On August 22, 2019, federal prosecutors unsealed an indictment charging Missouri business owner Michael David Dismer, 51, of Rogersville, with 28 counts of various tax and financial crimes, most of which involved defrauding customers out of payments for boat construction and, instead, spending the funds on a host of lavish personal expenses (including “lingerie… firearms… [and] a Hawaiian vacation for himself and six young women”). According to a Department of Justice (DOJ) press release, Dismer “induced 22 customers to pay him more than $4 million for the construction of specific vessels” during the period from 2013 to 2018, yet delivered clients non-functional craft, or in some cases, nothing at all. Despite receiving millions of dollars to construct boating vessels, Dismer also failed to file federal income tax returns during the period from 2013 to 2016 – a period during which his lowest income exceeded $688,000. In addition, Dismer is alleged to have engaged in employment tax fraud for more than a decade, “pyramiding” a succession of business entities which he allegedly abandoned as employment tax liabilities, interest, and penalties piled up.
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Businessman Charged with 5 Counts of Tax Evasion, 1 Count of Failure to File Returns
The 28-count indictment against Dismer made various allegations, including (1) one count of making false statements to federal agents, which violates 18 U.S. Code § 1001; (2) one count of willful failure to file a federal tax return, which violates 26 U.S. Code § 7203; (3) five counts of tax evasion, which violates 26 U.S. Code § 7201; and (4) 18 counts of wire fraud, which violates 18 U.S. Code § 1343.
Notice that tax evasion and failure to file returns are distinct tax offenses, defined and penalized under separate statutes. The difference is that tax evasion broadly relates to intentional “attempts to evade or defeat tax” in “any manner,” whereas 26 U.S. Code § 7203 specifically pertains to unfiled tax returns, nonpayment of federal taxes, or failures to supply information. Tax evasion is the more serious of the two offenses, which is reflected in their respective penalties. For willful failure to file or pay tax, the courts generally may impose a maximum fine of $25,000 and/or a maximum sentence of one year – consequences which, though severe, are more lenient than the maximum criminal penalties for tax evasion: under 26 U.S. Code § 7201, fines of up to $100,000 and/or up to five years in prison.
Notably, the willful failure to file or pay tax is typically a misdemeanor, whereas tax evasion is a felony. That being said, 26 U.S. Code § 7203 makes an exception for “willful violation[s] of any provision of section 6050I,” which are felonies rather than misdemeanors. (The statute referenced there, 26 U.S. Code § 6050I, specifically involves “returns relating to cash received in trade or business.”) In such cases, maximum penalties increase from one year to five years in prison. It is also important to note that civil IRS penalties are often imposed in criminal tax cases, such as the civil fraud penalty.
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Failure to file taxes, failure to pay taxes, and tax evasion are all serious criminal offenses when the taxpayer acts willfully. Even in civil cases where jail time is not a risk, the financial penalties can be extremely costly, particularly once interest has been factored into the equation. If you need help filing back taxes, amending prior returns, preparing for a tax audit, or handling a criminal tax investigation, make sure you consult with a knowledgeable and experienced IRS tax attorney for guidance on your legal options. For a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295 today for immediate assistance.
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