Federal Tax Fraud Defense FAQs

Investigations for criminal tax evasion have been on the rise in North Carolina and around the United States. At Arnold & Smith, PLLC our experienced state and federal criminal tax fraud defense attorneys have the experience and training necessary to fight assertively for our clients. Our lawyers understand that facing tax fraud charges can be particularly stressful and onerous. What is the tax fraud charge process? How can individuals best defend themselves when facing criminal tax fraud charges?

According to the Internal Revenue Service (IRS), tax fraud occurs when the taxpayer misrepresents material facts to deceive the IRS. Tax fraud also includes silence. For example, when acting in good faith would require telling the IRS about income and the taxpayer remains silent, he or she could be engaging in tax fraud. The misrepresentation or silence must result in material damage to the person who has a right to rely on the information.

More narrowly, tax fraud occurs when the taxpayer intentionally engages in wrongdoing. The taxpayer must have the intention to evade a tax that he or she knows or believes that she owes the IRS. In order to convict a taxpayer of tax fraud, the federal prosecutor must prove the following two elements:

• The taxpayer does, in fact, owe a tax that is due, and
• The taxpayer had a fraudulent intent to evade paying taxes

The federal government, specifically the IRS carries the burden of proof. The government has the obligation to prove to a judge or jury that the taxpayer engaged in tax fraud by submitting evidence that supports a conviction. The government can provide the following types of evidence:

• Witness testimony
• Records
• Documents
• Objects
• Direct evidence
• Circumstantial evidence

When trying a taxpayer for criminal tax fraud, the government must prove that the taxpayer is guilty beyond a reasonable doubt. In civil tax fraud cases, the government only needs to prove that fraud occurred by clear and convincing evidence. The penalties for criminal tax fraud vary, depending on the specific type of fraud committed. Federal tax law recognizes several different types of tax fraud, to include the following:

• Assisting in the preparation of a false return
• Removal or concealment with intent to defraud
• Submission of false documents
• Corrupt or forcible interference
• Failure to register
• Aiding and abetting in tax fraud
• Fraudulent receipt of property

Those convicted of criminal tax fraud face serious penalties, including prison time and serious fines. The prosecution has a right to enforce criminal penalties, and the purpose of the penalties is to punish the taxpayer and deter other taxpayers from engaging in fraud.

The IRS does have a history of accusing innocent taxpayers of committing criminal tax fraud. Sometimes innocent circumstances trigger an investigation by the IRS, leading them to assume that criminal tax fraud has taken place. The following circumstances are a red flag to the IRS for potential tax fraud:

• Unexplained net worth increases
• Substantial personal spending above a taxpayer’s available resources
• Deposits into a bank account from an unexplained source that substantially exceed the taxpayer’s reported income
• Documents that appear to be false, misleading, or altered

In order to meet the burden of proof, the government must prove that the taxpayer engaged in an affirmative act of fraud. Affirmative acts of criminal tax fraud can include the following actions:

• Concealment of bank accounts
• Concealment of assets
• Failure to deposit earnings into the business account
• Covering up the sources of income receipts

At Arnold & Smith, PLLC our tax fraud defense lawyers provide the guidance that our clients need. As soon as you are served with a Federal Grand Jury Subpoena, an IRS summons for documents, or you receive a visit from a special IRS agent, we recommend contacting our law firm. It is important that you refrain from voluntarily giving the IRS a statement until you receive advice from a skilled attorney. The IRS can and will use your statement against you should your case proceed to trial.

We create a comprehensive criminal defense strategy for our clients. Our strategy often includes working with forensic accountants and other experts and professionals from within the field. Using all of the tools at our disposal, we put together a comprehensive defense for our clients. Contact our law firm or call 704-370-2828 today to schedule your free initial consultation. We now provide three convenient locations to meet in Uptown Charlotte, Monroe and Mooresville.