Criminal Tax Defense Attorney

Avoiding Criminal Tax Charges ..and Prison

Facing criminal tax charges would surely be a horrific nightmare for anyone so unfortunate to be so accused. Just the mere allegation and subsequent investigation can have very damaging emotional, financial, and reputation effects even where the wrongly accused is later found innocent.

If you or your CPA, EA, tax preparer, or bookkeeper merely even suspect that you might be subject to a criminal or civil tax fraud investigation you would be very wise to immediately consult with an experienced criminal tax attorney. Proper criminal tax defense representation is indispensable in helping you mitigate the potentially devastating consequences surrounding a criminal tax investigation or alleged charges of tax fraud, tax evasion, embezzlement, or failing to file tax returns.

Decisions that you take during the course of a tax audit can rapidly transform a simple examination into a full blown CID criminal tax investigation. Lying or being evasive, intentionally delaying, being rude and non-respectful, nervous body language, and sweating profusely, can all be interpreted as indicia of tax fraud during a civil examination.

These indicia, or more commonly referred to in the profession as "Badges of Tax Fraud", are covertly and mentally tallied by civil tax examiners in determining whether to make a referral to the Criminal Investigation Division of the IRS or in a decision to access a civil fraud penalty.

Examples of Badges of Tax Fraud:

  • Maintaining inadequate records or destroying records
  • Failing to file tax returns
  • Providing implausible or inconsistent explanations during civil examination
  • Concealing assets during collection of tax liabilities or examination
  • Failing to cooperate with tax authorities
  • Displaying belligerent, rude, or disrespectful behavior to an IRS agent
  • Excessive dealing in cash
  • Filing false returns
  • Intentionally underreporting or omitting income
  • Overstating deductions or claiming false deductions
  • Hiding or transferring income with relatives or related entities
  • Keeping false records of your income or "second set of books"
  • Falsifying books or records "forgery"
  • Claiming fake dependents
  • Falsely claiming credits
  • Arranging affairs for the sole purpose of tax avoidance in a manner that lacks economic substance
  • Prematurely destroying records
  • Taking positions on a return that are "more likely than not" to be disallowed if discovered without sufficient disclosure
In my honest opinion the most dangerous part of a civil tax audit is the very real possibility that the IRS civil tax auditor upon suspecting that fraud may have occurred, because of his assessment of the Badges of Fraud that he or she suspects are present, might request a consultation with a fraud referral specialist whose sole job it is to covertly assist the examining agent in working up your case for referral to CID.

A substantial majority of reported convictions in criminal tax cases involve taxpayers who cooperated fully early in the civil examination, without properly trained tax counsel, and either lied or made damaging admissions to civil examiners, or worse yet, to CID special agents.

Moreover, CID agents have the advantage during the first interview with a taxpayer in that they have reviewed tax returns, they have spoken with the civil examining agent and possibly with a fraud referral specialist and they know the direction and scope of the investigation, consequently unrepresented taxpayers are at a distinct disadvantage.

What is at Stake where Tax Fraud May Have Occurred?

The stakes where Badges of Fraud exists in a taxpayer's fact pattern going into a civil tax audit or CID criminal investigation range from at best, a civil tax fraud penalty, equal to 75% of the additional tax owed as adjusted in the civil tax audit, plus interest on the penalty back to the original filing date of the return being audited. To at worst, up to 5 years in jail, coupled with fines as high as $500,000, plus the costs to the government of prosecuting you for each separate crime.

The IRS historically obtains convictions in over 80% of their criminal tax cases. The average sentence imposed by the federal government for Tax Crimes is forty-eight months. I am not talking "Club Fed" here, complete with a golf course, but rather I'm talking about a real high security prison, surrounded by barbed wire, complete with overcrowded barred cells. Because the stakes or so high, it is imperative that you consult an experienced criminal tax defense attorney in order to exponentially increase your odds of avoiding such a potentially life altering array of punishments.

I am most effective at minimizing the odds of a client facing criminal tax exposure when clients engages me early in a civil investigation before a criminal investigation is even started. It is a well known fact that the vast majority of criminal prosecutions originally arise as referrals from civil examinations. The IRS Criminal Investigation Division trains each examining agent to be their eyes and ears and be on the lookout for Badges of Fraud that come to light during routine civil examinations.

Therefore, the best defense to avoiding criminal charges, is to minimize the risk of a criminal referral out of a civil examination. My training as an Attorney, a CPA and my Master's Degree in Taxation coupled with over 20 years of real world tax controversy representation, including sitting on the California State Bar Tax Procedure and Litigation Committee, lends itself extremely well to limiting your criminal tax exposure and to minimizing the potential damage if this exposure materializes into a CID Criminal tax investigation. criminal tax defense lawyer

Obtaining an experienced criminal tax attorney is imperative when faced with strategic decisions such as whether to speak freely and candidly with a civil tax examiner or Criminal Investigation Division (CID) Special Agent or whether to remain silent. Only a criminal tax attorney is specifically trained to advise you on when to avail yourself of the powerful constitutional protections afforded by the fifth amendment protection against self incrimination and forth amendment protection against unreasonable searches and seizures in the tax arena. The hardest element for the government to prove, and thus the weakest part of their case, is that your actions were intentional. Consequently, I will use these constitutional protections in an effort to prove that you were not intentionally fraudulent.

At some point during a civil examination or criminal investigation you will ordinarily find yourself explaining your previous actions regarding your return to an IRS agent. If you know for a fact that you, or perhaps an overzealous tax preparer, substantially understated income, overstated deductions and or falsely claimed credits for example, (See Examples of Badges of Fraud above) then it is imperative that you consult a criminal tax attorney before your initial communication with the examining IRS agent. An experienced criminal tax attorney will coach you on what you should and should not say, they will make you conscious of the fact that IRS auditors are trained to observe your body language and demeanor, they will help you visualize the situation such that you do become so nervous that you wind up inadvertently incriminating yourself. Because it is a crime in and of itself, to lie or mislead a federal agent. You really only have two choices when faced with an interview by and IRS agent. 1. Say nothing 2. Tell the truth.

Taxpayers who find themselves faced with a alleged charges of tax fraud, tax evasion, or other tax controversy, whether they know it or not, are in urgent need of a highly trained and experienced criminal tax defense attorney. My experience and education dictates that garnering a head start on the Internal Revenue Service (IRS) or other taxing authority when faced with criminal tax charges is imperative to securing any advantage possible under the circumstances. Having sufficient time to conduct an independent investigation into the positions taken on the returns in question, time to research legal and defense options specific to the client's fact pattern, time to interview potential witness, time to review the effected accounting and financial records for badges of fraud, all help minimize the client's exposure to being convicted of a tax crime. A sufficient head start can be the difference between facing misdemeanor rather than felony charges, or better yet facing no charges at all.



Want to learn more about criminal tax defense related items?


How Does a Government Entity Decide to Pursue a Criminal Tax Charge?

The final decision to prosecute a criminal tax case is the culmination of a lengthy and complex administrative process which affords experienced and qualified criminal tax counsel ample opportunities to attempt to present an effective defense. Tax Crimes are first investigated by the Criminal Investigation Division (CID) of the Internal Revenue Service. CID uses a variety of criteria in selecting cases for investigation, the heaviest weight is placed, however, on how likely a prosecution is to result in a conviction.

Any recommendations by CID to prosecute an alleged tax crime are then reviewed by the District Counsel of the IRS. If the IRS District Counsel approves the recommendation, the case is then referred to the Tax Division of the Department of Justice. If after reviewing the case the Tax Division makes a recommendation to prosecute, the case is referred to the U.S. Attorney for possible prosecution if accepted by the U.S. Attorney's office. Effective criminal tax counsel can effectively argue that factors such as poor health, family problems, emotional problems est. that tend to create sympathy for the taxpayer and thus make it unlikely that the taxpayer would be convicted are present, and thus prosecution may be declined at any point in this lengthy process by effective tax counsel.

Examples of Available Defenses and Mitigation Techniques:

Defense counsel may attempt to convince CID or Grand Jury investigators that his or her client is much more valuable to them as a witness against other potential or actual targets than as a criminal tax defendant.
  1. Statute of Limitations: Arguing the statute of limitations for the specific tax crime has tolled.
  2. Establishing Deceit on the Part of a Civil Examiner: Defense counsel can endeavor to establish that an examining agent affirmatively misled the taxpayer about whether there was an ongoing covert criminal tax investigation and that this deceit was a material factor in the taxpayer's decision to give information to the examining agent when the taxpayer had a valid Fourth Amendment right not to. Courts have held that his type of deception will invalidate a taxpayer's consent to the examination of his records and make the examination an unreasonable search and seizure in violation of the Fourth Amendment.
  3. Techniques Available During the Criminal Investigation: Monitoring and anticipating the course of an investigation in the hopes of limiting, or where possible, eliminating potential criminal tax exposure. To this end, potential witnesses can be interviewed by tax defense counsel, or an investigator hired by counsel, before a CID special agent has made contact. Defense counsel will warn taxpayers under CID investigation that statements made to business associates, friends, his accountant, or an investigator may be passed on to the CID special agent because they are not privileged communications.
  4. Entrapment: If tax defense counsel can prove that a government agent induced a taxpayer to commit a tax crime that the taxpayer otherwise would not have committed, the defense of entrapment may be available. However, merely allowing a taxpayer to continue criminal conduct that was already started is not entrapment. The key to this defense is that the disposition to commit the crime must come from the government agent and not the taxpayer.
  5. Block IRS Summonses: Defense Counsel can object to an agent's summonses based on protections of confidentiality that may apply to tax advice given by a federally authorized tax practitioner to the taxpayer. However, this privilege may be properly asserted only in noncriminal tax matters before the IRS or in any noncriminal tax proceedings in federal court brought by or against the United States.
  6. Techniques Available During the Administrative Review of Criminal Investigation: During administrative review level of potential criminal prosecution cases, effective tax defense counsel has the ability to raise several defenses that if successful may cause case to be declined. These include lack of criminal intent, no tax due, defects in method of proof, dual prosecution, health, and the improbability of a conviction.

    A taxpayer may avoid prosecution by showing that he was previously prosecuted for substantially the same acts. The poor health of a taxpayer will not by itself prevent prosecution. However, if poor health and other factors creating sympathy for the taxpayer appear to make it unlikely that the taxpayer will be convicted are present, Defense Counsel can attempt to persuade the government that prosecution should be declined.

  7. Attempt to Prevent the Government From Proving Fraudulent Act(s) were Intentional: Proving that a taxpayer acted intentionally in violation of a known legal duty is a critical element of most of the government's criminal tax cases and is therefore ordinarily the most difficult element for the prosecution to prove. In the absence of a confession or the testimony of an accomplice, intent usually must be established by circumstantial evidence concerning the taxpayer's actions. The admissibility of circumstantial evidence is frequently a close question that criminal tax counsel can endeavor to suppress.
  8. Safeguard the Government's use of Circumstantial Evidence: When the IRS relies on indirect or circumstantial methods of proof, guidelines established by the courts establish safeguards that must be complied with in the use of that circumstantial evidence. Effective tax counsel can ensure that these safeguards are complied with.
  9. Compromise: Under the law, statutory authority exists for the Secretary of the Treasury and the Attorney General to compromise criminal tax cases without prosecution. However, this authority to compromise criminal cases is rarely used because allowing a defendant to buy his way out of criminal prosecutions would in effect create separate systems of justice for the rich and the poor.
  10. Pleas: Historically, by far the vast majority of the criminal tax indictments brought result in pleas. Each U.S. Attorney is authorized to accept a plea of guilty to the major count of an indictment without prior approval of the IRS. Federal prosecutors are required to initially charge the most serious, readily provable offenses that are consistent with the defendant's alleged conduct. Typically, once charges are brought, they will not be dismissed or dropped under a plea agreement unless the prosecutor has a good faith doubt about the government's ability to prove a charge based on either a perceived legal or evidentiary weakness in the case.

    By contrast, the IRS does not typically settle civil tax matters as part of a plea agreement although it has the statutory authority to do so. This rational for this is to avoid the appearance that the IRS uses the criminal process to coerce the collection of civil tax liabilities. This policy does not prevent the defendant from agreeing to civil admissions, such as receiving unreported income or claiming fraudulent deductions, as part of the criminal plea agreement. Information that the taxpayer provides in a civil case may also be used in a criminal case against the taxpayer. Thus, cooperating with a criminal investigation with or without proper legal counsel may have unexpected drawbacks for the taxpayer.

If You Have Been Charged with a Tax-Related Crime

Contact me online or call 800.681.1295 to speak to me to discuss your case.

My Orange County tax law office is conveniently located in Irvine, next to John Wayne Airport. I also have offices in the Westwood area of West Los Angeles a short distance from the 405 freeway on Wilshire Blvd. Office hours are 9 a.m. to 6 p.m. Monday through Friday, and later evening appointments are available by pre-arrangements. The office is open Monday through Saturday during tax season (February through April). Major credit cards are accepted.

Questions and Answers for Criminal Tax Representation