Civil and Criminal Tax Representation
As almost every American adult knows, the Internal Revenue Service selects tax returns for audit, or examination.
Civil and Criminal Tax Representation
As almost every American adult knows, the Internal Revenue Service selects tax returns for audit, or examination. This enables the agency to collect additional money that is owes to the federal government, but experts say the audit process also serves another important purpose. They help deter tax fraud.
The distinction between Civil Tax Fraud and Criminal Tax Evasion can seem nuanced to the average person, and oftentimes to the average tax practitioner. The variation between the factors that the IRS will consider in classifying a tax matter, as either criminal or civil, and the procedures that they will employ to pursue it, are beyond the scope of this discussion. It can not be overemphasized, however, that the stakes can be high. When in doubt, you should engage a competent tax professional.
Managing member, Mark C. Frey was employed by the Internal Revenue Service, as an Internal Revenue Agent, and later as a Field Audit Group Manager. His years of experience at the IRS gave him a valuable insight into the operation of the agency. It can truly be said that there is no substitute for having been there. During his time at the Internal Revenue Service, he was assigned to work on Civil Tax Cases, and Civil Fraud Cases. He also assisted the Criminal Investigation Division in the development of several of their criminal tax cases.
He is a member of the American Bar Association, as a U.S. licensed lawyer, and a member of the following ABA Tax Section committees – Civil & Criminal Tax Penalties, Foreign Activities of U.S. Taxpayers, U.S. Activities of Foreigners & Tax Treaties, Individual and Family Taxation, Closely Held Businesses, Tax Practice and Technology, among others.
He holds a Graduate Degree as a Master of Taxation from the University of Akron in Ohio, is admitted to practice before the United States Tax Court, and has been licensed as a Certified Public Accountant in five states, including Florida. He is a member of the American Institute of Certified Public Accountants, as well as a member of their various tax committees.
The fear of being selected for an IRS audit can cause most people some serious concern or anxiety. The IRS estimates that approximately six out of ten taxpayers cite the concern of being audited as a motive for being honest on their taxes.
What are the odds of getting audited? Fairly low, as it turns out. But the Internal Revenue Service has indicated that it plans to increase audits on certain categories of taxpayers. This increased effort will target filers with annual incomes over $400,000, according to reports. The stated purpose is to raise revenue and to crack down on tax dodgers.
The increased IRS enforcement effort will be funded by additional resources provided by the Inflation Reduction Act of 2022. After that law was passed, roughly a quarter of voters expressed concern about getting hit with an audit, according to a reliable research service.
One reason that the average taxpayer might have concern or anxiety about an IRS audit, is the possibility of having to pay additional fees and penalties. Another cause for concern might be a lack of understanding as to how the agency operates.
Tax returns are selected for audit as a result of various metrics or measurements. A common and long used method that the Internal Revenue Service has employed is the DIF Score. DIF stands for Discriminant Index Function, which is “government speak” for a computerized analysis that employs sophisticated algorithms. These are used to examine the significant details of your tax return to determine your DIF score. They look for patterns, inconsistencies, or significant fluctuations.
Developed by the IRS to score tax returns for audit potential, the actual DIF Score mechanism is secret and thus unavailable to taxpayers. A breakdown of the key criteria these algorithms consider include an income evaluation, deduction scrutiny, credit assessment, and other patterns and variations. These algorithms are used to verify the authenticity of claims, and compliance with predetermined eligibility requirements.