Federal Grand Jury Charges Los Angeles Attorney with Tax Evasion and Failure to Pay Over $1.7 Million in Taxes

The Scheme to Evade Tax Levies

On March 22nd, 2024, Milton C. Grimes, a Los Angeles-based attorney, was charged by a federal grand jury with tax evasion and the willful failure to pay taxes totaling over $2.4 million. According to the legal documents, Grimes had accumulated an IRS debt of $1.7 million in unpaid taxes for the years 2010 and 2014. In a calculated move to sidestep IRS collection actions, he deliberately maintained minimal balances in his personal bank accounts from 2014 through 2020.

The core of Grimes’ strategy involved redirecting his legal practice’s income into his law firm’s business accounts rather than his personal accounts. This maneuver was not merely about account management; it was a calculated effort to obstruct the IRS’s collection attempts. Utilizing the business accounts under his control, Grimes systematically purchased cashier’s checks and made cash withdrawals. This method allowed him to use the funds for personal and business expenses while avoiding the direct levying of his accounts by the IRS.

Over the six-year span detailed in the indictment, Grimes is accused of extracting approximately $16 million from his business accounts using cashier’s checks. This substantial sum, withdrawn in a way that skirted around his tax liabilities, highlights the elaborate lengths to which Grimes allegedly went to evade fulfilling his tax obligations to the IRS. The indictment not only sheds light on the sophisticated methods employed by Grimes but also underscores the legal thresholds for tax evasion versus tax avoidance.

Charges and Potential Penalties

Grimes faces one count of attempted tax evasion and four counts of willful failure to pay taxes, with a potential sentence of up to five years in prison for the tax evasion count and up to one year in prison for each count of willful failure to pay taxes if convicted. The indictment explicitly notes that from 2018 through 2021, Grimes filed individual income tax returns indicating he owed around $700,000 in taxes, which he has not paid, contributing to a total alleged tax loss to the IRS of approximately $2,418,050.

Legal Framework

The charges against Grimes are serious under federal law. Tax evasion, under 26 U.S.C. § 7201, is the willful attempt to evade or defeat any tax imposed by federal law. The statute for willful failure to pay taxes, under 26 U.S.C. § 7203, involves the willful failure to pay taxes at the time prescribed by law, without intent to evade taxes. The distinction between these charges reflects the nature of Grimes’ alleged actions: not only avoiding tax payments but also actively employing a scheme to evade IRS collection efforts.

Presumption of Innocence and Legal Defense

It’s crucial to remember that an indictment is merely an allegation. Grimes is assumed innocent until proven guilty, as is standard in the U.S. His defense may dispute the intentional nature of his actions, crucial for a guilty verdict. They might argue his financial dealings were legitimate, not efforts to bypass tax obligations. Additionally, they could attribute his tax payment failures to financial challenges, not intentional fraud.

IRS Criminal Investigation

The matter is under investigation by IRS Criminal Investigation. The federal agency responsible for examining financial crimes involving tax evasion, money laundering, and bank secrecy act violations. Their involvement underscores the seriousness with which the federal government views tax evasion and related offenses.

The case of Milton C. Grimes highlights the fine line between legal tax management and illegal tax evasion. As this case progresses, it will clarify legal versus illegal tax actions. It underscores the IRS’s investigative power and the severe consequences of tax law breaches.

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