Published on: October 27, 2020 Last modified: November 23, 2020

Everything to Know About the IRS Criminal Investigation Division

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    The Internal Revenue Service Criminal Investigation Division (IRS-CI) serves the United States’ public by scrutinizing potential criminal activity of the Internal Revenue Code and other related financial crimes. These investigations aim to ensure compliance with tax law and provide the public with confidence in the tax system. 

    If you find yourself facing an IRS criminal investigation, it is essential to understand what you’ll be going up against. This guide will detail how the IRS process looks, what constitutes a criminal act, and what to do if you find yourself on the wrong side of the law. 

    Which Acts Qualify for an IRS Criminal Investigation

    IRS criminal investigations usually begin when IRS special agents (including revenue agents or officers) believe the information they have reflects possible tax fraud. These investigations may also already be underway by other law enforcement agencies or by the United States Attorney offices across the country.

    irs criminal investigation division

    The IRS Criminal Investigation (CI) division classifies each investigation as one of the following:

    • Abusive Return Preparer Enforcement
      This type of fraud typically involves preparers preparing and filing false income tax returns, with inflated business expenses, false deductions, and excessive exemptions.
    • Fraud Involving Bankruptcy
      These crimes involve significant fraud in bankruptcy. The IRS is a considerable creditor in many such proceedings, so its interests must be protected.
    • Abusive Tax Schemes
      These schemes originally looked like foreign trust arrangements or abusive domestic arrangements, but over time have evolved into technical setups that take advantage of debit and credit cards issued by offshore financial institutions. They also involve issues with financial secrecy law related to foreign jurisdictions.
    • Corporate Crimes
      This tax crime often involves violations of the Internal Revenue Code through falsifying individual and corporate tax returns.
    • Financial Institution Crimes
      This tax fraud focuses on money laundering and tax violations against savings, banks, credit unions, money remitters, loan associations, and other financial institutions.
    • Employment Tax Enforcement
      These tax evasion schemes include employee leasing, pyramiding, paying employees in cash, failing to file payroll tax returns, and filing false payroll tax returns.
    • Gaming
      Bookmaking, numbers, and some charitable gaming operations are significant areas of compliance concern. These investigations look into the illegal gaming industry and aim to eliminate this unlawful behavior.
    • Fraud involving Healthcare
      Perpetrators of this fraud often develop schemes to financially benefit from false mental health, billings, chiropractic, nursing home, staged accidents, and patient referral schemes.
    • General Fraud
      These investigations look into violations of financial and tax law crimes. This can include those who intentionally do not comply with requirements to file tax returns or those who pose a severe threat to the tax administration.
    • Identity Theft
      This includes investigations into fraud related to identity theft.
    • Money Laundering & Bank Secrecy Act
      This crime involves fraud related to numerous financial transactions worldwide.
    • Non-Filer Enforcement
      Some people believe that taxes are voluntary. As a result, courts continuously impose financial penalties for bringing such frivolous arguments.
    • Narcotics Investigations
      These investigations include documenting and tracking down financial leads that allow investigators to go after narcotics organizations.
    • Public Corruption Crimes
      These crimes include various criminal offenses like embezzlement, extortion, illegal kickbacks, subsidy fraud, tax fraud, and bank fraud.
    • Questionable Refund Program
      This is a nationwide program designed to find fraudulent returns and stop payment of these false refunds. 

    These tax investigations often involve a thorough and detailed evidence gathering process. These special agents are thus considered experts in their field, especially against tax fraud, criminal tax activity, and other tax problems. 

    How a Criminal Investigation Works

    In a criminal investigation, the IRS will want to set up a case against you so the U.S. Attorney’s Office can prosecute. These criminal investigations will involve special agents interviewing coworkers, employees, associates, bankers, and even family members to acquire evidence on the extent of your tax fraud or evasion. These investigations can also include subpoenas of bank records, surveillance, and search warrants. 

    employee interviewing with internal revenue service criminal investigations division officer

    After the investigation, the special agent will decide whether to discontinue the case or proceed with prosecution. If they move forward with prosecution, a special report will be created and reviewed by the following IRS officers:

    • Supervisory Special Agent 
    • Centralized Case Review (a review team that looks into criminal investigations)
    • Assistant Special Agent in Charge 
    • CI Special Agent in Charge

    Once the CI special agent gives the go-ahead to prosecute, the matter will go to the Department of Justice, Tax Division (responsible for tax investigations), and the U.S. Attorney (responsible for all other criminal financial investigations). 

    If convicted of a tax violation, you can face intense fines, jail time, and personal and financial hardships. It is crucial that you contact a tax attorney promptly  if you discover you are under an IRS criminal investigation. These lawyers can ensure that you do not say anything that can hinder your case and get you the legal help you need.

    Benefits of Working With a Trusted Tax Advisor

    IRS criminal investigations are stressful and nerve-racking. The best way to stay out of tax trouble and prevent one from happening is to work with a tax advisor to ensure you are not accidentally committing any crimes. These advisors can make sure you are completing your financial and tax documents correctly and help you understand each part of the filing so you do not land yourself in hot water. 

    Before you have to deal with this challenging ordeal, contact Silver Tax Group. We can discuss your IRS criminal investigation needs or provide you with expert help regarding any other tax-related questions you might have.

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