- 25.6.22.1 Introduction
- 25.6.22.2 Guidelines for Soliciting Extensions
- 25.6.22.3 Notification of Taxpayer's Rights
- 25.6.22.4 Consent Forms and Letters
- 25.6.22.5 Preparation of Consent Forms – General Procedures
- 25.6.22.6 Preparation of Consents for Specific Entities and Taxes
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This section discusses extensions of the period of time for assessment of tax by consent. The Internal Revenue Code (IRC) provides that the statutorily prescribed period for assessment of tax may be extended, except for the estate tax imposed by Chapter 11, if both the Secretary and the taxpayer agree to do so in writing. This written agreement by the taxpayer and the Service to extend the period of time for assessment of tax is often referred to as an "extension" or "statute extension" . The agreement is also often referred to as a "consent" .
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The extension of the period for assessment will be secured only in cases involving unusual circumstances. The need for the extension should be clearly identified before it is solicited. When the assessment statute date has been determined and additional time is required to complete the examination or administrative processing of a case, an extension must be secured or other action must be taken to protect the interests of the Government.
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In order to be valid, the consent form evidencing the agreement to extend the period of time to assess tax must be executed by both the taxpayer and the Service before the statutory period for assessment expires. The period initially agreed upon for assessing tax may be extended multiple times by the parties executing additional consent forms.
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Waivers of restrictions on assessment, such as Form 4549, Income Tax Examination Changes, or Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessments, are not consents to extend the period of time to assess tax and the taxpayer's execution of these forms does not extend the period of time to assess tax.
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The IRC sections that provide for extending the period of time to assess tax by agreement are as follows:
IRC § 6501(c)(4) Extension of time to assess tax IRC § 6901(d) Extension of time to assess tax against a transferee IRC § 6229(b) Extension for TEFRA (Tax Equity and Fiscal Responsibility Act) partnership items (or affected items) and, for taxable periods beginning before 1/1/97, extensions for subchapter S items (or affected items) for TEFRA S corporations -
This section is organized as follows:
22.1 Introduction 22.2 Guidelines to be used to determine if and when extensions are to be solicited 22.3 Notification of Taxpayer's Rights 22.4 List of consent forms and associated letters 22.5 General guidelines used to prepare extensions of the period for assessment for all entities and types of tax 22.6 Instructions used to prepare extensions of the period for assessment in specific situations and types of tax 22.7 Open-ended consents 22.8 Guidelines pertaining to restricted consents Note:
References in IRM 25.6.22 to "flow-through" should be read as also referring to "pass-through" and, for purposes of this section, can be used interchangeably.
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The following guidelines will be used in determining if an assessment statute extension should be requested from the taxpayer.
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It is the policy of the Service to secure consents to extend the period of time to assess tax only in cases involving unusual circumstances. See Rev. Proc. 57-6, 1957-1 C.B. 729. Every attempt should be made to resolve cases before it is necessary to extend the statute of limitations. If it is necessary to extend the statute, the period of extension should be no longer than is necessary to complete the examination and other administrative actions.
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An examiner must obtain the approval of his/her group manager before requesting that a taxpayer execute a consent. The following conditions warrant soliciting a consent to extend the statute of limitations. This list is not all inclusive and in rare circumstances consents can be solicited before the 180–day time frame specified below but the case file must be documented by the Group/Team Manager with the reasons approval to extend the statute was granted for situations other than those listed:
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The limitation period for the taxable year under examination will expire within 180 days and there is insufficient time to complete the examination and the administrative processing of the case.
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The examiner discovers firm indications that substantial additional tax is due for prior periods and the statute of limitations for any of the prior periods will expire within 180 days and there is insufficient time to complete the examination and administrative processing of the case.
Note:
An examiner cannot initiate an examination on any return with less than 12 months remaining on the statute of limitations for assessment, without prior managerial approval.
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The limitation period for the taxable year under examination will expire within 180 days and the taxpayer has requested that the case be sent to Appeals.
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The limitation period for the taxable year under examination will expire within 180 days and the case is included in the Coordinated Industry Case (CIC) Program under the provisions of IRM 4.46.1, Overview of LMSB Guide for Quality Examinations, or involves a case in which the Form 6658, Notice of Special Investor Action, procedure is applicable. This form is used as a transmittal to send a copy of a K-1 to the Field/Campus TEFRA Function when an investor is manually linked to a flow-through entity.
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The limitation period will expire within 210 days for a case that will be (or has been) placed in suspense.
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The limitation period to assess preparer penalties will expire within 180 days and there is insufficient time to complete the examination and process the return preparer case.
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A joint investigation with the Criminal Investigation Division is in progress and there is the likelihood that the work can not be completed before expiration of the statutory period for assessment (see IRM 25.6.22.6.16.9 below and IRM 25.1.4.3.6, Statute Protection, for further instructions).
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A consent should not be requested in any case in which no previous contact has been made with the taxpayer, except where compelling tax administration reasons exist to justify the request for the consent. For example, consistent treatment of related taxpayers would be a compelling tax administration reason.
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A case should not be sent to Appeals with less than 180 days remaining before the expiration of the statutory period for assessment.
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It is the Service's practice to keep the statutory period of limitations open on all returns that the Joint Committee has under consideration, including returns recommended for survey action. The examiner should make every effort to obtain consents extending the period of limitations on all returns (including carryback and claim returns) directly involved in a Joint Committee case (including the non-reportable tax periods included in the Revenue Agent's Report) where the statutory period will expire within:
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12 months from the time the case is submitted to the Joint Committee reviewer or
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6 months from the date the report is transmitted to the Joint Committee Program Manager in Headquarters.
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In the situation when a case has been referred to the Criminal Investigation function or is under joint investigation with Criminal Investigation, the primary responsibility for protecting the civil statute for assessment is that of the examiner charged with the return(s). Before a request is made to the taxpayer to extend the statute, written agreement from Criminal Investigation must be obtained. Consult IRM 25.6.22.6.16.9 below and IRM 25.1.4.3.6 for procedures for soliciting consents involving joint investigation cases.
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If examination issues indicate that gross income was understated by more than 25% and the 6–year statute may apply, the normal 3–year statutory period for assessment should be extended, if the normal statute still has time remaining. If the examiner lets the normal 3–year period for assessment expire because of reliance on the omission of gross income being more than 25% of the amount of gross income stated in the return but it is ultimately determined the understatement is 25% or less, the Service would be barred from assessing the tax deficiency, absent some other exception to the normal period for assessment.
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Claims for refund do not extend the statutory period for assessing additional tax. Therefore, an open assessment statute should be protected and a consent obtained, if the statute is within the above-specified time periods unless (9), immediately below, applies.
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If it has been determined that there is no need to protect the assessment statute because there is no potential for additional tax to be assessed, this determination is to be reflected on the Form 895, Notice of Statute Expiration, signed or initialed and dated by the examiner and the manager. This determination could pertain to cases involving claims for refund and carryback tax periods. See IRM Exhibit 25.6.23–3, Instructions for Updating the Statute on AIMS, for proper alpha coding of the assessment statute expiration date (ASED).
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In cases previously closed and reopened by taxpayers through the filing of claims for refund, the taxpayer should not be routinely requested to agree to a consent unless new information or the re–examination of the return indicates that a redetermination of the tax liability may result in tax deficiencies.
Note:
The claim for refund amount can be offset by additional taxes attributable to adjustments discovered through the re–examination process after the period for assessment has expired.
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If the period for assessment is open as a result of a consent but closing action will not be completed within the time periods specified in the existing consent, then another consent must be obtained to further extend the statute. In this case, the earlier consent(s) must always be retained in the case file and safeguarded. These consents provide the proof that the statute was still open at the time a later consent was executed.
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As a result of an amendment of IRC section 6501 by the IRS Restructuring and Reform Act of 1998 (RRA 98), the Service must notify the taxpayer each time when the taxpayer is requested to consent to extend the period for assessment of the following rights (effective for requests made after 12/31/99):
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The right to refuse to extend the period of time for assessment.
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The right to request that the extension be limited to particular issues. .
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The right to request that the period for assessment be limited to a particular period of time, i.e., to a specific date.
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The notification should be made to the taxpayer (see IRM 25.6.22.3.1 below for joint return situations) and the taxpayer’s properly authorized representative, if any, unless the taxpayer has placed restrictions on providing copies to the representative, by:
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Mailing or presenting to the taxpayer a completed and dated Letter 907, Request to Extend Assessment Statute, or Letter 967, Letter Transmitting Consent Extending Period of Limitation, in the case of the Office of Appeals, along with the properly completed consent form, which contains the notice of taxpayers' rights, AND Publication 1035, Extending the Tax Assessment Period.
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If the taxpayer is represented, a copy of the same documents mailed to the taxpayer should be mailed to properly authorized representative along with a Letter 937, Transmittal Letter for Power of Attorney. If the Letter 907/967, consent form and Publication 1035 is presented to the representative, then also mail the documents to the taxpayer.
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The Service employee requesting the consent will document in the case file on Form 9984, Examining Officer's Activity Record, or other appropriate form, as specified by the procedures of the particular operating division or function, that the required notification of rights was made, the date of notification, specify who was notified, and how notified, i.e., by mail or personal presentation. In the case of a joint return, also see IRM 25.6.22.3.1, below. A copy of the Letter 907 or Letter 967 will be maintained in the case file.
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If a taxpayer chooses to exercise his/her right to refuse to extend the statute, it will be explained to the taxpayer that a statutory notice of deficiency may be issued or other appropriate action taken in those instances when a notice of deficiency is not first necessary in order to assess tax. See Publication 1035 for more detailed discussion. Procedures will be explained to the taxpayer in a manner consistent with the Service's mission statement.
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If the taxpayer requests an extension period that is shorter than needed to complete the examination and other administrative actions, the Service is not compelled to agree to such period. Both the taxpayer and the Service have the right to determine what they will agree to in the consent.
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If the taxpayer requests the consent be restricted to specific items, the service is not compelled to sign such a consent in all situations. Both the taxpayer and the Service have the right to determine what they will agree to in the consent. See IRM 25.6.22.8.1 and IRM 25.6.22.8.2 below for situations when restricted consents will normally be granted.
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Section 3201(d) of RRA 98 requires that, wherever practicable, any notice relating to a joint return be sent separately to each individual filing the joint return.
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Requests for statute extensions are notices requiring issuance of separate notices, except in those situations when it has been determined and documented in the case file that the individuals filing the joint return are residing at the same address. If both spouses are residing at the same mailing address, then:
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Mail or present one complete set of documents, which contains the appropriate Letter 907 or Letter 967 addressed to both spouses at the common address, a Publication 1035 and the required consent form which contains the notice of taxpayers’ rights.
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Document in the case activity record the date and fact of mailing of Letter 907 or Letter 967, Publication 1035 and the consent form or the date and fact of personal presentation and to whom presented.
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If it has been determined that both spouses are not residing at the same address, then document the separate addresses and mail separately a complete set of documents containing the Letter 907 or Letter 967 addressed to the respective separate address of each spouse, Publication 1035 and consent to each spouse and document the case activity record with the date and fact of separate mailings to each spouse. If the consent is personally presented, document the date and fact of separate personal presentations or the date and fact of personal presentation to one spouse and the date and fact of mailing to the other spouse. For preparation of consents when the spouses are separated or divorced, see IRM 25.6.22.6.1.1, below.
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See IRM 4.10.1.6.8.2, Verification of Address for Each Spouse, and IRM 25.15.6.2.1(1), Mailing Address Changes, for the requirements which specify that in every examination of a joint return, the examiner shall verify the last known mailing address for each spouse and document actions taken to verify the address.
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Various consent forms are used to extend the statutory period for assessment. There are also letters and publications sent with the assessment consent forms, which are discussed below.
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The following consent forms are used to extend the assessment statute:
Form 872 —Consent to Extend the Time to Assess Tax Used for income tax and various excise taxes. This is a fixed-date extension. Note:
This form does not cover flow-through TEFRA entity items or affected items unless modified with special language. See IRM 25.6.22.6.5.1.
Form 872–A —Special Consent to Extend the Time to Assess Tax
Used for income tax and various excise taxes. This is an open-ended (no fixed-date) extension.Note:
This form does not cover flow-through TEFRA entity items or affected items unless modified with special language. See IRM 25.6.22.6.5.1.
Form 872–B —Consent to Extend the Time to Assess Miscellaneous Excise Taxes Form 872–C —Consent Fixing Period of Limitation Upon Assessment of Tax Under Section 4940 of the Internal Revenue Code (Form 872 C is only available by ordering Package 1023, Application for Recognition of Exemption Under Sec. 501(c)(3) of the Internal Revenue Code) Form 872–D —Consent to Extend the Time on Assessment of Tax Return Preparer Penalty Form 872–F —Consent to Extend the Time to Assess Tax Attributable to Items of a Partnership or S Corporation That Have Converted Under Section 6231(b) of the Internal Revenue Code Form 872–H —Consent to Extend the Time to Assess Tax on a Trust Form 872-I __Consent to Extend the Time to Assess Tax As Well As Tax Attributable to Items of a Partnership (fixed-date extension). Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the taxpayer, see IRM 25.6.22.5.7.1(7). Form 872-IA __Consent to Extend the Time to Assess Tax As Well As Tax Attributable to Items of a Partnership (open-ended extension). Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the taxpayer, see IRM 25.6.22.5.7.1(7). Form 872–N —Notice of Termination of Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items
Used to terminate Form 872–O.Form 872–O —Special Consent to Extend the Time to Assess Tax Attributable to Partnership Items
Used for TEFRA partnership; should be signed by the Tax Matters Partner and is an open-ended extension. Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the TEFRA entity, see IRM 25.6.22.5.7.1(6).Form 872–P —Consent to Extend the Time to Assess Tax Attributable to Partnership Items
Used for TEFRA partnership; should be signed by the Tax Matters Partner and is a fixed-date extension. Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the TEFRA entity, see IRM 25.6.22.5.7.1(6).Form 872–Q —Notice of Termination of Special Consent to Extend the Time to Assess Tax Attributable to Items of an S Corporation
Used to terminate Form 872–R.Form 872–R —Special Consent to Extend the Time to Assess Tax Attributable to Items of an S Corporation
Used for TEFRA S Corporation; should be signed by the Tax Matters Person and is an open-ended extension. Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the TEFRA entity, see IRM 25.6.22.5.7.1(6).Form 872–S —Consent to Extend the Time to Assess Tax Attributable to Items of an S Corporation
Used for TEFRA S Corporation; should be signed by the Tax Matters Person and is a fixed-date extension. Caution: special rules apply if the taxpayer's authorized representative signs the consent on behalf of the TEFRA entity, see IRM 25.6.22.5.7.1(6).Form 872–T —Notice of Termination of Special Consent to Extend the Time to Assess Tax
Used to terminate Form 872–A or 872–IA.Form 872-U --Change of Address to Submit Notice of Termination of Special Consent to Extend the Time to Assess Tax. Note:
This is a notice that relates to open-ended consents -NOT ITSELF A CONSENT FORM
Used to notify taxpayers who have signed open-ended consents of the proper address to submit a consent termination when the IRS address has changed from that reflected on the open-ended consent form.Form 921 —Consent to Extend the Time to Assess Income Tax
Used to extend statute when taxpayer is granted approval to use the estimated cost of future improvements in certain real estate developments, as provided in Rev. Proc. 92–29, 1992-1 C.B. 748. The form, revised 07/2001, provides a period for assessment ending one year after the date a return is filed for the tax year in which the project is expected to be complete. The prior revision (01/2001) provided for a period of assessment ending on a date specified in the consent. For flow-through entity situations, see Forms 921–I and 921–P, below.Form 921—A —Consent Fixing Period of Limitations On Assessment of Income and Profits Tax
Used to extend statute when taxpayer is granted approval to use the estimated cost of future improvements in certain real estate developments, as provided in Rev. Proc. 92–29. The form is used for an S Corporation, Partnership, Limited Liability Company, Trust, Syndicate, Pool, Etc. It provides for a period of assessment ending on a date specified in the consent. However, see Forms 921-I and 921-P, described below, for more current usage.Form 921-I --Consent Fixing Period of Limitation on Assessment of Income and Profits Tax (S Corporations, Partnerships, Limited Liability Companies, Trusts, Syndicates, Pools, Etc.)
An alternative to Form 921, this form, revised 9/2001, is used by the investor in a partnership to consent to the extension of the period of time for assessment. This form should be used by investors in the electing S Corporation, Partnership, Limited Liability Company, Trust, Syndicate, Pool, etc. that are NOT subject to unified audit and litigation procedures, collectively known as TEFRA (Tax Equity and Fiscal Responsibility Act). For entities that are subject to TEFRA, use Form 921-P, described below. The form provides a period for assessment ending one year after the date a return is filed for the tax year in which the project is expected to be complete.Form 921-P --Consent Fixing Period of Limitation on Assessment of Income and Profits Tax (Partnerships and Limited Liability Companies) Revised 10/2001 and used to apply for a consent in accordance with Rev. Proc. 92-29. This consent generally applies to TEFRA partnership returns filed for partnership tax years beginning after September 3, 1982. For other entities (those not subject to the unified audit and litigation procedures, collecitvely known as TEFRA)) do not use Form 921-P. The form provides a period for assessment ending one year after the date a return is filed for the tax year in which the project is expected to be complete. Form 952 —Consent to Extend Period of Limitation on
Assessment of Income Taxes
Used for receiving corporation on the complete liquidation of a subsidiary under IRC § 332.Form 977 —Consent to Extend the time to Assess Liability at Law or in Equity for Income, Gift and Estate Tax Against a Transferee or Fiduciary
Used for transferee liability cases.Form 2750 —Waiver Extending Statutory Period for Assessment of Trust Fund Recovery Penalty Form 4016 —Consent Fixing Period of Limitation Upon Assessment of Employment or Miscellaneous Excise Taxes Against a Transferee
Used to extend statute on transferees for employment and excise taxes.Form SS–10 —Consent to Extend the Time to Assess Employment Taxes
Used for employment taxes – Federal Insurance Contributions Act, Federal Unemployment Tax Act, withholding taxes and Railroad Retirement Tax Act. -
In fiduciary situations, the following form is used to confirm a person’s authority to sign the consent:
Form 56, Notice Concerning Fiduciary Relationship-
Generally, a fiduciary should file Form 56 when the fiduciary relationship is created or terminated. Some fiduciaries file the form with the first return. Therefore, Form 56 may already be on file. If the examiner has reason to doubt that the Form 56 on file remains valid, the examiner needs to verify that the fiduciary relationship still exists or to secure a current Form 56 (dated not later than the date the fiduciary dates the consent) to ensure the fiduciary relationship still exists, in order to enter into a consent agreement.
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Part II of Form 56 concerns the authority for the fiduciary relationship; e.g., a will, a court order, a trust instrument. The instructions note that the fiduciary must be prepared to furnish evidence that substantiates the authority. This evidence may not be on file with the IRS. As noted below in IRM 25.6.22.6.1.2 (Minor), 25.6.22.6.1.3 (Incompetent Persons), IRM 25.6.22.6.1.4 (Decedents), IRM 25.6.22.6.6 (Trusts) and IRM 25.6.22.6.7 (Decedent's Estate (Income Tax – Form 1041), the fiduciary is to provide the evidence of fiduciary authority when submitting the consent in order to ensure the validity of the consent. The file should contain a copy of the instrument under which the fiduciary derives the authority to act, properly authenticated, and documents the fact that such authority remains in full force and effect on the date the consent is signed by the fiduciary.
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The following letters are used when consents are requested through the mail: A copy of the correspondence is to be provided to the authorized representative.
Letter 907 (with various suffixes depending on operating division or Letter 967 in the case of Appeals) Request to Extend Statute—Transmittal letter sent to the taxpayer with the consent. The number of days for the taxpayer to respond to the consent solicitation is to be inserted in the Letter 907, if not already specified in the particular version of the letter being used. Generally, at least 10 calendar days from the date of the letter should be allowed for the taxpayer to respond. Letter 928 Request to Extend Statute – Follow-up—Letter used, when appropriate, as a follow-up when consents have been previously requested but not received. Letter 929 Transmittal to Taxpayer of Copy of Signed Consent—After consents have been properly executed, this letter may be used to transmit a copy of the executed consent to the taxpayer for his/her records. Letter 1817 Letter to T/P Regarding Consents—Letter used to request additional information or send the taxpayer " new" consent forms if it is necessary to recontact the taxpayer about a consent. -
Publication 1035, Extending the Tax Assessment Period, will be sent to the taxpayer in every instance when a consent is requested by mail.
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If an oral request for a consent is made to the taxpayer or authorized representative, the consent and Publication 1035 will be handed to the taxpayer or authorized representative. When orally soliciting a consent, examiners should give taxpayers or authorized representative a brief explanation of taxpayers' rights and options.
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The following is a list of the consent forms that are used for each type of return as well as the Forms 872F, 952, 921 may be used in applicable circumstances (see IRM 25.6.22.4.1, Assessment Consent Forms):
Tax Form Consent Form Income Taxes 1040, 1040–A, 1040–EZ 872, 872–A, 872–I or 872–IA 1041 872, 872–A, 872-H, 872–I or 872–IA 1042 872 or 872–A 1065 (non-TEFRA) Protect statute of individual partner. Form 872 or 872-A can be used for this purpose but it is strongly recommended that if the examiner is uncertain as to the TEFRA status of any partnership in which the taxpayer has invested either directly or indirectly (as a result of tiering), Form 872-I or 872-IA should be used to extend the statute at the individual partner level. This is to ensure adjustments can be made to the partner's return as a result of any TEFRA partnership items and affected items. If the taxpayer is unwilling to execute a Form 872–I or 872–IA, then Area Counsel must be consulted. Use of an unmodified Form 872 or Form 872-A would be a restricted consent, effectively, because the consent would not cover any TEFRA partnership items or affected items. 1065 (TEFRA) 872–P or 872–O at TEFRA entity level or 872-I or 872-IA at individual partner level 1120, 1120–A 872, 872–A, 872–I or 872–IA 1120–F, 1120–FSC, 1120–DISC 872, 872–A, 872–I or 872–IA 1120S (Non-TEFRA) Tax on corporation 872 or 872–A Flow-through items Protect shareholder(s) statute 1120–S (TEFRA) 872–S or 872–R Excise Taxes 720 872–B 730 872–B 11C 872–B 2290 872–B Gift Taxes 709 872 or 872–A Estate Taxes 706 Cannot be Extended by Agreement Employment Taxes and Withheld Taxes 940 SS–10 941 SS–10 943 SS–10 944 SS–10 945 SS-10 Employee Share of FICA SS–10 Trust Fund Recovery Penalty 2750 Form 1040, FICA tax on tips not reported to employer 872, 872–A or SS-10 Form 1040, Household Employment Taxes 872, 872-A or SS-10. If Form 872 or 872-A is used, the distinct types of taxes covered must be separately specified Exempt Organizations 990 872 or 872–A 990–C 872 or 872–A 990–T 872 or 872–A 990–PF 872 or 872–A 4720 872 or 872–A Employee Plans 5330 872 5500 872–H 990–T 872 1041 872–H Transferee Liability Income tax 977 Employment taxes 4016 Excise taxes 4016 Return Preparer Penalty 872–D
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This section covers the procedures for the preparation of consents that generally apply to consents for all taxpayers and types of tax. IRM Section 25.6.22.6 below deals with requirements that pertain to specific taxpayers and types of tax.
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A consent to extend the period for assessment is a unilateral waiver of a defense by a taxpayer and it is not a contract. Contract principles are significant, however, as IRC § 6501(c)(4) requires that the parties enter into a written agreement as to the extension of the period of time to assess tax. Therefore, every effort should be made to ensure the following information is clear:
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The terms of the agreement
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Who is the taxpayer
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What years are involved
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Which individuals are authorized to sign the consent
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Whether or not there are any conditions and/or restrictions posed by the taxpayer or the Service
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There are fixed–date and open-ended (no fixed–date) consents. For further information as to the date the extended period for assessment ends see IRM 25.6.22.5.6 and 25.6.22.7, below, as well as IRM 25.6.22.4.1, above, to determine which forms are used to prepare fixed-date consents and which forms are used to prepare open-ended consents.
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The consent should be typewritten or computer generated. A pen may be used, but this practice is discouraged. Never use a pencil.
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The consent should be prepared by the Service, not by the taxpayer or the taxpayer's representative except forms of the 921 series can be prepared by the taxpayer and submitted for acceptance under Rev. Proc. 92–29, 1992-1 C.B. 748. This Revenue Procedure pertains to the use of an alternative to the general method under IRC section 461(h) by developers of real estate.
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Qualified extensions are not acceptable, except as provided for under the discussion of restricted consents at IRM 25.6.22.8 below.
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The consent must be prepared in duplicate. A duplicate original signed by both the taxpayer (or duly authorized representative with proper authority to do so) and delegated Service official is sent to the taxpayer. See IRM 25.6.22.5.11.1(e), below. The original and copy must each be executed with original signatures of the taxpayers and the Service official. Carbon signatures or facsimile signatures are not acceptable.
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Consents with alterations, erasures, and corrections should not knowingly be provided to the taxpayer for signature, regardless of how seemingly slight or immaterial the corrections or alterations might be.
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If the taxpayer has made alterations on the consent, a new consent should be prepared for the taxpayer's signature. However, if the alterations on the consent are acceptable to the Service, the taxpayer has initialed each alteration, and there is not sufficient time to perfect the consent, the person signing for the Service can initial the alterations and sign the consent. Advice of Area Counsel should be sought before relying on an altered consent to protect the statute.
Note:
The Service will not make changes to a consent form after execution by the taxpayer.
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Consents that contain errors (e.g., spellings, addresses, years, identification numbers) may not necessarily render the consent invalid; however, due diligence must be exercised to avoid errors. The courts have sometimes found that where the intent of the parties was to extend the period for assessment for the appropriate taxpayer and tax period, the errors in the consent did not invalidate the extension, i.e., the court "reformed" the consent. Decisions concerning the validity of consents which contain errors are not to be made without consulting Counsel.
Note:
The most important factor with respect to consent preparation is that the written consent manifests the intent of the parties to extend the period for assessment.
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The consent should be prepared and signed using the same name as that used on the return as filed, unless since filing, there has been a name change. In these situations, the consent should be prepared using both names, but the signature line should only show the current name; however, showing both the current and former names on the signature line is also acceptable.
Example:
Name line —"Mary Doe, formerly Mary Brown"
Signature line —"Mary Doe" -
Abbreviated names, such as "Geo." , " Chas." , "Jas." , "Wm." , etc., should not be used in the name line of the consent or the signature line, unless they are used on the return in both the name and signature block. If an entity's legal name contains abbreviations, then the abbreviations should be used.
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For employee plans matters, the consent must indicate the name of the plan and the plan number.
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The following will be entered on the "Kind of Tax" line on the consent form:
Type of Tax "Kind of Tax" Income "income" Excise tax reported on Form 1040 "excise" Chapter 42 and 43 IRC § 4940 through 4980E involving tax-exempt organizations and qualified pension plans "excise" Qualified Pension Plans "income" Gift Tax "gift" Excise Taxes reported on Forms 720, 730, 2290, and 11–C See IRM 25.6.22.6.11(4) FICA tax on tips "FICA on tips " Household Employment Tax "household employment" Foreign Persons, Withholding on U.S. Income of "withholding tax under Sections 1442–1464" -
Certain tax forms show more than one kind of tax. If income taxes and separate and distinct other types of taxes are involved such as excise or employment taxes, "the kind of tax" portion of the consent form should indicate each type of tax. For example, in the examination of a Form 1040, there may be income tax issues and one or more other issues present that involve an Individual Retirement Account (IRA). The IRA issues may give rise to Chapter 43 taxes reportable on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, and Form 1040. If the "kind of tax" line of the consent is completed only for "income tax" the statutory period for assessing any Chapter 43 excise tax deficiency may expire, thus barring the assessment of the excise tax. Therefore, in this example, the "kind of tax" on the consent form should specify "income and excise" .
Note:
The additional tax imposed by IRC section 72 on early distributions from a qualified retirement plans, including an IRA, or modified endowment contract is not a separate and distinct type of tax. Therefore, the additional tax imposed by IRC section 72 is covered by a consent