Ultimate Guide to New Jersey Tax Audits & Criminal Tax Law
If the IRS is looking into your personal or business tax records in New Jersey, you will need to be smart in order to avoid unnecessary interest, penalties and other serious consequences. Kevin E. Thorn, Managing Partner at Thorn Law Group has a proven record of experience protecting clients in federal tax audits and investigations. Call 201-355-8202 to speak with a New Jersey tax audit lawyer now.
What should you do if you receive an audit letter from the IRS? What if you are contacted by agents from the IRS Criminal Investigation Division? What can you do to protect yourself from being unjustly prosecuted and penalized by the IRS? If your tax filings are under scrutiny, these are important questions that an experienced New Jersey tax audit lawyer can help you answer.
Kevin E. Thorn, Managing Partner at Thorn Law Group, has a proven record of success defending clients in IRS tax audits and criminal tax law investigations. He also has significant experience in audit appeals and federal tax litigation. If you live or work in New Jersey and are being forced to deal with the IRS or its Criminal Investigation Division, you need to be careful about everything you say and do. Mr. Thorn can represent you throughout the process, deal with the IRS on your behalf and help you avoid life-altering consequences.
Why are You Being Audited or Investigated by the IRS in New Jersey?
The IRS has broad powers to audit individual and corporate tax filers for apparent violations of the Internal Revenue Code. The IRS Criminal Investigation Division enforces the Internal Revenue Code as well, and it has the power to investigate suspected violations of the Bank Secrecy Act, the Foreign Account Tax Compliance Act (FATCA) and various other federal criminal laws. As a result, when facing a tax law audit or criminal tax law investigation, one of the first issues you need to address is to determine why you are being targeted.
Due to the complexity of the Internal Revenue Code and the breadth of the laws that fall within the IRS Criminal Investigation Division’s jurisdiction, federal tax audits and investigations can target a wide range of alleged offenses. With his extensive experience in these matters, New Jersey tax audit lawyer Kevin Thorn can quickly assess the circumstances of your audit or investigation to determine what defenses you have available. Some of the most common allegations in IRS audits and criminal tax law investigations include:
- Tax evasion and general tax fraud
- Tax return preparer fraud
- Abuse of foreign and domestic trusts
- Abuse of offshore bank accounts (FATCA violations)
- Employment tax (payroll tax) fraud
- Excise tax fraud
- Financial institution fraud
- Insurance fraud
- Public corruption and bribery
- Racketeering (RICO violations), money laundering and other drug-related and organized crime-related issues
If the IRS uncovers evidence of intentional tax evasion or other criminal activity during an audit, the audit can quickly turn criminal in nature. While withholding or concealing information from the IRS can be dangerous, so can sharing too much information with federal authorities. Even if you do not believe you have anything to hide, when you are dealing with the IRS, you need to be extremely careful to avoid unnecessarily disclosing information that could lead to an investigation and the potential for criminal charges. Mr. Thorn can help you understand what you are (and aren’t) required to disclose, and he can help you make strategic decisions focused on protecting your finances and your future.
Facing an IRS Tax Audit: What Do You Need to Know?
1. There are Three Types of IRS Tax Audits.
If you are being audited by the IRS in New Jersey, understanding the type of audit you are facing can help narrow down the potential reasons why the IRS is reexamining your tax returns. There are three primary types of tax law audits:
- Correspondence audits
- Office audits
- Field audits
As the name suggests, correspondence audits are conducted by mail. They do not involve direct communication with IRS agents; and, as such, they do not generally involve complicated or high-risk issues. Most often, the IRS is simply seeking documentation to substantiate the tax liability or tax refund claimed in a return. However, if you do not have the necessary documentation, or if your documentation is inconsistent with what was stated in your return (even if you hired a CPA to prepare your return for you), then you could have an issue. To be safe, you should hire a New Jersey tax audit lawyer to assist you in preparing your response.
An office audit requires you to meet in person with an IRS agent (at their office, not yours). Office audits generally involve issues that require some explanation, but that do not necessarily indicate intentional fraudulent behavior. Prior to visiting the IRS, it is imperative that you speak with an attorney to make sure you are clear on what you should and shouldn’t say to the agent handling your audit.
The third type of audit, a field audit, is the most invasive and typically presents the greatest risk for individual and corporate taxpayers. During a field audit, IRS agents will come to your home or office to conduct “interviews” and examine your financial records. You can – and should – have a lawyer present during all field visits, as you need to make sure that you do not unknowingly and unnecessarily disclose information that could increase the scope of the audit or trigger a criminal investigation.
2. The Consequences of an Unfavorable IRS Audit Determination Can Be Severe.
If the IRS determines that you have unlawfully failed to report taxable income, failed to disclose foreign financial assets, or otherwise underreported or underpaid your federal tax liability, then you will be forced to pay all back taxes with interest and penalties. These penalties will generally be calculated as a percentage of your outstanding tax obligation.
You will be required to pay regardless of your ability to do so, unless you take appropriate action to reduce your liability. If it is not possible to avoid liability as the result of an IRS tax audit, then your attorney may advise you to pursue an offer in compromise.
3. There are Multiple Defense Strategies for Avoiding Interest and Penalties During an IRS Tax Audit.
While the consequences of being audited by the IRS can be severe, there are also multiple defense strategies for avoiding interest and penalties. The strategies that are available during any individual audit will depend on the specific allegations and factual circumstances involved. Of course, the best-case scenario is to be able to use existing documentation to prove that you have fully met your obligations under the Internal Revenue Code. However, even if this is not possible, you could still have several options for avoiding or mitigating any additional tax liability.
What if you do actually owe the IRS? If you discover during a tax law audit that you have underpaid the IRS, then you will need to approach your situation very carefully. While you may ultimately have to pay what you owe, taking the wrong approach could result in exposure to interest and penalties that could – and should – have been avoided.
Facing a Criminal Tax Law Investigation: What Do You Need to Know?
1. The IRS Criminal Investigation Division Focuses on Four “Strategic Priorities.”
The IRS Criminal Investigation Division focuses its investigative and law enforcement efforts on four “strategic priorities.” These strategic priorities target individual and corporate taxpayers that have underreported and underpaid income and taxes from both legitimate and illegitimate sources:
- Legal source tax crimes (i.e. underpayment of tax owed on income from legitimate sources)
- Illegal source financial crimes (i.e. racketeering-type crimes and other similar types of offenses)
- Narcotics-related financial crimes
- Counterterrorism financing
Within each of these four strategic priorities, the IRS Criminal Investigation Division utilizes multiple federal statutes to pursue charges for criminal tax violations and related offenses. For example, in addition to the Internal Revenue Code, Bank Secrecy Act and FATCA, the IRS Criminal Investigation Division also routinely targets taxpayers under:
- 18 U.S.C. § 371 (conspiracy to commit a federal offense or defraud the United States)
- 18 U.S.C. §§ 1341 and 1343 (criminal mail fraud and wire fraud)
- 18 U.S.C. § 1956 (money laundering)
- Anti-Kickback Statute
- Health Care Fraud Statute
- Racketeer Influenced and Corrupt Organizations Act (RICO)
- Securities and Exchange Act
As with IRS tax audits, when facing a criminal tax law investigation, it is imperative to determine what specific allegations you need to defend against. Our New Jersey criminal tax attorney can review the documentation and advise you based on the specifics of your situation. Defending against allegations of underpaying tax on legal income is a very different proposition from defending against allegations of deriving income from illegal sources. Likewise, defending against allegations under 26 U.S.C. § 7201 (attempting to evade or defeat tax) or 26 U.S.C. § 7202 (willful failure to collect or pay over tax) requires an entirely different strategy from defending against allegations of mail fraud, wire fraud or money laundering.
2. Criminal Tax Violations Carry Substantial Fines and Prison Time.
If you are being targeted for a criminal tax law violation and/or any other type of criminal activity, then you are at risk for substantial fines and the potential for long-term federal incarceration. For example, 26 U.C.C. § 7201 and 26 U.S.C. § 7202 both impose penalties of $100,000 in fines ($500,000 for corporations) and up to five years in prison for each individual offense. Even if you are not actually guilty of tax evasion or tax fraud, if federal prosecutors can implicate you in a conspiracy under 18 U.S.C. § 371, then you are still at risk for statutory fines and up to five years behind bars.
3. The Federal Government Always Has the Burden of Proof.
From seeking an indictment to pursuing a guilty verdict at trial, in all criminal tax law matters, the burden of proof rests squarely on the federal government. Even if a person or company commits a federal tax crime, if the government does not have the evidence to prove it, then no conviction is warranted. While this means that you always have a chance regardless of the circumstances at hand, it also means that you need to work with an experienced criminal tax attorney in New Jersey who can use the law to your advantage.
One of the most-common mistakes we see in federal tax audits and investigations is people trying to be overly cooperative with the IRS. While cooperating can be beneficial under the right circumstances, it can also be extremely dangerous. If you share incriminating information with the IRS before ensuring that you have appropriate protections, the IRS will use it against you.
Fast Facts: Protecting Yourself During a Federal Tax Law Audit or Criminal Tax Law Investigation in New Jersey
If you are being audited by the IRS or investigated by the IRS Criminal Investigation Division, there is a lot you need to know. There are also many critical mistakes you need to avoid. The more information you have, and the more strategic decisions you make, the less likely you are to put yourself in a position where additional taxes, interest and penalties become unavoidable.
- If you are facing an audit or investigation, the IRS is not simply going to go away. Unless you take appropriate measures to protect yourself, the IRS is going to pursue the matter to its conclusion.
- Not only can mistakes during an audit lead to civil penalties, but they can also trigger a criminal investigation.
- Making an offer in compromise is one way to mitigate your liability; however, before pursuing this route, you must be certain that it is your best option.
- Being investigated by the IRS Criminal Investigation Division does not mean that you are only being targeted for tax crimes. You could be at risk for facing multiple counts of multiple federal criminal offenses.
- Regardless of the circumstances at hand, hiring an experienced New Jersey tax audit lawyer is the best way to protect yourself against severe consequences.
Request a Confidential Consultation With a New Jersey Tax Audit Lawyer at Thorn Law Group
If you need legal representation for an IRS tax audit or criminal tax law investigation in New Jersey, we encourage you to contact us promptly. To request a confidential initial consultation with Kevin E. Thorn, Managing Partner at Thorn Law Group, call 201-355-8202 or inquire online now.