Awards & Recognition
The San Diego tax attorneys at the Tax Law Office of David W. Klasing have extensive experience representing taxpayers who are at risk of being charged with felony tax evasion or other tax fraud offenses. Our award-winning CPAs, CPA candidates and criminal tax defense attorneys have advocated fiercely on behalf of the clients we represent, in the process earning a reputation for zealous and effective legal representation. Whether we are fighting for reduced penalties, presenting evidence that attests to non-willful conduct, disputing whether the IRS acted properly, or exploring other approaches to the case, our tax evasion defense lawyers never stop working to protect our clients’ best net worth and liberty.
What “Tax Evasion” Means Under Federal Law
Federal tax evasion is a felony under 26 U.S.C. § 7201. The government must prove a tax due and owing, an affirmative act to evade or defeat that tax, and willfulness. The Supreme Court’s Spies decision describes affirmative acts, such as keeping a double set of books, concealing assets, or using cash transactions, to mislead. Cheek v. United States clarifies that “willfulness” means a voluntary, intentional violation of a known legal duty. Filing a willfully false return under 26 U.S.C. § 7206(1) is a separate felony. Obstructing the administration of the internal revenue laws under 26 U.S.C. § 7212(a) requires a nexus to a pending or reasonably foreseeable IRS action, as well as corrupt intent, as established in Marinello. Making materially false statements to federal agents is its own felony under 18 U.S.C. § 1001. Convictions can also carry higher “alternative” fines under 18 U.S.C. § 3571. Most Title 26 tax-crime charges carry a six-year statute of limitations under 26 U.S.C. § 6531.
Potential exposure and penalties: Section 7201 (evasion) is punishable by up to five years’ imprisonment and fines; § 7206(1) carries a maximum penalty of up to three years; false statements under § 1001 carry a maximum penalty of up to five years. Under 18 U.S.C. § 3571, individuals can face fines up to $250,000 for felonies and organizations up to $500,000, unless a specific statute limits otherwise. Furthermore, courts routinely order restitution.
What is Actually Considered Tax Evasion?
It is important to have a basic understanding of the crime you are at risk of being accused of committing. “Tax fraud” is a broad term that covers a range of tax crimes, which all share one trait in common: all were committed intentionally, or “willfully,” so that the taxpayer could avoid paying his or her true tax liability.
In comparison, the term “tax evasion” refers to a specific set of crimes, defined at 26 U.S. Code § 7201 as the willful attempt “to evade or defeat any tax” imposed under the Internal Revenue Code. It most commonly is charged in connection with the assessment phase of an income taxation case but can also be charged during the collection phase of a tax case. While “tax evasion” technically refers to this specific offense, the term is often used to describe acts of tax fraud in a general sense.
Examples of Tax Fraud
As noted above, tax evasion is a type of tax fraud criminalized under 26 U.S. Code § 7201. However, tax evasion is not the only type of tax fraud that can lead to criminal charges for a taxpayer. Other illegal tax acts include the following:
- 26 U.S. Code § 7202 – Willful failure to collect or pay over tax
- 26 U.S. Code § 7203 – Willful failure to file return, supply information, or pay tax
- 26 U.S. Code § 7206 – Fraud and false statements
- 26 U.S. Code § 7206(1) – Making or subscribing a false return or document
- 26 U.S. Code § 7206(2) – Aiding or assisting a false return
- 26 U.S. Code § 7207 – Fraudulent returns, statements, or other documents
Actions that could potentially give rise to these or related charges include:
- Altering or destroying tax or business records
- Concealing taxable income or assets from the IRS, including offshore income or foreign bank accounts
- Improperly claiming tax credits or deductions the taxpayer was ineligible to receive
- Using stolen personal information to prepare tax returns
- Willfully failing to file tax returns
- Willfully failing to pay taxes
Is Tax Evasion a Felony?
Tax evasion is a felony offense under 26 U.S. Code § 7201. The other crimes listed above are graded as follows:
- 26 U.S. Code § 7202 – Felony
- 26 U.S. Code § 7203 – Misdemeanor
- 26 U.S. Code § 7206 – Felony
- 26 U.S. Code § 7207 – Misdemeanor
Tax Evasion Penalties: Jail Time and Fines
According to the United States Sentencing Commission, “The average sentence length for tax fraud offenders was 17 months” for tax offenders who were sentenced during 2017. The criminal penalties for different tax offenses are set forth in their corresponding statutes, as listed below.
Criminal Penalty for Tax Evasion
The statutes listed above establish the maximum penalties for misdemeanor and felony tax offenses. Judges, however, may impose lesser or greater penalties if determined to be appropriate. The maximum federal jail sentences and criminal fines for tax evasion and related crimes are as follows: Note: each count carries with it the following potential sentences. The government will often hold such a significant amount of potential jail time in front of an investigated / indicted taxpayer that most criminal tax cases never go to trial but are instead resolved via plea bargaining. Many criminal actions of taxpayers can and do violate several of the statutes below simultaneously.
- 26 U.S. Code § 7201
- Fine – Up to $100,000
- Sentence – Up to 5 years
- 26 U.S. Code § 7202
- Fine – Up to $10,000
- Sentence – Up to 5 years
- 26 U.S. Code § 7203
- Fine – Up to $25,000
- Sentence – Up to 1 year
- 26 U.S. Code § 7206
- Fine – Up to $100,000
- Sentence – Up to 3 years
- 26 U.S. Code § 7207
- Fine – Up to $10,000
- Sentence – Up to 1 year
Note that these penalties may be increased for corporate tax offenders. For example, the $100,000 criminal fine for tax evasion, which applies to individual defendants, quintuples to $500,000 for corporate tax evaders.
Civil Fraud Penalties
A costly civil fraud penalty may be imposed before or after criminal charges are filed or contemplated against the taxpayer. This civil fraud penalty is equivalent to 75% of the underpayment. In addition, the taxpayer will also be required to pay interest that has accrued since the original filing date of the returns at issue.
High-Risk Fact Patterns That We See the Most Often
Classic Evasion and False Returns
Underreported income, sham deductions, nominee accounts, and cash skimming remain core CI priorities under §§ 7201 and 7206(1).
Obstruction During an Exam or Collection
Post-Marinello, obstruction requires a tie to an existing or foreseeable IRS action and corrupt intent, yet still encompasses document destruction, sham entities, and witness tampering.
Employment Tax Trust-Fund Exposure
Willful failures to collect or pay over employment taxes can bring criminal charges under § 7202, alongside civil trust-fund assessments. DOJ Tax and CI continue to emphasize these investigations in cash-intensive sectors common in San Diego.
Digital Assets
CI explicitly prioritizes crypto tracing and tax crimes involving digital assets. Final broker-reporting regulations require custodial brokers to issue Form 1099-DA for gross proceeds reporting, beginning with transactions on or after January 1, 2025, with basis reporting phasing in from 2026 under transitional relief. Expect much more third-party reporting to the IRS. John Doe summonses remain a valuable tool for identifying U.S. users.
High-Income Non-filers
The IRS has launched an initiative covering approximately 125,000 high-income non-filers, backed by resources from the Inflation Reduction Act. Letters were sent to those with an income above $ 400,000, including more than 25,000 individuals with an income over $ 1 million. Non-filing can be charged criminally where willfulness is present.
How Routine Civil Tax Cases Become Criminal in Practice
The IRS formalized a modern fraud pipeline: the Office of Fraud Enforcement (OFE) leads civil-side fraud strategy, and Fraud Enforcement Advisors now support exam and collection personnel in place of the old Fraud Technical Advisor role. When “firm indications of fraud” arise, agents consult the FEA and can prepare a Form 2797 fraud referral to be submitted to IRS-CI. Accepted criminal tax referrals are removed from civil status while the CI builds the case. If CI recommends prosecution, IRS Counsel and the DOJ Tax Division review the matter, and then it is referred to the U.S. Attorney.
Field contact changes matter. The IRS has ended most unannounced revenue officer visits and now schedules initial meetings using Letter 725-B. That change elevates the importance of your first response and document-production plan because early missteps can escalate a civil case toward a criminal path. If CI special agents appear unannounced, verify credentials, take their cards, decline a substantive interview, and contact counsel immediately. Lying to agents can independently trigger § 1001 liability.
Why Hire the Tax Law Offices of David W. Klasing in San Diego
At the Tax Law Offices of David W. Klasing, our mission is urgent and straightforward: keep your matter civil, minimize damage, and prevent indictment where the facts allow. We are a dual-licensed team of Criminal Tax Defense Attorneys and CPAs that pairs litigation-ready defense with forensic tax precision. We understand how exam teams document fraud indicators, when to limit interviews, how to route communications to preserve privilege, and when to engage CI or DOJ Tax to resolve matters pre-indictment. Only attorneys can confer attorney-client privilege and work-product protection; we extend that protection to accountants engaged under a Kovel arrangement for the purpose of obtaining legal advice.
We handle the full spectrum of federal criminal-tax exposure: evasion under § 7201, false returns under § 7206(1), obstruction under § 7212(a), employment-tax crimes under § 7202, conspiracy under 18 U.S.C. § 371, where charged, and parallel civil fraud penalties. We also advise on the timely use of the IRS Voluntary Disclosure Practice, as outlined in Form 14457, to address willful noncompliance before an examination or criminal investigation begins.
If there is any indication that your matter could become criminal, contact the Tax Law Offices of David W. Klasing promptly. We will halt direct questioning, control document flow, reconstruct records, model tax and penalty exposure, and implement a defense designed to protect your liberty and your net worth. David’s proven proficiency is available in San Diego, at our San Diego office, providing both legal and federal tax services in one place—at a single hourly billing rate.
San Diego Tax Evasion Defense Lawyers and CPAs
If you are at risk of being charged with tax evasion or a related tax offense, you need to begin planning your defense strategy as soon as possible. The Department of Justice is aggressive and diligent when it comes to prosecuting suspected tax offenders, with prosecutors often obtaining lengthy sentences and harsh penalties for defendants who are convicted. Merely being investigated by the criminal investigation division will result in an over 90% probability of a criminal tax conviction.
To discuss your tax issue confidentially in a reduced-rate initial consultation, call the Tax Law Office of David W. Klasing at (800) 681-1295, or call our San Diego tax office directly at (619) 780-2538. You can also contact us online to schedule an appointment. Please note that all meetings at our San Diego location must be scheduled in advance.
