Criminal Tax Prosecutions

Federal tax cases may be brought in either a civil or criminal capacity, and while the former may result in the imposition of hefty penalties and fines, a conviction for the latter may result in a lengthy term of incarceration. Generally, federal criminal tax prosecutions are brought by the United States Attorney's Office using one of the following three statutes, or a combination thereof: 1) Tax Evasion, in violation of 26 U.S.C. § 7201; 2) Willful Failure to File a Return, Supply Information, or Pay a Tax, in violation of 26 U.S.C. § 7203; or 3) Tax Fraud, in violation of 26 U.S.C. § 7206. In addition to the potential for incarceration, a conviction for a criminal tax offense is likely to be deemed both a crime of moral turpitude and an aggravated felony - carrying with it any number of negative collateral consequences, including the potential for deportation and the loss of a professional license or employment. See, e.g., Kawashima v. Holder, 132 S. Ct. 1166, 1172 (2012); Chhabra v. Holder, 444 F. App'x 493, 494-95 (2d Cir. 2011). It is therefore imperative that one retains an attorney as soon as he is made aware that he has become the target of a federal tax investigation.

First, pursuant to 26 U.S.C. § 7201, whoever willfully attempts to evade or defeat any federal tax shall - in addition to any other penalty provided by law - be imprisoned by up to five years and fined by up to $100,000, or $500,000 in the case of a corporate defendant. There are three elements that the government must establish beyond a reasonable doubt in order to secure a conviction for this crime: "(1) willfulness [on the part of the defendant], (2) the existence of a tax deficiency, and (3) an affirmative act constituting an evasion or attempted evasion of the tax." United States v. Citron, 783 F.2d 307, 312 (2d Cir. 1986). As the "capstone" of the entire "system of sanctions ... calculated to induce prompt and forthright fulfillment of every duty under the income tax law," this statute is extremely broad - and purposefully so. See Spies v. United States, 317 U.S. 492, 497 (1943).

Second, pursuant to 26 U.S.C. § 7203, whoever is required by federal law to pay any tax (including an estimated tax), file a return, keep any records or supply any information to the IRS, and fails to do so, shall be guilty of a misdemeanor and imprisoned by up to one year and fined by up to $25,000, or $100,000 in the case of a corporate defendant. If the willful conduct relates to cash transactions in aggregate of more than $10,000, a violation of § 7203 becomes a felony, punishable by up to five years imprisonment. It can be very easy for prosecutors to secure a conviction for this crime, and indeed, to prove a basic violation of § 7203, the government need only establish two elements beyond a reasonable doubt: "willfulness and [the] failure to pay a tax due." United States v. Coppola, 425 F.2d 660, 661 (2d Cir. 1969).

Third, pursuant to 26 U.S.C. § 7206, whoever willfully files any tax return, statement or other document under the penalty of perjury which he does not believe to be true and correct as to every material matter (or aids another in the creation of a tax document that is fraudulent or false as to any material matter) shall, upon conviction, be imprisoned by up to three years and fined by up to $100,000, or $500,000 in the case of a corporate defendant. The government must prove four elements beyond a reasonable doubt in order to secure a conviction pursuant to § 7206: (1) the defendant filed a federal tax return "which he verified to be true; (2) that the tax return was false as to a material matter; (3) that the defendant signed the return willfully and knowing it was false; and (4) that the return contained a written declaration that it was made under the penalty of perjury." United States v. Pirro, 212 F.3d 86, 89 (2d Cir. 2000). To be sure, only materially false statements may be punished by this statute, that is, those which have "the potential for hindering the IRS's efforts to monitor and verify the tax liability of the ... taxpayer." Id. (internal quotation marks omitted).

Hiring a top federal criminal tax attorney to defend you in any federal tax prosecution is crucial and will ensure that every viable defense is explored and utilized on your behalf. Lawyers at the Law Offices of Jeffrey Lichtman have successfully handled countless federal tax cases, exploiting holes in the prosecution's evidence to achieve the best possible result for our clients. Contact us today at (212) 518-1001 for a free consultation.