Charge of not filing tax return in 20 years leaves observers scratching their heads
By Teresa Auch Schultz firstname.lastname@example.org October 20, 2012 6:50PM
Gary City Councilwoman Marilyn Krusas (right) and attorney Scott King leave the Federal Courthouse in Hammond, Ind. Thursday October 4, 2012. Krusas was one six public officials indicted for public corruption. Krusas was indicted on failure to file taxes and tax evasion. | Stephanie Dowell~Sun-Times Media
Updated: November 22, 2012 6:34AM
When the U.S. Attorney’s Office announced several weeks ago an indictment against Gary Common Council member Marilyn Krusas, perhaps the most shocking part was the claim that she went more than 20 years without filing a tax return.
Two local lawyers who deal with IRS cases say the time it took to charge her with a crime is indeed strange.
“I was really scratching my head,” Paul Kohlhoff, a Valparaiso University law professor and director of the university’s tax clinic, said of his reaction on hearing news of the indictment.
According to the indictment, Krusas hasn’t filed a federal income tax return since 1991 and had received notices from the IRS as early as 2001 of a total of $157,413 taxes she owes to the federal government in back taxes. Although not filing can be charged as a crime, the government charged Krusas with one count of tax evasion, claiming she hid a $232,680 inheritance she received in 2009 and 2010 from the government by writing cashier’s checks to herself and a relative, instead of using it to pay off her tax debt.
Krusas, 69, has pleaded not guilty in the case.
Kerry Hannigan, special agent for public information officer in the IRS’ criminal division in Chicago, said the IRS would not share its policy on deciding which cases move to the criminal division and how that happens.
“All I can tell you is (her acts) did not go unnoticed,” Hannigan said.
She added that the IRS looks at every taxpayer and that anyone who violates the law will be prosecuted. She would not say how or why someone might go 20 years before being indicted.
David Herzig, an associate professor of law at Valparaiso University, and Kohlhoff shed some light on the process. The IRS uses computer systems that track forms that banks and employers are required to send in about how much income a person made from interest or wages, such as those earned by a city council member. Those systems will then try to match that information up with a person’s tax return.
The problem with this system, Herzig said, is that it’s trying to track more than 100 million tax returns.
“You can’t audit every return,” he said.
It can take several years to catch someone this way, Herzig said. He pointed to one of the other cases announced against a local politician, the one against East Chicago City Councilman Juda Parks. The government charged Parks with not filing a return for the years 2008 and 2009. The time it took for charges to come out in that case, Herzig said, fits what he would expect to see in similar cases.
Once the IRS’ computers do realize someone hasn’t filed, they will automatically send out a letter to the person, telling he or she needs to file.
If the person still doesn’t file, the IRS can create its own tax return for the person, which usually includes only the basic exemptions, and calculate taxes owed from that.
People can dispute these amounts, and it is unclear if Krusas did that.
“In a lot of cases, they just simply ignore the letters they receive,” Kohlhoff said.
These cases usually get turned over to collections and at some point do become a criminal matter. Kohlhoff said the IRS will usually focus on higher-profile cases.
“The government wants to make a statement,” he said.
Although this process can take a while, both Kohlhoff and Herzig said it’s not common for it to take as long as it did in Krusas’ case. Herzig said one possible issue might be that notices of the problem to IRS employees might have gotten lost somewhere, considering how many cases they deal with.
Herzig said he would have thought the IRS would have given more attention to Krusas given that she is a public official.
“It’s unusual that you would go 20 years without filing a return and all you would have is a notice,” he said.