NCJ Number
65977
Journal
NATIONAL PUBLIC ACCOUNTANT Volume: 24 Issue: 2 Dated: (FEBRUARY 1979) Pages: 11-19
Date Published
1979
Length
9 pages
Annotation
TYPES OF CRIMINAL TAX OFFENSES ARE DETAILED ALONG WITH METHODS AND INTERNAL REVENUE SERVICES (IRS) USES TO DETECT FRAUD AND THE ACCOUNTANT'S ROLE IN POTENTIAL FRAUD CASES.
Abstract
IN CRIMINAL TAX FRAUD CASES THE TAXPAYER AND HIS ACCOUNTANT ARE LEGALLY REQUIRED TO PROVIDE INFORMATION THAT CAN BE HIGHLY DAMAGING. THUS IS IS CRITICAL THAT EXPERIENCED LEGAL ASSISTANCE BE OBTAINED EARLY IN THE CASE TO AVOID CRIMINAL PROCEEDINGS. PRIMARY CRIMINAL OFFENSES UNDER THE FEDERAL CODE INCLUDE ATTEMPTS TO EVADE AND DEFEAT TAXES, FILING A FALSE AND FRADULENT RETURN, FAILURE TO FILE AND FAILURE TO PAY, AND AIDING AND ASSISTING IN TAX FRAUD. IN ADDITION TO THE SEVERE PENALTIES SPECIFIED BY THE CODES, AN INVIDUAL FACES SUBSTANTIAL LEGAL COSTS, LOSS OF INCOME WHILE IN PRISON, AND CIVIL TAX LIABILITIES. FRAUD PENALTIES PLUS INTEREST CAN BE ASSESSED EVEN IN CRIMINAL CHARGES ARE SUCCESSFULLY RESISTED AND OFTEN EQUAL OR EXCEED THE AMOUNT THHAT WAS OMITTED FROM THE TAX RETURN. DISTINCTIONS BETWEEN FRAUD AND TAX PLANNING CAN DEPEND ON THE MENTAL INTENT OF THE TAXPAYER. AN ACCOUNTANT SHOULD DOCUMENT THIS INTENT AND INSURE THAT QUESTIONABLE TRANSACTIONS ARE DISCLOSED ON SOMEONE'S TAX RETURN. THE IRS DISCOVERS FRAUD CASES THROUGH SPECIAL PROGRAMS WHICH MONITOR A PARTICULAR BUSINESS ACTIVITY SUCH AS GAMBLING, CHAIN INVESTIGATIONS, INFORMANTS, AND CLASS INVESTIGATIONS. FOR EXAMPLE, IOWA FARMERS ARE CURRENTLY BEING AUDITED IN DISPROPORTIONATE NUMBERS. TAX RETURNS THAT DO NOT MATCH RATIOS DETERMINED BY A SOPHISTICATED COMPUTER SYSTEM OR CANNOT BE QUICKLY PROCESSED MAY ALSO BE AUDITED. A CIVIL AUDIT THAT HAS SUSPICIOUS ELEMENTS CAN BE REFERRED TO THE CRIMINAL DIVISION WHERE THE TAXPAYER WILL BE INVESTIGATED IN A VERY THOROUGH MANNER WITH THE OBJECTIVE OF DEVELOPING A PROSECUTABLE CASE. SIGNS THAT AN AUDIT OF A LARGE NUMBER OF ORIGINAL DOCUMENTS, A SUBSTANTIAL DELAY AFTER THE START OF A CIVIL AUDIT, AND THE PRESENCE OF TWO AGENTS AT THE AUDIT. BECAUSE ACCOUNTANTS CAN BECOME PRIMARY IRS WITNESSES, THEY SHOULD REFUSE TO DISCUSS ANY POTENTIALLY CRIMINAL TAX ACTIVITIES WITH CLIENTS. IF AN ACCOUNTANT DISCOVERS A POTENTIAL TAX PROBLEM, HE SHOULD RECOMMEND CORRECTING THE ERROR. WHEN INTERVIEWED BY IRS AGENTS THE ACCOUNTANT SHOULD HAVE A LAWYER PRESENT AND REQUIRE A TRANSCRIPT. ALTHOUGH COOPERATION WITH THE IRS IS HELPFUL IN CIVIL CASES, IT CAN BE DISASTROUS IN CRIMINAL INVESTIGATIONS. (MJM)