Under-reporting or failing to report income to the IRS is no laughing matter. The agency might look the other way for a dollar or two, but when millions of dollars of income are ignored or misrepresented, the agency will launch an investigation. If convicted, scofflaws may face prison time and be liable for repayment of lost taxes, interest and penalties. But wait, there’s more: The government promotes these citizen sinners by naming them in press releases distributed to local media. No one needs that type of referral!

Six months for tax evasion
A Connecticut painting and remodeling contractor was recently sentenced to six months in prison after pleading guilty to tax evasion. According to an article in the Hartford Courant, from 2013 to 2019, the contractor “attempted to evade the assessment of federal taxes by cashing business checks instead of depositing them into his business’s bank account, depositing cash and business checks into his personal bank account, and failing to inform his tax preparer of this conduct.” This led him to file tax returns that, authorities stated, “substantially understated his gross receipts and income.”

In total, the contractor failed to report $2,163,645 in income, resulting in a 791,500 tax loss for the government. According to the Internal Revenue Service, he has repaid the tax loss and is working out payment of accumulated interest and penalties.

Currently free on bond, the contractor is slated to report to prison in August, followed by a year of supervised release. His company reports that he is Home Advisor Approved, accredited by the BBB and received a Best of Houzz service award in 2017. The company has many specialties including painting, flooring, kitchen, bathroom, design/build, and decking.

Contractor gets 15 months
We’re not saying this is a Connecticut problem, but a Hartford judge in that same courthouse sentenced a construction contractor based in Old Saybrook to 15 months in prison for tax evasion, followed by three years of supervised release. In this case, the court reported, the contractor did not have any personal bank accounts because “he paid all of his personal expenses through his business bank accounts and made cash withdrawals from the business accounts at casinos for personal expenses,” said the U.S. Attorney’s Office in a prepared statement. “In 2018 and 2021, [the contractor] received substantial income from his businesses but did not file any personal or business federal income tax returns, and also did not file any employment tax returns for his businesses.” 

The report also stated that he did not issue W2s or 1099s to his employees and contractors, and often paid unreported income in cash. “He also cashed checks made payable to his businesses at a check cashing business in New York and failed to report that income,” the Attorney’s Office continued. 

He was ordered to repay more than $230,000 in tax loss, along with accumulated interest and penalties.

Image courtesy of IndustriusCFO.