9.5.1  Administrative Investigations and General Investigative Procedures

Manual Transmittal

July 02, 2014

Purpose

(1) This transmits revised IRM 9.5.1, Administrative Investigations and General Investigation Procedures.

Material Changes

(1) Subsection 9.5.1.2.1(6) is added to include information on the new Form 14584, IRS-Criminal Investigation-Check for and Suspend Civil Activity Notification, which is designed to determine any past or current civil activity regarding the subject/taxpayer and related entities. Subsequent paragraphs in this subsection are re-numbered (7) – (11).

Effect on Other Documents

This IRM supersedes IRM 9.5.1 dated September 27, 2011.

Audience

This IRM is used by employees of Criminal Investigation.

Effective Date

(07-02-2014)

Signed by Domenic A. McClinton for Richard Weber, Chief, Criminal Investigation

9.5.1.1  (09-27-2011)
OVERVIEW

  1. This section focuses on administrative investigations ( i.e., investigations worked outside of the grand jury process). Most administrative investigations involve Title 26 and tax-related Title 18 violations. Administrative investigations may be worked whenever a special agent anticipates working without the cooperation of other agencies.

  2. Also discussed in this section are general investigative issues and rules of evidence applicable to all types of investigations, including grand jury investigations.

9.5.1.2  (09-27-2011)
Administrative Investigations

  1. Administrative investigations may be initiated whenever information indicating possible violations of tax, money laundering, or bank secrecy laws is received or developed by the Lead Development Center (LDC) and/or the Fraud Detection Center (FDC).

  2. Administrative investigations are initiated (numbered) as general investigations (GI), primary investigations (PI), or subject criminal investigations (SCI). For detailed descriptions of these three types of investigations (see IRM 9.4.1, Investigation Initiation).

  3. The Special Agent in Charge (SAC) or the SAC’s designee should select for investigation all information items which, after evaluation and screening, are deemed to warrant further inquiry (see IRM 9.9.1, Employee Criminal Investigation Management Information System (CIMIS) Responsibilities and Procedures).

  4. A brief summary of the basis for opening the investigation should be prepared and retained in the administrative file. At the discretion of the SAC, the summary may be contained in a separate document, such as a memorandum prepared by the evaluating special agent, or it may be incorporated in an existing document used in the field office's investigation initiation process. Document Manager contains a primary evaluation memorandum template for the investigation summary and referral recommendation.

  5. The automated data processing (ADP) Code 914 must be placed on the appropriate master file module(s) for all Title 26 and tax-related Title 18 subject criminal investigations. Controls and procedures are discussed in Criminal Investigation Law Enforcement Manual (LEM) 9.14.4 - Automated Data Processing Account Controls (on CI Connection in CASE (Communities Accessing and Sharing Expertise)).

  6. All assigned investigations are subject to sufficient investigative inquiry to support the disposition recommendation in the report, except when surveyed.

9.5.1.2.1  (07-02-2014)
Procedures in Financial Investigations

  1. Financial investigations, especially tax investigations, differ from most other types of criminal investigations in that (with the exception of crimes involving identity theft) the investigator generally begins with a known person and attempts to determine whether or not that person has committed a crime. In other types of criminal investigations, the investigator generally begins with a known crime and attempts to determine who committed it.

  2. The purpose of a special agent's investigation is to obtain facts and evidence to determine whether the person under investigation has committed a criminal violation.

  3. The special agent should first determine:

    1. Which criminal statute or statutes are alleged to have been violated.

    2. By whom, when, where, and by what means the offense was committed.

    3. The elements of each alleged offense, what evidence must be obtained to establish the elements, and the probable sources of the evidence.

    4. The timing and sequence of key interviews and service of summonses. Form 6085, Investigative Workplan, should be used to prepare a workplan.

    5. Whether the subject will be contacted for an initial interview.

    6. In a Title 26 or tax-related Title 18 investigation, whether the subject's books and records have been previously examined.

    7. What controls are currently in place on the ADP individual master file/business master file (IMF/BMF) accounts.

  4. The special agent should begin each investigation quickly and complete it as expeditiously as possible.

  5. The initial investigative activity should involve inspecting the subject's books and records and conducting other related inquiries to assess whether the investigation has criminal potential. These inquiries should include a review of the files of all relevant operating divisions –Small Business/Self Employed (SB/SE), Wage and Investment (W&I), Large Business and International (LB&I), Tax Exempt & Government Entities (TE/GE), and Criminal Investigation (CI) – to determine whether there is a pending or previous civil examination or criminal investigation relating to the subject. Other pertinent sources of information should be consulted (e.g., Treasury Enforcement Computer System (TECS), El Paso Intelligence Center (EPIC), Detroit Computing Center) to determine whether the subject is/was under investigation by another government agency.

    Note:

    The EPIC inquiries are limited to narcotics investigations and must be made by/on behalf of a special agent.

  6. The IRS-Criminal Investigation-Check for and Suspend Civil Activity Notification, Form 14584, is designed to determine any past or current civil activity regarding the subject/taxpayer and related entities (see the pdf form on the IRWeb Publishing Services Product Catalog Information page). Civil activity includes ongoing examinations and field collection activity for years and types of tax pertinent to the criminal case. The notification will disclose to the IRS civil functions the initiation of the SCI and applicable TC 914 controls related to the subject. The notification also requests that all civil activity be suspended. While prior civil actions relating to the taxpayer may rarely affect a criminal investigation, subsequent contacts with the taxpayer should be attempted only with the case agent’s knowledge and consent. If the criminal case is a non-tax investigation, this notification is not necessary. The Form 14584 should be sent to the Territory Managers for SB/SE Examination-Technical Services and SB/SE Collection Advisory-Technical Services. For field offices requesting acknowledgement of delivery, it is recommended that the router request a “read and/ or delivery receipt” in the e-mail. In addition to sending the form to the Territory Managers for (Examination and Collection Advisory), this notification should also be sent to the following IRS Civil functions via electronic e-mailbox (refer to the e-mailbox addresses located in the CI form routing section):

    • Tax Exempt Government Entities (TEGE)

    • Abusive Transactions & Technical Issues (ATTI-LDC)

    • Large Business & International (LB&I)

    • IRS SB/SE Fraud BSA (SB/SE BSA)

    This form does not replace Form 4135 – Criminal Investigation Control Notice and its separate process. This section only serves to notify the recipient that CI has requested TC 914 controls on applicable subjects/entities under investigation. In efforts to provide notification to the appropriate IRS civil function and receive an accurate and timely response, the SA should answer the specified notification questions in this section of the form.

  7. When the services of a cooperating revenue agent are necessary, the SAC should submit a request to the appropriate operating division Territory Manager where the subject is located (see subsection 9.5.1.2.1.5 regarding joint investigations with a cooperating examiner/officer).

  8. Investigations should be conducted impartially and thoroughly to obtain all pertinent information and evidence, including any exculpatory evidence.

  9. If the criminal investigation is conducted jointly with a civil operating division, the special agent should interview the cooperating examiner/officer to obtain all pertinent facts relating to developments preceding the joint investigation, such as statements made by the subject in the presence of the cooperating examiner/officer.

  10. If the investigation involves an alleged false or fraudulent return or other document, the special agent should obtain a statement under oath from the person who prepared the return or document.

  11. When the net worth method of proof is used to show an underreporting of income, the subject's filing record and copies of available income tax returns should be obtained for at least five years preceding and all years subsequent to the first year of the violations. In the event any of these returns are not available, and if the amount of income reported cannot be determined from other sources, the operating division Area Director's office should be asked to provide a list of the amounts of income tax paid (including payments of estimated taxes). In such cases, the amount of tax paid should be used to compute the maximum net income that could have appeared on the returns. Prior reports bearing on the matter should also be examined.

9.5.1.2.1.1  (09-27-2011)
Interview with Subjects of Investigations

  1. The special agent must obtain the original return or returns at issue, if any were filed for the pertinent period, prior to independently interviewing a subject, the subject’s representative, one of the subject’s present employees or the subject’s return preparer, and prior to inspecting the subject’s books and records.

  2. Exceptions to the requirement that original returns, rather than copies, be obtained may be made in investigations where an examination is extended to include taxable periods for which the original return is not available and the examination is based on the subject's retained copy, or where the use of copies is approved in writing by the SAC.

  3. In most administrative Title 26 or tax-related Title 18 investigations, the subject should be contacted for an initial interview to confront him/her with the allegations and to identify potential defenses or other weaknesses in the case before making further investigative contacts. Contact with the subject should be made within the first 30 days of numbering a subject criminal investigation. A decision not to contact the subject should be documented in management's investigation review files. The initial interview of the subject may take place at the same time as the initial interview with the return preparer and the accountant.

  4. All contacts with the subject or the subject’s representative must be documented. Special agents should avoid contact with the subject or the subject’s representative without a witness for the government, preferably another special agent, present.

  5. The special agent should monitor developments that could hinder or terminate the prosecution, such as the subject’s death or sudden serious illness, his/her absence from the jurisdiction of the US courts or the contamination of evidence.

9.5.1.2.1.2  (09-27-2011)
Additional Inspection of Taxpayers Records

  1. Title 26 USC §7605(b) provides that no taxpayer may be subjected to unnecessary examinations or investigations, and only one inspection of a taxpayer's books of account may be made for each taxable year, unless the taxpayer requests otherwise or, after investigation, the taxpayer is notified in writing that an additional inspection is necessary. Pursuant to Delegation Order 4-7 (formerly DO-57, Rev. 9) authority has been delegated to the relevant operating division Territory Managers to sign the notice of additional inspection (Letter 939 (DO)).

  2. Once signed by the appropriate operating division Territory Manager, the notice of additional inspection should be delivered to the subject of an investigation by the special agent or the cooperating revenue agent or revenue officer at the time the inspection is begun.

  3. In general, the Service will not reopen any case closed after examination unless information is developed that indicates fraud, malfeasance, collusion, concealment, or misrepresentation of a material fact (see Policy Statement 4–3 in IRM 1.2.13).

  4. Form 4505, Reopening Memorandum, should be used when requesting authority to reopen a case. Form 4505 is usually prepared by the examiner; however, situations may arise in which a special agent may be a co-initiator. The SAC may be listed in the routing block entitled “Other” on Form 4505. The special agent and the cooperating examiner/officer should jointly prepare one Form 886–A, Explanation of Items, to provide a narrative justification for the request.

  5. Title 26 USC §4423 specifically excludes wagering tax investigations from the provisions of 26 USC §7605(b). It provides that the books of account of any person liable for taxes on wagering may be examined and inspected as frequently as necessary for the enforcement of the wagering tax provisions.

9.5.1.2.1.3  (09-27-2011)
Requesting Returns

  1. This section lists the steps necessary to request tax returns. This is an overview only; detailed guidance for each of these steps can be found at:

    1. CI Connections on the Communities Accessing and Sharing Expertise (CASE) web page in the Tax Fraud Investigative Assistant (TFIA) Community

    2. Servicewide Electronic Research Program (SERP) Web page

    3. IRM Chapters: 2.9, Integrated Data Retrieval System Procedures (IDRS); 2.3, IDRS Terminal Responses; and 2.4, IDRS Terminal Input

9.5.1.2.1.3.1  (09-27-2011)
Identify the Document Locator Number

  1. The first step in requesting tax returns is to identify the document locator number for the tax returns needed. To do this, use IDRS Command Code IMFOLT (for SSN’s) or BMFOLT (for EIN’s) to get the Document Locator Number (DLN) of the tax return. The controlling DLN will be shown on the second line of information on both of these command codes. A Form 13368, IDRS Request, must be approved prior to accessing IDRS.

  2. If an adjustment has been made to the original tax return (TC 150), the controlling DLN will be different from the TC 150 DLN. This pertains to both paper returns, as well as electronically filed (ELF) returns. Compare the controlling DLN with the TC 150 DLN. If the two are different, request both DLN’s. In instances where multiple adjustments are made and/or amended returns are filed, more than two DLNs may need to be requested.

9.5.1.2.1.3.2  (09-27-2011)
Determining if Tax Return was Filed Paper/Electronically

  1. The File Location Code (FLC), which is the first two digits of the DLN, will identify whether a tax return is a paper return or an electronically filed return, as well as which IRS Campus is responsible for handling the return.

  2. A listing of all FLCs can be found on CASE in the TFIA Community. For each FLC, the corresponding IRS Campus is identified and it is noted whether the return is paper or electronic.

9.5.1.2.1.3.3  (09-27-2011)
Requesting Paper Tax Returns

  1. A Form 13368, IDRS Request, must be approved prior to requesting all tax returns. All paper tax returns are requested using IDRS Command Code ESTABDE. Please see the above referenced material for detailed guidance on using command code ESTABDE.

9.5.1.2.1.3.4  (09-27-2011)
Requesting Electronically Filed Tax Returns

  1. A Form 13368 (IDRS Request) must be approved prior to requesting all tax returns.

  2. Electronically filed returns for Processing Year 2009 and after may be filed in MeF (Modernized E-File System). The Modernized Tax Return Database (MTRDB) is the official repository of all electronic returns processed through MeF. Tax return data is stored immediately after returns are processed. IRS employees use the Employee User Portal (EUP) to access and view MeF tax returns/extensions, acknowledgements, transmissions and tax return related information processed through MeF. This application uses a web browser and allows IRS employees to view and print tax returns in a format that resembles the paper forms. The EUP gives the ability to view and print returns immediately, which means the return does not have to be ordered via IDRS. The MeF filed documents printed from EUP are considered original for all purposes except the Tax Return Inventory (TRI) program, where they are treated the same as TRPRT documents.

  3. Not all 2009 and subsequently filed electronic returns will be filed MeF. Some of them will still be filed via the ELF "Legacy" system as in the past. As more and more providers/preparers convert to the MeF method the number of MeF filed tax returns will rise, until the ELF "Legacy" system is phased out. IDRS Command Code TRDBV is the easiest place to look and find an indication of whether a return is filed MeF or ELF "Legacy" . Please see the above referenced material for detailed guidance on using command code TRDBV.

  4. All non-MeF ELF "Legacy" tax returns are ordered via IDRS command code TRPRT, regardless of the processing year. These documents are sent to the requestor via mail. Please see the above referenced material for detailed guidance on using command code TRPRT.

  5. Detailed procedures and training for obtaining electronic returns through EUP can be found on CASE in the TFIA Community, and the ELMS Course #29749 – Researching Accepted MeF Returns on RRD.

9.5.1.2.1.3.5  (09-27-2011)
Requesting Images of Forms 1040X

  1. Forms 1040X are converted to a scanned image before they are destroyed. The scanned images of the Forms 1040X (known as the correspondence imaging system (CIS) prints) can be retrieved using IDRS command code ESTABDX. The "CIS Print" must be notated in the remarks section.

9.5.1.2.1.3.6  (09-27-2011)
Locating Missing Tax Returns (Special Searches)

  1. To locate missing tax returns, employees should contact the Special Search Unit at the IRS Campus where the tax return was filed.

  2. A list of the campus special search unit contacts can be found on CASE in the TFIA Community.

  3. To identify the appropriate IRS Campus to contact, please review the table found on CASE in the TFIA Community. This reference will also identify whether the return is paper or electronic.

  4. Before asking for a special search, employees will need to have made at least two requests through normal ESTABD procedures - allowing two weeks between requests for mail time. If the tax return has not been received after both requests and the allotted mail time, a special search can be requested.

  5. A Form 2275 (Records Request, Charge and Recharge) with all of the pertinent information will be required. A manager must sign this form before the special search unit will service your special search request.

9.5.1.2.1.3.7  (09-27-2011)
Requesting Expedite Tax Returns for Interview or Court Proceedings

  1. Employees requesting expedite tax returns should complete Form 2275, Records Request, Charge and Recharge and route through the servicing CI Scheme Development Center Court Witness Coordinator.

  2. A listing of these Court Witness Coordinators can be found on CASE in the TFIA Community.

9.5.1.2.1.4  (09-27-2011)
Requesting Transcripts of Taxpayer Accounts

  1. If return information is needed, but original tax returns are not required, the IDRS should be used to request return information in the form of transcripts. Transcripts are accessed using IDRS command codes that allow the information be viewed on-line or printed. A Form 13368, IDRS Request, must be approved prior to requesting all transcripts.

  2. If a certified transcript is required, Form 4338, Information or Certified Transcript Request and/or Form 4338-A, IMF Information or Certified Transcript Request, will be used by CI personnel to request certified transcripts of account. These forms should be routed through the servicing CI Scheme Development Center Court Witness Coordinator. A listing of these Court Witness Coordinators can be found on CASE in the TFIA Community.

  3. Detailed guidance for requesting transcripts can be found on:

    1. CI Connections on the CASE web page in the TFIA Community

    2. Servicewide Electronic Research Program (SERP) Web page

    3. Internal Revenue Manual (IRM) Chapters: 2.9, Integrated Data Retrieval System Procedures (IDRS); 2.3, IDRS Terminal Responses; and 2.4, IDRS Terminal Input

9.5.1.2.1.5  (09-27-2011)
Joint Investigations with Small Business/Self Employed, Large Business and International, Tax Exempt/Government Entities, or Wage & Investment

  1. A joint investigation is one conducted by CI together with SB/SE, LB&I, TE/GE, or W&I investigations involving alleged tax evasion, willful failure to file a return and willful failure to pay a tax are usually investigated jointly with a civil operating division (see IRM 25.1.4, Joint Investigation).

  2. Use Form 6544, Request for Cooperating Examiner, to request a cooperating officer in joint investigations.

  3. In a joint investigation, the special agent is responsible for:

    1. the timing and priority of investigative actions

    2. developing evidence pertaining to the criminal features of the investigation

    3. preparing and issuing summonses

    4. obtaining original tax returns for all open periods and entities under investigation

    5. making copies of the original returns, certifying they are correct, and providing them to the cooperating examiner/officer within 30 days after initiating a joint investigation or receiving the original returns, whichever is later

    6. choosing the method for computing tax for criminal purposes

    7. establishing appropriate controls on tax returns (see LEM 9.14.4 in CASE)

  4. In a joint investigation, the cooperating examiner/officer is responsible for the examination and collection features of the investigation and for taking any necessary actions to protect the government’s interests with respect to the statutory period of assessment.

  5. The supervisory special agent (SSA) and the manager of the cooperating examiner/officer should exercise sufficient control and follow-up to ensure the prompt completion of the investigation. Joint quarterly four-way meetings must be conducted for both administrative and grand jury investigations, unless waived by both operating divisions. Form 6084, Quarterly Joint Workplan and Conference Memorandum, must be completed to document the meetings. At the meetings, the participants should review the status of the investigation and determine which actions should be taken by the cooperating examiner/officer and the special agent during the next quarter.

  6. If CI learns of an investigation within another operating division that is related to an active criminal investigation, CI must inform the appropriate operating division Territory Manager so that the related investigations may be coordinated to prevent actions that could prejudice the criminal investigation.

  7. Area Counsel, Criminal Tax (CT) is responsible for reviewing any proposed civil actions in a joint investigation. Criminal Tax should discuss the proposed civil action with the appropriate operating division’s counsel.

  8. If the SAC believes a proposed civil action might imperil the criminal investigation, the SAC should notify the appropriate operating division Territory Manager. If the Territory Manager disagrees, he/she may ask the SAC to reconsider and may seek further review by the Area Director of the appropriate operating division and the Director, Field Operations. If the parties fail to reach an agreement, the matter should be referred by the SAC to the Chief, CI. The Chief, CI, will consult with his or her counterpart in the other operating division and make a recommendation as to the proposed civil action.

  9. If the special agent believes a joint investigation should be expanded to include a return that was filed six or more years ago, he/she should submit a brief statement of the reasons for this expansion to the SAC, who will decide whether to expand the investigation.

  10. Policy Statement 4-26 (formally P-4-84) requires balancing the civil and criminal aspects of investigations to maximize civil enforcement without imperiling the criminal prosecution (see IRM 1.2.13, Policy Statements for the Examining Process). If it is determined that the civil statute will be allowed to expire in order to protect the criminal investigation, the special agent and the cooperating examiner/officer should prepare a “Balancing Memorandum”. This memorandum must be signed by the investigating agent, the SSA, the cooperating examiner/officer and his or her manager and the Territory Manager, and then forwarded to the SAC. The proposal to allow the civil statute to expire should also be reviewed by Area Counsel, CT. The Joint Investigation manual, IRM 25.1.4, contains additional information regarding the protection of civil statutes of limitations during a criminal investigation.

9.5.1.2.1.5.1  (09-27-2011)
Civil Action on Investigations Under Jurisdiction of the Tax Division

  1. In the transmittal memorandum forwarding a prosecution recommendation report to the DOJ, Tax Division, the SAC should describe any civil matters that are pending. The memorandum should summarize the outstanding liabilities of the taxpayer and related entities and modules. In addition, the memorandum should indicate any civil actions taken with respect to outstanding liabilities as well as any future action planned by other operating divisions.

  2. The transmittal memorandum can be updated at any time while the investigation is under the DOJ’s jurisdiction.

9.5.1.2.1.5.1.1  (09-27-2011)
Requests for Statute Extensions and Statutory Notices of Deficiency

  1. In some cases, the special agent may decide that a request for the subject’s consent to extend the civil statute of limitations is warranted. Such a request must be approved by the SSA and the SAC, and it should be made by the special agent who has actual custody of the return.

  2. In joint investigations, the cooperating examiner/officer should timely advise CI of any proposal to solicit consents to extend the statutory period for assessment. Unless CI requests otherwise, the cooperating examiner/officer should attempt to obtain the consent within 10 workdays following notification of CI. If the SAC and the operating division Territory Manager cannot reach an agreement with respect to the request for consent, the Director, Field Operations and the Area Director of the appropriate operating division will decide whether the consent should be solicited. If agreement is still not achieved, the matter should be elevated to the operating division commissioner level and to the Chief, CI, for resolution.

  3. If issuance of a statutory notice of deficiency would imperil the success of a criminal investigation or prosecution, a statutory notice will generally not be issued.

    Note:

    If a statutory notice is issued and the taxpayer petitions the US Tax Court, the government may be required to reveal evidence to the taxpayer, either in its answers to the taxpayer’s motions or at the civil trial, prior to the conclusion of the criminal investigation.

  4. If the operating division Territory Manager and the SAC authorize the operating division to issue a statutory notice in a pending criminal investigation, the authorization should provide that collection activity be suspended following the assessment of the deficiency and issuance of the first notice. If the account is not paid after the first notice, the Taxpayer Delinquent Account (TDA) will be issued but will be held by the office branch in inactive status until the tax is paid or CI notifies the operating division to proceed with collection activity.

9.5.1.2.1.6  (09-27-2011)
Disclosure of Return Information to Taxpayer’s Representative

  1. In general, 26 USC §6103 provides that returns and return information are confidential and may not be disclosed to any person by an officer or employee of the United States unless a statutory exception applies.

  2. Disclosure of returns and return information to a taxpayer's representative may be made only in the following circumstances:

    1. The taxpayer has executed a written consent to the disclosure (Form 8821, Tax Information Authorization, may be used for this purpose); or

    2. The taxpayer has provided the representative with a power of attorney. (Form 2848, Power of Attorney, may be used for this purpose).

9.5.1.2.1.7  (09-27-2011)
Tax Information Authorization

  1. A tax information authorization is a document signed by a taxpayer authorizing any individual or entity designated by the taxpayer to receive and/or inspect confidential tax information in a specified matter. A tax information authorization is not required if a power of attorney is properly filed, provided the power of attorney places no limitations upon disclosures.

  2. The tax information authorization may be executed on Form 8821, Tax Information Authorization, or on a substitute form that includes all the information requested on Form 8821. The requirements for filing a tax information authorization are described in Subpart E, Conference and Practice Requirements (26 CFR §601.501 – §601.509).

9.5.1.3  (09-27-2011)
Power of Attorney

  1. A power of attorney is a document signed by a taxpayer appointing an individual as attorney-in-fact to perform certain specified acts or types of acts on the taxpayer’s behalf. The taxpayer’s appointed representative may be an attorney, a CPA, an enrolled agent, an enrolled actuary or another individual described in 26 CFR §601.502(b).

  2. The requirements for filing a power of attorney are outlined in Subpart E, Conference and Practice Requirements (26 CFR §601.501 – §601.509). The taxpayer's representative may submit Form 2848, Power of Attorney and Declaration of Representative, or a substitute form that meets the specifications of 26 CFR §601.503(a). However, for purposes of processing the form onto the Centralized Authorization File (see below), a completed Form 2848 must be attached, even if not signed by the taxpayer.

  3. With certain exceptions set forth in 26 CFR §601.504(b), a power of attorney is required in order for the taxpayer's representative to perform any of the acts described in 26 CFR §601.504(a). These specific acts can also be found on the front page of Form 2848. In all other instances involving the receipt of confidential tax information, Form 8821, or an appropriate substitute, may be used instead of Form 2848.

  4. A document used in place of Form 2848 must contain the following information:

    1. Name, TIN, and address of the taxpayer(s).

    2. Name(s) and address(es) of representative(s) authorized by the taxpayer(s).

    3. Description of the matter(s) for which representation is authorized, including type(s) of tax, federal tax form number(s) and the tax year(s) or period(s).

    4. A clear expression of the taxpayer’s intent concerning the scope of authority granted to the representative.

    5. Taxpayer(s) signature(s) and the date.

    6. A written declaration from the representative stating that he or she is not currently under suspension or disbarment from practice before the IRS or any other practice of his or her profession, is aware of the regulations contained in Treasury Department Circular 230, is authorized to represent the taxpayer, and is a “recognized representative” under 26 CFR §601.502(b). For limitations on the acts which an unenrolled return preparer may perform, see 26 CFR §601.502(b)(5)(iii).

  5. If a power of attorney is granted to a person other than an attorney, CPA, or enrolled agent, Revenue Procedure 81-38, C.B. 1981-2, prohibits such person from performing the following acts:

    1. executing claims for refund

    2. receiving checks in payment of any refund of Internal Revenue taxes, penalties, or interest

    3. executing consents to extend the statutory period for assessment or collection of a tax

    4. executing closing agreements with respect to a tax liability or specific matter (see 26 USC §7121)

    5. executing waivers of restriction on assessment or collection of a deficiency in tax

  6. Information concerning a taxpayer should not be released to a third party without written authorization from the taxpayer. If questions arise as to the propriety of disclosing information to a person representing the taxpayer, the disclosure office should be contacted for guidance.

9.5.1.3.1  (09-27-2011)
Processing Power of Attorney Forms

  1. Upon receipt, the original of any power of attorney should be associated with the investigative file.

  2. A copy of the power of attorney should be forwarded to the attention of the Power of Attorney Unit at the Memphis or Ogden IRS Campus (depending upon the state of residence of the taxpayer as shown in Exhibit 9.5.1-1, State Mapping for POA/CAF Program) for data entry into the Centralized Authorization File (CAF). The copy forwarded should be legible and complete to ensure data entry can be accomplished. Indicate on this copy the first initial and surname of the investigating agent, the function/division that received the power of attorney and the field office where received.

    Note:

    Third party authorizations submitted on behalf of taxpayers residing abroad (international) are processed by the Philadelphia Accounts Management Center (PAMC) exclusively.

  3. Requests for copies of power of attorney forms, including all subsequently filed instruments such as revocations, substitutions, etc., should be by memorandum addressed to the appropriate IRS campus (see Exhibit 9.5.1-1).

  4. This procedure should be followed unless the power of attorney forms are clearly intended for one-time use, such as those submitted with Freedom of Information Act (FOIA) requests or Congressional inquiries. In these instances, no copy should be forwarded to the IRS campus and the original should be associated with the correspondence.

  5. Regulations require submission of sufficient copies of authorizations from representatives for each tax matter involved. (For a description of the information that must be included with respect to each tax matter, see 26 CFR §601.503(a)(5).) Each return for a taxable period represents a separate tax matter. However, an attorney or certified public accountant is required to file only one declaration for a particular party represented, regardless of the number of tax matters involved. Therefore, it may be necessary to make copies of authorizations.

9.5.1.3.2  (09-27-2011)
Representation by Governmental Officers and Employees

  1. Treasury Department Circular No. 230 prohibits current officers and employees of the executive, legislative, or judicial branches of the Federal government, or of the District of Columbia, from practicing before the IRS, except that such officers or employees may represent their parents, spouses or children, or any other persons for whom, or estates for which, they serve as guardians, executors, administrators, trustees or other personal fiduciaries, in matters in which they have not participated as government employees and for which they have had no official responsibility (see 18 USC §203 and §205).

  2. Depending on the extent to which former government employees were involved with a matter while in government service, they may be barred for one year, two years, or for life from representing any party to that matter.

  3. Partners and associates of former government employees may also be affected by this prohibition.

  4. No member of Congress or Resident Commissioner (elect or serving) may practice before the IRS in connection with any matter for compensation of any kind.

  5. Officers or employees of any state, or subdivision thereof, whose duties require them to pass upon, investigate, or deal with tax matters of such state or subdivision, may not practice before the IRS if such employment may disclose facts or information applicable to Federal tax matters.

  6. Federal or state officials or employees may discuss an investigation or appear with a taxpayer in the capacity of a witness without violating these restrictions. However, if a Federal or state official or employee appears to be representing a taxpayer under circumstances indicating a possible violation of Circular No. 230, the official or employee should be advised of the existence and content of Circular No. 230.

9.5.1.3.3  (09-27-2011)
Dealing with Powers of Attorney

  1. Title 26 USC §7521(c) generally provides that the IRS may not require a taxpayer to accompany his or her representative to an interview, if the taxpayer has executed a valid power of attorney. However, 26 USC §7521(d) provides that this rule does not apply to criminal investigations.

  2. Despite the exemption provided by 26 USC §7521(d), it is CI’s policy to honor powers of attorney so long as doing so would not hinder an investigation.

    Note:

    When conducting a grand jury investigation, the special agent should request guidance on this issue from the government attorney assigned to the investigation.

  3. In certain cases, CI may determine that honoring a power of attorney would delay or hinder an investigation. For example, a special agent may have been unable to contact a representative despite numerous attempts. In such instances, the special agent may request permission from the SSA, to notify the subject directly that the agent believes the representative is responsible for unreasonable delay or hindrance of the investigation (see 26 USC §7521(c)). If the SSA grants permission, the investigative file should contain documentation reflecting the fact that permission was given and the facts that led to this decision.

  4. Even if the subject is notified directly that the agent believes the representative is hindering the investigation, the IRS must continue to notify the representative of any proposed future contacts with the taxpayer, provide the representative with copies of notices, etc., and/or recognize the representative if the representative makes an appearance.

  5. Whenever correspondence is received from a taxpayer or representative in a tax investigation, and the reply or a copy thereof cannot be directed to the representative as requested because the above-described Conference and Practice Requirements have not been satisfied, the reply should be directed to the taxpayer, and the representative should be advised.

  6. If the IRS has received a valid power of attorney or other appropriate authorization requesting that taxpayer correspondence related to a particular CI matter be addressed or directed to a designated attorney or CPA representing the taxpayer, the following guidelines should be followed:

    1. Except as provided in (b) below, the correspondence should be addressed or directed to the authorized representative. A copy of the correspondence should also be furnished to the taxpayer, unless the taxpayer has specifically requested in writing that no copy be furnished.

    2. If a particular notice or other document is required by statute or regulation to be furnished directly to the taxpayer, the original should be directed to the taxpayer and a copy should be furnished to the authorized representative.

9.5.1.4  (09-27-2011)
Centralized Authorization File

  1. The Centralized Authorization File (CAF) is a centralized database containing detailed information on third parties authorized to act on behalf of a taxpayer (see IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File (CAF)).

  2. The CAF contains three types of records:

    1. Minimal taxpayer information such as taxpayer identification number (TIN) and name (taxpayer address and phone information are not processed onto the CAF).

    2. Third party name and address information (telephone and fax number may also be present).

    3. A summary of the types of tax and tax period(s) authorized for representation and the third party’s name(s), CAF number(s) and type(s) of authority granted for each period.

  3. The CAF number is a unique number assigned to each third party. The third party is expect to use it whenever he or she represents or acts on behalf of a client or requests oral or written tax information.

  4. The CAF information is a particularly useful tool in investigations where routine investigative sources have not been successful in identifying former and current clients of a return preparer(s).

  5. Centralized Authorization File (CAF) Information Requests are used to determine and list the clients of the subject of a criminal investigation. A CAF Information Request differs from the IDRS command code CFINK, which researches particular tax returns or taxpayers on which a third party has been listed as a power of attorney or an authorized representative, and who has been issued a CAF number. A CFINK request can be run through IDRS if the operator has access to the command code. Consult IRM 2.3.31 for instructions on the use of command Code CFINK.

9.5.1.4.1  (09-27-2011)
Criminal Investigation Access to Centralized Authorized File

  1. Delegation Order No. 9-9 gives the Chief, CI the authority to approve CI access to CAF information (see IRM 1.2.48).

9.5.1.4.2  (09-27-2011)
The Centralized Authorized File Information Request

  1. A CAF Information Request is made by the SAC in a memorandum to the Chief, CI. The subject line will read "Centralized Authorization File Information Request" .

  2. The CAF Information Request memorandum (see "Memo CAF Request" template in Document Manager) must contain the following information:

    1. investigation number

    2. summary of the investigative actions taken to date

    3. tax periods for which information is requested

    4. CAF number

    5. explanation of why access to CAF information is necessary

      Note:

      The explanation must indicate that the information is not available from other sources.

    6. concurrence line for the Director, Field Operations

    7. approval line for the Chief, CI

9.5.1.4.3  (09-27-2011)
Approval and Processing of Centralized Authorized File Information Requests

  1. All CAF requests are forwarded to the Chief, CI for approval through the Director, Field Operations to the Director, Global Financial Crimes, Policy and Support (CI:OPS:GFC), who will review the document for content and prepare appropriate routing documents to obtain approval from the Chief, CI.

  2. Following approval of the CAF Information Request, the Director, CI:OPS:GFC will submit the request directly to the Chief, IDRS Branch for research. The Director, CI:OPS:GFC will maintain all CAF Information Requests on behalf of the Chief, CI and will periodically review the usefulness of such requests.

  3. The Director, CI:OPS:GFC will also forward a copy of the approved CAF Information Request to the SAC. A copy of the request will be maintained in the corresponding group’s administrative case file.

9.5.1.5  (09-27-2011)
Parallel Investigations

  1. The Internal Revenue Code (IRC) has both civil and criminal provisions to address abusive tax schemes. In certain situations, the IRS will suspend a civil investigation until the related criminal investigation is completed, in order to avoid jeopardizing the success of the criminal case. However, criminal and civil investigations may be conducted simultaneously with respect to ongoing, abusive tax schemes that result in significant losses to the US Treasury. This manual section provides special agents with guidance with respect to CI's involvement and obligations when conducting a parallel investigation. Internal Revenue Manual 4.32.2, The Abusive Tax Avoidance Transactions (ATAT) Process should also be consulted for detailed descriptions of the policies and procedures of both CI and the civil operating divisions with respect to parallel investigations.

9.5.1.5.1  (09-27-2011)
Policy Statement

  1. Policy Statement P-4-26 provides policy guidance with respect to the impact of a civil compliance action during a criminal investigation (see IRM 1.2.13).

9.5.1.5.2  (09-27-2011)
Commencement of Parallel Investigation

  1. Criminal Investigation must be notified of all proposed investigations prior to authorization by the Small Business and Self Employed Lead Development Center (SB/SE LDC) or the Large Business and International Office of Tax Shelter Analysis (LB&I OTSA). Criminal Investigation should respond by indicating whether the commencement of a civil investigation would likely conflict with the criminal investigation.

  2. If CI has an open subject criminal investigation or related investigation or is interested in initiating a criminal investigation, civil examiners and special agents must meet and coordinate the gathering of evidence to support the separate criminal and civil investigations while being mindful of legal requirements and constraints. Communication is essential for a successful parallel investigation.

9.5.1.5.3  (09-27-2011)
Criminal Investigation of an Abusive Scheme or Abusive Preparer

  1. Criminal Investigation field offices may request a civil audit or investigation with the goal of terminating an abusive tax scheme or curtailing the actions of an abusive return preparer. A civil audit or investigation may result in a civil court injunction, a civil penalty or both.

  2. Requests for civil investigations of abusive schemes or preparers should generally be routed to the SB/SE LDC. The SB/SE website provides contact information for initiating a parallel investigation of an abusive tax scheme.

  3. The LB&I OTSA should be contacted with respect to abusive schemes promoted or fraudulent returns prepared by national law firms or accounting firms. The CI Philadelphia LDC can assist with locating the current LB&I OTSA contact person to request a promoter or preparer investigation from OTSA

9.5.1.5.3.1  (09-27-2011)
Role of the Criminal Investigation Philadelphia Lead Detection Center

  1. The CI Philadelphia LDC is responsible for the initial coordination with SB/SE and LB&I of potential parallel investigations.

  2. When the CI Philadelphia LDC receives notification of a proposed civil investigation from the SB/SE LDC or OTSA, the LDC conducts research in the Criminal Investigation Management Information System (CIMIS) to determine whether there is an open subject or related criminal examination. This preliminary research involves a search by name and taxpayer identification number, associate identity or "doing business as" (DBA) for any numbered CI investigations.

  3. The CI Philadelphia LDC transmits the basic information about the proposed investigation to the field office that services the area in which the subject resides.

  4. If the CI Philadelphia LDC CIMIS check discloses an open subject criminal investigation or related examination, the LDC issues a memorandum to the Special Agent in Charge (SAC) of the respective field office requesting a determination as to whether there is a conflict between the proposed civil action and the criminal investigation. A conflict exists if a civil investigation would greatly harm the ongoing criminal investigation. If there is a "no conflict" determination, a parallel investigation may be pursued.

9.5.1.5.3.2  (09-27-2011)
Criminal Investigation Field Office Actions

  1. The SAC should make the conflict/no conflict determination within 10 days of receiving the CI LDC memorandum and should fax the determination to the SB/SE LDC or OTSA.

  2. When a field office receives a primary investigation (PI) from the CI LDC relating to an abusive tax promotion or promoter, and there is a no conflict determination, the PI is considered a lead from the SB/SE LDC or OTSA. The evaluation of the PI should be completed within 30 days, with a provision for a 30-day extension. Within 10 days of receiving the PI, the assigned special agent should schedule and conduct a six-way conference. This conference assists CI in evaluating criminal potential and provides an opportunity to discuss how the parallel civil and criminal investigations will be conducted. The source code for these investigations is 31, IRS-other, not a fraud referral.

    Note:

    If a fraud referral has been developed with the assistance of a Fraud Technical Advisor (FTA) or by the referring Division, CI handles the investigations as a regular fraud referral.

9.5.1.5.3.2.1  (09-27-2011)
Six-Way Conference

  1. A six-way conference is required for all investigations where CI has an open investigation or is interested in pursuing an investigation. The conference should be held within 10 days.

9.5.1.5.3.2.2  (09-27-2011)
Conference Participants

  1. The following individuals should participate in the six-way conference:

    1. Examiner

    2. Group/Team Manager

    3. Area Counsel

    4. Special Agent

    5. Supervisory Special Agent

    6. Criminal Tax (CT) Counsel

  2. If there is a DOJ Attorney (AUSA or DOJ-Tax) assigned to the criminal investigation, the DOJ-Attorney should participate. If the DOJ-Attorney cannot participate, it is imperative that he/she is fully apprised of the nature of the discussion and decisions made with respect to the coordination of the civil and criminal investigations.

  3. The local FTA is encouraged to attend. Territory Managers, a representative from collections, and the SB/SE LDC Technical Advisor or the IMT Technical Advisor may also participate as appropriate.

9.5.1.5.3.2.3  (09-27-2011)
Discussion Topics During Six-Way Conference

  1. The goal of a parallel investigation is to ensure the IRS effectively balances civil and criminal actions to achieve maximum compliance and stop the promotion of the abusive tax scheme.

  2. The existence of a criminal investigation alone does not present a conflict and should not automatically delay or forestall a civil investigation.

  3. During the meeting, each operating division should share all non-grand jury information about the abusive scheme. The discussion should include:

    1. identification of the subject(s) or entities of the investigations

    2. types of evidence available and the source of such evidence

    3. information known with respect to participants

    4. tax theories or positions of each respective investigation

    5. any limitations on sharing information between divisions such as Rule 6(e) regarding grand jury secrecy

    6. potential impact of possible civil defense discovery motions during the criminal investigation

    7. effect of the disclosure requirements of Brady and Giglio, which apply to civil examiners involved with the injunction process

  4. The following factors are considered in determining whether or when the IRS should proceed with a parallel investigation:

    1. scope and size of the promotion in terms of potential loss of tax revenue, geographic location, number of promoters, participants or returns involved

    2. rate of growth and extent of marketing, particularly for internet problems

    3. potential for civil injunction

    4. deterrence value of civil verses criminal action

    5. potential impact on criminal investigation

    6. efficient and effective use of resources

    7. amount of time to complete the civil or criminal investigations

    8. ongoing or planned undercover operations or search warrants

    9. identification, potential examination, and deterrence of promotion participants

  5. At the conclusion of the six-way conference, determinations should be made with respect to:

    1. concurrence on commitment of a parallel investigation

    2. any proposed restrictions as to the extent or timing of the civil investigation

    3. contacts with investigation subjects and witnesses

    4. compliance actions with respect to identification participants

    5. sharing of all non-grand jury materials

9.5.1.5.3.2.4  (09-27-2011)
Outcome of Six-Way Conference

  1. The six-way conference may result in several different outcomes:

    1. Conduct a parallel investigation.

    2. Temporary delay any overt steps of the civil investigation (e.g., do not contact the promoter or third parties).

    3. Commence only a civil investigation.

    4. Proceed with only a criminal investigation.

9.5.1.5.3.2.4.1  (09-27-2011)
Delay of Civil Action

  1. Delay of overt civil action should only occur in investigations where CI can show that civil enforcement would seriously harm or impair the criminal investigation.

  2. Suspension of overt civil action should be limited to a short time frame to allow CI to complete a specific task (i.e., undercover activity or search warrant).

  3. Field compliance and CI should agree on extensions of time beyond the originally agreed-upon time frame.

  4. Criminal Investigation should allow civil examiners to continue to develop their investigation to the extent possible without taking any overt actions. Acceptable actions may include conducting internal and public information research, reviewing non-grand jury records in CI's possession, and securing or developing a participant list.

  5. Compliance actions with respect to abusive tax scheme participants who are not subjects or potential subjects of a criminal investigation should generally not be delayed.

9.5.1.5.3.2.4.2  (09-27-2011)
Resolving Conflicts

  1. Concerns about, or objections to, parallel investigations should be resolved through consultation among the civil examiners, special agents, the examiners and special agents’ supervisors, IRS attorneys, and, if a prosecution referral has been made, attorneys at the DOJ and/or US Attorney's Office (USAO). If resolution is not possible at this level, the matter should be elevated through the respective chains of command of CI and the civil operating division, and, if the matter has been referred, through the DOJ/USAO chain of command.

  2. If there is a dispute arising from a parallel investigation, the CI field office should notify the Global Financial Crimes senior analyst responsible for parallel investigations. Global Financial Crimes will provide guidance and will work with the field office to resolve the conflict.

  3. Separate memoranda should be prepared for the appropriate Territory Manager and the SAC. The briefing document should summarize the facts of the investigation, projected plan of action, and specific civil actions identified as problematic to the parallel investigation. The existence of a criminal investigation alone is not a sufficient basis for delaying a civil promoter investigation. Rather, CI should describe how the criminal investigation would be hindered if a civil investigation were begun.

  4. If necessary, the matter should be elevated as follows:

    1. The Territory Manager and the SAC should meet to discuss resolving any civil or criminal conflicts.

    2. If the Territory Manager and the SAC are unable to reach an agreement, the Territory Manager should submit a memorandum within 10 days to the SB/SE LDC or the Financial Services Promoter Manager describing the nature of the conflict and the reasons why CI believes civil action would harm the criminal investigation. The SB/SE LDC or LB&I promoter program should work with Global Financial Crimes and their respective operating division counsels to assist in resolution of the dispute.

    3. If an agreement is still not reached, the local SB/SE Examination Area Director or LB&I Director should attempt to resolve the issue with the CI Director, Field Operations.

    4. The next elevation level involves the SB/SE Director, Abusive Transactions, or the LB&I Industry Director/Issue Champion and Director, CI:OPS:GFC.

    5. The Deputy Commissioner, Services and Enforcement, has final authority for determining the appropriate course of action.

9.5.1.5.4  (09-27-2011)
Quarterly Coordination Meetings

  1. Civil examiners, special agents and their respective Area Counsels must continually coordinate their efforts. Investigation status meetings are required to be held, at a minimum, every quarter until the civil proceedings are complete or the civil investigation is placed in fraud suspense.

  2. The purpose of the quarterly coordination meetings is to communicate investigation developments and facilitate information sharing between the civil and criminal divisions. Criminal Investigation may not direct the actions taken with respect to the civil investigation.

  3. Participants in the meetings should include the examiner, special agent, their respective managers and their respective Area Counsels. If the matter has been referred to the DOJ, the assigned attorney should participate in these investigation status meetings. It is critical that the DOJ attorney assigned to the criminal investigation be fully aware of all civil actions, developments and evidence throughout the investigative process.

  4. If CI plans to use special investigative techniques, such as undercover operations, or to execute a search warrant, the civil operating division should be notified when practical. The timing of actions in a civil examination, investigation or other proceeding may affect special agent safety during the use of a special investigative technique or the execution of a search warrant. Therefore, close coordination and communication are necessary when CI uses such techniques. Any decisions on how and when to proceed should be weighed in favor of special agent safety concerns.

  5. Any concerns or objections raised during the investigation process should be resolved by consultation among the civil examiners and special agents, their respective supervisors and their respective Area Counsel. When the matter has been referred, the DOJ Attorney must be included in the decision-making process.

9.5.1.5.4.1  (09-27-2011)
Coordination of Theory of the Case

  1. Civil examiners, special agents and their respective counsel should carefully consider whether any tax theories or positions taken in their respective investigations (civil injunction, participant examination, and criminal prosecution) are inconsistent.


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