Owners of cash-heavy businesses such as restaurants, bars and some retail shops know that they have to be wary of employees skimming money -- that is, pocketing cash rather than recording the transaction and placing the cash into the register. Owners know that they have to be constantly vigilant because the temptation is constantly there for their employees handling cash.
Business owners also have to beware the temptation themselves. Skimming cash from their business illegal and can trigger Internal Revenue Service criminal tax investigations. According to a newspaper article, the IRS accused a pair of business owners northwest of Cleveland of tax fraud saying they skimmed about 27 percent of their shop's income over three years and failed to report the income on their tax returns.
The Ashland, Wisconsin, business owners recently agreed to plead guilty to charges of filing false tax returns, and other allegations. According to the news report, they skimmed $575,752. As part of their plea agreement, they have agreed to pay the IRS $200,000.
They each face up to three years in prison on the tax charges. Even worse for them, they face a maximum 20 years on federal drug charges for selling synthetic drugs at their shop.
The products were sold as incense and potpourri and labeled "not for human consumption," but were commonly used as stimulants, hallucinogens and marijuana-like substances by consumers.
According to the newspaper, the investigation into the shop was conducted by both the IRS and Drug Enforcement Administration, along with state and local law enforcement agencies.
This case is another illustration of how aggressive the IRS can be in its pursuit of unreported tax obligations. For those facing such an investigation, it can make sense to have an experienced Cleveland tax attorney contact the IRS and negotiate favorable terms on an agreement allowing you and your business to get into compliance before criminal charges are filed.
