The IRS and the April Surprise

Analysis of the latest government case-by-case data obtained by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University shows that during January 2015 a total of 131 taxpayers were prosecuted as a result of IRS investigations.

The data tracking trends also show that many IRS prosecutions are timed to coincide with tax filing season, presumably to help remind taxpayers of their legal obligations to avoid underreporting taxes owed on the returns they file.

Year after year, April consistently has the greatest number of criminal prosecutions as a result of IRS investigations — two-thirds or more higher than those seen in January. Figure 1 and Table 1 show both the 10-year average as well as prosecution figures from January through December 2014.

Figure 1. IRS Criminal Prosecutions by Month

The odds of criminal prosecution have also varied over time. The long term trend in prosecutions for these matters going back to FY 1994 is shown more clearly in Figure 2. The vertical bars in Figure 2 represent the number of prosecutions of this type recorded each fiscal year. Each presidential administration is distinguished by the color of the bars. While the numbers were highest during the early Clinton administration, the trend was downward and was substantially lower during the Bush administration. After President Obama assumed office, they began rising again. They climbed to 2,010 prosecutions during FY 2013 before falling by 16 percent to 1,689 during FY 2014.

Figure 2. IRS Criminal Prosecutions Over The Past 20 Years

Top Ranked Lead Charges

Table 2 shows the top lead charges recorded in the prosecutions of matters filed in U.S. District Court during FY 2014.

• "Fraud and False statements" (Title 26 U.S.C Section 7206) was the most frequent recorded lead charge. Title 26 U.S.C Section 7206 was ranked 1^st a year ago, while it was the 1^st most frequently invoked five years ago. It was ranked 1^st ten years ago and 2^nd twenty years ago.

• Ranked 2^nd in frequency was the lead charge "Conspiracy to defraud the Government claims" under Title 18 U.S.C Section 286. Title 18 U.S.C Section 286 was ranked 6^th a year ago, while it was the 5^th most frequently invoked five years ago. It was ranked 7^th ten years ago and 9^th twenty years ago.

• Ranked 3^rd was "Attempt to evade or defeat tax" under Title 26 U.S.C Section 7201. Title 26 U.S.C Section 7201 was ranked 2^nd a year ago, while it was the 2^nd most frequently invoked five years ago. It was ranked 2^nd ten years ago and 1^st twenty years ago.

Among these top ten lead charges, the one showing the greatest increase in prosecutions — up 37.0 percent — compared to one year ago was Title 18 U.S.C Section 286 that involves "Conspiracy to defraud the Government claims ". This was the same statute that had the largest increase — 888 percent — when compared with five years ago.

Again among the top ten lead charges, the one showing the sharpest decline in prosecutions compared to one year ago — down 48.4 percent — was "Public money, property or records " (Title 18 U.S.C Section 641 ). This was the same statute that had the largest decrease — 28.4 percent — when compared with five years ago.

Top Ranked Judicial Districts

During FY 2013 the Justice Department said the government obtained 6.4 prosecutions for every one million people in the United States, whereas there were 5.4 prosecutions per one million people during FY 2014. Understandably, there is great variation in the per capita number of prosecutions in each of the nation's ninety-four federal judicial districts. Table 1 identifies the districts with the greatest number of IRS prosecutions per capita in FY 2014.

• The Middle District of Alabama (Montgomery) — with 27.00 prosecutions as compared with 5.4 prosecutions per one million people in the United States — was the most active through September 2014. The Middle District of Alabama (Montgomery) was ranked 2^nd a year ago. The district's position ten years ago was 85^th and 83^rd twenty years ago.

• The Southern District of Alabama (Mobile) ranked 2^nd.

• The Southern District of Mississippi (Jackson) now ranks 3^rd.

The federal judicial district which showed the greatest growth in the rate of prosecutions compared to one year ago — 799 percent — was the Southern District of Mississippi (Jackson). Compared to five years ago, the district with the largest growth — 2079 percent — was the Southern District of Alabama (Mobile).

In the last year, the judicial District Court recording the largest drop in the rate of prosecutions — 52.9 percent — was Washington, D.C.