Published on 15 Oct 2016 | 5 months ago
The short answer to this question is that you could be criminally prosecuted.
There are all sorts of ways to actually commit one of these crimes
Ramifications go way beyond Tax Penalties and Interest (as with the standard civil audit)
For many tax evaders, it is not the penalties, additional income tax and interest or even spending some time behind bars that is the worst part of a criminal prosecution.
Rather, it is the ensuing shame, public humiliation and social ostracism that is associated with a prosecution that haunts them. Loss of professional License over “act of moral turpitude”
Many taxpayers do not realize, until it is too late, that the government publicizes a person’s criminal tax convictions in an attempt to achieve maximum deterrence effect on the rest of society.
Historically, people were hung, beheaded, or even burned at the stake publicly to warn citizens who contemplated committing the same crimes as the convicted.
Today we do not hang, behead, or burn individuals at the stake.
Instead, the government publicizes and broadcasts one’s criminal conviction.
The purpose of the criminal tax system, as described in the United States Attorney’s Manual follows:
The Government helps to preserve the integrity of this Nation’s self-assessment tax system through vigorous and uniform criminal enforcement of the internal revenue laws.
Criminal prosecutions punish tax law violators and deter other persons who would violate those laws.
To achieve maximum deterrence, the Government must pursue broad, balanced, and uniform criminal tax enforcement.
Broad and balanced enforcement is essential to effectively deter persons of varying economic and vocational status, violators in different geographic areas, and different types of tax law violations.
Facing criminal tax charges is a horrific nightmare for anyone so unfortunate to be so accused.
Just the mere allegation and subsequent investigation can have very damaging emotional, financial, and reputation effects even where the wrongly accused is later found innocent. (80% conviction rate where CID launches an investigation)
The stakes where Badges of Fraud exists in a taxpayer's fact pattern going into a civil tax audit or CID criminal investigation range from at best, a civil tax fraud penalty, equal to 75% of the additional tax owed as adjusted in the civil tax audit, plus interest on the penalty back to the original filing date of the return being audited.
To at worst, up to 5 years in jail, coupled with fines as high as $500,000, plus the costs to the government of prosecuting you for each separate crime and restitution for the tax loss.
One fraud is proven – civil side of IRS can open up every tax year to the dawn of time to audit in a separate action from the criminal prosecution at some later date (5 or 6) year statue of limitation for tax crimes… No statute of limitation civilly one fraud is proven) (Go back far enough to capture your net worth)