Awards & Recognition
It is not a crime to owe taxes. However, failing to file tax returns when they come due or withhold tax payments is a crime.
When facing high-risk tax audits from agencies like the IRS, CDTFA, EDD, or FTB, certain red flags, such as destroyed records, underreported income, badges of fraud, or unfiled tax returns (both intentional and negligent), can intensify the examination and may lead to high-risk eggshell and reverse eggshell tax audits (see below). As such, Santa Barbara residents and businesses must be aware of potential criminal tax violations and the signs indicating that they might be under a more rigorous investigation by the IRS’s Criminal Investigation Division (CID). This is especially so when the taxpayer has a history of Intentionally not filing tax returns and is now under audit and thus fears criminal tax prosecution.
Therefore, acting quickly and proactively by consulting an experienced dual-licensed Santa Barbara Failure to File Taxes Attorney and CPA is in your best interests. Each case requires a unique solution, which our knowledgeable, award-winning, unfiled tax attorneys are here to help you find. At the Tax Law Offices of David W. Klasing, we can help you prepare records and file your returns wholly and promptly before any problems occur. If you have already missed the filing deadline without requesting an extension and are facing potential civil or criminal tax penalties, we can work to mitigate the damage and bring you back into compliance. For a reduced-rate initial consultation, call our Santa Barbara tax office at (510) 764-1020 or contact the Tax Law Office of David W. Klasing online here.
What Happens After the IRS Identifies Me as a Non-Filer in Santa Barbara?
Initial Notices
- Once a non-filer has been identified, computer-generated notices are mailed to the taxpayer at their last known address.
- If you have moved since your last tax return was filed, you will have no idea what type of hornets’ nest you will be dealing with.
Collection Division Involvement
- If no response is received to the notices, the case is assigned to the Collection Division of the IRS.
- The Automated Collection System (ACS) within the Collection Division may eventually attempt to contact a taxpayer by telephone to seek delinquent returns.
Revenue Officer Assignment
- If ACS cannot secure the delinquent returns, a Revenue Officer may be assigned to contact the taxpayer at their home or business.
- The Revenue Officer can determine if the taxpayer has committed fraud. A referral may be made to the Criminal Investigation Division (CID) for possible prosecution if fraud is suspected.
Santa Barbara residents must promptly address any notices from the IRS to avoid escalating enforcement actions. As a non-filer, you would be wise to withhold any information from a trusted tax preparer initially due to the threat of criminal tax prosecution and the preparer’s lack of privilege. Instead, an attorney should be engaged before approaching the tax professional.
By choosing the Tax Law Offices of David W. Klasing, you can ensure that the tax attorney, trusted tax professional, and client first enter into a three-party agreement wherein the tax attorney retains the trusted tax professional to prepare the delinquent returns. This way, any information the trusted tax professional learns in the preparation of the returns, which is not disclosed on the returns themselves, will fall under the attorney-client privilege and thus can be protected from subsequent disclosure by the trusted tax professional. This strategy provides a critical layer of protection and ensures your case is handled with confidentiality and expertise.
How Long Can the IRS Pursue Unfiled Taxes in Santa Barbara?
Typical Audit Timeframe
- The IRS typically has three years to audit a filed return within a civil context. If your returns are never filed, the statue of limitation never begins to run and thus, theoretically the IRS or state government could audit every return that was not filed.
Extended Audit Period
- The audit period automatically extends to six years if twenty-five percent or more of income has been omitted or understated where an audit is conducted of an open return within the three year civil statute.
Continuing Offense Doctrine
- The six-year timeframe remains open if the taxpayer engages in “willfully attempting in any manner to evade or defeat any tax or the payment thereof.”
- Example: If the taxpayer leaves the U.S. as a fugitive, the statute of limitations is tolled.
Difficulty in Pinpointing the Tax Crime
- Determining the exact moment the tax crime occurred can be challenging:
- Did it happen with the filing of a false return?
- Does it continue when you lie about it or conceal the unfiled or false return?
At the Tax Law Offices of David W. Klasing, we have developed a national practice as to federal income tax issues administered by the IRS, so no matter what state you are from, if you are presently out of compliance and have not filed several years’ worth of returns, we can help bring you back into tax compliance. It is sometimes said that while an accountant’s focus is accuracy, an attorney’s focus is advocacy. Our dual-licensed Santa Barbara Non-Filer Assistance Tax Attorneys and CPAs expertise and training combine both fields: We place a premium on both accuracy and client advocacy.
A high level of care and accuracy is required when preparing and filing a delinquent tax return, and we have the skills and knowledge to keep you in compliance. In addition to having years of experience as a dually licensed Tax Lawyer and CPA in Santa Barbara, our founder and principal attorney, David W. Klasing, possesses decades of experience as a former auditor in public accounting and has represented clients in federal (IRS) and California (FTB, CDTFA (BOE), EDD) audits for nearly 30 years, enabling our tax team to navigate the audit process with precision and skill. David is secretary of the California State Bar Association Tax Procedure and Litigation Committee. He is also Vice Chair of the Orange County Bar Association Tax Section and a Member at Large of CalCPA Committee on Taxation.
Is Not Filing Tax Returns a Felony?
The short answer to this question is that it depends on the situation. If you took deliberate, intentional steps to avoid the assessment and payment of income taxes by not filing one or more of your tax returns, you could be charged with a crime because you acted “willfully.” The federal statute that makes non-filing a criminal offense, namely 26 U.S. Code § 7203, explicitly and exclusively focuses on willful failures to file, as opposed to failures based on negligence or sheer forgetfulness on the taxpayer’s part.
26 U.S. Code § 7203 states that willful failure to file a tax return is generally a misdemeanor offense. However, felony charges may be filed involving violations of 26 U.S. Code § 6050I – a statute explicitly dealing with tax returns “relating to cash received in trade or business.” Criminal penalties for failure to file a tax return, outlined under § 7203, provide a maximum fine of $25,000 (or, for corporations, $100,000), which may be imposed in place of or in addition to a prison sentence of up to one year. In felony cases, the maximum sentence increases to five years.
Contact Our Santa Barbara Office Today
Whether you are dealing with domestic or offshore issues like omitted taxable sources of offshore income coupled with a failure to file FBAR reports, you may be eligible for either the IRS’s full-blown domestic or offshore voluntary disclosure program or the IRS’s expat or domestic streamlined voluntary disclosure program. In either case, coming forward about your errors or fraudulent filings and disclosing through these programs will ordinarily result in more minor fines and a nearly guaranteed pass on criminal tax and information reporting prosecution, provided an audit or criminal investigation into your behavior has not already begun, and you utilize the correct program.
We skillfully navigate the complexities of various federal and California state voluntary disclosures, including domestic, offshore, CDTFA, and FTB voluntary disclosures, streamlined procedures, and delinquent FBAR and international information return submission procedures. As long as a taxpayer in Santa Barbara who has willfully committed tax avoidance (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the federal tax noncompliance through a domestic or offshore voluntary disclosure with the help of our Santa Barbara Foreign Account & Offshore Taxable Income Tax Compliance Attorney before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and simultaneously often receive a break on the civil penalties that would otherwise apply.
For a reduced-rate initial consultation, call our Santa Barbara tax office at (510) 764-1020 or contact the Tax Law Office of David W. Klasing online here. Please note that our San Francisco office is by appointment only.
Our Santa Barbara Office is Conveniently Located at:
7 W Figueroa St #300,
Santa Barbara, CA 93101
805-200-4053
