The indictment said new members who donated money were told that the funds were tax-free gifts under the Internal Revenue Service code.
In Thursday's first day of testimony, the government called IRS agents Paul Crowley and Barbara Shuster to testify. Crowley said tax records show that Bello reported to the government that she earned $8,650 in 2008 and $7,309 in 2009 — all rental income from a house on Hidden Lane in Guilford. She used H & R Block in Old Saybrook to file the returns.
Shuster, who said she did not examine Bello's or Platt's returns, testified that taxpayers have a responsibility to compute their taxes correctly.
She said that a gift is not taxable to the receiver only if certain conditions are met. She testified that an individual who had questions about whether money or property can be legally classified as a gift may seek guidance through seven IRS taxpayer assistance centers in Connecticut, by calling an 800 number or through the IRS website.
Under cross-examination by Pattis, Shuster agreed that tax evasion is illegal but that tax avoidance — the practice of finding legal ways to avoid paying taxes — is not illegal.
In his opening statement, Pattis said that Bello, a cosmetologist, should not have been expected to know federal tax law and that the government was overaggressive in its prosecution. At one point, he quoted lyrics from the Beatles song, "Taxman."
Einhorn reminded Shuster that she had testified that "nothing is easy with taxes."
"That's true," she said.
Einhorn said the women consulted accountants to be sure they were within the law.
"This was all done in good faith. They had a good-faith belief that everything they were doing was within the law," he said.