Tax Evasion and Double Jeopardy: Can You Be Tried Twice?

Tax Evasion and Double Jeopardy: Can You Be Tried Twice?

Tax evasion is a serious crime that can lead to hefty fines and even jail time. But what happens when you get punished by the IRS with penalties and interest, and then later get criminally prosecuted for tax evasion? Is that considered “double jeopardy”? Can the government punish you twice for the same offense? Let’s break it down.

What is Tax Evasion?

Tax evasion refers to illegally avoiding paying taxes by underreporting income, inflating deductions, hiding money offshore, etc. It’s a federal crime under the Internal Revenue Code.

If convicted, penalties include:

• Up to 5 years in prison
• Fines up to $250,000 for individuals or $500,000 for corporations

Tax evasion is different from tax avoidance, which involves using legal loopholes and strategies to minimize taxes owed. Tax avoidance is perfectly legal, while tax evasion is not.

What is Double Jeopardy?

The Double Jeopardy Clause in the 5th Amendment of the U.S. Constitution prohibits anyone from being prosecuted twice for the same offense. The idea is that the government shouldn’t be able to keep retrying you for something you’ve already been tried for.

For double jeopardy to apply, the charges usually need to be identical. Just because you get punished by the IRS doesn’t necessarily mean you can’t be criminally prosecuted later by the Department of Justice.

IRS Penalties vs Criminal Prosecution

When the IRS catches you underpaying taxes, they can hit you with penalties and interest. This is an administrative punishment through the IRS, not the criminal justice system.

Some common IRS penalties include:

• Failure to file penalty – 5% per month up to 25%
• Failure to pay penalty – 0.5% per month up to 25%
• Accuracy penalties – 20% for negligence, 40% for substantial understatement

These IRS penalties are civil, not criminal. Paying them does not prevent the Department of Justice from later charging you with criminal tax evasion under 26 U.S.C. § 7201.

As the Supreme Court stated in Helvering v. Mitchell (1938), “Congress may impose both a criminal and a civil sanction in respect to the same act or omission.”

When is it Considered Double Jeopardy?

Courts have generally ruled that IRS penalties and criminal prosecution for tax evasion are not double jeopardy. They involve separate offenses with different standards of proof.

For example, in Thomas v. Commissioner, the Tax Court ruled that “the imposition of the civil fraud penalty [was] not barred by the Double Jeopardy Clause of the Fifth Amendment…because civil tax penalties are remedial in nature rather than punitive.”

Another key distinction is that the IRS only needs to show civil tax fraud by “clear and convincing evidence,” whereas federal prosecutors must prove criminal tax evasion “beyond a reasonable doubt.”

When Does Double Jeopardy Potentially Apply?

There are certain situations where being punished by the IRS may raise viable double jeopardy defenses against criminal prosecution:

• Criminal Fines – If you already paid a criminal fine for tax evasion, you can’t be criminally prosecuted again for the same offense.
• Criminal Forfeitures – If assets were forfeited as part of a criminal case, those amounts may offset restitution in a later prosecution.
• Punitive Damages – Paying punitive civil damages may sometimes raise double jeopardy defenses.

However, regular IRS penalties like failure-to-file or underpayment penalties don’t preclude further criminal prosecution. The key is whether the prior punishment was criminal, not civil, in nature.

Pros & Cons of Double Jeopardy

There are reasonable arguments on both sides of this issue:

Against Double Jeopardy:

• Two separate sovereigns (IRS and Justice Dept) with different standards.
• IRS penalties are remedial, not punitive.
• Helps deter tax evasion by allowing multiple punishments.

For Double Jeopardy:

• Being punished twice for the same offense seems unfair.
• Possibility of excessive fines when combined.
• Forces IRS and Justice Dept to coordinate better.

As with many legal issues, there are good-faith arguments on both sides. It’s about balancing government power with individual rights. Where we draw the line is open for debate.

Avoiding Tax Evasion Charges

Regardless of where you stand on double jeopardy, the best advice is to avoid tax evasion altogether! Some tips:

• Report all income honestly and accurately.
• Claim only legitimate deductions you can substantiate.
• Disclose offshore assets to the IRS.
• Be upfront about mistakes – amend past returns if needed.
• Consult a tax professional if you have any doubts.

The risks simply aren’t worth it. An ounce of prevention is worth a pound of cure when it comes to taxes!

The rules around double jeopardy and tax evasion are complex. Consult a qualified tax attorney if you’re being audited by the IRS and believe criminal charges may follow. Understanding your rights is critical.

With the right help, you can navigate the system fairly and minimize any penalties. The tax man may cometh twice, but knowledge is power when dealing with the IRS and Justice Department.

References:
[1] https://www.irs.gov/newsroom/how-do-you-report-suspected-tax-fraud-activity
[2] https://www.irs.gov/businesses/small-businesses-self-employed/understanding-penalties-and-interest
[3] https://supreme.justia.com/cases/federal/us/390/39/
[4] https://www.wendellodom.com/double-jeopardy-and-criminal-tax-litigation/
[5] https://www.taxlawyersgroup.com/tax-evasion-tax-fraud-defense.html