Monday, August 30, 2010

State of IRS Criminal Investigations

I previously blogged here the TIGTA annual state of the universe on IRS's Criminal Investigation Function (that report is here). I supplement with some bullet points of interest (all relating to FY 2009 unless otherwise indicated:

1. CI spent , stated as a percentage,of "52.4 percent of its time on legal source tax and 72 percent on total tax investigations, both at a 10-year high." Those familiar with how statistics lie (or at least are misleading, should have some questions) may be able to question the desired conclusion from these statistics.

2. "[T]he number of legal source tax investigation initiations increased by 13.3 percent and the number of tax-related initiations increased by 14.4 percent. In addition, the percentage of all initiations that were legal source tax and tax-related increased by 1.3 and 2.5 percentage points, respectively. "

3. I found this statistic interesting because I now represent someone who should not have been investigated in the first place (fairly typical of my clients).  In this case, the IRS listened to an informant with misinformation and was unable to assess the credibility of the informant.  Here is the statistic: "the FY 2009 average of 413 days to discontinue a legal or illegal source investigation exceeded the 386 day average in FY 2008 by 7 percent." Draw your own conclusions as to the bare numbers of days the IRS' futzes around with bull shit investigation (OK, that's too harsh). But at least some of those being investigated should not have been in the first instance and it seems to me a bit harsh for subject them to an IRS criminal investigation for 413 days is just about 412 days too many. (OK, I will compromise at, say, 206 days too many). That period (whatever it is) is a period of unnecessary anxiety and costs that are, well, let's just say unfair.

4. "The number of subjects convicted of legal source tax crimes increased 2 percent from FY 2008 and has increased 17.5 percent since FY 2004."

5. "The overall publicity rate for prosecutions in FY 2009 was 81.9 percent." "Research suggests that higher levels of criminal sentences lead to greater tax compliance." And, just what research would that be? TIGTA does not identify the research.

6. CI "did not meet the long-term goal noted above or its revised conviction goal for FY 2009 of 2,135, reporting that it received only 2,105 convictions." And, here is what it says about that (footnotes omitted):

Despite not meeting some of its goals, the Division exceeded its FY 2009 goal of 4,000 by initiating 4,121 subject investigations. The FY 2009 initiations represent a 9.9 percent increase over the FY 2008 total of 3,749. In addition, the number of subject investigations open in inventory increased 7.7 percent over the FY 2008 total of 3,691 investigations. According to the FY 2009 Business Performance Review (BPR) document, the Division plans to complete 3,900 investigations and obtain 2,135 convictions in FY 2010. Division management expects that the 9.9 percent increase in initiations it experienced this fiscal year will provide for a future increase in completions and resulting convictions. Since the Division reported that it takes, on an average, less than 1 year (341 days) to refer a case for prosecution, n18 we believe the anticipated increase in initiations will likely result in an increase in completions and may allow the Division to meets it completion goals next fiscal year.

7. And here's the discussion of fraud referrals.
. The number of fraud referrals received by the Division decreased for a second consecutive year. The Division reported receiving 505 fraud referrals in FY 2009, a 13.4 percent decrease from the 583 received in FY 2008, and a 19.2 percent decrease from the FY 2005 high of 625. n25 Since fraud referrals remain a viable and important source of legal source tax investigations, we are concerned that the number of fraud referrals received has trended downward since FY 2005. During a February 2010 meeting, the Chief, Criminal Investigation, advised that this trend may change in the future since the operating divisions now have a performance commitment relating to fraud referrals.
What exactly is the "performance commitment related to fraud referrals?"

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