The ways of the Internal Revenue Service (IRS) can often be somewhat inscrutable. Why and how they choose to charge and prosecute tax crimes can often seem puzzling. The calculus is probably complex when the Service begins a criminal tax investigation. It is always about the money. But there are thousands of potential cases where there may be significant amounts of money at stake.
Sometimes it may be about the odds of winning a case. The IRS and the Department of Justice hate to lose. Because many times the prosecutions are as much about creating an impression in the minds of taxpayers that, they too, may be prosecuted for similar activities and therefore they need to adjust their behavior to conform. Losing criminal tax cases is not an effective strategy for creating this impression.
Often, in high-profile prosecutions, those prosecuted will believe the motivation is political, as with the case of the former mayor of Hialeah, Florida, who was prosecuted for tax evasion.
The IRS alleged he had failed to pay tax on $2 million. He believes that his case went to trial, instead of an audit, "to make an example." He claimed he relied on his financial professionals to prepare his taxes. His attorney noted that there are only 3,000 criminal tax prosecutions in a year out of the national population of 350 million.
Because the IRS is this selective, if you are being subjected to any type of tax investigation, you need to be alert to the potential consequences if the investigation should turn criminal. What may at first appear innocuous can quickly become very serious.
Having experienced tax counsel from the beginning is important. When you are speaking to a tax agent, any misstatements whether inadvertent or intentional, can become a criminal charge, even if the underlying tax controversy is resolved.
Source: CBS Miami, "Former Hialeah Mayor Speaks After Being Cleared Of Tax Evasion Charges," David Sutta, May 5, 2014