20.1.7  Information Return Penalties

Manual Transmittal

July 15, 2011

Purpose

(1) This transmits revised IRM 20.1.7, Penalty Handbook, Information Return Penalties.

Background

This section provides policy and procedures for the application of information return penalties per IRC 6721.

Material Changes

(1) Minor editorial changes have been made throughout this IRM. Website addresses, legal references, and IRM references were reviewed and updated as necessary. All reference to Form 4804 were removed and replaced with a reference to Form 4419.

(2) Included language on changes to penalty provision enacted by the Small Business Job Act (SBJA) of 2010.

(3) Remove most references to magnetic media an replaced with electronic media.

(4) Throughout this IRM, sections pertaining to law or legislation pre 1990 has been removed and the remaining sections renumbered. Also, content in several areas has been rearranged for clarity.

(5) Other significant changes to this IRM include the following:

Section Description
IRM 20.1.7.1.2 Added Form 1099-K, Merchant Card and Third Party Network Payments
IRM 20.1.7.1.5 Inserted text defining requirements for managerial approval of penalties
IRM 20.1.7.1.5.4 Address correction for Enterprise Computing Center Martinsburg
IRM 20.1.7.1.7.3.1 Address updated for forwarding correspondence relating to Resolution Trust and Federal Deposit Insurance Corporations
IRM 20.1.7.3.4.5 Revised and clarified text pertaining to request for hardship waiver
IRM 20.1.7.5.1 Deleted subsection on Public Law repealed in 1989
IRM 20.1.7.7 Deleted section referencing legislation passed in 1989
IRM 20.1.7.9.2.7 Deleted reference to willful neglect provisions of Due Diligence Safe Harbor
IRM Exhibit 20.1.7-1 Added Exhibit IRC 6721 Penalty for Large Businesses with Gross Receipts Over 5 Million
IRM Exhibit 20.1.7-2 Added Exhibit IRC 6721 Penalty for Large Businesses with Gross Receipts Less Than or Equal to 5 Million
IRM Exhibit 20.1.7-3 Added exhibit IRC 6722 Penalty for Large Businesses with Gross Receipts Over 5 Million
IRM Exhibit 20.1.7.-4 Added exhibit IRC 6722 Penalty for Large Businesses with Gross Receipts Less Than or Equal to 5 Million

Effect on Other Documents

IRM 20.1.7 dated (05-28-2010) is superseded.

Audience

Small Business/Self Employed Compliance Employees and other business operating division employees who address information return penalties.

Effective Date

(07-15-2011)

Duane Gillen
Director, Examination Policy, SE:S:E:EP
Small Business/Self-Employed Division

20.1.7.1  (07-15-2011)
Overview

  1. The term "information return" means any statement, form, or return as described in Treasury Regulation (Treas. Reg.) 301.6721-1(g) and Internal Revenue Code (IRC) 6724(d)(1).

  2. Internal Revenue Code IRC 6721, IRC 6722, and IRC 6723 contain the provisions for penalty application for the information return penalties covered in this IRM.

  3. Treasury Regulation section 301.6724-1 defines reasonable cause. IRC 6724 provides that the IRC 6721, IRC 6722, and IRC 6723 penalties shall not be imposed if the failure is due to reasonable cause.

20.1.7.1.1  (07-15-2011)
General

  1. Proposed penalty notices are generated from the information return data that is processed to the Payer Master File (PMF). Information return data includes:

    1. Form W-2, Wage and Tax Statement, which is filed with the Social Security Administration (SSA), and

    2. Form 1098, Form 1099, and all other information documents that are filed with the IRS.

  2. Systemically (computer) generated proposed penalty notices may include infractions identified for failure to timely file, failure to file on proper media, failure to file in the proper format, and/or missing and incorrect name/Tax Identification Number (TINs).

  3. These notices may include one, two, or any multiple combination of penalties for late filing, improper media, improper format, and/or missing and incorrect name/TINs.

  4. Generally, the Philadelphia Campus (PSC) Information Return Program (IRP) Penalty Unit assesses information return penalties in the 500-514 Penalty Reference Number (PRN) series, including penalties for prior year returns referred by the Submission Processing (SP) Campus sites.

  5. The IRP Penalty Unit assesses penalties for unprocessable returns filed on paper or on electronic media.

  6. Generally, Compliance Field Functions assess information returns penalties using the 600 PRN series.

  7. First-time filer procedures do not apply to information return penalties. The filing history should be considered, but penalties should not be waived or abated citing the first-time filing criteria alone.

  8. Penalty assessments are manually input to the Civil Penalty (CP) Module (MFT 13 for BMF, MFT 55 for IMF), using PRNs 500 - 514.

  9. Exhibit 20.1.7-5, 500 Series Reference Numbers shows the reference numbers applicable to information return penalties generally assessed by the Campuses.

  10. Exhibit 20.1.7-6, 600 Series Reference Numbers shows the reference numbers applicable to information return penalties generally assessed by the Compliance Field Functions.

  11. Following receipt of an IRS notice for a missing/incorrect TIN, the employer is required to make an annual solicitation for the correct social security number (SSN). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

20.1.7.1.2  (07-15-2011)
Forms

  1. The various penalties discussed in this section may apply to one or more of the following information reporting requirements:

    1. Form 1097-BTC, Bond Tax Credit;

    2. Form 1098, Mortgage Interest Statement;

    3. Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes;

    4. Form 1098-E; Student Loan Interest Statement;

    5. Form 1098-G, Certain Government Payments

    6. Form 1098-T, Tuition Statement ;

    7. Form 1099-A, Acquisition or Abandonment of Secured Property;

    8. Form 1099-B, Proceeds From Broker and Barter Exchange Transactions;

    9. Form 1099-C, Cancellation of Debt;

    10. Form 1099-K, Merchant Card and Third Party Network Payments;

    11. Form 1099-Q, Payments from Qualified Education Programs;

    12. Form 1099-R, Distribution From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.;

    13. Form 1099-S, Proceeds From Real Estate Transactions;

    14. Form 1099-INT, Interest Income;

    15. Form 1099-DIV, Dividends and Distributions;

    16. Form 1099-OID, Original Issue Discount;

    17. Form 1099-LTC, Long-Term Care and Accelerated Death Benefits;

    18. Form 1099-MSA, Distributions From an Archer MSA or Medicare + Choice MSA,

      Note:

      Form 1099-MSA was replaced by Form 1099-SA for 2004 and beyond.

    19. Form 1099-PATR, Taxable Distributions Received From Cooperatives;

    20. Form 5498, IRA Contribution Information;

    21. Form 5498-SA, Coverdell ESA Contribution Information;

    22. Form 5498-MSA, Archer MSA or Medicare+Choice MSA Information;

    23. Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding;

    24. Form 3921, Exercise of Incentive Stock Option Under Section 422(b)

    25. Form 3922, Transfer of Stock Acquired through an Employees Stock Purchase Plan Under Section 423(c);

    26. Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips;

    27. Form 8282, Donee Information Return;

    28. Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business;

    29. Form 8308, Report of a Sale or Exchange of Certain Partnership Interests;

    30. Form 8594, Asset Acquisition Statement;

    31. Form 8935, Airline Payments Report;

    32. Form W-2, Wage and Tax Statement;

    33. Form W-2G, Certain Gambling Winnings;

    34. Schedule K-1, Form 1065, Partner's Shares of Income, Deductions, Credits, etc.,

    35. Schedule K-1, Form 1120S, Shareholder's Share of Income, Deductions, Credits, etc., and

    36. Schedule K-1, Form 1041, Beneficiary's Share of Income, Deductions, Credits, etc.

20.1.7.1.3  (07-15-2011)
Reporting Forms

  1. Form 1096, Annual Summary and Transmittal of U.S. Information Returns, is used to report the total number of paper information returns filed for Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. A separate Form 1096 must be filed with each type of information return filed. Each Form 1096 should include:

    • Filer's name and address,

    • Filer's TIN,

    • Total number of information returns filed,

    • Total federal income tax withheld,

    • Total dollar amount reported,

    • Box checked that represents the type of information return filed, and

    • Filer's signature with the date signed.

  2. Form W-3, Transmittal of Wage and Tax Statements, is used to combine and report all paper Forms W-2 filed with the Social Security Administration (SSA) in Wilkes-Barre, PA.

20.1.7.1.4  (07-15-2011)
Common Features

  1. The information contained in this section is common to all information return penalties discussed in this section, unless otherwise indicated. Exceptions and additional information are noted in the discussions of the specific penalties.

  2. For IRM 20.1.7, "TIN" , refers to either an Employer Identification Number (EIN), a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).

20.1.7.1.4.1  (07-15-2011)
Payer Master File

  1. Payer Master File (PMF) is a file consisting of a composite of payer interest, partnership and S Corp. distributions, gambling winnings, and miscellaneous/other categories of information returns filed by businesses, corporations, banks, credit unions, and other payers of these types of income.

  2. This program creates and maintains a database of information for the IRS Small Business/Self Employed (SB/SE) division relating to filers of information returns (Form 1098, Form 1099, etc.). Information returns (Form 1096) and extension and waiver requests are maintained for five tax years on PMF.

  3. The Payer Penalty Program, excluding incorrect TIN filings, is administered from the PMF and notices are generated from information on the Business Master File (BMF) and Individual Master File (IMF). The PMF database also include a record of payment data to individuals that the business employs and is updated on a weekly basis.

  4. The Internal Revenue Code outlines civil penalty provisions for persons who fail to file information returns as required. Based on the information return data processed to the PMF, irreconcilable information is subjected to penalties.

    1. Notices 972CG, proposed civil penalty notices, are generated from PMF. Assessments that result from the proposed notices are manually input to the Civil Penalty Module.

    2. Penalties may also be proposed as the result of an examination of a filer's records.

    Note:

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  5. On-line users can request information through the online Integrated Data Retrieval System (IDRS) and paper transcripts through the Privacy Act Transcript Request Activity (PATRA).

  6. PMF maintains data covering the five most current tax years of information for all Form 1096 and all Forms W-3 documents, including generated penalty assessment or proposal amounts.

  7. Penalty abatements or waivers of proposed penalties from systemically (computer) generated notices are not posted on the PMF. This information must be obtained from IDRS Command Code (CC) "BMFOL" (MFT 13) or CC "IMFOL" (MFT 55) or by requesting the file document.

  8. Manually computed and asserted penalty assessments, waivers, or abatements are not shown on CC "PMFOL" . This information must be obtained from CC "TXMOD" (MFT 13/55), CC "BMFOL" , CC "IMFOL" , or CC "MFTRA" .

20.1.7.1.4.1.1  (07-15-2011)
IDRS Penalty Research Command Codes

  1. PMF data may be accessed by using IDRS CC "PMFOL" or CC "PATRA" as described below.

  2. See IRM 2.3, IDRS Terminal Responses, for additional information on IDRS research that can be beneficial in obtaining payer information.

20.1.7.1.4.1.1.1  (07-15-2011)
IDRS Command Code "PMFOL"

  1. CC "PMFOL" provides a summary of a filer's submissions by return type for the five most recent tax years as well as a complete record of each Form 1096 filed for all five years.

  2. The PMF is viewed using CC "PMFOL" , contains:

    1. Filer entity information;

    2. Filing History with indicators to show whether returns were filed or a penalty was proposed for the five most recent tax years;

    3. A record of each Form 1096 submitted by the filer, including: Documents - the type and number of forms submitted, the media used (paper or electronic), whether returns were original, amended or replacement; Payments - the total payment for all payees for each type of form; Withholding - the total amount withheld for all payees; Received Date - for late-filed returns; and Penalties - the number of returns for which a penalty was proposed for late filing, electronic media, and TINs;

    4. Return due date for each form type;

    5. Extension indicating the filer received an extension of time to file that extended the due date of the return;

    6. Waiver indicating the filer received a waiver exempting the returns from the requirement to be filed on electronic media; and

    7. Totals with a summary for each form type filed, amounts reported, and penalties proposed.

  3. BMF/IMF linkage is identified by the literal "Linked" in the entity section of the PMF. In this situation, PMF and IMF/BMF Master File (MF) share identical entity information.

    1. Linked PMF accounts are verified annually and receive entity updates from the MF on a weekly basis. This is the only way PMF can be updated.

    2. Individual Form 1096/ Form 1099 filings will not update the PMF entity. A different entity may be shown on "PMFOLD" for individual Form 1096/1099 filings, however, these will not update the PMF entity on "PMFOL" or MF.

    3. Approximately 95 percent of PMF is linked. The remaining 5 percent, which is not linked, represents new filers or filers without BMF/IMF filing requirements.

  4. The penalty indicators show which types of PMF generated penalties were assessed or proposed. The penalty indicators do not consider any manual assertions and should be used in conjunction with CC "TXMOD" , "BMFOL" , "IMFOL" , or "MFTRA" information to determine previous compliance history.

  5. For "YRS PNL" a blank (no entry) for a tax year indicates that no systemically (computer) generated penalty was issued (or proposed) for that period.

  6. For "YRS FILED" a blank (no entry) for a tax year indicates that no information returns were processed to PMF for that period. See IRM 20.1.7.1.4.1 concerning manual penalty assessments and (7) below concerning Forms W-3/ W-2.

  7. For Form W-2, currently only the information from Form W-3, that were penalized or that met penalty criteria (i.e., filer was granted a waiver or extension) appear on PMF. Information from other Form W-3 submitted by the filer for a particular tax year are not posted to the PMF; however, that additional information is available on CC "BMFOLU" (MFT "88" ).

  8. The "Transmitted" volume is the count for the number of returns processed, which should reflect the actual number of documents filed, minus voided or blank forms and forms reporting under one dollar. This count will sometimes differ from the count entered by the filer on Form 1096.

    Note:

    ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. The Subject to Penalty ("Subj" ) count appears for each Form 1096 record and refers to the total number of returns in a submission that could be penalized. No penalty is applicable to a particular Form 1096 submission unless separate amounts are shown in the "Late" , "MAG" , or "TIN" fields of the PMF.

  10. The "Replacement" volume is for returns that replace original returns when a correction is submitted to change a TIN, name, or return type.

  11. When applicable, an entry for Form 8487, Payer Master File Entity Change Entry, will appear on the civil penalty transcripts directly below the document that was changed or deleted. The affected document will state: "NOTE: THIS DOCUMENT HAS BEEN REMOVED" directly above the entity information for the affected Form 1096 record. This record will not be considered in penalty computations.

  12. "Civil Penalty Summary" (accruals) provides:

    1. Volume - The aggregate volume of original, amended, and replacement returns, by return type, that were transmitted and the number subject to penalty based on all Forms 1098, Forms 1099, Forms 5498, and Forms W-2G, filed.

    2. Gross Penalty Amounts - The gross penalty amounts applicable to the returns that were penalized by return type and the type of penalty (late, electronic media, and missing/incorrect TINs). These figures include all potential penalties identified for the tax year.

    3. Civil Penalty Proposed - "Civil Penalty Proposed" is the actual penalty amount proposed on the notice. This amount is limited by the penalty maximum of $250,000 per year and the $50 per return maximum for returns required to be filed before December 31, 2010. The Small Business Jobs Act (SBJA) of 2010 increases the penalty maximum from $250,000 to $1,500,000 per year and the per return maximum from $50 to $100 per return for returns required to be filed on or after January 1, 2011.

    4. Waiver - A waiver of electronic media filing is indicated by a "yes" or "no" entry. The extended due date (if applicable) is shown by return type. If no extension was granted, the date shown is the required due date for the return.

      Note:

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20.1.7.1.4.1.1.2  (07-15-2011)
IDRS Command Code "PATRA"

  1. CC PATRA provides complete transcript data for all five years on the PMF. Only paper (hard copy) transcripts are available and can also be requested using CC "IRPTR" . See IRM 2.3, IDRS Terminal Handbook, for a complete description of all hard copy requests.

20.1.7.1.4.2  (11-16-2007)
Filing Requirements for Information Returns

  1. The return must be postmarked by the due date. The due dates for information returns are listed below.

    Exception:

    When any due date falls on a Saturday, Sunday, or legal holiday, the due date becomes the next "business" day that is not a Saturday, Sunday, or legal holiday. See IRC 7503.

    1. Form 8300 - January 31 is the due date for the filer of Form 8300 to furnish a statement to each person named on the information return. The filer is also required to provide a written statement to each person named on the form showing:
      name, telephone number, and address of the information contact for the business,
      the aggregate amount of reportable cash, and
      that the information was provided to the IRS.
      This statement must be provided on or before the last day of January of the year following the calendar year in which the cash was received. The recipient of more than $10,00 in cash received in a trade or business is required to file Form 8300 within 15 days after the date the cash is received.

    2. Form 8308 - A partnership must file a separate Form 8308 with their Form 1065, when money or property is received by a partner in exchange for all or part of a partnership interest that is attributable to unrealized receivables or substantially appreciated inventory items (IRC 751 exchange). All partnerships required to file Form 8308 must furnish a copy of the form to each transferor and transferee by January 31st of the year following the calendar year in which the IRC 751 exchange occurred or, if later, 30 days after the partnership has notice of the exchange.

    3. Forms 1099-B, Forms 1099-S, and Forms 1099-Misc (only if reporting payments in Boxes 8 nor 14) - must be provided by February 15th.

    4. Form W-2, with Form W-3 - A filer is required to file Form W-2, with Form W-3 with the Social Security Administration no later than February 28th (March 31st, if filed electronically) of the year the return is required to be filed.

    5. Form 1098-C - Donees required to file Form 1098-C must provide Copies B and C of the form to a donor within 30 days from the sale of the vehicle (if it is sold without material improvements or significant intervening use) or within 30 days of the contribution.

    6. Form 8027 - A filer is required to file Form 8027 with the IRS no later than February 28th (March 31st, if filed electronically) of the year the return is required to be filed.

    7. Form 1097-BTC, Form 1098, Form 1099, Form 3921, Form 3922, Form W-2 and Form W-2G, with a Form 1096 Transmittal, with the IRS no later than February 28th (March 31st, if filed electronically) of the year the return is required to be filed.

      Note:

      Form 1097-BTC must be furnished to the recipient on or before the 15th day of the second calendar month after the close of the calendar quarter.

    8. Form 8935 is due within 90 days of the date of making the airline payment(s) to a qualified airline employee.

    9. Form 1042-S is required to be filed with the IRS and furnished to the recipient by March 15th of the year following the calendar year the funds were distributed.

    10. Form 5498 - Filers of Form 5498 are required to provide a copy to the participant by May 31st, but must furnish fair market value and RMD, if applicable, by January 31st.

    11. Form 5498-ESA - Filers of Form 5498-ESA are required to provide a copy of the form to the participant by April 30th.

    12. Form 5498-SA is required to be filed with the IRS and furnished to the participant no later than May 31st of the year the return is required to be filed for regular or roll over contributions that were made to an Individual Retirement Account (IRA).

    13. Form 8282 - When a donee disposes of certain charitable property within three years of its receipt, the donee shall provide an information return to the IRS on or before the 125th day after the disposition date of the property.

    14. Form 8594 The buyer and the seller must each report on Form 8594, The Acquisition Statement which must be filed with their federal income tax return for the year that includes the date of the acquisition; The form must include:
      The date of sale and total sales price (Part I);
      The allocation of sales price among seven asset classes and the aggregate Fair Market Value of each class of assets (Part II); and
      Supplemental information statements to cover increases and decreases in consideration received by the buyer (Part III).

  2. Generally, the filer is required to mail a correct statement (Form 1098, Form 1099, Form 5498, and Form W-2G) to payees no later than the last day of January of the year the return is required to be filed.

20.1.7.1.4.3  (11-16-2007)
Form 8508 - Request for Waiver From Filing Information Returns Electronically

  1. Information returns are filed either on paper or via electronic media. Paper information returns are filed with the Submission Processing Campus sites. Electronic information returns are filed with the Enterprise Computing Center - Martinsburg (ECC-MTB) in Martinsburg, WV.

  2. Per IRC 6011(e) information returns must be filed using electronic media when 250 or more of the same document types are submitted. The penalty applies to the returns that exceed this threshold. For example, if 300 Forms 1099–DIV are filed on paper, only 50 will be subject to penalties.

  3. A filer may request a waiver from the requirement to file on electronic media by filing Form 8508, Request for Waiver From Filing Information Returns Electronically, with the ECC-MTB.

    1. The filer must show that it would cause an undue economic hardship if the filer were required to file on electronic media.

    2. The request must be postmarked no later than the due date of the return.

20.1.7.1.4.4  (11-16-2007)
Form 8809 - Application for Extension of Time to File Information Returns

  1. A filer may request an extension of time to file information returns.

  2. The request for Form 1042-S, Form 1097-BTC, Form 1098, Form 1099, Form 3921, Form 3922, Form 5498, Form 8027, Form 8935, Form W-2, and Form W-2G is made by filing Form 8809, Application for Extension of Time To File Information Returns, with the ECC-MTB Information Returns Branch (IRB). The extension request must be postmarked no later than the due date of the return. The form may also be filled out online through the FIRE system for an automatic 30-day extension.

  3. Form 8809 may be filled out online through the FIRE system (File Information Returns Electronically) for an automatic 30-day extension. Online requests must be submitted by the due date of the return. Approvals are automatically displayed online if the request is made by the due date of the return. If an extension is requested for more than 10 filers, the request must be submitted online as a fill-in form or an electronic file (except for Form 8027). Although not required, filers are encouraged to submit requests for 10 or fewer filers electronically via the online fill-in form.

  4. Mail extension requests to:


    Internal Revenue Service Information Returns Branch
    Attn: Extension of Time Coordinator
    240 Murall Drive Mail Stop 4360
    Kearneysville, WV 25430

  5. Filers may also request an extension of time to provide the statement to recipients (payees). The request is made by submitting a letter to the IRS (ECC-MTB IRB). It must be postmarked no later than the due date of the recipient statement. The letter must contain:

    1. The filer's name, TIN and address,

    2. Type(s) of information returns,

    3. Reason for delay, and

    4. Signature of filer or authorized agent.

    Note:

    If approved, the extension is generally granted for a maximum of 30 days.

20.1.7.1.4.5  (07-15-2011)
Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns

  1. A withholding agent may request an extension of time to file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. The request must include:

    • The filer's (or transmitter's) name, address, and TIN,

    • The reason for delay and the date the returns will be submitted,

    • The type of return, i.e., Form 1042, and the tax year for which the extension is requested,

    • If filing electronically, the Transmitter Control Code (TCC), or other applicable designation of the organization or individual requesting the extension and the name of a contact person familiar with the request, and

    • A list providing the withholding agents' names and TINs, if the extension request is for multiple filers.

  2. The automatic extension for a Form 1042 is six months.

  3. Form 7004 for Form 1042 should be mailed to:


    Internal Revenue Service Center
    P.O. Box 40901
    Ogden, UT 84409

20.1.7.1.4.6  (07-15-2011)
Exceptions and Special Rules

  1. Inconsequential Omission The penalties discussed in this section will not be assessed for any failure to include correct information on an information return, tax return, or payee statement if the failure is considered inconsequential. An inconsequential omission or inaccuracy is defined as one that:

    1. Does not prevent or hinder the IRS in processing the information or putting the return to its intended use, and

    2. Does not hinder or prevent a payee from timely receiving and correctly reporting the information on its tax return or otherwise putting the information to its intended use.

  2. The IRS may administratively specify other errors or omissions that are never considered inconsequential.

  3. See IRM 20.1.7.3.3 for additional criteria for inconsequential errors and omissions under IRC 6721, IRC 6722, and IRC 6723.

  4. See IRM 20.1.7.8 for criteria relating to waivers, definitions, and special rules.

20.1.7.1.5  (07-15-2011)
Penalty Dollar Amounts and Limitations

  1. IRC 6721 provides for a penalty when an information return or statement is not timely and/or correctly filed by the due date of the return. Penalties assessed under IRC 6721 are based on a time sensitive penalty rate.

  2. The Small Business Jobs Act (SBJA) of 2010 changed the tiered penalty amounts. The following penalty amounts are effective for required to be filed on or after January 1, 2011.

    1. $30 per failure, not to exceed an annual maximum of $250,000 for returns filed correctly within 30 days of the due date,

    2. $60 per failure, not to exceed an annual maximum of $500,000 for returns filed correctly after 30 days, but on or before August 1, or

    3. $100 per failure, not to exceed an annual maximum of $1,500,000 for returns filed after August 1.

  3. The following penalty amounts are effective for returns required to be filed by December 31, 2010:

    1. $15 per failure, not to exceed an annual maximum of $75,000 for returns filed correctly within 30 days of the due date,

    2. $30 per failure, not to exceed an annual maximum of $150,000 for returns filed correctly after 30 days, but on or before August 1, or

    3. $50 per failure, not to exceed an annual maximum of $250,000 for returns filed after August 1.

    A small business limitation based on gross receipts is part of IRC 6721. A complete discussion of the related criteria is discussed in IRM 20.1.7.3.

  4. IRC 6722 provides for a penalty of $50 when a payee statement is not timely and/or correctly furnished.

    Note:

    The SBJA of 2010 increased the penalty to $100 for each failure for returns required to be filed on or after January 1, 2011.

  5. IRC 6723 provides for a penalty of $50 for a failure to comply with other specified information reporting requirements.

  6. IRC 6724 provides for waivers, definitions, and special rules. Reasonable Cause criteria is also addressed under this code section.

  7. IRC 6751(b)(1) states that no penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.

    Exception:

    Paragraph (1) shall not apply to:

    1. Any addition to tax under IRC 6651, IRC 6654, or IRC 6655, or

    2. Any other penalty automatically calculated through electronic means.

20.1.7.1.5.1  (07-15-2011)
Who Asserts/Assesses

  1. A Campus or compliance field function may determine that a penalty should be imposed.

    1. At the campus, the penalty proposal notice may generate automatically based on returns posted to the PMF, or

    2. Compliance field functions may consider the penalty during an examination if it is found that the filer failed to file, filed late, or filed incorrectly.

  2. Campuses use penalty reference codes in the 500 series for assessing these penalties. See Exhibit 20.1.7-5.

  3. Compliance field functions use penalty reference codes in the 600 series for assessing these penalties. See Exhibit 20.1.7-6.

20.1.7.1.5.2  (07-15-2011)
Penalty Computation

  1. To compute the appropriate information return penalty as it relates to IRC 6721 and IRC 6722, multiply the number of violations in each penalty category by the dollar amount associated with the respective category.

  2. Returns required to be filed by December 31, 2010:

    • Standard ($50),

    • Reduced ($15 or $30), or

    • Intentional disregard ($100).

  3. Returns required to be filed on or after January 1, 2011:

    • Standard ($100),

    • Reduced ($30 or $60), or

    • Intentional disregard ($250)

  4. To compute the appropriate information return penalty as it relates to IRC 6722, multiply the number of violations in each penalty category by the dollar amount associated with the respective category.

  5. Returns required to be filed before December 31, 2010:

    • Standard ($50) or

    • Intentional disregard ($100).

      Note:

      There was no reduced amount before January 1, 2011.

    The amount imposed cannot exceed the annual maximum of $100,000.

  6. Returns required to be filed on or after January 1, 2011:

    • Standard ($100),

    • Reduced ($30 or $60), or

    • Intentional disregard ($250).

  7. Assess only one penalty amount per return or payee statement.

  8. When appropriate, use the penalty reference number that identifies all violations that apply to the return.

  9. If more than one penalty is applicable for a document, then apply the penalty using the following criteria:

    1. If it is determined that the late-filing penalty, while proposed, should be waived, then the next penalty for that document (i.e., missing/incorrect TIN), should be considered.

    2. If it is determined that the missing/incorrect TIN penalty, should be waived, then the next penalt(ies) for that document (i.e., incorrect media), should be considered.

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20.1.7.1.6  (07-15-2011)
Examination Delinquent Information Return Procedures

  1. Secure and make two copies of the delinquent information returns.

    1. Send the original delinquent information returns to the appropriate Service Center Campus.

      Individual Master File (IMF) Delinquent Returns: Send To:
      IMF returns (other than International) Internal Revenue Service - Stop 31305
      5045 E Butler
      Fresno, CA 93888
      IMF (with International components) Internal Revenue Service - Stop 6054
      3651 S Interstate 35
      Austin, TX 78741
      Business Master File (BMF) Delinquent Returns: Send To:
      BMF (other than Large Business and International) (LB&I)) Internal Revenue Service - Stop 31
      201 W. Rivercenter Blvd.
      Covington, KY 41011
      BMF (with LB&I) components) Internal Revenue Service - Stop 6054
      1973 North Rulon White Blvd.
      Ogden, UT 84404

    2. Place one copy in the penalty case file.

    3. Attach the other copy to Form 5346, Examination Information Report, or (Form 5666, TE/GE Referral Information Report).

  2. Prepare Form 5346 or Form 5666 for each recipient shown on the delinquent information returns.

  3. Prepare and make a copy of:

    1. Form 1096, Annual Summary and Transmittal of U.S. Information Returns, for information returns filed with the Campus,

    2. Form W-3, Transmittal of Wage and Tax Statements, for Form W-2 filed with the SSA, or

    3. Any other specific information return not transmitted by a transmittal document (for example, Form 8300).

    Note:

    Form 4419, Application for Filing Information Returns Electronically, is no longer required for information returns required to be filed at ECC-MTB IRB.

  4. Retain the appropriate copies in the penalty case file.

  5. Across the bottom of Form 1096, Form W-3, or Form 4419, write in red "Delinquent Returns - Secured by Examination (or TE/GE) - Penalty Considered."

    1. Form 1096, enter "E" (Exam) in the first box under "Official Use Only."

    2. Do not make any markings in the top margin of Form 1096. This will interfere with the processing of these documents.

  6. If there is more than one type of information return, prepare separate transmittals for each type of information return.

  7. Prepare Form 3198, Special Handling Notice, and under the "Other" section write: "Assess Civil Penalty per Form 3645, Computation of Penalty for Failure to File Info Returns or Furnish Statements and Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties."

  8. Make a copy of the face of the income tax return for the tax year of the delinquent information returns. Retain the copy of the income tax return in the penalty case file.

  9. Prepare Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, for each tax year. Retain Form 8278 in the penalty case file.

  10. Prepare Form 3645, Computation of Penalty for Failure to File Information Returns or Furnish Statements, for each tax year. Form 3645 should stay in the penalty case file. Provide the following in the explanation section:

    1. The reason for the penalty,

    2. Did the filer agree or disagree with the penalty, and

    3. Was reasonable cause considered?

  11. If the taxpayer agrees with the penalty, ask for the payments and prepare Form 3244, Payment Posting Voucher.

  12. Do not secure an agreement on the Examination Report of Income Tax Changes. The information return penalty case file is separate from an income tax, employment tax or other case file.

  13. When asserting the penalty and the waiver provisions were considered, the following items must be noted on the Form 8278:

    1. When a waiver is denied:
      - Assert the penalty;
      - Give the filer written appeal rights,
      - Note on Form 8278 that the waiver provisions were considered, and
      - Identify the waiver requested using the penalty reason codes in Exhibit 20.1.7-7.

    2. When a waiver is granted:
      - Do NOT assess the penalty, and
      - Notate on Form 8278 that the waiver provision was granted.

    After determining whether to grant or deny the waiver provision claimed, identify the waiver request using the penalty reason codes in Exhibit 20.1.7-7.

20.1.7.1.6.1  (07-15-2011)
Collection Delinquent Information Return Procedures

  1. Assessments

    1. Generally, information return penalties are not asserted by collection actions; however, Collection personnel are not prohibited from making these types of assessments. During the course of an investigation or other contact with taxpayers, it may be determined that required information returns have not been filed. The information returns should be secured from the taxpayer, and if appropriate, the applicable penalty recommended for assessment.

    2. Across the bottom of Form 1099 or Form W-3, write in red "Delinquent Returns -Secured by Collection - Penalty Considered." Form 1096, Form W-2, and Form W-2c, enter "C" (Collection) in the first box under "Official Use Only."

      Caution:

      Do not make any markings in the top margin of Form 1096. This will interfere with processing these documents.

    3. A Civil Penalties Master file has been developed to accommodate most penalties using MFT 55 (for IMF) and MFT 13 (for BMF). Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties, is used to forward the assessment/abatement action for input.

    4. Penalties being recommended under IRC 6721, IRC 6722 or IRC 6723, Form 3645 (Computation of Penalty for Failure to File Information Returns or Furnish Statements) should be prepared. A determination as to reasonable cause should be entered under the caption "Recommendation of Examining Officer." If reasonable cause does not exist, the penalty should be collected. The Form 3645 and information documents should be attached to Form 8278 and submitted with the daily report for assessment.

  2. Abatements/Non-assessment

    1. See IRM 20.1.7.8 for waiver provisions due to reasonable cause for penalties under IRC 6721, IRC 6722 and IRC 6723.

    2. Penalties asserted by Examination will be identified by TC 240 with 600 series penalty reference number. Prior to abating these penalties, Collection employees will obtain the examination assessment file for any information previously presented by the taxpayer. This information should be reviewed and taken into consideration in making a reasonable cause determination.

    3. When taxpayers request non-assertion or abatement of penalties due to reasonable cause, the taxpayer must submit a signed statement explaining the basis for non-assertion/abatement or sign Form 3870, Request for Adjustment.

      Note:

      The signature must be executed under penalty of perjury. This requires insertion of "Under penalty of perjury the above information is true, correct and complete" on Form 3870 prior to obtaining the taxpayer's signature.

    4. The penalty reason code for abating the penalty should be annotated in red ["PRCXXX" (fill in number corresponding to applicable penalty reason code)] on the face of Form 3870 before is it is forwarded for processing. See Document 6209, IRS Processing Codes and Information, for penalty reason codes.

    5. Requests for non-assertion/abatement of penalties for reasonable cause will be approved by the requesting employee's manager. Approval will be denoted by the manager's signature next to the work on the form requesting non-assertion/abatement.

  3. Unassessed Liabilities - If after discussion of the causes for the failure, the employee determines that a taxpayer did not establish reasonable cause for the failure, the employee will inform the taxpayer that the penalty will be asserted.

    1. If the taxpayer disagrees with the employee's determination and maintains that the penalty should not be asserted, the employee should provide written notification of the denial to the taxpayer.

    2. Form 9423, Collection Appeal Request, will be sent to the taxpayer advising them of their pre-assessment appeal rights, claim procedures, and post-assessment appeal procedures.

    3. When a Collection employee decides to deny penalty relief and proceeds with assertion of the penalty, it is imperative that the decision be recorded in such a manner that other IRS employees will be aware that reasonable cause has already been addressed.

    4. That reason, when reasonable cause is denied at the time the information return penalty is recommended for assessment, the penalty reason code will be annotated on Form 8278 in column (e) opposite the penalty amount assessed. The penalty reason code (PRC) shall be entered in red in the following format "PRCXXX" (fill in number corresponding to applicable penalty reason code).

  4. Assessed Liabilities - When the collection employee makes a determination not to abate a penalty for reasonable cause, the taxpayer will be informed of that decision.

    1. If the taxpayer disagrees with the employee's determination and maintains that the penalty should be abated, written notification should be provided to the taxpayer using Letter 0854C. Collection personnel can request that Campus sites send this notification to the taxpayer.

    2. An appropriate input document will be used to request input of TC 290, Reason Code 062, blocking series 98 (without original return). This is necessary to insure that, if subsequent claims of reasonable cause are received, the employee will be able to determine that the issue has been addressed.

    3. If the taxpayer submits a written appeal, the collection employee who rejected the abatement request will examine the appeal for additional information which may change the original determination not to abate the penalty.

    4. Normally collection action will be suspended on the penalty portion of the assessment during the 15-day period granted to the taxpayer to file an appeal, or during the period the case is under consideration by Appeals. However, action need not be suspended if circumstances meriting continuation of collection action exist. The Collection compliance function employee must obtain managerial approval not to suspend collection of the penalty portion of the assessment.

20.1.7.1.6.2  (07-15-2011)
Campus Delinquent Information Return Procedures

  1. The penalties will be assessed on a Civil Penalty Module with:

    • MFT 13 (Business Master File), or

    • MFT 55 (Individual Master File).

  2. The penalty will be assessed/waived/abated/sustained using command code ADJ54. Input:

    1. A TC 290,

    2. The appropriate penalty reference number (Exhibit 20.1.7-5),

    3. The dollar amount of the penalty: (use a positive amount to assess, use a negative amount to abate, or use a zero amount to sustain for a "no change" ), and

    4. Blocking series: "52X" for the first assessment (full or partial change) on the module; "53X" for any subsequent adjustments on a module with a previous block 52, "98X" for any full or partial disallowance, "15X" for full waivers on BMF accounts or to file attachments, correspondence, etc., or "05X" for full waivers on IMF accounts or to file attachments, correspondence, etc.

    5. Use Hold Codes, Priority Codes, Posting Delay Codes, and Penalty Reason Codes as applicable. See Document 6209 for additional information regarding these codes and indicators.

  3. Use Letter 1948C, Civil Penalty Explained, to answer questions from the filer, to request additional information, or to notify the filer that the explanation submitted establishes reasonable cause and the penalty will not be charged or will be removed.

  4. Letter 0854C, Penalty Waiver or Abatement Disallowed/ Appeals Procedure Explained, is sent to the filer when a penalty waiver or abatement request is fully or partially denied. This letter provides appeal rights and the procedures filers must follow if they wish to appeal the IRS's decision.

    1. Only use Letter 0854C when the filer has submitted an explanation that can be fully evaluated to determine that the filer did not establish reasonable cause to have the penalty abated or waived. Letter 0854C should not be used to close a case that requires additional information to determine whether reasonable cause exists or for "no reply" cases.

    2. Letter 0854C should list the reason(s) the abatement request is being denied.

    3. Replies to Letter 0854C should be evaluated to determine if the information provided will allow the penalty unit to abate the penalty. If not, route the reply to Letter 0854C to the Campus Penalty Appeals Coordinator.

  5. When considering the assessment, or abatement of a penalty or a waiver request, the following information must be input to the appropriate Civil Penalty Module:

    1. If reasonable cause was considered and was either established or denied, enter RC 062 in the first reason code position, and

    2. When waiving/abating a penalty due to reasonable cause, use the appropriate Penalty Reason Code (PRC) (as shown in Exhibit 20.1.13) in the fourth reason code position.

      Note:

      Do not use Reason Code 062 if the penalty is waived/abated for other than reasonable cause, e.g., processing errors. In this case use only the appropriate fourth position penalty reason code.

  6. If a credit balance remains on the account after an abatement due to a credit offset from another module, research to see if the offset module is still on the account. If present, reverse the credit back to that account.

  7. When making an adjustment on a civil penalty module, the TC 290 acts as a carrier transaction. The TC 290 and the penalty reference number will post to the civil penalty module as a TC 240/241 with the penalty reference number used in the adjustment transaction.

  8. See IRM 21.5.2, Adjustment Guidelines, for complete Campus processing instructions.

  9. Before making any assessment, you must use the research Command Codes "BMFOL" , "IMFOL" , "INOLE" , "EINAD" , or "SSNAD" to make sure that the penalty is being assessed on the correct filer's account. To avoid unpostable conditions, the following factors must be considered prior to making the manual assessment:

    1. It may be necessary to establish the filer's entity on the Master File if it has not been established.

    2. The Entity Control Unit must establish BMF entities.

    3. The IRP penalty unit will establish entities and create Civil Penalty Name Lines for IMF accounts as required.

  10. DO NOT assess information return penalties against any federal agency.

    1. Notify the penalty analyst in Servicewide Penalties of any federal agency included in the penalty notice program.

    2. Mark the Form 1096 or Form W-3"Penalty Not Assessed."

    All systemically (computer) generated proposed penalty notices for federal agencies are suppressed by the Payer Master File if the employment code "F" designation is present on Master File. In addition, any IRP civil penalty assessed (in error) against federal agencies will automatically unpost if the Employment Code "F" designation is on Master File. These unpostables will be sent to the IRP Civil Penalty Unit on a Nullified Distribution List. Notify the penalty analyst in Servicewide Penalties of any federal agencies. If the Employment Code "F" designation is not present on the Master File, the penalty proposal notice or penalty assessment will generate. Campus should pull these notices during notice review and send to the penalty analyst in Servicewide Penalties.

20.1.7.1.6.3  (07-15-2011)
Processing Notice 972CG

  1. Notice 972CG, Notice of Proposed Civil Penalty, will generate from the Payer Master File for filers who fail to comply with the information reporting requirements.

  2. A Notice 972CG control listing for will generate to the Philadelphia Campus (PSC) site.

    Note:

    This listing generates as the first item in the file that contains the PMF transcripts.

  3. PSC and the Enterprise Computing Center - Martinsburg (ECC-MTB) Information Returns Branch (IRB) will work with MITS on establishing the actual dates that the computer disk (CD) or digital versatile disk (DVD) will arrive and the file number. Each file will be sorted in TIN order.

  4. Tape Files - Campus sites and ECC-MTB IRB will receive separate Notice 972CG tape files. These files include any:

    1. Notice 972CG (IMF) that requires special handling,

    2. Notice 972CG without TIN listings, that are less than 16 pages,

    3. Notice 972CG without TIN listings, that are more than 15 pages,

    4. Notice 972CG with TIN listings that contain up to 250 payee records,

    5. Suspense copies of all notices, including those mailed by ECC-MTB IRB, and

    6. Computer Paragraph (CP) CP 215A/ CP 15A, "Summary of Proposed Penalty" Notices, which are mailed with CP 215/ CP 15.

  5. Any Notice 972CG (IMF) that requires special handling - IMF notices that require special handling must be reviewed to separate notices that can be mailed from those that may require a change in the name (entity) on the notice before mailing.

  6. Any Notice 972CG with TIN listings - Campus sites will receive a copy of the TIN listings and retain the listings for association with the suspense file. This separate control listing will be generated for filers who receive TIN listings (paper and CD/DVD) and will include the filer's TIN (EIN or SSN), name, address, account access key number, CD/DVD (ECC-MTB IRB) or paper (PSC) sequential number, transmittal number, and the total volume of missing, incorrect, and/or not currently issued TINs.

    Note:

    Notices that include a penalty for TINs (Penalty Reference Numbers 502, 505, 507, 510) will be associated with the TIN listings. Publication 1586 must accompany these notices.

    1. TIN listings containing up to 250 payee records - notices that include a proposed penalty for missing and/or incorrect TINs of 250 or less payee records, a paper listing of the payee records with missing, incorrect or not currently issued TINs will be provided for mail out with Notice 972CG.

    2. TIN listings containing over 250 payee records - ECC-MTB IRB will mail Notice 972CGs and a CD or DVD for filers with 251 or more payee records with missing or incorrect TINs.

  7. Suspense copies - The Campus site must maintain a suspense copy of all notices.

  8. CP 215A/CP 15A, "Summary of Proposed Penalty" -The Campus site should produce one copy of the file containing CP 215A/CP 15A, Summary of Proposed Penalty. This item should not to be mailed with the Notice 972CG. It should be retained for later use with CP 215/CP 15 Notices.

  9. Retention -CDs and DVDs for Notice 972CG and TIN listings must be retained for 180 days.

20.1.7.1.6.3.1  (07-15-2011)
Mailing Notice 972CG

  1. The National Print Site (NPS) is responsible for mailing all notices, except those requiring special handling.

  2. PSC IRP Penalty Unit and ECC-MTB IRB should contact MITS for assistance if a TIN listing is received without a Notice 972CG.

  3. Notices with TIN listings, a complete package from the Campus should contain:

    1. The Notice 972CG,

    2. The Listing of missing, incorrect, and/or not currently issued TINs,

    3. Publication 1586, and

    4. A bar-coded return envelope.

  4. Notices with TIN listings, a complete package from ECC-MTB IRB should contain:

    1. The Notice 972CG,

    2. The paper listing, CD or DVD of missing, incorrect, and/or not currently issued TINs,

    3. Publication 1586, and

    4. A bar-coded return envelope.

  5. Misrouted Mail - If a filer contacts the Campus indicating that they have erroneously received a Notice 972CG and/or TIN listing for another filer, apologize and advise them to immediately return it to a designated contact person.

    Note:

    The PSC Campus site should establish a designated contact person to expedite the return of misrouted mail.

    1. Research to attempt to find the correct mailing address. If found, mail the notice to the correct filer and follow disclosure procedures.

    2. Stamp the current date on the notice prior to mailing. Update the history sheet and IDRS history, notating the misrouted mail and the new mailing date.

  6. Undeliverable Mail - See IRM 20.1.7.1.7.2 for undeliverable mail procedures.

20.1.7.1.6.3.2  (07-15-2011)
Federal Agencies

  1. Do not mail Notice 972CG to federal agencies. See Policy Statement P-2-4,IRM 1.2.20.1.2, Penalties and Interest Not Asserted Against Federal Agencies.

  2. Employment Code "F" is assigned to agencies of the United States Government. See IRM 3.13.2.5.3, Employment Code "F", for additional information.

20.1.7.1.6.3.3  (07-15-2011)
Special Notice Review Procedures for Notice 972CG

  1. Married Filing Joint Accounts and Non-Linked Accounts - Penalties cannot be assessed on married filing joint accounts using MFT 55 therefore special procedures are necessary to address the problem that occurs with IMF notices on joint accounts and non-linked accounts. These conditions require the manual review of the entity to ensure that the name on the notice is correct.

  2. IMF notices with joint names (and other non-linked conditions) will be sorted separately (except for those that already have a Civil Penalty Name line on Master File) to identify the liable spouse.

  3. The PSC Campus site must review the entity on these notices prior to mailing out.

  4. The name line on the Notice 972CG will be changed so that it agrees with the name of the accountable spouse who will be assessed the penalty.

  5. Extract and review any notices where the following conditions are present:

    1. A joint name line,

    2. The only name is a business name, or

    3. The information is garbled.

    Note:

    Any notices selected that have an individual name, or have a business name in addition to an individual name, may be mailed without change.

  6. Joint Name Lines - joint name lines, verify which spouse is accountable for the penalty. Prepare a new mail label including the name of the liable spouse. Cover the old name and address with the label and mail the notice.

  7. Business Names - if a business name is the only name present, research for the name of an individual associated with that SSN. If found, prepare a mail label with the individual's name, including the business name on the second name line. Cover the old name and address with the new label and mail the notice.

    Caution:

    business names, consider the possibility that the TIN shown is an EIN instead of SSN (the TIN may appear in SSN format). Research to determine whether the name/TIN is a valid BMF entity. If so, mail the notice.

  8. Garbled information - garbled information, research to find or verify the correct individual name associated with the SSN. If found, prepare a mail label with the individual's name. Cover the old name and address with the new label and mail the notice.

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  10. If an address change is identified during research, verify the name and correct the address on the label.

  11. If the notice is mailed later than the date on the notice, stamp the current date on the notice, stamp the new date on the file copy, and update the IDRS history.

  12. If a penalty is assessed on these accounts, it will be necessary to establish the account and/or to create a Civil Penalty Name line.

20.1.7.1.6.3.4  (07-15-2011)
Special Notice Review of CP 215/15 Notices

  1. These procedures must be followed for all IRP Civil Penalty notices, CP 215/CP 15 with information returns civil penalty reference numbers 500 - 514 (excluding penalty reference numbers 549 and 550).

  2. The following notices must be reviewed prior to mailing:

    1. All notices assessing penalties of $100,000 or more. Notices should be reviewed for accuracy and coordinated with any reviews conducted by the ARDI (Accounts Receivable Dollar Inventory) function (the amount may be lowered at the discretion of the Campus or Area Director.

    2. All notices assessing penalties against state or local agencies, charitable organizations, and any other notices determined to be sensitive by the Campus and/or areas. These notices will be reviewed to give the Campus Director the opportunity to alert the appropriate Area Director.

    3. For Large Complex Corporation cases, coordinate with the Large Corporation Technical Unit (LCTU) or other designated function. Clearly notate the file as a Large Complex Corporation, so correspondence replies received by the penalty unit can be coordinated with the LCTU.

  3. Before mailing:

    1. Review CP notices for garbled information.

    2. If the Notice 972CG was mailed prior to the CP 215, Civil Penalty - 500 and 600 Series /CP 15, Civil Penalties Notice, a penalty summary sheet, "Summary of Proposed Penalty" (CP 215A/CP 15A) will be provided for mailing with the CP notice. All CP 215A/15A Notices are generated at the same time as the Notice 972CG.

    3. The CP 215A/CP 15A Notice should only be mailed if the penalty amount on the CP notice is the same as on the Notice 972CG. Date stamp the summary sheet with the same date as the CP notice.

      Exception:

      If the amount on the CP notice is different, do not include the summary sheet.

  4. Do not mail any notices proposing penalties against federal agencies. See IRM 20.1.7.1.6.3.2, Federal Agencies.

    1. Do not assert these penalties. Notate "Fed-NoPen" on IDRS.

    2. If assessed, abate these penalties, notate "Fed-PenAbt" on IDRS and forward to the Servicewide penalty analyst.

    Note:

    Penalties may be assessed against state and/or local governments.

20.1.7.1.6.3.5  (07-15-2011)
Recreating Notice 972CG

  1. Filers may contact either the PSC or the ECC-MTB IRB Customer Service site to request recreates (copies) of Notice 972CG and/or TIN listings. These requests may be received at any time after the initial mailing of the notices.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. The procedure for filling the requests will differ for paper and CD or DVD and is based on when the request is received.

  4. For Notice 972CG mailed alone or with a paper listing of missing and incorrect TINs:

    1. PSC is required to retain a second printed "file" copy of the Notice 972CG (indefinitely) and the file copy of the TIN listings for at least 180 days.

    2. PSC will fill requests received within the 180-day period by photocopying the "file" copy of the notice and TIN listing and mailing it to the payer. These requests may be received directly at PSC or may be forwarded to PSC from the ECC-MTB IRB Customer Service site.

      Note:

      Filers who did not respond to Notice 972CG will generally have received the penalty notice at this point.

    3. When ECC-MTB IRB has filled the request, they will coordinate the mailing to PSC for association with Notice 972CG (if necessary) or will mail the listing directly to the filer.

      Reminder:

      Headquarter Operations does not retain copies of Notice 972CG or TIN Listings.

  5. For notices, CDs and DVDs:

    1. The ECC-MTB IRB Centralized Customer Service site will fill all requests received for CDs or DVDs of missing and incorrect TINs within the four year retention period (four years from the original mailing date of the Notice 972CG).

    2. ECC-MTB will retain copies of the original Notice 972CG.

    3. Requests for recreates of CDs or DVDs of missing and/or incorrect TINs received by PSC must be routed through the Management Support Branch Analyst to the ECC-MTB IRB Centralized Customer Service Site.

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

20.1.7.1.6.3.6  (07-15-2011)
Correcting Erroneous Entity Information

  1. This procedure is used to delete and/or move a Form 1096 that has posted to the wrong filer's account, TIN, or tax year on the PMF. Form 8487, Entity Change Entry, is used to make this correction.

  2. When the Unpostables area receives and researches entity information on a PMF unpostable case (for Form 1096 and finds both a valid IMF and BMF entity:

    1. The Unpostable staff has been instructed to post the PMF source document using the BMF entity information when both are equally correct.

    2. The filer is informed of the action the IRS has taken to post the Form 1096 source document.

    3. If the filer disagrees with this action, they will correspond to the unit responsible for working the IRP penalties. The PSC IRP Penalty Unit should request a PMF transcript to determine which transaction should be changed or deleted, then use Form 8487 to make the correction. In addition, Form 1096 may post to the wrong filer's account when there was an unsuccessful attempt to merge two accounts on the BMF or IMF resulting in a "no-merge" condition.

  3. Route completed Form 8487 to the Numbering and Batching Area in Submission Processing. See instructions in IRM 3.12.8 for additional information.

20.1.7.1.6.3.7  (07-15-2011)
PMF Uncorrectable Unpostables

  1. PMF transactions (Form 1096) that fail to post are sent to the Unpostable area for resolution. They return the transaction to the PMF as uncorrectable. The uncorrectable transactions are then screened for potential penalty situations, such as:

    1. Late filed submissions ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are selected and referred to the PSC IRP Penalty Unit.

    2. Submissions that meet the electronic media filing requirements ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ will be regenerated to the ECC-MTB IRB.

  2. The Campus will receive the listing of potential penalty cases titled "PMF Uncorrectable Unpostables Meeting Penalty Criteria." This listing is generated annually and contains the information necessary to research the Master File for a valid entity. Use the following instructions to resolve the potential penalty case:

    1. Obtain a microfilm copy of the Form 1096 source document to research for a valid entity on the Master File.

    2. Research the TIN and name control using IDRS Command Codes "PMFOL" , "IMFOL" , "BMFOL" , "NAME" , "NAMES" , "SSNAD" , "ENMOD" , plus any new command codes that are available.

    3. If a valid entity is found, check the TIN against the listings of extensions and waivers for the tax year in question.

    4. If the TIN is on the extension listing, DO NOT assess the late filing penalty unless the received date is later than the extended due date. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. If the TIN is on the electronic waiver listing, DO NOT assess the penalty for failure to file on electronic media. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Caution:

      If a TIN is changed as a result of the research, check both the old and the new TIN against the extension and waiver listings.

    6. If the TIN is not on the extension or waiver listing, assess the penalty manually.

  3. When a valid entity is found, forward a copy of the Form 1096 to the Receipt and Control Branch for processing through Integrated Submission and Remittance Processing (ISRP) and posting to the PMF (whether or not a penalty is assessed).

    1. Correct the name or TIN on the Form 1096, as appropriate,

    2. Notate "Correction to PMF Unpostable Penalty Considered" on the Form 1096,

    3. Forward the copy to the Receipt and Control Branch,

    4. Notate on the routing slip "Process as original" to alert Receipt and Control to process the copy as an original document, and

    5. Keep a copy of the corrected Form 1096 in the case file.

  4. Monitor the assessment action to ensure the penalty posts to the filer's account.

  5. Upon completion of this work, send a report to the PSC penalty analyst, showing separate counts for paper and electronic records with total number of:

    • Cases received,

    • Cases resolved (valid entity found, etc.),

    • Penalties assessed,

    • Form 1096 processed through ISRP (applies to paper only), and

    • Unresolved cases (no valid entity found or other reason).

20.1.7.1.6.3.8  (01-09-2009)
Form 3491 - Consumer Cooperative Exemption Application

  1. Cooperatives are entitled to an exemption from filing Form 1099-PATR (Taxable Distributions Received from Cooperatives), along with the corresponding Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) under Treas. Regs. 1.6044-4(a)(2). If the cooperative indicates they have an approved exemption, request the documentation and waive or abate the penalty when the information is received and verified.

  2. The cooperative should have received (by mail) their original Form 3491, Consumer Cooperative Exemption Application, with either the Area Director's stamped or original signature of approval or the Campus Director's stamped or original signature of approval.

    Caution:

    Original and/or unprocessed Form 3491 documents are NOT to be routed to the Information Return Program (IRP) Penalty Unit at the Philadelphia Campus Compliance site. Even though the Payer Master File (PMF) IRP Penalty Unit (Unit) is now centralized in Philadelphia, this Unit is not responsible for either approving or processing the Form 3491 because there is no information return penalty directly involved with Form 3491.

20.1.7.1.7  (07-15-2011)
Undeliverable Mail

  1. Process undeliverable notices within 48 hours of receipt.

  2. Research for a better address using IDRS CC "INOLE" , "ENMOD" or "IRPTR" .

    1. CC "INOLE" will provide the most current posted entity information on the National Account Profile (NAP).

    2. CC "ENMOD" may reflect a recently input address change that has not posted to INOLE.

    3. CC "IRPTR" will provide a current address for the filer from an information return filed for the most recent processing year.

  3. Telephone directories may be used as a secondary source if IDRS research does not provide a better address.

    Note:

    New address information obtained from these sources may not be used to update the taxpayer's address on the Master File.

20.1.7.1.7.1  (07-15-2011)
Undeliverable Notice 972CG

  1. Campus - If a Notice 972CG is undeliverable, PSC will research for a different address.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ECC-MTB IRB - ECC-MTB IRB will search for a better address for their undeliverable notices.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Research again for a new address when the undeliverable notices are purged for assessment of the penalty.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

20.1.7.1.7.2  (07-15-2011)
Undeliverable CP 215/15 Notices

  1. If Notice CP 215/CP 15 is undeliverable, research letters with operational errors, incomplete or incorrect names, and/or erroneous or extraneous data. Correct the error and mail the letter or notice.

  2. Place a label with the correct entity information (name and address) over the incorrect information for all CP 215/CP 15 Notices, including:

    1. Balance due notices (see (4) below),

    2. Even balance notices,

    3. Overpayment notices, and

    4. Taxpayer inquiries.

  3. If the CP 215/CP 15 Notice is undeliverable, and the no current name or address is located:

    1. Input a TC 290 .00 using the undeliverable notice and envelope as your source document.

    2. Notate in the case history that the notice was undeliverable and on the correct tax period on IDRS history, notate: "UNDEL-CPXX" or "UNDELCPXXX" .

  4. CP 215/15 Balance Due - If the CP 215/CP 15 Notice with a balance due is undeliverable, and the correction is to the name or address:

    1. Place a label with the correct entity information over the incorrect name or address for the following, regardless of the notice date,

    2. Stamp the notice with the current date,

    3. Control the account,

    4. Place a collection hold and notice hold (STAUP/TC 470) on the taxpayers account for the correct pay period, and

    5. Notate in a history item and on IDRS - "Remailed," then MMDDYYYY (the date the notice is re-mailed).

20.1.7.1.7.2.1  (07-15-2011)
Replies to Undeliverable CP 15/215 Notices

  1. Fully Agreed Replies received with full payment within 21 days of the notice re-mail stamped date - If a fully agreed reply is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with full payment, ensure no other penalties or interest are assessed.

  2. Fully Agreed Replies received with partial or no payment within 21 days of the notice re-mail stamped date - If a fully agreed reply is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with a partial or no payment, compute interest ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and let the adjustment (additional interest) notice go to the taxpayer.

  3. Fully Agreed Replies received with full payment or no payment after 21 days of the notice re-mail stamped date - If a fully agreed reply is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with full or no payment, compute interest ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and let the adjustment (additional interest) notice go to the taxpayer.

  4. Partially Agreed Replies received with full payment within 21 days of the notice re-mail stamped date - If a partially agreed reply with full payment of the partial agreement is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and you agree with the taxpayer's computations:

    1. Abate the penalty difference,

    2. Ensure no other penalties or interest are assessed, and

    3. Issue an adjustment (partially abated penalty and no interest) notice to the taxpayer.

  5. Partially Agreed Replies received without full payment of the partial agreement within 21 days of the notice re-mail stamped date. If a partially agreed reply is received without full payment of the partial agreement within 21 days ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Compute interest on the new penalty amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Abate the penalty difference, and

    3. Issue an adjustment (partially abated penalty and additional interest) notice to the taxpayer.

  6. Partially Agreed Replies received without full payment of the partial agreement after 21 days of the notice re-mail stamped date - If a partially agreed reply is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with full or no payment of the partial agreement and you agree with the taxpayer's computations:

    1. Abate the penalty difference,

    2. Compute interest on the new penalty ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and

    3. Issue an adjustment (partially abated penalty plus additional interest) notice to the taxpayer.

  7. Disagreement with Partially Agreed Replies received without full payment of the partial agreement after 21 days of the notice re-mail stamped date - If a partially agreed reply with full or no payment of the partial agreement is received ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and you disagree with the taxpayer's computations:

    1. Compute interest ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Issue an adjustment (additional interest) notice to the taxpayer,

    3. Disallow the claim, and

    4. Send a disallowance letter with explanation to the taxpayer.

  8. Disagreed reply with full, partial, or no payment of the penalty of the notice re-mail stamped date - If a disagreed reply is received (regardless of the date) and you agree with the taxpayers explanation:

    1. Abate the entire penalty difference,

    2. Ensure no other penalties or interest are assessed,

    3. Release any overpayment, and

    4. Notify the taxpayer.

  9. Disagree - Disagreed reply with full, partial, or no payment of the penalty of the notice re-mail stamped date - If a disagreed reply with full, partial, or no payment is received (regardless of the date) and you disagree with the taxpayer's computations:

    1. Compute interest ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Issue an adjustment (additional interest) notice to the taxpayer,

    3. Disallow the claim, and

    4. Send a disallowance letter with explanation to the taxpayer.

20.1.7.1.8  (07-15-2011)
Requesting Microfilm Source Documents

  1. These procedures may be used to request copies of Form 1096, Form W-2, or Form W-3 for returns filed on paper only. The PMF shows whether returns were filed on paper or electronic media.

    1. To request information on Form 1099 filed on electronic media, contact ECC-MTB IRB or log on to the IRS website.

    2. DO NOT request Form 6559, Transmitter Report and Summary of Magnetic Media, and Form 6559-A, Continuation Sheet, for Form 6559, Transmitter Report and Summary of Magnetic Media, for Form W-2 filed on magnetic media.

  2. You may request copies of Form 1096 (not Form 1099), Form W-2, and Form W-3. Generally, campus sites should not request Form W-3; however, if Form W-2 is needed to resolve a penalty case, request both Form W-2 and Form W-3.

  3. Form 1096 - When it is necessary to obtain a SCRIPS image or a microfilm print of the Form 1096, request it using the procedures in the IDRS Handbook. The Document Locator Number (DLN) of the Form 1096 is required to request the documents.

    1. The 14 digit DLN consists of:

      DIGITS DEFINITION
      1, 2 Campus or Area
      Office code
      3 Tax Class (5)
      4, 5 Document Code (69)
      6, 7, 8 Julian Date
      9, 10, 11 Block Number
      12, 13 Sequence Number
      14 List year

    2. Check the PMF transcript to determine where the returns were processed. The first two digits of the DLN identify where and how the Form 1096 was processed.

    3. SCRIPS (Service Center Recognition/Image Processing System) Documents: Use CC "ESTAB" with the definer "S" to request the image. The entire DLN is required when requesting a SCRIPS document. In some cases a Universal Access Routing (UAR) Code, must be entered as the last line of the data. This code includes the following: @, SC (at, numerical code of the Campus that processed the SCRIPS documents). Enter data with no spaces.

    4. Non-SCRIPS Campuses must use the UAR code in addition to the input currently requested in IRM 2.3.

    5. SCRIPS Campus sites should only use the UAR code when they are requesting documents from another SCRIPS Campus site.

    6. During the transition to SCRIPS, some documents may be microfilmed on the old system. If a SCRIPS image is not received after requesting through CC "ESTAB" "S" , use "ESTAB" "M" . See the procedures for OCR and Integrated Submission and Remittance Processing (ISRP) system documents.

  4. OCR and ISRP Documents:

    1. Input requests using ESTAB with both definers "S" and "M" . During the conversion to SCRIPS, OCR and ISRP documents may have been either imaged or microfilmed.

    2. Only ten digits of the DLN are required when requesting microfilmed documents (the DLN minus digits 3, 4, 5, and 14).

    3. The procedures for ESTAB "M" are contained in IRM 2.3.62, Command Code ESTAB. The following exceptions apply for input of Form 1096 requests: Use Micro Request CD "4" ; MFT 01 (BMF) or MFT 30 (IMF); Enter the modified DLN as the Micro Request number; and Enter Micro Code "R" after the tenth digit of the DLN.

    4. In the remarks section, enter "1096 Request" and the list year of the DLN (digit 14).

    5. Form 3774, Request for Research, may be used as an alternate method for requesting copies of Form 1096. Complete all applicable sections of Form 3774. The DLN of the Form 1096 must be entered in the remarks area followed by "1096 Request." If the Form 1096 was processed in another Campus, complete Form 3774 and route it to the appropriate Campus.

  5. Form W-2 and Form W-3: Use Form 3774 to request microfilm copies of Form W-2 and Form W-3. Complete all applicable sections of Form 3774 to ensure the complete request will be returned to the requester.

    1. Enter "W-2 Penalty" in the category section (Box 2) on Form 3774.

    2. Enter the Microfilm Sequence Number (MSN) of the Form W-3 in the remarks. To convert the MSN back to the 11 digit number assigned by SSA, drop the first two digits (Campus (formerly referenced as Service Center) code) and the fourteenth digit (list year). These digits were added to allow the IRS to process the information.

    3. Also, enter "W-3 and all W-2s" in the remarks for Form W-2 and Form W-3 requests.

      Note:

      The MSN(s) must be highlighted to ensure proper handling.

    4. Forward the request to the following address to obtain a print of the document. Allow 4 weeks for receipt of the requested microfilm.

    5. Beginning in 2009, all Wage Information Retrieval System (WIRS) requests need to be via the Online Retrieval System (ORS).

20.1.7.1.9  (07-15-2011)
Creating Entities or Name Lines for Non-Return Civil Penalty Cases

  1. These procedures are required to establish entities if there is no entity on the BMF or IMF or where a civil penalty name line (CVPN) must be established (the CVPN applies to IMF accounts only) to assess the penalty.

  2. An account will be created on the Master File to manually assess the penalty on IDRS.

  3. Campus sites will manually assess all IRP penalties on IDRS. Research must be completed prior to making the assessment to ensure that the penalty is being assessed to the correct filer's account. However, in the event one of these assessments goes unpostable, the case may be referred to the IRP Penalty unit to correct the entity problem.

  4. These procedures will also be used when no-merge transcripts are generated for penalties assessed on the wrong SSN.

20.1.7.1.9.1  (07-15-2011)
BMF Entities

  1. The Entity Function is the only area authorized to establish BMF accounts. Hand carry or use Form 3210, Document Transmittal, to route all cases that require that an account be established on the BMF to the Entity Control Unit. Maintain controls for all cases routed to Entity and ensure that they are returned for penalty assertion.

  2. Assess the appropriate penalty on IDRS following the instructions in this IRM section. Verify that the penalty was not previously assessed on the Civil Penalty Module (CPM).

20.1.7.1.9.2  (07-15-2011)
IMF Entities

  1. All IMF penalties must be assessed against the responsible individual. Assessments against joint accounts will not post to the Civil Penalty Module (CPM).

    1. After entity is established on the CPM or the civil penalty name line (CVPN) is created, the penalty should be manually assessed following the appropriate instructions in this IRM.

    2. In addition, correspondence should only be sent to the responsible (liable) individual. Ensure that the non-responsible spouse's name is removed before sending out a notice.

  2. An unpostable condition will occur when the taxpayer does not have an account on the IMF under his or her own SSN. Using the valid individual SSN, establish the account using CC "ENREQ" with TC 000.

  3. If the penalty is to be assessed against a spouse filing as the secondary taxpayer on a joint individual tax return and that spouse has no account on the IMF, establish an account using "ENREQ" with TC 000.

    1. Assess the appropriate penalty following the instructions in this IRM section. Verify that this is not a duplicate assessment.

    2. Once an account is established, Master File processing will establish a Civil Penalty Name Line (CVPN) on MFT 55 when the civil penalty assessment is input. Once created, the CVPN remains on the account and applies to all civil penalty periods.

  4. Special action to establish a CVPN for assessing civil penalties is required if all of the following conditions are met:

    1. The current account is, or has ever been married filing joint,

    2. The assessment will be against the primary taxpayer whose SSN controls the account, and

    3. The account does not already have a CVPN.

      Note:

      If a CVPN already exists, MFTRA transcripts and CC "INOLE" or CC "ENMOD" will display it after the current name and address data.

  5. To establish a separate CVPN, use an IMF entity change (CC "ENREQ" to generate a TC 013) with the special CVPN procedures described in the IDRS Handbook. When using this special procedure, only the CVPN change may be input. No other entity change information is permitted. Information to otherwise update the entity, such as an address change, should be input before establishing the CVPN. When using this procedure, both first and last names must match the Master File name. If the name does not show on IDRS/Master File, check CC "MFTRA" or "INOLE."

  6. If the correct account is on the Master File and has a CVPN, the name line may be updated (e.g., taxpayer's current account name is Mary Jones and the CVPN is Mary Smith) by input of CC "ENREQ" with the special procedures described above.)

    • EXAMPLE 1: A joint account is on Master File for John and Mary Doe (John's is the controlling SSN). A penalty is to be assessed against John. The account has no existing CVPN.
      Action : Input a CVPN for "John Doe" using the special procedures for establishing a CVPN shown in the IDRS Handbook. The penalty may be assessed immediately.

    • EXAMPLE 2: On the same joint account as above, the penalty is to be assessed against Mary Doe. Mary has an account on Master File under her own SSN with the name line of Mary Jones because she filed individually before filing jointly with John Doe. There is no CVPN on her account because she is the secondary taxpayer.
      Action : Input a name change (and address change, if appropriate) to her existing Master File account, then assess the penalty. No CVPN has to be input because she is the secondary taxpayer.

    • EXAMPLE 3: On a Joint account for John and Mary Doe, the penalty is to be assessed against Mary. However, Mary has no account under her SSN on the Master File.
      Action : Establish an account for her on the Master File using her SSN with TC 000, as described in the IDRS Handbook, then assess the penalty. No CVPN has to be input.

    • EXAMPLE 4: John Doe has a separate account without a CVPN on Master File and a penalty is to be assessed.
      No special name line action is required, the penalty may be assessed and a CVPN will be generated by Master File.

    • EXAMPLE 5: John and Mary Doe do not have an account on the Master File since they are non-filers. A penalty is to be assessed against John. If a joint return is to be processed as a delinquent or substitute, a joint name line should be established before establishing a CVPN. Once the joint entity is established, follow the special CVPN name line procedures to establish CVPN for John.

20.1.7.2  (07-15-2011)
Powers of Attorney for Civil Penalties

  1. Accountants, attorneys, enrolled agents, or other representatives from whom a taxpayer has requested assistance on tax issues submit inquiries to the IRS. The third party representative expects a reply to the inquiry so that the issue can be explained to the taxpayer.

    1. To authorize the third party reply, the representative may submit a Form 2848, Power of Attorney and Declaration of Representative, or

    2. Form 8821, Tax Information Authorization.

      Note:

      The power of attorney (POA) requests are referenced as "POAs" and the tax information authorization (TIA) requests are referenced as "TIAs."

  2. POA documentation may be received with a response to a civil penalty notice. The POAs or TIAs cannot be entered on the Centralized Authorization File (CAF) because civil penalties are asserted against non-return information documents. To ensure valid POAs/ TIAs are recognized:

    1. The POA/TIA should be kept with the penalty case file and used for all subsequent correspondence.

    2. When the penalty case and the POA/TIA are not kept together, local procedures must be established to maintain a civil penalty data base or listing.

20.1.7.2.1  (07-15-2011)
Authorized Third Party

  1. If a valid POA or TIA is received, copies of correspondence pertaining to the taxpayer should be sent to the authorized representative.

    Note:

    Refunds are not allowed to be sent to appointees named on Form 8821.

  2. A reply from a valid POA should be handled in the same manner as if the taxpayers themselves were responding.

  3. Original documents, photocopies, or documents submitted by FAX transmission are acceptable for processing.

  4. If the POA or TIA is received with the response to the CP 215/CP 15 Notice, review the document(s) for the following information:

    1. The name and mailing address of the taxpayer;

    2. Identification number of the taxpayer (e.g., social security number, ITIN, employer identification number);

    3. Employee plan number (if applicable);

    4. Name and mailing address of the representative(s)/ appointee(s);

    5. The type of tax involved, the federal tax form number, the specific year(s)/ period(s) involved (in estate matters the decedent's date of death), and specific tax matter or actions to be performed;

    6. The taxpayer(s)' signature(s); and

    7. In the case of a Form 2848, a completed Declaration of Representative (Part II).

  5. If the POA is granted to an attorney, CPA, enrolled agent or actuary, a declaration of good standing before the IRS must be signed by the designated representative (Part II of Form 2848).

  6. If any of the items listed above are missing, if possible call the submitter during normal business hours and request the missing items. If the submitter cannot be reached, reject the request as invalid and return it to the taxpayer.

  7. If the POA/TIA is valid and it specifies that it is for the CP 215/CP 15 Notice only, file it in the penalty case file.

    Note:

    The form may also specify the Form 1099 (series), Form 1096 or Civil Penalty, etc.

    1. If the POA/TIA does not specify CP 215/CP 15 Notice only, but does include authorization for tax returns, make a copy of the document for the penalty case file to be used with any subsequent correspondence, and,

    2. Route the original POA/TIA to the appropriate CAF unit.

  8. See IRM 4.11.55, Power of Attorney Rights and Responsibilities, for additional information regarding POAs and TIAs.


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