Mission. The mission of the Office of Fraud Enforcement (OFE) is to promote compliance by strengthening the IRS’ response to fraud and mitigating emerging threats. This includes:

The OFE builds strong internal and external partnerships and serves as the primary civil liaison to IRS-Criminal Investigation. By supporting cases throughout the life cycle and through full consideration of available treatments, OFE facilitates optimal disposition of cases with civil or criminal fraud potential.

Purpose. This IRM communicates fraud referral procedures for campus collection employees.

Audience. Campus collection employees and OFE employees.

Policy Owner. Director, Office of Fraud Enforcement, Small Business/Self Employed (SB/SE) Division.

Program Owner. Office of Fraud Enforcement, Policy, SB/SE.

Primary Stakeholders. The primary stakeholders are SB/SE campus collection and OFE.

Fraud cases begin with Campus Collection employees and their recognition of indicators and affirmative acts of fraud by taxpayers through regular case processing.

The detection and deterrence of fraud is every compliance employee's responsibility and the identification and reporting of any fraud indicators is a top priority when discovered. It is essential to identify and report any potentially fraudulent activities. Questions regarding Campus Collection fraud procedures should be referred to your respective CFFC. A list of CFFCs is located on the Fraud Development Knowledge Base.

The CFFCs are a resource who assist Campus Collection employees with cases with fraud indicators, reviews potential fraud development cases within their respective functions, and determines whether cases should be investigated by reviewing fraud documentation, reporting cases on the Campus Collection fraud functional coordinator (CCFFC) data template, and working with FEAs and, when appropriate, cross-functional coordinators in the processing of fraud development cases.

The CFFCs also act as liaisons to ensure the completion of appropriate fraud paperwork, work with the FEAs, and when applicable, cross-functional coordinators to process potential fraud development cases, and report the case on the CCFFC data template.

In all criminal and civil tax fraud cases, the burden of proof is on the government.

Tax evasion (Title 26 USC 7201) and false returns (Title 26 USC 7206(1)) are two common criminal tax offenses within Collection. Willfulness is a common element of tax crimes. Criminal Violations (Exhibit 25.1.1-1) is a listing of the elements necessary for criminal prosecution. Review the criminal criteria set forth in IRM 25.1.3.1.1, Background, for additional guidance.

Tax avoidance and tax evasion are different. Avoidance of tax is not a criminal offense. Taxpayers have the right to reduce or avoid their taxes by legitimate methods. Tax avoidance is a legal means used to lower tax liability by arranging financial affairs to the best advantage and by claiming rightful deductions, credits, and adjustments. Avoidance does not involve concealment or misrepresentation, but works within the legal parameters to shape events to reduce tax. Tax evasion is the illegal act of not reporting income, underreporting income, or providing false information to the IRS. Fraud may exist when a taxpayer willfully attempts to illegally underreport income, not pay taxes, or both.

Common indicators of fraud within Campus Collection involve the following issues:

Refer to IRM 25.1.2.3, Indicators of Fraud, for additional information on fraud indicators.

When an initial indicator of fraud is identified, fraud development must be considered. The CFFC will assist with assessing the fraud development potential and determining the plan of action.

Further development of the initial fraud indicators is necessary to document firm indications (affirmative acts) for successful fraud cases.

In instances with initial indicators of fraud, Campus Collection employees should interview the taxpayers with similar to normal case processing to gather information on the taxpayers' ability to pay and on the filing of delinquent returns.

When the taxpayer asks if a fraud referral is being considered or whether CI is involved, the compliance employee must not give a false or deceitful response. Guidance from the courts provides that compliance employees:

When interviewing the taxpayer with potential fraud indicators, it is critical for the employee to secure the taxpayer's explanations for any discrepancies. If possible, review the taxpayer's explanations with him or her and get a written signature that the summary is fair and accurate.

Suspend any attempts to resolve the case. If the taxpayer initiates an installment agreement on a potential fraud case, explain to the taxpayer that:

Documentation is critical for the development of fraud referrals. Maintain complete and accurate case notes that include:

Date stamp documents received from taxpayers but do not otherwise write on the documents. If documents are obtained from third parties, the source of the documents should be identified. For example, if received by mail, attach the envelope to the document or make a notation on the back of the document. If you need to write on a document make a copy of the original and use the copy for your work but never write on an original document secured from a taxpayer or third-party.

Do not indicate whether the taxpayer has committed fraud, just document the facts uncovered during the investigation.

When initial indications of fraud are discovered, Campus Collection employees should initiate a discussion with their CFFCs.

The CFFCs will review the case and, consult with the FEA as appropriate, to determine whether the case should be investigated further for potential fraud. If the FEA verifies that the case warrants review for potential fraud development or direct criminal referral, the CFFC should complete and submit the CCFFC data template via encrypted email to *Collection Campus Fraud Reporting. The specific fraud indicators will be checked on the Fraud Indicator Check Sheet (see ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡). See IRM 5.19, Liability Collection, for specific assignment controls.

Upon concurrence of potential fraud, the Campus Collection employee should suspend case resolution and proceed with the potential fraud investigation.

The CFFCs will document the Fraud Referral Summary Check Sheets (see Exhibit 25.1.11-2) to approve the potential fraud investigation.

After the concurrence of the CFFC, the Campus Collection employee works the potential fraud investigation within their normal scope of duties.

The Campus Collection employee will secure research prints from the Integrated Data Retrieval System (IDRS), including SUMRY, TXMOD, ENMOD, BMFOLI, IMFOLI, AMDIS, and Information Return Processing (IRP) documents.

Campus Collection employees will retain copies of original or amended returns secured.

Asset/locator research should be obtained, if it is within the normal process and authority of the workgroup.

If no contact has been established with the taxpayer (or authorized representative), a minimum of three attempted phone contacts must be documented. The taxpayer interview is especially important if records are inadequate, nonexistent or false.

For cases with only unfiled return modules, Form 3449, Referral Report, is also required. Note in block 7 that fraud indications are present.

Original documents are the best evidence. Always strive to view or obtain original documents. If doubts exist about the authenticity of a document, firmly request that the original be produced.

Documents and correspondence obtained from the taxpayer, or third parties must be retained as potential evidence. Copies of all documents provided by the taxpayer should be made as soon as practicable.

Never write on or alter original documents in any way. Work papers are secondary evidence. Make another copy of the document to make notes or highlight discrepancies.

Contact local counsel if the taxpayer requests the return of any records. Counsel will advise on the retention of any existing copies.

Once the Campus Collection employee completes the investigation and gathers the required evidence, the employee will complete the Fraud Referral Summary Check Sheet (see Exhibit 25.1.11-2).

The referring employee will meet with the CFFC to review the case.

The CFFC will consult with the FEA to determine if the case warrants review for potential fraud development or direct criminal referral. If the FEA agrees, the CFFCs will send the case file and supporting documents to the FEA. Once the case is sent to the FEA for evaluation, the CFFC should complete and submit the CCFFC data template via encrypted email to *Collection Campus Fraud Reporting.

The FEA will evaluate whether the case has sufficient information to refer directly to CI. If the case has fraud potential but needs further development, the FEA will recommend its transfer to Field Collection or Examination to continue the investigation. If the case does not have criminal fraud potential, the FEA will consider whether the civil fraud penalty should be pursued through Campus or Field Examination.

When firm indicators of fraud are present, referrals to CI will be completed by the controlling office with the concurrence of the FEA.

All criminal referrals must be routed through the FEA group manager for review, concurrence, and forwarding to CI. Refer to your functional chapter of IRM 5.19, Liability Collection, for referral procedures.

CI will screen incoming referrals for established criminal criteria and barriers to prosecution. If the referral does not meet the criminal criteria or has barriers to prosecution, the referral will be returned to Campus Collection via the FEA group manager. If the referrals meet the criminal criteria and supports CI's workplan, and no identified prosecution barriers are identified, the referrals will be forwarded to the appropriate CI Field Offices for further evaluation.

Within 10 work days of the evaluating field office's receipt of the referral, CI will contact the CFFC to schedule and conduct an initial conference. Within 30 work days of the receipt of the referral by the evaluating field office, the parties will meet again for a disposition conference. The purpose of the disposition conference is to discuss CI's decision to accept or decline the referral. It provides CI the opportunity to provide feedback to Campus Collection regarding that decision. If the referral is accepted, follow the guidance in your functional chapters of IRM 5.19, Liability Collection, to close the case. Make copies of all original documents submitted to CI. If declined, the FEA may recommend pursuing civil fraud penalties. Otherwise, Campus Collection will resume normal case processing to include alternative enforcement actions such as routing frivolous returns or adjusting collection determinations based on available information. Feedback to the originating employee should be included with the returned evaluation.

Once the FEA agrees that the case has criminal fraud potential, Form 11661-A, Fraud Development Recommendation - Collection, must be completed by the Campus Compliance Collection employees with the FEA's assistance. The FEA will sign the Form 11661-A, documenting the recommendation to transfer to Field Collection for further development.

The CFFC ensures the assembled case file being transferred includes the Fraud Indicator Check Sheet (see ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡), and the Fraud Referral Summary Check Sheet. All available supporting documentation, listed on the Fraud Referral Summary Check Sheet must also be included in the file.

The CFFC will send the case file to the Collection Fraud Policy analyst for potential transfer to Field Collection. See the fraud website for the current Collection Fraud Analyst contact. The physical transfer of the case file must be sent by traceable overnight service or other approved method. See IRM 10.5.1, Privacy and Information Protection, Privacy Policy, for further handling requirements.

Case activity should be suspended according to procedures in your functional chapter of IRM 5.19, Liability Collection, with a 60-day follow up.

Upon approval of the transfer to Field Collection, the CFFCs will use IDRS command code ASGNI/ASGNB to assign the case to the appropriate Field Collection group as indicated by the Collection Fraud Analyst. The eight-digit revenue officer (RO) assignment number includes the appropriate area office/territory office designation, followed by one of the following:

The Integrated Collection System (ICS) will assign a case subcode to cases sent to Field Collection for further development. The subcodes enable Field Collection to assign the case to an RO for further fraud development. The subcodes are:

The Collection Fraud Policy analyst will send the approved case file to the field group manager for assignment. Field Collection will work the case as a potential fraud development case in accordance with IRM 25.1.8, Field Collection.

Upon concurrence of the CFFCs, and the FEA, potentially fraudulent Centralized Offer In Compromise (COIC) cases should be sent to Field Collection groups for further investigation.

The CFFC and FEA will complete the Form 11661-A. When firm indications of fraud in the offer investigation are present, referrals to CI will be completed by the Campus Collection employees with the concurrence of the FEA. (see IRM 25.1.11.12 on CI Referral Evaluation).

After FEA approval of the Form 11661-A, the COIC case referral will be transferred to the Field Collection group nearest the taxpayer’s address. The COICs will issue an outgoing OI on ICS (sub code 106) to the Field Collection Group per the ICS parameter tables. Then, the COIC manager assigns the case on the Automated Offer in Compromise (AOIC) system to xxxx9998.

Retain the OIC case file within COIC. Send copies of the Form 656, Offer in Compromise; however, all other documents sent with the OIs can be originals. DO NOT WRITE ON ORIGINAL DOCUMENTS. Retain copies of all documents sent for the offer file.

The OI will be assigned to an RO who will work with the local FEA to make a determination if the potential for fraud development exists. See IRM 5.8.4.18, Potential Fraud Referrals, for additional actions.

Recommendations for asserting the civil fraud penalty should be carefully reviewed to establish that the evidence supports the assertion.

Fraud must be proven by clear and convincing evidence, and the statutory notice asserting the fraud penalty must be reviewed by Area Counsel.

When cases have criminal fraud potential relating only to returns which are unfiled or have civil fraud potential, the cases will be directed to Campus Examination for transfer to Field Examination for further development, or sent to Campus Examination for the assertion of the civil fraud penalty.

Upon concurrence of the FEA, the CFFC sends the completed Form 13549, Campus Fraud Leadsheet, and the corresponding documentation to the local Examination Campus Fraud Coordinator.

Case activity should be suspended according to procedures in your functional chapters of IRM 5.19, Liability Collection, and schedule follow up in 60 days.

Campus Examination will accept or decline a fraud lead within 21 days of receipt in accordance with IRM 4.19.10.4.5, Responsibilities of the Campus Fraud Coordinator (CFC).

If the lead is declined, the reason for the declination will be provided to the CFFC and returned to the initiator through the employee's manager. The normal case processing will resume.

If the Campus Examination Fraud Coordinator accepts the fraud lead for further development of the fraud issue(s), the case resolution will be suspended pending the assertion of the civil penalty. Refer to your respective functional chapter of IRM 5.19, Liability Collection, for procedures.