Money laundering and tax evasion are separate criminal offenses that both involve fraud, deception, and money. These offenses are often done separately, and one need not be required to perform the other. However, certain circumstances may allow for both offenses to occur together, or at least as part of a single larger criminal scheme or enterprise.
In a very general sense, tax evasion involves using deception or fraud to avoid paying taxes or avoid paying the full extent of your true taxes. On the other hand, money laundering involves money earned from illegal activities and concealing its illicit origins by passing it through complicated banking systems and transfers to make tracing it difficult. A person could theoretically be charged with both crimes at the same if these crimes were both parts of a larger criminal plan.
If you face tax evasion and money laundering charges, you will be confronted with a whole host of life altering legal consequences. Depending on the extent of your alleged criminal actions and the amount of money involved, you could pay very costly fines and even go to prison. You can contact our California tax fraud defense attorneys and CPAs for help with your case. Call the tax attorneys at the Tax Law Offices of David W. Klasing at (800) 681-1295 for a legal consultation.
Being Charged with Both Tax Evasion and Money Laundering
The crimes of tax evasion and money laundering do not necessarily have to be done together. In most cases, they are probably totally separate acts because their end goals are somewhat different. The goal of tax evasion is to defraud the government and not pay taxes, while the goal of money laundering is to hide the origins of illicitly earned money. However, it is possible that these two crimes can go hand-in-hand and a defendant could be charged with both at the same time.
A person could be charged with tax evasion and money laundering by earning money from illegal activities and then “washing” the money and filing fraudulent tax returns to avoid paying taxes on it. In such a case, the defendant not only commits money laundering but does so with the intent to avoid taxes and defraud the government. While this seems like a very niche and narrow form of criminal activity, it may not be as uncommon as you might think. People who earn income from illegal activities probably do not want to declare it as taxable income so they can hide their criminal actions from the government.
If you are facing an audit, eggshell audit, reverse eggshell audit or criminal tax investigation where charges for tax evasion and money laundering could be at issue, call our California tax fraud defense attorneys and CPAs for help. We can help you fight, or better yet avoid, criminal tax charges and or clear your name.
Differences Between Money Laundering and Tax Evasion Charges
Money laundering and tax evasion are two completely different criminal offenses that happen to involve money. While they do bear some similarities, such as their financial nature, they are separate offenses that do not necessarily overlap.
Money laundering must involve money that was obtained through some illegal means. Typically, the money must be earned through a specified unlawful activity (SUA) with certain degrees of intent or knowledge. The money is then put through numerous transactions, often involving different banks and financial institutions, to create a very confusing and untraceable trail. By doing this, the money’s illicit origins are difficult, if not impossible, to trace. Money laundering is different from tax evasion because it inherently involves another crime and does not necessarily involve taxes. The money must come from an SUA; if there is no SUA, meaning the money was earned legally, there can be no money laundering.
Tax evasion, on the other hand, does not require money obtained through unlawful activity. Instead, the money is often earned through legitimate means, but the taxpayer does not want to pay taxes on it. Tax evasion can be accomplished in a variety of ways, many of which are similar to channels used for money laundering. The purpose of tax evasion is to defraud the government and avoid paying taxes you otherwise owe.
One key difference between these two offenses is the source of the money in question. Money laundering requires the money to come from an SUA, while tax evasion can be performed with any money from any source. Money laundering must involve another underlying crime or offense, while tax evasion does not.
One other distinction is where the charges come from. The federal government usually brings charges dealing with federal taxation – i.e., tax evasion charges. If the money and SUA in the money laundering case did not cross state lines, you could face California state charges for the money laundering instead of federal charges.
For more information about these offenses, contact our California tax fraud defense Attorneys & CPAs.
How Money Laundering and Tax Evasion Go Together
Money laundering and tax evasion may occur separately but may also be two parts of a larger criminal scheme. For example, a person could earn money from an SUA and then avoid paying taxes on it, leading to charges for both crimes. The offenses actually can overlap in many ways as the channels used to launder the illicit money can also help hide the money from the government, making it easier to illegally dodge taxes.
These two crimes can go together in different ways too. Ordinarily, money laundering involves money that originates from an SUA. However, money laundering statutes contain provisions allowing the crime to be charged when money is transferred for the purpose of funding an SUA. The transfer of this money could also serve the dual purpose of disguising the source of the money and hiding it from tax collectors.
Money laundering and tax evasions are two very serious criminal offenses that carry rather stiff penalties. If you have been charged with either or both of these offenses, please get in touch with our dual licensed California tax fraud defense lawyers & CPAs.
Tax Evasion as a Predicate Offense for Money Laundering
A predicate crime is an offense required as part of the commission of a larger criminal plan or scheme. The predicate crime is a criminal offense in itself, but it is also a necessary step in a bigger crime operation. Tax evasion has traditionally not been considered a predicate offense for money laundering. However, other offenses may be involved in tax evasion that could be considered predicate offenses for money laundering.
Money laundering, as stated above, involves money that is obtained via an SUA. While evading your taxes is certainly unlawful, there are no violations of the Internal Revenue laws included among the list of SUAs in the Racketeering Influenced and Corrupt Organizations Act (RICO). However, even though tax fraud may not be a direct predicate offense for money laundering, other crimes like mail fraud or wire fraud commonly associated with tax evasion are direct predicate offenses.
Essentially, tax evasion is not a direct predicate offense for money laundering. However, other offenses involved in tax evasion may be direct predicate offenses, and you may end up being charged with money laundering. You should consult with an attorney if you believe you may be accused of a predicate offense for money laundering. Call our California tax fraud defense lawyers for help.
Contact Our California Tax Attorneys for a Legal Consultation
It is very possible that a defendant charged with money laundering could also be charged with tax evasion. While the crimes are independent of each other, they may work in tandem to accomplish a larger criminal goal. For help fighting your charges, contact our dual licensed California tax fraud defense attorneys & CPAs today. Call the Tax Law Offices of David W. Klasing at (800) 681-1295 to arrange a legal consultation.
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 IRS tax auditor’s 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 allegations
Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return