2018 Priorities of the IRS Criminal Investigation Division (IRS-CI):
Part I, Types of Cases

Following his appointment as new Chief of the IRS Criminal Investigation Division (IRS-CI), John D. Fort announced the 2018 priority areas for IRS-CI enforcement. These goals include pursuit of specific areas of suspected taxpayer noncompliance as well as the implementation of new techniques for identification and investigation. In this post, we will cover the types of tax crimes featured on Fort’s list.

Traditional tax crimes

Fort noted that the primary mission of the IRS-CI is, as usual, to investigate traditional tax crimes. Considering the fact that employment tax violations represent a significant portion of the annual tax gap, costing the government roughly $79 billion after collection efforts, we should expect the number of employment tax prosecutions to increase this upcoming year. The Department will also continue to investigate abusive tax schemes, tax fraud, return preparer fraud and other tax crimes.

International tax crimes

A new task force will be utilizing the Department’s resources and data from the Offshore Voluntary Disclosure Program (OVDP), Foreign Account Tax Compliance Act (FATCA), Swiss Bank Program, Panama Papers and other whistleblower efforts, in order to identify taxpayers who are hiding money offshore. In Part II, we will cover the new International Tax Group in more detail.

Cyber and cryptocurrency crimes

The Coinbase, Inc. case is only the beginning of IRS efforts to compel cryptocurrency holders to reveal and pay taxes on their digital holdings. The IRS has filed several other John Doe summonses, seeking the identities of U.S. taxpayers who are concealing income or are laundering money through Bitcoin use. Additional information about digital currency users is being acquired from foreign partners, attachés, and financial institutions. The IRS has also been utilizing the services of Chainanalysis, Inc., which has developed a refactor tool that tracks and analyzes transactions on the blockchain.

Other areas of focus

The focus of the IRS-CI’s new National Coordinated Investigations Unit (NCIU) – which we will cover in Part II – is the pursuit of (1) employment tax violations, (2) international tax crimes, (3) microcap stock fraud (an effort coordinated with the SEC), and (4) fuel excise tax abuses.

We also anticipate IRS-CI scrutiny of tax issues related to the new tax reform, such as misuse of the new 1099A 20% business deduction.

In our next post, we will explain how the IRS-CI intends to collect and harness data for use in its investigations.