Who's Afraid of the Big Bad Wolf?


Our federal government devotes millions of man-hours and billions of dollars each year to law enforcement. The FBI, DEA, and Bureau of Alcohol, Tobacco, and Firearms, along with lesser-known agencies like the U.S. FDA's Office of Criminal Investigations (pursuing criminal violations of food and drug laws), the Department of Commerce's Office of Export Enforcement (responsible for keeping dangerous technology out of the wrong hands), and NOAA's Fisheries Office for Law Enforcement (charged with protecting the ecosystem and marine life) all strike fear in at least somebody's heart.  

But there's one agency that has an almost mythical power in most minds, and that's the IRS. Many people who get audited are afraid of the IRS Criminal Investigation Division (even if in their minds they only know it as the “IRS Police”), and part of our job is to reassure them that everything is going to be OK. Indeed, although getting audited can be stressful, time-consuming, and downright terrifying, it’s extremely unlikely you’ll be hauled off to jail because of an income tax audit. The CI division is a subset the Enforcement division at the IRS, and it reserves its resources for the most serious tax crimes. Last week, the IRS CI unit released their Fiscal 2012 annual report. Here’s what they’ve been up to:  

  • Investigators cover a wide variety of tax-related crimes beyond the garden-variety tax fraud and celebrity "failure to file" cases that command the biggest headlines. Their work also includes identity theft, offshore tax evasion, tax treaty cases, tax protestors, money laundering, terrorist financing, public corruption, and drug enforcement cases.
  • While criminal cases keep the CI division busy, the numbers are still relatively small considering the 100 million+ returns the IRS collects every year. For Fiscal 2012, the Service initiated just 5,125 investigations, up from 4,720 in 2011. Out of those 5,125 investigations, they recommended 3,710 prosecutions. There were 3,390 indictments and 2,634 convictions (the federal government generally doesn't take you to court if they're not already sure they can win). 2,466 lucky winners drew all-expense-paid trips to "Club Fed."
  • Investigators spend a lot of time chasing down crooked tax preparers. For 2012, they investigated 443 suspicious-looking characters, recommended 276 prosecutions, and won 178 convictions. The average convicted preparer earns 29 months in jail, up from 25 months in 2011.
  • The IRS continues to uncover people who really just ought to know better. Take Jimmy Dimora, for example, a former Cuyahoga County (Ohio) Commissioner, who found himself looking for ways to supplement his county pay. Dimora took more than $166,000 in bribes to steer contracts to allies, get jobs and raises for associates, intercede with judges on pending cases, and generally abuse his office. Naturally, he forgot to pay tax on those bribes. Jimmy wound up drawing a 28-year sentence for his sideline business.

So, do any of these points strike a chord with you? Probably not. The average American has nothing to fear from the Criminal Investigations unit. You've got to do something really outrageous to draw one of those 5,000 case investigations. But this obviously doesn’t mean you’re completely invisible – millions of Americans are contacted by the IRS and state tax agencies every year. An audit can happen to any taxpayer at any time, and it’s critical to be prepared. The best thing you can do – besides making sure your return is accurate and complete, of course – is to have us on your side before you get audited. We’ll handle the rest!