Tax Fraud & Tax Evasion
The I.R.S. estimates tax crimes cost the federal government an average of $458 billion a year. As a result, they are targeting tax fraud and tax evasion more aggressively and frequently than before. If you are a target of the I.R.S. or New York State government for tax fraud or tax evasion, our experienced white collar criminal attorneys can help you.
Unfortunately, tax crimes can be charged with other crimes like Grand Larceny, or Falsifying Business Records, which can be aggregated and tried all at once, meaning defendants are looking at serious jail time if the government is successful in their lawsuit. It’s also possible to face both state and federal prosecution for a multitude of separate, but related crimes.
The Blanch Law Firm is well-equipped to handle daunting and complex cases for their clients charged with tax crimes. We have significant experience in defending both individuals and corporations in tax fraud investigations, all the way up through trying a case. Our attorneys understand both state and federal laws as they pertain to tax fraud, meaning we offer comprehensive and global defense to our clients.
- What is Tax Fraud?:
Tax fraud is basically any action that cheats the government out of taxes owed, such as failing to file a return, filing a false return, failing to report all income or knowingly claiming unauthorized deductions. Tax evasion is a subset of tax fraud, and is usually some sort of deliberate act of misrepresentation to the I.R.S. or state government of what is taxable income. In New York, someone can be held liable for both federal and state tax crimes.
- Crime and Punishment:
A federal statute orders that if anyone convicted of evading or defeating tax imposed upon them shall be guilty of a felony, and fined not more than $100,000 for an individual (or $500,000 if a corporation commits the crime), imprisoned not more than 5 years, or both, plus the costs of prosecution. 26 USC §7201.
Fraudulent returns carry a lower punishment, with anyone who willfully delivers to the Secretary any document that they know to be fraudulent shall be fined up to $10,000 (or $50,000 if a corporation), not imprisoned for more than a year, or both. 26 USC §7207
Anyone who fails to pay their tax, or make a return at all shall be guilty of a misdemeanor and, if convicted, be fined not more than $25,000 (or $100,000 if a corporation) and imprisoned not more than one year. 26 USC 7203.
Individuals accused of tax crimes by the I.R.S will be aggressively pursued and charged, and they face significant punishment – both in terms of financial fines and imprisonment. The Blanch Law firm will defend you just as aggressively. See the other elements and punishments that the federal government must prove when prosecuting federal tax crimes here.
New York State tax crimes are just as serious, and you can face state charges at the same time as federal charges. Someone accused of Criminal Tax Fraud in New York can face a prison sentence of anywhere between one and twenty-five years behind bars if convicted of Criminal Tax Fraud in the First Degree. It is a B felony and carries a mandatory prison sentence – even if you have no prior criminal record. NY Tax Law 1806
Tax Fraud in the Second Degree is a class C felony is a fairly common crime, punishable by up to fifteen years in prison. It applies to individuals who are convicted of withholding money from the government between $50,000 and $1,000,000.00.
New York State lists tax fraud down to the Fifth degree, the lowest level of tax crime in New York. It is a misdemeanor punishable by up to one year in jail. Tax crimes don’t just involve lying on your income tax return, but New York also has laws requiring residents to pay property tax, sales tax, estate taxes, business taxes, and more, failure of which to pay could be criminal. See the other elements and punishments for New York tax fraud crimes on our New York Tax Crime page.
- Tax Evasion Schemes:
Tax evasion isn’t always just hiding money in someone else’s name. Some of the most abusive schemes are those that involve foreign countries. Abusive Foreign Trust Schemes start off as multiple domestic trusts layered one on top of the other, but once the assets are in the domestic trust, they are passed to multiple foreign trusts, usually in tax haven countries like Luxembourg and the Cayman Islands.
If what happened was a simple accounting error or oversight, it defeats the elements the prosecution would need to prove in order to convict you. Tax fraud and tax evasion both have elements that require the defendant to carry out an act ‘knowingly’ or ‘intentionally.’ If what you did was simply negligent, then it would no longer be a criminal matter (although you still may face some liability in civil courts).
If you relied on the advice of a tax professional such as a Certified Public Accountant or tax lawyer, you may have some defense in the charges. Self-reporting any violations before the IRS finds out about them is another method to effectively defend yourself in tax investigations. The IRS Voluntary Disclosure Program and Offshore Voluntary Disclosure Program encourages taxpayers to report tax evasion or fraud and often only have to pay a monetary penalty. Most of the time, in exchange, the IRS will not proceed with a criminal prosecution. However, you should only do this with the advice and help of professional legal representation.
Finally, one of the best defenses is the statute of limitations. The I.R.S. must file a suit for tax evasion within six years of the alleged activity. If the charges are brought any time after that, then you have an affirmative defense against the I.R.S. In New York, there is generally a three-year statute of limitations on tax audits; however, this can be extended for up to six years if fraud exists, or a substantial understatement was submitted on a tax return.
Our attorneys at The Blanch Firm use creative and compelling defenses when their clients are faced with tax fraud charges. We are not afraid to call upon the skills of other professionals, such as CPAs and forensic accountants, to build the best possible defense, and fight against every allegation the state brings against our clients.
- Recent Cases:
Non-Filing Crimes- on April 19, 2017, a criminal defense attorney in Baton Rouge, Louisiana was sentenced to 30 months in prison for tax evasion, two years of supervised release, and ordered to pay nearly $1,000,000 in restitution to the I.R.S. The attorney operated a practice in Hammond, Louisiana, and for ten years failed to file any income or employment tax returns. On top of that, he didn’t pay the taxes he owed. He concealed his income and assets by creating three separate trusts and nominees, which he used to evade payment of federal income and employment taxes. He used the nominees to purchase his primary residence, and entered into a fake lease agreement with said nominee to hide his ownership of the property.
Abusive Filing Crimes- in New York, on October 25, 2016, a man was sentenced to 51 months in prison, with one year of supervised release and was order to pay a $125,000.00 fine and pay the IRS over $295,000.00 in back taxes. This gentleman was a tax prepare and owned a tax preparation business. From 2010 to 2014, he submitted about 3,200 tax returns each year, all of which contained a pattern of false and fraudulently inflated deduction for business expenses and charitable gifts. He also failed to report on his own tax returns nearly half of the receipts he received for his preparation services. His behavior deprived the I.R.S of over $550,000.00.
Most of these crimes are significant – it costs the government a lot of money to prosecute cases, and they should expect a good return. Nevertheless, if you are facing charges that you think are fairly low, you still need to speak to a legal professional about your rights and options. The crimes listed here show that, many times, those facing tax fraud charges have more to lose than just their liberty and money – some have professional licenses that could be suspended or removed based on a conviction for these crimes, including legal and tax professionals. The Blanch Law Firm has successfully defended our professional clients, preserving their licenses and accreditations, meaning they can continue to earn a living and support their family.
- Who Investigates?:
For federal and state taxes, different divisions investigate tax crimes. For the I.R.S., the Criminal Investigation Division is primarily responsible for conducting criminal investigations concerning violations of the internal Revenue Code and various money laundering statutes. A revenue agent, also called an auditor, typically triggers an investigation when they detect possible fraud. Sometimes they receive tips from the public as well as other law enforcement agencies across the country.
A lot of the investigation occurs before you even know about it, during their primary investigation. The I.R.S. is not obligated to inform the suspect of their criminal investigation, sometimes even suspending audits without explanation. This is not always a good thing – the audit is not over, but often the I.R.S. is working on building a criminal case against you. The agent will start gathering all the facts and evidence needed to prove their case, such as subpoenaing bank records, executing search warrants, conducting surveillance, and the like. Depending on the outcome of this investigation, the case may be dismissed, or further prosecuted by the agencies described below. The I.R.S conducts around 3,000 investigations each year, and prosecutes just under that number, demonstrating how serious they are about prosecuting suspicious cases.
In New York, there are multiple agencies that investigate tax fraud claims. Statewide, the Attorney General’s office uses the Criminal Enforcement and Financial Crimes Bureau to investigate and prosecute these crimes. More locally, it is the individual police departments and district attorney’s offices who will investigate and prosecute. In Manhattan, the Investigation Division is primarily responsible for looking into white collar crimes.
For more information on how these bureaus investigate the crimes, and what you should do if you think you are under investigation, click here for Federal and here for State.
- Who Prosecutes?:
While the I.R.S is primarily responsible for investigating, and the auditor may be your first point of contact, they cannot prosecute any tax cases. The special agent who is charged with primarily investigating will determine whether or not the case should be criminally prosecuted. If so, then their recommendation is forwarded to the Department of Justice Tax Division, if it is purely a tax investigation, or to the U.S. Attorney for all other investigations. While the special agent will be useful to the Attorney’s office in prosecuting the matter, it will be the individual attorneys responsible for doing so. The prosecution has a lot of help in the matter, since the I.R.S. seems to have a pretty good record of getting a conviction on their prosecution recommendations: in the last fiscal year, of the 2,744 recommendations made, 2,672 were convicted: a 97% conviction rate. This demonstrates that the investigation period can often be crucial for suspects, and why it is important to seek out legal advice as soon as you suspect you are under investigation for tax crimes.
The Tax Crimes Unit prosecutes those who avoid their tax obligations both to the City and State of New York. They are a division of the Manhattan District Attorney’s office, and they prosecute crimes just as vigorously as the I.R.S., reportedly recovering tens of millions of dollars each year through their work. In Brooklyn, their D.A.’s office has the Asset Forfeiture and Crimes Against Revenue Bureau, which prosecutes those individuals and business who fail to pay state and city taxes. Whichever borough you live in, the Blanch Law Firm has top-notch trial attorneys who are experienced in defending against all manner of tax fraud charges, from city all the way up through the federal levels.
The Blanch Law Firm has a team of experienced, trial attorneys who will conscientiously prepare and defend your case against all levels of prosecution – from the local district attorney’s office up through the United States Attorney’s office. We have experience in tax crime investigations, and we are knowledgeable in both state and federal criminal litigation. If you are facing tax crime charges, get in touch with us as soon as possible for an initial consultation.