For many individual taxpayers and businesses, the days before April 15th can be lost in a flurry of activity as they attempt to resolve their long-neglecting, yearly tax reporting and payment duties. However at other homes and local businesses where taxes have not been filed for the 2014 tax year, things may be suspiciously quiet and subdued. In homes or businesses like these, some may make comments like, “I don’t pay enough in taxes for the IRS to miss it, anyway.” Others may begin to do their taxes and then realize that they do not have the funds or resources available to cover their tax liability. Then, they incorrectly believe that they are better off failing to file and pay taxes to conceal their liability.
In short, tax problems can arise through a number of actions or failures to take action. While the reasons for tax problems can change, the fact that the IRS is aggressively pursuing non-compliant taxpayers regardless of their size and resources does not. In fact, in the days immediately preceding the April 15th tax deadline, the US Department of Justice (US DJ) published a rundown of some of its more notable tax prosecutions from the past year. What is notable about these convictions is that they include criminal convictions against entities including large and well-connected businesses, professional service providers like accountants and lawyers, and individual taxpayers.
Willful failure to pay tax can result in a felony conviction
One of the tax convictions highlighted by the DOJ and IRS is that of attorney William M. Weisberg. Mr. Weisberg was sentenced to one year and one day in federal prison for his willful failure to pay taxes. Additionally he was ordered to pay back more than $450,000 in restitution due to the unpaid taxes. According to documents released during the trial, despite filing taxes for 2008, 2009 and 2010 Mr. Weisberg only paid a portion of his tax liability for the 2009 tax year. Taxes for 2008 and 2010 went entirely unpaid despite Mr. Weinberg making many lavish expenditures including:
- $150,000 in school costs for his two children.
- $250,000 to rent a home.
- $35,000 for maid and house cleaning services.
- $135,000 for travel and entertainment expenses.
The IRS attempted to work out a payment plan with Mr. Weinberg in 2010. But Mr. Weinberg compounded his legal liability by lying to the IRS. He falsified a document from his law firm to state that the firm was already withholding funds from his checks to turn over to the IRS when it was not. To the IRS agent, this act signified willfulness and led to the enhanced penalties that he faced. Typically a non-willful failure to pay taxes can be punished at a rate of one-half of 1-percent of the unpaid tax liability for each month or part of a month where the tax remains unpaid.
Businesses must disclose all income, accurately state expenses, and pay over payroll taxes
Also highlighted in the IRS and DOJ’s list of tax convictions is the conviction of Arkan Summa, the owner of a number of Happy’s Pizza franchises. Mr. Summa was convicted as a participant in a tax conspiracy that underreported income and overstated expenses of his franchises. Furthermore employee wages were underreported in a fashion that resulted in an underpayment of payroll taxes, also known as trust fund taxes. Businesses have an obligation to collect, hold in trust, and turn over payroll taxes to the federal government. When they do not, serious penalties can apply. Mr. Summa was sentenced to 18 months in federal prison and was also ordered to return nearly $200,000 in restitution. The founder of Happy’s Pizza and 3 other individuals who participated in this scheme have also been convicted and sentenced.
Furthermore consider the actions of Nick Jodha, the owner and operator of United HVAC Services, Inc. From 2007 to 2010, Mr. Jodha had cashed some checks written out to his company at a check cashing service and failed to notify his accountant. Mr. Jodha also failed to mention that these funds were used for both personal and business expenses. While it is unclear whether this was part of a scheme to evade tax or an honest mistake, the IRS agent clearly believed that Mr. Jodha’s actions showed a willful intent to evade taxes. Mr. Jodha was sentenced to 12 months and one day in prison and must also pay more than $200,000 in restitution.
Business tax problems? Unfiled or unpaid taxes?
The IRS is aggressively pursuing taxpayers who have failed to comply with their obligation to file and pay taxes. If you failed to file by this April 15th, the longer you wait the more severe the penalties you face will be. There is no taxpayer too big or too small to escape IRS scrutiny. Moreover, if you filed a fraudulent return for 2014 that intentionally understates income and have done so for several prior tax years you should contact us immediately. The Tax Law Offices of David W. Klasing can work to help you resolve your tax problems including potential exposure for tax crimes. Call (800) 681-1295 today to schedule a reduced-rate tax consultation or contact us online.
