According to a Department of Justice press release, a Texas attorney and his client were recently sentenced after being convicted of defrauding the U.S. government in a complex tax scheme. The key takeaway of this story is that although there are various legal methods of reducing your tax burden, engaging in criminal behavior to lower your tax bill can have life-altering consequences to client and tax advisor. If you have failed to file a tax return for one or more years, failed to accurately complete your tax return, or have engaged in fraudulent tax activity, it is in your best interest to contact an experienced tax defense attorney to chart a path to getting right with the government.
Be aware that tax advisors can give patently criminal tax advice and you can go to jail for following it. White it is true that reasonable reliance on a tax professional can serve as a basis to avoid penalties that reliance must be reasonable. To good to be true advice will be seen by the taxing authorities as just that.
This story is an update to a blog posting that we brought our readers early last year. If you recall from our previous reporting, IRS and Department of Justice investigators alleged that John Green, a Texas Attorney and Thomas Selgas, his client, worked in tandem in an attempt to prevent the IRS from collecting a $1.1 million outstanding tax debt owed by Selgas. As a part of the scheme, Green allowed Selgas to hide his funds in Green’s Lawyers Trust Account, an account that attorneys use to hold clients’ funds.
Selgas deposited funds into Green’s trust account instead of his own bank. Green proceeded to pay Selgas’ personal expenses, such as credit card bills and other invoices. The strategy established by Green and Selgas was a long-term arrangement, as prosecutors alleged that the arrangement had lasted 10 years, between 2007 and 2017. Both Green and Selgas were convicted of conspiracy to defraud the United States. It is important to note here that Tax Evasion is basically two different crimes: evasion of assessment and evasion of payment. The crime prosecuted here illustrates the evasion of payment variety of income tax evasion.
Additionally, the pair worked together to file fraudulent tax returns for a partnership co-owned by Selgas by omitting significant amounts of partnership income. As a result, Selgas was also convicted of tax evasion of the assessment variety that most people are familiar with.
Seglas was sentenced to serve 18 months in federal prison, while Green was sentenced to serve six months in prison. Both were ordered to serve three years of supervised release upon the completion of their physical incarceration. Seglas and Green were ordered to pay restitution of $1,323,776 and $679,501, respectively.
As the defendants in the case referenced above have found out, the short-term gains that can sometimes be achieved by engaging in fraudulent tax activities are far outweighed by the potential life altering and net worth threatening civil and criminal repercussions that come along with being investigated, prosecuted, and convicted of those activities. It is critical to emphasize that there are a myriad of completely legal and respected tax planning strategies that taxpayers can use to mitigate a high tax bill. But, simply put, cheating on your taxes is not worth the risk.
If you have failed to file a tax return for one or more years, filed a tax return that is not materially correct, or have engaged in a fraudulent tax scheme to avoid paying the correct amount of tax, you should consult with an experienced tax defense attorney to determine the best way for you to come into compliance with federal and/or state tax laws without facing an audit, eggshell audit, reverse egg shell audit, criminal tax investigation, or criminal tax prosecution. Working with a seasoned tax lawyer, you will identify any areas of potential exposure and jointly decide on a path forward that keeps both your physical and financial freedom top of mind.
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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