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I was arrogantly told by an attorney based out of Tustin CA that no one goes to prison for tax fraud and tax evasion. T or F?

Santa Ana, CA |

An attorney was sitting as a temporary judge for a mandatory settlement conference: I am being sued by someone who has committed serious tax fraud and tax evasion and I feel that the person should be held accountable criminally. He told us that no one goes to prison for tax fraud or tax evasion. Is this really true?

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Attorney answers 10

Best Answer
Posted

False. The judge pro tem does not know what he is talking about. I seriously doubt whether he has any tax or criminal tax experience. While it is true that Federal tax fraud or evasion prosecutions are uncommon (only about 2000 criminal tax cases are filed each year in the entire U.S.), they are not unheard of. I tried about 8-10 criminal tax cases with the U.S. Attorneys Office, Tax Division, Los Angeles ("USAO Tax"), from 2000-2011 and disposed of numerous other criminal tax cases through pre-indictment plea agreements.

In general, the Department of Justice's Tax Division in Washington, D.C. ("DOJ Tax) will only authorize criminal tax fraud or evasion cases which meet the following criteria: (1) the taxpayer has a multi-year pattern (2 or more years) of failing to file returns, filing false tax returns or other documents and/or failing to pay tax; (2) the total tax loss is $30,000 or more (otherwise, if less tax loss is involved, a first-time criminal offender who pleads guilty and whose tax crime does not involve any specific offense characteristics, such as sophisticated means, a pattern or scheme from which he derived a substantial portion of his income, and/or he is in the business of preparing or assisting in the preparation of tax returns, he is very likely to be sentenced to probation; given the length and labor-intensive nature of criminal tax investigations -- 2000+ man hours -- nothing short of a prison sentence generally is satisfactory to the IRS/DOJ for deterrence and publicity purposes; (3) undeclared income from offshore banking activity and FBAR violations are involved (the IRS and DOJ are seemingly presently viewing each one of those cases, civil or criminal, as "the most important Federal case ever"); and/or (4) a celebrity or high-profile individual is the subject of the investigation. If factors 1 and 2 are not met, then DOJ Tax may authorize prosecution if factors 3 and 4 are met. As noted below, however, the IRS professes not to have any specific dollar threshold for criminal tax prosecutions, so it is possible (albeit highly unlikely) for a case to be prosecuted which involves a total tax loss less than $30,000 and no "specific offense characteristics," if the facts are damning.

If the plaintiff's conduct meets the prosecution criteria set forth above, then you should consider submitting an Information Referral to the IRS reporting his tax fraud. See http://www.irs.gov/pub/irs-pdf/f3949a.pdf

I've attached excerpts from a dated article which explains the tax loss criteria that the IRS and DOJ Tax use to determine whether to authorize criminal tax investigations and prosecutions:

"While the IRS will not admit to specific monetary threshold tax amounts or other specific
guidelines, CID generally observes certain standards for prosecution recommendations.
Traditionally, the tax consequence of the criminal tax violations for all prosecution
periods would be at least $10,000 for tax evasion and approximately $2,500 for failure to
file cases. For false document cases, the tax threshold amount may be less than $500. In
addition, CID normally adheres to the multi-year prosecution period in order to establish
a pattern of willful conduct.

Although CID generally adheres to the aforementioned standards, there are exceptions.
These might include cases in a targeted area of non-compliance or cases involving public
figures or cases in which the violations for a single year are sufficiently flagrant to clearly
establish criminal intent.

It is important to note that the Special Agent often has an interest in maximizing the
criminal tax calculations in order to enhance the apparent prosecution value or publicity
potential of an investigation. More importantly, the amount of the criminal tax calculation
is directly correlated with the severity of a potential sentence according to the Federal
Sentencing Guidelines." (page 9)

http://www.vairariley.com/CM/Custom/Dealing_With_IRS_Special_Age

The answer to this question does not establish an attorney-client relationship. Moreover, this attorney is licensed to practiced law ONLY in the State of California. Answers to questions from users in other jurisdictions or states are meant to provide only general information. Users should contact a local attorney in their jurisdiction or state to address their specific tax issue.

Zaher Fallahi

Zaher Fallahi

Posted

GREAT INFORMATION MR. STACK.

Richard Gordon Stack

Richard Gordon Stack

Posted

Thanks, Zaher.

Asker

Posted

Wow! Incredibly helpful! Yes, I did report it to the IRS. In fact, I just spoke with the CA Franchise Tax Board and they were VERY interested. They want me to send in all I can. Considering there are 7 years of fraud, it's a lot. Any suggestions exactly what I should send? It's incredibly expensive to copy all of this. One 4 in notebook cost me $75.00. And that only included examples of the tax fraud. Should I send the P&L for each year with the bank statements and credit card statements? I have her fake set of books and the audited set of books...Much thanks to you all! This woman is so full of greed, I cannot fathom what is in her head. She truly believes she can use excuses to get out of this. She clearly thinks she's gotten away with it already.

Asker

Posted

Unfortunately, I called an IRS agent, and because of the government shut down, this woman gets a short reprieve from IRS investigation. I'm hoping the other agencies will look into this.

Richard Gordon Stack

Richard Gordon Stack

Posted

Instead of you bearing the expense of copying the documents in your possession which evidence this woman's tax fraud, you should make an appointment to meet with an FTB Special Agent (or fraud investigator) and bring your records to that meeting for their review. The FTB (and later, the IRS) can then decide what documents they would like to photocopy and they will bear the copying expense. Be sure to obtain a written receipt if you turn over any of your original documents to the taxing authorities. Good luck! P.S. - If you like my responses, can you please consider giving me a "Helpful" or "Best Answer" vote? Thanks.

Posted

F. Tell that to Al Capone.

Law Offices of Andrew D. Myers, North Andover, MA & Derry, NH provide answers for informational purposes only. Actual legal advice can only be given by an attorney licensed in your jurisdiction, thoroughly familiar with the area of the law in which your concern lies. This creates no attorney-client relationship.

Posted

Its not true! Richard Hatch the first winner of Survivor went to jail for not reporting his winnings is one example.

Andrew Daniel Myers

Andrew Daniel Myers

Posted

How could I have forgotten about that one! He was living in New England when he brazenly did not report his very public winnings. Good job, counsellor.

Thomas J. Wagner

Thomas J. Wagner

Posted

Thanks. I had to ask my wife the name of the first winner since I don't watch that show. There are other celebs that went to jail recently for tax evasion as well. Wesley Snipes is one.

Asker

Posted

Thank you. Maybe there is hope. I have reported everything to the IRS and DA, among other agencies that were defrauded, also. I think the attorney from Tustin was quite impressed with himself. I'll just keep plugging away and reporting.

Thomas J. Wagner

Thomas J. Wagner

Posted

Good luck.

Posted

Not true. But that person's purported tax fraud is like not relevant in your civil matter, which is what I suspect the attorney/judge was trying to get at.

This content is not legal advice and it does not create an attorney client relationship. This content is provided for educational purposes only. If you need answers to specific legal problems, please engage an attorney. This content is not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax penalties.

Asker

Posted

Thank you. This particular attorney was really rude and I think he was just trying to act superior. I knew that it was a separate issue, however, he made it very clear that 'NO one goes to prison for such things." I was really surprised by his behavior.

Posted

The alleged tax evasion has little or nothing to do with your civil case. If you think the person is guilty of a crime, report it. They still have the right to sue you.

And as others have noted, the settlement judge is wrong on that issue.

First, the firm is a debt relief agency according to the U.S. Bankruptcy Code. We help people file for bankruptcy. We also do other stuff and we do it well, but Congress wants me to post this notice. Second, nothing on this site is legal advice. You are not my client unless you enter into a written agreement signed by you and me.

Posted

False. There must have been some misunderstanding in this case. Generally, attorneys do not make that type of blunt statements. Many tax issues are criminal in nature and people ago to jail/prison all the time, both on domestic and international tax violations. I recently met someone who voluntarily disclosed to me that had been recently released after serving over twenty years due to tax fraud. In addition, review the 2009 UBS case and find out how many holders of the Swiss bank accounts ended up in jail. Good luck.

Asker

Posted

There was no misunderstanding with that attorney-or rather the temporary judge. I indicated that I knew that the Plaintiff could sue for anything, but that I was going to hope that the criminal court would do something about all the unreported income, tax fraud and broken laws. This attorney was quite rude and was very condescending. All he spoke about was his "number" which indicates how long he has been in practice. He was actually "making fun of me" in the fact that I truly believe that people who commit tax fraud will go to prison. I was absolutely astounded. It makes me feel as if it's not worth it to be an honest and hard working person. I wish there was something I could do to bring this matter up to other judges. He indicated that he was "volunteering" for the temporary judge position. In fact, because I did not have an attorney, he never made eye contact with me or spoke to me directly, except for that comment. He clearly thought he was above me. I have a college degree from a University of CA. I am no dummy. I just got seriously defrauded by a very bad person. I truly feel that this so-called judge was out of line. My whole perception of the civil court system is so tainted now because of people such as that.

Posted

In a way what he / she said it true… In the U.S. each year the federal government brings about 5,000 criminal prosecutions a year. 3500 or so of those are add on crimes. Example a hit man busted for murder usually does not report his “hit man” income so evasion is added on… That leaves about 1500 pure tax crimes in the nation a year that get prosecuted. Given the gov is looking for publicity for prosecuting – unless you’re a country western singer or an action movie star criminal prosecution is highly unlikely. Rarely would the government be interested in criminally prosecuting someone fingered by an individual with a personal grudge as their sole motivation. The evasion has to be egregious and the prosecution likely to get press.

Posted

ask Wesley Snipes what he thinks about that

Posted

This is not true. The courts like to make a point out the tax protestors.

Richard Gordon Stack

Richard Gordon Stack

Posted

Yes, and tax protestors definitely deserve to be prosecuted to the full extent of the law.

Posted

This is not true. In 2010 I had a client who had failed to file tax returns for 5 years. They also had all their income paid to a Corporation but never paid any corporate tax, impersonated an IRS agent, and generally hung around "tax protestor' type people.

Both husband and wife were were indicted for tax evasion in the Eastern District of Wisconsin. Both were facing up to 25 years in prison, fines, and probation after their incarceration. I got them 6 months in prison with no fines and no probation. This couple still owes about $600K in taxes and penalties.

So yes... People go to jail.

Richard Gordon Stack

Richard Gordon Stack

Posted

I had a client who regularly filed his returns reporting the correct amount of taxes but failed to pay his Federal income taxes for 20 consecutive years. He played "whack-a-mole" with the IRS's collection efforts by doing such things as living a "cash lifestyle," opening an account with a different bank shortly after an IRS levy, depositing his commission checks in his business partner's bank account, and purchasing cashier's checks with his commission checks and using such cashier's checks to pay (and pre-bills) his and his family's bills. He originally was to be charged with tax evasion (evasion of payment) but I was able to persuade the prosecutor to charge him with obstruction of the lawful functions of the IRS under Section 7212(a) so as to improve his chances of not being deported (he is a British national). My client was looking at a guidelines sentence of 30-37 months but received a year and a day in prison. U.S. CIS is recommending that my client be deported to the UK but he has a fighting chance of staying in the U.S. if the government does not show that his offense involved "fraud or deceit" causing a loss of $10,000 or more. So, yes Virginia, people do go to jail, not just for filing false tax returns but also for failing to pay their taxes, coupled with some affirmative acts of evasion.

Asker

Posted

Thank you so much!!!! I am absolutely shocked that this settlement judge (attorney) spoke so out of line. This person has committed so much obvious tax fraud that it is scary. The even scarier part is that she thinks she'll get away with it by claiming ignorance. I bet she will try to use the innocent spouse defense, however, she is suing me claiming to be the owner of the company. I don't believe she can play it both ways...claim she really wasn't the owner for tax purposes and then claim she was so that she can sue me. I have reported the fraud to every agency it involves. She also paid all of her personal employees under the table for 7 years and never reported any or withheld any taxes. Forget any type of labor laws...in her world she is exempt. She also claimed to be the owner of the company so that her husband could collect disability all those years, although he was the one that worked. She blatantly spent money on herself and all of their personal expenses were recorded as business expenses. So...thank you for restoring my faith! This particular "settlement judge" really needs to get over his arrogance or stop making statements such as this.

Richard Gordon Stack

Richard Gordon Stack

Posted

You may want to consider reporting the comments made by the settlement judge to the Presiding Judge of the court in which your case is pending that tax fraud, in effect, is "no big deal." In my opinion, the settlement judge should be disqualified from serving as a judge pro tem in future cases.

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