We are committed to closing California's $6.5 billion tax gap, defined as the difference between tax that is owed and tax that is paid. Our special agents work cooperatively with law enforcement agencies throughout California to uncover illegal behaviors that contribute to the tax gap. These include underreporting income, overstating deductions, failing to file returns, failing to pay taxes due, and making illegal cash payments to employees.
Tax fraud is not a victimless crime. You can report suspected tax fraud by calling FTB at (800) 540-3453.
Cases prosecuted in the last month are described below.
Orange county millionaire sentenced in tax evasion scheme
A Fountain Valley man, involved in a promotion questioning the legality of withholding personal income taxes, was sentenced July 24, 2006, to two years in state prison on three counts of filing a false state income tax return with an additional one year enhancement.
George H. (Nick) Jesson, 55, a former 2002 California gubernatorial candidate, owned and operated three corporations in Huntington Beach: Capacitor Specialist International, Inc., No Time Delay Electronics, Inc., and C&D Electronics, Inc. According to court records, Jesson, and his wife failed to report more than $2.9 million from these corporations on their state income tax returns for 1997-1999. Jesson believed that withholding personal income taxes violated the Constitution, and that his employees could request to have no tax withheld from their paychecks. Jesson and others placed an ad in a national newspaper stating their refusal to withhold taxes from employee paychecks. The courts routinely strike down frivolous anti-tax arguments like this.
Jesson is currently in federal prison in Lompoc after pleading guilty last April to federal tax charges. His state sentence will run concurrent with his federal sentence.
False W-2 form leads to jail, $10,000 restitution for Hesperia man
A Hesperia man pleaded guilty August 8, 2006, to filing a false state income tax return, and grand theft.
Mark Edward Hope, 21, was sentenced to 90 days in county jail, to be followed by three years probation. According to court documents, Hope filed a fraudulent 2002 state income tax return by fabricating a 2002 Wage and Tax Statement (Form W-2), which resulted in a $2,462 refund. Human resources staff for the company listed on the Form W-2 stated they had no record of Hope being employed in 2002, nor did they issue him a W-2.
In addition to the jail sentence, Hope was ordered to pay $10,000 restitution to the FTB representing the fraudulent refund, plus a $5,205 penalty, and the cost of the investigation.