The title of this story comes from a great quote carried by WSB TV in Atlanta on Thursday. Josh Waite, head of Georgia Revenue Department’s special investigation unit said, “It’s a law enforcement agency. We’re not collecting taxes at gunpoint but we are going after the criminals that are stealing tax dollars.” Waite was talking about the criminal investigators found in virtually every tax agency including IRS Criminal Investigations.
Many people think that all IRS agents are law enforcement officers. Not true. Every IRS employee has a duty to enforce the tax laws of the U.S., but only specially trained agents are armed and authorized to criminally prosecute offenders. While they may be assisted by auditors (revenue agents) and collections specialists (revenue officers), only the IRS Criminal Investigations special agents can prosecute for criminal tax violations.
So what exactly does IRS Criminal Investigations do? According the IRS website, irs.gov, “Some people bend the tax law — others break it. Criminal Investigation’s job is to pursue the lawbreakers.”
Statistically, only a very small percentage of people with tax problems get prosecuted criminally. Unfortunately for taxpayers, once the IRS decides to go criminal, they usually win. Tax prosecutions have a very high conviction rate but that may simply mean that IRS Criminal Investigations is careful to only take cases they know they can win.
Although IRS special agents have the authority to investigate a wide variety of tax crimes, the typical crimes prosecuted are tax evasion, willful failure to file a tax return, filing a false return, identity theft, refund scams and lately, having unreported foreign accounts. Unless willful, making a mistake on your return is not a crime.
If you receive an audit notice, don’t automatically assume that a criminal prosecution will result. But if you know of significant underreported income, keeping two sets of books or cheating on your taxes, hire a good criminal tax lawyer immediately. Auditors have been specially trained and encouraged to make referrals to IRS Criminal Investigations in these circumstances.
Some taxpayers ask their accountant to deal with the problem and hope for the best. While that might work in many cases, tax preparers and CPAs don’t enjoy the same attorney – client privilege. This means IRS Criminal Investigations can force your accountant to testify against you. Lawyers, on the other hand, enjoy the attorney – client privilege.
Another misconception is that the IRS must tell you when you are under investigation. That’s not true. Only when a special agent comes to interview you must he or she tell you that an investigation has been commenced. By then, the investigation is often mostly complete.
Before an IRS Criminal Investigations officer can charge you with a crime, the agent must first have the case approved by his or her supervisor (the Special Agent in Charge), IRS Counsel and the Department of Justice Tax Division in Washington, DC. At any stage your lawyer can request a conference and try to explain why the case should not be prosecuted. If all those procedural safeguards fail, then the case is sent to a grand jury for indictment.
If you are being criminally investigated, don’t speak to any IRS personnel without a lawyer. Just like on television, anything you say can be used against you. If you think you can outsmart the IRS, that is doubtful too. Lying to an IRS criminal investigation agent is also a crime.
Some taxpayers believe the best thing to do when faced with an audit or possible criminal investigation is to come clean and file missing or amended returns to clean up any problems. While coming into compliance is always a good thing, don’t try this alone. These so called “voluntary disclosures” are fraught with peril. Let me explain.
The IRS operates on a voluntary compliance model. There just aren’t enough agents to review every return. Because of that, the Service likes to make examples of bad people. While cleaning up old return problems is important, it is critical to insure that the new returns (always signed under penalty perjury) won’t become a road map for a future prosecution.
Simply filing old returns once you are under investigation probably won’t work but making a voluntary disclosure before you are notified of an investigation is often a great way to avoid prison.
If you are being investigated by IRS Criminal Investigations or believe you have serious tax problems and want to come clean, contact a lawyer well versed in criminal tax matters.
Mahany & Ertl is a full service, national boutique practice concentrating in tax matters including tax crimes. Founding partner Brian Mahany is a former tax investigator, law enforcement officer and Assistant Attorney General – Tax. Let us bring our decades of experience to help preserve your freedom.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in complete confidence.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; Minneapolis, Minnesota and San Francisco, California. IRS tax related services available worldwide.
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Written by Brian Mahany, Esq.