
Some Common Defenses in Criminal Tax Cases
By Anthony Diosdi In previous articles, we discussed various defenses to indirect method cases, such as prior accumulated funds, nontaxable sources of net worth increases, bank deposits, improper allocation of income between taxable years, and accounting defenses. This article will focus on defenses to specific item cases. In these cases, once the Internal Revenue Service (“IRS”) establishes by proof a specific understatement of a tax liability, the question is will criminal liability follow and if so, does the taxpayer at issue have any viable defenses. The IRS has the burden of proof on this question. The IRS must tie the understatement of taxes to the defendant, demonstrating both his knowledge and intent. Translating this proposition into the language of investigative and administrative stages of a criminal tax case, the IRS…