Tax evasion can lead to serious consequences, including significant prison time, substantial fines, and supervised release. The severity of these penalties is intended to serve as a deterrent to prevent individuals from engaging in fraudulent activities and emphasizes the importance of fulfilling tax obligations.
For instance, a Virginia resident, James C. Jones Jr. has been convicted of evading employment tax payments, filing false tax returns, and obstructing the IRS. Operating Lifeline Ambulance Service Inc. from 2008 to 2009, Jones failed to remit around $200,000 in taxes, leading to a potential maximum prison sentence of five years for tax evasion, three years for each false return count, and three years for obstructing the Internal Revenue Service (IRS). The sentencing decision now rests with a federal district court judge.
If you need help resolving a high-risk tax issue, seek guidance from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295.
The Tax Evasion Case Against James C. Jones Jr.
A federal jury has convicted James C. Jones Jr., a Virginia resident, on charges of evading employment tax payments, filing false tax returns, and obstructing the IRS. The case spans from January 2008 to December 2009, during which Jones, the owner of Lifeline Ambulance Service Inc., failed to remit approximately $200,000 in federal income, Social Security, and Medicare taxes withheld from employees’ wages to the IRS. The IRS assessed the unpaid taxes against Jones personally in December 2009. To impede IRS collection efforts, Jones falsely claimed a lack of funds despite owning Caribbean properties, bank accounts, and a collection of classic cars.
Jones filed fraudulent tax returns from 2013 to 2018, omitting rental income from Caribbean assets and claiming false deductions as part of his obstruction tactics. He further misled the Justice Department by falsely asserting a lack of records responsive to a subpoena for foreign bank records. As the director and owner of several foreign holding companies, Jones possessed these records. The potential consequences for Jones include a maximum prison sentence of five years for tax evasion, three years for each false return count, and three years for obstructing the IRS. Additionally, he may face supervised release and monetary penalties.
If you have been accused of tax evasion or are at risk, you must hire legal representation as quickly as possible. Our Dual-Licensed Tax Lawyers & CPAs can help identify your best course of action. We can endeavor to assist you in avoiding criminal tax prosecution where possible and in achieving damage control where it is not.
How Do Taxpayers Obstruct IRS Investigations?
There are multiple ways that taxpayers can obstruct IRS criminal tax investigations, audits, and collection actions. As seen in the case of James C. Jones Jr, engaging in any of these obstructive behaviors undermines the integrity of the tax system and can lead to serious legal consequences.
False Financial Claims
Individuals may obstruct IRS investigations by making false financial claims, such as asserting a lack of funds or concealing assets to hinder the agency’s efforts to assess and collect owed taxes.
Falsifying Tax Returns
Filing fraudulent tax returns, omitting income, or inflating deductions are other tactics obstructing IRS investigations. This deceptive practice aims to mislead the IRS about an individual’s financial situation.
Concealing Records
Obstructive actions may involve concealing or refusing to provide records requested by the IRS, hindering the examination of financial transactions and sources of income critical to tax investigations.
Misrepresentation of Business Transactions
Individuals can impede IRS inquiries by misrepresenting business transactions and providing false information about income sources, expenses, or the nature of financial dealings to create obstacles for investigators.
Non-Cooperation with Subpoenas
Refusing to cooperate with subpoenas for financial records or providing false information in response to legal requests can obstruct the IRS’s ability to gather essential evidence for tax investigations.
Underreporting Income
Deliberately underreporting income to the IRS is a common form of obstruction, as it distorts the true financial picture and undermines the accuracy of tax assessments.
Illegal Transfer of Assets
Illegally transferring assets to avoid tax obligations obstructs IRS efforts to seize and liquidate assets for payment. This tactic involves hiding wealth through intricate transactions.
Potential Penalties for Obstructing an IRS Investigation
If the IRS investigates you, our legal team can help you cooperate with the agency without unnecessarily harming your interests. Obstructing an IRS investigation is never a good idea. There are several penalties in place to deter such behavior.
Criminal Charges and Imprisonment
Individuals found guilty of obstructing an IRS investigation can face criminal charges, leading to imprisonment. The severity of the obstruction may determine the length of the prison sentence imposed as a consequence.
Monetary Fines
Penalties for obstructing an IRS investigation include substantial monetary fines. These fines are a financial consequence for individuals attempting to impede the IRS’s ability to collect accurate tax information.
Additional Civil Penalties
Beyond criminal charges, obstructive actions can result in additional civil penalties. These penalties may compound the financial consequences for individuals involved in hindering the proper functioning of IRS investigations.
Supervised Release
As part of the penalties, individuals convicted of obstructing IRS investigations may be subject to supervised release, which entails a period during which the individual is monitored and must comply with specific conditions set by the court.
Legal Repercussions for False Statements
Making false statements during an IRS investigation can lead to separate legal repercussions. Individuals may face charges related to providing false information, compounding the legal consequences they may encounter.
Determining Prison Sentences for Tax Evasion
As previously mentioned, individuals convicted of tax evasion can face imprisonment as a significant consequence of their actions. The severity of the prison sentence typically depends on factors such as the amount of taxes evaded, the duration of the evasion, and any additional charges related to obstructing the IRS or providing false information. Courts may impose substantial prison terms ranging from several months to years to deter others from committing similar misconduct.
Coming Back into Tax Compliance Without Facing Criminal Tax Prosecution.
Suppose 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. In that case, 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.
You must 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 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 itself). Only an attorney trained in criminal tax defense fully understands the risks and rewards involved in voluntary disclosures and how to protect yourself if you do not qualify for 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 net worth.
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We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business; our team will help ensure your business is, too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
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