What Are the Risks of Facing IRS Scrutiny Related to Charitable Deductions?

Improperly claiming charitable deductions on your federal return can lead to liability for back taxes, interest, and civil penalties. If the IRS accuses you of willfully claiming fraudulent charitable deductions, you could also face criminal prosecution. Learn more from Boston tax evasion lawyer Kevin E. Thorn.

With the end of the year fast approaching, many taxpayers are looking for last-minute ways to reduce what they owe the Internal Revenue Service (IRS). One common way of reducing taxpayers’ federal liability is by making charitable deductions. But while charitable deductions can reduce taxpayers’ liability, they must also be careful to avoid mistakes that could lead to civil or criminal penalties.

As Boston tax evasion lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains, charitable deductions have become a focus area for the IRS. As the IRS prioritizes high-income taxpayer enforcement, it is paying close attention to how high-income taxpayers reduce their taxable income. If the IRS has reason to believe a taxpayer claimed improper charitable deductions, it can open an audit—and, if it has reason to believe the taxpayer willfully claimed improper charitable deductions, it can work with the Justice Department to pursue criminal charges.

What Are the Consequences of Improperly Claiming Charitable Deductions on a Federal Return?

The consequences of improperly claiming charitable deductions on a federal tax return depend on whether the IRS chooses to pursue civil or criminal enforcement (or both):

Civil Liability  

The IRS can impose civil liability following an audit that uncovers improper charitable deductions. This includes liability for:

• Back Taxes – Taxpayers may be held responsible for the taxes they would have paid if they had calculated their federal tax liability correctly.
• Interest – The IRS charges interest on all past-due amounts, including back taxes and civil penalties.
• Civil Penalties – Civil penalties for claiming improper deductions can be up to 20 percent of the amount a taxpayer underpays by improperly claiming charitable deductions.

Criminal Penalties

In criminal enforcement cases, the Justice Department can pursue charges under various provisions of the Internal Revenue Code. This includes charges under the federal tax evasion statute (26 U.S.C. Section 7201), which carries a fine of up to $100,000 and up to five years in prison.

How Our Law Firm Can Help

We represent taxpayers who are facing high-stakes IRS audits and criminal tax evasion investigations. We also represent taxpayers who need to proactively resolve federal tax controversies involving charitable deductions. If you have questions or concerns, we can help, and we encourage you to contact us promptly for a confidential initial consultation.

Schedule a Call with Boston Tax Evasion Lawyer Kevin E. Thorn

To schedule a confidential initial consultation with Boston tax evasion lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, contact us today. Call 617-692-2989 or tell us how we can reach you online to arrange a call as soon as possible.