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Defending Against Federal Tax Evasion Charges

Posted by Dmitry Gorin | Mar 04, 2024

Some have referred to the IRS as America's most aggressive debt collector. The government may often impose liens and seize assets to collect unpaid tax debts.

However, if you're suspected of deliberately or systematically avoiding paying your taxes, whether through underreporting or attempting to hide income, you can be charged with a crime under federal tax evasion and fraud laws. A conviction could result in steep fines and prison time. 

Federal Tax Evasion and Tax Fraud Charges

Title 26 U.S. Code 7202 covers the willful failure to collect or pay over tax. Federal tax law not only requires citizens and companies to pay their taxes on time, but it also holds accountable anyone responsible for collecting and paying over tax on behalf of others, such as employers withholding taxes for their employees. 

Title 26 U.S. Code 7203 covers the willful failure to file a return, supply information, or pay tax. While most people will not be criminally prosecuted for tax violations except for deliberate attempts at tax evasion, willful failure to file or pay taxes to the government is still considered a federal crime.

This federal law is related to the Internal Revenue Code (IRC) 7203, which deals with failure to file, supply information, or pay tax. 

Title 26 U.S. Code 7206 covers knowingly filing a false federal tax return, often called “tax fraud.” This federal statute criminalizes making false or fraudulent statements on tax returns or other documents submitted. 

Because the government takes the payment of taxes seriously and punishes these violations severely, hiring an experienced federal criminal defense attorney at the first sign of trouble is essential to ensure your rights are protected. Let's discuss the nature of tax crimes and the types of defenses a skilled attorney might use. 

What is Tax Evasion and Tax Fraud?

Tax evasion and tax fraud constitute serious federal crimes that often carry harsh penalties. While these terms are frequently used interchangeably, they have distinct meanings in the legal context.

  • Tax evasion (Title 26 U.S.C. 7201) refers to the deliberate act of avoiding paying taxes owed by using illegal means. It typically involves falsifying income records, inflating deductions, or hiding money and its sources.
  • Tax fraud is a broader term encompassing various activities intended to defraud the government of tax revenue. These activities include making false statements, failing to file returns, claiming fraudulent deductions, and not reporting all income.
  • Failure to file a tax return. This is the willful failure to file a return, supply information, or pay tax. Violations of this statute can result in misdemeanor federal charges if prosecutors believe they can establish that the person's failure to abide by the rules was willful.
  • False federal tax return. This law makes it a crime to subscribe to any return, statement, or other document that you assert to be true under penalty of perjury which you believe is not entirely accurate. It also prohibits assisting anyone in filing a return or making such a statement, knowing the information is untrue.

Prosecuting these crimes requires the government to prove specific elements beyond a reasonable doubt. These elements include an existing tax deficiency, willfulness in committing the act, and an affirmative act of evasion or attempted evasion.

What are the Tax Fraud and Evasion Charges?

The charges levied by federal prosecutors in tax fraud and evasion cases vary depending on the specifics of the alleged offense. Some standard charges include:

  • Filing a fraudulent return: This crime involves knowingly providing false information on a tax return to reduce tax liability.
  • Failure to file a return: This involves not filing a tax return when one is required.
  • Tax evasion: This involves deliberately avoiding paying taxes owed.
  • Conspiracy to defraud the United States: This involves collaborating with others to defraud the government of tax revenue.

Penalties for these crimes can range from monetary fines to prison terms, depending on the severity of the violation.

What Are the Related Federal Statutes?

26 U.S. Code Chapter 75 Subchapter A Part I General Provisions has numerous several federal laws related to tax evasion and tax fraud, including the following: 

  • 26 U.S.C. 7201 - Attempt to evade or defeat tax,
  • 26 U.S.C. 7202 - Willful failure to collect or pay overtax,
  • 26 U.S.C. 7203 - Willful failure to file a return, supply information, or pay tax,
  • 26 U.S.C. 7204 - Fraudulent statement or failure to make a statement to employees,
  • 26 U.S.C. 7205 - Fraudulent withholding exemption certificate or failure to supply information,
  • 26 U.S.C. 7206 - Fraud and false statements,
  • 26 U.S.C. 7207 - Fraudulent returns, statements, or other documents,
  • 26 U.S.C. 7210 - Failure to obey summons,
  • 26 U.S.C. 7211 - False statements to purchasers or lessees relating to tax,
  • 26 U.S.C. 7212 - Attempts to interfere with the administration of Internal Revenue laws,
  • 26 U.S.C. 7213 - Unauthorized disclosure of information,
  • 26 U.S.C. 7213A - Unauthorized inspection of returns or return information,
  • 26 U.S.C. 7214 - Offenses by officers and employees of the United States,
  • 26 U.S.C. 7215 - Offenses concerning collected taxes,
  • 26 U.S.C. 7216 - Disclosure or use of information by preparers of returns,
  • 26 U.S.C. 7217 - Prohibition on executive branch influence over taxpayer audits and other investigations.

What are the Legal Defenses Against Tax Evasion Charges?

While facing criminal charges regarding taxes can be daunting, the fact is that reporting and filing taxes is a complex process, which also means there may be numerous strategies to defend against these charges—through showing a lack of intent, errors in calculations, and other issues. 

A federal criminal defense attorney with specific experience in tax fraud defense can help determine the best strategy for you. Some common defenses include:

  • Lack of Willful Intent: Demonstrating that any errors on tax returns were due to honest mistakes or misunderstandings, not a deliberate intention to evade taxes.
  • Incorrect Tax Assessment: Contesting the accuracy of the tax assessment that led to the charges, potentially reducing or eliminating the alleged tax deficiency.
  • Involuntary Consent: Arguing that any incriminating evidence was obtained through coercion or without proper consent.
  • Advice of Counsel: Claiming reliance on professional advice from a tax expert or attorney, demonstrating an effort to comply with tax laws, not evade them.
  • Administrative Errors: Highlighting errors made by the IRS in processing the tax return may have led to incorrect charges.
  • Statute of Limitations: Asserting that the time limit for the government to bring charges has expired, typically six years from when the fraudulent tax return was filed. 

What are Some Other Defense Strategies?

Remember, the success of each defense strategy will depend on the specific circumstances of the case and the skill of the defense attorney handling it.

  • Lack of intent to commit fraud: The government must prove that the defendant willfully committed tax evasion or fraud. If the defendant can show that any mistakes were due to negligence or ignorance rather than intent, they may be acquitted.
  • Insufficient evidence: The prosecution must substantiate its claims with solid evidence. If the defense can create reasonable doubt about the evidence or its interpretation, this can lead to acquittal.
  • Statute of limitations: Tax evasion and fraud charges must be filed within a specific timeframe, typically six years from the alleged violation. If the charges are filed after this period, the defendant can move to have the case dismissed.

An experienced attorney is vital when facing tax evasion or fraud charges. Their knowledge of federal tax law enables them to evaluate the complexities of your case, devise effective defense strategies, and advocate vigorously on your behalf to help ensure your rights are protected throughout the legal process.

What Steps Should You Take? 

If you find yourself accused of tax fraud or evasion, take the following steps:

  • Hire an attorney: Seek legal representation immediately. An experienced attorney can guide you through the legal process and defend your rights.
  • Gather documentation: Collect all relevant financial records, which will be crucial in building your defense.
  • Avoid direct communication with the IRS: Do not communicate with the IRS without your attorney present. Anything you say can be used against you in court.

Perhaps we can negotiate a favorable plea agreement with the federal prosecutor. Contact us for a case review and to discuss legal options. Eisner Gorin LLP has offices in Los Angeles, California.

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About the Author

Dmitry Gorin

Dmitry Gorin is a licensed attorney, who has been involved in criminal trial work and pretrial litigation since 1994. Before becoming partner in Eisner Gorin LLP, Mr. Gorin was a Senior Deputy District Attorney in Los Angeles Courts for more than ten years. As a criminal tri...

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