Mark Matthews Talks to Tax Notes on Possible Pros and Cons in Fraud Program Changes

While there are few details on upcoming adjustments to the IRS’s National Fraud Program, the possible changes could have both benefits and detriments for tax enforcement, according to practitioners.

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Mark Matthews of Caplin & Drysdale, Chartered said part of the reason for the creation of the fraud technical adviser position was to help revenue officers and agents distinguish what sorts of bad behavior have the “jury appeal” to justify further investigation by the Criminal Investigation division. Matthews, who was CI chief during the development and creation of the fraud technical adviser position, gave the example of a taxpayer with a large tax debt and significant assets, saying revenue officers and agents need someone to emphasize that purchase of those assets after the tax debt arose has much better jury appeal in a criminal case for evasion of payment.

That selection process also provides feedback to field examiners and collectors explaining why referrals were accepted or rejected, Matthews said. This was meant to both educate revenue agents and dispel the impression that CI didn’t care about tax cases, he said.

Matthews said the initial reaction to the fraud technical advisers was positive, but that he does not know if any problems have arisen in the program in the meantime. “I don’t know what is behind the thinking to make those moves,” he said.

The IRS may have data concerning a peak in the fraud referral rate justifying a smaller number of fraud technical advisers, Matthews said. It is conceivable that the marginal utility of the last dozen or so fraud technical advisers is now exceeded by their cost, perhaps because of better training of revenue officers and agents, he said.

Pros and Cons

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Matthews agreed that centralizing the fraud technical advisers to create a “war room” to promote consistency and better use of data analytics could be a well-reasoned policy shift from the original emphasis on face-to-face availability.

Budget Issues

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Matthews said he hopes the National Fraud Program changes are not reassigning fraud technical advisers merely to bolster the falling audit rate, although he said he would be sympathetic to the temptation. It would be “penny wise, pound foolish” to reduce the emphasis on fraud referrals, he added.

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Excerpt taken from the article "Practitioners See Possible Pros and Cons and Fraud Program Changes" by Nathan J. Richman for Tax Notes.