Financial investigators and IRS Criminal Investigation Special Agents most frequently utilize a technique known as the “specific item method of proof” when building a tax fraud case. This method allows the investigators to present proof that an individual suspect received or disposed of income from a particular source(s) and failed to report the income for tax purposes. The source(s) of income may be legal, illegal or a combination of both. Such proof is referred to as evidence and will be designated as either direct or circumstantial in nature. Whenever proof is obtained by means of  the specific item technique it is referred to as direct proof.   There is an uninterrupted connection between the proof or evidence presented and a financial matter or transaction.   In other words, a “paper trail” of evidence exists that can be documented and/or illustrated via exhibits and testimony, then presented to a jury as necessary.   

Most individual and businesses (corporations, LLCs, partnerships) are required by law to pay taxes on earnings and other sources of income (Yes, even illegally derived income is taxable and must be reported). In order for prosecutors to charge the crime of tax fraud or more precisely, tax evasion three elements must generally be present in order to sustain a conviction. These three essentials must be proven in a court of law, beyond a reasonable doubt. Reasonable doubt is simply a doubt based upon the consideration of all the evidence (facts) and must be premised upon reason. It is not merely a suspicion or speculation.

Almost everyone is expected to pay taxes. However, there are individuals and businesses that cheat and pay less tax than they actually owe. Regardless of how you feel about paying taxes and how the government uses your money, tax fraud is illegal. Ultimately, tax cheats affect everyone and notifying the appropriate taxing authorities is the proper thing to do.