Early Stages of a Criminal Tax Investigation by Special Agents On Behalf of the Internal Revenue Service

It is important for an attorney to know who the client is in regard to a criminal tax investigation by the Internal Revenue Service. If a husband and wife make contact with the attorney, the attorney needs to determine if representation is for the husband and/or the wife. If representation is for both, the clients should execute Waivers of Conflict. There should be consideration as to whether or not the same lawyer or law firm can represent a husband and wife if the matter moves forward to criminal prosecution, which can occur.


If there is more than one person involved with the target in regard to a criminal tax investigation, consideration should be given as to whether or not the others may be informants or may be wearing a wire. An attorney should approach each case with this possibility in mind as it may determine how representation may proceed.


It may be difficult for taxpayers involved in a criminal tax investigation to be completely truthful. For example, they may not remember all relevant information, or they could be confused, or they may not have their facts accurate and sometimes there may be a memory loss, and sometimes relevant information is held back and sometimes clients are not comfortable explaining the whole story initially. This is an important issue because if an attorney assumes that the above may not occur, the attorney could make mistakes in regard to representation of the client.


In regard to an engagement by a client of an attorney, there should be two written documents, a written contract and a separate written engagement letter. The written contract may be in a typical form used by the attorney of the law office. An engagement letter may set forth certain representations of the client at the initial meeting which assists in confirming, at a later date, what the attorney was told by the clients at the initial meeting. The written contract should identify the scope of representation. The initial engagement letter should be approved and initialed by the client with the attorney retaining a copy of the engagement letter, initialed by the client, in the attorney’s file.


The initial contact by an attorney on behalf of a client involved in a criminal tax investigation should be in writing. The initial communication by the attorney on behalf of the client should identify the attorney, who the attorney represents and should provide the Internal Revenue Service with the Form 2848 - Power of Attorney and Declaration of Representative, so that the Internal Revenue Service has authority to communicate with the attorney on behalf of the taxpayer. An initial written contact, as opposed to a phone message, also eliminates any misunderstanding or mis communication. In most situations with the initial written contact, the attorney providing representation would indicate to the Special Agent for the Internal Revenue Service that further communications should be with the attorney and there should not be any further contacts with the represented party, that being the taxpayer. Further, after the initial written contact by the attorney with the Special Agent for the Internal Revenue Service, the client should be advised not to have any further communications directly with the Internal Revenue Service and that if they are contacted or approached, the taxpayer should refer the Special Agent of the Internal Revenue Service to the attorney providing representation.


In certain situations there may be an initial contact made by Special Agent with the taxpayer, prior to the taxpayer seeking representation of an attorney. In those situations, to the extent possible, the attorney should investigate and attempt to determine from the client exactly what was asked of the client and what the responses were of the taxpayer, so that the attorney is advised in regard to relevant information moving forward with representation.


After initial written contact with the Special Agent of the Internal Revenue Service, the attorney providing representation can request a meeting. The attorney should not have the client, the taxpayer, at the meeting. Rather, the meeting with the Special Agent of the Internal Revenue Service should be in an attempt to determine from the Internal Revenue Service, the status of matters, the nature and extent of the potential criminal violations claimed by the Internal Revenue Service, potential witnesses that may be involved, documents that are in the process of being requested pursuant to any Summonses, and what the Special Agent may be in the position to state or divulge in regard to the investigation. For example, if there was any direct contact by the Special Agent of the Internal Revenue Service with the client prior to retaining counsel, regardless of what the client says, the Special Agent of the Internal Revenue Service may have a different story, or perspective, in regard to questions asked of the client and responses given by the client before the client retained counsel.


A reason for a criminal tax investigation by a Special Agent of the Internal Revenue Service is usually in an attempt to obtain relevant facts to determine whether or not there have been any criminal tax violations and whether or not the Internal Revenue Service and/or any other agencies involved with the Internal Revenue Service, intend to proceed with indictment and/or criminal prosecution. In other words, the Special Agent may be attempting to assemble a quality referral for prosecution. That does not mean the Internal Revenue Service wishes to criminally prosecute all taxpayers that it investigates. The Internal Revenue Service attempts to learn about relevant facts, solicit information through third parties, including direct contacts or Summonses, and the Special Agent may conduct face-to-face interviews with third parties as the Special Agent deems appropriate given facts and circumstances.


The objective of an attorney in the early stages of a criminal tax investigation by the Internal Revenue Service can be attempting to prevent and/or not facilitate the Special Agent of the Internal Revenue Service putting together a quality referral for criminal tax prosecution. In other words, any attorney representing any taxpayer in a criminal tax investigation is legally and ethically attempting to provide legal guidance with the goal that the Internal Revenue Service does not move forward with an indictment and/or prosecution including because the Internal Revenue Service may determine, at some point, it may not be able to assemble a quality case for referral for prosecution. Counsel representing taxpayers need to be extremely careful with respect to being truthful responding to any questions of the Special Agent of the Internal Revenue Service. Further, any attorney providing representation should not be reluctant to raise issues, such as attorney-client privilege, and the attorney representing taxpayers does not have to respond to all questions posed by the Special Agent of the Internal Revenue Service. However, in any response that is given by the attorney to questions of the Special Agent of the Internal Revenue Service, accuracy in regard to any response is critical since the Special Agent will not forget the response and the attorney should anticipate that the Special Agent will make notes in regard to any response of the attorney on behalf of the taxpayer.

The Internal Revenue Service may ask to meet with the attorney and the taxpayer. The attorney should never produce the taxpayer, or the target of a criminal tax investigation, to give a statement to the Internal Revenue Service in the early stages of a criminal tax investigation. In fact, successful representation in regard to preliminary stages of investigation by the Special Agent of the Internal Revenue Service may result in the taxpayer never having to meet with the Internal Revenue Service or give a statement to the Internal Revenue Service.


In many situations, taxpayers believe they can talk their way out of a criminal tax investigation including in regard to early contacts by the Special Agent of the Internal Revenue Service. This is never the case. The Internal Revenue Service does not have to divulge everything it knows about a given taxpayer. With respect to any contacts, meetings or communications, the Special Agent has what they intend for the taxpayer, the attorney should carefully consider what is being said by the Special Agent and the possibility that even those statements of the Special Agent may be true, there could be issues regarding completeness or inaccuracies and what is being conveyed to the attorney by the Special Agent of the Internal Revenue Service may not be the entire story and there may be more relevant information that is not being disclosed by the Special Agent in regard to a criminal tax investigation.

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