What Business Owners Should Do Before Responding
If IRS Criminal Investigation, commonly called IRS-CI, has contacted your bank, credit union, lender, merchant processor, or other financial institution, you should assume the matter is serious until experienced criminal tax counsel proves otherwise. IRS-CI Special Agents are not ordinary civil auditors. They investigate potential criminal tax violations of the Internal Revenue Code and related financial crimes. When they seek bank records, account information, loan documents, signature cards, wire activity, cash deposits, merchant deposits, check images, or other financial data, they may be trying to determine whether a business owner underreported income, concealed accounts, inflated expenses, filed false returns, laundered proceeds, structured cash transactions, or diverted business receipts.
A bank contact does not always mean an indictment is inevitable. IRS-CI may be testing a lead, verifying a referral, comparing return information against third-party data, reviewing suspicious financial activity, or investigating another person or entity connected to your business. But bank records are often central to a criminal tax investigation because they reveal what money moved, when it moved, where it came from, who controlled it, and whether the filed tax returns match financial reality. If you learn that IRS-CI contacted your bank, do not treat it as a routine paperwork issue, and do not respond casually.
Why IRS-CI Wants Bank Records
IRS-CI follows the money. Bank records can show deposits that were never reported, cash that was split into smaller transactions, business receipts routed to personal accounts, transfers to relatives or related entities, payments to vendors that do not match claimed deductions, loan applications that contradict tax returns, and funds moving through accounts that were not disclosed to the preparer. For a business owner, the bank file may tell a more complete story than the QuickBooks file, the tax return, or the owner’s explanation.
The government may obtain or seek financial records in several ways, depending on the posture of the investigation. IRS-CI may review Bank Secrecy Act data, request records from financial institutions through appropriate procedures, subpoena bank records, use summons authority where legally available, interview bank personnel, or compare bank activity against tax returns, payroll records, Forms 1099, merchant processor statements, and other financial data. In fiscal year 2025, IRS-CI publicly reported that BSA data was searched in 94 percent of its cases, underscoring the centrality of financial institution data to modern criminal tax enforcement.
Business owners should also understand the problem with Suspicious Activity Reports. A bank generally cannot tell you whether it filed a SAR or even disclose information that would reveal whether a SAR exists. That does not mean the underlying bank records are off limits to the government. Account statements, transaction records, wire records, deposit records, and other ordinary business records can still become evidence. Therefore, calling the bank and demanding to know “who reported me” is usually unhelpful and may create additional concern if the call sounds like pressure, panic, or an attempt to interfere.
What the Bank Records May Tell the Government
A criminal tax case often turns on the difference between mistake and willfulness. Bank records help the government build that distinction. If the business reported gross receipts of $900,000 but bank deposits and processor activity show $1.5 million, IRS-CI will want to know why. If large checks were cashed rather than deposited, the government may examine whether income was intentionally kept off the books. If the business claimed major vendor deductions but the bank records show no matching payments, the government may test whether the expenses were fabricated. If loan applications reported much higher income than tax returns, the inconsistency could be strong evidence of knowledge and intent.
The same records can affect payroll tax, sales tax, and California tax exposure. A California business that deposited customer receipts but underreported taxable sales to the CDTFA, paid workers off the books, or used a separate bank account for cash receipts may face overlapping federal and state consequences. IRS-CI’s bank-record review may also identify transfers to owners, family members, shell entities, foreign accounts, crypto platforms, or other accounts that raise additional questions.
The key danger is that bank records rarely stand alone. IRS-CI may combine them with interviews of bookkeepers, bank employees, vendors, customers, payroll providers, and return preparers. A bank contact may be only one part of a broader effort to reconstruct the business’s real income and prove who knew what. By the time the taxpayer learns of the bank contact, the government may already have significant third-party evidence.
What Business Owners Should Not Do
Do not call the Special Agent to “explain” the bank records without counsel. Do not go to the bank and ask employees to change descriptions, remove memo lines, revise records, or avoid responding to lawful process. Do not move money, close accounts, delete accounting files, shred old records, alter QuickBooks, backdate invoices, create new loan documents, or ask a bookkeeper to clean up the file after the fact. Those actions can make the original tax issue appear to be concealment or obstruction.
Do not assume your banker, CPA, bookkeeper, payroll clerk, or return preparer can safely manage the problem for you. They are likely to become government witness number one against you in order to try and save themselves. They may have already been contacted. They may have records or communications that help or hurt your case. Communications with non-attorney accountants and bankers generally do not provide the protection taxpayers assume exists in a criminal tax matter. Once IRS-CI is involved, the taxpayer should think in terms of privilege-sensitive investigation, not casual damage control.
If you received notice of an IRS third-party summons involving bank records, do not ignore the deadline. In some circumstances, a person entitled to notice of a third-party summons may have a limited window to seek court relief, such as a petition to quash. In other circumstances, notice may not be required or may not arrive before the government obtains records. The correct response depends on the legal mechanism used, the requested documents, the investigation’s posture, and whether the taxpayer is the target, the subject, or a related third party. The worst response is an improvised one.
What to Do Before Responding
The first step is to preserve the record. Keep bank statements, check images, deposit slips, wire confirmations, loan files, merchant processor records, cash logs, accounting files, payroll records, invoices, emails, texts, tax returns, sales tax returns, and communications with the bank, bookkeeper, CPA, or IRS. Do not reorganize the facts to make them look better. Counsel needs the real record to evaluate exposure.
Next, identify what IRS-CI is likely investigating. Is the issue unreported income, cash transactions, payroll taxes, false deductions, sales tax mismatches, nominee accounts, foreign transfers, a preparer investigation, or another person’s case? Is the bank contact associated with a summons, subpoena, warrant, BSA review, or an informal witness contact? Is the taxpayer being asked to speak, produce documents, sign forms, or explain transactions? These questions should be answered before any substantive response.
Experienced criminal tax defense counsel can then analyze whether the bank records support an innocent explanation, a civil audit issue, an eggshell audit risk, or a criminal tax investigation. Counsel and Kovel Accountants may need to reconstruct income, compare bank activity against the filed returns, review preparer communications, evaluate amended return or voluntary disclosure issues, and determine whether speaking to the government helps or harms the taxpayer. If the government already has damaging records, the strategy should focus on damage control, credibility, and preventing unnecessary admissions or further false statements.
Contact the Tax Law Offices of David W. Klasing if IRS-CI Contacted Your Bank
At the Tax Law Offices of David W. Klasing, our dual-licensed Civil and Criminal Tax Attorneys and CPAs represent business owners, professionals, online sellers, contractors, medical practices, restaurants, and closely held companies when IRS-CI contacts banks, lenders, merchant processors, payroll providers, or other financial institutions. We understand how Special Agents use bank records, BSA data, third-party witnesses, accounting files, and tax returns to build a criminal tax theory.
Our goal is to intervene before the taxpayer says something, moves funds, alters records, or produces documents that cause avoidable damage. We analyze the bank records, tax returns, books, processor data, payroll records, sales tax filings, preparer files, and government contacts through both a civil and criminal tax defense lens. Where the facts support a civil explanation, we work to preserve credibility and contain the issue. Where the facts are potentially criminal, our focus shifts immediately to damage control, a privilege-sensitive investigation, and, where possible, preventing the matter from progressing to criminal tax prosecution.
If IRS-CI has contacted your bank or you received notice that the IRS is seeking your business bank records, do not try to explain the transactions alone. Call the Tax Law Offices of David W. Klasing at 800-681-1295 or contact us online to schedule a reduced-rate initial consultation. When Special Agents follow the money, the way you respond can determine whether the case remains controlled or becomes a life-altering criminal tax prosecution.
