On November 1, 2001, amendments to the Federal Sentencing Guidelines for tax crimes will become effective unless Congress vetoes them which seems highly unlikely. As with the amendments made in 1993, tax offenders are looking at increased punishment and a greater likelihood of time in a Federal prison if convicted of a tax offense.

The level of punishment under the Federal Sentencing Guidelines for tax crimes is tied to the amount of "tax loss" in a given case. The offense level is generally determined by what is referred to as the "Tax Table." The proposed amendments substantially compressed the Tax Table and increased the offense level for most amounts of tax loss. The current table and the amended table are set forth as follows:

Tax Loss Offense Sentencing (Apply the Greatest)	Offense Level	Sentencing Range
(A) $1,700 or less	6	0-6 Months
(B) More than $1,700	7	0-6 Months
(C) More than $3,000	8	0-6 Months
(D) More than $5,000	9	4-10 Months
(E) More than $8,000	10	6-12 Months
(F) More than $13,500	11	8-14 Months
(G) More than $23,500	12	10-16 Months
(H) More than $40,000	13	12-18 Months
(I) More than $70,000	14	15-21 Months
(J) More than $120,000	15	18-24 Months
(K) More than $200,000	16	21-27 Months
(L) More than $325,000	17	24-30 Months
(M) More than $550,000	18	27-33 Months
(N) More than $950,000	19	30-37 Months
(O) More than $1,500,000	20	33-41 Months
(P) More than $2,500,000	21	37-46 Months
(Q) More than $5,000,000	22	41-51 Months
(R) More than $10,000,000	23	46-57 Months
(S) More than $20,000,000	24	51-63 Months
(T) More than $40,000,000	25	57-71 Months
(U) More than $80,000,000	26	63-78 Months

Tax Loss Offense Sentencing (Apply the Greatest)	Offense Level	Sentencing Range
(A) $2,000 or less	6	0-6 Months
(B) More than $2,000	8	0-6 Months
(C) More than $5,000	10	6-12 Months
(D) More than $12,500	12	10-16 Months
(E) More than $30,000	14	15-21 Months
(F) More than $80,000	16	21-27 Months
(G) More than $200,000	18	27-33 Months
(H) More than $400,000	20	33-41 Months
(I) More than $1,000,000	22	41-51 Months
(J) More than $2,500,000	24	51-63 Months
(K) More than $7,000,000	26	63-78 Months
(L) More than $20,000,000	28	78-97 Months
(M) More than $50,000,000	30	97-121 Months
(N) More than $100,000,000	32	121-151 Months

Under the old Guidelines, a tax loss of $201,000 produced an offense level of 16, or a 21 to 27 month sentencing range, whereas under the revised tax loss table, a tax loss of $201,000 produces an offense level of 18, or a 27 to 33 month sentencing range. Even assuming a 3 level reduction for "acceptance of responsibility" under the old tax table, the tax offender was looking at a 12 to 18 month sentencing range while under the new Guidelines, the offender is looking at 18 to 24 months. Moreover, since the availability of lesser forms of imprisonment, such as a half-way house or home detention, are directly related to the offense level, increases in offense levels will limit the ability to obtain these forms of lesser punishment for tax offenders.

Under the Federal Sentencing Guidelines, in computing the amount of tax loss, penalties and interest are generally not considered. However, in collection type cases, such as evasion of payment or failure to pay, the Guidelines now instruct the sentencing court to take into account penalties and interest. Under the old version of the Guidelines, if a tax offender was evading a tax bill of $201,000, but which consisted of tax of only $41,000, the offender would have been at a level 13 or a 12-18 month sentencing range. Under the new Guidelines, the offender would be at an offense level of 18, substantially increasing the punishment to a 27-33 month sentencing range! Prior to this change, some courts had indicated that where the amount of the tax bill evaded was far in excess of the actual tax, a court consider an "upward departure" from the Guidelines.

There is been a two level enhancement or increase in the Guideline offense for taxpayers using "sophisticated means" or "sophisticated concealment" in the tax crime. Thus, if a taxpayer under the tax loss table was otherwise at a level 13, but employed "sophisticated means," the offense level was bumped up two levels - - to a level 15.

Under the amendment, if "sophisticated means" is used to commit an offense, the Guideline level will be a minimum level of 12. Thus even in low dollar tax loss cases, where sophisticated means is used, the offense level is ratcheted up to a level 12 and a sentencing range of 10-16 months - - basically insuring some form of community confinement, either a half-way house or home detention, in the smallest of tax cases.

There has been a conflict in the Circuit Court of Appeals as to how the tax loss is computed in a corporate skim case where there is a corporate tax loss and an individual tax loss because of failure to report the corporate income and the constructive dividends. The Circuit Courts have differed - - some Courts allow the individual tax loss to be reduced by the amount of the corporate level tax. Other Courts, however, have applied the full tax rates for the full amount of the skim in computing the individual tax loss. The Sentencing Commission took the harsher approach and now the Courts will be required to apply the tax rate to the full amount of the omitted income. Not good news for tax evaders with C Corporations.

The amendments are not good news for tax cheats. The likelihood of incarceration and incarceration for longer periods is increased. The good news is that under the constitutional prohibition on ex post facto laws, these increased penalties only apply to tax offenses which occur after their effective date - - November 1, 2001, so as long as the tax offender straightens out before November 1, 2001, he or she does not have to worry about the increased penalties.