Most U.S. taxpayers do not run afoul of the Internal Revenue Service’s Criminal Investigation Division. Known as the CID, it has special agents who work either with other criminal prosecution agencies, in or with inter-agency task forces, or are assigned on a case by case basis to a U.S. Attorney office. Understand that the Internal Revenue Service does not commonly begin a taxpayer collection action with a Criminal Investigation Division special agent. The most common I.R.S. taxpayer recovery begins with a telephone call to the target. The caller is an I.R.S. collection agent, not a C.I.D. agent.
If your first contact from the I.R.S. is a C.I.D. agent call you know that the ultimate outcome is most likely a criminal prosecution. It is best to retain a criminal defense attorney if you are called by a C.I.D. special agent. All customary investigations begin with a request for production. The request is either by letter or by verbal communication from an I.R.S. agent. Compliance is not voluntary but is mandatory so do not disregard an IRS request for production of records. You can negotiate the time and delay factor but you cannot fail to comply. Additionally, be very aware that your response must include all records requested. Any selective response by you, or any omission of records is an open door to a criminal prosecution. When we look over our law office records of criminal prosecutions for tax evasion it is common that the prosecutor includes several counts of obstruction of justice for failure to provide complete tax records. If the first contact you have with an IRS agent is a subpoena then you can conclude for certain that you are the subject of a criminal investigation. Anyone whose first contact from the IRS is from a CID special agent would be well advised to retain a criminal defense lawyer at the outset. The investigatory phase can last as long as six months. As the subject of an IRS review you are entitled to be represented by an attorney, but it is not always needed. Most if not all IRS inquiries resolve with an agreed resolution requiring payment of back taxes, fines and interest. Very few IRS contacts resolve with a criminal prosecution.
You must keep in mind that IRS compliance actions are entirely paper based and records based. An inculpatory statement (admission of guilt) is rarely a part of an IRS criminal prosecution so be candid and open in your conversation with counsel and, if so advised, with the IRS agent. Unlike most other criminal prosecutions, the government does not have to establish beyond a reasonable doubt the elements of the crime of tax evasion. The standard is willfulness and intent; and your tax filings are almost always sufficient to establish all the legal elements the government must prove up in a tax evasion prosecution.