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

Knowingly filing a false tax return and aiding another to do so are violations of the IRC, Section 7206. Briefly summarized, those violations encompass:

• Tax perjury — knowingly signing a false tax return that is false
• Willfully aiding another person to commit tax fraud
• Hiding assets with the intent to evade or defeat the assessment of taxes or in connection with a tax settlement or compromise offer

Penalties are stiff

The law says that anyone convicted of the foregoing is guilty of a felony. An individual can face a fine of $250,000 ($500,000 in the case of a corporation or go to prison for not more Read More

Contrary to popular belief, the IRS doesn’t want to throw you in jail. Criminal investigations consume a lot of resources, take time, and are expensive. For most taxpayers, a criminal investigation isn’t a first step, but rather the last step in a lengthy process to get you to resolve your tax debt. In other words, it’s rare that an agent will show up on your doorstep one day with cuffs in hand.

Additionally, while tax evasion and related charges are an important piece of the IRS Criminal Investigation (CI) charges, they’re not the whole kit and kaboodle. Often, criminal investigations are linked to other criminal activities like fraud, drug offenses, and money laundering. Need you forget Al Capone? When it comes to criminal activities, other federal agencies – like the Federal Bureau of Investigation and FINCEN – can pursue these Read More

The United States is tracking down hidden offshore accounts, and the latest news is a report that shows which states have the most taxpayers disclosing such accounts (California is No. 1), and where they are located (Switzerland is tops).

Taxpayers in at least 45 states and the District of Columbia reported accounts in 68 countries and territories.

The new U.S. Government Accountability Office report: “IRS’s Offshore Voluntary Disclosure Program (OVDP): 2009 Participation by State and Location of Foreign Bank Accounts,” is a supplement to its March 2013 report, “Offshore Tax Evasion: IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion.” Read More

The Latest in a Series of Defendants to be charged on Monday, January 14, 2013 with Concealing Accounts at Israeli Banks was a Beverly Hills resident. We originally posted The Long Arm of the IRS Reaches Israeli Shores – Oy Vey! which discussed that recent Articles about the IRS, FATCA and Israel, are proof that the IRS’ Probe into Secret Offshore Bank Accounts is not just limited to Switzerland.

Now Monajem Hakimijoo, also known as Manny Hakimi, of Beverly Hills, Calif., pleaded guilty on Feb. 13, 2014, in the U.S. District Court for the Central District of California to filing a false federal income tax return for tax year 2007, the Justice Department and Internal Revenue Service (IRS) announced Monday, February 17, 2014. Read More

We previously posted “Raoul Weil the Ex-UBS Banker Is Coming To America to Rat You Out! where we discussed that the former head of UBS’s wealth management division, Raoul Weil, has agreed to be extradited to the United States to face charges.

US authorities issued an international arrest warrant for Weil in early 2009, just months after he was charged with allegedly conspiring to help 17,000 American clients of Swiss bank UBS avoid taxes.

We also discussed that another UBS Banker, Bradley Birkenfeld who became a whistle blower and was awarded a $104 million reward from the U.S. Internal Revenue Service and this may happen all over again, now that Raoul Weil is being extradited to the US. Read More

After taking a plea deal and receiving 37 months in prison for playing a role in a tax fraud scam, Freddie Mitchell presented medical documentation stating he has chronic traumatic encephalopathy (CTE), a possible result of his 8 documented concussions. CTE can have symptoms of memory loss, motor skills impairment, depression, aggressive behavior and confusion. As it is in the research stages, not everyone agrees that CTE can be properly diagnosed unless postmortem. Mitchell clearly states that he did not want a plea deal and yet took one anyway on his attorney’s advice.

This scam involved more than NFL Superstar Freddie Mitchell. It involved an Internal Revenue Service agent making promises while clearly trying to defraud the government. It involved an NFL player with a big ego (something found commonly in professional sports) that had more Read More