Counting Down the Best of the Worst: Top Five CI Cases of 2020

top prosecutionsReality often bites. The Internal Revenue Service (IRS) drove that point home recently with a top five list of their most prominent prosecutions in 2020.


Hopefully you, or no one you know, are on the list of those whose tax dodges went bad in a big way. We are going to count down the top five, starting with:


Number Five: Déjà vu: Tax fraud, criminal tax fraud, prison

James McDaniel of Long Beach, California was a practicing real estate and tax attorney in California, until he wasn’t.


In 2004, Mr. McDaniel surrendered his license to practice law and then pled guilty to one felony count involving a false tax return. That guilty plea rose from the embezzlement by Mr. McDaniel of over $1 million from his legal clients. Because very few embezzlers report ill-gotten gains on their tax returns, the Internal Revenue Service (IRS) was deprived of more than $677,000 in taxable revenue from Mr. McDaniel’s failure to file an accurate return. Add tax, penalties and interest accrued between 1997 and 2001 on top of that and Mr. Daniel owed the princely sum of $1.4 million. In the case of the embezzled funds, Mr. McDaniel faced a charge of grand theft. Along with the steep fine, it bought the former attorney two years in prison.


And that is that. Except, it wasn’t. Individuals who make the IRS Criminal Investigation division (IRS-CI) list are real standouts in a sometimes-lackluster group of taxpayers who commit tax crime each year. Mr. McDaniel definitely earned his number five berth.


Chilling his heels in a federal penitentiary for two years did nothing to cool the ardor of Mr. McDaniel for schemes that might alleviate the pain of that $1.4 million penalty. Upon release, Mr. McDaniel created two shell companies and then went to work as a consultant in the areas of tax and real estate. Using the two entities, Mr. McDaniel moved money between the companies by installing other individuals as operators of those companies. The managers of both companies opened bank accounts into which Mr. McDaniel placed his earnings. Not only did he avoid paying his earlier fine, but he did not pay taxes between the years 2008 and 2017.


You may have guessed from reading this story that Mr. McDaniel was not completely under the radar of the IRS. When arrested again in 2018, Mr. McDaniel owed $1,584.26 in back taxes and found himself once again in custody. In February of 2021, he was sentenced to another five years in prison—and three years of probation after that. A sad capstone for any 66-year-old.


We cannot know what Mr. McDaniel was thinking when he veered off the path after his first prison sentence. With that tax legacy, the IRS was bound to stay in touch. One thing is for sure, time is on no one’s side. If you have stepped off center with your payroll taxes, offshore tax holdings, or some kind of shady tax structure, remember Mr. McDaniel. An experienced criminal defense tax attorney can help you address your situation to help you salvage your career—and your liberty. It is not too late—until it is.


Stay tuned—next time in our top five IRS-CS countdown, a tax preparer with a new take on an old scam.


Skilled legal representation with tax controversy or IRS criminal tax investigation

With offices in Cleveland and Chicago, the tax lawyers at Robert J. Fedor, Esq., LLC help you answer questions about your business tax return, or concerns you might have about foreign bank accounts or compliance. When you need experienced tax advice, call 800-579-0997 or contact us.


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