IRS Criminal Investigation Is Best Investment the US Can Make

The IRS finds itself in the crosshairs of Elon Musk’s Department of Government Efficiency during the busiest time of the year—tax filing season. But the agency’s Criminal Investigation Division continues to be one of the best investments the government can make. Government funding for IRS-CI is a strategic investment that yields significant returns for the public.

Who Is IRS-CI?

IRS-CI conducts financial crime investigations, including complex tax crimes, money laundering, identity theft, national security cases, narcotics trafficking, human trafficking, sex crimes, child exploitation, cybercrime, and terrorist financing. Its special agents—the only federal law enforcers with investigative jurisdiction over violations of the Internal Revenue Code—obtained a 90% conviction rate last year.

The confusion around the size and scope of IRS-CI’s work is vast. The division, with about 3,400 total current employees, is separate from the IRS’s civil side and differs in its mission and methods.

For years, much of the public didn’t know that the IRS even had a law enforcement agency. And with the influx of Inflation Reduction Act money, narratives came out that the IRS hired 87,000 armed agents—which wasn’t close to the truth. For context, IRS-CI has never employed more than roughly 3,500 special agents in its 105-year history.

IRS-CI has solved some of the most notorious financial crimes in US history, including putting away Al Capone, solving the baby Lindbergh kidnapping, tracing money that Saddam Hussein hid across Iraq, and helping trace Osama bin Laden’s financial network to combat his terrorist activities.

Revenue Recovery

One of the most direct returns on investment in IRS-CI special agents is the recovery of billions of dollars annually through successful prosecutions. For every dollar invested in the CI division, the government often recoups several times that amount in recovered taxes, fines, and penalties.

This replenishes public coffers and ensures everyone pays their fair share, promoting equity in the tax system. Simple math using statistics from the agency’s most recent annual report shows that the actual return on investment is $1.9 million per central withholding agreement. ROI is calculated by adding the total restitution ordered and seizures divided by the number of CWAs over a five-year average.

In fiscal 2024 alone, more than $7 billion in assets or proceeds were identified as derived from criminal activity. This resulted in more than $1.2 billion in assets seized, which was allocated to the Treasury Executive Office for Asset Forfeiture fund or paid to victims.

With an annual budget hovering around $920 million, one might ask why we don’t invest in more special agents every year. This conversation involves a delicate balance between investigating crimes and having enough prosecutors within the Department of Justice to prosecute them.

Deterring Financial Crimes

Seizures and jail time paint a picture of IRS-CI’s impact on financial crime, but its impact on preventing crimes is immeasurable. The presence of a robust IRS-CI is a powerful deterrent; knowing that skilled investigators are pursuing tax evaders and fraudsters discourages individuals and corporations from engaging in illegal activities.

This preventive effect saves countless people from becoming victims and saves the government potential costs of future investigations and prosecutions. The effect extends beyond tax-related crimes, influencing broader financial conduct and contributing to a more transparent and accountable economic environment.

The US’ voluntary compliance tax system only works when the public believes the system isn’t rigged. Their trust in the tax system is fundamental to its effectiveness. Even the smallest drop in voluntary compliance from year to year can equate to billions of dollars lost to US coffers.

IRS-CI special agents help maintain this trust by ensuring that no one is above the law. High-profile cases and successful prosecutions send a clear message that these crimes won’t be tolerated, reinforcing public confidence in the tax system’s integrity.

Broader Law Enforcement

IRS-CI special agents often collaborate with other law enforcement agencies to tackle complex financial crimes that cross jurisdictions. Their expertise in financial forensics and tax law is invaluable in cases involving organized crime, terrorism financing, and cybercrime.

IRS-CI is a key player in money laundering investigations, where criminals disguise the illicit nature of their funds by making them appear as legitimate sources.

In fiscal year 2024, IRS-CI special agents spent about 29% of their direct investigative time on non-tax investigations, including narcotics, transnational organized crime, cyber, and human trafficking. These investigations led to 1,120 prosecution recommendations and 967 defendants sentenced.

Seven former IRS commissioners recently wrote an op-ed on the absurdity of cutting the country’s revenue arm when trying to find cost savings. Within that revenue arm, IRS-CI special agents yield substantial returns for the public—making it an easy opportunity for lawmakers to separate their apparent disdain for the IRS with the clear financial results the special agents provide.

As financial crimes become more complex, sustained investment in this division is essential for a fair, transparent, and effective tax system. While immigration work may be the administration’s and prosecutors’ current focus, IRS-CI’s position as the only agency with the authority to investigate tax crimes makes it the best investment the government can make.

Turning our focus from investigating tax crimes can have dire, near irreversible effects on our voluntary compliance tax system.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Wilfred Castro is partner at Integritas³ and a retired special agent with IRS Criminal Investigation.

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