If you are found guilty or plead guilty in a federal criminal tax case, the court will likely order you to pay restitution. The court may also order you to pay the cost of prosecution. The article discusses how restitution and the cost of prosecution are typically determined.
Calculation of the Amount of Restitution in a Criminal Tax Case
In any criminal tax case, the amount of restitution is generally the money to which the government was entitled under the tax laws but which was not paid by the defendant. However, if a criminal defendant is convicted in a conspiracy to defraud the Internal Revenue Service (“IRS”), he or she may be held liable for all reasonable foreseeable losses caused to the IRS by the conspiracy. Thus, if a tax attorney or tax accountant is charged under 18 U.S.C. Section 371 for conspiring to defraud the United States by knowingly preparing false tax returns for his or her clients, this individual could be ordered to pay all reasonably foreseeable losses caused by his or her fraudulent tax return preparation. Restitution can be ordered in such a case even “for losses that occurred outside the statute of limitations period for the underlying crime.” See United States v. Parnell, 959 F.3d 537, 538-39 (2d Cir. 2020). In imposing restitution, a district court may include both prejudicial and postjudgment interest.
As a general rule, the amount of restitution does not include penalties. As a matter of policy however, the IRS will typically assess an additional civil fraud penalty of 75% of the underpayment of tax. This penalty assessment would be in addition to the restitution owed to the IRS.
The prosecution must establish the amount of loss for restitution by a preponderance of evidence. See 18 U.S.C. Section 3664(e). In some circumstances, the prosecution can satisfy this burden by presenting evidence establishing a reasonable estimate of the loss. See United States v. Osman, 853 F.3d 1184, 1189 (11th Cir. 2017). The district court must determine the amount of restitution. The district court may not delegate the judicial function inherent in ordering restitution to the IRS.
Determining the Cost of Prosecution
The cost of prosecution may be imposed on a criminal tax defendant by statute and the Sentencing Guidelines. See U.S.S.G. Section 5E1.5. The cost of prosecution includes docket fees, witness fees, the stenographer’s fees for daily copy of the trial transcript and the cost of charts and reproduction of records. The court may also consider among other factors, the expected costs to the government of any term of probation, or term of imprisonment and term of supervised release imposed. See U.S.S.G Section 5E1.2(d)(7) and 18 U.S.C. Section 3572(a)(6). These costs may include drug and alcohol treatment, electronic monitoring, and/or contract confinement costs. The most recent advisory from the Administrative Office of the United States Courts, dated October 25, 2023, provides the following monthly cost data:
Federal Prisons Facilities
Daily $136.00
Monthly $4,147.00
Annually $49,770.00
Community Correction Centers
Daily $107.00
Monthly $3,266.00
Annually $39,197.00
Supervision by Probation
Daily $12.00
Monthly $366.00
Annually $4,387.00
Anthony Diosdi focuses a part of his practice on criminal tax enforcement, broad-based civil tax compliance and white collar matters generally. He also advises clients on the IRS voluntary disclosure program, with particular focus on disclosure related to offshore banking accounts.
Anthony Diosdi is a frequent speaker at international tax seminars. Anthony Diosdi is admitted to the California and Florida bars.
Diosdi & Liu, LLP has offices in San Francisco, California, Pleasanton, California and Fort Lauderdale, Florida. Anthony Diosdi advises throughout the United States. Anthony Diosdi may be reached at (415) 318-3990 or by email: adiosdi@sftaxcounsel.com.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.
Written By Anthony Diosdi
Anthony Diosdi focuses his practice on international inbound and outbound tax planning for high net worth individuals, multinational companies, and a number of Fortune 500 companies.
