The federal government recently accused a Texas entrepreneur of over $2 billion in tax evasion. The case, if successful, will mark the biggest tax evasion case against a U.S. citizen in the country’s history. The government has a 39-count indictment against the entrepreneur, including allegations of tax evasion, failing to file foreign bank account reports (FBAR), money laundering and evidence tampering.
The prosecution states the accused held offshore entities to hide income from the Internal Revenue Service (IRS) and avoid paying taxes. However, as noted in a recent analysis by Forbes, although hiding things is bad, the attempt at a coverup is almost always worse. This case helps prove that point; the entrepreneur received additional criminal charges for tampering with and destruction of evidence. Similar patterns appear in other high-profile cases discussed in recent tax fraud prosecutions, where concealment efforts significantly worsened outcomes.
The tech mogul, Robert T. Brockman, has pleaded not guilty to all charges. If convicted, authorities state he faces a “substantial period of incarceration” and forfeiture of the funds that are connected to the criminal activity. When the case is complete, it could lead to millions in penalties. Comparable consequences have been imposed in other enforcement actions, including well-known tax evasion cases involving public figures.
What can taxpayers learn from this case?
The key to this case: transparency. Taxpayers should always report income and file taxes. It is important to do so honestly and to the best of your ability. Whether on purpose or by mistake, tax authorities have become increasingly effective at identifying unreported income and offshore assets.
Learning from Brockman and many other tax evaders, the United States government now has powerful regulatory tools that apply pressure to foreign banking institutions. These institutions are far more likely to cooperate with federal investigators and disclose information about accounts held by U.S. citizens. The government may use this information as part of an extensive and invasive investigation that often begins as an audit but can escalate into a criminal case. Understanding where lawful tax planning ends and criminal conduct begins is critical.
In some cases, investigations are triggered or accelerated by third parties. Increased use of informants has played a significant role in recent enforcement trends, making it important to understand how whistleblowers can initiate tax audits and investigations.
What starts as a civil audit can quickly take on criminal implications. Taxpayers who receive audit notices or investigative inquiries should take them seriously and understand how audits may progress and resolve, particularly when large sums or offshore accounts are involved.
Those facing an investigation for tax crimes are wise to act quickly to protect their interests. The attorneys at Goldburd McCone have experience handling matters that span both tax audits and criminal tax investigations and are ready to discuss your options, assist with agency correspondence, and provide strategic legal representation.