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The Internal Revenue Service has always been serious about income tax evasion. It’s their job to make sure everyone complies with current tax laws and that no one gets away with cheating. While there’s no shortage of true tax criminals, the tax code is very complicated and it is possible to make honest mistakes that look bad to the IRS. There is a difference between tax negligence and tax fraud, which is a critical distinction for someone under investigation.
Who Are the Most Common Offenders?
According to the IRS, 17 percent of taxpayers are guilty of noncompliance with the tax code. In fact, individuals are responsible for committing up to 75 percent of tax fraud, rather than large corporations. One study identified restaurant owners, clothing retailers, salespeople, car dealers, hairdressers and accountants as some of the top offenders. Restaurant servers, handymen, mechanics and service workers are also frequently known to underreport their income.
Is It Fraud or Just Negligence?
First of all, tax fraud involves a willful attempt to avoid paying taxes. This would be the case if an individual or corporation failed to file a tax return or pay the taxes due. Underreporting income also qualifies as tax fraud, as well as making fraudulent claims or filing false returns.
The IRS knows how complicated the tax code is and that a number of people have difficulty understanding it. As a result, they’re more likely to assume that an error was made, before trying to make a case for tax fraud. In these cases, an IRS auditor will probably attribute the mistake to negligence. Note that while these mistakes aren’t intentional, the taxpayer can still get fined 20 percent of the amount underpaid.
Auditors have a number of different signs they look for, when trying to determine the intent of the accused. Overstating exemptions or deductions is one of the biggest red flags, along with claiming exemptions for nonexistent dependents. Maintaining two sets of financial ledgers is seen as a clear sign of criminal intent, along with concealing or transferring income. Other such signs include falsifying expenses, using a phony social security number and deliberately underreporting income.
Common Tax Schemes
Private individuals aren’t always to blame for tax evasion. Sometimes they find themselves on the wrong end of a scheme perpetuated by an employer. Pyramiding, cash payment, employee leasing, false payroll returns and even failure to file payroll returns are some of the different methods companies have used to avoid paying taxes.
Pyramiding involves withholding taxes from workers without turning them over to the IRS. Companies that engage in this practice typically end up filing for bankruptcy to avoid paying their debts, then emerge as new businesses with different names, only to repeat the same process. As far as cash payment to employees is concerned, the practice is not illegal. However, it is common in tax evasion schemes.
Employee leasing is the practice of contracting third party businesses to take care of payroll, personnel and other administrative matters for their employees. While this is also not illegal, it becomes a problem when the third party company fails to turn over employment taxes to the IRS. Filing false payroll returns and failing to file them at all are both fraudulent practices.
Although tax crime convictions are statistically unlikely, they do occur. If you’re under investigation, you’ll need a tax fraud lawyer to represent you and fight for the best possible outcome. This is especially important if you’re not a good communicator or are likely to fold under pressure. Penalties for tax fraud can be very steep, involving heavy fines and possible prison time.
Correspondence audits: In a correspondence audit, the IRS will send you a letter notifying you that it is reviewing your tax return. The letter will request that you provide documentation to support the information on your return. You will have a limited time to respond to the letter, and you will need to provide the requested documentation.
In a correspondence audit, the IRS will send you a letter notifying you that it is reviewing your tax return. The letter will request that you provide documentation to support the information on your return. You will have a limited time to respond to the letter, and you will need to provide the requested documentation. Field audits: In a field audit, an IRS agent will visit you at your home or place of business to review your tax return. The agent will ask you questions about your return and request documentation to support the information on your return.
In either type of audit, you will need to provide documentation to support the information on your return. The documentation you will need to provide will depend on the information being reviewed. For example, if you are being audited for business expenses, you will need to provide receipts, invoices, and other documentation to support the expenses.
You will also need to provide documentation to support your income. For example, if you are being audited for wages, you will need to provide W-2 forms and other documentation to support the wages you reported. If you are being audited for interest or dividends, you will need to provide 1099 forms and other documentation to support the interest or dividends you reported.
You will need to provide any other documentation that is relevant to the information being reviewed. For example, if you are being audited for charitable contributions, you will need to provide documentation to support the contributions you made.
You will need to provide the documentation to the IRS agent conducting the audit. The agent will review the documentation and determine whether the information on your return is accurate. If the agent determines that the information on your return is accurate, the audit will be closed. If the agent determines that the information on your return is inaccurate, the agent will make adjustments to your return.
The adjustments will result in additional tax liability, penalties, and interest. The agent will send you a notice of the proposed adjustments. You will have a limited time to respond to the notice. If you agree with the proposed adjustments, you will need to pay the additional tax, penalties, and interest. If you do not agree with the proposed adjustments, you will need to file an appeal.
The IRS Audit Process
The IRS audit process is governed by the Internal Revenue Code and the Internal Revenue Manual. The IRS has a burden of proof in an audit. The IRS must prove that the information on your return is inaccurate. The IRS cannot simply assume that the information on your return is inaccurate.
The IRS will send you a notice of the proposed adjustments. The notice will explain the proposed adjustments and the basis for the adjustments. The notice will also explain your appeal rights. You will have a limited time to respond to the notice.
If you agree with the proposed adjustments, you will need to pay the additional tax, penalties, and interest. If you do not agree with the proposed adjustments, you will need to file an appeal.
If you file an appeal, the IRS will review your appeal and determine whether the proposed adjustments are accurate. If the IRS determines that the proposed adjustments are accurate, the IRS will send you a notice of the final determination. The notice will explain the final determination and the basis for the determination. The notice will also explain your appeal rights.
If you do not agree with the final determination, you will need to file an appeal with the United States Tax Court. The Tax Court is a federal court that has exclusive jurisdiction over tax disputes. The Tax Court is not part of the IRS. The Tax Court is a court of law, and the IRS is a party to the case.
The Tax Court will review your appeal and determine whether the final determination is accurate. If the Tax Court determines that the final determination is accurate, the Tax Court will enter a judgment against you. If the Tax Court determines that the final determination is inaccurate, the Tax Court will enter a judgment in your favor.
The IRS can also audit your state tax returns. However, the process is different than for federal returns. The IRS cannot order the payment of state taxes, interest, or penalties. Instead, it can recommend that the state pursue collection action against you.
The IRS conducts audits for a variety of reasons. Some audits are random, while others are triggered by discrepancies between the information on your tax return and information received from third parties, such as your employer or your bank.
If you are selected for an audit, the IRS will notify you by mail. The notice will explain the reason for the audit and will list the documents and information that you need to provide.
You can be audited for any tax year. However, the IRS generally has three years from the date you file your return to audit it. This is known as the statute of limitations. The statute of limitations is extended to six years if the IRS believes that you have underreported your income by more than 25%.
If you do not file a return, the statute of limitations does not apply. This means that the IRS can audit you at any time.
If you are audited, you should consult with a tax attorney. An attorney can help you understand the audit process and can represent you during the audit.
Defending Against an IRS Audit
The first step in defending against an IRS audit is to understand why you are being audited. If you are being audited because of a targeted audit, you may be able to avoid an unfavorable determination by providing additional information to the IRS. If you are being audited because of a random audit, you may be able to avoid an unfavorable determination by demonstrating that your tax returns were filed in good faith. The key to defending against an IRS audit is to work with an experienced tax attorney who can help you understand your rights and obligations, and who can help you defend your interests.
There are several types of tax fraud that can be committed by either an individual, business or the tax preparer. Sometimes, tax fraud is committed unintentionally or through negligence without the person meaning to commit the crime. However, it can still be punishable by time spent in jail, fines or probation depending on the overall circumstances surrounding the charges and fraud committed. To say the least, tax fraud is considered a serious crime. Any taxpayer who intentionally fails to comply with tax laws – has a lot to be worried about. If the IRS is convinced you deliberately tried to evade paying taxes you could be accused of tax fraud. The consequences of this can be jail time, or other penalties. If you make an error in filing taxes, this can result in civil penalties. If you’re found guilty of tax fraud, you could spend several years in prison, and pay fine. Typically, the IRS doesn’t pursue criminal charges – unless it sees purposeful avoidance of taxes.
According to the IRS, about 17 percent of people who file taxes don’t properly comply with the tax codes that are set forth by the service each year. About 75 percent of those people are individuals who find some way to commit tax fraud. In short, tax fraud is a willing attempt to avoid paying taxes or evade and defraud the IRS. There are a few scenarios that comprise tax fraud. One of the most common ways that people commit fraud is by not filing a tax return. Most people file a return at the beginning of each year. For many, they will receive a refund of some kind. Even those who have to pay taxes still file a return. Those who see that they have to pay a significant amount of money to the IRS are usually among the people who don’t file a return at all. Another way that tax fraud is committed is if someone doesn’t pay taxes that are owed. Most states and the federal government have some kind of plan in place to make it as easy as possible for people to pay taxes that are owed. Many people are able to have taxes owed taken from any refund that they get with any money that is left over being electronically deposited into a bank account or mailed in the form of a check.
Sometimes, a person might fail to report all of the income that is earned in order to pay less in taxes or to get a larger refund back. Businesses sometimes do this as well so that they don’t have to pay out as much in taxes from company profits. Tax preparers sometimes create a false tax return for customers in order to get more money for the customer or to get more money for themselves since they have the software to complete multiple returns.
When someone files a tax return or pays taxes, that person needs to understand that the IRS already knows that tax codes and laws can be confusing and can be difficult at times to understand. If the IRS detects an issue that is clearly a mistake or an error that wasn’t intentionally made, then a notice will be sent so that the person or business can correct that information. However, if the IRS sees a drastic change in the information that someone files from one year to the next, then it raises red flags for the IRS, which is when charges of tax fraud could come into play. Even if the mistake wasn’t done on purpose, there could still be a minimal fine to pay.
There are some common issues that the IRS will pay attention to when looking for tax fraud. One is a significant change in income from one year to the next. If someone loses a job, then the income will decrease. However, the IRS will usually want proof of a job loss or unemployment received. A benefit is that most documents pertaining to unemployment payments are sent to the IRS. Overstating deductions or a drastic change in deductions is another issue that is commonly seen. The birth of a child or a child leaving home to go to college isn’t a big deal. When you add a large number of people on your deductions or when there are several types of deductions made that haven’t been made in the past, the IRS will begin to scrutinize the details. Some people will use other children who don’t live in the home as a deduction to get more money. They will report that they earn less money than they do or claim personal expenses as business expenses to get a larger deduction.
An attorney can help if you’ve been charged with tax fraud. You need to keep all documents related to the tax return filed and information from the previous year to show any mistakes that have been made. Most attorneys can seek a judgment that involves payments over a certain length of time instead of jail for tax fraud unless there is a willing attempt or a large amount of money involved.
Working with an IRS tax fraud attorney
When you’re making an offer in compromise, you want to make sure that the process is smooth and successful. There’s a great deal of tedious paperwork that must be accurate. You also want to make sure that you understand the impact that an offer in compromise might have on criminal or civil proceedings that might relate to the non-payment of taxes. Your attorney can help you understand all of your options and help you prepare your case.
Ideally, you need to consult a good tax fraud attorney as soon as you learn that you are being investigated for tax fraud. Hiring an attorney early is a smart move because this professional will help you to mount a serious defense which might keep you away from prison. Additionally, your tax fraud attorney will advise you on how to cooperate with the IRS without having to incriminate yourself.
If you are under investigation for tax fraud, you need to hire the best tax fraud lawyer to defend you. You can freely speak to your attorney without having to fear that your attorney might be compelled to testify against you. The communication between your attorney and yourself is privileged and is protected by client-attorney privileges. So, to increase your chances of avoiding a jail term and other criminal penalties, you should consider hiring a good tax fraud attorney.
How does a John Doe Summons work?
The John Doe Summons is authorized by Internal Revenue Code Section 7609(f) and comes from the IRS. It is issued when the name of an offending taxpayer is unknown, and is not required to name anyone. This type of IRS summons became famous during 2008 when it was employed to penetrate secrecy laws in Switzerland. As a result, UBS divulged the names of roughly 4,500 Swiss bank accounts owners to the IRS. The modern day heavy enforcement of foreign bank account reporting regulations resulted from that single John Doe summons. It also gave birth to the Internal Revenue Service’s Offshore Voluntary Disclosure Program (OVDP), as well as a multitude of criminal tax fraud prosecutions and criminal prosecutions for willful non-filing Foreign Bank Account Reports (FBARs) on Form TDF 90-22.1
Some clients of Wegelin & Co., Switzerland’s oldest bank who had not been filing FBARs for their accounts there. A John Doe summons helped the IRS to procure their information in 2013.
Unlike other IRS summons which the IRS needs no approval to issue, a federal district court judge must approve a John Doe Summons before the IRS can issue it.
The judge’s approval is based on these criteria:
The summons must be connected to the investigation of a specific person or a specific group or class of persons, there exists reasonable basis to believe that such person or group or class of persons may fail or may have failed to comply with any provision of the tax law, and
information desired from the examining the records or testimony (and the identity of the person or persons with respect to whose liability the summons is issued) cannot be obtained from other sources.
A John Doe summons was also used by the IRS in the case of Belize Bank. In the fall of 2015, the IRS convinced a Miami federal district court judge to approve a summons to Belize Bank to get information about some account holders who were U.S. persons. The end goal is to use the Belize Bank records won by way of the John Doe summons to target those account holders who failed to report income as the law requires or to file FBARs.
Interestingly the issuing of a John Doe summons by the IRS changes the statute of limitations. Usually the statute of limitations on the IRS assessing additional tax is six years in situations when a person didn’t report foreign income according to tax laws. Nonetheless, if a John Doe summons isn’t resolved within a 6 month period, an extension is available to the IRS. Internal Revenue Code Section 7609(e)(2) states that the statute of limitations can be extended for a time period beginning on the date which is 6 months after the service date on the summons and ending on the date when the summons is finally resolved.
In the UBS case, the statute of limitations was suspended for almost two more years. You can learn how the IRS calculated that extension by clicking here.
In light of this provision, if you are a target of a John Doe summons, you may think the statute of limitations has expired. Alas, you may be under pressure for longer than you first believed.
Tax evasion is a very serious offense and is also referred to as tax fraud. It is never a good idea to try to avoid paying the taxes that you owe because you can find yourself convicted of a felony and in jail for up to five years. In addition, you could end up paying a fine of up to $250,000 as an individual taxpayer or $500,000 as a corporation. If you are found guilty of willful failure to file a tax return or pay the tax that is due, you could be facing a misdemeanor conviction that carries a prison sentence of up to one year. You could also be forced to pay fines totaling up to $100,000 as an individual and $200,000 as a corporation. According to reports from the IRS, about 17 percent of individual taxpayers fail to follow the tax code in one way or another. This is a fairly high percentage of the population that is susceptible for investigation for tax fraud.
There are many cases in which a taxpayer’s failure to obey the tax code is merely a mistake and not a willful violation. The IRS has well-tested programs to figure out which types of violations are genuine mistakes and the ones that merit criminal prosecution. You do not want to find yourself in the latter category because the government is fairly aggressive at investigating and prosecuting tax fraud. This is because the government wants to deter as many taxpayers as possible from being tempted to avoid reporting income or underpaying their taxes.
If you are engaged in overstating the number of exemptions or deductions that you are entitled to take, this could be a red flag for the IRS that you are trying to evade paying taxes. In addition, if you earn your income mostly in cash, this is another typical situation in which the IRS has found that taxpayers are tempted to go without reporting their income to the government. Tax fraud and evasion are investigated by the law enforcement department of the IRS, the IRS Criminal Investigation (CI).
Aside from getting together all of your documents, the first thing that you should do when faced with an investigation for tax evasion is to contact a licensed attorney. Yo should work with a tax evasion lawyer who regularly handles these types of cases and will be able to explain all the complexities to you of how the IRS works. The more information that you can discuss with your tax attorney, the better. You want to be fully informed of the process that the IRS will put you through and the potential pitfalls along the way. Whether you own a business or file taxes as an individual, the consequences of being convicted of tax evasion are severe. This can follow you around for the rest of your professional and personal life if not dealt with in a proactive way.
Do not be afraid of speaking with a tax evasion attorney to discuss your outcomes. Even if you think you will be convicted of tax evasion, it is better to have an experienced representative negotiating on your behalf with the IRS. Anything that you say to the IRS could be used against you, which is why it is preferable to streamline all of your communications through an attorney. Do not make the mistake of thinking that this problem will simply go away on its own no matter how badly you want it to. The sooner you get a plan in place to deal with your tax evasion charge, the quicker your life will get back to normal.
In many tax audits done by the IRS, the agency is only interested in collecting taxes owed, interest, and with penalties. The IRS can impose a negligence penalty, along with a late filing penalty, and charge interest on all the above. In a tax audit, even if the IRS suspect you’ve committed tax fraud, they can impose a civil tax fraud penalty. This penalty is typically equal to 75 percent of the tax you owe, plus interest on the penalty.
Based on the degree of fraud involved, the IRS auditor may ask a tax fraud specialist to look at your case and see if it should be sent for criminal prosecution. Normally, this specialist has experience and will seek advice of the IRS’ tax fraud attorney for help if it appears necessary.
The penalties for tax fraud are severe. You could get up to 5 years in jail, plus fines of $500,000, in addition to the expense of prosecution for each tax offense. Once the criminal tax case is completed by the IRS criminal unit, it will be referred back to the IRS Examination Division in which the taxes are assessed. The IRS can add the civil tax fraud penalty on top of the criminal tax fraud penalties. It’s important to know that tax statements from civil or criminal tax fraud cannot be discharged through bankruptcy. The civil fraud penalty is dischargeable in a Chapter 7 bankruptcy.
Tax fraud is defined as intentional wrongdoing. To be accused of tax fraud, you have to have an intentional violation. Mere carelessness isn’t tax fraud. The IRS looks for certain things when assessing whether fraud occurred, such as: understatement of income, inadequate records, failure to file, hiding assets, dealing in cash, failure to make estimated cash payments, failure to cooperate with authorities, failure to make payments.
If you have any of these problems and are audited by the IRS, you might need a tax fraud attorney. Actions you take during a tax audit can transform a normal tax audit into a tax fraud case. By way of instance, lying or giving false answers to IRS investigators, delaying the investigation, or other actions to mislead IRS agents can indicate fraud.
Experienced tax fraud attorneys can help you navigate an IRS tax audit, and help you formulate a plan.
There isn’t a requirement that you hire an attorney for any crime that you’ve been charged with whether it involves tax fraud or a misdemeanor. However, tax fraud is an area where you want to have the expertise of an attorney who can fight for the freedoms that you have and who can offer advice on a plea bargain if one is given. An attorney can give you advice about the evidence that is presented against you and battle against the prosecution if there isn’t a substantial amount of evidence to prove that you committed the crime. If you are seeking an appeal, then an attorney would be beneficial to have in your corner as it’s sometimes difficult to know how to prepare the paperwork after losing in court. It’s important to understand that the IRS often has several attorneys working for it, which means that these attorneys will usually be prepared to offer all of the documents possible against you to prove their case in court. Without the assistance of an attorney, you stand a greater chance at not winning that case.
Perhaps the most important thing for you to do when you are under investigation for tax fraud relates to what you must not do. First, make sure that you do not volunteer any information to the investigators from the IRS.
Keep your mouth shut and remember, anything you do or say may or can be used against you in a court of law. It is crucial for you to keep mum to avoid incriminating yourself. Do not allow the investigators to search you or your property without a warrant. If asked to comment on anything, however innocent it may be, don’t fall into that trap. A simple and “innocent chat” can be used against you to show that you either hid some information from the IRS or you had intent to commit tax fraud. Such evidence is admissible in court and can be used to bring criminal penalties against you.
Second, you need to be watchful and careful of what you say to your accountant or whoever prepares your tax returns. Although these professionals might be under your employ, any conversation between you and them is not considered to be protected by client-accountant privilege and as thus the IRS can compel your accountant to testify against you, failure to which they might be enjoined in your case as accomplices.
If you have made false statements or filed falsified documents to the IRS, you are likely to find yourself in a situation that is very bad. Additionally, if you make an incriminating statement to your accountant, you might find yourself in a terrible place.
Accusations of playing fast and loose with tax reporting and return preparation is not something anyone wants to face. Even so, there are individuals and business operations that are dealing with charges of fraud this very minute. Choosing to learn more about tax fraud, what sort of events can lead to allegations, and the kind of penalties that may be imposed is something every taxpayer must understand. Here is some information that will help the individual know if the time has come to seek help from a tax fraud lawyer.
What is Tax Fraud?
Tax fraud involves a conscious decision to falsify tax records and returns. In most cases, the motivation for committing such an act is to avoid paying the rightful amount of taxes due on income.
It’s important to note that mistakes can be made with accounting records that in turn lead to using incorrect information when filing reports and returns. Tax agencies look upon mistakes that were made with no intent to defraud in a different light. Unless there is solid evidence that actions were taken with the specific desire to reduce the amount of tax owed, obtaining a conviction will be difficult.
How is the Fraud Committed?
Altering reports and returns in order to lower the amount of taxes owed can involve several different strategies. One of the more common approaches it to claim exemptions or deductions that are not legitimate. In this scenario, it’s not unusual for individuals or business owners to create documentation that on the surface seems to confirm that the deduction or exemption is valid. It’s only upon closer examination of bank records and various financial documents that the legitimacy of the exemptions is questioned.
Failing to report income is another approach sometimes used to commit tax fraud. Individuals who are employed full time but also have a side job where they are paid in cash may decide to not include the proceeds from that second source of income. The belief is that without any type of paper trail, it would be difficult for anyone to question the return that is filed using the documentation provided by the primary employer.
Claiming personal expenses as business expenses is also one of the ways that fraud can be committed. An employee who travels for work and is reimbursed for credit card charges and out of pocket expenses as a result has essentially not sustained any type of business expense. Choosing to forget about the reimbursement by the employer and claiming those expenses on a return may lower the amount of taxes owed, but it does constitute fraud.
What are the Penalties for Tax Fraud?
There are civil and criminal penalties associated with a conviction of tax fraud. The type of action taken will depend on the manner in which the attempt to defraud the tax agency was structured.
Choosing to submit statements that are false is considered a felony. It is possible to be sent to prison for up to three years. There is also the chance of being fined. Currently, individuals may be fined as much as $250,000 USD for including false statements in their reporting. Business operations are subject to a much greater fine.
Seeking Help from a Tax Fraud Attorney
Receiving notice that a tax agency is conducting an investigation and charges of fraud are pending is not something anyone wants to experience. Should such a notification be received, now is the time to engage the services of a tax fraud lawyer.
The tax fraud lawyer will arrange for professionals to go over all documents submitted to the tax agency as well as evaluate the accuracy of all financial records in the client’s possession. The goal is to determine if there are any signs of an intention to withhold information from the agency or manufacture exemptions or deductions that are not valid.
Should the effort reveal nothing more than errors that appear to be the result of making postings in haste or failing to post an expense to the proper account, the tax fraud attorney is in a position to defend the client by pointing out there was no intent to defraud.
Remember that the legal counsel will be present throughout the process. In the best case scenario, it will be possible to confirm that any discrepancies are the result of an honest mistake and not a conscious attempt to commit fraud.
What’s the Difference between Negligence and Fraud Tax Evasion?
A very small percentage of tax fraud convictions occur each year, just .0022% out of the 17% of taxpayers who aren’t in strict compliance with the tax code each year. Additionally, the IRS reports that individuals account for 75% of tax code violations, while corporations are responsible for far less instances of tax fraud.
When is Tax Fraud not Tax Fraud?
The law establishes the definition of tax fraud as the willful attempt to evade tax obligations or an attempt to defraud the IRS. There are a number of ways an individual or business entity can do this. Intentionally failing to file a tax return, failing to pay due taxes, failing to report all received income, and making false claims on returns are all considered forms of deliberate tax fraud. The element of acting in a willful and deliberate manner is essential in the commission of tax fraud.
What happens in cases where errors occur without knowledge or willingness to defraud? The IRS acknowledges that the complexities of the tax code can cause honest errors to occur. When a return does contain errors or misinformation, the IRS will investigate the manner to determine if the mistakes were intentional or the result of an ignorance of the law. If they find the incident to be a result of a genuine mistake, it’s considered an act of negligence.
In the case of negligence, it’s still unlikely that the individual or company will get off without a penalty. While the government may not initiate criminal charges, it’s likely that an underpayment fine will still be charged to the tax filer. The fine is usually 20% of the underpayment.
What Constitutes Fraud and Who Does it?
During an investigation, the IRS looks at specific behaviors that indicate a willful attempt to defraud the government. For instance, overemphasizing deductions or exemptions might raise the suspicions of an investigator. Similarly, discovering a transfer of income, as though attempting to hide it from the government, is also a sign of a deliberate act.
The records themselves may point to intentional tax fraud. Falsifying documents, as in creating two sets of ledgers, are intentional acts committed to cheat the government. While many people may claim personal expenses as business expenses, this is also a type of tax fraud, related to falsifying returns.
In some instances, individuals can take the falsification of their tax returns to a far extreme. People have been known to file under a false social security number, which is also a form of identity theft. Other examples related to this kind of fraud includes claiming a nonexistent child on one’s tax returns to receive unjustified credit.
Looking at instances of tax fraud, the IRS has identified service workers who receive their pay in cash are most likely to underreport their income. Additionally, self-employed individuals who operate a primarily cash-based business are likely to claim less income than they actually earned. Specifically, the government has identified restaurant owners, clothing store operators, car dealers, and salespersons as most likely to commit tax fraud. Doctors, lawyers, and accountants are also common tax law violators.
While committing genuine negligence in the filing of a tax return may only result in a fee, the IRS takes willful fraud more seriously. A conviction for attempting to evade the payment of taxes is punishable by up to five years imprisonment and a fine of up to $250,000 for individuals. Corporations may be fined as much as $500,000. Convictions can result in either or both punishments, as well as being charged with the cost of prosecuting the case.
Providing false statements is a felony and can result in a 1-3 year prison term and fines similar to those assigned in cases of tax payment evasion. Failure to file a return provides for slightly less stern punishments. A conviction can result in up to one year imprisonment and a fine of $100,000 for an individual, $200,000 for corporations.
If you’re facing tax problems, either through negligence or willful fraud, an experienced tax fraud attorney may be able to help. An initial consultation can help you identify your options and your best course of action.
Types of Tax Evasion
Tax evasion might seem like a cut and dry crime. However, there are a few types of tax evasion that you might not hear about all the time or that might be more common than you think. If you discover that you might be guilty of tax evasion or if you have been convicted of evasion, then you might want to consider consulting with an attorney who can assist with the charges and any punishments that you might receive.
People who work have to pay taxes. This is a part of life. There are people who commit acts of fraud by offering information that isn’t true or leaving out information in order to make it appear as though the person didn’t make as much money, which means that the person wouldn’t have to pay as much money in taxes. One way that people commit tax fraud and evasion is when they don’t submit the proper forms when they have to complete a tax return or file the amount that they have made from business income. Some people will claim that they don’t make any money at all so that they get more money on a tax refund.
Another way that people commit tax evasion is when they pretend to transfer assets to someone else so that there is a lower tax liability involved. Failing to withhold the taxable part of an employee’s income is another way that people commit tax evasion. One of the ways that tax evasion is committed is when someone claims that income was earned in another location so that there is a lower tax liability. This could result in thousands of dollars that the person isn’t responsible for paying taxes on compared to the high amount that would be paid if the income was correctly submitted.
When businesses and individuals file their taxes, they can itemize deductions. These deductions include everything from assets to property that is owned in order to reduce the amount of taxes paid or the liability. Deductions, when used correctly, can be a benefit. However, when people begin falsifying information, it begins to unravel and can trickle down to other people who file deductions as well. If the IRS can track the deductions and file a claim that the items listed are not owned by the person filing the claim, then tax evasion charges can be filed.
One of the things that is similar to a deduction is a credit. These are amounts subtracted from a person’s liability so that the person gets a larger tax refund or so that the person doesn’t have to pay as much in income taxes. Some companies offer tax credits if you purchase a certain kind of appliance or vehicle. If used correctly, these credits can save a significant amount of money, so there isn’t a reason for someone to commit a fraudulent act. If you have been charged with tax evasion, it’s important to seek the assistance of a tax fraud attorney because the consequences could include fines or time in jail.
Nothing quite strikes fear in an individual like the three letter : I-R-S. Millions of Americans each year are put under IRS investigation for tax fraud. And you better believe, if the IRS sends you a letter, the most likely have the goods. In 2015, the IRS conviction rate was nearly 100 percent. So, the odds are not in your favor. Despite the numbers, there is no absolute guarantee that you will be convicted. If you receive the dreaded notification from the IRS stating you are under investigation for tax fraud, you should seek out the help of a highly-qualified tax fraud lawyer ASAP. Only tax fraud lawyers who are well-versed in the IRS tax code can help you. This is not the time to panic. Get in contact with someone who can assist you in your time of need.
If you intend on representing yourself against the IRS, you have a fool for a client. Going it alone is a no win situation. The IRS is a machine that can literally crush you beneath its massive wheels. Your only chance is experienced legal representation. Although the vast majority of tax fraud cases that go to trial end in a conviction, about 25 percent of the investigations do not end up in court. This is where a skilled professional comes in. Someone with a great deal of knowledge can potentially turn the tables on the IRS. After your tax fraud attorney investigates all the facts, they will find out what information the IRS Criminal Investigation Unit has on you. Once your tax fraud attorney knows what they’re up against, they can formulate an effective plan of action.
Tax fraud is a crime that has severe penalties. Depending on the severity of the crime, you could spend up to 20 years or more in prison. In addition to the prison time, there can also be hefty fines of thousands of dollars. And if you owe back taxes, you will be required to pay that along with accumulated fees and interest. At the end of the day, you could be looking at over a million dollars in IRS fees. If you need help, let an IRS fraud attorney help. If you need someone to pry you from the IRS grasp, only a skilled attorney can do it. Fine someone with a stellar track record and the tenacity to provide a vigorous defense.
An IRS fraud investigation can be terrifying. The IRS doesn’t back down. If your are investigated and they feel there is enough evidence to charge you — they will. If you are under an IRS fraud investigation, let and experienced professional navigate the process for you. You will need someone who cannot be intimidated by the IRS and determined to provide you an impenetrable defense. Don’t allow fear to take over your life. Let an experienced attorney help you so you can get on with your life. Time is of the essence. The IRS will not wait. Seek the help you need so you can get your life back.
Owing money to the Internal Revenue Service can be an extremely stressful position to be in. The more money a taxpayer owes, the more stressful and frightening the situation starts to become. And things can become even worse when your assets are not enough to pay off the debt. The IRS may agree to a payment plan but, in addition to paying back the owed taxes, interest and penalties accrue on the remaining debt. This complicates the entire repayment process.
Someone buried under debt with no idea how to get out may wish to speak to a tax fraud attorney who can assist with an offer in compromise. Taking advantage of this deal might prove to be a viable solution for those who qualify.
The Offer in Compromise
An offer in compromise refers to a relatively simple concept. A person cannot pay the full amount of debt within any reasonable amount of time. So, the taxpayer makes an offer to the IRS. The offer entails paying a percentage of the amount owed with an understanding the taxpayer pays within an agreed upon time period. If accepted, the IRS considers the debt paid. Hopefully, the taxpayer won’t run into more debt issues in the future. The IRS provides an online “Offer in Compromise Pre-Qualifier” that people can use to see if they meet the basic criteria.
While the concept of an offer in compromise is simple, the part about the IRS accepting the actual settlement comes with an obvious question mark. Will the IRS accept the offer in compromise?
Negotiating the Offer in Compromise
To submit an offer in compromise, a specific form must be filled out and submitted. No rule states the taxpayer cannot do this on his or her own. Nor is the taxpayer from acted as his/her own representative in any negotiations with the IRS. Would this be the best strategy, though?
Retaining a tax fraud attorney and allowing counsel to represent you in court during the negotiations could prove to be the better move. An attorney with expertise in tax law possesses the required expertise to handle this type of representation in a professional manner. An experienced tax fraud attorney knows the law and also surely handled numerous offers in compromise negotiations in the past.
No Guarantee of Acceptance
No one can predict with complete certitude how the Internal Revenue Service will respond to the submission of an offer in compromise. Hopefully, with a reasonable offer, the IRS won’t prove to be too difficult. However, the chance does exist that the IRS may turn down the offer. Things do not automatically end when the initial denial has been made.
The IRS maintains formal appeal processes for those who do not agree with a decision. The steps to request an offer in compromise appeal require the completion of several formal steps. Perhaps requesting a tax fraud attorney prepare the official appeal request could greatly reduce the chances of an error being made. Submitted documents must be accurate or else unwanted consequences may result.
Meeting with an Attorney
Worrying about IRS debt and the complexities of an offer in compromise can lead to many sleepless nights. Meeting with an attorney may prove to very informative. The tax fraud lawyer might discuss the steps that could be taken and advise a client on various matters related to the process.
Offers in compromise options may exist on the state level as well. Perhaps in both federal and state tax matters, the right lawyer could potentially come up with the right agreement for all parties involved.
If you find out you are facing an IRS audit, don’t panic. IRS audits happen every year. You may have a great deal of questions about the audit. But instead of stressing out, call on an IRS tax fraud lawyer who can guide you through the system. Each year, millions of taxpayer returns are flagged for audit. Basically what an audit does is review a taxpayers documentation to see if it correlates with the tax return. The IRS will verify wages, dependents, deductions and anything else recorded on the return.
There are a number of ways in which an IRS audit can be conducted: by mail, at the local IRS office, the taxpayer’s home, at your business or attorney’s office. While most taxpayers would prefer an audit by mail due the the simplicity and convenience, a field audit may be requested by the IRS. If a mail audit is approved, it is usually due to something minor such as something unanswered, overlooked or the IRS just need clarification on something. A field audit is more serious. If you receive an audit letter in the mail requesting a field audit, you should not delay in finding an attorney. An IRS tax fraud attorney knows all the ins and outs of audits, and you will need them to formulate a defense if necessary.
If you have an audit at the IRS office, it will eliminate interaction with an IRS field auditor, which can get testy. The IRS field auditor can make uninformed assumptions about your situation. Having the audit in the IRS office is anonymous and neutral. Just make sure you have a seasoned tax fraud lawyer that will strongly advocate for you. Field agents are notorious for attempting to scare individuals under an audit. Even if you don’t have an attorney, stand your ground. But the best policy is to always hire an attorney.
The downside of an IRS audit is that every source of income must be accounted for. This could take some time for all of the pertinent documentation to be gathered. You will need to check, double-check and triple-check your figures to make sure it matches what you have on your return. If you are found to have intentionally messed with the numbers, you could receive a very hefty find. Never let the IRS think you were attempting to withhold information from them.
When you meet with an attorney, make sure they go over your return with a fine-toothed comb. Bring all supporting documentation as well. The good thing about an audit is that your tax fraud attorney can find many expenses and deductions that you overlooked. A freshly prepared return can be used as a bargaining tool.
Taxpayers should know that IRS audits are mostly triggered by IRS computer software. If your return’s risk score gets a hit, you will be one of the 1.11% of the individuals who are audited every year.
If you find out that you are going to be audited, find out the how serious it is then get an attorney if needed. Only an IRS tax attorney can defend you and possibly get you off the hook.
Innocent spouse is a term used to identify a spouse who has filed joint tax returns with their spouse and is innocent of errors or omissions made by his or her spouse or their Income Tax Return, and who is not responsible for paying the unreported or inaccurately reported income tax information provided by their spouse. If your spouse has reported false or inaccurate information to the IRS on your joint tax returns without your knowledge or consent, here are 5 ways to determine if you need to speak with a lawyer.
1. Tax Discrepancies Discovered During divorce or Legal Separation
In many cases, a spouse is unaware of inaccurately reported taxes filed by their spouse until it is discovered during divorce litigation. By this time many years may have past since you first discovered the tax discrepancies, and although you may have a family law attorney representing you in the divorce proceedings, it would be prudent to speak with a tax fraud attorney who is specifically experienced in handling IRS innocent spouse relief cases.
2. Concealing Money During Marriage
At some point during your marriage you may discover that your spouse has been concealing funds for his or her own use and benefit. If you were completely unaware of their concealment of funds, it may be due to spouse’s concerted efforts to hide their wrongdoing from disclosure on your joint income tax returns. Consequently, you may discover that you unwittingly signed and filed income tax returns with the IRS that contained false or inaccurate information provided by your spouse. In this situation, you may be eligible for innocent spouse relief. However, you should speak with a lawyer first, to ensure that your rights are protected.
3. Concealing Funds Through Businesses or Partnerships
During the marriage, spouses may start a business or enter into business partnerships were only one spouse has primary knowledge and control of the finances associated with such businesses. This scenario oftentimes leaves the other spouse completely oblivious to the actual financial status of the business or partnership, and causes that spouse to unknowingly sign a joint tax return containing false or inaccurate information. Under this scenario, a spouse may be entitled to innocent spouse relief, but again, it is very important to speak with an experienced attorney before engaging the IRS.
4. Discovery of Erroneous and Understatement of Tax
You may discover that your spouse has incorrectly stated deductions, credits or failed to report income on your joint tax return. You may also discover that your spouse understated your tax liability. For example, your spouse may have reported a total tax amount due of $10,000 from income generated from self-employment, but based on an IRS audit, you actually owe $20,000, which results in a $10,000 understatement of income tax. Sorting all of this out can be complicated, but experienced IRS innocent spouse relief lawyers can remove the complication, and deal with the IRS directly on your behalf.
5. When Should You File for Innocent Spouse Relief
The best practice for determining when to file for innocent spouse relief, is to do so as soon after you discover the tax discrepancy as possible. However, the IRS has a deadline for requesting innocent spouse relief no later than two years after the IRS has attempted to collect the tax they have determined is due. An attorney who is experienced in these legal matters can help you gather and submit necessary documentation with your request for innocent spouse relief. Speaking with a qualified attorney is imperative to the success of your request.
Dealing with the IRS can be stressful and time-consuming, particularly when you are protecting yourself against tax implications not of your own making. IRS innocent spouse relief lawyers can take on the IRS, so you don’t have to.
The average American doesn’t want to be the IRS hit list. Sadly, every year, hundreds of thousands, if not millions of taxpayers commit income tax fraud and need a tax fraud lawyer This type of fraud occurs when an individual purposefully falsifies a tax return. In most cases, the taxpayer does it to avoid paying a rightful share of taxes. Granted, mistakes can happen on tax returns, however, if the IRS finds dependencies or that you filed no income at all, the consequences can be severe. If you are accused of committing income tax fraud, seek a skilled tax fraud attorney immediately. A seasoned tax attorney can help you understand your rights and provide a defense should you need one.
When individuals commit tax fraud, they usually alter returns to lower the amount of taxes owed. When an individual or business owner file the return, the documents may seem legitimate on the surface. Upon closer examination, it may be revealed that the legitimacy of the documents (bank records, financial papers) are not what they seem.
Some individuals for whatever reasons simply decide not to file income taxes. This can be a huge mistake. There are some who fail to include monies they are paid under the table in cash. But the IRS would need to establish some sort of paper trail to prove it. Claiming personal expenses as business expenses can also be considered fraud.
The penalties for committing income tax fraud can be quite severe. The IRS doesn’t look favorably upon individuals who fail to file income tax or cheat on their taxes. If you are convicted of filing false statements, you could spend up to three years in jail and fined up to $25,000. You may end up paying a stiffer fine if you own a business. Tax fraud is considered a felony. And aside from the fine, you will be required to do 80 percent of whatever time you receive.
If you receive a notice in the mail stating that you are being investigated for income tax fraud, you will need to find a highly-experienced attorney tax attorney. Your tax attorney will examine all of the records that were given to the IRS for inaccuracies and inconsistencies. The IRS will be required to prove intent and that can be a pretty high hurdle. If the errors on the tax return seem to be small or something your overlooked due to haste, chances are likely that an intent to defraud cannot be established.
Hire a tax attorney with a track record and years of experience. A skilled attorney can go over your records and make reasonable assumptions regarding your intent or lack thereof. While millions of people commit tax fraud every year, it’s still only a small percentage of the overall population. If you can account for the discrepancies on the return, you have little to worry about. But even instances where the math may seem a bit fuzzy, the IRS still must show intent. This is way you need an experienced tax fraud attorney on your side.
When the IRS begins a tax fraud criminal investigation on you, then it is time to lawyer up. The stakes are too high for you to take tax criminal investigations lightly. For you to be convicted of tax fraud, your intentions, as well as your actions, will be factored in. It is prudent to work with specialist tax defense lawyer to avoid a conviction. It is also important for you to be aware of activities that can trigger criminal tax fraud investigations.
Elements of fraud
The IRS has certain activities that it considers to be elements of fraud. The four main ones include deception, submitting false or altered documents, misrepresenting crucial or material facts and failing to submit returns. These elements may trigger criminal investigations, especially if these activities are carried out over a long period of time. Failing to submit your returns for one year may not constitute tax fraud unless you earn a huge sum of money.
Tax fraud and tax evasion
Tax evasion and tax fraud are considered serious offenses by the IRS. A criminal charge can lead to hefty fines, prosecution fees, interest tax on the amount owed, jail time and public humiliation. The IRS data portal contains your name and place of residence. This means you can easily get a knock on your door from an IRS investigator. When this happens, you need to immediately consult with a criminal tax lawyer. In most cases, the agents are usually making inquiries based on suspicions that you are involved in criminal tax activities. It is best to resolve this matter before a formal investigation begins. After this, any information you give or say to them can be used against you. An attorney will guide you on how to respond so that you do not incriminate yourself. The other benefit of working with a lawyer is the confidentiality clause. These lawyers cannot share your tax information with the IRS or any other party.
The need for a criminal tax defense lawyer
While a CPA can help in understanding tax issues, they may not have information on the legal issues. There are tax laws and codes that apply in different situations. These require special expertise. These laws are also complex and subject to changes and regular amendments. When facing criminal tax charges, you need the right information and advice. This is why it is in your best interest to get expert and legal help. Criminal defense lawyers have dealt with different situations. This exposure affords them great insight into your case. They also understand the ins and outs and possible defenses they can use.
It is also crucial to hire an attorney because there is a time limit in which you are expected to respond to the allegations. During this time, you need to prepare information to prove your case or to ask for a plea bargain. On your own, you may not have the time and know-how to have this information ready within the allocated time frame. Lawyers work with a team of associates who can help to prepare the documentation needed. This gives you time to conduct your normal daily operations without any interruptions.
A criminal tax conviction can have far-reaching consequences on you or your business. In most cases, it could mean that you close your business doors for a long time. If the charge is serious, you stand to face jail time. The investigations conducted by the IRS are thorough, as such, you need to be well represented by a criminal defense attorney. The attorney’s skills and know-how can be a huge asset in your case.
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