NY Tax Evasion [ Must Know ] FAQs to Protect Yourself

The facts surrounding the crime of tax evasion in New York  may vary. However, tax evasion may include:

IRS or NYS Tax Problem? 7 [ Must Know ] FAQs

Experienced IRS & NY tax attorney Charles Rosselli gives you valuable tips and strategies so that you do not get taxing advantage of by the IRS, NY Tax Department or a so-called tax resolution firm. 

What is Tax Evasion? 

Learn how to protect yourself from possible tax evasion charges by not committing mistakes that non-filers as well as unsuspecting taxpayers may make.

Tax evasion is a felony.

In order to prove the crime of tax evasion, the government must prove beyond a reasonable doubt that your conduct was an affirmative (willful) act to evade or defeat the payment of tax.

Tax Fraud vs. Criminal Tax Evasion

What makes a tax fraud matter a civil matter as opposed to a criminal tax matter?

First, the burdens of proof are different. In a civil tax fraud matter, the burden of proof is lower.

In a civil tax fraud matter, the IRS will have to prove it's case by a “preponderance of the evidence.”

This is a lower burden than in a criminal tax evasion case, where the burden of proof is “beyond a reasonable doubt.”

Second, civil tax fraud and criminal tax evasion have different monetary penalties.

For example, with a civil tax fraud matter (IRC Section 6663), you would be subject to lower fraud penalties than in a criminal tax evasion case.

Monetary penalties in a criminal tax evasion are much more severe.

You may be fined upon conviction not more than $100,000 or $500,000 in case of a corporation, together with the costs of prosecution.

Third, If it is criminal tax evasion matter, you could face a possible jail sentence as well as significant monetary penalties (see above).

Fourth,  the statute of limitations is different in a civil fraud tax matter as opposed to a criminal tax evasion case:

There is no statute of limitations is in a civil tax fraud matter.

Fo ar criminal tax evasion prosecution, the statute of limitations is typically either 3 years or 6 years depending upon the offense.

Will I Be Charged with Tax Evasion? 

Civil tax fraud as opposed to the crime of tax evasion hinges on one  word … “ willfulness.”

In other words, can the government prove that your conduct was willful?

Each tax matter is fact specific.

An experienced tax attorney should  review your specific fact pattern to determine whether your conduct has the “badges of fraud” that would rise to the level of willfulness that would merit a criminal tax investigation.

Steps to a Tax Evasion Investigation

Many criminal tax evasion investigations start as civil tax fraud matters. For example, you may filed a false tax return or failed to file years of tax returns.   

If the IRS or NYS agent sees that your tax matter is a high liability case where there are facts and circumstances that may rise to willfulness on your part, then...

The next step is that  your civil tax fraud matter  will be assigned to an IRS Special Agent or NYS agent for the purposes of a criminal investigation.

Your  civil tax investigation has been converted to a criminal tax investigation.

The Special Agent would determine, based upon the criminal tax investigation, whether the government should indict you with the attempt to evade or defeat the payment of a tax.

If it does, the IRS Special Agent will refer it the Department of Justice for the next step, a possible indictment for tax evasion.

Must Read Tax  Attorney Tip

These are 3 civil ( non-criminal)  matter that should be handled by a tax attorney:

1. failing to file a tax return
2. filing a false tax return
3. failing to file a NY sales tax return or pay sales tax 

Why?

Conversations with your CPA or accountant are not covered by attorney client privilege.

A tax attorney should handle all communications with the IRS even when there is not a criminal investigation because the matter can always be turned from a civil matter into a criminal investigation.

Needless to say, you should never speak to the IRS or New York State, either.

3 Common Tax Evasion Crimes [ IRS & NYS ] 

These are three common crimes that could arise from a civil tax investigation and morph into a criminal investigation.

Although you may not have committed one of the these acts does not mean that the IRS will investigate you from a criminal standpoint.

However, you should counsel if you have committed one of the following acts:

1. Filing a False Tax Return

The government simply has to prove that you signed the tax return for the tax year in question and you know that the tax return contained false information; and that you did so “willfully.”

Did you omit material income from your tax return ?

For example, did you claim that your income was lower on your income tax return than it actually was?

Do you have deductions on your tax returns that you do not have proof of ?

Remember, when you sign an income tax return, you are signing the tax return under the penalties of perjury.

Also, it is the legal responsibility of the taxpayer to ensure the accuracy of the tax return.

Whether your omission rises to a level of a crime is determined on a case by case basis. 

2. Willful Failure to File a Tax Return

There are several elements to filing a false tax return that the government must prove beyond a reasonable doubt:

1. Were you required to file a tax return?

2. Did you not file the tax return by the required due date?

3. Was your failure to file a tax return willful?

If the government decides to prosecute your nonfiler matter, it is not difficult for the government  to prove the above 3 factors.

Failure to file a tax return is a misdemeanor that carries a maximum sentence of one year in prison for each tax year.

The government typically prosecutes higher exposure cases or cases where there is a high chance of success. 

3. Failure to File or Remit NYS Sales Tax 

The failure to file a NYS sales tax return is a crime.

The failure to remit sales tax to the State of New York is a crime.

Sales tax is a 'trust fund' tax. This means, that you are collecting and holding the money on behalf of the New York State Department of Taxation and Finance.

The money does not belong to you or your business.

It does not matter that your business is or was experiencing financial difficulty.

The failure to pay NYS sales tax may be considered theft.

Average IRS Jail Time for Tax Evasion

Factors that may determine your average jail time:  

How the IRS & NYS Knows about Tax Crimes

The IRS and New York State Tax Department has sophisticated computer programs that tracks income; analyzes records; and identifies discrepancies on tax returns.

If you have unfiled tax returns or have filed a false tax return, time is of the essence to take proactive measures to solve your civil  tax problem before it becomes a bigger criminal tax problem.

Voluntary disclosure can lead to your tax matter remaining a civil matter and paying a penalty.

While no one likes to pay civil penalties to the IRS, it is better than being charged with a misdemeanor or possible felony.

Solving Your Tax Problem [ the first step ]

The best thing to do is handle you tax matter proactively so that you can avoid being charged with tax evasion. 

It  is our goal to protect you  from possible tax evasion or civil tax fraud issues by carefully guiding you through the complicated maze of tax laws and protecting your interests throughout the process so that we achieve the best possible results.

Experienced New York tax attorney Charles Rosselli and the Tax Problem Law Center focuses on IRS as well NYS state tax matters.

Whether your failed to timely file your income tax returns or disclose foreign bank accounts, we can help.

What to do next? Contact us  to determine how we can help you solve your tax problems.