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IRS Criminal Investigation: What Happens and What to Do
An IRS criminal investigation is a separate track from an audit or a collection case: IRS Criminal Investigation (IRS-CI) special agents, whom IRS-CI describes as the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, gather evidence, layers of management review it, and only if the evidence supports it does the file go to the Department of Justice with a recommendation to prosecute. All State Tax Resolution (Sabih Shafi, EA, IRS Enrolled Agent) starts these cases from the first call and brings in our partner tax attorney for the criminal defense side, so you work with one team.
Want a second set of eyes on your situation? Book a free 20-minute tax review.
What an IRS criminal investigation actually is
An audit letter, a balance due notice or a call from a collection officer is a civil matter, not a criminal investigation. A criminal investigation is run by IRS-CI, and its question is different: not "how much is owed?" but "does the evidence support criminal charges?" The IRS says its special agents are the only federal agents with investigative jurisdiction over violations of the Internal Revenue Code.
How an IRS criminal investigation starts
The IRS says criminal investigations can be initiated from information inside the IRS when a revenue agent (auditor), revenue officer (collection) or investigative analyst detects possible fraud. IRS-CI also routinely receives information from the public, from other law enforcement agencies and from U.S. Attorneys offices.
Inside the IRS, the Internal Revenue Manual spells out what a civil employee does when fraud indicators appear. Under IRM 25.1.2, if affirmative acts of fraud are established, the compliance employee must suspend collection or examination activity and notify the group manager and the fraud enforcement advisor, who recommends a referral to Criminal Investigation if criminal criteria are met. The manual also says owing tax is not enough on its own; an affirmative act of fraud has to be present. We walk through each trigger in how an IRS criminal investigation starts.
What special agents do once a case opens
Before a subject criminal investigation opens, a front line supervisor reviews the preliminary information and the special agent in charge approves it, so at least two layers of IRS-CI management have reviewed it.
Once a case is open, the IRS lists the techniques special agents use: interviews of third party witnesses, surveillance, search warrants, forensic examination of evidence, subpoenaing bank records and reviewing financial data. The special agent works closely with IRS Chief Counsel Criminal Tax Attorneys during the investigation.
If the evidence supports it, the agent writes a special agent report recommending prosecution. That report is reviewed by the supervisory special agent, a quality review team (Centralized Case Review), the assistant special agent in charge and the special agent in charge. IRS-CI then refers its findings to the Department of Justice for recommended prosecution. Each level of review may also decide that the evidence does not substantiate criminal charges.
If the case does not go criminal
A civil examiner who suspects fraud does not always end up with a prosecution. Under IRM 25.1.2, if criminal criteria are not met, or IRS-CI returns the case, the IRS considers the civil fraud penalty under IRC 6663 and/or the fraudulent failure to file penalty under IRC 6651(f). The two tracks are compared in civil fraud versus criminal tax evasion.
If a special agent contacts you
The Internal Revenue Manual describes what should happen at the first meeting. At the initial interview, the special agent identifies themselves as an IRS-CI special agent, displays credentials and badge, and provides a unique identification number and phone number. IRS-CI also offers an Employee Verification Tool to confirm that a special agent at your door works for IRS-CI, although the tool is not available during all enforcement actions.
Under IRM 9.4.5, special agents advise an individual of constitutional rights during non-custodial interviews when the individual is a subject of an investigation. The advisement for a subject covers three points:
Under the Fifth Amendment, the agent cannot compel you to answer questions or submit information that might tend to incriminate you.
Anything you say and any documents you submit may be used against you in any criminal proceeding.
You may, if you wish, seek the assistance of an attorney before responding.
The manual adds that the special agent will immediately terminate the interview if, at any stage, the subject indicates they wish to exercise rights to withhold testimony or records, or to consult with an attorney. The agent will also not use language that could be interpreted as a promise of immunity or settlement of the investigation. Whether and how to speak with an agent is a decision to make with a representative, not at the front door.
The crimes behind these cases
Federal tax crimes are written into the Internal Revenue Code, and each turns on willfulness. Four are worth knowing:
Tax evasion, 26 U.S.C. 7201. Willfully attempting in any manner to evade or defeat any tax or its payment is a felony: a fine up to $100,000 ($500,000 for a corporation), up to 5 years in prison, or both, plus costs of prosecution.
False return, 26 U.S.C. 7206(1). Willfully making and signing a return under penalties of perjury that you do not believe to be true and correct as to every material matter is a felony: a fine up to $100,000 ($500,000 for a corporation), up to 3 years in prison, or both, plus costs of prosecution.
Willful failure to file or pay, 26 U.S.C. 7203. Willfully failing to pay tax, file a return, keep records or supply information when required is a misdemeanor: a fine up to $25,000 ($100,000 for a corporation), up to 1 year in prison, or both, plus costs of prosecution.
Obstruction, 26 U.S.C. 7212(a). Corruptly obstructing or impeding the due administration of the tax code is punishable by up to 3 years in prison.
Under 18 U.S.C. 3571, an individual may be fined up to $250,000 for a felony or $100,000 for a Class A misdemeanor, so the Code amounts above are not the ceiling.
Criminal cases have time limits too. Under 26 U.S.C. 6531, the general limit to bring a tax prosecution is 3 years after the offense, except 6 years for the listed offenses, which include willfully attempting to evade or defeat any tax or its payment, and willfully failing to pay any tax or make any return.
IRS summons
A summons is a separate tool you may run into. Under 26 U.S.C. 7602(a), the IRS may summon the person liable for tax, or any person with possession of relevant books of account, to appear, produce records and give testimony under oath. Section 7602(b) lists inquiring into any offense connected with the administration or enforcement of the internal revenue laws among the purposes. Under 7602(d), no summons may be issued for a person while a Justice Department referral is in effect.
Coming forward before the IRS finds you
If you know there is a serious problem and no one at the IRS has contacted you, there is a formal route: the IRS Voluntary Disclosure Practice. The IRS describes a voluntary disclosure as a truthful, timely and complete disclosure of willful noncompliance through designated procedures. A disclosure is timely only if it is received before the IRS has commenced a civil examination or criminal investigation, received third-party information about the noncompliance, or acquired directly related information from a criminal enforcement action.
The IRS is also clear that a voluntary disclosure does not automatically provide immunity from prosecution, but it may result in prosecution not being recommended. Whether it fits your facts is a real question; start with the Voluntary Disclosure Practice and Form 14457.
What to do first
Keep every record exactly as it is. Do not alter, discard or create documents. Obstruction is its own crime under section 7212(a).
Write down who contacted you. Note the name, the unique identification number, the phone number and the date of any contact, and confirm identity through the IRS verification tool.
Do not decide how to answer at the door or on the phone. You can say you want to consult before responding, and the manual says the interview ends when you do.
Call us before you respond to anything. The first call is a free 20-minute review.
The civil side does not go away
A criminal question and a tax balance can exist at the same time, and the balance still needs a plan. Depending on the facts, that may involve an installment agreement or Currently Not Collectible status, an offer in compromise, or a passport certification if the debt is large.
Working with an Enrolled Agent
All State Tax Resolution is led by Sabih Shafi, EA, an IRS Enrolled Agent, and works with clients in every state and abroad by phone and video. We start the case from the first call, a free 20-minute review. We handle the IRS civil and collection side directly as an Enrolled Agent firm. When a case needs criminal defense, we bring in our partner tax attorney, and you keep working with one team from start to finish.
Frequently Asked Questions
How does an IRS criminal investigation start?
The IRS says it can start inside the IRS, when a revenue agent, revenue officer or investigative analyst detects possible fraud, or from outside information. IRS-CI routinely receives information from the public, from other law enforcement agencies and from U.S. Attorneys offices. Before a subject investigation opens, at least two layers of IRS-CI management review the preliminary information.
Does an IRS audit mean I am under criminal investigation?
No. An audit is a civil process. The Internal Revenue Manual says that owing tax is not enough to assert the civil fraud penalty, because an affirmative act of fraud must also be present. Only if affirmative acts of fraud are established does the compliance employee suspend activity and the case may be recommended for referral to Criminal Investigation.
What should I do if a special agent shows up?
Ask for credentials and the unique identification number and phone number the agent is required to provide, and write them down. You can check identity with the IRS verification tool. Under IRM 9.4.5 you may seek the assistance of an attorney before responding, and the interview ends when you say so. Then call us.
How can I tell if someone claiming to be a special agent is real?
At an initial interview the special agent displays credentials and badge and gives a unique identification number and phone number. IRS-CI also offers an Employee Verification Tool to confirm that a special agent at your door works for IRS-CI, though the IRS says it is not available during all enforcement actions.
Can a voluntary disclosure keep me out of criminal court?
Not automatically. The IRS says a voluntary disclosure does not automatically provide immunity from prosecution, but it may result in prosecution not being recommended. It must also be timely, meaning received before the IRS has started a civil examination or criminal investigation.
Does All State Tax Resolution handle IRS criminal investigations?
Yes. We start the case from the first call, a free 20-minute review, and we handle the IRS civil and collection side directly as an Enrolled Agent firm. When a case needs criminal defense, we bring in our partner tax attorney. You work with one team throughout, and we do not promise any outcome.
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Last reviewed: October 2026 by Sabih Shafi, EA
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This article is general information, not individual tax advice. If you want to talk through your own IRS situation, book a free 20-minute review or call or text us directly.
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