The IRS Criminal Investigation is an Intelligence Unit created on July 1, 1919, to address different types of tax fraud allegations. Initially, it was composed of six special agents previously employed as inspectors at the United States Post Office. The inspectors formed an elite group of highly trained and devoted professionals who have now evolved into the finest financial investigators in the world.
Focusing on financial investigations, especially those related to tax evasion, the Intelligence Unit changed its name in 1978 and became the Criminal Investigation (CI) department of the IRS. This update came with an expansion in the department’s role. In addition to investigating tax violations, the agency tackles currency violations and money laundering, among other financial crimes.
The mandate of the CI
Those targeted by an investigation by CI may face numerous penalties, including jail. Consulting with an experienced tax attorney familiar with IRS issues can clear any misunderstandings and help support proper tax compliance.
Currently, the CI’s mandate includes the following types of investigations:
Abusive tax schemes
Initially, abusive tax schemes were structured as abusive foreign and domestic trust arrangements. However, they have grown into sophisticated plans that depend on offshore financial institutions issuing credit or debit cards and financial secrecy laws of several foreign jurisdictions.
Abusive return preparer fraud
Return preparer fraud generally involves planned preparation and filing of erroneous tax returns. The preparers who commit this type of violation often claim excessive exemptions, unallowable credits, false deductions, or inflated business or personal expenses.
Bankruptcy fraud investigations allow the CI to prosecute individuals who have committed bankruptcy crimes. Their effort is to protect the interests of the IRS, which is a major creditor in most bankruptcy proceedings.
Corporate fraud mostly involves Internal Revenue Code (IRC) violations. This type of fraud can happen through the falsification of individual or corporate tax returns.
Financial institution fraud
The CI checks tax and money laundering violations that include fraud against credit unions, banks, loans and savings associations, money remitters, check cashers, and other financial entities. The CI relies upon Suspicious Activity Reports and Currency Transaction Reports in this type of investigation.
Employment tax evasion
There are numerous ways that employment tax evasion can occur. This type of fraud includes paying employees in cash, employee leasing, failing to pay payroll tax returns or falsifying them, and pyramiding.
CI special agents can investigate tax law violations and related tax crimes. This investigation is carried out to protect the American economy and tax administration. Failure to intentionally or willfully pay taxes or file tax returns is illegal, and the CI can target individuals who are suspected of this type of fraud.
International tax compliance
Cross-border transactions and complex international tax avoidance schemes are some of the major priorities that the IRS is currently tackling. Whether the individuals use trusts, foreign accounts, or other foreign entities, the IRS, through the CI, investigates such violations and identifies those who are culpable. This includes entities involved in Bank Secrecy Act (BSA) violations and money laundering.
The Criminal Investigation department is a sophisticated team of the IRS, responsible for ensuring proper financial compliance according to tax laws in the United States. The team identifies individuals and businesses involved in financial evasion or deception and holds them responsible for any fraudulent activity.