How Cheating on Your Taxes Can Lead to Prison
Think you can get away with cheating on your taxes?
Consider the cautionary tale of Gregg Kaminsky, an Atlanta-area e-commerce entrepreneur who ducked about $125,000 in tax due on earnings from a secret Swiss bank account and from the virtual world known as Second Life.
So what did Mr. Kaminsky do?
Opening a secret Swiss account. Mr. Kaminsky set up an account at Swiss bank UBS in 2000. The law requires taxpayers to disclose the existence of offshore accounts with more than $10,000 to the Treasury Department by filing a form annually, but Mr. Kaminsky didn’t file the required forms until 2010—after UBS admitted it helped U.S. taxpayers hide money abroad.
Adding to the account, and not declaring its income. Mr. Kaminsky made additional deposits into his UBS account, compounding his initial transgression, and he didn’t declare the income earned by the account. By mid-2005, the account reached a high point of $1.15 million.
Omitting the Swiss assets from his financial-aid forms. Mr. Kaminsky didn’t include the assets in his Swiss account when he filed federal financial-aid forms in 2007 and 2008.
Further concealing the secret account. Mr. Kaminsky moved the $400,000 remaining in his UBS account to a bank in Hong Kong during May and June 2009, after it became known that U.S. officials were investigating UBS for helping U.S. taxpayers hide money abroad.
Botching a confession. In 2010, Mr. Kaminsky decided to rectify his past tax mistakes. He says a lawyer advised him simply amend his past tax returns and perhaps minimize the penalties. In the process, he disclosed both the UBS and Hong Kong accounts.
Between 2007 and 2013, Mr. Kaminsky earned more than $140,000 of such income that he didn’t report to the IRS.
Omitting this income was a crucial misstep, say experts, because there is little that infuriates prosecutors more than a confession that pretends to be complete but isn’t.
Mr. Kaminsky has paid the IRS $91,983 in restitution plus more than $250,000 for concealing foreign accounts. On March 4, he was sentenced to four months in prison, followed by two years of supervised release and 200 hours of community service.
Original Story at The WSJ