Ongoing budget cuts appear to be weakening the enforcement efforts of the Criminal Investigation branch of the IRS, according to its most recent annual report.
The 2016 Annual Report of the IRS Criminal Investigation (IRS CI) agency offers a detailed look at the priorities and outcomes of the department in the last year—along with a look at what could be ahead given the predicted budget reductions.
As budget discussions continue in Washington, the bipartisan Center on Budget and Policy Priorities notes that the number of IRS staff “devoted to enforcing tax laws has dropped from over 50,000 to below 39,000, a decline of 23 percent” since 2010. Reflecting that trend, some key points from the 2016 Annual Report include:
- The number of cases initiated and prosecuted continues to decline. In 2016, 3.395 investigations were initiated, with 2,744 prosecutions pursued and 2,699 people sentenced. While overall prosecutions declined, the legal actions were largely successful.
- Areas that drew the most interest from CI in 2016 include (in order), money laundering, narcotics, identity theft, Bank Secrecy Act, and questionable refund violations.
- Focusing on the Bank Secrecy Act (BSA), and foreign bank account reports (FBAR), the number of investigations initiated has dropped precipitously since 2013. In 2013, 922 cases were opened, while in 2016, CI pursued only 504 cases. In 2013, the agency recommended 771 cases be prosecuted, which resulted in 453 people receiving sentences with an average incarceration rate of 70.6 percent.
But wait—interestingly, in 2016, the agency recommended 411 prosecutions that resulted in sentencing of 449 persons, with an average incarceration rate of 74.8 percent. The average months served by those convicted in 2013 and those convicted in 2016 were the same—36 months. In 2014 and 2015, the average number of months served was 35 and 31, respectively. Again—while the number of prosecutions dropped, the number of convicted, and the length of their sentences, generally equaled CI enforcement efforts in 2013.
- CI shows continuing interest in global financial crimes. Although cases initiated are fewer than other main focus areas, enforcement—and successful prosecution—between 2013 and 2016 has remained strong. CI defines “international operations,” as “complex international tax avoidance schemes and cross-border transactions.”
Since 2013, the number of persons sentenced for offshore tax evasion and other crimes has gradually increased rather than decreased. The incarceration rate of the convicted was at 83.1 percent in 2016, having climbed from 70.4 percent in 2013. In 2016, the convicted could expect to serve an average of 45 months in a correctional facility.
While budget and personnel cuts contribute to lower case numbers, the department delivers a stinging reminder that it pursues select individuals and entities with vigor—and oftentimes success. In a press release, the IRS states, “CI again boasted a conviction rate rivaling all of federal law enforcement at 92.1 percent.” Even with lower caseloads, the impact and potential outcome of investigation by CI remains a significant deterrent for most.
Approached by the IRS? Contact an experienced tax attorney.
If you, or your organization, are contacted by the IRS for a civil tax audit or other investigation, seek experienced legal counsel.
Representing clients locally in Illinois, Ohio, nationally, and abroad, Robert J. Fedor Esq., LLC is a skilled legal resource when you have questions about the IRS, criminal tax defense, or other offshore tax issues. Contact us today.
