According to a Department of Justice press release, a Hawaii Certified Public Accountant was recently sentenced to serve several years in prison on criminal tax charges relating to taking various steps to avoid the reporting of income and the concealment of assets once the IRS began their collection efforts. This story illustrates the importance of consulting with an experienced tax attorney before efforts to avoid paying tax become criminal.
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Court documents indicate that last November, a federal jury handed down convictions for Michael Higa and co-conspirator Wagdy Guirguis on counts of conspiracy. Additionally, Higa was convicted of one count of assisting in the preparation of a false tax return.
Higa, a licensed CPA in Hawaii, was the controller of several engineering businesses owned and operated by Guirguis. According to prosecutors, Higa was complicit in Guirguis’ attempts to divert business funds to his personal accounts intended for the payment of personal expenses.
One of the methods the pair utilized to pay less tax than owed was the failure to pay over $800,000 in federal employment taxes. When nearly a million dollars of employment taxes is not paid over, the IRS typically finds out, and not surprisingly, the IRS initiated collection efforts, as well as instituting a penalty of $812,000. In a continued effort to avoid paying tax, Higa and Guirguis took steps to thwart the IRS collection efforts. One such effort involved the fraudulent transfer of a condominium out of Guirguis’ name into solely his wife’s name. When the IRS caught on to the transfer of the condominium and began to inquire about the transfer, Higa and Guirguis instructed their bookkeeper cover up the existence of the transaction.
Prosecutors alleged that from 2001 through 2012, Higa and Guirguis utilized a nominee entity in an effort to divert nearly $1.3 million from business bank accounts to Guirguis for his personal use. The IRS estimates that during that time and as a result of the fund diversion, Guirguis underpaid federal income taxes by over $165,000. Finally, Higa assisted in the preparation of federal corporate income tax returns in which the company failed to report gross revenues of over $1.3 million.
Higa was sentenced to serve 40 months in federal prison and ordered to pay restitution of more than $2 million. Upon Higa’s release from federal prison, Higa will be required to serve three years of supervised release.
There is nothing criminal about structuring your business affairs in a manner that results in less tax being paid, as long as those steps are legal. On the other hand, many business owners and the professionals responsible for filing their tax returns have gone to prison for intentionally breaking the law with the motive to lower their taxes. If you are looking to optimize your business’s tax function and examine whether you can benefit from certain tax strategies, it is in your best interest to consult with an experienced business tax attorney.
Likewise, if you have potentially cut corners when preparing and filing your tax returns, you may greatly benefit from a consultation with an experienced tax defense attorney to determine if you have any criminal tax exposure. If such exposure exists, he or she will assist in the development of a strategy to mitigate the potential negative consequences of an IRS investigation or DOJ prosecution.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from all walks of life. Making a mistake and filing a false tax return can happen to anyone. Our team of zealous advocates is standing by to help assist in the crafting of a strategy to resolve your tax filing predicament. Do not let the stress of an unresolved tax dispute cause you to lose sleep. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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