Citizens who purposefully evade their tax obligations can face serious criminal tax penalties. In addition to paying large amounts of back taxes and penalties to the Internal Revenue Service (IRS), perpetrators may have to serve time in jail. As is the case with Douglas Smith, a dentist from Ohio who was sentenced to 4 years in prison for tax evasion.
Evidence from his trial shows that Smith failed to file income tax returns from 1992 onward. After the government notified him of their intent to collect payment for taxes he owed, Smith attempted to hide his assets to avoid their seizure and sale. Unfortunately, his attempts to hide assets to defeat collection efforts only served to worsen his sentence. If you are being investigated by the IRS, you should avoid similar conduct that could worsen the penalties you face.
Get help from our experienced Dual Licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing today by dialing (800) 681-1295.
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 being 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!
Convicted Tax Evader Sentenced to 4 Years of Jail Time
Douglas Smith was a dentist from Strongsville, Ohio who was convicted of attempted tax evasion in October of 2022. During his trial, the prosecution demonstrated that Smith had failed to file an income tax return since 1992. In 2008 and again in 2009, the IRS notified Smith of their intent to collect payment for the taxes he owed. Smith attempted to hide certain assets from the government by transferring them into a trust that he controlled. Among these assets was a home he owned in Columbia Station, GA.
In 2012, federal authorities seized approximately $250,00 in cash along with gold and silver bars from Smith’s Columbia Station residence. Still, after the seizure, Smith again tried to hide his assets by transferring his home into a second trust.
The IRS continued with their attempts to collect unpaid taxes from Douglas Smith. In 2015, they served a levy on his employer. In response, Smith filed for bankruptcy and provided false statements regarding his assets to protect them from collection.
Smith was sentenced to 4 years in prison by a federal jury for his criminal behavior. Furthermore, he owes more than $490,000 in penalties and back taxes to the IRS.
During his investigation and trial, Smith made several decisions that led to more serious penalties being assessed against him. If the IRS is investigating you, you should get support from our Dual Licensed Tax Attorneys and CPAs. Our legal team can mount a strategic defense and ensure that your interests are protected.
What is an IRS Levy?
A levy permits the legal seizure of your property in order to satisfy your tax debt. It is a more aggressive debt collection method than a lien. A lien protects the government’s interest in your property to secure payment of a debt, while levies allow the government to take your property.
Four requirements must be met before the IRS will levy. First, the IRS must send you a tax bill seeking the payment owed. Second, you must neglect the duty to pay. If you fail to pay your debts, the IRS has to send a final notice of their intent to issue a levy at least 30 days before it is executed. Finally, the IRS must also issue advance notification that they may reach out to third parties regarding the collection or determination of your tax debt.
Who is Prosecuted for Tax Evasion?
In general, anyone can be prosecuted for evading their tax obligations. At the corporate level, the IRS will generally look to directors, officers, and shareholders who exercise significant control over their companies. Furthermore, they may also look at bookkeepers, accountants, and tax preparers. At the individual level, the IRS will often prosecute individuals who signed incomplete tax returns or failed to file their returns entirely.
How Does the Government Catch Tax Evaders?
There are many ways that the IRS can catch tax evaders. Typically, they will look for badges of fraud that can be found in taxpayers’ returns, personal correspondence, and financial records. Still, there are other ways that perpetrators can be caught. For instance, the following are all methods used to catch U.S. citizens who evade their tax obligations:
Evaluating Computer Data
Over time, the IRS has upgraded the technology used to catch tax fraud. They use an Information Returns Processing System (IRP) to match data submitted by employers with data reported by individuals on their tax forms. However, instead of strictly matching and filtering taxpayers’ reported information, it is now suspected the IRS can track other data, such as medical records and credit card transactions. Evaluating computer data has become one of the more common ways that the government uncovers tax evasion.
Analyzing Footprints on Social Media
Additionally, the IRS regularly catches tax evaders by analyzing their social media footprints. For example, social media posts may reveal that a citizen is living a lifestyle that does not align with the income stated on their returns. It is still unknown whether the government is viewing private communications or non-public postings. However, taxpayers under criminal tax investigation can be assured that their social media profiles are likely to be analyzed.
Tips from Whistleblowers
Finally, the IRS can also uncover tax evasion through tips from whistleblowers. Whistleblowers are people who notify the government of illegal activities. For instance, an upset employee or aggravated spouse may inform the IRS that certain income was not properly reported. There are several reasons why whistleblowers decide to come forward. Perhaps they do so because they seek revenge or simply desire to do the right thing. In many cases, whistleblowers receive cash rewards if their tips lead to recoveries of tax losses.
Contact Our Law Firm for Help with Your Tax Issues
Seek assistance from our Dual Licensed Tax Audit Attorneys and CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
See our FBAR Compliance and Disclosure Q and A Library
See our Foreign Audit Q and A Library
See our Employment Tax Law Q and A Library
See our Civil and Criminal Divorce Tax Law Q and A Library
See our International Tax Q and A Library
Here is a link to our YouTube channel: click here.
Public Contact: Dave Klasing Esq. M.S.-Tax CPA, [email protected]
SOURCE Tax Law Offices of David W. Klasing, PC
