IRS Criminal Investigations: What You Need to Know

Dealing with IRS criminal investigations can be extremely intimidating, so you need to know exactly what you are up against. This type of investigation is more common than you would think, and you might not even be aware that you are under investigation until the IRS sends you a subpoena or shows up at your door front.

An IRS criminal investigation is not the same as an IRS audit. During an audit, the IRS Examination Division is determining whether or not you have correctly prepared your tax return. However, during an investigation, the IRS is putting together a criminal case which means you will be prosecuted by the U.S. Attorney’s Office.

If convicted, you could be subject to severe consequences, including fines and possible jail time. This could end in financial ruin in some cases and up to 6 years in jail, with severe fines and penalties which could result in literally hundreds of thousands of dollars. It should be noted that the government will not prosecute unless they are able to find a party guilty on at least 3 counts. However, taxpayers are not often aware that they are under investigation until the last minute, so they may have unwillingly made an incriminating admission to an investigator. This is why it is important to be aware of the possible signs or causes of a criminal investigation.

Possible Reasons for Criminal IRS Investigations

There are many reasons that the IRS might wish to prosecute a taxpayer. Below are some of the most common causes of a criminal investigation by the Internal Revenue Service.

• Willful Failure to Pay
• Fraudulent Statements
• Additional Taxes Due
• Attempt to Defeat Taxes
• Tax Evasion
• Tax Evasion Avoidance
• Willful Failure Maintain Records
• Bankruptcy Fraud
• Gaming Related Fraud
• Healthcare or Insurance Fraud
• Money Laundering
• Real Estate Fraud
• Questionable Tax Refunds

Warning Signs that You Might Be Under Investigation by the IRS

Even though it might completely catch you off guard, there are a few red flags which might alert you to the fact that you might be subject to a criminal investigation. Below are some of the most common tell-tale signs:

• You are informed by your bank that your records have been subpoenaed by the U.S. Attorney’s Office or the CID (IRS Criminal Investigation Division). If this is the case, you need to contact a tax attorney immediately for legal advice.
• If you are currently being pressured by an IRS agent and they suddenly stop contacting you. They might be in the process of reporting your case to a CID agent.
• Your friends, relatives or co-workers have been subpoenaed on your behalf.
• You are undergoing an audit and your IRS agent suddenly stops contacting you. This occurs because once a case is referred to the CID, it is put on “hold” so as not to jeopardize the case.
• You are contacted via phone or at your place of business by a CID agent. Do not offer them any information or documentation or answer any questions without legal counsel present!

If you notice any of the above, you should contact an experienced IRS tax attorney immediately to discuss your options. It is imperative that you use only an IRS attorney at this point as any statements and transactions which are made with your accountant can be used against your case. Your conversations with your tax attorney, however, are protected.

The IRS Criminal Investigations Process

An investigation by the CID is to be taken with extreme seriousness. The CID are federal “Special Agents” that wear a badge and are licensed to carry a firearm. They are highly trained and experienced financial investigators. They have the ability to contact your bankers, colleagues, employers, family members, friends and anyone else that might have information that is pertinent to your particular case. The investigative process includes, but is not limited to, subpoenas of bank records, important documents, and financial data and search warrants.

You first contact with a CID agent is initially through an in-person visit at your home or place of business. They will then notify you that you are under criminal investigation by the IRS. Again, you should simply say nothing and immediately notify a qualified IRS tax attorney.

If you are then indicted by the grand jury, you must appear in court starting with a bail hearing and arraignment. If the judge does not dismiss your case, the verdict is thus left to the jury. If the jury finds you guilty, you can petition for a lower sentence before the federal judge. You also have the right to appeal to a higher court (Ninth Circuit Court of Appeals and then the US Supreme Court).

If your appeal is denied, you can attempt to reverse the case or get a new trial by petition a “habeas corpus” if you have just cause in that you were falsely accused, treated unjustly misrepresented, etc.

Possible Outcomes

Quite often, an agreement can be reached out of a court of law that will enable you pay a fine and/or penalty in lieu of jail time. However, you could be subject to jail time up to (and possibly over) six years, depending on the severity of your case. Penalties can start at $25,000 a year.

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