IRS Criminal Investigations, How They Begin and Why
IRS Criminal investigations begin with a suspicion of fraud and violations of:
- Internal Revenue Code
- Bank Secrecy Act
- Money laundering statutes
...Among others.
When IRS determines there is a case against a violator, they refer it to the Department of Justice.
Why IRS Special Agents target a business for investigation
- An IRS revenue agent, an auditor detects possible fraud.
- An IRS Revenue officer - a collections officer detects possible fraud.
- A member of the community reports possible fraud.
- Another agency, such as law enforcement or EDD or state tax board reports possible fraud.
What happens if an IRS Audit is begun?
- The primary investigation starts when the special agent’s front line supervisor looks at the initial findings and decides whether to continue the investigation.
- Then a subject criminal investigation commences.
- At this point, at least two Criminal Investigators at a management level have reviewed the ‘primary investigation’ material and determined there is sufficient evidence to initiate a subject criminal investigation*.
The Process of a Criminal Investigation
The special agent works closely with IRS Chief Counsel Criminal Tax Attorneys during the course of the criminal investigation. AS in any criminal case the accused, or investigated, party has rights. Among those rights are the right to counsel. IRS Special Investigators will gather information by any means necessary.
- Interviews of third party witnesses
- Surveillance
- Search warrants
- Subpoenaing bank records
- Reviewing financial data.
A determination is made to go to trial or not
If the special agent determine that the evidence does not substantiate criminal activity, then the audit is discontinued.
If the special agent determines that the evidence does incriminate, then prosecution is recommended and a prosecution recommendation is sent to:
1. The Department of Justice, Tax Division, (if it is a tax investigation) or
2. The United States Attorney for all other investigations.
Prosecution by the Dept. of Justice
Once the case is turned over, the IRS special agent turns over all findings to the lawyers for the prosecution and is no longer involved in the case. The ultimate goal of an IRS Criminal Investigation prosecution recommendation is to obtain a conviction - either by a guilty verdict or plea. There are approximately 3,000 criminal prosecutions per year * as of 2017.
If IRS Criminal Investigators contact you, know your rights, contact a qualified Tax Attorney immediately and take the 5th amendment which is the right to remain silent.
*https://www.irs.gov/compliance/criminal-investigation/program-and-emphasis-areas-for-irs-criminal-investigation