Doctors and Tax Evasion/Fraud
Sadly, I see many doctors in my criminal law defense practice that come to me with tax problems, including being the victims of tax evasion and/or tax fraud charges. Unfortunately, most of the time, this occurs because of a combination of their trusting nature, the complexity of the tax code, and a failed tax plan or the lack thereof.
How it Happens: Doctors and Tax Problems
In their practice, doctors are accustomed to getting advice from other doctors. For instance, a family-practice physician might refer a patient to a cardiologist if the patient is having heart problems. When the referral is made, the family practitioner trusts that the specialist will do the work properly. This same trust is granted (whether earned or not) when some doctors interact with other professionals, such as tax advisors. Just as when they are practicing medicine and referring their clients to specialists, they often do not ask their colleagues about the fine details.
Doctors benefit by having a plan to maximize their tax efficiency (or tax avoidance); i.e. legally and properly reduce the amount of taxes that they pay. This is perfectly Legal Tax Defense and basic good advice. It is good practice to take every legal tax deduction. Physicians also have unusual situations. For instance, their income often exceeds that to qualify for many popular retirement savings programs like Roth IRAs and 401(k) plans. So, they often find themselves with complicated investment plans, tax advantage plans, tax deduction plans, and other strategies that meander through the excessively complicated tax code. Unfortunately, the doctors rarely have more than a precursory understanding of how these plans operate. They trust the «expert» and focus on what they do best, healing patients. Tax-reporting mistakes are made, the mistakes go unnoticed, and years go by.
The Legal Risks for Doctors with Tax Evasion/Fraud
The risks for physicians are quite serious. Tax evasion and tax fraud are both federal felonies. A doctor who is found guilty of either of these can lose his/her medical license and end up in prison. The prison sentence for a doctor with a false or fraudulent tax return can last years. However, if the tax issues are handled correctly and quickly enough, the criminal justice process can be avoided. And, even if it’s too late for a quick resolution, a strong case of a doctor’s innocence and defense can be presented to the jury.