In a press call on August 2, 2017, the Chief of the Internal Revenue Service’s (IRS) Criminal Investigation Division (CID), John D. Fort, announced two new enforcement initiatives: a National Coordinated Investigations Unit and an International Tax Enforcement Group.
The National Coordinated Investigations Unit is intended to be, in Fort’s words, a “cutting edge” group answering directly to CID’s management. It is intended to harness data already being gathered by the IRS’s civil departments to identify areas of non-compliance, so that major investigations can be coordinated at a national level.
The first three areas of inquiry for the new unit will be international tax enforcement, employment tax enforcement and microcap stock fraud (an effort that will be coordinated with the Security and Exchange Commission). In Fort’s words, these efforts will generate “must-work referrals that come out of this group to the field offices.” International tax and employment tax enforcement are already longstanding CID priorities, so it will be interesting to see how CID’s use of data analytics will further those goals and whether greater coordination at the national level will result.
For the International Tax Enforcement Group, CID intends to select roughly ten of its subject-matter-expert Special Agents to form a team primarily located in Washington, DC. Like the National Coordinated Investigations Unit, the International Tax Enforcement Group will be using data analytics to further their investigations. From the Offshore Voluntary Disclosure Program, Swiss Banking Program, Foreign Account Tax Compliance Act (FATCA) reporting and whistleblower efforts like those that generated the Panama Papers, among others, IRS CID now possesses a tremendous amount of raw statistical data regarding US taxpayers and their offshore financial holdings. The new International Tax Enforcement Group is intended to more effectively mine this data; in particular, Fort noted that this could lead to investigations in “other countries” and “other jurisdictions” that have not yet become a focus for IRS criminal enforcement.
For years, IRS CID has endeavored to maintain strong enforcement priorities in the face of staff attrition and reduced budgets, both of which we have previously discussed. The announcement of these two new initiatives and their focus on use of data analytics demonstrates that CID is attempting to leverage all resources at its disposal to continue to meet its mission.
Practice Point: For individual taxpayers, this announcement is yet another indication that a “wait and see” mentality when it comes to non-disclosure of offshore financial assets—or tax non-compliance more generally—is highly risky. Taxpayers confronting these problems should carefully evaluate all of their options, including voluntary disclosure, in light of CID’s recent announcement.