Am I being Targeted for IRS Criminal Investigation (How to Know)

Am I being Targeted for IRS Criminal Investigation (How to Know)

IRS Actively Investigates Foreign Accounts

Each year, the Internal Revenue Service targets thousands of taxpayers for criminal investigation. While the majority of tax violations are civil in nature – which means penalties are limited to monetary fines and sanctions – criminal violations do happen and can be much worse. This is because not only will the taxpayer becomes subject to monetary fines and penalties, but they may also become subject to incarceration if they are convicted of a tax crime. The IRS uses various different tactics and investigation techniques to monitor US taxpayers they believe may have committed a crime. This may include speaking with third parties, making contact with financial institutions utilized by the taxpayer — and other electronic communication analyses. Let’s take a look at five different investigative techniques used by the internal revenue service.

Loss of Communication with IRS Audit Agent

If a person is involved in a civil tax audit and the Agent believes that the taxpayer may have committed a tax crime, they are unable to pursue questions about the tax crime at the time of the audit. Instead, the agent will typically end the audit and refer the matter to their supervisor — and ultimately to the IRS Special Agents. The IRS Special Agents are tasked with conducting criminal investigations and it may be some time before anybody reaches out to the taxpayer — and the taxpayer may get a false sense of security that the matter has been resolved when it is really just getting started.

The IRS May Contact Foreign Financial Institutions (FFIs)

If the Internal Revenue Service believes that a taxpayer may have committed a financial crime, they are able to reach out to the Financial Institution in order to ascertain information about the accounts and movement of the money. Depending on whether or not they are pursuing a formal or informal investigation can impact the lengths that go to try to obtain the information. It could result in the US government seeking a summons/subpoena in order to obtain the necessary information — and this is typically done without letting you know first. Other times, the IRS visits the FI knowing that the taxpayer has a close relationship with the bank manager and will reach out knowing that the Manager will inform the taxpayer — then the IRS can track the taxpayer’s movements.

Uninvited IRS Agent at Your Home

Depending on what type of tactic the IRS wants to use, they may show up at the taxpayer’s home in order to ask questions about the purported violation. Taxpayers should never speak with a special agent or any government agent at this time. Instead, they should ask for identification and a business card — and let the agent know that they will reach back out to them through their attorney (even if they do not have an attorney yet). Some taxpayers (unfortunately) believe they can talk themselves out of the situation, but 99% of the time they just dig themselves into a deeper hole.

Showing up at the Taxpayer’s Place of Business

When the US government wants to apply more pressure, they may show up at a taxpayer’s place of business in order to interview third parties. In general, third parties are not necessarily required to speak with the agents. And, it is very important for employees at employment organizations to know their rights as well and be aware that just because an IRS Special Agent wants to talk to them about another person does not mean they have to talk to them. (It also doesn’t mean they have to be rude, it just means they do not have to communicate directly with the agent).

Unscheduled Meetings When A Taxpayer Least Expects it

In order to try to rattle the taxpayer, often times the IRS Agents will appear at locations that the Taxpayer will least expect. This may be at dinner with a business colleague or friend,  a health club, or another establishment that the taxpayer frequents. The purpose of this is to intimidate the taxpayer and let them know that they are under surveillance. The Special Agents then track how the taxpayer’s response to seeing how the taxpayer acts once they know they are under IRS investigation, such as who they go visit and do they begin transferring money or other assets.

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 that 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 of the Streamlined Procedures. 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

Golding & Golding: About Our International Tax Law Firm

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

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