Tax Attorney https://klasing-associates.com Sat, 25 Mar 2017 17:55:55 +0000 en-US hourly 1 Dual U.S.-Swiss Citizen Likely to Face FBAR Penalty After ‘Highly Speculative’ Appeal is Dismissed https://klasing-associates.com/dual-u-s-swiss-citizen-likely-face-fbar-penalty-highly-speculative-appeal-dismissed/ https://klasing-associates.com/dual-u-s-swiss-citizen-likely-face-fbar-penalty-highly-speculative-appeal-dismissed/#respond Sat, 25 Mar 2017 17:55:55 +0000 https://klasing-associates.com/?p=11253 The post Dual U.S.-Swiss Citizen Likely to Face FBAR Penalty After ‘Highly Speculative’ Appeal is Dismissed appeared first on Tax Attorney.

U.S. citizens and U.S. taxpayers have an obligation to file taxes, pay taxes, and complete and submit certain foreign informational reports regardless of their country of […]

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U.S. citizens and U.S. taxpayers have an obligation to file taxes, pay taxes, and complete and submit certain foreign informational reports regardless of their country of residency. That is, regardless of whether a U.S. taxpayer is living in California or Calcutta, he or she has an obligation to file and pay income tax on worldwide income and file an array of foreign information returns. While the taxpayer’s country of residence may affect the exact nature of the filing and whether tax minimization opportunities under a tax treaty are available, U.S. tax obligations cannot be avoided by a change of country of residency alone.

This duty to comply with one’s U.S. income tax and foreign information obligations continues to exist even while living outside of the country and specifically extends to the duty to file Report of Foreign Bank Accounts (FBAR). U.S. taxpayers are generally obligated to file FBAR at any time their covered foreign account balances aggregates to greater than $10,000. The failure to file FBAR can be punished with harsh civil monetary penalties. These penalties can apply even when the noncompliance was 100% accidental.

Dual Citizen Faces $1.4 Million in FBAR Penalties

Bernard Gubser is a dual citizen and a native of Switzerland. At some point, he became a naturalized U.S. citizen. Unfortunately, Mr. Gubser appears to have failed to consider the full range of tax consequences that U.S. citizenship would bring. For one, Mr. Gubser did not take any action regarding a Swiss account with an account balance of roughly $2.7 million.

Mr. Gubser said that he relied on the advice of his longtime accountant and was therefore not aware of the FBAR obligation during the 2008 tax year or while preparing his tax returns for the same tax year. Gubser claims that he only learned about the obligation to file an FBAR in 2010.

While penalties for FBAR mistakes start at $10,000, penalties can escalate far beyond this number. When agents and prosecutors believe that the compliance failure was willful — an intentional or voluntary disregard of a known legal duty — then even harsher penalties can be sought. When a taxpayer engages in a willful violation of FBAR, the penalty can consume the greater of $100,000 or 50% of the balance in the account at the time of the violation (IRM §4.26.16.4.5.1).

Where the foreign investment income related to a foreign account is omitted from a U.S. tax filing and simultaneously, the FBAR is not filed and the box on schedule B indicating the country the foreign account is in is ignored, it is understandable the government could believe the FBAR non-disclosure was willful to facilitate income tax evasion.

The IRS and DOJ have yet to seek a criminal tax conviction against Gubser. However, the IRS has threatened to seek a willful FBAR violation against the taxpayer. The 50 percent penalty would have resulted in a fine of roughly $1.4 million against Gubser. Furthermore, Gubser claims that in a meeting with attorneys from the IRS office of appeals, the attorneys indicated that they could prove the FBAR violation under a preponderance standard but not under a clear and convincing standard. Thus, Gubser claimed that he faced an imminent harm.

Following dismissal at the district court level due to the “highly speculative” nature of the lawsuit, Gubser appealed. On appeal, the 5th Circuit Court unanimously affirmed this ruling. The circuit court found, for essentially the same reasons as the district court, that the matter should be dismissed due to standing issues. Thus, Gubser still faces the potential of a significant FBAR penalty.

Could Gubser Have Leveraged a Voluntary Disclosure through OVDP to Fix his FBAR Error?

At least some have speculated that Gubser could have avoided this ordeal simply by leveraging the Offshore Voluntary Disclosure Program. However, in 2010 when Gubser learned about the issue, the OVDP program was limited to the 2009 incarnation of Offshore Voluntary Disclosure Initiative (OVDI). The current OVDP and Streamlined Disclosure programs were not yet available. OVDI was a one-track program that did not distinguish between willful and accidental violations. Thus, Gubser would have faced procedures and penalties like those levied as part of the standard OVDP program, but far more than what would be paid for non-willful conduct under the streamlined program.

However, voluntary disclosure programs have been redesigned since 2010. Currently, taxpayers who committed non-willful violations of the duty to file FBAR can qualify for Streamlined Disclosure. Under the streamlined disclosure program, taxpayers are subject to less stringent disclosure procedures and significantly reduced penalties. In fact, if the taxpayer is living abroad, there is no offshore penalty. Taxpayers facing similar FBAR concerns should take advantage of the currently available disclosure programs to avoid facing a situation similar to the one faced by Mr. Gubser.

Work with Tax Lawyers to Fix FBAR Errors

If you have made errors regarding filing FBARs or other offshore disclosures, and or omitted the taxable income related to the foreign accounts, income generating assets or businesses on your U.S. tax returns, this is not a problem that will simply go away or get better with time. The Tax Attorneys, CPAs and EAs of the Tax Law Offices of David W. Klasing take a strategic approach to all foreign account disclosure issues. We can help taxpayers living in the United States or abroad correct tax or information reporting mistakes and come back into compliance with the U.S. Tax Code. To schedule a confidential reduced rate consultation, please call our Los Angeles or Irvine law offices at 800-681-1295.

Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on foreign income and information non-compliance

 

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Taxpayers Sentenced for Tax Evasion, Tax Return Fraud After Restaurant Scheme Unravels https://klasing-associates.com/taxpayers-sentenced-for-tax-evasion-tax-return-fraud-after-restaurant-scheme-unravels/ https://klasing-associates.com/taxpayers-sentenced-for-tax-evasion-tax-return-fraud-after-restaurant-scheme-unravels/#respond Fri, 24 Mar 2017 16:00:13 +0000 https://klasing-associates.com/?p=11248 The post Taxpayers Sentenced for Tax Evasion, Tax Return Fraud After Restaurant Scheme Unravels appeared first on Tax Attorney.

Charles and Lisa Bolton were successful businesspeople who owned and operated two restaurants in the Hattiesburg, Mississippi area. Sports 22 Restaurant and Hall Avenue Package Store […]

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Charles and Lisa Bolton were successful businesspeople who owned and operated two restaurants in the Hattiesburg, Mississippi area. Sports 22 Restaurant and Hall Avenue Package Store were, to all outside appearances, upstanding and profitable businesses. However, prosecutors claimed that the Boltons attempted to pad restaurant profits by engaging in an array of fraudulent behaviors. The Boltons claimed that their actions were merely a mistake caused by reliance on the couple’s accountant.

However, despite the Bolton’s reputation as successful business owners and pillars of their community, they were convicted of various tax offenses by a jury of their peers. Time and time again, individuals who think that their reputation and community standing will protect them against tax allegations find that these factors do not provide the protection they assumed existed. If you are facing allegations of tax fraud stemming from practices at your cash intensive business, it is wise to contact a criminal defense tax lawyer as soon as possible.

How Did the Restaurant Owners Get Into Tax Trouble?

While it may seem to be somewhat of a bromide, taxpayers generally don’t set ordinarily out with the goal to commit tax fraud. Frequently, difficult circumstances or an approach to finances and taxes that becomes progressively more aggressive is behind tax mistakes and errors that trigger an audit or other enforcement action. Here, the taxpayers claim that a simple mistake due to bad advice was replicated multiple times causing it to mushroom into the tax audit and the criminal tax enforcement action.

However, according to the complaint filed against the taxpayers, the defendants willfully attempted to evade their lawful tax filing and payment obligations through three main means. First, the taxpayers cashed thousands of dollars in checks, purportedly issued to pay for liquor and wine, through means intended to conceal the receipt of income. To cover-up this act, the taxpayers then provided the deceptive “cooked” records to their tax preparer that omitted income. Finally, to the extent the taxpayers disclosed these transactions to their accountant, they mischaracterized the income as loans and payments for goods.

What Tax Laws Were the Taxpayers Found Guilty of Violating?

The taxpayers were accused of committing 10 counts of criminal tax offenses. The taxpayers were accused of five counts of tax evasion in violation of Section 7201 of the U.S. Tax Code. Taxpayers who willfully endeavor to avoid or defeat the assessment or payment of tax can be charged with this crime. The taxpayers were accused of committing tax evasion for the 2009 through 2014 tax years. A taxpayer who violates Section 7201 can face a potential prison sentence of up to up to five years per count, 7201 has a six-year statute of limitations, so 6 counts are possible, along with a monetary penalty, restitution, and supervised release.

The taxpayers were also accused of five counts of violating U.S. Tax Code Section 7206(1) – Filing a False Tax Return. The taxpayers were accused of violating this statute for the 2009 through 2014 tax years. Taxpayers who willfully file a false tax return or related documents can, upon conviction, face a prison sentence of up to three years per count, 6 year statute of limitations, and additional monetary penalties.

In September 2016, Charles Bolton was found guilty of four counts of tax evasion for the tax years 2010 through 2013. He was also found guilty of all counts of filing a false tax return. Although it is rare for a maximum penalty to be imposed, Charles Bolton could potentially face a decades-long prison sentence.

Linda Bolton was found guilty on five counts of filing a false tax report for the tax years from 2009- 2013. She was found not guilty on one charge of tax evasion and a mistrial was declared on the other four tax evasion charges due to a deadlocked jury.

Concerned About “Creative” Accounting Practices at Your Business?

If you believe that mistakes were made regarding income taxes, payroll taxes, or any other tax obligation held by your company then it is wise to seek tax guidance as soon as possible. Tax mistakes do not correct themselves with time and continued noncompliance often exacerbates potential criminal tax penalties when the fraud is discovered. If your business is a restaurant, convenience store, a gas station, or another type of business typically dealing in cash then the IRS is even more likely to suspect fraud and launch an audit or tax crime investigation.

The tax lawyers of the Tax Law Offices of David W. Klasing may be able to guide you through an Egg Shell Audit or criminal tax enforcement action. We strive to bring you back into compliance with the law while mitigating the consequences you face. To schedule a confidential and reduced rate consultation at our Los Angeles or Irvine tax law offices, please call 800-681-1295 or contact us online.

Check out our criminal tax video here.

To learn more about Egg Shell Audits, take a look at our video here.

For more videos, check out our YouTube channel.

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DOJ Files Lawsuit Against Canadian Resident with Dual U.S. Citizenship https://klasing-associates.com/doj-files-lawsuit-against-canadian-resident-with-dual-u-s-citizenship/ https://klasing-associates.com/doj-files-lawsuit-against-canadian-resident-with-dual-u-s-citizenship/#respond Thu, 23 Mar 2017 15:53:19 +0000 https://klasing-associates.com/?p=11243 The post DOJ Files Lawsuit Against Canadian Resident with Dual U.S. Citizenship appeared first on Tax Attorney.

On this tax blog we have long warned that as the strict enforcement of the requirement to file a Report of Foreign Bank Account (FBAR) and […]

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On this tax blog we have long warned that as the strict enforcement of the requirement to file a Report of Foreign Bank Account (FBAR) and other offshore information reports became more common and accepted, that the U.S. government would continue to push the envelope. In the past, we have predicted that the IRS may make OVDP terms less favorable. Alternatively, we have speculated that while FBAR covers all U.S. taxpayers, the IRS and DOJ may redouble their enforcement efforts targeting individuals living outside of the United States.

For dual nationals and U.S. expatriates who gambled that the IRS and DOJ would continue to focus compliance efforts on individuals living in the United States, there is bad news. The U.S. government is pursuing FBAR penalties against Canadian residents with U.S. dual citizenship. This penalty can theoretically be sought against any dual national who is a U.S. taxpayer.

Why Is a Canadian Resident Facing FBAR Allegations?

All U.S. taxpayers are required to report their offshore or foreign accounts when their assets exceed certain thresholds. In the context of the duty to file FBAR, the obligation is triggered when the taxpayer holds or has signature authority over one or more foreign accounts provided that the value of the accounts aggregates to $10,000 or more at any point in the year. The obligation to file FBAR is incurred even if the value of the accounts only surpasses the filing threshold momentarily. It is also important to note that taxpayers with an obligation to file FBAR, may also be required to make an additional FATCA disclosure. In any case, all U.S. taxpayers are required to file FBAR when the above conditions are met. This includes U.S. citizens living abroad and dual nationals who also have U.S. citizenship.

All U.S. taxpayers are required to report their offshore or foreign accounts when their assets exceed certain thresholds. In the context of the duty to file FBAR, the obligation is triggered when the taxpayer holds or has signature authority over one or more foreign accounts provided that the value of the accounts aggregates to $10,000 or more at any point in the year. The obligation to file FBAR is incurred even if the value of the accounts only surpasses the filing threshold momentarily. It is also important to note that taxpayers with an obligation to file FBAR, may also be required to make an additional FATCA disclosure. In any case, all U.S. taxpayers are required to file FBAR when the above conditions are met. This includes U.S. citizens living abroad and dual nationals who also have U.S. citizenship.

In this matter, United States v. Jeffrey P. Pomerantz, Pomerantz is a U.S. citizen who resides in Canada. The accounts in question are two accounts with the Canadian Imperial Bank of Commerce (CIBC) and one with Royal Bank of Canada (RBC) along with several Swiss accounts. Pomerantz filed his taxes, but admits that he did not file associated FBARs for calendar year 2007, 2008 or 2009.

Pomerantz is accused of failing to report the Canadian accounts and several additional Swiss accounts. Prosecutors also allege that Pomerantz opened a shell entity in Turks & Caicos which in turn opened several Swiss bank accounts. The FBAR penalties faced by Pomerantz total to more than $800,000 (USD). Pomerantz states that the penalties sought by U.S. prosecutors are inflated because he sold a house and placed the proceeds into a Canadian account thus placing the value of the home into the penalty calculation. However, this does appear to be a proper application of penalty procedures, so it is unclear on what grounds Pomerantz bases his claim that penalties are “inflated.” Perhaps he simply means that penalties imposed for willful violations of a duty to file FBAR are potentially jaw-dropping.

What Types of Accounts Should Dual Citizens Worry About?

Unfortunately, it is extremely easy for a well-meaning taxpayer to run afoul of FBAR’s reporting requirements. For one, Registered Retirement Savings Plan (RRSP) are extremely common in Canada. Many foreign nations have similar types of retirement savings plans. Provided that the individual’s foreign accounts exceed the $10,000 threshold, proper treatment of Canadian RRSPs requires a U.S. taxpayer to report the account as part of his or her FBAR disclosure. However, due to a tax treaty between the United States and Canada, tax on RRSP income is deferable until retirement provided that the taxpayer makes the proper election.

For taxpayers living in other foreign nations, there is a strong likelihood that if you hold a non-ERISA, pension plan-like retirement savings account they may be treated as a foreign trust. Income derived or accruing from a foreign trust is taxable for US purposes even without distribution and the likelihood of a duty to report the account via FBAR is high. One exception to taxable foreign trust treatment occurs when the retirement savings account is akin to U.S. Social Security and there is a tax totalization agreement in place between the US and the foreign jurisdiction or alternatively a tax treaty exclusion applies in which case the income accruing offshore will not be taxable until a taxable distribution is made.

Other foreign accounts that should be included in FBAR filing threshold aggregation and, if required, the actual FBAR include:

* Checking and savings accounts held at foreign financial institutions

* Financial accounts held at a foreign branch of a U.S. financial institution

* Indirect interests in foreign financial assets through an entity

* Foreign-issued life insurance or annuity contract with a cash-value

* Foreign mutual funds

* Foreign hedge funds

* Foreign privately equity funds

* Foreign life insurance policies

* Foreign annuities

Analysis of tax payment and offshore account reporting obligations relating to foreign retirement accounts can quickly become extremely complex and nuanced. When assessing these issues, dual nationals and other taxpayers with an obligation to file U.S. taxes would be prudent to seek the guidance of an experience international tax professional.

Work with Experienced International Tax Lawyers and Tax Professionals

Dually certified Tax Attorney and CPA David Klasing and his staff of CPAs & EAs have extensive experience assisting taxpayers with Domestic and International Tax concerns. If you are worried about a potential failure to file FBAR, or unreported sources of foreign income and the significant civil and criminal tax penalties that can result, the Tax Law Offices of David W. Klasing may be able to assist you in coming back into compliance with the U.S. Tax Code while mitigating the penalties you face. To schedule a confidential reduced rate consultation, call our Los Angeles or Orange County tax law offices at 800-681-1295 or contact us online.

Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on foreign income and information non-compliance.

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Can I Convert a California C Corp to an S Corp? https://klasing-associates.com/can-convert-california-c-corp-s-corp/ https://klasing-associates.com/can-convert-california-c-corp-s-corp/#respond Wed, 22 Mar 2017 11:00:28 +0000 https://klasing-associates.com/?p=11209 The post Can I Convert a California C Corp to an S Corp? appeared first on Tax Attorney.

As a company grows, the business environment changes and other factors impact how the company operates, there may come a time when the business structure is no […]

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As a company grows, the business environment changes and other factors impact how the company operates, there may come a time when the business structure is no longer conducive to the company’s goals. Over time, a form of legal organization that once suited the business and was conducive to its goals may come to work against these interests. It is important to note that  in most cases where practical tax and business considerations allow, it is possible to convert your company’s form of organization to better suit the organization’s current and emerging goals. The business tax lawyers, CPAs, and financial professionals at the Tax Law Offices of David W. Klasing can provide strategic guidance to align your business structure with your organizational goals.

Can You Convert a California Corporation to Other Entity Forms?

As a threshold question, one must first determine whether the laws of the state of California permit the conversion of a domestic (California) stock corporation to other forms of entity organization recognized in the state. As a general rule, A domestic stock corporation can convert into another recognized California business entity. Likewise, a California limited liability company (LLC), limited partnership (LP) or general partnership (GP) can convert into a California or foreign other business entity. Similarly, provided that the laws of the foreign jurisdiction allow for it, a foreign corporation can convert to a California corporation. However, the exception is that a California corporation cannot convert to a foreign entity.

What Steps Are Required to Convert a C Corp to an S Corporation?

For federal tax purposes, the only requirement that is set forth to convert a C corporation to an S corporation is completing and filing Form 2553 with the IRS to change the tax election.  Requirements regarding the completion and filing of IRS Form 2553 include that:

  • It must be signed by all the shareholders
  • The signed form must be submitted to the IRS no later than two months and 15 days past the beginning of the tax year for which the S corporation election is being made.

Form 1120S should be filed for the tax year in which the S corporation election is made.

What Tax, Financial and Legal Considerations Are Associated with Conversion of a C Corp?

When converting a California C Corporation to a California S Corporation, the biggest difference individuals will need to understand is a tax election. Technically all California corporations are initially formed as C corporations. It is only after the articles of incorporation have been filed, the bylaws enacted, shares issued, and the initial shareholders hold the first shareholder meeting that a newly formed California C corporation can elect to be treated as an S corporation by filing IRS Form 2553. If an S election is not made and filed within approximately 45 days of incorporating, the corporation will remain a C corporation until Form 2553 is filed.  There does not appear to be additional filing requirements with the California Secretary of State.

Additional tax compliance and other considerations that should accompany any decision to convert a C Corp should include:

  • Pass-through tax considerations – Converting a C Corp to an S Corp will result in disparate tax handling as the entity moves from an independent tax entity to a pass-through entity.
  • Built-in gains (BIG) tax considerations — If the S corporation sells assets derived from the C corporation at a profit or retained earnings from the C corporation is distributed within five (5) years of conversion the IRS imposes a 35% tax on the gains. In some cases, the BIG tax will apply even if assets are not sold but are such things as receivable accounts accrued under C status but collected under S.
  • Passive investment income taxes – A converted S corporations can be subject to taxes on passive investment income (e.g., interest, retained earnings, rents or royalties, or stock sale gains) inherited from a C corporation (PFIC tax). If this income exceeds 25 percent of the S corporation’s gross income and the S corporation has accumulated earnings and profits carried over from its C corporation years, then the S corporation will be subject to a special tax. If the PFIC tax applies for three consecutive years, the S conversion is terminated. Distributing any passive income to S shareholders will avoid the PFIC tax.
  • FICA and Self-employment tax minimization considerations — S corporation shareholders can minimize both self-employment and FICA taxes by creating a balance between a reasonable salary and dividends. Dividends/distributions are not subject to either self-employment tax or FICA.

The above represents only some of the considerations that should be addressed prior to converting a C Corp in California. Speak to an experienced tax attorney or CPA prior to engaging in any substantive actions regarding your business and its form of legal organization.

Tax Attorneys and CPAs Provide Business Entity Advice and Guidance

At the Tax Law Offices of David W. Klasing our attorneys, CPAs, and financial professionals can help your business address difficulties incurred due to an array of tax or financial concerns. If your company has undergone changes and its form of organization is a drag on your goals, we can assess whether organizations such as a C Corp, S Corp, LLC, or another form is more likely to be conducive to your goals. To schedule a confidential reduced rate consultation, call the Tax Law Offices of David W. Klasing at 800-681-1295 today.

 

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Los Angeles Businessman Sentenced to 24 Months in Prison Over Foreign Bank Account https://klasing-associates.com/los-angeles-businessman-sentenced-24-months-prison-foreign-bank-account/ https://klasing-associates.com/los-angeles-businessman-sentenced-24-months-prison-foreign-bank-account/#respond Tue, 21 Mar 2017 15:46:56 +0000 https://klasing-associates.com/?p=11201 The post Los Angeles Businessman Sentenced to 24 Months in Prison Over Foreign Bank Account appeared first on Tax Attorney.

According to a press release by the Department of Justice, Masud Sarshar, a Los Angeles businessman was sentenced to 24 months in a federal prison for […]

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According to a press release by the Department of Justice, Masud Sarshar, a Los Angeles businessman was sentenced to 24 months in a federal prison for failing to comply with Foreign Bank Account Reporting laws. Sarshar allegedly hid nearly $24 million in Israeli bank accounts. Court documents read much like a script from a spy movie as Sarshar and his bankers took elaborate precautions to ensure that his illegal behavior would go undetected. But, it turned out that even the most thought-out scheme was discovered and Sarshar will have 24 months to figure out where his plan went wrong.

According to court documents, Sarshar maintained foreign bank accounts at Bank Leumi and at least two other Israeli banks. U.S. Foreign Bank Account Reporting (FBAR) laws require that U.S. residents with accounts at financial institutions outside of the United States with a high-balance of at least $10,000 report the existence of such accounts on an annual basis. The willful failure to comply with FBAR laws can lead to substantial prison sentences and hefty fines (of up to half of the high-balance of the undeclared account for each year of violation).

Akin to a James Bond film, Israeli bankers, known as “relationship managers”, flew to Los Angeles to meet with Sarshar. In order to avoid the discovery of certain financial records, Sarshar’s bank statements were not mailed to his home in the United States, but instead were transported via USB drive around the neck of one of the Israeli relationship managers. Further, meetings with Israeli bankers were typically conducted in Sarshar’s automobile. While meeting in Sarshar’s car, relationship managers pitched Israeli bank products that allowed Sarshar to bring back to the U.S. $19 million of his overseas assets without creating a paper trail. Lastly, Sarshar collected approximately $2.5 million in interest from his foreign bank accounts without paying any federal income tax in the United States.

In addition to spending two years in a federal prison, Sarshar will also serve three years of supervised release. In addition to interest and penalties, Sarshar will be required to pay $8.3 million in restitution to the IRS. Lastly, Sarshar agreed to pay an $18.2 million FBAR penalty for failing to declare the existence of his accounts, as required by U.S. law.

It Is Only a Matter of Time Until the IRS Comes Knocking

If you have a foreign bank account that has not yet been declared, it is in your best interest to contact an experienced tax attorney as soon as possible. The Foreign Account Tax Compliance Act (FATCA) has banks around the world lining up to share incriminating account information with the IRS. Through the Information Data Exchange Services (IDES), identifying information about U.S.-owned bank accounts will flow directly into the mailbox of the IRS and their Criminal Investigations Division.

The Offshore Voluntary Disclosure Program (OVDP) allows qualifying U.S. residents who are accepted into the program to avoid criminal prosecution for failing to disclose the existence of a foreign bank account. The OVDP allows a taxpayer to provide the IRS with extensive records relating to their foreign bank accounts, pay any back-taxes and interest, and pay a penalty in exchange for a deferred-prosecution agreement from the government. It should be noted that the OVDP may not provide protection to those who are already being investigated by the IRS for any tax matter. Thus, time is of the essence to seek admittance to the program before your foreign bank turns you in.

The OVDP is not right for all non-compliant residents. Meeting with an experienced FBAR attorney will ensure that all potential options are considered and a solid legal strategy is implemented. Unlike other tax professionals, a tax attorney can provide you with legal advice related to criminal procedure and Constitutional law as they relate to IRS investigations.

Contact an Experienced Tax Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have assisted a plethora of taxpayers in their endeavors to come into compliance with FBAR laws. The Department of Justice and the IRS have made it clear that they will not stand idly by while U.S. residents hide money overseas. Do not lose any more sleep over the possibility of being hauled off to a federal prison for failure to disclose your foreign bank account. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on foreign income and information non-compliance.

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U.S. Residents with Undeclared Foreign Bank Accounts go to Prison while Swiss Bankers get Probation https://klasing-associates.com/u-s-residents-with-undeclared-foreign-bank-accounts-go-to-prison-while-swiss-bankers-get-probation/ https://klasing-associates.com/u-s-residents-with-undeclared-foreign-bank-accounts-go-to-prison-while-swiss-bankers-get-probation/#respond Tue, 21 Mar 2017 04:06:28 +0000 https://klasing-associates.com/?p=11180 The post U.S. Residents with Undeclared Foreign Bank Accounts go to Prison while Swiss Bankers get Probation appeared first on Tax Attorney.

Last week, Michele Bergantino, an Italian citizen and Swiss Resident, was sentenced to two years of unsupervised probation for his role in providing Swiss banking services […]

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Last week, Michele Bergantino, an Italian citizen and Swiss Resident, was sentenced to two years of unsupervised probation for his role in providing Swiss banking services to Americans with the intent to defraud the United States.

Last year, Bergantino pleaded guilty to one count of conspiring to defraud the United States. A wanted fugitive since his indictment in 2011, Bergantino served as a banker at the U.S. tax desk of Credit Suisse AG. During his time at the bank, prosecutors alleged that Bergantino assisted U.S. residents in setting up and maintaining foreign bank accounts with the aim of evading federal income taxes.

Foreign Bank Account Reporting (FBAR) laws require that Americans with foreign bank accounts disclose the existence of such accounts on an annual basis if the high-balance of such account exceeds $10,000. Those who are determined to have willfully failed to comply with FBAR may be sentenced to time in federal prison. Additionally, willful non-filers may face a penalty of up to 50% of the high balance in the undeclared bank account for each year that the account went undisclosed.

Those, like Bergantino, who are found guilty of conspiring to defraud the United States, are subject to the sentencing guidelines that are referenced to determine the appropriate sentence. In Bergantino’s case, federal guidelines indicated that the appropriate sentence should have been at least 37 months in prison. But at the sentencing hearing, the prosecution recommended only 22 months. The court determined that Bergantino should not serve any time in prison, at all. Instead, Bergantino was sentenced to two years of unsupervised probation, potentially evidencing preferential treatment for those who are willing to provide information to secure convictions of Americans who have failed to declare their foreign bank accounts.

The Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program (OVDP) provides residents that have not filed the proper disclosure forms with the IRS with a way to avoid a criminal prosecution. In order to qualify for a deferred prosecution agreement, the applicant must provide the government with extensive information about the foreign bank account. Additionally, the applicant must pay back-taxes and interest associated with income generated from money in the undeclared foreign bank account. Lastly, the applicant must pay a penalty, albeit less than the penalty for willful non-filers.

The OVDP has a potential drawback for residents who have or have had accounts at foreign institutions that are currently cooperating with the United States. OVDP acceptance may not be available for those applicants who are currently being investigated for any tax-related reason. Since the passage of the Foreign Account Tax Compliance Act (FATCA), banks from around the world are lining up to transmit information about American-owned bank accounts to the IRS. Thus, it is only a matter of time until incriminating information is transferred right into the hands of the IRS and their Criminal Investigations Division. Furthermore, bankers like Michele

Bergantino know that providing damning information about customers from the U.S. means lesser prison sentences.

Contact an Experienced FBAR Attorney Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing U.S. residents with ownership interests in foreign bank accounts. Regardless of your reasoning for failing to disclose your account to the IRS, our team of zealous advocates are ready to develop a plan to mitigate the potentially devastating impact of an FBAR prosecution. Do not lose another night of sleep over an undeclared foreign bank account. Contact the Tax Law Offices of David W. Klasing for a reduced-rate consultation.

Click Here is a link to our YouTube channel: Click Here.

Here is a link to our practice overview video on foreign income and information non-compliance.

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American Guns Reality TV Star Found Guilty of Tax Fraud https://klasing-associates.com/american-guns-reality-tv-star-found-guilty-tax-fraud/ https://klasing-associates.com/american-guns-reality-tv-star-found-guilty-tax-fraud/#respond Thu, 16 Mar 2017 19:52:13 +0000 https://klasing-associates.com/?p=11167 The post American Guns Reality TV Star Found Guilty of Tax Fraud appeared first on Tax Attorney.

For a time, Richard Wyatt, the star of the Discovery Channel’s American Guns reality TV show seemed to have it all. He was running a business […]

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For a time, Richard Wyatt, the star of the Discovery Channel’s American Guns reality TV show seemed to have it all. He was running a business in an industry he loved while receiving extensive national publicity and media exposure. Many store owners would have been incredibly jealous of Wyatt and his Gunsmoke, Inc. retail operation.

However, the glamor of the show apparently concealed certain improprieties that occurred behind the scenes. In 2012, before the show ever aired, Wyatt was accused of violating certain federal firearms rules and regulations. Following these allegations, Wyatt quietly surrendered his federal firearms dealer license. However, Wyatt apparently continued selling guns and firearms despite relinquishing his license.

Wyatt Fails to Report Income Due to Illegal Activities

Apparently Wyatt’s lack of a proper license did no deter him from negotiating a lucrative contract with the Discovery Channel. According to reports, the contract for the American Guns show brought in close to $500,000 for Wyatt.

Furthermore, Wyatt continued to sell firearms from his Gunsmoke store despite his lack of a license. Apparently, Wyatt came to agreement with several other gun store owners who did maintain a proper license. Under the agreement, these store owners acted as “shadow” dealers to facilitate Wyatt’s transactions. Customers who purchased a gun from Gunsmoke were required to go to a licensed dealer to actually secure the weapon. Store employees were directed to mischaracterize illegal gun sales as “miscellaneous” sales.

In order to conceal his fraud, Wyatt engaged in a number of practices. First, Wyatt submitted false records to the federal bureau of Alcohol, Tobacco, and Firearms. Wyatt also failed to report at least $1.1 million in income earned through the illegal sales of firearms in 2009, 2010, and 2012. In 2012, Wyatt willfully filed a false tax return showing an operating loss when he actually earned more than $350,000. Wyatt also faced charges that he did not file corporate income tax returns from 2010 through 2012.

Wyatt was convicted on 10 felony charges relating to the illegal gun sales, failures to report taxable income, and the false tax return. Wyatt is scheduled to face sentencing in July 2017 where he could be sentenced serve a federal prison sentence of up to 15 years.

Are Taxpayers Required to Report and Pay Taxes on Illegal Source Income?

While it may seem counterintuitive to a tax layperson, persons subject to the U.S. Tax Code are required to pay taxes on all forms of income – even illegal income. While it may border on a bromide, it is instructive to remember that Al Capone wasn’t convicted for racketeering, murder, or any other violent criminal charges. Rather, Al Capone was convicted for tax evasion due to not paying taxes on illegal source income.

Ordinary taxpayers who may have illegal gambling winnings due to playing online poker in foreign jurisdictions are just one type of taxpayer that can fall into this trap. In fact, the IRS instructs that a taxpayer’s illegal source income “must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.”

If you have earned illegal source income, do not compound the crimes you have already committed by making false statements on a tax return or otherwise also committing tax fraud or tax evasion. Some taxpayers will consider reporting their illegal source income after the authorities have already detected the scheme. In this scenario, the goal is to avoid getting charged for multiple crimes. Other circumstances may require different handling. Because this is a complex and nuanced factual and legal determination, it is prudent to only act after first speaking with a Criminal Tax Defense Tax Attorney.

Should I Talk to a Tax Lawyer or an Accountant if I’m Concerned About Illegal Gambling or other Illegal Source Income?

If you are concerned about underlying criminal issues, do not speak to an accountant about your concerns. To the extent that it is recognized, the accountant-client privilege is not robust enough to protect the information you disclose from a subpoena. Rather, if criminal issues are a concern, speak only to a Criminal Tax Defense Attorney because the attorney-client privilege is broadly recognized and robust enough to protect the information you may disclose. If the services of a forensic accountant or other financial professional is required, the Tax Lawyer can provide derivative attorney-client privilege to allow the accountant to assess your matter. To schedule a confidential, reduced rate consultation with a Criminal Tax Defense Lawyer from the Tax Law Offices of David W. Klasing, please call 800-681-1295 today.

 

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Former Starkey Labs Executive Faces Tax Charges Over Single Tax Return https://klasing-associates.com/former-starkey-labs-executive-faces-tax-charges-single-tax-return/ https://klasing-associates.com/former-starkey-labs-executive-faces-tax-charges-single-tax-return/#respond Wed, 15 Mar 2017 18:22:27 +0000 https://klasing-associates.com/?p=11158 The post Former Starkey Labs Executive Faces Tax Charges Over Single Tax Return appeared first on Tax Attorney.

For nearly a decade, from 2006 until 2015, Jeffrey Lee Longtain was Chief Operating Officer (COO) and the president of an affiliate company of Starkey Laboratories. […]

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For nearly a decade, from 2006 until 2015, Jeffrey Lee Longtain was Chief Operating Officer (COO) and the president of an affiliate company of Starkey Laboratories. This business is known as Northland Hearing Center and is in Oregon. To outside appearances, Starkey Laboratories and its affiliated companies were upstanding businesses. However, federal investigations into the business seemed to reveal an array of conflicts and self-dealing present at the business.

To date, Longtain is the sixth person to face a tax or other fraud charges due to the fallout from the Starkey investigation. This case shows just how precarious it is to rely on one’s reputation, standing, wealth, or other characteristics to stave off an investigation or deflect suspicion. Remember, IRS and state tax agents and auditors follow tax and financial evidence – not emotions. If a paper transaction is something other than what you purport it to be, agents will pursue the evidence and are likely to file an array of criminal tax charges.

Executive Faces Tax Fraud Charges Over Disguised Payments, Loans

According to court documents, Longtain was involved in a number of questionable transactions that raised questions about potential conflicts of interest. Longtain received payments of $105,600 between 2010 and 2015 from suppliers of Starkey Labs. The payments were made to cover Longtain’s personal golf membership fees. Prosecutors charge that Longtain received these payments but did not report them to the IRS as part of his annual income tax filings.

In addition to the payments for the golf memberships, prosecutors state that Longtain also arranged for a “loan” from Starkey. The loan was for $115,000 and was negotiated to cover the tax impact of a sale of restricted Northland Hearing Center stock. The government determined that the sale was an early and fraudulent termination. The proceeds from the sale included $8.2 million in cash split by Longtain and another executive.

However, according to allegations contained within the information against Longtain, the cash payment was not actually a loan:

As Longtain knew, the $115,000 payment that Nelson caused Starkey to make to Longtain was not a real loan, but rather a disguised payment and should have been reported as income on Longtain’s 2014 tax return. The defendant did not inform his tax preparer about this payment and thereby purposely and knowingly concealed income from his tax preparer that should have been reported on his 2014 return.

The fact that Longtain received a payment from the company was not the problem. The problem here is that Longtain allegedly attempted to conceal the payment by claiming that it was a loan rather than income. In mischaracterizing the nature of the payment and failing to report the golf membership payments, prosecutors allege that Longtain made false statements on his 2014 tax return.

What Penalties Can You Face for Filing a False Federal Tax Return?

Under Section 7202 of the U.S. Tax Code, “Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or another document, known by him to be fraudulent or to be false as to any material matter” is subject to punishment. Penalties can include a prison sentence of up one year, a fine of up to $10,000 ($50,000 in the case of a corporation), or both penalties.

In this matter, it is important to note that the charges faced by Longtain may indicate a best-case scenario due to cooperation with the authorities. Here, Longtain was charged under an “information” rather than a criminal indictment. This fact often indicates that the defendant is working with the authorities to provide evidence regarding the actions of co-conspirators and other involved parties. It is essential to recognize that willfully evading taxes over a course of years can and will often result in even harsher tax charges and potential consequences.

This Case Shows the Dangers of Relying on Reputation to Avoid Tax Charges or Allegations

This matter shows the danger of relying on one’s achievement, position in a company, or community standing to avoid criminal tax charges. As it happens all too often, taxpayers who rely on social standing to avoid suspicion face difficult circumstances when a tax or other charges damage the reputation they were relying on in the first place. Wise taxpayers who fear or suspect tax mistakes or other tax problems will contact a tax professional before an audit is launched or criminal tax allegations are made. The tax lawyers and CPAs of the Tax Law Offices of David W. Klasing can help you correct tax issues and meet the challenge of an IRS audit or criminal investigation. To schedule a confidential reduced rate consultation at our Los Angeles or Irvine tax law office, please call 800-681-1295 or contact us online today.

Here is a link to our YouTube channel: click here!

 

Criminal Tax Evasion;

https://www.youtube.com/watch?v=2rBasJaRz2o

Warning signs an audit has gone criminal;

https://www.youtube.com/watch?v=gTW_KSjf57w

What is an eggshell tax audit?;

https://www.youtube.com/watch?v=saJLVlER-iM

What is an effective tax defense in an IRS eggshell tax audit?

https://www.youtube.com/watch?v=7qixPqWTtvA

So you cheated on your taxes and you are under a tax audit;

https://www.youtube.com/watch?v=FZce4jqQJpI

Why should I hire a tax attorney to represent me in a tax audit?

https://www.youtube.com/watch?v=NDwc4GUfBX8

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Planning on Not Filing Taxes? Think a 5th Amendment Claim Will Excuse Your Failure to File? Think Again. https://klasing-associates.com/planning-not-filing-taxes-think-5th-amendment-claim-will-excuse-failure-file-think/ https://klasing-associates.com/planning-not-filing-taxes-think-5th-amendment-claim-will-excuse-failure-file-think/#respond Tue, 14 Mar 2017 20:58:23 +0000 https://klasing-associates.com/?p=11153 The post Planning on Not Filing Taxes? Think a 5th Amendment Claim Will Excuse Your Failure to File? Think Again. appeared first on Tax Attorney.

Many taxpayers are reluctant to file taxes. Some taxpayers with illegal source or questionable income are understandably wary about filing taxes. Other taxpayers are hesitant to […]

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The post Planning on Not Filing Taxes? Think a 5th Amendment Claim Will Excuse Your Failure to File? Think Again. appeared first on Tax Attorney.

Many taxpayers are reluctant to file taxes. Some taxpayers with illegal source or questionable income are understandably wary about filing taxes. Other taxpayers are hesitant to file taxes for a variety of less justifiable reasons. However, regardless of your reasons for not filing taxes, falling out of compliance with the U.S. Tax Code can open the door to additional scrutiny, audit risk, and civil and criminal tax penalties.

And yet, taxpayers routinely fail to file taxes. At least some non-filers indicate that they did not file due to their Fifth Amendment Constitutional right against self-incrimination. Unfortunately, this claim and this approach to non-filing are more likely to create tax and other legal trouble than it is to prevent it. Taxpayers who claim a Fifth Amendment right in the context of not filing taxes can face an array of penalties and additional scrutiny.

Recent Non-Filer Case Shows Dangers of 5th Amendment Tax Position

In the recent tax matter of Lee v. United States, a taxpayer claimed that he could not timely file his 2006 tax return because of an ongoing audit with the IRS. The ongoing audit concerned the taxpayer’s tax returns filed from 1999 through 2005. The taxpayer apparently believed that some aspect of his 2006 tax return would negatively impact the audit or lead to potential criminal tax charges. Thus, the taxpayer invoked the Fifth Amendment to justify his non-filing of taxes.

Following the close of the audit, the taxpayer later filed his 2006 tax return in 2010. Upon filing his tax return, the taxpayer sought to recover taxes paid on what he characterized as misclassified income. The IRS answered and counterclaimed against the defendant seeking civil penalties plus interest due to Lee’s late filing. Penalties were sought under IRC Section 6651(a) – Failure to file tax return or to pay tax. The United States also sought approximately $24,000 in interest.

Unfortunately, many taxpayers and business owners who enter into an audit without the guidance of an attorney will make claims of this type. Many people are simply anxious or afraid to make statements to an IRS agent and especially so when they already think that they have committed a crime.  It is true that what you say to an IRS agent can have a significant impact on your case or audit. Thus, extreme care and caution are necessary. However, in most scenarios, invoking your Fifth Amendment right is more likely to cause additional problems in your audit or enforcement proceeding.

Court Rejects Fifth Amendment Justification for Not Filing Taxes

The court assesses the taxpayers Fifth Amendment claims to justify his late filing in light of the dual delinquency penalties imposed under IRC Section 6551(a)(1), for failure to timely file taxes, and 6651(a)(a) for the failure to make timely payment of taxes.  Under the U.S. Tax Code, these penalties can be imposed unless the taxpayer can show that the failure is due to reasonable cause and not due to willful neglect.” 26 U.S.C. § 6651(a).

As a starting point, the court recognizes the general proposition that “taxpayers cannot rely upon the Fifth Amendment to justify a complete failure to file.” United States v. Neff, 615 F.2d 1235, 1239 (9th Cir. 1980) (citing United States v. Sullivan, 274 U.S. 259, 263–64 (1927)). However, the court does recognize a limited expectation where a Fifth Amendment objection “may properly be raised only in response to specific questions asked in the return.” Id. at 1238 (citing Garner v. United States, 501 F.2d 228, 252 n. 18 (9th Cir. 1972), aff’d, 424 U.S. 648 (1976).

Thus, while the court noted narrow exceptions where a Fifth Amendment claim could be raised, they found that the taxpayer’s situation was not compatible with these scenarios. Furthermore, even if the taxpayer was able to make a Fifth Amendment claim, he did not properly make the claim.

Essentially, the court found that the precedent cited by Lee in justifying his Fifth Amendment claim was narrowly construed to apply to illegal source gambling income. In that context, the mere act of filing certain gambling income forms identifies taxpayers as participants in illegal activity. In contrast, the same risk is not present when a taxpayer merely files a general tax return because all taxpayers are required to do so. However, if specific questions found within the tax return– such as whether the taxpayer held or had a financial interest in foreign accounts – could potentially justify a more limited, specific Fifth Amendment claim.

Procedural Errors by Taxpayer Also Dooms 5th Amendment Return Claim

However, the court also noted tactical errors that, even if his claim was otherwise justified, would have made it difficult or impossible for the taxpayer to prevail. For one, the taxpayer failed to timely file a 2006 tax return. Furthermore, the taxpayer did not assert his Fifth Amendment right at the time of filing. The court notes, “It is also a ‘well-established rule that a self-incrimination objection to an income tax return must be raised at the time of filing.’ Neff, 615 F.2d at 1238. The court further noted that a blanket Fifth Amendment claim is inappropriate. Rather, a taxpayer may only raise the defense in response to specific questions or inquiries presented by the return.

Essentially there is no recognized general Fifth Amendment claim regarding the non-filing of taxes.  Taxpayers who assert a general Fifth Amendment claim to justify their non-filing or late filing of taxes do not provide themselves with the protections they think they are raising. Rather, generalized claims of this type merely raise an audit red flag and increase the likelihood that the taxpayer will face a through audit or other, potentially criminal, tax enforcement proceedings.

Case Illustrates How Uncertainty Faced by Non-Filers Can Lead to Tax Mistakes

In this matter, the taxpayer’s initial tax audit, unfortunately, spawned additional tax mistakes and tax errors. While it may have seemed intuitive to a layperson that a taxpayer could claim a Fifth Amendment right to avoid filing an incriminating tax return, this is not the law. Taking action based on unsupported positions and debunked frivolous tax arguments resulted in the taxpayer being on the hook for additional failure to file and failure to pay penalties. Furthermore, since the Fifth Amendment claims by the taxpayer are a recognized frivolous tax position, the taxpayer could have faced additional penalties.

An awareness of tax procedure can help taxpayers avoid mistakes that would be fatal to an otherwise meritorious position. The tax professionals of the Tax Law Offices of David W. Klasing can assist with tax audits and criminal tax investigations. If you have failed to file taxes for one or more years, we can develop a plan to bring you back into compliance with the U.S. Tax Code while mitigating the consequences you face. To schedule a confidential, reduced rate consultation please call our Los Angeles or Irvine law office at 800-681-1295 or online today.

 

Here is a link to our YouTube channel: click here!

 

Here is a video on common issues faced by non-filers: https://www.youtube.com/watch?v=fPxse0jStTw

 

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Tax Evasion Guilty Plea by Former Owner of Popular Buffet Illustrates Aggressive California EDD Audit and Enforcement Tactics https://klasing-associates.com/tax-evasion-guilty-plea-former-owner-popular-buffet-illustrates-aggressive-california-edd-audit-enforcement-tactics/ https://klasing-associates.com/tax-evasion-guilty-plea-former-owner-popular-buffet-illustrates-aggressive-california-edd-audit-enforcement-tactics/#respond Sat, 11 Mar 2017 12:00:38 +0000 https://klasing-associates.com/?p=11145 The post Tax Evasion Guilty Plea by Former Owner of Popular Buffet Illustrates Aggressive California EDD Audit and Enforcement Tactics appeared first on Tax Attorney.

Restaurant and business owners located in dynamic and bustling metropolitan area such as Los Angeles or Orange County may come to believe that the California Economic […]

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Restaurant and business owners located in dynamic and bustling metropolitan area such as Los Angeles or Orange County may come to believe that the California Economic Development Division, Franchise Tax Board, IRS, or other tax enforcement agencies cannot possibly effectively police all the economic activity in the area. Other business owners may believe that the cash receipts they receive are untraceable by tax authorities and creates an opportunity to underreport income or payroll expenses.

Unfortunately, these assumptions are recklessly Illegal and can create a scenario where potential harsh civil and criminal tax penalties – including a prison sentence – are justified. Auditors for federal and state tax agencies simply follow the paper trail. If a company’s books or records are missing, disorganized, believed to be fraudulent, or otherwise not reliable, the agent may even set aside the books and resort to a sample observation audit or markup audit to determine the company’s sales and taxable revenue.

Restaurant Owner Pleads Guilty to Payroll Tax, Workers’ Compensation Insurance Fraud

Chang Tai Lin was the owner of the popular AA Buffet located in Salinas, California. While the business is popular with local businesses and workers, it also apparently attracted numerous tour buses and tourists. Thus, the business seemed to be well-frequented and profitable for its owner. However, it appears that the legitimate business profits were not enough and the business owner engaged in certain fraudulent practices to illegally reduce business compliance costs and taxes.

The businesses’ tax troubles bubbled to the surface in May of 2015 when a District Attorney’s Office [MCDA], Workers’ Compensation Fraud Unit began an investigation. The investigation initially focused on obtaining an array of documents from local law enforcement, state tax and government agencies,  and the buffet’s workers’ compensation insurance company. In March 2016, a search warrant was served on the business and the business owner’s home.

The investigation revealed a fraud scheme that involved underreporting the restaurant’s number of employees and payroll obligations. The scheme involved misrepresenting the number of workers who were employees. To conceal the existence of a large percentage of his employees, the defendant paid certain worker wages in cash. The owner did not report these payments on 1099’s while considering these employee’s independent contractors, or on W2’s as employees. Additionally, these cash basis workers were not reported for works comp insurance purposes, thereby allowing him to obtain workers’ compensation coverage at a significantly reduced premium. The restaurant owner also failed to report and properly account for payroll taxes for the off the books employees.  This pattern is also quite common where a restaurant employs illegal aliens which raises a whole host of other types of civil and criminal exposure.

What Consequences Can a Business Owner Face for Payroll Tax Fraud in California?

Business owners who attempt to pad profits through payroll tax fraud can face an array of serious consequences. Since payroll tax fraud is often accompanied by additional types of fraud including workers’ compensation fraud, the business owners, and responsible parties may face a multi-front battle. Since payroll tax issues also have a federal component, taxpayers accused of this type of act should also be prepared to meet the challenge of a federal payroll tax audit or allegations of wrongdoing.

As for the workers’ compensation insurance fraud, this is a California state crime which is punishable by a state prison sentence of up to five years. A monetary penalty of up to twice the amount gained due to fraud can also be imposed. As for the state payroll tax evasion charges, upon conviction, an individual who willfully violates the law can be punished with a prison sentence of up to three years and up to a $20,000 fine as well as federal criminal prosecution, penalties and restitution.

If the matter also impacted federal payroll tax obligations, then additional civil penalties are possible.

Work with a Tax Lawyer When Your Business Is Facing an Audit

If your business is facing questions regarding payroll taxes, sales tax, income tax, or other tax obligations the attorneys and tax professionals of the Tax Law Offices of David W. Klasing may be able to fight for you strategically and aggressively. Mr. Klasing is a dually certified attorney and CPA who can put his experience as a former public auditor to work for you. To schedule a confidential consultation online click here or please call 800 681-1295 today.

Here is a link to our YouTube channel: click here!

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