IRS Special Agents Investigating You? Here’s What to Do

Summary

If you’re being investigated by IRS special agents, it’s crucial to contact a tax attorney immediately. They can assist in handling the investigation, safeguarding your rights, and potentially providing legal representation in a criminal court case. IRS special agents investigate possible tax crimes, and an investigation can begin when an auditor, collection officer, investigative analyst, the public, or law enforcement alerts them to a potential crime. The investigation involves gathering evidence and reviewing financial records. If the evidence supports criminal charges, the case is referred to the Department of Justice Tax Division or the US Attorney. The penalties for tax fraud can be severe, including fines and imprisonment. If you’re unsure if you’re being investigated or have concerns about a tax crime, it’s recommended to consult with an experienced tax attorney.

What to Do If IRS Special Agents Are Investigating You?

If you are being investigated by the IRS, you should contact a tax attorney as soon as possible. A tax attorney can help you decide how to deal with the investigation, they can ensure your rights are protected, and if necessary, they can represent you in a criminal court case before the Department of Justice Tax Division.

Facing an investigation or even worrying that you might have committed a tax crime can be incredibly stressful. The penalties for tax fraud are very stiff, but here’s some good news – the IRS deals with most tax fraud with civil penalties, rather than criminal consequences.

However, every year there are a few thousand people who face criminal tax fraud charges and if you’re being investigated, this guide will help you understand what to expect. To get help now, contact us at the Timothy S. Hart Law Group today.

How Tax Crime Investigations Usually Start

IRS special agents investigate possible tax crimes, and the process generally starts when they get alerted about a possible crime from an auditor, a collection officer, an investigative analyst, the public, or law enforcement.

For example, if a collection officer believes that you were hiding assets when they were asking for details about your finances, they may recommend that a special agent review your case. Similarly, if an auditor discovers a high likelihood of fraud while reviewing your return during an audit, they may also recommend an investigation.

The Role of IRS Special Agents

Once a case has been referred to a special agent, they analyze the information to see if they think a tax or other financial crime has occurred. This is called the primary investigation, and for it to move forward, it must be approved by the special agent’s frontline supervisor and the head of the office.

If the supervisors both approve, the special agent opens a criminal investigation and starts gathering facts and evidence. They may conduct surveillance, execute search warrants, and subpoena records from your bank or other third parties. The special agent works with the IRS Chief Counsel Criminal Tax Attorney during this process.

The Review Process of Possible Tax Crimes

After reviewing the evidence thoroughly, the special agent and their supervisor will decide to discontinue the case or recommend prosecution. If they decide to pursue legal action, the special agent will generate a report about the possible crime, and this will be reviewed by the following:

• Agent’s supervisor
• The Centralized Case Review (aka the quality review team)
• The Criminal Investigation assistant special agent in charge
• The CI special agent in charge.

The investigation may be discontinued by any of these people if they don’t think the evidence supports criminal charges.

Unfortunately, you may not know if your case is being reviewed through this process. However, if you’ve recently had a collection issue or an audit go awry, that may be a sign that you’re being recommended for investigation. Similarly, if any third parties (bankers, employers, clients, etc) receive subpoenas related to you, that’s another huge sign that you may be under criminal investigation.

If you’re worried that you may have committed a crime but aren’t sure whether or not you’re being investigated, reach out to an attorney for help.

Prosecution of Tax Crimes

If IRS Criminal Investigation decides to recommend your case for prosecution, they will send it to the Department of Justice Tax Division. However, that is just for tax crimes. If another crime like money laundering is involved, they will send the case to the US Attorney. In either case, you need an attorney as soon as possible.

Consequences of Tax Fraud and Evasion

Because of the multiple layers of reviews, most cases that get to the DOJ lead to a guilty plea or verdict, and the penalties are very severe. If you are found guilty of tax evasion, you can face fines of up to $100,000 for individuals and up to $500,000 for corporations and up to five years imprisonment.

Tax evasion is just one type of tax fraud, and the penalties for other types of tax fraud vary based on the severity of the act. You can face misdemeanor charges for some acts with fines as low as $1,000 and prison terms of up to a year. For felony tax fraud, the penalties can increase to multiple years in prison and over $100,000 in penalties.

Additionally, you may have to pay restitution for gains that you earned due to the tax fraud or losses you caused to other people. You may also be subject to supervised release or probation after your jail term.

The consequences for criminal tax fraud are very severe, and if you are convicted of multiple counts of fraud and conspiracy to commit fraud, you can face up to five years for each count. People often go to prison for 20+ years for tax evasion crimes, especially when bank fraud or money laundering is involved.

What to Do If You’re Being Investigated

The IRS has a lot of power to investigate tax crimes and to gather information about you from third parties. If you’re dealing with an investigation, keep these tips in mind:

• Don’t panic – Although this may be the most stressful thing you have ever dealt with, try to stay calm. If you panic, you may do or say things that will hinder your case.
• Remember you’re dealing with criminal allegations – By the time you’re facing an investigation, the IRS believes that a crime has occured. At this point, you cannot make the issue go away by just paying the bill or offering to cover penalties.
• Don’t talk with other people about the investigation – Although you can and should talk with a lawyer, you should not talk with friends, relatives, or others about the issue. The IRS may reach out to anyone who knows you to learn more about the crime so the less people know, the better.
• Have a lawyer represent you – If the IRS is investigating you, they will request records. While you shouldn’t deny their requests, you also don’t want to provide more info than necessary. A lawyer can help you navigate this line.
• Don’t hide assets or transfer assets – Taking steps like this can make the situation worse, and in fact, these acts can constitute a tax crime if you haven’t already committed one.

When hiring an attorney, make sure that you get a tax attorney, but also make sure that you hire an attorney who has dedicated experience with criminal tax fraud cases.

Questions to Consider If You’re Unsure

Often, people aren’t aware that they are being investigated until the case gets referred for prosecution. Sometimes, people spend months worrying that they may have committed a tax crime, but they really just made a mistake or forgot to file a return. Here are some questions to consider if you’re unsure:

What type of IRS agent contacted you?

If you’ve been contacted by the IRS, note which type of agent called you. If it was a special agent, then, you are probably being subject to a preliminary investigation. They may have alternatively identified themselves as part of the IRS Criminal Investigation or IRS CI.

If it was a revenue officer, they were calling about an unpaid tax or unfiled return. If it was a revenue agent, then, they were probably contacting you about an audit. Both of these IRS employees can refer your case to a special agent, but if they’re still calling you, then they likely have not referred your case for an investigation.

Have you filed all your returns?

If you are certain that you filed your tax returns correctly, then you don’t need to worry about facing criminal charges. However, areas that you may have overlooked that can lead to criminal charges or stiff penalties include crypto transactions, income from offshore accounts, certain foreign assets, and payroll tax returns if you have employees.

Have you paid your taxes?

Not paying your taxes does not lead to criminal charges, but if you have unpaid taxes, you should contact the IRS and try to make payment arrangements. In most cases, when the IRS accuses someone of evading taxes, they are accusing them of filing tax returns that show a lower tax liability than they should. However, in rare cases, tax evasion can also occur just because someone took affirmative steps to avoid the payment of a tax once it was assessed.

What Are the Defenses for Tax Fraud?

To convict you of tax fraud, the prosecutors must prove that you acted willfully to evade paying taxes. There are several different types of tax fraud from not filing tax returns to providing false statements to refusing to issue W2s to your employees. The right defense varies based on the alleged crime and the situation.

Generally, criminal tax attorneys will try to establish that you did not have criminal intent. The prosecutor will try to prove beyond a reasonable doubt that you committed a crime, and your attorney will try to create doubt that you committed the crime.

What If the Fraud Was Not a Crime?

Tax fraud is not always a crime. Sometimes, the very same action can be treated as a civil offense rather than a criminal offense. If the IRS decides to hold you responsible for civil tax fraud, they can assess a penalty of 75% of the underreported tax.

If you face this penalty, you will not go through a criminal court case, but you can appeal the penalty to the Tax Court. Then, the Tax Court can either uphold the penalty or remove it. Sometimes, they may reduce the fraud penalty to an accuracy-related penalty or a negligence penalty for a gross valuation misstatement.

Get Help With Tax Fraud Investigations Today

If you’re facing criminal charges or an investigation, you need an attorney who has experience defending people against tax crimes. At the Timothy S. Hart Law Group, we have the experience you need, and we will provide you with a defense that can help minimize the potential consequences of the charges.

We can also help if you’re worried about criminal exposure or interested in learning more about the IRS’s Voluntary Disclosure program. Don’t live in stress – instead, get the help and representation you need today. To learn more, contact us today.