In the US, tax investigations often start with information uncovered by an audit. Some investigations are triggered by tips from the public – friends, family members or business associates may be aware of someone engaged in criminal behaviour and report them to the IRS. Other investigations are initiated by a whistleblower, or from the Department of Justice and US Attorney’s offices around the country. Finally, some investigations are prompted by the IRS itself. Whether a client is the subject of an IRS investigation or a criminal tax prosecution, it is important for them to have expert representation.
An expert HMRC investigation Tax Investigation Accountant accountant is able to protect their clients’ rights and interests if they are being investigated by the tax authorities. An investigation can be very stressful and a professional adviser is essential in managing the process. A good HMRC investigation accountant will be able to advise their clients on the best way to deal with the investigation, including how much to pay and when. They will also be able to provide advice and assistance on any tax appeals that may arise.
The key difference between a tax audit and a tax investigation is that a tax auditor will only be looking to make sure that your tax returns are correct, but in a tax investigation the focus shifts to determining evidence of evasion. The penalty for evading tax is severe and can be a prison sentence. Depending on the circumstances and amount involved, a taxpayer could also be forced to close their business or even be banned from operating as a director.
A person will be considered to have committed a crime under the Internal Revenue Code if they “knowingly” and “willfully” attempt to defraud the IRS. This includes the crime of failing to file a tax return or report income, as well as a number of other crimes related to tax evasion.
If the IRS investigation turns into a criminal case, the case is typically assigned to the Criminal Investigation Division (CID). CID investigates potential criminal violations of the Internal Revenue Code and other related financial crimes. They then prepare a report on the findings of their investigation and recommend if prosecution should occur.
The CID can go back as far as four years to investigate accounts and tax submissions, however, if there are reasons for suspicion such as high expenses compared with income or regularly late filing of returns then they can go back as many as 20 years. This is why it is so important to have access to many years of your accounts, even if you think you have nothing to hide. A qualified expert tax investigator can help to limit the scope of the investigation, or even derail the whole case altogether by making a presentation to CID that there has not been a crime committed. This requires a combination of strong advocacy from the lawyers and expert tax code analysis from a qualified accountant.