The Internal Revenue Service Criminal Investigation Division conducts criminal investigations regarding alleged violations of the Internal Revenue Code, the Bank Secrecy Act and various money laundering statutes. The findings of these investigations are referred to the Department of Justice for recommended prosecution.
Criminal Investigations can be initiated from information obtained from within the IRS when a revenue agent (auditor), revenue officer (collection) or investigative analyst detects possible fraud. Information is also routinely received from the public as well as from ongoing investigations underway by other law enforcement agencies or by United States Attorneys offices across the country.
Special agents analyze information to determine if criminal tax fraud or some other financial crime may have occurred. Relevant information is evaluated. This preliminary process is called a “primary investigation.” The special agent’s front line supervisor reviews the preliminary information and makes the determination to approve or decline the further development of the information. If the supervisor approves, approval is obtained from the head of the office, the special agent in charge, to initiate a “subject criminal investigation.” At this point, at least two layers of CI management have reviewed the ‘primary investigation’ material and determined there is sufficient evidence to initiate a subject criminal investigation.
Once an investigation is opened, the special agent obtains the facts and evidence needed to establish the elements of criminal activity. Various investigative techniques are used to obtain evidence, including interviews of third party witnesses, conducting surveillance, executing search warrants, subpoenaing bank records, and reviewing financial data.
The special agent works closely with IRS Chief Counsel Criminal Tax Attorneys during the course of the criminal investigation. This process ensures all legal aspects of the investigation and prosecution recommendation are correctly addressed. Having a well-trained criminal tax defense attorney during this stage can help ensure the IRS follows all the rules and doesn’t violate procedures and/or trample your constitutional rights.
After all the evidence is gathered and analyzed, the special agent and his or her supervisor either make the determination that evidence does not substantiate criminal activity, in which case the investigation is ‘discontinued,’ or the evidence is sufficient to support the recommendation of prosecution, in which case the agent proceeds with the preparation of a written report detailing the findings of violation of the law and recommending prosecution. This report is called a “special agent report” and it is reviewed by numerous officials, including:
If CI determines the investigation should be criminally prosecuted, a prosecution recommendation is forwarded to:
Each level of review may determine that evidence does not substantiate criminal charges and the investigation should not be prosecuted.
If the Department of Justice or the United States Attorney accepts the investigation for prosecution, the IRS special agent will be asked by the prosecutors to assist in preparation for trial. However, once a special agent report is referred to for prosecution, the investigation is managed by the prosecutors.
The ultimate goal of an IRS Criminal Investigation prosecution recommendation is to obtain a conviction – either by a guilty verdict or plea. The IRS conducts approximately 3,000 criminal prosecutions per year.