Signs the IRS is Investigating You and What to Do

March 21, 2024 Uncategorized

Contents

1 Signs the IRS is Investigating You and What to Do
- 1.1 How Investigations Get Started
- 1.2 Signs You May Be Under Investigation
- 1.3 If IRS Agents Come Knocking
- 1.4 Your Defense Strategy
- 1.5 Avoiding Criminal Charges
- 1.6 The Bottom Line
- 1.7 References

Dealing with the IRS can be scary. An audit or investigation can make anyone feel anxious. But there are things you can do to protect yourself and your rights if you find yourself on the IRS’s radar. This article will go over the common signs that the IRS may be looking into your taxes, plus give advice on steps to take if you suspect you’re being investigated.

How Investigations Get Started

There are a few different ways an IRS investigation can begin^[1]:

Information from an IRS auditor or revenue officer
Tips from informants
Data mining of tax returns
Related investigations of other taxpayers

So an investigation might start if an auditor sees something suspicious during a routine audit. Or it could be triggered by someone reporting potential tax fraud. The IRS also uses computers to search for anomalies in tax returns that may indicate a problem. And if they’re already looking into one taxpayer, that could lead them to start investigating associated people or businesses as well.

Signs You May Be Under Investigation

Many times the IRS won’t tell you directly that you’re under criminal investigation. But there are signs you can watch out for^[2]^[3]^[4]^[5]:

IRS agents suddenly stop contacting you after requesting information or asking you to pay taxes owed
Your IRS auditor seems to disappear without explanation
You or your bank gets subpoenaed for financial records
You stop getting the typical notices the IRS sends for things like penalties and interest
You get a surprise visit from IRS criminal investigation agents
Friends, family, business associates start getting contacted by the IRS

Some other red flags are if you submitted amended tax returns to correct errors, or if you failed to file for multiple years. While one mistake doesn’t necessarily mean you’re being looked at for criminal charges, patterns of behavior can draw scrutiny.

If IRS Agents Come Knocking

If IRS criminal investigators come to your home or place of business, you need to be very careful in how you respond. Here are some tips:

Don’t answer any questions right away. Politely state you need to consult with a tax attorney first.
Don’t invite them into your home or office. Step outside and close the door behind you if needed.
Don’t sign any documents without reviewing them carefully and having a lawyer assist you.
Take the agents’ business cards and write down their names and badge numbers.
Contact a criminal tax defense lawyer immediately.

Anything you say to IRS investigators can potentially be used against you later on. So it’s crucial you don’t answer questions or volunteer information before speaking to an attorney. Be cooperative, but protect yourself first.

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Your Defense Strategy

If you are contacted by IRS criminal agents or have reason to think you’re under investigation, your next steps are important. Here are some key points:

Hire an experienced criminal tax lawyer. You need someone who understands IRS procedures and investigations.
Don’t try to handle this alone. A tax attorney can deal with the IRS on your behalf.
Have your lawyer find out details of the investigation, including the special agent assigned to your case.
Develop a defense strategy with your attorney focused on your specific situation.
Follow your lawyer’s advice about whether to meet with investigators, provide documents, etc.

Some potential defenses your attorney may use:

You acted in good faith and had no intent to break tax laws.
It was a legitimate misunderstanding of confusing IRS rules.
Someone else prepared your return and you were unaware of any false information.
You had no knowledge of any wrongdoing within your business.

Your lawyer’s familiarity with tax law and investigative procedures will be invaluable in mounting the best defense. They can also negotiate with the IRS on your behalf if needed.

Avoiding Criminal Charges

To avoid facing criminal tax charges, the best thing you can do is be honest and compliant with the IRS:

File all tax returns on time, even if you can’t pay in full.
Keep thorough records to support figures on your returns.
If you discover an error, file an amended return ASAP.
Stay organized and retain tax documents for at least 3 years.
Pay as much as you can, or work out a payment plan, if you have a balance due.

Also make sure any tax professionals you use are reputable and know tax code well. While the IRS still may audit you if you follow these practices, you’re less likely to trigger a criminal investigation.

The Bottom Line

Dealing with IRS inquiries and investigations is stressful. But there are things you can do to protect yourself, like consulting with a tax attorney right away. Be smart, know your rights, and don’t panic. With the right help, you can get through it.

References

[1] https://www.irs.gov/compliance/criminal-investigation/how-criminal-investigations-are-initiated

[2] https://www.marca.com/en/lifestyle/us-news/personal-finance/2023/05/29/6474b5e2ca4741ef0b8b45cb.html

[3] https://klasing-associates.com/criminal-tax-defense/irs-criminal-investigations/

[4] https://landmarktaxgroup.com/irs-back-taxes/taxes-and-criminal-consequences-what-you-need-to-know-about-irs-criminal-investigations

[5] https://www.floridataxlawyers.com/how-to-tell-if-irs-is-investigating-you

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FAQs

Signs the IRS is Investigating You and What to Do - FEDERAL LAWYERS [2024]? ›

Conducting a Criminal Investigation

Various investigative techniques are used to obtain evidence, including interviews of third party witnesses, conducting surveillance, executing search warrants, forensically examining evidence, subpoenaing bank records, and reviewing financial data.

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What happens when the IRS investigates you? ›

What is considered suspicious activity to the IRS? ›

A false or altered document. Failure to pay tax. Unreported income. Organized crime.

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How much money do you have to owe the IRS before you go to jail? ›

You ignore the bill and all of the IRS's collection notices. At this point, the IRS may obtain a civil judgment against you for the $10,000. This gives the IRS the right to issue a federal tax lien, seize your assets, garnish your wages, or take other collection actions. The IRS cannot put you in jail.

Learn More Now ›

What makes IRS suspicious? ›

Certain types of deductions have long been thought to be hot buttons for the IRS, especially auto, travel, and meal expenses. Casualty losses and bad debt deductions might also increase your audit chances.

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Can the IRS track your cell phone? ›

It turns out that the IRS is using devices known as IMSI Catchers, “Stingrays” or cell cite simulators. It isn't exactly a phone tap, but it does mean there is data gathering going on. You might not know about it, and it could infringe on your privacy rights.

How do you know if the IRS is auditing you? ›

Remember, you will be contacted initially by mail. The IRS will provide all contact information and instructions in the letter you will receive. If we conduct your audit by mail, our letter will request additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.

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Does the IRS monitor your bank account? ›

Generally, the IRS won't go rifling through your bank account transactions unless they have a good reason to. Some situations that could trigger deeper scrutiny include: An audit – If you're being audited, especially for issues like unreported income, the IRS may request bank records.

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How long can the IRS investigate you? ›

Generally, the IRS can include returns filed within the last three years in an audit. If we identify a substantial error, we may add additional years. We usually don't go back more than the last six years. The IRS tries to audit tax returns as soon as possible after they are filed.

How to find out if IRS is investigating you? ›

Signs That The IRS Might Be Investigating You

IRS Agents And Auditors Have Stopped Contacting You.
Your Bank Records are Being Subpoenaed.
Your Previous Tax Returns are Being Audited.
Disproportionate Interest in Specific Transactions.
You're Contacted by The Criminal Investigation Division's Special Agent.

Jul 17, 2023

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How long does the IRS have to prosecute you? ›

Under Section 6531(2) of the U.S. Tax Code, the IRS has six years from the time the tax return is filed or from the last willful act that prevented the filing of a tax return from bringing a criminal tax charges. However, it can be difficult to pinpoint when, exactly, the last willful act occurred.