When Winning is Your Only Option.
This blog article is intended to assist taxpayers, who believe that they may be the subject of a criminal tax investigation, to avoid the commonly made errors that ultimately are a factor in determining whether the taxpayer will prevail.
Criminal Investigations of Possible Tax Violations are Conducted Differently Than Civil Tax Audits.
A common error that taxpayers and their tax return preparers make during a criminal investigation of possible tax violations is to attempt to handle the matter as they would a civil IRS audit. This is a substantial mistake. Often by the time the taxpayer and the tax return preparer realize that this is a mistake, it is too late.
The decision whether to seek an indictment for alleged tax violations is largely determined by evidence.
The taxpayer should realize that the IRS special agents that conduct criminal tax investigations are trained to gather evidence to support the IRS requesting authorization from the Department of Justice Tax Division for authorization to seek an indictment against the taxpayer who is the target of the investigation. The agents are trained that the taxpayer himself and his return preparer are often the best source of evidence needed to build a strong case against the taxpayer. Taxpayers and tax return preparers often think that if they are "nice" to the agents and cooperate by answering all of their questions, the special agents will realize that they have nothing to hide and that they are nice people that deserve to be left alone. This strategy may be a successful way to handle a civil tax audit. However, it is not the correct way to handle a criminal tax investigation. The special agents are trained to be nice to get the taxpayer to incriminate himself and to provide as much evidence as possible that the IRS will later use against the taxpayer to try to obtain a conviction. Remember agents have career reviews. Arrests and convictions can help career advancement.
Being "nice" to a special agent will not keep him form doing his job.
As a result, the taxpayer under investigation should immediately retain a criminal tax lawyer to represent him and to asert his constitutional privileges to remain silent and to have legal counsel present during all questioning. Special agents realize that once a taxpayer retains experienced criminal tax defense counsel the free flow of evidence will likely cease. As a result, special agents will often try to intimidate the taxpayer by getting angry and telling the taxpayer that if he does not "come clean" it will be worse for him. This is another tactic practiced by special agents to gather evidence against the taxpayer. While it requires a degree of fortitude, the taxpayer should decline any and all interviews until he has retained competent legal counsel to defend him.
Criminal tax investigations often last years and the subpoenas tend to come in waves.
Too often taxpayers do not uderstand that criminal tax investigations often take years. The special agents serve subpoenas upon the banks where the taxpayers conduct business. When the banks produce the cancelled checks and deposit items it takes a long time to review each and every item and to enter the data into a data base to be used for trial. During this period of time taxpayers often mistakenly believe that the IRS has forgotten them or has given up. This is seldom the case. Just about that time, the next wave comes and the agents begin conducting more interviews and serving more subpoenas. Competent defense counsel will try to contact each bank and get a complete copy of the documents that were provided to the IRS. In addition, defense counsel will try to contact persons that have been interviewed to learn what the questions and answers were.
During the criminal tax investigation the tax lawyer for the taxpayer should write to the Department of Justice, Tax Division Chief.
During the criminal tax investigation the tax lawyer for the taxpayer should write to the Department of Justice, Tax Division Chief and request a meeting if the IRS submits a report and requests authorization to indict the taxpayer. The Department of Justice is charged with the responsibility of making certain that the national enforcement policy of the IRS is applied consistently throughout the United States and that it is in the best interests of the United States to proceed with a criminal case.
The meeting with the DOJ Tax Division lawyers will not be a discovery session for the taxpayer. The taxpayer's representative will be told the alleged violations, the years the violations occurred and the amount of the tax loss. For the meeting to be productive the taxpayer's lawyer must be prepared to show the DOJ lawyers why a criminal tax case against the taxpayer is not in the best interests of the United States. One way to accomplish this is to unequivocally prove that the taxpayer is completely innocent. Unfortunately, this is normally impossible. As a result, taxpayer's counsel must find other arguments to be pursuasive.
A major pitfall of a DOJ Tax Division meeting is that the IRS will often learn from taxpayer's counsel the entire defense of the taxpayer.
By the time the case gets to the Department of Justice, the taxpayer is desperate to kill the case. The taxpayer will want to tell the agents and later the the government lawyers the proof he has that he intends to use to win the case. Too often this only preparers the IRS for these arguments and ultimately makes it more difficult to win at trial. Inexperienced defense lawyers often make this mistake and the magnitude of the error is not discovered until the trial takes place.
Selecting the correct lawyer is perhaps the most important decision the taxpayer will make concerning his case.
A common mistake made by taxpayers that are under investigation is that they hire the wrong lawyer. Taxpayers will often ask their friend or accountant for a recommendation for a criminal tax lawyer they should hire. Understand, when your friend recommends a lawyer and tells you that "he is the best", what he really means: "is this is the best one that I know." There is a huge difference. Often the lawyer recommended has never tried a jury trial for the defense in a federal criminal tax case. The lawyers under consideration often fall into one of four categories.
1. General Tax Lawyers
2. General Criminal Lawyers
3. Former Prosecutors
4. Criminal tax defense lawyers
General tax lawyers handle civil tax controveries or tax planning. These lawyers know a great deal about the Internal Revenue Code. However, they seldom, if ever, conduct trials before a jury. Civil tax cases are tried in U.S. Tax Court before a tax judge. There is no jury. Criminal tax cases involve violations of federal laws and as a result, are tried in federal court before a jury of 12 people. General tax lawyers are not experienced in defending federal criminal charges. Sometimes, a general tax lawyer will try to team up with a general criminal lawyer. This seldom works. It is not an efficient use of the taxpayer's funds and in a trial setting when the IRS agents are testifying, there is no time for the tax lawyer to explain to the criminal lawyer the tax laws to enable him to cross examine an IRS agent who is not required to follow any script. Further, the most important qualification of any lawyer with regard to defending criminal tax cases is the lawyer's trial record.
Further, the most important qualification of any lawyer with regard to defending criminal tax cases is the lawyer's trial record.
Most criminal lawyers have virtually no formal training in taxation. These lawyers will have trial experience but they do not have the training and education to keep up with IRS agents testifying in a criminal tax case. These lawyers will normally focus the entire defense of the taxpayer on the element of willfullness. To be found guilty of violating the tax laws the jury must find that the taxpayer willfully disobeyed the law. Willful conduct is conduct done with the specific intent to do something that the law forbids. A good tax defense should incorporate valid tax analysis to explain why positions taken on the tax returns are correct. Experts should be called to opine on these matters. Criminal lawyers generally to not have the tax expertise to do this. Again, the most important qualification of any lawyer with regard to defending criminal tax cases is the lawyer's trial record. Do not be afraid to do your research before hiring a lawyer in a criminal tax case. Ask the lawyer for the name and case number of the last 10 criminal tax cases that he tried and got a jury verdict. You may be shocked to find that over 90% of all lawyers have NEVER won (not guilty on all counts) a criminal tax case for the defense.
Former Prosecutors The general public has developed a belief that hiring a former prosecutor will get you more favorable treatment by the IRS agents, the DOJ lawyers and the local United States Attorneys. This is blatantly FALSE. Criminal tax cases are driven by evidence. If the agents have sufficient evidence, the case will go to trial. If the agents do not have sufficient evidence the case may be killed. The government only brings a very small fraction of taxpayers to trial on criminal tax charges and the goverment tries very hard to select cases that they are likely to win. The government reports that over 92% of the indictments returned alleging tax violations result in a conviction. No goverment lawyer or agent will place his career in jeopardy by doing something improper or unethical for a former prosecutor. Anyone who leads a taxpayer to believe that special treatment or favors will be afforded only if the taxpayer is represented by a former prosecutor is committing a fraud upon the taxpayer. The important qustion is how many criminal tax cases has the former prosecutor won while representing the defendant. Prosecutors are expected to win while they repesent the government. They get to pick the cases they will bring to court. They have funding from the government and agents as support. However, the relevant question is what is your track record defending taxpayers? Ask for the results of ten of those trials. If a lawyer tries to influence you by who he knows instead of what his track record is, do not walk away, RUN.
Criminal tax lawyers. A very small percentage of lawyers have a formal education and training in the area of taxation and also have extensive experiance in federal white collar crie defense. Thes lawyers are often Board Certified in Taxation or are CPAs as well as being lawyers. These lawyers understand tax law and also know how to try a case before a federal jury. Generally, these are the lawyers that have the best chance to be successful in a criminal tax case. However, the jury trial records of these lawyers vary significantly. A criminal tax defense lawyer who has won numerous jury trials for the defense is the way to go when WINNING IS YOU ONLY OPTION.
