Would you risk prison time to avoid paying taxes?
That’s a question Robert Hunter Biden, publicly known as "Hunter Biden," may have asked himself when he faced serious tax evasion charges recently. While the case attracted national attention due to his father, President Joe Biden, the reality is that many ordinary Americans face similar scrutiny from the IRS. The stakes are high—just like Hunter Biden, you could face hefty fines or even prison time if caught evading taxes. However, unlike the President’s son, you may not have the same legal resources or political connections at your disposal.
Although Hunter Biden’s business dealings and personal life have created challenges for his father’s political career, this scandal raises critical tax issues: What distinguishes tax evasion from civil tax fraud? And what lessons can everyday taxpayers learn from high-profile cases like Hunter Biden’s? This article explores these questions and the severe penalties associated with each.
The Hunter Biden Case: A Glimpse into Celebrity Tax Evasion
From 2016 through 2019, Hunter Biden and his companies, Owasco, PC, and Owasco, LLC, received over $7 million in gross income, largely from his roles as an attorney and board member for Burisma Holdings Limited, a Ukrainian industrial conglomerate, and through infrastructure projects with CEFC China Energy Co Ltd, a Chinese energy firm.1 Despite these substantial earnings, he failed to pay over $1.4 million in taxes for those years.2 His deliberate failure to pay taxes on time, file returns for 2017 and 2018, and the use of false business deductions led to his indictment on six misdemeanor tax offenses and three felony charges, including tax evasion.3 While the political implications of Hunter Biden’s tax crimes were significant due to his family ties, the underlying issue of tax evasion mirrors the experiences of many taxpayers who underreport income or inflate deductions. On September 5, 2024, the day his trial was to begin, Hunter Biden pleaded guilty to all nine federal charges. Initially, his legal team proposed an “Alford plea,” which allows a defendant to maintain innocence while acknowledging that sufficient evidence exists to convict. However, after prosecutors objected, Biden agreed to an “open plea,” admitting guilt without a prearranged deal for leniency.4
Biden’s unexpected guilty plea, intended to shield his family from further public scrutiny, occurred after his conviction earlier this year on three federal gun charges. He faces up to 25 years in prison for those convictions, with sentencing set for November 13, 2024. For the tax charges, his sentencing is scheduled for December 16, 2024, where he could face up to 17 years in prison and fines as high as $1.3 million.5 The intense public and political scrutiny surrounding this case continues to fuel debate over accountability and fairness in tax-related prosecutions.
This case underscores that tax evasion, whether intentional or accidental, can lead to severe consequences for anyone. Every day taxpayers face similar risks if they fail to report income accurately or comply with tax laws, making it crucial to seek professional guidance to avoid costly mistakes.
Understanding the Key Differences Between Tax Evasion and Civil Tax Fraud
Tax evasion is a deliberate attempt to deceive the IRS by underreporting income, claiming false deductions, or hiding assets.6 Common tactics include failing to report all income—such as foreign earnings, self-employment revenue, or income from side jobs—or fraudulently inflating expenses and deductions. In some cases, assets are hidden through foreign accounts or shell companies to obscure a taxpayer’s true financial picture.
Hunter Biden’s case is a textbook example of tax evasion, as he was charged with inflating business deductions and failing to pay $1.4 million in federal taxes. Although he eventually paid $2 million in back taxes and penalties, his late payment and personal struggles with addiction were inadmissible as a defense, highlighting how severe tax evasion cases can be
In contrast, civil tax fraud occurs when taxpayers misrepresent or make errors on their returns without the intent to deceive, often due to negligence or carelessness.7 For example, someone might improperly classify personal expenses as business deductions without proper documentation. While there may not be an intent to mislead, these actions still misreport tax liabilities and can result in civil fraud charges. Poor record-keeping or a lack of understanding of tax rules can lead to such mistakes.
Criminal tax evasion, however, involves willful and intentional acts to avoid tax obligations, such as concealing income or falsifying records. In Hunter Biden’s case, for instance, he allegedly diverted millions from payroll processes in his company, Owasco, PC, to avoid paying taxes.8 When the IRS uncovers such deliberate fraud, cases are referred to the Department of Justice (DOJ) for prosecution, as was the case with Biden’s consistent failure to pay taxes between 2016 and 2019.9 This tipping point for DOJ referral often involves actions such as intentionally falsifying records, fabricating deductions, or significantly underreporting income despite clear evidence that the taxpayer knew (or should have known) they were violating the law.10 In Hunter Biden's case, his fraudulent business deductions in 2018 included nearly $390,000 in personal expenses, such as:
- $43,693 for stays at the Chateau Marmont in Los Angeles, California;
- $1,716 for a stay at the Borgata in Atlantic City, New Jersey;
- $1,500 payment to an exotic dancer, misclassified as "artwork" on Venmo;
- $30,000 for his daughter’s law school tuition, listed as a business expense;
- $57,000 in wire transfers from Owasco, PC, falsely claimed as consulting payments, but actually used for personal expenses, including a $10,000 membership at a sex club; and
- a Lamborghini rental, incorrectly categorized as a business expense.11
Despite claiming these deductions, Biden spent most of 2018 in a downward spiral of alcoholism and crack cocaine use, which he detailed in his book Beautiful Things: A Memoir.12 His admissions in this book provided federal prosecutors with substantial evidence that these personal expenses were improperly deducted as business expenses on his 2018 return.
Repeated fraudulent behavior over multiple years, like Biden’s, often triggers a DOJ referral. This pattern of willful deception separates cases like his from instances of mere negligence or civil fraud.
Understanding the Severe Penalties of Tax Evasion and Civil Tax Fraud: What Every Taxpayer Should Know
Civil tax fraud penalties are designed to discourage fraudulent behavior. When any portion of a taxpayer’s underpayment is linked to fraud, the IRS may impose a 75% penalty on the fraudulent amount.13 Before doing so, however, the government must provide clear and convincing evidence of fraud. If fraud is proven, the entire underpayment is presumed to be fraudulent unless the taxpayer proves otherwise. Additionally, failure to file a return with the intent to evade taxes can also result in a 75% penalty.14 These penalties can be enforced even after the taxpayer’s death.15
For those caught evading taxes, as Hunter Biden was, the consequences are severe. The IRS imposes heavy fines for unpaid taxes, adding penalties for underpayment, late filing, and, in some cases, fraud. Beyond fines, tax evasion is a federal crime that can result in criminal prosecution, carrying fines of up to $250,000 for individuals and $500,000 for corporations.16
The most serious consequence is imprisonment. While jail time is rare, cases like Hunter Biden’s show that it is a genuine risk. Tax evasion can result in up to five years in prison, with an additional three years for filing false returns.17 Beyond legal penalties, a criminal tax conviction can damage reputations, impacting professional licensing and career prospects.
Hunter Biden’s case serves as a stark reminder for all taxpayers. While his situation is unique due to his father’s role as President, the IRS applies the same tax laws to everyone. Whether you’re earning millions from foreign business deals or running a small side hustle, it’s crucial to comply with tax regulations. Don’t risk prison or your freedom—it’s simply not worth it.
1United States v. Biden, No. 2:23-cr-00599-MCS (C.D. Cal. indictment filed Oct. 2023).
2Id. at 2
3 Id. at 17-54.
4Id.
5Id.
6See I.R.S., Worksheet Solutions: The Difference Between Tax Avoidance and Tax Evasion, IRS.gov, https://apps.irs.gov/app/understandingTaxes/whys/thm01/les03/media/ws_ans_thm01_les03.pdf, (last visited Sep. 10, 2024).
7J.P. Finet, J.D., Income Tax: Fraud vs. Negligence, FindLaw.com, (Sep. 11, 2023), https://www.findlaw.com/tax/tax-problems-audits/income-tax-fraud-vs-negligence.html (last visited Sep. 13, 2024).
8Biden Indictment, supra note 1, at 21-22.
9See Internal Revenue Manual § 9.1.3.3.2 (May 21, 2024); see also I.R.S., How Criminal Investigations Are Initiated, IRS.gov (last updated Aug. 20, 2024).
10See 26 U.S.C. §§ 7201 and 7206 (establishing felony liability for willfully attempting to evade taxes and willfully filing false tax returns or documents under penalties of perjury).
11Biden Indictment, supra note 1, at 32-50.
12 Biden Indictment, supra note 1, at 34-35. Hunter Biden's Beautiful Things: A Memoir is a New York Times Bestseller, and was originally published on April 6, 2021.
1326 U.S.C. § 6663(a).
14See 26 U.S.C. § 6651(f).
15United States v. Estate of Schoenfeld, 344 F. Supp. 3d 1354, 1375-76 (M.D. Fla. 2018) (holding that tax penalties survive the taxpayer's death because they are remedial in nature, compensating the government for losses and investigative expenses, rather than punitive, and citing established precedent that additional tax penalties, including those related to fraud or failure to report, are not extinguished upon death).
16See 26 U.S.C. § 7201, supra note 10, which imposes fines of up to $100,000 for individuals ($500,000 for corporations) and imprisonment of up to 5 years, or both. However, under 18 U.S.C. § 3571(b)(3), the maximum fine for a felony under federal law can be increased to $250,000 for individuals.
17 See 26 U.S.C. § 7206, supra note 10, which imposes a maximum sentence of 3 years in prison, up to $100,000 in fines for individuals ($500,000 for corporations), along with the costs of prosecution.
