What Happens During (and After) an IRS Criminal Tax Audit?

Facing an IRS criminal tax audit presents substantial risks. Not only can targeted taxpayers face substantial liability for back taxes, interest, and penalties, but individuals (including business owners and executives) can face prison time as well. As a result, an informed and strategic defense is essential—and this starts with knowing what to expect during (and after) the process. Find out what you need to know from Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

When a Taxpayer Learns About an IRS Criminal Tax Audit, the Inquiry is Already Well Underway

Criminal tax audits are handled by the IRS’ Criminal Investigation (CI) division. CI investigates all types of tax crimes, from underpayment of federal income tax to failure to disclose offshore accounts.

CI also conducts a preliminary analysis (or “primary investigation”) before launching a formal investigation (or audit). As a result, by the time a taxpayer learns about an impending audit, the inquiry is already well underway. As the IRS explains, “[a]t this point, at least two layers of CI management have reviewed the 'primary investigation' material and determined there is sufficient evidence to initiate a . . . criminal investigation.”

IRS Criminal Tax Audits Can Target Noncompliance in All Areas

While criminal tax audits are often triggered by evidence (or apparent evidence) of a particular tax law violation, they can target noncompliance across all areas. With this in mind, when facing criminal tax audits, targeted taxpayers must work with their counsel to assess all potential charges. Once targeted taxpayers have a comprehensive understanding of their risk exposure, then they can focus on working with their counsel to build and execute a targeted defense strategy.

IRS Criminal Tax Audits Can Lead to Serious Federal Charges

In all cases, IRS criminal tax audits can lead to serious criminal charges. This includes not only charges under the criminal provisions of the Internal Revenue Code, but also charges under the Bank Secrecy Act and other federal laws. The following is just a small sampling of charges that can stem from a criminal tax audit conducted by CI:

• Failure to disclose offshore accounts
• Federal tax evasion and tax fraud
• Making false statements to federal agents
• Money laundering
• Wire fraud and mail fraud

These charges (among others) carry serious penalties; and, while federal prosecutors will be willing to consider plea deals in some cases, negotiating a favorable deal requires a strategic approach—and there are no guarantees. As a result, rather than taking a wait-and-see approach, it is imperative that taxpayers targeted in IRS criminal tax audits take action promptly to protect themselves using all available means.

Request a Call with Washington D.C. Tax Attorney Kevin E. Thorn

If you need more information on defending against an IRS criminal tax audit, we strongly encourage you to contact us right away. To request a call with Washington D.C. tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 202-349-4033 or tell us how we can reach you online now.