Criminal and civil sanctions against IRS tax fraud are not mutually exclusive. As a practical matter, civil and criminal tax fraud penalties are treated independently and a taxpayer can easily be subject to both at the same time. If a taxpayer has been convicted of a tax crime and hit with severe criminal sanctions, he or she may still receive civil sanctions as well.
The most common tax crimes are tax evasion, which is specifically defined in 26 U.S.C. § 7201 as a failure to report taxes, reporting taxes inaccurately, or failing to pay taxes.
Yes, the Internal Revenue Code has its very own perjury and false statements statute. This crime is separate from the tax evasion statute, and different elements must be present for the taxpayer to be charged with perjury and false statements. Under the perjury and false statements statute, there are several different types of conduct which may form the basis for tax fraud penalties and prosecution. The statute makes it a felony for a person to do any of the following:
The Criminal Investigation Division of the IRS is very similar to other Federal law enforcement agencies in many respects. The group is staffed with special agents who work on tax fraud and financial crime cases.
The Department of Justice Criminal Tax Division has the ultimate authority to review and prosecute criminal tax cases. If you are subject to a criminal tax investigation or prosecution, it will likely be headed by the DOJ. The department has the power to authorize or decline criminal prosecutions, take action in response to Criminal Investigation Division or U.S. Attorney Grand Jury requests, and to oversee tax matters involving Tax Division directives.
Identity theft is a serious crime and of increased concern in recent years. Identity theft occurs when someone uses another person’s personal information, such as name or Social Security Number (SSN), without permission, to commit fraud or other crimes. There are several different types of identity fraud and the taxpayer’s response to each should be tailored to address the unique circumstances involved.
Tax attorneys may be called upon to help clients if they are victims of identity theft such as refund theft. Identity theft is a relatively new crime, but it is widespread and potentially very damaging to taxpayers. The IRS has responded to the threat by establishing several departments and pathways for tax representatives and their clients to file identity theft claims to seek relief.
A lesser-known criminal tax offense is called interference with the administration of tax laws. This offense is found in IRC § 7212(a), which prohibits conduct intended to interfere with the administration of tax laws.
IRC § 7203 enumerates a crime for failure to pay tax or estimated tax and other lesser tax crimes, including failure to supply information and failure to maintain records. In reality, the willful failure to pay tax offense is rarely prosecuted. According to the statute, the elements of the crime are as follows:
Failure to file returns or pay taxes is a federal tax crime that will be prosecuted by the IRS.
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