26 U.S.C. § 7201 defines what is tax evasion.  It states in relevant part that any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

Federal prosecutors might also add additional charges beyond tax evasion. Those charges could include conspiracy charges, under 18 U.S.C. § 371, or tax fraud under 26 U.S.C. § 7206.  The United States Sentencing Commission (USSC) recently released its Tax Fraud Report for fiscal year 2023. It states that off the 64,124 cases reported to the Commission in fiscal year 2023, 363 involved tax fraud (down 27% since FY 2019).  It is unclear if this downward trend will continue.

Recently, a man in New Jersey plead guilty to tax evasion. According to the Department of Justice, “for tax years 2015 and 2016, Matthew Tucci, of West Long Branch, NJ, filed tax returns that stated he owed more than $2 million in taxes for both years. Despite admitting that he owed those taxes, Tucci did not fully pay them when they were due. Instead, Tucci purchased real estate and engaged in a series of transactions designed to conceal his interest in those properties.

In 2017, the IRS sent notices to Tucci that he owed taxes, interest, and penalties for 2015 and 2016. After receiving these notices, Tucci transferred multiple properties to an entity owned by another individual, but he continued to exert control over at least two of them. Of the two properties Tucci continued to control, he sold one and refinanced the other. Tucci used the proceeds from these transactions to pay his personal expenses rather than his tax debts. In 2019, Tucci submitted documents to the IRS that falsely claimed that he had no connection to the entity that owned the 12 properties.

He faces a maximum penalty of five years in prison as well as a period of supervised release, restitution, and monetary penalties. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.”

In another case, a Florida businessman was sentenced to prison for tax evasion.  According to the  Department of Justice, “David Albert Fletcher, of Deltona, Florida owned and operated furniture liquidations businesses, including Century Liquidators. For tax years 2004 through 2013, Fletcher did not timely file his federal income tax returns or pay the taxes he owed. After an audit, the IRS assessed a total of $1.7 million in taxes, interest, and penalties against him.

To evade collection of these taxes, Fletcher concealed his income and assets from the IRS. For example, Fletcher used nominees to hide his purchases of luxury vehicles, including Rolls Royces. Fletcher also filed false income tax returns that understated his income by several million dollars, and when an IRS special agent interviewed him, Fletcher falsely represented the amount of income he earned.

In addition to his prison sentence, U.S. District Judge Wendy Berger for the Middle District of Florida ordered Fletcher to serve three years of supervised release and to pay approximately $7,112,689 in restitution to the United States.”

Recently, Meg Strickler was able to ensure that no tax evasion charges were filed against her client.  Contact us if you think you might be facing tax evasion or tax fraud charges.  We are here to help.

The “newer” question on page 1 of the Tax Form 1040 now has a question that states, “At any time during the past year did you receive any financial interest in virtual currency?” In 2019, this question was only on Schedule 1.  As of 2020, it is on page 1 of the Tax Form 1040.  This is specifically targeted to combat cryptocurrency tax evasion.

Under 26 U.S.C § 7206(1), it is a criminal offense to file a tax return the filer knows is materially false.  So, if you do not check that box on that first page, AND have substantial income in crypto, you might be targeted by the IRS.  Remember cryptocurrencies are essentially similar to common stocks.  This means a taxpayer must report their gains in cryptocurrencies on Form 8949.  These gains are passed through to Schedule D on personal returns.  The filer is responsible for paying capital gains tax on the net gain for the year.  The government is long since versed in understanding the intricacies of the market like the role of hardware wallets, the use of DEXs, on-chain information, and how to track crypto movement across distributed ledgers.   Please see here for a recent  example of a case where non-payment of federal income tax on cryptocurrency earnings led to a conviction.

Contact Conaway & Strickler, PC if you have any questions on these complex federal criminal tax issues.  Our experienced federal criminal defense attorneys are here to help.

Tax evasion is the most common federal tax crime and involves the failure to report taxes, reporting taxes inaccurately, or failing to pay taxes. Federal law defines the crime broadly; 26 U.S.C. 7201 states, “[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony. . .” The penalties for tax evasion can include significant monetary fines, imprisonment, or both.

To establish a case of tax evasion, the Government must prove three elements beyond a reasonable doubt:

1. The Defendant attempted to evade or defeat a tax or payment of a tax;

2. An additional tax was due and owing; and

3. The Defendant acted willfully.

The Government is generally required to prove that the taxpayer owed substantially more tax than was reported; however, the Government does not necessarily need to prove the exact amount of tax evaded. In most tax evasion cases, this comes in the form of understatements or omissions of income, claims of fictitious or improper deductions, false allocations of income, or improper claims of credit or exemption.

The Government can offer direct or circumstantial evidence to prove the required elements. This may include evidence of specific transactions affecting taxable income which were inaccurately reported, unexplained increases in the taxpayer’s net worth or expenditures not reflected in the taxpayer’s net worth, or evidence of taxable receipts in a taxpayer’s bank deposits.

Finally, the language of the statute gives the crime of tax evasion a broad scope. Specifically, the crime of tax evasion applies to “[a]ny person” – not just individual taxpayers. Tax evasion under 26 U.S.C. 7201 can also be used to prosecute an individual taxpayer’s tax preparer, accountant, or bookkeeper, a corporate officer attempting to evade their corporation’s tax, or the administrator of an estate attempting to evade the estate’s tax. Further, the statute applies to “any tax” and tax evasion in “any manner” (emphasis added).

Recent tax evasion cases include the federal criminal jury trial of reality TV stars Todd and Julie Chrisley. They were convicted of tax evasion and other charges. The DOJ alleged the Chrisleys knew the law was clear on taxable income and were required to file and pay taxes. The IRS CID agent on the case was quoted as saying, “These convictions should send a clear message regardless of your fame or notoriety, everyone will be held accountable for paying their fair share of taxes.” As a result of their case, they unfortunately are now in prison.

For more information on criminal tax charges, please contact us. We are more than happy to discuss your situation.