There are many ways to save on taxes. Here are some ways to save on taxes that work...until you get caught.
Method #1. Knowingly hire undocumented workers (felony #1), then don't pay employment taxes on their wages (felony #2). It's not clear from the article whether or not taxes were withheld from the workers' wages. But if you're going to commit two felonies, what's a third? Unfortunately for Wen Bing Wang, the restaurant owner in Traverse City, Michigan, the IRS caught on to his scheme. He has pleaded guilty to three counts of tax fraud, and could be facing fifteen years in prison. Interestingly enough, three other restaurant owners in the area will, according to
the story, be pleading guilty to similar offenses. They shared the same New York based accountant (or perhaps soon to be ex-accountant).
Method #2. Create phony entities, and lower your company's profits by having them receive some of your income. Then cash the checks at a local sports bar (which doubled as a check cashing service). Then, when you were indicted in 1995, flee to Ireland.
This might have succeeded. Unfortunately for Martin Harty, recently of Ireland but a former resident of the San Francisco Bay Area, he decided to take a vacation in San Francisco. The indictment was still on file so when he went through customs in Atlanta, he was arrested.
He pleaded guilty and could face up to three years at ClubFed but is probably looking at 12 - 18 months in prison.
Method #3. Don't pay your employment taxes. Then declare your company bankrupt, and declare personal bankruptcy. Follow this up by forming a new company in the same business, but have your son run the company. One problem, though: your son is away at college.
This is what Thomas & Vicki Seidel of Salinas, California have been accused of. They were indicted last week on failure to pay taxes and filing phony tax returns. Besides hiding the ownership of their business, they are also alleged to have hid assets, including a wheat farm in Idaho, some real estate, and another business, according to
this report.
Method #4. Have your family create bank accounts in their names, while the money is really yours. And don't declare any of the income from those accounts.
Given that David Beagley of Lindon, Utah is accused of not paying $815,000 in taxes, we're likely talking about some pretty hefty bank accounts.
Method #5. Don't pay withholding taxes, don't pay income taxes, and structure your cash transactions to avoid federal reporting requirements. Ziya Ozbay of Schenectady, New York and his son-in-law, Yalcin Ozbay of Saratoga Springs, New York, were found guilty of these crimes last week. Earlier, Mustafa Ozbay and Birol Ozbay pleaded guilty to these offenses (
story here).
The Ozbays owned several gas stations in upstate New York. They didn't file corporate tax returns for several years. They didn't keep adequate books and records, and they didn't provide their accountant with even those books and records. They withheld employment taxes from their employees but didn't remit them. And they deliberately "structured" their cash transactions to hide them from federal reporting requirements. All-in-all, the defendants were found guilty of many felonies, and will be spending a few years at ClubFed.
And there is an interesting conclusion to this story. The gas stations were branded as "USA Gas Stations." The government is expected to begin forfeiture proceedings against the Ozbays, and will likely end up owning the gas stations. This will definitely bring truth-in-advertising to some USA Gas Stations in upstate New York.
