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Story Update: Massachusetts Woman Sentenced to 48 Months in Prison for Tax and Drug Crimes

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    According to a Department of Justice press release, a Massachusetts woman who had recently pleaded guilty to various criminal counts including drug and tax charges was sentenced last week to four years in federal prison. This story should serve as a reminder that even illegal activities that generate income must be reported on a federal and state income tax return and if your illegal enterprise includes employees, federal and state employment tax rules also apply. Although most Americans are not engaged in the illegal activity the defendant was convicted of, ensuring that all of your income is accounted for is critical. If you have failed to file a tax return for one or more years, or have failed to include all of your income as part of your tax return, it is in your best interest to contact an experienced tax defense attorney to determine the best strategy to bring you into compliance.

    Defendant Failed to Comply with Tax Laws In Connection With Her Illegal Business

    We first brought you the story of Deanna Martin earlier this year. If you recall, the defendant, a resident of Milton, Massachusetts, owned and operated Northern Herb, an illegal marijuana distribution operation, between 2015 and 2018. Operating illegally, Northern Herb delivered marijuana to individuals without requiring that they prove that they had a license to purchase and use medicinal marijuana. Additionally, Northern Herb did not require that an actual person needed to be present at the time of delivery, leaving orders in unattended locations.

    Federal authorities estimate that Northern Herb had total revenue of more than $14 million between May 2016 and July 2018. Northern Herb was also estimated to have had 25 employees, none of which Martin maintained proper payroll processes for. Even if Martin contended that her staff were properly characterized as independent contractors, she failed to comply with the proper tax processes, such as issuing a Form 1099. In addition to not complying with employment related tax laws, Northern Herb did not file tax returns or pay income taxes on its substantial profits.

    In addition to her 48-month prison sentence, Martin was ordered to serve three years of supervised release upon the completion of her physical sentence. Lastly, Martin was ordered to pay over $520,000 in restitution to the United States.

    Getting Right with the Government After Falling Out of Compliance

    While it is true that most taxpayers are not engaged in a drug enterprise, many Americans take liberties when completing their federal and state tax returns by leaving off portions (or entire amounts) of certain income streams. While this is very common with taxpayers with cash-based businesses, failing to include all of your taxable income can arise in a variety of scenarios. In any event, the potential criminal and civil exposure such omission can cause can be life altering.

    If you have failed to file a tax return for one or more years, or have underreported income or overstated deductions on a filed return, you should work with an experienced tax lawyer to determine the best strategy to bring you into compliance. Together, you will determine the pertinent facts and circumstances of your case and work to get you right with the government. All the while, you will not have to go up against the IRS or Department of Justice alone.

    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!

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    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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