Income Tax Fraud
Maryland Criminal Tax Attorneys - Representing clients accused of income tax fraud in Baltimore & mid-Atlantic region
Allegations of criminal tax fraud are a serious matter, as penalties carry catastrophic professional and personal ramifications. Those who are in the midst of an IRS tax audit or are under investigation for potential tax crimes need experienced legal representation.
The Baltimore tax attorneys of Rosenberg Martin Greenberg advocate for those accused of criminal income tax fraud, providing clients with trustworthy advice on the best strategies to move forward.
Whether your corporation is under investigation, or you’re facing penalties as an individual taxpayer, having knowledgeable legal counsel can make the difference between freedom and incarceration in a federal penitentiary.
"Badges" of Criminal Tax Fraud
Recent statistics show that only a small fraction -- .0022 percent -- of all American taxpayers were convicted of criminal tax fraud. This number is shockingly low considering that the Internal Revenue Service estimates at least 17 percent of taxpayers are non-compliant in one way or another, and that the bulk of this cheating is done by middle-income individual earners.
The most common tax crimes include submitting false documents, underreporting income, failing to collect employment tax and failure to file tax returns and pay taxes. If convicted of criminal tax fraud, fines can reach $500,000 plus prosecution costs and up to five years of jail time.
When determining the difference between true tax fraud and a simple mistake, IRS investigators are trained to look for intentional acts of wrongdoing, also known as “badges of fraud.”
These badges include but are not limited to the following:
- Failure to file tax returns
- Understatements of income
- Keeping a duplicate sets of books, or no books at all
- Concealment of assets
- Substantial increases in net worth that are unexplained
- Claiming fictitious deductions
- Failure to report entire sources of income
- Inconsistent or unlikely explanations of behavior
- Failure to cooperate with tax authorities
- Engaging in illegal activities such as submitting false forms or social security numbers
Individuals who are currently enmeshed in an IRS tax audit are encouraged to seek legal assistance immediately, as one wrong move can transform a routine investigation into a full-blown tax fraud case. Any misinformation given to investigators or delay tactics used may suggest illegal conduct, giving the IRS even more reason to railroad you through the criminal tax system.
Income Tax Fraud or Negligence?
Given the complex nature of income tax codes and compliance, the IRS expects some errors every year.
If signs of intentional wrongdoing are absent, the auditors typically rack it up to an honest mistake rather than tax evasion.
According to the IRS, negligence includes a failure to:
- Make a reasonable attempt to comply with the internal revenue laws,
- Exercise ordinary and reasonable care in preparation of a tax return, or
- Keep adequate books and records or to substantiate items properly
Even if tax mistakes or underreporting were unintentional, the IRS can still levy a civil penalty of 20 percent of the underpayment. However, taxpayers are not required to pay such fines if there was a reasonable cause for their actions.
If, however, the IRS uncovers more serious misdeeds, including falsified submissions and other badges of fraud, a criminal investigation is usually the next step. This is conducted by the agency’s criminal division, known as the CID, which will review data collected from various sources such as law enforcement agencies and referrals from other auditors who found instance of underreported income.
Tax fraud cases involving sums less than $20,000 are rarely investigated by the CID.
Penalties of Income Tax Fraud
A taxpayer who intentionally evades paying his or her income taxes is subject to both civil and criminal penalties. Specific punishments depend on the type of fraud committed.
- Tax evasion: If convicted of this felony the taxpayer may be subject to incarceration for up to 5 years; up to $250,000 in fines for individuals or $500,000 for corporation, or both penalties and prosecution costs.
- Fraud and falsified statements: If convicted of this felony, the taxpayer may be subject to jail time not to exceed 3 years; up to $250,000 in fines for individuals or $500,000 for corporations, or both penalties, plus prosecution fees.
- Intentional failure to file a return, pay taxes or supply information: Upon conviction of this misdemeanor, the taxpayer may face imprisonment for a maximum of one year; maximum $100,000 fine for individuals or $200,000 for corporations, or both plus prosecution expenses.
Under Section 6531(2) of the tax code, those who have underreported over 25 percent of their income tax or willfully failed to file a return can face prosecution for six years -- a statute of limitation that begins from the time you intentionally failed to file a return or submitted a return with false information. This time period is tolled or temporarily halted in certain situations, such as when the taxpayer is abroad or a known fugitive.
It’s important to note that any subsequent act can re-start the statutes of limitation, meaning taxpayers may face criminal indictment for many years beyond this six-year time frame.
Criminal Tax Defense Attorneys
If you find yourself facing a tax fraud investigation, contact an experienced criminal tax defense attorney with the Baltimore offices of Rosenberg Martin Greenberg. For a complimentary consultation, call Brian Crepeau at 410.649.4981 or email firstname.lastname@example.org.
Preserve your freedom and protect your rights by securing legal counsel who can help you avoid income tax fraud indictment and provide excellent legal defense in the event criminal charges are filed.
Talk to a Baltimore Tax Attorney Today
If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.
Tax Controversy News
At best, a business tax audit will consume only time and personnel resources. At worst, you and your business could face criminal charges and payments of additional taxes, fines, and penalties. Moreover, if the audit uncovers fraudulent activity, substantial underpayments of taxes, or unreported income an audit can be expanded from three to six years,…
For married couples who reside in Maryland, the question of whether to file taxes jointly or separately can be a burdensome task. Many people assume that joint filing is expected or more advantageous, but the interaction of federal and state tax laws can complicate the decision. Baltimore-based tax law firm Rosenberg Martin Greenberg can help…
Colliot and Its Effect on Penalties for Potential FBAR Violations: Ruling Provides for Significant Limitation on Amount of Penalties
On May 15, 2018, the United States District Court for the Western District of Texas issued an important ruling concerning the application of willful FBAR penalties under 31 U.S.C. § 5321. In United States v. Colliot, Case No. AU-16-CA-01281-SS (W.D. Tex. 2018), the court held that the Internal Revenue Service (“the Service”) could not assess…