In Connecticut, if you fail to file your Sales and Use Tax return, they will charge you with a misdemeanor.
At my previous firm, I fought to release levies and liens for clients who were on their way to putting their tax problems behind them (but just were not there yet). I fought the IRS and state taxing authorities when the wrong person was stuck with a tax bill to put my clients on track and remove the IRS from their lives. I went to criminal court a few times.
I did not then, and do not now consider myself as a criminal attorney, but I have now had my share of trips to Connecticut criminal courts for tax clients.
One of my first cases as a solo practitioner was not what I expected. I was not looking for criminal cases at the time.
However, that all changed a week later when I met Ted.
There I was one week into my career as a solo-practitioner listening to Ted’s story (Ted’s name is changed for anonymity but I received his permission to share this story). As soon as I heard Ted's story, I wanted to help.
Ted’s story was one of an American Dream gone bust. While putting all his efforts into the success of his restaurant, Ted never filed sales tax returns. As a restaurant owner, Ted was supposed to file sales tax returns. However, while he was busy trying to make the restaurant succeed, Ted neglected to file and pay his sales tax returns.
Did the Department of Revenue Services (DRS) ever come looking for Ted’s sales tax returns while his restaurant was in business? No.
Instead, the DRS did what any “reasonable” state taxing authority would do, the DRS charged Ted with 10 counts of misdemeanor - failure to file sales and use tax return - each of which is punishable by up to 1 year in prison and up to a $1,000.00 fine.
Instead of being reasonable by auditing Ted and sending him a bill, the DRS sent a Special Agent that threatened to charge him with a crime for failing to file.
So, Ted actually had a serious criminal tax problem. He just did not know it yet.
Ted had no idea whether the DRS Special Agent ever followed through with his threats. In fact, Ted thought that the DRS Special Agent was being hyperbolic when he called Ted a criminal. Then, several years later Ted was pulled over for a seat-belt violation only to find out that the DRS Special Agent had followed through and that there was a warrant out for his arrest.
When Ted discovered that he was charged with failing to file his sales tax returns, he got his information together and hired an accountant to prepare the delinquent returns. Even with the returns in hand, the State's Attorney would not drop the charges. The State’s Attorney was using Ted's criminal case as a negotiating tactic by holding jail-time over his head in order to collect the back taxes. Ted owed $40,000 that he did not have.
After Ted retained me, I got right to work. After researching the law, I realized that the statute was poorly drafted. Ted, as the sole-owner of an LLC, was not one of the people who could be charged under Conn. Gen. Stat. section 12-428(1).
After filing a motion to dismiss to expose this defect in the statute, I was able to negotiate with the State’s Attorney to get a favorable deal for Ted. Ted was more than happy to accept this deal in order to put the entire ordeal behind him and to get the DRS out of his life.
Ted's case was exactly the kind of case I was looking for when I struck out on my own.
When I took his case, I did not know that under the circumstances that Ted could not be charged with the crime but I knew that the government threatening someone with jail-time for owing money was wrong. Finding a way to put this problem in the past for Ted confirmed that my decision to strike out on my own was correct.
I know that not every case will be as clear-cut as Ted's, but while working on Ted’s case I learned something about myself. As long apply the skills I learned earning my law degree, how to read, write, and fight, I will be able to help taxpayers like Ted who are being threatened and mistreated by state and federal governments and powerful collection agencies which all use fear and intimidation in an effort to collect a debt.