White collar crimes include a large number of non-violent crimes. White collar crimes are committed in a commercial or business setting. These types of crimes are considered to be non-violent because no physical harm occurs to a victim.
While collar crime is a subcategory of criminal law dealing with crimes committed by individuals in government and in businesses. In most cases, white collar crimes are motivated by financial gain. Although any individual can commit a white collar crime, individuals in professional positions typically have access to the resources necessary to commit these crimes.
The majority of white collar crimes involve some kind of fraudulent scam or activity. Common white collar crimes are discussed below:
- Fraud. Fraud occurs when an individual deceives another individual for a financial gain. Fraud commonly involves financial transactions in a business or corporate setting;
- Securities Fraud. White collar crimes most commonly occur in a corporate setting that involves securities, stocks, and bonds. A common white collar crime is insider trading. This occurs when an individual who has confidential information regarding a company’s investments trades or shares that information in violation of their duty to the company;
- Misrepresentation. Another type of securities fraud occurs when an individual knowingly misstates or misrepresents inside information about the company’s investments and finances, which causes investors to be misled based on the false and misleading information and to rely on that information when making business and financial decisions;
- Embezzlement. This white collar crime occurs when an individual has been entrusted legal authority over some type of property or money and then improperly takes that money from the individual for their financial gain;
- Tax Evasion. Tax evasion occurs when an individual attempts to avoid paying the required taxes that they owe to the Internal Revenue Service (IRS). Any scheme or action taken knowingly and intentionally to avoid paying taxes is considered tax evasion;
- Money Laundering. Money laundering is a criminal activity that is perpetrated by taking money that was gained by illegal means and using a series of transactions to make it appear that it was gained legitimately. In other words, the criminal takes dirty money and filters it into clean money;
- Bribery. This type of crime is perpetrated by offering money or property with the intention of influencing the actions of another;
- Bankruptcy Fraud. This crime occurs when a corporation or a business lies and misrepresents to their creditors regarding the assets and debts that they have in order to avoid paying the creditors or having the creditors reach their assets;
- Bank Fraud. One of the most common types of white collar crime is fraud against a banking institution. There are many different ways to defraud a bank, including:
- using fraudulent checks;
- commercial loan fraud;
- mortgage fraud;
- use and deposit counterfeit money; and
- other financial misrepresentations to the bank in order to obtain a financial gain.
Similar to other types of crimes, a conviction for a white collar crime can carry serious penalties. Another type of white collar crime is underreporting.
What is Underreporting?
Underreporting is a white collar crime that involves deliberately reporting that revenue or income is less than the actual amount received. An individual typically engages in this activity when reporting their tax information to the IRS in order to avoid paying a higher amount of taxes.
Is Failing to Report the Actual Amount of Money I Receive Fraud?
Yes, failing to report the actual amount of money an individual receives is fraud. The federal government and the states prohibit individuals from underreporting income or revenue.
What are Types of Revenue or Income that People Underreport?
There are several different types of revenue or income that individuals underreport. For example, an individual can fail to report:
- Employment income;
- Spousal support;
- Child support;
- Tax proceeds;
- Insurance claims;
- Money from a business;
- Disability payments;
- Various federal benefits;
- Worker’s compensation claims; and
- Property received in a divorce.
Is Tax Avoidance the Same as Underreporting?
No, tax avoidance is not the same as underreporting. Tax avoidance is the practice of arranging an individual’s financial affairs in order to minimize the taxes they pay each year.
Tax avoidance is a legal practice. It does not involve deliberately lying about the individual’s amount of income or revenue that is received.
Is Tax Evasion the Same as Underreporting?
Underreporting is a type of tax evasion. It is not the only type of tax evasion that can be committed.
Tax evasion is any act engaged in to defraud the IRS. These acts may include one or more of the following:
- Underreporting yearly revenue or income;
- Hiding taxable money;
- Inflating deductions; and
- Transferring income to offshore accounts.
Tax evasion can be perpetrated by an individual or by a corporation.
What are the Penalties for Underreporting?
There are several penalties an individual may face for underreporting. These penalties may include:
- A criminal sentence, which may include jail, prison, or probation;
- Criminal fines;
- The loss of their business license; and
- The loss of asset distribution or benefits.
Since a large number of taxes are considered federal taxes, federal agencies are commonly in charge of the prosecution of tax evasion cases instead of local law enforcement. There are federal laws that govern each tax evasion offense. In addition, each state may have their own tax evasion laws and possible penalties.
A conviction for tax evasion may lead to a prison term of up to 5 years. This term may be enhanced if there were multiple counts or if the individual is a repeat offender.
Violating federal tax laws can result in substantial fines. A conviction of tax evasion may result in up to a $250,000 fine for an individual or up to $500,000 for a corporation. A court may impose additional fines. In some cases, the court may require the defendant to pay restitution.
A court may sentence an individual convicted of tax evasion to probation. A probation sentence typically lasts between 1 and 3 years. The period of probation may be extended if the individual fails to comply with the terms and conditions of their probation.
What are Possible Defenses if I Am Accused of Tax Evasion?
Since tax evasion is a crime, defenses that are available for other crimes may be used. Common defenses to tax evasion include:
- Insufficient evidence;
- Statute of limitations;
- Mistake; and
In order to convict an individual of tax evasion, the prosecution must show that they willfully intended to not pay their taxes. If the individual can show that they forgot to file their return, that may be enough to show it was not intentional.
There is a time limit, or statute of limitations, for filing a charge of tax evasion. Once this time period has passed, the IRS cannot file a tax evasion charge even if they have sufficient evidence. Generally, the IRS is required to file charges within 6 years of the alleged tax evasion.
Entrapment occurs when a government agent lures an otherwise innocent individual into committing a crime they otherwise would not have committed. However, providing the opportunity to commit the crime is not considered entrapment.
The mistake defense can only be used in limited circumstances. For example, if an individual was mistaken regarding what day taxes were due or what exactly they were supposed to report, the mistake defense may work. However, claiming that an individual did not know they were required to file taxes does not work.
Lastly, there is always the insanity defense. However, it is a tough sell in any courtroom for any offense. It will most likely be ineffective in a tax evasion case.
Should I Contact a Lawyer If I Am Accused of Underreporting?
Yes, it is essential to have the assistance of an experienced tax lawyer if you are accused of underreporting. This is a serious white collar crime.
As noted above, if you are convicted of underreporting, you may face severe penalties, including fines or jail time. A lawyer can review your case, determine what defenses are available to you, and represent you during any court appearances.