Many hope to find creative ways to limit their tax liability every year. Unfortunately, too many of those strategies end in IRS audits, eggshell audits, reverse eggshell audits, criminal tax investigations, and even criminal charges. Understanding how the tax code applies to you is critical for steering clear of these troubling situations or defending yourself if you have already fallen out of compliance.
If you transfer assets in hopes that you might avoid having those assets levied or ceased to pay federal income taxes, you are breaking the Internal Revenue Code and could be subject to serious criminal and civil penalties. Federal courts have held that there is little difference in the criminality of evading payment of taxes as opposed to evading assessment of taxes. Tax evasion is a serious offense and can be punished in some circumstances with prison sentences.
If you are concerned about the IRS digging into your tax history, you would do well to consider enlisting the help of the Tax Law Offices of David W. Klasing. Our dual-licensed Tax Attorneys and CPAs have the knowledge and resources to prepare your defenses against the federal government. Hear more about our services by calling us at (800) 681-1295 or schedule a reduced rate initial consultation online here.
Is Transferring Assets to Avoid Paying Taxes an Affirmative Act of Tax Evasion?
There is a difference between willful and non-willful tax code violations. Simply failing to pay taxes is not enough to constitute a charge of intentional evasion of payment of tax. The government prosecutors will look for some affirmative criminal act on the part of the defendant. The affirmative act must have the effect of misleading or concealing the existence of income or assets.
If your act of transferring assets out of the eyes of the federal government misconstrues your tax liability or your ability to pay the taxes that you owe, that would have the legal effect of misleading or concealing for tax reasons. Transferring assets to avoid paying taxes would be viewed by a prosecutor (and a jury) as an affirmative act of tax evasion. As such, you could be charged with tax evasion for any attempt to improperly transfer assets.
Is There a Difference Between Evasion of Assessment and Evasion of Payment?
The history of caselaw’s treatment of tax assessment evaders and tax payment evaders is complicated. Court decisions in the 1960’s (particularly the decision in Sansone v. United States) defined the two offenses distinctly. However, recent decisions suggest that several of the federal circuit courts treat the two offenses as one and the same. Recent court trends indicate that both offenses fall under the federal tax evasion statute known as Section 7201.
The section reads as follows: “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
The Ninth Circuit held in United States v. Mal (1991) that Section 7201 “proscribes the single crime of tax evasion, a crime which can be committed either by evading the assessment or the payment of taxes.”
With such a broad range for prosecution, expect the government to invoke Section 7201 if you attempt to move money in order to avoid the assessment of taxes. Section 7201 carries serious financial and personal consequences. If you hope to avoid them, your best bet is enlisting the help of our dual licensed Tax Attorneys and CPAs.
Can You Be Charged with Tax Evasion for Transferring Assets if You Don’t Owe Anything?
You can be charged with evasion under the Internal Revenue Code even if you don’t owe the government any balance of tax liability. Attempted evasion of paying taxes is a crime unto itself. The criminality comes from the attempt. Therefore, it does not matter in the eyes of the law whether you had any outstanding balance of tax owed at the time of the affirmative act that constituted an attempt to evade taxes.
The only impact that your tax balance (or lack thereof) will have on tax evasion charges for attempting to avoid payment is in the sentencing that may be imposed if you are found guilty. For example, $30,000 of evaded federal income taxes is equal to one year in jail under the federal sentencing guidelines.
What If I Accidentally Violated the Tax Code?
If you transferred assets and avoided taxes without realizing that you were breaking the law, you may still be able to avoid the civil and or criminal tax penalties associated with noncompliance. You could choose to voluntarily disclose the tax impropriety to the IRS.
Voluntary disclosure is available to taxpayers who have made honest mistakes in their past tax filings or other reporting documents. By engaging in the voluntary disclosure program, a taxpayer may be able to avoid the harshest civil and criminal penalties for noncompliance.
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 disclosurebefore 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!
You should never attempt to engage in voluntary disclosure without the help of the dual licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing. Disclosure is a delicate process, and no one should take on the IRS without the help of the professionals.
Questions About Tax Liability and Transferring Assets? Get the Help You Need
Before wading into a situation that can quickly get out of control, you should speak to the dual-licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing. Remember, tax evasion is a broad, harsh charge with serious consequences. You deserve to know all of the facts. Call us for an assessment of your situation at (800) 681-1295.
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
