25.6.23  Examination Process - Assessment Statute of Limitations Controls (Cont. 1)

25.6.23.6 
Statute Controls in Examination and TE/GE Groups

25.6.23.6.9  (03-01-2008)
AIMS Tables 4.1, SC 4.0, EP 4.0, EO 4.0 and GE 4.0

  1. AIMS Table 4.1, Returns with Statute Date Pending, is a computer generated listing, produced monthly on AIMS, showing returns in examination groups in the area offices, having AIMS status codes 05, 06, 08–19, with statute dates that (according to AIMS) have expired or will expire within 180 days.

  2. AIMS Table 4.0, Returns with Statute Date Pending, is essentially the same as AIMS Table 4.1. AIMS Table 4.0 lists returns charged to functional areas in area offices other than examination groups. Tax returns in Planning and Special Programs (PSP), Technical Services (Exam), and Centralized Case Processing (CCP) appear in Table 4.0, which lists returns in AIMS statuses 00–59, except for those included in Table 4.1.

  3. Table SC 4.0, Returns with Statute Date Pending, is a comparable listing of returns in Examination units at the campuses. Table SC 4.0 lists cases in valid status codes within the status code range 00–59.

  4. EP Table 4.0, EP Returns with Statute Date Pending, is a comparable listing of returns in Employee Plans, for all status codes.

  5. EO Table 4.0, EO Returns with Statute Date Pending, is a comparable listing of returns in Exempt Organizations, for all status codes.

  6. GE Table 4.0, GE Returns with Statute Date Pending, is a comparable listing of returns in Government Entities, for all valid status codes.

  7. Exhibit 25.6.23–4, Tables 4.0 and 4.1, Returns With Statute Date Pending, describes the data in Tables 4.0 and 4.1.

25.6.23.6.9.1  (03-01-2008)
Responsibilities for Monthly Verification of ERCS/EPIC/EOIC and AIMS Table 4.1 and 4.0 Data

  1. In area offices, the AIMS Coordinator is responsible for timely distributing Table 4.0 or Table 4.1.

  2. The group manager in area offices is responsible for monthly verification of data in the ERCS Pending Statute Report (or the EPIC or EOIC Statute List for Days) and in AIMS Tables 4.1 and 4.0. The manager may delegate responsibility for verifying the statute control data to other employees.

  3. At campuses, the employee responsible for the statute control file does the monthly Table 4.0 verification for cases with statute expiration dates within 90 days, under the supervision of an assigned manager.

25.6.23.6.9.2  (03-01-2008)
Verification of ERCS/EPIC/EOIC and AIMS Table 4.1 and 4.0 Data

  1. See IRM 4.4.27.6.1.4, Procedures for Working Statute Control Report, for additional information pertaining to the working of Tables 4.1 and 4.0. Also see IRM 4.7.3, ERCS – Statute of Limitations, and IRM 4.7.6.6 pertaining to ERCS Pending Statute Report and ERCS 895 Report.

  2. Verification of ERCS, EPIC or EOIC statute control listings and AIMS Table 4.1 and Table 4.0 data is done at least monthly by the group manager or other designated person. The following steps will be taken when working the 4.1 and 4.0 tables.

    1. Compare AIMS Table 4.1 or 4.0 data with data in the ERCS Pending Statute Report or the EPIC/EOIC Statute List for Days. For returns having alpha statute codes, compare to the ERCS 895 Report or the EPIC/EOIC Form 895 Statute Log. Criteria for alpha statute codes are described in Exhibit 25.6.23–3.

    2. By reference to the ERCS 895 Report or the EPIC/EOIC Form 895 Statute Log, ensure there is complete Form 895 information for each return on the AIMS table having a statute expiration date within 180 days.

    3. The ERCS Pending Statute Report and the 895 Report identify tax returns having Forms 895 issued and returned by examiners. The EPIC/EOIC Statute List for Days and the Form 895 Statute Log identify returns having Forms 895 issued and returned by TE/GE specialists. The computer generated ERCS, EPIC or EOIC reports are used to keep track of Forms 895.

    4. Verify that the statute expiration date shown on Form 895 (per the ERCS, EPIC or EOIC reports) and on AIMS agree and are correct.

    5. Notify the group manager and the examiner or specialist of any discrepancies. Annotate Table 4.1 or 4.0 (or the ERCS Pending Statute Report or EPIC/EOIC Statute List for Days) that the examiner or specialist and the manager were notified.

    6. The manager, with assistance from the examiner or specialist as needed, resolves discrepancies. Make a notation on the AIMS table or the ERCS/EPIC/EOIC report of all discrepancies and their resolution.

    7. If the AIMS Table 4.1 or 4.0 (or ERCS, EPIC or EOIC statute list) indicates there is a tax return meeting statute control criteria and it is not controlled with a Form 895, perform a special search to locate the return. Upon locating the tax return in the group, notify the responsible examiner or specialist that statute control must be established or place the return in a red file folder and hand carry it to the manager for statute determination and preparation of Form 895.

    8. If the ERCS Pending Statute Report, the EPIC/EOIC Statute List for Days, or the Form 895 statute control file contains information on a return which is not listed on AIMS Table 4.1 or 4.0, determine whether or not the return is physically located in the Examination unit or the EP,EO or GE unit. Secure an AMDISA print, if necessary, to help locate the return. If the return is located, ensure that the statute expiration date on AIMS (and on ERCS, EPIC or EOIC) is correct.

    9. If the return is not located, verify that the return has physically left the Examination unit or the EP, EO or GE unit. Secure a receipted Form 3210, Document Transmittal, acknowledging transfer of the case file to another other unit. Update AIMS/ERCS/EPIC/EOIC accordingly.

    10. If there has never been a record of the return in the work group, notify the manager. The manager initiates a search for the return. The manager may obtain assistance from the AIMS/ERCS Coordinator in locating the return.

    11. Enter any corrected statute expiration dates on AIMS (through ERCS for Examination). Once an update is input with a statute expiration date beyond 180 days from the current date, that return will not appear on the AIMS statute table. Returns with statute dates shown as "872-A" will remain on the AIMS table.

    12. Upon completion of the above actions, the group secretary or other designated person gives Table 4.1 or 4.0 to the group manager or other designated manager for final review.

    13. As per IRM Exhibit 1.15.23-1 (Cont. 6) (11-01-2002) Records Control Schedule for Tax Administration – Examination, the tables may be destroyed after 5 years plus current year, or after no further reference value, whichever is earlier; however as per IRM 4.4.27.6.1.5, Disposition of Statute Control Reports, the tables must be retained for a minimum of two years by the responsible manager.

25.6.23.6.10  (03-01-2008)
Statute Transcripts

  1. Statute transcripts are generated monthly at the campuses on tax modules showing credit balances, no return posted, and returns having a potential statute expiration date within 180 days. The potential expiration date is three years from the due date of the return.

  2. Instructions on researching statute transcripts are in IRM 25.6.13, Transcripts, and in IRM 4.4.27.7.4, Accounts Maintenance and Statute Transcripts.

  3. Upon verifying that a case in a campus Examination Operation has a potential expiration date within 180 days, per a statute transcript, refer the case to the Accounts Management Statute Function, see IRM 4.4.27.7.4.2.2, Statute is Imminent.

  4. If statute expiration is not imminent (within 180 days), ensure that the correct statute date is reflected on AIMS. If the statute date is within 180 days, then also take the actions specified in IRM 25.6.23.6.4(5), Area Office Group Statute Controls.

25.6.23.6.11  (03-01-2008)
Disposition of Form 895

  1. When a case file under statute control is closed or transferred from an Examination or TE/GE work group, attach Form 895 to the front of the case file folder, on top of all other attachments.

  2. When processing of the case is completed, Form 895 is placed in the administrative case file by the case closing function.

25.6.23.7  (03-01-2008)
Statute Controls in Examination and TE/GE Case Closing Functions

  1. The following instructions apply to case closing functions in area offices, TEB Headquarters and campuses. They apply to:

    • Centralized Case Processing units located at campuses

    • Batch Processing or any other function closing examined cases at campuses.

    • TE/GE Support and Processing (TE/GE–SP).

    • TEB Headquarters as they close cases

25.6.23.7.1  (03-01-2008)
Initiating Controls in Case Closing Functions

  1. Statute controls will already be established on most returns having potential statute expiration dates within 180 days on cases coming into case closing functions/process. In the event controls have not been established, the following steps will be taken.

    1. If Form 895 is required but is not attached, notify the manager responsible for statute controls in the closing function and see IRM 25.6.23.7.1.3, Preparation/Correction of Form 895, for instructions on preparation of Form 895.

    2. The manager may contact the originating function for additional statute information or to give feedback about the lack of proper statute controls.

    3. Date stamp, showing the date of receipt in the closing function, the Form 895 which is attached to the case file folder. Write "Statute Control" on the outside of the case file, followed by the name of the tax examiner responsible for screening the case for statute controls or, in TE/GE, the name of the unit manager.

    4. Place a red folder around the case file if the case is not already contained in a red folder.

    5. Staple Form 895 to the outside of the file folder if the Form 895 is not already there.

25.6.23.7.1.1  (03-01-2008)
Time for Initiating Statute Controls In Case Closing Functions

  1. All returns with 120 days (180 days for TE/GE) or less remaining before the statutory period for assessment will expire (or may expire) are placed under statute controls.

25.6.23.7.1.2  (03-01-2008)
Screening Returns Received in Case Closing Functions

  1. Immediately upon receipt in the case closing function, a designated tax examiner or clerk (hereinafter "statute examiner" ), screens all returns and penalty cases to identify returns with statutes expiring within 120 days.

  2. The statute examiner inspects all returns with tax periods ending two and a half years, or more, prior to the date received in the case closing function for potential statute expiration.

  3. The statute examiner verifies that the statute expiration date on Form 895 is correct, taking into account any special statute conditions, if any, and is correctly reflected on AIMS and Master File.

  4. If the correct statute expiration date cannot be determined with certainty, the statute examiner obtains assistance from a manager.

  5. At campuses, assistance may also be obtained from the Statute Function.

  6. The statute examiner examines consents to extend statutes to ensure the consent is prepared correctly and has appropriate, timely signatures for the taxpayer and for the Service.

25.6.23.7.1.3  (03-01-2008)
Preparation/Correction of Form 895

  1. If there is no Form 895 with the case file and the statute expiration date is within 120 days, the statute examiner completes a Form 895 and attaches it to the front of the case file folder — on top of all other documents.

  2. All cases meeting the 120-day statute criteria must be controlled regardless of the length of time the case is going to be in the closing function.

  3. Line–by–line instructions for completing the current Form 895 are in Exhibit 25.6.23–1.

  4. As needed, the statute examiner adds or corrects Form 895 data, including the following items, and initials any additions or corrections:

    • Taxpayer name

    • SSN/EIN

    • Return form number

    • Taxable year or period

    • Amount of tax deficiency and penalty

    • Statute expiration date

    • Plan Number (Form 5500 returns)

    • Plan/RPT Number (Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, and 8038 returns, Information Return for Tax-Exempt Private Activity Bond Issues

  5. Any correction to the statute expiration date on Form 895 must be compared with the Master File ASED and AIMS ASED to ensure they all agree.

25.6.23.7.2  (03-01-2008)
Centralized Statute Controls in Case Closing Functions

  1. Statute controls are centralized in a single location.

  2. The statute control file consists of:

    • Form 895 control file

    • ERCS Pending Statute Report or

    • EPIC/EOIC Statute List for Days and

    • AIMS Table 4.0.

25.6.23.7.2.1  (03-01-2008)
Statute Control Responsibilities in Case Closing Function

  1. The Centralized Case Processing Manager or the individual TE/GE Program Manager designates a manager to have primary responsibility for maintenance of the statute control file. Actual maintenance of the file may be assigned to clerical personnel. This procedure does not relieve other managers and employees of their responsibilities to protect statutes within their respective areas.

  2. An employee having possession of a tax return in the closing function notifies the person maintaining the statute control file of any action or development affecting the statute.

25.6.23.7.2.2  (03-01-2008)
Case Closing Function's Form 895 Statute Control File — Open Section

  1. Copies of Form 895 in the open section of the control file are filed in order by statute expiration date. Forms 895 showing restricted Forms 872–A are placed in the front of the open section of the file.

  2. Multiple Forms 895 having the same expiration date are filed in order by SSN/EIN.

  3. The open section of the Form 895 file is monitored weekly. See IRM 25.6.23.7.3, 30-Day Statute Search, below for action to be taken on cases with statute expiration dates within 30 days.

25.6.23.7.2.3  (03-01-2008)
Case Closing Function's Form 895 Statute Control File — Closed Section

  1. Upon verifying that assessment has been made (AIMS Status 90, transaction code 300; Form 3552, Prompt Assessment Billing Assembly), move the control copy of Form 895 along with any documentation from the open section to the closed section of the file.

  2. Maintain the closed section of the file by month closed in order by SSN/EIN.

  3. Purge closed controls after 90 days and destroy them in accordance with IRM 1.15.23 or IRM 1.15.24, Records Control Schedule for Tax Administration for Examination and for TE/GE, respectively.

25.6.23.7.3  (03-01-2008)
30-Day Statute Search

  1. The following procedures will be followed when 30 days or less remain on the statute:

    1. The statute examiner photocopies the pertinent Form 895 or generates a list of statute imminent cases.

    2. The statute examiner gives the photocopies or list to the manager or supervisor of the case closing function and to the responsible tax examiner or special search clerk.

    3. If the statute is otherwise protected, the person who verifies such information annotates the statute control record accordingly, initials the entry and returns it to the statute examiner.

    4. If a return cannot be located after a special search, see IRM 25.6.23.7.6.4, Search for Missing Returns, below, the statute examiner initiates action to develop information and make a quick assessment.

    5. The statute examiner inputs an AIMS freeze code (freeze code " 1" ) using command code AMFRZ to prevent case closure. This will enable a tax examiner to abate any duplicate assessment that may occur.

25.6.23.7.4  (03-01-2008)
When to Update Form 895 in Case Closing Functions

  1. The statute expiration date will be changed upon receipt of:

    1. A properly executed statute extension or

    2. A termination of a statute extension.

25.6.23.7.4.1  (03-01-2008)
Procedure for Updating Form 895 in Case Closing Function

  1. The following procedures will be followed when updating Form 895.

    1. Locate the case file having Form 895 attached. Pull the control file copy of Form 895.

    2. Enter the new statute expiration date in Item 7 (5 on ERCS version) of Form 895.

    3. Write the consent form number, date received, and the name of the examiner in Item 9 (7 on ERCS version).

    4. The employee making the update initials Form 895 next to the revised statute date.

    5. The manager or supervisor approving the update initials Form 895 next to the revised statute date.

    6. Return the case file, with the updated Form 895 attached, to the assigned tax examiner for closing.

    7. File Part 1 of Form 895 under the revised statute expiration date.

25.6.23.7.4.2  (03-01-2008)
Updating Form 895 for Statute Extensions Received

  1. Write the consent form number, date received, and name of the examiner in Item 9 (7 on ERCS version) of Form 895.

  2. Then attach the consent form to the back of the first page of the return. If the consent covers multiple years, the original will be attached to the back of the first page of the tax return for the latest year and photocopies will be attached to the back of the first page of the tax return(s) for the earlier years.

25.6.23.7.5  (03-01-2008)
Updating AIMS, ERCS, EPIC, EOIC in Case Closing Functions

  1. Whenever a change or correction in the statute expiration date is determined, the person identifying such change initiates action to enter the revised statute date through AIMS/ERCS/EPIC/EOIC. Form 5348 — Examination Update, Form 5595 — TE/GE Update, are used to update the statute date on AIMS.

  2. Instructions for preparing Form 5595 are in IRM Exhibit 4.5.1–13, Instructions for Preparing Form 5595, TE/GE Update.

25.6.23.7.6  (03-01-2008)
AIMS Table 4.0 Use in Case Closing Functions

  1. AIMS Table 4.0, Table SC 4.0, EP Table 4.0, EO Table 4.0 and GE Table 4.0 are computer/electronically generated listings which reflect returns with statute dates that either have expired or are due to expire within 180 days.

  2. See IRM 25.6.23.6.9, AIMS Tables 4.1, SC 4.0, EP 4.0, EO 4.0 and GE 4.0, for the return status codes listed in Table 4.0.

25.6.23.7.6.1  (03-01-2008)
Information in AIMS Table 4.0

  1. See Exhibit 25.6.23–4, Tables 4.0 and 4.1, Returns With Statute Date Pending.

25.6.23.7.6.2  (03-01-2008)
AIMS Table 4.0 Responsibilities

  1. The statute examiner or a designated manager is responsible for generating Table 4.0 data.

  2. Additional responsibilities of the statute examiner and managers are explained in IRM 25.6.23.7.6.3, Verifying AIMS Table 4.0 Data With the Statute Control File, and IRM 25.6.23.7.6.4, Search for Missing Returns.

25.6.23.7.6.3  (03-01-2008)
Verifying AIMS Table 4.0 Data With the Statute Control File

  1. Each month a designated person (the statute examiner or manager) reviews and reconciles AIMS Table 4.0 data with the ERCS/EPIC/EOIC statute control data or with Form 895 statute control files for all returns having statute expiration dates shown to be within the next 120 days (90 days for campus cases and 180 days for TE/GE cases).

  2. Also see IRM 4.4.27.6.1.4, Procedures for Working Statute Control Report, for information pertaining to the working of Table 4.0.

  3. The designated person will do the following.

    1. Identify all returns having statutes expiring within 120 days (90 days for campus cases and 180 days for TE/GE cases). First verify data for returns having statute dates within 30 days; then verify remaining returns in priority order (60 days, then 90, then 120 days, etc.).

    2. Locate all returns appearing on Table 4.0 for the first time. Returns showing on Table 4.0 as repeats do not have to be physically located if previous tables show the return was located and the statute date has not changed. Place an "R" in front of the taxpayer name to indicate that the return has been located.

    3. Compare Column 1 data on Table 4.0 with the same data on the ERCS/EPIC/EOIC statute controls or on Form 895, Item 1.

    4. Compare the statute date in Column 8 of Table 4.0 with the date on the ERCS/EPIC/EOIC statute controls or on Form 895, Item 7 or 5, as well as contents of case file such as consent form, Form 3198, etc.

    5. Reconcile any differences between Table 4.0 and ERCS/EPIC/EOIC, Forms 895 or contents of case file.

    6. Note any explanations, including resolution actions, in the " Comments" column of Table 4.0 or on the ERCS/EPIC/EOIC statute control record.

    7. If necessary, update the AIMS/ERCS/EPIC/ EOIC data bases to show the correct statute expiration date information.

    8. If the statute will expire within 60 days or less and the AIMS/ERCS/EPIC/EOIC record shows the case is open, request a quick assessment. See IRM 4.4.25, Quick Assessments.

    9. If the ERCS/EPIC/EOIC record or Form 895 statute controls show the case is closed, verify closure through: AMDISA on AIMS (Status 90); a transcript of the tax module showing Examination or TE/GE case closure (posting of transaction code 300 or 301); and/or information noted on Form 895.

      Note:

      Annotate Table 4.0 showing the date the return was closed and the method (terminal, quick assessment, etc). If not previously done, update the AIMS/ERCS/EPIC/EOIC data bases.

    10. If an extension was received, annotate the form number and the new statute expiration date on Table 4.0. If not previously done, update AIMS/ERCS/EPIC/EOIC with the extended date.

    11. If a case appears on Table 4.0 and a corresponding Form 895 is not located in the open or closed section of the statute control file, research AIMS for the most recent data to locate the return. If there is no information on AIMS, perform additional research. See IRM 25.6.23.7.6.4, Search for Missing Returns.

    12. If the information on AIMS Table 4.0 is consistent with data in the ERCS/ EPIC/ EOIC or the Form 895 statute control record, place a check mark next to statute date, or in the "Comments" column, on Table 4.0.

    13. If the case has been closed, place a "C" next to the taxpayer name, or in the Comments column, on Table 4.0. Indicate the date and method of closure in the Comments column.

    14. If a case cannot be located in the case closing function, indicate "no record" or "NR" in the " Comments" column of Table 4.0 and search for the missing return. See IRM 25.6.23.7.6.4, Search for Missing Returns.

    15. If a return listed on Table 4.0 was ordered but not received, place an "O" in front of the taxpayer name. If the return was requested two months or more prior to the date of the listing, make a follow-up request for the return. Enter the date of the follow-up in the "Comments " column.

    16. If a case on the listing has been transferred, place a " T" next to the case name or in the "Comments" column. Indicate where it was transferred and the date transferred in the " Comments" column of Table 4.0.

    17. After AIMS Table 4.0 information has been verified against the ERCS/EPIC/EOIC or the Form 895 statute control records, and Table 4.0 shows cases that have been closed, transferred or erroneously charged to the case closing function, the manager or supervisor having overall responsibility for Table 4.0 determines where the case is located. If the case is still open in the area office or campus, notify the manager having physical possession of the case of the early statute expiration date. The manager having physical possession of the case outside the case closing function reviews the case file and takes necessary action to protect the statute and update the AIMS and ERCS/EPIC/EOIC data bases.

    18. After reconciling all items on Table 4.0 and making appropriate notations, the manager or supervisor responsible for the statute control file signs and dates Table 4.0.

    19. As per IRM Exhibit 1.15.23-1 (Cont. 6) (11-01-2002) Records Control Schedule for Tax Administration – Examination, the tables may be destroyed after 5 years plus current year, or after no further reference value, whichever is earlier; however as per IRM 4.4.27.6.1.5, Disposition of Statute Control Reports, the tables must be retained for a minimum of two years by the responsible manager.

25.6.23.7.6.4  (03-01-2008)
Search for Missing Returns

  1. Procedures for conducting a missing return search are as follows:

    1. If a return on Table 4.0 cannot be located in the case closing function, perform additional research.

      For Example: IDRS Master File research.
        Checking for related returns.
        Contacting the Examination or TE/GE group.
        Requesting the return from files.

    2. The missing return may have been erroneously attached to a related return.

    3. If research indicates a related return has been examined and closed within the past nine months, requisition the return from files to see if the missing return is attached.

    4. If the missing return is not located after additional research, provide the AIMS/ERCS analyst with the research information and request assistance in locating the return. If the return still cannot be located, gather enough information to make a protective manual assessment. See IRM 4.4.25, Quick Assessments.

    5. When a protective assessment is made, input an AIMS freeze code (freeze code "1" ) using command code AMFRZ to prevent case closure. This will allow an examiner to abate any duplicate or erroneous assessment.

    6. At local option, a copy of the completed AIMS Table 4.0 may be provided to the AIMS/ERCS analyst, whether or not there are missing returns.

25.6.23.8  (03-01-2008)
Imminent Assessment Statute Cases

  1. Imminent assessment statute cases require special handling and it is imperative that examiners and managers allow adequate time from case closing until the statute expiration date for the necessary case review, case processing and deficiency assessment.

25.6.23.8.1  (03-01-2008)
Minimum Time Remaining to ASED

  1. When submitting a case to Centralized Case Processing or Technical Services, as applicable, the following minimum amounts of time should be remaining on the assessment statute of limitations to allow for the case to be processed in the normal course of business:

    • Agreed (Non-TEFRA) cases - at least 4 months

    • Unagreed (Non-TEFRA) cases to Appeals or for issuance of Statutory Notice of Deficiency - at least 6 months at the time the case is received in Appeals or in Technical Services for issuance of the Statutory Notice of Deficiency

    • Agreed TEFRA key entity - at least 12 months

    • Unagreed TEFRA key entity to Appeals or for issuance of Final Partnership Administrative Adjustment (FPAA) or Final S Corporation Administrative Adjustment (FSAA) - at least 8 months at the time the case is received in Appeals or Technical Services for issuance of the FPAA or FSAA

25.6.23.8.2  (03-01-2008)
Non-TEFRA Cases With Less Than 90 Days to ASED

  1. In addition to the other procedures (red jacket, Form 895, Form 3198, Special Handling Notice for Examination Case Processing) for flagging imminent assessment statute cases, when a case includes a tax period that has less than 90 days remaining on the assessment statute of limitations at the time of closing from the group, the following actions are required:

    1. The case will be discussed by the group/team manager with his/her immediate manager and the case activity record will be documented to note that the discussion with the immediate manager has taken place concerning the circumstances surrounding the imminent statute agreed or no-change case. For unagreed imminent statute cases, the Form 4665, Report Transmittal, (for TCO cases Administrative Lead Sheet 105) should be documented to note the discussion of the imminent statute case with the second-level manager.

    2. The group/team manager in possession of the imminent assessment statute case will contact the appropriate manager in either Centralized Case Processing or Technical Services, depending on which organizational component will be receiving the case, to advise of the imminent statute case requiring special handling and whether or not the case requires Area Counsel review of any proposed statutory notice of deficiency (SNOD) as required by IRM 4.14.1.7.1, Mandatory Area Counsel Review Criteria. If Area Counsel review is required, a special handling notice should be attached to the case file and annotated with the remark: Area Counsel Review of Proposed SNOD Required.

    3. The case file is to be delivered to Centralized Case Processing or Technical Services, as applicable, by the most practical method (either hand delivery or by overnight mail/delivery service) and the group/team manager is to follow-up with the receiving unit's manager to ensure receipt of the case.

    4. If the imminent statute case requires issuance of a Notice of Deficiency (or FPAA or FSAA) then the case examiner will be made available for preparation of the notice, depending upon the needs of the Technical Services staff.

25.6.23.8.3  (03-01-2008)
TEFRA Cases With Less Than 240 Days to ASED

  1. For TEFRA cases, the steps enumerated in IRM 25.6.23.8.2, Non-TEFRA Cases With Less Than 90 Days to ASED, are to be followed, except that for TEFRA flow-through entity cases, a case is considered to meet the requirements for the imminent statute case processing procedures of IRM 25.6.23.8.2 if the TEFRA entity has less than 240 days remaining on the statute of limitations.

Exhibit 25.6.23-1  (03-01-2008)
Form 895 Instructions

This exhibit provides instruction for preparation of the manually prepared version of Form 895. Exhibit 25.6.23–2 provides instruction for preparation of the ERCS, EPIC and EOIC versions of Form 895.

#1. (a) Name and Address of Taxpayer. An AIMS address label may be used.
#1. (b) Taxpayer Identification Number. Enter SSN or EIN if not on a label used in 1. (a). Return Form Number. Enter as "1040" , "1120" , for example. Taxable Year or Period. Enter as "200312" , "200309 " , for example. Enter only one tax year on Form 895. Up to four quarterly Form 941 tax periods for the same calendar year may be on one Form 895. Enter as "200303, 200306, 200309, 200312" , for example.
#1. (c) Employee Charged with Return. Enter the name of the examiner or TE/GE specialist to whom the return is assigned as of the date Form 895 is initiated. Signature (employee charged with return), the examiner or TE/GE specialist to whom the return is assigned and date this item upon verifying or completing Items I through 9.
#2.
Notification Date. Enter the date Form 895 is initially given to the assigned employee.
#3.
Group Number. Enter the number of the group where the return is assigned as of the date Form 895 is initiated.
   
#5.
Date Return Filed or Due (whichever is later). Enter the filing date, but not earlier than the return due date. Information on determining a return filing date is in IRM 25.6.2.4.4, Statute of Limitations Chart for Tax Returns.
   
#7.
Expiration Date. Enter the correct assessment statute expiration date based on the date the tax return was filed. The employee charged with the return and the responsible manager put their initials and date next to the expiration date. Any update to the statute expiration date, including alpha code designations, must be entered in item #7 with the employee and manager initials and date. If a tax return has more than one statute expiration date, enter the earliest date in Item 7 and describe other expiration dates in Item 9.
#8.
Appropriate Blank to be checked by individual charged with return, check the applicable blank.
#9
Remarks. State information pertinent to the statute determination which is not evident elsewhere on Form 895.

Exhibit 25.6.23-2  (03-01-2008)
ERCS Form 895 Instructions

This exhibit provides instruction for the ERCS, EPIC and EOIC versions of Form 895. Exhibit 25.6.23-1 provides instruction for preparation of the manually prepared version of Form 895.

#1. (a) Name and Address of Taxpayer. An AIMS address label may be used.
#1. (b) Taxpayer Identification.
 TIN: Enter the SSN or EIN of the taxpayer.
 MFT: Enter the Master File Tax code.
 Tax Period: Enter as "200312" , "200309" , for example. Enter only one tax year on Form 895. Up to four quarterly Form 941 tax periods for the same calendar year may be on one Form 895. Enter as "200303, 200306, 200309, 200312" , for example.
Form Number: Enter as "1040" , "1120" , for example.
#1. (c) Employee Charged with Return. Enter the name of the examiner or TE/GE specialist to whom the return is assigned as of the date Form 895 is initiated.
  On the signature line the examiner or TE/GE specialist to whom the return is assigned signs and dates this item upon verifying or completing Items 1 through 7.
#2. Notification Date. Enter the date Form 895 is initially given to the assigned employee.
#3. Group Number. Enter the number of the group where the return is assigned as of the date Form 895 is initiated.
#4. Date Return Filed or Due (whichever is later). Enter the filing date, but not earlier than the return due date. Information on determining a return filing date is in IRM 25.6.2.
#5. Expiration Date. Enter the correct assessment statute expiration date, based on the date the tax return was filed. ERCS will initially generate the statute expiration date which is on AIMS. The employee charged with the return and the responsible manager put their initials and date next to the expiration date. Any update to the statute expiration date, including alpha code designations, must be entered in Item 5 with employee and manager initials and dates. Alpha code instructions are in Exhibit 25.6.23–3.
  If a tax return has more than one statute expiration date, enter the earliest date in Item 5 and describe other expiration dates in Item 7.
#6. Appropriate Blank to be Checked by Individual Charged with Return. Check the applicable blank.
#7. Remarks. State information pertinent to the statute determination which is not evident elsewhere on Form 895.

Exhibit 25.6.23-3  (03-01-2008)
Instructions for Updating the Statute on AIMS

(1) In Examination, Form 5348, Examination Update, is used to update statute of limitation information on AIMS. Form 5348 may be used to request statute updates on ERCS, the Examination Returns Control System. Statute updates on ERCS will automatically update the same data on AIMS. See IRM 4.4.34, Updating/Correcting AIMS Data Base, and IRM 4.7.3, Examination Returns Control System (ERCS) - Statute of Limitations.

(2) In EP, EO and GE Form 5595, TE/GE Update, is used to generate statute of limitation information on AIMS. Form 5595 may be used to generate statute updates on EPIC, Employee Plans Inventory Control, and EOIC, Exempt Organization Inventory Control. EPIC and EOIC updates will not automatically update AIMS.

(3) An extended or corrected statute expiration date is entered in this format: MMDDYYYY, representing two digits each for the month and day and four digits for the year. For example: 04152006.

Once a statute update has been input on AIMS and the statute expiration date is more than 180 days from the date AIMS Table 4.0 or 4.1 is generated, the return will no longer appear on the table.

(4) When an open-ended consent has been secured, for example, Form 872-A, Special Consent to Extend the Time to Assess Tax, enter "872-A " in the ASED field. When a Form 872–IA, Special Consent to Extend the Time to Assess Tax As Well As Tax Attributable to Items of a Partnership, has been secured, enter "872-IA."

This entry does not remove the return from AIMS Table 4.0 or 4.1. The "872-A" or "872-IA" designation will appear on the table indicating an open-ended consent has been secured.

Where a restricted consent to extend the statute is accepted, ensure that all deficiencies other than those covered by the extension are assessed (partial assessment) before the statute is updated, on AIMS and on ERCS/EPIC/EOIC, to the extended expiration date. Statute consent code "R" must be input to AIMS if a restricted consent agreement is entered into with the taxpayer. For guidelines for restricted consents, see IRM 25.6.22.8, Restricted Consents..

Updating ASED upon Issuance by Area Office of a Statutory Notice of Deficiency or Notice of Final Partnership Administrative Adjustments (FPAA)
When a statutory notice of deficiency is issued the Technical Services' issuing office will update the ASED on returns with a calendar date ASED to include the minimum number of days the period for assessment is suspended from running (90 or 150 days if the notice is addressed to a person outside the United States plus 60 days for a total of 150 or 210 days) in order to reflect the best information available with respect to the statute of limitations at the time the notice of deficiency is issued. Should the updated ASED change, for example, as a result of an agreement by the taxpayer to the deficiency, then the ASED would be updated again to reflect the new information.
When an FPAA is issued, the Technical Services' issuing office will update the ASED of the TEFRA entity to include the minimum number of days the Tax Matters Partner (TMP) or other partners have to petition the Tax Court, District Court or Claims Court (90 days for TMP plus 60 days (after 90th day) for other partners for a total of 150 days as per IRC § 6226) plus one year as per IRC § 6229 to reflect the best information available with respect to the statute of limitations at the time the FPAA is issued.

Alpha Codes
A two-digit alphabetic code designating a special statute situation may be entered in the day (DD) position of the statute date on AIMS, ERCS, EPIC and EOIC. For example, if FF is entered for a reference return and the actual statute expiration date is 04152006, the statute date will be entered on AIMS as 04FF2006.
An alpha code on the AIMS statute data base does not remove the return from AIMS Table 4.0 or 4.1. It creates a message indicating that special conditions exist which affect the statute expiration date. Also, it should be noted that the ASED is updated on AIMS as the result of entering an alpha code but the ASED is not updated at Master File.

ALPHA CODES
Code Description
AA Claim for Refund/Credit Only Issue
AB Assessment Statute of Limitations Waived by Properly Executed Closing Agreement
BB Loss Carryback – § 6501(h)
CC Joint Investigation
DD Credit Carryback – § 6501(j)
EE No Return Filed – § 6501(c)(3)
FF Reference Return
GG Non-TEFRA Flow-through
HH TEFRA Investor
II Form 1040, Other Taxes
JJ Non-Taxable Fiduciary
KK Bankruptcy Suspension – § 6503(h)
LL Third-Party Summons Suspension – § 7609(e)
MM Activity Not Engaged in for Profit – § 183(e)(4)
NN Substantial Omission of Items – § 6501(e)
OO False or Fraudulent Return – § 6501(c)(1); Taxpayer Not Under Joint Investigation
PP Non-taxable TE/GE Return
QQ Docketed Case
RR Various Other IRCs that Override IRC § 6501(a)
SS Financial Disability – § 6511(h)
TT Mitigation – § 1314(b)
UU Failure to Notify Secretary of Foreign Transfers – § 6501(c)(8)
VV Gifts Not Adequately Disclosed on Return – § 6501(c)(9)
WW Failure to Provide Information with Respect to "Listed" Transactions – § 6501(c)(10)
XX Return Preparer, Promoter and Aiding/Abetting Penalties (Only Used for ERCS Controls, not an AIMS Entry)
YY Participation in Abusive Offshore Arrangements
ZZ AIMS Database Transfer – Temporary ASED Alpha Code (Not to be Used/Input Unless Receiving (Gaining) Unit Approves)
   
Note:Alpha designations for TE/GE are locally defined.

CAUTION! Assessment statutes have expired and the ability to assess a tax liability has been lost through improper use of alpha codes. It is important that persons making alpha code determinations understand how the tax law impacting the periods of limitation applies in each particular situation.

Alpha coding the ASED should only be considered after attempting to extend the assessment statute or where there is not sufficient time to attempt to protect the assessment statute when the return is received in the examining group (generally, less than 30 calendar days prior to the return’s ASED) or an attempt to protect the statute on the return is unsuccessful.

There can be more than one special statute condition for a given tax period. In such cases, the statute controls should reflect the calendar date the period for assessment will expire, until it is determined with certainty which special assessment statute condition is to be relied upon to alpha code the AIMS ASED.

As a general rule, the alpha code should not be entered on AIMS and on statute control records prior to 180 days before expiration of the normal statutory period for assessment and the individual ASED alpha code descriptions below should be read in the context of this general rule. The exception to this general rule is that alpha code EE may be entered on AIMS in nonfiler situations at the time the AIMS record for the nonfiled tax period is established. Also, alpha code ZZ may be input prior to 180 days before expiration of the normal statutory period for assessment to enable transfer of the return.

Most alpha codes apply only when precise requirements of the law are met. The alpha code should be used only when it is clear that all essential elements of the applicable law are present.

For protection of the persons making and approving the ASED alpha code determination, in cases where the normal statutory period for assessment is still open, a statement in the Remarks section of Form 895 is required. The signatures or initials of the employee charged with the return and the manager next to the statement give added assurance that all aspects of the alpha code condition have been carefully considered.

The procedures, immediately below, are to be followed in those instances when the examiner and Group/Team Manager have made a decision to let the normal assessment statute expire in reliance on the extended assessment statute provisions of IRC §§ 6501(c)(1), false or fraudulent return; 6501(c)(8), failure to notify Secretary of foreign transfers; 6501(c)(9), gifts not adequately disclosed on return; 6501(c)(10), failure to provide information with respect to "listed transactions" ; 6501(e), substantial omission of items; 7609(e), suspension of statutes of limitations resulting from third-party summons. Also, see alpha code YY, below, for the requirement to document the case file and secure Territory Manager concurrence if this alpha code is being entered on AIMS.

Note:

These procedures do not apply to tax periods which have been referred to the Criminal Investigation Division for consideration of a joint investigation either before or after the expiration of the normal assessment statute of limitations. For assessment statute management guidance on cases referred for joint investigation, see IRM 25.1.4.3.6, Statute Protection.

  1. Timely and properly make a request to the taxpayer to extend the normal assessment statute of limitations and document the file accordingly with the request and the taxpayer’s response (or lack of response).

  2. Prior to the expiration of the normal assessment statute, document the Group Manager’s decision to allow the normal assessment statute to expire in reliance on an extended assessment statute based upon one of the exceptions to the normal three-year period for assessment which are specified above. The documentation of the case file is to be accomplished by the Group/Team Manager preparing a memorandum to file that has been concurred with, in writing, by the Territory Manager that fully sets forth the rationale and calculations to support the conclusion to allow the normal assessment statute to expire. The requirement to seek concurrence from the Territory Manager applies only to the special assessment statute conditions associated with the IRC subsections specified above and not the other special statute conditions described in this exhibit under the various other " alpha code" descriptions.

  3. Prior to the expiration of the normal assessment statute, update the AIMS database by means of the appropriate alpha code (" LL" for third-party summons suspension, "NN" for substantial omission of items, "OO" for false/fraudulent return, "UU" for failure to notify of foreign transfers, "VV" for inadequately disclosed gifts, "WW" for failure to disclose"listed transactions" and " YY" for Participation in Abusive Offshore Arrangements).

    AA — Claim for Refund/Credit Only Issue

AA designates a claim for refund/credit was filed timely by the taxpayer and a decision has been made that there are no other issues on the return which will warrant an additional assessment and the claimed refund has not been paid to the taxpayer. The statute is held open for refund or credit up to the amount of the claim subject to the limitation on the amount provided by the lookback rules of IRC § 6511(b) (e.g., for a refund claim filed within the 3-year period, the amount is limited to the tax paid during the 3-years immediately preceding the filing of the claim, plus the period of any extension of time for filing the return).

 AA should not be used if there are issues which could result in additional assessment of tax or penalties. The statute for assessment is not kept open by the timely filing of a claim for refund/credit.

 If the statute for assessment is open when a claim is received, the actual statute expiration date, rather than AA, should be entered initially on the statute control records. The statute controls should be updated to AA only after the examiner or TE/GE specialist is certain there is no likelihood of a tax or penalty assessment and only after the examiner ascertains that the refund amount has not already been paid to the taxpayer. An appropriate statement in the Remarks section of Form 895 would be:  "The return was inspected and there are no material issues other than those on the claim and the claimed refund has not been paid" .

Note:

Even though the assessment statute has expired, other adjustments can be made to taxable income to partially or fully offset the otherwise allowable claim for refund. If the claimed refund has been paid to the taxpayer, then no offsets can made after expiration of the assessment statute of limitations.

 AA may be used for formal claims, informal claims, and for taxpayer requests for abatement of unpaid tax (AIMS source code 73 - Taxpayer Request, also know as Audit Reconsiderations). Also, see alpha code SS —Financial Disability, for claims filed after the normal statute of limitations which are based on a claim of financial disability, as defined in IRC § 6511(h)(2).

Note:

If the taxpayer has not filed a timely claim for refund, overassessments are not to be made after the Refund Statute Expiration Date (RSED). While a Form 870 reflecting an overassessment can constitute the required claim for refund, the signed Form 870 must be filed with the Service (timely mailing is timely filing under IRC § 7502) on or before the RSED. See Rev. Rul. 68–65, 1968-1 C.B. 555. Normally, if the taxpayer files a claim for credit or refund, a Refund Statute Control Date (RFSCDT) is set at Master File. If no claim has been filed but the signed Form 870 reflecting an overassessment is being used as the claim for refund, then caution must be exercised as no RFSCDT will be on the Master File to block refunds which are outside the refund statute of limitations. Also, see IRM 4.10.8.9.7, Inviting Claims in Overassessment Cases.

AB—Assessment Statute of Limitations Waived by Properly Executed Closing Agreement

AB designates that the statutory limitation pertaining to the period of time for assessment of tax for the taxable period has been waived by a closing agreement that has been properly executed by both the taxpayer and a delegated Service official. The month (MM) and year (YYYY) entries accompanying the AB alpha code are the month and year the statute expired, absent the properly executed closing agreement waiving the assessment statute of limitations.

   BB — NOL or Capital Loss Carryback

 BB designates a net operating loss or capital loss carryback situation wherein the period of time for assessing a deficiency on the carryback year return is determined, under IRC § 6501(h) or § 6501(k), by the statute date of the loss year (source) return. The assessment statute of the loss year return or the assessment statute of the carryback return(s) must be protected in order to assess a deficiency in tax on a carryback year due to any changes to the loss carryback if a tentative allowance or the claim for refund resulting from the carryback has been paid.

BB may be used when the taxpayer has filed as a result of a carryback loss either an Application for Tentative Allowance (Forms 1045, Application for Tentative Refund, and 1139, Corporation Application for Tentative Refund) or a claim for refund (Forms 1040X, Amended U.S. Individual Income Tax Return, or 1120X, Amended U.S. Corporation Income Tax Return) in which the claim for refund has been paid to the taxpayer and, if the assessment statute on the carryback year(s) has not already expired, there are not "general" adjustments to the return for the carryback year in the case of claim for refund which has been paid or there are not " general adjustments" in the case of a tentative allowance that will result in tax to be assessed which is greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback) for the carryback year.. While " general" adjustments in the carryback year can be made to extent they do not result in a deficiency greater than the tentative allowance amount, care must be exercised due to the difficulty of determining the amount of tax attributable to the "general" adjustments and whether or not the tax resulting from the "general" adjustments will exceed the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback). If the assessment statute on the carryback year(s) is still open, BB should not be used if there may be "general" adjustments to tax for the carryback year which will exceed the tentative allowance amount as that deficiency would need to be assessed based on the ASED of the carryback year without regard to the provisions of IRC § 6501(h) or 6501(k)"General" adjustments are tax adjustments in the carryback year unrelated to the loss carryback.

Note:

BB is not to be used to alpha code the ASED for the carryback year(s) in situations where claims for refund have been filed as a result of carryback losses and the claims have not been paid; however, the alpha code AA may be used to code the AIMS ASED if the requirements for alpha code AA have been met. The AA alpha code is appropriate as a claim for refund can result from either an overstatement of income or an understatement of deductions on the original return or as a result of claims for refund (unpaid) resulting from carryback losses.

 When BB is used, some examples of appropriate statements in the Remarks section of Form 895 would be:

  1. If the ASED on the carryback return has not expired and the taxpayer has filed an Application for Tentative Allowance: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the loss carryback) and a deficiency can be assessed for the carryback year as a result of either or both a decrease in the carryback loss and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount. "

  2. If the ASED on the carryback return has not expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency for the carryback year and a deficiency can be assessed for the carryback year as a result of a decrease in the carryback loss."

  3. If the ASED on the carryback return has otherwise expired and the taxpayer has filed an Application for Tentative Allowance: "The normal ASED for the carryback year has expired and under IRC 6501(h) and IRC 6501(k), a deficiency can be assessed for the carryback year as a result of either or both a decrease in the carryback loss and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

  4. If the ASED on the carryback return has otherwise expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The normal ASED for the carryback year has expired and under IRC 6501(h), a deficiency can be assessed for the carryback year as a result of a decrease in the carryback loss."

 BB is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the loss year. For example: a 2000 carryback year return has a statute expiration date of 04152004 and the 2003 loss year return has a statute date of 04152007; the statute for the 2000 carryback year return will be updated to 04BB2007. The 04BB2007 designation will drop the carryback year return from AIMS Tables 4.0 and 4.1 until the 2007 date again comes within 180 days of expiring.

 BB is not used for the loss year return or for tax years having losses carried forward. An update to the statute expiration date for the loss year return will necessitate updating the BB statute date on the carryback years. If there is a Form 872-A extending the ASED on the loss year return, then the ASED of the carryback year would be 872-ABB. Similarly, if there is a Form 872-IA extending the ASED of the loss year return, the ASED of the carryback year would be 872–IABB.

    CC — Joint Investigation

 CC is used for tax periods covered by a Form 10498–B, Joint Investigations Intent to Solicit Consent to Extend Statute, or memorandum signed by the Territory Manager and Criminal Investigation, or the Area Director (Area Manager in TE/GE), stating that no consent to extend the statute should be secured. See IRM 25..1.4.3.6(8). An appropriate statement in the Remarks section of Form 895 would be: "Concurrence memorandum approved on [date signed by the Territory Manager or the Area Director]."

 CC may also be used with a tax return under joint investigation which has a statutory period for assessment that expired before the return was established on AIMS.

If Criminal Investigation withdraws from the joint investigation prior to the expiration of the statute, the statute controls should be updated to reflect the normal statute expiration date, or other applicable ASED alpha code, for example NN or OO, if some other exception to the normal three-year assessment statute applies.

If it is ultimately determined that there is no exception to the normal ASED, then replace the CC alpha coded ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment can not be made, refer to IRM 25.6.14.4.8, Statute Expiration Reporting Responsibilities and Procedures for SB/SE Area Office and Campus Organizational Components Involved Directly with or Providing Support for Tax Return Examinations, (or other procedures required by your particular organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report.

    DD — Credit Carryback

DD designates a credit carryback situation wherein the period of time for assessing a deficiency on the carryback year return is determined, according to IRC § 6501(j) and 6501(k), by the statute date of the return from which the credit was carried and according to IRC § 6501(i), the statute date of the return giving rise to the excess tax credit plus one year.

Credits which may be carried back are general business credits, as defined in IRC § 39, foreign tax credits, as defined in IRC § 904(c) and disallowed oil and gas extraction taxes, as defined in IRC § 907(f) – but see discussion of foreign tax credits and disallowed oil and gas extraction taxes, below.

For general business credit carrybacks, DD may be used when the taxpayer has filed either a claim for refund (which refund has been paid to the taxpayer) or an Application for Tentative Allowance (Forms 1045 and 1139) as a result of a credit carryback and, if the assessment statute on the carryback year(s) has not already expired, there are not "general adjustments " that will result in tax to be assessed which is greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback) for the carryback year. While "general" adjustments in the carryback year can be made to extent they do not result in a deficiency greater than the tentative allowance amount, care must be exercised due to the difficulty of determining the amount of tax attributable to the"general" adjustments and whether or not the tax resulting from the "general" adjustments will exceed the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback). If the assessment statute on the carryback year(s) is still open, DD should not be used if there may be "general" adjustments to tax for the carryback year which will exceed the tentative allowance amount as that deficiency would need to be assessed based on the ASED of the carryback year without regard to the provisions of IRC § 6501(j) or 6501(k)"General" adjustments are tax adjustments in the carryback year unrelated to the loss carryback.

Note:

DD is not be used to alpha code the ASED for the carryback year(s) in situations where claims for refund have been filed as a result of a credit carryback and the claims have not been paid; however, the alpha code AA may be used to code the AIMS ASED if the requirements for alpha code AA have been met.

Foreign tax credits and disallowed oil and gas extraction taxes: The Forms 1045 and 1139 cannot be used to carryback unused foreign tax credits or disallowed oil and gas extraction taxes but if the tax credit was carried back on an amended return and the claimed refund amount resulting therefrom had been refunded to the taxpayer, then IRC § 6501(i) would allow assessment of a deficiency resulting from the tax credit carryback so long as the assessment statute is open on the tax period giving rise to the excess tax credit plus one year. The alpha code DD may be used in these circumstances to code the AIMS ASED for the carryback tax period to designate the applicability of the § 6501(i) statute.

Credits can be "released" as a result of loss carrybacks from a subsequent year and made and made available for carryback or carryover to some other year. In these situations, the ASED for assessing a deficiency for the refunded amount or the tentative allowance amount of the " released" credit that is attributable to the loss carryback is also determined under § 6501(j) or 6501(k).

 When DD is used, some examples of appropriate statements in the Remarks section of Form 895 would be:

  1. If the ASED on the carryback return has not expired and the taxpayer has filed an Application for Tentative Allowance: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency greater than the tentative allowance amount (reduced by tax which may be assessed as a result of adjustments to the credit carryback) and a deficiency can be assessed for the carryback year as a result of either or both a decrease in the credit carryback and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount. "

  2. If the ASED on the carryback return has not expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The ASED for the carryback return is still open; however, the return was inspected and there are no material general adjustments which will result in a deficiency for the carryback year and a deficiency can be assessed for the carryback year as a result of a decrease in the credit carryback."

  3. If the ASED on the carryback return has otherwise expired and the taxpayer has filed an Application for Tentative Allowance: "The normal ASED for the carryback year has expired and under IRC 6501(j) and IRC 6501(k), a deficiency can be assessed for the carryback year as a result of either or both a decrease in the credit carryback and/or general adjustments in the carryback year which will result in a deficiency not exceeding the tentative allowance amount."

  4. If the ASED on the carryback return has otherwise expired and the taxpayer has filed a claim for refund as a result of the loss carryback and the claim has been paid: "The normal ASED for the carryback year has expired and under IRC 6501(j), a deficiency can be assessed for the carryback year as a result of a decrease in the credit carryback."

 DD is entered in the day (DD) position of the statute date field. The month (MM) and year (YYYY) positions designate the statute date of the tax year generating the credit.

 For example: a 2000 return with a statute date of 04152004 is a carryback year. The credit is carried from the 2003 year which has a statute expiration date of 04152007. The 2000 carryback year return will be updated to reflect a corrected statute date of 04DD2007. The 04DD2007 designation will drop the carryback year return from AIMS Tables 4.0 and 4.1 until the 2007 date is again within 180 days of expiration.

 DD is not used for the tax return which generated the credit nor for tax years having credits carried forward. An update to the statute expiration date for the tax year which generated the excess credit will necessitate updating the DD statute designation on the carryback years. If there is a Form 872-A extending the ASED on the return generating the credit carryback, then the ASED of the carryback year would be 872-ADD. Similarly, if there is a Form 872-IA extending the ASED of the loss year return, the ASED of the carryback year would be 872–IADD.

    EE — No Return Filed

 EE designates no return has been filed by the taxpayer. Therefore, there is no statute expiration date.

 EE is used in the AIMS ASED when a substitute for return is prepared by the IRS, either by inputting AM 424 with an appropriate push code to post an SFR TC 150 to Master File or by the IRS filing an actual IRC 6020(b) return to assess the types of taxes that can be assessed without the IRS first issuing a notice of deficiency. The month and year appearing with EE represent the normal statute expiration date if the return had been timely filed.

 When a late filed return is received from a taxpayer, the examiner or specialist will replace the EE statute designation with a true statute expiration date based on the date the return was received by the Service. The examiner or specialist will obtain transcripts throughout the examination, at least once a year, to check for postings (such as transaction code 976 or 977) indicating a return may have been filed. See IRM 4.4.9, Delinquent and Substitute for Return Processing, for additional information.

Note:

The taxpayer's signing and submitting of a waiver of restriction on assessment (Forms 4549, Income Tax Examination Changes, 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, etc.) does not constitute a return under IRC section 6020(a) and, therefore, does not commence the running of the assessment statute of limitations, see Rev. Rul. 2005–59, 2005-37 I.R.B. 505.

    FF — Reference Return

 FF is used when a return is requisitioned for reference only (source code 45) and there is no expectation of making a tax assessment for the tax period. If the statute is still open when a reference return is secured, the true statute expiration date should be used, rather than FF, until a definite determination is made that there will be no tax change.

 If a reference return is examined, replace the 45 source code with a source code appropriate for an open examination and replace the FF statute designation with the actual statute expiration date.

    GG — Non-TEFRA Flow-through

  GG is used for non-taxable, non-TEFRA Form 1065 (partnership) and Form 1120S (S corporation) returns. The statute for assessments flowing from non-TEFRA returns is determined on the returns of the partners or shareholders.

 If there is a possibility of a tax assessment on Form 1120S or if a final determination has not been made that the partnership comes within the TEFRA provisions, code GG should not be used.

    HH — TEFRA Investor

 HH is used for returns of partners in TEFRA partnerships and shareholders in TEFRA S corporations, having only TEFRA flow-through adjustments and the assessment statute is protected at the TEFRA entity level for all TEFRA entities from which an adjustment to the TEFRA investor's return is to be made. HH must not be used if there are non-TEFRA adjustments at the partner or shareholder level.

 The only S corporation returns which may come under TEFRA are those for tax years beginning after December 31, 1982 and beginning before January 1, 1997.

HH is used by campus TEFRA units where partner and shareholder returns are held pending only the outcome of TEFRA partnership and S corporation examinations.

Area offices may use HH when the return of the partner or shareholder are only subject to TEFRA flow-through adjustments. Area offices will not use the HH code for open partner or shareholder examinations when issues other than TEFRA flow-through adjustments exist.

II — Form 1040, Other Taxes

II is used to indicate that the Form 1040 return is being examined for the non-filing or underreporting of taxes reportable in the Other Taxes section of the Form 1040, and to indicate that a determination has been made that there are no income tax issues (Tax and Credits before consideration of Other Taxes) of material tax consequence on the Form 1040 return which require examination or the assessment statute has already expired with respect to the income taxes.

Since the extended tax assessment statute resulting from the non-filing of Other Taxes only applies to the tax liability relating to the Other Tax and does not apply to the income tax ASED, a careful determination that no income tax issues are present on the return must be made before alpha coding the AIMS ASED with II, if the income tax ASED has not otherwise expired at the time the alpha coding determination is being made. If there are income tax issues of tax consequence based on inspection of the Form 1040 and the period for assessment of the income taxes has not expired, do not code the AIMS ASED with II. Action must be taken to protect the income tax assessment statute of limitations.

Also, consideration needs to be given to protecting the assessment statutes for the Other Taxes, for which an examination is warranted, rather than relying on a non-filing determination to permit assessment of the Other Taxes at any time. Care must be exercised whenever a separate return or schedule required for an Other Tax is not filed with the Form 1040 return and the Service will rely on a non-filing determination to permit assessment of the Other Tax at any time. In particular, before concluding that filing of Form 1040 has no effect on the period for assessment of an Other Tax, make sure that it has been determined that the Other Tax is separate and distinct from the income taxes imposed by subtitle A of the IRC. See Rev. Rul. 79-39, 1979-1 C.B. 435 (FICA taxes on tip income are separate and distinct) and Rev. Rul. 82-185, 1982-2 C.B. 395 (self-employment taxes are not separate and distinct from income taxes). There is no separate ASED reflected on Master File or AIMS for these Other Taxes as Master File only reflects the ASED of the Form 1040 so the ASED for Other Taxes needs to be determined separately in instances of non-filing of Other Taxes.

Non-filing for the purposes of this AIMS alpha code means that the taxpayer filed a Form 1040 return but did not attach the information specified by the form or form instructions. An example of Other Taxes required to be reported on the Form 1040 return are household employment taxes, which are required to be reported in the Other Tax section of the Form 1040 and are to be supported by the attachment to the Form 1040 of a Schedule H, Household Employment Taxes. A taxpayer’s entry of a "zero" on the Form 1040 line item prescribed for reporting household employment taxes without supplying the supporting Schedule H will not start the running of the statute of limitations for household employment taxes. For example, a taxpayer who mistakenly computes wages and, therefore, honestly believes he has no tax liability and follows the IRS guidance that the schedule does not have to be filed, has not started the period of limitations (the "first position" ). The same treatment should apply if a number (greater than zero) is entered in the Other Tax section without the supporting schedule being supplied (the "second position" ). Case law specifically addressing the Schedule H has yet to be established regarding these positions.

If the taxpayer did report a tax liability for household employment taxes (in this example) on the Form 1040, the II AIMS alpha code can be used to designate that the return is being examined for household employment taxes only but Form SS-10 should be used to extend the assessment statute for household employment taxes, if necessary, even if AIMS is coded with the II alpha code. Again, there is presently no way to indicate the Other Tax ASED on AIMS. The month and year of the ASED on AIMS when using the II alpha code should be the month and year of the expiration of the Form 1040 ASED whether or not there was a filing or nonfiling of the Other Tax.

In addition to the household employment taxes discussed above, the alpha code II can be used to designate that the period for assessment has not expired for such Other Taxes as the Social Security and Medicare tax on tip income not reported to the employer and the excise taxes on excess contributions or accumulations in qualified retirement or other plans. For a comprehensive list of Other Taxes reported on the Form 1040 depending upon the tax period under consideration, see the instructions for the Other Tax section of the Form 1040. Again, as stated above, care must be exercised to determine that the underlying tax being considered requires the filing of a" return" for taxes which are separate and distinct from the income taxes imposed by subtitle A of the IRC and the Other Tax being considered has a period for assessment which has not already expired. For additional information, also see IRM 25.6.5.5.3, Forms Reporting More Than One Item of Tax.

    JJ — Non-taxable Fiduciary

 JJ is used for Form 1041 fiduciary returns for which it has been determined that the fiduciary entity is not a taxable entity for the tax periods in question but is a flow-thru entity. The assessment statutes are determined on the returns of the beneficiaries receiving flow-through items from the Form 1041.

    KK — Bankruptcy Suspense

 KK is used for returns of taxpayers who file petitions in Bankruptcy Court and the assessment statute is suspended pending resolution of the bankruptcy (unless the court lifts the stay earlier). Since, for bankruptcy petitions filed after October 22, 1994, the issuance of a statutory notice of deficiency is necessary in order for the bankruptcy stay to suspend the period of time for assessment, the KK alpha code should only be input by those employees managing the inventory of returns submitted for placement in or actually in a Bankruptcy Suspense status.

 Where a bankruptcy petition was filed before October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect plus 60 days as the Service is prohibited from making an assessment and is prohibited from issuing a statutory notice of deficiency. Where a bankruptcy petition is filed on or after October 22, 1994, the statute is suspended during the period of time the bankruptcy stay is in effect if a valid statutory notice of deficiency has been issued and no waiver of restriction on assessment is received.

Where a bankruptcy petition is filed on or after October 17, 2005, in the case of an individual taxpayer, the assessment statute is suspending from running on the pre-petition tax periods once the notice of deficiency is issued and during the period of time the bankruptcy stay prescribed in 11 USC 362 is in effect. Post bankruptcy petition tax periods should not be placed in bankruptcy suspense and alpha coded KK as the assessment statute is not suspended from running by the bankruptcy stay.

In the case of corporate taxpayers, the tax periods to which the bankruptcy stay is applicable will be determined by the Bankruptcy Court. Therefore, once the court determines the tax periods for which the stay is in effect and after the notice of deficiency is issued, then the tax periods to which the bankruptcy stay is applicable should be alpha coded KK and placed in bankruptcy suspense.

 When the bankruptcy stay is lifted, a new statute expiration date must be determined. Then the KK alpha statute code will be replaced by the recomputed assessment statute expiration date.

    LL — Third-Party Summons

 LL is used when the statute of limitations on assessment (but not collection) under IRC § 6501 or the statute of limitations on criminal prosecution under IRC § 6531 is suspended by operation of IRC § 7609(e)(1) or (e)(2). The suspension provisions operate as follows:

  • IRC § 7609(e)(1) suspends the statutes of limitations under circumstances where a third party is served with a summons that is subject to the notice requirement of § 7609(a), and the taxpayer (whose liability is being investigated by that summons) either intervenes in a suit to enforce the summons or files a petition to quash the summons. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period during which a proceeding, and appeals therein, are pending.

  • IRC § 7609(e)(2) suspends the statutes of limitations under circumstances where a recipient of a John Doe summons issued under § 7609(f) or where a recipient of a third-party summons that is subject to the notice requirement of § 7609(a) fails to comply with the summons for more than 6 months after the summons was served. Under these circumstances, the taxpayer's statutes of limitations (for the tax periods which are the subject of the summons) are suspended for the period beginning 6 months after the date the summons was served and ending on the date the summoned party finally resolves his response to the summons.

IRC § 7609(e)(1) and 7609(e)(2) should generally be relied upon to extend the period for assessment only in those instances when the ASED has otherwise expired. The ASED may be coded LL when it has been determined that § 7609(e)(1) or 7609(e)(2) is applicable and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 7609(e)(1) or 7609(e)(2) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

Note:

When the suspension of the assessment statute has ended, a new calendar date ASED must be determined and entered on AIMS and Master File. It is extremely important to thoroughly document the case file as to how the assessment statute suspension period was determined both as to how the beginning date and the ending date were determined and the case file must set forth the calculation of the new ASED resulting from the suspension. It is very important to act and to reflect the fact in the case file that the Service acted in a reasonable fashion in taking action to resolve an unresolved summons situation and made a factually correct determination when determining the date the response to the summons was finally resolved if the suspension of the assessment statute is pursuant to § 7609(e)(2). For suspensions of the assessment statute pursuant to § 7609(e)(1), the date that the period for judicial appeals ended must be accurately determined and documented in the case file.

    MM — IRC Section 183(e)(4): Activity Not Engaged in for Profit

 MM is used when a taxpayer makes the election under IRC § 183(e) to extend the statute until two years after the due date (determined without regard to extension of time for filing) for filing the last return to be considered in determining whether or not an activity is engaged in for profit. MM should not be used if there are potential adjustments to tax in addition to the § 183 issue.

 The month and year accompanying the MM alpha code will be the date determined under IRC § 183(e)(4). For example: if the due date for the final year involved in a § 183 determination is April 15, 1999, the alpha code designation for the tax years held open by the IRC § 183(e) election would be 04MM2001.

    NN — IRC Section 6501(e): Substantial Omission of Items

 NN is used to indicate that the Service is relying on a substantial omission of items meeting the requirements of either IRC § 6501(e)(1), (e)(2) or (e)(3), which pertain to income taxes, estate and gift taxes and excise taxes, respectively, as the exception to the normal three-year period of time for assessment of tax. The tax may be assessed within 6 years after the date the original return was filed or due, whichever is later, if the taxpayer omits:

  • More than 25% of the gross income reported on original Form 1040, 1041, and 1120

  • More than 25% of tax on original Form 720

  • Includable items in excess of 25% of the gross estate on original Form 706

  • Gifts in excess of 25% of the total gifts on original Form 709

The burden of proving omission of items is on the government. The ultimate test is did the taxpayer adequately apprise the Service of the nature and amount of the item. Therefore, as a general rule, the Service relies on § 6501(e) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

The ASED may be coded NN when it has been decided that reliance on § 6501(e) is warranted and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 6501(e) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

 The six-year statute, provided for in IRC § 6501(e), may apply when a joint investigation case is returned to Examination or TE/GE for assessment of tax after the three-year statute has been allowed to expire.

The 6-year limitations period applies to assess deficiencies and additional taxes with respect to taxpayer's entire return, Colestock v Commissioner, 102 TC 380 (1994).

The assessment period was extended to 5 years under the law at that time (now 6 years under current law) despite filing of an amended return, after the return due date, which included part of income omitted from original return so that omission on the amended return was not over 25 percent, Goldring v Commissioner, 20 TC 79 (1953); Houston v Commissioner, 38 TC 486 (1962).

 Once it has been determined that IRC § 6501(e) applies, .the ASED should be updated to the applicable six-year statute date. While the NN alpha code is being used in the ASED, the year (YYYY) accompanying the NN alpha code will be that of the six-year expiration date.

    OO — IRC Section 6501(c)(1): False or Fraudulent Return (taxpayer not under joint investigation)

 OO is used when the Service is relying on the provisions of IRC § 6501(c)(1), relating to the filing of a false or fraudulent return with the intent to evade tax, to keep the statute open. If fraud is proven, there is no limit on the period of time for assessment. Also, the taxpayer can not undo the fraudulent return by filing a nonfraudulent amended return, Badaracco v. Commissioner, 464 U.S. 386 (1984). So, if the original return is fraudulent, an increase in the tax liability can be assessed at any time.

If the return is under joint investigation, CC should be used rather than OO. The OO alpha code may be used for cases where the government can prove civil fraud and the statute for the entire return is not kept open by any other provision of the law.

As a general rule, the Service relies on § 6501(c)(1) to keep the statute open only in situations where the normal three-year statute has otherwise expired.

The ASED may be coded OO when it has been determined that § 6501(c)(1) is applicable and the normal three-year assessment statute applicable to the return may be allowed to expire if: (1) a consent to extend the assessment statute for the return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the return expire in reliance on § 6501(c)(1) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

ASED alpha code OO can also be used when the Service is relying on the fraudulent acts and intent to evade tax on the part of the return preparer to keep the assessment statute open on the returns of the preparer's clients, see Allen v. Commissioner, 128 T.C. No. 4 (2007).

 The month (MM) and year (YYYY) entries accompanying the OO alpha code are the month and year the statute would expire if the return was not false or fraudulent.

When a case is closed agreed from the group to Centralized Case Processing for assessment where § 6501(c)(1) has been relied upon to extend the assessment statute for a particular tax period, flag the case file with a Form 3198, Special Handling Notice for Examination Case Processing, and enter in the statute information section, proximate to the applicable tax period, the AIMS ASED as month/OO/year, (format: mm/OO/yyyy). In the Special Features, Other Instructions section enter: "6501(c)(1), assessment can be made at any time" . If the case is closed as unagreed for issuance of a statutory notice of deficiency or for routing to Appeals, then the OO alpha code should be reflected in the ASED field.

    PP — Non-taxable TE/GE Return

 PP is used for non-taxable returns under examination in TE/GE. Tax returns in EP and EO are initially controlled using actual statute expiration dates. The PP code may be used when it is determined with certainty the non-taxable return will not be converted to a taxable return.

 The month (MM) and year (YYYY) accompanying the PP alpha code will be the date of statute expiration as if it were a taxable return.

    QQ — Docketed Case

 QQ is used by Appeals and Counsel for cases docketed for trial in the United States Tax Court and by Technical Services for docketed cases which Appeals/Counsel has asked Technical Services to temporarily hold in inventory rather than transferring to Appeals.

    RR — IRCs that Override IRC Section 6501(a)

Examples of Code Sections Overriding § 6501(a), normal three-year period for assessment, under certain circumstances – not otherwise covered by a separately designated ASED alpha code
45H Credit for production of low sulfur diesel fuel
118 Contributions to the capital of a corporation
302 Distributions in redemption of stock
303 Distributions in redemption of stock to pay death taxes
354 Exchanges of stock and securities in certain reorganizations
355 Distribution of stock and securities of a controlled corporation
409 Qualifications for tax credit employee stock ownership plans
451 General rule for taxable year of inclusion
547 PERSONAL HOLDING COMPANIES - Deduction for deficiency dividends
617 Deduction and recapture of certain mining exploration expenditures
815 Distributions to shareholders from pre-1984 policyholders surplus account
860 PROVISIONS WHICH APPLY TO BOTH REGULATED INVESTMENT COMPANIES AND REAL ESTATE INVESTMENT TRUSTS - Deduction for deficiency dividends
905 FOREIGN TAX CREDITS – Applicable rules
982 Admissibility of documentation maintained in foreign countries
1033 Involuntary conversions
1042 Sales of stock to employee stock ownership plans or certain cooperatives
1233 Gains and losses from short sales
1359 ELECTION TO DETERMINE CORPORATE TAX ON CERTAIN INTERNATIONAL SHIPPING ACTIVITIES USING PER TON RATE - Disposition of qualifying vessels
2016 ESTATES OF CITIZENS OR RESIDENTS - Recovery of taxes claimed as credit
2032A ESTATES OF CITIZENS OR RESIDENTS - Valuation of certain farm, etc., real property
3121 EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX - Definitions
4979A MISCELLANEOUS EXCISE TAXES - Tax on certain prohibited allocations of qualified securities
6038A Information with respect to certain foreign-owned corporations
6234 Declaratory judgment relating to treatment of items other than partnership items with respect to an oversheltered return
6255 TREATMENT OF ELECTING LARGE PARTNERSHIPS - Definitions and special rules
6501 Limitations on assessment and collection (if not otherwise covered by a separate ASED alpha code)
6503 Suspension of running of period of limitation (if not otherwise covered by a separate ASED alpha code)
6861 Jeopardy assessments of income, estate, gift, and certain excise taxes
6872 RECEIVERSHIPS - Suspension of period on assessment
6901 TRANSFEREES AND FIDUCIARIES - Transferred assets
7507 Exemption of insolvent banks from tax
7508 Service in combat zone or contingency operation
7508A Presidentially declared disaster or terrorist or military action (suspension of assessment of tax must be specially stated in an IRS announcement/notice in order to suspend the period for assessment)
7611 Restrictions on church tax inquiries and examinations
7811 Taxpayer assistance orders
7874 Rules relating to expatriated entities and their foreign parents

 RR is used when another code section overrides IRC § 6501(a) and the special statute condition is not otherwise designated by another ASED alpha code. If RR is used, the Form 895 must reflect which particular IRC section applies and why.

An example of an IRC section which overrides § 6501(a) is IRC § 1033(a)(2)(C) under which a taxpayer whose property is involuntarily converted may elect to recognize only the gain that exceeds the cost of the replacement property acquired within a limited period of time. The RR code indicates that the statutory period for assessment is extended due to the IRC § 1033 election. In this example, RR may be used as long as the taxpayer has not notified the Service, in the manner prescribed in the relevant regulations, regarding replacement of the property. After the taxpayer notifies the Service that the converted property has been replaced or will not be replaced, a new statute expiration date will be determined, taking into account the suspension of the statute under IRC 1033, and the RR code will be replaced with the calendar date ASED.

 In the above example, the statute for assessment is kept open only for tax attributable to gain on the involuntary conversion so a determination must be made that the involuntary conversion is the only issue of tax consequence before the extended assessment statute of IRC § 1033 is relied upon to allow the ASED for the entire return to expire and the ASED is alpha coded RR.

The month (MM) and year (YYYY) entries accompanying the RR alpha code are the month and year the statute would expire if there was no involuntary conversion to consider in determining the ASED, in this example.

    SS — Financial Disability

 SS is used when a claim is received after the normal statute of limitations for filing a claim for credit or refund of tax has expired and the person signing the claim for credit or refund indicates that the taxpayer, an individual, is claiming financial disability. Internal Revenue Code § 6511(h), which was added by the IRS Restructuring and Reform Act of 1998, suspends the statute of limitations period for filing a claim for credit or refund in certain situations. See Rev. Proc. 99–21, 1999-1 C.B. 960, for specifics on the proper application of this provision.

 For example, an individual taxpayer timely filed his or her 2002 tax return. For the entire year of 2005 the taxpayer experienced a financial disability, as defined in § 6511(h) . In December of 2006 the taxpayer filed a claim for refund of taxes paid for 2002. The normal statute of limitations for credit or refund would have expired 04/15/06. However, due to the taxpayer's financial disability, running of the statute of limitations period for filing a claim for credit or refund is suspended for the period when the taxpayer was financially disabled (in this example, one year) — provided the procedures in Rev. Proc. 99–21 are followed. The ASED would be entered as 04SS2006, the date the ASED expires, to denote the claim filed based on § 6511(h).

Note:

Do not use AA for claims filed under the provisions of IRC §6511(h). Also, keep in mind this provision does not extend the ASED but would extend the Refund Statute Expiration Date (RSED).

    TT — Mitigation

 Under IRC § 1311, the Service is allowed to correct the effect of an erroneous treatment of an item in a taxable year which is closed by the statute of limitations under certain specific circumstances. These mitigation provisions apply only in seven specific circumstances (see description in IRC § 1312 and Treas. Reg. §§ 1.1312-1 through 1.1312-8). In general, the mitigation provisions are intended to offset the benefit a party might otherwise obtain by maintaining a position in an open tax year that is inconsistent with the treatment of the same item in a closed year (e.g., a taxpayer receives a double deduction.) Until a determination (as defined in IRC § 1313) is made, TT should be used to identify the otherwise statute-barred year as a year coming within the mitigation provisions of IRC §§ 1311–1314. The month (MM) and year (YYYY) entries accompanying the TT alpha code are the month and year the normal three-year statute expires. Once the determination is made, the ASED must be updated to the new one-year statute expiration date, which is one year from the determination date – IRC 1314(b).

UU — Failure to Notify Secretary of Foreign Transfers

UU is used to indicate that, as per IRC § 6501(c)(8), the period for assessment of tax with respect to any event or tax period will not expire before a date which is three years after the information required to be reported by IRC §§ 6038, 6038A, 6038B, 6046, 6046A or 6048 is furnished. If the information is not furnished, then the assessment statute, as determined by § 6501(c)(8), is unlimited with respect to the tax liability relating to the transaction/event for which the required information has not been furnished. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question.

The information to be furnished is transactional or event information of the type required to be reported by the above code sections, and regulations thereunder, on the currently prescribed forms (listed below) or as encompassed in applicable future form revisions and form number re-designations and is generally applicable to information the reporting of which is due after August 5, 1997. Prior to amendment in 1997, the § 6501(c)(8) exception applied to information required to be provided under § 6038B with respect to § 367 exchanges and distributions.

Reporting forms, as of the date of this memorandum, by IRC section:

  • Section 6038, Information Reporting with Respect to Certain Foreign Corporations and Partnerships - Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations), Form 8858 (Information Return of U.S. Persons With Respect to Disregarded Entities) and Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships)

  • Section 6038A, Information with Respect to Certain Foreign-Owned Corporations - Form 5472 (Information Return of a Foreign Owned Corporation)

  • Section 6038B, Notice of Certain Transfers to Foreign Persons - Form 926 (Return by Transferor of Property to a Foreign Corp., Foreign Estate or Trust, or Foreign Partnership) and Form 8838 (Consent to Extend the Time to Assess Tax Under 367 – Gain Recognition Agreement)

    Note:

    Unlike the other listed forms, Form 8838 is not a return; however, part of the form requires disclosure of the details of the transfer, and therefore, is a form that reports information required by section 6038B.

  • Section 6046, Returns as to Organization or Reorganization of Foreign Corporations and as to Acquisitions of Their Stock - Form 5471

  • Section 6046A, Returns as to Interests in Foreign Partnerships - Form 8865, Schedule P (Acquisitions, Dispositions and Changes of Interests in a Foreign Partnership)

  • Section 6048, Information with Respect to Certain Foreign Trusts - Form 3520 (Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) and Form 3520-A (Annual Return of Foreign Trust With a U.S. Owner)

Unlike some of the other exceptions contained in § 6501(c), this exception only applies to the tax liability relating to the transaction/event for which the required information has not been furnished and does not apply to the ASED for the entire return; therefore, IRC § 6501(c)(8) should generally be relied upon to extend the period for assessment only in those instances when the ASED for the entire return has otherwise expired.

The ASED may be coded UU when it has been determined that § 6501(c)(8) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(8) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on § 6501(c)(8) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under § 6501(c)(8) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the § 6501(c)(8) exception. The ASED determined under § 6501(c)(8) is three years after the date the required information is furnished.

The ASED determined under § 6501(c)(8) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the § 6501(c)(8) ASED only apply to the period for assessing the tax liability related to the transaction/event for which information was required to be furnished.

VV — Gifts Not Adequately Disclosed on Return

VV is used to indicate that the period for assessment of the tax imposed by Chapter 12 on gifts not adequately disclosed on the return may be assessed at any time. This exception to the normal three-year period for assessment is provided for in IRC § 6501(c)(9), which was originally added to the Code by P.L. 101-508, effective for gifts made after October 8, 1990

Generally, § 6501(c)(9) should only be relied upon to extend the assessment statute if the normal three-year assessment period has otherwise expired, since this exception to the normal three-year period for assessment only applies to the ASED for assessing tax with respect to the inadequately disclosed gifts and not the ASED for the entire return.

The ASED may be coded VV when it has been determined that § 6501(c)(9) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(9) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

For gifts made after October 8, 1990, and before January 1, 1997, the following Code provision is applicable: section 6501(c)(9) - "Gift tax on certain gifts not shown on return. If any gift of property the value of which is determined under section 2701 or 2702 (or any increase in taxable gifts required under section 2701(d)) is required to be shown on a return of tax imposed by chapter 12 (without regard to section 2503(b)), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. The preceding sentence shall not apply to any item not shown as a gift on such return if such item is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item."

For gifts made after December 31, 1996, the following Code provision is applicable:section 6501(c)(9) - "Gift tax on certain gifts not shown on return. If any gift of property the value of which (or any increase in taxable gifts required under section 2701(d) which) is required to be shown on a return of tax imposed by chapter 12 (without regard to section 2503(b), and is not shown on such return, any tax imposed by chapter 12 on such gift may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. The preceding sentence shall not apply to any item which is disclosed in such return, or in a statement attached to the return, in a manner adequate to apprise the Secretary of the nature of such item."

In deciding whether or not a gift was adequately shown/disclosed on the return, see Treas. Reg. § 301.6501(c)-1(e) and Treas. Reg. § 301.6501(c)-1(f).

WW — Failure to Provide Information with Respect to "Listed Transactions" (does not apply to taxable years with respect to which the period for assessing a deficiency expired before October 22, 2004, the date of enactment of American Jobs Creation Act (AJCA)

WW is used to indicate that, per IRC § 6501(c)(10), the period for assessment of tax with respect to a "listed transaction " that the taxpayer failed to disclose as required under § 6011 will not expire before one year after the earlier of either the date the taxpayer discloses the transaction in accordance with prescribed procedures (see Rev. Proc. 2005-26, 2005-17 I.R.B. 965 (April 25, 2005), or subsequently published guidance) or the date a "material advisor" meets the requirements of § 6112 with respect to a request by the Secretary under § 6112 relating to the transaction.

If neither the taxpayer nor the "material advisor" disclose the required information, the period of time for assessment of any tax with respect to the "listed transaction" is unlimited. Other exceptions to the normal statutory period for assessment of tax may also apply to the tax return in question and, of course, § 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period prescribed by § 6501(a).

The American Jobs Creation Act of 2004 (AJCA), Public Law 108-357, amended IRC § 6501(c) by adding a new exception, 6501(c)(10), to the normal three-year period for tax assessment in those instances when the taxpayer does not provide information with respect to a "listed transaction" as required under § 6011. Section 6707A(c)(2), which was added by the AJCA, defines a "listed transaction" as a transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction. Treas. Reg. § 1.6011-4(b)(2) also defines "listed transactions."

Note:

Because § 6501(c)(10) only applies if the taxpayer first fails to disclose the "listed transaction" as required under § 6011, § 6501(c)(10) would not apply if § 6011, and the regulations thereunder, do not require the taxpayer to disclose the "listed transaction." Therefore, it is important to consider the various effective dates of the applicable regulations under § 6011 and the type of taxpayer involved, in deciding the date by which the taxpayer is required to disclose the transaction.

Unlike some of the other exceptions contained in § 6501(c), this exception only applies to the tax liability related to the " listed transaction" and not to the ASED for the entire return; therefore, IRC § 6501(c)(10) should generally be relied upon to extend the period for assessment only in those instances when the ASED for the entire return has otherwise expired.

The ASED may be coded WW when it has been determined that § 6501(c)(10) is applicable and the normal three-year assessment statute applicable to the entire return may be allowed to expire if: (1) a consent to extend the assessment statute for the entire return can not be obtained after timely and proper solicitation, (2) the case file is documented with adequate justification for letting the assessment statute applicable to the entire return expire in reliance on § 6501(c)(10) and (3) written Territory Manager approval is obtained in advance of the normal three-year assessment statute expiration date.

In order to determine if the one-year period under § 6501(c)(10) has started to run, the examiner should consult Rev. Proc. 2005-26, or subsequently published guidance, to determine if the taxpayer or "material advisor" has complied with the requirements contained in the applicable published guidance.

Since a consideration of section 4 of the revenue procedure is that the required disclosure also be provided by the taxpayer to the Office of Tax Shelter Analysis (OTSA), even when the taxpayer provided the required information with the return filing, a process has been established to determine whether or not, and the date, this requirement to provide OTSA with the disclosure has been met. Contact OTSA by telephone at (801) 620-5121 or by fax at (801) 620-5122 to ascertain the fact of filing of the required disclosure with OTSA.

If the requirements of Rev. Proc. 2005-26 have not been satisfied by the taxpayer or the "material advisor," update the ASED for the tax period using Alpha Code WW in the "day day" position of the AIMS ASED field.

Caution:

Since one examiner may be examining the taxpayer’s return(s) and a different examiner may be examining the "material advisor," coordination is required between the relevant employees to determine the ASED for the tax period(s) being considered.

Once the required information is furnished so that the ASED can be determined and either the ASED on the entire return has otherwise expired or the Territory Manager has approved reliance on § 6501(c)(10) in advance of the expiration of the statute on the entire return in accordance with the above procedures, update the ASED to the date determined under § 6501(c)(10) and enter an "R" indicator, which indicates, in this instance, the restrictions applicable to the § 6501(c)(10) exception. The ASED is one year after the earlier of the date the taxpayer discloses the transaction, as discussed in the above-referenced revenue procedure, or the date that a "material advisor" meets the requirements of § 6112 with respect to a request by the Secretary under § 6112 relating to the transaction.

The ASED determined under § 6501(c)(10) can be extended by consent agreement but the examiner needs to bear in mind that consent agreements to extend the § 6501(c)(10) ASED only apply to the period for assessing the tax liability related to the "listed transaction."

Note:

If a transaction is "listed" after the taxpayer filed the taxpayer's return (or an amended return) for a taxable year during which the taxpayer participated in the transaction, then § 6501(c)(10) may apply if the period for assessment is still open both: (a) on the date the transaction is "listed" and (b) on the date § 6011 (including regulatory and other forms of guidance issued pursuant to that section’s authority) requires the taxpayer to disclose the transaction. Therefore, if the transaction is not "listed " before the ASED expires or the taxpayer is not required to disclose before the ASED expires for the taxable year(s) under consideration, then § 6501(c)(10) would not apply to the tax liability attributable to the transaction for those taxable years.
Currently (need to check applicability of the requirement at the time examiner is considering the issue), the regulations under § 6011 require a taxpayer to disclose these subsequently-listed transactions by submitting a completed Form 8886, Reportable Transaction Disclosure Statement, to the Office of Tax Shelter Analysis within 90 calendar days after the date on which the transaction became a listed transaction. The Commissioner also may determine the time for disclosure of listed transactions in the published guidance identifying the transaction.. See Treas. Reg. § 1.6011-4(e)(2)(i). Therefore, because § 6501(c)(10) is triggered by a taxpayer's failure to disclose a listed transaction, if the 90 calendar day period for filing the disclosure statement ends after the general period of limitations expires with regard to a year where the taxpayer participated in the listed transaction, then § 6501(c)(10) would not apply because the taxpayer would not have failed to disclose the transaction within the normal period of limitations and § 6501(c)(10) cannot reopen an already closed period of limitations.

XX — Return Preparer, Promoter and Aiding/Abetting Penalties (Only Used For ERCS Controls, not an AIMS entry)

XX is used on ERCS to designate that a return preparer penalty under IRC § 6694(b) may be assessed at any time. Return preparer penalty controls for penalties under § 6694(a) and 6695 are to reflect a date three years after either the due date of the return (without regard to an extension of time to file) or the date the return or claim for refund with respect to which the penalty is assessed was filed, whichever is later. XX can be used to designate that a return preparer penalty under § 6713 for preparer's unauthorized disclosure or use of taxpayer information may be assessed at any time.

XX also can be used to designate that the penalties under IRC § 6700 and 6701 for promoting abusive tax shelters and aiding and abetting understatement of the tax liability, respectively, may be assessed at any time. See IRM 20.1.6.1.8, Statute of Limitations.

    YY — Participation in Abusive Offshore Arrangements — Returns generally controlled under Project Codes 0020, Brokerage Initiative; 0127, Offshore Credit Card; 0160, Offshore Transactions; 0237, Foreign Trusts; 0671, Offshore Compliance Project, as well as returns controlled under any projects pertaining to abusive offshore arrangements subsequently approved by headquarters (see http://abusiveshelter.web.irs.gov/AbusivePromotions/ProjectCodes.htm#Offshore for currently approved Offshore Projects)

Note:

Since there is currently a limitation on AIMS of only one project code, YY may be used to alpha code the ASED as long as the return meets one of the Offshore Project code definitions, even if AIMS properly reflects some other approved project code rather than an approved Offshore Project code. If the return is not project coded on AIMS, the return should be project coded with the appropriate Offshore Project code either before or simultaneously with the input of ASED alpha code YY.

 YY is used when the decision is made to allow the normal statute of limitations to expire on the Offshore Project returns involving participation in abusive offshore arrangements, (e.g., Offshore Credit Card Project, Offshore Voluntary Compliance Initiative, Last Chance Compliance Initiative, Broker Initiative, or participants identified pursuant through a promoter investigation which involves tax avoidance/evasion tactics based on offshore arrangements) and the decision to allow the normal assessment statute to expire has been timely and properly documented, including approval by the Territory Manager. The documentation requirement to support the determination that special conditions exist will be satisfied by including the statement, "as a part of the OCCP (or LCCI, Broker Initiative, or promoter investigation involving tax avoidance/evasion tactics based on offshore arrangements), it has been determined that there is a likelihood in this case that one or a combination of the following conditions exists: (1) the tax return is false/fraudulent; (2) a sufficiently large omission of gross income to rely on the 6-year assessment statute; or, (3) failure to notify the Secretary of foreign transfers (section 6501(c)(8))" .

Generally, the YY ASED alpha code should only be used for tax returns filed by participants in abusive offshore arrangements where it has yet to be determined whether or not a specific statutory exception to the normal 3-year period of time for assessment of tax applies.

YY may also be used to alpha code the AIMS ASED when the normal 3-year period of time for assessment of tax has already expired before commencement of the examination of a return for a tax period which involves abusive offshore arrangements and it has yet to be determined whether or not a specific statutory exception to the normal 3-year period of time for assessment of tax applies.

If it is determined that some exception to the normal period for assessment applies, update the ASED to the applicable alpha code, for example, NN for § 6501(e), or OO for § 6501(c)(1) or UU for the § 6501(c)(8) exception.

The month (MM) and year (YYYY) entries accompanying the YY alpha code are the month and year the normal three-year statute expires.

If it is ultimately determined that there is no exception to the normal ASED, then replace the YY alpha coded ASED with the actual statute expiration date. If the ASED has in fact expired and an assessment can not be made, refer to IRM 25.6.14, Statute of Limitations – Barred Assessments/Barred Statute Cases (or other procedures required by your particular organizational component) for the procedures for preparing and submitting a Form 3999, Statute Expiration Report, or other form prescribed by your organization.

ZZ — Transfer of AIMS Database


Used to update the AIMS ASED temporarily to allow the transfer of the AIMS database. The terminal will not accept a transfer (Disposal Code 30) if the statute of limitations has expired or will expire within the times prescribed in IRM 4.4.33.3.1, Transfer Restrictions–Statute of Limitations, unless certain other conditions specified in IRM 4.4.33.3.1 are met.

Approval must be received from the receiving (gaining) unit before ZZ can be input. The receiving unit must change the AIMS ASED, which has been alpha coded ZZ, to the correct ASED upon receipt of the AIMS database. See IRM 4.4.33.3.1, Transfer Restrictions–Statute of Limitations.

Exhibit 25.6.23-4  (03-01-2008)
Tables 4.0 and 4.1, Returns With Statute Date Pending

  1. Data in AIMS Table 4.0 and AIMS Table 4.1.

    Column (1) : Name of Taxpayer
    Column (2) : Taxpayer Identification Number and Filing Status
    Column (3) : Master File Tax Code
    Column (4) : Tax Period
    Column (5) : Name Control/ Check Digit
    Column (6) : Activity Code
    Column (7) : Organization Code
    Column (8) : Statute Expiration Date
    Column (9) : Source Code/ Project Code/ Partnership Investor Control File (PICF) Code/ Organization Code Change/ Repeat Indicator
    Column (10) : Status Code (Table 4.1) and Date
    Column (11) : Comments

  2. Data in Table SC 4.0.

    Column (1) : Name of Taxpayer
    Column (2) : Taxpayer Identification Number and Filing Status
    Column (3) : Master File Tax Code
    Column (4) : Tax Period
    Column (5) : Name Control/ Check Digit
    Column (6) : Activity Code
    Column (7) : Status Date
    Column (8) : Statute Expiration Date
    Column (9) : Source Code/ Project Code/ PICF Code/ Repeat
    Column (10) : Comments

  3. Data in EP Table 4.0.

    Column (1) : Name of Taxpayer
    Column (2) : Taxpayer Identification Number
    Column (3) : Plan Number
    Column (4) : Tax Period
    Column (5) : Activity Code
    Column (6) : EGC
    Column (7) : Statute Expiration Date
       

  4. Data in EO Table 4.0.

    Column (1) : Name of Taxpayer
    Column (2) : Taxpayer Identification Number
    Column (3) : Master File Tax Code
    Column (4) : Report Number
    Column (5) : Tax Period
    Column (6) : Name Control/Check Digit
    Column (7) : Transaction Code 150 Date and File Year
    Column (8) : Statute Expiration Date
    Column (9) : Comments


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