The IRS generally doesn’t go after you criminally unless you do something to piss them off (like join an anti-tax group) or you are a celebrity and they want to make an example out of you (like Richard Hatch).
If you refuse to pay they will put liens on your property or paycheck. Generally the IRS just wants the money. They can’t get it from you if you are in jail.
Not true. They may be looking for a witness to get the boss. They have two potential witnesses. The boss may have represented that he merely did what these two guys told them to do.
The IRS can threaten that they were assisting in willfully making a false return (100k and prison). The IRS then goes after both employees (the more the merrier) and they accurately report (full transparency and a feeling they did nothing wrong-it was all the boss) that they willfully helped the boss in his fraud thinking they were transferring the burden back to the boss. Now the IRS has all three. Alternatively, one of these employees gets a lawyer and the lawyer obtains immunity before talking then the other two go to jail.
It may be nothing, but I want my clients to be fully prepared for the worst case scenario. I am a CPA with over 30 years experience. After hearing these initial facts I would stop the interview, call a criminal attorney with Federal experience and refer the client to them. I would then have the attorney hire me to do any leg work.
If it turns out it is merely a routine audit of related parties then most of the retainer for the attorney would be refunded. If it turns out there was something criminal in mind then my client has not incriminated himself and my client had the best chance of getting a deal. Once my client turns over any information without a deal in a criminal matter, the attorney has less or maybe nothing to negotiate with.