If at any time during the tax audit the taxpayer’s representative feels there may be a fraud investigation involved, or if the activities of the revenue agent suggest that the audit is leading to a fraud investigation, an attorney totally familiar with tax fraud matters should be consulted immediately. Under normal circumstances the revenue agent will not tell the taxpayer’s representative that fraud is suspected or that a fraud investigation is underway. This is something you, the representative, must ferret out for yourself.
The suspicion of fraud may be gleaned from certain ways you see the revenue agent behaving. These behaviors include circling around the taxpayer and contacting third parties for information and/or documents; these would be individuals and institutions such as the taxpayer’s customers or sources of supply. Other actions include a direct inquiry to financial institutions with which the taxpayer deals (especially if the IRS is looking for matters that don’t appear on the tax return but do appear in bank records); large deposits or withdrawals (as in, where did it come from, where did it go?); a request that your client furnish a net worth statement; or the sudden disappearance of the revenue agent with whom you’ve been interfacing. Such a disappearance indicates the possible referral of the case to the Criminal Investigation Division, because the revenue agent must cease all activity on the file while the CID decides whether to accept or reject the referral of the case from the revenue agent. Short form, if your revenue agent disappears for more than a month, contact a tax fraud attorney without delay and tell him or her your set of facts.