From the Tax Law Offices of David W. Klasing -Florida Resident That Failed to File Income Tax Returns, Pleads Guilty to Tax Evasion, Faces Federal Prison

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Tax Law Offices of David W. Klasing, PC

Jul 16, 2024, 06:37 ET

IRVINE, Calif., July 16, 2024 /PRNewswire/ -- According to a Department of Justice press release, a Florida man recently pleaded guilty to tax evasion related to his fishing operations. This story underscores the importance of complying with federal and state income tax laws and provides a glimpse into the potential penalties for the violation of such laws. If you have failed to file a tax return for one or more years, or you have failed to accurately report your income or expenses, you should contact an experienced tax attorney to help understand your exposures and determine the best strategy to bring you into tax compliance without facing criminal tax prosecution.

Defendant Failed to File Income Tax Returns for Several Years

Court records reveal that Christopher Garraty, a Florida resident, pleaded guilty to evading taxes on income earned from commercial fishing in Massachusetts. Despite earning substantial income from 2002 to 2018, Garraty failed to file federal income tax returns for several years despite owing approximately $413,879 in taxes. He cashed paychecks to conceal income, avoided bank reporting requirements, and used the cash for personal expenses.

This case is a great example of how misdemeanor non filing can be ramped up to felony evasion if the factors of Spies Vs. the United States are present which is basically non filing coupled with some effort to hide your intentional noncompliance.

The "Spies evasion" doctrine is, essentially, one of the ways of committing tax evasion. It is a legal theory that finds a taxpayer criminally liable when he willfully (1) fails to file a tax return, and (2) his action is coupled with an "affirmative act of evasion," like actively concealing or misleading the government. In Spies the Supreme Court identified at least seven examples of conduct that constituted affirmative acts of evasion. The Court stated: [We] "think [the] affirmative willful attempt may be inferred from conduct such as [1] keeping a double set of books, [2] making false entries of alterations, [3] or false invoices or documents, [4] destruction of books or records, [5] concealment of assets or covering up sources of income, [6] handling of one's affairs to avoid making the records usual in transactions of the kind, and [7] any conduct, the likely effect of which would be to mislead or to conceal." Spies v. United States , 317 U.S. 492, 499 (1943).

What is an "affirmative act" for purposes of the Spies evasion doctrine? It may be any number of things, including but not limited to, making a false statement to the IRS, either oral or written. Importantly, the statement could be made before, after, or at the same time as filing the tax return. Thus, for example, a taxpayer makes an "affirmative" act of evasion after failing to file his income tax return when he lies to the IRS about how much income he earned. Accordingly, a taxpayer's lying about earnings could also earn him jail time-and heavy penalties.

Garraty will be sentenced later this year and faces a maximum of five years in prison. In addition to physical incarceration, the defendant may also be sentenced to serve a period of supervised release, commencing upon the end of his prison sentence. Lastly, Garraty will likely be ordered to pay restitution to the IRS, representing the tax loss that he caused.

Severe Penalties for Tax Evasion and the Importance of Seeking Quality Legal Assistance

The above case underscores the severe consequences of tax evasion. Garraty's actions resulted in significant legal repercussions, including prison time, restitution, and fines. The penalties highlight the importance of compliance with tax laws and the severe consequences of attempting to evade them.

If you have been untruthful with the IRS or a state taxing authority about your income on filed tax returns, or if you have failed to file a tax return altogether, you should discuss your case with an experienced tax defense lawyer. Together, you will work to establish the pertinent facts of your case and develop a roadmap to bring you into tax compliance. You don't have to go up against the IRS or state taxing authority alone.

If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.

Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!

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Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

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