Many hope to find creative ways to limit their tax liability every year. Unfortunately, too many of those strategies end in IRS audits, eggshell audits, reverse eggshell audits, criminal tax investigations, and even criminal tax charges. Understanding how the tax code applies to you is critical for steering clear of these troubling situations or defending yourself if you have already fallen out of compliance.
If you transfer assets in hopes that you might avoid having those assets levied or ceased to pay federal income taxes, you are breaking the Internal Revenue Code and could be subject to serious criminal and civil penalties. Federal courts have held that there is little difference in the criminality of evading payment of taxes as opposed to evading assessment of taxes. Tax evasion is a serious offense and can be punished in some circumstances with prison sentences.
If you are concerned about the IRS digging into your tax history, you would do well to consider enlisting the help of the Tax Law Offices of David W. Klasing. Our dual-licensed Tax Attorneys and CPAs have the knowledge and resources to prepare your defenses against the federal government. Hear more about our services by calling us at (800) 681-1295 or schedule a reduced rate initial consultation online here.
Is Transferring Assets to Avoid Paying Taxes an Affirmative Act of Tax Evasion?
There is a difference between willful and non-willful tax code violations. Simply failing to pay taxes is not enough to constitute a charge of intentional evasion of payment of tax. The government prosecutors will look for some affirmative criminal act on the part of the defendant. The affirmative act must have the effect of misleading or concealing the existence of income or assets.
If your act of transferring assets out of the eyes of the federal government misconstrues your tax liability or your ability to pay the taxes that you owe, that would have the legal effect of misleading or concealing for tax reasons. Transferring assets to avoid paying taxes would be viewed by a prosecutor (and a jury) as an affirmative act of tax evasion. As such, you could be charged with tax evasion for any attempt to improperly transfer assets.
Is There a Difference Between Evasion of Assessment and Evasion of Payment?
The history of caselaw’s treatment of tax assessment evaders and tax payment evaders is complicated. Court decisions in the 1960’s (particularly the decision in Sansone v. United States) defined the two offenses distinctly. However, recent decisions suggest that several of the federal circuit courts treat the two offenses as one and the same. Recent court trends indicate that both offenses fall under the federal tax evasion statute known as Section 7201.
The section reads as follows: “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”
The Ninth Circuit held in United States v. Mal (1991) that Section 7201 “proscribes the single crime of tax evasion, a crime which can be committed either by evading the assessment or the payment of taxes.”
With such a broad range for prosecution, expect the government to invoke Section 7201 if you attempt to move money to avoid the assessment of taxes. Section 7201 carries serious financial and personal consequences. If you hope to avoid them, your best bet is enlisting the help of our dual licensed Tax Attorneys and CPAs.
Can You Be Charged with Tax Evasion for Transferring Assets if You Don’t Owe Anything?
You can be charged with evasion under the Internal Revenue Code even if you don’t owe the government any balance of tax liability. Attempted evasion of paying taxes is a crime unto itself. The criminality comes from the attempt. Therefore, it does not matter in the eyes of the law whether you had any outstanding balance of tax owed at the time of the affirmative act that constituted an attempt to evade taxes.
The only impact that your tax balance (or lack thereof) will have on tax evasion charges for attempting to avoid payment is in the sentencing that may be imposed if you are found guilty. For example, $30,000 of evaded federal income taxes is equal to one year in jail under the federal sentencing guidelines.
What If I Accidentally Violated the Tax Code?
If you transferred assets and avoided taxes without realizing that you were breaking the law, you may still be able to avoid the civil and or criminal tax penalties associated with noncompliance. You could choose to voluntarily disclose the tax impropriety to the IRS.
Voluntary disclosure is available to taxpayers who have made honest mistakes in their past tax filings or other reporting documents. By engaging in the voluntary disclosure program, a taxpayer may be able to avoid the harshest civil and criminal penalties for noncompliance.
You should never attempt to engage in voluntary disclosure without the help of the dual licensed Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing. Disclosure is a delicate process, and no one should take on the IRS without the help of the professionals.
Questions About Tax Liability and Transferring Assets? Get the Help You Need
Before wading into a situation that can quickly get out of control, you should speak to the dual-licensed Tax Lawyers and CPAs at the Tax Law Offices of David W. Klasing. Remember, tax evasion is a broad, harsh charge with serious consequences. You deserve to know all the facts. Call us to schedule a reduced rate initial consultation to assess your situation at (800) 681-1295 or schedule online.
Public Contact: Dave Klasing Esq. M.S.-Tax CPA, firstname.lastname@example.org