The IRS sometimes agrees to settle a tax debt for below what is actually owed. The offer in compromise is generally for far less than the taxpayer owes and whatever amount the IRS believes the taxpayer is able to pay. Unsurprisingly, before accepting an offer in compromise, the IRS carefully scrutinizes the taxpayer’s assets and income to determine whether the taxpayer has the means to pay the full debt.
For businesses and individuals with high net worth, such as clients represented by Brown, PC, tax debt is typically in the six and seven figures range. Despite owning extensive property, the client may not be able to pay the tax debt without jeopardizing the company’s operations or personal financial plans. Brown, PC often negotiates a compromise with the IRS to reduce tax liability. Based upon our 25 years of tax liability representation, we are able to execute a smooth transaction between our client and the government.
Our firm is also considered one of the top criminal tax defense firms in the country. Should a problem arise for a taxpayer who has entered into such an agreement, our firm can step in to protect the taxpayer’s rights and assets. Before founding our tax litigation law firm, Lawrence Brown was a trial attorney for the DOJ tax division. He knows firsthand the government’s strategies and tactics for pursuing tax debt and seizure of property. His insight is a benefit to our clients who face substantial losses in disputes with the IRS. Our firm recognizes how much is at stake. We are, therefore, selective about the cases we take so that we can give our full attention and resources to each one.
Penalties for Tax Compromise Fraud
Violation of 26 U.S.C. §7206(5) is a serious felony. If convicted, a corporate taxpayer may be fined up to $500,000. An individual taxpayer may be sentenced to up to three years in prison and fined up to $250,000. In addition, the taxpayer faces potential seizure of assets and assessment of taxes, interests and penalties. The taxpayer may also be ordered to pay twice the gross gain acquired by the taxpayer as a result of the violation or twice gross loss to another party.
Brown, PC represents multinational businesses with substantial assets maintained in complex business organizations. Often, what the government classifies as concealment may merely be the ordinary treatment of property associated with multiple layers of parent, subsidiary and affiliate corporations. We also represent high-profile individuals who hold valuable properties in trusts and in partnership with others.
Our clients would endure tremendous losses if the government prevailed in a tax violation case. We aggressively fight for our clients’ rights to their property, and in the case of individuals, their very freedom.
Fraud During Tax Compromises Negotiations
26 U.S.C. §7206(5) prohibits fraud in relation to a compromise under §7122 or a closing agreement under §7121. Specifically, the government must prove beyond a reasonable doubt that the taxpayer willfully concealed property or withheld, falsified or destroyed records.
§ 7206(5) applies narrowly to cases involving a compromise or a closing agreement. However, the IRS makes very few offers in compromise, instead opting to make installment agreements or other payback arrangements whenever possible.
Consequently, the government rarely prosecutes taxpayers under § 7206(5). Rather, the government may bring similar charges under more general provisions, such as §7206(1) declaration under penalty of perjury, §7206(2) aiding and abetting or §7212(a) corrupt or forcible interference with the administration of internal revenue law.
The taxpayer is not the only person or entity that may be charged under § 7206(5). The provision applies to any individual or entity that is responsible for concealing property or interfering with records related to the compromise or closing agreement.
Does the taxpayer have the resources to pay the tax debt in full? This is a crucial question the IRS seeks to answer before offering a compromise or closing the case. To make this determination, the IRS considers the value of the taxpayer’s property. In addition, the IRS may require forfeiture of the property to satisfy the debt. Section 7206(5) prohibits the taxpayer from concealing property from the IRS in relation to this assessment and payment.
Withholding, Falsifying and Destroying Records
The taxpayer is responsible for maintaining accurate records. The IRS meticulously reviews records in connection with an offer in compromise and when finalizing the closing agreement. Missing, incomplete, altered or inaccurate records raise red flags that may lead to further investigation. However, simply making a mistake or not having a record available is not a crime. The defendant must act willfully in regard to receiving, withholding, destroying, mutilating or falsifying documents or making a false statement about the taxpayer’s financial conditions.
Willfulness is an Element of the Offense
The government must prove beyond a reasonable doubt that the defendant’s actions were willful. The meaning of the word “willfully” in a 7206(5) violation is the same as in other provisions of the criminal tax code, which is that the taxpayer performed “a voluntary, intentional violation of a known legal duty.”
A tax fraud attorney at our Forth Worth law firm often attacks the element of willfulness. We may demonstrate that the taxpayer had a good reason for destroying records or transferring property independent of the IRS agreement. For example, our client’s IT department may have accidently purged computer documents, or our client’s transfer of property into another person’s name was predicated on a contract that predated the tax issues.
Consult with an Experienced Fort Worth Tax Fraud Lawyer if Charged With Property Concealment
The U.S. government aggressively pursues taxpayers charged with property concealment and record destruction. You need to fight those charges just as aggressively. A Fort Worth tax fraud lawyer at Brown, PC is your strong advocate.