All You Need to Know About Tax Fraud Investigations

Tax Fraud Investigations

IRS tax investigation is a very tiring process not only for the directors, officers, and employees in a corporation that is the subject of investigation, but for their legal advisors as well. Although investigators aren’t always aware of exactly what or who they are looking for, they are extremely cautious about sharing sensitive information, which ends up troubling legal advisors pertaining to if and what they should be preparing for. In this blog, we explore the proceedings of IRS tax investigations to help you get a better understanding of the legal actions taken in such conditions.

What is Tax Fraud?

At its basic, tax fraud refers to the intentional tax-related misconduct of a taxpayer. While the IRS understands if a taxpayer isn’t able to pay their dues or file returns due to some unavoidable reason, avoiding reminders and IRS representatives altogether is considered evasion, which renders the conduct a tax fraud. While engaging the IRS can help taxpayers get some sort of relief, some mistakenly believe they can escape the consequences of breaking tax regulations.

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How Does The Investigation Begin?

IRS tax investigation doesn’t necessarily begin at the Criminal Investigation Division, as a huge number of cases mainly depend on referrals from different departments of the IRS. Revenue agents must report any indication of scams they spot during the auditing process and stop the examination without informing the taxpayer or their representative the exact reason for doing so. In addition, some investigations are initiated directly by the Criminal Investigation Department (CID) without referrals from any other department of the IRS and focus on prominent figures of a specific area. Furthermore, special agents are recommended to stay in touch with other investigative agencies and report any fraud-related information that they might get to know through the investigations of the other agencies. Finally, some IRS tax investigations begin based on tips from informants in different agencies.

Who Are The Members of The Investigation Team?

The investigation team primarily consists of special agents that can provide valuable contributions in tackling defaulters. They are a well-trained group of professionals that are selected through high-standard examinations and, unlike revenue agents that have a time constraint, can help deal with time-consuming investigations that often last for 12 to 24 months. In addition, the team consists of cooperating revenue agents that work with the special agents as part of a “joint investigation process”. While the cooperating officer is usually the person that initially spotted the signs of fraud during an examination, it can also be a team of the most proficient experts that are at par with special agents, thanks to their extensive experience in dealing with such cases.

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Importance of IRS Criminal Investigation

When facing the full intensity of a criminal investigation, defaulters often end up questioning why the government would put so much time and money into the collection process. While the process does take a lot out of the IRS, it isn’t just aimed at collecting the amount owed by defaulting taxpayers but also acts to discourage other taxpayers from engaging in similar conduct. Besides, the ultimate goal of IRS tax investigations is to gather information and proof against individuals that are involved in tax fraud and ensure they are prosecuted.

The “Special Agent’s” Final Report

The final result of an IRS tax investigation is the special agent’s report, which consists of all the details and documents related to the investigation. Special agents are expected to assemble, arrange, and narratively explain this information while presenting necessary documents to validate their findings. Records of all the interactions with the taxpayer or their representatives are also part of this report, irrespective of how small or offensive they might be. This report is a reference for the team at different stages of the investigation and the basis for the final prosecution process.


It is best to always pay your taxes on time to avoid any action that may attract an IRS tax investigation. Should you ever be the subject of an investigation, it is highly recommended to hire a tax resolution attorney. The team of proficient and experienced IRS problem resolution attorneys at the Law Offices of Nick Nemeth can effectively help with IRS tax investigations to find the best available solution. Call (972) 426-2553 for a free consultation today! You can also fill our Contact Form or email

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