5.1.5. Balancing Civil and Criminal Cases

(1) The IRS recognizes that attempts to concurrently pursue both the criminal and civil aspects of a case may jeopardize the successful completion of the criminal case. This IRM section provides guidance to coordinate and implement IRS policy on balancing criminal and civil aspects in enforcement. It also provides guidance for cases involving post-conviction conditions of probation, supervised release, and/or the payment of restitution to the IRS by defendants convicted of tax violations or tax-related offenses.

(1) Authorities for this work include:

• Policy Statement 4-26, Criminal and Civil Aspects in Enforcement

• Firearms Excise Tax Improvement (FETI) Act of 2010, Public Law No. 111-237

(1) Headquarters Collection, Collection Policy is responsible for Collection policies and procedures applicable to probation, restitution, and civil enforcement in Collection cases with a criminal component.

(2) Civil Enforcement Advisory & Support Operations (CEASO) has operational responsibility for coordination and control of Collection probation and restitution-based assessment cases.

(3) Field Collection is responsible for conducting investigations in RBA and probation cases.

(1) The Advisory Measures Monitoring Report includes RBA measures.

(2) Program effectiveness is measured through periodic operational and program reviews.

(1) Program controls to oversee the processing of restitution and probation inventory are found in IRM 1.4.50, Resource Guide for Managers, Collection Group Manager, Territory Manager and Area Director Operational Aid.

(1) The following acronyms are common to balancing civil and criminal cases:Acronyms

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

1. CI will control all modules in which civil action is to be suspended by requesting input of TC 914.

2. A date will be established for a follow-up meeting to revisit the issue of proceeding with civil actions and reversing the CI controls. The follow-up meeting date should be no more than 90 days from the date civil action is suspended.

3. Cases in which civil action is to be temporarily suspended will be retained in inventory.

4. Collection will document the ICS case history with the determination to temporarily suspend civil action and the date of the follow-up meeting to revisit the determination.

   Note: Collection Statute Expiration Dates (CSEDs), and Trust Fund Recovery Assessment Statute Expiration Dates (ASEDs), for these cases will continue to be monitored by the assigned revenue officer.

(1) CCP will monitor cases in status 26 (assigned to a revenue officer) if the following two conditions are met:

1. a TC 914 appears on all of the modules, and

2. a decision has been made to suspend civil action due to the criminal investigation other than the temporary suspension discussed in IRM 5.1.5.4.1, Temporary Suspension of Civil Action, above.

(2) See IRM 5.1.5.13, Transferring Cases to CCP, below, for further information regarding the monitoring of TC 914 cases by CCP.

(1) For purposes of this section, a non-tax criminal case is one where the investigation or prosecution is not being made on behalf of the IRS.

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

(3) However, the IRS may not inform the Department of Justice (DOJ) whether there is any ongoing collection activity with respect to a particular taxpayer, or whether the IRS has suspended, or will suspend, such activity unless the Department of Justice submits a written request meeting the requirements of IRC § 6103(i)(2). See IRM 11.3.28, Disclosure to Federal Agencies for Administration of Nontax Criminal Laws.

(4) Telephone requests by a U.S. 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 IRS. In such cases:

• Disclosure of information — No information may be disclosed to the Department of Justice until the telephone request is followed up with a proper IRC § 6103(i)(2) request.

• Suspension action — If suspended, review after 72 hours to determine if the suspension should be continued. In all cases, the decision to suspend civil activity should come only from the Director, Field Area Collection.

• If contacted by the U.S. Attorney, revenue officers and advisors will make no comment on the case in question and refer the request, through proper channels, to the Director, Field Area Collection.

(1) Cases where the ASED or CSED will expire within one year will not be transferred to CCP without first obtaining approval from the revenue officer's group manager and managerial approval from CCP. The revenue officer group manager will secure CCP managerial approval via telephone or e-mail from the group manager, Field Office Resource Team.

(2) Before a case is transferred to CCP, the ICS history must reflect the actions taken regarding any imminent ASEDs or CSEDs.

(3) If the ASED for assessing the Trust Fund Recovery Penalty (TFRP) against a potentially responsible officer will expire within one year and either the employer or the potentially responsible officer is under criminal investigation, use Form 10498-C, Intent to Commence Civil Action - Statute Protection for Assessment of TFRP, to document agreement between Collection and CI regarding what, if any, actions should be taken to protect the ASED, or to acknowledge agreement that the ASED should be allowed to expire.

(4) If the CSED will expire within one year and the taxpayer is under criminal investigation, use Form 10498-D, Intent to Commence or Continue Civil Action - Collection Statute Protection, to document agreement between Collection and CI regarding what, if any, civil collection actions should be taken to protect the CSED, or to acknowledge agreement that the CSED should be allowed to expire.

(5) In order for either Form 10498-C or Form 10498-D to be effective, joint approval must be indicated by the signatures of the appropriate Collection Field Territory Manager and the CI Special Agent in Charge. Follow the procedures in IRM 5.1.5.4, Resolving Conflicts Regarding Parallel Investigations, above, to resolve any disagreements between Collection and CI regarding the commencement or continuation of civil collection actions to protect the applicable statute of limitations.

(6) Retain a copy of the Form 10498-C or 10498-D, as applicable, in the case file and document the case history accordingly. In limited circumstances it may be possible to extend the CSED. See IRM 5.17.4.5, Administrative Procedures for Extending Period of Limitations for Collection by Waiver.

(1) If a determination is made that civil action should be suspended on all modules while the criminal case is active, use the following procedures to close out the case and transfer it to CCP:

1. Verify that all modules have a TC 914 input (for cases with delinquent return only periods, follow the procedure in IRM 5.1.11.6.2.1(3), Preparing and Processing Fraud Referrals).

   Note: If TC 914 is present in some tax periods, but not in others, Field Collection employees should contact CI to determine whether or not collection should be suspended and input of additional TC 914s should be initiated by CI. If needed, the local FTA can assist with requests to CI for input of TC 914s.

2. Once TC 914 appears on all balance due modules, notify the group manager to remove the ICS sub code 910; if there is no sub code 910, ensure that the entity 971/281 is reversed via input of a 972/281. Use ICS options: "Collection Activities," "FTA Involvement," "Generate 972/281)."

3. Create an incoming OI on the ICS case; this incoming OI will be included in the case transfer to CCP and will be used by CCP for monitoring and control procedures. From the ICS Summary Screen, select the following:
   i) "Collection Activities"
   ii) "Create Modules"
   iii) "Create OI"
   iv) "Create Incoming OI"
   v) For the initial assignment, use the originator's (primary RO) assignment number
   vi) In the "Action Requested" field, select "Other"
   vii) In the "Remarks" field, insert "181 CID Control"
   viii) Select "Save"

4. Once you have created the OI, transfer the entire ICS case to CCP. From the ICS Summary Screen, select the following:
   i) "Collection Activities"
   ii) "Transfer"
   iii) "Transferee Office Requests Transfer"
   iv) At "Enter Receiving Assignment Number" insert 35796979
   v) At the ICS prompt, "Open CIP/OI/FTD Assigned to originator # (which is primary). Include these items in Transfer Action?" "Y/N?" select "Y"
   vi) When prompted, "do you want a Form 3210 to print for this transfer?" select "Yes"
   vii) Insert a note in the remarks section of the Form 3210: TC 914 Monitoring
   viii) The case will show approval pending until the Group Manager approves the transfer

5. Once approved, send your closed case file, marked "914" with the Form 3210 to the following address:

Internal Revenue Service

2970 Market Street

Philadelphia, PA 19104

Mail Stop 5-E04.116

Attn: TC 914 Monitoring

6. Upon case receipt, CCP will ensure the input of the STAUP 91 on all modules in status 26 which have a TC 914.

7. CCP will monitor the case, including any CSED or TFRP ASED statute issues, while the criminal investigation is pending and issue any necessary OIs to the field.

   Note: If the above outlined procedures are not followed, the case transfer will be rejected back to the originator for corrective action.

(2) If an ATAT case is transferred to CCP for monitoring, special instructions must be provided by the transferring office to CCP to ensure that any OIs subsequently issued by CCP are issued to the referring ATAT revenue officer, or to the appropriate Collection ATAT coordinator if the ATAT revenue officer is no longer assigned to the case.

(1) CCP will issue OIs to the field group for issues requiring field assistance or investigation, including the following:

• two-year collection risk analysis (e.g., collectibility determination, continued noncompliance, status of CI investigation)

• CSED protection

• ASED protection for potential Trust Fund Recovery Penalty (TFRP) assessments

• Notice of Federal Tax Lien refiling determinations

• new balance due modules that need TC 914 input or parallel investigation

(2) CCP will issue an OI to the field group every two years for purposes of determining whether administrative collection should remain suspended. The OI will request that the revenue officer conduct a risk analysis to determine:

• the status of the criminal investigation

• whether the taxpayer's noncompliance continues for tax periods subsequent to the periods under criminal investigation

• whether there is any indication that the taxpayer is fraudulently transferring property or otherwise taking actions to avoid future collection.

(3) If after coordination with CI it is determined that collection action should remain suspended, the revenue officer will document the basis for that determination in the case history. If it is determined that collection action no longer needs to be suspended for all or some of the modules, then the procedures above for parallel investigation should be followed.

(4) The time period for completing the OI is set forth in IRM 5.1.8.2(3), Courtesy Investigations. (45 days after issuance in most cases). If additional time is needed, the revenue officer should work with the issuing employee to prevent the case from reissuing to the field.

(1) One goal of resolving criminal tax cases is to require the defendants convicted (either by plea or by trial) to pay money to the IRS to redress the losses he or she inflicted on the Federal Treasury which resulted from their criminal conduct. Courts can award criminal restitution in tax cases when:

1. a defendant is convicted of a Title 18 offense involving a tax violation;

2. a defendant who pleads guilty to an IRC (Title 26) violation agrees, in the plea agreement, to pay restitution in connection with that violation; or

3. the court orders a defendant to pay restitution as a condition of supervised release or probation after a conviction on a Title 26 charge, whether or not the defendant agrees to the restitution.

(2) In most criminal tax cases involving restitution, the amount of the tax loss is calculated from evidence admitted at trial or from information contained in the plea agreement and presented to the district court at sentencing. The tax loss may be comprised of tax, interest, and/or penalties.

(3) The court may order the defendant to make payments to the court through a court ordered payment plan. These court ordered payments are sent by the Clerk of the Court to the W&I Submission Processing Center Restitution Unit in Kansas City.

(4) Payment of restitution for taxes owed must be credited against the civil liability for unpaid taxes as provided in a plea agreement or court order.

(5) Title 18 interest accrues as provided in 18 USC § 3612(f) on the restitution judgment if the restitution obligation exceeds $2,500 and the defendant has not paid such obligation in full before the 15th day after the date of judgment. The IRS does not assess or administratively seek to collect Title 18 interest. The court has discretion to waive Title 18 interest or limit the amount of interest the defendant is required to pay. The Title 18 interest discussed here is separate and distinct from Title 26 interest that accrues under IRC 6601.

(1) The United States may enforce a judgment imposing restitution in accordance with the practices and procedures for the enforcement of a civil judgment under federal law or state law.

(2) Each U.S. Attorney's Office has a Financial Litigation Unit (FLU), which has responsibility for the collection and enforcement of all civil and criminal judgments on behalf of the United States. Accordingly, the FLU is responsible for enforcing restitution orders and other orders relating to monetary penalties.

(3) While the IRS cannot take administrative enforcement action to collect court ordered restitution, it still has responsibility for monitoring compliance if the payment of restitution to the IRS is a condition of probation.

(1) The Firearms Excise Tax Improvement (FETI) Act of 2010, Public Law No. 111-237, amended IRC § 6201(a)(4)(A) to provide that the IRS shall assess and collect the amount of restitution ordered in a criminal case for failure to pay any tax imposed by the IRC in the same manner as if such amount were a tax. The law applies to restitution orders entered after August 16, 2010.

(2) Prior to the enactment of Public Law 111-237, the amount of restitution ordered payable to the IRS in a criminal case could not be assessed as a tax. This precluded the IRS from taking administrative collection action to collect the amount of restitution ordered.

(3) The FETI Act of 2010 also provides that:

• The assessment cannot be made until any appeals from the restitution order are concluded or the time for appealing has expired.

• The amount of restitution ordered may not be challenged by the person against whom assessed on the basis of the existence or amount of the underlying tax liability in any proceeding authorized under Title 26 (including in any suit or proceeding in court permitted under IRC 7422 ).

• In the case of any amount described in section 6201(a)(4), such amount may be assessed, or a proceeding in court for the collection of such amount may be begun without assessment, at any time.

Note: When a defendant is convicted after a trial, the enforceability of restitution ordered SOLELY as either a condition of supervised release or probation may shorten the collection period considerably. Restitution ordered solely as a condition of either supervised release or probation is only enforceable beginning with the first day of that period (the first day of supervised release following a prison term or the first day of probation, respectively) and ending with the last day of that conditional period as directed by the sentencing court. The periods of supervised release are on average 1 to 3 years long, and periods of probation are on average 3 to 5 years long. The Service can only make an assessment of an amount of restitution once the condition of restitution has begun.

(4) .In addition to assessing the amount of restitution ordered under section 6201(a)(4), the IRS may also assess the taxpayer and collect Title 26 interest and penalties if there is an independent basis for doing so apart from the criminal judgment and order, e.g., an assessment pursuant to a notice of deficiency, a signed Form 4549, Report of Income Tax Examination Changes, a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment or other consent, self-reported liabilities on a delinquent return(s), or a plea agreement. In such a case, coordinate the collection of the restitution amount assessed with the other assessment so that the restitution amount ordered is not collected twice.

(5) While a taxpayer may not challenge the amount of a restitution assessment under the IRC, the taxpayer may seek a review of collection actions being taken to collect the restitution-based assessment (RBA) through the Collection Due Process provisions of IRC § 6320 and § 6330.

(1) RBAs will be established by Examination. An MFT 31 module will generally be present for each tax year and/or tax period for which assessable criminal restitution was ordered by the court.

(2) The assessment will be made using a TC 290 or TC 298 with adjustment reason codes 141 through 148. The reason codes explain the type of restitution assessment.

(3) The module will contain a TC 971 with action code 102 and TC 971 with action codes 180 through 189. These action codes reflect the type of tax and tax periods for which restitution was ordered. The 18X action codes are indicators that there may be a potential duplication of assessment on another taxpayer account, for example, a spouse or a business. For an explanation of reason codes and action codes associated with RBAs, see IRM 5.19.23, Liability Collection, Restitution-Based Assessments Processing. For information about the assessment process see IRM 4.8.6, Criminal Restitution and Restitution-Based Assessments.

(1) While Title 26 taxes, interest and penalties are often included in computing the tax loss for criminal purposes and therefore are included in the amount of restitution ordered, additional Title 26 interest and/or penalties normally do not accrue and should not be assessed on the restitution amount unless ordered (very rare) or unless there is an independent basis for assessing them, e.g., an assessment pursuant to a notice of deficiency, a signed Form 4549 Income Tax Examination Changes (RAR), a Form 870 Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment or other consent, self-reported liabilities on a delinquent return(s), or a plea agreement. See also, Klein v. Commissioner, 149 T.C. No. 15 (2017) and Chief Counsel Notice CC-2019-004.

(2) If, however, the total amount of the restitution ordered by a federal district court includes interest and/or penalties in the tax loss calculation used to determine the RBA, the IRS should not abate such interest. Questions about whether interest was included in the amount of restitution ordered should be directed to Advisory via the centralized mailbox, *SBSE EEF Dallas Restitution. r Advisory will consult with SBSE Counsel if clarification is needed.

(3) Comments reflected on the Judgment and Commitment Order referring to Title 18 interest or the waiver of such interest do not have any bearing on whether there is an independent basis (notice of deficiency, etc.) for assessing Title 26 interest and/or penalties. The Service does not have jurisdiction over Title 18 interest. The defendant is required to pay this interest directly to the court, when applicable. The court can waive the Title 18 interest on the restitution ordered. If the defendant pays Title 18 interest to the sentencing court and the court forwards such payments to the Service, the Service applies the payments against the assessed amount, using the normal application of involuntary payment rules established by the Service.

(1) A RBA does not constitute an assessment of an amount of tax required to be shown on a tax return specified in section 6651(a)(1), so the section 6651(a)(3) failure to pay (FTP) penalty cannot be imposed on a RBA unless the Judgment & Commitment Order or related plea agreement specifically includes a FTP penalty. In the very rare circumstance that an order or related plea agreement specifically includes a FTP penalty, the FTP penalty ordered as restitution must be assessed as shown in the order or plea agreement. It is important that penalties and interest included in the restitution order or related plea agreement are assessed as such, and are not included with the same transaction code as tax. Including penalties and interest in the same transaction code as tax will result in the erroneous assessment of penalties and interest. See IRM 20.1.2.3.8.9, Failure to Pay Penalty for Restitution-Based Assessments, for additional penalty guidance.

(2) IRS may conduct a civil examination of the same tax liability for which restitution was awarded. Such an examination may result in the assessment of a deficiency based on that examination. Also, a taxpayer may file a delinquent return showing tax for which criminal restitution was ordered. In either case the criminal RBA and the other assessment will duplicate each other in whole or in part; however, they may be collected only once.

(1) The amount of restitution ordered payable to the Service is a liability, and once that liability is assessed by the Service there are effectively two means for collection, one judicial and one administrative. The liability itself, however, cannot be collected in full more than once.

1. The restitution liability is a judgment subject to collection by the Department of Justice Financial Litigation Unit (DOJ FLU). This restitution liability may be collected in accordance with the practices and procedures for the enforcement of a civil judgment. See IRM 25.3, Litigation and Judgments.

2. The Service also has the ability to use its administrative collection tools to satisfy the restitution liability by making a restitution-based assessment (RBA). Making this assessment allows the Service to collect the amount of the restitution liability in the same manner as if it was a tax. This means that administrative collection actions under the IRC may be used to collect the RBA.

(2) Although the IRS can assess and collect restitution under IRC § 6201(a)(4), the restitution judgment under Title 18 does not cease to exist following the assessment. The DOJ FLU can still rely on the collection procedures provided in Title 18 to collect the restitution judgment. The DOJ's efforts to collect the restitution judgment and the Service's ability to collect the RBA administratively, are parallel, non-exclusive means of collection.

(3) In order to ensure the full amount is only collected once, there must be close coordination between IRS Collection and the DOJ FLU. Advisory has responsibility for this coordination.

(4) IRS may conduct a civil examination of the same tax liability on which restitution was based. Such an examination may result in the assessment of a deficiency based on that examination. Also, a taxpayer may file a delinquent return showing tax for which criminal restitution was ordered. In either case the RBA and the other assessment will duplicate each other in whole or in part; however, they may be collected only once.

(1) Advisors will issue OIs to the field group to request investigations on probation and restitution cases when the conditions described above are present or when the advisor becomes aware that a restitution-based assessment has been made.

(2) Before issuing an OI, determine whether the investigation should be conducted by a general program field group or by an Abusive Tax Avoidance Transaction (ATAT) group. If the case contains ATAT criteria, issue the OI to the ATAT group. See IRM 5.1.5.16.2, Issuing Other Investigations to Abusive Tax Avoidance Transaction Collection Groups.

(3) RBAs may be in notice status, suspended status, or Bal Due status. The RBA will generally contain a STAUP to suspend the module for nine weeks following assessment. This suspends systemic notice and assignment and allows time for coordination of information and assignment. For field OIs:

1. If the RBA is suspended by a STAUP or in notice status, the OI should be issued to the group designation hold file XX00 according to geographic assignment. Instruct the field group to accelerate and assign the module for field investigation.

2. If the RBA is already in status 26 the OI should be issued to the revenue officer that has the case assignment. Instruct the field group to coordinate collection activities with Advisory.

(4) The advisor should include pertinent information with the OI request. The OI request should contain the following:

• Recommended actions to be taken.

• Relevant information from case file documents and forms including: the Judgment & Commitment Order, Form 13308, and Form 14104.

• Contact information if it is determined the revenue officer will need to make direct contact with the Special Agent, Fraud Suspense Coordinator, revenue agent, probation officer, or the Department of Justice Financial Litigation Unit (DOJ FLU).

• Information about the taxpayer's prison term and location where serving the sentence.

• Information about DOJ's collection of the judgment and results of any coordination between Advisory and DOJ or the DOJ FLU.

(5) The outgoing OI may be closed once the module(s) have been accelerated and the case assigned to a revenue officer. Advisors will retain open NF OIs for the probation and/or restitution Advisory case.

(1) In highly technical and specialized cases, assignment to an Abusive Tax Avoidance Transaction (ATAT) collection group will be warranted.

(2) The advisor will review all data available including, but not limited to, the Criminal Investigation Closing Report, Judgment and Commitment Order, and ICS case history and sub code. An OI will be issued to the appropriate Collection ATAT group no later than ten business days after determining if one or more of the following criteria are met and actions are needed by the field:

• The defendant is a promoter.

• The defendant is an abusive preparer.

• Established or archived case on ICS is coded with ATAT sub code 309 through 329.

• Indication of assets located offshore.

• Indication of complex forms of asset ownership utilizing multiple-layered entities and/or nominee or alter ego entities.

(3) If there is uncertainty as to whether the OI should be issued to an ATAT group, the advisor should contact the Collection ATAT Coordinator for guidance. A list of ATAT Coordinators can be found at http://mysbse.web.irs.gov/Collection/toolsprocesses/CollATAT/contacts/19487.aspx.

(1) The Conditional Probation Expiration Date is the date on which the defendant’s term of probation ends.

(2) Noncompliance with the terms of probation must be reported to court prior to this date, otherwise no action can be taken. In order for corrective action to be taken, noncompliance should be reported as soon as it is detected. Additionally, noncompliance with IRS-related conditions of probation must be reported at a minimum of 180 calendar days before the Conditional Probation Expiration Date. Therefore, investigation for this memorandum must be complete prior to that date. See IRM 5.1.5.20.1, The 180-Day Memorandum.

(3) The Conditional Probation Expiration Date is generally calculated as follows:

1. Starting date: date of sentence or court ordered date of surrender

2. Add: prison term

3. Add: period of supervised release or probation

4. Subtract: 1 day

(1) In the federal system, defendants may receive a reduction of their sentence if they comply with certain requirements or participate in certain designated programs while in custody.

(2) This reduction of time spent incarcerated will impact the calculation of the Conditional Probation Expiration Date.

(3) To determine whether the Conditional Probation Expiration Date has changed due to the defendant receiving a reduced sentence or as a result of other judicial action, Advisory should periodically check the defendant’s projected release date on the Bureau of Prisons web site: https://www.bop.gov/. Early termination of supervised release may also impact the Conditional Probation Expiration Date. Advisory will also review PACER at https://pacer.gov/ to determine whether the taxpayer’s period of supervised release was terminated early by the courts. The dates should be checked a minimum of once a year during the defendant’s period of incarceration and supervised release.

(4) If it is discovered that the defendant's projected release date has changed, Advisory will notify Criminal Investigation and other IRS employees who are assigned to or monitoring the case.

(1) When a collection investigation is requested, revenue officers will take the following actions:

1. Review information received from Advisory and any available ICS history. If a revenue officer determines a need for additional information or copies of forms and documents from the Advisory case file, make a request to the advisor assigned the NF OI. See IRM 5.1.5.16.1, Issuing Other Investigations.

2. Contact the advisor if the history indicates any activities are taking place or planned by the Department of Justice to collect the restitution judgment.

3. Conduct a compliance check and determine whether the taxpayer is in compliance with tax obligations and conditions of probation, if different.

4. Determine the taxpayer's assets and income, using the Collection Information Statement as an information source.

5. Verify information provided by the taxpayer.

6. In coordination with Advisory and the Department of Justice, determine what, if any, civil enforcement actions may be taken to collect outstanding tax assessments.

7. Carry out any specific instructions listed on the OI, such as requesting a Notice of Federal Tax Lien.

(2) Taxpayers must be advised:

• of the specific IRS-related conditions of their probation, including any requirements to file tax returns, pay outstanding tax liabilities, and/or pay restitution to the IRS

• that their compliance with the conditions of probation will be monitored and any instances of noncompliance will be reported to the courts

• that inability to pay situations will be reported to the courts for evaluation as a potential violation of the conditions of probation.

Note: Letter 4015 may be used by revenue officers in appropriate circumstances to inform defendants of their responsibilities.

(1) If enforcement action is being considered, revenue officers will contact the advisor that issued the OI prior to taking enforcement action. If the RBA case is assigned systemically and an OI has not been issued by Advisory, the revenue officer should contact the Advisory Centralized Restitution Unit at *SBSE EEF Dallas Restitution and request Advisory assistance in coordinating case activities.

(2) The advisor will coordinate with the special agent assigned to the case and evaluate any asset information developed by Criminal Investigation in the course of their investigation and provided in the closing package. The revenue officer may contact the special agent directly if it is agreed by the revenue officer and the advisor that such communication will facilitate case resolution.

(3) If enforcement activity is being considered, the advisor will discuss the case with the DOJ FLU to coordinate collection activities. Coordination is necessary because the DOJ has the ability to collect the restitution judgment while the Service may administratively collect the RBA.

(4) The local FTA may also be contacted, especially if the criminal case was the direct result of a fraud referral. The FTA may have valuable knowledge of the taxpayer, assets or income that may assist with the collection determination. The FTA can also provide a copy of the Form 2797, Referral Report of Potential Criminal Fraud Cases, if the case originated as a referral.

(5) Revenue officers will also determine the status of any examinations 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.

(1) The same determination and filing criteria apply when filing a NFTL for the statutory liens of unpaid RBAs that apply to other balance due accounts.

(2) NFTLs for these statutory liens:

1. contain special wording to indicate the nature of the assessment(s),

2. can be generated through the Automated Lien System (ALS), and

3. cannot be requested through the ICS.

   Note: In rare situations, circumstances may necessitate that the NFTL be manually prepared and hand-carried for filing. Use the ICS Form 668(Y)(c) template to manually prepare the NFTL. See IRM 5.12.7.7.4(7).

(3) To request a NFTL for an RBA, complete Form 12636, Request for Filing or Refiling Notice of Federal Tax Lien, and forward it via secure e-mail to the Centralized Lien Operation (CLO) for input to ALS. In the case of immediate filing, a copy of the manually-prepared NFTL must be provided to CLO.

(4) For RBA NFTLs printed and filed by CLO, the taxpayer’s Collection Due Process (CDP) notice is systemically issued. For those manually prepared, the requester is responsible for the issuance of the CDP notice.

(5) See IRM 5.12.7.7.4, Restitution-Based Assessment NFTLs for guidance on preparing NFTLs on RBA cases.

(1) RBAs may be closed as CNC, hardship by the Field Collection or Advisory.

(2) The taxpayer is responsible for making any required payments as directed by the court to satisfy the criminal restitution order. These are court ordered payments, and are allowable expenses.

(3) When the court orders restitution paid to federal and non-federal victims, the Service will not pursue enforced collection actions until the non-federal victims are paid in full. If there is no collection potential because non-federal victims are to be paid first, the case may be closed as a CNC hardship. Determine whether a mandatory follow-up is warranted based on the information in the court order. Revenue officers should consult Advisory for assistance in determining how and when to resume collection.

(4) RBAs should not be closed as unable to contact (UTC) or unable to locate (UTL) while the taxpayer is under supervised release or on probation. If the taxpayer cannot be contacted or located, coordination with the U.S. Probation Office through Advisory should take place. If the taxpayer is uncooperative or not in compliance with conditions of probation, follow the guidelines in IRM 5.1.5.23, Addressing Noncompliance.

(5) If the taxpayer is not under supervised release or on probation, the account may be reported UTL or UTC. If the "Restitution" program name is present on ICS, request through the group manager that it be removed. The "Restitution" program name, if present, will block UTL and UTC closures.

(1) Administrative collection of RBAs through levy and seizure is permissible. Decisions to issue a levy or conduct a seizure must be made on a case-by-case basis and coordinated with the DOJ through Advisory. This is because the DOJ may be taking action to collect the restitution judgment.

(2) Ensure all notice requirements have been met. Systemic notices are not generally issued on RBA accounts.

(3) Some accounts may have potentially duplicate assessments, such as a TC 300 audit assessment and an RBA for the same underlying tax liability. As with trust fund recovery penalties, these accounts are reconciled in Campus units, and payments are cross-referenced to prevent over-collection of the liability. See IRM 5.1.5.19.2, Cross-Referencing and Reconciliation of Payments, below. Potentially duplicate assessments will normally be listed on the Notice of Levy if proper notices have been served because these amounts will not be over-collected. Revenue officers may contact the advisor to determine whether to seek an advisory opinion from Area Counsel before proceeding if warranted by the facts and circumstances of the case.

(4) RBA liabilities do not arise from a tax form. When issuing Notice of Levy, revenue officers must ensure that the Kind of Tax field for RBA modules reflects one of the following terms:

• Restitution

• RBA

• Restitution-Based Assessment

• Restitution Assessment

(1) The IRS may not enter into an IA that would ultimately result in the taxpayer paying an amount less than, or less frequently than, a court ordered restitution payment plan.

(2) The IRS should enter into an IA only if it meets the following requirements:

• the entire amount of restitution ordered is satisfied at the conclusion of the IA,

• the minimum periodic payment under the IA is at least equal to the minimum periodic payment under the court ordered restitution plan, and

• the payment period under the IA is no longer than the payment period of the court ordered restitution plan.

(3) Restrictions apply to IAs that include RBAs. See IRM 5.14.4.7, Establishing Installment Agreements on Restitution-Based Assessments (RBA) and Related Civil Assessments, for detailed guidance.

(1) The IRS does not have the authority to compromise court-ordered restitution or Restitution-Based Assessments.

(2) The IRS may consider an OIC to pay liabilities other than restitution and RBAs, including civil tax, penalties, and interest for the same tax periods for which restitution was ordered, even if the restitution amount due has not been paid or will not be paid within the terms of the OIC.

(3) The defendant must notify the court and the Department of Justice of any material change in the defendant's economic circumstances that might affect the defendant's ability to pay. The United States may also notify the court of a change in the defendant's economic circumstances. See IRM 5.8.4.23.2, Offers in Compromise Submitted that Include Restitution.

(1) Taxpayers with RBAs can file for bankruptcy protection under any appropriate section of the bankruptcy code if they meet the legal requirements. While tax assessments for the years related to the assessments may be dischargeable, RBA assessments are not.

(2) When a revenue officer or advisor learns that a taxpayer against whom an RBA has been made has filed bankruptcy, the revenue officer or advisor will contact the Centralized Insolvency Operation and inform them that the bankruptcy involves an RBA. Provide this information even if the IRS has otherwise received notice of the bankruptcy case and the case has been opened on the Automated Insolvency System. RBA bankruptcy cases will be worked by Field Insolvency. See IRM 5.9, Bankruptcy and Other Insolvencies, for additional information about restitution and bankruptcy.

(3) Advisors will serve as a resource for Insolvency caseworkers needing assistance with RBA cases.

(1) RBA modules can only be adjusted under specific circumstances:

• The court issues a revised restitution order amending the amount a defendant is ordered to pay in restitution

• An error was made in the original RBA (e.g., incorrect amount assessed, incorrect year assessed, incorrect taxpayer assessed)

(2) Examination Technical Services is responsible for establishing and adjusting all RBA accounts, including preparation and submission of Form 3870, Request for Adjustment. Revenue officers should direct inquiries regarding all proposed RBA account adjustments to the centralized mailbox at *SBSE Tech Svs Criminal Restitution and await guidance before proceeding. Revenue officers should not submit Form 3870 for RBA modules to Collection Centralized Case Processing.

(1) Payments toward RBA accounts are posted using established designated payment codes. See IRM 5.1.2, Remittances, Form 809 and Designated Payments.

(2) Payments received as a result of collection enforcement action to collect RBAs are involuntary payments and may be applied in the best interest of the government.

(1) When multiple restitution debts stem from the same underlying tax liability, the full amount can only be collected once. Therefore, any payments that wholly or in part satisfy the RBA must also be applied against the underlying tax liability for the same type of tax and tax periods (duplicate civil and/or codefendant assessments), provided that the RBA relates to that underlying tax liability.

(2) The defendant ordered to pay restitution may be one or more of, but is not limited to:

• individual taxpayer

• spouse on joint account

• officer or employee of a corporation

• partner or employee of a partnership

• employee of a sole proprietorship

• return preparer or client

• tax shelter promoter.

(3) The SB/SE Campus Collection Operations Restitution Unit in Ogden is responsible for:

• monitoring RBA accounts

• cross-referencing payments and credits

• reconciling RBA accounts to ensure potential duplicate liabilities are only collected once

• responding to inquiries related to these accounts.

(4) To prevent duplicate collection, the Campus RBA Unit will cross-reference any payments made against the RBA to related duplicate assessments. Duplicate assessments include the RBA made on the MFT 31 account, and civil tax and or fraud penalties assessed on each respective parties’ underlying tax account.

(5) Payments and credits are only cross-referenced until the duplicate assessment and related penalties and interest are paid.

(6) For RBA modules in Non Master File (NMF) follow the guidelines for posting payments found in IRM 5.1.2.5.5, Inactive Account. In addition, when a revenue officer posts a payment to an RBA module in NMF, the revenue officer will forward a copy of the payment posting voucher(s) via secure e-mail to *SBSE Ogden RBA. Forwarding a copy of the payment voucher to the Ogden Restitution Unit is necessary to ensure timely cross-referencing and reconciliation of payments.

(7) IRM 5.19.23, Liability Collection, Restitution-Based Assessments Processing, contains detailed information about RBA cross-referencing and payment reconciliation Field Collection employees needing assistance resolving payment and credit reconciliation issues may contact the Ogden Campus RBA Unit by sending an inquiry via secure e-mail to *SBSE Ogden RBA. For RBA modules in NMF but not on IDRS, revenue officers and advisors needing posted transaction and balance due information can request Automated Non Master File System transcripts from the Ogden Campus RBA Unit via secure e-mail inquiry.

(1) Judgment and Commitment Orders (J&Cs) normally specify that defendants are to submit restitution payments to the office of the clerk of the district court in the district in which the defendant was sentenced. This will generally include restitution payments that are required to be paid to the IRS. Field Collection processing of such payments should be rare.

(2) After receiving, processing and recording restitution payments made by defendants, the clerk of court will forward the money to the victim(s) listed in the restitution order.

(3) All court ordered restitution payments to the IRS are processed by the Kansas City Submission Processing Center (SPC) at the following address:

Department of Treasury

Internal Revenue Service

Attn: DOJ/Criminal Restitution, Mail Stop 6261 P-6

333 West Pershing Road

Kansas City, MO 64108

(4) Any court ordered restitution payments received at sites other than the Kansas City SPC must be transshipped via overnight traceable method to the address in paragraph (3), above.

(5) In order for restitution payments to be linked to the defendant making the payment, identifying information, if available, such as the defendant’s full name, social security number or Taxpayer Identification Number, the tax year or years for which restitution has been ordered, and a statement that the payment is being made pursuant to a restitution order, should be included with the payment and forwarded to the Kansas City SPC. The tax year(s) for which restitution has been ordered may or may not be included in the J&C.

(6) Payments of court ordered restitution for judgments entered after August 16, 2010 will be posted using designated payment code (DPC) 26. Court ordered restitution for judgments entered August 16, 2010 and earlier will be posted using DPC 08.

(7) Contact the Kansas City SPC at *W&I Criminal Restitution if there are questions regarding the receipt and reconciliation of court ordered restitution payments.

(1) In connection with prosecutions for identity theft, refund schemes, and tax evasion, state courts may order defendants to pay restitution to the IRS.

(2) State or local officials may contact IRS to ask where to send restitution payments. Collection personnel receiving inquiries from state or local governments regarding where to send payments should advise them to send payments to the following address:

Department of Treasury

Internal Revenue Service

Attn: DOJ/Criminal Restitution, Mail Stop 6261 P-6

333 West Pershing Road

Kansas City, MO 64108

(3) Revenue officers or advisors receiving a state ordered restitution payment will transmit the payment using Form 3210, Document Transmittal, to the above address. Collection personnel needing information or assistance regarding these payments may contact the State Restitution Special Services Team via the secure mailbox at *W&I Criminal Restitution.

(4) When the State Restitution Team receives a payment with insufficient information, they may request assistance from Advisory to secure additional information. Advisory will contact the sender to obtain the additional information, which may include any or all of the following:

1. A copy of the court order (or the state equivalent).

2. All necessary information on the check, including: the case number, the defendant's name, and "State Restitution" written on the check.

3. A copy of the indictment, if possible.

4. A contact name and number for any questions.

(5) If there is already a Probation NF OI open, Advisory will not need to open an ICS module.

(1) A memorandum must be prepared and forwarded to CI SAC and CI Field Office Conditions of Probation Coordinator, with a copy to Exam Technical Services, in all cases where there are IRS-related conditions of probation and those conditions have not been met. The memorandum will be prepared by the advisor based upon information received from revenue officers who have been assigned to take actions on the case.

(2) The memorandum must be sent 180 days prior to the Conditional Probation Expiration Date. See IRM 5.1.5.16.3, above.

(3) The memorandum will include the following:

• a statement that the defendant has not met the conditions of probation

• the Conditional Probation Expiration Date

• the specific conditions of probation relating to the IRS

• actions taken or not taken by the defendant to comply with the conditions of probation

• if there are outstanding tax liabilities, including restitution-based assessments, the defendant’s efforts at paying the liabilities and whether or not such amounts are collectible

• if restitution was awarded to the IRS as a condition of probation, whether the defendant paid the amount ordered

• any relevant information regarding the defendant’s cooperation with the IRS to comply with the conditions of probation

• a statement addressing whether such failure was within the defendant’s control

(4) The advisor will update any controls being used to indicate the issuance of the memorandum sent to CI.

(1) The requesting agency may seek acknowledgement of IRS losses for the purpose of obtaining an order of restitution payable to the IRS. Upon receipt of the request, Advisory will open an NF OI on ICS using code 181.

(2) The advisor will conduct research to determine whether there was a loss to the government by utilizing the following research tools :

1. Financial Crimes Enforcement Network Query: Provides subject information by name. It can be used to identify bank account information and whether U.S. Treasury checks and electronic deposits were made by the subject.

2. Public Access to Electronic Court Records (PACER): An electronic court information system allowing ready access to information on federal court cases.

3. IDRS: Command codes INOLE, IRPTRO, TXMOD, and RTVUE can help determine the subject's taxpayer identification number and help identify whether fraudulent returns are being filed by the subject.

4. Electronic Fraud Detection System (EFDS): Helps establish whether the subject has any tax returns flagged for fraudulent activity and provides contact information if there is a Criminal Investigation (CI) agent assigned to the case.

(3) The advisor may contact the CI Scheme Development Center by e-mail at *CI-SDC Research. The CI analyst will provide research assistance and can help determine if there is tax loss due to erroneously issued refunds.

(4) Determine whether there are any assets in possession of the subject that would result in payment of part or all of the restitution to the IRS.

(5) Analyze the information to determine whether fraudulent tax returns were filed and if the IRS sustained a loss.

(6) If a loss was sustained, the advisor will prepare a letter on IRS letterhead for the signature of the Advisory Territory Manager requesting that restitution be ordered at the time of sentencing.

(7) If a loss cannot be determined, a letter will be prepared stating that it could not be shown that the government sustained a loss.

(8) Each response letter should only include:

• the defendant’s name with no other Personally Identifiable Information (PII)

• a statement to confirm how the IRS was victimized based on documents publicly available as well as any police report information available

• a statement that IRS is providing this letter as requested in order for restitution to be ordered payable to the IRS

• the total loss in dollars sustained by the IRS

• a request that a copy of the restitution order accompany any payment

• a request that any payments be sent to the following address:

Department of the Treasury

Internal Revenue Service

Attn: DOJ/Criminal Restitution, Mail Stop 6261 P-6

333 West Pershing Road

Kansas City, MO 64108

(9) Submit the response letter to the Advisory Territory Manager for signature. Once signed, the letter will be mailed to the requesting party with a copy retained for the case file.

(10) The case file will include the request letter, the response letter, and any research that was performed by the advisor and CI. Document all actions in the ICS history. The NF OI can be closed after the letter has been sent and all actions completed and documented.