What is a criminal investigation? Within the IRS, there is a special division responsible for cases that may involve tax evasion and tax fraud. The special agents in the Criminal Investigation Division (CID) often work with IRS Revenue Agents, IRS Revenue Officers, IRS attorneys, and the US Department of Justice during their investigations.
The IRS has the responsibility to audit tax returns for accuracy and collect federal taxes that are due. Throughout an ordinary audit or case review by IRS collection personnel, your tax case may sent to the criminal investigation division if certain indicators of tax evasion or badges of fraud are evident. Initial evidence may include failure to properly report all income, failure to file tax returns, intentional concealment of assets or income, misrepresentation of material facts, and establishing fraudulent alter ago or nominee entities, to name a few.
Criminal investigations involving domestic and international tax cases have been increasing steadily. Since 2010, the Internal Revenue Service has significantly expanded its efforts to determine more effective ways to combat off-shore bank fraud and address tax evasion worldwide. While run-of-the-mill IRS cases involving back taxes and tax audits usually carry no threat of jail time, business and individual taxpayers charged and convicted of tax evasion and tax fraud may be sentenced to imprisonment, restitution, monetary penalties, and more.