According to a Department of Justice press release, Lamar Taylor, a former Virginia Commonwealth University basketball team captain, was sentenced to 37 months in prison last week for Medicaid fraud and tax evasion. This case and others like it should serve as a warning to taxpayers that have not included all items of income (whether acquired legally or otherwise) on their income taxes.
Taylor owned and operated Global Interventions LLC, a Virginia-based company that provided at-risk youths with mentoring and counseling services. Global Interventions had a contractual relationship with the Virginia Department of Medical Assistance Services whereby Global Interventions would be paid Medicaid funds for services rendered to the at-risk youths in its charge. Taylor admitted that between 2014 and 2016, he and others caused Global Interventions to bill Medicaid, through an intermediary, for approximately $595,000 for mentoring services that were never performed. The IRS also participated in the investigation and assisted with tax evasion charges as Mr. Taylor failed to file personal tax returns and Global Interventions’ employment tax returns from 2012 through 2015, resulting in a Treasury revenue loss of approximately $400,000. The statutory maximum sentence for Taylor was 15 years but federal sentencing guidelines, a set of helpful instructions on how to sentence federal convicts, suggested 3 to 4 years.
It is fairly obvious that the Medicaid system cannot be exploited without criminal repercussions. On the other hand, the tax implications of such exploitations are not as intuitive. Section 61 of the Internal Revenue Code defines gross income as all income from whatever source derived. That simply means that unless the tax code specifically excludes a particular item of income, any income resulting in ascension to wealth is gross income and should be included on a taxpayer’s tax return in the appropriate year. Thus, when Mr. Taylor gamed the Medicaid system, he and his company should have included the nearly $600,000 of stolen funds on their respective tax returns. Failure to do so can (and in this case, did) result in a tax evasion charge and conviction.
One may ask how someone being investigated for Medicaid fraud also gets busted for tax evasion. The answer is more simplistic than you may think. The federal agencies that investigate financial crimes do not operate in a vacuum. The Federal Bureau of Investigation, Securities and Exchange Commission, and other agencies have open lines of communication with the IRS. During a criminal investigation, the IRS can give an investigating agency a view into the financial affairs of the investigation’s target. Reciprocally, when a government law enforcement agency determines that a financial crime has been committed, a quick call to the IRS can reveal whether the accused included the amount by which he or she was unjustly enriched on his or her tax return for the appropriate year. Likewise, if a taxpayer’s financial data suggests that he or she has engaged in illegal activity, a reviewing IRS agent may call in the assistance of other IRS investigators and even authorities from other federal or state law enforcement organizations.
An experienced tax attorney can be an extremely valuable resource at every point in an audit, investigation, or dispute. Unlike other tax professionals, a Criminal Tax Defense lawyer has extensive training in criminal tax defense, Constitutional law, and criminal procedure. A seasoned tax attorney with experience in audit defense can identify requests from the IRS or state taxing authority that may, if complied with, incriminate the taxpayer in a future proceeding. They can also remove the risks of criminal prosecution for past intentional acts of domestic, California or offshore evasion through a voluntary disclosure.
The accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers from all walks of life who are in need of a wide range of tax services. Whether the IRS has notified you of an upcoming audit, or the state taxing authorities have threatened you with a lien or a levy, our zealous advocates can worth with you to develop a go-forward strategy with you and your family in mind. Don’t let the threat of incarceration or hefty fines keep you up at night. Contact the Tax Law Offices of David W. Klasing for a reduced-rate consultation.
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