DOJ fraud chief directs prosecutors to weigh tax charges in every case

IRS Criminal Investigation team lost 331 staff last year, including 101 agents

The Wall Street Journal reported that Colin McDonald, who heads the Justice Department’s National Fraud Enforcement Division, said this month that federal prosecutors should weigh adding tax counts to every case they pursue. McDonald said financial gains from crimes should be reported to the IRS as income, whether earned honestly or fraudulently, and that failing to do so could lead to additional charges.

“When fraudsters benefit financially from their crimes, they are required to report their income—whether honestly or fraudulently obtained—to the IRS and pay appropriate income tax,” McDonald said. “Unsurprisingly, most fraudsters do neither.”

The Justice Department followed the directive with a tax-fraud enforcement surge highlighting dozens of cases accusing swindlers of trying to obtain a combined $490 million from the government. The National Fraud Enforcement Division said it was turning to tax law in part to “attack fraud from all angles.”

Federal prosecutors have used tax-fraud allegations as an enforcement tool for decades. The Wall Street Journal cited Al Capone as an example, saying IRS investigators helped nab him after other law-enforcement agencies had failed to bring him to heel. A 2024 Government Accountability Office report said losses from fraud could total as much as $521 billion annually, while a more recent GAO estimate put tax fraud alone as high as $304 billion per year.

The Trump administration has made fraud in government spending a priority. As part of that effort, the Justice Department created McDonald’s division earlier this year, and the move sparked infighting among department lawyers who handle white-collar crime.

Legal experts said adding tax charges could help prosecutors advance the antifraud effort and collect some of the money lost to tax fraud each year. They also said prosecutors would struggle to carry out the policy because of recent funding cuts and the complexity of tax cases. Carolyn Schenck, a Caplin & Drysdale partner who served as an IRS official for nearly 20 years, said the policy runs against the economic and staffing conditions facing the IRS and Justice Department.

“Criminal tax cases are resource-intensive,” Schenck said. “I think it’s going to be tough.”

Sean O’Connell, a Baker Donelson partner who has prosecuted both tax and fraud cases, said adding tax charges to more cases could divert investigators from more complex corporate-tax prosecutions.

“Those types of cases are not contemplated by this particular memo,” O’Connell said. “This particular memo seems to treat tax cases as, ‘Well, you guys can tag along on pre-existing fraud cases.’”

The strategy also follows last year’s dissolution of the Trump administration’s roughly 90-year-old Justice Department tax division, which handled criminal and civil enforcement. Personnel from the division were reassigned to other teams. The dissolution came after veteran tax prosecutors left the agency, including former division head David Hubbert and former criminal tax chief Stuart Goldberg, both of whom had decades of prosecutorial experience.

The IRS Criminal Investigation team said it continued investigating tax crimes while supporting broader federal public-safety efforts. The unit said it provided investigative expertise, intelligence gathering, surveillance, financial analysis and tactical support to multiagency operations while maintaining its focus on major tax and financial crimes. Its specialized agents call themselves “accountants with guns” and play a crucial role in Justice Department tax prosecutions. According to a 2025 enforcement report, the team lost 331 staff members last year, including 101 agents.

The Trump administration has said it is working to unwind a 20,000-person increase in overall IRS staffing under President Joe Biden and has proposed cutting the IRS budget by an additional $1.4 billion in 2027. A U.S. Treasury Inspector General report found that IRS Criminal Investigation provided labor valued at $37 million—equivalent to the work of 170 full-time special agents—to immigration and street-crime enforcement between May 2025 and March 2026. The report said most of that work was complete.

A Justice Department spokesperson said criminal tax prosecutors’ work “continues apace,” pointing to the results of the recently announced enforcement surge.

The tax-charge directive advances the division’s enforcement effort after MSI reported that the unit had struggled to produce new cases amid a monthslong internal turf war and recruitment shortfalls.