Income Tax Fraud

Tax evasion becomes a federal crime when a person willfully takes an affirmative act to evade or attempt to evade paying income tax that is owed to the Internal Revenue Service. A tax evasion conviction requires proof of two elements. First the taxpayer must owe a substantial income tax in addition to that declared on his return. Second, the taxpayer must willfully and intentionally commit some affirmative act such as a false statement to the IRS. Tax offenses are found in 26 U.S.C. §7201, 7203. A person charged with or under investigation for a tax fraud in Miami or in other South Florida locations should consult with an experienced criminal defense attorney.

When an accountant or an attorney advises a taxpayer on a matter involving the income tax laws, it is reasonable for the taxpayer to rely on that advice. In other words if a taxpayer consults with an accountant about whether he has a tax liability for a particular transaction and the taxpayer relies upon that advise, the taxpayer will have a complete defense to a charge of tax evasion. Most taxpayers are not able to discern an error in the advice from an accountant or attorney. The taxpayer can not be expected to challenge the advice of the attorney or to seek a second opinion. Otherwise this would nullify the very purpose of seeking the advice of a presumed expert in the first place.

There may be occasions where tax fraud is a result the tax preparers who try to secure a higher refund. The tax preparer does this by placing false information on the income tax returns for taxpayers. This type of tax fraud generally involves a preparer who claims inflated personal or business expenses, false deductions, excessive exemptions or unallowable credits on income tax returns prepared for their clients. The IRS recognizes that in some situations the client taxpayer may not have knowledge of the false expenses deductions exemptions or credits. Even if the taxpayer was not aware of the tax fraud, the IRS will still hold the taxpayer responsible for the tax due.

Tax preparer fraud may be found in the Schedule A portion of the return which includes unreimbursed business expense deductions. A fraudulent return may show deductions for personal expenses that were not business expenses, such as personal clothing, money spent at restaurants, haircuts. The Schedule A may have other fraudulent deductions such as charity contributions. Aiding another person in tax fraud is a violation of 26 U.S.C. 7206. Income tax fraud may include false credits for education expenses or false child care expenses. Even if the taxpayer is unaware of the false entries, the taxpayer will still be responsible for the correct tax amount owed as well as any penalties and interest.

The IRS advises tax payers to avoid tax preparers who claim they can obtain a larger refund than other preparers or who base their fee on the percentage of the amount of the refund are usually signs that fraud.

Tax evasion is often seen as a white collar offense, used to catch career criminals such as drug traffickers who become wealthy with no legitimate means of income. There is a 6 year statute of limitations on prosecutions for filing false tax returns and begins to run when the tax is due if there is an extension, the new due date.

Contact Miami attorney Ken Swartz if you or someone you know has been arrested, is being investigated, or is accused of committing income tax fraud.