Red Flags That May Trigger an IRS Egg Shell Audit or Criminal Tax Investigation
While some IRS audits are random, many more are the product of an IRS agent running statistical diagnostic software applied to the filed tax returns by all Americans in a given tax year. The agent identifies something suspicious on the tax return, or returns, you filed (or failed to file). As a result, you need to be aware of certain actions that could raise red flags and ultimately trigger an audit.
How an IRS Egg Shell Audit Works
IRS audits are conducted in multiple ways depending on the specific type of tax audit, though they share certain similarities. For example, virtually all IRS audits involve you, the taxpayer, being required to provide specific financial records and documents to the IRS for further examination and review.
There are instances where an IRS audit can be completed entirely through correspondence. In other instances, an IRS agent might ask that you visit a field office or they may ask if they can visit your home or business to review your financial records in person.
During an IRS audit, it is possible that the IRS auditor may discover issues giving rise to the possibility that fraud has occurred. If an auditor believes fraud has occurred, they may ask a fraud technical advisor to assist in the audit. If retained, a fraud tax advisor (FTA) will seek to discover and analyze any potential “badges of fraud” in your fact pattern that may indicate you, or an associate, committed tax fraud. If the FTA has reason to believe that fraud has occurred, your case could then be referred for a criminal tax investigation. If this occurs, the criminal investigation is usually handled by the Tax Section of the U.S. Department of Justice. If you find yourself in this situation, it is imperative that you consult with an experienced IRS audit defense lawyer to discuss your legal options. Why? Because DOJ attorneys who prosecute tax fraud cases generally have a 90 percent conviction rate. As a result, the sooner you get in touch with an experienced and respected IRS tax relief attorney, the better.
No matter the type of audit, you need to be proactive and seek the guidance of an experienced and knowledgeable IRS defense attorney such as Anderson Bradshaw. No matter your tax issue, our IRS debt relief law firm can help you. Our legal team possesses over three decades of experience helping clients with issues ranging from audit defense to reducing IRS taxes owed and debt mitigation. Our extensive experience means that we have seen a variety of different tax issues and have learned the best ways to handle them based on the unique situations of our clients.
Factors Indicative of Potential Tax Fraud
Several factors indicative of potential tax fraud are likely to catch the attention of the IRS or State Tax Agent who could refer the matter to a technical fraud advisor (creating an eggshell audit) or directly to CI to pursue a Criminal Tax Investigation, include:
- Your reported income suddenly and randomly declines in a single year
- Failing to file your tax returns in a given tax year, or multiple tax years
- If an IRS agent discovers information that you may have access to undisclosed foreign bank accounts that are required to be reported on an FBAR form.
- IRS audits are generally more common in cash-intensive industries such as restaurants, bars, laundry mats, and hospitality businesses.
In addition to the factors described above, there are certain scenarios where information is shared with the IRS by state or federal regulatory bodies or law enforcement agencies that could wind up triggering an IRS audit or criminal tax investigation. For example, if the IRS raids a check-cashing business and discovers large amounts of checks written to you personally or to your business that were cashed at that facility, they will likely audit you to try and see if there was unreported income. Another example is if you have undisclosed cryptocurrency information that the IRS obtains because of a John Doe Summons submitted to Coin base or other cryptocurrency trading platform. Keep in mind, in most instances, all it takes is $10,000 of unreported income to trigger an IRS audit.
If You are Concerned about Being the Subject of an IRS Audit, Contact Anderson Bradshaw Tax Today
The factors and issues described above are just some of the many elements that could be part of an IRS agent’s assessment of whether to refer your tax return for an audit or criminal tax investigation. If you find yourself in this situation, Anderson Bradshaw Tax Consulting is here to help. Our team of IRS audit defense and tax relief lawyers are passionate about assisting individuals and businesses resolve their tax-related difficulties and advocate for their rights if they are being subjected to an audit. We understand the struggles, challenges and fears that revolve around issues related to an IRS audit. Take action by contacting our office today to schedule a free 30 minute consultation at 877.550.3911 or for further information please visit www.AndersonBradshawTax.com.