Experienced Tax Fraud Attorneys
Our Firm is dedicated to helping you resolve all of your tax matters. We have experienced attorneys, knowledgeable paralegals and hard-working support staff diligently fighting on your behalf. Our full-service Federal Taxation Practice represents corporations, businesses, and private individuals and resolves their taxation issues with the best possible result.
Filing a tax return that falsely claims zero wages is a federal offense that could affect private individuals or businesses including corporations and even non-profits.
We help our clients deal with the Internal Revenue Service and advise them on how to properly structure their tax returns to avoid an audit and costly mistakes
If you or someone you know has been charged with filing a false tax return call us now.
We know everyone has to file taxes, but not only individuals must file, corporations, businesses, non-profits, and even some sole proprietorships. No matter what the size of your company, submitting false tax return will create a lot of unnecessary trouble for you and your business.
The repercussions are severe and could include fines, imprisonment, penalties, and interest. In addition, the case, if not resolved, could result in a lengthy, costly and time-consuming prosecution in Federal Court.
The Internal Revenue Service has released the following statistics for 2016:
- There was a total of 3395 Investigations initiated.
- Of those cases, 2744 resulted in Prosecution Recommendations.
- These resulted in 2766 cases.
- 2672 cases led to convictions.
- 2699 sentences were handed out.
- Those sentences resulted in prison time in 80 percent of cases
- The average sentence was 41 months.
Data Source: Criminal Investigation Management Information System.
Fiscal years run from October through September.
What is “Falsely Filing Zero Wages?”
“Falsely Filing Zero Wages” occurs when a filed tax return claims zero income for a particular tax year, either falsely or frivolously.
Claims of zero earned income are recognized by the Internal Revenue Service (IRS) and always trigger audits. These cases are flagged for any query about zero wage claim and will be investigated by the IRS. Unless it is valid, will be rejected and if determined to be deliberate, the claim could be prosecuted. It has a fine of $5000.00 for falsely filing zero wages.
Falsely Filing Zero Wages typically consists of:
- Filing a form 4852 (substitute form W-2) which reduces the total earned income to zero;
- Filing a “Corrected” Form 1099 which disputes the one filed by the employer;
- Submitting a statement rebutting the amount of taxes owed that had been submitted by a third party;
- Fraudulent claims – claims that were deliberately fabricated, as opposed to frivolous claims – are based on untrue or misleading information, have increased penalties.
For example, in 2008 Doreen Hendrickson of Michigan filed a tax return claiming her work as a movie extra was not taxable. Though she got money from the production company and received a 1099 tax statement requiring her to pay taxes on the income she still filed a return claiming zero wages.
Although the amount was minuscule, Mrs. Hendrickson’s refusal to submit an amended tax return, including this income in her taxes resulted in extensive fines, penalties and jail time.
Which Parties Can Be prosecuted for Falsely Claiming Zero Wages?
Although many instances of Filing Claiming Zero Wages were first initiated by promoters and unscrupulous tax professionals, most instances of prosecution affect the one who filed the false tax return. This is because generally, the person that signs the return is the one that certifies its veracity. The promoter usually faces civil fines and sanctions which could include loss of license.
What statute does Falsely Claiming Zero Wages violate?
26 U.S.C. § 7201 Attempt to Evade or Defeat Tax, declares it illegal to “willfully attempt in any manner to evade or defeat any tax imposed.”
Anyone who violates this section of law has committed a felony and is subject to a fine of $100,000.00 or in the case of a corporation who willfully files a false return the fine can be up to $500,000.00. In addition, anyone guilty of violating this section can also be imprisoned up to five years.
26 U.S.C. § 7204 Fraudulent Statement or Failure to Make Statement to Employees, declares it illegal to “willfully furnish a false or fraudulent statement.” The penalty for violating this section is a fine of $1,000.00 and imprisonment of one year.
Is This Similar to Other Types of Tax Fraud?
The IRS publishes an annual list of tax cheats, dodges and scams ‘Promoters’ use to deceive the public. The IRS refers to this list as the “Dirty Dozen:”
- Phishing: Use of fake emails or links to collect data, steal private information or cause malware to be downloaded. (IR-2018-39)
- Phone Scams: Calls impersonating IRS agents to elicit money or other information. (IR-2018-40)
- Identity Theft: Use and misuse of another person’s social security number or other identification. (IR-2018-42)
- Return Preparer Fraud: Dishonest tax preparation services (IR-2018-45)
- Fake Charities: Groups soliciting funds without having a true charitable purpose. (IR-2018-47)
- Inflated Refund Claims: Improper information provided to the IRS affecting the size of the refund. (IR-2018-48)
- Excessive Claims for Business Credits: Claiming Government credits that a business is ineligible for (IR-2018-49)
- Falsely Padding Deductions: Inflating or fabricating eligibility for tax deductions. (IR-2018-54)
- Falsifying Income to Claim Credits: Creating income to qualify for tax credits falsely. Falsely Claiming Zero Wages frequently falls into this category. (IR-2018-55)
- Frivolous Tax Arguments: Frivolous claims about the illegality of taxation. (IR-2018-58)
- Abusive Tax Shelters: Businesses or enterprises that are improperly created to avoid taxes (IR-2018-62)
- Offshore Tax Avoidance: Creating offshore accounts or businesses to hide income. (IR-2018-64)
These are all part of the ongoing list of IRS tax scams that could lead to serious consequences including fines penalties interest and jail time.
For more information on these schemes click or copy into your browser the link below:
“Dirty Dozen” tax scams
Who is in Charge of prosecuting these violations?
Tax scams are aggressively investigated by the IRS Criminal Investigation Division. This division is responsible for investigating these scams as well as any fraudulent or frivolous tax filing:
- Auditors investigate tax returns to discover fraud
- Special Agents analyze the flagged returns for tax fraud
- Frontline Supervisors review the information and determine if the investigation should proceed
- IRS Chief Counsel Criminal Tax Attorney’s then refers the case to the Department of Justice or the U.S. Attorney’s Office to prosecute claims after the recommendation of the Special Agent. (source: irs.gov).
How Are These Investigations Carried Out?
Fraud investigations can involve the following evidence:
- An auditor flags a suspicious tax return;
- The Special Agent evaluates the return to determine if the fraud was intentional;
- The Special Agent Supervisor approves or denies the finding of fraud, after independent review.;
- Once approved the file is returned to the Special Agent for Fact-finding;
- In conjunction with the Chief Counsel. Then obtains evidence, conducts interviews of witnesses, surveillance, obtains and executes search warrants, subpoenas bank records, and reviews financial information to build the case and determine the extent of criminal activity (source: irs.gov).
How do I defend myself if I am the subject of an IRS investigation?
- Find a competent attorney who can defend you. This is crucial because not only will an attorney provide the maximum amount of protection; an attorney also protects communications with attorney-client privilege.
- The most productive defense usually is demonstrating that any false information provided was done through error or was otherwise unintentional.
- Generally, a frivolous filing carries reduced penalties when compared to a fraudulent filing.
- An experienced Tax Attorney has numerous tools at his or her disposal to refute allegations of fraud or in the alternative, to negotiate a reduction in the potential penalties assessed, and to prevent your rights from being violated.
It is crucial for anyone subject to potential Tax Evasion prosecution to seek competent representation immediately.
“Falsely Filing Zero Wages” Recent cases.
Article #1: Tax Defiers face a high likelihood of successful prosecution
Allegations: Fraudulently reducing withholding taxes.
In January 2009, A resident of the District of Columbia, Police Officer Michael C. Irving, was found guilty of two counts of tax evasion. Officer Irving filed false withholding documents which reduced the taxes taken from his paycheck to zero. He then filed a tax return claiming zero income. Records show that Officer Irving had earned a salary of $155,221 that year.
Terms of Sentence were not available.
Article #2: Arizona Tax Preparers Barred from Future Tax Preparation.
Principle Charge: Promoting False claims Act Violation
Allegations: Submitting False Tax Returns and Promoting False Filings
Shelia Young, Deane Young, and Kennith Defoor were barred by a Federal Court from tax preparation based on their promotion of fraudulent tax schemes including “zero income” among other fraudulent claims. This injunction was issued pending the outcome of criminal cases filed against the three individuals for their promotion of filing fraudulent and false tax returns.
According to the DOJ Press Release the three Defendants, all family members filed false tax returns on behalf of others which resulted in false refunds of over 2.4 million dollars. Some Individual returns resulted in false refunds of over $100,000.
Article #3: Man From Utah Submitted Seven Years of Fraudulent Returns.
Charge: Conspiracy to Defraud the United States
Allegations: Reporting zero wages as part of a conspiracy to promote tax fraud
In 2012, Stephen Murphy, a resident of Utah, pleaded guilty in Salt Lake City to a single charge of Conspiracy to Defraud the United States. Mr. Murphy was sentenced to two years imprisonment and an additional year post-release supervision. He was also ordered to pay restitution in the amount of $83,831.
According to the DOJ press release, Mr. Murphy repeatedly filed false income tax returns between 2002 and 2009. In 2002, for example, Mr. Murphy claimed that his tax liability was zero because he was not a United States citizen based on frivolous and untrue claims that had been invented by various tax-defier promoters.
Other subsequent claims involved Falsely reducing his withholding allowance to zero by vastly overstating the deductions on his Form W-4. In addition, he used various other fraudulent schemes including; illegitimate charities and filing false 1099’s.
In some cases, Mr. Murphy used fraudulent and fictitious documents to support his claims, and in other cases, he created bank accounts in the names of fictitious charities to show fraudulent charitable contributions. He was sentenced in Federal Court in Salt Lake City, Utah, before Judge Dee Benson on April 18, 2012.
Article #4: Pennsylvania Doctor Charged With Tax Fraud.
Principle Charge: Tax Evasion
Allegations: Filing false 1099’s, operating sham trusts to hide assets, reporting zero wages as part of a pattern of tax fraud.
Dr. Eliseo Roquiz, an Anesthesiologist from Eerie Pennsylvania, was convicted, with the assistance of multiple promoters, to falsifying his taxes from 1998 – 2000.
DOJ Press Release stated, in 1998 Dr. Roquiz made two sham trusts to hide his assets. In one, he transferred personal assets including his home. He had medical service providers pay his salary and fees into these trusts. He then made false expenses, reducing his earned income to zero. He then hired the National Trust Service to prepare and file his taxes for the next three years.
After Dr. Roquiz’s taxes were flagged for an audit, he hired another tax promotor to submit fraudulent and misleading information to the IRS to cover his tax fraud. He then had a third promotor submit false forms including false 1099’s and false forms 433-A to fraudulently restate his income for those years.
In total Dr, Roquiz admitted to the crime of tax evasion in the amount of $342,361.11 and was ordered to pay restitution. He was sentenced in Federal Court before Judge Sean J. McLaughlin November 15, 2011, terms of the sentence were not disclosed.
For a Premier Firm That Specializes in Taxation and Tax Fraud Defense Please Call Us
If you are the subject of a tax fraud investigation don’t go it alone, you need professional right away.
Tax Fraud can lead to fines, penalties, interest, back taxes, jail time, and the loss of Professional Licenses. You need an experienced Tax Attorney on your side.
Our extremely experienced and professional attorneys know how to get the job done. They will negotiate on your behalf with the IRS, establish the best possible defense, and resolve any civil and criminal charges filed against you with the goal of obtaining the best possible outcome.
Whether you are faced with an audit and investigation or if charges have already been filed, call us. We have defended numerous clients in court and have helped many people, just like you, resolve their tax matters successfully.