Tax Crimes, Voluntary Disclosure, Investigation and the Prosecution Recommendation
A trial of a criminal tax case and the structure of plea negotiations represent areas where I retain criminal tax lawyers, a unique but well known subset of white collar criminal defense lawyers, different for federal and state tax matters. I enjoy the opportunity to work with those lawyers in designing the options that a client must consider.
THE CRIMINAL INVESTIGATION:
The criminal process requires an indictment or information alleging the commission of a tax crime before a trail can occur. Before an indictment or information can be requested, the Criminal Investigation Division of the Internal Revenue Service and Special Investigation Unit of the Tennessee Department of Revenue must issue a formal report requesting prosecution. In the federal system, the Tax Division (Criminal) at the United States Department of Justice must approve that request. In Tennessee, SIU will forward the report directly to the District Attorney.
I work with Special Agents first to assist them in understanding that no crime has occurred. I conduct a parallel investigation, hiring forensic accountants or former Special Agents or Examiners, to review all of the taxpayer’s financial transactions to determine why the taxpayer is being investigated.
My investigation, running parallel to the Special Agent’s, will assists taxpayers in deciding if an expedited plea should be requested or how the case can be framed for discussions with prosecutors before an indictment is sought. Early participation and working with a taxpayer avoids inadvertent disclosures of information otherwise protected by the 5th Amendment while at the same time disclosing information confirming that no crime occurred.
The State of Tennessee’s voluntary disclosure process could not be easier.
The Internal Revenue Service has reversed its long-standing and highly effective domestic voluntary disclosure program that allowed Taxpayer’s to confess the error of their ways and pay the tax and interest. No guarantee ever existed that prosecution would not occur; but absent fraud in the submission, the IRS, in the past, had little interest in prosecuting a taxpayer that submitted a voluntary disclosure.
Following the termination of the last iteration of the Offshore Voluntary Disclosure Program, the Internal Revenue Service issue a memorandum defining a new voluntary disclosure process that applied not only to offshore matters, but also to domestic voluntary disclosures “radically” altering the previous process for domestic voluntary disclosures. See Memorandum for Division Commissioners and Chief, Criminal Investigation, November 20, 2018: Updated Voluntary Disclosure Practice. A meaningful review of that process cannot occur in this website. Suffice it to say that that new process should not be used at all if it can possibly be avoided.