How the IRS treats criminal tax investigations may seem like a secret. In fact, how they go about their process is public knowledge, which you can find on their website under How Criminal Investigations Are Initiated. For your benefit, we wanted to go through the IRS information and give you some insight on how it works, revealing the “secret” that is the IRS.

In this post, we’ll cover criminal investigation sources, preliminary analysis, investigation approvals, conducting a criminal investigation, prosecution recommendations, and the prosecution process. Are you facing criminal tax charges? Tax Law Offices in Naperville has helped hundreds of clients navigate the complex code and laws of the IRS to reduce tax liability and salvage unfortunate tax situations.

Criminal Tax Investigation Operations

It’s important to know that the IRS has their own Criminal Investigation Division to conduct investigations for alleged violations of the Bank Secrecy Act, the Internal Revenue Code, and several statutes regarding money laundering. The discoveries in these investigations are referred to the Department of Criminal Justice as recommendations for prosecution. This means that once you are being investigated, you risk the chance of being charged and prosecuted as criminal, which can wreak havoc on your life.

IRS Special Agents and Sources

Information obtained by the IRS can initiate a criminal tax investigation. Sources that trigger this type of investigation include fraud, tax evasion, and more. Revenue agents (auditor) or revenue officers (collection) can report possible fraud. Furthermore, ongoing investigations can also be sourced to find information on potential fraud regarding taxes or otherwise.

Primary Investigation and Subject Criminal Investigation

When it comes to getting the criminal investigation started, the IRS will complete a preliminary analysis (primary investigation), which makes the case that they need to initiate an investigation. Information that is relevant to the suspected fraud is reviewed, and a case is built to get the investigation approved. If the case is approved, the head of the office initiates a “subject criminal investigation.” Two CI Personnel will review the primary investigation to approve it’s move to an official criminal investigation.

The Criminal Investigation

The special agent assigned to the case attains all the facts and relevant information to conduct a criminal investigation. They work to obtain more information, obtain evidence, and conduct interviews of third-party witnesses to the individual being investigated. Special agents will also conduct surveillance, subpoena bank records, execute on search warrants, and study financial data to build a case for the Department of Justice.

Special Agent Recommends Prosecution

If the criminal tax investigation builds a case, the special agent will deliver recommendations to prosecute the individual or entity under review. Two outcomes can occur at this stage. Either the special agent and their supervisor determine that the gathering evidence does not substantiate criminal charges, or the agent and the supervisor find that intent to prosecute is viable. If the report deems a pursuit of prosecution, the special agent will write a special agent report including the details of the investigation and showing the violation of laws regarding tax fraud.

The following officials then review the special agent report:

  • CI special agent in charge
  • CI assistant special agent
  • Criminal investigation quality assurance team
  • Special agent’s supervisor

The CI then makes the determination whether or not the investigation should be criminally prosecuted. If a prosecution is pursued, the CI recommendation is sent to the following:

  • The United States Attorney (all other investigations)
  • The Department of Justice, Tax Division (tax related investigations)

Now that you know the process prior to an effort to prosecute takes place, keep in mind that at each stage, if the evidence discovered does not substantiate a pursuit for prosecution, it is “discontinued.” However, if the evidence stands the test of multiple reviews and various levels of study, it will be taken to prosecution.

The Prosecution

Finally, the Department of Justice or United States Attorney must accept the investigation for prosecution. The special agent from the IRS who prepared the report will be requested to assist the prosecutors in the preparation for trial. The remainder of the investigation is then managed by the prosecutors, not the special agent.

Tax Law Offices in Naperville

A criminal tax investigation is not a process to take lightly. You will need representation to field and handle the IRS and their investigation, if you’re being charged with tax fraud or otherwise. It’s strongly suggested that you call our reputable tax lawyers to schedule a consultation.