The IRS and the April Surprise

Table 1. Number of Criminal Prosecutions
from IRS Investigations
Month 10-Year Average Calendar 2014
Jan 111 141
Feb 104 132
Mar 157 163
Apr 201 233
May 113 158
Jun 124 142
Jul 103 92
Aug 109 106
Sep 138 145
Oct 121 148
Nov 95 98
Dec 109 93

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.

IRS Criminal Prosecutions by Month
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.

IRS Criminal Prosecutions over the Past 20 Years
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.

Table 2. Top Charges Filed
Lead Charge Count Rank
Current 1 yr
ago
5 yrs
ago
10 yrs
ago
20 yrs
ago
26 USC 7206 - Fraud and False statements 226 1 1 1 1 2
18 USC 286 - Conspiracy to defraud the Government claims 163 2 6 5 7 9
26 USC 7201 - Attempt to evade or defeat tax 160 3 2 2 2 1
18 USC 287 - False, fictitious or fraudulent claims 98 4 5 10 4 5
18 USC 371 - Conspiracy to commit offense or to defraud US 82 5 4 3 5 4
18 USC 641 - Public money, property or records 79 6 3 22 13 18
18 USC 1028 - Fraud and related activity - id documents 53 7 9 21 11 61
18 USC 1956 - Laundering of monetary instruments 53 7 7 3 3 3
31 USC 5324 - Structuring transactions to evade reporting requir 47 9 10 11 10 8
18 USC 1343 - Fraud by wire, radio, or television 44 10 11 9 15 20

  • "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 1st a year ago, while it was the 1st most frequently invoked five years ago. It was ranked 1st ten years ago and 2nd twenty years ago.

  • Ranked 2nd 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 6th a year ago, while it was the 5th most frequently invoked five years ago. It was ranked 7th ten years ago and 9th twenty years ago.

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

Table 3. Top Ten Districts (per one Million People)
Judicial
District
Per
Capita
Count
FY 2014
Rank
Current 1 yr
ago
5 yrs
ago
10 yrs
ago
20 yrs
ago
Ala, M 27 31 1 2 62 85 83
Ala, S 26 22 2 13 82 18 28
Miss, S 19 36 3 78 15 2 52
Fla, S 15 102 4 7 10 7 3
Nevada 13 36 5 10 6 9 7
D. C. 13 8 6 3 14 5 63
Wyoming 12 7 7 81 74 72 75
R. I. 11 12 8 16 58 73 88
Oregon 9 36 9 69 18 14 36
Penn, W 9 33 10 36 9 58 1

  • 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 2nd a year ago. The district's position ten years ago was 85th and 83rd twenty years ago.

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

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

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.