In most tax audits done by the IRS, the agency is only interested in collecting taxes owed, interest, and with penalties. The IRS can impose a negligence penalty, along with a late filing penalty, and charge interest on all the above. In a tax audit, even in case the IRS suspect you have committed tax fraud, they can impose a civil tax fraud penalty. This penalty is typically equal to 75 percent of the tax you owe, plus interest on the penalty.
Depending on the level of fraud involved, the IRS auditor may ask a tax fraud specialist to look at your case and see whether it should be sent for criminal prosecution. Typically, this specialist has experience and will seek advice of the IRS’ tax fraud lawyer for help if it looks necessary.
The penalties for tax fraud are serious. You could get up to 5 years in jail, plus fines of $500,000, plus the expense of prosecution for each tax offense. When the criminal tax case is finished by the IRS criminal unit, it will be referred back to the IRS Examination Division where the taxes are assessed. The IRS can add the civil tax fraud penalty on top of the criminal tax fraud penalties. It’s important to understand that tax bills from civil or criminal tax fraud cannot be discharged through bankruptcy. The civil fraud penalty is dischargeable in a Chapter 7 bankruptcy.
Tax fraud is defined as intentional wrongdoing. To be accused of tax fraud, you have to have an intentional violation. Mere carelessness isn’t tax fraud. The IRS looks for certain things when assessing whether fraud occurred, for example: understatement of income, inadequate records, failure to file, hiding assets, dealing in cash, failure to make estimated cash payments, failure to cooperate with government, failure to make payments.
For those who have one of these problems and are audited by the IRS, you may need a tax fraud attorney. Actions you take during a tax audit can transform the usual tax audit into a tax fraud case. For example, lying or giving false answers to IRS investigators, delaying the investigation, or other activities to mislead IRS agents can indicate tax fraud.
Experienced tax fraud attorneys can help you navigate an IRS tax audit, and help you formulate a plan.
Is Tax Fraud a crime?
Tax fraud is a frequent charge which could result from genuine mistakes in reporting tax information to the IRS. Tax offenses are some of the most frequent white collar offenses, which impacts business professionals and average Americans. Underreporting income, failing to file taxes, or overstating deductions are grounds for audits. If the IRS finds cause further prosecute after someone falsifies their tax report – then the IRS will deeply explore.
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