Last week, the Internal Revenue Service released its annual Criminal Investigation report for 2016, detailing the number and type of investigations, recommended prosecutions and federal sentences obtained against those accused of tax crimes. While the total number may seem large to those unfamiliar with the annual report, they actually show that there was a general decrease in cases.
Much of the reason for the decrease in criminal tax cases is that the IRS has been experiencing budget cuts for the last six years. The IRS has dealt with this by cutting staff, including special agents, reallocating its resources and focusing on high priority cases.
Among the high-priority types of cases the IRS focuses its efforts on are those involving: narcotics; identity theft; suspicious returns; abusive return preparers; international operations; employment tax; public corruption; abusive tax schemes; and terrorism.
Criminal investigations initiated by the IRS when an IRS auditor or collection officer suspects possible fraud when reviewing a case, or based on information provided by the public or other law enforcement agencies or U.S. Attorneys. These violations may concern obligations under the Internal Revenue Code, the Bank Secrecy Act or a number of money-laundering laws. If a case under review is suspected to involve violations of these laws, the Department of Justice takes charge of the case.
When a taxpayer comes under investigation for any tax violation, but especially those involving potential criminal violations, it is important to work with an experienced attorney throughout the investigation. The special agents in charge of conducting criminal tax investigations have the power to use a variety of investigative techniques to obtain information, and it is important that the taxpayer understands his or her rights and have an advocate to address any problems that arise in the process.
If a case proceeds far enough to be recommended for prosecution and is taken over by the Department of Justice or the U.S. Attorney, the taxpayer will work with an attorney to resolve the case in the best possible manner. This may involve pleading guilty and settling the case, or it may require going to trial and fighting the charges. The best course of action, in any such case, needs to be determined in close consultation with an experienced attorney who understands tax law and how to effectively navigate the process.
The Fiscal Times, “Why the IRS Is Catching Fewer Tax Cheats,” Janna Herron, March 3, 2017.
IRS, How Criminal Investigation Are Initiated, Accessed March 6, 2017.