Purpose: This section covers the elements involved in a criminal trial, including topics such as jurisdiction, evidence, and testimony, that criminal investigators should be familiar with.

Audience: All Criminal Investigation (CI) employees.

Policy Owner: Director, Global Financial Crimes & Policy.

Program Owner: Director, Global Financial Crimes & Policy.

Primary Stakeholders: All CI employees.

Contact Information: To recommend changes or suggestions to this IRM email CIHQIRM@ci.irs.gov.

Goal: To instruct CI employees on the authorized techniques and available resources during trial.

During trial, the SA ordinarily may be present at the counsel table with the attorney for the government for assistance. The SA may assist the government attorney by maintaining all government exhibits in proper order for ready reference and presentation, keeping a list of both government and defense exhibits as they are introduced, checking to ensure that government witnesses are present and ready to testify, and managing other members of the trial team who will be assisting.

The SA may be called upon to prepare charts or schedules showing the taxpayer’s sources of income, correct taxable income, or the related tax liability. The charts or schedules may reflect summaries of specific items, net worth increases, expenditures in excess of available resources shown on tax returns, or other transactions that lend themselves to visual presentation. In some instances, such summaries have been formally introduced in evidence; in others, they have been exhibited to the jury and, at the end of the trial, used by the jury during deliberations. The need for visual presentations, the type of visuals, and the method of preparation will be affected by such considerations as the complexity of the investigation, the attitude of the court toward visual aids, the preferences of the attorney for the government, and available facilities.

The SA should listen carefully to all testimony and alert the attorney for the government as to any false, misleading, or erroneous statements. The SA agent may also assist in preparing questions to ask defense witnesses on cross-examination.

The SA should avoid any direct contact with the defendant at the trial in order to eliminate the possibility of any embarrassing or compromising situations. Likewise, association with defense counsel should be only in open court and with the knowledge and consent of the attorney for the government.

The court will usually instruct the jury against any contact with the attorneys or witnesses in the investigation. Any attempts by the SA to associate with a member or members of the jury may cause a mistrial.

During the trial and after a verdict has been rendered in the investigation, the SA should refrain from any demonstration of personal feelings in the matter.

The Department of Justice (DOJ), Tax Division, authorizes prosecution of all criminal tax investigations, except those that can be directly referred to the US Attorney’s Office (See IRM 9.5.12, Processing Completed Criminal Investigation Reports).

The DOJ, Tax Division, has the authority to litigate all criminal proceedings arising under the Internal Revenue laws, except for proceedings pertaining to: misconduct of IRS personnel; taxes on liquor, narcotics, firearms, coin- operated gambling and amusement machines; wagering; forcible rescue of seized property; interference with an employee acting under Internal Revenue laws; unauthorized disclosure of information; and counterfeiting, mutilation, removal or reuse of stamps.

The Federal district courts have jurisdiction over all offenses against the laws of the United States, including criminal violations of the internal revenue laws. Therefore, most Federal criminal tax investigations are tried in district court.

When specially designated by the district court, a US magistrate judge may have jurisdiction to try persons accused of misdemeanors (see Title 18 USC 3401). However, any person charged with a misdemeanor, other than a petty offense, may elect to be tried before a district court.

The term “venue” means the district or geographic area in which a trial must be held. In general, venue lies in the judicial district in which the crime was committed. If the crime consists of a failure to comply with a legal requirement, venue lies where the compliance should have occurred. A defendant may move to transfer venue because of prejudice or for the sake of convenience.

In tax evasion and false return investigations, venue may be proper in either the district where the return was filed or the district where it was prepared and signed. In an investigation of willful failure to file a return, venue lies in the judicial district where the return should have been filed with the IRS or where the taxpayer resides.

Title 18 USC 3237(b) provides that where an offense is described in Title 26 USC 7203, or where venue for prosecution of an offense described in Title 26 USC 7201 or 7206(1), (2), or (5) is based solely on a mailing to the IRS, and prosecution is begun in a judicial district other than the judicial district where the defendant resides, the defendant may move to be tried in the judicial district in which he was residing at the time the alleged offense was committed; provided, that the motion is filed within twenty days after arraignment of the defendant upon indictment or information.

In determining venue, courts consider the following factors:

When a choice of venue for trial exists, courts prefer that it be in the judicial district of the taxpayer's place of residence or business to avoid undue travel hardships on taxpayers and witnesses.

In criminal investigations, the government bears the burden of proving the commission of all the elements of the crime charged "beyond a reasonable doubt" . More than one hundred years ago, a court defined "reasonable doubt” as “such a doubt as would deter a reasonably prudent man or woman from acting or deciding in the more important matters involved in his/her own affairs" .

The burden of proof remains on the government throughout the trial, although the burden of going forward with evidence may shift from one side to the other.

When the party that has the burden of proof has produced sufficient evidence for the jury to return a favorable verdict, a prima facie investigation has been made. This does not mean that the jury will render such a verdict, but rather that the evidence is sufficient for them to do so. At this point, the defendant has two choices:

The burden of proving proper venue is an essential part of the government’s investigation. The standard for proving venue is by a preponderance of the evidence, not proof beyond a reasonable doubt. In the Wissler investigation, the court defined “a preponderance of the evidence” as follows: "When it is said that the burden rests upon either party to establish any particular fact or proposition by a preponderance or greater weight of evidence, it is meant that the evidence offered and introduced in support thereof to entitle said party to a verdict, should when fully and fairly considered produce the stronger impression upon the mind and be more convincing when weighed against the evidence introduced in opposition thereto."

The IRC provides that the burden of proof is on the IRS where fraud is alleged. Title 26 USC 7454 states: "In any proceeding involving the issue whether the petitioner has been guilty of fraud with intent to evade tax, the burden of proof in respect of such issue shall be upon the Secretary." In a fraud investigation, the government need not prove fraud beyond a reasonable doubt. However, a preponderance of the evidence is not sufficient. One court has stated that "Fraud must be established by evidence, which is clear, cogent, and convincing."

A stipulation is an agreement between the prosecuting attorney and defense counsel on certain facts in the investigation so as to expedite the trial by eliminating the introduction of evidence to prove undisputed facts. For example, the defense may admit the receipt of income, the acquisition of certain assets, the making of specified expenditures, or even the source and amount of income and the tax deficiency alleged. This agreement then relieves the government of the burden of producing sufficient evidence to prove such matters and would leave willfulness as the only real issue to be proved. Since willfulness is usually inferred from the manner in which transactions are handled and proven by the testimony of a number of witnesses that dramatizes the defendant's knowledge (thereof), the government exercises great care in agreeing to stipulations in investigations involving willfulness.

Stipulations are generally agreed upon and submitted to the court in writing prior to trial; however, they may be stated orally in open court and recorded by the court reporter during the trial.

In general, evidence is the means by which any alleged fact is established or disproved. Evidence may be presented orally through witness testimony, and/or by the introduction of records or other physical objects.

Direct evidence is evidence that tends to prove a disputed fact without any inference or presumption. Evidence is direct when the principal facts in dispute are sworn to by those who have actual knowledge of them by means of their senses. Direct evidence may take the form of admissions or confessions made in or out of court.

Circumstantial evidence is evidence that tends to prove a disputed fact by inference. A jury may properly find that circumstantial evidence outweighs conflicting direct evidence if the inference is more convincing than any other explanation offered. Circumstantial evidence is the only type of evidence generally available to show those elements of a crime that exist in the mind of the perpetrator, such as intent or motive. Therefore, proof of willfulness in most Internal Revenue violations is based on circumstantial evidence.

In addition to proving willfulness, circumstantial evidence such as evidence of increases in net worth, expenditures, or bank deposits is also frequently used to prove unreported income. In this connection, it is important to remember that the agent’s testimony alone is insufficient to establish the nature of a defendant’s expenditures. Rather, the government must call third-party payees as witnesses or introduce other independent testimonial or documentary evidence to establish the purpose of the payments. Failure to do so would create a so-called "Greenberg problem" , named after a First Circuit investigation of that name.

To save time and expense, a trial judge may accept certain facts without requiring proof, if they are commonly known or can be easily discovered. This is known as "judicial notice."

The admissibility of evidence in a federal trial is governed by the Federal Rules of Evidence (FRE). In addition, rules for the admissibility of various forms of documentary evidence in Federal courts are provided in 28 USC 1731–1745.

The admissibility of evidence must be considered during the investigative stage, long before the investigation reaches the courtroom. A detailed discussion of the types of evidence that should be sought, and the admissibility of such evidence may be found in IRM 9.5.1, Administrative Investigations and General Investigation Procedures.

A witness is generally presumed to be competent to testify (FRE 601). There is no rule automatically excluding an insane person, a child or even a convicted perjurer from testifying. At most, a witness’s competency to testify requires a minimal ability to observe, recollect and recount, as well as an understanding of the duty to tell the truth. The trial judge will determine whether a prospective witness satisfies these requirements.

In a Federal criminal investigation, a husband and wife are competent to testify in support of one another. However, there are spousal privileges that may prevent one spouse from testifying against another. For a discussion of spousal privileges, see IRM 9.5.1.34, Privileged Communications.

A defendant in a criminal trial is a competent witness and his/her testimony must be judged in the same way as that of any other witness, with due regard for his/her personal interest in the outcome of the investigation.

The jury (or judge if trial by jury is waived) determines the weight and credibility of a witness's testimony. The credibility of a witness may be attacked by any party, including the party calling the witness (FRE 607).

Witness credibility is judged by whether the witness had the capacity or opportunity to observe or be familiar with the subject matter of his/her testimony. Factors affecting credibility include the witness's self-interest, bias, prejudice, demeanor on the stand, prior inconsistent statements, prior mental derangement, intoxication at the time of the transaction to which he/she testifies, and prior convictions for a felony or crime involving moral turpitude.

If a witness gives contradictory testimony, the jury may accept the portion it believes and reject the remainder, or it may reject the witness's entire testimony if the witness has testified falsely as to a material point.

After counsel finishes direct examination of a witness, opposing counsel has the right to cross-examine that witness in order to test the veracity of his/her testimony. This is done by questions designed to:

The courts allow a wide latitude on cross-examination and generally permit the cross-examiner to:

The general rule in Federal courts with respect to witnesses other than defendants is that questions asked on cross-examination must pertain to matters brought out on direct examination. The rule is liberally construed, and where the direct examination relates to a general subject, the cross-examiner may go into the specifics of that subject. If the cross-examiner wishes to inquire into subjects not opened on direct examination from the witness, the cross-examiner must call the witness as his/her own witness and subject the witness to direct examination on such matters.

Impeachment is an attack on a witness’s credibility. The credibility of a witness may be attacked by any party, including the party calling the witness (FRE 607).

A witness may be impeached in the following ways, by:

At the discretion of the trial judge, a party may be permitted to recall a witness for further testimony, to correct a mistake in testimony, for further cross-examination, or to lay a foundation for impeachment.

The court may also recall a witness on its own motion.

The verdict is the formal decision or finding made by the jury. It must be returned to the judge in open court and must be unanimous. See Fed. R. Crim. P. 31.

If there are multiple defendants, the jury may return a verdict at any time during its deliberations as to any defendant about whom it has agreed. If there are multiple counts and the jury cannot agree on all counts as to any defendant, the jury may return a verdict on those counts on which it has agreed. If the jury cannot agree on a verdict on one or more counts, the court may declare a mistrial on those counts. The government may retry any defendant on any count on which the jury could not agree.

The defendant may be found guilty of an offense necessarily included in the offense charged, an attempt to commit the offense charged, or an attempt to commit an offense necessarily included in the offense charged, if the attempt is an offense in its own right. The Supreme Court has indicated that, where some of the elements of the crime charged themselves constitute a lesser crime, the defendant, if the evidence justifies it, is entitled to an instruction that would permit the jury to return a guilty verdict as to the lesser offense. However, where the facts necessary to prove the crime charged are identical with those required to prove the lesser offense, the defendant is not entitled to an instruction that would permit the jury to make a choice between the two offenses in returning its verdict.

The trial court must poll the jury at the request of either party, or may do so upon its own motion, in order to be certain the verdict is unanimous. If the poll reveals a lack of unanimity, the jury may be directed to retire for further deliberations or the judge may declare a mistrial.

Before submission to the jury, but after the government closes its evidence or after the close of all evidence, the court, on the defendant’s motion or on its own motion, may determine that the evidence is insufficient to sustain a conviction and order the entry of a judgment of acquittal. See Fed. R. Crim. P. 29. The motion may be made orally or in writing. In some circuits, the motion will be granted unless the trial judge determines that the evidence, taken in the light most favorable to the government, tends to show that the defendant is guilty beyond a reasonable doubt. In other circuits, the motion will be denied if the evidence would be sufficient to send the investigation to the jury in a civil action.

If the motion for acquittal is made by the defense upon the conclusion of the government’s evidence and is denied, the defendant may proceed by introducing evidence in his/her own behalf. This waives any objection to the denial. The defendant may renew the motion for judgment of acquittal after both sides rest. A failure to do so may foreclose any right on appeal to question the sufficiency of the evidence to sustain the conviction.

The trial court may reserve its decision on a motion for judgment of acquittal, proceed with the trial, submit the investigation to the jury, and decide the motion either before the jury returns a verdict or after it returns a verdict of guilty or is discharged without having returned a verdict.

The defendant may move for a judgment of acquittal, or renew such a motion, within 7 days after a guilty verdict or after the court discharges the jury, whichever is later. The court may then set aside the verdict and enter an acquittal. If the court enters a judgment of acquittal after a guilty verdict, the court must also conditionally determine whether any motion for a new trial should be granted if the judgment of acquittal is later vacated or reversed on appeal.

In general, the probation officer must conduct a pre-sentence investigation, unless a statutory exception applies, or the court finds it can meaningfully exercise its sentencing authority based on the information in the record. The pre-sentence report must apply the Advisory Sentencing Guidelines in determining the applicable sentencing range and must identify any basis for departing from that range. The report must also describe the defendant’s history and characteristics, including any prior criminal record, the defendant’s financial condition, and any relevant circumstances affecting the defendant’s behavior (See Fed. R. Crim. P. 32(c) and (d)).

In conducting the pre-sentence investigation, the probation officer will usually consult with the investigation SA about the defendant's cooperation (or lack thereof) during the investigation, the defendant's mental and physical history, whether the defendant has made any payments on the tax deficiencies involved in the criminal investigation, the defendant’s other outstanding tax liabilities, if any, and any other information that may be helpful in imposing sentence or granting probation.

The probation officer must give the pre-sentence report to both parties at least 35 days before sentencing, unless the defendant waives this minimum period. Within 14 days after receiving the pre-sentence report, the parties must state in writing any objections (See Fed. R. Crim. P. 32(e) and (f)).

Whenever a conviction is obtained, the SA should determine the identity of the probation officer assigned to prepare the pre-sentence report and provide that individual with any relevant information. In addition, the SA should do the following:

See IRM 9.6.2, Plea Agreements and Sentencing Process for additional information.

Before imposing the sentence, the court must provide each party with an opportunity to speak. At this time, the defendant may present any information that might mitigate the sentence.

At sentencing, the court will reference the Federal Sentencing Guidelines. Although the Guidelines themselves are no longer mandatory, the Supreme Court has held that a sentencing court must begin by correctly calculating the applicable Guidelines offense level, which includes relevant conduct, and then, if necessary, depart upward or downward from that level to determine the sentencing range.

After the court imposes sentence, the defendant may not withdraw a plea of guilty or nolo contendere (i.e., a plea by which the defendant neither admits nor denies the charges), and the plea may be set aside only on direct appeal or collateral attack (See Fed. R. Crim. P. 11(e)).

The SA should enter sentencing information into CIMIS within five days of sentencing, including the term of imprisonment, the term of probation/supervised release, the amount of court fines and any restitution ordered to be made to the IRS.

Within 14 days after sentencing, the court may correct a sentence that resulted from arithmetical, technical, or other clear error (See Fed. R. Crim. P. 35(a)).

In a criminal tax case, a court can require a defendant to pay the losses incurred by the government. The amount of the restitution ordered by the court is calculated from evidence submitted at trial or from information contained in the plea agreement and presented to the court at sentencing. See IRM 9.5.14, Closing Procedures for more detailed information relating to restitution.

Title 18 USC 3663 grants sentencing courts the authority to order the payment of restitution for certain crimes, including offenses under Title 18. In addition, 18 USC 3663A makes restitution mandatory for a number of offenses. However, these statutory provisions do not authorize orders of restitution with respect to Title 26 tax crimes or Title 31 currency-reporting offenses, unless the parties have agreed to restitution in a plea agreement (See 18 USC 3663(a)(3)). Therefore, sentencing courts generally may only order restitution of the amount of the tax loss in investigations where the convictions include a covered offense such as conspiracy, money laundering, false claims or mail fraud.

Public Law No. 111-237 amended IRC 6201 to provide that the Service shall assess and collect the amount of restitution ordered in a tax case for failure to pay any tax imposed under the Internal Revenue Code in the same manner as if such amount were such tax. The law applies to restitution orders entered after August 16, 2010.

Restitution may be ordered as a condition of probation or supervised release in tax, currency-reporting, and money-laundering offenses. See IRM 9.5.14, Closing Procedures for more detailed information when restitution ordered as a condition of probation or supervised release in tax cases.

The amount of restitution is generally limited to the loss caused by the specific conduct that is the basis of the offense of conviction and does not include relevant conduct, unless the defendant agrees otherwise in a plea agreement. Restitution generally does not include penalties, and it must be for a sum certain.

If the law requires restitution, the pre-sentence report must include sufficient enough information for the court to order restitution (See Fed. R. Crim. P. 32(c)(1)(B)).

To enable the court to order restitution, the SA should calculate the amount of tax due and owing for each year of conviction and provide that information to the prosecutor and probation officer. In the absence of a plea agreement that includes relevant conduct, the SA’s post-trial tax calculation should take into consideration only the information admitted into evidence during the trial and related to the year(s) of the offense(s) for which the defendant was convicted. The SA should ensure the interest calculation for tax due and owing is calculated up to the projected sentence date.

The restitution order must be included in the Judgment and Commitment Order (J&C) signed by the judge.

The IRS has designated a centralized location to receive and process all restitution payments. The address is: Internal Revenue Service - RACS, Attn: Mail Stop 6261 - Restitution, 333 W. Pershing Avenue, Kansas City, MO 64108

When sentencing a defendant, the court may suspend a portion or all of the sentence and instead place the defendant on home confinement or probation. Alternatively, the court may impose a sentence that includes both a term of imprisonment as well as a term of supervised release which occurs after imprisonment.

If probation or supervised release are imposed, the court will provide certain conditions that the defendant must abide by or face revocation of probation or supervised release (See 18 USC 3563; 3583(d)). Such conditions may include cooperation with the IRS, the timely filing of tax returns or amended returns, a prohibition against preparing tax returns for others, etc. Restitution may also be ordered as a condition of probation or supervised release.

Criminal Investigation is responsible for monitoring compliance with the J&C until the defendant is released from court supervision. For further information concerning CI’s responsibilities when conditions of probation or supervised release are imposed, see IRM 9.5.14, Closing Procedures.

The terms of the J&C may create a CIMIS conditional probation expiration date. To properly calculate the conditional probation expiration date, see IRM 9.5.14, Closing Procedures.

The court will enter a J&C to memorialize the sentence. A judgment of conviction must set forth the plea, the jury verdict or the court’s findings, the adjudication and the sentence. It must be signed by the judge and entered by the clerk.

Upon the defendant’s motion or its own, the court must withhold judgment if the indictment or information did not charge the offense for which the defendant was convicted or if the court did not have jurisdiction over the offense charged. The defendant must move to arrest judgment within 14 days after the court accepts a verdict or finding of guilty, or after a plea of guilty or nolo contendere.

Once entered, the J&C should be obtained by the agent and compared to the CIMIS entries. The CIMIS entries should be corrected as necessary, and any errors in the order should be brought to the attention of the prosecutor.

After sentencing, CI must prepare a closing package.

For specific information concerning the required contents of the closing package, see IRM 9.5.14, Closing Procedures for procedures for fully adjudicated tax and tax-related administrative and grand jury investigations.

Under Federal Rule of Appellate Procedure (FRAP) 4(b), in a criminal case, a defendant’s notice of appeal must be filed in the district court within 14 days after the later of:

When the government is entitled to appeal, its notice of appeal must be filed in the district court within 30 days after the later of:

Generally, appeals from the decisions of the Federal district courts are heard in the Court of Appeals for the appropriate circuit.

Upon the government’s motion made within one year of sentencing, the court may reduce a sentence if the defendant, after sentencing, provided substantial assistance in investigating or prosecuting another person.

In certain situations, the government may move for a reduced sentence more than one year after sentencing (See Fed. R. Crim. P. 35(b)(2)).

Congress has provided that, after a jury or court convicts a defendant of any of the principal substantive criminal tax offenses (e.g., 26 USC. 7201, 7203, 7206(1) and (2)), the court must order the defendant to pay the Government's costs of prosecution. Thus, the United States Attorney’s Office should seek recovery of the costs of prosecution in criminal tax cases.

Evidence from a criminal investigation may be used to prove fraud in a related civil tax investigation, even if the criminal investigation did not result in a conviction. Therefore, after the criminal proceeding has concluded, the SA often assists the government attorney in preparing for the civil trial and in presenting the civil investigation. In addition, because the SA was responsible for developing the evidence to sustain the ad valorem additions to the tax (except those concerning tax estimations) in the criminal investigation, the agent will often serve as a principal witness for the government in the civil trial.

Civil tax investigations are often tried in the US Tax Court, where the rules of evidence are similar to those that apply in civil non-jury trials in district court. In general, the IRS's determination of a deficiency is presumed to be correct (see Rule 32, Tax Court Rules of Practice). However, if a fraud penalty is asserted, the IRS has the burden of proving fraud with intent to evade tax. (26 USC 7454(a)). The evidence in that respect must be "clear and convincing" , i.e., not "beyond a reasonable doubt" as in a criminal investigation, but more than a mere preponderance. If the IRS does not prevail on the fraud issue, the taxpayer still has the burden of overcoming the prima facie correctness of the determination of a deficiency so long as the assessment was made within the applicable period of limitations.

Record of the disposition of a criminal investigation against a taxpayer is admissible in the Tax Court, and a conviction for tax evasion or attempted tax evasion is conclusive proof that the taxpayer committed civil fraud. Further, a guilty plea in a criminal investigation will be received by the Tax Court as an admission, to be given weight according to the circumstances. For example, if the taxpayer pleaded guilty to tax evasion, the plea would be sufficient to establish fraud. However, if the taxpayer pleaded guilty to failure to file a return, the plea would not necessarily prove the taxpayer had the intent to evade tax.

Even if the defendant was acquitted in the criminal investigation, the evidence used in that investigation may be sufficient to prove civil fraud. Unlike criminal punishment, a civil fraud penalty may apply even if the taxpayer filed amended returns, paid additional taxes after the filing of fraudulent returns, or died before the final adjudication of the civil investigation. This is because the civil fraud penalty applies to offenses against property rights, not personal rights.