Tax Crimes
Type of Tax Crimes
The most common tax crimes include tax evasion, willful failure to file return or supply requested information, willful failure to collect or pay over withholding tax, preparing false tax returns or submitting false tax documents, making false statements to governmental tax officials, making false claims, perjury, bribery, aiding and abetting in the preparation of false documents, and failure to file currency transaction reports.
Additional tax crimes include:
- Evasion of payment in tax collection cases
- Stacking of corporate and individual tax liabilities
- Aiding and abetting tax fraud
- Failure to collect or pay over withholding tax
- False withholding statements
- Conspiracy to impede or defeat the collection of tax.
In addition, there are comparable state tax law violations in the event the same acts are involved with state governmental tax agencies. Tax crimes may be charged against individuals, as well as corporate officers, partners, fiduciaries and others involved in the tax reporting chain. Whether the tax crime charges will be filed is dependent upon the amount of admissible evidence against the taxpayer, not dependent upon the amount involved. Therefore, tax crimes are relevant to all taxpayers, not only the taxpayers that have evaded significant amount of income . The amount of the tax loss to the government is only relevant in determining the sentence, not whether the crime occurred.
Why Tax Crimes are Investigated and Charges Filed
The IRS Criminal Investigation Division obtains evidence from civil audits, informers, and other leads in order to pursue criminal investigations against taxpayers. This includes ex-spouses, disgruntled employees, co-workers and business competitors.
The most common criminal investigation arises from information obtained from a civil tax audit. This includes the IRS Revenue Agent discovering unreported income – such as unreported business income deposited into the personal bank account, unreported business income where a form 1099 was not issued and skimming proceeds from the business. These cases generally also involve unsubstantiated tax deductions claimed on the tax return.
Another common CID investigation is commenced as a result of employers withholding taxes from its employees, yet not remitting the withheld taxes to the IRS or California EDD.
Gathering Evidence
The IRS Criminal Investigation Division and U.S. Department of Justice gathers evidence from various sources such as summonses, civil audits, informers, and search warrants. The government may issue a summons against the taxpayer or any third party to obtain information. There are several defenses against a summons . In the event the summons is overbroad or burdensome the summons may be quashed. In the event a search warrant is issued to obtain documentary evidence there are several privileges that can be used to quash the information obtained in a search warrant. The IRS Criminal Investigation Division and the Department of Justice are becoming more sophisticated in their use of mail covers and electronic surveillance in obtaining evidence. Extreme caution should be used as to not enhance their case or inadvertently provide evidence to them.
Your Rights During Criminal Investigation
Virtually all criminal tax investigations are commenced and worked extensively prior to notifying the taxpayer, or the taxpayer even becoming aware of the investigation. During any criminal tax investigation, your constitutional and legal rights must be advocated, or in some cases they will be deemed waived or lost. These include, Miranda warnings under the fifth amendment, right to counsel, right to a speedy trial under the sixth amendment, certain rights under the Taxpayer Bill of Rights, and securing information under the Freedom of Information Act. It is imperative that the attorney's work-product privilege is used to prevent admission of any evidence that was prepared in anticipation of litigation, this includes accountants workpapers prepared to assist the attorney in the case. The government has the burden to prove beyond a reasonable doubt that the taxpayer is guilty of a specific tax crime. Therefore, all rights and privileges should be aggressively protected to prevent incriminating evidence from being used against the taxpayer at trial. Since the jury can only hear admissible evidence, all incriminating evidence should be argued that it is inadmissible due to the violation of taxpayers' rights or privileges.
Federal Sentencing Guidelines
The Federal Sentencing Guidelines are an inherent part of a proper strategy for a criminal tax case. The analysis starts with the base offense level and makes adjustments based on criminal history, sentencing options, departures from the guideline range, type of criminal activity, and the sophisticated means used in the tax crime. In tax evasion cases, the determination of tax loss to the government is determinative of the base offense level. As such, it is important to follow a strategy throughout the criminal investigation and trial to assure the lowest base offense level, and to reduce all other federal sentencing guideline characteristics. Adjustments to the base offense level include acceptance of responsibility, obstruction of justice, or conducting an aggravating or mitigating role in the offense, past criminal history and background, and voluntary disclosure and substantial assistance departures.
