IRS Criminal Investigation Tax Crime Defense

When you think about an IRS criminal investigation, you probably imagine federal agents trying to figure out if you committed tax fraud. That's not how it works. IRS Criminal Investigation doesn't investigate to determine whether you committed a crime. They investigate because they already determined you did. The investigation you think is about discovering the truth is actually about documenting a conclusion that two layers of management pre-approved before the first Special Agent ever looked at your file. By the time they knock on your door, you're not a suspect under investigation - you're a statistic in their 90% conviction rate.

The economics explain everything. Each criminal tax investigation requires months of Special Agent time, forensic accountants pouring through financial records, and Department of Justice prosecutors who carry heavy caseloads. The government can't afford to invest all of that into cases they might lose. So they filter aggressively at the front end, accepting only cases where conviction is nearly mathematically certain. This is why defense attorneys at Spodek Law Group emphasize that your window to avoid federal charges isn't during the investigation - it's before the investigation formally begins, while you still don't know you're being targeted.

The trap is this: by the time you realize you're under criminal investigation, your realistic window to prevent charges has already closed. The pre-indictment phase happens while you're completely unaware that IRS-CI is building a case. The investigation takes 12 to 24 months on average. During that entire time, your cooperating with what you think are civil matters, your answering questions from your accountant, your providing documents to resolve what seems like a routine audit. Your actually feeding the prosecution everything they need to convict you. Understanding how IRS Criminal Investigation actually operates is the difference between catching the problem in time and facing near-certain conviction in federal court.

Why IRS Criminal Investigation Has a 90% Conviction Rate (It's Not About Better Prosecutors)

The IRS Criminal Investigation Division maintained a 90% conviction rate in fiscal year 2024. For cases involving Bank Secrecy Act violations, that rate climbed to 97.3%. Most people hear those numbers and think: "Wow, there prosecutors must be really good at there job." Defense attorneys hear those same numbers and think something completely different - "They only take cases they've already won."

The difference isn't about prosecutorial skill. Its about resource economics and case selection. Think of IRS-CI like a venture capital firm. VC's don't fund every startup that pitches them - they filter aggressively for companies with high probability of success because each investment requires significant capital and attention. IRS-CI operates the same way. They don't investigate every suspicious tax return because each investigation represents a massive commitment of investigative resources. They filter for cases where the evidence of criminal conduct is so strong that conviction becomes nearly inevitable once charges are filed.

This is why the conviction rate stays above 90% year after year. It's not that prosecutors win impossible cases through brilliant trial strategy. It's that impossible cases never become investigations in the first place. The filtering happens upstream, before you ever know your being looked at. A Revenue Agent conducting what appears to be a civil audit notices indicators of fraud - maybe significant income omissions, maybe false deductions, maybe books that don't reconcile with bank deposits. The agent consults with a Fraud Technical Advisor, whos job is to evaluate weather the case has criminal potential. If the FTA sees enough "badges of fraud," the case gets referred to Criminal Investigation.

But even then, the filtering continues. Before IRS-CI opens a formal "subject criminal investigation," at least two layers of management review the preliminary information. The Special Agent's front-line supervisor looks at the case first. If that supervisor approves, the file goes to the Special Agent in Charge - the head of the local CI office - who makes the final call on weather to allocate investigative resources. By the time the investigation formally begins, two levels of management have already concluded that the evidence supports criminal prosecution. The investigation doesn't determine guilt. It documents guilt that multiple people have already decided exists.

Todd Spodek, a prominent federal criminal defense attorney in New York, has seen this dynamic play out hundreads of times. "Clients come to us after they've been indicted and they ask: 'How did this happen? I thought they were just asking questions.' What they don't understand is that by the time IRS-CI is asking YOU questions, they've already asked everyone else. Your bank. Your accountant. Your business partners. People you did deals with five years ago. The questions there asking you aren't to discover the truth - there designed to lock in your testimony so you can't change it later."

In FY 2024, IRS-CI initiated over 2,667 criminal investigations, obtained 1,571 convictions, and maintained that 90% conviction rate. They sentenced 615 subjects to an average of 27 months in federal prison for tax violations. For cases involving Bank Secrecy Act filings, the conviction rate jumped to 97.3% and average prison sentences increased to 37 months. Those aren't "beyond reasonable doubt" conviction rates. Those are "beyond ANY doubt" conviction rates. When your case involves a BSA filing and IRS-CI decides to prosecute, your facing mathematical near-certainty of conviction.

The economics force this outcome. If IRS-CI pursued every suspicious return and only convicted 60% of defendants, the division would face serious questions about resource allocation and investigative effectiveness. So they maintain the 90% rate by refusing to take cases they might lose. This isn't about protecting defendants - its about protecting the division's reputation and justifying its budget. Your either a sure win, or your not investigated criminally. Theres no middle ground.

The $10,000 Threshold and Two-Layer Pre-Approval: Guilt Before Investigation

The moment you cross certain tripwires, the machinery starts moving weather you know it or not. One of those tripwires is an income omission of $10,000 or more in a single tax year. It doesn't matter if the omission was intentional fraud or a honest mistake - an omission above that threshold triggers an automatic referral to a Fraud Technical Advisor. Not discretionary. Not negotiable. Automatic.

Most people don't realize there's a specific dollar amount that seperates "civil tax problem" from "potential criminal case." They think the IRS evaluates each situation individually, considering your intent and the circumstances. That evaluation does happen - but only AFTER the automatic referral. The system doesn't ask "Did this person mean to commit fraud?" until your already in the pipeline that leads to Criminal Investigation. The $10,000 threshold is a sorting mechanism, and it sorts you into the category of "potential criminal defendant" before anyone has examined weather you actually committed a crime.

Here's what most people miss: the supervisor isn't asking "Did this person commit a crime?" The supervisor is asking "If we investigate this, will we be able to prove the crime and secure a conviction?" Those are fundamentally different questions. The first question is about truth. The second question is about prosecutability. IRS-CI management is answering the second question.

By the time you become an official subject, at least three people - the Special Agent, the supervisor, and the SAC - have reviewed the evidence and concluded that criminal prosecution is viable. They haven't just decided that something looks suspicious. They've decided that conviction is probable if the investigation proceeds and charges are filed. This is the moment when guilt gets predetermined. Not legally - you're still innocent until proven guilty in court. But practically, within the system, the decision has been made.

Bank Secrecy Act filings add another layer to this process. Banks are required to file Currency Transaction Reports for cash transactions over $10,000 and Suspicious Activity Reports when they detect potentially illegal activity. According to IRS's own data, 87.3% of criminal investigations recommended for prosecution during fiscal years 2022-2024 had a primary subject with a related BSA filing. And those cases resulted in a 97.3% conviction rate.

Why does a BSA filing make conviction almost certain? Because it provides independent, third-party documentation of suspicious financial activity that you can't explain away as a misunderstanding. Your bank - which has no motive to lie and isn't trying to help the prosecution - filed a report saying your transactions looked suspicious. When that report gets combined with tax returns showing unreported income and financial records showing cash deposits that don't match your stated business revenue, the case becomes nearly impossible to defend. The bank created the paper trail before you even knew anyone was looking.

IRS-CI Doesn't Investigate Whether You Committed a Crime - They Investigate Because They Know You Did

Defense attorneys will tell you something that sounds shocking the first time you hear it: "CI does not investigate to find out if you committed a crime. CI investigates because they already know you did." That's not a criticism of the agency or an exaggeration for dramatic effect. It's a practitioner's description of how the system actually functions based on hundreads of cases and years of experience.

The word "investigation" suggests an open-ended inquiry designed to discover the truth. A detective investigating a murder doesn't start with the conclusion that a specific person committed the crime - they start with the crime and investigate to identify the perpetrator. IRS-CI operates in reverse. They start with the person (you) and the conclusion (you committed tax fraud), and they investigate to gather evidence supporting that predetermined conclusion.

This isn't speculation. It's built into the structure described in the previous section. Before the investigation formally begins, management has reviewed the preliminary evidence and approved the case as prosecutable. The investigation's purpose isn't to determine weather prosecution is warranted - that decision has already been made. The investigation's purpose is to build a case strong enough to secure a conviction.

When IRS-CI Special Agents interview your business partners, your employees, your accountant, or your banker, there not trying to figure out if you committed tax fraud. There documenting evidence of tax fraud that they've already concluded you committed. When they subpoena your bank records, there not searching randomly for suspicious activity - there confirming the suspicious activity that led to the BSA filing that triggered the investigation in the first place. When they execute a search warrant at your home or office, there not hoping to discover evidence - there collecting evidence they already know exists based on months of preliminary investigation.

The timeline reveals this reality. The typical IRS-CI investigation takes 12 to 24 months from the time it's formally opened until a recommendation for prosecution is sent to the Department of Justice. In complex cases, investigations can stretch to three years or longer. During that entire period, the Special Agent is working on your case - interviewing witnesses, analyzing financial records, coordinating with prosecutors - while you remain completely unaware that your under criminal investigation.

But here's what defense attorneys understand: that 12 to 24 month timeline doesn't start when you first hear from IRS-CI. It starts when the Special Agent in Charge approves the subject investigation - which happens months or even years before you know anything is wrong. By the time you find out, the investigation is often in its final stages, with agents preparing the prosecution report that will be forwarded to DOJ.

IRS-CI typically doesn't contact the subject of an investigation until they've gathered substantial evidence from third parties. They interview your banker before they interview you, so your banker can't warn you that questions are being asked. They subpoena records from your accountant before contacting you, so you can't tell your accountant to withhold cooperation. They talk to employees, business partners, and vendors before approaching you, so those witnesses provide uncoached testimony about your business practices and financial transactions.

By the time they knock on your door, they've already assembled most of the case. The interview with you isn't about discovering new information - it's about locking in your testimony so you can't change your story later if the case goes to trial. If you say "I reported all my income" and they have bank records showing $200,000 in deposits that don't appear on your tax return, you've just created a provable false statement. The interview is a trap, and by the time your sitting across from the agents, the trap has already been set.

This is why experienced criminal defense attorneys emphasize one rule above all others: DO NOT TALK TO IRS-CI AGENTS WITHOUT AN ATTORNEY PRESENT. Not because your guilty. Not because cooperation is bad. But because by the time IRS-CI is asking you questions, the investigation is designed to gather evidence against you, not to evaluate weather your innocent. Your statements won't convince them to drop the investigation - management already approved it as prosecutable. But your statements CAN be used to fill gaps in there case, to lock in testimony they'll hold against you later, or to create new charges if you make false statements even about peripheral issues.

The 1-3 Year Investigation Timeline (And Why You Won't Know About It)

The average IRS-CI investigation takes 12 to 24 months. Complex cases routinely stretch to 36 months or longer. During that entire period - one to three years of your life - federal agents are building a criminal case against you while you go about your daily routine completely unaware that anything is wrong.

What are they doing during those 12 to 36 months? Everything. There interviewing third-party witnesses - your employees, your accountant, your banker, business partners, anyone who has knowledge of your financial affairs or business operations. There analyzing financial records line by line, tracing income and deductions across multiple tax years, comparing what you reported to what your bank deposits reflect. There executing search warrants, often at dawn when your least prepared to respond, seizing computers and financial records and business files. There working with prosecutors to ensure that every element of the alleged crime can be proved beyond a reasonable doubt.

And there doing all of this while you think everything is fine. Maybe you had a civil audit two years ago that closed without major issues. Maybe you haven't heard from the IRS at all. Maybe you have a minor tax controversy ongoing but it seems like a civil matter that your accountant is handling. Meanwhile, in an office somewhere, a Special Agent has a file with your name on it and is methodically building a federal prosecution.

The length of the investigation usually has nothing to do with the complexity of your case. Defense attorneys who handle these cases see investigations that take 18 months for relatively straightforward income omissions, and investigations that take 14 months for multi-million dollar international fraud schemes. The difference often comes down to the agent's caseload, weather key witnesses are cooperative or difficult to locate, how quickly banks respond to subpoenas, weather the agent gets pulled onto higher-priority cases, and dozens of other factors that have nothing to do with your conduct.

You're not waiting for them to investigate. Your waiting for there schedule to clear. That's an important distinction. The investigation itself could probably be completed in 6 to 8 months if the agent worked on nothing else. But agents carry multiple cases simultaneously, and priorities shift based on management directives, new referrals, and external pressures. So your case sits. Months pass. The agent works on it when time permits. And during all those months, your window to intervene and potentially prevent charges is slowly closing while you don't even know theres a window.

There's a moment in many IRS-CI investigations that defense attorneys call "the silence." It happens when a Revenue Agent who was conducting a civil audit suddenly stops communicating. Phone calls go unreturned. Emails stop. The audit that seemed to be progressing toward resolution just... freezes. Most taxpayers feel relieved. "I guess they dropped it," they think.

Defense attorneys feel panic when they hear about the silence, because they know what it means: the case was referred to Criminal Investigation. The Revenue Agent can't continue the civil audit because doing so might compromise the criminal case. So communication stops. And the taxpayer, who interprets the silence as good news, has no idea that the case just escalated to the division with a 90% conviction rate.

The Reverse Eggshell Audit and Why Your Accountant Can't Protect You

Your accountant is one of the most dangerous people in your life if your under criminal tax investigation. Not because accountants are malicious - they're not. But because accountant-client privilege doesn't exist in federal criminal tax cases. Every conversation you had with your accountant about tax strategy, every email discussing how to handle a questionable deduction, every meeting where you explained your business transactions - all of it can be subpoenaed and used against you in a criminal prosecution.

Most people don't know this. They assume that conversations with there accountant are confidential the same way conversations with there attorney are privileged. Some states have limited accountant-client privilege for certain types of communications, but federal criminal tax prosecutions are governed by federal law, and federal law provides no privilege for accountant communications except in very narrow circumstances that rarely apply. Your accountant can be subpoenaed to testify before a grand jury, and if they refuse to cooperate, they can be held in contempt. They can be forced to turn over every document you provided, every worksheet they prepared, every note from meetings where you discussed your taxes.

This creates a trap that many people fall into during the early stages of an investigation when they don't yet realize the civil matter has turned criminal. They bring there accountant to meetings with IRS auditors because the accountant understands the numbers and can explain the technical aspects of the return. The accountant answers questions, provides documentation, clarifies transactions that appear suspicious. The audit seems to be progressing normally. Then the case goes criminal, and the accountant recieves a grand jury subpoena.

Suddenly, every conversation the accountant had with the IRS during the "civil" audit becomes evidence in a criminal case. Every explanation the accountant provided - explanations based on information YOU gave them - gets used to build the prosecution. If the accountant said "My client told me this income was a loan repayment, not business revenue," that statement can be introduced at trial. If the prosecutor can prove the income wasn't a loan repayment, the accountant's statement becomes evidence that you lied to your accountant, which proves consciousness of guilt.

What's a reverse eggshell audit? It's when the IRS conducts what appears to be a civil audit while simultaniously running a criminal investigation. The taxpayer thinks there resolving a civil matter. The accountant thinks there helping with an audit. Meanwhile, Criminal Investigation is receiving everything - every document produced, every explanation given, every statement made during the "civil" process. The civil audit is a intelligence-gathering operation for the criminal case.

The two-agent test provides some protection, but only if you know about it. When one IRS agent shows up at your door, it's a civil matter - either an audit or collection issue. When two agents show up, it's a criminal investigation. IRS-CI Special Agents typically work in pairs for safety and corroboration. So if two agents knock on your door and identify themselves as IRS Criminal Investigation, you know immediately that your facing potential criminal charges. The correct response at that point is to politely decline to answer questions and contact a criminal defense attorney immediately.

The reverse eggshell audit and the accountant vulnerability combine to create a trap that catches many people. They cooperate with a civil audit, relying on there accountant to handle the technical aspects. The accountant provides documents and explanations. The cooperation seems to be resolving the matter. Then the civil agent goes silent. Months later, IRS-CI makes contact, and the taxpayer discovers that every piece of cooperation during the civil audit has been used to build a criminal case. The accountant - who was trying to help - has been subpoenaed and will testify about everything discussed during the civil audit. The cooperation cascade is complete: you cooperated yourself into federal prison.

The phone number for Spodek Law Group is 212-300-5196. If you recieve contact from IRS Criminal Investigation, or if a civil audit suddenly goes silent, or if your accountant receives a grand jury subpoena, that call needs to happen before you provide any additional cooperation. The stakes have changed. Civil rules don't apply anymore.

What a 97.3% Conviction Rate Actually Means (And Three Cases That Prove It)

A 97.3% conviction rate doesn't mean the prosecution wins difficult cases through superior legal skill. It means difficult cases don't get prosecuted. When your case involves a Bank Secrecy Act filing and IRS Criminal Investigation decides to move forward, your not facing reasonable doubt - your facing mathematical near-certainty.

Three recent cases illustrate what a 97.3% conviction rate looks like in practice.

John Walker and Hansen Helicopters

John Walker was the CEO of Hansen Helicopters Inc., a Guam-based helicopter business. The IRS-CI investigation started with tax violations. But as agents dug into the business, they discovered Walker was operating aircraft that were unregistered, illegally registered, or not airworthy. He concealed this from customers and regulators, earning over $400 million dollars through his scheme. The helicopters crashed. Repeatedly. The scheme resulted in at least 38 accidents or incidents. Eight people suffered serious bodily injuries. Ten people died. Walker was sentenced to 405 months (33.75 years) in federal prison and ordered to forfeit $58.4 million.

Feeding Our Future

Mukhtar Mohamed Shariff and Abdiaziz Shafii Farah stole more than $250 million in federal child-nutrition funds intended to feed low-income children. They created fake food distribution sites - often parking lots or vacant commercial spaces - that claimed to serve millions of meals when little to no food was actually provided. To support these claims, they created fraudulent rosters containing names like "Serious Problem" and "Britishy Melony." The fraud was so obvious it sounds like parody. They got the money anyway. Shariff was sentenced to 17.5 years in federal prison. Farah was sentenced to 28 years.

Janet Yamanka Mello

Janet Yamanka Mello was sentenced to 15 years in federal prison and required to pay more than $140 million in restitution for stealing nearly $109 million from youth programs and failing to pay more than $32 million in taxes on the stolen money. She thought she could hide a nine-figure theft from the IRS. IRS Criminal Investigation tracked every dollar.

These three cases share common features. The amounts involved were massive. The evidence was overwhelming. The sentences were severe. But here's what people miss when they read about these cases: these are the cases that make it into press releases because there exceptional. Most IRS-CI prosecutions involve smaller amounts and less dramatic facts. Someone who omitted $200,000 in income over three years. A business owner who claimed $500,000 in fraudulent deductions. These cases don't make headlines. But they result in convictions and federal prison time - remember, the average sentence in FY 2024 was 27 months.

The 97.3% conviction rate means that when IRS-CI and DOJ decide to prosecute a case with a BSA component, the outcome is predetermined. Your not going to trial and winning. Your not convincing a jury that the government got it wrong. The evidence is too strong, the financial trail is too clear, and the bank records created independent documentation before you knew you were being investigated.

The Only Realistic Window to Avoid Federal Charges

Everything discussed in this article points to one conclusion: by the time you know your under IRS Criminal Investigation, your realistic window to avoid federal charges has usually closed. The time to act isn't when you receive a target letter or when agents knock on your door. The time to act is before the investigation starts - or at minimum, as soon as you detect any warning signs that an investigation might be underway.

What are those warning signs?

• A civil audit that suddenly goes silent
• Your accountant or banker mentioning that they received contact from IRS or a grand jury subpoena
• Employees or business partners telling you that federal agents asked them questions about your business
• Your bank asking unusual questions about transactions or account activity

Any of these signals should trigger immediate consultation with a federal criminal defense attorney who specializes in tax cases.

The most common mistake is waiting. "Maybe it's nothing. Maybe the audit just closed. Maybe the agents were asking about someone else." People wait because they hope the problem will go away, or because they don't want to spend money on an attorney when there might not be a real problem. But waiting is catastrophic in IRS-CI investigations because the investigation timeline operates independently of your awareness. While your waiting and hoping, the Special Agent is interviewing witnesses, analyzing records, and building the prosecution. Every month you wait is a month closer to indictment.

If two IRS agents show up at your door and identify themselves as Criminal Investigation Special Agents, you are under criminal investigation. The correct response is: "I'm going to decline to answer questions without an attorney present. Please provide me with your contact information and my attorney will reach out." Then immediately contact a federal criminal defense attorney. Do not try to explain yourself. Do not provide documents. Do not answer "just a few quick questions." Every word you say is being evaluated as potential evidence for prosecution. There trying to lock in your testimony so you can't change it later.

For clients facing IRS-CI investigations or who suspect they might be under investigation, Spodek Law Group provides immediate consultation to evaluate the situation and determine the best path forward. The firm's approach focuses on early intervention - catching the case during the pre-indictment window when charges can potentially be avoided or minimized. With offices in New York and experience handling federal tax cases nationwide, the firm understands how IRS-CI operates and how to navigate the narrow window between investigation and indictment. You can reach the office at 212-300-5196.

The harsh reality is that once your indicted, the statistics take over. The 90% conviction rate for tax cases means that going to trial is almost certainly going to result in conviction. The 97.3% conviction rate for BSA-related cases means that if your case involves a Bank Secrecy Act filing, conviction is virtually guaranteed. At that point, the focus shifts from "how do we avoid charges" to "how do we minimize prison time."

The pre-indictment window is where cases are actually won. Not at trial - very few federal tax cases go to trial, and even fewer result in acquittals. Cases are won by preventing them from becoming cases. By presenting mitigation evidence before charges are filed. By demonstrating that the conduct doesn't meet the willfulness standard. By showing that there are innocent explanations for suspicious transactions. By convincing prosecutors that the case is ambiguous enough that a jury might not convict.

But all of that requires two things: knowing that an investigation exists or is likely, and acting immediately with experienced legal counsel. Most people fail on the first requirement because they don't find out about the investigation until its too late. Some people fail on the second requirement because they wait, hoping the problem will resolve itself. Both failures lead to the same outcome: indictment, conviction, and federal prison.

Your only advantage is knowledge. Knowing how the system operates. Knowing that investigation doesn't mean "determining guilt" but means "documenting predetermined guilt." Knowing that the pre-indictment window exists but closes before most people realize it was open. Knowing that cooperation with civil audits can build criminal cases. Knowing that accountants can't protect you. Knowing that the 97.3% conviction rate means the outcome is predetermined once charges are filed.

The investigation was over before it started. Unless you catch it before it starts.