A failure to file tax returns with the Internal Revenue Service (IRS) does not always lead to criminal charges, but when it does the IRS is a fierce adversary. The agency can interrupt or even shut down a business to conduct an investigation. The IRS can take possession of the subject of the investigation's assets through a process known as civil forfeiture.
A recent case provides an example.
Local restaurant chain faces allegations of tax evasion
The case involves a restaurant chain composed of seven restaurants. The IRS accused the owners of the restaurants of "cash skimming," a practice used to conceal and under report income. The agency states the owners conducted this practice to cover up almost 50 percent of the business' cash sales. This translates to over $8 million in alleged hidden income. If the agency can find evidence to support these allegations, the owners could be responsible for a tax bill that totals almost $675,000.
As part of the investigation, the IRS served search warrants at each of the seven restaurant locations. A search warrant allows the investigators to enter and conduct their investigation on the property - even if it interrupts business practices.
The allegations have led to criminal charges including failure to remit taxes and multiple counts of theft. These charges are not a conviction. As such, the owners can mount a defense to the charges to reduce the risk of criminal penalties that could include additional fines and potential imprisonment. The restaurant owners have also found themselves subject to multiple civil forfeiture actions, resulting in the possession of over $80,000 in assets from the owners by local law enforcement agencies.