Sentenced to 33-months in prison for Tax Crimes
Michael Chen was convicted by a federal jury of filing false federal corporate income tax returns and mail fraud. Mr. Chen, who was the owner of Fune Ya Japanese Restaurant in San Francisco, was sentenced in January of 2013 to 33 months in prison, 3-years of supervised release and has ordered to pay back $459,105 in restitution.
The awful details of the conviction
That federal jury found that Chen filed a false 2004 U.S. income tax return for an S Corporation (Form 1120S) for his Fune Ya Japanese Restaurant, failed to file corporate income tax returns for the restaurant for 2005 and 2006 and filed nine false employer’s quarterly federal tax returns (Form 941) with the IRS. He used the U.S. mail to file nine false quarterly sales and use tax returns with the California Board of Equalization for the mail fraud violations –a common method for prosecutors to pile on charges.
Evidence at trial showed that Chen paid Fune Ya employees cash wages totaling $548,919 for the 2004 through 2006 tax years. Employees claimed they received cash wages in white envelopes each payday. Chen deliberately failed to report these cash wages on his quarterly payroll tax returns (Form 941) filed with the IRS.
26 Boxes of evidence hidden under restaurant’s floor!
The San Francisco Chronicle newspaper reported that Chen was stashing cash receipts in bankers boxes in a crawl space underneath the restaurant floor. Federal investigators recovered 26 incriminating boxes of receipts that were marked as “seasoned Octopus”. The receipts provided irrefutable evidence of tens of thousands of cash transactions that Michael Chen never reported to the IRS. He bad! Owners of mostly cash businesses are always afforded increased scrutiny as you can read in our RED FLAGS section.
Chen did the prosecutor’s work! – encrypted Excel File
Federal investigators also located and entered into evidence an encrypted Excel spreadsheet on his computer that carefully and precisely documents some $1.9 million in restaurant sales but that Chen only reported $450,165 of the $1,900,000 to the California Board of Equalization and $65,738 in sales to the IRS.
Are you anxious about something the IRS might frown over?
If you got involved in something by accident or on purpose that might be considered tax fraud, tax evasion, or money laundering, it might be wise to seek confidential legal counsel from a tax attorney. A taxpayers’ attempt to right a wrong will often rectify the worst of circumstances with the best possible outcome when compared to those who wait until an investigation uncovers wrongdoing. By waiting to be “found out,” you are more likely to be charged with a crime and face serious consequences. Call tax lawyer Paul Staley to schedule a no cost, confidential meeting at (619) 235-4095.