🕵️♀️ Understanding IRS Criminal Investigations and Tax Scams in 2025: What Every Taxpayer and EA Should Know
Every tax season, stories about IRS investigations, tax scams, and “miracle refund” ads flood the internet.
But what really happens behind the scenes? And how can tax professionals and taxpayers protect themselves?
This post breaks down how the IRS Criminal Investigation Division (CI) operates, the most common fraud and scam types, and what every Enrolled Agent (EA) and taxpayer should know to stay compliant and safe in 2025.
1️⃣ The Role of the IRS Criminal Investigation Division (CI)
The IRS Criminal Investigation Division—commonly called IRS CI—is not your average audit department.
CI investigates serious violations of the Internal Revenue Code, including tax fraud, money laundering, bribery, and identity theft.
Their mission is to enforce the law and build public confidence in the U.S. tax system.
CI agents collaborate with federal, state, and international agencies to uncover illegal financial activity and bring those responsible to justice. Their work ensures that law-abiding taxpayers aren’t carrying the financial burden of those who cheat the system.
A New York restaurant owner pays employees off the books and underreports cash sales.
IRS CI compares bank deposits, payroll records, and vendor payments, uncovering unreported income.
The result? A federal tax evasion case that includes back taxes, penalties, and possible jail time.
2️⃣ Common Tax Fraud Cases
Tax fraud remains at the heart of CI’s enforcement mission.
When taxpayers intentionally underreport income, inflate deductions, or fail to file returns altogether, the IRS treats it as a criminal offense—not a simple mistake.
- Deliberately failing to report income
- Claiming personal expenses as business deductions
- Filing false refund or credit claims
- Maintaining two sets of books or manipulating accounting entries
These offenses undermine voluntary compliance—the foundation of the U.S. tax system.
CI agents use forensic accounting techniques to track hidden income, while the U.S. Department of Justice (DOJ) prosecutes cases that involve deliberate deception.
A tax preparer inflated refund amounts by adding fake dependents and education credits.
Both the preparer and the clients faced criminal charges for filing fraudulent returns.
3️⃣ Abusive Tax Schemes and Offshore Evasion
Another major enforcement area is the Abusive Tax Scheme Program.
Promoters and taxpayers create elaborate structures—offshore trusts, shell corporations, and fake partnerships—to hide income and assets. These schemes often involve moving money through multiple entities to disguise ownership and make it appear as though a foreign entity or nominee owns the assets.
In reality, the taxpayer still controls the money. These actions can result in significant civil penalties and criminal prosecution.
The IRS encourages anyone participating in such arrangements to voluntarily disclose their holdings through the IRS Voluntary Disclosure Program.
4️⃣ Refund Fraud and Identity Theft
Refund fraud happens when criminals use stolen personal data to file fake tax returns and claim fraudulent refunds. This type of crime skyrocketed with the rise of online filing.
Typical methods include:
- Using stolen Social Security Numbers (SSNs) to file early refunds
- Sending phishing or “smishing” texts that mimic IRS messages
- Promising inflated refunds through fake preparers or “tax consultants”
The IRS never initiates contact by email, text, or social media to request personal information.
If you receive such a message, report it at IRS Phishing Report Page.
5️⃣ IRS Warnings: The 2025 “Dirty Dozen” Scams
Each year, the IRS releases a list called the Dirty Dozen—the twelve most common scams
that taxpayers should avoid. Here are a few that continue to appear in 2025:
- Third-party Account Setup Scam: Fraudsters offer to “help” create an IRS online account to steal your identity. Only use IRS.gov.
- Fuel Tax Credit Scam: False claims for credits you’re not eligible for can lead to civil and criminal penalties.
- Offer in Compromise (OIC) Mills: Companies that promise to “wipe away tax debt” for huge upfront fees—avoid them. The IRS OIC tool is free.
- Fake Charities: Scammers exploit natural disasters to collect donations and personal data. Always verify using the IRS Tax-Exempt Organization Search (TEOS) tool.
• Set up your IRS account only through IRS.gov
• Verify charities through the IRS TEOS search tool
• If an offer sounds “too good to be true,” it usually is
6️⃣ Ethical Responsibilities for Enrolled Agents
Enrolled Agents (EAs) hold a federal license from the IRS to represent taxpayers.
This comes with strict ethical duties under Circular 230 and the NAEA Code of Ethics.
EAs are not only tax preparers—they’re trusted professionals obligated to act with honesty, integrity, and diligence.
As an EA, you must refuse to prepare or sign any return you know is false, and you must avoid assisting in abusive tax avoidance or evasion schemes.
You’re also required to advise clients of any potential compliance issues and explain the consequences of noncompliance under the Internal Revenue Code.
– Reconfirm any refund amount that seems unusually high.
– Decline clients who request “creative deductions” or fabricated dependents.
– Report unethical preparers or fraudulent activity to the
IRS Office of Professional Responsibility (OPR).
핑백: 2025 Guide to Trusts That Qualify as S Corporation Shareholders
핑백: Client Records Return (§10.28)
핑백: Ethical Duties Under Circular 230 (§10.20–10.23)