The Audit Survival Guide if You Cheated on Tax Filings (5 Tips)

The Audit Survival Guide if You Cheated on Tax Filings (5 Tips)

The Audit Survival Guide if You Cheated on Tax Filings

Sometimes, United States Taxpayers run afoul of the law – and it is not always premeditated. Oftentimes, it is simply the snowball effect of having made a mistake, not resolving that mistake, and then sticking your head in the sand. This then culminates with unresolved cheating on one or more years of tax returns. Before you get too overwhelmed, take a deep breath, you are not alone and it will usually turn out fine. Here is a typical example: a Taxpayer makes a bad decision about embellishing their expenses to the IRS or possibly failing to report foreign accounts they knew they were supposed to report with their tax return. Then they have the opportunity to fix the matter and put out the fire while it is small and manageable – but whether due to fear of getting caught or sheer bravado, they choose not to. Then that smaller issue snowballs over time into a much larger issue and next thing you know – the issue has caught the attention of the IRS or the DOJ and now the Taxpayer is under audit or examination. Here are some tips for Taxpayers caught in this unfortunate situation —

Stay Calm & Avoid Knee-Jerk Reactions

Oftentimes, a taxpayer will not be made aware by the Internal Revenue Service or Department of Justice that they are under criminal or quasi-criminal investigation until they receive the initial notice. A common knee-jerk reaction is to want to respond immediately to the US government to try to prove your innocence, but that can only lead to bad things. It is never advised to speak with the US government on matters that could potentially result in significant fraud penalties or criminal prosecution outside of an attorney.

Tax & Legal Representation (Board-Certified Tax Law Specialist)

IRS audits and examinations can be complicated. You are typically best served by retaining a Board-Certified Tax Law Specialist who is dual-licensed (EA or CPA and Attorney) and specifically specializes in the area of tax that you’re under audit for.

Assess Whether Presence at Audit is Necessary

Sometimes, it serves the client’s best interest to not appear at the audit or examination. That is because quite frankly, it is difficult for the taxpayer to not want to interject (usually over their counsel’s advice) during the exam and this can typically lead to self-incriminating statements. What may seem innocuous to the taxpayer may inadvertently take the IRS agent down a path that helps them better understand if the fraud occurred and if it did, how. Therefore, unless the taxpayer was compelled to appear, generally it serves their best interest not to appear at the audit or examination.

Are You Able to Pay the Outstanding Tax Liability?

Money talks, and even in the world of dealing with the US government this is still the case. If you are able to pay any potential penalties upfront, this goes a long way in helping resolve the case unless there are some egregious facts.

Avoid 3rd Parties (Protect the Attorney-Client Privilege)

It is human nature for individuals to want to share the best and worst parts of their life with other people (unless of course, you are an introvert and the idea of sharing that type of information with anyone just sounds terrible). You and your attorney have an attorney-client privilege in which the legal information discussed regarding your case remains confidential. If you begin publishing this information to third parties by way of conversations, written communications, etc. this may lead to having forfeiting (at least in part) that confidentiality — and the IRS and US government may be able to obtain that information.

Golding & Golding: International Tax Lawyers

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

Contact our firm today for assistance with getting compliant.