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Three Louisiana Residents Indicted for Federal Tax Fraud

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    According to a Department of Justice press release, three Louisiana residents were indicted by a federal grand jury recently for conspiring to defraud the IRS by filing false tax returns and paying employees under the table. This story should remind business owners that there is only one correct way to pay employees. Likewise, the potential repercussions of falsifying individual and corporate income tax returns never outweighs the one-off fraudulent tax savings that result from committing such a crime. If you have failed to file a tax return for one or more years, have filed income tax returns with false information, or have paid employees “under-the-table”, it is in your best interest to contact an experienced tax defense attorney to develop a strategy to come into compliance.

    Defendants Accused of Falsifying Tax Returns and Paying Employees in Cash

    Court documents reveal that Matthew Reck, David Farrell, and Dawn Farrell Ruiz are accused of conspiring to defraud the IRS. The three were responsible for operating the SES Construction Consulting Group and Global Technical Solutions. Reck was the co-owner of the two businesses while Farrell and Ruiz worked as project manager and bookkeeper, respectively. The three are accused of underreporting the income that they earned from the business on their individual income tax returns.

    Additionally, Reck and Ruiz are accused of causing the businesses to file false corporate income tax returns. According to the indictment, some employees were paid in cash or “under-the-table”. Thus, workers’ compensation was not reported to the IRS. When approached by investigators from the IRS, Reck is accused of lying about his relationship with the accountant for the two businesses.

    If convicted, each defendant can be sentenced to up to five years in prison for the conspiracy charge. Reck was also charged with making a false statement to federal agents, which can carry a federal prison sentence of up to five years. Farrell and Ruiz also face up to an additional three years in federal prison for assisting in the preparation of a false tax return. If convicted, the three could also face additional terms of supervised release and be required to pay restitution to the IRS for the tax loss that they caused.

    Identifying and Addressing Individual and Corporate Income Tax Exposures

    When operating a business, it is sometimes difficult to bifurcate your personal finances from those of the business. Likewise, in certain industries, it is not uncommon for employers or employees to pay or receive compensation for work “under-the-table”. Although paying employees in cash or taking certain liberties in the preparation of a federal or state tax return may not immediately appear to create a dramatic tax exposure, taxpayers like the defendants above would beg to differ.

    Over the past year, the IRS has beefed up its headcount so that they may conduct additional audits. Recently, the Biden administration has announced that it will work to increase funding for the IRS by up to 10 percent. The increase in funding will primarily go toward conducting more enforcement activities. Taxpayers who have filed tax returns with false information may find themselves receiving the short end of the government’s increased tax compliance efforts. Additionally, those businesses who have paid their employees in cash also run an increased risk of examination, civil, and criminal penalties.

    Taxpayers who believe that they may be at increased risk for tax enforcement actions should consult with an experienced tax defense attorney. Together, you will identify potential exposure areas and determine the best strategy to come into compliance. One of the most attractive benefits of being represented by a seasoned tax lawyer is not having to go up against the IRS or state taxing authority 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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