According to a Department of Justice press release, Warren Krotz, 62, was recently sentenced to serve a year and a day in a federal prison for tax evasion. The theme of this story is that any U.S. taxpayer can find themselves in the crosshairs of an IRS or state tax examination or criminal investigation. If and when that moment comes, having an experienced tax defense attorney in your corner can make all of the difference.
See our Criminal Tax Law Q and A Library
Court documents reveal that Krotz, a resident of Huntington, New York, was the owner and operator of W. Krotz Enterprises Inc. The business provided professional painting services around Long Island. An IRS criminal investigation uncovered that between tax years 2010 and 2016, Krotz took steps to evade both his personal and employment tax obligations.
Investigators gathered evidence indicating Krotz cashed more than $6 million in checks at various check-cashing businesses in order to avoid a record that could be used against him during a tax examination. IRS officials determined that all $6 million of checks cashed were gross receipts of the Krotz’s business, but he failed to report any of it on annual corporate tax returns.
As a part of running his business, Krotz also paid more than $2 million to his employees in the form of wages but did so in cash. Thus, no employment taxes were withheld, accounted for, or paid over to the IRS. The IRS estimates that the act of paying his employees “under the table” resulted in an employment tax loss of over $300,000.
Finally, Krotz received an additional $3 million of income that he failed to report on his individual tax returns. The government estimates and Krotz admitted to causing a tax loss of more than $1 million. After Krotz is released from federal prison, he will be required to serve three years of supervised release and pay restitution in the amount of $1,031,633 to the IRS.
Taxpayers, especially those who own their own businesses often express the desire to lower their tax liability. And although there is nothing wrong with lawfully structuring your affairs to decrease your tax bill, some taxpayers find themselves willfully out of tax compliance in an effort to achieve this end. Ideally, you should consult with an experienced tax attorney prior to the implementation of tax-savings strategies to ensure that they comply with federal and state tax laws.
If you are beyond that point and are now under tax examination or investigation, it is important to recognize common pitfalls. First, many taxpayers believe that they can take on the IRS alone. There is a preconceived notion that the IRS will acquiesce to a taxpayer if they have a convincing-enough story. On the flip side, there are a camp of taxpayers that will hand over any document the IRS or state tax authorities request and/or make statements that could later be used against them. That too, is not a wise decision.
The most effective strategy when undergoing an tax audit or criminal investigation is typically to consult with an experienced tax attorney with a history of representing taxpayers undergoing an examination. Your attorney will work with you to develop a strategy and be present at all interactions you have with the IRS or state taxing authority, ensuring that you do not overshare documents or make potentially incriminating statements.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have worked with business owners of companies ranging in size from middle market too mom and pop. If you have received notice from the IRS or state taxing authorities that your payroll tax withholding, accounting, and remittance procedures are being scrutinized, our team of zealous advocates will help you develop a legal strategy aimed at preserving the integrity of you and your business. Do not let the threat of a criminal tax investigation or prosecution keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
Here is a link to our YouTube channel: click here!
See our Audit Representation Q and A Library
In addition to our staffed main offices in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here.