Frequently Asked Questions in Criminal Tax Cases
What triggers a criminal tax investigation?
Criminal tax investigations are normally triggered by suspicious reports from banks, referrals from the civil division of the IRS, or disgruntled ex-spouses or business partners that make a referral.
How do you know when you are under criminal investigation for tax matters?
The first sign a taxpayer is under investigation is normally a visit from criminal investigators with the IRS. Federal agents want to get the taxpayer to answer questions before they have a chance to hire an attorney. In that vein, federal agents will show up at the taxpayer’s home or business to ask questions early in the investigation.
Which federal agency investigates criminal tax matters?
Criminal tax cases are investigated by the Criminal Investigations Division of the IRS (CID). At times, CID will team up with other agencies, like the FBI or OIG, if the target of the investigation is involved in matters beyond mere tax compliance.
What should I do if criminal agents with the IRS come to my home?
If criminal agents come to your home, it is imperative that you do not answer any questions. Criminal tax matters are complicated and taxpayers may make statements that seem innocuous, but later become key pieces of evidence in their case. If federal agents come to your home, you should politely decline to answer any questions without a lawyer and call a criminal tax attorney immediately.
Do I have to provide documents if the IRS subpoenas them?
The short answer is yes. A person does not have a fifth amendment privilege in the contents of a document. While a person under subpoena may have a privilege against actual production, financial documents are discoverable in the investigative process.
How long does a criminal investigation by the IRS take?
Criminal investigations with the IRS can take over a year to resolve. The investigation requires the government to collect documents, review financials, draft a special agent’s report, recommend action to the Department of Justice, and work with the criminal tax defense attorney to resolve issues. This process is lengthy and investigations that last two to three years are common.
Can I go to jail for filing a false tax return?
Yes. Knowingly filing a false tax return is a violation of 26 U.S.C. § 7206. This offense carries a sentence from 0-5 years in federal custody. The length of the sentence will be dictated by the amount of tax loss and other considerations.
Do you need a specialized attorney for criminal tax cases?
Yes. The nature of the investigation, legal defenses, and need for knowledge of the tax code make it imperative that a taxpayer hire an attorney with experience in criminal tax.
Can I get probation for tax fraud?
Yes. It is possible to obtain probation on nearly every criminal tax violation. However, the likelihood of obtaining that sentence is dictated by the amount of tax loss in the case, the taxpayer’s ability to make restitution, and other personal characteristics.
What is the difference between tax fraud and tax evasion?
Tax fraud is a global term that encompasses all criminal tax offenses, including tax evasion and filing a false return. Tax evasion requires the government to prove the taxpayer committed overt acts to conceal a criminal tax offense. Filing a false return requires proof the taxpayer knowingly filed false information in their return.
Can you stop a criminal investigation by paying off your taxes?
While paying off the tax debt can provide leverage in negotiations, most criminal tax cases do not go away if the taxpayer pays their debt. If this was true, there would be no incentive for taxpayers to follow the criminal rules as they could merely set money to the side to make payments during an investigation.
How do you get a criminal tax investigation back to the civil division of the IRS?
Every case is different. Criminal tax investigations are closed down, and sent back to the civil division, when a valid defense exists and/or a criminal tax attorney can show that the tax loss is far less than originally believed.
Are small tax preparation businesses legitimate?
Some small tax preparation businesses are perfectly legitimate. However, there are small firms that violate the criminal provisions of the Internal Revenue Code. Taxpayers should be leery of any tax preparation firm that promises huge refunds; normally by taking losses on a side business that does not exist or inflating business expenses.
What happens if you do not file your tax returns?
If a taxpayer fails to file a return by the due date, the civil division of the IRS will begin attaching penalties for not filing and not paying the tax timely. These penalties can nearly double the tax debt over time. If a taxpayer fails to file returns for multiple years, they can be charged with the criminal offense of failure to file.
Is tax evasion a felony offense?
Yes. In the federal system, tax evasion is a felony. If convicted the taxpayer faces 0-5 years in federal prison per count.
Is filing a false return a felony offense?
Yes. In the federal system, filing a false return is a felony. If convicted the taxpayer faces 0-5 years in federal prison per count.
Is not filing your tax return a criminal offense?
Yes. Failing to file a tax return by its due date is a misdemeanor offense in the federal system. However, this offense is not normally charged unless the taxpayer fails to file their return for multiple years.