3/23/2010

The IRS is beefing up its criminal-investigation unit -- a gentle reminder as the tax deadline approaches.

The IRS is beefing up its criminal-investigation unit -- a gentle reminder as the tax deadline approaches.
Posted by TheStreet Staff on Tuesday, March 23, 2010 1:12 PM
By Joe Mont, TheStreet



Lest you think you might be able to get away with it, the Internal Revenue Service`s criminal-investigation unit has more than 4,100 employees worldwide who might suggest otherwise.



More than 1.4 million Americans were audited last year, the most in more than a decade. And with an additional $8.2 billion budgeted for tax-enforcement efforts, a 10% increase, the odds of getting away with something sneaky are going to get even slimmer.



There were 2,229 prison sentences handed down for tax-related offenses last year. The following are some of the scams, and how delinquents were caught.




Auto Sales



Scams and fraud in the automotive sales industry -- ranging from tax evasion, employment tax fraud and money laundering -- are an ongoing focus for IRS investigators. Many of the cases investigated involve loan fraud, eBay scams, money laundering and drug financing.



In 2009, the IRS initiated 87 automotive-sales-related investigations, leading to 46 convictions. The incarceration rate was 74%, and the average jail sentence was 40 months.



In August, for example, Shirland Fitzgerald of Danville, Va., was sentenced to 140 months in prison and ordered to forfeit $1 million, the approximate amount laundered for three large-scale drug-trafficking organizations over a six-year period. According to the IRS, Fitzgerald used his dealership to allow drug dealers to purchase cars, disguising the identity of the purchasers and creating false paperwork to help them avoid seizure and forfeiture of by law enforcement.



Construction



The IRS investigated 338 cases of suspected fraud in the construction industry in fiscal 2009, 149 of which led to incarceration and an average jail time of 29 months.



Among the recent cases was a Las Vegas business owner who was sentenced to 15 years in prison for tax fraud.



According to the IRS, Robert Kahre owned and operated six construction-related businesses in Las Vegas and, between 1997 and 2003, paid employees more than $100 million in cash. Kahre also provided a payroll service to about 35 other construction contractors who employed thousands of workers.



Kahre claimed to pay the employees in gold and silver coins, but those coins were actually immediately exchanged for pre-determined envelopes of cash. The value of the coins was one-eighth the amount of what the employees received in the cash envelope. The recipients were alternately told either that the income was not taxable or they should report their income to the IRS only as the face amount of the gold and silver coins. No federal tax withholdings were made from the paychecks, and the wages were not reported to the IRS.



Doctors



In 2009, the IRS opened 104 investigations into cases of fraud by doctors, dentists and chiropractors. Of these, 69 led to jail time.



In June, two New Jersey men were sentenced for tax evasion and conspiring to violate the federal anti-kickback statute by agreeing to pay doctors to refer blood work to a Pennsylvania-based lab they operated. Asim Niaz and Taquir Khan were each sentenced to 15 months in prison and ordered to pay a $10,000 fine.