In its fiscal year 2024 annual report, the IRS Criminal Investigation (IRS-CI) unit announced its workforce grew to its biggest size in years, which helped improve the amount of investigations into tax shelters, fraud, and cybercrimes resulting in convictions. (IR 2024-307, 12/5/2024)
Snapshot.
Fiscal year 2024 was “one for the history books,” according to IRS-CI Chief Guy Ficco’s introductory message in this year’s report, released December 5.
In total, IRS-CI obtained 1,571 convictions with a conviction rate of 90%. Investigations identified $2.12 billion in tax fraud and another $7.03 billion from other financial crimes.
Categories that saw increased incarceration statistics and higher average sentence lengths from the previous fiscal year included abusive tax schemes, abusive return preparers, identity theft, and “questionable” refunds.
IRS-CI staff.
Ficco said his staff levels increased by more than 10% from October 2023 through September 2024. At 3,474 employees (2,290 special agents and 1,184 professional staff members), the current IRS-CI workforce is at the “highest level in nearly a decade.” For comparison, in fiscal year 2023 there were 3,138 employees, and 3,015 in the year prior.
Despite strides taken in hiring, the workforce size still pales in comparison to the over 4,000 staff in fiscal year 2010. The IRS’ annual budget shrank year-over-year since then, and the agency credits its newfound strength to the funding boost provided by the Inflation Reduction Act (P.L. 117-169), the bulk of which was earmarked for compliance enforcement.
Syndicated conservation easements.
The report highlighted several milestones achieved during fiscal year 2024, such as the first sentencings involving syndicated conservation schemes. In January, an accountant and an attorney were sentenced to 25 years and 23 years in prison, respectively, for inflating the value of land easements so investors could claim higher tax deductions.
Over more than a decade, the duo sold more than $1.3 billion in conservation easements to the tune of $450 million in losses to the IRS. So far, seven additional defendants have pleaded guilty for their involvement in their scheme.
Conservation easements are intended serve “legitimate environmental purposes rather than functioning as tax shelters,” read the report. They become “syndicated” easements when they are intentionally structured to farm tax deductions. The SECURE 2.0 Act of 2022 (P.L. 117-328) included provisions to prevent fraud and deter promoters.
Crypto crackdown.
Another milestone noted in the report is the first ever indictment of an individual “solely for failing to report or the underreporting of cryptocurrency earnings and gains on their tax return.” In February, a man was indicted for allegedly filing false tax returns after selling roughly $4 million in Bitcoin.
He is charged with downplaying the “substantial capital gains” from the sale, which he used to purchase a residence in 2017. The IRS said he also failed to report over $650,000 in Bitcoin sales on his 2018 and 2019 tax returns.
Similarly, a North Carolina-based appraiser admitted to inflating 18 easement valuations, some by “at least 600%.” The IRS says it suffered a tax loss of over $129 million.
Role of technology.
IRS-CI plans to continue relying on machine learning, advanced data analytics, and other “emerging technologies” to evolve the investigation process. Digital forensics, the report explained, was integral in the investigation of crypto exchange operator Binance.
Described as “one of the largest cases” in agency history, the company’s former CEO pleaded guilty in November 2023 to violating the Bank Secrecy Act by failing to maintain an effective anti-money laundering program. Binance agreed to pay more than $4 billion after admitting to “prioritizing growth of the company and profits over compliance.”
By not registering with the U.S. government as a money services business and allowing customers to transact in sanctioned jurisdictions, the exchange became a hotbed for illegal activity. Binance facilitated transactions involving “known terrorist organizations” and the “darknet market,” according to the report. From January 2018 to May 2022, Binance “willfully caused over $898 million in trades between” U.S. and Iranian, violating sanctions.
IRS-CI says it spearheaded the Binance investigation in collaboration with other federal agencies. The report gave credit to digital forensic specialists across field offices nationwide who performed critical work like analyzing evidence from seized electronic devices.
“We are committed to staying at the forefront of technology so our agents can keep pace or stay a step ahead of criminals and to leverage our skills to protect the U.S. tax system,” said Ficco.
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