Signs that a civil matter has changed
A civil auditor who finds firm indications of fraud is generally expected to pause and consult with fraud specialists, and the matter may be referred to IRS Criminal Investigation. From the taxpayer's side, that can look like an audit that stops without explanation, document requests that dry up, or an examiner who no longer returns calls. Other signs include employees, customers, or former partners being contacted, banks receiving grand jury subpoenas, or special agents asking for an interview. The New York State tax department has its own criminal investigators, and state and federal inquiries sometimes run side by side. None of these signs proves that a criminal case exists, but each is a reason to stop dealing with the government on your own.
Mistakes made in the early days
The instinct to fix things quickly can make matters worse. Filing amended returns without advice, moving money between accounts, or calling the auditor to explain everything can create new evidence or new exposure. Destroying or altering records after learning of an investigation can be prosecuted on its own. Discussing the substance with your regular accountant also carries risk, because those conversations are generally not privileged in a criminal case and the accountant may be interviewed. A voluntary disclosure through the IRS program is generally available only before the IRS has started an examination or investigation of you, so the timing of any decision about disclosure matters.
Once counsel steps in
Counsel can contact the IRS or prosecutors to learn whether you are regarded as a subject or a target, which sometimes clarifies what is under review. If accounting work is needed to understand the exposure, it is usually done by an accountant retained by the lawyer and working at the lawyer's direction. We go through every contact you have had with investigators, auditors, and third parties, and identify who else in your business or family may need separate representation. We also consider whether the facts point toward a civil resolution and whether there is anything worth presenting to the government before charging decisions are made. Each of those steps depends on what the evidence shows, so we do not commit to them until we have seen it.
