Burden Of Proof
The government will have the burden of proof with a charge of tax fraud. This can be a challenge as the government will have to prove a taxpayer intentionally defrauded the government. Previous cases where the government did prove a taxpayer knowingly violated the Internal Revenue Code were difficult. This is the reason a charge of tax fraud is something the government prefers to pursue in civil court. It is usually for a taxpayer underpaying their taxes.
Individual Tax Fraud Investigation
Allegations of tax fraud are investigated by the Internal Revenue Service Criminal Investigation Unit. They will focus their investigation on individual taxpayers and businesses in specific situations.
Taxpayer Tax Fraud Investigation
*A taxpayer intentionally did not file their income tax return.
*A taxpayer purposely did not pay the tax debt they owed the government.
*A taxpayer misrepresented the true state of their individual situation. They intentionally falsely claimed tax credits as well as deductions and more.
*A taxpayer purposely filed a false tax return.
*A taxpayer intentionally did not report all their income.
Business Tax Fraud Investigation
*Intentionally failing to file payroll tax reports
*Intentionally failing to report and pay all withheld payroll taxes
*Intentionally failing to withhold FICA (Federal Insurance Contributions Act) taxes as well as federal income tax from the paychecks given to employees
*Intentionally failing to report some or all cash payments given to employees.
*Intentionally hiring an outside payroll service which fails to pay any and all funds owed to the IRS.
Sources for Investigations
Investigations conducted by IRS Special Agents are often started after they receive information from an IRS revenue agent or revenue officer. Information is often received from the public. During the course of investigations sources of others involved in tax fraud will be revealed. It is also possible for law enforcement agencies to provide the IRS with information on possible incidents of tax fraud and more
During a criminal investigation, IRS special agents will work closely with the IRS Chief Counsel Criminal Tax Attorney. All necessary evidence is obtained and then analyzed. An IRS special agent or supervisor will decide if the evidence gathered indicates the subject engaged in criminal activity. Should the evidence indicate criminal activity, the IRS special agent will proceed with creating a report detailing the possible violations of the law.
Anyone who finds themselves in a civil or criminal court for tax fraud will need to speak with a legal professional as soon as possible. There are certain effective legal defenses that can be used.
*Mistake – It is possible to prove a taxpayer or business made an honest mistake when paying taxes due or reporting what has been earned.
*Insufficient Evidence – It is possible the government does not have enough documentation to prove their case against a taxpayer or business.
*Entrapment – This happens when the government is able to compel an innocent taxpayer or business to commit a crime. One that would not have been committed without governmental influence.
*Statute Of Limitations – There is a statute of limitations the government has when it comes to filing charges against a taxpayer or business. Once this time has passed, the government can no longer file charges.
Insanity – A taxpayer or business may claim they were insane at the time the offense occurred. Most legal professionals realize this is difficult to prove in any court.
When a person or business is accused of tax fraud, they will need to immediately speak with an attorney. These legal professionals know how to properly analyze a case. They know how to handle the situation for the best possible result.