All about Federal Income Tax Crimes
The Internal Revenue Service Code 7201 defines income tax fraud as a felony punishable by fines, prison time, and other penalties. Tax fraud is just one of a diverse list of potential income tax crimes pursued by the IRS’s Criminal Investigations division.
Basic types of income tax crimes include:
• Failure to file a tax return • Intentionally submitting false information on a tax return • Taking more deductions than you are allowed • Falsifying financial statements or other documents • “Laundering” money so as not to have to report it to the federal government • Claiming personal expenses as business deductions • Storing money that should be taxed in accounts overseas and not reporting that money • Collecting income taxes from employees and then not giving this money to the IRS
How and why the government fights back so hard against income tax crimes
According to an independent Cornell University-sponsored inquiry, income tax crimes cost the federal government close to $350 billion a year, annually. Thus, the government obviously has a huge motivation to go after individuals whom the government thinks are shirking their tax responsibilities.
To this end, the IRS runs a dedicated branch called Criminal Investigations (CI), which tracks down delinquent taxpayers. The biggest CI program is the General Tax Fraud Program, which investigates instances of money laundering, evasion, and similar crimes. Criminal Investigations also looks into allegations of financing narcotics or terrorism.
Criminal and civil penalties possible:
Taxpayers can be hit with both criminal and civil charges.
Criminal charges can lead to prison time, if a suspect is convicted. In addition, someone who fails to file an income tax can be subjected to fines of $25,000 for every year that he or she failed to file — going back a full six years from the time that a tax return should have been submitted. For instance, if someone failed to file for tax year 2007, the government can look all the way back to 2001 in his or her records. Further, the Federal Sentencing Guidelines are based primarily upon the amount of income not claimed.
Civil charges can be similarly severe. The penalties for failing to pay can accumulate indefinitely — as opposed to getting cut off after six years — and perpetrators also have to pay interest on the taxes owed, which can really add up. If convicted of a federal income tax crime, you may also have to pay fines and other penalties.
Famous tax evaders
The most famous tax evader of all time is the Chicago gangster Al Capone, who was busted after investigators spent years trying to arraign him for more serious charges pertaining to his criminal enterprises. Famous modern tax evaders have included entrepreneur Martha Stewart, country musician Willie Nelson, and President Obama’s Treasury Secretary, Timothy Geithner.
If you or a loved one has been charged with a federal income tax crime, it behooves you to speak at once with a competent and trial-proven federal criminal defense attorney.