The Internal Revenue Service is much more than just the federal agency that collects taxes. It has broad power to investigate individuals and businesses for evidence of potential tax crimes like fraud or evasion involving tax preparation, bankruptcy, banking, gaming, health care, underreporting, employment taxes, identity theft, money laundering, tax avoidance schemes, failure to file returns and much more.
When the agency uncovers what it believes to be evidence of tax fraud or other tax crime, it may refer the matter for federal criminal prosecution.
In its zeal to contain crimes related to taxes, the IRS will likely also investigate taxpayers who are innocent or at the least have only engaged in behavior that might violate civil tax laws that do not amount to criminal activity. Tax law and returns are very complicated and require interpretation of sophisticated legal concepts, especially for high income taxpayers. Sometimes the issue is a matter of good faith legal interpretation and when the IRS asserts otherwise, it is important to have experienced legal counsel on your side to fight the charges.
The IRS publishes criminal investigation data by fiscal year, which is from October through September. For FY 2015:
- Investigations started: 3,853
- Prosecutions recommended: 3,289
- Charges brought: 3,208
- Convictions: 2,879
- Sentenced, including prison, halfway house, home detention or a combination: 3,092
- Percentage to prison: 80.8 percent
- Average prison sentence: 40 months
The severity of these sentences underscores the need to retain an experienced tax crime lawyer as early as possible, even during the investigation. An attorney will communicate with federal authorities on behalf of the client and work to protect the client's legal and constitutional rights. Significantly, the lawyer will endeavor to assist the client in resolving the matter far short of criminal charges. It may be as simple as filing amended returns, or negotiation and settlement with the IRS may be an appropriate resolution.
If necessary, legal counsel will fight criminal charges aggressively and if conviction results, for fair sentencing. But early, smart involvement by a tax attorney can often help to prevent things going that far.