Skimming, Embezzlement, Accounting Fraud & Other Non-Tax Crimes in IRS CI Investigations

While IRS Criminal Investigation (IRS CI) investigates U.S. taxpayers suspected of committing tax crimes, it conducts investigations targeting a wide range of other suspected federal offenses as well. For taxpayers facing scrutiny from the IRS CI, it is crucial to ensure they have a clear and comprehensive understanding of the allegations at issue. Learn more from Texas criminal tax lawyer Lawrence Brown.

10 Examples of Potential Non-Tax-Related Allegations in IRS CI Investigations

The IRS CI is the criminal enforcement arm of the IRS. However, rather than targeting tax crimes exclusively, IRS CI works to gather evidence of numerous types of offenses that the U.S. Department of Justice (DOJ) can prosecute in federal court.

While most of these non-tax crimes are financial in nature, IRS CI assists with the investigation and prosecution of other types of serious federal crimes as well. With this in mind, some examples of charges that can result from IRS CI investigations include:  

1. Skimming

Skimming, also known as defalcation, involves diverting a business’s receipts so that they do not enter the business’s accounting system. While the primary purpose of skimming is generally to evade income tax liability, skimming is a federal offense on its own. Special Agents with IRS CI use various strategies and resources to uncover skimming, including conducting digital forensics and obtaining information from third parties.  

2. Embezzlement

Embezzlement involves abusing a position of trust or authority within a company, partnership, or institution to illicitly divert funds for personal use. IRS CI routinely targets insiders, bank personnel, and other individuals in embezzlement investigations. While the specific penalties for embezzlement depend on the circumstances involved, generally speaking, a conviction can lead to both substantial fines and federal prison time.

3. Accounting Fraud

IRS CI targets both entities and individuals in accounting fraud investigations. In many cases, IRS CI will conduct these investigations alongside the U.S. Securities and Exchange Commission (SEC), Federal Bureau of Investigation (FBI), and other federal law enforcement authorities. In these cases, these authorities often cast an extremely wide net—targeting not only corporate insiders, but accountants, consultants and other alleged co-conspirators as well.

4. Bank Fraud

Bank fraud is another federal crime that IRS CI routinely targets in its investigations. Allegations of bank fraud can take many different forms, from submitting false information on loan applications to check kiting schemes and other similar types of unlawful practices. In all cases, bank fraud charges carry substantial penalties, including up to a $1 million fine and 30 years of federal imprisonment.

5. Government Contract and Program Fraud

IRS CI is one of several federal authorities that investigates government contract and program fraud. This includes alleged fraud under contracts with all federal agencies as well as fraud under healthcare programs, disaster relief programs, and other similar types of programs that involve the disbursement of federal funds. Notably, IRS CI is continuing to aggressively target fraud under pandemic-era relief programs (including PPP fraud and ERC fraud)—as made clear by its recent press releases.

6. Money Laundering

Money laundering involves attempting to conceal the source of funds obtained through unlawful activity. The federal money laundering statute is extremely broad, and it allows the DOJ to target multiple individuals and organizations in a wide range of circumstances. In many cases, allegations of money laundering and tax evasion will go hand-in-hand, exposing the targets of IRS CI investigations to multiple substantial penalties.

7. Mail Fraud and Wire Fraud

Mail fraud and wire fraud allegations often go hand-in-hand with tax evasion allegations (among others) as well. The federal mail fraud and wire fraud statutes make it a federal offense to use the mail, phone communication, or the Internet in connection with the commission (or attempted commission) of a federal crime. Both of these statutes include provisions for substantial penalties, and, due to their breadth, federal prosecutors can pursue charges even when they lack the necessary evidence to prove a substantive offense.

8. False Statements

Making false statements to federal agents is a crime under 18 U.S.C. Section 1001. Similar to mail fraud and wire fraud, IRS CI and the DOJ can pursue charges for making false statements under a wide range of circumstances; and, if the target of an IRS CI investigation makes false statements to a Special Agent during the investigation, this can lead to federal prosecution regardless of whether the investigation was warranted.

9. RICO Violations

IRS CI also routinely conducts investigations targeting Racketeer Influenced and Corrupt Organizations (RICO) Act violations. Broadly, the RICO Act allows prosecutors to target organized criminal enterprises, although the level of “organization” needed to substantiate RICO allegations is fairly minimal. By their nature, IRS CI investigations targeting RICO violations will often involve exposure to charges for mail fraud, wire fraud, money laundering, and various tax-related offenses as well.

10. Narcotics and Weapons-Related Offenses

IRS CI plays a role in a surprising number of federal investigations targeting narcotics and weapons-related offenses. It tends to focus on cases involving trafficking, which also typically have financial and tax-related implications. These cases can involve the potential for substantial criminal penalties as well—and fighting to avoid these penalties requires highly experienced federal defense counsel.

Are You Under Investigation By The IRS CI?

If you are reading this because you are under investigation by the IRS CI, what do you need to know?

The most important thing you need to know is that time is of the essence. These investigations can move quickly, and by the time you find out that you are a target, IRS CI (and its federal law enforcement counterparts) may already have a substantial amount of evidence against you. Engaging federal defense counsel is the first step toward mitigating your risk, and you should consult with an experienced Texas criminal tax lawyer in confidence as soon as possible.

Request a Confidential Consultation with Texas Criminal Tax Lawyer Lawrence Brown

Texas criminal tax lawyer Lawrence Brown represents high-income and high-net-worth taxpayers in IRS CI investigations and related criminal prosecutions. To request a confidential consultation, call 888-870-0025 or tell us how we can reach you online now.