IRS Criminal Report Shows Increase in Tax Crimes, Convictions

On Monday, the Internal Revenue Service (IRS) released its Annual Business Report on Criminal Investigations for the fiscal year ended September 30, 2013.  The report noted a rise in criminal activity related to the committing of tax crimes, especially in the area of identity theft.  However, the report also highlighted an increase in the prosecution and conviction rates of tax crimes.

The goal of IRS Criminal Investigations is to support compliance with tax laws and the Internal Revenue Code by investigating and prosecuting tax crimes.  The annual report noted that for the 2013 fiscal year, IRS Criminal Investigations open 5,314 investigations of tax crimes and recommended 4,364 of those cases for prosecution.  Those numbers represented a 12.5 percent increase in investigations and an 17.9 percent increase in prosecutions as compared to the 2012 fiscal year.

Likewise, 2013 saw a 25.7 percent increase in a successful conviction related to tax crimes.  The IRS’ conviction rate was 93.1 percent in 2013, an increase of 0.1 percent over the conviction rate in 2012.

“The conviction rate is especially important because it reflects the quality of our case work, our teamwork with law enforcement partners and the U.S. Attorneys’ Offices, and it represents an increase over 2011 and 2012,” said Richard Weber, the IRS Chief of Criminal Investigation.

The increases in investigations, prosecutions, and convictions came at a time when the IRS began to see a decline in the number of available resources while the agency saw increased responsibility with the passage of ObamaCare.  IRS Criminal Investigations had 2,541 special agents available for fiscal year 2013, the lowest number in over a decade.

Identity Theft Leads Way in Litany of Tax Crimes

Of the 5,314 investigations of tax crimes performed by the IRS in 2013, more than 1,400 of those related to identity theft.  Those identity theft investigations led to the prosecution of over 1,200 individuals.

IRS Criminal Investigations estimates that it prevented the filing of over 1.3 million fraudulent tax returns, which would have paid over $7.1 billion in fraudulent tax refunds.

Other tax crimes pursued by IRS Criminal Investigations include money laundering, corruption by public officials, tax fraud conducted by tax preparers, international tax fraud, counterterrorism, and trafficking of narcotics.

“Our cases involved individuals and corporations from all segments of society.  They led us into corporate board rooms, offices of public officials, tax preparation businesses, identity theft gangs and narcotics trafficking organizations,” said Weber.

IRS Criminal Investigations works with over 35 Identity Theft Task Forces at the local, state, and federal levels.

“The [task force] represents true teamwork by all levels of law enforcement,” Weber noted.  “Individuals who commit identity theft demonstrate a blatant disregard of the integrity of the United States tax system and cause immeasurable hardship to innocent victims.”

“This report highlights some of the many noteworthy cases that were completed by [IRS Criminal Investigations], which is just the tip of the iceberg of the complex cases we completed this past year,” continued Weber.  “The dedication and enthusiasm of our employees was a driving force behind these achievements.  IRS [Criminal Investigations] continues to make our mark in history as the best financial investigators in the world.”

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.