Criminal Tax Cases
Internal Revenue Service (“IRS”) Criminal Investigation (“CI”) is responsible for investigating suspected federal tax crimes. CI is able to employ the full range of investigative techniques, such as wiretaps, undercover operatives, confidential informants, and search warrants.
Long periods of inactivity are not uncommon in criminal tax matters and they should not be interpreted as a signal that the IRS has dropped the case.
Criminal tax investigations are initiated for a variety of reasons. The criminal enforcement priorities at the IRS play an important role. For example, the IRS might be focusing on fraudulent Offer in Compromise submissions, unpaid employment taxes, offshore accounts, or tax return preparer cases, which will increase prosecutions in those areas. The Examination and Collection divisions also refer cases for criminal investigation. CI, moreover, opens investigations based on information that it receives from the taxpayer’s former spouse, business partner, employee, or other individual that reports an alleged crime to the IRS.
IRS Criminal Investigation Special Agents
IRS CI is small compared to the IRS’s civil enforcement divisions, and the government is keenly aware that it cannot bring criminal prosecutions against all taxpayers that underreport income or inflate deductions. Therefore, CI seeks to bring cases that will generate substantial press coverage and, thus, encourage voluntary compliance by the taxpaying public as a whole.
By the time that the taxpayer becomes aware of the investigation, it has likely been ongoing for many months, if not years. Therefore, the taxpayer’s attorney must take immediate steps to close this gap with the government, such as gathering records, interviewing potential witnesses, and critically analyzing the operative facts. In addition to addressing the substance of the investigation, identifying factors that diminish the “jury appeal” of a case can be particularly helpful. Factors that might cause a juror to sympathize with the defendant at trial include the taxpayer’s health, mental state, and age.
Criminal Tax Investigations
Procedurally, criminal tax investigations can be undertaken administratively, solely by CI, or through a federal grand jury, which involves an Assistant U.S. Attorney. The procedural posture of the case impacts the opportunities the taxpayer’s representative will have to meet with attorneys for the IRS, the Department of Justice, and the U.S. Attorney’s Office prior to the taxpayer being formally charged with a crime. At these meetings, the government will consider any defense that the taxpayer may have to the proposed charges, technical or substantive weaknesses in the contemplated prosecution as identified by the taxpayer’s representative, and other issues, such as the “jury appeal” of the case.
Taxpayers seeking to self-report prior tax violations can make a Voluntary Disclosure to the IRS. While making a Voluntary Disclosure is not a guaranteed shield to criminal prosecution, as a matter of policy, the government does not prosecute those making a Voluntary Disclosure meeting certain important requirements. A taxpayer’s eligibility for this program must be carefully evaluated prior to contacting the IRS.
My criminal tax experience includes the following issues:
- Tax Evasion
- Willful Failure to File
- Money Laundering
- Variances (or reductions) from the Federal Sentencing Guidelines
- Obstruction of the IRS
- Unreported Income
- False Statements on Tax Returns
- Tax Return Preparers
- Laundering Narcotics Proceeds
- Plea Agreements
- 5K1 Departures
- Voluntary Disclosures
- Inflated Expenses/Deductions
- Tax Loss Calculations
- State Criminal Tax Prosecutions