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When Does the IRS Pursue Criminal Charges?

when does the irs pursue criminal charges

Tax evasion and tax fraud are federal crimes. Both involve the willful attempt to either evade the assessment or the payment of taxes. But at what point does the IRS pursue criminal charges for these actions? What consequences are included in the criminal charges? How does one prevent these charges from being brought upon them? Here’s what you need to know about how and when the IRS pursues criminal charges against a taxpayer. 

What causes the IRS to consider pursuing criminal charges? 

The IRS typically does not pursue criminal charges unless you exhibit a pattern of intentionally breaking tax laws. This can include non-filing, filing fraudulent returns, falsifying information on your return, not paying taxes, and more. The IRS statute of limitations could trigger charges to be filed. Currently, the IRS has six years from the return filing date to pursue criminal charges that relate to failing to file and underreporting income. Finally, if you are ever audited, do not attempt to falsify records or omit information. This is a sure way to be implicated in a tax crime.  

If the IRS opens a case against you, they will refer it to the Department of Justice for prosecution. In order for the IRS to be successful in convicting someone for tax evasion, they must prove without reasonable doubt that the accused taxpayer (or nonpayer) acted in a deliberate and willful manner to avoid paying their taxes. 

What consequences are included in the criminal charges? 

While these charges are not as common as others, the penalties are very harsh and can have life-altering consequences. Being guilty of tax fraud can result in heavy fines, interest, penalties, and even jail time. The average jail sentence for tax evasion varies between three to five years. The sentence will depend on the severity of the case. In addition, you can be fined up to $100,000, or up to $500,000 for corporations. If you are found guilty of filing false tax returns, you can be fined up to $100,000 and up to three years in prison. Even misdemeanors, like failing to file, have harsh consequences. For example, you could owe up to $25,000 for each year of non-filing, and up to one year in jail.  

On the more extreme side, willfully hiding offshore bank accounts can result in up to $500,000 in fees and up to ten years in jail. Even if the action was not willful it will result in penalties.  

How do I prevent IRS criminal charges? 

The answer is simple: always remain tax compliant. Avoid committing tax evasion or tax fraud, and always file and pay your taxes. If you’re unable to pay, contact the IRS immediately to see what options you have. If you find yourself stuck in a tax dispute with the IRS, consider hiring an attorney to fix the issue while it’s at the civil level to avoid the charge becoming criminal.  

Remember, you are guilty even if you are only helping someone else evade their taxes, according to Section 7201 of the U.S. Internal Revenue Code. In any case, working with the IRS can help avoid criminal charges being filed against you. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations.  

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