Accounting Tax Fraud and Willfulness
-John the Barber timely filed both his barber shop’s Form 1120-S and his individual 1040 for the 2016 tax year.
-During 2016, John received cash payments from customers at his shop. John recorded these cash payments, as well as all other transactions, in one set of books.
-John also had a second set of books, which made no note of any of the cash payments received.
-When John’s tax preparer asked John for the corporate records for the barber shop for 2016, John only gave the preparer the second set of books (which do not note the cash payments).
-Both returns are thereafter filed, with no mention of the cash payments. John’s tax preparer was totally unaware of the cash payments.
-In addition to the above, John has a Canadian bank account from his childhood. As a result of this bank account, John has a requirement to check the box “yes” on Part III of his Schedule B (indicating ownership in a foreign account).
-When asked about any foreign accounts by his preparer, John forgets about the Canandian account entirely and, as a result, the 1040 is incorrectly filled out by his preparer.
*Pretend you are a prosecutor. Based only on the two crimes we have dicussed in class so far (TAX FRAUD AND WILLFULNESS), can John be charged with either?
*Can his tax preparer be charged with either?
When going through the various elements, feel free to include other facts not in the fact pattern that you think could be relevant (e.g. if John had destroyed the books) that could point toward both the attempt element and willfulness.
*Take each element step-by-step and methodically walk me through your thought process.