Tax Fraud and Evasion

If you are the subject of a criminal tax investigation for tax fraud or tax evasion charges, or you are seeking tax amnesty for unclaimed income, you need an experienced New York Tax Lawyer who understands the tax laws working for you. Get a free consultation with a skilled tax attorney today.

Types of Tax Crimes

There are several different types of tax crimes. You may be guilty of committing a tax crime if you intentionally avoid paying taxes by either 1) intentionally submitting false tax returns, 2) failing to file your tax return when tax is owed, 3) under-reporting your taxable income, or claiming excess deductions that reduce your tax liability, or 4) assisting others in the illegal conduct described above.

Tax Fraud and Evasion Investigations

A criminal tax investigation often originates from a referral from a civil tax auditor when they suspect illegal conduct. A criminal tax crime is usually investigated by either 1) the Internal Revenue Service by their Criminal Investigation Division (CID), 2) your State Attorney General or Tax Department, or 3) the county District Attorney, in the county that you reside.

These governmental agencies employ investigators and agents trained in law enforcement techniques and tactics, and act in a similar manner as police detectives to investigate the potential tax crime.

A criminal tax investigation for tax fraud or tax evasion is a very serious matter. Please do not discuss the tax issues with the investigators, or any other person until you obtain legal counsel who specializes in tax law issues. A criminal tax fraud or tax evasion charge against you has the potential to result in imprisonment. When you learn, or suspect that you may be the target of a criminal investigation, your best course of action is to immediately contact an experienced tax attorney since they have the training and experience to assist you.

Prosecution of Tax Crime

For IRS tax matters, once the tax investigation is completed and the special agent in charge of the case recommends prosecution, the IRS conducts many levels of review before a final decision is made to forward the case to the United States Department of Justice Tax Division in Washington, D. C., for prosecution. At the U.S. Department of Justice, Tax Division, prosecutors specializing in criminal tax crimes review the case and make the final decision whether the case should be prosecuted. If the Department of Justice, Tax Division, approves prosecution of the file, the case is transferred back to a local U.S. Attorney‘s office with the direction that the individual, or individuals, be prosecuted for the offenses alleged.

In most tax crime cases, whether for tax fraud or tax evasion, this multi-tiered review and approval process can work to your advantage. This is the case since there are a number of different opportunities for your counsel to influence your case before it ever reaches the final decision makers. If it is a State tax case, the State Attorney General or the County District Attorney, will decide if the case merits a prosecution, and your criminal tax attorney has the ability to influence this decision as well.

Under the Internal Revenue Code, a person who is convicted of felony tax evasion is defined as “[a]ny person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof…”. In addition to a felony conviction, one who is found guilty of felony criminal tax evasion shall be fined up to $100,000 for an individual and up to $500,000 for a corporation and/or face up to 5 years in prison. In addition to the fine and/or jail time, a felony-convicted taxpayer will also be responsible for the costs of prosecuting the case. The two basic types of evasion include: evasion of assessment and evasion of payment. The evasion of assessment includes failure to file or filing a false return. One common example we often see if where the IRS claims that not all of the taxpayers taxable income was included in their tax returns, based upon reviewing the taxpayers bank statements. Evasion of payment occurs after a tax is assessed and usually involves the concealment of assets available to pay taxes.

Tax fraud and false statements, under the Internal Revenue Code include willful statements and representations on any tax return or other document that “is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter.” Making fraudulent and false statements under the penalties of perjury are also actionable tax crime.

Criminal tax evasion and committing tax fraud are serious offenses that carry serious consequences. The common thread in these offenses is willfulness. A taxpayer must intentionally act or refused to act where required, but that is difficult to prove for all parties involved (the US Attorney or taxpayer).

Both the Internal Revenue Service and New York State take the evasion of paying taxes seriously and will conduct a criminal investigation if they believe that you are doing so. Therefore, tax fraud and tax evasion are serious charges. If either or both agencies are able to prove that you purposely did not pay taxes, you will face monetary penalties, as well as the possibility of prison.

You may be found guilty of committing tax fraud if you intentionally avoid paying tax by:

• Under-reporting taxable income
• Claiming excessive deductions, exemptions, or tax credits
• Knowingly falsifying tax returns
• Not filing your tax return when tax is owned
• Willful Failure to Pay
• Willful Failure to Keep Records
• Concealment of assets
• Failure to cooperate with tax authorities
• Engaging in or attempting to conceal illegal activities
• Preparing income tax returns that take excess deductions or incorrect dependents
• Making a false statement

Once a criminal tax investigation for tax fraud or tax evasion commences, you need the experience of a tax attorney to obtain the best results. A criminal tax fraud or tax evasion charge can result in large monetary penalties or imprisonment. Typically, unlike a civil audit, only the cases where it can clearly be shown that a problem exists will the case move forward as a criminal case.

A criminal tax investigation can be initiated at any time. Often it will originate from a civil tax auditor working for the IRS or New York State who believes that there is illegal conduct. If the investigation is by the IRS, their Criminal Investigation Division (CID) will be building the case against you. If the tax fraud initiates in your state, the investigation will be done by either the State Attorney General or the county District Attorney for the county that you reside in. In either case, these agencies employ agents and investigators who are skilled in finding tax fraud and tax evasion. Once the investigation is complete, the agent will often recommend prosecution.

If you are facing a federal tax fraud or tax evasion charge, the agent in your case will often recommend prosecution. The IRS will review the case before deciding to bring the case to the Department of Justice, Tax Division, in Washington D.C. At this level, prosecutors who specialize in criminal tax crimes will review the case and make the final decision if it will be prosecuted. If the Department of Justice, Tax Division approves prosecution, the case goes back to a local U.S. Attorney‘s office with the direction that the individual should be prosecuted for the crime.

If you are facing a state tax fraud or tax evasion charge, the State Attorney General or the County District Attorney will decide if the case should be prosecuted. Typically, the AG office or state will take their cue from the Tax Department.

The process leading up to prosecution is complex and multifaceted, but this can be an advantage to the taxpayer. Since there are multiple tiers that your case has to go through, with the help of an experienced New York Tax Attorney, you could prove your innocence at a lower level and never face prosecution.

If you are facing criminal tax evasion or tax fraud charges you may need to engage a tax attorney. Actions that you make which you believe are correct could significantly hurt your case. You need an experienced tax attorney who knows the system and can anticipate any problems to work towards a successful resolution.

Tax Amnesty

Tax amnesty is a limited time opportunity for a specified group of taxpayers to pay a defined amount of amount owed, in exchange for forgiveness of a tax liability (typically the penalties owed) relating to a previous tax period or periods and without fear of criminal prosecution. The Amnesty program typically is not available when some tax authority begins an investigation of the past-due unpaid taxes. In NYS this program is known as a voluntary disclosure. In that program, the taxpayer first makes the written disclosure to the Tax Department related to the issue involved. Such examples can be unfiled tax returns, tax returns filed but with underreported income or excess deductions, or business type matters related to unpaid collected sales tax, or unfiled sales tax returns. The taxpayer is given a choice once they make a full disclosure of selecting the number of years that are “fixed”. For sales tax collected but unremitted cases the minimum period of correction is six years. Otherwise, three years is the norm. Once the tax department accepts the disclosure, they enter into a contract with the taxpayer and the taxpayer files the needed tax returns. With the balance owed with unreported income or unfiled sales tax returns, it can be paid at once, or a payment plan can be established. Therefore, the voluntary disclosure process is a good way to avoid a criminal charge whether its an income tax, payroll tax, or sales tax offense matter.

By: Timothy S. Hart