Underreporting business income can lead to prison time

Fraudulent business tax returns can come with prison time. That is the message the Internal Revenue Service (IRS) is trying to send with two recent cases. The federal agency recently sentenced three different individuals to imprisonment for errors on their corporate tax returns.

How did corporate tax errors lead to prison time? The first case involves a man out of California who pled guilty to filing false corporate tax returns. A piece in Forbes discusses the case, explaining that the man was a sole shareholder and president of a company providing transportation services to disabled individuals. The man allegedly underreported income by over $4.6 million in 2009 and 2010. This resulted in a tax loss of over $1.5 million. 

The man also allegedly attempted to conceal the assets. He reportedly held multiple bank accounts and used false accounting books and records. He was sentenced to 30 months of prison time and will be required to pay restitution. The exact amount of restitution due will be set at a later date.

The second case involved a family business that provided marketing services to online websites. A separate piece in Forbes notes that two individuals, the owner and the bookkeeper, filed fraudulent corporate returns costing the IRS over $500,000 in tax payments. These two were sentenced to 33 months and 12 months prison time, respectively. They were also ordered to pay $396,306 in restitution to the IRS and $82,500 in fines.

What can business owners learn from these cases? Business owners and executives should take notice of these cases. The IRS takes false tax returns very seriously. If your business receives notice from the IRS of an impending audit, it is wise to seek legal counsel. An experienced attorney can review the tax returns and help build a case to defend your business interests and personal rights.