With IRS Criminal Tax Cases on the Rise, Who is At Risk?

The Internal Revenue Service (IRS) is working with the U.S. Department of Justice (DOJ) to pursue criminal tax cases with increasing frequency. These cases often involve substantial penalties—including large fines and prison time. Who is most at risk, and what can (and should) these taxpayers do to protect themselves? Virginia criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

Current Criminal Enforcement Priorities for the IRS and DOJ

Based on what we have seen recently, the IRS and DOJ have several current criminal enforcement priorities. This includes criminal enforcement not only under the Internal Revenue Code (IRC), but under the Bank Secrecy Act (BSA) and other federal statutes as well. Some examples of issues (or apparent issues) that currently present a high risk for criminal investigation and possible prosecution include:

• Individual and business federal income tax underreporting and underpayment
• Underreporting and underpayment of other IRS business taxes (including IRS payroll taxes and IRS construction business taxes)
• Abuse of federal tax benefits and programs (including the pandemic-era Paycheck Protection Program (PPP) and Employee Retention Credit (ERC))
• Misuse of offshore bank accounts to conceal assets or income from the IRS
• Misuse of other tax shelters and tax avoidance schemes

In light of these priorities, certain taxpayers are at greater risk of facing criminal scrutiny than others (although all taxpayers must ensure that they comply with the law). For example, taxpayers that may be at particularly high risk of facing a criminal tax fraud or tax evasion investigation include:

• Large partnerships and corporate taxpayers
• High-income and high-net-worth individual taxpayers
• Individual and corporate taxpayers with offshore bank accounts
• Taxpayers who report little or no taxable income to the IRS
• Taxpayers who have claimed tax credits or tax deferral under federal law (i.e., ERC credits and tax deferral under Section 1031 of the IRC

What Taxpayers Can (and Should) Do to Protect Themselves

With all of this in mind, what can (and should) taxpayers do to protect themselves if they are at risk? The answer to this question depends on the specific circumstances at hand.

For taxpayers that are not yet facing scrutiny, proactively seeking to come into compliance will generally be the best approach. However, this does not mean simply filing an amended return in most cases. Instead, taxpayers who are at risk of facing criminal charges will typically need to consider other options—such as a voluntary disclosure or streamlined filing.

For taxpayers who are under investigation or facing charges, building a strategic defense needs to be their top priority. This starts with engaging an experienced IRS and DOJ criminal tax attorney who can provide strategic advice based on the current status of the government’s investigation or prosecution and the specific allegations involved.

Schedule a Confidential Consultation with Virginia Criminal Tax Lawyer Kevin E. Thorn

If you need more information about the IRS’ ongoing efforts to prioritize criminal tax enforcement, we encourage you to contact us promptly. Please call 703-752-3752 or contact us online to schedule a confidential consultation with Virginia criminal tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.