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Oregon Man Pleads Guilty to Federal Charges After Feds Uncover Illegal Refund Scheme

According to a Department of Justice press release, an Oregon man recently pleaded guilty to conspiracy to defraud the United States through the filing of false claims. Although this story involves clearly intentional criminal behavior, it should serve as a reminder to those who have cut corners on their taxes in the past that the IRS and Department of Justice continues to investigate and prosecute those who willfully attempt to game the tax system. 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 examination, it is likely in your best interest to seek the assistance of an experienced tax defense attorney to determine the best course of action to bring you into compliance.

Defendant Stole Identities and Filed False Tax Returns Under Their Names

Court records reveal that Lawrence Collins, a resident of Oregon, worked with various other individuals to conspire to defraud the United States as a part of an elaborate identity theft and tax refund scheme. Prosecutors uncovered evidence that Collins illegally obtained identifying information of various individuals, some of whom were incarcerated in a nearby prison. Collins and his associates then used the personal information to file fraudulent tax returns that generated refunds.

Collins and his co-conspirators perpetuated the scheme from 2009 through 2014. The IRS estimates that the scheme caused more than $400,000 in false refunds to be claimed. Refunds were routed to bank accounts with routing information provided by Collins. The profits of the illegal scheme were divided between Collins and the other co-conspirators.

Collins’ sentencing is scheduled for September 14th. Collins faces up to 10 years in a federal prison for the conspiracy count. Additionally, Collins is likely to be sentenced to serve a period of supervised release and will be required to pay restitution to the IRS.

Not All Illegal Tax Schemes Involve Refunds Using Stolen Identities

The story above details a tax scheme that required the acquisition of identities and the preparing of false tax returns. It is important to understand that although schemes like the one detailed above do exist, the lion’s share of illegal tax activity that results in examinations and criminal investigations involve simple acts of omission such as failing to file a tax return or failing to report income.

Many taxpayers have the false belief that they are a small fish in a big pond and that the IRS is not interested in the “little guy”. This could not be any further from the truth. The IRS is well aware that most U.S. tax revenue comes from the “little guy” and that the erosion of the middle-class tax base is a threat to the government’s ability to generate revenue. As such, the IRS has invested millions of dollars into generating computer systems that will analyze tax returns to flag items that appear to be suspicious. Returns with sufficient anomalies are reviewed by hand and a decision as to whether to examine the return or not is made. During audit, the IRS will request that the taxpayer substantiate the positions taken on the tax return. It is important to remember that the taxpayer has the burden of proof when the IRS challenges a tax return item.

Note:  As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) 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, Kovel CPAs 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!

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Knowing When to Contact a Tax Attorney

If you have failed to file a tax return for one or more years or have filed a tax return with understated income or overstated deductions, you are at risk for audit. If the IRS determines that your actions rise to the level of “willful”, you are also at risk for criminal prosecution. Working with an experienced tax defense attorney, you can establish the facts of your case and determine the best strategy to come into compliance while mitigating as many of the potential negative outcomes as possible.

We Are Here for You

Regardless of your business or individual tax needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

In addition to our main office 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. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.

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