A New York wholesaler will find himself in front of a judge next year facing several years in prison after he recently pleaded guilty to obstructing and impeding the due administration of the internal revenue laws. This story is a reminder to business owners that although understating income or overstating deductions may be tempting, there are severe financial and criminal tax consequences to such activity.
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According to a Department of Justice press release, Jose Cerritos was the owner and operator of La Centro Americana Corporation (“La Centro”). La Centro was engaged in the business of wholesaling certain imported food items and serviced the New York City area.
According to prosecutors, Cerritos intentionally diverted cash receipts fro La Centro, which in turn caused the total revenue of the company to be understated. When it came time to file federal tax returns for the business, La Centro’s artificially lower levels of revenue resulted in the severe understatement of its total taxable income. The IRS and Department of Justice alleged that such activity occurred between 2011 and 2012.
When Cerritos was questioned by investigators, he produced falsified financial documentation that attempted to prove-out La Centro’s tax return results. Additionally, Cerritos failed to report all of his La Centro-related income on his individual federal income tax return, resulting in the underpayment of his own taxes, during the same 2011 and 2012 period.
Cerritos faces up to three years in prison for the IRS obstruction count. He will likely be sentenced to serve a period of supervised release after his physical incarceration in federal prison. Lastly, Cerritos will likely be ordered to pay restitution to the IRS to make up for the lost tax revenue resulting from his criminal misconduct. Cerritos will be sentenced in March of 2020.
If you are a business owner and believe that you have understated revenue or overstated deductions, resulting in a lower or no tax liability on your business or individual tax return, it is in your best interest to contact an experienced tax defense attorney as soon as possible. The IRS and state taxing authorities take business and personal tax fraud very seriously and voluntary disclosing past fraudulent tax conduct through competent tax counsel before an examination or investigation is begun, will typically mitigate or avoid any criminal tax consequences. Waiting for the IRS or state taxing authority to identify the issue and come knocking can result in criminal tax consequences.
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The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from all walks of life. Whether you are a business owner facing a sales and use tax audit or you have received notice that your individual return is being examined, our team of zealous advocates are standing by to help you develop a sound legal strategy that will keep your personal and financial interests at the forefront of importance. Do not lose sleep over the possibility of tax evasion or other tax-related charges from the IRS or state taxing authorities. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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