By Matthew Porter, Esq., LL.M
On May 1, 2013, the United States Sentencing Commission submitted its amendments to the federal sentencing guidelines to Congress (the amendments to federal sentencing guidelines can be found at Part 4, on page 12 by following this link). Of particular interest to the criminal tax attorneys at Nardone Law Group is the Sentencing Commission’s amendment to the guidelines for calculating tax loss. The tax loss amendment will take effect on November 1, 2013 unless vetoed by Congress. Until that time, the tax lawyers at Nardone Law Group expect many stakeholders to state their positions on the proposed changes to calculating tax loss. This article address the amendment as it relates to calculating tax loss.
What Is “Tax Loss”?
When a defendant is found guilty of a tax crime, the primary factor the court uses to determine the individual’s sentence is “tax loss.” Tax loss is generally the amount of tax a defendant owed and did not pay. Currently, there is a conflict in the Federal Courts Appeals over whether unclaimed credits, deductions, and exemptions should be considered in calculating tax loss. To illustrate the split, consider an individual who is convicted for failing to file a federal income tax return. In calculating the tax loss, some courts look only to the person’s income and determine how much tax the person should have paid on his income. Other courts consider the individual’s income, and then deduct appropriate exemptions, deductions, and credits to determine the amount of tax a person should have paid. The difference in the court’s interpretations of the tax loss guidelines can result in years of imprisonment in some cases.
NLG Comment: From our perspective, the tax loss calculation amendment is long overdue. It is absolutely unfair to sentence someone for tax loss, when the Court fails to identify the true and actual tax loss for a particular taxpayer.
The Sentencing Commission’s Proposed Amendment
The Sentencing Commission seeks to remedy this circuit split by amending Commentary to §2T1.1 to recommend consideration of legitimate unclaimed credits, deductions, and exemptions in calculating tax loss. The goal of the amendment is uniformity relating to a reasonable estimation of the tax loss.
The new Commentary provides that a court should account for the standard deduction and personal and dependent exemptions to which the defendant was entitled in calculating tax loss. The Commentary also recommends that courts account for unclaimed credits, deductions, or exemptions that are needed “to ensure a reasonable estimate of the tax loss” to the extent certain requirements are met.
As we understand as of October 2013, the Department of Justice has not come out with its stated position on the amendment to tax loss calculation. According to a recent statement from the Justice Department, the Department is still considering its position.
Contact Nardone Law Group
If you have concerns about civil or criminal tax matters, you should contact one of the experienced criminal tax attorneys at Nardone Law Group. We help individuals through all aspects of criminal tax matters, from criminal investigation by state and federal taxing authorities to criminal defense. The tax lawyers at Nardone Law Group can help you understand your rights and responsibilities when it comes to federal, state, and local taxes. Contact Nardone Law Group today for a consultation.