News and Press Releases

Santa Clara Painter Sentenced For Filing False Tax Return

May 16, 2012

SAN JOSE, Calif. – Insoo Kim, was sentenced yesterday to two months in prison and four months home detention for filing a false tax return, United States Attorney Melinda Haag and Special Agent in Charge, IRS Criminal Investigation, Marcus Williams announced.

Kim pleaded guilty on Nov. 14, 2011, to filing a false tax return. In pleading guilty, Kim admitted that since 1986 he has owned and operated Melody Painting in Santa Clara, Calif. For the 2003, 2004 and 2005 tax years, Kim filed a Schedule C on his individual income tax returns reporting Melody Painting’s gross receipts and gross wages paid. During those years, Kim maintained separate business bank accounts and concealed all but one account from the accountant who prepared his individual income tax returns and Melody Painting’s quarterly employment tax returns. Kim deposited approximately $1,907,103.33 in business receipts into the undisclosed accounts and paid undocumented workers in cash from those accounts. He knew Melody Painting’s receipts were not completely or accurately reflected on his Form 1040s, including his 2004 tax return.

In the spring of 2006, as part of an IRS audit, a Revenue Agent (RA) directed Kim to bring in his and his wife’s bank records and Melody Painting’s invoice and receipt records. According to court documents, Kim brought in records of several personal accounts and a single business bank account that he told the RA contained all of Melody Painting’s receipts. Kim also provided invoices that he claimed included invoices for all of Melody Painting’s operations during the audit period. In matching invoices to the disclosed bank account, the RA discovered $200,000 in the account that was not reflected by invoices. The RA asked where the money came from and if Kim had, in fact, disclosed all his records of business income or if he had non-taxable sources of income. Over the course of five meetings with the RA, Kim and his accountant maintained that he had provided all records but did not explain the discrepancy.

According to court documents, in February 2007 the RA issued a series of summonses to various banks for Kim’s account information. At a meeting in August 2007, Kim’s accountant told him that he needed to report everything because the RA had issued a summons that would determine if he had other accounts and additional income. Kim then admitted that he had three additional bank accounts where business receipts were deposited. Kim explained that he hired some undocumented painters and paid them in cash from those accounts. He then provided the RA with the additional bank records and invoices that were not previously revealed. The total federal income tax loss to the federal government for the 2003, 2004, and 2005 tax years is $28,451, which has been paid.

Kim, 57, of Cupertino, Calif., was indicted on March 9, 2011, and charged with three counts of filing a false tax return and eight counts of failure to collect and pay employment taxes. He pleaded guilty to one count of filing a false tax return.

Tom Moore is the Assistant U.S. Attorney who prosecuted the case with the assistance of Kathy Tat. The prosecution is the result of an investigation by the Internal Revenue Service Criminal Investigation and IRS - Small Business/Self- Employed Division.



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