When the IRS Pursues Criminal Charges: Things You Need to Know

The Internal Revenue Service (IRS) is responsible for enforcing tax laws in the United States. While most tax issues are civil matters that can be resolved through audits, assessments, and payment plans, there are instances where the IRS may pursue criminal charges against taxpayers for serious violations. Understanding when the IRS pursues criminal charges is crucial for taxpayers to stay compliant and avoid legal troubles. From tax evasion to fraudulent returns and failure to file, various offenses can lead to serious penalties if not addressed properly.

In such challenging circumstances, seeking professional assistance from experts from CuraDebt can provide invaluable support. CuraDebt offers comprehensive tax resolution services tailored to each client’s specific needs, including IRS audits, negotiations for settlements, and representation in criminal tax investigations.

Types of IRS Tax Crimes:

Tax crimes encompass a wide spectrum of illegal activities related to taxes, each carrying its own set of legal consequences. Some common types of tax crimes include tax evasion and filing false tax returns. Other involve failure to file tax returns, fraudulent claims for refunds, willful failure to pay taxes, employee tax fraud and tax preparer fraud.

Causes the IRS to Consider Pursuing Criminal Charges:

The IRS employs various methods to identify potential tax crimes and determine whether criminal prosecution is warranted.

Some red flags that may trigger an IRS criminal investigation include:

  • Large discrepancies between reported income and lifestyle.
  • Consistent underreporting of income or overstating of deductions.
  • Engaging in complex transactions to conceal income or assets.
  • Failure to file tax returns for multiple years.
  • Evidence of falsified documents or records.
  • Refusal to cooperate with IRS audits or investigations.

Some common types of tax crimes are tax evasion, fraudulent tax returns, and failure to file are among the key triggers for IRS criminal investigations.

Tax Evasion:

One of the primary triggers for IRS criminal investigations is tax evasion, which involves intentionally underreporting income, overstating deductions, or hiding assets to evade paying taxes owed. Individuals or businesses may engage in various schemes to conceal income. They might use offshore accounts, shell companies, or unreported cash transactions. The IRS closely scrutinizes taxpayers who exhibit a pattern of evasive behavior. This includes consistently underreporting income relative to their lifestyle. They may also engage in complex financial transactions designed to obscure taxable income.

Fraudulent Tax Returns:

Filing false or fraudulent tax returns is another common tactic used to evade taxes. This may involve fabricating income, claiming fictitious deductions, or misrepresenting expenses to inflate refunds or reduce tax liabilities. Taxpayers who submit fraudulent tax returns risk not only civil penalties but also criminal prosecution. If the IRS determines that the misrepresentations were intentional and material, individuals may face legal consequences. Red flags for fraudulent returns include discrepancies between reported income and supporting documentation. Additionally, inconsistencies in reported expenses or deductions may raise suspicion during IRS scrutiny.

Failure to File:

Failure to file tax returns is a serious offense that can lead to both civil and criminal penalties. Taxpayers who fail to file required returns may face criminal charges if the IRS determines that the failure was willful. Even if there is no intent to evade taxes, failure to file can still result in substantial penalties and interest accruing on unpaid taxes. The IRS may initiate criminal investigations against individuals who repeatedly fail to file returns despite receiving notices and warnings.

Tax Evasion for Businesses:

Tax evasion for businesses can manifest in various forms, such as underreporting income, inflating deductions, or engaging in fraudulent transactions to evade taxes. Common issues include manipulation of financial records, underreporting of sales, misuse of business expenses, and failure to withhold or remit payroll taxes. When the IRS suspects deliberate tax evasion by business owners, it may initiate criminal investigations.

How does the IRS conduct its criminal investigations?

When the IRS suspects criminal activity, it typically initiates a criminal investigation through its Criminal Investigation Division (CID). IRS special agents are tasked with gathering evidence, conducting interviews, and collaborating with other law enforcement agencies if necessary. The investigation may involve a multifaceted approach, including surveillance, data analysis, and forensic accounting techniques to uncover financial wrongdoing. Special agents may scrutinize financial records, interview witnesses, and analyze transactions to establish the extent of tax evasion or fraud. Additionally, the CID collaborates with other agencies like the Department of Justice or FBI for more resources in complex cases. When delving into IRS criminal investigations, it’s essential to consider the statute of limitations on tax evasion and tax fraud.

When Does the IRS Pursue Criminal Charges?

The IRS pursues criminal charges when there is evidence of serious tax evasion, tax fraud, or failure to comply with tax laws. The decision to pursue criminal charges is based on various factors, reflecting the gravity of the offense and its impact on tax administration and compliance. The IRS assesses the seriousness of the offense, weighing factors like tax amount and duration of non-compliance. Aggravating circumstances, like deliberate concealment, are also considered. Additionally, the taxpayer’s compliance history and willingness to cooperate with the investigation may influence prosecutorial decisions. The IRS aims for consistency and fairness in enforcement, balancing deterrence with individual circumstances. It upholds tax system integrity by holding evaders accountable, promoting taxpayer compliance.

When the IRS Pursues Criminal Charges for Business Owners?

The decision to pursue criminal charges depends on factors like the severity of the evasion, the extent of financial harm to the government, and the presence of aggravating factors like concealment or obstruction. Business owners may face criminal prosecution if found guilty of willful tax evasion or fraud, leading to significant penalties, fines, and potential imprisonment. Businesses must keep precise financial records, adhere to tax laws, and seek expert advice to prevent legal consequences.

Tax Evasion Potential Penalties for Individuals Convicted of Tax Crimes:

Individuals convicted of tax crimes may face significant penalties, reflecting the seriousness of the offenses and their impact on tax revenue and public trust. The severity of the penalties depends on the nature and extent of the offense, as well as any mitigating or aggravating factors present in the case. For instance, tax evasion can result in substantial fines, with penalties of up to $250,000 for individuals and $500,000 for corporations, in addition to potential imprisonment for up to five years. Moreover, convicted taxpayers may be required to pay restitution for unpaid taxes, interest, and penalties, further increasing their financial liability. The IRS aims to impose proportional penalties for tax crimes, deterring future non-compliance and promoting tax law compliance.

Common Legal Defenses In IRS Tax Crime Charges:

Taxpayers facing criminal charges have the right to defend themselves against allegations of tax crimes and seek mitigation of penalties through various legal avenues. Common legal defenses include lack of intent, where the taxpayer can demonstrate that any errors or omissions were unintentional or made in good faith. Additionally, individuals may negotiate plea agreements with the IRS, cooperating with the investigation in exchange for reduced charges or penalties. By proactively addressing the allegations, taxpayers can mitigate the potential consequences. They can present compelling legal defenses and protect their rights in the legal process.

Why is Compliance Reporting Crucial?

To avoid the risk of criminal prosecution, taxpayers should prioritize compliance with tax laws and regulations, maintaining accurate records and timely fulfilling their tax obligations. This includes reporting all income, deductions, and credits accurately and fully disclosing all relevant financial information to the IRS. Taxpayers should maintain thorough documentation. They should be prepared to substantiate any claims or deductions during audits. Staying informed and proactive in tax compliance helps individuals and businesses avoid legal troubles and protect their financial interests. Learn more about what is tax compliance and why is it important?

How CuraDebt Can Help:

Navigating the complexities of tax laws and regulations can be daunting, especially when facing the prospect of criminal charges from the IRS. In such situations, seeking professional assistance from experts from CuraDebt can be invaluable. CuraDebt offers comprehensive tax resolution services, including IRS tax relief programs, assistance with IRS audits, negotiations for settlements or installment agreements, and representation in criminal tax investigations. Our team of experienced tax professionals understands the intricacies of tax laws and can provide personalized guidance tailored to each client’s specific situation. 

By partnering with CuraDebt, taxpayers can gain peace of mind knowing that their interests are being protected and that they have a dedicated advocate working on their behalf to achieve the best possible outcome. Whether facing allegations of tax evasion, fraudulent tax returns, or failure to file, CuraDebt can provide the support and expertise needed to navigate the legal process effectively and mitigate the potential consequences of criminal prosecution.

IRS Tax Relief Programs and Tax Issues We Can Help With:

CuraDebt offers a comprehensive range of IRS tax relief programs and assistance to address various tax issues, including:

  • Resolving Unpaid Taxes: Negotiating payment plans with the IRS to settle outstanding tax debts.
  • Business Tax Support: Guidance for businesses dealing with tax debt, audits, and IRS notices.
  • Personal Tax Solutions: Tailored assistance for individuals facing tax debt, audits, or penalties.
  • Trust Fund Penalties Relief: Options for individuals held liable for trust fund penalties.
  • Tax Penalty Reduction: Negotiating with the IRS to reduce or eliminate tax penalties.
  • Halting Wage Garnishments: Assistance in stopping wage garnishments and exploring alternatives.
  • Managing Business Tax Liens: Strategies for handling business tax liens and resolving debt.
  • Audit Representation: Defense and representation during IRS audits to ensure fair outcomes.
  • Partial Payment Plans: Setting up partial payment plans for those unable to pay their full tax debt.
  • Offer In Compromise (OIC): Guiding individuals through the OIC process to settle tax debt.
  • IRS Fresh Start Program: Help for eligible taxpayers in resolving tax debt through the program.
  • Innocent Spouse Relief: Relief options for individuals facing tax debt due to a spouse’s actions.

CuraDebt offers tailored tax solutions, including strategies to prevent levies, release tax levies and liens, halt garnishments, resolve payroll tax issues, file unfiled tax returns, amend prior returns, and comprehensive income tax preparation services. For personalized assistance, contact CuraDebt today for a free tax consultation at 1-877-999-0486 and take the first step towards resolving your tax issues confidently.

Back to top

Get A Free, No-Obligation Tax Debt Relief Consultation


Get A Free, Tax Debt Analysis