As readers of our tax law blog are doubtlessly aware, federal tax crimes are typically prosecuted by the Tax Division of the U.S. Department of Justice via U.S. Attorneys. The DOJ routinely publishes the results of these cases in online press releases, such as this announcement detailing the guilty plea – and subsequent sentencing – of North Carolina doctor David Russell, 66, who in 2018 confessed to engaging in felony income tax evasion. In addition to taking “several actions” to avoid his federal income tax liabilities, including penalties and interest accumulated over a span of roughly six years, Russell also “ignored a… summons” from the IRS; “provided minimal information” once he did respond; “used a business to pay personal expenses”; and took various measures to conceal assets and income from the IRS, in one instance “having wages issued in the name of a company he controlled rather than directly to himself.” Our criminal tax defense attorneys discuss Russell’s case in greater detail – and provide a cautionary word of advice for taxpayers who find themselves facing similar situations.
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As tax crime statistics show year after year, most prosecutions lead to convictions: 91.7% in the 2018 fiscal year, according to an IRS press release. In turn, most convictions (and guilty pleas) lead to prison sentences for tax offenders. According to the United States Sentencing Commission, “The average sentence for tax fraud offenders [in fiscal year 2018] was 17 months,” while the IRS reports an even higher figure, citing an average sentence of 41 months, or approximately three years and five months, as recently as 2016.
The numbers are daunting for any defendant; yet Russell, who was charged and sentenced in North Carolina, told The Charlotte Observer that “the judge’s decision was very fair.” That decision, which was handed down by U.S. District Judge Robert J. Conrad in federal court earlier this month, was for Russell to serve a one-year, one-day sentence, in addition to paying fines of $10,000. (If our readers are wondering how such a sentence could seem “fair,” consider the maximum sentence for tax evasion, which is five years in prison and/or fines of up to $100,000.)
Our readers may also be wondering at the seemingly arbitrary nature of the sentence: Why one year and one day? However, there is a relatively simple explanation. In the federal prison system, certain inmates who serve “good time” can earn early release, or parole. However, this rule only applies if the original sentence was longer than one year. Therefore, judges sometimes sentence one year and one day to give the defendant an opportunity to serve less time in prison. (Note that, as a general rule, felony offenses are punishable by one year or more of prison time, whereas misdemeanors are typically punishable by less than one year – commonly sentences of 30, 60, 90, or 180 days.)
The sentence was imposed following Russell’s guilty plea to U.S. income tax evasion (which is technically charged, under U.S. Code § 7201, as the “attempt to evade or defeat tax”). In addition to avoiding IRS summonses and “omitting records related to… financial accounts and assets” during the period from mid-2012 to late 2015, the defendant also “failed to timely pay the taxes due for the years 2013 through 2015.”
Attempting to explain his involvement in tax crimes, Russell told the court he received “a lot of bad advice” from various “tax help groups.” While the government ultimately holds taxpayers accountable for their own information – a fact this case should make abundantly clear – Russell is likely telling the truth when he claims to have been misled. The IRS, after all, repeatedly lists return preparer fraud as one of its Dirty Dozen top tax scams, warning taxpayers to “avoid unscrupulous tax preparers” as recently as March 2019.
Russell, too, had a warning for taxpayers: “Let this be a lesson to anyone who doesn’t intend to follow the law.”
If you are under investigation for tax crimes, have been contacted or questioned by IRS agents for any reason, or have been notified that you were selected for a tax audit, knowing you cheated on the returns at issue, it is imperative that you take swift action to prepare and protect yourself. Work with a trusted tax evasion defense lawyer in California, like the award-winning IRS attorneys at the Tax Law Office of David W. Klasing. With over 20 years of experience fighting felony tax charges in federal court, we are aggressive and effective taxpayer advocates – especially when you are facing high stakes. Contact us online today to arrange a reduced-rate tax consultation, or call (800) 681-1295.
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