Taxpayers who willfully violate federal tax laws often face harsh criminal penalties. When those taxpayers also happen to be tax professionals, the criminal consequences can be compounded by devastating career setbacks, such as the suspension (or outright revocation) of various licenses and certifications. For one real-world example, look to the case of former tax attorney Scott C. Cole, 55, of Indiana, who was fined and sentenced to prison this September after pleading guilty to felony tax evasion. Cole, by taking a series of actions to unlawfully avoid paying his full tax liability, defrauded the IRS out of approximately $2.4 million. Unsurprisingly, the defendant received stiff penalties at sentencing, discussed below. Notably, Cole resigned from his previous practice as a tax lawyer after a state disciplinary commission “charged Cole with the filing of fraudulent tax returns,” according to a Department of Justice press release issued earlier this year. The most recent press release regarding the case, which provides updates on Cole’s sentencing this September, is available here.
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“Cole has a complete lack of respect for the law, for the tax code, his fellow citizens and for the court.”
Chief Judge Jane Elizabeth Magnus-Stinson, who sentenced Cole this September, had stern words to describe the defendant’s conduct – and handed down a sentence to match. At a hearing on Thursday, September 5, the judge sentenced Cole to 30 months in federal prison, additionally, ordering the repayment of more than $2.4 million to the Internal Revenue Service: a total of $2,410,443, to be precise.
The defendant, who pleaded guilty to tax evasion in early April, at that time “owed over $1,000,000 in taxes and penalties” – tax debts which arose “from Cole’s fraudulent [i.e. willful] omission of over $1.5 million of income” from federal personal income tax returns filed for the years 2001 and 2002. (Notably, this determination resulted from a tax audit, exemplifying the extreme dangers of IRS audits to taxpayers with unreported income.)
Beginning in 2011, the IRS embarked on a long campaign to collect the aforementioned “taxes and penalties” from Cole, continuing into 2017 (and showcasing the IRS’ persistence in pursuing unpaid tax debts). Throughout this approximately seven-year period, Cole, acting willfully, “took various steps to evade [the] payment of his tax debt,” including:
While the following is of course not a crime, the DOJ also pointed out that Cole “dealt extensively in cash” – something which is often, whether fairly or unfairly, treated by the government as a red flag for tax evasion. If you are the owner of a cash-intensive business, it is wise to begin proactively preparing for the possibility of an audit as soon as possible.
United States Attorney Josh J. Minkler summarized Cole’s schemes concisely, stating that the defendant “intentionally and purposely used his [tax] ‘expertise’ to repeatedly obstruct the Internal Revenue Service and… evade his federal tax obligations.” Tax preparer fraud is dealt with harshly by the DOJ – and by professional organizations.
Earlier in this article, we noted that CPAs and other tax professionals face not only criminal and civil penalties for tax crimes, but moreover, the loss or suspension of licenses and certifications. To that point, readers should keep in mind that, according to the DOJ, “Cole resigned from the Indiana bar following the filing of a complaint by the Supreme Court of Indiana Disciplinary Commission in 2014.” The subject of the complaint? The false state and federal tax returns, allegedly filed for the tax years 2001 and 2002 – more than a decade prior to the complaint itself.
Tax preparers, corporate accountants, and other tax and financial professionals are at high risk for IRS penalties, disciplinary actions, and even incarceration when willful violations of state or federal tax laws occur. If you are a tax preparer who may be facing a strictly civil or criminal tax audit or IRS investigation, make sure you are represented by an award-winning legal team with decades of experience handling complex federal felony cases. Call the Tax Law Office of David W. Klasing at (800) 681-1295 today, or contact us online to arrange your reduced-rate consultation regarding a civil or criminal tax matter. We will keep your information confidential.
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If you do not feel the IRS has gotten either the facts or the law right in assessing on a federal tax audit, we are very adept and have a long track record of bettering our client’s proposed audit assessments through effective IRS appeals representation and where necessary, IRS tax litigation to force the IRS to treat you fairly.
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