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Tax Fraud Recently I read of yet another businessman convicted of “tax fraud.” The actual charge is no doubt filing a false tax return. Well and good–tax cheaters must be punished. Certainly the government proved that he owed taxes and did not pay them–isn't that tax evasion? If so then prison might be the appropriate punishment. They did show that he owed taxes didn’t they? The answer is probably not. In 1999 I was convicted of filing false tax returns on the basis of four deductions that were fully disclosed on the tax return. The IRS did not have to prove that I owed any tax. They put an agent on the witness stand whom I had never seen and who was instructed to ask no questions and listen to no explanation of the deductions. She and the Prosecutor also included twenty-two other claims of "false statements" in the form of deductions. They presented “evidence” of all these “false” statements. The trial judge ruled in essence “no reasonable person could believe those twenty-two deductions were false.” He dismissed these claims after the jury had heard all of the “evidence.” Unfortunately, similar to the actions in the recent Martha Stewart “lying” case, the judge did not allow the jury to know why these claims were dismissed and understand the fact that the IRS was clearly wrong on twenty-two out of twenty six claims. He instructed them not to consider any of the “evidence” put before them purporting to show these twenty-two deductions as being false, but not to speculate as to why they were not to consider this "evidence." In reaching a verdict on the “falseness” of my deductions, the jury was not given instructions on the law regarding these deductions. They literally had to guess at the law.
Real
tax fraud is a serious matter.
All of us should pay our fair share.
Those who cheat deserve to be punished.
A Filing a False Statement charge should require that the
government show that income was received, but not recorded in any manner
on the books or tax returns of the individual or company charged.
In the alternative it ought to be shown that deductions were simply made up. The Filing a False Statement crime came about as a result of
numerous attempts to prosecute Al Capone.
Perhaps a noble goal but a flawed law recklessly used that has caused unjust
verdicts and prosecutions for many people. Note: In September 2004 the IRS agreed that the deductions were entirely proper (click to view) |
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