Posted by: Taxlitigator | January 1, 2016

It’s the Holidays – Say “Thank you” to Santa IRS-CI. By Robert S. Horwitz

The IRS recently gave unexpected Chanukah and Christmas presents to tax cheats and other assorted ne’er do wells. The present came from an unexpected source, Criminal Investigation (CI), in the form of CI’s 2015 Annual Report, released at the beginning of December, in time for holiday shopping.

All you need to know about the current state of CI is contained in the opening paragraph of the message of CI Chief Richard Weber: “We began the year facing deep cuts in our budget. Having hired only 45 agents in the last three years, attrition was catching up to us and our staffing levels hit their lowest levels since the 1970’s. We finally came to realize that fewer agents and staff really do mean fewer cases.”  Fewer special agents, fewer cases, fewer tax cheats brought to justice.  I guess less is NOT more.

Most of the remainder of the report is an attempt to make a silk purse out of a sow’s ear, with feel good stores about successful prosecutions and initiatives, many with CI’s “partners” in other law enforcement agencies. While CI has had accomplishments with the diminished resources at its disposal, the dire condition of criminal tax enforcement is revealed in the statistics contained in the report.  The number of special agents and professional staff is the lowest since the early 1970s and has fallen by almost one-third in 10 years.

Per capita, CI now has approximately 1 special agent for every 137,000 people living in the United States. That is probably a level that has not been seen since prior to World War II.  Elmer Irey, the first chief of CI and the man who brought Al Capone to justice, must be spinning in his grave.

The report lists CI’s priorities as:

  • Identity Theft Fraud
  • Abusive Return Preparer Fraud & Questionable Refund Fraud
  • International Tax Fraud
  • Fraud Referral Program
  • Political/Public Corruption
  • Organized Crime Drug Enforcement Task Force (OCDETF)
  • Bank Secrecy Act and Suspicious Activity Report (SAR) Review Teams
  • Asset Forfeiture
  • Voluntary Disclosure Program
  • Counterterrorism and Sovereign Citizens
  • In each of these categories the number of investigations initiated and cases referred for prosecution has declined over the last three years. The total numbers of investigations initiated and prosecutions recommended in 2013, 2014, and 2015 were:
FY 2015 FY 2014 FY 2013
Investigations Initiated 3853 4297 5314
Prosecution Recommendations 3289 3478 4364

CI’s top priority is identity theft fraud, i.e. criminal gangs who steal taxpayer’s identification numbers, electronically file false returns and obtain refunds. This crime affects hundreds of thousands of taxpayers and costs the U.S. Treasury billions of dollars in illegally obtained refunds each year.  Investigations initiated and prosecutions commenced between 2013 and 2015 were:

FY 2015 FY 2014 FY 2013
Investigations Initiated 776 1063 1492
Prosecution Recommendations 774 970 1257


General tax fraud is traditionally CI’s bread and butter. It is the investigation and prosecution of tax fraud committed by people who are engaged in legitimate businesses.  Like other priority areas of CI, investigations and prosecutions declined in this area:

FY 2015 FY 2014 FY 2013
Investigations Initiated 1202 1358 1554
Prosecution Recommendations 863 923 1190


And next we come to a program that has been widely touted by CI and the Department of Justice as a top priority: the investigation and prosecution of taxpayers who cheat the government out of employment withholding tax.  Here to, investigations initiated and prosecutions referred are down:

FY 2015 FY 2014 FY 2013
Investigations Initiated 102 120 140
Prosecution Recommendations 80 92 97

CI has a well-deserved reputation as the being the best financial crimes investigation agency in the world. Its special agents were well-trained, highly-motivated and CI has an unmatched level of success in obtaining convictions:  the conviction rate for federal tax prosecutions has never fallen below 90%.  CI has always been a key to ensuring voluntary compliance.  It has also been instrumental in the prosecution of drug trafficers, health care fraud, money laundering and the financing of terrorist organizations, among other things. With budget cuts and attrition, its ability to fulfill its mandate will only suffer, much to the relief of tax cheats and other perpetrators of financial crimes.

Robert S. Horwitz – For more information please contact Robert S. Horwitz – Mr. Horwitz is a principal at Hochman, Salkin, Rettig, Toscher & Perez, P.C., a former AUSA of the Tax Division of the Office of the U.S. Attorney (C.D. Cal)  and represents clients throughout the United States and elsewhere involving federal and state, civil and criminal tax controversies and tax litigation. Additional information is available at

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