Oxnard, CA Tax Attorney & CPA

Eggshell Audits

As mentioned, eggshell audits frequently occur when the taxpayer intentionally and materially understates revenue, overstates expenses, or claims credits they are not entitled to, but the auditor is unaware of these issues at the outset of the audit. From the IRS’s perspective, the audit is routine, and no tax fraud is initially suspected. The taxpayer and their representative, ordinarily view such an audit as a minefield. Seemingly innocuous questions could result in information that alerts the auditor to the underlying potentially criminal noncompliance.

There are a wide variety of issues that can create an eggshell audit. Generally, any material error on a tax return that significantly increases tax liability is of concern. Even an aggressive position on a tax return can become a criminal tax exposure especially as tax law changes over time. If you doubt the legitimacy of a previous tax position and you are being audited, consult our dual-licensed Tax Lawyers & CPAs for advice.

Eggshell audits can be survived. Our firm routinely deals with them, and we have not had a client go to jail over an eggshell audit yet. The IRS rarely completes an audit without discovering noncompliance. If a taxpayer lies, makes criminal tax admissions, or otherwise gets caught intentionally covering up known tax fraud, the consequences of those actions can be catastrophic.

We counsel taxpayers to respond accurately to IRS requests while only providing the minimum amount of information required. Our dual-licensed Tax Lawyers & CPAs can assist with developing and reviewing responses to the IRS to help ensure excess & potentially incriminating information is minimized. Additionally, our dual licensed Tax Attorney & CPAs can intervene if potentially criminal tax noncompliance is at issue and assist with keeping the audit purely about money where possible. Preventing a referral for a criminal tax investigation is our main goal in an eggshell audit. Engaging an dual licensed Criminal Tax Defense Attorney & CPA as early as possible to represent you in an audit is your best chance at keeping the audit purely civil and avoid a criminal tax investigation followed by criminal tax charges, prosecution and jail time.

Reverse Eggshell Audits

An eggshell audit reverses when the party withholding information is the IRS. This scenario results in a potential clandestine criminal tax investigation taking place under the guise of a civil audit. If the taxpayer is not notified of an ongoing criminal tax investigation, they will not ordinarily hire criminal tax defense counsel and consequently their unprepared and unqualified representatives, often the original preparer, rarely adequately prepare a defense and are thus prone to revealing incriminating information that can be used to prosecute the taxpayer and potentially the preparer as well. The original preparer also has a conflict of interest where they are likely to bury the taxpayer to protect their own reputation with the taxing authorities while trying to not go to jail themselves. The IRS benefits from these types of audits because criminal tax evidence can be collected while the taxpayer, and often their tax preparer representing them in the audit, are none the wiser. Taxpayers and their representatives are also more open and forthcoming if they believe that the audit results from mere random selection as opposed to actual suspicion of tax evasion. Therefore, our specially trained dual-licensed Tax Lawyers & CPAs are highly beneficial to any audit – even those involving seemingly harmless audits. There may be more to the audit than meets the eye, and only a specially trained an experienced dual licensed criminal tax defense attorney & CPA will be in the absolute best position to recognize the possible red flags.

Audits that are initially routine can turn into a reverse eggshell audit very quickly and be easily missed by the untrained eye. Formally, an IRS agent is required to halt any audit and refer it for criminal tax investigation if clear indications of fraud are found. However, whether something constitutes a clear indication of tax fraud is subjective, and auditors often continue a civil audit while collecting criminal tax evidence. In such cases, your attorney can spot the warning signs and advise on possible legal options including the potential to block illegally collected evidence.

If you or your business has been subjected to a reverse eggshell audit that led to a criminal tax investigation, you may be able to fight against the admission of some evidence at a trial. Since civil audits must end when tax fraud is indicated, any evidence collected after that point could be subject to a motion to suppress. Your dual licensed Criminal Defense Tax Attorney & CPA can evaluate if this option fits your situation.

Regardless of whether you know a reverse eggshell audit is occurring or not, full compliance with the IRS is expected. If you are concerned about incriminating yourself, you should speak with our dual-licensed Tax Lawyers & CPAs. We can help you provide responsive answers to the IRS while avoiding incrimination or offering excessive information. Reverse eggshell audits are exceptionally risky. Engaging a dual licensed Tax Lawyer & CPA early in the audit is your absolute best opportunity to mitigate those potentially life & career altering risks. Don’t forget that tax fraud is an act or moral turpitude that can cost you your career on top of your liberty and net worth.

Fighting Penalties for Failure to Pay or File Taxes

The U.S. Tax Code or Internal Revenue Code (IRC) requires U.S. citizens and residents to report, and pay taxes on, domestic and foreign income, no matter where the income was originally earned. Failure to file an income tax return can trigger a failure-to-file penalty if the return is not submitted by (1) the standard deadline, or (2) the extended deadline, in cases where the taxpayer has requested an extension. Additionally, the IRS can impose a separate failure-to-pay penalty. If the IRS has applied failure-to-file or failure-to-pay penalties against you, turn to the Tax Law Office of David W. Klasing for assistance reentering compliance with either requirement.

Get Back into Tax Compliance without Facing Criminal Tax Prosecution in Oxnard with our dual-licensed Voluntary Disclosure Attorneys and CPAs

If you’re in or near Oxnard and realize that you could face criminal tax prosecution over a history of blatantly cheating on your tax returns if discovered, voluntarily disclosing this history by knocking on the IRS’s door before they bang down your door, offer a nearly guaranteed method towards resolution without facing criminal tax prosecution.

Our Oxnard, CA Voluntary Disclosure Tax Attorneys + CPAs navigate the complexities of various federal and California state voluntary disclosures, including domestic, offshore, CDTFA (BOE), and FTB voluntary disclosures, streamlined procedures, and delinquent FBAR and international information return submission procedures. As long as a taxpayer 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 or California state tax non-compliance through a domestic or offshore voluntary disclosure before the IRS or the California state agency 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. We deal with: