The OFE’s Role in Combating Tax Fraud

When it comes to the IRS, tax fraud is one of its biggest and most urgent concerns. Launched in 2020, the IRS established the Office of Fraud Enforcement (OFE) is order to focus more strategically on combating tax fraud. Fraud detection has long troubled the IRS, so the OFE serves to “promote compliance by strengthening the IRS’ response to fraud and by mitigating emerging threats”.  With a vast knowledge in tax fraud, access to IRS resources, and experience with IRS agents, forensic accountants are poised to play a critical role in future tax fraud cases.

As legal teams lean more heavily on forensic accountants to resolve tax disputes, they will need to familiarize themselves with the six categories of Fraud Indicators from the IRS:

  1. Income
  2. Expenses/Deductions
  3. Books and Records
  4. Allocations of Income
  5. Conduct of Taxpayers
  6. Methods of Concealment

While these indicators are thorough, they are not mean to be all-inclusive. Instead, the fraud indicators listed in the handbook are meant to serve as example actions that a taxpayer may take in order to defraud or deceive the IRS.

In November, the IRS released an article citing how the newly established OFE will work to fight against tax fraud. Championing the combat against fraud on the civil side, the OFE works with the IRS-Criminal Investigation (IRS-CI) to refer cases where fraudulent activity may lead to potential prosecution. Most notably, the OFE has been shifting its focus to target CARES Act fraud. With more than $1 billion in estimated fraudulent CARES Act claims, the OFE must work diligently to review potential fraudulent claims.

Finally, the OFE has been leading the charge in blockchain tracing and the concealment of digital assets, brokerage accounts, and foreign or domestic bank accounts. With the OFE working diligently to bring fraudulent claims to light, legal teams will rely heavily on the expertise and experience of forensic accountants across the country.

At Ellrich, Neal, Smith & Stohlman, P.A., our staff includes multiple Certified Fraud Examiners who are involved in fraud detection and prevention engagements. Such engagements include evaluation of an organization’s internal controls, identification and measurement of frauds, and implementation of procedures that will reduce the risk of falling victim to fraud schemes in the future. Past fraud engagements have resulted in successful recoveries in both civil and criminal actions. Contact our Miami, Orlando, or Palm Beach Gardens offices today to speak with an expert.