North Carolina Paving Contractor Enters Guilty Plea to Tax Fraud Charges

December 13, 2013 — The Whistleblower Office of the Internal Revenue Service was established as a result of the Tax Relief and Health Care Act of 2006. The Office gives tipsters who have information concerning tax fraud the means to notify the IRS. Whistleblowers who collaborate with the IRS may be entitled to financial rewards that vary between 15 and 30 percent of the funds the government receives. When available, the handsome monetary rewards provide a powerful incentive for informants who report tax cheats flouting the laws that everyone else must live by.

North Carolina Paving Contractor Underreported Income by Over $1 Million

A North Carolina Paving Contractor has pleaded guilty to tax fraud, the Justice Department has announced. Over the last decade, Tommy Edward Clack has worked as a self-employed paving contractor, handling jobs in North Carolina, South Carolina, Florida and Maryland. To avoid inquiry by federal and state law enforcement, Clack frequently changed the name of his paving business. He has been charged with a number of state criminal violations in each of the states where he worked. In North Carolina, Clack was enjoined in 2010 from further operation there as a driveway paving contractor. In Maryland, Clack is subject to a cease-and-desist order that prohibits him from a variety of fraudulent practices.

Clack is also in trouble with the IRS for underreporting his quite lucrative paving contractor income on federal tax returns. Between 2004 and 2007, Clack’s gross income topped $5.7 million, but the paving contractor reported just a small portion of that to the government. Clack’s underreported income by the years at issue is as follows:

  • 2004 – $294,829
  • 2005 – $1,178,822
  • 2006 – $1,868,556
  • 2007 – $2,428,710.

Clack knowingly provided his accountant with false information to prepare his tax returns and signed the returns knowing they were false. Altogether, Clack failed to pay $1,350,597 during the four years at issue. To hide his tax fraud, Clack:

  • failed to keep books or records,
  • did much of his business in cash,
  • paid employees in cash, and
  • arranged cash transactions with his bank.

The bank transactions were in cash amounts low enough to get around rules requiring banks to file Currency Transaction Reports with the IRS.

Clack pleaded guilty to one count of willfully filing a false federal income tax return, for which he could receive a maximum of three year prison sentence with one year of supervised release and fine of up to $250,000.

Informants Collaborate With The IRS To Redress Tax Fraud

Before notifying the IRS, whistleblowers need to ensure they understand how the process works. The rules are different, for example, for rewards on information about a corporation’s tax violations as opposed to information about a private individual’s violations. Waters & Kraus’ tax fraud lawyers in Texas, Maryland and California are available to give whistleblowers the sound advice they need. Contact us by email or phone our whistleblower lawyers at 855.784.0268 to talk about what we can do to advance and protect your interests.

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