It is the only federal law enforcement agency authorized to investigate federal criminal tax violations and prosecute related financial crimes, such as money laundering, foreign exchange violations, and terrorist financing. These efforts are increasingly important given the emerging threats in the global financial landscape. The authority to enforce federal laws derives from a variety of statutes. These laws can assign the application of a particular law to a particular department, such as the Department of the Treasury, to an agency of a department such as the Internal Revenue Service (IRS), or simply that the application falls to the legal branch of government, the Department of Justice (DOJ).
The IRS is organized to meet the responsibilities of the Secretary of the Treasury under section 7801 of the Internal Revenue Code. The secretary has full authority to administer and enforce internal tax laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant. Taxpayers deserve to know that all taxpayers are responsible under the same tax laws and pay their fair share.
The Commissioner has the authority to refer all criminal matters within the jurisdiction of the IRS to the Department of Justice for investigation by grand jury, criminal prosecution, or other criminal enforcement action that requires a court order or approval from the Department of Justice. The IRS Criminal Investigation Department (CI) has nearly 3,500 employees worldwide, of whom approximately 2,500 are special agents whose investigative jurisdiction includes tax, money laundering, and bank secrecy laws. The IRS is developing a strategy to improve the services it provides to facilitate voluntary compliance for taxpayers and to ensure that the taxes due are paid. The IRS took a more strategic approach to identifying and selecting budget program priorities, among other measures.
However, the ability of the IRS to implement new initiatives, carry out ongoing compliance and taxpayer service programs, and combat IDT refund fraud remains a challenge. The IRS will work with taxpayers to help them meet their obligations and overcome any difficulties in filing, paying and declaring their taxes that may result from critical life or business events throughout the year. Information is also routinely received from the public, as well as from ongoing investigations being conducted by other law enforcement agencies or from United States prosecutors' offices across the country. The power of a special agent to make an arrest without a court order as a private citizen, when valid under state law, is not invalidated because the crime is outside the scope of application of internal tax laws.
Fraudulent plans related to aid payments and tax credits related to COVID-19 may affect the IRS's ability to address fraud in IDT refunds. In addition, the IRS uses the RRP to automatically detect and prevent IDT fraud and other refunds on individual returns. While other federal agencies also have jurisdiction to investigate money laundering and some violations of the bank secrecy law, the IRS is the only federal agency that can investigate possible criminal violations of the Internal Revenue Code. The IRS implemented some corrective measures to improve compliance and reduce the tax gap, including using the RRP to analyze individual returns requesting refunds, but there is still much work to be done to meet this criterion.
Without long-term voluntary and quantitative compliance objectives and without related performance measures, it will be more difficult for the IRS to determine the success of its strategies. This high-risk area, added to the list in 1990, includes two pressing challenges for the IRS to address the tax gap and combat IDT refund fraud. .