Contents

• [9.5] 13.1 OVERVIEW

• [9.5] 13.2 CIVIL TAX AND PENALTY ASSESSMENTS ON THE CRIMINAL TAX INVESTIGATION
  • [9.5] 13.2.1 Criminal Vs. Civil Tax
  • [9.5] 13.2.2 Civil Penalties
    • [9.5] 13.2.2.1 Fraud Penalty (IRC 6663)
    • [9.5] 13.2.2.2 Negligence Penalty (IRC 6662)
    • [9.5] 13.2.2.3 Delinquency Penalty (IRC 6651)
    • [9.5] 13.2.2.4 Failure To Pay (Late Payment) Penalty (IRC 6651)
    • [9.5] 13.2.2.5 One Hundred Percent Penalty (IRC 6672)

• [9.5] 13.3 CIVIL PENALTIES ON MONEY-LAUNDERING INVESTIGATIONS
  • [9.5] 13.3.1 Penalties For Title 18 Money-Laundering Investigations
  • [9.5] 13.3.2 Civil Penalties in Title 31 Investigations
    • [9.5] 13.3.2.1 Title 31 Civil Penalties Assessed Against a Financial Institution

• [9.5] 13.4 CIVIL ASSESSMENTS ASSOCIATED WITH PLEAS
  • [9.5] 13.4.1 Civil Assessments Associated With Pleas on Administrative Investigations
    • [9.5] 13.4.1.1 Plea Negotiations Prior To the Submission of the Special Agents's Report (Administrative Setting)
  • [9.5] 13.4.2 Pleas After Arrests, Informations, or Indictments

• [9.5] 13.5 RESPONSIBILITY FOR THE CIVIL STATUTES OF LIMITATIONS

• [9.5] 13.6 OFFERS IN COMPROMISE
  • [9.5] 13.6.1 Offers in Pending Criminal Investigations

• [9.5] 13.7 CIVIL RESTITUTION FOR QUESTIONABLE REFUND INVESTIGATIONS
  • [9.5] 13.7.1 Special Agent's Responsibilities in Restitution Orders
  • [9.5] 13.7.2 Service Center Criminal Investigation Branch (CIB) Responsibilities

• [9.5] 13.8 JEOPARDY AND TERMINATION ASSESSMENTS
  • [9.5] 13.8.1 Criteria For Determining When a Jeopardy or Termination Is Appropriate
  • [9.5] 13.8.2 Jeopardy or Termination Assessment Recommendations
  • [9.5] 13.8.3 Approval Process for Jeopardy or Termination Recommendations
  • [9.5] 13.8.4 Jeopardy Assessments in Actual and Potential Criminal Tax Investigations
  • [9.5] 13.8.5 Jeopardy and Termination Assessment Review Process
  • Exhibit [9.5] 13-1 CIVIL PENALTIES

[9.5] 13.1  (12-14-1998)
OVERVIEW

1. Civil assessments, penalties, offers, etc., while separate from criminal activities can still impact the criminal investigation. This chapter deals with some of those civil matters which may warrant consideration including:
   • Civil tax and penalty assessments on the criminal tax investigation.
   • Civil penalties on money-laundering investigations.
   • Civil assessments associated with pleas.
   • Offers in compromise.
   • Civil restitution for questionable refund investigations.
   • Jeopardy and Termination Assessments

[9.5] 13.2  (12-14-1998)
CIVIL TAX AND PENALTY ASSESSMENTS ON THE CRIMINAL TAX INVESTIGATION

1. The Internal Revenue Code (IRC) provides civil and criminal sanctions for violations of the Internal Revenue laws. Both civil and criminal sanctions may be imposed for the same offense. Typically, the civil assessments and penalties are not assessed until the criminal aspects of an investigation have been formally closed.

[9.5] 13.2.1  (12-14-1998)
Criminal Vs. Civil Tax

1. As introduced in Handbook 9.5, Chapter 8, Investigative Reports, there is a difference between the tax that is subject to criminal charges and the tax for which a taxpayer is liable in the civil process. The criminal violations are charged only against that tax deficiency that results from fraud. The civil tax deficiency is much broader and includes all tax due on a return. For example, a taxpayer may be charged criminally for evading his taxes because he skimmed cash from his business. The criminal tax deficiency would be the tax resulting from the income skimmed. Since many itemized deductions are limited to a certain percentage above a taxpayer's adjusted gross income, the increase in income because of the skimmed cash may have reduced or eliminated the taxpayer's medical deduction or miscellaneous deduction. The civil tax liability would include the total tax due, i.e., the tax from the evaded income as well as the adjustments to the taxpayer's itemized deductions.
2. The reason for the differences between civil tax liability and criminal tax can result from adjustments of a controversial or off-setting nature which are allowed in the criminal tax computation to remove controversial issues from the criminal action, as well as additional adjustments or disallowances of a minor, technical, and non-fraudulent nature which are considered solely for civil purposes (example in (1)). The difference may also be due to evidence not meeting the burden of proof necessary in a criminal case, although it may be adequate for the civil case.
3. Experience has demonstrated that attempts to pursue both the criminal and the civil aspects of a case concurrently may jeopardize the successful completion of the criminal case. As a result, Internal Revenue Policy, P-4-84, (Part 1 of the Internal Revenue Manual, Policies of Internal Revenue, Statement P-4-84) provides, among other things, that the consequences of civil enforcement actions on matters involved in the criminal investigation and prosecution case should be carefully weighed. Policy Statement P-4-84 requires balancing the civil and criminal aspects of investigations to maximize civil enforcement without imperiling criminal prosecution. This policy requires the full and positive support of all enforcement functions to maintain continuing cooperation and coordination. In the event there is doubt as to whether a proposed civil action would imperil prosecution, the opinion of the District Counsel shall be obtained.

[9.5] 13.2.2  (12-14-1998)
Civil Penalties

1. In addition to tax due and owing on a tax return, there are many types of civil penalties. Special agents should be alert to violations which may subject the violators to other civil penalties as set out in Part 20 of the IRM. This Chapter will briefly discuss those penalties most often seen on an assessment concerning a taxpayer being investigated by Criminal Investigation (CI). A very brief overview of some of the more common penalties can be found in Exhibit 12-1. For information concerning the criteria for assessment of these penalties, see Part 20 of the IRM, Penalties.
2. The civil sanctions, generally assessed as additions to the tax and also referred to as ad valorem penalties, are covered in Chapter 68 of the Code. Some of these penalties are:
   1. The 75 percent fraud penalty on an underpayment of any part of which is due to fraud (26 IRC 6663).
   2. The 20 percent negligence penalty for negligence or intentional disregard of rules and regulations (26 IRC 6662).
   3. The delinquency penalty (not exceeding 25 percent) for failure to file a return or a timely return (26 IRC 6651).
   4. Late payment penalty (1/2 of 1 percent per month not to exceed 25 percent) for failure to pay tax when it is due (26 IRC 6651).
   5. 100 percent penalty for "evasion of" or "failure to" collect, account, or pay over a tax required to be collected on behalf of the government (26 IRC 6672).
3. When the term"willfulness" is found in a civil penalty statute, it means actions "knowingly" , "consciously" , or "intentionally" taken. A voluntary course of action as distinguished from accidental would seem to satisfy the civil requirements. When used in criminal revenue statutes, the word "willful" generally means an act done with a bad purpose; without justifiable excuse; stubbornly, obstinately, perversely. The word is also employed to characterize a thing done without ground for believing it is lawful or conduct marked by careless disregard whether or not one has the right so to act.

[9.5] 13.2.2.1  (12-14-1998)
Fraud Penalty (IRC 6663)

1. The fraud penalty, when assessed, is 75 percent of the underpayment of tax due to fraud. In the case of a joint return, the penalty does not apply with respect to a spouse unless some part of the underpayment is due to the fraud of such spouse.
2. Acquittal in a criminal case is not decisive of the civil fraud issue. However, a criminal conviction for income tax evasion does decide the fraud issue and the taxpayer is collaterally estopped from raising it in the civil proceedings.

[9.5] 13.2.2.2  (12-14-1998)
Negligence Penalty (IRC 6662)

1. The negligence penalty, when assessed, is 20 percent of the underpayment, and 50 percent of the interest payable of any underpayment. The negligence penalty cannot be assessed against any portion of the understatement against which the fraud penalty is assessed.
2. The term "negligence" includes any failure to make a reasonable attempt to comply with the provisions of this title, and the term "disregard" includes any careless, reckless, or intentional disregard.

[9.5] 13.2.2.3  (12-14-1998)
Delinquency Penalty (IRC 6651)

1. An ad valorem delinquency penalty of 5 percent a month may be asserted when a tax return is filed delinquently without reasonable cause, or when a taxpayer fails to file a return without fraudulent intent. The penalty, limited to 25 percent, is imposed on the net amount due. In addition, effective for returns due after December 31, 1982, a minimum penalty will apply on an extended failure to file an income tax return. The penalty shall be $100 or 100 percent of the underpayment, whichever is less.

[9.5] 13.2.2.4  (12-14-1998)
Failure To Pay (Late Payment) Penalty (IRC 6651)

1. In the case of failure to pay the amount shown as tax on any return on or before the date prescribed for payment, a penalty shall be added to the amount shown on the return of 0.5 percent of the amount of the underpayment of tax for the first month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate.

[9.5] 13.2.2.5  (12-14-1998)
One Hundred Percent Penalty (IRC 6672)

1. A 100 percent penalty may be imposed in an amount equal to the total amount of tax evaded on any person required to collect, truthfully account for and pay over any tax who willfully evades, or fails to collect or account for and pay over such tax or willfully attempts in any manner to evade or defeat any such tax.

[9.5] 13.3  (12-14-1998)
CIVIL PENALTIES ON MONEY-LAUNDERING INVESTIGATIONS

1. Both Title 18 and Title 31 provide for civil penalties in relation to money-laundering violations.

[9.5] 13.3.1  (12-14-1998)
Penalties For Title 18 Money-Laundering Investigations

1. 18 U.S.C. 1956(b) provides that violators under subsection 1956(a) are also liable for a civil penalty of not more than the greater of:
   1. The value of the property, funds, or monetary instruments involved in the transaction.
   2. $10,000.

   The civil penalty is intended to be imposed in addition to any criminal fine.

2. The Federal Deposit Insurance (FDIC) Act provides that individuals convicted of 18 U.S.C. 1956, or conspiracy to do so, shall be precluded from all affiliation with an FDIC insured institution, including employment or ownership, for a minimum of 10 years from the date of conviction.
3. 18 U.S.C. 1956(h) and 1957 do not carry corresponding civil penalties.

[9.5] 13.3.2  (12-14-1998)
Civil Penalties in Title 31 Investigations

1. Civil penalty assessments for Title 31 violations are assessed by the Secretary of the Treasury, and can be assessed before the end of 6 years beginning on the date of the transaction that is the basis for the civil penalty.
2. A civil monetary penalty and a criminal penalty may be imposed for the same Title 31 violation.
3. The civil penalties are as follows
   1. 31 U.S.C. 5321(a)(1) --willful violation of any reporting requirement under Title 31 (except for foreign financial accounts and transactions). This section provides that a domestic financial institution, or any partner, director, officer, or employee thereof, who willfully violates any reporting requirement provision under Title 31 (except for foreign financial accounts and transactions), may be assessed a penalty not to exceed the greater of the amount involved in the transaction (up to $100,000) or $25,000.
   2. 31 U.S.C. 5321(a)(2) --failure to file a Currency and Monetary Instrument Report (CMIR), or filing a CMIR with a material omission or misstatement. This section provides that a person who does not file a CMIR, or files a CMIR with a material omission or misstatement, may be assessed an additional civil penalty, in addition to a penalty under 31 U.S.C. 5321(a)(1), up to the amount of the monetary instrument involved, to be reduced by the amount of any related forfeiture.
   3. 31 U.S.C. 5321(a)(3) )--failure to file a report related to foreign currency transactions. This section provides that a person who does not file a report related to foreign currency transactions may be assessed a penalty up to $10,000.
   4. 31 U.S.C. 5321(a)(4) --structuring of transactions. This section provides that a person who willfully structures transactions in violation of Section 5324(a) and (b) may be assessed a penalty up to the amount of the currency or monetary instruments involved, to be reduced by the amount of any related forfeiture.
   5. 31 U.S.C. 5321(a)(5) --willful violations related to reports and recordkeeping requirements for foreign financial accounts and transactions (excluding foreign currency transactions). A person who willfully fails to file a Report of Foreign Bank & Financial Accounts (FBAR) or files a FBAR with a material omission or misstatement, or does not make and retain records for interests in foreign financial accounts, may be assessed a penalty not to exceed the greater of the amount equal to the account balance at the time of the violation (up to $100,000) or $25,000.
   6. 31 U.S.C. 5321(a)(6) --negligent violation of any reporting or recordkeeping requirement of Title 31. This section provides for a penalty assessment of up to $500 on any financial institution which negligently violates any reporting or recordkeeping requirements of Title 31; and up to $50,000 for a pattern of negligent activity by a financial institution.
   7. 31 U.S.C. 5330(e) --failure to register a money-transmitting business. This section provides for a $5,000 penalty for each time that a person fails to comply with the registration requirements for money transmitting businesses under section 5330.
   8. 12 U.S.C. 1955 --willful violation of recordkeeping requirements. This section provides that any person or partner, director, officer, or employee of a domestic financial institution who willfully or through gross negligence violates any regulation under 12 U.S.C. Chapter 21, Financial Recordkeeping, may be assessed a penalty up to $10,000.
4. Recommendations for civil penalties can be made at any time but should not jeopardize an ongoing criminal investigation. All recommendations should not contain grand jury material, and must contain a statement that

   "information contained herein does not include grand jury material."

5. Tax information can only be released if a related statute call has been made. If it has, it should be communicated to FINCEN's Office of Compliance and Regulation Enforcement (OCRE), so that it is recognized that IRC 6103, tax disclosure rules, must be followed regarding subsequent use.

[9.5] 13.3.2.1  (12-14-1998)
Title 31 Civil Penalties Assessed Against a Financial Institution

1. When CI has determined that Title 31 civil penalties are warranted against a financial institution, a detailed report should be submitted to the Assistant Commissioner, CI, National Operations Division, for compliance coordination with the Director, Office of Financial Enforcement (U.S. Treasury). The report should identify the financial institution and each partner, officer, director, or employee against whom the penalty recommendation is made. Paragraphs (4) and (5) of the previous section (9.5.12.3.2) also apply.
2. The U.S. Attorney and the Director, Office of Financial Enforcement (U.S. Treasury) may decide that the assessment of a civil penalty in a Title 31 investigation is appropriate in lieu of prosecution. Districts will advise the Assistant Commissioner, CI, National Operations Division, of the agreement as soon as an agreement has been negotiated. If checks are received from a financial institution as payment for the civil penalties prior to assessment, the checks should be mailed to the Director, Office of Financial Enforcement (U.S. Treasury), 1500 Pennsylvania Avenue, N.W., Washington, DC 20220, along with a copy of any court order with respect to the stipulation for settlement. The district should then follow up with a recommendation for civil assessment. See Criminal Investigation Handbook 9.5 Chapter 13 for items needed in a reports recommending civil penalties for Title 31 investigations resulting in an indictment.

[9.5] 13.4  (12-14-1998)
CIVIL ASSESSMENTS ASSOCIATED WITH PLEAS

1. Requests for initiation of plea discussions can occur at any point in an investigation. The information to make a civil tax assessment may occur prior to the formal subject criminal investigation closing procedure found in Criminal Investigation Handbook 9.5 Chapter 14. The procedures to close an investigation where a plea has been entered is the same as for these cases that have been prosecuted. See Criminal Investigation Handbook 9.6 Chapter 2 for more information concerning plea agreements.

[9.5] 13.4.1  (12-14-1998)
Civil Assessments Associated With Pleas on Administrative Investigations

1. The request for initiation of any plea discussions or negotiations must originate with the taxpayer represented by counsel. CI will not initiate plea negotiations. CI personnel must emphasize that plea negotiation authority rests solely with the DOJ.

[9.5] 13.4.1.1  (12-14-1998)
Plea Negotiations Prior To the Submission of the Special Agents's Report (Administrative Setting)

1. If a taxpayer, who is not represented by counsel, expresses interest in entering a plea, the special agent will advise the taxpayer that plea negotiations are limited to those taxpayers represented by counsel.
2. When a taxpayer, through counsel, expresses a desire to plea prior to the conclusion of an administrative investigation, special agents will inform taxpayers and their counsel that the willingness to enter into plea negotiations with the DOJ in no way obviates the taxpayer's ultimate civil tax liability. See CI Handbook 9.6 Chapter 6 for more information on "simultaneous pleas."
3. Taxpayers requesting use of the early referral procedures will generally be expected to cooperate with the IRS in the determination and satisfaction of their civil tax liabilities as well as the criminal aspects. In the event the criminal investigation is completed by use of these procedures without establishing the appropriate civil deficiencies, the civil investigation will be completed by the Examination Division of the IRS.
4. The IRS will take precautions to ensure that information furnished by the taxpayer, prior to formal plea discussion with the DOJ, will not be foreclosed from future use under the restrictions of Rule 11(e)(6) of the Federal Rules of Criminal Procedure in the event that plea negotiations fail by reason of withdrawal or rejection by the DOJ.

[9.5] 13.4.2  (12-14-1998)
Pleas After Arrests, Informations, or Indictments

1. The information available to Examination to make a civil tax assessment in a plea situation following a grand jury investigation may consist of:
   1. Information provided to Examination by the taxpayer (defendant) voluntarily.
   2. Information obtained by the revenue agent obtaining the information in open court at the point the defendant enters a plea.
   3. Information provided by the defendant when sentenced as part of a condition of probation.

   NOTE:

   Information developed in an administrative investigation can be made available to the revenue agent by the special agent.

2. In a plea, the court hears the facts preliminary to imposing sentence. The government attorney will present the facts for the government. The role of the special agent in this regard is especially important since his or her oral presentation of facts on behalf of the government, in open court, forms the only supporting basis of the offenses charged in the information or indictment. It may also be the basis of information that Examination will use in its civil assessment.
3. When sentencing a defendant that has pled guilty to a tax charge, the court may suspend sentence and place the defendant on probation. A condition of probation may be that the defendant pay or make every effort to pay the tax ultimately determined. Failure to comply with the terms of probation may result in its revocation and imposition of sentence.
4. In order to help the court impose sentence or grant probation, the probation service of the court may make a presentence investigation and report. The investigation and report are concerned with any prior criminal record of the defendant and personal background, individual characteristics, financial condition, and any circumstances which may have affected his or her behavior. In this connection, the probation officer will usually consult with the special agent on the case for information about the defendant's cooperation (or lack of it) during the investigation, the defendant's mental and physical history, whether he or she has made any payments on the tax deficiencies involved in the criminal case, other tax obligations due the government, and data regarding any other matters which might be helpful to the court in imposing sentence or granting probation. The court, before imposing sentence, may disclose to the defendant or his or her counsel all or part of the material contained in the report of the presentence investigation and afford an opportunity to the defendant or his or her counsel to comment thereon. Any material disclosed to the defendant or his or her counsel shall also be disclosed to the attorney for the government (FRCrP Rule 32.)
5. A plea of guilty can be used in a civil suit for taxes and penalties against the taxpayer based on the same facts.
6. A plea of nolo contendere subjects the defendant to the same punishment as a plea of guilty, but does not admit the charges. It cannot be used against him or her as an admission in any civil suit for the same act.
7. The procedures for closing an investigation for which the charges have been adjudicated or pled are found in Chapter 14 in this Handbook (9.5).

[9.5] 13.5  (12-14-1998)
RESPONSIBILITY FOR THE CIVIL STATUTES OF LIMITATIONS

1. If the tax returns under investigation were under the control of a civil function at the time CI's participation in a grand jury was authorized, the civil function (Exam or Collection) which transferred the returns to CI is responsible for the civil statutes of limitation. If there has been no civil involvement before the start of a grand jury investigation and a Rule 6(e) order has not been obtained, CI is not responsible for the civil statutes.

[9.5] 13.6  (12-14-1998)
OFFERS IN COMPROMISE

1. CI is concerned with the following types of civil offers in compromise associated with a criminal investigation:
   1. Offers involving joint investigations by CI with the district Examination or Collection functions and in which the criminal aspects have been disposed.
   2. Offers made while criminal proceedings are pending.

[9.5] 13.6.1  (12-14-1998)
Offers in Pending Criminal Investigations

1. The District Director will record all such offers in compromises in a pending criminal investigation and forward the offer to the appropriate District Counsel.
2. The Chief Counsel represents the Commissioner in the consideration of offers in compromise relating to situations in which there is either:
   1. Pending litigation
   2. In situations in which litigation will ordinarily arise (this includes investigations in which recommendation for prosecution has been made).

   The Chief Counsel has authorized District and Regional Counsel to process such matters.

3. Investigation of the offer will be made, only as specifically requested by the Counsel office having jurisdiction of the criminal investigation. Requests may be made by Counsel for an examination or investigation of a taxpayer's financial status in connection with an offer in compromise submitted in a case in which criminal proceedings are pending:
   1. In Counsel.
   2. In DOJ
   3. In the United States Attorney's office.

   When such an examination or investigation is conducted, it shall be conducted jointly by CI and Examination functions.

4. Reports of joint investigations of a taxpayer's financial status in connection with an offer in compromise are of such varied type that no format is prescribed. Agents preparing such reports will be guided by the particular request.

[9.5] 13.7  (12-14-1998)
CIVIL RESTITUTION FOR QUESTIONABLE REFUND INVESTIGATIONS

1. These procedures apply to cases where the taxpayer has been ordered to make restitution for receipt of fraudulent or fictitious refunds.
2. When the court imposes an order of restitution, it can impose a condition requiring the defendant to make payments of restitution or adhere to a court-ordered installment schedule for payment of restitution.
3. Unless the court orders otherwise, restitution must be paid immediately. The court may permit the defendant to make restitution within a specified period or in specified installments, provided that the last installment is paid not later than:
   1. The expiration of probation.
   2. Five years after the end of the defendant's term of imprisonment.
   3. Or in any other case, 5 years after the date of sentencing.
4. Interest will not apply if the court order specifically excludes it. Interest will be computed from the date of the fictitious erroneous refund to the date of payment.
5. There is no statute of limitations for collection of court-ordered restitution.
6. There is no need to file a civil suit upon non-payment of restitution. Should the defendant fail to meet his or her obligation with regards to the court-ordered restitution, contact should be made with the U.S. Attorney's office which has jurisdiction and authority to enforce the terms of the court order.
7. The Service has no authority to make an assessment against an individual specifically for restitution. Therefore, the restitution (other than tax cases) will be processed as non-rebate fraudulent erroneous refunds.
8. Any subsequent refund return filed by the defendant can be offset to an amount owing from the court-ordered restitution by means of common law offset.
9. Any payments for court-ordered fines erroneously received as restitution payments should be directed to the U.S. Attorney's office which has jurisdiction for that case. Fines are handled through DOJ for deposit into the Crime Victims Fund

[9.5] 13.7.1  (12-14-1998)
Special Agent's Responsibilities in Restitution Orders

1. Within 30 workdays after sentencing wherein restitution is part of the sentence, the special agent will send to the service center a closing memorandum regarding the disposition of the case. The closing memorandum should include instructions regarding Tax Code (TC) 916 controls.

[9.5] 13.7.2  (12-14-1998)
Service Center Criminal Investigation Branch (CIB) Responsibilities

1. See Criminal Investigation Handbook 9.8, Criminal Investigation at the Service Center, Chapter 4. It contains a chapter which details CIB responsibilities when the court orders restitution.

[9.5] 13.8  (12-14-1998)
JEOPARDY AND TERMINATION ASSESSMENTS

1. The Criminal Investigation Division is responsible for recommending jeopardy or termination assessments in investigations under active consideration by Criminal Investigation and in investigations under joint active consideration with Examination or Collection.
2. Jeopardy assessments are authorized by IRC 6861 and 6862. IRC 6861 applies to income, estate, gift and certain excise taxes when the due date for filing and paying the tax returns has expired. IRC 6862 applies to taxes other than income, estate, gift and certain excise taxes whether or not the due date for filing and paying the tax has expired. For example, IRC 6862 provides the authority for making a jeopardy assessment on an employment tax return whether or not the return due date has expired.
3. Termination assessments, authorized by IRC 6851, may only be made on income tax liabilities, when the collection of tax is in jeopardy before the end of a taxpayer's normal year or before the statutory date the taxpayer is required to file a return and pay the tax.

[9.5] 13.8.1  (12-14-1998)
Criteria For Determining When a Jeopardy or Termination Is Appropriate

1. A jeopardy or termination assessment will be made by the Service if collection is determined to be in jeopardy because at least one of the following conditions exists:
   1. The taxpayer is or appears to be planning to depart quickly from the United States or to hide from authorities.
   2. The taxpayer is or appears to be planning to place property beyond the reach of the Government by removing it from the United States, by concealing it, by dissipating it, or by transferring it to other persons.
   3. The taxpayer's financial solvency is or appears to be imperiled. (This does not include investigations where the taxpayer becomes insolvent by virtue of the accrual of the proposed assessment of tax, penalties and interest.)
   4. The taxpayer has more than $10,000 in cash, and refuses to identify the owner. Cash, foreign currency, and bearer obligations and any other medium of exchange frequently used in illegal activities and specified as a cash equivalent will be subject to this rule. With the exception of bearer obligations, which are deemed to have a value equal to their face amount, cash equivalents will be measured by their fair market value
2. Notwithstanding the existence of one or more of the above-cited conditions, if a jeopardy or termination assessment might cause serious harm or incovenience to the general public, prior notice should be provided to the appropriate Regional Commissioner. If necessary, the Regional Commissioner will notify the Deputy Comissioner. Examples of such investigations include banks, newspapers, insurance companies, hospitals and public utility companies.

[9.5] 13.8.2  (12-14-1998)
Jeopardy or Termination Assessment Recommendations

1. Examination Form 2644, Recommendation for Jeopardy Assessment, should be used for jeopardy or termination assessment reports. Special agents should also utilize Examination Form 2645, List of Property Belonging to Taxpayer. Emergency situations may be handled orally and later documented by written reports.
2. The following information should be submitted in all reports to the extent practicable:
   1. Name, address and EIN or SSN of taxpayer.
   2. Tax, penalty and interest to be assessed by periods.
   3. The nature of the taxpayer's business or activity.
   4. The taxpayer's present financial condition.
   5. Information regarding the taxpayer's activity giving rise to the recommendation, such as transfer of assets without consideration.
   6. Records or statements with respect to continuing business or personal losses.
   7. Filing record of taxpayer.
   8. The taxpayer's record for resisting payment of taxes in the past (collection delays and unpaid taxes).
   9. The nature and location of the taxpayer's assets and the source(s) of his/her income.
   10. A statement as to the factual basis for the determination of taxable income and a schedule showing how the tax was computed.
   11. Any other information having a bearing upon the taxpayer's financial condition, future anticipation of losses, etc.
   12. Information showing whether the taxpayer is, or has been, the subject of a joint investigation and whether criminal prosecution has been, or is likely to be, recommended.

[9.5] 13.8.3  (12-14-1998)
Approval Process for Jeopardy or Termination Recommendations

1. In all reports originating in the Criminal Investigation Division regarding the assertion of a jeopardy or termination assessment, the Chief shall inform the Assistant Commissioner (International) or the District Director, in writing, whether it appears likely that criminal prosecution will be recommended in the investigation and also whether the assertion would imperil the successful investigation if a prosecution recommendation is likely.
2. The following clearances will be secured:
   1. Group Manager, Criminal Investigation Division.
   2. Branch Chief, Criminal Investigation Division.
   3. Chief, Criminal Investigation Division;
   4. Chief, Special Procedures Staff;
   5. Chief, Collection Division;
   6. Chief, Examination Division;
   7. District Counsel; and
   8. The Assistant Commissioner (International) or the District Director.

      NOTE:

      All jeopardy or termination assessments must be personally approved (sign Form 2644) by the Assistant Commissioner (International) or the District Director (See Delegation Order No. 219), unless they must exclude themselves from personal involvement.

3. The Assistant Commissioner (International) or the District Director must exclude themselves from personal involvement in those investigations where:
   1. They have had access to grand jury information.
   2. They are excluded from personal involvement due to restrictions contained in the Rules of Conduct; or
   3. They have reasonable cause to exclude themselves.
4. In the event the Assistant Commissioner (International) or the District Director has to exclude themselves from personal involvement for reasons prescribed above, then jeopardy and/or termination assessments will be personally approved by the Deputy Assistant Commissioner (International) or the Assistant District Director.
5. If all International or District officials identified above must exclude themselves from personal involvement, the personal approval of the Chief Operations Officer or Regional Commissioner is required. In any event, the person approving the jeopardy and/or termination assessment must not fall within any of the exclusionary situations that prevent the Assistant Commissioner (International) or a District Director from being personally involved.

[9.5] 13.8.4  (12-14-1998)
Jeopardy Assessments in Actual and Potential Criminal Tax Investigations

1. If the recommendation for a jeopardy assessment involves an investigation pending in the office of the Chief, complete information relative to the recommendation and the action taken will be incorporated in the special agent's final report.
2. If the recommendation for a jeopardy assessment involves an investigation in which prosecution has been recommended and the SAR is no longer pending in the office of the Chief, an original and eight copies of the report recommending the jeopardy assessment will be prepared. Seven of the copies will be distributed in the same manner as the copies of the final report at the time advice is requested as to whether a jeopardy assessment would be prejudicial to the criminal case. The eighth copy, which would normally become part of the file transmitted to Examination in the district, will be held by the Chief for transmittal to district Examination after the assessment has been made in order that district Examination may issue the statutory notice.
3. The original of the special agent's report recommending a jeopardy assessment will be forwarded, together with a transmittal memorandum from the Chief, to the Assistant Commissioner (International) or the District Director for appropriate action. If it was necessary to obtain the comments of other officials, the transmittal memorandum will recite their views regarding the proposed jeopardy assessment. In such cases, the transmittal memorandum will be prepared in an original and eight copies and, other than the original, distributed in the same manner as the jeopardy assessment report. The copies of the transmittal memorandum should be retained until after assessment action has been taken. A summary of such action shall be annotated on the copies prior to distribution. If there is insufficient room, an addendum should be added.
4. When the Department of Justice or the United States Attorney does not concur in a jeopardy assessment recommendation in any case within their jurisdiction and the recommendation for jeopardy assessment has been renewed, reports of the new circumstances and a request for review of the prior recommendation will be processed in the same manner as set forth above for the original jeopardy assessment report.
5. Jeopardy assessments will be withheld in potential criminal tax investigations to the extent necessary to avoid imperiling successful investigations or prosecution of such investigations. On the other hand, when such action is warranted in those investigations, it must be taken whenever it is feasible to do so. The Assistant Commissioner (International) or the District Director is responsible for this practice when jeopardy assessment recommendations are submitted for approval. See Policy Statement P-4-84.
6. The Chief, CI should coordinate with District Counsel any recommendations for jeopardy or termination assessments which may affect pending prosecution investigations. In investigations pending with the Department of Justice, an opinion should be obtained from District Counsel. In investigations pending with the United States Attorney, an opinion should be obtained by the Chief. Telephone authorizations, although normally not desirable, can be obtained in exigent situations. Should the office which has jurisdiction over the investigation conclude that the assessment would imperil successful criminal prosecution, such assessment shall not be made until all the criminal features of the investigation which may be imperiled by the action, including appeals, have been completed. The recommendation for assessment may, however, be renewed if new circumstances make such action appropriate.
7. To prevent premature processing of any documents filed by the taxpayer, the Chief, Criminal Investigation Division will process requests from the Chief, Examination Division, for input procedures of Master File transaction code TC-914.

[9.5] 13.8.5  (12-14-1998)
Jeopardy and Termination Assessment Review Process

1. Title 26, Section 7429, added by the Tax Reform Act of 1976, provides an expedited review of jeopardy and termination assessments. Within five days after the assessment, the Service must give the taxpayer a written statement of the information relied upon in making the assessment. Pattern Letter P-49 (Rev. 5-78) is used for this purpose and includes as an enclosure a computation of income and tax.
2. The taxpayer may request administrative review of the assessment within thirty days after the day the statement is provided or within thirty days after the last day of the period during which the statement is required to be furnished. The Service has fifteen days to complete its administrative review.
3. If the Service finds the assessment is inappropriate or excessive in amount, it may abate the assessment in whole or in part. If the administrative review is not satisfactory to him/her, the taxpayer may, within thirty days after the IRS review determination or the sixteenth day after the request for review, if earlier, bring action in the U.S. District Court for the district in which he/she resides.
4. Within twenty days after the taxpayer begins the action, the District Court is to make new, independent determinations regarding the reasonableness of the jeopardy or termination assessment and the appropriateness of the amount assessed. The Commissioner has the burden of proving whether the making of the jeopardy assessment or termination assessment is reasonable under the circumstances, but the taxpayer has the burden as to the reasonableness of the amount assessed.
5. The twenty day period may be extended by the court for up to forty additional days, but only on the request of the taxpayer. The court can order the IRS to abate the assessment or to redetermine the amount assessed in whole or in part. Any determination made by the court shall not be reviewed by any other court. A determination under IRC 7429 has no effect upon the determination of correct tax liability in a later proceeding.

Special agents should be alert to violations which may subject the violators to other civil penalties as set out in Part 20 of the IRM. In the chart below is a very brief overview of some of the more common penalties. For specific information, explanations, and criteria for assessment of these penalties and others, see Part 20 of the IRM, Penalties.