You may not realize it, but in some way or another, you’re almost always interacting with the IRS. Whether it’s a special agent or filing your taxes.
Obviously, it’s not always direct contact, but it’s contact nonetheless: your employer’s withholding from your paychecks, quarterly tax payments for the self-employed, and annual tax filing. For most taxpayers, though, that’s about it.
Well, that’s in until they run into a tax problem.
At Edge Financial, we know your first interaction with the IRS is going to be intimidating, and you shouldn’t have to go it alone. However, even though we hope you’ll enlist us for all your tax related needs, we believe knowledge is your first and most important foundation.
With that in mind, we’re answering the big questions about three types of IRS representatives: revenue agents, revenue officers, and special agents. If you’ve ever had a question about IRS special agents, now’s your chance to get that question answered.
IRS Special Agents are members of the Criminal Investigations department of the IRS. So unlike their counterparts, revenue officers who handle collections and revenue agents who handle audits, special agents investigate possible tax crimes in order to determine if they believe a crime has been committed—and if there should be criminal prosecution.
Most tax issues never put you face-to-face with IRS special agents. Audits? Nope. Tax debt? Nope. The IRS sends special agents only to investigate suspected tax crimes, like tax fraud or tax evasion.
So, what might cause a taxpayer to be investigated? Well, let’s reintroduce the revenue officers and revenue agents. These IRS professionals audit or enforce collections, and if they suspect a taxpayer has committed fraud, the matter will likely be handed over to the Criminal Investigations department. The IRS also accepts tips, so if a person knows or suspects you’ve committed fraud or tax evasion, they may speak up to the IRS. Finally, the IRS will open an investigation upon receiving info from other law enforcement agencies.
However, the IRS doesn’t jump directly from opening an investigation to sending out a special agent into the field; they’ll first go through internal reviews and approvals to decide if they will proceed with an investigation.
If so, the IRS special agent may enter the field.
A special agent might turn up in a number of spots: work, home, or somewhere else.
Since their main objective is to obtain evidence related to a suspected crime, they’ll perform a number of actions, ranging from surveillance to witness interviews. If they have a search warrant, they might search your home, car, computer, or business. And this also means they might seize financial information, like bank records, travel info, or any items relevant to the investigation at hand.
Once they’ve performed a full investigation, the special agent will determine whether there’s enough evidence to prove a crime was committed. If not, which does happen, that agent will recommend the investigation to be discontinued. If there is enough evidence, they’ll pass their findings along to a team at the IRS; this team will determine as a group whether they should send the case to a prosecuting body, like the Department of Justice.
When you learn you’re the subject of a criminal investigation, you’ll likely jump to the worst-case scenario, and your surprise may lead you to reveal information to a special agent that you might not otherwise. That’s good enough reason on its own to contact an attorney right away instead of answering an agent’s questions on their first visit.
Even if you’re completely innocent (as we hope you are!), you have the right to an attorney. And you should definitely enlist one right away; they’ll help you understand what info you actually need to provide to the investigation while making sure you maintain your rights.
It bears mentioning: Special agents aren’t there to arrest you. Special agents are there to collect information related to their investigation. So treat the situation with the appropriate seriousness it deserves, and try not to be overwhelmed. If you’re innocent, that’s likely going to be the result of the investigation anyway!
Tax practices like offshore banking can have big consequences if you don’t come clean, but there are ways to get ahead of your tax issues so they never reach the level that warrants a criminal investigation.
If you’re dealing with tax debt or liability, auditing, or other basic tax problems, don’t let them frighten you into inactivity. Get help.