IRS Audits vs. Criminal Investigations: Understanding the Differences

IRS auditWhen audited by the Internal Revenue Service (IRS), it is important to understand the focus of an audit and whether there is concern for a civil mistake or criminal wrongdoing.


Civil tax audits are common and may result from a random algorithmic pick, an error on your return, or a flag from an IRS tool that finds something amiss. Maybe the IRS has documents that dispute your deductions or the amount of income you reported. The examiner may find what appears to be a mistake and make an additional assessment. Or—while reviewing your documents, the examiner may find problems with your return that could point to civil tax fraud—or worse. 


If you are in the midst of a civil tax audit and the IRS examiner suspects fraud, the audit may be paused by the IRS without a complete explanation. A possible criminal tax investigation is reviewed and approved by IRS leadership based on evidence provided by an auditor, revenue officer, or analyst. Candidate cases for criminal tax investigations are vetted by at least two layers of management to ensure there is solid evidence to pursue an investigation.


If appropriate, the IRS may pursue suspicions of civil or criminal tax fraud. According to the IRS, the difference between civil tax fraud and criminal tax fraud is the standard of proof required to bring the charges. For criminal matters, investigators must be able to prove allegations of tax crime beyond a reasonable doubt. For civil tax fraud, clear and convincing evidence is required.


Whether a matter is viewed as civil or criminal tax fraud is decided by the IRS and is of importance to any taxpayer. Civil tax fraud may result in clawback of assets and steep penalties in addition to an assessment of the correct tax. Criminal tax fraud could lead to the same penalties along with additional fines, and imprisonment. Bottom line—criminal tax fraud charges are intended to be punitive and to prove a deterrent to the defendant and others.


It is important to remember that the IRS is careful about the matters that it chooses to prosecute.  The IRS expertly builds its cases and has a high conviction rate to show for it. If you learn that the IRS believes you have committed either civil or criminal tax fraud—speak to an experienced criminal tax attorney as soon as you suspect your audit may have been recommended for investigation. Early resolution may be your best option.


Experienced criminal tax attorneys provide aggressive defense against IRS prosecution

With offices in Cleveland and Chicago, the legal group at Robert J. Fedor, Esq., LLC delivers skilled representation on criminal tax investigations, compliance issues, tax litigation, and offshore tax concerns. Call 800-579-0997 or contact us online today.


Understanding Tax Fraud