Criminal Tax Investigations and Prosecutions

Federal criminal cases involving allegations of tax crimes are among the most complicated cases that most criminal defense attorneys will ever handle. For starters, these cases involve the highly complicated Internal Revenue Code. If that was not enough complexity, these prosecutions require an attorney who knows a lot of substantive and procedural law that impacts a federal criminal case. If any individual or company is facing an investigation or actual prosecution for a federal criminal tax crime, that person or company needs the services of a specialist, a lawyer who knows how to work on these extraordinarily complex cases.

Let’s start with the law. Obviously, there is the tax code itself. Tax law is a specialty unto itself, with a code and regulations so vast that some lawyers spend their entire careers trying to fully understand it. Tax specialists tend to be extremely smart, sometimes bookish, and sometimes are incapable of standing up to describe in court the precise tax issue that is at the heart of a case. This is not a criticism, it is simply an observation, for the tax laws are so complicated that it requires intense focus and scrutiny. However, being able to explain complicated subjects to a judge or jury is not the same as being an expert. Therefore, anyone facing a criminal tax case needs a criminal defense lawyer of the sort who can quickly learn the case, which includes not only the facts, but the complex legal issues at the heart of any criminal tax prosecution. Good criminal defense lawyers tend to be a “quick study” and need to learn new areas of the law for each new case they handle.

Next, we have the specific criminal laws that sometimes are used in federal income tax cases. For the most part, federal prosecutors use two statutes in tax fraud cases. One law says that it is a felony if anyone tries to avoid any tax or payment of tax. Anyone looking at a prosecution under this law faces a prison sentence of up to 5 years and a fine of up to $100,000. A second law says that a person commits a crime if he or she is otherwise required to pay a tax, file a return, keep records, or supply information, and that person willfully fails to pay the tax, make the return, keep the records, or supply the information. This law is usually a misdemeanor with a maximum 12-month sentence and a fine of up to $25,000. A few other federal tax fraud laws make it a crime if a person willfully fails to collect or withhold taxes. These laws generally include sentences ranging up to five years. Federal tax cases also often involve a “conspiracy” charge. In these cases, the prosecutor claims that two or more people teamed up to try and violate the tax laws. These kind of conspiracy crimes generally have a 5-year maximum penalty. Federal prosecutors also like to include “other” crimes in what seems to be a tax case, crimes like forgery, false statements, money laundering and similar add-on charges that usually are designed to ramp up the pressure on the person or company under investigation.

After understanding both the tax code and the specific statutes that tend to be used in a federal criminal tax case, the attorney then needs to know about procedure, meaning the process used in a federal criminal investigation and trial. As outlined in other places on this site, federal cases are very different, and anyone facing such a case needs an attorney well-versed in these highly specialized matters.

One of the main issues in most federal criminal tax cases is whether the prosecutor can prove beyond a reasonable doubt that the Defendant acted “willfully.” In other words, a person does not break the criminal tax law for the most part unless he or she intended to do so. The tax laws are so complicated that the United States Supreme Court has approved of a “good faith” defense in many of these matters, meaning that the jury is told that the Defendant cannot be guilty if he or she acted in a good faith effort to comply with the complicated tax provisions. A variation of this defense is “reliance” on the advice of an accountant or lawyer. Bad advice by a person’s accountant or attorney is usually not the same thing as willfully violating the tax laws.

If a person is guilty of a federal criminal tax cases, the lawyer needs to be very accustomed with working on the highly complicated sentencing rules used in these situations. Furthermore, the attorney needs to guide his or her client through parallel issues involving back taxes, penalties and interest. The lawyer also needs to consider potential criminal fines, forfeiture and issues that can even endanger a business that was involved in the case.

The is obviously just a summary of some issues that come up in a federal criminal case involving that tax laws. Anyone facing these scary situations needs to consult with an expert. Please feel free to contact Paul if you’d like to talk about your case, the office number is (404) 207-1338.