In the United States of America, tax evasion is illegal as it is in all countries. Norman Spencer PC is by your side whether you are being investigated by the IRS or are facing criminal tax charges. We will protect you anywhere in the United States or around the world because we have years of experience in tax evasion cases and defending criminal tax matters and the strongest support team of forensic accountants and former IRS officers.
Background on Tax Evasion Cases Enforcement in the United States
The US government is devoting significant resources to vigorously and uniformly implementing internal revenue laws. Individuals and companies who breach tax laws face criminal penalties, which the government hopes will discourage others.
The Tax Division of the United States Department of Justice has the power to administer all federal criminal tax enforcement and to allow or refuse tax investigations and prosecutions.
Administrative Investigations of Tax Evasion Cases by the IRS
IRS Special Agents with the Criminal Investigation Division (CI) investigate complaints of criminal violations and related provisions of Title 18, United States Code.
CI normally launches an investigation in response to one of the following:
- Fraud referrals from other IRS divisions;
- Information from other government entities;
- Information from private parties; or/and matters or projects created by CI.
CI approves investigations into matters that it suspects have the potential for criminal fraud prosecution or warrant further investigation. Special agents may investigate certain crimes to the degree that resources allow. Special agents also perform joint investigations with IRS operating division members. Special agents and revenue agents typically work together to investigate situations where taxpayers file false returns or willfully refuse to file tax returns.
A joint inquiry with revenue officers normally follows a deliberate failure to pay tax. Following the completion of an administrative investigation, the special agent prepares a special agent’s report (SAR), which contains exhibits, recommending that the case be prosecuted by the government.
The SAR, which includes a written account of the investigation and the special agent’s recommendations, is reviewed by both the special agent’s superiors and the Chief Counsel, Criminal Tax Division (CT Counsel). CT Counsel then drafts a Criminal Enforcement Memorandum (CEM) that includes information about the essence of the crime(s) for which the special agent recommends prosecution, the facts used to prove the crime(s), technological or legal challenges, anticipated prosecutorial problems, and the special agent’s particular recommendation.
If the CI Special Agent-in-Charge (SAC) decides that the government should prosecute the case, the case is referred to the Tax Division or, in some cases, the United States Attorney’s Office. A copy of the transmittal letter is submitted to the Tax Division when the IRS refers a case directly to the US Attorney’s Office. If the case involves only legal-source income (i.e., no drugs or organized crime) and the taxpayer’s attorney tell the IRS that the taxpayer wants to enter a guilty plea during an administrative investigation of a criminal tax case, the IRS may refer the case to both the United States Attorney’s Office and the Tax Division for an expedited guilty plea.
The IRS can send tax returns or tax return details with the Department of Justice when it refers a criminal case to them. If the IRS makes the criminal referral, the IRS, including CI, won’t continue or initiate an administrative investigation with respect to the taxpayer for the same tax and taxable period. However, if the Tax Division decides not to prosecute a case submitted to it by the IRS, the IRS can take any disciplinary action it sees fit in the circumstances, including referring the case to CI for further investigation. If CI wishes to investigate the case further, it will issue IRS summonses and the case will continue. The IRS always has the option of referring the case back to the Tax Division.
Inquiries by Grand Jury in Criminal Tax Evasion Cases
Although a federal grand jury investigates both tax and non-tax violations, the Tax Division must first approve and allow the use of a grand jury to investigate criminal tax violations. If CI can’t complete its investigation or decides that the administrative process would not be enough to collect sufficient evidence, it will request that the Tax Division permit a grand jury investigation.
Once a criminal referral has been rendered, the IRS, including CI, does not issue or begin an administrative summons with respect to the taxpayer for the same tax and taxable period. The US Attorneys’ Offices have the authority to perform grand jury inquiries into matters occurring under the Internal Revenue Code to the degree required to 1) perfect tax charges for which the Tax Division has approved an investigation or 2) decide whether the Tax Division can authorize prosecution.
Can a Non-Tax Grand Jury Look Into Possible Federal Tax Evasion Cases?
The short answer is yes. The Assistant Attorney General for the Tax Division has given US Attorneys’ Offices limited authority to extend non-tax investigations in order to prosecute potential federal criminal tax violations, designate targets (subjects), assess the extent of the expanded investigation, and end such proceedings. Before a United States Attorney’s Office may file information or request the return of an indictment in an extended investigation concerning criminal tax matters, the Tax Division must first sanction the relevant tax charges.
In limited cases, the IRS is allowed to refer criminal tax matters to the United States Attorney’s Office for prosecution. As a result, the IRS has given the US Attorney’s Office permission to conduct grand jury inquiries into these matters to the degree possible to perfect the charges to which the IRS has referred directly.
Without the Tax Division’s approval, the US Attorney’s Office does not extend grand jury inquiries into matters occurring under the Internal Revenue Code to include targets that the Tax Division has not previously approved. The US Attorney’s Office and the IRS must send a written request to the Tax Division for approval. The request must provide the necessary foundation for the Tax Division to approve the investigation’s extension.
When a grand jury investigation is completed and the US Attorney’s Office decides that there is sufficient evidence to prosecute, the US Attorney’s Office will ask the special agent assigned to the case to prepare a SAR. When that is done, the special agent will request that CT Counsel review it and prepare a CEM. The SAC must then send the SAR to the Tax Division for review and approval, along with copies of all relevant documents and the CEM. During this time, the US Attorney’s Office or the SAC must give the Tax Division a written recommendation from the US Attorney’s Office about the prosecution of a target for tax violations. Within thirty days, the Tax Division will review the prosecution recommendation. A grand jury investigation’s recommendation against indictment must also be submitted to the Tax Division for review. Alternatively, the IRS would inform the Tax Division that they have no recommendations for action. The Tax Division will complete its analysis within thirty days of obtaining the recommendation and either approve or decline prosecution.
What Can Be Disclose to the IRS in Tax Evasion Cases for Civil Purposes?
The United States Attorney’s Office is not allowed to share “matters occurring before the grand jury” to the IRS for use in a civil tax audit or administrative collection proceedings. There are some exceptions. For example, the court could allow the Government’s motion for grand jury matters to be disclosed for use in certain civil proceedings if the US Attorney’s Office meets the exception requirements set forth in Rule 6(e)(3)(C)(i)(I), which require federal prosecutors to show that it will make the disclosure “preliminarily to or in connection with a judicial proceeding…” and that it has a legitimate reason for doing so. Information that is not considered “matters occurring before the grand jury” may be released.
Grand jury material remains under the jurisdiction of the United States Attorney’s Office or the Tax Division and so the grand jury material may be disclosed only to IRS personnel assisting the government attorney in the criminal investigation and only for the purpose of enforcing federal law; and all grand jury material, including any copies made, must be returned to the United States Attorney’s Office or the Tax Division.
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