Criminal Tax Defense in California
A tax matter changes significantly when investigators examine possible criminal conduct. Questions about what was reported, who controlled the records and what a person understood can affect both the tax dispute and potential criminal exposure. The response needs to account for both.
RV Litigation Group PC assists individuals, business owners and other clients facing criminal tax allegations or investigations. This practice connects our tax work with White-Collar Defense, including matters involving financial records, interviews and government demands for information.
Respond to the Investigation With a Coordinated Plan
Government contacts and document requests
Counsel should review the nature of the contact, who is requesting information and the scope and timing of any demand. Interviews, subpoenas and other requests may raise different legal issues and should not be treated as routine return-preparation correspondence.
Preservation and review of records
Preserve relevant returns, accounting files, source documents and communications. The response should be based on an accurate record. Altering, concealing or destroying records can create additional problems and undermine the ability to investigate the facts.
Separate individual and business interests
A company, its owners and its employees may have different exposure and different accounts of events. We identify the proposed client and evaluate conflicts before assuming that one representation can cover everyone.
Consider the Tax and Criminal Issues Together
An audit, collection matter or business dispute may continue while criminal exposure is being assessed. Statements and submissions in one setting can matter in another. We review those overlapping issues and coordinate the legal response with appropriate financial or accounting support.
Correcting a return or making a payment does not automatically resolve criminal exposure. The IRS Voluntary Disclosure Practice has eligibility and timeliness requirements and does not guarantee immunity. Its suitability must be evaluated before a submission is made; it is not a routine substitute for individualized advice. See IRS Voluntary Disclosure Practice guidance.
The Tax Offense Determines What Must Be Proved
Allegations may concern evasion, a false return, willful failure to file or collected employment taxes. Each offense has its own elements. The provisions discussed below illustrate that an accounting error or unpaid balance alone does not establish a crime.
Tax evasion — section 7201
The prosecution must prove a tax deficiency, an affirmative act of evasion and willfulness beyond a reasonable doubt. An unpaid balance alone does not establish those elements. An affirmative act may involve concealment or misleading conduct, but the actual evidence and the charged theory control. Disputed receipts require tracing: a claimed transfer, loan, returned deposit or capital contribution must be examined against the records rather than accepted merely because of its label.
A materially false return — section 7206(1)
This offense concerns making and subscribing a return or other qualifying document, verified under penalty of perjury, that the signer does not believe to be true and correct as to a material matter, with the required willfulness. Unlike evasion, it does not require an actual tax deficiency. Materiality and knowledge remain separate questions. Review the document, the allegedly false item, the information supplied to the preparer and what the signer understood when signing.
Withheld employment taxes — section 7202
This provision addresses a person with the relevant duty who willfully fails to collect, or truthfully account for and pay over, tax. The government must prove the criminal elements beyond a reasonable doubt. Account permissions, instructions, access to funds and the chronology help explain the person’s actual duty and decisions. Shared authority may matter; a lack of exclusive control is not an automatic defense.
In the Ninth Circuit, ability to pay is not an additional element the prosecution must prove under section 7202. Keeping a business alive by paying other creditors does not itself excuse a known tax duty. This criminal inquiry remains distinct from the noncriminal responsible-person penalty under section 6672. See IRS criminal-tax provisions and United States v. Easterday, 564 F.3d 1004 (9th Cir. 2009).
Knowledge, Advice and Good-Faith Misunderstanding
Criminal tax willfulness generally concerns intentional violation of a known legal duty. A sincere misunderstanding of that duty can matter, even when objectively unreasonable; the factfinder still evaluates credibility. Knowing disagreement with the validity or constitutionality of tax law is different from misunderstanding what the law requires.
Using a preparer does not automatically establish good faith. Counsel examines what information was disclosed, the actual advice, warnings received, the person’s understanding and conduct at the relevant time. Negligence, an adjustment or a noncriminal tax penalty cannot replace proof of the criminal elements. See Cheek v. United States, 498 U.S. 192 (1991).
Potential Criminal Penalties
Sections 7201 and 7202 carry imprisonment of up to five years per count; section 7206(1) carries up to three years per count. Fines must also be assessed under 18 U.S.C. section 3571, which generally permits felony fines up to $250,000 for an individual or $500,000 for an organization, with potentially higher amounts tied to twice the gross gain or loss when that provision applies. Prosecution costs may also apply.
Those are potential statutory consequences, not predictions of a sentence. The count structure, proven conduct and applicable sentencing rules affect exposure. The amount of a trust-fund recovery penalty and a criminal sentence are different questions. See 18 U.S.C. § 3571.
Tax Obstruction and IRS Summonses Need Separate Analysis
For the Omnibus Clause of 26 U.S.C. § 7212(a), Marinello requires a connection to a targeted tax proceeding that was pending or reasonably foreseeable when the conduct occurred. Routine IRS processing is not enough. This limitation should not be transplanted automatically to a different obstruction statute.
IRS summons authority can include inquiry into a tax offense before a qualifying Justice Department referral is in effect. Under § 7602(d), a referral can restrict issuance and enforcement for the person, tax and period involved. Potential criminal exposure does not by itself make every summons invalid. Counsel reviews the demand, referral posture and applicable privileges before choosing a response.
Records That Help Us Evaluate the Matter
- Complete summonses, subpoenas, target letters, charging papers, interview requests and response dates.
- Returns and versions, workpapers, source records, payment history and records of actual control over funds.
- Communications with preparers and advisers, with the information supplied and advice actually received.
- A chronology of agency contacts, record changes and relevant business or management decisions. Preserve originals.
Start an inquiry with the notice or allegation, your role and any stated deadline. Preserve complete originals; arrange an appropriate transfer method before sending sensitive financial records.
Fictional California Examples
These fictional examples illustrate issues counsel may evaluate. They are not firm cases or results. Locations identify the setting; they do not establish venue, a local legal rule or a firm office.
An owner is investigated after bank deposits exceed reported business receipts. The owner points to transfers and asserted loans. Counsel traces the documents, business activity, return preparation and communications to assess the deficiency, affirmative-act and knowledge questions separately; an unexplained difference alone does not establish every element.
A taxpayer disputes an allegation that an advance was knowingly omitted from a signed return. Counsel reviews the agreement, repayment terms, records and preparer communications, including what the taxpayer actually believed. Section 7206(1) does not require a proven tax deficiency, but material falsity and criminal willfulness still require proof.
An officer disputes having actual authority over tax payments during the charged quarters. Counsel compares bank restrictions, approval records and instructions with what the officer knew and did. A cash-flow crisis does not alone resolve a section 7202 allegation, and liability for a noncriminal tax penalty is not itself a criminal conviction.
How We Help
Assess the stage and potential exposure
We review the known allegations, agency contacts and available records to understand the immediate legal decisions.
Investigate the facts and knowledge
We examine the financial evidence, instructions, chronology and conduct relevant to the particular offense under consideration.
Coordinate the response and defense
We address government communications, legal challenges and resolution or defense strategy within the agreed representation.
Legal and Agency Resources
These statutes, decisions and agency resources explain the legal framework discussed above. The appropriate response depends on the actual notice, procedural stage and facts.
- IRS criminal tax provisions
- Marinello v. United States, 584 U.S. 1 (2018)
- 26 U.S.C. § 7602: IRS examination and summons authority
- IRS summons authority and referral limitations
- 26 U.S.C. § 7201: tax evasion
- 26 U.S.C. § 7206: false returns and documents
- 26 U.S.C. § 7202: employment-tax offense
- 18 U.S.C. § 3571: criminal fine framework
- United States v. Scholl, 166 F.3d 964 (9th Cir. 1999)
Frequently Asked Questions
No. Inability to pay and an allegation of intentional evasion are different issues. Criminal liability depends on the elements of the particular offense and the evidence. The facts should be evaluated rather than assuming that either an unpaid balance or a later payment resolves the criminal question.
No. An amended return is not an automatic grant of immunity. Any correction or disclosure should be evaluated in light of the facts, known government activity and the applicable procedures. The IRS expressly states that its Voluntary Disclosure Practice does not guarantee immunity.
Not automatically. Their interests may differ over responsibility for records, statements or tax decisions. Counsel must identify the client and evaluate conflicts. Separate representation may be appropriate for an owner, employee or other person whose interests do not align with the business.
No. Criminal tax evasion requires its own elements, including willfulness and an affirmative act. The amount disputed in an audit does not by itself establish those elements.
No. IRS authority can include inquiry into tax offenses. The statutory restrictions associated with a qualifying Justice Department referral, the tax and period, and other objections must be assessed individually.
