CRIMINAL TAX PROBLEMS

Tax Fraud

Tax fraud is a serious crime, but it is not as rampant as many filers believe. In 2021, just 370 offenders were sentenced. Compared with previous years, fraud is down over 38%. However, if you are accused of tax evasion or fraud, it is still a serious accusation, even if you’re unlikely to be convicted.

Note: If the IRS is investigating you for a tax crime, contact us immediately to speak with a tax attorney.

Who Cheats on Their Taxes the Most?

Unfortunately, it is often middle-income earners or businesses that engage in fraud. Most people that are found to cheat on their taxes do one thing: underreport their income.

Tax evasion is the main charge in tax crimes, and it is common in cash businesses, such as:

  • Restaurants
  • Retail stores
  • Car dealers

Many professionals are known for trying to hide their income. If someone pays you in cash and you put the money in your pocket and never record it, is it really income? The IRS will punish you harshly if they find out that you are underreporting your income.

Next on the list, many business owners will deduct more business expenses than they should be, such as:

  • Writing off personal car expenses
  • Adding entertainment expenses

You have a right to claim every deduction that you are legally entitled to, but you cannot willingly cheat on your taxes to lower your income. Tax professionals, such as tax attorneys can help you determine whether an expense is a business expense and whether it can be deducted as such.

What Happens If You Are Caught for Tax Fraud?

Once your return has been filed, the IRS will look for red flags and scrutinize some tax returns to determine if tax fraud is occurring.

A tax audit of your return may be the first time you will learn of the fraud (aside from you if you willingly acted fraudulently).

If an IRS audit uncovers something wrong with your taxes, one of two things is likely to occur:

  1. You will be penalized
  2. Your case will be referred to the IRS criminal investigation division

A referral to criminal investigation division (CID) is unlikely. However, if your case does go to CID, it means that there is a serious case against you.

The law allows for up to 75% of the fraudulent underpayment to be added to a person’s taxes as a penalty.

Maximum criminal penalties of up to $100,000 can be assessed against individuals and up to $500,000 to corporations in tax fraud cases.  There may also be imprisonment of up to five years including costs of prosecution.

When You’ll Learn About an Investigation

You may not know that the IRS is investigating you until a formal charge against you has been filed. However, the IRS may also tell you about the investigation: it varies from case to case. Additionally, the IRS may begin contacting your:

  • Accountant
  • Tax preparer
  • Lawyer
  • Others involved

If these individuals decide to tell you about the call, it may be your first inkling that a tax fraud investigation is ongoing. During the investigation, the IRS must file Form 4135, which can lock your tax account.

You will not have the option to receive a refund or make a payment for any tax debt while the account is frozen.

Criminal Investigation has thousands of people that they investigate and many more that they could investigate but do not. It’s common for CID to avoid investigating cases where the taxes owed are less than $20,000 because they simply lack the resources.

The tax fraud investigation will begin with interviewing those closest to you, and this may include:

  • Business associates
  • Family
  • Friends
  • Advisors

Agents want to learn as much about you as they can and will then try to determine if tax fraud took place. Since CID investigators are well-trained federal employees, they will have the resources to investigate massive claims of tax fraud.

Note on Lawyer Confidentiality

As a lawyer, we’re legally bound to attorney-client privilege. If you hire us, we cannot disclose any discussions we have with you to the IRS, even if you admit to the fraud behind closed doors.  Additionally, if we hire experts, such as an accountant, to help us with the matter, they’ll also be protected by the attorney-client privilege.

Understanding Your Rights if Criminal Investigation Contacts You

CID may reach out to you for an interview, and if they do, know that they have already talked to your friends, family and associates. You’ll be the last person to be contacted by CID. In this case, CID already has a good understanding of your financial affairs.

Contact means that:

  • CID is likely to recommend prosecution
  • CID is questioning you in the hope that you confess or let damaging information slip

The agent must tell you that you’re a target in an investigation. You’ll also be read your rights and be told that you have a right to an attorney.

At this point, the tax fraud case has advanced greatly.

Request to speak to your attorney.

There’s a good chance that you’ll be prosecuted for one of the following:

  • Tax fraud
  • Tax evasion
  • Filing false returns
  • Failing to file a return

Tax fraud and prosecution can result in years in prison, public backlash and major fines and penalties. It is crucial to call a tax attorney.

Working with a tax attorney is the single most important step that you can take at this time. CID only investigates serious tax crimes, meaning that you didn’t make a silly mistake on your taxes that led to this point.

You are facing serious consequences and will need the help of a skilled tax attorney to navigate the road ahead of you.

Contact us immediately to talk with a tax attorney.

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