What Are the Potential Consequences of an IRS Criminal Tax Audit?

IRS criminal tax audits can pose substantial risks to taxpayers targeted in these inquiries. Facing criminal prosecution in federal court is a very real possibility, and all tax crimes carry severe penalties under federal law. Understanding what is at stake in your case is critical—as is knowing your options. Find out more from New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

3 Potential Outcomes of an IRS Criminal Tax Audit

IRS criminal tax audits generally have three potential outcomes, though the outcome of any particular audit will depend on the specific circumstances. Broadly speaking, depending on the circumstances, a criminal tax audit could lead to:

Resolution Without Additional Liability

One possible outcome is a resolution that avoids additional liability. Taxpayers targeted in criminal tax audits can seek to avoid additional liability by either:

• Affirmatively demonstrating compliance with the Internal Revenue Code (or other applicable law); or,
• Convincing the IRS that it does not have the evidence it needs to pursue enforcement.

Avoiding additional liability during a criminal tax audit requires an informed and strategic approach. When the IRS opens a criminal audit, it already has evidence (or apparent evidence) of noncompliance. To prevent the IRS from moving forward with seeking an indictment, a targeted taxpayer must demonstrate that enforcement action is unwarranted despite the evidence the IRS has uncovered.

Settlement with the IRS

If avoiding additional liability entirely is not viable under the circumstances at hand, settling with the IRS could be the next-best approach. Taxpayers can often substantially reduce the amount they owe by settling with the IRS, and entering into a settlement agreement eliminates the inherent risk of facing criminal charges at trial. Taxpayers who need to consider a settlement will want to work closely with their tax counsel to ensure they make sound decisions.

Criminal Prosecution for Tax Fraud and Other Crimes

The third possible outcome is facing prosecution for tax fraud and other crimes. If a criminal tax audit uncovers sufficient evidence to warrant an indictment, this can lead to various charges—all of which carry steep penalties. Taxpayers convicted of tax crimes in federal court can face penalties including (but not limited to):

• Liability for back taxes
• Interest on amounts owed
• Criminal fines
• Liens, levies, and other means of enforcement
• Federal prison time

Generally speaking, taxpayers targeted in criminal tax audits will want to avoid federal court prosecution if at all possible. With that said, sometimes fighting the government’s allegations in court will be the best approach—and, here too, taxpayers will want to work closely with their tax counsel to make sound decisions with their long-term best interests in mind.

Schedule a Confidential Consultation with New Jersey Tax Attorney Kevin E. Thorn

Are you facing an IRS criminal tax audit in New Jersey? If so, we encourage you to contact us promptly for more information. Call 201-842-7696 or contact us online to schedule a confidential consultation with New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, today.