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Criminal Tax Investigations are Increasing

The IRS Criminal Investigation Unit (CI) investigates criminal violations of the Tax Code and related financial crimes. CI investigates return preparer fraud, abusive tax schemes, employment tax evasion, illegal gaming activities, offshore tax evasion, and identity theft. The IRS has reported that 2013 criminal investigations increased by 12.5 percent.  According to the IRS, in the 2013 fiscal year, 5,315 cases were initiated, of which 4,364 were recommended for prosecution, with a 93% conviction rate.  The IRS conviction is high because it cherry-picks its cases. In criminal cases, the IRS must present sufficient evidence to prove guilt beyond a reasonable doubt. If the IRS believes it cannot meet that burden, the case stays civil, and civil tax penalties may apply.  In the case of an understatement, the IRS may assert a civil fraud penalty, which is 75% of the tax understatement.  In a civil fraud tax case, the IRS must prove fraud by clear and convincing evidence. Clear and convincing evidence is a greater burden of proof than preponderance of the evidence but less than beyond a reasonable doubt.

The Department of Justice (DOJ) has announced that it will focus on investigating and prosecuting criminals involved in identity theft.  DOJ warned that identity refund fraud cases are on the rise and growing in complexity.  The cases can range from refund-related identity theft, employment-related identity theft, social security theft, ITIN, EIN numbers, etc.  DOJ filed nearly 600 indictments or information in 2013, charging some 900 defendants with stolen identity refund fraud.

tax lawyer near meWhat You Can Do

In the last couple of years, my tax practice has received more calls from NJ residents who are receiving emails from people claiming to work at the IRS.  The emails request sensitive information and, in some cases, demand money.  According to the IRS and DOJ, these email scams are known as “phishing” and are prevalent.  The IRS does not communicate by email; you should not respond if you receive an email.

I have also received calls regarding a telephone scam in which someone claims to be from the IRS Criminal Tax Division and threatens criminal tax prosecution if the individual doesn’t pay money. The Criminal Tax Division does not operate in that regard, so you must be careful.

Because identity tax theft is a fairly new crime, many tax professionals are grappling with how to resolve the tax crime.  If you have been the victim of identity tax theft, then I would recommend following the below steps:

  1. Notify the Federal Trade Commission, FBI, state Attorney General’s office, and Social Security Administration that you have been victimized by identity tax theft.
  2. File a police report;
  3. Please review IRS publication 4535 and visit the IRS website regarding identity theft.
  4. Close any accounts that were opened or tampered with fraudulently,
  5. Contact the three major credit reporting bureaus, Equifax, Experian, and TransUnion,
  6. File a complaint with the Federal Internet Crime Complaint Center (IC3) and
  7. Visit for information about what to do if you are a victim of identity theft.

Need Legal Help?

As criminal tax investigations, particularly regarding identity theft, continue to rise, it’s crucial to be vigilant. If you’ve fallen victim to identity tax theft or need assistance, notify relevant authorities and seek legal help promptly.

Contact the Law Offices of Todd S. Unger, Esq. for expert assistance and guidance in resolving your identity theft case effectively.