There are many ways in which Americans can lower their local, state and federal tax burden. With deductions and credits, it may be possible to get a refund of $1,000 or more each year. However, taxpayers are expected to operate within the confines of the law when submitting tax returns or taking other actions to collect from the government. If you have committed tax fraud, you could face serious penalties, and it may be a good idea to consult with an attorney today.
What Are the Penalties for Tax Fraud?
If you are convicted of tax fraud, penalties range from jail time, prison time or a fine. In some cases, you could face jail or prison time and a fine. You may also be forbidden from working as a tax attorney, a tax preparation expert or as a CPA.
IRS guidelines propose a five-year prison sentence for those who attempt to evade paying taxes or who fail to collect taxes from others as required. This is in addition to a fine of up to $250,000 for individual taxpayers. Tax evasion is different from tax avoidance as tax avoidance involves using legal measures to lower a tax bill. Tax evasion occurs when an individual fails to pay what he or she legally owes after deductions and credits are taken.
The government also imposes penalties on those who fail to file a tax return. IRS guidelines suggest a one-year prison sentence in addition to a $100,000 fine for individuals. Individuals who make false statements on a tax return or who help others make false statements could be imprisoned for up to three years.
How Does an Attorney Help Those Accused of Tax Fraud?
Just because the government has accused you of tax fraud doesn’t mean that you are guilty of the charge. An attorney will take several different steps to show that you either told the truth or believed that you told the truth on all documents submitted to the government or any statements made to government officials.
In some cases, your attorney will attempt to show that you committed negligence as opposed to actual tax evasion. For example, if you fail to account for investment income in the past year because you didn’t get proper documentation from your broker, that may be seen as an honest mistake.
Failing to account for all of your tips while working as a waitress may also be seen as negligence as opposed to outright fraud. While you may still face a 20 percent penalty in addition to a fine, there is little chance of jail or prison time in a negligence case.
It is always in your best interest to hire an attorney when dealing with the IRS. It is not uncommon to receive an audit or face accusations of fraud because of inaccurate or incomplete information. Your attorney may be able to prove that the IRS made the mistake and that you owe nothing.
How Should You React to a Charge of Tax Fraud?
While you should hire an attorney to help with your tax fraud case, the government may ask to talk to you directly at some point. It is critical that you understand your rights and what you are legally required to disclose. Under no circumstances should you provide the government with more information than they ask for.
It is also never a good idea to answer any questions that you don’t have a good answer for. It is better to defer to legal counsel or ask for time to collect more information as opposed to giving an incomplete or inaccurate statement. Remember, anything that you say or do during the course of an investigation can and will be used against you.
In the event that you are questioned prior to retaining legal counsel, you generally have the right to stop an interview by asking for counsel. The interview will generally end right away and resume when you have an attorney representing your interests.
A charge of tax fraud is one that you should take seriously as your personal and professional reputations could be on the line. While there is no guarantee that an attorney can win an acquittal or a plea in your case, your odds of achieving a favorable resolution to your case increase when you hire legal counsel.
Tax crimes in the United States encompass a number of different white collar crimes. No matter what the specifics, tax crimes are federal offenses that can result in severe penalties for a person who is convicted. Generally speaking, in most cases, if a person is audited by the Internal Revenue Service (IRS), they are simply required to pay the taxes they owe, plus interest and penalties. There may also be a late filing fee imposed on the person. This is not something that would warrant a person being criminally prosecuted. However, if the individual is guilty of tax fraud, they can be charged and convicted of a federal offense.
What are Tax Crimes?
There are many different types of tax crimes. Some the crimes include tax evasion, filing a false tax return, filing false documents, failing to pay taxes, failing to file a tax return and failing to collect employment taxes. Tax evasion, in particular, is a serious offense and doesn’t merely take into consideration that the individual does not report all of their income but also overstates the amount of the deductions on their taxes as well.
It’s important to note that an honest mistake on a person’s taxes does not automatically equal tax fraud. the individual would have to knowingly cheat to commit a tax crime. Carelessness does not equate to a criminal act. The IRS will examine certain details to determine whether a person has committed tax fraud by checking for typical signs of the crime. Some of those signs include the following:
• Understating one’s income
• Inadequate records
• Failing to file tax returns
• Concealing one’s assets
• Engaging in illegal activities
• Dealing in cash
• Failing to make estimated tax payments
• Implausible or inconsistent explanations of behavior
• Attempting to conceal illegal activities
• Using a fake Social Security number
• Claiming an exemption for a dependent that does not exist
Who Most Commonly Commits Tax Crimes?
Generally speaking, those who most commonly commit tax crimes include people who are service workers and self-employed individuals who are primarily paid in cash or operate businesses that are based primarily on cash. This is because it tends to be easier to understate income that is earned in cash as opposed to that acquired through paychecks or direct deposit. Car dealers and other salespeople, restaurant owners, store owners, hairdressers, accountants, lawyers and doctors are at the top of the list in terms of being tax crime offenders.
Penalties and Sentences for Tax Crimes
If a person has been found guilty and convicted of tax fraud or any other type of tax crime, they will receive both criminal and civil penalties. The specific penalties the individual receives generally depends on the type of tax crime they committed. However, there are several potential penalties and sentences the person can be subject to:
• Attempting to evade or defeat paying taxes: If the person is convicted or tax evasion, they are charged with a felony and can receive a term of prison for up to five years or a fine that can range from $250,000 for an individual or up to $500,000 for businesses. Some individuals who are convicted of this tax crime can receive both penalties.
• Tax fraud and false statements: Tax fraud and filing false statements is also a felony charge. A person convicted of this crime can expect to receive up to three years in prison or a fine of up to $250,000 for individuals or up to $500,000 for businesses or both penalties, in addition to the cost of prosecution.
• Willfully failing to file a return, provide information or pay taxes in a timely manner: This tax crime is charged as a misdemeanor, which means a person who is convicted can receive a term of up to one year in prison or a fine of up to $100,000 for individuals or up to $200,000 for businesses or both, in addition to the cost of prosecution.
A person who faces charges for tax crimes needs the assistance of a skilled attorney. These are serious charges that warrant expertise from a lawyer who knows how to build the best possible defense.
Understanding Tax Crimes Tax crimes can be divided into two categories, failure to file a return and evasion. Failing to file a return doesn’t negate the responsibility of paying your taxes. To prove your guilt, the IRS must show that a return needed to be filed for the years in question. They must also prove that you willingly failed to file the required return. There are different ways that this can be accomplished. They can use income that was hidden from the government, or there may be tax deductions you claimed that you were not entitled too.
The IRS Puts Their Focus on Tax Preparers Tax preparers are at the focus of many IRS investigations. Federal law enforcement makes tax crimes a high priority, but they are more interested in who filed the tax forms. Accountants and those that prepare taxes find that it’s a great way to make a living. Unfortunately, every form that is submitted has the chance of coming back on you. Remember you put your name, address, and phone number at the bottom of each return. The IRS can use this information to track you. Taxpayers are often charged with aiding and abetting others. This means they know the numbers they are filing on these returns are fictitious, but they do it so that the person can get a higher refund. In many cases, the accountant or tax preparer may be given some of the refunds as a payment for their help. The problem is it’s often tricky to get these charges to stick. The government must be able to prove that the accountant knew that the numbers or deductions were false, and they chose to file it anyway. Though it can be done, it’s hard to determine foreknowledge.
Investigating A Tax Preparer A defense we often use is that the preparer did not know of any wrongdoing. The IRS knows that the clients are a great source of information. So the government begins their investigation by interviewing as many former clients as possible. It’s not uncommon for an accountant to find out about an ongoing investigation by customers. The federal government tries to catch everyone off guard to collect as much evidence as possible. The government wants to find out how the tax preparers are paid for their work. It can make a huge difference in whether there will be a criminal investigation or not. Any portion of the refund that goes back to the preparation for their labor is considered suspicious. If the preparer is getting a kickback from the refund, then it appears that there is an incentive to inflate the amount. Many times, the tax preparer has taken a very low service fee, but in return, they do many returns. This leads the IRS to believe that the low filing costs are associated with bringing in more money when the refund arrives.
Resolving Tax Crime Cases During our many years of defending people charged with tax crimes, we find that often a criminal investigation can be avoided. Sometimes it’s just pure luck, but in other cases, we can take definitive steps to change the odds. The number one reason why you need a lawyer is that much of what they do can resolve or lessen the charges from a tax crime. Before talking to any federal law enforcement officials, get a lawyer on board. Remember, anything that you say to these officials, can and will be used against you if you go to court.