Knowingly filing a false tax return and aiding another to do so are violations of the IRC, Section 7206. Briefly summarized, those violations encompass:

• Tax perjury — knowingly signing a false tax return that is false
• Willfully aiding another person to commit tax fraud
• Hiding assets with the intent to evade or defeat the assessment of taxes or in connection with a tax settlement or compromise offer

Penalties are stiff

The law says that anyone convicted of the foregoing is guilty of a felony. An individual can face a fine of $250,000 ($500,000 in the case of a corporation or go to prison for not more than three years (or both), plus pay the costs of prosecution.

The most common violations

Tax perjury and aiding and assisting are the most commonly committed offenses under the IRC.  Also, the most common prosecutions involve actual income tax returns, but can include false statements contained in:

• W-2 Forms
• IRS Schedules B and C
• applications for tax payment extensions
• financial information statements in connection with tax settlement negotiations

The most important elements of proof

To convict someone of tax fraud, the government must show evidence that “the maker of the return acted with knowledge and that his conduct was unlawful and with the intent to do something the law forbids.”

Also, the government must prove specific intent, which requires a “showing of willfulness” or “a voluntary intentional violation of known legal duty.” This is absolutely essential and cannot be proved simply by showing carelessness or gross negligence on the part of the taxpayer.

The good news is…

The chances of facing tax fraud charges for the average taxpayer are quite low.  According to NOLO Law for ALL:

“Fewer than 2% of us are ever investigated for tax fraud. And if you are, the likelihood of a civil fine or criminal charge is under 20%. The unofficial minimum amount of taxes owed before the IRS will file criminal fraud charges is over $70,000, in cases involving at least three years of fraud.”

Defending against IRS criminal tax charges

A person indicted for tax fraud needs an attorney who:

• is experienced in federal courts
• knows federal tax laws and the steps involved in criminal prosecution

The investigation, indictment and prosecution steps involve a multi-tiered process at the IRS where a defense lawyer can deal with government prosecutors before charges are filed.  A strategy could include convincing the government that no criminal intent was involved and paying a cash settlement might be in the best interests of justice.

On the other hand, if the government has a particularly strong case, a plea agreement with Department of Justice might be the best course. If so, according to IRS regulations, a taxpayer must be represented by counsel to start the process.