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IRS Special Agents Offshore Investigation Tactics
IRS Special Agents
IRS Special Agents: When it comes to the Internal Revenue Service and international tax investigations, the Special Agents are the IRS guys and gals you want to watch out for. While there is nothing comfortable about being audited or examined by an IRS agent, for the most part most examinations and audits and without much hassle.
Typically, there is nothing criminal about an IRS audit.
But, if your case has been referred to the IRS Special Agents, that can pose a problem.
The main reason is because now you are under quasi-criminal investigation.
While not all Special Agent Investigations will end in a referral for criminal indictment or a criminal complaint being filed – it can be very stressful, especially in light of the fact that foreign accounts compliance and offshore assets and investment investigations are on the rise
Who are the IRS Special Agents?
When a person is under audit or examination, it is not a per se criminal investigation. Rather, it is a civil inquiry.
If you are under audit and the agent believes you may have committed a criminal violation, the agent does not have any authority to pursue that avenue any further.
That is because the agent has not read you your rights, and an IRS audit does not mean you are being detained or under criminal investigation.
Instead, the cases referred to the IRS Special Agents.
The IRS Special Agents are tasked with investigating tax crimes.
For example, if you are on the receiving-end of an international tax audit on matters involving FBAR or FATCA, and the agent believes you acted willfully and with intent (criminal willfulness requires a higher mental intent its civil willfulness), the agent may abruptly stop the audit, and refer the matter to the special agents.
As provided by the IRS:
“Criminal Investigation (CI) is the law enforcement branch of the IRS. Our mission is to serve the American public by investigating potential criminal violations of the Internal Revenue Code, and related financial crimes, in a manner that fosters confidence in the tax system and compliance with the law. We encourage you to read more about Criminal Investigations mission and position requirements on our Criminal Investigation Division page.
As a Special Agent you will combine your accounting skills with law enforcement skills to investigate financial crimes. Special Agents are duly sworn law enforcement officers who are trained to “follow the money.”
No matter what the source, all income earned, both legal and illegal, has the potential of becoming involved in crimes which fall within the investigative jurisdiction of the IRS Criminal Investigation.
Because of the expertise required to conduct these complex financial investigations, IRS Special Agents are considered the premier financial investigators for the Federal Government.”
Are Special Agents Investigating Me?
Oftentimes, a person is unaware they are under investigation by the IRS Special Agents until they are approached by them for an interview.
As we have reiterated several times before, you should never speak with the IRS special agents outside of your counsel.
Anything you say to the special agents will be used against you.
In addition, there is no attorney-client privilege with a CPA, and therefore anything you tell the CPA is potentially discoverable by the U.S. Government.
Offshore Investigation Techniques
There are many different ways in which the IRS special agents may investigate you for International Tax matters, without you even knowing.
Here a few common techniques:
FBAR History
The U.S. Government has the ability to review your prior FBAR filing history.
Therefore, if halfway through a civil tax audit you tell the auditor that you don’t have foreign accounts, but the auditor already has that information available to them, they will pass it onto the Special Agent so that the Special Agents can conduct an in-depth search of your banking and financial transaction history (Read: Structuring and Smurfing)
FATCA Reporting
More than 110 countries, and over 300,000 Foreign Financial Institutions (FFIs) are FATCA reporting to the U.S. government about U.S. Account Holder information abroad.
Therefore, your FFI may have already reported you and your foreign accounts, assets and investments to the IRS.
IRS Special Agents Tailing or Following You
Sometimes the old-fashioned way still works.
While most of the time, IRS Special Agents are not following you around to see how you move and who you visit, it does happen.
We have represented clients who first contacted us after they thought they were being tailed by the IRS, only to return home to find other Agents waiting for them, with a search warrant in hand.
Speaking with 3rd Parties
The IRS Special Agents are free to interview whomever they want about you.
Depending on who they interview, and whether or not the person they are interviewing is also under investigation will determine whether the third party person tells you that they were visited by the special agents, or were instructed not to in order to protect their own hide.
Financial Institution Subpoena
The U.S. government can subpoena your financial institution regarding your financial history and transaction record.
This may lead to an IRS International Wire Transfer Audit, as well as guide the Special Agents down the path about how you been moving money around.
We Specialize in Offshore Voluntary Disclosure & Tax Compliance
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance with getting compliant.