The Crime called Tax Evasion (the grandaddy of them all) 

Tax evasion is a felony, and perhaps the most infamous crime in the Internal Revenue Code. (26 U.S.C. § 7201.) To convict a defendant of this offense, the prosecutor must prove a tax deficiency (failure to pay taxes) and an intentional effort to avoid taxes.

Tax Deficiencies

A tax deficiency occurs when someone hasn’t paid as much in taxes as is owed. Some courts require a “substantial” deficiency for a tax evasion conviction, but most hold that any shortcoming will suffice. The extent of the deficiency is measured by the tax amount that hasn’t been paid, not by the amount of unreported income.

Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in payroll, income and sales tax controversies for individuals, contractors, restaurants, bodegas and professional practices. 

As with any other crime, the prosecution may prove the offense through direct evidence. But finding clear proof of unreported income can be difficult. Investigators often don’t have access to taxpayers’ private records.

Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in payroll, income and sales tax controversies for individuals, contractors, restaurants, bodegas and professional practices. 

Without direct proof, prosecutors must rely on circumstantial evidence—any fact that leads to a reasonable inference that something has occurred. Among the sources the government uses to search for circumstantial evidence of unreported income are

1. net worth

2. bank deposits, and

3. cash payments.

A taxpayer can try to disprove what the government alleges is a tax deficiency. She might attempt to show that the income in question is nontaxable, that the government’s computation is flawed, or that a deduction or credit negates the deficiency.

Effort to Evade

In order to prove an attempt to evade, the government must demonstrate that the taxpayer took some kind of affirmative action; simple neglect isn’t enough. The government must generally establish that the taxpayer misrepresented her ability to pay taxes or tried to hide assets from the IRS. Several kinds of behavior intended to mislead or conceal will satisfy the effort-to-evade element. These include, but aren’t limited to

            filing false returns

            hiding assets or income sources

            placing assets in others’ names

            conducting transactions in others’ names

            destroying records

            keeping two sets of books

            making fake documents, such as invoices

            falsely entering or altering information

            consistently failing to document transactions, and

            dealing primarily in currency—for example, gold coins.

Intentional Conduct

The government must show that the taxpayer specifically intended to violate the law. It’s not enough that he was merely careless, or that he misunderstood his legal responsibilities. On the other hand, the kinds of behavior detailed above usually suggest—and can be used as circumstantial evidence of—the intent to elude tax obligations.

Possible Defenses

Even if not objectively reasonable, a taxpayer’s honest belief that he isn’t cheating—perhaps because of some kind of ambiguity in the law—is a defense against tax evasion charges. To assess the legitimacy of this kind of defense, certain factors are relevant, including the taxpayer’s

            current conduct

            record of compliance with tax laws, and

            level of knowledge.

Proof of reliance upon the advice of a professional can also support the taxpayer’s assertion that she didn’t intend to evade taxes. But for this defense to apply, she must establish that she provided the professional, such as an accountant or lawyer, with complete and accurate information.

Selig & Associates provides the most aggressive tax representation allowed by law. Specializing in payroll, income and sales tax controversies for individuals, contractors, restaurants, bodegas and professional practices. 

The taxpayer who claims an absence of intent to evade faces an uphill battle: Courts view these state-of-mind defenses skeptically. Furthermore, evaders can’t justify their actions by insisting that they disagree with policy or believe that a tax statute is unconstitutional. Other failed defenses include inability to pay and intent to pay in the future.

Criminal Penalties

A felony tax evasion conviction carries a maximum imprisonment of five years, a fine of up to $100,000, or both. If the defendant is a corporation, the fine can be up to $500,000. The sentence depends on several factors, chief among them the amount of taxes evaded. Several circumstances will increase the punishment. These include the defendant's failure to report a criminal source of substantial income and using sophisticated means to commit the offense.