Everyday Cases Show Tax Cheats Get Caught

Every day, in cities across the country, people are being prosecuted or convicted of tax crimes. You should view these cases as warnings and act accordingly.

Thomas and Brenda Ellis of Richmond, Va., had what many would consider a great business for cheating Uncle Sam.

They were the owners of Buzz Thru Car Washes, an automated car wash service. Customers deposited cash and coins, then drove into the stall to have their vehicles cleaned.

Cash revenue can be easy to hide from the IRS, right?

That’s what the Ellises apparently thought. Brenda Ellis kept the books, and every day her husband Thomas would bring home the money to be counted, she tallied the cash in two registers — one showing the actual revenue, the other showing the revenue they intended to declare.

The Ellises then deposited into the bank only as much money as they intended to declare, keeping the off-the-books income in cash to be used on personal expenses.

Untraceable, right? No way to be caught.

Wrong.

Thomas and Brenda Ellis pleaded guilty to conspiring to defraud the IRS of more than $133,000 in tax revenue. They face five years in prison and a fine of up to $250,000.

But the Ellises’ case isn’t an isolated one — and that’s the point. There are many Americans just like them who cheated on taxes only to be caught, prosecuted and in many cases jailed.

Even if you think you can’t be caught — such as thinking there’s no way for the IRS to trace missing cash revenue — everyday cases of Americans being charged with or convicted of tax crimes should make you think otherwise.

Take some other cases, for example.

Earlier this year, Iowa businessman Keith Chapman received three and a half years in prison after committing bankruptcy fraud and filing false tax returns.

Or look at the case of John A. Gullett, of Parkland, Fla. He received more than four years in prison after failing to report about $3 million income. Like the Ellises, he apparently thought the IRS would have no way of tracing his income.

And also like the Ellises, he was wrong.

If you’ve been cheating on your taxes, or are considering it during this sour economy, pay greater attention to the newspaper you read every morning. You’re likely to notice the stories you’ve been skipping over — the ones about tax cheats getting caught. They’re everywhere.

There’s a cold truth to stories such as these. It’s one thing to discuss numbers and figures. As I reported last month, for example, Congress increased the IRS’s enforcement budget to a record $5.5 billion — meaning more agents for more audits and more investigations.

But what does that mean?

Simply, it means there will be more stories like the Ellises, like Chapman, like Gullett.

And like you?

That’s the question you should ask yourself now if you’re in deep tax trouble. No matter how deep you’re in the hole, it’s always better to climb out willingly than to be found hiding down below.

Steven N. Klitzner is a Florida Tax Attorney who resolves IRS problems.  Mr. Klitzner is also a member of the LawGuru Attorney Network.

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