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Understanding Tax Fraud Investigations

Will I Be Accused of Fraud if I Make a Mistake on My Taxes?

Every year, Americans are required to calculate and pay their due state and federal taxes. The intricacies of a family’s unique situation can make the task complicated. With so many forms to navigate and information to input, mistakes are fairly common. Still, these incorrect filings could prompt a tax audit and, in some cases, a criminal investigation.

What Is an Audit?

An audit is a review of an individual’s or organization’s financial information to ensure that their expenses align with what has been reported to the IRS. The IRS performs three types of audits to verify the accuracy of tax returns:

  • Mail audits: Mail audits are the most common type of audit. Through them, the IRS requests the taxpayer to provide proof of a given item or items in their tax return. That individual will then send the necessary documents to an IRS Service Center tax examiner.
  • Office audit: Office audits require a taxpayer to meet with an auditor at an IRS office. The tax compliance officer will interview the taxpayer. The taxpayer should be prepared to show proof of income and other deductions or credits claimed on their return.
  • Field audit: Field audits are the most thorough type of audit performed by the IRS. During a field audit, the IRS will visit the taxpayer’s home or business to investigate that person’s lifestyle and finances. These audits are more commonly used when investigating exceptionally wealthy individuals, businesses, and taxpayers in uncommon tax situations.

An audit is not a criminal accusation. It is simply an attempt by the IRS to verify that the information provided is correct.

What Triggers an Audit?

While an honest mistake on your taxes likely won’t land you in jail, it still could trigger an audit by the IRS. Common mistakes include:

  • Declaring too many deductions
  • Failing to report certain income
  • Making false statements
  • Using an impermissible account

What Triggers an Investigation?

An investigation is distinct from an audit. Whereas an audit is intended to simply check a taxpayer’s submission to ensure the information is correct, a criminal investigation marks an effort by the IRS to mount a case against you.

Tax evasion investigations are typically initiated when an individual misreports income, credits, and deductions or fails to file a necessary return. These investigations often stem from audits where the IRS finds that an individual willfully and intentionally withheld income and other important financial information.

Will I Go to Jail?

Taxpayers are only prosecuted when the IRS finds that they intentionally evaded taxes. If you made a mistake that prompted an investigation, you are not guaranteed a criminal conviction.

If you or a loved one have been accused of tax fraud, contact Collins Gann McCloskey & Barry PLLC. Our attorneys will vigorously defend you in court and fight for your future. Call us today for a free consultation: (516) 218-5131.