Any taxpayer — individual, business entity or representative of an estate — can become the target of a criminal tax investigation. If you or your company has become the subject of an IRS criminal tax investigation or a Florida state tax investigation, it is important that you work with a skilled criminal defense attorney who can help you protect your assets and freedom.
Criminal Tax Investigations
A federal criminal tax investigation may be conducted by a federal grand jury at the direction of the U.S. Attorney's Office, or by special agents of the IRS Criminal Investigation Division. Either way, the objective of the investigation is to determine if there is sufficient evidence to prosecute the taxpayer for willfully violating the tax law by committing tax fraud or other violations of federal criminal tax statutes.
State and federal tax law is complex, and there are many ways a person or organization could find themselves on the wrong side of an investigation. Some of the more common criminal tax law issues include:
- Failure to collect or pay state sales tax
- Willful failure to collect or pay employee's payroll withholding tax
- Unreported offshore accounts and foreign income
- Federal tax evasion
- State tax evasion
- Failure to file tax returns
- Filing a false return
Failure To Collect Or Pay Withholding Tax
Businesses are struggling in this economy and one of the ways this is evident is in the increasing number of businesses that are failing to pay employee withholding tax in a timely manner or at all. If an employer is willfully failing to withhold taxes or to pay those taxes, they can be charged with the criminal offense of failure to collect or pay taxes under 26U.S.C. section 7202.
- Some employers are failing to withhold FICA, Medicare, or state or federal taxes from the employee's paycheck.
- Some employers are withholding money but failing to pay withholding tax to the IRS or state tax authority.
- Some employers are paying the employee share but not the employer share.
Withholding Errors and Criminal Violations
In order for the IRS to bring a criminal case for failure to pay withholding tax, they must prove that it was an intentional violation of the law, not a mistake.
- Did your company use an outside vendor to handle payroll? If you were unaware of the failure to pay withholding tax, it was not an intentional crime on your part.
- Were you wrongly advised by an accountant, bookkeeper, or other financial professional? That is not an intentional, criminal violation of the tax law.
- Did you believe the employee was a contractor for whom you were not legally required to withhold payroll taxes and only later find out they had been misclassified? This was also not an intentional violation.
As your defense lawyers, we will develop all appropriate defenses including any violations on your part that were not intentional, or that you were not the person responsible for withholding from employees and paying the withholding taxes to the IRS. Our first goal is to avoid prosecution, and if prosecution is unavoidable, to minimize the impact of any penalties.
Falsifying Employee Status
One aspect of tax fraud that the government prosecutes with extraordinary vigor is the falsifying of employee status in order to evade withholding taxes, social security and Medicare. Specifically, companies that improperly classify their employees as "independent contractors" not only fail to collect and pay over taxes to the IRS, but also may be defrauding workers' compensation companies.
When prosecuting cases of this kind, the federal government will not only seek to collect from an employer the contribution it was supposed to make on behalf of the employee for Medicare and social security, but the contribution that the employee was supposed to make, as well as the taxes which should have been withheld. The government may also prosecute for the failure to collect and pay over taxes, social security and Medicare withholding, even when workers are properly classified as employees. Section 7202 of the tax code makes this type of tax fraud a felony, punishable by up to $10,000 in fines and five years in prison.
Defense Against Falsified Employee Status Charges
There are many factors that go into determining whether a worker is an employee or a contractor, including:
- The degree of control the company has over the individual's results and the means of obtaining these results
- The amount of training the individual requires for the job
- The length of the continuing relationship between the individual and the company
- The location from which the individual works
- Whether the individual has to supply the tools of the trade
There is a degree of latitude and an element of interpretation of the factors which determine whether the worker is an employee or an independent contractor. Our lawyers have experience working with these factors to establish that the misrepresentation was a matter of mistake rather than a willful violation of the legal requirements.
Failure To File Tax Returns
Failure to file a tax return is a crime for each year that the tax return is not filed in a timely manner. For every year that you failed to timely file you could face one year in jail.
Criminal prosecution is not inevitable. There are ways to get back into the tax system, even if you have missed several years of tax filings. Our tax defense lawyers will work with you to develop a strategy to engage the IRS and to meet your tax obligations. Our goal is to avoid criminal tax prosecution, or if that is not possible, to vigorously defend you in court.
There is nothing illegal about having money or earning money overseas. There is a legal problem, however, when individuals and businesses do not declare their offshore income. People convicted of tax evasion, failure to declare or pay tax on offshore earnings, or other offshore tax crimes could face prison time and extended civil and criminal fines, as well as the requirement to pay all of the back taxes.
Amnesty for Unreported Offshore Income
There is good news for those who have unreported offshore accounts and income that was not reported. For the past several years, the government has operated a program that enables account holders to voluntarily report their offshore income to the IRS. This program, called the Offshore Voluntary Disclosure Program, allows businesses and individuals with undisclosed offshore income and accounts to potentially:
- Avoid the criminal prosecution and incarceration that could arise from undisclosed offshore income and accounts
- Reduce overall civil penalties associated with undisclosed offshore accounts
- Significantly reduce the amount of civil penalties imposed upon unreported offshore accounts
Willfulness is an essential element of tax evasion and fraud charges involving offshore income. Since the filing and paperwork requirements for offshore income are complicated, in some cases, we may argue that the lack of full disclosure of income was a result of error, oversight or lack of knowledge rather than a willful violation.
Federal Tax Evasion Defense Attorney
If the government suspects you of tax wrongdoing, you may be the subject of a civil IRS audit or a criminal tax investigation. A civil tax audit will occur if there is suspicion that you failed to file tax returns or failed to pay the correct amount of tax for:
- Estate tax
- Payroll tax/withholding of employee taxes
- Income tax
A civil audit may also begin because your tax return was chosen at random for review or because you were reported to the IRS by a disgruntled ex-employee, business competitor or ex-spouse.
Tax audits and criminal tax evasion cases can also arise from failure to report all income or claiming false deductions. Criminal tax cases can also result from tax shelters or other tax issues that the IRS considers an abuse, tax shelter or a scam to evade taxes.
Avoid Criminal Charges for Tax Evasion
If an IRS auditor suspects personal or corporate tax fraud, they may refer your case to IRS criminal investigators. If you willfully cheated the government of its money by evading taxes, you face criminal prosecution that could result in serious fines and a prison sentence. Tax evasion charges can result in jail time even for a person with no prior criminal convictions. This jail time will be related to the amount of back taxes you were obligated to pay.
Resolving Charges of Tax Evasion for Unreported Offshore Accounts
If you have unreported income from an offshore account, you may benefit from participating in the offshore voluntary disclosure program, a government program that provides a certain level of amnesty for those with unreported overseas assets. However, it is extremely important that you talk to an experienced criminal tax attorney before you do so.
Protecting Your Freedom With Early Intervention
In far too many cases, a business will learn about a federal tax evasion investigation only when an IRS representative comes to the company office for an interview. Unfortunately, this happens after the IRS has conducted an extensive investigation. Because the IRS criminal investigators are limited in number and have a large caseload, the IRS will not generally pursue a case to the point of sending a criminal investigator to a company's door until extensive investigations and case planning have already been conducted.
The Advantages of Early Intervention
Many companies do not realize that they can do a lot to help their tax fraud or tax evasion defense if they obtain counsel from experienced Orlando tax evasion defense lawyers early in the investigative process. If allegations are made — regardless of whether they are well-founded — our attorneys can help you even before indictment or before formal charges are brought against you. U.S. tax laws are unique, with specific rules that allow taxpayers under investigation to have conferences with the IRS and the Justice Department, allowing them the opportunity to present information that could prevent indictment and formal charges.
We have experience representing Florida businesses under investigation for tax evasion and tax fraud. We strive to convince the government to not bring charges. In the cases where we cannot avoid formal tax evasion charges, our early intervention puts us in a position to mount a more prepared and focused defense.
IRS Criminal Investigations
If you have been contacted by the IRS with a request for a meeting, you are doing the right thing by searching for a lawyer to advise you about your rights. IRS agents may seek to entice you to meet with them in an interview that will not be recorded. If this happens, from then on, the investigation and further action on your tax case will be a matter of your word versus the word of the IRS investigator.
Many clients of the Law Offices of Mark L. Horwitz, P.A., have come to us after damage had already been done in interviews with the IRS criminal or civil agents – and their tax cases became more serious than they had anticipated.
Is the IRS agent initiating a civil tax audit, or is he (or she) gathering evidence for potential criminal tax charges? Talk to an Orlando IRS audit lawyer for advice on this and other urgent tax questions.
Sales Tax Fraud
As a business owner, you are obligated under Florida state law to collect sales tax and pay it to the state. For sales taxes collected, you must file and remit the collected sales taxes on a monthly basis. Failure to comply with state sales tax law may be considered tax fraud, subjecting you to prosecution for a state sales tax crime.
Representation During a State Sales Tax Audit
The state of Florida is ramping up its enforcement of state sales tax, elevating suspected cases to the criminal level wherever possible. Even a casual conversation with an investigator can lead to serious consequences. This is especially true for small- and medium-sized businesses such as car dealerships and restaurants, which often have limited resources for accounting and tax preparation.
If the state believes you were delinquent in filing sales tax returns, or that there are discrepancies between your business practices and tax returns, it may impose a civil tax audit on your business. If, after a civil tax audit, the Florida Department of Revenue believes that your business has committed state sales tax fraud, the case may be referred to criminal prosecutors. The following can result in criminal charges for sales tax fraud:
- Failure to collect state sales tax from consumers
- Failure to properly report sales taxes
- Fraudulently underreporting state sales taxes
- Delay or failure to file sales tax returns
Establishing an Effective Defense Strategy
There are many reasons why you might fail to collect and file state sales taxes. Inadequate recordkeeping or confusion about whether a transaction is subject to sales tax could be a basis for a defense to charges of tax fraud. Before a civil audit turns into a criminal prosecution, speak with one of our lawyers.
Contact Our Law Firm
We understand that sometimes legitimate business practices can be misconstrued as financial misconduct. We also understand that businesses can have difficulty understanding our complex state and federal taxation requirements, leading to honest mistakes during tax season. If you have been accused of a tax crime and now face an audit or criminal charges, we can help you protect your assets and your reputation. To contact an attorney at the Law Offices of Mark L. Horwitz, P.A., call (407) 401-7224 or fill out our online form. We will fight to protect your rights and the professional standing of your business.