Where tax fraud questions usually start
The allegation is rarely about a single mistake. It tends to involve a pattern: cash receipts left out of a business's income, personal expenses run through a company, payroll taxes withheld from workers but not paid over, or income held in foreign accounts that were never disclosed. Return preparers face their own exposure when returns they prepared carry false items. What separates a civil tax dispute from tax fraud is generally willfulness, meaning a deliberate violation of a known duty rather than an error or a good-faith disputed position. Criminal investigators work for the IRS and also for the New York State Department of Taxation and Finance, and state and federal matters can proceed together.
Fixing it before anyone asks
If you know something is wrong and no tax authority has contacted you, there may be ways to come forward, but the choice of path matters. Quietly filing amended returns can draw attention without the protections a formal disclosure route may offer, and the IRS voluntary disclosure practice has conditions, including timing, that must be met before you begin. Talk with a lawyer before you file anything new, contact an agency, or move money. Gather the returns as filed, bank and brokerage statements, and any foreign account records. Leave the books as they are rather than cleaning them up.
Privilege and your accountant
Conversations with an accountant or enrolled agent do not carry the protection people often assume. A limited federal privilege for tax practitioners exists in some civil matters before the IRS, but it does not apply in criminal cases, and your preparer can be asked to testify. For that reason, when criminal exposure is possible, accounting work is often arranged through counsel so that it can be protected as part of legal advice. When we first meet, we look at what has been filed, what has been said and to whom, and whether any authority has made contact. Then we lay out the realistic routes, civil and criminal, and what each one would involve.
