Recently, the owner of a construction business in Massachusetts made the news after receiving an indictment alleging a multi-million-dollar tax evasion scheme where Baiense purportedly cashed checks to pay employees under the table without reporting the wages.
Businesses that pay employees in cash are a natural target for the IRS, and with increased activity coming from the federal government, cases like these are becoming commonplace. Even if the government does not find enough in their investigation to produce an indictment, the investigation itself can be quite damaging financially.
You can protect yourself against government employment tax audits and criminal tax investigations or prevent them from even happening today by picking up the phone and calling the Tax Law Offices of David W. Klasing today at (800) 681-1295.
Quincy Man Allegedly Concealed $11 Million Through Payroll Scheme
On Friday, August 12, U.S. Attorney Rachael Rollins announced that a federal grand jury had indicted Mauricio Baiense for his part in a multi-year tax fraud scheme.
Baiense, 55, formerly of Quincy, was indicted on charges that included defrauding the federal government, failing to collect and pay over taxes, aiding and assisting in preparing false tax returns, and making false statements to a government agency.
Check Cashing and Under-the-Table Payroll Scheme
Baiense owned and operated Contract Framing Builders, a construction business based out of Medford. According to court documents, Baiense was responsible for filing the company’s employment tax returns and handling the payroll taxes submitted to the IRS.
Prosecutors claim that, in the taxable years between 2013 and 2017, Baiense “facilitated” having approximately $11 million worth of checks drawn on the company’s bank account. The checks were made out to separate contracting services that were allegedly owned by Baiense himself. According to the allegations, Baiense then cashed the checks and used the money from the checks to meet “off-the-books” payroll obligations for employees of Contract Framing Builders.
Baiense allegedly did not report the cash wages to the IRS and did not pay employment taxes on any of the wages paid to employees in cash. Prosecutors also claim that Baiense assisted in the preparation of at least one fraudulent employment tax return that understated the actual wages paid to employees of Contract Framing Builders. In total, prosecutors believe that Baiense’s collective scheme may have deprived the IRS of roughly $4.4 million in unpaid employment tax revenue.
False Statement at Labor Hearing
Baiense is also accused of making a false statement to federal investigators when questioned under oath at a U.S. Department of Labor Occupational Safety and Health Administration (OSHA) hearing. The hearing was in regard to a fatal workplace accident, according to the statement released by the U.S. Attorney’s office.
No further details are known about the nature or context of the allegedly false statement. However, the existence of this charge adds gravity to the potential consequences of Baiense’s legal battle.
Charges and Potential Sentencing
In total, the indictment against Baiense includes one count of conspiracy to defraud the U.S. government, seven counts of failure to collect and pay over taxes, one count of aiding and assisting in the preparation of a false tax return, and one count of making false statements. Baiense received a conditional release from U.S. District Court Magistrate Judge Jennifer C. Boal.
If convicted, Baiense faces up to five years in prison for each of the seven counts of willful failure to collect or pay over employment taxes, five years in prison for conspiring to defraud the United States, and three years in prison for aiding and assisting in the preparation of a false tax return. This totals up to a potential prison sentence of up to 18 years.
In addition to any prison time, the charges also carry substantial monetary consequences. The conspiracy charge features a potential fine up to $250,000, as do the charges of failure to collect and pay over taxes. The false statement charge carries a maximum fine of up to $250,000 as well, not to mention the potential interest on the unpaid income and a potential order of restitution payments to the IRS. All of the charges also carry a possible period of supervised release of up to three years.
Baiense also faces up to five years in prison for the false statement charge stemming from the OSHA hearing. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Businesses with Cash Payrolls Are a Target for the IRS
When you think of the IRS, you may commonly associate the agency with their efforts against large corporations and their executives. However, the reality is that the majority of the IRS’ criminal investigative and prosecutorial efforts each year are focused on small businesses and their owners. This is even more common for small businesses that frequently deal in cash, especially when using cash to meet payroll obligations.
This affects more than just bad actors. The government is naturally curious about businesses that operate in cash because they believe these entities are more susceptible to mistakes, if not outright fraud. This means that a small business that is operating fully within the federal tax code may still feel the heat from the federal government just because of how they conduct their day-to-day business.
Even if you haven’t done anything wrong, a federal audit can be a trying, costly, and damaging process. The best way to deal with the possibility of an audit is to prepare beforehand by ensuring that you have a thorough and reliable record-keeping system. If you have made mistakes in the past, you may have the ability to rectify them if you act now, thereby avoiding provoking the IRS and landing yourself in serious trouble.
As long as a taxpayer that has willfully committed tax crimes (potentially including paying employees or independent contractors in cash without issuing W2’s or 1099’s) self-reports the tax fraud through a domestic voluntary disclosure before 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, Kovel CPAs 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!
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.
Our Dual Licensed Tax Attorneys and CPAs Can Help Your Small Business Avoid an Audit
If you have concerns about IRS action against you or your small business, reach out to the dedicated Dual Licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing. Call us today to find out more at (800) 681-1295.
Questions about delinquent payroll taxes and trust fund recovery penalty
- What happens if an employer continues to incur new payroll tax liabilities?
- California Employment Taxes Basics
- How Does the IRS Develop an Employment Tax Fraud Case from the First Indication of Fraud to a Criminal Indictment?
- Can more than one person be considered responsible by IRS
- How unpaid employment tax payments are allocated
- When a corporate officer is considered a responsible party
- Examples of trust fund recovery penalty determinations
- Failing to pay employment taxes after notice is given
- How to determine responsible person for trust fund recovery
- Assessing trust fund recovery penalty and option to appeal
- What is the trust fund recovery penalty?
- What are the penalties for failure to pay employment taxes
- When am I considered liable for company’s employment taxes
