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The High Stakes Involved In Tax Fraud Charges

Nowadays, it is not uncommon to read about high-profile business and industry leaders who come under fire for not paying taxes. Most recently, debates emerged in Congress over the need to increase the resources of the Internal Revenue Service (IRS) to enforce tax collection.

Because a conviction for this cannot only besmirch your reputation and significantly impact your business (and its stock performance), it is important to work with legal counsel who has an established practice and reputation for effective defense in white collar crimes. At my firm, the Law Offices of Peter Katz, I offer a free consultation so that you can better understand what is at stake and the options you have when facing these accusations and charges. Call me, attorney Peter Katz, at 609-900-2648 and arrange a meeting.

Why The Change In Process?

In all, the IRS loses nearly $400 billion each year in unpaid taxes, meaning it only collects about 84% of its entitled share in revenues, according to the Committee for a Responsible Federal Budget. The cause of this disparity? Folks who misrepresent their income on their tax filings. The IRS Criminal Investigation branch oversees potential criminal violations of the tax code and works with local law enforcement agencies to curb such abuses. One tool the IRS branch has to ensure that people are paying their fair share is Title 26 U.S.C. Section 7201 (attempt to evade or defeat tax), a criminal statute explicitly targeting those who attempt to avoid or fail to pay federal income taxes.

Title 26 U.S.C. Section 7201 – Attempt To Evade Or Defeat Tax

Title 26 U.S.C. Section 7201 makes it a crime for anyone to willfully attempt to evade or defeat the payment of federal income tax. There are three essential components to proving the crime beyond a reasonable doubt:

  • First, the prosecutor must show that the defendant owed a substantial amount of income tax.
  • Next, the prosecutor must prove that the defendant knew and understood that they had a tax deficiency, or, simply put, owed money in taxes.
  • Lastly, the prosecutor must show that the defendant willfully sought to evade or defeat the tax in some way, like concealing or misrepresenting income. Be mindful that failing to file a return without material evidence is insufficient to prove this element.

If the government proves these elements successfully, the defendant can face up to five years in prison and a $250,000 penalty.

Title 26 U.S.C. Section 7203 – Failure To File A Tax Return

As noted, failing to file a tax return is not sufficient proof of one willfully evading or failing to pay taxes. Nevertheless, that does not mean that failing to file does not come with a criminal penalty. Title 26 U.S.C. Section 7203 makes it a crime when one who is required to file a tax return willfully fails to file such a return at the time required by law (often that time is April 15, “Tax Day”). The prosecutor must prove beyond a reasonable doubt that:

  • The defendant was required by law or regulation to file a tax return.
  • The defendant failed to file such a return at the time required by law.
  • In failing to file the return, the defendant acted willfully.

If convicted, one can face up to one year in federal prison and a $100,000 fine. Depending on the details of the case, prosecutors may include other charges such as conspiracy, money laundering or embezzlement. This is why it is crucial to understand the full scope of the charges as early as possible.

Title 26 U.S.C. Section 7206 – Filing A False Tax Return

Like penalties for failing to file a tax return, there are also criminal sanctions for filing a false tax return, which carries with it a possible three-year prison sentence and a $250,000 fine. Title 26 U.S.C. Section 7206 (fraud and false statements) does not just penalize individuals who file a fraudulent tax return. The statute also covers those who assist in the filing of the false return. In sum, the rule covers anyone who willfully makes any return, statement or other document that contains or is verified by a written declaration that it is made under the penalties of perjury and that person does not believe such to be true and correct as to every material matter. For one to face conviction under Title 26 U.S.C. Section 7206, the government must prove beyond a reasonable doubt that:

  • The defendant filed a tax return.
  • The tax return included a written declaration made under penalty of perjury.
  • The return made a false material representation.
  • The defendant did not believe the return was true and accurate concerning the material matter.
  • The defendant acted willfully.

Given these elements, it is essential to define what makes something “material.” Something is “material” when it helped the accused either carry out their criminal activity or trick or deceive a target of the fraud into believing the accused.

Importance Working With Legal Counsel Right Away

Given the prominence of tax fraud and evasion cases in the news, it is without question that federal prosecutors are eager to bring these types of cases. Moreover, with the threat of possible imprisonment and financial penalties on the line, the need to hire legal counsel is apparent. As a former federal and state prosecutor, I understand what path the prosecution is likely to take and the effective defenses. Obtaining counsel as early in the process as possible is always recommended.

Get Over Two Decades Of White Collar Defense On Your Side

I know what is at stake in these cases, and I am prepared to create a strong defense on your behalf. When you work with me, you become my most important client. I serve people in New York and New Jersey. Call the Law Offices of Peter Katz at 609-900-2648 or contact me online to begin preparing your defense today.