Defending Clients Against Criminal Tax Investigations and Prosecutions

Criminal tax investigations and prosecutions are meant to destroy the person and his business because the IRS does not have the resources to investigate everyone. The IRS has to rely on tax prosecutions and prison sentences as a deterrence to others who cheat on their taxes or file false tax returns. The reason is that we have a voluntary tax system. We file tax returns every year and voluntarily assess ourselves by telling the IRS the amount of taxes we owe. If we don’t file our tax returns, we can be charged with the crime of failure to file our tax returns. Generally, taxpayers fall into three categories:

(1) Most taxpayers are wage earners who have their taxes withheld. IRS has their names in its computers because employers are required to file W-2s or 1099s so wage earners always file their tax returns.

(2) The wealthy taxpayers are not wage earners and have partnerships, joint ventures and real estate investments, for example. They have access to lobbyists and tax lawyers on whom they rely to pay zero or minimal taxes. Even those taxpayers face consequences if they fail to report all their income because IRS taxes worldwide income. Recently, the long arm of IRS caught up with them. Secret Swiss and other Offshore bank accounts are now a thing of the past because they had to disclose their USA depositors if they wanted to do business with any US bank. Voluntary disclosures, however, still exist for taxpayers who want to avoid criminal prosecution and limit draconian civil penalties; and

(3) The small business owners who have the greatest exposure because many work on the margins and some file inaccurate tax returns. They also experience cash-flow problems operating their businesses. Those taxpayers may have cash available from the withholdings of their employees, for example, but that money is held in trust and does not belong to the small business owner. Now, IRS has Employment tax compliance programs as a priority.

Regardless of political beliefs, we are a global society, and all US and Resident taxpayers are subject to the IRS laws: (1) all legal and illegal world-wide income has to be reported and taxed (2) deductions are only permitted if legal and congressionally authorized and (3) false statements are federal crimes. Thus, for example, a marijuana business has to report all its income, but it cannot deduct its business expenses because marijuana is still illegal under federal law, even though it may be legal in some states. The firm is ready to defend these taxpayers who are investigated or charged with tax-related crimes.

The emergence of Cryptocurrency is another global issue that IRS is not ignoring. IRS has already announced how Crypto will be taxed and has already used tools at its disposal to determine who owns Crypto. IRS will be arming itself by asking a delicate question under penalty of perjury on every Form 1040 tax return. That question is along these lines: have you engaged in any Cryptocurrency transactions during the year? The firm also is ready to defend anyone accused of making false statements on their tax returns.

As a former federal prosecutor and former IRS attorney, Mr. Perez has substantial insight into tax investigations and federal grand jury proceedings. He uses his nearly 50 years of experience and unique perspective to defend and protect clients from prosecution or draconian sentences for tax crimes, including allegations of:

• Failure to report income; failure to file tax returns; preparation of false tax returns, making false statements, and other Tax Fraud, Tax Crimes and related charges
• Grand Jury investigations, and IRS investigations
• Tax evasion, False Returns, Return Preparer fraud, False Claims, Conspiracies

The journey of a tax fraud case and how ultimately federal sentencing Guidelines impact tax crime sentences

A tax fraud investigation may begin by (1) a referral by an IRS revenue agent who has examined your tax return; (2) a disgruntled ex-spouse or ex-partner; (3) an informant tip or whistleblower to IRS; (4) another investigation that is looking at some other crime; and (5) numerous other ways not mentioned here. In any event, the targeted taxpayer will be visited either early in the morning or late evening. The hope is to get you by surprise to get you to submit to an interview. If they show you credentials of a badge and carry a gun, you are dealing with a Special Agent of the Criminal Investigation Division. Get a competent lawyer because the job of the Special Agent is to gather evidence to charge you with a tax crime and put you in jail. Talk to your lawyer first, not your CPA or accountant. Only your lawyer can tell you to remain quiet. Generally, your CPA or accountant return preparer will not want to know about your misdeeds and refer you to a competent lawyer in this field.

The Special Agent will gather evidence by summonsing bank records and other third parties and he has to document the fraud, like false statements, obstruction, a double set of records and other indicia of fraud. His completed report will be reviewed by IRS attorneys and then sent to the Department of Justice in DC. There, your case will undergo another review and then sent to the United States Attorney with instructions to seek a grand jury indictment against you, unless your attorney was successful in convincing the reviewers that there was no criminal tax case.

If the evidence is so overwhelming because, for example,  you talked to the Special Agent at his initial visit and confessed to cheating thinking your emotions might save you, you will have to engage in a plea bargain. The federal sentencing Guidelines will determine the sentence you will get, although your attorney can get creative and seek to get you probation.  This journey only covers your criminal tax case. What about the civil taxes that are owed? Those proceedings are generally suspended. They will never go away. The Court can order Restitution. But you will eventually have to pay those civil taxes and a 75% fraud penalty plus interest from the date the return was due.

Effects of Supreme Court cases on your case

Supreme Court tax cases have held that the Sentencing Guidelines are advisory only, not mandatory. Federal tax prosecutors still try to conduct business as if the Guidelines are mandatory. They focus on tax loss, and therefore the guidelines, and include the tax loss in their plea bargains. In some cases, tax loss may be acceptable because the alternative is a harsher sentence on a case that is not defensible. It is not wise to put on a dog and pony show just to look good and go to trial if you know your client’s exposure.  You may look good to the client and his family, but when the emotions settle down, they will know you did an injustice to your client. The Supreme Court’s decisions give creative lawyers an opportunity to help their clients to avoid draconian sentences. Caution: a civil attorney or young, inexperienced attorney must not learn at the Client’s expense. The accountant, who in most cases will have a continuing relationship with the taxpayer, must not permit this to happen.

Experienced involvement

Counsel, who are inexperienced in federal tax crimes, should proceed with caution. Concepts in complex areas like Tax, Federal Court Rules and Procedure, Evidence and Constitutional Law can’t be mastered overnight. For taxpayers who learn that their attorneys are not federal criminal tax defense lawyers, remember your freedom is on the line. It is important that you seek and retain an experienced federal criminal tax defense attorney at the earliest opportunity. Waiting too long can result in irreversible damage and financial ruin.

Hector Perez is available to represent taxpayers nationwide in federal courts throughout the country. He is in Southern California, and he can be reached at any time for emergencies. His office in Seal Beach, California is at 3020 Old Ranch Parkway, Ste 300, 90740.

Contact a discreet, experienced and reliable Federal and State Tax Crimes attorney for a confidential consultation.

Hector C. Perez & Associates has an office located in Seal Beach, CA and serves clients in federal courts in Southern California.  He is also available to represent certain federal tax defendants nationwide.

Call Hector C. Perez & Associates at 1-562.799.5524 to schedule your confidential consultation.