From the Tax Law Offices of David W. Klasing - When does the IRS Perform Criminal Tax Investigations?

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Tax Law Offices of David W. Klasing, PC

Jun 29, 2023, 06:37 ET

IRVINE, Calif., June 29, 2023 /PRNewswire/ -- The Internal Revenue Service (IRS) performs criminal investigations in order to uncover and prosecute individuals or entities suspected of committing criminal tax violations. There are multiple reasons why an IRS criminal investigation may be commenced.

Why you should use an Attorney to represent you in an audit

For instance, such an investigation may be performed if there is reason to believe that a person or business has evaded tax obligations by underreporting income, overstating deductions, or claiming credits they are not entitled to. Further, an investigation may serve to expose a fraudulent scheme or identify a falsified document. In general, IRS criminal tax investigations are very serious as the criminal investigations division of the IRS has a 90% conviction ratio. Taxpayers should understand the potential reasons for such investigations so that they may take the proper course of action to eliminate the risk of facing criminal tax prosecution.

If you believe you may be facing penalties for a tax violation, seek assistance from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295 or clicking here to schedule a reduced rate initial consultation.

Potential Reasons Why You May Be Criminally Investigated by the IRS

There are multiple reasons why the government may criminally investigate a taxpayer. The following are all common examples of why IRS criminal tax investigations are performed:

Fraudulent Schemes

A criminal tax investigation may be performed if the IRS suspects that you engaged in fraudulent schemes. For example, parties may participate in illegal tax shelters or execute complex transactions that are designed to hide income. These schemes aim to deceive the IRS and evade tax obligations. Accordingly, the IRS actively investigates anyone who partakes in these schemes.

Willful Failure to File or Pay

A willful failure to file or pay your taxes can also trigger an IRS criminal tax investigation. Such an investigation will serve to address the noncompliance and determine appropriate penalties. An intentional disregard for your tax obligations can result in the assessment of serious penalties, including fines and prison time.

Submission of False or Fraudulent Documents

Furthermore, you may be the subject of a criminal investigation if you submit false or fraudulent documents to the IRS. Providing fabricated documents to the IRS in an attempt to limit your tax obligations can undermine the integrity of the tax system and may lead to devastating consequences. Financial records like receipts are some of the most frequently falsified documents.

If you have been wrongfully accused of providing fraudulent documents to the IRS, then our Dual-Licensed Tax Lawyers & CPAs will help form your defense. We will communicate with the government on your behalf and fight to dismiss any unjustified charges.

Money Laundering and Offshore Tax Evasion

Money laundering and offshore tax evasion are common practices that give rise to IRS criminal investigations. For example, the government will likely investigate someone who attempts to conceal income by placing unreported funds into offshore accounts. The IRS collaborates with other agencies around the world to identify individuals and entities who perpetrate such schemes.

Involvement in Illegal Activities

Finally, you may be criminally investigated by the IRS if you participate in illegal activities like organized crime, drug trafficking, and fraud. When financial transactions associated with these activities come under scrutiny, the government can initiate a criminal tax investigation to uncover tax violations connected to the illegal proceeds at issue.

Can You Go to Jail for Tax Crimes?

Yes, you can go to jail if you are convicted of tax crimes. In order to be convicted of a tax crime, the government must be able to prove that you willfully evaded your tax obligations. Honest mistakes made on your tax returns will not warrant criminal penalties.

If you have been accused of a tax crime, having experienced legal representation by your side is important. Our legal team can help build your defense and ensure you do not face any unwarranted criminal penalties.

What Are the Other Penalties for Tax Crimes?

In addition to prison sentences, several other penalties may be levied against those who commit tax crimes. For example, the following are all potential penalties that may be assessed:

Fines

Individuals convicted of tax crimes can be subject to significant monetary fines. The amount of the fine can vary based on several factors, such as the amount of taxes evaded, the duration of the evasion, and any aggravating factors that may be present.

Restitution

The court may also order defendants to pay restitution, which involves reimbursing the government for the taxes owed, including any interest and penalties. Restitution aims to restore the financial harm caused by the tax crime at issue.

Civil Penalties

Civil penalties in tax crime cases refer to monetary fines. These penalties are distinct from criminal penalties and are intended to enforce compliance with tax laws.

There are multiple examples of civil penalties that defendants may face. For instance, a taxpayer may face a failure to file penalty if they do not file their tax return by the appropriate deadline. This penalty is typically a percentage of the unpaid tax amount and may increase over time.

Furthermore, a taxpayer may face an accuracy-related penalty for seeking unsupported deductions or credits. The penalty is generally 20% of the underpayment resulting from misconduct at issue.

Asset Forfeiture

Asset forfeiture is another type of penalty that may be imposed in tax cases. The government may seize assets such as bank accounts, real estate, vehicles, or other property obtained through or used in connection with a defendant's crime.

Probation

Instead of or in addition to jail time, the court may impose a period of probation as part of the sentencing. During probation, the individual must comply with certain conditions, such as regular reporting to a probation officer, payment of taxes owed, and restrictions on activities or travel.

Loss of Professional Licenses

Certain tax crimes, particularly those committed by professionals such as accountants or tax preparers, can result in the loss of professional licenses. This can have significant career implications. Those who lose their professional licenses may be restricted from working in their respective fields.

Damage to Reputation

Finally, being convicted of a tax crime can have long-lasting consequences for your reputation. Such a conviction can impact personal and professional relationships. Further, it may lead to social stigmas and troubles in various other aspects of life.

After Being Accused of a Tax Violation, Call Our Law Firm for Help

Get support from our Dual-Licensed Tax Lawyers & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.

Removing the Risk of Facing Criminal Tax Prosecution

If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.

Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!

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