Overview

According to the United States Bankruptcy Court, bankruptcies are steadily increasing and reached 1.7 million in fiscal year 2003. The increasing number of bankruptcy petitions filed has been accompanied by a correlative increase in bankruptcy fraud. In fact, the Department of Justice estimates that 10 percent of all bankruptcy petitions contain some elements of fraud. This results in serious consequences which undermine public confidence in the system, taint the reputation of honest citizens seeking protection under the bankruptcy statutes, and have a negative impact on voluntary compliance in our income tax system. With so much at stake, the detection and prosecution of bankruptcy fraud continues to be an area of focus for the IRS, as well as the Department of Justice.

Over the past five years, bankruptcy filings have averaged 1.4 million annually, with the IRS a party to approximately 40 percent of these filings. Since the IRS is often a major creditor in many bankruptcy proceedings, it is important that we protect the interests of the IRS. The IRS files over 150,000 proofs of claim per year to protect billions in taxes annually.

The goals of IRS Criminal Investigation’s Bankruptcy Fraud Program are to:

• Increase voluntary compliance with federal tax laws through the prosecution of those committing significant crimes in the bankruptcy arena
• Enhance IRS presence among bankruptcy professionals and practitioners for the dual purpose of increasing compliance and providing contact points to report allegations of fraud
• Foster enhanced cooperation between the IRS Operating Divisions and Criminal Investigation in attaining mutual compliance goals

Statistical Data

Bankruptcy Fraud enforcement statistics on investigations initiated, prosecutions recommended, indictments, convictions and months to serve in prison.

Examples are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Criminal Investigation (CI) home page

How to Report Suspected Tax Fraud Activities