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IRS Fraud Referrals Dropped During Covid— But That’s Unlikely to Continue

Posted by Brandon Keim | Sep 08, 2023 | 0 Comments

The Internal Revenue Service (IRS) has a criminal investigation bureau that looks into tax-related crimes. Historically, about seven percent of IRS criminal investigations arose out of referrals from other parts of the agency relating to taxpayer fraud. However, during Covid, the number of those interagency referrals dropped. They amounted to just four percent of the agency's criminal cases. Now, with the pandemic over, IRS officials are planning on changing that. And their goal isn't just to return the interagency referrals to the pre-Covid levels. Instead, they want to increase fraud-related referrals to even higher levels than before.

That's because they'd already decided to increase the fraud-referral investigations to more than seven percent before the pandemic and its related drop.

Notably, while the overall number of fraud-related referrals declined during the pandemic, the number of cases that the criminal bureau accepted and pursued had not. That is because the officials only made the fraud referrals when they had solid evidence of fraud.

But that will probably change as the IRS has instituted new procedures intended to increase the number of interdepartmental referrals. The other offices can now submit more abbreviated submissions with less proof of wrongdoing, leaving more of the evidence-gathering to the criminal division's investigators.

There's also another policy revision that may change who and when the criminal bureau pursues an investigation. One aspect of the criminal investigation bureau's mission is deterrence: When scofflaws are prosecuted and face prison, other taxpayers should avoid doing anything that would result in their own prosecutions.

Yet recent revisions to the federal sentencing guidelines have changed the possible incarceration for certain crimes. These changes are causing the IRS to rethink its enforcement priorities—to ensure they're prosecuting those who would face harsher penalties.

The likely result of both of these moves is that criminal investigators will come into the process and initiate investigations much earlier than they had done in the past. They will drop cases they decide along the way aren't worth prosecuting, but until then, taxpayers may be confronted with allegations of tax-related fraud much earlier on in the process.

That's why, if you have any concerns about a potential tax-fraud investigation, contact a tax attorney as soon as possible. Don't wait for the IRS to have fully recovered from Covid-related delays in investigation and prosecution. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.


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