Federal Jury in Charlotte, NC Finds Tax Professionals Guilty of Conspiring to Defraud the IRS
A federal jury in Charlotte, North Carolina, recently convicted two tax attorneys and an insurance agent of conspiring to defraud the United States. Their scheme involved promoting a fraudulent tax shelter designed to help clients file false tax returns. This operation spanned over a decade and caused significant financial harm to the IRS.
The Fraudulent Tax Scheme
Between 2011 and November 2022, the group marketed a plan called the “Gain Elimination Plan.” This fraudulent tax shelter was designed to hide clients’ taxable income by falsely inflating business expenses. These expenses included fictitious royalties and management fees, which were recorded as payments to a limited partnership tied to a charity.
In reality, these fees were fabricated, and the attorneys involved advised clients that the partnership required life insurance policies. These policies were linked to the profitability of the businesses and the taxable income they intended to shelter.
Financial Gains from the Scheme
The insurance agent involved earned over $2.3 million in commissions from selling these policies, splitting the profits with the attorneys. The attorneys received more than $1 million in total. Meanwhile, the agent filed false personal tax returns, underreporting income and inflating expenses, resulting in a tax loss exceeding $480,000.
Overall, the scheme led to a total tax loss of over $4 million.
Legal Consequences
The defendants now face severe legal consequences. The conspiracy charge carries a maximum penalty of five years in prison. Additionally, each charge of aiding in the preparation of false tax returns can result in up to three years of imprisonment. The insurance agent faces extra penalties for filing false personal tax returns.
The sentencing will be determined by a federal district court judge. This decision will take into account the U.S. Sentencing Guidelines and other statutory factors.
Justice Department and IRS Statement
Acting Deputy Assistant Attorney General Stuart M. Goldberg and U.S. Attorney Dena J. King for the Western District of North Carolina announced the convictions. The IRS Criminal Investigation division conducted the investigation, and experienced trial attorneys prosecuted the case.
Implications for Taxpayers
This case highlights the risks of engaging in fraudulent tax schemes. Taxpayers should exercise caution and avoid schemes promising to eliminate taxable income through questionable practices. Consulting with reputable tax professionals is the best way to ensure compliance and avoid legal repercussions.
The convictions in this case underscore the government’s commitment to pursuing tax fraud. By holding these individuals accountable, authorities send a strong message about the consequences of exploiting the tax system. The public is urged to remain vigilant and report suspicious activity to the IRS.
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