Many hard-working Americans who always pay their taxes may be shocked by the amount that the IRS projects goes unpaid. In recent years, there has been increasing focus on the “tax gap,” or the difference between the amount estimated to be due in taxes each year and the amount actually paid. As the tax gap has gotten more and more press, it has caused anger and frustration amongst individuals and businesses that work hard to file their returns properly and pay their taxes, perhaps with the help of a Dual Licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing.
The alarming news for non-compliant taxpayers is that recent increased lobbying to elected officials over this tax gap has led to increased funding for IRS enforcement action to be taken against those who do not pay what they owe, as well as new initiatives micro-targeted at particular areas where enforcement has been seen as lacking. For this reason, if you have unpaid taxes, failed to file your returns or filed incomplete or willfully evasive tax returns in recent years, now is the time to reach out to us to take the proactive corrective actions necessary to mitigate the financial damage as much as possible and avoid an audit or potential criminal tax investigation / prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed returns coupled with affirmative evasion of payment) 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!
Explanation of the Tax Gap
The IRS will occasionally release a report on the tax gap, the most recent of which was released in 2019 and covered calendar tax years 2011–13. For those years, the average annual gross tax gap was reported to be $441 billion at the time that taxes were due, which amounts to slightly over 16 percent of the projected total tax liability. Because the IRS eventually recovered $60 billion through voluntary late payments and enforcement activities, the average annual net tax gap for these years dropped in the ensuing years to about $381 billion, or about 14 percent of total tax liability, by the time the above report was released.
The report also delved further into the specific types of activity, or inactivity, driving the tax gap. The non-filing tax gap was estimated at $39 billion, the underreporting tax gap was $352 billion and the underpayment tax gap was $50 billion. In terms of the various different types of taxes, the estimated gross tax gap for individual income tax was estimated at $314 billion, the tax gap for corporate income tax was $42 billion, the tax gap for employment tax $81 billion, and the tax gap for estate and excise tax combined was $3 billion.
One issue in dealing with the tax gap has been the funding gap within the IRS itself forcing it to cut enforcement activities. As one analyst at the Tax Policy Center put it, “Congress has cut the IRS budget by about 20 percent in constant dollars since 2010. At the same time, Congress is asking the IRS to do far more with less. For example, Congress gave the agency a major role in administering the 2010 Affordable Care Act, the Foreign Account Tax Compliance Act, and other legislation that expanded IRS responsibilities. Since 2010, though, Congress has cut IRS funding even as the IRS confronted a surge in stolen identity refund fraud and, recently, over a billion cyberattacks yearly. Without adequate resources, the IRS suspended efforts to pursue non-filers and suppressed collection notices and levy notices because it couldn’t handle the phone calls and correspondence they prompted. All of these steps resulted from constrained funding and, collectively, they significantly shrank the IRS enforcement footprint.”
How the Tax Gap Might Affect You
As calls have increased for the IRS to deal with the tax gap, the agency has used these reports to micro-target specific areas where a certain type of behavior is contributing to the tax gap at a very high rate. For example, according to the Tax Policy Center, nearly half of the amount of individual income that went underreported, about $125 billion, comes from underreporting “by pass-through business filers such as sole proprietors, farmers, and those earning rental, royalty, partnership, and S-corporation income. They are prime targets for stepped-up enforcement.” If you fall into one of these categories and you have failed to report your income and assets correctly on past returns, it is vital that you reach out to a skilled Tax Attorney like those at the Tax Law Offices of David W. Klasing before the agency begins an investigation or audit into your behavior. Once an audit or criminal tax investigation has begun, mitigating the damage will become much more difficult (if not impossible) and you will likely end up facing high fines and even criminal tax charges if your behavior is deemed to have been willful.
If You Have Contributed to the Tax Gap by Failing to Report or Pay What You Owe, Reach Out to Our Experienced Tax Attorneys Right Away
Recently, the IRS has announced a step-up in criminal tax enforcement in several areas. There is every reason to think that, as the agency recovers from the economic toll of the pandemic, enforcement will increase even more so in an effort to ensure the tax gap does not widen due to the unforeseen circumstances of 2020. The best thing you can do if you are behind on taxes or have submitted false or misleading returns is to reach out to a battle-tested tax professional like those at the Tax Law Offices at David W. Klasing. Once we have assessed the particulars of your situation, we can help decide which solution is right for you, from amending your returns to a voluntary disclosure program to something else. To set up a consultation, call us today at (800) 681-1295.
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento. During the COVID-19 pandemic, our staff are working from home, but have full virtual meeting capability.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office at (800) 681-1295 and request a GoToMeeting if you are an existing client.
Questions and Answers on Unfiled Back Taxes
- What are the common issues that non-filers face?
- Risk of audit after filing delinquent prior year returns
- Can substitute return deficiency be discharge in bankruptcy
- Substitute return modified by subsequent delinquent return?
- Do I file every delinquent return for each missing year?
- How does the IRS identify non-filers?
- How important is it to the government that I didn’t file?
- Delinquent tax return criminal prosecution likelihood
- Will I get a refund on a delinquent tax year?
- What happens after enforcement action has begun?
- Should I use an attorney, EA or a CPA to represent me when I re-enter the tax system?
- Why do people drop out of the tax system?
- What happens after the IRS identifies me as a non-filer?
- IRS has not previously filed substitute returns
- Tax attorney representation when re-entering tax system
- How will the government force me to file returns?
- What penalties can IRS impose on delinquent tax filings?
- What should I do to re-enter the tax system?
- Can Law Office of David W. Klasing help me re-enter system?
- Will tax collection taken by authorities affect my credit
- I concealed bank accounts from the government
- Forgetting or failing to file tax return
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
- Federal criminal code crimes that apply to tax issues
- Penalty for making, subscribing, and filing a false return
- CID special agent’s report for criminal prosecution
- What is the discovery process in a criminal tax case?
- What the IRS includes in indictment for tax case
- What is the hardest element of a tax crime to prove?
- IRS methods of gathering evidence to prove tax crime
- What does a grand jury do in IRS tax crime prosecution?
- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
- What is income tax evasion and how is it punished?
- What is attempted income tax evasion?
- What is the crime of failure to pay tax? What is punishment
- Crime of making or subscribing false return or document
- Criminal Investigation Division investigation tactics
- Tax crimes related to employment tax forms and trust funds
- Tactics to defend or mitigate IRS criminal tax charges
- How the IRS generates leads about suspected tax crimes
- What is the crime ”evasion of assessment” of tax?
- Specific examples of “attempting” to evade tax assessment
- What is the so-called Spies evasion doctrine?
- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
- What is evasion of assessment for tax liability?
- Is evasion of assessment different from evasion of payment
- Does the IRS have a dollar threshold for tax fraud?
- What is the IRS burden of proof for tax fraud convictions?
- Are Tax Laws Constitutional?
- What is the source of law that defines tax evasion?
- Does section 7201 create two distinct criminal offenses?
- Does tax evasion definition include partnership LLC
- What if I helped someone else evade taxes?
- Is it illegal to overstate deductions on my tax return?
- Is it illegal to conceal bank accounts from the IRS?
- Do later losses justify prior deductions?
- Common reasons the IRS and DOJ start investigations
- What is the Mens Rea component of tax crimes?
- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
- Why enter into a proffer agreement?
- Limited use immunity from proffer agreements
- Difference between civil and criminal fraud allegations
