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March 10, 2003
If you’re
looking for your 15 minutes of fame, go beat Kasparov at chess. Discover a cure
for HIV. Figure out how we can stop the war in Iraq before it starts.
But don’t cheat on your taxes.
Millian Toms, our local CPA, says not even to
try – not even a little, much less a lot, which is what we’ll be discussing
today – the high rollers.
“Inflating normal charitable deductions or
taking deductions based on what you think someone in your income level is
entitled to take is pretty common, but I don’t recommend it,” Millian says.
“But there are sections of the IRS code,
Department of Treasury – they (some clients) don’t even know what they’re
exposing themselves to,” she added. “It’s my job as a preparer to help the
client, but some situations make my job more difficult than others.”
But hey, who says life is dull. Pull one of the
following and you, too, might find yourself in the very same situation as Al
Capone, although if you lose, and when cases get to this level the government
rarely loses, you might want to think about the long-term benefits of spending
25 years in a 6-by-9 cell with a very muscular man named Sally Ann.
“Each of the following is a section of the U.S.
code, over which the IRS has jurisdiction for the Department of Treasury,”
Millian says. “They specify the crime and what happens if convicted.” These
infractions are listed below in order of seriousness, beginning with the lessor
infractions.
- An attempt to evade or defeat tax. This
means people who simply don’t pay their taxes, for whatever reason. “This
comes under Title 26 USC § 7201. “That means it’s a felony punishable by up to
$250,000 for an individual; $500,000 for a corporation; or both plus the costs
of prosecution. And did I mention the jail time? Five years.”
- Then there’s the failure to collect or pay
over any taxes collected, Title 26, USC § 7202. That means, for example, the
employers hanging onto it instead of turning it over to the Treasury, which
naturally “has a dramatic and negative impact on your return, because you
think that money has been paid all this time,” Millian says. Get caught at
this one and you’re in for a 100 percent penalty charge plus interest, plus
the same fine structure found above.
- The usual difference between a felony and a
misdemeanor is: was the object in question worth more or less than $100. More,
it’s a felony. Less, it’s kicked down to a misdemeanor.
That’s the usual difference. The U. S. Code/
Department of Treasury is just a little bit different. Willful failure to file
a return, supply information or pay the tax, then you get to arm wrestle with
Title 26 of USC § 7203, which fortunately doesn’t pinch you as hard as a
felony code. Nah, with Title 26 here, you only have to pay $100,000 per person
and $250,000 for a corporation. Chump change, right? Add one year in prison or
both, plus the cost of prosecution and now what do you call it?
- The fraudulent withholding exemption or
failure to supply withholding information. That’s where, instead of just
claiming you and your spouse as deductions, you claim a bunch of imaginary
relatives, because it puts more money in your pocket since less is taken out
in taxes. Until you get caught, when you’ll have a year in jail to think about
Uncle Fester and the rest of your fictitious family, but there’s a bright
side: Title 26 of USC § 7205 says you cannot be fined more than $100,000 for
both.
- Making a false or fraudulent statement under
penalties of perjury. As Millian notes, “Some of the tax preparers say they’ll
defend you in court, but what they really mean is that they will defend what
they were told and where they put it on the tax return, and they will not
stipulate that what you told them is true.” Check Title 26 USC § 7206 (1).
This is a felony punishable by 3 years in jail, $250,000 for an individual,
$300,000 for a corporation, plus something we haven’t mentioned: In all of
these cases, if you lose, you get to pick up the tab for the prosecution as
well.
- You’ll notice that was Title 26 USC § 7206
(1), which stands for Part One. Part Two applies to any person who willfully
aids or assists you in Part One – if they do, they become liable to the same
punishment recommended in Part One.
- For all of you who’ve been working out and
thought you might scare off the IRS agent by cracking a walnut between your
pecs, Title 18, USC § 7212(A) might be of interest to you. Any attempt to
interfere with IRS agents, or attempt to corrupt or intimidate said agents
shall be imprisoned for 3 years and fined $250,000 for an individual, or
$500,000 for a corporation, or both.
- Making false, fictitious or fraudulent
claims against the IRS or any other government agent is the same as making
them against the U.S. Government – did you know that? Title 18 USC § 287
prescribes 5 years in jail, $250,000 for an individual and $500,000 for a
corporation, OR BOTH, if the judge is in a really good mood.
- Conspiracy to defraud the government with
respect to claims is not something the government takes lightly: 10 years,
$250,000 for an individual, $500,000 for a corporation, or both. Title 18, USC
§ 286.
- If you conspired and had company, such as
two or more persons, and the government can prove it, the ante goes up under
Title 18 USC § 371, 5 years, $250,000 as an individual, $500,000 as a
corporation, OR BOTH.
- And, as always, the big bomb is saved for
the last. If you thought what is legally called “fictitious obligations,” and
what the rest of us call counterfeiting and uttering and publishing (knowingly
writing a bad check) and you actually use the fictitious document, you’ll be
happy to know there is no dollar fee attached to this crime. However, if
proved, under Title 18, USC § 514, you win 25 years in jail, all expenses
paid.
Now, as Millian says, “On every one of those
they have to prove willfulness. You might still have to pay a fine, but there is
a presumption of innocence. These are very smart people in this section of the
IRS and you’re probably going to find more common sense here than you do in
other parts of the IRS.”
“Remember, when you get to this point, it’s got
to be a lot of money,” Millian says, putting just the right zing in that “a lot
of money.” Title 18 USC § 1956 says that if they suspect you of, for instance,
laundering money, they have to prove the underlying activity. Who knows the
proceeds came from unlawful activity? Whoever, knowing that the property
involved resulted from an illegal transaction intends to violate a section of
7201 or 7206, or knowing a transaction is designed to conceal or disguise an
unlawful activity or to avoid reporting under state or Federal law, gets you 20
years in prison, a $500,000 fine or twice the value of the property involved, or
whichever is greater, or both.
Some people think monies collected by the
IRS stay with the IRS. Not so, says Millian. The IRS enforces and, more
importantly, interprets, as do tax preparers, the rules Congress passes. When
these rules seem to conflict, a tax court steps in and decides who is correct.
To clarify this, that’s why we make our checks out to the United States Treasury
now, instead of the IRS.
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