If you ever wondered how the Federal Sentencing Guidelines work – here is an outline of the basics:

First Step – Determine Which Guidelines Manual Applies:

The Sentencing Guidelines require that courts use the Guidelines Manual in effect on the date of sentencing.  If the court determines that the use of the Guidelines Manual would violate the ex post facto clause of the Constitution, the court must use the Guidelines Manual in effect on the date that the offense was committed.  Generally this is not going to be an issue because the guidelines do not change often (especially for tax crimes).  


Second Step – Calculate the Guideline Range:

This is done by determining the applicable offense guideline section from the Guidelines Manual.  For tax related offenses go to “Part T” of Chapter Two of the Guidelines Manual.

A. Determine Base Offense Level:

  • For Tax Evasion, generally, the starting point is the amount of tax loss level from Table § 2T4.1

Example:  Fred Smith wants to plead guilty to one count of tax evasion.  The amount of tax evaded is $500,000.  Under Table § 2T4.1 this would mean an offense level of 20

B. Adjustments to Base Offense Level

  •  Adjust for any appropriate specific offense characteristics.  These are  found with each specific offense in Chapter 2.

Example: Fred’s tax evasion was sourced from criminal activity (drugs) so that means you increase 2 levels to a 22.

  •  Apply the adjustments related to victim, role, and obstruction of justice from Chapter Three of the Guidelines Manual.

Example: During the investigation, Fred tried to talk his way out of the problem when the IRS Special Agent’s came to visit.  During the interview Fred lied to the agents.     This obstruction of justice would add 2 additonal levels.  Now he is at a level 24.

  • Apply the adjustment as appropriate for the defendant’s acceptance of responsibility from Part E of Chapter Three.

Example: After coming to terms with problem, Fred decides to plead guilty.  For doing so he was able to get a reduction of 3 levels for accepting responsibility.  New level 21

  • Determine any adjustments for criminal history from Chapters 4 and 5

Example:  Unfortunately, Fred had a previous run in with the Feds for money laundering for which he was sentenced to 2 years in jail.  For this you add 3 points to the criminal history category.

So what does all this mean – what sentence is Fred looking at?

On the Sentencing Table a level 21 with criminal history category of 3 you are looking at a sentence of between 41-51 months.

While the sentencing guidelines are just “guidelines” and not required to be followed in every instance (see U.S. v. Booker) – Courts are generally predisposed to issue sentences that are within guidelines ranges.