Tony Luke’s is one of the most popular cheesesteak spots in the city of Philadelphia. Recently, its owners have been in the headlines for all the wrong reasons. The IRS announced in late July 2020 that Anthony Lucidonio, Sr., and his son, Nicholas Lucidonio, were indicted and charged with conspiracy to defraud the IRS, tax evasion, and aiding and assisting in filing false tax returns. If convicted, each of the defendants could face more than a decade behind bars as well as massive fines and other financial penalties. At the Tax Law Offices of David W. Klasing, our experienced Tax Attorneys and CPAs have been closely monitoring this story and what it could mean for other business owners across the country who have been employing similar tactics to the Lucidonios in order to avoid paying what they owe in taxes.
What May Have Led to the IRS’s Investigation of the Lucidonios?
While it does not provide specifics, the press release from the IRS detailing the Lucidonios’ misdeeds that led to their indictment reads as a sort of primer on exactly what not to do if you are looking to avoid scrutiny by the IRS. The Lucidonios are described as having committed nearly a decade’s worth of fraud against the agency and owing back taxes in the league of $8 million. Anytime you commit fraud this substantial, something is bound to catch the eye of an agent or auditor, or one of the “fraud technical advisors” (FTAs) that assist with audits, and lead them to refer you for a criminal tax investigation. Once an investigation is opened into your conduct, the skilled professionals at the IRS criminal investigation unit are not known to overlook anything. When they refer the matter for prosecution, they have a conviction rate of 90% +.
Another reason the IRS might have targeted Tony Luke’s is its status as a business that traffics in large amounts of cash. These businesses, like bars and restaurants, tend to be frequent targets of the IRS, as it is far easier to “cook the books” when cash is involved in most transactions instead of credit, debit, or some other secure bank transfer. Indeed, one of the issues mentioned in the press release is that multiple employees at Tony Luke’s reported being paid part of their wages under the table. Once something like this comes out, it is only a matter of time before the rest does. If you get in touch with a skilled tax attorney like those at the Tax Law Offices of David W. Klasing before things are referred for a criminal investigation or an audit, we can almost always work to bring you back into compliance without your actions resulting in a criminal conviction, even if they were willful.
Worth mentioning, but apparently not at issue in this case, is the use of Zapper Software that a cash based business owner can utilize to illegally remove cash sales and a corresponding amount of cost of goods sold from the books in proportion to the amount of skimmed cash is currently under attack by Federal and State taxing authorities.
What is Alleged in the Indictment Against the Lucidonios?
As noted above, the Lucidonios were charged with conspiracy to defraud the IRS, tax evasion, and filing false tax returns. From 2006 to 2016, the indictment alleges that the Lucidonios hid from the IRS more than $8 million in receipts by depositing only a portion of Tony Luke’s receipts into business bank accounts and filing false business and personal tax returns that substantially understated their income. Furthermore, it alleges that, through a scheme in which they paid only some of their employees’ wages “on the books,” while paying the rest under the table, the Lucidonios committed employment tax fraud because they failed to withhold and remit the necessary amounts of payroll taxes. From 2014 to 2015, their quarterly employment tax returns are alleged to have seriously understated wages paid and taxes due for those years.
Another interesting piece of information from the indictment is that the Lucidonios got spooked during an unrelated legal dispute over franchising rights in 2015. They feared that someone would leak information about their tax fraud scheme to the IRS, or the scheme would otherwise be uncovered in the course of the legal proceedings surrounding the franchise dispute. Instead of using this as a chance to contact a veteran dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing, who may have been able to help them get back into compliance, the Lucidonios amended prior-year tax returns to increase reported sales, but then falsely offset the increased income by fraudulently inflating expenses. These actions possibly helped spark a criminal tax investigation from the IRS.
If You Have Committed Past Acts of Willful Tax Fraud and Want to Get Back into Compliance without facing criminal tax prosecution, Call Our Battle-Tested Tax Attorneys Today
Just like most crimes, most of the time, willful tax fraud will catch up to you, and the longer you wait to let your wrongdoings be exposed, the more likely you are to face severe criminal penalties, including jail time & poverty inducing restitution. Unlike most crimes, tax fraud can be converted into purely a civil issue if you knock on the governments door before then bust your door in by making a timely, complete and accurate domestic or offshore voluntary disclosure. Luckily, if you get into contact with a skilled dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing before an audit or criminal tax investigation is opened, we can ordinarily bring you back into compliance without the assessment of criminal tax charges against you or the entities you own. If a high risk “egg shell” audit has already begun, we will help you survive it while minimizing the assessment of additional tax, penalties and interest and avoid your audit developing into a criminal tax investigation thus avoiding a criminal tax prosecution. Contact our office today at (661) 432-1480 to set up a consultation or schedule online here.
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
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- Tax crime aiding or assisting false return IRC §7206(2)
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- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
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- Failure to keep records or supply information
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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
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- What is a reverse egg shell audit?
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- 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
