Did IRS Special Agents Approach You, What Should You Do?

IRS Special Agents

Did IRS Special Agents Approach You?

In a majority of situations involving the Internal Revenue Service, when a taxpayer has run afoul of U.S. tax law, it will be a civil issue and not a criminal issue. And, while taxpayers may become subject to significant fines and penalties for a civil tax violation (although not always), there is no risk of incarceration or loss of liberty. Sometimes, unfortunately, taxpayers can become the subject of an IRS criminal investigation. In this type of situation, taxpayers will receive an unexpected visit from the IRS Special Agents. Typically, they will approach the taxpayer when the taxpayer is not ready and wants to question the taxpayer about various facts and circumstances related to a potential criminal violation either involving themselves or a third party. When taxpayers are approached by the IRS criminal investigation unit, they must be very cautious in what they say because the:

• • • The taxpayer may not know what the matter is about;

    • The taxpayer does not know how much information the IRS already has;

    • Trying to talk your way out of this situation can typically only make it worse; or

    • It is better to have an attorney with you when communicating with the us government.

Because there has been an uptick in enforcement protocols involving the failure to file various international information reporting forms, especially in matters involving high-income earners abroad, foreign trusts, and other passive entities, let’s look at what taxpayers can do to protect themselves in a situation in which they’re visited by the special agents from the IRS Criminal Investigation Department.

First, Be Respectful to the Agent

While it can be very intrusive and disrespectful when the agents approach a taxpayer in a situation in which the taxpayer is not ready, such as when they are leaving their home,  sending their children off to school, or leaving work, it is important to understand that that is their plan. The goal of the IRS Special Agents is to get you off-balance and talking – since most taxpayers are more inclined to talk in situations in which they are taken by surprise and uncomfortable – and feeling uneasy about not knowing why the Agents approached them in the first place. Especially in a situation in which the taxpayer may have recently dropped their children off at school or something family-related, it puts the taxpayer into a very difficult mental strain — and the agents want to take advantage of this. As much as the taxpayer may want to go off on the agents it is typically better to just be respectful.

Tell The IRS Special Agents You Will Contact Counsel

But, being respectful does not mean speaking with the agents directly outside of your counsel.

Therefore, we always recommend that when taxpayers are approached by the IRS Special Agents they calmly let the agents know that they will be contacting their attorney and then the attorney will be contacting the special agents to schedule an interview we’re meeting. No matter what the agents say after that — and how much they are trying to goad the taxpayer into speaking — taxpayers should not engage in a conversation with the agents.

Despite what the Taxpayer may think they know, the taxpayer usually is unaware specifically why the agents may be approaching them, the amount of information that they already have, or if the taxpayer is even personally under investigation or if it is a third party. There is no point in guessing at the issue and giving the IRS agents ammunition or fuel for their investigation because quite frankly the Taxpayer may end up providing the Agents information that they did not have and were not anticipating getting from the Taxpayer in the first place.

Be Careful Where You Go Next

Sometimes, the IRS agents will approach a taxpayer just to let them know that they are under investigation but not necessarily ask the taxpayer any specific questions.

The goal of this strategy is to rattle the taxpayer and then the agents will follow the taxpayers to determine what happens next. For example, does the taxpayer go to one of their foreign financial institutions and begin transferring or withdrawing money? Alternatively, or in addition to this, who does the taxpayer visit after they have been confronted by the IRS Special Agents? This helps the IRS Special Agents from the Criminal Investigation Department to prepare a roadmap for their investigation and so taxpayers should be cautious about how they move and who they communicate with after they have been confronted by the special agents.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

This resource may help taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.