Tax fraud is any deliberate effort to avoid the payment of taxes.
Tax fraud usually involves the intentional concealing and misrepresenting the true state of one's affairs in order to reduce tax liability. Dishonest tax reporting, such as under-reporting of income, overstating deductions, under-declaring profits or gains, forging tax documents, etc., are also considered acts of
tax fraud.
Tax fraud is a
white collar financial crime which can be committed by individuals, firms, trusts, and other entities. Individuals and groups that are convicted of
tax fraud are subject to strict penalties. Cases involving
tax fraud are handled differently than other
federal crime cases. The Internal Revenue Service, or IRS, is the
federal government agency that is responsible for the investigation of
tax fraud and all tax related matters.
The IRS has a special
Criminal Investigation Division (CID) that is responsible for developing and maintaining a national program to combat
tax fraud. The CID is composed of
federal investigators who are trained in law enforcement and have a strong background in finances and accounting. The primary focus of the
Criminal Investigation Division is to identify and investigate
tax fraud promoters and those who play an integral role in facilitating or furthering large and small scale
tax fraud schemes.
When the CID has reason to believe that
tax fraud is taking place, CID agents will investigate that case to determine if there is enough evidence to recommend prosecution. Once prosecution is recommended by CID agents, the case will go through several reviews before official charges are brought. The
tax fraud case will be forwarded from the CID to the U.S. Department of Justice Tax Division where
federal prosecutors will determine whether or not to authorize official charges in against a
tax fraud suspect(s). If
tax fraud prosecution is approved at this level, then the case is sent to the United States Attorney's office in a local jurisdiction where they are to indict and prosecute the person or persons named in the tax fraud investigation.
The fact that a
tax fraud case goes though so many reviews before formal charges are brought can work to a defendant's advantage. In each step of the process, the tax fraud suspect's attorney can meet with the federal government officials to persuade them against prosecution in a
tax fraud case. If the government has sufficient evidence that
tax fraud has taken place, they will most often prosecute. However, if the actions in question can be explained as a misunderstanding and the government is convinced that no
criminal tax fraud took place, a defendant may be able to avoid
federal tax fraud prosecution. Most often it is in the suspect's best interest to handle
tax fraud allegations through discussions with government prosecutors rather than to a jury at a
federal criminal tax fraud trial.
