The IRS implements a meticulous system that seeks to identify all tax offenders. The IRS categorizes tax offenses in two categories. Negligence is when a taxpayer makes an error either by having erroneous figures or mathematical calculations in their tax returns or erroneously misses various entries while filing. Negligence is seen as not being willful in the discrepancies in figures and the IRS only seeks civil charges against those who are negligent. On the other hand, fraudulence involves outright cheating on your taxes. This is a willful act of defrauding the IRS to avoid paying due taxes. This includes crimes such as having two sets of accounting records for fraud purposes, forging receipts and other documentation, altering figures in various tax records, and not filing a tax return with no valid reason. For such crimes, the IRS pursues both civil and criminal charges.
According to an analysis by the IRS, 17% of taxpayers cheat on their tax returns. The main culprits are employment occupations, businesses that are cash intensive, and service industry workers. This includes bar waitresses, lawyers, doctors, construction workers, domestic workers, and way-side shops. However, the IRS prosecutes very few tax cheats. In a recent tax year, the IRS charged 2,472 taxpayers for criminal offenses, which accounted for only 0.002% of taxpayers. However, these statistics should never be an incentive to cheat on your taxes. The IRS is actively increasing its audits to track down and pursue both negligent and fraudulent taxpayers. 2010 statistics show that the IRS has increased audits in all taxpayer groups. Furthermore, when the ax falls your way, the consequences are really not worth the risks on lying on your returns.
Criminal investigations conducted by the IRS are handled by the IRS Investigations Department. The department has special agents who investigate various potential tax cheats and prosecute taxpayers once they have enough evidence to build a case. If you are ever contacted by one of these special agents, you should be aware that you are being investigated for criminal charges. Here is what to do if you find yourself in such a situation:
- Ask for Identification – If you are approached by an individual or team of people claiming to be special agents from the IRS Investigations Department, you should ask them for a business card or identification. If the contact is on email or telephone, do not divulge any information whatsoever to them. There are many identity theft scams that are circulating and their aim is to steal your information for malicious use. Besides this, receiving a business card is good for future reference when contacting or referring to the IRS agent assigned to your case.
- Do Not Answer Questions – After they identify themselves and give you a business card, ensure that you do not give any information about your taxes. The Fifth Amendment in the U.S. Constitution gives you a right to not bear witness against yourself in a criminal case. This means that the agents have no right to get you to talk in any way, concerning your taxes or any other matter that may incriminate you.
- Beware of the Witness Trap – You should also be careful about the witness trap. The IRS Investigations Department special agents will usually tell you that they are not investigating you but rather, they want you to be a witness in a case. Once they gather enough evidence, they then seek criminal charges against you. Therefore, even if they tell you that they are not investigating you, do not give them any information.
Seek Legal Counsel - Next, you should seriously consider seeking legal counsel to get help on how to handle the situation. Your attorney will advise you on what to do and he or she will represent you in criminal claims.
