IRS Criminal Investigation: Tax Crime Investigation Defense.

IRS Criminal Investigation (IRS CI) is the law enforcement division of the Internal Revenue Service. It investigates suspected violations of the federal criminal tax laws. As the only law enforcement agency within the IRS, IRS CI consists of highly trained special agents who have the authority to execute search warrants and make arrests.

IRS Criminal Investigation has special agents (and other federal law enforcement agencies as well) who may have been assigned to a criminal investigation targeting you or someone in your household or family. IRS CI may initiate contact with you in an effort to obtain a voluntary interview or statement about the subject matter of the investigation.

Being approached by an IRS special agent does not necessarily mean that a subject criminal investigation is already well underway. All information you communicate, and any documents you provide, should be carefully evaluated by defense counsel before communication with the government. Inadvertently disclosing information that could create criminal liability is a significant concern in tax investigations, and statements made to IRS special agents can become critical evidence for a criminal case.

IRS Criminal Investigation investigations are subject to federal constitutional law. The Fifth Amendment, ratified in 1791 and binding on the states, includes protection against compelled self-incrimination. In many circumstances, there is strong justification for exercising this constitutional right. IRS Criminal Investigation investigations are also subject to Fourth Amendment limitations. The Fourth Amendment, also ratified in 1791 and binding on the states, prohibits unreasonable searches and seizures, and contains additional protections for individuals facing suspected criminal tax fraud charges and other federal tax violations. An IRS search warrant or an agent’s request for your financial or business documents may be a subject for discussion with your defense counsel.

How does IRS Criminal Investigation classify referrals as primary, subject, or general?

IRS CI receives referrals (or “recalls”) of fraud and other criminal tax law violations from various sources. While civil auditors may be the most frequent source of referrals to IRS CI, these are not the only sources. Other law enforcement agents, prosecutors, other federal and state agencies, the IRS Office of Chief Counsel, and a few other sources can and do generate referrals. When a civil auditor identifies fraud “firm indicators,” he or she must immediately cease conducting his or her civil audit. IRS CI policy instructs the auditor to use Form 2797 to identify the potential fraud case for referral consideration. IRS CI policy instructs the auditor not to inform the taxpayer of his or her case referral.

IRS CI then conducts its “initial evaluation,” or “primary investigation.” The purpose of the primary investigation is to evaluate suspected violations of the federal criminal tax law and determine whether they present potential criminal tax fraud charges for federal prosecution. In conducting the primary investigation, the IRS CI special agent will assess the case’s strength based on the investigation’s potential, the likelihood of obtaining a conviction, the potential criminal exposure, the agent’s (and the IRS’s) ability to gather evidence, and other factors.

If the primary investigation justifies proceeding further, then IRS CI will initiate a “subject criminal investigation.” This will be a subject criminal investigation targeting an identified person or entity (including a business entity, or estate/trust). Along with the subject criminal investigation, IRS CI will document the subject, the suspected federal tax crimes, and other important aspects in the case. The subject criminal investigation is similar to any other type of federal law enforcement case, with a focus on gathering evidence for a criminal case, conducting interviews, and, in some instances, executing search warrants, arrest warrants, and seizure warrants.

IRS CI investigates and recommends prosecution of tax crimes under the Internal Revenue Code (IRC). Investigations that are not focused on an identified individual or entity may be classified as general investigations.

What must prosecutors prove in a federal tax-evasion case, and what can it cost?

IRS Criminal Investigation investigates a wide array of federal criminal tax violations. It is not only tax evasion, but it can also have civil or state consequences (and federal charges that do not involve the IRS). Tax evasion is only one of many crimes listed in Title 26 of the U.S. Code (Internal Revenue Code). 26 U.S.C. § 7201 addresses federal criminal tax evasion, while other provisions address other federal tax violations.

What does it mean to evade taxes at the federal level? Section 7201 prohibits “willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof”

It prohibits:

• Willfully attempting (any attempt to evade or defeat)
• In any manner (broad authority for federal prosecutors)
• To evade or defeat (including both tax liability and payment)
• Any tax imposed by this title (all federal taxes imposed by the IRC)
• Or the payment thereof (all payments, meaning all types of taxes)

What is the potential cost for federal tax-evasion charges?

• Prison Time: Conviction under 26 U.S.C. § 7201 (federal tax evasion) carries up to five years’ imprisonment.
• Individual Fines: Conviction carries potential fines up to $100,000.
• Corporate Fines: Conviction carries potential fines up to $500,000.
• Prosecution Costs: Convicted individuals must also pay prosecution costs.

What must the government prove to show tax evasion?

• Specific Intent (Willfulness): Federal prosecutors must prove that you intentionally violated a known legal duty. “Willfulness” is defined as a voluntary, intentional violation of a known legal duty.
• Existence of a Tax Due: Federal prosecutors must prove that you owed a tax. Section 7201 does not specify a minimum tax liability, and the circuits differ on whether the government must prove that the additional tax was substantial. However, no amount is too large to be prosecuted.
• Attempt to Evade: Federal prosecutors must prove that you tried to evade or defeat the tax. This attempt must be willful and intentional. An “attempt” is defined as taking an affirmative act with the intent to evade or defeat taxes. For example, keeping multiple sets of books or intentionally hiding assets in an offshore account are examples of attempts to evade tax.
• Evade or Defeat: Federal prosecutors must prove that you tried to evade (avoid liability) or defeat (avoid payment) of federal taxes.

Which resolutions remain when federal, state, and civil tax proceedings overlap?

IRS criminal investigations have the potential to turn into federal prosecutions. All suspected criminal tax cases get categorized as either “subject criminal investigations” or “general criminal investigations,” and all are either prosecuted in the courts or resolved. If resolved before the prosecution commences, then prosecutors and defense counsel will have negotiated any potential civil and criminal consequences for a particular case.

If the IRS pursues the case forward, all of the consequences of a federal prosecution are on the table. The U.S. Department of Justice (DOJ) will then conduct a plea bargain negotiation with the defendant. A guilty plea, however, waives the right to trial and will carry certain criminal and civil consequences.

IRS criminal investigations often turn into criminal cases in which prosecutors then try to secure a conviction for the defendant. The resolution of the case is usually a plea agreement, but a trial can be taken to a verdict if necessary. A sentencing judge can potentially reject a prosecutor’s recommended sentence, so a good defense counsel is necessary.

The case may also be pursued as a civil case through the U.S. Tax Court system. A good defense counsel will work to minimize the risks of both civil and criminal outcomes. Civil information obtained from the IRS, state authorities, or private parties can later be used against the defendant in a criminal case.

The federal and state governments may try to prosecute related tax crimes separately, and IRS Criminal Investigation can investigate related federal charges. IRS criminal investigations, along with parallel criminal, civil, state, and federal proceedings, require particular experience from a defense team.

IRS Criminal Investigation (IRS CI) cases with the potential for federal prosecution must be defended by experienced federal defense attorneys who have a comprehensive background defending against federal and state criminal tax fraud charges and other federal and state crimes. We handle complex cases from all over the country,.

How much can IRS conviction statistics tell you about a tax case?

IRS CI completed 2,850 criminal investigations during fiscal year 2025, according to the IRS’s most recent performance report. The IRS’s most recent performance report says that IRS CI had an 89.0 percent conviction rate during fiscal year 2025. How is this conviction rate calculated? What is the denominator? How does this relate to the 1,409 investigations?

What is the general meaning of these statistics? Various published statistics use a variety of terminology and calculations. For instance, some pages describe their figures as the “conviction rate,” and others refer to the “conviction percentage.” All of these figures vary because they all have different definitions, and it is difficult to accurately assess a case’s strength based on these stats.

Several published statistics use a conviction rate between 80 and 92 percent. However, each figure uses either a different timeframe or a different population of people, making them all inconsistent. Some stats are based on the total number of cases referred to the DOJ, while others are based on the total number of cases tried. This means that the number of cases referred to the DOJ will always be the largest, and the number of successful convictions will be the smallest, as some of the prosecutors might drop cases.

For example, the most recent published conviction rate of 88.4 percent for fiscal year 2023 does not identify the population in its denominator, which means it is difficult to understand this number.

Get Advice on Your Situation

If you want someone to look at the specifics of your case, Spodek Law Group handles federal criminal defense nationwide from New York and Los Angeles. The firm has been practicing since 1976 and its motto is simple: we owe loyalty to only you. Call 888 348 8028.