Chicago CPA and Attorney Paul Daugerdas was convicted in 2014 of conspiracy to defraud the IRS, client tax evasion, IRS obstruction and mail fraud. He was sentenced to 180 months of imprisonment, three years of supervised release, $164,737,500.00 in forfeiture and $371,006,397.00 in restitution.
At trial, the evidence supported that he back-dated certain transactions related to tax shelters he sold to wealthy clients and that these statements were used in the preparation of his clients’ tax returns. In addition to selling tax shelters, he personally used these tax shelters to reduce his tax liability on his own tax returns. He subsequently filed an Appeal of his conviction and sentence in the United States Court of Appeals for the Second Circuit.
After considering his arguments, the Court affirmed his conviction and sentence. There are different types of tax crimes. Intentionally failing to file a tax return is a misdemeanor punishable by imprisonment up to one year. Filing a tax return that you know to not be truthful is a felony and can subject you up to imprisonment for greater than one year. Further, conviction can also bring with it fines and restitution.
These fines and restitution are in addition to the tax liability that you will still owe to the IRS for the years in which you were convicted of a tax crime. The government uses these criminal statutes to punish the individuals that the government believes should be punished. As a corollary, the government also uses these types of convictions to act as a deterrent to others who may consider engaging in similar behavior.