Chess Pieces on a Chessboard

Criminal Tax Audits

The Internal Revenue Service’s recent expansion in the number of its revenue agents, tax compliance officers, and revenue officers likely portends a corresponding uptick in its compliance efforts, including an increase in “eggshell audits.” Through the use of proper strategic planning, the eggshell audit may present an opportunity for the taxpayer to avoid potential criminal liability, and prevent an unpleasant situation from becoming exponentially worse. The Los Angeles tax specialists at the Ben-Cohen Law Firm possess the expertise of both an attorney, certified by the State Bar of California Board of Legal Specialization as a Taxation Law Specialist, and a licensed Certified Public Accountant (CPA). We have the tools and techniques to effectively handle eggshell audits, and reduce the chances of criminal action by the IRS.

A precise focus for achieving specific goals

An eggshell audit is a civil IRS examination where potential underlying criminal issues also exist. In the course of an eggshell audit, one of three outcomes will most likely occur: the agent discovers no criminal issues; the agent discovers criminal issues but is persuaded not to initiate the criminal investigation process; or the agent discovers criminal issues and decides to make a referral to the IRS’s Criminal Investigations Division (CI).

If you become the subject of an eggshell audit, you should not utilize your tax return preparer to represent you at the audit. Instead, you should retain an attorney experienced in these types of proceedings. The attorney may then contract an accountant subject to the terms of a Kovel agreement. These agreements, established by United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961), are unique arrangements that allow the attorney-client privilege to extend from your legal representatives to accountants. It is essential that the accountant be subject to a Kovel arrangement, because it may be necessary to share highly sensitive and potentially harmful information with the accountant, which must be kept within the confines of the attorney-client privilege.

Our goals for clients facing eggshell audits are twofold. Our primary objective is to keep the audit as a civil examination and avoid a referral to the IRS’s Criminal Investigations Division. Secondly, we seek to minimize tax exposure and avoid civil fraud penalties imposed by the IRS. Section 6663 of the Internal Revenue Code imposes a 75% penalty on that portion of an underpayment that the IRS deems attributable to fraud.

Helping you to prepare in advance of your eggshell audit

In addition to representing clients during their eggshell audits, we also provide vital assistance during the important time of preparation leading up to the audit. As a client facing an eggshell audit, you may have possession of documents that could, if disclosed to the IRS, potentially expose you to significant civil penalties or criminal prosecution. In order to prepare the best defense for you, we work with you to identify this information and make sure it is protected. Again, it is essential to partner with legal counsel on this matter, not your tax preparer, to ensure that the disclosures of sensitive information fall under the umbrella of the attorney-client privilege.

Understand that, for us to best represent you, we need to have detailed and accurate information to assess your exposure, where the sensitivities are, and what mitigating facts we can use to offset the risk. We may need to conduct detailed forensic analyses of your accounting records. This process can be essential to prepare for your audit and to devise a plan to prevent the audit from becoming a criminal investigation.

Eggshell audits are potentially dangerous matters for you and your business, as the ability to minimize the scope and context of the IRS’s investigation may mean the difference between a manageable civil penalty and criminal charges or fraud-related penalties. Our firm has the knowledge and experience regarding eggshell audits to offer our clients the best representation in these matters. If you have concerns about your audit, contact the Los Angeles tax attorneys at the Ben-Cohen Law Firm.

Client Reviews
I approached Mr. Ben-Cohen regarding a pending case with the State of California and my small business. During a time that was quite stressful, I found Mr. Ben-Cohen to be the perfect person to represent me and my company. He communicated with me in clear terms so that I understood everything that was taking place in a timely manner. He treated my situation with the type of candor you only find in a consummate professional and successfully negotiated a deal with the State of California that far exceeded my expectations. I found him to be kind, efficient, sensitive and nothing short of brilliant. I consider myself fortunate to have met him and highly recommend his services. I will not hesitate to use his firm in the future should a need arise.
★★★★★
I am an international tax advisor and have worked with Pedram on more than a dozen difficult and challenging cases. Pedram's clients and fellow advisors highly respect him because he has an uncanny ability to quickly identify and work diligently to resolve his clients' issues. Pedram is pragmatic in his approach. He is transparent with his clients and dedicated to getting to a fair and reasonable outcome. I have attended an IRS Appeals conference with Pedram and would want no other attorney on my side. Pedram is extremely passionate in his work and representing his clients. He is also enjoyable to work with and develops very good relationships with his clients and fellow advisors. I highly recommend Pedram for any tax controversy work. Avvo, Curt
★★★★★
Top Drawer Tax Fraud Lawyer. Pedram got me out a CI jam I thought I would not resolve. He is also fair and reasonable with his billing. I interviewed 4 top Tax Fraud Lawyers in LA and went with Pedram...Glad I did! Google, Michael Jeppson
★★★★★
Pedram Ben-Cohen at Ben-Cohen Law Firm, PLC is one of the most incredible, creative, and caring attorneys I have ever dealt with. He gave us hope but also gave us the reality and worst case scenario. He fought for us tooth and nail. The attention and time Pedram put into the case was like no other. He charged us more than fair and was very reasonable in every aspect. He is not the kind of attorney that charges for every minute. I liked him very much not only as an attorney but as a person because he is very honest, is true to his integrity, and is dedicated to his clients. He loves what he does and has the passion to protect and defend his clients, which totally shows in his work and our outcome. We originally hired another attorney from a famous firm who basically did not give us much hope on our case . That is when we came to Pedram who won our case in a short amount of time and got us the outcome we were looking for. Because of Pedram and his creativeness, willingness, and dedication, he got us our favorable outcome. He is our go to attorney for sure, without a doubt. Avvo, Anonymous
★★★★★
A few years ago I had a major tax problem and I was looking for the right professional tax lawyer. I interviewed at least five experts and all of them were very professional. I am very picky. When I met Mr. Pedram Ben-Cohen, it took me no more than five minutes to decide that he was the one, and I was absolutely right with my intuition. He is very professional, knowledgeable, smart, and knows his job perfectly. In addition to all of his professional skills, as a person he is very friendly, pleasant, ready to help, and took care of me like I was his own family. I referred and recommended him to friends and family with tax problems and will continue to do so warmly to anyone. I know that he is able and will do his job the best way for his clients. He is my personal tax lawyer and expert and will remain so. Google, Shlomo Kattan
★★★★★
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