According to a Department of Justice press release, Catinia Farrington, of Cypress, Texas, was sentenced to serve five years in a federal prison for submitting false claims to Medicaid and tax evasion. The criminal activity was alleged to have happened between 2011 and 2015 while Farrington was the owner of Durham County Mental Health and Behavioral Health Services LLC in Durham, North Carolina. According to federal prosecutors, Farrington processed claims for patients that were not even seen at her facility.
Court documents indicated that Haydn Thomas, an acquaintance of Farrington, worked on the administrative staff for a local oral surgeon. As part of Thomas’ work duties, he had access to sensitive medical information of the patients that visited the surgeon, including their Medicaid identification numbers. Prosecutors asserted that Thomas provided the numbers to Farrington and she filed thousands of false claims seeking Medicaid reimbursements.
The government estimates that Farrington earned more than $1.1 million relating to the fraudulent claims and used business bank accounts to pay for personal expenses to avoid paying federal income tax on the income. Farrington pleaded guilty to the charges levied against her last fall, as did her co-defendant Haydn Thomas. In addition to serving five years in prison, Farrington was ordered to serve a three-year term of supervised releases and pay nearly $4 million to the North Carolina Fund for Medical Assistance and nearly $400,000 to the IRS.
There are a great many taxpayers who use business bank accounts to pay for their own personal expenses, like Catinia did in the story outlined above. This can be true of those aren’t engaged in illegal activity, otherwise. The IRS takes issue with the payment of personal expenses with business bank accounts because it likely will result in (1) the business taking more tax deductions for expenses that do not actually relate to the business and (2) the individual benefiting from the use of the business bank account reporting less income or compensation from the business than they actually received.
Contact an Experienced Tax Attorney Today
If you are a business owner and have commingled your business and personal funds, you may be at risk if either your personal or business tax return is examined by the IRS. The best course of action is to consult with an experienced tax defense attorney to establish a strategy to rectify the situation. The IRS is ramping up their collection efforts in an attempt to pay for the new tax expenditures in the recent Tax Cuts and Jobs Act, which means that they will taking a close look at issues such as these during routine examinations.
Ms. Farrington’s case is also an example of federal agencies working together once a person is suspected of committing a federal crime. Ms. Farrington was likely first investigated for the fraudulent Medicaid claims and her tax crimes were discovered as a result. This is extremely common. That being said, taxpayers should not adopt the notion that their tax noncompliance will only be discovered if they are committing other crimes.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from varying walks of life. Whether you are a small business owner under audit, an individual with undeclared foreign bank accounts, or anything in between, our zealous advocates are ready to assist you develop a strategy with your physical and financial freedom as its top priority. Do not let the IRS, state taxing authorities, or the threat of tax-related incarceration keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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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
- How to respond to willful 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
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
