Mission Creep from Within at the IRS: Why Criminal Investigation Special Agents Will Not Shrink the Tax Gap

Robert A. Warren, Timothy J. Fogarty, Philip A. Cola


Tax evasion on legal source income costs the U.S. Treasury an estimated $1 trillion annually.  The tax gap is the difference between what is owed and what is collected. The Internal Revenue Service (IRS)’s Criminal Investigation Division (CI) is the sole law enforcement agency responsible for combating tax evasion and IRS managers prefer that CI criminal investigators (special agents) pursue such cases. However, evidence suggests that only about a quarter of the cases investigated by special agents are tax gap cases, while the bulk are more exotic cases involving narcotics-related money laundering, Ponzi schemes, and identity theft. The authors surveyed 348 current and former special agents about their case preferences in order to determine the causes of this discrepancy, and then compared this data to statistical data obtained from the United States Government (USG) and prior qualitative research. This paper suggests several possible causes of the difference between the CI’s stated mission and its results. The closure of the tax gap is critical to the solvency of the USG and this is, to the authors’ knowledge, the first academic paper to address the problem of non-tax gap case selection by special agents and related consequences.

Keywords: Tax Gap, Internal Revenue Service, Criminal Investigation, Special Agent.

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