Those who evade their taxes may be met with criminal tax penalties. However, in order for such penalties to be imposed on an entity or individual, the government must be able to prove that their nonpayment of taxes was a willful act. Making an innocent mistake on your tax return does not mean you are automatically guilty of tax evasion.
For example, in 2023, the president of Brisbane Recycling Company was convicted of tax evasion. The Internal Revenue Service (IRS) uncovered that Joseph Nubla had engaged in fraudulent money transfers that were designed to hide his corporate income. For his intentional evasion of tax obligations, Nubla is facing a potential prison sentence of five years and a maximum fine of $100,000.
If you need help with a civil or criminal tax issue, seek support and guidance from our Dual-Licensed Tax Lawyers & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
Joseph Nubla Faces Criminal Penalties for Tax Evasion in California
Joseph Nubla is the former president of Brisbane Recycling Company. In 2023, he and his business partner were convicted of conspiracy to defraud the United States. In addition to the conspiracy charge, Nubla also faces criminal penalties for tax evasion.
The charges stem from a scheme in which Nubla and his business partner engaged in fraudulent money transfers as an attempt to hide corporate income. Between the years 2009 and 2015, Nubla wrote several checks to his business partner. The total value of all of the checks sent totaled $18 million. Nubla had falsely claimed that the payments to his partner were business expenses for the use of heavy equipment. In reality, the business partner was sending the money back to Nubla in a variety of ways. The partner sent money transfers back to Nubla, purchased homes for Nubla, and wrote him cashier’s checks pretending to pay back a loan.
For the charge of conspiracy to defraud the government, Nubla and his business partner are facing a potential prison sentence of five years and a fine of $250,000. Furthermore, for the tax evasion charge, Nubla will potentially have to serve another five years in prison and pay an additional fine of $100,000. A sentencing date has not been set.
Potential Consequences of Tax Evasion
Making an innocent mistake on your return does not make you guilty of tax evasion. However, if you willfully avoid your tax obligations, the penalties you face can be severe. First, you can face a wide array of civil punishments like failure-to-file penalties, accuracy-related penalties, underpayment penalties, and interest on penalties owed. These penalties can add up to significant amounts. In some cases, criminal tax evaders can face civil fraud penalties of 75% of the amount of the tax they intentionally understated.
Furthermore, those who are guilty of tax evasion can face severe criminal tax penalties. For instance, convicted tax evaders will have a felony on their records. Also, they may face up to five years in jail and fines of up to $250,000 for individuals and $500,000 for corporations. Lastly, the government may also make convicted defendants foot the bill for prosecuting them.
Still, making mistakes on your tax returns is very easy to do. If the government accuses you of deliberately evading taxes, we may be able to prove that you simply made an honest mistake. Guidance from our Dual-Licensed Tax Lawyers & CPAs can be highly valuable when seeking to avoid criminal tax penalties in your case.
Examples of Ways the IRS Catches Tax Evaders
There are several methods the government uses to catch tax evaders. First, the Information Returns Processing System is a computerized system that helps the IRS match what is submitted on 1099s, W2s, and Schedule K-1s from employers with what is reported by individual taxpayers. Discrepancies between the employers’ forms and individual taxpayers’ returns will be considered red flags for tax evasion and may result in audits being performed or CP2000’s being issued.
It is also believed that the IRS has secretive systems that allow them to track things like banking deposits, credit card transactions, and more. The agency has not revealed much information regarding these electronic tracking methods. Still, there is evidence that these sophisticated systems are in place.
Additionally, the IRS will look at social media accounts for suspected tax evaders. In this day and age, much of our lives is made public online. If your social media posts indicate that you are living a life that does not coincide with the income reported on your tax return, then you may be investigated further.
Finally, the government also catches tax evaders using informants. Often, these informants are referred to as “whistleblowers.” The IRS Whistleblower Office pays monetary awards to informants whose information is effectively utilized. Anyone can be a whistleblower. For example, a disgruntled employee may report their company for tax evasion as an act of revenge. Further, an individual who cheats on their taxes may be reported by a disagreeable family member. In any case, the IRS treats whistleblower reports very seriously.
IRS Unveils New Plan to Enhance Enforcement of Tax Crimes
The Inflation Reduction Act of 2022 has set aside $80 million for the IRS to improve customer service and enhance their enforcement of tax crimes. However, the plan for spending this money seems to be primarily focused on catching tax evaders rather than improving customer service.
It has been suggested that our nation suffers from $7 trillion of uncollected tax revenue. Accordingly, the new funds being infused into the IRS will be used to hire new teams of revenue agents and tax attorneys. These new hires will keep the agency from being overwhelmed while auditing corporations and complicated business partnerships. It has been estimated that over the next 10 years, between 87,000 and 110,000 new employees will be hired. Therefore, the agency’s ability to enforce tax crimes will be significantly enhanced.
How to Avoid Criminal Tax Prosecution if you Have Cheated on Your Tax Returns
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!
Contact Our Law Firm for Assistance with Your Tax Issues
Get help from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295.
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
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- 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
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- 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?
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- 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
