AccessibilitySkip to Top NavigationSkip to Main ContentHome  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 4. Examining Process

Chapter 19. Liability Determination

Section 4. CAWR Reconciliation Balancing (Cont. 1)

4.19.4  CAWR Reconciliation Balancing (Cont. 1)

4.19.4.3 
Replies

4.19.4.3.4  (02-01-2008)
Replies — Forms 941c, Statement to Correct Information Previously Reported Under the Federal Insurance Contributions Act, Form 843, Claims, Form W-3c/W-2c

  1. Work the penalty issues for these cases in accordance with IRM 20.1, Penalty Handbook.

  2. If original Forms W-3c/W-2c are received for IRS CAWR cases:

    • Ensure legibility and that valid EIN, TIN, and dollar amounts are present

    • Post money changes to the CAWR module by completing Form 6209

    • Write "Recon" on the original Forms W-3c (copy A) and send it with all W-2c copies to SSA .

    • Photocopy the original Forms W-2c and attach the copies to the correspondence received or a printout of the first page of the CAP case file

    • Make a second copy for the W-2c program, if withholding changes are present on these documents for the work outlined in See IRM 4.19.4.8.

  3. Annotate in red, "IRS RECON" on the Forms W-3 or transmittal forms and mail them to the following address:

    Social Security Administration

    Data Operations Center, ATTN: IRS Reconciliation

    1150 E. Mountain Drive

    Wilkes-Barre, PA 18702-7997

  4. If the taxpayer states that all W-2s have been filed, are correct and provides Form 941c or 843 to correct the account:

    1. Work in accordance with DP Tax Adjustments IRM 21.7, Business Tax Return and Non-Master File Accounts.

    2. Do not decrease the 94X account below the amounts reported on the Forms W-3/W-2 and W-3c/W-2c.

    IF THEN
    The reply is received with Form 941c requesting an increase in social security wages/tips, Medicare wages and/or federal income tax withheld.

    1. Input a TC 290 for the appropriate money amount and the applicable Item Adjustment Codes using Blocking Series 55 with the correct correspondence and IRS received date. Use the IRS Received date as the Amended Claims date.

    2. Input the appropriate adjustment amount you will be adjusting and the number of tax modules (quarters) adjusted on the CAP Detail screen.

    3. Close CAP using the appropriate closing code.
    The reply is received with Forms 941c and/or Form 843 requesting a decrease and an Authorized Original Signature is present:

    1. Input a TC 291 for the appropriate money amount and the applicable item adjustment codes using blocking series 55 with the correct correspondence and IRS received date. Use the IRS Received as the amended claims date.

    2. Input the appropriate adjustment amount you will be adjusting and the number of tax modules (quarters) adjusted on the CAP Detail Screen.

    3. Close CAP using the appropriate closing code.

      Note:

      DO NOT decrease the Form94X account below the amounts reported on the Forms W-3/W-2 and W-3c/W-2c

    If an Original Authorized Signature is not present.

    1. Return Form 941c and/or Form 843 to the taxpayer for an authorized signature.

    2. Assess and close the case using the appropriate case processing procedures. See IRM 4.19.4.7.

4.19.4.3.5  (02-01-2008)
Working Replies - Cross Reference (X-Ref) Cases/Filed With Another EIN

  1. When working replies always research IDRS for a X-Ref EIN. If found, check for the X-Ref EIN on CAP. If the X-Ref EIN is on CAP, work the cases together.

    Note:

    Notate the X-Ref EINs on the CAP detail screens.

    .

  2. If the X-Ref EIN is not on CAP:

    1. Research the X-Ref number (i.e., CC BMFOL definer U, INOLE definer T.)

    2. Request WIRS for the X-Ref number (if needed).

    3. Correspond with the taxpayer for missing Forms W-3/W-2 (if needed).

    4. If necessary, transfer the Forms W-3/W-2 to the appropriate EIN via Forms 6209 and 6494.

    5. If the information balances the account, close the case by entering the appropriate closing code and file the correspondence.

    6. If the information does not balance the case assess using the applicable procedures in See IRM 4.19.4.7.

  3. Input a TC 971 on IDRS using CC REQ77 with action code 017 to identify the cross reference EIN.

  4. If the taxpayer states that the W-2s were filed by a parent corporation or another EIN:

    1. assess the necessary tax and /or penalty.

    2. send 2057c requesting the EIN under which the Forms W-2 are filed and advising them that tax and/or penalty was assessed.

  5. If WIRS are needed to resolve cases, order them through IDRS using CC MFTRA definer W (MFTRAW).

  6. If the X-Ref EIN has an LCI contact the LCTU prior to adjusting any tax and/or penalties. See IRM 4.19.4.2.1.1.

4.19.4.3.6  (02-01-2008)
Replies Received On Missing Tax Return Issues

  1. When the employer replies and a missing return is received, take the following actions:

    IF THEN
    The employer replies, and furnishes the missing returns balancing the case.

    1. Check IDRS to see if a TC 150 is present.

    2. If a TC 150 is not present, the returns are original returns and need to be processed.

    3. Process the returns received as original, even if the return was marked "copy" .

    4. Edit the return underlining the EIN, Tax Period, Name Control and IRS Received date, if not present. In the left hand margin of the return write "599" with appropriate closing code indicator. Make a copy to attach to the case file.

    5. Send the original return to Submission Processing following local procedures.

    6. Send a 2057c closing letter informing him/her the return has been sent to the appropriate area for processing.

    7. Check IDRS for an open TDI indicator. If present and the current status on the module is 02 or 03 use CC FRM49 to input a TC 599 CC 94.

    8. If the case is in any other status use CC FRM49 to input a TC 599 CC 18 on the missing tax return module.

    9. File correspondence using the "No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply states the return is for one tax period, but the actual return shows another tax period.

    1. Edit the correct tax period on the return and process as instructed above.

      Note:

      This allows Submission Processing to process the returns accurately.

    The employer states they filed the returns in question and the return posted to Master File.

    1. File correspondence using the "No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The employer replies furnishing the missing returns and the information does not balance the case.

    1. Check IDRS to see if a TC 150 is present.

    2. If a TC 150 is not present, the returns are original returns and need to be processed.

    3. Process the returns received as original, even if the return was marked "copy" .

    4. Edit the return underlining the EIN, Tax Period, Name Control and IRS Received date, if not present. In the left hand margin of the return write (process as original, 599, and the appropriate closing code indicator). Make a copy to attach to the case file.

    5. Send the original return to Submission Processing following local procedures.

    6. Send a 2057c closing letter informing him/her the return has been sent to the appropriate area.

    7. Check IDRS for an open TDI indicator. If present and the current status on the module is 02 or 03 use CC FRM49 to input a TC 599 CC 94

    8. If the case is in any other status, use CC FRM49 to input a TC 599 CC 18 on the missing tax return module.

    9. Assess the case following "IRS-CAWR Assessment Needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.7  (02-01-2008)
IRS-CAWR Replies with Forms W-3/W-2 and/or Forms W-3c/W-2c

  1. The following information applies to original Forms W/3W-2, copies of Forms W-3/W-2 and Forms W3c/W-2c. When reviewing a reply check any forms received in the correspondence for errors.

    IF THEN
    The reply is received with Forms W-3/ W-2 and/or Forms W-3c/W-2c correcting social security wages, medicare wages, social security tips, AEIC, and/or Federal Income Tax withheld balancing the case.

    1. For W-2c only: Prepare automated Form 6209 to adjust the appropriate amounts.

    2. Prepare Form 6494 or send copies of Forms W-3/W-2 and/or Forms W-3c/W-2c to SSA (if appropriate).

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply is voiding Form(s) W-2 processed in error and the information will balance the case.

    1. Prepare automated Form 6209 to adjust the appropriate amounts.

    2. Prepare Form 6494, using correction code (4) to void the attached Forms W-2s to correct SSA records.

      Note:

      If exact duplicates Form 6494 is not needed.

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply indicates Forms W-3 and/or Forms W-2 were processed under an incorrect EIN and the information will balance the case.

    1. Prepare automated Form 6209 to transfer Forms W-2 to the correct EIN.

    2. Prepare Form 6494 with correction code (3) to correct SSA records.

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply indicates social security wages were reported over the maximum and the information will balance the case.

    Note:

    Refer to Document 6209 Section 3.12, Social Security Tax Rates

    1. Prepare Form 6209 to reduce social security wages to the maximum.

    2. Do not prepare Form 6494.

    3. Send a 2057c closing letter explaining the social security maximum wage amounts to the taxpayer and close the case on CAP using the appropriate closing code.

    4. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.8  (02-01-2008)
IRS-CAWR Replies with Forms W-3/W-2 and/or Forms W-3c/W-2c or Substitute Forms/Listings

  1. This section addresses any reply received for a case that has magnetic media attached or paper forms attached.

    Note:

    ALWAYS make a copy of any Forms W-3/W-2/W-3c/W-2c or substitute forms received. A copy must be attached to the CAWR file to substantiate any actions taken.

    IF THEN
    The employer submits information on magnetic media. Examples:

    • Full Size Tape Reel

    • Compact Disc

    • Floppy Disk

    1. Send 2057c closing letter informing the taxpayer that SSA no longer accepts magnetic media and they must provide the IRS with paper copies of Forms W-2.

    2. Properly dispose of magnetic media follow local security procedures.

    3. Process the case following the appropriate procedures.
    The employer submits a wage listing showing all required information to balancethe account.

    1. Prepare automated Forms 6209 .

    2. Prepare Form 6494 and attach the wage listing and send to SSA.

    3. Highlight and identify the data on the first employee for SSA to use as a guide to processing the submission.

    4. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply includes Form(s) W-2/W-2c that balance the case

    1. For Form W-2c only: Prepare automated Form 6209

    2. Prepare Form 6494 and attach Forms W-2/W-2C and send to SSA.

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply includes Form(s) W-2/W-2c that take the case below tolerance.

    1. For Forms W-2c only: Prepare automated Form 6209.

    2. Attach copies of Forms W-3/W-2/W-2c/W-3c received to Form 6494.

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply includes Forms W-2/W-2c that increasing any of the applicable fields (social security wages/tips, medicare wages, Federal Income Tax Withheld, and/or AEIC) to more than the 94X amounts,

    1. For Form W-2c only: Prepare automated Form 6209.

    2. Prepare Form 6494 and attach Forms W-2/W-2C and send to SSA.

    3. Assess the case following "IRS-CAWR Assessment Needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.9  (02-01-2008)
Corporations - New Owners Reply

  1. The Civil Penalty is due to IRS from the entity that incurred the liability.

    Example:

    If the corporation is T. Pine Enterprises and Tom Pine sold the entity (T. Pine Enterprises) to John Jones, the corporation itself, T. Pine Enterprises, is responsible for the liability, regardless of who the officers or owners are.

  2. In TY 2005, a new Form 941, Schedule D was introduced. This Schedule D will allow the parties involved in Acquisitions, Statutory Mergers, or Consolidations to report discrepancies identified as a result of the merger.

    IF THEN
    The taxpayer is a corporation and responds they bought the business and are not liable for the discrepancy and/or Civil Penalty OR The current or previous owner of the corporation can establish a payment arrangement, however, the payment arrangement does not have an impact on the Service's ability to assess the liability.

    1. Send a 2057c closing letter on CAP, explaining that the corporation (the entity as in the above example) is liable.

    2. Assess the case following the applicable Assessment Needed case processing procedures. See IRM 4.19.4.7.

    The taxpayer is other than a corporation and states he/she bought the Business and are not liable for the discrepancy.

    1. Send a 2057c closing letter on CAP informing the taxpayer he/she should have requested a new EIN when purchasing the business.

    2. Assess the case following the applicable assessment needed case processing procedures. See IRM 4.19.4.7.

    You receive Forms W-2c and Forms 941c but the taxpayer provides a new EIN

    1. Make the appropriate adjustments on IDRS See IRM 4.19.4.3.4.or transfer the return(s) to the new EIN if necessary using Form 12810.

    2. Update CAP with the correct address to ensure notices are sent to the previous owner.

    3. Send a 2057c closing letter explaining the adjustments made to the taxpayer's account and close the case on CAP using the appropriate closing code.

    4. Forward Forms W-2c to SSA on Form 6494.
    The taxpayer does not provide the information necessary to resolve the case

    1. Send a 2057c closing letter explaining why the reply was insufficient requesting the appropriate Forms to resolve the discrepancy.

    2. Follow procedures in first If and Then statement.
    the taxpayer provides a Schedule D with information that resolves the discrepancy

    1. Enter the x-ref EIN into the x-ref field on the CAP detail screen.

    2. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    the taxpayer provides a Schedule D with information that does not resolve the discrepancy

    1. Assess the case using "IRS-CAWR Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.10  (02-01-2008)
Replies Indicating TIPS Incorrectly Reported

  1. Large food or beverage establishment employers are required to report allocated tips under certain circumstances.

    IF THEN
    The reply indicates tips and no Form W-3c/W2c were received

    Note:

    Forms W-3c/W-2c must be filed to correct the discrepancy.

    1. Send a 2057c closing letter explaining that when we receive additional information we will reconsider the adjustment to their account.

      Note:

      If the taxpayer states the discrepancy is due to allocated tips explain amounts should be reported on the Allocated tips Line 8 on Forms W-2.

    2. Assess the case using "IRS-CAWR Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The reply indicates tips were incorrectly reported and Forms W3c/W2c were received,

    1. Prepare automated Form 6209 to adjust all appropriate fields based on the Forms W3c/W-2c amounts.

    2. Prepare Form 6494 using the correction code 5.

    3. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.11  (02-01-2008)
Replies Including Schedule H, Household Employment Tax Issues

  1. Household Employers must file Schedule H (Form 1040) to report wages to the IRS and Forms W-2 with SSA. Schedule H may be filed by both the Primary and Secondary taxpayers. Work any Schedule H issue as you would other CAWR issues. Actions specific to Schedule H are included in this TRIDOC.

  2. Fiscal year filers must report wages paid on a calendar year basis. Fiscal year taxpayers filing individual income tax returns must include a Schedule H covering the period January 1 through December 31.

  3. The household employment tax is reported on the appropriate line of Form 1040 and included in the TC 150 amount. If an adjustment is necessary, use Blocking Series 05, Reason Code (RC) 050, and Source Code 2 to adjust the appropriate line for employment taxes from Schedule H.

  4. When making adjustments to Forms 1041 household employment tax from Schedule H, use Blocking Series 55.

  5. Schedules H filed with Form 1040, Refer to IRM 21.6, Individual Tax Returns.

  6. Schedules H Filed With Form 1041, Refer to IRM 21.7,Business Tax Return and Non-Master File Accounts.

  7. The interest free provisions for adjustments on BMF employment taxes are in effect for errors discovered on IMF, Schedules H. Refer to IRM 21.6, Individual Tax Returns, for procedures. Reference Codes for Adjusting Schedule H are as follows:

    To Correct the For the Primary Taxpayer, Use Reference Code For the Secondary Taxpayer, Use Reference Code
    EIN on CC ADJ54 — XREF/PRIM/SEC-EIN Field 993 for .00 994 for .00
    Total FICA Wages 004 904
    Total Medicare Wages 073 973
    Federal Income Tax Withheld (if requested by employee) 003 903
    SSA and Medicare Tax 007 907
    AEIC (Do not use on MFT 05 adjustments.) 335 335

    Note:

    See IRM 21.6.4.4.8.2 for additional instructions on adj Sch H accounts.

4.19.4.3.12  (02-01-2008)
State and Local Governments Replies

  1. IF THEN
    The reply indicates the employees are social security exempt and the discrepancy is only in social security (FICA) and Medicare wages for an employer

    1. Do not accept their explanation unless they provide documentation to show the employees are covered under a state or political subdivision retirement system, or qualifies for one of the exceptions listed in IRM 21.7, Business Tax Return and Non-Master File Accounts.

    The documentation described above is provided by the taxpayer:

    1. Prepare automated Form 6209 if applicable.

    2. Prepare Form 6494 to adjust the social security and/or Medicare wages if applicable.

    3. File Correspondence following the "No Assessment needed " case processing procedures. See IRM 4.19.4.7.1.

    If the documentation above is not provided by the taxpayer.

    1. Assess the case using "IRS-CAWR Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.13  (02-01-2008)
Statute Issues/Prompt Assessments

  1. The Statute Awareness Program was created to minimize barred assessments and erroneous abatements.

  2. For information on conditions which might extend the Assessment Statute Expiration Date (ASED), Refund Statute Expiration Date (RSED), or Collection Statute Expiration Date (CSED), see IRM 25.6, Statute of Limitations .

  3. RSED Procedures —Claims for credit or refund of prepaid credits must be filed within three (3) years from the return due date or extended due date, whichever is later. Claims for credit or refund of non-prepaid credits must be filed within two (2) years from the date of the last payment.

    Reminder:

    Ensure the claim is for payment of tax, not penalties and/or interest.

  4. This credit will be moved to the Excess Collection Files (XSF) and cannot be used to offset liabilities for other periods.

  5. ASED Procedures — If the ASED on a tax increase case is within ninety (90) days, route the case to the Procedures Statute function using Form 3210, Document Transmittal. Notate on the transmittal "CAWR case," for each routed ASED case.

  6. If the assessment is over $10 million dollars, send a complete copy of the IRS-CAWR or SSA-CAWR case file to the following address.

    Office of Unpaid Assessments Analysis

    Technical Analysis Section

    P. O. Box 24551

    ATTN: Mari McMahon Stop 1035 BB

    OS:CFO:R:U:T

    Kansas City, MO 64131

  7. See LEM 4.19.4.3.13.

  8. IRM 25.6 , Statute of Limitations, will provide instructions in the event that a taxpayer's claim is fully or partially disallowed even if the statute is imminent (within 90 days) or already expired.

  9. Document 7368 , Basic Guide for Processing Statute Cases, is available to all service campuses and area offices. Order this document from the National Distribution Center using catalog number 10296C. Document 7368 contains valuable information on statute-specific topics; therefore, a copy should be present in each working group.

  10. Reference the following IRMs, as necessary, in regards to erroneous abatements. The CAWR unit management will need to determine who takes care of the forms and where to send them.

    • IRM 21.6, Individual Tax Returns

    • IRM 21.7 , Business Tax Returns and Non-Master File Accounts

    • IRM 21.4.4 , Refund Inquires - Manual Refunds

    • IRM 25.6 , Processing Procedures Exempt Organization Business Master File, and

    • IRM 25.7 , Statutes of Limitations

      Note:

      To eliminate —D freeze issues use priority code 4 when abating any prior year civil penalties and tax assessments where there are applied payments.

4.19.4.3.14  (02-01-2008)
Replies With PAL Indicator Present

  1. When working the reply take into consideration the reason the PAL indicator is present, as it may resolve or help to resolve the discrepancy.

    IF THEN
    The CAWR case has a PAL indicator (identified after screening) and the taxpayer replies resolving the discrepancy.

    Note:

    Take into consideration the reason the PAL indicator is present

    Note:

    This indicator is used by Automated Under Reporters (IMF)

    1. Prepare automated Form 6209 to adjust the appropriate amounts if applicable.

    2. Prepare Form 6494 or send copies of Forms W-3/ W-2 and/or Forms W-3c/W-2c to SSA if applicable.

    3. File Correspondence following the "No Assessment needed " case processing procedures. See IRM 4.19.4.7.

    The CAWR case has a PAL indicator (identified after screening) the reply does not resolve the discrepancy.

    1. Assess and close the case using the appropriate case processing procedures. See IRM 4.19.4.7.

4.19.4.3.15  (02-01-2008)
Replies Received For Delete Cases

  1. A delete case is one which has been brought into balance at Enterprise Computing Center-Martinsburg (ECC-MTB) through various updates to the module.

    IF THEN
    A response is received and the taxpayer identifies an issue unrelated to previous correspondence

    1. If the taxpayer is addressing a CAWR issue, work the case according to the taxpayer's intent.

    2. If the taxpayer's issue is unrelated to CAWR, forward the correspondence to the appropriate area.

    The reply is received and the case has been " deleted " on Master File. (CAP shows closing code 11)

    1. Send a 2057c letter explaining IRS received additional information balancing your account. No further information will be necessary.

    2. File Correspondence following the no assessment needed case processing procedures. See IRM 4.19.4.7.