On Tuesday, April 10, 2018, Miami-based CPA Darryl Sharpton was indicted by a federal grand jury on multiple tax-related criminal charges, including (1) willful failure to collect or pay over tax, in violation of 26 U.S. Code § 7202; (2) willful failure to file return, supply information, or pay tax, in violation of 26 U.S. Code § 7203; and (3) attempt to evade or defeat tax (commonly called “tax evasion” or “tax fraud”), in violation of 26 U.S. Code § 7201. Prosecutors assert that Sharpton not only failed to file tax returns, but also failed to pay taxes, for multiple tax years. The defendant allegedly accomplished these crimes by misusing corporate accounts, removing his name from business records, and lying to agents from the Internal Revenue Service (IRS). Like our previous profiles of accountants and tax preparers who have been indicted (and in many cases, convicted) for tax crimes, Sharpton’s case, though still pending, delivers a sharp reminder to noncompliant taxpayers: it may take years, but the IRS will eventually detect and retrace your missteps. If you have unfiled tax returns, owe money to the IRS, or have misrepresented information to the IRS, you risk the same consequences as Sharpton.
The Department of Justice (DOJ) press release announcing the indictment notes that Sharpton, a Certified Public Accountant, owned the Miami CPA firm The Sharpton Group, which “specialized in financial and management consulting, audit and attestation, and tax and wealth planning.” If prosecutors’ allegations are true, Sharpton used his extensive professional tax knowledge to advance a multi-year tax fraud scheme, in which the defendant allegedly:
Prosecutors allege that Sharpton acted willfully, or deliberately, which is why the case is being treated as a criminal rather than civil matter. (For a thorough discussion of this subject, readers may be interested in our explanation of the difference between criminal tax evasion and civil tax fraud, or how the IRS determines whether conduct was willful.) Examples of Sharpton’s willfulness noted in the press release include “removing himself from his company’s payroll, paying his personal expenses through the corporate bank accounts, and lying to an IRS collections official” – all examples of deliberate actions that were specifically calculated to minimize or outright avoid the defendant’s tax liabilities.
Sharpton’s legal troubles, like those of most taxpayers who find themselves in similar positions, began with an IRS tax audit, which – like many – culminated in the assessment of additional tax. When Sharpton failed to pay his adjusted tax bill, the IRS attempted to collect the unpaid tax debts by issuing IRS tax levies and tax liens.
Rather than addressing or challenging this unwelcome outcome the lawful way – that is, working with the IRS to negotiate an offer in compromise (OIC) or installment agreement, or alternately, filing a written protest disputing the basis for the assessment (a process known as “appealing” an audit) – Sharpton responded by taking the actions described above, apparently in an effort to disappear from the IRS’ radar. Needless to say, this effort proved unsuccessful.
In addition to failing to file and pay taxes on his own behalf, Sharpton also allegedly failed to remit the payroll taxes he withheld from his employees’ compensation. Failing to pay over withheld employee compensation, a common example of payroll tax fraud, can trigger a penalty known as the “Trust Fund Recovery Penalty” (TFRP), which is typically calculated by adding the employee’s portion of the taxes that were withheld to the unpaid income taxes that were withheld.
The TFRP, though costly, may be among the least of Sharpton’s worries. If found guilty, he could also be sentenced to (1) up to five years in prison per count of failure to pay over payroll taxes; (2) up to one year in prison per count of failure to file a tax return; and (3) up to five years in prison per count of tax evasion. Moreover, the nature of Sharpton’s professional background – tax planning and wealth management – means he will likely be censured or face crippling sanctions. The same is true of tax attorneys, financial planners, financial risk managers, and other types of financial professionals who become embroiled in IRS criminal investigations.
Anyone can be prosecuted for tax crimes, including accountants, attorneys, and other tax professionals. Do not assume that noncompliance will go unnoticed, however seemingly minor or well-disguised. Gain control of the situation early on by working with an experienced tax attorney.
Whether you are looking for an IRS tax audit lawyer to represent you during an audit, an IRS audit appeals attorney to help you dispute the results of an audit, a tax relief attorney to help you work out an IRS payment plan, or a criminal tax defense lawyer to protect your rights and defend you in court, the Tax Law Office of David W. Klasing is prepared to provide the level of zealous service that distinguishes our tax firm from the rest. To schedule a reduced-rate consultation about a state, federal, or international tax issue, contact us online, or call the Tax Law Office of David W. Klasing at (800) 681-1295.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing we now have offices in San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento. You can find additional information on all of our offices here.
Helpful Audit, Appeals and Litigation Q and A Libraries:
Helpful Audit Appeals and Litigation Videos:
How do you survive an audit where you cheated? https://youtu.be/FZce4jqQJpI
How should tax audits be handled by Criminal Tax Counsel? https://youtu.be/0kt7eEp3g1c
When should you ditch the original preparer? https://youtu.be/0kt7eEp3g1c
Why should I hire the Tax Law Offices of David W. Klasing to handle my appeal? https://youtu.be/qqDQgXRmYu0
How do I know when I should file an appeal? https://klasing-associates.com/question/know-sure-im-ready-request-appeals-conference/
What are the basics of Federal tax litigation? https://youtu.be/FgxeoucqM7g