IRS Criminal Investigation: A Guide to Criminal Tax Defense

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You need to be straight forward when it comes time to do your taxes. With the government on the lookout for tax fraud and other offenses, the last thing you would ever want is to draw the attention of the IRS. 

If you do happen to become the subject of an IRS criminal investigation, you will need professional legal help to assist you. 

So what are the situations that make such an investigation likely?

Consider these points below to learn more about these sorts of tax penalties. 

1. Falsifying Information on Your Tax Return

One of the primary reasons you might need criminal tax defense is if you falsified information on a tax return, or are accused of doing so. 

Whether you falsify personal information, such as your social security number or state of address, or the name or type of business that you run, this can spell trouble for your tax return. 

Never run the risk of drawing an investigation by providing false information on your tax return. 

2. Hiding Your Money in an Offshore Bank Account

A lot of people use offshore bank accounts as a tax shelter. While there are legal ways to set up offshore trusts and other arrangements, you always have to report any income to the IRS. 

You’ll need the assistance of a criminal tax defense lawyer if you’re accused of hiding money in an offshore account. 

Always stay on top of filling out the proper forms when you storing money in one of these financial institutions. By keeping everything above board, you greatly decrease the likelihood of being audited or hit with infractions. 

3. Underreporting Income on a Tax Return

Gather all of your tax documents to make sure you are fully reporting every bit of money that you earned this year. 

If you underreport income, you will most get hit with an audit that can later turn into charges. 

You are more likely to be accused of tax evasion when the amount you reported is grossly less than what you actually earned. Always keep thorough documentation of everything that you earn, and make sure to keep your returns on file for years so that you have proof. 

4. Falsely Reporting Income

Anytime you earn income, you’ll need to report it in full, the type of income it is,  and where it came from. 

By fabricating any of this information, you will find yourself in hot water with the IRS more often than not. Always be as accurate and specific as possible with the income that you report. 

Most importantly, don’t get tempted to fill in the blanks with any information that you aren’t sure about. Anything construed as falsely reported income can leave you open to serious tax infractions. 

5. Committing Identity Theft

People’s data is at risk at alarming numbers with identity theft on the rise. 

Identity theft is particularly rampant during tax time. Never use another person’s social security number, or otherwise impersonate them on a tax return. 

Identity theft is common when a person seeks a tax refund by using another person’s information. Social security numbers and other pieces of personal information are also routinely sold on the black market.

Because these issues are becoming increasingly prevalent, you can expect to face significant charges if accused of committing identity theft at tax time. It’ll be worth your time to get the assistance of a tax attorney that can help you if you are charged with one of these crimes. 

6. Hacking or Phishing

In today’s world, hacking and phishing are at an all-time high. 

The FBI’s most-wanted list is filled with cybercriminals, and mobile malware is an increasing threat. As such, hackers are finding ways to get access to people’s personal tax information. 

If you are accused of participating in one of these schemes, you’ll have a lot at stake and will need to prove your innocence. 

The hacks are generally carried out by tricking people into clicking on something that takes their personal information. In many cases, the pages that take information pose as the IRS or some other tax help related website. 

7. Participating in IRS Scams

There are a number of tax scams that are carried out each and every year. 

Many of these tax scams involve calling or texting people in an attempt to collect a debt. These people pose as the IRS and tell people that they have a warrant out for their arrest. 

You can expect to see these sorts of scams ramp up each year around tax time, and a number of people each year fall prey to these sorts of scams. 

By participating in one of these scams on any level, you can be held accountable for these scams if you defraud people by impersonating the IRS. 

8. Falsely Preparing Other People’s Taxes

A number of people each year also get in trouble and end up in an IRS criminal investigation for impersonating tax preparers. 

They pose as tax preparers and take people’s information to commit identity theft and get the refund the other person is entitled to. Other fake tax preparers do this just to collect and pocket inflated tax preparation fees. 

This is why people are advised to only let proven licensed and insured tax professionals to handle their return. 

9. Impersonating a Charity

Unfortunately, many people falsely pose as charitable organizations in order to defraud people. 

It isn’t uncommon to see these sorts of situations on the rise, particularly on the heels of natural disasters. Any non-profit or charitable organization needs to have a 401(c)3 designation in order to legally operate and should have thorough accounting of how money goes in and out. 

If you’re just pocketing the money or not keeping proper accounting, you can expect for the IRS to look into it sooner than later. 

10. Claiming Zero Income Erroneously

When a person doesn’t earn any money in the current tax year, they are able to claim zero income on their tax return. However, if you claim this when you actually did bring in income, the IRS will take it as a tax fraud or tax evasion situation. 

Not only is claiming zero wages when you earned more a case of tax fraud, but it’s also a felony. Because of this, you’ll need to do everything in your power to make sure that you’re properly handling your taxes and accounting for every dime of income. 

11. Taking Deductions That You’re Not Eligible For

Finding deductions is an important part of handling your taxes, and one that can be favorable for you. 

Tax preparers can help you take advantage of deductions to the point that you either dramatically lower what you owe in taxes, or get you a refund altogether. However, you need to be mindful to only claim deductions that you are eligible for. 

Simply plugging in information about a home office you never used, or travel you never took can leave you open to an IRS investigation. 

12. Failing to Properly Report Real Estate Property

Stay aware of what you owe in property taxes as well. 

When you fail to disclose real estate property, it also means that you’re failing to pay personal property taxes on that real estate. 

Take inventory of all your assets each tax period, including real estate property, and pay what you owe in taxes upfront. This helps you to avoid setbacks and ensures that you don’t wind up in court pleading your case. 

13. Mixing Business and Personal Expenses

Each year, you’re responsible for logging the expenses that came into play for your business. 

Be sure that you never mix business and personal expenses when trying to get business-related deductions on your taxes. 

Getting loose and sloppy with this level of accounting can make it so that you blend these worlds together, and end up paying penalties in the process. The best thing you can do is keep separate accounts for your business and personal needs. 

That way, there’s never a question about whether an expense was for your household or for running your company. Be as thorough as you can with your accounting so that you don’t run into this problem or an avoidable investigation. 

You should also always be aware of what you can deduct and keep your records clean. Writing off business expenses incorrectly can also bring you problems. 

For instance, in most states, you can either write off the repair and maintenance costs of a vehicle, account for depreciation, or deduct mileage based on the state’s rate, but not all of the above.

By knowing the laws of your state and what you are able to legally deduct, you’ll stay on the right side of the law and avoid issues such as an IRS criminal investigation. 

14. Maintaining Different Sets of Books

The IRS also will raise red flags if you have different sets of books. 

Be sure that your records are kept consistently and in one location. That way, you won’t have to answer questions about what the records mean, and there will be little confusion. 

15. Creating and Using Fake Tax Documents

Creating fake tax documents from scratch is also problematic when it’s time to file. 

You’ll see this a lot in the case of freelancers. Rather than reporting income that they were actually paid, some freelancers will create fake 1099 documents that report income they never received. 

Doing this is considered falsifying income, which could get you a stiff fine and even criminal prosecution depending on the amount and situation. Many scammers create fake 1099 forms each year to account for income that they never earned. 

This is also why it’s so important to do business only with tax preparers that you can trust. Some scamming tax preparers will cut corners and create fake 1099 forms, which can land you in hot water. 

16. Engaging in Frivolous Arguments

When you file erroneous and frivolous complaints against the IRS, you could also be put under IRS criminal investigation. 

Some people will make claims and complaints related to their taxes that don’t end up having any merit. Not only does this waste the IRS’ time and resources, people often do so when they are trying to skirt their responsibility and defraud the government. 

While you should never hesitate to touch base with the IRS when you have any sort of claim, make sure that you’re not tying them up with frivolous arguments, because it can come back to bite you. 

The best way to address these sorts of problems is to hire the help of a tax professional that understands whether or not you have a claim. By hiring them as a third-party, they can speak on your behalf and you will decrease the likelihood that you will be put under investigation for legitimate claims. 

Always be sure that any tax professional you hire is accredited and look into their background information to know that they are trusted. 

Get Help if You’re Facing an IRS Criminal Investigation

These tips are helpful for you if you’re ever up against an IRS criminal investigation of any sort. 

If you run into any sort of investigation, it’s something that you always need to take seriously. Otherwise, you will face significant penalties and may potentially even face criminal prosecution. 

The best thing you can do to avoid these problems is to lean on us since we’re equipped to help you with any tax issue. We’ve been in business for years and would be happy to help you out. 

If you need help with anything tax-related, contact us online or give us a call at 1-855-410-9985.

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