Contrary to popular belief, the IRS doesn’t want to throw you in jail. Criminal investigations consume a lot of resources, take time, and are expensive. For most taxpayers, a criminal investigation isn’t a first step, but rather the last step in a lengthy process to get you to resolve your tax debt. In other words, it’s rare that an agent will show up on your doorstep one day with cuffs in hand.

Additionally, while tax evasion and related charges are an important piece of the IRS Criminal Investigation (CI) charges, they’re not the whole kit and kaboodle. Often, criminal investigations are linked to other criminal activities like fraud, drug offenses, and money laundering. Need you forget Al Capone? When it comes to criminal activities, other federal agencies – like the Federal Bureau of Investigation and FINCEN – can pursue these violations. However, the IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code.

Knowing that, here are ten tips for staying out of jail:

Tip # 1: File and Pay Your Taxes on Time

This seems obvious. But failing to file and pay on time happens all of the time for all kinds of reasons. Generally, you get a couple of bites at the apple since ultimately, the IRS just wants to get paid. Yet, time and again, once an investigation has been initiated, taxpayers either refuse to pay or don’t pay the tax due. While there may be valid reasons for nonpayment, when it appears that resources are available, not filing and/or nonpayment just makes a bad situation worse. At sentencing hearings, judges take note of whether taxpayers have made arrangements to resolve ongoing liabilities.

Tip # 2: Open Your Mail and Respond On Time

Whatever you do, don’t take the ostrich approach of burying your head in the sand and hoping that it will go away. If you’ve been chosen for examination or if the IRS has asked you to provide additional information about your return, it means you’re on their radar. In most cases, it does not mean that you’ve been targeted for criminal investigation, just that additional information is required. But failing to respond – especially if you have good reasons for your behavior – doesn’t help and in most cases, it raises the level of inquiry.

Tip # 3: Cooperate During an Examination

There is no question that audits are a royal pain in the *ss. They trigger all sorts of strong emotions. Indeed, they make people angry, defensive, and combative. But none of that helps. And it could make a bad situation worse. Procedurally, criminal investigations are generally initiated from information obtained when a revenue agent (auditor) or revenue officer (collection) detects possible fraud. While there are guidelines that lead to criminal inquiries, there may be some wiggle room – but not for taxpayers who thumb their nose at the IRS and are not cooperative.

Tip # 4: Be Consistent

Very simply, no privilege applies when speaking to or making disclosures to the IRS. If you report sales of $ 500,00 to the state for purposes of sales tax, the IRS will want to see these numbers accounted for – and vice versa. It is not unusual for the IRS to exchange information with other law enforcement agencies — local and federal — throughout the country. Don’t assume that you’ve outsmarted the “fox” when you tell one story to one agency and another to the IRS. Be consistent in your reporting. This is the only sure way of not waiving any red flags in front of the bull.

Tip # 5: Don’t Destroy Records

Destroying records can be a crime. And if there’s anything you don’t need, that’s additional charges. Once an investigation is opened, an IRS special agent will attempt to gather facts and evidence. This may include interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data. It happens more often than you might think. For example, special agents have gone undercover to observe the lifestyle of many taxpayers, most especially those who own cash-based businesses. Why? To determine whether the business was hiding cash. In other words, to determine whether the cash coming in is actually being reported on the business’s tax returns. Needless to say, cash register receipts, bank statements, and deposit and withdrawal slips may be evidence. For this reason, you don’t want to destroy any of these records. That can also be a crime – just ask Roni Deutch who was accused of shredding piles of evidence in her tax case, making a bad situation even worse.

Tip # 6: Don’t Be Cocky!

Look no further than Jordan Belfort, the “Wolf of Wallstreet,” for an example of how not to act when confronted by FBI agents. While there might be a temptation to roll the dice and see what happens, once criminal charges are filed, you have to take the matter seriously.

Tip # 7: Don’t Lie

Failing to file and failing to pay can result in criminal charges. Guess what else can? Lying to federal investigators. It’s called perjury. Of course, you can get caught in a lie. Don’t forget the old saying, “Oh what a web we weave when we seek to deceive.” Be smart. You have a right to remain silent – so use it! One thing is clear: lying just makes things worse.

Tip # 8: Hire a Defense Attorney

You guessed it. Once a criminal investigation has begun, the wheels have been set in motion. After all the evidence has been collected, the IRS special agent will determine whether to recommend your case for prosecution or return it back to the field for completion of the audit. At this point, you’re not talking yourself out of charges (remember Jordan Belfort). Your case will be referred to either the Department of Justice, Tax Division, or to the United States Attorney. At that point, it’s not a matter of simply mitigating penalties. A tax attorney can’t do much for you at this point. So what type of attorney do you need? A criminal defense attorney. Will the ordinary run of the mill criminal defense attorney suffice? Definitely not. What you need is a bona fide criminal defense attorney — one who has experience in tax crimes and who has a solid reputation for being a zealous advocate.

Tip # 9: Read the Fine Print

The IRS Criminal Investigations unit obtains nearly 3,000 criminal prosecutions per year. That’s a pretty big number. What’s even more sobering is how many of these result in a conviction: over 90%. If you are prosecuted, the prosecutor may make you a plea offer. In some instances, it might make sense to take it. But always read what has been put in front of you and remember that you do have rights.

Tip # 10: There is No Perry Mason

Let’s debunk a myth: last minute dramatics make for good TV but not in real life. There is no piece of evidence that is going to save you at the very end. In fact, there may be twice as many “smoking guns” as there is even a shred of exculpatory evidence. You can’t count on the fact that, even if things are going badly, that the momentum will suddenly shift in your favor. In fact, just the opposite has been known to happen. Once the government rolls the boulder up to the top of the hill, the laws of physics provide a valuable lesson: it merely builds up speed on its way down. Realistically, you know how things are going as the investigation goes along. You know that continuing to stand there, hopeful (or should I say, in denial), is no different than the antelope that freezes like a deer in headlights when it sees the oncoming cheetah. Doing nothing is not an option. You must be proactive. Hire an attorney. Pull out records. Be forthcoming. Be thoughtful. Think about your strategy – and that means exploring all of your options. That wild card might be your lucky break – or it could be another dead end. Keep your chin up. And whatever you do, don’t rely on theatrics!

Conclusion

The IRS has a lot of power. No question that can be scary. At the same time, there are a number of steps that you can take to mitigate – or even eliminate – the potential for examinations, penalties and even jail time. But avoiding this parade of horribles from the very beginning? Priceless.

In accordance with Circular 230 Disclosure