Tax code laws are some of the most complex regulations to be understood by consumers. The IRS depends on self-determining acquiescence to calculate taxes obliged, which means that taxes are autonomous by the individual or business. This leaves room for error, or possibly deceit. The following lists some necessary information every taxpayer should be aware of when preparing or filing taxes.
The IRS pursues investigations of alleged transgressions through the law enforcement branch of the agency called the IRS Criminal Investigations Unit, or CI. CI investigators use prominent methods to reveal computer information safeguarded by encryption or passwords to uncover tax crimes such as Bank Secrecy Act violations and money laundering.
The IRS estimates that individual taxpayers, not businesses, commit about 75% of all tax fraud violations. However, less than 1% of taxpaying Americans are ever convicted of a tax crime. The biggest culprits are cash-intensive businesses and service industry workers. The majority of fraud is committed by is failing to reveal all revenue. Self-employed restaurant owners, retail apparel stores and car dealerships are examples of such fraud. Several other professions that have been found to defraud the government are telemarketers and other sales personnel, lawyers, doctors, accountants and cosmetologists.
Agents are trained to look for willful intentions to delude the IRS, or fraud. Keeping two sets of financial records, using a phony Social Security number, or claiming a fictitious spouse as a dependent when they are not married are all illustrations of tax fraud. Even though investigators are looking for fraud, typically they will give the individual the benefit of the doubt and not pursue criminal charges for tax fraud if it was truly an honest mistake. A careless error on a return could result in a penalty of 20% added to a tax bill. However, this is more desirable than the 75% civil penalty that is imposed if a person is culpable of tax fraud.
Investigators are skilled at detecting certain kinds of misconduct, otherwise known as badges of fraud. Businesses who keep two sets of books or no records at all, altered receipts and doctored checks to cause an increase in deductions are some offenses that fall into this category. Although the chances that an individual or business will be convicted of a tax crime are slim, the possibility does exist. Any taxpayers that find themselves in this situation should contact an experienced and knowledgeable criminal tax attorney right away.
Income tax fraud requires a willful and intentional attempt to defraud the IRS or circumvent federal tax laws. If signs of fraud are absent, agents will assume that it was an honest mistake rather than in intentional evasion of the tax laws. Generally, the IRS can identify if an oversight is the consequence of fraud or negligence. Auditors look for common forms of suspicious or fraudulent activity by closely analyzing tax areas and taxpayer clusters that are prone to deception. The IRS strives to disparage infractions by designating monetary penalties, disclosing guilty parties to the public and recommending incarceration for lawbreakers. The specific types of fraud determine penalties for income tax fraud. If an individual or corporation is convicted of a tax crime, they could be found guilty of a felony and may be subject to imprisonment of up to 5 years and fines up to $500,000.
Byline: Sam Ronald is a freelance blog contributor, articles about securities litigation is his particular specialty.