The government’s tax crime prosecution activity increases every day. Most recently, their efforts resulted in the sentencing of a Pennsylvania man to six years in jail and $18 million in monetary penalties.
The defendant, Christopher Hogg, pled guilty to allegations of tax evasion, bank fraud, and filing false tax returns in September of last year. Hogg was engaged in a $21 million insurance scheme, but what tipped the government off to his activities was his failure to include $750,000 of income on a tax return.
The IRS is more vigilant and aggressive than ever before regarding unreported income. To make sure that you don’t find yourself in a sticky situation with the federal government, contact the dual-licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing by calling (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.
Businessman Sentenced to Six Years in Prison on Tax Evasion and Fraud Charges
On February 8, 2022, the IRS announced that Christopher Hogg of Gladwyne, PA had been sentenced to six years and three months in prison, with two subsequent years of supervised release. Additionally, United States District Court Judge Nitza Quinones Alejandro ordered Hogg to hand over more than $18 million in penalties and restitution to the federal government. The sentence comes after Hogg pled guilty last September to charges including bank fraud and conspiracy to commit bank fraud, filing a false tax return, and tax evasion.
The initial indictment alleged that between November of 2016 and January of 2018, the defendant participated in an insurance premium financing scheme. Together with other co-conspirators, the defendant submitted more than 30 applications to a financing company for loans that they purported were meant to be used for purchasing insurance.
Instead of purchasing that insurance, the defendant used the money to finance his business and his personal wealth. Hogg purchased several personal luxuries with the fraudulent funds, including a Mercedes Benz S-Class, a house on the Main Line, vacations, and membership at a country club.
How Did the Government Discover the Scheme?
The IRS was alerted to Hogg’s affairs when he failed to report income on consecutive tax returns. Hogg failed to include more than $370,000 on his Form 1040 in 2016 and failed to file a tax return in 2017 when he earned roughly $1.7 million in taxable income. The resulting loss of tax revenue for the government from these two years was around $750,000, to which the IRS did not take kindly.
This story represents a gross violation of tax law that was almost sure to be discovered. However, though many tax errors are not this egregious, the government announced Hogg’s sentencing with a clear message in mind – if you don’t report income, the government will find out, and they won’t be kind when they do.
Special Agent in Charge Jacqueline Maguire made this clear in her statement in the IRS’ press release announcing the sentencing: “Today’s sentence is significant enough that it should serve as a warning to other criminals: give careful thought to whether the ill-gotten gains you are receiving are worth going to prison; because that’s exactly where you’re going.”
The IRS Is Planning to Conduct More Audits and Criminal Tax Investigations
The Hogg case is just the start. The IRS has received considerably more funding from the current administration than in years past. The money is being used to bolster the IRS’s Criminal Investigations Department (IRS-CI). The IRS-CI is adding staff, upgrading their technology, and upping their litigation budget.
Practically, what this means is that the IRS is planning more audits. When the audits happen, they will take longer, and the government will investigate more thoroughly. And if the audit results in any suspicions of criminal tax violations, the IRS will have the resources to take the target to court and criminally prosecute.
This doesn’t just apply to future filings. You should expect the federal government’s tax watchdog to go back into past filings to investigate offenses where the statute of limitations has not expired. The range on a typical tax audit could run as long as six years in the past, meaning that issues that you thought had already been resolved might come back to haunt you.
The IRS got funds added to their war chest on the premise that they would close the tax gap, which is estimated to be over $1 trillion annually. Essentially, through tax prosecutions and convictions of previously undetected tax evaders, the federal government will recoup their investment in the IRS, and then some.
How Can You Prevent Tax Audits or Criminal Tax Allegations?
No one wants to find themselves staring down the barrel of an exhausting and invasive government tax audit or, worse yet, a criminal tax indictment. The best way to prevent yourself from falling into this situation is to make sure that you remain in compliance with the complex federal tax regulations.
Even if you have criminal tax exposure emanating from returns filed in years past, you still may have the opportunity to correct them. The federal government offers a voluntary disclosure program to taxpayers wishing to come clean about previous potentially criminal tax issues and avoid eggshell / reverse shell audits, criminal investigations and criminal tax indictments followed by prosecution. You can even secure predictable program based civil penalties by voluntarily disclosing your past noncompliance and simultaneously avoid criminal tax prosecution altogether.
However, you should not attempt to voluntarily disclose without the help of a seasoned dual licensed Tax Attorney & CPA. Depending on the circumstances, providing the government with information may not aid your case. If done incorrectly or at the wrong time, you could even exacerbate your existing criminal tax exposure. The dual-licensed Tax Attorneys and CPAs at the Law Offices of David W. Klasing have decades of experience with the voluntary disclosure process and can advise you if the program is appropriate to get you back into tax compliance without facing criminal tax 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!
Get Tax Law Help by Calling the Tax Law Offices of David W. Klasing Today
Get the Tax Law expertise that you need to avoid government audits and criminal tax charges by calling our dual-licensed Tax Attorneys and CPAs at (800) 681-1295.
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.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.
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
