We have seen many creative strategies for conducting an effective IRS audit defense. Trying to bribe the auditor isn’t one of them. That is the hard lesson learned by Stephen Jacobs, a chiropractor from Lowell, Massachusetts. For the next 9 months, Dr. Jacobs will be trading his white scrubs for orange.
According to the indictment, an IRS revenue agent met with Jacobs in 2013 during a routine income tax audit. The auditor was concerned with several deductions taken by Jacobs including two payoffs Jacobs made to two women to keep them from going to the police or chiropractic licensing board. Jacobs admitted to the auditor that he bribed the woman to keep from being reported for what could only be characterized as inappropriate touching.
Rather than face sanctions, Jacobs evidently bribed the two women in order to buy their silence. If it worked on his two former patients, why not bribe the auditor? Prosecutors say that Jacobs asked the agent if there was anything he could do to “just deal with this.” When the agent said no, Jacobs apparently threatened the agent. (Another bad audit defense strategy.)
That conversation was ended but in a future monitored conversation, Jacobs asked the agent, “You want a bribe? You want me to pay you.”
By now, the agent had sought assistance from the Criminal Investigation Division of the IRS who began monitoring conversations between the agent and Dr. Jacobs. Acting with permission, the auditor “accepted” the bribe and Jacobs turned over $5000 in cash.
Jacobs was indicted and charged with bribery of a government official. Last October he pleaded guilty to the charge after unsuccessfully attempting to have the case dismissed. Earlier this month he was sentenced to 9 months in prison, 2 years extended supervision upon his release and a $10,000 fine. Fortunately, he did not offer a $5000 bribe to the sentencing judge or prosecutors.
Jacobs argued for a no jail sentence, in part because he believes the IRS agent entrapped him. At some point, Jacobs claims the agent said, “I could give you a favorable decision but why would I do that. I’m putting my job on the line. You know. What’s in it for me?”
Based on the alleged entrapment, Jacobs first tried to have the case dismissed for “outrageous government conduct” that “shocks the conscience.” Prosecutors said the only outrageous and shocking conduct was Jacobs’ admission that he bribed two women not to file sexual battery or misconduct charges against him.
Why Jacobs even bothered with the bribe is even more puzzling. According to prosecutors, he paid a $5000 bribe to avoid paying $6000 in taxes! By admitting in the sexual misconduct episodes and other bribes, Jacobs will probably lose his chiropractic license and may face charges in connection with the two women he inappropriately touched.
Stephen Jacobs is a smart guy; he went to 8 years of college and has a doctorate degree. (We will pass on evaluating his common sense.) Trying to outsmart the IRS is never a good idea. Only a well qualified lawyer or CPA should handle audit defense. Never try to take short cuts and never try to handle without outside help,
Need help with IRS or state audit defense? Give us a call. We have decades of IRS tax experience. Many audit defense cases can be handled on a flat fee basis. For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept in confidence.