How the IRS Reconstructs Income in Tax Fraud Cases (Video) (Course Id 2706)

• Who is this course for?
  This course is designed for CPAs, IRS Enrolled Agents, and other professionals who need Continuing Professional Education (CPE), especially those involved in tax compliance, fraud detection, or defense.

• What is this course about or what problem does this course solve?
  The course explains how the IRS reconstructs income in tax fraud cases, focusing on the legal standards, investigative methods, and defense strategies relevant to federal tax evasion charges.

• How can the knowledge from this course be used?
  Professionals can use this knowledge to understand how the IRS builds tax fraud cases, effectively represent or advise clients under investigation, and critically evaluate the accuracy of government income reconstructions.

• Why is this course important to a CPA, Accountant, or IRS Enrolled Agent?
  Understanding income reconstruction methods and fraud indicators is critical for tax professionals to identify risks, ensure compliance, or defend clients in tax fraud cases.

• When is this course relevant or timely?
  This course is particularly relevant now as it was newly released in 2025 and addresses contemporary IRS practices and legal strategies in tax fraud enforcement.

• How is a course like this consumed or used?
  It is delivered as a QAS self-study video course that includes review questions and a final exam, with no prerequisites or additional materials required.

In one of the climactic scenes from 1954’s On The Waterfront, Crime Commission prosecutors had to make their corruption case against union boss Johnny Friendly (a/k/a Michael Skelly) by convincing a reticent yet pure-hearted Terry Malloy to come forward and tell what he knew about corruption in the International Longshoremen’s Association, beginning with the murder of Joey Doyle, because an underling insisted that “we were robbed last night and can’t find no books.” 

If that same case came up in 21st Century tax court, Eva Marie Saint and Karl Malden could’ve stayed at home rather than serving as Marlon Brando’s cheering section, because government prosecutors could reconstruct the ILA’s income, based on the records retention requirements in Section 6500 et seq.

In this course, we will discuss the elements of the federal tax evasion statue and delve into the methods that the IRS uses to reconstruct income in tax fraud cases.

Video - NASBA QAS - NASBA Registry - IRS Enrolled Agents - 2706

Course Learning Objectives

1. What are the primary methods used by the IRS to reconstruct income in tax fraud cases, and how do they differ in application?
2. How can taxpayers effectively defend themselves against accusations of income tax fraud, particularly when using the net worth method?
3. In what ways do "badges of fraud" influence the determination of willfulness in tax evasion cases?
4. What impact does the burden of proof shift have on the prosecution and defense in tax evasion cases, particularly in terms of unreported income?
5. How does the concept of willful blindness apply to taxpayers who fail to report foreign financial accounts?
6. What role do non-taxable sources of income play in defending against claims of unreported taxable income?
7. How can the accuracy of the government's calculations regarding a taxpayer's net worth be challenged in court?
8. What factors do jury members consider when determining whether a taxpayer acted willfully in the context of tax evasion?
9. How do indirect methods of proving unreported income complicate the legal process for taxpayers accused of tax fraud?
10. In what ways can the presentation of evidence regarding a taxpayer's lifestyle and expenditures affect the outcome of a tax fraud case?
11. How important is the understanding of tax laws and filing requirements for individuals with foreign accounts in avoiding tax evasion charges?
12. What are the potential consequences for taxpayers who fail to disclose foreign accounts, both legally and financially?

Chapter 1 - How the IRS Reconstructs Income in Tax Fraud Cases

Chapter 1 Review Questions