According to a Department of Justice press release, a Virginia man was recently convicted of multiple criminal counts related to filing false tax returns and failing to file a tax return after he attempted to dodge the payment of taxes on large sums of business income that he earned. This story should remind taxpayers that claiming deductions for expenses that were not incurred or claiming other unsupportable tax positions can cause much more harm than good. If you have failed to file a tax return for one or more years or have taken a position on a federal or state tax return that could not be substantiated upon an audit, eggshell audit, reverse eggshell audit or criminal tax investigation, you should contact an experienced tax defense attorney to determine your best avenue to come back into tax compliance and avoid criminal tax prosecution.
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!
Defendant Significantly Understated Income and Fraudulently Inflated Deductions
Court records reveal that Michael Tiernan, 62, of Williamsburg, Virginia, was a financial officer for Ford’s Colony Realty, LLC. Prosecutors alleged that between 2015 and 2016, Tiernan filed federal income tax returns that severely understated the income that he earned from his employment. The income that was reported was fraudulently offset by deductions for expenses that were not actually incurred. In 2015, the defendant claimed that he was insolvent and was therefore not liable for taxes related to the discharge of a portion of his indebtedness.
At his trial, prosecutors introduced evidence that proved that Tiernan underreported income by nearly $300,000 in 2015 and more than $204,000 in 2016. In 2017, Tiernan failed to file a federal tax return altogether. The defendant’s sentencing is scheduled for later next year. He faces up to seven years in prison. Additionally, Tiernan may be sentenced to serve an additional term of supervised release to commence upon the completion of any physical prison stay. Lastly, Tiernan will likely be ordered to pay restitution to the IRS, representing the tax loss that he caused.
Getting Right with the Government After Falling Behind
The defendant in this case obviously made several mistakes. First, taxpayers are required to include all of their taxable income when filing tax returns. The IRS and state taxing authorities have multiple methods that identify taxpayers who underreport large amounts of income. Likewise, taxing authorities target taxpayers who intentionally inflate deductions for expenses that were not incurred. Lastly, failing to file a tax return is simple to detect and can bring additional scrutiny to other tax returns that have been filed.
If any of the facts in the above story are familiar to your tax situation, you should contact an experienced tax defense attorney to identify and quantify your civil and/or criminal tax exposure. Together with your seasoned tax attorney, you will work to establish the pertinent facts of your case and then develop a roadmap to get you right with the government. During that process, you will not have to go up against the IRS or state taxing authority alone.
We Are Here for You
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.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
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More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
- What is a reverse egg shell audit?
- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return
