Awards & Recognition
One of the Best Tax Fraud Attorneys in Los Angeles
The Internal Revenue Service is extraordinarily aggressive when it comes to monitoring and enforcing taxpayer compliance with federal tax laws. If the IRS determines that a Los Angeles taxpayer, whether an individual or business entity, has in any way willfully failed to adhere to the Internal Revenue Code, there can be serious negative outcomes, including civil penalties and criminal prosecution, which could result in prison time.
If you have failed to file tax returns, have underreported your income, or have taken other actions that could constitute tax evasion, you are in urgent need of a Los Angeles tax fraud attorney. Assisted by knowledgeable CPAs and armed with decades of trial experience, the tax defense attorneys at the Tax Law Office of David W. Klasing can defend you in court, negotiate with the IRS, protect your constitutional rights, mitigate your penalties, and bring you back into compliance with the Internal Revenue Code. Contact the Tax Law Office of David W. Klasing online immediately to arrange a reduced-rate consultation or call our Los Angeles tax office at (310) 492-5583 for help today.
What is Tax Fraud (Tax Evasion)?
The terms “tax fraud” and “tax evasion” are used interchangeably. Put simply, tax fraud or tax evasion occurs when a taxpayer engages in a willful, or intentional, attempt to avoid paying his or her full tax liabilities. Tax fraud can involve any type of state or federal taxes – frequently income taxes, sales taxes, and payroll taxes (FICA taxes), which include Medicare and Social Security taxes. Tax fraud can occur domestically or offshore and is engaged in by individuals and corporations alike.
Types of Tax Frauds
Every year, the IRS publishes a list called the “Dirty Dozen,” which is an annual compilation of some of the most common tax scams. While the Dirty Dozen lists vary slightly from year to year, tax scams featured often include:
- Concealment of income and assets in offshore bank accounts, which must be reported by filing FinCEN Form 114 or the “FBAR” (Foreign Bank Account Report)
- Falsification of income in order to claim tax credits, often the Earned Income Tax Credit (EITC)
- Other improper claiming of tax credits, such as the fuel tax credit or research tax credits
- Padding of tax deductions
- Tax return preparer fraud
- Use of abusive tax shelters
- Hidden Bank Accounts
- Hidden Source of Income or Assets & evading payment in collection action
Examples of tax crimes include, but are not limited to, the following offenses, which are highlighted in the IRS Tax Crimes Handbook:
- 26 U.S. Code § 7201 – Attempt to evade or defeat tax (evasion of assessment, evasion of payment)
- 26 U.S. Code § 7206 – Fraud and false statements
- 26 U.S. Code § 7207 – Fraudulent returns, statements, or other documents
- 26 U.S. Code § 7202 – Willful failure to collect or pay over tax
- 26 U.S. Code § 7203 – Willful failure to file return, supply information, or pay tax
How Does the IRS Detect Fraud?
Indications, or “badges,” of tax fraud are frequently discovered when the IRS is reviewing a taxpayer’s income tax returns or other tax documents. For example, the taxpayer may have claimed an unusually high number of tax credits, or may have failed to file one or more returns altogether. In other cases, missing records or contradictory, non-credible statements become apparent to an examiner while he or she is conducting an audit.
If badges of fraud are uncovered, the Civil Examination Division (CED) of the IRS, which oversees civil audits, may refer a taxpayer’s case to the Criminal Investigation Division (CID, or IRS-CI). In this way, what begins as a relatively routine examination can spiral into an eventual indictment. Other badges of tax fraud include:
- Exclusively or primarily making cash transactions
- Intermingling business and personal assets or income
- Losing or destroying important financial records
- Making frivolous tax arguments, such as arguments of unconstitutionality
Criminal and Civil Penalties for Tax Fraud
Civil and/or criminal penalties may be imposed for tax fraud, depending on the situation. The criminal penalties for tax fraud include incarceration, fines, IRS restitution, and in many cases, supervised release, which is similar to parole or probation.
According to the United States Sentencing Commission, “The average sentence length for tax fraud offenders was 17 months.” Various tax crimes have different maximum sentences – for instance, five years for tax evasion, five years for willful failure to pay over tax, and three years for willfully making and subscribing a false return (i.e. fraud and false statements). The respective maximum fines for these offenses are $100,000, $10,000, and $100,000 – notwithstanding any additional IRS restitution that may be ordered.
Even if a taxpayer is not charged with tax crimes, he or she may nonetheless face harsh civil penalties for tax fraud. For example, 26 U.S. Code § 6663 (imposition of fraud penalty), specifically 26 U.S. Code § 6663(a), establishes a devastating civil fraud penalty “equal to 75% of the portion of the underpayment… attributable to fraud.” There are, however, various defenses to imposition of the civil fraud penalty, such as the taxpayer’s ability to prove that he or she had “reasonable” cause to underpay his or her tax liabilities.
Los Angeles IRS Fraud Lawyers and CPAs Handling Tax Evasion Cases
If you or one of your family members has been arrested for tax evasion, is undergoing an IRS criminal investigation, has been chosen to undergo an IRS tax audit, or has otherwise been contacted by the IRS, the time to seek legal help is now – before the situation escalates further. Even the civil penalties for tax fraud are severe, making swift and effective action vital. For a reduced-rate initial consultation, contact the Tax Law Office of David W. Klasing online, or call our Los Angeles IRS fraud attorneys at (310) 492-5583 today.
