Recently, a Fresno California business consultant received a sentence of multiple years in prison and nearly $2 million in restitution payments after pleading guilty to charges including wire fraud, bank fraud, and tax evasion. The defendant’s alleged schemes were egregious in nature, but the prosecution and sentencing show an increased criminal tax enforcement appetite on the part of the IRS.
With federal income tax audits and criminal tax investigations on the rise, now is the time to secure your defenses against the consequences that these invasive actions can bring to you or your small business. The first step in protecting yourself is reaching out for help.
To discuss your situation and concerns with a Dual Licensed Tax Lawyer and CPA, reach out to the Tax Law Offices of David W. Klasing today by calling us at our offices at (800) 681-1295 or schedule online HERE.
Business Consultant in Fresno Sentenced After Pleading Guilty to Criminal Tax Charges
On April 18th, the Department of Justice issued a press release announcing Kenneth Shane Patterson, of Fresno, California, had received a sentenced from U.S. District Judge Dale A. Drozd of the U.S. District Court for the Eastern District of California. Patterson, 44, received a sentence that included 66 months in prison time and an order to pay $1.9 million in restitution to the IRS. The sentence followed Patterson’s entering of a guilty plea last October on charges of wire fraud, bank fraud, and tax evasion.
Wire Fraud
According to court documents, Patterson convinced the owner of a small business to provide him with funds that totaled over $1 million over the course of 31 months. Patterson represented to the small business owner that he would use this money to clear liens and pay other expenses so that he could ultimately purchase a skilled nursing facility in Pasadena. Patterson claimed that, once he had purchased the nursing facility business, he would sell it back to the small business owner for lower than market value. However, court documents suggest that Patterson never intended to use the funds he received from the small business owner to purchase the nursing facility, and instead spent them on separate business expenses as well as his own personal gambling.
Bank Fraud
Patterson also used a bank fraud scheme known as “check-kiting” to spend money that he did not have. Patterson wrote two checks totaling $230,000 from a JPMorgan Chase business account in his control and made them out to another business account that he controlled at Bank of America. However, Patterson’s JPMorgan Chase account was insufficient to cover the checks. In fact, court documents show that the JPMorgan Chase had a balance of less than $10,000 at the time of the transfer.
After the illegitimate transfer, Patterson quickly spent the funds from the Bank of America account before the bank realized that the check had bounced. As a result of Patterson’s check-kiting scheme, Bank of America sustained a loss of roughly $150,000.
Tax Evasion
Court documents suggest that Patterson made use of a variety of illicit strategies to evade both the assessment and payment of federal income taxes. These evasive behaviors date back as far as 2003. In particular, government prosecutors focused on Patterson’s having no personal bank account, paying expenses on business accounts, and doing a substantial amount of business in cash.
Takeaways from the Patterson Sentencing for Taxpayers and Small Business Owners
In this case, just like any other criminal tax proceeding, there are a few lessons that our Dual Licensed Tax Attorneys and CPAs can take away and use for the benefit of our clients.
Be Careful with “Business Experts”
Patterson described himself on his LinkedIn page as an “Accomplished Business Development Officer with over 20 years’ experience in the SBA Industry.” Patterson claimed that he had more than “$2 billion in SBA 7a, and SBA 504 Loans and SBA 504 Green Loans and USDA B&I Loans under [his] belt.” No matter how trustworthy someone may seem, you should always enlist the help of a Dual Licensed Tax Lawyer and CPA to help you evaluate any business dealings where you are parting with a large amount of your hard-earned money.
The IRS Can Look Back Far into Your Income Tax Return History
To secure the guilty plea, the IRS’ Criminal Investigations Division (IRS-CI), the FBI, and the Office of the Inspector General for the Federal Deposit Insurance Corporation (FDIC) utilized information that they had from Patterson’s tax filings from nearly 20 years ago. While some tax code violations are barred from prosecution after a certain amount of time has passed, others are not. If the government suspects that you may have some issues in your reporting history, they now have the capability and resources to investigate.
Even if you did nothing wrong and have nothing to hide, the process of a federal or California government audit or criminal tax investigation can be tedious, time-consuming, and have damaging effects on your personal and business reputation. Therefore, the best way to prevent the consequences of past mistakes coming back to bite you is to discuss your tax filing history with a Dual Licensed Tax Attorney and CPA.
Plea Deals Won’t Always Keep You Out of Jail
Many criminal tax defendants who are hoping to avoid spending time behind bars will look to accept a plea agreement with prosecutors. A plea agreement is a deal where a defendant agrees to plead guilty to some charges in exchange for favorable considerations, such as other charges being dropped or lighter sentencing recommendations from prosecutors. However, just because a prosecutor recommends that a defendant avoid jail time or massive fines does not mean that a court is bound by the plea deal. Before accepting any type of agreement on criminal tax charges, be sure to discuss your situation with your Dual Licensed Criminal Tax Defense Attorney and CPA.
Get Tax Help When You Need it from the Tax Law Offices of David W. Klasing
Our Dual Licensed Tax Attorneys and CPAs provide a circumspect approach to our clients’ issues that can benefit you no matter the circumstances. To find out more, call us today at (800) 681-1295.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
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!
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
- What is a reverse egg shell audit?
- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
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
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
- Tax crimes related to employment tax forms and trust funds
- Tactics to defend or mitigate IRS criminal tax charges
- How the IRS generates leads about suspected tax crimes
- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
- Does the IRS have a dollar threshold for tax fraud?
- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
- Does section 7201 create two distinct criminal offenses?
- Does tax evasion definition include partnership LLC
- What if I helped someone else evade taxes?
- Is it illegal to overstate deductions on my tax return?
- Is it illegal to conceal bank accounts from the IRS?
- Do later losses justify prior deductions?
- Common reasons the IRS and DOJ start investigations
- What is the Mens Rea component of tax crimes?
- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
- Why enter into a proffer agreement?
- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud allegations
Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return
