The IRS Criminal Investigations (CI) Division handles tax crime cases. These cases are much less common than civil tax cases. The IRS states that they prosecute approximately 3,000 criminal tax cases each year.
However, these prosecutions also provide a warning to all other taxpayers. Criminal tax prosecutions may not common, but they do happen and the penalties can be very severe.
How Cases Are Initiated
CI can receive referrals from many different sources. IRS examiners who are completing an audit can refer a case to CI is they detect possible criminal conduct.
Other law enforcement agencies can also refer cases, and the public can tip-off CI to potential tax fraud cases.
First, a preliminary investigation is conducted. A special agent will review the information and report it to their supervisor, who then has to refer to the case to another supervisor. If both of them approve, a full criminal investigation can begin.
Note that the IRS has a higher burden of proof in a criminal case than a civil tax fraud case, but a taxpayer can be subject to criminal and civil penalties for the same conduct.
The Criminal Investigation
CI can then use various methods to get the information they need, such as:
- Interviewing third-party witnesses
- Conducting surveillance
- Using search warrants
- Subpoenaing bank records
- Analyzing financial data
At this point, it’s still possible for the case to be discontinued without a recommendation of prosecution. Even if the special agent can gather enough evidence to support their case, they still have to get approval from several supervisors before criminal prosecution can be recommended.
Finally, the case needs to be presented to the Department of Justice (DOJ). The DOJ still has the ability to shut down the investigation if they don’t believe there is enough evidence to support a prosecution.
If the case survives all these layers of approval, then the prosecution will begin. Substantial resources have already been expended on the investigation at this point, so the DOJ will want to get a condition either by a guilty verdict or a plea.
If you are involved in an IRS audit and disclose the wrong piece of information, it could lead to a potential referral of your case to CI. This is one reason to always have an audit defense attorney handle your case for you.
Contact a criminal tax attorney immediately if you are being investigated or charged with criminal tax fraud. Call (770) 939-7710 to schedule your consultation with one of the tax attorneys at The Gartzman Law Firm.