Los Angeles Tax Fraud Defense Lawyers
Paying taxes is a part of life that every working professional must go though. Each year, we submit to the government our tax information and help support various programs and services. The Internal Revenue Service (IRS) must oversee and handle millions of people filing for a variety of taxes. With all the complexity that comes with this, it shouldn’t come as a shock that each year, many people come under fire and receive accusations of tax-related fraud. Depending on the details of their charges, a conviction of tax fraud can be life-changing and have long-lasting consequences.
If you or a loved one has been accused of tax fraud, it’s important to get help as soon as possible. When facing such a large entity like the IRS, having a proper understanding of all your legal options will help protect your future, assets, and livelihood. At Werksman Jackson & Quinn, LLP, we are dedicated to making sure our clients don’t suffer from steep fines and other penalties over a mistake like an improperly filed tax return, negligence of the law, or other justifiable reasons. Call our office at (213) 688-0460 to find out more about your options.
Tax fraud is any activity intentionally done by an individual, business, or organization, that allows them to avoid paying the correct amount of taxes. If the IRS suspects fraudulent activity to have occurred, their law enforcement branch, the IRS Criminal Investigation Division (CDI), will begin a probe into your financial details.
Because the tax system is very complicated, there are several acts that fall under this broad definition. These include:
- Filing a false tax return
- Under-reporting income
- Willfully failing to file an income tax return
- Claiming personal expenses as business expenses
When discussing tax fraud, many people might experience confusion over the differences between tax fraud, tax evasion, and tax avoidance. Simply put, tax evasion is a form of tax fraud. It pertains to the types of tax fraud that involve misrepresentation of taxable income. It is subject to the same penalties as every other variation of tax fraud.
Tax avoidance, on the other hand, may appear to result in similar circumstances as tax fraud–-paying lower taxes than what would be expected–but it is actually 100% legal. Tax avoidance can be described as the legal use of the tax system to one’s own advantage and avoiding the payment of a certain amount of unnecessary taxes someone would otherwise be required to pay. It can include things such as increasing your retirement savings, maximizing your work deductions, or misusing a health savings account. Tax avoidance bleeds over into tax fraud when you attempt to pay lower taxes by dishonest means.
Tax evasion is a common form of tax fraud. The term tax evasion refers specifically to the act of concealing, lying, or some other form of deceit to pay less in taxes than what you actually owe. While tax evasion falls under the umbrella of tax fraud, the two are not interchangeable terms, as evasion must include the element of deceit. Common examples of tax evasion include:
- Using company funds to pay for personal items or services
- A business owner collects taxes from employees but neglects to give them to the IRS
- Placing a home or property within a fake trust in order to reduce taxes
Penalties for tax evasion can be incredibly harsh. The IRS and federal government take the fraud very seriously, as taxes are a key part of funding American infrastructure. If you are convicted of tax evasion, then you can expect to be facing:
- Up to five years in prison
- A fine of up to $250,000
Thankfully, defending against an accusation of tax evasion or fraud is possible. However, you would need a skilled white collar defense attorney with the expertise and know-how necessary to successfully fight your case in court.
If the IRS believes you have under-reported your income, they will send you a CP2000 notice. This doesn’t mean that you are being audited, but it does indicate that they think there is a discrepancy in what you owe them. It’s essential to respond to this notice before the deadline, but you will want to speak to an experienced tax attorney before you make your reply.
There are reasons why the IRS may think you owe them money even if you don’t. It’s possible that you only owe a portion of the money that’s being requested, or you may not owe the government anything at all. A tax fraud defense attorney can sort out the situation to determine whether or not you are in compliance.
It’s possible that you accidentally misreported your income, or maybe the IRS requires additional facts regarding a deduction, the type of income you received, or some other essential piece of information. For example, you may have sold a piece of property, and the IRS is recording the full price of that property as income without subtracting the amount of money your originally paid for it. This is a relatively simple issue, but if the IRS doesn’t have the exact piece of information they need, they will treat the matter as an act of noncompliance.
After speaking with a tax attorney, you can decide whether you want to pay the IRS the amount of money they say you owe, or you can decide to contest the issue. If there’s a dispute, your lawyer will review all the necessary documents and create a document explaining why you should not be expected to pay what the government is demanding.
If it turns out that you do owe the IRS money, your attorney can help you achieve the best possible outcome and they can also help negotiate repayment terms, if that’s how you wish to resolve the matter.
If you have unfiled tax return, don’t wait to resolve the issue. Talk to a tax fraud attorney as soon as you can. Even if you don’t have all your records, your attorney can request a complete wage and income transcript from the IRS and prepare all your unfiled tax returns.
There are penalties and interest that apply when you fail to file your taxes, so the longer you wait, the more money it could cost you. If you continue to avoid paying your taxes, the IRS will eventually file a “substitute for return” on your behalf, which may disregard deductions that could save you money.
No matter how many years it’s been since you filed your taxes, an attorney can help. Your lawyer will review your situation, retrieve your tax documents, and file all late returns on your behalf. If there are fines or penalties owed, your attorney can negotiate the terms and payment options.
It is essential to keep business expenses and personal expenses separate. Many business owners assume that they can get away with deducting personal expenses such as mortgage payments and luxury items because it’s not a serious offense, or perhaps IRS just won’t notice. But evading taxes through illegitimate deductions is income tax evasion by definition, and the IRS has many ways to discover these infractions:
- Regular tax evaluations
- If the business has unpaid payroll taxes
- Through IRS analytics of cyber security breaches
- Through social media or statements provided by the business website
- Through court filings, such as a divorce proceeding or business litigation
- When the business is owned by multiple parties and one of them is examined by the IRS
- When an outside tax preparer displays a pervasive pattern of preparing false returns
According to federal law, anyone who knowingly attempts to defraud the IRS by not paying the necessary amount of taxes is subject to a maximum fine of up to $100,000, or, if it’s a corporation, no more than $500,000, along with the taxes owed. Additionally, the person convicted of tax fraud may face imprisonment of up to 5 years.
The maze-like nature of American tax system can easily lead unsuspecting individuals into the sights of the IRS if they are not careful when filing their tax returns. If you have been accused of tax fraud, common defense strategies include arguing that you committed the act in an unwilful manner—that is, you did not intentionally make the mistake of under-reporting your income, incorrectly claiming expenses, etc. Another common approach is arguing that you solely acted based on the information provided by others. Again, this shows that you acted in good faith and never intended on committing tax fraud.
The team at Werksman Jackson & Quinn, LLP, are seasoned veterans at interpreting tax law, defending our clients and providing effective criminal defense in the face of large, bureaucratic groups like the IRS. As soon as you become aware that you are under investigation by the IRS, you should contact a Los Angeles federal crime defense attorney immediately. To get the legal guidance you deserve, call our office at (213) 688-0460.
Recent Case Results
- Complete Dismissal of Molestation Charges
Attorney Mark Werksman’s 29 year old client was falsely accused of molesting two neighborhood children and was subsequently charged with felony child molestation, with a significant prison sentence hanging over his head should he be convicted. Instead, at the preliminary hearing Werksman was able to convince the court to grant his client a complete dismissal of any charges.
- Decision Set Aside
Client, a college student in a faulty Title IX case, was awarded $130,000 in attorney fees.
- Probation with No Jail Time for Drug Money Laundering Charge
Wilmington man accused in New York federal court of laundering drug money through the sale of laptop computers. Mark was able to get the case transferred to federal court in Los Angeles, where he convinced the United States Attorney to reduce the charges. His client was sentenced to probation with no jail time on a misdemeanor conviction.