Despite using no fewer than four different names, 41-year-old Florida resident Sally Ann Johnson – otherwise known to authorities as “Angela Johnson,” “Angelia Johnson,” and “Sally Reed” – failed to avoid being prosecuted last year for felony tax evasion. Unfortunately for Johnson (or Reed), it seems that her psychic abilities, which apparently promised “spiritual cleansing,” were not powerful enough to predict the immense penalties she would receive, including fines, restitution, and prison time, after pleading guilty to attempting to interfere with the administration of the Internal Revenue laws. Johnson, who concealed from the Internal Revenue Service (IRS) approximately $3.5 million in income received from “an elderly Martha’s Vineyard woman” for performing “repeated exorcisms,” was sentenced by U.S. District Court Judge Denise J. Casper in January 2018. Perhaps a stronger crystal ball would have helped Johnson avoid conviction, though the safest route would have been to report and pay taxes on the income.
Psychic Fined, Sentenced to 26 Months After Pleading Guilty to Tax Fraud
According to a press release issued by the Department of Justice (DOJ), “Johnson owned and operated various businesses, including Flatiron Psychic, Psychic Match, Inc., and Psychic Spiritual Salon, Inc., all of which purported to offer ‘psychic readings,’ ‘spiritual cleansing & strengthening,’ and ‘meditation & healing.’” Through these businesses, Johnson, rotating between multiple aliases, collected payments totaling more than $3.5 million from a client described as an “elderly woman living on Martha’s Vineyard,” who enlisted Johnson to help “rid [herself] of demons through repeated exorcisms.”
Momentarily setting aside the ethics of selling exorcisms to the elderly, nothing within the Internal Revenue Code prohibits an enterprising individual from marketing himself or herself as a “psychic.” What the IRC does prohibit, however, is concealing income earned through such enterprises. You might not believe in ghosts and ghouls, but you cannot doubt the existence of the Tax Code – nor the government’s willingness to aggressively prosecute those, like Johnson, who willfully violate its provisions. If demons don’t scare you, the threat of an IRS criminal investigation should.
Just consider the penalties that Johnson, after pleading guilty in Boston federal court, received for her tax crimes. Not only must she pay the IRS restitution totaling just over $725,900, she must also repay her client all $3,567,300 charged for the “spiritual cleansing and healing services” rendered. Further, Judge Casper ordered Johnson to serve a sentence of 26 months in prison.
Readers of our tax law blog should keep in mind that these penalties were the result of a plea agreement Johnson willingly entered with prosecutors, meaning they are actually less severe than the consequences Johnson may have otherwise risked. The statute under which Johnson was prosecuted, 26 U.S. Code § 7212 (attempts to interfere with administration of internal revenue laws), provides under 26 U.S. Code § 7212(a) a maximum prison sentence of up to three years, or 36 months.
California Tax Preparation, IRS Audit Representation, and Criminal Defense
Johnson followed an elaborate scheme to evade, for a time, detection by the federal government. According to the press release, Johnson’s actions included:
- Instructing the client “to send payments to at least three different bank accounts with which Johnson was associated, including an account in another person’s name.”
- Making large cash withdrawals from the accounts after the deposits were made.
- Using a credit card, in the client’s name, to “accrue substantial charges.” Because the card was registered to the client, who therefore paid the associated credit card bills, the IRS was unable to assess this portion of Johnson’s income.
- Failing to file a personal income tax return, and failing to file a tax return for any of the businesses Johnson operated. As Tax Day approaches, business owners should note that, even without income or expenses, certain entities may still be required to file returns. When in doubt, it is prudent to review your tax responsibilities with an experienced business tax attorney.
- Failing to pay taxes on the income, which exceeded $3.5 million, received from the client.
Our experienced criminal tax defense attorneys do not need to read your palm to tell you that, if you have failed to file a tax return, failed to pay taxes, failed to report domestic or foreign income, or otherwise failed to comply with the U.S. Tax Code, you could find yourself in a similar position as Sally Ann Johnson. If you are already under audit or are facing a criminal investigation, the need for zealous and aggressive representation is critical to mitigate penalties while ensuring protection of your constitutional rights.
If you have any doubts or concerns, however minor, regarding your compliance with local, state, federal, or international tax laws, you are urged to contact an Orange County tax evasion attorney for aggressive representation and dedicated, on-point financial guidance. With the recent wave of federal tax reforms likely to cause confusion for individual taxpayers and businesses alike, it is more crucial than ever to retain meticulous and trustworthy tax preparation services to help guide you over this year’s rocky tax terrain. As we enter tax-filing season, don’t struggle with the new tax laws alone: instead, get prompt and dependable tax help from the award-winning legal team at the Tax Law Office of David W. Klasing. For a reduced-rate consultation with our IRS tax attorneys or tax planning professionals, contact us online, or call the Tax Law Office of David W. Klasing at (800) 681-1295 today.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.
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Here is a link to our practice overview video on warning signs than an audit has gone criminal.
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
Foreign income and information non-compliance
