How successful is the IRS in litigating tax fraud schemes?

Civil Audits vs. Criminal Investigations
March 26, 2014
Bad Economy? The Gov Turns Up the Heat on Tax Evaders
March 26, 2014

How successful is the IRS in litigating tax fraud schemes?

Date: 02/08/12

Topic: Criminal Tax Representation

The short answer is that the IRS is very aggressive and more often than not successful when it investigates and chooses to prosecute those it uncovers as involved in promoting or participating in tax fraud schemes.

The IRS has incarcerated 75.9% (in 2009), 71.1% (in 2010), and 76.8% (in 2011) of those it investigated for being engaged in tax fraud schemes. Roughly, a tax fraud scheme is a scheme to avoid taxation that is promoted to the public as legal but in reality is an illegal investment vehicle, because it attempts to avoid or minimize applicable federal tax though non legal means. What is conspicuous by its absence in the previous report, however, is that these figures do not include those cases where the IRS has civilly settled with the taxpayer without resorting to criminally prosecuting truly guilty taxpayers. This is partly good news to taxpayer. In the past, our firm has successfully settled cases with the IRS in the taxpayer’s favor where criminal prosecution was a possibility but a purely civil result was obtained often without civil fraud penalties.

Once exposed by the IRS as one promoting tax fraud schemes, the IRS may very well make it public. This page, for example, lists a number of recent promoters who were convicted. If you have been involved with a tax fraud scheme that you know in your heart is fraudulent you should consider “coming clean” before the IRS comes knocking on your door at which point criminal prosecution exposure is much harder and riskier to mitigate.