Tax Crimes - Is the IRS Coming to Get You? Lance Wallach, expert witness.

People who have money in other countries are a target of the IRS. I get a lot of phone calls with people who have these problems. 419, 412i, hiding money offshore etc. The IRS may be looking for you if you had anything to do with this. Tax crime attacks by the IRS are up almost 50% so you need to be careful. Last year IRS raided the offices of Benistar, Grist Mill Trust, Nova with about 50 agents and took all the files. If you did business with them the IRS will probably come to you.

The numbers are out and they aren’t good for people convicted of tax crimes. While the U.S. Department of Justice Tax Division has always enjoyed a very high conviction rate, many people convicted of tax crimes never went to jail. Not anymore. In 2001, the average tax offender received a sentence of 18 months. Now those sentences average 25 months.

The statistics are a bit misleading because a decade ago, half the people convicted never went to jail. The average sentence may have been 18 months but many folks got house arrest while others received sentences of several years. Now, those convicted are probably going to jail. In other words, not only has the average sentence increased but also so has the likelihood of receiving a prison sentence.

Sentences in federal criminal cases are governed by the United States Sentencing Guidelines. Although no longer binding on judges, they are the court’s starting point and most judges’ stay within guidelines.

The sentencing guidelines attempt to account for a wide range of factors including one’s criminal history, whether the defendant used “sophisticated means” to carry out the crime and whether the defendant took early acceptance of responsibility for his or her actions. For tax cases, the guidelines also look at “relevant conduct” tax loss. The higher the tax loss, the longer the recommended sentence.

The current guidelines impose suggest stiff penalties for tax crimes and many judges now believe that house arrest is not a strong enough deterrent to insure voluntary compliance.

What does this mean for people with tax problems? Plenty.

First, if you know you have a problem, don’t bury your hand in the sand. The IRS operates on a “first contact” basis. That means if you come clean before you are caught, criminal penalties can generally be avoided.

Second, if you are indicted and convicted, it pays to have a lawyer with extensive federal criminal tax appearance. Adjustments to the sentencing guideline calculations often can mean the difference between prison and freedom. Although there are many good lawyers that can negotiate a fair plea agreement, the final sentence is up to the court. Mastery of the federal sentencing guidelines and the thousands of court cases interpreting those guidelines separates great criminal tax lawyers from the rest of the pack.

As an expert witness Lance Wallach's side has never lost a case. People need to be careful of 419 Welfare Benefit Plans, 412i plans, Section 79 plans and Captive Insurance Plans. Most of these plans are sold by insurance agents. If you are in an abusive, listed or similar transaction plan you need to file under IRS 6707a. The participant files form 8886, and the salesmen or accountant who signs the tax returns files form 8918 if they got paid over $10,000. They are called Material Advisors and face a minimum $100,000 fine. Some plans are offshore which could involve FBAR or OVDI filings. If you have money overseas you probably need to file for IRS tax amnesty. If you want to reduce the tax we suggest that you first file and then opt out. For more information Google Lance Wallach.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.