25.15.12  Appeals Procedures

Manual Transmittal

September 30, 2013

Purpose

(1) This document transmits revised IRM 25.15.12, Relief from Joint and Several Liability, Appeals Procedures.

Material Changes

(1) Revised IRM to incorporate Interim Guidance AP-25-1012-4 to eliminate from Letter 3288 the "Last Day to File a Petition with the United States Tax Court" .

(2) Revised IRM to incorporate Interim Guidance AP-25-0313-01 to include an explanation of Tax Court rights with every innocent spouse determination.

(3) Editorial changes (including grammar, spelling, and minor clarification) were made throughout the IRM.

IRM Reference Description of Change
IRM 25.15.12.2 Removed reference to IRM 25.15.10. This IRM has been deemed "Obsolete" by the program owner. This IRM is no longer needed because its contents are duplicated in IRM 4.8.5.
IRM 25.15.12.5.2.1 Updated IRM citation and title.
IRM 25.15.12.5.2.2 Updated IRM citation and title.
IRM 25.15.12.7.4 Update to remove "if applicable" . Letter 3288 should always provide information about filing a petition with Tax Court. Revised to incorporate Interim Guidance AP-25-0313-01.
IRM 25.15.12.7.8 Updated to clarify the suspension of the CSED stops 60 days after the form is signed on behalf of the Commissioner.
IRM 25.15.12.7.9 Removed obsolete and/or out dated information.
IRM 25.15.12.9 Corrected letter number in (a) to 3791.
IRM 25.15.12.10 Revised to incorporate Interim Guidance AP-25-0313-01. Removed obsolete information from Note: In an action on decision (AOD 2013-07), the IRS has announced it will acquiesce in a Ninth Circuit decision, stating that although it disagrees that section 6015(e)(1) provides both a de novo standard of review, it will no longer argue that the Tax Court should review section 6015(f) cases for an abuse of discretion or that the court should limit its review to the administrative record.
IRM 25.15.12.13 Updated IRM citation.
IRM 25.15.12.15 Updated IRM citations.
IRM 25.15.12.15.2 Updated IRM citation.
IRM 25.15.12.16 Revised to incorporate Interim Guidance AP-25-0313-01. Updated IRM citation (3).
IRM 25.15.12.16.1 Revised to incorporate Interim Guidance AP-25-0313-01.
IRM 25.15.12.16.2 Revised to incorporate Interim Guidance AP-25-0313-01.
IRM 25.15.12.18 Update IRM citation.
IRM 25.15.12.20 Updated IRM citation.
IRM 25.15.12.21 Revised to incorporate Interim Guidance AP-25-0313-01.
IRM 25.15.12.21.1 Removed (f) Compute the LAST DAY TO FILE and enter that date on the right hand side of Letter 3288. Per IG AP-25-1012-4, Appeals will no longer compute and include a "Last Day to File a Petition with the United States Tax Court" on innocent spouse final determination Letter 3288.
IRM 25.15.12.18 Updated IRM citation.
IRM 25.15.12.23.1 Updated IRM citation.
IRM 25.15.12.23.2 Revised to incorporate Interim Guidance AP-25-0313-01. Removed the requirement to issue Letter 3288 without information about filing a petition with Tax Court.
IRM 25.15.12.26.3 Updated IRM citations.
IRM 25.15.12.26.5 Updated IRM citations.
IRM 25.15.12.26.6 Updated IRM citations.
IRM 25.15.12.26.7 Updated IRM citations.
IRM 25.15.12.26.8 Updated IRM citations.
IRM 25.15.12.26.9 Updated IRM citations.
IRM 25.15.12.26.11 Updated IRM citations.
IRM 25.15.12.26.13 Updated to clarify the suspension of the CSED stops 60 days after the form is signed on behalf of the Commissioner.
IRM 25.15.12.26.14 Updated IRM citations.
IRM 25.15.12.26.15 Removed obsolete information. The RS's CSED is suspended upon filing of Form 8857 therefore Appeals should never received a claim where the RS's CSED has expired. Correct IRM citations
IRM 25.15.12.26.16 Updated IRM citations. Removed outdated references.
IRM 25.15.12.28.1 Updated note under refundable payments for Recons for claim previously denied for timeliness.

Effect on Other Documents

This IRM supersedes the information in IRM 25.15.12, Relief from Joint and Several Liability, Appeals Procedures, dated August 10, 2012. Incorporated Interim Guidance Memorandum AP-25-1012-04, Interim Guidance to Eliminate from Letter 3288 the "Last Day to File a Petition with the United States Tax Court" , which was issued October 12, 2012 into this IRM. Incorporated Interim Guidance Memorandum AP-25-0313-01, Interim Guidance on Changes to Innocent Spouse Procedures to Explain Tax Court Rights, which was issued March 5, 2013 into this IRM.

Audience

Appeals Employees

Effective Date

(09-30-2013)

Susan L. Latham
Director, Policy, Quality and Case Support

25.15.12.1  (05-22-2012)
Overview of the Innocent Spouse Appeals Process

  1. This section covers the processes and procedures for handling appeals of determinations made in response to requests for relief from joint and several liability pursuant to IRC 6015 ("innocent spouse" appeals). Appeals makes a determination on these requests for relief when appropriate.

  2. Joint and Several Liability: Married taxpayers may elect to file joint returns with their spouse. See IRC 6013(a). Under IRC 6013(d)(3), each spouse filing a joint return is jointly and severally liable for the tax; that is, each spouse is responsible for the entire income tax liability even though all or part of the liability arises from income earned by or a deduction attributable to the other spouse.

  3. An election to file a joint return may only be revoked before the due date of the return, including extensions. However, an executor or administrator may revoke a joint return election made by a surviving spouse within one year of the due date of the surviving spouse’s return, including extensions (time for filing such return). See Treas. Reg. 1.6013-1(d)(5).

  4. IRC 6015 provides relief in certain circumstances from the joint and several liability imposed by IRC 6013(d)(3). Appeals technical employees (ATEs) make the final determination under the following provisions:

    • IRC 6015(b) – Innocent Spouse Relief – provides an election for relief from a deficiency/understatement of tax liability.

    • IRC 6015(c) – Separation of Liability – provides an election to allocate a deficiency/understatement.

    • IRC 6015(f) – Equitable Relief – provides IRS with discretion to grant equitable relief from deficiencies and underpayments if the relief provisions under 6015(b) or 6015(c) do not apply.

  5. IRC 6015 is effective for:

    • Unpaid balances as of July 22, 1998; and

    • Liabilities arising after July 22, 1998

  6. Under IRC 66(c), married taxpayers filing separate returns in community property states may request relief from the operation of state community property laws. This is also considered innocent spouse relief.

25.15.12.1.1  (05-22-2012)
Common Terms Applicable to Innocent Spouse Cases

  1. The following commonly used terms apply to innocent spouse cases:

    1. Requesting spouse (RS) – The person who files the request for innocent spouse relief (Form 8857,) or otherwise properly raises the issue of innocent spouse relief. Sometimes this person is also referred to as the "electing spouse" .

    2. Non-requesting spouse (NRS) – The spouse or former spouse of the person who files the request for innocent spouse relief. Sometimes this person is also referred to as the "non-electing spouse."

      Note:

      Both spouses may request innocent spouse relief for the same tax period. Therefore, you can have two cases where one spouse is the RS on his/her claim and the non-requesting spouse (NRS) on their spouse’s claim.

    3. Appellant spouse – The taxpayer who requested Appeals consideration. This can be the requesting spouse, the non-requesting spouse, or both.

25.15.12.1.2  (05-22-2012)
Types of Cases That Can Be Innocent Spouse Cases

  1. There are many different types of cases that can result in an appealed innocent spouse case. Innocent spouse cases are non-docketed or docketed, and post-assessment or pre-assessment. Appeals considers an innocent spouse issue as part of an appeal of any of the following types of cases (not all-inclusive):

    • Non-docketed denial of an innocent spouse request (post-assessment)

    • Non-docketed open examination (pre-assessment proposed deficiency case)

    • Docketed denial of an innocent spouse request (post-assessment)

    • Docketed proposed deficiency case with request for innocent spouse relief raised in the petition (pre-assessment)

    • Innocent spouse request in connection with a collection due process case (typically post-assessment)

  2. Married or formerly married taxpayers who file joint (or separate returns while married in community property states) may be relieved of income tax liability under certain conditions.

  3. If the RS is relieved of the income tax liability under IRC 6015, related penalties, additions to tax, additional amounts, and interest are relieved.

  4. If relief is denied in whole or in part to the RS, he/she may appeal the preliminary determination. The NRS may not appeal a decision to deny relief to the RS.

  5. If relief is granted in whole or in part to the RS, the NRS may appeal the preliminary determination to the extent relief is granted to the RS.

  6. Both spouses might appeal a partial-relief preliminary determination.

25.15.12.1.3  (05-22-2012)
Disclosure of Information

  1. Do not disclose the following information:

    • The other spouse's new last name, location, or telephone number;

    • Any information about the other spouse's employment, income or assets.

  2. Do not disclose the RS’s personal information to the NRS. Similarly, do not disclose the NRS’s personal information to the RS.

  3. Information with respect to the joint return account, such as the balance due, can be disclosed to either spouse. See IRM 11.3.2.4.1, Individuals, for additional information regarding disclosure of collection activities with respect to joint returns.

  4. Request for information concerning divorced or separated spouses beyond that provided in IRC 6103(e)(8) should be referred to the Disclosure Office. See IRM 25.15.1.9.2, Disclosure Rules, for additional information regarding disclosure rules.

25.15.12.2  (09-30-2013)
References Available to Appeals

  1. Appeals employees are responsible for researching and using information contained in all reference materials

  2. ATEs follow the Internal Revenue Code and Regulations, Rev. Proc. 2003-19, 2003-1 C.B. 371, Rev. Proc. 2003-61, 2003-2 C.B. 296, Notice 2012-8, 2014-4 I.R.B. 309, and the Internal Revenue Manual.

  3. This manual section is part of IRM 25.15, Relief from Joint and Several Liability, a cross-functional IRM that provides guidance on innocent spouse cases. In addition to the Appeals procedures contained in this section, refer to the following sections:

    IRM Title Topic Covered
    IRM 25.15.1 Introduction General information on relief from joint and several liability and relief from application of community property laws for all functions.
    IRM 25.15.2 General Procedures/Employee With Taxpayer Contact General guidelines for employees with taxpayer contact concerning innocent spouse issues.
    IRM 25.15.3 Technical Provisions of IRC 6015 Discusses innocent spouse provisions of IRC 6015 and provides detailed guidance and procedures for processing innocent spouse requests for relief.
    IRM 25.15.5 Relief from Community Property Laws/Community Property States Discusses relief from community property laws and the provisions of IRC 66.
    IRM 25.15.6 Field Examination Procedures Provides procedures for Revenue Agents or Tax Compliances Officers in Small Business/Self Employed (SB/SE) Operating Division Examination Areas offices for working cases involving requests for relief from joint and several liability.
    IRM 25.15.7 Compliance Campus Functions Provides procedures for Compliance Campus functions, including the Cincinnati Centralized Innocent Spouse Operation (CCISO), Correspondence Examination (SCEB), Automated Underreporter (AUR), and Customer Service Representatives.
    IRM 25.15.8 Procedures for Working Innocent Spouse Relief Cases Provides procedures for revenue officers in Collection Field function to handle case with a request for relief from joint and several liability.
    IRM 25.15.9 Account Processing of Requests for Relief from Joint and Several Liability Provides instructions for the processing of innocent spouse cases. Although the procedures are directed to CCISO, the guidance should be considered by other functions when processing innocent spouse cases.
    IRM 25.15.11 Taxpayer Advocate Service Contacts and Identity Theft Referrals Provides Taxpayer Advocate Service (TAS) procedures related to innocent spouse and identity theft issues.
    IRM 25.15.14 Innocent Spouse Tracking Systems Inventory Validation Instructions Provides guidance and procedures to IRS employees responsible for updating and ensuring the Innocent Spouse Tracking System (ISTS) is current and accurate.
    IRM 25.15.15 Mirror Modules for Requests for Relief from Joint and Several Liability Provides procedures for mirroring modules for requests for relief from joint and several liability.
    IRM 25.15.16 Telephone Contacts Provides procedures for employees who have contact with taxpayers by telephone in processing innocent spouse cases.
    IRM 25.15.17 Reconsiderations Provides procedures for processing a final determination or a claim previously closed as nonqualified when a RS submits additional information not previously considered as long as the Collection Statute Expiration Date (CSED) or Refund Statute Expiration Date (RSED) is still open.

  4. There are a number of other IRM sections that Appeals employees may need to use to resolve an innocent spouse case. See IRM 25.15.1.1.2, Other IRMs Pertaining to Examination Programs, for a list of potential references to consider (not all-inclusive).

  5. Additional information regarding procedural and technical aspects of the Innocent Spouse program is available on the IRS Innocent Spouse website at http://win.web.irs.gov/innocent_spouse.htm.

  6. Additional resources regarding Innocent Spouse Appeals cases are posted on the Appeals website at http://appeals.web.irs.gov/tech_services/innocentspouse/default.htm.

25.15.12.3  (10-01-2012)
Account and Processing Support (APS) Responsibilities for Innocent Spouse Cases

  1. Account and Processing Support (APS) is responsible for establishing, maintaining and releasing control of innocent spouse cases in Appeals inventory, issuing final determination letters and processing account adjustments.

  2. APS is the coordination point in Appeals for Examination and Collection functions, Compliance campuses, Counsel Offices and the public.

    Caution:

    APS employees must use extreme caution when responding to telephone requests for information to avoid disclosing the requesting spouse’s (RS’s) new name or address, if any, to the non-requesting spouse (NRS) or the NRS’s separate representative. Similarly, do not disclose the NRS’s new name or address, if any, to the RS or the RS’s separate representative.

  3. Access to the following automated systems is needed to process innocent spouse cases in Appeals:

    1. ACDS (Appeals Centralized Database System), including its subsystems, such as Processing Employee Automated system (PEAs) and the Docket Information Management System (DIMS)

    2. IDRS (Integrated Data Retrieval System)

    3. AIMS (Audit Information Management System)

    4. ISTS (Innocent Spouse Tracking System)

    5. TL CATS (Counsel Automated Tracking System)

    6. CDPTS (Collection Due Process Tracking System)

25.15.12.4  (05-22-2012)
IDRS/ISTS Controls

  1. The office initially receiving the Form 8857, Request for Innocent Spouse Relief, is responsible for inputting the following transaction codes. Normally, these codes are already input on innocent spouse cases received in Appeals. Upon receipt of an innocent spouse case, verify if these transaction codes were input, and if not, take steps to input them.

    • Transaction Code 971 with AC 065 – This transaction code identifies a processable innocent spouse claim has been filed. The input of TC 971 AC 065 stops all potential collection action and generates a L- Freeze Code which prohibits offsets and prevents notices from being issued except for Notice 521, Monthly Reminder on Installment Agreements and CP 71, Annual Reminder Notice of Balance Due.

      Note:

      The TC 971 with AC 065 requires the following: The taxpayer’s TIN who filed for relief (RS). A cross-reference entry is not required (leave bank) if the primary taxpayer is the RS. If secondary taxpayer is the RS, enter the TIN of the secondary spouse and the date the Form 8857 or equivalent was filed with IRS. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972, for additional information regarding TC 971 AC 065.

    • Transaction Code 130 – Verify that this transaction code is on ENMOD for the NRS. It prevents an “erroneous” refund by freezing the entire account. The system automatically generates this transaction code when the proper TC 971 AC 065 and cross-reference is input on any MFT 30 account. If both spouses request relief, a TC 131 should be input to reverse the automatic TC 130s. See IRM 25.15.2.4.3, TC 130 Entire Account Frozen From Refunding, for additional information regarding TC 130 and TC 131.

    Caution:

    A TC 130 will not post if there is no balance due at the time TC 971 AC 065 posts. Therefore, if there is no balance due, you will have to manually input a TC 130.

  2. Innocent Spouse Tracking System (ISTS) – This is a mandatory, nationwide, cross-functional system developed to track and monitor the various stages of an innocent spouse case. The system is used to provide claim status information and statistical information. Appeals is responsible for updating the system. See IRM 25.15.14, Innocent Spouse Tracking Systems Inventory Validation Instructions, which describes the procedures for updating ISTS.

25.15.12.5  (05-22-2012)
APS Establishes ACDS Controls

  1. APS is responsible for carding the case on ACDS, within the time frames established in IRM 8.20.5, Processing and Establishing New Receipts.

  2. Innocent Spouse is one of the categories of cases on the Appeals Inventory Report (AIR). It is shown on ACDS as Category "INNSP."

  3. For a case to be included in the INNSP category, the Feature Code must contain SD (Spousal Defense) and the TYPE Code cannot be:

    1. Collection Due Process (CDP) TYPE Code, i.e. DPLN (CDP Lien), DPLV (CDP Levy), or DPL2 (CDP Lien and Levy), or

    2. Offer in Compromise (OIC)

  4. It is important to ensure an Innocent Spouse key case is properly included in the appropriate category on ACDS.

  5. Whether a case is initially received as an innocent spouse case, or identified as an innocent spouse case during Appeals consideration of the case, the work unit number must properly reflect the feature code SD on the key case to ensure it is counted as an innocent spouse case on the Appeals Reports.

  6. A separate work unit number will be needed for the innocent spouse case when the issue is raised during Appeals consideration of a CDP case. See IRM 25.15.12.16, CDP/EH and Innocent Spouse Cases, which provides additional instructions for CDP with innocent spouse cases.

  7. If both spouses file a request for relief, even if the same tax years(s), control each case with a separate work unit number on ACDS. The ISTS also keeps separate records according to the Primary/Secondary (P/S) indicator.

25.15.12.5.1  (05-22-2012)
Carding the Joint Return Work Unit as Key Case

  1. Taxpayers who file a joint return and one or both spouses request innocent spouse relief are controlled on ACDS in a work unit number that includes three records – one for the joint return, one for the RS and one for the NRS.

  2. The joint return is controlled as the key case. The RS and the NRS are each controlled as a related case within the same work unit number.

  3. The related case records are created for the following reasons:

    • To control the separate addresses of the RS and the NRS, for use when generating letters and forms from APGolf;

    • To control the separate statutes of the RS and the NRS. Separately control the NRS’s Assessment Statute Expiration Date (ASED) on ACDS on pre-assessment proposed deficiency cases. There is no need to separately control the NRS’s Collection Statute Expiration Date (CSED) on ACDS on post-assessment cases. See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table. Use this exhibit to assist in determining the correct statute date/code to use.

25.15.12.5.1.1  (10-01-2012)
Joint Return Key Case Record

  1. Establish the joint return as the key case record on CASES using the normal procedures on the case inventory screen and follow the additional instructions described below:

    • TPName – Enter the names as shown on the joint return.

    • ADDR – Leave blank.

    • TIN – Enter the primary TIN on the joint return as indicated on IDRS for the key tax period.

    • TIN2 – Enter the TIN of the secondary spouse on the joint return as indicated on IDRS for the key tax period.

      Note:

      The ACDS/ISTS match program requires the primary TIN on IDRS be entered in the TIN field on ACDS and the secondary TIN on IDRS (if applicable) be entered in the TIN2 field on ACDS.

    • TPTYPE – Select "Pri" in the drop down box if the RS is the primary TIN on the joint account or "Sec" in the drop down box if the RS is the secondary TIN on the joint account.

      Note:

      TPTYPE "Both" – is not applicable. If both spouses are requesting Appeals consideration, each is controlled under a separate work unit number.

    • MFT – Enter MFT 30.

      Note:

      The ACDS/ISTS match program requires that MFT 30 be entered on the key case record, even though in most cases, the MFT 30 joint account is already mirrored and each spouse is controlled on IDRS under his or her own separate MFT 31 account(s).

    • TYPE – Enter "I" for "Income Tax."

    • FEATRCD – Always enter SD for Spousal Defense (Innocent Spouse) on the key case record. Also enter feature code DP when the innocent spouse work unit number is created to separately control the innocent spouse case raised as a collection alternative in connection with a Collection Due Process case. Enter feature code RE when the case is a reconsideration. See IRM 25.15.12.28.5, Account and Processing Support (APS) Responsibilities for Reconsideration Cases Sent to Appeals, for additional information on reconsiderations. Enter any other feature code as applicable. A complete list of valid Feature Codes can be found on the ACDS Utilities menu.

    • REQAPPL – Enter the date of the request for appeal. Usually, for non-docketed cases, the date of the protest is used, if the request is written. For docketed cases, use the date the petition is filed. See IRM 8.20.3.3.16, REQAPPL (Request Appeal — Date Taxpayer Requested Appeal), for additional information on the rules regarding the appropriate date to use for this field.

      Note:

      If the case was established as another type of case prior to receipt of the request for innocent spouse relief, the original REQAPPL date is retained when it is appropriate to convert the original work unit to an innocent spouse work unit. In this circumstance, this field is not updated to reflect any subsequent requests for appeal. For example, if a request for innocent spouse relief is received on a small docketed case, convert the work unit to an innocent spouse work unit by updating the fields to correspond with the instructions in this section. If instead, it is appropriate to create a new work unit number to separately control the innocent spouse case, input the date of the request for appeal. For example, a separate work unit number is needed to control the innocent spouse case when the request for relief is received in connection with a CDP case. See IRM 25.15.12.16, CDP/EH and Innocent Spouse Cases, for additional information regarding procedures for CDP with innocent spouse cases.

    • RECEIVED – Enter the received date stamped on front of case (the date the case is received in Appeals).

    • SOURCE - Enter the appropriate Source Code. For example, enter SC if the source of the case is CCISO. If the source of the case is Field Examination, enter FE. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS), for additional information on the appropriate SOURCE to use.

    • DKTNO - If docketed, enter the docket number as it appears on the petition or docket list.

    • KEYTP - Leave blank.

    • KEYTIN - Leave blank.

    • KEYPER - Enter the earliest period of the joint return.

    • REPNAME and Address - Leave blank.

    • SNTYPE - This item is completed on all docketed cases or if a notice of deficiency or determination letter was issued on the joint return and it is in 90-day or 150-day status. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS), for additional information on the appropriate SNTYPE to use.

    • SNDATE - If applicable, enter the date the notice of deficiency or determination letter was issued.

    • NOTES - If the NRS appealed the RS’s determination, enter "NRS APPEAL." Enter any other information as applicable.

  2. On the case return information screen, follow the normal procedures and follow the additional instructions described below:

    • AIMS Indicator - Enter "E" if the case is not on AIMS and is not required to be on AIMS. This applies to most appealed innocent spouse cases received from the Cincinnati Centralized Innocent Spouse Operation (CCISO). If AIMS control is required on the joint return, enter either "Y" to indicate it is on AIMS or "N" to indicate it is not but should be on AIMS. If "N" is entered, take additional action to establish the case on AIMS.

    • TAXPER - Enter all tax periods as appropriate.

    • TAXPER Modifier - Leave blank if the original return or TRPRT print is in the file, or enter "N" if no original return or TRPRT print is in the file.

    • Statute Date/Code - See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table.

    • BodCd – Enter the appropriate BodCd. For example, enter 296 if the case originated in CCISO.

    • Proposed Tax Def/-OA - See Figure 25.15.12-1, Proposed Dollars/Joint Return Work Unit.

    • Proposed Pen Def/-OA - See Figure 25.15.12-1, Proposed Dollars/Joint Return Work Unit.

    Figure 25.15.12-1

    Proposed Dollars/Joint Return Work Unit

      Pre-assessment Post-assessment
    Proposed Tax Enter the proposed deficiency of tax as shown on the examiner's report. Leave blank
    Proposed Penalty Enter the proposed penalty amount, is any, as shown on the examiner's report Leave blank

25.15.12.5.1.2  (05-22-2012)
Requesting Spouse Related Record

  1. Establish a non-key related record for the RS using the same work unit number as the key case. Follow normal CASES procedures on the case inventory screen and follow the additional instructions described below:

    • TPName – Enter the current name of the RS.

    • ADDR – Enter the current address of the RS.

    • TIN – Enter the TIN of the RS.

    • TPTYPE – Blank. This field is not active if the MFT is not equal to 30. The RS is controlled with MFT 31.

    • MFT – Enter MFT 31.

    • TYPE – Enter "I" for "Income Tax."

    • FEATRCD – Enter SD for Spousal Defense (Innocent Spouse) on the RS related record.

    • REQPPL – Leave blank. The REQPPL date is only entered on the key case.

    • RECEIVED – Enter the received date stamped on front of case (the date the case is received in Appeals).

    • SOURCE - Enter the appropriate Source Code. For example, enter SC if the source of the case is CCISO. If the source of the case is Field Examination, enter FE. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS), for additional information on the appropriate SOURCE to use.

    • KEYTP – Enter the names as shown on the joint return.

    • KEYTIN – Enter the primary TIN of the joint return.

    • KEYPER – Enter the earliest period that relief was requested.

    • REPNAME and ADDRESS – For non-docked cases, use the name of the RS’s separate representative, if any, in last name, first name format in the first REPNAME field. For docketed cases, use the name of the attorney of record, if any. The name of an additional separate representative at the same address as the first representative may be entered in the second REPNAME field. In lieu of a second REPNAME, a title for the first representative, if provided, or additional address information may be entered in this field. Do not enter the representative’s telephone number in this field because it displays when a letter is generated on APGolf. Enter the representative’s address in the representative’s address fields following the REPNAME fields. Check the authorization level of the representative to verify that the representative is authorized to practice before Appeals prior to inputting. IDRS command code CFINK is used to determine whether an individual claiming to be a taxpayer’s representative is, in fact, authorized to represent or act on the taxpayer’s behalf, or to receive the information she/he requests. See IRM 2.3.31, IDRS Terminal Responses - Command Codes CFINK and RPINK for CAF Inquiry, and IRM 8.1.6.3, Representatives Qualified to Practice Before Appeals, for additional information.

    • NOTES – Enter RS. If the RS’s name is different than the name shown on the return as filed, also enter formerly known as (FKA) information.

  2. On the case return information screen, follow normal procedures and follow the additional instructions described below:

    • AIMS Indicator – Enter E, exempt from AIMS, or rarely, enter either Y or N. Y indicates the MFT 31 account is controlled separately on AIMS. N indicates the MFT 31 account is not but should be on AIMS. If N is entered, take additional action to establish the case on AIMS.

    • TAXPER – Enter all tax periods as appropriate.

    • TAXPER Modifier – Leave blank. The Tax Period Modifier is not applicable on the related record.

    • Statute Date/Code – See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table.

    • BodCd – Enter the appropriate BodCd. For example, enter 296 if the case originated in CCISO.

    • Proposed Tax Def/-OA – Leave blank.

    • DDAMTCLM/DDAMTDIS – Leave blank.

    • APPLAMTCLM/APPLAMTDIS – Leave blank.

25.15.12.5.1.3  (05-22-2012)
Non-Requesting Spouse Related Record

  1. Establish a non-key related record for the NRS using the same work unit number as the key case. Follow normal CASES procedures on the case inventory screen and follow the additional instructions described below:

    • TPName – Enter the name of the NRS.

    • ADDR – Enter the address of the NRS.

    • TIN – Enter the TIN of the NRS.

    • TPTYPE – Blank. This field is not active if the MFT is not equal to 30. The NRS is controlled with MFT 31.

    • MFT – enter MFT 31.

    • TYPE – Enter "REF" for "Reference."

    • FEATRCD – Do not enter SD on the NRS record, even if the NRS is appealing the RS’s preliminary determination or both spouses requested an appeal, but enter any other applicable feature code.

    • REQAPPL – Leave blank. The REQAPPL date is only entered on the key case.

    • RECEIVED – Enter the received date stamped on front of case (the date the case is received in Appeals).

    • SOURCE - Enter the appropriate Source Code. For example, enter SC if the source of the case is CCISO. If the source of the case is Field Examination, enter FE. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS) for additional information on the appropriate SOURCE to use.

    • KEYTP – Enter the names as shown on the joint return.

    • KEYTIN – Enter the primary TIN of the joint return.

    • KEYPER – Enter the earliest period that relief was requested.

    • REPNAME and ADDRESS – For non-docked cases, use the name of the NRS’s separate representative, if any, in last name, first name format in the first REPNAME field. For docketed cases, use the name of the attorney of record, if any. The name of an additional separate representative at the same address as the first representative may be entered in the second REPNAME field. In lieu of a second REPNAME a title for the first representative, if provided, or additional address information may be entered in this field. Do not enter the representative’s telephone number in this field because it displays when a letter is generated on APGolf. Enter the representative’s address in the representative’s address fields following the REPNAME fields. Check the authorization level of the representative to verify that the representative is authorized to practice before Appeals prior to inputting. IDRS command code CFINK is used to determine whether an individual claiming to be a taxpayer’s representative is, in fact, authorized to represent or act on the taxpayer’s behalf, or to receive the information she/he requests. See IRM 2.3.31, IDRS Terminal Responses - Command Codes CFINK and RPINK for CAF Inquiry and IRM 8.1.6.1, Representatives Qualified to Practice Before Appeals, for additional information.

    • NOTES – Enter NRS. If the NRS is appealing the RS’s preliminary determination, enter "NRS APPEAL" in "NOTES" to distinguish the case as a NRS Appeal. If the NRS’s name is different than the name shown on the return as filed, also enter formerly known as (FKA) information.

  2. On the case return information screen, follow normal procedures and follow the additional instructions described below:

    • AIMS Indicator – Enter E, exempt from AIMS, or rarely, enter either Y or N. Y indicates the MFT 31 account is controlled separately on AIMS. N indicates the MFT 31 account is not but should be on AIMS. If N is entered, take additional action to establish the case on AIMS.

    • TAXPER – Enter all tax periods as appropriate.

    • TAXPER Modifier – Leave blank. The Tax Period Modifier is not applicable on the related record.

    • Statute Date/Code – See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table.

    • BodCd – Enter the appropriate BodCd. For example, enter 296 if the case originated in CCISO.

    • Proposed Tax Def/-OA – Leave blank.

    • DDAMTCLM/DDAMTDIS – Leave blank.

    • APPLAMTCLM/APPLAMTDIS – Leave blank.

25.15.12.5.2  (05-22-2012)
Carding the Separate Return Work Unit (For Married Taxpayers Who Filed Separate Returns in Community Property States)

  1. Special instructions apply to carding a case for married taxpayers who filed separate returns in community property states where one or both spouses is requesting equitable relief.

  2. This type of case requires special CASES procedures to create a work unit that includes two records — one for the RS and one for the NRS.

  3. The RS is controlled as the key case. The NRS is controlled as a related case.

  4. If both spouses are docketed under separate docket numbers, each spouse must be controlled as a separate key case work unit. Enter cross reference information in the "Notes" field.

25.15.12.5.2.1  (09-30-2013)
Requesting Spouse Key Case Record

  1. Establish the RS as the key case record. The RS is the key case record even if the NRS is the appellant. Follow normal CASES procedures on the case inventory screen and follow the additional instructions described below:

    • TPName - Enter the current name of the RS.

    • ADDR - Enter the current address of the RS.

    • TIN - Enter the TIN of the RS.

    • TIN2 - Leave blank.

    • TPTYPE - Enter "Pri" for primary.

    • MFT - Enter MFT 30.

    • TYPE - Enter "I" for "Income Tax."

    • FEATRCD - Always enter SD for Spousal Defense (Innocent Spouse) on the key case record. Enter feature code DP when the innocent spouse work unit is created to separately control the innocent spouse case raised as a collection alternative in connection with a Collection Due Process case. Enter any other applicable feature code.

    • SOURCE - Enter the appropriate Source Code. For example, enter SC if the source of the case is CCISO. If the source of the case is Field Examination, enter FE. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS) for additional information on the appropriate SOURCE to use.

    • REQAPPL – Enter the date of the request for appeal. Usually, for non-docketed cases, the date of the protest is used, if the request is written. For docketed cases, use the date the petition is filed. See IRM 8.20.3.3.16, REQAPPL (Request Appeal — Date Taxpayer Requested Appeal), for additional information on the rules regarding the appropriate date to use for this field.

      Note:

      If the case was established as another type of case prior to receipt of the request for innocent spouse relief, the original REQAPPL date is retained when it is appropriate to convert the original work unit to an innocent spouse work unit. In this circumstance, this field is not updated to reflect any subsequent requests for appeal. For example, if a request for innocent spouse relief is received on a small docketed case, convert the work unit to an innocent spouse work unit by updating the fields to correspond with the instructions in this section. If instead, it is appropriate to create a new work unit number to separately control the innocent spouse case, input the date of the request for appeal. For example, a separate work unit number is needed to control the innocent spouse case when the request for relief is received in connection with a CDP case. See IRM 25.15.12.16, CDP/EH and Innocent Spouse Cases, for additional information regarding procedures for CDP with innocent spouse cases.

    • DKTNO - If docketed, enter the docket number as it appears on the petition or docket list.

    • KEYTP - Leave blank.

    • KEYTIN - Leave blank.

    • KEYPER - Enter the earliest period of the joint or separate return.

    • REPNAME and Address - Enter the name of the RS’s separate representative, if any, in last name, first name format in the first REPNAME field. The name of an additional separate representative at the same address as the first representative may be entered in the second REPNAME field. In lieu of a second REPNAME, a title for the first representative, if provided, or additional address information may be entered in this field. Do not enter the representative’s telephone number in this field because it will appear on letters generated using APGolf. Enter the representative’s address in the representative’s address fields following the REPNAME fields. Verify that the authorization level of the representative is authorized to practice before Appeals prior to inputting. IDRS command code CFINK is used to determine whether an individual claiming to be a taxpayer’s representative is, in fact, authorized to represent or act on the taxpayer’s behalf, or to receive the information she/he requests. See IRM 2.3.31, IDRS Terminal Responses - Command Codes CFINK and RPINK for CAF Inquiry and IRM 8.1.6.1.3, Representatives Qualified to Practice Before Appeals, for additional information.

    • SNTYPE - This item is completed on all docketed cases or if a notice of deficiency or determination letter was issued on the separate return and it is in 90-day or 150-day status. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS), for additional information on the appropriate SNTYPE to use.

    • SNDATE - If applicable, enter the date the notice of deficiency or determination letter was issued.

    • NOTES - Enter "RS" . If the RS’s name is different than the name shown on the return as filed, also enter formerly known as (FKA) information.

  2. On the case return information screen, follow the normal procedures and follow the additional instructions described below:

    • AIMS Indicator - Enter "E" if the case is not on AIMS and is not required to be on AIMS. This applies to most innocent spouse claims received from CCISO. If AIMS control is required on the separate return, enter either "Y" to indicate it is on AIMS or "N" to indicate it is not but should be on AIMS. If "N" is entered, take additional action to establish the case on AIMS.

    • TAXPER - Enter all tax periods as appropriate.

    • TAXPER Modifier - Leave blank if the original return is in the file, or enter "N" if no original return is in the file.

    • Statute Date/Code - Enter the separate statute date/Code for the RS. See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table.

    • BodCd – Enter the appropriate BodCd. For example, enter 296 if the case originated in CCISO.

    • Proposed Tax Def/-OA - See Figure 25.15.12-2, Proposed Dollars/Separate Return Work Unit.

    • Proposed Pen Def/-OA - See Figure 25.15.12-2, Proposed Dollars/Separate Return Work Unit.

    Figure 25.15.12-2

    Proposed Dollars/Separate Return Work Unit

      Pre-assessment Post-assessment
    Proposed Tax Enter the proposed deficiency of tax as shown on the examiner's report Leave blank
    Proposed Penalty Enter the proposed penalty amount, if any, as shown on the examiner's report Leave blank

25.15.12.5.2.2  (09-30-2013)
Non-Requesting Spouse Related Record

  1. Establish the non-key related record for the NRS on CASES using the same work unit number as used for the RS. Follow normal procedures on the case inventory screen and follow the additional instructions described below:

    • TPName - Enter the name of the NRS.

    • ADDR - Enter the address of the NRS.

      Note:

      Do not disclose the NRS’s current name or address to the RS, if different than on the return.

    • TIN - Enter the TIN of the NRS.

    • TPTYPE - Enter "Pri" for Primary. This field is active if the MFT is equal to 30.

    • MFT - enter MFT 30.

    • TYPE - Enter "REF" for "Reference."

    • FEATRCD - Do not enter feature code SD on this record, but enter any other feature code that is applicable.

    • REQAPPL - Leave blank.

    • SOURCE - Enter the appropriate Source Code. For example, enter SC if the source of the case is CCISO. If the source of the case is Field Examination, enter FE. Refer to IRM 8.20.3, Appeals Centralized Database System (ACDS), for additional information on the appropriate SOURCE to use.

    • KEYTP - Enter the name as shown on the requesting spouse’s return.

    • KEYTIN - Enter the TIN of the requesting spouse’s return.

    • KEYPER — Enter the earliest period of the RS.

    • REPNAME and Address - Enter the name of the NRS’s separate representative, if any, in last name, first name format in the first REPNAME field. The name of an additional separate representative at the same address as the first representative may be entered in the second REPNAME field. In lieu of a second REPNAME, a title for the first representative, if provided, or additional address information may be entered in this field. Do not enter the representative’s telephone number in this field since it displays when a letter is generated using APGolf. Enter the representative’s address in the representative’s address fields following the REPNAME fields. Check the authorization level of the representative to verify that the representative is authorized to practice before Appeals prior to inputting. IDRS command code CFINK is used to determine whether an individual claiming to be a taxpayer’s representative is, in fact, authorized to represent or act on the taxpayer’s behalf, or to receive the information she/he requests. See IRM 2.3.31, IDRS Terminal Responses - Command Codes CFINK and RPINK for CAF Inquiry and IRM 8.1.6.1.3, Representatives Qualified to Practice Before Appeals, for additional information.

    • NOTES - Enter "NRS." If the NRS’s name is different than the name shown on the return as filed, also enter formerly known as (FKA) information.

  2. On the case return information screen, follow normal procedures and follow the additional instructions described below:

    • AIMS Indicator - Enter E, exempt from AIMS, or rarely, enter either "Y" or "N." "Y" is used to indicate the account is controlled on AIMS, and "N" is used to indicate it is not but should be on AIMS. If "N" is entered, take additional action to establish the case on AIMS.

    • TAXPER - Enter all tax periods as appropriate.

    • TAXPER Modifier - If Appeals has the original separate tax return leave the Tax Period Modifier blank; If Appeals does not have the original separate tax return enter "N."

    • Statute Date/Code - Enter the separate statute date/code for the NRS. See Exhibit 25.15.12-1, Innocent Spouse — ACDS Statute Date/Code Table.

    • BodCd – Enter the appropriate BodCd. For example, enter 296 if the case originated in CCISO.

    • Proposed Tax Def/-OA - Leave blank.

    • DDAMTCLM/DDAMTDIS - Leave blank.

    • APPLAMTCLM/APPLAMTDIS - Leave blank.

25.15.12.6  (05-22-2012)
Assignment of Innocent Spouse Cases

  1. Innocent Spouse cases must be promptly assigned for consideration, no later than 30 days from when the case is received in Appeals.

  2. Both the key case and related cases must be assigned to the same employee.

25.15.12.7  (05-22-2012)
Appeals Innocent Spouse Letters and Forms

  1. On letters to the NRS when the RS's name is inserted, use the name of the RS as shown on the return. On letters to the RS when the NRS's name is inserted, use the name of the NRS as shown on the return.

  2. The following letters are approved for Appeals use and should be generated from the Appeals Generator of Letters and Forms (APGolf) sub-system of the Appeals Centralized Database System (ACDS). In addition, the letters are posted on the Publishing web site.

  3. General Rule is to send all required letters to the taxpayer's last known address of record. The Service is required to exercise due diligence to find and use the taxpayer's last known address. The last known address is the address on the most recently filed and properly processed tax return, unless the taxpayer has clearly and concisely notified the IRS of a change of address, or the Service may update the taxpayer's address of record by using United States Postal Service's National Change of Address database. See IRM 4.8.9.8.2, Taxpayer Address, for additional information.

  4. When mail sent to a taxpayer's last known address is returned undeliverable, ATE will:

    If, after all necessary research is completed... Then...
    Another address is determined Reissue the letter to the new address
    No new address is determined Continue to process the case and send all required letter to the taxpayer's last known address of record, unless the exception applies.

    Exception:

    If you are not granting relief to the RS, and mail to the NRS at the last known address was returned undeliverable and you are unable to locate a new address, there is no need to send either of the required letters (conference letter and final notice) to the NRS.

    Note:

    This exception does not apply to notices of deficiency. Continue to issue notices of deficiency to the taxpayer's last known address, even if mail was returned undeliverable to that address and no new address is determined.

  5. Never destroy undeliverable mail; keep one copy of the letter and enclosures (except for publications, notices and self-addressed IRS envelopes) stapled to the undeliverable envelope (in correspondence order) with the undeliverable envelope stapled to the front of the letter.

25.15.12.7.1  (05-22-2012)
Deceased Non-Requesting Spouses

  1. The NRS is entitled to receive all required letters, even if the NRS is deceased.

  2. Usually, you will find out that the NRS is deceased from the RS. A deceased taxpayer also may be identified on IDRS by one or more to the following:

    • The literal "DECD" after his/her name on INOLE and ENMOD

    • Date of Death on INOLE (Generated by an SSA record)

    • TC 540 on TXMOD or IMFOLT for the year of death

  3. If there is no indication on IDRS that the NRS is deceased, request as much of the following information as possible from the RS or representative:

    • Date of death and copy of death certificate

    • County in which the taxpayer died

    • County in which the taxpayer resided at time of death

    • A will, validated through the court

    • Name, address and telephone number of the fiduciary (executor, executrix, or administrator of the taxpayer's estate), if any

  4. If the NRS has not been identified as deceased on IDRS, send an update request with a copy of the death certificate to ask APS to:

    • Add the "DECD" indicator to IDRS using CC INCHG, and

    • Input TC 540 using CC REQ77 for the year of the taxpayer's death, unless the date of death is in the current year or there is a filing requirement for the year of death.

  5. It is important to determine the proper person to contact on behalf of the NRS because that person is responsible for protecting the rights of the deceased NRS by providing any relevant additional information and presenting the NRS's position.

  6. There may be an estate or a fiduciary for the deceased NRS. Ask the RS if he/she knows whether the NRS has an estate. In addition, research IDRS using CC INOLE with definer G, to determine if the Service is aware of an estate. If yes, research using CC CFINK for POA information under the EIN of the estate.

  7. A fiduciary (trustee, executor, administrator, receiver, or guardian) stands in a position of and acts as the taxpayer, not as an appointee or representative. A fiduciary does not need to complete a third party authorization unless the fiduciary wishes to authorize someone else to act in place of the decedent. If necessary, obtain the following:

    • Form 56, Notice Concerning Fiduciary Relationship, when necessary to prove the creation or termination of a fiduciary relationship

    • Court papers naming the person as the court-appointed or court certified personal representative for the deceased taxpayer.

    • Authorized representative forms, when necessary to verify an authorized representative.

    Caution:

    Use caution when determining the NRS's authorized representative from CFINK. A third party authorization expires with the death of the taxpayer.

  8. How to address letters to deceased taxpayers:

    If the NRS is Deceased and ... Then Address the Letter to the Deceased NRS To:
    • There is no estate

    • You do not know if there is an estate

    • The fiduciary is unknown

    Address the first name line to the deceased NRS at the NRS's last known address:

    Example:

    John Doe (Deceased)

    There is an estate Address the first name line to the estate of the taxpayer and address the second name line to the executor, fiduciary, or representative at the address of the person named on the second name line:

    Example:


    Estate of John Doe


    Joseph Elm, Executor
    The fiduciary is known Address the first name line to the deceased NRS and address the second name line in care of the fiduciary or representative at the address of the person named on the second name line:

    Example:


    John Doe (Deceased)
    c/o Jane Green, CPA

  9. On docketed cases notify the assigned Counsel attorney that the NRS is deceased.

  10. All actions and discussions with affected taxpayers and/or representatives should be fully documented on the ACDS case activity record. Recommended comments specific to cases involving a deceased NRS include:

    • NRS is deceased, date of death

    • If a required letter was not sent to the NRS, annotate the reason:

      Example:

      Letter 3289 was not sent to the NRS because no relief was granted to the RS and mail to the NRS's last known address was returned undeliverable and could not locate a new address.

25.15.12.7.2  (05-22-2012)
Uniform Acknowledgment Letter (UAL)

  1. Letter 4141, Uniform Acknowledgment Letter, is used for non-docketed Innocent Spouse cases. The Appeals Team Manager (ATM) is responsible for generating and issuing Letter 4141 on the date the case is assigned on ACDS, which cannot be later than 30 days from the ACDS "Received Date" . See IRM 1.4.28.3.1, Assignment of Work Units and Issuance of Letter 4141(CG), Uniform Acknowledgment Letter (UAL), for additional procedures on issuance of UAL.

  2. Letter 4141 is also used for most docketed Innocent Spouse cases, unless an approved Uniform Acknowledgment Letter substitute is used, such as Letter 3808 or Letter 3808-A, combination acknowledgment/initial contact letters used in Campus Appeals offices. When UAL Letter 4141 is used, the ATM is responsible for generating and issuing it on the ACDS "Assigned Date" . In Campus Appeals offices, when approved Uniform Acknowledgment Letter substitute Letter 3808 or Letter 3808-A is used, the AO is responsible for generating and issuing it no later than 30 days from the ACDS "Assigned Date" .

  3. Carefully review the administrative file to ensure the letter is only generated for and mailed to the appellant spouse, the taxpayer who requested appeals consideration. For example, if the RS is appealing Compliance's full or partial denial of relief, Letter 4141 must only be mailed to the RS. If the NRS is appealing Compliance's full or partial allowance of relief to the RS, Letter 4141 must only be mailed to the NRS. Look for "NRS APPEAL" in "NOTES" on the joint key case record to determine if the NRS is the appellant spouse. If both the RS and the NRS are appealing Compliance's determination then Letter 4141 must be sent to both.

  4. When APGolf is used to prepare the letter, certain entries are made systemically on ACDS.

  5. Because the UAL letter for an innocent spouse case is generated from a non-time sheet (related) record, the employee must manually make a CAR entry regarding the issuance of the UAL. See IRM 1.4.28.3.1(4), Assignment of Work Units and Issuance of Letter 4141(CG), Uniform Acknowledgment Letter (UAL), for required entries.

  6. See Exhibit 1.4.28-1, Pre-Selected Enclosures for the UAL Based Upon the Category and Type of Case, for required enclosures for an innocent spouse case.

25.15.12.7.3  (05-22-2012)
Initial Contact/Conference Letters

  1. Letter 965, Conference Letter Non-docketed Case, or other pattern conference letter available on APGolf. A conference letter may be used to schedule an informal conference with the appellant spouse, and it explains what they should do if they plan to provide additional information and supporting documentation, or be represented. It also may be used to request additional information to help support the taxpayer's position. Initial contact may be made by telephone in lieu of an initial contact conference letter.

  2. Letter 3791, Appeals Conference for Innocent Spouse Relief - to Non-requesting Spouse. This conference letter is sent to the non-requesting spouse when the requesting spouse appeals the preliminary determination if Appeals proposes to increase the amount of relief recommended. It is sent to provide the non-requesting spouse with an opportunity to provide any relevant additional information, present his or her position, or request an Appeals conference before the final determination.

  3. Letter 3792, Appeals Conference for Innocent Spouse Relief - to Requesting Spouse. This conference letter is sent to the requesting spouse when the non-requesting spouse appeals the preliminary determination if Appeals proposes to decrease the amount of relief recommended. It is sent to provide the requesting spouse with an opportunity to provide any relevant additional information, present his or her position, or request an Appeals conference before the final determination.

25.15.12.7.4  (09-30-2013)
Determination Letters

  1. Letter 3288, Final Appeals Determination - to Requesting Spouse. This letter is used to advise the requesting spouse of the determination concerning relief from joint and several liability under IRC 6015 and to provide information about filing a petition with Tax Court.

  2. Letter 3289, Final Appeals Notice - to Non-requesting Spouse. This letter is used to advise the non-requesting spouse of the determination concerning relief from joint and several liability under IRC 6015. There are no provisions in IRC 6015 that allow the non-requesting spouse to petition the United States Tax Court from a notice of final determination.

25.15.12.7.5  (05-22-2012)
Agreement Transmittal Letters

  1. Letter 969, Letter Transmitting Agreement Form Non-Docketed Case. This letter is used in non-docketed cases to send an agreement form to the taxpayer or representative for signature.

25.15.12.7.6  (05-22-2012)
Closing Letters

  1. Letter 913, Closing Letter - Agreed Cases. This letter is used in non-docketed cases to notify the taxpayer that his or her case is being closed.

25.15.12.7.7  (05-22-2012)
Docketed Letters

  1. Use the same letters for an Innocent Spouse docketed case as used for a docketed case. In addition, the following letters may be used for docketed cases:

    • Letter 970, Conference Invitation Docketed Case. This letter offers a conference to discuss the possibility of settling the docketed case without trial. Initial contact may be made by telephone in lieu of an initial contact conference letter.

    • Letter 3808, S-Docketed Initial Contact Letter. This letter is an initial contact letter for use by Campus Appeals offices for docketed "S" cases. It contains a paragraph directing payments to be made to an IRS Campus. The appropriate IRS Campus is selected when the letter is generated from a drop-down list.

    • Letter 3808-A, S-Docketed Initial Contact Letter. This letter is an initial contact letter for use by Appeals offices for docketed "S" cases. It contains a paragraph directing payments be made to the Campus Appeals office address shown in the letterhead.

    • Letter 1220, Letter Sending Stipulation to Taxpayer for Signature/Docketed Case. Use this letter to send settlement documents to taxpayers for review, signature and return. A version of this letter with a paragraph to provide an estimate of the total amount owed including tax, penalties and estimated interest is also available on APGolf.

    • Letter 971, Letter Advising No Settlement Reached - Docketed Case. Use this letter to notify a petitioner that no settlement was reached and the case was referred to Counsel for trial preparation.

25.15.12.7.8  (09-30-2013)
Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases

  1. Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases, is used to allow a RS who requested relief under IRC 6015 to indicate agreement with the IRS determination and waive, in writing, the collection restrictions contained in IRC 6015(e)(1)(B). Use of this waiver is only appropriate in post-assessment innocent spouse cases. Appeals cannot require a taxpayer to waive his or her rights. When the RS signs Form 870–IS, Waiver of Collection Restrictions in Innocent Spouse Cases, it is anticipated that the RS will not petition the Tax Court. It should be noted, however, that Form 870–IS, is not 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 or within 90 days from the date the Service issues a final determination letter. Nonetheless, once the IRS receives the signed Form 870–IS, the Service may resume collection against the RS. It should also be noted that the suspension of the collection statute expiration date (CSED) stops 60 days after the form is signed on behalf of the Commissioner.

  2. A faxed signature can be accepted (up to the Servicewide established threshold amount for acceptance of consents by fax, currently up to $250,000).

  3. When a signed Form 870-IS is received from the RS ensure there has been no alteration of the original.

  4. The ATE must secure a signed Form 870-IS with instructions that include complete information on Tax Court rights on all agreed cases for which partial or full relief is granted.

    Note:

    The ATE will no longer attempt to secure a Form 870-IS on fully denied request for relief, even if the RS is in agreement with the determination. Instead, the ATE will issue a final determination letter, except on combo cases.

  5. See IRM 25.15.3.10, Waivers, for a complete discussion and detailed guidance and procedures for use of Form 870-IS.

25.15.12.7.9  (09-30-2013)
Customized Form 5402, Appeals Transmittal and Case Memo, for Innocent Spouse Cases

  1. The Appeals Technical employee (ATE) is responsible for providing Account and Processing Support with the necessary disposition information to update ACDS, ISTS and IDRS. Refer to IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions, for guidance to IRS employees charged with the responsibility of updating and ensuring the Innocent Spouse Tracking System (ISTS) is current and accurate.

  2. Use of the Customized Form 5402, Appeals Transmittal and Case Memo, for Innocent Spouse cases, is mandatory. See IRM 8.6.2.2, Customized Form 5402, for more information. The ATE must provide the following information so APS can update ISTS:

    • ISTS ADP Code - Required entry in the ADP field is one of the following:

    Required Entry Explanation
    A Allowed in Full
    D Disallowed in Full
    P Partially Allowed

    • ISTS Code Section - Required entry in the Code Section is one of the following:

    Required Entry Explanation
    6015b IRC 6015(b)
    6015c IRC 6015(c)
    6015fd IRC 6015(f) understatement/deficiency
    6015fo IRC 6015(f) underpayment/original liability
    66ceqr IRC 66(c) equitable relief — community property
    66cins IRC 66(c) innocent spouse — community property
       

    Note:

    On disallowed deficiency cases, Do Not use "(f)" when entering the code section. Use "(b)" or "(c)" as appropriate.

    Exception:

    If the case is an understatement that is untimely under (b) and (c) but timely under (f), use (fd).

    Note:

    In any other combination of partial allowance/disallowance, the activity code input will be the one which reflects the highest dollar amount allowed. For example, if the total amount of a claim is $1,000 and $500 is allowed under IRC 6015(b), $250 is allowed under IRC 6015(f) and $250 is disallowed, then the activity code input will be "P6015B " , with the appropriate reason code for partial disallowance under IRC 6015(b).

    • ISTS ADP Reason Code - Required entry under Reason Code if the ADP is P or D are listed below:

      Reason Code Explanation
      A Liability attributable to the RS
      B RS received significant benefit from the unpaid/unreported liability

      Note:

      Don't use with IRC 6015(c).

      BT At the time the return was signed, the RS had no reason to believe the tax would be paid
      DA Disqualified assets transferred to avoid paying tax
      E It is equitable to hold the RS liable

      Note:

      Don't use with IRC 6015(c).

      FT Fraud/fraudulent transfers of assets between the spouses
      K Knowledge of item giving rise to deficiency
      MS Marital status not met for IRC 6015(c)
      O Other (should only be used with managerial approval)
      OC Offer in compromise was previously accepted for the RS
      P Paid in full after claim was received
      RB Refund barred by Internal Revenue Code (IRC)
      RJ Res judicata
      S Statute barred for filing Form 8857
      V Verification missing
       

      Note:

      If denying recaptured credits only under IRC 6015(b) or IRC 6015(c) use K if the RS knew about the unreported issue that caused the reversal of the credits. Use A if the RS did not know about the unreported issue that caused the reversal of the credits. Under IRC 6015(f) use E.

  3. The ATE is no longer required to complete the following field on the Innocent Spouse Customized Form 5402:

    • Amount Claimed

    • Appeals Amount Allowed

    • Appeals Amount Disallowed

  4. The ATE must review the account for levies, liens, OICs, IAs, missing payments and collection statute dates to determine whether these issues have an impact on the innocent spouse case. Address these issues and any special processing instructions on the Customized Form 5402 prior to sending the case to APS for closing.

  5. Allocation of any payments and credits must also be identified, and detailed information provided to APS in the closing instructions.

  6. Instructions for completing the Innocent Spouse Customized Form 5402 are posted on the Utilities menu of ACDS.

25.15.12.7.10  (05-22-2012)
Appeals Case Memorandum for Innocent Spouse Cases

  1. ACMs should address the taxpayer's position, the government position and Appeals analysis and final determination. See IRM 8.6.2, Conference and Settlement Practices, Appeals Case Memo (ACM) Procedures, for more detailed information on ACM guidelines.

  2. A sample Appeals Case Memorandum (ACM) for Innocent Spouse cases is posted on the Appeals Innocent Spouse web site.

  3. Any changes made to Compliance's determination will require an Appeals Case Memorandum to fully explain and support the rationale on which the changes were made.

  4. Sometimes, but in very limited use, the Form 5402, Appeals Transmittal and Case Memo can serve as the ACM when everything that needs to be said about the case fits into the Remarks Section of the form. Examples include:

    • No response from the spouse who requested the appeals conference.

    • Full concession by the spouse who requested the appeals conference.

    • No consideration case (no relief available to grant the RS).

    • A very simple case: attribution and/or the RS does not meet the threshold requirements to be considered for relief.

  5. If a brief narrative is appropriate, please remember to include both the RS's and the NRS's position. All factors under IRC 6015(f) should be addressed.

  6. A Schedule of Adjustments is not needed on an assessed innocent spouse case. A schedule may be needed if ATE is working the income issue along with the innocent spouse on a pre-assessed case.

25.15.12.8  (05-22-2012)
Preliminary Review by the AO

  1. If either spouse chooses to protest Compliance's determination and requests an appeal, review the determination using applicable standards and Appeals guidelines.

  2. Innocent spouse cases will normally be worked on a first in first out basis.

    • However, when Taxpayer Advocate Service (TAS) identifies a case requiring expedite treatment, the case is worked as expeditiously as possible. The determination for expedite treatment is based on the facts and circumstances of the case. TAS identifies a case requiring expedite treatment as TAS Criteria 1 or marks the Operations Assistance Request (OAR) with EXPEDITE printed in red on top of the request. Refer to IRM 13.1.7.2, TAS Case Criteria, for description of types of TAS criteria.

      Note:

      See IRM 13.1, Taxpayer Advocate Case Procedures, for more information about TAS.

    • In addition, docketed cases sent back to CCISO that are forwarded to Appeals are also worked as expeditiously as possible. This happens, for example, in cases where the RS raises relief under IRC 6015 for the first time in a docketed deficiency case.

  3. The following are actions the AO must take during preliminary review (not all-inclusive):

    • Verify the statute.

    • Verify that the statement of disagreement is in the case. An exception is the CDP/INNSP combination cases.

    • Verify that the request for relief is timely for IRC 6015(b) and IRC 6015(c). See IRM 25.15.1.6.2, Time Period for Making the Request, for information regarding making a timeliness determination.

    • Verify that the request for equitable relief under section IRC 6015(f) or section IRC 66(c) was filed before the expiration of the period of limitation for collection under section IRC 6502, or if applicable, the period of limitation for credit or refund under section IRC 6511.

    • Review systems (i.e. ACDS, IDRS, ISTS) for accuracy. This includes verifying that the case is in stage 15 on ISTS.

    • Verify that the case is in the correct category and that the case summary cards are correctly carded into ACDS. See APS carding instructions in IRM 25.15.12.5, APS Establishes ACDS Controls, to determine if the case summary cards are accurate.

    • Verify the mailing address for each spouse and update, if necessary, on ACDS and IDRS.

    • Conduct a preliminary review of the file to determine if additional information is needed.

  4. Determine if there is a CI freeze on the account. If yes, is the account mirrored? If not, is there documentation in the file to indicate CI agrees to allow the account to be mirrored at processing? If yes, consider the case. If not, return the case to CCISO or the source function if the case did not originate in CCISO, as a premature referral.

25.15.12.8.1  (05-22-2012)
First Collection Activity or the "Two-year Rule"

  1. The RS must file a request for relief with the IRS under subsections of IRC 6015(b) and IRC 6015(c) no later than two years from the date of the first collection activity against the RS after July 22, 1998. Not all attempts to collect by the IRS trigger the two-year period.

  2. Exercise caution when determining if a request for relief is untimely. Collection activity that may start the two-year rule includes applying (or offsetting) a RS's separate income tax refund to the joint tax for which the RS is seeking relief, an offset of a joint tax refund to the joint tax if the RS had an interest in the overpayment, i.e., wages with withholding that contributed to the refund, IRC 6330 notices, filing of a suit by the United States against the RS, and claims in judicial proceedings.

  3. See IRM 25.15.3.4.4, Collection Activity, for more information on this topic.

    Note:

    The Two-year Rule no longer applies to requests for equitable relief under IRC 6015(f) or IRC 66(c). These requests must be filed before the expiration of the period of limitation for collection under IRC 6502, or if applicable, the period of limitation for credit or refund under IRC 6511.

25.15.12.8.2  (05-22-2012)
Refund Offsets

  1. The two-year period for filing a section 6015(b) or (c) claim will not run if the IRS did not properly give notice of the right to file a request for innocent spouse relief on or about the time the refund was applied to the joint tax.

  2. Refund offset notices issued after March 7, 2005 start the two-year period for filing an innocent spouse request for relief because notice of the right to file a claim for relief is provided with the refund offset notice. Requests filed more than two years after such notices are considered untimely for IRC 6015(b) and IRC 6015(c) requests.

  3. If the offset occurred prior to March 7, 2005, the claim is considered timely unless there is evidence that the Service notified the RS, or the RS was otherwise aware, of his or her right to file an IRC 6015 claim at the time of the offset.

  4. When denying untimely requests for relief due to refund offsets made after March 7, 2005, attempt to confirm that the Service notified the RS of the right to file an IRC 6015 request for relief at that time of the offset. Confirm the Service sent the RS a refund offset notice with Publication 1 or with language on the notice advising the RS of the RS's right to file a request for relief under IRC 6015 by asking the RS if he or she has a copy of the notice and by trying to locate the appropriate CP code on the RS's transcript of account.

25.15.12.9  (09-30-2013)
Initial Contact

  1. Initial contact with the appellant spouse may be made by either correspondence or telephone.

  2. If preliminary review of the case suggests a change in the determination is likely, send either Letter 3791 to the NRS or Letter 3792 to the RS, whichever is applicable.

    1. If the RS alone requests a conference, the NRS is notified of the RS's request for a conference by CCISO. Rev. Proc. 2003-19 requires the NRS be notified if Appeals is considering increasing the relief recommended. Letter 3791 is used for this purpose.

      Note:

      If, upon initial review of the innocent spouse case, the AO is considering changing the determination to a more favorable result for the RS, immediately send Letter 3791 to the NRS.

    2. If the NRS alone requests a conference, the RS is notified of the NRS's request for a conference by CCISO. If there is consideration to reduce the relief recommended in the preliminary determination by the examiner, notify the RS by Letter 3792 and give him/her an opportunity to present further arguments and information.

      Note:

      If, upon initial review of the innocent spouse case, the AO is considering changing the determination to a less favorable result for the RS, immediately send Letter 3792 to the RS immediately.

  3. If both spouses request an Appeals conference, hold the conferences separately, with both parties permitted to submit information and supporting documentation. Initial contact with both spouses may be made by either correspondence or telephone.

  4. Most Innocent Spouse Appeals conferences are conducted by telephone or correspondence. Face-to-face conferences are more appropriate for cases involving complex issues or a substantial volume of documentation. However, if the taxpayer and/or representative prefer a face-to-face conference, advise the taxpayer/representative that he or she is expected to appear at the Appeals conference in person. See IRM 8.6.1.3, Conference Techniques Used by Appeals Technical Employees (ATEs), for additional information.

25.15.12.10  (09-30-2013)
Appeals Consideration

  1. This is an overview of actions the ATE takes during consideration of the case (not all inclusive).

  2. Consider the facts and circumstances of the case and all pertinent information when making a determination.

  3. Consider whether the government faces litigating hazards under the following provisions:

    1. Under section IRC 6015(b) or (c), a RS may elect relief for a deficiency/understatement of tax liability (but not an underpayment), and section IRC 6015(f), a RS may request relief for a deficiency/understatement or an underpayment. In response to a Notice of Final Determination under any subsection, the RS may petition the Tax Court to contest the determination. The Tax Court may also consider a section 6015 claim under any subsection in a deficiency proceeding or a CDP proceeding.

      Note:

      The Tax Court will review the section 6015 claim using a de novo standard of review under all subsections.

    2. IRC 66(c), traditional or equitable relief for married taxpayers filing separate returns in community property states, does not allow the taxpayer to petition the Tax Court for a redetermination in a stand alone proceeding. See Bernal v. Commissioner, 120 T.C. 102 (2003) for additional information. Instead, IRC 66(c) relief may only be raised in the Tax Court in a petition from a notice of deficiency.

  4. Fully explain joint and several liability and the criteria for relief under applicable IRC sections.

    Note:

    The RS can not withdraw a request for relief after the preliminary determination letter has been issued.

  5. Fully document the determination in workpapers.

  6. Prepare required reports, letters, agreement forms, computations, etc.

  7. Send separate notices to each spouse as required by law. See Rev. Proc. 2003-19; Treas. Reg. § 1.6015-6; and IRC 6015(h)(2).

  8. Prepare a Customized Form 5402 for the Innocent Spouse case using ACDS APGolf.

  9. Fully explain the reasons for the determination to either grant or deny relief in the Appeals Case Memorandum (ACM), as needed, or on the Customized Form 5402, if the case is very simple or the taxpayer concedes in full. See IRM 25.15.12.7.9, Customized Form 5402, Appeals Transmittal and Case Memo, for Innocent Spouse Cases, for additional requirements for an ACM.

  10. Upon reaching a final decision, Appeals:

    1. Solicits and executes a waiver, Form 870-IS with instructions that include complete information on Tax Court rights on all agreed cases for which partial or full relief is granted from the RS. No longer attempt to secure a Form 870-IS on fully denied requests for relief, even if the RS agrees with the determination. Instead, issue a final determination letter for relief, except combo cases.

      Note:

      If the case has multiple tax years with several different determinations that include a denied year(s) and the RS is in agreement with all determinations, then you can include the denied tax year(s) for administrative purposes on Form 870-IS.

    2. Issues the final determination letter to the RS if no waiver is signed or determination is fully denied, except combo cases.

    3. Notify the NRS of the final determination.

    4. Completes processing of partially or fully allowed claims

    5. Completes the required updates to the Innocent Spouse Tracking System (ISTS).

25.15.12.11  (05-22-2012)
Notice and Participation of NRS

  1. IRC 6015(h)(2) requires the NRS be notified and given an opportunity to participate in administrative proceedings for requests for relief filed under IRC 6015. Service employees have been directed to contact the NRS in order to ensure the case is fully developed and the NRS’s rights are considered under all the innocent spouse provisions.

  2. Treasury Regulation 1.6015-6(a)(2) provides that the Service must notify the NRS of the preliminary and final determination with respect to the RS's IRC 6015 request for relief. If Compliance determines that the RS is eligible for full or partial relief, the NRS can file a protest and receive an administrative conference in Appeals.

    Note:

    The NRS does not have the right to appeal if the NRS is no longer liable for the tax liabilities at issue, e.g. they were discharged in the NRS's bankruptcy proceedings and/or offer-in-compromise, or the NRS's CSED has expired. Return such nondocketed cases to CCISO as premature referrals.

  3. Appeals' decision is final for the NRS. The NRS does not have the right to petition the Tax Court. See Rev. Proc. 2003-19 and Maier v. Commissioner, 119 T.C.267 (2002), aff'd., 360 F.3d 361 (2d Cir. 2004) for additional information.

  4. In docketed cases, if the NRS is not already a part of the judicial proceedings, Chief Counsel notifies the NRS of the petition filed by the RS and offers the NRS an opportunity to intervene by filing a Notice of Filing of Petition and Right to Intervene with the Court, the NRS, and the RS. See IRM 25.15.12.25.2, NRS Notice and Intervention, for additional information.

  5. Contact with the NRS with respect to the joint return does not constitute third party contact under IRC 7602(c).

25.15.12.11.1  (05-22-2012)
Potentially Abusive NRS

  1. In some cases, the file may contain information which shows that the RS was previously abused and fears harassment or retaliation from the NRS in response to filing of the request for relief. Special procedures were developed to send letters from a centralized location to help protect the RS’s address, location, and contact information. First contact the RS to determine if there is a need to take additional precautions to protect the RS’s address, location, and contact information. If additional precautions are needed:

    • Field ATEs should follow the procedures in (3), below.

    • Campus ATEs should follow normal procedures since their letters are already mailed from a centralized location.

  2. The NRS must be notified and given an opportunity to present further arguments and information if the ATE is considering increasing the relief recommended.

  3. If it is necessary to contact the NRS and there is a need to take additional precautions to protect the RS’s address, location, and contact information, field ATEs will prepare conference Letter 3791 or decision Letter 3289, Notice of Final Determination, as follows and send it as an attachment in an encrypted e-mail to the Cincinnati APS Processing Team Manager (PTM):

    1. Use the Cincinnati Campus Appeals office address and Innocent Spouse Coordinator's contact information on the letter. The address and contact information are found on the Appeals web site on the Innocent Spouse page.

    2. Use the name and title of the Deputy Chief of Appeals in the letter's signature block.

  4. The PTM signs Letter 3791 on behalf of the Deputy Chief of Appeals and mails it by regular mail. The PTM or assigned employee faxes a copy to the ATE, monitors the response for 45 days, and forwards any response to Appeals. To monitor the response, APS will:

    1. Create a case on PEAs with TYPE = OTH, sub-type blank, and

    2. Place it in suspense for 45 days, with suspense reason code S04 - Waiting on taxpayer for information/response.

    3. If a response is received from the NRS, send an encrypted e-mail to the ATE to inform him or her of receipt of the response, mail the NRS's response to the ATE, remove the PEAs case from suspense and close it on PEAs.

    4. If no response is received in 45 days, send an encrypted e-mail to the ATE to inform him or her that no response was received from the NRS, remove the PEAs case from suspense and close it on PEAs.

  5. The PTM signs Letter 3289 on behalf of the Deputy Chief of Appeals. The PTM or assigned employee mails the letter by regular mail to the NRS and faxes a copy to the ATE.

25.15.12.12  (05-22-2012)
Tacit Consent Factors

  1. Tacit consent means that the joint return is valid even though the RS may not have signed it himself/herself because the consent is implied by or inferred from the RS's actions or statements.

  2. Here are some questions you should consider when determining whether tacit consent applies:

    • Did the RS have a filing requirement? Did the RS file a MFS return? Please note that in a community property state a spouse is required to report their share of the community property, not just their income.

    • Did the RS participate in the preparation of the return by providing return information?

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

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

    • Did they file joint returns in prior or subsequent years?

    • Did the RS sign other tax related documents, such as in other locations on the return, forms filed after the return was filed, extension requests, and installment agreements?

    • Are there any return schedules that belong to or include the RS?

    • Were there any gains or losses belonging to the RS?

    • Are there any income items on the joint return belonging solely to the RS?

    • Was the RS a victim of domestic violence or abuse? If so, the RS may have tacitly consented in order to avoid being abused.

25.15.12.13  (09-30-2013)
Forgery

  1. If the RS alleges forgery, he/she should have provided a statement addressing the forgery issue.

  2. Review the case for tacit consent.

  3. The burden of proof is on the taxpayer to prove forgery and no intent to file a joint return.

  4. See IRM 25.15.7.10.13.5, Forgery, for additional information.

25.15.12.14  (05-22-2012)
Innocent Spouse Raised During Consideration of a Non-docketed Case

  1. If the taxpayer raises the issue of Relief from Joint and Several Liability during an appeal of a non-docketed proposed deficiency case, secure a completed Form 8857, Request for Innocent Spouse Relief, or a similar statement containing the same information, signed under penalties of perjury.

25.15.12.14.1  (05-22-2012)
Premature Referral - Jurisdiction Released to Examination

  1. Generally, for a non-docketed proposed deficiency case, the case is returned to the originating Examination function for consideration of the Relief from Joint and Several Liability issue. Jurisdiction is released, since this is a new issue which requires Examination work.

  2. If unusual circumstances exist (e.g., short statute), Appeals and Examination decide the best way to handle the request on a case-by-case basis.

25.15.12.15  (09-30-2013)
AUR/Innocent Spouse Cases

  1. When Automated Underreporter Unit (AUR) and Cincinnati Centralized Innocent Spouse Operation (CCISO) are simultaneously considering issues on the same taxpayer(s), regarding both a proposed deficiency (AUR) and a request for Innocent Spouse relief (CCISO), coordination between the functions is necessary. AUR is responsible for all issues except innocent spouse. Coordination with Appeals becomes necessary if the taxpayer(s) appeals either the AUR or CCISO determination, or both. An appeal can be received before or after AUR issues a notice of deficiency; therefore the case can be received in Appeals either post-assessment or pre-assessment.

  2. When AUR receives a Form 8857 or similar written statement. AUR notifies CCISO. AUR's procedures for issuing a notice of deficiency vary depending upon whether CCISO has made a determination at the time AUR is ready to issue the notice of deficiency. See IRM 25.15.7.3, Automated Underreporter (AUR) or Compliance Campus Examination Operations (CCEO)Cases - Overview and IRM 4.19.3.20.1.20, Innocent Spouse Relief Cases, for additional information

25.15.12.15.1  (05-22-2012)
CCISO Has Not Made Determination

  1. When AUR is ready to issue a notice of deficiency and CCISO has not yet made a determination on the Innocent Spouse request for relief, AUR checks IDRS CC: ISTSRA to determine the latest stage, and then:

    1. If stage 01 - 04 — AUR issues the notice of deficiency (to both taxpayers) and contacts CCISO to inform them a notice of deficiency was issued.

    2. If the stage is 05 or higher, AUR contacts CCISO first to determine if the notice of deficiency should be issued. AUR does not issue the notice of deficiency during the time period for the RS or NRS to appeal CCISO's preliminary determination.

      Note:

      If the case is in stage 11, AUR does not issue the notice of deficiency until 51 days after the Stage 11 date.

      Note:

      When CCISO has made a full relief determination, AUR issues a notice of deficiency to only the non-requesting spouse.

  2. When AUR issues a notice of deficiency and CCISO has not made a determination, AUR will issue Letter 4314C only to the RS. This letter informs the RS of the impending notice of deficiency and that CCISO is in the process of making a determination based on their claim.

25.15.12.15.2  (09-30-2013)
CCISO Made Determination

  1. When CCISO makes a determination before AUR has issued the notice of deficiency, AUR follows the instructions in IRM 25.15.7.3, Automated Underreporter (AUR) or Compliance Campus Examination Operations (CCEO)Cases - Overview.

    1. When CCISO denies or partially allows relief and neither spouse requests an Appeals conference, AUR prepares and sends the notice of deficiency to both spouses, following normal AUR procedures.

      Note:

      When CCISO makes a partial determination, AUR will issue Letter 4314C only to the RS. This letter informs the RS of the impending notice of deficiency and explains that although CCISO has made a determination, the notice of deficiency must include the full deficiency amount.

    2. When CCISO has made a full relief determination and the NRS does not request an Appeals conference, AUR will issue a manual a notice of deficiency only to the NRS.

    Note:

    This case only comes to Appeals if the taxpayer(s) appealed the AUR determination or filed a petition in response to the notice of deficiency.

25.15.12.15.3  (05-22-2012)
Appealed IS Case/Notice of Deficiency Not Issued

  1. When CCISO informs AUR prior to the issuance of the notice of deficiency that the IS determination was appealed:

    1. AUR and CCISO will coordinate to ensure that both the AUR and the IS portion of the case file are sent to the Cincinnati Campus Appeals Processing Section.

    2. AUR and CCISO will flag their separate file to indicate it is part of a related AUR/IS case that must be associated when received in Appeals with the other function's file.

  2. AUR will:

    1. Provide photocopies of the AUR case contents.

    2. Ensure all AUR related issues are addressed.

    3. Continue to work the AUR case.

    4. Notify the Cincinnati Campus Appeals Office of any changes to the case based on further taxpayer correspondence. If changes are made AUR will notify the Cincinnati Campus Appeals Office of the changes.

    5. At the end of the CP2000 suspense period, send Letter 2626C. Include a special paragraph using the following verbiage:

      Example:

      "An appeal of the Innocent Spouse determination was filed. While the appeal is pending, we will continue processing the underreported income issue(s). We will send a notice of deficiency to both spouses within the next two to four weeks, which outlines your rights to petition the United States Tax Court."

    6. Issue a notice of deficiency by updating the case with PC 75.

    7. Provide a copy of the notice of deficiency to the Cincinnati Campus Appeals Processing Section.

    8. Maintain and monitor the case.

    9. Notify Appeals of any subsequent changes to the original deficiency amount (i.e.: recomputed notice/supplemental report, case closed "No Change," etc.).

    10. Follow normal procedures to assess the joint account if the taxpayer does not petition the U.S. Tax Court on the AUR issues.

      Note:

      If the IS appeal is still pending at the end of the Statutory Notice suspense period, AUR will send the RS Letter 1802C and include a special paragraph using the following verbiage:

      Example:

      "An appeal of the Innocent Spouse determination was filed. While the appeal is pending, you may receive collection notices because our automated system requires and sends certain notices when the tax is assessed."

25.15.12.15.4  (05-22-2012)
Appealed IS Case/Notice of Deficiency Issued

  1. If, after AUR issued the notice of deficiency, CCISO or AUR is informed that either the RS or the NRS has appealed the IS determination:

    1. AUR and CCISO will coordinate to ensure that both the AUR and the IS portion of the case file are sent to the Cincinnati Campus Appeals Processing Section.

    2. AUR and CCISO will flag their separate file to indicate it is part of a related AUR/IS case that must be associated with the other function's file when received in Appeals.

  2. AUR will:

    1. Issue an interim letter informing the taxpayer that proceedings before Appeals do not waive or extend the period within which a petition may be filed with Tax Court.

    2. Provide copies of the AUR case contents, including a copy of the notice of deficiency. If a copy of the notice of deficiency is not available at the time AUR provides the copy of their case file, AUR will fax a copy to Cincinnati Campus Appeals Processing Section when available.

    3. Maintain and monitor the case.

    4. Notify Appeals of any subsequent changes to the original deficiency amount (i.e.: recomputed notice/supplemental report, case closed "No Change, " etc.).

    5. Follow normal procedures to assess the joint account if the taxpayer does not petition the U.S. Tax Court on the AUR issues.

      Note:

      If the IS appeal is still pending at the end of the Statutory Notice suspense period, AUR will send the RS Letter 1802C and include a special paragraph using the following verbiage:

      Example:

      "An appeal of the Innocent Spouse determination was filed. While the appeal is pending, you may receive collection notices because our automated system requires and sends certain notices when the tax is assessed."

25.15.12.15.5  (05-22-2012)
Appealed AUR Non-docketed Case with IS Issue

  1. When taxpayer appeals the AUR case prior to issuance of the notice of deficiency and IS determination, AUR will inform CCISO that the AUR case has been appealed and they need to send their case to same campus Appeals office where AUR is sending their case.

  2. CCISO will:

    1. Make a preliminary determination and issue letters to the taxpayers.

    2. Wait until the time to appeal has expired for both taxpayers.

    3. Forward the IS case to the same Appeals office as the AUR case.

  3. Appeals will be responsible for issuing the notice of deficiency, if needed.

25.15.12.15.6  (05-22-2012)
AUR Docketed Case with IS Issue

  1. When the taxpayer petitions the U.S. Tax Court on the AUR issue prior to the IS determination, AUR will inform CCISO that the taxpayer has petitioned the tax court.

  2. AUR will route the docketed case to the Appeals office designated on the docket list.

  3. CCISO will:

    1. Make a preliminary determination.

    2. Coordinate with Counsel to determine if CCISO will send determination letters to the RS and the NRS or forward the case to Appeals.

    3. If instructed by Counsel, forward case to the same Appeals Office as the AUR case.

25.15.12.15.7  (05-22-2012)
Special "Carding" Procedures for APS on IS/AUR Cases

  1. Source functions route non-docketed AUR/Innocent Spouse cases to Cincinnati Campus Appeals Processing Section and docketed Innocent Spouse cases to the Appeals office indicated on the docket list. Refer to the Campus Case Routing guidelines posed on the Appeals web site.

  2. Create one work unit for the "AUR/Innocent Spouse" case.

  3. Most Innocent Spouse cases are routed to Cincinnati Campus Appeals Processing Section. Cincinnati APS usually receives the CCISO Innocent Spouse case first, due to the close proximity of the Cincinnati Campus Appeals Office to CCISO.

  4. Card the case following the Innocent Spouse carding procedures described earlier in this IRM. Because it is typical to receive the CCISO file first, pending receipt of the AUR file, APS will:

    1. Note in ACDS "Awaiting AUR information/response"

    2. Print a copy of the joint case summary card and place in a follow-up folder

    3. Forward the administrative file for assignment.

    4. Set a follow-up date equal to ten (10) calendar days from the received date. If the AUR file is not received by the follow-up date, contact AUR to determine the reason for the delay and initiate appropriate action to resolve the problem.

    5. When the AUR file is received, send it to ATE who was assigned the case and update ACDS that information was received.

    6. If the case is docketed, immediately after carding, forward the CCISO file to Counsel for answer. Upon receipt of the AUR file, update ACDS if needed and associate the AUR file with the CCISO file. The case might be in Counsel jurisdiction or Appeals jurisdiction, depending upon when the AUR file is received.

    Caution:

    A TC 130 will not post if there is no balance due at the time TC 971 AC 065 post. Therefore you will have to manually input a TC 130.

25.15.12.15.8  (05-22-2012)
Appeals Technical Employee Assignment and Consideration

  1. The case is either -

    • Assigned to a Cincinnati Campus ATE;

    • Transferred to another ATE based upon workload considerations; or

    • If a face-to-face conference is requested or the issues are considered very complex, transferred to a Field Appeals Office, generally according to the address of the spouse who requested the appeal, ideally after both parts of the case are received. See IRM 8.6.1.3.1, Reasonable, Convenient Conference Opportunities (Circuit Riding), for more information on holding conferences on dates and in locations that are reasonably convenient to taxpayers and representatives.

  2. Consideration is given to the Innocent Spouse issue and any other appealed issues in the case.

  3. If the Innocent Spouse issue is the only issue being considered by Appeals. Take the following action:

    1. Monitor IDRS for assessment.

    2. If account is assessed prior to closing of the IS issue, update the statute date/code on your case summary cards to reflect that the case is now assessed.

    3. Follow-up with Innocent Spouse AUR contacts as needed. A list of contacts can be found on the W&I Innocent Spouse Website contact page under the link "IS AUR Contacts."

  4. Ensure all required notices are sent to the non-appellant spouse.

25.15.12.15.9  (05-22-2012)
Agreement Reached

  1. If Appeals has both the IS and AUR issues and an agreement is reached with both spouses regarding a proposed deficiency:

    1. When relief is denied in full or in part, include a statement on Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, explaining the amount of innocent spouse relief allowed. This statement serves to notify the RS of the result and is in lieu of a NRS decision Letter 3289.

    2. When relief is allowed in full, include a statement on closing Letter 913 to notify the RS of the result in lieu of Form 870. Include a statement on the NRS's Form 870 in lieu of a NRS decision Letter 3289 to explain the amount of innocent spouse relief allowed to the RS.

    3. Send closing Letter 913 to each spouse.

    4. Close the case using standard closing procedures for proposed deficiency cases.

  2. Show the deficiency on Form 870 as follows:

    • If Innocent Spouse relief is fully allowed, show the full deficiency on the NRS’s Form 870. Include a statement that full innocent spouse relief is allowed on the NRS's Form 870 in lieu of a NRS decision Letter 3289. Also send closing Letter 913 to the NRS. Send the RS a closing Letter 913 stating his or her case was closed with no deficiency and that full innocent spouse relief is allowed.

    • If Innocent Spouse relief is fully denied, the full joint deficiency is shown either on one joint Form 870 signed by both spouses, or the full deficiency is shown on two separate Form 870 signed separately by each spouse. Include a statement on the Form 870 that no innocent spouse relief was granted. This statement serves to notify the RS of the result and is also in lieu of a NRS decision Letter 3289. Send closing Letter 913 to each spouse.

    • If Innocent Spouse relief is partially allowed, show the full deficiency on the NRS’s Form 870 and show only the portion of the deficiency not relieved on the RS’s Form 870. Include a statement that partial innocent spouse relief is granted on both Form 870s. This statement serves to notify the RS of the result and is also in lieu of a NRS decision Letter 3289. Send closing Letter 913 to each spouse.

  3. If Appeals only has the innocent spouse issue for consideration and agreement is reached, in addition to normal closing procedures when AUR has not yet assessed the account:

    1. Contact AUR for information regarding when AUR will make the assessment.

    2. Inform APS on Form 5402 of the status of assessment.

    3. Instruct APS on Form 5402 to adjust the account after it has been assessed based upon the final determination.

25.15.12.15.10  (05-22-2012)
Partial Agreement or Agreement Not Reached

  1. If agreement is reached with only one spouse, secure Form 870 from that spouse and issue a notice of deficiency to the other spouse. Send closing Letter 913 to the spouse who agrees. See IRM 25.15.12.23, Notice of Deficiency Under IRC 6015. This section provides language to include in the notice of deficiency for the unagreed spouse.

  2. If agreement is not reached with either spouse, issue a notice of deficiency, jointly or separately, as required. The language in the notice of deficiency serves to notify the RS of the result and is in lieu of a separate NRS Determination Letter 3289. See IRM 25.15.12.23, Notice of Deficiency Under IRC 6015. Refer to this section to determine whether to issue the notice(s) of deficiency jointly or separately and for language to include in the notice of deficiency(s). The deficiency, if any, is assessed by Appeals if defaulted.

  3. If a notice of deficiency is issued, APS monitors the case and defaults it, or if petitioned, updates ACDS and forwards it to Counsel for trial preparation, using standard procedures.

  4. If Appeals only has the innocent spouse issue for consideration and agreement is not reached, in addition to normal closing procedures when AUR has not yet assessed the account:

    1. Contact AUR for information regarding when AUR will make the assessment.

    2. Inform APS on Form 5402 of the status of assessment.

    3. Instruct APS on Form 5402 to adjust the account after it has been assessed based upon the final determination.

25.15.12.16  (09-30-2013)
CDP/EH and Innocent Spouse Cases

  1. IRM 25.15.12.16, CDP/EH and Innocent Spouse Cases and its subsections uses the position Appeals Officer (AO) to describe the ATE assigned the IS WUNO and Settlement Officer (SO) to describe the ATE assigned the CDP WUNO, to distinguish the responsibilities.

  2. A taxpayer may request a Collection Due Process (CDP) hearing or an equivalent hearing using Form 12153, Request for Collection Due Process or Equivalent Hearing. When a taxpayer raises innocent spouse before, during or after filing a CDP request, you most likely have what is referred to as a "combo" case that requires coordination of the two separate parts of the case.

    Note:

    The CDP must be for the RS.

  3. A taxpayer may always raise IS in a CDP hearing unless the IS issue was previously:

    • Heard by Appeals and a final determination letter issued, or

    • Considered by Compliance and a final determination letter was issued to the RS in a SNOD or final determination letter prior to the Service's receipt of the CDP request, or

    • Decided by the Tax Court

  4. See IRM 8.22.8.9, Innocent Spouse (IS), for additional procedures related to the CDP/EH part of the case.

  5. You do not have a "combo" case if the IRS previously made a determination on IS in a notice of deficiency or final determination letter. If ISTS is in stage 12 prior to the CDP request then the IRS has already made a final determination as to spousal defenses by issuing a final determination letter.

  6. You can identify an open CDP with a Transaction Code (TC) 520 with Closing Code (CC) 76 or 77 (without a reversing TC 521) on TXMOD or IMFOLT. Closing code 76 is a lien and 77 is a levy. A TC 971 Action Code (AC) 275 (without a reversing TC 972 AC 275 or a TC 971 AC 276 or TC 971 AC 277) on TXMOD or IMFOLT also indicates there is an open CDP hearing. A TC 971 AC 630 may also be present, but only if the hearing involves a proposed levy action.

    Note:

    If a TC 520 is present on TXMODA or IMFOLT, it will be paired with an indicator "B" if both spouses requested a CDP hearing, "P" if only the primary spouse requested a CDP hearing or "S" if only the secondary spouse requested a CDP hearing.

  7. A TC 520 will not be present if the taxpayer has requested an equivalent hearing. You must rely on TC 971 codes to determine if there is an open equivalent hearing. A TC 971 AC 278 (without a reversing TC 972 AC 278 or a TC 971 AC 279 or TC 971 AC 280) on TXMOD or IMFOLT indicates there is an open equivalent hearing. A TC 971 AC 631 may also be present, but only if the equivalent hearing involves a proposed levy action.

  8. If the CDP hearing request was received by Automated Collection System (ACS), there will also be an open IDRS control on TXMODA with activity beginning with CDP or EH (equivalent hearing). The final activity on that control should be 2APPLS indicating ACS sent the CDP to Appeals.

  9. When Form 8857 is received in Collection prior to or simultaneously with the Form 12153, Request for a Collection Due Process or Equivalent Hearing, or other valid written request for CDP/EH hearing, ACS or Field Collection screens it, makes Integrated Data Retrieval System (IDRS) updates, and forwards the request to the CCISO for consideration within 10 business days of receipt.

  10. When Form 8857 is received in Appeals after the CDP/EH case is already in Appeals or ACS/Field Collection did not send to CCISO, Appeals will:

    1. Date stamp Form 8857 or ensure it was date stamped by Collection

    2. Request input of feature codes "SD" and "DP" to the CDP WUNO

    3. Send the Form 8857 and a copy of Form 12153 and copies of any returns or audit reports included in the CDP/EH case to CCISO for an IS preliminary determination, using transmittal Form 3210, Document Transmittal within 10 business days of receipt.

    4. Send the case on Form 3210 marked "EXPEDITE – CDP CASE" for a preliminary determination to:
      IRS - Cincinnati Innocent Spouse Operation
      Attn: CDP Coordinator, Stop 840F
      201 West Rivercenter Blvd.
      Covington, KY 41011

      Note:

      You may fax Form 8857 to CCISO at (859) 669-5256 if there are no supporting documents, e.g. no return file. The request must be marked "Expedite-CDP case." .

    5. Notify the taxpayer by phone or letter that the IS claim is being forwarded to CCISO for investigation and that both the requesting spouse (RS) and nonrequesting spouse (NRS) will be contacted by CCISO. Advise the taxpayers that CCISO will issue a preliminary determination letter to the taxpayers and the claim will be returned to Appeals for a final determination in CDP.

    6. CCISO will inputs TC971 AC 065 on receipt of the case.

    7. CCISO will establish the case on the Innocent Spouse Tracking System (ISTS).

25.15.12.16.1  (09-30-2013)
Coordination of CDP/EH and Innocent Spouse Procedures

  1. Appeals delays any hearing on non-spousal defense issues or collection alternatives until a determination is made regarding the innocent spouse request.

  2. If the CDP hearing request was joint, the hearing may proceed for the NRS. However, the final determination may not be made until the IS claim has been considered. The collection potential from the RS may affect the viability of a proposed collection alternative.

  3. The SO will suspend the CDP case while the innocent spouse case is considered. The SO enters CARATS action/sub-action codes SU/PI using the date the Form 8857 is sent to CCISO. Update the status code to E/OTH.

    Note:

    If the case is transferred to another employee to monitor, the receiving employee places the case in suspense.

  4. CCISO will mirror accounts, prior to sending the IS portion of a CDP/IS case back to Appeals. See IRM 8.22.8.9.4, Mirrored Modules, for additional information on mirrored modules.

  5. Mirroring allows collection activity to continue for the NRS if not otherwise suspended for a timely CDP hearing.

  6. CCISO should not issue a final determination letter on combo cases. If CCISO has inadvertently issued a final determination letter, the SO will contact CCISO to get the Administrative file or at least a copy of the work papers and determination letter. The CDP will be suspended, until after the expiration of the period for the taxpayer to petition for a judicial review of the IS determination. If the taxpayer:

    1. Petitions: the CDP remains in suspense until the Tax Court decision becomes final.

    2. Does not petition: the SO takes the CDP case out of suspense and sends the administrative file for the innocent spouse case on Form 3210 to Cincinnati Campus APS, who establish the innocent spouse case in ACDS and forwards to ATM for assignment.

25.15.12.16.2  (09-30-2013)
Working Innocent Spouse - CDP/EH "Combo " Case

  1. Appeals is responsible for the final IS determination in CDP.

  2. Following receipt of the innocent spouse administrative file from CCISO, Cincinnati Campus APS will

    • Card a separate IS WUNO following normal carding procedures

    • Cross-reference the CDP WUNO in "NOTES" field.

    • Add feature code "DP" to the IS WUNO

    • Forward the IS case to an Appeals Team Manager (ATM) for assignment to an AO.

  3. Form 12509 provides the taxpayer with the opportunity to request an Appeals hearing in a non-CDP case. In CDP, the taxpayer has already raised an IS issue that Appeals must consider. The taxpayer's response on Form 12509 is helpful to establish the reason for disagreement, but Appeals must make a CDP determination on the IS issue whether or not the RS returns Form 12509.

  4. The AO will work the IS case according to normal procedures. At the conclusion of working the case, the AO will:

    • Prepare Form 5402, Appeals Transmittal and Case Memo, which will include instructions to APS regarding all required account adjustments and Innocent Spouse Tracking System (ISTS) updates.

      Note:

      The 5402 will be approved by the AO's ATM. The ATM will not input an ACAP date for the IS WUNO.

    • Prepare an ACM explaining the IS determination.

    • Secure Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases, on all agreed cases for which partial or full relief is granted.

    • Prepare an electronic narrative explaining the IS determination for inclusion in the final CDP closing letters which the SO will prepare. The AO can use The Case File Attachments feature in ACDS to attach a narrative to the case. You can locate the case file attachment feature by clicking the red cases button in ACDS. The case file attachment is located on the main cases menu page under other functions.

    • Use CARATS action code MS, not AC/FR, when transferring the IS case to the SO.

    • Prepare Form 30/40 to transfer the IS case through APS to the SO.

  5. The SO prepares all closing letters on combo cases. The SO will include the IS determination in the final CDP closing letters. The type of letters used when closing a CDP/EH case with an innocent spouse issue is discussed in IRM 8.22.9.4.2 , Closing a CDP with Innocent Spouse. Both spouses will be entitled to a closing letter regardless of whether one, or both, submitted the CDP hearing request.

  6. The SO will close all assigned WUNOs, including the IS WUNO with all appropriate closing information pertaining to the IS disposition.

  7. A CDP request can be withdrawn up to the point the determination letter is issued. If the taxpayer(s) withdraws the CDP request, the SO will research to determine the status of the IS case:

    • If the IS case is still in CCISO, the SO will deliver or fax a copy of the withdrawal Form 12256 within 2 business days to notify CCISO of the withdrawal. CCISO will retain the IS case and work it following their normal procedures.

    • If the IS case is assigned to an AO, the SO will deliver or fax a copy of the withdrawal Form 12256 within 2 business days to notify the AO of the withdrawal. The AO will remove the "DP" feature code from the IS case. The AO will make a final determination and close the case following normal innocent spouse procedures.

    • If the CDP/EH request is withdrawn after the AO has returned the IS case to the SO. The SO will close the IS case by adopting the AO decision by sending Letter 3288 (RS) and Letter 3289 (NRS).

  8. APS issues the closing/determination letters and updates ACDS to reflect the issuance. APS will:

    1. Update CDP WUNO with SNTYPE = 090A and SNDATE = the date the determination letter was issued, instead of SNTYPE = 030A on the CDP work unit, in order to suspense the file for the longer period allowed to petition Tax Court under the Innocent Spouse provisions.

    2. Update IS WUNO with SNTYPE = 090A and SNDATE = the date the determination letter was issued.

25.15.12.16.3  (05-22-2012)
Closing Innocent Spouse/CDP Cases

  1. All Innocent Spouse cases along with related CDP cases are routed to the Cincinnati APS for closure and should remain together.

  2. APS will:

    1. Close the CDP and IS work units on ACDS.

    2. Update the Innocent Spouse Tracking System (ISTS). See IRM 25.15.14, Innocent Spouse Tracking Systems Inventory Validation Instructions for procedures.

    3. Input all required IS and CDP adjustments/transactions. See IRM 8.22.3, Back-End Processing for Collection Due Process and Equivalent Hearing Cases, for additional information on CDP transactions.

    4. Update CDPTS appropriately.

    5. When all adjustments/account transfers have been completed and posted to IDRS close IS and CDP work units on PEAs.

    6. The administrative files should be filed according to standard procedures.

    Note:

    A MFT 31 account does not automatically mean the case is an INNSP case. If a previous determination was made and the case is only in Appeals as a CDP case, do not send the case to Cincinnati for final processing.

25.15.12.17  (05-22-2012)
Hoyt Investors and IRC 6015(c)

  1. Three Tax Court Memo decisions were issued in May and June 2005 that awarded attorney's fees to the petitioner's attorneys, in part because the Service denied IRC 6015(c) relief because of actual knowledge. These cases involve Hoyt investors and are as follows:

    • Foy v. Commissioner, T.C. Memo. 2005-116 (5/19/2005),

    • Owen v. Commissioner, T.C. Memo. 2005-115 (5/19/2005),

    • Bulger v. Commissioner, T.C. Memo. 2005- 147 (6/20/2005).

  2. The Service has the burden of proof when denying a IRC 6015(c) claim because of actual knowledge. When the deficiency results from an erroneous deduction or loss, the Service must establish that the requesting spouse knew the facts that made the deduction or loss unallowable.

  3. When a Hoyt investor is received where CCISO denied relief under IRC 6015(c) because the requesting spouse had actual knowledge, carefully examine the actual knowledge determination. If it is determined the requesting spouse did not know the facts (e.g., overvalued livestock or same animals sold to different partnerships) that made the loss unallowable, then do not deny relief because of actual knowledge. Instead consider if the requesting spouse is entitled to "full relief" or "partial relief" .

    Example:

    If the Hoyt investment was a joint investment between the requesting and non-requesting spouse, then the requesting spouse is still liable for 50% of the deficiency, subject to other considerations, such as the transfer of a "disqualified asset" as discussed in IRC 6015(c)(4) or the tax benefit exception in IRC 6015(d)(3)(B). Remember, under the tax benefit exception the portion of the deficiency allocated to the requesting spouse can increase or decrease. For example, if the requesting spouse is the wife and she was a homemaker without any income, she received no "tax benefit" from the Hoyt loss and her portion of the deficiency is allocated to the non-requesting spouse. In those circumstances, relief is granted. Further questions on actual knowledge and the operation of the tax benefit exception can be addressed to local counsel.

25.15.12.18  (09-30-2013)
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. Similarly, if an amended return was processed with only one 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. These erroneous assessments usually cannot be corrected since assessment is generally barred by the statute of limitations. These are referred to as "Barred Statute One Signature (BSOS)" cases. When applicable, in lieu of completing Form 3999, Statute Expiration Report, a copy of the "Barred Statute Memo" is completed by the ATE, approved by the manager, and placed in the administrative file. See the "Barred Statute on Erroneous Assessments" memo format posted at http://win.web.irs.gov/innocentspouse/innocent_memorandums.htm. 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." Advise the NRS, "Our records indicate you signed the consent to assess and collect the proposed tax, penalties, and interest. There is no record of your spouse signing a consent to assess and collect the liability. The statute of limitations has expired to assess and collect it from your spouse. Therefore, you are solely liable for the additional assessment."

  2. These cases do not meet Innocent Spouse criteria but the RS is nevertheless relieved of the liability because the assessment period expired. The barred assessment is moved to MFT 31 for the spouse whose signature is on the report.

  3. For additional information regarding these cases see IRM 25.15.7.10.13.3, Barred Statute One Signature (BSOS) and IRM 25.15.9.1.4, Barred Statute One Signature (BSOS).

25.15.12.19  (05-22-2012)
Separate Assessment Module Overview

  1. In January 2001, the MFT 31, Separate Assessment Module, was added to the Individual Masterfile (IMF). MFT 31 contains split spousal assessments previously processed to the Automated Non-Master File (ANMF) which meet one or more of the following conditions:

    • Collection action is prohibited against only one spouse.

    • Each spouse is liable for different amounts.

    • Extensions or suspensions result in different Collection Statute Expiration Dates (CSEDs) or Assessment Statute Expiration Dates (ASEDs) for each spouse.

  2. See IRM 21.6.8, Split Spousal Assessments (MFT 31), for detailed information about MFT 31 accounts.

  3. Check non-master file (NMF), as well as MFT 30 and MFT 31 to secure information relating to joint accounts.

25.15.12.19.1  (05-22-2012)
Master File 31

  1. MFT 31 is an individual (IMF) master file tax (MFT) account code. MFT 31 is used for assessments against an individual taxpayer on a joint module and is generated by one or more of the following:

    • Bankruptcy — either spouse is discharged or dismissed from bankruptcy.

    • Offer in Compromise (OIC) — either spouse makes an offer on a liability.

    • Criminal Restitution - an assessment of criminal restitution ordered payable to the IRS has been made.

    • Tax Court— either spouse is going to Appeals or petitions the tax court. (Exam/Appeals/Automated Underreporter (AUR)).

    • Innocent Spouse— an assessment is made against a joint module but one spouse is relieved of the liability fully or partially.

    • Exam agreed/unagreed cases - when only one spouse agrees to the tax deficiency, while the other spouse does not agree, but does not appeal or file a petition.

    • Taxpayer Assistance Order— either spouse files Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order).

    • Installment Agreement — either spouse requests an installment agreement.

    • Currently Not Collectible (CNC) — account qualifies for CNC based on either spouse's financial status.

  2. There are three types of MFT 31 accounts:

    • Split/Transfer - MFT 31 accounts created or in process prior to January 2005 or a qualifying NMF MFT 20 account (CSED expired after January 1, 2005);

    • Mirrored - Bankruptcy by only one spouse, innocent spouse claim, agreement to tax adjustment by only one spouse, OIC filed by only one spouse, joint OIC defaulted by one spouse, Form 911 filed by only one spouse, one spouse requests an installment agreement or one spouse qualifies for CNC;

    • Exam/Appeals/AUR - one spouse is going to Appeals or petitions the tax court, or a court order of criminal restitution.

  3. As of January 1, 2005, the triggering event will determine when the account is moved from MFT 30 to MFT 31 and what type of MFT 31 account is established. The TC 971 action code will identify the triggering event. See IRM 21.6.8.3(3), What is MFT 31, for a list of triggering events.


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