If you suspect that the Internal Revenue Service (IRS) is scrutinizing your financial activities, it’s crucial to act promptly and strategically. An IRS criminal tax investigation can be daunting, stressful, and downright frightening. Most investigated taxpayers aren’t even aware of what is at issue until they receive a surprise visit from the IRS Criminal Investigation Division (IRS-CI). IRS tax investigations can arise for various reasons: unintentional mistakes and accountant errors, intentionally unreported income & overstated deductions, or the use of fraudulent, non-compliant accounting practices / cooked books. Understanding the appropriate steps to take can significantly influence the outcome. Here’s a comprehensive guide to navigating this challenging situation effectively.
Recognize the Signs of an IRS Investigation
Identifying early indicators of an IRS criminal tax investigation can empower you to respond appropriately. Common signs include receiving unexpected letters or phone calls from the IRS, requests for detailed information regarding your financial records, site visits to your home or place of business for in-person interviews, and formal audit notices. These signs often indicate that the IRS is examining your tax returns closely and may be building a case against you. IRS audits can vary in their degree of scrutiny. They might be as straightforward as correspondence-based clarifications or as involved as on-site evaluations where IRS agents sift through financial records at your home or business. No matter the audit’s nature, it’s essential to act promptly. Sometimes, the IRS might utilize a Fraud Technical Advisor (FTA) during audits. Their role is to spot potential fraud indications. Discovering such signs can lead the FTA to recommend a comprehensive IRS criminal tax investigation unit review. Considering the criminal investigations’ formidable 90% conviction rate in cases they opt to investigate, having knowledgeable dual-licensed civil and criminal tax defense attorneys & CPAs on your side is paramount.
Understand the Nature of IRS Criminal Tax Investigations
Criminal IRS investigations are multi-year endeavors characterized by their focus and detail-oriented approach. IRS agents meticulously examine tax returns, source documents, bank records, and other financial information to build a case. They often operate behind the scenes, analyzing data before making their presence known. By the time you become aware of an IRS criminal tax investigation, the IRS may already be nearly completed or finished with their investigation having already contacted third-party witnesses or taken other significant actions to solidify their case. Consequently, if you are confronted with a criminal tax investigation or are worried about a high-risk audit potentially becoming an eggshell or reverse eggshell audit, you are wise to seek to understand the potential gravity of your circumstances. This is why immediate action is essential to mitigate potential civil and criminal tax consequences. Criminal tax investigations are not only thorough but also strategic, aiming to build a robust case that stands up in court. Understanding this process helps in recognizing the severity of the situation and the importance of swift, informed responses.
Remain Calm and Organized
Panic can lead to hasty decisions that may worsen your situation. Instead, take the following steps to maintain control and effectively manage the investigation:
Start by gathering all relevant financial documentation, including tax returns, receipts, bank statements, and any correspondence with the IRS. Carefully review your filed tax returns to identify any discrepancies or errors that may have triggered the investigation. Maintaining detailed records of all interactions with IRS agents, including dates, times, and the nature of discussions, is also essential. Organized documentation not only aids in your defense but also demonstrates your willingness to cooperate and resolve any issues transparently.
Pro Tip:
The first time that most people unfortunately realize they are, or more likely, have been, criminally investigated for tax crimes is when they are randomly approached by two agents from the IRS criminal investigation division wearing guns & badges and carrying handcuffs. Quite often this is when your first leaving your home for the office in the morning while you are still kind of mentally out of it. Their common approach is to try and encourage you to clear up what they state is most likely a simple misunderstanding regarding your taxes. One agent questions you & the other writes down everything that is said. They will often read you a Miranda like warning stating that something along the lines of “anything you say can and will be used against you in a possible subsequent criminal tax prosecution and you have a right to have an attorney present”.
The ONLY APPROPRIATE course of action is to identify yourself and be cordial and respectful and state, “I am more than happy to cooperate with your investigation, but I require an attorney to be present before speaking to you. Resist their attempts to get you to speak without an attorney present. They are likely to say something like, if you were innocent, you would be speaking with us right now. Don’t take the bait. Nothing you say is likely to help the situation. Immediately write down as much of the conversation as you can remember and seek qualified criminal tax defense counsel immediately.
Arrests for tax crimes are rare, but the same advice applies. You have nothing to say until your attorney is present. Their only goal is to get you to lie to incriminating questions they already know the answer too. This makes prosecuting you much easier. It helps convince a jury that that that you were lying on the returns at issue and continued to lie when questioned on the prior returns.
Lying to a federal agent is a crime on its own and can be used as the last affirmative act to criminally prosecute tax crimes even outside of the ordinary 5- or 6-year statute of limitations.
Avoid Common Pitfalls
When facing an IRS tax audit or criminal tax investigation, it’s crucial to avoid specific actions that could jeopardize your defense and escalate your situation. Here’s what you should NOT do:
Do Not Participate Unnecessarily
You are within your rights to refuse to participate in an interview. Participating without proper legal guidance can lead to inadvertently incriminating yourself.
Avoid Incriminating Yourself
If faced with potentially incriminating questions, invoke your constitutional 5th Amendment rights. Do not answer questions that could be used against you without consulting your attorney.
Do Not Handle Communications Alone
Let your tax counsel handle all interactions with IRS agents. This ensures that your rights are protected and that no inadvertent disclosures weaken your position.
Do Not Ignore Subpoenas
If the IRS decides to subpoena you to appear for an interview, do not ignore it. Failing to comply can result in federal court’s contempt power, leading to additional legal complications typically involving fines or practically unlimited jail time until you comply.
Avoid Sharing Sensitive Information
Do not share sensitive personal or financial information with IRS agents without the presence of your attorney. This protects you against potential misuse of your information.
Don’t Rely on Your Original Tax Preparer During an IRS Criminal Tax Investigation
When facing the daunting prospect of a high-risk tax audit or criminal tax investigation, your first instinct might be to turn to the person who prepared your taxes. While this may seem logical, it is rarely the best course of action. Tax audits and criminal tax investigations demand a level of legal and strategic expertise that tax preparers are not equipped to provide. Engaging a dual-licensed civil and criminal tax defense attorney and CPA is critical to protecting your rights, liberty, and financial future. Here’s why:
Risks of Exposing Sensitive Information
- Conversations with tax preparers are not protected by confidentiality. If summoned in a legal proceeding, they are obligated to disclose any incriminating information you shared or face a federal court’s contempt power themselves.
- Tax preparers under scrutiny often attempt to shift the blame for any noncompliance onto their clients to safeguard their license and reputation, leaving you vulnerable to harsher penalties or criminal tax charges. This even more likely where they may have coached you on the tax compliance problems at issue. They are thus very likely to be the first witness to be called against you in any subsequent criminal tax prosecution.
Lack of Legal Protection and Confidentiality
- Only an attorney-client relationship can provide the protection you need you require during a high-risk tax audit or criminal tax investigation. The attorney-client privilege and the attorney work-product doctrine ensure that any information or admissions you provide while seeking legal counsel remain confidential.
- These legal protections are critical when handling sensitive matters, such as criminal tax investigations, to prevent damaging evidence from being used against you.
Superior Legal Expertise
- A tax attorney can utilize Kovel letters to extend the attorney-client privilege to consulting accountants, allowing for confidential collaboration while preserving your legal protections.
- Attorneys specialize in advocacy, which is indispensable when disputes escalate to questions of tax law or criminal intent. While accountants focus on accuracy, attorneys craft robust defenses designed to challenge the IRS’s evidence and protect your rights.
Take Immediate Action
Time is of the essence when you merely suspect you may be under criminal tax investigation. Implement the following steps without delay to protect your interests and build a strong defense:
Contact our dual-licensed IRS tax audit attorneys CPAs at the Tax Law Offices of David W. Klasing, whose combined expertise is invaluable in navigating complex tax laws and IRS civil and criminal tax procedures. Once engaged, stop all correspondence with the IRS; let your attorney handle all communications to ensure that your rights are protected and that no inadvertent disclosures weaken your position. Follow the legal advice provided by our legal and financial advisors meticulously to avoid missteps that could compromise your defense. Starting this process immediately allows for timely mitigation of risks and the effective construction of a robust defense strategy, leveraging the time available to address all aspects of the high-risk audit or criminal tax investigation comprehensively.
Suppose you are already under the microscope of the IRS. In that case, we can help you take the proper steps to mitigate the financial damages to your bottom line, and we excel at keeping overly aggressive taxpayers out of prison. Consequently, to date, we have never had a straight civil or high risk audit client criminally prosecuted for tax crimes even where our clients were clearly facing eggshell & reverse eggshell audits on multiple prior occasions. To schedule your first appointment with a dual licensed Tax Attorney and CPA at a reduced rate today, call (888) 564-1409 on schedule online here.
If You Believe to Be Under High Risk Audit or Criminal Tax Investigation by the IRS, Contact the Tax Law Offices of David W. Klasing Today
At The Tax Law Offices of David W. Klasing, we specialize in high-risk IRS audits, including eggshell and reverse eggshell audits and criminal tax investigations. We offer unparalleled expertise to guide you through this process. Our team comprises dual-licensed civil and criminal tax defense attorneys and CPAs, enabling us to deliver comprehensive support and ensure your defense strategy is both strategic and effective. Led by David W. Klasing, who proudly maintains an “A+” rating from the Better Business Bureau and an impeccable 10.0 rating on AVVO, our commitment to premier tax audit defense representation remains unwavering. Unlike typical legal service providers, our firm serves as a beacon of excellence in federal and California tax defense, boasting a remarkable history of successes under the guidance of some of the nation’s most exceptionally trained tax professionals. In a landscape where over one million attorneys and more than half a million CPAs are active, only approximately 24,000 individuals hold both licenses, an estimated 3,000 have also earned a Master’s in Taxation. David W. Klasing is part of this elite group, utilizing his unparalleled education and experience to fiercely advocate for our clients in their civil and criminal tax defense challenges. Additionally, we consistently manage a blend of civil and potentially criminal tax cases simultaneously to keep the IRS uncertain and guessing.
Call us today at (888) 310-3543 or complete our online contact form to secure a reduced-rate initial appointment. To make our services as accessible as possible, we’ve introduced a convenient scheduling option, where clients can reserve a four-hour slot at any of our satellite locations, and David W. Klasing, an instrument-rated private pilot, will personally travel in the firm’s fast and efficient Cirrus SR22 to any of our satellite offices to meet with you. We have designed this service to benefit our clients, with no additional travel expenses added to your bill.
