For some people cheating on tax forms, here and there, and for insignificant amounts, may be acceptable conduct. However, the IRS has recently sent some clear signals that it has a zero tolerance policy for tax fraud.
Jeffrey and Marla Stein were successful professionals. They lived in a posh home in Manhattan´s Upper East Side, in one of the areas with the world´s priciest real estate. He was a vascular surgeon with a private practice and contracts with some of New York´s top hospitals, including Mount Sinai. She was a personal injury lawyer at an established firm. According to estimates, they were making upwards of half a million dollars a year between the two of them. They had a teenage son in high school. In short, the Steins were living the American dream.
There was only one Achilles heel in their seemingly perfect setup: they were not very keen on paying their taxes. As an IRS audit recently revealed, the glamorous couple broke the law several times in order to avoid paying their due taxes.
Among the various tax fraud schemes the couple used to dodge the IRS, some of the most common were filing reports for non-existent expenses, medical services never rendered, and other fictitious deductibles as part of their joint tax forms; hundreds of thousands of dollars to offset income from their businesses.
But the house of cards was about to collapse. When the IRS announced an audit of the Steins` tax returns, it didn´t become an opportunity for them to come clean and confess their crimes. In any case, it was, perhaps already too late to avert the tragedy; well, actually, tragedy for them, jackpot for the IRS.
In a desperate attempt to emerge from the audit with flying colors, Mr. Stein dug out some Social Security Numbers from injured veterans and created fake invoices for technical services for his practice. He was able to obtain the military identities through a medical group he worked for, which had contracts with the United States Department of Veterans Affairs. Mrs. Stein followed suit, creating numerous fake invoices of her own. Between the two of them, they were able to forge enough documents to make it look, at least on paper, like everything was in order with their tax returns.
After being prosecuted for tax fraud, the couple was sentenced to serve jail time, one year for Mr. Stein and six months for Mrs. Stein. Mr. Stein was also sentenced to perform 100 hours of community service per year for the three years following his release from prison. The couple also must pay nearly 350,000 in penalties.
If that isn’t enough, they may also lose their professional licenses. (State licensing boards can revoke professional licenses after a felony conviction or conviction for a crime of dishonesty. Tax fraud related charges often fall into both categories.)
Both the press and the judge emphasized that the Steins` finances were thriving, thus their behavior had no other justification than sheer greed.
The Steins clearly had enough money to face whatever fines and penalties the IRS might have imposed on them for their tax fraud. They probably didn´t count on ending up in jail. For a couple accustomed to a lavish and comfortable lifestyle, the shock will likely be tremendous.
This story sends a clear message that should alert anyone who has doubts about the accuracy or validity of their tax returns. If you want to avoid prison and the possible loss of your career, consider coming clean. The IRS generally operates on a first contact policy meaning if you come forward first, criminal prosecution can usually be avoided. A knowledgeable tax lawyer can help you minimize penalties and avoid criminal prosecution. There may be some penalties to pay but the harshest fraud penalties (currently 75% of the tax owed!) can often be avoided.
We have many years of experience advising clients about the best course of action to choose in order to maintain an impeccable record with the IRS and the US Department of Justice. You can set the record straight now, and avoid many a headache tomorrow
Need more information? Contact attorney Beth Canfield at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept strictly confidential. Initial consultations are available without charge or obligation.
MahanyLaw – America’s Tax Lawyers