Law Offices of Sanford I. Millar

Don’t get me wrong, I am not suggesting that there is an equivalence in actions between Laurie Loughlin, whose underlying alleged[1] criminal activity involved bribery in an effort to get her daughters into college and the conduct of an organized crime leader, but I am pointing out the common denominator, tax crimes. 

The IRS-Criminal Investigation Division is the law enforcement agency charged with investigating and recommending tax prosecutions to the Department of Justice.  The cases that usually get prosecuted have as their predicate a “false statement crime”.  Every tax return requires the taxpayer to sign “under penalties of perjury”.  The act of knowingly signing a false return (a return that omits reportable income or overstates deductions) is a false statement crime.  An examples is the alleged deduction of a college bride as a charitable contribution. 

The conviction rate on federal tax crimes is in the near 95% range.  These cases are carefully screened by the IRS and DOJ before being brought.  The sentencing range in a typical tax evasion case is under three (3) years in federal prison.  But, with a little bit of effort the taxpayer can turn the case into a “money laundering” and tax evasion case and add years to the sentence.   Example:  The use of a false charity to hide the payment of a bride is an act of “money laundering”.   

If a taxpayer has engaged in tax evasion or tax evasion and “money laundering” and is not under current investigation, and the unreported income is from a lawful source they can come forward through a “voluntary disclosure” and avoid prosecution. 

The challenge is how to come forward with illegal source income, (such as fund received in violation of Sanctions), or illegal gambling or other crimes.  The proceeds of criminal activity must still be reported (as Al Capone the Chicago mobster of the late 1920’s found out).  It was, after all tax charges that brought down the infamous gangster.

One of the alternative techniques to filing a formal “voluntary disclosure” is filing amended returns. The problem with this strategy is that the filing of an amendment to reported previously unreported income is that it admits the prior false statement crime.  It is a problematic solution. 

The college bribery cases highlight the role of the IRS-CI in investigating and prosecuting what would on the face of it appear to be non-tax cases.  The lesson in that Laurie Loughlin case is that “the tax man commeth”. 


[1] She is presumed innocent until proven guilty

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