Tax crimes, is the IRS coming to get you?

Lance Wallach

419,412i, hiding money offshore etc. The IRS may be looking for you if you had anything to do with this. Tax crime attacks by the IRS are up almost 50% so you need to be careful. Last year IRS raided the offices of Benistar, Grist Mill Trust, Nova with about 50 agents and took all the files. If you did business with them the IRS will probably come to you.

People who have money in other countries are a target of the IRS. I get a lot of phone calls with people who have these problems.

The numbers are out and they aren’t good for people convicted of tax crimes. While the U.S. Department of Justice Tax Division has always enjoyed a very high conviction rate, many people convicted of tax crimes never went to jail. Not anymore.  In 2001, the average tax offender received a sentence of 18 months. Now those sentences average 25 months.
The statistics are a bit misleading because a decade ago, half the people convicted never went to jail. The average sentence may have been 18 months but many folks got house arrest while others received sentences of several years. Now, those convicted are probably going to jail. In other words, not only has the average sentence increased but also so has the likelihood of receiving a prison sentence.
Sentences in federal criminal cases are governed by the United States Sentencing Guidelines. Although no longer binding on judges, they are the court’s starting point and most judges’ stay within guidelines.
The sentencing guidelines attempt to account for a wide range of factors including one’s criminal history, whether the defendant used “sophisticated means” to carry out the crime and whether the defendant took early acceptance of responsibility for his or her actions. For tax cases, the guidelines also look at “relevant conduct” tax loss.  The higher the tax loss, the longer the recommended sentence.
The current guidelines impose suggest stiff penalties for tax crimes and many judges now believe that house arrest is not a strong enough deterrent to insure voluntary compliance.
What does this mean for people with tax problems? Plenty.
First, if you know you have a problem, don’t bury your hand in the sand.  The IRS operates on a “first contact” basis. That means if you come clean before you are caught, criminal penalties can generally be avoided.
Second, if you are indicted and convicted, it pays to have a lawyer with extensive federal criminal tax appearance.  Adjustments to the sentencing guideline calculations often can mean the difference between prison and freedom. Although there are many good lawyers that can negotiate a fair plea agreement, the final sentence is up to the court. Mastery of the federal sentencing guidelines and the thousands of court cases interpreting those guidelines separates great criminal tax lawyers from the rest of the pack.

I suggest you also consider using an ex IRS agent who is a CPA to help you.

Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA faculty of teaching professionals, is a frequent speaker on retirement plans, abusive tax shelters, financial, international tax, and estate planning.  He writes about 412(i), 419, Section79, FBAR and captive insurance plans. He speaks at more than ten conventions annually, writes for more than 50 publications, is quoted regularly in the press and has been featured on television and radio financial talk shows including NBC, National Public Radio’s “All Things Considered” and others. Lance has written numerous books including “Protecting Clients from Fraud, Incompetence and Scams,” published by John Wiley and Sons, Bisk Education’s “CPA’s Guide to Life Insurance and Federal Estate and Gift Taxation,” as well as the AICPA best-selling books, including “Avoiding Circular 230 Malpractice Traps and Common Abusive Small Business Hot Spots.” He does expert witness testimony and has never lost a case. Contact him at 516.938.5007, or visit

The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

1 comment:

Lance Wallach said...

Internal Revenue Code Section 79

Internal Revenue Code Section 79
Group Term & Group Permanent Life Insurance

Group Insurance is a Significant Employee Benefit

A business can provide group insurance for employees and take an income tax deduction for premiums paid and have employees receive favorable taxation on the coverage. If life insurance is needed, finding and paying premiums with after-tax dollars may be expensive.

The source of the premium is the business. Group insurance premiums are income tax deductible for the business and may have a significant effect on corporate and personal tax liability. Life insurance protection is available without paying the entire premium cost on an individual after-tax basis.

It Works Like This

The business adopts a group insurance plan that qualifies under Section 79 of the Internal Revenue Service Code.
The business pays income tax deductible contributions to the insurance company.
The employee is not taxed on the full amount of the premium payment but rather on the imputed income attributable to his or her coverage in excess of $50,000. However, any employee contributions reduce this imputed income dollar for dollar. This tax benefit is not available to key employees if the plan is discriminatory (see below).
The employee is taxed on the permanent portion of the total coverage less any employee contributions.
Death benefits are paid to the employee's beneficiary income tax free.
Advantages to the Business

A Section 79 Plan is an attractive fringe benefit to be used to retain and reward key employees.
The business is entitled to "an ordinary and necessary business expense" income tax deduction, provided that total compensation to any employee is reasonable.
The business is also entitled to income tax deductions for any additional premiums for waiver of premium, accidental death, and special class ratings although the employee does not have to report these cost as income.
A Section 79 Plan may be used in conjunction with and "super-imposed" on a group master contract or individual contracts.
At cross-over, the imputed income charges to the employee excc; amount. At this point, the business could bonus the premium to the employee.
And what about the IRS Audits