Tax evasion through underreporting involves deliberately providing inaccurate financial information to tax authorities, aiming to pay less than the owed taxes. This deceptive practice undermines the integrity of the tax system and can lead to serious legal consequences for individuals, businesses, and their associated tax preparers.
For example, Susan Salanitri, the owner of Rocco’s Pizzeria and the currently closed Rocco’s Fine Dining in New Paltz, NY, recently admitted guilt to five charges of falsifying tax returns spanning five years. Aged 60, she was sentenced to two years of probation and ordered to pay over $300,000 in restitution on November 9 for purposefully underreporting restaurant revenues from 2015 to 2019, leading to a $307,665 tax underpayment.
If you need assistance with civil, or potentially criminal, tax-related issues, seek support from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or clicking here to schedule a reduce rate initial consultation.
The Case Against Susan Salanitri
Owner Susan Salanitri of Rocco’s Pizzeria and the now-shuttered Rocco’s Fine Dining in New Paltz, NY has recently admitted guilt to five charges of falsifying tax returns over a five-year period. Aged 60, Salanitri was sentenced to two years of probation and ordered to pay more than $300,000 in restitution on November 9. She confessed to purposefully underreporting her restaurant revenues from 2015 to 2019, resulting in a $307,665 tax underpayment. The case was prosecuted by assistant U.S. attorney Michael Barnett, who presented a signed plea agreement from Salanitri on September 22, 2022.
Rocco’s Pizzeria opened in 2011 under Rocco Panetta’s ownership, who also owned the renowned La Stazione until March of this year. Panetta has faced legal issues himself, implicated in a $10 million illegal sports betting crew across New York counties. Salanitri took over Rocco’s ownership in March 2014 and opened Rocco’s Fine Dining in July 2018 despite having no prior experience in the restaurant industry. Interestingly, she previously owned Radiance Day Spa for 33 years. The plea deal details the ownership transfer, shedding light on Salanitri’s unconventional entry into the restaurant business.
The Internal Revenue Service (IRS) estimates an annual loss of $1 trillion in illegally unpaid taxes, a significant increase from the $441 billion estimated between 2011 and 2013. A 2019 Government Accountability Office report highlights underreporting as the most prevalent form of tax evasion.
If you have been accused of tax evasion, or currently under audit and cheated on the return being looked at, then it is crucial that you seek legal representation immediately. Our Dual-Licensed Tax Audit Lawyers & CPAs can review your case and determine the best course of action. Accordingly, you may avoid criminal tax prosecution like that faced by Salanitri. We have never had an audit client get criminally prosecuted.
Common Forms of Tax Evasion
Tax evasion refers to the deliberate underpayment or nonpayment of taxes. This illegal practice can arise in many different forms. For instance, perpetrators may utilize any of the following:
Underreporting
Underreporting income is a prevalent form of tax evasion where individuals or businesses intentionally provide inaccurate financial information to tax authorities, thereby paying less than the actual owed taxes. This can involve concealing cash transactions, inflating deductions, or misrepresenting business revenues. Detecting underreporting often requires thorough scrutiny of financial records and transactions by IRS auditors and criminal tax investigators.
Offshore Accounts
Tax evasion frequently takes the form of utilizing offshore accounts to conceal offshore taxable income and income generating assets, investments, and businesses. Individuals can attempt to evade U.S. taxes by skirting tax and offshore information reporting requirements and obscure their financial activities by keeping funds in jurisdictions with strict bank secrecy laws. This method often involves creating complex networks of accounts and entities to further complicate the tracing of funds. We can help you come back into compliance without facing criminal prosecution through the following IRS programs and are extremely knowledgeable and experienced with all of them.
Phantom Employees
Another common tactic is the creation of phantom employees or fictitious payroll records. This involves inflating the number of employees on payroll or creating nonexistent individuals to fraudulently claim employment-related tax benefits. This deceitful & fraudulent practice aims to illegally reduce taxable income and avoid payroll taxes, contributing to revenue losses for state and federal tax authorities.
Shell Companies
Utilizing shell companies is a sophisticated method of tax evasion where individuals establish fictitious entities with minimal or no legitimate business activities. These entities serve as conduits for concealing income, facilitating fraudulent transactions, and manipulating financial statements. Identifying the true beneficiaries of funds within a network of shell companies can pose significant challenges for tax enforcement agencies. Recent FinCen regulations and programs are aimed at identifying and curtailing this activity.
Transaction Laundering
Transaction laundering involves disguising the true nature of financial transactions to conceal taxable income. This method often utilizes legitimate businesses to process payments for illicit activities, making it challenging for tax authorities to trace the funds back to their source. The complexity of transaction laundering schemes requires advanced investigative techniques to unravel the layers of deception.
Fraudulent Deductions
Individuals and businesses engaging in tax evasion may resort to claiming fraudulent deductions to reduce their taxable income. This can include inflating business expenses, fabricating charitable contributions, or falsely categorizing personal expenses as business-related. Identifying and challenging these deceptive deductions is crucial for maintaining the accuracy and fairness of the tax system.
Cryptocurrency Transactions
With the rise of digital currencies like Bitcoin, tax evasion has taken on new forms. Cryptocurrency transactions can be challenging to track due to their decentralized nature and pseudonymous user identities. Individuals may exploit this anonymity to underreport or conceal taxable income derived from cryptocurrency transactions, posing a unique set of challenges for tax authorities. However, the IRS is going after cryptocurrency fraud in a big way.
Transfer Pricing Manipulation
Multinational corporations engaging in cross-border transactions may illegally manipulate transfer pricing to shift profits to jurisdictions with lower tax rates. This involves fraudulently manipulating the prices for goods, services, or intellectual property transferred between affiliated entities, allowing companies to illegally minimize taxable income in higher-tax jurisdictions. Addressing transfer pricing manipulation requires international cooperation and advanced analytical techniques.
Plea Bargains in Tax Evasion Cases
Plea bargains play a significant role in resolving tax evasion and other tax crime cases, offering a mechanism for both prosecutors and defendants to reach mutually acceptable outcomes without incurring the cost of trial.
In most criminal tax cases, defendants often face the prospect of substantial fines and potential imprisonment that greatly exceed what the government is willing to accept via plea bargain. For example, defendants often face the potential for 10 – 30 years in jail for their crimes while the government is often willing to plea them down to 2 – 4 years in jail via plea bargain as it saves the government the time and expense of putting on a trial. Plea bargains allow the criminal tax defense counsel of individuals accused of tax-related offenses to negotiate with prosecutors, potentially agreeing to have their client admit guilt to specific charges in exchange for more lenient monetary penalties, less jail time and to avoid the double whammy of a subsequent civil audit for noncompliance that was not criminally charged but subsequently could be. This can involve reduced fines & restitution, shorter probation periods, fewer crimes charged, or even a lesser sentence. Prosecutors, on the other hand, benefit from the efficiency and resource conservation that plea bargains provide, avoiding protracted trials.
Contact Our Law Firm Today for Assistance with Your Civil and Actual or Potential Criminal Tax Problems
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 disclosurebefore 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!
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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