No one wants to be the subject of a tax evasion investigation. Being accused of tax evasion can lead to significant fees and penalties. Even worse, however, it can lead to criminal tax evasion charges, which may result in jail time.
Unfortunately, a simple error in tax reporting or overly aggressive tax planning can be construed as evasion by the Internal Revenue Service. The IRS, however, only has a certain amount of time to pursue an audit. Understanding the timeline may help give you a better idea of how far back the IRS can probe.
As a base rule, the IRS has three years from the time tax evasion is allegedly committed to pursue an audit. This rule is not set in stone and may be extended depending on the circumstances. Additionally, the IRS will be allotted a total of six years to file for audit if you omitted more than one-quarter of your income from your tax return. In general, the more significant the perceived evasion, the more time the IRS is given.
When it comes to alleged criminal tax evasion, the IRS has, again, a six-year statute of limitations beginning from the time the return is filed or from the time you chose not to file the return. However, fleeing the country for six years will not get you out of criminal charges. The statute of limitations can be “tolled” – or suspended – if the target of the investigation leaves the country or becomes a fugitive.
Unfortunately, the statutes of limitations are not always clear – and are often circumstantial – when it comes to tax evasion. Any number of situations can lead to an extended timeframe for the government to work within. Because of this, it is very important to work closely with an experienced IRS tax lawyer if you suspect you are being investigated or you have been accused. A tax attorney will understand the statute of limitations you are facing and may be able to help you seek a favorable outcome.
