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Federal tax crime enforcement vs. California enforcement

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    California tax crimes are similar to those of the Federal Government. However, in California there are additional statutes that make failure to file, disclose income, or pay a misdemeanor, even without a showing of intent or willfulness.

    The Franchise Tax Board (FTB) has in recent years stepped up their criminal investigation section. The criminal investigation section have identified their mission as being to:

    • Identify, investigate, and effect prosecution of tax evasion, fraud, and employee misconduct.
    • Encourage compliance with the California income tax laws, and
    • Maintain the public’s trust through publicity.

    The FTB currently has 42 special agents working in the criminal investigation division. The Criminal Investigation Division maintains case inventories consisting of failure to file, and false income tax return cases; refund fraud cases, and joint task force operation cases. Joint task force operation cases can involve local, state, and/or federal agencies. Crimes typically investigated and prosecuted with income tax violations include identity theft, embezzlement, grand theft, money laundering, workers’ compensation insurance fraud, employment taxes and labor crimes, medical fraud, and “capping.” Capping is soliciting business for another, and becomes a crime when the business objectives include fraud and deception (recruiting patients for unnecessary medical procedures, for example).

    The FTB states that the Special Agents perform most of the duties associated with a “peace officer” role. They write and serve search warrants, gather and analyze evidence, interview witnesses, interrogate suspects, make recommendations to prosecute, serve arrest warrants, assist prosecutors through all stages of the prosecution, track and apprehend fugitives, and monitor terms of probation. While the FTB Special Agent force is currently relatively small, the FTB has showed intent to pursue criminal matters with vigor.

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