The IRS is serious about tax evasion and investigates people who try to avoid paying taxes. If they find proof that someone knowingly underreported income or hid money, they may file charges. Florida residents should understand how these investigations work to avoid mistakes that could lead to legal trouble.
Common ways the IRS detects tax evasion
One common way the IRS tries to spot evasion is through audits, which happen when tax returns have red flags, such as large deductions or unreported income. The IRS also gets information from banks, employers, and other businesses, which must report payments to individuals. If reported income does not match what a taxpayer lists, the IRS may investigate.
Another way the IRS finds tax evasion is through whistleblowers. Employees, business partners, or even ex-spouses may report suspicious tax behavior. The IRS has a whistleblower program that rewards people who provide information leading to unpaid taxes.
Steps the IRS takes to build a case
The IRS starts by reviewing tax returns and financial records. If they see unusual patterns, they may conduct an audit to gather more details. During an audit, they may request bank statements, business records, and other financial documents. If they find false information or missing income, they can dig deeper.
If the IRS believes someone committed tax evasion, they assign the case to the Criminal Investigation Division. Agents collect more evidence, including emails, recorded conversations, and hidden transactions. They may interview witnesses or analyze offshore accounts.
With enough evidence, the IRS may recommend criminal charges. The case then goes to the Department of Justice for prosecution. If convicted, a person may face heavy fines, repayment of unpaid taxes, and even prison time.
How to avoid IRS trouble
Filing taxes correctly and on time can help prevent an audit. However, unintentional mistakes can still happen and trigger an investigation. Anyone who the IRS contacts about a tax return does well to respond quickly and provide any requested documents. Ignoring IRS warnings or failing to cooperate can lead to more serious investigations.
