Don't Mess With Taxes

The scheme involved false W-9 information, which meant the payor wasn't able to provide the owner of the artificial turf company, or the Internal Revenue Service, with the proper third-party report, allowing the man to evade nearly a million in federal tax. Until tax investigators caught up to him. 

Artificial grass has been dividing sports fans and players since its installation in Houston's iconic Astrodome in 1966.

But fake grass is gaining ground among residential and smaller commercial customers. The market is forecast to reach $7 billion by 2025, as we deal with hotter temperatures, drought, and water sources literally drying up nationwide.

That means a lot of money for AstroTurf et al companies.

It also meant jail time for one Southern California artificial turf company owner who didn't report nearly $9 million in business income.

Treasury cheated out of nearly $1 million in tax: The owner of the Newport Beach-based business was sentenced to 15 months in federal prison for failing to report the millions his business earned.

That intentional oversight, according to the U.S. Attorney's Office for the Central District of California resulted in attempted federal tax evasion of more than $946,000.

"He generated more than a million dollars in business income each year. He reported not one dime of that to the IRS," said Assistant U.S. Attorney Charles E. Pell of the Santa Ana Branch Office in a sentencing memorandum.

The 56-year-old San Pedro man, whose name I'm leaving out here but you can find in the Department of Justice announcement, pleaded guilty to one count of tax evasion on July 7.

At a Sept. 8 hearing, he was sentenced to the prison term, as well as ordered by the district court judge to pay a $50,000 fine.

Fake tax form scheme: The man's company installs artificial turf for residential and commercial customers in Orange and Los Angeles counties. From 2016 to 2020, the business generated more than $1.5 million in gross income per year, say federal prosecutors.

But not wanting to pay taxes on that income, the man used a fake tax ID.

Officials say he emailed customers federal tax forms listing the false identification information, so when the customers reported the payments they made to the firm to the Internal Revenue Service, they money would not be linked directly to the business or its owner.

On three occasions in 2020, according to federal officials, he emailed customers in Los Angeles and Beverly Hills an IRS Form W-9, Request for Taxpayer Identification Number and Certification, with false information and a signature in a fictitious identity.

The defendant sent similar fraudulent W-9 forms during the tax years 2016, 2017, 2018, and 2019, and provided a false W-9 to a school in Irvine in August 2016.

Unpaid tax money used for crypto, real estate: While attempting to evade the payment of taxes during those years, officials say the California man made more than $63,000 in transfers to the Coinbase cryptocurrency exchange from a bank account associate with his business.

He also used more than $500,000 in company funds to make real estate purchases in Nevada and Mexico, say prosecutors.

In total, the businessman failed to report approximately $8,926,333 in income, according to IRS Criminal Investigation agents who successfully worked the case. That cheated the IRS out of approximately $946,479 in federal income taxes for the tax years 2016 through 2020.

The good fiscal news for Uncle Sam is that before his recent sentencing hearing, the man paid all the back taxes he owed, plus interest.

But wait. There's more. In addition to paying back what he owed, the man also paid an additional 75 percent fraud penalty.

Crime did pay this time, but for the tax collector.

Tax Felon Friday: A Form W-9 typically is used by an independent contractor, like me as a freelance writer. You fill it out with your correct Taxpayer Identification Number, or TIN, (unlike the AstroTurf guy in this case) and give it to the person or company who's hired you.

That employer then reports to the IRS the amount of money you made, using your TIN, if you made more than $600 on the job. For most of us sole proprietors, that reporting is done via Form 1099-NEC, Nonemployee Compensation, copies of which are sent to us contract workers and the IRS.

The IRS relies on these third-party information reports to ensure that self-employed people, including gig workers, report all our nonwage income when we file their annual tax returns.

Note, too, that even if you don't get a tax form because you didn't make enough to trigger its required filing, you still owe tax on those lesser amounts.

You might think the IRS won't be able to track all your unreported income down. And yes, it's not always easy, especially if we're talking amounts way below the $9 million in this case.

But do you really want to take that chance and end up being a part of the ol' blog's end-of-week Tax Felon Friday feature?

You can catch up on previous tax crime posts, including those that were published long before I gave them a special designation, in the, what else, tax crimes category. You'll find this post at the top of that collection right now, so just scroll down for more.

You also might find these items of interest:

• Being the boss tax basics
• The many versions of IRS Form 1099
• Report all your income even if you don't get a 1099 form

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