Justice Department Calls for Stricter Sentences in Offshore Tax Evasion Cases

In the Justice Department’s continuing effort to curb offshore tax evasion by U.S. taxpayers, officials have asked the U.S. Sentencing Commission for stricter sentences in Federal tax cases. Offshore tax evasion has been a top priority for the Justice Department’s Tax Division for the past several years, with the most notable cases coming in the wake of the UBS deferred prosecution agreement. This latest request for stricter sentences signals the government’s ongoing pursuit of U.S. taxpayers using secret foreign bank accounts to evade U.S. taxes.

Federal Sentencing Guidelines

Current Federal Sentencing Guidelines use “tax loss” to determine the sentence in a tax crime. Tax loss is considered the greater of the actual or intended tax loss resulting from the offense.

Current Tax Loss Table

Tax Loss Offense Level(Apply the Greatest) Offense Level Sentencing Range
(A) $2,000 or less 6 0-6 Months
(B) More than $2,000 8 0-6 Months
(C) More than $5,000 10 6-12 Months
(D) More than $12,500 12 10-16 Months
(E) More than $30,000 14 15-21 Months
(F) More than $80,000 16 21-27 Months
(G) More than $200,000 18 27-33 Months
(H) More than $400,000 20 33-41 Months
(I) More than $1,000,000 22 41-51 Months
(J) More than $2,500,000 24 51-63 Months
(K) More than $7,000,000 26 63-78 Months
(L) More than $20,000,000 28 78-97 Months
(M) More than $50,000,000 30 97-121 Months
(N) More than $100,000,000 32 121-151 Months
(O) More than $200,000,000 34 151-188 Months
(P) More than $400,000,000 36 188-235 Months

Stricter Sentencing Guidelines

Although the current version of the sentencing guidelines allow for sentence enhancements when the offense is committed through “sophisticated means” or where the guideline range understates the seriousness of the offense, the Justice Department’s annual letter to the U.S. Sentencing Commission urges the Commission,

“to recognize that an upward departure may be warranted where the tax loss, the customary proxy for harm in tax – related cases, substantially understates the seriousness of the offense.”

The actual tax loss in a case involving offshore bank accounts may be small because it is typically calculated on income earned on the account. In it’s letter, the Government argues that the tax loss is disproportionate to the seriousness of the offense because secret foreign bank accounts typically have lower rates of return and higher fees.

This comes at a time when Swiss banks are under pressure to handover account information on their U.S. clients. See out Offshore Tax Evasion page for the latest news in this area and follow us on Twitter @BostonTax.

More Information

U.S. Department of Justice Criminal Division Annual Letter to U.S. Sentencing Commission

Boston Tax Attorney Offshore Tax Evasion Resource Page

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