(1) During an examination, if it is determined that the taxpayer failed to file Form(s) 8300, or furnish a statement(s) as required, the delinquency procedures in IRM 4562.5 will be followed.

(2) Briefly, the delinquency procedures in IRM 4562.5 require that the examiner:

(a) Secure any delinquent Forms 8300 and/or statements and forward the originals to the Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232.

(b) Determine if the failure to file was due to reasonable cause; if the failure to file was due to reasonable cause the penalties imposed by IRC 6721 through 6723 will not apply.

(c) Secure a written statement from the taxpayer, under penalties of perjury, setting forth all the facts alleged as reasonable cause.

(d) Place a photocopy of the delinquent Form 8300 and/or statement in a Penalty Case File, if the failure to file was not due to reasonable cause.

(e) Compute the penalty under IRC 6721 through 6723 on Form 8278, Computation and Assessment of Miscellaneous Penalties, as provided in IRM 4560.

(f) Attach Form 3198, Special Handling Notice, to the penalty case file.

(1) IRC 60501 and the temporary regulations do not exempt attorneys from the reporting requirements of Section 60501. Information by an attorney on Form 8300 concerning the identity of a client and the amount of cash received is usually not privileged because, absent special circumstances, such information does not involve a confidential communication. This is especially true with respect to the amount of legal fees paid by the client to the attorney for services rendered. Therefore, in the case of an attorney who asserts the "attorney-client privilege," the examiner should consider issuing a summons to the attorney following the guidelines in IRM 4022 in order to obtain the specific information omitted by the attorney by virture of the assertion of the attorney-client privilege.

(2) Issuance of an administrative summons under IRC 7602 may be appropriate where the examiner is seeking to determine the amount of penalties for which an attorney may be liable by virtue of the attorney's improper:

page 4234-111 (12-8-89)

(a) filing of numerous Forms 8300 asserting the "attorney-client privilege"; or

(b) claiming that privilege as "reasonable cause" for the failure to file required Forms 8300.

(3) Further, a "dual purpose" summons issued to determine both the amount of penalties for which the attorney is liable as well as the client(s)' income tax liabilities may be properly supportable in such circumstances. Se: Tiffany Fine Arts, Inc. v. United States, 105 S. Ct. 725 (1985).

(4) A "John Doe" summons may also be appropriate in order to obtain information on an attorney's client(s) where the Form(s) 8300 filed by the attorney contain(s) an assertion of the "attorney-client privilege" provided that the "reasonable basis" test of IRC 7609(1)(2) can be satisfied. Something more than demonstrating the mere existence of the large amount of cash involved in an IRC 60501 transaction may be required to be shown in order to satisfy the reasonable basis test of IRC 7609(f). See: In the Matter of the Tax Liabilities of John Does, Members of the Columbus Trade Exchange in the Years 1977 and 1978, 671 F. 2nd 977 (6th Cir. 1982).

(5) An alternative method to obtain information required to be filed with the Service under IRC 60501 is to seek an injunction against the attorney under IRC 7402(a). See: United States v. Carley, 57 AFTR 2d, par. 86-922 (2d Cir. 1986).

(1) Examiners should refer cases to Criminal Investigation Division (CID) of any person engaged in a trade or business, (including responsible officers or employees of the business) who had sufficient notice of the filing requirements of Form 8300, but who willfully, thereafter, failed to file the form on numerous occasions, or who filed a Form 8300 which is false with regard to a material matter.

(2) The determination of willfulness with respect to possible criminal violations of the reporting requirements under IRC 60501 should be made on a case by case basis.

(3) In general, examiners should follow the procedures in IRM 4565, General Fraud Procedures, without regard to any dollar criteria as set forth in 565 of the Law Enforcement Manual IV,

(1) In addition to the package audit requirements for Form 8300 (text 710), field examiners will verify in all examinations whether the taxpayer filed correctly or was required to file:

(a) Form 3520, Creation of or Transfers to Certain Foreign Trusts-Information Return, pursuant to IRC 6048.

(b) Form 3520A, Annual Return of Foreign Trust With U.S. Beneficiaries-Information Return, pursuant to IRC 6048(c).

(c) Form 926, Return by a transferor of Property to a Foreign Corporation, Foreign Trust or Estate, or Foreign Partnership-Excise Tax Return, pursuant to IRC 1491, asserting a 35% excise tax on certain transfers.

(2) Field examiners should, as a minimum, compare filed Form(s) 3520, 3520A, 926 and 90-22.1 (FBAR) to the tax return to identify potential noncompliance or tax avoidance issues. Although Form 90-22.1 is not filed with the tax return, the taxpayer's copy (if available) should be utilized for this analysis.

(3) During an examination, if it is determined that a taxpayer was required to file Form 90-22.1 (FBAR) but failed to do so, the examiner will secure the delinquent form from the taxpayer. The original delinquent Form 90-22.1 should be sent to the Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232, Attn: FBAR. If the taxpayer refuses to file a delinquent Form 90-22.1, a referral should be made to the district CBRC, following the procedures in text 742.

(4) In all field cases, examiners will include in Form 4318, Examination Workpapers, a statement as to his/her findings concerning the provisions of this section, and the package audit requirements for Form 8300. Quality Review Staff will ensure that such a statement is included in all cases it reviews. The regions will monitor and ensure adherence to these provisions during regular district program visitations.

(5) Field examiners will find IRM 4235, Techniques Handbook for In-Depth Examinations, text 7(16)0 and 7(17)0, replete with instructions to assist them in identifying and uncovering areas of noncompliance and unreported in

(1) Examiners should not solicit the currency reports required to be filed under Title 31 (text 231), except Form 90–22.1 (FBAR), from a taxpayer during an income tax examination. Form 90-22.1 may be solicited from the taxpayer for purposes of satisfying the procedures in text 710:(7) and 740. Examiners, however, can determine on a sample basis whether the taxpayer under examination has filed the appropriate currency reports through the use of CBRS.

(2) In addition, examiners should not examine books and records of the taxpayer for purposes of determining if the taxpayer is complying with the recordkeeping provisions of Title 31. Examiners may, however, request and examine any of these records which are relevant to the income tax examination of the taxpayer.

(3) It is imperative that examiners keep income tax examinations (Title 26) separate and distinct from Title 31 compliance checks. The 1 provisions of IRC 6103 restrict disclosure of Title 31 violations discovered during an income tax examination to another government agency, including Treasury. Consequently, proper referral procedures for possible Title 31 violations must be followed.

(4) Form 5103 (Examiner's Check Sheet) should be prepared and forwarded to the district CBRC, whenever an examiner detects a possible violation of the Title 31 reporting or recordkeeping requirements by financial institutions under the Service's jurisdiction (text 252).

(5) Form 5104, Report of Apparent Violation of Financial Recordkeeping and Reporting Regulations, should be prepared and forwarded to the district CBRC whenever examiners detect a violation by a financial institution not under the Service's jurisdiction (text 251). In addition, Form 5104 will be used to report taxpayers who failed to file or filed a false Form 90-22.1 (FBAR).

(6) The examiner's workpapers may be attached to Form 5104 if the district believes the workpapers will support or explain the examiner's findings and conclusions. All workpapers and any other documents attached to Form 5104 must be neat, legible, and concise.

9631.4 (6-2-87)

Processing with District Counsel and Statute Cases

(1) Reports containing recommendations for criminal prosecution, if approved by the Chief, should be forwarded to District Counsel not less than 310 days prior to the expiration of the period of limitations as to the first alleged offense, from the standpoint of time, included in the recommendation of prosecution, in the absence of exceptional circumstances. If exceptional circumstances exist that would act to waive this rule, they shall be detailed in the memorandum transmitting the case to District Counsel. Such factors as the importance of the case and late discovery of strong evidence of flagrancy should be weighed with the desirability of an even flow of cases and sufficient review time for District Counsel and Department of Justice. The determination as to whether such circumstances are of an exceptional nature must be a matter of judgment on a case-bycase basis. Also, consideration should be given in each such case to dropping, for prosecution purposes, the tax period or possible count about to be beyond the limitation period, unless it is vital to successful prosecution. The fact that the statutory period about to terminate involves a tax year considered vital to the prosecution recommendation shall be interpreted as an exceptional circumstance to waive the rule.

(2) When District Counsel concurs with recommendation of prosecution, in accordance with the procedure of the Chief Counsel's office, District Counsel will forward to the Chief two copies of the criminal reference letter prepared by his/her office. The Chief shall retain one copy for his/her files. The ARC may, at his/ her discretion, require that a copy be forwarded to his/her office by the Chief. Cases are sometimes processed by Chief Counsel when a particular District Counsel has a heavy case load or for other administrative reasons. When this pro

page 9-460.3 (3-1-90)

cedure is followed, the distribution to the Criminal Investigation function will be the same.

(3) As provided in IRM 9357, District Counsel will ordinarily discuss any defenses raised by the taxpayer at the formal conference with the special agent prior to requesting a supplemental investigation. The ARC may, at his/her discretion, require that a copy of District Counsel's request for supplemental information or data be forwarded to his/her office by the Chief. Supplemental reports and reports of supplemental investigation will be processed in the same manner as original reports. District Counsel will retain the Administrative File for ninety days following transmittal of a Request for Supplemental Investigation by Criminal Investigation personnel. During this time, District Counsel is responsible for control of civil matters. In the event the request cannot be accomplished within this time, the Administrative File may be returned to the appropriate District Director for control of civil matters deemed necessary by that official.

(4) If District Counsel determines that a Special Agent's Report is incomplete to the extent that additional investigative activity involving a massive supplemental request is required, the case may be returned to the Chief, Criminal Investigation Division, accompanied by a Declination Memorandum. The district then has ten workdays to decide whether or not the additional investigative activity required to perfect the SAR is warranted. If a decision is made to complete the necessary work and resubmit the SAR to District Counsel, the matter will be treated like any other supplemental. If it is determined that the additional work required by District Counsel is not warranted, the matter will be treated like other District Counsel declinations. (See IRM 9570, Exhibit 400-1 for Case Management and Time Reporting System reporting requirements).

(5) If District Counsel does not concur with recommendation for prosecution in a case, he/ she will confer with the Chief, Criminal Investigation Division, in an effort to resolve the differences of opinion. If after the conference District Counsel still does not concur with the prosecution recommendation, District Counsel will prepare a Declination Memorandum, transmit it to the Chief and send a copy to the ARC.

(6) District Counsel will ordinarily forward prosecution cases to the Tax Division of the Department of Justice. However, District Counsel may refer the following types of cases direct to the U.S. Attorney: certain violations relating to Form 8300 (Report of Cash Payment Over $10,000 Received in a Trade or Business); trust fund penalty cases; corrupt or forcible interference cases; forcible rescue cases; excise tax cases and cases involving violations of 18 USC 1621, 1622, or 1623 which were committed in contravention of the internal revenue laws, were committed during the judicial process (before the grand jury or trial jury), and involve a prosecution recommendation solely under those sections.

(7) When a case is forwarded to District Counsel for review and referral direct to the U.S. Attorney, the Chief should furnish the original and four copies of the special agent's report to District Counsel, so that District Counsel may send two copies to the Department of Justice.

9631.5 (3-16-83)

District's Reply to Declination
Memorandum

(1) Within ten workdays from the date of the Declination Memorandum, the Chief, Criminal Investigation Division, will submit to the ARC(CI), a protest report signed by the District Director or his/her designee, but no lower than the Chief, CID setting forth the district's disagreement with the Declination Memorandum; or a memorandum of notification that the district will protest the Declination Memorandum, to be followed promptly by the protest report.

(2) The protest report will include any comments concerning overall evaluation of the evidence, interpretation of law, or other disagreements with opinions expressed in the Declination Memorandum. Any new or additional facts or evidence developed after receipt of the Declination Memorandum will be included in a separate report signed by the special agent, and submitted with the district's protest report. Such reports by the special agent should be limited to a presentation of the facts and should not contain opinions relating to action proposed by District Counsel.

(3) A copy of the district's protest report (and notification, if applicable) will be forwarded to District Counsel. When the District's protest

page 9-461 (3-1-80)

report includes a separate report signed by the special agent reflecting new or additional facts or evidence developed after receipt of the Declination Memorandum, a copy of the special agent's report will also be forwarded to District Counsel.

(4) If District Counsel does not receive the district's protest report or notification within the time limit prescribed above, District Counsel may assume that the Declination Memorandum will not be protested and consider the matter closed.

9631.6 (3-16-83)

Consents and Statutory Notices on Prosecution Cases in District Counsel

District Counsel may request that consents extending the statutory period of limitation on assessment be obtained by the Chief, Examination Division, in the district, with respect to criminal prosecution cases where the administrative file has been delivered to the office of the District Counsel. Where timely consents are received, they will be accepted by or on behalf of the District Director and forwarded to the District Counsel who will satisfy himself/herself that the signature on the consent corresponds with the signature on the return. In the event consents are not timely filed and the District Counsel has not indicated that the statutory notice of deficiency should be issued, the Chief, Examination Division, will notify the District Counsel that the requested consents were not received. Where consents are not timely filed and the District Counsel has indicated that the statutory notice of deficiency should be issued, the tax return and any other part of the administrative file considered necessary to properly prepare the statutory notice will be obtained from the District Counsel by the Chief, Examination Division. Pattern letter P-258 (Exhibit 9320-6 provided in IRM 9325.2:(8)) shall be used in lieu of Form L-21 in these cases.