IRS Criminal Investigation in the News

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Last week in The Fear of Funding I discussed the blowback on the Inflation Reduction Act and its funding for the IRS. Writing about the often byzantine world of tax procedure and tax administration typically does not engender much passion. My Op-Ed for NBC News discussing why the heated rhetoric about the IRS funding is dangerous and misleading triggered a different (mostly offline) response then my typical takes on, for example, whether dissipated assets are part of a taxpayer’s reasonable collection potential.

It is always helpful to focus on facts when considering policy issues, especially issues that can excite or inspire fear.  One issue that politicians and others have not covered with great clarity is what exactly IRS Criminal Investigation does. To that end, I encourage a read of CI’s 2021 Annual report, which explores CI’s unique role in tax administration and its relationship to law enforcement more generally.

The bulk of what CI does in terms of time and agent hours is work on tax matters and general tax fraud investigations:

Building a fraud case is time intensive and can often involve high profile people and businesses. For example, as reported widely last week, IRS CI assisted with the investigation and arrest of three key ringleaders of Yoga To The People, and what has allegedly been a multi-year scheme to siphon money from yoga students without the key YTTP executives reporting the proceeds or filing tax returns. (As an aside, the mainstream press loves to report yogi misdeeds, with NY Times, WAPO and TMZ running stories on this; TMZ has best photos….).

CI also assists on non tax investigations like its Illegal Source Financial Crimes Program. According to the CI Annual Report, in these cases, “special agents’ investigations focus on individuals who receive income from illegal sources, such as embezzlement, bribery, and fraud. They also focus on money-laundering schemes, where individuals launder their ill-gotten gains by making the money appear as if it came from legitimate source.”

There is lots more in the report, including solid numbers on investigations, prosecutions and employee numbers.

CI is a key part of our tax system, with its employees investigating and at times recommending prosecution of criminal tax violations and other related financial crimes to the Department of Justice. While most taxpayers will never interact with CI, it is an important part of a system that depends on the community at large respecting and complying with the law.

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

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