25.15.6  Field Examination Procedures

25.15.6.1  (03-21-2008)
Overview: Purpose of Manual

  1. This section covers Small Business/Self-Employed (SB/SE) Operating Division Examination responsibilities in cases involving requests for relief from joint and several liability.

  2. Most claims filed including Collection Referrals, Collection Due Process, and Taxpayer Advocate Service (TAS) cases, will be worked at the Cincinnati Centralized Innocent Spouse Operation (CCISO) at the Covington Campus.

  3. CCISO will transfer cases to the Area offices meeting the following criteria:

    • Requests with open field examination Audit Information Management System (AIMS) controls

    • Requests involving open Taxpayer Equity and Fiscal Responsibility Act (TEFRA) issues

    • Requests made when there is a pending Offer in Compromise for Doubt as to Liability or Collection (jurisdiction code 2 or 3) for the non-requesting spouse (NRS). Jurisdiction code 1 cases will be sent if unable to retrieve the administrative file

    • Cases with other open litigation indicators

    • Taxpayer Advocate Service (TAS) cases where the taxpayer has requested a face-to-face examination

    • Cases requiring face-to-face interview to make a determination on the claim, due to unresolved inconsistencies in testimony, transfers of assets, or the overall complexity of the return

  4. Field Examination will consider and make a determination on the above claims and requests received during the examination of a joint return.

25.15.6.1.1  (03-21-2008)
Priority Cases

  1. All relief from joint and several liability cases are priority cases and will receive prompt consideration. TAS cases marked "Expedite" have the highest priority.

25.15.6.1.2  (03-21-2008)
Determining the Tax Year

  1. Identify all years shown on Form 8857 or specified in the requesting spouse’s (RS) correspondence. All years must be addressed.

  2. If the tax year is not indicated on the form, the correspondence must specifically address a particular year to be considered.

    If the RS: then:
    Indicates 2006 on Form 8857 and attaches a letter that says "you took my refund to pay the taxes for 2005" . Consider both 2006 and 2005. This is because 2006 is listed on the Form 8857 and 2005 is the year the RS really wants relief for since that is the year they owed taxes.
    Indicates 2005 on Form 8857 and attaches a letter that says "you took my 2006 refund" . Consider 2005 only since that is the year on the Form 8857 and 2006 would not qualify for relief.
    Leaves the tax year blank but attaches an IRS notice of an offset of a refund to a balance due on a previously filed joint return or states "you took my 2006 refund and applied it to my 2005 taxes" . Work the year indicated on the Integrated Data Retrieval System (IDRS) notice or correspondence for the year the overpayment was offset.

    Example:

    A 2006 overpayment was offset to the 2005 year; you only need to address 2005. The difference between this and the example in the box above is that the RS did not specify a year on Form 8857.

    Indicates 2002 - 2006 (research shows the years listed were all filed single with overpayments) and the RS states "you took my refunds every year for taxes that my ex-spouse owes" . Work only the years requested since the RS did not specify the years filed jointly.
  3. If the research shows that you could consider a request for relief for one year not being requested but you disallowed or non-qualified the claim, advise the RS you could consider the other year. Use Letter 3657A or Letter 3658.

    Note:

    Do not solicit a Form 8857 for a year that clearly will be disallowed or non-qualified.

    Example:

    The time to file Form 8857 has expired. See IRM 25.15.3.4.4(2) for a discussion of what constitutes the start date for the 2–year period for filing a claim.

  4. If a taxpayer only requests one year on Form 8857 but you could consider another year; build the year on Form 8857 and then advise RS via Letter 3659 to advise that there is another year the Service could consider.

    Note:

    Do not solicit a Form 8857 for a year that clearly will be disallowed or non-qualified.

    Example:

    The time to file Form 8857 has expired. See IRM 25.15.3.4.4(2) for a discussion of what constitutes the start date for the 2–year period for filing a claim.

  5. If there is no year indicated on Form 8857 and a year was not mentioned in correspondence, return the claim to the taxpayer with the appropriate paragraphs selected for Letter 3658. Explain that Form 8857 could not be processed since the tax year was omitted. Circle the received dates in red and remove all internal documents before the claim is returned to the taxpayer.

    1. Control ISTS on the latest joint year filed. If no joint account, control under the RS’s taxpayer identification number (TIN) for the latest year filed.

    2. Update ISTS and the Input Record to Stage 29 with Activity "UNPR" and then to Stage 30 with Activity "NOACCTP"

      Note:

      Do not input TC 971 AC 065.

25.15.6.1.3  (03-21-2008)
IDRS/ISTS/AIMS Requirements

  1. All requests for relief from joint and several liability MUST be established on AIMS using project code 0014. Follow steps below in paragraphs (2) through (9) upon receipt of claim. Time should be charged according to the table below

    732 - Innocent Spouse Review SETTS Non DET Activity Code used by Revenue Agents and Tax Auditor Reviewers located in Technical Services Tax and Examiner Coordinators. There are no restrictions on this code.
    Special Feature Code 6 SETTS DET Code to be used when an Innocent Spouse return has been secured. Time charged should be charged to the Activity Code of the return with "XX6" as the Second Segment Code.

  2. Date stamp Form 8857 when received.

  3. Determine if the request is processable (i.e. contains a valid signature, tax period(s) and TINs). If any of these are missing, circle the received date and return to the taxpayer explaining why you are returning it using Letter 3658.

  4. If the request is processable, the Area Innocent Spouse Coordinator (ISC), or other designated responsible person, will promptly establish the case on AIMS using Source Code 73, for requests filed with Examination, unless the year is already established on AIMS in another source code.

  5. Update the case to AIMS Project Code 0014 unless another project code already exists (0001-0099).

  6. Input TC 971 with Action Code (AC) 065 to the joint account to identify the account as an innocent spouse case as discussed in IRM 25.15.2.4.2.

  7. The system automatically generates the TC 130 on the NRS.

  8. Examination is required to input and update the Innocent Spouse Tracking System (ISTS). See IRM 25.15.14 for details.

  9. The function initially receiving the request for relief has the responsibility of notifying the ISC to establish the case on the ISTS. Examination must notify the ISC when the RAR is issued and what the determination is in order for ISTS to be updated.

25.15.6.1.3.1  (03-21-2008)
TC 570 on Current Year Overpayment Return

  1. If Form 8857 was attached to an original tax return showing an overpayment, Returns Submission Processing should have input a Computer Condition Code "3" on the current tax year to prevent the refund from offsetting to the year for which relief is being requested.

  2. If there is a TC 570 (caused by Computer Condition Code "3" ), and TC 971 AC 065 is posted on the year the relief is being requested, prepare Form 3177 and send to the local ISC to input TC 571 to reverse the TC 570 and allow the overpayment to refund.

  3. If there is no TC 971 AC 065 posted to the requested relief year, input one or follow local procedures to have the transaction code input. After the TC 971 AC 065 has posted, input TC 571.

25.15.6.1.4  (03-21-2008)
All Joint and Several Liability Cases Subject to Review

  1. All IRC 6015 relief from joint and several liability cases are subject to local streamline review before Case Processing closes the case. All cases should be clearly marked on Form 3198 or equivalent Special handling - Innocent Spouse case. Technical Services (TS) will ensure the appropriate closing instructions are included for Case Processing for all open exam cases. TS will issue the Preliminary and Final Determination letters and suspense for all post assessment claim cases.

  2. The cases will be reviewed and approved by local review staff. This is explained further in IRM 25.15.10 .

  3. The term local review is used to refer to any Area function performing the local review of joint and several liability determinations regardless of whether the duties are performed by TS or by another designated function.

25.15.6.2  (03-21-2008)
"Package Audit" Requirements

  1. During examination of all joint returns, the examiner MUST take the following actions:

    1. Verify and update the mailing address for each spouse following the required procedures and IDRS research. See IRM 25.15.6.2.1 for procedures.

    2. Explain joint and several liability and that relief may be available under IRC 6015. Ask the taxpayers if they wish to pursue the available relief. See IRM 25.15.6.2.2 for the procedures.

    3. Fully document the explanation and the taxpayer's decision of the taxpayer in the work papers.

    4. If the taxpayer(s) requests relief, the issue must be considered concurrently with other examination issues. The examiner must give full and objective consideration of the issue, addressing all relief provisions requested. The consideration and decision will be explained in the work papers and required reports. See IRM 25.15.6.2.3 for procedures.

    5. Send separate notices to the spouses as required by RRA 98 § 3201(d). Copies of notices will be made a part of the work papers and actions relating to the issuance of these notices will be recorded on the taxpayer contact sheet. Any returned undeliverable mail will also be made a part of the work papers. See IRM 25.15.6.2.4 for the procedures.

25.15.6.2.1  (03-21-2008)
Mailing Address Changes

  1. In every examination of a joint return, the examiner shall verify the last known mailing address for each spouse and document actions taken to verify the address. The examiner shall check for a change of address on IDRS and request each spouse confirm their mailing address at the initial contact or interview.

  2. If either spouse has a change of mailing address, the examiner shall update the Master File using the procedures contained in IRM 4.4.11, AIMS/Processing Handbook, Entity Changes. Do not change the mailing address of one spouse based solely on information obtained from the other spouse.

  3. If there is a different address for the secondary taxpayer, and there is no entity module established on the Master File (MF), create a dummy entity and enter the correct address. Contact the Area AIMS/ERCS Analyst for guidance on creating a dummy entity.

25.15.6.2.2  (03-21-2008)
Explain Available Relief

  1. The examiner MUST explain joint and several liability and relief available under IRC 6015 to both taxpayers or their representative(s).

  2. The examiner may provide the taxpayers or representative(s) with IRS Publication 971, Innocent Spouse Relief (And Separation of Liability and Equitable Relief) , which explains these provisions in detail. If requested, provide Form 8857, Request for Innocent Spouse Relief, and the accompanying instructions.

  3. See IRM 25.15.1.6 for more details on Form 8857. See IRM 25.15.2.2 regarding taxpayer inquiries related to relief from joint and several liability.

25.15.6.2.3  (03-21-2008)
Document Explanation

  1. The discussion of joint and several liability and available relief MUST be documented on the administrative lead sheet work paper 105–1.2, or initial taxpayer contact sheet 120–1 for revenue agents, or on Form 4700, Examination Workpaper, for tax auditors and tax compliance officers. If additional work papers are necessary, the administrative lead sheet or Form 4700 should contain an index reference to the supporting work papers. Document the case history record, Form 9984, Examining Officer’s Activity Record, the following:

    • Date of discussion,

    • Persons present at the discussion,

    • Actions taken to explain IRC 6015,

    • Taxpayers’ responses when asked whether they wished to pursue available relief.

25.15.6.2.4  (03-21-2008)
Separate Notices

  1. When the spouses have different mailing addresses, the examiner must send all correspondence separately to each spouse.

  2. Even if the spouses have the same mailing address, the examiner must send the notices required by law separately to each spouse along with items listed in IRM 4.10.1.6.8 , Examination of Returns. The examiner must copy the original notice and send the copy to the secondary taxpayer in a separate envelope addressed solely to the secondary taxpayer.

  3. If one or both of the spouses have not indicated a new mailing address, all notices/letters must be sent separately to the last known address.

  4. For notification requirements see IRM 25.15.1.9.

25.15.6.3  (03-21-2008)
General Procedures for All Innocent Spouse Claims

  1. Field examination may consider an innocent spouse issue as part of an open examination (pre-assessment case) or as a stand-alone claim (post-assessment case). Certain procedures, such as notifying the nonrequesting spouse (NRS) and giving full consideration to all possible relief provisions, must be followed in both situations.

  2. The examiner should pay special attention to statute of limitations implications.

    • In open examination cases, the assessment statute expiration date (ASED) is relevant

    • In claim cases, both the refund statute expiration date (RSED) and the collection statute expiration date (CSED) are relevant

25.15.6.3.1  (03-21-2008)
Notice and Participation by NRS

  1. A NRS is the spouse who did not request relief from joint and several liability. Contacting the NRS regarding the joint return does not constitute disclosure to a third party.

  2. The NRS must receive notice of, and an opportunity to participate in, any proceeding with respect to an innocent spouse election under IRC 6015.

    1. The NRS must be given 30 days to respond.

    2. The notice is not required to be sent certified mail.

    3. The notice must be sent to the NRS’s last known address.

    Note:

    See IRM 25.15.3.3 for additional information on contacting the NRS.

  3. Do not release one spouse’s personal information to the other spouse. For example, do not release either spouse’s new name, home address, telephone number, place of employment, etc., to the other spouse.

  4. Information with respect to the joint return account module, such as balance due, may be released. If in doubt as to what may or may not be disclosed, follow IRM 11.3.2, Disclosures to Persons with a Material Interest, established guidelines or check with the local disclosure officer.

  5. A copy of the administrative letter ( Letter 3284) notifying the NRS of the request for relief and inviting participation in the proceedings should be included in the case file, and Form 9984, Examining Officer’s Activity Record, should be notated with the date the letter was sent.

  6. The NRS will also be notified of the preliminary determination. Letter 3660 should be used on a post-assessment case. The determination will be included in the Revenue Agent Report (RAR) on a pre-assessment case.

  7. See Exhibit 25.15.3 and IRM 25.15.5 for letters to use when contacting the NRS.

25.15.6.3.1.1  (03-21-2008)
Rights of the NRS

  1. The NRS has the administrative right to request an Appeals conference to protest the determination to grant partial or full relief within 30 days of the notification letter or RAR. Notify the RS if the NRS files an appeal. Appeals will notify the RS of proposes to change the preliminary determination. The RS will be given an opportunity to participate in the appeal.

    Note:

    When you are working a case with a short statute, issue the statutory notice of deficiency without giving appeal rights to the NRS.

  2. A case allowing relief must be suspended for 45 days. This allows 30 days for the NRS to protest plus a 15 day mail period.

    Note:

    A preliminary determination letter will only be issued in a pre-assessment case if there is sufficient time remaining on the statute of limitations. A notice of deficiency including the innocent spouse determination may be issued in cases where the statute of limitations is imminent and no statute extension can be obtained; generally, when the statute of limitations will expire within 150 days and the taxpayers will not execute a consent to extend the statute of limitations period. See IRM 4.14.1.4 and IRM 4.10.18.11.11(3).

  3. The Appeals decision is final for the NRS. The NRS does not have the right to petition Tax Court. If the RS petitions the Tax Court, the NRS does have the right to intervene in the Tax Court proceeding.

  4. If the determination is a full denial, inform the NRS that he/she will be contacted if the RS protests the determination.

  5. If the NRS requests an Appeal conference, forward the entire case to Appeals. In partial allowance cases, an allocation worksheet must be included.

25.15.6.3.1.2  (03-21-2008)
Alleged Abuse

  1. When the RS alleges abuse by the NRS, or fears retaliation or harassment, special procedures should be followed. Contact the RS and advise the RS that the Service is required to contact the NRS and give the RS the option to proceed with or withdraw the claim. CCISO will send the notification letter to the NRS and hold the letter pending a response. Because CCISO is the centralized innocent spouse site, this added precaution will conceal the RS’s location.

    Note:

    This is not required for claims filed on the June 2007 revision.

  2. For cases originating in the field, if domestic abuse is alleged, the examiner should contact the RS to determine if it is necessary to take additional precautions to conceal the location of the RS. If necessary, coordinate, through the local Area Innocent Spouse Coordinator (ISC), and with CCISO so the letter is mailed and monitored from CCISO.

25.15.6.3.2  (03-21-2008)
Full and Objective Consideration of All Relief Provisions

  1. The examiner shall consider the facts and circumstances of the case, apply the innocent spouse law objectively, using the guidelines provided in IRM 25.15.3 and IRM 25.15.5 to determine whether any relief from joint and several liability applies.

  2. The examiner shall consider all possible relief provisions that might apply even if the RS requests relief under only one provision.

    Example:

    If the RS requests relief under IRC 6015(b), and this relief provision does not apply, the examiner shall consider the IRC 6015(c), election to allocate a deficiency, and the IRC 6015(f), equitable relief, provisions.

    Note:

    This is not an issue if the claim is filed on the June 2007 revision of Form 8857 as relief is requested generally under IRC 6015 on the form instead of specific subsections.

  3. IRC 6015(e) was amended in December 2006. For claims affected by the amendment the CSED will be suspended for many IRC 6015(f) only claims. See IRM 25.15.1.8 for a detailed discussion about the suspense of the CSED. In addition, the Form 8857 was revised in June 2007, If the RS used an old version of Form 8857 solely requested relief under IRC 6015(f) and the amendments do not apply, then follow the procedures in paragraphs 4 through 9 below. If any of the three conditions do not exist, consider relief under all subsection of IRC 6015 unless further advised by the RS.

  4. If the RS only requested IRC 6015(f), equitable relief, and it appears this relief would not apply, consider relief under IRC 6015(b) or IRC 6015(c). If it appears that (b) or (c) relief might apply, contact the RS and suggest that he/she file an affirmative election for (b) or (c). If the RS does not affirmatively elect (b) or (c), do not grant any relief under either (b) or (c). Generally relief under (f) would also not be appropriate because the RS has not met the burden of establishing that (b) or (c) are not available.

    Note:

    This is not an if the claim is filed on the June 2007 revision of Form 8857 because the CSED will be extended on all claims filed on the June 2007 revision.

  5. If the RS wants consideration under IRC 6015(b) or IRC 6015(c), the RS must amend the original claim and affirmatively elect IRC 6015(b) or IRC 6015(c). On post-assessment cases, the collection statute will not have been suspended from the date of the original claim unless the taxpayer elected (b) or (c).

  6. If the RS wants to amend the Form 8857 to include an election under IRC 6015(b) or IRC 6015(c) and the balance due amount is $5,000 or less, oral authorization may be accepted. Notate on Form 8857 in red ink the additional relief sought, the date of such request, and initial the change. Document the work papers appropriately. See IRM 25.15.3.2(5).

  7. If the RS chooses to amend the Form 8857 to include an affirmative election under IRC 6015(b) or IRC 6015(c) and the balance due is greater than $5,000, ask the RS to submit a written request for specific additional relief consideration, signed under penalties of perjury. Date stamp the document and staple it to the original Form 8857.

  8. The instructions in See IRM 25.15.6.1.2. apply only when adding additional code sections to the request. The instructions do not apply to adding additional years to the request. See IRM 25.15.6.1.2. for instructions for adding additional years to the request.

  9. Before reaching a determination, the examiner must fully develop the facts and analyze the evidence. This will include contacting both spouses.

25.15.6.4  (03-21-2008)
Issue Raised During Examination

  1. If the taxpayer raises the issue of relief from joint and several liability during an audit, secure a completed Form 8857, Request for Innocent Spouse Relief, or a similar statement containing the same information, signed under penalties of perjury.

  2. Date stamp Form 8857 when it is received.

  3. Determine if the request is processable. See IRM 25.15.6.1.3(3). paragraph (3) for details.

  4. If the Form 8857 claim includes years not currently under examination, establish those years on AIMS unless local procedures indicate the ISC or another function will establish additional years. See IRM 25.15.6.1.3 for details on codes to be input.

25.15.6.4.1  (03-21-2008)
Preparation of Exam Report for Cases Involving Income Tax Adjustments In Addition to Innocent Spouse Claim

  1. Form 4549, Income Tax Examination Changes Report, will be prepared in open examination cases involving income tax adjustments in addition to an innocent spouse issue.

  2. The examination report will include all examination issues and an explanation of the determination for the innocent spouse claim. This will constitute the agreement for the examination adjustments and the innocent spouse issue if signed.

  3. The report will include only the pre-assessment years open for examination.

  4. The Form 4549"other information" block for the RS must include the following statement, appropriately completed: Mr./Mrs. ___, TIN ___, requested Innocent Spouse relief under IRC 6015(b), IRC 6015(c) or IRC 6015(f) for the tax year(s) ending ___. Relief has been granted/denied. Mr./Mrs. ___is jointly and severally liable for $___ plus penalties and interest and individually liable for $___plus penalties and interest. See attached statement. The attached statement is the separate computation explained in (6) below.

  5. Years not under examination (post-assessment claims) for which an innocent spouse claim has been filed will require a separate case file and letters issued by Technical Services (TS).

  6. Prepare separate computations for joint assessment amounts and individual liabilities when a deficiency is allocated or apportioned under IRC 6015(b), IRC 6015(c) or IRC 6015(f). When partial relief is allowed, the taxpayer remains liable for a portion of the liability, i.e., the taxpayer had actual knowledge of two out of the three adjustments made. See the procedures for allocating a deficiency at IRM 25.15.3.7.2.

  7. If the case is considered unagreed, prepare unagreed write-up Form 886-A, including the innocent spouse issue, and prepare Letter 950. This will constitute the 30 day letter for the innocent spouse issue as well.

25.15.6.4.2  (09-01-2006)
Agreed or Partially Agreed — Open Examination

  1. In an agreed case where relief is being granted for the entire deficiency, an agreement is not necessary from the RS.

  2. Agreement to income tax adjustments may be secured on the following forms:

    • Form 4549, Income Tax Examination Changes Report

    • Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment — A statement similar to the statement required on Form 4549 should be included on this form. See IRM 25.15.6.3.2.

  3. If the case is partially agreed, use established guidelines for partial agreements.

  4. These cases are subject to local review and should be notated on the Form 3198 or equivalent when closed to Technical Services (TS) in Status 21. It is not necessary to seek approval prior to issuance of an RAR.

25.15.6.4.2.1  (03-21-2008)
Waivers

  1. IRC 6015(e)(5) allows a RS who agrees with the IRS determination under IRC 6015(b), IRC 6015(c), or IRC 6015(f) to waive, in writing, the collection restrictions imposed by IRC 6015(e)(1)(B). These waivers are only applicable to post-assessment cases. It is anticipated that the RS will not petition the Tax Court. However, Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases, is not considered a final determination letter. Thus, even if the RS signs the Form 870-IS, the RS may petition the Tax Court at any time after six months from filing the claim, unless the Service also issues a final determination letter. Nonetheless, once the IRS receives the signed Form 870-IS, the Service may resume collection against the RS. The suspension of the CSED stops 60 days after the IRS receives the signed Form 870-IS regardless of whether the RS files a petition in Tax Court, or whether a final determination letter has been mailed.

  2. Form 870-IS can be found at http://publish.no.irs.gov/catlg.html. The catalog number is 35518X. See Exhibit 25.15.3-26.

  3. Advise the RS of his/her right to complete the waiver and the actions that will be taken upon acceptance of the waiver. A Form 870-IS will be mailed to the RS upon request.

25.15.6.4.3  (03-21-2008)
Unagreed — Open Examination

  1. In an unagreed case where an IRC 6015 issue of relief from joint and several liability was raised during an audit and there are other adjustments, normal unagreed deficiency procedures should be followed.

  2. The examiner will issue the 30 day letter according to local procedures.

  3. If no response is received within the 30 days, forward the case to local review. Local review will then forward the case to the 90 day section for issuance of the 90 day letter. The 90 day letter will include an explanation of the innocent spouse issue. This will constitute notice of the final determination to the RS and NRS as well as the notice of deficiency.

  4. If a request for an Appeals conference is made within 30 days:

    1. The examiner shall prepare (if warranted) a rebuttal to the protest, and consider any new arguments raised in the protest. If additional information is provided concerning the relief from joint and several liability issue, the examiner shall take such information into consideration. If the initial determination of the innocent spouse claim changes due to additional information, the examiner shall issue a corrected/supplemental Revenue Agent Report allowing the taxpayer an additional 30 days to appeal the revised determination.

    2. Close the case to local review when the 30 days have expired. Use the appropriate examination disposal code found in Document 6209, IRS Processing Codes and Information.

    3. The case should be closed to TS with a disk in status 21. The case should be flagged, "Expedite — Innocent Spouse Case — Appeal Requested" .

    4. TS should update ISTS, input the necessary transactions and promptly forward to Appeals using established guidelines.

  5. If the only unagreed issue is the innocent spouse issue, treat the entire case as unagreed.

25.15.6.4.4  (03-21-2008)
Forwarding Post-Assessed Cases to Appeals

  1. One or both spouses may request an Appeals conference in response to the preliminary determination letter on all partial and full grants of relief. Only the RS can request an appeal of a denial of relief.

    1. If only one spouse requests an Appeals conference, the case will be sent to the Appeals office servicing that taxpayer.

    2. If both spouses request a conference, the case will be sent to the office servicing the RS. The appeals officer will follow procedures already in place to arrange a conference with the NRS.

25.15.6.4.5  (09-01-2003)
Closing Documents

  1. When a request for relief from joint and several liability is considered during an examination, additional information is required on forms used in closing a case. The following forms are required in all cases unless otherwise directed by local areas where the case is being worked:

    • Form 3198, Special Handling Notice, (or other special handling form used locally) should be annotated "IRC 6015 Relief Case."

    • Form 5344, Examination Closing. This form will be used to direct the AIMS closing and any adjustments to be made to the Master File (MFT 30 and 31) accounts and Non-Master File (NMF) accounts.

25.15.6.5  (03-21-2008)
Claims (Post-Assessment Cases)

  1. Field examination may be assigned post-assessment claims (claims for innocent spouse not related to an open audit year).

  2. These claims will be established on AIMS.

  3. The examiner will prepare work papers and Form 866-A consistent with all other exam cases. See IRM 25.15.6.8. for Case File Assembly.

  4. Forward for mandatory streamline review.

  5. Prepare closing documents (See IRM 25.15.6.4.5). The following Disposal Codes should be used for post-assessment cases.

    Determination Type of Case
      6015
    Allowed in Full 01
    Disallowed Fully or Partially:
    • Agreement or no response to 30 day letter.

    • Appealed on 30 day notice

    • Defaulted on final notice

    • Petitioned

     
    01
    07
    10
    11

  6. IRC 6015 applies to claims for relief from liabilities that arise after July 22, 1998 and to liabilities that arose prior to July 22, 1998 but remained unpaid on that date.

  7. Claims for refund can be made under IRC 6015(b), and IRC 6015(f), (imitations apply) see IRM 25.15.3.8.2.1.

25.15.6.5.1  (03-21-2008)
Claims for Relief under IRC 6015

  1. If the case contains a post-assessment IRC 6015(b), IRC 6015(c) or IRC 6015(f) claim except for cases noted in (2) below, a final determination letter must be issued, even if the case is agreed.

  2. A Waiver of Collection Restriction in Innocent Spouse and Separation of Liability Cases, Form 870-IS , has been developed for use in post-assessment IRC 6015(b), IRC 6015(c), or IRC 6015(f) cases. As noted in See IRM 25.15.6.4.2.1., Form 870-IS is not a final determination, but as the RS is agreeing to allow immediate collection, it is anticipated that very few, if any RS, would petition the Tax Court. See IRM 25.15.6.4.2.1.

25.15.6.5.2  (09-01-2006)
Other Claims for Refund

  1. If the taxpayer’s claim for refund includes IRC 6015 issues, follow normal claim procedures with the following exceptions:

    1. Include the statement in the "Other Information" section of Form 4549. See IRM 25.15.6.4.1(4).

    2. Send the case to TS for issuance of the letters and RAR.

    3. Because determination letters must be sent on all claim cases, TS will issue the normal claim letter including the RAR along with the Innocent Spouse Determination letter and suspense under normal procedures.

25.15.6.6  (03-21-2008)
Requests as Part of An Offer in Compromise

  1. A taxpayer may file for relief from joint and several liability by filing a Form 656, Offer in Compromise (OIC), on the basis of a doubt as to liability. The innocent spouse issue will be given the same consideration under IRC 6015, as non-OIC cases.

  2. A claim for relief from joint and several liability cannot be considered if a prior OIC was accepted for the same spouse for the same year. See Treas. Reg § 301.7122-1(e).

  3. Form 8857 is not required for an innocent spouse claim as long as the required information i.e., year and type of relief requested such as IRC 6015(b), IRC 6015(c) or IRC 6015(f) is included and the statement signed under penalties of perjury is included. If innocent spouse relief is the only issue of an OIC, it is more effective to treat it as a pure innocent spouse claim.

    1. Ask the taxpayer to make a written request withdrawing the OIC and asking that the consideration of the innocent spouse claim proceed.

    2. The taxpayer has the right to decline the examiner’s request and continue with his or her OIC.

    3. If the taxpayer submits the written request to withdraw the OIC, we will consider the innocent spouse claim to have been filed on the date the OIC was signed by the authorized Service employee.

    4. If the taxpayer submits the written request to withdraw the OIC, after OIC closing procedures are followed, the claim can proceed under normal claim procedures.

    5. IDRS should be updated to reflect the withdrawn OIC.

  4. If the request for innocent spouse relief is worked as an OIC, establish the OIC on AIMS.

  5. Input IDRS Transaction Codes associated with any other innocent spouse claim (See IRM 25.15.2.4.2 and IRM 25.15.2.4.3).

  6. Input and update "Innocent Spouse Tracking System" (See IRM 25.15.14.2).

  7. All IRC 6015 procedures must be followed (i.e. notification to NRS and final determination letters).

  8. Refer to IRM 4.18, Exam OIC Manual.

25.15.6.7  (03-21-2008)
Closing Forms If Relief Granted Non-AIMS Closings

  1. In some rare instances (i.e. NMF module or case is in status 90) a case may not be established on AIMS. In this case, a Memorandum and a Form 3870, Request for Adjustment, must be used.

  2. Memorandum — If a case is not established on AIMS, and relief is being granted to a RS for a prior assessment, the examiner must prepare a memorandum with the subject "Relief for MF Assessment." The memorandum should contain the following information:

    • Names and TINs of both spouses

    • Taxable year for which relief is granted

    • Date of assessment in question

    • Amount of relief granted

    • Appropriate IRC 6015 relief provision

    • The amount to be transferred against the NRS on Master File MFT 31 or Non-Master file

  3. Form 3870 , Request for Adjustment. A separate form for each year is required to process adjustments to accounts not on AIMS. The form should include the following comments and attachments:

    • A brief statement explaining the factual basis for granting relief and a reference to the Memorandum

    • A copy of an IDRS transcript (IMFOLT) with relevant postings highlighted; and

    • Copy of Form 8857

25.15.6.8  (03-21-2008)
Case file Assembly

  1. Attach to the outside of the case file (in descending order):

    1. Case Routing Form (if applicable)

    2. Innocent Spouse Cover Sheet (if applicable)

    3. Form 895 — Notice of Stature Expiration

    4. Form 3198 — Special Handling Notice

    .

  2. Attached to the inside left of the case file (in descending order):

    1. AMDISA

    2. ISTS Input Sheet (one per year)

  3. Loose inside - right side (in descending order):

    1. Form 5344

    2. Form 3870/ Form 3465/Form 12810/ Form 2363

    3. Current TXMOD or NMF transcript(s)

    4. Innocent Spouse Determination Letters

    5. Form 8857 and Attachments

    6. Original Tax Return(s) or Form 2275 showing Document destroyed and administrative file

    7. Form 4318/Leadsheet

    8. Work papers including:
      Form 9984
      Work papers/ Form 886- A write-up
      Allocation worksheet (if applicable)
      Copy of divorce decree & other court documents
      Form 12510
      Form 12508
      Information regarding property transfers - from NRS to RS.

  4. Memorandum from Collection Group manager requesting Examination Assistance.

25.15.6.9  (09-01-2006)
Technical Services(TS)

  1. All requests for relief from joint and several liability worked in Field Examination, regardless of determination, will be sent to TS in status 21 to streamline review before the case is closed.

  2. Field Examination will issue any required examination reports for all open examination cases before they are sent to TS.

  3. For open examination cases, the examiner will retain the case for the 30 day period and consider additional information submitted by the taxpayer, if applicable. At the end of the 30 day waiting period, the case will be forwarded to TS for preparation of the Statutory Notice of Deficiency. For all post assessment cases, the examiner closes the case to TS for issuance of determination letters.

  4. If the taxpayer has requested an Appeals conference, TS will update ISTS, input the appropriate closing codes and send to Appeals.

  5. TS will review all requests for relief to determine whether the procedural provisions have been completed and prepare closing instructions for Centralized Case Processing. See IRM 25.15.10 for streamline review procedures.

25.15.6.9.1  (09-01-2003)
Case Returned to Group

  1. The reviewer will return a case to the group if there is an obvious error and relief should have been granted.

  2. The case will also be returned if account problems have not been resolved. The reviewer should monitor the required return of cases from the group within 14 days.

25.15.6.9.2  (03-21-2008)
Case Approved

  1. The reviewer will take the following actions on reviewed and approved cases:

    1. Pre–Assessment Cases — Reviewer will ensure the necessary closing instructions for all agreed cases are correct and close to Centralized Case Processing. If the case is unagreed, the case will be sent to the 90 day clerk for issuance of the Statutory Notice of Deficiency. If the case was appealed from the 30 day letter, the reviewer must make the necessary ISTS updates, input the appropriate closing codes and then forward to Appeals. The reviewer is responsible for making all ISTS updates, not just the ones pertaining to Appeals.

    2. Post-Assessment Cases — Reviewer will prepare and issue the Preliminary or Final Determination Letters as necessary. Reviewer will retain the case for the 30/90 day period, send to Appeals, or Centralized Case Processing as necessary. The reviewer will also make all necessary updates to ISTS.

25.15.6.10  (09-01-2006)
Account Problems

  1. Before any case is forwarded for review, all account problems must be resolved. Account problems are problems with the account not related to the request for relief.

  2. The function with jurisdiction over the case has the responsibility to resolve any account problems that affect the determination of relief by Examination. Field Examination is not to resolve the account problems of cases under the jurisdiction of another function unless local agreements are reached with the functions. An example of a case under another functional jurisdiction is an IDRS status 26 case referred by Collection. However, Examination shall notify the responsible function of account problems related to the referral for prompt resolution of the problems.

25.15.6.11  (03-21-2008)
Innocent Spouse Coordinator (ISC)

  1. The ISC is responsible for:

    1. Coordinating the building of case files of the incoming innocent spouse claims and assigning them to the appropriate groups;

    2. Remaining current on Innocent Spouse tax law and procedures, ensuring the IRC 6015 provisions, related regulations, and policies are applied consistently within the Area;

    3. Keeping the Innocent Spouse reviewers, Field Compliance personnel, and Appeals personnel up to date on the latest changes in the law, interpretations, and procedures for reviewing the closing of cases. This can be accomplished by conducting a monthly meeting with the reviewers;

    4. Providing tax law training and procedural updates to all Field personnel (Examination and Collection);

    5. Working with the AIMS/ERCS Analyst to ensure that all Innocent Spouse claims input on AIMS/ERCS are established. If there are problems, resolve with the AIMS/ERCS Analyst;

    6. Assisting the Lead Reviewer in TS with guidance;

    7. Assisting Taxpayer Education and Communication (TEC) and Stakeholder Partnerships, Education and Communication (SPEC) with outreach programs;

    8. Validating the ISTS Inventory Validation Listings (IVLs);

    9. Preparing program status reports as requested by management, alerting management of any areas of concern;

    10. Coordinating with TS to ensure the analysis of data from Examination Quality Measurement System (EQMS) reviews is timely disseminated and that actions are taken to ensure training, and other guidance is provided to address quality issues;

    11. Maintaining/updating existing Innocent Spouse desk procedures for Planning and Special Programs (PSP); and

    12. Coordinating with the CCISO on transfer of cases to and from the Area. Resolve any discrepancies.


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