Tax evasion is the use of illegal means to avoid paying taxes. There are many different ways taxpayers evade taxes, including using tax havens to keep unaccounted money and assets, under-reporting income, filing a fraudulent tax return and claiming false deductions. Tax evasion is a crime and is punishable under law. The punishment for tax evasion includes heavy penalties and/or imprisonment.
If a taxpayer is found to be using illegal methods to reduce their tax liability, the IRS’ Criminal Investigation (CI) department will investigate the case. The CI investigates potential criminal violations of the Internal Revenue Code and tax related crimes, and has the legal right to contact the friends, employers and those in contact with the suspect to gain information and evidence. Criminal Investigation can use other methods, such as phone tapping, to obtain evidence of a tax crime.
The CI has special agents who deal with tax money laundering and violations of Bank Secrecy Act laws, along with other federal agents that investigate other tax crimes. There are approximately 3,700 employees in the Criminal Investigation department of the IRS. Many times, CI agents team up with other law enforcement agencies to solve a case.
Taxpayers that have evaded taxes in the past by taking advantage of tax havens or hiding assets in foreign financial institutions can now get back into compliance with reduced penalties and little chances of imprisonment using the Offshore Voluntary Disclosure Program (OVDP) of the IRS.