embezzlement and tax evasion
We had a employee we paid $40000 ayear and he lived way beyond his means with our money. The wife was aware that was all the legal money they were receiving. I don't beleive we have evidence proving she participated but she did help spend the funds on lavish trips etc...and we didnot know it but we were paying for her vehicle...Now her husband is dead and she refuses to pay anything back...My question can she be turned in for tax evasion or fraud since she was aware of his extra money? Can I turn her into the Irs since they did not claim it on their taxes? She and her husband left us pennyless oweing the irs and she recieve over $800000 in life insurand policies...We have five kids and my husband only took a salary of $75000 ayear and he embezzled over a million dollars.
2 Answers from Attorneys
Re: embezzlement and tax evasion
A difficult situation, indeed.
First things first, you are likely looking at a claim against the estate of the deceased individual. Unfortunately, most criminal restitution remedies die with the individual. Thus, you would likely have to sue the estate for the money. The insurance policies are likely untouchable because they are, at their simplest level, contracts to pay a third party - eg, his wife. Has the estate been probated? I would suggest finding a local probate/estate attorney .
Second, we have the tax issue. My thinking is that making a complaint to the IRS won't necessarily help you recover any sums. The IRS will want to recover for their benefit if they deem there to be a tax deficiency/evasion.
I would be happy to discuss: [email protected]
Re: embezzlement and tax evasion
As you already appreciate, you're in a tough spot here. Yes, you can certainly provide this information to the IRS. But since the husband was the one who stole the money, it is unlikely that the IRS will try to prosecute the wife for criminal tax evasion.
What is more likely is that the IRS will assert a civil tax liability against the husband, and will seek to collect from his estate, assuming there is anything from which to collect. If he and his wife filed joint returns, she in theory would be "jointly and severally" liable for the tax, penalties and interest. But unless the IRS can show that she knew about the tax understatement, or that there were prohibited transfers of assets to her, she would be entitled to file an election allocating the additional tax to her late husband. This is possible under the "innocent spouse" provisions of IRC sec. 6015(c), for which one can qualify if widowed, separated or divorced (obviously here it is the widowed test that applies). More information on innocent spouse relief is available in the articles I have published on this subject, which are in the articles section of my website at www.bjhaynes.com.
Finally, I'm a tax lawyer and thus don't know much about other kinds of legal remedies. However, it seems that there should be some legal recourse available to you against the wife since she received the financial benefit of the embezzlement. Talk to a local attorney about suing her to impose a "constructive trust" on any assets that can be traced to the embezzlement.