Could a divorce trigger a criminal tax audit?

IRS tax evasionWe think new and regular readers of our Cleveland tax blog will find interesting a question-and-answer exchange between an attorney who doubles as a newspaper advice columnist and a reader of the Boston paper. The reader wrote in about his past tax evasions that might come up in court during his divorce. He wondered if the tax evasions are exposed in his split from his wife, would the fraud necessarily be reported to the Internal Revenue Service?



The business owner and reader was probably disappointed to find out that the answer is yes, if the trial judge issues a finding involving the tax fraud, the judge would be obligated to report the crime to the IRS after the divorce trial.

The family law attorney and columnist noted that judges are expected to report tax fraud crimes, and that a failure to do so might make the adjudicator look like a co-conspirator. Plus, if the reader really did send in tax returns with false declarations of income, receipts, deductions, expenses, etc., the business owner violated the law.

The lawyer notes that if the reader doesn't want to risk being reported to the IRS, he should settle his divorce disputes quickly. If he doesn't do that, the IRS will begin a criminal tax audit and IRS and state tax agents will one day knock on the doors of his business and home with warrants in hand. They'll seize the reader's financial documents and he can then expect that the search will be "followed by criminal charges."

In similar situations in which a person anticipates an investigation of a failure to file gross receipts, or claims of exaggerated expenses, they will discuss matters with a tax attorney who can work with the IRS to resolve the issues before criminal charges are filed. If charges are filed, an experienced Cleveland tax lawyer can conduct negotiations or provide aggressive representation in court.

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