As a former CPA, I can’t tell how many times I’ve heard clients say that since they received money in cash “it wasn’t taxable.” WRONG! Not only did I correct that impression for my clients, I would not keep them as clients if they insisted on being a part of what is obviously tax fraud.
Now, I went to prison for tax evasion, so I am not lily white. In fact, while I am not proud of my past, I have a unique perspective from which to write and comment. Perhaps my comments will be the foundation that might help others.
According to the US Attorney’s office, a practicing Houston area dentist has pleaded guilty to filing a false income tax return and evading more than $145,000 in federal income taxes between 1999 and 2003. Dr. Brian G. Martinez, 51, a practicing dentist in Houston, pleaded guilty to the federal felony tax charge Thursday, May 1, 2008. At the hearing, Martinez admitted that between Jan. 1, 1999, and April 15, 2004, while engaged in the commercial practice of dentistry, he received payment for services rendered to patients in the form of cash and/or by credit card, check or money order. Although books and records for the practice recording the payments made by patients for services rendered were maintained, not all payments were recorded in the books and records that were disclosed to those who prepared Dr. Martinez’s tax returns for calendar years 1999 through 2003. In some instances, Martinez was handed both cash receipts and checks which he personally cashed, which would not be disclosed, documented or disclosed to the tax return preparers.
COMMENT: The practice of not keeping accurate records is common. In fact, the fact that Dr. Martinez went to the trouble to keep inaccurate records show deliberate intent and, likely will pay against him at his sentencing hearing.
Martinez concealed from his tax preparers a total of $533,048 in revenue or gross receipts received from patients during calendar years 1999 through 2003 – all taxable income – causing materially false income tax returns to be filed with the IRS and evading the payment of a total of $149,253 in income taxes for those tax years.
COMMENT: When cash receipts are concealed the question often arises, what to do with the cash. More times than not, the IRS can recreate accurate income records by looking at lifestyle. Rarely does a person hide the cash. Most of the time they spend it and that’s the one activity that creates the trail for a conviction.
To help with sentencing, Martinez paid restitution – delivering a check in the amount of $149,253 payable to the IRS. Sentencing is set for July 25, 2008. Martinez faces a maximum of five years in prison and a $250,000 fine. Additionally, the court may impose up to three years of court supervision to follow any term of imprisonment imposed. I suspect that Martinez will face 12 months in prison!
Comments are welcome!
White Collar Crime Speaker – Chuck Gallagher – signing off…