The IRS Criminal Investigation Division Special Agent

The Criminal Investigation Division of the IRS is very similar to other Federal law enforcement agencies in many respects. The group is staffed with special agents who work on tax fraud and financial crime cases.

Special agents typically work on several tax fraud cases at one time, serving both administrative and Grand Jury case responsibilities on each case. Their job is to meticulously review and develop evidence to support criminal prosecution against taxpayers. They principally focus on tax offenses of failure to file, false returns, evasion, and currency and money-laundering schemes. Investigations conducted by special agents are typically extremely document and accounting record intensive and may take at least a year to develop before they are officially submitted for CI managerial review. They also often involve sophisticated tax, accounting, financial fraud, and evidentiary principles. Ultimately, a case may be referred up to CI for criminal prosecution based upon input, guidance, and first line review by the case special agent and his or her immediate supervisor. These individuals have a great deal of prerogative to determine whether a case is acceptable for investigation by CI and eventual criminal prosecution.

While a case is under investigation by the Criminal Investigation Division, the CI monitors and controls the taxpayer’s account information to ensure that all returns and other data concerning the taxpayer are retained by the system. If returns or refunds are submitted by the taxpayer while under CI investigation, they may be processed or assessed only if doing so will not jeopardize the investigation.

The Special Agent’s Investigative Reports

At the conclusion of an investigation, the special agent prepares a report summarizing the findings of the investigation and whether or not criminal prosecution was recommended.

When prosecution is recommended, special agents prepare a report using one of two formats. The Special Agent Report (SAR) is used for all tax and tax-related investigations. The Summary of Investigation (SOI) is the report used for non-tax Grand Jury investigations, including plea agreement cases.

The SAR is made up of a cover sheet, table of contents, report body, witness and exhibit lists, appendices, summaries of witness testimony, and exhibits. The report body contains the special agent’s recommendations and a conclusion section which describes the prosecution charges and duration, theory of prosecution, an analysis of the elements of any criminal offenses, any explanations or defenses provided by the defendant, and a record of any contact between the IRS and the taxpayer and his or her representative. If the special agent recommended prosecution at the end of the investigation, then the SAR may also contain a section titled “Other Pertinent Data,” which generally discusses the use of warrants, undercover operations, consensual and nonconsensual information-gathering tactics, any plea agreement information, and certain personal information about the taxpayer.

In a case not recommended for prosecution, there is a narrative report or form that is essentially treated as a closing report. In this type of report, the special agent may recommend that the matter be referred to another IRS division for further action. These reports are also carefully drafted to avoid any language that could potentially jeopardize later development of the fraud issue or the imposition of the civil fraud penalty upon the taxpayer.

What Happens if an Investigation is Discontinued?

Sometimes, there simply is not enough evidence to support prosecution of a taxpayer on criminal tax grounds. When it appears that there is not enough evidence to support prosecution, or there is no prosecution potential whatsoever, the special agent will recommend to withdraw the case from the CI. This step requires approval from the special agent’s manager, but once that is obtained, the case is considered “discontinued.” If this happens, the taxpayer will typically be notified in writing by a letter issued by the special agent in charge of the case. Where the case was referred to CI from another IRS operating division, it will revert back to that division once it is discontinued by the CI. If the case reached the level of a Grand Jury investigation, discontinuation requires notice sent to the IRS criminal tax counsel, concurrence by the prosecutor supervising the investigation, and the creation of an internal closing letter drafted by the Tax Division of the Department of Justice. If any of the evidence is subject to the secrecy restrictions of Rule 6(e) of the Federal Rules of Criminal Procedure, it will be stored and not passed back down to the civil divisions for further handling.

Does the Criminal Investigation Division Conduct Joint Investigations?

Sometimes, the CI may need assistance from personnel in the civil operations sphere of the IRS in order to conduct its investigations. These ventures are known as “joint operations” and are employed in both administrative and Grand Jury cases. In many joint investigations, the civil field agent who originally recommended a case for criminal prosecution may end up assisting the CI on the investigation. In such a situation, the non-CI employee will focus exclusively on gathering evidence to aid in the determination or collection of civil liability, while the CI special agent will continue to prove tax or other criminal violations. Non-CI agents may assist the CI special agent with conducting interviews, compiling work and analysis with respect to the taxpayer’s books and records or third-party data. They may also review the taxpayer’s tax returns and provide input as to whether a notice of deficiency should be imposed against the taxpayer.

How a Tax Attorney Can Help with Criminal Investigations

If you are under investigation by the IRS for a potential criminal prosecution, then you must consult with an experienced tax attorney. The Tax Lawyer - William D Hartsock Tax Attorney Inc. has been successfully helping clients with criminal tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.