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Tax fraud is a serious criminal offense with potential life-changing consequences. Depending on the circumstances, tax fraud can be charged as a misdemeanor or a felony. Tax fraud involves intentionally deceiving the Internal Revenue Service (IRS) or the Oklahoma Tax Commission (OTC) in order to avoid paying legally owed taxes. The most common charges include failing to file returns, underreporting income, and sales tax evasion. Individuals and businesses charged with tax fraud face steep penalties such as felony charges, prison time, and significant fines as outlined in federal law 26 U.S.C. §7201 and and Oklahoma Statute 68 O.S. §2375. Cases are tried in both state and federal courts, depending on the nature of the charges.
If you have been accused of tax fraud it is imperative to remain silent, preserve all relevant documentation, and consult a criminal defense attorney as soon as possible. The tax fraud attorneys at The Law Offices of Adam R. Banner employ a variety of legal defense strategies including demonstrating a lack of intent, challenging procedural errors, or arguing that mistakes were due to 3rd party preparers.
Tax fraud is a generic term for anyone who willfully and intentionally tries to avoid paying legally owed taxes. Methods used in tax fraud include hiding income, underreporting income, overstating deductions, falsifying records, or hiding assets. While many people try to cut corners to save a few bucks at the end of the year, the potential gains are just not worth the possible penalties.
It’s important to remember that individuals are taxed on the state and federal level. As such, fraud can occur either as a state felony or a federal felony. In either situation, the investigation into the alleged wrongdoing will most likely be headed by a specialized unit.
On the state level, these cases are most often investigated and prosecuted by the Oklahoma Attorney General’s office. On the federal level, the cases are usually investigated by agents for the Internal Revenue Service (IRS) and prosecuted by the United States Attorney for the federal district in which the criminal activity occurred.
The legal defenses for tax fraud include demonstrating a lack of intent to defraud, a reliance on a tax preparer or accountant, insufficient evidence, procedural and constitutional violations, voluntary disclosure or compliance before indictment, and the expiration of the statute of limitation. The legal defense strategies for charges of tax fraud are listed below.
Depending on the circumstances of the case, one or several of the defense strategies listed above can be employed by a fraud attorney to fight the prosecution's case.
Tax fraud requires the prosecution to prove that the defendant acted knowingly and willfully, meaning they understood their actions were illegal and did it anyway. An attorney can argue that the defendant simply made a mistake, misunderstood their tax obligations, or were careless. These circumstances would not meet the legal threshold for fraud.
Arguing that an error was made by a tax preparer or accountant is a valid legal defense. Many individuals and businesses rely upon professional tax preparers or accountants to handle bookkeeping and file their tax returns. In this circumstance, the accused did not know about or intend to defraud the state or federal tax authority. This defense is particularly relevant for business owners or individuals with complex returns who hire experts to handle their tax filings.
Challenging the quality and credibility of the prosecution's evidence is an important legal defense strategy in both state and federal court. To secure a conviction for tax fraud, prosecutors are required to prove each element of the offense beyond a reasonable doubt. Any evidence that is circumstantial or inconclusive will not justify a conviction.
Procedural or constitutional violations are another legal defense for tax fraud charges. Violations of the Fourth Amendment (search and seizure), Fifth Amendment (self-incrimination), or due process can be grounds to dismiss evidence or the entire case. IRS and OTC agents are required to follow strict rules during their investigations. Any evidence that is obtained through an illegal search and seizure, or if the defendant's constitutional rights were violated can be suppressed by the court.
Voluntary disclosure is the act of correcting tax filings or paying the owed taxes before criminal charges are filed or an audit begins. This process may involve filing amended returns, paying back taxes, or notifying the IRS or OTC of previous errors. Voluntary compliance supports the defense's argument that the taxpayer did not act with the intent to defraud. This proactive step can lead to reduced charges, civil penalties instead of criminal charges, or be used to help the defendant during plea negotiations.
The statute of limitations is the legal deadline for the government to file criminal charges. If the statute of limitations has expired, the defense can move to have the charges dismissed. The statute of limitations for felony tax fraud in Oklahoma is three (3) years, though there are circumstances in which this period can be extended. Charges of civil tax fraud can be filed up to three (3) years from the date the return was filed. However, if a fraudulent return was filed with the intent to evade paying taxes, there is no statute of limitations on the assessment and collection of the owed taxes.
It is essential to explore all defense options during a tax fraud case due to the serious penalties associated with a conviction.
The penalties for tax fraud in Oklahoma include criminal and civil consequences. Criminal charges range from misdemeanors to felonies depending on the amount of tax evaded and the intent to defraud. Felony convictions can result in up to five (5) years in prison and fines as high as $100,000. Civil penalties include the repayment of back taxes, interest, and additional penalties of up to 75% of the unpaid tax if fraud is proven.
Moreover, Oklahoma has a general provision in its tax code that also requires an additional penalty equal to the amount of the tax, penalty and interest, due and delinquent upon a finding of guilt.
Laws related to tax preparation aren’t limited to individuals preparing their own taxes. The regulations apply to accountants and any other person assisting in the preparation of the associated and related documents. A failure to correct something on your return that you know is incorrect could also lead to liability, even if it is something that your tax preparer included.
Liability can also reach to a person’s company as well. The applicable rules and regulations regarding taxes apply to those preparing individual returns as well as corporate returns.
There are just as many ways to violate federal laws when it comes to tax fraud. The Internal Revenue Code is thick and tricky to navigate, and it is chock-full of potential pitfalls for those people hoping to defraud the government.
A willful failure to file a federal tax return can result in up to one (1) year in federal prison. A person who makes a false or fraudulent statement on a federal return can face a maximum of three (3) years in prison. Truth be told, there are numerous ways one can run afoul of the IRS.
As a general rule though, any person who willfully attempts, in any way, shape or form, to evade or defeat ANY tax imposed by the Internal Revenue Code will face various fines, penalties, and potential incarceration. Though there are various punishment ranges depending on the act or omission, federal law provides for a generic punishment of up to five (5) years imprisonment and up to a $500,000.00 fine for tax fraud.
The penalties for federal tax fraud include criminal charges and civil monetary penalties, depending on the nature of the crime. Under 26 U.S.C. §7201, the willful attempt to evade any federal tax is punishable by up to five (5) years in federal prison, fines up to $100,000 for individuals or $500,000 for corporations, and payment of all taxes owed. Federal tax fraud cases are investigated by the IRS Criminal Investigation Division (CID). The penalties for federal tax fraud are listed in the table below.
Due to the severity of the penalties associated with federal tax fraud, it is imperative to speak with a criminal defense attorney as soon as possible. They can help you navigate the entire process from investigation to trial, ensuring your rights and reputation are protected at all times.
