When Irs Special Agents Come A'knockin': a Guide for the Unwary

• Publication year: 2002
• Pages: 51
• Citation: Vol. 31 No. 12 Pg. 51

31 Colo.Law. 51 Colorado Lawyer 2002.

2002, December, Pg. 51. When IRS Special Agents Come A'Knockin': A Guide for the Unwary

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51

Vol. 31, No. 12, Pg. 51

The Colorado Lawyer
December 2002
Vol. 31, No. 12 [Page 51]

Specialty Law Columns
Criminal Law Newsletter
When IRS Special Agents Come A'Knockin': A Guide for the Unwary
by James R. Walker, Andrew W. Swain
C 2002 James R. Walker and Andrew W. Swain

This column is sponsored by the CBA Criminal Law Section. It features articles written by prosecutors, defense lawyers and judges to provide information about case law legislation, and advocacy affecting the prosecution, defense and administration of criminal cases in
Colorado state and federal courts.

Column Editors:

Leonard Frieling, a criminal defense attorney in private practice, Boulder - (303) 449-0092; Morris Hoffman, a judge for the Second Judicial District Court, Denver

About The Authors:

This month's article was written by James R. Walker, Denver, a partner with Rothgerber Johnson & Lyons LLP - (303) 623-9000; and Andrew W. Swain, Denver, a tax manager with KPMG LLP - (303) 382-7335, aswain@kpmg.com.

The IRS's law enforcement officers routinely make surprise visits to taxpayers and witnesses as part of their investigation of alleged criminal violations of the tax laws. This article discusses how targeted individuals and their attorneys can best handle surprise visits.

Most federal agencies have a law enforcement arm or division. The Criminal Investigation Division ("CID") serves as the law enforcement arm of the Internal Revenue Service ("IRS"). The CID investigates alleged violations of the Internal Revenue Code ("Code")1 and related provisions of the United States Code.2 The CID also investigates potential crimes such as income tax evasion, filing of false and fraudulent returns, willful failure to file returns, currency-reporting violations, and money laundering.3

The Code gives CID investigators, who are referred to as "special agents," authority to interview witnesses under suspicion, including the taxpayer.4 Special agents commonly conduct their interviews through surprise visits to the taxpayer's or witness's home or office. The visits frequently are beneficial to the agents' investigation - and often are devastating to the taxpayer.

This article discusses the purpose of special agent visits and the manner in which special agents likely will conduct surprise visits. The article also addresses safeguards the taxpayer, his or her attorney, and any witnesses should take during and after the visit. This article is intended as a guide for those unfamiliar with the CID's investigative tactics, such as criminal or civil attorneys who have handled few criminal tax matters. However, it should not be used as a substitute for representation by qualified criminal tax counsel.

The Surprise Visit

Special agents conduct their field investigations in pairs. Thus, the arrival of two special agents at a taxpayer's door means that they are conducting a criminal investigation.5 Special agents are readily distinguishable from the IRS's civil investigators, revenue officers, tax examiners, and revenue agents. Special agents have gold badges, carry guns, and possess the authority to make arrests.6 These differences aside, all IRS civil investigators have the authority to refer cases to the CID.7 In fact, although expressly prohibited by IRS policy, many civil tax investigations are covert criminal tax investigations, thus warranting the taxpayer's retention of tax counsel at the early civil stage.8

Special agents use surprise visits to the taxpayer's home or workplace as a standard method of gathering information and admissions.9 They use the element of surprise to seize the psychological advantage, exploit the absence of counsel, foreclose future defenses, obtain records, and develop evidence establishing a criminal tax violation.10

When unexpectedly confronted by special agents, taxpayers often are panicked, flustered, overconfident in their ability to talk themselves out of trouble, or simply unaware of the danger and significance of their testimony. Thus, taxpayers often waive their rights and incriminate themselves by making an admission, false statement, or implied admission through an omission. The danger of the surprise visit is exacerbated by the fact that giving misleading or false information to a special agent after filing a false return can constitute tax evasion.11

Miranda-Type Warnings

IRS guidelines require that, before special agents may question the taxpayer during a surprise visit, they must identify themselves as special agents for the IRS and tell the taxpayer that "one of [their] functions is to investigate the possibility of criminal violations of the Internal Revenue laws, and related offenses."12 Next, IRS guidelines mandate that the special agents read the taxpayer a variation of the Miranda13 warnings, as follows:

In connection with my investigation of your tax liability (or other matter), I would like to ask you some questions. However, first I advise you that under the Fifth Amendment to the Constitution of the United States, I cannot compel you to answer any questions or to submit any information if such answers or information might tend to incriminate you in any way. I also advise you that anything which you say and any documents which you submit may be used against you in any criminal proceeding which may be undertaken. I advise you further that you may, if you wish, seek the assistance of an attorney before responding.14

The IRS guidelines' Miranda-type warnings and the prophylactic safeguards specifically described in Miranda differ primarily in that the IRS's warning does not include an advisement that counsel will be provided should the taxpayer be indigent. Instead, the guidelines advise that the taxpayer may seek representation if he or she wishes. IRS guidelines mandate that the special agents' surprise interview must stop immediately if the taxpayer says he or she wants to: (1) remain silent; (2) withhold the records; or (3) contact an attorney.15 The next section discusses how a taxpayer invokes his or her rights under Miranda and the IRS's Miranda-type warning during a surprise visit.

Safeguards During Surprise Visit to Taxpayer

The taxpayer who expects a visit from special agents or who calls his or her attorney because two agents appear unexpectedly at the door should follow this all-important advice: Say or ask absolutely nothing about the investigation. The taxpayer must understand that there are no "off the record" discussions with special agents.16 The taxpayer also should: (1) be polite to the special agents; (2) ask for their business cards;17 (3) tell the special agents that the...