Houston tax evasion attorney

Taxpayers get behind on their taxes as they do every other type of liability. It happens. But owing the IRS unpaid taxes can be more than a civil problem. Non-payment can lead to criminal tax evasion charges. The United States v. Connerton, No. 3:17-cr-47 (D. Conn. 2019), case provides an opportunity to consider the “affirmative act” requirement for tax evasion.

Facts & Procedural History

The taxpayer operated a business that developed material for surgical gloves. He funded the business by raising money from investors.

The taxpayer was indicted on wire fraud, securities fraud, and tax evasion.

The tax evasion charge was for $253,033 of unpaid taxes for the 2003-2015 tax years.

Tax Evasion, Generally

Tax evasion is the most severe tax crime of them all. It is a Felony. It has the stiffest punishment–which is a maximum of 5 years in prison and up to a $100,000 fine.

The government has to establish several facts in support of a tax evasion case. These facts include:

  1. The existence of a substantial tax debt.
  2. That the individual was willful in his nonpayment.
  3. That the individual had an affirmative act to evade or defeat the tax calculation or payment.

While one may not be able to control the first two facts after-the-fact, they may be able to control the last fact. The last fact, the affirmative act, is more concrete. It is something that can be carefully avoided.

Evidence of Tax Evasion

To establish the willful nonpayment element, the government presented evidence that:

  1. The IRS had sent 80 notices to the taxpayer in 2015 and 2016
  2. The IRS notices were found in a search of the taxpayer’s house.

The government also presented evidence that the taxpayer had been buying lottery tickets and had paid for vacations during this time.

To establish the required affirmative act, the government presented evidence that the taxpayer took steps to make it difficult for the IRS to collect. This included:

  1. Paying his personal expenses out of a business account, which was an account the IRS could not levy.
  2. Purchasing cashiers checks that the IRS could not levy.
  3. Move money from the business account to his personal account, but withdraw the entire amount in cash.

This is the typical evidence that establishes an affirmative act for unpaid taxes. The jury found this evidence sufficient to support the tax evasion charge.

Not Providing an Affirmative Act

The case is instructive in how taxpayers should respond when they have unpaid taxes.

While living with the threat of the IRS levy isn’t ideal, taking affirmative acts to defeat the collection of tax is problematic. This can include taking large sums of cash out of bank accounts and using accounts that the IRS cannot easily levy can be the required affirmative act for tax evasion, as in this case.

It is typically advisable to work with the IRS and to be in contact with the IRS revenue officer. This might include attempts to find ways to manage the IRS tax debt or pay the IRS something. This can help minimize collection surprises and not provide the affirmative act facts needed for a tax evasion charge.

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