What are defenses to IRS tax fraud charges?

On Behalf of | Oct 4, 2021 | White Collar Crime

The Internal Revenue Service (IRS) brings tax fraud charges against businesses or individuals accused of intentionally and willfully falsifying information on their returns to avoid paying the taxes they owe.

Since paying taxes in the U.S. is a voluntary system, the IRS often publicizes tax fraud convictions and seeks significant prison sentences for offenders as well as fines and other penalties.

Examples of tax fraud

Prosecuting tax fraud can be challenging for the government as they must prove it was an intentional act and not mere negligence or misunderstanding the nation’s complex tax code. Examples include:

  • Intentionally not reporting all earned income
  • Deliberately not paying taxes that are due
  • Knowingly not filing an income tax return
  • Claiming a false deduction
  • Claiming a personal expense as a business expense

Anyone who knowingly prepares and files a false return can also be charged.

Tax fraud convictions have decreased

The U.S. Sentencing Commission reports 324 tax fraud convictions resulted in 2020, representing a dramatic decrease from 2017 when 598 cases resulted in guilty verdicts. The average sentence is 16 months in prison, and nearly 69% of offenders received prison terms.

Sentences can be increased when defendants use sophisticated means to cover up fraud, or the accused is in a supervisory or leadership role or abuses a position of public trust. Longer sentences are also likely when a suspect lies to investigators.

Defenses against tax fraud allegations

Tax fraud charges can have a devastating effect on your life. If convicted of this white collar crime, you face severe penalties. However, the government must prove you intended to defraud the IRS. Experienced white collar crime defense attorneys have several defenses at their disposal, including:

  • Insufficient evidence
  • You paid all owed taxes
  • You filed an extension before the IRS investigation began
  • The statute of limitations expired
  • Entrapment
  • The shortfall was not intentional
  • Innocent spouse relief if you were unaware of inaccuracies or omissions

Even when a successful defense happens, civil penalties can result for underpaid taxes. However, payment plans are typically available, and you avoid prison and other criminal penalties.