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IRS Aims New Civil and Criminal Tax Enforcement Measures on High-Income Earners

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    The Internal Revenue Service (IRS) treats tax fraud very seriously. As of 2023, the agency has continued to enhance its ability to enforce tax laws and criminally punish those who intentionally and willfully evade their tax obligations through illegal means.

    New IRS enforcement efforts focus on high-income taxpayers and large partnerships that have faced declining audit rates in recent years. You may come under IRS scrutiny if you fall into these categories or have offshore financial accounts. It’s advisable to seek qualified tax advice, to proactively ensure compliance, and promptly respond to any IRS notices to minimize potential civil penalties and interest or criminal tax prosecution and restitution in egregious cases.

    Seek support and guidance from our experienced Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by calling (800) 681-1295 or by clicking HERE to book a reduced rate initial consultation.

    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 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, KovelCPAs, 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!

    Understanding the New Strategies Implemented by the IRS

    The IRS has unveiled a comprehensive tax enforcement initiative aimed at bolstering oversight on high-income earners, partnerships, and individuals with offshore bank accounts. This initiative is rooted in the agency’s commitment to restoring equity to the tax system and addressing the decline in audit rates experienced by affluent taxpayers in recent years.

    Targeting Wealthy Taxpayers with Outstanding Debts

    Central to the IRS’s crackdown are taxpayers reporting income exceeding $1 million and tax liabilities surpassing $250,000. The IRS has identified approximately 1,600 individuals meeting these criteria, collectively owing substantial sums in unpaid taxes. Specialized revenue officers will focus exclusively on collecting from these high-end delinquent accounts starting in fiscal year 2024, with potential unannounced field visits commencing next year. Fortunately, our Dual-Licensed Tax Lawyers & CPAs are prepared to offer crucial assistance to taxpayers who have been targeted by the IRS.

    Funding Boost and Reduced Audits for Low Earners

    This enforcement push follows a significant budget increase for the IRS through the Inflation Reduction Act. The added funding aims to cover the costs associated with pursuing tax evaders among the affluent while maintaining low audit rates for those earning less than $400,000 annually. Moreover, the IRS aims to curtail audits for moderate- and low-income taxpayers claiming the Earned Income Tax Credit (EITC).

    AI-Powered Audits for Large Partnerships

    The IRS is set to expand its examinations of large partnership tax returns, which have historically received limited scrutiny due to their complexity and resource-intensive nature. Audits of 75 of the largest U.S. partnerships, each with assets exceeding $10 billion, will commence by the end of September. Additionally, compliance notices will be sent to 500 partnerships in October for unexplained balance sheet discrepancies that may trigger audits. To streamline these complex audits, the IRS plans to employ artificial intelligence and machine learning to identify anomalies and target non-compliant returns more efficiently.

    Foreign Account Enforcement

    The IRS is also ramping up enforcement regarding failing to disclose foreign bank and financial accounts. Taxpayers with offshore accounts exceeding $10,000 must file a separate foreign bank account report (FBAR). The IRS has identified discrepancies in filings, signaling potential non-compliance among those with average account balances exceeding $1.4 million. Audits for serious FBAR offenders are slated for 2024, and the IRS is enhancing its capabilities to identify unreported foreign holdings.

    Potential Consequences for Tax Evaders

    Tax evaders can endure severe consequences for their misconduct. For instance, those who are convicted of tax evasion may face any of the following:

    Criminal Consequences

    Tax evasion can result in serious criminal tax consequences. When individuals or businesses deliberately underreport their income or engage in fraudulent activities to reduce their tax liability, they can face criminal tax charges. These charges can include tax evasion, which is a felony in all jurisdictions. Conviction of tax evasion may lead to imprisonment for a specified period, which can vary depending on the severity of the offense and the specific laws of the jurisdiction. Additionally, individuals found guilty of tax evasion may be required to pay fines, and the court can order them to forfeit assets gained through the illegal activities. In some cases, tax evasion can also result in the forfeiture of property used in the commission of the crime.

    Civil Penalties

    Tax evasion not only carries criminal tax penalties but also substantial civil penalties. These penalties are typically imposed by tax authorities like the Internal Revenue Service (IRS) in the United States. Civil penalties can include substantial fines, which can be calculated based on the amount of unpaid taxes, the severity of the evasion, and whether the evasion was willful or non-willful. In some cases, the fines can exceed the amount of the unpaid taxes. Tax authorities may also charge interest on the unpaid tax amount, increasing the overall financial burden on the evader.

    Back Taxes and Interest

    One of the direct financial consequences of tax evasion is the obligation to pay unpaid taxes along with interest. When tax evasion is detected, tax authorities will typically assess the evader’s actual tax liability based on available information. The evader is then required to pay the full amount of unpaid taxes, which can be substantial, especially if the evasion has occurred over several years. Additionally, interest is charged on the unpaid taxes from the date they were originally due. This interest accrues over time, significantly increasing the overall amount owed.

    Seizure of Assets

    Tax authorities may seize assets as a means to recover unpaid taxes and penalties. This can include bank accounts, real estate, vehicles, and other valuable assets owned by the individual or business involved in tax evasion. The seized assets may be sold for pennies on the dollar to satisfy the tax debt. The severity of asset seizure can vary depending on the jurisdiction and the extent of the tax evasion. In some cases, individuals may lose their homes or businesses because of tax evasion.

    Loss of Professional Licenses and Reputation Damage

    Professionals such as lawyers, accountants, doctors, architects, and financial advisors who engage in tax evasion can face severe consequences beyond financial penalties. They may lose their professional licenses or certifications. 

    Contact Our Firm Today for Help Dealing with Your Tax Issues

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

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