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OFFICE OF TREASURY INSPECTOR GENERAL

FOR TAX ADMINISTRATION

DATE: July 1, 2005

CHAPTER 400 – INVESTIGATIONS

(400)-390 Remittance Test Investigations

390.1 Overview.
Local Investigative Initiatives (LII) probing potential thefts of taxpayer remittances from
Internal Revenue Service (IRS) or lockbox facilities are also known as remittance tests.
The remittance test program is a continuous proactive activity conducted throughout the
year. The purposes of these investigations are:

• To test the various processing systems at IRS Submission Processing


Centers, IRS field offices and IRS lockbox facilities to assure that negotiable
remittances (e.g. cash, money orders made out in blank, returned refund
checks, etc.) are not being fraudulently diverted.
• To identify any control weaknesses that jeopardize the protection and
safeguards over revenues received

This section includes the following information related to remittance test investigations:

• Remittance Test Initiation Procedures


• Controlled Remittance Tests
• Uncontrolled Remittance Tests
• Documentation of Remittance Tests
• Unrecovered Remittances
• Procedures When Theft is Identified
• Initiating Spin-Off Investigations
• Imprest Funds in Remittance Tests
• Report Format

These guidelines are intentionally basic in nature due to the variations in operating
practices among IRS Submission Processing Centers, IRS lockbox facilities and IRS
field offices. Use good judgment, common sense and imagination when conducting
remittance tests. Special Agents (S/A’s) should contact the TIGTA-Office of Audit (OA)
for reports or information on noted problem areas and control weaknesses disclosed by
program reviews for the functional area being tested.

390.1.1 Acronyms Table.

390.2 Remittance Test Initiation Procedures.


TIGTA-Office of Investigations (OI) has committed to conducting remittance tests at IRS
lockbox banks during the peak filing period of each year. The Special Agent-in-Charge
(SAC) is responsible for establishing a test program schedule for remittance tests
conducted at IRS lockbox facilities during other times of the year and at IRS field offices
and IRS Submission Processing Centers. Scheduling of such tests should cover the

Operations Manual 1 Chapter 400


OFFICE OF TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

DATE: July 1, 2005

whole year at different times of peak and non-peak filing periods for each IRS lockbox
facility and/or IRS Submission Processing Center within the SAC’s jurisdiction.
Consideration should be given to conducting tests during different work shifts and in
different work units. TIGTA should not target a particular IRS or lockbox employee
without a reasonable suspicion of wrongdoing.

A request to initiate a remittance test is submitted and approved in accordance with the
procedures in Section 320.4 of this Chapter. A LII for remittance testing does not
require approval by the Deputy Assistant Inspector General for Investigations (DAIGI).

Once approved, initiate a LII in the Performance and Results Information System
(PARIS) for each remittance test conducted using the “Financial Fraud” Profile and the
appropriate violation code relating to “Theft/Embezzlement - of Tax Remittance at a
lockbox or non-lockbox (IRS) facility”. Title it under the designation of the IRS
Submission Processing Center, IRS lockbox facility or IRS field office being tested.
Document the LII as a Master Project Case in PARIS and enter any employee or non-
employee spin-off cases initiated as a result of the LII.

390.3 Controlled Remittance Tests.


Controlled remittance tests are designed to verify that IRS Submission Processing
Centers, IRS field offices and IRS lockbox facilities are not fraudulently diverting
negotiable remittances (e.g. cash, money orders made out in blank, returned refund
checks, etc.), but rather are posting documents to the individual taxpayers’ accounts.

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390.4 Uncontrolled Remittance Tests.


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390.4.1 Investigative Procedures. In uncontrolled remittance tests:

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OFFICE OF TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

DATE: July 1, 2005

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• The SAC-Field Division or designee, but not lower than an Assistant Special
Agent-in-Charge (ASAC), determines the dollar amounts of the remittance
tests.
• Account for funds used in these tests, which are posted to the Unidentified
Remittance File and are not recovered, as expended from the investigative
imprest fund, in accordance with Chapter 600, Management Services, Section
50.11.3 of the TIGTA Operations Manual.

390.4.2 Monitoring Funds in the Unidentified Remittance File. Money submitted


through the system to the Unidentified Remittance File may remain there for up to one
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390.5 Documentation of Remittance Test.


Document in a Memorandum of Interview or Activity (Form OI 2028-M) each remittance
test conducted.

Record all denominations and serial numbers of United States (US) currency, checks, or
money orders used. This will help deter possible court challenges to the currency/
money order identification.

The Form OI 2028-M should contain:

• The identity of the person(s) tested.


• The IRS Submission Processing Center, IRS lockbox facility or IRS field office,
including work units and work shifts tested.
• The identity of operating personnel who assisted.
• A brief explanation of how the test documents were placed into the work flow
and recovered.

390.6 Unrecovered Remittances.


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390.7 Procedures When Theft Is Suspected.


Establish liaison with the local United States Attorney’s Office (USAO) prior to
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OFFICE OF TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

DATE: July 1, 2005

Prior to searching any place or container, the S/A should determine whether the
employee has a reasonable expectation of privacy in the area to be searched. If the
employee has a reasonable expectation of privacy in the area to be searched, the S/A
needs to obtain a search warrant unless a recognized exception to the search warrant
requirement (e.g., consent) applies.

Prior to searching an individual, the S/A should attempt to obtain consent to search. A
consent search of a person who is not under arrest does not preclude successful
prosecution if evidence of a theft is found.

If consent is obtained, conduct the search in accordance with directions from the U.S.
Attorney’s Office (USAO). Case law concerning *** *** ** *********** ***** in searches differs
in various judicial districts. A second S/A should witness the search, when possible.

If the subject does not consent to a search of his or her person, then one cannot be
undertaken unless a search warrant is obtained or another recognized exception to the
search warrant requirement (e.g., search incident to arrest) applies.

Before any questioning use another S/A as a witness. When there is probable cause to
suspect a person:

• Contact local USAO for guidance.


• Advise the subject of their Constitutional rights against self-incrimination.

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390.8 Initiating Spin-Off Investigations.


Initiate an Employee Investigation using the “Financial Fraud” Profile and violation code
419 - Theft/Embezzlement - Tax Remittance (Non-Lockbox) from IRS Facility when a
theft occurs and the suspect is an IRS employee.

If the suspect is a lockbox employee, initiate a Non-employee Investigation using the


“Financial Fraud” Profile and the violation code 416 - Theft/Embezzlement - Tax
Remittance (Lockbox) from Lockbox Facility. See Section 280.8.2 of this Chapter for
information regarding thefts or embezzlements at lockboxes.

Cite the appropriate investigation number in the LII Report of Investigation (Form OI
2028). Enter the employee or non-employee investigation as a spin-off case of the LII
in PARIS.

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OFFICE OF TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

DATE: July 1, 2005

Refer the facts concerning any investigation disclosing a theft and suspect to the USAO
or an appropriate person in the Department of Justice (DOJ) for a prosecutive opinion
as soon as appropriate.

390.9 Imprest Funds in Remittance Tests.


Use the investigative imprest fund to obtain all moneys used in conducting remittance
tests. See Chapter 600, Management Services, Section 50.11.3 regarding the
investigative imprest fund. The following procedures apply:

• For remittance tests at IRS lockbox facilities, use TIGTA investigative imprest
funds for all remittance tests that S/A’s participate in.
• Return test money, which is properly processed and recovered, to the
investigative imprest fund.
• Handle as special moneys any test money being held as evidence. Money
held as evidence is reported on a Statement of Special Moneys and Property
Transaction (Form OI 141) at the time of seizure and is accounted for to the
investigative imprest fund as having been expended. When prosecution is
declined or the judicial process is terminated prior to trial, dispose of the
money. After trial or final court action, retrieve money admitted as evidence in
court and process. See Chapter 600, Management Services, Section 50.11.8
of the TIGTA Operations Manual for guidance regarding the investigative
imprest fund.

Note: Form OI 141 is not required to report that test money was released to the court
for trial. Accountability during such time is documented through evidence log entries.

• Any test money not recovered within 48 hours, or allowed to proceed into the
IRS system and left there for future follow-up, will be accounted for in the
investigative imprest fund as having been expended.

390.10 Report Format.


Report test results on Form OI 2028 following the instructions in Section 250.7 of this
Chapter. The report should contain:

• The number of tests conducted.


• The identity of the persons tested.
• The IRS Submission Processing Center, IRS lockbox facility or IRS field office
tested.
• Identification of operating personnel who assisted.
• A brief explanation of how the test documents were put into the work flow and
recovered.
• References to spin-off cases, if any.

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OFFICE OF TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION

DATE: July 1, 2005

Note: It is not necessary to attach copies of IRS documents reviewed. List specific
details concerning preparation of documents or remittances on the Chronological Case
Worksheet (Form OI 6501).

Forward all reports regarding remittance tests to IRS Investigations Management &
Process Improvement (IRS-IM) as instructed in Section 250.12 of this Chapter. Send
the original report to the TIGTA-Complaint Management Team.

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