Tax fraud investigations can start long before you get a formal notice. The California Franchise Tax Board (FTB) and Internal Revenue Service (IRS) often gather evidence quietly for months. Spot early warning signs to give yourself time to plan a defense. Know these signals to help you fix issues before they become big legal problems.
How do you know if you’re under investigation?
Here are several signs that might show you are under monitor for possible tax issues:
- You get many audit notices or requests for more documents
- You get visits from IRS or FTB agents in your home or business without warning
- Tax authorities ask your employers, banks, or business partners questions
- You receive an IRS or FTB summons to provide specific financial records
- Your bank accounts or assets get frozen suddenly without a reason
Tax authorities can look at records, issue summonses, and take testimony under oath. These indicators often present warning signs before you get formal charges.
What typically triggers a tax fraud investigation?
Tax authorities don’t pick targets randomly. You and your business may be getting attention due to:
- Reporting much less income than what others report
- Claiming too many deductions for your income level
- Keeping multiple sets of financial records
- Running cash-heavy businesses with poor records
- Filing returns with math errors or inconsistencies yearly
The California Revenue and Taxation Code also deals with tax fraud. It also contains the penalties for lying on tax returns.
How can you respond to warning signs?
If you see these warning signs, you should prepare for these claims, as tax fraud is serious. They can lead to hefty fines and criminal charges in California. A tax lawyer can explain what worries the authorities about your taxes and help you respond. Work with someone who knows California and federal tax laws, can check your case, talk to authorities, and help you gather needed papers. Acting early often leads to better outcomes and gives you a higher chance of avoiding criminal charges with good representation during the investigation.
