David M. Garvin, Selected by "Best Lawyers in America."
Contact a tax fraud defense attorney if you believe that you may be the target of a federal investigation. Do NOTmake the mistake of answering any questions without first retaining an experienced tax fraud lawyer who specializes in federal tax crimes defense. Do your due diligence and select the best tax fraud defense attorney you can to represent you and protect your liberty.
A growing number of tax preparers are under investigation for alleged tax fraud. The Internal Revenue Service is responsible to collect the funds upon which the country depends to function. Somewhere along the way Congress decided to use the Internal Revenue Code to influence social behavior. For example, if they wanted more people to buy real estate, they revised the Internal Revenue Code to permit a real estate tax deduction, etc. Eventually, politicians realized that they could use the Internal Revenue Code to get public support and votes by passing legislation that authorizes "Refundable Credits" to certain taxpayers. Samples of refundable credits are: The Earned Income Credit, the Education Credit, the American Opportunity Credit and the Fuel Tax Credit. These refundable credits actually are not refunds of any taxes paid in during the year. Instead, they are a payment even of the taxpayer has notpaid any taxes. The policy of giving money to taxpayers who have not paid in any taxes has led to a large amount of fraud. Instead of collecting taxes to be used by the government to operate the country, the IRS has been forced to disperse funds to taxpayers who claim these credits on their tax returns.
The amount of fraud by taxpayers is so prevalent in this area the IRS is now forcing tax return preparers to be de facto law enforcement agents while they are preparing tax returns for the public. Treasury Department Circular No. 230 Section 10.34 provides the standards with respect to tax returns and other papers. Section 10.34 (d) provides that a tax practitioner preparing a tax return "generally may rely in good faith without verification upon information furnished by the client."
However, now preparing a tax return in good faith no longer is good enough. The IRS may issue penalties against the tax preparer for not conducting "due diligence" when including refundable credits on a taxpayer's tax return. The IRS can conduct due diligence audits on the tax preparer for some or all of the tax preparers' clients. During these audits the IRS auditor will often begin by demanding a complete list of the names, addresses and social security numbers of all of the tax returns that the tax preparer prepared during the past 12 months. Upon receipt of the list the auditor will schedule a date to conduct the audit at the tax preparer's office. When the auditor arrives the auditor will demand the tax preparer produce a sample of 25 to 50 files of client's that the auditor has selected.
The IRS auditor will review each file to see whether the tax return preparer documented the due diligence the tax preparer preformed while preparing the taxpayer's tax return. If the due diligence is not written in the file of the individual taxpayer the IRS agent will treat the tax preparer as having failed to conduct that particular element of due diligence. Generally, there are four recognized areas of due diligence that the tax return preparer must preform and document for each tax return he prepares. The IRS auditor will assess a penalty for each due diligence category that is not documented in writing in the client's file by the tax return preparer. It is not unusual for the penalty on one client file to total $500. If an audit encompasses 100 tax returns, the penalty assessed may be $50,000 or more. This is only an example. Each audit may involve a different number of tax returns and a different amount of fines. The stated objective of the IRS is to reduce tax fraud of taxpayers and tax return preparers. If at anytime during a due diligence audit the IRS agent suspects fraud he may refer the case for criminal investigation and prosecution. This often results in tax preparers and taxpayers disagreeing over who is responsible for the tax credits taken on the tax return.
Section 6694 of the Internal Revenue Code addresses understatements of taxpayer's liability by tax return preparers. Section 6694 provides that an understatement due to unreasonable positions by a tax preparer, that the preparer knew (or reasonably should have known) was unreasonable shall result in a penalty equal to the greater of $1,000 or 50% of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.
An unreasonable position is a position that does not have substantial authority. If the understatement is due to willful or reckless conduct, the preparer shall pay a penalty with respect to each such return or claim an amount equal to the greater of $5,000, or (B) 75% of the income derived (or to be derived) by the tax return preparer with respect to the return or claim. If a return preparer prepared 100 tax returns in which he willfully took an unreasonable position the potential penalty could be $500,000.
Noe Mompoint operated a successful tax preparation company for years. He always thought of himself as a person who did things the right way. In 2014, Mr. Mompoint was very disappointed to learn that he was the subject of a criminal tax investigation. Mr. Mompoint maintained that he was innocent and demanded a jury trial. The trial took place in 2016. The government called approximately 15 witnesses. Mr. Mompoint was represented by tax fraud defense lawyer, David M. Garvin. Mr. Mompoint was found NOT GUILTY on all eleven (11) counts of the indictment.
Publication 4687 contains the Due Diligence requirements for paid preparers. Publication 4687 starts by stating the following. By law, if you are paid to prepare a tax return or claim for refund claiming one or more of the following tax benefits, youmust meet four due diligence requirements. The tax benefits are the earned income credit (EITC), the child tax credit (CTC), the additional child tax credit (ACTC), the credit for other dependents (ODC), the American opportunity tax credit (AOTC), and head of Household (HOH) filing status. The 2017 Tax Cuts and Jobs Act expanded the due diligence requirements to cover eligibility to file as head of household. You must comply with the following four Due Diligence Requirements:
1. Compute the Credits Based on the Facts;
2. Complete and Submit Form 8867;
3. Keep Records; and
4. Ask all the Right Questions
The IRS states that if the preparer has any doubt, the preparer must ask the client additional questions that a well-informed tax return preparer, knowledgeable in the law, would conclude the information furnished seems incomplete. The preparer must document in his files at the time of the interview the questions asked and the client's answers. The preparer must compute the credit on a worksheet for any EITC, CTC/ACTC, ODC or AOTC claimed on the return. Form 8867, the Paid Preparer's Checklist must be completed and filed.
The tax return preparer must keep and have readily available for at least 3 years:
1. Form 8867;
2. The applicable worksheet for each credit on the return;
3. Copies of the taxpayer's documents that the tax preparer relied upon to give the credit; and
4. A written record of how, when, and from whom the information used to prepare Form 8867 and the applicable worksheets were obtained. This includes the questions asked and the answers given.
If any of the following apply, the preparer may be penalized for the failure of an employee to exercise due diligence:
1. The paid preparer or a member of the management participated in, or knew prior to the return being filed, of the employee's failure to properly comply with the due diligence requirements;
2. The firm failed to establish reasonable and appropriate procedures to ensure compliance with due diligence requirements; or
3. The firm disregarded the reasonable compliance procedures in the preparation of the tax returns through willfulness, recklessness, or gross indifference. This includes ignoring facts that would lead a person of reasonable prudence and competence to investigate further.
Sergio Gardea is an accountant and tax return preparer in Ohio. The United States claimed that he improperly claimed refundable credit on many of his client's tax returns. He was indicted on 30 counts of filing false tax returns. Mr. Gardea maintained his innocence and entered a plea of NOT GUILTY to all counts. Mr. Gardea went to trial and was represented by David M. Garvin. During the trial the government conceded 9 counts. The jury unanimously found that Mr. Gardea was NOT GUILTY on all counts.
The IRS keep track of the activities of individual tax return preparers through the Preparer Tax Identification Number (PTIN). A vast majority of tax returns are filed electronically. The paid preparer is required to place his PTIN on the face of each tax return the preparer files. The IRS computer keep track of the details of the tax returns filed by a specific PTIN. The averages on the returns of a specific PTIN are then compared to the local, regional and national averages for all tax returns filed by other paid preparers. If the IRS computer finds that the percentages of a specific paid preparer are unusually high the IRS may commence an investigation. For example, if the percentage of a specific preparers' returns reflect that over 90% of his client's received refunds as the result of refundable credits, the IRS might commence an investigation to determine what is going on. Generally, the IRS agent will speak with a substantial number of the the paid preparer's clients. If the client state that they do not know why the refundable credits were taken on their tax returns, the IRS may make the return Preparer the target of its investigation. At this point, the investigation may be handled by the civil section of the Department of Justice, Tax Division or it may be accepted by the criminal section of the Department of Justice Tax Division for criminal investigation and prosecution. If the civil section of the Department of Justice, Tax Division is assigned the case the D.O.J. attorney will represent the government in its effort to have the tax return preparer enjoined from preparing any tax returns in the future.
The department of justice lawyer will file a complaint in the United States District Court in the area of the business of the paid preparer or his business. The complaint in most cases will seek an immediate temporary injunction prohibiting the preparer from preparing anymore tax returns until the case is resolved. The complaint will also seek a permanent injunction barring the paid preparer from preparing tax returns in the future. This is sometimes referred to as the "Business Death Penalty" since the business will be prohibited from doing any further tax preparation.
Because the trial will seek equitable relief from the United States District Court the actual trial will be before the Court. There will be no jury. The Court will hear the witnesses and receive the evidence. Ultimately the Court will decide whether the United States has proven by a preponderance of the evidence the required elements to warrant the issuance of a permanent injunction. See United States v. Cruz, 611 F.3d 880 (11th Cir 2010) and University of Miami law review article, Tax Prepares Finally Beat IRS Death Penalty Action. The Cruz is a landmark case and represents the first time the tax return preparer prevailed in an injunction case based upon the preparer's alleged misconduct in preparing tax returns for clients. David M. Garvin was the tax lawyer that successfully defended Mr. Cruz.
The law review article begins its analysis as follows:
"Prior to United States v. Cruz, courts in the Eleventh Circuit had always sided with the government when it sought to enjoin a person from acting as a tax return preparer as a result of the preparer having continuously engaged in offensive conduct. Such an injunction is known as a "death penalty" injunction because the enjoined tax return preparer is no longer permitted to perform tax return preparation services. Nationally, the government is almost always successful when the issue is litigated. The Eleventh Circuit's decision in Cruz demonstrates that there is a gray area in "death penalty" injunction cases. It will force the government to fully demonstrate that the tax return preparer engaged in an ongoing pattern of fraudulent conduct and that a less restrictive injunction will not be sufficient, before the government will be able to obtain a "death penalty" injunction against a tax return preparer. The Eleventh Circuit's decision can also stand for the broader principle that the IRS will be expected to satisfy the traditional standards for equitable relief when it seeks an injunction within the Eleventh Circuit."
If you are a tax preparer and believe that the IRS or Department of Justice, civil tax division has commenced an investigation or lawsuit against you with the aim of obtaining an injunction it is important that you retain legal counsel with experience in defending these matters as soon as possible. When interviewing any lawyer, it is your right to ask whether the lawyer has ever handled these types of cases. Ask for the results as well as the name of the case and the case number. This will enable you to check with the Clerk of the District Court to verify the outcome. As a tax preparer it is important to do your due diligence in retaining the attorney who will represent you. You have a right to ask if the lawyer has ever won a tax injunction case while representing the tax preparer. You are welcomed to compare the track record of David M. Garvin to any other lawyer or law firm. Because the government in an injunction case is seeking the equivalent to the "Death Penalty" of the business, most tax preparers believe that this is a time when "WINNING IS THE ONLY OPTION."
The Criminal Division of the Internal Revenue may investigate and seek the prosecution of tax preparers who they believe to have willfully violated the tax laws. Tax preparers who are charged with violating the Internal Revenue laws are often charged with violating 26 U.S.C. Section 7206(2). Section 7206(2) provides that any person who willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other documents, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with knowledge or consent of the person authorized or required to present such return, affidavit, claim or document shall be guilty of a felony and, upon conviction thereof be imprisoned not more than 3 years.
The best tax lawyers know that criminal investigations should never be treated by the taxpayer or his representatives as a civil audit. It should be remembered that the job of a special agent is to collect evidence in order to indict and convict the target of the investigation. The agents are trained to be friendly to get the taxpayer and witnesses to talk and provide them information they need to make a criminal case. However, they can also quickly become angry and intimidating to get the taxpayer or witness to talk, if they determine that this is necessary to get the job accomplished.
Jeffrey Marlow was shocked when the IRS executed a search warrant on his tax preparation business. Determined to clear his good name, Mr. Marlow set out to retain the best criminal tax lawyer he could find. He was convinced that winning was his only option. Ultimately, Mr. Marlow selected David M. Garvin as his tax fraud defense lawyer. Several months later, while Mr. Garvin was in New York on another case, a call came in on his cellphone. It was the special agent in charge of Mr. Marlow's case. He told Mr. Garvin "you must be a hell of an attorney". The special agent said that he had been ordered to close the case against Mr. Marlow over his objection.
The Internal Revenue Service records reflect that less than 1% of all lawyers have successfully defended a taxpayer indicted of a federal tax crime. When selecting a criminal tax attorney it is your right to know if the lawyer has ever won a criminal tax case for the defense.
Criminal tax defense attorney, David M. Garvin, has represented several tax return preparers that were investigated for tax violations by the Criminal Investigation Division. Upon meeting with the Department of Justice, Tax Division lawyers and/or the Assistant United States Attorney assigned to the case, David M. Garvin was able to get the criminal case killed and referred back to the civil division of the IRS. This is a testament to the review system and the integrity of the lawyers assigned by the government to review tax cases.
Representative cases of tax fraud defense attorney David M. Garvin that involved tax return preparers that were killed after investigation but before trial are:
Because less than 1% of the licensed lawyers have won (Not Guilty on all counts) a criminal tax trial for the defense, there is no margin of error afforded a taxpayer who intends to go to trial in a criminal tax case and prove his or her innocence. Tax fraud defense attorney, David M. Garvin, is a lawyer who also earned a LLM in taxation (Masters in Law) and is a CPA. Because of his formal training and his unique abstract reasoning (top 1% on national standardized test), Mr. Garvin is able to utilize the complex concepts contained in the Internal Revenue Code to his advantage while defending his clients. Mr. Garvin's ability to master the Internal Revenue Code's complex rules and regulations and his ability to master the courtroom during a jury trial are renown by his peers, his clients and the Courts in which he has appeared.
Other criminal lawyers in tax cases have tried to emulate Mr. Garvin's knowledge and skills by retaining a tax lawyer to conduct the jury trial with them. Unfortunately, this seldom works. In these cases, the IRS agents that testify know more about the facts and the Internal Revenue Coda than the criminal lawyer representing the defendant. The IRS on direct and cross examination, realizing that the criminal lawyer does not know the Internal Revenue Code, can make statements citing the Code that the criminal lawyer does not know how to respond to. Even if the criminal lawyer walks back to the table for the defense and asks the tax lawyer if the IRS agent is correct, the tax lawyer will not have sufficient time to explain to the criminal lawyer the technicalities to undue the damage caused by the IRS agent or the governments expert witnesses. The tax lawyer cannot conduct the cross examination because most tax lawyers have never handled a federal jury trial and are not experienced enough to conduct an effective cross examination of a trained IRS agent.
When you are the target of an IRS criminal investigation, retaining a criminal tax lawyer who has actually gone to trial in numerous criminal tax cases and has obtained complete acquittals (Not Guilty Verdicts on All Counts) is imperative. There are a lot of competent tax attorneys that have no concept as to how to try a federal criminal trial. Likewise, there are a lot of competent criminal lawyers who know how to try a case but, have no knowledge of the tax laws. When these lawyers are hired by a taxpayer they often limit their defense of the taxpayer to the issue of willfulness. This routinely results in the defense lawyer ultimately recommending that the client accept a plea agreement which requires the taxpayer to plead guilty to a felony. An experienced successful tax fraud lawyer knows that a defense based solely upon willfulness is a defense of last resort and is seldom sufficient to achieve not guilty verdicts on all counts.
There is no substitute for common sense. If you ask the average person the following questions they almost unanimously give the following answers.
Q: If you needed heart surgery, would you hire a doctor, who had never
successfully performed heart surgery before, to perform your surgery?
Q: If you needed to build a house, would you hire a contractor, who had
never successfully built a house before, to build your house?
Q: If you needed a pilot to fly you to a meeting, would you hire a pilot,
who had never successfully flown an airplane, to fly you to your meeting?
These common sense answers beg the question:
“Why would you hire a lawyer, who has never won a criminal tax trial for the defense, to defend you in a criminal tax investigation or trial?”
You have the absolute right when selecting a lawyer to ask for the names of the cases and the case numbers of the cases which resulted in Not Guilty on all counts verdicts. Do your homework as if your very liberty depends upon it. Because it may!
David M. Garvin is a renown Florida Bar Certified Tax Lawyer. He holds a LLM in taxation and is also a CPA. Mr. Garvin’s law offices are located in Miami, Florida. His practice concentrates on tax fraud and tax evasion cases. Mr. Garvin accepts cases nationwide.
* Note: The results of each trial are largely affected by the unique facts of that case. Past results are not a guarantee of future success.
The practice areas of the Firm include the following federal tax crimes:
Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.
Any person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both, together with the costs of prosecution.
Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution.
In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure.
In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting "felony" for "misdemeanor" and "5 years" for "1 year".
In lieu of any other penalty provided by law (except the penalty provided by section 6674) any person required under the provisions of section 6051 to furnish a statement who willfully furnishes a false or fraudulent statement or who willfully fails to furnish a statement in the manner, at the time, and showing the information required under section 6051, or regulations prescribed thereunder, shall, for each such offense, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.
a) Withholding on wages Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in addition to any other penalty provided by law, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both. (b) Backup withholding on interest and dividends If any individual willfully makes a false certification under paragraph (1) or (2)(C) of section 3406(d), then such individual shall, in addition to any other penalty provided by law, upon conviction thereof, be fined not more than $1,000, or imprisoned not more than 1 year, or both.
Any person who - (1) Declaration under penalties of perjury Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or (2) Aid or assistance Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; or (3) Fraudulent bonds, permits, and entries Simulates or falsely or fraudulently executes or signs any bond, permit, entry, or other document required by the provisions of the internal revenue laws, or by any regulation made in pursuance thereof, or procures the same to be falsely or fraudulently executed, or advises, aids in, or connives at such execution thereof; or (4) Removal or concealment with intent to defraud Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title; or (5) Compromises and closing agreements In connection with any compromise under section 7122, or offer of such compromise, or in connection with any closing agreement under section 7121, or offer to enter into any such agreement, willfully - (A) Concealment of property Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or (B) Withholding, falsifying, and destroying records Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax; shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.
Any person who willfully delivers or discloses to the Secretary any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both. Any person required pursuant to subsection (b) of section 6047 or pursuant to subsection (d) of section 6104 to furnish any information to the Secretary or any other person who willfully furnishes to the Secretary or such other person any information known by him to be fraudulent or to be false as to any material matter shall be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned not more than 1 year, or both.
(a) Corrupt or forcible interference
Whoever corruptly or by force or threats of force (including any threatening letter or communication) endeavors to intimidate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly or by force or threats of force (including any threatening letter or communication) obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title, shall, upon conviction thereof, be fined not more than $5,000, or imprisoned not more than 3 years, or both, except that if the offense is committed only by threats of force, the person convicted thereof shall be fined not more than $3,000, or imprisoned not more than 1 year, or both. The term “threats of force”, as used in this subsection, means threats of bodily harm to the officer or employee of the United States or to a member of his family.
(b) Forcible rescue of seized property
Any person who forcibly rescues or causes to be rescued any property after it shall have been seized under this title, or shall attempt or endeavor so to do, shall, excepting in cases otherwise provided for, for every such offense, be fined not more than $500, or not more than double the value of the property so rescued, whichever is the greater, or be imprisoned not more than 2 years.
If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.
If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.
To contact Criminal Tax Lawyer David M. Garvin call 305-371-8101.
Copyright 2020 David M. Garvin, P.A.