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.
Discussed in this section are general
investigative procedures and rules of
evidence applicable to all types of
investigations, including grand jury
investigations.
9.5.1.2
(07-15-2002)
INITIATION OF ADMINISTRATIVE
INVESTIGATIONS
Administrative investigations may be
initiated whenever information
indicating possible violations of tax,
money laundering, or bank secrecy laws
is received or developed by the Lead
Development Center (LDC) or special
agent.
Investigations are initiated (numbered)
as general, primary, subject criminal,
or subject seizure investigations. A
complete description of these four types
of investigations is contained in IRM
9.9, Criminal Investigation Management
Information System (CIMIS).
9.5.1.2.1 (07-15-2002)
Procedures in Financial
Investigations
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.
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.
The
special agent should first determine
what evidence must be obtained to
establish the elements of the crime
and the probable sources of the
evidence. A workplan may then be
developed. Form 6085, Investigative
Workplan, is an excellent tool for
preparing the workplan and can be
found in Document Manager.
Investigations should be started
quickly, and once begun, should be
completed as quickly as possible.
Investigations should be conducted
impartially and thoroughly to obtain
all pertinent information and
evidence, including any evidence
that may tend to exonerate the
subject.
9.5.1.2.2 (07-15-2002)
Burden of Proof
In
criminal cases, the Government bears
the burden of proof 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.
9.5.1.2.3 (07-15-2002)
Types of Evidence
Direct evidence is that which, if
believed, proves the existence of
the principal or ultimate fact
without any inference or
presumption. Evidence 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.
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 including
malice, intent, or motive, which
exist only in the mind of the
perpetrator of the deed. 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.
9.5.1.2.4 (12-14-1998)
Relevancy
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 business partners would
most likely be relevant to prove
intent, while the fact that he
played golf every Thursday would
most likely not be relevant to prove
any of the elements of a tax case.
All
relevant evidence may not be
admissible, however, since the rules
of evidence may preclude the
admission of evidence on other
grounds.
9.5.1.2.5 (07-15-2002)
Competency or Admissibility
Evidence must be legally obtained
and properly authenticated to be
admissible.
For
example, evidence obtained by the
special agent during an illegal
search will generally not be
admissible. Likewise, photocopies of
financial records are normally not
admissible without some explanation
of the inability to produce the
original documents.
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."
9.5.1.2.5.1 (07-15-2002)
Hearsay
Hearsay is a statement offered
in evidence to prove the truth
of the matter asserted. Hearsay
is evidence that does not come
from the personal knowledge of
the declarant but from the
repetition of what the declarant
has heard others say. Under
Federal Rule of Evidence 802,
hearsay statements are
inadmissible at trial unless an
exception to the rule is
applicable. Lack of opportunity
for cross-examination and
unreliability are the principal
reasons for excluding hearsay
testimony.
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.
9.5.1.2.5.1.1
(07-15-2002)
Exceptions to the
Hearsay Rule
Federal Rules of Evidence
803 and 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 become
familiar with the exceptions
enumerated in Rules 803 and
804.
9.5.1.2.6 (12-14-1998)
Presumptions
A
presumption is a rule of law that
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.
9.5.1.2.6.1 (07-15-2002)
Conclusive Presumptions
A
conclusive presumption is
binding upon the court and jury
and rebuttal evidence is not
permitted. For example, there is
a conclusive presumption that an
infant under the age of seven
(7) is incapable of committing a
felony.
9.5.1.2.6.2 (12-14-1998)
Rebuttable Presumptions
A
rebuttable presumption is one
that prevails until it is
overcome by evidence to the
contrary. For example, there is
a rebuttable presumption that a
criminal defendant is innocent.
9.5.1.2.7 (07-15-2002)
Privileged Communications
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:
The communications must
originate in confidence,
with the belief they will
not be disclosed.
The element of
confidentiality must be
essential to the full and
satisfactory maintenance of
the relationship between the
parties.
The relationship must be one
which in the opinion of the
community ought to be
diligently fostered.
The injury to the
relationship by the
disclosure of the
communication must be
greater than the benefit
gained by the correct
disposal of litigation.
There are four generally recognized
privileges in Federal judicial
proceedings: attorney/client,
husband/wife, clergy/penitent, and
government/informant. There are also
a number of other relationships
where 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.
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. "
The
attorney-client privilege must
be strictly construed. The mere
existence of the 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 nor the
dates and amounts of legal fees
paid by a client.
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.
9.5.1.2.7.2 (12-14-1998)
Husband Wife Privileges
There are two spousal
privileges: marital
communications privilege and
adverse testimony privilege.
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 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.
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.
Communications remain
privileged after termination
of the marriage.
The marital communications
privilege belongs to, and
therefore may be invoked by,
the defendant-spouse.
There exists an independent
privilege of one spouse to
refuse to testify adversely
against 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 or on any
non-confidential
communications either before
or during the marriage. The
spouse may not be compelled
to testify, or prevented
from testifying.
9.5.1.2.7.3 (07-15-2002)
Clergyman and Penitent
Privilege
While the 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.
9.5.1.2.7.4 (07-15-2002)
Informant and Government
Privilege
This privilege allows
enforcement agencies to withhold
from disclosure the identity of
persons who furnish information
on violations of law to officers
charged with enforcement of that
law.
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 fulfil that obligation. The
contents of a communication are
not privileged unless they tend
to reveal the informant's
identity.
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.
Where disclosure of an
informant'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.
This
section contains a number of
administrative procedures to be employed
in most administrative investigative
situations.
9.5.1.3.1 (07-15-2002)
Opening Investigations
The
Special Agent in Charge (SAC) or
Assistant Special Agent in Charge
(ASAC) will select for investigation
all information items which, upon
evaluation and screening, are deemed
to warrant inquiries beyond those
authorized for evaluating
information items.
A
brief summary of the basis for
opening the investigation will be
prepared and retained in the
administrative file. At the
discretion of the SAC, it may be a
separate document, such as a
memorandum prepared by the
evaluating special agent, or it may
be incorporated in an existing
document used in the field office's
investigation initiation process.
All
assigned investigations will be
subject to sufficient investigative
inquiry to support the disposition
recommended in the report, except
when surveyed.
9.5.1.3.1.1 (07-15-2002)
Additional Inspection of
Taxpayer's Records
Internal Revenue Code (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,
after investigation, he/she is
notified in writing that an
additional inspection is
necessary.
Authority has been delegated to
the respective Operating
Division Territory Manager for
cases within their jurisdiction
to sign the notice to a taxpayer
that an additional inspection of
such taxpayer's books of account
is necessary.
In
general, the provisions of IRC
§7605(b) should be invoked only
where, subsequent to closing a
case, information is developed
which indicates fraud,
malfeasance, collusion,
concealment, or
misrepresentation of a material
fact. (See Policy Statement
P-4–3.) Any such notice, after
signature by the appropriate
Operating Division Territory
Manager, 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.
Letter 939 (DO/IO) will be
utilized to notify the taxpayer
that an additional inspection is
necessary.
Requests for issuance of notices
under IRC §7605(b) will be
supported by statements
detailing the grounds upon which
the requests are based.
Form 4505, Reopening Memorandum,
will be used when requesting
authority to issue a notice to
taxpayers that an additional
examination of their records is
required. Form 4505, is usually
prepared by the examiner
however, situations may arise in
which a special agent may be a
co-initiator. The SAC may be
listed in the routing block
entitled "Other" on Form 4505.
The special agent and the
cooperating officer will jointly
prepare one Form 886–A,
Explanation of Items, containing
narrative justification for the
request.
IRC
§4423 specifically excludes
wagering tax cases from the
provisions of IRC §7605(b). It
provides that the books of
account of any person liable for
taxes on wagering may be
examined and inspected as
frequently as may be necessary.
9.5.1.3.2 (07-15-2002)
Initiation of Investigative
Activity
The
initial investigative activity
should involve such inspection of
the taxpayer's books and records or
other related inquiries as is
necessary to initially determine
whether the case possesses criminal
potential. These inquiries should
include a check of the Small
Business/Self Employed Division
(SB/SE), Wage and Investment
Division (W&I), Tax Exempt &
Government Entities Division
(TE/GE), and Criminal Investigation
(CI) 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., Treasury
Enforcement Computer System (TECS),
El Paso Intelligence Center (EPIC),
Detroit Computing Center, most of
which can initially be done by the
Lead Development Center.
9.5.1.3.2.1 (07-15-2002)
Interview with Subjects of
Investigation
The
special agent must obtain the
original return or returns
involved, if any were filed for
the pertinent period, prior to
independently interviewing a
taxpayer, his/her
representative, or one of
his/her present employees or
inspecting the taxpayer's books
and records.
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 SAC.
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 SAC will
submit a request to the SB/SE.
9.5.1.3.2.2 (07-15-2002)
Joint Investigations with
Small Business/Self
Employed, Tax
Exempt/Government Entities,
or Wage & Investment
A
joint investigation is one
conducted by CI together with
SB/SE, TE/GE, or W&I.
Investigations involving alleged
tax evasion, willful failure to
file a return and willful
failure to pay a tax are usually
investigated jointly with a
civil function.
Use
Form 6544, Request for
Cooperating Examiner, to request
a cooperating officer in joint
investigations initiated from a
source other than a fraud
referral.
In
a joint investigation, the
special agent is responsible
for:
the timing and priority
of investigative actions
developing evidence
pertaining to the
criminal features of the
investigation
preparing and issuing
summonses
obtaining original tax
returns for all open
periods and entities
under investigation
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
choosing the method for
computing tax for
criminal purposes
Note:
Supervisory Special Agent
(SSA) approval is required
for all tax returns
requested by CI field office
personnel.
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 with
respect to the statutory period
of assessment.
The
SSA of the special agent and the
manager of the cooperating
revenue agent should exercise
sufficient control and follow-up
to ensure the prompt completion
of the investigation.
If
CI learns of a case within the
civil function which is related
to an active investigation, CI
will inform the appropriate
Operating Division Territory
Manager of the other function so
that the related cases may be
coordinated to prevent action
which may prejudice the criminal
investigation.
If
the special agent thinks the
investigation should be extended
to a return that was filed six
or more years ago, he/she will
submit a brief statement of the
reasons to the SAC. The SAC will
determine whether to extend the
investigation.
Policy Statement P-4-84 requires
balancing the civil and criminal
aspects of investigations to
maximize civil enforcement
without imperiling criminal
prosecution.
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. See IRM
9.5.1.3.1.1.3, Additional
Inspection of Taxpayer's
Records.
9.5.1.3.2.3 (07-15-2002)
Civil Action on
Investigations Under
Jurisdiction of the Tax
Division
The
SAC, in the transmittal
memorandum forwarding a report
to the Tax Division, 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
specify what further action, if
any, the other operating
divisions with civil action
responsibility plan to take on
the accounts. This memorandum
can be updated at any time while
the investigation is under the
jurisdiction of the Tax
Division.
The
Criminal Tax (CT) Counsel will
be responsible for reviewing the
proposed civil actions. The CT
Counsel should consult with the
other operating divisions'
counsel on the proposed civil
action. The CT Counsel will
notify the Territory Manager
with civil action
responsibility, of any proposed
civil actions they feel might
imperil the criminal
investigation. In the event the
Territory Manager disagrees with
CT Counsel's advice, he/she may
ask CT Counsel to reconsider the
advice. Upon reconsideration,
should CT Counsel still stand by
its earlier advice, the
Territory Manager may seek
further review by the Area
Director of the appropriate
operating division and the
Director, Field Operations.
Should the parties fail to reach
agreement, the matter will be
referred by the SAC to the
Chief, CI. The Chief, CI will
consult with his/her counterpart
in the other operating division
and make a recommendation as to
the proposed civil action.
9.5.1.3.2.4 (07-15-2002)
Request to Suspend Civil
Action on Non-Tax Criminal
Cases
A
non-tax criminal case is, for
these purposes, defined as any
case which is not being
investigated by or on behalf of
the IRS.
The
Operating Division Territory
Manager will not suspend any
examination or collection
activity at the request of the
US Attorney, except in extreme
emergency situations (such as an
inability to obtain approval of
the Tax Division or court action
if the criminal case is
imminent). The Operating
Division Territory Manager may
suspend action for 72 hours if
such delay will not be
detrimental to the IRS. However,
the Operating Division Territory
Manager 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.
For
instances in which the Operating
Division Territory Manager
temporarily suspended civil
action, he/she shall submit to
the Deputy Commissioner of the
operating division a narrative
report containing the following
information:
the name(s) of the
individual(s) or
entity(ies) involved and
the nature of the
offense(s)
the type of civil action
that has been suspended
including the types of
taxes involved and
number of audits being
suspended
an estimate of the
accrual of tax
liabilities awaiting
trial or other
disposition of the
non-tax case
facts and circumstances
which should be
considered in
determining the risk to
assessment and ultimate
collection
the Operating Division
Territory Manager's
recommendation as to
whether the temporary
suspension should be
continued
9.5.1.3.2.5 (07-15-2002)
Requests for Statute
Extensions and Statutory
Notices of Deficiency
If
it is determined by the special
agent and approved by the SSA
and SAC that an extension of the
statutory period is warranted,
the special agent who has actual
custody of the return shall
request the extension.
In
joint investigations where the
administrative file has not been
forwarded in connection with the
referral of the special agent's
report to CT Counsel and there
is danger of an early expiration
of the statutory period for
assessment, the cooperating
revenue agent will timely advise
CI of any proposal to solicit
consents to extend the statutory
period for assessment. Normally,
the solicitation of such a
consent does not prejudice an
investigation and, unless CI
requests otherwise, within ten
(10) 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 SAC and the
Operating Division Territory
Manager cannot reach an
agreement, the Director, Field
Operations and Operating
Division Area Director of the
appropriate operating division
shall then decide if the consent
will be solicited.
If
it appears likely that criminal
prosecution will be recommended,
a statutory notice normally will
not be issued if issuance of the
notice would imperil successful
criminal investigation or
prosecution.
Note:
If a statutory notice is
issued and the taxpayer
appeals to the US Tax Court,
the Government may be
required to reveal evidence
to the taxpayer, either in
the answer or at the trial
of the civil case ahead of
the criminal investigation.
If
the Operating Division Territory
Manager or CT Counsel authorizes
the other operating division to
issue a statutory notice in a
pending criminal investigation,
the authorization shall provide
that collection activity be
suspended following the
assessment of the deficiency and
issuance of the first notice. If
the account is not paid after
the first notice, the Taxpayer
Delinquent Account (TDA) will be
issued, but will be held by the
office branch in inactive status
until the tax is paid or
Criminal Investigation notifies
the other operating division to
proceed with collection
activity.
9.5.1.3.2.6 (07-15-2002)
Automated Data Processing
Controls
Transaction Code (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. The TC 910 will permit CI
to retain on the master file all
transactions on 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
IRS campus to the CI field
office. In addition, a quarterly
inventory listing will be
generated and forwarded to CI.
The
TC 914 or TC 916 will provide
all of the controls described
above for TC 910. A TC 914 will
allow a refund to generate when
the return is posted. A TC 916
and 918 creates a freeze on the
account. (See paragraph (4) d
and f.) In addition, TC 914 and
TC 916 will:
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.)
Permit posting of input
transactions which have
been reviewed.
Prevent a merge of
master file tax modules
if one or both modules
are subject to TC 914 or
TC 916.
Prevent the computerized
issuance of Form 5546,
Examination Return
Charge-Out, and prevents
establishment of record
on the Automated
Information Management
System (AIMS) data base.
This can be overridden
through a manual
process.
Prevent the issuance of
Taxpayer Delinquency
Investigations (TDI's)
or the operation of
delinquency check
procedures on the
Business Master File
(BMF) and control the
issuance of outputs
under the operation of
the Information Returns
Processing (IRP) program
and the Individual
Master File (IMF)
Delinquency Check.
Terminate any further
TDI investigation by
generating a TDI recall
for all tax modules in
TDI status.
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.
At the time of posting
TC 914, produce a
complete Martinsburg
Computing Center
transcript of the tax
modules titled "
INTEL-914" .
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 in which
voluntary contributions from
self-employed persons to their
own retirement accounts are
recorded.
Other Automatic Data Processing
(ADP) codes include:
TC 911 reverses TC 910
TC 912 reverses TC 914
TC 915 posts to the
module identified by the
Master File Transaction
(MFT) and tax period of
the incoming transaction
and reverses only the
refund freeze portion of
the TC 916 and 918; this
is associated with the
Questionable Refund
Program
TC 916 posts to the tax
module identified by the
MFT Code and freezes the
refund when a refund
return posts
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
TC 918 posts to the
entity module and will
establish a CI freeze on
the entire account; it
prevents refunds, credit
elects and offsets going
on to BMF and IRAF
TC 919 posts to the
entity module and
reverses the TC 918
Criminal Investigation shall
terminate from an investigation when
it is determined that there is no
prosecution potential.
Discontinued investigation reports
will be reviewed by the SSA and,
upon approval, will be forwarded to
the SAC or ASAC for review and
approval.
In
all investigations where a Form 211,
Application and Public Voucher for
Reward for Original Information, has
been filed and are determined to
lack criminal potential, a copy of
the closing report will be forwarded
to the area SB/SE, Attention:
Informant Claims Examiner,
regardless of whether the allegation
concerns a failure to file or a
filed return.
9.5.1.3.3.1 (07-15-2002)
Notification to Taxpayers
When an Investigation is
Discontinued
When an administrative
investigation, not a
Questionable Refund Program
case, is discontinued, a letter
will be prepared by the SAC and
sent to the taxpayer and/or
representative by mail. The
letter will state that CI is no
longer investigating the
taxpayer. If appropriate, it
should also state that the
matter has been referred to the
civil function.
If
the SAC 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.
In
investigations declined by CT
Counsel or the Tax Division,
letters of notification will not
be sent by the IRS.
In
prosecution reports, originals,
photocopies, 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.
The
special agent shall interview the
cooperating officer to obtain all
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.
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.
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 the preceding
five years 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 Operating
Division Area 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
that could have appeared on the
return. Prior reports bearing upon
the matter should be examined for
useful information.
9.5.1.3.5 (07-15-2002)
Requesting Returns
The
Integrated Data Retrieval System (IDRS)
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 Return View (RTVUE)
through IDRS. Electronically filed
(ELF) return information can be
obtained through the command code
Tax Return Data Base View (TRDBV).
This provides all information on the
ELF return starting with tax year
1999 and forward. Tax Return Data
Base (TRDB) is also the official
system of record for ELF returns. 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. The
SSA approval is required for all tax
returns requested by CI field office
personnel.
9.5.1.3.6 (07-15-2002)
Requesting Transcripts
Transcripts are accessed via IDRS
command codes. This will allow a
transcript to be viewed on-line or a
hard copy to be printed. However, if
a certified 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 CI
personnel to request certified
transcripts of account and will be
forwarded to the Fraud Detection
Center (FDC) that services the
requesting field office.
The
requirements for filing a power of
attorney or tax information
authorization by taxpayer
representatives are outlined in Subpart
E, Conference and Practice Requirements
(26 Code of Federal Regulation (CFR),
Part 601).
The
taxpayer's representative may submit
Form 2848 (Power of Attorney), Form 8821
(Tax Information Authorization), or a
substitute form which meets the
specifications of 26 CFR 601.503(a).
Forms 2848 and 8821 are available as a
convenience. Their use is not mandatory.
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
601.504(b), a power of attorney is
required in order for the taxpayer's
representative to perform any of the
specific acts described in 26 CFR
601.504(a). These specific acts can also
be found on the front page of Form 2848.
In all other instances involving the
receipt of confidential tax information,
a Form 8821, or an appropriate
substitute, may be used in lieu of Form
2848. A document used in place of Form
2848 or Form 8821 should contain the
following information:
name, TIN, and address of the
taxpayer(s)
name(s) and address(es) of
representative(s) authorized by
the taxpayer(s) and, if more
than one person, a designation
of which representative is to
receive notices or written
communications
specific act(s) the
representative(s) is authorized
to perform
type(s) of tax and federal tax
form number(s)
tax
year(s) or period(s)
name(s) and address(es) to which
copies of notices or other
written communications required
to be addressed to the taxpayer
should be sent
taxpayer(s)
signature(s) and the
date
if
a power of attorney or tax
information authorization is
granted to an attorney,
Certified Public Accountant
(CPA), or an enrolled agent, the
signature of each such person,
along with a declaration that
he/she is not currently under
suspension or disbarment from
practice before the IRS
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 is required.
It is not necessary that the
signature on a tax information
authorization be acknowledged or
witnessed
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:
executing claims for refund
receiving checks in payment of
any refund of Internal Revenue
taxes, penalties, or interest
executing consents to extend the
statutory period for assessment
or collection of a tax
executing closing agreements
with respect to a tax liability
or specific matter under IRC
§7121
executing waivers of restriction
on assessment or collection of a
deficiency in tax
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.
9.5.1.4.1 (07-15-2002)
Processing Power of Attorney
Forms
Upon receipt, the original of any
power of attorney will be associated
with the investigative file.
A
copy of the Power of Attorney (POA)
will be forwarded to the Memphis or
Ogden IRS Campus, depending upon the
state of residence of the taxpayer
as shown in Exhibits 9.5.1–1 and
9.5.1–2, State Mapping for POA/CAF
Program, Attention: Power of
Attorney Unit, for data entry into
the Centralized Authorization File (CAF). The copy forwarded should be
legible and complete to ensure data
entry can be accomplished. Indicate
on this copy the first initial and
surname of the investigating agent,
the function receiving the power of
attorney, and the field office where
received.
Requests for copies of power of
attorney forms, including all
subsequently filed instruments,
including revocations,
substitutions, etc., should be by
memorandum addressed to the
appropriate IRS campus. (See
Exhibits 9.5.1–1 and 9.5.1–2.)
This procedure will be followed
unless they are clearly intended for
one-time use, such as those
submitted with Freedom of
Information Act requests or
Congressional inquiries. In these
instances, no copy should be
forwarded to the IRS campus and the
original should be associated with
the correspondence.
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
USC 500 and 26 CFR 601.503(a)(5)).
Therefore, it may be necessary to
make copies of authorizations.
9.5.1.4.2 (07-15-2002)
Federal Officers and Employees
Treasury Department Circular No. 230
prohibits current federal officers
and employees in the executive,
legislative, or judicial branches of
the government, or in any agency of
the United States, including the
District of Columbia, from
practicing before the IRS, 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.
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.
Partners and associates of former
government employees may also be
affected by this prohibition.
No
Member of Congress or Resident
Commissioner (elect or serving) may
practice before the IRS in
connection with any matter for
compensation of any kind.
Employees of any state, or
subdivision thereof, whose duties
require them to pass upon,
investigate, or deal with tax
matters of such state or
subdivision, may not practice before
the IRS if such state employment may
disclose facts or information
applicable to federal tax matters.
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, IRS employees should
advise such individual concerning
the existence and content of
Circular No. 230.
9.5.1.4.3 (07-15-2002)
Dealing with Powers of Attorney
When a taxpayer, or a representative
who has a power of attorney on file
with the IRS, requests that contacts
with the taxpayer by IRS personnel
be made through the representative,
such request will be complied with.
There exists an exemption for CI
provided in IRC §7521(d); however,
it is CI's policy to honor the power
of attorney. Exceptions to this
policy can be made with managerial
approval as cited in paragraph (2),
below.
If
advance notification of or contact
with the power of attorney would
result in severe prejudice to the
taxpayer or the investigation,
management may decide to bypass the
representative. Examples of severe
prejudice would include:
if the power of attorney
filed is designed to shield
the representative from
investigation rather than to
protect the interests of the
taxpayer or witness
when repeated attempts to
comply with a request that
all contact be made through
a taxpayer's representative
result in significant
hindrances to the
investigation
In these instances, the
special agent may request
permission from the SSA to
contact the taxpayer
directly. If the SSA grants
permission, the
investigative file should
contain documentation
reflecting the fact that
permission was given and the
facts that led to this
decision.
An
authorization to bypass a
representative in a particular
situation does not nullify the power
of attorney. The IRS has the
responsibility to continue to notify
the representative of any proposed
future contacts with the taxpayer
(absent a continued managerially
approved exception), providing the
representative with copies of
notices, etc., and/or recognizing
the representative if the
representative makes an appearance.
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.
If
the IRS has received a valid power
of attorney or other appropriate
authorization requesting that
taxpayer correspondence related to a
particular CI matter be addressed or
directed to a designated attorney or
CPA representing the taxpayer, the
following guidelines will be
followed:
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.
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.
9.5.1.4.4 (07-15-2002)
Disclosure to Powers of Attorney
Disclosure of returns and return
information to the taxpayer's
representative will be made only in
the following circumstances:
The taxpayer is present at
the time of the disclosure.
The taxpayer has executed a
written consent to the
disclosure. (Form 2848-D,
Declaration and
Authorization, may be used
for this purpose.)
The taxpayer has provided
the representative with a
power of attorney. (Form
2848, Power of Attorney, may
be used for this purpose.)
Exhibit 9.5.1-1
(07-15-2002)
STATE MAPPING FOR POA/CAF PROGRAM
Exhibit 9.5.1-2
(07-15-2002)
STATE MAPPING FOR POA/CAF PROGRAM
Presented by Alvin Brown and Associates,
tax attorney, formerly with the Office of the Chief Counsel of the
IRS.
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