Badges of Fraud: What Sets the Alarms Off at the IRS?

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A new client once came to me saying she had made an error in preparing her tax return and inadvertently took a deduction to which she was not entitled. “Will I go to jail if I’m audited?” The answer of course, is no. If that were the case, you might as well surround the country in barbed wire and imprison all of us. After all, I’m sure almost everyone in this country has made an error or misunderstood a tax law and claimed a deduction they shouldn’t have or failed to report some income because the reporting document got lost in the mail or misplaced.

But some taxpayers go too far. Their tax returns read like a fiction novel. Therefore, IRS auditors have been trained to spot the hot issues which usually are present with dishonest taxpayers.  These hot issues are called by the IRS as the “Badges Of Fraud” which could result in your case being referred to the IRS Criminal Investigation Division (CID).

 The Badges Of Fraud include:

  • understatements of income;
  • inadequate records;
  • failure to file tax returns;
  • implausible or inconsistent explanations of behavior;
  • concealment of assets;
  • failure to cooperate with tax authorities;
  • engaging in illegal activities;
  • attempting to conceal illegal activities;
  • dealing in cash; and
  • failure to make estimated tax payments.

If you have any of these tax problems and you are audited by the IRS you may need to engage a tax fraud attorney. Actions you take during the course of a tax audit can turn a run of the mill tax controversy into a tax fraud case. For example, lying or giving evasive answers to IRS investigators, delaying tactics, and other actions designed to mislead IRS agents are all indicia of tax fraud.

The penalties for criminal tax fraud are very serious. They range up to 5 years in jail, plus fines of up to $500,000, plus the costs of prosecution for each separate tax crime. Once the criminal tax case is completed CID will refer the case back to the IRS Examination Division where the taxes will be assessed, and the IRS can be expected to add on the civil tax fraud penalty, on top of any criminal tax fraud fines.

Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.

Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.

IRS Traps Gentlemen’s Club Owner Who Filed False Tax Returns And Maintained Two Sets Of Books.

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You can’t have it both ways. More than one small business owner has either underreported his income or overstated his business expenses in order to save on income taxes. But that can come back to haunt them when they go to sell the business. While not universally true, most buyers base their offer on the cash flow from the business. Low income means a low selling price. That was the situation in this case. The big difference was the buyers were undercover IRS agents.

John M. Potter owned and operated a “gentlemen’s club” called Potter’s Pub, Inc. Potter’s Pub was a cash-based business that derived receipts from food and drink charges run through the cash register, door cover charges, juke box moneys, pool table receipts, and moneys paid to the pub by the dancers for the privilege of “dancing”. Mr. Potter was the president and sole owner. For each year at issue he filed, and signed as president, a Form 1120, U.S. Corporation Income Tax Return, for Potter’s Pub. Those returns reported losses for 2002 and 2003 and zero taxable income for 2004 and 2005. Mr. Potter’s individual income tax returns for the years at issue reported no wages, dividends, or other income from Potter’s Pub on the returns.

In December 2006 IRS Special Agents engaged in an undercover investigation of Potter’s Pub posing as buyers interested in acquiring the business. Mr. Potter assured the undercover agents that Potter’s Pub was much more profitable than it appeared. He explained that he deposited in the corporate account only enough of the business revenues to cover its expenses and that he wired the balance of its revenues to his personal bank account in Florida. These wire transfers were structured in amounts less than $10,000 to avoid reporting obligations by the bank to the IRS. In reality, Mr. Potter told the undercover agents, Potter’s Pub grossed more than $1 million annually and he took home between $400,000 and $520,000 each year. He showed the agents clandestine sales ledgers for 2003 and 2004 that supported the gross receipts he claimed, acknowledging that it might have been unwise to maintain documentary evidence of his skimming.

During a subsequent search of Potter’s Pub, IRS Special Agents seized upwards of $200,000 in cash and obtained the set of clandestine sales ledgers that tracked its daily receipts. These ledgers confirmed that Potter’s Pub’s annual receipts for 2002 to 2005 were vastly in excess of the amounts that Mr. Potter had reported to the IRS. The difference between its actual gross receipts and the gross receipts reported on the company’s Forms 1120 for those years exceeded $2 million.

In January 2009 Mr. Potter was criminally charged with eight counts under Section 7206(1) and (2) for making and subscribing false tax returns, and for assisting in the preparation of false tax returns, for himself and Potter’s Pub. In May 2009 he pleaded guilty to one count of making and subscribing a false Form 1120 on behalf of Potter’s Pub for 2002. Pursuant to his plea, he was sentenced to 18 months’ prison time and supervised release for one year. He was also ordered to pay restitution of $400,000.

Don’t think the case above could happen to you? In a case some years ago a taxpayer was selling his business and divulged the second set of books to the buyer. At some point the buyer had a falling out with the seller and reported him to the IRS.

One of the dangers of filing false returns, other than the obvious one of problems with the IRS (and the applicable state), is that how you deal with other parties who are interested in your financial position. For example, you’re going for a bank loan for your business, or a home mortgage, a car loan, or, as in this case, you’re trying to sell your business. If you present financials that conflict with your tax return you run the risk being accused of defrauding the lender or buyer. Worse, the financials presented to the bank can be used as evidence of fraudulent intent with respect to the tax returns.

Already filed returns which can be considered fraudulent? The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

How To Stay Out Of Jail: Lessons To Learn From The “Queen Of IRS Tax Fraud”

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Crime doesn’t pay. Despite using money from crime to temporarily fund a lavish lifestyle, Rashia Wilson of Tampa, Florida, learned her lesson the hard way before a Federal District Court Judge in July 2013 when she was sentenced to 21 years of prison for Tax Fraud and Weapons Charges. She is also ordered to pay restitution of more than $3 million. At the time of sentencing she was just 27. When she is released, her children, currently all in elementary school, will all have graduated from high school. Her youngest child will be 23.

While Wilson was briefly able to cash in on her crimes before landing a record prison sentence, the details of her spree read like a “What Not To Do” map when stealing from the government. If you’re one of those folks pondering how best to stay out of jail, here are a few tips:

1. Don’t steal. That should be obvious but clearly, it’s not. Stealing from the government – in particular, identity theft – is on the rise and as a result, the IRS put identity theft resulting in tax fraud at the top of its list. In the scheme, thieves like Wilson access your personal information including your name, address and Social Security number to fraudulently file a tax return and claim a refund without your consent. Wilson gleaned much of the information she used to file fraudulent returns from medical records: in addition to printouts of medical records, investigators found thousands of ID numbers at her home.

In order to combat this level of fraud, the IRS now has 3,000 people working on identity theft related cases, more than twice the number from two years ago. So they’re watching you. If, on the other hand, you believe you are at risk of identity theft due to lost or stolen personal information, contact the IRS Identity Protection Specialized Unit at 800-908-4490.

2. If you did steal, don’t talk about it. Wilson had a big mouth. She liked to talk about herself and her money. She also liked to throw it around. She used the millions she stole from others to finance a showy lifestyle, including $30,000 on her 1-year-old’s birthday party, and $90,000 on a 2013 Audi (which she bought using a money order). She wanted to show off. And that’s exactly how she caught the eye of investigators. Her behavior prompted U.S. District Judge James. S. Moody Jr. to remark at her sentencing, “She knew what she was doing was wrong. She reveled in the fact that it was wrong.”

3. If you did steal, don’t expect your privacy settings on Facebook or use of a fake name to protect you. I don’t care what you think you know about privacy settings, when you put something out there on Twitter or on Facebook, it’s not protected. As a taxpayer, that means you should avoid posting personally identifying information like tax ID numbers and your address (the IRS Facebook page won’t allow you to post comments for that reason). And you should certainly avoid posting photos of yourself surrounded by stacks of cash with such gems as:

I’m Rashia, the queen of IRS tax fraud. … I’m a millionaire for the record. So if you think that indicting me will be easy, it won’t. I promise you. I won’t do no time, dumb b——.

In additional when you sign up for Facebook, the terms of use indicate that “Facebook users provide their real names and information” and you agree that “you will not provide any false personal information on Facebook.” Apparently, this is about the only rule that Wilson followed. She used her real name to create a personal page on Facebook where she regularly bragged that she couldn’t be arrested and teased the police, posting entries like:

I’M RASHIA, THE QUEEN OF IRS TAX FRAUD… I’m a millionaire for the record, so if U think indicting me will B easy it won’t, I promise you! U need more than black and white to hold me down N that’s to da rat who went N told, as if 1st lady don’t have da TPD under her spell. I run Tampa right now.

Granted, that feels like it’s written in code but if you can fumble your way through it, you get the gist. And yes, in case you’re wondering, Wilson isn’t college educated. Or high school educated. Or even middle school educated. She failed the 5th and 6th grades and that’s as far as she got. A lack of punctuation and, heck, let’s face it, actual consonants and vowels, didn’t hold her back from blasting authority figures on Facebook. Turns out, they were paying attention.

Investigators worked for two years to gather evidence against Wilson and a host of other fraudsters as part of Operation Rainmaker so dubbed because of the amount of money that was raining down. Included in that group was Wilson’s boyfriend, Maurice “Thirst” Larry, and a friend, Marterrence “Quat” Holloway.

4. Don’t assume that your luck won’t run out. Born into poverty to a coke addict and a father in prison, Wilson quickly glommed on to a life of crime. She dropped out of school in the 7th grade. Since then, she has been arrested 40 times and held felony convictions for grand theft and burglary, but never did any time in a state prison. She came to believe that her streak would continue, bragging to practically everyone that she would never do any time. That streak ended July 2013.

5. Hire tax counsel now. The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

IRS Trolling Social Media Looking For Tax Evaders

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Thanks to Big Data analysis and digital information-gathering tactics, the IRS employs a more watchful eye than ever especially with the fiscal challenges faced by the Federal government, the pressure for the IRS to recover lost revenue has never been higher. Conveniently enough, the IRS has made massive investments in its computing power and tools for crunching big data, allowing for more automation and rapid analysis. That means a greater capacity for robo-audits and less room for honest mistakes.

The IRS is reportedly using data from social media on people who file fishy-seeming taxes or don’t file at all. The IRS loses roughly $300 billion per year to tax evasion; and in times of budget cuts, with a smaller staff, the agency has allegedly turned to both data mining and data crunching.

In its quest to find and audit tax dodgers, the IRS is said to use online activity trackers to sift through the mass amounts of data available on the Internet. This data is then added to the information the agency already has on people, such as Social Security numbers, health records, banking statements and property rolls.

But the IRS efficiency in catching tax evaders is not just from an improvement in the tools it uses but also from the fact that the data itself is richer and more varied than ever, drawing increasingly from whatever details about our digital lives the IRS can get its hands on, including information that isn’t publicly accessible.

In an April 2013 U.S. Senate Hearing, Senator Chuck Grassley (Iowa, Republican) asked Steven Miller, the IRS’ then acting commissioner, whether the IRS obtained a search warrant before reading private Facebook or Twitter messages. The Senator didn’t get an answer.

We don’t know the full extent of the IRS’s data-mining capabilities, but recent reporting has revealed new details. 

1. Analyzing Your Social Media Updates 

The social Web has been a boon for IRS investigators, who can use updates from Facebook, Twitter and other services to bolster its cases against alleged tax cheats. Information about work history, one’s physical whereabouts and even purchases can be gleaned from social networks. Some of it, like tweets and certain details from Facebook, are public. But should the IRS want to take a closer look, it supposedly has the means to do so, with or without a warrant. 

According to recent reports, the IRS cross-references data from social networks with Social Security numbers and then works in a host of other private data to look for suspicious patterns. 

the IRS is using online activity trackers to mine through massive amounts of data on sites like Facebook, Instagram and Twitter to look at photos and other updates that might offer a glimpse into vacations, home and car purchases and other goodies.

Facebook, Instagram, and Twitter have all become places where people post intimate details about their lives: vacation photos, work successes, buying a new house, car, or other cool stuff.

However, this information is also up for grabs by the Internal Revenue Service. So a word of advice: THINK BEFORE YOU POST. After all, do you really want IRS to like your Facebook update or be your newest Twitter follower?

2. Monitoring Digital Payments and Credit Card Activity 

The rise of commerce and digital payments has also given the IRS new sets of data to mine and analyze. The agency has long looked at taxpayers’ activity on ecommerce sites like EBay, but are now going deeper and getting a look at credit card transactions and other online payments. 

The IRS looks for potential auditing targets by matching tax filings to social media or electronic payments. The exact mechanism of this monitoring isn’t publicly known (lest they tip off tax cheats) but it is widely believed that it includes examining credit card transactions for the first time ever. And if the IRS feels it has cause to take a peek at your online payment data, it won’t have a problem doing so. 

3. Peeking At Your Email Usage 

While as of April 2013 the IRS said it would abandon its controversial policy that claimed the right to read taxpayers’ e-mail without first obtaining a search warrant, the IRS did not make the same commitment for other private electronic communications including when and how the IRS looks at email usage.

The IRS’ big data analysis tools are used in part for “tracking individual Internet addresses and emailing patterns.” That’s pretty vague. In theory, the IRS could glean some details about email usage simply by looking at browsing activity, whether that insight comes from an ISP or email service provider. 

Does that mean that the IRS has blanket access to everybody’s Gmail account for the purpose of feeding its data-crunching behemoth? That seems pretty unlikely. Instead, what the IRS likely does is to get a search warrant to access individual accounts for people who are already suspected of wrongdoing. It usually is easy for the IRS to be granted a search warrant and the taxpayer is not required not receives any notice that a search warrant was issued.

Conclusion

Of course, these days everyone from Google to Nike is cobbling our data together to create profiles of us.

Still, it’s different when the IRS does it. If Nike is analyzing your information, the worst consequence is that they market stuff to you that you don’t want and it’s annoying. However, if the IRS does it, the worst consequence is there could be legal ramifications, whether it’s fines, penalties or imprisonment. Which is why the sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

What Tax Crimes Can The IRS Charge You With?

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Unlike a civil tax examination, a criminal tax investigation has little to do with the assessment of additional tax. The purposes of a criminal investigation are (1) to detect suspected criminal tax offenses and (2) to refer those offenses for criminal prosecution. The government’s goal is to obtain a conviction that results in imprisonment, fines, and/or restitution.

Tax Evasion


This is a particularly broad, catch-all statute that subjects the taxpayer to fines of up to $100,000.00 ($500,000.00 for corporations) and imprisonment of up to 5 years for the willful attempt in any manner to evade or defeat any tax under the Internal Revenue Code. While used sparingly by the U.S. Justice Department, it nevertheless remains a potential trap for even the most innocuous and benign transgressions of the IRC.

Fraud and False Statements


Any person who makes a false or fraudulent statement, or assists another person to make a false or fraudulent statement in connection with documents submitted to the IRS, such as Form 433A or B, or an offer in compromise or a closing agreement, may be prosecuted under this statute and, if convicted, subjected to a fine of up to $100,000.00 ($500,000.00 in the case of a corporation) and imprisoned up to three years. Concealment of property from the IRS, or withholding, falsifying or destroying records, also subjects the person to prosecution under this statute.

Failure to File Returns, Supply Information, or Pay Tax


This is another broad statute that can be used to criminally convict a taxpayer for failing to file a tax return, filing an incomplete one, or not paying the tax that is due. The taxpayer may be fined $25,000.00 ($100,000.00 in the case of a corporation), plus costs of prosecution, and incarcerated up to one year in a federal prison.

If CID 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.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

How The IRS May Start A Criminal Investigation Against You?

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The IRS Criminal Investigation Division (“CID”) is made up of Special Agents who are duly sworn law enforcement officers who are trained to “follow the money”. CID may open up an investigation in higher profile cases as a result of coordination with the FBI, DEA, INS and other agencies. However, average citizens should not assume that they are immune from investigation by the CID. They may be targets of special programs, such as those involving tax protester groups, bankruptcy fraud, or bank deposits or currency exchange transactions involving cash of $10,000.00 or more. In addition, they may be referred to CID by Revenue Agents of the Examination Division or Revenue Officers of the Collection Division who have reason to believe that there may be fraud or tax evasion involved in the cases they are working. Finally, CID may open an investigation simply as a result of a telephone call to their “squeal” line if it feels that the call warrants further investigation.

A criminal case is the most serious kind of case that IRS can have against a taxpayer. Nothing even comes close to the impact of an investigation by the Criminal Investigation Division. If it results in a referral to the U.S. Justice Department and subsequent prosecution, the consequences may be devastating, including damage to the taxpayer’s personal and business reputation, financial ruin, break up of his or her family unit, and, worst of all, incarceration.

If you are contacted by Special Agents and asked to be interviewed, decline the interview and contact a criminal attorney immediately. Do not say anything to them. Anything you say may be held against you – even statements you may consider to be innocuous. For example, many criminal statutes require an element that is known as “willfulness.” Willfulness is a state of mind that cannot be demonstrated through direct evidence. The government must resort to circumstantial evidence to prove a state of mind, such as statements by the taxpayer. Therefore, even statements about the weather, depending on the context in which they are made, may be relevant to prove “willfulness.” An unwary taxpayer, encouraged by seemingly friendly and low-key Special Agents, may disclose information that is damaging to his or her case.

How do you know you have been contacted by Special Agents? They almost always travel in pairs, show their gold badges, and, as a matter of policy, usually read your “Miranda” rights on initial contact.

The need to retain counsel cannot be overemphasized. The criminal “game” is played by special rules and you need a representative who knows them.

If CID 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.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

Beware Of IRS Special Agents Who Travel In Pairs!

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An IRS Special Agent works for the IRS’ Criminal Investigation Division (“CID”). Special Agents are duly sworn law enforcement officers who are trained to “follow the money”. They investigate potential criminal violations of the Internal Revenue Code, and related financial crimes. Unless they are working undercover they will identify themselves with credentials which include a gold badge. The same gold badge appears on their business cards. Generally IRS Special Agents travel in pairs if they are going to interview someone. One to conduct the interview, and the other to take notes, and act as a witness if necessary.

If you are contacted by an IRS Special Agent it is because he or she is conducting a CRIMINAL investigation. It is possible that the Special Agent is only interested in you as a witness against the target of the IRS investigation. However, it is a bad idea to speak to Special Agent without a criminal tax attorney present. IRS Special Agents are highly trained financial investigators. If you are the target or subject of an IRS criminal investigation you are not going to talk your way out of it, by “cooperating”; instead you may be giving the IRS more evidence to use against you.

Even if the IRS Special Agent tells you that you are only a witness you should still consult with an experienced criminal tax attorney BEFORE speaking with an IRS agent. If you make misstatements that you think put you in a better light you could change your role from a witness into a target. The best tactic is to simply tell the Special Agent that you are uncomfortable talking to him until you have had a chance to speak with your attorney. Then ask him for his business card. In this way your tax attorney can contact the Special Agent directly, and determine the best course of action.

There are a number of statutes in the Internal Revenue Code that authorize the federal government to prosecute individuals, including those dealing with tax evasion, fraud and false statements, failure to file returns, failure to pay tax, etc. Some, like the tax evasion statute, are worded in particularly broad terms and may ensnare the unwary or careless taxpayers.

If CID 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.

The sooner you hire tax counsel experienced in criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco, San Diego and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

Seven Tips To Avoid Having To Check Into “Club Fed” For Tax Evasion

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Many criminal investigations start as a result of a referral from the civil side of the IRS. That is why for most taxpayers, a criminal investigation isn’t a first step, but rather the last step in a lengthy process to get you to resolve your tax debt even if it means that an IRS Special Agent will show up on your doorstep one day with cuffs in hand.

Additionally, while tax evasion and related charges are an important piece of the IRS Criminal Investigation Division (CID) charges, the government tends to link to other criminal activities like fraud, drug offenses, and money laundering. When it comes to criminal activities, other federal agencies – like the Federal Bureau of Investigation (FBI) and the Financial Crimes Enforcement Network (FinCEN) – can pursue these violations.

Tip # 1: File and Pay Your Taxes on Time

This seems obvious. But failing to file and pay on time happens all of the time for all kinds of reasons. With all the balance due notices the IRS will issue, it should be clear that the IRS just wants to get paid. Yet, time and again, once an investigation has been initiated, taxpayers either refuse to pay or don’t pay the tax due. While there may be valid reasons for nonpayment, when it appears that resources are available, not filing and/or nonpayment just makes a bad situation worse. At sentencing hearings, judges take note of whether taxpayers have made arrangements to resolve ongoing liabilities.

Tip # 2: Open Your Mail and Respond On Time

Whatever you do, don’t think that by not claiming or opening mail from the IRS that your tax problems will go away by themselves. If you’ve been chosen for examination or if the IRS has asked you to provide additional information about your return, it means you’re on their radar. In most cases, it does not mean that you’ve been targeted for criminal investigation, just that additional information is required. But failing to respond – especially if you have good reasons for your behavior – doesn’t help and in most cases, it raises the level of inquiry.

Tip # 3: Cooperate During an Examination

Nobody likes IRS audits. They trigger all sorts of strong emotions. Indeed, they make people angry, defensive, and combative. But none of that helps. And it could make a bad situation worse. Procedurally, criminal investigations are generally initiated from information obtained when a Revenue Agent (auditor) or Revenue Officer (collection) detects possible fraud. While there are guidelines that lead to criminal inquiries, there may be some wiggle room – but not for taxpayers who thumb their nose at the IRS and are not cooperative.

Tip # 4: Be Consistent

Very simply, no privilege applies when speaking to or making disclosures to the IRS. If you report sales of $500,000 to the state for purposes of sales tax, the IRS will want to see these numbers accounted for on the Federal Income Tax Return. It is not unusual for the IRS to exchange information with other law enforcement agencies — local and federal — throughout the country. Don’t assume that because you have not yet heard from one tax agency information provided to another tax agency is not being shared. Be consistent in your reporting. This is the only sure way of not waiving any red flags in front of the bull.

Tip # 5: Don’t Destroy Records

Destroying records can be a crime. And if there’s anything you don’t need, that’s additional charges. Once an investigation is opened, an IRS Special Agent will attempt to gather facts and evidence. This may include interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data including cash register receipts, bank statements, and deposit and withdrawal slips. Special Agents have even gone undercover to observe the lifestyle of many taxpayers, most especially those who own cash-based businesses to determine whether the business was hiding cash.

Tip # 6: Take Any Confrontation With IRS Special Agents As A Serious Matter

While there might be a temptation to roll the dice and see what happens, once criminal charges are filed, you have to take the matter seriously. Failing to file and failing to pay can result in criminal charges. Lying to federal investigators can result in additional criminal charges. It’s called perjury. Be smart. You have a right to remain silent – so use it!

Tip # 7: Hire a Criminal Tax Defense Attorney

Once a criminal investigation has begun, the wheels have been set in motion. After all the evidence has been collected, the IRS Special Agent will determine whether to recommend your case for prosecution or return it back to the field for completion of the audit. At this point, you’re not talking yourself out of charges. Your case will be referred to either the Department of Justice, Tax Division, or to the United States Attorney. At that point, it’s not a matter of simply mitigating penalties. You need to hire a criminal tax defense attorney who has experience in tax crimes and who has a solid reputation for being a zealous advocate.

Conclusion

If CID 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.

The sooner you hire tax counsel experienced with criminal tax matters, the higher the chance that further escalation of your case in the criminal arena could be avoided or limited.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

 

Are You Under Investigation For An Alleged Tax Crime? Protest Yourself!

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What is a Tax Crime?

Tax crimes include all crimes that are under the jurisdiction of the Criminal Investigation Division (CID) of the IRS. While there are dozens of criminal offenses defined in the Federal tax code, they generally all fall under one of two categories: crimes related to the filing of the return and crimes related to the failure to file a return. The most common crime related to the filing of a return is criminal tax evasion, which, at the Federal level, carries a maximum penalty of 5 years in prison and a $250,000 fine for individuals, plus the cost of prosecution. For taxpayers charged with criminal tax fraud for failing to file a return, the penalties can be just as severe: up to five years in prison plus a fine of up to $25,000. In addition to the tax crime provisions of the Internal Revenue Code, CID is also charged with enforcing certain other financial crimes, including: money laundering, structuring transactions to avoid reporting requirements, or aiding and abetting another in the commission of tax evasion. Tax preparers who file fraudulent returns for their clients can be charged with aiding and abetting tax fraud. Given the fact that return preparer fraud is one of the CID’s top operational priorities for this year, more preparers than ever are being charged tax crimes than ever before.

What to do if contacted by a criminal investigator

If you are contacted by a criminal investigator with the IRS, the best thing to do is indicate that you do not want to speak to the investigator, and immediately contact a California tax evasion lawyer. You will know that this person is from CID by checking his credentials and seeing that he or she is a “Special Agent”. A carefully crafted response from a qualified criminal tax fraud attorney can make the difference between being prosecuted for a tax crime and walking away from the investigation unscathed. While you are constitutionally protected against being forced to incriminate yourself, it is important to note that this right must be asserted. Simply ignoring the investigators will usually result in a summons being issued and you will be required to respond to the investigators or face criminal prosecution for failing to comply with the summons. If you have been contacted by the IRS and think you may be the subject of a criminal tax fraud investigation, you should contact a qualified criminal tax attorney before speaking to anyone else about the matter. It is important to note that conversations with an accountant, CPA, or “tax professional” are not always privileged and the other party may be forced to disclose what you have said to them. However, conversations with a criminal tax fraud attorney, even one that you have not retained, pertaining to your case are generally covered under the attorney-client privilege. Your tax fraud lawyer can never be forced to disclose your confidential conversations to anyone.

The differences between white collar crime attorneys and tax fraud attorneys

There are many white-collar crime attorneys who are willing to take tax evasion cases. However, only a full-time criminal tax lawyer is qualified to handle most tax cases. Because the existence and severity of most tax fraud crimes depends on the amount of the tax evaded, a thorough understanding of the tax code is indispensable to comprehensive representation. Unlike white-collar criminal lawyers, tax fraud attorneys are trained in and have extensive knowledge of the various provisions of the federal tax laws. Sometimes, the charge of tax evasion can be defeated by simply finding deductions and tax credits that the taxpayer failed to take advantage of, countering the effect of any omitted income or inflated deductions elsewhere on the return. A taxpayer who intentionally omitted income, or fabricated deductions on a tax return is not guilty unless they understated their tax due. A qualified tax evasion lawyer who knows the ins and outs of the Internal Revenue Code may be able to find enough other deductions and credits to offset the understatement of income, and beat a charge of tax evasion.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.

Careful What You Say And Who You Speak To When Under Criminal Tax Investigation

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Tax evasion stories aren’t covered in the news very often but the IRS still aggressively pursues tax cheats, particularly those who are accused of serious crimes such as filing a false return. It’s wise for all taxpayers to learn about the procedure and the possible penalties that come along with being prosecuted for tax fraud. Finding out how seriously the agency views these matters serves as a real deterrent against skimping on income tax forms.

Be Careful Who You Speak To

If you’re ever investigated by the IRS for possible tax crimes, it’s essential that you never speak to any of the agency’s representatives. If you owe a tax debt, communication with the IRS is usually helpful, since you can negotiate a possible settlement. In case of a criminal tax investigation, though, the IRS is not interested in assisting you to pay off your balance. The agency’s main goal is to gather evidence of your crimes and use it against you during the trial.

If you speak to an IRS agent on your own, the agent can use anything you said in the conversation as evidence to prove the agency’s claim. Simply agreeing that you owe a debt or that you neglected to file a return can sink your case. It’s also important to know that, if you have been working with a certified public accountant, you do not have any type of privilege to cover your communication. This means that your accountant can also be called as a witness against you during the trial.

Tax Perjury vs. Tax Evasion

You can be convicted of tax perjury simply by filing incomplete or incorrect information, even if it was unintentional. Tax evasion, though, is a far more serious charge. In this case, the IRS believes that you deliberately filed an incorrect tax return in order to avoid paying your rightful amount of income tax. Taxpayers who are found guilty of tax evasion often face stiff penalties, including fines and federal prison time.

The best way to handle your criminal tax defense during a tax investigation is to hire an experienced, qualified tax defense attorney who is familiar with both IRS tax law and your specific situation. He or she can give you both legal and financial advice that will help you navigate through the trial.

Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and elsewhere in California defend you from the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems and minimize the chance of any criminal investigation or imposition of civil penalties.