Cost for unreported income: 30 years in jail
A Cohasset man was sentenced yesterday to 30 years in federal prison for failing to report more than $1.6 million in taxable income to the Internal Revenue Service between 2000 and 2004.
For complete article click link above
Showing posts with label tax evasion. Show all posts
Showing posts with label tax evasion. Show all posts
Tuesday, January 8, 2008
Tuesday, November 13, 2007
Kerik indictment would wreak havoc for Giuliani
Kerik indictment would wreak havoc for Giuliani
"Kerik faces 14 charges, including criminal conspiracy, tax evasion and making false statements to White House officials considering him for Homeland Security secretary.
In return for Kerik's support, the indictment said, the New Jersey company paid for more than $250,000 in improvements to his apartment in the Bronx. Among the renovations were new bathrooms with a Jacuzzi, the marble entrance and a new kitchen.
The indictment said Kerik concealed this income -- as well as rent payments a New York real estate developer made on an Upper East Side apartment -- from the IRS.
Kerik's fame led to a contract to write a book and, according to the indictment, he failed to report more than $75,000 in income from that project."
Please click title above for complete article
"Kerik faces 14 charges, including criminal conspiracy, tax evasion and making false statements to White House officials considering him for Homeland Security secretary.
In return for Kerik's support, the indictment said, the New Jersey company paid for more than $250,000 in improvements to his apartment in the Bronx. Among the renovations were new bathrooms with a Jacuzzi, the marble entrance and a new kitchen.
The indictment said Kerik concealed this income -- as well as rent payments a New York real estate developer made on an Upper East Side apartment -- from the IRS.
Kerik's fame led to a contract to write a book and, according to the indictment, he failed to report more than $75,000 in income from that project."
Please click title above for complete article
Monday, November 5, 2007
Unreported Income: IRS Civil Tax Fraud and Criminal Tax Evasion
The IRS will often pursue a Taxpayer first, on criminal tax evasion, and then, civil tax fraud (otherwise, the taxpayer could assert, during the civil investigation, his Fifth Amendment privilege against self-incrimination).
If the IRS pursues civil tax fraud first and wins, they may collect civil penalties, tax and obtain discovery information, and then pursue criminal proceedings (and use the civil file to prosecute).
Civil Tax Fraud, and Criminal Tax Evasion cases have different:
I. Burdens of Proof
II. Statutes of Limitations (Unreported Income)
III. Penalties
IV. Collateral Estoppel (Civil/Criminal Issues)
I. Burdens of Proof
(Evidentiary Standard)
a. Civil Tax Fraud: “Clear and Convincing Evidence” (a.k.a. Preponderance of the Evidence)
b. Criminal Tax Evasion: “Beyond a Reasonable Doubt” (Higher Standard)
II. Statutes of Limitations
a. Civil Tax Fraud: No statute of limitations (tax can be assessed at any time).
b. Criminal Tax Fraud (Evasion): The criminal statute of limitations is only on the prosecution of the crime i.e. tax evasion (not the assessment of tax owed).
Generally, 3 years after the offense is committed.
Six (6) years for specified offenses (including: unreported income) (IRC §6531)
Under Federal Criminal Code (Title 18 U.S.C.A.) 5 years after the commission of a crime.
The statute begins to run when the last of the acts constituting the tax evasion is committed.
III. Penalties (Unreported Income)
(a) Civil Tax Fraud
(1) Fraudulent Failure to File Tax Return (IRC §6651(f))
15% of net amount of tax due for each month, (up to a maximum of 5 months), for a maximum penalty of 75% (of unpaid tax) (IRC §6651(f)). This is the only penalty imposed for failure to file.
(2) Fraudulent Tax Return (Unreported Income) (IRC §6663(d))
If any part of an underpayment of tax (required to be shown on a tax return) is due to fraud, a penalty equal to 75% of the portion of the underpayment.
(3) Accuracy – Related Penalty (IRC §6662(b)(1)-(5))
A penalty at a flat rate of 20% on portion of underpayment of tax.
The fraud penalty and accuracy-related penalty apply only for filed tax returns.
(4) Spousal Liability (IRC §6663(c))
For a joint tax return, both spouses are subject to joint and several liability for the entire tax liability.
The civil fraud penalty applies only to the spouse responsible for the underpayment that is attributable to fraud.
(5) Failure to Pay Tax
The penalty applies to the amount of unpaid tax due:
Unpaid tax shown as due on a tax return (IRC §6651(a)(2))
½ percent (of unpaid tax) for each month, up to a maximum of 25% (of unpaid tax)
Unpaid tax not shown as due on a return (i.e., unreported income (IRC §6651(a)(3))
½ percent (of unpaid tax) for each month up to a maximum of 25% (of unpaid tax)
OFFSETTING PENALTIES (IRC §6651(c)(1))
If taxpayer is liable for more than one of the delinquency penalties with respect to any tax return, the amount of the penalty for failure to file, is reduced by the amount of the penalty for failure to pay (the amount shown on a return for any month for which both penalties apply )
There is no offset for the penalty for failure to pay tax (IRC §6651(a)(3)) not shown as due on a return (i.e., unreported income).
No credit is allowed against the civil fraud penalty for any criminal fines paid for income tax evasion and conspiracy to defraud the U.S.
(b) Criminal Tax Evasion (Unreported Income)
(1) IRC §7201: Criminal penalty for willful attempt by any person to evade or defeat any tax or the payment of any tax
Conviction, punishable:
Fine: $100,000 (individual)
$500,000 (corporation)
Imprisonment: Not more than 5 years (or both fine and imprisonment)
(2) IRC §7203: Criminal Failure to File or Pay Taxes
Willful failure to pay tax, file a return, keep required records, or supply required information
Fine: $25,000 (individual)
$100,000 (corporation)
Imprisonment: Up to one year (or both fine and imprisonment)
IV. Collateral Estoppel
When criminal proceedings are followed by civil proceedings, the legal doctrine of collateral estoppel may apply. This doctrine provides that an issue necessarily decided in a previous proceeding (the 1st proceeding) will determine the issue in a subsequent proceeding (the 2nd proceeding), but only as to matters in the 2nd proceeding that were actually presented and determined in the 1st proceeding.
a. Conviction for criminal tax evasion collaterally estops the taxpayer from contesting the existence of fraud for purposes of the civil fraud penalty because a finding of criminal fraud (beyond a reasonable doubt) establishes proof of civil fraud (by clear and convincing evidence).
b. Acquittal of criminal tax evasion does not collaterally estop the government from proving civil fraud (by clear and convincing evidence). The acquittal established that proof of fraud did not exist beyond reasonable doubt, but that does not mean that proof of fraud by clear and convincing evidence does not exist.
If the IRS pursues civil tax fraud first and wins, they may collect civil penalties, tax and obtain discovery information, and then pursue criminal proceedings (and use the civil file to prosecute).
Civil Tax Fraud, and Criminal Tax Evasion cases have different:
I. Burdens of Proof
II. Statutes of Limitations (Unreported Income)
III. Penalties
IV. Collateral Estoppel (Civil/Criminal Issues)
I. Burdens of Proof
(Evidentiary Standard)
a. Civil Tax Fraud: “Clear and Convincing Evidence” (a.k.a. Preponderance of the Evidence)
b. Criminal Tax Evasion: “Beyond a Reasonable Doubt” (Higher Standard)
II. Statutes of Limitations
a. Civil Tax Fraud: No statute of limitations (tax can be assessed at any time).
b. Criminal Tax Fraud (Evasion): The criminal statute of limitations is only on the prosecution of the crime i.e. tax evasion (not the assessment of tax owed).
Generally, 3 years after the offense is committed.
Six (6) years for specified offenses (including: unreported income) (IRC §6531)
Under Federal Criminal Code (Title 18 U.S.C.A.) 5 years after the commission of a crime.
The statute begins to run when the last of the acts constituting the tax evasion is committed.
III. Penalties (Unreported Income)
(a) Civil Tax Fraud
(1) Fraudulent Failure to File Tax Return (IRC §6651(f))
15% of net amount of tax due for each month, (up to a maximum of 5 months), for a maximum penalty of 75% (of unpaid tax) (IRC §6651(f)). This is the only penalty imposed for failure to file.
(2) Fraudulent Tax Return (Unreported Income) (IRC §6663(d))
If any part of an underpayment of tax (required to be shown on a tax return) is due to fraud, a penalty equal to 75% of the portion of the underpayment.
(3) Accuracy – Related Penalty (IRC §6662(b)(1)-(5))
A penalty at a flat rate of 20% on portion of underpayment of tax.
The fraud penalty and accuracy-related penalty apply only for filed tax returns.
(4) Spousal Liability (IRC §6663(c))
For a joint tax return, both spouses are subject to joint and several liability for the entire tax liability.
The civil fraud penalty applies only to the spouse responsible for the underpayment that is attributable to fraud.
(5) Failure to Pay Tax
The penalty applies to the amount of unpaid tax due:
Unpaid tax shown as due on a tax return (IRC §6651(a)(2))
½ percent (of unpaid tax) for each month, up to a maximum of 25% (of unpaid tax)
Unpaid tax not shown as due on a return (i.e., unreported income (IRC §6651(a)(3))
½ percent (of unpaid tax) for each month up to a maximum of 25% (of unpaid tax)
OFFSETTING PENALTIES (IRC §6651(c)(1))
If taxpayer is liable for more than one of the delinquency penalties with respect to any tax return, the amount of the penalty for failure to file, is reduced by the amount of the penalty for failure to pay (the amount shown on a return for any month for which both penalties apply )
There is no offset for the penalty for failure to pay tax (IRC §6651(a)(3)) not shown as due on a return (i.e., unreported income).
No credit is allowed against the civil fraud penalty for any criminal fines paid for income tax evasion and conspiracy to defraud the U.S.
(b) Criminal Tax Evasion (Unreported Income)
(1) IRC §7201: Criminal penalty for willful attempt by any person to evade or defeat any tax or the payment of any tax
Conviction, punishable:
Fine: $100,000 (individual)
$500,000 (corporation)
Imprisonment: Not more than 5 years (or both fine and imprisonment)
(2) IRC §7203: Criminal Failure to File or Pay Taxes
Willful failure to pay tax, file a return, keep required records, or supply required information
Fine: $25,000 (individual)
$100,000 (corporation)
Imprisonment: Up to one year (or both fine and imprisonment)
IV. Collateral Estoppel
When criminal proceedings are followed by civil proceedings, the legal doctrine of collateral estoppel may apply. This doctrine provides that an issue necessarily decided in a previous proceeding (the 1st proceeding) will determine the issue in a subsequent proceeding (the 2nd proceeding), but only as to matters in the 2nd proceeding that were actually presented and determined in the 1st proceeding.
a. Conviction for criminal tax evasion collaterally estops the taxpayer from contesting the existence of fraud for purposes of the civil fraud penalty because a finding of criminal fraud (beyond a reasonable doubt) establishes proof of civil fraud (by clear and convincing evidence).
b. Acquittal of criminal tax evasion does not collaterally estop the government from proving civil fraud (by clear and convincing evidence). The acquittal established that proof of fraud did not exist beyond reasonable doubt, but that does not mean that proof of fraud by clear and convincing evidence does not exist.
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