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Power. Some of us have it and most of us fear it. But we fear power most when an entity can yield it over us. Most times when someone receives a letter from the Internal Revenue Service (IRS), their heart skips a beat, heart palpitations begin, and clammy hands take over. Why do we fear the IRS? Power. The IRS can garnish wages, seize assets, and impose financial penalties and interest. Add the random thought that the IRS may also have the power to put you in jail, and you’ve got a healthy dose of forosophobia, fear of taxes and the IRS. We often feel helpless and embarrassed when the IRS comes after us, but there are only a few circumstances when the IRS truly sets their sights on someone.
What can the IRS prosecute you for?
Tax evasion/ Tax avoidance – Failing to pay your taxes for years on end, has the potential to bring the IRS right to your door, especially if you make a significant amount of money. Not reporting lucrative sources of income will also cause an audit to occur.
The statute of limitations usually refers to how much time the Internal Revenue Service (IRS) has to pursue tax fraud or tax evasion crimes by filing charges. In most instances, the Internal Revenue Service can audit tax returns for up to three years after they have been filed. This
means that the federal statute of limitations is capped at three years. Any fraudulent activity i.e., making up dependents, claiming significant deductions on your tax return and setting up a complicated and illegal scheme to avoid paying taxes all together can potentially land you in
jail. Even going so far as to help others avoid paying taxes or the correct amount of taxes will land you in the hotseat with the IRS. Simply put. Fraud = Jail Time.
What the IRS cannot prosecute you for?
Back taxes – As a rule, negligence = a civil penalty. The IRS actually expects a certain amount of error when it comes to your taxes. Depending on that level of error, you may not face any consequences but pay the amount of taxes owed once the error is adjusted and possibly accrue a penalty fee.
Criminal vs. Civil Proceedings
Criminal tax fraud includes tax evasion, willful failure to collect or pay over tax, and even failure to file a return or provide information to pay your taxes. Regarding the Statute of Limitations: In general, there is no statute of limitations for the government to bring up fraud penalties when it comes to civil tax fraud. For most criminal tax fraud cases, the government has six years to bring up a criminal case.
Civil tax fraud includes either willfully filing a return that doesn’t have correct information or willfully failing to file their tax return at all.
What are the criminal penalties?
The Internal Revenue Service (IRS) reports Over 2,500 criminal investigations, the identification of more than $10 billion from tax fraud and financial crimes, and a nearly 90% conviction rate are just a few highlights from the IRS-Criminal Investigation (IRS-CI) Fiscal Year 2021 Annual Report. Criminal penalty consequences include up to three to five years of jail time and up to $100k in fines, while civil misdemeanor penalty charges, such as not filing a tax return are assessed. These penalties, can accrue fines of $25k for each year a taxpayer fails to file and although unlikely, can face up to 1 year of jail time.
No one is exempt from the wrath of the Internal Revenue Service (IRS). Some celebrities have taken a hit from the IRS and faced monetary consequences and even jail time.
1. Willie Nelson
In 1990, the federal government seized most of Nelson’s assets and forced him to pay over $16 million in back taxes and fines for committing tax fraud. He was also found guilty of being involved in a fake tax shelter.
2. Marc Anthony
In 2007, Anthony was served a bill from the IRS demanding $2.5 in back taxes. In 2010, he was served an additional two bills from the IRS totaling over $3 million in unpaid taxes on real estate that he owned. Anthony blamed his manager for both issues, but the IRS didn’t buy it.
3. Martha Stewart
Martha Stewart is also a convicted tax evader, and she committed insider trading. Shortly before she was sent to jail for insider trading, she was legally obligated to pay $220,000 in back taxes and penalties to New York state.
4. Wesley Snipes
Wesley Snipes was found guilty of being a tax evader of the highest order. Snipes used several illegal tactics to hide his income, and he was found guilty on three counts of failing to file a federal income tax return for three years. He ended up owing the IRS $17 million in back taxes, penalties, and interest. Snipes was ultimately sentenced to serve three years in prison.
5. Nicolas Cage
In 2009, the IRS sent Cage a bill for $6 million. Cage would claim that a former manager of his was to blame for the unpaid tax bill he owed (he would even claim that his manager made poor investments on his behalf in risky real estate dealings). Cage would ultimately pay his tax bill – plus fines and penalties and has since fired that manager.
Don’t Face the IRS Alone: Get Help from an IRS Tax expert CPA attorney
First things first, take a deep breath. Dealing with the IRS can be scary, but you have options, and you have a voice. Acting sooner rather than later is the best course of action and may have a positive impact on your situation. The Taxpayer Advocate Service (TAS) is your voice at the
IRS, and they are helping taxpayers, individuals and businesses included. You may be eligible for assistance if you have tried to resolve your issues through proper IRS channels and have had no success or you feel the current IRS procedure isn’t working. Visit the Internal Revenue Service website for more information https://www.irs.gov/advocate/the-taxpayer-advocate-service-is-your-voice-at-the-irs
How an expert tax attorney can help you
A tax attorney can help protect your rights and negotiate with the IRS on your behalf. With their in-depth understanding of tax law, tax attorneys are well qualified to act as a go-between with their clients and the IRS. When you trust Dallo Law Group to protect your assets and reduce your tax liability, you can rest assured we see the whole picture, never quit, and never accept no for an answer. Our tax attorneys can advise you on which strategy is best for you, taking into consideration your individual circumstances, while exhausting every possible avenue and keeping you honestly informed about what to expect from the IRS. Whatever you are facing, we have a team of tax experts who are more than equipped to handle your situation. Level the playing field by calling a tax attorney today and gain peace of mind.