27 Nov 23

Philadelphia Federal Tax Fraud and Evasion Charges: IRS Investigations

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Last Updated on: 8th December 2023, 03:56 am

Philadelphia Federal Tax Fraud and Evasion Charges: IRS Investigations

Dealing with the IRS can be intimidating. Many people panic when they get that dreaded letter in the mail saying their being audited. Or even worse, if your being criminally investigated for tax fraud or evasion. Don’t panic! There are defenses and ways to protect yourself. This article will break down the common criminal tax charges in Philadelphia, what triggers IRS investigations, and potential defenses to fight back.

According to the IRS, tax evasion and fraud costs the government over $458 billion annually. Thats a crazy amount of money! No wonder their taking this stuff so seriously nowadays. Tax evasion is basically when you intentionally try to avoid paying taxes that you owe. This is usually done by hiding income, inflating deductions, or just not filing at all. Tax fraud is when you intentionally try to cheat on your taxes through deception and lying. The IRS does not take kindly to either of these activities.

Common Tax Evasion and Fraud Charges

There are a handful of criminal tax charges the Department of Justice and IRS pursue. If your being criminally investigated or charged, it will likely be for one of these:

  • Tax Evasion – Intentionally trying to avoid paying taxes you owe. This can include hiding income, lying about deductions, or not filing at all. Punishable by up to 5 years in prison.
  • Filing a False Return – Lying or falsifying information on your tax return. Punishable by up to 3 years in prison.
  • Failure to File – Simply not filing a return when required. Punishable by up to 1 year in prison.
  • Tax Fraud – Intentionally deceiving the IRS through false statements or documents. Punishable by up to 3 years in prison.
  • Employment Tax Fraud – Not paying payroll taxes for employees. Punishable by up to 5 years in prison.

As you can see, the penalties and prison time can really add up if your convicted. And your looking at federal charges, not just state. The IRS and Department of Justice do not mess around with this stuff.

What Triggers a Criminal Tax Investigation?

So how does the IRS decide who to criminally investigate in the first place? There’s a few red flags that tend to trigger a closer look:

  • Not filing tax returns for multiple years
  • Drastic changes in reported income that don’t match other records
  • Large, suspicious deductions or business expenses
  • Engaging in “cash” businesses like restaurants where receipts aren’t carefully tracked
  • Not properly reporting ownership of foreign bank accounts or assets
  • A whistleblower or informant tips off the IRS about potential fraud

If your already behind on filing taxes, now is the time to catch up. The more years you don’t file, the greater the chance of an audit or investigation. Remember, the IRS has access to tons of financial records through banks, employers, businesses, etc. If your own tax return doesn’t match what they see, it raises red flags.

The Audit vs. Criminal Investigation

Most people think of an IRS audit when they hear the IRS is looking into their taxes. An audit is different than a criminal investigation. An audit is usually a civil process where the IRS reviews your financial documents to determine if you underpaid on your taxes. You may end up owing penalties and back taxes, but its not criminal at this point.

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A criminal investigation is when the IRS believes you have intentionally committed fraud or evasion. They start gathering evidence to prosecute you on criminal charges. This can include interviewing witnesses, reviewing financial records, surveillance, etc. A criminal tax investigation is much more serious than an audit.

Can the IRS Investigate without Notifying You?

Unlike an audit, the IRS may start a criminal investigation without actually notifying you. If they tipped you off, it might lead to destruction of evidence. So in most cases, you won’t know your under criminal investigation until an agent shows up to interview or arrest you.

However, at some point the IRS does have to notify you once the investigation reaches a certain stage. This is usually done through a “subject letter” informing you that your now a subject in a criminal probe. If your already at this stage, its critical to hire a lawyer immediately.

How to Handle the Initial IRS Interview

When first contacted by an IRS criminal agent, either in person or by phone, your instinct may be to try and explain yourself or clear things up. Don’t do this! There are strict rules in these types of investigations. Anything you say can potentially be used against you later on. Even innocent mistakes could be twisted against you.

The best approach is to politely decline to answer any substantive questions. Explain your invoking your 5th amendment right and will be retaining a lawyer. This prevents self-incrimination. Don’t worry about seeming “guilty” – any experienced lawyer will advise exercising your rights.

Potential Defenses for Tax Evasion and Fraud Charges

If your already at the point of being charged criminally, don’t panic yet. There are potential defenses an experienced tax attorney can raise on your behalf. Some common defenses include:

  • You lacked willful intent – For tax fraud and evasion, the government must prove you intentionally violated the tax code. If errors were accidental, you may not have willful intent.
  • Reliance on a tax professional – Reasonably relying on a tax accountant or adviser shows you weren’t intending to break the law.
  • Duress or coercion – External threats or pressure from others could negate willful intent.
  • Mistake of law – A genuine misunderstanding of complex tax laws could undermine intent.
  • Statute of limitations expired – There is a 6 year limit for criminal tax prosecutions. An experienced lawyer may find the clock ran out.

An adept tax attorney knows how to analyze the specifics of your case to determine the best defense strategy. Don’t go it alone against the IRS machine without representation.

Negotiating with the IRS to Reduce Charges

Even if the evidence seems stacked against you, an experienced tax lawyer may be able to negotiate with IRS and the Department of Justice to reduce charges. This depends on the specifics of your case and your background. Some potential options include:

  • Getting charges reduced from felony to misdemeanor
  • Having multiple charges consolidated into a single charge
  • Agreeing to plead guilty to a less serious tax offense
  • Settling for probation and paying back taxes instead of prison

The IRS wants to collect money, not put people in already crowded prisons. If you demonstrate a willingness to pay back taxes, there may be an alternative resolution. This is all up for negotiation when handled properly.

Can You Go to Jail for Not Paying Taxes?

Simply owing back taxes is usually not enough to land you in jail. The IRS first will attempt to collect through liens, levies, asset seizure, etc. Jail time is reserved for intentional criminal tax violations. Some key factors include:

  • How much you owe – Larger amounts increase chance of criminal prosecution
  • Number of years delinquent – Multiple years not filing raises your risk
  • Evidence of intentional deception – Lying and fraud will get you in hot water
  • Overall criminal history – Prior run-ins with the law makes IRS less lenient

That said, the IRS tends to be more understanding of taxpayers that come forward voluntarily to address back taxes owed. The sooner you take corrective action, the better. Don’t wait for the IRS to come find you!

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Can the IRS Take Your House for Unpaid Taxes?

Yes, the IRS can technically seize your home and other assets to satisfy a serious tax debt. They don’t take this step lightly though. First, the IRS will place a tax lien on your home. This protects their interest in case you sell the property. If you still don’t pay, the IRS can then levy your home, forcing the sale to pay off the tax debt. They will work with you to set up installment plans first, but if you continually default, a levy and seizure is possible as a last resort.

The IRS must follow specific procedures for seizing assets like a home. A tax attorney can help you assert your rights and defenses during this process. Negotiating an alternate resolution is often possible before it reaches the seizure stage.

Should You Ever Talk to the IRS Without an Attorney?

When it comes to criminal tax investigations, the answer is almost always no. The IRS is building a case against you, not trying to help you out. Anything you say can be used against you later. Even explaining yourself or trying to correct simple mistakes can come back to haunt you.

You have the constitutional right to remain silent and speak to an attorney first. Politely decline to answer questions until your lawyer is present. This goes for phone calls, in-person meetings, or even a casual IRS visit to your home or office.

The only exception may be simple questions to confirm your identity, address, employment, etc. But tread carefully – this can quickly morph into substantive questioning. Assert your rights and don’t feel pressured into answering anything of substance without counsel.

Can You Go to Jail for Structuring Bank Transactions?

Yes, ‘structuring’ cash transactions to avoid IRS reporting requirements carries criminal penalties, including potential prison time. This commonly happens when people deposit just under $10,000 in cash to avoid automatic IRS reporting on amounts over $10k. Even if the money is legally obtained, purposely structuring deposits to avoid reports is considered illegal. Jail time is rare but possible if convicted. The maximum sentence is 5 years. Any suspicious structuring will likely trigger an IRS investigation. Consult an attorney if you’re contacted by the IRS about deposits just under $10k.

When Does the IRS Investigate Small Businesses?

The IRS pays extra attention to small businesses, especially cash-heavy industries like restaurants, bars, nail salons, and car washes. Unreported cash transactions are tempting for many struggling small biz owners trying to reduce taxable income. But beware – the IRS scrutinizes expenses, payroll taxes, cash deposits, and other red flags. An unusually low profit margin compared to similar businesses may trigger an audit or investigation. Consulting a tax pro can help avoid common bookkeeping mistakes that raise suspicion.

Can the IRS Take Your Passport for Unpaid Taxes?

Believe it or not, yes – since 2012, the IRS can revoke your U.S. passport if you have a seriously delinquent tax debt exceeding $52k (adjusted for inflation). They must provide written notice at least 90 days before revoking it, allowing you time to respond. Getting your passport back requires full payment of the tax debt or entering an approved payment plan. This controversial enforcement method is aimed at preventing Americans from fleeing the country to evade taxes. Always try to address tax debts promptly before reaching the passport revocation stage.

When Can the IRS File Criminal Charges?

The IRS tends to take a graduated approach, pursuing civil collection and audits first before escalating to criminal charges. Criminal prosecution requires firm evidence of intentional deception, concealment, or fraud. Some red flags that may prompt criminal charges include:
Submitting false W-2s, 1099s, or other fabricated documents
Creating multiple fake businesses to claim bogus deductions
Repeatedly hiding large amounts of income from the IRS
Lying during an audit or under oath
Identity theft or falsifying Social Security numbers
If convicted, penalties range from fines up to $250k to years in federal prison, depending on the charges. Hiring an experienced tax defense lawyer is critical once you reach the criminal stage.