The special agents of IRS Criminal Investigation (CI) conduct the administrative investigations into allegations of criminal violations arising under the internal revenue laws and related provisions of Title 18, U.S.C. (e.g.,18 U.S.C. §§ 286, 287, 371, 1341). CI generally initiates investigations as a result of one of the following:

1. • Fraud referrals from other divisions within the IRS;

2. • Information provided by other government entities;

3. • Information provided by private parties; or/and

4. • Matters or projects developed within CI.

CI approves for investigation matters that it finds to have criminal fraud prosecution potential or that it deems to warrant further inquiry. Special agents pursue those matters to the extent available resources permit.

Special agents conduct joint investigations in cooperation with representatives of IRS operating divisions. Special agents usually investigate matters jointly with revenue agents when taxpayers have filed false returns or have willfully failed to file tax returns. Joint investigations with revenue officers usually evolve from a willful failure to pay tax.

After an administrative investigation is completed, the special agent must prepare a special agent's report (SAR), together with exhibits, in order to recommend that the Government prosecute the matter. The SAR contains a detailed account of the investigation and the special agent's recommendations, and is reviewed by both the special agent's supervisors and the Chief Counsel, Criminal Tax Division (CT Counsel). CT Counsel then prepares a Criminal Enforcement Memorandum (CEM) that discusses the nature of the crime(s) for which the agent recommends prosecution, the evidence relied upon to prove the crime(s), technical or legal issues, anticipated difficulties in prosecution, and the special agent's specific recommendation. Thereafter, if CI concludes that the Government should prosecute the matter, the CI Special Agent-in-Charge (SAC) refers the matter to the Tax Division or, in some cases, the United States Attorney’s Office. See JM 6-4.243. When the IRS directly refers a matter to the United States Attorney’s Office, it simultaneously forwards a copy of the transmittal letter to the Tax Division.

During an administrative investigation of a criminal tax case, the IRS may refer the case directly and simultaneously to both the United States Attorney’s Office and the Tax Division for an expedited guilty plea, if only legal-source income is involved (i.e., neither narcotics nor organized crime), and the taxpayer's counsel states that the taxpayer wishes to enter such a guilty plea. The plea must be consistent with the Tax Division's major count policy. See JM 6-4.310.

When the IRS refers a criminal matter to the Department of Justice, it may share returns or return information with the Department of Justice (see 26 U.S.C. § 6103(h)(2)). Once a criminal referral is made, the IRS, including CI, may not issue or commence an action to enforce an administrative summons with respect to the taxpayer for the same tax and the same taxable period. See 26 U.S.C. § 7602(d).

When the Tax Division declines a matter that the IRS referred to it for prosecution, the IRS can take whatever administrative action it thinks is appropriate under the circumstances, including further investigation by CI. Should CI choose to investigate the declined matter further, its agents can use IRS summonses when conducting that investigation. 26 U.S.C. § 7602(d). The IRS may resubmit the matter to the Tax Division as a new referral.

[updated June 2020]