Are You Dealing with the IRS? A Federal Tax Evasion Defense Lawyer at The Criminal Defense Firm Can Help
Tax evasion is a serious federal crime that carries substantial penalties. While many people assume the worst that can happen is that the Internal Revenue Service (IRS) will impose interest and penalties, this is not the case. The IRS pursues criminal tax evasion investigations in many cases, and these investigations can lead to criminal fines and prison time.
Are you facing scrutiny from the IRS or IRS Criminal Investigation (IRS CI)? Do you have concerns about your (or your company’s) filing history? Are you aware of past reporting or payment obligations involving income, employment, estate and gift, or other tax liability? If so, it is important that you speak with a federal tax evasion defense lawyer right away.
The IRS has enhanced its resources for combating tax evasion in recent years. It has increased the size of its staff devoted to conducting audits and white-collar criminal investigations, and it is increasingly relying on data analytics and artificial intelligence to identify tax law violations. In many cases, the IRS works alongside the U.S. Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) as well, and these collaborative efforts often result in large-scale takedowns that implicate multiple companies and individuals in multi-million-dollar tax evasion schemes.
Former Federal White-Collar Prosecutors Providing Tax Evasion Defense Representation
At The Criminal Defense Firm, we provide defense representation for companies and individuals facing tax evasion and tax fraud allegations nationwide. We handle audits and investigations involving the IRS, IRS CI, DOJ, FBI, and other federal agencies. We also serve as defense counsel for companies and individuals that have received grand jury subpoenas and that are awaiting trial on grand jury indictments for tax evasion and related crimes.
In these cases, our defense lawyers rely on centuries of combined experience as former federal white-collar prosecutors. Before entering private practice, many of our lawyers served in high-ranking positions with the DOJ. This includes serving as U.S. Attorneys, Assistant U.S. Attorneys, and DOJ trial attorneys assigned to prosecuting large-scale and high-value white collar cases. Our lawyers have successfully resolved numerous tax evasion investigations without charges being filed, and we have an extensive track record in the federal courts as well.
Understanding the Federal Crime of Tax Evasion
Tax evasion is a federal crime under Section 7201 of the Internal Revenue Code. This law provides that, “[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed . . . or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both . . . .”
The federal tax evasion statute applies to all types of taxes owed to the IRS. It also covers underpayment of tax by all means (i.e., failure to file a return, underreporting income, or failing to remit employment taxes held in trust)—provided that the underpayment is “willful.” While companies and individuals can still be held civilly liable for inadvertently underpaying their federal tax liability, underpayment only rises to the level of criminal tax evasion when there is evidence of willfulness, or intent.
With that said, the IRS (and the DOJ) can prove willfulness in a variety of ways, and willfulness can be inferred from the circumstances in many cases. This is one reason—among many—why it is imperative that targeted companies and individuals engage experienced defense counsel as soon as possible. The IRS, DOJ, and FBI all have substantial resources at their disposal, and they can investigate suspected tax evasion through a variety of different means.
When we represent companies and individuals in federal tax evasion cases, challenging the government’s evidence of willfulness (and working to prevent the government from collecting such evidence, if it exists) is often a key defense strategy. But, it is also just one defense strategy among many. There are several ways our lawyers can work to protect companies and individuals against facing prosecution for tax evasion—provided that we are able to get involved as early in the process as possible.
Why Do Companies and Individuals Choose The Criminal Defense Firm for Federal Tax Evasion Defense?
When you are facing an IRS audit or a federal investigation involving allegations of tax evasion, you need an experienced defense team on your side. Here are just some of the reasons why thousands of clients have put their trust in the defense lawyers at The Criminal Defense Firm:
1. Our Clients Only Work with Senior Attorneys
All of the lawyers at The Criminal Defense Firm have senior-level experience. Additionally, as noted above, many of our defense lawyers prosecuted tax evasion and other white-collar crimes at the DOJ before entering private practice.
2. We Have a Nationwide Network of Former Federal Agents
Along with our former federal prosecutors, we also have a nationwide network of former federal agents who are available to consult on our clients’ cases as needed. This includes former Special Agents with IRS CI.
3. We Know the Government’s Playbook
Since our team includes former federal prosecutors and federal agents, we know the government’s playbook. We know why, when, and how the government chooses to target companies and individuals for tax evasion, and we know what it takes to resolve these investigations in the target’s favor.
4. We Focus on Quietly Achieving Pre-Charge Resolutions
While our defense lawyers have extensive trial experience, we focus on quietly achieving pre-charge resolutions whenever possible. By resolving our clients’ tax evasion investigations without charges and without publicity from the IRS, DOJ, or FBI, we are able to minimize the financial and reputational costs involved.
5. Our Results Speak for Themselves
Finally, and perhaps most importantly, our results speak for themselves. Our clients trust us because we have shown time and time again that we have what it takes to protect companies and individuals in high-stakes federal cases.
Understanding the Federal Penalties for Tax Evasion and Related Crimes
When pursuing charges for tax evasion, federal prosecutors will often pursue a variety of related charges as well. As a result, during investigations into suspected tax evasion, IRS CI and FBI agents will frequently seek to gather an extraordinary amount of evidence that prosecutors at the DOJ can use to substantiate as many charges as possible. If targeted companies and individuals do not engage experienced defense counsel to protect them, these efforts can result in substantial penalties being on the table.
What are the penalties for tax evasion? What are the penalties for the other crimes that the DOJ frequently prosecutes alongside tax evasion? Under the Internal Revenue Code and other pertinent provisions of the U.S. Code, the penalties for these crimes include:
- Tax Evasion – Under the federal tax evasion statute, companies found guilty of evading or defeating tax can face fines of up to $500,000. Individuals found guilty of tax evasion can face up to a $100,000 fine and five years in federal prison.
- False Statements on Income Tax Returns – In cases involving underreporting of taxable income, fraudulent deductions, and other false statements on income tax returns, companies can also face fines of up to $500,000. Individuals can face fines of up to $100,000 plus three years of federal imprisonment.
- Aiding or Assisting in the Preparation of False Tax Documents – Any company or individual accused of aiding or assisting with the preparation of false tax documents can face the same penalties as a firm or individual charged with submitting a false statement on their returns—a $500,000 fine for companies, and a $100,000 fine plus three years of prison time for individuals.
- Conspiracy – Companies and individuals involved in tax evasion schemes, or even proposed tax evasion schemes, can face prosecution under the federal conspiracy statute. Conspiracy charges carry the same penalties as the offense (or offenses) underlying the purported conspiracy in some cases; and, in others, they carry statutory fines and up to five years of imprisonment.
Defending Against a Federal Tax Evasion Investigation
In most cases, federal tax evasion investigations start with IRS CI. As the IRS’s criminal investigation arm, IRS CI’s stated 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.”
As a practical matter, however, the primary purpose of investigating tax evasion is not to instill confidence in the tax system, but rather to punish those who attempt to skirt the system’s requirements. Tax evasion investigations are often swift and heavy-handed, and targeted companies and individuals need a team of defense lawyers who can level the playing field.
In many cases, defending against a federal tax evasion investigation will involve demonstrating compliance with the Internal Revenue Code. Many federal investigations are misguided, and taxpayers that can rely on their counsel to demonstrate full compliance can completely avoid penalties in many instances. But, when this is not possible, a key defense strategy will often be to focus on preventing the government from proving willfulness, as discussed above.
When is an attempt to evade tax considered to be “willful”? As explained in the proposed jury instructions for federal tax evasion cases (Government Proposed Jury Instruction Number 26.7201-5):
“A person may not be convicted of federal tax evasion on the basis of a willful omission alone; he/she also must have undertaken an affirmative act of evasion. . . . [A person] acted ‘willfully’ if the law imposed a duty on him/her, he/she knew of the duty, and he/she voluntarily and intentionally violated that duty.”
As the proposed jury instructions go on to further explain:
“This is a subjective standard: what did [defendant] honestly believe, not what a reasonable person should have believed. Negligence, even gross negligence, is not enough to meet the ‘willful’ requirement.”
This highlights several critical aspects of the government’s burden of proof in federal tax evasion cases. Specifically, to secure a conviction for tax evasion under the Internal Revenue Code, the DOJ must be able to prove that the targeted company or individual:
- Knew of the duty to pay the tax in question;
- Voluntarily and intentionally violated the duty to pay the tax in question;
- Undertook an “affirmative act of evasion” (an omission is not enough);
- Did not “honestly believe” that the affirmative act was lawful; and,
- Was more than merely negligent (or grossly negligent).
If federal investigators cannot gather the evidence needed to prove all of these elements (along with the other elements of federal tax evasion), then their investigation should not result in a referral for criminal prosecution. At The Criminal Defense Firm, we work diligently to protect our clients during the investigative process, and we have had significant success resolving high-stakes cases at this stage.
Defending Against Federal Tax Evasion Charges (and Related Charges)
If you or your company is already facing an indictment for tax evasion, then your defense strategy will need to focus on preventing the DOJ from meeting its burden of proof. While this may mean preparing to present a defense at trial, it may also mean working to secure a pre-trial dismissal or plea deal. While pre-trial (and post-indictment) dismissals are rare overall, we have had significant success securing favorable outcomes for our clients at the pre-trial stage.
As your (or your company’s) defense counsel, we will work to combat the government’s allegations by all means available. Some examples of the defenses we may be able to assert during the pre-trial phase or at trial include:
1. Inadequate Evidence of Underreporting or Underpayment
In many cases, it will be possible to successfully defend against charges of tax evasion and related crimes by challenging the DOJ’s evidence of underreporting or underpayment. If the government cannot prove that a taxpayer has underreported or underpaid its federal tax liability beyond a reasonable doubt, it cannot secure a conviction. The Internal Revenue Code is extraordinarily complex; and, as a result, determining a taxpayer’s responsibilities is often far from straightforward. Thus, raising questions about whether the DOJ can actually substantiate a violation of the code will often prove to be an effective defense strategy.
2. Inadequate Evidence of Willfulness
Since willfulness is inherently subjective, challenging the DOJ’s evidence of this element can be an effective defense strategy in many cases as well. With that said, the DOJ can use emails, text messages, drafts, and various other records to prove willfulness, so it is important not to assume that simply raising the question of willfulness will be enough to carry the day.
3. No “Affirmative Act of Evasion”
As noted above, proving federal tax evasion requires more than evidence of an omission—it requires an “affirmative act of evasion.” If prosecutors do not have evidence of the following, then it may be possible to avoid a conviction by challenging this element of the government’s case:
- Filing a false or fraudulent return that substantially understates taxable income
- Not keeping books or records
- Keeping two sets of books
- Creating false entries in accounting records
- Creating false invoices, receipts, or other documents
- Destroying books or records
- Concealing assets or income sources
With that said, these are just examples. When working to prove tax evasion, federal prosecutors can also rely on evidence of any “other conduct whose likely effect would be to mislead the Internal Revenue Service or conceal income.” Once again, when facing tax evasion allegations, it is imperative to work with experienced defense counsel who can effectively challenge the government’s case by all means available.
4. Good-Faith Belief in the Accuracy of the Taxpayer’s Filings and Payment
One strategy for challenging the government’s evidence of willfulness is demonstrating a good-faith belief in the accuracy of the taxpayer’s filing or payment. This good-faith belief could be based on personal understanding, the advice of an accountant or tax preparer, or the advice of legal counsel. While honest mistakes can still trigger liability for interest and civil penalties, they do not warrant criminal prosecution for tax evasion.
5. Constitutional Violations Resulting in Evidence Inadmissibility
If federal agents conduct a search or seizure without a warrant during a federal tax evasion investigation, this can potentially render the government’s evidence inadmissible. There are numerous other issues that can render the government’s evidence inadmissible as well. If our federal tax evasion defense lawyers can keep the government’s evidence out of court, we can use this to work toward securing a dismissal.
A Closer Look at Tax Evasion and Its Related Federal Criminal Offenses
If you or your company is under scrutiny or facing prosecution by the DOJ, it is absolutely imperative that you have a clear understanding of the allegations at issue. This is the first step toward building a targeted and effective defense strategy. At The Criminal Defense Firm, our defense lawyers rely on centuries of combined experience gained on both sides of federal white-collar criminal cases to build defense strategies, help our clients make informed decisions, and protect our clients by all means available.
Tax evasion is a federal crime under 26 U.S.C. Section 7201. This federal statute makes it a criminal offense to willfully underreport or underpay any obligation owed under the Internal Revenue Code. Thus, not only can underpaying a taxpayer’s income or employment tax liability lead to tax evasion charges, but so can failing to disclose offshore accounts and other common reporting violations.
Again, one of the keys to a federal tax evasion case is proof of willfulness. If the government cannot prove willfulness, it cannot secure a conviction for tax evasion. But, non-willful tax violations can still lead to civil enforcement action, so targeted companies and individuals must be careful to avoid executing defense strategies that unnecessarily expose them to civil penalties.
False Statements on Income Tax Returns
Making false statements on income tax returns is a federal crime under 26 U.S.C. Section 7206(1). To be guilty under Section 7206(1), a taxpayer must submit a false statement to the IRS that is “material” and with the intent to violate the taxpayer’s duty of accurately reporting his, her, or its federal income tax liability. Thus, if false information contained in a taxpayer’s return is not material, or if the inclusion of false information on a taxpayer’s return was unintentional, these are both defenses that experienced counsel should be able to use to avoid unnecessary consequences during an IRS CI investigation or a DOJ tax evasion prosecution.
Aiding or Assisting in Preparation of False Documents Under Internal Revenue Laws
Companies, firms, and individuals that aid or assist in the preparation of false tax returns or substantiating documentation can face criminal prosecution under 26 U.S.C. Section 7206(2). This includes company insiders as well as outside accountants, consultants, and advisors. When pursuing charges under Section 7206(2), DOJ prosecutors must meet the same burdens of proof that apply under Section 7206(1)—meaning that there must be clear evidence of both intent and materiality that prosecutors can use to prove guilt beyond a reasonable doubt.
Participating in a conspiracy to commit tax evasion is a federal crime under 18 U.S.C. Section 371. A conspiracy arises when two or more parties agree to work together to achieve an unlawful goal (i.e., to evade tax). To be involved in a conspiracy, a party must be aware of the unlawful nature of the common goal—merely acting in a way that incidentally advances some element of the conspiracy is not enough. However, the federal conspiracy statute is extraordinarily broad, and it allows the DOJ to pursue charges against multiple unrelated parties in many cases.
Contact the Federal Tax Evasion Defense Lawyers at The Criminal Defense Firm
If you or your company is in need of experienced defense counsel for a federal tax evasion matter, we encourage you to contact us promptly. To speak with a senior tax evasion defense lawyer at The Criminal Defense Firm in confidence, call 866-603-4540 or tell us how we can reach you online now.
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