Don’t Let the Bogeyman Get You!

An adviser forwarded the following email string along to me—you can’t make this stuff up!  Only in America. . . .

The adviser’s clients had landscaping work accomplished at their home. After the work was completed a final bill was sent by the landscaping firm.  At the bottom of the invoice was the following handwritten note:

“P.S.  I know I quoted you $635.00 for the project. However, being a business owner I don’t mind asking if you can pay in cash, or write a check out to me in my name. If you do so, I will reduce the price for my services to $600.00.  My taxes are horrible.  If you don’t want to, I will not be upset at all and will understand 100%.  Please let me know.  I can stop by and pick up the check at your convenience.”

The client forwarded the note to their adviser and asked the following question:

“What are the risks in writing someone this large of a personal check?  I’d love to get a discount and do the landscaper a favor, but I don’t want to open up any tax issues and $600 is a lot of money.”

The answer is fairly straightforward; the risks are quite high because the landscaper is asking the client to facilitate tax fraud. The US code is quite clear that “Any person who willfully attempts in any manner to evade or defeat any tax imposed or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

While I do not see a $100,000 fine, I do clearly see “aiding and abetting” in the fact pattern.  Intentional filing of materially false tax returns is considered tax fraud, and is a criminal offense. Any person convicted of committing tax fraud, or aiding and abetting another in committing tax fraud, may be subject to forfeiture of property and/or jail time.

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