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A strong incentive to avoid or resolve serious business tax fraud problems

On Behalf of | Aug 27, 2020 | Tax Crimes |

A new business tax case enforcement office

In the spring of 2020, the Internal Revenue Service (IRS) opened a new division devoted primarily to investigating tax fraud involving small businesses.

Heightened vigilance by the IRS

Any small business or self-employed individual should be aware that new resources are being devoted to detecting fraud and collecting on business tax accounts, including income tax, estimated taxes, self-employment tax, employment taxes and excise tax. A business may face the escalation of a civil tax collection case to the level of a criminal tax fraud prosecution.

Common types of business tax fraud

Fraud in small business tax cases may involve: A failure to file tax returns, a failure to pay or report taxes, claiming false dependents, claiming false expenses and deductions, tax evasion, doing business without proper licenses (resulting in tax errors), unreported income, fraudulent employer withholding tax statement (Form W-2( and fraudulent returns and return preparation schemes. This list is not intended to be exhaustive, but rather, representative of common areas of tax fraud that small businesses and their owners often fall into. While a case is still up for civil enforcement, it is vital that taxpayers pursue favorable resolutions such as through offers in compromise (OICs).

When tax fraud allegations trigger criminal prosecution

Varieties of fraud handled by the IRS Criminal Investigation division include: abusive return preparer enforcement, abusive tax schemes, bankruptcy fraud, corporate fraud, employment tax enforcement, financial institution fraud, gaming, general fraud investigations, healthcare fraud, identity theft schemes, international investigations, money laundering and bank secrecy act, narcotics-related investigations, non-filer enforcement, public corruption crimes, and questionable refund.

About the new Fraud Enforcement Office

The new Fraud Enforcement Office was established within the IRS Small Business/Self Employed Division in March, headed by a longtime veteran of IRS Criminal Investigation, Damon Rowe. Mr. Rowe’s educational qualifications include a Bachelor of Accounting degree, a J.D. and a Master of Legal Letters in Taxation degree. He served with the IRS Criminal Investigation division for more than 20 years.

Bridging the divide between civil and criminal business tax prosecutions

One of the focus areas of the new Fraud Enforcement Office is the identification of and referral of civil business tax fraud cases to be considered for criminal prosecution. A business owner or owners who realize the heightened potential for criminal prosecution of tax fraud should be vitally interested in arriving at resolutions before their cases are referred to the criminal side.