The Internal Revenue Service (IRS) performs criminal investigations in order to uncover and prosecute individuals or entities suspected of committing criminal tax violations. There are multiple reasons why an IRS criminal investigation may be commenced.
For instance, such an investigation may be performed if there is reason to believe that a person or business has evaded tax obligations by underreporting income, overstating deductions, or claiming credits they are not entitled to. Further, an investigation may serve to expose a fraudulent scheme or identify a falsified document. In general, IRS criminal tax investigations are very serious as the criminal investigations division of the IRS has a 90% conviction ratio. Taxpayers should understand the potential reasons for such investigations so that they may take the proper course of action to eliminate the risk of facing criminal tax prosecution.
If you believe you may be facing penalties for a tax violation, seek assistance from our Dual-Licensed Tax Lawyers & CPAs at the Tax Law Offices of David W. Klasing by dialing (800) 681-1295 or clicking here to schedule a reduced rate initial consultation.
Potential Reasons Why You May Be Criminally Investigated by the IRS
There are multiple reasons why the government may criminally investigate a taxpayer. The following are all common examples of why IRS criminal tax investigations are performed:
Fraudulent Schemes
A criminal tax investigation may be performed if the IRS suspects that you engaged in fraudulent schemes. For example, parties may participate in illegal tax shelters or execute complex transactions that are designed to hide income. These schemes aim to deceive the IRS and evade tax obligations. Accordingly, the IRS actively investigates anyone who partakes in these schemes.
Willful Failure to File or Pay
A willful failure to file or pay your taxes can also trigger an IRS criminal tax investigation. Such an investigation will serve to address the noncompliance and determine appropriate penalties. An intentional disregard for your tax obligations can result in the assessment of serious penalties, including fines and prison time.
Submission of False or Fraudulent Documents
Furthermore, you may be the subject of a criminal investigation if you submit false or fraudulent documents to the IRS. Providing fabricated documents to the IRS in an attempt to limit your tax obligations can undermine the integrity of the tax system and may lead to devastating consequences. Financial records like receipts are some of the most frequently falsified documents.
If you have been wrongfully accused of providing fraudulent documents to the IRS, then our Dual-Licensed Tax Lawyers & CPAs will help form your defense. We will communicate with the government on your behalf and fight to dismiss any unjustified charges.
Money Laundering and Offshore Tax Evasion
Money laundering and offshore tax evasion are common practices that give rise to IRS criminal investigations. For example, the government will likely investigate someone who attempts to conceal income by placing unreported funds into offshore accounts. The IRS collaborates with other agencies around the world to identify individuals and entities who perpetrate such schemes.
Involvement in Illegal Activities
Finally, you may be criminally investigated by the IRS if you participate in illegal activities like organized crime, drug trafficking, and fraud. When financial transactions associated with these activities come under scrutiny, the government can initiate a criminal tax investigation to uncover tax violations connected to the illegal proceeds at issue.
Can You Go to Jail for Tax Crimes?
Yes, you can go to jail if you are convicted of tax crimes. In order to be convicted of a tax crime, the government must be able to prove that you willfully evaded your tax obligations. Honest mistakes made on your tax returns will not warrant criminal penalties.
If you have been accused of a tax crime, having experienced legal representation by your side is important. Our legal team can help build your defense and ensure you do not face any unwarranted criminal penalties.
What Are the Other Penalties for Tax Crimes?
In addition to prison sentences, several other penalties may be levied against those who commit tax crimes. For example, the following are all potential penalties that may be assessed:
Fines
Individuals convicted of tax crimes can be subject to significant monetary fines. The amount of the fine can vary based on several factors, such as the amount of taxes evaded, the duration of the evasion, and any aggravating factors that may be present.
Restitution
The court may also order defendants to pay restitution, which involves reimbursing the government for the taxes owed, including any interest and penalties. Restitution aims to restore the financial harm caused by the tax crime at issue.
Civil Penalties
Civil penalties in tax crime cases refer to monetary fines. These penalties are distinct from criminal penalties and are intended to enforce compliance with tax laws.
There are multiple examples of civil penalties that defendants may face. For instance, a taxpayer may face a failure to file penalty if they do not file their tax return by the appropriate deadline. This penalty is typically a percentage of the unpaid tax amount and may increase over time.
Furthermore, a taxpayer may face an accuracy-related penalty for seeking unsupported deductions or credits. The penalty is generally 20% of the underpayment resulting from misconduct at issue.
Asset Forfeiture
Asset forfeiture is another type of penalty that may be imposed in tax cases. The government may seize assets such as bank accounts, real estate, vehicles, or other property obtained through or used in connection with a defendant’s crime.
Probation
Instead of or in addition to jail time, the court may impose a period of probation as part of the sentencing. During probation, the individual must comply with certain conditions, such as regular reporting to a probation officer, payment of taxes owed, and restrictions on activities or travel.
Loss of Professional Licenses
Certain tax crimes, particularly those committed by professionals such as accountants or tax preparers, can result in the loss of professional licenses. This can have significant career implications. Those who lose their professional licenses may be restricted from working in their respective fields.
Damage to Reputation
Finally, being convicted of a tax crime can have long-lasting consequences for your reputation. Such a conviction can impact personal and professional relationships. Further, it may lead to social stigmas and troubles in various other aspects of life.
After Being Accused of a Tax Violation, Call Our Law Firm for Help
Get support from our Dual-Licensed Tax Lawyers & CPAs by calling the Tax Law Offices of David W. Klasing at (800) 681-1295.
Removing the Risk of Facing Criminal Tax Prosecution
If you have failed to file a tax return for one or more years or have taken a position on a tax return that could not be supported upon an IRS or state tax authority audit, eggshell audit, reverse eggshell audit, or criminal tax investigation, it is in your best interest to contact an experienced tax defense attorney to determine your best route back into federal or state tax compliance without facing criminal prosecution.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) 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 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.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
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- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRStaxauditor’sss findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
Questions and Answers for Criminal Tax Representation
- When tax defense counsel parallels tax crime investigation
- Guilty of tax obstruction by backdating documents?
- To be found guilty of tax obstruction must a person actually be successful in impeding the IRS’s functions?
- Help! The Document I Gave the IRS Had False Information
- Tax crime aiding or assisting false return IRC §7206(2)
- What is the crime known as tax obstruction § 7212?
- What is the difference between tax perjury and tax evasion?
- What is the tax crime commonly known as tax perjury?
- What is a Klein Conspiracy?
- Increased possibility of civil action in IRS investigation
- Am I Guilty of Tax Evasion if the Law is Vague?
- What happens if the IRS thinks I committed tax crimes?
- What are ways to defend against a tax evasion charge?
- Difference between criminal tax evasion and civil tax fraud
- What accounting method does the IRS use for tax fraud
- Can I Change Accounting Method to the Accrual Method
- What is the willfulness requirement for tax evasion?
- I didn’t know I committed tax fraud. Can I get off?
- Concealed assets from IRS. Can I avoid tax evasion charges
- How government proves I willfully engaged in tax evasion
- What is the venue or court where a tax crime case is heard?
- Must the IRS prove tax crimes beyond a reasonable doubt?
- Is it a crime to make false statements to the IRS?
- Will the IRS overlook my tax evasion if it’s minor?
- Failed to tell IRS about my nominee account
- Audit risk with cash based business transactions
- How to defend a client charged with tax evasion
- Is it tax evasion if I didn’t file income tax return?
- Government says I attempted to evade my taxes. Now what?
- I forgot to pay my taxes or estimated tax. Is this a crime?
- Government proof I “willfully” failed to pay taxes
- 5 Ways to Respond to Tax Evasion Charges
- Being audited after using a tax professional
- Rules for what an IRS agent can do while investigating me
- How tax preparers, attorneys and accountants are punished
- How the IRS selects tax crime lead for investigation
- How does the IRS prosecute suspected tax crimes?
- Does IRS reward informant leads for suspected tax crimes?
- How the government proves deficiency in a tax evasion case
- Do prior tax crimes factor into new IRS tax convictions?
- Requesting conference before investigative report is done
- Requesting conference after IRS Special Agent Report
- What are my rights during an IRS criminal investigation?
- Avoid prosecution for tax crime with voluntary disclosure?
- Defense tactics that make it hard for to prove willfulness
- How a tax attorney can stop your criminal tax case?
- What can you generally tell me about tax crimes?
- Continuing filing requirement with investigation pending
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- What the IRS includes in indictment for tax case
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- Failure to keep records or supply information
- Failure to make a return, supply information, or pay tax
- What is attempting to evade payment of taxes?
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- Does overstating deductions constitute tax evasion?
- Is it tax evasion if my W-4 contains false statements?
- IRC §7201 attempt to evade vs. common-law crime of attempt
- What are the penalties for Spies tax evasion?
- How government proves a taxpayer attempted tax fraud
- What is a tax that was “due and owing.”
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- What is a proffer agreement and what are the risks?
- Why to have an attorney to review a proffer agreement
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- Limited use immunity from proffer agreements
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