According to a press release from the U.S. Department of Justice (DOJ), 49-year-old defendant Saleem Hakim, a former precious metals broker from Smyrna, Georgia, was convicted by an Atlanta federal jury on three counts of tax crimes in December 2018. The defendant, who was found guilty of willfully failing to file tax returns on three occasions, deceived not only the federal government, but also his own clients, pocketing a portion of the funds they contributed to his operations for unauthorized “personal use.” Following his conviction last month, Hakim now awaits sentencing, which is scheduled to occur on February 26, 2019. According to one analysis of the case (U.S. v. Hakim, 2018), he “filed three pretrial motions, raising several issues and many nonsensical allegations. (Dkts. 14, 17, 18). He argued, for example, that he is a separate corporation, that his name is copyrighted, and that he is subject only to God’s law.”
During the period from 2011 to 2013, Saleem Hakim was enjoying success with his precious metals business. Over these three years, clients paid more than $1 million to retain Hakim’s services, which involved “brokering the sale of precious metals,” according to DOJ records.
Needless to say, this would have placed Hakim well above the monetary threshold to file a federal income tax return, an obligation he should have understood clearly. (For the 2019 tax year, the threshold is generally $12,000 for those who are single and under the age of 65. In 2011, the income threshold was even lower at $9,500.) Nonetheless, he willfully failed to file income tax returns for the three-year period in question.
Taxpayers (and even tax professionals) often wonder whether failing to file returns is a crime. Unfortunately for taxpayers, the answer is that it can be, as is clearly established by federal statute at 26 U.S. Code § 7203, pertaining to “willful failure to file return, supply information, or pay tax.” This statute provides the following:
“Any person [who is] required under this title to pay any estimated tax or tax, or… to make a return, keep any records, or supply any information, who willfully fails to [do so], at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor…”
It is important to note that the statute specifies willful, as opposed to negligent (careless), failure to file. However, that does not mean that non-willful taxpayers are necessarily “off the hook.” While negligently failing to file a tax return is not prosecuted like a criminal offense, this sort of violation can lead to hefty IRS penalties: 5% of the outstanding tax due, with another 5% added for every month or partial month the taxpayer fails to file the return. These failure-to-file penalties have a ceiling of 25%.
It is also important to note that, with regard to criminal violations, penalties are more severe: up to one year in jail, in addition to fines as great as $25,000 for individuals (or $100,000 for corporations). Further, the court may order the defendant to pay the IRS restitution, and/or to serve a period of “supervised release,” which is similar to probation, after he or she is released from jail.
According to the aforementioned case analysis, Hakim attempted to defend his case by citing Clearfield Trust Co. v. United States (1943), a Supreme Court case which involved a dispute as to whether federal laws controlled “negotiable instruments” (such as checks or promissory notes). However, as the analysis then noted, Clearfield “simply has no bearing on his criminal case.” Several other notable excerpts from the analysis, which describes the defendant’s pretrial motions as “rambling and nonsensical,” are quoted below:
The bottom line for non-filers and criminal tax exposure is that the simple act of non-filing when you have a legal requirement to do so is a misdemeanor. Wesley Snipes did there years in jail for this. If any of the factors in Spies v. United States are present the misdemeanors can be ramped up into felonies. Even as simple misdemeanors with 6 years of non-filing you could potentially be looking at 6 years in jail (one year in jail per count). If charged with “Spies” evasion 5 years of non-filing could potentially lead to 15 – 25 years in jail (three to five years in jail per count).
Our office has an extensive history of bringing non-filers safely back into the system without criminal tax prosecution and we also can help work out a reasonable collection alternative to deal with the back taxes, penalties and interest you will most likely owe.
Willful or even negligent failures to file tax returns can lead to debilitating tax penalties – and in a worst-case scenario, federal prosecution. If you need help catching up on unfiled taxes, ask the non-filer assistance attorneys at the Tax Law Office of David W. Klasing how we can help you file back taxes, minimize penalties and liabilities, and get current on the amount you owe. Whether you simply forgot to file taxes last year, or you have a more complex non-filer tax issue, our award-winning team of attorneys and accountants is here to provide guidance. Contact us online today for a reduced-rate legal consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
Helpful Q and A Libraries: