Recognizing IRS Tax Fraud

What is Tax Fraud?

Tax fraud involves individuals, businesses, trusts, and other entities deliberately using unlawful methods to evade paying taxes. This can include underreporting income, overstating deductions, maintaining dual sets of records, making false entries, and using offshore accounts to hide income.

How to Spot Tax Fraud

As former IRS agents with over 60 years of combined experience, we have seen numerous cases of tax fraud. Here are some common examples under federal tax law:

  • Underreporting Income: Deliberately omitting taxable income.
  • Overstating Deductions: Falsifying deductions to reduce tax obligations.
  • Keeping Dual Records: Maintaining two sets of books to conceal financial information.
  • False Entries: Making false entries in records to evade taxes.
  • Expense Misclassification: Declaring personal expenses as business expenses.
  • False Deductions: Submitting deductions that do not qualify.
  • Hiding Assets: Concealing or transferring money or assets.
  • Non-reporting of Cash Income: Failing to report cash earnings.
  • Using Offshore Accounts: Hiding income through offshore accounts.

If you believe you might be at risk, contact us today.

An Overview of Tax Fraud and IRS Criminal Investigations

The IRS Criminal Investigation unit comprises about 4,100 employees worldwide, including approximately 2,700 special agents. These agents enforce laws related to tax violations, money laundering, and the Bank Secrecy Act. The IRS is the sole federal agency authorized to investigate potential criminal violations of the Internal Revenue Code.

Voluntary Compliance

The U.S. tax system relies heavily on voluntary compliance, where individuals and corporations self-assess their tax obligations. Intentional noncompliance can result in civil audits or criminal investigations, leading to prosecution and possible jail time. The IRS frequently publicizes convictions to promote voluntary compliance.

The Role of Special Agents

Special agents, also known as criminal investigators, play a unique role in federal law enforcement. With the increasing use of digital financial records, these agents are trained to retrieve computer evidence using specialized forensic technology to access encrypted, password-protected, or otherwise hidden financial data.

High Rate of Conviction

The IRS Criminal Investigation unit has one of the highest conviction rates among federal law enforcement agencies. Those found guilty may face substantial prison sentences, fines, civil taxes, and other penalties.

Legal Consequences

Title 26 USC § 7201: Attempt to Evade or Defeat Tax

  • Penalty: Up to 5 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both, plus the cost of prosecution.

Title 26 USC § 7202: Willful Failure to Collect or Pay Over Tax

  • Penalty: Up to 5 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both, plus the cost of prosecution.

Title 26 USC § 7203: Willful Failure to File Return, Supply Information, or Pay Tax

  • Penalty: Up to 1 year imprisonment, a fine of up to $100,000 for individuals ($200,000 for corporations), or both, plus the cost of prosecution.

Title 26 USC § 7206(1): Fraud and False Statements

  • Penalty: Up to 3 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both, plus the cost of prosecution.

Title 26 USC § 7206(2): Aid or Assistance in Fraudulent Activities

  • Penalty: Up to 3 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both, plus the cost of prosecution.

Title 26 USC § 7212(A): Attempts to Interfere with the Administration of Internal Revenue Laws

  • Penalty: Up to 3 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both.

Title 18 USC § 371: Conspiracy to Commit Offense or Defraud the United States

  • Penalty: Up to 5 years imprisonment, a fine of up to $250,000 for individuals ($500,000 for corporations), or both.

Contact Clarity Tax Resolutions

Don’t let IRS problems overwhelm you. Our team of professionals, including former IRS agent Michael D. Sullivan, is here to guide you through and successfully handle your tax issues.

This structure provides clear, concise information on tax fraud and its consequences, while emphasizing your expertise and readiness to assist clients.