Tax Fraud And Denaturalization Risks: A Balanced View For Taxpayers

Forbes

04-08-2025

Recent headlines have created alarming concerns among naturalized U.S. citizens. These have suggested that certain tax issues could lead to the loss of U.S. citizenship. This fear is now being amplified on various platforms and stems from a case involving, Vanessa Ben, a Houston woman facing denaturalization over her admission of tax fraud prior to naturalizing.
Indeed, the risks of tax fraud and its immigration consequences are very serious. However, taxpayers should be cautious of overly alarmist narratives or unscrupulous tax professionals who may be seeking to profit from the overwhelming sense of panic. False tax returns, for example, may constitute tax fraud if the return was filed with intent to evade taxes. Distinguishing between honest errors and willful misconduct is key.
This article provides a factual look at Ms. Ben's denaturalization case. It examines the intersection of tax fraud and naturalization and explores certain unique tax challenges faced by naturalized citizens with prior tax filing concerns. An understanding of the legal landscape and avoiding fear-driven decisions, along with possible steps to address the issues can help guide concerned taxpayers.
The Vanessa Ben Denaturalization Case: A Cautionary Tale
In July 2025 it was reported in various press articles that Vanessa Ben, a Houston woman was facing denaturalization after pleading guilty in 2019 to filing a false tax return, resulting in a $7,712 refund. Ms. Ben filed her U.S. Individual Income Tax return and signed the form attesting to its validity, but she was aware it contained false information. Ms. Ben was sentenced to 12 months in prison and fined. It has been reported that Ms. Ben now confronts the Department of Justice's attempt to strip her citizenship, alleging she concealed her tax fraud during naturalization. Public details on her case are limited because many denaturalization cases are filed under seal, resulting in the inability to access court filings.
Denaturalization has been rare. The DOJ has made denaturalization a priority and Ms. Ben's case seems to reflect the DOJ's recent push to prioritize denaturalization for various causes. These include fraud/intentional misrepresentation during naturalization, as outlined in the DOJ's June 11 memo.
For naturalized citizens, tax fraud committed prior to obtaining U.S. citizenship can have severe consequences due to the strict requirements for applicants. The N-400 Application for Naturalization asks, 'Have you EVER committed, agreed to commit, asked someone else to commit, helped commit or tried to commit a crime or offense for which you were NOT arrested?' (Part 9 Question 15a). Applicants are required to disclose all crimes or offenses, including for example, uncharged tax fraud, because this would reflect on 'good moral character' as required under 8 C.F.R. § 316.10. The failure to disclose such offenses can be considered willful misrepresentation and constitute grounds for denaturalization under 8 U.S.C. § 1451.
Tax Fraud and Denaturalization: The Misrepresentation Trap
In Vanessa Ben's case, the DOJ alleges she committed tax fraud before naturalizing and failed to disclose it, thus misrepresenting that she had good moral character. The case highlights a critical lesson for those seeking naturalization. Even uncharged offenses, such as tax fraud or knowing underreporting of income, must be disclosed during naturalization. Misrepresentation doesn't require a conviction; the DOJ need only prove by "clear, unequivocal, and convincing" evidence, that the applicant concealed a material fact or made a misrepresentation that would have disqualified him from citizenship. Kungys v. United States, 485 U.S. 759, 1988.
Taxpayers should be cautious of advisors who sensationalize denaturalization risks to generate fees. However, for those with concerns, it would be proactively wise to engage qualified counsel. Prior tax filings and the Form N-400 could be reviewed to determine whether past tax issues exist, their materiality and potential impact on the naturalization matter.
Naturalized citizens who committed tax offenses, such as tax fraud, while green card holders face unique challenges. These include an unlimited statute of limitations for civil tax fraud, the limitations of amending tax returns in the hope of 'curing' the original fraud, and risks associated with the IRS' Voluntary Disclosure Program. All of these issues intersect with immigration consequences and create a complex legal landscape.
If a taxpayer files a fraudulent tax return, the IRS can assess taxes and penalties at any future time. The statute of limitations simply does not start to run. This means tax fraud committed as a green card holder can resurface in the future, many years after naturalization. For example, if a taxpayer fraudulently underreported income a decade ago, the IRS can impose back taxes, interest and a 75% fraud penalty.
Taxpayers filing an amended tax return to correct a fraudulent filing are often surprised to learn that this does not negate the original fraud or reinstate the three-year statute of limitations. The original fraudulent intent is what triggers the unlimited statute of limitations. A later correction will not simply erase it. This leaves taxpayers vulnerable to IRS assessments indefinitely, even after attempting to correct the fraudulent filing. In fact, filing amended returns could be a trigger and invite such scrutiny.
The IRS VDP is now quite strict. It permits taxpayers to disclose willful tax evasion, pay back taxes and penalties, and possibly avoid criminal prosecution. However, participation in the VDP requires a detailed narrative about the tax noncompliance. The details provided in the taxpayer's narrative could provide the DOJ with evidence for denaturalization if the fraud or tax evasion occurred prior to naturalization. For instance, if a green card holder intentionally underreported income and later naturalized without disclosing it, a VDP submission could be used to argue misrepresentation took place on the on the Form N-400. The VDP may protect against criminal tax charges, but it certainly is no shield against civil penalties or immigration consequences.
Notably, in June 2025, the IRS agreed to remove a controversial 'willfulness checkbox' from the form required to enter VDP, Form 14457, following advocacy from the National Taxpayer Advocate. The NTA argued that this checkbox, completed under penalty of perjury, deterred taxpayer participation because it caused them to risk self-incrimination. This change has not yet been implemented and is expected in the Form 14457's next revision. While this contemplated change reduces the explicit admission of willfulness, a narrative is still required. It must be very carefully prepared since the narrative could implicate taxpayers in denaturalization cases. Taxpayers should consult with tax and immigration attorneys to weigh VDP risks carefully, choosing advisors who will not exploit taxpayer fears and inflate the threats unnecessarily.
Involuntary Denaturalization And The Exit Tax
For naturalized citizens with significant assets or income or tax noncompliance, denaturalization carries an additional risk. These individuals can be treated as 'covered expatriates' upon denaturalization. As discussed in my previous Forbes article, covered expatriates involuntarily stripped of citizenship face a mark-to-market tax on unrealized gains and U.S. recipients of gifts or inheritances from them at any future date face significant transfer taxes.
Tax fraud often involves unreported income, suggesting significant assets, which could trigger harsh taxes upon denaturalization. Taxpayers should bear in mind that denaturalization is a lengthy process. It does not happen suddenly. The proceedings can take months or years since they involve civil or criminal court proceedings and often include appeals. This extended timeline provides taxpayers time to obtain tax planning and implement it. For example, depending on the facts, taxpayers can look at restructuring assets to eliminate or minimize exit tax liability if denaturalization looms.
Conclusion
Denaturalization and tax fraud or evasion are linked and clearly carry serious legal consequences. Those with concerns can take proactive steps to ascertain and mitigate their risks. Steps include consulting experienced tax and immigration attorneys who are reputable. They can help taxpayers carefully review tax filings and immigration records, and based on the findings, strategize and address errors. Advisors who exploit fears with exaggerated claims must be carefully avoided. Taxpayers should always remember that they can use the extended timeline of denaturalization proceedings to plan strategically.
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