The government does not treat tax crimes lightly. If you purposely evade your taxes, you can face harmful penalties like expensive fines and jail time. As seen in the case of former La-Jolla businessman Robin McPherson, U.S. prosecutors will continue to track down tax evaders even if their crimes were committed over 20 years ago.
McPherson was convicted of evading taxes on profits made by his telemarketing company. Before his sentencing hearing in 2001, he fled the country to avoid punishment. However, in 2022, he was apprehended in Costa Rica. He will now face criminal consequences for both bail jumping and tax evasion.
If you are worried that you may be accused of a tax crime, seek guidance from our Dual Licensed Tax Attorneys and CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295 or schedule a reduced rate initial consultation online here.
Convicted Tax Evader Caught in Costa Rica
Robin McPherson was the president and co-owner of a telemarketing company in La Jolla called Continental Wireless Cable Inc. Between 1999 and 2000, McPherson and two other defendants were convicted of evading taxes on profits earned by the company. According to the Department of Justice, McPherson and his co-defendants caused the Internal Revenue Service (IRS) to suffer a tax loss of over $1 million.
Before his sentencing hearing in 2001, McPherson fled to Costa Rica. While abroad, McPherson continued his criminal activities. Between 2016 and 2022, he engaged in a wire-fraud scheme in which he solicited money for a fake development project and then used the funds for personal expenses.
Finally, in 2022, McPherson was apprehended in Costa Rica. He will now face penalties for tax evasion, bail jumping, and wire fraud.
How Much Time Does the Government Have to Prosecute You for Tax Fraud?
The amount of time the government has to prosecute tax fraud varies from case to case. The Internal Revenue Service (IRS) essentially has an unlimited amount of time to punish you for civil tax fraud. This type of fraud usually results in a fine of 75% of the evaded income tax being assessed against perpetrators in order to civilly punish the fraudulent behavior.
However, if you are found to have intentionally evaded your tax obligations, then you may face criminal penalties like prison time. The same behavior that results in a civil fraud penalty can be criminally prosecuted. The IRS does not prosecute criminal tax matters. Instead, tax crimes are prosecuted by the Income Tax Division of the U.S. Department of Justice. When prosecuting a criminal tax matter, the government usually has six years from when the criminal activity occurred to file its case. However, if the last affirmative act of a defendant is to lie about their fraudulent behavior, this can restart the six-year clock.
Several exceptions exist to the standard, six-year statute of limitations for prosecuting tax crimes. Furthermore, the period in which the six-year window commences and terminates may be unclear in some cases.
Open Pleas vs. Plea Bargains for Tax Crimes
There are multiple ways to plea bargain to reduce the punishment a tax offender receives by saving the government the cost and hassle involved by a trial. Defendants can enter into open pleas or negotiated plea agreements, also known as plea bargains. Those who enter into open pleas will do so without any assurances from the prosecution as to what their sentences should be. Entering into an open plea agreement may be beneficial if you hope to receive a lesser sentence than what was proposed by the government during negotiations.
On the contrary, defendants who enter into negotiated plea agreements do so because they have reached agreements with prosecutors concerning their sentences. Usually, when entering into a plea bargain, you will plead guilty to one or more offenses you have been charged with. In return, you will receive a reduced sentence.
There are multiple factors to consider when determining whether you should enter into an open plea or a plea bargain. Entering into a negotiated plea agreement to reduce the counts of your conviction may not affect your sentence whatsoever. Furthermore, if you enter into an open plea agreement, you may preserve your right to challenge relevant conduct as it applies to your sentencing.
Can You Go to Prison for Tax Evasion?
A large percentage of tax fraud cases do not result in prison sentences. You will likely not face criminal tax consequences if you merely made a careless mistake when filing your taxes. Instead, you may simply have to pay fines that serve to punish your mistake and repay the government for the taxes you owe.
However, if you are found to have intentionally evaded your tax obligations, you may face criminal penalties such as jail time. In such cases, longer prison sentences will be levied against those who caused greater amounts of tax loss to the government. For example, $30,000 of tax loss equates to approximately one year in jail under the federal sentencing guidelines.
Still, there is a multitude of other factors that may be analyzed when establishing prison sentences for tax crimes. For instance, those with extensive criminal histories may face longer jail time. Your role in the scheme could also play a part in whether you face jail time, with the masterminds behind mass marketed tax evasion schemes often facing harsher jail time than followers.
Are You Supposed to Report Illegal Source Income on Your Tax Returns?
The Internal Revenue Service (IRS) also expects taxpayers to report illegal source income. For instance, Robin McPherson was convicted of inappropriately acquiring funds through an illegal wire fraud scheme. In that case, the money procured through the illegal scheme should also have been reported to the IRS. Failure to include illegal income on your tax returns is considered a form of tax evasion and can be punished via criminal prosecution, incarceration, and restitution.
If You Have a Tax Issue You Need to Resolve, Call Our Law Firm for Help
Get help with your civil and criminal tax issues by contacting our Dual Licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing. Call (800) 681-1295 or click here to schedule a reduced rate initial consultation.
Coming Into Compliance with the Help of a Tax Attorney
It is important to remember that the IRS takes tax fraud seriously and has a variety of tools at its disposal to investigate and prosecute those who commit such crimes. Taxpayers should always be careful to file accurate and truthful tax returns, as well as report all of their income and pay the appropriate amount of tax. If you are facing a tax issue, it is recommended that you consult with a seasoned tax attorney who can advise you on the best course of action to take to resolve the matter and avoid any legal consequences.
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
- What is a reverse egg shell audit?
- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRStaxauditor’sss findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
- Tax crimes related to employment tax forms and trust funds
- Tactics to defend or mitigate IRS criminal tax charges
- How the IRS generates leads about suspected tax crimes
- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
- Does the IRS have a dollar threshold for tax fraud?
- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
- Does section 7201 create two distinct criminal offenses?
- Does tax evasion definition include partnership LLC
- What if I helped someone else evade taxes?
- Is it illegal to overstate deductions on my tax return?
- Is it illegal to conceal bank accounts from the IRS?
- Do later losses justify prior deductions?
- Common reasons the IRS and DOJ start investigations
- What is the Mens Rea component of tax crimes?
- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
- Why enter into a proffer agreement?
- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud allegation
