Michigan's Tax Enforcement Unit selects cases using data analytics that flag unusual patterns, audit findings suggesting willful misconduct, and tips from disgruntled employees or business partners. Once the Treasury opens a criminal investigation, they build cases designed for prosecution, not resolution. Their investigators work directly with prosecutors to secure indictments.
Michigan prosecutes tax evasion as a felony, with potential consequences including imprisonment, plus fines and restitution. Prosecutors must prove willful intent to evade taxes through affirmative acts of concealment or deception. Common acts leading to prosecution include underreporting income, maintaining double sets of books, or using cash to avoid creating records.
Submitting false information on Michigan tax returns becomes criminal when prosecutors can prove deliberate falsification rather than negligent mistakes. These cases often arise from civil audits that uncover patterns suggesting intentional misrepresentation. Defense requires showing reliance on professional preparers, inadequate record-keeping systems, or legitimate explanations for discrepancies.
Michigan's criminal tax enforcement has intensified over the past decade, with the Department of Treasury pursuing cases that previously would have remained civil matters. State prosecutors increasingly file criminal charges for tax evasion, filing false returns, and employer withholding violations, often seeking felony convictions that carry imprisonment and substantial financial penalties.
The Michigan Treasury's approach to criminal tax cases differs from that of the IRS. State investigators often complete investigations more quickly and coordinate closely with local prosecutors who are familiar with tax crime prosecutions. Michigan courts handle these cases under state criminal procedures, which can be more favorable for certain types of evidence challenges but require attorneys familiar with both tax law and state criminal defense practices.
Common triggers for Michigan criminal tax investigations include significant underreporting discovered during civil audits, failure to file returns for multiple years despite notices and collection efforts, employee reports of cash skimming or unreported income, and suspicious banking activity identified through data matching programs. The state also pursues criminal charges against employers who fail to remit withheld taxes, particularly when the amounts are substantial or the violations span multiple quarters.
Business owners face particular vulnerability in Michigan tax investigations because state investigators often interpret aggressive tax positions or creative accounting as evidence of willful evasion. Sales tax compliance issues frequently escalate into criminal investigations, especially for cash-intensive businesses such as restaurants, retail stores, and service providers, where skimming allegations are common.
Professional tax preparers also face increased scrutiny, with Michigan pursuing criminal charges against preparers who file false returns for multiple clients or participate in tax schemes designed to artificially reduce clients' tax liabilities. These cases often involve conspiracy charges that can result in significant prison sentences.
If convicted, defendants face restitution orders for all unpaid taxes, civil fraud penalties that can multiply the tax owed, professional license suspensions or revocations, and a permanent criminal record that diminishes future employment and business opportunities.
When Michigan Treasury investigators open an investigation, the process moves forward whether you're represented or not. Having experienced legal counsel from the start helps ensure your rights are protected and positions you to respond strategically.
Contact our office immediately at (248) 262-3400 for a confidential case review. The earlier we're involved, the more options we typically have, whether that means resolving the matter civilly, negotiating a favorable outcome, or building a strong defense.
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