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Restaurants accused of tax fraud, face state and federal charges

On Behalf of | Sep 17, 2018 | Tax Audits

The Department of Justice (DOJ) has accused five restaurants to tax evasion. The charges include claims the restaurant owners made use of software called “tax zappers” to remove revenue from their books. Instead of properly claiming proceeds from their restaurants on tax returns, the government claims the owners removed cash from registers and used the funds to pay employees under the table.

What is “tax zapper” software? Business owners can use the software to suppress sale records and illegally reduce tax obligations. Business owners use the software to delete selected transactions. The software will also recalculate receipts and taxes the business owes — essentially creating two financial accounts for the business allegedly using the software.

Is this a common problem? The government claims tax zappers are often used by businesses to thwart tax obligations. According to estimates by a professor with the Boston University School of Law in the tax department, such software is responsible for the loss of up to $21 billion in tax revenue for states throughout the country every year.

Federal authorities are combining efforts with local, state authorities in an effort to recoup these funds.

What can business owners learn from this case? The government is cracking down on the use of software to thwart tax obligations. Due to increased efforts by state and federal agencies, business owners could face false allegations of wrongdoing. Business owners can mitigate this risk by seeking legal counsel with Goldburd McCone LLP as soon as they are aware they are under an investigation by the Internal Revenue Service (IRS) or DOJ.