As is the case across the federal government, funding cuts have meant fewer agents in charge of pursuing criminal tax litigation in cooperation with federal prosecutors.
Officials recently confirmed there are 2,100 IRS special agents, down from 2,800 in the late 1990s.The agency has hired some new agents recently, but getting them incorporated into the agency and having them begin new investigations takes time.
As a consequence of this situation, some areas of the country experience selective criminal enforcement of the tax laws, with some people avoiding investigation simply because IRS resources are scarce.
Still, the Chief of the Criminal Investigation division recently reported that he and his team are paying particular attention to alleged abuses in the payroll tax system. Such abuses can include efforts to avoid Social Security and Medicare taxes, by paying employees under the table. According to the IRS official, such maneuvers are more likely to attract the attention of criminal investigators in the months and years ahead.
Investigators are also focusing on issues involving offshore tax abuses, such as alleged failures to report income from foreign investments. These cases can often be complicated by the need to coordinate with foreign governments.
Interestingly, relatively few criminal investigations, only about 8%, are arising from civil tax audits that uncover a pattern of behavior that the IRS finds suspicious. Likewise, the IRS is opening relatively few investigations based on reports received from the general public or from whistleblowers.
It can be hard to guess where the IRS or other federal and state agencies will direct their attention, and many people and businesses get an unwelcome surprise when they find that they are under investigation. It is important to get the help of a lawyer with experience in defending clients in a variety of tax litigation issues.