When Can Tax Preparers (and Their Clients) Face IRS Criminal Tax Investigations?

Targeting tax preparers is an effective way for the Internal Revenue Service (IRS) to prosecute tax evasion and tax fraud. In many cases, not only will IRS investigations targeting tax preparers lead to charges against the tax preparers involved, but they will lead to charges against tax preparers’ clients as well. In this article, Maryland tax attorney Kevin E. Thorn, Managing Partner of U.S. International Tax Advisors, explains what tax preparers (and their clients) need to know about facing an IRS criminal tax investigation.

When Does the IRS Target Tax Preparers and Their Clients?

The IRS targets tax preparers in a variety of different circumstances. When facing an IRS criminal tax investigation, understanding what triggered the investigation can be a critical step toward executing a strategic defense. With this in mind, some of the most common triggers of criminal tax investigations targeting tax preparers (and their clients) include:

• Red Flags in Taxpayers’ Returns – Red flags in taxpayers’ returns (and especially similar red flags in multiple taxpayers’ returns) can raise questions about a tax preparer’s practices or complicity.
• Taxpayer Complaints – Complaints filed with the IRS’s Taxpayer Advocate Service can also trigger investigations targeting tax preparers.
• Taxpayer Investigations – In some cases, investigations targeting taxpayers will also raise questions about whether scrutiny of a taxpayer’s tax preparer is warranted.
• Sophisticated Tax Avoidance Strategies – When tax preparers assist their clients with executing sophisticated tax avoidance strategies, this can often lead to enhanced scrutiny.
• IRS Enforcement Priorities – Assisting taxpayers with matters that fall within current IRS enforcement priorities can lead to enhanced scrutiny as well.

When facing an IRS criminal tax investigation, determining the current status of the investigation is critical as well. While it will be possible to avoid criminal charges in many cases, the opportunities for staving off an indictment can wane as an investigation progresses.  

What Risks Can Tax Preparers and Taxpayers Face in IRS Criminal Tax Investigations?

IRS criminal tax investigations can present substantial risks for tax preparers and taxpayers alike. Under the criminal provisions of the Internal Revenue Code, tax evasion and other offenses carry steep fines and federal prison time. In many cases, IRS investigations can lead to other federal criminal charges as well, including charges for conspiracy, money laundering, and other serious white-collar offenses.

What Should Tax Preparers and Taxpayers Do If They Are Under Investigation?

With these risks in mind, tax preparers and taxpayers need to engage experienced tax counsel at the first sign of IRS scrutiny. Once an IRS criminal tax investigation is underway, avoiding unnecessary consequences requires a proactive and strategic defense. If you have concerns about facing IRS scrutiny, engaging experienced tax counsel promptly can be critical for avoiding a criminal investigation as well.

Get the Advice You Need from Maryland Tax Attorney Kevin E. Thorn

If you need to know more about defending against (or seeking to avoid) an IRS criminal tax investigation, we encourage you to contact us promptly. Call 240-235-5096 or contact us online to schedule a confidential consultation with Maryland tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group.