Civil vs. Criminal IRS Investigations: Understanding the Key Differences
What Type of IRS Investigation Are You Facing?
If you’ve received a notice from the IRS, you may be wondering whether your case is civil or criminal—and what that means for you. The IRS conducts two types of investigations: civil and criminal. While both can result in serious consequences, the key difference is that civil cases involve financial penalties, whereas criminal cases can lead to prison time.
As a tax attorney and former IRS revenue agent, I’ve seen firsthand how civil and criminal tax investigations unfold. Understanding the key differences between civil vs. criminal IRS investigations is critical to protecting your rights and minimizing potential consequences.
Civil IRS Investigations: Financial Penalties, Not Jail Time
A civil IRS investigation generally involves an audit or collections action. In a civil case, the IRS is determining whether you owe additional taxes, penalties, or interest.
Key Characteristics of a Civil Investigation:
- Conducted by IRS Revenue Agents (like I was during my time at the IRS) or Revenue Officers.
- Common triggers: Underreported income, improper deductions, late tax filings, and other errors.
- Consequences: Additional tax liability, penalties, and interest—but no jail time.
For example, if the IRS audits your business and finds unreported income, it may assess additional tax and penalties. While this can be financially devastating, it does not carry criminal consequences unless fraud or another tax crime is involved.
However, a civil audit can turn into a criminal case if the IRS finds evidence of intentional wrongdoing.
Criminal IRS Investigations: Risk of Prison Time
A criminal tax investigation is handled by IRS Criminal Investigation (CI), a division of the IRS that operates like a law enforcement agency. CI agents—sometimes called special agents—investigate tax fraud, tax evasion, and other financial crimes.
Key Characteristics of a Criminal Investigation:
- Conducted by IRS CI special agents (who have law enforcement authority).
- Common triggers: Willful tax evasion, fraudulent failure to file, money laundering, and other tax-related crimes.
- Consequences: Criminal charges, large fines, and potential prison time.
A high-profile example of a criminal tax case is Hunter Biden’s tax charges, which involved alleged tax fraud and evasion. Cases like these often involve deliberate attempts to hide income, create false deductions, or engage in illegal financial transactions.
How a Civil IRS Case Can Turn Criminal
While most IRS audits and tax disputes remain civil, some can escalate into criminal investigations. If an IRS revenue agent (civil side) uncovers potential fraud, they may refer the case to IRS Criminal Investigation.
For instance, when I was an IRS agent, I audited a taxpayer who used frivolous tax protestor arguments—a common red flag for fraud. After identifying questionable filings, I referred the case to CI. In that situation, the IRS was more interested in pursuing the tax preparer than the individual taxpayer, but the case still had serious implications.
If you believe your civil audit could turn criminal, it is critical to seek legal representation immediately.
What Should You Do If You’re Under IRS Investigation?
Regardless of whether your case is civil or criminal, you should not deal with the IRS alone. The sooner you involve a tax attorney, the better your chances of avoiding severe penalties or criminal charges.
- If you’re facing a civil audit: A tax attorney can help reduce penalties, negotiate with the IRS, or challenge improper tax assessments in Tax Court.
- If you’re under criminal investigation: You need an experienced tax attorney who understands criminal defense to protect your rights and develop a strong legal strategy.
Contact Boss Tax Law Today
IRS investigations—whether civil or criminal—are serious and require immediate attention. If you’re being audited, owe back taxes, or suspect you may be under criminal investigation, contact me today. As a former IRS agent and experienced tax controversy attorney, I can help you navigate your situation and protect your financial future.