On April 10, 2018, just before the tax filing deadline, the U.S. Department of Justice issued an announcement, reminding the public of tax obligations and highlighting a number of criminal tax cases. The DOJ reminds that evading one’s tax obligations could end badly, with substantial fines and penalties, and even long prison sentences. Taxpayers are also reminded to be on the lookout for unscrupulous tax return preparers, who seek to inflate refunds by falsifying deductions, among other means. Even if a tax return preparer makes an error on an individual’s tax return, it is still the taxpayer’s responsibility to pay the correct taxes, and that individual may still be responsible for any unpaid taxes, interest, and fines resulting from these crimes.
“Tax returns are signed under the penalties of perjury, and every taxpayer is ultimately responsible for the contents of his or her own return,” cautioned Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “While the vast majority of Americans truthfully report and pay their taxes, unfortunately there are those who seek to cheat the system and take a free ride on the backs of the hard working men and women of this country. The Justice Department is committed to bringing tax evaders and those who falsely prepare tax returns to justice.”
Following are a few highlights of the criminal tax cases prosecuted by the government:
Recent Tax Evasion Prosecutions of Individuals
- In July 2017, a Watertown, New York, restaurateur was sentenced to 150 months in prison for tax evasion and investment fraud. He engaged in a scheme to evade more than $4 million in taxes and obstruct the IRS.
- In October 2017, a Grand Junction, Colorado, business owner was sentenced to 88 months in prison for tax evasion and failing to file corporate and individual tax returns. He had not filed a personal tax return since 1992 and had not paid individual income taxes since 1993.
- In January 2017, a St. Louis, Missouri, tax return preparation business owner was sentenced to 27 months in prison for tax evasion. He underreported his businesses’ gross receipts by over $1.5 million and evaded over $580,000 in tax.
- In August 2017, a south Florida salesman was sentenced to 12 months and one day in prison for tax evasion. From 2002 to 2015, he earned over $1.5 million in income selling hurricane resistant windows and evaded paying over $350,000 in taxes. Except for the 2007 tax year, he had not filed an income tax return since 2002.
Recent Employment Tax Prosecutions
- In March 2018, the owners of a Memphis, Tennessee, staffing company, who were husband and wife, were sent to jail for failing to pay over payroll taxes and filing false tax documents. The husband was sentenced to 75 months in prison and his wife was sentenced to one year in prison. They failed to pay over $2.8 million in withholdings and other employment taxes to the IRS and filed false employment tax returns.
- In October 2017, the owner of a Las Vegas, Nevada, strip club was sentenced to 24 months for evading employment taxes. The former owner of The Crazy Horse Too evaded paying more than $1.7 million in employment taxes.
- In July 2017, a Potomac, Maryland, doctor and entrepreneur was sentenced to 119 months and 29 days in prison for defrauding his former company’s shareholders and for failing to pay more than $7.5 million in employment taxes.
Recent Prosecutions Involving Offshore Bank Accounts
- In October 2017, two Tampa, Florida, business executives were sentenced to prison for 54 months and 72 months respectively for their roles in a conspiracy to defraud the United States using an offshore tax shelter scheme. They conspired to create and promote a sham offshore tax shelter strategy marketed to clients.
- In July 2017, a Fort Myers, Florida, businessman was sentenced to 57 months in prison for conspiring with investment advisors to hide money in offshore bank accounts. He used secret numbered bank accounts and foreign shell companies to hide millions of dollars in order to evade more than $728,000 in U.S. taxes.
- In October 2017, a Greenwich, Connecticut, resident pleaded guilty to failing to report to the Department of Treasury funds he maintained in foreign bank accounts. He opened accounts at several banks, including Credit Suisse, UBS, Bank Leu, Clariden Leu, and Bank Hofmann. In 2004, the value of his foreign accounts exceeded $28 million. For over a decade, he filed false tax returns, on which he failed to report income from his foreign accounts.
Recent Prosecutions of Attempts to Obstruct the IRS
- In July 2017, a Loveland, Colorado, businessman and delicatessen owner was sentenced to 24 months in prison for conspiring to file fraudulent claims for tax refunds. He conspired with his return preparer to file three tax returns that claimed more than $1 million in bogus refunds, of which the IRS paid $350,765. He spent the funds on precious metals and coins, a truck, jewelry, luxury travel, and sporting equipment.
- In November 2017, a Greensboro, North Carolina, resident was sentenced to 37 months in prison for corruptly endeavoring to obstruct the IRS. He filed several fraudulent tax returns with the IRS that included fake income and withholdings, which claimed over $750,000 in fraudulent refunds. He also filed documents with the Guilford County Register of Deeds purporting to renounce his United States citizenship and proclaiming to be a sovereign citizen.
- In October 2017, a Boynton Beach, Florida, resident was sentenced to 30 months in prison for obstructing the IRS. He filed fraudulent personal tax returns with the IRS that sought more than $5.6 million in fraudulent refunds, of which the IRS paid more than $485,000. He used the funds to purchase a house and multiple vehicles, including a Jaguar and Mercedes Benz.
Federal prosecutors for the Tax Division and U.S. Attorney’s Offices across the country continue to work with special agents of Internal Revenue Service Criminal Investigation and other law enforcement agencies to investigate and prosecute those who illegally evade their taxes.
Former IRS Attorneys of Holtz, Slavett & Drabkin, APLC represent clients in criminal tax investigations, as well as sensitive civil tax examinations, employment tax cases, and difficult tax collection matters. You can reach us at (310) 550-6200 to schedule a consultation.