According to a Department of Justice press release, a former Indiana CPA was recently sentenced to serve two years in federal prison for failing to include large sums of income on his individual tax return, resulting in the substantial underpayment of tax. This story should serve as a warning to those taxpayers who have failed to accurately report their true income or expenses on previously filed tax returns. The IRS has recently increased their headcount to provide more examination coverage, signaling that time is of the essence. If you have been untruthful on your previously-filed tax returns, it is in your best interest to consult with an experienced tax defense attorney to determine the strategy to come into compliance before the IRS initiates their own inquiry.
Defendant Failed to Report Substantial Amounts of Income
Court records reveal that Mark Harmon, 64, from Evansville, Indiana was the owner and operator of his own CPA firm. He assisted clients with accounting matters, as well as providing audit services. Department of Justice investigators alleged that between 2012 and 2015, Harmon’s largest client was the Pittsburg Tank and Tower Group. Between the tax years indicated above, Harmon received substantial income for providing accounting and financial audit services to the Pittsburg Tank and Tower Group. On audit, Harmon indicated that he earned approximately $75,000 per year from such services.
Because Harmon was providing professional services, Pittsburg Tank and Tower Group did not issue a Form 1099 on an annual basis. Likely knowing this, Harmon underreported the amount of income that he earned while doing work for the company. While under examination, Harmon untruthfully suggested that the large payments made to him by Pittsburg Tank and Tower Group were loan proceeds, and thus, should not be considered taxable income. When pressed on this issue, Harmon provided altered invoices that he had sent to the Pittsburg Tank and Tower Group which were titled “Loan Request”. After the real invoice requests were turned over by the company, he provided services to, Harmon admitted that he had altered the documents and that the amounts he was paid were truly income for services.
Harmon’s tax evasion caused a substantial underreporting of his income, which resulted in an underpayment of tax of more than $200,000. In addition to being sentenced to two years in federal prison, Harmon was sentenced to serve one year of supervised release. Additionally, he was ordered to pay over $208,000 in restitution to the IRS.
Underreported Income? Inflated Expenses? Get Right with The Government Today
As the deadline to file annual tax returns draws near, it is common for taxpayers to take steps to mitigate their tax bill. Although there are some lawful methods that can be used to reduce the amount of tax you owe, simply lying to the government about the money that you have earned is not an advisable one. If you have already filed a tax return for a prior tax year that has understated income, overstated deductions, or claimed tax credits that you were not entitled to, getting right with the government before your misdeed is discovered is generally the best strategy.
As we mentioned at the outset of this article, the IRS has hired hundreds of new revenue agents who will be responsible for auditing taxpayers and uncovering potential tax crimes. Additionally, the IRS has employed data analytics technology that provides the Service an automated pathway to detecting those who have lied on their tax returns. Consulting with an experienced tax defense attorney will help ensure that your physical and financial freedom remain top of mind while developing a strategy to come into tax compliance. While you are being represented by a seasoned tax lawyer, you will never have to go up against the IRS alone.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
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Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
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Questions and Answers on Unfiled Back Taxes
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Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
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- What are ways to defend against a tax evasion charge?
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- What is the willfulness requirement for tax evasion?
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- Concealed assets from IRS. Can I avoid tax evasion charges
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- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
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- Failed to tell IRS about my nominee account
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- Government says I attempted to evade my taxes. Now what?
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- Requesting conference before investigative report is done
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- Failure to keep records or supply information
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- IRC §7201 attempt to evade vs. common-law crime of attempt
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- How government proves a taxpayer attempted tax fraud
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- Why to have an attorney to review a proffer agreement
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- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud allegations
