Background on Federal Tax Crimes
In addition to its lien and levy power, the IRS and the state government has the ability to initiate criminal investigations and charges against taxpayers for wide variety of tax crimes. These charges can lead to heavy fines and time in federal prison.
The IRS’s Criminal Investigations Division (CID) is comprised of approximately 3,700 employees worldwide, approximately 2,600 of whom are special agents whose investigative jurisdiction includes tax, money laundering and Bank Secrecy Act laws. While other federal agencies also have investigative jurisdiction for money laundering and some bank secrecy act violations, IRS is the only federal agency that can investigate potential criminal violations of the Internal Revenue Code.
Initiating Tax Crime Investigations
Criminal investigations are initiated when an auditor or collections officer detects possible fraud. In addition, other federal, state and local agencies, and US Attorneys offices can forward information to CID which might launch a criminal investigation.
Once an investigation is initiated, special agents are assigned to analyze the case to determine if a tax crime or some other crime has occurred. This is referred to as a “primary investigation.” The special agent’s supervisor has approval over whether to further investigate the crime. If approval is received, then the special agent in charge of the head office will begin a “subject criminal investigation.”
The subject criminal investigation is a full investigation in which the special agent obtains the facts and evidence needed to establish the elements of criminal activity. This involves the full range of investigative techniques that the public is generally aware of, including interviewing witnesses, conducting surveillance, obtaining and executing search warrants, subpoenaing bank records, and reviewing financial data.
These special agents work closely with IRS Chief Counsel Criminal Tax Attorneys during the course of the criminal investigation, similarly to how police and detectives work with prosecutors. This process ensures all legal aspects of the investigation and prosecution recommendation are correctly addressed.
Recommendation of Prosecution
If the special agent and the special agent’s supervisor determine that the evidence is sufficient to support the recommendation of prosecution, then the agent proceeds with the preparation of a written report detailing evidence supporting a violation of the law and recommendation of prosecution.. This report is called a ‘special agent report’ and it is reviewed by numerous officials, including CID.
If CID determines the investigation should be criminally prosecuted, a prosecution recommendation is forwarded to:
- The Department of Justice, Tax Division, (if it is a tax investigation) or
- The United States Attorney for all other investigations.
Each level of review may determine that evidence does not substantiate criminal charges and the investigation should not be prosecuted.
If the Department of Justice or the United States Attorney accepts the investigation for prosecution, the IRS special agent will be asked by the prosecutors to assist in preparation for trial. At this point the special agent is managed by the prosecutors.
IRS Goal: Conviction or Plea
The ultimate goal of an IRS Criminal Investigation prosecution recommendation is to obtain a conviction or plea. IRS CID obtains about 3,000 convictions per year.
List of Federal Tax Crimes
Below is the list of federal tax crimes and other related crimes, and links to more information:
- Evasion of Tax Assessment or Tax Payment
- Failure to Collect or Pay Tax
- Failure to File, Supply Information, or Pay Tax
- Fraudulent Withholding Exemption or Failure to Supply Information
- Fraud and False Statements
- Fraudulent Returns, Statements, or Other Documents
- Attempt to Interfere with Administration of IRS Laws
- Aiding and Abetting
- Conspiracy to Defraud the Government
- False, Fictitious, or Fraudulent Claims
- Conspiracy to Commit Offense or to Defraud the US
- Fictitious Obligations
- Identity Theft
If you are being investigated for a tax crime, then it can be very helpful to retain an attorney. Our attorneys have experience in over 100 criminal matters, including death penalty cases, white collar crime, and federal writs and appeals. Give us a call at (408) 459-8427 for more information.