As a Tax Lawyer representing clients in a criminal tax investigation, one of the most important defense strategies is knowing when to cooperate with an IRS special agent and when to refuse cooperation. Over the course of the special agent’s investigation, the taxpayer will be faced with numerous opportunities to cooperate or refuse cooperation. This is an extremely important decision that should be made only after complete and thorough deliberation. The consequences of cooperation must be weighed because in many circumstances, cooperation can be tantamount to a confession.

How Much Cooperation is Too Much?

Deciding the proper level of cooperation requires analysis of the federal tax crime Investigation Division’s goals, the particular special agent conducting the investigation, and a very thorough understanding of the taxpayer’s situation and facts of the case. A tax attorney must weigh the pros and cons of cooperation to determine whether the client will ultimately be best served by cooperating with the special agent in the investigation process. Once some or complete cooperation has been established, counsel cannot withdraw or diminish the level of cooperation without raising the suspicion of the special agent in charge. In most cases, any change in demeanor will require some explanation. Counsel should also be wary of promising cooperation yet failing to follow through. If cooperation is promised or feigned but not supplied, the consequences for the taxpayer can include harsher sentencing, consideration as a badges of civil fraud, or being charged with a criminal charge of obstruction.

In nearly any investigation, it is generally not a good idea for the taxpayer to submit to an in-person interview with the special agent in charge. Taxpayers often mistakenly believe that an interview with the special agent will give them a chance to tell their side of the story and persuade the special agent to reject prosecution. However, this is almost never the case. Instead, taxpayers too often make outright admissions, provide crucial evidence to the special agent, compromise their potential defenses, and make false exculpatory statements, all of which can severely undermine the taxpayer’s case and lead to negative results. For this reason, it is almost always better for a taxpayer to avoid an in-person interview with the special agent.

Counsel may implement one of several cooperation schemes, depending on the unique circumstances of the case:

  • Full cooperation. Full cooperation may be used if counsel believes that fully cooperating with the IRS special agent result in an end to the investigation because of lack of guilt or insufficient evidence against the taxpayer.
  • Full or selective cooperation. A lesser degree of cooperation is selective cooperation, which may be used to selectively cooperate in certain aspects of the special agent’s investigation. This is useful when counsel and taxpayer believe that the special agent may conclude that a prosecution is not worth pursuing.
  • Full or selective cooperation when the case is not defensible. In cases where the taxpayer’s position is not defensible, counsel may wish to engage in full or selective cooperation in the hopes that doing so may lower the taxpayer’s sentence or civil fraud penalty.
  • No cooperation. In some cases, it is best to proceed with no cooperation. Counsel should proceed with no cooperation if he or she believes there is little to be gained by cooperation or that cooperation will serve neither the client’s civil interests nor the criminal defense.

Ultimately, it is important to have realistic notions of what cooperation can achieve. In most cases, a special agent will not be persuaded to give up prosecution based solely on the taxpayer’s cooperation. Instead, cooperation can influence how the investigation is conducted.

Cooperation by Voluntary Production of Documents or Records

When contemplating cooperation with the special agent’s investigation, counsel and the taxpayer may be faced with an option to voluntarily produce documents and records. These documents and records typically fall into one of two categories: documents that the special agent can potentially obtain without the taxpayer’s cooperation, and those that the special agent cannot retrieve without cooperation. For obvious reasons, the taxpayer typically should not voluntary produce documents in the second category.

With respect to documents that are known to exist and can be obtained by the special agent through the use of third party summons, the taxpayer may wish to offer cooperation by voluntary producing these documents and records. In those cases, the special agent will be able to obtain the documents anyway, but taxpayer’s cooperation will make the process easier and reduce embarrassment to the taxpayer. Here, counsel may ask the third party document custodian to informally participate in producing the documents and records to the special agent without the use of summons or Grand Jury proceedings. In some cases, the special agent may also allow this informal document production to take place without informing the third party of the existence of an IRS investigation. Facilitating evidence gathering can be a positive strategy because it may cause a special agent to recommend against turning an administrative investigation into a more formal CI investigation.

How a Tax Attorney Can Help with Your Criminal Tax Case

If you are under investigation by the IRS for a potential criminal prosecution, then you must consult with an experienced tax attorney. San Diego Tax Attorney William D. Hartsock has been successfully helping clients with criminal tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.

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