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How serious is gift tax evasion
|Thanks for visiting Spodek Law Group. We’re a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience handling federal criminal cases – including tax crimes that other firms won’t touch. You’ve probably heard about some of the cases we’re known for, like representing Anna Delvey in the Netflix series, the Ghislaine Maxwell juror misconduct case, or defending clients in massive Ponzi schemes where we secured months instead of decades. If you’re reading this, you’re worried about a gift tax problem that could turn criminal.
Gift tax evasion carries the same federal penalties as income tax evasion – five years in prison, $250,000 in fines, 75% fraud penalties on top of the tax owed. But criminal prosecutions are rare. What makes gift tax evasion dangerous isn’t the statutes themselves. It’s how these cases surface during larger fraud investigations, and how a single unreported transfer can destroy your financial life once the IRS starts looking.
The Line Between Legal Gifts and Criminal Evasion
In 2025, you can give $19,000 to anyone without filing a form – that’s the annual exclusion, up from $18,000 last year. Give more than that, you file Form 709. You still won’t owe taxes because you have a lifetime exemption of $13.99 million. Married couples effectively get $38,000 per recipient by splitting gifts.
Evasion starts when you deliberately hide transfers to avoid reporting. Not filing Form 709 when you should. Calling a $100,000 transfer a “loan” with no paperwork. Structuring gifts across multiple years but backdating the transactions. Using shell companies to mask the real recipient. The IRS doesn’t prosecute mistakes – they prosecute lies.
Setting up trusts to reduce estate taxes is legal planning. Failing to report a $500,000 gift to your daughter and hoping nobody notices – that’s evasion. Under 26 U.S.C. § 7201, the government must prove you willfully tried to evade the tax. Willfulness means you knew about the obligation and intentionally violated it.
Federal Sentencing Treats Gift Tax Like Any Other Tax Crime
Maximum statutory penalty: five years federal prison, $250,000 fine. Actual sentences come from the federal sentencing guidelines based on tax loss. Evade $50,000 in gift taxes, your base offense level is probably 12-14. Add sophisticated means – offshore accounts, fake entities, false documents – and you’re at level 16 or higher. With no criminal history, that’s 21-27 months.
The guidelines have been advisory since United States v. Booker in 2005, but judges still use them as the starting point. Then comes restitution – paying back every dollar of evaded taxes. Plus the civil fraud penalty, which is 75% of the unpaid tax on top of the tax itself. Evade $100,000, the IRS assesses $175,000 before interest. Cases sit for years during investigation. By sentencing, restitution can double.
IRS Criminal Investigation has about a 90% conviction rate on referred cases. If they refer your case to the Department of Justice for prosecution, they’ve already built it.
Gift Tax Prosecutions Almost Never Stand Alone
I’ve handled hundreds of federal tax cases over many, many years, and pure gift tax prosecutions are rare. The IRS doesn’t dedicate resources to a single unreported gift unless it’s tied to bigger fraud.
Gift tax evasion shows up as additional counts in larger schemes. You defraud investors for $10 million, then gift $2 million to your kids without reporting – that’s tax evasion stacked on wire fraud. You hide income through shell companies, then use those entities to make unreported gifts – that’s money laundering plus tax crimes. IRS-CI spends 70% of its time on tax violations and nearly 30% on money laundering and financial crimes.
Criminal cases typically involve sustained patterns of non-filing over multiple years, large amounts suggesting deliberate concealment, or false statements to agents during audit. If you forgot to file Form 709 after giving your son $25,000 for a down payment, you face penalties and interest, probably not indictment. If you moved $5 million through transactions designed to disguise gifts while under audit, you’re in criminal territory.
What Triggers IRS Criminal Investigation
Large unreported transfers surface during income tax audits – yours or the recipient’s. You claim financial hardship, but your daughter just bought a $2 million house. The IRS will ask where that money came from. Bank Secrecy Act reporting catches structured transactions – banks file suspicious activity reports straight to federal law enforcement.
Estate tax audits uncover gift tax evasion constantly. When someone dies, the IRS examines lifetime gifts to calculate the taxable estate. Gifts that should have been reported decades ago suddenly appear. The statute of limitations for gift tax fraud never expires if you never filed the return.
Whistleblowers provide tips. Ex-spouses, former business partners, disgruntled employees – people who know about unreported gifts. The IRS pays whistleblower awards up to 30% of what they collect.
Collateral Damage Goes Beyond Prison Time
Federal prison is obvious, but not the worst consequence. You lose professional licenses – CPAs, attorneys, financial advisors. A tax crime conviction ends your career in any position involving financial responsibility. Background checks flag the felony permanently.
Restitution survives bankruptcy. The government gets paid first, always. They garnish wages, seize assets, place liens on property. Family relationships fracture. If you gifted money to your kids and didn’t report it, they become witnesses in your prosecution. The gifts might get clawed back. What you thought was helping them becomes dragging them into federal court.
What We Do Differently at Spodek Law Group
At Spodek Law Group – we understand that most people facing these allegations aren’t criminals. They made bad decisions, got terrible advice, or didn’t understand the rules. The government doesn’t care about your intent when building the case, but intent is everything at trial and sentencing.
Todd Spodek is a second-generation criminal defense lawyer who grew up in this business. He represented Anna Sorokin in the case that became a Netflix series. He defended a client in a $12 million Ponzi scheme and secured a six-month sentence. We’ve handled cases others called unwinnable – this is key to why clients choose us. Our firm includes former federal prosecutors who know exactly how the government builds tax cases.
When the IRS is at examination stage, we focus on preventing criminal referral. Show reasonable cause, demonstrate lack of willfulness, cooperate to resolve civilly. Once it goes criminal, cooperation might help or might make things worse – we assess the evidence and tell you honestly what you’re facing. The worst thing you can do is ignore this until charges are filed.
If you haven’t been contacted yet but know you have unreported gifts, voluntary disclosure options exist – though they’re restrictive. Coming forward before the IRS discovers it eliminates criminal prosecution risk in most cases, but only if done correctly.
If Criminal Investigation agents show up, you’re past the civil stage. They identify themselves as special agents. You need counsel immediately – not after you “explain everything.” The cases we win are the ones where clients called before talking to agents.
We handle federal criminal tax cases nationwide, available 24/7. The IRS executes search warrants at dawn, serves grand jury subpoenas without warning. Gift tax evasion is serious, but serious doesn’t mean hopeless. Call us.