CRIMINAL TAX PROSECUTION:
Not all tax cases are brought in tax court. Under certain circumstances, criminal charges can be brought, under state or federal law, for tax offense violations. Tax cases are often convoluted. It is in your best interest to contact an attorney immediately if you are being audited, accused of, or charged with a tax offense. Criminal tax convictions can result in significant fines, restitution orders, imprisonment, forfeiture of property, damage to your credit rating, the suspension or loss of a professional license, and/or the loss of one’s livelihood.
Ohio state and/or federal tax offenses, can include, but are not limited to, the following:
Selected State of Ohio Tax Offenses:
- Employer’s duty to withhold tax, in violation of R.C. §5747.06 http://codes.ohio.gov/orc/5747.06;
- Employers to file return and pay withholding, in violation of R.C. §5747.07 http://codes.ohio.gov/orc/5747.07;
- Failure to File a Return or Report and/or Filing an Incomplete, False, or Fraudulent Return, Report, or Statement, in violation of O.R.C. § 5747.19 http://codes.ohio.gov/orc/5747.19 ;
- Vendor or transient vendor’s license – prohibitions upon license suspension, in violation of R.C. 5739.30 http://codes.ohio.gov/orc/5739.31.
Selected Federal Tax Offenses:
- Attempt to Evade or Defeat Tax, in violation of 26 U.S.C. § 7201 https://www.law.cornell.edu/uscode/text/26/7201 ;
- Willful Failure to Collect or Pay Over Tax, in violation of 26 U.S.C. § 7202 https://www.law.cornell.edu/uscode/text/26/7202 ;
- Willful Failure to File Return, Supply Information, or Pay Tax, in violation of 26 U.S.C. § 7203 https://www.law.cornell.edu/uscode/text/26/7203
- Fraudulent Statement or Failure to Make Statement to Employees, in violation of 26 U.S.C. § 7204 https://www.law.cornell.edu/uscode/text/26/7204 ;
- Fraudulent Withholding Exemption Certificate or Failure to Supply Information, in violation of 26 U.S.C. § 7205 https://www.law.cornell.edu/uscode/text/26/7205 ;
- Fraud and False Statements, in violation of 26 U.S.C. § 7206 https://www.law.cornell.edu/uscode/text/26/7206 ;
- Fraudulent Returns. Statements, or Other Documents, in violation of 26 U.S.C. § 7207 https://www.law.cornell.edu/uscode/text/26/7207 ;
- Offense Relating to Stamps, in violation of 26 U.S.C. § 7208 https://www.law.cornell.edu/uscode/text/26/7208 ;
- Unauthorized Use or Sale of Stamps, in violation of 26 U.S.C. § 7209 https://www.law.cornell.edu/uscode/text/26/7209 ;
- Failure to Obey Summons, in violation of 26 U.S.C. § 7210 https://www.law.cornell.edu/uscode/text/26/7210 ;
- False Statements to Purchasers or Lessees Relating to Tax, in violation of 26 U.S.C. § 7211 https://www.law.cornell.edu/uscode/text/26/7211 ;
- Unauthorized Inspection of Returns or Return Information, in violation of 26 U.S.C. § 7213A https://www.law.cornell.edu/uscode/text/26/7213A
- Offense with Respect to Collected Taxes, in violation of 26 U.S.C. § 7215 https://www.law.cornell.edu/uscode/text/26/7215 .
FEDERAL TAX LAW ENFORCEMENT:
THE UNITED STATES DEPARTMENT OF JUSTICE TAX DIVISION
The United States Department of Justice Tax Division is responsible for enforcing the nation’s tax laws through both civil and criminal litigation. The Tax Division handles or authorizes most civil and criminal litigation that concerns or relates to the internal revenue laws in federal district and appellate courts. Tax Division attorneys seek to secure correct, uniform and fair interpretations of the internal revenue laws and to ensure that uniform standards are applied in criminal tax prosecutions. Tax Division attorneys work closely with the Internal Revenue Service and United States Attorneys’ Offices to develop tax administration policies; handle civil trial and appellate litigation in federal and state courts; pursue federal grand jury investigations; and handle criminal prosecutions and appeals. To the greatest extent possible, the Tax Division coordinates the use of both civil and criminal enforcement tools, to maximize the deterrent effect of its litigation and to enhance collection efforts.
The Internal Revenue Code is codified in Title 26 of the United States Code. This Title contains within it the federal criminal tax laws, the violations of which can result in federal criminal charges.
FEDERAL EMPLOYER TAX RESPONSIBILITIES AND “RESPONSIBLE PERSONS”
Employers are required by federal law to account for, collect, and pay over to the IRS taxes “imposed by this title”. The taxes required to be withheld by employers include income and Federal Insurance Contributions Act, or “FICA”, (Social Security and Medicare) taxes from employees’ wages. These withheld taxes are sometimes referred to as “trust fund” taxes, as they are to be held in trust for the United States, until the employer is required to remit payment to the IRS (26 U.S.C. 7501(a)). “The withholding taxes are part of the wages of the employee, held by the employer in trust for the government; the employer, as a function of administrative convenience, extracts money from a worker’s paycheck and briefly holds that money before forwarding it to the IRS.” Bell v. United States, 355 F.3d 387, 392 (6th Cir. 2004) (quoting Gephart v. United States, 818 F.2d 469, 472 (6th Cir. 1987). “An employer who fails to pay taxes withheld from its employees’ wages is, of course, liable for the taxes which should have been paid.” Slodov v. United States, 436 U.S. 238, 243 (1978).
The employer is also required to “match” the FICA taxes and remit matching funds to the IRS.
Even though you may own a company that is incorporated, the incorporation of your business will not shield you from personal civil or criminal liability for failure to account for, collect, and/or pay over to the IRS “trust fund” and/or FICA matching taxes.
The IRS may impose penalties against delinquent employers, and may hold “responsible persons” of employers personally liable for failure to account for, collect, and/or pay over taxes. Failure to willfully pay over to the IRS withheld trust fund taxes can result in a civil judgment and penalty (26 U.S.C. 6672), as well as a criminal conviction (26 U.S.C. 7202).
Federal criminal tax charges include, but are not limited to, offenses commonly known as “tax evasion” (26 U.S.C. 7201), “willful failure to collect or pay over tax” (26 U.S.C. 7202), “failure to file, supply information or pay tax” (26 U.S.C. 7203).
Persons that can be held civilly and/or criminally liable for failure to account for, collect, and/or pay over “trust fund” taxes include “an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs” (26 U.S.C. 6671(b)).
A person can be held civilly liable for non-payment of trust fund taxes under 26 U.S.C. 6672(a) if he or she:
- Is responsible for paying the taxes; and
- Willfully failed to turn over the tax money to the government.
Similarly, a person can be held criminally liable for non-payment of trust fund taxes under 26 U.S.C. 7202 if:
- The defendant was a person who had a duty to collect, truthfully account for, or pay over federal income and social security taxes that were required to be withheld from the wages of employees; and
- The defendant failed to collect or truthfully account for or pay over federal income and social security taxes that were required to be withheld from the wages of employees; and
- The defendant acted willfully.
A single violation of 26 U.S.C. 7202 can result in imprisonment for up to five (5) years.
As can be seen, failure to account for, collect, and pay over to the IRS “trust fund” taxes can result in significant civil penalties and/or judgments, as well as criminal liability and/or imprisonment.
CALL ZUKERMAN ABOUT FEDERAL TAX LAW ENFORCEMENT
There are numerous state and federal tax laws, violations of which can result in the imposition of significant civil penalties, money judgments, or imprisonment. Therefore, anyone that is under investigation for, accused of, or charged with a violation of state or federal tax laws should retain legal counsel immediately.
If you, or some you know, have been accused of a state or federal tax offense or has been indicted for a state or federal tax offense, do not hesitate to contact Zukerman, Lear & Murray Co., L.P.A. today.