IRS Budget Cuts Results In Fewer Criminal Tax Investigations

According to Law360, Criminal investigations by the IRS reached their lowest levels over the past five years last year because of a reduction in IRS resources, according to a report by the Treasury Inspector General for Tax Administration.

The office said there were "unfavorable trends" in criminal investigations of businesses due to declining resources, like budget challenges, which resulted in attrition of field special agents, in a report on trends over the past five years that the office made public on September 18, 2017.

The Criminal Investigation division initiated 3,395 cases in fiscal year 2016, down 34 percent from 2012, the report said, and tax-related investigations in 2016 made up 57.8 percent of those, the lowest proportion of the past five years.

“TIGTA identified a trend of special agent inventory taking longer to turnover because of the increased time it takes for special agents to determine a case did not contain prosecution potential,” the report said. Investigations discontinued in 2016 had taken an average of 540 days to determine there was no prosecution potential, up from 422 days in 2012.

The report found the number of agents decreased because attrition, with 148 agents lost in 2016 compared with 125 lost in 2012. When combined with agent hiring during those same years, there were 2,217 agents in fiscal 2016, down more than 400 from 2,664 agents working in fiscal 2012. But the report found the agents “consistently maintained inventory levels over an average of 5.30 cases per field special agent.”

 

Initiated international investigations rose to 221 in 2016 from 211 in 2012, as did the completion of international investigations, growing to 311 in 2016 from 290 four years earlier.

The office said it did not make any recommendations along with this report but it did gave the IRS an opportunity to review a draft of the findings.