Anthony Sykes & Company

          IRS audits are the largest source of Criminal Tax cases. This is a part of the IRS that most people are unfamiliar with, and never want to see. The IRS Criminal Investigation Division handles these cases. If ever visited by one of these Special Agents (yes, that is their title), keep in mind that lying to them can result in a Felony. Always ask to see identification, ask for a business card, and consider what to say, if anything.           Often they may approach a person and say they are not the target of an investigation, just a witness. That might be true at the time. There is nothing to keep the answers given at the time, to be used against a person if/when the investigation changes. This is a situation when a Taxpayer needs to go find legal representation. It is their right to communicate with the Criminal Investigation Division through an attorney. Usually a qualified Tax Professional can keep finances from going in this direction in the first place.

          It’s widely known that Federal Tax Law is complex. This is part of the reason for audits, the civil review of tax filings. How can those reviews turn into a criminal case? There is no simple answer.           One common area is income . Always report all of your income. Numbers that don’t make sense can start audits, and upon further review, it’s up to the discretion of the IRS Auditor where to go. Another contributing factor is statements made during the auditing process. A false statement given is a great way to prolong an audit. This is another area where a qualified Tax Professional will help a Taxpayer. They are a great representative for the Taxpayer to the IRS, and will be able to provide the documents being reviewed.           If the conduct displayed, or the information provided move past a certain threshold for the Auditor, the case may be passed on the IRS Criminal Investigation Division . There is no obligation to inform the Taxpayer of this change in inves

           The IRS just updated the information on how auditors will handle employment Tax exams. The key points will stay the same. Audits usually start off because of a risk area, or because of previous history with the employer. When the examination starts, they will look at the internal controls. That means they are looking to determine if the business keeps good written records and are in compliance with all applicable laws or obligations. If this can be proven, the audit tends to be quick, if not, the search will expand. Here are the consistent problems that are found in many cases.           Wrongly categorizing employees as independent contractors. When this is done, the proper taxes are not being paid. That will lead to the taxes, along with penalties being assessed. Our previous post described some of the points that the IRS uses to make this determination. Businesses need to use this to avoid making a costly mistake. Fringe benefits is another common issue. The busines

          The IRS wants all businesses and business owners to know the difference between an Employee and an Independent Contractor. One will have income tax, Social Security, and Medicare withheld from their pay, the other will not. This may seem like a small issue, but our next post will discuss why it matters.           Here are a couple of points to keep in mind to help make the distinction. How the business exerts behavioral control , such as determining what work should be accomplished and directing how it is done, that matters to the IRS. Financial control such as how the worker is paid and the extent they can make their services available to the market are also taken into consideration.           Apart from the aspect of control, how the relationship is defined plays a key role. This will include written contracts, the provision of a pension, insurance plan vacation or sick days, or the extent the worker has unreimbursed business expenses. These all matter to the IRS and