Signs the IRS is Investigating You and What to Do - FEDERAL LAWYERS [2024] (2024)

Dealing with the IRS can be scary. An audit or investigation can make anyone feel anxious. But there are things you can do to protect yourself and your rights if you find yourself on the IRS’s radar. This article will go over the common signs that the IRS may be looking into your taxes, plus give advice on steps to take if you suspect you’re being investigated.

How Investigations Get Started

There are a few different ways an IRS investigation can begin^[1]:

• Information from an IRS auditor or revenue officer
• Tips from informants
• Data mining of tax returns
• Related investigations of other taxpayers

So an investigation might start if an auditor sees something suspicious during a routine audit. Or it could be triggered by someone reporting potential tax fraud. The IRS also uses computers to search for anomalies in tax returns that may indicate a problem. And if they’re already looking into one taxpayer, that could lead them to start investigating associated people or businesses as well.

Signs You May Be Under Investigation

Many times the IRS won’t tell you directly that you’re under criminal investigation. But there are signs you can watch out for^[2][3][4][5]:

• IRS agents suddenly stop contacting you after requesting information or asking you to pay taxes owed
• Your IRS auditor seems to disappear without explanation
• You or your bank gets subpoenaed for financial records
• You stop getting the typical notices the IRS sends for things like penalties and interest
• You get a surprise visit from IRS criminal investigation agents
• Friends, family, business associates start getting contacted by the IRS

Some other red flags are if you submitted amended tax returns to correct errors, or if you failed to file for multiple years. While one mistake doesn’t necessarily mean you’re being looked at for criminal charges, patterns of behavior can draw scrutiny.

If IRS Agents Come Knocking

If IRS criminal investigators come to your home or place of business, you need to be very careful in how you respond. Here are some tips:

• Don’t answer any questions right away. Politely state you need to consult with a tax attorney first.
• Don’t invite them into your home or office. Step outside and close the door behind you if needed.
• Don’t sign any documents without reviewing them carefully and having a lawyer assist you.
• Take the agents’ business cards and write down their names and badge numbers.
• Contact a criminal tax defense lawyer immediately.

Anything you say to IRS investigators can potentially be used against you later on. So it’s crucial you don’t answer questions or volunteer information before speaking to an attorney. Be cooperative, but protect yourself first.

Your Defense Strategy

If you are contacted by IRS criminal agents or have reason to think you’re under investigation, your next steps are important. Here are some key points:

• Hire an experienced criminal tax lawyer. You need someone who understands IRS procedures and investigations.
• Don’t try to handle this alone. A tax attorney can deal with the IRS on your behalf.
• Have your lawyer find out details of the investigation, including the special agent assigned to your case.
• Develop a defense strategy with your attorney focused on your specific situation.
• Follow your lawyer’s advice about whether to meet with investigators, provide documents, etc.

Some potential defenses your attorney may use:

• You acted in good faith and had no intent to break tax laws.
• It was a legitimate misunderstanding of confusing IRS rules.
• Someone else prepared your return and you were unaware of any false information.
• You had no knowledge of any wrongdoing within your business.

Your lawyer’s familiarity with tax law and investigative procedures will be invaluable in mounting the best defense. They can also negotiate with the IRS on your behalf if needed.

Avoiding Criminal Charges

To avoid facing criminal tax charges, the best thing you can do is be honest and compliant with the IRS:

• File all tax returns on time, even if you can’t pay in full.
• Keep thorough records to support figures on your returns.
• If you discover an error, file an amended return ASAP.
• Stay organized and retain tax documents for at least 3 years.
• Pay as much as you can, or work out a payment plan, if you have a balance due.

Also make sure any tax professionals you use are reputable and know tax code well. While the IRS still may audit you if you follow these practices, you’re less likely to trigger a criminal investigation.

The Bottom Line

Dealing with IRS inquiries and investigations is stressful. But there are things you can do to protect yourself, like consulting with a tax attorney right away. Be smart, know your rights, and don’t panic. With the right help, you can get through it.

References

[1] https://www.irs.gov/compliance/criminal-investigation/how-criminal-investigations-are-initiated

[2] https://www.marca.com/en/lifestyle/us-news/personal-finance/2023/05/29/6474b5e2ca4741ef0b8b45cb.html

[3] https://klasing-associates.com/criminal-tax-defense/irs-criminal-investigations/

[4] https://landmarktaxgroup.com/irs-back-taxes/taxes-and-criminal-consequences-what-you-need-to-know-about-irs-criminal-investigations

[5] https://www.floridataxlawyers.com/how-to-tell-if-irs-is-investigating-you