What Triggers a Federal Tax Evasion Investigation?

There are several red flags that may prompt the IRS to open a criminal probe, including:

• Large, unexplained discrepancies between your reported income and bank deposits or lifestyle
• Suspicious activity like frequent large cash transactions or transfers to offshore accounts
• Tax returns that differ substantially from prior years without explanation
• Evidence of hiding ownership of assets or income sources
• Tip-offs from whistleblowers, disgruntled employees, etc.

If the IRS believes you deliberately tried to cheat on your taxes, they have the authority to conduct an in-depth investigation that may involve subpoenas, interviews, property searches, and more.

Potential Tax Evasion Penalties

Tax evasion is a felony charge, meaning potential penalties are severe. Exact punishments depend on the extent of fraud and amount of tax owed. Possible sanctions include:

• Up to 5 years in federal prison and $250,000 in fines for each count
• Restitution for all back taxes plus interest and penalties
• Forfeiture of property or other assets involved in hiding income
• Permanent criminal record impacting future employment, finances, etc.

In many cases, the IRS will also audit several previous tax years to determine the full scope of evasion. The goal is to recoup every dollar possibly owed – which can add up to staggering sums with interest and penalties.

Key Defenses in Tax Evasion Cases

Lack of Intent to Defraud

Since criminal tax cases require proving intent, we build a defense by showing there was no purposeful deceit or concealment of income. Common arguments include relying on a tax preparer’s advice or misunderstanding reporting responsibilities.

Procedural Violations by the IRS

We scrutinize whether IRS agents followed proper protocols when gathering evidence and building a case. Demonstrating Constitutional violations of rights or other procedural missteps can get charges dismissed.

Negotiating Alternatives to Prosecution

In some situations, we may be able to negotiate alternatives to criminal charges, like reaching a civil settlement admitting tax deficiencies but avoiding prison. These options still carry financial penalties but help prevent a felony record.

Attack Credibility of Government Informants

Often, the IRS relies heavily on informants or whistleblowers to identify potential tax evasion. We thoroughly vet these sources to reveal credibility issues, personal grudges, or incentives to fabricate evidence against the accused.

Appealing Tax Deficiencies

Part of the defense strategy involves formally contesting any tax deficiencies assessed by the IRS through the appeals process. Successfully reducing alleged unpaid taxes undermines asserted damages.

Proving Reasonable Reliance on Tax Professionals

Another method for defeating criminal intent is demonstrating good faith reliance on the advice of CPAs, tax attorneys, or other tax preparers. The burden then shifts to proving negligence on their part versus yours.

Uncovering IRS Agent Misconduct

While rare, we also investigate whether IRS agents themselves crossed ethical lines or failed to properly assess reasonable defenses in building a case. Evidence of misconduct weakens the credibility of allegations.

Are You Facing Tax Evasion Charges?

Dealing with a federal criminal tax investigation can be an intimidating and high-stakes ordeal. However, an experienced Philadelphia tax attorney can advise on the pros/cons of defense strategies and build a case to protect your rights. Don’t wait to seek legal counsel if you suspect you are being targeted for tax evasion. Call today for a free, confidential case assessment.