Investigations into possible fraud and tax crimes conducted by the Criminal Investigations Diviion often involve numerous interviews of taxpayers, taxpayer’s representatives, and other third parties.
Third Party Interviews Used in Criminal Investigations
Third party interviews are used in nearly every IRS criminal investigation and these individuals are interviewed about their knowledge of the subjects and occurrences under investigation. If the third party has any documents pertaining to the investigation, they will be obtained and copied by the IRS. The most common third party witnesses are tax return preparers, employees of financial institutions, the taxpayer’s business associates, and others who can independently establish elements of the criminal offense for which the taxpayer is being investigated. Interviews conducted by special agents are sometimes recorded, and a post-interview memoranda is typically prepared as well. If the third party is a tax preparer and a false or fraudulent return crime is being investigated, the special agent will also obtain a sworn statement regarding the preparation of the tax return.
How Does the Criminal Investigation Division Conduct Interviews?
Interviews performed in connection with a criminal investigation are thoroughly planned in advance after the special agent has had time to research all publicly available evidence, existing case evidence, tax returns, and other information available in IRS databases. Witnesses other than the taxpayer also can provide evidence and information to be used by the special agent over the course of the interview. When a special agent begins an interview, he or she typically does not give detail about the criminal nature or any other particulars of the investigation against the taxpayer. Such disclosures are only made when they are necessary to conduct the interview.
Criminal investigation interviews are rarely conducted by the special agent alone. Typically, another IRS agent or employee will also be present with the special agent during the interview. Interviews are recorded in written form by the special agent, and may take the form of an affidavit, unsworn statement, a transcript of the questions and answers, or a memorandum. If the witness wishes to see a copy of the final written report, it will be furnished to him or her upon request. During the interview, the witness has the right to have counsel present; however, the counsel’s ability to interfere with the special agent’s questioning is limited and counsel cannot control the scope or censor the subject matter of the interview. The subject taxpayer does not have the right to be present during third party witness interviews.
How are Circular Form Letters used in Criminal Investigations?
In conducting its criminal investigations, the IRS may need to obtain similar documents and evidence from similarly situated third party witnesses. In order to contact the greatest number of necessary witnesses in an efficient manner, the IRS employs a process called circularization, which involves the use of form letters or “circulars”. This techniques is particularly useful where the special agent investigating the case needs to contact a large number of third party witnesses who are dispersed geographically. Circular form letters should be used only in limited circumstances. In order to use circular form letters, the special agent must be sure to familiarize himself or herself with the law and regulations governing the use of disclosures. Specifically, the circular form letter can disclose that the taxpayer in question is under investigation by the IRS Criminal Investigation Division, but it should be careful not to suggest that the taxpayer is guilty of wrongdoing. Although it is unlikely that an indictment would be thrown out for improper use of form circular letters, it would be possible for a taxpayer to receive a civil remedy for damages if the special agent misuses the technique.
How are Summonses Used in Criminal Investigations?
In non-Grand Jury cases, special agents frequently rely on administrative summonses to gather evidence in support of their case against a taxpayer. Summonses can be used against the subject of the investigation as well as third parties to obtain books and records, accounting records, and other documents pertinent to the taxpayer’s situation. Summonses can require the production of a variety of documents, including some that would not have been used in the preparation of a tax return or admissible in a judicial proceeding. Moreover, summonses are not governed by any particular civil or criminal statute of limitations, so they may be used to require production of records for tax returns before and after the subject tax year in question. They can also be used to compel appearances and testimony. The special agent’s ability to issue summonses is fairly broad and may be used merely on “official curiosity.” They can be issued without even a showing of probable cause and can be used to identify an unknown taxpayer who might have unpaid tax liability. A summons can be used to compel the production of documents that may obtained elsewhere by the special agent, including information from other federal agencies. If the special agent wants information and documents previously obtained from a third party during the course of a grand jury investigation, he may be able to do so through the use of summonses.
One of the only restrictions place on the use of summonses is that they be reasonable with respect to the time and location of their response, and cannot be on a Saturday, Sunday, or other official holiday. The place for return indicated on the summons may be designated as that which suits the witness’ convenience, or may be specified as the special agent’s office.
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 criminal tax attorney.
San Diego Tax Lawyer, William D Hartsock Esq. 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.