Discussion Question Week Ten: Criminal Fraud versus Civil Fraud and Taxation of U.S. Businesses Operating Abroad (Essay Sample)

Discussion Question Week Ten
Name
University
Discussion Question Week Ten
Factors that would result in Criminal Investigation of a Client rather than Civil Fraud Proposed by the IRS
The chances of a client being investigated under criminal charges as opposed to civil fraud depend on several factors. The factors include the income level of the client and if the incomes are omitted. The type of losses or deductions claimed, the kind of business and the possibility of owning foreign assets are other possible factors. Errors in mathematical calculations may also draw inquiries.
High-income filters and omitting the incomes attract audits. Failing to report all the taxable income on returns is a criminal offence against the state. Therefore, the client will be investigated under crime as opposed to the civil offence. The omission will cause a miss match sending the IRS computers to raise a red flag that attracts investigations. Another factor is if the charitable deductions are much larger than the income the red flag is raised.
Creation of Foreign Subsidiaries as a method to Defer Income of the Main U.S. Companies
The United States has a residential tax system as opposed to a territorial tax system. Under the territorial tax system, tax will be remitted to the United States treasury for the economic activities that take place in that country regardless of the location of the companies. The residential tax paying system, the U.S taxpayer, is meant to pay tax according to the U.S tax rate. T...