4.8.10  Notice of Determination of Worker Classification (Cont. 1)

4.8.10.9 
Before Issuing the Notice of Deficiency Worker Classification (NDWC)

4.8.10.9.1  (07-31-2012)
Mandatory Area Counsel Review

  1. The cases subject to mandatory Counsel review are as follows:

    1. Burden of proof - Where the Service will have the burden of proof regarding any issue contained in the notice of determination, such as asserting the civil fraud penalty under IRC 6663 or the fraudulent failure to file penalty under IRC 6651(f).

    2. 530 reasonable basis - Where the taxpayer has met the substantive and reporting consistency requirements of section 530 of the Revenue Act of 1978 ("section 530" ), and the disagreement revolves around whether the taxpayer has a reasonable basis.

    3. Predecessor/successor - Where the case involves treatment of workers as employees by a predecessor organization and that treatment is being imputed to the current taxpayer as its successor for section 530 purposes.

    4. $1,000,000 - Where the proposed amount of employment taxes plus penalties total $1,000,000 or more for all periods combined.

    5. Three party arrangements - Where the case involves a three party arrangement in which workers provide services to one party but are paid by another, regardless of which entity is receiving the notice. Temporary employment agencies and professional employer organizations (PEOs) are common examples of this arrangement. While these cases may be difficult to identify upon review of draft notice, often the taxpayer's name (or the third party's name in the case where the notice is being sent to the client but the file indicates a third party arrangement was involved) will include the word "leasing," "staffing," "personnel," or "temporary."

    6. Partnerships - Where the case involves reclassifying workers the taxpayer treated as partners in a partnership, including a limited liability company (LLC).

    7. Criminal - Where the civil case is related to a criminal case.

    8. International - Where the case involves workers performing services outside of the United States or where the notice of determination is issued to a taxpayer not located in the United States.

    9. Governments - Where the notice of determination will be issued to a taxpayer that is a government entity, including an indian tribal government.

    10. Projects - Where the notice of determination is issued as part of a project, including any project with an Issue Management Team (IMT) or Emerging Issue Team project. For example, notices issued as part of the Offshore Employee Leasing (OEL) IMT project.

4.8.10.9.1.1  (07-31-2012)
Area Counsel Recommendations

  1. If Area Counsel suggests changes to the proposed notice of determination, the following actions will be taken:

    1. Area Counsel will provide written directions and guidance on how to perfect the notice of determination, if necessary.

    2. The reviewer will consider Area Counsel's proposed changes and modify the notice as directed, if in agreement.

    3. If the reviewer disagrees with Area Counsel's recommendations, he/she will discuss the case with his/her group manager. The Technical Services group manager will then discuss the case with the Area Counsel attorney to resolve the disagreement.

    4. In order to override Area Counsel's advice, the case file must include a memorandum from the Area Director outlining the reason(s) for not following Area Counsel's recommendations.

  2. All written communications to/from Area Counsel must be kept in the case file.

4.8.10.9.1.2  (07-31-2012)
Area Counsel Review Time Frames

  1. A notice of determination subject to mandatory review must be submitted to Area Counsel with at least 60 days remaining on the statute. If less than 60 days remain, the Technical Services group manager will call the appropriate Area Counsel to advise him/her of the imminent statute case and to coordinate the case review. The case should be hand delivered, if possible. If hand delivery is not possible, the case will be sent via express mail.

  2. Area Counsel will return the case to the Technical Services reviewer within 45 days of receipt. The reviewer will follow-up on any case that has been pending in Area Counsel for more than 45 days and document the results on the reviewer's activity record.

4.8.10.9.1.3  (07-31-2012)
Submitting Cases to Area Counsel

  1. Prepare Form 3210, Document Transmittal, and a cover memo to transmit a case to Area Counsel for review of the NDWC. The memo will include the following:

    1. The taxpayer's name and taxpayer identification number,

    2. The tax period(s) involved,

    3. The earliest statute of limitations date,

    4. The reason for review of the notice of determination,

    5. The reviewer's name and contact telephone number,

    6. The identification of any related cases being submitted for information or related review, and

    7. Any other information the reviewer feels will assist Counsel in the review of the case.

  2. The reviewer should clearly mark the case "priority handling" for any imminent statute.

  3. The reviewer should ensure the case is updated to Review Type 42 and Suspense Code 542 on ERCS to indicate the case is with Area Counsel for review.

4.8.10.10  (07-31-2012)
Signing and Dating the Notice of Deficiency of Worker Classification (NDWC)

  1. IRC 7436 authorizes the Secretary (of the Treasury) to issue a notice of determination by certified or registered mail.

4.8.10.10.1  (07-31-2012)
Signing Notices

  1. Delegation Order 4–26 in IRM 1.2.43.27, Delegation Order 4-26 (formerly DO-251), delegates authority to sign notices of determination to other Service officials.

  2. As it relates to Technical Services, the Technical Services Territory Manager (TSTM) is delegated to sign and issue a NDWC. The TSTM may further delegate this authority to specific individuals within his/her functional area. This is accomplished by way of memorandum, which must be updated periodically for changes in staffing.

  3. Delegated individuals may sign the notices in any of the following ways:

    1. Manually sign the name of the specified official followed by the initials of the delegated signing official.

    2. Imprint the specified official's signature using a signature stamp followed by the initials of the delegated signing official.

    3. Add the initials of the delegated signing official to the machine-imprinted, specified official's signature.

    4. The specified official may personally sign or imprint his/her signature and title using a signature stamp.

    5. For notices produced at correspondence production services print sites, imprint the specified official's signature and title using a machine-imprinting process.

      Note:

      "Signing official" must always be a delegated official pursuant to Delegation Order 4-26. "Specified official" must always be a delegated official pursuant to Delegation Order 4-26 but may, and generally would be, above the organizational level of the "signing official" . The "specified official's signature" is the signature of the individual designated by the particular function (e.g., TSTM), which is issuing the notice of determination, by having his/her signature reflected on the notice as the issuing official.

  4. Signature stamps are locally procured with only the delegated officials having access. Proper security procedures should be used to prevent unauthorized use.

4.8.10.10.2  (07-31-2012)
Dating Notices

  1. Two dates are included on the Letter 3523:

    1. The date the letter is issued - This is the same date the letter is mailed to the taxpayer. See IRM 4.8.10.11.2, Records of Mailing, below.

    2. The last day the taxpayer can file a petition with the Tax Court - This date is 90 days after the notice is issued (150 days if the taxpayer is located outside the United States). See Exhibit 4.8.10-1 for details of how to compute this date.

  2. The reviewer preparing the notice of determination does not complete either of these dates. Both are completed by the person who mails the notice of determination.

4.8.10.11  (07-31-2012)
Disposition of Copies

  1. Notices of determination will generally be prepared in duplicate.

    1. The original, including all statements and attachments, is sent to the taxpayer by certified mail or registered mail (if mailed to a person outside the United States).

    2. A copy is kept in the case file as evidence that the notice of determination was sent to the taxpayer. See Pietanza v. Commissioner, 92 T.C. 729 (1989). The case file is then suspended by the issuing office pending its ultimate disposition.

4.8.10.11.1  (07-31-2012)
Power of Attorney

  1. If a Form 2848, Power of Attorney and Declaration of Representative, is received by Technical Services, the reviewer should check the representative's status as described in IRM 4.11.55.1.2.2, POA Not Authorized to Practice Before the IRS.

  2. If a taxpayer is represented by a duly authorized power of attorney, a copy of the notice of determination mailed to the taxpayer will be sent to the representative by regular mail. Letter 937 (DO), Transmittal Letter for Power of Attorney, is used as the cover letter to transmit the copy of the notice. The enclosure section of the letter should indicate Letter 3523.

  3. If the power of attorney does not cover all periods in the notice of determination, the notice should not be sent to the representative. Instead, Letter 4368, Statutory Notice Not Sent to Representative - Tax Periods Not Specified, should be included with the taxpayer's notice of determination. The letter advises the taxpayer why a copy of the notice was not sent to the representative identified on Form 2848. If Form 2848 does not include all periods and a subsequent Form 2848 is submitted by the representative, a new page 2 must be signed by the taxpayer.

  4. Document the case activity record (Form 9984 or equivalent) for any actions taken regarding the power of attorney that may appear to be in conflict with the Form 2848 instructions, including but not limited to:

    • If a copy of the notice of determination is not sent to the representative because the Form 2848 does not cover all years included in the notice.

    • If a copy of the notice of determination is sent to the representative but the Form 2848 (pre-March 2004 revision) specifies the original is to be sent.

4.8.10.11.1.1  (07-31-2012)
Unenrolled Return Preparer

  1. Under Circular 230, Regulations Governing Practice before the Internal Revenue Service, and Treas. Reg. 601.502(b)(5)(iii), an unenrolled return preparer may only represent a taxpayer in the examination process for the tax year or period covered by returns the unenrolled return preparer prepared. An unenrolled return preparer may not represent a taxpayer beyond the examination process.

  2. A copy of a notice of determination cannot be sent to an unenrolled return preparer, even if authorized to receive such notice, since they cannot represent the taxpayer beyond the examination process.

  3. Letter 4369, Statutory Notice Not Sent to Representative - Limitations to Practice Before the IRS, will be sent to the taxpayer with the NDWC to notify him/her that a copy of the notice of determination was not sent to the unenrolled return preparer.

4.8.10.11.2  (07-31-2012)
Records of Mailing

  1. Each Technical Services Territory Manager must maintain a record of the dates the notices were mailed since:

    • The validity of the date of notice could be challenged by the taxpayer.

    • The Tax Court does not have jurisdiction over a case when the taxpayer files a petition after the 90th day (150th day, if the notice is addressed to a taxpayer outside the United States) or, if later, the date shown on the notice as the last day to file the petition.

    • The Commissioner has the burden of proof in establishing the date of mailing.

  2. The record of certified and registered mailing is maintained on PS Form 3877, Firm Mailing Book for Accountable Mail, together with the certified/registered mail numbers, which are supplied by the United States Postal Service.

    1. Across the first line of each form, type the following or use a stamp to imprint: "Notices of Determination, for the tax periods indicated, have been sent to the following taxpayers:"

    2. The certified/registered mail number is entered along with the name and address of the addressee. Multiple addresses are entered separately.

    3. In the "Remarks" column, enter the tax periods to which the notice is applicable.

    4. The designated employee will stamp the front of the notice envelope with:

      Certified Mail No.
       
      Or
       
      Registered Mail No.

    5. The certified/registered number will be entered next to the stamp on the envelope.

    6. The notices and the PS Form 3877 are taken to the Post Office. The Post Office employee will compare the count and numbers used with the envelope notices.

    7. The Service employee will indicate delivery to the Post Office by signing and dating PS Form 3877 as part of the permanent record of mailing. The Post Office employee will insert the postmark on the PS Form 3877.

    8. The receipted forms will be numbered consecutively and retained in separate folders for a period of 10 years. These receipted forms are kept with the receipted forms for statutory notices of deficiency but should never be commingled with any other mailing records.

4.8.10.11.3  (07-31-2012)
Consequences of an Incorrectly Mailed Notice

  1. If the notice is incorrectly addressed and/or mailed:

    1. The taxpayer may raise a challenge that the notice does not conform with statutory requirements.

    2. A notice may be held to be invalid if not mailed to the last known address or if it is not mailed by certified or registered mail, as required. Furthermore, a notice that is mailed outside the United States by certified mail rather than registered mail may also be held to be invalid.

    3. If the notice is invalid and the assessment statute has expired so that no valid notice can be issued, any assessment based on a notice cannot be made and, if made, should be abated.

4.8.10.12  (07-31-2012)
Notice of Determination of Worker Classification Suspense Files

  1. Notice of determination cases are suspended 105 days (165 days for taxpayers outside the U.S.) to await taxpayer correspondence, agreement, or notification of a petition with the U.S. Tax Court. The suspense period is comprised of 90 days (150 days for taxpayers outside the U.S.) plus an additional 15 days to determine if a petition was filed with the U.S. Tax Court.

  2. When a case is received for suspense, the proper ERCS codes should be input. The status code will be updated to Status Code 24, ERCS Review Type 38, and ERCS Suspense Type 538.

  3. Each case file will be marked with either the issue date or the default date of the notice of determination.

  4. The case files are then filed by issue date or default date. Within these dates, the cases are filed either alphabetically by taxpayer name or numerically in TIN order. All related returns should remain together filed under the primary entity name or TIN.

  5. On a monthly basis, the suspense inventory should be reconciled to ensure all returns are where they should be. This can be accomplished through the use of the Inventory Listing Report or the Status Report in ERCS.

  6. The Inventory Listing Report can generate a complete inventory list, including returns assigned to employees. This report can also generate a partial inventory list of overage cases based on the number of days since the date in review.

  7. The Status Report generates a list of returns in a single user entered status code. The report can be generated for any review status code, including Status Code 24.

4.8.10.12.1  (07-31-2012)
Updating the Assessment Statute Expiration Date

  1. Upon issuance of a notice, a case is updated to Status Code 24 and the statute of limitations is recomputed to reflect the maximum tack on time permitted by law for assessment (i.e., as if the notice defaults - 90 or 150 days, plus 60 days for processing). Generally, Exhibit 4.8.10-2, Defaulted 90 Day Letter Without Form 872-A or SS-10 Consent, should be used as a guide to recompute the assessment statute of limitations. Form 5348 should be prepared to update the recomputed statute.

  2. If an agreement is received before the end of the 90 Day (150 Day) period, the statute should be recomputed a second time. Agreed cases should be a high priority item and closed as soon as possible to avoid having a barred assessment statute. Exhibit 4.8.10-2, Agreement Cases with/without Form 872 or SS-10 Consent, (whichever is applicable) should be used as guidance to recompute the final assessment statute. Form 5348 should be prepared to update the recomputed statute.

  3. If a case is petitioned, the statute should remain as the updated assessment statute noted in paragraph 1 above. Under no circumstances will the ASED for a petitioned case be updated back to the original statute.

4.8.10.12.2  (07-31-2012)
Statute Controls

  1. The Statute Expiration Reports in ERCS allows the user to print statute expiration notices and create reports to check for pending statutes. Two reports included within the Statute Expiration Reports are:

    1. Pending Statute Report - Returns are included on this report if the statute expires within the user entered number of days.

    2. 895 Report - Returns are included on this report if the statute expires within the specific number of days set by SB/SE or LB&I. For Technical Services users, the number of days must be in the range 180 to 400. The same number is used in determining if a Form 895 should be generated.

  2. The Pending Statute Report lists returns with numeric statute expiration date falling within a variable number of days as entered by the user. This report is useful in calling attention to returns with short statutes and determining if a Form 895 should be issued. The report also has a section containing a summary of employees with returns with short statutes.

  3. The 895 Report generates a listing of returns in review statuses which meet any of the following criteria:

    • The statute date expires within the number of days determined by the area office or by LB&I,

    • The statute date is an alpha date (e.g. 04CC2009),

    • The statute date is a Form 872-A, Special Consent to Extend the Time to Assess Tax,

    • The statute date has already expired, or

    • A Form 895 has been issued for the return.

    Note:

    ERCS includes a return on the 895 Report based on the actual statute date if the statute is numeric. This means if the statute has been extended, the extended date is used to determine if the return should be on the report. If the statute has been changed but not approved, the earlier of the prior statute or the current statute is used.

  4. Technical Services should review the Pending Statute Report on a weekly basis during peak times (January through April) and bi-weekly during the rest of the year. Suspense personnel should ensure that all cases with notices of determination are properly in Status Code 24 and have updated ASEDs, as previously discussed.

  5. Identify and monitor as a "Statute Case" as follows:

    If less than 120 days left on Then the case is a "Statute Case" and
    original ASED prior to issuance of Notice of Determination of Worker Classification, it must have the notice letter issued on or before the original ASED.
    revised ASED after issuance of notice of determination, it must be assessed on or before the revised ASED.

4.8.10.12.2.1  (07-31-2012)
AIMS Table 4.0

  1. AIMS 4.0 Table is generated monthly and provides:

    1. A report a list of all returns by status for which the statute of limitations will expire in 180 days or less.

    2. A listing of returns with expired statutes.

  2. Each Technical Services group, including the notice of determination suspense unit, is expected to reconcile the 4.0 Table with the ERCS Statute Pending Report on a monthly basis. The group should:

    1. Run the ERCS Statute Pending report and the 895 report on the AIMS Cycle cut-off date (Doc. 6036).

    2. Work the Table 4.0 report within 10 days of receipt. Once the table is worked, it should be signed and dated by both the manager and the employee designated to work the table.

  3. Instructions for working the 4.0 Table are contained in IRM 4.4.27.5.1.1, Procedures for Working Statute Control Report. At a minimum, the following should be completed:

    • Research the listing on AIMS to eliminate those accounts which have been closed or transferred out.

    • Compare AIMS and ERCS. If AIMS and ERCS do not match, the location of the physical case should be determined and the status code should be updated on the appropriate system.

    • Place a "C" in front of the taxpayer's name if a case has been closed.

    • Place a "T" in front of the taxpayer's name if a case has been transferred,

    • Notify the manager having custody of cases of the early statute date.

    • Identify and verify first statutes expiring within 30 days.

    • Locate the return/case file for each account appearing for the first time. Place an "R" in front of the taxpayer's name to indicate that the return has been located.

    • Follow established missing return or case file procedures if research shows that the return or case file is missing.

    • Perform monthly managerial review of statute controls after staff reconciliation.

    • Sign and date 4.0 Table in red. The manager and the employee designated to work the 4.0 Table are both required to sign.

    • Retain the table for two years.

    Reminder:

    All corrections and notations on the 4.0 Table must be in red.

4.8.10.12.3  (07-31-2012)
Taxpayer Contact

  1. While the case is in suspense, the taxpayer may:

    1. Make telephone contact

    2. Send in correspondence

    3. Submit additional information

    4. Request reconsideration

    5. Appear in person for further discussion

  2. Any communication with the taxpayer regarding notices of determination should clearly state that reconsideration of the case will in no way serve to suspend or extend the 90 day or 150 day period in which a petition may be filed with the United States Tax Court.

  3. If the taxpayer's representative calls or comes in to discuss the taxpayer's account, a valid Power of Attorney (POA) or Tax Information Authorization must be in the file or no information may be furnished. A request may be made to the taxpayer to obtain a completed POA. Without a POA on file, a general explanation of the notice of determination procedures may be provided.

  4. It is imperative that all contacts with the taxpayer or power of attorney be documented on the reviewer's activity record.

4.8.10.12.3.1  (07-31-2012)
Telephone Contact

  1. When telephone contact is made, the designated contact person will:

    1. Obtain the taxpayer's name, TIN, and issue date of the notice,

    2. Pull the case file,

    3. Answer routine questions, and

    4. Refer technical questions to the designated notice reviewer.

  2. Inform the taxpayer that the Notice of Determination gives them three options:

    1. The right to petition the United States Tax Court,

    2. The right to contact the Taxpayer Advocate Office, and

    3. The right to agree with the tax deficiency by signing the waiver.

  3. If the taxpayer does not agree, but does want to stop the continuation of interest, he/she may make a deposit under IRC 6603. Revenue Procedure 2005-18, IRB 2005-13, provides that the payment must be accompanied by a written statement designating the remittance as a deposit (known as a "IRC section 6603 Deposit" ).

  4. It is imperative that all telephone contacts are documented in the case history, and a copy of any written documentation received is placed in the case file.

4.8.10.12.3.2  (07-31-2012)
Correspondence Received

  1. When correspondence is received, the designated contact person will:

    1. Date stamp the correspondence,

    2. Pull the case file, and

    3. Route the case to the designated notice reviewer for technical review.

  2. Letter 556 (DO), Acknowledgement of Protests, Correspondence and Requests for Interviews, may be used to acknowledge receipt of the correspondence if the taxpayer is not contacted by telephone.

  3. The taxpayer must be clearly informed that reconsideration of the case will not suspend or extend the period for filing a petition with the U.S. Tax Court.

  4. The reviewer may determine that the case should be sent back to the originating examination group for consideration of additional information.

  5. If the case is returned to the group, follow the procedures outlined in IRM 4.8.10.12.3.4 below.

    Note:

    Any time a case is pulled from the notice suspense file and transferred to a reviewer, the employee code on ERCS is updated. This is an important step in order to keep track of all cases. The case is still maintained in Status Code 24 unless or until it is forwarded out of Technical Services. If the case is returned to the group it is sent back in Status Code 12 and a "dummy" file is prepared to enable the 90 day suspense personnel to monitor the case for either default or petition.

  6. All contacts and actions taken on the case after the Notice of Determination is issued must be recorded in the case file.

4.8.10.12.3.3  (07-31-2012)
Additional Information or Appointment Requested

  1. When the taxpayer submits additional information or requests an appointment, the designated contact person will:

    1. Route the case back to the designated notice reviewer to determine the appropriate course of action,

    2. Annotate the date, action taken, and who initiated the action on both the control card and the statute control card files, and

    3. Update the appropriate ERCS employee code when the case is sent out of the 90 day Suspense area.

  2. All 90 day cases should be returned to the 90 day suspense area for final disposition.

    IF THEN
    Agreement received, 1. Close all notice controls,
    2. Update statute, and
    3. Forward for assessment.
    No agreement received, 1. Suspend awaiting default,
    2. Follow default procedures if default date has passed, and
    3. Follow petition procedures if a petition is filed.

4.8.10.12.3.4  (07-31-2012)
Case Returned to the Group

  1. If the designated notice reviewer determines that a case should be returned to the group for consideration of the correspondence and/or information received, the reviewer will prepare a Form 3990, Reviewer's Report, to transmit the case to the group. The Form 3990 should instruct the group to return the case to Technical Services as soon as their reconsideration is complete or prior to the default date. The Form 3990 should also instruct the group that the taxpayer must be informed during each contact (both verbal and written) that reconsideration does not suspend or extend the time to file a petition with the United States Tax Court.

  2. Because the assessment statute expiration date (ASED) has already been updated to reflect the maximum assessment date (based on a default), the group must be cautioned about the statute, particularly for those cases for which the notice was issued with little time remaining on the normal statute.

  3. The Form 3990 should include a detailed explanation of the ASED shown on the AIMS/ERCS system. The following sample paragraphs may be used for this purpose:

    "The notice of determination issued to the taxpayer is enclosed in the file for your information. Please do not disturb, destroy, or alter the notice. It should remain on the front of the case file when the case is closed from the group after the reconsideration. Refer to IRM 4.10.8.7.1, 90-Day Pre-Assessment Cases, for the applicable procedures to follow for the audit reconsideration.

    CAUTION REGARDING THE ASSESSMENT STATUTE: If the taxpayer neither agrees nor petitions the Tax Court by the last date to file a petition shown on the notice of determination in the case file, then the last day for assessment of the additional tax shown on the notice of determination is mm-dd-yyyy. AIMS/ERCS has already been updated to reflect this date.

    If the taxpayer signs an agreement prior to the last day to file a petition shown on the notice of determination, then the 90 or 150 day period stops and the assessment statute is suspended from the date the notice was issued until the date the agreement is received by the Service plus an additional 60 days for the assessment to be processed. Therefore, if the taxpayer signs an agreement form during the audit reconsideration, it is important to return the case promptly to Technical Services so the assessment can be made prior to the expiration of the suspended statute of limitations. See Exhibit 4.8.10-2 for additional information."

  4. After the Form 3990 is prepared, the case file and Reviewer's Report should be given to the Group Manager for signature.

  5. Once the manager approves the Reviewer's Report, the case should be given to the notice suspense unit for preparation of a "dummy file" . This file is used as a back-up in the event it becomes necessary to make an immediate assessment and is filed in the suspense files. The file should include:

    1. A copy of the tax return,

    2. A complete copy of the notice of determination,

    3. A copy of the most recent Form 5344, and

    4. A copy of the Reviewer's Report transmitting the case back to the group.

  6. Once the group has completed work on the case, it should be returned directly to the reviewer. The notice reviewer is responsible for notifying the taxpayer of the final outcome of the reconsideration via Letter 555-T, Reconsideration After Statutory Notice, or Letter 645-T, No Change - After Statutory Notice Issued.

  7. The reviewer will then return the case to the notice suspense unit to either close the case if agreed or no-changed, or to continue suspending the case if the 90 day (150 day) suspense period has not expired. The notice suspense unit will destroy the dummy file when the original case file has been returned, ensuring that the original notice of determination still remains with the case file.

4.8.10.12.3.5  (07-31-2012)
Taxpayer Requests Transfer of 90 Day Letter Case

  1. If the taxpayer requests transfer of a NDWC to another area, the area that issued the notice may transfer the case.

  2. Associate the correspondence with the case file and forward the file to designated notice reviewer to approve and provide instructions.

  3. Technical Services staff will update ERCS for the transfer per the reviewer's instructions and mail the case via Form 3210, Document Transmittal.

4.8.10.13  (07-31-2012)
Undeliverable Notice of Deficiency of Worker Classification (NDWC)

  1. A notice of determination forwarded by certified mail and returned by the U.S. Postal Service because the addressee has moved and left no forwarding address, is considered undeliverable.

  2. A notice returned by the U.S. Postal Service stamped "unclaimed" or "refused" is generally not considered undeliverable. These cases will be referred to the designated technical person.

  3. Any time a notice is returned undeliverable or unclaimed, a determination of the taxpayer's correct address will be made. Documentation of the research is required to be maintained in the case file.

  4. The following procedures are performed for undeliverable notices. Also, see IRM 4.10.2.7.2.1, Undeliverable Initial Contact Letters.

    1. Date stamp the returned envelope and associate the undeliverable notice with the case file.

    2. Check the envelope for a change of address annotated by the U.S. Postal Service.

    3. Check all addresses on all notice of determination letters issued. Often, multiple duplicate original notices were issued to more than one address.

    4. Check the telephone and/or city directory addresses to confirm the address.

    5. Research for a new address using in-house address information and outside locator services.

    6. Print INOLES and check the file to determine that the notice was correctly addressed to the last known address of the taxpayer. If the INOLES address is the same as the one used on the Letter 3523, a copy of the INOLES should be stapled to the bottom of the top page of the letter and the case should be returned to the notice suspense unit. If the INOLES address or the address from research in (b) through (e) above is different than the one used on the Letter 3523, the case should be returned to the designated notice reviewer to determine if the letter should be reissued.

  5. The following procedures are performed for unclaimed or refused notices:

    1. Date stamp the return envelope and associate the unclaimed or refused mail with the case file.

    2. Check the envelope for a change of address annotated by the U.S. Postal Service.

    3. Print INOLES and recheck the file to determine that the letter was correctly sent to the last known address of the taxpayer.

    4. Print a copy of the INOLES and staple it to the bottom of the top page of the letter and return the case to suspense if the address is the same on the INOLES as the notice.

    5. Return the case to the designated reviewer for re-issuance if the address is different on INOLES and the address was updated before the issuance of the notice. If sufficient time does not remain on the statute of limitations to reissue the notice, then upon expiration of the suspense period, the deficiency will be assessed by default (absent a petition or an agreement).

  6. Based on the information secured using the above process steps, either reissue the notice, as specified below, or allow it to default.

4.8.10.13.1  (07-31-2012)
Internal Address Information

  1. Review the AIMS Weekly Update Report for possible address changes. Codes 18 and 19 show new addresses updated to Master File.

  2. Request CFOL and IDRS research on both the business TIN and the individual SSN (for unincorporated businesses) using command codes INOLES, SPARQ, IRPTRO, BMFOLE/IMFOLE, ENMODA, and TELER (taxpayer's telephone number) to call the taxpayer.

  3. Contact Collection (Insolvency function) if the taxpayer is in bankruptcy.

4.8.10.13.2  (07-31-2012)
New Address Found

  1. If a new address is obtained that was changed on IDRS prior to the issuance of the original notice and there is sufficient time remaining on the regular assessment statute, the notice of determination should be reissued. The period in which the taxpayer may petition the Tax Court starts with the date the new notice of determination is mailed.

  2. If a new address is obtained that was changed on IDRS subsequent to the issuance of the original notice, the notice of determination should be re-mailed.

    1. The envelope in which the letter was originally mailed and the notice of determination itself must be closed with the case file.

    2. The envelope, letter, and research performed will be part of the notice of determination. This documentation will establish that the Service complied with the law and mailed the notice by certified or registered mail to the taxpayer's last known address.

4.8.10.13.3  (07-31-2012)
Unable to Locate Taxpayer

  1. The address on Master File will be considered the taxpayer's last known address if the taxpayer cannot be located or a new address is not provided or verified by the taxpayer. If research shows no later address, the envelope in which the letter was originally mailed and the notice will be securely stapled in the taxpayer's file as evidence that the Letter 3523 was sent by certified or registered mail to the taxpayer's last known address. However, the case should not be defaulted until the 105 day or 165 day suspense period has ended.

4.8.10.14  (07-31-2012)
Protests Received After Issuance of the Notice of Deficiency of Worker Classification (NDWC)

  1. If a protest is received, the designated notice reviewer will review the protest to determine if it is sufficient. The reviewer will also coordinate with the Appeals office to determine if Appeals will accept the case file for consideration given that a notice of determination has already been issued. This is particularly important for cases with less than 180 days remaining on the ASED. See IRM 4.10.8.11, Unagreed Case Procedures: Preliminary (30-Day) Letters.

  2. For other correspondence, the designated reviewer will determine what necessary action should be taken, if any, and will communicate this determination to the taxpayer and/or representative.

4.8.10.14.1  (07-31-2012)
Delinquent Return Secured

  1. If the taxpayer in a non-filer case provides a completed tax return after the notice of determination is issued, treat the return as "substantial documentation" and follow normal examination reconsideration procedures. This applies whether or not an assessment has been made (TC 290 or 300), unless a petition has been filed with the Tax Court.

  2. If a petition has been filed with the Tax Court, the delinquent return will be transmitted to the appropriate Appeals Office that serves the Area making the determination of the tax liability.

  3. The statute of limitations must be updated to correctly reflect the receipt of the delinquent return.

4.8.10.15  (07-31-2012)
United States Tax Court Petition Filed

  1. A petition is a taxpayer's request to the Tax Court for a redetermination of the deficiency or amount of tax. A petition for a notice of determination must be filed within 90 days (150 days if addressed to a person outside the United States) of the date the notice was issued.

  2. A docketed case is a tax case assigned a docket number in the U.S. Tax court. These cases include petitions filed in response to:

    1. Notices of deficiency,

    2. Final adverse determination letters (including notices of determination), and

    3. Final partnership administrative adjustments.

  3. A regular case is a tax case with a deficiency or amount of tax of more than $50,000 (including deficiency, tax, and penalties) for any one taxable period.

  4. Taxpayers may elect to have their case conducted under the Court's simplified small tax case or "S" case procedures. Trials in small tax cases are generally less formal and result in speedier disposition. However, decisions entered pursuant to small tax case procedures cannot be appealed. Taxpayers may elect small tax case procedures for tax disputes involving $50,000 or less (including tax and penalties) for any one taxable period.

  5. Technical Services notice suspense units are responsible for monitoring the docket list to determine if a petition is filed in response to a notice of determination. If a petition is filed, the case must be located, processed for closing and transmitted to Appeals within ten (10) calendar days of the receipt of the docket list.

4.8.10.15.1  (07-31-2012)
Petition Mailed to IRS Office

  1. Occasionally, the taxpayer or representative mails a petition to the IRS, specifically to the office that issued the notice of determination (e.g., Technical Services), rather than to the U.S. Tax Court.

  2. If the petition is received before the expiration of the 90 day (150 day) period, the petition should be mailed by Technical Services to the Tax Court using regular mail that is postmarked on or before the 90 day period expires. The petition should be sent under cover of transmittal Letter 4370, Petition Transmitted to the US Tax Court, to the Tax Court. The taxpayer should be sent Letter 4371, Petition Forwarded to the Tax Court, to inform him/her the petition was forwarded.

  3. If Technical Services receives the petition past the 90 day (150 day) period (even if the petitioner's envelope is postmarked before the 90th or 150th day) or it cannot be postmarked by the IRS prior to the expiration of the 90 day (150 day) period, Technical Services will return the petition to the taxpayer indicating that the document was mistakenly mailed to the wrong address. Letter 4372, Petition Returned to the Taxpayer, is used for this purpose.

    Example:

    If Technical Services receives a petition on the 90th (150th) day, but by the time it is processed through the clerical staff, the 90th (150th) day has expired, the petition will be returned to the taxpayer.

  4. Technical Services should not forward a petition to the Tax Court if the 90 day (150 day) period has already expired.

4.8.10.15.2  (07-31-2012)
Importance of Timing

  1. The United States Tax Court requires the filing of an "answer" by the Commissioner of Internal Revenue in all docketed cases.

  2. Employees responsible for monitoring the docket list must be aware of and take all necessary actions to ensure Counsel receives docketed administrative files with sufficient time remaining to meet the due date established by the U.S. Tax Court to answer the petition.

  3. The "answer due date" , or the time within which the petition must be answered, is set by the Tax Court at sixty (60) days from the date the petition is served on the IRS. The answer due date for small tax case petitions is the same as it is for regular tax case petitions.

  4. Counsel needs time to prepare its answer, therefore Appeals must ensure the cases are received in Counsel no later than twenty (20) days prior to the answer due date.

  5. In order to meet these time frames, it is imperative that Technical Services employees timely identify, locate and process petitioned cases to the appropriate Appeals office.

4.8.10.15.3  (07-31-2012)
Identifying Petitioned Cases

  1. The docket list is a list of cases docketed by the U.S. Tax Court.

  2. Once a petition is received by the Tax Court, it is given a number, processed and then served on the IRS.

4.8.10.15.3.1  (07-31-2012)
Tax Litigation Counsel Automated Tracking System

  1. After the Tax Court serves the taxpayer's petition(s) to the Commissioner, the docket list is established by the Docket and Records Branch, Legal Processing Division, in the Office of the Associate Chief Counsel (Procedures and Administration) directly on the Tax Litigation Counsel Automated Tracking System (TLCATS). Once entered on TLCATS, the petitions and files are mailed to the assigned Appeals offices. Additionally, a hard copy of the list is e-mailed as an attachment to employees in the various operating divisions/functions who are members of an e-mail distribution list maintained by Counsel.

  2. The hardcopy docket list shows:

    • Docket list number

    • Date list prepared by Counsel

    • Date petitions served on IRS

    • Docket number for each case

    • Notice date (date of notice of determination)

    • Taxpayer(s) name, address, and TIN(s)

    • Years petitioned

    • Postmark date

    • Source of notice, if known (office that issued)

    • Appeals office

    • Area Counsel office

  3. In addition to creating and distributing the hardcopy docket list by e-mail, Counsel also posts the docket list as a file to a server.

  4. The hardcopy docket list is one method of identifying taxpayers who have filed petitions to the U.S. Tax Court.

  5. One advantage of the hardcopy docket list is the speed of delivery. The docket list is usually generated within one or two business days of when the petitions are received. Since the list is then disseminated via e-mail to the users on the distribution list, it is received no more than three (3) business days from the petition's receipt.

  6. One disadvantage of the hardcopy docket list is that the list includes the petitions for all Areas that are in docket number order only. Therefore, all users get the same listing and must go through each page to locate the petitions for the cases they control or need to locate.

  7. For more detailed information concerning TLCATS, refer to IRM 30.7.1, Management Systems; Information Systems.

4.8.10.15.3.2  (07-31-2012)
Docketed Information Management System

  1. The Docketed Information Management System (DIMS) is an automated Appeals program similar to the docket list.

  2. Appeals downloads the docket list file from the server and posts it on its automated system, DIMS, a sub-system of the Appeals Centralized Database System (ACDS).

  3. The DIMS system is available to both Appeals and non-Appeals employees responsible for issuing and monitoring notices or letters containing Tax Court rights. Access to DIMS is obtained through the Online 5081 process.

  4. The DIMS system listing is another method of identifying taxpayers who have filed petitions to the U.S. Tax Court.

  5. One advantage of the DIMS system over the hardcopy docket list is that users are able to print either the entire list or sort the list so that it contains only the cases they control or need to locate.

  6. One disadvantage of the DIMS system is that it is produced after the hardcopy docket list.

  7. For more detailed information concerning DIMS, refer to IRM 8.4.1, Appeals Docketed Cases, Procedures for Processing and Settling Docketed Cases.

4.8.10.15.3.3  (07-31-2012)
U.S. Tax Court Website

  1. The last method of identifying docketed cases is through the U.S. Tax Court website (http://www.ustaxcourt.gov). This method is used for 90 day (150 day) cases that are not otherwise identified as petitioned on the hardcopy docket list or the DIMS list. These cases would be defaulted and processed for assessment. Before the cases are closed to Centralized Case Processing, each defaulted taxpayer is checked against the taxpayer database on the Tax Court website.

  2. On the website's home page, select the tab titled "Docket Inquiry."

  3. The Docket Inquiry screen allows the user to search by docket number, individual party name, or corporate name keyword. Since this method is used primarily as a safe guard for defaulted cases, the docket number is usually not known.

  4. The Docket Inquiry page also has a Docket Inquiry Help link that will provide information on how to use the search functions. The help resource does not provide a topical search database. It merely provides general information on how to use each of the three search functions.

  5. The Individual Party Name search page asks for the taxpayer's last name, first name, middle initial, and state code.

  6. The Corporate Name Keyword asks for at least one keyword. The page also includes a link to a list of excluded keywords that cannot be used in the keyword search.

  7. Docket records are available on the website for cases filed on or after May 1, 1986. The docket entries are updated Monday through Friday at approximately 6:00 p.m.

  8. The advantage to this method is that it ensures the most diligent search possible and helps to prevent a situation in which Technical Services must re-establish a closed case because a petitioned taxpayer is untimely identified.

  9. The disadvantage to this method is that it requires a direct search by taxpayer name, and each individual taxpayer must be searched separately.

4.8.10.15.4  (07-31-2012)
Processing Petitioned Cases

  1. Technical Services Notice Suspense Unit personnel are expected to use the DIMS generated docket list to pull up docketed case lists in numerical (and consequently, chronological) order. DIMS is the preferred method because users can sort the list so that it contains only the cases they control or need to locate. This, in turn, reduces the overall time needed to identify petitioned taxpayers.

    1. While the use of DIMS is required, Technical Services personnel may also use the hardcopy docket list and/or the Tax Court website.

    2. Using multiple methods to identify petitioned taxpayers increases Technical Services' ability to identify all petitioned cases. This helps prevent the need to re-establish prematurely closed cases where Technical Services was notified of the petitions after the cases defaulted.

  2. Upon retrieval, the docket list will be date stamped.

  3. Determine the taxpayer(s) who have filed petitions. Perform research on all taxpayers containing the unique office code, as well as those with "unknown" office codes.

  4. The "unknown" cases are taxpayers without a pre-determined Area office code. Research should be conducted to determine which office these taxpayers are assigned to.

  5. Within ten (10) calendar days of receiving the docket list, the cases must be located, processed for closing and transmitted through Technical Services to the Office of Appeals.

    1. Notice Suspense Unit personnel will locate the case file, close out all controls, and forward the case file to the appropriate office. The docket list will be annotated to indicate the specific action taken on the case and the date.

    2. If a case has been transferred to another area, notify that area or the transfer, and give them the date the petition was filed, the name of the petitioner, and the year(s) involved. A copy of the docket list page identifying the taxpayer and the tax year(s) should be forwarded to the area where the case was transferred.

    3. If it is determined that the case is physically located in another area or campus, telephone the office having physical possession of the case to inform them that the taxpayer has petitioned the Tax Court. The docket list number and petition date must be provided.

  6. After closing the case, it must be forwarded immediately to Appeals (hand carried whenever possible) to obtain immediate acknowledgement of the transmittal, via Form 3210.

  7. At the end of each month, the Form 3210 tickler file will be reviewed and follow-up actions must be taken on any Form 3210 for which Part 4 has been outstanding for 30 days or more. This is done to determine whether the cases were received by Appeals and/or to determine why Part 4s were not returned.

  8. When the Appeals acknowledgment copy is received, destroy the tickler file copy and replace it with the Appeals acknowledgment copy. The Appeals acknowledgment copy will be kept for one year from the date of receipt.

4.8.10.15.5  (07-31-2012)
Unlocatable Case Files

  1. If the case cannot be physically located within three days of receipt of the docket list, prepare Form 5348, AIMS/ERCS Update (Examination Update), to input Freeze Code "Q" on AIMS. Any area attempting to update the status of the "Q" freeze coded case will forward the case to Technical Services' suspense file area upon notification of the freeze code. When the case is located, reverse the "Q" freeze code via a Form 5348.

4.8.10.15.6  (07-31-2012)
Status 90 Cases

  1. Occasionally, a case appearing on the docket list has already been defaulted, tax assessed and closed out to the Campus file area. AIMS research will indicate Status Code 90. If this occurs, Technical Services is responsible for preparing Form 3177, Notice of Action for Entry on Master File, to input CC STAUP (15 cycles) to prevent the issuance of balance due notices to the taxpayer.

  2. When a docketed case that is in AIMS Status Code 90 is identified, a current printout of a full AMDISA or TXMOD must be secured. This printout will be attached to a copy of the appropriate page of the docket list and will be forwarded to Appeals via Form 3210. Appeals will also be notified that the STAUP has been input to stop the notices. APPEALS WILL BE RESPONSIBLE FOR MONITORING THE STAUP TO INCREASE/DECREASE THE NOTICE SUPPRESSION TIME FRAME AND FOR RETRIEVAL OF THE CASE FILE FROM CAMPUS.

  3. Examination must build a file that will include:

    1. Full AMDISA and TXMOD prints of all docketed tax periods;

    2. A copy of the page in the docket list identifying the taxpayer, tax periods, docket number and Appeals Office;

    3. Photocopy of the closed control card showing the date the notice was issued; and

    4. Form 5348 requesting CC AMSTUR, Status Code 24.

  4. If no data is available, the file will include:

    1. TXMOD and/or MFTRA print of the docketed tax periods which verify the TIN and reflects an examination closure,

    2. Record of CC AM 424 request to create an AIMS database, and

    3. A copy of the page on the docket list identifying the taxpayer, tax periods, docket number, and Appeals Office.

  5. The file will be sent to the closing function for suspense until 40 days before the Status Code 90 date.

  6. At the end of the 40-day period, the closing function will:

    1. Re-establish the case using Form 5348, CC AMSTUR,

    2. Prepare Form 5344, Examination Closing Record, to close the return to Appeals. Since the examination results contain the now unagreed to assessment, an amount of $1 must be entered in Item 18 to prevent a duplication of examination results.

    3. Route the AIMS print, verifying Appeals status, to Appeals for association with the file.

    4. APPEALS WILL REQUEST ABATEMENT OF THE ASSESSMENT.

4.8.10.16  (07-31-2012)
Defaulted Notices

  1. It is the responsibility of Technical Services to take the necessary actions to ensure the assessment of the underpayment on any defaulted notice of determination is made within the statutory period for assessment.

  2. If the taxpayer does not petition the Tax Court or agree to the underpayment within 90 days (150 if addressed to a person outside the United States), the case is considered to be defaulted. The underpayment is to be assessed immediately after the requisite number of days (105 or 165) have passed from the date of the issuance of the notice.

  3. Assessment of the underpayment on any defaulted case must be made within the statutory period. Per Treas. Reg. 301.6503(a)-1, the period of limitation on assessment and collection of any deficiency (or in this case, proposed assessment on notice of determination) is suspended for 90 days (150 days, if addressed to a person outside the United States) after the mailing of a notice of such deficiency (or in this case, notice of determination) plus an additional 60 days thereafter. Do not count Saturday, Sunday, or a legal holiday in the District of Columbia as the 90th day.

  4. Close out all controls and forward the defaulted case for closure to Centralized Case Processing (CCP) in Status Code 51.

Exhibit 4.8.10-1 
Computation of Last Day to File a Petition with United States Tax Court and Computation of Default Date

Computation of Last Day to File a Petition with United States Tax Court

Description Julian Date Calendar Date
Notice of Determination Issued    
Plus 90/150 days +_____ +_____
for 90/150 day letter    
Equals Last Day to File a    
Petition with Tax Court    
  ======== ========

Note:

Saturday, Sunday or a legal holiday in the District of Columbia is not counted as the last day.

Computation of Default Date

Description Julian Date Calendar Date
Notice of Determination Issued    
Plus 90 (150) days    
for 90 day letter + +
Plus 15 days for Notification of    
Tax Court Petition +_____ +_____
Equals Default Date ======== ========

Exhibit 4.8.10-2 
Assessment Statutes:
Agreed Case Without Form 872-A or SS—10 Consent
Agreed Case With Form 872-A or SS-10 Consent
Defaulted 90 Day Letter Without Form 872-A or SS-10 Consent
Defaulted 90 Day Letter With Form 872-A or SS-10 Consent

Agreed Case Without Form 872-A or SS-10 Consent: If the taxpayer agrees to the tax before the end of the 90 days, then the statute is extended by the number of days suspended plus 60 days.

Description Julian Date Calendar Date
Date Agreement is received 80 March 21
Minus date 90/150 day letter is issued − 15 January 15
Equals number of days suspended from assessing 65  
Plus 60 days to assess + 60 + 60
Equals number of days to add to original statute 125  
Julian date of original statute, including any Form 872 or SS-10 extension + 105 April 15
Julian date of corrected statute 230
=======
August 18

Agreed Case With Form 872-A or SS-10 Consent: A notice of determination terminates Form 872-A or SS-10. If the taxpayer agrees, the statute date is extended for 60 days from the agreement received date. This is allowed by law to process the assessment.

Description Julian Date Calendar Date
1. Date Agreement is received 194 July 13
2. Plus 60 days to assess + 60 + 60
3. Equals Extended ASED 254 September 11
     
     

Defaulted 90 Day Letter Without Form 872-A or SS-10 Consent: If the taxpayer does not petition Tax Court or agree to the deficiency by signing a waiver, then the case is closed as unagreed. The deficiency can then be assessed because the taxpayer has defaulted (i.e., has not responded to the Notice of Determination (90/150 Day Letter). The statute will be extended for the 90/150 days the case was suspended plus 60 days allowed by law to process the assessment.

Description Julian Date Calendar Date
Original statute date 105   April 15  
Plus 90 (150) days for 90 day letter + 90 (or 150) + 90 (or 150)
Plus 60 days to assess + 60
_____
  + 60
_____
 
Equals extended ASED 255   September 12  

Defaulted 90 Day Letter With Form 872-A or SS-10 Consent: A notice of determination terminates Form 872-A or SS-10. If the notice defaults, the statute date is extended for the 90/150 days the case was suspended plus 60 days allowed by law to process the assessment.

Description Julian Date Calendar Date
Date 90 (150) Day Letter issued 105   April 22  
Plus 90 (150) days for 90 day letter + 90 (or 150) + 90 (or 150)
Plus 60 days to assess + 60
_____
  + 60
_____
 
Equals extended ASED 255   September 19  

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