Comparing Civil and Criminal Tax Law in Washington DC

Violating tax law does not automatically mean you are facing jail time – in fact, that is extremely rare. Most tax controversy cases are a civil matter, with monetary fines as a penalty but not prison time. However, it is still important to know the difference between civil and criminal tax law in Washington DC. If you do find yourself in a highly sensitive situation, ask an experienced criminal tax attorney for help.

The Difference Between Civil Tax Law and Criminal Tax Law

Civil law means that the worst that could happen after a violation would be a monetary penalty; whereas in criminal tax law, there is potential for incarceration, in addition to monetary penalties. One of the main differences between these two scenarios is the burden of proof.

The burden of proof in civil tax law is the preponderance of the evidence, which means it must be more likely than not that the taxpayer committed the violation. In criminal tax law, the standard is “beyond reasonable doubt,” which means there is a 98 or 99% certainty that the person is guilty of a tax violation. Tax law generally defaults to the civil system but can move to the criminal side in extreme circumstances, especially if willfulness can be proven. Civil penalties are only monetary in nature, while criminal penalties may involve both prison and monetary punishment.

Types of Civil Tax Cases

The most common types of issues that individuals or businesses in DC may experience are unfiled tax returns, IRS audits, unpaid taxes, and trust fund recovery penalties. Certain other situations, like failure to disclose offshore financial accounts, are generally civil but could elevate to criminal in very specific cases. A trained tax controversy lawyer could analyze a taxpayer’s situation and help determine if there is criminal exposure and how to address it administratively.

Determining a Civil or Criminal Tax Investigation

When determining of a violation should produce criminal charges, IRS Special Agents conduct a primary investigation for supervisory approval. Then the Special Agent in Charge needs to approve it, initiate a subject criminal investigation, and issue a Special Agent Report. At this point, it is recommended to the Department of Justice Tax Division, or the U.S. attorney’s office if a case is to be criminally pursued. Otherwise, it will default to the civil system for typical tax non-compliance cases.

The IRS’s determination to pursue a criminal tax matter is based upon the evidence and the deterrence effect. Each year, the IRS only audits approximately 1% of taxpayers based upon the agency’s available resources. The criminal prosecution is even a smaller percentage than that. On the criminal side, only a couple hundred to a couple thousand taxpayers may be targets of criminal prosecution per year.

The IRS looks to the Department of Justice for the deterrence effect, which is why the IRS and DOJ sometimes subject their investigations on celebrities, to get the most publicity and to spur everyday taxpayers to follow the law. By seeing the consequences of criminal tax violations, other individuals and businesses will be more likely to follow the law.

Call Our DC Attorneys if You Are Concerned About a Civil Tax Case Turning Criminal

In the rare instances where your alleged actions fall into the category of criminal acts, you need to tread carefully. Comparing civil and criminal tax law can be difficult for anyone in Washington DC. Call Pontius Tax Law to understand what aspects of the case might trigger a DOJ investigation.