Tax Law Center Blog

Tax advisors should take note of the guilty plea last week by Matthew Tucci of West Long Branch, New Jersey, in a significant tax evasion case. This case serves as an illustration of the IRS’s focus on collection enforcement and the criminal implications of deliberately concealing assets to avoid tax liabilities.

Case Summary: Matthew Tucci pleaded guilty to tax evasion, specifically related to his failure to pay over $2 million in acknowledged tax debts for the 2015 and 2016 tax years. Instead of satisfying his obligations, Tucci engaged in a series of sophisticated transactions to hide his ownership of assets, diverting funds for personal use.

Key Technical Takeaways for Tax Advisors:

1. Acknowledged Tax Debt and Failure to Pay:
   • Violation: Unlike many evasion cases that involve underreporting income, Tucci filed returns for 2015 and 2016, acknowledging his substantial tax liabilities (over $2 million), but then willfully failed to pay. This highlights evasion through willful non-payment rather than solely non-filing or under-reporting.
   • Advisors: This emphasizes that filing a return does not absolve a taxpayer of their payment obligation. Advisors must stress the importance of timely payment, even when clients acknowledge a large tax bill. Payment plans, offers in compromise (OICs), and installment agreements are legitimate avenues for taxpayers who cannot pay immediately, but active concealment will lead to severe consequences.
2. Asset Concealment and Fraudulent Transfers (Badges of Fraud):
   • Methods: Tucci purchased real estate and immediately engaged in transactions to conceal his ownership. After receiving IRS notices in 2017, he transferred multiple properties to an entity owned by another individual. He maintained de facto control over at least two of these properties, selling one and refinancing another for personal expenses, not tax payments.
   • Advisors: This demonstrates classic “badges of fraud” often pursued by IRS Criminal Investigation (CI). These include:
     • Retention of control: Despite legal transfer to a third party, Tucci retained control, indicating a sham transaction.
     • Use of nominees/straw persons: Utilizing another individual’s entity to hold properties is a common tactic for asset protection (often illegitimate in the context of tax evasion).
     • Diversion of funds: Proceeds from the sale and refinancing of “hidden” assets were used for personal expenses, directly demonstrating intent to evade payment.
3. Submission of False Documents to the IRS:
   • Violation: In 2019, Tucci submitted false documents to the IRS, claiming no connection to the entity that owned the 12 properties. This is a direct act of obstruction and a separate criminal offense.
   • Advisors: This action escalates a civil collection matter into a clear criminal case. Advisors must emphasize to clients that providing false information or documents to the IRS is a serious crime. Maintaining honest and transparent communication with the IRS, even during audits or collections, is very important.

Conclusion: The Matthew Tucci case is a reminder for advisors of the multifaceted nature of tax evasion, particularly when it involves active asset concealment and deceptive practices aimed at frustrating IRS collection efforts. It underscores the IRS’s ability to uncover sophisticated schemes and the severe criminal penalties, including incarceration, for those who willfully attempt to evade their tax obligations. Advisors must continue to guide clients toward legal and compliant methods for managing tax liabilities.

For more information, refer to the official IRS press release: New Jersey Man Pleads Guilty to Tax Evasion