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So your probably facing federal tax evasion charges and your completely confused because you thought tax issues were civil matters. Maybe you received a notice that IRS-Criminal Investigation is looking into your returns. Maybe there’s allegations you concealed income or claimed false deductions. Or maybe your just accused of failing to file returns for several years. Look, we get it. Your ABSOLUTELY TERRIFIED about criminal tax prosecution. And you should be! Because tax evasion under 26 USC 7201 carries 5 YEARS in federal prison and prosecutors treat tax crimes as seriously as violent offenses because “everyone must pay their fair share”!
Let me explain how civil tax problem becomes criminal case. Section 7201 is broadest and most serious criminal tax offense – punishes any willful attempt to evade or defeat tax! Originally designed for sophisticated tax cheats but now applied to regular people with tax debts!
The statute has THREE elements prosecutors must prove: (1) existence of tax deficiency, (2) willfulness, and (3) affirmative act of evasion! Each element strictly construed but prosecutors twist all three against defendants!
Here’s what’s really scary – IRS-Criminal Investigation has 93% conviction rate! They only prosecute cases with overwhelming evidence! If IRS-CI knocks on your door, you’re likely target of criminal investigation! Regular revenue agents don’t do criminal work – presence of special agents means criminal case!
Penalties are DEVASTATING beyond prison! Maximum $100,000 fine ($500,000 for corporations) PLUS costs of prosecution PLUS restitution of unpaid taxes PLUS civil penalties PLUS interest! We’ve seen defendants pay 3X the original tax debt after criminal conviction!
Three primary criminal tax statutes with DIFFERENT elements and penalties!
Section 7201 is tax evasion – most serious! Requires willfulness, affirmative act, and tax deficiency! Maximum 5 years prison and $100,000 fine! Used for substantial tax evasion with concealment!
Section 7203 is failure to file tax return – misdemeanor! Only requires willful failure to file when required! Maximum 1 year prison and $25,000 fine! Easier to prove because no affirmative act required! But can’t charge 7203 if defendant filed FALSE return – that becomes 7206!
Section 7206 is making false statements on return – felony! Requires knowingly and willfully signing return containing material false statements! Maximum 3 years prison and $100,000 fine! Doesn’t require proof of tax deficiency!
Prosecutors charge MULTIPLE statutes for same conduct! Didn’t file for 5 years then filed false return? That’s five 7203 counts PLUS 7206 counts! Evaded taxes through offshore accounts? 7201 PLUS 7206 for false return PLUS FBAR violations!
The 7206 statute has multiple subsections! 7206(1) is false return! 7206(2) is aiding and assisting in preparation of false return – targets accountants and tax preparers! Can prosecute both taxpayer and preparer!
Willfulness is CRITICAL element but definition helps defendants!
Willfulness means voluntary, intentional violation of known legal duty! Government must prove beyond reasonable doubt that defendant KNEW federal tax law imposed duty AND intentionally violated it!
This creates powerful defense! If you didn’t know you had tax obligation or misunderstood law, no willfulness! Supreme Court in Cheek v. United States held good faith belief negates willfulness! Even objectively unreasonable good faith belief is defense!
Example: believe wages aren’t taxable income because of tax protester arguments? Courts say that’s objectively wrong BUT if you genuinely believed it, no willfulness! We’ve won cases where clients had sincere (though incorrect) beliefs about tax law!
But willfulness can be proven circumstantially! Pattern of underreporting, using cash, offshore accounts, lying to accountant, destroying records – all evidence of willfulness! Jury infers you KNEW you were violating law!
Reckless disregard for truth can satisfy willfulness! Signing return without reading it? Not defense! Ignoring accountant’s questions? Evidence of willfulness! “I didn’t look at my return” doesn’t work!
Section 7201 requires affirmative act of evasion – NOT just omission!
Can’t convict on willful failure to file alone – that’s 7203 misdemeanor! Must show defendant took affirmative steps to evade or defeat tax! Mere omission isn’t enough for felony evasion!
Common affirmative acts: filing false return, concealing assets, dealing in cash, using nominees, maintaining offshore accounts, backdating documents, destroying records, lying to IRS agents! Any conduct designed to mislead IRS or conceal truth satisfies element!
Cash businesses create affirmative act evidence! Operating cash-only business, skimming cash, maintaining two sets of books, destroying receipts! Prosecutors argue cash business ITSELF is evidence of evasion intent!
Offshore accounts are RED FLAG for IRS-CI! Swiss bank accounts, shell companies in Cayman Islands, foreign trusts! Failing to report foreign accounts on FBAR creates separate criminal charges! Can get 5 years for FBAR violation PLUS tax evasion!
But failing to file return ISN’T affirmative act for 7201! That’s why government charges 7203 for non-filing! Need something MORE than failure – need concealment, false statements, misleading conduct!
Understanding process is CRITICAL for defense!
IRS-CI special agents investigate potential tax crimes – these aren’t revenue agents doing civil audits! Special agents are federal law enforcement with guns and badges! If they contact you, case is CRIMINAL!
Investigation starts with information – whistleblowers, routine audits discovering fraud, currency transaction reports, John Doe summonses! IRS-CI opens fewer than 3,000 cases per year but convicts over 90%!
Special agents interview witnesses, subpoena bank records, execute search warrants, use undercover operations! They work with FBI, DEA, Homeland Security on complex cases! By time they knock on your door, they’ve built substantial case!
Target interview is TRAP! Special agents show up unannounced wanting to “clear some things up”! NEVER speak to IRS-CI without attorney! Fifth Amendment applies to tax crimes! Anything you say will be used against you – they’re not there to help!
After investigation, IRS-CI refers case to DOJ Tax Division for prosecution decision! Tax Division reviews evidence and decides whether to indict! High conviction rate because they only prosecute strong cases!
Sentences for tax crimes are SERIOUS despite lower statutory maximums!
Section 7201 maximum is 5 years but can run consecutive for multiple years! Five years tax evasion for 2018, 2019, 2020 could mean 15 years total! Plus fines, restitution, supervised release!
Sentencing guidelines calculate offense level based on tax loss! Base level 6 but loss amount adds levels! Loss of $6,500-$15,000 adds 2 levels, loss over $550 million adds 30 levels! High tax loss means guideline sentence approaching statutory maximum!
Sophisticated means enhancement adds 2 levels! Offshore accounts, shell companies, false documents – all “sophisticated means”! Nearly every tax evasion gets this enhancement!
More than minimal planning adds 2 levels! Tax evasion by definition involves planning so enhancement almost automatic! We fight by showing planning was minimal not extensive!
Obstruction enhancement if lied during investigation! Destroyed documents? Add 2 levels! Lied to agents? Add 2 levels! One lie to IRS-CI during interview can add years to sentence!
Restitution is MANDATORY! Must pay full amount of tax loss plus penalties and interest! Can exceed original tax debt by 200-300%! Becomes federal lien on all assets!
Several defenses exist but require immediate action!
Good faith belief is complete defense to willfulness! If you genuinely believed you didn’t owe taxes or thought you were complying, no willfulness even if belief was wrong! We prove clients relied on advice, misunderstood law, had reasonable basis for position!
Reliance on tax professional! If CPA or tax attorney advised position and you relied in good faith, negates willfulness! Must show you disclosed all facts to professional and followed their advice! Blind reliance without disclosure doesn’t work but genuine reliance is powerful defense!
No tax due! If government can’t prove actual tax deficiency, tax evasion fails! We challenge IRS’s calculations, contest adjustments, prove deductions were legitimate! No deficiency = no crime!
Lack of affirmative act for 7201! If only evidence is failure to file or pay, that’s 7203 misdemeanor not 7201 felony! We show no concealment, no false statements, no misleading conduct!
Statute of limitations! Generally 6 years for tax crimes! Limitations starts when return filed or due date if no return! We identify when limitations expired and move to dismiss!
Voluntary disclosure! If you come forward BEFORE IRS starts investigation, can avoid prosecution! IRS has voluntary disclosure program encouraging compliance! Must be truly voluntary – after IRS contact too late!
Six-year statute of limitations with IMPORTANT exceptions!
General rule is 6 years from when return filed or due date if no return filed! For non-filers, limitations runs from April 15 of year following tax year! 2018 return due April 15, 2019 – 6 years runs until April 15, 2025!
But exceptions EXTEND limitations! If taxpayer outside U.S., limitations tolled during absence! If bankruptcy filed, limitations suspended! Ongoing conspiracy can extend limitations through last overt act!
Related crimes have different limitations! FBAR violations are 5 years! Wire fraud is 5 years! Money laundering is 5 years! Tax evasion from 2015 may be time-barred but related money laundering charges aren’t!
Voluntary disclosure BEFORE investigation starts can prevent prosecution even for old years! But must be truly voluntary! If IRS already contacted you or started audit, too late for voluntary disclosure!
We analyze limitations carefully! Which years are still within 6-year window? Which charges are time-barred? Challenge any stale charges!
Look, we’re not your typical lawyers who don’t understand tax law complexities. We’re former federal prosecutors who CHARGED tax crimes with IRS-CI and know EXACTLY what government must prove – especially willfulness element!
We understand Cheek good faith defense and how to prove genuine beliefs! We know when conduct lacks affirmative act for 7201! We can negotiate voluntary disclosures before prosecution starts! Most importantly, we prevent civil tax disputes from becoming criminal cases!
Other lawyers don’t recognize criminal investigation until too late! They let clients speak to IRS-CI special agents! They don’t understand difference between revenue agents and criminal investigators! Their ignorance leads to statements that become prosecution evidence!
Call us RIGHT NOW at 212-300-5196
IRS-Criminal Investigation moves FAST once opened – don’t wait!
Former federal prosecutors – Tax crime specialists – Available 24/7!
Don’t speak to ANYONE from IRS without experienced tax crime counsel! Revenue agents refer suspicious cases to IRS-CI! Special agents interview witnesses and targets! Every statement you make can become evidence! Assert Fifth Amendment and call us IMMEDIATELY!
Remember – federal tax crimes aren’t just for sophisticated tax cheats, there for anyone who owes taxes and took steps to avoid paying. One false deduction, one offshore account, one destroyed record can mean 5 years in federal prison plus crushing restitution. You need someone who understands both complex tax law AND criminal procedure. Call us NOW before tax problem becomes criminal prosecution!
Very diligent, organized associates; got my case dismissed. Hard working attorneys who can put up with your anxiousness. I was accused of robbing a gemstone dealer. Definitely A law group that lays out all possible options and best alternative routes. Recommended for sure.
- ROBIN, GUN CHARGES ROBIN
NJ CRIMINAL DEFENSE ATTORNEYS