IRS Criminal Investigations--How Initiated
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) or revenue officer (collection) 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 the further development of information, then additional 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 IRS Criminal Investigation 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.
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 they determine that 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:
1. The agent’s front line supervisor, called the supervisory special agent;
2. A criminal investigation quality review team, called a Centralized Case Review;
3. Criminal Investigation assistant special agent in charge;
4. Criminal Investigation special agent in charge.
If Criminal Investigation determines the investigation should be criminally prosecuted, a prosecution recommendation is forwarded to:
1. The Department of Justice, Tax Division, (if it is a tax investigation); or
2. The United States Attorney for all other investigations.
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 for prosecution, the investigation is managed by the prosecutors.
The ultimate goal of an IRS Criminal Investigation prosecution recommendation is to obtain a conviction or plea. The IRS has approximately 3,000 criminal prosecutions per year.
For consultation on a matter with the IRS, please call Gene M. Bowman with the Bowman Law Firm at 256-539-9850. The Bowman Law Firm is located in Huntsville, Alabama.