From the Tax Law Offices of David W. Klasing - New York Auto Repair Shop Owner Sentenced for Federal Tax Fraud for Cashing Customer Checks and not Reporting the Cash for Tax Purposes

IRVINE, Calif., Oct. 15, 2024 /PRNewswire/ -- Aniello Strocchia was sentenced on August 26, 2024, to 20 months in prison after pleading guilty to conspiracy to defraud the United States. As part of his years-long scheme, Strocchia took checks payable to his auto repair shop, cashing them with a check-cashing business instead of a bank. With help from others, Strocchia took over $1 million in business income for himself, using the funds to make expensive and luxurious personal purchases.

While cashing business checks for himself, Strocchia underreported income on his personal and business tax returns for several years between 2013 and 2017. The result was nearly $1 million in tax loss to the IRS, which Strocchia was ordered to pay in restitution when sentenced in August.

There are many red flags in Strocchia's case, many of which could have alerted IRS criminal tax investigators that he was concealing his income on his income tax returns. For example, despite reporting a low personal income, Strocchia made expensive luxury purchases, which often indicates a discrepancy to the IRS. Witnesses are often useful to the IRS when building these criminal tax cases, and financial institutions, including check-cashing businesses, must follow federal regulations and quietly alert the appropriate federal agencies about suspicious financial activity.

Recent IRS Conviction for Conspiracy to Commit Tax Fraud

Before his sentencing, Strocchia pleaded guilty in October 2023 to conspiring to defraud the United States by concealing his income from the IRS. He enacted this scheme over a period of several years, avoiding paying nearly $1 million in taxes to the IRS.

While owning and operating an auto repair shop in Maspeth, New York, Strocchia regularly cashed checks payable to his shop at check-cashing businesses. Instead of depositing the checks into his businesses' bank accounts, he cashed them for personal reasons, with the help of several others. These activities diverted over $1.3 million in business funds for Strocchia's personal use.

Check-cashing services are an option for people who do not have bank accounts or others. They turn checks into cash for a fee, depending on how risky the transaction appears. These outfits are known to be routinely raided by the IRS looking for exactly this type of scenario.

Strocchia did not disclose this check-cashing activity to his tax return preparers from 2013 to 2017, resulting in intentionally fraudulent return to be filed. Not only did Strocchia provide false information regarding the auto repair shop's income during that time, but also for his personal income.

With the cashed checks made payable to his business, Strocchia made lavish purchases, including about $500,000 in home renovations.

By underreporting his business and personal income to the IRS for five years, Strocchia caused a tax loss of $989,976, and he was ordered to pay this amount in restitution during his sentencing.

Though Strocchia faced up to five years in prison for the charges against him, he was sentenced to just 20 months, followed by two years of supervised release for conspiracy to commit tax fraud.

In addition to prosecuting individuals for criminal tax violations, the IRS also often imposes civil penalties.

IRS Red Flags to Investigate Tax Fraud and Other Violations

The IRS likely flagged Strocchia's returns for several reasons. When filers own businesses and their lifestyle does not align with the history of reported income of that business, IRS criminal tax investigators might be more likely to start and clandestine tax investigation or initiate a reverse eggshell audit. For example, in Strocchia's case, he made lavish purchases, like a luxury car collection and real estate acquisitions, despite a history of reporting his personal income and business income as questionably low.

When investigating tax evasion or other tax code violations, the IRS might monitor a person's social media accounts to gauge their lifestyle, interview their business associates or friends to learn more about their activities, and review back deposits, banking, and financial information to build cases. See here for the typical methos of proving tax reporting fraud.

Another tool the IRS uses when investigating criminal tax violations is witness testimony. For example, in Strocchia's case, he involved several other individuals in his check-cashing scheme, potentially implicating them and pointing investigators toward individuals they could interview to build a stronger case. The IRS might interview an individual's business partners or associates as well, particularly if they are using their business to shield their income, as Strocchia did.

The IRS may also rely on financial institutions to alert them to questionable activity. When diverting business funds for personal use and underreporting his income, Strocchia used check-cashing businesses. These businesses, like banks, are held to federal regulations and must alert the IRs or other agencies, like the Financial Crimes Enforcement Network, to suspicious activity or any transaction of $10,000 or more.

Because of these regulations and the possible consequences financial institutions might face if they violate them, banks and other institutions typically report suspicious activity to the IRS, prompting further criminal tax investigations.

Getting back into Tax Compliance Without Facing Criminal Tax Prosecution.

If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.

Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. 

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!

Contact Our Team for Help Today

Call the Tax Law Offices of David W. Klasing at (800) 681-1295 to arrange a reduced rate initial consultation with our Dual Licensed Criminal Tax Defense Attorneys and CPAs about your case or click here

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