Prominent Tax Attorney Found Liable for Civil Tax Fraud Penalties
After being convicted of criminal tax fraud and serving 18 months in federal prison, a prominent former California tax attorney recently found himself again the subject of an IRS investigation into his alleged tax fraud. After a criminal tax case that culminated in Owen G. Fiore's guilty plea to tax evasion for the 1999 tax year, the IRS began to seek civil tax fraud penalties against Mr. Fiore for 1996 through 1999. Although Mr. Fiore conceded the tax disputes and the tax fraud charges for 1998 and 1999, he disputed his fraud liability for 1996 and 1997. While the Tax Court felt that it was unclear whether some of Mr. Fiore's actions weighed in favor of a finding of tax fraud, the court took a novel approach and ultimately held that Mr. Fiore had been "willfully blind" to his unreported income, and consequently found him liable for tax fraud for the 1996 and 1997 tax years.
Borrowing heavily from criminal law principles and discussing relevant appellate jurisprudence on the issue, the Tax Court applied the infrequently-used (at least in the area of civil tax fraud) willful blindness concept to Mr. Fiore's actions in the years in question. Specifically, the court stated that if the IRS could prove by clear and convincing evidence that Mr. Fiore was "aware of a high probability of unreported income or improper deductions" and "deliberately avoided steps to confirm this awareness," the standard for civil tax fraud would be met.
Ultimately, the Tax Court found that Mr. Fiore met both prongs of the test for willful blindness. Discussing Mr. Fiore's extensive work experience and education, the court found that such experience ensured that he was aware of the risk of underreporting his income through generally neglecting firm administration. Furthermore, the court discussed Mr. Fiore's significant use of funds during the period in question, and inferred from this that he consciously chose to not pay taxes in order to have more funds on hand. As to the second prong of the test, the court found that since Fiore had access to bank statements, bills and deposit slips for each taxable year, yet failed to check them when preparing his tax returns, this constituted "deliberate" avoidance of steps to confirm the underreporting of his income.
After this discussion of Mr. Fiore's tax return problems, the Tax Court concluded that the finding of willful blindness not only weighed in favor of tax fraud, but deserved "particular weight" in determining whether Mr. Fiore had committed tax fraud. When added to other factors such as Mr. Fiore's repeated failure to cooperate in his IRS tax audits, consistent underreporting of income, and haphazard recordkeeping (none of which conclusively weighed in favor of a finding of tax fraud on their own), the court found that the IRS had met the burden of proof to show that Mr. Fiore committed tax fraud in 1996 and 1997.
If you or one of your clients have received a tax audit notice, or are under civil or criminal investigation by the IRS you should contact a tax litigation attorney to assess your options.
If you have tax problems, don't let them turn into criminal tax problems. Call the former IRS tax attorneys at Brager Tax Law Group, A P.C. at 1-800-Tax Litigator.
Dennis Brager Interviewed on KFWB Radio Scheduled for Repeat Performance 3/29
Dennis Brager was the featured guest on Money Talk 101 with Bob McCormick on KFWB Radio 980 AM. Dennis talked about tax problems including foreign bank accounts, offers in compromise, the liability of individuals for corporate sales tax and payroll tax, and innocent spouse tax issues. Dennis fielded questions from the listeners on identity theft and the claim of right doctrine.
Dennis will be on KFWB Radio 980 AM Money Talk 101 again on Friday, March 29th from 9:05 to 11 AM talking about tax problems.
James Pflueger Acquitted on Tax Fraud Conspiracy Charges
The Pflueger case involves an 87 year old retired automobile dealer from Hawaii, who allegedly filed false tax returns and hid $15 million in a Swiss bank account while not paying taxes on the sale of a property known as Hacienda. Pflueger was acquitted of all charges against him. The judge ruled that the IRS did not prove beyond a reasonable doubt that Pflueger willingly and knowingly filed a false tax return. The IRS, however, will likely pursue Pflueger for the $4.5 million owed on the sale of the Hacienda.
Liechtenstein Asked by U.S. Government for Tax Info
The government of Liechtenstein has been asked by the U.S. government to turn over information on fiduciaries who have set up foundations for U.S. citizens. It is likely that these foundations were used to evade U.S. taxes, and hide from the IRS. This latest development is another step in the quest to uncover U.S. monies in foreign bank accounts. It underscores the increasing danger in continuing to hold undisclosed foreign accounts.
Dennis N. Brager, Esq.
Former IRS Senior Trial Attorney
Nationally Recognized California State Bar Certified Tax Specialist
KFWB Radio 980 AM
"Money 101 with Bob McCormick"
9:05 to 11 AM PT
Friday, March 29, 2013
Innocent Spouse Webinar
9 AM PT
May 21st, 2013
State Bar Small & Solo Firm Summit
Long Beach, CA
June 20-22, 2013
2013 American Bar Association 30th Annual Institute on Criminal Tax Fraud and 3rd National Institute on Tax Controversy
December 11-13, 2013
KFWB Radio 980 AM
"Money 101 with Bob McCormick"
9:05 AM - 11 AM PT
March 11, 2013
Los Angeles County Bar Association's 2013 Tax Night
"International Tax Enforcement Update"
2012 American Bar Association nth Annual Institute on Criminal Tax Fraud and 2nd National Institute on Tax Controversy
"Tax Strategies, Administrative Tax Strategies and Techniques in a Recessionary Economy"
Articles Written by Dennis Brager
The Brager Tax Law Group is a tax litigation and tax controversy law firm, which represents clients with tax problems and tax disputes with the IRS, the California Franchise Tax Board (FTB), the State Board of Equalization (SBE) and the Employment Development Department (EDD). All of the firm's tax lawyers were former trial attorneys with the IRS.