25.3.6  Open Litigation Control, Monitoring and Closing Actions

Manual Transmittal

September 09, 2013

Purpose

(1) This transmits new IRM 25.3.6, Litigation and Judgments, Open Litigation Control, Monitoring, and Closing Actions.

Material Changes

(1) Editorial change to IRM 25.3.6.3.2.2(4)(a) to update organizational name for the Centralized Lien Operation.

(2) Editorial change to IRM 25.3.6.5.3(2) to correct work submission location and add a note to distinguish the location for processing manual refunds from the work handled by the FORT.

(3) Editorial change to IRM 25.3.6.5.3.1(2) and (3) to correct work submission location and correct a hyper-link.

Effect on Other Documents

This supersedes IRM 25.3.5, Open Litigation Control, Monitoring and Closing Actions, dated December 10, 2010.

Audience

SBSE Collection Employees and all Operating Divisions

Effective Date

(09-09-2013)

Scott D. Reisher
Director, Collection Policy
Small Business/Self-Employed

25.3.6.1  (12-07-2010)
Types of Litigation Controlled by Advisory

  1. The provisions of this section apply in general to all litigation cases controlled by Advisory. Required actions are to be taken by Advisory unless otherwise noted.

  2. The types of cases normally under Advisory's control and responsibility are as follows:

    1. Collection suits initiated by Collection employees.

    2. Civil injunctions to restrain pyramiding.

    3. Refund suits involving the Trust Fund Recovery Penalty (TFRP).

    4. Suits against IRS employees.

    5. Suits to enjoin or restrain IRS actions involving collection matters.

    6. Other suits against the IRS (section 2410, wrongful levy, suits for damages, etc.).

    7. Cases in which Area Counsel or the Department of Justice specifically requests Advisory assistance.

    Note:

    Proofs of claim in probate proceedings are covered separately in IRM 5.5.4.

  3. The following types of litigation are generally not controlled by Advisory and, therefore, not addressed in this part of the IRM:

    1. Bankruptcy cases - The Centralized Insolvency Operation and Field Insolvency have responsibility for bankruptcy cases. See IRM 5.9.1.3, The Role of Insolvency.

    2. Refund Litigation involving all liability other than the Trust Fund Recovery Penalty (TFRP) - Refund Litigation Units in the appropriate campuses control such litigation.

    3. Tax Court Cases (non-Collection Due Process) - Appeals has control and inputs Transaction Code (TC) 520s. Inquiries should be referred to Appeals Processing Services. See generally IRM 8.20, Appeals Case Processing Manual.

    4. Tax Court Cases (Collection Due Process) - Appeals has control and inputs TC 520 cc 76 or 77. These cases are module-specific, so some modules may be in litigation and others in open collection status.

  4. Advisory involvement may occasionally be needed in the types of cases listed in paragraph (3), above. When this occurs, consider each case individually. Control and handle appropriately.

    Note:

    In Tax Court Collection Due Process cases, sometimes there is a need to have Collection consider collection alternatives such as an installment agreement. A remand to Appeals is not appropriate unless Appeals was found to abuse its discretion in its determination.

  5. Summons enforcement actions are not addressed in this section of the IRM. See IRM 25.5.10, Summons - Enforcement of Summons, and IRM 5.17.6.23, Summonses, Civil Enforcement, for information regarding this type of action.

25.3.6.2  (12-07-2010)
Initial Review and Actions by Advisory

  1. Notification - Advisory will generally learn of the commencement of a litigation case from:

    • recommendation from a revenue officer,

    • receipt of a summons and complaint against the United States, the Internal Revenue Service, the Department of the Treasury, or an individual IRS employee in the course of their duties, or

    • notification by Area Counsel or the U.S. Attorney.

  2. Initial Review and Actions - Many litigation-related actions have strict time requirements. It is essential that such actions are identified promptly and taken in a timely fashion. Take the following actions immediately upon receipt of a summons and complaint or other notification of litigation:

    1. Review available case information to determine urgency (imminent statutes of limitations, etc.) and proper course of action.

    2. Immediately notify Area Counsel whenever a complaint filed in a state court proceeding is received and there is any question as to whether or not the case should be removed to federal district court. The time period for removing an action to federal district court is short, generally within 30 days after receipt of a copy of the complaint.

    3. Review any summons or subpoenas received to determine deadlines for responding or dates for court hearings.

    4. Forward documents immediately to Area Counsel and/or the U.S. Attorney's Office, depending upon the nature of the suit and local practice. If the response or appearance date is imminent, call Area Counsel and/or the U.S. Attorney's office to advise, and hand deliver the papers to them if possible. See IRM 25.3.3, for additional guidance regarding suits brought against the United States.

    Note:

    Depending upon the nature of the action, the litigation may be handled in the Department of Justice (DOJ) by either a civil trial attorney in the Tax Division or an Assistant U.S. Attorney in the local U.S. Attorney's Office. With the exception of certain types of cases that are brought against the IRS under section 2410 (28 USC § 2410) (e.g., foreclosure, quiet title, condemnation), the case will also be assigned to an Area Counsel Attorney. Any actions taken in litigation cases must be coordinated through the Area Counsel Attorney assigned to the case unless the case is of the type that may be handled solely by the local U.S. Attorney's Office. See IRM 34.5.6.2 for the types of cases that may be handled solely by the U.S. Attorney's Office. These cases are under DOJ's exclusive authority for settlement. The IRS has no authority to settle these cases. Throughout this IRM section, the term "Counsel" will refer to either the Area Counsel Attorney assigned to the case or the local Assistant U.S. Attorney if the case is being handled solely by that office.

  3. Case Files - Establish and maintain case files for all litigation cases.

  4. Set up appropriate case controls as described in IRM 25.3.6.3, below.

25.3.6.2.1  (12-07-2010)
Data Gathering

  1. See IRM 5.17.12, Investigations and Reports, for information regarding

    • the type of investigation to be performed on accounts that may require legal action to assist in collecting the account, and

    • the types of reports to be prepared.

      Note:

      The same general principles apply to investigations and reports required in cases where a suit has been filed against the United States.

  2. Counsel (either the Area Counsel Attorney or the Assistant U.S. Attorney assigned to the case) will commonly specify what documents are needed. However, do not wait for Counsel's request to begin obtaining documents that can be reasonably anticipated as needed.

  3. Secure the following items, as appropriate and/or requested, and forward them to Counsel:

    1. Original returns and associated documents (Revenue Agent Reports (RARs), Substitute For Return (SFR) documents, etc.).

      Note:

      These documents may be obtained by using ESTAB (or ESTAB request via Form 4844) or by faxing Form 2275, Records Request, Charge and Recharge, (clearly indicating that the case is in litigation) to the appropriate campus.

    2. Certified transcripts under seal. Use Form 4340 transcripts under seal or locally certified IDRS or Transcript Delivery System (TDS) transcripts as needed. For court cases, certified transcripts under seal should be requested because they are self-authenticating under the Federal Rules of Evidence. See IRM 25.3.6.2.1.1(3), below. If the transcripts are more than six months old, provide current balances in the narrative.

    3. Administrative files.

    4. Schedules/summaries of unpaid liabilities.

    5. Notices of Federal Tax Lien and other documents evidencing liens or other interests in property. Include information regarding any estate tax liens, notice of which may or may not be recorded.

    6. Certified copies of refund checks (for suits to recover erroneous refunds).

    7. Other required documentation as needed for particular cases.

25.3.6.2.1.1  (12-07-2010)
Form 4340 Procedures

  1. An Advisory request for the preparation of a Form 4340 is made on a Form 4338, Information or Certified Transcript Request (BMF or TFRP) or Form 4338-A (IMF Information or Certified Transcript Request).

  2. Transmit (generally by fax) the completed Form 4338/4338A to the appropriate campus certification unit. Preparation of Form 4340 is limited to only a few authorized campus employees. At present, these employees are generally in the Compliance and Accounting Branch functions.

  3. Mark the "Under Seal" box on the Form 4338/4338A if a Form 4340 is needed for a court case. Form 2866, Certificate of Official Record, will be included only when the "Under Seal" box is checked. See IRM 21.2.3.4.2.1, Form 4340, Certificate of Assessments, Payments and Other Specified Matters, for more information.

  4. Indicate a required response date appropriate to how quickly the transcript is needed (generally one month for routine requests and two weeks for expedited requests). If a transcript is needed more quickly, coordinate with the appropriate campus employee by telephone.

25.3.6.2.1.2  (12-07-2010)
Certified Copies of Refund Checks

  1. If needed in erroneous refund suits, request copies of refund checks from the appropriate Campus Refund Inquiry Section and provide the following information with the request:

    1. Taxpayer Identification Number (TIN)

    2. MFT

    3. Period(s)

    4. Refund date(s)

    5. Refund amount(s)

    Note:

    Specify whether certified or regular copies are needed (certified copies will generally be needed).

25.3.6.2.1.3  (12-07-2010)
Follow-ups on Data Gathering

  1. If administrative files or other documents are requested and not received at the time the suit recommendation is sent to Counsel, schedule periodic follow-ups (no more than one month apart) to ensure that the requests for documents are received and being processed.

  2. Keep Counsel apprised of any delays in obtaining needed files or documents.

25.3.6.2.2  (12-07-2010)
Document Review

  1. Before sending any documents to Counsel, review the documents to ensure that:

    • all copies are legible

    • all pages are included (if not, obtain the missing pages)

  2. In cases involving lien priorities, ensure that certified copies of Notices of Federal Tax Lien (NFTLs), lien-related certificates, and other liens have been obtained from the recorder's office. Also make note of the lien refiling date to ensure that all NFTLs are timely refiled.

25.3.6.3  (12-07-2010)
Case Controls

  1. Appropriate case controls and follow-ups must be established to ensure protection of the Government's interest and priority.

  2. Use the Integrated Collection System (ICS) to control all Advisory litigation cases.

25.3.6.3.1  (12-07-2010)
ICS Control

  1. Establish ICS control modules for all litigation cases upon receipt (generally within 10 calendar days).

  2. Use the appropriate action code to identify the type of case. If more than one action code applies, choose the one that most specifically identifies the type of case.

    • 131, Suits by U.S.

    • 132, Suits Against U.S.

    • 133, Suits Against IRS Employees (see IRM 25.3.4)

    • 134, TFRP Refund Suits

  3. Input earliest Collection Statute Expiration Date (CSED), Notice of Federal Tax Lien (NFTL) refile deadline, and Assessment Statute Expiration Date (ASED) (if applicable) in the appropriate ICS fields when establishing the modules if this information has not already been added.

  4. Set follow-up dates needed to assure timely completion of initial and subsequent actions. Include a follow-up date for each needed NFTL refiling in the case. Use dates early in the legal refiling period. See IRM 5.12.2.20.2, Required Refiling Period.

    Note:

    The IRS uses NFTLs that contain self-releasing provisions that will extinguish the underlying statutory lien if the NFTL is not timely refiled during the refiling period. Therefore, NFTLs must be timely refiled in all jurisdictions in which they are filed in order to prevent the statutory lien from being extinguished.

  5. For TFRP refund suits, to the extent possible, input ICS cross-references to all involved entities and TINs (corporation, other responsible parties). The name and TIN of the taxpayer bringing the suit should be primary. Separate controls for related cases may be needed if third-party complaints are brought against responsible parties other than the taxpayer bringing the refund suit.

25.3.6.3.2  (12-07-2010)
Transaction Code (TC) 520

  1. Transaction Code (TC) 520 with the appropriate closing code (cc) must be input on all modules that are involved in litigation. TC 520 is an indicator that alerts those researching an account of pending or ongoing litigation. When input promptly, the TC 520 indicator provides awareness of the litigation and prevents inappropriate actions by other IRS functions. This input should be requested whether or not there is an existing bankruptcy-related TC 520 on the account modules. TC 520 freezes the tax module or entity, depending upon the closing code used, from refunding and offsetting.

    Note:

    Input of the TC 520 cc 80 is generally requested as of the date that the suit is filed. However, input may be requested prior to that time in imminent CSED situations noted in IRM 25.3.6.3.2.2, below.

  2. Advisory is responsible for requesting the input of TC 520 with the appropriate closing code for all suits for which Advisory has responsibility. See IRM 25.3.6.1, Types of Litigation Controlled by Advisory.

    Note:

    Depending upon which closing code is used, TC 520 may or may not suspend the running of the statute of limitations for collection. Therefore, it is extremely important to use the correct closing code for the particular type of action.

  3. IRM Exhibit 25.3.6-1, Closing Codes for Transaction Code 520, lists the closing codes that are commonly used by Advisory when requesting TC 520 input. A complete list of closing codes used with TC 520 can be found in Document 6209, IRS Processing Codes and Information, Section 11, Collection, TC 520 Closing Code Chart.

    Note:

    If an action to reduce the tax liability to judgment is involved, requesting input of TC 520 cc 80 prior to the original CSEDs on all accounts is essential to prevent the erroneous posting of TC 608 and resulting abatements, erroneous NFTL releases, etc. Keep in mind that TC 520 with cc 70, 71, 73 or 75 does not suspend the running of the collection statute of limitations or prevent TC 608 from posting. See IRM 25.3.6.3.2.2, Cases with Imminent CSEDs, below, for additional guidance for protecting the CSED.

  4. It may be necessary to change TC 520 closing codes. For example, input of TC 520 cc 70 should be requested when a determination is made to forward a suit recommendation to reduce assessments to judgment to alert other IRS offices that litigation is in process. Once the suit is actually filed, or if the CSED becomes imminent, closing code 70 (which does not suspend the running of the collection statute of limitations) must be changed to closing code 80 (which does suspend the running of the collection statute of limitations). See IRM 25.3.6.3.2.2, Cases with Imminent CSEDs, below.

    1. To change from a closing code that does not protect the CSED (such as cc 70, 71, 73, or 75) to one that does (such as cc 80 or 82), simply input the new TC 520 with the desired closing code. It is not necessary to reverse the prior TC 520.

    2. To change from a closing code that protects the CSED (such as cc 80 or 82) to one that does not protect the CSED (such as cc 70, 71, 73, or 75), the prior TC 520 must be reversed (TC 521) or corrected (TC 522) before the new one is input. Care must be taken to coordinate the reversal or correction with the new input to ensure that a premature TC 608 does not post.

  5. TC 520s (and corresponding reversing transactions) on litigation case types not controlled by Advisory will be requested by the unit controlling the litigation.

  6. Ensure successful posting of requested TCs 520 and resolve posting inaccuracies and problems.

  7. Keep a complete record of entities and modules to which TC 520 input is requested by Advisory in order to ensure all are reversed when appropriate.

25.3.6.3.2.1  (12-07-2010)
Trust Fund Recovery Penalty (TFRP) Litigation

  1. The collection statute of limitations is suspended for the period of time during which the IRS is prohibited from collecting. See IRC § 6672(c)(4), and IRM 5.7.7.6.2, Withholding Collection - IRC 6672.

  2. Two different Internal Revenue Code (IRC) provisions may apply to suspend the running of the collection statute of limitations for the Trust Fund Recovery Penalty (TFRP):

    1. IRC § 6331(i) generally prohibits a levy during the pendency of a TFRP refund suit in which the unpaid tax is in issue, unless jeopardy exists or the taxpayer waives his rights under this subsection. See IRM 5.7.7.6.2(3). The collection statute of limitations is suspended at the time the refund suit is filed and continues until a court order or judgment is entered in the proceeding from which an appeal may be taken becomes final. See IRC § 6331(i)(6). This provision was added by Section 3433(a) of the 1998 IRS Restructuring and Reform Act of 1998 and is now the general rule.

    2. IRC § 6672(c) requires the IRS to stay collection of the TFRP if, within 30 days after notice and demand, the taxpayer:
      (i) pays the amount required to commence a proceeding in court (tax attributable to one employee for one quarter);
      (ii) files a claim for refund of that amount;
      (iii) posts an appropriate bond, acceptable to the Secretary; and
      (iv) begins the court proceeding within 30 days after denial of the claim for refund.
      This provision is part of the original statute and is rarely used because of the bond requirement. Thus, only taxpayers desiring a lien release before litigating will likely use it.

  3. Request input of TC 520, closing code 82, when either IRC § 6672(c) or IRC § 6331(i) applies to suspend the statute of limitations for collecting the TFRP.

  4. If a third-party complaint is filed in a refund suit against other parties against whom related TFRP assessments have been made, request input of TC 520, closing code 80, for those other parties as of the date the third-party complaint is filed. A third party complaint must be filed before the CSED in order for the CSED to be extended under IRC § 6502(a). If the CSED is imminent, follow the procedures set forth, below, in IRM 25.3.6.3.2.2, Cases with Imminent CSEDs.

25.3.6.3.2.2  (09-09-2013)
Cases with Imminent CSEDs

  1. If a court proceeding to collect the tax is commenced before the Collection Statute Expiration Date (CSED), the period during which the tax may be collected by levy is extended and does not expire until the tax liability or a judgment arising from the tax liability is satisfied or becomes unenforceable. See IRC § 6502(a). In order for the CSED to be extended on the tax module, Transaction Code 520 with closing code 80 (TC 520 cc 80) must be input on IDRS before the CSED. Input of the TC 520 cc 80 suspends the running of the statute of limitations for collection.

  2. Generally, TC 520 cc 80 should not be input before suit is actually filed because the suspension of the collection period under IRC § 6502(a) does not begin until that date. However, TC 520 cc 80 (using the actual date of input as the transaction date) should be input to prevent a TC 608 from posting in cases that:

    1. have been referred to Area Counsel for suit, or not yet been so referred but will be; and

    2. involve a CSED within four weeks or less.

    Note:

    In such cases, also ensure that the Notice of Federal Tax Lien is timely refiled. See IRM 25.3.6.4.1.2, below.

  3. Early posting of TC 520 cc 80 will begin the suspension of the collection period prior to the date that suit is actually filed. If the suit is not actually filed before the CSED, this entry must be corrected (request input of TC 522, no closing code). If suit is timely filed, there is no need to correct the entry because filing the suit suspends the running of the collection period until the liability for the tax or a judgment arising from the tax is satisfied or becomes unenforceable. The fact that the TC 520 was input prior to the date the suit was filed must be noted in the ICS history and Area Counsel must be advised of this action in case questions are raised in litigation regarding the posting date of the TC 520.

    Note:

    In order for the extension of the CSED provided by IRC § 6502(a) to take effect, suit must actually be filed prior to the CSED.

  4. If TC 608 posts prematurely in a case where a suit has been timely filed, actions must be taken to reestablish the assessed balances and to revoke the premature release of any Notices of Federal Tax Lien (NFTLs). If TC 608/TC 583’s are pending (PN) on TXMOD, take the following actions:

    1. Check the Automated Lien System (ALS) to see if the issuance of physical certificate(s) of release is pending. If so, contact the Centralized Lien Organization (CLO) to see if mailing of the certificate(s) can be stopped. See http://serp.enterprise.irs.gov/databases/who-where.dr/als.dr/case-processing-lien-units.htm for contact information for the appropriate CCP Lien Team.

    2. Request immediate input of TC 520 cc 80, using a transaction code input date that is at least one (1) day prior to the CSED.

    3. If the NFTL releases have already been issued, make a determination as to possible harm to the Government’s priority and the related suit action. Issue OIs to field collection if needed to gather information necessary to make the determination.

    4. Advise Area Counsel and DOJ immediately, and proceed as directed relative to submitting revocations of the erroneous NFTL releases and filing of new NFTLs. See IRM 5.12.3.23, Revocation of Certificate of Release or Nonattachment, and IRM 5.12.3.25, Reinstatement of Lien.

  5. Any requests for the input of TC 520 cc 80 must be made by Advisory personnel to ensure proper (Non-Insolvency) Litigation Accounts Management System (LAMS) case controls are maintained.

25.3.6.3.2.3  (12-07-2010)
Failure to Honor Levy Suits

  1. A suit to enforce a levy is generally brought against a third party, not against the taxpayer (e.g., the taxpayer’s employer fails to honor a levy served to reach the taxpayer’s wages). See IRM 5.17.4.12, Action to Enforce a Levy.

  2. While IRC § 6332(d)(1) provides that any person who fails or refuses to surrender property subject to levy shall be personally liable in an amount equal to the value of that property (but not exceeding the total amount of the tax liability with respect to which the levy was made), any amount recovered in the suit (other than costs) is to be credited against the delinquent tax liability. See IRM 5.17.4.12.3, Liability for Failure to Comply.

    Note:

    If the 50-percent penalty under IRC § 6332(d)(2) is imposed and collected, the penalty amount should not be credited against the delinquent tax liability.

  3. If the notice of levy was timely served prior to the collection statute of limitations running against the taxpayer and the notice of seizure was properly given to the taxpayer within the meaning of IRC § 6335(a) (see IRC § 6502(b)), then the personal liability arising from a failure to honor that levy may be enforced in any appropriate case at any time without limitation, notwithstanding any subsequent expiration of the normal or extended CSED against the taxpayer. See IRM 5.17.4.12.4, Initiation of Suit.

  4. If the CSED is not imminent when a suit for failure to honor a levy is filed, request input of TC 520 with closing code 75 (which does not suspend the CSED nor change the collection status), unless for some reason the collection status on the taxpayer's account should be changed to status 72 (i.e., there is some reason to suspend collection action against the taxpayer). Use TC 520 cc 70 (which does not suspend the CSED but changes the collection status to 72) if suspending collection action against the taxpayer is appropriate. Status 72 suppresses all IDRS balance due notices. See Exhibit 25.3.6-1, Closing Codes for Transaction Code 520.

  5. If it appears that the collection statute of limitations will expire prior to the conclusion of the failure to honor levy suit and subsequent collection, request input of TC 520 cc 80 on the taxpayer's account prior to the expiration date to allow for the application of any recovery in the suit to the delinquent tax liability. Once the amount recovered in the failure to honor levy suit (other than costs or the 50-percent penalty) is applied to the taxpayer's account, request input of TC 521.

25.3.6.3.3  (12-07-2010)
Account Records Review

  1. Review all account module transcripts involved in litigation and other internal records to identify the following:

    • Potential problems with assessment and/or collection statutes of limitations

    • Needed NFTL refilings

    • Errors, omissions, etc. in filed NFTLs

  2. Establish appropriate case controls and follow-ups to ensure protection of the Government's interest and priority.

25.3.6.4  (12-07-2010)
Open Case Monitoring and Actions

  1. After initial actions have been completed, perform follow-up reviews to ensure completion of actions and monitoring of case status while litigation is ongoing.

  2. Use ICS follow-up or other calendar system.

  3. Contact field collection and other IRS personnel connected with the case as needed to keep them apprised of significant developments, particularly in cases where collection is not suspended or that person has been sued.

25.3.6.4.1  (12-07-2010)
Periodic Open Case Reviews

  1. Advisory monitored cases should be followed up as necessary, but no less than annually, until the litigation is concluded. Determine the status of all open litigation cases by contacting Counsel or by using PACER, LexisNexis, or similar systems. The Litigation Accounts Maintenance System (LAMS) TC 520 Non-Insolvency Listing can be used as part of the periodic monitoring of open litigation cases.

  2. Additionally, accounts that are open on the LAMS TC 520 Non-Insolvency Listing must be reconciled on an annual basis. If a case is on the LAMS listing but not open on ICS, a decision must be made to either open an ICS control or to close the TC 520, as appropriate. Failure to monitor the LAMS listing will result in outdated tax modules on which the litigation may have ended and the CSED expired.

  3. Include the following actions in your follow-up review and analysis as applicable to the particular case:

    1. Ensure proper TC 520 and closing code is in place on all affected account modules.

    2. Ensure completeness of ICS follow-ups.

    3. Review CSEDs and ASEDs.

    4. Review NFTLs filed in all jurisdictions and refile as needed.

    5. Review account balances.

    6. Take appropriate action with regard to any unresolved credit balances (refund, offset, transfer, etc.).

      Note:

      Refunds and offsets are frozen on a module with an open TC 520. If an account has a credit balance, it must be manually transferred to another module. Consult with Counsel before doing this on litigation cases.

    7. If necessary, contact Counsel to determine case status and need for action.

    8. Review issues of relevance to individual cases.

    9. Advise Counsel of any problems, significant account changes, new liabilities, or other identified issues of note. Secure updated certified transcripts as needed.

    10. If needed, issue an OI to field collection (if possible to the revenue officer who initiated the suit) to conduct a records check to ensure that information regarding lien claimants has not changed or to gather other needed information.

    11. Document the ICS history with the review results and actions taken.

    12. Set an ICS follow-up for the next periodic review.

  4. Periodically review BMF accounts that relate to the TFRP accounts involved in litigation cases. Take the following actions as appropriate if they do not occur systemically:

    1. Identify any changes that would affect the related TFRP account balances.

    2. Recompute TFRP account balances as needed.

    3. Contact Counsel to advise and obtain direction as to account adjustment.

    4. Secure and forward updated certified transcripts of affected accounts.

      Note:

      Do not adjust individual TFRP account(s) without consultation with and/or instructions from Counsel.

  5. Document ICS histories to reflect the review results and related actions. Include the current status of the litigation, forthcoming proceedings and court dates, and any settlement options being considered.

25.3.6.4.1.1  (12-07-2010)
Statute of Limitations Monitoring

  1. Monitor applicable CSEDs and ASEDs.

  2. If CSED is imminent:

    1. Contact Counsel to ensure awareness of the CSED and to secure instructions as needed.

    2. Make sure the CSED is protected. See IRM 25.3.6.3.2.2 for guidance on cases with imminent CSEDs.

  3. ASED problems should be rare, but may arise, particularly if unassessed TFRP liabilities are involved. Address appropriately when encountered.

25.3.6.4.1.2  (12-07-2010)
Notice of Federal Tax Lien Refiling

  1. Ensure that all Notices of Federal Tax Lien (NFTLs) are timely refiled.

    Note:

    The IRS uses NFTLs that contain self-releasing provisions that will extinguish the underlying statutory lien if the NFTL is not timely refiled during the refiling period. Therefore, NFTLs must be timely refiled in all jurisdictions in which they are filed in order to prevent the statutory lien from being extinguished.

  2. If an NFTL is released prematurely or if the refiling deadline is missed and the NFTL self releases:

    1. Contact Counsel to advise and secure direction as to appropriateness of revoking the release and filing a new NFTL and the need for inclusion of special language on the new NFTL.

    2. Determine what, if any, effect the premature release had on lien priority.

    3. Revoke the release and file a new NFTL if and as directed. See IRM 5.12.3.23, Revocation of Certificate of Release or Nonattachment, and IRM 5.12.3.25, Reinstatement of Lien.

    4. Secure and forward a copy (certified if requested) of the new NFTL to Counsel.

      Note:

      TC 520 with cc 70, 71, 73, or 75 does not suspend the CSED or prevent TC 608 from posting. If TC 608 posts while litigation is pending because the appropriate closing code suspending the CSED was not timely input, corrective actions must be taken. See IRM 25.3.6.3.2.2(4), above. TC 520 with cc 80 does suspend the CSED, but does not affect the calculation of the NFTL refiling period.

25.3.6.4.2  (12-07-2010)
Requests for Additional Investigation or Assistance

  1. Types of requested investigation or assistance that may be received from Counsel include the following:

    1. Verification of and information regarding prior administrative claims submitted by a taxpayer,

    2. Additional data gathering,

    3. Current balance due computations or analyses,

    4. Verification of financial statements,

    5. Evaluation of settlement offers,

    6. Securing copies of NFTLs and other recorded documents,

    7. Preparation and/or execution of declarations or affidavits,

    8. Providing testimony (commonly provided by Advisors), and

    9. Miscellaneous requests.

  2. When a current balance due computation is requested:

    1. Determine the date through which the balance is to be computed.

    2. Determine the form in which the information is needed. For example, in many cases, a simple INTST computation is sufficient. In some, such as when settlement is being considered, a breakdown of the remaining liability into tax, penalty, and interest may be needed. INTSTB may be used for this purpose in situations where there is just one assessment of tax within a tax module.

    3. Take any current credit balances into account when computing remaining balances due, and transfer any credit balances to unpaid account modules. Failure to do so may result in unaddressed credit balances being refunded to the taxpayer.

      Note:

      Consult with Counsel prior to taking any actions with respect to credit balances.

  3. When you receive requests for additional investigation or assistance from Counsel, refer the request to field collection as needed by issuing an OI to the appropriate group. Coordinate with the group manager prior to issuing the OI. Explain the purpose and importance of the requested action.

    Note:

    Collection referrals from Counsel are mandatory OIs. See IRM 5.1.8.5.1(3), Types of Mandatory OIs

  4. In the OI:

    • Be specific about what is required.

    • Identify and stress the response deadline. It is commonly necessary to contact Counsel to determine the response deadline.

    • Prior to issuance, determine from the requestor if taxpayer contact in the course of the investigation is acceptable and include that information in the OI.

    • Indicate the proper form and format for the OI response. Stress the need for complete, well presented, and typed response reports when appropriate, such as in the case of financial and collectibility analyses.

25.3.6.4.3  (12-07-2010)
Pending or Proposed Settlements

  1. If possible, pending or proposed settlement agreements should be reviewed before finalization. Insofar as possible, ensure the following:

    1. Inclusion of proper address(es) for payment direction,

    2. Inclusion of specific language permitting offset of refunds during payment period,

    3. Avoidance of terms/conditions that are not sufficiently precise or would be inadvisable (e.g., the acquisition of real property subject to a life estate interest), and

    4. Any other applicable concerns are addressed.

      Note:

      Advisory is commonly not consulted prior to finalization of settlement.

  2. Current balance due computations may be requested when settlement is being considered. If this occurs, follow the guidance in IRM 25.3.6.4.2(2).

25.3.6.5  (12-07-2010)
Closing Actions

  1. Proper closing actions must be taken to avoid questions and issues arising at a later date when information regarding the outcome of the litigation may not be readily available.

25.3.6.5.1  (12-07-2010)
Litigation Related Payments

  1. Payments resulting from litigation are generally received by the Department of Justice and electronically transferred to the IRS via Intra-Governmental Payment and Collection (IPAC) at the Kansas City campus. See IRM 3.17.243.24,Department of Justice (DOJ).

  2. If a litigation related payment is received in Advisory or field collection, do not post the payment. Contact Counsel for guidance and process the payment as instructed.

  3. If a payment known to have been received in a litigation case does not post or post correctly within a reasonable time, follow-up with the Department of Justice and the campus as needed.

25.3.6.5.2  (12-07-2010)
Actions Dictated by Judgment or Settlement

  1. Take all required and recommended actions promptly upon advisement that a judgment was entered or a settlement was reached. Actions can include the following:

    • adjustment or abatement of tax liabilities,

    • release of NFTL,

    • interest restriction, or

    • other directed or required action.

    Note:

    In all cases where collection of a tax liability has been referred to the Department of Justice (DOJ) or the United States has obtained a judgment for tax liabilities, compromise authority thereafter rests solely with DOJ. The IRS has no authority to settle these cases.

  2. Resolve any uncertainties or inconsistencies with Counsel.

  3. Monitor account records to ensure required actions are taken correctly and completely. This includes the items listed in paragraph (1), above.

  4. See IRM 25.3.5.9, Judgment Follow-up, Offers in Settlement, for procedures for Department of Justice settlements involving deferred payment and/or future income collateral agreements.

25.3.6.5.3  (09-09-2013)
Special Notices of Abatement/Adjustment

  1. In some cases, usually refund litigation, where an adverse ruling is issued, abatements or adjustments with special requirements for refunds and/or notice preparation and issuance may be necessary.

  2. Specific requests and instructions for such actions may be received from Area Counsel or the Department of Justice. When such a request is received, prepare an explanatory cover memorandum. Forward the request to the Field Office Resource Team (FORT) in Centralized Case Processing in the Philadelphia campus except for assessment types handled by specialized functions. Specialized functions include: Combined Annual Wage Reporting (CAWR), Trust Fund Recovery Penalties (TFRP), Automated Substitute For Return (ASFR), and Exam. Refer to http://mysbse.web.irs.gov/Collection/toolsprocesses/CaseRes/adj/send/default.aspx for the routing for these types of assessments.

    Note:

    The explanatory memorandum should request that the original notice(s) and other generated items be sent to the attorney responsible for the case, unless specifically directed otherwise, with a copy to be provided to Advisory for the case file.

    Note:

    For manual refunds, follow the instructions in IRM 5.1.12.20, Manual Refund and IRM 5.1.12.20.1.8, Forward the Request for Manual Refund when processing the manual refund.

25.3.6.5.3.1  (09-09-2013)
Assistance from the Field Office Resource Team (FORT)

  1. The Field Office Resource Team (FORT) is a department within Centralized Case Processing (CCP) in Philadelphia.

  2. The FORT handles requests relating to Department of Justice cases except for those subject to handling by specialized functions (i.e, CAWR, TFRP, ASFR, Exam). Case routing for specialized functions can be found on, http://mysbse.web.irs.gov/Collection/toolsprocesses/CaseRes/adj/send/default.aspx.

  3. FORT responsibilities include appropriately processing cases referred by General Case Processing (GCP) Tax Examiners, including assessment or adjustment of balances due, credit transfers and payment tracers, resolution of unpostable TC 520s, as requested by Advisory or the field. DOJ accounts originating in Advisory are forwarded directly to CCP/FORT.

    • When received in CCP, cases are generally directed to the FORT by way of a FORT Referral document approved by the releasing GCP front line manager or lead tax examiner.

    • Referrals are controlled on IDRS to FORT Tax Examiners for first in first out (FIFO) processing.

    • The timeframe for completing routine GCP referrals is targeted to be 14 days.

    • Originating offices have the option of e-mailing DOJ requests requiring special or otherwise expedited handling to the FORT Manager. "DOJ Request" should be reflected in the subject line.

    • Additional information regarding the FORT, including contact information, can be found through http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/casepro/ccpcoll/default.aspx and in IRM 5.4.12, Field Office Resource Team.

25.3.6.5.4  (12-07-2010)
TC 520 Reversals

  1. In judgment cases and TFRP refund cases where a counterclaim resulted in balance(s) due being reduced to judgment, TC 521 will not be input until certain further actions have been completed. Monitor these cases and input TC 550 and TC 521 in accordance with normal judgment procedures. See IRM 25.3.5, Judgment Follow-up, for further guidance.

    Note:

    If a judgment has been entered in the case, it is important to extend the CSED by inputting TC 550, with definer code 4, prior to reversing the TC 520 if the collection statute expiration date fell during the pendency of the litigation. Otherwise, a TC 608 will automatically post upon reversal of the TC 520, which results in the account being zeroed out.

  2. If liabilities have not been reduced to judgment, release open TC 520s when litigation is concluded by requesting TC 521 on all modules.

    Note:

    Make sure TC 521 is input on all modules of all entities on which Advisory requested TC 520 input during the litigation process.

  3. To ensure that appropriate actions have been taken to reverse open TC 520s, Advisory will review the Litigation Accounts Maintenance System (LAMS) TC 520 Non-Insolvency Listing on an annual basis.

25.3.6.5.5  (12-07-2010)
Other Closing Actions

  1. Take the following additional closing actions, as appropriate:

    1. Forward copies of each judgment and other applicable related documents and correspondence to the Advisory employee responsible for establishing and monitoring judgment files so the appropriate follow-up controls can be established.

    2. Advise any revenue officer or other IRS employee with an interest in the outcome of the case. Forward any information relevant to future collection.

    3. Retrieve all original returns, administrative files, etc. from Counsel and return them to the appropriate storage locations. If they cannot be retrieved, document the situation and reasons in the case history.

    4. Follow document retention schedules set forth in IRM 1.15.28, Records Management - Records Control Schedule for Collection. See also IRM 1.15.4.2.1, Records Management - Retiring Records to the Federal Records Center.

    5. Close the ICS NF OI for the litigation when all case actions have been completed and documented. When learning that a judgment was secured, open a NF OI to control it whether or not the litigation NF OI is ready to be closed. See IRM 25.3.5, Judgment Follow-up, for further guidance.

Exhibit 25.3.6-1 
Closing Codes for Transaction Code 520

Type of Open or Pending Suit CC Changes to Status 72 Suspends BAL DUE Suspends CSED
General Litigation: Foreclose Federal Tax Lien Only, Other Suits by U.S. not listed below, Non-foreclosure suits against the U.S. (other than refund), when collection suspension is appropriate 70 Yes No
Refund Suits (TFRP) when neither IRC 6672(c) nor IRC 6331(i) applies to suspend the CSED and collection is not to be suspended 71 No No
Refund Litigation when neither IRC 6672(c) nor IRC 6331(i) applies to suspend the CSED and collection is to be suspended (generally used for refund suits other than TFRP that are controlled by campus refund litigation) 73 Yes No
Failure to Honor Levy (unless CSED is imminent - then use cc 80; or unless suspension of collection against the taxpayer is appropriate - then use cc 70). Also use for other general litigation cases when collection is not to be suspended 75 No No
Collection Due Process (CDP) file (IRC 6320 - Lien) 76 Yes Yes
Collection Due Process (CDP) filed (IRC 6330 - Levy) 77 Yes Yes
Suit to Reduce Claim to Judgment and any other suits where litigation continues beyond the pre-suit CSED and later application of proceeds is permitted and anticipated 80 Yes Yes
CVPN with Appeal Rights, including TFRP refund litigation when either IRC 6672(c) or IRC 6331(i) applies to suspend the CSED for collecting the TFRP 82 Yes Yes
  • See Document 6209, IRS Processing Codes and Information, Section 11, Collection, TC 520 Closing Code Chart, for additional information about these and other TC 520 closing codes.

  • Status 72 is generated when a TC 520 with closing code 70, 73, 76, 77, 80 or 82 is input and posts to a module. This status suppresses all IDRS balance due notices.

  • Closing codes 76 and 77 are used for Collection Due Process (CDP) Lien and Levy. These cases are not controlled by Advisory, but by Appeals.

  • Litigation closing codes 78 and 79 are currently reserved and not to be used.

  • TC 520 freezes the tax module or account (entity), depending upon the closing code used, from refunding and offsetting.

  • To change from a closing code that protects the CSED (such as cc 80 or 82) to one that does not protect the CSED (such as cc 70, 71, 73, or 75), the prior TC 520 must be reversed (TC 521) or corrected (TC 522) before the new one is input. Care must be taken to coordinate the reversal or correction with the new input to ensure that a premature TC 608 does not post.

  • To suspend a CSED that is open under closing code 70, 71, 73 or 75, re-input TC 520 with the desired closing code (80 or 82), using as the transaction date the date on which the CSED suspension begins. Reversal of the original TC 520 is not required.

  • A closing code is not needed to reverse a TC 520 with closing codes 70, 71, 73, 75, 80 and 82.

  • Use of closing codes 71 and 73 for TFRP refund litigation cases should be uncommon.


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