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Ultimate Guide to Virginia Tax Audits & Criminal Tax Law

If you are facing an IRS audit or criminal tax law investigation in Virginia, hiring an experienced tax lawyer is the best way to protect yourself against interest, fines and other penalties. To request a confidential consultation with Kevin E. Thorn, Managing Partner at Thorn Law Group, call 703-752-3752 now.

The IRS aggressively pursues individuals and businesses suspected of underreporting and underpaying their federal tax obligations. Through audits and criminal tax law investigations, the IRS pursues back taxes, interest, and substantial penalties, and many individuals and businesses targeted in audits and investigations will face substantial liability. If you find yourself being targeted by the IRS, you need to take action promptly, and your first step should be to consult with a Virginia tax audit lawyer right away.

Why do you need to consult with a lawyer? The answer is simple: IRS agents and Special Agents with the IRS Criminal Investigation Division are very good at what they do. They are also extremely persistent, and they will continue to pursue you until either: (i) they are satisfied that you have meet your obligations; or, (ii) you have been ordered to pay what you owe (and more). Once the IRS is in pursuit, there is no chance that the audit or investigation will “simply go away.” You need to defend yourself by all means available. In order to do so, you need an experienced federal tax attorney on your side.

Common Allegations in Federal Tax Law Audits and Criminal Tax Law Investigations

Why are you being audited or investigated by the IRS? If you are like most people, learning that the IRS is reexamining your tax returns came as a complete surprise. You have always trusted your accountant to prepare your returns for you, and you have always assumed that he or she was doing what was necessary to prevent this exact scenario.

But, now you are being forced to defend your returns. Are they accurate? Did you (or your accountant) omit any necessary forms? Could you be in debt to the IRS? If so, how much do you owe?

When facing an IRS audit or criminal tax law investigation, you need to determine exactly why the IRS is looking into your tax history, and you need to do so quickly. Until you know what triggered the audit or investigation, you simply have no way of defending yourself effectively. You cannot afford to assume that you know what is at issue – even if you have made a mistake such as failing to collect employment taxes or to report your offshore bank accounts – as trying to defend a violation that isn’t at issue could result in the audit or investigation being expanded.

Each IRS audit is different, and the IRS Criminal Investigation Division has been vested with the authority to investigate a multitude of crimes under the Internal Revenue Code, the Bank Secrecy Act, the Foreign Account Tax Compliance Act (FATCA) and various other federal criminal laws. Depending on your filing history, your sources of income, your domestic and foreign holdings and other factors, potential issues underlying your federal tax audit or investigation could include:

  • Tax evasion and general tax fraud
  • Tax return preparer fraud
  • Failure to report offshore bank accounts (FATCA violations)
  • Abuse of foreign and domestic trusts
  • Employment tax fraud
  • Excise tax fraud
  • Financial institution or insurance company fraud
  • Public corruption
  • Mail and wire fraud
  • Money laundering
  • Conspiracy
  • Financial crimes related to narcotics, racketeering and other illegal income sources

Most people earn their income through legitimate means and do their best to pay what they owe. However, this does not prevent the IRS from making serious allegations against them. If you are facing an IRS audit or criminal tax law investigation, you need to take your situation extremely seriously, and you need to speak with a Virginia tax audit lawyer promptly.

10 Questions You Need to Answer if You Have Been Contacted by the IRS in Virginia

Once you have received an audit letter from the IRS or been contacted by Special Agents from the IRS Criminal Investigation Division, you need to immediately focus your efforts on your defense. You need to make informed and strategic decisions, and you need to avoid mistakes that could lead to unnecessary exposure to interest, fines and even federal imprisonment. With this in mind, here are 10 questions that you need to answer as soon as possible:

1. Why did the IRS choose to initiate an audit or open an investigation?

Once again, when facing an audit or investigation, determining why you are being audited or investigated should be one of your top priorities. Answering this question will allow you to build an appropriate defense, assess your potential risk and make strategic decisions moving forward. While underreporting or underpaying your income taxes is one possibility, the IRS routinely audits and investigates taxpayers for numerous other statutory violations as well.

2. Has anyone else been involved or implicated in the audit or investigation?

Did your accountant receive an audit letter or subpoena? Did your foreign bank send you a FATCA letter? Have any of your business partners, suppliers or clients been contacted by the IRS? Determining whether anyone else has been involved or implicated in the audit or investigation will provide additional insight into the scope and nature of the IRS’s inquiry.

3. Did you fail to submit any required forms to the IRS or the Financial Crimes Enforcement Network (FinCEN)?

Failing to file necessary forms with the IRS or FinCEN is a common trigger for tax audits and investigations. If you are delinquent on submitting any tax or financial reporting forms, you need to know about it, and you need to address the issue proactively before the IRS imposes penalties or seeks an indictment. Contact Virginia tax audit lawyer Kevin Thorn as soon as possible for assistance.

4. Do you owe back taxes (plus interest and penalties) to the IRS?

Just as you need to independently discern whether you have omitted any necessary filings, you also need to determine whether you owe back taxes (plus interest and penalties) to the IRS. If you do, interest and penalties will continue to accrue; however, you also need to be careful to avoid raising red flags by submitting voluntary payment to the IRS.

5. Can you afford to pay what you owe the IRS?

If you determine that you owe back taxes, interest and penalties, can you afford to pay what you owe? While this is an imminently practical issue, it is also a question that will help inform your strategy for dealing with the IRS. If you demonstrably cannot afford to pay (and you do not have any defenses to liability), then your best option may be to pursue an offer in compromise. A deferred prosecution agreement is another potential option, although pursuing this route requires extremely careful consideration and a thorough assessment of all possible alternatives.

6. Are you at risk for non-tax-specific prosecution?

As we mentioned above, the IRS Criminal Investigation Division does not just enforce the Internal Revenue Code. It investigates violations of numerous other federal criminal statutes as well, and it often works closely with the Federal Bureau of Investigation (FBI), the U.S. Department of Justice (DOJ), and other agencies to pursue broad-scale criminal indictments. With offenses such as mail fraud and wire fraud carrying the potential for hundreds of thousands of dollars in fines and decades behind bars, you need to know the full scope of your potential exposure in order to make informed decisions about your defense.

7. How far back is the IRS looking?

As a general rule, the IRS can examine up to three years of returns during an audit. However, this statute of limitations can be extended under various circumstances, and it can be longer in criminal investigations. As a result, in addition to knowing they types of issues that are under scrutiny, you also need to know the duration of history at issue.

8. If you are facing an audit, what type of audit are you facing?

The IRS conducts three types of audits: correspondence audits, office audits and field audits. Each type of audit has a specific purpose, and the type of audit you are facing can potentially tell you a lot about the IRS’s inquiry.

  • Correspondence Audits – These audits are conducted by mail and typically involve issues that can be corrected with minimal effort. However, they can still lead to additional tax liability, interest and penalties.
  • Office Audits – These audits require you to meet in-person with an IRS agent in Virginia. They tend to involve issues that are more-complicated than those raised in correspondence audits, and it is important to speak with a tax audit lawyer before you meet with the IRS.
  • Field Audits – During a field audit, IRS agents will come to your home or business. These are generally the most-dangerous type of audit, and in order to protect yourself you should have your attorney present at all times.

9. If you are being audited, is there a risk that the inquiry could turn criminal?

While facing an audit is stressful, it can also lull some people into a false sense of complacency. They assume the fact that the IRS initiated an audit means they are not risk for criminal prosecution. Although this is often true, it is not universally the case. If an audit reveals evidence of intentional underreporting, intentional underpayment or other criminal conduct, then the IRS Criminal Investigation Division may take over and pursue an indictment on one or more criminal charges.

10. How long do you have before the IRS reaches a conclusion or pursues an indictment?

How long have you had the IRS’s attention? Particularly if you are facing a criminal investigation, the answer may be, “longer than you think.” Once you find out that you are being audited or investigated, you need to try to determine how long the audit or investigation has been ongoing. This will help tell you just how close the IRS is to imposing civil penalties or pursuing a criminal indictment.

Potential Defenses to Tax Fraud and Other Tax-Related Allegations

With these questions answered, our Virginia criminal tax lawyer can begin to put together a defense strategy focused on resolving your IRS audit or criminal tax law investigation as favorably as possible. Just as there are numerous potential allegations in these types of matter, there are also numerous potential defenses. While every situation is unique, some of the potential defenses to allegations of tax fraud and other tax crimes include:

  • Full Reporting and Payment – If you can prove that you fully met your reporting and payment obligations, then you should not be subject to any interest or penalties. When possible, affirmatively demonstrating your compliance (without unnecessarily disclosing information to the IRS) can be the best defense during an audit or investigation.
  • No Reporting Obligation – If you did not actually have an obligation to report your income or holdings to the IRS, then “failing” to report them is not an offense. Oftentimes, audits and investigations focus on reporting requirements that do not apply to the subject taxpayer.
  • Lack of Intent – If you made a mistake but did not do so intentionally, then demonstrating your lack of intent may be your best option. However, this approach carries risk, and you should not admit to anything unless advised to do so by your attorney.
  • Statutory Protections – In certain cases, statutory protections can be used to prevent prosecution. This includes protections for innocent spouses and other taxpayers whose returns are inaccurate due to factors beyond their control.
  • Constitutional Protections – From unreasonable searches and seizures to violations of the right to a speedy trial, violations of taxpayers’ constitutional protections can provide defenses in many cases as well.

Speak With a Virginia Tax Audit and Investigation Lawyer in Confidence

If you need to speak with a lawyer in Virginia about an IRS audit or criminal tax law investigation, we encourage you to contact us right away. To schedule a confidential initial consultation with Managing Partner Kevin Thorn at Thorn Law Group as soon as possible, call 703-752-3752 or request an appointment online now.


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