The U.S. government treats tax crimes very seriously. Several methods can be employed to catch tax evaders. Furthermore, those who are caught can face multiple types of civil and criminal penalties for their misconduct.
For instance, Edward Scott Finn is a business owner in Maryland who was caught underreporting income in an attempt to limit tax obligations. For his actions, Finn is now facing a prison sentence of 16 months and has been ordered to pay restitution for the tax loss he caused. Upon being arrested, he erased and reset his cell phone in an attempt to disrupt the investigation against him. However, his actions did not prevent him from being convicted.
If you are facing (or merely at risk of facing) potential penalties for a tax violation, seek help from our Dual-Licensed Tax Attorneys & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
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 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, 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!
Edward Scott Finn is a former Lieutenant with the Prince George's County Police Department and owner of Edward Finn Inc. (EFI). In 2023, he was sentenced to 16 months in prison for tax evasion. Finn has also been ordered to pay restitution in the amount of $367,765 and will serve two years of supervised release after his prison term is completed.
Finn operated EFI as a private company and used off-duty law enforcement officers to provide security services to various businesses. He admitted to underreporting over $1.3 million of EFI income on his individual tax returns from 2014 to 2019. In his attempts to minimize his tax obligations, Finn created false business expenses and deposited checks payable to EFI into personal or non-EFI bank accounts. Furthermore, he also used business funds for personal expenses such as a boat and a car.
On April 22, 2021, federal agents arrived to execute a search warrant at Finn's residence. Upon their arrival, Finn erased and reset his cellphone. Still, his actions did not protect him from the severe consequences of his actions.
In order to avoid facing penalties similar to those levied against Finn, you should attempt to address any tax issues you have quickly and efficiently. If you suspect that you may have committed a tax crime, then our Dual-Licensed Tax Lawyers & CPAs will help evaluate your case and determine the appropriate next steps.
There are multiple methods that the U.S. government can utilize to catch tax evaders. The following are some of the more common methods that are employed:
Financial institutions, employers, and other entities are required to report certain financial transactions and income to the Internal Revenue Service (IRS). This includes forms like W-2s for employees, 1099s for various types of income, and 1098s for mortgage interest. The IRS compares this reported information with individuals' tax returns in order to identify discrepancies and possible violations.
The IRS also uses data analytics to uncover instances of tax evasion. They compare taxpayer data to statistical norms and identify anomalies that might indicate misconduct. For instance, red flags may be raised if someone reports significantly lower income compared to their peers in similar professions or income brackets.
Many tax evaders are captured through whistleblowers. A whistleblower is an individual who exposes illegal activities within an organization, typically within a corporation or other type of business entity.
The IRS has a program that encourages individuals with knowledge of tax evasion to report it. Whistleblowers can receive monetary rewards if their information leads to the recovery of unpaid taxes. This program has been very effective in uncovering complicated tax evasion schemes.
Tax audits are another method used to catch tax evaders. The IRS conducts audits to examine taxpayers' financial records and verify that they have accurately reported their income and claimed deductions. Audits can be conducted randomly or targeted based on specific criteria, such as unusually high deductions or suspicious activity.
Finally, tax evaders are also uncovered through offshore account reporting. The U.S. government has implemented initiatives like the Foreign Account Tax Compliance Act (FATCA), which requires foreign financial institutions to report information about accounts held by U.S. taxpayers. This reporting helps the government identify taxpayers who may be hiding income and assets in offshore accounts.
Many types of evidence can be used to convict tax evaders. For example, the prosecution may rely on any of the following:
Financial records are a very common form of evidence used against defendants in tax evasion cases. The government may introduce a defendant's bank statements, canceled checks, and credit card statements in order to demonstrate discrepancies between reported income and actual income. These records can show deposits, expenses, transfers, and other financial activities that indicate unreported income or fraudulent deductions.
The defendant's filed tax returns and related forms, such as W-2s, 1099s, or Schedule C (Profit or Loss from Business), can be essential pieces of evidence. The prosecution may compare these documents with other financial records to identify inconsistencies, false deductions, or unreported income.
When demonstrating a defendant’s misconduct, the government may also obtain records from third parties like banks, employers, and clients. These records can reveal unreported income, undisclosed assets, or fraudulent transactions.
Additionally, expert witness testimony may be used to convict tax evaders. Experts such as forensic accountants and tax professionals can explain complicated financial matters to demonstrate how specific misconduct occurred.
Finally, the government may also present witnesses who can testify about a defendant's tax evasion scheme. Potential witnesses include employees, business partners, clients, or others with knowledge of a defendant's actions.
Get help from our Dual-Licensed Tax Attorneys & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.