With the announcement of the recent arrest of South Carolina Rep. Harold Mitchell for alleged tax evasion and the U.S. Justice Department’s federal tax evasion investigation of several Israeli banks, tax fraud has been in the news this week. This signals an increased emphasis on tax related prosecutions. With the federal government and many states such as Alabama, Florida, Louisiana, Georgia and New York struggling financially, tax investigations are believed to have increased in an effort to recoup tax revenue.
While the Internal Revenue Service receives over 100 million tax returns each year, typically your chances of being audited are around 1%. Traditionally, very few of these audits led to criminal charges, but when that happens, there are serious consequences of up to 5 years in prison and a $100,000 fine, while an organization may be fined up to $500,000. The taxes at issue with interest, a fine, and the costs of prosecution may also be imposed. A tax evasion conviction can also carry consequences beyond sentencing such as the loss of professional or business licenses, loss of right to possess firearms, deportation of illegal aliens, loss of voting and other civil rights, not to mention the embarrassment that is associated.
A person can be convicted of tax evasion or tax fraud if they willfully attempt to avoid paying a lawfully due tax. Tax evasion consists of three elements: (1) an underpayment of tax; (2) caused by the defendant’s affirmative act; (3) committed with the willful intent to evade or defeat the tax. While there is no law to prevent it, the Justice Department rarely pursues an evasion of less than $2500. Most tax evasion cases deal with capital gains and income taxes, and usually involve a pattern of underpayment or evasion over an extended period.
One common example of a tax evader is a citizen or business who deals primarily in cash and fails to report all cash sales, thus avoiding income tax on the revenues generated. Another common offender is someone also charged with theft or the sale of narcotics, who for obvious reasons does not report this revenue as income to the IRS. Probably the most common form of tax evasion is the fraudulent claim of itemized deductions. For instance, a company executive may use funds try to claim deductions for expenses that were really personal and not true business expenses.
Many times tax evasion investigations begin with an angry ex-spouse or ex-employee seeking revenge, or seeking to obtain a money reward as a “whistle-blower”. A criminal attorney specializing in tax evasion defense should be contacted immediately upon learning you are the target of such an investigation. A tax evasion attorney may be able to avoid charges, or protect you in the event charges are brought. If you believe you are the subject of a tax evasion investigation, call our white collar attorneys at 205-552-4705 for us to begin your defense immediately.