Tax Fraud Charges in Colorado

Tax fraud in Colorado is a serious criminal allegation that can arise when prosecutors or tax authorities believe a person or business intentionally evaded taxes, filed false returns, failed to file required returns, failed to pay taxes owed, submitted false refund claims, concealed income, claimed improper deductions, used false documents, failed to collect or remit taxes, or otherwise tried to defeat Colorado tax obligations. These cases may involve individual income tax, business tax, sales tax, wage withholding, payroll tax, fuel tax, marijuana or regulated-industry tax, refund claims, corporate returns, or multi-year tax investigations.

Colorado’s general criminal tax penalty statute is C.R.S. § 39-21-118. That statute includes several different tax-related offenses. The most serious general provision applies when a person willfully attempts in any manner to evade or defeat a tax administered by the Colorado Department of Revenue or the payment of that tax. That offense is a class 6 felony. The same statute also criminalizes willful failure to collect or truthfully account for and pay over tax, willful failure to file returns or pay tax, materially false refund statements, and fraudulent, frivolous, or willfully false returns.

Tax fraud cases are different from ordinary tax disputes. Many taxpayers make mistakes, misunderstand deductions, rely on bad advice, miss deadlines, keep poor records, or disagree with the Department of Revenue about how much tax is owed. Those issues may lead to audits, penalties, interest, assessments, or collection actions, but they do not automatically prove a crime. In a criminal tax case, the prosecution must prove the required mental state, often willfulness, and must show that the conduct was more than negligence, confusion, or a good-faith mistake.

Colorado Tax Fraud Defense Attorney

A tax fraud accusation can threaten a person’s freedom, business, finances, professional reputation, license, immigration status, and future ability to work. The investigation may begin with a tax audit, Department of Revenue inquiry, suspicious refund claim, business records review, employee complaint, bank-reporting issue, whistleblower report, or referral from another agency. By the time criminal charges are filed, the state may already have records, returns, bank documents, emails, bookkeeping files, payroll information, accountant communications, and witness statements.

At the Law Office of Matthew A. Martin, P.C., we understand that tax fraud cases require careful review of both the numbers and the intent evidence. Matthew Martin examines the tax returns, audit history, Department of Revenue communications, bookkeeping records, bank deposits, invoices, payroll records, sales records, refund claims, accountant involvement, business practices, and whether the prosecution can prove a willful tax crime beyond a reasonable doubt. We fight to protect clients from overcriminalized tax disputes, unsupported fraud allegations, and penalties based on misunderstanding rather than intentional wrongdoing.

If you or someone you love has been charged with tax fraud, tax evasion, filing a false tax return, or a related tax offense in Colorado, call (303) 725-0017 to schedule your free consultation today.

Overview of Tax Fraud Charges in Colorado

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Definition of Tax Fraud Under Colorado Law

Colorado does not use only one narrow statute titled “tax fraud.” Instead, tax fraud cases may be charged under several tax and criminal statutes depending on the conduct alleged. The main general criminal tax statute is C.R.S. § 39-21-118, which applies to taxes administered by the Colorado Department of Revenue.

Under C.R.S. § 39-21-118, a person commits a class 6 felony if they willfully attempt in any manner to evade or defeat a tax administered by the Department of Revenue or the payment of that tax. This is the general Colorado tax evasion offense. The statute also creates misdemeanor offenses for willfully failing to collect or truthfully account for and pay over tax, willfully failing to file a required return, willfully failing to pay estimated tax or tax owed, and knowingly making false statements in certain refund applications.

Separate tax statutes may also apply to specific tax types. For example, sales tax, income tax, special industry taxes, payroll-related obligations, and regulated business taxes may involve additional penalty provisions. Prosecutors may also charge non-tax crimes if the alleged conduct involves forged documents, identity theft, theft, computer crime, forgery, false statements, or conspiracy.

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Common Situations Leading to Tax Fraud Charges

Underreported Income — Tax fraud allegations often begin when the state believes a person or business failed to report income. Prosecutors may rely on bank deposits, 1099s, W-2s, business records, invoices, payment apps, cash transactions, or third-party records to argue that income was hidden.

False Deductions or Expenses — A taxpayer may be accused of claiming deductions, business expenses, losses, credits, or write-offs that the state believes were false, inflated, personal rather than business-related, unsupported, or intentionally misclassified.

Failure to File Tax Returns — Some cases involve allegations that a person or business willfully failed to file required tax returns. The key issue may be whether the failure was willful or caused by confusion, illness, poor records, financial hardship, reliance on others, or misunderstanding.

Failure to Pay Taxes Owed — Failure to pay can lead to civil collection issues, but criminal charges may be considered when prosecutors believe the taxpayer willfully failed to pay or took steps to evade payment.

Sales Tax Fraud — Businesses that collect sales tax may face serious allegations if they fail to remit taxes collected from customers, underreport taxable sales, use false point-of-sale records, keep two sets of books, or conceal cash sales.

Payroll and Withholding Tax Issues — Employers may face tax fraud allegations if they fail to withhold, account for, or pay over required employee taxes. These cases may involve payroll records, employer filings, employee complaints, bank records, and business cash-flow issues.

False Refund Claims — Tax fraud allegations may arise when a person claims a refund based on false income, false withholding, false credits, fictitious dependents, false business losses, or another inaccurate statement. Colorado law separately addresses false statements in refund applications.

Tax Preparer or Accountant-Related Cases — A taxpayer may be accused based on returns prepared by another person. In some cases, the defense may focus on reliance on a tax preparer, bookkeeper, accountant, payroll company, or other professional. In other cases, the preparer may be the target of the investigation.

Identity Theft and Refund Fraud — Some tax fraud cases involve allegations that someone used another person’s identifying information to file a false return, claim a refund, or create fraudulent tax documents. These cases may also involve identity theft, forgery, computer crime, or theft charges.

Business Record and Audit Disputes — A tax audit can become a criminal investigation if the state believes records were altered, destroyed, falsified, withheld, or intentionally misleading. The defense may need to distinguish poor recordkeeping from deliberate fraud.

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Willful Tax Evasion

Willful tax evasion is the most serious general tax offense under C.R.S. § 39-21-118. A person commits this offense if they willfully attempt in any manner to evade or defeat a tax administered by the Department of Revenue or the payment of that tax. This broad language can apply to attempts to avoid assessment of tax, avoid payment of tax already owed, conceal income, hide assets, use false records, or otherwise defeat tax collection.

The word “willfully” is critical. A tax evasion case should require proof that the person intentionally violated a known legal duty, not merely that they made an error or failed to pay. Tax law can be complicated, and many taxpayers misunderstand rules, rely on professionals, lack records, or make negligent mistakes. Those issues may create civil penalties, but they are not the same as willful evasion.

The defense in a tax evasion case often focuses on intent. Did the accused know the tax obligation existed? Did they intentionally conceal income or assets? Did they rely on a preparer or accountant? Were records incomplete because of disorganization rather than fraud? Was there a good-faith misunderstanding of the law? Did financial hardship cause nonpayment without an intent to evade? These questions can determine whether the case is criminal or civil.

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Failure to File, Failure to Pay, and Failure to Remit Taxes

C.R.S. § 39-21-118 also criminalizes several failure-based tax offenses. A person who willfully fails to collect or truthfully account for and pay over a tax administered by the Department of Revenue may face misdemeanor charges. A person who willfully fails to make a return, pay estimated tax, or pay tax owed may also face criminal penalties under the statute.

Failure-to-file and failure-to-pay cases can arise from individual tax returns, business returns, sales tax returns, wage withholding, payroll obligations, or other tax filings. The key issue is often whether the conduct was willful. A missed filing deadline, unpaid bill, or business cash-flow crisis does not automatically prove a crime. The prosecution must show more than inability to pay or disorganization.

For businesses, failure to remit collected taxes can be especially serious. If a business collects sales tax from customers or withholds taxes from employee wages but does not remit those funds to the state, prosecutors may view the conduct more harshly than ordinary nonpayment. The defense may examine who controlled the business finances, who was responsible for filings, whether a payroll company was involved, whether records were accurate, and whether the accused had authority or knowledge.

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False or Fraudulent Tax Returns

False or fraudulent tax return allegations may involve underreported income, false deductions, inflated expenses, fake dependents, false credits, altered W-2s, false 1099s, incorrect business losses, unreported cash income, or inaccurate schedules. Colorado law can impose both criminal and civil consequences for fraudulent, frivolous, or willfully false returns.

A false return is not automatically a criminal tax fraud case. Tax returns may contain mistakes because of misunderstanding, careless preparation, software errors, missing forms, reliance on a preparer, poor bookkeeping, or uncertainty about tax law. The prosecution must prove the required mental state for the charged offense.

The defense may review draft returns, accountant communications, tax software entries, source documents, receipts, bank records, amended returns, prior filing history, and whether the taxpayer made good-faith efforts to comply. If the taxpayer relied on a qualified professional and provided accurate information, that may be a major defense issue.

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False Refund Claims

Colorado law specifically addresses false statements made in connection with tax refund applications. A person who through gross negligence or recklessness makes a materially false statement in applying for certain refunds, or a person who makes a false statement in connection with an application for a refund, may face misdemeanor penalties under C.R.S. § 39-21-118.

False refund cases may involve income tax refunds, sales tax refunds, business refund claims, fuel tax refunds, credits, exemptions, or other claims for money from the state. These cases often depend on whether the statement was material, whether it was false, whether the accused knew or should have known it was false, and whether the refund claim was based on mistake or intentional misrepresentation.

Refund fraud allegations can also lead to related charges if prosecutors believe the claim involved forged documents, identity theft, false invoices, altered records, or a broader scheme. The defense must examine the refund application, supporting documents, communications with the Department of Revenue, and the taxpayer’s basis for believing the refund was legitimate.

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Sales Tax, Payroll Tax, and Business Tax Fraud

Business tax fraud cases can be especially serious because businesses may collect taxes from others and hold them for remittance to the state. A restaurant, retailer, contractor, dispensary, service provider, online seller, or other business may face investigation if the Department of Revenue believes taxable sales were underreported, sales tax was collected but not remitted, returns were false, or records were manipulated.

Sales tax cases may involve cash sales, point-of-sale records, bank deposits, merchant processor records, sales journals, inventory records, invoices, customer receipts, and audit estimates. Prosecutors may allege that the business kept two sets of books, skimmed cash, underreported gross receipts, or falsely claimed exemptions.

Payroll and withholding cases may involve employee wages, withholding records, unemployment tax issues, payroll company records, employer filings, cash payroll, worker classification, and whether the accused person was responsible for collecting and paying over taxes. Business owners, officers, managers, bookkeepers, and payroll personnel may all be investigated depending on who controlled the filings and funds.

A defense attorney must determine who was responsible, what records actually show, whether tax amounts were calculated correctly, whether the issue was civil or criminal, and whether the state can prove willful misconduct by the accused person.

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Colorado Tax Fraud vs. Federal Tax Crimes

Colorado tax fraud charges involve state tax obligations administered by the Colorado Department of Revenue or specific Colorado tax statutes. Federal tax crimes involve the Internal Revenue Service and federal statutes, including tax evasion, false returns, failure to file, employment tax crimes, and conspiracy.

The same conduct can sometimes create both state and federal exposure. For example, underreported income, false business records, payroll tax schemes, or refund fraud may affect both Colorado tax liability and federal tax liability. A taxpayer may be audited or investigated by one agency and later face questions from another.

A Colorado criminal defense strategy should account for possible federal implications when necessary. Statements made to state investigators, auditors, or tax agents may affect federal exposure. Amended returns, payments, interviews, document production, and negotiations should be handled carefully when both state and federal issues may exist.

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Penalties for Tax Fraud in Colorado

The penalties for tax fraud depend on the specific statute charged, the amount involved, whether the accused is an individual or corporation, and whether related charges are filed.

Willful Tax Evasion — Under C.R.S. § 39-21-118, willfully attempting in any manner to evade or defeat a tax administered by the Department of Revenue, or the payment of that tax, is a class 6 felony. A class 6 felony in Colorado generally carries 1 year to 18 months in prison, a fine of $1,000 to $100,000, and 1 year of mandatory parole. The tax statute also specifically authorizes a fine of not more than $100,000 for an individual or $500,000 for a corporation, or both fine and imprisonment, together with the costs of prosecution.

Willful Failure to Collect or Pay Over Tax — A person required to collect, account for, and pay over a tax who willfully fails to do so, or who willfully attempts to evade or defeat that tax or its payment, may be charged with a misdemeanor under C.R.S. § 39-21-118. The statute provides punishment by a fine of not more than $10,000, or imprisonment in the county jail for not more than 1 year, or both, together with the costs of prosecution.

Willful Failure to File or Pay — A person who willfully fails to pay estimated tax or tax, make a return, keep records, or supply information as required may be charged with a misdemeanor. The statute provides punishment by a fine of not more than $1,000, or imprisonment in the county jail for not more than 1 year, or both, together with the costs of prosecution.

False Refund Statements — A person who through gross negligence or recklessness makes a materially false statement in applying for certain refunds, or another person who makes a false statement in connection with a refund application, may be charged with a misdemeanor. The statute provides punishment by a fine of not more than $500, imprisonment in the county jail for not more than 90 days, or both.

Civil Fraud Penalties — Criminal penalties are not the only risk. Colorado law may impose civil penalties, interest, and assessments. For example, a fraudulent, frivolous, or willfully false income tax return may result in a civil penalty of $150 or 150% of the amount of tax, whichever is greater. A fraudulent or willful failure to file may result in a penalty of $75 or 100% of the amount of tax, whichever is greater.

Related Charges Can Increase the Exposure — Tax fraud cases may also involve theft, forgery, criminal possession of a forged instrument, identity theft, computer crime, securities fraud, money laundering, conspiracy, attempt, or racketeering-related allegations. When multiple charges are filed, the total exposure may be far greater than the tax charge alone.

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Civil Penalties, Interest, and Restitution

Tax fraud cases often involve both criminal and civil consequences. Even if a person avoids prison or jail, they may still owe back taxes, penalties, interest, restitution, costs of prosecution, and collection-related amounts. These financial consequences can be substantial, especially in multi-year cases or business cases involving sales tax, withholding, or payroll obligations.

Restitution may be ordered in a criminal case if the state or another victim suffered a loss. Restitution may include unpaid tax, improper refunds, investigative costs, or other losses tied to the offense. Civil assessments may also continue through the Department of Revenue.

Because the financial consequences can exceed the criminal fine, a defense strategy should evaluate the tax calculation itself. The state’s loss number may be based on estimates, assumptions, incomplete records, audit sampling, or disputed classifications. Challenging the amount owed can be important for plea negotiations, sentencing, restitution, and civil resolution.

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Collateral Consequences of a Tax Fraud Conviction

A tax fraud conviction can create serious consequences beyond jail, prison, fines, or restitution. Because tax fraud involves dishonesty and financial misconduct, it can affect employment, professional licensing, business ownership, government contracts, banking relationships, credit, immigration status, security clearances, and reputation.

Licensed professionals may face disciplinary action if convicted of a tax fraud-related offense. Accountants, attorneys, financial advisors, real estate professionals, insurance professionals, healthcare providers, contractors, and business owners may face licensing-board review, credentialing problems, or loss of trust with clients and employers.

Business owners may face additional consequences, including loss of licenses, liens, levies, garnishments, collection actions, vendor issues, lease problems, financing difficulties, and reputational harm. A tax fraud case can also affect partners, employees, shareholders, and family members connected to the business.

For noncitizens, fraud and theft-related convictions can carry serious immigration consequences. The risk depends on the exact offense, sentence, loss amount, factual basis, and immigration status. Anyone with immigration concerns should have the case reviewed before entering a plea.

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Defenses to Tax Fraud Charges

No Willful Intent — Many tax crimes require willfulness. If the accused person made a mistake, misunderstood the law, relied on a professional, had poor records, or acted negligently rather than intentionally, the prosecution may not be able to prove criminal tax fraud.

Good-Faith Mistake — A good-faith misunderstanding of tax law can be a powerful defense. Tax rules can be complicated, and a taxpayer who honestly believed they were complying may not have acted willfully.

Reliance on Accountant, Bookkeeper, or Tax Preparer — If the taxpayer gave accurate information to a tax professional and reasonably relied on that person’s advice or preparation, the defense may argue lack of criminal intent.

No Tax Due or Incorrect Tax Calculation — The prosecution must prove the tax issue accurately. If the state’s assessment is wrong, overstated, based on bad assumptions, or unsupported by records, the defense may challenge the amount owed or the existence of tax due.

No False Statement — In false return or refund cases, the defense may challenge whether the statement was actually false, material, or attributable to the accused person.

Lack of Responsibility for Filing or Payment — In business cases, the accused person may not have been the person responsible for filing returns, collecting taxes, remitting payments, or keeping records. The defense may examine job duties, corporate authority, bank access, and who controlled the tax process.

Poor Records Rather Than Fraud — Bad bookkeeping, missing receipts, cash-based business practices, or disorganized records may create audit problems, but they do not automatically prove criminal fraud.

Financial Inability to Pay — Inability to pay tax owed is different from willful evasion. A taxpayer may owe money but lack funds because of business failure, unemployment, illness, debt, or economic hardship. The defense may argue that nonpayment was not an intentional attempt to evade.

Amended Returns or Corrective Action — Filing amended returns, correcting mistakes, responding to notices, or making payment arrangements may help show good faith, depending on timing and circumstances.

Unlawful Search, Seizure, or Interrogation — Tax fraud investigations may involve subpoenas, search warrants, computer searches, phone searches, bank records, interviews, and document seizures. If law enforcement violated constitutional rights, the defense may seek suppression.

Statute of Limitations Issues — Tax cases may involve older returns or multiple tax years. The defense may examine whether charges were filed within the applicable limitations period and whether the state can prove the relevant conduct occurred when alleged.

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Role of a Colorado Criminal Defense Attorney

Reviewing the Tax Records — A defense attorney examines returns, amended returns, notices, audits, bank records, payroll records, sales records, invoices, receipts, books, ledgers, and communications with tax authorities.

Analyzing the State’s Tax Calculation — The defense must determine whether the alleged tax loss is accurate. Audit assumptions, estimates, sampling, classifications, exemptions, deductions, and credits may all need review.

Challenging Willfulness — Matthew Martin focuses on whether the prosecution can prove intentional wrongdoing rather than mistake, negligence, poor recordkeeping, reliance on professionals, or financial hardship.

Examining Accountant and Preparer Involvement — If a tax professional prepared the return or advised the taxpayer, the defense may investigate what information was provided, what advice was given, and whether reliance was reasonable.

Protecting the Client During Investigations — Tax investigators may ask for interviews, documents, explanations, or admissions. A defense attorney helps protect the client from making statements that may later be used in a criminal case.

Addressing Business Consequences — For business owners, the defense may need to consider licenses, employees, payroll, liens, audits, collection actions, and ongoing tax compliance.

Negotiating Civil and Criminal Outcomes — In some cases, the goal may be dismissal or reduction. In others, the defense may seek a resolution involving payment, restitution, amended filings, reduced charges, probation, or avoidance of felony conviction.

Trial Representation in Tax Fraud Cases — If the case proceeds to trial, the defense attorney challenges the state’s financial evidence, cross-examines tax investigators and accountants, explains complicated tax issues, and emphasizes the prosecution’s burden to prove criminal intent beyond a reasonable doubt.

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Key Elements the Prosecution Must Prove

The elements depend on the specific tax offense charged. In a willful tax evasion case under C.R.S. § 39-21-118, the prosecution must generally prove beyond a reasonable doubt that:

  • the defendant willfully attempted to evade or defeat a tax administered by the Colorado Department of Revenue or the payment of that tax;
  • the tax was owed or administered under Colorado law;
  • the defendant’s conduct was more than mistake, negligence, or inability to pay;
  • the defendant acted with the required criminal intent; and
  • the conduct occurred in Colorado or otherwise fell within Colorado’s jurisdiction.

In a willful failure-to-file, failure-to-pay, or failure-to-remit case, the prosecution must generally prove that:

  • the defendant had a legal duty to file, pay, collect, account for, or remit tax;
  • the defendant failed to do so;
  • the failure was willful; and
  • the required filing, payment, collection, accounting, or remittance related to a tax administered by the Colorado Department of Revenue.

In a false refund or false return case, the prosecution must prove the statement or return was false, that the accused person was responsible for it under the charged statute, and that the required mental state was present. If the prosecution cannot prove the tax duty, false statement, amount, responsibility, or criminal intent, the defendant cannot be convicted of the charged tax offense.

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Frequently Asked Questions

Is tax fraud a felony in Colorado?
It can be. Willfully attempting to evade or defeat a tax administered by the Colorado Department of Revenue is a class 6 felony under C.R.S. § 39-21-118. Other tax offenses may be misdemeanors depending on the conduct charged.

What is the penalty for tax evasion in Colorado?
Willful tax evasion is a class 6 felony. A class 6 felony generally carries 1 year to 18 months in prison, a fine of $1,000 to $100,000, and 1 year of mandatory parole. The tax statute also authorizes a fine of up to $100,000 for an individual or $500,000 for a corporation, plus costs of prosecution.

Can I go to jail for failing to file taxes?
Possibly, if the failure was willful and charged criminally. Under C.R.S. § 39-21-118, willful failure to file may be punished by up to 1 year in county jail, a fine of up to $1,000, or both, plus costs of prosecution.

Is a tax mistake the same as tax fraud?
No. Mistakes, negligence, poor records, or misunderstanding tax law may lead to civil penalties or interest, but criminal tax fraud generally requires proof of a culpable mental state such as willfulness.

Can relying on an accountant be a defense?
It can be. If the taxpayer provided accurate information and reasonably relied on a qualified tax professional, that may help show lack of willful intent.

Can a business owner be charged for unpaid sales tax?
Yes. If a business collects sales tax but does not remit it, prosecutors may consider criminal charges depending on the facts. The defense may examine who was responsible, whether the failure was willful, and whether the tax calculation is accurate.

Can tax fraud charges be filed with other crimes?
Yes. Tax fraud may be charged with theft, forgery, identity theft, computer crime, conspiracy, money laundering, or other financial crimes depending on the allegations.

What if I cannot afford to pay the taxes owed?
Inability to pay is different from willful evasion. Financial hardship may be an important defense issue, especially if the person did not conceal assets or intentionally avoid payment.

Can filing an amended return prevent criminal charges?
Not always. Corrective action may help show good faith depending on timing and circumstances, but it does not automatically prevent prosecution if the state believes the original conduct was criminal.

Should I talk to tax investigators without a lawyer?
You should be careful. Statements made during a tax investigation can be used in a criminal case. It is usually best to speak with a defense attorney before answering questions or producing explanations.

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Additional Resources

Colorado Revised Statutes § 39-21-118 – Criminal Penalties — This is the main Colorado statute for criminal tax penalties. It addresses willful tax evasion, willful failure to collect or pay over taxes, willful failure to file or pay, false refund statements, and related criminal penalties.

Colorado Revised Statutes § 39-22-621 – Income Tax Penalties — This statute addresses civil penalties for income tax issues, including fraudulent or willfully false returns and fraudulent or willful failure to file.

Colorado Department of Revenue – Report Tax Evasion & Fraud — This state resource explains how suspected tax evasion and tax fraud may be reported to the Colorado Department of Revenue or the IRS.

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Finding a Colorado Tax Fraud Defense Attorney

Tax fraud charges in Colorado can be complicated, document-heavy, and financially devastating. These cases may involve audits, business records, tax returns, bank records, accountant communications, refund claims, sales tax records, payroll records, civil penalties, restitution, and possible felony exposure. They also require careful attention to the difference between a tax mistake and a willful tax crime.

At the Law Office of Matthew A. Martin, P.C., we defend clients facing tax fraud, tax evasion, false return, failure-to-file, failure-to-pay, fraud, forgery, identity theft, theft, and related financial crime allegations throughout Colorado. We investigate the records, challenge intent evidence, evaluate the tax calculations, protect constitutional rights, and fight to reduce the criminal and financial consequences of tax-related charges.

If you are facing tax fraud charges in Colorado, call (303) 725-0017 today to schedule your free consultation.

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