The Internal Revenue Code (IRC) contains both civil and criminal provisions to address fraud. Revenue officers may conduct civil investigations before, during or after criminal investigations of the same taxpayer. If the investigation is conducted simultaneously with the criminal investigation, the process is referred to as a parallel investigation.

Collection employees should be alert to the presence of a TC 914, Active Criminal Investigation, on related tax modules in pre-contact analysis. The TC 914 is not an entity code but the presence of the code on any module in the case may indicate the need to apply parallel investigation procedures.

Parallel proceedings involve simultaneous investigations or litigations of separate civil and criminal aspects of a case involving a common individual or entity. Some potential civil remedies that could occur in a parallel proceeding are IRC 6672 Trust Fund Recovery Penalty Investigations, injunctions for pyramiding taxpayers, Notice of Federal Tax Lien filings, issuance of levies, jeopardy levies, service of summons, and pursuit of erroneous refunds.

Civil and criminal parallel investigations are conducted as separate investigations. They are not joint investigations but do require significant coordination between the Operating Divisions throughout the civil investigation and litigation processes. While regularly scheduled coordination meetings are required, CI must not direct the revenue officer’s actions in the civil investigation.

Policy Statement 4-26 (P-4-26), Criminal and Civil Aspects in Enforcement (formerly Policy Statement 4-84), provides guidance on taking civil enforcement action when the taxpayer is also involved in a criminal investigation. This compliance strategy is intended to identify the best alternative from the full range of civil and criminal sanctions available, prevent additional loss of tax revenue, and foster voluntary compliance.

If CI and Collection cannot agree on an approach, P-4-26 describes the procedures for elevating and resolving any disagreements.

If a conflict exists when a criminal and collection investigation are ongoing at the same time, the affected operating divisions must resolve the conflict and determine how and when the civil and criminal actions should proceed.

A six way meeting will be held with the revenue officer, the revenue officer group manager, the special agent, the supervisory special agent (SSA), SBSE Counsel, and Criminal Tax Counsel. The local Fraud Technical Advisor should also be consulted. If a case is open in the U.S. Attorney’s Office or the Department of Justice, representatives from those offices should also be invited to the meeting.

A decision will be made as to whether to conduct parallel investigations, to proceed solely criminally, or to proceed solely civilly. In some instances, civil action may be suspended temporarily, for example, to permit CI to complete an undercover investigation or execute a search warrant. In such cases, a date should be set for a follow up meeting to revisit the issue of going forward with collection actions.

In cases where civil action is to be suspended, the following actions will occur:

Any disagreements on how to proceed should be elevated and resolved in accordance with the guidelines in P-4-26. Any disagreements with the U.S. Attorney and/or Department of Justice should be brought to the attention of the Special Counsel for Civil/Criminal Coordination, Tax Division, Department of Justice.

Once agreement is reached that a parallel investigation will take place, criminal investigators and revenue officers conducting the parallel investigation should coordinate the development of the evidence that will support both the criminal and civil actions while being mindful of the legal requirements and constraints.

Ongoing communication is essential for a successful parallel investigation.

A coordination meeting must take place within 30 days of the decision approving the parallel investigation. The participants must include the Revenue Officer, Special Agent, their respective managers and SBSE Area Counsel and criminal tax attorneys. The local Fraud Technical Analyst (FTA) should also be consulted. If a matter has been referred to DOJ/USAO, DOJ/USAO attorneys should be included in coordination activities.

Civil and criminal investigators and IRS attorneys should continually coordinate their efforts. Case status meetings should be held at least quarterly until the collection actions are complete. These coordination meetings will facilitate sharing important case developments.

The purpose of the case status meeting is to communicate the case developments and facilitate information sharing between Collection and CI. In grand jury cases, CI will not be able to share information subject to grand jury secrecy rules and IRC disclosure provisions. The revenue officer should be prepared to discuss the collection plan of action and the impact of these actions on the criminal proceeding. CI will not direct the actions in the collection investigation.

Use of special investigative techniques, such as undercover operations, or instances where there is the active pursuit of a search warrant should be communicated with SBSE Collection when practical. The timing of collection actions may affect special agent safety during a special investigative technique or the execution of a search warrant. Therefore, close coordination and communication is necessary when CI utilizes these techniques. Any decisions on how and when to proceed should be weighed in favor of special agent safety concerns.

If concerns are raised about the criminal investigation or the collection investigation, those concerns or objections should be resolved by consultation among the collection and criminal personnel and their supervisors, Counsel attorneys and their managers. When the matter has been referred, the Department of Justice and/or Assistant United States Attorney’s Office should also be included in the decision making process.

The revenue officer will advise the special agent assigned to the parallel investigation of all meetings with the taxpayer(s).

If the special agent has informed the taxpayer under investigation of his or her Fifth Amendment rights, the revenue officer must explain to the taxpayer or his or her representative at each meeting that the revenue officer is conducting a civil investigation and the information provided will be shared with criminal investigation.

If a taxpayer under investigation inquires about criminal implications or whether the taxpayer is the subject of a criminal investigation before CI has contacted the taxpayer, the revenue officer must be careful to provide accurate information and not mislead the taxpayer. The revenue officer should inform the taxpayer that they are conducting a civil investigation, and that the information obtained can be shared with Criminal Investigation. Under no circumstances should the revenue officer inform the taxpayer that the case has been referred to Criminal Investigation (CI). This is CI's responsibility. The revenue officer should immediately notify the special agent of the contact with the taxpayer.

There is no specific prohibition on conducting joint revenue officer and special agent interviews of taxpayers. However, revenue officers and special agents must clearly identify themselves and their roles at these meetings and prepare a joint Memorandum of Interview (MOI). The MOI should be prepared by the special agent and signed by both interviewers. The revenue officer should receive a copy of the MOI, while the special agent retains the original. All interview notes must be provided to the special agent.

CI may in some cases request that the revenue officer not contact the taxpayer or representative. In such cases, the revenue officer should refrain from issuing Letter 3164P or any appointment letters to the taxpayer or representative. SBSE Area Counsel should be involved in any decision to conduct an investigation without contacting the taxpayer or representative.

Revenue officers and special agents should attempt to use different witnesses to prevent the possibility of inconsistent testimony and potential discovery issues raised during the civil or criminal judicial process.

If the decision is made to use the same witness, the SBSE Counsel Attorney, Criminal Tax Attorney and DOJ or Assistant US Attorney assigned to the case should be consulted and coordinate any selection of these witnesses.

Sharing information between revenue officers and government attorneys assigned to the case is a key ingredient in developing civil and criminal cases simultaneously and efficiently.

Information sharing between civil and criminal functions is appropriate unless prohibited under the grand jury secrecy rules of Rule 6(e) of the Federal Rules of Criminal Procedures and disclosure provisions of IRC § 6103, Confidentiality and Disclosure of Returns and Return Information. Judicial districts and appellate courts have diverse rulings on what constitutes grand jury information; therefore, the determination about what information can be shared will be made on a case by case basis.

Special agents generally develop as much evidence as practical before using the grand jury process. This can be done through summonses, search warrants, witness interviews, and undercover operations. This will allow CI to share information obtained with SBSE. Information obtained from CI should be included in civil investigation files as the information may be useful in future civil actions at the conclusion of the criminal case, including probation cases including civil liability resolution.

In the six-way meeting noted above, SBSE Collection should request that non-grand jury information be separated from grand jury material for civil investigation purposes.

Revenue officers must inform CI that civil files are available. Access to all available information in the civil file must be provided to CI. Criminal attorneys have a duty to disclose certain information to criminal defendants; therefore, it is absolutely necessary for the special agents and criminal attorneys to be made aware of and provided with all the information in the collection file, including documents, interview notes and any other information that SBSE gathers. The sharing of information should be done so that there are no unnecessary delays.

Collection actions generally will be temporarily suspended if CI is conducting an undercover operation or developing probable cause to execute a search warrant. Nevertheless, the benefits of an undercover operation or search warrant should be weighed against the need to prevent additional tax revenue loss.

Information obtained through a search warrant is generally not grand jury information. Search warrant information obtained during the grand jury process can be made available to revenue officers if no grand jury information was included in the affidavit for the search warrant.

Use of search warrant or undercover evidence should be coordinated with Area Counsel, CI and their respective Counsel and the Assistant US Attorney.

IRC § 7602(d) does not allow a summons to be issued or enforced concerning any person if a Department of Justice (DOJ) referral has been made by the IRS for such person. IRC § 7602(d)(2) defines a " referral" as either an IRS recommendation to the DOJ for tax related grand jury investigation or criminal prosecution of the taxpayer or a criminal investigation request from the DOJ made to the IRS pursuant to IRC § 6103(h)(3)(B). Coordination between SBSE and CI is critical because pursuing a grand jury investigation or making a prosecution recommendation precludes using summonses in collection investigations.

IRC § 7602(d)(3) states for purposes of what constitutes a referral that each taxable period and each type of tax is treated separately. An administrative summons for unrelated periods or types of tax will generally not impede the criminal investigation.

If a taxpayer has been referred to DOJ for grand jury investigation or criminal prosecution and the revenue officer wants to issue an administrative summons to the taxpayer, the revenue officer and approving manager should speak with Area Counsel, the special agent, and Criminal Tax Counsel along with any DOJ attorney or Assistant US Attorney assigned to the case prior to issuing the summons. During this conference, the parties will determine whether an administrative summons would be permissible under IRC § 7602(d)(1) and whether the issuance of a summons would adversely affect the criminal investigation or prosecution.

When Counsel's criminal tax attorneys are assisting CI prior to referral to the DOJ, the case is considered under jurisdiction of Chief Counsel. Jurisdiction is established when Counsel accepts the CI referral.

When the DOJ has accepted the referral of the case, it is considered under jurisdiction of DOJ.

IRC §§ 6103(h)(2) & (3) allows DOJ attorneys from both the civil and criminal sections to contact either civil or criminal investigators to solicit case information that may help perfect the matter referred to DOJ. Requests should be in writing and coordinated with CI and Disclosure. Grand jury information can be disclosed only to those parties on the grand jury list. Revenue officers will generally not possess grand jury information, but should be aware that disclosure of any such information in their possession cannot be disclosed except in these very limited circumstances. Contact local Counsel in the event there is any question about the information requested.

Technical Services Advisory (Advisory) is often the default point of contact for these cases. When Advisory receives requests from Counsel or DOJ on these cases, it will determine whether the case is being actively investigated or in an inactive status such as queue assignment or CNC.

For cases under active collection investigation, the Director, Collection Area Operations is responsible for coordinating collection activities with the authority having jurisdiction over the criminal case. DOJ jurisdiction cases, active cases will be coordinated through Area Counsel as well. A transmittal memorandum from the Director, Collection Area Operations will be addressed to SBSE Area Counsel and will include:

Area Counsel will be responsible for:

Advisory will report to Area Counsel on the inactive cases noted above, including the following information.

Criminal Investigation (CI) will notify the Advisory Territory Manager of each new case by issuing a Notification Memorandum to the Advisory Territory Manager.

For cases under active Collection investigation (SC 26), including any related entities identified in the Notification Memorandum or Compliance Initiative Program (CIP) cases, Advisory will forward the Notification Memorandum to the appropriate Field Collection Territory Manager. Receipt and transmittal of the Notification Memorandum will be documented in ICS history.

For cases that are in notice stream or queue status, no further action is required.

For NF 181 OIs open as of the effective date take the following actions:

Public confidence in the tax system requires that SBSE Collection exercise due diligence to ensure taxpayer compliance with civil liability resolution required as a condition of probation.

Probationary cases are considered a part of the Service’s balancing of civil and criminal aspects of enforcement.

To ensure proper emphasis on collection of civil liability, Advisory will issue an Other Investigation (OI) to the appropriate field group on all new probation case receipts that are not in Status 26 to ensure that a collection determination is made on all Bal Due and Del Rets, including those periods where SBSE Examination has an open case to assess the delinquencies that were included in the prosecution.

These investigations are non-discretionary for revenue officer field groups.

Advisory is responsible for:

CI will provide Advisory with notification of a new probation case by providing the conditions of probation directly to the Advisory Territory Manager. CI will use its Form 13308, Criminal Investigation Closing Report (Tax and Tax related only), to transmit the criminal case judgment and other necessary information.

For notifications that do not include the necessary documentation, Advisory will prepare a memorandum report for the Territory Manager that specifies the missing information, such as Judgment and Commitment Orders and plea agreements, necessary to the completion of the collection determination. The memorandum will also indicate that further case actions cannot occur without the documents specified.

Advisory will take the following actions when notified of the conditions of probation.

A taxpayer who is required to resolve their civil liabilities as a condition of probation is under court order to pay the obligation. Because these conditions are often the result of plea agreements, it is important to enforce the civil conditions and to report any instances of taxpayer non-cooperation, non-compliance or inability to pay promptly to Advisory.

Revenue officers will evaluate the conditions of probation and any asset information developed by CI in the course of their investigation and provided to the civil function, prior to taxpayer contact.

Revenue officers will contact Examination to determine the disposition of any unfiled returns subject to conditions of probation and include any proposed deficiencies in the total liability and case disposition.

Taxpayer or power of attorney contact will augment the information provided with the ICS OI to determine the taxpayer’s ability to pay. Field investigation will determine:

Taxpayers must be advised

ICS lien filing requests require the assignment of the Bal Due case. When filing of the Notice of Federal Tax Lien is indicated, revenue officers should request the assignment of the Bal Due case. The OI may be closed when the Bal Due case is assigned. Accounts may also be accelerated to SC 26 when other circumstances warrant. The collection determination must be concluded and reported to Advisory in any case.

Revenue officers will report the results of the investigation to Advisory by memorandum report. The report will be routed through the group manager and will include the following information:

If case circumstances warrant, balance due accounts should be accelerated to Status 26 for revenue officer assignment.

Balance due and delinquent return modules subject to conditions of probation will not be assigned to the queue without a collection determination on assessed modules and coordination with the SBSE Examination function on any unfiled periods.

The required reports will be submitted through channels to Advisory as soon as the investigation is concluded. A formal report is required no later than 180 days prior to the expiration of probation.

Revenue officers are responsible for reporting the status of any assigned case subject to civil conditions of probation. This may include older case assignments where conditions were not previously addressed. When TC 910 is present, revenue officers should contact advisory to determine the status of the case and any reports needed for monitoring compliance. Taxpayer interviews in these cases should be conducted to address all case disposition requirements noted above.

Advisory will review the revenue officer report for completeness. Any questions and follow-up actions will be addressed by Form 5942, Reviewer's Report - Technical Services Advisory to the group manager.

Advisory will monitor the probation case regularly to ensure the taxpayer is meeting the terms of his/her probation.

The Collection Field function report of collection determination is the basis for monitoring taxpayer compliance with civil resolution requirements, including the status of any installment agreements concluded with the taxpayer.

On an annual basis, Advisory will determine the taxpayer’s filing and payment status for all tax years, including last filed returns and compliance with any estimated tax payment requirements. Advisory will notify CI of any noncompliance.

If there are additional assessments resulting from Examination actions resulting from the criminal case that were not addressed by Field Collection, Advisory will issue an ICS outgoing OI to the revenue officer for a collection determination on those assessments.

Advisory is the focal point for reporting case conditions to CI.

For cases assigned to the Collection Field function (CFf), the revenue officer will inform Advisory of the status of the case by memorandum through the field group manager and field territory manager, not later than 180 days prior to the expiration of the probationary period. The report will include

For cases reported by the CFf in (2) above, Advisory will review the revenue officer report. The Advisory Territory Manager will add a covering memorandum report and forward the package to CI.

For all other probation cases, Advisory will generate the memorandum report to CI that includes:

Case conditions will be reported not less than 180 days prior to the expiration of the probationary period.

Advisory will retain a copy of all memorandum reports with the probation case file.

IRC 6103(h)(4) allows disclosure of returns and return information to a U.S. Probation Officer for the purposes of informing the court of any non-compliance by a taxpayer during such taxpayer’s probationary period under the following circumstances:

Advisory and other SBSE Collection employees are not authorized to disclose the information directly to U. S. Probation Officers. If contacted directly for information, employees should advise that the information will be provided to CI for the required coordination with the Disclosure Officer and the Assistant United States Attorney as appropriate.

When revenue officer investigation determines that the taxpayer subject to conditions of probation has moved to another state, Advisory will be notified of the new address and other relevant information.

Advisory may become aware of taxpayer relocation in its monitoring activities.

In all cases, Advisory will contact the CI function for the name, telephone number and address of the new probation officer.

The transferring Advisory group manager will notify the receiving Advisory group manager, stating that the case is being transferred with paper file to follow.

The forwarding function will update the retained paper file upon receipt of the Form 3210 acknowledgment.

)Further monitoring of the conditions of probation is the responsibility of the receiving Advisory function.

Exception:In some instances the courts will allow a taxpayer to relocate but will retain control of the case. In these instances, cases should not be transferred.

Civil restitution orders normally specify that payments made in compliance with the order are made through the courts. Advisory processing of such payments should therefore be rare.

All restitution payments are processed by a centralized location at the following address:

Any payments received, along with identifying information should be sent to this address via Form 3210.

Probation cases should be closed when

Enter history on ICS that describes the closing actions taken.

Close any open SPBOI – 182 on ICS.

For purposes of this section, a non-tax criminal case is defined as one in which the investigation or prosecution is not being made on behalf of the Internal Revenue Service.

The Director, Collection Area Operations, can suspend collection activity at the request of the Justice Department on a taxpayer who is the subject of a non-tax criminal case.

However, the Service may not inform the Department of Justice whether there is any ongoing collection activity with respect to a particular taxpayer, or whether we have suspended, or will suspend, such activity unless the Department of Justice submits a written request meeting the requirements of IRC 6103(i)(2).

Telephone requests by a United States Attorney to suspend collection activity can be honored in emergency situations (such as when court action is imminent) provided a delay in collection activity would not be detrimental to the Service. In such cases: