Tax Cheating Season

Author: 
Fay Mitchell

It’s the time of year for one of life’s certainties, and it’s not death. Yes, the tax filing deadline is near. Since April 15 falls on a Sunday, procrastinators have until April 17 to file taxes this year. Americans, as a nation, are fairly dutiful in this often unpleasant task, but the urge to cheat sometimes wins out. Here are some tax cheatin’ examples that may have led filers to rue the day.

The largest fine paid in a tax-related case in North Carolina was in 2011 and involved cheating on cigarette tax revenue. Two South Carolina businessmen, John M. June and Larry Phillips, entered an Alford plea on two counts of obtaining property by false pretense. They operated Tobaccoville USA and J & E distributors. Authorities said they overstated their 2005 cigarette sales and understated their 2006 cigarette sales to take advantage of changes in North Carolina tax law and to gain considerable savings.

In an Alford plea, the defendant pleads guilty while asserting innocence but acknowledges that there is enough evidence to be found guilty. The men were said to have evaded about $2.5 million in state excise taxes by altering records of cartons of cigarettes sold before a 2005 tax increase. They subsequently collected $3.5 million they weren’t entitled to from an escrow fund meant to pay for smoking-related injuries no less.

Their reward? Together they paid $2.5 million to the N.C. Department of Revenue, a $1.5 million fine each and together made a $1 million contribution to the state’s medical trust fund. The $6.5 million total constitutes the largest tax-related fine in the state’s history.

Not only businessmen, but men of the cloth have yielded to the appeal of tax fraud. In 2009, Charlotte minister Anthony L. Jinwright was charged with five counts of tax evasion, five counts of tax perjury, one count of lying to federal agents and three counts of mail fraud. The indictment stated that Jinwright failed to report more than $800,000 in taxable income, including at least $75,000 earned by his wife between 2001 and 2006.

Jinwright was senior pastor of a Charlotte church, owner of Jinwright Funeral Services and founder of A.L. Jinwright Ministries. He leased a home owned by NFL legend Reggie White for $21,000 a month and owned another home. His church gave him tens of thousands monthly to rent fancy cars, which included BMWs and a Bentley. He received an average of more than $500,000 a year in salary and perks for six years. The indictment said his wife received more than $800,000 over the same time period.

In May 2010, Jinwright was convicted of one count of conspiracy to defraud, six counts of tax evasion and six counts of filing a false tax return. He was sentenced to serve more than eight years in federal prison. He was released Dec. 15, 2017. His wife Harriet was convicted of one count of conspiracy to defraud and three counts of tax evasion. She was sentenced to more than six years for conspiracy and tax evasion. She was released Feb. 8, 2017. The couple was ordered to pay $2 million in restitution.

Jinwright is not the only cleric to fall from grace. Charlotte televangelist Todd Coontz, author of “Breaking the Spirit,” “Please Don’t Repo My Car,” and other titles, in June 2017 was indicted on three counts of failure to pay taxes and four counts of aiding and assisting in filing false tax returns. The televangelist preached on receiving and managing wealth and promised financial miracles to people who sent money to the ministry. He was charged with filing delinquent tax returns from 2000-2014 and having federal tax liabilities of more than $326,000.

The federal indictment stated that vehicles purchased by the ministry or corporations included BMWs, Land Rovers, Ferraris, a Maserati and others. Coontz’s family members drove some of the cars. There were no records of the supposed business use of the vehicles, according to the indictment. The ministry purchased a $1.5 million condominium. His businesses deducted more than $200,000 for clothing purchases and tens of thousands of dollars for meals and entertainment.

Coontz was charged with filing a false tax return from 2010-13. Ministries often paid Coontz, who now lives in Florida, for traveling to speak to them. He hid income from the IRS by claiming the travel as a business expense and keeping the reimbursement as personal income. He would allegedly cash checks made payable to him from speeches and book sales so they did not appear on his accounting records. Coontz’s trial in federal court in Charlotte began April 3, 2018 and he was found guilty of failing to pay taxes and filing false tax returns April 5. Sentencing was not scheduled at this writing, but he may face hundreds of thousands of dollars in fines and years in jail.

While taxes on legitimate income are a given, it may be a surprise to learn that illegal sources of income also are taxable. North Carolina’s “Unauthorized Substance Tax” presumes that persons in possession of such substances are drug dealers. North Carolina charges $3.50 for each gram of marijuana, $50 for each gram of cocaine, $50 for each group of “low street value” drugs such as steroids and $200 for each gram of a controlled substance. Possession of “illicit spirituous liquor,” such as moonshine, is prohibited. (You may recall that it was the tax collector [revenuers] chasing moonshiners that reportedly gave rise to auto racing and NASCAR).

Drug dealers are required to pay the tax within 48 hours of receiving the illegal substance, but are not required to give their name, address, social security number or other identifying information. Upon paying the tax the dealer will receive a tax stamp that should be attached to the drugs – the stamps may be purchased in person or by mail. The law also prohibits the N.C. Department of Revenue from revealing any information about purchase of the tax stamps to law enforcement. The information cannot be used in court or to further an investigation.

Most folks aren’t collecting income from cigarette profits, mega churches or drugs. But other little white tax lies can get up to $250,000 in fines or at worst five years in prison. A Credit Karma Tax study found that about six percent of Americans admitted to fibbing on their tax returns. The most common deceptions are failure to report income, possibly from part time work or self-employment (including illicit activity); phony deductions and credits, (particularly charitable contributions); omitting tips and gifts or paying others off the books (remember the nanny or housekeeper); or hiding gambling winnings (the entity paying you will report it also).

Remember to render unto Caesar that which is Caesar’s and to avoid tax hazards. Many happy returns!