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Tax Prosecutors Still ‘Open for Business’ During Pandemic

Posted on July 15, 2020

Tax scofflaws shouldn’t underestimate the Justice Department Tax Division during the pandemic, as its attorneys face few limitations other than travel concerns and court closures, according to Principal Deputy Assistant Attorney General Richard Zuckerman.

“We are open for business,” Zuckerman said July 14 on an American Bar Association Section of Taxation webcast. “The pandemic has slowed the wheels when it comes to going to court, but not on organizing cases, vetting cases, and getting them ready to be prosecuted or enforced civilly.”

The Tax Division saw an influx of referrals from the IRS Criminal Investigation division at the beginning of March, when states first started implementing shutdowns in response to the coronavirus, and it has seen a steady level of cases since then, Zuckerman said. He attributed that to the diligence of CI agents.

“A lot of agents have to put together [prosecution] memos; they have to get their paperwork in order. And if they were unable to go out and do the normal agent thing, they were apparently quite diligent in tying up the cases that they had worked and shifting them over to us,” Zuckerman said.

The Tax Division’s lawyers have also had time during court closures to review and comment on referrals, Zuckerman said, noting that he’s encouraging more discussion of whether a particular referral from the IRS should be a civil or a criminal case. Those discussions often involve asking the IRS why a case was sent over for an injunction rather than prosecution, or vice versa, he said.

The goal isn’t to cause a civil referral to become criminal once at the Tax Division, but to provide IRS examiners with some guidance for future decisions on whether to make fraud referrals that could lead to prosecution recommendations, according to Zuckerman.

Taking Precautions

Zuckerman said he remains cautious about authorizing travel and about setting up in-person meetings with defense attorneys. Decisions about the latter have been left to the relevant civil and criminal chiefs, he said, adding, “I'm not going to force in-person conferences under the circumstances regardless of spacing or the wearing of masks.”

An attorney seeking a meeting with a Tax Division attorney should make the request to the relevant chief and something will be worked out, Zuckerman said, although he added that the meeting might take place over Zoom or via conference call.

Asked about geographic uniformity when different regions are facing different levels of infection, Zuckerman said the Tax Division is making the same efforts it did before the pandemic to ensure even application of the law throughout the country.

Zuckerman also noted that courts have varied their responses across the country, with a few judges demanding in-person meetings and hearings.

CI’s Priorities

CI Chief Don Fort, speaking on the same webcast, said that while his division hasn’t been able to hire the special agent classes he’d hoped because the law enforcement training facility has been closed during the pandemic, it has been able to add professional staff, support staff, data scientists, and program analysts in recent months. CI also has been able to explore outside contracting vehicles for both IT and specialists, he said.

CI’s data analytics specialist group, the nationally coordinated investigations unit (NCIU), dropped some of its existing workload to work on COVID-19-related fraud several months ago, Fort said. However, he also said that CI has had to shift only about 1 percent of its investigative time to pandemic fraud during the first three months of the pandemic. That has taken little away from CI’s traditional tax fraud focus because of substantial reductions in identity theft work, he said.

Fort said he has two further goals for the NCIU following its early successes, particularly on employment tax criminal cases.

First, Fort said he wants to see the concept expanded for use by other parts of the IRS. Second, he said there are more areas, including examinations of high-wealth individuals, to which CI can apply the NCIU.

Fort announced his retirement from the IRS the week of July 6. His last day as CI chief will be September 30.

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