In the few weeks before the traditional tax due date of April 15th, IRS agents and Justice Department are pushing as many cases into court as possible. The reason is simple. Big tax evasion headlines “scare” people who are otherwise tempted to cheat on their taxes. One Seattle businessman, however, got caught and is now going to spend the next four and a half years in a federal prison.
Thomas Hazelrigg III, a former developer, was convicted of tax evasion last December and sentenced earlier this month. U.S. District Court Judge Thomas Zilly claimed the prison sentence was in part based on lies Hazelrigg made during his trial and his refusal to cooperate with the IRS.
Judge Zilly said, “You knew from the get-go you owed these taxes — you agreed to pay them. The only reason we are standing here today is because you didn’t pay those taxes, not withstanding the fact that you made more than $10 million during the period of time the government was asking you to pay those taxes.”
The indictment claims that Zilly hid money from the IRS by funneling into secret nominee accounts. As we have warned before, simply not paying taxes is usually a misdemeanor but using a nominee account – usually a bank account opened in a different name – can be an affirmative act of tax evasion. That makes non payment a felony punishable by up to 5 years in prison.
What made this case so bizarre was that Hazelrigg admitted he owed taxes and promised to pay. In essence, he received a second chance but still didn’t pay. Instead of paying the IRS what he agreed to pay, he purchased two chandeliers worth $460,000.
Acting U.S. Attorney Annette Hayes said after his sentencing, “His greed was enormous – he had all the means to pay but instead chose to embark on a sophisticated effort to evade his obligation to pay taxes. As we approach April 15th, this case serves as a reminder that everyone has an obligation to pay their fair share of taxes and those who don’t – no matter how devious their attempts at evasion are – will be held accountable.”
The lessons here are simple.
First, if you are given a second chance from the IRS, don’t blow it. Although short staffed, the IRS has a long institutional memory. If you cheat them twice they are probably not going to forget.
Second, although no one likes paying taxes, jurors and judges have little tolerance of those that can afford to pay but don’t. Owing the IRS $500,000 but instead using the money for chandeliers was not lost on the court.
A good tax lawyer can often steer a civil IRS audit away from criminal tax evasion but no one can work miracles. And from our knowledge of the facts, only a miracle would have saved Hazelrigg.
Under audit by the IRS or facing an IRS criminal investigation? Consult a good criminal tax lawyer immediately. CPA’s and enrolled agents can help with routine audits but if you have hidden accounts, receive payments in nominee name or haven’t reported all your income, you need a lawyer. Accountants unfortunately don’t enjoy the same confidentiality guaranteed by the attorney – client privilege.
Need more information? Contact attorney Beth Canfield at or by telephone at (414) 223-0464. Already under investigation for tax evasion? Contact attorney Brian Mahany at or by telephone at (414) 704-6731. All inquiries protected by the attorney – client privilege.
Mahany & Ertl – America’s Tax Lawyers.