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When Does the IRS Pursue Criminal Charges?

Various tax relief options can resolve many tax issues, but when we talk about tax evasion or tax fraud, the things are different because the IRS may refer your case to federal courts. If you’re deliberately evading taxes, you should know that the result may end in prison.

Still no need to panic. To make a rational decision on what to do, we want to clarify criminal charges for you.

How Do Tax Evasion Suspicions Turn into Criminal Investigations?

The IRS doesn’t make tax evasion a current issue for each and every individual who fails to pay. However, if there are doubts, it initiates an audit process to clarify the situation.

IRS special agents must follow strict procedures to initiate an investigation. They collect all the evidence and analyze it to find evidence. While auditing, they follow some methods, including:

  • significant discrepancies between reported income and lifestyle,
  • underreported income,
  • overstating deductions,
  • hiding income or assets through complex financial transactions,
  • persistent failure to file tax returns,
  • presence of false documents or records
  • failure to cooperate with IRS audits.

Tax Crimes:

Tax evasion involves deliberately underreporting income, inflating deductions, or hiding assets to avoid tax liabilities.

Fraudulent tax filings are also a tax evasion. Manipulating refunds or fabricating income to reduce tax liabilities, claiming fictitious deductions or misreporting expenses are all part of this.

Failure to file tax returns is a serious offense that can result in both civil and criminal penalties. If the IRS detects willful noncompliance, you may face criminal charges.

Business tax evasion can occur in a variety of forms, including underreporting income, inflating deductions, or engaging in fraudulent transactions to avoid taxes.

What Are the Signs of an IRS Criminal Investigation?

The IRS typically notifies you when it has gathered significant proof, so understanding early that a criminal investigation has been launched against you can help you effectively prepare yourself for possible consequences.

  1. Check your bank accounts for any unusual activity; for example, freezing accounts or banks rejecting transactions without a clear reason.
  2. IRS special agents may visit your home or business to catch you off guard and gather evidence. Additionally, your business partners, accountant, and financial advisors may also have begun receiving questions from them.
  3. If you receive a subpoena for your financial records, this clearly indicates that there is a criminal investigation against you. This is often used in the later stages of the investigation, and you’re legally required to provide the requested documents.

Feeling Overwhelmed?

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What are the penalties for tax evasion?

Your tax evasion adventure may end with heavy fines, prison sentences and long-term financial consequences.

Civil penalties:

First of all, you may face heavy fines depending on your tax situation. These penalties can be calculated as a percentage of taxes you’re owed or as a flat fee per violation. Additionally, you may need to pay interest for unpaid taxes. And, you may face accuracy-related penalties for payments resulting from negligence or disregard for tax rules and regulations.

Criminal penalties:

If you’re convicted of tax evasion, you’ll face various punitive sanctions. The length of time in prison depends on how long you did tax evasion and how much you didn’t pay. You may also lose your employment opportunities, professional license, and right of voting.

Shortly, civil penalties are additional tax penalties added to the tax debt. Criminal penalties often include imprisonment in addition to financial tax penalties.

What Steps Should You Take if You’re Under Investigation by the IRS?

In such a case, you should prove that everything was a mistake unintentionally. Thus, you can cooperate with the IRS in exchange for lower penalties rather than prison punishment.

First, accept it and stop freaking. Audits by the IRS are typically conducted on suspicion of tax fraud. Don’t try to get a resolution on your own, and avoid contacting the IRS directly. Because what you say may be evidence against you. To reduce such risks, contact a tax lawyer in no time.

Secondly, collect and organize all documents such as emails, financial statements, tax returns, and correspondence. Besides, comply with tax laws and filing requirements while the investigation is ongoing.

Thirdly, during the process, the IRS may seize your business assets, so it may impact your operations. Be prepared for this.

The last but not least, maintain confidentiality and remain calm when sharing the process with family friends. Only share the information with your lawyer because anything can be evidence for the IRS. Remember, your lawyer will inform you in detail about all stages.

Can the IRS Arrest You?

If you file a tax return but still owe taxes, and the IRS auditor doesn’t suspect intentional fraud, no civil lawsuit will be filed against you. In general, the IRS has the right to collect tax owed and take actions such as serving a Notice of Levy, withholding a tax refund you’re owed, or filing a Notice of Federal Tax Lien. These processes are civil sanctions and don’t result in imprisonment. However, if ignored, it increases your financial burden.

If you’re involved in serious tax crimes such as tax fraud or tax evasion, you may face prison sentences. However, even in some cases of tax evasion, the process may turn into civil fraud penalties and not result in criminal penalties. That’s why it’s vital to manage the process with an expert.

If you’re looking for the best tax lawyer in your state, contact us. No matter which state you live in, we can help you.

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Hear From Our Clients

Worried About IRS Tax Issues?

Concerned about potential tax evasion or fraud accusations? Get expert advice to navigate IRS investigations and safeguard your rights.
See all reviews
See all 1573 reviews

Hear From Our Clients

Set up your FREE Consultation

Let us know how we can reach you.

A licensed tax professional will contact you within one business day

or Call 1-855-212-5900