Running an escort service isn't easy — especially when the IRS comes calling

Whatever the women in Dennis Zarudny's "Elite Escort Service" did with clients for the advertised $500 to $800 per hour was his business and their business, as far as federal prosecutors were concerned.

What Zarudny did with the money and how much he declared on his federal income taxes, on the other hand, was his business and the Internal Revenue Service's business. After the IRS showed it wasn't happy about being shorted by indicting Zarudny on eight counts of tax fraud charges, Zarudny pleaded guilty to one count of making and subscribing a false tax return.

In return, federal prosecutors will drop the other seven counts. Zarudny will face a maximum of three years in prison.

Zarudny ran the escort service out of his Miami Beach and a South Beach virtual office through Denzar, a company for which he's the only shareholder. He chose a tax class for Denzar for which its income, loss, deductions, etc. would be reported on Zarudny's personal tax return. Zarudny admitted in court documents underreporting his income for 2011, 2012, 2013 and 2014.

Court documents say for 2011, 2012 and 2014, Zarudny "reported as gross receipts only the amounts customers of Denzar, Inc. paid using credit cards, knowing that those amounts would have been reported to the IRS. For tax year 2013, the Defendant reported some cash or checks sales, in addition to credit card sales."

He will be sentenced June 11.

This story was originally published April 17, 2018 at 6:00 AM with the headline "Running an escort service isn't easy — especially when the IRS comes calling."