A Tax Fraud Conviction Can Lead to Green Card Revocation

Recently, the U.S. government has significantly increased enforcement of immigration, resulting in more immigrants being deported than ever before. While not all crimes can lead to deportation, oftentimes, taxpayers misconstrue that only physical/violent crimes can lead to deportation — but that is not always the case. For example, if a green card holder committed tax fraud that reaches the level of ‘aggravated felony,’ that is a crime sufficient to lead to a deportation order. This can be very concerning for taxpayers who are in the United States on visas and green cards because tax fraud is a vast crime and involves more than just filing false tax returns. Let’s take a brief look at the Supreme Court ruling in Kawashima to understand how the U.S. government concludes that tax fraud is a deportable crime.

26 U.S.C. 7206(1) Tax Fraud

Tax fraud comes in many different flavors, and Internal Revenue Code Section 7206 is the main statute that refers to criminal tax fraud. If a person violates any of the subsections of IRC 7206, they may become subject to felony tax fraud and subject to significant fines and penalties, along with incarceration. In the case of Kawashima, this also led to deportation.

Declaration under penalties of perjury

Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; o

Aid or assistance

- - Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; or

Fraudulent bonds, permits, and entries

- - Simulates or falsely or fraudulently executes or signs any bond, permit, entry, or other document required by the provisions of the internal revenue laws, or by any regulation made in pursuance thereof, or procures the same to be falsely or fraudulently executed, or advises, aids in, or connives at such execution thereof; or

Removal or concealment with intent to defraud

- - Removes, deposits, or conceals, or is concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by section 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title; or

Compromises and closing agreements

- - In connection with any compromise under section 7122, or offer of such compromise or in connection with any closing agreement under section 7121, or offer to enter into any such agreement, willfully—

Concealment of property

- - Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or

Withholding, falsifying, and destroying records

- - Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax; shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.” With respect to subsection one, a defendant can become subject to criminal tax fraud when they file a false tax return, which is what happened in the current case.

8 U. S. C. §1101(a)(43)(M)(i) (Clause (i))

Title ‘8’ of the USC refers to Aliens and Nationality. The definition of ‘Aggravated Felon’ under section 1101 (with respect to deportable offenses)

- - (43) The term “aggravated felony” means—(M) an offense that— (i) involves fraud or deceit in which the loss to the victim or victims exceeds $10,000; or (ii) is described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000;

Why is Tax Fraud a Deportable Offense?

In Kawashima, the court held that because the conviction exceeded $10,000 and the Ninth Circuit Court of Appeals determined that this would qualify as an aggravated felony — the offense was deportable. In other words, because it was an aggravated felony that involved fraud or deceit, which resulted in an excess of $10,000 of loss to the U.S. government, it was a deportable offense. As provided by the Supreme Court:

1. - Kawashima was convicted of violating 26 U. S. C. §7206(1), which provides that any person who “[w]illfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter,” shall be guilty of a felony. Mr. Ka- washima does not dispute that the elements of a violation of §7206(1) include, inter alia, that the document in question was false as to a material matter, that the defendant did not believe the document to be true and correct as to every material matter, and that he acted willfully with the specific intent to violate the law. See, e.g., United States v. Aramony, 88 F.3d 1369, 1382 (CA4 1996); United States v. Kaiser, 893 F.2d 1300, 1305 (CA11 1990); United States v. Marabelles, 724 F.2d 1374, 1380 (CA9 1984); United States v. Whyte, 699 F.2d 375, 381 (CA7 1983).
  - Although the words “fraud” and “deceit” are absent from the text of §7206(1) and are not themselves formal elements of the crime, it does not follow that his offense falls outside of Clause (i). The scope of that clause is not limited to offenses that include fraud or deceit as formal elements. Rather, Clause (i) refers more broadly to offenses that “involv[e]” fraud or deceit—meaning offenses with elements that necessarily entail fraudulent or deceitful conduct.

- - “Mrs. Kawashima was convicted of violating 26 U. S. C. §7206(2), which declares that any person who “[w]illfully aids or assists in . . . the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter,” has committed a felony. Mrs. Kawashima does not dispute that the elements of a violation of §7206(2) include, inter alia, that the document in question was false as to a material matter and that the defendant acted willfully. See Aramony, supra, at 1382; United States v. Sassak, 881 F.2d 276, 278 (CA6 1989); United States v. Hooks, 848 F.2d 785, 788–789 (CA7 1988); United States v. Dahlstrom, metricconverter713 F.2d 1423, 1426–1427 (CA9 1983). We conclude that Mrs. Kawashima’s conviction establishes that, by knowingly and willfully assisting her husband’s filing of a materially false tax return, Mrs. Kawashima also committed a felony that involved “deceit.”
  - “The language of Clause (i) is clear. Anyone who is convicted of an offense that “involves fraud or deceit in which the loss to the victim or victims exceeds $10,000” has committed an aggravated felony and is subject to depor- tation pursuant to 8 U. S. C. §1227(a)(2)(A)(iii). The elements of willfully making and subscribing a false corporate tax return, in violation of 26 U. S. C. §7206(1), and of aiding and assisting in the preparation of a false tax return, in violation of 26 U. S. C. §7206(2), establish that those crimes are deportable offenses because they necessarily entail deceit.”

Supreme Court Rejects Kawashima’s Arguments

The Supreme Court rejected Kwashima’s arguments as follows:

- - (a) The Kawashimas’ argument that they cannot be deported for the commission of an “aggravated felony” because crimes under §§7206(1) and (2) do not involve the fraud or deceit required by Clause (i) is rejected. This Court looks to the statute defining the crime of conviction, rather than the specific facts underlying the crime, see Gonzales v. Duenas-Alvarez, 549 U.S. 183, 186, to determine whether the Kawashimas’ offenses involve fraud or deceit within the meaning of Clause (i). Section 7206(1) provides that any person who “willfully makes and subscribes any return . . . which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter,” shall be guilty of a felony. Although the words “fraud” and “deceit” are absent from §7206(1) and are not themselves formal elements of the crime, it does not follow that Mr. Kawashima’s offense falls outside Clause (i).
  - Clause (i) is not limited to offenses that include fraud or deceit as formal elements. Rather, it refers more broadly to offenses involving fraud or deceit?meaning offenses with elements that necessarily entail fraudulent or deceitful conduct. Mr. Kawashima’s conviction under §7206(1) involved deceitful conduct in that he knowingly and willfully submitted a tax return that was false as to a material matter. Mrs. Kawashima was convicted of violating §7206(2), which declares that any person who “[w]illfully aids or assists in . . . the preparation or presentation . . . of a return . . . which is fraudulent or is false as to any material matter” has committed a felony. She committed a felony involving deceit by knowingly and willfully assisting her husband’s filing of a materially false tax return. Pp. 3?6.
  - (b) The Kawashimas’ argument that Clause (i), when considered in light of 8 U. S. C. §1101(a)(43)(M)(ii) (Clause (ii)), must be interpreted as being inapplicable to tax crimes is also rejected. Clause (i) defines “aggravated felony” to mean an offense that “involves fraud or deceit in which the loss to the victim or victims exceeds $10,000.” Clause (ii) defines “aggravated felony” as an offense that is “described in section 7201 of title 26 (relating to tax evasion) in which the revenue loss to the Government exceeds $10,000.” Contrary to the Kawashimas’ claim, the difference in the clauses’ language—“revenue loss to the Government” in Clause (ii) compared to “loss to the victim” in Clause (i)—does not establish Congress’ intent to remove tax crimes from the scope of Clause (i). By its plain language, Clause (i) covers a broad class of offenses that involve fraud or deceit, and Congress’ decision to tailor Clause (ii)’s language to match the sole type of offense it covers does not demonstrate that Congress intended to implicitly circumscribe Clause (i)’s broad scope.
  - Furthermore, interpreting Clause (i) to include tax crimes does not violate the presumption against superfluities. The specific inclusion of tax evasion in Clause (ii) does not make it redundant to Clause (i) because the inclusion was intended to ensure that tax evasion pursuant to 26 U. S. C. §7201 was a deportable offense. Pp. 6?10.
  - (c) The United States Sentencing Guidelines’ separate treatment of tax crimes and crimes involving fraud and deceit does not support the Kawashimas’ contention that Congress did not intend to include tax crimes within Clause (i). No evidence suggests that Congress considered the Guidelines when drafting 8 U. S. C. §1101(a)(43)(M). Moreover, the differences between §1101(a)(43)(M) and the Guidelines undercut any inference that Congress was incorporating the distinction drawn by the Guidelines into §1101(a)(43)(M). Pp. 10?11.
  - (d) Construing §1101(a)(43)(M) in the Kawashimas’ favor under the rule of lenity is not warranted in light of the statute’s clear application. P. 11.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and/or other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Late-Filing Disclosure Options

If a Taxpayer is out of compliance, there are various international offshore tax amnesty programs that they can apply to safely get into compliance. Depending on the specific facts and circumstances of the Taxpayers’ noncompliance, they can determine which program will work best for them.

*Below please find separate links to each program with extensive details about the reporting requirements and examples.

Streamlined Filing Compliance Procedures (SFCP, Non-Willful)

The Streamlined Filing Compliance Procedures is one of the most common programs used by Taxpayers who are non-willful and qualify for either the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures.

Streamlined Domestic Offshore Procedures (SDOP, Non-Willful)

Taxpayers who are considered U.S. residents and file timely tax returns each year but fail to report foreign income and/or assets may consider the Streamlined Domestic Offshore Procedures.

Streamlined Foreign Offshore Procedures (SFOP, Non-Willful)

Taxpayers who are foreign residents may consider the Streamlined Foreign Offshore Procedures which is typically the preferred program of the two streamlined procedures. That is because under this program Taxpayers can file original returns and the 5% title 26 miscellaneous offshore penalty is waived.

Delinquent FBAR Submission Procedures (DFSP, Non-Willful/Reasonable Cause)

Taxpayers who only missed the FBAR reporting and do not have any unreported income or other international information reporting forms to file may consider the Delinquent FBAR Submission Procedures — which may include a penalty waiver.

Delinquent International Information Returns Submission Procedures (DIIRSP, Reasonable Cause)

Taxpayers who have undisclosed foreign accounts and assets beyond just the FBAR — but have no unreported income — may consider the Delinquent International Information Return Submission Procedures. Before November 2020, the IRS was more inclined to issue a penalty waiver, but since then this type of delinquency procedure submission has morphed into a reasonable cause request to waive or abate penalties.

IRS Voluntary Disclosure Procedures (VDP, Willful)

For Taxpayers who are considered willful, the IRS offers a separate program referred to as the IRS Voluntary Disclosure Program (VDP). This program is used by Taxpayers to disclose both unreported domestic and offshore assets and income (before 2018, there was a separate program that only dealt with offshore assets (OVDP), but that program merged back into the traditional voluntary disclosure program (VDP).

Quiet Disclosure

Quiet disclosure is when a Taxpayer submits information to the IRS regarding the undisclosed foreign accounts, assets, and income but they do not go through one of the approved offshore disclosure programs. This is illegal and the IRS has indicated they have every intention of investigating Taxpayers who they discover intentionally sought to file delinquent forms to avoid the penalty instead of submitting to one of the approved methods identified above.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.

**Need Help Finding an Experienced Offshore Tax Attorney?**

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.

Contact our firm today for assistance.