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RJS Law - A Tax Law Firm

RJS Law: San Diego Tax Attorney & Lawyer | CPA | IRS | FTB | California

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SOUTHERN CALIFORNIA’S FINEST
LAW FIRM

COMPLIMENTARY CASE EVALUATION

SAN DIEGO
(619) 595-1655
ORANGE COUNTY
(949) 535-2000
El CAJON
(619) 595-1655
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
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      • Innocent Spouse Relief
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WINNER OF THE UNION TRIBUNE SAN DIEGO'S BEST TAX LAW FIRM

 


5 YEARS IN A ROW

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Contact
Blog
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
      • FTB Notices
      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
    • Events
    • SD Metro San Diego’s Top Attorneys 2020
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
    • USD Feature Story
    • Publications
  • Contact

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Criminal Tax Evasion vs. Civil Tax Fraud: What’s the Difference?

Tax Evasion

While the federal Internal Revenue Code establishes a number of specific tax-related offenses, in broad terms, failing to pay what you owe can be described as “tax evasion” or “tax fraud.” If your tax returns are being audited, or if you are under investigation by the Internal Revenue Service (IRS), it is critical to understand the distinction between criminal tax evasion and civil tax fraud, as asserting the wrong type of defense could potentially result in exposure to fines, interest, additional financial penalties, or even federal imprisonment.

Tax Evasion vs. Tax Fraud: Important Similarities and Differences

As we have discussed previously, the terms “tax evasion” and “tax fraud” are often used interchangeably, and the IRS examines the same factors when deciding whether to pursue civil or criminal enforcement. These include factors such as:

  • Understating taxable income
  • Taking questionable deductions
  • Accounting improprieties
  • Destroying relevant records
  • Transferring or concealing assets
  • Dealing in cash
  • Refusing to cooperate with the IRS

Additionally, as explained by the IRS, “willfulness” is an element of both the criminal offense of tax evasion and the civil offense of tax fraud:

“Willfulness is a major factor in establishing fraud. Willfulness is an element of both civil and criminal fraud. The definition of willfulness has evolved from court decisions and is not defined by statute. Willfulness is a state of mind, a conscious, knowing decision to do or fail to do some act. It is defined as the ‘voluntary, intentional violation of a known legal duty.’”

What, then, are the differences? The first major difference between criminal tax evasion and civil tax fraud cases is the government’s burden of proof. In order to prove criminal tax evasion, the government must be able to prove that you willfully underpaid your federal tax obligation “beyond a reasonable doubt.” In civil cases, the government’s burden of proof is lower – “clear and convincing evidence” is all that is needed to establish civil liability.

The second major difference between criminal tax evasion and civil tax fraud is the severity of the penalties that can be imposed. In civil tax fraud cases, potential penalties include:

  • Assessment of the correct tax amount
  • Interest
  • Civil fines
  • Retrieval of fraudulently-transferred assets

In criminal tax evasion cases, however, potential penalties include criminal fines and federal imprisonment. Under the primary federal criminal tax evasion statute, 26 U.S.C. § 7201, anyone who is convicted of willfully evading federal income tax, “shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.”

What Are Some Potential Defenses to Allegations of Criminal Tax Evasion and Civil Tax Fraud?

When facing allegations of underpaying federal tax, there are a number of potential defenses that taxpayers can utilize to avoid civil and criminal penalties. However, these defenses do not include claiming that your accountant or tax attorney misadvised you. In many cases, the most-effective defense strategy will involve challenging the government’s evidence of willfulness. This can be done by asserting (among other things) that:

  • You were not aware that your tax returns were incorrect.
  • You did not intentionally submit a false tax return.
  • You lacked a “dishonest purpose” in submitting an incorrect return.
  • You believed in good faith that you did not owe any additional tax.
  • Your federal tax returns were correct.

Are You Facing Allegations of Criminal Tax Evasion or Civil Tax Fraud?

If you are facing allegations of criminal tax evasion or civil tax fraud, it is important that you speak with a tax attorney immediately. To schedule a complimentary consultation at our offices in San Diego, Orange County, or Beverly Hills, please call 619-595-1655 or contact us online now.

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