One of my persistent comments is that there are two distinct areas of tax practice – determination of the correct tax and collections. In collections, ability to pay is more the issue. I usually qualify this with the comment that there is a third area, where the agents carry guns and can arrest you. If you watch the movie the Untouchables, you will understand why people would joke ”That’s how they got Al Capone”, when they were notified they were going to be audited. (That is of course based on a misunderstanding of the distinction.) Those CID folks are so good that they often get diverted into fighting other forms of white collar crime. This creates a problem in dealing with the tax gap, since they are the only law enforcement agency charged with enforcing criminal violations of the tax laws. At any rate the Inspector General seems to think they are stepping up their act in that regard based on this press release:
WASHINGTON –The Internal Revenue Service’s (IRS) Criminal Investigation (CI) division surpassed its goals for Fiscal Year (FY) 2010, according to a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).
CI is primarily dedicated to developing and investigating legal source tax cases, which are crimes involving legal industries and occupations and legally earned income. The prosecution of these cases is key to supporting the IRS’s overall compliance goals, enhancing voluntary compliance with the tax laws, and promoting fairness and equity in the tax system. The overall objective of TIGTA’s review was to provide a statistical portrayal with trend analyses of CI’s enforcement activities for Fiscal Years 2006 through 2010.
In support of the IRS’s overall effort to reduce the Tax Gap, CI achieved improved performance during FY 2010 by committing resources to both legal and illegal source tax investigations and working with other IRS operating divisions to develop and investigate tax cases. During FY 2010, CI received approximately $658 million of the IRS’s Operating Plan budget to fund the criminal investigation programs that explore potential criminal violations of the Internal Revenue tax laws, enforce criminal statutes relating to these violations, and recommend prosecution as warranted.
Originally Published on forbes.com on August 29th,2011
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CI surpassed its goals for FY 2010 by expending 71.2 percent of its time on total tax investigations, with 52.6 percent of that time devoted to legal-source tax investigations. CI also reported that the number of legal source tax investigation initiations increased by 12.3 percent and the number of tax-related initiations increased by 10.6 percent. Further, the number of subjects convicted of legal source tax crimes increased 6.9 percent from FY 2009 and has increased 22.6 percent since FY 2006.
In FY 2010, CI also surpassed its goal of completing 3,900 investigations bycompleting 4,325. CI demonstrated efficiency in processing legal and illegal source investigations by reducing the average days elapsed to complete an investigation to 365 days, an 8.8 percentage improvement (rounded) from the FY 2009 average of 401 days. In addition, CI exceeded its FY 2010 goal of 4,000 initiated subject investigations by initiating 4,706.
CI management attributes the increases to better management oversight, which includes emphasizing the need to complete initial interviews and the gathering of facts within the first few months of an investigation.
“I commend Criminal Investigation for this improved performance,” said J. Russell George, Treasury Inspector General for Tax Administration. “Their work continues to be critical to IRS efforts to reduce the Tax Gap.”
TIGTA made no recommendations in this report, nor did IRS officials make any comment although they were provided that opportunity.
Somebody, who has reason to know about such things, told me, off the record, that you have to evade at least 100 grand a year for three years to get the CID folks interested in you. I wouldn’t count on that and the collections guys can make you pretty miserable with liens and levies, so behave yourself.