IRS Criminal Investigation: When the Internal Revenue Service believes you have committed a tax crime, they may launch a criminal investigation against you. Typically, the IRS Special Agents will be tasked with conducting the investigation into your background, finances, and tax history to assess the damage. In recent years, with the service making foreign accounts compliance a key enforcement priority, taxpayers who have not properly disclosed offshore accounts, assets, investments and income are at a high risk.
Let’s review how the IRS conducts Criminal Investigations.
Criminal Investigation Tactics
The IRS, Department of Justice and the U.S. Government as a whole have made Federal Tax Crimes involving Tax Evasion and Tax Fraud that involve Foreign Income and Offshore Accounts a key enforcement priority.
Typical IRS Criminal Tax Investigations include:
- Tax Evasion
- Tax Fraud
- Money Laundering
- Structuring & Smurfing
Here are some of the more common tactics
Contacting Your Bank Manager
The only reason the IRS would reach out to your bank, is if the Service is building a case against you.
Oftentimes, when the IRS agent visits your bank manager, it is to begin comprehensive research on issues such as transfers, moving money offshore, and other matters related to your bank account.
They may want to know how often you come to the bank, and how often you request cash as opposed to other transfers.
They may also want to know if there any other non-primary individuals on the account, accessing your information and if there are other accounts that the IRS may not know about yet.
Showing up Unannounced at Your Home
When a person is not cooperating with the IRS, or consistently avoids appearing before the IRS, the IRS can get frustrated.
One way the IRS relieves its frustration is by visiting by a person’s residence to try to put pressure on them.
This can be done for two main reasons:
- The first reason is to put some pressure on the individual to let them know that the IRS is aware of where person lives and that the situation is not going away so quickly.
- Second, is so the IRS can monitor how the person reacts after the IRS appears at their home. For example, as a result of the IRS visiting their home unannounced, if a person under investigation begins making significant transitions or transfers of money from one location or account to another – it may help the IRS pursue a criminal investigation.
Showing up at your Employment or Place of Business
This is a little more intense, and is usually not protocol unless a person owns their own business.
Over the years, several of our clients have had visits from the IRS while in the pre-criminal investigation phase that the IRS showed up at their place of business to ask themselves – and other employees – various questions.
Of course, other individuals at the place of employment not required to speak to the IRS if they are not under subpoena or summons, but more often than not, they either do not know their rights and/or are too afraid to remain silent/
A Sudden Stopping of Communication From the IRS
If you are ever in an audit and the audit ends, but you are unable to obtain a closing letter or any other documentation from the IRS it may be cause for concern.
That is because when a civil audit is stopped either abruptly (or with a little more tact), before it seems like the audit is complete, it is because the IRS agent believes there is a criminal violation.
If the agent suspects a criminal violation, they are absolutely prohibited from asking further questions. That is because in a criminal setting, a person has a right against self-incrimination.
A civil audit is not a criminal investigation, and therefore the agent does not have the right to ask criminal type questions.
Interviewing your CPA
If the IRS believes the CPA has information regarding a potential criminal tax matter, the IRS will send them a summons and bring their own “court reporter” with them to a question-and-answer session.
While the CPA has the right to counsel, it is important to understand that if the IRS is taking these types of actions against people on your behalf, then chances are the IRS is at least trying to put together all the evidence he can to determine whether there may be a criminal issue at play.
Minimize IRS Criminal Investigations with Voluntary Disclosure
If you have come to the realization that you have undisclosed unreported foreign accounts — either because you acted willfully or non-willfully, there are options available to you to get into compliance.