According to a Department of Justice press release, an inventor from Wyoming was recently sentenced to federal prison on tax-related charges. This story reminds taxpayers that although the underreporting of income sometimes seems to be an easy way to pay less tax, the penalties for being caught most certainly outweigh the benefits.
Court documents reveal that U.S. Magistrate Judge Kelly H. Rankin sentenced Douglas Brendle to serve a year and a half in a federal prison after Brendle was convicted of two counts of willfully failing to file income tax returns and a single count of making a fraudulent application for health care benefits.
Prosecutors alleged that from 2008 through 2012, Brendle owed and operated Brendle Climbing Systems LLC. As a part of that company, Brendle developed recreational climbing equipment. In early 2013, Brendle sold the rights to the exercise equipment to certain investors. Between 2013 and 2014, Brendle received approximately $1.5 million in payments for the use of his invention. Although he received income during 2013 and 2014, Brendle failed to file an income tax return or pay federal income tax for those years. The IRS and Department of Justice estimated that the tax loss associated with Brendle’s failure to file or pay was $404,501.
While Brendle was being investigated for tax crimes, investigators also determined that he was receiving health care benefits for himself and for his family from the Wyoming Medicaid program. Such a program is a jointly run program between the federal government and the State of Wyoming and is intended for low-income individuals and their families. Investigators discovered that at the end of 2013, Brendle falsely reported to the state that he had no income, resulting in the payment of over $17,000 of benefits to be paid to him and his family between 2013 and 2014.
At his sentencing hearing, Brendle was also sentenced to serve one year of supervised release after his term of physical incarceration ends. Additionally, Brendle was ordered to pay restitution in the amount of $404,501 to the IRS and $17,174 to the Wyoming Medicaid program.
Many taxpayers believe that they can fly under the IRS’ radar, even if they omit income that they have earned. Taxpayers that engage in such conduct offer various explanations once they are caught such as “I thought the IRS had bigger fish to fry” or “they won’t even notice”. But unfortunately, many of those same taxpayers find themselves locked up in a federal prison.
If you have failed to file a federal tax return or have filed a tax return that is not truthful and correct, it is in your best interest to contact an experienced tax defense attorney to discuss your options. The IRS and their advanced computer systems do an efficient job of scrubbing over tax returns in a matter of seconds to determine if any badges of fraud exist. If any red flags are identified, a revenue agent will review the return manually, typically resulting in an examination. If the badges of fraud are abundant and clear, the case will typically be sent to the IRS Criminal Investigations team. Having an experienced tax defense attorney by your side during the process will help ensure that your strategy is thoroughly thought out and executed.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers from varying backgrounds and financial situations. Whether you have not filed a tax return in over a decade or simply forgot to file your last year’s return, our team of zealous advocates is poised to assist in the development of a strategy that will keep your physical and financial well being top-of-mind. Do not let the possibility of criminal failure to file charges keep you up at night. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.
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