Tips for defending against IRS Tax Fraud investigations.
When it comes to committing tax fraud & IRS tax crimes, penalties are no joke. The IRS can leave you with nothing, and even throw you in jail. Here’s some advice from our Michigan Tax lawyer, Venar R. Ayar on how to protect yourself from IRS allegations of tax evasion, what to expect, and how to handle it.
1. Get a lawyer. If the IRS criminally investigates you, this is crucial. Because of attorney-client privilege, communications between a client and his attorney are protected, keeping everything confidential. The limited tax practitioner-client privilege does not extend to criminal tax matters.
2. Tax crimes are most likely spotted during an audit. If you are caught by an auditor in a tax lie or fraud, you may be penalized or your case may be referred to the IRS’ criminal investigation division (CID).
3. Auditors will look for tax fraud. Also known as tax evasion, this is a willful act, with intent to defraud the IRS. For example, using a false social security number, keeping another set of financial books, or claiming a blind spouse as a dependent when you are single are all justified. To your advantage, they will usually give you the benefit of the doubt. An absent amount of money on your tax return, overstated, or phony deductions and exemptions are also reasons to be punished by the tax fraud civil penalty.
4. Negligence and fraud are not always clear. A mistake on your tax return will cost about a 20% penalty, while tax fraud will cost you a 75% penalty tacked onto your tax bill. Tax fraud examples include multiple sets of books of record for a business, false receipts, and altered checks. Usually, the auditor will not tell you if a criminal tax fraud referral has been made.
5. Alleged tax fraud cannot be combated easily. Defenses raised against tax fraud allegations are: cash hoard, nontaxable income, and honest mistake. The IRS does not typically accept any of these defenses at face value. In this case, a skilled attorney will be your most useful weapon.
6. Lying will only make it worse. If an IRS auditor believes you’ve cheated on your taxes, they can either impose a penalty for fraud, or begin a criminal investigation. In this case, they can get information from law enforcement agencies, and even other IRS divisions. Also, to ask someone else to lie to the IRS on your behalf is a separate crime.
7. Unless formally charged, you may not know of an investigation. But, you may hear from your friend, employee, accountant or lawyer. The CID will usually investigate cases involving $20,000 or more.
8. You will be the last source. If the CID is building a case against you, chances are they have already contacted potential witnesses, and looked at thousands of records. If they still want to talk to you, you are probably recommended for prosecution. They will be looking for a confession from you.
9. Know your rights. A special agent must contact you immediately if you are the target of a tax fraud investigation. He will read you a version of the Miranda rights—the right to remain silent, the right to have an attorney, and the warning that anything you say can be used against you. Know that it will be.
10. If you are convicted, consequences are high. If you put the government through a trial, there is an 80% chance that you will be send to federal prison for tax fraud. However, if you reach a plea bargain without a trial, chances are that you could be fined and/or placed on probation, given home confinement, or sent to a halfway house.
Reasons You Can be Charged
If the Criminal Investigation Department recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud. For more information, click here.
If you fall under this category, and want to learn more about how to protect yourself, feel free to give us a call, or send us e-mail here.
[author] [author_image timthumb=’off’]https://www.ayarlaw.com/wp-content/uploads/2013/02/venar-about-sm.jpg[/author_image] [author_info]Michigan tax lawyer, Venar R. Ayar, founder of Ayar Law Group, holds ten years of experience as an accounting specialist and tax lawyer. He earned his Juris Doctor at the University of San Diego School of Law, receiving a Master of Laws in Taxation—the highest degree available in tax. His main focus has become Michigan tax resolution as well as IRS tax resolution, including individual and business tax matters; tax planning, tax compliance and white-collar criminal defense. His business background has helped him to become personable and understanding in his work. Representing clients before the IRS, Ayar’s practice and experience has proved him as an honest and dedicated leader in the realm of Michigan tax lawyers. Click here to contact your Michigan tax lawyer, Venar Ayar. [/author_info] [/author]