The Internal Revenue auditors and collection agents are not law enforcement officers. They are ordinary civil servants employed by the federal government. They do not wear badges or carry firearms.
You can only be arrested if you are indicted by a federal grand jury on criminal charges of income tax evasion.You have committed criminal tax evasion when you willfully, knowingly, intentionally, and with an “evil motive”, defraud the government of taxes that the government is lawfully entitled to.Generally, you have committed a crime if you intentionally hide income and fail to report all of your income on your tax return. It is a crime to knowingly submit false documents to the IRS.Technically, you have committed a crime if you fail to file a tax return (late filing). In reality the IRS does not enforce this law because it would be impossible to bring charges and arrest every taxpayer who files a late return. Rather than having you indicted and arrested, the IRS would much rather charge you interest and penalties for filing late. Remember, if you are in prison you are costing the government about $60,000 a year. The government would rather see you free and working to pay taxes to the U.S. Treasury. Internal Revenue does not make any money off of convicts.Taking a deduction that is “questionable” or “debatable” is not a crime. Just because the IRS may disagree with a deduction or some other item on your return does not mean that a crime has been committed, as long as what you did was in good faith and you believed your action was legal and you had reasonable grounds for your belief that you were in compliance with the law.About 1/1000th of one percent (0.0000125) of the people who file tax returns end up going to prison for a tax crime. Most of those people are high profile personalities such as celebrities, politicians, organized crime figures, and drug dealers. Remember Willie Nelson the singer, Leona Helmsley the hotel and real estate mogul, and Emelda Marcos the former First Lady of the Philippines? These people made good targets because of their celebrity status. The prosecution of those individuals was sure to get a lot of press, that is why they were targeted. The IRS likes to make examples of high profile “tax cheaters” to intimidate the average citizen.
Consider the following statistics:
- In 1995 116,000,000 people filed personal income tax returns.
- The IRS investigated 5,000 of those people.
- After investigations were completed, 3,336 of the 5,000 were actually indicted.
- Of the 3,336 who were prosecuted, 2,229 were found guilty and sent to prison.
- Of the 2,229 who were convicted and sentenced, 842 were drug dealers.
- Of the remaining 1,387 non-drug dealers who went to prison, a majority of those were being tried for
other more serious crimes in addition to the tax charges. Most were involved in illegal enterprises such as organized crime and white-collar crime.