In a recent court decision, and appeals court affirmed a criminal verdict against an individual who had not filed tax returns, personal or corporate, for more than 6 years.
In the case of United States of America v. Carlo J. Marinello, II, the Court found that Mr. Marinello had violated 26 U.S.C. Section 7212(a), which imposes felony criminal liability on one who “corruptly or by force or threats of force … endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title.” (the Internal Revenue Code).
Mr. Marinello had a freight service that he had incorporated. He maintained little documentation of his business income or expenses. He also shredded or discarded most of the business’s records, including bank account statements, employee work statements, gas receipts and bills. He paid his employees in cash, and failed to issue them or himself either Form 1099 or W-2. He also used corporate funds for personal purposes, including paying his personal mortgage and monthly payments to his mother’s senior living center.
Mr. Marinello attempted to claim that there needed to be an intent factor that needed to be in place in order to be convicted under this code section, and that since he was unaware of an IRS investigation, he did not have the required intent. The jury did not see it that way, and based on all of the intentional destruction of records, along with hiding income, transferring assets to a nominee and other items, he was found guilty.
This was obviously an egregious violation of the law, but it does demonstrate that overt acts to hide income from the taxing authorities can have dire consequences. Merely failing to file will not normally result in a criminal conviction, but destroying documents and hiding money can result in some time away. Mr. Marinello was sentenced to 3 years in federal prison, and ordered to pay restitution to the IRS in an amount more than $300,000.
Keep good records and stay out of trouble.
Comments or questions are welcome.