The Internal Revenue Service (IRS) audited approximately 934,000 tax returns in 2017. The IRS conducted 70.8 percent of these audits via a mailed correspondence and 29.2 through a full field investigation.
The IRS uses these investigations to determine if tax payers are correctly reporting income and expenses. In some cases the evidence gathered during an initial investigation can result in a criminal investigation. Criminal investigations by the IRS are not uncommon. The agency conducted 3,019 criminal investigations just last year.
What types of penalties can come with a criminal investigation by the IRS?
Tax crimes can come with serious consequences. In some cases, convictions can come with a prison sentence. Here are four recent examples of cases that resulted in jail time last year.
- Maryland. A woman in Maryland got over two years of prison time and was ordered to pay $127,180 in restitution after she was convicted for taking part in a tax-fraud scheme. The scheme involved filing refunds using stolen identities.
- Minnesota. A man out of Minnesota was sentenced to almost three years in jail after he was convicted for failing to file tax returns for ten years. He was also accused of diverting and attempting to hide income from the IRS.
- Florida. A man from Florida received just under two years of prison time for fabricating business expenditures to deduct on his tax returns.
- Virginia. An investment broker from Virginia was sent to prison for five years. She developed a business plan funded by investments. Investors provided $1.1 million in funds for her business. Allegedly, the woman only used approximately $3,000 to get the business running and pocketed the remaining investments as salary. The IRS also claims that the entrepreneur neglected to properly account for the funds on her tax returns.
These examples show how an initial investigation can build into criminal tax charges. A taxpayer can reduce the risk of an audit leading to criminal penalties by building a defense to the allegations. An attorney experienced in these matters can help.