IRS investigators focusing on fraud

Unit: Failing to file a return by midnight tonight is one of four types of infractions targeted by the IRS Criminal Investigation Division's local office.

April 15, 2002|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Hundreds of thousands of Marylanders will rush to mail their income tax return today to beat the midnight deadline. Others who owe taxes won't even bother filing.

Failure to file a tax return when required is one of the four areas of fraud that the IRS Criminal Investigation Division is targeting in Maryland and across the country.

The others:

Abusive trusts set up in the United States and overseas to hide the ownership of assets and income or disguise the nature of financial transactions.

Employers that don't withhold workers' taxes or fail to send the money to the government.

Preparer fraud, where a tax preparer makes fraudulent claims on tax returns to, say, secure large refunds.

Though nonfiling is a growing concern of the Criminal Investigation Division, it's not new. Some people don't file to evade taxes, while others wrongly claim that income taxes are illegal because the 16th Amendment creating the tax was never ratified, IRS officials said.

All income is taxable, even money from illegal sources. Failure to file is how the agency nailed Chicago gangster Al Capone in the 1930s.

And you can't avoid taxes with a trust, although abusive trusts here and offshore have been cropping up in the past few years claiming otherwise, said Vicki Duane, special agent in charge of the Criminal Investigation Division's Baltimore field office.

The growth of companies failing to file employment taxes can result in troubles not only for the businesses themselves, but for workers, too, especially at retirement, Duane said.

"They try to file for Social Security or they try to get Medicare ... and find out that the corporation has never paid into that and they are left with nothing," she said.

For the most part, tax season has little effect on the Criminal Investigation Division, although it keeps an eye out for preparer schemes that inevitably crop up, Duane said.

This year the IRS released a "dirty dozen" list of the top preparer schemes. Among them is one where preparers charge African-American tax filers a fee for preparing a return claiming a slavery reparations tax credit, which doesn't exist.

Duane, whose office covers Maryland, Delaware and Washington, said her department participates in a wide range of investigations where authorities are trying to follow the money. "That's what we do best," said Duane.

The division's special agents, including those in Duane's office, are helping track the funds used to finance September's terrorist attacks.

The Criminal Investigation Division has about 2,900 special agents, sort of accountants with guns. The Baltimore field office has 70 agents, and 10 more will be added by fall.

The Baltimore field office initiated 72 cases in the past fiscal year, down from 104 cases in 1998. The decrease is due to a drop in the number of experienced agents because of retirements and the increased complexity of cases, according to IRS officials.

The difference between civil and criminal is a matter of intent. Fail to report income, and you may be caught by an auditor in the civil division. Go for years intentionally hiding income, and you could be snagged by a criminal investigator.

That may be the case with the recent civil investigation into as many as 2 million Americans who may be avoiding taxes by using credit cards from offshore accounts.

"We can't imagine the circumstances that would cause between 1 [million] and 2 million taxpayers to need a credit card issued from a foreign bank," said Mark E. Matthews, chief of the IRS Criminal Investigation Division in Washington.

The criminal division was established in 1919. One of its recruiting posters for years has featured Capone's mug and proclaims "Only an accountant could catch Al Capone."

Nowadays, the division is attracting applicants for other reasons. In October, the division launched its online hiring system and over three months almost 3,700 people applied, so many applicants that the division temporarily shut down the site.

Matthews attributed part of the interest in investigative work to Sept. 11.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.