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Tax fraud typology and IRS investigations

When the IRS’s Criminal Investigations division (CI) looks in to possible tax fraud, it never does so in the abstract. To the contrary: the CI is transparent about how it classifies the areas it the areas and lines of inquiry it may pursue.

What are these classifications for tax fraud investigations?

The short answer is that on its website the IRS lists out a virtual A to Z of types of tax evasion investigations. Arranged alphabetically, the list begins at A, with abusive return preparer enforcement. It continues with more than a dozen other types, ending at Q for questionable refund program (QRP).

Some of these areas are quite specific to a field or industry. Investigations in possible healthcare fraud, for example, involve activities that are particular to the health care setting, such as patient referral kickbacks and pharmaceutical diversion.

Similarly, another specific area for IRS investigations is financial institution fraud. This type of investigation involves activities such as compliance with the Bank Secrecy Act, currency transaction reports and other anti-money laundering rules.

IRS criminal investigations are by no means limited, however, to specific industries. In “general fraud investigations,” special agents also pursue the full gamut of possible violations of tax laws and associated financial crimes.

In short, the CI is organized in ways that seek to respond effectively to the type of tax fraud that is suspected.

A trend in the last few years, of course, is that the IRS is doing fewer criminal investigations overall. Compared to 2011, only seven years ago, the number of investigations is down by about a third.

Yet this hardly means the IRS is a paper tiger. As we’ve noted briefly in this post, the agency has systemic ways to organize its criminal investigations to make them as effective as possible. If you think you may be in the IRS’s crosshairs, it makes sense to get knowledgeable legal counsel.

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