Eggshell Audits: Civil and Criminal Tax Fraud

One of the most stressful experiences an individual can go through is a tax audit. Not only do you face the possibility of stiff penalties and high interest on any funds the IRS determines you owe, but there can also be criminal violations if there are accusations that you violated some complex tax law. Although many taxpayers are chosen for routine and random audits, other taxpayers are chosen for eggshell audits. These types of audits are not random, and they often result in criminal charges filed, as a tax appeal lawyer in Allentown, PA, like from Hoegen & Associates, P.C., can explain.

If you have been notified by the IRS that you are being audited, it is critical to contact an experienced tax attorney right away, especially if you have been told that the IRS suspects you of filing fraudulent tax returns.

When the IRS suspects a taxpayer has filed a tax return that does not accurately reflect what their actual income and deductions were, they will conduct an eggshell audit. The agency may suspect that the individual underreported their income, failed to report interest or capital gains, or took deductions or tax credits they were not entitled to. If any of these fraudulent activities occurred, the result is usually the individual did not pay the correct amount of taxes to the government they should have. When this is done deliberately, the individual could face serious criminal charges and harsh penalties.

What Are the Penalties I Could Face from an Eggshell Audit?

If the IRS determines that the taxpayer did file a fraudulent tax return, not only will they be required to pay the money they owe, along with high interest, but there will also be other consequences, depending on the circumstances of the fraudulent activity. Penalties incurred include:

·        If the fraud was a result of the individual ignoring rules set forth by the IRS or because the individual was just negligent in their filing, they face a 20 percent penalty.

·        If the fraud was the incorrect reporting of the value of property, the individual faces a 40 percent penalty.

·        If the IRS determines that the individual committed tax fraud, they face a 75 percent penalty.

The individual not only faces those civil penalties listed above, but they may also face criminal charges. Tax fraud is charged as a felony and penalties if convicted can be harsh, with the possibility of up to five years in prison and fines up to $100,000.

Just as in other types of cases, there are different degrees of proof needed when a tax fraud is being investigated. When an individual is being investigated for civil tax fraud, the IRS must prove that there was a high probability that the tax fraud happened. If there is a criminal investigation being conducted, then the prosecutor is required to prove beyond a reasonable doubt that the individual committed tax fraud. It is not uncommon for an individual to be facing both a civil audit and criminal investigation for tax fraud at the same time.

If you are facing an eggshell audit or any other type of IRS inquiry, contact a tax attorney today for assistance.

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