The Internal Revenue Service (IRS) has the authority to examine a taxpayer’s returns to determine if there are any badges of fraud that warrant an investigation. The administrative consequences that come with these sensitive, or “eggshell,” investigations can be steep and a few of these investigations may even lead to criminal charges. Thankfully, a dedicated tax lawyer could help prevent these charges from ever materializing.
It is possible for you to address allegations of fraud directly with the IRS upfront. Often, this approach might conclude the investigation early on in the process. You must be precise and specific when dealing directly with the IRS. That is where a Rockville tax fraud and evasion lawyer could help. With their guidance, you could obtain a favorable outcome from a tax fraud investigation. The IRS mainly focuses on individuals and businesses with higher incomes and tax burdens, so those with smaller incomes reported on Forms W-2 who also claim standard deductions generally do not need to worry about a potential investigation.
Understanding What is Considered Tax Fraud
Tax fraud is a term that describes an effort to unlawfully limit the amount of tax debt an individual or business owes. For fraud to occur, these actions must be willful or intentional. In many cases, tax fraud results from misrepresentations on a tax return or other official form.
There are numerous ways in which an individual could engage in tax fraud. Often this involves intentionally leaving out material information on an income tax return, such as substantially underreporting income or overstating deductions. The purpose of these actions could be to limit the amount of tax that is owed to the IRS.
Businesses have also been known to engage in tax fraud. In addition to providing fraudulent tax returns, some businesses have falsified payroll tax information. Business tax fraud could also cover the failure to withhold or report payroll or income taxes. This is frequently accomplished by concealing cash transactions.
Intent to Commit Fraud
Central to every allegation of tax fraud is a person’s intent. For an action to be fraudulent, there must be an intentional or willful effort to shortchange the government on what it is owed. Someone who was negligent or careless on their tax return may receive a smaller penalty but will not be charged with fraud. One way a tax fraud lawyer in Rockville could help during an investigation is by establishing that a tax discrepancy was accidental and was not done with the intent to deceive the IRS.
Although they sound similar, tax evasion is only one potential method of tax fraud. Evasion requires willfully misrepresenting a person’s income in order to underpay tax to the government, either by evasion of assessment or evasion of payment.
Evasion of assessment occurs before a tax bill is ever due. It involves fraudulently altering the assessment of tax debt, usually by overstating financial losses or hiding income. Evasion of payment occurs after the assessment is made. While this type of evasion does not alter the amount owed, it can conceal the assets that could pay that tax bill. Evading tax payments could involve failing to report assets in overseas bank accounts or concealing assets elsewhere.
A local tax evasion attorney could advise someone on their potential liability and assist them in demonstrating a lack of willful intent to the IRS.
IRS Audits and Investigations
There are multiple forms of investigation used by the IRS. In some cases, they will merely conduct an audit. If there is reason for the IRS to find that tax fraud has occurred, it could result in a civil investigation, which does not result directly in criminal prosecution. However, it could lead to a finding that fraud was possible or likely. During audits and civil investigations, IRS investigators will typically work with a taxpayer and their local tax fraud attorney to obtain documents and answer questions they have about the filing. The IRS will also take it into account if a taxpayer relied on a professional to file their taxes and it was that professional’s fault for the mix-up. This requires extensive proof before it will be accepted as a defense.
Talk to a Rockville Tax Fraud and Evasion Attorney as Soon as Possible
If the IRS suspects that fraud may have occurred, they will investigate further to determine if criminal charges are warranted. Thankfully, a Rockville tax fraud and evasion lawyer could help you prevent further escalation by documenting how there was no willful intent to deceive. Call today to learn more.