UPDATE: Last week, we reported on a
confounding case that could have tested the patience of Job. Thankfully,
commonsense prevailed and justice was [eventually] served. In the instant
matter, the State erroneously assessed a tax liability on an Attorney’s Escrow Account.
Unfortunately, the Tax Agent assigned to this debacle didn’t know (and didn’t
want to know) what an escrow account is. Rather, he insisted that the taxpayer
was obligated to pay taxes on every dime deposited. Moreover, they were going
to suspend our client’s drivers’ license if he didn’t start paying. Finally out
of desperation we contacted the Taxpayers Advocates Office and after presenting
all of the material facts and circumstances, which included supporting
documentation and affidavits, the Advocates Office interceded on our behalf and
this morning at 11:37am the [erroneous debt] was discharged in plenary.
Tax Crime? Tidbit of the Day
Like it or not, criminal restitution and civil tax liability
are separate and distinct. And to the paying-party, this unpleasant little
distinction is a pricy proposition. If you’re in trouble with the IRS or State,
you probably want to just “get on with your life” Well Sunshine, here’s a word
to the wise - you’d better look before you leap.
IRC Section 6201(a)(4)(A) expounds upon this “distinction” viz. requiring the Secretary to collect the amount of restitution
ordered pursuant to 18 U.S.C. § 3556 in the same manner "as if such amount
were such tax."
The distinction between criminal restitution and tax liability
frequently becomes an issue when a Tax Return Preparer is convicted of
preparing false returns (in violation of 26 U.S.C. § 7206(2) and is ordered to
pay restitution determined by the tax owed by his clients. Nota bene, the Tax Return Preparer will never (try as some may)
become civilly liable for the taxes attributable to someone else, a/k/a the coconspirator or so-called
self-proclaimed aggrieved party .
Restitution is determined under the Mandatory Victim
Restitution Act of 1996, Pub. L. No.1 04-132, § 204(a), 111 Stat. 1227 (1996)
(codified as amended at 18 U.S.C. § 3663(A)), This applies to certain tax cases
and directs that the amount of restitution is generally the amount of property
taken from the victim (an actual loss to the government in a tax case) under 18
U.S.C. § 3663A(b)(1)(A) and (B), whereas restitution ordered pursuant to a plea
agreement may be "to the extent agreed to by the parties in a plea
agreement" for any amount greater or less than the loss attributable to the
criminal offense. 18 U.S.C. § 3663(a)(3).
Definition
of a 'Tax Cheat'
An individual (or group) who,
through fraud, dishonesty or avoidance, does not pay the amount of tax that
would be obligated if tax rules were properly followed. A tax cheat may
improperly use tax shelters or purposefully miscategorize earnings and expenses
under the pretense that the government will not miss the lost revenue because
of the obligation's size relative to all taxes collected. Those found to be
cheating on their taxes may be subject to fines, penalties or imprisonment.
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