Pay Up or Lock Up !

If You don’t pay your taxes, you might go to lock up!

Pay Up or Lock Up !

We’ve learned just how good the government’s computers are at keeping track of transactions between and amongst taxpayers. Sometimes people you do business with will file the tax required paperwork that they should, and you should get a copy of those forms and be diligent to attach them to your tax return. These are forms like 1098’s and 1099’s. Sometimes, though required, the people who have paid you money don’t file the paperwork – so do you think that it is okay to “forget about that?” Probably shouldn’t…

Taxpayers who do business in person, by mail, in “brick and mortar” establishments or partially/fully on the Internet should not be surprised that a human investigator at the IRS, taking a closer look at your tax return, is capable of uncovering transactions (or threads, traces, and evidence of transactions) that took place online or offline. They might wonder if all transactions were included in the gross income reported and if the corresponding obligation is being paid. Newspapers around the country have story after story of local taxpayers taking time off from “life” to spend time in Lock-UP for what is called “Tax Fraud.”

Some recent Stories in the News

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Tax Fraud in Kansas

Dallen D. Harris, a 39-year old Wichita, Kansas man has been sentenced to two years in federal prison and ordered to pay $827,216 in restitution for tax evasion after he pleaded guilty to one count of tax evasion.

Mr. Harris admitted in a plea agreement that he had reported taxable income for the year 2010 of $164,157 when really his income was $1,045,972. Yikes! [NOTE: You can bet it would easy for a first year IRS trainee to see that Mr. Harris standard of living and all of his business activities suggested the stated income was a little low…]

What did Mr. Harris do for a living? He sold porn-related domain names. Court records in related cases show some of the domains that may have accounted for some of his income: celebritysextape.tv, adultkingdom.net, porntesters.com, hardcorefilms.tv, celebritynakedpic.com and sextape.com.

How is the government finding restitution? According to newspaper accounts, the Feds are going after Mr. Harris’ houses, cars and bank accounts.

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Tax Fraud in Pennsylvania

Mr. Karoly, is a 60-year old, well-known Philadelphia attorney, who made a big name and lots of money filing aggressive lawsuits against local police departments was sentenced to 6 1/2 years for tax evasion, mail fraud and money laundering. Ouch! That is a significant sentence.

Mr. Karoly was ordered by a federal judge to immediately stop practicing law and remain under home confinement and monitoring with an electronic device until he reports to prison on July 6, 2013. Moreover, Karoly was ordered to pay a sizable $1.57 million in back taxes and additional restitution.

In a non-jury trial in November 2012, U.S. District Judge Lawrence F. Stengel convicted Karoly on three counts of mail fraud and three counts of money laundering after Karoly pleaded guilty to three counts of failing to pay taxes on more than $5 million in income in 2002, 2004 and 2005. Newspaper articles report that judge Stengel told Karoly: “You have a lack of honesty, duplicity and a remarkable tendency to blame others. You are also deceptive.”

In addition to other charges, Karoly had apparently donated $500,000 to the Lehigh Valley PA Community Foundation in 2004 and had then written it off on his tax returns as a donation, but then later diverted the money to Dubbs Memorial United Church of Christ in Allentown, PA and then redirected again to a private foundation under attorney Karoly’s control. He used “written-off money” for personal and business expenses.

District Judge Stengel said Karoly’s offenses were “premeditated, calculated offenses over several years,” and “what makes these crimes so profoundly reprehensible is that he was an attorney.”

Judge Stengel sentenced Karoly to 36-months prison time on the tax charges, and 78 months prison time on the mail fraud and money laundering charges which will run concurrently keeping the total sentence down to 6 – 1/2 years. The sentence, considering the offenses, are on the low-side of the Federal sentencing guidelines.

Judge Stengel said that Karoly’s position as an attorney held him to a “special standard,” and “Karloy’s failure to pay taxes was an insult to hard-working people.” The judge went on to say: “a lawyer who is not honest is a threat to society,” and also chastised Karoly for: “behavior that shocks the conscience — lying under oath and producing a fake document during his money laundering trial.”

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Fresno real estate broker sentenced for tax evasion

A Fresno real estate broker was recently sentenced in federal court to 18 months in prison for failing to pay more than $200,000 in income taxes.

In a plea agreement, Brian Keith Cortez admitted to evading an assessment of his taxes from 2003 to 2006 on income from his Fresno real estate and mortgage brokerage businesses, Mortgage Express, Mortgage Express Inc., and Valley Investment Properties.

Cortez, 47, who owned and operated the Fresno branch of Mortgage Express and Mortgage Express Inc., provided home mortgage brokerage services as well as refinancing on mortgages and other services for securing financing on home purchases.

For each loan processed by the business, Cortez earned a 10 percent commission and a $200 fee — income that was not reported to the IRS following an investigation by the agency’s Criminal Investigation Division.

Assistant United States Attorney Jeremy R. Jehangiri prosecuted the case.

The sentence by Chief United States District Judge Anthony W. Ishii includes 18 months in prison followed by three years of supervised release and $199,160 in restitution.

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