San Francisco IRS Tax Fraud Defense Attorney + CPA
At the Tax Law Office of David W. Klasing, our San Francisco tax fraud lawyers have more than 20 years of experience defending taxpayers charged with, or merely with exposure for, domestic and offshore tax evasion, return preparer fraud, willful failure to file tax returns, and other felony and misdemeanor tax offenses. Our award-winning team of zealous and proficient tax professionals features skilled tax defense attorneys with proven track records, supported by a team of dedicated CPAs functioning as Kovel Accountants. In addition to his many years of legal experience, San Francisco tax attorney David W. Klasing also brings to the table more than a decade of experience as a public auditor, enabling our criminal tax lawyers to develop stronger, more effective defense strategies for the clients we serve. If you are concerned about an audit or criminal investigation related to IRS fraud, contact us online to schedule a reduced-rate consultation, or call our appointment only San Francisco office at (415) 287-6568 today.
What is IRS Tax Fraud?
“Tax fraud” is a broad term that can be applied to many types of actions, or failures to act, on the part of a taxpayer. What these actions share in common is that all are performed willfully, for the purpose of enabling the taxpayer to avoid paying his or her full tax liability to the federal government. Put simply, IRS tax fraud is any intentional act taken by a taxpayer to circumvent federal tax laws.
Under the broad scope of this definition, there are numerous ways that tax fraud can occur. For example, under 26 U.S. Code § 7201 or IRC § 7201, a person commits tax evasion when he or she “willfully attempts in any manner to evade or defeat any tax imposed” by federal law.
While the terms “tax fraud” and “tax evasion” are often used interchangeably, there are also many other offenses that constitute tax fraud. For instance, many cases of tax fraud in San Francisco involve employers who willfully fail to collect or pay over FICA taxes (also known as “payroll taxes” or “trust fund taxes”), which violates 26 U.S. Code § 7202, constituting payroll tax fraud. Other examples of tax fraud include:
- 26 U.S. Code § 7203 – Willful failure to file return, supply information, or pay tax
- 26 U.S. Code § 7206 – Fraud and false statements
- 26 U.S. Code § 7207 – Fraudulent returns, statements, or other documents
How Does the IRS Detect Fraud?
Using sophisticated and sensitive technology, with an increasing emphasis on data analytics, the IRS has developed numerous methods for detecting tax fraud. However, speaking generally, most tax fraud investigations are initiated because a tax audit has revealed one or more red flags, known as “badges of fraud,” that tax fraud may have occurred.
Internal Revenue Manual (IRM) 25.1.2 covers this subject exhaustively. The manual identifies no fewer than six different categories for indicators of fraud, including badges of fraud related to income, allocations of income, expenses and deductions, books and records, methods of concealment, and even a taxpayer’s personal conduct during an IRS tax audit. Some of the more common examples of badges of fraud include:
- Failing to file a federal income tax return
- Failing to pay taxes
- Failing to maintain the required financial records
- Failing to report all sources of income
- Failing to report bank accounts, whether located in or outside the U.S.
- Having major expenses that are out of proportion to the taxpayer’s reported income
- Improperly claiming deductions or tax credits
- Making false statements, whether on tax documents or during an audit
Penalties and Jail Time for Tax Evasion
There are two basic types of tax penalties: civil penalties, which may be applied in criminal or non-criminal cases, and criminal penalties, which may be imposed only if a taxpayer is convicted of, or pleads guilty to, committing a tax crime, such as tax evasion. It is important for tax defendants to understand that, far from being mutually exclusive, these penalties are often imposed together in criminal cases, with civil penalties heaping additional costs atop court-imposed fines and fees and restitution.
Both sets of penalties can be devastating – particularly if imposed together. The civil fraud penalty is 75% of the additional federal taxes assessed plus any interest that has accumulated back to the original filing deadline of the return at issue, while the maximum criminal penalties for each offense are set forth in the corresponding federal criminal tax statutes. For example, under 26 U.S. Code § 7201, the maximum sentence for tax evasion is five years in prison, per count, with a potential maximum criminal fine as high as $100,000.
Sentencing judges have some discretion over the length of an offender’s sentence, within the established guidelines. According to the United States Sentencing Commission (USSC), in fiscal year 2017, “More than half of tax fraud offenders were sentenced to imprisonment only (59.1%). The average sentence length for tax fraud offenders was 17 months.” In addition to criminal fines, the court may also order the offender to pay restitution to the IRS to offset the tax loss to the federal government. If the offender was a licensed professional, he or she could face serious sanctions, potentially resulting in the loss of one’s career or business for acts of moral turpitude.
San Francisco IRS Fraud Lawyers and CPAs Handling Tax Evasion Charges
Being charged with any crime is a frightening and stressful experience. When that crime involves an agency of the federal government, like the Internal Revenue Service, the accused faces devastating consequences, which may include fines, restitution, incarceration in federal prison, and years of supervision once the prison term ends. If you have been charged with tax fraud in San Francisco, or have been chosen for auditing and are worried about the potential for an IRS criminal investigation, it is imperative that you contact a highly experienced IRS fraud defense lawyer in San Francisco for legal assistance.
To arrange a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or, to speak with one of our attorneys in person, call our San Francisco tax office at (415) 287-6568. Please note that our San Francisco location is by appointment only.