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IRS Criminal Investigation

Posted by Juda Gabaie | Oct 26, 2020 | 0 Comments

If you are the subject of an audit by the Internal Revenue Service (IRS), your case might go from a civil to a criminal investigation without your knowing. The Criminal Investigation (CI) Division at the IRS pursues these investigations and recommends prosecution to the relevant authorities. How do you know if you're under criminal investigation by the IRS, and what does the process look like?

The IRS Criminal Investigation Process

Criminal investigations at the IRS usually start in one of two ways. Auditors or collection agents might notice potential fraud when working on a case and refer it to CI. CI also refers to public information or ongoing investigations by other law enforcement agencies.

Special agents review the case under a “primary investigation” and present it to a supervisor. If the supervisor wants to move forward, the case becomes a “subject criminal investigation.” Once this investigation is open, the special agent will gather evidence by interviewing third parties, conducting surveillance, executing search warrants, reviewing bank records and collecting financial data.

After reviewing the evidence, the special agent and their supervisor will either discontinue the investigation or write a report recommending prosecution. The Department of Justice or the United States Attorney then handles prosecution and conviction.

Which Activities Will Lead to an IRS Criminal Investigation?

CI works in different areas related to violations of the Internal Revenue Code, the Bank Secrecy Act, and money laundering statutes. They investigate bankruptcy and corporate fraud, such as concealing assets, filing false returns, or falsifying company accounting records.

The special agents at CI also look into fraud against financial institutions and fraud related to healthcare, such as false billings, staged accidents or patient referral schemes. They also investigate identity theft cases, illegal gaming operations, public corruption and money laundering. Offshore accounts for abusive tax schemes and illegal cross-border transactions launch investigations as well.

Emphasis areas of IRS Criminal Investigation Division

  • Bankruptcy Fraud
  • Corporate Fraud
  • Financial Institution Fraud
  • Healthcare Fraud
  • General Fraud Investigations
  • Identity Theft Schemes
  • Abusive Tax Schemes
  • Employment Tax Enforcement
  • Gaming
  • Narcotics-Related Investigations
  • International Investigations
  • Public Corruption Crimes
  • Questionable Refund Program
  • Money Laundering and Bank Secrecy Act
  • Non-filer Enforcement

Signs an IRS Investigation Has Become Criminal

When an IRS agent stops contacting you abruptly, chances are they've referred your case to the CI Division and it's on “pause” while they prepare for criminal prosecution.

If your bank or accountant has been contacted or subpoenaed by CI or the U.S. Attorney's Office, they are building a case against you and you should consider contacting a tax attorney. Remember, statements made to your accountant are not protected, but consultations with your attorney are.

Other warning signs are agents showing special interest in certain transactions, asking for many copies of your documents, or showing up at your business unannounced and asking probing questions without counsel present.

If you're concerned about an IRS criminal investigation, it's wise to contact a tax attorney. Gabaie & Associates, LLC represents clients in tax issues nationwide before the IRS. Call us at 443-345-8291 or contact us online for a free consultation.

About the Author

Juda Gabaie

Juda Gabaie Esq. has dedicated his career in defending clients nationwide to resolve tax disputes before the Internal Revenue Service and the state taxing agencies. Juda has represented clients before the US Tax Court, Maryland Tax Court, and Comptroller of MD hearing compliance. As an adjunct prof...

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