Tax Fraud and Tax Evasion Are Serious Federal Crimes that Carry Substantial Penalties
If you or your company is under investigation for federal tax fraud or tax evasion, it is important to understand what is at risk. The Internal Revenue Code (IRC) contains several provisions that prohibit fraudulent and evasive practices, and all of these provisions call for substantial fines and jail time.
The Internal Revenue Service’s Criminal Investigation division (IRS CI) and the U.S. Department of Justice (DOJ) routinely pursue criminal charges for tax fraud and tax evasion. They post press releases about these charges on their websites; and, in these press releases, they often tout the sentences that the defendants are facing. In both individual and corporate tax fraud and tax evasion cases, it is not unusual for defendants to face several years of jail time and hundreds of thousands or millions of dollars in fines.
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Brian J. Kuester
Former U.S. Attorney
Former DA
Amanda Marshall
Former U.S. Attorney
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Joe Brown
Former U.S. Attorney
& Former District Attorney
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John W. Sellers
Former Senior Trial Attorney
U.S. Department of Justice
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Linda Julin McNamara
Former Chief, DOJ Appeals
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Joanne Fine DeLena
Former Assistant U.S. Attorney
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Aaron L. Wiley
Former Federal Prosecutor
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Roger Bach
Former Special Agent (OIG)
Chris Quick
Former Special Agent (FBI & IRS-CI)
Kevin M. Sheridan
Former Special Agent (FBI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Dennis A. Wichern
Former Special Agent-in-Charge (DEA)
Understanding What is At Risk in Your Federal Tax Fraud or Tax Evasion Case
At The Criminal Defense Firm, we have a deep understanding of the risks involved in federal tax fraud and tax evasion cases—because we have handled these cases from both sides. Before entering private practice, several of our lawyers and defense consultants investigated and prosecuted tax crimes at IRS CI and the DOJ. As a result, not only do we have a thorough understanding of the law, but we also understand when, why, and how these agencies pursue substantial penalties for tax crimes.
If you are under investigation by IRS CI or facing charges from the DOJ, this is the level of experience you need. You need lawyers and consultants who not only understand your case from the defense perspective, but who can also see your case from the federal government’s point of view. With such severe penalties on the table, you cannot afford to take chances, and you cannot afford to rely on an inexperienced defense team.
The Federal Penalties for Tax Fraud and Tax Evasion
As we mentioned above, there are several provisions pertaining to tax fraud and tax evasion in the Internal Revenue Code. Each of these provisions establishes its own unique penalties, so understanding the specific allegations or charges against you (or your company) is critical for understanding what is at stake.
Broadly speaking, however, the penalties for tax fraud and tax evasion fall into two main categories: (i) incarceration and (ii) criminal fines. While the fines for corporations are typically more substantial than the fines for individuals, even individuals can be at risk for six or seven-figure financial liability. In corporate tax fraud and tax evasion cases, executives and other individuals can also face charges—so investigations targeting corporate tax fraud and tax evasion can (and frequently do) lead to prison time as well.
Here is an overview of the potential sentences for tax fraud, tax evasion, and related crimes:
1. Attempt to Evade or Defeat Tax (26 U.S.C. Section 7201)
Section 7201 is the main tax evasion statute in the Internal Revenue Code. Under Section 7201, it is a federal felony to “willfully attempt[] in any manner to evade or defeat any tax” imposed under federal law.
- Prison Time – Up to five years of federal imprisonment.
- Criminal Fines – Up to $100,000 for individuals and $500,000 for corporations.
2. Willful Failure to Collect or Pay Over Tax (26 U.S.C. Section 7202)
Section 7202 of the Internal Revenue Code makes it a federal felony to “willfully fail[] to collect or truthfully account for and pay over” any tax owed under federal law. This covers not only individuals’ and companies’ income tax liability, but their liability for employment, estate, gift, and other taxes as well.
- Prison Time – Up to five years of federal imprisonment.
- Criminal Fines – Up to $10,000 for individuals and corporations.
3. Willful Failure to File Return, Supply Information, or Pay Tax (26 U.S.C. Section 7203)
Under Section 7203 of the Internal Revenue Code, it is a federal misdemeanor offense to “willfully fail[] to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law.” This covers all taxes and all required returns—including returns related to tax liability, foreign financial assets, and other mandatory disclosures.
- Prison Time – Up to one year of federal imprisonment.
- Criminal Fines – Up to $25,000 for individuals and $100,000 for corporations.
4. Fraud and False Statements (26 U.S.C. Section 7206)
Section 7206 of the Internal Revenue Code allows for criminal prosecution of taxpayers and tax preparers in a broad range of circumstances. This statute covers virtually all forms of tax fraud and tax evasion (overlapping with the statutes discussed above in many respects); and, as a result, it is not uncommon for individuals and companies to face prosecution under Section 7206 and other provisions of the IRC.
- Prison Time – Up to three years of federal imprisonment.
- Criminal Fines – Up to $100,000 for individuals and $500,000 for corporations.
5. Fraudulent Returns, Statements, or Other Documents (26 U.S.C. Section 7207)
Willfully filing a fraudulent tax return or submitting false documentation in connection with a fraudulent tax return is a federal misdemeanor under Section 7207 of the Internal Revenue Code. Charges under Section 7207 will also frequently be accompanied by charges under other provisions of the Internal Revenue Code.
- Prison Time – Up to one year of federal imprisonment.
- Criminal Fines – Up to $10,000 for individuals and $50,000 for corporations.
6. BSA and FATCA Violations
Individual and corporate U.S. taxpayers that own (or have control over) offshore accounts and other “foreign financial assets” must disclose these assets to the IRS and the Financial Crimes Enforcement Network (FinCEN). These disclosure obligations exist under the Bank Secrecy Act (BSA) and Foreign Account Tax Compliance Act (FATCA), and both the BSA and FATCA provide for criminal prosecution in cases involving willful violations.
- Prison Time – Up to 10 years of federal imprisonment (in most cases).
- Criminal Fines – Up to $500,000 for individuals and corporations (in most cases).
7. Conspiracy, Mail Fraud and Wire Fraud, and Other Federal Crimes
Along with facing charges under the IRC, BSA, and FATCA, individuals and companies targeted in tax fraud and tax evasion investigations can face a bevy of other federal criminal charges as well. This includes charges for conspiracy, mail fraud, and wire fraud, among other crimes. Depending on the circumstances involved, the penalties for these crimes can potentially far exceed those for violations of the Internal Revenue Code.
- Prison Time – Up to 30 years of federal imprisonment.
- Criminal Fines – Up to $1,000,000 for individuals and corporations.
FAQs: Avoiding the Maximum Sentences for Tax Fraud, Tax Evasion, and Related Crimes
What is the Risk of Facing Tax Fraud or Tax Evasion Charges as the Result of an IRS CI Investigation?
If IRS CI is targeting you or your company for tax fraud or tax evasion, the risk of facing federal charges is very real. IRS CI works quickly to gather evidence of these crimes through a variety of means, and it works alongside the DOJ to pursue charges when warranted. If IRS CI is investigating you or your company, you should talk to a lawyer right away.
How Can I (or My Company) Avoid Tax Fraud and Tax Evasion Charges in an IRS CI Investigation?
When facing a federal tax fraud or tax evasion investigation, engaging experienced defense counsel promptly will give you the greatest chance to avoid charges stemming from IRS CI’s inquiry. There are ways to work effectively with IRS CI to resolve investigations without charges, but pursuing the right strategy requires insights that can only be gained from decades of experience.
Can You Negotiate a Plea Deal for Federal Tax Fraud and Tax Evasion?
It is possible to negotiate a plea deal for federal tax fraud and tax evasion in many cases. If negotiating a plea deal is your (or your company’s) best option, the former federal prosecutors and IRS CI agents at The Criminal Defense Firm can assist with targeting a plea deal that minimizes the consequences of IRS CI’s investigation.
Do I Need a Lawyer if IRS CI is Targeting Me (or My Company) for Tax Fraud or Tax Evasion?
Yes, if IRS CI is targeting you or your company for tax fraud or tax evasion, you should consult with a lawyer as soon as possible.
How Can I Avoid the Maximum Sentence for Federal Tax Fraud or Tax Evasion?
There are multiple strategies that can be used to avoid the maximum sentence for federal tax fraud or tax evasion. Engaging experienced defense counsel during the investigative process will provide the greatest opportunity to secure a favorable pre-charge resolution. If it is not possible to avoid charges, then your (or your company’s) defense counsel should be able to assert defenses during the grand jury, pre-trial, and trial phases as necessary; and, depending on the facts at hand, negotiating a settlement with the government may be a good option.
Schedule a Confidential Consultation at The Criminal Defense Firm
If you need to know more about the risks involved with facing a federal tax fraud or tax evasion investigation, we encourage you to contact us promptly. Call 866-603-4540 or contact us online to schedule a confidential consultation at The Criminal Defense Firm.