Texas Couple Facing Trial for Unreported Income and Other Tax Charges

A couple from Bastrop, Texas, is facing trial on federal tax charges based on returns filed for the restaurants that the couple owned in Bastrop County. The couple could face up to five years in prison based on the charges they face. Learn more about the case below, and contact an experienced Dallas, Texas tax attorney if you’re dealing with serious tax issues.

Restaurateurs fail to report cash income

Michael and Cynthia Herman are the former owners of three restaurants, two in downtown Bastrop and one near the Travis County line. The couple was indicted in 2017 on charges relating to business expenses claimed on their tax returns, including seven counts of tax fraud and one count of conspiring to defraud the IRS. Federal prosecutors claim that the Hermans avoided paying taxes on the full extent of their income by failing to deposit all cash receipts received at the restaurants to their business bank accounts. That cash was never reported to their tax preparer as business income and thus never reported to the IRS. The government also alleges that the couple used their business accounts to pay personal expenses, such as pool repair costs, home utility bills and the salary of a home employee, all while claiming that these expenses were business-related. The couple pleaded not guilty to the charges, and they continue to maintain their innocence of any wrongdoing.

Trial delayed multiple times

So far, the Hermans’ trial has been delayed multiple times, in part due to the number of documents involved in the case. Prosecutors explained that federal investigators had been looking into the couple’s finances since 2013. Their investigation resulted in prosecutors being given some 44 boxes of materials seized pursuant to a warrant, as well as over 27,000 pages of materials, a terabyte-sized hard drive full of materials needing review, and multiple audio and video recordings. Prosecutors requested the first delay of trial, explaining that they would need to find additional accounting experts to review the years’ worth of ledgers related to the couple’s two business entities (and would need to wait out tax season to do so). The Hermans have also hired experts to review the documents and provide a counterpoint to prosecutors’ claims. Additional requests for more time followed, with the fifth and most recent extension of time having been granted earlier this month.

If you’re facing claims by the IRS or are being audited or charged with tax-related crimes, make sure you have a seasoned and dedicated defense to those claims by contacting the skilled Texas tax lawyers at the Scammahorn Law Firm for a confidential consultation, in Tyler at  903-595-1000.