Tennessee Federal Criminal Lawyer Blog

As a criminal defense and tax attorney, I often deal with the intersection of those two areas of practice when handling tax evasion and tax fraud cases. Even though the number of tax prosecutions by the federal government has increased in recent years, the total number of criminal tax prosecutions are relatively few. For example, in 2010, there were approximately 1,250 tax fraud charges brought by the Department of Justice.

With so few tax prosecutions each year, the types of criminal tax prosecutions usually focus on a few groups of people: celebrities or high profile people, tax protesters, and lately, those who have attempted to evade taxes by hiding assets outside the country. Of course, there are cases which don't fit into of the aforementioned categories, but two recent tax fraud cases show how tax authorities have targeted a few higher profile individuals. While the IRS and the Department of Justice are usually the lead agencies in the pursuit of tax fraud prosecutions, other agencies can also get involved.

Last week, actor Stephen Baldwin (who is looking very "Baldwin-esque" in the mugshot above) was arrested in New York for failure to file state income taxes for $350,000 in earnings from 2008-2010. Baldwin denies that he committed any crime, but acknowledges that his personal bankruptcy and other financial factors contributed to his inability to pay his taxes. Baldwin is scheduled to return to court on February 5, 2013.

Apparently, the U.S. is not the only government which pursues higher profile individuals, as Germany arrested Fabian Thylmann last week on suspicion of tax evasion. Although Thylmann may not be a household name to many, he is the owner of 2 of the world's top 110 websites, YouPorn and Pornhub. Thylmann was arrested in Belgium and will likely be extradited to Germany in the near future.

I have often said that clients charged with tax crimes are my favorite clients because they often passionately believe that they are right in their beliefs. Sadly, they are often wrong, but they are at least acting with conviction. However, it is a rare case when a defendant can combine their own misguided beliefs on the tax laws with an incorrect prediction of the return of Jesus Christ. Such a defendant can be found in the form of Kentucky minister Ronald E. Weinland.

Weinland was indicted on November 10, 2011, for attempting to evade taxes in excess of $350,000 for tax years 2004 - 2008. A copy of the Indictment can be found here. According to the Indictment, Weinland failed to file tax returns during these periods, he used church contributions for his personal use without reporting the funds as income, and he failed to file a Report of Foreign Bank (FBAR) regarding a bank account that he had in Switzerland. His trial is scheduled for this upcoming Monday, June 4, 2012.

In what would have been perhaps the most unique ground to ask for a continuance of a trial, Weinland predicted that Jesus Christ would return to the Earth on May 27, 2012. Unfortunately for Weinland, his trial is still scheduled to proceed next week. If convicted, he could face up to 5 years in prison, restitution, fines, and court costs for violating 26 U.S.C. 7201.

More information on Weinland can be found at this Fox TV station's website here.

According to a press release from the United States Attorney for the Northern District of Georgia, a Monroe, Georgia man was sentenced to 15 months in prison for failing to file his income tax returns. James Guinn owned a plumbing business near Atlanta, and from 2003 to 2006, Guinn's adjusted gross income was over $350,000. However, Guinn failed to file tax returns for any of those years.

Guinn apparently refused to file his federal returns because of information from the group "American Rights Litigators." American Rights Litigators is an anti-tax organization that advises clients on avoiding payment of income taxes. The group is probably best known for its connection with actor Wesley Snipes, who did not file tax returns for years based on the advice he received from the founder of American Rights Litigators, Eddie Kahn.

James Guinn was warned by the IRS that the anti-tax arguments he advanced were not legally valid and that he was required to file income tax returns. Guinn nonetheless refused to pay a total of approximately $67,513 in income tax. Guinn will be paying that amount now as restitution to the IRS along with a $20,000 fine.

As the Guinn case shows, non-payment of income tax can result in serious financial penalties and even imprisonment. The government will continue its crackdown on alleged financial fraud and tax crimes, and cases like Guinn's will become increasingly common. If you have received a summons or warrant from the IRS, you need a criminal defense attorney experienced in federal tax law.

Each year as the filing deadline for filing personal tax returns approaches, the Internal Revenue Service and the Department of Justice seem to increase the number of publicized cases in which they are involved. As one U.S. Attorney bluntly states, "As taxpayers prepare to file their returns, they should know that the Department of Justice and the IRS are actively investigating and prosecuting those who attempt to shirk their civic duty to pay their fair share."

Let's take a quick look at a few of the tax-related indictments which have arisen in the past week:

* A Virginia pharmacist was indicted after he allegedly told his employer to stop withholding state and federal income taxes from his paychecks. The indictment also accused the pharmacist of failing to file federal tax returns from 2001 until at least 2007, and for allegedly setting up multiple limited liability companies to disguise and conceal assets and transactions.

* An Ohio man is charged with tax evasion for allegedly failing to report portions of his income earned in 2005 through a skilled-gaming business he owns in a purported attempt to evade tax liability, and he is also accused of paying no taxes in 2006 and 2007, despite the Government's claim that he had a combined taxable income of $329,420 and owes a total of $80,916 in back taxes for those two years.

* A California man is facing tax evasion charges for allegedly failing to file income tax returns for calendar years 2004, 2005 and 2006, despite having income in those years of $870,000 (2004), $838,000 (2005), and $206,000 (2006). The Government claims that the taxes owed added up to approximately $622,000. The indictment also asserts that the defendant falsely denied to IRS agents that he had received personal income from his business and falsely accused a corporate officer of embezzling from the company.

* A Florida man is accused of evading taxes by failing to report a $102,000 broker's commission on his tax return. The Government claims that the defendant and his wife listed their taxable income for 2005 as $121,826 when it was nearly double that -- $237,468. The couple owed $58,956 in taxes but paid less than half that, according to federal officials.

If you receive a summons and/or a search and seizure warrant from the IRS or FBI, you should immediately contact an experienced federal criminal defense attorney. As these latest rash of tax evasion charges show, the Government is committed to pursuing and ultimately prosecuting those whom they view as tax criminals.

Criminal tax defense lawyers are often hit with questions about penalties for clients failing to file tax returns. 26 U.S.C. Section 7203 provides generally that a failure to file a tax return is a misdemeanor, which is punishable by a fine of up to $25,000 for individuals and up to $100,000 for corporations.

However, taxpayers (and attorneys) should be aware that a misdemeanor for failure to file tax returns can quickly grow in to a felony charge. The ultimate issue to determine whether a failure to file case turns into a felony revolves around the concept of "willfulness," which is addressed statutorily in 26 U.S.C. Section 7201.

In the case of United States v. Garland Miller, the Fifth Circuit provided a nice overview on criminal tax law as it relates to willfulness:

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. 26 U.S.C. § 7201. The elements of a violation of 26 U.S.C. § 7201 are: (1) existence of a tax deficiency; (2) an affirmative act constituting an evasion or an attempted evasion of the tax; and (3) willfulness. United States v. Nolen, 472 F.3d 362, 377 (5th Cir. 2006).

Affirmative acts that satisfy the second element may include keeping double sets of books, concealment of assets, or "any conduct, the likely effect of which would be to mislead or to conceal." Spies v. United States, 317 U.S. 492, 499 (1943); see also United States v. Robinson, 974 F.2d 575, 577 (5th Cir. 1992).

To prove willfulness, the third element, the government must show that: (1) the law imposed a duty on the defendant; (2) the defendant knew of that duty; and (3) the defendant voluntarily and intentionally violated that duty. Cheek v. United States, 498 U.S. 192, 201 (1990); United States v. Simkanin, 420 F.3d 397, 404 (5th Cir. 2005). The evidence at trial sufficiently demonstrates Miller's evasion. It is undisputed that he failed to file tax returns for tax years 2000 and 2001, as charged in the indictment. Further, Miller acted affirmatively when he converted payments made to the clinic to cash, money orders, and cashier's checks. Witnesses testified that Miller's practice of converting payments made to the clinic made it difficult for the IRS to determine his income. These affirmative acts had the "likely effect of mislead[ing]" the IRS, and precluded the agency from effectively assessing his tax liability. Spies, 317 U.S. at 399; Robinson, 974 F.2d at 577. Moreover, Wolff testified that the Medical Manager software on Miller's clinic's computers included double sets of billing records.

Non-filers and non-payers should pay special attention to the language that I placed in bold in the text from the Miller case. The Government has a lot of discretion in pushing for a felony tax case by the simple language of "any conduct, the likely effect of which would be to mislead or to conceal." Such conduct could include failure to file a tax return.

Additional Resources
United States v. Garland Miller, Fifth Circuit Court of Appeals, November 20, 2009
26 U.S.C. Section 7201
26 U.S.C. Section 7203