What Happens to a Tax Case If I’m Under IRS Criminal Investigation?

First, the smartest thing the taxpayer can do is to stop talking. It absolutely must be understood that a criminal tax case is qualitatively completely different from a civil case.

Unlike a civil tax case, a criminal tax case is not about money. The taxpayer may have a rich uncle who is willing to pay every single dime owing on his behalf, but that will not stop a criminal investigation from going forward. Money is only secondary in a criminal case. The amount of money that was lost to the government through the scheme only has importance in determining the severity of the penalty for the crime.

The primary focus of a criminal case is coming up with the proof to be able to convict the target of a tax crime, the most usual of which is tax evasion. By the time criminal investigation division (CID) agents get involved they will not be interested in financial settlements like the revenue agents.

The criminal investigation is focused on finding the evidence that will support the key element of a tax crime – “willfulness” – purposeful conduct on the part of the taxpayer to fool the government from getting the tax to which it is legally entitled. Common examples are knowingly preparing false books of account, concealing income, taking phony deductions, or making misleading statements.

The misleading statements include those that are made during the course of the investigation. Instead of “trying to talk your way out of it”, it is advisable that the taxpayer exercise his legal right to not talk to investigators, excuse himself and hire a legal representative. As they say on TV, anything you say can and will be used against you.

Criminal tax cases can take a number of paths. Some die out after a few months, possibly because investigators do not uncover evidence of sufficient weight or quality that it will support a finding that the conduct in question was criminal “beyond a reasonable doubt,” or other more serious cases will command the office’s attention. Others will prove productive and end in a plea agreement or trial, if the taxpayer decides to take the higher-risk route.

Nationally criminal tax cases are actually few and far between. However, the taxpayer with a tax problem that he knows involves an element of fraud, or could be characterized as such by the government, is wise to seek advice.