Taxes present the balancing act of reducing liability within the bounds of IRS regulations. This equation becomes more difficult for individuals and corporations with high value assets or complex business structures. Unfortunately, higher income people and companies are generally on law enforcement radar and most likely to be targeted for tax evasion inquests.
Brown, PC is among the best-known tax litigation and white collar crimes defense law firms in the country. We have represented high-profile clients in high-stakes cases for 25 years. Before opening our firm, Lawrence Brown worked as a DOJ Tax Division trial attorney prosecuting tax fraud and tax evasion cases. He fully knows the strategies and tactics of the U.S. Attorneys and how to successfully challenge them.
Our clients include celebrities, executives, business owners and multinational corporations that own substantial assets and tend to carry heavy tax liability. Becoming the target of a tax evasion investigation can have detrimental effects, including loss of freedom, expensive fines, seizure of assets and residual damages to career, reputation and financial security. With so much to lose, our clients put their trust in a firm with the strong history of successful taxpayer advocacy.
Tax Evasion Penalties
The penalties for tax evasion can be enormous and devastating. Under 26 U.S.C. §7201, tax evasion is a felony punishable by up to five years in prison. Individuals may also be fined up to $100,000 and corporations up to $500,000. These criminal fines are in addition to interests and penalties that may be imposed on the tax liability.
The government may also bring simultaneous charges that increase these harsh penalties. For example, the government often alleges the umbrella charge of tax evasion to review sources of income that it suspects are illegal, such as unlawful campaign contributions, gambling proceeds, embezzlement, extortion, fraud, fraudulent loans, kickbacks, bribery and narcotics sales.
When Does a Legal Tax Maneuver Become Tax Fraud?
Every taxpayer attempts to minimize tax liability and to utilize tax breaks wherever possible. This might include calculating the tax advantages of various accounting methods or moving assets to tax friendly offshore accounts. These legal tax maneuvers may raise red flags and expose the taxpayer to IRS audit and prosecutorial scrutiny. An accounting error, an asset undervaluation or a misapplied deductible can put the taxpayer at risk of a tax evasion investigation.
Brown, PC often counsels taxpayers at this crucial early stage. We conduct our own thorough investigation to deliver proof to the government that our client acted strictly within the law. If a tax reduction maneuver ran afoul of IRS rules, a Fort Worth tax evasion lawyer at our firm will demonstrate that the action was a mistake, not a willful attempt to evade tax liability.
What is Tax Evasion?
Tax evasion is a term often heard, but rarely understood. Famously, mob boss Al Capone was caught in the snares of this charge when law enforcement could find no other means of detaining him. Today, law-abiding citizens with extensive assets and complex business arrangements often find themselves being treated like a criminal under this catchall charge. Tax evasion refers to a wide-range of tax fraud allegations, but falls within two main categories:
- An attempt to evade or defeat assessment of tax
- An attempt to evade or defeat payment of tax
The government must prove that the evasive action of the taxpayer was willful and what amount of tax was due. Our lawyers hone in on these two essential elements to demonstrate that the actions of our client were not criminal. The prosecution must drop charges or the jury must acquit if the government cannot prove beyond a reasonable doubt that our client owed the amount alleged and took an affirmative act to willfully avoid assessment or payment of taxes.
Tax Assessment Evasion
In tax assessment evasion investigations, the taxpayer is generally accused of purposefully interfering with the government’s ability to determine the true amount of tax owed. This charge may involve a number of overt acts, most commonly filing a false tax return that omits income or claims unlawful deductions, to understate tax liability. However, failing to file a tax return may also trigger a tax evasion investigation if the taxpayer also takes evasive action, a theory informally known as “Spies-evasion” in reference to the U.S. Supreme Court case Spies v. United States.
Tax Payment Evasion
Once the IRS has made a tax assessment, the taxpayer may be held liable for actions to avoid paying. In these cases, the amount due is established either through the taxpayer’s returns or alleged deficiencies if the taxpayer failed to file a return. Showing that the taxpayer did not pay is not enough to constitute a crime. The government must prove that the taxpayer took an affirmative action to avoid paying. These cases typically involve concealment. Often, the government alleges that the taxpayer intentionally hid assets or removed assets from the government’s reach, to offshore accounts or to another person or business, for example.
Willful Overt Act
The act must be overt and willful to be considered evasive under §7201. The U.S. Supreme Court in Spies listed examples of overt evasive acts, including:
- Keeping a double set of accounting books
- Doctoring accounting books
- Destroying records
- Creating false invoices
- Concealing assets
- Hiding the source of income
Making a false statement to the IRS is also an overt act, as is instructing employees to not cooperate with IRS agents. Filing a false W-4 or other tax document is also an affirmative act. Additionally, movement of assets out of reach of the government, such as transferring stocks or money to family members or false bank accounts, could constitute an affirmative act.
Even though the act itself might be legal, it could still meet the elements of the crime if done with the intention to avoid a tax liability assessment. Conversely, an affirmative act without a proven evasive motive does not constitute a crime. For example, failure to pay taxes despite having the means to do so would not be enough. Therefore, our lawyers focus on motive and have successfully challenged highly contentious tax assessment cases based upon our client’s good faith.
Consult with Brown, P.C. to Successfully Challenge Tax Evasion Charges
Challenge IRS accusations with the help of an experienced Fort Worth tax evasion lawyer. At Brown, P.C. we deliver aggressive defense representation to protect the rights of high-profile, high-income individuals and corporations.