- 25.15.8.1 Introduction
- 25.15.8.2 Revenue Officer (RO) Responsibilities
- 25.15.8.3 Receipt of Form 8857
- 25.15.8.4 Discontinue Collection Activity
- 25.15.8.5 Referrals to Centralized Unit
- 25.15.8.6 Balance Due Module Re-issuance
- 25.15.8.7 Resuming Collection Activities
- 25.15.8.8 Notices of Federal Tax Lien
- 25.15.8.9 Collection Statute
- 25.15.8.10 Offer in Compromise
- 25.15.8.11 Application of Payments
- 25.15.8.12 Statute of Limitations for Filing Claims for Relief
- 25.15.8.13 Disclosure Issues
- 25.15.8.14 Closing the Non-Master File and MFT 31 Account
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This section covers Field Collection responsibilities and involvement in cases with requests for relief from joint and several liability.
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ROs shall explain the provisions for relief from joint and several liability to taxpayers and answer any questions they may have with respect to their claim. See IRM 25.15.2.2 .
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Upon receipt of a Form 8857, Request for Innocent Spouse Relief, the Revenue Officer (RO) will screen it, make Integrated Data Retrieval System (IDRS) updates, and forward the request to the appropriate function for consideration. See IRM 25.15.8.3.
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When a taxpayer files Form 8857 directly with the RO or when the RO is notified that a Form 8857 has been filed, he or she will discontinue collection against the requesting spouse (RS) for the period for which the claim is filed, unless collection would be in jeopardy. The RO will continue collection actions against the non-requesting spouse (NRS).
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The RO will retain jurisdiction of innocent spouse/joint and several liability relief claims if, at the time the claim is filed, the module is assigned to a RO.
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The RO will not make any determination on the claim. Collection personnel are not authorized to determine the merits of a request for relief.
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When a final determination has been made regarding the request for relief from joint and several liability, the RO will make recommended adjustments to the account and partial lien releases, where necessary, and continue appropriate collection activity.
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In the past, on cases where jurisdiction was retained, the RO had the responsibility of updating the collection statute expiration date (CSED) on all modules. Presently, the CSED is only to be updated at the RO's discretion when future collection potential against the RS and ability to monitor the case exists. Extension of all CSEDs created a potential for inadvertently collecting from the NRS after his or her CSED had already expired.
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Definition of collection activity, for the purpose of determining timeliness for filing a claim for relief, can be found in 25.15.3.4.4.
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When a RO receives a completed Form 8857 from the taxpayer, the RO should complete, or follow local guidelines to have the following completed:
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Date stamp and initial the receipt date on the request for relief — Form 8857 or its equivalent.
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Screen the request as explained in IRM 25.15.6.1.3(3).
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Input Transaction Code (TC) 971, with Action Code (AC) 065 to identify the account as an innocent spouse case as discussed in IRM 25.15.2.4.2.
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TC 130 will automatically generate on the NRS. Input TC 130 on the RS if necessary, as explained in IRM 25.15.2.4.3 of this manual.
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When there is no open balance due module assigned to the RO, immediately (within 10 business days) mail the Form 8857 to the Cincinnati Centralized Innocent Spouse Operation (CCISO) at:
IRS
Stop 840F
PO Box 120053
Covington, KY 41012. -
When there is an open balance due module assigned to the RO, he or she will retain jurisdiction and make an Examination referral to CCISO. See IRM 25.15.8.5.
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Levies, seizures and court proceedings against the RS are prohibited by statute when a claim is filed under IRC 6015.
Exception:
The collection prohibition does not apply if a termination assessment under IRC 6851 or a jeopardy assessment under IRC 6861 has been made.
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Refund offsets are not prohibited by statute. However, the Service has made a policy decision not to offset refunds while a claim is pending. If you secure a refund return or obtain information indicating a refund return is being processed:
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The refund will offset to any balance due module other than the one on which the claim is filed.
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To the extent that an overpayment exceeds any balance due on tax modules not under consideration for section 6015 relief, a refund should be issued to the RS.
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Request expedited processing of the claim from CCISO.
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Release freeze immediately after determination that relief is fully granted and there are no other liabilities to which funds can be applied.
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Offset refund immediately after final determination that the claim is fully or partially denied and the RS's claim is no longer being considered by the Service or a court. Monitor for systemic refund of residual amount, to the taxpayer. See IRM 25.15.8.7. regarding resuming collection activity.
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The RO will document the case file and, if a determination is made that collection needs to be continued against the RS, will secure approval from the Territory Manager.
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The RO will ensure that the RS understands:
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Penalties, additions to tax, additional amounts, and interest continue to accrue on the entire module
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Suspension of collection activity is limited to tax years for which a claim is filed
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The collection statute is suspended for claims filed from the date the claim is filed until the taxpayer waives the restrictions on collection or until the expiration of the 90 day period after the Final Determination Notice is issued, or if a petition is filed with the Tax Court, until the decision of the Tax Court becomes final, and for 60 days thereafter
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If an installment agreement is in effect, the RO will ensure the RS understands that the decision to maintain, renegotiate or default the agreement will have significant consequences. See IRM 25.15.2.2.1 for an explanation of these consequences.
Note:
See IRM 5.14.4.4 for guidance on innocent spouse claims and installment agreement requests.
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The RO will release any levies or seizures, including continuous wage levies, filed prior to the claim unless the Territory Manager determines they should not be released.
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Technical Support will not release or modify federal tax liens until a determination is made. See IRM 25.15.8.8.
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The RO will continue collection against the RS for tax years NOT included in the claim filed.
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The RO will continue collection against the NRS.
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If the RS has made any payments on the liability, a successful IRC 6015(b) or IRC 6015(f) claim may result in a refund without adequate time to collect from the NRS. Thus, in these circumstances, the RO must consider whether the Service should recommend that the Department of Justice file a suit to reduce the tax assessments to judgment against the NRS. For general guidelines regarding whether it is feasible to recommend this suit, see LEM 5.5. Additionally see IRM 5.17.4.7 for a general discussion on this type of suit.
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The RO cannot remove the RS’s name from the balance due module.
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When a request for relief from joint and several liability is made, the RO will retain jurisdiction of open balance due modules. However, Examination or CCISO will make all determinations of whether to grant relief.
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CCISO will generally make the determinations on Collection cases unless local procedural or unusual situations call for the case to be worked in Field examination.
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To aid in the expeditious handling of these cases, the RO will take the following actions within 3 business days of receipt of Form 8857:
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The RO will screen the Form 8857 for completeness and processability. See IRM 25.15.8.3.
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If the Form 8857 is processable, the RO will fax the referral documents to CCISO.
Fax: (859) 669-5256.
Attn: Innocent Spouse Coordinator.
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CCISO will:
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Date stamp the faxed Form 8857.
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Acknowledge receipt via return fax to RO.
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The referral documents to be faxed to the CCISO unit include the following:
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Form 3449, Referral Report
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Copy of Form 8857. The RO should retain the original
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Copy of original return if available
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Collection history items
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Any other information relevant to the relief determination process (i.e., telephone number and address of the NRS, any indications of the existence of disqualified assets, evidence that the joint filing status is erroneous, whether the RS has any balance due for tax years after the years involved in the claim, details of any prior communications with the RS, information regarding the RS's finances, etc.)
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The RO will prepare Form 3449, Referral Report, and mark in red on the top margin "Expedite — Innocent Spouse Case. " The RO should clearly note whether the CSED of the NRS is within 12 months.
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The inventory and progress of all requests for relief from joint and several liability cases will be tracked through the Innocent Spouse Tracking System (ISTS). The system provides information regarding the current status of the case.
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As a relief from joint and several liability case reaches various stages, the employee with control over the request shall immediately update the account on ISTS to reflect the case progress using command code "ISTSR" within three business days of the case reaching the next processing stage. See IRM 25.15.14.4 for details on the various stages and required inputs.
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The RO is responsible for ensuring updates are made for any status relating to collection actions including receipt of request, transferred request, and request of the administrative file.
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Assistance in ensuring updates are made can be obtained through the Field Innocent Spouse Coordinator.
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Upon receipt of the referral documents, CCISO will:
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Date stamp the faxed Form 8857
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Acknowledge receipt via return fax to RO
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CCISO will be responsible for notifying the NRS that a claim has been filed, of the preliminary determination, of the right to appeal and for apprising the NRS of the final determination of the case.
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If a preliminary determination is not made within 120 days, the CCISO Unit will contact the RO regarding the status of the case and will provide updates every 30 days thereafter.
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CCISO will notify the RO of the final determination via fax.
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If agreement is reached, Field examination will work the referral. Both functions shall work together to secure necessary documents, address account problems, and prepare for a prompt resolution of the claim for relief. The RO may contact Examination for guidance when gathering the necessary information to complete the referral.
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Referrals to field examination should be made through the Field Innocent Spouse Coordinator who is responsible for establishing the claims on Audit Information Management System (AIMS).
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The Examination group manager will assign an examiner and notify the Collection group manager no later than 2 weeks from the date of the referral.
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The examiner shall periodically update the RO on the status of the case and specifically advise when it is forwarded to the Quality Measurement Staff (QMS).
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The examiner’s findings may affect the original balance due module and entity module. If the examiner finds the IRC 6015 relief provisions:
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Do not apply — Collection will be notified by memorandum. In these cases, the RO may resume collection if the circumstances set forth See IRM 25.15.8.7. have been met. No entity problems should arise.
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Fully apply — Once the Master File or Non-Master File balance due module is transferred to the NRS, no Collection action is necessary to make the entity change.
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Partially apply — A joint balance due module (MFT 30) is transferred to the campus showing the corrected amount owed by both taxpayers. A separate balance due module (MFT 31) is issued for the portion of the original assessment for which each spouse is separately liable.
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The RO will resume collection after any of the following have occurred:
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90 days have elapsed from issuance of the final determination letter on the claim and no notice is received of a Tax Court petition filing
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The Tax Court decision becomes final
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The taxpayer has waived the collection restrictions. See IRM 25.15.6.4.2.1
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The collection of the tax is in jeopardy
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If the RS timely appeals the Tax Court's decision, collection may be resumed from the date the RS files the notice of appeal, unless the RS files an appeal bond pursuant to the rules of IRC 7485.
Note:
Because the RS may be denied a refund of amounts collected during the pendency of appeal, the Service has made the policy decision not to begin collection after a notice of appeal is filed unless the expiration of the statute of limitations is imminent or collection will be jeopardized by the delay.
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Granting relief relieves the RS of personal liability for joint income taxes. Community property of the RS remains subject to collection against the NRS.
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The RS may, at any time (regardless of whether the Service has mailed a notice of final determination to the RS), waive the restrictions on collection.
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When an innocent spouse/joint and several liability relief claim has been filed, but the Examination determination is pending, the RO will consider the provisions of Policy Statement P-5-16 prior to filing the Notice of Federal Tax Lien.
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The RO will file a notice of lien against the NRS, if needed.
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A Notice of Federal Tax Lien may have been filed on a joint income tax balance due module before a claim for relief was made. The original notice will remain in force until an Examination determination is made.
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If Examination denies innocent spouse relief, no change to the original notice is necessary.
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If Examination grants the relief provisions in full:
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The examiner will send a request to the Automated Lien System (ALS) Unit for notification to the appropriate jurisdiction the balance due module is now satisfied for the RS only.
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The ALS Unit will NOT release the original notice.
Note:
The RO will monitor the account to ensure there is a partial release issued by contacting the ALS unit after approximately 20 days.
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If Examination grants relief in part, the RO will:
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Treat the reissued joint assessment as if there had been a partial abatement of the original balance due module;
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Take no action on the original notice until the reissued joint liability is fully paid;
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Release the lien when the module is fully satisfied.
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See IRM 25.15.1.8for information on the collection statute.
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Involuntary payments and undesignated voluntary payments received from the NRS or from his or her assets should generally be applied in the order below:
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individual liability,
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joint liability.
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The RO should determine if the statute of limitations has expired for filing a claim for Relief from Joint and Several Liability.
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Under the provisions of IRC 6015, the statute will have expired if the claim is filed more than two years from the first collection activity against the RS after July 22, 1998.
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Actions which constitute collection activity with respect to the individual making the election can be found in IRM 25.15.3.4.4
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A request for relief may be made before commencement of collection activity (e.g., in connection with an audit or prior to the CDP letter).
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A claim involving a deficiency is premature if filed for a tax year prior to the receipt of a notification of an audit or a letter or notice indicating there may be an outstanding liability with regard to that year. A claim involving an underpayment may be filed at any time after the balance due return is filed. Premature requests for relief will not be considered.