Representation before the Internal Revenue Service Criminal Investigation Division (Special Agent and Special Agent In Charge) and representation before the U.S. Department of Justice (Tax Division) and United States Attorney:
The Internal Revenue Service recently increased its criminal tax investigations relating to federal tax crimes. For several years the IRS Criminal Investigation Division had a heavy emphasis in its non-tax crime investigations, such as drugs and money laundering. The IRS Criminal Investigation Division principle focus has returned to tax investigations (tax crimes).
A tax crime is a serious matter. A conviction may result in a prison sentence and or a large fine. A tax crime conviction may also result in the revocation and loss of a person’s professional license, a violation of an employment contract moral’s clause, job loss, and otherwise has a terrible effect on taxpayer’s personal life.
The most common criminal tax investigations focus on (1) tax evasion, (2) filing a materially false tax return, and (3) failure to file a required tax return. The target of a criminal tax investigation must understand that a criminal investigation is very serious. You should immediately consult with a tax controversy attorney whose special knowledge includes criminal tax defense.
The Internal Revenue Service has begun to investigate tax return preparers and other tax professionals with renewed emphasis. Any person who willfully aids or assists in the preparation or filing of a tax return or other document that is false as to any material matter may be subject to a criminal tax investigation and indictment. A tax professional who is subject to a criminal tax investigation should seek the counsel of a tax controversy attorney who understands criminal tax defense.
A criminal tax defense should focus on each of the following:
- Limit the government’s access to the taxpayer’s records;
- Where appropriate assert constitutional defenses, which must be timely raised;
- If the IRS is relying upon an indirect method of proof analysis (bank deposit analysis, net worth analysis, percentage mark-up, or another indirect method of proof), a thorough understanding of the methodology is critical to the defense;
- Review all facts (interview witnesses, review documents and records, and where appropriate reconstruct missing records) to negate evidence that the taxpayer intended to file a false tax return;
- Provide evidence that the taxpayer did not act with the intent to evade (willful behavior);
- Determine whether the IRS tax law conclusions are correct (the tax laws are very complex and sometimes the IRS criminal investigator does not properly apply the tax law);
- Assert procedural defenses; and
- Criminal defense representation must also focus on sentence factors which will mitigate a prison sentence and focus on probation.
Following a criminal tax investigation, the case is generally returned to the Internal Revenue Service examination function for a civil tax audit. In most cases, the IRS will assert a civil fraud penalty. The civil fraud penalty rate is 75%, a substantial penalty.
Anyone subject to a criminal tax investigation should immediately consult with a lawyer who has expertise in tax controversy matters and understands criminal tax law, procedure, and defense.