CPA protection tips to uncover criminal tax matters
March 21, 2014
CPA aiding and abetting in criminal tax fraud
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Can third party be liable for corporation’s actions?

Yes, generally most tax crimes involve a taxpayer’s own tax liability but a defendant may have vicarious criminal liability (legal principle to hold liable one person for the actions of another when engaged in some form of joint or collective activity) concerning actions he or she has taken regarding another person or entity’s tax liability. Through this doctrine a corporate officer, director, or employee can possibly be accused and convicted of attempted evasion of the related corporation’s taxes and it extends to corporate tax preparers as well as attorneys. Along the same lines, it is a crime to willfully subscribe false documents and accordingly, third party individuals are occasionally convicted for signing false documents relating to the tax liability of others.

Another source of vicarious liability for third parties is the general federal aiding and abetting statute. This statute makes any person who aids or abets another person or entity in the commission of a federal offense subject to punishment as a principal. For the Government to impose aiding and abetting liability on a third party, it will be required to prove that third party defendant affirmatively assisted another person or entity to commit a federal crime and that they shared the criminal intent that the act be completed. In many of the situations where a charge of aiding and abetting is appropriate, the government can also charge third parties with the general federal conspiracy statute, for entering into an agreement with another person or entity to commit a federal crime.

Under Federal Law, the term “person,” which is used to describe corporations and other legal entities, is deemed to include corporate officers, partners, members, and even may include employees who have a duty to perform and do so in a manner that constitutes a criminal violation. Of course, corporations and other legal entities may themselves be subject to prosecution for tax crimes. Corporations or other entities are held liable for the criminal acts of its employees and owners if the criminal act is done on its behalf and the criminal act was within the scope of the employee’s or owner’s authority.