IRS Criminal Investigation (CI) released its annual report, which details statistics for the 2014 calendar year, as well as its current enforcement priorities. The report yielded some interesting findings.
As expected, the budget cuts that have afflicted the IRS have also affected CI, with the overall number of investigations initiated down substantially from the two preceding years. Despite this decrease in investigations, however, the number of overall criminal convictions in 2014 was roughly the same as it was in 2013, and it is substantially higher than the number of convictions in 2012.
The annual report laid out CI's enforcement priorities, which include things like identity theft fraud, return preparer fraud, international tax fraud, counterterrorism and the "sovereign citizen" movement, as well as the ongoing Offshore Voluntary Disclosure Program. During 2014, CI initiated 4,297 criminal investigations. Of these, 3,272 resulted in criminal charges being brought. Of the defendants charged, a staggering 93.4% were ultimately convicted of a crime, whether at trial or by plea agreement. What this tells us is that the best opportunity for beating a criminal tax case is during the pre-indictment phase of the investigation.
The Department of Justice Tax Division oversees all federal criminal tax prosecutions. In order to seek criminal tax charges, federal prosecutors must first obtain Tax Division approval. At this point, the target(s) of the investigation can request a conference with Tax Division, where he or she can demonstrate why tax charges are not appropriate. On many occasions, our firm has successfully convinced Tax Division to decline prosecution.