Civil & Criminal Taxation FAQs

1. What is tax law?
Tax law involves the taxation of income, both corporate and personal, and real or personal property acquired through personal and professional efforts. In addition to income tax, there is employment tax, excise tax, sales tax, gift tax, inheritance tax, capital gains tax, property tax and many other areas of taxation.

2. What happens if I don't file my taxes?
People who do not file their returns usually fail to do so due to some traumatic occurrence in their lives. For these people, a deal can usually be made within the collection division of the IRS. However, the IRS treats failure to file taxes as a criminal act. This usually results in imprisonment for the nonfiler. If a taxpayer does not file his return, the IRS may file a return for him called an SFR or Substitute for Return. This always results in higher taxes than if filed by the taxpayer. However, the taxpayer may always file a return, no matter how late. Before any deals can be made with the IRS, at least the past three years returns must be filed.

3. What are white-collar crimes?
White-collar crime is a term that is usually applied to crimes associated with business that do not involve violence or bodily injury to another person. Many federal white-collar prosecutions are for tax crimes, such as tax evasion, failure to file income tax returns, or tax fraud.

4. What will happen if I am being investigated for a tax crime?
The typical criminal tax case is investigated by the Internal Revenue Service Criminal Investigation Division (CID). When the CID completes an investigation, it recommends prosecution. Once the IRS approves prosecution, the case is forwarded to the US Department of Justice Tax Division, where federal prosecutors specializing in criminal tax violation review the case and decide whether to authorize prosecution. If the Department of Justice Tax Division approves prosecution, the case is then sent to the local US Attorney's office with the direction that the individual or individuals named be indicted and prosecuted for the offenses alleged.

5. How will I know if I am being investigated?
There are several indicators that a CID investigation may be pending:
A. You receive notice of a pending audit and have knowledge that the return to be audited contains improper deductions or understates your income;
B. Your bank notifies you that the IRS has requested copies of your bank statements;
C. Your accountant or the person who prepared your return is subpoenaed to appear before a U.S. Grand Jury with your returns and records; or
D. An IRS special agent contacts you for an interview.

6. Should I hire an attorney if I am being investigated due to my taxes?
If you are an individual, company, business or any other entity currently facing a criminal or civil tax investigation, you should immediately contact an experienced civil or criminal taxation law attorney.

7. I failed to pay my taxes when filing my returns and owe for several years. Is there a way to settle with the IRS and avoid the threat of liens and levies?
If you filed your returns and did not pay the taxes due on the return, you are probably receiving periodic demand notices from the IRS for payment. There are ways to delay this process if you react and file the proper documentation within the period allowed by the law to appeal the notices. However, if you allow the period to expire, you must seek a negotiated settlement and compromise of your tax obligations with the IRS. The current vehicle for doing this is the Offer in Compromise. When properly filed and accepted it will stop the liens and levies and provide you with a timeframe for paying your back taxes.

8. What is an Offer in Compromise?
An Offer in Compromise is a statutory method to allow you to settle your IRS debt for less than the amount owed and/or to pay the agreed upon amount over a period. You must meet the IRS required circumstances of:

  • doubt as to liability,
  • doubt as to collectability and/or
  • the compromise of your tax liability results in effective tax administration.

9. Can I file bankruptcy and discharge my taxes?
Most income taxes are dischargeable in bankruptcy. However, restrictions do apply and if you file bankruptcy too soon you will not be able to discharge the tax liability. For example, personal income taxes must be at lease three years old and assessed at least 240 days before the filing of a bankruptcy petition. However, some tax liability cannot be discharged at any time by bankruptcy. These relate to the failure to withhold and pay employment taxes.