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TIGTA Report: IRS’s Criminal Investigation Made Gains in 2010

[August 29, 2011]

WASHINGTON –The Internal Revenue Service’s (IRS) Criminal Investigation (CI) division surpassed its goals for Fiscal Year (FY) 2010, according to a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).

CI is primarily dedicated to developing and investigating legal source tax cases, which are crimes involving legal industries and occupations and legally earned income. The prosecution of these cases is key to supporting the IRS’s overall compliance goals, enhancing voluntary compliance with the tax laws, and promoting fairness and equity in the tax system. The overall objective of TIGTA’s review was to provide a statistical portrayal with trend analyses of CI’s enforcement activities for Fiscal Years 2006 through 2010.

In support of the IRS’s overall effort to reduce the Tax Gap, CI achieved improved performance during FY 2010 by committing resources to both legal and illegal source tax investigations and working with other IRS operating divisions to develop and investigate tax cases. During FY 2010, CI received approximately $658 million of the IRS’s Operating Plan budget to fund the criminal investigation programs that explore potential criminal violations of the Internal Revenue tax laws, enforce criminal statutes relating to these violations, and recommend prosecution as warranted.

CI surpassed its goals for FY 2010 by expending 71.2 percent of its time on total tax investigations, with 52.6 percent of that time devoted to legal-source tax investigations. CI also reported that the number of legal source tax investigation initiations increased by 12.3 percent and the number of tax-related initiations increased by 10.6 percent. Further, the number of subjects convicted of legal source tax crimes increased 6.9 percent from FY 2009 and has increased 22.6 percent since FY 2006.

In FY 2010, CI also surpassed its goal of completing 3,900 investigations by completing 4,325. CI demonstrated efficiency in processing legal and illegal source investigations by reducing the average days elapsed to complete an investigation to 365 days, an 8.8 percentage improvement (rounded) from the FY 2009 average of 401 days. In addition, CI exceeded its FY 2010 goal of 4,000 initiated subject investigations by initiating 4,706.

CI management attributes the increases to better management oversight, which includes emphasizing the need to complete initial interviews and the gathering of facts within the first few months of an investigation.

"I commend Criminal Investigation for this improved performance,” said J. Russell George, Treasury Inspector General for Tax Administration. “Their work continues to be critical to IRS efforts to reduce the Tax Gap."

TIGTA made no recommendations in this report, nor did IRS officials make any comment although they were provided that opportunity.