Tax fraud is where you make fraudulent misrepresentations on your tax return, knowing that they are not correct at the time. Tax fraud is very similar to tax evasion. Tax evasion is the actual crime itself, whereas tax fraud is the allegation by the Internal Revenue Service that you made false representations on your tax return.
What constitutes a tax crime is a statement on the tax return that understates the amount of taxable income, or false statements on the tax return. For instance, on the bottom of Scedule B where it is asked if you have authority over or interest in a foreign bank account, if you answer "no" knowing that you do in fact have an interest in or authority over a foreign bank account, then that false statement is a crime that can lead to very severe penalties.
Penalties For Federal Tax Crimes
Federal Tax crimes are subject to criminal prosecution and conviction means jail time. The amount of jail time for tax fraud or federal tax crimes can vary significantly based on the circumstances of the case.
Tax Fraud Penalties
In addition to possible criminal charges and jail time, there are penalties for tax fraud which amount to a stiff monetary burden. There is a 75% civil tax fraud penalty, which is huge and is intended to wipe out any benefit that you may have gotten from the fraudulent act. It is 75% of the tax. So, if you were supposed to pay $100,000 and you are convicted of tax fraud, then you would be liable for the original $100,000 plus a $75,000 penalty, plus interest.
How The IRS Prosecutes Income Tax Fraud
First the IRS has to discover tax fraud. They primarily discover it through audits and informants such as business partners gone bad, ex-spouses, whistleblowers, etc. Once they discover it, they will have a revenue agent go through great depths on an audit. The revenue agent will work with a fraud referral specialist. A fraud referral specialist is someone who doesn't come out into the field, but instead instructs the revenue agent how best to handle the case. Then the case is transferred to a special agent and the special agent serves subpoenas, search warrants and they have the right for summons as well in order to collect the information necessary to file charges and go to trial.
Successful Defense Strategies In Tax Fraud Cases
The strategy is the most important thing. You have to know what the IRS can potentially claim. You need to know what the downside is of each fact and argument. You have to know what the potential problems are throughout so that you can build a case that presents the tax payer in the most favorable light possible.
Aggressive Defense Against IRS Tax Fraud Charges
This tax law firm aggressively defends clients rights against IRS tax fraud charges by collecting all of the information and documentation necessary in order to build up a case that will show there was no tax crime committed.