Criminal cases are an integral part of the examination process and Technical Services is designated as the liaison between Field Examination and Criminal Investigation. Activities in this program include (but are not limited to) suspending the civil case during the criminal prosecution process, monitoring examination related conditions of probation after the prosecution, and ensuring appropriate civil actions at the end of the criminal investigation for both prosecuted and non-prosecuted taxpayers.

By law, the Service has the authority to make the appropriate assessments related to fraud when cases have been successfully prosecuted and ensure the related issues to the case such as conditions of probation are appropriately resolved. The IRM is the source for the procedures for the Service to accomplish these tasks.

Technical Services serves in the role of liaison to help ensure the procedures in IRM 1.2.13.1.11, Policy Statement 4-26 (Formerly P-4-84) are followed appropriately.

The Director, Examination - Technical Services is the executive responsible for the fraud and grand jury suspense program. The detailed responsibilities are as outlined below in IRM 4.8.11.2 and thereafter.

Audience - The employees responsible for taking action or who require knowledge about the program, process or activity.

Fraud coordinator - is the local Technical Services revenue agent reviewer assigned to complete the various required procedures for the fraud and grand jury suspense program outlined in this chapter.

Collateral record - the record maintained on ERCS only for monitoring cases or issues that are not controlled on AIMS.

Administrative investigation - a case where the prosecution recommendation has been made.

Grand jury investigation - a case where the case has been referred by CI for further investigation.

Suspense cases - cases that are involved in tax or tax-related investigations which are under the jurisdiction of the Department of Justice (DOJ) / or Assistant United States Attorney (AUSA).

Conditions of Probation - conditions order by the Court for the taxpayer when the criminal case is finalized.

Restitution-based Assessments - assessments ordered by the Court when the criminal case is finalized which represent the loss incurred by the government.

The table lists commonly used acronyms and their definitions:

The type and timing of the actions during the criminal investigation determine when the case should be sent to TS for suspense of any civil examination case. Two events trigger the action of sending a case to TS for suspense. Refer to IRM 4.8.2.10.3.1, Why Cases Are Placed in Fraud and Grand Jury Suspense. Triggering events are 1) CI recommends prosecution of the taxpayer or 2) grand jury investigation is initiated. This subsection explains the three primary notices CI is required to send to TS (and Examination as applicable) to notify Examination of critical stages reached in the criminal investigation process and to provide a brief overview of the steps taken when these notices are received in TS.

CI is required to determine if any civil action is being taken or planned, and to notify Compliance (Examination and Collection) when they open an investigation. Once a Title 26 and / or tax-related Title 18 investigation is initiated (numbered) and TC 914 codes are placed on the appropriate master file modules, Form 14584, IRS - Criminal Investigation - Check for and Suspense Civil Activity Notification, is prepared by CI and forwarded to TS to determine if any civil action with respect to the target and / or any related entities is currently in progress. CI will send Form 14584, to TS via secure e-mail to notify SB/SE Examination of the initiation of criminal proceedings and to verify current and prior civil activity on the criminal suspects and related returns. Refer also to IRM 9.5.1.2.1, Procedures in Financial Investigations, IRM 9.5.2.6.3, Civil Actions During the Grand Jury Investigation, IRM 25.1.4.3.3, Required Communications, and IRM 25.1.5.2, Grand Jury Suspense. CI is also required to send this form to other functions / Business Operating Divisions (BODs). See IRM 4.8.11.3.1 (2)(b) below.

CI must notify Compliance when the criminal investigation is referred to the DOJ and / or AUSA. CI will send the Notice of Department of Justice Referral memorandum to TS and other required functions / BODs via secure e-mail. This notification should clarify that the investigation was referred for prosecution recommendation (administrative investigation) or is referred for further investigation (grand jury investigation). This notification is the event that requires the civil examination case to be sent to TS for suspense. Refer also to IRM 4.8.11.3.2 and IRM 25.1.3.4(7), Accepted Criminal Referrals.

CI will notify Compliance when the criminal investigation is closed (i.e., prosecution completed, discontinued, or declined for prosecution). CI will send Form 13308, Criminal Investigation Closing Report (Tax and Tax Related Only), to TS and other required functions / BODs via secure e-mail. If the case has been discontinued, CI will also provide the DI report narrative or Form 10273, Discontinued Investigation Report, to TS via secure e-mail.

CI notifies TS when jurisdiction of the criminal investigation has been transferred to the DOJ using the Notice of Department of Justice Referral memorandum. This notification should clarify that the investigation was referred for prosecution recommendation (administrative investigation) or is referred for further investigation (grand jury investigation).

After confirming there is an open examination, the fraud coordinator should send the Notice of Department of Justice Referral memorandum via secure e-mail to the assigned examiner and the examiner’s manager informing them that the civil case file(s) and controls should be forwarded for suspense to TS. This notification to Examination should include instructions on how the case should be prepared for suspense. It is recommended to include the FTA as a recipient of the e-mail notification to Examination so they may provide additional guidance.

For more information, refer also to the following

When the case for suspense is initially received in TS, it will be placed into ERCS Status Code 20, Mandatory Review, with the applicable review type based on which box is check on Form 3198, Special Handling Notice For Examination Case Processing, Suspense Type 504 (30 day action date) and assigned to the fraud coordinator. Refer also to IRM 4.8.11.3.6.3.

Administrative fraud (referred to by CI as "prosecution recommendation" ) and grand jury (referred to by CI as "further investigation" ) suspense cases may be at significantly different stages of the civil examination process when the criminal investigation is referred to DOJ. Administrative fraud suspense cases should normally be complete in virtually all aspects when arriving for fraud suspense (i.e., ready for unagreed examination report to be issued), whereas grand jury suspense cases will vary considerably, depending upon the status of the civil case as of the date the grand jury investigation was initiated (e.g., from unstarted with only ERCS/AIMS controls established to virtually complete).

When an administrative investigation ("prosecution recommendation" ) is completed and CI recommends criminal prosecution to the AUSA or DOJ, CI will send the Notice of Department of Justice Referral memorandum to TS to initiate suspense action of the taxpayer’s civil examination. The fraud coordinator will research AIMS/ERCS, contact the special agent, and /or use a Planning and Special Programs (PSP) specialist to determine the identity of the assigned cooperating examiner. This information will be available on a Form 6544. Request for Cooperating Examiner / Revenue Officer. When the case is open in an examination group, the fraud coordinator will forward via secure e-mail the CI memorandum and provide instructions to the examination group to send the case for Fraud Suspense. The instructions to the field should specify a response date for receipt of the case in TS, generally within 30 days. The group should forward the case to TS in Status Code 21 and check the Suspense Cases and Fraud Suspense boxes in the Forward to Technical Services section of Form 3198.

Once a grand jury ("further investigation" )request has been approved, CI will send the Notice of Department of Justice Referral memorandum to TS to initiate suspense action for the taxpayer’s civil case file as required by IRM 9.5.2.6.3. Upon receipt of the notification by Examination, taxpayer contact must immediately cease on the tax year(s) currently under examination. Absent initiation of Policy Statement 4-26 procedures (see IRM 1.2.13.1.11, Policy Statement 4-26 (Formerly P-4-84)), the examination must be documented and completed to the point that the case was approved for the grand jury. See IRM 25.1.5.2(3). No additional AIMS/ERCS controls will be established on any prior, subsequent, or related returns to those already under examination once the grand jury investigation has commenced. The open civil case file is sent to TS for Grand Jury Suspense. In order to avoid the possibility of tainting the civil files with Federal Rule of Criminal Procedures 6(e) (Rule 6(e)) information. Refer to IRM 9.3.1.4.1, Grand Jury Secrecy (Federal Rules of Criminal Procedure Rule 6). There could be serious legal and administrative consequences for not adhering to these procedures. If the civil case file becomes "tainted" , it could render all information and documents unusable for civil purposes. All grand jury information must be treated with special handling according to Rule 6(e).
Once CI’s Notice of Department of Justice Referral memorandum is received, the fraud coordinator will determine whether or not the taxpayer’s returns are under examination by checking AIMS/ERCS and IDRS. If it is determined that the taxpayer is under examination, send the CI memorandum to the Examination group via secure e-mail and include instructions notifying the group of the procedures for sending the case to TS for Grand Jury Suspense. The Examination group must cease taxpayer contact immediately upon this notification, promptly document all examination work done to date, and prepare an examination report on adjustments developed prior to notification of proceedings. IRM 25.1.4 and IRM 25.1.5, Grand Jury Investigations, and IRM 4.8.11.3.4.

The examination group should then forward the case to TS in Status Code 21 and check the Suspense Cases and Grand Jury Suspense boxes in the Forward to Technical Services section of Form 3198.

For both types of cases (adminstrative fraud and grand jury) the fraud coordinator will retain a copy of the Notice of Department of Justice Referral memorandum and instructions provided to Examination to send the case to suspense for monitoring purposes. These should be monitored until the case is received in TS for Fraud or Grand Jury Suspense. If the case is not received in TS by the response date set in the initial memo (generally within 30 days), a follow-up with the examination group is required. It is particularly important to follow up on grand jury cases, due to the risk that these cases can become "tainted" with grand jury information, specifically in instances where the examiner is requested to be a cooperating examiner during the grand jury investigation. If the case is not received in TS after 90 days, the request should be elevated through the TS management chain for resolution with Examination.

When the case is received for suspense, associate the Notice of Department of Justice Referral memorandum and the instructions you provided to Examination with the civil case file(s) (if not already included by the examiner). The fraud coordinator will review the case to determine if all qualifications have been met before placing it into Fraud or Grand Jury Suspense.

Incoming Fraud or Grand Jury Suspense cases should be reviewed immediately after arriving in TS. If it is not possible to conduct a comprehensive review immediately, at a minimum, a detailed statute review should be performed to verify the statute of limitations and a quick review performed to determine if the case qualifies for suspense and the case file appears complete. If the statutes are not correct or the statutes are not adequately protected, and / or the case file does not qualify for suspense (not referred to DOJ or incomplete), it should generally be returned promptly (i.e., within the established time frames associated with the suspense type for incoming cases - generally within 30 days) to Examination with Form 3990, Reviewers Report.

Incoming Fraud Suspense case should be reviewed when received in TS in which prosecution has been recommended. Use the quality attributes in IRM Exhibit 4.8.3-1, Quality Attributes, and the procedures outlined in Exhibit 4.8.11-1 to aid in the review. The case files should contain sufficient development to support the proposed adjustments and penalties reflected in the workpapers and the RAR. The case files should contain sufficient explanations, supporting schedules, and copies of supporting documentation to support any proposed adjustments identified prior to the case being placed into suspense. As a general rule, a case sent to TS for Fraud Suspense should be a complete unagreed case in all respects (similar to a completed unagreed examination case file ready for issuance of a statutory notice of deficiency).

The review of incoming Grand Jury Suspense cases is different from the review of incoming Fraud Suspense cases in that the examination on an incoming grand jury case ceased "as is, where is" upon notification of grand jury proceedings. Therefore, the case may or may not have progressed far enough for the examiner to propose specific adjustments, or civil actions ceased before the issues were examined or fully developed. This may present problems because the case file may lack clear and concise documentation. Regardless of these problems, the case file documentation for work done to date must be reviewed, and the case must be placed in suspense and the statutes monitored. No additional audit activity may be performed once notification of the grand jury investigation is received. Activity to prepare the case for suspense is allowed. The examiner is responsible for properly documenting the case file to the point at which examination activity ceased. Actual review of the case for Grand Jury Suspense is done in the same manner as in Fraud Suspense cases, except that the fraud coordinator must recognize that the examiner was not responsible for any additional work (other than preparing the case for suspense) after notification of the grand jury referral. The focus of the review of a case for Grand Jury Suspense is on proper documentation of work done prior to notice of grand jury referral.

At a minimum, the fraud coordinator will ensure the incoming case for suspense (both types) includes the following. Refer also to IRM 25.1.4.3.11 and IRM 25.1.5.2.

The statute of limitations for all returns sent for suspense should be reviewed and confirmed. Refer to IRM 4.8.11.3.5 and subsections thereunder.

When determined the case will be accepted for suspense, complete the steps as provided in IRM 4.8.11.3.6, and subsections thereunder.

If the case does not meet all requirements to accept the case into suspense prepare Form 3990 explaining the requirements and corrections needed. Transfer the case back to the originating Examination group using ERCS and Form 3210Document Transmittal. Send it back in the prior status used by Examination (12, 17, 18), and the appropriate ERCS reject reason code per IRM Exhibit 4.7.7-5, TS Reject Reasons.

When reviewing a case submitted for Fraud or Grand Jury Suspense, the first thing the fraud coordinator will determine is the correct statute of limitations. The fraud coordinator must make an independent determination to confirm the statute of limitation date. Review the return, IDRS Masterfile, AIMS, ERCS, Form 895, Notice of Statute Expiration, and any other statute-related documentation available to confirm the received / filed date, due date, and determine the statute date. If different or incorrect, the dates will be reconciled, and updated accordingly. A Fraud and Grand Jury Suspense Control Sheet (refer to IRM 4.8.11.3.6.2 and Exhibit 4.8.11-2) is completed for each taxpayer summarizing the statute of limitations for each return placed in suspense. Related taxpayers / returns which may affect the statute of limitations should also be identified on the control sheet. Refer to IRM 4.8.11.3.5.1, for more detailed procedures.

Refer to IRM 25.6, for more information on IRS policies and procedures relating to statutes.

For each taxpayer, place copies of the most critical information which is needed for monitoring the case while it is in suspense into a separate specially colored folder (see IRM 4.8.11.3.6.1). This "suspense monitoring file" will allow easy access to all pertinent information.

Complete the suspense control sheet (see IRM 4.8.11.3.6.2) and attach it to the front of the suspense monitoring file.

Complete Form 5348, AIMS/ERCS Update (Examination Update), to update AIMS and ERCS accordingly for statutes, status codes, review types, suspense types, etc. Refer to IRM 4.8.11.3.6.3 and IRM 4.7.7Examination Returns Control System (ERCS), Technical Services.

Place the suspense monitoring file and the examination case file(s) in your designated secure area following your local procedures.

While the case is in suspense, follow the monitoring policies and procedures in IRM 4.8.11.4.

At least every six months (180 days), each tax return / period controlled in Fraud and Grand Jury Suspense must be reviewed for changes to the statutes of limitations and the status of the criminal investigation / prosecution. Suspense Types 591 and 592 are used in ERCS to set these 180 day action dates. ERCS suspense reports should be used to determine which cases are due for a six-month check. See Exhibit 4.8.11-4 for a job aid in completing the six-month check procedures.

At a minimum, there should be some form of contact with CI (written / e-mail recommended) on every case in suspense to ensure that there is still an active criminal investigation / prosecution and when they anticipate the criminal case to be closed. If no information is contained on the activity record regarding the case status within the last six months, CI should be contacted.

Other actions that must be taken at each six-month action date include, but are not necessarily limited to:
-- Reviewing Masterfile / IDRS for any relevant changes, such as statutes, freeze codes, returns, and IRS controls (e.g., -Z freeze, -A freeze, TC 91X (e.g., TC 912, TC 914, etc.), TC 42X, TC 976 / 977, TC 560, TC 59X, etc.). Suggested command codes to research include IMFOL / BMFOL / TXMODA, AMDIS, INOLE, TRDBV, ENMOD, SUMRY.
-- Updating AIMS / ERCS coding, as applicable.
-- Updating Form 895 and suspense control sheet(s), as applicable.
-- Checking for any returns filed by the taxpayer(s) since the last periodic check.

TS is responsible for protecting all civil assessment statutes for controlled returns held in Fraud and Grand Jury Suspense.

In addition to the six-month status check procedures in IRM 4.8.11.4.1 above, there are statute protection procedures specific to cases held in Fraud and Grand Jury Suspense. The following subsections cover these requirements.

Refer also to IRM 25.6, for more information regarding statute of limitation issues. For employment tax specific statute issues refer also to IRM 4.23.14, Employment Tax Statute Control and Extension.

When the criminal aspects of the fraud case have been completed (e.g. criminal prosecution is concluded, or the criminal investigation is discontinued by CI or declined by DOJ), CI must notify TS and other functions / BODs. CI will send the Form 13308 and other required forms and information to the contact designated by the TS TM (e.g. TS Fraud coordinator, TS manager, TS tax examiner, "mailbox" , etc.) via secure e-mail. The receipt of the Form 13308 is used to advise civil functions that the criminal investigation has concluded on tax or tax-related investigations and civil activities may resume. Refer to IRM Exhibit 25.1.1-1, Criminal Violations, for a list of which criminal charges are generally considered tax or tax-related.

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IRM 9.5.14.15, Criminal Investigation Closing Report, briefly summarized below, explains CI’s requirements for what to include with the Form 13308.

CI is required to provide complete and correct forms, as well as relevant supporting information, with their closing packages. As the first reviewer of the referral to Examination, it is the responsibility of TS to confirm that the closing package is complete and correct based on the information provided. When the closing package does not appear complete or correct, TS will contact CI with a detailed request to complete the package and / or correct the errors. The following gives a general overview of a complete and correct Form 13308 package. Also refer to IRM 4.8.6.2.2.1, Perfecting the CI - CR Package, for similar information in regards to reviewing Form 14104.

The TS fraud coordinator, or other designated TS personnel (e.g., personnel monitoring fraud e-mail inboxes), will take the following actions upon initial receipt of Form 13308 from CI:

The Form 13308 should be reviewed within 15 days of receipt from CI to review the outcome of the criminal case and to determine the appropriate civil actions. The Form 13308 used should be the most current revision of the form. The following line items of the Form 13308 should be reviewed for completeness and accuracy based on the information available.

If after reviewing the items detailed above, it is determined that the Form 13308 and closing package is not complete or errors are identified, the entire closing package should be returned back to the CI employee(s) listed in Part A, Section IX (or other established procedures with CI) with a detailed request of what needs to be fixed before it may be "processed" . When returning the case to CI for correction, be sure to remind CI to send the revised / corrected closing package to all required recipients.

If after reviewing the items detailed above, it is determined that the Form 13308 and closing package are complete and appear correct, the case should be "processed" and the appropriate actions completed accordingly.

The TS fraud coordinator will review the case to determine the appropriate civil resolution actions within 45 days of receipt from CI. Many closing packages received by CI may not require additional civil examination actions. Care should be taken to ensure that only cases with examination potential are sent to the field for examination.

In cases involving a successful prosecution of tax or tax-related charges the case should generally be forwarded to the field for civil resolution because there are indicators of fraud and tax non-compliance. However, the fraud coordinator is still required to evaluate the case and determine the civil examination potential. If the case includes Examination-related conditions of probation and / or assessable criminal restitution refer to IRM 4.8.11.6 and IRM 4.8.11.7, respectively, and follow the additional special procedures for these cases. For example, ERCS collateral records will be established to monitor cases with Examination-related conditions of probation.

The review to determine appropriate civil resolution actions should include, but is not limited to, the following:

The TS fraud coordinator will document the results of their review and determination of civil examination potential accordingly. Consideration should be given to IRM 25.1.6.2, Procedures, (specifically (7) through(10) regarding fraud penalty determinations), and IRM 4.20.2.2(5), General Collectibility Considerations, (regarding scope and collectability) when making this decision.

If determined that civil action is warranted, the TS fraud coordinator will prepare a memorandum containing specific instructions for civil resolution (including COP and restitution procedures if applicable) of the case to the appropriate examination group or PSP, as applicable. Refer also to IRM 4.8.11.5.7.

If determined that civil examination action is NOT warranted, the TS fraud coordinator will document their determination accordingly. The case will be considered closed.

Successfully prosecuted Title 18 cases with tax implications (e.g., filing false claims for refund, conspiracy to file false claims for refund, making false statements, money laundering, etc.) must also be considered whether there is sufficient information for civil action such as the assertion of the civil fraud penalty or fraudulent failure to file penalty. Refer also to IRM Exhibit 25.1.1-1, Criminal Violations, and IRM Exhibit 3.17.243-9, Department of Justice Glossary.

Fraud Suspense - The fraud coordinator will retrieve the case from suspense and review the information submitted by CI and related criminal documentation to inform the examiner of the current status of the case. The fraud coordinator will prepare a memorandum (see IRM 4.8.11.5.7) to transmit the case back to the originating group (the Examination group which sent it to TS for suspense) for civil resolution instructing the group manager (and examiner) of the required procedures to complete the examination. The memo should include details of how the criminal case was completed, such as if the taxpayer pled guilty, was found guilty, or the criminal investigation was discontinued. This memo is hereafter referred to as the "civil resolution cover memo."

Grand Jury Suspense - If the examiner who worked the civil examination prior to grand jury initiation was also added to the Rule 6(e) list and privy to grand jury information, that examiner is "tainted" and cannot work the civil resolution. If the group manager of that examiner was added to the Rule 6(e) list and was privy to grand jury information, that manager is also "tainted" and cannot have the civil resolution returned to his or her group. If the group manager of that examiner was not added to the Rule 6(e) list and was not privy to grand jury information, that manager may have the civil resolution assigned to his or her group as long as it is not assigned to any examiner who is "tainted" by grand jury information. If assistance is needed for assignment of the case, PSP may be consulted to help determine the appropriate group for the civil resolution. See IRM 4.8.11.5.8.2. As above for Fraud Suspense cases, the fraud coordinator will prepare the "civil resolution cover memo" (see IRM 4.8.11.5.7) to transmit the case back to the field for civil resolution instructing the manager and examiner of the required procedures to complete the examination. The memo should include details of how the criminal case was completed, such as if the taxpayer pled guilty, was found guilty, or the criminal investigation was discontinued.

The assessment statute date of each tax year controlled on AIMS / ERCS will be re-verified by the TS fraud coordinator. AIMS / ERCS will be updated if necessary to reflect the most appropriate civil assessment statute. Prior execution of Form 10498-B notwithstanding, the correct civil statute for each tax year must be re-determined and a determination made regarding the best course of action to protect the government’s interest with respect to assessment in light of the release of jurisdiction over the case by CI. The applicability of the three-year statute under IRC 6501(a), the six-year statute under IRC 6501(e), special purpose alpha statutes applicable in certain limited situations (for example, IRC 6501(c)(8), failure to notify Secretary of foreign transfers, "YY" / "AB" in the case of pre-sentencing closing agreements, etc.), and "open for fraud only" under IRC 6501(c)(1) will be properly considered. See IRM 25.6.23.6.6.2 in conjunction with IRM Exhibit 25.6.23-3.

The TS fraud coordinator is responsible for taking appropriate statute protection actions on imminent (less than 180 days remaining) statute returns controlled in suspense which are being reassigned to Examination. This includes soliciting statute extensions, securing TS or field TM approval to allow the statute to expire, or having a statutory notice of deficiency issued, as appropriate.

If no case file has been maintained in suspense (i.e., the case was never established on AIMS) AND the case warrants a civil examination, the fraud coordinator will send a referral to Examination consisting of the CI closing package, and any other available relevant case information, including the "civil resolution cover memo" (per IRM 4.8.11.5.7) to their designated local Examination Area PSP, generally via secure e-mail (or other mutually agreed secure method).

In addition, a cover memorandum from TS to PSP will be sent with the referral to Examination which includes instructions for PSP to review the case, establish AIMS controls for the civil resolution case, perform normal case building, and forward it to an appropriate field group for the civil resolution. In grand jury cases, this cover memorandum will identify the assigned cooperating grand jury examiner and manager (if any) and advise that the civil resolution case cannot be assigned to any examiner or manager "tainted" by grand jury information. Refer to Exhibit 4.8.11-8 for a sample template cover memo to PSP. Use of this template is not required.

The TS fraud coordinator is NOT responsible for securing a statute extension, securing TS TM approval to allow the statute to expire, or having a statutory notice of deficiency issued, as appropriate, on any returns being referred which are not controlled on AIMS.

Refer to IRM 4.8.11.5.8.2 for more information on PSP’s responsibilities for civil resolution cases.

The TS fraud coordinator will prepare a memorandum to Field Examination with information about the criminal and civil case (if in suspense), and instructions regarding the special closing actions required for these cases. The memo will be printed and enclosed on the top of the primary admin file. The memo (referred to as the "civil resolution cover memo" ) should include a discussion of the following, to the extent applicable:

For a suggested memo format and language, for the "civil resolution cover memo" , refer to Exhibit 4.8.11-7. Use of this template is not required

When open in suspense, the case is to be transferred back to the originating group (the Examination group which sent it to TS for suspense). If the Examination group later determines to reassign the case they may do so accordingly.

When not open in suspense, the case will be transferred to the local Examination Area PSP to be established on AIMS and assigned by PSP.

The case should generally be transferred from TS to the Examination group or PSP for appropriate civil resolution within 45 days of receipt of Form 13308 from CI. The exceptions to this general rule are as follows:

Upon receipt of a civil resolution case the receiving group manager will note the instructions provided by TS and assign the case to a qualified examiner. If the case is an Examination-related COP case, the manager should highlight the special instructions in the memo. COP monitoring is a shared responsibility between TS, PSP, and Field Examination. Refer also to IRM 4.8.11.6 for the additional requirements for civil resolution cases with examination-related COP and IRM 4.8.11.7 for the additional requirements for civil resolution cases with RBA. Refer to IRM 4.8.11.8 for more information on the review process when the civil resolution case is closed by Examination.

In accordance with normal examination procedures, the assigned examiner will consider the civil resolution requirements of the case and take appropriate examination actions with respect to the prosecution years, relevant conduct years, and related returns.

When the criminal investigation included preparer and / or promoter charges, the corresponding civil penalties and / or injunction actions also must be considered during the examination. Refer to IRM 20.1.6, Preparer, Promoter, Material Advisor Penalties, IRM 4.11.51, Return Preparer Program, and IRM 4.10.6, Penalty Considerations, for information on asserting civil penalties and seeking injunctions.

If after examination, the statute of limitations is determined to have expired and assessment is barred, a Form 3999, Statute Expiration Report, is required if the tax year / return at issue was open in AIMS status below 80 or is being examined but is not controlled on AIMS as of the date of statute expiration. Refer to IRM 4.2.1.9, Statute Expiration Reports, and IRM 4.2.1.10, Taxpayer Notification of Assessment Statute Expiration and Acceptance of Voluntary Payments on Expired Statute Returns When Taxpayer Was Contacted for Examination, and subsections thereunder. See also Exhibit 4.8.11-6.

All tax years of a civil resolution case, with AIMS Freeze Code "P" , regardless of disposal code, and all civil resolution preparer penalty cases must be closed to TS for mandatory review in Status Code 21. Check the box on Form 3198 for Civil Disposition of Joint Investigation - AIMS Freeze Code "P" (includes Criminal Restitution) to ensure proper routing. TS will review the case to ensure all required civil resolution procedures have been completed.

Refer to IRM 4.8.11.6 for the additional requirements for civil resolution cases with conditions of probation (COP), and IRM 4.8.11.7 for the additional requirements for civil resolution cases with criminal restitution.

While CI, Collection, and Examination all share responsibility for monitoring compliance with the conditions of probation relating to the Service, Examination is primarily responsible for ensuring that the appropriate examination actions are taken on completed tax and tax-related criminal investigations and monitoring the conditions of probation which relate to the examination process. Examination’s responsibilities for probation monitoring are shared between Field Examination, PSP, and TS. It is important that the TS fraud coordinator be familiar with Field Examination’s role in probation monitoring, as outlined below.

IRM 25.1.4.5, provides the overview of Examination’s responsibilities on COP cases. In addition to the civil resolution actions listed in IRM 4.8.11.5.9, Field Examination, in coordination with TS and PSP (as applicable), is responsible for the following civil resolution actions on COP cases:

In cases in which the taxpayer refuses to comply with probation terms relating to the examination process, the Field Examination TM is responsible for immediately notifying the SAC, and / or designated CI probation liaison of the non-compliance with COP once identified, and for requesting follow-up action by CI through the US Probation Office and / or Court to enforce the conditions of probation, as appropriate.
In cases in which action by CI is requested, Field Examination is responsible for following up with CI regarding actions taken to enforce compliance. Four-way conferences (RA, GM, SA, SSA) and consultation with a FTA should be utilized by Field Examination as appropriate to decide upon and facilitate the most appropriate course of action.
In cases in which CI requests enforcement action through the US Probation Office and / or Court, the examiner should ask CI to provide executed copies of documents submitted by the probation office to the court for the civil file.

For all probation cases in their jurisdiction, the Field Examination TM is responsible for sending a memorandum to the SAC and / or the designated CI probation liaison, regarding the taxpayer’s level of compliance with the Examination-related (or assessment-related) COP by the earlier of the date the case is closed by Examination or 180 days prior to the expiration of the probation period. IRM 25.1.4.5(6). This memorandum to the SAC is often referred to as the "180 Day memo" or "COP Compliance Memo" . A copy of this memo is required to be sent to the TS fraud coordinator for monitoring purposes.

If a determination is made to not conduct an examination on an examination-related COP case, the completion of the "COP compliance memo" is not required. However, the Form 13308 must clearly reflect why the case was not examined, and if it was successfully prosecuted under Title 26, Counsel concurrence was secured.

All examination-related COP cases (regardless of disposal code) must be closed to TS in Status Code 21 for mandatory review. The Civil Disposition of Joint Investigation - AIMS Freeze Code P block of Form 3198 must be checked to ensure proper routing.

In coordination with CI, Collection Advisory, and Field Examination, the fraud coordinator will monitor all cases with conditions of probation relating to the examination process. In order to carry out this responsibility, TS will take the following actions:

The "dummy" probation file will be retained in accordance with the standard retention policy for IRS Examination fraud case files, as provided by Document 12990, Records Control Schedules (RCS), Schedule 23, Tax Administration – Examination, Item 42, Examination Case Files, Item 42(a), Fraud Cases, Job No. N1-58-88-4 (located on page 247 on the 04-2014 revision).

Civil resolution cases which include restitution-based assessments require additional procedures to ensure the assessments and payments are properly identified and monitored by the Service. The guidance for the fraud coordinator’s responsibilities for criminal restitution cases is IRM 4.8.6.3 and subsections thereafter.

Effective January 2015, all cases with restitution-based assessments (identifiable by a TC 971 AC 102) which are controlled and open on AIMS (with an open TC 420), will have the "Criminal Restitution Code" of "1" systemically added to the AIMS controls.

The AIMS Criminal Restitution Code 1 (CR1) prevents the AIMS record from closing (Status Code 90 and TC 421). Similar to the AIMS Freeze Code "P" , the CR1 requires the case to be reviewed by TS prior to closure or other transfer out of Examination (Status Code 51 to CCP for examined closures and non-examined survey closures, Status Code 41 to PSP for certain non-examined closures such as record deletion, Status Code 81 to Appeals for petitioned or protested cases).

All cases with CR1 (and / or AIMS Freeze Code "P" ) must be transferred by Field Examination to TS in Status Code 21. Form 3198 will be "flagged" by checking the box for Civil Disposition of Joint Investigation-AIMS Freeze Code P (includes Criminal Restitution)under the "Forward to Technical Services - Update to Status Code 21" section on the right side of the form.

Upon receipt of the case with CR1, TS will review the restitution aspects of the case and complete / prepare the procedures covered in IRM 4.8.6.3.3, Conclusion of Civil Actions / Examination, and subsections thereafter.

When the case is ready to be transferred from TS for closure (or to Appeals), the CR code must be updated from "1" to "2" . The procedures for updating the CR code are as follows:

When a successfully prosecuted tax (Title 26) case is closed by Examination and sent to TS for mandatory review and removal of the AIMS Freeze Code "P" the following steps should be completed by the fraud coordinator:

When a successfully prosecuted case (under any Title) which has tax or tax-related conditions of probation / supervision is closed by Examination and sent to Technical Services for mandatory review and removal of the AIMS Freeze Code "P" the following steps should be completed by the fraud coordinator.

When a successfully prosecuted case (under any Title) which has restitution assessable under IRC 6201(a)(4) is closed by Examination and sent to TS for mandatory review and update of the AIMS Criminal Restitution Code "1" , the following steps should be completed by the fraud coordinator.

IRM 25.1.6.2(9) states: "The civil fraud penalty and / or the fraudulent failure to file penalty must be asserted if a taxpayer was successfully prosecuted by the DOJ under Title 26 (i.e. IRC 7201, IRC 7203, IRC 7206(1)) and the prosecution involved additional tax assessment(s) as opposed to payment of existing assessment(s). Any exceptions to this rule must be approved by Area Counsel. In unsuccessful prosecution cases, non-assertion of the civil fraud penalty and / or the fraudulent failure to file penalty is the discretion of the Examination group manager. Examination group managers are encouraged to consult with their local FTA for assistance. This rule also applies in the case of any related taxpayer involved in the same transaction and to any other year or period of the same taxpayer which is related to or affects the year or period for which criminal prosecution was successful."

The examiner must be advised to consider this provision when making their determination of civil fraud.

IRM 25.1.6.2, Fraud Handbook, Civil Fraud, Procedures, provides that upon civil resolution of a prosecution case, the examiner should contact CI to ascertain which criminal statutes the taxpayer was convicted of before attempting to resolve the related civil fraud penalty. CI must generally provide this information to TS along with the Form 13308 as part of the "closing package" . The following documents will help the examiner support the civil fraud penalty:

If any applicable documents are not received from CI, the fraud coordinator should ask CI to provide them. IRM 9.5.14.15 reflects the documents that CI is required to provide. If they are unable to provide the additional documents, the documents may be available through PACER.

The fraud coordinator should instruct the examiner that these documents are very important to aid in developing, documenting, and supporting the assertion of the fraud penalty. When a taxpayer is prosecuted or pleads guilty, it is very important to determine if the prosecution included tax charges or violations specifically under IRC 7201 or IRC 7206. It is also important to identify the specific tax years for which the taxpayer was prosecuted, and convicted or pled guilty.

Collateral estoppel means that the taxpayer may not contest the element of fraud within the civil fraud penalty but may dispute the amount of the underpayment upon which such penalty is based. Refer to IRM 4.8.11.9.3.4 below, for further discussion on collateral estoppel. These facts are very important in determining the effort needed and documentation required in sustaining the assertion of the civil fraud penalty and the years to which the penalty is applicable.

The following discusses the burden of proof and collateral estoppel, as well as other miscellaneous items, as they relate to the fraud penalty and the fraudulent failure to file penalty.