Most of the Internal Revenue Service's 90,000 employees are financial
bureaucrats, working to collect the taxes that finance our government.
But the Criminal Investigations unit, or IRS-CI, is an elite division of
3,700 financial crimefighters dedicated to protecting those taxes. Last
month, they released their Fiscal 2013 annual report.
And business sure is booming! In 2013, IRS special agents initiated
5,314 investigations (up 3.7% from 5,125 in 2012) and recommended 4,364
prosecutions (up 17.9% from 3,710 in 2012). There were 3,865 indictments
and 3,311 convictions (the IRS doesn't take someone to criminal court
unless they're pretty sure they can win). And 2,812 miscreants won
themselves the proverbial "three hots and a cot" for terms averaging 25
Most of IRS-CI's targets are plain old crooks. But some of them are just
so awkwardly entertaining, we had to share their stories:
Every time you pump a gallon of gas, you pay 18.3 cents in tax to build
and repair federal roads. But there's a little-known exemption that lets
off-road users like drag racers apply for a refund. Evan Knoll,
the "King of Drag Racing" and owner of Torco Racing Fuels in Grand
Rapids, Michigan, saw that exemption and smelled opportunity. (Maybe it
was something in the fumes?) Knoll claimed $83 million in refunds over nine years from 1999-2008 before pleading guilty to nine counts of fraud and drawing a 14-year sentence. Now that's some high-octane cheating!
Edward Picardi was a surgeon in South Dakota, who spent way too
much time performing liposuction on his tax bill. First, he ran his
income through a series of entities organized in Ireland, Hungary,
Cyprus, the Isle of Man, Jersey, and Guernsey. (Really? Hungary?
Were the Cayman Islands just too obvious?) Then he deposited it into
various foreign accounts he controlled through a New Zealand trust, in
the name of one last corporation established on the delightfully sunny
island of Nevis. After several weeks in trial, the judge in Picardi's
trial surgically removed five years of freedom from the good doctor's
future. Without anesthesia. Ouch.
Michael Chen owned the Fune Ya Japanese Restaurant in Richmond, California, just north of Berkeley. (Apparently the fried banana dessert was a hit.) Chen kept detailed records of his daily sales in 26 boxes marked "Seasoned Octopus." But he never reported his cash
sales to the IRS. Oops. He also paid his employees $548,919 in cash
without sending the IRS any payroll tax on their income. Another
mistake. Now the long tentacle of the law has got him for 33 months,
enjoying his meals in a place where they don't serve octopus at all.
You might think that if you're already stuck in jail, you can't commit
tax fraud. Well, you would be wrong. Michael Joseph III was feeling
"underemployed" at the Apalachee Correctional Institution in the Florida
panhandle when he hit upon one of those brilliant ideas we all wish we
had thought of. Why not while away those idle hours filing false tax
returns using other inmates' names and social security numbers? Yeah!
And while we're at it, why not have the IRS mail the refunds to momma's
house? Unfortunately for our enterprising would-be accountant, prison
officials discovered the scheme during a routine mail search. Joseph
pled guilty to 41 various offenses and drew another 63 months behind bars. At least now he's doing time in a classy federal joint instead of some loser state can.
We all know taxes have gone up this past year, and we all know nobody
enjoys paying. That's the bad news. The good news is you don't have to
risk a visit from the tax cops to pay less. You just need a plan.
There's no shortage of court-tested, IRS-approved strategies for paying
less. So if you're still worried about April 15, and you haven't asked
us about our planning service, what are you waiting for?