California tax fraud is separated into different categories: tax evasion of assessment taxes, evasion of payment, failing to file a tax return, and filing a false return. Regardless of the category, if you are convicted for tax fraud you could face serious jail time and be fined anywhere upwards of $25,000. Regardless of the potential consequences, there are people who choose to deliberately break the law and beat the tax system. They fail to state the correct amount of income earned, overstate deductions and falsify documents. They conceal or transfer income and report personal expenses and business expenses. In these cases, legal and financial consequences are justified.
But what about innocent taxpayers? Filing taxes is not an easy process, especially when owning a business, working multiple jobs, or owning several assets that need to be itemized. There is plenty of room for mistakes. Sometimes something as simple as misapplying a tax code can spell doom for individuals or businesses, and may end up in a criminal investigation. Incorrect deductions or categorizing income inappropriately may end up looking like fraud, which attracts the attention not only of the I.R.S., but specifically their criminal division.
I.R.S. tax investigations are very involved and complicated. “C.I.”’s (Criminal Investigations) are conducted by the law enforcement branch of the I.R.S., also known as the General Tax Fraud Program. They conduct CI’s for everything from tax evasion to money laundering. Typically, they review the stated amount of income, place and duration of employment and the payment of excise taxes. If the facts don’t add up, you can be charged with crimes including: Tax Evasion, Attempt to Defeat Tax, Tax Evasion/Avoidance, Additional Tax Due, Willful Failure to Pay, Willful Failure to Keep Records and Fraudulent Statement to Employers.
If a taxpayer is caught cheating on their taxes, the civil and criminal penalties can be grave. The I.R.S. can assess the amount of money owed and attach penalties and interest to the entire period of time taxes have gone unpaid, and they can continue to increase indefinitely. If income is under-reported by 25% or more, the I.R.S. has grounds to go back for 6 years (3 years is for regular Statute of Limitations) and charge the fraudulent party with underpayment of taxes for that entire time.
Should the I.R.S. find proof that payment of taxes was willfully avoided, they have the freedom to go through your entire tax history to apply penalties, interest and fines on any unpaid taxes. There is no limit to the amount of money you could end up owing the government.
If you are facing prosecution for tax fraud and tax crimes in California, it is imperative to work with a tax professional with knowledge of the system and who can assist you in pursuing the best possible options. The situation is not hopeless; often an agreement or settlement can be made out of court that can enable you to pay fines instead of doing jail time. You may also be able to arrange for a plan to pay off your debt, so that you can maintain your financial stability—and your freedom.