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The shutdown: audits suspended, but not criminal investigations

Last week we wrote about the changed tax-compliance climate for offshore accounts. This week, with the partial shutdown of the federal government, we find ourselves exploring a different type of change: the effect of the shutdown on IRS activities.

Much depends, of course, on how long the shutdown goes on. If it lasts into next week, the contingency plan prepared by the Treasury Department will need to be reassessed. This is because the original plan is only designed to last for up to five business days. And, at the time this post is being written, we are already toward the end of day five.

The most important news for taxpayers is probably that the IRS has suspended all tax audits during the shutdown. This does not mean, however, that taxpayers will simply rest easy while Washington ties itself in knots trying to resolve the latest political impasse.

It's true that most IRS employees are on furlough during the shutdown. That means they are not allowed to work. Only about 10 percent of the agency's workforce will be working as "excepted employees" until Congress comes up with further appropriations.

Keep in mind, though, that a significant number of those employees work in the Criminal Investigation (CI) division. Indeed, more than 3,500 employees in that division have remained at work.

And there is a lot of work to be done. The CI has nearly 9,000 investigations currently open and nearly 4,600 of those are active investigations. Evidence-gathering by special agents, the execution of search warrants and other work aimed at detecting and prosecuting tax fraud or other criminal violations is still going on, even as ordinary IRS offices around the country have closed.

Source: Forbes, "With Shutdown, Taxes Still Due But You Can't Ask IRS For Help," Kelly Phillips Erb, October 1, 2013

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