Criminal investigations are quite serious and the penalties for being convicted of a tax crime can include significant prison time and other punishments and loss of other privileges. The United States Department of Justice recently reported an incarceration rate of over eighty percent of individuals convicted of tax crimes. In addition to prison sentences, if you are convicted of a tax crime, taxpayers may also be assessed enormous monetary tax assessments and substantial fines.

The most common types of tax crimes prosecuted include failing to file income tax returns, filing an income tax return that contained a false item or items, under-reporting income, submitting false documents, making false statements or claims. Recently the Internal Revenue Service has aggressively prosecuted individual taxpayers who have become involved in offshore tax shelters to avoid reporting of legal or illegal income or other illegal activities.

If you know, or suspect, that you are being, or may be, criminally investigated, it is a major mistake for you to ignore the Internal Revenue Service or speak to a Special Agent [i.e. an IRS criminal agent] without consulting with a qualified attorney experienced in tax. Statements made by you to a Special Agent may be used against you by the government to build their case against you. In addition, anything you say to an accountant, CPA, enrolled agent, or other non-attorney can be used against you and that professional can be compelled to testify against you at trial. To establish a tax crime, the Internal Revenue Service must prove "beyond a reasonable doubt" that a taxpayer failed to report their correct tax liability so that additional tax is due and owing.

In establishing a case against the taxpayer, the tax is not measured in terms of gross or net income or by any particular percentage of the tax shown to be due and payable. Rather, a prosecution for a tax crime may be based on a wide range of issues other than the underlying liability at issue. Thus, a taxpayer in any given case could be prosecuted if the government believes that they omitted a few thousand dollars of taxable income from an income tax return.

As a result, it can be very dangerous to attempt to represent yourself before the Internal Revenue Service or any other taxing agency even if you do not believe that you did anything wrong or that you simply believe that that amount in controversy involves an “insignificant” amount of money. We believe that you should always have an experienced tax attorney to represent you before the taxing agencies.

The government may attempt to establish a tax crime through direct evidence, the net worth method, the expenditure method, and/or the bank deposit method. Under the direct evidence method, the government will attempt to establish a tax crime through transactions which were not properly reported on a tax return. Under the net worth method, the government will focus on income received and not reported by a taxpayer.

Closely related to the net worth method is the expenditure method. Under this method, the government will attempt to establish a tax crime by establishing that a taxpayer purchased more goods and/or services during a given period than the gross income reported on a tax return in question, (sometimes known as the “lifestyle” method). Finally, under the bank deposit method, the government uses a formula based on the taxpayer’s taxable income. If the taxpayer under investigation deposited more money in their bank accounts than what was reported on a tax return during a given period, the government may classify these deposits as unreported income and use this evidence of a tax crime, if it is not explained and proven as not taxable income.   

If your case is referred for criminal investigation, we believe that an attorney who understands how the above-mentioned government methods are used may be a great help to you. The attorneys of at the Law Offices of Stephen Moskowitz, LLP are familiar with the methods the government uses to recommend prosecuting individuals for tax crimes. Let our attorneys aggressively represent you.

Tax crimes are not only targeted against the taxpayer who fails to report income. Instead, tax crimes may be brought against anyone who attempts to “evade or defeat” the collection of tax by transferring assets. In addition, any individual who “aided and abetted” a taxpayer to evade tax may be prosecuted for a tax crime. The attorneys at the Law Offices of Stephen Moskowitz, LLP have represented individuals criminally investigated in these situations. We want to represent you if you are criminally investigated for transferring assets or for aiding and abetting a taxpayer evade tax, or any other criminal tax matter.

If a criminal case is started, it is very likely that a non-criminal case will be started shortly after the conclusion of the criminal investigation regardless of the criminal case outcome. How your defense is presented during the criminal investigation could significantly affect the outcome of any following civil case. At the Law Offices of Stephen Moskowitz, LLP, we prepare your defense to take into account potential civil assessments.

Of course, if a criminal case is started, the first step is to try to avoid any criminal prosecution or punishment such as imprisonment and fines. However, it is also important to coordinate a proper civil defense and negotiate an outcome of the civil case.

You may find the criminal process a long and difficult one on both you and your family. We want to help you. To the best of our ability, we want to give you the peace of mind that you are being represented by tax attorneys who actually care about your case and we want to explain the process to you. We want to explain your options and what we believe to be reasonable in your case. We want you to have the benefits of our best efforts at this very difficult time in your life.

For a prompt evaluation of your case, please call us to schedule a free confidential attorney client privileged consultation either in person or by telephone.