Tax Fraud & Tax Evasion

Allegations of tax fraud or tax evasion can change your life quickly. A routine audit can evolve into a criminal investigation. A disagreement over documentation can become an accusation of willful conduct. And once the IRS believes a case involves deception, the government’s approach often shifts from collecting tax to building a criminal file.

Frazier Law represents individuals and businesses facing civil fraud penalties, criminal tax investigations, and charges such as tax evasion and filing false returns. Led by principal attorney Charles R. Frazier and certified public accountant (CPA) Rick Miller, our firm has helped clients since 2009 with tax controversies and IRS defense. We are licensed in Tennessee, Michigan, and Texas, and we handle complex federal tax matters nationwide. Charles is a former IRS agent and holds an LL.M. in Taxation from the University of Alabama at Tuscaloosa. He is also a Chartered Financial Consultant (ChFC) through The American College of Financial Services.

If you suspect you are under scrutiny or you have already been contacted by the IRS, the Department of Justice, or federal agents, the most important step is to get informed counsel early. Timing matters. The words you use matter. The documents you provide matter. Early decisions often shape the options that remain later.

Tax Fraud vs Tax Evasion

Many people use the terms “tax fraud” and “tax evasion” interchangeably. In practice, they describe related but different government theories.

Tax fraud is a broad label that can refer to civil fraud penalties, criminal tax offenses, or both. It generally involves an allegation that a taxpayer intentionally misrepresented facts to reduce tax, claim improper refunds, conceal income, or otherwise mislead the government.

Tax evasion is a specific criminal offense. In federal cases, “tax evasion” typically refers to the crime of willfully attempting to evade or defeat tax, which prosecutors often charge under 26 U.S.C. § 7201. Evasion claims are serious because they require the government to prove willfulness, an affirmative act of evasion, and an actual tax due and owing.

A case can involve civil issues, criminal issues, or a mix of both. Sometimes the government begins with a civil examination and later refers the matter to IRS Criminal Investigation. Other times the first contact is an agent at your door. Either way, the core issue becomes the same: what the government can prove, and how quickly you can take control of the narrative.

Civil Fraud vs Criminal Tax Charges

Civil cases are primarily about assessment and collection. The IRS examines returns, proposes adjustments, and can impose penalties and interest. In civil fraud matters, the government may assert a civil fraud penalty, often under 26 U.S.C. § 6663. The civil fraud penalty is severe and is generally 75 percent of the portion of the underpayment attributable to fraud, plus interest.

Criminal cases are about punishment. The government may seek charges such as tax evasion (26 U.S.C. § 7201), filing a false return or other false tax documents (26 U.S.C. § 7206), or failure to file (26 U.S.C. § 7203). Prosecutors can also add other federal offenses depending on the facts, including conspiracy (18 U.S.C. § 371), or charges related to financial transactions when applicable.

A key difference is the burden of proof. Civil tax liability is typically determined using a lower standard than criminal cases. Criminal charges require proof beyond a reasonable doubt. That said, do not assume a case is “only civil” just because it started as an audit. The government can change course when it sees indicators of willfulness.

What “Willfulness” Really Means

In tax prosecutions, willfulness is often the battleground. It is not simply a mistake, a bad year, or poor recordkeeping. Willfulness is an intentional violation of a known legal duty. The government usually tries to prove willfulness through patterns, statements, concealment, or conduct that suggests the taxpayer understood the requirement and chose not to comply.

Building a defense often involves showing an alternative explanation that is consistent with the facts and credible in context, such as reliance on a tax professional, a misunderstanding of complex rules, lack of intent, or errors driven by disorganization rather than deception.

How Tax Fraud Allegations Commonly Arise

Most tax fraud and evasion cases do not start with a dramatic confrontation. They start with a paper trail. Something does not match. A third party report conflicts with a return. A refund claim raises flags. A business shows recurring cash activity without adequate records. The IRS sees a pattern and begins asking questions.

Common situations include unreported income, inflated deductions, improper business expense claims, alleged payroll tax issues, failures to file, offshore reporting problems, or return positions that the government characterizes as knowingly false.

Common Red Flags in IRS Examinations

The IRS often focuses on areas where documentation is weak and misstatements are easier to allege. Red flags can include substantial cash income, inconsistent bank deposits compared to reported income, unusually high deductions relative to income, repeated losses for businesses that appear to be hobbies, and aggressive credits without support.

In business cases, payroll taxes and worker classification disputes can lead to serious exposure. A failure to remit employment taxes can become a major enforcement priority, and in some circumstances the government pursues individuals it believes were responsible for collecting and paying those taxes.

Informants, Former Employees, and Business Disputes

Some cases start because someone reports the taxpayer. A disgruntled employee, former spouse, competitor, or business partner may provide information, documents, or leads. Once an allegation is made, investigators can use it as a roadmap to request records and test the claims.

Even if the information provided is incomplete or biased, it can trigger an inquiry. A focused defense strategy aims to keep the government from treating a one sided allegation as established truth.

The IRS Criminal Investigation Process

IRS Criminal Investigation, often called IRS CI, is the branch of the IRS that handles potential criminal tax violations and related financial crimes. CI agents are trained to develop cases for prosecution, often working with federal prosecutors.

A civil revenue agent typically cannot continue a civil examination after a case has been referred to CI for criminal investigation. In many situations, the taxpayer may not be told immediately that a criminal referral has occurred. The first clue may be the tone of document requests, the involvement of special agents, or contacts with third parties.

What to Do if Federal Agents Contact You

If special agents show up, call, or leave a card, you should assume the stakes are high. You have the right to decline an interview and request counsel. You can be polite without being helpful. You can say you want your attorney present before any discussion. What you should not do is try to talk your way out of it on the spot. Well meaning explanations can be misunderstood, misquoted, or used to establish intent.

Just as important, do not destroy documents, delete communications, or “clean up” records. Obstruction and destruction issues can create additional exposure that is often worse than the underlying tax dispute.

Subpoenas, Summonses, and Third Party Records

Investigators can obtain records from banks, payment processors, employers, customers, and others. In tax cases, financial reconstruction is common. The government may use bank deposits analysis, net worth methods, expenditures methods, or specific item proofs to argue income was omitted or expenses were fabricated.

A strong defense requires understanding what records exist, what the government is likely to obtain, and how to present the full story behind the numbers.

Tax Evasion and Related Federal Charges

While every case is fact specific, federal tax prosecutions commonly involve a set of recurring statutes:

Tax evasion under 26 U.S.C. § 7201 is often viewed as the most serious tax crime. It typically requires proof of a tax deficiency, willfulness, and an affirmative act designed to evade or defeat tax. Examples of alleged affirmative acts can include using nominees, keeping double books, concealing assets, or routing income through accounts intended to hide ownership.

Filing false returns or documents under 26 U.S.C. § 7206 often focuses on false statements on a return, schedules, or other tax filings. A taxpayer can face exposure even if the government has difficulty proving a full evasion theory, because § 7206 is centered on the falsity and willfulness rather than a full tax deficiency element.

Failure to file under 26 U.S.C. § 7203 can also be charged criminally, particularly when the government believes the failure was willful and part of a larger pattern.

Depending on the investigation, prosecutors may allege conspiracy (18 U.S.C. § 371), aiding and assisting (26 U.S.C. § 7206(2)) for those involved in preparation or promotion, or additional offenses if financial conduct goes beyond the tax return itself.

Defense Strategy in Tax Fraud Investigations

Effective tax defense is not one size fits all. The right approach depends on what stage the matter is in, whether the government is treating the case as civil or criminal, what documents exist, and what the taxpayer’s actual exposure may be.

At Frazier Law, we focus on building a strategy that addresses both the legal elements and the financial reality. Our team includes an attorney with former IRS experience and advanced tax training, alongside CPA insight that helps assess how the numbers were developed, where the record is strong, and where reconstruction may be needed.

Early Case Assessment and Risk Management

A major part of tax fraud defense is identifying the government’s likely theory before it becomes fixed. We evaluate the returns at issue, underlying bookkeeping, bank activity, communications with preparers, and any prior IRS interactions. We also assess whether there are badges of fraud the IRS commonly relies upon, such as concealment, inconsistent explanations, or unexplained cash.

From there, we work with the client to stabilize the situation. That can include organizing records, correcting misunderstandings, and creating a plan that avoids unnecessary exposure while preserving options.

Reliance on Professionals and Good Faith Mistake

Many taxpayers rely on CPAs, bookkeepers, payroll providers, or tax return preparers. When that reliance is reasonable and in good faith, it can be a powerful defense to willfulness. A key issue becomes what the taxpayer disclosed to the professional and what guidance was given.

Similarly, complicated issues involving entity structures, deductions, basis, and reporting classifications can lead to mistakes without criminal intent. The defense is often strongest when the facts show disorganization or misunderstanding rather than purposeful deception.

Challenging the Government’s Financial Reconstruction

In many cases, the government’s analysis is only as good as its assumptions. Bank deposits analysis can confuse transfers for income. Net worth methods can miss loans, gifts, inheritances, or asset sales. Business expense classifications can be oversimplified, particularly for companies with mixed personal and business usage of accounts.

Our approach includes testing the numbers carefully. When the government’s math is wrong or its assumptions are shaky, that can change the entire risk profile of the case.

Voluntary Disclosure, Amended Returns, and Corrective Action

People often ask whether they should “fix it” by filing amended returns or paying. The right answer depends on the facts and the risk of criminal exposure. Corrective action can help in some contexts, but it can also create a paper trail and admissions that prosecutors may later use. Timing matters, and so does the method.

In some situations, a voluntary disclosure strategy may be appropriate, particularly when a taxpayer has significant past noncompliance and wants to reduce criminal risk by coming forward through established processes. The government’s voluntary disclosure framework has changed over time, and the details must be evaluated carefully based on the specific conduct and years involved.

The most important point is this: do not take steps that affect criminal exposure without a plan guided by experienced counsel.

Potential Consequences of Tax Fraud and Evasion Allegations

Tax cases can involve multiple layers of consequences. Even when charges are not filed, an IRS fraud assertion can dramatically increase civil liability.

Civil Exposure

Civil exposure can include the underlying tax, penalties, and interest. Fraud related penalties, accuracy related penalties, or late filing and late payment penalties can add up quickly. The IRS may also use tools such as liens and levies if the case moves into collection with unresolved balances.

Criminal Exposure

Criminal exposure can include fines, restitution, probation, and imprisonment depending on the charges and sentencing factors. In federal cases, sentencing typically considers the tax loss amount, conduct that suggests sophistication, obstruction, and other factors. The collateral effects can include reputational damage, employment issues, professional licensing issues, and restrictions tied to supervised release conditions.

Because the stakes are so high, a focused defense strategy is designed to prevent charges when possible, limit exposure when prevention is not realistic, and resolve the matter in a way that protects the client’s long term future.

How Frazier Law Helps in Tax Fraud Matters

Frazier Law’s practice is built for high stakes tax disputes. Since 2009, we have represented clients in tax controversies and IRS defense. Our leadership combines legal and financial perspective in a way that matters in fraud and evasion cases. Charles R. Frazier is a former IRS agent with an LL.M. in Taxation, and Rick Miller is a CPA who understands how records are created, how they break down, and how to reconstruct them credibly.

We represent clients in Tennessee, Michigan, and Texas, and we handle federal tax matters regardless of location. Whether your case involves an audit that is getting more aggressive, a notice that suggests fraud penalties, a CI inquiry, or criminal charges, we can help you respond in a controlled, strategic way.

What Working With Our Firm Typically Looks Like

We begin by evaluating what the government knows, what it is likely to obtain, and where the risk points are. We help clients manage communications and document production so the case stays organized and the client does not unintentionally make the situation worse.

When appropriate, we engage with the IRS or DOJ through counsel channels, negotiate resolution paths, and prepare for appeals or litigation if needed. In criminal cases, we coordinate defense strategy with a clear understanding of the tax issues driving the prosecution theory.

Frequently Asked Questions

How can I tell if my case is criminal?

A civil audit can feel stressful without being criminal. Criminal risk increases when IRS CI is involved, when special agents contact you, when subpoenas are issued, or when the IRS is focused on intentional conduct rather than adjustments. If you are unsure, treat it seriously and speak with counsel before responding.

Should I talk to the IRS to “clear it up”?

In civil matters, communication is routine, but in potential fraud matters, unplanned interviews can be risky. If there is any chance the case is heading toward criminal scrutiny, you should have representation before engaging in substantive discussions.

Can filing amended returns fix the problem?

Sometimes amended returns help, but they can also create admissions. The decision should be made only after evaluating the facts, the timeline, and the likelihood of criminal interest.

What if the mistake was my preparer’s fault?

Reliance on a professional can be a strong defense, but it depends on what you provided and what you understood. A careful review of communications and documentation is essential.

Take Control Before the Government Defines the Story

Tax fraud and tax evasion allegations are not just about numbers. They are about intent, credibility, documentation, and timing. The earlier you have experienced guidance, the more options you typically have. Once the government locks into a theory, it becomes harder to change the trajectory.

If you are facing an IRS examination with fraud indicators, an IRS Criminal Investigation inquiry, or allegations of tax evasion or false filings, contact Frazier Law to discuss your situation. We will help you understand what you are up against, protect your rights, and build a strategy designed to resolve the matter with as little disruption as possible.