Tax Fraud & Federal Charges: What You Need to Know

Tax fraud and tax evasion are among the more common offenses often lumped into the white collar crime category. Often, these offenses are associated with well-known financial titans, corporate executives, and even celebrities, including actors like Wesley Snipes and Mike “The Situation” Sorrentino, who was recently sentenced to 8 months in federal prison for failing to pay taxes on $9 million in income.

While tax fraud may have strong associations with celebrities and top executives, nearly anyone can come under scrutiny from the Internal Revenue Service (IRS), and face serious charges and penalties for federal crimes.

Tax-Related Criminal Charges

The U.S. Tax Code, Title 26 section 7201 of the U.S. Code, makes it a crime to willfully attempt to evade assessment or payment of taxes imposed by the federal government. There are a number of specific offenses under this section, including not only tax evasion and tax fraud, but also:

• Attempt to evade or defeat tax (§ 7201)
• Willful failure to pay (§ 7202)
• Willful failure to file tax returns or provide information (§ 7203)
• Fraudulent statements (§ 7206)
• Attempt to interfere with administration of Internal Revenue laws (§ 7212(A)

How the IRS Identifies Crime

The IRS is comprised of various divisions that allow it to identify and investigate criminal tax offenses. The agency’s Criminal Investigation Division (CID), for example, investigates corporate and individual taxpayers, in addition to those who prepare taxes, suspected of committing tax fraud and other fraud offenses involving income taxes.

In addition to reviewing any civil audits conducted by other divisions or agencies, CID investigators look for many red flags when scrutinizing suspects, including:

• Failures to file tax returns
• Discrepancies in reported income and 1099s
• Fraudulent or fictitious tax deductions or documents
• Failures to report income, understating income, and concealing assets
• The use of tax evasion schemes such as pyramiding, sham trusts, using corporate funds to pay for personal expenses, and employee leasing or third-party payers

Tax Fraud Penalties

Though every case is different, federal charges for tax fraud are very serious allegations that can pose severe and life-altering penalties. However, as with many other fraud and white collar crimes, sentences upon a conviction may be influenced by various factors and potential sentencing enhancements, including:

• Financial loss suffered by the government
• The scope of conduct, including the use of any sophisticated scheme or means
• Whether defendants were responsible for leading or supervising others in the commission of the fraudulent offense
• Whether defendants used a special skill or abused their public positions
• Whether defendants impeded investigations or obstructed justice

In addition to civil penalties, individual convicted of tax-related crimes under Title 26 of the U.S. Code face significant terms of imprisonment, including:

• § 7201 and 7202 – 5 Years
• § 7203 – 1 year
• § 7206 – 3 years
• § 7212(A) – 3 years

In some cases, tax fraud investigations may also result in conspiracy charges relating to a conspiracy to commit tax fraud or defraud the federal government, which is penalized by up to five years in prison on each count.

Related Charges

Investigations into tax fraud can also unearth information that may provide evidence for prosecutors to pursue other related fraud charges, including:

• Wire fraud, in connection to fraudulent tax returns filed electronically, or other fraud-related activity
• Mail fraud, in connection to returns mailed to the IRS, as well as other fraud-related conduct
• Money laundering
• Embezzlement
• Securities fraud
• Conspiracy to commit tax fraud or defraud the federal government

Proven Defense From Experienced Ohio Federal Criminal Defense Lawyers

Friedman Nemecek Long & Grant, L.L.C., L.L.C. is comprised of nationally recognized and award-winning attorneys who leverage decades of collective experience when guiding clients through all types of criminal investigations and cases. If you or someone you love is currently under investigation for tax fraud or tax evasion, or have been charged with any federal crime, the time to retain proven representation is now.