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FY 2018 DOJ Criminal Case Statistics | Tax Lawyer & Attorney Minneapolis

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An analysis of the fiscal year 2018 DOJ criminal case statistics reveals certain interesting patterns about federal criminal tax prosecution in that year. Let’s explore in more detail these patterns.

2018 DOJ Criminal Case Statistics: Typical Tax Criminal

The analysis of the FY 2018 DOJ criminal case statistics reveals an interesting fact – a typical tax criminal is very different from any other type of a criminal. A typical tax criminal is about 50 years old and has at least one college degree; and, he is male.

This finding is not very surprising, because this category of males happens to also include the description of one of the most productive and affluent parts of our society. Rational risk-taking and even gambling are also characteristics that belong to this demographic.

2018 DOJ Criminal Case Statistics: Fewer but Longer Sentences

In FY 2018, 577 tax crime offenders were sentenced compared to 660 in 2017. The tax crime sentence, however, was much longer than in 2017 – 17 months in FY 2018 versus 13 months in FY 2017.

It should be pointed out that the majority of tax crime offenders entered into plea agreements. Only 7.5% of tax crime cases went to trial.

2018 DOJ Criminal Case Statistics: Judges Are Mostly More Lenient Than Federal Sentencing Guidelines

Another interesting fact is revealed by the FY 2018 DOJ criminal case statistics concerning sentencing. In FY 2018, federal judges were more lenient than the federal sentencing guidelines, thus considering them too harsh for the crimes committed. Almost 76% of sentences fell short of the minimum recommended by the federal sentencing guidelines. About 24% of tax crime sentences fell within the federal sentencing guidelines, but even 65.1% of them were at the minimum end of the recommended range.

Tax practitioners, however, should not ignore the guidelines or assume that the judges will always be lenient: 10 sentences or 7.8% of the 129 cases within the guidelines came in at the maximum end of the range. There were also additional sentences that even exceeded the guidelines.

2018 DOJ Criminal Case Statistics: Probation

In addition to prison time, the courts imposed probation and other conditional confinement which affected the average 17-month sentence that was discussed above. Without the probation, the average FY 2018 tax crime sentence was 23 months. About 32.2% of the tax crime convictions received probation or probation plus some other conditions of confinement (other than prison).

2018 DOJ Criminal Case Statistics: Fines and Restitution

72.1% of tax crime cases resulted in sentences which included restitution but no fines; 16.3% included both; 6.1% of sentences contained neither fines nor restitution. In FY 2018, the judges imposed fines and restitution totaling close to $283.1 million; this averages at $27,517 in fines and $565,766 in restitution per case.

Sherayzen Law Office Strives to Help Its Clients to Avoid Criminal Prosecution

US international tax law is replete with criminal penalties. A US taxpayer who fails to comply with US international tax requirements must always contend with the possibility of facing criminal prosecution.

One of the primary goals of Sherayzen Law Office is to help its clients reduce and even eliminate the possibility of a criminal prosecution with respect to prior noncompliance with US tax laws. A number of strategies may be employed to achieve this goal depending on the situation, including offshore voluntary disclosure and proper handling of an IRS audit.

Contact Sherayzen Law Office for professional help with reducing the possibility of criminal prosecution with respect to your past US tax noncompliance.

Minneapolis MN International Tax Lawyer & Attorney | PLR 201922010

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On May 31, 2019, the IRS released a Private Letter Ruling (“PLR”) on the extension of time to make an election to be treated as a disregarded entity for US tax purposes under Treas. Reg. Section 301.7701 (26 CFR 301.7701-3). Let’s explore this PLR 201922010 in more detail.

PLR 201922010: Fact Pattern

PLR 201922010 deals with a typical fact pattern for someone who is doing business overseas. A US citizen wholly owns a foreign corporation which wholly owns a foreign subsidiary. The foreign subsidiary wants to make an election to be classified as a disregarded entity for US tax purposes, but misses the deadline to do so timely. Hence, it files a request for the IRS to grant a discretionary extension of time to file Form 8832 pursuant to Treas. Reg. Sections 301.9100-1 and 301.9100-3.

PLR 201922010: Legal Analysis

The IRS began its legal analysis of the request by noting that, under Treas. Reg. Section 301.7701-3(a), a business entity that is not classified as a corporation under Treas. Reg. Section 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8) (hereinafter, an “eligible entity”) can elect its classification for federal tax purposes as provided in Treas. Reg. Section 301.7701-3. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under the Treas. Reg. Section 301.7701-2(b)(2)) or a partnership. An eligible entity with a single owner, however, can elect to be classified as an association (i.e. a corporation) or to be disregarded as an entity separate from its owner.

The IRS then focused specifically on the classification of foreign entities relying on Treas. Reg. Section 301.7701-3(b)(2)(I). This provision states that, unless it elects otherwise, a foreign eligible entity is (A) a partnership if it has two or more members and at least one member does not have limited liability; (B) an association if all members have limited liability; or © disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

What does “limited liability” mean in this context? Treas. Reg. Section 301.7701-3(b)(2)(ii) answers this question by stating that a member of a foreign eligible entity has limited liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member.

How does one make this classification election? Treas. Reg. Section 301.7701-3(c)(1)(I) provides, in part, that an eligible entity may elect to be classified other than as provided under Treas. Reg. Section 301.7701-3(b), or to change its classification, by filing Form 8832 with the service center designated on Form 8832.

Then, the IRS addressed the key issue for this PLR – when this classification election can be made. Treas. Reg. Section 301.7701-3(c)(1)(iii) provides that the election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.

Is it possible to make a late election? The IRS answered this question by referring to Treas. Reg. Section 301.9100-1(c), which provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (Code), except subtitles E, G, H, and I. Treas. Reg. Section 301.9100-1(b) defines “regulatory election” as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice or announcement published in the Internal Revenue Bulletin.

Treas. Reg. Section 301.9100-3 addresses extensions of time for making late regulatory elections. Treas. Reg. Section 301.9100-3(a) states that such requests for relief will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg. Section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.

PLR 201922010: IRS Granted Request for Extension to Time to Make the Election

Based on the information submitted and the representations made, the IRS concluded that the foreign entity satisfied the requirements of Treas. Reg. Sections 301.9100-1 and 301.9100-3. As a result, the IRS granted to the foreign entity an extension of time of 120 days from the date of PLR 201922010 to file a properly executed Form 8832 with the appropriate service center electing to be treated as a disregarded entity.

PLR 201922010: The Electing Foreign Entity Must Submit Form 8858 and All Other Returns

The IRS emphasized that its ruling was contingent on the electing foreign entity and its owner filing within 120 days from the date of the PLR all of the required federal income tax and information returns for all relevant years. The IRS specifically mentioned Form 8858 (Return of U.S. Persons With Respect to Foreign Disregarded Entities).

Contact Sherayzen Law Office if You Need to File a PLR Request for Late Entity Classification Election Similar to PLR 201922010

If you need to ask the IRS to grant a late entity classification request, you can contact Sherayzen Law Office for professional help with drafting and submitting your request for a Private Letter Ruling.