Married couple Kyung Yeon, 63, and Richard Howard, 65, who together owned several sushi and barbeque restaurants in the San Francisco area, recently pleaded “no contest” to felony charges of workers’ comp and tax fraud. Alternately known as a “nolo contendere” plea (literally, “I do not wish to contend”), a plea of no contest, though ultimately an admission of guilt, differs subtly from a “guilty” plea in that, uniquely, a plea of “no contest” protects the defendant from civil litigation (i.e. being sued). The sentences handed down to Yeon and Howard should remind all taxpayers of the penalties that can result from a tax evasion charge – and consequently, the importance of hiring an experienced criminal tax defense attorney when facing an IRS tax investigation in California or beyond.
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According to investigators, Yeon and Howard owned at least four California restaurants: Bluefin Sushi in Tracy; Matsu Sushi in Manteca; Matsu Sushi in Pleasant Hill; and Chop Chop Korean BBQ, also located in Pleasant Hill. Collectively, these establishments employed a total of 28 workers, with a mix of part-time and full-time employees comprising each team. During the 36-month period from approximately December 2012 through December 2015, Yeon and Howard failed to pay back wages totaling roughly $270,000 – a fact to which local law enforcement was alerted, during the summer of 2016, by an investigator from the U.S. Department of Labor (DOL).
Criminal charges were subsequently filed against Yeon and Howard in summer of 2018. The complaint, or charging document against the defendants, alleged that Howard and Yeon failed to pay the IRS more than $1 million in payroll taxes (also called “FICA taxes”), paying employees with cash in an effort to obscure the company’s financial maneuverings. Allegations of payroll tax fraud frequently arise from tax audits, such as worker classification audits, making IRS audit representation essential for business owners and employers. Indeed, the IRS makes employment tax fraud one of its top enforcement priorities (as the numerous cases profiled in our payroll tax fraud archive make plain). If you are a small business owner in California, you should review your bookkeeping and accounting methods with an experienced business tax attorney to ensure compliance with payroll tax requirements.
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Entering into a plea agreement with prosecutors, Yeon pleaded “no contest” to two charges: workman’s compensation fraud and federal tax evasion, with both offenses graded as felonies. Howard also pleaded “no contest,” though to lesser charges: one count of misdemeanor fraud. Though Howard’s offense involved an insurance violation, one common example of a misdemeanor tax charge is willfully failing to pay taxes or file a return, punishable under 26 U.S. Code § 7203 by up to one year in jail and up to $25,000 in criminal fines.
Howard received the following penalties: a criminal fine of $1,000, two years of probation, and 100 hours of community service. Yeon, who pleaded “no contest” to a felony, received harsher punishments: five years of probation, three months under house arrest, and a criminal fine of $20,000. In addition to the aforementioned fines, both defendants were also ordered to pay IRS restitution of approximately $80,000. For Yeon, that brings costs to around $100,000.
If you are under investigation for tax evasion or related federal or California tax offenses, you need aggressive yet strategic legal representation – starting immediately. Every moment you delay weakens your case. For a reduced-rate legal consultation, call our award-winning Orange County tax fraud lawyers at (800) 681-1295, or contact the Tax Law Office of David W. Klasing online.
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