According to a Department of Justice press release, a medical doctor residing in South Florida was sentenced to 51 months in prison recently for tax evasion, wire fraud, and Social Security disability fraud. This story illustrates the interconnectivity of federal government agencies and how an investigation by one agency can quickly result in tax charges being pursued.
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According to court documents and other evidence provided, Arthur John Kranz was a licensed physician specializing in the field of psychiatry. Commencing in 2002, Kranz contacted his private insurance company and made a claim that he was disabled and unable to work. His claim was accepted and he began to receive private disability payments. In December 2003, Kranz submitted an application to the Social Security Administration for disability benefits based on the same disability referenced with his private insurance company. The Social Security Administration approved his application and Kranz began receiving Social Security payments alongside his private insurance payments. According to the terms of his private insurance and those with the Social Security Administration, Kranz was legally required to provide notification to each entity if he were able to return to work.
Prosecutors alleged that from January 2006 to March 2013, Kranz worked as a psychiatrist at a medical facility in Pennsylvania and earned over $1.6 million for his services. Kranz did not report that he was able to and was working to the SSA or his private insurance company. Instead, in order to avoid being cut off from his disability benefits, Kranz took steps to hide his income from providing medical services from the insurance company, the SSA, and the IRS. Investigators uncovered that Kranz asked to be paid through nominee individuals and sham corporations he created for the purpose of receiving his employment payments. Kranz also filed falsified personal tax returns, reporting zero income from his work as a psychiatrist, and provided his private insurance company with false and misleading information about his true employment status.
In addition to serving over four years in prison, Kranz was ordered to serve three years of supervised release. Additionally, he will be required to pay restitution of over $1 million.
Many taxpayers believe that federal governmental agencies do not communicate with each other. Although it can sometimes feel that way, when it comes to investigating criminal behavior, interagency efforts are extremely common. In this case, Mr. Kranz violated laws that would be investigated by several different agencies. But as in many cases, if a taxpayer has profited by the violation of federal law, there is a strong likelihood that tax laws have also been violated.
If you have received notice that the IRS or state taxing authorities has selected your tax return for examination, it is in your best interest to contact an experienced tax attorney as soon as possible. Opening dialogue with a taxing authority with the assistance of a tax defense attorney will help you control the narrative without giving up information that may later be used against you at a trial.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers from varying backgrounds with diverse tax issues. Whether you are facing a payroll tax dispute or are under audit for an unrelated tax matter, our team of skilled advocates are standing by to help you craft a strategy that keeps your interests at the top of mind. Do not let the IRS or state taxing authorities keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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