Tax Fraud – Defenses
There are several defenses to a charge of tax evasion (§ 7201). In Cheek v. United States, 111 S. Ct. 604 (1991) the Court held that a defendant’s subjective good-faith belief need not be objectively reasonable to negate intent. In United States v. Charroux, 3F.3d 827, 831 (5th Cir.1993), the court found that good faith reliance on accountants and tax advisors to whom the taxpayer had given all material facts will be a defense. In United States v. Chastain, 84 F.3d 321 (9th Cir. May 17, 1996), the court enunciated what constituted appropriate jury instructions on what constitutes good faith.
Although good faith reliance may provide a defense to § 7201, defendants must understand that amended returns constitute admissions. In certain cases, defendants can even be indicted for filing false amended returns. See, United States v. Barrow, 1997 U.S. App. LEXIS 16239 (6th Cir. 1997).
A defendant must also appreciate that voluntary disclosure and immunity are not always sufficient defenses to a § 7201 charge. In United States v. Tenzer, 127 F.3d 222, (2d Cir. 1997), the court reversed a district court’s decision to dismiss the indictment because the defendant, a tax lawyer, had failed to comply with the voluntarily disclosure policy. However, Tenzer implies that had the defendant, in fact, complied with the voluntary disclosure policy, the court might have affirmed the lower court’s decision. In United States v. Noske, 1997 U.S. App. LEXIS 15039 (8th Cir. 1997), the court held that a taxpayer could still be convicted in spite of an immunity agreement. Noske is an important case to be aware of when attempting to negotiate immunity agreements for clients.
To defend against § 7206(1) (signing a false return), the defendant must prove good faith reliance. Even though § 7206(1) does not require the Government to show an actual deficiency, the defendant should introduce evidence, if available, negating the existence of a tax deficiency to show that the defendant did not possess the requisite intent to violate 7206(1). See United States v. Taylor, 574 F.2d 232, 234-35 (5th Cir.), cert. denied, 439 U.S. 893 (1978).
To defend against § 7206(2) (aiding and assisting in false statements), the individual must prove good faith reliance. Again, the defendant should attempt to demonstrate a lack of intent to violate 7206(2) by establishing the absence of a tax deficiency.