According to a Department of Justice press release, Dennis Zarudny, a Miami-area escort service owner, was sentenced to serve two years in prison for filing a false tax return. Zarudny owned Denzar, Inc., which operated under “Elite Miami Escorts” and “Elite Escort Service”. Zarudny’s clients paid for services using cash, checks, and credit cards. Prosecutors accused Zarudny of lying about his tax liability on Denzar’s federal tax returns between 2011 and 2014.
Throughout their investigation, the IRS uncovered evidence that proved that Zarudny and his company correctly reported the full amount of business revenue from credit card receipts but skimmed a large sum of cash and credit card transactions, resulting in an underreporting of business income. Additionally, Zarudny filed personal tax returns that didn’t accurately reflect his true income.
In addition to serving 24 months in a federal prison, Zarudny will be required to serve an additional one year of supervised release. Finally, Zarudny will likely be ordered to pay restitution to the IRS. A hearing on exactly how much he will be ordered to pay is set for this Winter.
Most of the stories that we cover on our blog involve criminal tax charges that were filed along with other, non-tax related charges. Examples of these situations involve a defendant being charged with wire fraud or conspiracy to defraud the United States, in addition to filing a false tax return or tax evasion. This particular story reminds our readers that those who file false tax returns without committing any other crime are not immune to investigation and prosecution. With the IRS budget seeing cuts nearly every year, top Treasury officials have urged their investigators to work with the Department of Justice to drop the hammer on taxpayers who aren’t living up to their tax obligations.
Although it does not appear that Zarudny used any special software or technology in his crimes, some business owners have employed the use of skimming devices and software. These tools are illegal in many states and will skim a certain number of transactions off of the books of the company. This practice lowers the revenue of the business and results in an artificially low tax liability. Many states have reported that skimmers cause millions of dollars of lost tax revenue, every year. Tax authorities have ramped up enforcement on small-to-medium sized businesses, ensuring that they are properly reporting income as it is earned.
Whether you know that you have made errors on your filed tax returns in the past or believe that you may have, it is in your best interest to contact an experienced tax attorney sooner rather than later for an initial consultation. Many of the stories that we report on involve taxpayers receiving harsh prison sentences because they didn’t get out in front of the tax charges or investigation. Instead, many taxpayers who are accused of a tax crime will either ignore the pending actions or they will take steps to obstruct the IRS or state taxing authority. These actions typically result in additional charges and more potential prison time for the accused. In most situations, the IRS and state tax authorities are more than willing to work with a taxpayer and their attorney to resolve the matter.
An experienced tax defense attorney is multi-faceted, in that they are able to serve clients from a technical tax perspective and provide legal advice concerning interpretation of statutes and regulations, as well as provide top-notch strategic audit and criminal defense representation. Although other tax professionals may be able to effectively serve clients in one of the above-mentioned areas, only a tax defense lawyer has the educational background and experience to provide quality client service in all areas of tax law.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers who are facing a tax examination or potentially-criminal tax investigation. Our team of zealous advocates will work with you to develop a roadmap and strategy for your set of circumstances with an aim to minimize the negative consequences of interactions with tax authorities. Don’t let the threat of an IRS or state tax audit or investigation keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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