Now that tax season has come and gone, it’s audit season for the Internal Revenue Service (IRS). The IRS received a substantial increase to its enforcement budget under the Inflation Reduction Act of 2022, and it has signaled that it intends to use the additional funds to target both individual and corporate taxpayers. As a result, many taxpayers are finding themselves in need of an experienced New Jersey white collar crime lawyer—as allegations of tax evasion and tax fraud present risks for serious criminal charges.
Along with signaling its intent to ramp up enforcement, the IRS has also signaled that it intends to focus its enforcement efforts in certain priority areas. With this in mind, here is an overview of what taxpayers in New Jersey need to know about facing scrutiny from the IRS in 2024:
Tax Evasion and Tax Fraud Can Take Many Different Forms
Under the Internal Revenue Code (IRC), tax evasion and tax fraud can take many different forms. Underreporting or underpaying any tax owed to the IRS can lead to charges under Section 7201 of the IRC, which makes it a federal offense to “willfully attempt[] in any manner to evade or defeat any tax imposed” under federal law. This means that charges under Section 7201 can involve:
- Failure to report taxable income (whether ordinary income or capital gains)
- Claiming fraudulent exemptions, credits or deductions
- Failure to collect or remit employment taxes
- Failure to report (or pay) estate or gift tax
- Failure to report foreign bank accounts or other foreign financial assets
Although evidence of a “willful” attempt to evade or defeat tax is required for criminal prosecution under Section 7201, unintentional reporting and payment violations can still lead to substantial liability for back taxes, interest and civil penalties. As a result, even when taxpayers have defenses to white collar criminal charges for tax evasion and tax fraud, they must still work with experienced counsel to make informed decisions about how best to deal with the IRS.
The IRS Has Identified Several Enforcement Priorities for 2024 (and Beyond)
While the IRS targets taxpayers for all forms of tax evasion and tax fraud, it has identified several enforcement priorities for 2024 (and beyond). For example, violations involving the following types of issues may put taxpayers at increased risk for white collar criminal prosecution:
- Business tax fraud (i.e., claiming fraudulent business deductions or paying employees under the table)
- Cryptocurrency tax fraud (i.e., failure to report income from the sale of Bitcoin or other cryptocurrencies)
- Employee Retention Credit (ERC) fraud
- Paycheck Protection Program (PPP) fraud
- Tax evasion and tax fraud committed by high-income and high-net-worth taxpayers
Again, these are just examples. All forms of tax evasion and tax fraud can put all taxpayers at risk, and those who have concerns should consult with a New Jersey white collar crime lawyer promptly. When possible, resolving tax controversies before they trigger scrutiny from the IRS can significantly mitigate taxpayers’ risk of facing criminal tax evasion or tax fraud allegations.
Facing Scrutiny from the IRS Might Not Be Your Only Concern
Along with the IRS, state authorities in New Jersey also prosecute taxpayers for tax evasion and tax fraud. As a result, taxpayers who have concerns about their federal filings should give due consideration to their state filings as well. Tax evasion is a third-degree indictable offense under New Jersey law, and the New Jersey Division of Taxation’s Collection and Enforcement Branch routinely conducts investigations targeting both individuals and businesses.
Tax Evasion and Tax Fraud Carry Substantial Penalties
Tax evasion and tax fraud carry substantial penalties under both federal and state law. For example, Section 7201 of the IRC imposes up to a $100,000 fine for individuals ($500,000 for corporations) and up to five years of federal imprisonment. In federal cases, individuals and companies charged with tax evasion or federal tax fraud may also face charges including (but not limited to):
- Willful Failure to Collect or Pay Over Tax (Section 7202 of the IRC) – Up to a $10,000 fine and five years of imprisonment
- Willful Failure to File a Return or Pay Tax (Section 7203 of the IRC) – Up to a $25,000 fine ($100,000 for corporations) and one year of imprisonment
- Tax Fraud and False Statements to the IRS (Section 7206 of the IRC) – Up to a $100,000 fine ($500,000 for corporations) and three years of imprisonment
As noted above, tax evasion is a third-degree indictable offense under New Jersey law. This means that in state cases, defendants can face up to a $15,000 fine and three to five years of prison time. But, depending on the specific allegations involved, prosecutors may pursue a variety of other white collar criminal charges as well.
Facing Allegations of Tax Evasion or Tax Fraud Requires an Informed and Strategic Defense
In both federal and state cases, facing allegations of tax evasion or tax fraud requires an informed and strategic defense. Taxpayers—both individual and corporate—must have a comprehensive understanding of the relevant facts and the relevant law, and they must avoid making any assumptions about the allegations against them. This requires highly experienced legal counsel.
When facing scrutiny from the IRS or the Collection and Enforcement Branch, consulting with an experienced New Jersey white collar crime lawyer is a key first step toward avoiding unnecessary consequences. While there are several potential defenses to tax evasion and tax fraud charges, taxpayers must be prepared to assert the right defenses based on the specific circumstances of their case.
Request an Appointment with a New Jersey White Collar Crime Lawyer at Helmer, Conley & Kasselman, P.A.
If you need to know more about defending against (or avoiding) tax evasion or tax fraud charges in New Jersey, we encourage you to contact us promptly. To speak with an experienced New Jersey white collar crime lawyer at Helmer, Conley & Kasselman, P.A. in confidence, call 877-435-6371 or tell us how we can reach you online today.
