With the increasing attention that the United States government is devoting to the prevention and prosecution of white collar crime, the IRS is similarly renewing its commitment to prosecuting tax criminals. Although the Criminal Investigation Division is one of the smallest divisions of the IRS, it focuses intensely on the three thousand criminal prosecutions it recommends each year. Currently, CID secures convictions in approximately 85% of cases it recommends for prosecution. Some of the most common tax crimes include:
Tax Evasion – Internal Revenue Code Section 7201
Tax evasion is the most serious charge in the Internal Revenue Code, carrying a maximum sentence of five (5) years in prison and a two hundred and fifty thousand dollar ($250,000 USD) fine per count. Tax evasion involves the voluntary and intentional violation of a person’s known legal duty, such as a person who tries to conceal the nature, extent or ownership of income or who inflates/fabricates tax deductions. In most cases, the IRS will investigate multiple years and try and prosecute individuals for multiple counts of tax evasion (example: 3 years of misstated returns = 15 years in prison and up to a $750,000 fine.)
Failure to File a Return, Supply Information, or Pay Tax – Internal Revenue Code Section 7203
Failure to file a return, pay a tax or estimated tax, keep legally-required tax records (such as business receipts), or supply legally required tax related information. Violation of the statute is a misdemeanor punishable by a fine of up to $25,000 for an individual ($100,000 for a corporation), imprisonment of not more than one year, or both. To obtain a conviction, the government must first prove that the taxpayer was required to file a tax return for a specific tax period and did not timely do so. However, it is possible for a taxpayer to be convicted, even if they do not owe any tax.
Courts look at several factors when determine whether a taxpayer was aware of a filing obligation:
- Had the taxpayer filed a tax return before?
- What was the taxpayer’s education level?
- What type of job does the taxpayer have?
- Did the taxpayer receive a warning letter from the IRS?
- The government can prove willful non-filing by showing that the taxpayer disregarded a warning letter.
Failure to collect or pay payroll taxes – Internal Revenue Code Section 7202
Any person required to collect, account for, and pay over any tax imposed by this statute, or who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be imprisoned not more than five (5) years, fined not more than ten thousand dollars ($10,000 USD), or both.
Attempts to Interfere with Administration of the Internal Revenue Laws/Preventing IRS Agents and Employees from Fulfilling Their Duties – Internal Revenue Code Section 7212
Corrupt or Forcible Interference: Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of the Internal Revenue Code, shall, upon conviction thereof, be fined not more than five thousand dollars ($5,000 USD), or imprisoned not more than 3 years, or both, except that if the offense is committed only by threats of force, the person convicted thereof shall be fined not more than three thousand dollars ($3,000 USD), or imprisoned not more than 1 year, or both.
Forcible Rescue of Seized Property: Any person who forcibly rescues or causes to be rescued any property after it shall have been seized under this title, or shall attempt or endeavor so to do, shall, excepting in cases otherwise provided for, for every such offense, be fined not more than $500, or not more than double the value of the property so rescued, whichever is the greater, or be imprisoned not more than 2 years.
In addition to the tax crimes listed above, the government can also charge the following related crimes:
- Mail Fraud
- Wire Fraud
- Bank Fraud
- Computer Fraud
- Bankruptcy Fraud
- Insurance Fraud
- Mortgage Fraud
- Money Laundering