United States General Accounting Office
GAO Report to the Commissioner, Internal
Revenue Service
November 1997
TAX
ADMINISTRATION
IRS’ Efforts to Place
More Emphasis on
Criminal Tax
Investigations
GAO/GGD-98-16
United States
GAO General Accounting Office
Washington, D.C. 20548
General Government Division
B-275359
November 6, 1997
The Honorable Michael Dolan
Acting Commissioner of Internal Revenue
Dear Mr. Dolan:
The Internal Revenue Service’s (IRS) Criminal Investigation Division (CID)
investigates tax fraud and assists other law enforcement agencies in
investigating financial crimes, such as money laundering associated with
narcotics trafficking. In the early 1990s, IRS studies raised questions about
CID’s investigative priorities because they increasingly comprised nontax
investigations that supported national drug and crime policies to the
detriment of tax investigations, even as the estimated tax gap grew to
about $128 billion for 1992.1 This concern caused CID to revise its
investigative strategy, thereby focusing more resources on tax
investigations. As part of this revised strategy, in fiscal year 1995 CID
established fraud and narcotics as its main investigative program areas.
The fraud program was further subdivided between tax gap fraud and
other fraud, thus enabling CID to track resources applied specifically to tax
gap investigations.
This report, which we prepared under our basic legislative responsibilities,
discusses the actions CID has taken since the early 1990s to increase the
time spent on tax investigations versus nontax investigations. It also
highlights the investigations initiated by CID, as well as referrals to U.S.
Attorneys for prosecution and court sentences based on these
investigations, for fiscal years 1990 through 1996.
Between fiscal years 1990 and 1992, IRS data show that the percent of time
Results in Brief spent on tax gap investigations decreased by 10 percentage points,
continuing a downward trend since the early 1980s. On the basis of the
recommendations of two IRS studies done in the early 1990s, CID began in
October 1993 taking actions designed to increase the amount of time its
agents spent conducting tax investigations. Specifically, CID reorganized its
administrative functions and operations with the intent of better targeting
resource allocations. It also consolidated and recategorized its program
areas with an objective of better tracking its investigations. In addition, as
of fiscal year 1996 CID established goals for the percent of time to be spent
on its investigations, particularly for tax gap investigations.
1
The tax gap is defined as total tax liability less taxes paid voluntarily. IRS’ tax gap reports do not
indicate how much of the tax gap is attributable to fraud.
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Since these actions were initiated, the percent of time spent on tax gap
investigations has increased by 13 percentage points from a low of
46 percent in 1992 to 59 percent in 1996.2 Overall, the 59 percent in fiscal
year 1996 represented a net increase of 3 percentage points over the fiscal
year 1990 level.
Between fiscal years 1992 and 1996, there was an increase in the percent
of tax gap investigations that CID initiated and in the percent of referrals to
U.S. Attorneys for prosecution based on tax gap cases; since fiscal year
1994, the percent of court sentences based on tax gap cases has also
increased. However, as of fiscal year 1996 the increases in these indicators
have not been enough to match fiscal year 1990 levels.
CID carries out IRS’ criminal law enforcement responsibilities under three
Background principal statutes. Under title 26 U.S.C., IRS has authority to investigate
alleged criminal tax violations, such as tax evasion and filing a false tax
return. Under title 18 U.S.C., IRS has authority to investigate a broad range
of fraudulent activities, such as false claims against the government and
money laundering. Under title 31 U.S.C., IRS is responsible for enforcing
certain recordkeeping and reporting requirements of large currency
transactions, such as cash bank deposits of more than $10,000. In carrying
out its responsibilities, CID coordinates as necessary with IRS’ District
Counsel, the Tax Division within the Department of Justice (Justice), and
local U.S. Attorneys to prosecute violators of these statutes.
Combating money laundering and other financial crimes is considered a
high priority by both Justice and the Department of the Treasury
(Treasury). According to Justice officials, because of CID’s expertise in
conducting detailed financial investigations, U. S. Attorneys and law
enforcement agencies routinely rely on CID’s assistance in investigating
financial crimes, particularly those involving money laundering related to
narcotics trafficking. In addition, CID agents have access to tax
information, which they can use to develop financial investigations more
fully. CID is also involved in ongoing efforts to identify and investigate
emerging financial crimes, such as health care and bankruptcy fraud.
According to CID officials, although such assistance places competing
2
At our request, CID staff used the characteristics defined in fiscal year 1995 for investigations
conducted under its main program areas—fraud and narcotics—to identify the amount and percent of
time applied to these types of investigations between fiscal years 1990 and 1994. The fraud program
was further broken out by tax gap and other fraud. They did the same for the number and percent of
(1) CID investigations initiated, (2) referrals to U.S. Attorneys for prosecution based on CID cases, and
(3) court sentences based on CID cases.
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demands on CID’s time, it also aids in establishing the cooperative
environment conducive to getting CID’s tax cases prosecuted and in
obtaining information that can lead to criminal tax investigations.
Historically, CID’s total staffing and budget have represented about 5
percent of IRS’ overall resources. As of the end of fiscal year 1996, CID had
the full-time equivalent of 4,504 staff, including 3,065 special agents, and a
budget of $366 million. CID is also reimbursed for some of the assistance it
provides to other law enforcement agencies, particularly Justice’s
Organized Crime Drug Enforcement Task Force (OCDETF) program.3
To determine the actions CID has taken since the early 1990s to increase
Scope and the time spent on tax investigations relative to nontax investigations, we
Methodology interviewed senior CID officials in IRS’ National Office, officials from both
the Tax and Criminal Divisions in Justice, and officials from the Office of
the Under Secretary for Enforcement in Treasury. We interviewed the CID
officials because of their responsibilities in managing CID operations and
setting division policies. Justice and Treasury officials were interviewed to
obtain their opinions regarding CID’s (1) assistance in narcotics and money
laundering investigations and (2) increased emphasis on tax
investigations. We also reviewed CID’s annual goals and objectives and
annual performance reports for fiscal years 1990 through 1996, as well as
relevant documentation on the reorganization of its administrative
functions and operations.
To determine the types of investigations initiated and the results of
referrals to U.S. Attorneys for prosecution and sentences resulting from
these prosecutions, we analyzed IRS’ Criminal Investigation Management
Information System (CIMIS) data. CID uses CIMIS data to track the status and
overall results of its criminal investigations, including the direct
investigative time (DIT) expended on investigations. DIT is the amount of
time that CID agents spend directly working on investigations. We selected
fiscal years 1990 through 1996 to identify CID’s investigative trends in order
to capture data from the time of the IRS studies that raised concerns about
CID’s investigative priorities through fiscal year 1996, the most recent
period for which data were available.
3
OCDETF is a federal interagency coordinated effort to investigate and prosecute major drug
organizations, particularly those with connections to organized crime. Under a reimbursement
agreement with Justice, CID is reimbursed up to the level allowed by Congress for the cost of its
agents’ salaries when assisting in OCDETF investigations. According to data provided by CID officials,
between fiscal years 1990 and 1996, CID provided $130 million in assistance to the OCDETF program
over and above the $205 million received in reimbursement from Justice.
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We obtained and analyzed CIMIS data to identify nationwide by fiscal year
(1) the number and results of various types of CID investigations, and
(2) the principal sources of information that led to CID investigations. CID
staff, at our request, reconfigured CIMIS data for fiscal years 1990 through
1996 to reflect the current IRS field alignment of 4 regions and 33 districts,
as well as CID’s current program areas—fraud and narcotics—with fraud
further broken out between tax gap fraud and other fraud. Other than
reconciling the totals from CIMIS data extracts to CID annual performance
reports, we did not verify the accuracy of the CIMIS data.
We did our work from October 1996 to August 1997 in accordance with
generally accepted government auditing standards. The work was done at
IRS’ National Office and Southeast Regional Office; IRS’ Georgia, South
Florida, and Delaware-Maryland District Offices; and at U. S. Attorney’s
offices in the Northern District of Georgia, the Southern District of
Florida, and the Maryland District. We selected the offices we visited
because of the proximity of our staff working on this assignment.
We requested comments on a draft of this report from the Acting
Commissioner of Internal Revenue and the Attorney General. Their
comments are discussed at the end of this letter.
In the early 1990s, concerns raised in IRS studies regarding CID’s
Actions to Increase investigative priorities spurred CID to take actions to increase the amount
Direct Investigative of time its agents spent on tax investigations. Between fiscal years 1990
Time Spent on Tax and 1992, the percent of DIT spent on tax gap investigations decreased
from 56 percent to 46 percent; since then, the percent of DIT spent on tax
Investigations gap investigations increased to 59 percent as of fiscal year 1996. CID has
established a range of 57 to 61 percent of DIT to be spent on tax gap
investigations as its goal for fiscal year 1997 and beyond.
Subsequent to hearings on IRS employee misconduct in 1989 before the
Subcommittee on Commerce, Consumer and Monetary Affairs, House
Committee on Government Operations, the Commissioner of Internal
Revenue appointed an independent panel to review various concerns
raised during the hearings, including issues relating to criminal
investigations. In its October 1990 report, the panel stated that there had
been a significant decrease in CID resources applied to tax investigations
and a corresponding increase in resources applied to nontax
investigations. The panel believed that CID’s work priorities were not
properly aligned with IRS’ strategic goal of increasing taxpayers’
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compliance with the tax laws. The panel recommended that CID
(1) establish a criminal enforcement policy in line with IRS’ overall efforts
to increase compliance with the tax laws, (2) ensure that its allocation of
resources and mix of cases are consistent with such a policy, and
(3) closely monitor and control implementation of this policy through the
National Office.
Also, to address concerns about whether CID’s workload was properly
balanced between tax and nontax investigative efforts, IRS convened a
study group that included representatives from Justice and Treasury. The
study group’s August 1991 report found that CID resources used for tax
investigations had declined about 18 percentage points between fiscal
years 1980 and 1990; on that basis, the study group recommended that
resources devoted to tax investigations be increased and that future
resources devoted to narcotics investigations be limited to the amount
expended in fiscal year 1991. The IRS Executive Committee agreed with
these recommendations, and in June 1992 CID initiated an action plan to
implement them.
The actions led to a reorganization of CID, which began in October 1993
and was fully implemented in October 1994. The reorganization was done
in part with the intent of giving CID’s national office a better means to
control and monitor field activities to keep them aligned with national
policies and objectives as recommended by the review panel and the study
group. In terms of its organizational structure, CID was reduced from 7
regions and 63 districts to 4 regions and 34 districts.4 In addition, the
position of Director of Investigation (DI), reporting directly to the IRS
National Office Assistant Commissioner for Criminal Investigation, was
established in each region to oversee and coordinate investigative
activities. The DIs replaced seven former Assistant Regional
Commissioners for Criminal Investigation, who reported directly to the
Regional Commissioners. The DIs are responsible for ensuring that CID field
offices adhere to national office program objectives and policies.
Another action CID took to better track the allocation of its resources to
tax versus nontax investigations was to consolidate its major program
areas and to establish a specific category for tax gap investigations. In
fiscal year 1995, CID consolidated the five program areas under which
investigations had been categorized and tracked—narcotics, organized
crime, public corruption, financial compliance, and other illegal
4
CID was subsequently reduced to 33 districts when IRS’ district office reorganization took place in
fiscal year 1996.
Page 5 GAO/GGD-98-16 IRS’ Criminal Investigation Division
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crime—into two principal program areas—fraud and narcotics. The fraud
program was subdivided into tax gap fraud and other fraud. Tax gap fraud
pertains to investigations of legal industries with alleged criminal tax
violations.5 The other fraud category involves investigations of illegal
industries or money laundering investigations with no tax-related charges.6
The narcotics program primarily relates to investigations of money
laundering activity by individuals and organizations involved in narcotics
trafficking.
Beginning in fiscal year 1996, CID set specific national goals for the percent
of DIT to be used on tax gap and narcotics investigations to help ensure
that additional resources would be allocated to tax gap investigations. The
fiscal year 1996 DIT goals were 58 percent for tax gap
investigations—1 percent higher than the actual DIT for fiscal year
1995—and 24 percent for narcotics investigations—the same as the actual
DIT for fiscal year 1995.
Since CID began taking these actions, DIT applied to tax gap investigations
has increased. (See fig. 1.) According to data provided by IRS, the percent
of time applied to tax gap investigations for fiscal years 1993 through 1996
increased 13 percentage points. As of fiscal year 1996, CID applied
59 percent of DIT to tax gap investigations, exceeding its goal by
1 percentage point, while applying 22 percent of DIT to narcotics
investigations, 2 percentage points short of its goal.
5
According to CID officials, although tax gap investigations usually result in prosecution and
sentencing for Title 26 violations, they may also involve certain Title 18 violations, such as defrauding
the government or filing a false claim. They further stated that they prefer prosecution and sentencing
under Title 26, but they will opt to use Title 18 when they feel certain that Title 26 charges will not hold
up in court.
6
Investigations of illegal industries with alleged criminal tax violations are included in the other fraud
program.
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Figure 1: Percent of Nationwide DIT by
Type of Criminal Investigation—Fiscal
Years 1990 Through 1996 Percent
100
80
60
40
20
0
1990 1991 1992 1993 1994 1995 1996
Fiscal year
Tax gap fraud
Narcotics
Other fraud
Source: GAO analysis of IRS data.
According to CID national office officials, the goal for the amount of DIT to
be allocated to tax gap investigations in fiscal year 1997 is a range of 57 to
61 percent, and the goal for narcotics investigations is a range of 23 to
25 percent. They stated that these goals, which are expected to be the
goals for the next few years, were developed with input from the DIs. It is
CID officials’ judgment that these goals will enable CID to (1) conduct
investigations in support of IRS’ strategic goal of increasing compliance
with the tax laws; (2) contribute to the government’s efforts in combating
narcotics and money laundering; and (3) continue allocating some of its
investigative time to cases involving emerging financial crimes, such as
health care fraud.
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CID considers completed investigations that merit referral to the U.S.
Trends in the Number Attorneys for prosecution as an important step toward the eventual
and Results of CID prosecution, conviction, and sentencing for criminal tax violations and
Investigations for related financial crimes. By publicizing convictions, CID hopes to deter
others from engaging in such criminal activity and to promote voluntary
Fiscal Years 1990 compliance with the tax laws. Consequently, CID uses statistical data from
Through 1996 CIMIS to track the number and percent of investigations initiated, as well as
the number and percent of referrals made to U.S. Attorneys for
prosecution and sentences handed down by the U.S. courts based on CID
cases. CIMIS data show that the percent of tax gap investigations initiated,
the percent of tax gap cases referred to U.S. Attorneys for prosecution,
and the percent of court sentences based on tax gap cases have all begun
to increase since CID increased the time spent on tax gap investigations.
However, as of fiscal year 1996, the increases have not been enough to
match fiscal year 1990 levels for these indicators.
Trends in the Types of As shown in figure 2, tax gap investigations represented 54 percent of all
Investigations Initiated CID investigations initiated in fiscal year 1996. This is an increase over the
fiscal year 1992 level of 47 percent and just under the fiscal year 1990 level
of 55 percent. The figure also shows that between fiscal years 1990 and
1996, narcotics investigations decreased from 30 percent to 25 percent of
all CID investigations initiated. Other fraud investigations were
6 percentage points higher in fiscal 1996 than in fiscal year 1990.
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Figure 2: Percent of Criminal
Investigations Initiated Nationwide by
Type—Fiscal Years 1990 Through 1996 Percent
100
80
60
40
20
0
1990 1991 1992 1993 1994 1995 1996
N = 5,279 N = 5,218 N = 6,538 N = 6,148 N = 5,346 N = 5,000 N = 5,334
Fiscal year
Tax gap fraud
Narcotics
Other fraud
Source: GAO analysis of IRS data.
Trends in Investigations Figure 3 shows that, in general, the percent of CID cases being referred to
Referred to the U.S. the U.S. Attorneys for prosecution for tax gap fraud since fiscal year 1992
Attorneys for Prosecution has increased, while the percent of other types of referrals—narcotics and
other fraud cases—either declined or remained somewhat stable.
Specifically, tax gap referrals represented 47 percent of all CID referrals in
fiscal year 1996 compared to 39 percent in fiscal year 1992 and 49 percent
in fiscal year 1990.
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Figure 3: Percent of Referrals for
Prosecution Nationwide by Type of
CID Investigation—Fiscal Years 1990 Percent
Through 1996 100
80
60
40
20
0
1990 1991 1992 1993 1994 1995 1996
N = 3,230 N = 3,677 N = 4,252 N = 4,267 N = 3,745 N = 3,615 N = 3,605
Fiscal year
Tax gap fraud
Narcotics
Other fraud
Note: Referrals for prosecution in a particular fiscal year do not necessarily relate to the year the
case was initiated.
Source: GAO analysis of IRS data.
Trends in Sentences From Court sentences—including incarceration, probation, and fines—based on
Cases Referred to the U.S. tax gap investigations decreased from 54 percent of all court sentences
Attorneys for Prosecution based on CID investigations in fiscal year 1990 to a low of 37 percent in
fiscal year 1994. Since that time tax gap sentences have increased to
44 percent of all court sentences for CID cases as of fiscal year 1996.
Overall, sentences based on narcotics investigations increased from
32 percent to 39 percent of all court sentences based on CID investigations
between fiscal years 1990 and 1993, then decreased to 31 percent as of
fiscal year 1996. (See fig. 4.)
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Figure 4: Percent of Sentences
Nationwide by Type of CID
Investigation—Fiscal Years 1990 Percent
Through 1996
100
80
60
40
20
0
1990 1991 1992 1993 1994 1995 1996
N = 2,409 N = 2,785 N = 2,635 N = 3,052 N = 3,235 N = 2,801 N = 2,777
Fiscal year
Tax gap fraud
Narcotics
Other fraud
Note: Sentences in a particular fiscal year do not necessarily relate to the year the case was
initiated or referred to a U.S. Attorney for prosecution.
Source: GAO analysis of IRS data.
Additional information relating to CID’s investigations between fiscal years
1990 and 1996 is shown in appendixes I, II, III, and IV. Appendix I shows
the number of staff days applied nationwide by type of criminal
investigation. Appendix II contains information on the percent of DIT
applied to each type of criminal investigation by IRS location. Appendix III
shows the numbers of investigations, referrals to the U.S. Attorneys for
prosecution, and court sentences by type of criminal investigation.
Appendix IV discusses the principal sources of information on which CID’s
investigations were based.
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IRS and the Department of Justice each provided comments on a draft of
Agency Comments this report. Each agency generally agreed with the information presented
and Our Evaluation in the report and offered technical comments, which we have incorporated
where appropriate.
Copies of this report are being sent to the Chairmen and Ranking Minority
Members of the Senate Committee on Finance, the Senate Committee on
Governmental Affairs, the House Committee on Ways and Means, and the
House Committee on Government Reform and Oversight; the Chairman
and Ranking Minority Member of the Subcommittee on Treasury, General
Government, and Civil Service, Senate Committee on Appropriations; and
the Chairman and Ranking Minority Member of the Subcommittee on
Treasury, Postal Service, and General Government, House Committee on
Appropriations; various other congressional committees; the Secretary of
the Treasury; the Attorney General; and other interested parties. We will
also make copies available to others upon request.
Major contributors to this report are listed in appendix VI. Please contact
me on (202) 512-9110 if you or your staff have any questions about this
report.
Sincerely yours,
Lynda D. Willis
Director, Tax Policy and
Administration Issues
Page 12 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Page 13 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents
Letter 1
Appendix I 18
Investigative Time
Applied Nationwide
by Type of Criminal
Investigation in Fiscal
Years 1990 Through
1996
Appendix II 19
Percent of Direct
Investigative Time
Applied to CID
Investigations in
Fiscal Years 1990
Through 1996
Appendix III 24
The Number and
Results of CID
Investigations in
Fiscal Years 1990
Through 1996
Page 14 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents
Appendix IV 26
Sources of
Information That
Resulted in CID
Investigations in
Fiscal Years 1990
Through 1996
Appendix V 28
Comments From the
Internal Revenue
Service
Appendix VI 29
Major Contributors to
This Report
Tables Table I.1: Number of Direct Staff Days Applied Nationwide by 18
Type of Criminal Investigation in Fiscal Years 1990 Through 1996
Table II.1: Percent of Total DIT Applied to Tax Gap Investigations 19
by Location in Fiscal Years 1990 Through 1996
Table II.2: Percent of Total DIT Applied to Narcotics 20
Investigations by Location in Fiscal Years 1990 Through 1996
Table II.3: Percent of Total DIT Applied to Other Fraud 22
Investigations by Location in Fiscal Years 1990 Through 1996
Table III.1: Number of CID Investigations Initiated Nationwide in 24
Fiscal Years 1990 Through 1996
Table III.2: Number of CID Investigations Referred to the U.S. 24
Attorney for Prosecution Nationwide in Fiscal Years 1990
Through 1996
Table III.3: Number of Sentences Nationwide Resulting from CID 25
Investigations in Fiscal Years 1990 Through 1996
Figures Figure 1: Percent of Nationwide DIT by Type of Criminal 7
Investigation—Fiscal Years 1990 Through 1996
Page 15 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Contents
Figure 2: Percent of Criminal Investigations Initiated Nationwide 9
by Type—Fiscal Years 1990 Through 1996
Figure 3: Percent of Referrals for Prosecution Nationwide by 10
Type of CID Investigation—Fiscal Years 1990 Through 1996
Figure 4: Percent of Sentences Nationwide by Type of CID 11
Investigation—Fiscal years 1990 Through 1996
Figure IV.1: Percent of Investigations Initiated Nationwide by 26
Selected Sources—Fiscal Years 1990 Through 1996
Abbreviations
CID Criminal Investigation Division
CIMIS Criminal Investigation Management Information System
DI Director of Investigation
DIT Direct Investigative Time
IRS Internal Revenue Service
OCDETF Organized Crime Drug Enforcement Task Force
Page 16 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Page 17 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix I
Investigative Time Applied Nationwide by
Type of Criminal Investigation in Fiscal
Years 1990 Through 1996
This appendix presents the nationwide number of staff days applied
directly to the major types of Criminal Investigation Division (CID)
investigations. This does not include staff days applied to noninvestigative
activities, such as training.
Table I.1: Number of Direct Staff Days Applied Nationwide by Type of Criminal Investigation in Fiscal Years 1990 Through
1996
Number of staff days by fiscal year
Type of investigation 1990 1991 1992 1993 1994 1995 1996
Fraud
Tax gap 273,192 262,544 253,245 278,261 301,640 328,595 361,494
Other 43,906 66,923 110,107 115,942 96,753 98,002 98,032
Narcotics 160,988 169,882 170,665 168,116 159,357 138,356 134,794
Information items 9,757 15,444 16,516 17,391 11,383 11,530 18,381
Total direct staff days 487,842 514,793 550,533 579,711 569,133 576,483 612,702
Note 1: Investigative time spent following up on information provided to CID that indicates
potential criminal violations prior to initiation of an investigation is categorized as information
items.
Note 2: Totals do not add due to rounding.
Source: GAO analysis of IRS data.
Page 18 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II
Percent of Direct Investigative Time Applied
to CID Investigations in Fiscal Years 1990
Through 1996
This appendix shows the percent of direct investigative time (DIT) applied
to the major types of CID investigations nationwide, by regions, and by
district offices from fiscal years 1990 through 1996. For fiscal year 1996,
CID set national DIT goals of 58 percent for tax gap investigations and
24 percent for narcotics investigations. To achieve these goals, CID
requested that the Directors of Investigation for each region help to ensure
that the regional DIT was within a range of 58 to 60 percent for tax gap
investigations and 24 to 26 percent for narcotics investigations.
Table II.1: Percent of Total DIT Applied to Tax Gap Investigations by Location in Fiscal Years 1990 Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Nationwide 56 51 46 48 53 57 59
Midstates Region 51 45 40 43 47 54 56
Midwest 52 46 44 50 55 57 62
Arkansas-Oklahoma 55 40 34 43 49 57 57
Houston 55 50 45 52 54 56 49
Illinois 61 56 47 50 50 55 59
Kansas-Missouri 54 53 44 42 48 53 61
North Central 58 48 53 56 60 64 73
North Texas 47 38 37 33 33 49 56
South Texas 26 26 18 20 32 46 34
Northeast Region 61 57 53 53 56 58 61
Brooklyn 71 70 65 62 66 62 60
Connecticut-Rhode Island 61 60 58 58 64 69 74
Manhattan 55 44 50 47 51 52 56
Michigan 60 58 55 55 58 58 60
New England 49 51 44 48 49 50 58
New Jersey 64 62 57 54 63 64 64
Ohio 60 48 42 45 50 55 63
Pennsylvania 64 64 51 52 52 57 62
Upstate New York 72 64 64 64 66 63 64
Southeast Region 54 49 46 49 55 58 59
Delaware-Maryland 56 51 47 52 55 59 59
Georgia 59 50 47 59 56 57 60
Gulf Coast 65 54 57 57 64 64 61
Indiana 70 63 58 59 60 67 66
(continued)
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Appendix II
Percent of Direct Investigative Time Applied
to CID Investigations in Fiscal Years 1990
Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Kentucky-Tennessee 60 52 44 47 58 58 57
North-South Carolina 39 36 41 39 50 55 57
North Florida 46 45 41 40 46 49 52
South Florida 39 39 34 41 51 50 55
Virginia-West Virginia 61 55 53 50 60 65 64
Western Region 55 51 41 45 50 56 60
Central California 56 58 53 53 58 56 58
Los Angeles 60 52 45 50 60 62 68
Northern California 61 51 36 47 45 54 57
Pacific Northwest 49 50 43 47 50 49 57
Rocky Mountain 54 49 34 38 48 57 60
Southern California 51 48 41 37 42 53 58
Southwest 55 49 38 49 53 59 62
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System data.
Table II.2: Percent of Total DIT Applied to Narcotics Investigations by Location in Fiscal Years 1990 Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Nationwide 33 33 31 29 28 24 22
Midstates Region 37 38 36 35 32 25 26
Midwest 33 39 37 32 29 25 26
Arkansas-Oklahoma 21 28 27 25 21 19 16
Houston 34 35 37 32 33 30 40
Illinois 30 31 33 28 28 24 24
Kansas-Missouri 34 34 34 33 30 23 21
North Central 34 34 29 22 24 19 12
North Texas 33 34 36 41 39 22 19
South Texas 65 63 54 64 50 34 46
Northeast Region 28 29 28 26 26 25 23
Brooklyn 14 14 17 15 19 23 23
Connecticut-Rhode Island 31 25 23 21 19 13 10
Manhattan 38 43 36 36 35 35 32
(continued)
Page 20 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II
Percent of Direct Investigative Time Applied
to CID Investigations in Fiscal Years 1990
Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Michigan 27 26 27 25 24 26 25
New England 43 34 30 23 25 22 20
New Jersey 25 25 28 26 26 24 21
Ohio 26 32 29 31 26 26 22
Pennsylvania 26 25 30 28 29 25 25
Upstate New York 21 25 21 22 23 17 12
Southeast Region 34 35 30 28 26 23 21
Delaware-Maryland 35 36 31 30 30 23 26
Georgia 29 32 29 23 27 25 21
Gulf Coast 27 30 25 24 23 20 22
Indiana 18 18 20 20 21 18 17
Kentucky-Tennessee 25 26 18 21 19 16 14
North-South Carolina 43 45 34 35 30 23 23
North Florida 37 35 29 25 22 17 12
South Florida 56 52 46 39 33 35 27
Virginia-West Virginia 30 31 30 29 25 21 19
Western Region 33 31 32 28 28 23 19
Central California 36 34 26 19 21 19 14
Los Angeles 36 34 31 31 29 21 19
Northern California 28 28 33 26 28 22 22
Pacific Northwest 35 28 27 24 26 26 20
Rocky Mountain 33 32 32 27 27 21 18
Southern California 41 39 39 35 34 29 24
Southwest 25 27 37 30 26 17 12
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System data.
Page 21 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II
Percent of Direct Investigative Time Applied
to CID Investigations in Fiscal Years 1990
Through 1996
Table II.3: Percent of Total DIT Applied to Other Fraud Investigations by Location in Fiscal Years 1990 Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Nationwide 9 13 20 20 17 17 16
Midstates Region 11 15 21 19 18 19 17
Midwest 11 11 16 13 11 15 10
Arkansas-Oklahoma 20 30 36 29 28 22 25
Houston 9 13 17 14 12 12 10
Illinois 6 8 16 18 18 17 14
Kansas-Missouri 10 10 19 22 19 22 15
North Central 7 16 17 20 15 15 13
North Texas 18 25 27 25 27 28 24
South Texas 9 10 28 15 18 19 20
Northeast Region 8 11 16 18 15 14 13
Brooklyn 13 12 15 19 12 12 13
Connecticut-Rhode Island 5 12 16 19 15 16 14
Manhattan 6 9 10 13 11 10 9
Michigan 10 13 14 15 14 11 12
New England 6 12 22 25 23 24 20
New Jersey 8 9 13 18 10 11 13
Ohio 10 16 23 20 20 15 11
Pennsylvania 7 9 18 19 17 16 10
Upstate New York 6 10 13 12 10 19 22
Southeast Region 9 13 21 20 16 17 18
Delaware-Maryland 6 9 19 16 14 16 13
Georgia 8 15 22 17 16 18 18
Gulf Coast 6 13 15 16 9 15 16
Indiana 8 15 17 16 13 10 12
Kentucky-Tennessee 14 20 35 29 20 23 26
North-South Carolina 16 18 24 24 18 21 19
North Florida 14 17 26 31 27 30 31
South Florida 4 7 16 15 12 11 15
Virginia-West Virginia 7 12 15 18 13 13 15
Western Region 8 15 24 25 19 19 19
Central California 7 6 18 27 19 23 27
Los Angeles 2 12 22 17 9 14 11
(continued)
Page 22 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix II
Percent of Direct Investigative Time Applied
to CID Investigations in Fiscal Years 1990
Through 1996
Percent of DIT by fiscal years
Location 1990 1991 1992 1993 1994 1995 1996
Northern California 8 17 28 25 24 22 18
Pacific Northwest 12 18 27 27 21 22 20
Rocky Mountain 10 18 32 33 24 20 20
Southern California 3 8 16 25 20 15 15
Southwest 15 20 22 19 18 20 23
Note: Percentages have been rounded to the nearest whole percent.
Source: IRS Criminal Investigation Management Information System data.
Page 23 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix III
The Number and Results of CID
Investigations in Fiscal Years 1990 Through
1996
This appendix presents information on the number of CID investigations
that were initiated, the number of investigations in which CID
recommended prosecution, and the number of sentences resulting from
prosecutions from fiscal year 1990 through fiscal year 1996. According to
CID officials, completing an investigation and subsequently prosecuting and
sentencing the subject of the investigation may take a year or more. As a
result, the number of prosecution recommendations and sentences shown
in a particular fiscal year in tables III.2 and III.3 may not have resulted
from the investigations initiated in the corresponding fiscal year in table
III.1.
Table III.1: Number of CID Investigations Initiated Nationwide in Fiscal Years 1990 Through 1996
Number of investigations initiated by fiscal year
Type of investigation 1990 1991 1992 1993 1994 1995 1996
Fraud
Tax gap 2,895 2,530 3,098 2,927 2,602 2,506 2,857
Other 781 822 1,345 1,396 1,103 1,201 1,144
Narcotics 1,603 1,866 2,095 1,825 1,641 1,293 1,333
Total investigations 5,279 5,218 6,538 6,148 5,346 5,000 5,334
Source: IRS Criminal Investigation Management Information System data.
Table III.2: Number of CID Investigations Referred to the U.S. Attorney for Prosecution Nationwide in Fiscal Years 1990
Through 1996
Number of investigations referred by fiscal year
Type of investigation 1990 1991 1992 1993 1994 1995 1996
Fraud
Tax gap 1,574 1,561 1,642 1,805 1,535 1,579 1,708
Other 430 605 937 1,009 889 891 865
Narcotics 1,226 1,511 1,673 1,453 1,321 1,145 1,032
Total referrals for prosecution 3,230 3,677 4,252 4,267 3,745 3,615 3,605
Source: IRS Criminal Investigation Management Information System data.
Page 24 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix III
The Number and Results of CID
Investigations in Fiscal Years 1990 Through
1996
Table III.3: Number of Sentences Nationwide Resulting From CID Investigations in Fiscal Years 1990 Through 1996
Number of sentences by fiscal year
Type of investigation 1990 1991 1992 1993 1994 1995 1996
Fraud
Tax gap 1,310 1,344 1,203 1,225 1,194 1,104 1,223
Other 333 402 459 630 805 736 691
Narcotics 766 1,039 973 1,197 1,236 961 863
Total sentences 2,409 2,785 2,635 3,052 3,235 2,801 2,777
Source: IRS Criminal Investigation Management Information System data.
Page 25 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix IV
Sources of Information That Resulted in CID
Investigations in Fiscal Years 1990 Through
1996
CID relies on various sources of information for initiating its investigations,
including information from (1) within IRS, such as from the Examination
Division; (2) other government sources, such as U.S. Attorneys;
(3) currency transaction reports; and (4) the public. Although information
from other government sources may result in various types of CID
investigations, including tax fraud, information from within IRS
predominantly results in tax fraud investigations. Information provided
from within IRS and by other government sources accounted for about
75 percent of the total CID investigations initiated each year for fiscal years
1990 through 1996. As shown in figure IV.1, investigations based on
information provided by other government sources increased from about
45 percent in fiscal year 1990 to about 51 percent in fiscal year 1996.
Investigations based on information provided from within IRS fluctuated
from about 32 percent in fiscal year 1990 to about 29 percent in fiscal year
1996.
Figure IV.1: Percent of Investigations
Initiated Nationwide by Selected
Sources—Fiscal Years 1990 Through Percent
1996 100
80
60
40
20
1990 1991 1992 1993 1994 1995 1996
Fiscal year
IRS referrals
Government non-IRS referrals
Source: GAO analysis of IRS data.
Page 26 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix IV
Sources of Information That Resulted in CID
Investigations in Fiscal Years 1990 Through
1996
In 1991, a study group convened to examine CID’s workload and to
recommend changes to better balance, direct, and strengthen its future
investigative activities recommended that IRS reemphasize its internal
fraud referral program. In an effort to increase the quality of internal fraud
referrals from other IRS groups to CID that may lead to tax fraud
investigations, IRS established formal fraud referral procedures effective
for fiscal year 1996. This included establishing the position of fraud
coordinator in each district office to act as a focal point for fraud referrals.
According to CID officials, the objective of these procedures is to increase
coordination between CID and other IRS functions, particularly the
Examination Division, in an effort to ensure that only cases involving
potential criminal fraud, rather than civil fraud, are referred to CID. CID
officials further stated that it is too soon to determine the overall success
of the new procedures.
Page 27 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix V
Comments From the Internal Revenue
Service
Page 28 GAO/GGD-98-16 IRS’ Criminal Investigation Division
Appendix VI
Major Contributors to This Report
Charlie Daniel, Assistant Director
General Government Mark Gillen, Assistant Director
Division, Washington, Robert McKay, Evaluator-in-Charge
D.C. James O’Donnell, Evaluator
Charles W. Woodward, III, Senior Evaluator
A. Carl Harris, Assistant Director
Atlanta Field Office Clarence Tull, Senior Evaluator
Sally P. Gilley, Evaluator
(268768) Page 29 GAO/GGD-98-16 IRS’ Criminal Investigation Division
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Address Correction Requested
Tax Administration: IRS' Efforts to Place More Emphasis on Criminal Tax Investigations
Published by the Government Accountability Office on 1997-11-06.
Below is a raw (and likely hideous) rendition of the original report. (PDF)