Understanding IRS Resolution Options for People with Pending Criminal Charges

Facing criminal charges while owing federal taxes to the IRS is stressful and legally complex. These dual challenges can create significant financial strain and increase the risk of mistakes that affect both your criminal defense and civil tax liabilities. Navigating this situation requires a clear understanding of how criminal tax fraud differs from civil tax issues and what steps can be taken to protect your rights.

Fortunately, the IRS provides resolution programs that may assist individuals with outstanding tax liabilities, even during criminal investigations. Under certain conditions, taxpayers can request installment agreements to pay overdue taxes over time, pursue options to reduce their total liability, or temporarily halt collection actions. Knowing which programs are available and how they interact with pending criminal proceedings is essential to prevent additional penalties or enforcement measures.

This guide will explain the difference between civil and criminal tax fraud, outline which IRS relief programs may apply to individuals facing criminal charges, and provide a step-by-step overview of the application process. It will also emphasize the importance of involving a qualified tax professional, legal advisor, or defense attorney when navigating complex cases. Acting early and demonstrating good faith compliance can reduce penalties, protect legal rights, and improve the chances of achieving a favorable resolution.

Understanding Civil vs. Criminal Tax Issues: Key Differences Under Tax Law

Knowing the difference between civil tax problems and criminal tax fraud is essential. Each involves different procedures, penalties, and standards of proof under the Internal Revenue Code, and both can result in serious financial or legal consequences.

Essential Differences Between Civil and Criminal Tax Issues

The IRS ensures people pay their taxes by putting them in jail and taking them to civil court. Both civil and criminal tax issues involve breaking tax laws, but they have different goals and follow distinct legal processes.

Civil Tax Enforcement:

• Civil enforcement's main job is to ensure that people pay their fines, taxes, and interest.
  
  
• Civil cases usually involve mistakes on tax returns, underreporting income, or underpaying taxes.
  
  
• Several things could happen, such as levies, liens, wage or bank account garnishment, and other property seizures.
  
  
• You don't have to worry about going to jail in civil tax cases.

Criminal Tax Enforcement:

• Criminal enforcement addresses willful tax law violations, such as fraud, money laundering, identity theft, or abusive tax schemes.
  
  
• IRS Criminal Investigation (CI) leads investigations, which may involve violations of the Bank Secrecy Act or other financial laws.
  
  
• Penalties include fines, restitution, and incarceration. Criminal tax convictions can result in prison sentences and damage your record permanently.
  
  
• In civil cases, the government only has to prove that someone is guilty beyond a reasonable doubt. This standard of proof is higher than that required in criminal cases.

Common Examples of Civil and Criminal Cases

• Civil Case
  
  
  • Example: Failing to report freelance income on a tax return.
    
    
  • Outcome: The IRS assesses penalties and demands payment.
    
    
• Criminal Case
  
  
  • Example: Submitting false deductions or concealing offshore accounts.
    
    
  • Outcome: The IRS files charges for criminal tax fraud.

Understanding these distinctions is crucial when facing criminal charges or a tax investigation. While civil enforcement aims to recover unpaid taxes, criminal prosecution seeks to penalize criminal activity that violates federal tax law.

Parallel Investigations and IRS Coordination in Criminal Tax Cases

Taxpayers facing criminal charges may be subject to a parallel investigation, where the Internal Revenue Service (IRS) conducts both civil and criminal investigations simultaneously. Close coordination between separate agency divisions is required for these investigations, which can significantly impact the handling of your case.

What is an investigation that is going on at the same time?

When the IRS simultaneously goes after tax or financial crimes in civil and criminal cases, this is called a parallel investigation. These investigations often arise in cases involving:

• Criminal tax fraud
  
  
• Abusive tax schemes
  
  
• Identity theft
  
  
• Money laundering
  
  
• Not paying taxes or telling the IRS about offshore bank accounts

According to the IRS Internal Revenue Manual (IRM) 5.1.5, civil and criminal units must work together to ensure that one case doesn't get in the way of another.

How IRS Coordination Affects Your Case

During a parallel investigation, the IRS takes several coordinated steps to balance both enforcement tracks:

• Civil collection activities may be paused. The IRS may delay liens, levies, or other collection actions to avoid compromising an ongoing criminal investigation.
  
  
• Financial disclosures are carefully reviewed. Any financial information submitted during a civil resolution process—such as through an installment agreement or offer in compromise—may be shared with criminal investigators if permitted by law.
  
  
• The process involves the sharing of evidence and communication. While the IRS must follow strict legal standards, information like tax returns, income records, or reports of criminal activity may be reviewed by civil and criminal agents when properly coordinated.
  
  
• There are limits on how people can interact with each other. When an agency investigates a taxpayer for a crime, it doesn't send as many notices or direct messages because it wants to keep the investigation secret.

Why Coordination Matters

If departments don't work together well, they could violate taxpayers' rights or make prosecuting harder. To avoid this, the IRS uses internal protocols to:

• Establish clear communication between agents from each division.
  
  
• Review the case strategy regularly to ensure no conflict between civil enforcement and criminal proceedings.
  
  
• Record all actions taken by different departments in the taxpayer's administrative file.

Suppose business owners, individual taxpayers, and their lawyers know how parallel investigations work. In that case, they can make better choices when responding to IRS notices or resolving a tax issue during a criminal case.

IRS Resolution Programs Available During Criminal Proceedings: Options for Taxpayers Facing Criminal Charges

The Internal Revenue Service (IRS) has several programs to help individual taxpayers pay their taxes, even if they are facing criminal charges. However, additional scrutiny, timing restrictions, and coordination with criminal investigation teams often apply. These are the main ways to resolve a criminal case that is still open.

Installment Agreements

Taxpayers can pay their tax bill over time in small monthly payments with an installment agreement.

• Eligibility: You must have filed all required tax returns, be current with estimated payments, and not be in an open bankruptcy proceeding.
  
  
• Types of Agreements:
  
  
  • Short-Term Plans: Available for balances under $100,000 and payable within 180 days.
    
    
  • Long-Term Plans: Monthly payments extending beyond 180 days.
    
    
  • Direct Debit Plans: Automated bank account withdrawals to reduce the risk of default.
    
    
• Things to think about in a criminal case:
  
  • Restitution obligations could affect how much you have to pay, and the police may review any financial information you give them.

Offer in Compromise (OIC)

Based on how much they can pay, an Offer in Compromise lets taxpayers settle their total tax debt for less than the full amount they owe.

• Eligibility Requirements:
  
  
  • All required tax returns must be filed.
    
    
  • You can't be in the middle of a bankruptcy case.
    
    
  • You must be current on estimated tax payments and federal tax deposits if self-employed.
    
    
• Types of Offers:
  
  
  • Doubt about Collectibility: You cannot pay the full amount within the legal collection period.
    
    
  • You disagree with how much tax you owe, so you wonder if you owe it.
    
    
  • Effective Tax Administration: Full payment would cause severe financial hardship, even though you technically could pay.
    
    
• Things to think about in a criminal case:
  
  
  • Offers may be delayed until after criminal proceedings conclude.
    
    
  • The IRS considers your assets, income, bank accounts, and future earning potential.
    
    
  • You could get new criminal charges or fines if you give false financial information.

Currently Not Collectible (CNC) Status

The IRS might mark your account as Currently Not Collectible if you can show that paying it would cause you serious financial problems.

• Eligibility: Your income must barely cover basic living expenses, and you must submit complete financial documentation, including:
  
  
  • Form 433-A or Form 433-B
    
    
  • Recent pay stubs
    
    
  • Your bank account statements
    
    
  • Proof of costs for the home
    
    
• Important Notes:
  
  
  • You are still required to pay your taxes, even if you are classified as CNC.
    
    
  • Interest and fees keep adding up.
    
    
  • The IRS periodically reviews your case to determine if payment capacity has improved.
    
    
• Things to think about in a criminal case:
  
  • The IRS may take longer to process or ask for more paperwork, but CNC can be used in criminal cases.

Collection Due Process (CDP) Hearings

You can contest IRS collection actions like levies or liens at a Collection Due Process hearing.

• How to Request: File Form 12153 within 30 days of receiving a notice of a levy or Notice of Federal Tax Lien.
  
  
• Your Rights Include:
  
  
  • Disputing the tax liability or collection method.
    
    
  • Requesting payment alternatives, such as an installment plan or an offer in compromise.
    
    
  • The process involves presenting financial information for consideration.
    
    
• Criminal Case Considerations: CDP hearings remain available during criminal investigations. The Appeals Office, on the other hand, needs to work with IRS CI to make sure they don't mess up any ongoing cases.

Help from the Taxpayer Advocate Service (TAS)

The IRS has an independent group called the Taxpayer Advocate Service that helps people with complicated or late tax cases.

• When to Use TAS:
  
  
  • You are experiencing a tax scam, fraud, or unreasonable delay.
    
    
  • The IRS has not responded to or resolved your issue after multiple attempts.
    
    
  • You have many money problems, and your health, property, or safety is in danger.
    
    
• Important: TAS may get involved in cases of theft or criminal activity, especially when a taxpayer's rights are in danger because of conflicting civil and criminal processes.

Understanding and leveraging these programs can provide crucial relief for taxpayers with pending criminal charges. However, each option involves distinct rules, timelines, and risks. We strongly recommend working with a qualified tax preparer, attorney, or enrolled agent, especially when a criminal investigation may review sensitive financial details.

Step-by-Step to Applying for IRS Relief During Criminal Tax Investigations

If you are facing criminal charges and tax debt, knowing how to apply for IRS relief programs is essential to give yourself the best chance of success. A clear and organized process will ensure your case is handled quickly if you want an Installment Agreement, Offer in Compromise (OIC), or Currently Not Collectible (CNC) status. Here is a step-by-step guide to help you get through the application process.

Assess Your Legal and Tax Situation

Assessing your current situation is essential before applying for any IRS resolution program.

• Identify Criminal Status: Determine if you're currently under investigation or facing criminal charges. If so, please consult a tax lawyer before completing any forms.
  
  
• Check Your Tax Liabilities: Get copies of your tax returns and any notices from the IRS to determine whether you owe any taxes, penalties, or interest.
  
  
• Clarify Affected Tax Years: Different tax years may be involved in criminal and civil matters. Determine the years under investigation for crimes that impact your eligibility for specific programs.
  
  

Review Available Relief Options

It's time to look at which IRS programs are best for you now that you know exactly how much you owe in taxes. Key options include

• Installment Agreements: If you can pay your debt over time, you may qualify for an installment agreement, provided you meet eligibility criteria such as filing all tax returns and being current with estimated payments.
  
  
• Offer in Compromise (OIC): If you cannot pay your full tax liability and meeting the full amount would cause financial hardship, consider applying for an OIC.
  
  
• Currently Not Collectible (CNC): If your income barely covers necessary living expenses, you may qualify for CNC status, temporarily suspending IRS collection actions.
  
  
• Collection Due Process (CDP) Hearing: If you're facing levies or tax liens, a CDP hearing allows you to challenge IRS actions and request alternative payment methods.
  
  

Prepare Your Application

Accurate and complete documentation is essential for a successful application.

Documents You Will Need:

• Proof of Income: Recent pay stubs, business income records, or any other documentation showing your income.
  
  
• Recent Tax Returns: Ensure all required tax returns have been filed, including those for the years in question.
  
  
• Financial Hardship Statement: This is a detailed description of your financial situation, including monthly expenses and income. It is crucial for the CNC status or an OIC.
  
  
• Valid Government-Issued ID: A photo ID may be necessary for identity verification.
  
  
• Form 433-A (or 433-B): These forms provide a detailed financial statement of your assets, liabilities, and income/expenses. They are used for most relief applications, such as OIC or CNC.

Additional Documents (Depending on the Program):

• Form 9465: To apply for an installment agreement.
  
  
• Form 656: For an Offer in Compromise.
  
  
• Form 12153: To request a CDP hearing.

Submit Your Application

Once you’ve gathered the necessary documents, follow these submission steps:

1. Applications on the Internet:
   
   
   • You need the IRS Online Payment Agreement tool to set up payment plans.
     
     
   • If you want to apply for an OIC, you can use the IRS website's OIC Pre-Qualifier tool to see if you qualify before you do.
     
     
2. Through the Mail:
   
   
   • The forms also tell you where to send your application forms to the right IRS office.
     
     
3. By Phone:
   
   
   • You can also call the IRS at 800-829-1040 for individuals or 800-829-4933 for businesses to ask for payment plans.

Pay Required Fees

Some IRS programs, such as OIC and installment agreements, require upfront payments or fees. These include:

• Application fees for OICs depend on your income level and filing status.
  
  
• You may incur installment agreement fees, particularly if you select a long-term payment plan or make payments via direct debit.

Maintain Communication

After you send in your application, you should:

• Respond promptly to IRS requests for additional documentation or information.
  
  
• You can check the status of your application on the IRS website or by calling its toll-free number.
  
  
• Maintain open communication with IRS agents to ensure that your application is processed smoothly and without delays.

Follow Up and Monitor Progress

If your application is approved, you’ll receive a formal notice from the IRS outlining the terms and conditions of your resolution. If it’s denied, you are entitled to appeal the decision.

• For Installment Agreements and CNC Status: You will receive a confirmation letter with details of the monthly payment plan or the suspension of collections.
  
  
• For OIC: You will be asked if your application has been accepted or turned down. If rejected, you may still have the option to appeal. The Ableis step-by-step guide ensures you fill out the application correctly and gives you a better chance of settling your tax debts while also dealing with criminal charges. Keep in mind that every case is different. Talk to a tax professional or lawyer if you have questions or need help with the application process.

How Restitution and Criminal Cases Impact IRS Resolutions for Tax Liabilities

The IRS must carefully coordinate civil and criminal enforcement actions when a taxpayer faces criminal charges, especially in tax fraud, money laundering, or other financial crimes. Restitution and criminal penalties can make it harder for the IRS to settle your tax bill. Knowing how these affect each other is essential when looking for tax relief.

Impact of Restitution on IRS Resolution Programs

Restitution typically refers to the amount a defendant must pay as part of a criminal conviction, often for crimes like tax fraud or identity theft. Even though restitution payments aren't the same as tax debts, they can change how the IRS can help you.

• Offer in Compromise (OIC):
  
  
  • If you’re under criminal investigation and required to pay restitution, the IRS considers compensation when evaluating your ability to pay.
    
    
  • You may need to be extra careful with restitution-based assessments when determining your Offer in Compromise or the amount to pay in an Installment Agreement.
    
    
• Installment Agreements:
  
  
  • You may still qualify for an installment agreement if you face tax debt and restitution.
    
    
  • As part of the financial review, the IRS will examine how well you can pay your taxes and any restitution you owe. Your monthly payments might change to take into account your restitution obligations.
    
    
• The status of Currently Not Collectible (CNC):
  
  
  • Due to financial difficulties, you can obtain a Currently Not Collectible (CNC) status if you cannot pay your taxes, including restitution payments.
    
    
  • This stops the IRS from collecting your taxes for a short time, but the interest and penalties on your tax bill will keep adding up.
    
    

Working together on tax problems that are both civil and criminal

• The IRS has units for both criminal and civil investigations:
  
  
  • When criminal charges are involved, IRS civil and criminal investigation units must coordinate to avoid conflicts between collecting taxes and enforcing criminal penalties.
    
    
  • This coordination may slow down some processes, like approving an OIC or installment agreement, even though criminal charges are still pending.
    
    
• Financial Information Sharing:
  
  
  • Any financial information you give to civil tax relief programs could be given to criminal investigators, changing how you plan to handle your case. This is particularly crucial if you are under investigation for tax crimes or involved in a tax scheme that harms people.
    
    
• How restitution affects tax breaks:
  
  
  • The IRS must look at taxpayers' debts, including taxes owed and restitution, if they have been found guilty of tax fraud, money laundering, or other financial crimes.
    
    
  • Occasionally, the IRS may put tax recovery ahead of civil action if the criminal penalties are meant to keep the taxpayer's assets from being available.
    

Timing and delays due to criminal cases

• Stopping collection activities:
  
  
  • During an active criminal investigation, some IRS collection actions, like levies or liens, may be put on hold or delayed to avoid making things more complicated for the police. Proceedings.
    
    
• Resolution Processing Delays:
  
  
  • Because civil and criminal enforcement need to work together, resolution applications, like those for an OIC or installment agreement, may take longer to process when there are criminal charges.

Conclusion

Restitution and criminal proceedings significantly impact the IRS’s ability to resolve tax debt efficiently. Suppose you are under criminal investigation or facing tax fraud charges. In that case, it is essential to understand how restitution-based assessments, timing delays, and coordination between civil and criminal units will affect your options. Talking to a tax lawyer or professional about these complicated issues is a good idea to ensure you get the best possible outcome.

FAQs About IRS Criminal Tax Resolution and Relief Programs

Can I still apply for an IRS payment plan if I'm being investigated for a crime?

You can still apply for an installment agreement even if you have been charged with a crime. However, the application process may slow down due to the need for more coordination with the IRS Criminal Investigation (CI). Financial information for civil tax relief programs may also be shared with criminal investigators, which could change the outcome. When applying during tax season, please take these considerations into account.

Will asking for tax relief affect my criminal case?

No, applying for civil tax relief usually has nothing to do with your criminal case. However, the IRS may share specific financial details with criminal investigators, and any false statements made during the relief application process could result in further legal consequences. If an employer or other entity is investigating you, always seek advice from a tax attorney.

If I'm being investigated for a crime, can I still get an offer in compromise?

You can still ask for an Offer in Compromise (OIC) even if you are charged with a crime. But the process will be watched more closely. The IRS will check your ability to pay by looking at your tax debts and any money you owe in restitution. If the police are still looking into your case, your application might be put on hold until it ends.

What happens if my IRS payment plan request is denied?

You can appeal through the Collection Due Process (CDP) hearing system if your installment agreement request is denied. Alternatively, you can reapply with additional documentation, correct errors, or explore other relief options like an Offer in Compromise or Currently Not Collectible (CNC) status. Ensure that all documents, including recent-year tax filings, are up-to-date to improve your chances of approval.

What does restitution mean for my payment plan with the IRS?

We consider restitution payments when calculating your tax and unpaid criminal fines. While the IRS may allow for an installment agreement that factors in restitution, the costs will be adjusted based on your financial capacity to meet both obligations. Restitution can also affect the approval process for programs like OIC or CNC status. It's also important to consider how restitution impacts employees or any other entity you may owe money to.

Can I apply for IRS relief if I’m facing tax fraud charges?

You can still apply for IRS tax relief programs even if facing tax fraud charges. However, the IRS will coordinate between civil and criminal functions, subjecting options like OIC or installment agreements to additional scrutiny. Ensuring all financial information is accurate is essential to avoid further complications. You might also have to deal with payroll tax problems as an employer.

Do I need an attorney or tax professional if criminal charges are pending?

If you're facing criminal charges for tax fraud or another crime, it's highly recommended that you talk to a tax lawyer or other expert. These experts can help you deal with the complicated process of applying for tax relief, ensuring you follow both civil and criminal procedures, and protecting your legal rights while resolving the issue. They will also help determine your eligibility for relief during tax season.