Tax Fraud and Tax Evasion
In most tax audits the IRS is only interested in collecting the taxes owed, plus interest along with a few penalties. Perhaps the IRS might impose a negligence penalty or a late filing penalty. However, if during the tax audit the IRS suspects that you have committed tax fraud they can impose a civil tax fraud penalty. The civil tax fraud penalty is equal to 75% of the tax owed, plus interest on the penalty. Worse yet the IRS tax auditor might ask the tax fraud referral specialist to look at your case to see if it should be sent to the IRS Criminal Investigation unit for criminal tax prosecution. The IRS tax fraud referral specialist is usually not a tax lawyer, however, he has experience in tax fraud cases, and will seek the advice of the IRS' own tax fraud lawyers for help if it seems necessary.
Tax crimes include filing a false tax return, tax evasion, filing false documents, failure to collect employment taxes, failure to pay taxes, and failing to file a tax return. The penalties for criminal tax fraud are very serious. They range up to 5 years in jail, plus fines of up to $500,000, plus the costs of prosecution for each separate tax crime. Once the criminal tax case is completed the IRS Criminal Investigation unit will refer the case back to the IRS Examination Division where the taxes will be assessed, and the IRS can be expected to add on the civil tax fraud penalty, on top of any criminal tax fraud fines.
Clients sometimes ask, "What is the difference between tax fraud, and a simple mistake?" Generally tax fraud or tax evasion involves an intentional wrongdoing. Mere carelessness is not tax fraud. The IRS decides whether tax fraud has been committed by looking for badges of tax fraud. These badges include:
- understatements of income;
- inadequate records;
- failure to file tax returns;
- implausible or inconsistent explanations of behavior;
- concealment of assets;
- failure to cooperate with tax authorities;
- engaging in illegal activities;
- attempting to conceal illegal activities;
- dealing in cash; and
- failure to make estimated tax payments.
If you have any of these tax problems and you are audited by the IRS you may need to engage a tax fraud attorney. Actions you take during the course of a tax audit can turn a run of the mill tax controversy into a tax fraud case. For example, lying or giving evasive answers to IRS investigators, delaying tactics, and other actions designed to mislead IRS agents are all indicia of tax fraud.
An experienced tax fraud lawyer can help you navigate the treacherous waters of an IRS tax audit, and help formulate an effective strategy. Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. For example in one recent case handled by tax attorney Dennis Brager, the IRS alleged that our client had failed to report over $600,000 in income and didn't file tax returns for more than 6 years. Nevertheless we ultimately settled the case for much less than the IRS first demanded, and without paying any tax fraud penalties. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty you owe it to yourself to arrange for an appointment with tax attorney Dennis Brager.
Call us today at 800.380.TAX LITIGATOR or contact us online.