New Jersey man Mitchell Bleicher, 52, former owner of cleaning supply business Allied Materials Inc., pleaded guilty this month in Camden federal court to three criminal charges, including one count of money laundering, one count of wire fraud, and one count of income tax evasion. According to a press release issued by the U.S. Department of Justice, Bleicher engaged in a scheme to overbill customers, reaping earnings he then concealed from the IRS by failing to report the income on tax returns filed over the period from 2011 to 2017. By willfully failing to report income, Bleicher defrauded the federal government out of approximately $579,000. Bleicher, who pleaded guilty on February 8, 2018, is currently scheduled to be sentenced on May 17, 2019 – and if past statistical trends are any indicator, he is likely to face formidable felony penalties. However, criminal penalties can often be mitigated through strategic legal handling, making IRS fraud defense representation essential in any tax evasion case.
Without exception, the Internal Revenue Service expects taxpayers to report all taxable income – including, believe it or not, income obtained through illegal means. The IRS explicitly states this in Publication 17 (2018), Your Federal Income Tax (available in full here), which contains the following instructions for taxpayers:
“Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 21, or on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if from your self-employment activity.”
Taxpayers often ignore these instructions in an effort to conceal drug dealing, illegal gambling, or other crimes. However – as conviction and sentencing rates attest – these efforts are almost never successful. Such was the case for Berlin, New Jersey business owner Mitchell Bleicher, who was charged with, and later admitted to, committing tax evasion, wire fraud, and money laundering in connection with unreported income he obtained by fraudulently billing a customer (“Company 1”) for products that were never delivered.
According to the DOJ press release, Bleicher initially “ensure[d] that his fraudulent invoices were accepted” by paying off a contractor who performed work for Company 1. After this contractor stopped working with Company 1, Bleicher kept the scheme going by bribing Company 1’s new contractor with various favors and luxuries, including “expensive wines,” “expensive dinners,” and “professional sports games.”
Per the IRS instructions quoted above, Bleicher should have reported the income – which totaled more than $1.9 million – despite the fact that it was obtained by defrauding Company 1. He failed to do so, instead using the earnings to purchase “Rolex watches, two Rolls Royce automobiles, two Subaru automobiles, motorcycles, home renovations and college tuition for his children,” according to the DOJ. In the process, Bleicher prevented the IRS from collecting nearly $579,000 in tax revenue – a substantial tax loss for the government.
Accordingly, he now faces serious consequences at sentencing in May. The maximum penalties for the single count of money laundering include a prison sentence of up to 1o years, and/or criminal fines as high as $250,000. The single count of wire fraud can result in fines of up to $250,000 and/or a prison sentence of up to 20 years. The press release states that Bleicher will also face fines of up to $250,000 and/or a maximum prison sentence of five years for the single count of tax evasion.
As the press release pointed out, the FBI worked together with special agents from the IRS Criminal Investigation Division (IRS-CI) to investigate and prosecute Bleicher. These special agents are alerted to possible tax crimes whenever auditors, who are also called “examiners” or “revenue agents,” discover indicators of tax fraud during an IRS audit (pending review of such indicators by the auditor’s manager). If you or your business is facing an IRS criminal tax investigation or tax audit, and you are concerned about the potential for criminal charges to result, it is in your best interests to consult with an IRS tax audit defense attorney immediately for guidance.
The best way to avoid a domestic investigation for tax crimes is to enter the domestic voluntary disclosure program (DVD). The best way to avoid an international investigation for tax crimes is to enter into an offshore voluntary disclosure program (OVDP). If no badges of fraud are in the fact pattern and expat or domestic streamlined voluntary disclosure, or delinquent information reporting with penalty abatement is the way to go. Let us get you sleeping at night again!
At the Tax Law Office of David W. Klasing, we are Santa Barbara tax evasion defense lawyers and CPAs who combine more than 20 years of experience providing aggressive, sophisticated legal representation to individual taxpayers, business entities, trusts, and other foreign and domestic organizations. With tax offices strategically located throughout Northern and Southern California, we are positioned to take swift action building your case and protecting your rights. Contact us online to schedule a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 to speak with a tax attorney promptly. Note: All of our offices are by appointment only.
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