26 U.S. Code § 7201 - Attempt to Evade or Defeat Tax
Tax evasion is a white collar crime carrying large fines and a possible time in jail, depending on the details of the case.
You could face prosecution in the state of California or at the federal level, depending on which taxes have not been paid. 26 U.S.C. § 7201 is the federal statute regarding imposition and collection of taxes and used by prosecutors when someone willfully attempts to evade or defeat a federal tax.
It's a crime to deliberately pay less than you owe on taxes and the most common forms of tax evasion charges are related to the following:
- under-reporting your actual income,
- making false statements on your tax return, and
- failure to even file a tax return.
In spite of efforts to reduce tax evasion incidents with audits, it's still a massive problem for the Internal Revenue Service (IRS) every year.
While tax fraud is a serious crime at the federal level, it's also a severe offense in the state of California with strict repercussions.
Readers should note that in order for a prosecutor to convict you of violating tax evasion laws, they have to prove you knew the information was false and it was deliberately provided with the intent to avoid paying taxes.
Our Los Angeles criminal defense lawyers are reviewing the laws more closely below.
What is the Definition of Tax Evasion?
Tax evasion is commonly called tax fraud that includes any type of behavior involving a deliberate act of not paying your taxes. The most common methods include:
- failing to file a tax return: Failure to file a return doesn't release anyone from their obligation to pay taxes.
- False transactions to conceal: making a fake transaction will often be discovered during an audit of all alleged transactions.
- False residency: Tax filers who live in California will frequently claims to be a resident of another state with lower taxes and liability.
- Transfer of assets: Allocating assets in order to pay less taxes are very common, but it's illegal and can lead to criminal charges or large fines.
- Filing a tax return with false information: This is also common and frequent inconsistencies and false claims could result in a tax audit.
- False claims of high deductions: High deductions listed on your tax return means you will own less money, but is also unlawful.
- Under-reporting income or omitting it altogether: Filers have multiple places to store their money and income. From numerous bank accounts to web applications, keeping these funds out of a tax return is illegal.
The IRS knows that errors happen, but there is a difference between an honest mistake on a return and intentional tax evasion.
In cases where there are honest errors, the IRS will normally adjust the tax return and the tax filer will have to pay the difference.
What are the California Tax Evasion Codes?
California has two codes for tax evasion and the penalties depend on your case specifics and evidence the prosecution uncovered during their investigation.
Taxation Code 19705 makes it unlawful for anyone to willingly make false statements on their tax returns and pass them off as factual.
Taxation Code 19706 applies to individuals, officers, or employees who fail to file a tax return or make false statements on the tax return.
What is Federal 26 U.S.C. § 7201 Tax Evasion?
The federal crime of tax evasion in legally defined under 26 U.S.C. § 7201 as follows:
- Any person who willfully attempts to evade any tax imposed, in addition to other penalties, and if convicted of a felony, will be fined up to $100,000, or $500,000 for a corporation, or imprisoned up to 5 years, or both.
It should be noted that tax evasion requires an affirmative act, meaning there was intentionally violates a known legal duty.
You can be convicted under this statute if you knowingly and willfully sign and submit a tax return that contains material false statements, including omitting information.
What are the Defenses for Tax Fraud?
There's a lot of people who fall prey to making moves that put them in a bad position as it relates to taxes.
If you're being charged with any type of tax fraud defense in California, whether it be at the state or federal level, you need representation right away. I will have you come in and we'll sit down and go over everything in the privacy of my office.
Obviously, you'll give me all the information. Don't leave anything out because it's just going to be to your detriment. Then we will design a plan in order to get you the best result.
Sometimes the plan involves fighting the government; other times it involves negotiating with the government. It really just depends on what the circumstances are, what evidence the government has and what you and I decide is the best course of action.
These tax fraud cases really are centered around the government not getting money they believe they are entitled to. They are very similar to the Mafia in the sense that whenever money moves or exchanges hands, they need to get a piece of it.
If you didn't give them their piece and you didn't give them their percentage and they find out about it, especially if it's a significant amount, then they're going to come looking for you.
They're going to bring their agents and bring their prosecutors, and a lot of these federal judges are obviously very sympathetic to the government, especially in these tax fraud-related cases.
How Can We Prepare an Effective Defense Strategy?
So, we need to breakdown exactly what it is you're accused of doing and then we'll sit down in the privacy of my office and dissect it piece by piece to determine an effective defense strategy for best possible outcome.
Sometimes the government doesn't get it right. Sometimes they believe one thing is going on, but another thing is going on.
Unfortunately, a lot of time they do a one-sided investigation in these tax fraud cases and only get part of the story, especially if it's at the investigation phase.
You want to get somebody like me on the case who's got 30 years investigating these type of cases, trying these type of cases and negotiating them. I will be able to put the pieces in place to properly defend you.
Sometimes the government needs to hear your side of the story and they don't press charges against you. Other times, they need to hear your side of the story and we can negotiate something pre-indictment or pre-criminal complaint.
It really just depends on what evidence they have, what it is exactly you did, what your criminal record looks like and how much money the government is claiming they're out.
Can I Pay the Money Back to the Government?
If we can make the government whole, in other words, pay the money back that was purportedly taken or the taxes that were not paid or whatever the case may be, then we put ourselves in a much better position.
Because the government's job, first and foremost, in addition to punishing somebody, is making sure if they're out money, they get the money back.
If we can help them get the money back, we put ourselves in a strong negotiating position. That's on the one end.
On the other end, sometimes the government can't prove that you're guilty of any tax-related offense and that's when we need to fight them.
We need to challenge their evidence, do our own investigation, be ready to cross-examine their witnesses at a preliminary hearing, at a trial or at a motion, whatever the case may be.
So, you've come to the right place if you're charged with any type of tax evasion or tax fraud related offense. Pick up the phone. Make the call.
Get somebody on your side who's been doing this almost 30 years. Ask for a meeting with Ron Hedding. I stand at the ready to help you. Hedding Law Firm is based in Los Angeles County.