The Internal Revenue Service (“IRS”) is the federal agency that collects taxes. One of the main functions of the IRS is to administer the Internal Revenue Code
(the “tax code”). The tax code is a series of federal tax laws.
However, the IRS does not only collect taxes. It also investigates criminal activity related to the tax code, such as identity theft, tax fraud, narcotics, and money laundering. In addition, the IRS provides assistance to individuals and organizations with tax filings.
Are you being investigated by the IRS for criminal activity? If so, hiring an experienced attorney can make an otherwise overwhelming experience more manageable. The IRS has sophisticated tools to uncover criminal activity. You need an attorney who has the foresight as to what exactly the IRS is searching for.
The IRS Casts a Wide Net to Capture Different Crimes
The IRS acts as a powerful law enforcement agency. The IRS single-handedly caused the demise of Al Capone, one of the most notorious mobsters of all time. By securing his conviction for tax evasion, Al Capone was finally within the reach of federal law enforcement.
Types of Crimes Investigated by the IRS
The IRS investigates a garden-variety of crimes, including:
- Identity Theft
- Cyber Crimes
- Tax Fraud
- International Financial Crimes
- Public Corruption
- Corporate Fraud
- Money Laundering
- Organized Crime
- Narcotic Trafficking
The crimes the IRS handles typically deal with finances. Most actions investigated by the IRS implicate tax evasion. However, the IRS also investigates terrorist organizations, organized crime rings, and cyber criminals.
The IRS As a Vehicle for Law Enforcement
The IRS works relentlessly to combat criminal activity. The IRS has access to advanced tools that make its job easier. It is also constantly changing its investigative techniques. The IRS even employs undercover agents and informants to investigate potential crimes. There is virtually no transparency in the processes leading up to an audit.
Some of the audits the IRS conducts are random. However, if you are being audited, there is no way for you to know if it is truly random or if you are being targeted. These advanced practices are responsible for the IRS’ high success rate in combating crimes.
Functions of the IRS
The IRS acts on behalf of the President to enforce federal tax laws. The IRS is the largest bureau under the Department of the Treasury. It is responsible for collecting almost all internal revenue in the United States. The IRS operates with a $12 billion budget and approximately 92,000 employees.
The IRS started as an agency to collect only income tax. It has since expanded in size and power. The IRS now enforces and collects several types of taxes, including those relating to employment, corporate income, excise, gifts, and estates. The taxes the IRS collects fund the federal government.
In 2017, the IRS collected over $3.4 trillion in taxes. It refunded $437 billion. This resulted in a net gain of close to $3 trillion. The IRS estimates that nearly 15% of all taxes collected between 2008 and 2010 account for underpayments or non-filings.
The IRS Has Its Own System of Government
The IRS performs executive, legislative, and judicial functions. The IRS primarily performs an executive role in the enforcement of the tax code. As a legislative body, the IRS regulates the compliance of procedures and policies with the tax code. As a judicial body, the IRS has the power to hear all appeals relating to taxes. In this role, the IRS can issue liens and seize property as payment for overdue taxes. The IRS’ actions do not require court approval.
The IRS Plays By Its Own Rules
The IRS publishes the Internal Revenue Manual. This manual provides a blueprint of how the IRS works. The manual can be accessed by the public. While the manual gives an idea of what the IRS will do in certain situations, the IRS is not obligated to follow its own manual. United States v. Horne. U.S. v. Horne, 714 F.2d 206 (1st Cir. 1983).
The Architecture of the IRS
The IRS is made up of 4 divisions:
- Wage and Investment,
- Large Business and International,
- Small Business and Self-Employed, and
- Tax-Exempt and Government Entities.
The IRS is split into criminal and civil tax divisions. Many times, these divisions work hand-in-hand. In the context of tax fraud, you may be held civilly and criminally liable.
There are several other offices within the IRS, including the Criminal Investigation Unit.
The Criminal Investigation Unit
The Criminal Investigation Unit (“CIU”) investigates potential violations of the tax code. The crimes the CIU investigates are divided into 4 categories:
- Tax crimes,
- Non-tax crimes,
- Cyber crimes, and
- Narcotics, counter-terrorism, and organized crime.
Most of the crimes the CIU investigates relate to tax fraud. However, the CIU has also successfully prosecuted identity theft, money laundering, public corruption, and corporate fraud.
The Continued Success of the Criminal Division
The Criminal Investigation Unit (“CIU”) is highly successful in exposing violations of the tax code. In 2017 alone, the CIU uncovered nearly $2.5 billion in tax fraud and $1.1 billion in other financial crimes. The CIU’s conviction rate has been at an all-time high at a whopping 91.5% in 2017.
You Must File Your Taxes With Total Accuracy
Remember, the information you furnish for the purposes of filing your tax return must be accurate. It is a punishable crime to knowingly report false information on a tax return. Filing taxes accurately can be tricky. This is why there is an entire industry devoted to filing tax returns. You can file your taxes yourself or seek the assistance of an expert.
You must also file your taxes by the deadline stated on the IRS website. If you are filing on behalf of a business, it is critical that you keep copies of all financial records.
You must ensure that each financial transaction is listed in the 1099 form for accurate reporting. Countless individuals are serving hefty prison sentences for trying to deceive the IRS.
Are You Being Audited By the IRS?
The IRS may have decided to audit you for a reason or no reason at all. The IRS does random sample audits to uncover discrepancies in filed taxes. The IRS might also issue an audit if it suspects that you have inaccurately reported your income, intentionally or not. During an audit, the IRS investigates you or your business for potential violations of the tax code. The IRS will examine your financial information to make sure all of it has been reported.
There are several red flags that alert the IRS to potential tax violations. These include high charitable donations, using only even numbers on your tax return, claiming too many expenses, or a simple mathematical error. These days, the IRS commonly audits those who report no income or make over $1 million annually.
If you have been selected for an audit, you will be notified by mail with a request to respond to the notification. The audit can be done in-person or through the mail. Each audit can examine your tax history and finances from the past 6 years. But usually the audit only examines the last 3 years. It is critical that you maintain all income-based records for at least 6 years.
The length of the audit will depend upon the type and amount of information needed for a determination. The audit usually begins soon after the IRS receives your tax return. The audit concludes with a finding of “no change”, “agreed”, or “disagreed”. “No change” means the IRS found your reporting to be accurate. “Agreed” means the IRS found changes and you agreed to pay what is due. “Disagreed” means the IRS is making the changes that you do not agree with.
Know Your Rights!
If you are being audited, you must remember that you have the right to an attorney. An experienced attorney can provide you with guidance throughout the process.
During the investigation, the IRS may question you. Remember, you also have the right to not incriminate yourself. You even have the right to have an attorney present during your questioning. Having an attorney at this stage can make all the difference between a conviction and a complete dissolution of your case.
An experienced attorney can also represent you during an audit. You also have the right to dispute any changes found after an audit. An attorney can even help you fight changes the IRS has already found.
The Criminal Lawyer Group Can Help You Battle The IRS
The experience of being investigated by the IRS can be frightening. As a law enforcement agency, the IRS can even place you under arrest and press charges against you. The IRS may also act in an undercover capacity so chances are high that you will not even know you are under investigation.
The IRS is committed to punishing those who are committing financial crimes. The best way to avoid any issues is to maintain financial records and accurately report on them. You must also refrain from unlawful financial activities.
Call Us Now
If you are under an investigation by the IRS, our experienced criminal defense attorneys can assist you every step of the way. Our attorneys specialize in this field and would guide you through the complex tax and criminal systems in the IRS.
If you have any questions concerning your activities, or if you are currently being audited, our attorneys can assist you with how to maintain compliance.