Criminal tax litigation is a complex area of the law that involves the potential for severe consequences for those involved, both criminally and financially. Taxpayers facing criminal tax charges need skilled representation to navigate the intricacies of the criminal tax process. It’s important to consider that every criminal tax case has not only a criminal component, but a civil component that must be accounted for and appropriately dealt with as well. Most criminal tax matters begin as an audit or investigation and ultimately result in a tax assessment, regardless of whether criminal charges end up being filed.
Understanding Criminal Tax Offenses:
In general, criminal tax offenses differ from civil tax disputes in that they involve the element of intent. For the element of intent to be established, the Government generally must prove there was knowledge and willfulness at the time the alleged crime was committed. Common criminal tax offenses include:
1. Tax Evasion/Tax Fraud: Willful attempt to evade or defeat the assessment or payment of taxes and/or deliberate deception or misrepresentation of financial information to reduce tax liability.
2. Filing False Tax Returns: Knowingly submitting tax returns with false information or omissions.
3. Failure to File Tax Returns: Willful failure to file required tax returns by their due dates.
4. Larceny/Failure to Pay Trust Fund Taxes: Knowingly failing to pay over “trust fund” taxes such as New York State sales tax and the employee’s portion of Federal or State payroll taxes.
The Criminal Tax Litigation Process:
1. Investigation: Criminal tax litigation often begins with an investigation or audit by the Federal and/or State taxing authorities. If the Government finds sufficient evidence of a tax crime, it will refer the case to the Federal/State prosecutors for the filing of criminal charges.
2. Grand Jury Proceedings: After the prosecutors approve moving forward with criminal prosecution, they will typically initiate a grand jury proceeding, where they present their case before a panel of jurors who decide if there’s sufficient evidence to support each element of the alleged tax crime(s), in which case the defendant is indicted.
3. Arrest/Arraignment: Following an indictment, the defendant is arrested, formally charged, and required to appear in court to be processed and enter a plea (guilty or not guilty) to the charges filed. The judge decides whether to set bail.
4. Pretrial Proceedings: During pretrial proceedings, both the prosecution and defense exchange information, file motions, and negotiate a potential plea agreement.
The Importance of Hiring a Tax Attorney Skilled in Both Criminal & Civil Tax Defense Matters:
Criminal tax litigation can be a life-altering experience as it not only puts your freedom at stake, but it can also affect your reputation, your job, your relationships, and your finances. When confronted with such highstakes, it is crucial to have a tax attorney representing you who can effectively manage both the civil and criminal side of criminal tax litigation.
In the event you either plead guilty or are found guilty of a tax crime, you could be affected by the following civil implications:
1. An otherwise dischargeable tax assessment (e.g., income tax assessment) that emanates from criminal tax conviction cannot be discharged in bankruptcy.
2. Most criminal tax assessments are coupled with onerous fraud penalties that are ineligible for abatement either administratively or due to reasonable cause.
3. Criminal tax assessments are ineligible for an Offer-In-Compromise (OIC) even in financial hardship situations.
4. You are prohibited from later challenging the underlying tax liability that emanates from a criminal tax conviction.
5. The interest and penalty calculation for any resulting criminal tax liability begins at the time the tax return is due to be filed and paid, not the date of the criminal tax conviction.
6. A criminal tax conviction at the federal or state level can, and often does, lead to a criminal tax investigation at the other level.
Facing criminal tax charges can be overwhelming, but you don’t have to navigate the complex world of criminal tax litigation alone. At McLaud Law, our experienced team of tax professionals are dedicated to defending your rights and achieving the best possible outcome in your case. Contact us today to discuss your situation and learn how we can provide the expert representation you need during this challenging time