This story serves as an update to a previous blog posting that we provided to you earlier this year. In June, Michael and Cynthia Herman, both of the Austin, Texas area, were convicted of filing false corporate tax returns and conspiring to violate U.S. tax laws. The pair was recently sentenced and now likely appreciates that breaking federal tax law can result in severe criminal consequences.
To recap from our previous story, court documents indicated that the Herman’s owned and operated three local eateries: Cindy’s Gone Hog Wild, a restaurant and bar in Travis County, Cindy’s Downtown and Hasler Brothers Steakhouse, both in Bastrop County, Texas. Prosecutors presented evidence at trial to show that the couple caused a certain amount of revenue from the restaurants to be skimmed, resulting in financial documents maintained by the businesses to reflect lower-than-actual income. The evidence indicated that approximately $570,000 was skimmed from the business right into the pockets of its owners. Additionally, the couple paid for personal expenses with their business bank accounts, further skewing the accuracy of their individual and corporate tax returns.
According to a Department of Justice press release, at sentencing, Michael Herman learned that he would serve 21 months in federal prison, while Cynthia Herman will serve five years of probation. Michael Herman was also ordered to serve three years of supervised release after he is released from prison. Finally, the Herman’s were ordered to pay over $150,000 in restitution to the IRS.
What Exactly Is Skimming?
Skimming is a common tactic used by some businesses to illegally reduce their tax liabilities. Skimming can take many shapes and some business owners even resort to purchasing certain technology solutions that automatically achieves the intended result. In the end, a business that is engaged in skimming is removing a certain amount of profits of the books typically by understating cash sales. It is easy to see why federal and state tax authorities have set out to target taxpayers engaged in the practice. An auditor employing markup methodology will often flag this unreported cash income.
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When to Contact a Tax Defense Attorney
If you believe that you or your business has understated revenue or overstated business deductions, it is imperative that you contact an experienced tax defense attorney as soon as possible to evaluate your options especially if you are facing a federal or California Tax Audit. Generally speaking, taxpayers who preemptively address discrepancies before the IRS or state taxing authority raise them have better outcomes than those who do not. Typically, when the IRS opens a criminal tax investigation, they have evidence that potentially criminal wrongdoing has occurred, and they have a 90% conviction ratio.
See our Audit Representation Q and A Library
Contact an Experienced Tax Attorney Today
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience representing taxpayers from all walks of life. Whether you are a business owner facing a sales and use tax audit or you have received notice that your individual return is being examined, our team of zealous advocates are standing by to help you develop a sound legal strategy that will keep your personal and financial interests at the forefront of importance. Do not lose sleep over the possibility of tax evasion or other tax-related charges from the IRS or state taxing authorities. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, and Sacramento.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. 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. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here
