Tax Fraud

Businesses throughout the country can learn valuable tax law lessons from this case. Running a successful business requires careful financial planning, including withholding taxes on employee wages to pay the Internal Revenue Service (IRS). One business is gaining media attention for its failure to properly follow these rules by withholding the taxes but, instead of paying the IRS, using the withholdings for personal gains. Forbes reported on the case, stating the CEO of Arrow Trucking Company was accused of using the withheld taxes to purchase luxury vehicles and cover the cost of a wedding. Ultimately, the court found the CEO guilty of these accusations and sentenced him to seven and a half years imprisonment and $21 million in restitution for a variety of tax fraud crimes, including conspiracy to defraud the United States and tax evasion.

This case serves as a reminder to those in business across the country: it is important for officers and directors to take payroll taxes seriously. If the IRS considers you a “responsible person” the agency can go after you personally for taxes the company failed to pay. Penalties for violations can range from shutting down the business to criminal charges against liable individuals, as noted in the story above. It is beneficial to have a basic understanding of these crimes to help better ensure your actions and the actions of your business are in compliance with the law.

More on conspiracy to defraud

The United States Department of Justice defines conspiracy to defraud the United States as offenses involving

two or more persons [who] conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose.

The broad language of this definition can cause problems, so courts generally rely on the definition of “defraud” as provided by the United States Supreme Court. Essentially this definition states that any attempt to obstruct or defeat the lawful function of a department of the government, like the IRS, is considered an attempt to defraud the United States.

More on tax evasion

Tax evasion is defined by the Internal Revenue Service (IRS) as any willful attempt to evade or defeat any taxes. Violation can result in a felony conviction with penalties that may include:

  • Imprisonment. Conviction of tax evasion can result in a prison sentence of up to five years.
  • Monetary penalty. In addition to potential time, convictions can also result in fines of up to $250,000 for individuals and $500,000 for corporations.

These are just a few of the penalties that can be tied to these types of crimes.

Accusations of tax fraud

Accusations of tax fraud can accompany a number of charges, including fraud and certain drug crimes. These charges can also be tied to various business practices, particularly those involving offshore accounts. Due to the complexity of these charges, it is wise for those facing charges of tax crimes to seek the counsel of an experienced tax crimes lawyer.

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