The most common federal tax crime is tax evasion, which is specifically defined in 26 U.S.C. § 7201 as a failure to report taxes, reporting taxes inaccurately, or failing to pay taxes. To establish a case for tax evasion under section 7201 of the Internal Revenue Code (IRC), the government must prove each of the following beyond a reasonable doubt: that the taxpayer attempted to evade or defeat a tax or payment of a tax; an additional tax was due and owing; and the taxpayer acted willfully. If the IRS proves its case for tax evasion against a taxpayer, the penalty can be significant including monetary fines and jail time.
Tag Archive for Tax Crimes
Iconic mobster Al Capone died in prison after he was convicted of tax evasion. More recently, after the notorious Lufthansa robbery that was immortalized in 1990’s Goodfellas, Jimmy the Gent went to prison not for his alleged role in the robbery but for a point-shaving scandal involving the Boston College basketball team. It could be that crime syndicate figures portrayed by actor Robert De Niro have a certain susceptibility to financial crimes prosecutions, or there could be something else at work.
Tax evasion and other financial crimes in New Jersey are often substitute prosecutions. Traditionally, tax evasion has been easy to prove: there are accurate and timely returns on file, or there are not. “You want to put a murderer in jail for not paying his taxes?” asked a befuddled Elliot Ness in the De Palma version of The Untouchables. Read more
Gary Stern is the latest professional to become ensnared in the coils of the criminal justice system. The once prominent lawyer who represented NFL players, doctors, lawyers, and other professionals has been charged with tax fraud. Federal prosecutors allege that Stern organized, operated, and promoted elaborate and bogus tax schemes, primarily to help his wealthy clients evade federal income taxes. For as complicated a strategy as these tax schemes might have been, they can be reduced to something so simple that even a caveman could do it: claiming millions of dollars in tax credits.
Specifically, the charges relate to preparing fraudulent tax returns and impeding the operation of the IRS. A federal indictment filed Tuesday in U.S. District Court in Chicago alleges that from 2006 to 2010, Gary J. Stern, “corruptly obstructed and impeded” the IRS Read more
Ex-Seyfarth Shaw Attorney Case: The Latest in a Series of Department of Justice Prosecutions For Tax Shelter Fraud
Recently, tax shelters have become the target of much prosecution by the Department of Justice. In the largest criminal tax case ever filed, professional services company KMPG LLP admitted to engaging in fraud and generating at least $11 billion dollars in false tax losses. The multi-billion dollar criminal tax fraud conspiracy involved the elaborate design, marketing, and implementation of fraudulent tax shelters.
Since the 2005 KPMG indictment and subsequent guilty plea, the Department of Justice has continued in its quest to uncover instances of tax shelter fraud. The case of Chicago tax lawyer and former Seyfarth Shaw LLP partner, John E. Rogers, is among the latest in a series of tax shelter fraud criminal prosecutions. Starting in 2010, the U.S. Department of Justice targeted John E. Rogers, ex-Seyfarth Shaw LLP partner, with a civil suit alleging he Read more
L.A. Fashion District: The Most Recent Target of the U.S. Government’s Crackdown On Money Laundering And The BMPE
The Los Angeles Fashion District spans 100 blocks, with over 2,000 businesses selling fashions and accessories at 30% to 70% off retail prices.
Saturdays are the busiest Los Angeles Fashion District shopping days, when wholesale-only shops open to the general public. The Sunday shopping epicenter is Santee Alley, between Olympic and Pico Boulevards, where you’ll find low prices, lots of knock-offs and fakes.
Thanks to a recent raid of dozens of businesses in the Fashion District, rock bottom prices and a wide-selection of clothing isn’t all that the Fashion District is now known for. Law enforcement operations have revealed that money laundering activities and Read more
For those of you who might be wondering, the cartoon-image that accompanies this blog is not meant to portray any of the defendants in this case. However, that does not mean that it is there for no apparent reason. On the contrary, it is intended to represent someone (or perhaps some people). I’ll give you a hint. The image itself is a bit of a paradox. Sound confusing? You’ll have to keep reading to find out its hidden meaning. I promise that you won’t be disappointed.
Joshua Vandyk met a terrible fate on Friday, September 5, 2014. The thirty-four year old investment advisor was sentenced to serve 30 months in prison for conspiring to launder monetary instruments. Read more
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
The government is not required to prosecute persons whom it believes has violated the law. Certainly, in the tax context, only a small percentage of people who are known or reasonably suspected to have committed a tax crime are investigated and prosecuted. Judgment calls abound – from the first discovery of information through prosecution.
Given the limited resources that can be applied to tax prosecutions, the government must be highly selective. The ability to “pick and choose” which cases it prosecutes is the reason why it has such a high conviction rate. The message from Uncle Sam to taxpayers is this: “Sure, we don’t prosecute all tax cheats, but if we get you in our prosecution cross-hairs, you are dead.” 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