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In January, the United States Department of Justice (DOJ) announced the convictions by federal jury of Texas lawyer John O. Green, along with client Thomas Selgas, on charges of tax fraud and conspiracy. Both client and attorney were found guilty of conspiring to defraud the United States (more specifically, the IRS), with Selgas additionally convicted of income tax evasion. Conspiracy is charged under 18 U.S. Code § 371, while tax evasion – or, as the offense is technically called, “attempt to evade or defeat tax” – is charged under 26 U.S. Code § 7201, which categorize the respective offenses as felonies.
In July of 2018, the DOJ announced the indictment of Green, Selgas, and wife Michelle Selgas, who were accused of conspiring together for the purpose of “defrauding the United States by obstructing the Internal Revenue Service (IRS) from assessing and collecting the Selgases’ federal income taxes.” While Michelle Selgas was later acquitted, or found not guilty, on both the conspiracy and tax fraud charges, Selgas and Green were convicted in January 2020, concluding a case that began more than a year earlier.
All that remains now is for Selgas and Green to be sentenced, with sentencing dates currently unscheduled according to the DOJ. Selgas, convicted of both offenses, faces up to five years in federal prison for each charge – the statutory maximums set forth under 18 U.S. Code § 371 and 26 U.S. Code § 7201. Green, who was convicted only of conspiracy, faces a maximum sentence of up to five years. The press release further noted that both men “face a period of supervised release, restitution and monetary penalties,” but did not provide specific numbers.
The scheme which led to the pair’s conviction involved Selgas’ unpaid tax debts, and Green’s Interest on Lawyers Trust Account (IOLTA): “a bank account used by a lawyer to hold money in trust for clients,” as the DOJ succinctly describes. Beginning in 2007 and continuing until 2017, Selgas repeatedly deposited funds into Green’s IOLTA, from which “Green would then pay the Selgases’ personal expenses.”
The purpose of this arrangement, at least in part, was to conceal funds from the IRS, to which the Selgases owed more than $1 million. The source of the debt was “outstanding taxes that Selgas refused to pay,” or in other words, back taxes Selgas was avoiding.
In addition to directing funds into Green’s IOLTA (rather than toward the IRS), Selgas also took other steps to defraud the Internal Revenue Service. Acting with Green’s assistance, Selgas “filed a false tax return on behalf of… [a] partnership Selgas co-founded, omitting a substantial portion of the partnership’s income” from such return. As our IRS fraud attorneys have cautioned, the legal definition of tax evasion – that is, any willful attempt to evade or defeat any federal tax “or the payment thereof” – extends to the members of partnerships (and moreover, any LLCs that elect to be taxed as partnerships).
Intentionally concealing taxable income from the IRS is a form of fraud, regardless of whether the taxpayer is an individual or a business entity like a partnership. It is likewise a crime to willfully evade payment of one’s tax liabilities, including the payment of IRS penalties or interest charges.
Note: As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax prosecution, the taxpayer can be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously receive a break on the civil penalties that would otherwise apply. It is imperative that you hire an experienced and reputable tax defense attorney to take you through the voluntary disclosure process. As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one-stop-shop to efficiently achieve the optimal and predictable results. See our Testimonials to see what our clients have to say about us!
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If you have made tax compliance errors that are in need of resolution, require assistance getting caught up on back taxes, or have concerns about a tax audit or IRS investigation, it is in your best interest to contact an experienced tax defense attorney immediately. For confidential, 24-hour tax assistance throughout Northern and Southern California, contact the Tax Law Office of David W. Klasing online or call (800) 681-1295 for a reduced-rate consultation.
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