Understanding How the IRS Handles Tax Fraud Cases

Posted by on Apr 5, 2017 in Advice From the Experts, Legal, Tax Litigation |

How the IRS Handles Tax Fraud Cases

The method put in place by the IRS to identify tax offenders is seamless starting from alerts using credit scores and social security numbers. Offenses when identified fall into two categories: negligence and fraudulence.

Defining Negligence

The act of negligence is defined in terms of a taxpayer making an error in the computation of tax which often involves wrong figures and mixed up calculations in tax returns. In this case, the IRS views this as not a willful attempt to avoid paying taxes and therefore files civil charges. Lawrence Bronw, a tax attorney in Dallas, often tells people that hiring a trustworthy accountant is imperative. If an accountant accidentally enters a wrong number or files your taxes incorrectly, you’ll end up with a big headache.

Defining Fraud

Fraud, on the other hand, is definitely a wilful attempt to cheat the system and avoid paying rightful taxes. Fraud covers having different accounting records, forging of relevant documents, and alteration of figures in tax records and avoidance of filing tax returns for no justifiable reason. When crimes such as the before mentioned are committed, the IRS pursues legal action in both civil and criminal areas.

Studies: 17% of Taxpayers Cheat

A recent study conducted by the IRS revealed that in the United States, 17% of taxpayers cheat when filing tax returns. The perpetrators are often engaged in occupations that are mainly cash heavy. They include the hospitality industry workers, construction crews, shop attendants, lawyers, wayside shops, and doctors. Even with the known statistic, the rate at which the IRS charges offenders is relatively low.

In the year 2016, the number of individuals and corporations charged with tax offenses in total accounted for less than 1%. The audit process for tracking down both classes of offending taxpayers is currently receiving an overhaul so as to fast track the process. Previous year figures show that audits for all taxpayers groups have been increasing.

The actual conduction of the criminal investigation is carried out by the IRS Investigations Department where specially trained agents are well versed with the methods and in the knowledge of how to identify potential tax cheats and prosecute the offenders with the evidence gotten from investigations.

Also, how to build a case is something they are well versed in so if the matter happens to be charged with a criminal offense, the process of evidence gathering would not be a problem. In the likelihood of being contacted by any IRS agent, then you should be aware that criminal charges are being investigated.

Before the IRS launches a full on investigation, the first step and also the most common is to launch an audit. This starts by sending a correspondence audit; a letter stating that the IRS is getting ready to charge your return and also more money. This is often caused due to discrepancies and differences between your documents and that of a third party.

To handle this, the best way would be to reach out to the IRS by asking where the problems are and correcting them before sending back. The other step involves an office audit where the IRS auditor engages you in a face to face conversation going over the details of your return. This step only comes about if you failed to cover the errors in the correspondence audit.