Individuals holding positions of authority and trust can, over time, come to believe that they serve an indispensable role. While there is nothing wrong with valuing work one performs and the service one provides to the community, for some people a line can be crossed. They may progress from a confident, self-assured individual to one who seems to believe that their contributions and characteristics place them above the law. Unfortunately, assumptions that one’s tax fraud cannot or will not be detected rarely pan out. Frequently these individuals end up facing serious criminal tax charges after their schemes are discovered.
While one cannot know the exact thoughts that go through the mind of a person before they engage in fraud or tax evasion, there does seem to be several general patterns of thought that are characteristic of this type of thinking.
Some individuals seem to believe that they are simply beyond suspicion due to their community standing or contributions. Essentially, they consider themselves to be “Teflon” in the sense that people would never even suspect that they could engage in fraud or other wrongful acts. This type of thinking is often present in individuals who make significant charitable donations, have a role in the local or community government, or are a priest or religious individual.
Other professionals seem to believe that their intelligence and goal-oriented personality have allowed them to develop the “perfect” tax scheme that is undetectable to regulators. This type of thinking is often present in extremely high achieving individuals like doctors, surgeons, business people, and others. The belief that the IRS cannot possibly identify and track the fraud is also present in many owners of smaller cash intensive businesses who believe that cash presents an opportunity to commit fraud. Thinking that you can outsmart the taxing authorities is a common cause of many a tax evasion conviction. They have seen it all and if fraudulent taxpayers come up with something new they will soon become aware of it because that is their job.
Still, other professionals occupy positions of trust because their work involves highly intimate and emotionally fraught aspects of their client’s life. While most professionals take their duties seriously, some may attempt to exploit the sensitive or embarrassing nature of their client’s visit for their own gain. They may believe that an embarrassed, grieving or otherwise compromised client is less likely to report their misdeeds.
Some folks cheat a little and get away with it. Then they cheat a little more, and a little more and a little more often revisiting the same return multiple times in program like TurboTax. Tax fraud is often learned behavior common in first generation Americans that learned to do business in corrupt business environments. The reasons fall away as unimportant once an audit turns criminal or the criminal investigation division comes a knocking.
According to allegations made by federal prosecutors from the Department of Justice, funeral home director Al T. Hughes diverted at least $1.25 million in income over a five-year period. Despite this significant income, prosecutors allege that Hughes failed to report it and pay taxes on it. In fact, prosecutors allege that Hughes reported only $268,164 in income over the affected period.
Generally, prosecutors claim that the scheme by Hughes was conducted by diverting customer and client checks. Rather than depositing the check in the corporate accounts, prosecutors say that Hughes deposited the checks into his own account or at a check cashing service. He did not inform his business partner of his actions. Prosecutors charge that Hughes typically used the misappropriated funds to pay personal expenses.
Hughes is charged with a failure to report the diverted receipts as income on his 2010, 2011, 2012, 2013, and 2014 federal tax returns resulting in a substantial tax due and owing to the Internal Revenue Service. For each of the five counts faced by Hughes, a five-year maximum prison sentence could apply. In addition, individuals convicted of tax crimes are also frequently made to pay restitution amounting to the tax dollars the taxpayer cost the federal and state governments, penalties, and interest to settle their tax debt. Furthermore, a fine, the costs of prosecution and a term of supervised release can also apply.
If you are a professional who has committed tax mistakes or tax crimes, the “human factors” you believe will deflect suspicion are unlikely to provide much, if any, protection. IRS agents and auditors simply follow the money and paper trail to tax crimes – wherever the facts may lead. All it takes is as little as $10,000 of unreported income and the Revenue Agent working your audit is required to consult with a Technical Fraud Advisor to determine if the facts of your case warrant a handoff to the criminal investigation division of the IRS whom has an 80% conviction rate if they chose to open a tax crime investigation. If you are concerned about facing tax charges, there may still be time to correct your mistakes and avoid a potential worst case scenario. Whether you are merely concerned or already facing an audit or criminal tax investigation/enforcement proceeding, contact the tax attorneys of the Tax Law Offices of David W. Klasing for a reduced rate initial consultation by calling 800-681-1295 today.