IRS Taxpayer Fraud & Evasion Investigations
Criminal Tax Lawyers: Our criminal tax lawyers represent clients in offshore account, asset and income investigations. The number of IRS Criminal Tax Investigations for offshore assets and foreign accounts compliance is on the rise. There has been an increased enforcement on FBAR and FATCA. And, recently the U.S. Government has shifted focus to criminal enforcement.
The DOJ has pursued both civil and criminal investigation, and recently indicted defendants in an FBAR Criminal Case and a FATCA Criminal Case. Of course, most offshore infractions are not criminal — but it is important that if you were willful in your non-compliance, to be aware of how to proceed.
*Streamlined Procedures are not available for willful violations
**At the criminal level (unlike civil) the government must prove intent in order to prove willfulness, not just the lower willful standards of reckless disregard or willful blindness.
IRS International Asset, Account & Income Investigations
We represent clients facing potential criminal tax investigations for offshore assets and foreign accounts compliance.
Oftentimes an IRS Special Agent will recognize an Indicator of Fraud and want to pursue an Audit or Examination, and it is the Criminal Tax Defense Lawyer’s job to diffuse the situation…quickly.
While there are only a few thousand prosecutions each year, there are hundreds of thousands of individuals if not more that get stuck in the IRS matrix and could possibly be facing a criminal investigation.
Common examples of International Tax Crimes include:
- International/Offshore Tax Fraud
- International/Offshore Tax Evasion
- International/Offshore Structuring
- Offshore Money Laundering
Criminal Investigation vs. Criminal Prosecution
The difference between an Eggshell Audit, Criminal Investigation and Criminal Prosecution is the stage of the examination.
Even though the IRS may only recommend a few thousand cases for prosecution, there are numerous audits/eggshell audits in which a person who has offshore or foreign assets are at great risk for significant fines and penalties (see below)
At Golding & Golding, our primary focus is on international tax law.
International Tax It goes by many different names, such as offshore disclosure, foreign income reporting, income from abroad, overseas income or assets, etc. W
hile we also represent individuals with domestic related issues, it is only in situations in which the primary cause is offshore non-reporting, with additional domestic disclosure issues tacked on.
International Tax Evasion and Fraud
To better understand tax evasion and r tax fraud, it is important to put it into perspective. Not everybody with unreported foreign income, assets or investments has committed a crime. One of the most important key aspects of determining whether somebody is fraudulent or committed tax evasion is to determine why they did not report the money, income, assets, etc.
The IRS typically has the burden of proof “to prove” a person was fraudulent or that the person committed tax evasion. It is not as simple as an agent does not like you and determines, “you know what I’m going to pursue tax fraud charges against Joe or Jane.” There must be evidence, and the IRS must prove with that evidence that a person knowingly, or with intent or reckless disregard failed to include income or other assets on their tax return.
How does the IRS Pursue Offshore Criminal Tax Charges?
Unless somebody “sold you out,” or you out or you are at the receiving end of a whistleblower case, the IRS does not typically initiate a criminal tax evasion or fraud claim from the beginning. It typically starts as a typical IRS Audit involving omitted foreign income.
Example: Tax Audit Turned Special Agent Investigation
The typical scenario go something like this: David has unreported income of roughly $250,000 a year from a business he owns in a foreign country. David is aware he is supposed to report this might, but chose not to.
To avoid detection, David prepares his own taxes. Unfortunately, David over embellished his expenses on his US income and now he is being taken to task and audited by the IRS.
David Appears at the Audit
When David appears at the audit, he does so with an attorney. But, against his attorneys wishes, David refuses to turn down the swagger. He walks in knowing more than everybody else, and not concerned about the auditor.
The auditor begins asking David questions, like if David is only reporting $300,000 a year in income — how does he live in a $3,000,000 house? The IRS agent is also interested in the fact that David has multi-million dollars spread across multiple accounts.
When David is unable to provide a significant response, the IRS agent asked David whether he has any other income that has not been reported. What David doesn’t know, is that the IRS agent is already aware of wire transfers that if, through from overseas.
How does the IRS agent know this? Because as a result of some routine FATCA reporting, David’s accounts were reported by the Foreign Financial Institution. Since David is a US citizen, with a Social Security number that he used to open the foreign account — the bank automatically reported him (David thought he would have received a FATCA Letter first).
Indicators of Fraud
Even before David sat down at the audit, the IRS agent was investigating what is referred to as Badges of Fraud. It’s a fancy way of saying “What in David’s history or background will show me that he has acted fraudulently or willfully”
The following is a list of the Indicators of Fraud as provided by the IRS:
Listed below are categories of fraud indicators. Each category list is not intended to be all-inclusive, instead citing examples of actions taxpayers may take to deceive or defraud.
Indicators of Fraud—Income
- Omitting specific items where similar items are included.
- Omitting entire sources of income.
- Failing to report or explain substantial amounts of income identified as received.
- Inability to explain substantial increases in net worth, especially over a period of years.
- Substantial personal expenditures exceeding reported resources.
- Inability to explain sources of bank deposits substantially exceeding reported income.
- Concealing bank accounts, brokerage accounts, and other property.
- Inadequately explaining dealings in large sums of currency, or the unexplained expenditure of currency.
- Consistent concealment of unexplained currency, especially in a business not routinely requiring large cash transactions.
- Failing to deposit receipts in a business account, contrary to established practices.
- Failing to file a tax return, especially for a period of several years.
- Cashing checks, representing income, at check cashing services and at banks where the taxpayer does not maintain an account.
- Concealing sources of receipts by false description of the source(s) of disclosed income, and/or nontaxable receipts.
Indicators of Fraud—Expenses or Deductions
- Claiming fictitious or substantially overstated deductions.
- Claiming substantial business expense deductions for personal expenditures.
- Claiming dependency exemptions for nonexistent, deceased, or self-supporting persons.
- Providing false or altered documents, such as birth certificates, lease documents, school/medical records, etc.
- Disguising trust fund loans as expenses or deductions.
Indicators of Fraud—Books and Records
- Multiple sets of books or no records.
- Failure to keep adequate records, concealment of records, or refusal to make records available.
- False entries, or alterations made on the books and records; back-dated or post-dated documents; false invoices, etc.
- Invoices are irregularly numbered, unnumbered or altered.
- Checks made payable to third parties that are endorsed back to the taxpayer.
- Checks made payable to vendors and other business payees that are cashed by the taxpayer.
- Variances between treatment of questionable items as reflected on the tax return, and representations within the books.
- Intentional under- or over-footing of columns in journal or ledger.
- Amounts on tax return not in agreement with amounts in books.
- Amounts posted to ledger accounts not in agreement with source books or records.
- Journalizing questionable items out of correct account.
- Recording income items in suspense or asset accounts.
- False receipts to donors by exempt organizations.
Indicators of Fraud—Allocations of Income
- Distribution of profits to fictitious partners.
- Inclusion of income or deductions in the tax return of a related taxpayer, when tax rate differences are a factor.
Indicators of Fraud—Conduct of Taxpayer
- False statement about a material fact pertaining to the examination.
- Attempt to hinder or obstruct the examination.
- Failure to follow the advice of accountant, attorney or return preparer.
- Failure to make full disclosure of relevant facts to the accountant, attorney or return preparer.
- The taxpayer’s knowledge of taxes and business practices where numerous questionable items appear on the tax returns.
- Testimony of employees concerning irregular business practices by the taxpayer.
- Destruction of books and records, especially if just after examination was started.
- Transfer of assets for purposes of concealment, or diversion of funds and/or assets by officials or trustees.
- Pattern of consistent failure over several years to report income fully.
- Proof that the tax return was incorrect.
- Payment of improper expenses by or for officials or trustees.
- Willful and intentional failure to execute pension plan amendments.
- Backdated applications and related documents.
- False statements on Tax Exempt/Government Entity (TE/GE) determination letter applications.
- Use of false social security numbers.
- Submission of false Form W-4.
- Submission of a false affidavit.
- Attempt to bribe the examiner.
- Submission of tax returns with false claims of withholding resulting in a substantial refund.
- Intentional submission of a bad check resulting in erroneous refunds and releases of liens.
- Submission of false Form W-7 information to secure Individual Taxpayer Identification Number (ITIN) for self and dependents.
Indicators of Fraud—Methods of Concealment
- Inadequacy of consideration.
- Insolvency of transferor.
- Asset ownership placed in other names.
- Transfer of all or nearly all of debtor’s property.
- Close relationship between parties to the transfer.
- Transfer made in anticipation of a tax assessment or while the investigation of a deficiency is pending.
- Reservation of any interest in the property transferred.
- Transaction not in the usual course of business.
- Retention of possession or continued use of asset.
- Transactions surrounded by secrecy.
- False entries in books of transferor or transferee.
- Unusual disposition of the consideration received for the property.
- Use of secret bank accounts for income.
- Deposits into bank accounts under nominee names.
- Conduct of business transactions in false names.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.