According to DoJ, Ronald Olson, a vice president and deputy operation manager for Turner Construction Company (“Turner”), pled guilty on July 29, 2020, to charges of evading taxes on more than $1.5 million in bribes he received from building sub-contractors and is scheduled to be sentenced on December 9, 2020.
In related proceedings, co-conspirator Michael Campana, a subordinate construction manager at Bloomberg, LLC (“Bloomberg”), was sentenced last Friday, July 24, 2020 to 24 months in prison, for evading taxes on more than $420,000 in the same scheme.
In addition, two managers of a construction contractor – Anthony Guzzone and Vito NiGro – were respectively charged on July 14 and July 22, 2020, for evading taxes on more than $1.4 million and $1.8 million in bribes that they respectively received in the same scheme.
Between 2011 and 2017, Guzzone was a construction project manager for Bloomberg, a global financial firm that was engaged in various building projects in New York City and elsewhere, while Olson and Nigro were executives at Turner, which performed construction projects for Bloomberg. For most of that time, beginning in 2013, Campana was also a construction manager at Bloomberg. Each of the defendants participated in a scheme to obtain bribes from construction sub-contractors, who paid kickbacks to the defendants in exchange for being awarded various construction contracts and sub-contracts performed for Bloomberg.
In all, the defendants are charged with failing to pay taxes, between 2010 and 2017, on bribes exceeding $5.1 million. The defendants received such bribes in various forms, including millions of dollars in cash, as well as construction labor and materials for work on their individual homes and properties, and the direct payment of personal expenses. Such personal expenses included charges related to Campana’s 2017 wedding, such as approximately $40,000 paid by sub-contractors to a catering hall in New Jersey, over $13,000 to a photography studio, and over $23,000 to a travel agent for airline tickets purchased in connection with Campana’s honeymoon, as well as Super Bowl tickets worth almost $8,000 provided to Guzzone. Each of the defendants evaded federal income tax on this bribery income, by failing to declare it on income tax returns for various years between 2010 and 2017.
The taxpayers should have reported this income on their Form 1040, Schedule C. As ridiculous as it sounds, the federal government requires that money acquired through illegal means be reported and taxed just like legitimate income. It's right there on the official IRS tax instructions:
"Income From Illegal Activities, Such As Money From Dealing Illegal Drugs, Must Be Included In Your Income on Form 1040, Line 21, or on Schedule C or Schedule C-EZ (Form 1040) if From Your Self-Employment Activity."
Not surprisingly, very few criminals ever declare this type of income. However some do, when they have either been caught during that tax year or think they are about to be caught. Their goal is to avoid getting charged twice: once for their initial crime and again for evading the taxes on their ill-gotten gains. Don't forget that it was tax charges that ultimately put away Al Capone.
Where a taxpayer informs the IRS that they made millions from embezzling, stealing money or dealing drugs; legally the IRS can't inform law enforcement, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return.
The IRS is prohibited from proactively alerting other agencies about criminal activity, unless terrorism is involved. And even in that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own. The rules are all spelled out in an IRS guide to "section 6103," the law that covers tax-return confidentiality. Like many legal statutes, it's complex and filled with loopholes.
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Read more at: Tax Times blog