Criminal Tax Defense

Criminal Tax Fraud & Tax Evasion

How IRS Criminal Tax Evasion & Tax Fraud Cases Start

Criminal investigation on your tax returns or fraudulent tax activity is usually initiated by the Criminal Investigation Division of the IRS which is located in Los Angeles, San Francisco and Orange County. The following is a non comprehensive list of causes and indicators which may imply that you are under a criminal investigation for tax fraud or tax crimes:

1. IRS Special Agent contacts you directly to investigate your taxes. At this stage it is very likely you are a target of criminal tax investigation.
2. Your partner or business associate is charged for criminal tax fraud. IRS often obtains tax evasion and other tax fraud or suspicious activities while prosecuting guilty tax offenders whose web of friends and colleagues may also be implicated through their association with the potential tax defendant.
3. Tax Informants hoping to gain financial reward will often notify the I.R.S. of friends and associates of falsifying tax returns or tax fraud.
4. Banks are also obligated to notify the Internal Revenue Service of certain questionable transactions. In addition, if your bank advises you that the IRS’ Criminal Division is trying to obtain your bank transaction records, it is very likely that IRS has you on their radar for criminal tax investigation.
5. During your tax audit by IRS, FTB or California Sales tax audit, if the IRS, FTB or CDTFA discovers large discrepancies between your tax returns and their audit investigations, your case may be “referred” to the criminal division for investigation to either the IRS or California state taxing agencies. This is one of the main reasons why most informed taxpayers will not hire anyone other than an attorney to handle their tax audits.

Statute of Limitations for Tax Crimes – 26 U.S.C. § 6531

The statute of limitations for criminal tax offenses including tax evasion and tax fraud under Title 26 of the U.S. Code is 6 years pursuant to United States Code § 6531.

IRS regards tax fraud and tax evasion as very serious criminal tax matters. Misrepresenting your income or failing to pay appropriate taxes can carry severe monetary penalties, jail time, and criminal felony convictions which could seriously damage your reputation and livelihood. There are substantial legal and financial penalties if you are caught in criminal tax activities. It is very important to take pro-active measures if you believe that there are problems with your tax case. If you have any questions about your taxes, or the possibility of a criminal tax matter, you need to consult a tax attorney immediately.

Most Important Aspect of Defending Criminal Tax Fraud Cases

Concept of Willfulness

Willfulness in criminal tax cases requires the Government to prove that the law imposed a duty on the tax defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty.

Criminal tax defendant’s typical position will be that he/she was clueless about tax laws and only followed someone else’s lead or advice. If sufficient facts exists that support this criminal tax defense, then multiple meetings with government attorneys and investigators may be necessary to build this narrative in the minds of government prosecutors.

The government is not required to prove “bad faith or evil intent” or “evil motive and want of justification,” but certainly may introduce such evidence in a criminal tax prosecution. Potential criminal tax defendant can rebut this line of attack by IRS if facts can support such a tax defense but the core criminal defense strategy must be based on willfulness via lack of tax knowledge narrative.

In response, a defendant may attempt to establish a good faith misunderstanding of the law or a good faith belief that he did not violate the law to negate willfulness, even if his belief or misunderstanding is objectively unreasonable. United States v. Abboud, 438 F.3d 554, 581 (6th Cir. 2006) (“because of the complexity of the tax system, tax law is one of the few areas where the Supreme Court has held that ignorance of the law is a defense.”)

Willful Blindness:

A related concept in criminal tax prosecutions is “willful blindness.” If a defendant challenges willfulness on the grounds that he did not review his return prior to signing and filing, the government may introduce evidence to establish that the defendant acted with a conscious purpose to avoid knowledge of clearly false information reported on the return. In other words, a defendant may not avoid criminal liability by intentionally putting himself in a position where he does not have actual knowledge of the facts. United States v. Anthony,545 F.3d 60, 65-66 (1st Cir. 2008); United States v. Martin,773 F.2d 579, 584 (4th Cir. 1985).

Because a refusal to see what is clearly present is inconsistent with a good faith is understanding of the law, the government frequently requests willful blindness instructions in criminal tax trials. However, a willful blindness instruction should not be given without evidence that the defendant deliberately ignored relevant facts. United States v. Miller,588 F.3d 897, 905 (5th Cir. 2009); UnitedStates v. Mapelli, 971 F.2d 284, 285-87 (9th Cir. 1992).

Criminal tax defendant’s background, experience, education and wealth can be important factors in defending a client against a potential criminal tax case. Past involvements in tax shelters, questionable business practices and prior tax audits from IRS, California FTB, Sales Tax CDTFA and Payroll tax investigations should be considered as negative factors in preparing for criminal tax defense.