Two dentists in the state of Washington who avoided more than $460,000 in income taxes were sentenced in US District Court in Seattle to seven days in prison and 400 hours of community service, reports the United States Attorney’s Office of the Western District of Washington.
Mike Hsieh of Kent and Christine Chen of Renton, who own Comfort Family Dentistry in Kent, took steps to illegally hide their income from the Internal Revenue Service (IRS) to reduce their tax obligation between 2007 and 2014.
For all the tax years between 2007 and 2014, they admit failing to pay about $231,000 in taxes each that they should have paid. During the sentencing hearing, US District Judge Richard A. Jones ordered each to pay a $5,000 fine.
“It was pure greed,” said Jones. “It wasn’t about need. It was about greed… It wasn’t a simple mistake. For eight years you had your accountant file false tax returns. You had eight separate years to change your mind and not be involved in criminal activity.
Hsieh and Chen maintained two sets of financial statements for the practice. One showed the actual expenses, and the other showed inflated expenses. The dentists gave the fraudulent expense statements to their accountant for tax preparation.
The pair also established a bank account that was not disclosed to the tax preparer. Patient fees deposited into the account were not reported as income. Also, the dentists took cash proceeds from the practice and never reported that income to their accountant or on their taxes.
For tax year 2013, Hsieh admits he reported a taxable income of $232,753 when it was really more than $100,000 higher. Hsieh should have paid taxes on income of $348,663. Also for tax year 2013, Chen reported income of $319,131 when her true income was $425,679.
Both dentists own multiple properties and dental practices. Chen lists assets exceeding $4 million, while Hsieh lists assets of more than $2 million.
“This was a deliberate, calculated scheme to cheat the government,” said Assistant United States Attorney Brian Werner, noting that the defendants did not need the money. “There was no need to cheat the government. This offense was motivated purely by greed.”
Each defendant will pay slightly more than $231,000 in restitution. Their attorneys estimate they also will need to pay an additional $300,000 in interest and penalties to the IRS.
In arguing that Hsieh and Chen should avoid prison time, their attorneys noted that their criminal conviction prompted one bank to end its relationship with them and that the dental practice was dropped as a preferred provider by a large dental insurance plan.
“Dr. Hsieh and Dr. Chen each filed false tax returns that underreported income and inflated expenses at their dental practice to avoid paying income taxes. Their criminal scheme lasted years and cheated the Treasury of hundreds of thousands of dollars,” said IRS-Criminal Investigation Special Agent in Charge Justin Campbell.
“Taxpayers should have confidence that IRS-Criminal Investigation will aggressively pursue tax fraud and ensure that all business owners pay their fair share,” said Campbell.