We all aim to be honest with regards to our taxes, but sometimes mistakes are made, or misunderstandings occur. When this happens, you could face an investigation by the Internal Revenue Service. Being investigated by the IRS is intimidating and prosecutors treat tax fraud charges very seriously.
The IRS will investigate a variety of crimes based on taxes. The IRS may perform a general fraud investigation if they suspect a taxpayer intentionally and willfully was noncompliant with tax filing requirements and/or paying the appropriate amount of taxes. The IRS may also perform a non-filer investigation if they suspect a person is making frivolous tax arguments to avoid paying taxes.
Some IRS investigations involve organizations, rather than individual taxpayers. For example, the IRS will investigate suspected abusive return preparer fraud. This is fraudulent activity committed by tax preparers who file false income tax returns. Corporate fraud will also be investigated by the IRS if they suspect corporate and individual tax returns have been falsified. Suspected employment tax evasion will also be investigated by the IRS.
IRS investigation procedure
When an IRS investigates possible criminal activity, the investigation begins when an auditor or collection officer notices what looks like fraud. A special agent will analyze this information to determine whether a tax crime has allegedly been committed. This is known as a “primary investigation.” If approved by a supervisor, the investigation is elevated to a “subject criminal investigation.” The special agent will work with IRS Chief Counsel Criminal Tax Attorneys to obtain all facts and evidence necessary to meet the elements of the alleged crime.
The special agent and their supervisor will then issue a determination known as the “special agent report” stating that either there is not enough evidence to charge the taxpayer with a crime and the investigation will be “discontinued,” or there is enough evidence to support prosecution. If criminal prosecution is recommended, the agent forwards the recommendation to the Department of Justice, Tax Division, for tax-related investigations or the U.S. Attorney for non-tax related investigations.
What can you do if you are being investigated by the IRS?
You should take any IRS investigations and tax charges seriously. There are ways you can protect your interests. You can work with legal professionals to address the investigation. After all, oftentimes mistakes or miscommunications are made, and you should not have to pay more than what you owe or be penalized in other ways.