25.15.7  Compliance Campus Functions (Cont. 2)

25.15.7.10 
Cases Assigned to Financial Technicians (FT) for Full Scope Determinations

25.15.7.10.7  (02-19-2013)
Partial Relief

  1. Refer to IRM 25.15.3, Technical Provisions of IRC 6015, and IRM 25.15.5, Relief from Community Property Laws/Community Property States.

  2. Partial relief basically means the RS is not entitled to full relief of the entire balance due without regard to a request for refund.

    Note:

    If the RS is entitled to full relief of the balance due, but will not receive the full refund requested, it is now considered a fully allowed request. The RS should be contacted if in doubt as to the relief requested. The discussion with the RS should be documented on AMS. Keep a copy of the AMS print(s) in the case file. If the taxpayer does not specifically request a payment be refunded, do not consider it for refund. Examples of partial allowances are:

    Example:

    RS requests relief of a joint liability in the amount of $5,000 (plus penalties and interest) due to an underpayment. $700 of the underpayment is attributable to the RS because they did not have sufficient federal income tax withheld from their wages. A review of the facts and circumstances show it would be inequitable to hold the RS responsible for the $4,300 of underpayment attributable to the NRS. Only partial relief would be granted because of the $700 underpayment attributable to the RS.

    Example:

    RS requests relief of a joint liability in the amount of $12,000 (plus penalties and interest) due to understatement. The NRS failed to report $50,000 of income on the return and the entire understatement is attributable to the NRS. It is determined the RS knew of and significantly benefited from $20,000 of the NRS's unreported income. If the RS meets the qualifications for relief, it would be appropriate to grant partial relief of the tax owed on the $30,000 of income the RS did not know about when the return was filed. This would be considered partial relief because of knowledge.

  3. Prepare an allocation worksheet.

  4. Follow IRM 25.15.7.10.9, Taxpayer Notification/Suspense Procedures.

  5. If the account is not mirrored, refer to IRM 25.15.9.1.6, Partially Allowed Requests Full Scope Examiners, for closing instructions.

  6. If the account is mirrored refer to IRM 25.15.15.3.2, Relief Allowed in Full and Refund Due. Refer to IRM 25.15.15.3.3, Partial Relief Allowed and No Refund Due, and IRM 25.15.15.3.4, Partial Relief Allowed with Refund or Balance Due, for closing instructions.

25.15.7.10.7.1  (02-25-2011)
De Minimis Tax Liability

  1. Refer to IRM 25.15.3.6.6, Partial Relief Available, for additional information on de minimis tax liability.

25.15.7.10.8  (02-19-2013)
Relief Disallowed

  1. Claims are fully disallowed when the RS does not meet the qualifications for granting relief. Refer to the Technical Provisions in IRM 25.15.3, Technical Provisions of IRC 6015, and IRM 25.15.5, Relief from Community Property Laws/Community Property States.

  2. Follow Taxpayer Notification/Suspense procedures, IRM 25.15.7.10.9, Taxpayer Notification/Suspense Procedures.

  3. Refer to IRM 25.15.15.3.5, Relief Disallowed, for closing instructions on mirrored modules. Refer to IRM 25.15.9.1.5.1, Denied under IRC 6015(b), (c), or (f), for closing instructions on non-mirrored modules.

25.15.7.10.9  (02-19-2013)
Taxpayer Notification/Suspense Procedures

  1. Issue preliminary determination letter to RS, NRS, and current POA, if applicable. Check CFINK for valid POA.

    Caution:

    If the RS indicated they were a victim of spousal abuse or domestic violence, and the claim is being fully or partially allowed, two attempts must be made to contact and notify the RS of the preliminary determination before issuing the preliminary determination to the NRS. You must attempt to reach the RS by telephone. Attempts to reach the RS by telephone and conversations with the RS must be documented on AMS. Place a copy of the AMS print(s) in the case file. Either during a telephone conversation or in the preliminary determination letter; explain the preliminary determination to the RS, inform the RS we are required to inform the NRS of the preliminary determination, and provide referral information to the RS for the National Domestic Violence Hotline unless they indicate they do not want it. If the RS is in immediate danger, refer the RS to 911. If the RS is concerned for their safety, but not in immediate danger, refer the RS to the National Domestic Violence Hotline at 1–800–799–SAFE (7233), 1–800–787–3224 for TTY or (206) 787–3224, which is a video phone for deaf callers only.

    Note:

    When the RS indicates that they are a victim of spousal abuse or domestic violence, a victim of domestic violence (VODV) indicator must be input on the account. See IRM 25.15.16.4.3Victim of Domestic Violence for additional information.

    1. If you are able to reach the RS by telephone, issue a preliminary determination letter to the RS and NRS the same day.

    2. If you are unable to reach the RS by telephone, issue a preliminary determination letter to the RS. Wait one week before issuing the preliminary determination letter to the NRS.

  2. On fully allowed claims the RS will receive appeal rights only if they will not receive the full refund requested. On fully allowed claims the NRS will receive appeal rights. The full allowance preliminary determination letter for the RS is Letter 4986C. The full allowance preliminary determination letter for the NRS is Letter 4983C. If closing action(s) will be taken within the team, document "Keep in Team" on the ISTSR Input Record.

    Exception:

    If there is a barred refund and the account is full paid, do not issue a preliminary determination letter to the NRS. The NRS should only receive a final determination letter.

    Note:

    It is not necessary to provide appeal rights to the NRS when there is nothing for the NRS to appeal. Such as when the:
    Account is fully paid and relief has been allowed in full under IRC 6015(c),
    NRS's debt was discharged in bankruptcy,
    NRS's debt was cleared because of an OIC, or
    NRS's CSED has expired.

    Send the final letters and close the case. The full allowance final determination letter for the RS is Letter 5086C. The final determination letter for the NRS is Letter 3323C. If the only issue when allowing full relief is a barred refund, send the preliminary determination letter to the RS as normal, but do not issue a preliminary determination letter to the NRS. The NRS needs only a final letter.

  3. On partially allowed claims both the RS and NRS receive appeal rights. The partial allowance preliminary determination letter for the RS is Letter 4987C. The partial allowance preliminary determination letter for the NRS is Letter 4984C. If closing action(s) will be taken within the team, document "Keep in Team" on the ISTSR Input Record.

  4. On fully disallowed claims the RS will receive appeal rights, but the NRS will not. The full disallowance preliminary determination letter for the RS is Letter 4988C. The full disallowance preliminary determination letter for the NRS is Letter 4985C.

  5. On fully disallowed and partially allowed claims, the RS may request a Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases.

    Exception:

    Form 870–IS cannot be sent on an open AUR/CCEO case.

    Note:

    If Form 870-IS is received, follow IRM 25.15.3.10, Waivers.

  6. Update ISTS and the ISTSR Input Record as follows:

    1. Update ISTS to Stage 11 with appropriate determination and code section for fully allowed requests. Partially allowed and disallowed requests also require input of a reason code. See IRM 25.15.14.4.1.11, Stage 11 - Preliminary Determination Letter Issued.

      Note:

      On allowed and partially allowed cases where the RS indicated they were a victim of spousal abuse or domestic violence, the claim will remain assigned to the employee that made the preliminary determination until the NRS preliminary determination letter is issued. The ending suspense date should be 45 days from the date the NRS preliminary determination letter is issued.

      Caution:

      If the RS indicated they were the victim of spousal abuse or domestic violence, do not update ISTS to Stage 11 until the NRS preliminary determination letter is issued.

      Note:

      When the RS indicates that they are a victim of spousal abuse or domestic violence, a victim of domestic violence (VODV) indicator must be input on the account. See IRM 25.15.16.4.3Victim of Domestic Violence for additional information.

    2. When ISTS is updated to Stage 11, input a comment entry of "30DYMMDDYY" Use the ending suspense date, which is 45 days from the date the preliminary determination letter is issued to the NRS.

    3. When ISTS is updated to Stage 11, update TXMOD control to 02XXX00030, with activity "30DYMMDDYY" . Use the ending suspense date.

    4. After the Stage 11 ending suspense date, input Stage 27 if necessary, with the appropriate tax year(s).

      Note:

      Cases should only be updated to Stage 27 if a refund will be issued or the account needs to be adjusted. If the processing of the determination can be accomplished by input of a Transaction Code (TC) 971 Action Code (AC) 131, or the account is full paid and no refund will be issued, then Stage 27 should not be notated.

  7. Document Activity Record and notate time on case.

  8. Notate purge date on folder and suspend the case for 45 days.

  9. If claim is allowed or partially allowed, notate closing instructions in the Clerical Instructions section of the ISTSR Input Record.

  10. If a refund is due or the account needs to be adjusted, complete Form 3465, Adjustment Request.

  11. If a refund is due, put case in appropriate folder.

  12. See IRM 25.15.7.5.8.1, Liens, if there is a TC 582 on the account and the claim is being fully or partially allowed.

25.15.7.10.10  (02-19-2013)
Rework

  1. The definition of a "rework" is any of the three following situations exist and a final determination letter has not been issued:

    • When it is necessary to evaluate a claim previously non-qualified in error, follow IRM 25.15.7.10.10.1, Claim Previously Non-Qualified in Error, for case building instructions.

    • When the preliminary determination letter has been issued and either taxpayer sends in additional information that changes the outcome, resulting in a revised preliminary determination being issued.

    • When it is necessary to consider payment(s) for refund not originally requested.

      Note:

      When issuing a second preliminary determination letter ensure both the RS and NRS are given their appeal rights as required for the revised preliminary determination.

      Example:

      Claim was previously denied but now has been allowed, give the NRS their appeal rights. Also give the RS appeal rights if the request is fully allowed, but the RS is not receiving the full refund requested.

  2. Update IDRS control base with activity code "Rework" and the original received date of the innocent spouse claim.

  3. Update ISTS and the ISTSR Input Record to Stage 10 with correspondence received date. Work the case within 30 calendar days of received date. If unable to work the case within 30 calendar days because you are waiting on additional information, issue an interim letter.

  4. Consider all new information submitted. See IRM 25.15.7.10.6, Allowed Requests, IRM 25.15.7.10.7, Partial Relief, and IRM 25.15.7.10.8, Relief Disallowed, for the procedures to follow as to whether it is now a fully allowed, partially allowed or disallowed claim. For a claim non-qualified in error that requires case building, IRM 25.15.7.10.10.1, Claim Previously Non-Qualified in Error.

  5. If full paid by the NRS, follow IRM 25.15.7.10.13.2, Full Paid Solely by the NRS Since Receipt of Form 8857.

25.15.7.10.10.1  (02-19-2013)
Claim Previously Non-Qualified in Error

  1. If a claim was previously non-qualified in error, it must be built for consideration.

    Exception:

    Because this claim was previously non-qualified, a final determination letter was not issued. This is considered a rework. Open the existing ISTS record by input of Stage 10. Follow IRM 25.15.7.6, Case Building - General, for case building instructions; however, do not duplicate ISTS stages previously input. In Letter 3659C acknowledge and apologize for the error.

  2. Once a preliminary determination is made, ISTS will be updated to Stage 25 with activity of IRSE. Stage 25 must be one day prior to the Stage 11 date. Stage 25 should not be input until the preliminary determination letter is issued. Follow IRM 25.15.7.10.6, Allowed Requests, for allowed claims. Follow IRM 25.15.7.10.7, Partial Relief, for partially allowed claims. Follow IRM 25.15.7.10.8, Relief Disallowed, for disallowed claims.

25.15.7.10.10.2  (02-19-2013)
Preliminary Determination Can Now Be Changed

  1. Notate Activity Record, "Received additional information, changing determination to A6015(X), P6015(X), or D6015(X)" with the appropriate reason code.

    Note:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

  2. Prepare amended work papers.

  3. Update IDRS control base to 02XXX00030 with the activity of the new purge date.

  4. Update ISTS and the ISTSR Input Record to Stage 25 with the correct activity code and then Stage 11. Enter the new 30 day purge date.

    Note:

    Stage 25 date must be one day prior to the new Stage 11 date.

  5. Follow IRM 25.15.7.10.6, Allowed Requests, if now fully allowed. Follow IRM 25.15.7.10.7, Partial Relief, if now partially allowed. Follow IRM 25.15.7.10.8, Relief Disallowed, if now disallowed.

    Exception:

    Send revised preliminary determination letters to the RS, NRS and current POA, if applicable. Explain relief was allowed, partially allowed or disallowed based on the additional information.

25.15.7.10.10.3  (02-19-2013)
Determination Remains the Same, But the Reason Changes

  1. Notate Activity Record, "Received additional information same determination with a new reason."

    Note:

    There needs to be an actual change in the reason.

    Example:

    The original determination was full disallowance under IRC 6015(f) with reason code "BT" . The second denial was under IRC 6015(f) with reason code "E" . The workpapers reveal the case was disallowed for the same factors but a different reason code was selected.

    Note:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

  2. Prepare amended workpapers.

  3. Update IDRS control base to 02XXX00030 with the new purge date.

  4. Update ISTS and the ISTSR Input Record to Stage 25 with the activity code of "ADDI" .

    Note:

    Stage 25 date must be one day prior to new Stage 11 date.

  5. Follow IRM 25.15.7.10.7, Partial Relief, if partially allowed. Follow IRM 25.15.7.10.8, Relief Disallowed, if disallowed.

    Exception:

    Send revised preliminary determination letter to RS, NRS, and current POA, if applicable. Explain the additional information was considered and the new reason(s) for not allowing full relief.

  6. Provide appeal rights as appropriate for the new reason.

  7. Suspend the case for 45 days waiting for appeal.

25.15.7.10.10.4  (02-19-2013)
Determination and Reason Does Not Change - Appeals Conference Is Not Requested

  1. Notate Activity Record, "Received additional information, no change in determination" . If time to appeal has expired, issue the final determination letter.

  2. If time to appeal has not expired, contact the RS or NRS and advise him/her there is no change in our determination and remind him/her of when the appeal rights will expire. Since the determination and reason has not changed, this is not a rework. Delete Stage 10 on ISTS. Input a comment entry on ISTS to explain why Stage 10 was deleted. Update the TXMOD control base back to 02XXX00030 with the activity of the original purge date. Refile on 30–day wall.

25.15.7.10.10.5  (02-19-2013)
The Determination and Reason Does Not Change - Appeals Conference Requested

  1. Notate Activity Record "Received additional information, no change in determination."

    Note:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

  2. Follow IRM 25.15.7.10.11, Appeals Procedures, for procedures on working Appeals cases.

25.15.7.10.10.6  (02-19-2013)
Additional Correspondence Received Date after Date Final Determination Letter Issued

  1. See IRM 25.15.17, Reconsiderations.

    Caution:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

25.15.7.10.11  (02-19-2013)
Appeals Procedures

  1. A request for an Appeals conference by either the RS or NRS must be submitted in writing. See Rev. Proc. 2003–19, 2003-1 C.B. 371.

    Caution:

    Certain communications between employees in CCISO and the IRS Office of Appeals are prohibited. These prohibited communications are referred to as "ex parte" . Ex parte communications are communications that take place between Appeals and another function within the service without the participation of the taxpayer or the taxpayer's representative. Additional information on ex parte communications can be found in IRM 4.25.1.5.13, Ex Parte Communications and IRM 8.1.10, Ex Parte Communications.

  2. When a taxpayer submits a timely Form 12509, Statement of Disagreement, or a statement requesting an appeal, review the request for new information.

    Note:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

    1. If new information, see IRM 25.15.7.10.10, Rework.

    2. If no new information, review the request to ensure the determination was correct. If determination was correct, follow IRM 25.15.7.10.11.2, Forwarding Appeals Requests to Appeals.

    Note:

    On partially allowed cases, if one spouse appeals and there is still time remaining for the other spouse to respond, hold the case until that time expires or an action is taken by the other spouse. Place in a designated color folder.

  3. If the determination was incorrect:

    1. Input Stage 10, then 25 with activity code "IRSE" . Input a new Stage 11, 12, or 29 as appropriate. Stage 25 should not be input until the second determination letter is ready to be issued. Stage 25 date must be one day prior to Stage 11.

    2. Input history item "Incorrect disallowance" .

    3. Follow IRM 25.15.7.10.9, Taxpayer Notification/Suspense Procedures. Issue revised preliminary determination letters to explain the correct determination. Provide appeal rights as appropriate for the correct determination.

25.15.7.10.11.1  (02-19-2013)
Appeals Conference Requested by the RS or NRS After Issuance of Final Determination Letter

  1. See IRM 25.15.17, Reconsiderations.

    Caution:

    If a taxpayer timely provides additional information or files an appeal, but it is not associated timely, it is timely and the additional information or appeal should be considered. The additional information is timely if the IRS receives it prior to the date the final determination letter is issued or if it is postmarked no later than 30 days from the date of the preliminary determination letter.

25.15.7.10.11.2  (02-19-2013)
Forwarding Appeals Request to Appeals

  1. Each case must have:

    • Form 8857, Request for Innocent Spouse Relief,

    • Form 12509, Statement of Disagreement, or statement requesting an Appeal,

    • Documented Activity Record,

    • Original and/or amended workpapers,

    • Original tax return, CP 2000 (if applicable), copy of audit report (if applicable), copy of the SNOD if applicable and subsequent adjustment documents for all years being appealed. You must make at least two attempts to secure documents. If unable to secure the documents, notate the Activity Record and keep the document charge outs or a copy of the ESTAB request(s) in the case file.

      Note:

      RTVUE and IRPTR prints or prints containing essentially the same information can be substituted.

  2. Input comment entry on ISTS, "Send to Appeals" .

  3. Send Letter 4144C to RS, NRS and current POA, unless it is a docketed case. Do not send Letter 4144C on a docketed case.

  4. If the taxpayer has a question regarding his/her open case in Appeals or the question can only be answered by Appeals, refer the taxpayer to an Appeals Account Resolution Specialist in Fresno at (559) 456–5931.

  5. Update TXMOD per local procedures.

  6. Update ISTSR Input Record to Stage 07 APPLXXX. The first X identifies which taxpayer filed the appeal, P for primary, S is for secondary and B is for both taxpayers. The second and third digits identify the two digit Appeals Office Code. If both spouse's appeal, use the Appeals Office Code of the RS.

  7. The tax examining technician will update ISTS to Stage 07 and close the IDRS control base.

25.15.7.10.11.3  (02-19-2013)
Docketed Appeals Case

  1. If a taxpayer petitions the Tax Court, it should be identified through Docket Information Management System (DIMS) research. It may also be identified through a contact from Appeals requesting the case.

    1. Have the case pulled and returned to you.

    2. Document the contact on AMS along with any shipping information. Place a copy of the AMS narrative in the case.

    3. If case is located through DIMS, ensure it is in appropriate folder.

    4. Notate Activity Record.

    5. Update IDRS control base to 02XXX00007 using the received date of the appeal and the activity "DOCCASE" .

    6. Update ISTSR Input Record to Stage 07 APPLXXX. The first X identifies which taxpayer filed the appeal, P for primary, S is for secondary and B is for both taxpayers. The second and third digits identify the two digit Appeals Office Code. If both spouse's appeal, use the Appeals Office Code of the RS.

    7. Update history item on ISTS to "Docket Case/List #, DK#xxxxxx and date" if available.

    8. Forward to Closing Technician.

    Exception:

    If the claim was disallowed for no verification and the case has now been docketed, the CCISO will make a determination based on the information submitted and document the history sheet. CCISO will not send determination letters to the RS or NRS. CCISO will not update ISTS or change the ISTSR Input Record with the determination.

  2. The Closing Examiner will:

    1. Prepare case to be forwarded to Appeals following IRM 25.15.7.10.11.2, Forwarding Appeals Request to Appeals.

      Note:

      Route both "S" and "Regular" docketed cases to the Cincinnati campus Appeals office.

    2. Update ISTS to Stage 07 APPLXXX. See IRM 25.15.14.4.1.2(7), Stage 02 - Transferred, for procedures.

    3. Complete and enclose in the case file, "IRS Memorandum to Appeals Office" .

    4. Attach "EXPEDITE" label to the front of the folder.

25.15.7.10.11.3.1  (02-19-2013)
Docketed Information Management System (DIMS)

  1. The Office of Chief Counsel prepares and e-mails a hard-copy of the DIMS lists to the various IRS functions, including the CCISO, who issues notices to taxpayers that include Tax Court rights. A DIMS list contains all cases where the taxpayer has petitioned the Tax Court during a specified period. CCISO must review the entire DIMS list to identify innocent spouse cases that appear on the list. It is important to pay particular attention to any case where the source of the notice is "unknown" .

    Note:

    Counsel needs to "answer" a petition no later than 60 days from the date the petition is served on the IRS. The "answer due date" is set by the Tax Court.

  2. If Appeals does not receive a docketed case within ten calendar days from receipt of the docket list, Appeals begins its process of searching for and securing the case. If the ISTS stage of the case will prevent CCISO from transmitting the docketed case to Appeals within ten calendar days of the docket list date, CCISO must notify the Appeals DIMS contact and provide the ISTS status of the case for the DIMS contact to provide to the assigned Counsel attorney.

    Note:

    The DIMS list identifies an Appeals office for each case. A DIMS contact is designated for each Appeals office on the DIMS office Code Assignment list posted on the Appeals web page at http://appeals.web.irs.gov/APS/DIMS_contacts.htm.

  3. The DIMS list contains a docket list number, a docket number and date. Enter these items as a comment entry on ISTS.

  4. If ISTS is Stage 01 through 04, place a print of ISTS and a copy of the DIMS listing entry in a designated color folder and give to the First Read Team. The designated color folder indicates that no determination has been made and the case should be purged and expedited to Full Scope via Stage 05 for a determination.

  5. If ISTS is Stage 05, the Full Scope Team will receive a designated color folder with the ISTS print. Work these cases on an expedite basis. After a determination is made, prepare the workpapers, document the history sheet. Coordinate with the DIMS contact and assigned Counsel attorney to determine if CCISO will send determination letters to the RS or NRS or forward the case to Appeals.

    Note:

    If the docketed case has been or will be dismissed for lack of jurisdiction, Counsel may direct CCISO to retain the case and proceed with sending determination letters to the RS or NRS.

    Reminder:

    If you are directed to send the case to Appeals, do not issue the determination letters.

  6. If ISTS Stage is 11 through 28 retrieve the case file and place in a designated color folder. Place a print of ISTS and a copy of the DIMS listing entry in the case file. Update TXMOD to DOCCASE, 02XXX00007 and place file in appropriate bin for the closing technician. Then the case will be forwarded to Appeals. See IRM 25.15.7.10.11.2, Forwarding Appeals Request to Appeals.

  7. If case is in Stage 30, request the document from Files, place in designated color folder with updated ISTS print and copy of DIMS listing entry and forward to Appeals. See IRM 25.15.7.10.11.2, Forwarding Appeals Request to Appeals. Input TC 971 AC 065 and update ISTS and the ISTSR Input Record to Stage 07 if the petition is an Innocent Spouse issue.

25.15.7.10.12  (02-19-2013)
Special Circumstances, Technical Questions or Referrals

  1. Procedures listed in this subsection are for special circumstances, technical questions or referrals.

25.15.7.10.12.1  (02-19-2013)
Bankruptcy

  1. Bankruptcy is identified by TC 520 for either the RS, NRS, or both. Once a determination is reached, call the bankruptcy office to determine the specialist assigned to the case. Call the specialist and advise them which taxpayer filed the innocent spouse claim, advise them of the determination and see if you can mirror the account and adjust it.

  2. Update History Sheet with information obtained during these contacts with bankruptcy.

25.15.7.10.12.2  (09-01-2006)
Liens and Levies

  1. See IRM 25.15.7.5.8.1, Liens, for information on claims where Liens are involved.

  2. See IRM 25.15.7.5.8.2, Automated Collection System (ACS) Tax Levy, for information on claims where Levies are involved.

25.15.7.10.12.3  (02-19-2013)
Community Property

  1. If the RS has requested relief for a year where there is no joint return but the RS filed a married filing separate return, check IRM 25.15.5.2, Community Property States, to see if the RS lived in a community property state.

  2. A community property issue can also exist if the RS filed as single or head of household and their correspondence indicates community income was reported on the return. There is not a community property issue if a joint return was filed.

  3. Community property cases will be referred as a technical referral.

    1. Attach a technical referral sheet with "Community Property" .

    2. Notate history on ISTS "Community Property."

    3. Notate TXMOD "COMMPROP" , re-control to the Technical Team and update team number.

25.15.7.10.12.4  (03-21-2008)
He Said/She Said

  1. If statements of the NRS and RS contradict each other and there is no other information within the case file to make a determination, reassign the case to the Technical Team for assistance.

25.15.7.10.12.5  (02-19-2013)
Tax Equity and Fiscal Responsibility Act (TEFRA)

  1. Consistent treatment of all innocent spouse claims involving adjustments to partnership items is critical. All TEFRA cases are to be reassigned to the Technical Team.

  2. TEFRA cases are identified by TC 420/424 with employer identification number (EIN) information. Another indication of TEFRA is Source Code (SC) 17, 23, or 39 on TXMOD or AMDISA.

  3. There are a number of factors to consider in order to determine if innocent spouse claims involving adjustment to partnership items qualify for relief. No one factor is determinative of whether or not relief will be granted. Instead the Service takes into account all the facts and circumstances in determining whether relief is appropriate. These facts include but are not limited to:

    • Who benefited from the income or losses claimed on the return from the K-1?

    • Whose name is on the K-1?

    • Look for the Key Case if there is no K-1 or workpaper in the administrative file

    • Look for Tax Court documentation to see who was named in the partnership for the court case.

    • Did the RS sign either Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment or Form 906, Closing Agreement on Final Determination Covering Specific Matters.

    • Did the RS participate in Appeals proceedings?

    • Did the RS participate in the partnership?

    • Did the RS participate in gathering info on the partnership for the return?

    • Were the taxpayers investors in the top tier who would have received Notice of Beginning Administrative Proceedings (NBAP) or in a tiered situation and not aware of examination?

    • How did the partnership affect the size of the refund or provide other benefits such as reduced liability?

    • See carryback or carryforward losses to see how it affect the tax returns. Is the RS still receiving a tax benefit from losses claimed on more recent tax returns? Taxpayers may claim credits and losses 3 years back or 15 years forward from the year of the loss/credit by filing an amended tax return for those years.

    • TEFRA coordinators can be found at. http://mysbse.web.irs.gov/exam/tip/tefra/contacts/11895.aspx. Request that they send you copies of any partnership information they have, i.e., K-1, administrative file, court case, etc. for the case file.

    • Did the RS receive benefit from the partnership assets from the estate of the deceased spouse?

      Note:

      Sometimes the taxpayers want to know why it took IRS so long to notify them. It is the Tax Matters Partner's responsibility to keep the investors informed. The TEFRA unit only deals with the Tax Matters Partner.

      Note:

      The taxpayers can submit a Form 843, Claim For Refund and Request for Abatement

    • The marital status of the taxpayers. Spouses still married cannot qualify for relief under IRC 6015(c),

    • Whether both spouses signed the partnership agreement or other document identifying the investment as jointly held,

      Note:

      The investment could be deemed jointly held even if the partnership agreement is only signed by one of the spouses if the partnership investment was purchased during the marriage and the spouses live in a community property state.

    • Jointly held property is attributable 50 percent to the RS.

    • Both spouses signed personal checks payable to the TEFRA entities.

    • Both spouses were sent pre-filing notifications alerting them of the hazards of claiming deductions/losses/credits from these partnerships.

    • The losses/deductions are large in relation to reported income.

    • Items allocable to the NRS must be allocated to the RS when the RS received a tax benefit as a result of the item and vice versa.

25.15.7.10.12.6  (03-21-2008)
Erroneous Refunds

  1. Instructions to work erroneous refunds can be found in IRM 21.4.5, Erroneous Refunds.

  2. An erroneous refund is the receipt of money from the IRS to which the recipient is not entitled. This applies even if the erroneous refund involves the taxpayer's own money. Refer any erroneous refund as a technical referral. Examples of erroneous refunds are:

    • Misapplied payments,

    • A credit refund the taxpayer is not entitled to receive,

    • An incorrect tax assessment or adjustment causing an incorrect refund,

    • A designated payment posting to the correct TIN but the wrong tax period or MFT and the payment was refunded to the taxpayer,

    • Taxpayer files a claim for a lost refund, receives a replacement check and then finds the original and keeps both,

    • Barred statute refunds,

    • A taxpayer makes an advance payment against a pending tax increase and the money refunds before the tax assessment posts, and

    • A taxpayer receives both a manual (TC 840) and computer generated (TC 846) refund for the same overpayment.

25.15.7.10.12.7  (03-21-2008)
Unable to Secure Administrative File

  1. If you are unable to secure the administrative file, even after requesting a special search, and you can't work the claim without the return, reassign the case file to the Financial Specialist.

25.15.7.10.13  (03-21-2008)
Exceptions to Innocent Spouse Provisions

  1. The subsections below provide information on processing claims not qualifying for innocent spouse provisions.

25.15.7.10.13.1  (02-19-2013)
Collection Statute Expiration Date (CSED) Expired

  1. When the CSED was expired when Form 8857, Request for Innocent Spouse Relief, was received, but not closed as non-qualifying in First Read:

    1. Send the Letter 3657C to the RS, NRS, and POA, if applicable.

    2. Update ISTS and the ISTSR Input Record to Stage 29 with reason code "CSED" . It is not necessary to suspend these cases. See IRM 25.15.14.4.1, Stage Definitions and Activity, for ISTS information.

    3. Update IDRS controls per campus directions.

      Note:

      If the CSED expired for the RS only, input TC 971 AC 131 on the RS's module.

      Reminder:

      The CSED is suspended upon receipt of Form 8857. So if the CSED was open when the claim was received, the claim must be evaluated.

  2. The most common conditions that could affect the CSED are:

    • TC 290 (Additional tax assessment)

    • TC 300 (Additional tax assessment by Examination or Collection)

    • TC 340 (Restricted Interest)

    • TC 480 (OIC)

    • TC 520 (Bankruptcy)

    • TC 550 (Waiver to extend the CSED). To get a copy of the signed waiver, call the contact found on the Innocent Spouse Website under contacts for Form 900, Tax Collection Waiver

    • TC 971 AC 065 (Innocent Spouse Claim)

    • CDP Hearing Request

  3. See IRM 5.1.19.3, Case Actions That Can Suspend And/Or Extend a CSED, for additional information.

25.15.7.10.13.2  (02-19-2013)
Full Paid Since Receipt of Form 8857

  1. If payments are made by the RS and the RSED is open, a determination must be made. Verify the payments were made by the RS using the Remittance Transaction Record (RTR). If the RSED is closed, the claim will be disallowed. Use the standard explanation for RSED expired per IRC 6511(a): "We can’t allow a claim for credit or refund if you file the claim more than 3 years after you file the return, or more than two years after you pay the tax, whichever is later. "

  2. Send Letter 4988C with the appropriate paragraphs to the RS, and Letter 4985C to the NRS, and current POA(s), if applicable.

    Note:

    Suggested wording to the NRS "Our records show the account was full paid after the innocent spouse claim was filed. We notified the person who was your spouse for the tax year(s) listed above that we are no longer considering their request for innocent spouse relief. No further action is necessary."

  3. Update ISTS and the ISTSR Input Record to Stage 11 with appropriate activity code.

  4. Input comment entry on ISTS of 30DYMMDDYY

  5. Update TXMOD control to 02XXX00030 with activity "30DYMMDDYY" . MMDDYY is the ending suspense date.

  6. Suspend case for 45 days.

25.15.7.10.13.3  (02-19-2013)
Barred Statute One Signature (BSOS)

  1. If a deficiency assessment was made to a joint account based on the signature of one spouse on a waiver of assessment, the assessment is not a valid assessment with respect to the non-signing spouse and deficiency procedures must be continued for the non-signing spouse. Similarly, if an amended return (Form 1040-X, Amended U.S. Individual Income Tax Return) was processed with only the NRS’s signature, the amended return may only be processed for the signing spouse. Refer to IRM 25.15.1.2.9, Joint Assessment/One Signature, for additional information. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If the statute of limitations on assessment has expired for the non-signing spouse,

    1. Prepare the "Barred Statute Memo" .

    2. After the manager signs the "Barred Statute Memo" and returns the case to you, send Letter 3657C to the RS and current POA, if applicable. Advise the RS, "Our records indicate you did not sign the consent to assess and collect the proposed tax, penalties, and interest. Therefore you are no longer liable for the additional assessment."

    3. Send Letter 3323C to the NRS and current POA, if applicable. Advise the NRS, "Our records indicate you signed the consent to assess and collect the proposed tax, penalties, and interest on date. There is no record of (RS's name) signing a consent to assess and collect the liability. Therefore, you are solely liable for the additional assessment. "

    .

  3. Prepare Form 3465, Adjustment Request, if a payment needs to be refunded or account is not mirrored. If a refund is due, place in appropriate folder.

  4. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "BSOS" .

  5. Update IDRS control.

  6. If the RS is the non-signing spouse and the module has been mirrored refer to IRM 25.15.15.3.6, Barred Statute One Signature (BSOS). If the module has not been mirrored refer to IRM 25.15.9.1.4, Barred Statute One Signature (BSOS), for closing instructions.

25.15.7.10.13.4  (02-19-2013)
Account Problems

  1. When the RS or Financial Technician identifies an account problem, refer as a technical referral.

  2. Each account problem referred as a technical referral shall include:

    • Entire case file

    • Clear and detailed documentation of account problem

    • Supporting documentation, i.e., tax return, copies of social security cards, audit case file, etc.

  3. Place case in appropriate folder.

  4. Control or re-control TXMOD with activity "ACCTPROB" using the Form 8857, Request for Innocent Spouse Relief, received date.

  5. Update ISTS to Stage 05 with activity code "TECH" and input a comment entry on ISTS of "Account Problem" .

  6. If the RS requests an abatement of penalties (e.g., the failure to file, failure to pay, estimated tax, accuracy related and fraud penalties), or interest, and there is no innocent spouse issue, forward the request to Accounts Management function that processed the taxpayer's return (the file location of the DLN identifies the campus that processed the return) and request they process as a Form 843, Claim For Refund and Request for Abatement. If the request involved other penalties, refer the case to the Lead. Send appropriate letter advising the RS and current POA, if applicable, that the case was transferred. Update ISTS and the ISTSR Input Record to Stage 29 with activity code of "ACTP" and Stage 30 with activity code of "ACCTCORR" . Issue Letter 86C to the RS.

    Caution:

    If relief would have been appropriate for the underlying tax, then relief is appropriate for the penalties and interest. See IRM 25.15.3.8.1(6), Understatements and Underpayments, to determine if relief should be considered under IRC 6015, or treated as an 843 claim.

  7. These cases require a TC 290 for .00. If you have access to input a TC 290, do so. Otherwise, notate the tax year(s) and activity code for Stage 30 on the ISTSR Input Record, but do not date Stage 30 on the ISTSR Input Record. Stage 30 will be dated when the TC 290 for .00 is input.

  8. If the NRS was advised we were considering a Form 8857, Request for Innocent Spouse Relief, send Letter 3323C to the NRS. Advise the NRS that the tax has been paid, and we cannot consider Form 8857 for relief of penalties and/or interest alone.

25.15.7.10.13.5  (02-19-2013)
Forgery

  1. If RS alleges forgery review the case for tacit consent. See IRM 25.15.7.10.13.5.1, Tacit Consent Factors.

  2. The burden of proof is on the taxpayer to prove forgery and no intent to file a joint return. Compare the signature on the return or assessment document with the signature on Form 8857, Request for Innocent Spouse Relief. If it is an electronic signature you will not be able to compare signatures but you should consider "tacit consent" factors. If it appears that the RS signed the return or assessment document, or if the taxpayer intended (tacit consent) to file a joint return advise the RS and continue processing the Form 8857, Request for Innocent Spouse Relief.

    Note:

    Signatures usually change over the years. You could always request documentation showing true signatures, i.e., a copy of driver’s license, social security card, etc. However, this is not necessary if "tacit consent" factors apply.

    Note:

    Send Letter 105C if tax is full paid and the taxpayer is requesting a refund. otherwise issue the appropriate innocent spouse determination letters.

  3. If unable to determine there was "tacit consent" , reassign the case to the Financial Specialist. Input comment entry on ISTS, Possible Forgery.

  4. If you determine forgery does apply, correct the account.

    Note:

    The taxpayer claiming forgery may not be the RS. In this case, address both the forgery issue and request for innocent spouse relief.

    1. Recompute the tax return for the spouse who actually signed/filed the return. See IRM 21.6.1.4.7(1) and (2) and (3), Claims of Joint to Single or Head of Household Where Joint Election is Invalid. See Pub 17, Your Federal Income Tax (For Individuals), to determine the correct filing status, exemptions, tax, etc. Any items removed such as a dependent exemption must be documented and based on tax law. If the RS has a filing requirement, advise him/her to file his/her return. There is no ASED issue because he/she did not file a return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      Adjusting the Withholding does not require a statutory notice of deficiency.

    2. If the account is mirrored, correct the filing status, input TC 971 AC 131 on the RS's module and refund any applicable payments.

    3. If the account is not mirrored, adjust the MFT 30 and remove the spouse's name, if the RS is the secondary.

  5. If the NRS is the person claiming forgery input TC 971 AC 065 and TC 971 AC 131 with a posting delay code (PDC) of 1 on the NRS's MFT 31.

    Note:

    The TC 971 AC 065 must be input or the TC 971 AC 131 will not post.

  6. If the original return was valid but the amended return (TC 977 / TC 976) is the forged return:

    1. Mirror the account if not already mirrored,

    2. Do not remove the spouse's name from the joint return because the original return was valid and

    3. Adjust the RS's MFT 31 account to the original figures. Input TC 971 AC 002 with the X-ref TIN.

  7. If the original return was forged and the TC 977/976 is the valid separate return for the RS:

    1. Mirror the account if not already mirrored.

    2. Correct the tax on the RS's module to reflect the tax per the items shown on the TC 977/976. Input TC 971 AC 001 on the RS's MFT 31 module.

    3. Correct the name line and filing status.

    4. Adjust the NRS's account per the recomputed tax.

25.15.7.10.13.5.1  (02-25-2011)
Tacit Consent Factors

  1. Did the RS have a filing requirement? Consult Publication 17, Your Federal Income Tax (For Individuals), for the year at issue to determine if the RS had a filing requirement. The filing requirement is not determined by whether or not the RS has taxable income. Did the RS file a MFS return?

    Note:

    In a community property state, both spouses are required to report their share of the community property, not just their own income.

  2. Check the filing status for prior and subsequent tax years.

  3. Did the RS participate in the preparation of the return by providing return information, i.e., W-2s and/or 1099s?

  4. Was there a tax benefit, i.e., reduced income tax or Earned Income Tax Credit?

  5. Check the entire return for signature, forms filed after return was filed, extension requests, and installment agreements.

  6. Check the entire return for schedules that belong to or include the RS. Were there any gains or losses belonging to the RS?

  7. Did RS have another reason to file jointly, e.g., divorce decree, immigration purposes, etc.?

25.15.7.10.13.5.2  (02-19-2013)
Invalid Joint Election When RS and NRS Were Not Married

  1. If the taxpayers filed a joint return, but the RS claims that they were not married and did not live in a state that recognizes common-law marriage, see IRM 25.15.7.5.6(2), Invalid Joint Election, for the common law marriage chart by state.

    1. ESTAB for all tax returns,

    2. Secure copy of Divorce Decree if taxpayer says they were divorced by the end of the tax year, and

    3. Documentation is needed if the RS states they were never married and they did not live in a common law state for the year relief is being requested. Contact RS to request documentation verifying there was not a marriage. A statement from the court house could be one way to verify or document their last name is not the same as the man's last name. Unless there is something in the case file that shows the RS is not credible, you would accept the documentation as proof.

      Note:

      Some states recognize common-law marriage that began in another state, not just where they resided during the tax year for which they are requesting relief. See IRM 25.15.7.5.6(2), Invalid Joint Election.

  2. Once it has been established that the election is invalid, see IRM 25.15.7.10.13.6, Correcting an Invalid Joint Election, to determine how to proceed.

    Caution:

    You can only change the filing status to 3 or 6 for the NRS if the marriage was not valid and the NRS was married to a person other than the RS, for example, the marriage between the RS and the NRS was not valid because the NRS was not divorced from his first wife when he married the RS. The RS's filing status would be 1 for single or 4 for Head of Household, but the NRS's filing status would be 3 or 6 for married filing separate.

  3. If you determine the joint return is valid, send Letter 105C if the tax is full paid and the taxpayer is requesting a refund. Otherwise, use the appropriate innocent spouse letters, advising the RS why the joint return was deemed valid.

25.15.7.10.13.6  (02-25-2011)
Correcting an Invalid Joint Election

  1. There are three types of invalid joint returns:

    1. Forgery - RS did not sign the return and there was no tacit consent. There is no ASED for the RS, unless the RS filed their own return. The ASED for the NRS begins when the joint return was due to be filed, or was filed, whichever occurred later. If the signature was forged, but the return is also unlawful or invalid, process as a forgery.

    2. Unlawful - taxpayers had no legal right to file jointly. Any previously issued refunds must be considered. The ASED begins when the joint return was due to be filed, or was actually filed, whichever occurred later.

    3. Invalid - amended return changing to separate filing status filed prior to the due date of the return. The ASED begins when the joint return was due to be filed, or was actually filed, whichever occurred later. All previously issued refunds must be taken into consideration.

  2. When it has been determined that the joint election was invalid, for example, the taxpayers were not married, determine each taxpayer's separate liability. See IRM 21.6.1.4.7(1) and (2) Claims of Joint to Single or Head of Household Where Joint Election is Invalid, and IRM 21.6.1.4.5.1 (3), Allowable Claims Procedures . See Pub 17, Your Federal Income Tax (For Individuals), to determine the correct filing status, exemptions, tax, etc. Any items removed such as a dependent exemption must be documented and based on tax law. If the RS has a filing requirement, advise the RS to file a return and send it to you within 30 days. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    Neither taxpayer's tax can exceed the tax that would have been owed had they filed their own return.

    1. If the combined separate taxes are less than the tax currently on the module, complete Form 3465, Adjustment Request, to input TC 291 as appropriate, on each spouse's MFT 31.

    2. If the combined separate taxes are more than the joint tax currently on the module and the ASED is closed, allocate per IRM 25.15.3.7.2, Allocating a Deficiency under IRC 6015(d).

    3. If the combined separate taxes are more than the joint tax currently on the modules and the ASED is open, or you can't determine their correct tax or share of refunds, non-qualify the case per IRM 21.6.1.4.7(2). Update ISTS to Stage 29 with Activity "ACTP" . Send Letter 3657C advising taxpayer to submit an amended return to the campus where they normally file their individual tax returns. Update TXMOD to 02XXX00012.

    4. If the taxpayers owe some liability jointly, e.g., recaptured Earned Income Tax Credit (EITC), post the joint liability back to the MFT 30 joint module. Adjust the MFT 31 modules to remove the joint liability after that liability has been transferred back to the MFT 30 module.

    Note:

    If entire balance due will remain joint leave account mirrored on MFT 31.

  3. A refund will only be issued if the payments were made by the RS and the Refund Statute Expiration Date (RSED) has not expired or if the taxpayer files an amended return.

  4. Input TC 972 AC 110 to stop the mirroring of payments.

  5. Prepare Form 3465, Adjustment Request, to remove the RS’s name from the account and change to the appropriate filing status. Abate the tax on the account attributable to the RS’s income.

    Exception:

    Do not remove the spouse's name if any balance due will remain on the joint account on MFT 30. If entire balance due will remain joint, leave account mirrored on MFT 31 and do not change the name line.

  6. Input TC 972 AC 065 using the same date as TC 971 AC 065.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. If the account is not mirrored, adjust the MFT 30 and remove the spouse's name, if they are the secondary.

25.15.7.10.13.6.1  (02-19-2013)
The RS is the Secondary Taxpayer, but has No Filing Requirement

  1. If RS received a refund on the original return that is now being recaptured, see IRM 21.6.1.4.5(3), Joint to Separate, Single, or Head of Household Procedures . If a refund is not being recaptured and RS is not entitled to Earned Income Credit (EIC), see IRM 21.6.1.4.5.1(3)(2), Allowable Claims Procedures .

  2. If the account is not mirrored, leave the account not mirrored.

    1. Remove the RS's name from the joint account and correct the filing status on the primary taxpayer's ENMOD.

    2. Complete Form 3465, Adjustment Request, to remove the RS's name from the account and change the filing status to 1, 3, 4, or 6 as appropriate. Correct the exemption amount.

    3. Send Letter 3657C to the RS and Letter 3323C to NRS with appropriate paragraphs.

    4. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" .

    5. If refunding payments to the RS, place in designated color folder and assign the TXMOD control base to 02XXX00000 with activity code "INVA" and claim received date.

    6. If no refund, assign TXMOD control to 02XXX00012 with activity code "INVA" and the IRS received date of the Form 8857, Request for Innocent Spouse Relief.

  3. If the account is mirrored, instruct the closing examiner to clear the balance on the RS's MFT 31 module by following IRM 25.15.15.3.1, Relief Allowed in Full and No Refund Due.

    1. Complete Form 3465, Adjustment Request, to remove the RS's name from the joint entity and correct the filing status to 1, 3, 4, or 6 as appropriate. Correct the exemption amount, if applicable. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Send Letter 3657C to the RS and Letter 3323C to NRS with appropriate paragraphs.

      Note:

      If not removing the entire balance due or refunding all payments requested, send Letter 106C instead of Letter 3657C.

    3. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" .

    4. If refunding payments to the RS, place in designated color folder and assign the TXMOD control base to 02XXX00000 with activity code "INVA" and claim received date.

    5. If no refund, assign TXMOD control to 02XXX00012 with activity code "INVA" and the IRS received date of the Form 8857.

25.15.7.10.13.6.2  (02-19-2013)
The RS is the Primary TP, but Does Not Have a Filing Requirement

  1. If RS received a refund on the original return that is now being recaptured, see IRM 21.6.1.4.5(3). If Earned Income Tax Credit (EITC) is not being recaptured and RS is not entitled to EITC see IRM 21.6.1.4.5.1(3)(2).

  2. If the account is not mirrored, have the account mirrored.

  3. If the account is mirrored, instruct the closing examiner to clear the balance on the RS's MFT 31 module by following IRM 25.15.15.3.1, Relief Allowed in Full and No Refund Due.

    1. Complete Form 3465, Adjustment Request, to remove the secondary taxpayer's name from the joint entity and correct the filing status to 1, 3, 4, or 6 as appropriate. Correct the exemption amount, if appropriate. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Send Letter 3657C to the RS and Letter 3323C to NRS with appropriate paragraphs.

      Note:

      If not removing the entire balance due or refunding all payments requested, send Letter 106C instead of Letter 3657C.

    3. Update ISTS and the ISTSR Input Record to Stage 29 and with activity code "INVA" .

    4. If refunding payments to the RS, place in designated color folder and assign the TXMOD control base to 02XXX00000 with activity code "INVA" and claim received date.

    5. If no refund, assign TXMOD control to 02XXX00012 with activity code "INVA" and the IRS received date of the Form 8857, Request for Innocent Spouse Relief.

25.15.7.10.13.6.3  (02-19-2013)
RS Filed a Return Which Was Processed

  1. Determine if all income was reported on his/her separate filed return. If accepting the separate return as filed, input Transaction Code (TC) 971 Action Code (AC) 131 on RS's MFT 31 account and TC 972 AC 110 on both MFT 31 accounts.

    Exception:

    If the RS still owes a joint amount, for example, recaptured Earned Income Credit (EIC).

  2. Complete Form 3465, Adjustment Request, to remove the RS's name, exemption amount and income from the joint account. Recompute the tax for the NRS and change the filing status to 1, 3, 4, or 6 on the NRS's ENMOD. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Send Letter 3657C to the RS and Letter 3323C to the NRS.

    Note:

    If not removing the entire balance due or refunding all payments requested, send Letter 106C instead of Letter 3657C

  4. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" .

  5. Update TXMOD control base to 02XXX00000 with activity code "INVA" and the date of claim.

    Note:

    If ASED is expired on the joint module, contact Statute for instructions.

25.15.7.10.13.6.4  (02-19-2013)
RS's Return Has Not Been Processed - Open ASED

  1. Math verify the return.

  2. If the RS is the secondary taxpayer, forward the original return to Batching for processing.

  3. Monitor for the RS's separate return to post. After it is posted, prepare Form 3465, Adjustment Request, to back out the RS's income, name, exemption, if appropriate, and change filing status on the primary taxpayer's ENMOD.

    Exception:

    If there is an amount owed jointly, like recaptured Earned Income Credit (EIC).

  4. Input TC 971 AC 131 on RS's MFT 31 account and a TC 972 AC 110 on both the RS's and NRS's account.

  5. If the RS is the primary taxpayer, do not forward to Batching, adjust the RS's MFT 31 account to show the figures per the return. Update the ASED.

  6. Send Letter 3657C to the RS and Letter 3323C to the NRS.

    Note:

    If not removing the entire balance due or refunding all payments requested, send Letter 106C instead of Letter 3657C.

  7. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" .

  8. Update TXMOD control base to 02XXX00012 with activity code "INVA" and the date of claim.

25.15.7.10.13.6.5  (02-25-2011)
RS's Return Has Not Been Processed - Expired ASED

  1. Math verify the separate return.

  2. Recompute the tax on the joint account by considering the NRS' new filing status and exemptions. If the separate tax for each taxpayer is less than the tax currently on the joint module, complete Form 3465, Adjustment Request, to input Transaction Codes (TC) 291. If there is not enough tax on the joint module to cover both spouses individual taxes you will allocate as follows:

    1. Determine the new total combined tax of the NRS and RS (based on the RS's return).

    2. Determine their share of the tax based on their own taxable income (TXI) and apply this percentage to the actual tax available from the joint return. If one spouse's actual tax is less than their percentage of the joint tax, adjust to that person's correct tax.

    3. Adjust both MFT 31 modules to these figures.

      Caution:

      The new total tax on both modules cannot exceed the joint tax.

  3. Account will have to be mirrored if it has not been.

  4. Input TC 972 AC 110 on both MFT 31 modules.

  5. Send Letter 3657C to RS.

  6. Send Letter 3323C to NRS.

  7. Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" .

  8. Update TXMOD control base to 02XXX00012 with activity code "INVA" and claim received date.

    Caution:

    You may need to contact Statute to determine if ASED extended.

25.15.7.10.14  (09-01-2006)
Special Handling

  1. This section gives instructions for situations requiring special handling.

25.15.7.10.14.1  (07-17-2009)
AUR

  1. Refer to IRM 25.15.7.3, Automated Underreporter (AUR) and Compliance Campus Examination Operations (CCEO) - Overview.

25.15.7.10.14.2  (02-25-2011)
Deceased NRS and Taxpayers Were Still Married

  1. The fact the NRS is deceased affects fact gathering. You may not get the other side of the story, so proving knowledge may be more difficult. IRM 25.15.7.2.1(4) for information on addressing letters to the deceased NRS.

  2. When determining if it is inequitable for holding the RS liable, a deceased NRS could impact the significant benefit factor and should be considered e.g., whether the RS inherited property from the estate of the NRS.

  3. Verify whether there is an estate. If there is an estate, is it still open?

  4. Ask for a copy of the will. Look for assets the RS may have received.

  5. If the RS is a beneficiary of the estate and is being granted full or partial relief, he/she should be advised they could still be held liable under other provisions of the law.

  6. If a revenue officer was actively collecting (Collection Status 26 prior to receipt of Form 8857, Request for Innocent Spouse Relief), notify the revenue officer if there was any property transferred to the RS.

25.15.7.10.14.3  (02-19-2013)
CSED Expired on Underpayment But Not on Understatement

  1. When the Collection Statute Expiration Date (CSED) has expired on the underpayment, but not on the understatement, refer the claim to the Technical Team.

25.15.7.10.14.4  (02-19-2013)
Combat Zone

  1. Combat Zone (CZ) accounts, identified by a -C freeze, indicate a taxpayer who is or was serving in a designated combat zone area. See IRM 5.19.10.6.3, Combat Zone Freeze Code.

    Note:

    The -C freeze stays on the account even after the taxpayer is no longer in the CZ. When working an account that contains a -C freeze, additional research is required to determine the taxpayer's CZ status. Research CC IMFOLE for the combat indicator on Line 11.

  2. If Combat indicator is "1" , then the taxpayer is still serving in a combat zone. Any compliance activity such as assessing or collecting tax is prohibited. However, if the taxpayer has other issues or requests information, you may work other issues and contact the taxpayer if needed. The other issues do not include an innocent spouse request for relief. All action will be suspended on these until the taxpayer is no longer a combat zone participant.

  3. If Combat indicator is "2" , then the taxpayer is no longer a combat zone participant. Follow normal IRM procedures to work the case.

  4. If you are contacted by a taxpayer or family member advising the taxpayer is in a combat zone, ask for the date of deployment and input TC 500 CC 56 on the account to cease enforcement activity. If this happens, suspend the claim until the taxpayer returns. Because both taxpayers have appeal rights, do not make determinations or send preliminary/final determination letters if one or both are in a combat zone and cannot act upon their rights. Send Letter 2761C to the taxpayer requesting the combat zone exit date if TC 500 CC 53, CC 55, or CC 57 is not present. Send Letter 3659C to the RS if they are not the deployed taxpayer. See IRM 5.19.10.6.4, Combat Zone Computation of Suspense Period, for additional information.

  5. Update your claim to Stage 26 using activity code "COMB" and input a history item to indicate "Combat Zone RS " or "Combat Zone NRS" .

  6. Once the exit date is provided, input the date using REQ77. Input TC 500 with the appropriate closing code releasing combat zone freeze code. See IRM 5.19.10.6.5.1, Combat Zone IMF Procedures, for appropriate code.

25.15.7.10.14.5  (02-19-2013)
Identity Theft

  1. When a taxpayer disagrees with the understatement because they claim their identity was stolen, coordinate with the function that proposed the deficiency, i.e., Automated Underreporter (AUR) or Exam. They will determine the appropriate action to take regarding the identity theft. Suspend the Innocent Spouse determination in ISTS stage 06 until the identity theft issue is resolved. An allegation of identity theft can be made by either taxpayer or be identified by the service. For additional information see:

    1. IRM 4.19.13.25, Campus Exam Identity Theft

    2. IRM 4.19.3.20.1.23, Stolen Identity (IDT) Claims - General and,

    3. IRM 10.5.3, Identity Protection Program.

  2. When you receive documentation stating identity theft or you suspect identity theft, review IDRS CC IMFOLE for an identity theft indicator for the tax year(s) the taxpayer is claiming. An identity theft indicator is TC 971 with an Activity Code (AC) 501–506 or 522–524.

    1. If there is not an identity theft indicator on the account, input TC 971 AC 522 PNDCLM. If you suspect identity theft, input TC 971 AC 522 IRSID. Additional guidance on these indicators can be found IRM 10.5.3.2.6, Initial Allegation or Suspicion of Tax -Related Identity Theft - Identity Theft Indicators.

    2. If the taxpayer alleges identity theft and has provided supporting documents per IRM 10.5.3.2.7, Overview - Identity Theft Supporting Documentation, input TC 971 AC 522 (INCOME, MULTFL, INCMUL, NOFR, or OTHER). Refer to IRM 10.5.3.2.7.3,Marking Taxpayer Accounts When Accepting Identity Theft Supporting Documents, for guidance.

      Note:

      For input instructions see IRM 10.5.3-12, TC 971 AC 522 Tax-Related Identity Theft, Case Status (Initial Claim/Suspicion and Supporting Documents). Input EXAM as the program, even if it is AUR. This is so the Exam headquarters analyst will be able track it as an Innocent Spouse issue. Format should be: WI one space EXAM one space and the appropriate Tax Administration Source. In the Remarks area enter IDENTITY THEFT.

    3. In the event you need to reverse the TC 971 AC 522, see IRM 10.5.3-13, TC 972 AC 522 - Reversal of TC 971 AC 522.

  3. If the area that proposed the deficiency determines that the taxpayer is not liable for the deficiency because of identity theft, it may resolve the innocent spouse claim.

  4. Once the identity theft issue is resolved, work the cases per existing procedures.

  5. Place innocent spouse claims with an identity theft issue in a designated color folder and open an additional control on TXMOD assigned to 0297900522 in "M" status. Upon closing, the tax examining technician will close the identify theft control base. If at closing the identity theft control base is not present, the tax examining technician will refer the case to their manager. Time spent working identify theft cases should be reported under OFP code 713–91210 for a paper case and 703–91210 for a phone call.


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