Handbook 9.5
The Investigate Process
Chapter 1
Administrative Investigations and General Investigative Procedures
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Contents
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Administrative investigations are those investigations worked outside of
the grand jury process. Most administrative investigations involve only Title
26 violations, although it is possible to investigate Title 31 violations
and some Title 18 violations administratively. Administrative investigations
may be worked whenever the special agent anticipates working without the
cooperation of other agencies, and whenever time is not of the essence.
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General Investigative procedures and rules of evidence are discussed in this
chapter which are applicable to all types of investigations, including grand
jury investigations.
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Administrative investigations may be initiated whenever information is received
or developed by the special agent indicating possible violations of tax,
money laundering, or bank secrecy laws.
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Investigations are initiated (numbered) as either General, Primary, Subject
or Subject Seizure Investigations. A complete description of these four types
of investigations is contained in IRM 9.9, CIMIS.
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Financial investigations, especially tax investigations, differ from most
other types of criminal investigations in that the investigator generally
begins with a known person, and then 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 then attempts to
determine who committed it.
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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.
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The special agent should first determine what evidence must be obtained to
establish the elements of the crime. A work chart or other plan of procedure
may then be developed. This essentially involves a listing of evidence required,
and the probable sources of this evidence.
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Investigations should be commenced quickly, and once begun, should be completed
as quickly as possible.
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Investigations should be conducted impartially and thoroughly to obtain all
pertinent information and evidence, including any evidence which may tend
to exonerate the subject.
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In criminal cases, burden of proof is the obligation of the government to
prove the commission of all of the elements of the crime "beyond a reasonable
doubt" . This burden remains on the Government throughout the trial, although
the burden of going forward with evidence may shift from one side to the
other.
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Direct evidence is that which, if believed, proves the existence of the principal
or ultimate fact without any inference or presumption. It is direct when
the very facts in dispute are sworn to by those who have actual knowledge
of them by means of their senses. It may take the form of admissions or
confessions made in or out of court.
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Circumstantial evidence is that which tends to prove the existence of the
principal fact by inference. It is the only type of evidence generally available
to show such elements of a crime as malice, intent, or motive, which exist
only in the mind of the perpetrator of the deed. The proof of "willfulness"
in most Internal Revenue violations, therefore, is based on circumstantial
evidence. Circumstantial evidence is also frequently used to prove unreported
income through indirect methods, as shown by increases in net worth,
expenditures, or bank deposits.
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Evidence is relevant when it has a tendency to make a consequential fact
even the least bit more probable or less probable than it would be without
the evidence. For example, the fact that an individual concealed large brokerage
accounts from his wife would most likely be relevant to prove intent, while
the fact that he habitually beat his wife would most likely not be relevant
to prove any of the elements of a tax case.
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All relevant evidence may not be admissible, however, since the rules of
evidence may preclude the admission of evidence on other grounds.
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Evidence must be legally obtained and properly authenticated to be admitted.
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For example, evidence obtained by the special agent during an illegal search
will generally not be admitted. Likewise, photocopies of financial records
are normally not admitted without some explanation of the inability to produce
the original documents.
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To save time and expense, a trial judge may accept certain facts without
requiring proof, if they are commonly and generally known, or can be easily
discovered. This is known as "Judicial Notice" .
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Hearsay is a statement offered in evidence to prove the truth of the matter
asserted. Evidence which does not come from the personal knowledge of the
declarant but from the repetition of what the declarant has heard others
say is hearsay. Under Federal Rule of Evidence 802, hearsay statements are
inadmissible at trial unless an exception is applicable. Lack of opportunity
for cross-examination and unreliability are the principal reasons for excluding
hearsay testimony.
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Prior statements by a witness testifying under oath, and subject to cross
examination; and certain admissions listed in Federal Rule of Evidence 801(d)(2)
are not hearsay.
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Federal Rules of Evidence 803 & 804 list a number of exceptions to the
hearsay rule, including some used often in tax investigations, such as the
business records exception and the public records exception. Special agents
should examine Rules 803 & 804 to become familiar with these exceptions.
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A presumption is a rule of law which permits the drawing of a particular
inference as to the existence of one fact not certainly known from the existence
of other particular facts. Although it is not evidence, it may be considered
as a substitute for evidence. Presumptions may be conclusive or rebuttable.
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A conclusive presumption is binding upon the court and jury and evidence
in rebuttal is not permitted. For example, there is a conclusive presumption
that an infant under the age of seven is incapable of committing a felony.
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A rebuttable presumption is one which prevails until it is overcome by evidence
to the contrary. For example, there is a rebuttable presumption that a criminal
defendant is innocent.
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There are certain special types of relationships in which information
communicated by one person to the other is held confidential and privileged
between them. The one to whom the information has been imparted cannot be
compelled to divulge it without the consent of the other. There are four
fundamental conditions:
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The communications must originate in confidence, with the belief they will
not be disclosed;
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The element of confidentiality must be essential to the full and satisfactory
maintenance of the relation between the parties
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The relation must be one which in the opinion of the community ought to be
diligently fostered;
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The injury that would inure to the relationship by the disclosure of the
communications must be greater than the benefit thereby gained for the correct
disposal of litigation.
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There are four generally recognized privileges in Federal judicial proceedings:
attorney/client, husband/wife, clergyperson/penitent, and government/informant.
There are also a number of other relationships in which it is sometimes difficult
to compel testimony. For example, there is no recognized privilege for
communications between parent/child, physician/patient, or
journalist/confidential source.
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Black's Law Dictionary defines the attorney-client privilege as the "client's
privilege to refuse to disclose and to prevent any other person from disclosing
confidential communications between he and his attorney."
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The attorney-client privilege must be strictly construed. Mere attorney-client
relationship does not make every communication by the client to the attorney
confidential. The communication must have been made to an attorney in confidence
for the purpose of enabling the attorney to render legal services to the
client. When it does apply, the privilege covers corporate as well as individual
clients. The attorney-client privilege does not include a right to withhold
the name of a client. Dates and amounts of legal fees paid by a client do
not constitute a privileged communication.
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An accountant employed by an attorney or retained by a taxpayer at the attorney's
request to perform services essential to the attorney-client relationship
may be covered by the attorney-client privilege.
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There are two spousal privileges: Marital Communications Privilege and Adverse
Testimony Privilege.
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Communications between husband and wife, privately made, are generally assumed
to have been intended to be of a confidential nature, and are therefore held
to be privileged. It is essential, however, that the communications must
be, from their nature, fairly intended to be of a confidential nature.
Communications made in the presence of a third party are not privileged.
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Privilege is not extended to communications made outside the marriage relations,
either before marriage or after divorce. Further, the privilege applies only
to communications, and not to acts.
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Communications remain privileged after termination of the marriage.
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The marital communications privilege belongs to, and therefore may be invoked
by, the defendant-spouse.
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There exists an independent privilege of one spouse to refuse to testify
adversely against a another. With respect to this privilege, the testifying
spouse alone has the choice of whether or not to refuse to testify adversely
on any act observed and on any non-confidential communications either before
or during the marriage. The spouse may not be compelled to testify, nor
foreclosed from testifying.
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While privilege between clergyman and penitent has been recognized in the
Federal courts, this privilege has not been extended to such financial
transactions as contributions made through a clergyman.
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This privilege allows enforcement agencies to withhold from disclosure the
identity of persons who furnish information of violations of law to officers
charged with enforcement of that law.
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The purpose of the privilege is the furtherance and protection of the public
interest in effective law enforcement. The privilege recognizes the obligation
of citizens to communicate their knowledge of the commission of crimes to
law enforcement officials and, by preserving their anonymity, encourages
them to perform that obligation. The contents of a communication are not
privileged unless they tend to reveal the informant's identity.
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This privilege differs from all the others in that it is waivable only by
the Government whereas the others are for the benefit of, and waivable by,
the individual.
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Where disclosure of an informer's identity or the content of the communication
is relevant and helpful to the defense of an accused or is essential to a
fair determination, the trial court may order disclosure. If the Government
then withholds the information, the court may dismiss the indictment.
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This section contains a number of administrative procedures to be employed
in the most common administrative investigation situations.
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The Chief or Branch Chief will select for investigation all information items
which, upon evaluation and screening, are deemed to warrant inquiries beyond
those authorized for evaluating information items.
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A brief summary of the basis for opening the investigation will be prepared
and retained in the administrative file. At the discretion of the Chief,
CID, the summary may be a separate document, such as a memorandum prepared
by the evaluating special agent, or the summary may be incorporated in an
existing document used in the district's investigation initiation process.
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All assigned investigations will be subject to sufficient investigative inquiry
to support the disposition recommended in the report, except when surveyed.
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The initial investigative activity in an investigation should involve such
inspection of the taxpayer's books and records or other related inquiries
as are necessary to make an early determination as to whether or not the
case possesses criminal potential. These inquiries should include a check
of the Examination and Criminal Investigation Divisions to determine whether
there is a pending or previous examination or investigation relating to the
principal. Other pertinent government agency inquiries are also important,
e.g., TECS, EPIC, Detroit Computing Center.
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The special agent must possess the original return or returns involved, if
any were filed for the pertinent period, as a prerequisite to independently
interviewing a taxpayer, his/her representative, or one of his/her present
employees or inspecting the taxpayer's books and records.
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Exceptions may be made in cases where an examination is extended to include
taxable periods for which the original return is not available and the
examination is based on the taxpayer's retained copy, or where such action
is approved in writing by the Chief.
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The special agent should interview the taxpayer or representative, and inspect
the taxpayer's books and records. When the services of a cooperating revenue
agent are necessary, the Chief will submit a request to the Examination Division.
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A joint investigation is one conducted by Criminal Investigation together
with Examination or Collection. Investigations involving alleged tax evasion
or willful failure to file a return are usually investigated jointly with
Examination. Investigations involving willful failure to pay a tax may be
investigated jointly with Collection.
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Form 6544, Request for Cooperating Examiner, will be used to request a
cooperating officer in joint investigations initiated from a source other
than Examination Division fraud referral.
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In a joint investigation, the special agent is responsible for:
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the timing and priority of investigative actions;
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developing evidence pertaining to the potential criminal features of the
investigation;
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preparing and issuing summonses;
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obtaining original tax returns for all open periods and entities under
investigation;
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NOTE:
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Group manager approval is required for all tax returns requested by Criminal
Investigation district office personnel.
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making copies of the original returns, certifying they are correct, and providing
them to the cooperating revenue agent within 30 days after initiating a joint
investigation or receiving the original returns, whichever is later; and
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choosing the method for computing tax for criminal purposes.
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In a joint investigation, the cooperating officer is responsible for the
Examination or Collection features of the investigation and taking any action
necessary to protect the interests of the Government in respect to the statutory
period of assessment.
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The group managers of the special agent and the cooperating revenue agent
should exercise sufficient control and follow-up to ensure the prompt completion
of the investigation.
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If Criminal Investigation learns of a case in Examination or Collection which
is related to an active investigation, Criminal Investigation will inform
the appropriate chief of the other division so that the related cases may
be coordinated to prevent action which may prejudice the criminal investigation.
The District Director will resolve any disagreement concerning the propriety
or timing of action in such matters.
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If the special agent thinks the investigation should be extended to a return
which has been filed for six or more years, he/she will submit a brief statement
of the reasons to the Chief. The Chief will determine whether to extend the
investigation.
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Policy Statement P-4-84 requires balancing of the civil and criminal aspects
of investigations to maximize civil enforcement without imperiling criminal
prosecution.
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IRC 7605(b) provides that no taxpayer shall be subjected to unnecessary
examinations or investigations, and only one inspection of a taxpayer's books
of account shall be made for each taxable year unless the taxpayer requests
otherwise or unless, after investigation, he/she is notified in writing that
an additional inspection is necessary. Any such notice, after signature by
the District Director, will be delivered to the taxpayer by the special agent
or the cooperating revenue agent or revenue officer at the time the inspection
is begun.
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[9.5]
1.3.3.3 (12-14-1998)
Civil Action on Investigations Under Jurisdiction of the Office of the
Chief Counsel or the Department of Justice
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The District Director, in the transmittal memorandum forwarding a report
to District Counsel, should specify what civil matters are pending. The
transmittal should summarize outstanding liabilities of the taxpayer and
related entities and modules. The transmittal memorandum should state the
civil action taken, if any, on the outstanding liabilities and should specify
what further action, if any, the district having responsibility for civil
actions plans to take on the accounts. This memorandum can be updated at
any time while the investigation is under the jurisdiction of the Office
of the Chief Counsel or the Department of Justice.
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District Counsel will be responsible for reviewing the proposed civil actions
and will notify the District Director having responsibility for civil actions
of any proposed civil actions which they feel might imperil the criminal
investigation. In the event that the District Director disagrees with District
Counsel's advice, he/she may ask District Counsel to reconsider the advice.
Upon reconsideration, should District Counsel still stand by its earlier
advice, the District Director may seek further review by Regional Counsel.
Should the District Director and Regional Counsel fail to reach agreement,
the matter will be referred by the District Director through the Regional
Commissioner to the Chief Compliance Officer Attn: Assistant Commissioner
(Criminal Investigation). The Assistant Commissioner, (Criminal Investigation)
will consult with the Assistant Chief Counsel (Criminal Tax) and make a
recommendation to the Chief Compliance Officer.
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The above procedures do not apply to Grand Jury cases which will be referred
to Regional Counsel.
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[9.5]
1.3.3.4 (12-14-1998)
Request to Suspend Examination or Collection Action on Non-Tax Criminal
Cases
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A non-tax criminal case is, for these purposes, defined as any case which
is not being investigated by or on behalf of IRS.
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The District Director will not suspend any examination or collection activity
which is requested by the United States Attorney, except that in extreme
emergency situations (such as inability to obtain approval of the Tax Division
and court action in the criminal case is imminent), the District Director
may suspend action for 72 hours if such delay will not be detrimental to
the Service. However, the District Director will temporarily suspend collection
or examination activity upon request from the Assistant Attorney General,
Tax Division, or representative of that office. Such request shall be coordinated
with Chief Counsel.
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. For instances in which the District Director temporarily suspends examination
or collection activity in a case, he shall submit to the Assistant Commissioner
(Examination) or (Collection) a narrative report containing the following
information:
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The name(s) of the individual(s) or entity(ies) involved and the nature of
the offense(s).
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The type of examination or collection action which has been suspended including
the types of taxes involved and number of audits being suspended.
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An estimate of the accrual of tax liabilities pending trial or other disposition
of the non-tax case.
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Facts and circumstances which should be considered in determining the risk
to assessment and ultimate collections.
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The District Director's recommendation as to whether the temporary suspension
should be continued.
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[9.5]
1.3.3.5 (12-14-1998)
Requests for Statute Extensions and Statutory Notices of Deficiency
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If it is determined by the special agent and approved by the group manager
and Chief, CI, that an extension of the statutory period is warranted, the
special agent who has the actual custody of the return shall request the
extension.
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In joint investigations wherein the administrative file has not been forwarded
in connection with the referral of the special agents report to District
Counsel and there is danger of an early expiration of the statutory period
for assessment, the cooperating revenue agent will, timely advise Criminal
Investigation of any proposal to solicit consents extending the statutory
period for assessment. Normally, the solicitation of such a consent does
not prejudice an investigation and unless Criminal Investigation requests
otherwise, within ten workdays following the date the cooperating revenue
agent submits his/her notification of intention to solicit a consent, the
cooperating revenue agent will endeavor to obtain the consent. If the Division
Chiefs cannot reach an agreement, the District Director shall then decide
if the consent will be solicited.
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If it appears likely that criminal prosecution will be recommended, a statutory
notice normally will not be issued if the issuance of the statutory notice
would imperil successful criminal investigation or prosecution.
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NOTE:
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If a statutory notice is issued and the taxpayer appeals to the United States
Tax Court, the Government may lose control over the facts which it will be
required to reveal to the taxpayer, either in the answer or at the trial
of the civil case ahead of the criminal investigation.
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If the District Director or District Counsel authorizes Examination to issue
a statutory notice in a pending criminal investigation, the authorization
shall provide that Collection suspend collection activity 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 Criminal Investigation notifies Collection to proceed
with collection activity.
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TC 910 will prevent the removal of tax filing or payment data from the Master
File to the Retention Register. Such data is routinely removed relative to
taxpayers whose tax module reflects no tax liability (zero balance) and no
activity for a period of three years. TC 910 will permit Criminal Investigation
to retain on the Master File all transactions on the file at the time the
TC 910 is posted. At the time TC 910 posts, a complete transcript (entity
and all tax modules) titled "INTEL-910" is generated and forwarded by the
service center to district Criminal Investigation Function. In addition,
a quarterly inventory listing will be generated and forwarded to Criminal
Investigation Function.
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TC 914 or TC 916 will provide all of the controls described above for TC
910. In addition, TC 914 and TC 916 will:
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prevent posting of all original input transactions addressed to the tax modules
(a tax module is a record of tax data for a taxpayer, covering only one type
of tax for one tax period);
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permit posting of input transactions which have been reviewed;
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prevent a merge of modules if one or both modules are subject to TC 914 or
TC 916;
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prevent the computerized issuance of Form 5546, Examination Return Charge-Out,
and prevents establishment of record on the AIMS data base.
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Prevent the issuance of TDI's or the operation of delinquency check procedures
on the BMF and control the issuance of outputs under the operation of the
Information Returns Processing (IRP) program and the IMF Delinquency Check.
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Terminate any further investigation by generating a Taxpayer Delinquency
Investigation (TDI) recall for all tax modules in TDI status.
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Terminate any further collection action by preventing subsequent issuances
of TDA's. If a tax module is in TDA status, the TDA will be placed in Inactive
status.
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At the time of posting TC 914, produce a complete National Computer Center
transcript of the tax modules titled "INTEL-914" .
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Controls on the Individual Retirement Account File (IRAF) may be input directly;
however, a TC 914 or TC 916 Control on the IMF will automatically place a
control for the same taxpayer on the IRAF. The IRAF is a separate master
file wherein voluntary contributions from self-employed persons to their
own retirement accounts are recorded.
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Other ADP codes include:
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TC 911 reverses TC 910. TC 912 reverses TC 914.
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TC 918 is used for fictitious taxpayers only and will post to the entity
module and will establish a Criminal Investigation freeze on the entire account.
It prevents refunds, credit elects and offsets going to BMF and IRAF.
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TC 915 posts to the module identified by the MFT and tax period of the incoming
transaction and reverses only the refund freeze portion of the TC 916 and
918.
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TC 917 posts to the module identified by the MFT and tax period of the incoming
transaction and reverses the TC 916 on the tax module.
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TC 919 posts to the entity module and reverses the TC 918.
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Criminal Investigation shall withdraw from an investigation when it is determined
that there is no prosecution potential.
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Discontinued investigation reports will be reviewed by the group manager
and, upon approval, will be forwarded to the Chief or Branch Chief for review
and approval.
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In all investigations where a Form 211, Application and Public Voucher for
Reward for Original Information has been filed, and which are determined
to lack criminal potential, a copy of the closing report will be forwarded
to the district Examination function, Attention: Informant Claims Examiner,
regardless of whether the allegation concerns a failure to file or a return
filed.
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[9.5]
1.3.4.1 (12-14-1998)
Notification to Taxpayers When an Investigation is Discontinued
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When an administrative investigation is discontinued, a letter will be prepared
by the Chief, CI and sent to the taxpayer and/or representative by mail.
The letter will state that the CI is no longer investigating the taxpayer.
If appropriate, it should also state that the matter has been referred to
Examination, EP/EO, or Collection.
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If the Chief CI decides not to notify the taxpayer, a memorandum setting
forth the reasons will be prepared. Letters will not normally be sent in
grand jury investigations, nor investigations involving multiple filers or
individuals related to other prosecution investigations.
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In investigations declined by District Counsel or the Department of Justice,
letters of notification will not be sent by the Service.
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In prosecution reports, originals, photocopies, or transcripts or all evidentiary
matters relevant and material to the determination of whether or not criminal
proceedings should be recommended shall be obtained for inclusion as exhibits
to the special agent's report. Summaries may be substituted in lieu of lengthy
transcripts.
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The special agent shall interview the cooperating officer to obtain all the
pertinent facts relating to occurrences prior to its status as a joint
investigation, such as statements made by the principal in the presence of
or to the examining officer.
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If the investigation deals with an alleged false or fraudulent return or
document, the special agent shall obtain a statement under oath from the
person who prepared the return or document.
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When the net worth method of proof is used, the taxpayer's filing record
and copies of available income tax returns should be furnished for at least
five years preceding and all years subsequent to the starting point to furnish
additional support to the starting point. In the event that any of the required
returns are not available, and if the amount of income reported on such returns
cannot be determined from other sources, the District Director's office should
be requested to furnish a listing of the amounts of income tax paid, (including
payments with estimates). A computation will then be made based on the tax
paid to determine the maximum net income which could have appeared on the
return. Prior reports bearing upon the matter should be examined for useful
information.
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The Integrated Data Retrieval System or other automated system will be used,
whenever possible, to request returns or return information. If the original
return is not required, return information may be requested via command code
RTVUE through IDRS. In other instances, Form 2275, Records Request, Charge
and Recharge, should be used to request tax returns and related documents
or photocopies of them, transcripts of information from tax documents, and
miscellaneous Service records. Group manager approval is required for all
tax returns requested by Criminal Investigation district office personnel.
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This information is accessed via command codes IMFOL (individual master file
on-line) or BMFOL (business master file on-line). This information should
eliminate the need for a regular transcript in most situations. However,
if a transcript is necessary, Form 4338, Information or Certified Transcript
Request (see Exhibit 9320-3), and Form 4338-A, IMF Information or Certified
Transcript Request will be used by Criminal Investigation personnel to request
both regular and certified transcripts of account and will be forwarded to
the service center for the district where the return was filed.
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The requirements for the filing of a power of attorney or tax information
authorization by taxpayer representatives are outlined in Subpart E, Conference
and Practice Requirements (26 CFR, Part 601).
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The taxpayer's representative may submit Form 2848 (Power of Attorney), Form
2848-D (Authorization and Declaration), or a substitute form which meets
the specifications of 26 CFR 601.502(c). Forms 2848 and 2848-D are available
as a convenience. Their use is not mandatory.
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The taxpayer's representative may submit Form 2848 (Power of Attorney), Form
2848-D (Authorization and Declaration), or a substitute form which meets
the specifications of 26 CFR 601.502(c). Forms 2848 and 2848-D are available
as a convenience. Their use is not mandatory.
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The principal purpose of a power of attorney or tax information authorization
is to authorize a representative to perform certain acts or receive or inspect
certain tax information. With certain exceptions set forth in 26 CFR
601.502(c)(iii), (4) or (5), a power of attorney is required in order for
the taxpayer's representative to perform any of the specific acts described
in 26 CFR 601.502(c)(1). 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, a Form 2848-D, or an appropriate substitute, may be used
in lieu of Form 2848. A document used in place of Form 2848 or Form 2848-D
should contain the following information:
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Name, TIN, and address of the taxpayer(s).
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Name(s) and address(es) of all agents authorized to represent the taxpayer(s)
and, if more than one person, a designation of which representative is to
receive notices or written communications.
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Specific act(s) the representative(s) is authorized to perform.
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Type(s) of tax.
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Tax year(s) or period(s).
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Name(s) and address(es) to which copies of notices or other written
communications required to be addressed to the taxpayer should be sent.
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Taxpayer(s) signature(s) and the date.
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If a power of attorney or tax information authorization is granted to an
attorney, CPA, or an enrolled agent, the signature of each such person, along
with a declaration that he or she is not currently under suspension or disbarment
from practice before the IRS.
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If a power of attorney is granted to an unenrolled preparer (one not specified
in (h) above), signatures of two disinterested witnesses or a notary's signature
and seal. It is not necessary that the signature on a tax information
authorization be acknowledged or witnessed.
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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 the following acts:
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Executing claims for refund.
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Receiving checks in payment of any refund of Internal Revenue taxes, penalties,
or interest.
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Executing consents to extend the statutory period for assessment or collection
of a tax.
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Executing closing agreements with respect to a tax liability or specific
matter under IRC 7121.
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Executing waivers of restriction on assessment or collection of a deficiency
in tax.
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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 Officer should be contacted for guidance.
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Upon receipt, the original of any power of attorney will be associated with
the investigative file.
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A copy will be forwarded to the applicable service center, Taxpayer Relations
Branch, Attention: Power of Attorney Unit, for data entry onto the Intergrated
Data Retreival System (IDRS) 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 division receiving the power of attorney, and the
district where received.
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Requests for copies of power of attorney forms, including all subsequently
filed instruments, including revocations, substitutions, etc., should be
by memorandum addressed to the service center Taxpayer Relations Branch.
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This procedure will be followed unless they are clearly intended for one-time
use, such as those submitted with Freedom of Information requests or
Congressional inquiries. In these instances, no copy should be forwarded
to the service center and the original should be associated with the
correspondence.
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Regulations require submission of sufficient copies of authorizations from
representatives for each tax matter involved. Each return for a taxable period
represents a separate tax matter. An attorney or certified public accountant,
however, is required to file only one declaration for a particular party
represented, regardless of the number of tax matters involved (5 U.S.C. 500
and 26 C.F.R. 601.502(b). Therefore, it may be necessary to make copies of
authorizations.
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Treasury Department Circular No. 230 prohibits current federal officers and
employees in the executive, legislative, and judicial branches of the government,
or in any agency of the United States, including the District of Columbia,
from practicing before the Service, except that such officers or employees
may represent members of their families or any other persons or estates for
which they serve as guardians, executors, administrators, trustees or other
personal fiduciaries.
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Depending on the extent to which former government employees dealt with a
matter while in government service, they may be barred for one year, two
years, or for life from representing any party other than the government
with respect to that matter.
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Partners and associates of former government employees may also be affected
by this prohibition.
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No Member of Congress or Resident Commissioner (elect or serving) may practice
before the Service in connection with any matter for compensation of any
kind.
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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 Service if such state employment may disclose
facts or information applicable to Federal tax matters.
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Federal or state officials or employees may discuss a case 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 the Circular's
provisions, Service employees should advise such individual concerning the
existence and content of Circular No. 230.
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When a taxpayer, or a representative who has a power of attorney on file
with the Service, requests that contacts with the taxpayer by Service personnel
be made through the representative, such request will be complied with, except
as provided in 26 U.S.C. 7521(d), or in paragraph (2), below.
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When repeated attempts to comply with a request that all contacts be made
through a taxpayer's representative result in unreasonable delays or hindrances
to the investigation, the special agent who is assigned to the matter may
request permission from the Chief to contact the taxpayer directly. If the
Chief grants permission, the investigative file should contain sufficient
facts to show how the investigation or examination was being delayed or hindered
by complying with the request of the taxpayer or representative. The Chief
will provide the taxpayer and the representative with a written notice of
the permission to bypass, in advance of direct contact with the taxpayer,
briefly stating the reasons for granting such permission.
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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 Conference and Practice
Requirements have not been satisfied, the reply will be directed to the taxpayer
and the representative will be advised
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If the Service has received a valid power of attorney or other appropriate
authorization requesting that taxpayer correspondence related to a particular
Criminal Investigation matter be addressed or directed to a designated
attorney-at-law or certified public accountant representing the taxpayer,
the following guidelines will be followed:
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Except as provided in (b) below, the correspondence will be addressed or
directed to the authorized representative. A copy of the correspondence will
be furnished to the taxpayer, unless the taxpayer has specifically requested
in writing that no copy be furnished.
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However, if a particular notice or other document is required by statute
or regulation to be furnished directly to the taxpayer, the original shall
be directed to the taxpayer and a copy shall be furnished to the authorized
representative.
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that the reply has been so directed.
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If advance notification of or contact with the power of attorney would result
in severe prejudice to the taxpayer or to the investigation, the Chief will
consult with District Counsel to determine if it is legally permissible to
bypass the representative without advance notification. The investigative
file should contain sufficient facts to support a decision to bypass.
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NOTE:
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For example, if the power of attorney filed is designed to shield the
representative from investigation, rather than to protect the interests of
the taxpayer-witness, a decision to bypass should be made.
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An authorization to bypass a representative in a particular situation does
not nullify the power of attorney. The Service still has the responsibility
of continuing to notify the representative of any proposed contacts with
the taxpayer and of recognizing the representative if the representative
makes an appearance.
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Disclosure of returns and return information to the taxpayer's representative
will be made only in the following circumstances:
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The taxpayer is present at the time of the disclosure;
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The taxpayer has executed a written consent to the disclosure (Form 2848-D,
Declaration and Authorization, may be used for this purpose); or
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The taxpayer has provided the representative with a power of attorney (Form
2848, Power of Attorney, may be used for this purpose).
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Internal Revenue Manual
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Hndbk. 9.5 Chap. 1 Administrative Investigations and General Investigative
Procedures
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(12-14-1998)
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