How to Detect IRS Surveillance During an Investigation

Detecting IRS Surveillance During Tax Investigations

Being audited or investigated by the Internal Revenue Service (IRS) can feel scary and stressful. The IRS has wide authority to examine your financial records and transactions. However, there are limits on what they can do during an investigation. Understanding your rights and recognizing signs of IRS surveillance can help you handle an audit or investigation.

Why the IRS Investigates Taxpayers

The IRS Criminal Investigation division (IRS CI) investigates suspected violations of tax law, money laundering, and other financial crimes. Some reasons the IRS may open an investigation include:

• Evidence of tax evasion or filing false returns
• Hiding income in offshore accounts
• Engaging in abusive tax shelters or schemes
• Identity theft
• Failure to file returns or pay taxes

IRS agents must get approval to open an investigation. They typically start with a civil audit and gather evidence to support criminal charges if violations are found. For more on IRS audit procedures, see the IRS Audits page.

Your Rights During a Tax Investigation

If you’re under IRS criminal investigation, you still have important rights, including:

• The right to remain silent – You can refuse to answer questions or provide documents that may be self-incriminating
• The right to legal counsel – You can have your attorney deal directly with the IRS
• Protection against unreasonable searches – The IRS must get a warrant to search your home or office
• Presumption of innocence – The IRS must prove you violated tax laws

Knowing your rights helps you avoid accidentally incriminating yourself and gives you leverage when negotiating with the IRS. The IRS Taxpayer Bill of Rights outlines protections for taxpayers.

How the IRS Conducts Surveillance

The IRS can thoroughly examine your finances, but there are limits on more intrusive investigative techniques. Methods IRS agents might use include:

• Reviewing your tax returns and filings – IRS can analyze returns going back up to 6 years to spot errors or inconsistencies.
• Requesting documentation – IRS can legally compel you to provide financial statements, receipts, business records, and other documents. See the IRS page on records requested during audits.
• Interviewing witnesses – Agents can question your business associates, employees, customers or anyone else who may have information.
• Obtaining third party records – With proper authorization, the IRS can get your bank, credit card and other records.
• Electronic surveillance – With a federal court order, the IRS can monitor phone calls, emails and texts.

Signs the IRS May Be Monitoring You

The IRS cannot disclose an open investigation. However, there are signs suggesting you may be under surveillance:

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• Receiving an IRS letter about an audit or potential criminal charges.
• IRS makes repeated or broad requests for documents.
• Your business associates, banks, or others report being questioned.
• You notice suspicious activity near your home/office.
• You find sealed court documents about your finances.
• Your devices act oddly, indicating monitoring software.

While not definitive proof, these hints warrant caution. The CP75 and CP75A notices often signal increased IRS scrutiny.

Responding to Possible IRS Surveillance

If you suspect IRS surveillance, dos and don’ts include:

• DO consult an experienced tax attorney or CPA.
• DO be cooperative within limits – Don’t obstruct justice or volunteer excess information.
• DO exercise your right to remain silent during questioning.
• DO continue conducting yourself legally.
• DON’T destroy evidence or hide assets.
• DON’T make false statements or lie during the investigation.
• DON’T discuss the case except with your lawyer.
• DON’T retaliate against IRS informants or witnesses.

An IRS criminal probe is serious. Staying calm and following the proper protocols can help you successfully assert your rights.

Avoiding IRS Scrutiny

The best protection is avoiding IRS attention in the first place. Tips include:

• Always report all income and pay taxes on time and in full.
• Keep meticulous records of income, deductions, and business expenses.
• Be truthful and accurate on your tax return.
• Don’t claim aggressive deductions or take extreme tax positions.
• Stay cooperative but don’t volunteer excess information during audits.
• Get help from a tax professional if you have a complicated return.

While the IRS targets deliberate tax evaders, they also investigate honest mistakes. Working with a knowledgeable tax preparer or accountant can help avoid audit red flags. The IRS Audits page has more audit prevention tips.

Navigating IRS Investigations

An IRS criminal probe can be intimidating but doesn’t have to be disastrous. Understanding the process, knowing your rights, and working with an experienced attorney helps you successfully navigate an investigation. Here are some additional tips:

• Be proactive – If you believe you may be under investigation, consider contacting the IRS first through a voluntary disclosure program rather than waiting for the IRS to contact you. This can demonstrate cooperation and good faith.
• Gather and preserve records – Have records like tax returns, bank statements, business documents, etc. organized and ready to provide if requested. But do not destroy or alter any records.
• Consider an accounting review – Have a CPA review your books and records to identify any errors or omissions. This can help get ahead of any issues.
• Limit communications – Be cautious in communications about your taxes or finances, even informal ones, as these could be used as evidence.
• Know your rights – Be aware you have the right to an attorney and to not provide self-incriminating evidence. Invoke these rights politely if needed.
• Cooperate within limits – Strive to cooperate fully without volunteering unnecessary information or speculating.
• Stay compliant moving forward – Ensure any past mistakes are not repeated and taxes are filed/paid on time.
• Explore resolution options – Many cases can be resolved through settlements. Your legal counsel can advise if this is applicable.

While an IRS criminal investigation is undoubtedly serious, handling it carefully and properly can help lead to the best resolution. Work closely with experienced legal counsel throughout the process.