Part 3. Submission Processing

Chapter 17. Accounting and Data Control

Section 243. Miscellaneous Accounting

3.17.243  Miscellaneous Accounting

Manual Transmittal

August 28, 2012

Purpose

(1) This transmits revised IRM 3.17.243, Accounting and Data Control, Miscellaneous Accounting.

Material Changes

(1) IPU 11I1901 issued 12-05-2011 Changed IRM 3.17.243.2 to add additional criteria for Reversal of Erroneous Abatement cases.

(2) IPU 12U0124 issued 01-12-2012 IRM 3.17.243.3.3 Updated to include instruction regarding the monitoring of manual refunds.

(3) IPU 12U0394 issued 02-13-2012 Updated IRM 3.17.243.3.3 to include instruction regarding the monitoring of manual refunds.

(4) IPU 12U0498 issued 02-27-2012 Updated IRM 3.17.243.3.5(2) to instruct employees to access CC IMFOL/BMFOL instead of TXMOD to obtain the split refund indicator.

(5) IPU 12U0498 issued 02-27-2012 Updated IRM 3.17.243.5.6 to include a note regarding the review of Forms 2424.

(6) IPU 12U0498 issued 02-27-2012 Updated IRM 3.17.243.5.8 to include delegation authority for review and approval of Forms 2424.

(7) IPU 12U0498 issued 02-27-2012 Updated IRM 3.17.243.5.10 to include new balancing and reporting procedures.

(8) IPU 12U0734 issued 03-26-2012 Updated IRM 3.17.243.3.5 to include an If/Then table and to add notes regarding the processing of request related to ID Theft cases.

(9) IPU 12U0952 issued 04-27-2012 Updated IRM 3.17.243.5.9.3(3) to insert a note regarding a listing that will be sent to Kansas City.

(10) IPU 12U1278 issued 06-22-2012 Updated the chart in IRM 3.17.243(2) to remove incorrect instructions.

Effect on Other Documents

IRM 3.17.243 dated September 9, 2011(effective 10-01-2012)is superseded. This IRM also incorporates the following IRM Procedural Updates (IPU) - 11I1901, 12U0124, 12U0394, 12U0498, 12U0734, and 12U0952.

Audience

All Submission Processing Campuses (W and I).

Effective Date

(10-01-2012)

Paul J. Mamo
Director, Submission Processing
Wage and Investment Division

3.17.243.1  (10-01-2010)
Form 1040NR Fiduciary (CSPC Only)

  1. All Form 1040NR Fiduciary returns are processed to the Non-Master File database at the Cincinnati Submission Processing Center (CSPC).

    Note:

    A Form 1040NR Fiduciary return is processed as a Non-Master File return

    under Master File Tax 20.

  2. This section provides procedures for the Non-Master File processing of Fiduciary Form 1040NR returns. These returns are processed ONLY at the CSPC, and are filed to report income received by foreign estates or trusts. Form 1040NR filed by Non-Resident Alien individuals are processed on Master File. If returns, which have been identified as "fiduciary" are found to actually be individual returns, they must be returned to the Receipt and Control area where they are to be resorted to Individual Master File (IMF) Returns Processing.

3.17.243.1.1  (10-01-2010)
Due Date

  1. If Form 1040NR is being filed for a nonresident alien estate or trust that has an office in the United States, the return is due by the 15th day of the 4th month following the close of the tax year. (For a calendar-year return, the due date is April 15.)

  2. If Form 1040NR is being filed for a nonresident alien estate or trust that does not have an office in the United States, the return is due by the 15th day of the 6th month following the close of the tax year. (For a calendar-year return, the due date is June 15.)

    Note:

    If the regular due date for filing falls on a Saturday, Sunday, or legal holiday, Form 1040NR is due by the next business day.

3.17.243.1.2  (10-01-2011)
Distinguishing Form 1040NR Fiduciary Returns from Individual Returns

  1. Fiduciary returns will have some or all of the following characteristics:

    • Name line(s) may consist of numbers or a combination of letters and numbers

    • Account, Trust, Grantor, or Nominee may be indicated

    • Name line(s) may indicate Estate of . . .

    • No filing status may be indicated

    • No exemptions may be shown

    • The return may have an Employer Identification Number (EIN) instead of a Social Security Number

    • The trust will show deductions for distributions made to U.S. or foreign beneficiaries. If so, check to make sure the beneficiaries reported the income on their returns. Also, check Integrated Data Retrieval System (IDRS) to see if Form 3520 or Form 3520-A filed is the trusts name. The trust may state that it is a grantor trust of a foreign owner. If so, flag return and forward a copy to the LB&I International Individual Compliance team at:
      Internal Revenue Service
      2970 Market Street
      Philadelphia, PA 19104
      BLN 2-H08-200
      Attn: Jack Loggia

3.17.243.1.3  (10-01-2011)
Document Perfection

  1. Verify only the items below:

    1. Name Control — underline name control in red. Be certain that the name control of the trust itself is indicated, rather than that of the bank or other company.

    2. Identifying Number — if number is missing, route to Entity Control for assignment.

    3. Street Address — if the return shows an address in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ with "Foreign Trust Organization" .

    4. Line 66a — U.S. Tax Withheld at Source by partnerships under Section 1446 — if Form 8805 is not attached and the credit is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ correspond. If no response, "X" the credit. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ allow the credit.

    5. Line 66b — U.S. Tax Withheld at Source by partnerships under Section 1446 — if Form 1042-S is not attached and the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ correspond. If no response, "X" the credit. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ allow the credit.

    6. Line 67a — Form 8288-A – Statement of Withholding on Disposition of U.S. real property interest by a foreign person — if credit is claimed, verify that Form 8288-A is attached. If attached route case to FIRPTA (Foreign Investment Real Property Tax Act) unit for verification. If not attached, correspond. If no reply, "X" the credit.

      Note:

      After FIRPTA verifies the credit it will be returned to the originating function. If FIRPTA credit slip verifies an amount other than the amount listed on the document, "X" the credit on Line 67a and edit the correct amount verified on the document that is reflected on the credit verification slip.

    7. Line 67b — Form 1042-S — if Form 1042-S is not attached and the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , correspond. If no response, "X" the credit. If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    8. Signature — if the return is unsigned, return to taxpayer for signature. DO NOT CORRESPOND IF FACSIMILE SIGNATURES ARE PRESENT.

      Note:

      Line 68: If there is an amount present, and the return is being filed for an Estate and Trust, you will need to "X" out the amount. Estate and Trust are not eligible to claim this credit.

    9. Math-verify taxpayers computation. If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ accept return as filed.

    10. If the return is obviously late-filed (see "Due Date" above), and filer does not establish reasonable cause for lateness, and it is determined that penalty and/or interest assessments are required, follow the procedures below for preparing Form 3465, Adjustment Request, and route the return as directed for the appropriate action. The form is to be prepared if adjustment action will be required on a return. If the return involved has been blocked and numbered, attach the Form 3465 to the return and leave in the block for later adjustment action. If the return is not numbered (no-remittance), use the Form 3465 for routing to Adjustments for necessary action. Complete the form as follows:

      Complete the following:
      Enter the taxpayer’s name
      Enter the DLN
      Check Routing box for "Adjustments"
      Enter the EIN or SSN (if present)
      Enter the tax period ending, year and month
      Enter the tax form number
      In the "Remarks" areas, enter the reason (late filing) for the routing
      Complete the blocks for Signature, Unit Phone and Date

3.17.243.1.4  (10-01-2010)
Disposition of Returns

  1. Route remittance returns to Non-Master File Accounting.

  2. Route non-remittance returns to Receipt & Control for processing.

3.17.243.2  (12-05-2011)
Reversal of Erroneous Abatements

  1. General - This section provides instructions for overriding Master File computer programming that prevents the reversal of abatement transactions after the Statute of Limitations for Assessment has expired.

  2. Erroneous abatements can be reversed only in limited circumstances. They are:

    1. Clerical errors. See IRM 25.6.1.10.2.1.1.1, Statute of Limitations Processes and Procedures .

    2. Unauthorized abatements made after referral to the Department of Justice. See IRM 25.6.1.10.2.1.1.2.

    3. Abatements due to bankruptcy discharges. See IRM 25.6.1.10.2.1.1.3.

    Note:

    Any penalties and interest that were erroneously abated can be assessed as if the erroneous abatement never occurred. Penalties and interest should also continue to accrue as if the erroneous abatement had not occurred.

    Note:

    Refer to IRM 25.6.1, Statute of Limitations, Statute of Limitations Processes and Procedures, for additional information.

  3. Processing - Receive requests for Reversal of Erroneous Abatement from the Statute Team, under cover of Form 12810, Transfer Request Checklist.

3.17.243.2.1  (10-01-2009)
Reversal of Erroneous Abatements Checklist

  1. Form 12810, Account Transfer Request Checklist, containing the following information:

    1. Complete entity information of the account being transferred from the Master File.

    2. If the reversal request involves a MF account, a current MFTRA or account transcript showing the account balance as either a debit or zero should be included.

      Note:

      If the reversal request is for a NMF account, a current NMF transcript must be attached.

    3. Reversal request listing the 23C date of the assessment being reinstated.

    4. Transaction codes and amounts being reversed.

  2. Completed Form 3465 with TC 860, the reinstated 23C date and entity information of the taxpayer whose account will be established on Non-Master File (NMF). The information may not be the same as the MF account being transferred. If the reversal is for a NMF account, no account transfer is necessary.

    1. Indication of either "Notice to Taxpayer" or "No Notice to Taxpayer" .

    2. If a credit is available, indicate where the credit is located.

  3. A memorandum (2-way memo) will be signed by the Campus Compliance Official of the responsible Team, addressed to the Accounting Official. This memorandum will set forth the conditions surrounding the erroneous abatement, the amount of tax considered still due, the type of tax, the tax period and taxpayer identification information. In addition, information should be included on how the reinstated liability will be handled, i.e.,, a credit is available for application and/or a notice will be issued to the taxpayer. Upon approval of the Statute Control Team and acceptance by the Accounting Official, this memorandum serves as authorization to process the requested action.

  4. If the original assessment documents cannot be obtained, a dummy document should be prepared and approved by the manager of the initiator, or at least 2 attempts to obtain the document should be provided (Form 4251 - Charge out document).

  5. A letter to the taxpayer explaining the action and the amount of tax, penalty, and/or interest being reversed will be included if a notice to the taxpayer is required. A 510-C letter (Refund in Error; Return check) is not appropriate for the TC 860 action. The letter to the taxpayer will accompany the first notice (Form 6335) to the taxpayer. The letter must be signed by the Originating Function's Operation Manager.

    1. If taxpayer is not going to be billed, credit must be available in Excess Collections to full pay the account.

      Note:

      If the credit is located in another Campus, contact the requestor for Form 2158.

    2. Form 8765 (IDRS Control File Credit Application), must be included with the accounting package.

    3. This credit must be posted before the reversal request can be sent through Statute to NMF.

    4. Once the account is loaded, the credit can be applied to ANMF using Form 8765.

3.17.243.2.2  (10-01-2009)
Processing the Reversal of Erroneous Abatement Package

  1. The reversal of erroneous abatement package, as described in (IRM 3.17.243.2.1), will be forwarded to the Accounting Operation from the Statute Operation only. At the option of the Operation Manager, a preview of the package may be made to ensure all necessary documents are received. If items are missing, the request should be rejected back to the requestor through the Statute Function (See IRM 25.6.1.10.2.2.3, Statute of Limitations, Processing of Erroneous Abatement by the Originating Function).

    1. The review may also include an analysis of the integrity of the request to ensure proper administration of the Internal Revenue Code and Regulations.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      If the taxpayer has submitted payment, the reversal must be processed.

    3. The Accounting Operation Manager must sign approval on the memorandum indicated in (3) above when the request is accepted.

  2. The Account Transfer Team will input the TC 400 to the MF.

    1. IMF accounts - Input TC 971, Action Code 045 using REQ77.

    2. BMF accounts - Prepare Form 514-B, Credit Transfer Voucher and Form 813, Document Register. (See IRM 3.17.243.2 for detailed instructions)

    Note:

    A TC 400 will not post to a MF account that has a credit balance. Prepare credit transfer document(s) for available credit(s), if appropriate.

  3. The TC 400 will generate CP 96 (IMF) or CP 296 (BMF).

  4. The Account Transfer Team will edit CP 96/296/396 and prepare the Reversal of Erroneous Abatement package for NMF processing.

  5. The Account Transfer Team will forward the Form 12810, original Form 3465, Operation Manager's approved memorandum, and the original letter for the taxpayer (when a notice is required) to the appropriate function.

    Note:

    For additional instructions on processing Reversal of Erroneous Abatements see IRM 3.17.46.2.9, Automated Non-Master File Accounting .

3.17.243.3  (10-01-2009)
Requests for Account Adjustments

  1. Form 1120, U.S. Corporation Income Tax Return, and 1041, U.S. Fiduciary Income Tax Return (For Estates and Trusts), and 1041ES, Estimated Income Tax for Fiduciaries, are received from Reject Correction Unit.

    1. Form 3473, Rejected Document Transmittal, is attached to each transmittal of Form 1120 or Form 1041 returns from the Rejects Function.

    2. Form 3892, Corporation Edit Sheet, (ISRP - Section 02), and Form 4227, Intra-SC Reject or Routing Slip, are attached on the front of each Form 1120.

  2. Form 3465, Adjustment Request, are received from various Functions within IRS.

  3. Requests for adjustments may also be received on the Optional Form 27, 2-Way Memo, from district and field offices. Annotate action taken on both original, and copy. Route copy to initiator. If TC 520 is present on the account, a "W" freeze is present. Route the request and/or any attached documents to CSCO for processing. Local routing procedures may vary.

  4. Cases are controlled by the control clerk.

    1. The control clerk will count and maintain the record of receipts and releases on the report.

    2. The control clerk will order MFTRA on IDRS only on jeopardy refunds. All other Form 1120 are checked by the Parent-Subsidiary technicians.

  5. All Form 1120, except short period returns, should indicate whether a "Form 3177" was prepared before being routed to Accounting.

    1. If there is no indication of "Form 3177" , input TC 590 with closing code 14 using FRM49 for each subsidiary if transferring credits to the parent corporation.

    2. Note "Form 3177" on the return.

    3. If returns are frequently received without the "Form 3177" notation, refer to your supervisor so that the Processing Division can be notified of the deficiency.

3.17.243.3.1  (10-01-2009)
Parent-Subsidiary Cases

  1. Do not transfer subsidiary corporation prepayments to a parent corporation until a consolidated Form 1120, U.S. Corporation Income Tax Return, is filed. When such credits are transferred, the transfer and other related actions described below will be initiated and controlled by the Campus with which the consolidated return is filed.

  2. Locate and verify credits claimed on line 32 of Form 1120.

    1. Check IDRS for credits using Command Code SUMRY, on the Parent. If the credit is found, bring up the account using Command Code TXMODA. Look for the TC 590 or TC 599. If the account is not on IDRS, request data from the Master File to verify credits claimed using BMFOL, BRTVU or one of the other CFOL research Command Codes. Annotate the log or local worksheet document. Examine the account transcript when received to locate the credit claimed by the parent corporation.

    2. Use Form 851, Affiliations Schedule, and Schedule-K to help locate credits from subsidiary taxpayers. Compare amounts claimed on F-851 with credits available as shown on the transcripts.

    3. Backup withholding may be present on line 32-F of Form 1120. No substantiation (Form 1099 Series) is required for entry of backup withholding on line 32-F. Since Regulated Investment Credit is normally entered on this line, the absence of an attached Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, may indicate an entry is backup withholding.

3.17.243.3.1.1  (10-01-2009)
Transferring Credits

  1. Transfer a credit to the correct module if necessary. Use IDRS whenever possible, since only IDRS will provide a cross-reference audit trail for Document Codes 24 and 48.

  2. Format DRT24 is used for transferring credits when a secondary transaction code is required. Format DRT48 is used for transferring carry over or other non-revenue receipt items. Format FRM34 is used for transferring credits within a Master File when no secondary codes are required.

  3. Use format DRT24 to move the credits to a module for any return that has not posted.

  4. If the parent return has already posted, use CC FRM34.

    1. Use Subsidiary Code 1 if moving estimated credits from the subsidiary account to the parent corporation account with CC FRM34. If there is a credit on the module, a (para/sub cr) transcript will generate unless a TC 599 is present. If a TC 570 is required, overlay the C Credit Freeze Code on Line 7 position 40 with a 1 to generate the 570. This must be reversed at a later date.

    2. This transcript will remind the para/sub clerk that a credit remains on the account.

    3. If the subsidiary corporation is liable for the period in question, take no action. If the subsidiary corporation is not liable, the credit should be resolved by either transferring the credit to a liable period or refunding to the parent corporation.

    4. Use subsidiary code "0" for other transfers of Form 1120 estimated payments.

    5. In all other cases, leave the subsidiary code blank.

  5. Check for any debit balances on the subsidiary accounts before transferring to the parent corporation account.

  6. If IDRS shows a rejected TC 620 with the needed credit amount, notify the Reject Team that the credit is needed on the module. Notate the Form 1120 worksheet and close the case.

  7. If Unpostable Code 305 or 307 is present on the account, hand carry the return to the Unpostables Team to be corrected.

  8. Prepare FRM49:

    1. If Document Perfection has not indicated "Form 3177" in the margin of a consolidated return or there was not a TC 590 or TC 599 on the TXMOD, input TC 590 with closing code 14 using FRM49.

    2. Adjustment action is necessary when the subsidiary return (TC 150) has posted, but the parent corporation assumes liability for the period and claims credit.

    3. Input TC 470 on the subsidiary module.

    4. Transfer the credit to the parent corporation account.

    5. Prepare Form 3465 Adjustment Request, to abate the tax liability on the subsidiary amount.

3.17.243.3.1.2  (10-01-2009)
Credit Verification

  1. If the credits found do not agree with the credits claimed on the return, contact the requestor for an explanation.

    1. First check the available information closely.

    2. The missing credit may have been used elsewhere or previously refunded to the taxpayer or a debit may have been created by a misapplied credit.

    3. If it is necessary to verify a claimed credit, ask requestor to provide (copy) front and back of check. Hold the case open until it is received and traced. Input on IDRS the appropriate status code to the tax period.

3.17.243.3.2  (10-01-2009)
Short Period Form 1120

  1. Short period returns occur for several reasons:

    1. A business consolidates to form a new corporation.

    2. A taxpayer goes out of business.

    3. A taxpayer has approval to change fiscal year accounting period.

  2. These returns are received from rejects and controlled in the same manner as the consolidated corporation returns.

    1. Correct the Fiscal Year month and filing requirement, if necessary, before moving credits.

    2. Input secondary TC 570 to freeze module from offsetting or refunding the credit. Input a TC 571 if a credit balance remains after the return posts.

    3. Assign short periods on IDRS as IRRQ with ACTON.

    4. Verify credits when transferring to the short period. If condition codes Y and F are not present, use ENMOD and ENREQ, which generate BNCHG to change the Fiscal Year month to set up the period.

    5. Transfer credit and return Form 1120 to the Reject Team. Because of the NAP Validation of the Credit Transfer Command Codes, there should be fewer Unpostables. If the transaction unpost, it must be corrected immediately.

    6. If excess credits are shown in IDRS, transfer only the amount claimed on the return.

    7. For refunds with a transfer to debit balance, do not change line amounts on the Form 1120 return.

  3. Procedures for researching and transferring credits and for releasing refunds are the same as for consolidated returns.

3.17.243.3.3  (02-13-2012)
Form 1120 and Form 1041 Manual Refunds

  1. Form 1120 and Form 1041 manual refunds are routed to Accounting when the 45 day interest free period is in jeopardy. The Credit and Accounts Transfer Team will request a transcript to verify the ES credits claimed on the return. If the credits are the same as claimed on the return, initiate Manual Refund procedures as prescribed in IRM 3.17.79.0, Accounting Refund Transactions and IRM 21.4.4, Refund Inquiries .

  2. All manual refunds that are prepared and processed must be monitored by the initiator until the TC 840 post. The procedures outlined in IRM 21.4.4.5.1 are to be followed to complete the monitoring.

3.17.243.3.4  (10-01-2011)
$50 Million and $500 Million Refunds Notification

  1. IRM 3.17.79.3.7 requires Treasury and IRS's Chief Financial Officer (CFO) to be given a 2 day notification whenever they have a single refund or several refunds with an aggregate total of $50 million dollars or more are scheduled for payment on any give day and a five (5) day notification whenever a sign refund or several refunds with an aggregate total of $500 million has been received for processing.

  2. Refer to IRM 3.17.79.3.7 for reporting instructions for $50 ad $500 million dollar refunds.

3.17.243.3.5  (06-22-2012)
Form 12857 Receipts

  1. General Explanation of Form 12857 is as follows:

    • Form 12857 is used to transfer an erroneously posted refund to the correct tax module on IDRS.

    • There are two parts to the form.

    • Part A will list the information relative to the account the refund needs to be posted “To”.

    • Part B will have the information relative to the account where the TC 840/846 is currently posted and being transferred “From”.

  2. Review the Form 12857 to ensure it is completed correctly. The following actions are to be taken when the F12857 is received.

    • Access IDRS command code IMFOL or BMFOL to verify that the account on Part B does in fact have a TC 840/846 posted.

      Note:

      Requests that are received related to ID Theft cases should include IDRS prints showing the posted refund and the "to" account .

    • Verify that the amount and transaction date are correct. There may be instances where the TC 841 being input differs from the posted TC 840 or TC 846. See the table below.

      If And Then
      the TC 841 is less than the TC 840/846 a TC 720 is present for the difference reject the Form 12857
      the TC 841 is less than the TC 840/846 a TC 898 is present for the difference process the Form 12857
      the TC 841 is more than the TC 840/846   reject the Form 12857

    • Verify that boxes 11, 12, and 16 of Part A have the requested information. These fields are must enter boxes and missing data will cause the document to error out. If the information is missing, contact the originator to obtain.

    • If the Form 12857 doesn't show a split refund code, verify that one doesn't exist. If IDRS shows a SPL-REF-CD, annotate it in box 9, Part B, on the Form 12857.

    • Verify that the SSN in Part A has an account established for the applicable tax year.

    • Once the F12857 has been reviewed and a decision to process has been made, the receiving campus MUST acknowledge receipt of the form. The F3210 MUST be signed and returned to the originator within two (2) business days. This can be completed via fax or inter-office mail.

    • Assign a DLN to the form and prepare a Form 813.

    • Forward the form to the RACS unit for journalization.

    • Input a history item on IDRS for both accounts/modules – 12857RELSD.

    • After the journalization is completed, the form will be sent for processing, through ISRP.

  3. All Form 12857 received must be processed within 5 business days.

    Note:

    Any Forms 12857 that are received and identified as ID Theft must be given priority handling and must be forwarded to Batching under cover of Form 3210. The Form 3210 must be annotated, "ID Theft, please Expedite" .

3.17.243.4  (10-01-2011)
Refund Litigation Cases

  1. This subsection describes the requirements for receiving, processing, controlling and releasing Refund Litigation case requests.

3.17.243.4.1  (10-01-2011)
Background

  1. A taxpayer initiates a complaint or petition in a suit for recovery of taxes. This is forwarded to the appropriate SPC by a United States Attorney in district court cases, or by the Tax Division of the Department of Justice in Court of Claims cases.

  2. To assist the Service in expediting retrieval of the necessary files, telephone contact (follow up via memorandum) is made by the offices indicated above. These calls provide pertinent information on the taxpayer and the tax liability.

  3. Facsimiles (fax) and memorandums are received from both the District Counsel and Chief Counsel.

  4. Instructions in this subsection referring to “Counsel” means either District Counsel or Chief Counsel.

  5. The telephone call and a copy of the complaint or petition should be received prior to the facsimiles or memo from Counsel requesting the files. Send the requested information to the requesting office (either District Counsel or Chief Counsel) using either certified or registered mail.

3.17.243.4.2  (10-01-2011)
Processing Requests

  1. Maintain a monthly log, showing all new case requests processed during the month and the dates on which the telephone call, initial complaint and the fax/memo was received.

  2. Take the following action immediately upon receipt of the taxpayer’s complaint, telephone call or fax/memo:

    1. Use command code ACTON to establish an open control base for all affected tax modules.

    2. Identify each tax period involved in a Refund Litigation case with a TC 520 freeze with CC73. If a TC 520 with CC73 is not present, take the necessary steps to input this freeze.

    3. If the account has been moved to the retention register, use applicable procedures to reestablish the account (TC 370).

  3. Research and secure the requested document(s) using expedite procedures.

    • Use IDRS research capabilities to help locate needed returns.

    • When documents are charged-out, contact the appropriate function to immediately obtain the required documents.

      Note:

      Take this action regardless of where the documents are charged-out.

    Exception:

    If the document is charged-out to the Examination Function for a Frivolous Filer Case, secure a photocopy to forward to the requesting Counsel. The Examination Function will forward the tax return as soon as their case is resolved.

3.17.243.4.3  (10-01-2011)
Controlling Cases

  1. If a facsimile/memo is not received in the Files Function within ten (10) calendar days from the receipt of the copy of the taxpayer’s complaint or the initial call from Counsel (whichever came first), the Refund Litigation Coordinator (RLC) must telephone the respective Counsel in the area office to request it.

    Note:

    Take this action whether all, some or none of the requested documents have been secured. The purpose is to alert Counsel that no fax/ memo has been received. Request fax/memo from Counsel or secure the date it was mailed.

  2. Associate all documents received with the related complaint (petition) and hold for receipt of the facsimile/memo from Counsel’s office.

    • Review the case file for any indication that a statutory notice of claim disallowance has been sent to the taxpayer.

    • If a statutory notice of claim disallowance is sent to the taxpayer, use the certified mailing number and date the notice was mailed to obtain the certified mailing documents from the mail room.

    • Associate these documents with the case file.

  3. When the facsimile/memo is received from Counsel, associate and compare the fax/memo with the copy of the complaint (petition) to determine if the documents requested and those secured are in agreement.

    1. Resolve any discrepancies.

    2. If any needed Revenue Agent Reports (RARs), appellate reports, etc., are attached to other returns, amend the facsimile/memo to include those returns and note the additions on the transmittal.

    3. This comparison excludes any supplemental fax/memo from Counsel.

    4. Perform the actions requested in the facsimile/memo.

    5. The copy of the complaint (petition) can be made a part of any retained control file.

  4. When the facsimile/memo is received and all documents for the case have NOT been secured, the RLC must immediately contact District Counsel and give the status of the case. Counsel will advise whether to send what has been compiled or to hold until the entire case file has been secured.

  5. When all documents for a case are not located, send a microfilm transcript for ADP modules to Counsel and the Department of Justice. If the tax module is not present, notify Counsel. Forward microfilm transcripts immediately when the module becomes available.

    Note:

    Regardless of whether the partial case file or just the transcript has been sent, handle the case expeditiously.

3.17.243.4.4  (10-01-2011)
Releasing Cases

  1. When the facsimile/memo has been received, prior to forwarding the assembled case file to Counsel, photocopy the file.

    1. Do not delay transmitting the case file. Do not exceed 75 pages for the duplicate file

    2. Copy priority items in this order: Transcripts, Claims for Refund, RARs, Tax Returns, and Appellate Reports

    3. If the requested administrative files are voluminous, call the District Counsel for permission to omit the duplicate file procedure.

  2. Send the copy to: Assistant Attorney General, Tax Division, Department of Justice, Washington, DC 20530 via certified or registered mail. Note the title of the case and court in which the case is pending and attach a copy of the facsimile/memo.

  3. Use a copy of the original facsimile/memo to set up a case file to control the receipt of each document or information received for the case.

  4. Ninety days (90) after receipt of the original facsimile/memo, forward a copy of the control file listing documents not secured. Include an explanation of the research that has been performed and indicate controls have been terminated.

3.17.243.4.5  (10-01-2011)
Closing Returned Cases

  1. Take the following actions when the completed Refund Litigation case is returned to the SPC:

    1. Check the case file to verify that all returns shown on the Form 3011-A, Transmittal Memorandum, are enclosed.

    2. Indicate on Form 3011-A if returns or related materials are missing before returning the form to Chief Counsel.

    3. Examine the file to locate the Notice of Adjustment. Associate the Notice of Adjustment with the specific return and place the work papers with the current refile numbered return.

    4. If the Form 3011-A indicates a settlement is to be paid by the Government or other adjustment is required but no evidence that adjustment has been input, route the file to the Examination Function.

    5. Refile non-potential “Closed” case returns and work papers by the current refile (control) DLN. If more than one period is involved in the completed Return Litigation case, refile work papers with the most current tax period refile DLN.

  2. After Form 3011-A is received and verified, remove the TC 520 freeze by inputting a TC 521. Input a TC 521 for each module that contains a TC 520 with CC73. Close all open control bases.

3.17.243.4.6  (10-01-2011)
Emergency Refund Litigation Case Requests

  1. Refund Litigation Cases already in progress sometimes need expeditious handling of requests for additional information from District Counsel. Requests are via telephone.

    • District Counsel must furnish in writing the full name and IRS badge or commission number of the person(s) making the telephone request as soon as possible after the request.

    • This information should also be included in the facsimile/memo.

      Note:

      It is not necessary to wait until receipt of a fax or memo before processing the request as long as District Counsel provides the necessary information.

  2. Immediately upon receipt of the telephone request, begin securing the requested documents and/or information.

    • Photocopy upon securing information

    • Hold Department of Justice photocopy until written memo or facsimile is received.

  3. If a facsimile/memo is not received within five (5) days from the receipt of the telephone request, telephone Counsel in the appropriate office to request it.

  4. Maintain a monthly log, exclusive of the log required in IRM 3.5.61.4.2.2, Processing Request, showing all emergency telephone requests during the month and dates received.

3.17.243.4.7  (10-01-2011)
Collections on Judgements in Tax Cases

  1. These cases were previously known as Refund Suits and Collection Suits in which a judgement is rendered to collect taxes.

    1. Collection on these judgements requires Department of Justice to secure the current year returns. Requests for these returns come directly from the Department of Justice.

    2. These requests will be via telephone and followed by a two-part memo; one part to be stamped “received” and returned to the Department of Justice immediately.

  2. Immediately upon receipt of the telephone request, begin securing the requested documents and/or information.

  3. If the memo has not been received within five (5) days from the receipt of the telephone request, telephone the requester to request it.

3.17.243.4.8  (10-01-2011)
Transcript Generated due to Unpostable

  1. If the transcript generates because of an unpostable condition, resolve the unpostable.

3.17.243.4.9  (10-01-2011)
Diagnostic Transcript Type Q (Diag Q Transcripts)

  1. Diagnostic (DIAG) Transcripts identify unresolved IDRS conditions. They may also identify operational problems in other functional areas.

  2. The Campus Collection activity routes DIAG Q transcripts to the Refund Litigation Coordinator when:

    1. There is an unreversed TC 520 or unpostable TC 521, or

    2. No TC 520 but a -V or -W freeze and the closing code is 71 or 73 for all MFT’s except 13 or 55.

  3. These transcripts generate when the above condition has been present for at least one year, or the CSED (Collection Statute Expiration Date) has expired.

  4. The type of DIAG-Q transcript is indicated in the upper-right hand corner of the transcript. The codes and meanings are:

    1. "DIAG-Q TYPE 1" Indicates one year since freeze was established. This number can be from 1 to 9. If the number “9” is present, check the transaction date to determine the number of years of inactivity.

    2. "DIAG-Q TYPE C" -Indicates that the CSED has expired.

  5. Upon receipt of the DIAG-Q transcript, screen the transcript to ensure that it has not been mis-routed. If the transcript is mis-routed, contact the Service Center Collection Branch (SCCB).

3.17.243.4.10  (10-01-2011)
Transcripts Generated due to Expired CSED or Inactivity

  1. When the transcript generates because of an expired CSED or inactivity, check the case control card to determine the current status of the case, and take one of the following actions:

    If The case is: Then
    Closed and the module balance is "0" Reverse the TC 520
    Closed and the module balance is NOT "0" Pull the case to determine if Form 3011-A has been received. It may be necessary to contact a technical unit to ensure that any necessary adjustment actions have been taken. After these steps have been taken, reverse the TC 520.
    Active (not closed)

    1. Order a hardcopy ENMOD of the TIN

    2. Highlight the name and address information

    3. Prepare a routing slip to the area where the case is charged out (usually District Counsel or Chief Counsel, Litigation Division). Provide the information in (2) below.

    4. Send the DIAG-Q and ENMOD to the appropriate Counsel.

  2. When it's necessary to send notification to Counsel, notate the following information: "Attached is a DIAG-Q transcript and hardcopy of an ENMOD. The DIAG-Q indicates that the CSED has expired, or the TC 520 has been on the case for years and there has been no activity"
    "Please take the appropriate actions on this case. If the case is closed and the TC 520 should be reversed, please provide us with a copy of the Form 3011-A (or a new Form 3011-A if the original Form 3011-A is not available). Send the Form 3011-A to the address shown below" Provide your office's street address.

  3. If there is no record of the case, contact National Office Chief Counsel to verify the status of the case.

    If the case is: Then:
    Open Counsel will inform you what area office controls the case
    Closed or counsel has no record of the taxpayer, and the module balance is "0" Reverse the TC 520
    Closed or Counsel has no record of the taxpayer, and the module balance is NOT "0" Route the DIAG-Q to Special Procedures Function (SPF). Indicate to SPF what action has been taken (e.g., research, contact with Counsel).

3.17.243.5  (10-01-2010)
Department of Justice (DOJ)

  1. On March 1, 1984, the Atlanta Campus began receiving monies collected through the Department of Justice (DOJ) as a result of court actions and IRS referrals to DOJ for collection. Effective in June 2010, these monies are now be received and processed at the Kansas City Campus.

3.17.243.5.1  (10-01-2010)
Monies Collected by the Department of Justice

  1. There are situations which require the aid of the courts to collect or recover taxes. The U.S. Department of Justice (DOJ), Tax Division, represents the IRS in both civil and criminal litigation filed in federal district courts. U.S. Attorneys’ Offices may also represent the IRS in litigation.

  2. Monies collected through the Department of Justice (DOJ) in civil cases are electronically transferred to IRS via Intra-Governmental Payment and Collection (IPAC). See IRM 3.17.243.5.2, for more information.

    Note:

    The IRS is statutorily required to release Notices of Federal Tax Lien within 30 days from the date that the liability for the amount assessed has been fully satisfied or has become legally unenforceable. Expeditious handling of monies collected is, therefore, imperative.

  3. Payments known as "Debt Management Payments" will also be received from DOJ. These payments are handled differently because they are not payments of tax liabilities. See IRM 3.17.243.5.6, for more information

  4. Monies may also be paid to the IRS as the result of a criminal case where the court orders the defendant to pay restitution. Criminal restitution payments may or may not be applied to taxpayers’ accounts, depending upon whether civil tax assessments have been made. See IRM 3.17.243.5.9, for more information regarding criminal restitution payments.

3.17.243.5.2  (10-01-2010)
DOJ Payments Transferred via IPAC

  1. Intra-Governmental Payment and Collection (IPAC) provides a standardized interagency fund transfer mechanism for federal program agencies. Monies received by DOJ as a result of civil litigation are transferred to the IRS via an IPAC 1081, Voucher and Schedule of Withdrawals and Credits. A detailed listing to support transfer of funds is mailed to IRS by DOJ along with the individual payments comprising the total amount transferred via IPAC 1081.

  2. Payments on the IPAC support listing may be from three different sources within the Department of Justice (Tax Division, US Attorneys and the Debt Management Section), each of which should be researched and processed differently.

  3. The support listing shows the following information:

    • Section 1, Debtor Payment Information, reflects the total amount of each payment collected by DOJ; and

    • Section 4, Administrative Adjustments, lists those payments on which three percent has been withheld by DOJ and reflects the amount withheld on each payment.

  4. Payments from Tax Division have the legend "TAX DIVISION" and a telephone number in the far right-hand column. Those from the Debt management Section show "Debt Accounting Operations group" along with a phone number.

  5. Procedures for the journalization of DOJ IPAC receipts are found in IRM 3.17.63.26.2, Redesign Revenue Accounting Control System . DOJ (IPAC) receipts are journalized to Account 4975, Liability DOJ Receipts, per IRM 3.17.50.3.11.1, Submission Processing RRACS Procedures.

  6. The following instructions are to be used by the Accounting Technicians or Tax Examiners working DOJ IPAC to research IDRS and apply credits to the proper tax modules. Every effort should be made to utilize in-house (IRS campus) resources and these instructions before calling other offices and agencies for assistance.

  7. By statute, DOJ may withhold three percent of all amounts collected pursuant to civil debt collection activities. Therefore, if a civil payment is received through IPAC for $100.00, DOJ will "hold-back" $3.00 and transfer the remaining $97.00 to the IRS.

    1. Section 4, Administrative Adjustments; of the Detail Listing to Support Transfer of Funds shows the payments on which the three percent has been withheld by DOJ (See figure 3.17.243.-1, Abstract Numbers). The amount of each payment withheld by DOJ is provided.

    2. A comparison must be made in order to determine the payments on which the three percent was withheld and to compute the actual amount transferred to IRS in those cases where the hold-back occurred. Taxpayers must, however, be given full credit for the total amount received by DOJ (see below, IRM 3.17.243.5.6 guidelines for processing civil payments on which three percent has been withheld by DOJ).

      Note:

      For Criminal Restitution there is NO three percent charge

    Figure 3.17.243-1
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Department of Justice Tax Division Payment Log to IRS

  8. The order of processing payments received through IPAC should be:

    • U.S. Attorney payment

    • Tax Division payments

    • Debt Management payments

3.17.243.5.3  (10-01-2010)
US Attorney and Tax Division Payments

  1. Four determinations must be made for all U.S. Attorney and Tax Division payments:

    • Liability assess-ability

    • Taxpayer identification

    • Module(s) to which payment is applied

    • Assessment status

      Note:

      IPAC receipts must be worked within 2 days

3.17.243.5.3.1  (10-01-2010)
Liability Assess-Ability

  1. The first determination to be made is whether the payment relates to an assessed tax liability. Payments relating to assessed tax liabilities will be applied to the appropriate taxpayer accounts. See IRM 3.17.243.5.3.3, below. If the payments relate to liabilities that are not assessable, they are applied as described in paragraph (5), below.

  2. Refer to Cause of Action column of DOJ listing.

  3. Unassessable erroneous refunds, refund schemes, Debtor Master File (DMF) accounts, attorneys fees and payments for other agencies are unassessable as taxes. No attempt should be made to post payments determined to be unassessable to a taxpayer’s account.

  4. If Attorney’s fees, DMF accounts and payments for other agencies are erroneously received, they must be transferred back to DOJ. Contact the DOJ collection officer, using the following instructions for the specific source of payment. No further determinations need be made for these payments.

  5. Follow instructions in IRM 3.17.63.26.2, Lock Box Deposit of Collections From Civil Judgments (Kansas City Only) for transferring unassessable payments other than attorney fees and payments for other agencies from Account 4975, (Liability DOJ Receipts) to the correct general ledger accounts. No further determinations need be made for these payments.

  6. Continue making the remaining three determinations for assessable payments and for those payments for which assess-ability cannot yet be determined. If, at any time during subsequent research, a payment is determined to be unassessable, refer back to paragraph 5, abandoning efforts to apply the credit to a specific taxpayers account.

3.17.243.5.3.2  (10-01-2010)
Taxpayer Identification

  1. ) If the taxpayer's TIN is included on the IPAC support listing verify that this is the correct taxpayer by researching IDRS under this identifying number. Freeze conditions on the account such as TC130 or TC 520 help to positively identify the taxpayer.

  2. If the taxpayer's TIN is not shown on the IPAC support listing, research in-house record systems such as IDRS for the entity shown as the debtor on the IPAC support listing. Freeze conditions on the account such as TC 130 or TC 520 help to positively identify the debtor as the taxpayer.

    Note:

    Prior to posting a payment, research IDRS for freeze codes which may cause the payment to unpost. See IRM 21.5.6, Freeze Codes, and Document 6209, IRS Processing Codes and Information, for an explanation of specific freeze codes. Coordination must be done with the appropriate contact to resolve the freeze code condition in order to prevent the payment from becoming an Unpostable transaction.


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