Decoding the Implications of a Target Letter
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Decoding the Implications of a Target Letter
Receiving a target letter from the IRS can be an unsettling experience. This type of letter indicates that you are under investigation for possible criminal tax violations. Understanding what a target letter means and knowing how to respond can help you navigate this difficult situation.
What is a Target Letter?
A target letter, sometimes called a subject letter, is sent by the IRS to notify you that you are the target of a criminal tax investigation (source: Reddit). This means the IRS has evidence suggesting you may have committed tax crimes or violations of tax law.
Common reasons for receiving a target letter include (source: Avvo):
- Underreporting income on your tax returns
- Hiding offshore bank accounts or assets
- Engaging in abusive tax shelters or schemes
- Committing tax fraud or evasion
A target letter does not necessarily mean you will be criminally prosecuted. However, it does indicate the IRS has focused its investigation specifically on you.
What Should You Do After Receiving a Target Letter?
If you receive a target letter, you should not ignore it (sources: Reddit, Quora). Here are some steps to take:
- Contact a criminal tax defense attorney immediately. An experienced lawyer can help protect your rights and guide you through the process (source: LawInfo).
- Do NOT speak to IRS agents without your attorney present. Anything you say can be used against you (source: FindLaw).
- Begin gathering and preserving financial records. Your lawyer can request documents from the IRS case file through the discovery process (source: Avvo).
- Consider if civil settlement is an option. In some cases, reaching a monetary settlement with the IRS can resolve a criminal tax investigation (source: Quora).
What Are the Consequences of a Target Letter?
The implications of receiving a target letter include:
- Possible criminal charges – Tax crimes like tax evasion or filing a fraudulent return can result in fines up to $100,000 and imprisonment up to 5 years per offense (source: Reddit).
- Asset seizures – The IRS can seize property and assets suspected of being involved in illegal tax activities (source: Quora).
- Civil fines and penalties – In addition to criminal penalties, you may face substantial civil fines equal to up to 75% of the unpaid tax (source: Avvo).
However, hiring an experienced criminal tax attorney affords the best chance to mitigate these consequences and even avoid prosecution in some circumstances (source: LawInfo).
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Strategies for Responding to a Target Letter
Upon receiving a target letter, a swift, strategic response guided by counsel can help control damage. Possible responses include (sources: Reddit, FindLaw):
- Submitting a “noisy” response to buy time and access to the IRS’ evidence files.
- Presenting evidence of reasonable reliance on a tax advisor’s counsel.
- Arguing unconstitutional IRS procedures were used to obtain evidence.
- Negotiating a favorable plea deal or settlement agreement pre-indictment.
An attorney experienced with the IRS can advise if such responses may apply in your case.
Takeaways for Handling a Target Letter
Receiving a target letter from the IRS is serious, but strategic action can help mitigate risks (source: Quora). Key takeaways include:
- Promptly contact a criminal tax defense lawyer for advice and representation.
- Do not communicate directly with IRS agents when under criminal investigation.
- Explore settlement options your lawyer may be able to negotiate.
- Be proactive in responding to the letter rather than ignoring it.
With an experienced legal guide, you can decode the implications of an IRS target letter and map out an appropriate response. This affords the best opportunity to resolve the tax investigation favorably.
Resources
For more information, check out these additional resources: