1.34.4  Unpaid Assessments

1.34.4.1  (06-17-2009)
Introduction

  1. The Chief Financial Officer (CFO) Act of 1990 requires that the Internal Revenue Service (IRS) produce auditable financial statements. Congress has charged the Government Accountability Office (GAO) with the audit of IRS’s Financial Statement. After the completion of each year’s audit, GAO reports the results in a Report to the Secretary of the Treasury. This report is commonly known as the "Blue Book." GAO can also document findings or concerns in subsequent management letters. While other samples are mentioned, these desk procedures pertain mostly to the Unpaid Assessments (UA) sample of the Financial Audit. Specific details about classification, collectibility, and sampling are contained in GAO's Methodology for Review of Unpaid Assessment Cases document. Also, specific details about the Custodial Audit Support Tracking System (CASTS) database are contained in CASTS's system documentation.

  2. IRS has developed programming to divide its inventory of unpaid assessments into four financial classifications based on generally accepted accounting standards. The largest portion of the custodial assets reported on the financial statement are in the Taxes Receivable classification. The four classifications are:

    • Taxes Receivable (TR) - Self-assessed by the taxpayer, an agreed examination, a court ruling in favor of the IRS, etc.

    • Compliance (CA) – Trust Fund Recovery Penalties, un-agreed examinations, 6020(b), SFR or other unagreed IRS compliance program assessments.

    • Write off (WO) – Very little or no chance of collection

    • Memo – Payment(s) or other means of eliminating or reducing the balance due was in house prior to the end of the September 30th fiscal year. Also included are duplicate assessments and fraudulent/frivolous returns.

    The value of the Taxes Receivable is reported on the face of the IRS financial statement. The other classifications are included in the supplemental statements.

  3. Annually, a statistically valid sample is selected from IRS’s inventory of taxpayer accounts with balances under $26-million based on master file assessments. All Taxes Receivable modules of $26 million and over will be selected for the sample. The Compliance and Write-off samples are selected using dollar unit sampling (DUS) of taxpayer accounts with any balance due.

    Note:

    For FY 2009, the threshold for 100% selection is between $30-$31 million.

    Even though accounts of $26 million and over are only a small number of IRS’s total unpaid assessment inventory, they account for the majority of the dollars. IRS’s program allows assessments of $10 million and over to be manually moved between classifications using a TC 971. This is necessary for those accounts that, for one reason or another, cannot be classified correctly by the computer program. The Action Codes used with TC 971 are:

    • 203 – manual move to Tax Receivable

    • 204 – manual move to Compliance

    • 205 - manual move to Write-Off

    • 208 - manual move to Memo

    If a module should be manually moved, the TC 971 must be posted by the sample pull date. A posted manual move indicator must be reversed if the module’s classification should be changed or the module balance due falls below $10 million. See Exhibit 1.34.4-2.

  4. Normally, the sample is taken from the June inventory (cycle 25). This timing is used because the due date of the financial statements does not allow adequate time for sampling after the fiscal year end. After September 30th, IRS and GAO make comparisons between the inventory as of the sample cycle and the fiscal year end to ensure no major discrepancies exist.

  5. Each sampled account is analyzed for the proper financial classification and to estimate the amount of Taxes Receivable that may be collectible. This is accomplished by requesting various documents from Files, field offices, etc. GAO audit coordinators have been established in each campus to assist in securing the required documentation. Centralized Case Processing (CCP) in Philadelphia is assigned to secure field documentation. There are also coordinators for specialized areas such as Appeals and the Taxpayer Advocate Service (TAS). The CFO holds a coordinators' conference each year to ensure each coordinator understands the importance of the audit and their role in the financial audit.

  6. It is crucial that IRS has documentation that supports the classification of each sampled module and documentation to support the amount estimated collectible for each Taxes Receivable module in the sample. Otherwise, the module will be considered misclassified and its value is projected to the appropriate population of unpaid assessments. If GAO finds too many misclassifications, a good outcome on the audit is at risk.

  7. Occasionally we will see returns that may be fictitious or frivolous. Any module of this sort with a balance of more than one billion dollars should be referred to the Section Chief. The Section Chief will elevate it for account resolution. Unless we can determine that account resolution will be immediate, we must manually move the module to Memo. Frivolous or fictitious returns with lower balances should also be moved to Memo, after approval from the Section Chief, if we can substantiate the fact that they are not legitimate returns. Referrals for correction will be done on a case-by-case basis.

  8. Starting in 2009, we will have additional New, Changed and Dropped $10 Million reports issued by the Modernization and Information Technology Service (MITS). These will be for cycle 24 and for the cycle that is one week before Fiscal Year End (FYE). Each analyst is responsible for reviewing his or her assigned range of Taxpayer Identification Numbers (TINs) to ensure that any questionable or misclassified modules are manually reclassified prior to the cycle 25 sample pull, and prior to FYE cycle 38 or 39. In addition, two other analysts will review the entire listings.

  9. In the past, we have requested emergency reel replacements done by MITS cycle 25. For the 2009 audit, MITS will suspend cycle 25 processing to allow BASS time to review the $10 Million reports generated cycle 25. BASS analysts will review the cycle 25 accounts quickly, and take action to input TC 971 manual moves immediately. This must be done within a day. As soon as the accounts have been reviewed and any necessary manual moves input, MITS will resume processing. The effect of the suspension of processing is that all cases can be classified correctly manually before the cycle 25 sample is pulled.

1.34.4.2  (06-17-2009)
IRS/GAO Agreement – Book Value Adjustments and Memo

  1. The definition of Book Value Adjustment (BVA) has been determined by agreement between BASS and GAO.

  2. If an assessment, abatement, or credit transfer is pending or posted at the time the case is reviewed by IRS, but was not posted at the sample pull cycle, a BVA may be appropriate.

  3. There are various scenarios that may require an adjustment to the book value. The audit methodology already includes exceptions for cases such as complex audits, frivolous returns, etc. In addition to those types of situations, the IRS may also consider a book value adjustment on certain modules that fall outside the norm, even in the absence of solid supporting documentation. In such special circumstances, intangible evidence may indicate a near certainty the balance will be eliminated or reduced.

  4. The correct classification is not always obvious. When the case has extenuating circumstances, BASS will exercise reasonable judgment to determine the proper classification for the financial statements.

  5. The charts below have guidelines for determining whether or not a BVA is appropriate. For more information and example situations, please refer to the Methodology for Review of Unpaid Assessment Cases.

1.34.4.2.1  (06-17-2009)
Types of Book Value Adjustments

  1. Amended Return or Subsequent Adjustment

    Amended Return or Subsequent Adjustment
    If ... Then ...
    If received prior to sample cutoff and posted cycle 26 or 27 BVA
    If received prior to sample cutoff and posted cycle 28 or later No BVA
    If received prior to sample cutoff and is Unpostable No BVA
    If processing was delayed Internal Control MFC but no BVA
    If received after sample cutoff No BVA

  2. Penalties

    Penalties
    If ... Then ...
    Abatement for Reasonable Cause posted cycle 26 or 27 BVA
    Abatement for Reasonable Cause posted cycle 28 or later No BVA
    Assessment of penalties, lien fees, etc. No BVA if generated transaction
    If manually assessed Same rules as in (1) above for amended returns or subsequent adjustments

  3. Payments - As with the processing of assessments and abatements, there is a normal delay of generally two weeks between the receipt of a payment and the posting of the payment to the master file.

    Payments
    If ... And ... Then ...
    Payment is received before the sample pull date Payment is posted after the sample pull date BVA
    Payment is received after the sample pull date Payment is posted to the sample module Count as a collection

  4. Misapplied Payments

    Misapplied Payments
    If ... Then ...
    We have proof the payment was applied as TP directed No BVA
    We do not have proof the payment was applied as TP directed, if the change is between TR and any other classification BVA
    We have proof the payment was applied as TP directed, if the overall TR dollars are unchanged No BVA, but you must get the ARDI transcript for the other module from MITS to prove it is in TR

  5. TC 706: Credit is not available to offset until the return or credit on the "from" module posts. Offset credit should post the same cycle as the credit posts on the other module.

    TC 706 Offset
    If ... Then ...
    TC 706 offset credit posts to sample module No BVA, as credit becomes available the same cycle the offset credit transfer is generated
  6. TFRP BVAs

    TFRP BVAs
    If ... And ... Then ...
    There is a misposted TC 538 Both modules involved are in the same financial classification No BVA, but you must get the ARDI transcript for the other module from MITS to documents its classification
    Payment for the TFRP is received prior to the sample pull date The related cross-referencing of the payment on the BMF (TC 538) is not posted until after the sample pull date BVA, because the BMF module balance was overstated at the time of the sample pull

    Note:

    IRS policy allows nine weeks to process the posting of the cross-reference payment on the BMF module. However, regardless of whether or not the IRS time frame was met, the condition above will require a BVA.

1.34.4.3  (06-17-2009)
Case Files

  1. BASS maintains case files on Taxes Receivable cases of more than $25 million, and Compliance and Write-off cases of more than $10 million. Cases that are in the Memo classification are also maintained. We will retain these case files in the section until the balance due goes below the dollar threshold, or until the CSED expires on the balance. The cases are kept in blue file folders, and commonly referred to as "Big Blue" or "BB" cases.

  2. When audit samples are selected, new case files must be assembled for non-BB cases.

1.34.4.3.1  (06-17-2009)
Contents and Assembly

  1. Completed case files ready for final review should be assembled with the GAO control sheet on top, followed by the classification DCI, then the Collectibility DCI, the Accounts Receivable Delinquent Inventory (ARDI) transcript, Master File Transcript Requests (MFTRA) and the rest of the file contents.

  2. Folders:

    1. Large-Dollar Big Blue (BB) cases will stay in blue folders.

    2. Other cases will be in folders of a designated color for the year and sample type. These colors change each year in order to keep sample items distinct.

    3. To ensure visibility of the TIN, when putting more than a few pages in a folder, fold the bottom along one of the other fold lines. If the case contents are too large to fit in a folder, put them behind the folder. Large case files that do not fit in a folder can be put in a box. Just make sure the TIN, etc. is visible.

    4. Remove old, outdated ARDI and MFTRA transcripts and, as documents are logged in and filed in the folder, discard the duplicate faxed requests, etc.

    Note:

    Retain BRTVUs or RTVUEs and collectibility documentation, including case notes from prior years.

    Obliterate all sample numbers that pertain to a prior year audit. (Multiple sample numbers could lead to misfiled documents.) If the folder is old and worn out, replace it with a new one.

    Caution:

    Do not discard ANY GAO notes, forms, or documents from prior audits. This includes MFTRA transcripts if there are any GAO notations on them.

  3. Labels:

    1. For new BB cases, use a generated printed label or write the TIN, Master File Tax (MFT), tax period(s) and plan number (if any) on the folder on a blank label.

    2. The sample is received in an electronic file format and includes the TIN, MFT, tax period, plan type and GAO sample number. These fields are imported into a word processing software program and used to create and print the labels for the yearly sample. Sometimes more than one module per taxpayer is in the sample. There should only be one folder per sampled taxpayer, regardless of the MFT or tax period. If there are multiple tax periods sampled, attach the labels to the same folder.

      Exception:

      If the sample includes a BB module as well as an Under-$26-million module, use the blue folder and a folder of the sample’s designated color. Rubber band the two folders together.

    3. For BB cases selected for a sample, overlay the existing label with the new label that has the current sample number on it.

  4. Sticky Notes: Use small sticky notes to mark the module under review on MFTRA. Sticky notes should also be used to flag the original return, Form(s) 2749, Form 870, etc. In other words, you should flag pertinent items that are essential to show the correct classification and collectibility of the module under review. This will assist both BASS reviewers and GAO as they go through case file contents.

  5. ARDI Transcripts: The ARDI transcripts contain pertinent information from IRS’s classification program, master file, and the account’s dollar value as of the extract cycle for each sampled module. The transcripts are generated by MITS and made available to BASS at the start of the audit. If additional or replacement transcripts are needed, they can be requested from MITS Internal Management.

  6. MFTRA Transcripts:

    1. Complete MFTRA transcripts are required for each taxpayer in the sample. Transcripts for sample cases are automatically generated at the start of the UA audit. Transcripts are also generated for cross-reference officers identified in TFRP modules.

    2. Staple transcripts together in the upper left-hand corner. Use a binder clip for transcripts that are too thick to be stapled. Only if the transcript is too thick for a binder clip should a rubber band be used. We don’t want case file contents to roll up inside the folder.

  7. Shelving Buckets: Do not force too many case files into a bucket. Add buckets and rearrange on the shelves or trucks as necessary. Multiple boxes or extra-large documents can be stored in the storage room. Check the "Oversized Doc" box on the CASTS documentation page if documentation is stored separately from the case folder, and notate it within the case folder as well.

  8. Receipt of Documentation:

    1. As documents are received, they must be date-stamped and the associated Form 3210 transmittal (if any) should be date-stamped and acknowledged by fax. Acknowledgements are sent to the appropriate GAO Coordinator regardless of who actually sent the documents. It is up the coordinators to get back to the people who assist them. When you are checking in mail, you must verify that each Document Locator Number (DLN) received was the one requested. Do this before acknowledging and returning the Form 3210, and before logging the documents into the CASTS.

    2. If the wrong DLN or no DLN is received, fax the Form 4251 or Form 2275 to the appropriate coordinator for follow-up. During the UA audit, follow-up requests may be skipped because of time constraints, and because the coordinators are receiving weekly reports that tell them the document’s status. Also, verify that each document in a box is logged in and filed in the correct case file. Occasionally multiple one documents are stapled together when they are shipped. Make sure this is not the case.

    3. If a request is received that shows the DLN is charged out to one of us, check CASTS for the current audit year, and check the prior years’ archived databases to see if it was previously received. See Exhibit 1.34.4-1.The DLN may have been refiled, filed with the dropped case files or never received.

  9. $10 Million and Over Accounts:

    1. We receive monthly reports from MITS of all new, changed, or dropped modules that have balances of $10 million or more for Compliance, Write-off, and Memo accounts. For Taxes Receivable modules, the report will print for modules that have balances of $25 million or over.

    2. Ongoing case files are maintained in the BASS Section for all of these active large dollar accounts. This is because these cases have a high likelihood of being selected for the UA audit.

    3. The FY 2009 audit will have a threshold of between $30 and $31 million for Taxes Receivable 100% selection. Since many of the new accounts are settled very quickly, you may choose to monitor the case for a period of time before you request case file documentation. For new accounts identified in May or June, you should request documentation immediately, since these are not likely to be resolved before selection of the audit sample.

    4. There are IRM procedures that require Exam and Appeals to forward copies of documentation when they make assessments of $10 million or more. If such documentation is received, hold on to it for use in our case files.

  10. Refiles: Case files for the under $10 million and miscellaneous sample cases are retained in the BASS office until after the sample for the next year’s audit has been selected and we are certain that GAO will not be revisiting the sample. Once it is determined what, if any, documentation is needed for the current year’s audit, the DLNs can be refiled. The Forms 4251 must be removed, or if the document is small, clearly marked as a refile. Otherwise, Files treats these as new, incoming requests. Also, the appropriate refile information on CASTS must be entered to show that the DLN was refiled. Enter refile information on the current audit year, not on any prior audit years.

  11. Dropped Cases: Each month, cases will drop out of the UA $10 million or $25 million inventory. If you have any assessment or abatement documentation in dropped case files, please hang on to them or give them to the team analyst assigned to the Abatement Audit. The documents may be needed for the GAO Abatement Audit.

1.34.4.3.2  (06-17-2009)
Classification Documentation

  1. The ARDI Program Requirement Package (PRP) 180, Section 15 (IMF), and 480, Section 95 (BMF), documents IRS’s classification program. To be able to determine if a module is correctly classified, you must know how certain accounts are handled and why. These PRPs, along with the documentation and procedures described below will be used to determine if IRS’s unpaid assessment inventory is reported accurately on the financial statement.

1.34.4.3.2.1  (06-17-2009)
DLN Documentation

  1. The majority of the documents used to support IRS’s classification are posted to the taxpayer’s account and filed by DLN. The controlling DLN, and all TC 29X and 30X DLNs for each module in the Under-$26-Million sample are extracted from the MFTRA print file when it is returned from master file. The data is used to print the MFTRA transcripts. These DLNs are automatically mass-requested at the start of the UA audit. The DLNs mass-requested and other data, e.g., TC 530 date, name control, etc. are extracted from the print file and returned electronically to be imported to CASTS.

  2. Often, the DLNs mass-requested are not sufficient to support classification, especially in the case of a multi-year audit. If the sample module has exam involvement, review the MFTRA of the account to determine if it is a multi-year audit. Review the tax periods before and after the sample period for a TC 30X or TC 421 that posted about the same time. The Exam work papers usually are filed with the latest balance due account, but not always. As of January 2000, Exam and Appeals are required to input TC 971 with AC 057 when they are closing modules with a refile DLN that does not contain the Exam work papers. The cross-reference account data input with the TC 971 will be that of the module containing the work papers.

  3. The exam blocking series should indicate if documentation is attached. See IRM 4.4.1, Exhibit 4.4.1–11. Because of time restraints, it is usually necessary to order any likely DLNs, even if some of the documents prove to be unrelated to the assessed balance. Order additional DLNs using IDRS Command Code ESTABDG. This command code is reserved for GAO requests.

    Note:

    TC 30X DLNs with blocking series 760-769 will not be automatically requested. You must request these manually if they are needed.

  4. If the examination audit is still open, (-L freeze on the module) use IDRS command code AMDISA to determine the location of the audit. You can determine the location by using the Exam website http://sbse.web.irs.gov/AIMS/ . Click on "Contacts," go to the Employee Group Code list, and look up the information by PBC. Request copies of the necessary documentation from the appropriate coordinator.

  5. If a Form 4251 or Form 2275 request response is received which indicates the document is an RGS document, request the RGS file from one of the designated BASS analysts who have RGS access.

  6. ESTABD with the definer G was created for, and is to be used only for, the GAO audit of IRS’ financial statement. The programming for the definer G causes the literal "GAO Financial Audit" to be printed directly beneath the DLN. Documents requested using ESTABDG will be sorted to the top in each Form 4251 run. The sort cannot be changed locally. Files and FRC have instructions to treat these as the highest level expedite requests.

  7. Follow current ESTAB procedures to request DLNs. Notate your name, phone number and office symbols in the comments area. Additional comments such as "New $10 Million," "abatement sample," are helpful when associating documents. If the request is for a specific sample case, notate the sample number in the comments field on the ESTAB request.

  8. ESTABD with the definer X can be used to request Correspondence Imaging System (CIS) prints. Include the CIS number in the Remarks area on the request.

  9. Sometimes the necessary documentation has been destroyed. See Exhibit 1.34.4-3. In 1990, when Congress added an additional four years to the six year CSED, the retention period for only the controlling DLN on some balance due accounts was extended for an additional four years. The CFO requested a change to the retention criteria beginning in cycle 200034.

    1. If you receive a Form 4251 marked "destroyed" without a copy of the appropriate CSED extended list attached, review the retention criteria to ensure that the document should have been destroyed. The Form 4251 notations are OFTEN incorrect in this regard. If the document should not have been destroyed, contact the appropriate campus coordinator and ask them to have Files check the CSED extended list. Remember that documentation for 1120 and 706 modules have a 75-year retention. If you are uncertain, ask the BASS CSED Subject Matter Expert (SME).

    2. A copy of the applicable CSED list should be attached by Files or FRC to all Form 4251 responses marked "destroyed."

  10. Sometimes the necessary documentation was not filed with the DLNs posted on the balance due account. This may be because the module was part of a multi-year audit, the assessment was made on NMF but the documentation has a master file DLN, etc. And, occasionally the documentation just cannot be located. Whatever the reason, alternative documentation must be obtained. Use whatever resources are available to obtain this.

1.34.4.3.2.1.1  (06-17-2009)
ELF DLNs

  1. Electronically Filed (ELF) DLNs should be requested using IDRS cc TRPRT, (or through the MeF portal for 1120s only.) The chart below shows location codes for ELF DLNs. File Location Code (FLC) 66 can be either ELF or paper, so it is excluded from the chart. See IRM 3.10.72.27.7 for more details.

    Note:

    Some of the ELF location codes have changed over the years. There are some older DLNs with these location codes that will be paper documents, and vice versa. If you find this to be the case, use manual procedures to request the DLN.

    2009 ELF DLNs by Location Code
    01–09                    
    10–19         14   16      
    20–29             26 27    
    30-39 30   32              
    40–49                    
    50–59     52              
    60–69         64          
    70–79 70   72     75 76     79
    80–89 80               88  
    90–99 90   92 93         98*  
    * For F1120, with blocking series 500-978, TC 150 posting cycle after 200312.

1.34.4.3.2.2  (06-17-2009)
Other Documentation

  1. Appeals File: If there is a TC 300 with a disposal code (DC) 07 posted prior to or immediately following the assessment causing the balance due, contact the GAO Appeals Coordinator for the Appeals File. The coordinator will forward the information request to the appropriate Appeals Office.

  2. Tax Court Decisions: A TC 300 with DC 11, or TC 520 closing code (CC) 72, posted prior to or immediately following the assessment causing the balance due is an indication that the taxpayer petitioned Tax Court. If the case goes to trial, the presiding judge will ordinarily issue a report setting forth the findings of fact and an opinion. The case is then closed in accordance with the judge's opinion by entry of a decision stating the amount of the deficiency or overpayment, if any.

    1. The decisions resulting from a trial may also sometimes be located through Lexis-Nexis. You can access Lexis-Nexis through SERP.

    2. Appeals processes almost all of the assessments from Tax Court. Request these from Appeals using the same procedures used for an Appeals case. Appeals has access to District Counsel’s CATS tracking system and should be able to locate the decision.

    3. Copies of the Appeals Memorandum or Tax Court Decisions are often included with the final doc code 47 closing documents. If you have a 47 doc in the file and these documents are attached, it is not necessary to contact Appeals.

  3. Trust Fund Recovery Penalty (TFRP) cases: Make screen prints of IDRS command code UNLCER for the business and all responsible officers. If information cannot be found on UNLCER, include a screen print in the case file for GAO that shows "No Data Available" and annotate that all campuses were checked. If there are no TC 971s, or UNLCER information is not available, wait for the assessment document. Using the signature on the assessment document (return), use IDRS command code SSNAD or NAMES on that officer’s name to see if a TFRP assessment can be located.

    1. For non-sample cases, (BB $10 million or $25 million) order complete MFTRA transcripts for each officer and, if MFT 55, penalty reference 618, for the business. Request the TFRP file from CCP. (TFRP file retention is 12 years.) See the DCI for detailed information.

      Note:

      If the sample item is the Form 941, and the officer’s UNLCER shows more than one business, you do not need to do anything with the other businesses.

    2. The purpose of the trust fund analysis is to provide complete cross-referencing of all accounts for GAO to determine if any audit adjustments or re-classifications need to be made. When re-computing the trust fund modules, if you cannot get the same total that was assessed or there are payments requiring posting to accruals, use the special TFRP program on certain computers in the BASS Section. Attach the Page 4 printout to the DCI.

  4. Offer in Compromise (OIC) cases:

    1. If the account has a TC 480 there should be a file that contains the original offer, IRS response, etc. at either the campus or area office.

      Exception:

      OICs returned "not processible" will not have a paper file.)

    2. Request all OIC documentation through CCP. Request only a copy of the latest Form 656 that contains the sample module. If it is determined later that the entire file is needed, request it through CCP. Because CCP has little lead time, make every effort to quickly determine whether the complete file will be needed so that CCP is allowed as much time as possible. CCP will work requests for COIC cases worked at the Brookhaven and Memphis locations, also.

    3. Doubt as to Liability cases are not loaded onto AOIC. They are worked by Exam. If there is an open TC 480 and no AOIC, check with Exam.

  5. Installment Agreement cases (status 60): Make screen prints from IDRS command code IADIS. Check for cross-reference indicators on the IADIS prints for associated modules related to a business or an individual account if working a business taxpayer case. This is needed to check for payment applications that may be going to other modules. A pattern of payments as indicated in the agreement will support IRS’ Taxes Receivable classification, since the original documents are not normally retained.

  6. Math Error Returns: Returns with math errors are classified as Taxes Receivable. The agreement with GAO is that this is a valid classification if 60 days have elapsed and the taxpayer has not replied to the math error notice. However, our programming does not account for the 60 days; it classifies based on whether or not the math error switch is turned on.

    1. If you review a math error case during the audit, compare the TC 150 posting cycle to the sample pull cycle to see if at least nine cycles (63 days) have elapsed. If 60 days have not elapsed, put the case aside and monitor it.

    2. After the 60 days has passed, check IDRS TXMOD to see if a control base has been opened, or if a history item indicating TP reply has been entered. Also, a current STAUP is an indication that the taxpayer has replied. Check AMS for notations of TP contact.

    3. If the taxpayer has replied, classify the case according to the reply. You may need to issue a DCI to get information.

    4. If no reply or indication of contact is found, no additional action is necessary. Complete the UA audit case review and DCIs as normal.

1.34.4.3.2.3  (06-17-2009)
Alternative Documentation

  1. Sometimes we cannot get the usual documentation we need to support case classification. In such cases, we will have to pursue alternative documentation in order to support taxpayer agreement or court findings. The following are some options that may be used in lieu of tax returns, Form 870 waivers, court cases, or other items.

  2. A TC 900 waiver may be used to support Taxes Receivable classification. If the taxpayer agreed to an extension of the CSED (TC 550), request a copy of the Form 900 waiver through the appropriate coordinator if the TC 550 has a definer code of "1." Otherwise, no Form 900 exists. Use the DLN of the TC 550 to determine which coordinator to contact. The Form 900 Waiver will list the applicable tax periods and amounts. Do not order the Form 900 if the DLN is 2779999999992. This is a systemic input of TC 550s due to RRA98.

  3. Bankruptcy courts can uphold or discharge IRS assessments. Many of their more recent rulings are on the PACER/RACER system, which the CCP coordinator can get. Some bankruptcy decisions can also be found on Lexis-Nexis, which is accessible thru SERP.

  4. Judgments (TC 520, CC 80) are filed at the county courthouse. Contact CCP for documentation pertaining to these. Some judgments can also be found on Lexis-Nexis.

  5. Sometimes the documentation to support collection will have documentation that also supports the classification of the account. If the account is assigned with a TSIGN to a Revenue Officer, controlled on IDRS, had recent examination activity, etc., the employee working the account may have pertinent documentation. Contact the appropriate campus coordinator or CCP and ask them to contact the employee. The Taxpayer Advocate Service (TAS) may have copies of needed documentation, etc. You will probably want to use General DCI for this.

1.34.4.3.3  (06-17-2009)
Collectibility Documentation

  1. To determine what documentation to request from the field offices, MFTRA and IDRS must be reviewed for the collection status of the account. Then, depending on where the account is in the collection process, documentation should be requested, and if the account is in active collection, you will need to send out a collectibility DCI. See IRM 1.34.4.7.11.2.

    1. Do not issue a DCI for TC 470 or STAUP information unless you can determine who is actively working the case. STAUPs are often input by IRS employees who are taking taxpayer telephone calls. The employee who inputs the STAUP has nothing to do with the case. A STAUP or TC 470 is just an indication that some function is looking at the case, or the taxpayer has made contact with IRS. We are not really interested in why the STAUP was input; we want to know what is going on with the account.

    2. During the UA Audit, collectibility DCIs will be sent through GAO Coordinators. As the audit progresses, some accounts will change status. There may be instances where you need to issue a late DCI because of recent changes to the account.

  2. Bankruptcy cases: Most areas are now maintaining their case files on the paperless Automated Insolvency System (AIS) instead of using paper files. Prints from AIS, if supported by prints from the bankruptcy courts PACER/RACER system are acceptable. The retention on bankruptcy files is only two years, so do not request a paper bankruptcy file if it has been closed for longer than two years.

  3. DCIs are sent out only if someone is actively working a case. In other words, the case must have an open IDRS control base, AMDIS in an active status, TSIGN, etc. Do not send a DCI if there is no current activity on the module or account.

1.34.4.4  (06-17-2009)
Account or Programming Correction and the Issues Page

  1. Occasionally, we will find an account needing corrective action. It could be that we find payments not applied, the wrong amount assessed, etc. Using a General DCI, you should refer these to the appropriate coordinator, along with copies of any substantiating information you have. Ask to be notified as to what corrective action was taken and when it will be completed. If the account is in the sample, then corrective action needs to be taken as soon as possible.

    1. When extensive problems that affect the processing of multiple accounts are identified, document the problem on the CASTS Issues Page. These issues will be assigned to BASS analysts after the UA audit for additional research and possible action. The CFO issues a report at the conclusion of the audit that details problems identified.

  2. During the audit process, certain situations are identified which require programming changes or enhancements. Also, GAO frequently changes or adds to existing criteria. We maintain an ongoing list of needed changes and ideas for enhancements. Use the Issues Page on CASTS to notate the issues. For the changes and enhancements to be in effect for the next year’s audit, we must submit the Unified Work Request (UWR) no later than February each year. The earlier we submit the UWR, the more time there is to review and test the changes.

1.34.4.5  (06-17-2009)
Matters for Further Consideration (MFCs) and Audit Inquiry Forms (AIFs)

  1. During the audit, GAO provides IRS with written questions, MFCs and AIFs, which if not cleared, not only have a negative impact on the audit, but also can provide the basis for GAO’s internal control weakness determinations and management letters. We must research these fully and carefully respond in writing. Attach IRM references, policy statements, or any other items to support IRS’ position.

1.34.4.6  (06-17-2009)
Miscellaneous Samples

  1. GAO frequently selects other types of IRS inventory to audit. These audits normally will have a separate job code. We have to be careful of disclosure issues because not all job codes entitle GAO access to taxpayer information.

  2. The various inventories are targeted because GAO or Congress suspects there is a problem with how the inventory is handled. If GAO doesn’t find any problems, they usually discontinue the audit after one or two years. Consequently, it is extremely important that any necessary supporting documentation is provided, and that all issues, questions, MFCs and AIFs are resolved completely and timely. Some inventories targeted in the past include frozen credits, NMF, abatements, liens, installment agreements, manual interest, and Department of Defense (DOD) contractors.

1.34.4.7  (06-17-2009)
CASTS Database

  1. The CASTS database was created to track DLNs, monitor case file progress, generate reports and collect statistics, initially for the GAO Unpaid Assessment Audit. Its use has expanded to include other audit samples. Caution must be exercised when entering information, and entries should be as consistent as possible from one analyst to another.

  2. Take the time to become familiar with each screen. Most fields have explanatory, pop-up instructions or drop-down menus. If others are needed, they can be added. There is a separate remarks screen, which is tied to each specific MFT, tax period and form. The remarks screen can be used as clarification when the existing fields on the main forms don’t suffice. Keep remarks as brief as possible so that the entire field can be viewed without scrolling through it. Use abbreviations and remember lowercase letters take up less space than uppercase letters. Uppercase letters are used for the name control.

  3. Detailed instructions for entering data into and generating reports from CASTS can be found in separate CASTS documentation. As CASTS has frequent updates and changes, it is not practical to attempt to keep procedures current in this document.

  4. The information below is general, and can be used for broad guidance and familiarity. The Control Page and Documentation Page are the main two pages that are used year-round, as they track cases both for the audit and for large-dollar "Big Blue" cases. Collectibility DCIs and the General DCI may also be used year-round.

1.34.4.7.1  (06-17-2009)
Audit Page

  1. Total Cases Tab - This page shows a chart with a breakdown of cases by sample type, TRCAT, classification, and completion status. This page can also query and display lists of cases that meet particular criteria.

1.34.4.7.2  (06-17-2009)
Classification Page

  1. This page is completed after all classification information has been gathered and analyzed.

1.34.4.7.2.1  (06-17-2009)
Analysis Tab

  1. - Enter Yes/No for Correctly Classified. If No, Answer Class Should Be and Manual Move To.

1.34.4.7.2.2  (06-17-2009)
Classification Tabs

  1. After you determine the correct classification, click the appropriate tab (Taxes Receivable, Compliance, Write-off, Memo, Split) and enter the reason. You must enter a reason whether the classification is correct or incorrect. Details for each of the tabs are below.

  2. Taxes Receivable Tab - This form is used to explain why a particular module should be classified as a Taxes Receivable. Taxes receivable is defined as Unpaid assessments are enforceable claims for which specific amounts due have been determined and the person(s) or entities from which the tax is due have been identified. Assessments include both self–assessments made by persons filing tax returns or assessments made by IRS. Assessments recognized as Taxes Receivable include:

    • tax returns filed by the taxpayer without sufficient payments

    • taxpayer agreements to assessments at the conclusion of an audit or to a substitute for a return

    • court actions determining an assessment

    • taxpayer agreement to pay through an installment agreement or through accepted offers-in-compromise

    After reviewing a case, select up to three reasons to backup your position. The primary reason listed should be the most significant.

  3. Compliance Tab - This form is used to explain why a particular module should be classified as a Compliance assessment. Compliance assessments are defined as "An unpaid assessment in which neither the taxpayer nor court has affirmed that the taxpayer owes amounts to the federal government." For example, an assessment resulting from an IRS audit or examination in which the taxpayer does not agree with the results of the examination is a Compliance assessment and is not considered a receivable under federal accounting standards. Also, cases where the IRS cannot provide sufficient documentation to support taxpayer agreement to support classification as a Taxes Receivable will be classified as Compliance assessments. The key distinction between Taxes Receivable and Compliance assessments is the acknowledgement by the taxpayer or a court that the taxpayer owes the money to IRS. According to the definition, select up to three reasons to back up your classification selection. The primary reason listed should be the most significant.

  4. Write-off Tab - This form is used to explain why a particular module should be classified as a Write-off. Write-offs are defined as "unpaid assessments for which IRS does not expect further collections due to factors such as taxpayer’s death, bankruptcy, or insolvency. Write-offs may at one time have been Taxes Receivable or Compliance assessments, but the absence of any future collection potential prevents them from being considered receivables under federal accounting standards." Select up to three reasons to support your classification decision. The primary reason listed should be the most significant. Modules with an unreversed TC 971-54 or a TC 972-54 less than 3 months old are excluded from Write-off criteria (PCA cases).

  5. Memo Tab - This form is used to explain why a particular module should be classified as a Memo. Memo modules are defined as "Unpaid assessments that are not receivables according to federal financial standards." In the past, GAO referred to these accounts as "nothings" or "not a receivable." The guidelines for determination of Memo classification often require a level of professional judgment, as the situations are not precise. Examples of instances of when an account should be moved to Memo include:

    1. Duplicate assessments. We want to report the assessment only once. This happens frequently on NMF accounts because of spousal assessments.

    2. The assessment is due to a fraudulent return filed by a taxpayer.

    3. There are credits misapplied to another module or TIN that will full pay our account.

    4. Abatements - During the audit, when the module balance is completely abated and the situation qualifies for a complete BVA, the module is moved to Memo.

    5. The situation involves a complex case in which the taxpayer will receive refunds on some modules and has deficiencies on other modules.

    6. There are many tax periods involved with related and/or intermingled issues.

    7. The examination/appeal will not be resolved for over one year.

    8. The Appeals Officer, Revenue Officer, etc. has no idea of what will end up being owed or refunded until all actions are completed. This is because this taxpayer is handled as an account, not by tax period, so there can be some netting and global issues to contend with.

    9. The taxpayer has asked, and IRS has agreed, not to issue refunds or pursue collection until all issues are resolved (even if several of the modules are already settled.) The deficiency modules will have a STAUP, TC 470, or some other freeze that prevents notices/collection.

  6. Split Tab - This form is used to explain why a particular module should be classified as a Split assessment. Split assessments are identified during the audit. This usually occurs in Trust Fund cases where we classify the non-trust fund amount as Write-off and the trust fund portion as a Taxes Receivable. There are many other examples of splits relating to trust fund cases. Splits also occur when there are two unpaid assessments on one module that are different classifications.

    Example:

    The module has an unagreed URP assessment and an unpaid original return. The original return would be classified as a Taxes Receivable and the unagreed URP as a Compliance assessment. When you have a split, you must fill out the Split Tab, and the Classification tabs relating to the split. In the previous example, you would complete the Split Tab, Compliance Tab, and the Taxes Receivable Tab.

  7. Book Value Adjustment Tab - This form is to be used only for partial book value adjustments. If the entire TMB is being eliminated, this is a Memo module – not a book value adjustment. When the book value is adjusted, you must also enter a reason under one of the other tabs – Taxes Receivable, Compliance, Write-off, or Split – as appropriate.

    Example:

    A payment of $200 was received before the sample but did not post until after the sample. The balance due is $1000. Since the payment does not full pay the module, we have to reduce the receivable by $200 because $200 of the unpaid assessment was not a receivable as of the sample. Therefore, we adjust the book value of the receivable. See IRM 1.34.4.2.1.

1.34.4.7.2.3  (06-17-2009)
Audit Values Tab

  1. Enter the audit value dollar amounts for each of the classifications; Taxes Receivable, Compliance, Write-off, and Memo. Each of these fields must have a value, so enter zero if appropriate. The other fields will populate automatically. The term "financial" is interchangeable with the term "Taxes Receivable." You may encounter some old case files that use the term "Financial. "

1.34.4.7.3  (06-17-2009)
Split Allocation Worksheet

  1. If a module has a split classification, you must complete the allocation worksheet. It will reflect the dollar amounts for each classification, and automatically break the balances down in to tax, penalty, and interest. Attach this page to the classification DCI in the case file.

1.34.4.7.4  (06-17-2009)
Control Page

  1. The control page contains the basic information for each module, such as financial classification, total module balance (TMB), bucket code, TIN, MFT, and tax period, name control, and associated samples.

1.34.4.7.4.1  (06-17-2009)
General Tab

  1. Non-Sample Cases - Each active tax module in CASTS will have a Control Page. Control Page data from ARDI records is loaded into CASTS on a monthly basis. All non-sample cases are assigned an owner based on TIN range and other factors. Each owner will need to input the name control to his or her cases when they are new. When a case drops out of large-dollar inventories, the control page will disappear with the next monthly inventory load.

  2. Sample Cases – Sample cases will be loaded at the beginning of each audit cycle. Some sample cases will overlap with large-dollar cases that are already in CASTS. Non-BB sample cases will not have owners assigned.

1.34.4.7.5  (06-17-2009)
Documentation Page

  1. The Documentation Page is used to show what items of documentation have been requested from other office locations or from Files or the Federal Records Center (FRC.)

    Details for entering data are in CASTS system documentation. Some general principles, though, should be followed.

    1. The received date should be stamped on documentation received, or if a faxed copy is received, use the date printed across the top of the fax, unless it is obviously incorrect.

    2. For audit cases, List Years for the generated DLN requests must be manually entered as soon as possible after the DLNs have been imported into the CASTS and entry must be completed prior to issuance of the first outstanding DLN reports.

    3. For the purposes of identifying documentation received, a fax is the same as a copy.

    4. If we request a document, then for some reason later discover that we should not have requested it, the entire record should be deleted from the CASTS. For example, if a request was generated as part of the automated sample requests, and no document really exists for the requested DLN, delete the record. This is not to cover up our errors, but to ensure that the statistics for the coordinators are accurate.

    5. During the transition through the various versions of the databases over the years, many changes were made in an attempt to more accurately track documentation statistics. Since many of the $10 million cases have been around for a long time, many of them are marked " PriorYrAnalysInsuff." This is because when new reasons were added, there was no way to convert an old doc request into the new database format.

    6. If, during your review, one of your cases is marked as " PriorYrAnalysInsuff" and you are able to complete the analysis by looking at the information in the folder, update it to the correct status. For example, if you can tell that we did not receive a document because it was charged out to someone, update the status from "PriorYrAnalysInsuff" to "ChargedOut."

    7. If the coordinator has the original document, but for whatever reason sends us a copy or a fax, mark it as received using the "Copy (or fax) Received" field instead of the "Received" field.

    8. If you locate a copy of a document in another file, but neither the coordinator nor we were able to secure the original document close out the request with "CopyFoundw/Other."

    9. If you locate an original DLN behind another DLN, mark the original DLN as "renumbered" in CASTS. You may need to make a new entry for this, but it is necessary in order to show that we physically have possession of this DLN, and so that we do not issue a request for it in a subsequent analysis.

    10. When checking in documents that are BNIF, DNIF, or charged out to CP55 or CP155, physically check each DLN received to see if any of the missing DLNs are filed behind a renumbered DLN.

1.34.4.7.6  (06-17-2009)
GAO Coordinators Page

  1. This form is used to send reports, emails, and faxes to the GAO Coordinators. You can use the Find function to query on fields in this form to find a coordinator from a specific campus or area office.

  2. Reports are set up to automatically be sent via email to the appropriate recipients in the Campuses, CCP, or BODs.

    Note:

    Follow the instructions on the page for emails or faxes.

1.34.4.7.7  (06-17-2009)
Lien Page

  1. This form is used for the annual Lien Sample. This review is currently being performed by SB/SE, not by CFO-BASS. However, BASS may perform follow-up on the SB/SE work.

1.34.4.7.8  (06-17-2009)
Trust Fund Recovery Penalty Cases

  1. These instructions are to be used to correctly classify and determine collectibility of TFRP cases included in both the Unpaid Assessment portion of the GAO Financial Audit and to identify cases with errors to be sent for correction.

  2. If it is determined that a referral is necessary in order to have account corrections made, notate the details on the Referral/Analysis tab on the TFRP Corp Page.

  3. Ordering Process:

    1. Review the MFTRA.

    2. Determine if the penalty was assessed. (Use MFTRA for 971 action codes, UNLCER, etc.

    3. If assessed, order complete MFTRA for any officer not included in the bulk order by MITS.

    4. If DLNs needed have not been ordered by the bulk request at the beginning of the audit, request them manually for all officers and the sample module.

    5. Order applicable Collection and TFRP files for sample cases and any related officers.

      Note:

      When ordering TFRP files, order the BMF entity file as well as all known officers. Some former district offices maintain their files under the TIN of the officers, not under the BMF number.

    6. When a TFRP case is so old that needed documentation is unavailable, CFO will make one attempt to secure the microfilm for the Income Tax and Social Security figures. If the microfilm is not received or it is not legible, the case will be reclassified as Compliance or Write-off and no recalculation will be required.

  4. Recalculation Process - The purpose of the trust fund recalculation analysis is to provide complete cross-referencing of all accounts for the GAO to determine if any audit adjustments or reclassifications need to be made. When recomputing the trust fund modules, if you cannot get the same total that was assessed or there are payments requiring posting of accruals, use the special TFRP program on certain computers in the BASS Section. Attach the Page 4 printout to the DCI. If the TFRP case is a full Write-off, no recalculation of penalty will be done even if payments were made.

  5. Collectibility - Calculate collectibility per general instructions, keeping in consideration collectibility from all sources (BMF entity and all officers or other responsible parties).

1.34.4.7.8.1  (06-17-2009)
TFRP Corp Page

  1. If the trust fund penalty was not assessed, document the reason on TFRP Corp page when information is received.

  2. If the penalty was assessed, begin the recalculation of the penalty. Use the CASTS TFRP Corp pages for the simple ones, use the FSC or computer program for others and then enter results on the TFRP Corp pages.

  3. If the trust fund calculated does not match the amount assessed, determine the correct amount and enter on the TFRP Corp pages. Try to match amount assessed and enter that on the 2749 page.

1.34.4.7.8.2  (06-17-2009)
TFRP Officer Page

  1. This page is used to input applicable information for officers (IMF) associated with a trust fund (BMF) case. Complete a form for each officer.

1.34.4.7.8.3  (06-17-2009)
Allocation Worksheet

  1. This worksheet is used to show the portion of unpaid TFRP assessment and the Taxes Receivable amount. Complete a worksheet for each officer, and include a print of it in the case file.

1.34.4.7.9  (06-17-2009)
Tracking Page

  1. This page is used to keep track of where we are with cases, both in terms of case completeness and case location.

  2. As each case is screened initially at the beginning of the audit, the person screening must pull up this page and mark Collectibility Status and Classification Status with the appropriate notations.

  3. Update the collectibility and classification fields as appropriate when you do subsequent analysis.

  4. This page is also used to check cases in and out to GAO/IRS. This function is done only by the BASS section chief or her designee.

1.34.4.7.10  (06-17-2009)
Reports Page

  1. The Reports Page is used to generate reports of outstanding documentation, and to generate reports specific to each employee.

1.34.4.7.11  (06-17-2009)
DCIs

  1. Data Collection Instruments (DCIs) are used to get information from other IRS offices and to document information placed in each audit case file. There is also a General DCI that can be used to get non-collectibility information from the field or campuses. This can be used to ask about the status of an open IDRS control base, amended return, CI freeze, TC 470, etc. Not all cases will require a General DCI.

1.34.4.7.11.1  (06-17-2009)
Classification DCIs

  1. Each case file must contain a Classification DCI.

1.34.4.7.11.2  (06-17-2009)
Collectibility DCIs

  1. Each Taxes Receivable case must contain a Collectibility DCI.

  2. Some Collectibility DCIs are printed and sent to the field, completed and returned to us, and put in the case file. These are for cases that are being actively worked in some fashion. These will usually have a TSIGN associated, and are being worked by a revenue officer (R.O.), or an OIC or Bankruptcy specialist, for example.

  3. If a field DCI is used in a case, a UA analyst must also complete a Summary DCI and include it in the case file.

  4. Some DCIs are completed only by UA analysts, printed, and put in the case file. These are for cases such as those in notice status, CNC, queue, etc. that do not have any current collection activity.

  5. The three main types of collectibility DCIs are:

    1. Other Collectibility (with many sub-types including CFf, bankruptcy, OIC, and litigation)

    2. Estate Collectibility

    3. Installment Agreement (IA) Collectibility and other Long Term Payment Arrangements

1.34.4.7.12  (06-17-2009)
Other Collectibility DCI

  1. This page has multiple uses: It is used to track information as well as to produce DCIs.

  2. Use the Summary DCI to reflect collectibility for modules that have no current collection activity, are not in bankruptcy, litigation, or have an open OIC. These would be cases in notice status, under tolerance, CNC, Queue TDA, ACS TDA, and other statuses where limited documentation exists or when only master file transcripts are available. In assessing collectibility, we are looking to see that the taxpayer is current in filing, has an established pattern of paying prior delinquent tax periods, and/or the only delinquent module is the sample module. Collectibility will be based in whole or in part on patterns of refund offsets, subsequent payments (including from notice of levy), and from an analysis of the prior payment history and current compliance level of the taxpayer.

  3. For cases that have current bankruptcy, CFf, litigation, or OIC activity issue a Field DCI. After the response is received, you will need to also complete a summary DCI that will include information from the field DCI along with your own analysis. You should include both the Field DCI and the Summary DCI in the case file. When you issue a Field DCI, you need to fill in only the Details tab on the Other Collectibility Form. The rest of the DCI will be generated. All of the other tabs must be competed for the Summary DCI.

    1. DCI Details Tab - Fill in the blanks.

    2. Periods Owed Tab - This information will be imported systemically for every case in the UA sample. You must click on the Sort button to process the DCI correctly.

    3. Offset/Payments Tab – Complete for IMF cases only for each type of DCI.

      Refund Offsets – Are there any refund offsets on the account?
      Federal Must answer Yes/No drop-down
      State Levy Must answer Yes/No drop-down
      Fill in offset amounts from the three most recent tax years. (State refund offsets should be considered in the same manner as federal refund offsets. For example, tax year 2004 would actually occur in 2005, 2005 would occur in 2006, etc.)
      Does it appear the pattern will continue? Answer Yes/No. If there are offsets from all three years, answer Yes.
      AvgFed X 3 Computed field
      Avg State X 3 Computed field
      Total next 3 years Computed field

      Caution:

      Do not consider offsets that are TETR or Economic Stimulus Payments only in the offset pattern.

      Payments Posted After the audit sample cutoff cycle – 20XX25
      Other than Sample Module Enter payments received in the appropriate month fields. Use transaction date, not posting cycle to determine the month.
      Sample Module Enter payments received in the appropriate month fields. Use transaction date, not posting cycle to determine the month
      Payments posted to sample after 20XX25? Check box if applicable.
      Paid in Full? Answer Yes/No

    4. Calculate Collectibility Tab - Enter the collectibility amount for the entire account, and click on Collectibility.

    5. Comments/Management Approval Tab - Enter a summary of the module. You can use the canned narratives for a start by clicking on the Narratives button. Then customize the narrative to fit your case at a more highly detailed and specific level. You want this field to give a good summary of the case such that a reviewer could get a good overall picture of the collectibility situation without reading anything else.

1.34.4.7.12.1  (06-17-2009)
Collection Field Function DCI

  1. This DCI is sent to a CCP GAO Coordinator to pass on to the Revenue Officer who is assigned the case. This is for cases that are in status 26, and do not have other conditions such as bankruptcy, OIC, etc.

    Note:

    Do not send issue DCIs for modules with TSIGN numbers ending in 7000 or 8000.

  2. If DCIs are received back without complete information, you may need to contact the field employee directly, or go back through the GAO Coordinator. GAO Coordinators are instructed to review DCIs for completeness before they return them to us.

1.34.4.7.12.2  (06-17-2009)
Bankruptcy DCI

  1. Use this DCI for cases that are in current bankruptcy (unreversed TC 520 with cc 60-67, 81, 83 and 85-89, -V freeze).

  2. Fill in information on the "DCI Details" and "Periods Owed" tabs on the Other Collectibility Page, and select Bankruptcy from the drop-down on the DCI Details page. This will produce a printed DCI that is specifically for bankruptcy cases.

1.34.4.7.12.3  (06-17-2009)
Litigation DCI

  1. Use this DCI for cases that are in current litigation status (unreversed TC 520 with a -W freeze). Closing code 71, 72, 73, 74, 75, 78, 79, 80, 81, 82 or 84 should appear on one of the tax modules for the taxpayer but not necessarily on the sample module.

    Exception:

    TC 520 with closing code 81 does not always indicate open litigation. If it is open litigation, the case should be open on AIMS.

  2. Fill in information on the "DCI Details" and "Periods Owed" tabs on the Other Collectibility Page, and select Litigation from the drop-down on the DCI Details page. This will produce a printed DCI that is specifically for litigation cases.

1.34.4.7.12.4  (06-17-2009)
Special Procedures Function DCI

  1. This DCI is seldom used anymore, but it is there if you need it. It works the same way as the others.

1.34.4.7.12.5  (06-17-2009)
Offer in Compromise DCI

  1. This DCI is sent to a CCP GAO Coordinator to pass on to the Revenue Officer who is assigned the case.

    Note:

    A separate DCI must be completed for each responsible officer if a trust fund penalty is involved.

  2. The employee who completes the DCI should check the appropriate box or boxes on the lower portion of page one to show what documentation was used and is being forwarded with the file.

1.34.4.7.13  (06-17-2009)
Estate Collectibility

  1. Use this form to record payment and collectibility information for Estate cases which have claimed the section 6166 installment election and are in Master File status 14. For other Estate accounts (non-status 14), record collectibility in the Other Collectibility Page.

1.34.4.7.14  (06-17-2009)
Installment Agreement and other Long Term Payment Arrangement Collectibility

  1. Installment Agreements (IA) - Installment agreement collectibility can be done at the beginning of the audit. However, all installment agreement DCIs will need to be re-evaluated near the end the audit to update payment information, and ensure the agreement did not default. Include August MFTRA and IADIS print screen with the final Control Sheet.

    1. Determining whether taxpayer is current with Installment Agreement terms - The purpose of this section is to determine if the taxpayer is current and in compliance with the terms of the installment agreement. For purposes of the collectibility analysis, a taxpayer is considered current if the master file transcript shows the required payments have been submitted for the latest three consecutive months. If the sample installment agreement module does not meet these criteria, the collectibility of the sample module must be recomputed based on refund offsets and subsequent payments and should not include projected installment payments.

    2. Other factors are considered in determining collectibility based on an IA. Less than three payments on an IA would need to be strongly justified by a really good filing and payment history. The user fee can be counted as the first payment if the entire payment amount went to user fees. If the taxpayer has made irregular payments, as long as the total of the last three months is equivalent to what three equal payments would be, we would project collectibility.

    3. If the taxpayer has a long history of making payments, missing some now and then, but is still making payments, they should be totaled and averaged to project collectibility. Similar to classification, collectibility will require sound judgment based on the current facts.

  2. Other Long-Term Payment Arrangements – This DCI can also be used to estimate collectibility for Continuous Wage Levy cases, and for FPLP cases.

1.34.4.7.15  (06-17-2009)
Issues Page

  1. Use this page to record any issues, questions, or problems you encounter during the audit. We do not have time to research issues during the audit, so we notate them on this page. After the audit, research assignments will be made based on these issues. It is important that you fill in every blank, and make the narrative detailed enough so that follow-up can be done.

1.34.4.7.16  (06-17-2009)
Non-UA Samples

  1. Abatement Sample Documentation - Information for the Abatement sample must be entered into the Control Page and the Documentation Page. Collectibility determinations are not applicable. On the Control Page, fill in all applicable fields. The fields that must be completed are:

    • The GAO sample number. The number will be in the format of A123.

    • TIN

    • MFT

    • Tax period

    • Name control

    Complete the fields on the Documentation Page in the same manner as you would for any other case.

  2. Other Samples – some will be tracked on CASTS, some will not. This varies from sample to sample and year to year. The Revenue and Refund (R&R) samples were tracked in CASTS as of FY 2008. Procedures for R&R documentation are not contained in this document.

Exhibit 1.34.4-1  (06-17-2009)
CFO-BASS IDRS Employee Numbers

All BASS Section employees have IDRS numbers starting with 09991.

Note:

Some CFO employee numbers previously started with 09126 and 09127, and 09130. Case files that have been around for a while might contain documentation with those numbers.

Exhibit 1.34.4-2  (06-17-2009)
IDRS Input – TC 971/972 (Manual Move/Reverse Manual Move)

  1. IDRS Command Code (CC) TXMODA is a prerequisite of REQ77. If there is not a TXMODA already on IDRS, use CC MFREQC to establish the module on IDRS.

  2. Overlay TXMODA with CC REQ77 and then xmit. This will generate an FRM77 screen.

  3. You must enter "971" in the TC field, today’s date in the TRANS-DT field, the appropriate AC in the TC971-151-CD field and comments in the remarks field at the bottom of the form.

  4. To reverse a manual move (TC 972), repeat the steps above to generate the FRM77 input screen.

  5. You must enter "972" in the TC field, the same date originally entered in the TRANS-DT field (refer to the posted TC 971 in the module) or the current date, the same AC in the TC971-151-CD field and comments in the remarks field at the bottom of the form.

  6. A previous manual move must be reversed prior to inputting a new manual move indicator. The indicator must also be reversed when the module no longer meets manual move criteria. It may also a good idea to reverse the manual move indicators if a module drops - this varies from case to case.

Exhibit 1.34.4-3  (06-17-2009)
General Document Retention Criteria

General Document Retention Criteria
IRM 1.15.29 (revision 7-1-2005)
Form Retention Period Form Retention Period
706 75 years 1120 75 years
709 varies 2290 6 years after end of processing year*
720 6 years after end of processing year* FTD micro 7 years after end of processing year*
941/943/940 CT-1 6 years after end of processing year* payment posting documents Usually 5 years after end of processing year**
990 series 6 years after end of processing year* 1040/1041 6 years after end of processing year*
* Unless needed for the CSED extract
**Paper documents may not be retained - electronic images only are available.

CSED EXTRACT: Each year, in cycle 34, the computer analyzed IMF (except MFT 55), IRAF (added in 1998) and BMF balance due accounts. Prior to 200034, if the CSED was not expiring and the controlling DLN was scheduled for destruction, then just the controlling DLN was pulled and retained for an additional 4 years only. This means that documents with a list year of 89 and prior have already been destroyed whether or not the CSED has expired (except Form 706 and 1120).

Starting with the 200034 extract, the criteria changed to also include TC 29X, and 30X DLNs scheduled for destruction as well as MFT 55 modules. Now all DLNs saved from destruction will be retained until there is no longer a balance due or the CSED has expired. This includes list year 90 thru 93 controlling DLNs pulled before the 200034 extract because they were the Control DLN. Other changes include saving the TC 30X DLNs in the module that contains the work papers in multi year audits, DLNs in modules with a TC 400, and non-document code 51 NMF DLNs. The CSED listing are available on EONS.

RULE OF THUMB
All control DLNs with LY 1989 or earlier have been destroyed.
All non-control DLNS with LY 1993 or earlier have been destroyed.
All MFT 55 DLNs with LY 1993 or earlier have been destroyed.
GENERAL DOCUMENT RETENTION CRITERIA
IRM 1.15.28 (revision 8-1-2004)
Form/Type General Retention Period
656 (Offer in Compromise) 6 years after case is closed
TFRP Files 12 years after assessment year
Bankruptcy Files 2 years after court closure
CNC (53 Files) 3 years
Judgment Files (TC 520 cc 80) 6 years after becoming inactive
Form 900 Waiver 4 years after account satisfied or 3 years after expiration
433–D Installment Agreement 3 years

Note:

Not all of these are stored in Campus Files or the FRC. The originals or copies may be in an Area Office, CCP function, or other facility.


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