The Internal Revenue Service (IRS) has an extensive job in the federal government to ensure business owners pay the taxes required under the Internal Revenue Code. The IRS cannot analyze every tax return filed in a given tax year. To combat this problem, the IRS has learned to focus their inquiries on members of certain groups or certain tax behavior which often accompanies fraudulent filings. Once a return is flagged, the IRS will conduct an audit to determine if the correct amount of taxes were paid, and whether the action was a mistake or a willful evasion. It is at this point where the IRS will decide whether the case belongs in the Civil Division or the Criminal Investigations Division (CID) of the IRS.
The offense of filing a fraudulent return requires a person to willfully file a false statement with the IRS. This means a filer must know what is required under the Internal Revenue Code and still choose to file the falsity. There is a fine line between making an honest mistake and committing a federal crime. This line will decide which division of the IRS handles the investigation. This reality makes it crucial that anyone under investigation hires an experienced tax fraud attorney early in the process.
Most criminal tax investigations begin with a civil audit, or a referral from a bank or an unfriendly peer of the filer. Early in the process, the IRS will be calculating whether the matter should be handled by the Criminal Investigations Division. If an agent with the CID obtains the case, then a real risk exists that criminal charges will follow. Luckily, the filer has multiple opportunities to steer the investigation back to the civil division. These opportunities are created by the slight variations between criminal and innocent activity, and make criminal tax cases truly unique in our system of justice.
A criminal tax case will always start with an investigation from an agent with the CID. When the agent’s investigation is complete, they will make a decision on whether the case should be referred to the Department of Justice (DOJ) in D.C. If they choose to make the referral, an attorney with DOJ will review the file and make a recommendation. If DOJ decides to move forward with criminal charges, the case is returned to local counsel for prosecution. Local counsel will make the decision on whether to indict. At each juncture in this road map, a tax filer has the opportunity to challenge the willfulness of their conduct, the accuracy of the government’s numbers, and the proposed tax loss under the IRC. For this reason, it is important to contact a competent tax fraud attorney to advocate a defense at each step of the process. It is imperative the tax filer has representation to meet with the CID agent, the DOJ attorney, and local counsel. There are numerous cases where effective representation early can push the case away from the criminal umbrella.
Anyone under investigation by the CID needs a competent criminal tax lawyer as soon as an agent makes contact. The attorneys at Odom, Davis & Hobson have been handling criminal tax cases for over 40 years. We have walked numerous clients through the process outlined above with good results. We deal with criminal tax cases on a daily basis, and understand the laws and procedures in this area. If we are unsuccessful in resolving the case civilly, our tax fraud lawyers are experienced litigators who are ready to take these cases to trial.
We have two important goals in any criminal tax case. First, convince the government the case should be handled by the civil department. Second, if the case does end in a criminal indictment, to build a defense against the allegations and take the facts before a jury.
In 2019, Brian Hobson and Wendell Odom successfully pulled two cases out of the CID and back under civil audit. Both cases involved allegations of businesses underreporting income. Both clients are no longer in the criminal system, and prison time is off the table.
Leave your criminal tax case in the hands of qualified tax fraud lawyers.
Contact us today for a consultation.
Below are various articles written by our attorneys relating to criminal tax matters:
Criminal Tax Defense Articles
ANATOMY OF A CRIMINAL TAX CASE: PART TWO Wendell Odom Before tackling a criminal tax case, one needs...
CIVIL TAX CASE VERSUS CRIMINAL TAX CASE Tax Fraud vs. Tax Avoidance Tax avoidance generally describes...