Egg Shell Audits

Maryland Criminal Tax Lawyer

What is an Egg Shell Audit?

An egg shell audit is a civil audit in which the tax returns examined by the IRS contain an under-reporting of income, an overstatement of deductions or credits, or some other inaccuracy that results in the taxpayer paying less tax liability than what he would have paid if he had submitted a true and accurate tax return.   When the understatement of income or the over-reporting of deductions/credits is unintentional and due to negligence or a mistake, the taxpayer may be subject to a penalty of 20 percent of the underpayment.  If a taxpayer is found to have willfully attempted to evade or defeat paying a tax obligation, the taxpayer is guilty of a felony crime and can face up to five years of imprisonment and/or a fine of not more than $250,000 ($500,000 for corporations).

When the IRS initiates a civil audit, the taxpayer may worry that the IRS agent will find something suspicious that will cause the agent to refer the taxpayer to the IRS Criminal Investigation (CI) Division.   It is important to recognize that IRS agents are expertly trained in uncovering fraudulent activities and will conduct an exhaustive, in-depth investigation to identify tax fraud and other financial crimes.   This means that when a taxpayer suspects that he filed a tax return that misreported information to his own advantage, he should consult an experienced criminal tax lawyer who can help determine if the IRS civil audit may be turning into a criminal investigation.   

The IRS also initiates what are known as reverse egg shell audits.  In a reverse egg shell audit the IRS is actually conducting a criminal tax investigation camouflaged as a civil tax audit.  Reverse egg shell audits are particularly worrisome because the taxpayer has no knowledge that the IRS agent is conducting the audit in an effort to uncover and collect information that will be used by the CI Division in its criminal investigation. 

A Tax Attorney Can Guide You through the Audit Process

If you have been contacted by an IRS agent for a civil audit, it is essential to work with an experienced tax attorney who can guide you through each step of the audit process.   The lawyers at US International Tax Advisors are experienced tax law professionals who represent clients in Maryland, across the United States and around the world who have been targeted by the IRS in civil and criminal tax fraud investigations.  Our attorneys understand the sensitive nature of egg shell audits and understand what types of activities IRS agents look for when referring a taxpayer to the IRS Criminal Investigation Division.  When you are involved in an audit we will work with you to determine the extent to which you should cooperate with IRS agents and when issues or problems arise, we will intervene in the process to protect your legal rights and limit your exposure to fines and penalties.

For more information about our firm or to discuss a tax law matter with a member of our legal team, contact our Maryland tax law satellite office today at (844) 796-8565.