Erroneous Tax Fraud Charges Can Still Hurt Business Owners

In today’s media-saturated culture, anyone can be quickly and harshly tried in the court of public opinion. Criminal charges, no matter how unfounded, can hurt a person’s reputation and compromise their standing in the community. For business owners, news of criminal charges can hurt sales, customer loyalty and access to credit.

This includes charges alleging tax fraud or other financial impropriety. While it did not occur here in California, a recent case demonstrates how quickly business owners anywhere can be harmed by tax-related criminal charges – even if they turn out to be completely bogus.

A woman named Gail is a seemingly successful business owner in western New York. According to news sources, she owns seven Ace Hardware/lumber stores. Last September, Gail was charged by the state with tax fraud for allegedly underpaying sales tax revenue between 2005 and 2009. She supposedly owed the state $589,000 in unpaid revenue.

The case was investigated for more than six months. In late May, the charges were finally dropped after Gail and her attorney were able to show documentation proving that she did not owe any additional tax money. In fact, there were months during the disputed period when she paid more than she owed.

Commenting on the case, Gail’s attorney explained that “apparently, the New York State Tax Department was looking at other records, other third-party records, that misled them in relation to what my client’s sales tax liability was . . . [but] we were able to establish that initial audit was not correct.”

If you are a business owner and have been charged with crimes related to state or federal taxes, this case should be a reminder that the government can fairly easily make giant mistakes. But those mistakes can be costly to you if you don’t have a strong legal advocate on your side.

Source: WGRZ News, “Attorney: State Botched Gui’s Lumber Tax Audit,” Kelly Dudzik, May 20, 2015