A longtime promoter of abusive trust schemes designed to hide clients’ income from the IRS has been convicted of tax charges.

Sharon D. Kukhahn, also known as Sharon Stephenson, was convicted Thursday in a Tacoma, Wash., federal court of four counts of tax evasion and corrupt interference with the income tax laws. According to the indictment, Kukhahn, 62, promoted the same type of abusive trust scheme that in 2006 sent her partner, David Carroll Stephenson, 54, to prison for eight years. Stephenson was convicted following a two-week trial and ordered to pay $8.5 million in restitution. 

At Kukhahn’s trial, prosecutors detailed the steps that she took from 1999 to 2005 to promote an abusive trust scheme designed to hide individual taxpayers’ income and assets from the IRS.

Kukhahn and others referred clients to Stephenson, who sold trust packages to more than 400 individuals. Purchasers used the trust packages to conceal income and assets from the IRS, and, as a result, failed to pay over $7 million in taxes. The jury found that through her own use of the trust packages, Kukhahn evaded paying income taxes in 2003, 2004, 2005 and 2006.

For a fee, Kukhahn helped clients obtain internal records from the IRS, claimed to “decode” them, and then mailed so-called “rebuttal packages” that supposedly would remove clients from the tax system. In reality, the packages were designed to stop audits and collection by IRS employees, as well as to provide clients with a defense against tax evasion charges by creating “evidence” that the client could later use to dispute his or her criminal intent. 

Kukhahn also provided a letter-writing service for clients that was further designed to thwart IRS efforts to collect taxes. Kukhahn sold the letter-writing service to more than 1,400 clients, helping them cheat the U.S. out of more than $4 million in income taxes.

The jury deliberated for only about two hours after a seven-day trial before convicting Kukhahn. She faces up to five years in prison for each count of tax evasion and the conspiracy count, and up to three years in prison for corrupt interference with. Each count carries a $250,000 fine. She was remanded to custody following the verdict Thursday and is scheduled to be sentenced on August 8.

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