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November 29, 2022


Austin, Texas, couple receives tax fraud conviction

The couple were restauranteurs who allegedly underreported their business income.

A federal jury recently convicted a husband and wife of tax crimes related to the reporting of income from their restaurants. The government accused the taxpayers of skimming cash off their business receipts and underreporting their remaining income.

The allegations

They owned three restaurants in Travis and Bastrop County, Texas. According to a Department of Justice news release, there was evidence that they would deposit only part of their cash receipts into bank accounts set up for their businesses. These diminished deposit amounts were the numbers they used to report business income on their tax returns.

This reportedly resulted in underreporting of $570,000 in cash income. In addition, prosecutors alleged that they used their business accounts to pay household expenses like pool repair, household employee wages and home utilities. They faced charges of reporting these personal expenses as business expense deductions to the IRS.

The jury convicted them of conspiracy to defraud the U.S. and filing false individual tax returns. The husband was also convicted of filing false corporate income tax returns.

For these convictions, each of them could receive up to five years in prison for conspiracy and three for each false tax return charge as well as potential money penalties, restitution and supervised release.

Lessons learned

This story raises tax-related issues that all business owners should carefully consider, especially if their commercial enterprises bring in cash, a form of income more susceptible to under or wrongly reporting to tax authorities. It is crucially important for such a business taxpayer to carefully set up a sound system of recordkeeping and reporting. A legal professional can provide advice about how to handle such a challenge as well as how to respond to an IRS inquiry or audit.

The higher a taxpayer’s income or more complex their asset portfolio, the more complex their tax returns are likely to be. Any high net-worth individual, business owner or other professional facing IRS investigation or even potential criminal charges connected with a tax return should seek immediate legal representation. An experienced tax attorney can communicate with the IRS and advocate fiercely on the client’s behalf to protect their livelihood, assets and reputation.

The lawyers at Brown, PC, in Fort Worth represent taxpayers facing IRS audit and investigation as well as defend taxpayers and tax preparers accused of tax crimes such as fraud or tax evasion.