Every CID recommendation to prosecute taxpayers for a Tax Crime are reviewed by District Counsel attorneys. An opportunity therefore exists for a Taxpayer’s representative to present defenses at a requested District Counsel conference. The reality is that District Counsel must be satisfied that evidence gathered by CID is sufficient to establish that a tax crime was committed and that reasonable probability of conviction exists. District Counsel is faced with two choices, decline to prosecute or return a particular case for additional investigation by CID. It is to be noted however that once a case is worked up and presented for review by District Counsel, Few cases are in fact declined.
If IRS District Counsel determines that prosecution is warranted or that grand jury investigation should take place, the case is referred to the Department of Justice. This referral takes place via a letter referred to as a Criminal Reference Letter (CRL), which sets forth the recommendation of District Counsel for prosecution, the evidence supporting the recommendation, details concerning the technical aspects of the case, and an assessment of possible prosecution problems. The CID special agent’s report and exhibits are also enclosed. A copy of the CRL is sent to the appropriate U.S. Attorney within the Department of Justice with instructions to charge specific crimes against the taxpayer and designating one or more major counts which may premise a plea agreement. Referral to the Department of Justice terminates the IRS’s authority to issue or enforce any further summonses to investigate the Criminal Tax matter. Declination, or refusal to take the case, by the Department of Justice restores the IRS’s authority to use administrative process. Cases that meet all the other requirements for prosecution may nevertheless be declined by the Justice Department simply because their trial attorneys are of the opinion that no jury would convict due to a combination of circumstances, such as the taxpayer’s age and health, the fact that the taxpayer has already suffered enough, or other circumstances likely to evoke jury sympathy. Defenses based on the lack of probability of conviction are of greatest value when conferring with the Department of Justice’s trial attorneys.