Tax Evasion Attorney for Tax Fraud Defense
Paying less than you owe to the Internal Revenue Service (IRS) is a violation of federal law that can lead to civil or criminal penalties. If you are under investigation or facing charges for tax evasion under 26 U.S.C. Section 7201, you need to engage experienced federal defense counsel promptly.
All United States citizens and residents owe reporting obligations to the Internal Revenue Service (IRS). Citizens and residents must accurately calculate their federal income tax liability, and they must timely pay what they owe. U.S. businesses have similar obligations as well, and they must also report and pay payroll taxes (i.e. Social Security tax) and all other applicable taxes imposed by the Internal Revenue Code.
Failure to pay any federal tax when due is a violation of the Internal Revenue Code, and it can lead to either civil or criminal penalties. Most cases are civil in nature, and the IRS is constantly auditing individual and corporate taxpayers across the country. However, allegations of intentional underpayment or nonpayment can lead to criminal charges, and the penalties for criminal tax evasion are severe.
Tax Fraud Penalties
Both individuals and corporate entities may be penalized for tax fraud. Criminal penalties for tax fraud generally involve large fines, prison terms in federal penitentiaries, and repayment of the government’s costs of prosecution. Civil penalties for tax fraud include monetary penalties or fines and repayment of the government’s prosecutorial expenses.
- Tax Evasion: Punishment for tax evasion includes a prison sentence of up to five years, a fine of up to $100,000 for individuals and $500,000 for corporations, and repayment of the costs of prosecution.
- False Statements on Income Tax Returns: Punishment for making false statements on income tax returns includes a prison sentence of up to three years, a fine of up to $100,000 for individuals and $500,000 for corporations, and repayment of the costs of prosecution.
- Aiding or Assisting in Preparation of False Documents Under Internal Revenue Laws: Punishment for assisting in preparation of false tax documents includes a prison sentence of up to three years, a fine of up to $100,000 for individuals and $500,000 for corporations, and repayment of the costs of prosecution.
- Conspiracy: Where the object of a conspiracy is a felony, as is the case for federal tax crimes, the punishment is up to five years in prison and/or criminal fines. A person found guilty of conspiracy to commit a tax crime may face additional penalties for the underlying tax crimes that were the object of the conspiracy.
Are You Under Investigation for Tax Evasion?
Criminal tax evasion investigations are handled by the IRS’s Criminal Investigations Division (IRS-CI). Within the federal law enforcement system, IRS-CI’s role is to, “serve the American public by investigating potential criminal violations of the Internal Revenue Code and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.”
While IRS-CI investigates a multitude of criminal offenses under the Internal Revenue Code and other federal statutes, one of its primary enforcement priorities is tax evasion under 26 U.S.C. Section 7201:
What does it mean to “evade or defeat” a federal tax? In essence, it means paying less than you owe. If you are under investigation for tax evasion, this will be a matter to be determined based on the tax burden imposed by the Internal Revenue Code. Your defense attorneys will need to review your federal tax filings and your personal or business financial records in detail to determine whether your federal tax obligations have been satisfied. If it can be shown that you have paid what you owe, then this should effectively end the inquiry. However, if you have underpaid, then you will need to be able to show that your underpayment was not “willful” in order to avoid criminal culpability.
What does it mean to “willfully” attempt to evade or defeat a federal tax? Government Proposed Jury Instruction Number 26.7201-5 highlights a key aspect of the federal crime of tax evasion. It states, in part:
Examples of affirmative acts that federal prosecutors can use to pursue charges for criminal tax evasion include:
- Filing a false or fraudulent return that substantially understates taxable income
- Keeping a double set of books
- Creating false entries, invoices, or documents
- Not keeping books or records
- Destroying books or records
- Concealing assets
- Covering up sources of income
- “[O]ther conduct whose likely effect would be to mislead the Internal Revenue Service or conceal income”
If you underpaid your federal taxes but you did not do so willfully, then you are not guilty of criminal tax evasion. However, you could still be liable for civil penalties (in addition to payment of the full tax you owe). As a result, when facing a federal investigation for tax evasion under 26 U.S.C. Section 7201, you need to approach your defense strategically, with your priorities being: (i) to avoid any liability at all if possible; and, (ii) if you cannot avoid liability entirely, to ensure that your case is handled civilly rather than criminally.
Have You Been Charged with Federal Tax Evasion?
If you have already been charged with criminal tax evasion, then you must focus your defense on the specific allegations at hand. As stated in the quote from 26 U.S.C. Section 7201 above, you are facing five years in prison and a $100,000 fine as an individual (plus liability for taxes and interest); or, if your company has been charged, it is facing a maximum fine of $500,000 (plus liability for taxes and interest).
In order for a tax evasion attorney to defend against a charge of tax evasion, there are a number of strategies that can be utilized. However, determining which strategies are viable in any particular case requires a thorough assessment of the factual and legal circumstances at hand. Some examples of potential defenses to tax evasion include:
1. Inadequate Evidence of Underpayment or Non-Payment of Federal Tax
In order to prove a charge for tax evasion under 26 U.S.C. Section 7201, federal prosecutors must first prove that you under-reported your federal tax liability. If there is not sufficient evidence to prove that you submitted a false or fraudulent return (regardless of whether or not you actually submitted a false or fraudulent return), then the government cannot prove its case against you.
2. Inadequate Evidence of a Willful Attempt to Evade or Defeat Tax
The government must also be able to prove that you make a “willful” attempt to evade or defeat tax. If federal prosecutors do not have the evidence required to convince the jury that you intended to avoid tax liability and knowingly filed a false or fraudulent return, then you cannot be convicted of criminal tax evasion even if you paid less than you owed.
3. Inadequate Evidence of an Affirmative Act in Furtherance of the Attempt
Likewise, proving guilt for criminal tax evasion requires evidence that you undertook an affirmative act in furtherance of your attempt to underpay the IRS. Once again, the burden of proof rests with the U.S. Department of Justice (DOJ), and if the DOJ’s attorneys do not have the evidence to prove an affirmative act, then they should not be able to secure a conviction in federal district court.
4. Good-Faith Belief in the Accuracy of the Tax Liability Reported and Paid
If you had a good-faith belief that your returns complied with the Internal Revenue Code, then federal prosecutors cannot prove that you acted willfully in attempting to avoid federal tax liability. Even if your belief was unreasonable, if you truly believed that you were submitting an accurate return, then you did not commit criminal tax evasion under 26 U.S.C. Section 7201.
5. Constitutional Violations Resulting in the Inadmissibility of Evidence
How did the federal government secure its evidence against you? Did federal agents raid your home or office? Did they seize your computer or phone? Did they question you or your employees? While there are numerous ways that federal agents can lawfully collect evidence during a tax evasion investigation, there are also numerous miscues that can lead to evidence being deemed constitutionally inadmissible in court.
Federal Tax Evasion Crimes Defined
Tax Evasion [26 U.S.C. § 7201]: A person commits “tax evasion” by knowingly and willfully under-reporting his income on his tax return with the intent of evading payment of taxes to the government. Tax evasion requires an affirmative act; merely failing to file a tax return does not amount to tax evasion, even if the failure to file was willful. In the context of tax crimes, a person acts “willfully” where he voluntarily and intentionally violates a known legal duty. Thus, in the context of tax evasion, a person who does not fulfill his tax obligations because he believed he did not owe any money to the government would not be committing tax evasion, regardless of whether such belief is reasonable.
False Statements on Income Tax Returns [26 U.S.C. § 7206(1)]: A person may be guilty of making “false statements on income tax returns” if that person knowingly and willfully signs and submits a tax return that contains material false statements with the intent to violate a known legal duty. A false statement is considered “material” if it is capable of influencing an Internal Revenue Service audit, investigation, or verification of income. The term “false statement” includes material omissions from an income tax return. In the context of tax crimes, person acts “willfully” where he voluntarily and intentionally violates a known legal duty. Thus, if a person includes false statements or omissions on a tax return as a result of that person’s mistaken beliefs or misunderstandings, that person would not be criminally liable for making false statements on an income tax return. Similarly, if the false statements are the result of the person’s reliance on a tax preparer, that person may have a defense to the crime of making false statements on a tax return.
Aiding or Assisting in Preparation of False Documents Under Internal Revenue Laws [26 U.S.C. § 7206(2)]: A person may be guilty of “aiding or assisting in preparation of false documents under the Internal Revenue Laws” if that person knowingly and willfully assisted in the preparation of a tax return that contained material false statements with the intent to violate a known legal duty. A false statement is considered “material” if it is capable of influencing an Internal Revenue Service audit, investigation, or verification of income. The term “false statement” includes material omissions from tax documents. In the context of tax crimes, person acts “willfully” where he voluntarily and intentionally violates a known legal duty. Thus, a person who acts on a mistaken belief or misinformation will not have violated the law. Importantly, the knowledge or consent of the person whose taxes are prepared is irrelevant to commission of this crime.
Conspiracy [18 U.S.C. § 371]: A person may be guilty of conspiracy if he willfully agrees with at least one other person to commit a crime and at least one overt act is taken in furtherance of the conspiracy by that person or one of that person’s co-conspirators. A “conspiracy” is created when two or more individuals agree to work together to in pursuit of an unlawful goal. To be involved in a conspiracy, a person must be aware of the unlawful nature of the scheme; merely acting in a way that incidentally advances some element of the conspiracy does not render someone a conspirator. Nonetheless, the person need not be aware of all of the details of the scheme, of the identities of all other co-conspirators, or of all of the plans or actions of the co-conspirators to join the conspiracy. No formal agreement need exist or be acknowledged by the co-conspirators.
How to Choose a Tax Evasion Lawyer
Why Do Clients Choose Oberheiden P.C. for Tax Evasion Defense?
At Oberheiden P.C., we represent individuals and companies nationwide in federal tax evasion investigations and trials. If you are under investigation or facing charges under 26 U.S.C. Section 7201, or tax evasion, here are five reasons to choose us to represent you as your tax evasion attorney:
- We are a federal defense law firm. Our practice is devoted to representing clients in federal matters, including tax evasion.
- We are former federal prosecutors and agents. Several of our attorneys and defense consultants are former DOJ attorneys and former investigators with the IRS and other agencies.
- We have handled thousands of federal matters from both sides. Collectively, our attorneys and defense consultants have handled thousands of federal investigations, grand jury proceedings, and trials from both sides.
- We do not employ paralegals or junior associates. Unlike other law firms, we do not employ paralegals or junior associates.
- We have a 95% success rate in federal white-collar cases. An Oberheiden P.C. federal white collar criminal defense attorney has a 95% success rate of helping clients avoid convictions and sentencing in tax evasion and other white-collar cases.
Contact Our Tax Evasion Attorneys Today for a Confidential Case Assessment
If you are under investigation by IRS-CI or facing federal charges for tax evasion, we encourage you to contact us immediately. To speak with one of our former federal prosecutors in confidence right away, call 888-680-1745 or request a free and confidential case assessment online now.