It is without question that the U.S. tax system is complicated. This is why most Americans seek out the assistance of an accountant to complete their taxes. Despite the initiative to obtain professional help, if an individual is not forthcoming or takes steps to reduce their tax liabilities, this could result in significant penalties. While some may think he or she will face civil consequences, if it is determined that one took steps to obstruct or evade tax responsibilities, this could result in criminal penalties.
Whether one faces civil or criminal tax consequences depends on how a person acts during the audit. It should be noted that most criminal tax cases stem from matters that were plain civil audits. It is when the auditor notices something suspicious during a civil audit that they will then notify the Criminal Investigation Division. It should be further noted that the IRS does not need to inform the person being audited that they referred the matter to the criminal division.
Thus, when an individual is under the impression that the audit is over and he or she is in the clear, the IRS could be quietly building a criminal case. When individuals make false statements to auditors, this is considered a huge mistake. Even more so, a person's conduct during the entire audit can significantly alter the outcome of the audit and whether it gets referred to the criminal division. Trying to hide the ball or outsmart the IRS will likely not work in a person's favor, as they can typically sense when obstruction and evasion are occurring.
Because criminal tax cases could result in an individual facing prison time, hefty fines and other consequences, it is important to understand how best to protect your rights and interests in the matter. And because most criminal cases stem from civil matters, it is equally important to obtain legal guidance when faced with civil tax liabilities as well.