25.15.2  General Procedures/Employees With Taxpayer Contact

Manual Transmittal

July 29, 2014

Purpose

(1) This transmits revised IRM 25.15.2, Relief from Joint and Several Liability, General Procedures/Employees with Taxpayer Contact.

Material Changes

(1) Editorial changes have been made throughout this IRM.

(2) IRM 25.15.2.2(1) updated to state the reference is for employees in CCISO.

(3) IRM 25.15.2.2.1(1)b changed "will" to "may" be entitled to a refund.

(4) IRM 25.15.2.3 removed stop number from PO Box address.

(5) IRM 25.15.2.4 corrected address to CSPC instead of PO Box.

(6) IRM 25.15.2.4(2) added instruction for Area Office employees to forward form 8857 to their coordinator.

(7) IRM 25.15.2.4.1 title updated to Returns Received in Submission Processing Areas.

(8) IRM 25.15.2.4.1 corrected address to CSPC instead of PO Box.

(9) IRM 25.15.2.4.2(1) added sentence stating that the codes are input on Master File Tax (MFT) 30, MFT 31 and Non-Master File (NMF).

(10) IRM 25.15.2.4.2(2) added exception to have area office exam employees input TC 971 AC 065.

(11) IRM 25.15.2.4.2(4) Note has been removed. The information is obsolete.

(12) IPU 13U1007 issued 05-30-2013 IRM 25.15.2.4.2(6) Updated IRM reference.

(13) IRM 25.15.2.4.2(1) added note with information from previous (10).

(14) IRM 25.15.2.4.2(10) removed and added to note under (1).

(15) IRM 25.15.2.4.2(11) removed instruction for Non-Master File and added information into (1).

(16) IRM 25.15.2.4.3(1) added sentence to connect information with (2).

Effect on Other Documents

This material supersedes IRM 25.15.2, General Procedures/Employees With Taxpayer Contact, dated March 5, 2013. The following IRM Procedural Update (IPU) 13U1007 (dated 05/30/2013) has been incorporated into this IRM.

Audience

Employees in all business operating divisions who have contact with taxpayers addressing an innocent spouse issue

Effective Date

(07-29-2014)


Steve C. Klingel
Director, Reporting Compliance
Wage and Investment Division

25.15.2.1  (07-17-2009)
Purpose

  1. The purpose of this IRM is to provide general guidance for employees who have taxpayer contact.

  2. If during a taxpayer contact it appears a hardship situation may exist, complete Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and refer the taxpayer to the Taxpayer Advocate Service (TAS). Refer to IRM 13.1.7.2, TAS Case Criteria and IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, for more information.

25.15.2.2  (07-29-2014)
Taxpayer Inquiries

  1. If a taxpayer inquires about the relief from joint and several liability provisions, the employees in the Cincinnati Centralized Innocent Spouse Operation (CCISO) should follow the instructions in IRM 25.15.16, Telephone Contacts. Field employees will refer to IRM 25.15.1, Introduction, for additional information.

  2. Refer taxpayers to the Taxpayer Advocate Service (TAS) when the contact meets TAS criteria and you can't resolve the taxpayer's issue the same day.

    1. See IRM 21.3.18, Taxpayer Advocate Service (TAS) Guidelines for additional information on how and when to refer a taxpayer for additional assistance.

    2. See IRM 13.1.7.4, Same Day Resolution by Operations for information on same day resolution.

25.15.2.2.1  (07-29-2014)
Installment Agreements in Effect

  1. If the taxpayer elects to file a Form 8857 and has an installment agreement in effect, he or she must decide whether or not to continue making payments while the request for relief is considered. Inform the taxpayer of the following consequences:

    1. If the requesting spouse (RS) does not continue to make payments, the taxpayer may be in default of the installment agreement, and the Service may terminate it. If the request for relief is denied and the case has become final, the Service may resort to its normal collection procedures in order to collect the liability in full.

    2. If the RS continues to make installment payments and relief is granted under IRC 6015(b) or IRC 6015(f), the taxpayer may be entitled to a refund of these payments.

    3. If the RS continues to make payments and the request for relief is granted under IRC 6015(c), the taxpayer will not be entitled to a refund. IRC 6015(g)(3) prohibits credits or refunds for an election under IRC 6015(c).

  2. The RS or the non-requesting spouse (NRS) may wish to renegotiate an installment agreement (e.g., in cases of hardship or changed financial condition).

25.15.2.3  (07-29-2014)
Location for Taxpayer to File Form 8857

  1. The employee should instruct the taxpayer to mail the completed and signed Form 8857 to the Cincinnati Centralized Innocent Spouse Operation (CCISO).

    1. For USPS mail to:
      IRS
      PO Box 120053
      Covington, KY 41012

    2. For private delivery service mail to:
      IRS
      201 West Rivercenter Blvd
      Stop 840 -F
      Covington, KY 41011

    3. or, fax the completed and signed Form 8857 to:
      (855) 233–8558

  2. Inform the taxpayer he or she will be contacted between 30-45 days of receipt of the form.

25.15.2.4  (07-29-2014)
Direct Receipt of Form 8857

  1. When an employee receives a completed Form 8857 (or similar statement) directly from the taxpayer, the employee should:

    1. Date stamp the receipt date on the innocent spouse request (Form 8857 or its equivalent).

    2. The Form 8857 must be received in CCISO within 10 days of receipt. Immediately mail the form to:
      Cincinnati Submission Processing Center (CSPC)
      201 West Rivercenter Blvd
      Stop 840-F
      Covington, KY 41011
      Attn: CCISO

  2. Area Office employees in Compliance receiving a claim on an open examination should submit the Form 8857 to their Area Innocent Spouse Coordinator.

25.15.2.4.1  (07-29-2014)
Returns Received in Submission Processing Areas

  1. If the Form 8857 (or a similar statement) is attached to an original or amended tax return:

    1. Date stamp Form 8857 (or similar statement).

    2. Detach the request and immediately forward it to:
      Cincinnati Submission Processing Center (CSPC)
      201 W. Rivercenter Blvd
      Covington, KY 41011
      Attn: CCISO
      Stop 840F

    3. Enter computer condition code (CCC) 3 on an original return showing an overpayment and forward the return for processing.

25.15.2.4.2  (07-29-2014)
Innocent Spouse Indicator Transaction Code (TC) 971/972

  1. Upon filing of a processable innocent spouse relief request, IRS is prohibited from taking certain collection action against the RS. IRS will stop all potential collection action by inputting TC 971 action code (AC) 065. These codes are input on Master File Tax (MFT) 30, MFT 31 and Non-Master File (NMF). The input of TC 971 AC 065 sets an L- freeze which prohibits offsets and prevents notices from being issued except for CP 521, Monthly Reminder on Installment Agreements and CP 71, Annual Reminder Notice of Balance Due. Form 3177Notice of Action for Entry on Master File should be prepared to request input of TC 971 AC 065.

    1. The input of TC 971 AC 065 triggers the generation of the innocent spouse freeze code L–.

    2. The TC 971 AC 065 will identify the spouse filing the request for relief.

    3. The TC 971 AC 065 will track the possible suspension of the collection statute expiration date (CSED).

    4. At any point, there may be up to 2 open TC 971 AC 065 on an account module.

    5. The TC 971 AC 065 must be reversed at the completion of the case with a TC 972 AC 065.

    6. If there are two or more TC 971 AC 065 with the same taxpayer identification number (TIN), do not try to reverse with TC 972 AC 065 until you have completed the case. If you input a TC 972 AC 065 it will release all TC 971 AC 065 and release the L- freeze code.

    Note:

    If the employee does not have the capability of inputting these transaction codes, contact the appropriate area or campus IRC 6015 or Innocent Spouse Coordinator requesting the coordinator input the codes.

  2. TC 971 AC 065 is not required if there is no need to stop collection activity (e.g., no balance due or pending assessment when claim is received). This can occur when the:

    1. tax is full paid when the claim is filed;

    2. claim is actually an injured spouse claim;

    3. claim is unprocessable; or

    4. claim is premature and there is no deficiency or underpayment.

      Exception:

      A TC 971 AC 065 is required to be entered if the claim is being worked by the exam field office and a TC 420 is present.

    Caution:

    If you are refunding a payment to the RS which will create a balance due and the claim is still pending, you need to input the TC 971 AC 065.

  3. TC 971 AC 065 requires an additional data entry on Form 3177, Notice of Action for Entry on Master File to identify the spouse filing the request for relief.

    1. If the primary taxpayer is the RS, leave the TIN field blank.

    2. If the secondary taxpayer is the RS, enter the TIN of the secondary spouse in the TIN field.

  4. An additional data entry (date Form 8857 was filed) is required for the TC 971 AC 065 and TC 972 AC 065 codes to track the CSED. See IRM 25.15.1.8, Statute of Limitations on Collection, relating to information on extending the CSED to determine the appropriate data entry required.

  5. When inputting TC 971 AC 065 enter the date the Form 8857 was filed with IRS. This date is the beginning of the CSED suspension date if the collection statute is suspended.

  6. When the final determination on the request for relief is made and the case is completed (e.g., final determination issued but no Tax Court petition is filed), input TC 972 AC 065. In addition, input TC 972 AC 065 when a signed Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases, is received. The TC 972 AC 065 may require an entry for the TIN field, see (3) above. The TC 972 AC 065 releases the L- freeze, which allows the IRS to resume collection against the RS. See IRM 25.15.9.1.20(5), Final Purge/Transfer Complete for additional information.

  7. When inputting TC 972 AC 065 for disallowed and partially allowed IRC 6015(b), IRC 6015(c), or applicable IRC 6015(f) cases (see IRM 25.15.1.8, Statute of Limitations on Collection), enter one of the following dates for purposes of stopping the suspension of the CSED:

    1. The date the IRS receives a signed Form 870-IS for the RS and it is signed on behalf of the Commissioner, plus 60 days;

    2. If no Tax Court petition was filed, the date 90 days from the mailing date of the final determination letter, plus 60 days; or

    3. If a Tax Court petition was filed, the date the Tax Court decision becomes final, plus 60 days.

      Note:

      There is an exception to the general rule that the collection statute is suspended until the Tax Court decision becomes final. If the RS appeals the Tax Court decision and does not post an appeal bond, the Service is no longer prohibited from resuming collection. Thus, the suspension of the CSED will end 60 days after the filing of a notice of appeal without an appeal bond. Although the Service may resume collection, a policy decision has been made not to collect in these circumstances unless the collection statute is about to expire or collection is in jeopardy. See IRC 7485. Accordingly, TC 972 AC 065 should not be input. Because there is no way to indicate on a tax module that collection should not occur while letting the CSED run, Chief Counsel will inform the Headquarters Innocent Spouse policy analyst of cases where the RS appealed the Tax Court. The policy analyst will monitor the case to ensure the collection statute does not expire or that the collection of the liability becomes in jeopardy.

  8. When inputting TC 972 AC 065 for cases where the CSED was not extended for the innocent spouse relief request, enter the date the Form 8857 was filed with IRS. This date will be the same date as the date used for TC 971 AC 065 entry, indicating no extension of the CSED.

  9. When inputting TC 972 AC 065 on claims withdrawn, add 60 days from the date the request to withdraw was received.

25.15.2.4.3  (07-29-2014)
TC 130 Entire Account Frozen From Refunding

  1. When a TC 971 AC 065 is input, it creates an L– freeze which prevents credit offsets into the module and could allow "erroneous" refunds to the NRS. To prevent refunds from being issued erroneously instead of being offset, the TC 971 AC 065 will generate a TC 130, see (2) below.

  2. When the TC 971 AC 065 is input, the system automatically generates the TC 130 (document locator number (DLN) will start with "17" ) on the NRS in order to prevent an "erroneous" refund. The TC 130 identifies the NRS’s TIN and tax year for which any overpayment should be applied. A CP 44, Credit Available for Application to Non-IMF Account generates anytime an overpayment is available from the NRS’s account. The Compliance campus will resolve the CP 44 issue. The RS’s TIN is not listed with the TC 130, so any refund due to the RS will be allowed if the return is filed under the RS’s own TIN.

    Caution:

    A TC 130 will not post if there is no balance due at the time TC 971 AC 065 post. If Automated Underreporter (AUR)/Exam assesses tax on the MFT 30 you will have to manually input a TC 130.

  3. There are situations where both spouses request relief. In this scenario, a TC 131 should be input to reverse the automatic TC 130. This will prevent CP 44 from generating unnecessarily.

  4. ENMOD shows TC 130 followed by the Compliance campus designation where the TC 130 was input and a cross-reference TIN where any credits, should be applied. Blocking is as follows:

    • 000 — Master File Assessment

    • 001 — Offer in Compromise

    • 002 — NMF (DLN of TC 130 will show 2 in the ninth position)

    • 004 — Taxpayer request

  5. When the innocent spouse claim is resolved and it is the only issue, input TC 131 to reverse the TC 130. TC 131 reverses all TCs 130.

    Caution:

    If there are two TC 130, research to ensure you do not reverse the TC 130 if there is another reason for the TC 130.

    Example:

    There are two TC 130 on ENMOD. One TC 130 is because an innocent spouse claim was filed as indicated by the DLN starting with a "17" . The other TC 130 is because there was an NMF (identified by a "2" in the ninth position of the DLN) account. All NMF accounts require a TC 130. In this case, do not input a TC 131.

25.15.2.5  (09-01-2006)
Determinations on Requests for Relief

  1. Determinations on all requests for relief assigned to area employees, including Employee Plans and Exempt Organization function employees, will be made by the Compliance function.

  2. Whenever possible, the same examiner will make the determination for all years for which relief is requested on Form 8857.

25.15.2.6  (07-17-2009)
Requesting Returns through IDRS

  1. Use the Integrated Data Retrieval System (IDRS) command code "ESTAB," with modifier "V" to expedite the request for an original return. For additional information on this command code, see Document 6209, IRS Processing Codes and Information.


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