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April 29, 2015

IRS-CI Fiscal Year 2014 Annual Business Report Demonstrates the IRS' Broad Authority and Investigative Successes

The tax attorneys at Nardone Law Group in Columbus, Ohio, are committed to keeping taxpayers updated regarding the Internal Revenue Service’s efforts to eliminate tax fraud, through civil and criminal investigations. Depending on the circumstances surrounding the case, these investigations can result in fines and penalties, as well as sentences of incarceration. In our prior article on the Criminal Consequences of Tax Evasion, we discussed a recent case in which the IRS sentenced a delinquent taxpayer to 18 months in prison and ordered him to pay more than $1.6 million in restitution to the U.S. government. That case, and many others like it, provided a warning to taxpayers: if you commit tax crimes, such as filing false returns, making fraudulent claims, or assisting others in similar acts, you can and will face severe punishments if convicted.

Recently, IRS Criminal Investigation (IRS-CI) released its Annual Business Report for Fiscal Year 2014 (view here). The main function of IRS-CI is to investigate potential criminal violations of the Internal Revenue Code and related financial crimes. The Report outlined IRS-CI’s successes and challenges from the previous year, providing statistics and summaries of the progress made towards eliminating tax crimes. This article provides a brief overview of the Report, as well as some of the cases of note from Fiscal Year 2014.

IRS-CI Annual Business Report

The IRS-CI Annual Business Report for Fiscal Year 2014 provides a broad overview of IRS-CI’s efforts to enforce U.S. tax laws and combat tax fraud. The Report includes cases summaries, which illustrate the diversity and complexity of IRS-CI investigations. In his introductory message, Chief Richard Weber declared IRS-CI to be the “best financial investigators in the world,” and further noted that “[o]ur special agents and professional staff continue to be the model by which other law enforcement agencies should be judged.” Chief Weber further discussed how IRS-CI was able to reach unprecedented agreements and make great strides in enforcement during FY 2014.

The IRS-CI Report focuses largely on the agency’s “investigative priorities.” The investigative priorities are areas of concern, in which IRS-CI concentrates much of its resources and energy. Some of the investigative priorities involve long-standing challenges faced by the IRS, while others represent emerging trends in the financial and technological industries. The Fiscal Year 2014 investigative priorities included:

  1. Identity Theft Fraud;
  2. Return Preparer Fraud & Questionable Refund Fraud;
  3. International Tax Fraud;
  4. Political/Public Corruption;
  5. Bank Secrecy Act;
  6. Asset Forfeiture;
  7. Voluntary Disclosure Program; and
  8. Counterterrorism and Sovereign Citizens.

Each of these areas provides unique and ongoing challenges for IRS-CI. As the Report’s case summaries demonstrate, however, IRS-CI has had significant success in investigating, prosecuting, and preventing tax crimes within these priority areas.

Examples of IRS-CI Success

Among other important information, the IRS-CI Annual Business Report provides case summaries of various investigations adjudicated during FY 2014. The cases involve a variety of tax crimes, such as tax-related identity theft, money laundering, public corruption, and terrorist financing. Some cases resulted in hefty penalties and fines, others imposed lengthy sentences of incarceration, while many involved a combination of the two. Regardless of the outcome, the cases demonstrate the IRS-CI’s broad authority to investigate and punish criminal taxpayers.

One of IRS-CI’s main priorities is to combat fraud and ensure compliance with relevant tax laws. In the largest criminal tax case ever filed, Credit Suisse pleaded guilty to conspiracy to aid and assist U.S. taxpayers in the filing of false income tax returns. Credit Suisse ultimately agreed to pay a total of $2.6 billion. In the wake of the Credit Suisse investigation, IRS-CI brought a case against Bank Leumi Group, a major international Israeli bank. Bank Leumi Group admitted that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns. As part of their agreement with the IRS, Bank Leumi Group will pay $270 million and cease to provide banking and investment services for any accounts held, or beneficially owned, by U.S. taxpayers. The successful investigations of these two major foreign financial institutions are a prime example of IRS-CI’s objective to stop fraud, while also displaying its global reach.

Coinciding with its efforts to combat fraud, IRS-CI works hard to protect the integrity of the financial system. For example, Liberty Reserve, a leading digital currency company, and seven of its principals were indicted for an alleged $6 billion money laundering scheme. Similarly, Ross William Ulbricht, the creator of “Silk Road,” was indicted on charges of engaging in a continuing criminal enterprise, money laundering, and other federal offenses. Silk Road was a website, which allowed over 100,000 users to buy and sell illegal drugs and other unlawful goods and services. While IRS-CI was able to use its unique and creative investigative skills to put a stop to these illegal practices, the work is far from over.

What Does This Mean for Taxpayers?

IRS-CI has made significant headway in the fight against tax crime, and the Annual Business Report certainly reflects that. Looking to Fiscal Year 2015, Chief Weber recognized the challenges ahead, stating, “[w]e will not lose sight of taking care of our people and will continue to push initiatives…investing in technology, and improving communication and transparency.” With this in mind, it now seems more important than ever for taxpayers to be aware of their U.S. tax obligations. With the IRS’s broad investigative authority, and the risk of significant fines, penalties, and prison sentences, taxpayers cannot afford to be non-compliant. If you or your business have been contacted by an IRS revenue officer, or are currently undergoing an investigation, it is important to consult with an experienced tax attorney to find out what solutions are available.

Contact Nardone Law Group

Nardone Law Group routinely represents businesses and individuals who are undergoing an IRS audit, examination, or investigation, including criminal tax investigations. If you have been contacted by an IRS revenue officer, or if you are currently facing a civil or criminal tax investigation, contact one of our experienced tax attorneys today. Nardone Law Group’s tax lawyers and professional staff have vast experience representing taxpayers before the IRS. We will thoroughly review your case and determine what options and alternatives are available.

Contact us today for a consultation to discuss your case.

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April 29, 2015

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