Santa Barbara IRS Tax Fraud Defense Combo Attorney & CPA
Tax fraud charges are extremely serious and demand urgent legal action. Even a misdemeanor fraud conviction can result in jail time, costly criminal fines, and civil fraud penalties, in addition to the suspension or loss of professional licenses. The consequences are magnified for a felony, which may be punished with 3 to 5 years of prison time per count (multiple count convictions are common).
If you are being investigated for income tax evasion or other forms of tax fraud, you must act swiftly to protect your constitutional rights and mitigate the damage. Consult with an experienced Santa Barbara Criminal Tax Defense Attorney from the Tax Law Office of David W. Klasing right away. Contact us online to schedule a reduced rate consultation or call our Santa Barbara office 24 hours at (805) 200-4053.
What is the IRS Definition of Tax Fraud?
Fraud is an attempt to wrongfully deprive someone of money, goods, or other possessions. There are many ways that a person can commit fraud, with some common examples including credit card fraud, insurance fraud, and welfare fraud.
When a taxpayer makes deliberate attempts to avoid paying his or her rightful share of state or federal taxes, he or she engages in tax fraud. Under this broad definition, tax fraud can assume many forms. For example, tax fraud can involve the deliberate misclassification of employees as independent contractors, which constitutes employment tax fraud; the willful nondisclosure of reportable foreign accounts or income generating offshore assets, constituting offshore tax evasion and offshore information reporting fraud or the failure to report some of your earnings to the IRS, constituting income tax fraud.
Acting intentionally, or “willfully,” is an important component of tax fraud. When a taxpayer violates the law by acting negligently or carelessly, he or she may face civil penalties, but does not have criminal liability due to the absence of willfulness. Proving that the taxpayer acted willfully is a key part of any criminal tax investigation or effort to prosecute.
Note: As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax prosecution, the taxpayer can be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously receive a break on the civil penalties that would otherwise apply. It is imperative that you hire an experienced and reputable tax defense attorney to take you through the voluntary disclosure process. As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results. See our Testimonials to see what our clients have to say about us!
How Does the IRS Discover Tax Evasion or Other Crimes?
Some taxpayers may be lulled into a false sense of security by recent IRS budget cuts. Do not let the downtick in IRS audits mislead you: there are numerous ways the IRS can detect tax fraud, even that which occurs on a seemingly minor scale.
Most frequently, fraud is discovered when the IRS conducts a tax audit. For example, the IRS may select a tax return for auditing if the return is scored poorly by IRS algorithms like the Discriminant Inventory Function System (DIF). If a subsequent IRS audit uncovers indicators of tax fraud, or “badges of fraud” (listed here), the auditor will likely halt the examination and refer the case to the IRS Criminal Investigation division (IRS-CI) for closer analysis.
See our Audit Representation Q and A Library
Depending on its findings and the strength of the available evidence, IRS-CI may refer the case to the United States Department of Justice (DOJ) for criminal prosecution. There are various crimes that the government may charge against a taxpayer, with some common examples including:
- Attempting to interfere with the administration of internal revenue laws, i.e. “tax obstruction” (26 U.S. Code § 7212)
- Willful failure to collect or pay over tax, such as payroll taxes (26 U.S. Code § 7202)
- Willful failure to file returns or pay taxes (26 U.S. Code § 7203)
- Willfully aiding or assisting a false return, i.e. “tax preparer fraud” (26 U.S. Code § 7206(2))
- Willfully making and subscribing a false return, i.e. “tax perjury” (26 U.S. Code § 7206(1))
The charging document is known as an “indictment” or “information,” depending on the nature of the case. Alleged tax offenders are typically prosecuted by the Department of Justice (DOJ) Tax Division, which works closely with IRS-CI to secure evidence and build cases. However, as the DOJ explains in Title 6 of the Justice Manual (Criminal Tax Case Procedures), “In limited categories of cases, the Tax Division authorizes the IRS to refer certain matters… directly to the United States Attorney’s Office for prosecution” (Section 6-4.122, United States Attorney’s Grand Jury Investigations and Prosecutions).
What Are the Civil or Criminal Penalties for Tax Fraud?
Most federal tax crimes are classified as felonies, though several charges, such as tax obstruction, are lesser offenses known as misdemeanors. As such, the criminal penalties for tax fraud can be harsh.
One of the most common yet serious charges is tax evasion, which carries a longer maximum sentence than many other tax crimes. Under 26 U.S. Code § 7201, the maximum sentence for tax evasion is up to five years in federal prison per count. For other tax offenses, the maximum sentences are as follows:
- Failure to Collect or Pay Over Tax – Up to 5 years per count (felony)
- Failure to File or Pay Taxes – Up to 1 year per count (misdemeanor)
- Return Preparer Fraud – Up to 3 years per count (felony)
- Tax Obstruction – Up to 1 year per count (misdemeanor)
- Tax Perjury – Up to 3 years per count (felony)
The judge may also order the taxpayer to pay criminal fines, IRS restitution for tax losses caused, and/or assorted civil penalties. For example, 26 U.S. Code § 7201 allows judges to impose criminal fines of up to $100,000, which increase to $500,000 for corporations. The civil fraud penalty is equivalent to 75% of the taxpayer’s liability.
Santa Barbara IRS Tax Fraud Defense Combo Lawyer + CPA Serving Southern California
If you are at risk of being charged with tax crimes, have been questioned by IRS agents regarding another taxpayer, or are concerned about criminal tax exposure resulting from an IRS tax audit, you should talk to a tax defense lawyer in Santa Barbara right away. For a reduced-rate consultation, contact the Tax Law Office of David W. Klasing online, or call our Santa Barbara office 24/7 at (805) 200-4053.
Please note meetings at our Santa Barbara location are by appointment only.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. With end-to-end encryption, strong passwords and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here