by Brian Mahany
We handle many criminal IRS cases. Many of those cases are business owners who slide down the slippery slope when at first they “rob Peter to pay Paul” by not paying the IRS. The problem snowballs and next thing they know, the guys and girls with calculators and guns come knocking. This story, however, is simply bizarre. It’s about the line between stretching the truth and outright fraud.
Jill Schwartz- Musin was once a tax cop, a special agent with the IRS Criminal Investigations Division. After leaving the IRS, she and her husband went into the tax preparation business. Although her husband Howard ran the business, Jill was very much active with clients and their tax matters. (According to the 23 page complaint filed by the US Justice Department, Jill was criminally convicted of Interfering with the Administration of Internal Revenue Laws and sent to prison. Afterwards, she was precluded from representing people before the IRS.)
That’s not all. Previously she was also sanctioned for telling clients she was a CPA. She isn’t an accountant and her defense that CPA stood for “current power of attorney” didn’t fly.
Did any of this stop the Musins? No. Prior to taking the current action against the Musins, IRS auditors examined 168 of the tax returns prepared by Howard. 166 had mistakes, some serious.
The crux of the complaint is the outrageous deductions claimed by the Musins on returns they prepared for clients and on their own personal return. In some cases, prosecutors say the deductions were simply made up.
What were some of the things the Musins tried to pass off as legitimate tax deductions and business expenses? Read what U.S. District Court Judge John A Jarvey said in the Southern District of Iowa, “To the Musins, the ownership of a small business has been treated as a license to convert almost any of one’s personal expenses into business deductions. According to them, if you believe that looking successful helps make you successful, your clothes, hair care, and manicures are deductible. If your dog barks while you are away from your home based business, it’s deductible. If your child’s nanny ever answered the business phone, the nanny is deductible. If you visit a business associate while on vacation, it is deductible. If you pay rent to yourself, or even if you don’t, it’s deductible. If you have a six year old child, payments to the child are deductible employee expenses. If you have used your living room television in a business meeting, it’s deductible. And your hobbies, like scuba diving, pet cats and flying, easily deductible. It is not any one client or any particular deduction that is at issue here. It is a wholesale pattern of taking deductions without justification that entitles the government to injunctive relief.”
Creative license? Criminal Fraud? Or sheer stupidity? You decide.
Businesses frequently have trouble determining what is a legitimate business expense and what isn’t. Especially with small businesses, the line is frequently gray. Other business owners and taxpayers simply make bad decisions when faced with mounting bills and little income. Whatever the reason, if you find yourself the subject of an audit, contact a competent tax attorney. In many times a skilled tax lawyer can keep an audit from becoming a criminal prosecution.
Already being investigated by the IRS criminal division? Then you need a lawyer immediately.
The criminal tax lawyers at Mahany & Ertl can help with a wide variety of tax problems including audit defense, tax evasion charges, collection matters and tax court litigation. The earlier you call us, the more we can help.
Mahany & Ertl, LLC – America’s tax lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine and San Francisco, California (coming soon). Services nationwide.