Ten Ways Not To Say Goodbye: Avoiding Jailtime For Tax Charges -

When asked by a (repeat) client how to stay out of jail, criminal defense attorneyCharlie Thomas offered this sage advice: Stop stealing shit.

The same logic applies to taxes. If you want to avoid jail time, for the most part, the best advice is to file and pay on time. But I know that doesn’t always happen so let’s assume that you didn’t do that. What next?

It’s important to understand that the Internal Revenue Service doesn’t want to throw you in jail. Criminal investigations consume a lot of resources: they take time and they’re expensive. So for most taxpayers, a criminal investigation isn’t a first step, but rather the end process of lengthy attempts to get you to resolve your tax obligations. In other words, it’s rare that an agent will show up on your doorstep one day with cuffs in hand.

Additionally, while tax evasion and related charges are an important piece of the IRS Criminal Investigation (CI) charges, that’s not the sole purview. Often, criminal investigations are linked to other criminal activities like fraud, drug and weapons violations and money laundering. Remember Al Capone? When it comes to criminal activities, while other federal agencies – like the Federal Bureau of Investigation – can pursue those violations, the IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code.

With all of that in mind, here are ten tips for staying out of jail:

1. File and pay your taxes on time. This seems like it would go without saying. And it happens – all of the time and for all kinds of reasons – that a taxpayer might not file and pay on time. You generally get a couple of bites at the apple since ultimately, IRS just wants to get paid. Yet, time and again, once a criminal investigation has been initiated, taxpayers either refuse to pay or don’t pay the tax due. While there may be valid reasons for nonpayment (such as lack of resources to make payment), when it appears that resources are available, not filing and/or nonpayment makes a bad situation worse. At sentencing hearings, judges take note – as they did in the case of Lauryn Hill - of whether taxpayers have made arrangements to resolve ongoing liabilities.
2. Open your mail and respond appropriately. Not thinking about it isn’t going to make it go away. If you’ve been chosen for examination or if the IRS has asked you to provide additional information about your return, it means you’re on their radar. In most cases, it does not mean you’re being considered for criminal proceedings, just that additional information is required. But failing to respond – especially if you have good reasons for your behavior – doesn’t help and in most cases, it raises the level of inquiry.
3. Cooperate during an examination/audit. Audits make people angry. And defensive. And withdrawn. And combative. But none of that helps. And it could make a bad situation worse. Procedurally, criminal investigations are generally initiated from information obtained when a revenue agent (auditor) or revenue officer (collection) detects possible fraud. Speaking from experience, while there are guidelines that lead to criminal inquiries, there is some wiggle room – but not for folks who are not cooperative.
4. Be consistent. There is no privilege that applies when talking or making disclosures to IRS as opposed to state or other agencies. If you report sales of $1 million to the state for purposes of sales tax, the IRS is going to want to see those numbers accounted for – and vice versa. Information may be exchanged by other law enforcement agencies or tax authorities across the country. Don’t assume you’re being clever when you tell one story to one agency and another to IRS. Be consistent in your reporting so as not to raise concerns or red flags.
5. Don’t destroy records. Destroying records can be a crime – and you don’t need additional charges. Once an investigation is opened, an IRS special agent will attempt to gather facts and evidence. That may include interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data. Trust me. It happens: I’ve been a witness (for the defense) at a criminal case where a private investigator was hired to analyze the lifestyle of the owner of a cash based business to determine if cash received equaled cash paid out. But those records may be evidence – and you don’t want to destroy evidence. That can also be a crime – just ask Roni Deutch who was accused of shredding piles of evidence in her tax case, making a bad situation worse.
6. Don’t lie. Failing to file and failing to pay can result in criminal charges. You know what else can? Lying to federal investigators and/or committing perjury.Of course you can get caught in a lie. Be smart. You have a right to remain silent – and you may want to use it – and your attorney can help you determine if it makes since to do so. One thing is clear: lying just makes things worse.
7. Don’t be overconfident. While there might be a temptation to roll the dice and see what happens, once criminal charges are filed, you have to take the matter seriously. Choosing not to put on any defense is rarely a good strategy. Wesley Snipes’ team said, at trial, “We could have put on a big show, but we don’t do that. We’re not going to waste the jury’s time.” The result? A conviction – and jail time. While the temptation may be to be angry and assume that any crime is the government’s burden to prove, that doesn’t equal throwing your hands up in the air. Be prepared.
8. Hire a defense attorney. Once a criminal investigation has begun, and after all the evidence is collected, the IRS special agent will determine whether to continue your case or recommend prosecution. At this point, you’re not talking yourself out of charges. Your case will be referred to either the Department of Justice, Tax Division, or the United States Attorney. At that point, it’s not a matter of simply mitigating penalties. A tax attorney – like me – can’t do much for you at this point. You need a criminal defense attorney, preferably one who has experience in tax crimes. Not a DUI attorney. Not a family lawyer. Not a corporate guy (or gal). A bona fide criminal defense attorney.
9. Read the fine print. The IRS Criminal Investigations unit secures approximately 3,000 criminal prosecutions per year. That’s a pretty big number. If you are prosecuted, you may be asked to take a plea. In some instances, that makes sense. But read what has been put in front of you and remember that you do have rights. See #8.
10. Understand that there is no Perry Mason.Last minute dramatics make for good TV but not in real life. There is no piece of evidence that is going to save you at the very end. You can’t count on the fact that, even if things are going badly, there’s going to be a moment where the momentum will generally shift. Realistically, you know how things are going as the investigation goes along. You know that continuing to stand there, hopeful, isn’t enough. You have to be proactive. Hire an attorney. Pull out records. Be forthcoming. Be thoughtful. Think about your strategy – and that means exploring all of your options. That wild card might be your lucky break – or it could be another dead end. It’s important to keep your chin up but don’t rely on theatrics – that only works in Hollywood.

Let’s be honest. The IRS has a lot of power. A lot. And that can be very scary. There are a number of steps that you can take to mitigate – or even eliminate – the potential for examinations, penalties and quite possibly, jail time. But heading the whole thing off at the beginning? Even better.

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

www.securitytaxservices.com

H&R Block Offers Apology, Cash To Make Up For Filing Snafu -

If you were one of the hundreds of thousands of taxpayers affected by the tax season filing snafu involving education credits – and you filed using H&R Block – you might be getting some relief.

The tax preparation giant is offering $25 to its customers affected by the delay in processing individual tax returns claiming education credits. The $25 will be loaded onto Emerald Cards, the company’s signature debit card, which is also used for taxpayer refunds.

The company had this to say about the resolution to a situation that taxpayers and preparers alike are ready to be over:

This past tax season has been like no other in recent memory. The late passage of additional tax legislation and subsequent delay in the issuing of all tax forms pushed the beginning of the e-filing season back almost two weeks to the end of January. This alone caused a refund delay for close to 18 million taxpayers who usually file in January and receive a refund by early to mid-February.

The IRS has reported it has cleared nearly all returns impacted by the 8863 processing delay. We are confident more than 90 percent of our clients impacted by the form delay have either received their tax refund or received notice of a possible refund date. For those who are experiencing a longer delay, it is possible the IRS has identified additional issues with the return.

H&R Block appreciates that the issue involving the filing of Form 8863 this past tax season may have frustrated and inconvenienced impacted clients. H&R Block recently sent those clients who had their tax returns prepared and filed in company-owned locations its sincerest apologies and a $25 Emerald Card gift card to account for any processing delay and express thanks for their patience in this matter.

These clients can rest assured their tax professional prepared their tax return accurately and the tax refund was never in jeopardy due to this issue. The problem was a system disconnect in processing the form that unfortunately further delayed the return. This delay was not caused by something the tax professional did – or did not do.

Once the company became aware of the issue, it worked diligently on the clients’ behalf with the IRS to expedite the processing of those returns. By working with the IRS, most clients ultimately received their refund more quickly than originally expected.

H&R Block serves approximately 15 million clients in its offices and strives to provide consistent quality client service. Nevertheless, we will not stop working to improve that experience for all of our clients.

This was the second high profile statement from the company. In March of this year, H&R Block CEO Bill Cobb issued an apology to customers, admitting that the company “missed a step” but making assurances that “I want you to know that we hear the frustration of those impacted by this issue loud and clear, and we’re working every avenue we can to get your refund to you as fast as possible.”

Those processing delays were expected to hold up refunds for as many as six weeks. However, it appears that IRS was able to move affected returns more quickly than expected and most taxpayers saw their refunds in less time. By mid-April, almost all taxpayers who had been impacted by the filing problems had received their checks.

The damage was done, however, for a number of taxpayers. In particular, students hoping to use refunds to pay tuition and those relying on finalized returns in order to complete financial aid applications, were angry and took to the internet to complain. At least three lawsuits have been filed by customers hoping to recover from losses suffered because of the delays. The company hasn’t responded publicly to the lawsuits but has continued to stress that the majority of customers were not significantly affected.

The delays, of course, made headlines for weeks in an already dramatic tax season marked by a late start, sequestration worries and last minute online outages reported by TurboTax customers. H&R Block hopes that, now that things have settled for most taxpayers, this gesture will help make up for some of the difficulties. So you tell me, will it?

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

www.securitytaxservices.com