Tax evasion is a criminal offense. The Internal Revenue Service (IRS) pursues both civil and criminal charges for violation of tax law. Civil charges carry fines and penalties, but criminal charges could lead to imprisonment. If you believe you're under investigation for tax evasion or tax fraud, contact a California Tax Attorney to know your rights.
The IRS and Criminal Tax Investigations
The IRS has a Criminal Investigation Division (CI) dedicated to handling criminal tax cases. CI conducts alleged violations of U.S. tax laws and statutes and refers their findings to the Department of Justice for prosecution. In 2019, CI launched 2485 cases, identified $1.8 billion in tax fraud, and had a 91.2% conviction rate.
What kinds of cases does CI investigate?
- Filing false returns
- Abusive tax schemes
- Corporate fraud
- Employment tax evasion
- Illegal gaming operations
- Identity theft
- International tax avoidance schemes
- Money laundering
- Narcotics-related investigations
- Public corruption
What Is Tax Evasion?
According to the Internal Revenue Code, section § 7201, there are two kinds of tax evasion. The first is “the willful attempt to evade or defeat the assessment of tax.” The second is “the willful attempt to evade or defeat the payment of tax.”
The most common form of tax evasion is the first type, evasion of assessment. Filing a false return that omits income or claims deductions to which the taxpayer is not entitled counts as evasion of assessment.
The second type, evasion of payment, usually comes after the IRS or the taxpayer establishes that a tax payment is due. The taxpayer might try to conceal money or assets that they could pay their taxes from, which would count as evasion of payment.
What Are the Penalties for Tax Evasion?
Tax evasion is a felony. If you're convicted, you'll be fined up to $100,000, or $500,000 if you're a corporation. You may also go to prison for up to five years and be required to pay the costs of prosecution.
How Does the IRS Investigate Tax Evasion?
If you make an honest mistake on your taxes, the IRS won't charge you with tax evasion. CI must determine that you've committed intentional fraud and gather evidence to prove so. To find you guilty of tax evasion, the prosecutor must establish the following:
- A substantial income tax was due in addition to what you declared on your returns.
- You made an affirmative attempt to evade or defeat an income tax.
- You willfully attempted to evade or defeat the tax.
Once CI has a potential case for tax evasion, special agents follow a process of analysis and investigation. At the end of their investigation, agents will decide to discontinue the case or recommend prosecution.
California Tax Attorney
If you have been charged with a tax crime or feel you are under investigation by the IRS, contact a tax attorney as soon as possible. If convicted, you could face fines, jail time, and a criminal record. Contact a California Tax Attorney to set up a consultation or for help with your California tax issues.