How IRS Criminal Investigation Develops a Tax Case

IRS Criminal Investigation is the federal law-enforcement component responsible for investigating potential criminal violations of the Internal Revenue Code and other financial crimes within its jurisdiction.

A criminal tax investigation may originate from information developed by:

• IRS revenue agents or revenue officers
• Other law-enforcement agencies
• United States Attorneys' Offices
• Ongoing criminal investigations
• Outside sources

Once a subject criminal investigation is approved, special agents may use investigative techniques including interviews, surveillance, search warrants, bank-record subpoenas, and forensic analysis of financial records.

After gathering and reviewing the evidence, IRS Criminal Investigation may discontinue the investigation or recommend prosecution.

In a criminal tax matter, a prosecution recommendation generally proceeds to the Department of Justice for tax-law review and charging authorization. A resulting prosecution may involve attorneys from the Justice Department's criminal tax enforcement function, an Assistant U.S. Attorney, or both.

A prosecution recommendation is not a conviction. If charges are filed, the government still must prove every element of the offense beyond a reasonable doubt.

Willfulness Can Be the Central Dispute

Many criminal tax cases turn on what the defendant knew and intended.

An inaccurate return, unpaid balance, aggressive tax position, bookkeeping problem, or reporting mistake does not automatically prove a voluntary and intentional violation of a known legal duty.

Evidence may raise questions about:

• What tax obligation the defendant understood
• What information was available at the time
• Whether income or assets were intentionally concealed
• Whether records were knowingly falsified
• Whether deductions or credits were deliberately misstated
• What the defendant told accountants or tax advisers
• What advice the defendant actually received

Good-faith reliance on a tax professional may be relevant to whether the government can prove willfulness, particularly where the taxpayer fully disclosed the relevant facts and relied on professional advice.

Having an accountant or preparer is not an automatic defense. The communications, disclosures, records, and surrounding circumstances matter.

Other Federal Tax Charges May Apply

Tax evasion under 26 U.S.C. §7201 is not the only criminal tax offense.

Willful Failure to File or Pay

26 U.S.C. §7203 generally makes willful failure to file a required return, pay a required tax, keep required records, or supply required information a misdemeanor.

For an individual, a conviction under the general provision can carry up to one year of imprisonment, in addition to applicable financial penalties and prosecution costs.

False Tax Returns and Statements

26 U.S.C. §7206 addresses several forms of tax fraud and false statements.

Section 7206(1), for example, applies when a person willfully makes and subscribes a return, statement, or other document that is signed under penalties of perjury and that the person does not believe to be true and correct as to every material matter.

Section 7206(2) separately addresses willfully aiding or assisting in the preparation or presentation of a materially false or fraudulent tax document.

The charged statute matters because §7201, §7203, and §7206 require different proof and carry different potential penalties.

Sentencing Depends on More Than the Five-Year Statutory Maximum

A conviction under 26 U.S.C. §7201 is a felony carrying a statutory maximum of five years in prison.

That maximum does not tell you what sentence a particular defendant would receive.

For many federal tax offenses, U.S.S.G. §2T1.1 provides the starting guideline framework. The offense level is generally connected to the tax loss through the Tax Table in U.S.S.G. §2T4.1.

The guideline analysis can also involve:

• The number of tax periods involved
• The amount treated as tax loss
• Whether sophisticated means are alleged
• Related criminal conduct
• Acceptance of responsibility
• Criminal history
• Other guideline provisions and sentencing factors

The tax loss used for guideline purposes is a legal sentencing calculation and may not necessarily be identical to every civil tax figure asserted by the IRS.

A sentencing assessment therefore requires review of the charged counts, tax periods, records, alleged loss, criminal history, applicable Guidelines, and other case-specific facts.

Federal Tax Cases in Phoenix

Federal criminal cases in Phoenix are heard in the United States District Court for the District of Arizona.

The Phoenix Division operates from the Sandra Day O'Connor U.S. Courthouse and includes Maricopa, Pinal, Yuma, La Paz, and Gila counties for federal court administration.

The assigned courthouse and venue depend on where the alleged conduct occurred and the procedural posture of the case.

Our federal criminal defense attorneys evaluate the investigation and charge within the federal system rather than treating it as an ordinary Arizona state prosecution.

Trial-Focused Preparation and Direct Attorney Access

Financial cases can involve years of tax returns, bank records, business documents, communications, spreadsheets, and statements from accountants or other witnesses.

We examine that record carefully.

Our attorneys prepare criminal matters with trial in mind, review evidence for inconsistencies or unsupported assumptions, and work directly with clients rather than routing substantive legal decisions exclusively through case managers or staff.

That preparation can matter when the dispute centers on what the records actually show and what conclusions can reasonably be drawn about intent.

Discuss the Investigation Before You Respond

If IRS Criminal Investigation has contacted you, federal investigators are requesting an interview, you received a subpoena, or you have already been charged, understanding the exact stage of the case is important before making substantive decisions.

represents clients in federal criminal matters in Phoenix and throughout Arizona. Our phones are answered 24/7 for urgent criminal matters.