The sentence of an individual who pled guilty to tax fraud was affirmed by the Seventh Circuit Court of Appeals. John McKinney was charged with eleven counts of tax evasion and conspiracy to defraud, impede, impair, obstruct and defeat the functions of the Internal Revenue Service (IRS) in the collection of income taxes. McKinney’s actions are a textbook example of how to turn a financial problem into a criminal tax problem.
McKinney and his brother owned a construction company. Mr. McKinney failed to pay his taxes seven years between 1999 and 2006. In 2003, the IRS placed federal tax liens against McKinney for taxes he owed. He avoided the taxes by transferring money earned from his company into separate nominee accounts, which the brothers used for personal and household expenditures. McKinney gave the IRS Revenue Officer false statements regarding his ability to pay his taxes.
When his wife and sister-in-law applied for residential mortgages, which McKinney was unable to qualify for because of the federal tax liens, McKinney falsely told loan officers that they were both full-time employees of his company. However, neither worked for the company or reported this employment on their tax returns. These financial transactions diverted business income earned by the brothers into assets owned by their wives, thereby avoiding IRS tax assessments and tax liens.
The brothers made false statements regarding their inability to pay income taxes, causing the unsuspecting IRS to close its investigation in 2007. However, the IRS discovered the brothers’ tax fraud, and charged the brothers in 2011. McKinney pleaded guilty to one count of conspiracy, one count of tax evasion and three counts of making false statements. He was sentenced to nearly five years imprisonment with three years of supervised release. The court also ordered him to pay $1.5 million in restitution.
Contact our experienced criminal tax attorneys at 800 Tax-Litigator for a confidential consultation to discuss available options if you have been contacted by the IRS in connection with civil or criminal tax fraud, or any other high stakes tax problem.