2016 Statistics on Tax Crime Convictions and Prison Sentencing

Certain crimes have higher rates of arrest, prosecution, and conviction than others. For instance, a quick glance at crime statistics published by the Los Angeles Police Department will show you that in 2015, more than 9,600 people were arrested for aggravated assault, whereas just over 300 people were arrested for homicide. Though less common than offenses like drug possession or car theft, “white collar” (financial) crimes, such as tax evasion and other tax crimes, are associated with high rates of conviction and sentencing amongst defendants. Various statistical reports attest to these facts, with one of the more recent sources being the 2016 “Quick Facts” on tax fraud offenses released by the United States Sentencing Commission (USSC). This data creates a clearer profile of who commits tax crimes, how those crimes impact the economy, and perhaps most importantly, how convicted offenders are punished.

What Percentage of Tax Offenders Were Sentenced to Prison in 2016?

The following statistical information is sourced directly from the USSC, which drew upon data from 2012 to 2016 to compile a “Quick Facts” report on tax fraud offenses for 2016. You can view the brief report in its entirety by clicking here. Otherwise, our tax attorneys have excerpted some of the report’s more salient (and surprising) points below. All the following statistics pertain to the 2016 fiscal year, except where otherwise noted.

Who most frequently commits tax crimes, and where?

• A total of 584 individuals were convicted of tax fraud, accounting for 1% of the defendants sentenced under USSC guidelines.
• Statistically speaking, the “typical” tax offender is a white (49%) male (68.8%) U.S. citizen (94%), at an average age of 50 upon sentencing.
• Four out of five tax offenders have no prior criminal history.
• Certain jurisdictions report higher numbers of tax crimes than others, with two of the top five located here in California. Judicial districts with the highest number of tax offenders were:
  1. Northern District of Illinois (32 offenders)
  2. Eastern District of New York (29)
  3. Eastern District of California (28)
  4. Central District of California (23)
  5. Eastern District of Pennsylvania (22)

(For reference for California taxpayers, the Central District of California, Southern Division, has jurisdiction over tax crime cases in Orange County. The Western Division has jurisdiction over Los Angeles County, among others.)

How is the U.S. economy impacted by these crimes?

• The median loss resulting from the offenses was calculated to be $218,035.
• Astoundingly, more than 90% of the offenses “involved tax losses of $1.5 million or less.” (While “less” is not defined, it is notable that, by comparison, only 25.9% of the offenses caused losses below $100,000.)

What percentage of convicted offenders received enhanced penalties, and why?

• In general, penalty enhancements were more common than penalty reductions. For example, penalties were increased for offenders who:
  • Led or supervised the offense (6.3% of offenders).
  • Obstructed justice, or otherwise impeded the investigation or case (5.3%).
  • Used “sophisticated means” to hide or carry out the offense (11%).
  • Used a special skill, or “abus[ed] a public position of trust” (4.1%).

• By comparison, only 3.9% of offenders received sentence reductions, which were permitted in cases where the defendant was considered “a minor or minimal participant in the offense.”

How were convicted tax offenders sentenced?

• The majority of those sentenced – a total of 63.9% – received prison sentences.
  • Though alternate sentences were not specified in the report, IRS crime statistics, which are linked below for further reading, note that the term “sentence” may, in place of or addition to incarceration in federal prison, include “confinement to… [a] halfway house, home detention, or some combination thereof.” In other words, convicted offenders may be placed under house arrest or be ordered to live in specific environments, even if they are not necessarily incarcerated in prison.

• The average length of a prison sentence for tax fraud was 15 months, or one year and three months. This represents an overall decrease during the period from 2012 to 2016, during which the average sentence decreased by 90 days, shortening from 18 to 15 months.

If you are interested in additional reading on this subject, one of the best resources is the Internal Revenue Service (IRS). Investigation and enforcement statistics are published annually on the IRS website, such as these IRS criminal investigation statistics for the current fiscal year. You can also use the IRS website’s search function to target specific tax statistics on taxpayer compliance, international tax matters, business tax matters, and related topics.

Orange County, CA Tax Crime Defense Attorneys Handling Tax Evasion and Fraud Charges

Whether you scrutinize a specific data point, or look broadly at trends and patterns to see the “big picture,” you will arrive at the same conclusion: though the average sentence is slowly shrinking, you are still likely to be detected, investigated, charged, and convicted if you engage in tax crimes. If you are convicted or plead guilty, you are likely to be incarcerated – in most cases, for more than a year. You will also be heavily fined, to say nothing of the damage that will result to your career and reputation. Further, you may find that your criminal record makes it difficult to find employment, particularly if you work in finance or business, long after you have paid for your fines and completed your sentence.

Don’t let yourself become a statistic. If you are under criminal investigation by the IRS, are concerned about the outcome of an in-progress IRS tax audit, or believe that you may have failed to comply with tax laws in the past, such as failing to report foreign income by filing an FBAR, the best way to protect yourself is to promptly consult an experienced tax attorney who has a track record of obtaining favorable outcomes in criminal cases involving failure to file a tax return, failure to pay tax, filing a fraudulent return, and related matters. To book a reduced-rate consultation with the skilled Orange County tax evasion attorneys at the Tax Law Office of David W. Klasing, contact us online or call our tax defense lawyers at (800) 681-1295 today.

Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices in San Bernardino, Santa Barbara, Panorama City, and Oxnard! You can find information on all of our offices here.

Here is a link to our YouTube channel: click here!

Here is a link to our practice video on warning signs than an audit has gone criminal.

What is an eggshell tax audit?

https://www.youtube.com/watch?v=saJLVlER-iM

What is an effective tax defense in an IRS eggshell tax audit?

https://www.youtube.com/watch?v=7qixPqWTtvA

So, you cheated on your taxes and you are under a tax audit…

https://www.youtube.com/watch?v=FZce4jqQJpI

Why should I hire a tax attorney to represent me in a tax audit?

https://www.youtube.com/watch?v=NDwc4GUfBX8