A new presidential administration brings new priorities. President Donald Trump is shifting tax enforcement away from the typical small-business owner and more toward dismantling criminal organizations that are related to illegal immigration and border security.
Trump is moving more resources to combat border-related crimes, such as illegal immigration, human trafficking, and narcotics smuggling. The Department of Homeland Security has already asked the IRS’s criminal investigation division to help enforce illegal immigration laws.
IRS-CI has approximately 2,300 sworn law enforcement agents who were trained side by side at the Federal Law Enforcement Training Center with agents who eventually join Homeland Security; the US Secret Service; the US Marshals Service; and the Department of Alcohol, Tobacco, Firearms, and Explosives, to name a few.
To qualify for IRS-CI, these special agents must have an accounting background, and many of them are licensed CPAs. They use their accounting skills to investigate tax crimes such as false tax returns, tax evasion, and unpaid payroll taxes. Their scope of the investigation is usually three to five years, meaning that they analyze thousands of transactions to prove their case.
IRS-CI also investigates non-tax crimes, such as bulk cash smuggling and money laundering. With the Trump administration’s focus on border-related crimes, IRS-CI will be expected to investigate larger criminal organizations such as cartels and human smugglers. This will leave less tax enforcement for legal source crimes, such as your local HVAC owner underreporting sales on a tax return.
With its ability to investigate tax and non-tax crimes, IRS-CI must balance its caseloads. If it doesn’t investigate tax crimes, nobody can—it has sole jurisdiction over such offenses. And because the Department of Justice’s Tax Division must approve any criminal tax charges, expect to see less typical tax cases such as that hairdresser failing to file a timely tax return, and more of Trump’s immigration-focused cases.
Criminal organizations rarely report all their income on their tax returns, which is why IRS-CI will be asked to evaluate potential tax crimes. It is one tool in the arsenal for Trump’s administration to focus on his border enforcement policies. Because most crimes are greed related, IRS-CI can use its tax expertise to bring down larger criminal organizations, such as the infamous 1930s gangster Al Capone.
This shift of resources can tilt the playing field against the honest small business owner, because without a decent level of deterrence, tax crimes will increase. But the changing of priorities is no different for any administration.
After the Sept. 11, 2001, terrorist attacks, many government resources were diverted to find terrorism financing, including IRS-CI. In the last 10 years, criminal tax enforcement has been on cryptocurrency and undisclosed foreign income. Nevertheless, the rubber band for criminal tax compliance can only be stretched so far to stay effective.
IRS-CI will have to balance its expertise in tax crimes that probably will focus on immigration such as employment tax crimes for those cases of workers without legal documentation, while investigating these larger criminal organizations. To meet its mission, IRS-CI will be asked to generate some level of deterrence for the average taxpayer to stay honest with compliance.
The tax gap, which is the estimated difference between what should be paid versus what is paid, was estimated to be $696 billion for the 2022 tax year, according to an October 2024 study. This deficit will increase if the deterrence for the public isn’t there.
Because the DOJ’s Tax Division is the final authority on tax crimes, it will have to lock step with the US Attorney General Pam Bondi’s priorities. At the end of the day, IRS-CI must recommend cases that the DOJ wants.
Honest taxpayers suffer a higher cost of doing business when tax cheats create an unfair advantage. You see it in the construction industry when laborers are paid under the table in cash. This is one area that you can expect IRS-CI to scrutinize, as illegal immigration is used as a source of labor.
As a 20-year veteran of IRS-CI, I can assure you that its special agents will use their skills to target tax cheats and those who profit from crime. That’s why they took the job to begin with. But they can only do so much when more is being asked.
As part of the IRS, they keep the tax system fair. The question is how Trump’s administration will balance its legal income tax enforcement by keeping the small business owner honest with the greed-related crimes from border enforcement.
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