How is the Amount of Restitution Calculated?
How much restitution you have to pay can be a complicated equation, but essentially it boils down to the money that was actually owed to the government that wasn’t paid. See United States v. Chalupnik, 514 F.3d 748, 754 (8th Cir. 2008); United States v. Galloway, 509 F.3d 1246, 1253 (10th Cir. 2007).
Earlier we discussed how the sentencing guidelines for tax crimes rely heavily on what is known as the tax loss. The difference between the tax loss and the loss calculated for purposes of restitution is that restitution has to be the amount that was actually lost as a result of the crime, rather than the amount of loss that was intended.
Generally, Restitution can only be for the loss that caused by the crime actually charged and not any other related conduct. United States v. Serawop, 505 F.3d 1112, 1124 (10th Cir. 2007).
The only exception to this is if the loss occurred as part of a conspiracy to defraud the Government. See United States v. Cohen, 459 F.3d 490, 500 (4th Cir. 2006). Any penalties for the offense (for example, there is a civil failure to file penalty that can be added along with are not usually included in the calculation of restitution, but may be ordered in cases such as evasion of payment or failure to pay. See United States v. Chalupnik, 514 F.3d 748, 754 (8th Cir. 2008).
However, any interest can be included in the restitution, even interest accruing after the judgement is entered. See United States v. Perry, 714 F.3d 570, 577 (8th Cir. 2013).
How Goes the Government Collect Restitution?
To the Government, the ideal way to collect on a monetary punishment is payment in full, or as much as possible, either immediately or on a set date. However, if the defendant doesn’t have the resources, the court can set a payment schedule. See U.S. v. Myers, 198 F.3d 160 (5th Cir. 1999).
The government can generally enforce restitution for 20 years after the formal written decision of the court was entered or 20 years after the defendant is released from prison, whichever is later. 18 U.S.C. § 3613(b).
Restitution acts as a lien (legal claim against your property or assets that you have now or will have in the future) in favor of the government. If restitution is collected while the defendant is in prison, restitution will be collected by the Federal Bureau of Prisons.
Once the defendant has been released, if they are subject to supervised release or probation, the local probation office will enforce restitution. After that, the burden to ensure compliance with the restitution is on the USAO and AUSA handling the case, and restitution will be paid directly to the clerk of court.
While restitution can still be collected outside of the term of probation or supervised release order by the court, the IRS’ policy is that restitution that is ordered as a condition of probation or supervised release can only be collected during the period of supervised release or probation. PMTA 2018-19 (8/23/18) at 2-3.
What is Criminal Forfeiture?
Whereas restitution seeks to pay back money or property actually taken from the victim, criminal forfeiture seeks to penalize the defendant for any gains resulting from or used in illegal conduct.
Criminal forfeiture is different from restitution because it gives the Government the ability to actually seize assets and property you may have in your possession, if they were used in a crime or bought with the proceeds of a crime.
Unlike restitution, forfeiture is part of the actual sentence in a criminal tax case rather than just a condition of probation or supervised release. Libretti v. United States, 516 U.S. 29, 39-41 (1995).
A forfeiture allegation must be included in the criminal indictment, so the defendant will be on notice that the Government intends to seize assets. Fed. R. Crim. P. 32.2(a).
In other words, if the Government intends to take your property using this mechanism, you will be forewarned. The indictment can include either a list of the property to be forfeited, or just a general statement that the Government is intending to forfeit all property that can be forfeited. Id.
What is the Criminal Forfeiture Process?
In criminal tax cases, forfeiture is used sparingly however, we’ll quickly walk you through the process. As soon as the defendant is found or pleads guilty to a tax crime where the Government is seeking criminal forfeiture, the court must determine what property is actually subject to forfeiture. United States v. Davenport, 668 F.3d 1316, 1320 n.7 (11th Cir. 2012).
The Government can’t just waltz into your home and take everything you own, just because you have been convicted of a tax crime. If the Government intends to seize specific property, they must prove that the property was connected to the offense that was charged.
Typically only property that is used in or gained from the offense charged can be forfeited. United States v. Capoccia, 503 F.3d 103, 114 (2d Cir. 2007). However, the internal revenue code has its own forfeiture provisions which specifically allow only for the forfeiture of property used or intended for use in violating tax laws, and not for proceeds of the tax crime. See 26 U.S.C.7302 §§7303.
Forfeiture is not appropriate in criminal tax cases which deal only with unpaid taxes from legal income. See Tax Directive 145, §§ 8(a) & n.5.).
Once the judge or jury determines what can be forfeited, the court will enter a preliminary order of forfeiture which states the amount of money or property to be forfeited. Fed. R. Crim P. 32.2(b)(2). Once this preliminary order is entered, the Government is authorized to seize the noted property. Fed. R. Crim P. 32.2(b)(3).
The preliminary order becomes a final order at the time of sentencing unless the defendant consents for the final order to be entered prior to sentencing. Fed. R. Crim P. 32.2(b)(4)(A). However, if a third party has any claim to the property being forfeited, the order can’t be finalized until that party’s claim is resolved. Id.
If you have read through the entire article, you’ll have a good understanding about the purpose of restitution – to compensate the victim – usually the government – and the purpose of forfeiture and fines – to punish the delinquent taxpayer.
As a tax attorney, it’s my job to defend the taxpayer, and if we agree to work together, my firm will prepare a case to make your restitution reasonable. If you think that the level of your financial liability will more than likely end up on trial, we’ll back you up with our experience dealing with both the state and federal tax authorities in and out of court.