When individuals and corporations make deliberate decisions that violate federal tax laws, they face the possibility of a criminal investigation that can result in prosecution and possible jail time. The key to avoiding conviction: avoiding the criminal referral.

Federal tax crimes for which individual and business taxpayers are commonly investigated include:

  • Tax fraud and tax evasion
  • Underreporting taxable income
  • Claiming false deductions
  • Failure to collect and pay over employment tax
  • False statements
  • Failure to file returns
  • Abusive tax schemes
  • Offshore tax avoidance
  • Concealing or fraudulently transferring assets

The IRS also investigates tax scams perpetrated against taxpayers, including tax identity theft, cyber crimes, return preparer fraud, fake charities, inflated refund claims, and impersonating IRS agents.

Advantage: IRS

The IRS reports that, for the 12-month period that ended September 30, 2022, the IRS Criminal Investigation unit:

  • Initiated more than 2,550 criminal investigations for tax and financial crimes;
  • Identified $32.6 billion in cases involving tax and financial crimes;
  • Made 1,837 criminal referrals; and
  • Among the cases accepted for prosecution, obtained a 90.6% conviction rate (1,564 convictions).

In an earlier IRS report, more than 82% of convictions resulted in prison time, with an average sentence of 45 months. Criminal sentences generally include payment of restitution, plus penalties and interest. Sentencing in criminal tax cases is governed by federal sentencing guidelines; generally, the prison sentence is determined by the amount of tax that the taxpayer should have paid.

For taxpayers facing the possibility of criminal prosecution, two 2021 statistics illustrate the gravity of a criminal tax investigation:

  • 62% of all investigations that are started result in a criminal referral, either to the Tax Division of the U.S. Department of Justice or to the U.S. Attorney’s Office.
  • More than 75% of referrals result in a conviction or a guilty plea.

Avoiding Conviction for Tax Crimes

For taxpayers who have attracted criminal scrutiny of the IRS, the key is heading off the criminal referral. Recognizing that tactic, the IRS tries to act quickly to interview potential targets before the taxpayer can hire an attorney. Do not talk to the IRS alone, even if the special agent informs you that you are not the subject of the investigation.

You want a criminal defense attorney who knows taxation and is experienced in negotiating with, and trying cases against, the federal government. Of particular importance is hiring a tax litigator who has worked for the government, at either the IRS or the Justice Department.

Experienced Defenders of Taxpayer Interests

The successful outcomes that our criminal tax litigation attorneys have achieved for clients have generally occurred when:

  • The taxpayer involved them in the case very early in the process;
  • The attorney was able to convince the government’s special agent that the government could not meet its burden of proof; and
  • The government chose not to refer the case for criminal prosecution.

Call Now

If you believe you are, or are likely to become, the target of an IRS investigation, your call to Brandon Keim or Mike Harsch at 602.277.2010 can be your first step toward avoiding a criminal referral of your tax issue and avoiding a criminal prosecution.