The number of referrals by the Internal Revenue Service to the Justice Department for criminal prosecution hit a more than 30-year low this past January, as the number of IRS criminal investigators continues to decline.

Syracuse University’s Transaction Record Access Clearinghouse, or TRAC, reported Monday the Justice Department received 135 new referrals for prosecution from the IRS in January, a substantial decline from its peak four years ago. The IRS referred only 1,824 taxpayers for criminal prosecution in the most recent 12-month period, compared with the same 12-month period four years ago when it had referred 3,896, or more than twice that number, according to TRAC.

IRS referrals haven’t been this low since the clearinghouse began tracking the information in 1986 during the Reagan administration. “One reason for this decline is that IRS has fewer criminal investigators as a result of congressional cuts to its annual appropriations,” said the report. “The types of crimes that were the focus of IRS attention also showed change.”

Since 2010, the number of IRS criminal investigators has declined 22 percent, from 2,749 to 2,153. However, the drop-off of IRS special agents available to investigate criminal violations of the tax laws still wasn’t as dramatic as the plunge in IRS criminal referrals. Convictions for money laundering offenses declined the most between fiscal years 2014 and 2017, compared with convictions for tax fraud. During fiscal 2017, 51 percent of all convictions resulting from IRS referrals were for tax fraud, and 22 percent were for other types of white collar crime. Only 16 percent were for government regulatory offenses, mainly money laundering. Another 6 percent were for narcotics and drug offenses. There was a rise since 2010 in median prison sentences for offenders from 12 to 15 months.


IRS headquarters in Washington, D.C.
IRS headquarters in Washington, D.C. Andrew Harrer/Bloomberg

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.