The IRS launched a new offensive against small business-owners in New York, LA, DC, Philly and other swanky metropolitan areas. Accordingly, a phalanx of jacked up specially-trained tax examiners and collectors are hitting the streets and shaking down delinquent taxpayers. People who own cash businesses, e.g. restaurants, body & repair shops, barbershops, bars, liquor stores, convenience stores, etc., are being audited like never before. The IRS is concomitantly cracking down on payroll withholding violations and has singled out medical doctors and medical practices with a vengeance. Moreover says David Selig of Selig & Associates, the IRS now shares information with various State Agencies. Specifically, the IRS state partnering program, facilitates and expands joint tax administration relationships between the IRS and state taxing authorities, such as departments of revenue and state workforce agencies. IRS and state/local agencies share data with each other through a variety of ongoing initiatives. The information includes: Audit Results; Federal Individual and Business Tax Return Information and Employment Tax Information. A recent recipient of this “joint operation” said that it was akin to being financially gang-raped, a sentiment that we find offensive and in extremely bad taste.
Todays Tax Law Tutorial: The IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code. Compliance with the tax laws in the United States relies heavily on self-assessments of taxes owed. This is called voluntary compliance. When individuals and corporations make deliberate decisions not to comply with the law, they face the possibility of a civil audit or criminal investigation which could result in the assessment of costly tax penalties or prosecution and possible jail time. A financial analysis, or investigation, of the individual’s financial history often determines whether the omission is unintended or a willful attempt to evade payment of taxes.
What is a Financial Investigation?
Financial investigations are usually very document-intensive. Specifically, they involve records, such as bank account information, real estate files, motor vehicle records, etc., which point to the movement of money. Any record that pertains to or shows the paper trail of events involving money is important. The major goal in a financial investigation is to identify and document the movement of money. The link between where the money comes from, who gets it, when it is received and where it is stored or deposited, can provide proof of criminal activity. Tax evasion, public corruption, health care fraud, telemarketing fraud and terrorist financing are just a few of the types of crimes that revolve around money. In these cases, a financial investigation often becomes the key to a conviction. Traditional law enforcement relies on investigative tools such as crime scene analysis, physical evidence, fingerprint identification or eyewitness accounts. The limitations of these techniques become obvious to those who are trying to prove wrongdoing in a sophisticated financial crime. With no proof, there is no conviction.
What are the Major Areas of Financial Investigations?
IRS Criminal Investigation’s focus on financial investigations falls into three interdependent categories: Legal Source Tax Crimes, Illegal Source Financial Crimes, and Narcotics-Related Financial Crimes/Counterterrorism Financing. These three areas are mutually supportive and create a well-rounded law enforcement program for IRS which addresses the growing fraud in legal industries as well as penetrates the nucleus of money laundering operations and drug trafficking/terrorist financing organizations.
Focusing on Legal Source Tax Crimes
Criminal Investigation's primary resource commitment is devoted to the development and investigation of legal source tax crimes. These investigations involve legal industries and occupations, and more specifically, legally earned income. Fraud in legal industries is often termed "white collar" crime because it involves financial violations, including tax violation, by individuals who are not involved in other criminal activity. Some of the tax violations include income tax evasion, failure to file, or filing a false tax return. The crimes often include employment tax fraud, false claims for tax refunds, abusive trust schemes, unscrupulous tax return preparers and frivolous filers/nonfilers who challenge the constitutionality of the American tax system.