There are many ways that taxpayers can illegally evade their tax obligations. However, when a tax evasion scheme is uncovered, its perpetrators can face significant civil and criminal tax penalties.
For instance, Ryan Richmond, the former owner of a Warren-based cannabis dispensary, has been found guilty of tax evasion and is potentially facing a minimum of nine years in federal prison. Richmond routed customer credit card payments through a bank account unrelated to his business in order to conceal revenue acquired between 2011 and 2014. He also misled Internal Revenue Service (IRS) investigators about his involvement in the tax evasion scheme, exponentially worsening the consequences of his actions as lying to a federal agent is a felony in and of itself.
If you need assistance dealing with a civil or criminal, domestic or international, federal or California tax issue, contact our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or clicking here to schedule a reduced rate initial consultation.
A former proprietor of a Michigan-based cannabis dispensary is now facing a minimum of nine years of incarceration in federal prison due to convictions related to tax evasion and impeding the Internal Revenue Service (IRS), as confirmed by officials. Ryan Richmond, aged 46 and hailing from Bloomfield Hills, has been found guilty by a federal jury, per an announcement by the U.S. Department of Justice on Monday.
According to official statements, Richmond was the owner and operator of Relief Choices, LLC, situated in Warren. The U.S. Department of Justice's Acting Deputy Assistant Attorney General, Stuart Goldberg, stated that the dispensary conducted its financial operations using cash transactions and channeled customer credit card payments through an unrelated third-party bank account between 2011 and 2014. This strategy was employed to obscure the actual gross revenue of the business. Additionally, in 2015 and 2016, Richmond misled IRS investigators, particularly one who was scrutinizing his personal income tax return, about his knowledge of the dispensary's business activities.
According to IRS estimates, the consequences of Richmond's actions resulted in a tax revenue loss of over $1 million. In March 2021, a federal grand jury in Detroit issued an indictment against Richmond. His sentencing is scheduled for December 13, during which he could potentially face five years of imprisonment for each count of tax evasion, three years of incarceration for obstructing the IRS, and one year in prison for willfully failing to file a tax return. Furthermore, Richmond may be subject to supervised release, restitution orders, and fines as part of his sentencing.
If you are concerned about being accused of tax evasion, our Dual-Licensed Tax Lawyers & CPAs will review your case and identify the appropriate course of action. We can help you work with the IRS to avoid criminal tax consequences like those levied against Richmond.
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.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore 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 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, KovelCPAs, 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!
There are several different forms of tax evasion schemes. Still, some schemes arise more frequently than others. The following are all examples of popular tax evasion schemes perpetrated by U.S. taxpayers and regularly prosecuted by federal and state taxing authorities:
One prevalent tax evasion scheme involves the use of shell companies and undeclared offshore accounts to hide taxable offshore income and assets. Taxpayers establish shell companies in low-tax or tax haven jurisdictions and channel their earnings through these entities. By doing so, they illegally evade reporting their income to their home country's tax authorities. These offshore accounts and companies often make it challenging for tax authorities to trace the true ownership and income generated, enabling illegal tax evasion. The IRS criminal investigation division spends a great deal of time uncovering and prosecuting this type of offshore illegal activity.
Another common tax evasion method is intentionally underreporting income. Taxpayers may deliberately misrepresent their earnings by not reporting cash income, inflating deductions, or manipulating financial records. This tactic aims to lower the taxable income and, consequently, the amount of taxes owed. Tax authorities combat this by cross-referencing income sources and scrutinizing discrepancies in financial records. Unreported income is often picked up in band deposit analysis reconciliation against reported taxable income.
Payroll fraud is a tax evasion scheme where employers create phantom employees or misclassify workers as independent contractors. This allows them to underreport the wages paid and avoid payroll taxes, such as Social Security and Medicare contributions. Employers may also fail to withhold income taxes from employees' paychecks, diverting funds that should be remitted to tax authorities. Unscrupulous employers also pay employees in cash without issuing 1099’s or W2’s. Tax agencies investigate this fraud by comparing 1099 and payroll records with reported expenses and employment tax filings.
Offshore tax shelters are complex financial structures designed to reduce or eliminate tax liability. High-net-worth individuals and corporations may use these shelters to invest their money offshore, often in financial products specifically designed to minimize taxes. While some offshore investments are legal, others exploit loopholes to evade taxes. Tax authorities have been working to close these loopholes and improve transparency in offshore financial transactions to curb this form of evasion.
As digital currencies like Bitcoin gain popularity, tax evasion involving cryptocurrencies has become a concern. Some individuals and businesses may underreport or fail to report their cryptocurrency holdings and transactions, leading to tax evasion. Tax authorities have started implementing measures to track cryptocurrency transactions and ensure compliance with tax laws.
Transfer pricing manipulation is a strategy often employed by multinational corporations to shift profits between their subsidiaries located in different countries. Companies may overstate expenses in high-tax countries and underestimate income in low-tax jurisdictions. By doing so, they can reduce their overall tax liability. Tax authorities combat this scheme by implementing transfer pricing regulations and scrutinizing intercompany transactions to ensure they are conducted at fair market value.
Some taxpayers invest in complex financial instruments marketed as tax shelters, promising substantial tax benefits. These investments are designed to generate paper losses that can offset taxable income, thereby reducing the taxes owed. However, tax authorities deem many of these tax shelters abusive and illegal. The tax code is continuously updated to close such loopholes and identify illegitimate tax shelters. Taxpayers who invest in these schemes can face penalties, including back taxes and fines when discovered by tax authorities.
Seek assistance from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing today by calling (800) 681-1295.
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