May 15, 2017 Practice Points

"Cooked" Meeting Minutes Do Not Qualify as Business Records

A revenge tax filing results in a prison sentence—to nobody's surprise

by Michael R. Lied

Charles Petrunak was a pyrotechnician who was the sole owner of Abyss Special FX, Inc., a pyrotechnic and aerial fireworks company. Because of the nature of its business, Abyss was regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). Two ATF inspectors, Jill Krofta and Manuel Vicario, conducted a mandatory inspection of Abyss and filed a report detailing violations found in that inspection. At a later hearing, the administrative law judge found Petrunak in violation of explosives regulations and revoked his explosives license. Petrunak was therefore unable to work with fireworks and explosives, and Abyss ceased business.

Several years later, Petrunak tried to get revenge against Krofta and Vicario. He mailed both of them an IRS W-9 form requesting identifying information and then sent them an IRS Form 1099 (1099) alleging that Abyss had paid each of them $250,000. Krofta and Vicario both provided the forms to their supervisors and filed their taxes indicating only the income they actually received, excluding the fictional $250,000 payment. Because Krofta's tax return did not include the $250,000 for which a 1099 had been issued, the IRS audited Krofta and informed her that she owed $101,114 in taxes. Krofta was forced to spend considerable time and energy to straighten out the situation.

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