Denney and Denney - Atlanta Tax Services If you are behind on your taxes, call 404 874 9866 today!

IRS ABUSE ― Undercover Agents
(Entrapment (?))

Attention, all citizens, business owners and self-employed persons: Lend me your ears! The next time you respond to an ad in a newspaper, receive a telephone call or a visit from a stranger promising you a business opportunity that sounds "too good to be true," you may want to proceed with caution because that person may be an IRS Special Agent.  The agent may appear as a business broker, clergyman, lawyer, or used car salesman.  He will have a phony office, business cards and stationery, telephone numbers, license plates and plenty of cash   all courtesy of the IRS Criminal Investigation Division.

"Business Opportunity Projects" (a.k.a. BOP's) always involve IRS Special Agents posing as prospective purchasers of businesses.  They always represent themselves as buyers of businesses that will allow them to skim lots of cash.  Most owners tend to exaggerate their claims and point out the reasons why their business is a particularly good buy; then they proceed to tell the undercover agent everything he wants to know. Smile, you're on Candid Camera!  You have been Bopped!

The typical business owner does not have a clue he is dealing with an IRS undercover agent until it is too late.  Many citizens want to refer to the above tactics as entrapment; however, as you will soon see, even if you challenge the "con" and ask the person if he works for the IRS, the agent is authorized to lie to you.  This issue was specifically addressed in United States vs. Centennial Builders, Inc. (summarized below).

[Special Agent] McCammon visited [the taxpayer], Jones, at his retail cleaning business identifying himself as a private businessman interested in buying a cleaning business.  During the meeting, the agent asked for information about his cash business and Jones specifically asked McCammon if he was an IRS investigator. McCammon denied that he was, and continued to ask questions.

Based on the information provided by Jones, McCammon issued eight summonses to four banks, two corporations, and two accountants demanding books and records relating to the taxpayer's income tax liabilities. The summonses were enforced by the federal district court, and the taxpayer appealed this decision to the U.S. Court of Appeals.

Here is what the court had to say:

In the end, the appellant's arguments boiled down to the proposition that it is just not fair for an undercover IRS agent to entice taxpayers into discussing assets relating to their tax liability without informing them of his identity as an IRS Agent.  We have rejected similar contentions before and we reject them here.  We are not here to prescribe "fair" rules for the "game" of lawmen vs. lawbreaker.  The law does not denounce clever or innovative police work within the bounds of the Constitution even though the lawbreaker really has no chance of escaping prosecution. [emphasis added]

Woe be unto you if you are 100% compliant with all IRS rules and regulations, but you choose to exaggerate your cash opportunities simply because you want to sell a "dog" business to an "idiot" that has too much money. Hold on to your hat; you are in for the ride of your life.

Your only defense against an IRS undercover agent is references, references, and more references. Who does the agent know and what deals has he done in the past?