Category Archives: criminal tax law

On October 29, 2019 we ORIGINALLY posted The IRS is Now Criminally Prosecuting Employers For Failure To Pay Withheld Payroll Taxes! where we discussed that the IRS is stepping up criminally prosecuting business owners for failing to turn over withheld payroll taxes.

Then on October 12, 2020 we posted The IRS Criminally Prosecutes Yet Another Employer For Failure To Pay Withheld Payroll Taxes!, on June 4, 2020  we posted Another Employer Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and on June 29, 2020 we posted More Employers Gets Criminally Prosecuting For Failure To Pay Withheld Payroll Taxes! and now according to DoJ, a federal grand jury returned an indictment, charging a North Carolina couple with federal employment tax and individual income tax violations.

As alleged in the indictment, from 1992 through the present, James Rice was an orthopedic surgeon who owned and operated an orthopedic practice that the indictment refers to as “Sandhills Orthopaedic.” The indictment further alleges that his wife, Susan Rice, worked at Sandhills Orthopaedic and handled the administrative operations, including payroll and employment tax obligations. Susan Rice also purportedly owned and operated a truffle business. 

The Rices Have Been Charged With A Variety Of Tax Offenses, Including Conspiring To Not Pay Any Taxes On Their Business And Personal Income And To Defraud The United States By Failing To Pay Employment Taxes
Owed By Sandhills Orthopaedic. 

Between 2007 and 2014, the Rices allegedly withheld employment taxes from Sandhills Orthopaedic’s employees, but failed to pay over approximately $580,000 in social security and other tax withholdings to the IRS. 

The indictment also alleges that the Rices did not file individual income tax returns for the 2014 through 2016 tax years, despite earning gross income in excess of the filing threshold, and that James Rice did not file corporate tax returns for an entity over which he was president for the 2014 through 2017 tax years. 

If Convicted, The Rices Face A Statutory Maximum Sentence of Five (5) Years In Prison and A $250,000 Fine For
Each Conspiracy, Tax Evasion, and Employment Tax Count.

They also face one (1) year in prison for each of the charges relating to failing to file individual and corporate tax returns. 

They are also subject to additional monetary penalties, supervised release, and restitution. 

An indictment merely alleges that crimes have been committed. The defendants are presumed innocent until proven guilty beyond a reasonable doubt.

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According to Law360, aNorth Carolina federal court wrongly applied an obstruction of justice enhancement to the 46-month sentence of a man convicted of tax fraud totaling more than $2.7 million, and he must be resentenced, the Fourth Circuit said Thursday.

The three-judge panel vacated Arthur Joseph Gerard's sentencing in a North Carolina district court for helping a holistic medicine business' conspiracy to hide more than $2.7 million from the Internal Revenue Service. 

The appellate court upheld Gerard's conviction, but found the lower court didn't fully explain how Gerard's testimony satisfied the three elements of perjury that would support the sentence enhancement for obstruction of justice, according to the per curiam opinion.

"While the court found that Gerard's testimony was contradictory and false, the court did not rule on whether the false testimony was material or given willfully," the court said.

Gerard was sentenced in November to 46 months in prison to be followed by three years of supervised release, and was ordered to pay nearly $568,000 in restitution, according to court documents.

On appeal, Gerard had argued that the lower court failed to detail an example where his testimony could be considered perjury that would warrant a sentence enhancement for obstruction of justice, according to court documents. In the lower court's opinion, there was inadequate discussion of why the sentence enhancement was warranted and a failure to "identify any explicit findings regarding perjury," Gerard said in his appeal brief.

Meanwhile, the U.S. government argued that the rationale for the sentence enhancement was properly laid out in the lower court's opinion, clearly identifying several of Gerard's statements as false, according to its brief.

The case is U.S. v. Arthur Joseph Gerard III, case number 19-4858, in the U.S. Court of Appeals for the Fourth Circuit.

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The court of claims In ALL STACKED UP MASONRY, INC. v. U.S., 26 AFTR 2d 2020-XXXX, (Ct Fed Cl), 10/22/2020 held that “Taxes are what we pay for civilized society.” Compania General De Tabacos de Filipinas v. Collector, 275 U.S. 87, 100 (1927) (Taft, C.J.). For good reason, there are few lawful justifications for failing to pay one's taxes. 

Plaintiff All Stacked Up Masonry, Inc. (“All Stacked Up”), a corporation, believes it has such an excuse. It brings this suit to challenge penalties and interest assessed by the Internal Revenue Service (“IRS”) following its failure to file the appropriate payroll tax documents and its failure to timely pay payroll tax liabilities for multiple tax periods.

All Stacked Up filed its Complaint seeking a refund of $95,590.67, the amount it previously paid to the IRS in tax penalties and interest for the periods ending December 31, 2013, through December 31, 2015. All Stacked Up asserts that its failure to comply with its tax obligations should be excused due to “reasonable cause” and thus, the penalties and interest it paid should be refunded. 

The basis of All Stacked Up's assertion of reasonable cause involves an injury suffered by the owner, Sean Spraungel. 

This Injury Caused All Stacked Up To Delegate Tax Preparation Responsibilities To An Employee, Who Could Not Properly Operate The Tax Preparation Software. 

The Employee's Failures Left All Stacked Up
Noncompliant With Its Tax Obligations.

Although Spraungel may have suffered significant injuries after falling on ice, and other employees of the corporation may have experienced user difficulties in operating tax preparation software, these excuses cannot establish “reasonable cause” necessary to abate tax penalties assessed by the IRS. 

Furthermore, even if All Stacked Up could show reasonable cause for failing to file a return or pay the taxes owed, part of All Stacked Up's claim would nevertheless be barred by the applicable three-year “look-back” period.

For the reasons set forth above, the Court hereby GRANTS the United States' motion to dismiss, (ECF No. 11), pursuant to RCFC 12(b)(6), and DISMISSES All Stacked Up's Complaint without prejudice. The Clerk is directed to enter judgment accordingly.

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On August 26, 2020 we posted IRS Is Not Sending Notices for Unpaid Taxes Until it Catches Up on Mail Backlog, where we discussed on August 21, 2020, the IRS announced that it has suspended the mailing of three notices – the CP501, the CP503 and the CP504 – that go to taxpayers who have a balance due on their taxes. 

Although the IRS continues to make significant reductions in the backlog of unopened mail that developed while most IRS operations were closed due to COVID-19, this temporary adjustment to processing is intended to lessen any possible confusion that might be associated with delays in processing correspondence received from taxpayers.

Now the IRS will resume issuing the 500 series balance due notices to taxpayers later this month. These notices were paused on May 9 due to COVID-19.

Although the IRS continued to issue most agency notices, the 500 series were suspended temporarily because of a backlog of mail at the IRS due to COVID-19. 

In late October or early November some taxpayers will begin seeing the updated 500 series notices with current issuance and payment dates.

Have IRS Tax Problem?

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

Read more at: Tax Times blog