The Department of Justice recently announced in a press release that an Iowa tax professional was recently sentenced to serve more than one year in federal prison for filing tax returns that he knew to be false and taking a portion of the fraudulently paid refunds for himself. Although this story primarily relates to the actions of a tax preparer, it highlights the consequences that taxpayers face when they intentionally break federal tax law. 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 by the IRS or state taxing authority, it is in your best interest to contact an experienced tax defense attorney to determine the best way to resolve your tax noncompliance. Even intentional criminal tax evasion can be corrected without the risk of criminal tax prosecution if you are willing to knock on the government’s door before they come knocking at yours!
Court documents reveal that David Miller, 52, of Iowa was the owner and operator of his own tax preparation business. Between 2011 and 2016, Miller admitted to preparing false tax returns for multiple clients. Additionally, Miller admitted to stealing portions of his clients’ tax refunds. Miller’s fraudulently prepared client tax returns resulted in an estimated tax loss of $125,954. Additionally, Miller’s theft from client tax refunds was not, but should have been reported as income on his individual tax return. Failure to report such amounts on his individual income tax return resulted in an additional loss to the government of $30,752.
Miller was sentenced to serve 12 months and one day in federal prison. Additionally, Miller was ordered to serve two years of supervised release upon the completion of his federal prison sentence. Finally, Miller agreed to pay approximately $156,000 in restitution to the IRS.
Unfortunately, tax preparers that are willing to cheat for their clients are in high demand and often will have new clients lined up around the block that desire to pay less taxes. It is important to realize that it is not just the tax preparer that has exposure for tax fraud. Is saving money on your federal and state tax bill worth risking a jail sentence and the associated life altering consequences of criminal tax conviction.
Many taxpayers take the position that they are a small fish in a huge pond of other taxpayers. That false confidence can often play a part in a taxpayer’s decision to take positions on their tax returns that either lower tax liability or increase their federal refund. Common methods of obtaining a fraudulent refund or decreasing tax liability include underreporting income, overstating deductions, or claiming tax credits that are not appropriate. But what many taxpayers are unaware of is the technological advancements that have been made by the IRS in the past decade.
When a taxpayer’s individual or business tax return is filed, whether electronically or physically, the return is scanned and analyzed by complex computer systems. The system is intelligent enough to correct mathematical errors (both favorable and unfavorable to the taxpayer) and to detect potential “badges of fraud”. If enough fraud indicators are identified, the case will be referred to a revenue agent who will determine whether the case should be further referred to IRS Criminal Investigations (CI). If CI begins and investigation, they have a 90% + conviction rate.
The key to avoiding a criminal investigation or prosecution is to take care of any compliance issues before they escalate. If you have not yet received an examination notice, there may be time to correct the mistake by filing an amended return, making a quiet disclosure, or utilizing another compliance method such as a domestic or offshore voluntary disclosure. If you have already been contacted by the IRS, your experienced tax attorney will represent you in any and all of your government interactions to resolve your issue quickly and efficiently and keep the audit about money and not about criminal tax exposer to the greatest extent possible.
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.
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.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.