Tax issues can be stressful, especially when you find yourself under investigation by the Internal Revenue Service (IRS). While most IRS inquiries are civil in nature, some cases escalate to criminal investigations. Understanding the difference between these two types of investigations is critical, as the stakes and potential outcomes vary significantly.
At Trombley & Hanes, P.A., our Florida criminal and civil litigators are here to help you navigate the complexities of IRS investigations and protect your rights. Here’s what you need to know about the distinction between IRS civil and criminal tax investigations.
IRS Civil Tax Investigations
Civil tax investigations are the more common type of inquiry and are primarily focused on ensuring compliance with tax laws.
These investigations typically arise from discrepancies on tax returns, such as:
- Failing to report income.
- Claiming excessive deductions.
- Filing returns late or failing to file altogether.
The goal of a civil investigation is to determine the correct amount of tax owed. If errors or underpayments are identified, the IRS will seek to collect the unpaid taxes, along with penalties and interest.
The key components associated with these types of claims include:
- Penalties: Civil investigations result in financial penalties, which may include fines for late payments or accuracy-related errors.
- Burden of Proof: The IRS must demonstrate that you were negligent or made unintentional errors.
- Resolution: Most civil cases are resolved through audits, amended returns, or payment plans.
While civil investigations can result in significant financial consequences, they generally do not involve criminal charges unless there is evidence of intentional fraud.
IRS Criminal Tax Investigations
Criminal tax investigations are far more serious and involve allegations of intentional wrongdoing, such as tax evasion or fraud. These cases are handled by the IRS Criminal Investigation (CI) division, which focuses on identifying and prosecuting illegal activities. The primary goal of a criminal investigation is to uncover and prosecute willful violations of tax laws.
This includes efforts to defraud the government, such as:
- Intentionally under reporting income.
- Creating false deductions or credits.
- Engaging in offshore tax evasion schemes.
The key components associated with these types of claims include:
- Penalties: Criminal tax violations carry severe penalties, including imprisonment, substantial fines, and restitution.
- Burden of Proof: The IRS must prove beyond a reasonable doubt that the taxpayer intentionally violated the law.
- Resolution: Criminal cases may result in prosecution, plea agreements, or dismissal of charges.
How to Tell If an IRS Investigation is Civil or Criminal
The consequences of civil and criminal tax investigations differ dramatically.
If you are under IRS scrutiny, look for the following indicators:
- Civil Investigations: Typically involve communication from the IRS Examination Division, such as audit notices or requests for documentation.
- Criminal Investigations: Often begin discreetly, with special agents conducting interviews or issuing subpoenas. If special agents identify themselves, it’s likely a criminal matter.
While civil cases focus on recovering unpaid taxes, criminal cases can result in incarceration and a permanent criminal record. The distinction also affects the legal strategies and defenses that can be employed.
How Trombley & Hanes Can Help
Whether you are facing a civil tax audit or a criminal tax investigation, it is crucial to seek experienced legal representation. At Trombley & Hanes, our Florida criminal and civil litigators understand the complexities of IRS investigations and are dedicated to protecting your rights and interests. Contact us at 813-229-7918 or online to schedule a consultation to discuss your case and develop a strategy tailored to your situation.
Related Links:
- What The IRS Wants You to Know About Virtual Currency
- What To Know About Virtual Currency And IRS Audit
- What To Know About Reporting Virtual Currency To The IRS
