Facilitating Tax Evasion: Criminal Liability for Aiding, Abetting and Promoting Tax Law Violations

When seeking to close the tax gap through enforcement, the Internal Revenue Service (IRS) doesn’t solely target taxpayers who have underreported and underpaid their federal tax liability. It also targets those who facilitate tax evasion and tax fraud. Accountants, advisors and promoters can all face heavy-handed enforcement; and, when targeted by the Internal Revenue Service (IRS), they must work with an experienced Texas criminal tax lawyer to defend themselves by all means available.

Several provisions of the Internal Revenue Code impose criminal liability for facilitating tax evasion and tax fraud. When targeting accountants, advisors and promoters, the IRS’ Criminal Investigation Division (IRS CI) and the U.S. Department of Justice (DOJ) will often pursue indictments for a variety of other non-tax-specific crimes as well. As a result, avoiding prosecution can be a substantial undertaking, and individuals targeted for aiding and abetting must work closely with their defense counsel to assess all potential charges and formulate a comprehensive and cohesive defense strategy.

Potential Charges Against Accountants, Advisors and Promoters Accused of Facilitating Tax Evasion and Tax Fraud

From helping taxpayers implement abusive tax shelters to assisting with the submission of fraudulent Paycheck Protection Program (PPP) loan applications and Employee Retention Credit (ERC) claims, the IRS and other authorities are actively targeting accountants, advisors and promoters for facilitating all forms of tax evasion and tax fraud. In these cases, the IRS and IRS CI are working with the DOJ to pursue criminal charges for offenses including (but not limited to):

Promoting Abusive Tax Shelters

In recent years, the IRS has been paying particular attention to individuals who encourage taxpayers to violate the Internal Revenue Code and other federal statutes. The IRS refers to these individuals as “promoters,” and its Office of Promoter Investigations focuses specifically on “identifying promoters and enablers of abusive tax transactions and shutting them down quickly to prevent tax loss and to protect taxpayers.” The IRS’s Office of Promoter Investigations has recently placed particular emphasis on targeting individuals who promote fraudulent schemes and abusive tax shelters involving:

• ERC claims
• PPP loan applications and forgiveness certifications
• Syndicated conservation easements
• Trust arrangements designed to evade federal tax
• Other listed transactions and transactions of interest (TOI)

Under 18 U.S.C. Section 2, anyone who “aids, abets, counsels, commands, induces or procures” the commission of an offense against the United States can face the same punishment as the individual or organization that commits the offense in question. This means that individuals who are found guilty of promoting tax fraud, tax evasion and other crimes can be punished as if they committed these crimes themselves.

Aiding and Abetting Tax Evasion and Tax Fraud

The IRS and IRS CI routinely pursue aiding and abetting charges against accountants, advisors and others who are suspected of assisting taxpayers with implementing abusive tax shelters. Under Section 7206(2) of the Internal Revenue Code (IRC):

“Any person who . . . [w]illfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter . . . shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both . . . .”

As Section 7206(2) also makes clear, accountants, advisors and others can face criminal prosecution for aiding and abetting “whether or not” the taxpayer in question is aware of the fraud or falsity involved. Individuals accused of aiding and abetting tax crimes can be penalized under 18 U.S.C. Section 2 as well.

Preparing and Submitting False Tax Returns  

Along with other means of aiding and abetting tax crimes, accountants, advisors and others can also face prosecution for preparing false tax returns and submitting false statements to the IRS. This includes, but is not limited to, preparing false returns for clients’ signature and submission as well as willfully signing a return without a reasonable belief that the return is “true and correct as to every material matter.” Individuals who assist with the preparation and submission of false tax returns can face prosecution under Section 7206(2) of the IRC, 18 U.S.C. Section 2 and various other federal statutes.

Mail Fraud and Wire Fraud  

Promoters, accountants and advisors who assist with implementing abusive tax avoidance schemes, preparing fraudulent tax filings and submitting of other fraudulent documents to federal authorities can also face charges for mail fraud and wire fraud. The federal mail fraud and wire fraud statutes are extremely broad, and they have the potential to apply in all types of cases targeting promotion, aiding and abetting. Under each of these statutes, potential penalties can be as high as a $1 million fine and 30 years of federal imprisonment depending on the circumstances involved.  

Conspiracy to Commit Tax Fraud, Money Laundering and Other Crimes

In addition to mail fraud and wire fraud, individuals accused of promoting or aiding and abetting tax crimes will frequently face conspiracy charges as well. Depending on the circumstances involved, conspiracy charges can either carry up to a $250,000 fine and five years of imprisonment or the same penalties as the underlying offense.

Importantly, even if the DOJ is not able to substantiate criminal charges against an accountant, advisor or promoter, the IRS may still be able to pursue civil enforcement under the Internal Revenue Code. For example, Section 6700 if the IRC imposes civil penalties for promoting abusive tax shelters, and Section 6701 imposes civil penalties for aiding and abetting the understatement of federal tax liability.

Request an Appointment with a Texas Criminal Tax Lawyer at Brown Tax, P.C.

We represent individuals who are facing substantial exposure in promoter and aiding and abetting investigations. If you are facing scrutiny from the IRS or any other federal agency, you can call 888-870-0025 or contact us online to request an appointment with a Texas criminal tax lawyer at Brown Tax, P.C.