Sam Brotman, JD, LLM, MBA December 12, 2020 27 min read

8 Frequently Asked Questions about the Criminal Tax Process

What Should I do if I am Visited by Special Agents? 

Have you ever heard that phrase, “You have the right to remain silent?” Exercise your right to remain silent. Do not talk to the special agent. Get the special agent's card. They travel in pairs, so you will often be visited by two of them. 

Get the special agent's card and say, "I would like to consult with my attorney and I will call you back."

Even if you are just a witness, it is important that you do not expose yourself to liability. By no means should you consent to an on-the-spot interview or start answering questions. 

The special agent will try and push you to do that because their job is to get as much information out of you as possible. It is very important that you take a pause and realize that you are talking to a criminal investigative agent — the people who carry badges and guns  — and step away from the situation.

Hire a third party; have somebody intercede on your behalf, or at least take a pause and figure out what this is about. Once you do that, then you can go into your special agent interview prepared.

You can go in willing to answer the questions that they are asking, or you can decide which questions you are not going to answer because you may be potentially at risk and you are going to want to gauge the interview. That is really really important.

You want to make sure that you are approaching the situation with the degree of caution that it deserves. Be very careful around special agents. These are the people who build cases to put people in jail. Take a pause, review the situation, and then only act when you are certain that you know what the outcome is going to be.

What Should I do if I Suspect That My Tax Preparer is Being Investigated by the IRS?

If you think that somebody might be a subject or a target of an IRS criminal investigation you are going to want to think about cutting off contact with them sooner rather than later. If somebody is under the microscope of IRS-CI, you do not want to be anywhere near that person; you do not want to touch them with a 10-foot pole.

A lot of tax preparers get investigated by CI because they present a huge problem for the IRS. Think about it this way. If you are an individual and you cheat on your taxes, the loss is really mitigated to your individual return. I am not saying that is a good thing but from the government's perspective, when the government looks at tax cases, one of the factors they consider is tax loss.

The tax loss with an individual may not be as great, but when you are dealing with a preparer, the tax loss associated with tax preparer cases can be greatly amplified across all the preparer's clients. If you are one of those clients, there could be errors on your return whether you know about them or not. 

You are going to want to mitigate your own risk. Most often in tax preparer cases, you will face some sort of a civil audit and so it is important to be prepared going into that.

You are not just dealing with civil liability, penalties and interests at this point; you are dealing with potential criminal liability and if you do not think that your tax preparer is going to throw you under the bus in order to save themself, then you are kidding yourself. 

The best thing that you can do is consult with a tax attorney. Depending on the circumstances, you may not need to get tax counsel involved right away, you may just need a little bit of a consultation and wait to see and assess the situation. 

But, it is important that you understand what your risks are, what your rights are and have a clear path going forward on how you should handle things.

If I am Contacted by an IRS Special Agent or by the Criminal Investigation Division About Somebody Else, What do I do? 

The biggest mistake that I see in witness investigations is when the witness assumes that because the special agent is asking about somebody else that witness is not at risk. There is a reason why that special agent is talking to you, and often they will handle their interviews in pairs.

Even though they may say that they are seeking information about somebody else, it does not mean that you are not under the microscope for your actions as well. I never recommend that people talk to special investigation agents in the initial interview.

The best thing to do is get the special agent's card. Take a breather, prepare for that interview and then come back so you can give the agent your full cooperation. Know very clearly what questions you are going to answer and what you are not going to answer. 

When you are dealing with these people, you need to exercise your right to remain silent. You need not give them information that could lead to problems for you down the road.

It is important as a witness to understand that even if you say, "I have not done anything wrong. I have nothing to worry about,” do not underestimate the agents. The agents do not have to be truthful with you. They do not have to tell you what they are really after. They do not have to give you anything. 

You need to be very careful in the statements that you make to them. You need to be very careful in how you approach them and ultimately, the goal is to remove yourself from any element of risk whatsoever.

Should I Hire a Criminal Defense Attorney or Should I Hire a Criminal Tax Attorney? 

It depends. These are different people who do different things.

My experience with criminal defense attorneys is that most of them have a good handle on state cases because they see a lot of them. Even among those who handle federal cases, a lot of them do not practice tax cases very often.

They may have experience trying a criminal tax case because oftentimes, charges from the tax world get wrapped up into things like money laundering and bank fraud and a whole host of other crimes, but they are not a tax specialist.

A tax specialist is very valuable during a criminal tax investigation because we understand the playing field. We know how the civil audit side is supposed to respond. We know how civil collections works and we know what constitutes willfulness in a tax case. We know what positions the client takes and we understand the return. A criminal tax attorney understands these issues and can work to mitigate.

The downside with a lot of criminal tax attorneys is trial experience. Criminal tax attorneys live in the tax world. We are not necessarily experts in criminal trial procedure. 

If your case goes to trial, you probably want somebody who is an expert in criminal trial procedure. Most criminal defense attorneys, because they spend the majority of their time in the courtroom, are experts at criminal defense and criminal defense procedure.

I usually recommend a combination of both. If you have a team of people who have criminal tax experience and potentially criminal trial experience, then you have a very well-rounded defense team. A lot of our most successful cases come from working in tandem with criminal defense counsel. 

If you are in the middle of a criminal investigation or even if you have reasons to suspect you might soon be, you want to have the best team possible because the consequences are so severe. I think it is a good idea to have a blend of both.

What I recommend is, no matter whom you hire, whether it is our firm or somebody else, go interview them. Go talk to them about what their level of experience is. Go talk to them about ways they think they can help in the investigation and get honest feedback.

You have the right to choose who your counsel is. Make an informed decision. Talk to criminal defense counsel; talk to criminal tax counsel. Weigh the pros and cons and make a decision from there.

Is it Possible to Just Pay Your Taxes and Make a Criminal Investigation Go Away? 

No. When a case reaches the level where IRS-CID is involved, it has evolved beyond the point of paying the taxes because what they are doing is looking at your conduct, and even the payment of tax does not eliminate your previous conduct. It is an admirable thing to do, but at the same time, it is not going to make your criminal charges go away completely.

Now, the good news is that payment of tax can mitigate the tax loss. It can let some of the air out of the tires with what the IRS is charging you with because, look at it from a practical perspective, the U.S. attorney is saying, "We are going to charge you with these crimes. You did all this stuff, and you defrauded the government," and blah, blah, blah. 

If you pay the tax and the interest and the penalties, you can mitigate some of the harm done. There is still harm but it is a lot less of an appealing case for a prosecutor if they are not able to stand in front of the judge and argue a tax loss. 

The answer is still no. It does not make it go away, but yes, it can help strategically within an investigation.

What I recommend is to not pay the taxes immediately. Wait, develop a strategy and offer that as a carrot potentially in the future to help mitigate your criminal exposure. It is better to play your cards at the right time than to hurry up and just do things without any sort of strategy in place. Sit down with a criminal tax attorney, build a plan and then execute that plan over the course of the investigation.

Why Do I Need Legal Counsel?

A criminal investigation is a problem that you cannot solve on your own and that you cannot ignore and hope it goes away. The mistake that a lot of people make is they waste time. The sooner legal counsel can get involved and look at the facts, the sooner we can control what happens in the future, and the better off you are going to be. 

You cannot change what happened in the past, there is nothing you can do. The past is the past, but you can certainly change the future. You can alter what the events are in the future by taking certain actions now.

The best thing that you can do in a criminal investigation is mitigate your liability. Take steps to undermine the government's case before it reaches its conclusion. Put things in front of the agent that would dissuade against willfulness. 

Put things in front of the agent   that would contradict their facts. Make it as hard for them as possible to hand that case over to the U.S. Attorney.

If you do enough of that from the beginning — especially when the agent is not in the conclusion stage of their investigation — there is a good chance you can sabotage their case and derail it, and that they ultimately, will not recommend it for prosecution.

You are not really going to be able to do that by yourself. When dealing with people who are not covered under attorney-client privilege, those people can eventually be used to testify against you. Having the protection of an attorney in a criminal matter is critically, critically important.

How Can Brotman Law Help Me in My Criminal Tax Case?

Should I retain Brotman Law to represent me in my criminal tax matter? When you go through a criminal tax case, there are a lot of different phases. Criminal tax cases can be multi-year investigations. They are a huge commitment; they are a huge threat, and because of the success of the U.S. Attorney's Office with its 90 percent conviction rate, you have to be on guard.

From our end, our firm really has a lot of experience in dealing with these types of cases. We know tax, we know tax on the civil side and we know it in all phases of the criminal side. When we reach a mutual decision with the client that it is in our best interest to move forward on a criminal case, there is a lot of strategy that goes in that process.

There is a strategy in terms of how we are going to handle this from a legal perspective; there is a strategy involved in terms of how we are going to handle this from a resource perspective, and it is a fight. Make no mistake about it. 

These are the biggest stakes that we face because there is  a real possibility that at the end of the day our client is going to end up in jail, and we take that very seriously. We are going to do everything that we can on our end to mitigate any consequence.

We are constantly looking for avenues to turn the case civil, to make it go away and to reduce things down to the lowest level possible. We are constantly derailing the investigative process; we are constantly working with the U.S. attorneys and the agents to take the air out of their case, and we are fighting as hard as we can on behalf of our clients.

I think it is our tenacity that really separates us as a firm because we have the experience in going through these cases. We can empathize with our clients, and we fight on their behalf because it is personal to us. That is what I think really separates us.

If you are reading this and you want to know more, I invite you to come sit down and talk with us. Come meet me, come meet our senior team, come lay out the facts of your case and let us figure out if it is a good fit. If it is not a good fit, I promise you we are not going to take the case. 

How Much Will It Cost for Brotman Law to Take My Criminal Tax Case?

It is a complex question with a complex answer, but let me get straight to the point. Criminal investigations are usually matters that take a long time to resolve. The government is taking their time in building an investigation and there usually is a lot of complicated circumstances around the facts. There may be multiple witnesses and there may be multiple years where conduct is alleged.

We may have unfiled tax returns, we may have fraudulently filed tax returns, or at the very least, tax returns that are not correct. When looking at cost, you have to consider that the behavior in question has generally occurred over an extended period of time. 

With that said, there is a lot of work that goes into these cases. Some of the work happens at the beginning in order to mitigate the damages. Some of it involves preparing for a special agent interview, preparing for a proffer session with the U.S. Attorney, or preparing for a number of different things that get submitted during the course of these investigations.

Generally speaking, we do not use a lot of paralegal time on our criminal matters. The staff that has lower billing rates largely goes away. Now, we can leverage our lower billing rate staff, to help offset the cost in terms of organizing documents and preparing them for submissions and things like that. But, when it comes to a criminal matter, you want the best and the brightest in the firm handling the matter.

That is usually me, and in some combination, with my senior team. Our billing rates for senior attorneys are anywhere between $350-$525 an hour. I want you to take that into perspective. A lot of it is driven by documents, by the conduct of the agent, and by the facts, and so it is very hard to give an estimate.

With that said, when we take a criminal matter on, we are usually looking at about a $25,000 retainer. That obviously varies. If it is a witness investigation, we are not going to need anywhere near that much of a retainer to get the work done in the case. If it is a larger and more complex criminal matter, we have taken retainers that are $100,000 or more.

When we quote a retainer, we look at the volume of work that is involved and try to distribute that as most efficiently as possible. There are a lot of moving pieces that go into this. A lot of the times what happens with a criminal investigation, particularly on the tax side, is that we will bring in a bookkeeper, and a CPA, under what we call a Covell agreement, which protects them under the envelope of our attorney-client privilege and we use that to offset costs.

There is a lot of care that is taken at my level and among our senior attorneys to really mitigate resources, and to protect things because we want to make sure we are giving the client the best representation possible. We take our job as counsel very seriously. 

 

We do not want to be a financial burden on anybody, but we want to make sure that the work gets done because it is in the client's best interest to do the work and to do it right.

There is an investment in that. It is a significant investment, and that investment usually spans over many, many months, in order to resolve these types of cases. That is the best guidepost I can give you for how much a matter generally costs in the firm from a criminal side of things.

If I know more facts, I can definitely give you a better guideline of where you stand, and then how much your case is going to cost, and help you plan that out to make sure that you are utilizing the resources most effectively. I think that is ultimately best for any criminal tax matter and it is best for you, the client.

Receive the Best of
Brotman Law

Get this topic delivered straight to your inbox.

Book an Action Plan
avatar

Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

COMMENTS

BECOME AN INSIDER

Our best stuff: secrets, tax saving tools, and tax defense strategies from the braintrust at Brotman Law.

  • Expanded benefits during your first consultation with the firm.
  • Priority appointment scheduling and appointment times.
  • Complementary access to our firm’s concierge services.
  • Receive updates and “insider only” tax strategies and tactics.
  • And many more benefits.

Not Sure Where to Start?

Step 1 Start Here

Start Here

These ten big ideas will change the way you think about your taxes and your business.

Start Here

Step 2 Learn About Your Situation

Learn About Your Situation

Find the articles and videos you need to make the right tax decisions in the learning center.

Visit the Learning Center

Step 3 Explore Our Services

Explore Our Services

It is not just about what we do, but who we are, why we do it, and how that benefits you.

View All Services

Step 4 Get Your Game Plan

Get Your Game Plan

Meet with us to outline your strategy. No further obligation, 100% money-back guarantee.

Book an Action Plan