IRS Criminal Investigations

IRS Criminal Investigations

The Internal Revenue Service Criminal Investigations Division conducts investigations of taxpayers suspected of tax crimes such as tax evasion and the pyramiding of payroll taxes. Whereas the civil enforcement procedures the IRS employs to collect unpaid taxes can have devastating financial effects on taxpayers, criminal investigations can result in the most impactful consequence, incarceration.

Chapter 75 of the Internal Revenue Code outlines the various crimes related to taxpayers. Among them are attempting to evade or defeat taxes imposed by statute, failure to collect or pay over payroll taxes, failure to file a return, filing fraudulent reports of employee’s income and withholding or willfully failing to file such a report, filing false or fraudulent information to your employer to decrease the amount of withholding and filing a fraudulent tax return.

These crimes carry fines of between $1000 and $100,000 and maximum terms of imprisonment of between 1 and 5 years, with the harshest penalties, $100,000 in fines and a maximum of 5 years imprisonment being reserved for attempting to evade or defeat taxes imposed by statute.

In addition to the fines and potential terms of imprisonment, the IRS will seek a restitution order as part of sentencing if the defendant is convicted. The restitution order requires the defendant to repay the amount of tax found through the criminal proceeding to have been evaded, willfully under reported or willfully not collected or paid over to the IRS. The restitution order is payable not only as one of the terms of sentencing but is also collectible through IRS civil enforcement.

Criminal Investigators initiate investigations of taxpayers based on information obtained from civil enforcement officers, such as Revenue Officers and Revenue Agents, whistleblowers and other governmental agencies. Investigators will analyze the data obtained through a primary investigation to determine whether a crime has potentially been committed. Once the primary investigation is completed, if warranted a subject criminal investigation will be opened in which the investigator will begin gathering evidence to use against the taxpayer in a criminal prosecution.
During the subject criminal investigation, evidence will be gathered through summonsing and subpoenaing financial records, interviewing witnesses, surveillance and search warrants. At the conclusion of the investigation, the IRS Criminal Investigator will either discontinue the investigation or make a recommendation for prosecution to the Department of Justice and United States Attorney’s Office. The ultimate authority in determining to move forward with an indictment on criminal charges rests with the Department of Justice Tax Division.

The stakes could not be any higher when an IRS criminal investigation is initiated against a taxpayer. Taxpayers face fines of up to $100,000, imprisonment of up to 5 years and restitution orders to repay the tax owed through their criminal conduct. If you have been advised that you are the subject of a criminal investigation please do not delay in speaking to a tax practitioner who can assist in preserving your rights through the criminal process.

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