IRS Criminal Tax Investigations
The IRS has a special unit dedicated to investigating potential criminal violations of the Internal Revenue Code and related financial crimes including money laundering, currency crimes, antitrust violations and Bank Secrecy Act violations. This unit, the IRS Criminal Investigation Division (“CI”) is composed of Special Agents who are expertly trained financial investigators. CI Special Agents employ law enforcement techniques such as wiretaps, search warrants and undercover operations. These agents aggressively conduct exhaustive, in-depth investigations into individuals and businesses to uncover tax and financial crimes, including:
General Tax Fraud Washington, DC Criminal Tax Attorney
Return Preparer Fraud
Abusive use Trusts
Employment Tax Fraud
Undisclosed Offshore Accounts
Excise Tax Fraud
CI’s conviction rate is one of the highest in federal law enforcement. Not only do the courts hand down substantial prison sentences in such cases, but those convicted must often pay fines civil penalties and interest in addition to any back taxes owed.
18.104.22.168.1.3 (11-01-2011) Court Appeals
While income tax investigations may be petitioned before the U.S. Tax Court without prepayment of the taxes, excise tax investigations of interest to CI generally are not contested before the U.S. Tax Court (see subsection 22.214.171.124.2). Challenges to such excise tax investigations generally are made to either the U.S. Court of Claims or the U.S. District Court, and then only upon prepayment of some amount of outstanding tax.
126.96.36.199.3 (09-09-2004) Excise Tax Investigations
Excise tax returns, unlike those for income taxes, do not lend themselves to analysis to determine the possible existence of tax violations. The information contained in quarterly excise tax returns on Form 720, Quarterly Federal Excise Tax Return, is limited to the kind of tax, the gross tax, the credit for overpaid tax in prior returns, and the net tax due.
Excise tax investigations related to false or fraudulent returns usually result from referrals following field audits of taxpayers’ books and records. As violations applicable to excise taxes often occur simultaneously with income tax offenses, field audits conducted by the operating division in income tax matters often disclose violations with respect to excise taxes.
Referrals in such investigations often relate to both excise and income tax violations. Investigations of offenses involving willful failure to file excise tax returns, or willful failure to collect and pay over excise taxes, are usually based upon referrals from the civil operating divisions.
Excise tax violations are also disclosed through surveys conducted by CI and from information obtained by special agents during his/her investigation of income tax offenses. As most excise tax offenses are committed in conjunction with income tax violations, investigation of both types of violations usually arise from the same sources.
188.8.131.52.4 (09-09-2004) Techniques of Excise and Income Tax Investigations Compared
Although the criminal penalties for most excise tax violations are imposed by the same Title 26 sections that relate to income taxes, the nature of the evidence needed to sustain prosecution of excise tax violations differs in many respects from that required in income tax investigations.
Excise tax is based on specifically enumerated articles or services, whereas income tax is based strictly on income.
For this reason, the established methods for determining income in income tax investigations may be inadequate to sustain a criminal prosecution for evasion of the excise tax on specifically enumerated articles or services.
Under certain circumstances the specific item method of proving income may be effectively used in excise tax investigations, especially if adequate records are maintained by the taxpayer.
Any other method of proving income may be used if the circumstances are such that the evidence developed will serve to establish or buttress proof of a violation of the excise tax on the specifically enumerated articles or services involved.
In general, the investigative techniques applicable to income tax investigations may be used in excise tax investigations.
184.108.40.206.5 (11-01-2011) Jeopardy Assessment in Excise Tax Investigations
Title 26 USC §6862 provides that if the secretary believes the collection of any tax (other than income tax, estate tax, gift tax, and the excise taxes imposed by Chapters 41, 42, 43, and 44) under any provision of the Internal Revenue laws will be jeopardized by delay, he/she should, whether or not the time otherwise prescribed by law for making a return and paying such tax has expired, immediately assess such tax (together with all interest, additional amounts, and additions to the tax provided for by law).
220.127.116.11.6 (09-09-2004) Criminal Penalties for Excise Tax Violations
Criminal penalties for most violations of excise taxes are imposed by the same USC sections that relate to income taxes and cover offenses such as:
willful failure to file a return, pay tax, supply information, or keep records
willful failure to account for, collect, and pay over a particular tax
willful attempts to defeat the tax in any manner
The USC also provides specific penalties that are only applicable to the various excise taxes. (The various criminal penalties are enumerated in IRM 9.1.3, Criminal Statutory Provisions and Common Law.) For example, 26 USC §7215 and 26 USC §7512, relate to offenses involving collected taxes and cover non-compliance with an official notice to collect and deposit "trust fund" taxes.
(CID) CRIMINAL INVESTIGATION DEPARTMENT
Income Tax Investigations