I Received a Letter from IRS Criminal Investigation (IRS CI). What Now?
September 29, 2023
IRS Criminal Investigation (IRS CI) conducts inquiries targeting a wide range of both tax-related and non-tax-related offenses—and these inquiries can present substantial risks for high-asset and high-income taxpayers. This includes not only the risk of substantial liability for back taxes, interest and fines, but also the risk of federal incarceration.
As a result, when a taxpayer (or the representative of a corporate taxpayer) receives a letter from IRS CI, a proactive but measured response is required. IRS CI regularly touts its successes, and avoiding both unwanted publicity and unnecessary consequences starts with making informed decisions with a clear strategy in hand. While IRS CI investigations can lead to criminal prosecution, it is often possible to favorably—and quietly—resolve these investigations with the right approach.
What You Need to Know When Facing an IRS CI Investigation
So, you’ve received a letter from IRS CI. What do you need to know? Here are some key considerations for both individual taxpayers and corporate representatives when faced with a criminal investigation:
1. What Does the Letter Say?
One of the first steps to take after receiving a letter from IRS CI is to read the letter carefully. What does it say? Are you (or is your company) a target? Or is IRS CI seeking information in connection with an investigation into a third party? What are the investigating agents requesting, and when are you expected to respond? These are all critical pieces of information that will play a role in determining your next steps.
2. What is Your (or Your Company’s) Risk Exposure?
If you or your company is under investigation, you will need to promptly conduct a risk exposure assessment. This assessment should be guided by and conducted with the oversight of outside counsel. This will provide the protections of the attorney-client privilege, and it will also allow you to rely on the advice of counsel as you go through the process of collecting and reviewing all pertinent documentation.
3. What Are Your Options?
Any time you are dealing with a federal investigation, you need to ensure that you are giving due consideration to all of your options. At this point, voluntary disclosure is off of the table, but should you cooperate with IRS CI’s investigation? If so, to what extent? If cooperating is not the best approach, how can you effectively confront the investigation without increasing your risk of prosecution in the process?
4. What Are the Potential Outcomes?
Along with evaluating your options, it is equally important to identify and assess the likelihood of all potential outcomes. IRS CI investigations are criminal by nature—so what is the worst-case scenario if the U.S. Department of Justice (DOJ) brings charges and secures a conviction at trial? What can you reasonably expect from a settlement with the IRS? If you don’t settle before the DOJ secures an indictment, what can you reasonably expect from a plea deal? Critically and realistically assessing all potential outcomes is imperative for making informed decisions at all stages of the process.
5. What is the Best Strategy Under the Circumstances?
Once you have a clear understanding of the relevant facts, your options, and the potential incomes, then you can shift your focus to developing a targeted defense strategy. Can you (or your counsel) convince IRS CI that its inquiry is misguided and that further investigative efforts are unwarranted? If not, does it make sense to work with IRS CI under the circumstances, or is the best course of action to challenge IRS CI’s allegations and/or investigative tactics in court?
6. What Can You Expect from IRS CI During the Investigation?
IRS CI uses various investigative tools and tactics to gather information in support of criminal prosecutions. In most cases, issuing a target letter is just the first step of many. Subpoenas, search warrants, interview requests, and other investigative tools and tactics all present different risks and opportunities, and being able to anticipate what is in the pipeline is essential for strategic planning as well.
7. Are Any Other Federal Agencies Involved?
In many cases, IRS CI works alongside other federal agencies to conduct large-scale investigations. If IRS CI isn’t the only federal agency investigating, this is a critical fact that you need to know—and you need to know it as soon as possible. Dealing with multiple federal agencies adds to the challenges and risks of facing scrutiny, and it will impact your strategy significantly.
8. Are Any Other Targets Involved?
Another key piece of information you need when facing an IRS CI investigation is whether any other targets are involved. If you or your company is being targeted as part of an alleged large-scale criminal conspiracy, this will significantly impact your defense strategy as well.
9. How Long Has the Investigation Been Ongoing?
Like all federal agencies, IRS CI makes strategic decisions about when to notify targets of its investigations. The longer its investigation has been ongoing, the more information it is likely to have in its possession—and the closer it may be to seeking an indictment.
10. How Should You Approach Your (or Your Company’s) Defense?
The answers to these questions (among many others) will determine what you should do next after receiving a letter from IRS CI. Ultimately, the key is to formulate an informed defense strategy that is custom-tailored to the circumstances at hand. To ensure that you are making smart decisions with your (or your company’s) best interests in mind, you should speak with a federal criminal tax lawyer as soon as possible.
Contact Brown Tax, P.C. for More Information
If you need to speak with a federal criminal tax lawyer about a letter from IRS CI, we invite you to get in touch promptly. We represent high-net-worth and high-income individual and corporate taxpayers in significant criminal tax matters. To request an appointment with a lawyer at Brown Tax, P.C., please call 888-870-0025 or contact us online today.