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April 3, 2018


SCOTUS narrows government’s ability to pursue tax evasion charges

Entrepreneurs know that paperwork can become unmanageable while running a business. Business owners are constantly making decisions on which material to keep and which to shred. But what if you inadvertently shred important tax documents or fail to file taxes at all? The Supreme Court of the United States (SCOTUS) recently addressed this question.

The case, Marinello v. United States, involves a business owner that failed to maintain business records and did not file business or personal taxes. The Internal Revenue Service (IRS) investigated Marinello in 2004. The investigation was unable to determine if Marinello’s income was significant enough to warrant the need for tax filings. Eventually, the IRS conducted a second investigation and questioned Marinello about his failure to file or pay taxes. The IRS charged Marinello with eight tax code misdemeanors and one felony count of tax evasion.

Marinello fought the charges, essentially stating that he could not be guilty of a crime because he did not know he was the subject of an investigation.

How did SCOTUS rule?

In the past, as noted in a piece by Texas Public Radio, federal prosecutors would rely on a provision of the tax code that made it a felony to “corruptly…endeavor to obstruct or impeded the due administration” of the tax code. This has been used broadly to support the prosecution of various tax crimes.

SCOTUS appears to have narrowed the application of this provision with the holding in Marinello. The highest court in the country stated that in to convict under this provision, the accused must have had some knowledge of an impending investigation.

What is the impact of this ruling?

Any ruling by SCOTUS impacts the law throughout the country.

The case should also serve as a reminder of the intricacy of these criminal charges. An allegation of tax evasion requires the government establish various elements. A failure to do so can defeat the case. As such, it is important to seek legal counsel to help review the allegations and build a case that questions every element.

Tax Evasion