By Frances A. Tomes, Esq., and the Tax Resolution Team at Tomes Law Firm, PC

Business owners sometimes assume that the Department of Justice and IRS Criminal Investigation focus only on enormous tax-evasion cases or headline-grabbing fraud schemes. A recent New Jersey sentencing shows why that assumption can be dangerous and IRS Criminal Investigation is not limited to multimillion dollar cases.

On August 12, 2026, a Bergen County business owner was sentenced to 24 months in federal prison after previously pleading guilty to wire fraud and money laundering. According to the U.S. Attorney’s Office for the District of New Jersey, he fraudulently obtained approximately $670,292 through the Paycheck Protection Program and Economic Injury Disaster Loan program. Prosecutors said the applications inflated business revenue, payroll expenses, and employee counts, and that the funds were then diverted for personal gain.

The court also imposed three years of supervised release, restitution of $670,292, and a $10,000 fine. The case did not involve tens of millions of dollars. It involved a six-figure amount – and it still resulted in incarceration.

Why Was IRS Criminal Investigation Involved?

IRS Criminal Investigation, often called IRS-CI, follows money. Its special agents investigate suspected tax crimes, but they also work on money laundering, federal program fraud, financial crimes, and cases in which tax returns or business records help establish what happened.

In a PPP or EIDL investigation, agents may compare the loan application against tax returns, payroll filings, bank statements, employee records, accounting data, and how the proceeds were spent. Inconsistencies across those records can become important evidence.

Although the defendant in this case was charged with wire fraud and money laundering – not tax evasion – IRS-CI conducted the investigation because tracing funds and comparing financial records were central to the case. That distinction is worth understanding: contact from IRS-CI does not necessarily mean that the government’s concern is limited to a tax charge.

An Inaccurate Application Is Not Automatically a Crime

Not every mistake, inconsistent number, or poorly prepared application is criminal. Criminal cases generally require proof of knowledge and intent, and the facts surrounding the submission matter. A hurried estimate, a bookkeeper’s error, and a knowingly fabricated payroll figure are not the same thing.

The difficulty is that business records do not always tell their own story. An investigator may view an inconsistency very differently from the person who prepared or signed the application. That is why a business owner should not guess, speculate, or try to explain the matter informally before counsel has reviewed the documents and timeline.

Six-Figure Cases Can Still Result in Prison

There is no safe dollar amount below which federal prosecutors will ignore suspected fraud. The amount of loss affects charging decisions and sentencing, but it is only one part of the picture. Conduct that can materially increase risk includes:

• Submitting figures that conflict with filed tax returns or payroll records.
• Creating, altering, backdating, or deleting documents after questions arise.
• Using restricted business-relief proceeds for personal expenses.
• Moving funds among accounts in a way that appears designed to conceal their source or use.
• Making false or incomplete statements to a lender, federal agent, accountant, or other adviser.
• Repeating the same misrepresentation in multiple applications or supporting records.

If IRS-CI Contacts You

An unexpected call, letter, subpoena, or visit from a federal agent is serious, but it is not a reason to panic. The first response can influence the rest of the matter.

1. Remain calm: Be courteous and do not obstruct the agents.
2. Confirm identity: Obtain names, agencies, contact information, and copies of any paperwork provided.
3. Do not guess: A confident but inaccurate answer can create a new problem.
4. Pause substantive discussion: Do not agree to an interview or provide records until you have obtained legal advice, unless a valid legal process requires an immediate response.
5. Preserve records: Do not delete, alter, destroy, or ask anyone else to change documents, messages, financial records, or electronic files
6. Contact counsel promptly: An attorney can evaluate the nature of the inquiry, communicate with the government, and coordinate the professional team

The Attorney, CPA, and Enrolled Agent Have Different Roles

A coordinated team can be extremely valuable, but the professionals are not interchangeable.

• The attorney evaluates criminal exposure, legal strategy, interviews, subpoenas, disclosures, and communications with prosecutors or investigators.
• The CPA analyzes books, returns, financial statements, calculations, and accounting treatment.
• The enrolled agent can provide tax-compliance analysis and representation before the IRS within the scope of the engagement.

When criminal exposure is possible, the attorney should ordinarily coordinate the review. Communications with a CPA or enrolled agent are not automatically protected by the attorney-client privilege merely because the subject involves taxes. The structure and purpose of the engagement matter.

What Should a Business Owner Do After Discovering a Possible Problem?

If a business owner discovers that an application, tax return, payroll filing, or supporting record may be materially inaccurate, the worst response is often to ignore it, destroy records, or create a new explanation before the facts are understood.

A more careful approach is to preserve the existing records and arrange a confidential legal review. Counsel can help determine who prepared the information, what the owner knew when it was submitted, whether the same figures appear elsewhere, where the funds went, and whether a corrective filing, repayment, disclosure, or other response should be considered. The right course depends on the specific facts; there is no one-size-fits-all correction.

The purpose of this article is not to alarm business owners. It is to encourage an early, informed response. A confidential review before a voluntary interview, document production, or improvised explanation can help protect the owner while allowing the legal and tax team to understand the facts.

Frequently Asked Questions

Can IRS Criminal Investigation investigate PPP or EIDL matters?

Yes. IRS-CI investigates financial crimes and money laundering as well as criminal tax violations. Tax returns, payroll records, bank records, and the movement of funds may be central to a federal program-fraud investigation.

Does repaying the money prevent prosecution?

Not necessarily. Repayment may be relevant, but it does not automatically erase a completed offense. A person should obtain legal advice before making a repayment or disclosure intended to address possible criminal exposure.

What if the application contains an honest mistake?

An error is not automatically fraud. Knowledge, intent, materiality, supporting records, and subsequent conduct all matter. The safest next step is to preserve the records and obtain a confidential review before giving an explanation.

Should I speak first with an attorney, CPA, or enrolled agent?

If criminal exposure may exist, start with an attorney experienced in tax controversy or financial investigations. The attorney can then determine how a CPA or enrolled agent should participate and whether the work should be coordinated through counsel.

Speak with Tomes Law Firm Before Responding
If IRS Criminal Investigation, the Department of Justice, the Small Business Administration, a lender, or another government agency has contacted you about a business application, tax filing, or movement of funds, speak with counsel before providing a substantive response.
You do not need to wait for a subpoena or a visit from an investigator. If you are concerned that an application, tax filing, or supporting document may contain materially inaccurate information, an early confidential review may provide more options. Contact us today for a confidential consultation to discuss your situation at 732-333-0681 or 833-4IRS-TAX