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The long arm of the IRS

In case you didn't know, the IRS has a criminal investigation division. And they are decidedly proud of their well-earned reputation as a law enforcement agency. As you may have guessed, the division focuses on traditional tax cases, but has also worked in the areas of tax-related identity theft, money laundering, public corruption, cybercrime and terrorist financing.

The Criminal Investigation division has just released its 2017 Criminal Investigation Annual Report. As "the premier financial investigators in the world, and the only federal agency authorized to investigate federal income tax crimes," they are the financial crimes experts. A snapshot of the 2017 year for the Criminal Investigation division:

  • 2,159 special agents, 835 support staff
  • 3,019 investigations, 2,294 indictments, 2,549 sentenced
  • $2.5 billion tax fraud identified
  • $1.1 billion proceeds identified from other financial crimes
  • 91.5 percent conviction rate

General tax fraud

Since voluntary compliance of both tax returns and tax payments are influenced by enforcement of the Internal Revenue Code, tax fraud investigations will always be the bread and butter for the Criminal Investigation division. Under the general tax fraud heading, common schemes include under-reporting or omitting income, keeping two sets of books, claiming false deductions or claiming personal expenses as business expenses or transferring or hiding assets to avoid proper payment.

Abusive tax schemes

If you're thinking offshore, apparent foreign ownership of trusts or corporations that's actually under the control of a U.S. taxpayer, you are correct. A case from 2017 is a suitable example. A former business professor was sentenced for hiding over $220 million. He underreported his income and hid his millions in a Swiss bank. He was sentenced to jail, paid restitution of $250,000 and paid a civil penalty of $100 million.

Refund fraud program

This is really a three part program focusing on:

  • Identity theft. This involves using others' identities to falsify refund claims.
  • Questionable refunds. Using false identities backed by false information, these are fraudulent claims.
  • Abusive return preparers. Corrupt preparers claim false or inflated expenses, deductions and exemptions.

To help you and your business avoid--or recover from--any legal issues that may arise, choose experienced legal counsel. An experienced business attorney can advise your business in areas of general business law, operating agreements, grievance, fiduciary responsibilities, and compliance with rules and regulations.

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