Contents

• [9.5] 4.1 Overview
  • [9.5] 4.1.1 Multiple Claims for Refund
    • [9.5] 4.1.1.1 Investigative Techniques (Multiple Claims for Refund)
    • [9.5] 4.1.1.2 Investigation of Multiple Claims For Refund
    • [9.5] 4.1.1.3 Fraudulent Claims Indicators
    • [9.5] 4.1.1.4 Characteristic Features of Multiple Fraudulent Returns
    • [9.5] 4.1.1.5 Detection of the Fraudulent Claims
    • [9.5] 4.1.1.6 Multiple Refund Identification by Automated Data Processing
    • [9.5] 4.1.1.7 Assistance of the Postal Service in Multiple Refund Schemes
    • [9.5] 4.1.1.8 The Questionable Refund Program (QRP)
      • [9.5] 4.1.1.8.1 Procedures for Service Center Identified QRP Schemes
      • [9.5] 4.1.1.8.2 District Procedures for Service Center Identified QRP Schemes
      • [9.5] 4.1.1.8.3 Procedures for District Identified QRP Schemes
  • [9.5] 4.1.2 Return Preparer Program (RPP)
    • [9.5] 4.1.2.1 Procedures for Service Center Identified RPP Schemes
    • [9.5] 4.1.2.2 District Procedures for RPP Scheme Referrals
    • [9.5] 4.1.2.3 Procedures for District Identified RPP Schemes
    • [9.5] 4.1.2.4 Investigative Techniques (Unscrupulous Return Preparers)
    • [9.5] 4.1.2.5 Investigation of Multiple Fraudulent Returns Prepared by Unscrupulous Return Preparers
    • [9.5] 4.1.2.6 Developing the Investigation
    • [9.5] 4.1.2.7 Embezzlement of the Client's Tax Payment
  • Exhibit [9.5] 4-1 List of First Three Digits of SSN and their Assigned Areas of Issuance

[9.5] 4.1  (07-30-1998)
Overview

1. Fraudulent refund cases fall within two groups, Multiple Claims for Refunds and Unscrupulous Return Preparers.

[9.5] 4.1.1  (07-30-1998)
Multiple Claims for Refund

1. Multiple claims for refund results from federal income tax return(s) that are supported by fabricated and false Forms W-2, Wage and Tax Statement(s). The return(s) may be filed by one, two, or more subjects in collusion with intent to defraud the government.

[9.5] 4.1.1.1  (07-30-1998)
Investigative Techniques (Multiple Claims for Refund)

1. In the multiple claims for refund cases, the investigation is directed toward:
   1. The authenticity of return(s) and supporting document(s).
   2. Ascertaining the responsible return(s) preparer and filer.

[9.5] 4.1.1.2  (09-02-1999)
Investigation of Multiple Claims For Refund

1. Cases in this group originate in a variety of ways such as:
   1. The service center may forward information indicating that multiple returns have been filed by the same taxpayer.
   2. The Chief, Collection Division, may forward to the Chief, CI, returns indicating false claims for refunds, which were secured during Collection activity.
   3. A postman may report the delivery of numerous government checks to an address or person showing unusual interest in the mail.
   4. The U.S. Postal Service or Internal Revenue Service (IRS) may note an excessive number of mail-forwarding requests.
   5. An audit may disclose a nonexistent address, taxpayer, employer, or excessive deductions.
   6. A return preparer or filer may, in the presence of an informant, boast about how much he or she received in refunds.
   7. Scrupulous return preparers, may report suspicious return preparers to the Service.
2. Special agents should understand the provisions of Title 18, U.S. Code, Section 287, and be prepared to coordinate their investigative activities with investigations conducted by the Secret Service, the U.S. Postal Service, or other government agency. It is not unusual for this type of return preparer or filer to be involved in violations of other federal statutes.
3. The Secret Service is interested in knowing of an investigation of counterfeiting and forgery statutes (see text, Secret Service Records).
4. The Postal Service is interested in the use of the mails to defraud the federal government.
5. The assistance of the United States Attorney's office may be utilized to obtain an arrest or search warrant.
6. A violation of Title 18, USC, Section 287, occurs upon the filing of a fabricated federal income tax return wherein a false representation is made that the tax has been overpaid and there is a claim made for a refund of the overpayment.

[9.5] 4.1.1.3  (07-30-1998)
Fraudulent Claims Indicators

1. The following are indicators special agents should look for in these cases:
   1. Multiple filing may be confined to a single IRS district or may extend to many districts.
   2. The name used on a fraudulent return may be an alias, a fictitious name, or a variation of a preparer or filer's name.
   3. The address is usually the address of a hotel, a motel, a rooming- house, a post office box number, or general delivery. However, residential street numbers have been used on occasion.
   4. Attached to the returns are fabricated and false Form W-2 (sometimes handwritten) showing fictitious employer(s), salary, or tax withheld.
   5. The name of the employer shown may or may not be an existent firm or person. If the name is that of an existent firm or person, an out-of-state address is frequently shown.
   6. Usually the only income reported on the return is salary under $5,000 from one employer.
   7. Form 1040A is used more often than Form 1040.
   8. If the preparer or filer is acquainted with the Service's pre-refund audit tolerance, the amount claimed for dependents and other deductions will keep the claimed refund within amounts, eliminating the possibility of detection by a pre-refund audit.
   9. Early detection of this claim enables the Service to stop the issuance and delivery of refund checks to fraudulent claimants.

[9.5] 4.1.1.4  (09-02-1999)
Characteristic Features of Multiple Fraudulent Returns

1. Some of the characteristic features of multiple fraudulent returns which will lead to their detection as fictitious are listed below:
   1. A substantial refund is claimed solely on the basis of the number of exemptions listed.
   2. An unrealistic amount is shown as tax withheld.
   3. Absence of or unrealistic social security information shown. Unless an exempt occupation, such as state government employment, is involved, a Social Security number should be shown and the correct amount of Social Security deduction listed.
2. Special agents should look for the following items to detect false social security numbers:
   1. Social Security numbers should appear 000-00-0000.
   2. They always being with a number 0 to 7; never begin with an 8 or a 9.
   3. Prior to January 1966, the middle two digits had to be odd if the number was under ten (01, 03, 05, 07 or 09) and even for higher numbers (10, 12, 14, etc.). Presently, as each area exhausts their sequence of numbers in the odd and even categories, they will start using the even numbers under ten then the odd numbers above ten.
   4. The first three digits of the Social Security number identify the area of issuance. A list of numbers and their assigned areas of issuance are shown in Exhibit 9.5.4-1.
   5. The percent and maximum amount withheld should agree with the law for the year involved.
3. Absence of or an unrealistic Employer's Identification Number shown on Form W-2. These should always appear 00-0000000 with the first two digits being the code number of the IRS district. For example, a Tennessee Employer's Identification Number should ordinarily begin 62- and the following 7 digits should be within the limits of the numbers assigned thus far.
4. Unusual delivery instructions such as different addresses being shown on Form W-2 and the tax return, a boulevard address in small towns, a taxpayer's use of Post Office Box, General Delivery, and mail forwarding services.
5. Similarity of information, format, or writing on several returns. Frequently, cases involving numerous returns being filed by one person can be detected by his or her continued use of similar names as to taxpayers, employers, exemptions, and types of deductions claimed; or similarity in the arrangement of the information and the printing, handwriting or typewriting appearing on the returns.
6. Undeliverable refund checks resulting from the taxpayer's miscalculations of intentional design.
7. In instances where the taxpayer plans to receive the refund check at an address other than the one listed on the return, the scheme may be to file a change of address with the Postal Service prior to delivery of the check. The scheme may also be to recover the check after it has been returned to the Service by later providing forwarding instructions.
8. Undeliverable refund checks frequently include those the taxpayer failed to intercept.
9. Refund checks retrieved by the taxpayer after they have been returned to the IRS leave a trail of forwarding instructions.

[9.5] 4.1.1.5  (09-02-1999)
Detection of the Fraudulent Claims

1. The investigation is not over upon the detection of the fraudulent filing. Additional investigative responsibilities may include the following:
   1. Special agents must analyze the false documents to determine if a specific scheme or technique is being used and if there are any additional false returns. Computer generated extracts of refund information are available to help special agents identify additional returns having similar characteristics to those already discovered. These extracts (routines) are described in the Law Enforcement Manual (LEM) IX.
   2. Special agents must be familiar with surveillance techniques (see text 9.4.6) to identify and locate subjects.
   3. Special agents must understand the meaning of Probable Cause and be acquainted with text 9.4.12, 9.4.9, and 9.6.2 relating to arrests, searches, and complaints, respectively.
2. Special agents may ask the postmaster or postal inspector for a description of the renter of each postal box and, with the postmaster's cooperation, arrange a surveillance of the postal box. The Postal Inspection Service will make available equipment that gives a signal when the postal box is opened. Special agents should discuss with their Group Manager whether they should arrest the person opening the box and picking up the check, or should the arrest be delayed.
3. Special agents should utilize the services of the Office of Forensic Science and Support for handwriting and typewriting comparisons. Special agents should be acquainted with the procedures prescribed in Handbook 9.4 Chapter 11.
4. To identify the subject's handwriting and typewriting to the returns filed, special agents should:
   1. Obtain copies of refund checks which may have been cashed; have handwriting analyses made of the endorsements; and follow through with inquiries. Such inquiries may lead to the identification of the negotiator of the checks by disclosing the name of the person or firm that cashed or deposited the checks.
   2. Examine all post offices' records where the boxes are rented in order to obtain a specimen of the renter's handwriting.
   3. Identify references given by the renter applying for a box and determine, in the case of fake references, how the renter arranged to intercept and reply to the postal authorities' inquiry.
   4. Special agents should obtain printed, typewritten, and handwriting specimens in order to have an expert compare these specimens with handwriting, printing, and typewriting on tax returns, check endorsements, and forwarding instructions.
   5. Special agents should obtain prior and subsequent years' returns, if any.
5. Special agents must determine if employers' names correspond with those on Forms W-2 and tax returns filed. These employers should be contacted to determine if the persons listed on the returns are on their payroll.
6. Special agents should contact the State Unemployment Compensation office to verify information on the Forms W-2. The State Unemployment Compensation office maintains records pertaining to FUTA tax information on employers and their insured employees. This office can determine if an employer, employee, or Social Security number listed on a tax return exists in that state. This state office can also supply, by telephone, all information shown on the application for the Social Security number.

[9.5] 4.1.1.6  (09-02-1999)
Multiple Refund Identification by Automated Data Processing

1. The purpose of automated data processing (ADP) identification is to assist in identifying returns filed by individuals filing multiple false claims for refund and returns prepared by unscrupulous tax practitioners (so-called tax experts or refund mills).
2. To have the Individual Master File (IMF) checked the Chief, CI should submit a request, in triplicate, to the Assistant Commissioner, CI, Attention: Service Center Support, through the Director of
   Investigations.
3. The request should contain the following data to utilize this program:
   1. Tax year to be checked.
   2. Which of the routines is to be used (1), (2), (3) or (4). (See LEM IX.)
   3. Lowest ZIP code number (five digits) or the geographic area to be checked.
   4. Highest ZIP code number (five digits) of the geographic area to be checked. (High ZIP code need not be furnished for Routine (3).
   5. Only one ZIP code is used for Routine (4).
   6. Reason for request. Priority will be given to search the IMF to identify returns in an opened investigation over a possible multiple filing search.
4. A single request for Routines (1) or (2) can consist of a maximum of 2099 zip codes. For example, a single request may specify a low ZIP code number of 30000 and a high of 32098. For Routine (3) and Routine (4) a single ZIP code constitutes a request. Since some districts may not have a range of 2099 ZIP code numbers, Headquarters may incorporate ZIP code numbers of other districts in the request to the National Computer Center to make maximum use of the program.
5. To provide security and establish priorities, the Director, Tax Refund Fraud has been designated to coordinate this program with the National Computer Center.

[9.5] 4.1.1.7  (07-30-1998)
Assistance of the Postal Service in Multiple Refund Schemes

1. Part 232.3d of the Postal Service Manual instructs postal employees to report to their Inspection Service suspicious activities engaged in by the holders of post office boxes. Should an employee note such suspicious activity, i.e., a quantity of tax refund checks directed to a post office box, in the normal course of his or her duties, and volunteer this information to an Inspector, the information would be made available to the Internal Revenue Service, if apparently indicative of criminal activity.
2. The situation in (1) above is to be distinguished from the process of systematically scanning or watching incoming mail for the purpose of identifying alleged violators of the Internal Revenue Code and notifying IRS of the names of the alleged violators. This has been determined to satisfy sufficiently the definition of a mail cover and, therefore, local Postal Officials should not be requested to have employees institute such a watch on the mail without requesting an official mail cover.
3. A request for delivery of a refund check to a specific address will be made by the local special agent to the local Postal Inspector. The Postal Inspector will arrange to have an employee of the Postal Service put the refund check in the Post Office box or deliver the check to a residence address in a regular delivery. The Postal Inspector will notify CI of the approximate time the check will be delivered to the desired address.
4. It has been determined by the Legal Liaison Officer, Chief Inspector's Office, U.S. Postal Service that a prison mail room is not part of the U.S. Postal system. Consequently, prison officials can make additions to addresses without violating postal regulations. In this regard, it is possible to request from prison officials that all of a prisoner's mail going to IRS be directed to the Chief, Criminal Investigation Branch of the appropriate service center. As appropriate, District Directors should establish coordination with local prison officials concerning assistance in redirecting any mail leaving the prison.

[9.5] 4.1.1.8  (09-02-1999)
The Questionable Refund Program (QRP)

1. The purpose of the Questionable Refund Program (QRP) is to detect and stop fraudulent and fictitious claims for refunds on income tax returns.
2. The goal is to investigate and prosecute promoters and conspirators. Investigative priorities are the responsibility of each District Chief as based upon local prosecution standards. Emphasis should be given to investigations with a greater potential for continuing loss.
3. Special agents should maintain close relationships with tax preparers and should expeditiously respond to information on alleged schemes.
4. Special agents, working in conjunction with the service center Questionable Refund Detection Teams (QRDT), should take reasonable steps to ascertain the magnitude of the scheme and the number of participants.
5. Investigative steps should include the following:
   1. Contacting the preparer or transmitter.
   2. Identifying the person controlling the refund address.
   3. Determining the existence of mail forwarding instructions.
   4. Contacting lending institutions and establishing the falsity of wage and income documents.

[9.5] 4.1.1.8.1  (09-02-1999)
Procedures for Service Center Identified QRP Schemes

1. Effective October 1, 1996, all QRP schemes referred to a district office will be input as primary investigations into the Criminal Investigation Management Information System (CIMIS) database by personnel in the Criminal Investigation Branch (CIB) at the service centers.
2. The Form 4930 will be prepared at the service center and entries will be made in items 1-10, 12-18, 23, 24, 27, 29, and 71. The original Form 4930 will accompany the referral to the district. A copy of the Form 4930 will be retained in the scheme file maintained at each CIB.
3. The investigation number for each of these investigations will contain a specific identifier for each CIB.
4. The first two digits, normally the district officer number, will identify the service center where the investigation was initiated.
5. After the primary is initiated, CIMIS will place them in a QRP group case pool. Each district will be assigned a group pool number for QRP referrals and this number will appear in the Lead SSN field (Item 1) of the Form 4930.
6. The QRP has been assigned pool number 9999. For example, the group pool number for the Los Angeles District will be 000-95-9999.
7. These primary investigations will appear in the district inventory and will appear in the CIMIS reports and statistical summaries as any other open primary investigation in the district.
8. Effective January 1999, all QRP schemes must be linked to one national General Investigation (GI). The GI number (009910003) is assigned to all Service Center Criminal Investigation Branches

[9.5] 4.1.1.8.2  (09-02-1999)
District Procedures for Service Center Identified QRP Schemes

1. Upon receipt of the QRP Scheme referral from the service center, the receiving district will promptly assign an agent to evaluate the referral, and update the Form 4930 to reflect the case assignment and the due date of the evaluation of the referral.
2. The due date is 90 days from the receipt of the referral by the district.
3. The name of the Primary Investigation should not be changed. If a Subject Investigation is initiated as a result of the evaluation of the QRP Primary Investigation, the Form 4930 initiating the subject should reflect the name of the target of the investigation. This will not be consistent with the name on the primary investigation. Even though they are not consistent, the primary investigation will still be linked to all subject investigations initiated.
4. The district is responsible for closing QRP Primary Investigations as well as Subject Investigations which are initiated as a result of the evaluation of the QRP scheme referral. These investigations should be closed in a manner consistent with all other primary and subject investigations.
5. At the conclusion of the criminal aspects of a false refund investigation, the Chief, CI, will forward a memorandum containing the true name and Social Security number of the filer to the Chief, CIB. The Chief, CIB, will then notify the service center Examination and Collection Branch via two-way memo to have the taxpayer's account adjusted and collection action initiated.

[9.5] 4.1.1.8.3  (09-02-1999)
Procedures for District Identified QRP Schemes

1. In the event the District Office rather than the Service Center opens a QRP Primary Investigation (PI), the District Office must call the appropriate Service Center QRP coordinator to receive a scheme number. This will help to prevent duplicating open PIs on schemes the Service Center is already tracking.
2. The district is responsible for closing all QRP Primary Investigations and Subject Investigations in a manner consistent with all other Primary and Subject Investigations.
3. At the conclusion of the criminal aspects of a false refund investigation, the Chief, CI will forward a memorandum containing the true name and Social Security number of the filer to the Chief, CIB. The Chief, CIB will then notify the Service Center Examination and Collection Branch via two-way memo to have the taxpayer's account adjusted and collection action initiated.

[9.5] 4.1.2  (07-30-1998)
Return Preparer Program (RPP)

1. This Program involves claims on federal income tax returns prepared by unscrupulous return preparers who claim excessive deductions and exemptions on returns prepared for clients. The clients may or may not have knowledge of the excessive deductions and exemptions claimed.
2. These preparers develop a large clientele through a reputation for saving clients' money, and often charge exorbitant fees on the basis of large refunds to be obtained.
3. Most unscrupulous return preparers have the refund checks mailed to their office, exact an exorbitant fee, forge the endorsement, and negotiate the check without the client's knowledge.
4. Investigations in this group originate from a variety of sources, such as:
   1. Letters of complaint from the public and information from informants concerning returns' preparers.
   2. Complaints from ethical practitioners and professional societies.
   3. Screening of returns by service center personnel.
   4. Identification of suspect preparers by CI and other Service
      personnel.

[9.5] 4.1.2.1  (09-02-1999)
Procedures for Service Center Identified RPP Schemes

1. Effective October 1, 1999, all RPP schemes referred to a district office will be input as primary investigations into the Criminal Investigation Management Information System (CIMIS) database by personnel in the Criminal Investigation Branch (CIB) at the service centers.
2. The Form 4930 will be prepared at the service center and entries will be made in items 1-10, 12-18, 23, 24, 27, 29, and 71. The original Form 4930 will accompany the referral to the district. A copy of the Form 4930 will be retained in the scheme file maintained at each CIB.
3. The investigation number for each of these investigations will contain a specific identifier for each CIB.
4. The first two digits, normally the district officer number, will identify the service center where the investigation was initiated.
5. After the primary is initiated, CIMIS will place them in a RPP group case pool. Each district will be assigned a group pool number for RPP referrals and this number will appear in the Lead SSN field (Item 1) of the Form 4930.
6. The RPP has been assigned pool number 8888. For example, the group pool number for the Los Angeles District will be 000-95-8888.
7. These primary investigations will appear in the district inventory and will appear in the CIMIS reports and statistical summaries as any other open primary investigation in the district.
8. Effective January 1999, all RPP schemes must be linked to one national General Investigation (GI). The GI number (009910005) is assigned to all Service Center Criminal Investigation Branches

[9.5] 4.1.2.2  (09-02-1999)
District Procedures for RPP Scheme Referrals

1. Upon receipt of the RPP Scheme referral from the service center, the receiving district will promptly assign an agent to evaluate the referral, and update the Form 4930 to reflect the case assignment and the due date of the evaluation of the referral.
2. The due date is 90 days from the receipt of the referral by the district.
3. The name of the Primary Investigation should not be changed. If a Subject Investigation is initiated as a result of the evaluation of the RPP Primary Investigation, the Form 4930 initiating the subject should reflect the name of the target of the investigation. This will not be consistent with the name on the primary investigation. Even though they are not consistent, the primary investigation will still be linked to all subject investigations initiated.
4. The district is responsible for closing RPP Primary Investigations as well as Subject Investigations which are initiated as a result of the evaluation of the RPP scheme referral. These investigations should be closed in a manner consistent with all other primary and subject investigations.
5. At the conclusion of the criminal aspects of a false refund investigation, the Chief, CI, will forward a memorandum containing the true name and Social Security number of the filer to the Chief, CIB. The Chief, CIB, will then notify the service center Examination and Collection Branch via two-way memo to have the taxpayer's account adjusted and collection action initiated.

[9.5] 4.1.2.3  (09-02-1999)
Procedures for District Identified RPP Schemes

1. In the event the District Office rather than the Service Center opens a RPP Primary Investigation (PI), the District Office must call the appropriate Service Center RPP coordinator to receive a scheme number. This will help to prevent duplicating open PIs on schemes the Service Center is already tracking.
2. The district is responsible for closing all RPP Primary Investigations and Subject Investigations in a manner consistent with all other Primary and Subject Investigations.

[9.5] 4.1.2.4  (09-02-1999)
Investigative Techniques (Unscrupulous Return Preparers)

1. The investigative techniques used in these investigations are different from the techniques used in multiple claims for refund investigations. These investigations are directed toward:
   1. Determining the responsibility for the overstatement of the deductions and exemptions claimed.
   2. Establishing whether such overstatements were made with corrupt intent.

[9.5] 4.1.2.5  (09-02-1999)
Investigation of Multiple Fraudulent Returns Prepared by Unscrupulous Return Preparers

1. The returns in this group of investigations are usually of authentic origin but are fraudulent because of overstated deductions or exemptions.
2. Some of the most flagrant violations have been committed by unscrupulous return preparers who have been illiterate, trusting clientele.
3. Occasionally, it has been established that a preparer has conspired with the taxpayer to file a false and fraudulent return.
4. Internal Revenue Code (IRC) 7206(2) (see text 9.1.1) is used in the prosecution of the preparer in the former cases; and either this section or Section 371, Title 18, is used in the latter type of case. These are not the only statutes that may be invoked. Section 371, Title 18, is the conspiracy statute and the techniques of investigation of conspiracy cases are set forth in IRM Handbook 9.1 Chapter 3.

[9.5] 4.1.2.6  (09-02-1999)
Developing the Investigation

1. Multiple refund cases involving unscrupulous preparers are developed by patient and painstaking interviews of the clientele to determine responsibility for fraudulent returns.
2. Facts can often be obtained expeditiously and with less alarm by interviewing each client prior to a formal subject interview.
3. If the client interview discloses information or records which are material to the investigation, the client testimony can be obtained later under oath.
4. In an effort to evaluate allegations, consideration should be given to using a special agent in an undercover status. The undercover agent can have a return prepared and learn the practitioner's modus operandi and obtain evidence.
5. The investigation should establish if the fraud is attributable to the preparer, the client, or both. An interview should, therefore, be designed to ascertain:
   1. The name of the person that recommended the preparer and the identity of others known to have used the preparer's services. It is advisable to obtain prior years' returns filed by the client. Prior year returns not prepared by the subject can be used for comparison.
   2. Information and records used in the preparation of the return.
   3. Any memorandum or notes the preparer made of information
      furnished.
   4. Any discussion between the preparer and client regarding the amount of deductions and exemptions to be claimed.
   5. Any suggestions made by the preparer that more deductions should be claimed. These suggestions should be fully explained.
   6. If each deduction claimed is the same amount furnished to the preparer by the client, obtain documents and statements concerning amounts claimed. If the amount claimed is different than that which was furnished to the preparer, obtain the client's explanation.
   7. If the client knew that an excessive amount had been claimed, determine why he or she permitted it; and if the client did not know, how it escaped him or her.
   8. The circumstances of the client's signing the return. Was the return signed before or after it was completed? If the client signed the return in blank, why? If the return was completed before the client signed it, did the client review the contents? How could any excessive amounts escape him or her?
   9. Did the client know a refund was claimed?
   10. Why the client believed he or she was to receive a refund.
   11. The client's literacy, knowledge, or training in tax matters.
   12. The amount of the preparer's fee and was the amount charged based on the refund to the obtained?
   13. Where the refund check was to be mailed; if to the preparer's address, why?
   14. Did the client cash the refund check?
   15. Obtain an explanation of the check cashing. Determine if it was cashed by the preparer; did the preparer take a fee from the proceeds; and was possession of the check by the preparer used to coerce payment of an exorbitant fee?
   16. Did the preparer endorse the client's name to the check? If so, did the client authorize it?
6. The questions listed above are submitted as an outline for a preparer interview. Other pertinent questions may arise as the interview proceeds. During the preparer interview, if possible, obtain copies of:
   1. Any memorandums or notes made during interviews with clients.
   2. Any memorandums, documents, and data furnished to the preparer by the client for use in preparing the client's return.
   3. Any list of fees charged, list of clients, retained copies of returns filed, or other pertinent material that the preparer maintains.
7. The preparer's employees should be interviewed to establish procedures for the preparation of returns. The outline for the interview of the subject preparer should also be used for all employees preparing returns.
8. The pattern of investigations most susceptible to the development of successful criminal prosecution are those cases involving:
   1. Returns having claims that are completely without basis.
   2. Clientele testify that deductions were listed without their knowledge.
   3. The actions of the practitioner corroborate the testimony of his or her clientele.
9. Special agents should not use possible legitimate deductions as evidence.
10. Special agents should keep in mind that the clients may be as culpable as the practitioner. Client culpability should be resolved as soon as possible.

[9.5] 4.1.2.7  (09-02-1999)
Embezzlement of the Client's Tax Payment

1. These are cases in which the unscrupulous preparer accepts payment for the tax liability of the client at the time of preparation of the return but does not file the return or pay the tax. In these investigations, the preparer cannot be charged with violation of IRC 7203; however, IRC 7201 has been recommended in several instances.
2. In one case tried under IRC 7201, U.S. v. Mesheski , the court held that such acts involve only the crime of embezzlement under state law, and do not come within the definition of attempt to evade or defeat tax.
3. Other courts have disagreed with that conclusion, and found that the defendant intended to cheat not only his or her clients by embezzling their money but also the government by evading the clients' taxes. U.S. v. Charles L. O. Edwards .