A tax evasion charge can severely disrupt an individual’s life. For instance, defendants in tax evasion cases may endure financial losses, emotional distress, reputational harm, and even time in prison. Worse yet, if your professional licensing has a moral character requirement or if you have secured federal contracts, you could lose both.
Recently, in August of 2023, the owner of a construction company in New Jersey was arrested on tax evasion charges. He is potentially facing a prison sentence of up to five years for his crimes and may have to pay significant fines. Thankfully, if you suspect that you may be accused of evading tax obligations, the team at our firm is prepared to help. We can review your case and begin the process of building your defense.
Seek assistance from our Dual-Licensed Tax Lawyers & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
A New Jersey contractor named Joel Konopka was arrested on federal tax evasion charges. The charges against him included four allegations of corporate tax evasion, two counts of submitting false corporate tax returns, and two counts of failing to file corporate tax returns. The following is a summary of his case.
Joel Konopka served as the owner and sole shareholder of Konopka Construction, a company that operated in northern New Jersey from 2014 to 2017, offering a range of construction, contracting, and snow plowing services. During this period, the company earned a substantial income of over $3.3 million in total, with more than $1 million in income generated in the year 2016.
However, Konopka allegedly failed to accurately report this income. He submitted corporate tax returns for the years 2014 and 2015, stating that his company had no income and neglected to file any tax returns for the years 2016 and 2017. Additionally, he was accused of not making any tax payments to the Internal Revenue Service (IRS) during these years. It is alleged that Konopka concealed his company's income by predominantly conducting transactions in cash, receiving substantial checks payable to Konopka Construction for services provided, which amounted to hundreds of thousands of dollars.
One notable instance involved Konopka Construction being awarded a contract to provide snowplowing services to the Township of Hillside in 2016, resulting in an approximate payment of $388,000. Astonishingly, none of this income was reported as corporate income. Instead, Konopka filed tax returns on behalf of himself and his wife for the years 2015, 2016, and 2017, falsely declaring business income ranging from $32,070 to $35,778, primarily attributing it to Konopka Construction.
Further compounding the situation, Konopka cashed the checks received on behalf of his business at various check-cashing establishments in Essex and Ocean counties, effectively concealing the financial trail.
If convicted, Joel Konopka could face significant penalties, including a potential maximum prison sentence of five years and a maximum fine of $500,000 for each count of tax evasion.
It's worth noting that Konopka is not the only construction company owner facing allegations of tax evasion in recent months. In May, the owner of a New York-based construction company, Pawel A. Bartoszek of Lake Grove, New York, pleaded guilty to filing a false corporate tax return, concealing approximately $6.1 million in business income over a period spanning from 2015 to 2017. According to information released by the U.S. Department of Justice, Bartoszek admitted to cashing checks from his business's clients instead of depositing them into a corporate account.
If you are facing allegations of tax evasion, you must connect with our Dual-Licensed Tax Lawyers & CPAs as quickly as possible. We can evaluate the specifics of your case and explain the optimal course of action.
Tax evasion and tax avoidance are two distinct concepts that revolve around managing one's tax liability, and they differ significantly in their legality and ethical implications.
Tax evasion is the unlawful act of deliberately underreporting income, inflating deductions, concealing money in offshore accounts, or engaging in fraudulent activities to minimize tax obligations. It entails a deliberate effort to deceive tax authorities and pay less taxes than legally owed, making it a criminal offense prohibited in nearly all jurisdictions. Tax evasion is characterized by deception, illegality, and concealment, and can result in severe penalties, including hefty fines and imprisonment. Ethically, it is widely condemned as it undermines the tax system and shifts an unfair tax burden onto law-abiding taxpayers.
In contrast, tax avoidance is a legal strategy used to minimize tax liability by leveraging deductions, credits, exemptions, and other provisions within the tax code. It involves taking advantage of legitimate tax planning opportunities provided by the law to pay the least amount of tax legally required. Tax avoidance adheres strictly to tax laws, and individuals or businesses employing such strategies operate transparently, disclosing their actions to tax authorities as required by law. Unlike tax evasion, tax avoidance does not result in criminal tax penalties; it remains within the boundaries of the legal framework. However, debates about the ethical aspects of tax avoidance persist despite its overall legality and acceptance as a prudent financial strategy.
There are several examples of tax evasion schemes. For instance, the following are all schemes that are regularly uncovered by the IRS:
Shell companies exist only on paper and have no real business operations. They are used as a front to funnel income or assets, making it difficult for tax authorities to identify the ultimate beneficiaries. This scheme involves setting up a network of such companies to hide income, avoid taxes, or launder money. Shell companies can be created in jurisdictions with lax regulations and minimal disclosure requirements, making it harder for authorities to uncover the true owners.
Some businesses, especially in cash-intensive industries like restaurants or construction, may underreport their income by not recording all transactions or keeping two sets of books. This allows them to evade taxes because they only report a fraction of their actual earnings to tax authorities. This scheme is often facilitated by paying employees in cash to avoid creating a paper trail.
With the rise of cryptocurrencies, some individuals and businesses have turned to these digital assets to hide their income. Cryptocurrency transactions can be difficult to trace because they are decentralized and often offer a degree of anonymity. Tax evaders may not report their cryptocurrency holdings or transactions, resulting in unreported taxable income.
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 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!
Regardless of your business or estate 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.
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