Evading Everything

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16328212 - amount owe in the income tax return

Fraudsters tend to think they should receive a special exemption when it comes to paying taxes. Today’s “Fraud of the Day” reveals a Southern California businessman who evaded millions of dollars in personal and business-related taxes owed. His tax evasion tactics led to a conviction for tax fraud as well as workers’ compensation fraud.

 Have you ever stopped to wonder just how much money you could save it you didn’t pay taxes? According to the Congressional Budget Office, each household pays approximately $20,000 in taxes. And, the more money you make, the higher the tax bracket, thus a higher amount of taxes are due. It’s easy to see how today’s fraudster, who was the owner and operator of a successful retail chain of more than 50 Los Angeles-based stores, could have rationalized evading his taxes.

According to the article, the businessman failed to report more than $29 million in taxable sales, more than $39 million in taxable income and more than $8 million in wages. (Altogether, he avoided paying $5.6 million in sales, income and payroll taxes.)

But, that’s not all folks. Over six years, he also failed to report more than $7 million in wages to his insurance carriers and failed to pay $353,792 in workers’ compensation insurance premiums. (Talk about selling your employees short. If an on-the-job injury occurred, his employees are out of luck.)

So, what happens when criminals don’t pay their taxes? Approximately a quarter of federal spending goes to provide retirement and disability funds through Social Security. Federal health programs such as Medicare and Medicaid also take a huge chunk of federal tax dollars. Then there are other income security programs such as veterans’ benefits, unemployment compensation, food stamps and housing assistance, just to name a few. (When tax evaders fail to pay their taxes, it hurts honest taxpayers, raises taxes and makes it harder for other businesses to shoulder the tax increases that occur as a consequence of tax evasion.)

The Los Angeles businessman was sentenced to two years in the county jail for tax fraud and workers’ compensation fraud. His plea agreement requires him to pay more than $7.6 million in restitution for tax and associated costs. If he fails to pay full restitution within six months, he will be serving the next 17 years behind bars. (Now, there’s some real motivation to comply.)

Congratulations to the California Attorney General’s Office for successfully prosecuting the case and for pointing out to this criminal, as well as any others considering the same crime, that you can run, but you can’t hide from the law.

Today’s “Fraud of the Day” is based on an article entitled, “Calif. Retailer sentenced to prison for tax, workers comp fraud,” posted on BusinessInsurance.com January 19, 2018.

The owner and operator of a Southern California retail chain was sentenced to two years in prison for sales tax evasion, false income tax returns, failure to pay taxes and workers compensation fraud, California Attorney General Xavier Becerra announced Wednesday.

Between 2010 and 2016, Jeong Kim, owner and operator of more than 50 Los Angeles-based Fashion Q and Q stores in Los Angeles, Orange, San Diego, San Bernardino and Ventura counties, failed to report more than $29 million in taxable sales, more than $39 million in taxable income, more than $8 million in wages, and evaded payment of $5.6 million in sales, income and payroll tax. The owner also failed to report more than $7 million in wages to his insurance carriers and evaded payment of $353,792 in workers compensation insurance, according to a press release.

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Larry Benson
Larry Benson is currently the Director of Strategic Alliances for Revenue Discovery and Recovery at LexisNexis Risk Solutions. In this role, Benson is responsible for developing partnerships for the tax and revenue and child support enforcement verticals. He focuses on embedded companies that have a need for third-party analytics to enhance their current offerings.