Tax Fraud – Frequently Asked Questions (page 1)
What is the course of a tax fraud investigation?
A taxpayer who may be the subject of a criminal recommendation will be afforded a district conference when one is requested by him or when the Chief of the Criminal Investigation Division (“CID”) determines that a conference will be in the best interests of the government, prior to referring the case to Washington. At the conference, the tax payer will be informed of the “alleged fraudulent features” of the case, “to the extent consistent with protecting the government’s interests,” by the IRS representative. In addition, the taxpayer will be supplied with the facts and figures upon which the proposed criminal charges are based.
If a positive recommendation (such as the recommendation of a criminal tax violation) has been made against someone by the CID, the case is then forwarded to the Office of District Counsel and its enforcement section. The taxpayer would be notified of this fact and would then be accorded a conference in the Office of District Counsel. Occasionally, a conference is not granted. There is no right to a review or conference at this level, or at any level for that matter. Unfortunately, because civil penalties are discussed, some taxpayers and their counsel believe that the conference is “civil.” It is not!
In the event that the case receives the final recommendation of the IRS (acting through District Counsel), the entire file would then be forwarded to the Criminal Section of the Tax Division of the Department of Justice in Washington D.C. (with a recommendation to prosecute) and the taxpayer and his counsel would be notified. Although the Criminal Section would not initiate a conference, a conference may be allowed to the taxpayer and his representative upon request.
Because the criterion for this conference has changed from whether a crime has been committed to whether the government can win in the courtroom, there are many opportunities to present defensive materials that would impair a successful prosecution.
Upon receiving a case from the Department of Justice, Tax Division, Criminal Section, most US Attorney’s offices will grant counsel a pre-indictment conference to discuss any matters that could or should be presented to a grand jury, or even to discuss the possibility of not indicting, upon request.
At the beginning of the investigation, it would be prudent to write a letter to all potential conferees, requesting a conference and to follow up as it becomes more appropriate.