This article will explain the basics of criminal tax investigations. It is extremely important if you find yourself under such an investigation, or believe that the potential for a criminal investigation exists in your case, that you obtain an experienced attorney to represent you.
Internal Revenue Code (IRC) Section 7608(b) grants the right to the criminal investigators of the IRS’ Intelligence Division to investigate tax crimes. There are various means by which the IRS may decide to begin a criminal investigation, including audits that indicate potential fraud, informant’s tips, or other credible reports, such as newspaper articles about fraudulent behavior. An IRS agent will begin to collect more information at this point as part of the procedures of the Internal Revenue Manual in order to establish a “firm indication of fraud.” Once such an indication can be demonstrated, the taxpayer’s civil audit will be suspended, and referred to the Criminal Investigation Division (CID).
The Criminal Investigation Division (CID) of the IRS is empowered under IRC Sections 7622 and 7602 to examine records, books and other supporting documents regarding information contained in tax returns, to take testimony and to administer oaths.
Taxpayers and their representatives will not be informed of the reasons for the suspension once their case is referred to the CID. It is thus crucial that taxpayers be careful regarding any statements they may make to an IRS agent, as the potential exists for such information to be used against them in a criminal proceeding.
After a case is referred to the CID, it will be reviewed by the CID Chief. The Chief will then assign a Special Agent to investigate if it is felt that the case clearly indicates possible fraud. The Special Agent, accompanied by another agent serving as a witness, may then contact the taxpayer, without prior notice. The agent is required to give the taxpayer a Miranda-type warning. An agent may also, in certain circumstances, obtain a search warrant, as well as the summons power under IRC Section 7602.
If an agent determines after the investigation that a prosecution should be in order, the case will then be forwarded to the IRS attorneys. Under the criminal standard of proof, it must be demonstrated that the evidence against the taxpayer is sufficient to prove guilt beyond a reasonable doubt, and that it is a reasonable probability that the taxpayer will be convicted of the crimes alleged.
Once the case is transferred, the taxpayer will then usually have the opportunity to present any defenses at a special conference with the IRS. If the IRS counsel agrees that the taxpayer should be prosecuted after the evidence and arguments presented at the conference, the case will then be referred to the Tax Division of the Department of Justice for review. If the DOJ attorney decides that the taxpayer should be prosecuted, the case may be then transferred to the U.S. Attorney (the DOJ attorney may also give the U.S. Attorney discretion of whether to prosecute, or not, in certain cases). The U.S. attorney may in some circumstances receive the case with an authorization for a grand jury investigation to be conducted.
As can be seen from the information above, criminal tax investigations are a serious matter. There are numerous potential pitfalls that may arise at any step of a tax investigation that may lead a taxpayer to ultimately wind up being convicted for a tax crime.
The taxpayers are advised to obtain experienced tax attorneys to represent them if they believe, at any point in their civil investigation that the potential for a criminal investigation exists.
Contact Sherayzen Law Office for Legal Advice Regarding Criminal Tax Matters
If you believe that you may be subject to a criminal IRS investigation, contact Sherayzen Law Office. Our experienced tax law firm will analyze the facts of your case, offer defense options and rigorously represent your interests during the IRS investigation and any court proceedings.