The more complicated a business transaction and business becomes, the more complicated the tax calculations are likely to become. This is a very good reason to consult with tax and legal professionals at tax time and throughout the year.

For one Twin Cities developer, an Internal Revenue Service inquiry led to a tax fraud guilty plea and will likely lead to some prison time. He is alleged to have not met his tax obligation due to unreported income.

A recent news article goes into some depth on the developer’s tax controversies and other alleged transgressions.

  • In 1998 he was reportedly the largest Section 8 landlord in the Twin Cities. St. Paul prohibited him from buying any additional housing in that city due to underpaying employees and violating federal labor laws.
  • He turned the Minneapolis Athletic Club into a luxury hotel. Ownership went back to the lender after the developer was found to have violated labor union laws.
  • The developer and his wife built a 19,000 square foot home on a Lake Minnetonka island, with six bathrooms and seven fireplaces. During its construction, the couple claimed income as low as $12,000 per year.

The federal tax charges against the developer are for the tax years 2003 through 2010 during which time the developer allegedly did not claim millions in income. During that time the couple allegedly created fake management fee entries on their income tax returns. It was not reported whether the developer’s former wife was aware of, or would be charged with, tax fraud.

It seems clear that a good way to avoid charges of tax fraud is to use reputable professionals in all tax or business dealings. Should the IRS request an audit, an attorney can act as a spokesperson and could prevent an individual from committing any unintentional misstatements or errors.

Source: StarTribune, “Tax cheat is about to get his (way over) due,” Jon Tevlin, May 16, 2012