IRS Criminal Investigation: How the Process Works

“You’re under criminal investigation.” The special agents visit the door of your home. Maybe they first introduce you to the criminal investigation process with a search warrant of your home or business. Maybe they start out with an IRS summons for your records. What now? What next? The words “you are under an IRS criminal investigation” can be scary, and understandably so. A typical person put under IRS criminal investigation will be charged with a crime or face severe, financially-devastating fraud penalties.

During an IRS criminal investigation, a typical person will often see their friends, family members and business customers summonsed or subpoenaed. An IRS criminal investigation can wreck a life or a business without ever even reaching the indictment stage. Once the IRS gives a case to the grand jury, they get an indictment 99 percent of the time against most lawyers. Once the IRS indicts, they win at trial more than 90 percent of the time against most lawyers. Once the IRS secures a conviction, they win on appeal more than 90 percent of the time against most lawyers. Once the IRS goes to sentencing, the typical judge in the typical case gives real prison time, with the average prison time rising to a longer prison sentence than most gang-bangers would face.

But you don’t have to be a “typical” person. Just as not all lawyers are created equal, neither must be your defense. Barnes Law enjoys a track record of proven success, known for defending Wesley Snipes and crafting the closing argument for Joe Banister, winning acquittals in the hardest cases. A typical Barnes Law client under IRS investigation never sees the inside of a prison cell. A typical Barnes Law client under IRS investigation is never even indicted. Typical Barnes Law clients under IRS investigation never lose their freedom or their business or their family.

The IRS criminal investigation process has to go through many hurdles. And if you employ the right defense, you can protect your innocence and stop the process from moving forward to a prison sentence, a big fine, a large fraud penalty, and the business-bankrupting, family-destroying effects of a difficult prison sentence. The IRS criminal investigation process can start in the following ways:

  • A “fraud” referral from a revenue agent conducting an audit in the audit process of your returns;
  • A special agent with the IRS, as Joe Banister once was, opens a criminal case against you (you can find out when by using the Freedom of Information Act and inside knowledge about the IRS internal record-keeping processes; if you can obtain your “individual master file” you can find a “914″ code entered on a specific date that will tell you when the IRS criminal investigation began);
  • The special agent then has to obtain various approvals before he can take certain actions, including making contact with your bank, your employer, your doctor, your family, your landlord, your employees, your vendors, your providers, and the like, especially if he is using an IRS summons to do so (or he’s supposed to; a good defense can make sure an IRS special agent has to follow the rules);
  • The special agent has to get special authorization from the “special agent in charge” of the local IRS criminal investigation office before he can ask the grand jury to use its subpoena power to get information, documentation or testimony about you (the form is called a “9131″ form seeking “grand jury investigation authorization”);
  • The special agent has to get even more special authorization and approvals from higher-ups if he wants to issue a search warrant, with special rules for seeking records of attorneys, accountants, and public businesses.

The special agent does not decide if the grand jury will indict you or bring federal charges against you; instead, the IRS criminal investigation process works as follows:

  1. The special agent opens up an IRS criminal investigation case, coded as a “914″ freeze on your individual master file;
  2. The special agent obtains approvals for certain IRS criminal investigation information-gathering needs, depending on the kind of request, be it contacting a third party, issuing a summons for documents or testimony, asking the grand jury to subpoena documents or testimony, including, depending on the request involved, getting approvals and authorization from the special agent in charge of the local office, the supervisory special agent, the district counsel for the IRS, the local Assistant United States Attorney, the higher-ranking officials in D.C. with the IRS or the Department of Justice Tax Division;
  3. If the special agent believes there is a good reason to bring a criminal case, then the special agent will make a “referral” for “prosecution,” asking for the Department of Justice to indict, often using a form called a “special agent report,” or “SAR” for short, which details the findings of the special agent in the IRS criminal investigation, possible federal charges thew IRS can indict with, the available defenses known to the special agent, and the reasons for referral;
  4. Any of the following have the right and obligation to either approve the referral for prosecution, or reject the prosecution entirely and refuse to indict you, including the supervisory special agent, the special agent in charge of the local office, the special agent in charge of the region, the supervisor of any IRS criminal investigation in Washington D.C., the district counsel for the IRS, the CT counsel for the IRS;
  5. Even if all the IRS personnel involved approve the special agent’s referral, the rules, laws, court cases and tax code collectively require the IRS obtain the appropriate official approval from both the local prosecutor’s office (the United States Attorney from your local district) and approval from the Tax Division of the Department of Justice in Washington D.C. (Important to note: you have a right under the rules to seek a conference with each of the people involved in the process, a conference right that can stop federal charges before they reach a place where they indict you);
  6. If all the IRS food chain approves the referral to indict you, the Tax Division of the Department of Justice approves, and the local United States Attorney approves, then they must still seek the approval of the grand jury to indict you;
  7. If the grand jury does indict you, then you face a case in court, where the process starts with a bail hearing and an arraignment (where you enter your plea of not guilty and hear certain rights spoken to you);
  8. You have a right to try to have a district court federal judge dismiss any indictment even before the case ever goes to a jury;
  9. If the judge does not dismiss the case, then the case goes to the jury to decide your innocence;
  10. If you lose before the jury, you still have a chance to obtain a lower sentence or no sentence in prison at all before the sentencing process starts before the federal judge;
  11. Even if you lose with the judge and the jury, you still have a right to an appeal to a higher court, such as the Ninth Circuit Court of Appeals (and, after them, the United States Supreme Court) for California federal charges, where a three-judge panel of the Appeals Court can reverse the case, set you free earlier, and give you a new trial;
  12. Even if the appeal fails, you still have a chance to reverse the case, get free earlier, and get a new trial, with a petition called “habeas corpus” that allows you to raise issues like government agents lying, government prosecutors hiding evidence, jurors engaging in misconduct to get on the jury (like three jurors in the Wesley Snipes case did), or other issues unknown at the time of the case.

Put simply, the feared knock on the door announcing you are under IRS criminal investigation is scary, and for good cause, but it doesn’t have to be a life-threatening experience. Just as our legal system is as good as the lawyer by your side, so a good defense is as good as the attorney who brought it. Few of my clients under IRS criminal investigation ever face prison, and that is because I work hard to prove their innocence while using every right in your hand to protect you from harm.

Want to find out more? Email me, and I will send you a free book with details, charts, and examples of the IRS criminal investigation process and ways to stop it before it starts.