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Civil And Criminal Tax Problems

September 17, 2024

Tax lawyers are educated and trained in 26 United States Code which is commonly referred to as the Internal Revenue Code (IRC).  The Internal Revenue Service (IRS) is charged under federal tax law with the responsibility to enforce the IRC.  When taxpayers find themselves or their businesses in some form of federal tax controversy or trouble with the IRS, a tax lawyer is an excellent place to turn for counsel, guidance and advocacy.  Tax lawyers provide enormous support and advocacy for individuals, entrepreneurs, investors, tax preparers and businesses who find themselves subject to IRS tax audits and examinations; IRS collection of federal tax by levy; IRS civil penalty assessments; and IRS scrutiny; Financial Crimes Enforcement Network (FinCEN) and other federal law enforcement agency’s criminal investigations. A tax attorney can help individuals and businesses with these types of serious legal problems.

Tax Lawyers Can Help With IRS Audits, Examinations And Investigations

IRS audits, examinations and investigations can be triggered by many things.  For example, disgruntled employees, vendors, customers, spouses and others could blow the whistle on alleged tax violations at your place of business or in your home.  IRS examinations and investigations are increasingly triggered today by unusual or suspicious patterns flagged by artificial intelligence enabled computer systems.

Perhaps the wisest thing the taxpayer can do when notified of an IRS investigation is to consult with a federal tax lawyer.  It is extremely important to protect and preserve the taxpayer’s rights.  Oftentimes, the taxpayer is not knowledgeable enough about the structure of the IRS or its methods.  For example, the two broad areas of the IRS are the civil division and the criminal investigation division.  The IRS agent at your door or visiting your company — from which division are they from?  To say that it is important to know right from the first contact with the IRS which division you are dealing with, is a tremendous understatement.  Bottomline, an attorney helps the individual and business taxpayer alike to understand their legal options, their legal rights under the law; so that, the taxpayer can understand and evaluate the legal and tax implications when dealing with an IRS Audit, Examination or Investigation and make the best choices as to how to deal with the IRS scrutiny.

Tax Lawyers Can Help With IRS Collection Of Federal Tax By Levy

IRS is authorized by Internal Revenue Code Section 6331 to collect federal tax liabilities by levy when the taxpayer fails to pay the tax after a 10-day notice and demand for payment of the taxes.  In addition to challenging the IRS with respect to strict adherence to the notice and demand provisions of the applicable sections of the IRC and implementation regulations, taxpayers may under appropriate circumstances raise hardship concerns under IRC Section 6343(a)(1).

Perhaps the wisest thing the taxpayer can do when they receive an IRS Notice of Intent to Levy is to schedule an appointment with an attorney.  Tax lawyers guide the taxpayer through the IRS’ collections process and help the taxpayer understand legal and tax implications of the federal tax levy.  A tax levy is the IRS actually seizing the taxpayer’s bank accounts, the taxpayer’s wages and the taxpayer’s other property or right to property.  The IRS is not required to go to a court of law to take the taxpayer’s property by levy.  The tax lawyer can assist the taxpayer in evaluating the sufficiency of the notice of levy, evaluate whether seizure of specific property is proper, and evaluation and marshaling of evidence in support of any hardship defense or reasonable cause defense that might be available under all the facts and circumstances.  Bottom line, the tax lawyer can help taxpayers preserve, protect and present their defenses to IRS collection activity in the IRS Independent Office of Appeals.  There are two principal procedures available to the taxpayer when challenging IRS collection actions in the IRS Independent Office of Appeals.  These two procedures are called the Collection Due Process Procedure (CDP) and the Collection Appeals Program (CAP).

Sometimes the taxpayer is still unsatisfied with the results or decision obtained in the IRS Independent Office of Appeals.  Sometimes it is advisable to proceed in the judiciary.  Tax lawyers can help the dissatisfied taxpayer to evaluate and weigh the cost-benefit as to whether to file suit against the Commissioner of the Internal Revenue Service.  The attorney can represent the taxpayer in the appropriate judicial forum depending under the facts and circumstances, such as, representation in U.S. Tax Court, U.S. District Court and the United States Court of Federal Claims under the proper circumstances.

Tax Lawyers Can Help With Claims For A Refund, Abatement Of Certain Taxes And Civil Penalties

The IRS is authorized under the Internal Revenue Code and related tax regulations to abate (the word “abate” simply means to forgive or waive) certain taxes and civil tax penalties assessed against the taxpayer for certain violations of the Internal Revenue Code.  Generally, Form 843 is used to claim a refund or request an abatement of certain taxes, interest, penalties, fees, and additions to tax.  Tax lawyers can help taxpayers to prepare and file refund requests and abatement of penalties, interest, fees and other tax adjustments.  Note that Form 843 is not always the proper form to use when filing a refund request or request for abatement with the IRS.  For example, sometimes refund requests and requests for abatement must be filed using amended tax returns.  Requests untimely or filed inaccurately could be rejected or denied by the IRS.  Bottom line, the attorney can help the taxpayer comply with tax law when filing refund requests and requests for abatement of taxes, penalties, interests and other fees.  Strict statutes of limitations apply to all requests for refund and request for abatement.  Tax lawyers help individual taxpayers, tax return preparers in preparer penalty cases, entrepreneurs, investors and business taxpayers prepare and file request for refund and request for abatement of civil penalties, taxes and interest in compliance with applicable federal tax laws while using proper procedures and forms.

Tax Lawyers Can Help With Criminal Investigations And Prosecutions

The IRS is authorized under the Internal Revenue Code and related regulations to investigate federal tax crimes.  As mentioned before in this blog, the Criminal Investigation Division (CI) of the IRS is charged with investigating all kinds of criminal violations of 26 United States Code.  But, make no mistake about it, tax crimes are investigated by numerous different federal law enforcement agencies, including but not limited to, the Federal Bureau of Investigation (FBI) who investigates criminal activity more broadly; the U.S. Department of Homeland Security (DHS) also investigates federal tax crimes as well as immigration and customs related crimes.  The Financial Crimes Enforcement Network (FinCEN) also investigates tax related crimes along with money laundering, terrorist financing and a host of other financial crimes.  In fact, in the last year or so, numerous blogs and numerous podcasts have been produced on the Corporate Transparency Act of 2021 (CTA) which requires more than 42 million small and medium sized businesses structured under any States’ business organizational laws to file Beneficial Ownership Information Reports (BOIR) with FinCEN or be subject to stiff $500 per day civil fines and potential jail time for up to two years for willful violations of the CTA. The U.S. Justice Department brings tax cases referred to them in federal courts throughout the country.

Attorneys can counsel individuals and business taxpayers in the pre-indictment phase, IRS criminal investigations phase, and in criminal prosecutions in federal district court. Finally, tax lawyers play a crucial role in tax planning, business structuring, estate planning to help individuals and business taxpayers understand the legal and tax implications of economic and other decisions they make every single day that can expose them to civil and criminal jeopardy.

Finally, with regards to the Beneficial Ownership Information Reporting (BOIR)requirements of the Corporate Transparency Act — impacted business owners and those substantially controlling small and medium sized businesses must be preparing themselves and their companies to comply with the CTA and file their initial BOIR with FinCEN by January 1, 2025.  Bottom line, Tax lawyers can counsel individual taxpayers and business owners to make wise decisions in compliance with applicable law, including tax laws and other laws, such as the Corporate Transparency Act of 2021.  Tax Lawyers are also there to defend individuals and their businesses when and if they run afoul of the law.  Keep in mind, corporations, partnerships and other legal fictions can create legal jeopardy for their owners and individuals who substantially control them.  Artificial intelligence enabled investigatory tools are likely to spread more daylight on complex arrangements and ties. Transparency is the catch word of today!  By partnering with an experienced lawyer, individuals and businesses can better navigate complex federal, state and local tax laws and federal, state and local business transparency laws.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.