Most people think of an IRS audit as a paperwork headache, but when fraud is suspected, the reality is far more serious. Even a simple mistake or a misunderstood deduction can put you under intense scrutiny, and suddenly, the questions aren’t just about figures on your tax return; they’re about your intent and your integrity.
The IRS has become more aggressive and sophisticated in identifying potential fraud, and what starts as a routine review can quickly become a high-stakes investigation.
In these situations, it’s not enough to hope things will work out or to rely on ordinary tax help. Defending yourself against the IRS, especially when fraud is on the table, takes specialized legal skill, strategic thinking, and a clear understanding of the risks ahead. For anyone facing this kind of IRS tax audit, the right defense isn’t just helpful; it’s essential.
This blog post will show you why having a qualified and experienced IRS tax audit attorney is important when facing IRS tax audits, especially when fraud is suspected.
Keep reading!
What Is an IRS Tax Audit?
IRS tax audits are a detailed review of your tax return and financial records. The IRS uses audits to confirm that you have reported your income, deductions, and credits accurately, as well as that the appropriate amount of tax has been paid. Anyone who files a tax return, individuals, businesses, organizations, and even non-profit, can be subject to a tax audit.
| Types of IRS Tax Audits • Correspondence audits: Conducted by mail, usually for minor issues or requests for additional documentation. • Office audits: In-person interviews at an IRS office, focusing on specific items on the return. • Field audits: IRS agents visit the taxpayer’s home or business, often for more complex cases. |
While many audits are civil in nature, focusing on verifying the accuracy of your tax return, the process can sometimes uncover discrepancies or patterns that raise concerns for the IRS.
If auditors find signs that suggest intentional underreporting of income, overstated deductions, or concealed assets, what began as a standard review may quickly escalate into a criminal investigation. In situations where there are signs of fraud and willful misconduct, the IRS may shift its focus from a civil audit to a potential fraud investigation, often involving its Criminal Investigation Division.
At that point, the risks and consequences increase significantly, making it crucial to understand your rights and seek legal guidance if you sense the IRS tax audit is becoming more serious.
How a Tax Fraud Defense Attorney Makes a Real Difference in IRS Tax Audits?
In recent years, IRS tax audits, especially those involving suspected fraud, have become more aggressive and complex.
Here’s how a tax fraud defense attorney can help you handle and defend against an IRS audit in today’s environment.
During an Audit
When the IRS initiates an audit, the process becomes more formal and the stakes are higher, especially if your return contains elements that could be interpreted as fraud.
You may find yourself facing →
- Requests for extensive documentation or explanations about income, deductions, or foreign assets
- IRS interviews or meetings where agents ask detailed questions about your finances, business operations, or recordkeeping
- Disputes over the legitimacy of certain deductions, credits, or business expenses
- The IRS is raising concerns about unreported income, repeated business losses, or large cash transactions
- The possibility that the IRS tax audits could escalate to a criminal investigation if the IRS uncovers evidence of intentional wrongdoing
If you are in the midst of an audit and recognize any of these situations, it’s critical to protect your rights and respond strategically.
Here’s how a tax fraud defense attorney can help during an audit, especially when fraud concerns are present:
| 1. Managing all IRS communications and interviews An attorney can communicate directly and represent you in meetings with IRS agents on your behalf. They ensure that your responses are precise and do not inadvertently provide information that could be misinterpreted or used as evidence of fraud. | 2. Reducing Stress and Risk Having a tax attorney provides peace of mind, knowing a professional is managing the process and advocating for your best interests. |
| 3. Analyzing IRS claims and evidence A tax fraud defense attorney reviews the IRS’s allegations, calculations, and any evidence they present. They identify errors, inconsistencies, or gaps in the IRS’s case and present counter-evidence to support your position. | 4. Building a targeted defense strategy If the IRS hints at fraud, your attorney develops a defense based on the facts and your intent. This may include demonstrating that discrepancies were honest mistakes, providing documentation to support your claims, or showing that the IRS’s interpretation is incorrect. |
| 5. Negotiating to limit penalties and resolve the audit Attorneys can negotiate with the IRS to reduce penalties, settle disputed amounts, or resolve the audit without escalation. Their experience with IRS procedures and settlement options can make a significant difference in the outcome. | 6. Maintaining attorney-client privilege All your communications with your IRS tax audit attorney remain confidential, even if the audit escalates. This privilege is not available with a CPA or enrolled agent and is especially important if the IRS begins to suspect criminal conduct. |
| 7. Preparing for possible escalation If the audit appears to be moving toward a criminal investigation, your attorney is ready to intervene immediately, advising you on asserting your rights, limiting further exposure, and preparing for the next phase of defense if needed. | |
If the Audit Escalates to a Criminal Investigation
While many IRS tax audits remain civil, there are situations where the process can take a much more serious turn. You may find yourself facing a potential criminal investigation if, during the audit, the IRS uncovers evidence that suggests intentional wrongdoing.
This can include:
- Falsified or altered records
- Hidden or unreported income
- Willful misstatements or omissions on your tax returns
- Use of offshore accounts or complex transactions to conceal assets
- Patterns of behavior that signal fraud, such as repeated false statements or destruction of documents
When these red flags appear, the IRS auditor may refer your case to the IRS Criminal Investigation Division (CI). At this stage, the focus shifts from confirming the information on your tax return to building a criminal case that could lead to prosecution, substantial fines, or even imprisonment.
You might not always receive a clear warning that your audit is escalating. Sometimes, the first signs are →
- A sudden halt in communication from the IRS during a civil audit can signal that the case is under criminal review, as the civil audit is typically paused while IRS CI evaluates the evidence.
- You may be visited by special agents or receive requests for information that go beyond the scope of a typical audit.
If you notice any of these developments, it’s critical to act quickly and protect your rights.
Here’s how a tax fraud defense attorney can help if your audit escalates to a criminal investigation:
1. Immediate intervention and representation: Your attorney becomes your primary contact with the IRS and its investigators, ensuring you do not provide information that could be used against you.
2. Protecting your rights: At this stage, every statement and document matters. An attorney will advise you on your rights and safeguard your rights during a criminal investigation by the IRS CI.
3. Developing a strategic defense: An attorney builds a defense tailored to your circumstances. They analyze the IRS’s allegations, identify weaknesses in the government’s case, and develop a defense strategy. An attorney can also challenge procedural errors or overreaches by investigators and negotiate with the IRS to limit the scope of the investigation
4. Negotiating with prosecutors: If criminal charges are likely, your attorney can negotiate with federal prosecutors, seeking reduced charges, favorable plea agreements, or even immunity in certain cases.
5. Preparing for litigation: If your case proceeds to court, your IRS tax audit attorney will represent you at every stage, filing motions, cross-examining witnesses, and presenting evidence to challenge the IRS’s allegations.
6. Managing publicity and reputational risk: For high-profile individuals or businesses, your attorney can help manage sensitive information, limit public exposure, and coordinate with public relations professionals if needed.
After Audit
Finishing IRS tax audits doesn’t always mean your tax worries are over. Depending on what the IRS finds, you might have to deal with new tax bills, penalties, or even more serious issues.
Common situations after an audit →
- The IRS says you owe more taxes, plus penalties or interest.
- You get a formal notice called a “90-day letter” (notice of deficiency), which gives you a chance to dispute the IRS’s decision before paying.
- You need to set up a payment plan or negotiate a settlement if you can’t pay everything at once.
- You want to appeal the audit results because you think they’re wrong or unfair.
- You may need to fix related state or international tax filings.
Tax fraud defense attorney help after the audit →
- Appealing tax audit results: If you disagree with the IRS’s findings, your attorney can help you file an appeal with the IRS Office of Appeals or take your case to US Tax Court. They’ll prepare your case and represent you throughout the process.
- Work with the IRS on a collection alternative: If you owe money, your tax attorney can work with the IRS to reduce penalties, arrange a payment plan, or apply for an offer in compromise.
- Defending against criminal charges: If the IRS refers your case for criminal prosecution, your tax attorney will defend you, challenge the government’s evidence, and represent you in court if needed.
Get the Best IRS Audit Defense with Diana Pelham!
When the IRS signals a closer look, whether it’s a letter, a request for documents, or a full audit, uncertainty and pressure follow fast, especially if fraud is suspected. In these moments, what matters most is having someone who understands both the law and the process and who will stand between you and the IRS at every stage.
That’s where Diana Pelham makes a real difference. As an IRS tax audit attorneys, her experience with complex IRS tax audits, fraud investigations, and cross-border tax issues has taught her how to spot risks early, respond strategically, and protect your rights if things escalate. Her legal background is more than technical tax knowledge; it’s clear advocacy, strong negotiation, and a commitment to keeping your financial future secure.
If you need a steady hand and a strong advocate during an IRS audit or investigation, get in touch with Diana Pelham, who is ready to help you confidently move forward. Based in Washington, D.C., she serves clients nationwide and supports U.S. taxpayers abroad facing complex IRS matters.
FAQs
Why was I selected for an IRS audit?
Selection can be random, based on statistical formulas, or because your return differs from “norms” for similar taxpayers. You may also be selected if you have transactions with someone else who is being audited.
What should I do if I receive an IRS audit letter?
Read the letter carefully to understand what is being examined and what documents are needed. Consult Pelham PLLC immediately if you are unsure how to proceed.
How long can the IRS go back to audit my return?
Generally, the IRS can audit returns filed within the last three years, but this period can be extended if substantial errors are found.
Can the IRS audit me more than once?
Yes, but not for the same tax year. You may be audited again for different years or if similar issues arise in future filings.
How is a tax audit different from a tax investigation?
A tax audit is a routine check for accuracy and compliance. A tax investigation, often conducted by the IRS CI, is initiated when there is suspicion of fraud or intentional wrongdoing and can lead to criminal charges.
When does a tax audit become a criminal investigation?
If the IRS auditor finds evidence of willful fraud or evasion, the case may be referred to the IRS CI for further review and possible prosecution.
What should I do if my audit is referred to theIRS Criminal Investigation Division?
Contact Pelham PLLC immediately. We can safeguard your rights, manage all communications, and provide legal defense if criminal charges are pursued.
What happens if I disagree with the audit findings?
You have the right to appeal the IRS’s proposed changes through the IRS appeals process or, if necessary, through the courts.
How long does an audit take?
The length of an audit varies depending on its complexity and how quickly you provide the requested information
