Filing a tax return and paying the taxes owed are a legal requirement under federal law. Failure to do so can result in criminal charges as well as civil liability. For an individual or a company with high earnings and a valuable assets portfolio, an innocent mistake can result in an unnerving IRS audit, alarming criminal charges and extensive potential losses. A criminal conviction can also lead to the frightening prospect of the loss of freedom.
Attorney Lawrence Brown is a former DOJ Tax Division trial lawyer who has prosecuted dozens of criminal tax cases and knows the specific approaches and strategies used by the government. Attorney Brown has devoted his 25-year career to tax litigation and white-collar crimes defense, making him a skilled advocate of taxpayers who face criminal charges. He has rigorously studied the tax codes and knows the inner workings of the courts where these cases are heard. He, along with each Fort Worth criminal tax lawyer at Brown, PC, formulates a dual approach that zealously defends clients in the criminal courts while protecting their financial interests in civil IRS and Tax Court proceedings.
Our firm is selective about the cases we take so that we can deliver the highest quality representation in the most complex and highest profile criminal trials. Our clients include well-known companies and individuals, including celebrity athletes, actors, entertainers, businesspeople, executives and professionals.
Penalties and Charges
Failure to file a tax return or to pay is a misdemeanor under 26 U.S.C. §7203, punishable by up to one year in prison and hefty fines, in addition to costs, penalties and interests on the original estimated taxes owed. The government may also upgrade the misdemeanor charges to evasion, a felony crime carrying the potential of five years in prison.
Charges may be based on four general areas, including:
- Failure to pay the estimated taxes due
- Failure to file a tax return
- Failure to keep records pertaining to taxes
- Failure to supply the information to the IRS
The government rarely files charges for failure to supply information or keep records, partly because of the short statute of limitations. However, failure to file tax returns and pay estimated taxes are often more aggressively prosecuted, especially if the taxpayer has substantial assets and owes a large debt liability as is common with our clients. It is important to note that the provisions of § 7203 apply to “persons” which the tax code refers to as individuals, estates, trusts, associations, partnerships and corporations.
Criminal Charges for Failure to File
To convict on a failure to file charge, the government has the burden of proving three elements beyond a reasonable doubt:
- The taxpayer was required to file a tax return
- The taxpayer failed to file the return at the legally prescribed time
- The taxpayer’s failure to file was willful
In a failure to file case, the government must prove receipt of taxable income. Our attorneys hold the government to this burden. When representing companies or individuals who have lost profits in a given year, a Fort Worth criminal tax lawyer at our firm can sometimes show that gross income did not exceed the statutory minimum, so our client did not have a duty to file a tax return. The government need not show a tax deficiency, however, only that a return was required.
IRC Section 60501 requires a taxpayer file a Form 8300 information return on the 15th day after receiving more than $10,000 in cash in a single business transaction or multiple related transactions. This requirement often ensnares attorneys and other professionals who are unaware of the law.
A taxpayer who files a return may nonetheless be charged with a crime under §7203 if the government alleges an illegal source of income was not reported. Courts have decided that filing only a bottom line figure without enough information for the IRS to make its calculations may not be considered a return under the code. In addition, a late filing may also be subject to criminal charges.
Criminal Charges for Failure to Pay
The government must prove beyond a reasonable doubt three elements to convict for failure to pay:
- The taxpayer had a duty to pay a tax liability
- The taxpayer did not pay the tax at the time legally required
- The taxpayer’s actions were willful
A failure to pay case is typically related to failure to file a tax return, but may also involve a failure to pay the full amount. A failure to pay may be charged as a felony evasion if the taxpayer attempts to hide assets or takes another affirmative action to avoid paying the government.
Failure to pay, failure to file and evasion are crimes of intent, meaning the government must prove willfulness on the part of the taxpayer. The U.S. Supreme Court has defined the willful violation of a criminal tax code as the “voluntary, intentional violation of a known legal duty.”
Negligence does not violate the statute, but rather the taxpayer must have deliberately disobeyed the law. State of mind is often difficult to show through direct evidence. However, the government may prove willfulness through circumstantial evidence.
The government does not need to show that the taxpayer was financially able to pay taxes by their due date. However, we may argue that our client’s actions were not willful, but instead were based upon our client’s financial circumstances.
Consult a Fort Worth Criminal Tax Lawyer at Brown, PC When Faced with Failure to File or Pay Tax Violations
Failure to file and failure to pay can give rise to serious charges and substantial financial losses. Brown, PC is well-known as a leading law firm in tax trial cases. When you retain a Fort Worth criminal tax lawyer at our firm, we will deliver a strong defense in the criminal courts while helping to preserve your financial wellbeing.