Memo to IRS-CI: Don't Forget to Tout Your Legal-Source Income Casework!

‘Twas two days before Christmas and all through the house, not a lawyer was blogging. Except for Joel Crouch.

I’m writing today, in part, to give lift to a post that my partner put out just before the holiday. Mr. Crouch aptly (and with a dose of dad-joke humor that I clearly appreciate) summarizes IRS-Criminal Investigation’s recent publication of its "top ten cases of 2025."

But I’m also writing to point out a bit of a peculiarity with that list: Of the ten cases highlighted in IRS-CI’s press release, not a single one concerns “legal source” income. We have a bribery case; and an embezzlement case; and two other theft cases; and a consumer fraud case; and an identity theft case; and a programs fraud case; and a cryptocurrency mixing case—and even a Guamanian “illicit helicopter business” case (!). There is a tax preparer who apparently ran a refund mill on the list. But not a single case of tax evasion by a defendant who ran a legitimate business and committed no non-tax crimes. What gives, IRS-CI?

We know, as practitioners, that IRS continues to criminally investigate legal-source income cases. In fact, even in an era of austere law enforcement budgets that is reportedly seeing a smaller number of "complex" cases being brought, and where IRS’s case selection is reportedly more and more driven by compliance analytics and by banks’ suspicious activity reporting, it’s a safe bet that IRS-CI is still more likely to number up a contractor with a cash payroll than a Kazakh crypto-mixer.

We also know that IRS is understandably interested in improving taxpayer compliance—hence its recent proposal of a revised voluntary disclosure practice (VDP). And we know that it makes sense, from a compliance improvement perspective, to tout legal-source casework. After all, if you want regular taxpayers—the kind who aren’t running “illicit helicopter businesses” or other inherently unlawful operations—to follow the tax laws in good faith, then why not make it clear that they too might face criminal penalties for flagrant abuses of the system?

I get that CI is genuinely proud about its work in illegal-source cases, and about how tax enforcement work can truly be instrumental in taking down very bad actors. They should be proud! Brought in tandem with a substantive criminal charge, a looming tax count can leave a perpetrator with nowhere to go. Oh, you thought this revenue was legit; then why not report it on your return? It’s an effective one-two punch for the government—or a pincer maneuver, if you prefer the military metaphor. Not for nothing is IRS-CI often involved in criminal cases with a non-tax element. And it’s true, IRS Special Agents can follow the money like no one else in government.

Yet, given the broader interest in deterrence and tax compliance, it still seems peculiar that IRS-CI is so seemingly bashful in highlighting its legal-source cases.

I don’t know the reason for this, but it’s a good rule of thumb that whenever a government agency acts in a way that doesn’t quite make sense from a policy perspective, politics is afoot. And I do know that there are political operatives flitting in and around tax circles in Washington—communications and messaging types, from both parties—who seem to cling to this view that tax enforcement is a “loser” of an issue politically. The idea behind this, I guess, is that if the IRS touts legal-source tax enforcement, then people out there beyond the Beltway (including blue-collar demographics that both parties court) will get their backs up and hold it against the government.

I’m a little skeptical about that bit of conventional wisdom. To be sure, I understand that there are very online circles where concerns about a “supercharged IRS” predominate. And I wouldn’t doubt that many politicians and staffers and donors frequent these circles. (And, I should add, there clearly are times when the IRS’s conduct merits concern and criticism.) So, maybe there is an “inside baseball” advantage to focusing the messaging on illegal-source cases. Maybe the focus on the baddest-of-the-bad-guys is the surest fire way to salvage tax enforcement appropriations and to keep the administration supportive of the IRS’s mission. Maybe.

But there is a countervailing point, a perspective that I can’t help but take away from years presenting criminal tax cases to grand juries and trial juries throughout the country as a government attorney: When the government has an airtight legal-source tax case—where there is solid evidence coming in of concealment and willfulness and tax due and owing—jurors are very often locked in. And in a case like that, those blue-collar types that the politicos are so concerned about, they tend to be the ones nodding their heads like they’re in church during the prosecutor’s closing argument. However much they might dislike the IRS, those folks seem to have no patience whatsoever for neighbors who underreport hundreds of thousands of dollars of taxable income. I have a hard time envisioning them reacting negatively to the mention of a righteous legal-source case or two on a year-end IRS top-ten list.

Anyway. It bears reiterating that, whether IRS touts them or not, legal-source criminal tax cases will continue to be made. There simply are not enough embezzlers or crypto-mixers or gonzo helicopter tour companies on the government’s radar screen to fill up IRS-CI’s docket. If you run an above-board business but have tax compliance concerns, read up on the IRS’s revised Voluntary Disclosure Practice. If you have questions, or if you want to learn more about your options, consult counsel.

For questions on this blog, contact jrillotta@meadowscollier.com.