Mission Creep Within the IRS: Why Criminal Investigation Special Agents Will Not Shrink the Tax Gap | Weatherhead School at Case Western Reserve University

Mission Creep Within the IRS: Why Criminal Investigation Special Agents Will Not Shrink the Tax Gap

Mission Creep Within the IRS: Why Criminal Investigation Special Agents Will Not Shrink the Tax Gap

Authors

Published

Journal of Tax Administration, vol. 7.2, 2022

Abstract

Tax evasion on legal source income costs the US Treasury an estimated $1 trillion annually. The “Tax Gap” is the difference between what is owed and what is collected. The Criminal Investigation Division of the Internal Revenue Service (CI) is the sole law enforcement agency responsible for combatting tax evasion, and IRS managers prefer that CI criminal investigators (special agents) pursue such cases. However, evidence suggests that only about a quarter of the cases investigated by special agents are Tax Gap cases, while the bulk of the cases are more exotic cases involving narcotics-related money laundering, Ponzi schemes, and identity theft. The authors surveyed 348 current and former special agents about their case preferences to determine the causes for this discrepancy, and then compared the data to statistical data obtained from the United States Government (USG) and prior qualitative research. This paper suggests several possible causes of the difference between the CI’s stated mission and their results. Closing the Tax Gap is critical to the solvency of the USG, and this is the first academic paper to address the problem of non-Tax Gap case selection by special agents and related consequences.