Initiation Of A Tax Fraud Investigation

Written by TaxSqueal. Posted in Blog

It is nearly impossible to pick up a newspaper, listen to the radio or watch television nowadays without learning about a financial crime that has been alleged or committed.  Tax fraud seems to be everywhere.  The common thread is MONEY.  Traditional law enforcement agencies generally rely upon physical evidence, crime scene analysis, eyewitness accounts, informants and confessions, among other techniques, to gather proof of a crime.  These methods work best in instances where a crime already has been committed and law enforcement is attempting to identify the criminal.  However, the growth of money motivated crimes mandates the need for financial investigations. Since financial crimes typically involve merely an allegation of tax evasion, a different inquiry approach needs to be employed.  This unique method of investigation is known as the forensic accounting approach.

The Government’s decision to initiate an investigation of a suspected tax cheat is a tricky one. It depends upon a variety of factors such as resources, funding and time constraints.  Individuals ultimately selected for investigation are chosen carefully and methodically. Considerations include the total dollar amount of the alleged tax fraud, age and education level of the suspect, availability of evidence, as well as overall jury appeal. Quite simply, the Government does not want to expend substantial resources conducting an in-depth tax investigation and subsequently lose a case in court. This is why the process of initiating a tax fraud case is extremely structured and stringent.
Investigations that are initiated usually involve thousands of dollars in unreported income, coupled with a flagrant disregard for the tax laws. Such tax frauds are primarily motivated by greed. Publicity of successful prosecutions is aggressively pursued by the Government is in an effort to deter other taxpayers from committing similar tax violations. This becomes particularly apparent during the tax filing season in and around April 15th.
Whether beginning an investigation or simply gathering information about the alleged tax evader, it is going to have a significant impact upon that person’s life. When an investigator rings a neighbor’s doorbell or shows his/her badge to a banker to ask questions about the alleged tax cheats financial accounts, a series of events start to unravel that cannot be stopped. Being accused of any criminal activity is embarrassing enough, but possibly worse is to having such as accusation circulating amongst family, friends and business associates.
Once confronted with tax fraud allegations or investigative findings, individuals generally tell the truth, lie or squeal on someone else. Their reputations, established professions, financial well-being, as well as family and social relationships hinge upon the investigation and its ultimate outcome. This emphasizes the importance of providing complete, detailed and accurate information when submitting anonymous allegation forms in instances of suspected tax fraud.