Effective Tax Fraud Investigation Defense in Texas
Introduction to Tax Fraud and Investigations
An Internal Revenue Service Fraud Investigation is a serious matter, whether Civil or Criminal. A Civil Tax Fraud investigation can have serious and negative impacts on your financial health. A Criminal Tax Fraud investigation escalates the situation quickly and significantly, impacting not only your financial health but also your freedom. If you have been contacted by the Internal Revenue Service regarding a Criminal Tax Issue, contact an experienced tax lawyer immediately, as time is of the essence. Contact Booth P.C. for a confidential discussion and assessment of your case.
Stated very generally, Federal tax fraud is defined as intentional acts to avoid or underpay taxes, such as filing false returns, underreporting income, or concealing assets. Both individuals and businesses can be penalized for tax fraud. The key factor in any Federal Tax Fraud investigation, civil or criminal, is the government proving that you willfully and/or had the intent to violate the Internal Revenue Code.
If you are found liable for tax fraud after a Civil investigation (like an IRS Audit), the penalty is 75% of the amount you owe (i.e., you owe $100,000 in tax, and the Civil Fraud penalty is $75,000). The penalties for criminal tax fraud (tax evasion)* are also significant and are based on the tax fraud charges brought against you by the Internal Revenue Service. For example:
- Filing false tax returns (including false statements in a Tax Return)- Up to 3 years imprisonment and fines of up to $100,000 for Individuals and $500,000 for Businesses, plus Attorney’s fees;
- Aiding or assisting another person or entity in preparing False Documents- Up to 3 years imprisonment and fines of up to $100,000 for Individuals and $500,000 for Businesses, plus Attorney’s fees;
- Tax Evasion- Up to 5 years imprisonment and fines of up to $100,000 for individuals and $500,000 for Businesses, plus Attorney’s fees;
*When you see the terms tax fraud vs. tax evasion, think Civil (tax fraud) v. Criminal (tax evasion), although the terms are often used interchangeably.
An experienced IRS Tax Fraud Booth P.C. tax lawyer is a trusted advisor and zealous advocate for both individuals and businesses during a Civil or Criminal Tax Fraud investigation. Crucially, retaining an experienced Booth P.C. tax lawyer in the early stages of a tax fraud investigation can mitigate the potential for escalating charges.
Understanding the IRS Criminal Tax Investigation Process
The IRS Criminal Investigation Division’s (IRS-CI) exists for the purpose of investigating potential criminal violations of the Internal Revenue Code. When IRS-CI has developed a case that it believes is worthy of prosecution, IRS-CI partners with federal prosecutors at the U.S. Department of Justice to criminally prosecute violations of the Internal Revenue Code. In all but the most serious cases, the federal prosecutors at the local U.S. Attorney’s Office will be charged with representing the United States of America/IRS against you. To be clear, this is serious.
IRS-CI criminal tax investigations are based on suspected violations of the Internal Revenue Code. How IRS-CI is made aware of these suspected violations can vary substantially. One of the most common ways IRS-CI begins an investigation is after receiving a criminal tax fraud referral from an IRS employee conducting an IRS Civil Audit. Other ways include informants, tips from other Federal or State Agencies, and whistleblowers (who are offered rewards in exchange for credible information).
The IRS Criminal Investigation Division is one of the most sophisticated investigative divisions in the Federal Government and uses all manner of techniques to investigate suspected Tax evasion, including audits, interviews, surveillance, and reviewing financial records. In certain cases, a Federal Grand Jury is empaneled, and IRS-CI uses grand jury subpoena powers to gather evidence. In others, IRS-CI uses IRS Administrative Summonses to gather evidence and testimony.
No two investigations are the same, but very generally, the Tax Fraud investigative process begins with a red flag of some kind, either via an IRS Civil Audit or some other source of information. A “Fraud Referral” is then made to IRS-CI (unless IRS-CI initiates the investigation on its own) detailing the suspected criminal violation(s). IRS-CI then begins a criminal tax investigation, including the evidence gathering process. After concluding the evidence-gathering process, IRS-CI will assess the potential for criminal charges.
You can be contacted by the IRS Criminal Investigation Division at several stages during the criminal investigation process. You could be directly contacted via letter, by the issuance of a summons, or in an unannounced visit to your home or place of business. The agent will/should identify themselves and advise you that you are currently the target of a criminal tax investigation. Again, this is serious.
Know your rights, specifically your rights under the 5th Amendment to the U.S. Constitution to remain silent. Exercise your rights. And call your lawyer at Booth P.C.
Understanding the IRS Civil Tax Fraud Investigation Process
The Civil Tax Fraud Investigation process is similar to the standard IRS audit/examination process. You receive a letter from the IRS examination division that advises you that your Tax Return(s) have been selected for examination. During this examination, you will be notified that the IRS is contemplating asserting the Civil Fraud penalty against you based on your actions or conduct during the period under the tax Audit (i.e., not reporting all of your income, overstating deductions, etc.). The Civil Fraud penalty can also be asserted against you for your actions during the audit (i.e,. giving the IRS Agent a false or altered document). You can also be assessed the Civil Fraud Penalty as part of a Criminal Tax Prosecution or plea agreement.
Once the Civil Fraud penalty has been asserted against you, you will have the opportunity to dispute this finding with the examination function, the Independent Office of Appeals, or at Trial. If the IRS is sustained in its finding, you will be assessed a penalty equal to 75% of the tax you owe, and, crucially, this penalty (unlike other IRS penalties) is generally non-dischargeable in Bankruptcy. Although the Civil Fraud penalty is less severe than a Criminal Fraud (Evasion) investigation or indictment, it is still imperative that you retain an accomplished, zealous, and experienced tax lawyer to represent your interests.
Types of Tax Fraud Investigations and Cases in Texas
The Internal Revenue Code is over 80,000 pages. The possible number and type of Criminal and Civil Fraud cases are too numerous to list. However, the most common Criminal Tax Evasion and Civil Fraud cases include:
- Individual income tax fraud (false deductions, hiding income, failing to file).
- Employment tax fraud (underreporting payroll, not remitting withheld taxes).
- Corporate and business tax fraud (improper reporting of deductions or credits, unreported revenue, offshore accounts).
- Tax preparer fraud (preparers filing false returns to inflate refunds or reduce liabilities).
- International tax fraud, including offshore accounts and unreported foreign income.
While this list is not exhaustive, every Criminal and Civil Tax Fraud investigation includes unique elements, risks, and potential penalties. Whether Criminal or Civil, successful resolution requires extensive knowledge, experience and, most importantly tax fraud investigation defense specifically tailored to your needs and situation. Booth P.C. should be your first call if you are under a tax fraud investigation, whether in Texas or throughout the Country.
Defense Strategies for Tax Fraud Investigations
Each Tax Fraud investigation is unique and will require a unique strategy tailored to the facts of your case. However, the first step you should take is to contact an experienced tax fraud investigation attorney immediately. Booth P.C. will speak with you immediately and begin to gather facts and evidence to prepare for a vigorous and zealous defense.
Although the best defense to a Criminal or Civil Tax fraud investigation is unique to the facts of the case, common defense strategies can include:
- Lack of intent/willfulness (mistakes vs. fraud).
- You had a good-faith beliefin your tax reporting.
- Challenge the evidence collected or the investigative procedures used in your case.
- Negotiating a settlement or a plea agreement for reduced charges.
Oftentimes, Civil Fraud and Criminal Tax Fraud/Evasion cases can be resolved without trial during settlement negotiations. This requires careful case preparation, extensive evidence gathering, analyzing the procedures used by the IRS criminal investigation division and the U.S. Attorney’s Office during the investigation of your case, and several strategic decisions. To be clear, for the best outcome, an experienced, knowledgeable tax attorney is a necessity.
Avoiding Penalties and Protecting Your Rights
Retaining an experienced tax fraud litigation attorney as early as possible can often result in reduced or eliminated Civil penalties and reduced or no Criminal Tax Charges. An experienced tax fraud litigation lawyer from Booth P.C. can quickly contact IRS-CI or the Department of Justice on your behalf and determine the strength of the case against you. Based on your situation, an assessment can also be made regarding proactive compliance efforts and IRS Voluntary Disclosure programs. Early involvement in your civil or criminal investigation by an experienced Booth P.C. is your best chance to reduce or eliminate penalties and protect your rights. If you need tax fraud investigation help in Texas or around the Country, contact Booth P.C.
How Our Law Firm Can Help You
Being accused of committing tax fraud by the Internal Revenue Service or tax evasion by the United States of America is likely one of the most harrowing situations you or your business will face. Booth P.C. will be your trusted advisor during these very difficult investigations. As a trusted advisor, we will discuss with you your options and advise you on the best path forward. As a zealous advocate, we will defend you in the U.S. Tax Court or the Federal District Court. Most importantly, we think about the end at the beginning, using our courtroom and substantive tax experience to mitigate or eliminate exposure at every step. Don’t take on the IRS or DOJ alone. Contact Booth P.C. today.
Frequently Asked Questions
How does a tax fraud investigation usually begin?
Criminal Tax Fraud (Tax Evasion) investigations begin in a variety of ways, but most begin based on a referral from a Civil IRS Revenue Agent, IRS-CI standalone investigations, Whistleblowers, and information from other Federal and State agencies. Civil Tax Fraud investigations are often initiated based on IRS analysis of tax reporting information, Criminal Tax cases, special enforcement programs, and whistleblowers.
What are common signs that I may be under an IRS-CI criminal investigation?
The most common ways an individual or business may discover that it is the subject of an IRS-CI Criminal Investigation include direct contact by an IRS-CI Special Agent, receiving a subpoena or search warrant, and the suspension of a Civil IRS Audit.
Can I go to prison for tax fraud?
Yes. Virtually all Federal Criminal Tax Fraud statutes (including Evasion) include incarceration in the range of punishment.
How far back can the IRS investigate suspected Criminal Tax Evasion?
The Statute of Limitations for Tax Evasion is 6 years.
What should I do if I am contacted by IRS Criminal Investigation (IRS-CI)?
Contact a lawyer immediately.
Can hiring a tax fraud defense attorney stop criminal charges?
Yes, depending on the severity of the allegations against you, an attorney experienced in tax fraud investigations is your best chance at reducing or eliminating any potential charges you may face.
How does intent play a role in proving tax fraud?
Both Criminal Tax Evasion and Civil Tax Fraud require intent (willfulness) as an element of the charge against you. Proving intent is generally where most of the effort in Criminal and Civil Tax cases is focused.
Can tax fraud investigations also involve Texas state tax authorities?
Not directly. IRS-CI criminal tax investigations and IRS Civil fraud investigations are based on violations or non-compliance with Federal tax law. There are instances, however, where state taxing authorities (like the Texas Comptroller) may have information that is relevant to the Federal Tax fraud investigation. However, this does not mean the state taxing authority is investigating you for tax fraud.
Is it possible to negotiate a settlement or reduced penalties in a tax fraud case?
Yes. In fact, after careful preparation and analysis, negotiating a settlement in a Civil or Criminal case is not an uncommon outcome, although every case is unique.
What is the difference between a civil tax fraud penalty and criminal tax fraud charges?
There are several differences, but the primary difference is that Criminal Tax Fraud includes the possibility of incarceration, whereas Civil Tax Fraud does not. Also, Criminal Tax Fraud includes potential fines, restitution, and attorney’s fees, whereas Civil Tax Penalties are 75% of the Tax debt you owe. In both Criminal Tax investigations and Civil Tax Fraud investigations, you owe the tax due, in addition to any other penalties or fees.