V. Statute of Limitations Defense

Perhaps the most important affirmative defense in tax cases is the statute of limitations. Section 6531 controls the statute of limitations periods for most criminal tax offenses. Under section 6531, the general rule is that the statute of limitations for criminal tax offenses is three years. However, the exceptions to the three-year rule essentially swallow up the general rule.

The CTM includes a helpful table that sets forth the limitations periods for common tax offenses: Read More

IV. Fifth Amendment Defense

Criminal tax cases are chock full of constitutional claims made by defendants. The tax protest movement, in particular, has spawned many constitutional defenses, from the sublime to the ridiculous.

A valid constitutional defense is the Fifth Amendment right against self-incrimination. In United States v. Sullivan, 274 U.S. 259 (1927), the Supreme Court of the United States held that the privilege against self-incrimination is not a defense to prosecution for failure to file. In other words, a defendant may not rely on the Fifth Amendment to not file at all.

However, the Court said that the privilege could be asserted, in appropriate Read More

III. Cash-Hoard Defense

In the indirect methods of proof, the government must prove one of two things: either (1) an increase in net worth or (2) that deposits made by the defendant into his bank account were not reported as income. The most common defense to these indirect methods is that the defendant had substantial quantities of cash at the beginning of the period under investigation. This defense is known as the cash hoard defense.

A typical cash hoard defense asserts that the defendant in earlier years received gifts or an inheritance from family and/or friends, which he then spent during the prosecution period. The Supreme Court of the United States described the cash hoard defense as Read More

II. Good-Faith Belief Defense

A key element of most tax crimes is willfulness. The government must show that the defendant willfully evaded taxes or willfully filed a false return. This means that the government must prove that (1) the defendant knew what was required by law and, (2) notwithstanding, intentionally violated the law.

This definition raises several opportunities for the defense. For example, the defendant may introduce evidence that he was mistaken as to the state of the law or that he had a good-faith misunderstanding as to what the law provided. Such a defense would negate willfulness and would enable the jury to acquit. On the other hand, a good-faith belief that Read More

I. Forgotten-Deduction Defense

In a tax evasion case, the government bears the burden of proving that the defendant had a substantial tax deficiency. Defendants often try to show that there was no deficiency, that their return was substantially accurate, or at least raise questions pertaining to the government’s calculations. The argument usually goes something like this: “I had unclaimed deductions.”

The most famous example of this is United States v. Helmsley, 941 F.2d 71 (2d Cir. 1991). There, the defendant used one method of depreciation on her return. When the government charged her with tax evasion and put on evidence of a deficiency, the Read More

Introduction

Affirmative defenses are rare in criminal tax cases. The government has the burden to prove each and every element of the offense beyond a reasonable doubt. As a result, the burden is generally on the government to prove all the relevant facts to the jury, and the defendant may simply put on evidence that will counter the government’s proof.

What this means is that the defendant can deny having the required mental state to commit tax evasion without shifting the burden from the prosecution to himself to prove that he lacked the required mental state. Indeed, the burden remains firmly on the prosecution. Sandstrom v. Montana, 442 U.S. 510, 524 (1979). To the extent that the Read More