In May 2023, the Third Circuit of the Court of Appeals held that intended tax loss should be used in sentencing calculations for tax crimes rather than actual tax loss. This means that, for sentencing purposes, a judge can consider what might have been lost if a defendant had been successful in their tax crime. 

Tax Loss 

The case, United States v. Upshur, hinged on how the United States Sentencing Commission (U.S.S.G.) defined tax loss. An earlier case, which relied on different guidelines, didn't differentiate between intended versus actual loss.  

The Upshur case, however, relied on different parts of the U.S.S.G. The relevant portions of the U.S.S.G. provided a detailed description of both actual and intended loss in tax fraud schemes. In these cases, a tax loss may result from a defendant's aid, assistance, or advice. 

Fraudulent Tax Schemes and Actual Loss 

Here, the U.S. indicted the defendant over two fraudulent tax schemes. The defendant was found guilty and sentenced to 84 months. 

In his first tax scheme, he claimed he could help people pay off their debts. They would wire him money, and, in exchange, he would file fraudulent tax returns that he claimed would result in substantial tax refunds. Payment for this “service” began at $500, and the defendant was mostly unsuccessful at achieving the refunds. 

The second scheme involved large overpayments to the IRS to generate a significant refund. Similar to the first scheme, it wasn't wildly successful. However, if these schemes had been successful, the IRS could have lost up to $325 million. It was this intended amount that was used during sentencing. 

The defendant wanted to rely on intended loss for sentencing. As his schemes hadn't worked, the intended loss was zero. 

If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.