5.1.5  Balancing Civil and Criminal Cases

5.1.5.1  (08-03-2009)
Parallel Investigations

  1. The Internal Revenue Code (IRC) contains both civil and criminal provisions to address fraud. Revenue officers may conduct civil investigations before, during or after criminal investigations of the same taxpayer. If the investigation is conducted simultaneously with the criminal investigation, the process is referred to as a parallel investigation.

  2. Collection employees should be alert to the presence of a TC 914, Active Criminal Investigation, on related tax modules in pre-contact analysis. The TC 914 is not an entity code but the code's presence on any module in the case may indicate the need to apply parallel investigation procedures.

  3. Parallel proceedings involve simultaneous investigations or litigations of separate civil and criminal aspects of a case involving a common individual or entity. Some potential civil remedies that could occur in a parallel proceeding are IRC § 6672 Trust Fund Recovery Penalty investigations, injunctions for pyramiding taxpayers, Notice of Federal Tax Lien filings, issuance of levies, jeopardy levies, service of summons, and pursuit of erroneous refunds.

  4. Civil and criminal parallel investigations are conducted as separate investigations. They are not joint investigations but do require significant coordination between the operating divisions throughout the civil investigation and litigation processes. While regularly scheduled coordination meetings are required (see IRM 5.1.5.5), Criminal Investigation must not direct the revenue officer’s actions in the civil investigation.

    Note:

    The local Collection Fraud Technical Advisor (FTA) can be a valuable resource in the coordination process.

5.1.5.2  (08-31-2010)
IRS Policy Concerning Parallel Investigations

  1. Policy Statement 4-26 (P-4-26), Criminal and Civil Aspects in Enforcement (formerly Policy Statement 4-84), provides guidance on taking civil enforcement action when the taxpayer is under criminal investigation. See IRM 1.2.13.1.11.

  2. IRS policy concerning parallel investigations and the procedures in this IRM are intended to provide guidance in identifying the best alternative from the civil and criminal sanctions available, prevent additional loss of tax revenue, and foster voluntary compliance.

  3. Civil enforcement actions with respect to taxable periods of the same and other types of taxes not included in the criminal investigation generally do not imperil successful criminal investigation or subsequent prosecution. Therefore, civil enforcement action for such taxable periods or other types of tax will proceed concurrently unless there is agreement between the responsible functions to withhold civil action in whole or in part during the criminal investigation. See P-4-26, IRM 1.2.13.1.11(4).

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  8. Any proposed civil enforcement action must be coordinated to minimize adverse consequences on the criminal investigation. For example, a revenue officer should not take the following actions without first obtaining the approval of the Special Agent in Charge:

    • contacting the taxpayer

    • taking enforced collection action against the taxpayer

    • entering into an agreement with the taxpayer to resolve civil tax liabilities

  9. Because civil enforcement actions with respect to the same taxable periods and same types of taxes for those periods included in the criminal investigation may imperil the criminal investigation or subsequent prosecution, the consequences of civil enforcement action must be carefully weighed. However, there generally should be no suspension of collection action on assessed amounts of tax liabilities reported on filed returns. See P-4-26, IRM 1.2.13.1.11(8).

5.1.5.3  (08-03-2009)
Resolving Conflicts Regarding Parallel Investigations

  1. If a conflict exists when a criminal investigation and collection action are ongoing at the same time, the affected operating divisions must resolve the conflict and determine how and when the civil and criminal actions should proceed.

  2. A six way meeting will be held with the revenue officer, the revenue officer group manager, the special agent, the supervisory special agent (SSA), SB/SE Area Counsel, and Criminal Tax Counsel. The local Fraud Technical Advisor should also be consulted and attend the meeting, if possible. If a case is open in the U.S. Attorney’s Office or the Department of Justice, representatives from those offices should also be invited to the meeting.

  3. A decision will be made as to whether to conduct parallel investigations, to proceed solely criminally, or to proceed solely civilly. In some instances, civil action may be suspended temporarily (for no more than 90 calendar days), for example, to permit CI to complete an undercover investigation or execute a search warrant. In such cases, a date should be set for a follow up meeting to revisit the issue of going forward with civil actions. See IRM 5.1.5.3.1, Temporary Suspension of Civil Action. If the case requires suspension of civil action for more than 90 calendar days, the procedures in IRM 5.1.5.3.2, Case Monitoring When Civil Action is Suspended, should be followed.

  4. Any disagreements on how to proceed should be elevated and resolved in accordance with the guidelines in P-4-26. See IRM 1.2.13.1.11. Any disagreements with the U.S. Attorney and/or Department of Justice should be brought to the attention of the Special Counsel for Civil/Criminal Coordination, Tax Division, Department of Justice.

5.1.5.3.1  (08-03-2009)
Temporary Suspension of Civil Action

  1. In cases where civil action is to be temporarily suspended, the following actions will occur:

    1. CI will control all modules in which civil action is to be suspended by requesting input of TC 914.

    2. Collection will document the ICS history.

    3. Cases in which civil action is to be temporarily suspended will be retained in inventory.

    4. A date will be established for a follow-up meeting to revisit the issue of going forward with civil actions and reversing the CI controls. The follow-up meeting date should be no more than 90 days from the date civil action is suspended.

      Note:

      Collection Statute Expiration Dates (CSEDs), and Trust Fund Recovery Expiration Dates (ASEDs), for these cases will continue to be monitored by the assigned revenue officer.

5.1.5.3.2  (08-03-2009)
Case Monitoring When Civil Action is Suspended

  1. Centralized Case Processing (CCP) will monitor cases in status 26 (assigned to a revenue officer) if the following two conditions are met:

    1. a TC 914 appears on all of the modules, and

    2. a decision has been made to suspend civil action due to the criminal investigation other than the temporary suspension discussed in IRM 5.1.5.3.1, Temporary Suspension of Civil Action, above.

  2. See IRM 5.1.5.13, Transferring Cases to CCP, below, for further information regarding the monitoring of TC 914 cases by CCP.

5.1.5.3.3  (08-03-2009)
Requests to Suspend Collection Action on Non-Tax Criminal Cases

  1. For purposes of this section, a non-tax criminal case is one where the investigation or prosecution is not being made on behalf of the IRS.

  2. The Director, Collection Area Operations, can suspend collection activity at the request of the Department of Justice on a taxpayer who is the subject of a non-tax criminal case.

  3. However, the IRS may not inform the Department of Justice whether there is any ongoing collection activity with respect to a particular taxpayer, or whether the IRS has suspended, or will suspend, such activity unless the Department of Justice submits a written request meeting the requirements of IRC § 6103(i)(2). See IRM 11.3.28, Disclosure to Federal Agencies for Administration of Nontax Criminal Laws.

  4. Telephone requests by a U.S. Attorney to suspend collection activity can be honored in emergency situations (such as when court action is imminent) provided a delay in collection activity would not be detrimental to the IRS. In such cases:

    • Disclosure of information — No information may be disclosed to the Department of Justice until the telephone request is followed up with a proper IRC § 6103(i)(2) request.

    • Suspension action — If suspended, review after 72 hours to determine if the suspension should be continued. In all cases, the decision to suspend civil activity should come only from the Director, Collection Area Operations.

    • If contacted by the U.S. Attorney, revenue officers and advisors will make no comment on the case in question and refer the request, through proper channels, to the Director, Collection Area Operations.

5.1.5.4  (08-03-2009)
Commencement of Parallel Investigation

  1. Once agreement is reached that a parallel investigation will take place, criminal investigators and revenue officers should coordinate the development of the evidence that will support both the criminal and civil actions while being mindful of the legal requirements and constraints.

  2. Revenue officers should consult their local Fraud Technical Advisor (FTA). FTAs can provide guidance to revenue officers during parallel investigations due to their knowledge of both Collection and Criminal Investigation procedures.

  3. Ongoing communication is essential for a successful parallel investigation.

5.1.5.5  (08-03-2009)
Coordination Meetings

  1. A coordination meeting must take place within 30 calendar days of the decision approving the parallel investigation. The participants must include the revenue officer, special agent, their respective managers and SB/SE Area Counsel and Criminal Tax attorneys. The local Fraud Technical Advisor (FTA) should also attend the meeting, if possible. If a matter has been referred to the Department of Justice (DOJ) and/or U.S. Attorney’s Office (USAO), the DOJ/USAO attorneys should be included in coordination activities.

  2. Civil and criminal investigators and IRS attorneys should regularly coordinate their efforts through case status meetings held at least quarterly until the collection actions are complete. These coordination meetings will facilitate sharing important case developments.

  3. The purpose of the case status meeting is to communicate the case developments and facilitate information sharing between Collection and CI. In grand jury cases, CI will not be able to share information subject to grand jury secrecy rules and IRC disclosure provisions. With the assistance of the FTA, the revenue officer should be prepared to discuss the collection plan of action and the impact of these actions on the criminal proceeding. CI will not direct the actions in the collection investigation.

  4. Use of special investigative techniques, such as undercover operations, or instances where there is the active pursuit of a search warrant should be communicated to Collection when practical. The timing of collection actions may affect special agent or revenue officer safety during a special investigative technique or the execution of a search warrant. Therefore, close coordination and communication is necessary when CI utilizes these techniques. Any decisions on how and when to proceed should be weighed in favor of employee safety concerns.

  5. If concerns are raised about the criminal investigation or the collection investigation, those concerns or objections should be resolved by consultation among the collection and criminal personnel and their supervisors, Counsel attorneys and their managers. When the matter has been referred, the DOJ and/or USAO attorneys should also be included in the decision making process.

5.1.5.6  (08-03-2009)
Interviews

  1. The revenue officer will advise the special agent assigned to the parallel investigation of all meetings with the taxpayer(s) prior to such meeting.

  2. If the special agent has informed the taxpayer under investigation of his or her Fifth Amendment rights, the revenue officer must explain to the taxpayer or his or her representative at each meeting that the revenue officer is conducting a civil investigation and the information provided will be shared with Criminal Investigation (CI).

  3. If a taxpayer under investigation inquires about criminal implications or whether the taxpayer is the subject of a criminal investigation before CI has contacted the taxpayer, the revenue officer must be careful to provide accurate information and not mislead the taxpayer. The revenue officer should inform the taxpayer that they are conducting a civil investigation, and that the information obtained can be shared with CI. Under no circumstances should the revenue officer inform the taxpayer that the case has been referred to CI. This is CI's responsibility. The revenue officer should immediately notify the special agent of the contact with the taxpayer.

  4. There is no specific prohibition on conducting joint revenue officer and special agent interviews of taxpayers. However, revenue officers and special agents must clearly identify themselves and their roles at these meetings and prepare a joint Memorandum of Interview (MOI). The MOI should be prepared by the special agent and signed by both interviewers. The revenue officer should receive a copy of the MOI, while the special agent retains the original. All interview notes must be provided to the special agent.

  5. CI may in some cases request that the revenue officer not contact the taxpayer or representative. In such cases, the revenue officer should refrain from issuing Letter 3164P or any appointment letters to the taxpayer or representative. SB/SE Area Counsel should be involved in any decision to conduct an investigation without contacting the taxpayer or representative.

5.1.5.7  (01-01-2007)
Witnesses

  1. Revenue officers and special agents should attempt to use different witnesses to prevent the possibility of inconsistent testimony and potential discovery issues raised during the civil or criminal judicial process.

  2. If the decision is made to use the same witness, the SB/SE Counsel Attorney, Criminal Tax Attorney and DOJ or Assistant U.S. Attorney assigned to the case should be consulted and coordinate any selection of these witnesses.

    Note:

    The term "witness" in the context of this section refers to any third party interviewed by revenue officers in the conduct of a civil collection investigation.

5.1.5.8  (08-03-2009)
Information Sharing

  1. Sharing information between revenue officers and government attorneys assigned to the case is a key ingredient in developing civil and criminal cases simultaneously and efficiently.

  2. Unless prohibited under grand jury secrecy Rule 6(e) of the Federal Rules of Criminal Procedure and disclosure provisions of IRC § 6103, Confidentiality and Disclosure of Returns and Return Information, information sharing between civil and criminal functions is appropriate. Judicial districts and appellate courts have diverse rulings on what constitutes grand jury information; therefore, the determination about what information can be shared will be made on a case by case basis.

  3. Special agents can develop evidence administratively through summonses, search warrants, witness interviews, and undercover operations. Evidence developed administratively before using the grand jury process may be shared by CI with Collection. Information obtained from CI should be included in civil investigation files as the information may be useful in future civil actions at the conclusion of the criminal case, including probation cases involving civil liability resolution.

  4. In the coordination meeting noted above, Collection should request CI to separate non-grand jury information from grand jury material for civil investigation purposes. The non-grand jury information should be dated and initialed to document that the information was obtained prior to the grand jury.

  5. Revenue officers must inform CI that civil files are available. Access to all available information in the civil file must be provided to CI. Prosecutors have a duty to disclose certain information to criminal defendants; therefore, it is absolutely necessary for the special agents and Assistant U.S. Attorneys to be made aware of and provided with all the information in the collection file, including documents, interview notes and any other information that Collection gathers. The sharing of information should be done so that there are no unnecessary delays.

5.1.5.9  (08-03-2009)
Undercover Operations and Search Warrants

  1. Collection actions generally will be temporarily suspended if CI is conducting an undercover operation or developing probable cause to execute a search warrant. Nevertheless, the benefits of an undercover operation or search warrant should be weighed against the need to prevent additional tax revenue loss.

  2. Information obtained through a search warrant is generally not grand jury information. Search warrant information obtained during the grand jury process can be made available to revenue officers if no grand jury information was included in the affidavit for the search warrant. Criminal Investigation should consult with the Assistant U.S. Attorney assigned the case prior to turning over any information or documents obtained through the grand jury process.

  3. Use of search warrant or undercover evidence should be coordinated with Area Counsel, CI and their respective Counsel, and the Assistant U.S. Attorney.

5.1.5.10  (08-03-2009)
Administrative Summons

  1. IRC § 7602(d) does not allow a summons to be issued or enforced concerning any person if a Department of Justice (DOJ) referral has been made by the IRS for such person. IRC § 7602(d)(2) defines a "referral" as either an IRS recommendation to DOJ for tax related grand jury investigation or criminal prosecution of the taxpayer or a criminal investigation request from DOJ made to the IRS pursuant to IRC § 6103(h)(3)(B). Coordination between SB/SE and CI is critical because pursuing a grand jury investigation or making a prosecution recommendation precludes using summonses in collection investigations.

  2. IRC § 7602(d)(3) states for purposes of what constitutes a referral that each taxable period and each type of tax is treated separately.

  3. If a taxpayer has been referred to DOJ for criminal prosecution and the revenue officer wants to issue an administrative summons to the taxpayer, the revenue officer and approving manager should speak with Area Counsel, the special agent, and Criminal Tax Counsel along with any DOJ attorney or Assistant U.S. Attorney assigned to the case prior to issuing the summons. During this conference, the parties will determine whether an administrative summons would be permissible under IRC § 7602(d)(1) and whether the issuance of a summons would adversely affect the criminal investigation or prosecution.

5.1.5.11  (08-03-2009)
Cases Under Jurisdiction of the Department of Justice

  1. Criminal Investigation refers cases to the Department of Justice (DOJ) Tax Division for prosecution. When DOJ has accepted the referral of the case, it is considered under the jurisdiction of DOJ.

  2. IRC § 6103(h)(2) & (3) allows DOJ attorneys from both the civil and criminal sections to contact either civil or criminal investigators to solicit case information that may help perfect the matter referred to DOJ. Requests should be in writing and coordinated with CI and Disclosure. Grand jury information can be disclosed only to those parties on the grand jury list. Revenue officers will generally not possess grand jury information, but should be aware that any such information in their possession cannot be disclosed except in these very limited circumstances. Contact Area Counsel in the event there is any question about the information requested.

  3. Advisory is often the default point of contact for these cases. When Advisory receives requests for information from CI or DOJ on these cases, an employee will determine whether the case is being actively investigated or in an inactive status such as queue assignment or CNC.

    • For active cases, determine the case assignment, provide CI/DOJ with the group manager contact and note the ICS history. If information is provided directly to DOJ, CI should be informed of the actions taken.

    • For inactive cases, determine the CI contact that will receive the Advisory report noted in (6) below and open an ICS control no later than five (5) business days of receipt of the CI/DOJ request.

  4. For cases under active collection investigation, the Director, Collection Area Operations is responsible for coordinating collection activities with CI. In cases under DOJ jurisdiction, active cases will also be coordinated with DOJ through CI. A transmittal memorandum from the Director, Collection Area Operations will be addressed to CI and will include:

    • Pending civil matters

    • Dates of assessment for all periods for which collection action is proposed

    • All outstanding liabilities of the taxpayer and related entities and modules

    • Balance owing on the assessed amounts

    • Civil action already taken on any outstanding liabilities

    • Assets owned by the taxpayer

    • Value of the taxpayer’s assets

    • Other claims, if any, against the taxpayer’s assets

    • Conclusion as to whether personal contact with the taxpayer would be necessary

    • Advice as to whether collection activity other than levy, such as filing a notice of lien, would be sufficient to protect the interest of the United States

    • Actions the Area Director plans to take on these accounts in the event CI and DOJ (when the case has been referred to DOJ) concur with the Area Director’s determination that the proposed civil action will not prejudice the pending criminal case

    • Conclusion as to whether even the passive-type collection activity would tie up the taxpayer’s assets to the extent that the taxpayer would be unable to finance a defense of the potential criminal prosecution

  5. Criminal Investigation will be responsible for:

    • Reviewing the proposed civil actions

    • Notifying the Area Director of any proposed actions they feel might imperil the criminal case

  6. Advisory will report to CI on the inactive cases noted above, including the following information:

    • a description of the inactive status of the case (queue, CNC, etc.)

    • the taxpayer's compliance with any installment agreement for assessed liabilities

    • contact information in the event further case information is required

5.1.5.12  (08-03-2009)
Advisory Processing - CI Notification of Cases Under TC 914

  1. Criminal Investigation (CI) will notify the Advisory Territory Manager of each new case where a criminal investigation has been opened by issuing a Notification Memorandum to the Advisory Territory Manager (formerly known as the Technical Services (Advisory) Manager).

  2. Advisory will forward the Notification Memorandum to the appropriate Field Collection Territory Manager no later than 10 business days of receipt for cases under active collection investigation (status 26) or Compliance Initiative Program (CIP) cases, including any related entities. Receipt and transmittal of the Notification Memorandum will be documented in ICS history.

  3. For cases that are in notice stream or queue status, no further action is required.

  4. For NF 181 Other Investigations ("OIs" ) currently open and new TC 914 cases, take the following actions:

    • For cases in status 26, advise the assigned revenue officer that Advisory is closing its monitoring activities and document the ICS history.

    • For inactive cases, close the OI.

5.1.5.13  (08-03-2009)
Transferring Cases to Centralized Case Processing (CCP)

  1. When the decision is made to suspend all civil action due to the criminal investigation, cases in status 26 will be transferred to Centralized Case Processing (CCP) for monitoring. If a decision is made to take civil action, follow the parallel investigation procedures set forth in IRM 5.1.5.4, above.

  2. The following cases should not be transferred to CCP for monitoring:

    • Cases in the queue (status 24)

    • Currently Not Collectible (status 53)

    • Cases in litigation (e.g., litigation, bankruptcy (status 72 in any module))

    • Cases where the Assessment Statute Expiration Date (ASED) or Collection Statute Expiration Date (CSED) will expire within one year

    • Cases in OIC (status 71 in any module)

    • Cases in status 12

    Note:

    If the situation arises where modules have mixed statuses, determine whether the status for certain modules needs to be reactivated due to open activity on the account (i.e., criminal investigation). Refer mixed status cases to CCP if restrictive conditions prevent modules that are in status 24 or 53 from being reactivated. Do not refer cases to CCP if any module is in status 72 (litigation) or status 71 (OIC). Also, cases where there is an imminent statute for any period should not be referred to CCP until the issue is addressed. See IRM 5.1.5.13.1, Cases with Imminent Statutes, below.

  3. CCP will monitor balance due and delinquent return cases. A TC 914 should appear on all modules showing a delinquency before the case is transferred.

    1. If a case is transferred to CCP and subsequent balance due modules open on the account and have no TC 914 controls, CCP will issue an Other Investigation (OI) to the last revenue officer assigned to the account.

    2. The revenue officer will contact the CI special agent to advise him/her that the modules are not protected by the TC 914 controls.

    3. The special agent should request CI to place TC 914 controls on the new modules unless civil action is to take place.

    Note:

    Responsibility for inputting the TC 914 remains with CI.

5.1.5.13.1  (01-11-2010)
Cases with Imminent Statutes

  1. Cases where the ASED or CSED will expire within one year will not be transferred to CCP without first obtaining approval from the revenue officer's group manager and managerial approval from CCP. Managerial approval from CCP can be obtained by the revenue officer's group manager either calling or emailing the FORT group manager.

    Note:

    Any actions to address an imminent statute must be coordinated with CI. See IRM provisions relating to parallel investigations, above.

  2. Before a case is transferred to CCP, the ICS history must reflect the actions taken regarding any imminent ASEDs or CSEDs.

  3. If the ASED for assessing the Trust Fund Recovery Penalty (TFRP) against a potentially responsible officer will expire within one year and either the employer or the potentially responsible officer is under criminal investigation, use Form 10498-C, Intent to Commence Civil Action - Statute Protection for Assessment of TFRP, to document agreement between Collection and CI regarding what, if any, actions should be taken to protect the ASED, or to acknowledge agreement that the ASED should be allowed to expire.

    Note:

    If a Letter 1153 (DO) has already been issued to the potentially responsible office prior to the commencement of the criminal investigation, Collection must notify CI that a Letter 1153 (DO) has been issued, explain the appeal rights that the taxpayer has as a result of such notification (see IRM 5.7.6.1.3), and determine the best course of action.

  4. If the CSED will expire within one year and the taxpayer is under criminal investigation, use Form 10498-D, Intent to Commence or Continue Civil Action - Collection Statute Protection, to document agreement between Collection and CI regarding what, if any, civil collection actions should be taken to protect the CSED, or to acknowledge agreement that the CSED should be allowed to expire.

  5. In order for either Form 10498-C or Form 10498-D to be effective, joint approval must be indicated by the signatures of the appropriate Collection Field function (CFf) Territory Manager and the CI Special Agent in Charge. Follow the procedures in IRM 5.1.5.3, above, to resolve any disagreements between Collection and CI regarding the commencement or continuation of civil collection actions to protect the applicable statute of limitations.

  6. Retain a copy of the Form 10498-C or 10498-D, as applicable, in the case file and document the case history accordingly. In limited circumstances it may be possible to extend the CSED, see IRM 5.17.4.5,Administrative Procedures for Extending Period of Limitations for Collection by Waiver.

5.1.5.13.2  (04-15-2011)
Procedures for Transferring Cases to CCP

  1. If a determination is made that civil action should be suspended on all modules while the criminal case is active, use the following procedures to close out the case and transfer it to CCP:

    1. Verify that all modules have a TC 914 input (for cases with delinquent return only periods, follow the procedure in IRM 5.1.11.6.2.1(3)).

      Note:

      If TC 914 is present in some tax periods, but not in others, Collection Field function employees should contact CI to determine whether or not collection should be suspended and input of additional TC 914’s should be initiated by CI. If needed, the local Fraud Technical Advisor (FTA) can assist with requesting CI to input TC 914s.

    2. Once TC 914 is on all balance due modules, notify the group manager to remove the ICS sub code 910; if there is no sub code 910, ensure that the entity 971/281 is reversed via input of a 972/281. Use ICS options: "Collection Activities," "FTA Involvement," "Generate 972/281)."

    3. Create an incoming OI on the ICS case; this incoming OI will be included in the case transfer to CCP and will be used by CCP for monitoring and control procedures. From the ICS Summary Screen, select the following:
      i) "Collection Activities"
      ii) "Create Modules"
      iii) "Create OI"
      iv) "Create Incoming OI"
      v) For the initial assignment, use the originator's (primary RO) assignment number
      vi) In the "Action Requested" field, select "Other"
      vii) In the "Remarks" field, insert "181 CID Control"
      viii) Select "Save"

    4. Once you have created the OI, transfer the entire ICS case to CCP. From the ICS Summary Screen, select the following:
      i) "Collection Activities"
      ii) "Transfer"
      iii) "Transferee Office Requests Transfer"
      iv) At "Enter Receiving Assignment Number" insert 35766979
      v) At the ICS prompt, "Open CIP/OI/FTD Assigned to originator # (which is primary). Include these items in Transfer Action?" "Y/N?" select "Y"
      vi) When prompted, "do you want a Form 3210 to print for this transfer?" select "Yes"
      vii) Insert a note in the remarks section of the Form 3210: TC 914 Monitoring
      viii) The case will show approval pending until the Group Manager approves the transfer

    5. Once approved, send your closed case file, marked "914" with the Form 3210 to the following address:
      Internal Revenue Service,
      2970 Market Street
      Philadelphia, PA 19104
      Mail Stop 5-E04.114
      Attn: TC 914 Monitoring

    6. Upon case receipt, CCP will ensure the input of the STAUP 91 on all modules in status 26 which have a TC 914.

    7. CCP will monitor the case, including any CSED or TFRP ASED statute issues, while the criminal investigation is pending and issue any necessary OIs to the field.

      Note:

      If the above outlined procedures are not followed, the case transfer will be rejected back to the originator for corrective action.

5.1.5.13.3  (08-03-2009)
Other Investigations Issued by CCP

  1. Centralized Case Processing (CCP) will issue OIs to the field for issues requiring field assistance or investigation, including the following:

    • two-year collection risk analysis (e.g., collectibility determination, continued noncompliance, status of CI investigation)

    • CSED protection

    • ASED protection for potential Trust Fund Recovery Penalty (TFRP) assessments

    • lien refiling determinations

    • new balance due modules that need TC 914 input or parallel investigation

    Note:

    Revenue officers should not close new balance modules with TC 530 cc 12 (unable to contact) or TC 530 cc 03 (unable to locate).

  2. The time period for completing the OI is set forth in IRM 5.1.8.2(3), Courtesy Investigations, which is 45 days after issuance. If additional time is needed, the revenue officer should work with the issuing employee to prevent the case from reissuing to the field.

5.1.5.13.4  (08-03-2009)
Closing Cases Monitored by CCP

  1. When the criminal investigation is completed, CI prepares a Form 13308, Criminal Investigation Closing Report (Tax and Tax related only), and forwards the form and other documents, as appropriate, to the Territory Managers, Technical Services (Exam) and Advisory (Collection).

  2. If the closing report relates to a case that has been referred to CCP for monitoring, Advisory will, within 10 business days of receipt of the Form 13308, either

    1. route a copy of the Form 13308 to CCP, or

    2. make an ICS history entry noting that CI has closed the case and the method of closure.

  3. CCP will return cases to the assigned field group if further collection action is needed.

5.1.5.14  (08-31-2010)
Monitoring Conditions of Probation Relating to the IRS

  1. Following the conviction of a defendant for a criminal tax violation or tax-related offense, the court may order the defendant to comply with certain tax-related conditions of probation or supervised release, and/or order the payment of restitution to the IRS. Public confidence in the tax system requires that the IRS exercise due diligence to ensure taxpayer compliance with conditions of probation relating to the IRS.

  2. If a defendant is not sentenced on a criminal tax violation, these procedures relating to the monitoring of probation cases apply only if there is an IRS-related condition of probation.

  3. To ensure that any noncompliance with IRS-related conditions of probation is detected and appropriate parties are timely notified, coordination between Criminal Investigation, Examination, and Collection is essential. When the defendant is required to pay restitution to the IRS, coordination with the Kansas City Submission Processing Center (SPC) may also be necessary to determine whether such payments are being received. See IRM 5.1.5.24.2, Restitution Payment Processing, below.

  4. The conditions of probation are set forth in a document signed by the judge called a Judgment and Commitment Order (J&C). CI is responsible for providing Advisory with the conditions of probation.

5.1.5.15  (08-03-2009)
Advisory Actions - Probation Cases

  1. To ensure effective coordination in monitoring probation cases and the timely exchange of information, single points of contact will be designated in Advisory to serve as liaisons for probation cases.

  2. CI will provide Advisory with notification of a new probation case by providing the conditions of probation directly to the Advisory probation liaison. CI will use Form 13308, Criminal Investigation Closing Report (Tax and Tax related only), to transmit the criminal case judgment and other necessary information.

  3. Upon receipt of a new probation case from CI, the Advisory probation liaison will take the following actions no later than 10 business days of receipt of the Form 13308:

    • Record the date on which the closing package is received from CI and ensure that all necessary documents are included in the package.

    • Complete Form 13308, page 2, Item 9.a. and forward a copy via fax or secured e-mail to CI. Forward a copy to the local Fraud Technical Advisor (FTA).

    • If additional information is required, request it from CI.

    • If the TC 914 has not been released, coordinate with CI to have it released. For all cases involving conditions of probation, the posting of TC 910 by CI will be verified using CC ENMOD, and any necessary coordination with CI will be completed.

    • Create a new NF OI using action code 182 (Probation), then close the existing NF OI for criminal investigation (action code 181) if one is open. The case file opened under action code 181, if one exists, will be used for the probation case.

    • Determine the Conditional Probation Expiration Date as provided in IRM 5.1.5.15.1, below.

    • Review the conditions of probation and determine what civil actions need to be taken and the timing of those actions.

      Note:

      For purposes of monitoring probation cases and having relevant information readily accessible in one place, such as the names and phone numbers of the special agent and probation officer assigned to the case and the dates relating to the probationary term, use of a spreadsheet or table is highly recommended. The spreadsheet or table may also be used for purposes of reconciling case information with Technical Services (Exam) and Criminal Investigation. See IRM 5.1.5.15(5), below.

  4. The civil actions to be taken on a probation case and the timing of those actions will depend upon the conditions of probation. The following table provides some of the more common scenarios and corresponding civil actions that should be taken:

    If ... Then ...
    There are outstanding civil tax assessments or delinquent returns An OI will be issued to a revenue officer to make a collection determination and to attempt to secure delinquent returns in appropriate cases.
    There are no outstanding civil tax assessments against the defendant Continue to monitor the case for compliance with any IRS-related terms of probation, such as the requirement to timely file and pay taxes.
    If civil tax assessments are subsequently made by Exam An OI will be issued to a revenue officer to make a collection determination.
    There are no conditions of probation relating to the IRS except for the payment of restitution Determine when restitution payments are to commence. If the defendant is incarcerated and making nominal restitution payments, monitor the projected release date.

  5. The Advisory probation liaison is responsible for

    • coordinating any civil enforcement actions with Technical Services (Exam) and any revenue agent assigned to the case

    • monitoring all cases with IRS-related conditions of probation and following up on any OIs issued to the field

    • exchanging information with CI and Technical Services (Exam) to reconcile the status and actions pending in all probation cases on a semi-annual basis.

      Note:

      The reconciliation of probation cases with CI and Technical Services (Exam) may be accomplished by comparing the information contained on spreadsheets, tables, or other reports maintained by each function.

  6. The Advisory probation liaison will conduct a yearly compliance check (e.g. determine the need for an OI to the field to secure a delinquent return or address a new liability that has been assessed) on or before the date of the defendant's projected release date or the tentative date on which the defendant's term of probation ends.

5.1.5.15.1  (08-03-2009)
The Conditional Probation Expiration Date

  1. The Conditional Probation Expiration Date is the date on which the defendant’s term of probation ends.

  2. Noncompliance with the terms of probation must be reported to court prior to this date, otherwise no action can be taken. In order for corrective action to be taken, noncompliance should be reported as soon as it is detected. Additionally, compliance or noncompliance with IRS-related conditions of probations must be reported at a minimum of 180 calendar days before the Conditional Probation Expiration Date. See IRM 5.1.5.18.2,The 180-Day Memorandum. Therefore, investigation for this memorandum must be complete prior to that date.

  3. The Conditional Probation Expiration Date is generally calculated as follows:

    1. Starting Date: Date of Sentence or Court Ordered Date of Surrender

    2. Add: Prison Term

    3. Add: Period of Supervised Release or Probation

    Note:

    When Home Confinement is a special condition of supervised release, this does not change the calculation. The period of Home Confinement is included within the period of supervised release.

5.1.5.15.2  (08-03-2009)
Monitoring the Conditional Probation Expiration Date

  1. In the federal system, defendants may receive a reduction of their sentence if they comply with certain requirements or participate in certain designated programs while in custody.

  2. This reduction of time spent incarcerated will impact the calculation of the Conditional Probation Expiration Date.

  3. To determine whether the Conditional Probation Expiration Date has changed due to the defendant receiving a reduced sentence, the Advisory probation liaison should periodically check the defendant’s projected release date on the Bureau of Prisons website (http://www.bop.gov). The date should be checked at a minimum of once a year on or before the projected release date.

  4. If it is discovered that the defendant's projected release date has changed, the Advisory probation liaison will notify CI and other IRS employees who are assigned to or monitoring the case.

5.1.5.16  (08-03-2009)
Role of Revenue Officers

  1. The Advisory probation liaison will explain the required action requested in any Other Investigation (OI) issued to a revenue officer and provide any relevant information and documents.

  2. Generally, OIs will be issued to a revenue officer in the following circumstances:

    • A collection determination needs to be made in balance due cases.

    • Delinquent returns need to be secured.

  3. Investigations initiated to the field will be worked promptly and any required enforcement actions concluded expeditiously. These investigations are nondiscretionary for revenue officer field groups.

  4. Revenue officer closing actions will be reported to the Advisory probation liaison by memorandum attached to the closed case file.

  5. After completing all actions on the OI, the revenue officer will return the case file to the Advisory probation liaison using Form 3210, Document Transmittal.

5.1.5.16.1  (08-03-2009)
Collection Determinations in Probation Cases

  1. In appropriate circumstances, revenue officers may be required to make collection determinations in probation cases. These circumstances may include, but are not limited to, situations where:

    • tax liabilities have been assessed against the defendant that may be collected by administrative collection action

    • civil tax assessments are made against the defendant pursuant to a plea agreement or pursuant to a civil examination after the criminal case and a collection determination or collection action is warranted

    • the defendant is ordered to pay restitution to the IRS as a condition of supervised release and payments are to begin immediately

    • the defendant is ordered to pay restitution to the IRS as a condition of probation and there are indications that the defendant has the assets to make such payments even though he or she is incarcerated

    Note:

    While administrative collection action may not be taken to collect restitution payments, information regarding the defendant's compliance with a court order to pay restitution to the IRS must be provided to the probation office, and the collectibility of such amounts must be provided to the Financial Litigation Unit of the U.S. Attorney's Office. See IRM 5.1.5.19 and 5.1.5.20, below, regarding the disclosure of information in probation cases.

  2. Before contacting the defendant, revenue officers will contact the special agent assigned to the case and evaluate any asset information developed by CI in the course of their investigation and provided in the closing package.

  3. The local Fraud Technical Advisor (FTA) may also be contacted, especially if the criminal case was the direct result of a fraud referral. The FTA may have valuable knowledge of the taxpayer, assets or income that may assist with the collection determination. The FTA can also provide a copy of the Form 2797, Referral Report of Potential Criminal Cases, if the case originated as a referral.

  4. Revenue officers will also determine the status of any examinations to determine the disposition of any unfiled returns subject to conditions of probation and include any proposed deficiencies in the total liability and case disposition.

  5. When a collection determination is warranted, revenue officers will take the following actions:

    1. Determine the defendant's assets and income, using the Collection Information Statement as an information source.

    2. Verify information provided by the defendant.

    3. Determine what, if any, civil enforcement actions may be taken to collect outstanding tax assessments.

  6. Defendants must be advised:

    • of the specific IRS-related conditions of their probation, including any requirements to file tax returns, pay outstanding tax liabilities, and/or pay restitution to the IRS

    • that their compliance with the conditions of probation will be monitored and any instances of noncompliance will be reported to the courts

    • that inability to pay situations will be reported to the courts for evaluation as a potential violation of the conditions of probation

      Note:

      Letter 4015 may be used by revenue officers in appropriate circumstances to inform defendants of their responsibilities.

  7. If the filing of a Notice of Federal Tax Lien is warranted, revenue officers should request the assignment of the balance due case. The OI may be closed when the balance due case is assigned. Accounts may also be accelerated to Status Code 26 when other circumstances warrant. The collection determination must be concluded and reported to the Advisory probation liaison in any case.

  8. Balance due and delinquent return modules subject to conditions of probation will not be assigned to the queue without a collection determination on assessed modules and coordination through the Advisory probation liaison with Examination on any unfiled periods.

  9. If there are additional assessments resulting from Examination actions that were not addressed by Field Collection, the Advisory probation liaison will issue another OI to the revenue officer for a collection determination on those assessments.

5.1.5.16.2  (08-03-2009)
Revenue Officer Reports

  1. Revenue officers will report the results of their investigation to the Advisory probation liaison by memorandum report. The report will be routed through the group manager and will include the following information:

    • a determination of collectibility on all open periods, including periods under examination

    • for failure to file convictions, a summary of the review of the Special Agent Report (SAR), the Revenue Agent Report (RAR) and any available work papers for the reports

    • a statement regarding whether a Notice of Federal Tax Lien has been filed with respect to assessed civil tax liabilities

    • copies of collection information statements secured

    • a summary of enforcement action taken against assets

    • a summary of any voluntary payments made by the taxpayer

    • if applicable, any installment agreements concluded with the taxpayer to pay assessed civil tax liabilities, including a copy of the agreement

      Note:

      Advisors and revenue officers do not have the authority to modify the terms of a restitution order entered by the court. Any changes to the requirements for the payment of restitution to the IRS as ordered by the court must be coordinated with the probation officer and the U.S. Attorney's Office through appropriate disclosure channels. See IRM 5.1.5.20, below.

    • estimated tax payments required for current taxes

    • any non-cooperation by the taxpayer

    • if applicable, a determination of uncollectible condition, with a copy of Form 53

    • a copy of Letter 4015 if sent to the defendant

  2. The report will be provided to the Advisory probation liaison as soon as the investigation is concluded.

5.1.5.17  (08-03-2009)
Role of Abusive Tax Avoidance Transaction (ATAT) Collection Groups

  1. In highly technical and specialized cases, assignment to an Abusive Tax Avoidance Transaction (ATAT) collection group will be warranted.

  2. The Advisory probation liaison will review all data available including, but not limited to, the CI Closing Report, Judgment and Commitment Order, and ICS case history and sub code. An OI will be issued to the appropriate Collection ATAT group no later than ten business days after determining if one or more of the following criteria are met and actions are needed by the field:

    • The defendant is a promoter.

    • The defendant is an abusive preparer.

    • Assessed amount is $250,000 or greater.

    • Tax liability is $1,000,000 or greater.

    • Established or archived case on ICS is coded with ATAT sub code 309 through 319.

    • Indication of assets located offshore.

    • Indication of complex forms of asset ownership utilizing multiple-layered entities and/or nominee or alter ego entities.

  3. If there is uncertainty as to whether the OI should be issued to an ATAT group, the Advisory probation liaison should contact the Collection ATAT Coordinator for guidance. If the Collection ATAT Coordinator determines that an OI has been inappropriately assigned to an ATAT Collection group, the OI can be reassigned to a general program Collection group based on zip code assignment.

  4. A current list of Collection ATAT Coordinators and the geographic area covered is maintained at http://abusiveshelter.web.irs.gov/AbusivePromotions/CollectionGroups.htm.

5.1.5.18  (08-03-2009)
Noncompliance with Conditions of Probation

  1. A variety of conditions may be imposed by the court as conditions of probation. Some of the more common IRS-related conditions of probation are:

    • cooperating with the IRS in an examination

    • filing past due and current tax returns

    • paying or making arrangements to pay past due taxes

    • paying restitution to the IRS

  2. Lack of cooperation with the IRS includes failing to file returns or filing frivolous returns, failing to schedule or appear at scheduled appointments, failing to provide complete records in a timely manner, putting assets beyond the reach of the IRS, and any actions causing unwarranted delays in resolving tax compliance issues.

5.1.5.18.1  (08-31-2010)
Immediate Notification of Noncompliance with Conditions of Probation

  1. When a determination is made that a defendant is not complying with the conditions of probation, this information must be immediately reported to the Advisory probation liaison. The Advisory probation liaison will report the noncompliance in accordance with disclosure laws. See IRM 5.1.5.20, below.

  2. Do not wait until 180 days before the expiration of the probation period to report any noncompliance. The requirement to report compliance or noncompliance with the conditions of probation 180 days prior to the expiration of the probation period is in addition to the requirement to report any noncompliance that is identified during the probation period.

5.1.5.18.2  (08-03-2009)
The 180-Day Memorandum

  1. In all cases where there are IRS-related conditions of probation, a memorandum must be prepared and forwarded to CI, with a copy to Technical Services (Exam), stating whether the conditions of probation relating to the IRS have been met.

  2. The memorandum must be sent 180 days prior to the Conditional Probation Expiration Date. See IRM 5.1.5.15.1, above.

    Note:

    The requirement that a memorandum be provided no later than 180 days prior to the expiration of the probationary period does not mean that compliance with conditions of probation need not be monitored, and noncompliance not reported, throughout the probationary period. Do not wait until 180 days prior to the Conditional Probation Expiration Date to report noncompliance.

  3. The memorandum will be prepared by the Advisory probation liaison based upon information received from revenue officers who have been assigned to take actions on the case.

  4. The memorandum will include the following:

    • the Conditional Probation Expiration Date

    • the specific conditions of probation relating to the IRS

    • actions taken or not taken by the defendant to comply with the conditions of probation

    • if there are outstanding tax liabilities, the defendant’s efforts at paying the liabilities and whether or not such amounts are collectible

    • if restitution was awarded to the IRS as a condition of probation, whether the defendant paid the amount ordered

    • any relevant information regarding the defendant’s cooperation with the IRS to comply with the conditions of probation

    • a statement as to whether the defendant has met or not met the conditions of probation and, if the conditions have not been met, whether such failure was within the defendant’s control

  5. The Advisory probation liaison will update whatever controls are being used to indicate the issuance of the memorandum sent to CI.

5.1.5.19  (08-31-2010)
Reporting Compliance and Noncompliance to the Probation Officer

  1. Noncompliance with the conditions of probation must be immediately reported to the Advisory probation liaison. The Advisory probation liaison will report the noncompliance in accordance with applicable disclosure laws.

  2. Ensure that any disclosure of return or return information to a probation officer is in compliance with disclosure requirements. See IRM 5.1.5.20, below.

5.1.5.20  (08-31-2010)
Disclosure of Return Information to the Probation Officer

  1. IRC § 6103(h)(4) allows disclosure of returns and return information to a U.S. Probation Officer for the purposes of informing the court of any noncompliance during a defendant's probationary period under the following circumstances:

    • Information on Return(s) must relate to a taxpayer convicted of a criminal tax violation.

    • A U.S. Probation Officer must be charged with the responsibility of determining whether such taxpayer is complying with the terms of probation that relate to the Internal Revenue Laws.

    • Information on return(s) are limited to those years specified in the conditions of probation issued by the court, or to the conviction years and those years for which the taxpayer is placed on probation.

    • Disclosure of the returns and return information would not identify a confidential informant or seriously impair a civil or criminal tax investigation.

  2. Where compliance with IRS-related conditions of probation in a criminal tax case is at issue, information regarding the years specified in the conditions of probation may be disclosed by the Advisor directly to the probation officer. Information about other tax years generally may not be disclosed without the taxpayer’s written consent unless the information is material for the court’s consideration in revoking or extending probation or supervised release. If there are any questions as to whether the taxpayer was convicted of a criminal tax violation, request a copy of the Judgment and Commitment Order or other document from probation which clearly sets forth the conditions of probation and the offense(s) under which the taxpayer was convicted.

  3. In probation cases where an Advisor issues an Other Investigation (OI) to the field, the revenue officer assigned to the case may communicate directly with the probation officer as long as proof of the above required circumstances for disclosure under IRC § 6103(h)(4) has been obtained, or a written consent to disclosure has been provided. The revenue officer should coordinate with the Advisor to ensure that direct communications with the probation officer are appropriate and to keep the Advisor informed of the nature of the communications. In probation cases where an OI has not been issued to the field, any direct communications with probation officers by SB/SE Collection employees should be limited to the single points of contact for probation cases in Advisory.

  4. In cases in which the taxpayer was convicted of a non-tax related crime, the IRS will only disclose taxpayer information if presented with a written taxpayer consent, such as a Form 8821, Tax Information Authorization. If the only information needed is verification that a taxpayer has not filed tax returns, instruct the probation officer to use Form 4506-T, which has a check box for requesting Verification of Nonfiling. Form 8821 may be used to obtain taxpayer consent in both tax and non-tax cases. However, ensure that the form has been filed with the appropriate IRS office within 120 days after the date it is signed by the taxpayer.

    Note:

    Publication 4799, Common Questions and Answers Regarding Interactions between the U.S. Probation Office and the Internal Revenue Service in Supervision Cases, has been issued to provide information to probation officers regarding IRS procedures in probation cases. The publication provides additional information on how probation officers can obtain the information they need to determine a taxpayer’s compliance with IRS-related conditions of probation.

5.1.5.21  (08-31-2010)
Addressing Noncompliance

  1. There are several actions that may be taken by the IRS when faced with an uncooperative and noncompliant defendant, such as:

    • The special agent can meet with the probation officer and the defendant and explain to the defendant the possible consequences of his or her actions or inaction.

    • The Advisory probation liaison or revenue officer assigned to the case may also meet with the probation officer as long as disclosure requirements are met. See IRM 5.1.5.20, above.

    • The probation officer can be requested to attend meetings between IRS employees and the defendant to further define exactly what the defendant must do in order to demonstrate that he or she is cooperating with the IRS and attempting to fulfill the conditions of probation in good faith.

  2. While it is the responsibility of the Special Agent in Charge (SAC) to take whatever steps are necessary to initiate appropriate legal action in any instance where the taxpayer has failed to comply with the conditions of probation (IRM 9.3.1.8.1(4)), CI and SB/SE share joint responsibility in ensuring compliance with court orders (IRM 9.5.14.8(1)). In order to ensure compliance with IRS-related conditions of probation, and to take appropriate actions to address noncompliance, the probation officer must be timely informed of incidents of noncompliance throughout the probation period.

  3. Once noncompliance with IRS-related conditions of probation is identified, the Advisory probation liaison will notify the probation officer responsible for monitoring the taxpayer's compliance. See IRM 5.1.5.20, above. The Advisory probation liaison will also keep CI apprised of any such communications along with the status of the taxpayer's compliance.

5.1.5.22  (08-03-2009)
Seeking Revocation

  1. If the defendant has not complied with the conditions of probation relating to the IRS, a determination must be made whether to seek revocation of probation.

  2. If revocation of probation is sought, CI should contact the probation officer and, if appropriate, the prosecutor to explain that revocation of probation appears to be necessary in the case.

  3. Once a decision to seek revocation has been made, the IRS must assist the probation officer and the prosecutor in obtaining or providing any necessary testimony and documentation.

5.1.5.23  (08-03-2009)
Actions When Taxpayer Relocates to Another State

  1. When revenue officer investigation determines that the defendant moved to another state, the Advisory probation liaison will be notified of the new address and other relevant information.

  2. In all cases, the name, telephone number and address of the new probation officer will be obtained.

  3. Because the CI field office where the case is assigned will not change, the Advisory probation liaison assigned to the case also will not change even if the defendant moves to another territory.

  4. The Advisory probation liaison is authorized to issue OIs to revenue officers in other territories in probation cases.

5.1.5.24  (08-03-2009)
Restitution - Overview

  1. In a criminal tax case, the offense generally results in the loss of government property, i.e., the money to which the government was entitled under the tax laws but which was not paid by the defendant.

  2. Through a restitution order, a court can require a defendant in a criminal tax case to pay money to the IRS in order to redress the losses he or she inflicted on the Federal Treasury.

  3. A court can impose restitution as an independent element of a sentence or as a condition of probation or supervised release.

  4. Restitution is generally limited to losses caused by the offense(s) of conviction. The major exception to this general rule is in cases involving plea agreements. The parties to a plea agreement in any criminal tax case may agree to restitution in an amount greater than the loss attributable to the offense(s).

  5. The district court must determine the amount of restitution and must state that the defendant is required to pay a sum certain.

5.1.5.24.1  (08-03-2009)
Restitution Payable to the IRS

  1. One goal of resolving criminal tax cases is to require the defendants convicted (either by plea or by trial) to pay the unpaid taxes resulting from their criminal conduct. Courts can award criminal restitution in tax cases when:

    1. a defendant is convicted of a Title 18 offense involving a tax violation;

    2. a defendant who pleads guilty to an Internal Revenue Code (Title 26) violation agrees, in the plea agreement, to pay restitution in connection with that violation; or

    3. the court orders a defendant to pay restitution as a condition of supervised release or probation after a trial on a Title 26 charge, whether or not the defendant agrees to the restitution.

  2. In most criminal tax cases involving restitution, the amount of the tax loss is calculated from evidence admitted at trial or from information contained in the plea agreement and presented to the district court at sentencing.

    Note:

    If the court waives all interest and penalties during sentencing, the interest and penalties being waived are those that may be imposed under Title 18 of the United States Code. In a criminal tax case, the court does not have jurisdiction to waive civil interest and penalties that may be imposed under Title 26, the Internal Revenue Code.

  3. Restitution is not assessed as a tax, but payment of restitution for taxes owed must be credited against the civil liability for unpaid taxes as provided in a plea agreement or court order.

  4. The sum fixed in a restitution order should include interest under the Internal Revenue Code provisions to the date of sentencing or other specified date. Following entry of the restitution order, interest accrues as provided in 18 USC § 3612(f). Restitution generally does not include civil tax penalties.

  5. Taxpayers responsible for paying restitution remain subject to tax return filing requirements. An assessment of the taxpayer's civil liability should be made (subject to notice of deficiency procedures, if applicable) as soon as possible after the restitution order to ensure proper application of the payments to the relevant tax year.

  6. Restitution should not be confused with civil tax liability.

    • The amount of the loss a defendant can be ordered to pay as restitution must result from the defendant’s criminal activity and that amount generally does not include civil tax penalties.

    • A restitution order does not bar the IRS from determining civil tax liability in an amount greater than the amount ordered payable to the IRS as restitution.

    • A restitution order also does not prevent a taxpayer from challenging the IRS's determination that the civil liability exceeds the amount of the restitution order.

  7. If, in connection with a restitution order, a defendant signs a Form 870, Waiver of Restrictions on Assessment & Collection of Delinquency in Tax & Acceptance of Overassessment, waiving the restrictions on assessments, the IRS may assess the amount reflected on the waiver.

  8. A restitution order may only be contested by direct appeal of the criminal case. Under no circumstances may an offer in compromise be accepted if it attempts to compromise the amount of the restitution. See IRM 5.1.5.24.5, Offers in Compromise and Restitution, below.

5.1.5.24.2  (01-11-2010)
Restitution Payment Processing

  1. Judgment and Commitment Orders (J&Cs) normally specify that defendants are to submit restitution payments to the office of the clerk of the district court in the district in which the defendant was sentenced. This will generally include restitution payments that are required to be paid to the IRS. Advisory processing of such payments should therefore be rare.

  2. The clerk of court has the responsibility, for the district court, to monitor the defendant’s compliance with the court order. After receiving, processing and recording restitution payments made by defendants, the clerk of court will forward the money to the victim(s) listed in the restitution order.

  3. All restitution payments to the IRS are processed by a centralized location at the following address:

    Internal Revenue Service - RACS
    Attn: Mail Stop 6261, Restitution
    333 W. Pershing Ave.
    Kansas City, MO 64108

    Note:

    Most clerks of court rely upon the Judgment and Commitment Order (J&C) to determine the address of the victim(s). Therefore, probation officers should be informed of the address of the centralized location for processing IRS restitution payments to ensure that this address is included in the J&C.

  4. Any criminal restitution payments received at sites other than the Kansas City Submission Processing Center (SPC) must be transshipped via overnight traceable method to the address in paragraph (3), above.

  5. In order for restitution payments to be linked to the defendant making the payment, identifying information, if available, such as the defendant’s full name and social security number, the tax year or years for which restitution has been ordered, and a statement that the payment is being made pursuant to a restitution order, should be included with the payment and forwarded to the Kansas City SPC. The tax year(s) for which restitution has been ordered may or may not be included in the J&C.

  6. Contact the Kansas City SPC at (816) 325-3780 if there are questions regarding the receipt and reconciliation of criminal restitution payments.

5.1.5.24.3  (08-03-2009)
Default in Restitution Payments - Remedies

  1. Upon a finding of default on a restitution payment, the court may

    • revoke the term of supervised release

    • modify a term of supervised release

    • resentence a defendant

    • hold the defendant in contempt of court

    • enter a restraining order or injunction

    • order the sale of the defendant’s property

    • accept a performance bond

    • enter or adjust a payment schedule

    • take any other action necessary to obtain compliance with the restitution order

  2. If a defendant is unable to make a good faith effort at repayment, he may seek modification of the restitution order. The court may also, if appropriate due to the economic circumstances of the defendant, order nominal periodic payments.

    Note:

    As more fully explained in IRM 5.1.5.24.5, below, the IRS does not have the authority to modify the terms of a restitution order.

5.1.5.24.4  (08-03-2009)
Enforcement of Restitution Orders

  1. The United States may enforce a judgment imposing restitution in accordance with the practices and procedures for the enforcement of a civil judgment under Federal law or State law.

  2. Each U.S. Attorney's Office has a Financial Litigation Unit (FLU), which has responsibility for the collection and enforcement of all civil and criminal judgments on behalf of the United States. Accordingly, the FLU is responsible for enforcing restitution orders and other orders relating to monetary penalties.

    Note:

    Revocation of probation or supervised release can be a powerful tool in motivating a defendant to pay restitution. Because periods of probation or supervised release are often fairly short, difficulties may arise in timely seeking revocation based on the failure to make restitution payments. Thus, compliance should be closely monitored and noncompliance reported immediately upon discovery.

5.1.5.24.5  (08-03-2009)
Offers in Compromise and Restitution

  1. The IRS may not accept an offer in compromise that in any way modifies the terms of a restitution order. Any changes to the terms of a restitution payment schedule in a Judgment and Commitment Order must be made pursuant to the direction of the court.

  2. The defendant must notify the court and the Department of Justice of any material change in the defendant's economic circumstances that might affect the defendant's ability to pay. The United States may also notify the court of a change in the defendant's economic circumstances. Upon receiving notice of such change, the court may, on motion of a party or on its own motion, adjust a restitution payment schedule, or require immediate payment in full, as the interests of justice require. See 18 USC 3664(k). A defendant seeking to adjust a restitution order or payment schedule should consult with his or her probation officer.

  3. There may be situations where the IRS has assessed civil tax liabilities, interest and penalties in excess of the amount that was awarded as restitution. In this situation, the IRS may consider an offer in compromise to pay the additional taxes, penalties, and interest for the same tax periods for which restitution was ordered only if the defendant has paid or will pay as part of the offer the full amount of the restitution.
    Example: The court orders payment of restitution to the IRS for the 2000 tax year in the amount of $50,000. The IRS assesses civil tax liabilities, interest, and penalties in the amount of $80,000 for the same tax year. The IRS may compromise the additional amount assessed as civil tax liabilities ($30,000), only if the defendant has paid or will pay the full amount of the restitution ($50,000).

  4. The IRS also will not consider an offer based on Doubt as to Collectibility (DATC) or Effective Tax Administration (ETA) for "nonrestitution" taxes or years because those offers must include a compromise of all unpaid taxes.
    Example: The court awards restitution payable to the IRS in the amount of $50,000 for the tax years 2000 and 2001. The IRS assesses civil tax liabilities in the amount of $25,000 for tax year 2002. The IRS may not compromise the civil tax liability for the 2002 tax year based on doubt as to collectibility or effective tax administration because the offer would have to include tax years for which restitution was ordered payable to the IRS.

  5. If an offer in compromise is submitted by a taxpayer that includes tax periods for which criminal restitution was ordered payable to the IRS, the offer should be not be considered unless it provides for full payment of the amount of restitution. Taxpayers submitting such offers should be informed that only the district court that entered the restitution order can modify it.

  6. Questions relating to the terms of a restitution order (e.g., amount awarded, tax periods covered) should be directed to the special agent assigned to the case or the Advisory probation liaison. Defendants seeking to modify a restitution order should be directed to contact their probation officer.

5.1.5.24.6  (01-11-2010)
IRS Role in Monitoring Restitution Orders

  1. While the IRS cannot take administrative enforcement action to collect restitution, it still has responsibility for monitoring compliance if the payment of restitution to the IRS is a condition of probation. See IRM 5.1.5.14 and IRM 5.1.5.15, above.

  2. If civil tax assessments are made against a defendant who has been ordered to pay restitution to the IRS, the Advisory probation liaison must notify the Kansas City SPC (see IRM 5.1.5.24.2(6), above) within five business days of receipt of such notification that an assessment has been made. The liaison will confirm that sufficient information has been provided to the campus, such as the criminal restitution information sheet prepared by CI, or will provide such information to ensure that proper application of the restitution payments can be made.

5.1.5.25  (08-03-2009)
Advisory Closing Actions

  1. Probation cases should be closed no later than 10 business days after:

    • the conditions of probation have been met over the probation period

    • noncompliance with terms of probation have been identified and referred to CI and the probation period has expired

  2. The Advisory probation liaison will periodically check (at least annually) whether the conditions of probation have been terminated early by the court. See IRM 5.1.5.15.2(3). The case should be closed no later than 10 business days after learning that the conditions of probation were terminated by the court.

  3. Enter history on ICS that describes the closing actions taken.

  4. Close any open NF OI – 182 on ICS.


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