IRS Criminal Probes Fell Last Year

by Mike Godfrey, Tax-News.com, Washington

12 June 2007

While the number of tax-related investigations started by the Internal Revenue Service rose during the 2006 fiscal year, the number of criminal investigations initiated by the agency fell last year, according to a new Treasury report.

The Treasury Inspector General for Tax Administration's (TIGTA) latest report into the IRS's enforcement activities showed decreases in several key performance measures from Fiscal Year 2005. For example, the number of subject investigations initiated decreased 8.5%, the number of subject investigations in open inventory decreased 5.8%, the number of subject investigations referred for prosecution decreased 4.9%, the number of subjects convicted of a crime decreased 6.1%, and the number of subjects sentenced for a crime decreased 3.6%.

The study revealed that the number of investigations in the Department of Justice pipeline was at a 6-year high. This resulted in the function spending more direct investigative time to prepare these investigations for adjudication instead of initiating new investigations.

Meanwhile, TIGTA said that the percentage of direct investigative time spent on legal source income tax and tax-related investigations was at a 7-year high. Although the function reported it was spending more time investigating these types of cases, overall investigations initiated decreased, thus affecting the number of legal source income tax and tax-related investigations initiated.

The TIGTA report raised concerns that the IRS is losing experienced special agents to attrition faster than it is replacing them. According to its most recent estimates, the function’s planned hiring will not offset Fiscal Year 2006 attrition or expected Fiscal Year 2007 attrition.

In addition, the report noted that Congressional concerns about the function’s Questionable Refund Program continue, although TIGTA said that it is encouraged by the IRS’s actions to implement changes within this Program.

In an effort to ensure voluntary compliance, the IRS continues to increase its publicity on tax prosecutions. The overall publicity rate of 75.6% for prosecutions in Fiscal Year 2006 was at an all time high.

TIGTA's report did not offer any specific recommendations, but it concluded that: "There is a need for continued progress in enforcement of criminal tax and tax-related violations to enhance voluntary compliance and foster confidence in the integrity of the tax system."

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