Hunter Biden’s 3 Tax Crimes & Why They Matter
Well, this is CRITICALLY IMPORTANT to business owners.
Hunter Biden was set to go on trial for some criminal tax violations. Here we describe Hunter’s tax charges. This is also a partial list of those charges of which business owners should be aware. From the Internal Revenue Code (IRC):
-
IRC Section 7201 – Tax Evasion
-
IRC Section 7203 – Failure to File and Pay Over Tax
-
IRC Section 7206 — Filing False Returns
These are the criminal tax charges in Hunter’s indictment. But also, we regularly see cases of everyday business owners who are alleged to have violated these tax laws.
26 U.S. Code § 7201 – Attempt to evade or defeat tax
The first law to look at is Internal Revenue Code section 7201. Basically, the law defines tax evasion as willful acts taken to defeat the IRS’s ability to assess and/or collect the tax properly owed. Federal tax evasion comes with a potential prison sentence of five years, if a person is convicted. There is also a fine of up to $100,000.
Note that tax evasion is different from tax avoidance. We all have a right to lawfully limit our tax liability. We just cannot use fraudulent or deceptive means to minimize our taxes.
26 U.S. Code § 7203 – Willful failure to file the return, supply information, or pay tax
IRC Section 7203 is the statute that so many business owners inadvertently violate. This is the “willful” failure to report, account for, and pay over taxes. This especially applied to payroll taxes.
To generally summarize, it you have a known responsibility to withhold taxes from employees pay, and then
-
you fail to account for the withholding,
-
you fail to file the periodic tax returns with the IRS (for example, the quarterly Form 941 returns),
-
you fail to pay over these taxes to the IRS,
In that event, a person possibly could be convicted of violating Code Section 7203. This is a misdemeanor violation which carries a sentence of up to 1 year per violation, and a fine up to $25,000.
Any business owner that has fallen behind on payroll tax could have violated this statute.
26 U.S. Code § 7206 – Fraud and false statements
Code Section 7206 is the criminal tax law for filing false tax returns. This statute also requires “willfulness” (duty, knowledge of the duty, decided failure to fulfill that duty).
One particular subsection is §7206(2), Aid or Assistance. This part includes anyone who:
“Willfully aids or assists in, or procures, counsels, or advises the preparation … of a [tax] return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter …”.
It does not even matter whether the actor knew of the falsity or fraud, or even had consent to do so.
The IRS is particularly aggressive in pursuing tax return preparers that violate this statute. The punishments vary but are usually severe.
This violation, upon conviction, is a felony with a fine of up to $100,000, and imprisonment of up to 3 years per violation.
Real-Life Mistakes and Misjudgments
People can make mistakes. Errors on tax returns happen all the time. It is the willful part that makes the act criminal.
What the IRS focused on with Hunter Biden was his lifestyle. In gathering evidence to convict him, the IRS calculated that he enjoyed an extravagant lifestyle. Note that it is not a crime to have a notable, expensive, or even extravagant lifestyle.
However, Hunter is alleged to have taken tax deductions for these non-business expenses. The government cited the use of prostitutes, drugs, alcohol, lavish travel, etc. This matters because they were non-business expenses.
-
When a person (or company) routinely takes tax deductions (or “write-offs”) for these expenses and then files false tax returns, they could be in violation of Sections 7201 or 7206.
-
When a person pays for those expenses with funds withheld from employees’ wages but fails to pay the payroll taxes to the government, then that person violates Section 7203.