Tax Fraud

Allegations of Tax Fraud

Lead by Robert M. Wilson, Kimball & Wilson LLP, provides representation to individuals and corporations which have been contacted by the Criminal Investigation Division of the IRS. Kimball & Wilson, LLP can assist you whether you are a third party recipient of an Administrative Summons or Grand Jury Subpoena or the subject or target of the investigation.

Administrative Summonses

Most IRS criminal investigations are conducted by Special Agents with the Criminal Investigation Division (CID) of the IRS though the use of an Administrative Summons. These summonses are usually directed to third-parties, such as banks, accountants, clients and vendors. They are also used to obtain documents directly from the target of the investigation. The Internal Revenue Code (Sec. 7602, et seq.) authorizes the use of the Administrative Summons, but also provides the mechanism for a third-party or the taxpayer to move to have the summons quashed.

Grand Jury Investigations

Some IRS criminal investigations are also conducted by a federal grand jury. Many times these cases are parallel investigation done in conjunction with another federal investigation being conducted by another federal law enforcement agency such as the FBI, Secret Service or DEA. One major difference between an administrative investigation and one conducted by a grand jury is that the latter utilizes grand jury subpoenas to procure documents and records and to obtain information from third-party witnesses.

Foreign Bank Accounts

The IRS has launched a major offensive designed to uncover the existence of off-shore bank accounts and other financial accounts. Federal regulations require taxpayers who have an interest in a foreign financial account to file what is known as an F-Bar Form (Report of Foreign Bank and Financial Account. The form number is TD F 90-22.1). In addition, such taxpayers are required to disclose an interest in foreign accounts on their tax returns. The IRS has begun to aggressively prosecute the failure to make complete disclosure of such accounts.

The Foreign Account Tax Compliance Act (FATCA)

The Foreign Account Tax Compliance Act (FATCA) is designed to aid U.S. efforts to improve tax compliance involving foreign financial assets and offshore accounts. Under FATCA, U.S. taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS. This reporting will be made on Form 8938, which taxpayers attach to their federal income tax return, starting this tax filing season. In addition, FATCA will require foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Taxpayers and institutions need to take steps now to avoid potential criminal repercussions arising from FATCA.

Tax Evasion

26 U.S.C. § 7201. Attempt to evade or defeat tax

“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

Many federal criminal tax investigations revolve around allegations of tax evasion. This is a felony offense, the essential elements of which include (1) an additional tax due and owing; (2) willfulness; and (3) an attempt to evade or defeat the tax. As with all federal tax offenses requiring a showing of “willfulness,” tax evasion involves a voluntary, intentional violation of a known legal duty.

False Tax Returns

26 U.S.C. § 7206. Fraud and false statements

“Any person who—

(1) Declaration under penalties of perjury

Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.

Shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.”

This statute is not violated unless the taxpayer has made, signed and filed a false tax return or other document. The elements of this offense are: (1) making and subscribing a false return or other document; (2) which states by written declaration that it was signed under penalties of perjury; (3) the falsity in the return or document was material; and (4) willfulness.

Failure to File

26 U.S.C. § 7203. Willful failure to file return, supply information, or pay tax

“Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting ‘felony’ for ‘misdemeanor’ and ’5 years’ for ’1 year’.”

This statute actually sets out five different tax misdemeanors: (1) willful failure to file a required return; (2) willful failure to pay an estimated tax; (3) willful failure to pay tax; (4) willful failure to keep records; and (5) willful failure to furnish information. Each one is punishable by up to one year imprisonment

It is a felony punishable by up to five years imprisonment, if the willful failure to file involves an IRS Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

Abuse Tax Shelters

The IRS has vigorously investigated and sought prosecution of what it terms “abusive tax shelters.” These are typically shelters in which the IRS believes there to be no legitimate purpose but the evasion of taxes. Many such shelters involve the use of “family” trusts and other grantor trusts and other trust mechanisms. Many criminal investigations into abusive tax shelters target the promoters of the shelters, and not the taxpayer. Recently, however, the IRS has made it a point of emphasis to target individual taxpayers who fall within certain prosecution guidelines.

Lead by experienced white collar criminal defense attorney Robert M. Wilson, we take pride in our ability to fully examine each and every aspect of your case. We offer thorough representation and construct a strong and ethical defense on your behalf.

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