The IRS regularly receives hundreds of allegations of tax fraud from informants and referring agencies. However, budgetary constraints and manpower restrictions may enable only a select few to rise to the level of a full-scale criminal investigation.   One technique often utilized to determine if there is any credibility to an informant allegation, especially anonymous tax fraud allegations, is to perform a limited surveillance of the residence or business premise address. Depending on what is observed, coupled with available internal records, the special agent may decide to initiate an investigation at that immediately or conduct other covert activities. These additional unique activities could include garbology (trash analysis) or a request for a mail cover. Such investigative practices will typically enhance the evaluation of information prior to initiating an investigation.

It is nearly impossible to pick up a newspaper, listen to the radio or watch television nowadays without learning about a financial crime that has been alleged or committed.  Tax fraud seems to be everywhere.  The common thread is MONEY.  Traditional law enforcement agencies generally rely upon physical evidence, crime scene analysis, eyewitness accounts, informants and confessions, among other techniques, to gather proof of a crime.  These methods work best in instances where a crime already has been committed and law enforcement is attempting to identify the criminal.  However, the growth of money motivated crimes mandates the need for financial investigations. Since financial crimes typically involve merely an allegation of tax evasion, a different inquiry approach needs to be employed.  This unique method of investigation is known as the forensic accounting approach. 

The Government’s decision to initiate an investigation of a suspected tax cheat is a tricky one. It depends upon a variety of factors...