Recently, in a U.S. Federal Court, osteopathy physician, Dr. Werner Grentz, was indicted for failing to file and failing to pay income tax. From 2005 to 2010, Dr. Grentz worked in hospitals and medical offices in eastern Kentucky and Tennessee. Over the six year period he earned between $169 thousand and $356 thousand annually, for a total of more than $1.5 million.
Any person required to pay tax who willfully fails to pay tax, or file a tax return, is guilty of a misdemeanor. IRC § 7203. Misdemeanors are punishable by up to a year in jail and/or a fine of $100 thousand. 26 USC § 7203.
However, if any person willfully commits fraud to evade paying taxes, the misdemeanor becomes a felony. The burden is on the Internal Revenue Service (IRS) to prove the taxpayer’s failure was not just an omission to do something, but an “affirmative act” to not pay his or her required taxes. Felonies are punishable by up to five years in prison and/or a fine of $250 thousand. 26 USC § 7201.
Dr. Grentz was charged with two misdemeanors and four felonies. As proof of an “affirmative act” the IRS argued Dr. Grentz:
- Evaded taxes by providing one of his employers with a W-4 that falsely claimed he was exempt from having federal income tax withheld from his earnings; and
- Set up two corporate bank accounts to receive part of his earnings.
Bottom line, it is better to file a tax return even if it omits or incorrectly states some taxable items, than to not file at all.
Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles County. On the first and third Thursday of every month, Givner & Kaye hosts its MCLE & CE accredited series - "Thursday Insights." On June 5th, join Givner & Kaye for insights into “Trying to Make A Good Deal out Of a Commercial Loan Gone Bad”. Call Givner & Kaye at (310) 207-8008 today.