IRVINE,
Calif., July 16, 2024 /PRNewswire/ -- According to
a Department of Justice press release, a Florida man recently pleaded guilty to tax
evasion related to his fishing operations. This story underscores
the importance of complying with federal and state income tax laws
and provides a glimpse into the potential penalties for the
violation of such laws. If you have failed to file a tax return for
one or more years, or you have failed to accurately report your
income or expenses, you should contact an experienced tax attorney
to help understand your exposures and determine the best strategy
to bring you into tax compliance without facing criminal tax
prosecution.
Defendant Failed to File Income Tax Returns for Several
Years
Court records reveal that Christopher
Garraty, a Florida
resident, pleaded guilty to evading taxes on income earned from
commercial fishing in Massachusetts. Despite earning substantial
income from 2002 to 2018, Garraty failed to file federal income tax
returns for several years despite owing approximately $413,879 in taxes. He cashed paychecks to conceal
income, avoided bank reporting requirements, and used the cash for
personal expenses.
This case is a great example of how misdemeanor non filing can
be ramped up to felony evasion if the factors of Spies Vs.
the United States are present
which is basically non filing coupled with some effort to hide your
intentional noncompliance.
The "Spies evasion" doctrine is, essentially, one of the ways of
committing tax evasion. It is a legal theory that finds a taxpayer
criminally liable when he willfully (1) fails to file a tax return,
and (2) his action is coupled with an "affirmative act of evasion,"
like actively concealing or misleading the government.
In Spies the Supreme Court identified at least
seven examples of conduct that constituted affirmative acts of
evasion. The Court stated: [We] "think [the] affirmative willful
attempt may be inferred from conduct such as [1] keeping a double
set of books, [2] making false entries of alterations, [3] or false
invoices or documents, [4] destruction of books or records, [5]
concealment of assets or covering up sources of income, [6]
handling of one's affairs to avoid making the records usual in
transactions of the kind, and [7] any conduct, the likely effect of
which would be to mislead or to conceal." Spies v.
United States , 317 U.S.
492, 499 (1943).
What is an "affirmative act" for purposes of
the Spies evasion doctrine? It may be any number
of things, including but not limited to, making a false statement
to the IRS, either oral or written. Importantly, the statement
could be made before, after, or at the same time as filing the tax
return. Thus, for example, a taxpayer makes an "affirmative" act of
evasion after failing to file his income tax return when he lies to
the IRS about how much income he earned. Accordingly, a taxpayer's
lying about earnings could also earn him jail time-and heavy
penalties.
Garraty will be sentenced later this year and faces a maximum of
five years in prison. In addition to physical incarceration, the
defendant may also be sentenced to serve a period of supervised
release, commencing upon the end of his prison sentence. Lastly,
Garraty will likely be ordered to pay restitution to the IRS,
representing the tax loss that he caused.
Severe Penalties for Tax Evasion and the Importance of
Seeking Quality Legal Assistance
The above case underscores the severe consequences of tax
evasion. Garraty's actions resulted in significant legal
repercussions, including prison time, restitution, and fines. The
penalties highlight the importance of compliance with tax laws and
the severe consequences of attempting to evade them.
If you have been untruthful with the IRS or a state taxing
authority about your income on filed tax returns, or if you have
failed to file a tax return altogether, you should discuss your
case with an experienced tax defense lawyer. Together, you will
work to establish the pertinent facts of your case and develop a
roadmap to bring you into tax compliance. You don't have to go up
against the IRS or state taxing authority alone.
If you have failed to file a tax return for one or more years or
have taken a position on a tax return that could not be supported
upon an IRS or state tax authority audit, eggshell audit, reverse
eggshell audit, or criminal tax investigation, it is in your best
interest to contact an experienced tax defense attorney to
determine your best route back into federal or state tax compliance
without facing criminal 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 disclosure before
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, Kovel CPAs and EAs,
our firm provides a one stop shop to efficiently achieve the
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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
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