2017 Statistics on Tax Crime Convictions and Prison Sentencing

Last year, our criminal tax defense lawyers published an article examining tax fraud statistics for 2016, such as how many people were convicted, where the most convictions occurred, and the typical length of a prison sentence. These statistics were drawn from the United States Sentencing Commission (USSC), which releases an annual overview of tax fraud offenses, offenders, and penalties. In this update, we’ll be taking a closer look at some of the USSC’s tax fraud statistics for 2017, showing what’s changed, what’s stayed the same – and how tax fraud offenders are punished.

2017 Tax Fraud and Prison Sentencing Statistics

The data in this article is sourced from the USSC’s 2017 “Quick Facts” report on tax fraud offenses. (To view the previous year’s version, follow this link.) The facts presented below all refer to fiscal year 2017, unless otherwise noted.

Who is the “average” tax offender, and where do the most tax crimes happen?

• Strangely enough, the same number of people were convicted of tax fraud in 2017 as in 2016: 584 offenders each year.
• However, tax fraud accounted for a slightly larger portion of cases in 2017 than in 2016. In 2016, 584 out of 67,742 cases involved tax fraud. By comparison, 584 out of 66,873 cases involved tax fraud in 2017.
• In 2017, the “average” tax offender was slightly older, increasing from age 50 to age 52 upon sentencing. Similar to 2016, the average offender in 2017 was a white (52.4%) male (69.4%) U.S. citizen (93.8%). (In 2016, these percentages were respectively 49%, 68.8%, and 94%.)
• The majority of the offenders (over 80%) “had little or no prior criminal history” – despite the fact that most tax fraud charges are extremely serious felonies.
• In 2016, the top five places with the highest number of tax offenders, ranking by court districts, were Illinois (Northern District), New York (Eastern District), California (Eastern and Central Districts), and Pennsylvania (Eastern District). In 2017, Pennsylvania fell off the list while California filled yet another slot, accounting for three out of the top five jurisdictions where tax fraud crimes were prosecuted:
  1. Northern District of Illinois (35 offenders)
  2. Northern District of California (31)
  3. Eastern District of California (29)
  4. Central District of California (25)
  5. Eastern District of New York (23)

How did tax crimes affect the U.S. economy?

• The median tax loss was determined to be $277,576 for 2017. Even accounting for inflation, this still represents a dramatic increase from 2016, when the median tax loss was nearly $60,000 lower at $218,035.
• Only “19.8% of tax offenses involved tax losses of $100,000 or less,” whereas more than 87% “involved tax losses of $1.5 million or less.”

How was tax fraud punished?

• The average length of a tax fraud prison sentence was 17 months, or one year and five months. This represents a two-month sentencing increase from 2016, when the average prison sentence was 15 months.
• Approximately 59% of the convicted offenders “were sentenced to imprisonment only.”

What percentage of people received enhanced penalties for tax fraud, and why?

• There were four main reasons a sentence could be increased: (1) “using sophisticated means” to hide or carry out the offense; (2) obstructing justice; (3) being considered a leader or key player in the tax scheme; or (4) “abusing a public position of trust or using a special skill.”
• Respectively, these factors led to increased sentences for (1) 12.5% of offenders (compared to 11% in 2016); (2) 8.7% of offenders (compared to 5.3% in 2016); (3) 8.4% of offenders (compared to 6.3% in 2016); and (4) 3.8% of offenders (compared to 4.1% in 2016 – the only decrease among these percentages in 2017).
• Conversely, 2.4% of offenders received lighter penalties “because they were a minor or minimal participant” in the tax crime.

For more information about tax crimes, you may be interested in learning about the IRS criminal investigation process, browsing our criminal tax FAQ section, or perusing the many IRS statistics that are available on the Internal Revenue Service’s website.

California Criminal Tax Defense Attorneys Fighting Tax Evasion Charges

When comparing tax crime statistics from 2017 and 2016, a pattern becomes evident: as the government’s tax losses are growing larger, sentences are getting longer, with larger percentages of offenders facing enhanced penalties. In short – enforcement is getting more aggressive. That is especially true here in the state of California, which accounted for at least 85 out of the 584 tax fraud cases, or about 14.6%, that occurred in 2017.

The bottom line for taxpayers? If you or a family member is under investigation for tax fraud, has been chosen for a tax audit, or is worried about failing to file taxes or failing to pay taxes in the past, it is in your best interests to consult with a tax evasion defense lawyer right away. Depending on the situation, it may be necessary to file an amended return, participate in a voluntary disclosure program, dispute the results of your tax audit, or start building a defense strategy. However, the longer you wait to act, the fewer options – and less bargaining power – you will have when dealing with tax authorities and law enforcement.

If you’re worried about noncompliance with state or federal tax laws, talk to an experienced tax attorney about your options right away. For a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online or call us today at (800) 681-1295. We serve taxpayers in Northern California, Southern California, and international taxpayers.

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 San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.

Helpful Q and A library:

https://klasing-associates.com/topics/audit-representation-faq/

https://klasing-associates.com/topics/assisting-cpas-with-client-criminal-tax-exposure-faq/

https://klasing-associates.com/topics/criminal-tax-representation-faq/