The Internal Revenue Service (IRS) has announced the formation of a new office that will specifically target small business tax fraud. The Fraud Enforcement Office, housed within the IRS’s Small Business/Self Employed Division, will begin working with IRS Criminal Investigations (CI) and the IRS’s civil enforcement divisions in 2020.
According to the IRS, the Fraud Enforcement Office will, “focus on unscrupulous activities of taxpayers and professional enablers that undermine our Federal Tax Laws . . . [and] thwart emerging threats as it relates to fraudulent filings and related activities.” It’s director, Damon Rowe, is a highly-respected veteran of IRS CI who has been with the agency for more than 20 years.
What Constitutes Small Business Tax Fraud?
The Fraud Enforcement Office will be targeting small businesses suspected of committing civil and criminal violations of the Internal Revenue Code. This includes intentional and unintentional acts and omissions such as:
- Failing to report taxable income
- Misclassifying taxable income
- Claiming fraudulent deductions
- Claiming personal expenses as business expenses
- Reporting fraudulent losses
- Maintaining false books and records
- Hiding assets and income (whether domestically or offshore)
- Utilizing unlawful tax shelters
- Failing to file quarterly or annual returns
- Failing to pay federal income tax
As a department of the IRS’s Small Business/Self Employed Division, the Fraud Enforcement Office has oversight of businesses with less than $10 million in assets. This includes, but is not limited to, start-up entities, single-owner entities, and businesses with few or no employees.
What Should I Do if I am Contacted by the IRS’s Fraud Enforcement Office?
If you are contacted by the IRS’s new Fraud Enforcement Office, you should promptly consult with an experienced Maryland tax attorney. You will need to quickly determine why your small business is being targeted, and you will need to assess whether and to what extent your business (and you personally) could be at risk for civil or criminal prosecution. Working closely with your attorney, you will need to answer questions such as:
- Has your small business underreported its taxable income?
- Is the IRS claiming that your small business owes more than it has paid?
- Is there a risk that you could face criminal allegations for intentional tax fraud or tax evasion?
- If your small business is behind on its federal income taxes, what is your best option for moving forward?
- If the Fraud Enforcement Office’s allegations are misguided, how can you prove it?
Of course, these are not easy questions to answer, and assessing your potential exposure and your available options requires a comprehensive understanding of the Internal Revenue Code as it applies to your specific circumstances. They key is to work quickly and make informed decisions based on the advice of experienced tax counsel.
Schedule a Confidential Consultation with a Maryland Tax Attorney
If you have questions or concerns about your Maryland small business’s federal income tax liability and would like to speak with an attorney, we encourage you to get in touch. To schedule a consultation with Attorney Kevin E. Thorn, Managing Partner at Thorn Law Group, email ket@thornlawgroup.com, call 240-235-5096 or contact us confidentially online now.
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