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Tax evasion indictment issued for money funneling scheme

California residents may have heard the recent West Coast story of a man accused of tax evasion for funneling money from bank account to bank account. In the indictment handed down by a grand jury earlier this month, the man allegedly tried to fly under the radar of the IRS by transferring the money in small amounts.

The man owned and operated a very profitable mortgage company, which appears to have produced income in the hundreds of thousands of dollars. Yet he never disclosed the money to the IRS, failing to file tax returns from 1997 to 2006.

According to the allegations, he instead deposited the money into a bank account under the name of a corporate entity he created. From there, he transferred the funds to a second account located on the island of Maui. Then he began to make withdrawals from that second account in amounts less than $10,000 to avoid IRS detection. The law requires banks to inform the government if account activity exceeds $10,000 in a given day. The indictment alleges that the withdrawals total $280,860.

In 2007, the man filed some missing returns and made an offer to the IRS to pay off his tax debt. According to the IRS, the man neglected to disclose assets owned by his corporate entity as well as two bank accounts. The IRS subsequently declined his settlement offer.

This man could face substantial financial penalties. In addition, reports indicate that he is outside the country, and that federal officials are attempting to arrest him and bring him to court. He made an initial and unsuccessful attempt to deal with the IRS by himself, but an experienced tax attorney could have helped mitigate potential consequences in his case.

Source: The Maui News, "Tax evasion charges for former Maui man," Feb. 8, 2012.

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