What Taxpayers in New York Need to Know About the Recent Rise in IRS Criminal Tax Cases

We have recently seen a rise in federal tax investigations leading to criminal charges. These cases begin with investigations conducted by Internal Revenue Service Criminal Investigation (IRS CI)—and, when Special Agents at IRS CI believe they have sufficient evidence to substantiate criminal charges, they refer the matter to the U.S. Department of Justice (DOJ) for prosecution in federal court. Learn more from New York criminal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

What Types of Allegations Can Trigger IRS Criminal Tax Cases?

Based on recent developments, IRS CI is targeting a wide range of federal criminal tax cases. This includes not only cases involving traditional forms of tax evasion and tax fraud, but also cases involving sophisticated tax shelters and other tax avoidance schemes. Pandemic-era fraud (i.e., PPP and ERC fraud) remains a top enforcement priority for IRS CI as well. With this in mind, some examples of allegations that can trigger criminal tax cases include:

• Underreporting liability for individual federal income taxes (including improperly claiming credits and deductions)
• Underreporting liability for IRS business taxes (including IRS payroll taxes and IRS construction business taxes)
• Using offshore bank accounts, shell companies, and other tax shelters to evade federal tax liability
• Using other sophisticated tax avoidance schemes that result in underpayment of federal tax liability
• Improperly using Section 1031 and other provisions of the Internal Revenue Code (IRC) to claim tax exemptions or tax deferral

These allegations—among many others—can lead to prosecution under various provisions of the IRC and other federal laws. Potential charges in these cases include (but are not limited to):

• Willful failure to collect or pay over tax (26 U.S.C. Section 7202)
• Willful failure to file a return, supply Information, or pay tax (26 U.S.C. Section 7203)
• Fraud and false statements (26 U.S.C. Section 7206)
• Fraudulent returns, statements, or other documents (26 U.S.C. Section 7207)
• Money laundering (18 U.S.C. Section 1956) and other federal financial crimes under Title 18

All of these statutes impose substantial fines for individual and corporate taxpayers, and individuals can face federal prison time as well. As a result, for taxpayers facing criminal scrutiny (or concerned about it), engaging an experienced IRS and DOJ criminal tax attorney is a critical first step toward avoiding unnecessary consequences.

What Are Your Options if You Have Concerns About Facing Criminal Tax Charges?

For taxpayers who have concerns about facing federal criminal tax charges, the options available depend on the circumstances. For example, if IRS CI has not yet launched an investigation, then submitting a voluntary disclosure may be a viable option. However, once an investigation is underway or charges have been filed, the landscape shifts significantly.

Discuss Your Options with New York Criminal Tax Attorney Kevin E. Thorn

If you need to know more about your (or your company’s) options for avoiding criminal tax-related penalties in federal court, we encourage you to contact us promptly. To schedule a call with New York criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 914-534-6004 or tell us how we can reach you online now.