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Part 3. Submission Processing

Chapter 0. General

Section 230. Lockbox Processing Procedures

3.0.230  Lockbox Processing Procedures

3.0.230.1  (01-01-2008)
Introduction

  1. This Internal Revenue Manual (IRM) gives the procedures for a uniform method of documenting, reviewing, classifying and reporting procedural changes under the jurisdiction of the Tax Payment Management Branch.

  2. It provides the monitoring and evaluation methods used by all management levels in Internal Revenue Service (IRS) in conjunction with Financial Management Service (FMS) to oversee and evaluate the Lockbox Depositaries (Lockboxes).

  3. It describes how management in the Submission Processing Campuses (SPC) should handle a Lockbox processing/procedural change after being approved by Tax Payment Management Branch, Headquarters.

3.0.230.2  (01-01-2008)
Purpose

  1. This IRM provides Processing Internal Controls directives and general procedures for tax payments/returns received at the SPC from the Lockbox Depositaries.

  2. The FMS, a bureau of the United States Department of Treasury, acquires Lockbox collection services for the Internal Revenue Service (IRS). The IRS Lockbox network consists of commercial banks designated by FMS to process federal tax payments.

  3. Lockboxes, regardless of their Business Master File (BMF) or Individual Master File (IMF) designation, are expected to process all payments (BMF and IMF) that are considered processable.

3.0.230.2.1  (01-01-2008)
Lockbox Bank Processable IRS Forms

  1. All lockbox sites will process payments received with designated IRS forms. Specific procedures and policy are provided to the lockboxes via the Lockbox Processing Guidelines (LPG). Lockboxes must provide the necessary services (personnel, facilities, equipment, and materials) to process the payments received with these forms and follow the instructions for returns to be forwarded to the SPC they service. The processable IRS forms are as follows:

    • Form 433–D, Direct Debit Installment Agreement

    • Form 433–D-V, Direct Debit Installment Agreement, Payment Voucher

    • Form 940, Employer's Annual Federal Unemployment Tax Return/Payment Voucher

    • Form 940PR, Employer's Annual Federal Unemployment Tax Return, Puerto Rico*

    • Form 941, Employer's Quarterly Federal Tax Return/Payment Voucher

    • Form 941PR, Employer's Quarterly Federal Tax Return, Puerto Rico*

    • Form 941SS, Employer's Quarterly Federal Tax Return, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands*

    • Form 943, Employer's Annual Tax Return for Agricultural Employees/Payment Voucher

    • Form 943PR, Employer's Annual Tax Return for Agricultural Employees, Puerto Rico*

    • Form 944, Employer's Annual Tax Return/Payment Voucher

    • Form 944PR, Employer's Annual Tax Return, Puerto Rico*

    • Form 944SS, Employer's Annual Tax Return, American Samao, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands*

    • Form 945, Annual Return of Withheld Federal Income Tax/Payment Voucher

    • Forms 1040, 1040A, and 1040EZ, U.S. Individual Income Tax Return/Payment Voucher

    • Form 1040ES, Estimated Tax Payment Voucher

    • Form 1040NR, U.S. Nonresident Alien Income Tax Return**

    • Form 1040PR, U.S. Self-employment Tax Return for Puerto Rico**

    • Form 1040SS, U.S. Self-employment Tax Return for the Virgin Islands/American Samoa, Puerto Rico/Guam/Commonwealth of the Northern Mariana Islands**

    • Form 1040X, Amended U.S. Individual Income Tax Return

    • Form 1041ES, Estimated Tax Payment Voucher

    • Form 2159, Payroll Deduction Installment Agreement

    • Form 2159V, Payroll Deduction Installment Agreement, Payment Voucher

    • Form 2290, Heavy Highway Vehicle Use Tax Return/Payment Voucher

    • Form 4868, Application for Automatic Extension of Time to file U.S. Individual Income Tax Return/Payment Voucher

    • Form 8109/8109B. Federal Tax Deposit (FTD) Coupon

    • Form 8453, U.S. Individual Income Tax Declaration for Electronic Filing

    • Form 8879, IRS e-file Signature Authorization

    • Form 8892, Payment of Gift/GST Tax and/or Application for Extension of Time to File Form 709

    • Form 9465, Installment Agreement Request

    • CP521 and CP523, Installment Agreement Payment Notices

    • Letters 3640, 3640A, and 3641, Federal Tax Lien Payoff Letters***

    • Letters 3856, 3856A, Manually Monitored Installment Agreement (MMIA) Letter/Payment Voucher****

    • Private Collection Agency (PCA) Payments****


    *Ogden SPC only
    **Austin SPC only
    ***Cincinnati SPC only
    ****Kansas City SPC only

3.0.230.3  (01-01-2008)
Scope

  1. The provisions prescribed are limited to Processing Internal Controls directives and procedures in this IRM, the LPG and the Lockbox Security Guidelines (LSG). All SPC functional areas will use this IRM to process and handle work performed by each Lockbox. The LPG will be used for all Lockbox payment processing systems and the LSG will be used for all Security Requirements by each Lockbox Depositary.

  2. Lockbox Field Coordinators (LFC) should familiarize themselves with the following documents and IRMs:

    • Lockbox Processing Guidelines (LPG)

    • Lockbox Security Guidelines (LSG)

    • Functional and Compliance Reviews 1.16.2

    • Physical Security 1.16.1

    • Residual Remittance Processing System, 3.24.133

    • General Losses and Shortages, 3.0.167

    • Campus Deposit Activity, 3.8.44

    • Manual Deposit Process, 3.8.45

    • Extracting, Sorting and Numbering, 3.10.72

    • OFP Codes Overview, IRM 25.8.1

    • Account Resolution, 21.5

3.0.230.4  (01-01-2008)
General Instructions

  1. The IRS, FMS and Lockboxes have established a contract to deposit Federal tax payments expeditiously by:

    1. Processing the vouchers and payments and crediting the amount to the United States Treasury's deposit account.

    2. Providing data associated with these payments via cartridge tapes to the IRS for posting to the taxpayers' accounts.

    3. Forwarding unprocessable items to the IRS SPC.

    4. Sending the "Daily Mail-Out Package" to the SPC. The Lockbox Document Transmittal will list the contents of each day's work being shipped to each assigned SPC.

  2. Taxpayers are instructed to send their IMF or BMF tax payments for various forms to post office boxes related to a lockbox site.

  3. States are being realigned based on the SPC Consolidation plans. The approved realignment for the 2008 filing season is shown on Exhibit 3.0.230–1.

  4. Changes and recommendations to be incorporated into the January revision of this IRM must be received at Headquarters no later than the preceding June 30 for consideration.

3.0.230.4.1  (01-01-2008)
Lockbox Depositaries

  1. Commercial banks are chosen through a process initiated by the IRS and directed by FMS to serve as Lockbox Depositaries for the IRS.

  2. IRS Lockbox Policy and Oversight Section (LPO) provides the procedures and policies to be followed in conjunction with FMS.

  3. Lockboxes are required to follow the instructions for processing payments and all other instructions included in the LPG.

  4. Lockboxes are required to follow the instructions for Physical, Personnel, Courier and Information Technology security and all other instructions included in the LSG.

3.0.230.4.2  (01-01-2008)
Security Standards (Physical/Disclosure)

  1. The bank will provide adequate security, equipment, and facilities to safeguard all remittances received, processed, and shipped to the SPC as follows:

    1. All Lockbox Security Requirements, Physical, Personnel, Courier and Information Technology related, will be followed as specified in the LSG.

    2. A disclosure statement must be signed according to the conditions of employment (employees and vendors) to ensure tax data is not revealed to unauthorized persons.

    3. Deposit remittances must be packaged in one of the following manners:
      1. Cardboard boxes with heat strapping and placed in cloth sleeves that can be sealed with an identification number/tag;
      2. Secure in locked metal or plastic boxes with an identification number/tag.

    4. The Lockbox is liable for any loss or shortage of funds received and not properly credited to the IRS. (This applies if the loss or shortage occurs while the remittance is in the Lockbox's possession).

      Note:

      The floor, desks, and cabinets within a lockbox site will be checked at the end of each shift to make sure all work has been processed or forwarded to the SPC per the LPG.

    5. Lockbox employees will be aware of suspicious mail safety procedures. Employees should leave the package alone and contact the site manager. The site manager will contact a Treasury Inspector General for Tax Administration (TIGTA) representative.

    6. All lockboxes are subject to reviews to ensure all procedures outlined in the LPG and LSG are followed.

  2. The TIGTA Office is responsible for the investigation of any missing remittance mailed to the Lockbox. The Lockbox is responsible for assisting TIGTA in the investigation and resolution of any missing remittance directed to the Lockbox.

    1. Lockbox will immediately notify TIGTA, FMS, Tax Payment Management Branch and LFC when remittances are missing. A statement from the bank employee will contain the reporting elements in IRM 3.0.230.10.

    2. The LFC will then notify the Remittance Security Coordinator (RSC). Find RSCs contact information under the Submission Processing Website under Security. See IRM 3.0.167, Losses and Shortages.

3.0.230.5  (01-01-2008)
Tax Payment Management Branch, Lockbox Policy and Oversight Section (LPO) - Responsibilities

  1. The Lockbox Policy and Oversight Section (LPO) of the Tax Payment Management Branch has responsibility for the development of system, security, and processing requirements for the Lockbox Program. They also have responsibility for ensuring the processing, deposit, and security requirements stated in the LPG and LSG are followed by the lockbox network. Following are specific roles and responsibilities:

    A. Financial Agent Selection Process

    • Supports FMS by providing information to be included that reflects the policy requirements of the Service.

    • Participates in all planning sessions with FMS.

    • Assists in preparing a timeline of activities that will meet the schedule of all parties involved.

    • Provides concurrence with all documents prior to the release to Network Banks.

    • Provides concurrence on any and all changes to the Financial Agent Agreement (FAA) after issuance to Network Banks.

    B. Lockbox Processing Guidelines (LPG) and Lockbox Security Guidelines (LSG)

    • Updates these documents in accordance with tax legislation.

    • Organizes a forum for all IRS Lockbox Analysts to participate in an annual review of the LPG with FMS.

    • Provides comments and recommendations for updates on the LPG based on field experiences.

    • Tracks and addresses all suggestions and comments reported during previous filing season.

    • Conducts discussion sessions with FMS as needed or requested.

    • Provides draft of the LPG and the LSG with a "nature of changes" page to LPO and FMS analysts for review and comment.

    • Provides copies of final documents to all users in time for changes to be implemented including FMS and Lockbox Network Banks.

    • Communicates changes and updates to all users in a timely manner.

    • Provides a process to collect feedback on all requirements.

    • Assigns a coordinator at Headquarters to track and respond to waiver requests associated with the LPG and LSG. Waiver request procedures are included in the Security Memorandum of Understanding (MOU).

    • Provides technical assistance to the bank sites, campus employees, management and other parties utilizing the LPG.

    • Provides processing training (upon request by the bank sites) to temporary and permanent employees.

    C. Functional Specification Package (FSP)

    • Works with IRS Modernization & Information Technology Services (MITS) to develop the Lockbox FSP (software requirements)

    • Works with each bank to ensure adequate understanding of the software requirements.

    • Works with MITS to ensure consistency between lockbox software specifications and IRS internal software specifications.

    • Works with IRS Test Assurance and Documentation Division and the bank sites to ensure adequate and timely testing and certification of banks software.

    • Ensures bank sites timely receive the FSP and that new programs are implemented within required timeframes.

    • Works with IRS MITS and Lockbox banks to resolve Lockbox software production problems.

    D. Filing Season Readiness (FSR) — Coordination

    • Coordinates with Multimedia Production Division to test pre-printed vouchers.

    • Coordinates and ensures proper Lockbox voucher testing at the bank sites.

    • Coordinates PO boxes for each site with FMS. (FMS coordinates with each lockbox site).

    • Communicates with FMS and the Banks to ensure all of the Lockbox Network Post Office Box addresses by form type are correct.

    • Ensures addresses to be posted on the Internet are correct.

    • Coordinates with IRS MITS and Forms and Publications to ensure correct Lockbox addresses are incorporated in the mail-out tax packages and documents.

    • Coordinates with IRS MITS to ensure timely and adequate Systems Acceptability Testing (SAT) and timely software certification of the Lockbox Banks.

    • Determines workload distribution for each site based on each sites capacity and performance in concert with FMS.

    • Works in concert with FMS to validate that all Bank sites are certified for Security (Refer to Security MOU for certification details.)

      E. Review of Lockbox Bank FSR

    • Calculates the Program Completion Date (PCD) for each site based on expected volume of work and provides PCD information to each site.

    • Provides Lockbox PCD information for each bank site to the Program Management/Program Assistance Branch of Submission Processing Headquarters.

    • Conducts filing season readiness meetings with lockbox sites and SPCs.

    • Updates the Lockbox Readiness Review Plan template to reflect needed changes on an annual basis.

    • Distributes the Readiness Review Plan to each bank site with established timeframes for completion.

    • Conducts an analysis of the Readiness Plans to ensure processing requirements are addressed.

    • Coordinates with each lockbox site any required changes, concerns, or issues for resolution prior to the start of the new calendar year.

    • Ensures adequate supplies are on hand at each lockbox site to meet processing needs (excludes LTO cartridges, LTO cartridge labels, and CDs.)

    • Conducts pre-peak and post-peak meetings with each lockbox site and the respective SPC.

      F. Processing Internal Controls (PIC) and Procedural Reviews

    • Performs PIC and Procedural Reviews using the Data Collection Instrument (DCI) at the lockbox sites during peak processing periods.

    • Develops new DCIs for on-site reviews and SPC reviews as new work is brought into the lockbox program.

    • Updates PIC and Procedural DCIs to accurately reflect new requirements and/or changes in the LPG.

    • Compiles and analyzes data from on-site and the SPC DCI reviews to monitor the quality of lockbox processing.

    • Prepares and submits the lockbox SPC DCI to the IRS, Statistics of Income (SOI) by the 15th of every month.

    • Prepares and submits the PIC and Procedural DCIs to SOI by the 15th of the month following all peak and non-peak visits to lockbox sites.

      G. Production Reporting

    • Updates the Daily Deposit Production Report as new work is brought into the lockbox program.

    • Monitors, on a daily basis, productivity and inventories using the Daily Deposit Production Report and Office of the Assistant Secretary (OFAS) Production Report submitted by each bank site and the OCR Daily Deposit Cycle Report.

    • Coordinates resolution of issues identified with the bank site and FMS.

    • Prepares a weekly production report during BMF (January) and IMF (April) peak periods.

      H. Oversight

    • Develops specific oversight guidelines, quality improvements and control programs in conjunction with FMS.

    • Performs oversight at banks during designated peak periods.

    • Reviews compliance with LPG and LSG requirements..

    • Monitors the quality of each banks' performance with LPG and LSG guidelines.

    • Analyzes all program review reports on all oversight visits and shares results with FMS.

    • Works in concert with FMS to conduct an analysis of peak performance that includes data collected by IRS analysts and FMS.

    • Works in concert with FMS to conduct post peak meetings with each bank site to review their performance quarterly.

    • Provides additional training and/or training aids for bank sites on an ad-hoc basis if quality improvement is needed.

    • Supports the SOI analysts with the anomaly detection process. (See separate MOU with Research, Analysis and SOI (RAS).

    • Makes recommendations on ways to improve bank site oversight and discusses issues of concern with FMS.

    • Responds to inquiries from internal and external stakeholders as needed,

    I. Lockbox Continuity of Operations

    • Works in concert with FMS to develop and implement a Continuity of Operations plan.

    • Works with FMS, banks and SPC to coordinate testing of Continuity of Operations plan.

    • Provides field support to the contingency site as needed.

    • Provides 24/7 primary contacts to the Computer Security Incident Response Center/Situation Awareness and Management Center (CSIRC/SAMC) process, updates CSIRC/SAMC when contacts change (See Security MOU for details on the CSIRC/SAMC process.)

3.0.230.6  (01-01-2008)
Mandatory Lockbox Review Trips

  1. Following is a chart designating Mandatory Review trips by LFC Analysts. It lists the peak dates and type of payment with form number to be processed by the lockboxes.

    MANDATORY TRIPS - IMF COORDINATORS
    APRIL PEAK  
    April 15 1040, 1040ES, 4868 processing
    MINI-PEAK
    January 15 1040ES processing
    June 15 1040ES processing
    September 15 1040ES processing
    MANDATORY TRIPS - BMF COORDINATORS
    January 31 94X processing
    April 30 941 processing
    July 31 941 processing
    October 31 941 processing

3.0.230.6.1  (01-01-2008)
Declaring Program Completion Date (PCD) and Peak Sweep

  1. Each lockbox site receives a Program Completion Date (PCD) in which to complete receipts received during January/BMF and April/IMF peaks from the IRS.

  2. Before PCD is declared, IRS in conjunction with FMS (if available) must complete a sweep of the facility. Refer to LPG for specifics.

  3. The LFC will declare when PCD has been met after the sweep. If no LFC is present, an on-site IRS representative will declare when PCD has been met.

3.0.230.7  (01-01-2008)
Bogus or Questionable Remittances

  1. Lockboxes may receive bogus remittances that resemble checks and money orders. They follow the procedures outlined in the LPG.

  2. When TIGTA decides not to pursue the case, the bogus remittances are sent to the LFC.

  3. The LFC then coordinates with the Receipt and Control Operations to return the suspicious remittance to the taxpayer.

3.0.230.8  (01-01-2008)
Areas of Impact

  1. Submission Processing Functional areas impacted by lockboxes are Receipt and Control, Error Resolution, Unpostables, Accounting, Submission Processing Quality Review/Improvement Team and Notice Review. Additionally MITS, Accounts Management and Field Compliance are also impacted by lockbox processing.

3.0.230.8.1  (01-01-2008)
Accounts Management Operations

  1. Customer Service Representatives should make management aware of unusual taxpayer complaints regarding Lockbox processing.

  2. Report any potential theft/embezzlement to the TIGTA Office of Investigations and the RSC found on the Submission Processing web site under Security.

  3. Follow all procedures outlined in IRM 21.3.4.7.6, Altered and/or Stolen Taxpayer Payments.

3.0.230.8.1.1  (01-01-2008)
Encoding Errors

  1. Accounting Operations corrects lockbox encoding errors (Refer to IRM 3.17.10, Dishonored Check File (DCF) and Unidentified Remittance File (URF), and reports the errors each month to the LFC.

  2. The LFC consolidates a monthly report of the Lockbox encoding errors along with all lockbox reviews performed by the SPC and submits it to SOI.

3.0.230.8.1.2  (01-01-2008)
Payment Tracers

  1. A payment tracer case is generated when a taxpayer inquires about a payment which has not been credited to his account. The taxpayer usually has received an erroneous notice.

  2. Accounts Management and Field Compliance are responsible for the preliminary processing of payment tracer requests.

  3. Instructions for processing these requests are contained in IRM 21.5.7.4.8.4, Lockbox Payments.

  4. If preliminary research does not result in locating the payment, the case will be forwarded to the Hard Core Payment Tracer Unit.

  5. Depositaries are given 21 calendar days, upon receipt, to respond to SPC inquiries concerning deposit issues.

  6. If a timely response is not received, notify the Lockbox Field Coordinator.

3.0.230.8.1.3  (01-01-2008)
Balancing and Control Function

  1. The Balancing Unit will receive a copy of the journal package prepared by the Revenue Accounting Control System (RACS) Unit.

  2. The deposit amount from the Lockbox Deposit Ticket is added to the deposit amount from the regular Remittance Processing System (RPS) Deposit Recap RPS 03-42.

  3. This amount should agree to the totals on Service Center Control File (SCCF) 11-43, RPS IMF Control Date Recap/Master Control Records.

  4. Contact the LFC if there is a discrepancy between the totals attributable to Lockbox.

3.0.230.8.2  (01-01-2008)
Correspondence (General)

  1. Correspondence is all written communication from taxpayers, or his/her representatives, and is forwarded daily from the Lockboxes. Receipt and Control follows their IRM to deliver this work to be processed through the normal pipeline. Refer to IRM 21.3.3, Incoming/Outgoing Correspondence/Letters, for additional information.

3.0.230.8.3  (01-01-2008)
Remittance Transaction Research (RTR) System

  1. The Remittance Transaction Research (RTR) system is a researchable database that contains remittance processing data and images from Lockbox sites and Integrated Submission and Remittance Processing (ISRP). All Operations in Submission Processing and Accounts Management are to refer to IRM 3.5.10, Remittance Transaction Research (RTR), for specific instructions on using the system.

3.0.230.8.4  (01-01-2008)
Error Resolution (ERS)

  1. Images of processed documents will be available for research on the RTR system. Documents are identifiable as scannable and non-scannable by the file location codes.

  2. Transactions that fail the generalized mainframe (GMF) math error, consistency and validity checks are generated for correction to ERS.

  3. Instructions for resolving these errors are contained in IRM 3.12.10, Error Resolution, Revenue Receipts.

  4. Notify the LFC if there is a significant increase in ERS volume relating to Lockbox processing.

3.0.230.8.5  (01-01-2008)
Unpostables

  1. Lockbox transactions are processed and matched against IMF and BMF data on the Master File.

  2. Transactions that fail to match master file validity and consistency checks will generate a list to the Unpostable Unit for corrective action.

  3. Instructions to correct unpostable conditions are in IRM 3.12.179, IMF Unpostable Resolutions, IRM 3.12.279, BMF Unpostable Resolution, IRM 3.13.122, IMF Entity Control Unpostable Correction Procedures, and IRM 3.13.222, BMF Entity Control Unpostable Correction Procedures.

  4. Unusually large volumes of errors in certain unpostable category codes may indicate a need for additional training and/or revisions to LPG and/or IRMs. The Unpostable Unit must notify the LFC when volumes are above average.

3.0.230.8.6  (01-01-2008)
Notice Review

  1. The Notice Review process ensures the information received from the taxpayers is complete and correct, and no taxpayers receive an erroneous refund.

  2. The Notice Review function will receive IMF, BMF and IDRS Computer Paragraph (CP) Notices. These notices may be selected for review by Notice Review Processing System or IDRS Review Notice Register.

  3. Notices are generated to taxpayers when adjustments have been made to their account(s).

  4. Instructions for researching lockbox payments is included in IRM 3.14.1, IMF Notice Review and IRM 3.14.2, BMF Notice Review.

  5. Unusually large volumes of errors resulting in notices may indicate a need for additional training and/or revisions to Lockbox Processing Guidelines. Notify the LFC when the volumes are above average.

  6. The file location code in the DLN of the audit trail will be the indicator of Lockbox processing. See Exhibit 3.0.230-2.

3.0.230.8.7  (01-01-2008)
Modernization & Information Technology Service (MITS)

  1. MITS will initially send 100 clean cartridges to the Lockbox.

  2. Included in the shipment will be a four month supply of Forms 3220 (Mass Storage Media) pre-printed with the deposit run information.

  3. Periodically, MITS will replace the cartridges based on a predetermined agreement between the center and the Lockbox.

  4. MITS will receive daily the following four cartridges:

    • Optical Character Recognition (OCR) Deposit Cartridge (RPS0103)

    • OCR Trans Cartridge (RPS0501)

    • OCR Print Cartridge (RPS9701)

    • Levy Source Cartridge (RPS0503)

  5. The cartridges will contain deposit data from the previous day's deposit (i.e., tapes received on Wednesday will contain processing date of Tuesday).

  6. Cartridges containing Saturday and Sunday processing will be delivered during April peak on the weekend when SPC is open.

  7. Weekend processing cartridges will usually be received on Monday in addition to Friday's cartridges when the SPC is closed. If the SPC is closed on Monday, cartridges will be delivered on the next business day the SPC is open.

  8. Process cartridges as soon as possible after delivery.

  9. Copies of the run controls are generated, if requested, by Receipt and Control Operations.

  10. Each center may establish print requirements for the OCR print cartridge (RPS9701).

3.0.230.8.7.1  (01-01-2008)
Cartridge Replacement Instructions

  1. There may be instances where a lockbox cartridge requires a replacement. The computer assistant at the transmitting SPC, or at the receiving Computing Center, is usually the first to make this determination.

  2. When a replacement cartridge is needed, the computer assistant will do the following:

    1. Identify the cartridge and determine why the replacement is needed, if possible.

    2. Open an ITAMS ticket.

    3. Notify the SPC LFC. (See SERP-Lockbox in Who/Where)

    4. Provide identifying information about the cartridge requiring a replacement such as the cartridge number, job-run-file-id (from Form 3220) and the deposit date.

  3. The LFC will contact the bank and have a replacement cartridge created and sent to the SPC the following day.

3.0.230.8.8  (01-01-2008)
Quality Review/Improvement Team

  1. A responsibility of the Quality Review/Improvement Team is to assist the LFC to ensure that the quality standards provided in the LPG are maintained. The assistance is to be provided through in-house program or process reviews, on-site procedural reviews, and in the area of notice review.

  2. Instructions on the use of Data Collection Instruments (DCI) and the Review Process are included in IRM 3.0.230.12, Submission Processing Campus Quality Review of Lockbox. Contact the LFC if you have any questions regarding the reviews and use of DCI's.

  3. The Quality Review/Improvement Team ensures the work being processed by the lockbox sites is within IRS standards. The reviewers will examine critical elements from processing which could cause a work stoppage, and make recommendations for improvement if processing guidelines are not accurate. Refer to IRM 3.0.230.12 and IRM 3.0.275, Business Results Measures for Submission Processing Functions.

3.0.230.9  (01-01-2008)
Reporting Requirements

  1. Lockbox sites are required to report total dollars and items deposited via the Daily Deposit Production Report to Headquarters.

    Note:

    The word daily means any day lockboxes are working including Saturday, Sunday and Holidays.

  2. Deposits made on Monday, Tuesday, Wednesday and Thursday must be reported to Headquarters by the following day. For example, Tuesday's deposit will be reported Wednesday morning; Wednesday's deposit reported Thursday morning, etc.

    Note:

    Remittances for Saturday, Sunday and Holidays must be deposited the next business day.

3.0.230.9.1  (01-01-2008)
Daily Deposit Cycle Report

  1. IRS management uses the Daily Deposit Cycle Report (DDCR) to monitor the deposit activities and cash management practices.

  2. The DDCR is also used to monitor the Lockbox deposits made on a daily basis to ensure lockbox policies and processing guidelines are being followed.

3.0.230.10  (01-01-2008)
Embezzlement/Theft

  1. The Submission Processing Directors will NOT be held accountable for any theft/loss that occurs at the Lockbox. (Credit cannot be issued from either Accounts 7610, 7620 or 7650.) The LPG states that the Lockbox is liable for funds received and not properly credited to the IRS.

  2. When an IRS employee or manager identifies or suspects a revenue receipt shortage, they should immediately contact TIGTA and follow the instructions in IRM 3.0.167, Losses and Shortages.

  3. The Lockbox is required to ensure adequate controls exist to minimize or prevent instances of any thefts or losses due to embezzlement or employee negligence.

  4. When a lockbox manager or an employee becomes aware of a theft/loss, it must be reported immediately (within one hour) to TIGTA, FMS, Tax Payment Management Branch and LFC.

  5. Lockbox management will obtain a statement from the employee who discovers the theft/loss. The report will contain the following:

    1. Date the loss/shortage occurred or discovered

    2. The amount of the loss/shortage

    3. The type of tax or fund in which shortage/loss occurred.

    4. The circumstances involved with the loss/shortage and

    5. The involved employee's signature, position, title, and the date the statement is prepared

3.0.230.10.1  (01-01-2008)
Remittance Security Coordinator (RSC)

  1. Each SPC has selected a member of the Planning and Analysis Staff as the RSC.

  2. If the LFC is notified that a Lockbox theft has occurred, then the coordinator must notify the RSC. The RSC is responsible for centralized control, coordination and protection of taxpayers for potential embezzlement and theft cases. Refer to IRM 3.0.167, Losses and Shortages.

  3. The RSC will coordinate the theft/shortages with TIGTA, Submission Processing Director, Headquarters Losses and Shortages Analyst, LFC, and Hard-core Payment Tracer Unit.

    Note:

    Report any potential theft/embezzlement(s) to the Treasury Inspector General for Tax Administration (TIGTA) Office of Investigations at 1–800–366–4484 (TIGTA Hotline Information) and the local Remittance Security Coordinator listed on the Submission Processing Web Site under Security.

  4. SPC and Field Offices are to report any potential thefts/embezzlements immediately to the RSC so the RSC can ensure taxpayers are protected from adverse action while the case is investigated.

  5. Advise the respective SPC LFC when the potential loss may involve a lockbox bank.

3.0.230.10.2  (01-01-2008)
Lockbox Tax Remittance Losses

  1. Lockbox thefts and embezzled remittances are stolen and/or altered remittances that have been through the Lockbox tax payment process. They may occur under the following conditions:

    • Endorsed and made payable to someone other than the IRS.

    • Embezzlement, misappropriation or other criminal acts.

    • Lockbox employee negligence.

    • Deposit discrepancies (encoding errors)

    • Deposit loss in transit

    • Theft - remittance stolen to obtain taxpayer identity and/or cash.

  2. LFC's will receive available information and documentation regarding the theft/shortage of tax collection from TIGTA and/or the RSC.

  3. The LFC will then report the theft/shortages of any tax collection received at the Lockbox for IRS if reimbursement from the lockbox bank is being requested. Use Form 9534, Lockbox Theft Report. See Exhibit 3.0.230-3.

  4. Fax a copy of this report and required documentation (copy of altered check and information verifying perpetrator was connected to the Lockbox Bank, if known) to the LPO Analyst.

  5. Coordinate resolution of the Lockbox cases with LPO analyst on a case-by-case basis.

  6. When notified, the LPO analyst is required to:

    1. Notify FMS.

    2. Verify TIGTA has been informed.

    3. Prepare a request-for-reimbursement letter to include taxpayer's name, TIN, dollar amount, taxpayer's SPC location, telephone number, and a copy of the front and back of the check to FMS within 30 days.

    4. Set up a control file and prepare a quarterly theft report for submission to FMS.

  7. If, after one year no evidence is discovered which implicates an employee of the Lockbox in the theft, embezzlement, or subsequent negotiation, the LFC will:

    1. Request a manual refund for the Lockbox bank on Form 3753, Manual Refund Posting Voucher.

    2. Send Form 3753 to Accounting Operations for approval and processing. (See IRM 3.17.79, Accounting Refund Transactions, for additional information on the issuance of the manual refund.)

  8. If the Lockbox has been reimbursed as described above, and it is subsequently determined that the Lockbox was responsible for the misappropriation:

    1. Theft/Embezzlement analyst will notify FMS and request, in writing, that FMS notify the Lockbox to submit a repayment.

    2. Repayment will be made to the General Fund, General Miscellaneous Receipts, Account 2320 with a SF–215 (Deposit Credit Voucher) annotated "FOR DEPOSIT TO GENERAL MISCELLANEOUS RECEIPTS, ACCOUNT 20-3220 LOCKBOX REIMBURSEMENT" in the Agency Use comments section.

3.0.230.10.3  (01-01-2008)
Lockbox Reimbursement Policy

  1. If a Lockbox Bank processing error has a significant impact to taxpayers or the IRS, the IRS may pursue reimbursement.

  2. The SPC will notify the LFC of the incident.

  3. The LFC will notify LPO Section and provide information of its potential impact.

  4. The LPO will approve the use of a unique recovery/rework program code by a specific SPC.

  5. Upon approval, the SPC will use program code 85380. The LFC will monitor the use of the unique recovery/rework program code.

  6. The LFC will advise the bank of the situation and request an Incident Report be prepared to document the situation. In addition, the bank will research the cause of the problem and develop a method to avoid the situation in the future.

  7. Each LFC will submit a quarterly report outlining volume and hours used by the SPC correcting the problem to the LPO section.

  8. LPO Section will be responsible for submitting a quarterly report to FMS and the Tax Payment Management Branch with a recommendation regarding reimbursement. If the recommendation is reimbursement, FMS will initiate recovery of funds from the Lockbox Bank.

3.0.230.11  (01-01-2008)
Lockbox Daily Mail-Out Package

  1. The Lockbox will forward daily, via courier, all work processed during the current day's activity. Lockbox Document Transmittal will list the contents of the mail-out package, and will be addressed to specific functional areas. The document contents will include:

    1. All unprocessed work. (Remittances must be packaged separately)

    2. All returns sorted and volume processed.

    3. Lockbox Field Coordinator Package ( IRM 230.12.3)

    4. Address change cards or Forms 8822 (Postal Service Change of Address) and photocopies of CP 521 and 523 vouchers with address changes.

    5. Accounting package.

    6. Four magnetic cartridge tape files with Form 3220 (Mass Media Storage Transmittal).

  2. Destroy Lockbox Document Transmittal, Forms 3210, Document Transmittal and 3220, Mass Media Storage Transmittal, after one year.

3.0.230.11.1  (01-01-2008)
Receipt & Control Operations

  1. Receipt and Control Operations is the central point for receipt of the mail-out package from the Lockbox. An employee from Receipt and Control or other designated personnel is responsible for ensuring the mail is received and all Lockbox work is distributed to the SPC functional areas.

  2. Mail received will be opened daily. A 100 percent review of the mail-out package is performed daily upon receipt by an employee in Shipping and Receiving or Receipt & Control Operations.

  3. The mail-out package must be received no later than noon daily in shipping containers. Contact the LFC if any items are missing from the containers or if the shipment is received after 12 p.m.

  4. The LPG specifies packaging/distribution/reporting instructions. Contact the LFC for specific instructions if necessary.

  5. Maintain the daily Lockbox Document Transmittal in a file for the LFC's to review.

  6. MITS will process the cartridge tapes and deliver the RPS Remittance Recaps to Receipt and Control.

  7. Receipt and Control Operations will distribute the Accounting package to the proper area after the deposit has been verified.

3.0.230.11.1.1  (01-01-2008)
Unidentified Large Checks

  1. Submission Processing Campus (SPC) will provide additional research on unprocessable checks of $5,000 or more for the Lockbox sites.

    1. Lockbox sites will fax their requests for research to the contacts agreed upon by the SPC and LFC.

    2. Within four hours of receipt of the request, the SPC will research IDRS for the missing information and provide a response to the Lockbox site.

    3. If the missing information cannot be supplied to the site, the Lockbox site will forward the remittance to the SPC along with the fax as instructed in the LPG.

3.0.230.11.2  (01-01-2008)
Accounting Operations

  1. The Accounting package must conta