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When Can an IRS Audit Lead to Criminal Charges in New Jersey?

Offshore Account Update

Posted on March 29, 2024 |

While most IRS audits present risks for civil liability (i.e., liability for back taxes, interest and penalties), targeted taxpayers can also face criminal charges in some cases. Defending against an IRS criminal tax audit requires a very different approach, and it is critical that taxpayers targeted in these audits engage an experienced New Jersey criminal tax lawyer to advise them and communicate with the IRS on their behalf.

Generally, the same types of violations that can lead to civil enforcement can also lead to criminal prosecution (although the IRS and DOJ can pursue criminal charges on additional grounds as well). The key difference, in most cases, is willfulness. While inadvertently violating the Internal Revenue Code (IRS), Foreign Account Tax Compliance Act (FATCA) or Bank Secrecy Act (BSA) can lead to civil enforcement, evidence that a taxpayer has willfully violated the law can trigger criminal prosecution.

5 Common Charges Flowing from IRS Criminal Tax Audits

With this in mind, here are five examples of common charges flowing from IRS criminal tax audits in New Jersey:

1. Income Tax Evasion

Willfully attempting to evade federal income tax liability is a criminal offense under Section 7201 of the IRC. Federal prosecutors can pursue criminal charges for violations ranging from failing to file a return to claiming fraudulent deductions and exemptions.

2. Employment Tax Fraud

Willfully engaging in employment tax fraud can lead to criminal charges as well. This is true for both companies and individual owners and executives. Underreporting payroll in order to avoid the employer’s share of employment tax and failing to remit employees’ tax withholdings are both prosecutable as criminal offenses under the IRS.

3. Preparing a False Return

Preparing a false return is also a criminal offense when a taxpayer knowingly submits false information to the IRS. Even if a taxpayer isn’t certain whether a statement on their return is false, if the taxpayer should have known and chose not to research the issue or seek advice, this can be enough to justify criminal charges.

4. Filing a False Return

Willfully preparing a false return and willfully filing a false return are separate criminal offenses under the IRC. It is not uncommon for taxpayers to face both of these charges following an IRS criminal tax audit.

5. Offshore Account Disclosure Violations

Just like violations of the IRC, violations of the BSA and FATCA can either be civil or criminal in nature depending on the circumstances involved. Intentionally underreporting or failing to report offshore bank accounts or other offshore assets can lead to serious criminal charges.

Request an Appointment with New Jersey Criminal Tax Lawyer Kevin E. Thorn

New Jersey criminal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, has extensive experience representing individual and corporate taxpayers during IRS criminal tax audits. If you or your company is facing scrutiny from the IRS, we encourage you to contact us promptly for more information. Call 201-842-7696 or contact us confidentially online to request an appointment with Mr. Thorn today.

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