Do taxpayers with criminal tax cases involving unreported accounts get treated better than other criminal tax defendants? The answer is yes!
A recent article in the Journal of Accountancy says that the average sentence for a person whose crimes involve offshore accounts was 15 months. The average sentence for those convicted of crimes involving bogus tax shelters was 3 years. Although the “average” sentence is 15 months, roughly half of those convicted go to jail while the other half receive home confinement or probation sentences.
Even if a person doesn’t go to prison, willful failure to file an FBAR form (Report of Foreign Bank and Financial Accounts) is still a felony. Last time we checked, convicted felons face severe employment and social consequences merely as the result of their felon status.
The JOA article is certainly illuminating but does not get into many specifics. For instances, people indicted for tax crimes often face multiple charges. When that happens, the judge takes all the criminal activity into account when sentencing a defendant.
Another issue is the comparison between offshore tax cases and fraudulent tax shelters. The latter are quite rare. The more common tax crimes involve tax evasion, fraudulent returns, failure to file returns and conspiracy to defraud the IRS. Those crimes are not addressed in the Journal story.
Last year, the IRS reported that tax crimes in general garnered a sentence of 25 months (2011 data). Just one decade earlier the average sentence was 18 months, a 40% increase.
Statistics can be misleading but the Journal article, written by Scott Novak, is still very helpful. When all the data is read together, we can safely conclude the following:
First, prison sentences in criminal tax cases appear to be getting longer.
Second, cases involving offshore accounts to appear to be treated somewhat more leniently.
Third, the Justice Department wins almost every case they bring.
Our conclusion, whether you receive probation or 30 months in prison, not failing FBARs and reporting foreign accounts isn’t worth the risk. Remember, FBAR violations are felonies.
If there is any good news at all for taxpayers with compliance problems, it may be that very few people are prosecuted. Although we have tracked well over 100 offshore tax prosecutions in recent years, many involve banks, bankers and lawyers. Novak says that in the last 4 years, just 71 taxpayers have been charged for these crimes.
If you have unfiled FBARs or other offshore reporting violations, seek legal help immediately. CPA’s and enrolled agents can help fix many tax problems but they don’t enjoy the attorney – client privilege. That means the IRS can comple your accountant to testify against you.
Our criminal tax lawyers know how to work quickly and fully protect your rights. Founding partner Brian Mahany is a former agent and Assistant Attorney General – Tax. Our team has decades of criminal tax defense experience ready to help you and your business.
For more information on criminal tax cases, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). Simply want to come into compliance before you are caught? We can help you there as well. All inquiries are protected by the attorney – client privilege and kept in complete confidence.
Post by Brian Mahany, Esq.
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