Our federal government devotes millions of man-hours and billions of dollars each year to law enforcement. The FBI, DEA, and Bureau of Alcohol, Tobacco, and Firearms, along with lesser-known agencies like the U.S. FDA's Office of Criminal Investigations (pursuing criminal violations of food and drug laws), the Department of Commerce's Office of Export Enforcement (responsible for keeping dangerous technology out of the wrong hands), and NOAA's Fisheries Office for Law Enforcement (charged with protecting the ecosystem and marine life) all strike fear in at least some body's heart.
But there's one agency that has an almost mythical power in most minds, and that's the IRS. The tax cops put Pete Rose and Wesley Snipes in jail. They put Al Capone in jail, for Pete's sake! We'd all better watch out, right? Well, you be the judge. Last week, the IRS Criminal Investigation unit released their Fiscal 2012 annual report— and the findings might surprise you. Here are some of the highlights:
- Investigators cover a wide variety of tax-related crimes beyond the garden-variety tax fraud and celebrity "failure to file" cases that command the biggest headlines. Their work also includes identity theft, offshore tax evasion, tax treaty cases, tax protesters, money laundering, terrorist financing, public corruption, and drug enforcement cases.
- Business is booming — but numbers are still relatively small considering the 100 million+ returns the IRS collects every year. For Fiscal 2012, the Service initiated just 5,125 investigations, up from 4,720 in 2011. Out of those 5,125 investigations, they recommended 3,710 prosecutions (IRS investigators don't actually prosecute offenders themselves; they turn that job over to the Department of Justice.) There were 3,390 indictments and 2,634 convictions — the Feds generally don't take you to court if they're not already sure they can win. 2,466 lucky winners drew all-expense-paid trips to "Club Fed."
- Investigators spend a lot of time chasing down crooked tax preparers. For 2012, they investigated 443 suspicious-looking characters, recommended 276 prosecutions, and won 178 convictions. The average convicted preparer earns 29 months in jail, up from 25 months in 2011.
- The IRS continues to uncover people who really just ought to know better. Take Jimmy Dimora, for example, a former Cuyahoga County (Ohio) Commissioner, who found himself looking for ways to supplement his county pay. Dimora took more than $166,000 in bribes to steer contracts to allies, get jobs and raises for associates, intercede with judges on pending cases, and generally abuse his office. Naturally, he forgot to pay tax on those bribes. Jimmy wound up drawing a 336 month sentence for his sideline business. (For those of you who try not to use math on a daily basis, that's 28 years behind bars.)
Do any of these points strike a chord with you? Of course they don't. The average American has nothing to fear from the Criminal Investigations unit. As far as most of us are concerned, the IRS is just the federal government's collection agency, nothing scarier. You've got to do something really outrageous to draw one of those 5,000 case investigations.
We all know taxes are going up this year, and we all know nobody wants to pay. That's the bad news. The good news is you don't have to flirt with IRS Criminal Investigations to pay less. You just need a plan. There's no shortage of court-tested, IRS-approved strategies for minimizing your tax. So if you're still smarting from April 15, and you haven't asked us about our planning service, what are you waiting for?
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