Nobody likes to pay taxes and nobody likes to be audited. If you are audited, you should hire someone to represent you, as there are risks in handling it yourself. For one thing, most Internal Revenue Service (IRS) criminal cases spring from regular old civil audits and even simple interactions can go south. A good example of how to land in trouble is if you have deceptive or obstructive behavior with the IRS. Some people think they can fool the IRS and cover up something. The cover-up can be worse than the crime. Take the case of James Brassart of Bentonville, Arkansas, who was sentenced to three years in prison for tax evasion.
According to court documents, you filed your 2006 tax return reporting adjusted gross income of $ 1,502,749 and taxes owed to the IRS of $ 486,438. You did not pay all your taxes, for which you were charged penalties and interest. That hardly sounds criminal, right? Well, Mr. Brassart took many steps to hide his income and assets. It used three nominated corporations, Eagle Creek Construction and Development Inc., Mono Pro LLC, and Sierra Madre Contracting LLC, to conduct business and purchase assets. He did his best to try to avoid paying the IRS. In fact, between 2010 and 2016, Brassart filed four bogus bankruptcy applications to try to settle its tax debt.
In those bankruptcies, Brassart made false statements and submitted fraudulent documents concealing his ownership interests in the nominated corporations. Through its actions, Brassart caused a total tax loss to the IRS of approximately $ 1,360,682. He was sentenced to three years in prison, another three years of supervised release, plus an order to pay more than $ 1.3 million in restitution.
His is not the only example of evasive behavior causing fire. Minnesota chiropractor Donald Gibson was convicted of five counts of tax evasion, plus one count of presenting a false financial instrument to the US.. Treasury Department. Gibson did not file his tax returns from 2004 to 2014. Not only that, but he tried to evade his tax obligations for years. Prosecutors proved that Dr. Gibson diverted money to a warehouse bank called MYICIS. Depository banks can conceal ownership of funds in part by mixing funds with other people’s.
This warehouse bank was finally closed. Using the warehouse bank, Gibson cashed more than $ 800,000 in business checks at a check cashing facility. He also sent fake money orders and financial instruments to the IRS. Aside from his antics with the warehouse bank and not filing tax returns, Gibson also formed Sovereign Christian Mission. He claimed that this was a In good faith religious organization. But the feds claimed this was simply a way to further hide his chiropractic income and pay for his personal expenses.
Gibson used his Sovereign Christian Mission to pay for his own groceries, entertainment, dinners, and car repairs. The IRS calls that ‘private inurement’, when the money that is of course dedicating yourself to religious or charitable purposes ends up benefiting individuals. Unsurprisingly, charity founders and insiders come under special scrutiny. The activities of Dr. Gibson’s private church were bad enough, prosecutors claimed.
Gibson was eventually sentenced to 33 months in prison plus two years of supervised release. It could have been worse. If you look at the potential prison terms, what was arguably worse for Dr. Gibson is how he responded when the IRS was auditing. While the IRS was auditing his tax returns, and later during the ensuing criminal investigation, Dr. Gibson presented a bogus financial instrument allegedly worth $ 300 million to the IRS, claiming that he paid his income tax obligations.
Time and again, in serious tax cases, a person may think that preparing fake invoices, fake receipts, and made-up expenses can get you outside from problems. Usually the opposite is the case. It’s one of the reasons that talking to the IRS in an audit or investigation can be dangerous. What if he speaks badly? Curiously, claiming The Fifth Amendment protection in tax cases can be wrong. One of the biggest problems has to do with books and records. You must keep them to meet your tax reporting obligations. If those records are incriminating, can you refuse to release them? It can, but it may not help. Even if you claim Fifth Amendment protection against self-incrimination, the IRS can give you a “request for information document” to produce your records.
You can refuse, but the IRS will issue a subpoena. If you refuse to answer that, the IRS will take you to court, and the court will likely order you to comply. But doesn’t your constitutional right to take the fifth trump trump the IRS? Not always. Ironically, you can refuse to speak, but you may not be able to refuse to produce documents. Your own private documents are personal records and, if they could incriminate you, they are protected by the Fifth Amendment. But the doctrine of mandatory records says that should still deliver documents no matter how incriminating. The government requires you to keep certain records and the government has the right to inspect them.
In most cases, a tax audit is civil and there is little risk of it turning into something else. However, most criminal tax cases arise directly from civil tax audits. IRS civil auditors ‘refer’ a case to the IRS Division of Criminal Investigation. The IRS civil auditor will not tell you this is happening, so the first time you find out, your case may have gone from bad to worse.