With the recent downtick in IRS audits, some taxpayers may be tempted to cheat on their tax returns as April 15, 2020 approaches. Don Fort, who has overseen several aggressive tax enforcement initiatives since his appointment as chief of the IRS Criminal Investigation division in 2017, has a strong message for those taxpayers: if you have engaged in tax fraud, “there is nowhere to hide” from IRS-CI. This is not an empty threat, with IRS-CI achieving a conviction rate of over 91% in 2019. That year, 1,500 taxpayers were investigated by IRS-CI for tax crimes – 848 of whom were sentenced, according to an IRS-CI report. With another filing season underway, our criminal tax defense attorneys remind taxpayers to heed Fort’s warning – or risk being targeted themselves.
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IRS Launching “12 New Examination Teams” to Conduct Tax Audits, Increasing Risk for Criminal Investigations
“They took their money offshore and hid around the world,” said Fort, “but we found them. They went on the dark web thinking that their actions were anonymous, but they weren’t, and we again found them.
“They now deal in cryptocurrency,” he continued, “again thinking this will make them anonymous, but our agents have once again proved that there is nowhere to hide. We will not stop in our pursuit [of tax offenders].”
These words, part of Fort’s “Message from the Chief,” make for a stark introduction to IRS-CI’s 2019 report. They’re also indicative of where IRS-CI is heading in 2020. In particular, the division has announced that it plans to focus on taxpayers who hold or have engaged in:
- Unreported cryptocurrency transactions. The IRS argues that virtual currency is frequently used to facilitate tax evasion, money laundering, and organized crime, leading to the creation of an international task force dedicated to combating “the growing threat to tax administrations posed by cryptocurrencies and cybercrime.” Cryptocurrency tax regulations have tightened in recent years, resulting in more taxpayers being summonsed, audited, fined, and/or criminally investigated. You should talk to a Bitcoin tax lawyer for help reporting cryptocurrency to the IRS correctly if you have a history of noncompliance.
- Abusive micro-captive transactions. The IRS has recently stepped up its enforcement efforts around abusive micro-captives, which repeatedly earn a spot on the IRS’ annual “Dirty Dozen” list. In September 2019, the IRS offered a settlement for micro-captive insurance schemes, as we wrote about here. An update last month revealed that almost 80% of its recipients accepted the offer – and that “the IRS is establishing 12 new examination teams… to open audits related to thousands of taxpayers in coming months.” That final point cannot be emphasized strongly enough: the IRS is creating a dozen new teams of agents to conduct thousands of additional audits in 2020 and beyond.
- Offshore financial accounts. As longtime readers will recognize, foreign bank accounts have been an IRS enforcement priority for years, spurred partly by the creation of the Foreign Account Tax Compliance Act (FATCA) in 2010. In 2019, the IRS hinted at expanding its presence in tax havens like Singapore, Dubai, and the Netherlands. If you have offshore bank accounts in these or other jurisdictions, you could be required to file an FBAR (FinCEN Form 114), file Form 8938 (Statement of Specified Foreign Financial Assets), report the income on Schedule B (Interest and Ordinary Dividends) of your tax return, and/or file additional forms and schedules to meet all disclosure requirements. Our international tax attorneys are highly experienced in this area of tax law and are ready to help you comply effectively.
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While numbers of tax audits and criminal investigations may have declined, IRS-CI’s conviction rates have remained steady – and with 12 new audit-focused groups of agents now forming, the peril for taxpayers is only increasing. The danger is especially great for offshore account holders, cryptocurrency users, and small business owners, all of whom are likely candidates for an IRS tax audit.
If you require IRS audit representation, criminal tax representation, or tax help with issues like FBAR and FATCA, look to the Tax Law Office of David W. Klasing for zealous, 24-hour support this tax season. We can prepare and file your tax returns, represent you in an IRS audit, and fight to minimize civil or criminal tax penalties. Contact us online to set up a reduced-rate consultation, or call the Tax Law Office of David W. Klasing at (800) 681-1295 to speak with an IRS tax attorney today.
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