Federal Tax Evasion Defense: Can Your Charges Be Reduced?
Federal Tax Fraud and Evasion Defense Attorney in Los Angeles
Facing federal tax fraud or tax evasion charges is an incredibly serious matter. These offenses can result in prison time, substantial fines, and long-term damage to your reputation. Often, these charges stem from extensive investigations by the IRS or the Department of Justice, leaving you feeling overwhelmed and uncertain about your next steps.
If you are under investigation or have been charged, having an experienced federal tax fraud defense attorney by your side is crucial. At The Law Offices of Arash Hashemi, we specialize in defending individuals and businesses against complex federal tax allegations. Our priority is to protect your rights, fight the charges, and minimize the impact on your life and future.
Call us today at (310) 448-1529 to schedule a confidential consultation. We are here to help you navigate these challenging circumstances and secure the best possible outcome for your case.
What Is Federal Tax Fraud or Evasion?
Federal tax fraud and tax evasion are serious offenses that involve intentionally avoiding tax obligations owed to the federal government. While both crimes are intentional and involve dishonesty, they differ in the methods used and the specific legal violations they entail.
Tax Fraud
Tax fraud occurs when someone intentionally falsifies information on tax returns or related documents to reduce their tax liability. If you knowingly provided false details to the IRS to lower your taxes, you could be charged with tax fraud. Examples of tax fraud include:
- Underreporting Income: Deliberately failing to report all sources of income to the IRS.
- Overstating Deductions or Credits: Claiming deductions or credits you are not entitled to in order to reduce your taxable income.
- Falsifying Financial Records: Manipulating financial documents or tax forms to mislead the IRS about your financial situation.
Tax fraud focuses on providing false statements to manipulate your tax liability, which can result in significant penalties, including criminal prosecution.
Tax Evasion
Tax evasion is the deliberate act of avoiding payment of taxes owed to the federal government. If you failed to file your tax returns or took intentional steps to conceal income, you could be accused of tax evasion. Common examples include:
- Failing to File Tax Returns: Avoiding filing your tax returns altogether to hide taxable income.
- Hiding Income in Offshore Accounts: Placing income in foreign bank accounts to keep it out of reach of the IRS.
- Using Shell Companies: Establishing fake businesses to conceal income or claim fraudulent deductions.
Tax evasion focuses on avoiding taxes altogether, often through schemes or efforts to hide income and assets.
Key Difference Between Tax Fraud and Tax Evasion
The primary distinction between tax fraud and tax evasion lies in the method. Tax fraud generally involves making false statements or misrepresentations to the IRS, while tax evasion focuses on actively avoiding payment of taxes through concealment or failure to comply with tax laws.
Both offenses are considered serious crimes under federal law and can result in harsh penalties, including prison time, significant fines, and restitution. If you are facing allegations of federal tax fraud or evasion, securing an experienced defense attorney is critical to protecting your rights and building a strong defense.
Penalties for Federal Tax Fraud and How They Can Be Reduced
Federal tax fraud and evasion carry severe penalties designed to punish offenders and deter others from violating tax laws. If convicted, you may face both criminal and civil consequences that can have life-altering effects. Criminal penalties include significant prison time and steep fines. For example, a conviction for tax evasion under 26 U.S.C. § 7201 can result in up to 5 years in federal prison per offense, while tax fraud under 26 U.S.C. § 7206 carries a maximum of 3 years per offense. Individuals can also face fines of up to $100,000, and corporations can be fined up to $500,000, along with the cost of prosecution.
In addition to prison time and fines, restitution is often required, which means you must repay the full amount of unpaid taxes, along with interest and penalties. Civil penalties may also be imposed, such as an accuracy-related penalty of 20% of the underpaid taxes or a civil fraud penalty of up to 75% of the unpaid amount for intentional fraud. These penalties can compound the financial strain caused by a criminal conviction.
However, penalties can often be reduced with the right legal strategy. For instance, the IRS’s Voluntary Disclosure Program allows individuals who self-report discrepancies before an investigation begins to potentially avoid criminal charges and reduce penalties. Additionally, an experienced attorney can negotiate settlements with the IRS or DOJ, challenge the validity of evidence, or argue that the alleged violations were unintentional rather than willful. By employing these strategies, it may be possible to lessen the consequences and protect your future.
Warning Signs of a Federal Tax Investigation: Are You at Risk?
Federal tax investigations are rarely sudden; they are often the result of extensive review by the IRS or Department of Justice (DOJ). Recognizing the warning signs early can be critical in protecting your rights and preparing a defense.
One of the first indicators is receiving an audit notice or summons from the IRS. While audits are not always criminal in nature, they can escalate if the IRS uncovers discrepancies suggesting fraud or evasion. Subpoenas for financial records, such as bank statements, tax filings, or communications, are another red flag that your activities are under scrutiny.
In more serious cases, investigators may interview employees, accountants, or business partners as part of their inquiry. These interviews are often aimed at gathering information to build a case against you, and statements made during these interactions can be used as evidence. In some instances, the IRS or DOJ may take aggressive actions, such as the seizure of bank accounts or assets, signaling the investigation is moving toward criminal charges.
If you notice any of these warning signs, it is crucial to consult with an experienced federal tax defense attorneyimmediately. Acting quickly can help protect your rights, prevent mistakes during the investigation, and allow your attorney to begin building a strong defense strategy.
Early Steps to Take When Facing Federal Tax Evasion Charges
1. Do Not Speak to Investigators Without Legal Representation
One of the biggest mistakes individuals make is speaking to IRS agents or DOJ investigators without first consulting an experienced tax defense attorney. Anything you say can be used against you, even casual remarks or seemingly innocent explanations. Before providing any information, contact a qualified attorney to ensure your rights are protected and that any communication with investigators is handled strategically.
2. Preserve All Financial Records
Start organizing and securing all relevant documentation, including tax returns, bank statements, invoices, and communications with accountants or financial advisors. These records will be essential in analyzing the allegations against you and building a defense. Do not alter or destroy any documents, as this could be viewed as obstruction of justice and lead to additional charges.
3. Avoid Further Missteps
Do not attempt to correct or “fix” potential issues in your tax filings without legal guidance. For example, filing amended returns or making payments without understanding the full scope of the investigation could be interpreted as an admission of guilt. Instead, consult with your attorney to develop a comprehensive strategy that addresses the allegations while protecting your interests.
Taking these steps early can help you avoid critical mistakes and set the foundation for a strong defense. Federal tax investigations are serious, and having experienced legal representation from the start is essential.
Can You Resolve Tax Fraud Without Criminal Charges?
The Voluntary Disclosure Program (VDP) allows taxpayers to self-report errors or omissions in their tax filings before an investigation begins, potentially avoiding criminal charges. By coming forward voluntarily, you demonstrate good faith and a willingness to comply, which can result in reduced penalties and civil rather than criminal resolution. In many cases, tax fraud allegations can be handled through civil penalties instead of criminal prosecution. Civil resolutions often involve paying fines, interest, and penalties but avoid the severe consequences of a criminal conviction, such as imprisonment and a permanent criminal record.
Our defense attorney can also negotiate settlements with the IRS to resolve tax liabilities. Options include offers in compromise, which settle debts for less than the full amount owed, or installment agreements, allowing repayment over time. These approaches can address outstanding liabilities without escalating to criminal charges.
Common Defenses Against Federal Tax Evasion Charges
Lack of Willful Intent
To secure a conviction for tax evasion, prosecutors must show that you intentionally and knowingly violated tax laws. If the alleged misconduct was the result of an honest mistake, misunderstanding, or negligence, this lack of willful intent can be a strong defense. For instance, you may have misinterpreted complicated tax codes, made an error in calculating income, or failed to report income unintentionally. Without evidence of deliberate fraud, the prosecution’s case weakens significantly.
Reliance on a Tax Professional
Many individuals rely on certified accountants or tax professionals when preparing their taxes. If you sought advice from a competent tax professional and fully disclosed all relevant facts, errors made as a result of their guidance could demonstrate that you acted in good faith. This defense emphasizes that you followed expert advice and had no intention to evade taxes.
No Tax Deficiency Exists
To prove tax evasion, the prosecution must establish that taxes were actually owed. If there is no tax deficiency—meaning no unpaid taxes existed due to deductions, credits, or legitimate losses—then there can be no tax evasion. This defense is particularly useful if IRS calculations are flawed or if you can show that your taxable income was accurately reported.
Lack of Financial Motive
Tax evasion charges often rely on the assumption that the accused sought to illegally avoid paying taxes to save money. If you can demonstrate that there was no financial gain from the alleged actions—such as a situation where tax benefits were not realized or the alleged evasion resulted in overpayment—this can undermine the prosecution’s case.
Inability to File or Pay Taxes
Circumstances beyond your control, such as severe financial hardship, illness, or a lack of access to critical records, may have prevented you from filing or paying taxes on time. While inability to file or pay does not erase the tax obligation, it can serve as a defense against allegations of willful evasion.
Procedural Errors or Illegal Search and Seizure
The IRS and Department of Justice must follow strict legal procedures during investigations. If your rights were violated—such as through an illegal search, coercion to produce documents, or breaches of attorney-client privilege—your attorney can challenge the admissibility of evidence obtained unlawfully. Suppressing such evidence can weaken or dismantle the prosecution’s case.
Legitimate Interpretation of Tax Laws
Tax laws are notoriously complex, and reasonable interpretations of ambiguous provisions may be used as a defense. For example, you may have believed that an expense was deductible or that a tax credit applied to your situation. Even if your interpretation was ultimately incorrect, demonstrating that it was reasonable and made in good faith can negate claims of willful misconduct.
Statute of Limitations
The IRS generally has a limited time frame—typically three years after a tax return is filed—to assess taxes or initiate criminal charges. If the statute of limitations has expired, the government may be barred from prosecuting the case. However, certain exceptions, such as failing to file a return or committing fraud, may extend this timeframe.
Voluntary Disclosure
If you voluntarily disclose errors or discrepancies to the IRS before an investigation begins, you may be eligible for the IRS Voluntary Disclosure Program. This program encourages taxpayers to self-report issues, potentially avoiding criminal charges and reducing penalties. Acting proactively shows good faith and may result in more favorable treatment.
Each defense strategy depends on the specifics of the case, the evidence presented, and the actions taken before and during the investigation. By working with an experienced federal tax defense attorney, you can evaluate the government’s case, challenge its weaknesses, and build a tailored defense to protect your rights and freedom.
Contact Our Los Angeles Tax Fraud Defense Attorney
If you are being investigated or have been formally charged, it is essential to act quickly and secure experienced legal representation to protect your rights.
Attorney Arash Hashemi has over 20 years of experience handling federal cases, including allegations of tax evasion and fraud. We will carefully examine the details of your case, scrutinize the government’s evidence, and identify any procedural errors or weaknesses that can be used to your advantage. Whether negotiating with federal authorities or advocating on your behalf in court, We will work tirelessly to achieve the best possible outcome for your case.
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