IRS Criminal Investigation: A definitive guide

​In most of the cases, in order to suspect the tax law violation, the IRS allocated special agents from the specialized Criminal Investigation Division. If you are running a CPA firm and your clients come to know that they have been listed by IRS for criminal Investigation then you should know what to do and what not to do. 

Consult an experienced attorney

​You might be thinking that there is a wide range of options to offer to your clients if they have been singled out for the IRS criminal Investigation but in reality, the options are not many.  The only thing which you can tell your client to do is to get advice from an attorney who has good command over criminal investigation before giving the records or telling anything to the special agents from the Criminal Investigation Division. If you disclose anything improper to the special agents then it could become a strong point against your tax law violation when you are put in the witness stand. 

​Let’s understand this with an example

Let’s understand the IRS Criminal Investigation with the help of a hypothetical example of Angston (doctor) who tries to get away with the investigation by using improper ways and finally ends up making the situation worse for him.

One day, when Angston was on his way to the parking lot of his office, he saw two agents from the CID division but instead of entertaining them, he simply ignored them by saying that since they don’t have any appointment, they can’t talk to him and he is going to go for his yoga classes now.

But as Angston moved away from them, he remembered an article in which he read about dealing with IRS agents and he thought to give it a shot. He then turned back and asked the agents to meet him in his office after half an hour.

But the hollow knowledge of Angston didn’t help him in dealing with the IRS agents and things started going worse for him. The questioning went for more than two hours and he missed his yoga classes as well.

The two agents also found more than $60,000 in payment from the patients and that extra money wasn’t mentioned in the records of the receipts which were used to prepare the 1040 forms and Angston was not able to give any solid reason to why this huge amount of payment was not included and why it went unreported.

Angston didn’t know that the IRS asks his agents to prepare memos on how the suspect reacts when questions are asked and a note of their answer is also collected. So, according to the law, the two agents noted down the reaction and the answers of Angston. They also mentioned in their memo that upon asking questions, Angston become nervous and he also started sweating. At a point during the conversation, Angston got angry and even shouted at the agents.

Many times during the questioning, Angston tried to break the tension by discussing about his achievements and explaining his life journey but nothing seemed to work. The agents asked Angston couple of times that whether he wants to leave the conversation and go for his yoga classes but Angston insisted on staying.
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Finally, after several hours of questioning and because of lack of knowledge, the two agents were able to make Angston coffees that he willingly made $60,000 payment from his patients unreported and he was charged with three years of sentence and a fine of $5,000 for the tax fraud. 

​Important takeaways from this example

• It doesn’t matter how much you have read or researched about dealing with IRS agents, you should never do it on your own.
• You should never even utter a single word to the IRS agents without the presence of an experienced attorney.
• In case you find out that you have been singled out for the IRS criminal investigation, you should immediately consult an experienced attorney who is well versed in dealing with IRS special agents.
• You should avoid getting singled out for such an investigation in the first place. Be very careful while filing your 1040 form from your receipts and never try to avoid reporting any type of payment as it can result in a disaster. 
  

​As a CPA firm, you should be prepared to deal with every type of situation and your client being singled out for IRS investigation is one such situation. Advice your client to avoid such investigation in the first place by filling the 1040 form completely and consult their attorney before disclosing anything to the special agents as anything can be used against your client in the witness box and it can turn the case upside down.