When the
verdicts’ been read and the fat lady has sung, most convicted tax cheats have fleeting
thoughts of escape, suicide and their eventual incarceration, viz. the big house. But when it comes to
the rough and tumble world of tax collecting, incarceration is but a measly bump
in the road. In fact, the financial consequences associated with tax crimes are
so financially onerous, that restitution and judgments frequently go unpaid.
Unfortunately, indigence won’t stop the IRS from playing “pig pile” a/k/a
bringing a civil action for unpaid
taxes, penalties and interest.
To this
end, one of our former clients, who was incarcerated for a non-tax related
offense, was contacted by an IRS Agent who wanted to interview him in prison.
Our client refused, and eventually the resourceful Agent made up his own
extrapolations, which were based on jaundice publications from the New York
Post (and were wildly inaccurate).
Another one of our client’s was visited by the IRS in a halfway house she called home, and just about coerced into signing a $1,000,000
confession of judgment (that she probably didn’t owe). The inducement to sign was as simple as it
was effective “Admit to this tax
liability, or we’ll refer your case to Criminal Investigations, and you’ll be
back in prison for another 5 years” (powerful stuff). Keep in mind that, at
the time of her confession, she was 67 years old, indigent and in terrible
health. Ultimately, we had her placed into temporarily uncollectable status,
and she died several months later. A Dickensian
story if ever there was one, says David Selig of Selig & Associates.
Tax Tip of the
Day: In a criminal tax case,
a court can require a defendant to pay the losses incurred by the government.
The amount of the restitution ordered by the court is calculated from evidence
submitted at trial or from information contained in the plea agreement and
presented to the court at sentencing.
Public Law No. 111-237
amended IRC 6201 to provide that the Service shall assess and collect the
amount of restitution ordered in a tax case for failure to pay any tax imposed
under the Internal Revenue Code in the same manner as if such amount were such
tax. The law applies to restitution orders entered after August 16, 2010.
The law also amended IRC
6213(b) to stipulate that a notice of assessment of restitution is not a notice
of deficiency and may not be petitioned to Tax Court and IRC 6501(c) to address
the unlimited assessment period for restitution-based assessments (RBAs).
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