Using Reliance on an Accountant as a Tax Evasion Defense in California

Using Reliance on an Accountant as a Tax Evasion Defense in California

Paying taxes can be complicated, so many people rely on accountants to prepare their tax returns. But what happens if you get accused of tax evasion because of mistakes your accountant made? Can you use reliance on your accountant as a defense in California? This article will explain the basics of using reliance on an accountant as a tax evasion defense.

What is Tax Evasion?

Tax evasion is intentionally not paying taxes you owe. It’s illegal. Some examples of tax evasion are:

• Not reporting income
• Claiming false deductions
• Hiding money in offshore accounts

Tax evasion is different from tax avoidance, which is using legal loopholes to minimize taxes. It’s also different from failing to pay taxes due to a mistake, which may just lead to penalties.

Elements of Tax Evasion

For someone to be convicted of tax evasion in California, the government has to prove these elements beyond a reasonable doubt:

1. The person owed additional tax
2. The person tried to evade or defeat paying the tax
3. The person acted willfully

So if you made a mistake on your taxes, that alone isn’t enough to prove tax evasion. The government has to show you intentionally tried to avoid paying taxes you owed.

Reliance on Accountant Defense

Since tax laws are so complicated, many people hire accountants to prepare their tax returns. In some cases, you may be able to avoid a tax evasion conviction by arguing you relied on your accountant’s advice.

For this defense to work, you need to show:

• You gave your accountant all the needed information
• You followed your accountant’s advice
• You didn’t have any reason to think your accountant’s advice was wrong

If you can show this, it helps demonstrate you didn’t intentionally try to evade paying taxes. Any mistakes were because you reasonably relied on your accountant’s professional advice.

Example Cases

Here are some examples of taxpayers who successfully used a reliance on accountant defense:

• A California taxpayer was acquitted of tax evasion when he showed he relied on his accountant’s advice about reporting income from his business [3].
• A taxpayer in another state who was prosecuted for falsely stating information on his tax returns successfully argued the information wasn’t material because he relied on his accountant to prepare the returns accurately [5].

So this defense can work, but your reliance on your accountant has to be reasonable based on the facts.

Limits of Reliance on Accountant Defense

There are some limits on using a reliance on accountant defense:

• You may need to show you provided your accountant with complete and accurate records. For example, if you gave your accountant fake business receipts to lower your taxes, this defense won’t work.
• The advice you relied on has to be within your accountant’s expertise. For example, relying on your accountant’s advice about reporting illegal income probably wouldn’t be considered reasonable.
• You may still be liable for civil tax penalties even if you avoid criminal conviction by using this defense.

Additionally, your accountant’s credibility could be questioned if they have been involved in preparing false returns for other clients [3]. So your accountant’s reputation and history may impact this defense.

Other Possible Defenses

In addition to reliance on an accountant, some other tax evasion defenses that may apply include:

• Good faith misunderstanding of law – You made a sincere mistake in interpreting complex tax laws.
• Lack of willfulness – You can show you didn’t intentionally try to evade taxes.
• Statute of limitations – Too much time has passed since the alleged evasion for you to be prosecuted.

The right defense depends on the specific facts of your case. A tax attorney can advise you on the pros and cons of different defenses.

Getting Legal Help

Dealing with a tax evasion accusation can be overwhelming. But an experienced tax attorney can help protect your rights. They can evaluate whether a reliance on accountant or other defense may apply in your case. Having skilled legal representation can make all the difference in achieving the best possible outcome.