How Do Authorities Distinguish Between Tax Mistakes and Tax Fraud?

A tax audit is a nerve-racking experience for any taxpayer. When subjected to the scrutiny of federal investigators, anyone can feel like a criminal, even when they have done nothing wrong. This can make it particularly difficult to respond to allegations of tax fraud that actually resulted from an innocent mistake.

How do investigators separate mistakes from fraud, and how can audited taxpayers prove mistakes to end investigations as quickly as possible?

The Signs for Which Investigators Look

Investigators look for key indicators that distinguish an innocent mistake from genuine fraud. Patterns of behavior generally look intentional. It is, therefore, difficult to convince an auditor that a repeated mistake was not intentional fraud. Avoid patterns of mistakes by seeking the advice of a qualified tax professional. Be sure to seek a second opinion if and when it is necessary.

Auditors also look for concealment of assets. Many actions can appear to be concealing (even if they are not). Creating trusts, corporations, or other legal entities can give the appearance of a taxpayer who needs a place to hide assets. Filing some tax forms but not others may cause an auditor to think you have intentionally withheld detrimental information. Filed forms can also be problematic if you underreport business income or inflate expenses on them. Finally, the manner in which you perform financial transactions can also be a red flag to tax investigators. Using cash, consistently making deposits of just less than $10,000, and using traveler’s checks can all look like measures designed to prevent accurate documentation of assets.

How to Prove a Mistake

To defend against allegations of tax fraud, you must prove that you did not intentionally file incorrect forms, fail to report income, or commit other acts of tax fraud. You can accomplish this in many ways. If you relied on advice from a tax professional, for example, you may resolve the audit simply by providing the tax professional’s information to auditors. In other cases, auditors may require more detailed documentation of the tax advice that you received.

You should not, however, hand any of this over to the authorities without first consulting with a criminal defense attorney. Such documents can inadvertently incriminate you as well as the tax professional, and a defense attorney can protect your constitutional right against self-incrimination.

In cases where the incorrect forms were filed or forms were filled out incorrectly, you may resolve the audit with a simple amended filing. Investigators will generally alert a taxpayer when they can resolve an audit with a simple amended filing. Depending on the nature of the amended filings, however, this may result in greater overall tax liability. Moreover, taxpayers must consult with an attorney, accountant, or other tax professional before filing any amended forms. Filing incorrect amendments can make the audit process even more time-consuming and costly.

Charges Associated with Tax Fraud

When authorities discover what they believe to be tax fraud, they will often investigate further into any possible underlying or related offenses. In some cases, people commit tax fraud to simply avoid paying taxes; others, however, use fraudulent information on their tax return to mask other white collar financial crimes. The following are only some allegations that may accompany tax fraud charges:

  • Embezzlement – If a person or group of people is taking assets or skimming from a business, they will need to cover their tracks by using false information on taxes.
  • Money laundering – Concealing the illegal source of money and integrating funds into the legal stream of commerce often involves significant false record-keeping. These falsified records can then become the basis for false tax returns.
  • Bankruptcy fraud – If someone files for bankruptcy and tries to conceal assets or income, they will likely also conceal the assets or income on their taxes.
  • Conspiracy – If investigators suspect that tax fraud is part of a larger corporate scheme and they charge more than one individual with tax fraud, prosecutors may also pursue conspiracy charges.

Whether you are facing tax fraud charges based on your personal returns or have been charged with multiple white collar offenses, your first call should be to an experienced Philadelphia criminal defense lawyer who knows how to handle cases in both state and federal court.

The Right Representation for Your Tax Investigation

Attorney Brian J. Zeiger is an experienced criminal defense attorney who has defended clients from many types of tax investigation and criminal charges. He delivers the personalized service you deserve. Don’t fight criminal charges alone—rely on the skill and experience of a qualified defense attorney. Call (215) 546-0340 today to schedule your consultation.

White collar crimes are nonviolent infractions with financial motives committed by corporate or government employees. Because white collar crimes are generally proven by extensive paperwork and documentation, their investigation can be quite complex and lengthy. This makes it highly likely that a suspect will be contacted by law enforcement agents at some point during the investigation and asked to make statements about the case. If you have been contacted by investigators about an alleged white collar crime, you have important constitutional rights that you must protect. Knowing what to do in this situation can ensure you receive fair treatment from the justice system.

Don’t Say Anything About the Case

All suspects are protected from making incriminating statements about themselves under the Fifth Amendment to the United States Constitution. Unfortunately, the nature of many white collar investigations causes many suspects to inadvertently waive this right. Law enforcement agents will often arrive at suspects’ homes or offices, where they feel more comfortable. Agents will frame conversations as opportunities for suspects to give their respective sides of the story. Agents may claim that their goal is to clear the suspect’s name—not to investigate them as an offender. All of these things cause suspects to make statements that ultimately hurt their abilities to defend themselves from criminal charges.

Even if you have not been involved in a white collar crime in any way and know that you are innocent, speaking with federal agents or state law enforcement authorities can always be stressful. Too many people agree to answer questions with the intention of eliminating suspicion when, in reality, they say something that may lead to additional suspicion. In addition, being nervous or stressed during questioning can be mistaken as trying to hide something or guilt.

Instead of agreeing to speak with the authorities, you can invoke your Fifth Amendment rights to refrain from answering questions. If you do sit down with investigators, you should always have an experienced criminal defense attorney present to represent and advise you.

Contact a White Collar Defense Attorney as Soon as Possible

An experienced criminal defense attorney can protect suspects from inadvertently making incriminating disclosures to law enforcement. The attorney will also protect clients from other infringements on constitutional rights, including warrantless searches or seizures of evidence. Finally, an attorney can craft a strategy that will lead to the fastest, most cost-effective, and overall best outcome for a client. The sooner clients hire an attorney, the better protection their constitutional rights will receive. Getting an attorney involved at the start of an investigation can also help resolve the case faster, thereby reducing the time and expense of lengthy litigation. During an investigation, your attorney can take note of certain lines of questioning or insinuations by authorities to determine the nature of the evidence that may be against you.

Save All Documentation About the Incident in Question

White collar crime investigations are generally driven by written documentation of what occurred. Because of this, suspects must retain all documentation related to the incident. This can include expense reports, tax filings, profit and loss statements, quarterly earnings reports, emails, internal memoranda, photographs, calendars, and many other types of physical evidence. Whether these are in paper or electronic form, they should be preserved. Your attorney can use these documents to create an effective defense strategy. Do not turn them over to law enforcement investigators except on the advice of counsel. Never destroy any documentation related to an active investigation, because this can give rise to separate criminal charges for obstruction of justice.

The above are only some things you should know if you are the subject of a federal investigation of possible criminal activity. It is important to have a lawyer examine your situation as soon as possible and provide advice based on your specific circumstances.

Aggressive Representation for Your Criminal Defense

Many people know that they maybe accused of a crime by federal authorities well before an indictment is ever filed. The moment you believe that you are under suspicion of a white collar crime, you should seek legal assistance and representation.

If you have become the target of a criminal investigation, contact an experienced criminal defense attorney as soon as possible. Attorney Brian J. Zeiger is a highly-skilled criminal defense attorney who has protected the rights of defendants charged with a wide variety of white collar crimes. He will fight for you to ensure the justice system treats you fairly. Call (215) 546-0340 today to schedule your consultation.

For many suspects, the formal filing of criminal charges in court is not the first indication that something is amiss. Law enforcement investigators will often attempt to contact and interview a suspect before sending the case to a prosecutor for review. This is particularly true in white collar cases—such as real estate, corporate malfeasance, and other types of fraud—which rely heavily on extensive documentation, and need witness statements to clarify and corroborate the volumes of written evidence. This investigatory phase can last weeks or even months.

White collar crimes pursued by federal authorities can have particularly extensive investigations. Many federal agencies may be involved including the Department of Justice, Internal Revenue Service, Securities and Exchange Commission, and more. Investigators for these agencies have substantial funding and their goal is to hand over solid evidence to the U.S. Attorney’s Office before charges are ever filed.

While the case is pending, many suspects feel that they do not need the advice of an attorney, and can resolve the case by presenting their sides of the story to investigators. This can do serious and irreversible damage to the suspect’s ability to defend himself at trial.

Read on to learn more about what to do while an investigation is pending, and how an experienced Philadelphia criminal defense attorney can protect your constitutional rights before charges are ever filed.

An Attorney Can Prevent a Suspect From Making Incriminating Statements

The Fifth Amendment protects all suspects from being forced to make incriminating statements against themselves to law enforcement, prosecutors, or other government workers. It is easy to recognize the danger of incriminating statements when under arrest or in an interrogation room. But while an investigation is pending, conversations are more casual, and it is easy to lose sight of which statements will incriminate you and which will clear your name. Investigators will often visit a suspect at home or work. There is usually a casual tone to the conversation. Investigators may claim they just need a little help to “clear up the matter,” or that they just want “your side of the story.” All these factors make suspects more likely to accidentally reveal information that can inadvertently incriminate them.

The reality is that investigators will say anything to get the information they want. While they may seem to care about protecting you and your best interests, they are actually seeking any proof that you (or others) were involved in any criminal activities. Even if they claim you are not the one under investigation, you should always consider yourself to be under investigation if agents show up at your door, call you in for an interview, or otherwise request information from you. Never trust what agents say and instead call an attorney and inform them of everything that has happened so far.

A defense attorney will work with a suspect during law enforcement investigations to determine which—if any—information to disclose. Some information can help resolve an investigation more quickly. Other information can make it much harder to defend a client at trial. Only an experienced criminal defense attorney can accurately distinguish between the two. The earlier in the investigation you hire an attorney, the sooner the attorney can begin protecting you—and you are less likely to accidentally reveal incriminating information.

An Attorney Can Work With Investigators to Reduce the Time and Expense of Litigation

As previously discussed, some statements can actually help resolve a law enforcement investigation more quickly. An attorney can not only identify the information that you should reveal, but can also determine the strategy that will achieve the best outcome for you. In some cases, this may involve taking the case to trial and forcing the prosecutor to prove the case to a jury. In other cases it might be faster and more cost-efficient to simply explain the client’s side of the story to investigators to reduce the charges—and in rare cases, this can cause law enforcement to close an investigation altogether.

Having the representation of an experienced white collar crime defense attorney as early as possible in the investigative process can ensure your rights are protected even prior to any arrest or charges. It is never too early to discuss a possible criminal case with an attorney.

The Right Representation for Your Criminal Defense

Sound legal advice can mitigate the collateral damage of a criminal investigation. Contact Attorney Brian J. Zeiger at (215) 546-0340 today to schedule your consultation. Attorney Brian Zeiger is an experienced criminal defense attorney who has successfully protected client’s rights throughout many types of criminal investigations. Now let him help you.

Under Pennsylvania law, Ponzi schemes are a type of investment fraud. In a pyramid scheme, a promoter collects money from a certain number of people, who in turn knowingly collect more money by recruiting others. In contrast, a Ponzi scheme refers to a fraudulent scam that promises high rates of return on an investment, when in fact any money received is actually coming from “investors” who enter the scheme later. The scheme generates returns for older investors by acquiring new investors. Under both pyramid and Ponzi schemes, eventually, there is not enough money to go around, and the schemes quickly unravel.

If you have been charged with a white collar crime, such as investment fraud, in Pennsylvania, you need knowledgeable and experienced legal representation on your side throughout your entire case.

Attorney Brian J. Zeiger can help safeguard all of your legal rights while your criminal case is pending, and can help formulate potential legal defenses to your criminal fraud charge.

Historical Background

Ponzi schemes were named after Charles Ponzi (1882-1949), who implemented a scheme that paid early investors with money gained from later investors. Today, Ponzi schemes are criminalized under Pennsylvania’s fraud and white collar crime laws.

Prosecuting Ponzi Schemes

In its most basic sense, a Ponzi scheme involves a swindle in which the promise of a quick return lures the crime victims into taking bigger risks. Since they involve fraud, Ponzi schemes are normally prosecuted as federal crimes, but they may also be prosecuted under Pennsylvania state laws. They may also be charged as either felonies or as misdemeanors, depending on the nature of the crimes. Felonies are normally punishable by more than one year of incarceration. Misdemeanors are punishable by up to one year of incarceration, or by fines or other less-serious penalties.

Possible Penalties upon Conviction

Ponzi schemes are serious crimes and, depending upon the facts and circumstances of the case, can result in severe criminal penalties upon conviction, including jail time. Common penalties upon conviction include:

  • Probation
  • Fines
  • Restitution to the alleged victims
  • Community service
  • Injunctions
  • Restraining orders
  • Revocation of business licenses
  • Freezing business assets
  • Jail time

Contact a Philadelphia, Pennsylvania, Criminal Defense Lawyer Today for a Free Initial Consultation and Case Evaluation

If you have been charged with a white collar crime, including involvement in a Ponzi scheme or other type of criminal fraud, get experienced legal representation on your side every step of the way. Attorney Brain J. Zeiger can discuss the facts of your case with you, work to formulate potential legal defenses to your charge and, if necessary, represent you in court. A skilled lawyer can make a significant impact on the way that your case is resolved, whether that involves taking your case to trial or working out a plea deal with the prosecutor handling your case.

To schedule a free consultation and case evaluation with a Philadelphia, Pennsylvania criminal defense lawyer, please call us (215) 546-0340 or contact us online.