In its 2018 Data Book, the IRS reported investigating nearly 2,900 taxpayers for suspected tax crimes, such as tax evasion (26 U.S. Code § 7201), willful failure to file a return (26 U.S. Code § 7203), or filing a false return (26 U.S. Code § 7206(1)). In an effort to use its resources efficiently and reduce tax fraud effectively, the IRS looks for specific red flags when processing the approximately 140 million returns that are filed annually by U.S. taxpayers. While a single flag might not trigger an examination, the risk of a tax audit – or worse, an IRS criminal investigation – increases exponentially if the IRS detects patterns or clusters of tax errors. If you are worried about a criminal tax investigation or civil IRS tax audit, take swift action to protect yourself by consulting an experienced tax defense professional, like the IRS tax attorneys and CPAs at the Tax Law Office of David W. Klasing. With a nationally renowned record spanning more than 20 years in all areas of civil, criminal, and international tax representation, we know how to limit your criminal tax exposure and mitigate the penalties you face.
IRS agents who conduct tax return audits are known as “revenue agents.” Revenue agents are trained to look for certain indicators or “badges” of fraud, which the IRS lists exhaustively in Internal Revenue Manual (IRM) 25.1.2 (Recognizing and Developing Fraud), available here. While IRM 25.1.2 provides valuable information about many subjects (including return preparer fraud, fraud development procedures, and various IRS investigative techniques), most pertinent to this discussion is Section 184.108.40.206, which provides dozens of examples of IRS indicators of tax fraud. These examples are divided into six subsections, as follows:
As this article should make clear, there are countless actions the IRS may perceive as being indicative of tax fraud – particularly if these actions reoccur across multiple tax years and/or coincide with other indicators of fraud. The Department of Justice takes an aggressive approach to prosecuting suspected tax offenders, demanding an equally aggressive defense strategy.
If you are worried about a tax audit or criminal investigation, you need the guidance of a proven and tested trial attorney with a record of obtaining favorable case outcomes. There are numerous advantages to having criminal tax defense counsel parallel to a criminal IRS investigation. To arrange a confidential, reduced-rate consultation with a criminal tax defense attorney serving Northern and Southern California, contact the Tax Law Office of David W. Klasing online, or call (800) 681-1295 today.
An offshore or domestic voluntary disclosure may be the answer as long as you are knocking on the governments door before they start to knock on yours!
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Warning signs an audit has gone criminal
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Also, we’ve expanded our offices! In addition to our offices in Irvine and Los Angeles, the Tax Law Offices of David W. Klasing now have offices San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland and Sacramento.
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Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here: