The Internal Revenue Service (IRS) is dedicated to resolving tax issues, often by any means necessary. One of the most serious aspects of their operations is their full authority to conduct criminal investigations, which are used to determine whether taxpayers are adhering to tax laws.
If the IRS suspects that you are engaging in willful tax evasion, you may find yourself under an audit, or in more severe cases, facing a full criminal investigation.
Hiring a tax attorney early in the process is crucial, as it can help you address these issues legally without harming your financial stability. Unfortunately, many people wait too long to seek legal assistance, which means that by the time they do, some relief options may no longer be available. This is why understanding the signs that the IRS might be investigating you can be incredibly helpful.
How to Recognize the Signs That the IRS May Be Investigating You
While the IRS investigation process is often subtle, there are telltale signs that indicate you might be under investigation. The following are some of the most significant warning signs that your audit may have evolved into a more serious matter, such as a criminal investigation.
1. IRS Agents and Auditors Stop Contacting You
At first glance, the cessation of contact with IRS agents may seem like a relief after going through an audit. However, in many cases, this can be a red flag. If you’ve been in communication with the IRS for an extended period, you know that they are persistent and proactive in pursuing delinquent taxes. They typically respond to your calls and maintain an active presence in your case.
If suddenly the agents stop reaching out, fail to respond to your inquiries, or cease communications altogether, it could indicate that your case has been transferred to the IRS’s Criminal Investigation Division. This division becomes involved when the IRS believes there is evidence of serious tax crimes such as tax evasion, asset concealment, or making false statements.
In addition, when auditors are no longer involved, it’s possible that your case is no longer under their jurisdiction. As a precaution, tax professionals within the IRS’s Examination and Collection Divisions are required to suspend their activities to avoid interfering with a criminal investigation. If the IRS becomes unresponsive, this is a critical moment to consult a tax attorney.
2. Your Bank Records Are Subpoenaed
Another serious indication that you might be under IRS investigation is when the Criminal Investigation Division subpoenaed your bank records. This typically happens when the IRS or the US Attorney’s Office is seeking additional information that could support a criminal investigation. If your bank notifies you of a subpoena for your records, it’s essential to act quickly and consult a legal professional to protect your rights and navigate the next steps.
Similarly, if your accountant is subpoenaed and required to produce your tax records before a grand jury, it is another strong sign that the investigation has taken a criminal turn. It’s important to understand that accountants are not protected by attorney-client privilege. Thus, anything shared with them may be used against you, which is why it is wise to engage a tax lawyer.
3. The IRS Audits Your Previous Tax Returns
If the IRS starts auditing past tax returns that you filed, especially older returns, this can be a cause for concern. Often, the IRS will select older returns for review if they suspect discrepancies, such as questionable deductions or reported income that doesn’t align with their expectations.
Though not an automatic sign of a criminal investigation, auditing past tax returns raises red flags, especially if there is a pattern of inconsistencies. If this happens, it’s essential to remain cautious during communications with your accountant, as anything you disclose could potentially be used against you in a criminal case. Since accountants are not bound by attorney-client privilege, it’s wise to consult a tax attorney who can offer confidentiality protections.
4. Disproportionate Focus on Specific Transactions
If IRS agents begin to scrutinize a particular transaction or set of transactions more closely, or if they request an excessive amount of documentation, it may indicate that they are suspicious of potential fraudulent activity. This targeted scrutiny is one of the most obvious signs that the IRS is taking a deeper look into your tax affairs and could be laying the groundwork for a criminal investigation.
Agents often focus on the intent behind specific transactions, which may lead them to believe there are criminal elements involved in your tax filings. If you find yourself under intense scrutiny for certain transactions, it’s important to take immediate action and consult a tax attorney, as you may be facing an investigation into criminal activity.
5. You Are Contacted by a Special Agent from the Criminal Investigation Division
Just like detectives from law enforcement, IRS special agents can contact you directly to investigate your tax matters. They might call you, visit your home, or meet you in person, all in an effort to gather incriminating information. While the agent may appear friendly and forthcoming, their goal is not to assist you; they are working to build a case against you.
If you find yourself being contacted by an IRS special agent, it’s crucial that you understand your rights. The best thing to do is to remain silent and invoke your Fifth Amendment right against self-incrimination. You are not required to say anything further without the presence of an attorney, so politely inform the agent that you’ll need legal representation before continuing the conversation. It’s crucial to act with caution in these situations, as anything you say could potentially harm your case.
When Should You Hire a Tax Attorney?
Now that you are aware of the signs that the IRS may be investigating you, the next question is: when should you hire a tax attorney? Ideally, the sooner, the better. In many cases, involving an attorney early in the process—such as when you’re first notified of an IRS audit—can help protect you from unintentionally making statements that could incriminate you.
The early stages of an audit are critical because they set the tone for the rest of the process. Even simple conversations with the IRS during the audit phase can unintentionally provide them with incriminating evidence, leading to a referral to the criminal branch. This is why it is often beneficial to have an attorney by your side from the start.
An attorney can provide guidance during interviews, protect your rights, and ensure that you do not inadvertently provide damaging information. It is important to note that an attorney is bound by attorney-client privilege, unlike an accountant. This means that anything you discuss with your attorney is confidential, offering you a layer of protection that doesn’t exist with your accountant.
If the IRS investigation eventually leads to accusations of tax fraud or evasion, you’ll need a qualified attorney to represent you in court. In such cases, the stakes are incredibly high, as criminal charges could result in severe penalties, including the possibility of imprisonment. A tax attorney with experience in criminal defense will be your best asset in ensuring your rights are defended and the best possible outcome is achieved.
Why You Need Legal Help from the Law Offices of Mary E. King
While understanding the signs that the IRS may be investigating you is important, it’s crucial to recognize that you could still inadvertently harm your case without professional legal help. Even a small misstep during an audit or investigation could have serious consequences. That’s where a skilled tax attorney can make a difference.
At the Law Offices of Mary E. King, we specialize in defending clients facing IRS criminal investigations. Our extensive experience in handling complex tax matters allows us to provide the best legal representation possible, safeguarding your rights and financial future.
If you suspect that the IRS is investigating you or you’ve already received a subpoena or contact from a special agent, don’t wait. Contact us today for a free consultation at 941-906-7585 or via our online form. Let us help you protect your rights and work toward the best possible resolution of your case.
