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March 2, 2017


IRS Criminal Investigation report shows aggressive prosecution

We regularly represent taxpayers, businesses and tax preparers in Texas and beyond facing potential tax-related criminal investigation or charges by the IRS Criminal Investigation division. This week, the IRS announced in a news release that it had released its fiscal year 2016 annual report of Criminal Investigation activities.

Criminal defense in tax-crime matters essential

An important take away from the FY 2016 report is that no one should face the full force of the IRS without the advice and representation of experienced legal counsel when CI is investigating or considering criminal charges. According to the news release, during FY 2016 the division’s conviction rate was more than 92 percent. This level of prosecutorial success shows that the agency is very serious about tax crime cases, which can bring severe penalties and sanctions for convictions, including asset forfeiture and jail time.

Other negative consequences, even without conviction, can include damage to reputation, loss of professional licenses or difficulty obtaining employment.

It is important to engage a tax lawyer as early as possible – even at the audit stage – to protect the taxpayer or preparer’s constitutional and legal rights. To prepare for negotiation or advocacy, a lawyer will consult with financial experts as necessary to assist in understanding the matter in detail.

The attorney will communicate with the IRS on behalf of the client, including in negotiation that could lead to a settlement of the matter that may not include a conviction. If the matter should go to trial, seasoned counsel will advocate fiercely on behalf of the client in the courtroom, before a jury or, if necessary, at sentencing. In some cases, a lawyer may file an appeal or seek other postconviction relief.

Tax crimes and CI priorities

In FY 2016, CI kicked off almost 3,400 criminal cases, concentrating on cybercrime, financing of terrorism, identity theft, money laundering and public corruption. Examples of additional federal crimes related to taxation involving private individuals or businesses include:

  • Tax fraud
  • Failure to file a tax return
  • Tax evasion, domestic and international
  • Understating taxes owed, possibly by understating income or other taxable gain, overstating allowable deductions or using credits inappropriately
  • Failure to collect or pay employment taxes
  • Various conspiracy or aiding and abetting charges
  • Related perjury or false-statement charges
  • Tax violations related to drug crimes
  • And many others

The CI also targets crimes related to so-called abusive and dishonest return preparers. Currently the division focuses on tax preparers who file fraudulent returns, including those that claim credits on client returns like the earned income tax credit or EITC without performing due diligence to uncover actual eligibility.

The report includes detailed summaries of a wide variety of tax-related criminal cases the IRS handled in FY 2016.

A seasoned tax attorney can answer questions about the IRS focus on criminal tax activity.

Tax Crimes