Posted by: Robert Horwitz | February 5, 2018

Criminal Tax Restitution Order Overcomes Later IRS Settlement by Robert S. Horwitz

The Government routinely seeks a restitution order in criminal tax cases. When a defendant pleads guilty to a tax crime, the U.S. will either require the taxpayer to agree to a restitution amount or acknowledge that the U.S. can request restitution as part of the sentence.  Once the restitution order is entered, the defendant cannot challenge it in later proceedings in the sentencing court or in a civil tax case.  See 26 U.S.C. sec. 6201(a)(4).

In Choi v. United States, Crim. No. RDB 12-0066 (D. MD. Jan. 30, 2018), the defendant pled guilty to one count of tax evasion.  The court sentenced him to 18 months imprisonment and ordered him to pay restitution in the amount of $739,253.98 for the 2006-2009 tax years.

After Choi was released from prison, he settled his civil tax case with IRS Appeals for $132,991. In December 2016, Choi filed for habeas corpus relief to get the court to reduce the amount of restitution by claiming ineffective assistance of his criminal defense counsel.  According to Choi, his criminal defense counsel should have gotten a restitution order similar to the amount of the settlement with Appeals.  Choi lost.

The federal habeas statute, 28 U.S.C. sec. 2455, provides that “A prisoner in custody under sentence of a court established by Act of Congress” can seek habeas relief. The problem is that, as interpreted by the U.S. Courts of Appeal, a defendant can only use habeas to challenge a custodial sentence, not fines or restitution orders. The court therefore denied Choi’s motion for relief.

The court then addressed the merits of Choi’s ineffective assistance of counsel claim. There is a two-prong test to show ineffective assistance of counsel: 1) the defendant must establish that his attorney performed below an objective standard of reasonableness and 2) counsel’s substandard performance denied the defendant a fair trial.  Choi failed to satisfy either prong.

First, Choi signed a plea agreement that said he was satisfied with his attorney. At his sentencing he told the court he discussed the probation report, which recommended $739,253.98 restitution, with his counsel and was satisfied with his counsel’s explanation and the report.  In a colloquy with the court prior to imposition of sentence, Choi did not indicate that he was dissatisfied with either his counsel’s performance or with the restitution amount.  Thus he failed to establish the performance prong.

Second, Choi did not show prejudice. A settlement with Appeals is not a determination of the correct civil tax liability.  Choi never presented any evidence to establish that the restitution amount was wrong.  Thus, even if he could show substandard performance, he could not prove prejudice.

In a criminal tax case the defendant’s first objective is not to be convicted.  If convicted, his goal is to get the shortest possible term of incarceration.  As a result, to some degree, restitution might be a bit of an afterthought where the defendant’s primary focus is not on gathering evidence to reduce the tax loss. This can result in a taxpayer being faced with a restitution amount that is several times more than what is actually owed.  And once the restitution order is entered, you cannot get it reduced.

ROBERT S. HORWITZ – For more information please contact Robert S. Horwitz – or 310.281.3200   Mr. Horwitz is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., a former Department of Justice Trial Attorney and former Assistant United States Attorney in the Tax Division of the U.S. Attorney Office in Los Angeles. He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. Additional information is available at


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