It’s easy to assume that only big-time tax cheats end up under the IRS’s radar. However, even small mistakes or suspicious activities can lead to a deeper investigation. Many taxpayers unknowingly make decisions that raise red flags, turning a routine review into a full-blown criminal investigation. Understanding the common triggers can help you stay clear of trouble and protect your rights.
What triggers an IRS Criminal Investigation?
The IRS doesn’t pursue every tax issue as a criminal matter, but certain actions can change that quickly. Here’s a breakdown of the most common triggers:
Underreporting Income or Hiding Sources
One of the most frequent causes of an IRS criminal investigation is underreporting income. This includes not declaring earnings from freelance work, side businesses, or offshore accounts. The IRS receives reports from various sources like banks, employers, and financial institutions, and if the numbers don’t add up, it raises questions.
Example: If you’re earning income from freelance projects but only reporting half of it, that discrepancy could prompt the IRS to look into your finances.
Claiming Excessive Deductions or Unwarranted Credits
The IRS CI special agents pay close attention to deductions and credits that don’t align with your reported income or financial records. For instance, claiming significant business deductions without proof or trying to get a tax break for false expenses are common mistakes. Fraudulent claims are a serious offense, and when patterns emerge, it become a trigger for deeper scrutiny.
Consistently Not Filing Tax Returns or Paying: Tax Evasion
If you repeatedly fail to file your tax returns or avoid paying large amounts owed, the IRS may consider you a tax evader, engaging in tax evasion. Missing a year may not always lead to a criminal investigation, but ignoring tax obligations over several years can land you in hot water. If the IRS suspects intentional avoidance, it may refer your case for criminal review.
Unreported Offshore Accounts and Hidden Assets
The IRS is particularly vigilant about offshore accounts. When taxpayers fail to disclose foreign bank accounts or assets, it’s seen as an attempt to hide income or wealth. This can lead to an investigation for tax evasion or even money laundering, depending on the situation. Reporting requirements are strict, and penalties can be severe if these assets go unreported.
Working with Fraudulent Tax Preparers or Being Part of a Conspiracy
While it’s essential to use a qualified tax professional, working with a tax preparer involved in tax fraud or income tax fraud can have serious consequences. The IRS fraud department is actively investigating financial fraud, and if your returns are flagged, you could become a target. Financial fraud investigators often look into both the preparer and the taxpayer in these cases. If you find yourself involved, it’s important to consult a tax fraud lawyer to protect your interests and handle the investigation effectively. If you find yourself involved, our tax attorneys can offer free consultations.
What Happens During an IRS Criminal Investigation?
Once the IRS suspects serious misconduct, the IRS Criminal Investigation Division (CI) takes over. Their job is to gather evidence of potential wrongdoing and build a case if needed. Here’s what typically happens:
Document Reviews: The IRS CI reviews financial records, bank statements, transaction histories, and tax returns. They look for inconsistencies, omissions, or suspicious transactions.
Interviews and Subpoenas: The IRS may call in taxpayers for interviews or send summonses to provide documents. If needed, they can also question business associates or third parties connected to the case.
IRS Special Agents’ Role: Trained IRS criminal investigation special agents take the lead in collecting evidence. They are skilled at tracking down missing information, linking income to sources, and identifying patterns of fraud.
It’s essential to have a tax attorney handle these interactions to avoid unintentional self-incrimination or missteps that could worsen your case. Visit https://www.jdavidtaxlaw.com/irs-criminal-investigations/ to learn more about how J David Tax Law can assist in defending your case and minimizing the risks involved.
Protect Yourself From Criminal Investigation: Get Legal Help
If you suspect that you are being investigated or have received notice from the IRS, it’s critical to consult a tax attorney right away. Legal representation can serve as your shield, handling all communications with the IRS and building a proactive defense strategy to protect your interests. A trusted attorney, like those at J. David Tax Law, can guide you through the investigation process, helping to minimize risk and protect your interests.
Steps to Lower the Risk of IRS Criminal Charges
Even if the IRS initiates an investigation, not every inquiry leads to criminal charges. However, it’s important to address concerns immediately and avoid risky behaviours. Here are steps to protect yourself:
Amend Tax Returns to Avoid Tax Evasion : Mistakes happen. Correcting any discrepancies on your own before the IRS formally addresses them can show good faith and a willingness to comply with the law.
Cooperate Smartly with Criminal Investigators: It’s essential to cooperate with IRS requests but let your attorney manage key communications. They can ensure you don’t unintentionally incriminate yourself or give misleading information.
Demonstrate Non-Criminal Intent: If the issue was caused by honest errors or lack of knowledge, having clear records and an experienced tax attorney to present your case can help show there was no malicious intent.
What Are Your Options If an IRS Criminal Investigation Escalates?
Sometimes, despite your best efforts, an IRS investigation can lead to more severe actions. When this happens, having an attorney is essential for guiding you through various options, including
Plea Agreements: When evidence strongly points to wrongdoing, a tax fraud lawyer can negotiate plea deals for lesser charges or reduced penalties. This approach can save you from a long and costly trial.
Preparing for Trial: If negotiations fail, and you’re confident in your defense, taking the case to court may be the best route. A well-prepared tax fraud attorney will challenge the IRS’s evidence and question the intent behind their claims.
Appeals: In cases of unfavorable outcomes, filing an appeal gives you a chance to challenge the findings and provide new documentation.
Exploring IRS Programs: Even if negotiations are challenging, IRS programs like the Fresh Start Initiative or Offers in Compromise allow for partial settlements based on financial situations, possibly lowering what you owe.
Conclusion: Stay Informed and Protect Your Rights
The key to avoiding serious trouble is understanding the triggers for a criminal investigation by the IRS.If you notice any red flags or suspect that your financial activities could draw IRS attention, don’t wait.
Taking proactive steps and seeking guidance from a knowledgeable tax fraud attorney like those at J. David Tax Law can make a significant difference in protecting your assets and freedom. Stay informed, act wisely, and always consult a professional when facing IRS-related issues. Call us at (888) 342-9436 for immediate help with your case.
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