When you hear the word “criminal” combined with the words “tax fraud,” you might think of Al Capone, the 1930s gangster who was finally jailed when he pled guilty to tax evasion. But criminal tax fraud isn’t always that high-profile nor does it necessarily involve large sums of money. Suspicion of tax fraud charges can stem from a regular taxpayer lying when questioned about a discrepancy found in a tax return audit.
Tax fraud involves willful intent. What happens If an IRS auditor or other officer suspects fraud rather than a mistake? The case gets sent to the IRS’s Criminal Investigation Division (CID) and a special agent begins a primary investigation. This investigation is the first step in the process and the point when all available information is gathered and reviewed.
Once this primary investigation is complete, the next step is for a supervisor to review the information and determine whether the data is sufficient to proceed further. If the supervisor recommends moving forward, then the special agent in charge reviews the primary information and makes an independent decision on whether to pursue a criminal investigation. The entire primary investigation process is a precise procedure that requires two layers of management to have determined there is sufficient information before beginning a criminal investigation.
The Criminal Investigation
In the criminal investigation, a special agent digs further than the information available at the beginning of the primary investigation. This special agent looks specifically for facts and evidence of criminal activity. The agent might interview third-party witnesses, conduct surveillance, subpoena bank records, or review other financial data. The agent can also execute search warrants. Meanwhile, criminal tax attorneys from the IRS Chief Counsel’s office work alongside the agent to ensure legal aspects are being correctly addressed.
The evidence gathered in the criminal investigation is then analyzed, and the special agent along with a supervisor determine whether the evidence is sufficient to support a prosecution for criminal tax fraud. If so, the agent prepares a written report that is then independently reviewed by four supervisors. These include the agent’s frontline supervisor, a criminal investigation quality review team, the assistant special agent in charge of the CID office, and the agent in charge of the office. If all agree the evidence is factual and the case should be criminally prosecuted, it is then sent to either the Justice Department’s tax division or the US Attorney’s office.
Signs You’re Being Investigated
The IRS does not necessarily notify a taxpayer that they are being investigated for criminal fraud. But there are certainly signs that indicate such. These include your bank being served an IRS summons for records, your accountant being interviewed by the IRS, and the agent assigned to your audit disappearing and not returning phone calls.
The number of people sentenced for tax fraud each year are small. According to the United States Sentencing Commission, only 494 taxpayers were convicted of criminal tax fraud in 2019. Their cases involved tax evasion; willful failure to file a return, supply information or pay tax; fraudulent returns; and aiding, assisting, and advising in tax fraud.
The IRS suspects more taxpayers are committing criminal fraud than have been caught. The tax bureau has been beefing up its efforts to uncover criminal tax fraud, including opening a Fraud Enforcement Office earlier this year. The office’s specific mission is to expand fraud detection and deter willful non-compliance.
Have Questions? Call the Experienced Tax Attorneys at Wiggam & Geer
If you suspect you are being investigated for tax fraud or have been accused of such, the experienced attorneys at Wiggam & Geer can represent you throughout the process. Contact metro Atlanta’s top tax and bankruptcy attorneys by clicking here or giving us a call at (404) 233-9800.