A difficult economic climate, unexpected medical expenses or the loss of a job can leave an individual or family scrambling to make ends meet. These economic pressures may entice otherwise honest, hard-working people to attempt to avoid their tax obligations. Many times people may attempt to balance their finances by failing to file a tax return or failing to pay their tax obligation. The taxpayer may justify his or her failure to file by claiming that he or she is only a “small fish” that the IRS would not be interested in. Others may incorrectly believe that failing to file will keep them off of the IRS’ radar.
Unfortunately for those who try to evade their tax obligations, neither belief is true. In recent years the IRS has significantly improved its ability to identify and pursue taxpayers who fail to file taxes. The IRS has developed software algorithms to help identify non-compliant taxpayers, and uses specially trained agents to pursue persons suspected of failure to file. The Brager Tax Law Group can help you correct your tax compliance issues to avoid civil or criminal consequences.What if the IRS questions me about allegedly unfiled returns?
In some instances, an IRS agent may ask directly if you have filed a tax return for all relevant years where a return was legally required. This question can place a taxpayer in an extremely difficult quandary if he or she has not filed a return for each year as required by law.
On one hand, if you respond in the affirmative and claim that you have filed taxes for all years when you have not, you will have knowingly lied to the IRS regarding your tax returns. Providing false information regarding a tax return to the IRS can result in a prison sentence of up to 3 years, in addition to significant fines and penalties being imposed. However, if you answer in the negative and indicate that you have not filed your returns, you may have just admitted to a crime if the agent has reason to believe your conduct was willful.
An experienced tax law attorney, like those of the Brager Tax Law Group, can analyze the potential outcomes where it appears that the taxpayer is stuck choosing between unfavorable options. In a situation like this, an experienced tax lawyer might advise you to simply tell the agent that you will provide the requested information once you have had the opportunity to review your records. In short, telling the IRS that you will get back to them shortly can buy you time while preserving all of your legal options. By contrast, if you answer the question either affirmatively or negatively, your legal avenues will have already narrowed or you may have compounded your tax problems by committing an additional tax offense. While the IRS will impose a deadline on an information request, it is typically willing to grant an extension of 60 to 90 days.Is a failure to file a tax return a crime?
Yes, as per 26 USC §7203, a failure to file a required tax return is a misdemeanor and can be punished by up to 1 year of imprisonment and significant fines and penalties, provided that the failure to file was willful.
In other circumstances, the failure to file or pay taxes may rise to the level of criminal tax fraud, governed by 26 USC §7201, or civil tax fraud under 26 USC § 6663. In accordance with the criminal tax fraud statute, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.” The IRS may choose to bring criminal charges for a failure to file taxes for up to six years from the unfiled return’s due date.
Additionally, 26 USC §6663 can impose a civil penalty of “an amount equal to 75% of the portion of the underpayment which is attributable to fraud.” This is generally referred to as an IRS “civil fraud penalty.” While there is no statute of limitations for civil tax fraud, IRS guidelines typically requires charges to be brought within 6 years.
Other related tax crimes include:
The Brager Tax Law group can help you resolve your tax problems in a strategic and carefully considered manner.
Voluntary disclosure procedures may offer US taxpayers a way out
If you are already under investigation, the voluntary disclosure program is, unfortunately no longer an option. This fact underscores the importance of taking timely action to correct your tax compliance problems, or you may find potential solutions excluded due to time or circumstances. While a voluntary disclosure may result in the IRS declining to recommend your case for criminal prosecution, there is no guarantee of that decision, nor does the voluntary disclosure process confer any substantive or procedural protections.
It is essential to consult with an experienced tax attorney prior to taking any action regarding your tax problems. To speak with one of the Brager Tax Law Group’s dedicated and experienced attorneys, call us at (800) 380-TAX LITIGATOR or contact us online today.
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