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What is “Willful Blindness” in Relation to Tax Crimes?

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What is “Willful Blindness” in Relation to Tax Crimes?

 

Willful blindness (also known as conscious avoidance or deliberate ignorance) is a judicial doctrine that makes a criminal conviction on a tax issue more likely by imputing knowledge onto a defendant. The doctrine broadens the statutory definition of a guilty party to include someone who is found to have deliberately avoided the discovery of incriminating information. Willful blindness is a widely observed judicial doctrine. It is specifically employed in criminal tax cases by the prosecution where a defendant may not have had actual knowledge of the tax offense in question but may “ought to have” known or consciously avoided finding out. Willful blindness can be a difficult hurdle to navigate in a court of law. Those who are facing allegations of willful blindness in a tax case should immediately consult one of our competent dually licensed Tax Attorneys and CPAs about their options. Call the Tax Law Offices of David W. Klasing today at (800) 681-1295 or schedule a reduced rate consultation online here.

The “Willful Blindness Doctrine” in Tax Cases

Once a narrowly construed doctrine, the willful blindness doctrine was established primarily by United States v. Jewell (1976), a case tried in front of the 9th U.S. Circuit Court of Appeals. In Jewell, the Court of Appeals determined that the trial court was correct to instruct the jurors that they could find the defendant guilty of possession when he voluntarily drove a car filled with marijuana across the U.S. border, despite there being no evidence of the defendant having any actual knowledge of the cargo he was transporting.

The application of the loosely defined doctrine proliferated rapidly into other areas of the law as a favorite tool of prosecutors to secure convictions in cases where proof of actual knowledge was difficult to obtain. This is certainly the case in white-collar and tax cases, where the type of knowledge that the prosecution must prove is often complex. The doctrine was more eloquently defined at the Supreme Court level in the 1991 case Cheek v. United States, where “willfully” was defined as a “specific intent to violate a known legal duty.” Cheek also provides the primary defense against a violation of the Internal Revenue Code (IRC), which you can read more about below. For questions about the willful blindness doctrine and how it may apply to you, please reach out to one of our dually licensed Tax Attorneys and CPAs today.

Examples of Willful Blindness in the Context of Tax Crimes

While negligent, reckless, or inadvertent actions do not amount to a criminal tax charge, there are several examples of instances where a prosecuting attorney may attempt to employ willful blindness in order to secure a conviction. These examples include when a defendant fails to:

  • Inspect and report the entirety of profits from offshore entities
  • Inquire about potentially fraudulent filings for fear of confirmation
  • Refrains from examining a tax return despite suspicion of falsely inflated losses

If you believe that one of the above examples may apply to you, please contact a competent tax attorney.

Willful Blindness Jury Instruction in a Tax Crime Case

For the jury to consider willful blindness as a means for imputing knowledge to a defendant, the court will have to issue an instruction to the jury. The content of the instruction is predetermined by the conscious avoidance doctrine of the Second Circuit. To find that the defendant was willfully blind, the jury will have to determine beyond a reasonable doubt that the defendant’s actions were deliberate to avoid specific knowledge, either of the law or of their own financials. The jury must consider two factors:

  1. Whether the defendant suspected that there was information relevant to their tax liability that they had not discovered
  2. Whether the defendant acted purposefully to avoid discovering said information

Courts vary on which guidance they abide by on proper application of willful blindness jury instruction. Some allow the government to use the willful blindness instruction to establish willfulness. Others only allow the willful blindness instruction where the evidence could establish the defendant’s actual knowledge definitively. For more information on whether your case is being heard appropriately, reach out to one of our dually licensed Tax Attorneys and CPAs for a complete, diligent assessment.

Where the willful blindness jury instruction is given and a jury finds the defendant guilty, the process of appealing this verdict can be very difficult. Therefore, it is critical to enlist the help of a competent, experienced California Tax Law Attorney and CPA early on to make sure you are properly represented at every stage of your case.

Defenses to Willful Blindness in Tax Crimes

When faced with criminal charges under the Internal Revenue Code, a defendant may choose to employ a Cheek defense, created by the aforementioned case in front of the Supreme Court. In Cheek, the Supreme Court determined that a defendant could combat a criminal tax charge with evidence of their own lack of willfulness. Generally, a defendant using the Cheek defense must demonstrate their own good-faith belief that they were acting in accordance with the IRC. The availability of the Cheek defense depends on the circumstances by which a willful blindness jury instruction is offered or not.

Willful Blindness and Collective Knowledge

The willful blindness doctrine may also be utilized to implicate a corporation generally, based on the collective knowledge of multiple agents of the corporation. The corporation could be criminally liable if the organizational structure of the corporation is found to have been deliberately contrived to obfuscate information about tax liability.

Accused of Willful Blindness? Call Our Tax Attorneys/CPAs Today

If you are facing charges from the IRS, or even if you are concerned about a potential case against you, it is important that you contact the dually licensed Tax Attorneys and CPAs at The Tax Law Offices of David W. Klasing. We have decades of experience dealing with the IRS on behalf of individuals and corporations, and we will work tirelessly on your behalf. Call our offices today at (800) 681-1295 or schedule a reduced rate consultation online here

Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed domestic or foreign tax and information returns coupled with affirmative evasion of U.S. income tax on domestic or offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore 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!

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