Tax evasion is ordinarily a federal offense. This means it is going to be investigated and prosecuted at the federal level. This also means a very aggressive prosecution and very substantial penalties if convicted. This is a conviction that could be life altering with draconian financial consequences.
This doesn’t mean that everyone who owes money to the IRS, has failed to file taxes, or hasn’t reported foreign bank accounts will be charged or convicted of federal tax evasion. There are 139.6 million taxpayers, according to the Tax Foundation, but there are less than 3,000 indictments each year for tax-related crimes. That’s a very small percentage of taxpayers. However, these nearly 3,000 cases involve taxpayers who are charged with willfully evading their tax obligation, so these cases do happen.
In other words, a tax evasion accusation could happen to you and requires the assistance by a tax law expert as soon such an investigation surfaces.
Tax Evasion, the Grand Jury Clause, and Indicting a Ham Sandwich
When the United States was founded, the Grand Jury Clause was included in the Bill of Rights. This clause serves to protect citizens against unwarranted and arbitrary prosecutions. For a federal prosecutor to obtain an indictment, the grand jury must be presented with evidence that establishes probable cause that a crime has been committed. At least that’s the theory.
Unfortunately, prosecutors have so much control over grand juries that it can be easy to convince them that probable cause exists. There famous legal saying that “a prosecutor can get a grand jury to indict a ham sandwich.” What this means is that in some cases an indictment may be obtained that may not be warranted. This is why a tax evasion attorney is needed as soon as the investigation starts. It’s especially important to have one experienced and familiar with the federal court system. Grand jurors only see and hear what the prosecutor presents and thus often do not know the whole story in a particular case. An experienced attorney with prior experience as a federal prosecutor is best equipped to advocate for a defendant wrongfully charged with tax evasion
To put into perspective how common this next step may be:
In fiscal year 2016, 3,395 investigations were initiated and 2,761 of those were indicted. A charge for tax evasion puts a defendant in a tough place. It’s not a place that should be faced alone, however. There is usually a lot of pressure on a defendant to plea bargain before indictment, but this pressure is made much worse because of the ease with which indictments may be obtained. This is a reason why legal help is needed as soon as a person learns that he or she is under investigation rather than after an indictment is returned.
Avoiding Prosecution for Federal Tax Evasion
Taking a look at how the government defines tax evasion; 26 U.S. Code Stat 7201 provides that tax evasion is the willful attempt to defeat or evade a tax. Conviction not only results in possible imprisonment of more than five years, but it can also result in $100,000 in fines for individuals or $500,000 for corporations. The goal is to demonstrate to the government the alleged tax evasion was not a willful attempt to avoid paying taxes but rather it the result of an honest mistake or oversight.
Mistake or not, one would think that avoiding the strict penalties should be simple, but it often requires sophisticated planning and strategy. A person facing potential tax related allegations should retain a qualified tax attorney who can assist in implementing a plan to avoid criminal tax charges. For example, if there there are unfiled returns, it usually makes sense to file them with a payment of the taxes due. If tax is owed due to an underpayment, it may be possible to work out a plan with the IRS to pay the money back. If there is unreported income, an experienced tax lawyer may assist in amending past returns so the income is accounted for and any money owed can be paid. A tax amnesty program is also an option under the advisement of your tax attorney.
While all of these steps may not ultimately prevent you from being charged with a tax crime, ion many cases they are effective in that they demonstrate a good faith effort to comply with the law.. Regardless of whether you are charged or not, it is best to have an attorney represent you to determine the best course of action and to shield you from the IRS during the investigation. If charged, you need an advocate by your side who has experience in federal to guide you through the process and to obtain a satisfactory rersult.