December 30, 2022
What Do You Need to Know if You Have Been Contacted By IRS Criminal Investigation (IRS CI)?
Facing scrutiny from IRS Criminal Investigation (IRS CI) is a serious matter. As its name suggests, IRS CI is tasked with uncovering—and assisting in the prosecution of—criminal violations of the Internal Revenue Code (IRC). But, IRS CI’s investigative authority also extends far beyond the IRC, and it routinely announces investigations targeting individual and corporate taxpayers for money laundering, mail fraud, wire fraud, drug trafficking and other crimes.
In fact, IRS CI’s emphasis areas include several crimes that are not related specifically to tax fraud and tax evasion. Along with targeting companies and individuals for tax crimes, IRS CI also prioritizes enforcement in the areas of:
- Bankruptcy fraud
- Corporate fraud
- Financial institution fraud
- General fraud
- Illegal gaming and gambling
- Healthcare fraud
- Identity theft
- International crimes
- Narcotics-related offenses
- Public corruption
What Is IRS CI Investigating (and Why)?
With this in mind, when facing investigations from IRS CI, companies and individuals must quickly seek to discern the allegations that are under scrutiny. While defending against criminal tax allegations is not easy, defending against additional allegations of fraud or other crimes adds layers of difficulty. To avoid the risk of facing criminal fines and jail time, corporate officers and other individuals must develop and execute defense strategies that effectively address all of the allegations at issue.
When facing an IRS CI investigation, understanding why you or your company is facing scrutiny is important as well. Is IRS CI working with the Federal Bureau of Investigation (FBI), the U.S. Securities and Exchange Commission (SEC) or another government agency? Did a corporate whistleblower file a complaint? Is the investigation the result of information uncovered during an IRS audit? These are all very different scenarios that entail different risks and require different strategies.
Should You Cooperate with IRS CI’s Investigation?
Upon learning of an IRS CI investigation, many corporate officers and other individuals’ first question is: “Should I cooperate?” The answer to this question is, “It depends.”
Whether it is in a company’s or individual’s best interests to cooperate during an IRS CI investigation depends entirely on the circumstances involved. The same is true with regard to how much cooperation is warranted. In some cases, cooperating with IRS CI can be the best approach for facilitating a resolution that minimizes the risks involved. But, in others, the best approach will be to fight against the government’s allegations by all means available.
Cooperating with IRS CI (or any federal agency) during a criminal investigation can be risky. This is especially true when necessary precautions are not taken in advance. Sharing too much information, or sharing the wrong information, can facilitate prosecution, and, in most cases, once an incriminating disclosure has been made, the damage cannot be done (absent necessary protections).
While IRS CI has a Voluntary Disclosure Program that can mitigate the risk of prosecution in some cases, taxpayers are ineligible to participate in this program once an investigation is underway. At this point, any voluntary disclosure or other cooperation must be undertaken very carefully and with the advice and oversight of experienced defense counsel.
How Should You Approach an IRS CI Investigation?
Along with making an informed decision about whether (and to what extent) to cooperate—and in order to make this decision—there are several other steps that targeted companies and individuals must take when facing IRS CI investigations as well. Some examples of these steps include:
1. Engage Defense Counsel to Intervene in IRS CI’s Investigation
Engaging defense counsel to intervene in IRS CI’s investigation promptly is important for several reasons. Not only will experienced defense counsel be able to advise you regarding how best to approach the investigation, but your defense counsel will be able to communicate with IRS CI’s investigators on your (or your company’s) behalf as well. Your defense counsel can also address any impending deadlines, seek to delay the issuance of any search warrants or subpoenas and work to discern the full scope and nature of IRS CI’s inquiry.
2. Conduct an Internal Audit and Risk Assessment
Understanding the risks involved in an IRS CI investigation requires an in-depth understanding of the relevant facts. Targeted companies and individuals should work with their defense counsel to identify and examine all relevant records and communications in order to both: (i) assess the veracity of the allegations at issue; and (ii) determine what defenses they can assert. When facing scrutiny from IRS CI (or any federal agency), informed decision-making is critical, and making informed decisions requires a comprehensive understanding of the facts at hand.
3. Formulate a Targeted Defense Strategy
In criminal cases, federal prosecutors must be able to prove guilt beyond a reasonable doubt. With this in mind, executing a successful defense often focuses on preventing investigators from collecting the evidence prosecutors will need to secure a conviction. While there are limits on the extent to which companies and individuals can withhold information during federal investigations (and improperly withholding or destroying evidence can itself lead to criminal charges), there are various ways that experienced defense counsel can work to convince investigators that a referral for prosecution is unwarranted.
4. Pursue a Specific (and Desirable) Outcome
When facing an IRS CI investigation, resolving the investigation without the need to go before a federal grand jury is generally the best-case scenario. Working with their defense counsel, targeted companies and individuals should pursue a specific (and desirable) outcome. Whether this involves working to resolve the investigation without an indictment, negotiating a settlement, or preparing to defend against criminal allegations in federal court depends on the circumstances involved.
5. Be Prepared for Circumstances to Change
Finally, while developing an effective defense strategy and planning ahead are important, companies and individuals targeted in IRS CI investigations also need to be prepared for the circumstances to change. Cooperation from outside parties, additional allegations and various other changes in circumstances can all drastically alter the calculus of executing an effective defense.
Contact Brown Tax, P.C. in Texas for More Information
If you need to speak with experienced defense counsel about an IRS CI investigation, we encourage you to contact us promptly. Call 888-870-0025 or contact us online to speak with an attorney at Brown Tax, P.C. in confidence today.