The Problem of Filing a False Tax Return

A mistake or an intentional deception on a tax return can cause problems downstream. You should know what to do if you need to correct a return—or if you knowingly submitted a fraudulent tax return to the Internal Revenue Service (IRS).

David Haley owned a successful business, Haley & Associates Mechanical Contractors, and conducted his business in Clarksville, Tennessee. Mr. Haley, 65 years-old, made money in heating and plumbing. From 2014 through 2017, his receipts were more than $1,000,000 per year. Mr. Haley was routinely paid by check by his clients who also filed IRS Form 1099-MISC on earnings they paid to him. So far—so good.

For reasons unknown to anyone but Mr. Haley, he chose not to report his income on tax returns filed for the years 2015 through 2017. The mismatch between submitted 1099s and non-reported income triggered an IRS criminal tax investigation which ended with a guilty verdict on federal charges. 

This narrative offers some basic pointers:

• ·Think carefully about willfully providing false information to the IRS. The IRS is well-equipped to cross-reference missing and under-reported income against a myriad of information sources.
• If you do provide false information—or if you made a mistake on your return—you can remedy the situation to a certain point. If the IRS has not already caught the error or incongruency, you can file an amended return. The same goes if you have a change of heart about a fraudulent return on which you already received a refund—or if you made a mistake.
• ·The IRS screens in several ways for errors concerning tax credits, deductions, underreported or unreported income, math errors, and other figures. The IRS has started to use AI to identify anomalous patterns in tax returns and schedules that might indicate tax fraud. As well, the IRS has been using its Automatic Underreporter system for some time to reduce human hours identifying tax fraud on tax returns.
• While we do not know the finer-grained specifics of this case, the IRS agents on this case may not have had difficulty identifying this tax crime. Mr. Haley did not report his income, but his clients did. As well, it was not likely the best choice to take this matter to a federal jury trial. In some instances, working with experienced tax defense counsel early on can avoid trial and potentially resolve the matter without loss of liberty.

After being found guilty, Mr. Haley was sentenced to two years in prison earlier this month. He will pay restitution of $186,290 plus a $5,000 fine, and supervised release following his prison term.

Filing a fraudulent tax return has consequences. If you are concerned about a tax crime, or a significant error on your return—speak with a knowledgeable tax attorney about your case before you hear from the IRS.

Are you facing a criminal tax charge or IRS audit?  Contact our law firm

If you receive an IRS audit letter or are challenged by a tax controversy in Cleveland, Chicago, or elsewhere nationally or abroad, the tax attorneys at Robert J. Fedor, Esq., LLC can help. We deliver seasoned, strong criminal tax defense. Call us at 800-579-0997 or contact us online.