What Constitutes a “Tax Crime?”

business going to jailYou or your company might underreport your income a little.  Maybe you don’t reveal all of your foreign holdings on your FBAR.  Or, maybe you cooked up a scam over a few years that finds you claiming deductions you have no hope of being able to support.  Are you going to jail?


We talked earlier about the chronic defunding of the Internal Revenue Service (IRS).  It is true—the number of IRS prosecutions for tax crimes has declined.  So, in terms of crime, is the IRS aiming at your accounting practices?


An IRS mandate: Educate about and deter tax fraud

Within the IRS, the Criminal Investigation (CI) unit takes a hard look at tax fraud, tax-associated money laundering, and illegal proceeds earned by legitimate companies through a variety of fraudulent methods. Some of the crimes pursued by CI include:


  • Employment and payroll tax fraud: Payroll tax issues are common.  Underreporting workforce numbers, collecting payroll taxes (federal unemployment, social security, and withholding taxes) and failing to pay them over to the IRS, or paying employees in cash under the table are just a few of the schemes pursued by the IRS. 


  • Refund fraud: Most people know that filing a false income tax return could turn into tax litigation.  Individuals and tax preparers engage in refund fraud and sometimes identity theft in order to obtain an unearned tax refund.  This is also the realm where fake deductions, exemptions, and business expenses come into play.


  • Abusive tax schemes: US taxpayers who avoid filing regulatory reports like FBAR and FATCA  could find themselves facing an IRS criminal tax investigation.  With the proliferation of secrecy jurisdictions, individuals with significant wealth may seek the greater privacy available through offshore tax havens.  There is often a fine line between an abusive tax scheme and a tax option used by an unwitting taxpayer trying to make legitimate use of offshore tax resources.


Committing tax fraud or tax evasion could provoke the interest of the IRS.  But remember, the IRS is both underfunded and short-staffed these days.  An important aspect of any tax crime is intent.  It takes less time and money to work out a civil arrangement with a delinquent taxpayer, than it does to try and convict that same taxpayer of a criminal offense.  Bottom line?  If you are approached by the IRS about the possibility of an IRS audit—immediately speak with an experienced tax lawyer to keep your career, financial wellbeing, and liberty intact.


Talk with an experienced criminal tax defense attorney in Cleveland

If facing a tax challenge, contact Robert J. Fedor, Esq., LLC for a confidential consultation.  From offices in Cleveland, Ohio, and Chicago, Illinois, we provide local, national, and international legal service to resolve your tax issue.  Contact us or call 800.579.0997 today.


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