Accused of Filing Numerous Fraudulent Returns But Pleading to Filing One: What Deal Awaits the Person Accused of Filing One?

Recently I have questioned how sentences are determined in tax fraud cases. In How Much Prison Time Should Be Imposed on a Tax Return Preparer Convicted of Preparing and Filing Fraudulent Returns?, I pointed out that a tax return preparer's sentence for preparing fraudulent returns amounted to 30 hours in prison for each fraudulent return, and in terms of the tax revenue loss, one day in prison for each $2,917 in federal taxes unpaid by the preparer's clients as a consequence of the preparer's fraud. In So Is Tax Fraud Less Reprehensible Than FEMA Fraud, I questioned why two defendants, one convicted of FEMA fraud and the other convicted of tax fraud, each causing about the same amount of economic loss to the U.S. Treasury, received very different sentences, five years in prison for the FEMA fraud and 18 months for the tax fraud. In A Tax Fraud Sentencing More Than Two Decades After the Fraudulent Events, I questioned why those who are convicted of tax fraud crimes that create revenue losses in the millions get short prison terms.

Yesterday, the Department of Justice issued a press release that brings to center stage another aspect of how the criminal justice system produces questionable outcomes in tax fraud cases. According to the press release, a Florida man filed "numerous false tax returns on behalf of himself and purported trusts he controlled." He cause the trusts to file returns showing significant income and tax withholding payments to the IRS, which generated large refunds. However, the trusts did not receive the claimed income and did not make the claimed tax payments. So the trusts were not entitled to the refunds. The man also filed tax returns for 2023 that omitted his employment income. All of the returns he filed claimed more than $4.2 million in unjustified refunds.

The man pleaded guilty to one count of filing a false tax return. This guilty plea brings a maximum penalty of three years in prison.

If sentenced to three years in prison, the defendant will be subject to a term twice the 18-month sentence imposed for tax fraud but only three-fifths of the five-year sentence imposed for FEMA fraud mentioned in So Is Tax Fraud Less Reprehensible Than FEMA Fraud.

What puzzles me is how someone who filed "numerous tax returns" can be permitted to plead guilty to one count of filing "a" false tax return. What deal is offered to the taxpayer who faces conviction for filing ONE false tax return? Is that taxpayer permitted to plead guilty to filing one-twenty-fifth of a false tax return? Or is the best that the taxpayer can obtain is the same guilty plea for filing one false tax return but on sentencing face a maximum prison term of, say, 6 weeks?

I understand that guilty pleas reduce the workload in the criminal justice system, not only for courts but also for the prosecutors and the defense attorneys. I understand that prosecutors prefer guilty pleas when there is a greater-than-negligible risk that a trial would bring an acquittal. I understand that when the risk of conviction is more than minimal, defense attorneys prefer their clients to plead to lesser charges with far fewer consequences that what would be faced if convicted.

The volume of literature on the positive and negative effects of plea bargaining on the criminal justice system is enormous. Yet nothing has improved, public perceptions that erode the criminal justice system remain, and inequities in outcome continue. Pleading down to one count of filing a false tax return might make sense when the accused has filed two or three or four, but when there have been "numerous" fraudulent filings, why not work out a plea to filing three or four false returns instead of one? Then the person accused of filing one false return won't face the inability to work out a plea to filing one-twenty-fifth of a false return.

A Tax Fraud Sentencing More Than Two Decades After the Fraudulent Events

Earlier today, the Department of Justice published a press release announcing the sentencing of a taxpayer who pled guilty to tax evasion. The taxpayer evaded taxes by purchasing real property, vehicles, and cashier's checks in the name of a business used to conceal the property's beneficial ownership and source. The taxpayer did this to avoid enforcement f a previous tax judgment against his personal assets. The taxes were due for "1999 and including 2001." The total amount of taxes, interest, and penalties owed to the U.S. Treasury was $2,467,523.44. The taxpayer was sentenced to 24 months in prison, followed by 36 months of supervised release. The taxpayer was also ordered to pay $2,467,523.44 in restitution.

The taxpayer pled guilty on April 2 of this year. The sentencing took place this month.

Two things strike me. First, why did 25 years elapse between the latest of the taxable years in question (2001) and the year in which the guilty plea was entered and sentencing imposed (2026)? Is justice delayed always justice lost? Perhaps not, but it makes no sense that it takes 25 years to deal with this sort of situation. Well, perhaps it does, considering the facts outlined in this account of the adventures of the taxpayer and his spouse, which I will those who are interested in more details check out for themselves. Still, the wheels of justice do seem to move more slowly than most people would prefer.

Second, it appears as though the prison term is the amount of evaded taxes divided by 100,000 and converted to months. That might simply be coincidence. In How Much Prison Time Should Be Imposed on a Tax Return Preparer Convicted of Preparing and Filing Fraudulent Returns?, I questioned the sentence in a tax fraud case. I reacted to the imposition of an 18-month prison sentence on a tax return preparer who prepared and filed about 463 fraudulent returns, causing a tax loss to the U.S. Treasury of $1,575,250. Though dividing by 100,000 and converting to months doesn't quite match 18, I continue to wonder why crimes that create losses in the millions get such short prison terms.