Gatherwright Freeman has years of experience representing clients in IRS criminal investigations for tax evasion. To convict anyone of tax evasion the government must prove beyond a reasonable doubt that (1) there is a tax deficiency, (2) an affirmative act constituting evasion or attempted evasion of the tax, and (3) willfulness. The maximum sentence for tax evasion is five years imprisonment and a fine of $100,000 for individuals or $500,000 for organizations. As a practical matter, the Sentencing Guidelines established by Congress provide narrow parameters within which defendants must be sentenced and fined based upon the tax loss for the years under investigation and the criminal history of the defendant.
Examples of affirmative acts constituting tax evasion include keeping double sets of books, making false entries or alterations, making false invoices, destroying books or records, concealing assets or hiding sources of income, holding assets in other person’s names, diverting company funds to pay personal expenses, handling one’s affairs to avoid making the usual records in such transactions, such as cashing checks at the payee’s bank instead of depositing them into the taxpayer’s bank account, or a consistent pattern of overstating deductions. However, the government has to prove these acts were willful and not merely inadvertent. Willfulness is the most frequently contested element in criminal tax cases. Lack of willfulness is often the key to the taxpayer’s mitigation and defense.
Gatherwright Freeman has years of experience representing clients in IRS criminal investigations for false returns. The IRS imposes criminal sanctions on persons who willfully sign returns and other documents that are signed under penalties of perjury which the signer does not believe to be true and correct as to every material matter. The IRS usually makes charges against taxpayers for false returns when it appears that such charges will be easier to prove than tax evasion. For example, if gross receipts have been underreported and offsetting underreported deductions may provide a defense to tax evasion, the IRS may charge the taxpayer with filing a false return. The IRS only has to show that one “material” item on the return was intentionally falsified. The IRS does not have to prove a tax deficiency in order to charge a person with filing a false return.
The maximum sentence for filing false returns is three years imprisonment and a fine of $100,000 for individuals or $500,000 for organizations. As a practical matter, the Sentencing Guidelines established by Congress provide narrow parameters within which defendants must be sentenced and fined based upon the tax loss for the years under investigation and the criminal history of the defendant
Gatherwright Freeman has years of experience representing clients in IRS criminal investigations, including failure to collect and pay over payroll taxes. Any person required to collect and pay over payroll taxes who willfully fails to do so can be charged with a felony and be fined $10,000 and/or imprisoned up to five years for each offense. As a practical matter, the Sentencing Guidelines established by Congress provide narrow parameters within which defendants must be sentenced and fined based upon the tax loss for the years under investigation and the criminal history of the defendant.
A responsible person for payroll tax violations may be an owner, officer, director, shareholder, or some other person with sufficient control over the funds to direct disbursement of such funds. To show “willfulness,” the government must show that the person responsible for paying the taxes was aware of the outstanding taxes and either deliberately chose not to pay the taxes or recklessly disregarded an obvious risk that the taxes would not be paid. The payment of net wages (wages minus trust fund taxes) to employees when funds are not available to pay withholding taxes is considered a willful failure to collect and pay over under the law.
Gatherwright Freeman has years of experience representing clients in IRS criminal investigations for failure to file tax returns. Failure to file is a misdemeanor charge with a sentence of up to one year imprisonment and a fine of $25,000 for individuals and $100,000 for organizations. However, because each yearly failure to file is a separate charge, the maximum sentence is cumulative for anyone who has willfully failed to file over a period of years.
Gatherwright Freeman has years of experience representing clients in IRS criminal investigations, including failure to pay. Failure to file is a misdemeanor charge with a sentence of up to one year imprisonment and a fine of $25,000 for individuals and $100,000 for organizations. However, because each yearly failure to file is a separate charge, the maximum sentence is cumulative for anyone who has willfully failed to file over a period of years.
In a failure to pay case, the must show beyond a reasonable doubt that the taxpayer knew of his or her obligation to pay tax, penalty, or interest and intentionally did not pay. Carelessness or negligence is not enough to support a failure to pay conviction. If the defense can convince the jury that the failure to pay was the result of an honest mistake or misunderstanding, an acquittal is the appropriate verdict.
Although it was once held willfulness could not be supported if it was proved that the individual did not have funds sufficient to pay the tax at the time the tax was due, later courts held that financial ability to pay the tax when it comes due is not a prerequisite to criminal liability.
Gatherwright Freeman has years of experience representing accountants and tax preparers in IRS criminal investigations, including those who are investigated or charged with aiding and abetting taxpayers with filing false or fraudulent returns.
The maximum sentence for aiding and abetting is three years imprisonment and a fine of $100,000 for individuals or $500,000 for organizations. As a practical matter, the Sentencing Guidelines established by Congress provide narrow parameters within which defendants must be sentenced and fined based upon the tax loss for the years under investigation and the criminal history of the defendant.
For taxpayers with exposure to potential criminal liability due to a willful failure to report income (tax evasion) or willful failure to disclose foreign financial assets (FBAR violations) a voluntary disclosure to the IRS may be a viable solution. Voluntary disclosures are designed to provide taxpayers with such exposure with (1) protection from criminal liability and (2) terms for resolving their tax and penalty obligations.
Voluntary disclosures are often utilized in divorce scenarios where the taxpayer wants to self-report to the IRS before the ex-spouse contacts the IRS. Voluntary disclosures also arise in the case of business disputes between co-owners where the taxpayer wants to self-report to the IRS before a disgruntled partner contacts the IRS to blow the whistle.
Often states and local governments are struggling to balance budgets and find funding for government services. These financial difficulties have made the states and localities more creative and aggressive in pursuing tax audits and collections. Unlike the IRS which chooses its criminal cases carefully, local governments, especially cities, are quick to assign criminal liability for simple failure to file or pay a tax and, consequently, quick to place noncompliant taxpayers under arrest or in jail. Gatherwright Freeman has years of experience representing taxpayers in state and local courts for criminal tax violations.
