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Each and every document that a person submits to the IRS may fall under scrutiny. A misstatement on a return, statement or other document could be classified as false and trigger an investigation. At best, the taxpayer must sacrifice time and money to cooperate with the IRS’s inquiries. At worst, the government may file fraud charges.
Brown, PC can assist taxpayers at the earliest stages to keep charges from being filed in the first place. If the government prosecutes the taxpayer, our law firm can build a strong defense that protects our client’s assets, financial security and freedom. Our firm has exclusively handled tax disputes and white collar criminal defense for 25 years. We have the experience, resources and innovative strategies to take on the highest profile tax fraud investigations and prosecutions.
Our clients comprise Fortune 500 companies and well-known individuals in the world of entertainment, sports and business. They tend to be high profile and high income with complicated financial portfolios, the exact taxpayer profile most likely to be targeted by an IRS investigation. Our busy clients do not generally do their own taxes and instead rely upon third party accountants, auditors and other tax professionals. Ultimately, however, liability is attributed to both the taxpayer and tax professional for mistakes or false statements made on the documents submitted to the IRS. For this reason, our Texas tax fraud lawyers suggest that any person or entity that is questioned about a document retain experienced counsel before acting or responding.
Penalties Under § 7207
Willfully submitting a fraudulent return, statement or other document to the IRS is a misdemeanor. An individual taxpayer is subject to a jail sentence of up to one year and fines of up to $100,000. A corporate taxpayer is subject to up to $200,000 in fines. The sentence may also include retribution for double the gross gain to the taxpayer or double the gross loss to another party resulting from the taxpayer’s false statement.
Section 7207 misdemeanor charges are generally reserved for isolated incidents or in cases in which the taxpayer cooperated fully with the IRS or confessed immediately when the IRS questioned the veracity of the document. The government also considers mitigating factors, including the assistance of a lower-level participant in the prosecution of another person responsible for a broader tax fraud scheme. Otherwise, the government is likely to pursue felony fraud charges if the taxpayer submitted the false document in furtherance of a plan to deceive the IRS.
If appropriate, our firm negotiates reduction of a felony fraud charge to a misdemeanor to minimize the sentence imposed upon our client. However, if the government’s evidence does not meet the high standard of proof, we demand dropped charges or acquittal at trial.
Elements of Fraudulent Returns, Statements or Other Documents
The government must prove a 26 U.S.C. § 7207 violation beyond a reasonable doubt. The three elements of the offense are:
- The taxpayer or preparer submitted to the IRS a tax return, statement or another document.
- That return, statement or document was false with respect to a material matter.
- The taxpayer or preparer acted willfully.
What is a “Document” under § 7207?
A document under § 7207 includes lists, returns, accounts, statements or other documents. However, the section applies to virtually any document without limit as to type. The government generally does not pursue § 7207 charges for filing a false tax return, but may instead pursue the taxpayer or preparer under other provisions.
The taxpayer may be liable for a false statement made on a document prepared by another person if the taxpayer delivered or disclosed the document to the IRS. This holds true even if the taxpayer did not sign the document, but merely submitted it to the IRS knowing the document contained a false statement of a material matter. Common scenarios involve an IRS audit in which the auditor submits cancelled checks, invoices or receipts that have been altered to reflect an overstated amount of deductions.
What is a False or Fraudulent Material Matter?
A false material statement is an element in several criminal tax code violations, including § 7207 charges that involve IRS fraud. First, the document must contain a false or fraudulent statement. Second, the falsity must be about a material matter. However, materiality is not based upon whether the taxpayer’s taxes are affected by the statement and, in fact, could apply to statements that do not reduce tax liability. This gives the government discretion to classify practically any information as material, a point that our attorney vehemently argues against.
What Does Willful Mean in the Criminal Tax Code?
The taxpayer is only criminally liable for willful conduct. In other words, an error or negligence does not subject the taxpayer to criminal liability, although perhaps civil liability. Willful generally means a “voluntary, intentional violation of a known legal duty.”
Short of an admission of wrongdoing, rarely does direct evidence of willfulness exist. The government typically proves taxpayer intent through circumstantial evidence. Like putting a jigsaw puzzle together, the government attempts to demonstrate the taxpayer’s state of mind by connecting several incomplete pieces to form a bigger picture. Texas tax fraud attorneys are skilled at undermining each piece of evidence to raise reasonable doubt as to the willfulness of the taxpayer’s actions.
Consult with a Texas Tax Fraud Lawyer if Facing a Tax Fraud Investigation or Prosecution
A misstatement on a document filed with the IRS can give rise to a tax fraud investigation. Do not delay in retaining aggressive defense counsel to protect your financial interests, future and freedom. The Texas tax fraud lawyers at Brown, PC will fight aggressively on your behalf.