"The IRS has established a unit called the IRS Criminal Investigation Division (CI). The CI is dedicated to investigating potential criminal violations of the Internal Revenue Code and related financial crimes including tax evasion, money laundering, wire fraud, tax fraud and undisclosed offshore accounts."
Title 26 - Tax Evasion - I.R.C. § 7201
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.
Two Kinds of Tax Evasion. Section 7201 creates two offenses: (a) the willful attempt to evade or defeat the assessment of a tax, and (b) the willful attempt to evade or defeat the payment of a tax.
- Evasion of Assessment. The most common attempt to evade or defeat a tax is the affirmative act of filing a false return that omits income and/or claims deductions to which the taxpayer is not entitled.
- Evasion of Payment. This offense generally occurs after the existence of a tax due and owing has been established (either by the taxpayer reporting the amount of tax or by the I.R.S. assessing the amount of tax deemed to be due and owing) and almost always involves an affirmative act of concealment of money or assets from which the tax could be paid.
Willful failure to collect or pay Over Tax
Title 26 - Willful Failure to Collect or Pay Over Tax - I.R.C. § 7202
Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, be fined* not more than $10,000, or imprisoned not more than fie years, or both, together with the costs of prosecution.
There are two (2) types of offenses: (1) a willful failure to collect; and (2) a willful failure to truthfully account for and pay over tax.
- Failure to Collect or Truthfully Account For and Pay Over Tax. Failure to collect, or truthfully account for and pay over. The Department of Justice Tax Division’s position historically has been that a willful failure to truthfully to account for and pay over is a “breach of an inseparable dual obligation.” Under this theory, a willful failure to pay after a truthful accounting is made, by filing a return, would still leave “the duty as a whole unfulfilled and the responsible person subject to prosecution.”
- Willfulness. It must be shown that the taxpayer voluntarily and intentionally acted in violation of a known legal duty
Failure to File, Supply information or pay tax
Title 26 - Failure to File, Supply Information or Pay Tax - I.R.C. § 7203
Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction, thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.
There are four separate offenses described in I.R.C. § 7203:
- Failure to pay an estimated tax or tax;
- Failure to make (file) a return;
- Failure to keep records; and,
- Failure to supply information.
Fraudulent Withholding exemption or Failure to Supply information
Title 26 - Fraudulent Withholding Exemption or Failure to Supply Information - I.R.C. § 7205
Withholding on Wages. Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in addition to any other penalty provided by law, upon conviction thereof, be fined* not more than $1,000, or imprisoned not more than 1 year, or both.
Backup Withholding on Interest and Dividends. If any individual willfully makes any false certification under paragraph (1) or (2)(c) of section 3406(d), then such individual shall in addition to any other penalty provided by law, upon conviction thereof, be fined* not more than $1,000, or imprisoned not more than 1 year, or both.
Fraud and False Statements
Title 26 - Fraud and False Statements - I.R.C. § 7206
Any person who (1) willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or (2) willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document or (3) removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection or any tax imposed by this title or (4) willfully conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or (5) willfully withholding, falsifying, and destroying records. Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, related to the estate or financial condition of the taxpayer or other person liable in respect of tax
This violations typically result from a taxpayer falsely inflating deductions or under reporting income on federal income tax returns to reduce or avoid his or her tax burden.
Fraudulent Returns, Statements, or Other Documents
Title 26 - Fraudulent Returns, Statements, or Other Documents - I.R.C. § 7207
Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined* not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both. Any person required pursuant to section 6047(b), section 6104(d) or subsection (i) or (j) of section 527 to furnish any information to the Secretary or any other person who willfully furnishes to the Secretary or such other person any information known by him to be fraudulent or to be false as to any material matter shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both.
This offense usually involve false, altered or fictitious documents presented by taxpayers under audit in response to requests for substantiation of claimed itemized deductions or other deductions or credits on the return
Attempts to Interfere with Administration of Internal Revenue Laws
Title 26 - Attempts to Interfere with Administration of Internal Revenue Laws - I.R.C. § 7212
Corrupt or Forcible Interference. Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be fined* not more than $5,000, or imprisoned not more than 3 years, or both, except that if the offense is committed only by threats of force, the person convicted thereof shall be fined not more than $3,000, or imprisoned not more than 1 year, or both. The term "threats of force," as used in this subsection, means threats of bodily harm to the officer or employee of the United States or to a member of his family.
Forcible Rescue of Seized Property. Any person who forcibly rescues or causes to be rescued any property after it shall have been seized under this title, or shall attempt or endeavor so to do shall, excepting in cases otherwise provided for, for every such offense, be fined not more than $500, or not more than double the value of the property so rescued, whichever is the greater, or be imprisoned not more than 2 years.
Aiding and Abetting
18 U.S.C. § 2 - Aiding and Abetting
(a) Any person who commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal. (b) Any person who willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.
If the defendant acted through a guilty party, then the defendant may be charged under either aids, abets, counsels of § 2(a) of this statute or under § 2(b) willfully causes an act to be done.
Conspiracy to Defraud
18 U.S.C. § 286 - Conspiracy to Defraud the Government with Respect to Claims
Whoever enters into any agreement, combination, or conspiracy to defraud the United States, or any department or agency thereof, by obtaining or aiding to obtain the payment or allowance of any false, fictitious or fraudulent claim, shall be fined under this title or imprisoned not more than ten years, or both.
This offense usually involve entering into an agreement to defraud the government in the manner specified. In order to convict, the government must prove that the defendants agreed to engage in a scheme to defraud the government and knew that the objective of the scheme was illegal.
18 U.S.C. § 371 - Conspiracy to Defraud the United States or To Commit Offense
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.
If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.
False, Fictitious, or Fraudulent Claims
18 U.S.C. § 287 - False, Fictitious, or Fraudulent Claims
Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned for not more than five years and shall be subject to a fine in the amount provided in this title.
This offense usually involve a taxpayer signed and filed a fraudulent tax return or the taxpayer deposited or cashed the tax refund check which was obtained through a fraudulent return.
18 U.S.C. § 287 - Fictitious Obligations
Anyone who, with the intent to defraud, (1) draws, prints, processes, produces, publishes, or otherwise makes, or attempts or causes the same within the United States; (2) passes, utters, presents, offers, brokers, issues, sells, or attempts or causes the same, or with like intent possesses, within the United States; or (3) utilizes interstate or foreign commerce, including the use of the mails or wire, radio, or other electronic communication, to transmit, transport, ship, move, transfer, or attempts or causes the same, to, from, or through the United States, any false or fictitious instrument, document, or other item appearing, representing, purporting, or contriving through scheme or artifice, to be an actual security or other financial instrument issued under the authority of the United States, a foreign government, a State or other political subdivision of the United States, or an organization, shall be guilty of a class B felony.
This offense usually involves individuals and groups around the United States who attempt to obtain benefits from the United States and private businesses without paying for them. Such individuals or groups attempt fraudulent payment by using fictitious checks, money orders, warrants, or sight drafts, some of which are made to appear to be drawn on the U.S. Treasury. The purported checks, money orders, sight drafts, etc. used have no monetary value.
18 U.S.C. § 1028(a)(7) - Identity Theft
Anyone who knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law. The prison sentence can range from 5 years to 30 years depending on the criminal acts.
This offense usually requires that the production, transfer, possession, or use of the means of identification be in or affect interstate or foreign commence, including the transfer of a document by electronic means, or that the means of identification is transported in the mail in the course of the production, transfer, possession, or use.
The term “money laundering” refers to the activities and financial transactions that are undertaken specifically to hide the true source of the money. In most cases, the money involved is earned from an illegal enterprise and the goal is to give that money the appearance of coming from a legitimate source.
Money laundering is a very complex crime involving intricate details, often involving numerous financial transactions and financial outlets throughout the world. Criminal Investigation has the financial investigators and expertise that is critical to “follow the money trail.”
Criminal Investigation focuses on money laundering where the underlying conduct is a violation of the income tax laws or violations of the Bank Secrecy Act. According to the IRS, money laundering is the means by which criminals evade paying taxes on illegal income by concealing the source and the amount of profit. Money laundering is in effect tax evasion in progress.
When a criminal has a large amount of illegal income, they have to do something with it in order to hide it from the IRS. They attempt to launder it to make it appear as if it was from a legitimate source, allowing them to spend it or invest it in assets without having to worry about the IRS and tax consequences.
One of the ways to launder illegal proceeds is to move the money out of the United States and then bring it back in a clean form, often disguised as loan proceeds. Another method is to channel or co-mingle the money through various business activities to give the appearance that the money was derived from a legal source.