IRS Criminal Tax Audits: When Can Tax Violations Lead to Criminal Charges in Boston?

For most people, facing an IRS audit triggers fear of liability for back taxes, interest and penalties. However, IRS audits can also lead to criminal prosecution in some cases. With additional resources at its disposal in 2024, the Internal Revenue Service (IRS) is ramping up its enforcement efforts—and this includes its efforts to hold individual and corporate taxpayers criminally accountable when warranted. Learn more from Boston criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

When Can IRS Audits Lead to Criminal Prosecution for Individual and Corporate Taxpayers?

While most IRS audits are civil in nature, the IRS and its Criminal Investigation Division (IRS CI) do not hesitate to charge both individual and corporate taxpayers with criminal violations of the Internal Revenue Code. In most cases, the key differentiating factor between civil liability and criminal culpability is willfulness. For example, while taxpayers can face liability for back taxes, interest and penalties when they inadvertently pay less than they owe, Section 7201 of the Internal Revenue Code provides:

“Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

Section 7201 is extremely broad, and it allows the IRS to pursue criminal enforcement in a wide range of scenarios. For example, criminal tax audits under Section 7201 frequently involve allegations including (but not limited to):

• Willfully underreporting taxable income
• Willfully underpaying federal income tax
• Willfully failing to pay the employer’s share of employment tax (i.e., by underreporting payroll)
• Willfully failing to pay over employees’ share of employment taxes held in trust
• Willfully claiming fraudulent deductions (i.e., home office and other business expense deductions)

Additionally, while Section 7201 is extremely broad, it is also just one of several criminal provisions of the Internal Revenue Code. The IRS can pursue criminal charges for violations of the Bank Secrecy Act (involving offshore disclosure violations) and other federal laws as well. As a result, even when an IRS audit seems relatively benign initially, targeted taxpayers must be extremely careful to ensure that they do not unnecessarily expose themselves to the risk of criminal prosecution. This starts with gaining a clear understanding of what (if anything) revenue agents might find during the audit process that suggests a willful violation of the law.   

Request a Confidential Consultation with Boston Criminal Tax Attorney Kevin E. Thorn

If the IRS is auditing you (or your company) in Boston, it is vital that you engage experienced counsel to help you make smart decisions and communicate with the IRS on your behalf. To learn more from Boston criminal tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 617-692-2989 or request a confidential consultation online today.