Tax fraud is a deliberate violation of Internal Revenue laws by those who do not file and properly report their income and expenses. Tax fraud requires both an underpayment and fraudulent intent.
The primary objective is to foster voluntary compliance with federal tax laws through the recommendation of criminal prosecution and/or civil penalties against taxpayers who attempt to evade the assessment and/or payment of taxes due.
Examples of fraudulent criminal activities that violate tax law:
• Deliberately underreporting or omitting income.
• Overstating the amount of deductions.
• Keeping two sets of books.
• Claiming personal expenses as business expenses.
• Hiding or transferring assets or income.
The Treasury Inspector General for Tax Administration (TIGTA) audits the IRS on various matters. A recent audit of IRS found the fraud referrals to the IRS Criminal Investigation (CI) increased over the prior fiscal year.
The audit noted an increase in the number of criminal investigations and of prosecution recommendations.
However, the audit found some problems in the reliability of data CI used to determine the timeliness of evaluating fraud referrals.
TIGTA recommended that the IRS:
• Stress the importance of capturing correct fraud referral-processing data.
• Modify the information-management system or develop an alternative method to accurately calculate the fraud referral evaluation period.
• Establish goals for the fraud-referral timeliness-performance measures.
• Strengthen procedures to ensure that the criminal investigation code is input in a timely fashion into the computer system.
• Issue a reminder to periodically review reports to ensure that the internal computer referral code is input in a timely fashion into the IRS system.
The IRS agreed with those recommendations, except it did not agree to set a percentage goal for the performance measure (item 3). The IRS said it will try to ensure that fraud referrals are expeditiously reviewed.
In the recent fiscal year, the average number of months to serve in jail per tax-fraud conviction was 28 months.
Did you hear? “Always drink upstream from the herd.” — Will Rogers.