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Structuring Transactions Can Lead to Significant Prison Time Above Guidelines when Facing Tax Charge

The Federal Tax Crimes blog recently posted a blog regarding a sentencing proceeding which involved the owner of a wholesale salon supply business. As set forth originally by the Federal Tax Crimes blog, United States v. Nguyen, ___ F.3d ___, 2017 U.S. App. LEXIS 6390 (5th Cir. 2017) dealt with a business owner who was charged with aiding and assisting the filing of a false corporate tax return. The taxpayer pleaded guilty to a single count in violation of 26 U.S.C. § 7206(2) – aiding and assisting in the preparation and presentation of a false and fraudulent return, statement, or another document.

This matter is particularly noteworthy due to the court’s approach to sentencing. Generally, a court is presented with sentencing guidelines which weigh various factors surrounding the conduct and past behavior to calculate a sentence. Under certain circumstances, a court may choose to deviate from the guidelines. In this matter, the court determined it was appropriate to order an upward variance of the sentencing guidelines. In fact, the court affirmed a sentence that was in excess of the guideline’s maximum and equal to the maximum sentence under the law.

Business Owner Structured Transactions to Avoid Cash Reporting

Structuring a transaction means that a person or business owner “conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading . . . reporting requirements.” 31 C.F.R. § 1010.100. Under Section 5324, it is illegal to structure transactions to avoid reporting and disclosure laws. To prove the structure, a prosecutor must typically show all of the following:

  1. The defendant knew of the bank financial institution’s legal obligation to report transactions in excess of $10,000. Structuring of cash deposits is a consideration at all U.S. financial institutions.

  2. The defendant structured a transaction with knowledge.

  3. The defendant intended to avoid a reporting requirement.

At trial, Nguyen attempted to explain certain cash depositing and transaction practices as not constituting structuring. First, Nguyen claimed that he never received a letter from his financial institution warning him to change his practices due to suspected structuring. However, Nguyen provided no reasons why the letter was not received and could not explain suspicious conduct he engaged in during the period immediately following his apparent receipt of the letter. Prosecutors found more than $3 million in cash at Nguyen’s place of business with most of the currency separated into $10,000 bundles.

The court also found Nguyen’s explanations regarding multiple $9,000 deposits unconvincing. He claimed the reason for multiple $9,000 deposits in close temporal proximity was due to “gambling winnings.” Doing no favor to himself, Nguyen also indicated to agents that he never withdrew or deposited “over $10,000 at a time.”

In this matter and at the district court level, the court expressed its view that there was sufficient evidence regarding illegal structuring activities and that Nguyen had engaged in illegal structuring to avoid cash reporting obligations. In light of evidence showing Nguyen’s awareness of the structuring, ineligibility for a reduction due to acceptance of responsibility, and other factors, Nguyen faced an applicable Guidelines range of 21-27 months. However, the court imposed a prison sentence of 36 months.

Structuring Can Increase Sentence Faced by a Taxpayer

It is essential to recognize that a taxpayer’s actions and approach to an audit or tax investigation can have significant impacts on any sentence that may be imposed. Taxpayers who come forward voluntarily can often avoid tax charges. However, if your matter has already proceeded too far and you are facing criminal tax charges, it is important you take all steps to show that you did not intend to violate the law. Even if you are convicted of filing false tax returns or other tax crimes, the evidence you present at trial will still influence the sentence guidelines and therefore the punishment you face.

The attorneys of NewPoint Law Group, LLP are dedicated to fighting to protect our clients against tax charges. Whether you are concerned about an audit or are already facing tax allegations, we can work to develop a strategic defense. To schedule a confidential consultation at our Roseville or Folsom tax law office locations, please call 800-358-0305 or contact us online.

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