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Part 21. Customer Account Services

Chapter 6. Individual Tax Returns

Section 6. Specific Claims and Other Issues (Cont. 1)

21.6.6  Specific Claims and Other Issues (Cont. 1)

21.6.6.4 
Specific Claims Procedures

21.6.6.4.19 
Federal Income Tax Forgiveness for Certain United States (U.S.) Military and Civilian Employees and Other Individuals

21.6.6.4.19.2 
Killed in Terrorist Action (KITA)/Killed in Action (KIA) and Astronauts Killed in the Line of Duty

21.6.6.4.19.2.2  (06-12-2009)
KITA/KIA Procedures for All Functions

  1. KITA/KIA processing is expedited at all times. Follow guidelines in the table below:

    Signature The rules regarding decedent returns apply.
    Income and Deductions Exclude all income and deductions of the decedent only. If a joint return is filed, an allocation is required on joint income (e.g., interest, dividends, etc.) and deductions. Payments and deductions may be allocated differently in community property states.
    Balance Due Returns Payment is usually received with the return. Normal collection procedures apply for deceased taxpayer's balance due returns received without payment.
    Transaction Codes (TC) 420 or 922 The AM KITA/KIA Coordinator or designated employee will contact the Compliance KITA/KIA Coordinator. For a list of KITA/KIA Coordinators,

    Note:

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

    Due Dates Normal filing dates apply for both the original and any amended returns. Decedent's administrator/surviving spouse may request an extension of time to file which is granted if normal conditions are met.

    Exception:

    For KIA - IRC Section 7508(a) may have already provided additional time to file due to the decedent's service in combat zone.
    Clearing and Deposit Follow normal procedures if a remittance return is received.
    Numbering and Batching KITA/KIA returns are hand carried and batched by current year and prior year.
    Interest and Penalties See IRM 21.6.6.4.19.2.3.1,Interest Computation.

    Reminder:

    Statutory exceptions (per IRM 20.1, Penalty Handbook) should be applied liberally when determining if penalties are to be assessed. Before assessing penalties, contact the AM KITA/KIA Coordinator.

  2. Unpostables — The Technical Unit or designated function monitors all actions they have taken on KITA/KIA accounts and will contact Unpostables concerning the resolution of an unpostable condition. A new reason code, "2" was established for Unpostable 164. The criterion for generating is TC 150, 290, or 300 input to an account containing the KITA or Hostage indicator. The Unpostable function will contact the Kansas City Campus to have them check the Victim's list. If the taxpayer is not on the list, the Unpostable function will process the return. The Kansas City Campus will remove the KITA indicator. If the taxpayer is on the list, the return will be forwarded to the Kansas City Campus. This unpostable check will be bypassed for TC 150 with Computer Condition Code "O."

  3. Organization/Function/Program (OFP) - Program 82385 must be used to report time working on KITA/KIA returns.

21.6.6.4.19.2.3  (10-01-2009)
Technical Unit or Designated Function KITA/KIA and Astronauts Killed in the Line of Duty

  1. All returns (original or amended) and all case files/inquiries are expedited to the Technical Unit or designated function. Except as specified in the following instructions, Normal Procedures must be followed.

  2. If any of the years in question have a:

    1. TC 420 — Contact the appropriate Compliance KITA/KIA Coordinator who will determine the proper case disposition in conjunction with the Area/Territory Office Examination function.

    2. TC 922 — Contact the appropriate campus Compliance KITA/KIA Coordinator who will secure the return and case file. The Underreporter case is closed to the function handling the KITA/KIA return(s).

    3. Open Control — Contact the employee and tell them to send you what they have. Consider all information when working the KITA/KIA case.

    4. -Z Freeze — Refer case to the Fraud Detection Center.

  3. Examine returns for completeness. If missing items can be determined from other parts of the return or attachments complete the missing section. "KITA/KIA" must be stamped or written across the top of the return. Returns/claims filed due to the Victims of Terrorism Tax Relief Act of 2001 should be identified as KITA anthrax, or KITA 9/11. Returns filed due to the Military Family Tax Relief Act of 2003 should be identified as KITA astronauts.

  4. Check Command Code (CC) ENMOD for the literal "KITA" next to the Name Control. If not present, use CC ENMOD/ENREQ to input the indicator "1" in the KITA field of CC INCHG. Use "No source document" (NSD). Enter "KITA" or "KIA" and the event in the remarks. This action will generate a TC 016 on ENMOD. To turn off the setting input indicator "9."

  5. Verify the dependent TINs. If invalid and unable to find a valid TIN, contact the claimant.

  6. All contact with the administrator/surviving spouse is made through the appropriate KITA/KIA Coordinator or designated employee. Record all activities on document history sheets. The documentation must include the date and action. Both tax years must be kept in the same file. If only one return is received, such as the 2007 original return, call or write the victim's family and/or representative to remind them of the forgiveness available on the other tax years. Do not delay the processing of the return you received.

  7. A certification from the Department of Defense, the Department of State, or a death certificate must accompany all returns and claims for refund.

    Note:

    Returns filed for victims due to the Victims of Terrorism Tax Relief Act of 2001 and due to the Military Family Tax Relief Act of 2003 are verified against a listing maintained by the Kansas City KITA Project Office. If the taxpayer's name is not on the list you must request a certified copy of the death certificate prior to issuing a refund. Kansas City will indicate the need to secure a certified death certificate on cases sent to your office.

  8. In KIA cases the date of entry into a combat zone is needed to process the return/claim. This date may be found on CC IMFOLE, or noted on the claim/return. For additional information on how to identify the entry and exit dates for combat zone see IRM 5.19.1.4.10.4, Combat Zone Freeze Code.

  9. Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer must accompany all returns and claims for refund.

    Note:

    A Form 1310 is not required if the surviving spouse is filing an original or amended joint return with the decedent, or the administrator is filing an original Form 1040, Form 1040A, Form 1040EZ, or Form 1040NR, for the decedent and a court certificate showing their appointment is attached to the return.

  10. Contact must be made, when possible, by telephone. If unable to reach the administrator/surviving spouse after two calls, request the information in a letter.

    Note:

    Before disclosing any tax information, you must be sure you are speaking with the taxpayer or authorized representative (see IRM 21.1.3.2.3, Required Taxpayer Authentication). Before leaving a message on a taxpayer's answering machine, refer to IRM 11.3.2.6.1, Leaving Information on Answering Machines/Voice Mail.

  11. In all cases, ask the administrator/surviving spouse to provide the information in 30 days. Inform them that without the supporting information we will not be able to issue a refund. Also, we may have to increase the tax they owe or reduce the refund.

  12. If no reply is received within 45 days call or send a follow-up letter. Tell the administrator/surviving spouse to provide the information in 10 days, then wait 15 days for a reply.

  13. If no reply is received after the second contact, call or send another follow-up letter. Wait an additional 15 days for a reply.

  14. If no reply to the third request follow normal "No Consideration" procedures in IRM 21.5.3.4.6, for amended returns.

  15. For joint returns, if the missing/incomplete information is the allocation of income/deductions, process as a normal joint return. Verify the tax is correct for filing status 2 and edit if necessary. Apply the ≡ ≡ ≡ ≡ ≡ "tax tolerance" only if it benefits the taxpayer.

  16. For all other issues, use the Correspondence Action Chart in IRM 3.11.3.6.3.3, No Reply/Incomplete Reply/Undeliverable Correspondence, to code original returns for processing if the taxpayer does not provide ALL requested information, correspondence is returned by the United States Postal Service (USPS) as "undeliverable," or all correspondence conditions were not included when the first correspondence was sent.

    Note:

    Do not edit an RPD when any of the above applies.

  17. Edit a CCC "U" on all"no reply" returns in addition to the other actions specified in the Correspondence Action Chart, except when any of the following apply:

    • The only correspondence item was for withholding support

    • The correspondence was not required

    • All correspondence conditions were not included when the first correspondence was sent.

  18. For late"no reply" returns, honor the original received date.

  19. Send the administrator/surviving spouse a letter informing them to file a Form 1040X with the required information. Remember, if a manual refund is not issued (no "O" code), the original return will unpost. Call the Kansas City KITA Office at 816-325-2860 and let them know the return will unpost. When the Unpostable Function calls the KITA office they will be told to post the return. Make sure all of your actions are clearly documented on the history sheet you attach to the return. The return will post when input the second time.

  20. The CCC "O" may also be present if a taxpayer is issued a manual refund before the return posts. When processing the original 2008 tax year returns for KITA/KIA also adjust the Recovery Rebate Credit.

    1. The administrator/surviving spouse may inquire as to why they did not get the RRC.

    2. If the surviving spouse and the decedent are not eligible, explain to the surviving spouse/administrator.

    3. If the surviving spouse and the decedent are eligible for the RRC:

    • Determine the amount for the RRC and edit the appropriate amount on Form 1040 (line 70), Form 1040A (line 42), or Form 1040EZ (line 9) if processing an original return. If processing an amended return and the RRC needs to be adjusted, refer to IRM 21.6.3.4.2.12.7, Adjusting 2008 RRC .

    Note:

    Refer to IRM 21.6.3.6.7.7.4Return Posting with Computer Condition Code (CCC) " O", for additional information.

  21. The following applies to ALL KITA/KIA original returns:

    • Edit (in red) the return, beginning with the total tax line. Apply the ≡ ≡ tax tolerance only if it benefits the taxpayer. Edit, if applicable, all items following the tax including the minimum payment/credit amount and the "refund" amount, or the "amount owed." Enter Computer Condition Code (CCC) "Y." Code the entity portion and address. Enter the appropriate CCC (F, W, L, etc.). See (24) below if a joint return.

    • Prepare a manual refund, if applicable: enter CCC "O" on the return. Follow normal procedures including research for outstanding balances. Attach a copy of the manual refund form to the return. See IRM 21.6.6.4.19.2.3.1, Interest Computation.

      Note:

      If outstanding balances, send the appropriate offset letter prior to satisfying the debts.

      Exception:

      Contact the Kansas City KITA Office at 816-325-2860 if any of the following conditions are present:
      • Non-filer/SFR (Substitute for Return) for two years or more
      • Underreporter with balance due for two years or more
      • Examination assessment over $2,000 (per tax year) with a balance due

    • Notate the following in the lower left hand corner of page 1 of the Form 1040/1040A/1040EZ:
      • KITA or KIA
      • Employee name
      • Employee telephone number

    • Hand carry the return to Batching with Form 3210. If an error code generates during processing, the ERS Function will suspend the document and contact the employee. All math errors must be resolved prior to the processing of the return. Contact the victims' family and/or representative if necessary.

    • Contact the victims' family and/or representative, via telephone or letter, regarding the adjustment actions taken on KITA amended or original tax returns. Provide the tax forgiveness amounts, the refund amounts including the Recovery Rebate Credit (if changed from the taxpayer's amount), the anticipated dates the refunds should be received, interest amount allowed with the refund, and the IRS employee name, identification number, telephone number, and address to contact if there are any questions.

    • Monitor for posting and to confirm the refund, if any, is issued.

    • Destroy copies of returns used for monitoring purposes and all duplicate information.

    • File all other documentation, including the history sheets, by inputting a TC 290 .00 on the latest KITA/KIA year filed. In remarks put: "KITA" or "KIA" documentation.

  22. The following applies to ALL KITA/KIA amended returns:

    • Math verify for completeness.

    • Adjust the tax. Apply the ≡ ≡ ≡ ≡ "tax tolerance" only if it benefits the taxpayer. Use Reason Code 99, Source Code 1, hold code 4 if the adjustment results in an overpayment, and use the appropriate blocking series. Enter "KITA" or "KIA" and the event in the remarks. DO NOT ADJUST THE INCOME. Leave the control base open and monitor until all actions have posted.

      Note:

      Adjustments made to an electronically filed return account must use blocking series 05 (do not use blocking series 18).

    • Prepare a manual refund if applicable. See IRM 21.6.6.4.19.2.3.1, Interest Computation.

    • All claim disallowances must be reviewed by the KITA Project coordinator.

  23. If the return/claim is filed due to the Victims of Terrorism Tax Relief Act of 2001 or the Military Family Tax Relief Act of 2003, the following applies:

    Note:

    Only: KITA Anthrax, KITA 9/11, KITA Oklahoma City, KITA Pentagon, KITA Astronaut.

    1. See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for taxes not eligible for forgiveness.

    2. Tax on the decedent's income would have been received if the decedent had not died; such as paycheck, dividends, etc., is forgiven.

    3. Death benefits paid by the employer if they are paid as a result of the decedent being a victim of the terrorist attack are excluded. If these death benefits would have been received for any cause of death, then normal rules apply.

    4. A minimum tax relief benefit of $10,000 is provided to victims of April 19, 1995, September 11, 2001, Anthrax, and any astronaut whose death occurs in the line of duty after December 31, 2002. This minimum applies to the original and amended Form 1040, and Form 1041 returns. Publication 3920, Tax Relief for Victims of Terrorist Attacks, suggests to the taxpayer to file the amended and original returns together. To determine if the individual has been given the minimum relief, consider the total tax forgiven. Penalties and interest previously paid on tax liability forgiven by the Act are not included in the computation of the minimum relief. Also included is the tax forgiven on the Form 1040 (a worksheet is included in Publication 3920). If necessary, check IDRS for adjustments to the years involved. If unable to determine if all returns are filed, contact the administrator/surviving spouse. See IRM 21.6.6.4.19.2.3(3) for correspondence procedures. Question whether a Form 1040 or other returns will be filed. Tell the administrator/surviving spouse to send the returns to you. If you receive a return that has not come through the Kansas City KITA Office, call 816-325-2860 so the information can be added to the national database. See IRM 21.7.4.4.1, Form 1041, U.S. Income Tax Return for Estates and Trust, for additional information on Form 1041. Per normal procedures, if the taxpayer has questions you are unable to answer, write them up and refer to your work leader or manager. Apologize to the taxpayer for not being able to answer the inquiry immediately. Inform them they will receive a response as soon as possible but no later than 3 business days.

      Note:

      Do not delay refunds waiting to receive additional returns. If the return (amended or original) you have is processable, complete the case processing expeditiously. If additional return(s) are received, the account must be adjusted accordingly.

    5. If the minimum amount has not been forgiven, the taxpayer can claim a payment/credit up to $10,000 on the "Other Payments " line of the last taxable year. For tax year 2001, Form 1040 this is line 65 or line 59 for 1995 Form 1040. The taxpayer has been instructed to write "Sec 692(d)(2)" to the right of line 65, above line 66 for 2001 Form 1040 and to the right of line 59 above line 60, for 1995 Form 1040.

    6. If a Form 1040X is filed to claim the relief, the amount can be entered on Line 15, with the same write-in, to allow the credit input TC 290.00 if no other adjustment is required. Use the credit reference number 766 to allow the credit or credit reference number 767 (with a minus sign) to decrease a previously posted credit. Use RC 99, SC 1, the appropriate hold code, and blocking series.

    7. For amended returns received prior to the signing of Public Law 107-134, Victim of Terrorism Tax Relief Act of 2001, the date of enactment, January 23, 2002, must be used in the AMD-CLMS-DT field.

    8. On claims related to the April 19, 1995, terrorist attack, input "S" for the "OVERRIDE-CD" and insert the received date of the claim in the "RFSCDT" field. This will override the Refund Statute Expiration Date (RSED).

  24. Joint returns — Only the decedent's part of the joint income tax liability is eligible for the refund or tax forgiveness. Refer to the worksheet in Publication 3920 Tax Relief for Victims of Terrorist Attacks. To determine the part attributable to the decedent, the person filing the claim must complete the following steps:

    1. Figure the income tax for which the decedent would have been liable as if a separate return had been filed.

    2. Figure the income tax for which the spouse would have been liable as if a separate return had been filed.

    3. Multiply the joint tax liability by a fraction. The top number of the fraction is the amount in a) above. The bottom number of the fraction is the total of a) and b). The result is the decedent's tax liability that is eligible for the refund or tax forgiveness. Apply the ≡ ≡ ≡ ≡ "tax tolerance" only if it benefits the taxpayer.

  25. If the decedent's administrator/surviving spouse is unable to complete the process in (24) above, they should attach a statement of all income and deductions indicating which belongs to each spouse. You must then make the proper division.

  26. If the member of the Armed Forces was domiciled in a community property state and the spouse reported half the military pay on a separate return, the spouse can get a refund of taxes paid on his or her share of the pay for the years involved. The forgiveness of unpaid tax on the military pay would also apply to the half owed by the spouse for the years involved.

  27. Kansas City will prepare a weekly report.

21.6.6.4.19.2.3.1  (10-01-2008)
Interest Computation

  1. Following is information on the date from which interest should be computed on the $10,000 minimum benefit (make-up payment) and any actual payments a victim made with respect to tax that the Act now forgives.

  2. Normal rules apply unless otherwise specified. The "make-up " payment is considered paid on the date of enactment of the Act, January 23, 2002. Following normal rules regarding the accrual of interest, interest may or may not be computed on that payment from that date.

  3. Interest will not begin to accrue prior to the filing of a return with respect to a victim who had a filing obligation prior to the enactment of the Act. Victims who did not have a filing requirement, (for example, children who had not earned sufficient income to have a filing requirement) will be paid interest on the "make-up " payment from January 23, 2002, even if a return claiming the $10,000 minimum relief is not filed until a later date, so long as the return or claim for refund is timely under IRC Section 6511.

  4. The following scenarios illustrate the application of the rules:

    Example:

    A World Trade Center victim dying in 2001 filed timely for 2000, making tax payments of $2,000 by April 15, 2001. For tax year 2001, the victim had income tax withholding payments of $2,500. The victim is entitled to a $5,500 make-up payment. ($2,000 +$2,500 + $5,500 = $10,000) Solution—Interest with respect to payments regarding tax year 2000 begins to accrue April 15, 2001. If a timely return is filed for 2001, interest for both the $2,500 withholding payments and the $5,500 make-up payment begins to accrue April 15, 2002. If the Service pays a refund within 45 days after April 15, 2002, interest will not be paid on the 2001 tax year.

21.6.6.4.20  (10-01-2008)
Virgin Island Form 1040 and 1040A

  1. Route claims received from taxpayers residing in the Virgin Islands to the Austin Campus for processing. Follow procedures below:

    1. Check the TC 150 DLN for blocking series 630–639 (Virgin Island).

    2. Write "Virgin Island" on the transmittal.

    3. Send a Letter 86C to the taxpayer advising of the transfer.

21.6.6.4.21  (11-14-2008)
Electronic Filing System (e-file)

  1. Refer to IRM 21.7.4.4.4.15, Electronic Filing of Corporate Returns, for information on electronically filed Form 1120,U.S. Corporation Income Tax Return, Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, Form 1120S, U.S. Income Tax Return for an S Corporation , and Form 990, Return of Organization Exempt From Income Tax. Utilize CC TRDBV, or CC RTVUE, or CC BRTVU, if TRDBV is unavailable, to verify return information in lieu of requesting an Electronic Filing (ELF) return (hard copy print). Only obtain a hard copy of the ELF return if it must be reprocessed or reinput.

  2. For tax years prior to 1998, use CC ESTAB or CC ELFRQ.

    Reminder:

    ELFRQ may only be used in the campus that processed the electronic return (and Form 8453) and campuses linked to that processing campus via IDRS.

  3. For tax year 1998 and subsequent, use CC TRPRT to request graphic prints. The TRPRT graphic will be available nationwide regardless of where the return was filed. The TRPRT print is not considered the original return. The print will be labeled "TRPRT PRINT DO NOT PROCESS" . See IRM 21.5.2.4.23.1 , Reprocessing Electronic Returns. However, when the return must be reprocessed, the TRPRT print will be used. Refer to IRM 21.2.2.4.4.6, TRDB CC TRPRT (Tax Return Print) Input , for additional information on TRDBV and TRPRT.

    Note:

    When reprocessing an E-file return, you must check the TRPRT print for the Personal Identification Number (PIN). If there is no PIN on the TRPRT print, you must request Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, see (4) below, and attach a copy of the Form 8453 to the TRPRT print.

  4. Do not use blocking series 18 for e-filed returns. Use the applicable blocking series for the type of return/situation you are adjusting . Refer to Returns Processing Adjustment Blocking Series in Document 6209, IRS Processing Codes & Information, for a listing of adjustment blocking series.

    Note:

    Refer to IRM 21.5.4.4, Math Error Procedure Processing and IRM 21.5.3.4.6, No Consideration and Disallowance of Claims and Amended Returns.

  5. Request Form 8453, U.S. Individual Income Tax Declaration for Electronic Filing, if needed. When using CC ESTAB, enter the applicable MFT and "8453" for the form. If 8453 is not input for the form, the request will be systemically rejected. When using CC ELFRQ, use action "2" .

    Note:

    For tax year 2003 and subsequent, the DLN of the Form 8453, can be obtained through Command Code (CC) R8453. Input R8453, space and the taxpayer's social security number. For tax years prior to 2003, use the DLN of the original return.

  6. DO NOT attach information (e.g., loose forms, schedules, and correspondence) to an ELF return. To identify an ELF DLN see Document 6209 Section 4, Document Locator Number, Part 3 Campus and Filing Location Codes. Use the following procedures:

    1. File the information using TC 290 with the applicable blocking series for the type of return/situation you are adjusting using the non-refile DLN.

    2. DO NOT use an "attachment" or "association form."

      Note:

      These procedures are not needed for documents scanned into Correspondence Imaging System (CIS). CIS serves as the retention area for these documents.

  7. Electronic Filing Unit (EFU) may forward Form 3465, Adjustment Request, to the Adjustments/Correspondence Branch with a problem annotated. Take normal adjustment action.

21.6.6.4.22  (10-01-2008)
Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

  1. Take the following action if the taxpayer submits a payment for excise tax and attaches a Form 5330, Return of Excise Taxes Related to Employee Benefit Plans (Voucher Update Document):

    1. Detach and photocopy the Form 5330. Attach Form 1725, Routing Slip, to the photocopy of Form 5330 and route to Ogden, UT 84201–0027, M/S 6270 Attn.: Employee Plan (EP) Accounts Unit (this is the EP unit in Ogden responsible for all "Post Processing" EP work).

    2. Write "Photocopy Only — Do Not Process" across the front of the form.

    3. Route the original Form 5330 to Receipt and Control for processing to the Business Master File (BMF). Receipt and Control has instructions to transship the Form 5330 to Ogden for processing.

    4. Process adjustment per Form 1040, or Form 1040X if necessary, using the SC 1, RC 099, and appropriate blocking series.

    5. Use a hold code to prevent release of the excise tax payment.

    6. Annotate the Form 1725 that the original Form 5330 was sent to Ogden for processing and that the credit is posted on the IMF.

    7. Advise the EP function of the credit on Individual Master File (IMF) available for transfer to BMF MFT 76.

21.6.6.4.23  (10-01-2008)
Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts

  1. Form 8697, is filed with Form 1040X. See IRM 21.7, Business Tax Returns and Non-Master File Accounts, for background information.

  2. Determine if discrepancies exist between liabilities reported by the taxpayer on the overpaid or amended Form 8697 and the related income tax accounts.

    If And Then
    Discrepancies exist   Close to Examination using local routing procedures.
    NO discrepancies exist IMF - The claim is ≡ ≡ ≡ or more. BMF - The claim is ≡ ≡ ≡ ≡ ≡ ≡ or more Refer to Examination as Category A.
    NO discrepancies exist IMF - The claim is less than ≡ ≡ ≡ . BMF - The claim is less than ≡ ≡ ≡ ≡ Process following normal adjustment procedures.

21.6.6.4.24  (10-01-2008)
Public Safety Officers Killed in the Line of Duty

  1. If all of the following conditions are satisfied, the Taxpayer Relief Act of 1997 generally excludes from income amounts paid:

    • After December 31, 1996,

    • As a survivor annuity,

    • On account of the death of a public safety officer,

    • To someone who is killed in the line of duty after December 31, 1996,

    • To the extent that the annuity is attributable to the officer's service as a law enforcement officer.

  2. The survivor annuity must be provided under a governmental plan to the surviving spouse (or former spouse) of the public safety officer or to a child of the officer. Public safety officers include law enforcement officers, firefighters, rescue squad or ambulance crew. The provision does not apply to the death of a public safety officer if it is determined by the appropriate supervising authority that:

    1. The death was caused by the intentional misconduct of the officer or by the officer's intention to bring about the death,

    2. The officer was voluntarily intoxicated at the time of death,

    3. The officer was performing his or her duties in a grossly negligent manner at the time of death, or

    4. The actions of the individual to whom payment is made were a substantial contributing factor to the death of the officer.

  3. If an amended return claims this exclusion, the filer must provide a copy of the death certificate and a letter from the employing agency to substantiate the claim. Follow normal claims processing procedures.

21.6.6.4.25  (10-01-2003)
Exclusion of Income by Junior Reserve Officers Training Corps (JROTC) Instructors

  1. Taxpayers, retired from the military service, are citing IRC Section 134 of the Internal Revenue Code, claiming their compensation as JROTC instructors is tax exempt. A JROTC instructor's salary is fully includable in gross income as compensation for services under IRC Section 61(a)(1).

  2. Disallow the claim. Send the Letter 105C. Include the following information: "We disallowed your claim to exclude compensation received as a JROTC instructor from your income. The amount you received as a JROTC instructor for teaching is characterized as salary, rather than as an allowance. Internal Revenue Code Section 134 does not apply because the salary at issue does not meet the statutory definition of a qualified military benefit. Rev. Rul. 71-307 concluded that the compensation received by JROTC instructors is fully includable in gross income."

21.6.6.4.26  (10-01-2009)
Meal Expense Deduction

  1. A deduction for meal expenses may be available for meals consumed while traveling away from home. Away from home according to IRC Section 162(a)(2) means traveling away from home on business that requires the taxpayer to remain away from home overnight at the time of the expense. A deduction for a meal expense also may be available in other limited circumstances, such as an entertainment expense.

  2. Generally, business-related meal and entertainment expenses according to IRC Section 274(n), are subject to the 50% deduction limit. A higher percentage may be deducted if meals take place while a taxpayer is traveling away from home and is required to remain away from home overnight during, or incident to, any period of service subject to the Department of Transportation's (DOT) hours of service limits. The deductible percentage is phased in as follows:

    If the Tax Year is Then the Deductible percentage is
    1998, 1999 55
    2000, 2001 60
    2002, 2003 65
    2004, 2005 70
    2006, 2007 75
    2008 and subsequent 80

    Note:

    See Publication 17, Your Federal Income Tax Return, for complete information and requirements on meal expense deduction and for individuals subject to DOT's "Other Income" and "hours of service" limits. See Publication 463, Travel, Entertainment, Gift and Car Expenses, for more information on when meal expense deductions are allowed, and for more information on this and other exceptions to the 50% deduction limit.

  3. Review claim for completeness. If all requirements are met, input the necessary adjustment. If all requirements are not met, refer to IRM 21.5.3, General Claims Procedures for claim disallowance. If unable to determine that all requirements are met, refer to IRM 21.5.3.4.7.2.1 , Examination Technical Assistance Request.

21.6.6.4.27  (04-01-2009)
Lottery Winnings

  1. Many lottery winners receive their lottery prizes in yearly installments over a 20 to 26 year period. The winners are sometimes allowed to sell their rights to the future payments, to third parties in exchange for a lump sum payment. These lump sum payments can range from several thousand to several million dollars.

  2. The lump sum payments should be reported as "Other Income" on Form 1040. Taxpayers are filing amended returns to change the income to capital gains. This allows them to benefit from the preferential capital gains tax rates versus the ordinary income tax rates. Disallow the claim, include in the 105C the following disallowance language: "Proceeds from the sale of rights to receive lottery winnings are ordinary income and may not be treated as a capital gain."

21.6.6.4.28  (10-01-2009)
Form 8873, Extraterritorial Income Exclusion

  1. Form 8873, is used to calculate the amount attributable to foreign trading gross receipts that a taxpayer may exclude from gross income for the tax year. The exclusion applies to both corporate and noncorporate taxpayers and is applicable to certain qualifying transactions entered into after September 30, 2000. The Form 8873, should be attached to an income tax return.

  2. See Form 8873, and its Instructions for more details on qualifying foreign trading gross receipts and other information. The form and instructions are available at http://www.irs.gov .

21.6.6.4.29  (10-01-2006)
Clean Fuel Vehicle Property

  1. IRC Section 179A provides the rules on deductions for clean-fuel vehicles and certain refueling property.

  2. Rev. Proc. 2002-42 applies to motor vehicles (other than buses, trucks, and vans with a gross vehicle weight rating greater than 10,000 pounds) that are propelled by both a gasoline internal combustion engine and an electric motor that is recharged as the motor vehicles operate (hybrid vehicles) and that otherwise meet the requirements of IRC Section 179A.

  3. Taxpayers who placed the type of vehicle described above in service on or before December 31, 2003, may qualify for a $2,000 deduction. The amount is a reduction to adjusted gross income and for tax year 2002 should be entered on line 34 Form 1040. The taxpayer should also enter the amount of their deduction and "Clean-Fuel" on the dotted line next to line 34. No additional documentation is required.

  4. Before it was amended in 2004, the deduction for Clean-Fuel Vehicle Property was scheduled to be reduced by 25 percent for vehicles placed in service in 2004, and by 50 percent for vehicles placed in service in 2005. The Working Families Tax Relief Act of 2004 amended IRC Section 179A to allow the full deduction for vehicles placed in service in 2004 and 2005.

    Note:

    No deduction is allowed for vehicles placed in service in years after December 31, 2005.

  5. See Publication 535, Business Expenses for additional information, such as deduction for business clean-fuel vehicle property by employees, sole proprietors, partnerships, S corporations, and C corporations. Instructions are also included for recapture of the deduction.

21.6.6.4.30  (10-01-2008)
Economic Growth and Tax Relief Reconciliation Act of 2001 IRC Section 803 — Victims of the Nazi Regime

  1. IRC Section 803 of Title VIII of the Economic Growth and Tax Relief Reconciliation Act of 2001 provides that there will be no federal income tax on restitution payments received by eligible individuals (or their heirs or estates) who were victims of the Nazi regime. Eligible individuals are persons who were persecuted on the basis of race, religion, physical or mental disability, or sexual orientation by Nazi Germany, any other Axis regime, or any other Nazi-controlled or Nazi-allied country. Excludable restitution payments include those payments made payable by a country or a fund established by a country or as a result of the resolution of a legal action or under a law providing for payments. Payments for the compensation or reparation of assets stolen, hidden, or lost during the World War II era as a result of the individual's status as an eligible individual are also excludable. Proceeds of insurance issued by European insurance companies immediately before and during World War II also qualify for exclusion.

  2. Such restitution payments will not be included in gross income and will not be taken into account for purposes of applying any code section that takes into account excludable income in computing adjusted gross income, including IRC Section 86 of the Code (relating to the taxation of social security benefits). The basis of any property received is its fair market value at time of receipt. IRC Section 803 applies to payments or property received after December 31, 1999. Any interest earned on escrow accounts or settlement funds established pursuant to the settlement of the action entitled "In re: Holocaust Victim Assets Litigation," or funds to benefit eligible individuals or their heirs created by the International Commission on Holocaust Insurance Claims, are not taxable. Refer questions that cannot be answered from the information above to Examination as a technical question.

21.6.6.4.31  (10-01-2009)
Maritime Claims

  1. Maritime personnel are filing claims for the following:

    • Expenses associated with traveling to and from union halls to seek employment (job search).

    • Refund claims based on deducting meals and incidental expenses (M&IE) at the per diem rate.

  2. Refer claims for expenses associated with traveling to and from union halls to Examination as Category A.

  3. Refer claims for deductions of meals and incidental expenses while temporarily traveling away from home to Examination as Category A.

    Exception:

    If claim does not have a breakdown of the days, localities, and rates Refer to IRM 21.5.3.4.6,No Consideration and Disallowance of Claims and Amended Returns, for additional information. Send the Letter 916C include the following information: put in the first open paragraph--"Claims for deductions of incidental expenses at a daily (per diem) rate where meals and lodging are furnished by the employer must identify the number of days, the locality in which the expenses were incurred, and the applicable rate for incidental expenses only for that locality, as provided for in the Federal Travel Regulations." Second open paragraph- "Establishment of the time, place and business purpose requirement may be met with a copy of the ships schedule. Per Rev. Proc. 2003-80, the rate for travel increased to $3 per day for travel days on or after November 1, 2003."

21.6.6.4.32  (10-01-2008)
Continental Can Settlement

  1. Approximately 4,000 taxpayers received distributions as part of a class action lawsuit against Continental Can Company, Inc. These distributions were fully taxed as wages, except to the extent that the exceptions for the maximum wages bases for FICA tax and FUTA tax applied and (for purposes of the employee FICA tax) except to the extent that certain employees qualified for the credit for FICA tax paid in excess of the applicable FICA wage base as the result of receiving wages from two or more employers. Protective claims were filed to have this distribution treated as non-taxable. The IRS agreed to settle these claims by treating 75% of the distributions as taxable for income tax purposes and 70% of the distributions as wages for employment tax purposes.

  2. Protective claims for refund of Form 1040 and Form 1041, U.S. Income Tax Return for Estates and Trusts, were filed on the behalf of the settlement participants for calendar years 1992 through 2002 with the IRS and stored at the Kansas City Campus. Since these claims treated the entire distribution as non-taxable (as opposed to 70% or 75%), new claims must be filed.

  3. Refund claims on Form 843, Claim for Refund and Request for Abatement, were filed with the IRS Philadelphia Campus on behalf of individuals for employee Federal Insurance Compensation Act (FICA) and on behalf of the employer for employer FICA and Federal Unemployment Tax Act (FUTA) taxes. Copies of the claims were subsequently sent to the Kansas City Campus. Taxpayers were strongly encouraged to file their FICA claims through the employer. The volume of individuals filing claims should be minimal.

  4. Taxpayers participating in this settlement are all represented by the same accounting firm. Since there are approximately 19,000 tax periods involved the IRS agreed to accept spreadsheets in lieu of individual Forms 1040X. These spreadsheets will include all of the data necessary to adjust the accounts. Follow the procedures in IRM 25.6.1.10.2, Request for Abatement, if the Refund Statute Expiration Date is passed except for the following: overlay the Refund Statute Control Date (RFSCDT) with the date the protective claim was filed. Do not issue a manual refund unless other manual refund criteria exist. The adjustment will be input as "no source document" (NSD), unless issuing a manual refund. If a manual refund is issued the Form 3753, Manual Refund Posting Voucher, or Form 5792, Request for IDRS Generated Refund (IGR) can be used as the source document (SD). The spreadsheets for Forms 1040X will be maintained in the Kansas City Accounts Management (AM) function.

  5. If a manual refund is required for IMF cases note in remarks "Continental Can, Spreadsheet, Kansas City Campus AM function." The authority for the refund is "class action, Continental Can" and evidence of the credit is "spreadsheet." Follow normal manual refund procedures for all other items. Batch Continental Can claims together when routing to the Accounting function.

  6. Refer taxpayer inquiries regarding the Form 1040 account adjustment to the Kansas City AM function, phone inquiries via Form 4442, Inquiry Referral, paper inquiries via transmittal. Note "Continental Can" on the Form 4442 or the transmittal.

  7. Amended Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, Form 941, Employer's Quarterly Federal Tax Return, and Form 1041, will be submitted to the Philadelphia AM function. Follow the procedures in (c) above except the adjustment will be input as SD.

  8. If a manual refund is required for BMF cases note in remarks "Continental Can, Form 940, Form 941, or Form 1041. " The authority is "class action, Continental Can." Follow normal manual refund procedures for all other items. Batch Continental Can claims together when routing to the Accounting function.

  9. Refer taxpayer Inquiries regarding the Form 940, Form 941, and Form 1041, account adjustment to the Philadelphia AM function using the procedure in "8" above.

  10. Tell taxpayers who inquire about participation in the settlement, if they were part of the class action suit, to contact the administrators of the settlement fund. Tell other taxpayers that the statute for refund has expired on the 1998 tax year and prior tax years (unless unusual circumstances have kept the statute open).

21.6.6.4.33  (10-01-2008)
Federal Insurance Compensation Act (FICA) Claims Citing North Dakota State University vs. United States

  1. FICA claims are being filed for a refund of FICA taxes based on North Dakota State University vs. United States. In this decision, the court held that cases involving payments to college or university professors made in exchange for the relinquishment of their tenure rights are not FICA Wages.

  2. The IRS will follow this case only in the 8th circuit and allow claims only to college and university professors within this jurisdiction.

  3. Check the taxpayer's address. If the claim did not originate in the Eighth Circuit (that is, did not originate in AR, IA, MN, MO, NE, ND, SD), disallow it. Send the Letter 105C including the following information: "We disallowed your claim for refund of FICA taxes because the Service is not following the North Dakota State University decision of the Eighth Circuit outside the Eighth Circuit."

  4. If the claim originates in the Eighth Circuit and involves college and university professors, allow the claim, following the procedures in IRM 21.7.2.4.18.6.2, Excess FICA Tax Withheld – Employee Claims for Refund.

21.6.6.4.34  (10-01-2008)
Federal Insurance Compensation Act (FICA) and Railroad Retirement Tax Act (RRTA) Claims Citing CSX

  1. Taxpayer is claiming a refund of FICA or RRTA tax citing CSX Corporation v. United States, see IRM 21.7.2.4.18.6.11, CSX Claims.

21.6.6.4.35  (10-01-2008)
Federal Insurance Compensation Act (FICA) Claims by Medical Residents

  1. Taxpayer is claiming a refund of FICA tax due to Medical Resident Status; see IRM 21.7.2.4.18.6.9.2, Employee Claims (Medical/Dental Residents).

21.6.6.4.36  (10-01-2008)
Federal Insurance Compensation Act (FICA) Claims by Major League Baseball Players

  1. Taxpayer is claiming a refund of FICA tax as a Major League Baseball Player; see IRM 21.7.2.4.18.6.10 , Refund Claims/Major League Baseball.

21.6.6.4.37  (10-01-2008)
IRC Section 3121(v) - Federal Insurance Compensation Act (FICA) Claims from Airline Employees and Retirees

  1. Current or retired United Airline and Delta Airline employees whose nonqualified deferred pension benefit plans were terminated during the airlines' bankruptcy proceedings are filing claims for refund; see IRM 21.7.2.4.7.4.2, IRC Section 3121(v) - FICA or FUTA Claims from Airline Employees and Retirees.

21.6.6.4.38  (10-29-2008)
Indian Fishing Claims filed for refund of Federal Insurance Compensation Act (FICA) taxes

  1. Taxpayer is filing a claim for refund of FICA taxes which may or may not cite IRC Section 7873. These claims are to be worked in the Ogden campus. If received at any other campus, ensure the case is notated as a fishing claim and forward expeditiously to the Ogden Service Center, if the case is on CIS use the re-route capability. Once received in Ogden they will follow IRM 21.7.2.4.18.6.2 , Excess FICA Tax Withheld, Employee Claims for Refund.

21.6.6.4.39  (10-01-2008)
Case/Transcript for U.S. Departing Alien Income Tax Return Form 1040–C

  1. Some aliens must obtain a Certificate of Compliance (also known as an exit or sailing permit) before permanently departing the U.S. or any U.S. Possession. This is obtained by filing Form 2063, U.S. Departing Alien Income Tax Statement or Form 1040–C, U.S. Departing Alien Income Tax Return. A Certificate of Compliance is made when the Director or delegate signs the certificate; see IRM 25.6.1.6.7,Case/Transcript for U.S. Departing Alien Income Tax Return (Form 1040–C).

21.6.6.4.40  (05-20-2008)
TY 2001 — Rate Reduction Credit (RRC)

  1. This section has procedures for the Rate Reduction Credit (RRC) on tax year 2001 returns.

21.6.6.4.40.1  (05-20-2008)
RRC Overview

  1. As part of the new tax law, tax rates for TY 2001 were reduced. In order to provide taxpayers with the benefits of the 10% rate more quickly, advance payments of the Immediate Tax Relief (ITR) were issued (or used to offset tax/non-tax debts) based on their TY 2000 tax return. Taxpayers are not required to include this as income on their 2001 federal income tax return. However, requirements for their state return may be different. Advise the taxpayer to check with their state authority.

  2. Taxpayers who received no ITR or less than the maximum credit may be able to claim the credit on their 2001 return. The credit is not refundable but can reduce the tax liability to zero.

  3. Taxpayers whose ITR credit is larger than the credit amount figured on the 2001 tax return will not have to pay back the difference.

  4. Taxpayers who did not have a tax liability for 2000 but have one for 2001, can claim the RRC credit on their return, provided they are otherwise eligible.

    Note:

    The RRC is a credit against 2001 tax and not refundable. If the taxpayer does not have a tax liability for TY 2001, the RRC cannot be claimed. This is also true for decedents without a 2001 tax liability. In some instances, the ITR check from the 2000 module was returned as undeliverable, or not cashed by the taxpayer or taxpayer representative and not reissued by the December 31, 2001 cutoff date. These payments cannot be reissued and if no 2001 tax liability exists, there is no recourse for these cases.

21.6.6.4.40.2  (10-01-2008)
Explanation of the RRC

  1. If eligible, the 2001 RRC is claimed on Form 1040, Line 47; Form 1040A Line 30; or Form 1040EZ Line 7.

    Note:

    CC TRDBV may not accurately reflect the taxpayer's entry for Form 1040EZ. If Line 7 (RRC per return) is present, it is netted with Line 11 (tax per return). In these cases, Line 11 (tax per return) is not the actual taxpayer entry.
    Use the following information for taxpayer inquiries requesting assistance completing the RRC worksheet:

    • The maximum credit is the same as the maximum payment amount: $600 for Filing Status (FS) 2 or 5, $500 for FS 4, and $300 for FS 1 or 3. The amount is based on the FS for 2001.

      Note:

      A change in 2001 FS from 2000 FS may result in a change in the allowable amount of 2001 RRC.

      Example 1. Taxpayer filed as Married Filing Joint (MFJ) for 2000 and filed as Head of Household (HOH) in 2001. Taxpayer and spouse received ITR check for $600 ($300 each taxpayer). Taxpayer entitled to an additional $200 RRC for 2001 based on HOH, (if the $200 RRC does not reduce the tax below zero).

      Example 2. Taxpayer filed as HOH in 2000 and filed as Single in 2001. Taxpayer received an ITR check for $500 based on HOH status in 2000. Based on Single status for 2001, taxpayer maximum credit is $300. The taxpayer does not have to pay back the $200 difference.

    • The 2001 RRC can reduce the tax liability, but not below zero. Any excess credit is not refundable.

    • If the taxpayer can be claimed as a dependent, they cannot claim the RRC. However, they may get the benefit of the new 10% tax rate by using the Tax Computation Worksheet found in the tax instructions.

    • If the taxpayer is a Non-Resident Alien, they cannot claim the RRC.

    • If the taxpayer does not have the ITR credit amount, the Customer Service Representative (CSR) must review the TY 2000 tax account and provide the amount.

    • Refer to the RRC Worksheets for further assistance.

21.6.6.4.40.3  (10-01-2008)
RRC Qualifications

  1. Taxpayers must meet the following qualifications to claim the RRC.

    • A tax year 2001 Federal income tax return must be filed.

    • Maximum credit, based on 2001 FS, was not realized on 2000 tax account.

    • Tax liability must be present. RRC can reduce the tax to zero, any excess is not refundable.

    • Changes made by IRS during processing of the 2001 tax return must be considered. For example: If Error Resolution System (ERS) increased or decreased the tax, any applicable RRC will also be adjusted.

    • Amended or subsequent returns will affect the amount of any allowable RRC.

    • The taxpayer must not be claimed as a dependent on another return for 2001.

      Note:

      If taxpayer was claimed on another return for 2000 and is claiming their own exemption for 2001, they may be eligible for the RRC. Advise taxpayer to complete the RRC worksheet to determine amount of eligible RRC.

    • Non-Resident Alien taxpayers are not eligible for the RRC.

21.6.6.4.40.4  (10-01-2008)
RRC Research

  1. Except as specified in the following instructions, follow normal procedures to resolve account problems or discrepancies. You may also need to reference other IRM sections, such as:

    • IRM 21.1.3.20, Oral Statement Authority

    • IRM 21.4.1, Refund Research

    • IRM 21.4.2, Refund Trace and Limited Payability

    • IRM 21.5.5, Unpostables

    • IRM 5.19, Liability Collection

    • IRM 20.2.7, Abatement and Suspension of Interest, IRC Section 6404 and 7508

    • IRM 20.1, Penalty Handbook

    • IRM 25.6, Statute of Limitations

    • IRM 21.6.6.4.40, TY-2001 Rate Reduction Credit (RRC)

21.6.6.4.40.5  (10-01-2008)
RRC IDRS Account Information

  1. Use CC TRDBV to determine the amount of RRC claimed by the taxpayer and allowed by the computer during processing. The RRC amount will show on Form 1040, line 47; Form 1040A, Line 30; or Form 1040EZ Line 7. Since the 2001 RRC will reduce the tax, there is no identifying or corresponding transaction/reference code on the module.

    Note:

    CC TRDBV may not accurately reflect the taxpayer's entry for Form 1040EZ. If Line 7 (RRC per return) is present, it is netted with Line 11 (tax per return). In these cases, Line 11 (tax per return) is not the actual taxpayer entry.

  2. Use CC TRDBV to determine if an electronic return was rejected. Error Reason Code (ERC) 185 and ERC 190 are RRC reject codes assigned to electronic returns with incorrect RRC amounts or instances where the taxpayer is a dependent on another return and ineligible for the RRC. If the electronic reject is still unresolved, advise the taxpayer to contact the paid preparer to correct the reject condition and retransmit the return. You may need to assist the taxpayer in determining the correct amount of RRC, if any, to claim on the 2001 tax return.

  3. Changes to the RRC may affect other non-refundable credits. Changes to the RRC also may affect Form 8812, Additional Child tax Credit.

  4. Use TC 291 (or TC 290 if applicable) when adjusting the 2001 RRC. Use RC 096 with appropriate SC and any other RC's. RC 096 for 2001 reads: "Tax Relief Credit."

21.6.6.4.40.6  (05-20-2008)
RRC Taxpayer Notice Codes (TPNC)

  1. ERS will assign the following TPNC's for RRC errors identified during processing:

    • TPNC 610 — We figured your Rate Reduction Credit for you.

    • TPNC 611 — We cannot allow your Rate Reduction Credit, our records show that you received the maximum Rate Reduction Credit or you reported no taxable income for tax year 2001.

    • TPNC 612 — You figured or entered the Rate Reduction Credit incorrectly.

    • TPNC 613 — You reported that you can be claimed as a dependent on another person's return. You are not allowed the Rate Reduction Credit.

      Note:

      TPNC's assigned during processing do not consider adjustments posted to 2000 modules after cycle 200152. Based on this information, you will need to research the 2000 account for subsequent actions and determine if the TPNC is correct.

21.6.6.4.40.7  (10-01-2008)
Adjusting 2001 RRC

  1. There has been a tremendous increase each cycle in the issuance of Computer Paragraph (CP) 12 Notices because of RRC computation errors on 2001 tax returns. In addition to taxpayer computation errors, programming problems, in some instances, has generated additional RRC amounts during processing when the taxpayer was not entitled to it. Also, in some cases, the RRC amounts claimed by the taxpayer were incorrectly disallowed during processing.

  2. To resolve these types of inquiries, it is necessary to research both the TY 2000 and TY 2001 modules.

    • In TY 2000, the ITR credit posted as TC 766/CRN 338. Use CC IMFOLT to research the TY 2000 module and determine the amount of ITR credit, if any, in the 2000 module.

    • For TY 2001, the RRC is a non-refundable credit and if present, is included in the TC 150 tax computation. There is no identifying or corresponding transaction/reference code. Use CC TRDBV to determine the amount of TY 2001 RRC claimed by the taxpayer and/or allowed during processing. The RRC amount will show on Form 1040, Line 47; Form 1040A, Line 30: or Form 1040EZ, Line 7.

21.6.6.4.40.7.1  (05-20-2008)
RRC Not on Original Return

  1. If the taxpayer does not claim RRC on the TY 2001 original return, an amended return is not required to adjust the TY 2001 module for the allowable amount of RRC.

    1. Review the TY 2000 and TY 2001 modules to determine the allowable RRC amount, if any.

    2. Adjust the TY 2001 module using TC 291 for the RRC amount and RC 096.

    3. Advise the taxpayer of the action taken.

      Example:

      The taxpayer did not receive the full amount of ITR credit in 2001 because of low taxable income. The RRC was not claimed on the TY 2001 return. The taxpayer is eligible for $75 RRC, which was computer generated during processing. (TRDBV) display $75 in the RRC "Per Computer" field). The refund was not adjusted and a math error notice was not sent to allow the RRC because of the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

21.6.6.4.41  (04-01-2009)
Abusive Tax Avoidance Transactions (ATAT)

  1. Abusive Tax Avoidance Transactions (ATAT) - Individuals are filing claims and attaching Form 8594 for the purpose of re-characterizing termination payments from insurance companies as capital gains, even though the payments should be reported as ordinary income.

  2. Baker vs. Commissioner [338 F.3d 789 (7th Cir 2003)] has already addressed this issue. The promoter is aware that the IRS was affirmed; however, he continues to erroneously advise his clients, who are typically retired or terminated insurance agents, that their termination payments should be treated as capital gain instead of ordinary income. Termination payments, to which the agent is issued a 1099, are payments that an insurance agent receives for a pre-determined number of years after he stops selling policies for the insurer. This period can vary, but is typically from 3 to 5 years. Individuals are filing claims in order to reclassify their termination payments as capital gain, to obtain refunds for taxes paid in previous years.

  3. Any claims submitted meeting the issue as described should be disallowed. Issue a 105C disallowance letter including the following information "The termination payments from insurance companies are considered ordinary income, and cannot be treated as capital gains."

21.6.6.4.42  (04-01-2009)
IRC Section 165 – Theft Loss Conversions

  1. Taxpayers are filing claims for "theft losses" due to corporate misconduct and Ponzi schemes.

  2. Claims are generally filed on Form 1040X, Amended U.S. Individual Income Tax Return, and include comments indicating "theft loss deduction under IRC Section 165(c)(2)" or "investment loss" or "investment theft loss." The claims frequently include an opinion letter explaining the theft loss and why it qualifies as an IRC Section 165(c)(2) loss.

  3. The theft loss is reported on page 2 of Form 4684,Casualties and Thefts, and flows to the "Other Miscellaneous Deductions" section of Schedule A, Itemized Deductions & Interest and Dividend Income. The miscellaneous deductions may indicate:

    1. Form 4684, Casualties and Thefts, income producing property

    2. IRC Section 165 attorney fees

    3. Investment theft loss

    4. Form 4684, Casualties and Thefts

  4. The following subsections provide instructions for processing the different types of IRC Section 165 theft loss conversions.

21.6.6.4.42.1  (04-01-2009)
Claims due to Corporate Misconduct

  1. Notice 2004-27 advised taxpayers that the IRS will disallow theft losses claimed with respect to decreases in the market value of stock, purchased on the open market that may be attributable to corporate misconduct.

  2. The claims will indicate a "theft loss deduction" or "IRC Section 165 loss deduction" shown on Schedule A, Itemized Deductions & Interest and Dividend Income, but will not mention a specific Ponzi scheme.

    Note:

    The optional safe harbor described in Revenue Procedure 2009-20, see IRM 21.6.6.4.42.2, Claims due to Ponzi Schemes, does not apply to losses that result from a decrease in the market value of stock purchased on the open market, even if the decrease in value of the stock is attributable to corporate misconduct on the part of an officer or employee of the corporation.

  3. Net operating loss claims (RINTs and TENTs) related to these theft losses may also be received. Coordinate the processing of the net operating loss claim(s) with the amended return claiming the loss. Whenever possible, one employee should be assigned the amended return and the carryback claim(s). The net operating loss claim will be disallowed in conjunction with the amended return.

  4. These claims should be disallowed with appeal rights. The disallowance language is as follows:

    To qualify for a theft loss, you must verify 1) you had a direct relationship with the "defrauder " , 2) the loss you claim resulted from a taking of property that is illegal under the law of the state where it occurred, 3) the taking of the property was done with criminal intent, and 4) all claims for recovery have been closed and completed.


    Additionally, you must verify 5) all means of recovery have been exhausted and 6) the amount of the loss is the actual amount of money stolen. There is no evidence that you meet these qualifications; therefore, the deduction has been disallowed.

  5. Refer to IRM 21.5.3.4.6.1,Disallowance and Partial Disallowance Procedures, for additional information on disallowance procedures.

21.6.6.4.42.2  (06-12-2009)
Claims due to Ponzi Schemes

  1. Revenue Ruling 2009–09 and Revenue Procedure 2009–20 are published to provide guidance for filing claims due to a Ponzi scheme. The ruling and procedure are available on irs.gov.

  2. Ponzi scheme claims will typically reflect a "theft loss deduction" or "IRC Section 165 loss deduction" shown on Schedule A, Itemized Deductions & Interest and Dividend Income, along with the Form 4684, Casualties and Thefts. Additionally, these claims may reference a specific Ponzi scheme.

  3. Generally, Revenue Ruling 2009-09 allows a loss in the year in which the investment is determined to be part of a Ponzi scheme (discovery year). Revenue Ruling 2009-09 provides guidance for determining the amount of deductible theft loss.

    Revenue Procedure 2009-20 provides an optional safe harbor to assist qualified investors in these criminally fraudulent schemes compute the amount of their theft loss claim. The Revenue Procedure 2009-20 applies to discovery years (as defined below) beginning after the taxable year ending on December 31, 2007.

    Note:

    The optional safe harbor described in the Revenue Procedure 2009-20 does not apply to losses that result from a decrease in the market value of stock purchased on the open market, even if the decrease in value of the stock is attributable to corporate misconduct on the part of an officer or employee of the corporation. Procedures for processing claims for a theft loss resulting from a decrease in the market value of stock due to corporate misconduct are described in IRM 21.6.6.4.42.1, Claims due to Corporate Misconduct.


    The Revenue Procedure 2009-20 instructs taxpayers electing the safe harbor to mark the Form 4684, Casualties and Thefts, with "Revenue Procedure 2009-20" across the top of the Form 4684.

    Note:

    Claims may also be received that are removing income previously reported, protective claims, or other different methods. Claims received utilizing a method other than Form 4684 theft deduction should be forwarded to Exam as CAT-A.

  4. In order to elect consideration under the safe harbor, the taxpayer's claim must include the following:

    1. Form 4684, Casualties and Thefts

    2. Appendix A, Statement by Taxpayer Using the Procedures in Rev. Proc. 2009-09 to Determine a Theft Loss Deduction Related to a Fraudulent Investment Scheme

    Note:

    These claims may also create a Net Operating Loss, which generally can be carried back for the 3 preceding years. However, for the 2008 tax year, the taxpayer may elect a 3, 4, or 5 year carryback period for the applicable 2008 net operating loss. For additional information on net operating loss claims, refer to IRM 21.5.9,Carrybacks.

  5. If a complete claim utilizing the "safe harbor" method is received after April 1, 2009, for the year in which the loss is determined, process the claim following normal procedures. Do not refer to CAT-A, unless the claim includes other issues that meet the CAT-A criteria. Refer any claim not utilizing the safe harbor method to CAT-A if the criteria applies as outlined in Exhibit 21.5.3-2, EXAMINATION CRITERIA (CAT-A). Refer to SERP Alert 090208 for procedures for claims received prior to April 1, 2009.

    Note:

    The loss claimed on the Form 4684, Casualties and Thefts, is reported on the taxpayer's Schedule A, Itemized Deductions & Interest and Dividend Income, CAT-A criteria for the Schedule A applies.

  6. If a complete claim is submitted for any year prior to the year in which the loss is determined, forward the claim as CAT-A criteria.

  7. If any incomplete claim is submitted, reject the claim back to the taxpayer with a request for any missing information, as outlined in IRM 21.5.3.4.2,Tax Decrease or Credit Increase Processing.

21.6.6.4.43  (05-08-2009)
IRC Section 3082(a) of the Housing and Economic Recovery Act of 2008 - Disaster Primary Housing Grant Relief

  1. Taxpayers who were affected by hurricane Katrina, Rita or Wilma and filed a casualty loss on their primary home may have received a housing relief grant in a later year. The housing relief grant is a tax free grant unless the taxpayer claimed a prior year primary home casualty loss. Homeowners who claimed a primary home casualty loss, and then received a housing grant in a later year, were required, by law, to pay tax on all or part of the grant to compensate for the tax benefit of the casualty loss. While individual circumstances varied, this meant some taxpayers ended up paying more tax on the grant than they saved by claiming a casualty loss. IRC Section 3082(a) of the Housing and Economic Recovery Act of 2008 changed this requirement.

  2. Taxpayers now have the option of amending prior year returns to reduce their primary home casualty loss by the amount of the grant which will result in a tax increase. Taxpayers have one year from the amended return received date to pay the tax with no penalty or interest.

  3. The Internal Revenue Service released News Release IR-2008-115 and a Notice 2008-95 designed to help eligible homeowners who received housing grants stemming from Hurricanes Katrina, Rita or Wilma, take advantage of this new tax provision. If you receive a call from taxpayers questioning this news release, advise them to follow the guidance in Notice 2008-95.

  4. Taxpayers are instructed to write "Hurricane Grant Relief" on the top of their amended return and to mail it to the Austin campus. The address will contain a unique IRS Code Format Number (CFN – last four digits of the ZIP code) 0255.

  5. These returns will be centralized in Accounts Management (AM) in the Austin campus. If you receive one of these cases and are not part of the Austin centralized team, follow procedures below to route all related cases to Austin.

    1. Keep all cases together and route/reassign all years at the same time

    2. If you receive a paper case, route to the Austin AM ICT team (Image Control Team ) at M/S 6567

    3. If you receive a case that has already been scanned into CIS,

    • Reassign to the Austin Campus IDRS number 0638126186

    • Change the category code to XHRG

    Caution:

    Exam Function: Do not send these cases CAT-A as "taxable to non-taxable" prior to reassigning to the Austin campus. These returns do not meet CAT-A criteria.

    Statute Function: These cases are not restricted by normal statute rules. Follow instructions above to route to the Austin AM ICT if you receive any cases meeting the criteria in this alert.

    Appeals Function: Some taxpayers filed an amended return prior to the news release and their claims were denied. If the taxpayer writes in for appeal rights, follow the instructions above to route to the Austin AM ICT.

  6. You can identify these adjustments/claims by:

    • "Hurricane Grant Relief" written on the top of Form 1040X/amended Form 1040/ Form 843

    • Mention of "IRC Section 3082 "

    • Mention of Louisiana Road Home Grants or Mississippi development Authority Hurricane Katrina Homeowner Grant

    • Indication that the taxpayer is removing a prior year hurricane Katrina, Rita or Wilma casualty loss of their primary home

    • Form 1040X removing/reducing hurricane casualty loss of their primary home

    • Form 1040X removing a hurricane housing grant

    • Form 843 requesting relief from penalties and/or interest as a result of removing/reducing a primary home casualty loss

  7. The amended returns may consist of a variety of adjustments such as:

    • An assessment for 2004 or 2005 reducing a previously claimed primary home casualty loss

    • An assessment for 2005, 2006, and/or 2007 reducing a Net Operating Loss (NOL) carryover due to the reduction of a previously claimed primary home casualty loss

    • An assessment for 1999 through 2004 reducing a carryback due to the reduction of a previously claimed primary home casualty loss

    • A decrease for 2006 or 2007 reducing or eliminating housing grant income received as a result of a hurricane loss

  8. The procedures below are for the Austin AM centralized team only:

    If And Then
    1. The taxpayer is filing Form 1040X to remove a primary home casualty loss on a prior year return There is no prior balance due on the module. 1. Input TC 290 for the amended return tax increase
    2. Use Reason Code 176
    3. Input TC 270 for .00
    4. Input TC 340 for .00
    5. Input TC 770 for .00 if credit interest was allowed on a prior refund
    6. Input DB-INT-TO-DT (MMDDYYYY - 23C date of the adjustment) (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars
    7. Input the Amended Claims Date (the latter of July 30, 2009, or the due date for the return in the year the grant was received)
    Note: Statute imminent and statute expired years are being bypassed with RC 176
    2. The taxpayer is filing Form 1040X to remove a primary home casualty loss on a prior year return There is a prior balance on the module
    Important: Interest and Failure to Pay (FTP) will not be charged on the TC 290 adjustment amount. However, accruing FTP and interest will be assessed on the module balance prior to the TC 290 adjustment and computed to the 23C date of the adjustment following the procedures in the next column. Be sure to check CC INTST prior to inputting your adjustment.     		1. Compare IMFOLT to INTST
    2. Pull up IMFOLT
    3. Write down the following from the IMFOLT screen

    1. Interest date

    2. Total interest

    3. FTP total


    4. Input CC INTST computed to interest date from IMFOLT
    5. Compare

    1. Total FTP with total FTP from IMFOLT

    2. Total interest with total interest from IMFOLT


    6. a) If IMFOLT and INTST match ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Use INTST to calculate the interest and penalty accruals to the 23C date of your adjustment (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars
    b) If IMFOLT and INTST do NOT match Manually calculate the FTP penalty and interest accruals to the 23C date of your adjustment (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars
    7. Input TC 290 for the amended return tax increase
    8. Use RC 176

    • Input TC 270 for accrued FTP amount

    • Input TC 340 for accrued interest amount

    • Input DB-INT-TO-DT (MMDDYYYY - 23C date of the adjustment)


    9. If the module you are adjusting is in status 22, 24 or 26, or ANY module on the account has an installment agreement (I/A) (status 6X), photocopy the first page of the amended return and route the copy to Collections at: Internal Revenue Service Attn: Ken Marek SBSE Collection Policy
    5000 Ellin Road Room C9-363 Lanham, Md 20706-1348
    for manual monitoring
    Note: Statute imminent and statute expired years are being bypassed with RC 176
    3. The taxpayer is filing Form 1040X to remove a primary home casualty loss on a prior year return The casualty loss was carried back (account will have a TC 295 or TC 299) and there is no prior balance due on the module
    Note:Carryforward (Net Operating Loss Deduction claimed on Line 21, Form 1040) are worked using the procedures in 1st Then box above.     		1. Input TC 298 for the amended return tax increase on the module(s) the loss was carried back to
    2. Input INT-CMPTN-DT from the prior Carryback adjustment (MMDDYYYY) the due date of the return the loss was carried back from, without regard to extensions
    3. Use RC 177
    4. Use BS 95 if statute imminent or statute expired. Otherwise, use BS 92 (adjusting with original TC 150 document) or BS 91 (adjusting without original TC 150 document
    5. Input TC 270 for .00
    6. Input TC 340 for .00
    7. Input TC 770 for .00 if credit interest was allowed on a prior refund
    8. Input DB-INT-TO-DT (MMDDYYYY - 23C date of the adjustment) (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars.
    9. Input the amended claims date (the latter of July 30, 2009, or the due date for the return in the year the grant was received)
    4. The taxpayer is filing Form 1040X to remove a primary home casualty loss on a prior year return The casualty loss was carried back (account will have a TC 295 or TC 299) and there is a prior balance due on the module
    Note: Carryforward (Net Operating Loss Deduction claimed on Line 21, Form 1040) are worked using the procedures in the 2nd Then box above.
    Important: Interest and Failure to Pay (FTP) will not be charged on the TC 298 adjustment amount. However, accruing FTP and interest will be assessed on the module balance prior to the TC 298 adjustment and computed to the 23C date of the adjustment following the procedures in the next column. Be sure to check CC INTST prior to inputting your adjustment.     		1. Compare IMFOLT to INTST
    2. Pull up IMFOLT
    3. Write down the following from the IMFOLT screen

    1. Interest date

    2. Total interest

    3. FTP total


    4. Input CC INTST computed to interest date from IMFOLT
    5. Compare

    1. Total FTP with total FTP from IMFOLT

    2. Total interest with total interest from IMFOLT


    6. a) If IMFOLT and INTST match ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Use INTST to calculate the interest and penalty accruals to the 23C date of your adjustment (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars.
    b) If IMFOLT and INTST do NOT match Manually calculate the FTP penalty and interest accruals to the 23C date of your adjustment (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars.
    7. Input TC 298 for the amended return tax increase on the module(s) the loss was carried back to.
    8. Input INT-CMPTN-DT (MMDDYYYY) the due date of the return the loss was carried back from, without regard to extensions
    9. Use RC 177
    10. Use BS 95 If statute imminent or statute expired year. Otherwise, use BS 92 (adjusting with original TC 150 document) or BS 91 (adjusting without original TC 150 document
    11. If the module you are adjusting is in status 22, 24 or 26, or ANY module on the account has an Installment Agreement (I/A) (status 6X), photocopy the first page of the amended return and route the copy to Collections at: Internal Revenue Service Attn: Ken Marek SBSE Collection Policy
    5000 Ellin Road Room C9-363 Lanham, Md 20706-1348
    for manual monitoring
    5. The taxpayer is filing Form 1040X to remove a hurricane housing grant as income (taxable to non-taxable)
    Note: Do not send CAT-A     		The taxpayer never claimed a hurricane primary housing casualty loss in a prior year(s)
    Note: If the taxpayer states they did not claim a primary housing casualty loss, accept their word; otherwise research prior year accounts for a casualty loss claim.     		Follow normal IRM guidelines to remove the housing grant as income. Housing grants are not taxable unless a primary housing casualty loss was taken on a prior year(s) return.
    Note: Review IRPTRO for a Form 1099 matching the grant amount. If a Form 1099 was issued, the grant was not a qualifying grant, and should be claimed as income. Disallow the claim.
    6. The taxpayer is filing Form 1040X to remove a housing grant as income (taxable to non-taxable)
    Note: Do not send CAT-A     		The taxpayer claimed a hurricane primary housing casualty loss in a prior year and IRS has received a Form 1040X to reduce/eliminate the loss 1. Input TC 291 to remove the housing grant as income
    2. Use hold code 4 to hold the notice and the overpayment
    3. Transfer any portion of the overpayment needed to cover the tax on the prior year(s) hurricane primary housing casualty loss using:

    • Doc Code 24 and credit freeze code 1 (if the amended return on the prior year has not been processed yet), or

    • Bypass Indicator 1 (if the amended return on the prior year has been processed and there is a balance due on the module)


    4. Allow the remainder of the overpayment to refund to the taxpayer
    5. If the Form 1040X for the prior year primary home casualty loss has not been worked, work per applicable procedures above.
    6. Send a letter to the taxpayer explaining actions taken
    7. The taxpayer is filing Form 1040X to remove a housing grant as income (taxable to non-taxable) Note: Do not send CAT-A The taxpayer claimed a hurricane primary housing casualty loss in a prior year but IRS has NOT received the Form 1040X to reduce/eliminate the loss 1. Remove the housing grant as taxed income
    2. Do not correspond for the amended return to reduce/remove the prior year primary home casualty loss prior to removing the grant as taxed income
    3. Send the taxpayer a 076C Letter with the following paragraphs:
    Without Carryback
    Send the taxpayer a 076C Letter with the following paragraphs:
    A
    C
    L (open paragraph) We are now considering your home grant as non-taxable income. You must file Form 1040X and make an election under IRC Section 3082(a) of the Housing and Economic Recovery Act of 2008 to reduce or eliminate your primary home casualty loss deduction (but not below zero) by the amount of the grant you received as reimbursement for your loss.
    * (open paragraph) You must file Form 1040X by the due date of the return for the year in which you received the grant; or July 30, 2009. The additional tax due on the prior year may be paid interest and penalty free within one year after you file Form 1040X. You may make payments toward this liability at any time during that period. We will apply any overpayments to the additional tax.
    Note: You may use a different letter if another letter will provide a better response to the taxpayer. Ensure you include the paragraphs above in whatever letter you send.
    Use applicable closing paragraph(s)
    With Carryback Send the taxpayer a 3064C Letter with the following paragraphs:
    F
    L (open paragraph) We are pleased to tell you that we have approved your claim(s).
    * (open paragraph) We are now considering your home grant as non-taxable income. You must file Form 1040X and make an election under IRC Section 3082(a) of the Housing and Economic Recovery Act of 2008 to reduce or eliminate your primary home casualty loss deduction (but not below zero) by the amount of the grant you received as reimbursement for your loss.
    M (open paragraph) If your primary home casualty loss deduction exceeded your income for the year, and you carried the excess loss back to prior tax years as a net operating loss (NOL), you must also file Form 1040X for those years to reduce or eliminate the portion of the NOL that is due to the primary home casualty loss, by the amount of the grant.
       
    * (open paragraph) You must file Form 1040X by the due date of the return for the year in which you received the grant; or July 30, 2009. The additional tax due on the prior year may be paid interest and penalty free within one year after you file Form 1040X. You may make payments toward this liability at any time during that period. We will apply any overpayments to the additional tax.
    Use applicable closing paragraph(s)
    Note: You may use a different letter if another letter will provide a better response to the taxpayer. Ensure you include the paragraphs above in whatever letter you send.
    4. Allow the Refund
    5. Close the case, do not suspense
    8. The taxpayer is filing Form 843 requesting abatement of penalties and/or interest on a prior year primary home casualty loss adjustment The tax IS paid in full and interest and penalty has only been charged on the primary home casualty loss adjustment. Caution: RC 176 cannot be used with TC 290 for .00
    1. Use the applicable TCs to reverse the posted primary home casualty loss adjustment using hold code 4 (holding notice and credit).
    2. Input TC 290 to reassess the casualty loss tax increase
    Note: If there is no tax change, only a credit change, input TC 290 for .01
    3. Use hold code 4
    4. Use Reason Code 176
    5. Input TC 270 for .00
    6. Input TC 340 for .00
    7. Posting delay code 1
    8. Input DB-INT-TO-DT (MMDDYYYY - 23C date of the adjustment) (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars.
    9. Input the Amended Claims Date (the latter of July 30, 2009, or the due date for the return in the year the grant was received)
    Note: Statute imminent and statute expired years are being bypassed with RC 176.
    Since the T/P won't receive an adjustment notice showing penalties and interest abatement, send the taxpayer a 2357C letter (or other applicable letter) advising of penalty and interest abatement.
    9. The taxpayer is filing Form 843 requesting abatement of penalties and/or interest on a prior year primary home casualty loss adjustment The tax has NOT been paid in full and there is no other unpaid liability in the module
    — OR —
    Interest and penalty was charged in the module on other tax in addition to the primary home casualty loss adjustment.     		1. Use the applicable TCs to reverse the posted primary home casualty loss adjustment. Use hold code 2
    2. Input TC 290 to reassess the casualty loss amended return tax increase
    3. Use posting delay code 1
    4. Use RC 176
    5. Input TC 270 for .00
    6. Input TC 340 for .00
    7. Input DB-INT-TO-DT (MMDDYYYY - 23C date of the adjustment) (23C date can be determined, see Document 6209 for anExplanation of Output Cycle Calendars.
    8. Input the Amended Claims Date (the latter of July 30, 2009, or the due date for the return in the year the grant was received)
    10. The taxpayer is filing Form 843 requesting abatement of penalties and/or interest on a prior year primary home casualty loss adjustment The tax has NOT been paid in full and there IS other unpaid liability in the module 1. Use the applicable TCs to reverse the prior primary home casualty loss adjustment using hold code 2
    2. Wait for the abatement to post
    3. Follow 2nd If – And – Then box instructions above
    11. Taxpayer files a Form 1040X/amended return There are multiple issues including primary home casualty loss adjustments and/or hurricane house grant issues 1. Prepare two dummy returns, one containing only the hurricane grant relief (IRC Section 3082(a)) tax assessment, and the other containing tax assessment for all other issues
    2. Notate "signature on CIS" in the signature field
    3. Have dummy returns scanned into CIS
    4. Process the "other issues" dummy return using regular IRM procedures
    5. Process the hurricane grant relief dummy return, using procedures above. Most of the time the "other issues" adjustment(s) will be input first.
    6. Notify the taxpayer of the actions taken
    Note: If there are multiple adjustments and you cannot determine which order the adjustments need to be done in, contact Teresa Walker at 801-620-7376 for guidance.

  9. Note: Taxpayers who received their home grant before January 1, 2009 have until July 30, 2009 to amend their primary home casualty loss and until July 30, 2010 to pay any resulting tax, penalty and interest free. Taxpayers who receive a home grant after January 1, 2009 have until the due date of the return in the year they receive the grant to amend their primary home casualty loss and one year from the return due date to pay any resulting tax, penalty and interest free.
    Caution: Do not reject hurricane grant relief (IRC Section 3082(a)) assessment returns to the taxpayer. If the taxpayer does not supply the amount they received for their hurricane housing grant or other pertinent information, call or correspond and request the missing information.


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