4.8.8  Miscellaneous Responsibilities

Manual Transmittal

December 06, 2013

Purpose

(1) This transmits revised IRM 4.8.8, Technical Services, Miscellaneous Responsibilities.

Material Changes

(1) This transmittal reissues existing procedures. Minor editorial changes have been made throughout this IRM. Website addresses, legal references, and IRM references were reviewed and updated as necessary. Other significant changes to this IRM include the following:

Reference Description of Change
IRM 4.8.8.4 Corrected definition of personal holding company tax to indicate an additional 15% tax vs. a penalty.
IRM 4.8.8.5 (2) Included note to explain interest relief for taxpayers during active military service; clarified timely notifications per IRC 6404(g), Abatements, expanded definition of eligible participants per IRC 7508, Time For Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation, and clarified interest suspension available per IRC 6601(c), Interest on Underpayment, Nonpayment, or Extensions of Time for Payment, of Tax, when timely assessments are not completed.
IRM 4.8.8.5.1 (6) Updated list of requests not worked by interest abatement coordinator to include cases involving IRC 6404(f), and revised title of presidentially declared disaster area to federally declared disaster area.
IRM 4.8.8.5.2 Added note to reflect interest abatement coordinators for specialty estate and gift tax cases.
IRM 4.8.8.5.4 Separated out section for cases originating from Taxpayer Advocate Staff.
IRM 4.8.8.5.6 Included comments that the examination technical time report is generated through ERCS.
IRM 4.8.8.5.7.2 Included comment to properly annotate Form 3198, Special Handling Notice for Examination Case Processing, for cases to be returned to the interest abatement coordinator after Appeals consideration of audit adjustments and to note if Appeals was cited in the delay claimed by the taxpayer.
IRM 4.8.8.5.7.4 (6) Removed requirement to include last date to petition on interest abatement determination letters to tie to currently published letters. Deleted the note regarding mailing of the 30 day and 180 day letter because the interest abatement program is now centralized.
IRM 4.8.8.7.1.1 Included Appeals in list of functions involved in jeopardy/termination cases.
IRM 4.8.8.7.1.2.1 (4) Clarified reasons to delay processing of a jeopardy/termination case.
IRM 4.8.8.7.1.3.5 (1) Removed comment regarding the return of seized property when jeopardy/termination notices are not issued timely.
IRM 4.8.8.8.1 (3) Clarified employee authorized to approve termination offer.
IRM 4.8.8.8.2 (7)(h) Updated to reflect new ex parte communication guidelines per Rev. Proc. 2012-18.
IRM 4.8.8.8 Added throughout this section and subsections doubt as to liability (DATL) after OIC when applicable for clarity.
IRM 4.8.8.8.3 (2)(b) Clarified signature needed when only one spouse from a joint return files and withdraws an offer.
IRM 4.8.8.8.4 (1) Deleted the last sentence of paragraph one.
IRM 4.8.8.8.4 (3) Included reference to requirement for deemed acceptance letter per IRC 7122 (f), Compromises.
IRM 4.8.8.8.5 (2) Included requirement to complete checksheet for Planning and Special Procedures to input case information into the automated offer in compromise (AOIC) database.
IRM 4.8.8.8.7 (3) Included procedures when only one spouse submits an offer in compromise.
IRM 4.8.8.9 (4) Clarified instructions for Form 2285, Concurrent Determinations of Deficiencies.
IRM 4.8.8.9.1 (4) Included requirement to annotate Form 3198, Special Handling Notice for Examination Case Processing, to reflect restricted adjustments from an NOL carryback.
IRM 4.8.8.9.1 (8) Paragraph deleted because CCP provides final interest computations to the taxpayer.
IRM 4.8.8.9.2 Clarified requirements for the preparation of Form 2285.
IRM 4.8.8.9.2 (1) Moved note to the end of the section to point out that each source year should be separately identified on the Form 2285 and clarified cases that did not require a Form 2285.
IRM 4.8.8.11 (5) Deleted final sentence to make this IRM consistent with guidance in IRM 4.2.1.5, Guidelines for Deficiency Cases.
IRM 4.8.8.12.1.2 (1) Included Estate and Gift as one of the business units that does not submit requests for counsel advice through Technical Services. Deleted the phrase "whether or not assigned to the group" from the first sentence.
IRM 4.8.8.12.2.1.3 (15) Updated address for determination letters per the first revenue procedure of the current year.
IRM 4.8.8.15 Revised imprest fund audit procedures based on memorandum of understanding dated July 27, 2011.
IRM 4.8.8.16.2 (4) Clarified procedures to indicate that estate and gift tax cases do not utilize a transmittal letter.
IRM 4.8.8.16.3 (1) Include alternative resolution implementation (ARI) as a resource for abusive transactions (AT) cases.
IRM 4.8.8.17.1 (2) Updated to reflect new ex parte communication guidelines.
IRM 4.8.8.18.2 Removed references to versions of Letter 3164 no longer in use.
IRM 4.8.8.18.4 (1) Added documentation requirements when issuing Pub 1, Your Rights as a Taxpayer, and making third party contacts.
IRM 4.8.8.20 (5) Clarified procedures for processing qualified offers.
IRM 4.8.8.22 Added section for working the Rev. Proc. 92-29, Alternative Cost Method for Real Estate Developers, program in Technical Services.
Exhibit 4.8.8-10 Added exhibit—Check Sheet to Determine if Rev. Proc. 92-29 Procedures Were Followed for the Initial Request.
Exhibit 4.8.8-11 Added exhibit—Project Status Sheet—Revenue Procedure 92-29.

Effect on Other Documents

This material supersedes IRM 4.8.8 dated July 1, 2011.

Audience

Small Business and Self-Employed (SB/SE) Technical Services employees.

Effective Date

(12-06-2013)

Rodney M. Kobayashi
Director, Technical Services SE:S:E:TS
Small Business/Self-Employed

4.8.8.1  (12-06-2013)
Overview

  1. This section includes duties and responsibilities assigned to Technical Services, which are not addressed elsewhere. The following topics are included:

    • Accumulated Earnings Tax

    • Closing Agreements

    • Deficiency Dividends of a Personal Holding Company

    • Interest Abatement Cases

    • Involuntarily Converted Property

    • Jeopardy/Termination Assessments

    • Offer in Compromise Cases

    • Restricted Interest Cases

    • Specialist Referrals

    • Statute Expiration Reports

    • Formal and Informal Technical Assistance

    • Transferee Liability Cases

    • Mitigation Cases

    • Imprest Fund Audits

    • Abusive Transactions (AT)

    • Appeals/Counsel Liaison

    • Third Party Contacts

    • Report of Foreign Bank and Financial Account (FBAR) Coordination

    • Qualified Offers

    • Subject Matter Experts

4.8.8.2  (12-06-2013)
Accumulated Earnings Tax

  1. In any proceeding before the Tax Court involving the allegation that a corporation has permitted its earnings and profits to accumulate beyond reasonable business needs, the burden of proof is on the Commissioner unless a notification is sent to the taxpayer under IRC 534(b), Burden of Proof, prior to the issuance of a notice of deficiency. Letter 572, Proposal to Issue a Notice of Deficiency for Excess Accumulated Earnings Under IRC Section 531, is used for this notification. However, if such notification is sent to the taxpayer and the following exist, the burden of proof will be on the Commissioner as to the grounds given in the statement.

    1. The taxpayer timely submits the statement (meaning the grounds on which the taxpayer relies to establish that there has been no accumulation of earnings and profits beyond the reasonable needs of the business) and

    2. Such grounds are supported by facts contained in the statement.

    See Treas. Reg. 1.534-2(a)(2).

  2. The notification Letter 572 may be sent to the taxpayer prior to issuance of the 30 day letter or concurrently with the 30 day letter (in which case the purge date will allow for 60 days rather than the normal 30 days). The letter must be sent by certified mail, normally by the examiner using the examiner's contact information. However, only officials and Technical Services' reviewers delegated to sign notices of deficiency pursuant to Servicewide Delegation Order 4-8 are authorized to sign notifications under IRC 534(b) according to Rev. Proc. 56-11, 1956-1 C.B. 1028. Therefore, the case is forwarded to Technical Services to sign Letter 572. Technical Services will return the case to the group for certified mailing and suspense. See http://mysbse.web.irs.gov/RefLibrary/imd/delorders/functional/examination/21757.aspx.

  3. If a taxpayer responds to Letter 572 with a rebuttal statement, the examiner will follow the instructions in IRM 4.10.13.2, Accumulated Earnings Tax (IRC section 531). If it is determined that a notice of deficiency should be issued, the case will be forwarded to Technical Services. Specific language with regard to the accumulated earnings tax issue must be used for the notice of deficiency and can be found in IRM 4.8.9, Statutory Notices of Deficiency.

  4. IMMINENT STATUTE CASES: A notice of deficiency will not be issued before expiration of the period of time granted by Letter 572 for filing the statement, except when the statute of limitations is imminent or when other compelling circumstances require earlier issuance. In the event that the statute of limitations is imminent, and the taxpayer will not consent to an extension, the case should be forwarded immediately to Technical Services so a reviewer can prepare and mail the notification letter prior to issuance of the notice of deficiency.

  5. IRM 4.10.13, Examination of Returns, Certain Technical Issues, has an in-depth discussion of accumulated earnings tax and the notification process.

4.8.8.3  (12-06-2013)
Closing Agreements

  1. IRC 7121, Closing Agreements, provides authority for entering into closing agreements. IRM 8.13.1, Processing Closing Agreements in Appeals, outlines situations requiring the use of a closing agreement and provides in-depth instructions about preparing a closing agreement. Closing agreements are final and are intended to completely dispose of debatable matters. Generally, Large Business and International (LB&I) does not route closing agreements through Technical Services.

  2. Joint Committee Cases—Closing agreements for joint committee cases should not be executed on behalf of the Commissioner prior to clearance by the joint committee of taxation. After clearance by the joint committee of taxation, the case will be returned to the originating group for execution of the agreement. See IRM 4.36.3.6.2, Closing Agreements, for further details.

4.8.8.3.1  (12-06-2013)
Technical Services Responsibilities

  1. Generally, Technical Services reviews all Small Business and Self-Employed (SB/SE) closing agreements prior to obtaining the taxpayer's signature.

  2. After review, Technical Services forwards the closing agreement to area counsel for approval of both the form and language used.

  3. In some situations, such as certain abusive transaction (AT) cases, closing agreements with pro-forma language are used. The pro-forma closing agreement language is generally related to a specific AT scheme, and developed by a team consisting of a technical advisor, a technical services reviewer, and a counsel attorney. The technical services reviewer member performs the steps listed in paragraph (4) below, in cooperation with the other team members. Since counsel is involved in drafting the agreement, it is not necessary to obtain separate counsel review and concurrence, as long as the pro-forma language is not modified. When pro-forma closing agreements are used, it is probable the area technical services reviewer will not receive the closing agreement for review until after the taxpayer signatures are obtained.

  4. Prior to taxpayer signature, the reviewer:

    1. Ensures it will be advantageous to have the matter permanently and conclusively closed, or the taxpayer can show good and sufficient reasons for an agreement and the government will sustain no disadvantage.

    2. Ensures the determined matters are stated in terms that can reasonably lead to only one interpretation.

    3. Gives consideration to the impact a specific matter determination will have on other tax periods or other related cases.

    4. Verifies that the examiner's report adequately includes all significant factors (see IRM 8.13.1).

    5. Ensures the closing agreement is not dependent on the taxpayer's promise to perform a future act.

    6. Ensures the correct closing agreement form is used.

    7. Secures area counsel approval as required. Once approved, Technical Services forwards the closing agreement to obtain the taxpayer's signature, either to the examiner working the case or directly to the taxpayer.

  5. After the closing agreement is executed, the reviewer will do the following:

    1. Ensure the closing agreement is properly executed, including the three required original copies pursuant to IRM 8.13.1.2.15, Number of Copies—One Taxpayer or Joint Return Agreements.

    2. Ensure the reverse side of each original closing agreement reflects the dated signatures of both the receiving and reviewing officers.

    3. Write the following in the top margin of the front page of the tax return:
      "Agreement under IRC 7121, years affected ___. Closing agreement attached to the return for the taxable period ended ___ (latest return in file)."

    4. Date stamp each executed copy of the closing agreement (on the reverse side) and forwards it to the appropriate delegated officer for signature.

    5. Attach one copy of the original closing agreement signed by the delegated official to the reverse side of the first page of the tax return.

    6. Forward the executed duplicate original of the closing agreement to the taxpayer along with Letter 1595-D,Final Signed and Approved Closing Agreement Transmittal Letter. See IRM Exhibit 8.13.1-23, Sample Letter Sending Taxpayer Copy of Closing Agreement—Letter 1595.

    7. Attach the third original copy to the workpapers with a copy of Letter 1595–D and Form 4222, Closing Agreement Checklist.

    8. Make a copy of the closing agreement and mark it as "Retention Copy." If a subsequent tax year is affected by the closing agreement, forward a copy with Form 5346, Examination Information Report, to Planning and Special Programs (PSP).

    9. Forward the closing agreement, RAR, and any applicable workpapers for suspense, as appropriate.

    10. Immediately forward a copy of the executed closing agreement to the Campus Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) Function (CTF) if the closing agreement is for a TEFRA entity.

4.8.8.4  (12-06-2013)
Deficiency Dividends of a Personal Holding Company

  1. Personal holding company (PHC) tax is an additional 15% tax that discourages excessive accumulation of passive income. Treasury regulations under IRC 547, Deduction for Deficiency Dividends, provide a method (absent fraud) for a corporation to eliminate its personal holding company tax liability for a prior year by making a distribution of a deficiency dividend. The benefits of IRC 547 are applicable when an examination results in an agreed deficiency in PHC tax.

  2. These procedures are not applicable to dissolved corporations.

  3. IRM 4.10.8.10, Examination of Returns, Report Writing, Deficiency Dividends, discusses closing procedures for deficiency dividend cases.

4.8.8.4.1  (12-06-2013)
Scope of Review

  1. The Technical Services reviewer will do the following:

    1. Ensure there is sufficient time remaining on the statute of limitations for the PHC tax issues (twelve months recommended to complete procedures).

      Note:

      Without an executed Form 2198, Determination of Liability for Personal Holding Company Tax, the case is unagreed and should be returned to the group for a 30 day letter (if sufficient time remains on the statute) or should be forwarded for a statutory notice of deficiency.

    2. Ensure the file includes a signed waiver (Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment) from the taxpayer for all PHC and non-PHC adjustments.

    3. Ensure the file includes a Form 2198 (informal) or Form 866, Agreement as to Final Determination of Tax Liability (closing agreement under IRC 7121), if the taxpayer indicated an intention to make a deficiency dividend.

4.8.8.4.2  (12-06-2013)
Reviewer Responsibilities

  1. The Technical Services reviewer will do the following:

    1. Reviews Form 2198 and signs, on behalf of Commissioner, as outlined in SB/SE Delegation Order 4.1. See http://mysbse.web.irs.gov/RefLibrary/imd/delorders/functional/examination/21757.aspx

    2. Follow the closing agreement procedures if Form 866 is used.

    3. Attach Form 2198 to the return of the latest taxable year covered by the closing agreement.

    4. Forward Form 870 for non-PHC issues for partial assessment with instructions to return the documents to Technical Services.

    5. Prepare Letter 1152, Agreement Transmittal for Signed Personal Holding Company/Determination of Liability for Personal Holding Company Tax. Sends three copies of the executed Form 2198 and three Form 976, Claim for Deficiency Dividends Deductions by a Personal Holding Company, Regulated Investment Company, or Real Estate Investment Trust, with Letter 1152 by registered or certified mail. The registered or certified receipt is maintained in the case file as evidence of the mailing date ("date of determination" ).

    6. Place the case in suspense until the earlier of receipt of Form 976 from the taxpayer or 120 days from the "date of determination."

    7. Date stamp the claim if Form 976 is received and return the case to the examiner with the following instructions:
      1. Verify information on Form 976,
      2. Prepare examination report per IRM Exhibit 4.10.8-8, Sample Form 4549A—Personal Holding Company—Page 1,

      Note:

      Report Generation Software (RGS) does not reflect a specific credit for a Deficiency Dividend Deduction. The examiner should select "Prepayment Credits" in issue setup for the offset to the PHC tax. The examiner should include a statement in "Remarks" to identify the Prepayment Credit as a Deficiency Dividend Deduction and to note restricted interest is applicable.


      3. Ensure Transaction Code (TC) 300 on the Form 5344, Examination Closing Record, is accurate and Reference Code 321 appears on Line 15 of Form 5344.

      Note:

      The Reference Code 321 will appear on a transcript after the assessment has been made to explain the reason for the restricted interest when a TC 300 of zero has posted. See IRM Exhibit 4.4.12-5, AIMS/Processing Handbook—Examined Closings, Surveyed Claims, and Partial Assessments, Item 15 Reference Numbers for Forms 990C, 1041, 1042, 1066, and 1120.


      4. Prepare Form 3189, Deficiency Dividend Deduction Case Transmittal, for restricted interest purposes. See IRM Exhibit 4.10.8-9, Examination of Returns, Report Writing, Sample Form 3189—Deficiency Dividend Deduction Case Transmittal.
      5. Annotate page one of Form 3198, Special Handling Notice for Examination Case Processing, "Forward to Technical Services." Check the box for "Personal Holding Companies." Annotate page two of Form 3198"Special/Restricted Interest Features." Check the box for "Other Code Section," "Section 547 Restricted Interest Computation."
      6. Return case to Technical Services for final review.

    8. Return the case to the examiner for claim disallowance if Form 976 is filed after the 120 day period, although the reviewer may issue the claim disallowance to expedite case processing.

    9. Forward the file for closure and assessment if Form 976 is not received after the 120 day period.

      Note:

      If the taxpayer executed a Form 2198, these procedures should be followed even if taxpayer stated no Form 976 would be filed.

4.8.8.5  (12-06-2013)
Interest Abatement Cases

  1. An abatement of interest may be requested for interest that is incorrectly computed, overassessed based on current tax laws, policy and or procedure, assessed after the expiration of the period of limitations, or erroneously or illegally assessed.

  2. Interest may be abated or suspended if it is one of the following:

    • Erroneously or illegally assessed (IRC 6404(a), Abatements, General Rule);

      Note:

      Under the Servicemembers Civil Relief Act, interest is suspended for the period during the taxpayer's active military service. If the taxpayer is not eligible for the interest suspension, interest is capped at 6% while the taxpayer is on active military duty. See IRM 5.1.7.12.2, Interest and Limitation on Collection.

    • Attributable to certain errors or delays by the IRS (IRC 6404(e)(1), Abatements, Abatement of Interest Attributable to Unreasonable Errors and Delays by the Internal Revenue Service, In General.

    • Due on an erroneous refund (IRC 6404(e)(2)), Abatements, Abatement of Interest Attributable to Unreasonable Errors and Delays by the Internal Revenue Service, Interest Abated With Respect to Erroneous Refund Check.

    • Due on an increased liability of which the IRS does not notify the taxpayer in a timely manner (IRC 6404(g), Abatements, Suspension of Interest and Certain Penalties Where Secretary Fails to Contact Taxpayer).

    • Due on an account for a taxpayer located in a Presidentially declared disaster area (IRC 6404(i), Abatements, Cross Reference and IRC 7508A, Authority to Postpone Certain Deadlines by Reason of Presidentially Declared Disaster or Terroristic or Military Actions).

    • Due on an account for a participant in a military combat zone, part of a contingency operation away from the taxpayer's permanent duty station, or recuperating during a qualified hospitalization, IRC 7508, Time for Performing Certain Acts Postponed by Reason of Service in Combat Zone or Contingency Operation.

    • Suspension per IRC 6601(c), if the Services does not assess a deficiency within 30 days after an agreement is received or executed by a Service official (TEFRA cases).

  3. Refer to the following:

    • IRM 20.2.7, Abatement and Suspension of Interest

    • IRC 6404(e)

    • Treas. Reg. 301.6404–1, 26 CFR 301.6404-1

    • Treas. Reg. 301.6404–2, 26 CFR 301.6404-2

    • Temporary Treas. Reg. 301.6404–4, 26 CFR 301.6404-4

    • IRM 8.7.7.14, Abatement of Interest Claims

    • IRM 1.2.51.2, Delegation Order 20-1 (formerly DO-228, Rev. 3)

    • IRM 1.2.51.3, Delegation Order 20–2 (New)

    • Rev. Proc. 2005-38, 2005-2 C.B. 81

4.8.8.5.1  (12-06-2013)
Claims Worked by Technical Services

  1. A "claim" and "request for abatement" should not be used interchangeably. However, the process used by Technical Services is the same regardless of whether it is a paid assessment (claim for refund) or an unpaid assessment (request for abatement).

  2. Interest abatement cases may come from various sources such as the campus, the field, the taxpayer advocate office, or directly from a taxpayer or representative.

  3. For purposes of this section only, the terms "claim" and "request for abatement" are used interchangeably, and the process is the same regardless of whether it is a paid assessment (claim for refund) or an unpaid assessment (request for abatement). There is no authority to abate unagreed, unassessed interest.

  4. The claims or requests for abatement will only be worked by the Technical Services interest abatement coordinator (IAC) if there is a TC 300 on the module and an examination indicator reflecting field (RA, TA, or TCO) examination (EGC 1XXX or 2XXX), AND are one of the following:

    1. Claims or requests for abatement which allege a ministerial or managerial error or delay occurred during the course of an examination or an appeal of an examination, for both open examinations and closed examinations. These are known as IRC 6404(e)(1) claims.

      Note:

      For both open and closed examinations, the majority of cases worked by the Technical Services IAC will relate to IRC 6404(e)(1). Interest abatement claims (interest has been paid) or requests for interest abatement (interest has not been paid) on assessed accounts, both unpaid and fully paid, will be considered with regard to IRC 6404(e)(1).

    2. Claims or requests for abatement citing the "good faith" exception to IRC 6404(g). See Temporary Treas. Reg. 301.6404–4, 26 CFR 301.6404-4.

  5. Claims or requests for abatement that require coordination with other areas, such as claims alleging error or delay in both a collection matter and an examination or appeals matter, should be discussed with the Collection IAC and Technical Services IAC to determine which function should work the claim.

  6. Types of claims or requests for abatement NOT worked by the Technical Services IAC include the following:

    1. An error was made in the computation of interest (IRC 6404(a)).

    2. An error was made in the assessment of interest (IRC 6404(a)).

    3. An erroneous refund was made (IRC 6404(e)(2)).

    4. Erroneous written advice was given (IRC 6404(f))

    5. An error was made in the application of suspension interest under IRC 6404(g).

      Note:

      These claims generally do not cite the "good faith" exception

      .

    6. The taxpayer was affected by a federally declared disaster area (IRC 6404(i) and IRC 7508A).

    7. The taxpayer was in a combat zone (IRC 7508).

  7. A listing of IACs can be found on the Office of Servicewide Interest Program website at http://sbseservicewide.web.irs.gov/interest/iac/default.aspx.

4.8.8.5.2  (12-06-2013)
Claims Originating From an Open Examination

  1. Taxpayers may request interest abatement during an ongoing examination. The following actions must have been taken by the examiner prior to sending the interest abatement case to Technical Services:

    Note:

    Examinations originating from Specialty estate and gift tax groups should forward their interest abatement requests to the appropriate coordinator as outlined in the IACs listing for estate and gift. See http://sbseservicewide.web.irs.gov/interest/iac/281.aspx.

    1. Secured a completed Form 843, Claim for Refund and Request for Abatement, from the taxpayer,

      Note:

      In the case of LB&I, a letter requesting net rate netting may be used in place of the Form 843. See IRM 4.10.26.4, Receiving a Request(s) for Net Rate Netting.

    2. Documented Form 4318-OA, Examination Workpapers Index—Office Audit, / Form 4318, Examination Workpapers Index, and Form 9984, Examining Officer's Activity Record, regarding the filing of the claim.

      Note:

      In the case of LB&I, Form 4700, Examination Workpapers, / Form 4318 is not used. The claims or requests for abatement will be located under SAIN 060.

    3. Attached an explanation of the facts surrounding the claim or request for abatement to the Form 843.

    4. Contacted the Technical Services IAC to discuss the closure of the examination file and arranged to provide the IAC with a copy of pertinent information from the administrative file including a copy of the Form 843 with an explanation of the facts surrounding the claim, a copy of the Form 9984, a copy of the report, and any other pertinent information or correspondence that may impact the abatement determination.

  2. At the conclusion of the examination, the examiner will mark Form 3198 directing Centralized Case Processing (CCP) to charge the case back to the applicable local Technical Services group manager.

  3. The interest abatement claim will be addressed after the examination case is closed and the tax, penalty (if applicable), and interest are assessed.

4.8.8.5.3  (12-06-2013)
Claims Originating From the Campus

  1. Interest abatement claims are commonly received from the campus after the examination has been completed, the tax assessed, and the case file closed. These claims are generally not on Audit Information Management System (AIMS) or on RGS.

  2. When the campus receives a claim for interest abatement, IRM 4.19.11.1.29, Liability Determination—Examination Classification of Work, Abatement of Interest, states that the campus will have completed the following:

    1. Obtained the historical examination/appeal file(s) for all years involved in the examination, and

    2. Made a determination as to where the case should be worked based on where the alleged error or delay occurred.

  3. If the campus determines the case should be worked in Technical Services in accordance with IRM 4.8.8.1(1) above, the campus will forward the claim or request for interest abatement and historical file(s) to the Technical Services IAC's group manager.

4.8.8.5.4  (12-06-2013)
Claims Originating From Taxpayer Advocate Service

  1. When a taxpayer contacts Taxpayer Advocate Service (TAS) for resolution of their claim and TAS determines action is required by Technical Services, TAS will send an operations assistance request (OAR) along with supporting documentation to the designated technical service group. If the designated reviewer determines additional information is required, they will request the information from the assigned TAS employee. The reviewer may return the OAR if the information is not received timely. The service level agreement (SLA) between the National Taxpayer Advocate and the SB/SE Commissioner outlines the guidelines and timeframes for the OAR process and can be located on SB/SE's home page. See http://mysbse.web.irs.gov/RefLibrary/svclvlagm/adndum/18023.aspx. OARs routed to the incorrect Technical Services group should be returned to TAS per the SLA.

4.8.8.5.5  (12-06-2013)
Claims Originating From Other Functions

  1. Claims and requests for interest abatement can be received from functions other than SB/SE examination groups, campus, or TAS. Claims can originate in Collection groups, as well as in LB&I groups.

  2. If claims are received without the original examination case file and it is determined that the file is necessary, the case file should be requested using ESTAB procedures found at http://oamc.web.irs.gov/techlinks/jobaids/OCSC%200839%20ESTAB.doc.

4.8.8.5.6  (12-06-2013)
Developing the Interest Abatement Claim File

  1. If the original examination case file cannot be obtained, an attempt to reconstruct the file can be made using the Form 843 data, transcripts, and information gathered from contact with the examiner and or the appeals officer. Appeals officers can usually e-mail to the Technical Services IAC a copy of their activity record. The examiner’s oral testimony and time charged on the case (examiner's technical time report automated through the ERCS program) can provide insight into their activities during the alleged periods of delay. An OAR from TAS should be useful in writing a recommendation. If the OAR does not contain the necessary information, the IAC may request TAS provide additional information that outlines the delay.

  2. For claims or requests for abatement on partners and or shareholders with respect to flow through adjustments where the alleged error or delay occurred during the partnership and or S-corporation examination, the historical investor files and the flow through entity files should be secured if necessary. If the alleged error or delay occurred during the assessment process, the claim or request for interest abatement should be forwarded to the Campus IAC to be addressed.

  3. If the claim involves an alleged delay or error that occurred in the Collection Division or Wage and Investment—Field Assistance Division, the claim should be referred to the Collection Advisory IAC.

4.8.8.5.7  (12-06-2013)
Technical Services Interest Abatement Coordinator Procedures

  1. Refer to IRM 20.2.7, Abatement and Suspension of Interest, for additional information.

  2. The Technical Services IAC will record the time spent on interest abatement cases on Form 9984, and charge time directly to the case. Time spent performing duties that cannot be charged directly to a particular case is charged to Activity Code 587 with Second Segment Code 008.

4.8.8.5.7.1  (12-06-2013)
Inventory Controls

  1. Upon receipt of the claim and case file, the Technical Services IAC will do the following:

    1. Obtain a TXMOD to ensure the tax and or penalty has been assessed. The official assessment date is the "23C date" , which is the date the assessment actually posts to the module.

      Note:

      A pending assessment is not the official date and does not protect the statute of limitations.

    2. Instruct the Technical Services group clerk to add the claim to ERCS as a Non AIMS record, MFT C9, Review Type 08, Suspense Code 508, and Status Code 20.

    3. Instruct the group clerk to input ACTON A history items to indicate that the IA claim or Form 843 has been received. This should prevent another area from working the issue, and also serves to alert other IRS employees of case activity that may affect any balance due. Refer to IRM 2.3.12, IDRS Terminal Responses—Command Code ACTON, for ACTON procedures.

4.8.8.5.7.2  (12-06-2013)
Coordination with Appeals and Collection

  1. If the original examination case is unagreed and protested, the original case should be forwarded to Appeals. The Form 3198 should be annotated in the Technical Services section that an original Form 843 or informal claim is enclosed in the case file. Once the assessment determination has been made and the case is closed to Status Code 90, the case file will be re-charged to the Technical Services IAC to address the interest abatement claim.

    1. If the tax and or penalty are sustained by Appeals, the case should be forwarded to the Technical Services IAC after the assessment has been made, similar to cases coming from examination groups.

    2. If Appeals does not sustain the examiner's adjustments, the interest abatement issue could be a non-issue.

    3. Coordination with Appeals should be ongoing in order to provide the most efficient service to both the taxpayer and the Service. Claims regarding delays in the appeal process should be addressed at the same time as the examination delays when processed by the Technical Services IAC. If the claim alleges a delay while in Appeals previously, Form 3198 should be annotated as such. The appeals officer should have documented any delay or error in the appeals process on his or her activity record. The activity record and Form 5402, Appeals Transmittal and Case Memo, should be included in the examination/appeals case at closing.

  2. Check the TXMOD or IMFOLS transcript to determine if the case is in collection Status Code 22, 24 or 26 and if so, contact Collection to request collection activity be stopped, IF WARRANTED. Unless it is clear that interest will be abated and there will be no balance due, collection activity should not be routinely stopped.

4.8.8.5.7.3  (12-06-2013)
Procedures for Working Interest Abatement Cases

  1. Research IDRS and include a current INOLES and CFINK print in the file to document the correct taxpayer address and power of attorney (POA) information.

  2. Claims or requests for interest abatement may be allowed without further consideration if they meet one of the following criteria:

    1. Category A criteria (refer to IRM Exhibit 21.5.3-2, Account Resolution – General Claims Procedures, Examination Criteria (CAT-A) – General.)

    2. Claims or requests that fall below the tolerance level stipulated in IRM 20.2.7.4, Errors or Delays in Performance of a Ministerial or Managerial Act, IRC 6404(e)(1),

    3. Claims or requests that fall below the tolerance level guidelines that may be established by Technical Services.

  3. Review the administrative case file and prepare a chronology of events that tracks the activities and delays, if any, that occurred during the examination.

  4. Prepare a written narrative stating the facts, law, and recommended resolution. Form 886-A, Explanation of Items, is generally utilized for this purpose and is attached to the determination letter.

  5. Determine the correct stop and start dates for any abatement that will be allowed. The Technical Services IAC is not required to make any computations as to the amount of interest to be abated. CCP should be contacted if it is necessary to compute the allowable amount. The abatement amount secured from CCP will be included in the determination letter.

  6. Prepare the appropriate determination letter, as explained in IRM 4.8.8.5.7.4, Interest Abatement Determination Letters, below.

  7. A case summary sheet may be prepared describing the actions taken on the case, the taxpayer information, amounts (or dates) requested for abatement, the code section cited or referenced, the reasons for abatement/non-abatement and the level of signature approval necessary.

4.8.8.5.7.4  (12-06-2013)
Interest Abatement Determination Letters

  1. Once the Technical Services IAC has reviewed all of the documents and made an abatement determination, the appropriate preliminary (30 day) determination letter and attachments will be prepared and forwarded to the Technical Services group manager or territory manager for signature. Use the most recent revision of Letter 2289, Full Disallowance on Interest Abatement Claims, or Letter 2290, Partial or Full Allowance on Interest Abatement Claims. Attach Form 886-A with the explanation in support of the determination.

  2. Letters granting abatements in excess of $2,500.00 require the signature of the Technical Services territory manager. Letters granting abatements of $2,500.00 or less, and fully disallowed abatement requests require the signature of the Technical Services group manager. The amount of interest to be abated may need to be obtained from CCP for partial or fully allowed abatements in order to determine the level of approval necessary (group manager or territory manager signature). See Delegation Order 20-1 (formerly DO-228, Rev. 3) in IRM 1.2.51.2. The determination letter should provide the allowed abatement amount.

  3. The Technical Services IAC has signature authority to issue notices of final determination disallowing the abatement of interest in any instance in which an IRC 6404(e)(1) claim for interest abatement is immediately disallowable because the claim falls outside the scope of the statute (for example, employment tax cases).

  4. After the appropriate preliminary determination letter is signed, the Technical Services IAC will date and mail it to the taxpayer (and POA, if applicable). If the return was jointly filed, separate letters should be mailed to each spouse. Fully allowed claims should be closed immediately to the designated CCP office. For fully or partially disallowed claims, the case is suspended for 45 days (30 days plus an additional 15 days) to allow the taxpayer an opportunity to appeal the decision. ERCS will be updated to Status Code 22 and Suspense Code 528, effective as of the date of mailing. ACTON A should be entered to update the history of the case.

  5. If a timely protest is received on a fully or partially disallowed claim, the case is forwarded to Appeals using locally established procedures. If the taxpayer has filed an informal claim, it is recommended that Form 843 be solicited before transferring the case to Appeals. This formalizes the taxpayer's position and perfects the informal claim. ACTON A should be entered to update the history of the case. The ERCS MFT C9 record should be closed to Status Code 90 when the claim is forwarded to Appeals.

  6. If no agreement or protest is received, a final determination letter (180 day Letter) should be prepared and routed for signature using the same routing as discussed above for the 30 day letter. Use Letter 3180, Final Determination Letter for Fully Disallowing an Interest Abatement Claim, for fully disallowed claims and Letter 3181, Final Determination for Partially Disallowing an Interest Abatement Claim, for partially disallowed claims. After proper signatures are obtained, the Technical Services IAC will insert the mailing date and issue the 180 day letter to the taxpayer (and POA if applicable). Again, separate letters are required in the case of a joint return. Final determination letters are sent via certified mail to the taxpayers (registered mail if addressed outside the United States). ERCS will be updated to Status Code 24 and Suspense Code 529. ACTON A should be entered to update the history of the case.

    Note:

    If the Technical Services IAC is in a remotely located office, both the 30 day and 180 day letters may be prepared and sent concurrently to the group manager or territory manager for signatures, and held by the Technical Services IAC until the appropriate time to issue them.

  7. Final determination letters are sent out by certified mail and are suspended for 195 days (180 days plus an additional 15 days) to allow the taxpayer an opportunity to petition Tax Court. At the end of the suspense period, the U.S. Tax Court website (www.ustaxcourt.gov) will be accessed to determine if the taxpayer has petitioned Tax Court. If the taxpayer has not petitioned Tax Court, the case should be closed to CCP as outlined in IRM 4.8.8.5.7.5, Closing Interest Abatement Cases, below. If the taxpayer has petitioned the Tax Court, the case should be closed to Appeals. ACTON A should be entered to update the history of the case. The ERCS MFT C9 record should be closed to Status Code 90 when the claim file is forwarded to CCP or Appeals.

4.8.8.5.7.5  (12-06-2013)
Closing Interest Abatement Cases

  1. Close the case file to the appropriate Centralized Case Process (CCP) office when the interest claim or request for abatement is fully allowed or when the required time period has expired and the taxpayer has not protested or petitioned the disallowance.

  2. Prepare Form 3870 for all cases. The required fields on Form 3870 include the following:

    1. Line 1 TIN

    2. Line 2 Name and Address

    3. Line 4 MFT

    4. Line 5 Period Ending

    5. Line 6 Assessment Date

    6. Line 7 Source

    7. Line 10 Personal Contact

    8. Line 11 Reason for Adjustment; specify "from" "to" dates

    9. Line 19 Reason Code (use RC 080 for full disallowance, RC 081 for partial allowance, RC 082 for full allowance)

    10. Line 21 Hold Code (3)

    11. Line 29 Transaction Code (TC 290 for -0- if fully disallowed, or TC 290 for -0- and TC 34X with the notation, "amount to be determined by CCP." ) See http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/casepro/cp/ccpalerts/examalerts/21783.aspx for procedural guidance for processing interest abatement claims.

  3. An authorizing signature on Form 3870 is required only on allowed interest abatements requests. Allowed abatements in excess of $2,500.00 require the signature of the Technical Services territory manager. Allowed abatements of $2,500.00 or less require the signature of the Technical Services group manager. For fully disallowed cases, note the signature block "No Signature Required." If an abatement of interest is allowed, the appropriate to and from dates will be shown on the form. CCP will compute the amounts and make the adjustment. The reason for adjustment section should include a brief explanation of the determination.

    Note:

    If the Technical Services IAC is in a remotely located office, Form 3870 can be sent concurrently with the 30 day and 180 day letters to the group manager or territory manager for signatures. The Technical Services IAC will date Form 3870 when the case is closed.

  4. Prepare Form 3198 with specific instructions for CCP to compute the correct abatement amount and post the adjustment. The most current revision of Form 3198 should be used. Note on the Form 3198"Please store the interest abatement case file behind the most current interest abatement request year’s TC 290 DLN."

  5. ACTON A should be input to indicate the final disposition.

  6. The historical examination file should be returned to the re-file section, since several years may be involved and they must be stored where they can be easily located.

4.8.8.6  (12-06-2013)
Involuntarily Converted Property

  1. The provisions of IRC 1033, Involuntary Conversions, allow for the deferral of gains realized on the disposition of compulsorily or involuntarily converted property when a taxpayer purchases similar property within the specified replacement period. When the taxpayer is unable to replace the property within the normal replacement period, he or she can request an extension of the replacement period by writing to the area director. The area director will forward the taxpayer's request for an extension of time to Technical Services for consideration.

  2. Treas. Reg. 1.1033(a)-2(c)(3), 26 CFR 1.1033(a)-2(c)(3), describes the time period and circumstances in which a taxpayer may request an extension of time to replace involuntarily converted property from the area director or director of field operations.

  3. Refer to IRM 4.2.2.3, Extensions of the Replacement Period of Involuntarily Converted Property, for details regarding taxpayer applications.

  4. Refer to IRM 4.8.8.12.2.1.1 (2) regarding determination letters issued by an area director on the replacement of involuntarily converted property.

4.8.8.6.1  (12-06-2013)
Technical Services' Responsibility

  1. Technical Services is responsible for granting or denying extensions and for following up on taxpayers who fail to notify the Service if they have replaced the property or amended their returns.

  2. The request for extension of the replacement period should be reviewed to ensure the taxpayer has provided all the necessary information as follows:

    • Name, address, and taxpayer identification number of the taxpayer

    • Legal descriptions of property converted

    • Date property was converted

    • Adjusted basis of converted property

    • Date(s) and amount(s) of payment(s) received

    • Copy of return that related to the deferral of the gain

    • Statement of action taken to replace the property

  3. The taxpayer has 2 years to replace personal property. The taxpayer has 3 years to replace real property (not including stock in trade or other property held primarily for sale) held for productive use in trade or business or for investment.

  4. The taxpayer must demonstrate reasonable cause for not replacing the converted property within the original required time period. Refer to Rev. Rul. 60-69, 1960-1 C.B. 294. Also, see Treas. Reg. 1.1033(a)-2(c)(3)(i) and (ii). Refer to SB/SE Delegation Order No. 4.24 (Rev. 1) at http://mysbse.web.irs.gov/RefLibrary/imd/delorders/functional/examination/21875.aspx for authority to issue letters.

  5. If the extension request is granted, Letter 1039, Extension Granted to Replace Involuntarily Converted Property, is sent to the taxpayer to advise him or her an extension has been granted. Generally, extensions are not granted for more than 1 year. The taxpayer must notify the Service when the property is replaced.

  6. If the taxpayer has not provided enough information, the reviewer should request additional information from the taxpayer.

  7. If the extension request is not granted, the taxpayer should be notified and provided the reason(s) why. Extensions can be denied if the request is premature.

    Example:

    If the taxpayer requests an extension to replace real business property under IRC 1033(g) at the end of two years, the request can be denied since business property has a 3-year replacement period.

  8. Follow-up is required as noted below:

    1. When the taxpayer notifies the IRS the property has been replaced, the following actions should be taken:

      (i) If there is a gain to report, the reviewer should monitor the case to ensure an amended return is filed. If an amended return is not filed, prepare Form 5346 and forward to PSP.

      (ii) On a yearly basis, send follow-up Letter 1954, Involuntary Conversion Follow-up Letter, to taxpayers whose replacement periods have expired and who have not notified the IRS replacement property has been acquired. For taxpayers who do not respond to Letter 1954, prepare Form 5346 and forward it to PSP.

  9. The statute of limitations for the year in which gain is deferred remains open until 3 years after notification is received from the taxpayer indicating the replacement is completed or notification of an intention not to replace. See Treas. Reg 1.1033(a)-2 for method of notification. The statute remains open if the taxpayer does not complete the replacement within the time allowed. Alpha Code "RR" is used when the taxpayer has not notified the Service of the replacement. The correct statute is reflected if the notification has been received.

4.8.8.7  (12-06-2013)
Jeopardy and Terminations

  1. This section discusses Technical Services responsibilities with respect to Jeopardy and Termination cases, which include the following:

    1. Assistance for development, preparation, and review of jeopardy/termination assessments;

    2. Preparation of statutory notices of deficiency for jeopardy/terminations assessments; and

    3. Abatement of improper or excessive jeopardy/termination assessments.

  2. Refer to IRM 4.15, Jeopardy/Termination Assessments, for complete details regarding these types of cases.

4.8.8.7.1  (12-06-2013)
Reviewer Responsibilities

  1. The Technical Services group manager will designate a jeopardy/termination reviewer. The jeopardy/termination reviewer should be a reviewer with prior jeopardy/termination experience and or knowledge.

  2. The jeopardy/termination reviewer is responsible for all of the following:

    1. Assisting field examination with developing and preparing jeopardy/termination assessments. Refer to IRM 4.15.2, Jeopardy/Termination Assessments—Examination Procedures, for complete examination procedures.

    2. Reviewing possible jeopardy/termination cases to determine if a case meets jeopardy/termination criteria.

    3. Preparing notices of deficiency for jeopardy/termination cases that have been assessed. Refer to IRM 4.8.9.17.3, Technical Services—Statutory Notices of Deficiency, Jeopardy and Termination Assessments, for notice of deficiency procedures for jeopardy/termination cases.

4.8.8.7.1.1  (12-06-2013)
Assisting Examination

  1. The jeopardy/termination reviewer assists field examination in the development and preparation of jeopardy/termination assessments. Assistance can take the form of clarifying procedures, discussion with area counsel concerning the facts of the jeopardy/termination case, providing Examination personnel with updated information, pre-review of the case with the examiner, etc.

  2. A jeopardy/termination situation usually occurs over a relatively short period of time and must be resolved as quickly as possible.

  3. Multiple areas and functions, including Examination, Collection, Technical Services, Criminal Investigation, Appeals, Area Counsel, and various Campus Units will be involved in these cases. Technical Services helps to coordinate the process so a proper outcome can be achieved in a timely manner.

4.8.8.7.1.2  (12-06-2013)
Technical Services Pre-Review

  1. The jeopardy/termination reviewer reviews the case to determine if it meets the jeopardy/termination criteria.

4.8.8.7.1.2.1  (12-06-2013)
Review of Pre-Approval Report

  1. The jeopardy/termination reviewer reviews the pre-approval report noted in IRM 4.15.2.4.1.3, Jeopardy/Termination Assessments Handbook—Examination Procedures, Preparing the Pre-Approval Report. The review includes determining the following:

    1. The conditions for the jeopardy/termination exist

    2. The case is developed and documented properly

    3. The report is prepared properly

    4. The computations are correct

  2. The jeopardy/termination approval report and package is prepared as noted in IRM 4.15.2.4.1.3 and IRM 4.15.2.4.1.4, Jeopardy/Termination Assessments Handbook—Examination Procedures, Preparing the Package. Form 2644, Recommendation for Jeopardy/Termination Assessment, takes the place of Form 5344, Examination Closing Record.

  3. The case is not prepared the same way as a case under examination. Form 4665, Report Transmittal, Form 4318, Examination Workpaper Index, and Form 886-A are not required. However, under the jeopardy/termination provisions, a notice of deficiency must be issued to the taxpayer who is subject to the jeopardy/termination assessment.

  4. An examination is completed and the case is assembled according to general case file assembly procedures. The case is then closed on an expedite basis for issuance of the notice of deficiency. The only reasons to delay closing on an expedited basis are if one of the following conditions are met:

    1. If Appeals or the Department of Justice obtains an agreement by the taxpayer of the amount of his or her actual liability and waiver of the issuance of the notice of deficiency.

    2. If it appears that Appeals or the District Court is likely to find there was no jeopardy.

    3. The amount of assessment is inappropriate.

  5. After review, if the jeopardy/termination reviewer agrees with the pre-approval report, it will be returned to the examiner. The reviewer will then assist the examiner to coordinate area counsel's review of the pre-approval report.

  6. If the jeopardy/termination reviewer does not agree with the pre-approval report, it will be returned to the examiner. The reviewer will provide the examiner with the reasons for the disagreement.

4.8.8.7.1.2.2  (12-06-2013)
Review of Approval Report and Approval Package

  1. The reviewer will review the approval report noted in IRM 4.15.2.4.1.3.6, Jeopardy/Termination Assessments Handbook—Examination Procedures, Approval Report, and the approval package noted in IRM 4.15.2.4.1.4. The review will cover the items in the review of the pre-approval report noted in IRM 4.8.8.7.1.2.1, Review of Pre-Approval Report, above, and the following:

    1. Ensure the forms are completed correctly

    2. Ensure the case file(s) is prepared properly

  2. After review, if the reviewer agrees with the approval report and package, the Technical Services group manager will sign each Form 2644 in the appropriate area and coordinate securing the remaining required signatures to make the assessment.

  3. If the reviewer does not agree with the approval report and package, the approval report and package will be returned to the examiner. The reviewer will provide the examiner with the reasons for the disagreement.

  4. If Examination management disagrees with the reviewer, the case will be discussed with the Technical Services group manager.

    1. If the issue in question can be resolved, the parties can proceed as agreed.

    2. If agreement cannot be reached, the issue will be resolved through existing management channels.

    3. If the examiner disagrees with the resolution of the issue, the examiner will adopt management's position. However, the examiner has the right to submit a dissenting opinion, which will be maintained as a part of the administrative case file.

4.8.8.7.1.3  (12-06-2013)
Preparing Notices of Deficiency

  1. A notice of deficiency is required to be mailed to the last known address of the taxpayer within a 60 day period, as prescribed in the jeopardy/termination provisions. Refer to IRM 4.8.9.17.3 and subsequent for procedures concerning preparation of a notice of deficiency that follows a jeopardy or termination assessment.

  2. If the jeopardy/termination assessment exceeds the corresponding deficiency, the excess amount remaining unpaid should be abated. If all or part of the excess has been paid, no refund should be made until the case is closed.

4.8.8.7.1.3.1  (12-06-2013)
Jeopardy Notice of Deficiency

  1. Under IRC 6861(b), Jeopardy Assessments of Income, Estate, Gift, and Certain Excise Taxes, a notice of deficiency is required to be mailed to the last known address of the taxpayer within 60 days of the date of the assessment.

  2. The deficiency amount stated on the notice of deficiency will be either the amount of the assessment, or the reduced amount determined by Appeals, if the notice of deficiency is not issued before the Appeals determination. An increased amount may require another jeopardy assessment.

4.8.8.7.1.3.2  (12-06-2013)
Termination Notice of Deficiency

  1. Under IRC 6851(b), Termination Assessments of Income Tax, if a termination assessment is made, a notice of deficiency is required to be mailed to the last known address of the taxpayer, for the taxpayer's full taxable year, within 60 days after the later of the following:

    1. The due date of the taxpayer's return for the taxable year, determined with regard to extensions, or

    2. The date the taxpayer files a return for the taxable year.

  2. The deficiency amount stated on the notice of deficiency can be greater than, less than, or equal to the amount of the termination assessment.

  3. If the taxpayer does not file a return, the notice of deficiency must be sent within 60 days after the due date of the return. In Perlowin v. Sassi, 711 F.2d 910 (9th Cir. 1983), affirming in relevant part, but reversing on other grounds, the Court of Appeals concluded that the District Court was correct in its interpretation of IRC 6851(b). The District Court interpreted the statute to mean that if no return is filed, the IRS should issue a deficiency notice within 60 days of the due date of the tax return. The deficiency is calculated in accordance with the procedures for calculating deficiencies in jeopardy assessments where the taxpayer has failed to file a return.

    Example:

    Examination terminates the taxpayer's period from January 1, 2007 through November 1, 2007. The taxpayer does not file a tax return for 2007. The taxpayer did not file any extensions. When preparing the notice of deficiency, the period will be for the full taxable year, January 1, 2007 through December 31, 2007. The notice of deficiency must be mailed on or before June 14, 2008.

    Example:

    Examination terminates the taxpayer's period from January 1, 2007 through November 1, 2007. The taxpayer files a timely request for extension of time to file the return until October 15, 2008. The taxpayer does not file a tax return for 2007. When preparing the notice of deficiency, the period will be for the full taxable year, January 1, 2007 through December 31, 2007. The notice of deficiency must be mailed on or before December 14, 2008.

  4. Return Filed—A notice of deficiency is required when the correct tax liability is determined and a deficiency exists (the correct tax liability is greater than the tax shown on the return). Amounts collected under a termination assessment are not treated as payments that would be considered for purposes of determining the amount of a deficiency.

    Example:

    A termination assessment is made against taxpayer A, a calendar year taxpayer, in the amount of $18,000. The termination assessment is made for the period from January 1, 2007 through November 1, 2007. On or before April 15, 2008, taxpayer A files a Form 1040, U.S. Individual Income Tax Return, showing an income tax liability for the full year 2007 of $10,000. The area director determines taxpayer A's liability for tax year 2007 is $16,000. A notice of deficiency in the amount of $6,000 must be sent to taxpayer A on or before June 14, 2008. Assuming the area director had collected the $18,000 assessed, $2,000 may be refunded to taxpayer A. No refund will be made until the case is closed.

    Example:

    A termination assessment is made against taxpayer A, a calendar year taxpayer, in the amount of $18,000. The termination assessment is made for the period from January 1, 2007 through November 1, 2007. The taxpayer files a timely request for extension of time to file returns until October 15, 2008. On July 31, 2008, taxpayer A files a Form 1040 showing an income tax liability for the full year 2007 of $10,000. The area director determines taxpayer A's liability for tax for 2007 is $16,000. A notice of deficiency in the amount of $6,000 must be sent to taxpayer A on or before September 29, 2008. Assuming the area director had collected the $18,000 assessed, $2,000 may be refunded to taxpayer A. However, no refund will be made until the case is closed.

    Note:

    When the tax reflected on the full year's return equals the termination assessment, and an examination of the full year's return results in no additional tax or overassessment, the notice of deficiency need not be issued.

  5. No Return Filed—If the taxpayer fails to file a return, the tax per return is taken as zero. A notice of deficiency is required to be issued since the correct tax liability normally will be greater than zero. Amounts collected under a termination assessment are not treated as payments that would be considered for purposes of determining the amount of a deficiency.

    Example:

    A termination assessment is made against taxpayer A, a calendar year taxpayer, in the amount of $18,000. The termination assessment is made for the period from January 1, 2007 through November 1, 2007. Taxpayer A fails to file a tax return for 2007. The area director determines taxpayer A's liability for the full tax year 2007 is $16,000. A notice of deficiency in the amount of $16,000 must be sent to taxpayer A on or before June 14, 2008. Assuming the director had collected the $18,000 assessed, $2,000 may be refunded to taxpayer A. However, no refund will be made until the case is closed.

4.8.8.7.1.3.3  (12-06-2013)
Possessor of Cash Notice of Deficiency

  1. Under IRC 6867, Presumptions Where Owner of Large Amount of Cash is not Identified, if a possessor of cash jeopardy/termination assessment is made, IRC 6851 and IRC 6861 are followed. Therefore, a notice of deficiency is required to be mailed under the applicable jeopardy or termination procedures. The possessor of the cash is treated as the taxpayer for purposes of the notice of deficiency procedures, and the possessor of the cash is sent the notice of deficiency.

  2. A new taxable entity is created with a temporary taxpayer identification number (TIN) for the possessor of cash. The use of the temporary TIN enables separate tax liability treatment for the possessed cash and avoids any effect on the possessor's individual personal tax liability, which remains separate from the IRC 6867 assessment.

  3. All documents requiring entity information must use "(Possessor's Name) as Possessor of Certain Cash" as the name line.

4.8.8.7.1.3.4  (12-06-2013)
Review by Counsel

  1. All notices of deficiency prepared in jeopardy/termination cases will be reviewed by area counsel before issuance. Allow sufficient time for counsel review during the 60 day period. Since area counsel has 45 days to review and return a notice of deficiency per IRM 4.8.9.9.2.3, Technical Services, Statutory Notices of Deficiency, Area Counsel Review Time Frames, the notice should be ready for submission to area counsel shortly after making the jeopardy assessment. All notices of deficiency will comply with the IRS Restructuring and Reform Act requirements as defined in IRM 4.10.1.6, Taxpayer Rights.

4.8.8.7.1.3.5  (12-06-2013)
Late Mailing

  1. Failure to issue the notice of deficiency within the 60 day period nullifies the jeopardy/termination assessment (for filed returns, and may nullify the assessment for non-filed returns), and entitles the taxpayer to an injunction restraining further collection of taxes.

  2. Even if a notice of deficiency is not issued within the time prescribed by the jeopardy/termination provision, the Service can still make a determination of the correct tax liability as long as a notice of deficiency is sent to the taxpayer within the time prescribed by IRC 6501.

    Example:

    Taxpayer A, a calendar year taxpayer, has not filed a Form 1040 for 2006. A jeopardy assessment is made for 2006 on February 15, 2008, prior to issuance of any notice of deficiency to taxpayer A. A notice of deficiency is mailed to taxpayer A on April 16, 2008. The jeopardy assessment is invalid because the notice of deficiency was issued after the 60 day period, which expired April 15, 2008. However, the notice of deficiency is still valid.

4.8.8.7.1.4  (12-06-2013)
Abating Jeopardy/Termination Assessments

  1. During administrative and judicial reviews of the jeopardy/termination assessment actions, there will be some determinations that the assessment was improperly made or was excessive in amount.

  2. Technical Services is responsible for abating jeopardy/termination assessments. The jeopardy/termination assessment case file, including the statement of reasons, report of findings, and a new computation of tax, will be forwarded from the Technical Services group manager.

  3. Technical Services will prepare an abatement file. The abatement file will be sent to Centralized Case Processing for processing the abatement. The abatement file will consist of the following:

    1. Form 3198. Under "Letter Instructions for CCP," mark "Other Instructions," and write "Abatement of [jeopardy or termination] assessment of [type of tax (income or other)] tax. Please expedite."

    2. Form 5344 or Form 3870, Request for Adjustment, with the necessary information placed on the form according to the instructions. The information is taken from the jeopardy/termination assessment file.

4.8.8.8  (12-06-2013)
Offer in Compromise Cases

  1. IRM 4.18, Exam Offer-in-Compromise, provides guidelines for the processing of examination doubt as to liability (DATL) offer-in-compromise cases (OIC). The purpose of an offer in compromise is to allow the taxpayer to offer an amount toward his or her tax liabilities that is less than the full amount owed. If the offer is accepted, the offer in compromise becomes an agreement between the government and the taxpayer that settles the taxpayer's liabilities as agreed to in the offer.

  2. Examination is responsible for the investigation and processing of OIC cases based on DATL.

  3. Technical Services is responsible for the administrative review and case closing procedures. This occurs after the investigation and processing of OIC DATL cases are completed in Examination. The offer can be rejected, withdrawn, or accepted.

  4. An OIC DATL does not exist when the liability has been established by a final court decision or judgment concerning the existence or amount of the tax liability.

  5. The filing by the taxpayer of a processable OIC DATL extends the period of time for assessment in accord with the terms of the waiver provisions contained in the Form 656-L, Offer in Compromise (Doubt as to Liability).

  6. The Technical Services reviewer should complete the following:

    1. Perform current IDRS research for all years listed on the offer, including CFINK to determine if there is a power of attorney.

    2. Check ERCS to ensure the case is in the correct status, review and suspense type.

    3. Check for input of TC 480 for all years listed on the offer.

4.8.8.8.1  (12-06-2013)
Overview

  1. This section provides administrative review and closing procedures for OIC DATL requests.

  2. IRM 1.2.44.2, Servicewide Policies and Authorities—Delegations of Authorities for the Collecting Process, Delegation Order No. 5-1 (Rev. 3) To Accept, Reject, Return, Terminate or Acknowledge Withdrawals of Offers in Compromise, outlines the level of authority needed to approve an OIC DATL.

  3. As it pertains to Technical Services, Delegation Order No. 5-1 authorizes the following persons to perform the following pertaining to OIC DATL:

    Action Employee Authorized to Approve
    To accept an offer in compromise Technical Services territory manager.
    To reject an offer in compromise Technical Services group manager.
    To return an offer in compromise Technical Services group manager.
    To terminate an offer in compromise Upon the death of the taxpayer—Revenue agent reviewer GS-11 and above, though the letter should be approved by the group manager. Upon the default of the terms of the compromise—The official who accepted the offer in compromise or his or her successor.
    To acknowledge withdrawal of an offer in compromise Technical Services group manager.

4.8.8.8.2  (12-06-2013)
Independent Administrative Review Procedures for Rejected Offers

  1. IRC 7122(e), Administrative Review, requires the Service to provide for independent administrative review of all proposed rejections of an OIC prior to the rejection being communicated to the taxpayer.

  2. For Examination, this review should occur within the Technical Services function where a reviewer is designated as the independent administrative reviewer (IAR). The IAR cannot be anyone who has worked on the case or is a part of the initial rejection or acceptance decision.

  3. The grade level of the IAR should be the same or greater than the individual making the initial rejection or acceptance decision.

  4. The IAR should be independent, defined as "free from influence, guidance, or control of others." This indicates the review should be made by one who is not influenced by the maker of the original rejection decision, i.e. not an employee who reports to the reviewer. In instances where the IAR is the supervisor of the OIC DATL reviewer, the supervisor must clearly make an independent judgment after a full review of the case. To the extent that an immediate supervisor may defer too much to the judgment of the OIC DATL reviewer, the supervisor should not be appointed as the IAR. In instances where the OIC DATL reviewer made the rejection recommendation, to avoid any possible question concerning independence, the area may want to consider appointing someone other than the OIC DATL reviewer’s immediate supervisor as the IAR.

  5. The IAR will review all proposed rejections of OIC DATLs prior to any indication or notification of such action being given to the taxpayer. The purpose of the review is to evaluate the case and determine if rejection is the correct decision.

  6. The review criteria include, but are not limited to the following:

    1. Whether IRM requirements were followed (procedural and mathematical accuracy),

    2. Whether the tax law was correctly considered and applied, and

    3. Whether the facts/circumstances were thoroughly developed.

  7. If the rejection is sustained, the IAR will take the following actions:

    1. Sign Form 1271, Rejection or Withdrawal Memorandum, as reviewer signifying concurrence with the recommendation.

    2. Provide a brief comment in the remarks section (findings/conclusions from review.)

    3. Prepare a rejection letter. The sample language in Exhibit 4.8.8-1, OIC Sample Rejection Letter Language, may be used for this purpose.

    4. Prepare Form 3177, Notice of Action for Entry on Master File, to have a STAUP 22 for six cycles input on module for cases in which an abatement report is prepared. STAUP 22 stops collection activity to allow time for the input of the abatement. STAUP 22 should be input by a designated Tax Examiner in Technical Services.

    5. Forward the case file to the delegated official for approval of Form 1271 and signing, dating and mailing the rejection letter to the taxpayer. Dual notification is required for joint offers.

    6. A taxpayer is allowed 30 days to respond to the rejection letter.

    7. If a taxpayer responds by requesting an appeals conference, the OIC DATL reviewer is to review the protest to ensure that it is valid. Valid protests are both timely and adequate. If valid, the file is forwarded to Appeals for consideration. If no protest is received, or if the protest is not timely, the file is forwarded/closed for final processing. If the protest is not adequate, issue Letter 1025, Letter of Protest, to the taxpayer with a copy to the representative, if applicable. Letter 1025 allows the taxpayer 10 days to provide an adequate protest.

    8. If the case is to be forwarded to Appeals, prepare Form 4665 summarizing the unagreed issues. Send Letter 2280, Transfer to Appeals, to notify the taxpayer the case is being forwarded to Appeals.

      Note:

      When discussing cases with appeals officers, keep in mind the provisions of Rev. Proc. 2012-18, 26 CFR 601.106, regarding the prohibition on "ex parte" communications between appeals officers and other IRS employees.

    9. If the case is forwarded to Appeals, do not prepare Form 3177 to have TC 481 input.

    10. If the taxpayer does not request an appeal, complete Form 3177 to have TC 481 input to reverse the offer. TC 481 indicates a rejected offer.

    11. If the taxpayer does not request an appeals conference, the OIC DATL file is forwarded to Centralized Case Processing (CCP) for closing using Form 3198 as a cover sheet. The rejection letter should be contained in the file and if applicable, the file should contain the documents listed in IRM 4.8.8.8.5 (2) below.

  8. If the IAR determines the rejection is not appropriate, the case file will be returned to the examiner via Form 3990, Reviewers Report, with an explanation stating why the rejection was inappropriate. If an agreement cannot be reached between the examiner and the IAR, the issue will be elevated to management levels as appropriate.

4.8.8.8.3  (12-06-2013)
Withdrawn Offers

  1. An OIC DATL is withdrawn if the taxpayer agrees to the findings of the investigation by signing a letter stating the offer is being withdrawn.

  2. The Technical Services reviewer completes the following:

    1. Reviews the examiner’s workpapers addressing the offer.

    2. Checks for a withdrawal letter signed by the taxpayer. The taxpayer's signature is always required on the letter of withdrawal. If the offer was filed jointly, signatures of both spouses are required. The taxpayer's representative (per the power of attorney) may authorize withdrawal of the OIC DATL on the taxpayer's behalf.

    3. If an examination report has been prepared, reviews for accuracy and support in the workpapers. Prepares Form 3177 to have a STAUP 22 for six cycles input on module for cases in which there is an abatement report. STAUP 22 stops collection activity to allow time for the input of the abatement. STAUP 22 should be input by a designated Tax Examiner in Technical Services.

    4. Signs Form 1271 as reviewer signifying concurrence with the recommendation. Provides a brief comment in the remarks section (findings/conclusions from review).

    5. Prepares a withdrawal confirmation letter and forwards the case to the delegated official for signature. The sample language in Exhibit 4.8.8-2, OIC Sample Withdrawal Letter Language, may be used for this purpose. The delegated official also signs Form 1271.

    6. After the letter is signed, dated and mailed to the taxpayer, keeps a copy for future inquiries. Separate mailings are required for each spouse on a joint offer.

    7. Closes the case to CCP with Form 3198 as a cover sheet. Completes Form 3177 to have TC 482 (indicates a withdrawn offer) input. Indicates on Form 3198 if an examination report is enclosed. The file should contain the applicable documents listed in IRM 4.8.8.8.5 (2) below.

4.8.8.8.4  (12-06-2013)
Accepted Offers

  1. Before an OIC DATL can be accepted, there must be some doubt as to the correctness of the liability.

  2. If the offer is accepted, the Technical Services reviewer complete the following:

    1. Reviews Form 7249, Offer Acceptance Report, and

    2. Prepares an acceptance letter and forwards it to the delegated official for signature. The sample language contained in Exhibit 4.8.8-3, OIC Sample Acceptance Letter Language, may be used for this purpose.

  3. Per IRC 7122(f), Compromises, the taxpayer must be issued an acceptance letter if the Service did not make a determination with regarding to the OIC within 24 months of receipt. The letter will be signed by the current level of authority delegated permission to sign an OIC acceptance letter and sent to the taxpayer. See IRM 5.8.8.6, 24 Month Mandatory Acceptance under IRC 7122(f), and IRM Exhibit 5.8.8-4, 24 Month Acceptance Letter.

  4. Refer to IRM 4.8.8.8.5 below for case closing procedures.

4.8.8.8.5  (12-06-2013)
Case Closing Procedures

  1. After the appropriate letter is sent to the taxpayer, the OIC DATL file is forwarded to Centralized Case Processing, unless the taxpayer has requested an appeal of a rejected offer.

  2. The file should contain the following:

    • Form 656-L, Offer in Compromise (Doubt as to Liability).

    • Rejection letter to the taxpayer, with a copy to the representative, if applicable.

    • Withdrawal letter from the taxpayer, as well as the withdrawal confirmation letter to the taxpayer, if applicable.

    • Form 1271 (for rejected or withdrawn offers), Form 7249 (for accepted offers), Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, if applicable.

    • Form 2848, Power of Attorney and Declaration of Representative, if applicable.

    • Tax return (original, copy or RTVUE (IDRS print).

    • Original workpapers/report.

    • Form 3870 or revised workpapers and Form 4549, Income Tax Examination Changes.

    • Form 5344.

    • Completed checklist from PSP for closure on the Automated Offer in Compromise (AOIC) system. See Figure 4.8.8-1 below for a copy of the checklist.

    Figure 4.8.8-1

    OIC-DATL EXAM—IAR/TECHNICAL SERVICES CASE REVIEW  
    TIN: Office Number:
    Taxpayer Name  
    TIPRA Date (IRS Received Date):  
    IAR/Technical Reviewer Name: Review Date:
    IAR Concurrence: __Yes ____No
    Comments:
     
     
     
     
     
    Amount of Deposit:
    Disposition of Deposit: ____ Refund ____Apply
    Tax Year Applied:
    Form or Letter Issued:
    Mail Date of Letter:
    Copy to PSP Date:
    Date Closed to CCP:
       
    Final Disposition Code:
    • 1 - Acceptance by Exam

    • 2 - Acceptance by Appeals

    • 3 - Reject Sustained by Appeals

    • 5 - Reject (Did not Appeal)

    • 6 - Withdrawn

    • 8 - Terminated

    • 9 - Withdrawn in Appeals

    • 10 - Return (Processable and Not Processable)

  3. The Campus OIC Unit processes the payment transfer (Form 3040), and in instances where the OIC DATL reviewer is unable to do so, may also input the appropriate IDRS transaction code for acceptance TC 780, withdrawal TC 482 or rejection/return TC 481 of the OIC DATL, and reversal of the STAUP (if applicable).

  4. For accepted OIC DATL cases, a copy of Form 7249 and a sanitized MFTRA (an external user transcript containing entity data) for all periods compromised are forwarded to the appropriate party so the file is available for the public inspection file. Offer-in-compromise public inspection file locations are based on the taxpayer's geographic area of residence. The IRS Intranet provides the locations. These documents are retained for public inspection for a period of one year, after which they may be destroyed.

  5. The OIC DATL reviewer frequently gets inquiries on recently closed OIC DATL cases. To respond to these inquiries, the OIC DATL reviewer should, at a minimum, maintain copies of Form 1271, Form 7249, and Form 2848, if applicable, and the confirmation letter for a period of six months. The copies should not be maintained longer than one year, after which they should be shredded since the originals are in the administrative case file.

  6. Refer to IRM 4.8.8.8.6, Deposits, below for actions required if a taxpayer submits a deposit with the OIC DATL.

  7. After review, the OIC DATL reviewer in Technical Services will send a copy of the determination letter and workpapers to the PSP OIC DATL Coordinator, using Form 3210, Document Transmittal. See IRM 4.18.5.2, Exam Offer-In-Compromise, Review, Closing and Reporting Requirements, Case Closing Procedures.

4.8.8.8.6  (12-06-2013)
Deposits

  1. A taxpayer may submit a deposit when he files the OIC. A completed copy of Form 2515, Record of Offer in Compromise, which should have been prepared by the campus, and a copy of the check should be included in the case file. Also, the examiner’s workpapers should address how the taxpayer wants the deposit to be applied. The payment may or may not be applied to the year(s) in question. The options are to apply it against the outstanding tax or have it refunded.

  2. The Technical Services reviewer should contact the appropriate campus to inform them how the taxpayer wishes to have the deposit applied. Form 3040 can be completed to authorize deposit application, or the taxpayer can give instructions regarding the deposit on the signed withdrawal letter.

4.8.8.8.7  (12-06-2013)
Additional Offer in Compromise Issues

  1. Collection Due Process Cases: The Technical Services reviewer must review the case to ensure adjustments/reports are correct. Once completed, the case is forwarded to Appeals.

  2. Termination Offers: Consideration of an offer must be terminated upon the death of a single proponent. Offers closed as terminations do not require preparation of Form 1271. The Technical Services reviewer is responsible for issuing a termination letter. The letter is forwarded to the Technical Services group manager for signature. The sample language in Exhibit 4.8.8-4, OIC Sample Termination Letter Language, may be used for this purpose. See IRM 5.8.7.5.1, Closing an Offer as a Termination, for procedures to close a terminated offer.

  3. If only one spouse submits an OIC DATL, then the account may need to be split. See IRM 21.6.8, for procedures.

4.8.8.9  (12-06-2013)
Carryback Adjustments Requiring Form 2285

  1. Interest is generally paid to taxpayers on tax overpayments under IRC 6611, Interest on Overpayments, for the time period the government has use of the taxpayer's money. Interest is charged on tax deficiencies under IRC 6601, Interest on Underpayment, Nonpayment, or Extensions of Time for Payment, of Tax, for the time period the taxpayer has use of the government's money. In most cases, the time period begins with the normal due date of the return.

  2. "General adjustments" are adjustments made to the tax return as part of the audit for that particular year. These do not include any carryback adjustments arising from subsequent years that are applied to the audit year. However, anything carried forward into the current year from a prior year is a general adjustment or a current period adjustment. Interest on general adjustments is computed based upon the due date of the return being examined.

  3. The Internal Revenue Code (IRC) specifies if certain deductions, credits, and items of income are present, the interest accrual period will be different and may need to be restricted. See IRM 20.2.8.6, Interest—Restricted Interest, Reasons for Restriction, for a detailed list of the reasons for restricting interest on a tax module. IRM Exhibit 20.2.8-1, Provisions Restricting and Prohibiting Interest, contains a table displaying various types of tax adjustments and their restricted interest treatment.

  4. One of the reasons for restricting interest on a tax module is a claim or tentative allowance to carryback net operating losses (NOLs), net capital losses (NCLs) and credits. Interest is computed based upon the due date of the tax return from which the carryback originates. As compared to general adjustments, this shortens or "restricts" the period during which interest is computed. The carryback is called a "restricted adjustment."

  5. When an examination includes both "general adjustments" and "carryback adjustments," the tax liability subject to the different interest start date must be identified and separated from the tax liability attributable to the "general adjustments." This identification and separation is accomplished by the completion of Section I of Form 2285, Concurrent Determinations of Deficiencies.

4.8.8.9.1  (12-06-2013)
Review of the Restricted Adjustment RAR and Form 3198

  1. Restricted adjustment cases are controlled on ERCS by Technical Services using Status Code 20, Review Type 09.

    Note:

    This is only for cases where there is not a tax computation specialist (TCS) assigned in LB&I.

  2. Restricted adjustment cases are sent to Technical Services for special handling. As such, they are subject to review only if the case is also a mandatory review case.

  3. All cases requiring restricted interest treatment must be identified as such on Form 3198.

  4. The reviewer should ensure Form 3198 has been properly notated. Form 3198 should contain the following notations:

    1. Restricted interest cases requiring Form 2285 must be identified as such on Form 3198 to ensure proper routing upon case closing. The following review steps should be taken:

      (1) Review page one of Form 3198 to ensure it has routing instructions to FORWARD TO TECHNICAL SERVICES.
      (2) Review page one to ensure the box is checked for "Restricted Interest (Form 2285 required)" .
      (3) If the restricted adjustment made is a NOL carryback, check the box on page 2 under the "Special/Restricted Interest Features" that says "NOL and Capital Loss Carryback" in addition to the "Other Code Section" check box.

      Note:

      Case will be updated to Status Code 21 for routing to Technical Services.

    2. Restricted interest cases not requiring a Form 2285, must be identified as such on Form 3198 to ensure proper routing upon case closing. Check the box on the left side of Page 1 and review page two of Form 3198 to ensure it has been annotated to indicate Special/Restricted Interest Features, check box for "Other Code Section" and annotate "IRC 6611(f)—No Form 2285 Required."

      Note:

      Case will be updated to Status Code 51 for routing to CCP unless other feature requires routing to Technical Services, i.e. an unagreed closure.

    3. Agreed, no changed and surveyed Joint Committee cases as defined in IRM 4.36.2, Identification of Joint Committee Cases, should be sent directly to the Joint Committee Review Program. The Joint Committee reviewer will complete Form 2285 if required. Additional information may be found at http://lmsb.irs.gov/hq/pqa/4/home.asp,

    4. The reviewer's signature, date of signature, and telephone number will be entered on the Form 3198 before closing to CCP, Status Code 51.

  5. IRM 4.10.8.13.3.4, Restricted Interest, with IRM Exhibit 4.10.8-10, Sample Form 4549A—Full Allowance of Tentative NOLD, through IRM Exhibit 4.10.8-13, Restricted Interest Decision Chart (Non-Joint Committee Cases Only), provide detailed instructions about the preparation of reports presenting carryback adjustments and general adjustments. The report should have been prepared and presented to the taxpayer detailing the source year of all carryback adjustments with appropriate remarks in "Other Information" as suggested in IRM 4.10.8.13.3.4(5)(a).

  6. If the report consists of both carryback adjustments and general adjustments, the case file should contain a "Restricted Adjustment Report" that reflects the potential deficiency subject to interest per IRC 6601(d). This is a report generated without the carryback adjustments to reflect the taxpayer's deficiency attributable to the general adjustments until the due date of the offsetting source year carryback. More than one source year requires additional "Restricted Reports" until each source year is accounted for in order to prepare Form 2285. The taxpayer's last marginal rate is computed as follows in the event the reviewer must separate the report:

    1. Merge the case into the RGS program.

    2. Deal with only one year at a time.

    3. Go into issue adjustments. Make note of the amounts of all the carryback adjustments.

    4. Eliminate all of the carryback adjustments by deleting them or entering zero for the amount of the adjustment. Do the same for alternative minimum tax preference item for the alternative minimum tax net operating loss deduction. Compute the tax that should now reflect only the current period adjustments.

    5. Print out the first page of the report reflecting the deficiency.

    6. Go back into issue adjustments and re-enter the adjustment for the carryback(s) from the earliest subsequent year. Run the report again and print the page of the report reflecting the deficiency. The difference between this report and the last report would be the tax change due to the carryback from the earliest subsequent year.

    7. Repeat this process for each subsequent year from which there was a carryback until the final report is the same as the examiner's report.

  7. The reviewer ensures the NOL or credit adjustment on the report is not a combination of two or more source years. The Form 4318 or workpapers should be reviewed to determine if multiple NOLs or credit carrybacks make up the adjustment.

4.8.8.9.2  (12-06-2013)
Requirements for Preparation of a Form 2285

  1. Form 2285 is required when:

    1. Losses or credit carrybacks from more than one year are being carried back to the same year, or

    2. A "general adjustment" resulting in more than $100 in tax and a carryback (loss or credit) from at least one subsequent year are involved.

    Note:

    Each source year is required to be separately identified.

  2. Form 2285 is not required in the following instances:

    1. An unagreed case is either petitioned to the United States Tax Court or forwarded to Appeals for settlement,

    2. A tentative allowance was made and the report approves the allowance (a no-change report),

    3. The carryback arises from only one year and there is a partial recovery of the tentative allowance,

    4. There are no general adjustments or there is a general adjustment resulting in $100 or less in tax and a carryback from only one year.

  3. IRM Exhibit 4.10.8-13 displays a quick reference "Restricted Interest Decision Chart (Non-Joint Committee Cases Only)."

4.8.8.9.3  (12-06-2013)
Completion of Form 2285

  1. Technical Services is responsible for completing Section I of Form 2285. In LB&I, tax computation specialists (TCS) complete Section 1 of Form 2285 for all agreed and partially agreed cases. For further information see http://lmsb.irs.gov/hq/pqa/Restricted_Interest_Toolkit/Chapter_4.asp.

  2. Instructions about how to complete Form 2285 are outlined on the publishing website for the form. See Tax Computation Specialists Downloads, for a sample of a completed Form 2285, Part I. References may be found in:

    1. IRM 20.2.8, Restricted Interest

    2. IRM 20.2.9, Interest on Carryback of Net Operating Loss

    3. Http://lmsb.irs.gov/hq/pqa/Restricted_Interest_Toolkit/Chapter_1.asp

    4. Http://lmsb.irs.gov/hq/pqa/4/Joint_Committee/jcspreadsheets.asp

  3. The reviewer should contact the examiner who worked the case to verify the amounts of the adjustments arising in various years. Use of RGS may net some carryback and carryforward adjustments, making preparation of Form 2285 confusing.

  4. The completed Form 2285 is placed on the top of the examiner's report inside the case file. The case will be closed to CCP in Status Code 51.

    Example:

    If a taxpayer requests a payoff figure on a case requiring a Form 2285, the controls will typically be held in the examining group. The group will make the request to CCP for the payoff figure, but CCP will request the restricted interest reviewer complete Part I of Form 2285. The reviewer will obtain the report and appropriate documents to complete Form 2285 and forward to the CCP tax examiner.

  5. On complex restricted interest computations, the reviewer may prepare a memorandum for an area counsel advisory.

4.8.8.10  (12-06-2013)
Specialist Referrals

  1. When reviewing a case, the Technical Services reviewer verifies that the examiner made referrals to specialists, as appropriate. When the mandatory referral criteria are met, examiners should document the consideration of referrals in the case file. Examiners should keep a copy of the referral (hard copy or electronic), or if not referred, the reason for not referring the case should be noted in the workpapers or the activity record.

  2. See IRM 4.10.2.6.5, Referrals for Specialists, for instructions to examiners and the mandatory referral criteria. See IRM 4.10.6.3.3, Referrals, for information regarding assistance from specialists in developing penalty issues.

  3. Visit http://lmsb.irs.gov/hq/fs/InformationResources/SRS/FS_Referral.asp for the mandatory referral criteria as well as information on the Specialist Referral System (SRS).

  4. Other referrals, such as requests for informal advice from area counsel, requests for field service advice, and requests for technical advice should be submitted to the technical coordinator in Technical Services. See IRM 4.8.8.12, Formal and Informal Technical Assistance, below, for more information.

4.8.8.11  (12-06-2013)
Statute Expiration Reports

  1. The Technical Services reviewer working with statute expiration cases must be knowledgeable of statute of limitations provisions and should know the following:

    1. When a statute expires and or an assessment is barred

    2. When a Form 3999, Statute Expiration Report, is required

    3. Who is responsible for preparing the report

    4. What information is required for a preliminary and or final report

    5. How to route the report within the mandatory processing time frames

    6. How to close a case involving an expired statute

  2. Form 3999 is prepared when the statute of limitation expires prior to the appropriate assessment, overassessment or no-change and the case is in Examination. Form 3999-T, Statute Expiration Report (for TEFRA key cases), is used for TEFRA key cases. IRM 25.6.1.13, Barred Assessments/Barred Statute Cases, provides detailed instructions for the preparation and routing of the report (both preliminary and final). Additional information can also be found in IRM 4.2.1.4, Reports on Cases Involving Expiration of the Statutory Period for Assessment.

  3. Form 3999 can be prepared as a preliminary or final report. Management generally prepares a preliminary report when a function or employee discovers (but was not responsible for) the potentially expired statute. The final report is prepared by the manager of the individual responsible for the expired statute.

  4. Technical Services may review a case at the request of a group manager to determine if a Form 3999 is required, before the preliminary report is forwarded to the next level of management. The reviewer will determine whether the assessment is actually barred or if it can be assessed under one of the lesser known provisions of the statute. Refer to IRC 6501, Limitations on Assessment and Collection, for exceptions to the normal three-year limitation period.

  5. Refer to IRM 4.2.1.5, Taxpayer Notification of Statute Expiration and Acceptance of Voluntary Payments on Barred Statutes, for procedural guidance on notifying taxpayers of expired statutes.

  6. The final report on Form 3999 is routed through the territory manager, to the area director. Refer to the SB/SE Statute Expiration Reporting Timetable in IRM Exhibit 25.6.1–4, SB/SE Statute Expiration Reporting Timetable (for examination-related activities).

  7. Refer to IRM 25.6.1.13 for case closing procedures once the Form 3999 is approved.

4.8.8.12  (12-06-2013)
Formal and Informal Technical Assistance

  1. Examiners and taxpayers request advice regarding interpretation and proper application of the IRC and related regulation to a specific set of facts for which they want an authoritative response.

  2. Technical Services prepares responses to inquiries of a technical or procedural nature received from taxpayers. Technical Services also responds to requests from within the Service for technical and procedural guidance, though the majority of these requests and responses are made via telephone or e-mail.

  3. The first revenue procedure of each year (i.e., Rev. Proc. 2011-1) provides the conditions under which the Service will rule or issue an opinion regarding the application of tax law to a taxpayer's factual situation. This revenue procedure also sets forth the procedures taxpayers must follow in requesting a ruling letter, an information letter, or determination letter.

  4. The second revenue procedure of each year (i.e., Rev. Proc. 2011-2) provides the conditions under which the Service will issue formal technical advice regarding the application of tax law to a specific taxpayer's factual situation. This revenue procedure also sets forth procedures both taxpayers and Service employees must follow when requesting technical advice.

  5. Technical Services becomes involved either in issuing an information letter or determination letter or in forwarding a request for technical advice. Technical Services also coordinates the submission and receipt of requests for advice from area counsel, as well as requests for field service advice.

  6. The duties described in this subsection may be delegated to two or more area reviewers, as necessary.

4.8.8.12.1  (12-06-2013)
Requests for Advice From Examiners

  1. Examiners and or group managers may informally request assistance. Reviewers should encourage open communication and resolution of a problem with minimum management involvement.

  2. Some area counsel offices have specific attorneys assigned to each area group for informal advice. The appeals/counsel liaison in these areas should maintain a list of the attorney assignments for simple informal advice. Visit http://counsel.web.irs.gov/etools/counsel_irs/pdirectory.asp for a listing of contacts in Counsel.

4.8.8.12.1.1  (12-06-2013)
Informal Assistance From Chief Counsel

  1. Technical Services reviewers may obtain informal assistance from Chief Counsel by telephone to assist examiners with technical inquiries. A current listing of contacts is contained at Chief Counsel's Intranet site at http://counsel.web.irs.gov.

  2. Informal assistance directly from Chief Counsel is not routine. Reviewers should only request Chief Counsel assistance under limited circumstances. Instead, reviewers should request routine assistance from area counsel when needed.

4.8.8.12.1.2  (12-06-2013)
Advice From Area Counsel

  1. Examiners frequently make direct contact with area counsel attorneys. Generally, LB&I and E&G do not direct requests for advice through Technical Services.

  2. Written requests for area counsel advice from examiners and or group managers (other than LB&I and E&G) should be routed through the Appeals/Counsel liaison in Technical Services, who will ensure the pertinent facts are included, adequate research has been performed, and the request for advice is appropriate, given the issue. The Appeals/Counsel liaison will forward the written request to area counsel and maintain a log of such requests for follow-up. See http://mysbse.web.irs.gov/AboutSBSE/Exam/ts/contact/23619.aspx for a listing of liaisons.

  3. When the advice response is received from area counsel, the Appeals/Counsel liaison will forward the original memorandum to the appropriate examiner. At the same time, a copy of the memorandum will be maintained by the Appeals/Counsel liaison. If it appears the issue is relevant to more than a single taxpayer, the Appeals/Counsel liaison may prepare a technical alert or other communication to notify all area examiners of the issue.

4.8.8.12.1.3  (12-06-2013)
Requests for Field Service Advice

  1. Field Service Advice (FSA) is case specific advice provided to examiners by the Associate Chief Counsel. FSA does not represent a final determination of the Service's position, even in the case for which it was requested.

  2. Examiners will contact the Appeals/Counsel liaison to determine if a request for FSA is appropriate. The Appeals/Counsel liaison will review the request for FSA to determine if the request warrants Chief Counsel consideration.

  3. If the request warrants Chief Counsel consideration, if it is factually complete, and if adequate research has been performed, the Appeals/Counsel liaison forwards the request to area counsel. Area counsel will review the request to ensure the issue warrants chief counsel involvement. Once reviewed, area counsel forwards the request to chief counsel.

  4. The Appeals/Counsel liaison will maintain a log of all FSA sent to Area Counsel for follow-up. Specific procedures for requesting FSA are contained in the chief counsel directives manual (CCDM) found at http://counsel.web.irs.gov/deskguide/.

4.8.8.12.1.4  (12-06-2013)
Requests for Technical Advice Memorandum

  1. A technical advice memorandum (TAM) is requested according to formal procedures contained in the second revenue procedure issued each year. This revenue procedure is updated annually, but may also be modified or amplified during the course of the year.

  2. Because technical advice is issued to assist field offices, it is the field office that determines whether to request it. In determining whether to request technical advice, the field office should consider whether other forms of guidance, e.g., published guidance, generic advice, or some other form of advice, would be more appropriate. Before requesting technical advice, however, the field office must request assistance and a recommendation from field counsel.

  3. As noted in IRM 4.8.8.12.1.2, Advice From Area Counsel, above, written requests for area counsel advice are routed through the Appeals/Counsel liaison in Technical Services.

  4. New streamlined procedures have been implemented in the processing of TAM requests. The field examiner and the assigned area counsel attorney will determine if a TAM is warranted. The field examiner will prepare the Form 4463, Request for Technical Advice or Technical Expedited Advice, and all required attachments and forward to the assigned area counsel attorney. The area counsel attorney will forward the request via electronic means directly to the Office of Chief Counsel.

  5. Technical Services role in the TAM process is limited to processing the original written request for area counsel advice. In some instances, area counsel may request additional assistance if necessary.

  6. For complete TAM procedures, please refer to the second revenue procedure of the year (i.e., Rev. Proc. 2011-2) and IRM 4.2.3, Technical Advice to Taxpayers and Examination Personnel.

4.8.8.12.2  (12-06-2013)
Request for Advice From Taxpayers

  1. Any employee who gives advice and assistance to taxpayers should use the following guidelines:

    1. Ensure there is a clear understanding of the facts involved in the transaction under discussion and the applicable principles of law are identified and explained so the taxpayer understands the facts and law as discussed.

    2. Advice should not be given until there is a clear understanding of the facts and applicable law. If the facts are not clear, clarify areas of doubt and request additional information as needed. If the applicable law is not clear, follow through with necessary research to ascertain the correct answer before replying fully to the request.


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