Employee Tax Fraud—What Happens when a Worker Embezzles?

Employee theftCriminal tax investigations are often aimed at business owners or C-suite executives.  Just as often, it is the rank-and-file who perpetrate tax fraud.

 

In early March, Alabama resident Alita Edeker was sentenced to almost four years in prison for stealing from her employer and filing false income tax returns.  According to the Department of Justice, Ms. Edeker was an accounts manager at a science technologies company based in Auburn, Alabama, between 2005 and 2014.

 

Like many individuals who embezzle from their employer, Ms. Edeker was in a position that enabled her to route and reroute monies coming into the company for the payment of goods and services.   Ms. Edeker processed credit and debit card product purchases for the company. Between 2007 and 2014, Ms. Edeker transferred more than $700,000 into accounts that she controlled.

 

Monies gained from tax crime often go to pay debt or pay for personal comforts.  Ms. Edeker used the illicit funds to pay for her car, home utilities, and mortgage.

 

As with many types of criminal endeavors, Ms. Edeker was pursued for filing fraudulent tax returns.  In addition to the embezzlement and making false statements about the money she diverted, the IRS found she filed inaccurate income tax returns between 2011 and 2013. 

 

Ultimately, Ms. Edeker will serve her prison time, plus three years of probation.  She is required to repay her employer $819,497.29 and owes the IRS another $101,604.  As an accounts manager and felon, Ms. Edeker will be hard-pressed to repay her debts in her lifetime.

 

When an employee embezzles, it is important for an employer to obtain experienced legal advice about reporting the loss to the IRS, and properly classifying repayments on those embezzled funds should they occur.  At the outset of discovery of the theft, employers can provide the IRS with information about the loss.  That said, the report and steps to deal with the embezzlement should be reviewed with general counsel or a qualified tax attorney before contacting the IRS.

 

In this instance, Ms. Edeker had the opportunity to reach out for legal help at any point during her long fraud.  Although crimes were committed, working to mitigate their impact at any point before arrest is a better strategy than waiting and wondering about arrest.  If you are aware of a potential criminal tax charge or just a tax irregularity—seek experienced legal advice sooner than later.

 

Highly qualified legal representation with IRS audits or criminal tax defense in Chicago and Cleveland

The law offices of Robert J. Fedor, Esq., LLC provide confidential, knowledgeable legal representation and strategic tax solutions to challenges of tax fraud, offshore tax issues, and alleged criminal tax matters.  Call 800-579-0997 or contact us today.

 

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