The Anti-Loophole: The “Voluntary” Tax Which is Not So Voluntary

Once again, we are confronted with the truth the our “voluntary” tax system is not entirely voluntary after all. As Dan Ackroyd said on Saturday Night Live in the 90s, playing then-presidential contender, Bob Dole as he berated then-President, Bill Clinton, “You know it, I know it, and the American People know it.”

But, apparently, North Carolinian, Chet Lee West, didn’t know it. Or so he acted. He was convicted in District Court of three counts of tax evasion. West, acting as his own attorney at trial, stated in his closing arguments that the jurors should ‘see the truth and set me free.” The jurors did not agree with his statement and reached the guilty verdict in only 1 hour.

Owing more than $52,800 in back taxes, West, claimed he found a loophole in the tax code that freed him from having to pay income taxes. West attempted to read from a book containing federal tax codes but the judge had him stop, explaining that she would instruct the jurors what the law is.

During the trial, West admitted that he had not filed taxes since 2000 and had sent a letter to the IRS explaining that he elected to not be subject to income tax.  (Now that is an election almost everyone could support – at least until one considers Supreme Court Justice Oliver Wendell Holmes’s take on this issue. Holmes famously said: “I like to pay taxes. With them I buy civilization.”) The IRS responded to West’s “election not to be subject to income tax” with a letter back to West informing him that American citizens cannot opt out of paying taxes.

Donald J. Kleine, the Federal prosecutor said that West knew he had an obligation to pay his taxes but, “just didn’t want to.”

West was sentenced to Federal prison for a term of more than 4 years and ordered to pay restitution to the Internal Revenue Service in the amount of $439,515.

Bakery Owner Can’t Have His (unpaid tax obligation) Cake and Eat It Too

macaron cookieOne baker seems to have gotten caught with his fingers in the cookie jar:

Owner of Kasia’s Bakery in New Britain, CT Marian Kobryn pled guilty to tax evasion by operating his business on a cash-only basis and not reporting the cash income or (of course) paying tax on it. From 2010 to 2013, sales totaling $730,860 were deposited into personal bank accounts usually under $10,000 to evade bank’s currency transaction reporting requirements (another illegal practice known as “structuring.”

Pleading guilty to one count of making a false statement of a federal tax return, Kobryn was sentenced to time served due to serious health issues, Kobryn has been ordered to pay restitution in the amount of $435,00 to cover back taxes owed, hence being compelled to restore that raided cookie jar.

IRS: Skimming is for Milk, Not for Tax Reporting, & Bar Owner Finds Self in Pickle

This might be called the Case of the Candid Calendar. A Wisconsin bar owner was sentenced to 18 months in federal prison and ordered to pay a $100,000 fine for filing false tax returns.

Cat-laps-milk-glassAccording to court records, Jared Jerome Hart, 36, of Eau Claire, Wis., owned a tavern called The Pickle Bar. His bar accepted payments only in cash, and at the end of each day, tavern employees would place daily sales in a safe for Hart to pick up. Hart would count the cash, and then record a number for the day in his own daily calendar. Hart would then deposit only some of the cash from into the business account.

Hart gave his accountants the payroll information, bank statements, the check register and vendor invoices. From these records, which Hart knew were incomplete, the accountants created the official books of the bupicklesiness.  Hart never told his accountants about the cash he was “skimming” from the tavern, or the second set of books he was keeping at home.  Hart’s daily calendars were discovered during the execution of a search warrant at his home in June 2012.

Between 2008 and 2011, there was more than a $1 million discrepancy between the gross receipts of The Pickle Bar reflected in the books the accountants maintained and the second set of books Hart maintained at his home.

Chiropractor Adjusts Tax Return, Gets 15 Months

Working on more than spines, a Pennsylvania chiropractor attempted a sort of tax decompression by manipulating and adjusting her tax return to file a 2006 federal income tax return that falsely claimed her taxable income was $89,754, when, in fact, she had taxable income of $1,151,928, and owed at least $363,566 in taxes for that year.

Unhappily for tspine-diagramhe chiropractor, Maria Giacalone-Hewson, 43, of Canadensis, Penn., who operated Canadensis Healthcare Inc. was sentenced to 15 months in prison for aiding the preparation and filing of a false federal income tax return and false statements relating to healthcare matters.

At her sentencing, Giacalone-Hewson was also ordered to pay $113,821 in taxes that she owed forthe years 2007 through 2010.

In addition to the prison term, Judge Mariani ordered that Giacalone-Hewson be supervised by a probation officer for three years following her release from prison.

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Simple Math: $66 is Not $198,713, and so, a Plea of Tax Evasion is Pled

The pluses and minuses of understating one’s income on a tax return include, on the plus side, one’s tax bill will be smaller. But, on the minus side, such an understatement is a crime with serious consequences.

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Withholding But Never Letting Go Gets Businessman Sentenced to 15 Months

All too often business owners find all that money they have withheld from employees’ paychecks much too tempting. Instead of paying it to the IRS, as they are obligated, they keep it, and use it for other things, like the electric bill, or a supplier whose supplies are necessary for the business to stay in business. Other people’s money used for things for which it was not supposed to be used. This can lead to problems. For example:

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The Sin of Snipes, Replayed: Mayor Pleads Guilty to Failing to File Tax Return

The mayor of Mount Vernon, N.Y., just north of Manhattan, has pleaded guilty to failing to file corporate and personal income tax returns. Failing to file tax returns is the same crime for which Hollywood film star Wesley Snipes famously was convicted and for which he spent nearly three years in federal prison.

Mayor Ernest D. Davis, 76, faces up to two years in prison as a result of his plea agreement.

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Paper Faker Nabbed: $1.8 Million Phony Tax Refunds Grabbed

For all the fear and anxiety people suffer in the run up to April 15th and the filing of tax returns, lots of taxpayers look forward to the refund to which they are entitled from the IRS as reported in their tax return. But, imagine you were not entitled to that so desirable refund, but a refund was coming to you anyway?

It would be like Christmas in April. Imagine that (indeed, rumor has it that John Lennon’s hit song, Imagine, left out the line “Imagine all the tax refunds….”)

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Letter from the Editor (Post-Mayan Apocalypse Fizzle): A New Life for the Newsletter, Life, Law & Taxes

(From the vault: A slightly different version of this post was published in the paper newsletter, sent to subscribers through the regular U.S. mail, in January 2013, on the occasion of the paper newsletter being revived to monthly publication, after a hiatus.)

It has been a while since the last edition of the through-the-regular-snail-mail Life, Law and Taxes, was completed and mailed out to you.

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