The IRS can issue an assessment for back taxes and penalties in a civil matter, without having to prove that you had any intent to evade your taxes. All that is necessary for the IRS to say that you owe back taxes is evidence that you either underpaid your obligations or that you received a refund for which you were ineligible. Everything can change if the IRS believes that they have enough to make a criminal referral for tax evasion. Still, there is something more needed than just the fact that you did not pay enough taxes.
Here are some of the criminal charges that the IRS may pursue through the U.S. Attorney’s office for tax-related matters.
Tax Evasion
You can be convicted of tax evasion if a prosecutor can prove the following four elements beyond a reasonable doubt:
- There was tax owed but never paid.
- There was an intentional act to evade your tax liability that can include: concealing income, filing a false return, keeping two sets of books, underreporting cash receipts, using sham entities, destroying documents, or hiding assets.
- The defendant acted willfully to try to evade their tax obligations.
- The falsehood was material to the determination of the tax assessment.
You cannot be charged criminally for tax evasion if you made an innocent error in good faith. The law requires that you have taken some type of willful action, meaning that the prosecutor must prove that there was intent. If you are convicted of tax evasion, you can be sentenced to up to five years in prison and fined up to $100,000 (in addition to having to pay back taxes).
Filing a False Tax Return
You can also be charged with a crime for knowingly including false information on a tax return that you have signed under the penalty of perjury. Both this crime and tax evasion are charged as felonies. There is one key difference between tax evasion and filing a false tax return: the latter crime does not require there to have been a tax owed to the IRS. The penalty for filing a false tax return is up to three years in prison.
Failure to File a Tax Return
It is a legal obligation to file a tax return, regardless of whether you owe any taxes to the government. You must also pay all of your tax debts to the IRS. You can be charged criminally for the failure to file a tax return. Here, the failure to file the tax return must have been willful. In other words, you cannot be charged with criminal failure to file a tax return if the situation resulted from a good-faith error. If you are convicted of a failure to file a tax return, you can be sentenced to up to a year in prison for every year that you missed. Accordingly, a conviction can result in several years in prison if you have missed more than one year of tax returns.
Conspiracy to Defraud the United States
In some cases, you do not need to have engaged in actual tax evasion to be charged with a crime. Conspiracy is one of the most effective weapons in a prosecutor’s arsenal. In general, a conspiracy refers to two or more people agreeing to commit an illegal act and taking overt actions in furtherance of their scheme. So long as they have taken a single step towards an illegal act with which there is an agreement between them, all those involved can be charged with conspiracy, unless they have overtly withdrawn from the scheme. Conspiracy to defraud the United States is punishable by up to five years in prison.
Aiding and Assisting in Tax Fraud
Even if you have not committed actual tax fraud yourself, assisting someone else in doing so is also a crime. These charges are commonly filed against accountants who have filed a false return on someone else’s behalf when they know that the taxpayer is committing tax evasion. A conviction for this crime carries a penalty of up to three years in prison, along with a substantial fine.
False Statements
Any time that you are dealing with a government official who has investigative powers, you are under the obligation to speak truthfully, whether verbally or through written statements. Even if the IRS does not have enough evidence to go after you for tax evasion, they may recommend charges based on the process and anything illegal that you are alleged to have done during its course. In other words, you can end up learning the hard way the old adage that “the cover-up is worse than the crime.”
Federal law gives prosecutors a broad authority to charge you with false statements. 18 USC 1001 is the federal law that prohibits false statements in certain circumstances. Prosecutors favor the use of these charges in many circumstances. They can charge you with making false statements as either an addition to a tax evasion charge, or independently on its own. A conviction can result in a punishment of up to five years in prison.
Specifically, the law makes it a crime to:
- Falsify, conceal, or cover up by any trick, scheme, or device a material fact;
- Make any materially false, fictitious, or fraudulent statement or representation; or
- Make or use any false writing or document, knowing the same to contain any materially false, fictitious, or fraudulent statement or entry.
Speak to a New York Tax Lawyer Today
If you are facing criminal tax charges or want to avoid them in the first place, you must speak with a New York tax attorney at the Thorgood Law Firm. You should never try to deal directly with the IRS on complicated issues, nor should you attempt to face allegations of misconduct on your own. You can speak with a New York tax attorney by filling out an online contact form or by calling us today at (212) 490-0704.
