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No one wants to pay more than they have to in taxes. But taking tax shortcuts can cause big problems when the IRS and the Justice Department get involved. Depending on the size, length of time, and severity of the tax fraud, you could even face criminal consequences.
From single parents, to international developers, to tax preparers, everyone has an obligation to report income to the IRS. When you take shortcuts, you could find yourself facing serious criminal consequences. This blog will offer some examples of recent criminal consequences for tax fraud and other related charges.
Dan Horsky was a business administration professor emeritus at the University of Rochester. He owned at least $200 million in assets held in Swiss bank accounts, including Credit Suisse. But Horsky did not disclose those foreign accounts or complete the mandatory FBAR forms. Instead he named a nominee and filed false income tax returns from 2008 to 2014, hiding at least $73 million in income and evading over $10 million in federal taxes.
On November 4, 2016, Horsky pleaded guilty to conspiring to defraud the United States and conspiring to file a false expatriation form. He faces 5 years in prison and has paid a $100 million FBAR penalty.
H. Ty Warner, the creator of Beanie Babies, was also charged with failing to disclose overseas income held in Swiss bank accounts. Unlike Horsky, he pleaded guilty to tax evasion. His tax attorney also presented substantial evidence of his philanthropic efforts. This allowed him to serve a probation sentence rather than face prison time.
Sometimes the source of income isn't international, but it is still illegal. Michael Rowan, his two businesses, and a business partner provided investment and financial services to professional athletes including National Football League Players. Between 2008 and 2014, Rowan embezzled nearly $3 million from his clients, and then did not report that income to the IRS.
On October 31, 2016, Rowan pleaded guilty to wire fraud (a 20 year felony) and filing a false income tax return (a 3 year felony). In addition to time in prison, Rowan will also have to pay restitution to his clients and pay $479,000 to the IRS for unreported income from 2009 to 2013.
While some people face criminal charges for their own tax shortcuts, others are involved in elaborate identity theft enterprises. These tax fraud schemes can result in hundreds of filings and thousands of dollars in fraudulent tax refunds. On October 31, 2016, Hugh Robinson was convicted by a federal jury of 15 counts of conspiracy to defraud the United States, theft of public money, and aggravated identity theft. Robinson and 10 co-defendants filed fraudulent income tax returns using the stolen identities of dead U.S. taxpayers. By doing so, Robinson received over $237,000 in refund checks.
The jury verdict sets Robinson up to face a long prison sentence. The conspiracy charge comes with up to 5 years. Each of the 7 theft of public money charges come with a 10 year sentence, and each of the 7 identity theft charges adds at least 2 years.
All those charges can add up. On November 4, James Vernon Battle was sentenced to a total of 61 months in prison (just over 5 years) for a similar identity theft refund tax fraud scheme. With as many counts as Robinson is facing, he could see even more.
It isn't just the U.S. taxpayer that could face criminal consequences for tax shortcuts. Because they file so many tax returns, tax preparers can see criminal behavior add up quickly to serious consequences. William Doonan, an attorney and tax return preparer, inflated his clients' tax refunds by making up or overstating medical deductions, home mortgage interest, charitable gifts, and job expenses. Doonan regularly filed 3,000 tax returns each year. All together, Doonan created over $6 million in false deductions. On November 1, 2016, Doonan pleaded guilty to aiding in the filing of false returns and tax obstruction, each of which have a maximum penalty of 3 years in prison.
Sometimes it can seem easy enough cut some corners and save yourself some taxes. But taking tax shortcuts can catch up with you in a big way. If your circumstances are severe enough, you could find yourself facing criminal consequences including prison time and thousands, or even millions, of dollars in fines and penalties.
Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years experience. If you have questions regarding criminal consequences of tax fraud or non-disclosures, contact Joe Viola to schedule a consultation.