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How NOT To Handle an IRS Collection Matter

According to DoJ, Wagdy A. Guirguis, owner of several engineering businesses, was sentenced June 28, 2019 to 5 (five) years in prison in Honolulu.

On Nov. 20, 2018, a jury convicted Guirguis of:
  1. Conspiracy to defraud the United States along with co-conspirator Michael Higa,
  2. Three counts of filing false corporate income tax returns,
  3. One count of failure to file a corporate income tax return,
  4. Three counts of tax evasion,
  5. One count of corruptly endeavoring to obstruct and impede the Internal Revenue Service (IRS), and
  6. One count of witness tampering.

The convictions arose from a scheme to divert funds from Guirguis’ business entities for his own personal benefit and to avoid the payment of federal employment taxes, corporate and individual income taxes, and IRS penalties.

According to the evidence presented at trial, Guirguis operated numerous engineering businesses. Higa, a Certified Public Accountant (CPA), was the controller of these businesses.

Higa also served as a nominee officer of another entity controlled by Guirguis.

When The IRS Determined Guirguis’ Businesses Owed Over $800,000 In Federal Employment Taxes And Assessed An $812,000 Penalty, Guirguis And Higa Took Steps To Place Income And Assets Out Of The Reach Of The IRS.

For instance, Guirguis and Higa used the nominee entity to fraudulently convey a condominium to Guirguis’ wife. After an IRS revenue officer began questioning Mrs. Guirguis’ sole ownership of this condominium, Guirguis and Higa instructed a bookkeeper to alter the books and records in an attempt to conceal this transaction from the IRS.

From 2001 through 2012, Guirguis and Higa also used the nominee entity to divert approximately $1.3 million from Guirguis’ businesses for Guirguis’ personal use. As a result of their diversion and the concealment efforts, Guirguis’ 2010 through 2012 returns omitted $553,000 in income, resulting in a tax deficiency of $165,000.

In addition, Guirguis filed corporate income tax returns that fraudulently omitted millions of dollars of gross receipts. For one of his businesses, Guirguis simply did not file a corporate tax return, thereby not reporting more than $1.7 million in gross receipts.

After the IRS levied the bank accounts of one business, Guirguis diverted incoming funds owed to that business, directing payment of the funds to a different business. Guirguis also instructed a tenant to disregard IRS collection notices and pay rent directly to him rather than to the IRS. Moreover, Guirguis made false and misleading statements to IRS revenue officers, all in an effort to obstruct the IRS’ efforts to collect on the taxes he and his companies owed.

To impede the criminal investigation into his tax violations, Guirguis falsely told an employee, who had testified before the grand jury, that he did not know about the false backdating in the books of the nominee entity, and asked the employee to sign a false statement to that effect.

In addition to the term of imprisonment, U.S. District Judge Helen Gillmor ordered Guirguis to:

  • Serve 3 years of supervised release, and
  • to pay a $925 special assessment,
  • to pay $6,730.24 in prosecution costs, and
  • to pay $3,308,868 in restitution to the IRS minus any payments already made to the IRS.

Sentencing for Michael Higa is scheduled for July 1.

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Read more at: Tax Times blog

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