From Special Agent to Prosecutor: How DOJ Reviews a Criminal Tax Case

IRS Criminal Investigation investigates. It does not prosecute. Between a special agent's recommendation and a federal indictment sits a layer of review by lawyers, first inside the IRS and then at the Justice Department.

This guide describes that review as Title 6 of the Justice Manual, the Department's published policies for tax cases, lays it out. It is general information. If your case is at this stage, you need counsel actively involved, because there may be a chance to be heard before a decision is made.

A note on names

The Justice Manual assigns criminal tax review to the Department's Tax Division. The Department's fiscal year 2026 budget exhibits proposed realigning the Tax Division's criminal enforcement work into the Criminal Division and its civil work into the Civil Division, and justice.gov now files the Tax Division's home page under its archives. The Justice Manual provisions described here are the ones published on justice.gov. Which office performs each step may change; the published process is what is described below.

Step one: the special agent's report

Under JM 6-4.110, when an administrative investigation is complete and CI believes prosecution is warranted, the special agent prepares a special agent's report, with exhibits. The Justice Manual describes it as a detailed account of the investigation with the special agent's recommendations.

The report is reviewed by the special agent's supervisors and by attorneys in IRS Chief Counsel's Criminal Tax Division. Those attorneys prepare a criminal enforcement memorandum that discusses the crimes recommended, the evidence, technical or legal issues, anticipated difficulties, and the special agent's recommendation. If CI concludes the case should be prosecuted, the Special Agent in Charge refers it to the Justice Department or, in some cases, directly to a United States Attorney's Office.

What changes at referral

The referral changes the IRS's own powers. Under IRC 7602(d), once a Justice Department referral is in effect for a person, "no summons may be issued under this title, and the Secretary may not begin any action under section 7604 to enforce any summons, with respect to any person if a Justice Department referral is in effect." JM 6-4.110 notes the same rule. A referral is in effect when the IRS has recommended a grand jury investigation or prosecution, and it ends when the Attorney General notifies the IRS in writing that the Department will not prosecute or will not authorize or will discontinue a grand jury investigation, or when the criminal proceeding is finally resolved.

The Justice Manual also notes that the IRS may share returns and return information with the Department under IRC 6103(h)(2) when it refers a criminal matter.

Step two: who has authority

JM 6-4.200 says the Tax Division has responsibility for all criminal proceedings arising under the internal revenue laws, with listed exceptions, and that it "must approve any and all criminal charges that a United States Attorney's Office intends to bring against a defendant for conduct arising under the internal revenue laws, regardless of which criminal statute(s)" the office proposes to use. The Manual cites 28 C.F.R. 0.70. JM 6-4.218 says final authority for prosecution or declination of criminal tax matters rests with the Assistant Attorney General.

The reason, according to JM 6-4.010, is uniformity: "tax enforcement potentially affects more individuals than any other area of criminal enforcement," and broad, balanced, uniform enforcement is needed to deter violators of different economic and vocational status across different places.

Step three: the standard of review

JM 6-4.211 says the Principles of Federal Prosecution in JM 9-27.220 govern whether to authorize prosecution. In addition, the Department considers "uniformity, balanced and broad enforcement goals, and Department and IRS priorities and policies." For grand jury requests, the standard is whether "articulable facts support a reasonable belief that a target or subject is committing or has committed a tax crime."

Civil collection does not factor in. JM 6-4.360 says proposed criminal tax cases are reviewed "without any consideration being given to the matter of civil liability or the collection of taxes, penalties, and interest."

Step four: complex or non-complex

JM 6-4.212 sorts IRS referrals into two tracks.

Complex matters are referrals where the IRS used an indirect method of proof, the facts or legal issues are complicated, or the case has technical, sensitive, tax, or policy issues. A Criminal Enforcement Section attorney reviews the referral and prepares a prosecution memorandum analyzing the evidence and problems, at least one senior attorney reviews it, and the Department then decides whether to authorize or decline. See indirect methods of proof.

Non-complex matters are straightforward referrals without technical or sensitive issues. The Department transmits them to the appropriate United States Attorney's Office within two weeks, and that office must consider the matter within 90 days.

When the investigation was conducted through a grand jury, JM 6-4.125 says the United States Attorney's Office forwards its recommendation along with the special agent's report and the criminal enforcement memorandum, and the Department will, whenever possible, complete its review within 30 days.

Recommendations against prosecution count too

The review is not one-directional. JM 6-4.125 says the IRS must also transmit a recommendation against prosecution resulting from a grand jury investigation to the Department for evaluation, or advise that it has no recommendation, and that the Department will complete its evaluation and authorize declination or other action within 30 days of receiving it. Under JM 6-4.213, the Department also monitors matters the IRS refers directly to United States Attorneys' Offices and can pull improperly referred matters back for its own review.

Step five: the conference

This is the step taxpayers most need to know about. JM 6-4.214 says that if time and circumstances permit, the Department generally grants a taxpayer's written request for a conference. If the matter has already been forwarded to a United States Attorney's Office, the request goes to that office, which has discretion to grant or deny it.

At the conference, the Department "usually advises conferees of the proposed charges, the method of proof, and the income and tax computations that the IRS recommended," and says these may change. The taxpayer or representative may present explanations or evidence. But "the conferees may not use the conference ... as an opportunity to explore the Government's evidence."

Two rules make this a job for counsel:

• The government "may use any statements made by the taxpayer at the conference not only to evaluate the matter, but also in any court proceeding, whether criminal or civil," and may develop investigative leads from information provided.
• The government does not, however, use in general court proceedings statements made at the conference by the taxpayer's attorneys.

The same section says plea negotiations are permitted during conferences in non-grand jury cases, consistent with the major count policy. See criminal tax plea agreements and sentencing.

Step six: authorization or declination

The Department authorizes prosecution, declines, or sends the case back for more work. If it declines, JM 6-4.110 says the IRS can take whatever administrative action it thinks appropriate, including further CI investigation using summonses, and may resubmit the matter as a new referral. A declination is not the same as being cleared, and the civil side, including the civil fraud penalty, remains.

The takeaway

A criminal tax case passes through several sets of trained eyes before anyone is charged. That process is also an opportunity. A well-prepared presentation by counsel, at the right time and in the right form, is part of how cases are evaluated. A taxpayer who walks into a conference alone and starts explaining is giving the government admissions it can use.

Joint requests also need approval. Under JM 6-4.123, a United States Attorney's Office may not expand a tax grand jury investigation to include targets the Department did not previously authorize without its approval, and the office and the IRS must submit a written request establishing the basis for expansion.

General information only, not legal advice. Reading this page does not create an attorney-client relationship. Laws and IRS procedures change; the sources cited were reviewed on the date shown above.