The IRS has set forth a special department devoted to investigating possible criminal violations of the Internal Revenue Code and other possible financial crimes such as; money laundering, antitrust violations, and currency crimes. This particular department consists of IRS agents who have been trained in financial investigation, including techniques such as undercover operations, search warrants, and wiretaps. During these investigations the IRS performs extensive, in-depth investigations into an individual’s or business’s financial records to reveal any tax or financial crimes including:
- unfiled tax returns
- conspiracy
- tax fraud
- tax evasion
Unfiled Tax Returns
Filing your tax return is required by law; failure to do so is punishable with the time in prison and a considerable amount of monetary fines. The astonishing fact is there are roughly 10 million individuals and businesses that fail to or refuse to file their returns each year. Taxpayers who failed to file their annual return have been deemed the IRS’s highest priority when investigating criminal activity. If the IRS feels that the taxpayer’s failure to file has risen to the level of tax evasion, it will be considered a felony crime that carries a punishment of up to five years in prison per year that was unfiled.
Conspiracy
If a taxpayer decides to plot or concurred with someone else to do something that has been carried out and amounts to another federal crime or offense, is considered the federal crime of conspiracy. By law the government does not need actual proof that the conspirator in question has carried out their illegal plan. The “Klein Conspiracy” is defined as an agreement whose reason was to commit fraud or any other offense towards the IRS, and requires sufficient evidence.
Tax Fraud
A large portion of IRS investigations consist of focusing on federal tax fraud. The misconception is that tax fraud is only punishable to individuals and companies; however, the tax preparer’s are liable as well. Tax fraud is a broad topic consisting of tax evasion, failure to file a return, failure to supply sufficient information, failure to pay taxes, creating false statements, etc. examples of tax fraud include:
- purposely overstating the amount of deductions
- inserting phony entries in records
- blatantly claiming personal expenses as business expenses
- keeping two sets of books or records
- claiming bogus deductions
- concealing or moving one’s assets or income
- consciously omitting or underreporting one’s income
Tax Evasion
Simply put tax evasion is the act of using illegal measures to purposely avoid tax is by an individual or business. This crime is usually committed by the taxpayer knowingly misrepresenting or providing false information to the IRS. This usually includes false reporting, such as stating less income, profits, or gains than truly earned. Taxpayers achieve this by keeping more than one set of books, concealing assets or income in offshore accounts, or overstating deductions.
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