Archive for category: IRS Criminal Investigation Division Operation & Developments – Domestic Tax Issues
With the announcement released just recently that the IRS is hiring hundreds of new agents dedicated to doing tax audits, this means that it will be crucial for US taxpayers to stand up and take notice. In addition, with these new hires, the reports indicate that the agents are going to be more focused, on self-employed small-business owners, and those who are behind on filing their taxes too. For that reason, taking the time now to work with a tax advisor, or tax attorney service provider, could help the person to avoid issues when these workers start to do their jobs. With that said, for those that may find themselves facing this particular situation, this article will provide some suggestions they can put into practice immediately, so continue reading to learn more.
In past years, the IRS had become relaxed in regard to enforcing taxpayers who were delinquent on paying back the taxes they owed. Moreover, due to not having enough employees to cover the arrears log of audits, it was extremely difficult for them to enforce more audits, and focus their attention on the lost revenue from these backlogs of audits. Nevertheless, the Commissioner stated that with these new 700 hired employees, it was going to allow them to try, and recoup all those past years of revenue, which is owed to the government entity.
In addition, these brand-new hires are being made possible due to funds inside of the IRS becoming available for use, by the latest retirements taking hold. Keeping that in mind, many people think the extra $290 million, which Congress gave the IRS helped too with these recent auditor employees. In contrast, that is not the case, as those funds given were actually earmarked to be used for customer services, improvements to our cyber security, and the agencies long fight against identity theft.
With that said, the Congress said that they found these extra funds during their own internal review of their accounts, and discovered that there was enough within their current fiscal year, to provide for these new 600-700 enforcement positions. Moreover, they are not going to roll out the first set of job openings, at least for a few more weeks. However, when they do, they are placing them into the departments that oversee the self-employed taxpayers, and small-business owners. In addition, the IRS plans to place hundreds of more employees into other higher-level enforcement positions, later this year too.
Therefore, for those business owners who have just barely been getting by on covering their tax bills, they might be one of the first among the list to face audits, when these jobs get filled. Moreover, small-business owners might not be aware that some of the tax breaks they have been taking on their returns filed, might already be putting them at risk for a red flag to the IRS to look into those credits deeper. Keep in mind, that in the past, the IRS simply did not have the man power to enforce some of the discrepancies that business owners were taking on their filings.
In addition, for those that are self-employed, and who perhaps tried to save some cash, by filing out their own tax returns, they too should take notice on these new IRS agents. Keep in mind that the whole idea behind hiring these agents, is to allow the IRS to get more work completed faster for the general public. Therefore, if the business owner has fallen behind on taking care of their quarterly payments, and the enforcement agent comes across this information within their database as missing, these new hires are actually there to bring more enforcement to collecting those payments.
For that reason, taking the time to sit down with a tax attorney service provider could prove to be beneficial in certain circumstances. In addition, these professionals are very familiar with the most-recent tax laws, and ways to protect their clients from perhaps facing jail time for the amount owed to the government. However, if the small-business owner waits until they are contacted by these newly hired IRS enforcement agents, it might hinder how much the tax attorney could help their clients then. Therefore, spending a bit of time with the advisor now, to help the business owner take a closer look at their financial records, may even help them to reduce their overall tax bill long term.
Having said that, while many of the newly hired IRS agents will be placed into the self-employment, and small business departments, that is not to say that individual taxpayers are exempt from these audits either. In fact, the enforcement agents are going to be handling those taxpayers, who are already delinquent in their tax obligations with great force. Therefore, if up until now, the person has simply not been contacted by the IRS due to the lack of employees within those areas, they too should take notice of this article topic today. Be that as it may, taking the time to visit a tax professional advisor to look over the past five years’ worth of a person’s tax returns they have already filed with the IRS could also prove to be essential, if for no other reason than peace of mind.
When the IRS puts these newly hired enforcement agents to work within the next upcoming weeks, it could spell trouble for both small-business owners, and individual taxpayers alike. Moreover, this is especially going to be true, if these same self-employed businesses have fallen behind with their tax obligations, and have not been paying them on time for a few years or more. However, there are qualified tax attorneys that could readily guide their clients into getting caught up with their tax bills, before being audited by the IRS. Therefore, for those business owners, or individuals who find themselves in this particular situation, taking the time now to speak with a professional tax attorney could help bring the individual current with their tax obligations effortlessly.
A simple mistake, oversight, or your accountant’s malpractice may trigger an IRS criminal investigation. Specifically, unreported income, a false statement, the use of an impermissible accounting or banking service, or declaring too many deductions are things that could initiate an audit, which could then rise to the level of an IRS criminal investigation.
As you can imagine, the IRS Criminal Investigation Division (“CID”) uses a vast array of tools to investigate a suspected tax evasion case or while conducting a criminal investigation. If you think about it, every employee of the IRS has a single task of ensuring that the IRS tax collections are maximized. IRS Special Agents, who work on the criminal tax cases, are no different. If you file your taxes, their goal is to prove that you may have understated or omitted income or sources of income or you may have falsified sources of income or taken deductions or credits for which you do not qualify.
The tools that the IRS Special Agents have at their disposal include interviewing the suspect, summons, search warrants, and use of grand juries.
Should I talk to the IRS Special Agent during an IRS Criminal Investigation and what are my rights?
Since the IRS Special Agents conduct a criminal investigation, you have a right to remain silent and not incriminate yourself and the right to an attorney. At your first encounter, the IRS Special Agent will advise you of your rights. You should exercise them and ask for an attorney. The Special Agent is then required to terminate the encounter.
As you can imagine, nothing you say to a Special Agent is off-the-record! If you choose to disregard this advice, the IRS Special Agent will be more than happy to continue with the encounter. You’ll be surprised how people continue to dig themselves into a deeper hole even after all these warnings.
Interview with an IRS Special Agent
The “interview” is the most obvious and also the most common tool is the old fashioned approach of directly asking you if you are engaged in tax evasion. This interview can take place at your home or your place of business or both. When an IRS field officer comes to interview a subject suspected of tax evasion, that officer doesn’t just ask questions. They are also required to assess your standard of living as compared to the income shown on your tax return. In addition, the Special Agents have the legal authority to examine books and records and take your testimony under oath.
During the interview, the Special Agents (they travel in pairs so one can interview and the other takes notes) will find out about other persons who may have knowledge about your sources of income and if there is cash that you may not have disclosed to the IRS. One of the primary goals of the interview is to establish cash on hand because one of the common defenses is uncertainty about cash on hand. If they seem to always appear at the most inconvenient time, it is because they are required to timely obtain confessions or admissions from the subjects and witnesses who may have information about the case. These witnesses may include your spouse, friends, neighbors, your tax return preparer and others including others with whom you may have a business relationship like banks and brokerages.
I must mention here that the tax return preparer must also not talk to the IRS Special Agent without consulting an attorney. This attorney should be different than the attorney who is representing the person who is under IRS criminal investigation.
Methods of Proof that the IRS Special Agents Use to Prove Their Case
To prove tax evasion, the IRS Special Agents may use many different methods like:
- Specific Item Method: One or more specific transactions that the taxpayer engaged in were not full or accurately reported.
- Net Worth Method: Attributes taxable income to the difference between assets and liabilities.
- Expenditures Method of Proof: Taxpayers’ expenses are more than reported sources of income.
- Bank Deposits Method: In case of a business, IRS assumes that proof of deposits is a substantial evidence of taxable revenue receipts.
- Percentage Markup Method: IRS takes a big data approach and assumes that based on its analysis of a typical business.
- Unit and Volume Methods: Estimate receipts based on volume of business activity.
Needless to say, each of these methods has its own pros and cons and some defenses. The method that the IRS Special Agent applies depends on the circumstances of the case and in case of businesses, the type of business and the method of accounting employed by that business.
Typically in IRS criminal investigation cases, the Agents are tight lipped about the details of the case. For this reason, at the conclusion of the IRS criminal investigation, your attorney should request a conference with the Special Agents in charge of the investigation. Much can be gleaned from the line of questioning of the Agents.
IRS does give consideration to the fact that you voluntarily disclosed the information that the IRS asked and also your age, health and mental condition. Essentially, the IRS is weighing their chances of winning a case.
What Should You Do?
Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.
Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.
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