Ocean City business owner pleads guilting to tax fraud
OCEAN CITY, Md. – A Berlin man has pleaded guilty to tax fraud related to his Ocean City business.
According to his guilty plea, 66-year-old Sunil Chawla owned and operated “India Emporium”, a seasonal retail store, for more than 20 years. Chawla also received income from a business (“Company 1”) operated by his son, 36-year-old Saurabh Chawla, from 2009 to 2019. Chawla’s duties at Company 1 included receiving electronics and other items obtained by the company. Chawla was involved in reselling, maintaining and tracking Company 1’s inventory, and packaging and shipping daily orders as directed by his son, Saurabh. From 2009 to 2018, Chawla reportedly received an annual salary of approximately $60,000 from Company 1. Every month, Chawla frequently wrote himself a $5,000 check that was drawn against Company 1’s bank account. In 2009 and 2010, Chawla intentionally did not report any income from Company 1. From 2012 to 2018, Chawla repeatedly engaged in tax fraud by underreporting his $60,000 annual salary at Company 1, resulting in a $70,000 tax loss to the IRS.
Chawla and Saurabh allegedly discussed and agreed on the amounts that Chawla would list on his tax returns, which would then be listed on Saurabh’s returns as an expense of Company 1. In later years, Chawla’s compensation was fraudulently classified as a non-taxable gift, rather than compensation related to Chawla’s employment in an effort to lower Chawla’s taxable income in any given year. Additionally, Saurabh failed to file a form 1099 each year to report Chawla’s income to the IRS. In 2013, Chawla reportedly emailed Saurabh, expressing his concern about whether a 1099 had been filed by Company 1 that would require Chawla to pay self-employment.
As stated in the plea agreement, Chawla submitted a U.S. Joint Income Tax Return, IRS Form 1040 for the year 2017, in which he falsely reported that his adjusted joint gross income was $19,849 and that his total tax due was $3,571 when Chawla knew that his joint taxable income was much greater than the amount reported.
In September 2021, U.S. District Judge Catherine Blake sentenced Saurabh to 66 months in federal prison, followed by three years of supervised release, for conspiracy, interstate transportation of stolen goods, and tax evasion. Saurabh was also ordered to pay a total of $713,619 in restitution and sign an order of forfeiture, requiring him to forfeit several fraud-related assets, including a 2013 Tesla Model S, $2,308,062.61 from accounts in his name, and the sale of property in Aurora, Colorado.
Chawla faces a maximum sentence of three years in federal prison, followed by one year of supervised release. He is scheduled to be sentenced later this year.
