4.10.12  Frivolous Return Program

Manual Transmittal

February 23, 2012

Purpose

(1) This transmits a revision to IRM 4.10.12, Frivolous Return Program.

Material Changes

(1) Various. This IRM section provides Campus Examination employees guidelines for selecting, controlling, investigating and closing Frivolous Return Program (FRP) cases.

(2) LEM 4.19.1 information has been added to this IRM marked as OUO information.

(3) IPU 100783 issued 05-14-2010 IRM 4.10.12.5.1(7) - Added a time frame of within 30 days

(4) IPU 100783 issued 05-14-2010 IRM 4.10.12.5.2 - Added a time frame of within 30 days

(5) IPU 100783 issued 05-14-2010 IRM 4.10.12.7.6 - Changed Title to "Backing Off Accounts on Invalid Returns"

(6) IPU 100783 issued 05-14-2010 IRM 4.10.12.1.1 - Moved item (50) to (29)

(7) IPU 100783 issued 05-14-2010 IRM 4.10.12.4.8 - Changed editing location on return

(8) IPU 100783 issued 05-14-2010 IRM 4.10.12.4 - Changed wording for Routing Procedures.

(9) IPU 100783 issued 05-14-2010 IRM 4.10.12.4.4(5) & (7), IRM 4.10.12.4.5(4)(c), IRM 4.10.12.4.8 & IRM 4.10.12.4.8.6 - added "cleared, include last 5 digits of IDRS number "

(10) IPU 100783 issued 05-14-2010 IRM 4.10.12.5.3 - Add "copy of"

(11) IPU 100783 issued 05-14-2010 IRM 4.10.12.5.4(5) Add Note - Ensure excessive credit claimed is appropriately addressed prior to closing.

(12) IPU 100783 issued 05-14-2010 IRM 4.10.12.8 BMF Correspondence Add - Statute awareness & IRM reference Add - Potential audit/SFR should be forwarded to Classification Delete - Reference to count in & out of FRP Master Add - OFP code for FRP master sort to 91585(c) to distinguish Correspondence from Returns.

(13) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.1 BMF Return/Claim Filings Add- Procedures to pre-notify the Business and the Individual & penalty assessment instructions Add - Procedures to send to Classification if and Individual cannot be identified Add - Clarification to OFP code use

(14) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.2 Identifying Frivolous BMF Filings Add - New Notice 2010-33 for reference of Argument Codes Add - Clarification of Exam Classifier requirements for referral Add - Clarification of "change of command" replaced with "FRP Technical Advisor"

(15) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.3 Conducting BMF Compliance Check Add - Note to send non-filer with IRPTR income to Classification to review for SFR potential

(16) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.4 Potentially Frivolous BMF Filings Add - Clarification of "change of command" replaced with "FRP Technical Advisor"

(17) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.5 Questionable Frivolous BMF Filings Update - Title change Add - Section IRM 4.10.12.8.7 to IRM 4.10.12.8.5 Update - Fraud tolerance amount to $10,000 Add - Clarification of "Case Building" to Classification Update - Action Code 440 to 331 per SP change Delete - reference to FRP Master

(18) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.6 Non-Frivolous BMF Filings Update - Title change Update - Form 301 replaced with appropriate Form 12775 Add - FRP CLEARED & last 5 digits of IDRS#

(19) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.7 Deleted section - incorporated into IRM 4.10.12.8.5

(20) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.8 update to IRM 4.10.12.8.7 Specialized BMF Processing Add - Clarification of "change of command" replaced with "FRP Technical Advisor"

(21) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.9 update to IRM 4.10.12.8.8 Forms 94X, Employment Tax Returns Processing Add - in addition to other tax schemes in reference to Section 861 Add - clarification to returns marked "final" Add - reference to audit potential procedures Update - FRP processing procedures "If & Then Charts

(22) IPU 100783 issued 05-14-2010 IRM 4.10.12.8.10 update to IRM 4.10.12.8.9 Processing Frivolous Forms 1041 with Argument Codes 33 & 34 Update - Title change IRM 4.10.12.8.10 Processing Frivolous Forms Claiming Fuel Tax Credit (FTC) Add- new section

(23) IPU 100783 issued 05-14-2010 IRM 4.10.12.5.2 update to the time frame

(24) IPU 101656 issued 11-24-2010 IRM 4.10.12.5.3(1) overriding R code on cases before 1-1-2010

(25) IPU 101656 issued 11-24-2010 IRM 4.10.12.5.3 removed NOTE

(26) IPU 101656 issued 11-24-2010 IRM 4.10.12.5.1(3) added freeze types

(27) IPU 101656 issued 11-24-2010 IRM 4.10.12.5.2(7) added to NOTE combine same year penalties and managerial approval must be indicated on Form 8278

(28) IPU 101656 issued 11-24-2010 IRM 4.10.12.5.1(6) and (7) explained 30 daytime frame

(29) IPU 101656 issued 11-24-2010 IRM 4.10.12.6.2 Added correct exhibit number

(30) IPU 101720 issued 12-16-2010 IRM 4.10.12.5.5(1)(3)(a) updated to include correct IRM reference for NMF penalty

(31) IPU 101720 issued 12-16-2010 IRM 4.10.12.5.1(3) corrected TC 971-089

(32) IPU 110106 issued 01-11-2011 IRM 4.10.12.4.1(1)(b) updated to show cases should be controlled in A status

(33) IPU 110106 issued 01-11-2011 IRM 4.10.12.2.1 updated link to IRM 21.5.3.4.16.7

(34) Editorial changes made throughout the IRM

Effect on Other Documents

This material supersedes IRM 4.10.12, dated 11-27-2009.

Audience

Campus Examination employees

Effective Date

(02-23-2012)



Jeff Basalla
Director,
Campus Reporting Compliance, SE:S:CCS:CRC
Small Business/Self-Employed

4.10.12.1  (02-23-2012)
FRP Overview

  1. This section provides Campus Examination employees guidelines for selecting, controlling, investigating and closing Frivolous Return Program (FRP) cases.

  2. Servicewide consolidation of the receipt and processing of all frivolous documents at the Ogden Compliance Services Campus was completed January 1, 2001.

  3. The IRS, through administration of Internal Revenue Code section 6702, will address non-compliance based on unfounded legal or constitutional arguments. This law provides for a $5000 penalty to be imposed upon any taxpayer who files a purported return failing to contain information from which the correctness of the reported tax liability can be determined or that clearly indicates that the tax liability shown must be substantially incorrect. The penalty is intended to address those situations where a taxpayer is furthering a frivolous argument or demonstrates a prima facie intent to delay or impede administration of the tax law.

  4. IRC Section 6702(b), added by The Tax Relief and Health Care Act of 2006 (TRHCA), authorizes the IRS to impose a $5,000 penalty on a person submitting a specified frivolous submission. Specified frivolous submissions include CDP hearing requests, offer in compromise, installment agreement request and applications for a taxpayer assistance order. Section 6702(b)(3) provides that the penalty will not apply if the IRS notified the taxpayer that the submission is a specified frivolous submission and in response the taxpayer withdraws the submission with 30 days after the notice.

  5. Examination will conduct training for functions involved in processing and/or examining returns or correspondence to emphasize recognition of frivolous documents and provide appropriate referral instructions.

  6. The FRP will take a proactive approach to addressing frivolous non-compliance by providing outreach education through TEC and other stakeholders on pertinent program data such as geographic trends of frivolous filings and common frivolous arguments. The program will coordinate new systemic identification of frivolous filings wherever possible and make referrals to affected stakeholders such as the Office of Professional Responsibility, Criminal Investigation Division, Lead Development Center, and Communications and Government Liaison.

4.10.12.1.1  (02-23-2012)
Frivolous Arguments

  1. Frivolous arguments are currently described in Notice 2008-14, 2008-1 C.B. 310 (or its successor notice), the Truth About Frivolous Arguments, and any revenue ruling issued since the publication of either of these documents. Please refer to these publications for the most current listing of frivolous arguments. Recognized frivolous arguments include but are not limited to:

    1. Wages/Receipts Not Income (NTR) - The individual argues that salaries and wages are not "income" within the meaning of the Sixteenth Amendment, which grants Congress the power to "Lay and collect taxes on income, from whatever source derived... " The individual could also argue that labor worth a certain amount is exchanged for money worth the same amount and therefore there is no income to be taxed.

    2. Eisner v. McComber- The individual reports wages but deducts them as "non-taxable compensation/remuneration " referencing Eisner v. McComber 252 U.S. 189 (1920). The individual may alter line items showing non-taxable compensation or non-taxable receipts to back out some or all of their income, generally resulting in a zero tax liability.

    3. Zero Returns (ZERO) - The individual submits a return with zero money amounts on all or most of the line items on the form, e.g., an individual may enter zeros for income and deductions but enter an amount of tax withheld by an employer and request a refund of that amount. See Rev. Rul. 2004-34. A statement may be attached claiming there is no section of the Internal Revenue Code that established an income tax liability. The statement may also contain arguments regarding the definition of income. There are several variations on this type of filing such as those bearing the words "nunc pro tunc" and "not liable." See also item 42 in this list.

    4. U.S. v. Long (Z-LONG) - The individual submits a return with zero money amounts. To explain the zeros inserted on the form, the individual references "U.S. v. Long" . See United States v Long. 618 F2d74 (9th Cir 1980).

    5. Not a Citizen/Free Citizen/Not a Resident of Federal Zone - The individual argues that he or she is not a citizen of the United States and receives no income or benefits from sources within the United States. The individual may file a Form 1040NR to receive a refund of withheld income tax or claim citizenship of a "State Republic" . Alternatively, the individual may claim that the United States does notinclude all or part of the physical territory of the 50 States and instead consists of only places such as the District of Columbia, Guam, Puerto Rico, the Virgin Islands, the Northern Marianna Islands, and certain other "possessions, enclaves, and trust territories. See Rev. Rul. 2004-28."

      Note:

      The aforementioned does not apply to a foreign person who has paid withholding inadvertently and has filed a claim for a refund.

    6. Reparation Tax (REPTX) - The individual submits a return, an amended return, or correspondence referring to a reparation settlement based on the impact of slavery, or may refer to black taxes, reparations for African-Americans, or 40 acres and a mule. It may also include a Form 2439 with fictitious RIC such as Investment Taxes or Department of the Treasury. See Rev. Rul. 2004-33.

    7. Form 2555 Deduction (F2555) - The individual submits a return showing income then deducts that same amount (or a large portion of that amount) by adding "Form 2555" to line 21. Form 2555, Foreign Earned Income, is usually attached showing the individual's address in the United States as the foreign address. The individual also shows his income on Form 2555 as "foreign earned income" even though his employer's address is also in the United States. Correspondence may be attached arguing the term "income" and stating that each of the several states are foreign countries.

      Note:

      Frivolous Forms 2555 should be worked in the FRP area at the receiving Campus rather than forwarded to AUSC.

    8. Not a "Person" or "Individual (NTINDV)" - The individual argues he or she is not a " Person" or "Individual" within the meaning of the Internal Revenue Code and is therefore not subject to income taxes. See Rev. Rul. 2007-22.

    9. Sixteenth Amendment (16AMEND) - The individual argues the Sixteenth Amendment was not properly ratified and therefore the federal government does not have the legal authority to collect an income tax without apportionment. Generally the argument focuses on matters such as inconsistencies in versions ratified by the various states.

    10. Fifth Amendment (5AMEND) - The individual makes an improper blanket assertion of the Fifth Amendment right against self-incrimination as a basis for not providing any financial information.

    11. Altered Jurat/UCC 1–207 (JURAT) - The individual submits a return that contains income and deductions but the jurat (generally defined as a certification on an affidavit declaring when, where, and before whom the document was signed) has been altered or stricken. May include reference to UCC 1–207 or a statement that the return was not signed under penalties of perjury. The alteration may be located elsewhere on the return with an arrow pointing to the jurat. There may be an explanation on the return or attachments reflecting the desire to negate the effect of the jurat by showing the taxpayer did not intend to file a return in good faith. See Rev. Rul. 2004-34.

    12. Altered Form (ALTFORM) - The individual submits a return altering any or all line items with the intent of facilitating non-compliance with the tax laws

    13. Unsigned Returns (UNSIGN) - The individual completes a return but fails to sign and includes a statement explaining why the return is not signed indicating, among other arguments, disagreement with the tax system.

    14. Wages Deducted in Cost of Goods Sold (F-SCHC) - The individual submits a return with a Schedule C attached claiming a deduction which is equal, or nearly equal, to the amount reported as wage income. The deduction is usually included in the cost of goods sold but could appear under a different deduction category.

    15. Valuation (FAIRMV) - The individual argues that income is not taxable because of the declining fair market value of the dollar, because the dollar is not backed by gold/silver, because the value of services is offset by the value of the labor (barter income), etc.

    16. In Lieu of (ILO) - The individual submits a document captioned, Statement in lieu of U.S. income tax Form 1040. Various other arguments may be used in the document. See Rev. Rul. 2004-34.

    17. Disclaimer (DISCL) - The individual submits documentation which contains a disclaimer. The disclaimer states the individual, "disclaims the liability for the tax due" , making the liability on the return zero. This disclaimer may be a part of a return, on a return attachment, or in other documents.

    18. Protest Against Government Action/Inaction (WARTAX) - The individual argues that their refusal to file a return or pay tax is justified because they disagree with government policies or spending plans. The individual may claim deductions or credits because of an objection to having his or her taxes used to support various government activities. See Rev. Rul. 2005-20.

    19. Taxes are Voluntary/Law Does Not Require (VOLUN) - The individual submits a return, amended return, or correspondence that argues income taxes are voluntary.

    20. Challenges to Authority/Title 26 or "law" in Other Documents (CONST) - The individual may argue that Title 26 of the United States Code is not law because it was never enacted as named. As a separate position, the individual may argue that other laws or documents prevent the IRS from assessing and collecting tax. This argument may reference the Bible, Bill of Rights, Declaration of Independence, Magna Carta, Northwest Ordinance, Declaration of Resolve, Federalist Papers, Mayflower Compact, Articles of Confederation of 1788, Declaration of Rights of 1765 and 1774, and others.

    21. Challenges to Authority/Due Process (VOFPOV) - The individual questions various administrative authorities such as delegation orders, summons authority, privacy act, etc. This argument may be based on contentions that Treasury Department Orders (TDOs) were not published in the Federal Register, that the Commissioner lacked authority to propose regulations, that TDOs, Regulations, Treasury Decisions, Forms, and other actions and activities do not comply with the Paperwork Reduction Act, Privacy Act, Administrative Procedures Act, and Federal Register Act. The individual may argue that they must be afforded a hearing or a trial before taxes can be assessed or before property can be seized.

    22. Internal Revenue Service is a Private Organization/Collects Tribute, Not Taxes (TRIBU) - The individual argues that the IRS is an entity named the Internal Revenue and Tax Service, Inc. which was incorporated in Delaware in 1933. The individual further argues that since the IRS deposits its revenues in the Federal Reserve Bank, it is a collection agency for the bank, which is in the business of making loans and conducting proprietary business, thereby removing the cloak of governmental immunity. Additionally, they argue the Department of Treasury is part of the United Nations and is clandestinely leading the tax-paying public into a "new world order"

    23. Alleged Churches/First Amendment (ALDGCH) - The individual receives income from non-religious sources and may claim a vow of poverty. The individual submits a return where all, or substantially all, of the gross income is claimed as a deduction on Schedule A of the return.

    24. Amended Returns/Form 843 Claim for Refund and Request for Abatement (AMEND) - The individual files an amended return or a Form 843 to obtain a total refund of all taxes paid in prior years, based on a tax avoidance argument not supported by law.

    25. Untaxed (UNTAX) - The individual argues that he or she should be "untaxed" and attempts to drop out of the Social Security system. He or she will withdraw or rescind his or her SSN, claiming he or she is a sovereign citizen. See Rev. Rul. 2004-31.

    26. Federal Reserve Notes Are Not Legal Tender (FEDRES) - The individual argues that their wages are not taxable because they were paid in federal reserve notes. He or she argues that notes are not valid currency or legal tender and, thus, those who possess them cannot be subject to a tax on them.

    27. Services Not Taxable/Thirteenth Amendment/Form of Servitude (13AMEND) - The individual argues that income results only from the sale of goods, and therefore, the value of services is not taxable. This includes indentured servitude arguments and barter offsets. The individual may also argue that the Thirteenth Amendment outlawed slavery. He or she may claim to be "natural unfranchised individuals and freemen" who are residents of states, and therefore nonresident aliens for the purpose of the Internal Revenue Code.

    28. Obscene, Vulgar, Harassing (OBSC) - The individual submits documents or other materials indicating that non-filing is due to dissatisfaction with tax policies or taxation in general. Often, this argument is expressed with obscene, vulgar, or crude language and characters in an extremely demeaning manner.

    29. Any other position described as frivolous in any revenue ruling or other published guidance in existence when the return adopting the position is filed with or the specified submission adoptng the position is submitted to the Service.

    30. Non-negotiable Chargeback (NNCB) - The individual attempts to sell his/her birthright back to the government for a large dollar amount and requests that a "Treasury Direct Account" be set up to hold the money.

    31. IRC 861 for Individual Employees (IMF 861) - The individual files a return or claim stating that wages are not taxable based on 26 CFR section 1.861 and requesting a refund of all federal withholding.

    32. IRC 3121 (FICA) - The individual contends that IRC section 3121 exempts the Federal Insurance Contribution Act (FICA) portion of earnings from the definition of wages and therefore from gross income for federal tax purposes. The individual attempts to reduce taxable income by his/her portion of withheld social security tax

    33. 1041 - Lifetime Social Security Claims (LFTMEARN) - The individual claims a refund for all social security paid during their lifetime. Taxpayer requests a "lifetime earnings statement" from Social Security Administration in order to list the amount of withheld social security taxes as federal income tax or other payments. See Rev. Rul. 2005-17.

    34. 1041 - In Lieu of 1040 (1041 ILO) - The individual deducts personal income as fiduciary fees or other deductions on Form 1041 resulting in a zero tax liability.

    35. IRC 1341 - Claim of Right (COR) - The individual claims "compensation for personal labor" is not taxed by Title 26, IRC section 134 1, and takes a deduction on Schedule A or removes the amount from gross income. See. Rev. Rul. 2004-29.

    36. Bosnian Refugees (BOSNREF) - The individual attempts to eliminate tax liability by filing Form 1040X, removing their tax on line 10 (Total Tax) and citing under Part II that they are entitled to refunds based upon their status as Bosnian refugees.

    37. Not Liable (NTLIABL) - The individual submits returns or claims with "Not Liable" printed on the return. The returns also reflect zero money amounts.

    38. IRC 861 Business - Employment Tax (BMF 861) - This argument targets employers and advises them that wages are exempt from withholding. Based on 26 CFR section 1.861, promoters of this scheme advise employers to stop withholding and paying payroll taxes on their employee's wages. In addition, some employers file amended payroll tax returns and request refunds of previously paid payroll taxes.

    39. EIC with Disability Income (FRIVEIC) - The individual reports disability income as the sole source of income to claim earned income credit but does not attach a Form W-2 or Form 1099.

    40. Exempt Employees of World Bank Organization (XMTEMP) - The individual files a return with a statement attached which asserts, "World Bank Employee - Wages not Subject to Income and/or Non-Taxable Income - World Bank." The individual lists an adjustment equal to the amount of the wages and claims adjusted gross income is zero. May also cite IRC section 893 which provides a tax exemption to some employees of international organizations.

      Note:

      The World Bank qualifies as an international organization, therefore, if the individual worked for the World Bank as a citizen of another country, they may qualify for the exemption.

    41. American Indian Treaty (AMERIND) - The individual attempts to eliminate tax liability by filing forms 1040 removing their income on line 21 (Other Income) and citing, "less Native American Indian Treaty" or "Native American Indian Treaty." The returns usually include Form 1099 MISC or other income documents that include withholding which can result in a refund of withholding credit.

      Note:

      IRC section 7873 , various court cases and revenue rulings allow for tax free income earned either for fishing rights on treaty land, income from the land or on land held in trust for certain individual Native Americans. For more information, contact an IRS Indian Tribal Government Specialist.

    42. Nunc Pro Tunc (NUNC) -The individual attempts to eliminate tax liability by filing returns citing "Nunc Pro Tunc" somewhere on the return. The return usually consists of all zeros except withholding and generally a refund is claimed. No further justification for the zero return is given. "Nunc Pro Tunc" is Latin for "Now for Then" . These taxpayers appear to want the IRS to accept the frivolous return they have filed in place of what they filed previously. See Rev. Rul. 2006-17.

    43. IRC 1001 (1001) - The individual attempts to eliminate tax liability by filing Forms 1040X removing all or part of income as an itemized deduction on Schedule A, "Other Miscellaneous Deductions" and citing,"IRC 1001: even exchange of property - Labor (property) - Employer's (property). NO GAIN REALIZED. Butcher's Union Co. v. Crescent City Co., 111 US 746 (1884)."

    44. Zero Wages on a Substitute Form: Taxpayer generally attaches either a substitute Form W-2, Form 1099, or Form 4852 that shows " $0" wages or no wage information. A statement may be included indicating the taxpayer is rebutting information submitted to the IRS by the payer. Entries are usually for Federal Income Tax Withheld, Social Security Tax Withheld, and/or Medicare Tax Withheld. An explanation on the Form 4852 may cite "statutory language behind IRC 3401 and IRC 3121" ,or may include some reference to the company refusing to issue a corrected Form W-2 for fear of IRS retaliation.

    45. Fuel Tax Credit - An individual files a return or claim requesting an amount of fuel tax credit that is so disproportionately excessive to income (normally business income) reported on the individual's return as to be unallowable In addition, the individual's occupation would generally not qualify for off-highway usage.

    46. Form 1099-OID - An individual files a return reporting false amounts of income (generally "Other" or "Miscellaneous " income) and all of them claim a false amount of income tax withholding approximately equal to the amount of falsely reported income. Although the returns report income, they do not calculate any tax due. Some of the returns have Form 1099-OID (Original Issue Discount) attached and some have Forms 1096. Other false financial instruments may be filed in the place of or in addition to the Forms 1099-OID such as Form 2439, promissory notes, bonds, sight drafts, etc.

    47. C-Filings - This frivolous position includes four categories of filings as follows

        a. An individual files a return claiming various types of deductions, credits, or overpayments/refunds that have no relation to reality and because of their outrageous character, qualify as frivolous returns.
        b. An individual files a return containing the filers identifying information but does not request a refund, often lacking sufficient information to determine a tax liability.
        c. An individual files a return with various types of rambling dialogue and/or crazy arguments that no one could reasonably view as a good faith attempt to comply with the law.
        d. An individual files a return that attempts to send some type of message or protest to the IRS, but fails to include sufficient identifying information for the Service to either determine the identity of the taxpayer or correspondent or return address.

    48. Prisoner Filings - An individual who is incarcerated files a return where they include a Substitute Form W-2 (F.4852). In the explanation portion of the F.4852 they explain the income is based on a computation of minimum wage for hours worked within the prisons and lists an amount of withholding which allegedly represents the withholding an employer would withhold from an employee working at minimum wage. The inmate claims a refund based on the data for income and withholding the prisoner alleges the prison should have reported. The claims also may include a list that includes a work log or a computer printout showing their cost of incarceration.

    49. Collections Issues - An individual files frivolous documents contending that various collections issues are invalid (e.g., Offers in Compromise, Collection Due Process Requests, Installment Agreements, Appeals Requests etc.) because they are not filed and or signed by someone with delegated authority, they may have no certificate of assessment attached, they do not comply in form or content with a State or Local laws, are not in a certain format or lack a valid OMB number or other frivolous positions.

    50. Non Taxable Social Security (SS) Benefits - An individual files a return reflecting non-taxable SS, or Railroad Retirement benefits and claims false or excessive withholding credit resulting i a zero return.

  2. A cross reference, The Truth About Frivolous Tax Arguments, is available at www.irs.gov/taxpros/article/0..id=159853.00.html .

  3. and Notice 2008-14.

4.10.12.1.2  (02-23-2012)
Authority and Responses to Common Frivolous Arguments

  1. The judicial system and the Internal Revenue Code provide alternative ways to test the income tax statutes without violating the law. Taxpayers may contest a notice of deficiency by filing a petition with the Tax Court without paying the tax. Taxpayers may also file a refund suit in the United States District Court or the United States Court of Federal Claims after paying the tax. However, if the IRS Appeals Office provides administrative review in connection with such litigation, it will not give a taxpayer an Appeals hearing on cases involving solely the failure or refusal to comply with tax law because of moral, religious, political, constitutional, conscientious or similar grounds. See IRM 8.1.1.3.1, No Appeals Conference or Concession on Certain Arguments, and IRM 20.1.6.1.4, Appeal Rights, for additional information.

  2. It is not the policy of the IRS to respond to frivolous arguments on a point by point basis. These arguments almost always reflect personal opinions and frustrations with the tax system that the IRS is unable to address. The responsibility of the IRS is to administer the federal tax law as enacted by Congress. The Service responds to technical questions about individual accounts; however, it has no administrative authority to change tax laws. The Service's responsibility is to administer the tax laws as they exist and to ensure they are uniformly applied. The Frivolous Return Program provides for initial responses to each issue or argument presented; however, it provides for no responses to repeated inquiries on the same positions that have no basis in law. The program encourages individuals to seek competent tax counsel and advises of the potential consequences of advancing frivolous arguments.

  3. Title 26 of the United States Code, reproduced separately as the Internal Revenue Code (Code), contains most of the Federal tax law. Under Title 26, the IRS is a part of the United States Department of the Treasury. Generally, section 7803 of the Code provides that there shall be in the Department of the Treasury a Commissioner of Internal Revenue, who shall be appointed by the President, by and with the advice and consent of the Senate. Section 7803 of the Code states that the Commissioner shall have such duties and powers as may be prescribed by the Secretary of the Treasury. IRC section 7804 of the Code states that the Secretary is authorized to employ such number of persons as the Secretary deems proper for the administration and enforcement of the Internal Revenue Laws. The IRS performs administrative and enforcement duties pursuant to the authorization of IRC sections 7803 and 7804 and other provisions of the Code.

  4. Sections 6001 and 6011 of the Code provide, in pertinent part, that every person liable for any tax imposed by the Code shall make a return. In addition, section 6012 of the Code provides that every individual whose gross income equals or exceeds certain amounts shall make a federal income tax return. "Shall " as used in sections 6001, 6011, and 6012, means "must " ; "must" means "to be required to." Who is required by the tax code to file an income tax return is explained in the instructions for Form 1040 under the heading "Filing Requirements."

  5. The Sixteenth Amendment, making the income tax constitutional, was ratified in 1913. The Constitution, Article 1, Sections 7 through 9, and the Sixteenth Amendment give the Federal Government the right to levy and collect taxes. The Sixteenth Amendment authorized a tax on income, regardless of source, without apportionment. The courts have rejected claims that the Sixteenth Amendment was not properly ratified. The Amendment was ratified by 38 states altogether, and ratification was necessary by only 36. The U.S. Supreme Court has recognized the validity of the Sixteenth Amendment. Brushaber v. Union Pacific Railroad Co., 240 U.S. 1, 18-20 (1916); Bob Jones University v. United States, 461 U.S. 574, 615 (1983). Official notice of the resolution of ratification by the states to the Secretary and his subsequent certification by proclamation is conclusive upon the courts.

  6. The U.S. Supreme Court has held that the requirement that individuals file a federal income tax return does not violate the self-incrimination clause of the Fifth Amendment. United States v. Sullivan, 274 U.S. 259 (1927). Judicial precedents clearly establish that failure to comply with the filing and reporting requirements of the federal income tax laws will not be excused based upon blanket assertions of constitutional privilege against self-incrimination under the Fifth Amendment. United States v. Irwin, 561 F.2d 198 (10th Cir. 1977), cert. denied, 434 U.S. 1012 (1978); United States v. Neff, 615 F.2d 1235 (9th Cir. 1980), cert. denied, 447 U.S. 925 (1980).

  7. The statutory provisions of the Code that require the filing of income tax returns do not violate the Fourth Amendment prohibition against unreasonable searches and seizures by the Federal Government.

  8. Gross income, not "income" , is the starting point for determining an individual's federal income tax liability. The term "gross income" is defined in section 61 of the Code. The Code in Subtitle A, Chapter 1, Subchapter A — "Determination of Tax Liability" , provides whether an individual is liable for income tax. Section 1 imposes a tax on the taxable income of every individual. Chapter 1, Subchapter B — "Computation of Taxable Income" , provides whether an individual has taxable income. Section 63 defines taxable income, generally, as gross income minus the deductions allowed by Chapter 1. The argument that wages are not income has been rejected so frequently that the very raising of it justifies the imposition of sanctions. Connor v. Commissioner, 770 F.2d 17, 20 (2d Cir. 1985); "We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit" Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984). This frivolous argument has been the subject of numerous court decisions, which held the position to be contrary to existing law.

  9. IRC section 6065 states, "Except as otherwise provided by the Secretary, any return, declaration, statement or other document required to be made under any provision of the internal revenue laws or regulations shall contain or be verified by a written declaration that it is made under the penalties of perjury." See also Cohen v. United States, 201 F.2d 386 (9th Cir)., cert. denied, 345 U.S. 951 (1953); Sen. Rep. No. 685, 81st Cong., 1st Sess., Part II 4 (1949) ("the purpose of the statute is to relieve the taxpayers of the burden of notarizing their returns" ).

  10. The courts have often imposed sanctions on taxpayers who raise these types of arguments in litigation. In Coleman v. Commissioner, 791 F.2d 68, 69 (7th Cir. 1986), the court stated, "Some people believe with great fervor preposterous things that just happen to coincide with their self-interest. [Certain individuals] have convinced themselves that wages are not income, that only gold is money, that the Sixteenth Amendment is unconstitutional, and so on. These beliefs all lead to the elimination of their obligation to pay taxes. The government may not prohibit the holding of these beliefs, but it may penalize people who act on them."

  11. The Government expects voluntary compliance with the federal tax law. This means that we expect taxpayers to comply with the law without being compelled to do so by action of a Government agent; it does not mean the taxpayer is free to disregard the law. If an individual is required by law to file a return or pay tax, it is mandatory that he or she do so. Failure to do so could cause the individual to be subject to civil and criminal penalties; including fines, and imprisonment. See, for example, Schiff v. Commissioner, T.C.Memo 1984–223, aff'd, 751 F.2d 116 (2 Cir. 1984).

4.10.12.1.3  (02-23-2012)
Identification of Frivolous Documents

  1. Frivolous documents often:

    • contain arguments about the obligation to file or pay tax on the face of the tax return or on attachments to the tax return

    • include altered forms or jurats containing frivolous arguments

    • are attempts to impede or circumvent the administrative processing of the tax return.

  2. The criteria for considering a civil penalty for frivolous tax returns is found in IRC 26 section 6702. It states," A person shall pay a penalty of $5000 if -"

    1. such person files what purports to be a return of a tax imposed by this title but which -

      1. does not contain information on which the substantial correctness of the self-assessment may be judged, or

      2. contains information that on its face indicates that the self-assessment is substantially incorrect, and

    2. the conduct referred to in paragraph (1)

    • is based on a position which the Secretary has identified as frivolous under subsection (c), or

    • reflects a desire to delay or impede the administration of Federal tax laws.

  3. Notice 2008-14, 2008-1 CB 310, or any successor notice provides the Secretary’s list of frivolous issues.

  4. Frivolous returns may be valid or invalid. A valid return is one that meets the requirements to start the statute of limitations under IRC section 6501. Frivolous returns are normally considered "valid or processable" under IRC section 6611(s) (although there are some exceptions) if they meet the following four-point criteria from Beard v Commissioner, 82 T.C. 766, 777(1984), :aff’d per curiam, 793 F.2d 139 (6th Cir. 1986):

    1. The return must contain sufficient data to calculate a tax liability, and

    2. must purport to be a return, and

    3. must include an honest and reasonable attempt to satisfy the requirements of the tax law, and

    4. must be signed under penalties of perjury. (Generally the jurat must be unaltered).

  5. A frivolous return that does not meet the four-point criteria listed above is considered invalid. Invalid, frivolous returns should not be processed.

  6. Frivolous documents take many forms. Frivolous arguments may be asserted on original returns, amended returns, claims, or documents purporting to be returns. Returns may claim frivolous deductions, credits or exclusions or may omit items of income. Individuals might refuse to pay or file based on a variety of frivolous or discredited legal or constitutional theories. Unusual attachments to the return also serve as indicators that the return is frivolous.

  7. When identifying frivolous documents, consider key indicators such as:

    • Altered jurats, rewording or crossing off parts of the jurat, statements such as "signed under duress," and "all rights reserved" ,

    • Irregular entities such as: name of taxpayer in all lower case letters, addresses such as "Territory of (state)" or address in all lower or upper case letters,

    • Reducing or eliminating tax liability without valid justification, and

    • Illegal or improper credits, deductions, or exclusions.

4.10.12.1.3.1  (02-23-2012)
Detecting Frivolous Filings

  1. Identification of frivolous filings can be made in any Service office by any employee. They may be identified during original return processing, amended return or claim processing, during the course of a routine audit, or upon any contact with a taxpayer or their representative.

  2. Frivolous filings not related to an open case should be routed to the Ogden Compliance Campus Examination Frivolous Return Program (see 4.10.12.1.3.4 Transshipping Frivolous Filings to FRP). These filings include returns and amended returns or claims identified in CAS and Compliance in the campuses, field offices, and other Service offices.

    Note:

    Do Not

    close case or transfer controls in order to transship cases that are already in the process of examination or in an automated system, e.g., ASFR or AUR. Forward frivolous document only for the assertion of the IRC 6702 penalty.

  3. If unable to ship the original frivolous return or frivolous correspondence to FRP, (e.g. it is needed for a court case), coordinate with the FRP Coordinator for guidance on handling the document. Contact information for the Coordinator can be found at: http://sbse.web.irs.gov/cs/Programs/FRP/FRP.htm.

  4. If the frivolous document contains valid inquiries such as FOIA requests, transcript requests, or taxpayer advocate issues, it should be forwarded to the appropriate function prior to transshipping to Ogden FRP.

4.10.12.1.3.2  (02-23-2012)
Submission Processing Identification and Processing of Frivolous Filings

  1. Frivolous returns or documents purporting to be returns identified by Submission Processing operations in the campuses will be forwarded to a central location for screening. See IRM 3.11, Campus Returns and Document Analysis, and IRM 3.12, Campus Error Resolution, for guidance on identifying and forwarding.

    Note:

    Examination will coordinate annual training with Submission Processing on identifying new arguments and/or refresher for this program.

  2. Effective January, 2003, valid, frivolous returns requiring processing will be worked under a memorandum of understanding (MOU) between W&I and SB/SE. The MOU provides for expedited handling of frivolous IMF returns referred by Ogden Compliance Services to Fresno Submission Processing. Frivolous Return Program will perform all Code and Edit activities per IRM 4.10.12.4.8 prior to shipment to Fresno and ensure returns are statute cleared. Frivolous Return Program will transship returns to Fresno weekly via Form 3210. Write "FRP" in large letters on each package to make clear to the receiving site the contents of the package. Mail package for Fresno processing to:

    Internal Revenue Service

    Attn: Batching M/S 31305

    5045 E. Butler

    Fresno, CA 93888

  3. Fresno will batch the returns separately from regular Forms 1040; however, no unique program code or 5th digit is necessary. The returns will be expedited through cycle and processed through the Integrated Submission/Remittance Processing System (ISRP). The returns are all edited with Action Code 440 which will place them in Rejects Suspense inventory after going through ISRP. When processing is complete Fresno Rejects personnel will transship the return back to Ogden FRP on a weekly basis via Form 3210. Write "FRP " in large letters on each package to make clear to the receiving site the contents of the package. Mail processed returns back to Ogden to:

    Internal Revenue Service

    Attn: FRP M/S 4450

    1973 N. Rulon White Blvd.

    Ogden, UT 84404

  4. Both Ogden and Fresno campuses will follow IRM 3.10.72 and any local procedures for using designated Private Delivery Service to transship.

  5. When FRP identifies returns that are not frivolous, received from campus FRP Coordinators, they will provide feedback to the respective FRP Coordinator to educate them and prevent further occurrences.

    Note:

    Notification will be provided to Submission Processing, through the local Planning & Analysis Staff, if FRP Coordinators identify numerous nonfrivolous filings.

  6. Valid, frivolous returns on International forms or that have International impact will be routed to the appropriate Campus processing International forms.

  7. Any non-frivolous returns that require processing (such as mis-routes) will be directed to Kansas City Submission Processing Campus as outlined in national transshipment procedures.

4.10.12.1.3.3  (02-23-2012)
Campus FRP Coordinators

  1. A FRP Coordinator will be assigned at each campus Exam operation as a collateral duty. The coordinators will assist on inquiries related to frivolous documents for their respective campuses. They will liaison with Ogden FRP on pertinent information related to frivolous filings and review frivolous filings identified as follows:

    1. Review each document to determine if it meets FRP criteria.

      Note:

      For Cincinnati and Ogden campuses, BMF returns require expedited handling and should be reviewed within two business days. BMF returns that Exam is unable to determine are frivolous but which have a high degree of likelihood that they are frivolous should be immediately returned to Submission Processing for timely processing and refund issuance (these will not be X-coded) and then referred back to Exam FRP for potential audit. Code these returns with Action Code 331 (Cincinnati) and (Ogden) and attach Form 4227, Intra Service Center Reject, with remarks, "Refer to Exam FRP for audit after processing. "

    2. If the document is not frivolous, stamp the upper left corner, "FRP" and return it to processing.

    3. If the document is frivolous, determine if it was identified after having received a DLN. If the document does have a DLN, it must be cancelled before continuing FRP processing.

    4. Route to Ogden FRP for further processing (See IRM 4.10.12.1.3.4 Transshipping Frivolous Filings to FRP).

  2. Charge time spent screening and transshipping documents to OFP code 91852.

4.10.12.1.3.4  (02-23-2012)
Transshipping Frivolous Filings to FRP

  1. Documents deemed frivolous must be referred to Odgen Compliance Services within 5 business days of receipt via Form 3210:

    Note:

    Form 3210 will include SSN's for any returns or claims covered: however, correspondence does not require a listing of SSN's.

        Mail to:    
        Ogden Compliance Services    
        Attn: FRP, M/S 4450    
        1973 N Rulon White Blvd    
        Ogden, Utah 84404    

4.10.12.2  (02-23-2012)
General Administrative Procedures

  1. This section provides general information to develop and resolve FRP examination cases. Standard examination procedures expressed in IRM 4.19.10, Examination General Overview, through IRM 4.19.17, Non-Filer Program, apply to all cases and include:

    1. Initiating examinations

    2. Dealing with Powers of Attorney

    3. Preparation of audit forms

    4. Taxpayer replies and responses

    5. Handling undeliverable correspondence

    6. Workpaper guidelines

    7. Special handling situations

    8. No response and unagreed cases

    9. Statutory notices

    10. Close out procedures

    11. Statute control

    12. QMS monitoring

    13. Seven auditing standards

4.10.12.2.1  (02-23-2012)
Links to Other IRMs

  1. Although employees are responsible for familiarizing themselves with and utilizing all IRS Internal Revenue Manuals, the following IRM's have particular importance with respect to FRP processes:

    • IRM 3.11, SP Returns and Document Analysis

    • IRM 3.12 , SC Error Resolution

    • IRM 4.19.10,Examination General Overview

    • IRM 4.19.11, Examination Classification of Work

    • IRM 4.19.12, Centralized Files and Scheduling

    • IRM 4.19.13,General Case Development and Resolution

    • IRM 4.19.14 , EITC/Revenue Protection Strategy

    • IRM 4.19.15 , Discretionary Programs

    • IRM 4.19.16 , Claims

    • IRM 4.19.17, Non-Filer Program

    • IRM Part 8 , Appeals

    • IRM Part 9 , Criminal Investigation

    • IRM Part 20.1, Penalty handbook

    • IRM Part 20.2, Interest

    • IRM 21.3.3.3.2 , Potentially Dangerous Taxpayer (PDT), for use in identifying PDTs and subsequent handling procedures

    • IRM 21.3.3.4.18, Pseudonyms

    • IRM 21.3.3.4.24, Review of Outgoing Correspondence, for use by managers and leads in reviewing correct case actions

    • IRM 21.5.3.4.16.7, Identifying Frivolous Returns/Correspondence and Responding to Frivolous Arguments

    • IRM 21.7.2.4.18.6.13, Frivolous Employment Tax Claims

  2. The following web sites also contain information pertinent to FRP:

    • http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/frp/default.aspx

    `

4.10.12.2.2  (02-23-2012)
FRP Master

  1. Frivolous Return Program Master (FRP Master) is a database used to track and monitor current inventory and includes historical data on accounts not in compliance for two consecutive years, filing and paying. FRP Master is a composite of several tables linked together to allow FRP employees to accurately respond to taxpayers and assists in trending frivolous filings for outreach education to internal and external stakeholders. It also provides the means to identify new abusive tax avoidance promotions in order to make referrals for civil injunctive actions, criminal investigations, and follow-up monitoring on violations of existing court orders on abusive promoters and preparers. The tables include but are not limited to:

    • Daily Reports- Employee time and action taken on cases

    • Project Status Listing (PSL) - Current information on new program issues, abusive tax schemes, frivolous return preparers and promoters, court actions on FRP cases, and general topical data on FRP cases

    • Friv Input Form - Table used to update taxpayer compliance history, forms and letter sent to taxpayers, pre-audit compliance, frivolous arguments used by the taxpayer, etc.

    • TAR Form - Used to elevate unique technical questions, data on new promotions, etc., for inclusion on PSL

    • Interview Screen - Questions posed to taxpayers during telephone interviews to ascertain background on specific frivolous promotions and/or taxpayer frivolous arguments

    • Weekly Reports - Inventory report data

    • FRP Alerts - Sign on message to inform employees of pertinent information

  2. Utilize FRP Master to ensure record is made of all pertinent actions taken on accounts. Consider existing information derived from FRP Master Project Status Listing prior to taking action on existing accounts such as whether.

    • PSL reflects if a return preparer is currently enjoined from return preparation

    • Copy will be made of new filings by a particular promoter/preparer for referral to the Lead Development Center (LDC)

    • If specific action or no action will be taken on a new receipt for a particular type of filing.

    • New receipts will be routed to a specific area or employee

  3. FRP Master reports will be created on a regular basis to proactively provide data to TEC, SB/SE Communications and Liaison, and ATAT on:

    • emerging schemes

    • abusive promoters and/or preparers

    • trends in geographic locations of frivolous filings or specific business affiliations

    • the need for outreach education on specific promotions

    • any data pertinent to the overall compliance objectives of the Service

  4. FRP Master reports will also be used to fulfill requests made by internal and external stakeholders on program data but will be coordinated and approved through the Ogden FRP Senior Technical Coordinator and Examination Operations Manager for Service Center Support.

4.10.12.2.3  (02-23-2012)
Inventory Report

  1. Each return and claim will be counted into inventory as a new receipt when an issue is created on FRP Master.

  2. Daily correspondence receipts are counted into inventory using the "Held Unassigned" option on FRP Master

  3. Most issues are counted as a closure when a closing action code is selected on FRP Master.

  4. Penalty receipts are counted when a penalty issue is created, plus any return or claim closes during the reporting week with one of the following actions code.

    • preltr/gdrtn

    • signedjurat

    • gdrtn/2/proc

    • frvclm/toci

    • goodclm/toci

    • gdclm/done

    • gdrtn/toci

    • frvrtn/toci

  5. Penalties are counted as closures when a penalty issue is closed, plus any of the penalty receipts counted from the return or claims issue closing with one of the specified action codes listed above.

  6. Claims New Starts, receipts and closures are counted when a TE selects one of the following action codes during the reporting week:

    • gdclm/done

    • no consideration

    • preltr/gdrtn

    • purge/frvrsp

    • purge/frvrtn

    • purge/norsp

    • signedjurat

    • frvclm/disallow

      Note:

      These are reflected at the bottom of the weekly inventory report and are the figures that are entered into Work Performance & Cost (WP&C).

  7. Preparer/promoter investigation cases will be entered as an issue when identified and closed when referral is made to the Lead Development Center (LDC)

  8. Preparer penalty assessment cases will be entered as an issue when approval memo is received from SBSE LDC and closed when the assessment is made.

  9. Revenue protection is reflected on the inventory report for cases that will not be processed on AIMS:

    • if a non-frivolous return is filed or a claim is waived in response to letter 3176C,

    • if a frivolous return is deemed no potential for further processing.

    • when a claim is disallowed

    • when a penalty case is assessed and closed

    • when preparer penalty cases are assessed and closed

  10. Inventory reports will be generated weekly to reflect new receipts, closures, any necessary adjustments, ending inventory and revenue protection derived from non-AIMS case processing for each OFP code.

4.10.12.2.4  (02-23-2012)
Systemic Identification and Analysis of Frivolous Filings

  1. Programs have been created to systemically identify potential frivolous filings that have been processed. The programs generate transcripts or output for manual review and potential FRP processing.

    1. Weekly Transcript Process: A frivolous return transcript is generated when returns/claims with specific criteria for frivolous filings are identified.

      1. Complete IDRS research to determine if posted return is frivolous.

      2. Ensure any refunds are stopped whenever possible.

        Note:

        If refund will be held more than 30 days, a L1721C must be generated to notify the taxpayer that a refund is being held.

      3. Estab potential frivolous returns and open TXMOD control.

      4. Enter volume of transcripts ordered using "Held Unassigned option on FRP Master under OFP 91853(N)."

      5. Review Estab'd returns as they are received to determine if frivolous.

      6. If it is determined that the posted return is frivolous:

        • Close TXMOD Control with "FRIVRTN" as the activity.

        • Count out of inventory using "Held Unassigned " option on FRP Master under OFP 91853(F), volume must be entered as a negative to count out.

        • Return will then follow normal frivolous return processing procedures.

      7. If is determined that the posted return is not frivolous:

        • Close TXMOD control with "NOTFRIV" as the activity.

        • Release refund if applicable.

        • Count out of inventory using "Held Unassigned" option on FRP Master under OFP 91853(N), volume must be entered as a negative to count out.

        • Refile return.

      8. If is determined that the posted return is not frivolous but is suspicious in nature forward to Examination Technical Advisor for classification and/or selection.

      9. If it is determined that the posted return is not frivolous but was processed incorrectly make referral to Brookhaven or appropriate function.

      10. If Form 4251 is received with no return:

        • Research IDRS to ensure controlling DLN has not changed

        • If Form 4251 indicates return is charged out, coordinate with the employee who has the document to determine if frivolous.

        • If there are indications that a CIS return is available, secure CIS document to determine if frivolous.

        • Attempt to secure the document three times prior to managerial approval to close.

    2. Daily Extract Process: A computer extraction of return and adjustment information is provided on Control D when specific criteria for frivolous filings are identified. .

      1. Complete IDRS research to determine likelihood that posted return is frivolous.

      2. Ensure any refunds are stopped whenever possible.

        Note:

        If refund will be held more than 30 days, a L1721C must be generated to notify the taxpayer that a refund is being held.

      3. Estab potential frivolous returns and open TXMOD control.

      4. Enter volume of returns ordered using "Held Unassigned " option on FRP Master under OFP 91853(N).

      5. Review Estab'd returns as they are received to determine if frivolous.

      6. If it is determined that the posted return is frivolous:

        • Close TXMOD control with "FRIVRTN" as the activity.

        • Count out of inventory using "Held Unassigned" option on FRP Master under OFP 91853(F), volume must be entered as a negative to count out.

        • Return will then follow normal frivolous return processing procedures.

      7. If it is determined that the posted return is not frivolous:

        • Close TXMOD control with "NOTFRIV" as the activity.

        • Release refund if applicable.

        • Count out of inventory using "Held Unassigned" option on FRP Master under OFP 91853(N), volume must be entered as a negative to count out.

        • Refile return.

      8. If it is determined that the posted return is not frivolous but is suspicious in nature forward to Examination Technical Advisor for classification and/or selection.

      9. If it is determined that the posted return is not frivolous but was processed incorrectly refer to Brookhaven or the appropriate function.

      10. If Form 4251 is received with no return:

        • Research IDRS to ensure controlling DLN has not changed.

        • If Form 4251 indicates return is charged out, coordinate with the employee who has the document to determine if frivolous.

        • If there are indications that a CIS return is available, secure CIS document to determine if frivolous.

        • Attempt to secure the document three times before requesting managerial approval to close.

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4.10.12.2.5  (02-23-2012)
Case Referrals to and from Other Programs

  1. Criminal investigations - All correspondence and returns will be screened for referral to Criminal Investigation (CI) (See IRM Part 9). Cases meeting the following criteria will be coordinated with CI through the FRP/CI Coordinator using the "CI Tab" on FRP Master.

    • TC 910 etc.

    • Indications

    • Delinquencies

      a. Returns with open Z freeze (TC 914, 916 or 918)
    • Approval must be received from CI before continuing with audit procedures, this is done by entering the following information on the FRP Master CI tab:
    1) year(s) being worked
    2) Agent ID#
    3) TC 91X – Must be open and the most recent
    4) first two digits of the most recent, open 91X DLN and
    5) brief explanation of action that will be taken on case.

    • Suspend all casework actions until response is received.

    • Select appropriate action code on FRP Master.


    Note:

    If a prior request has been made and response is not more than a year old, that response can be used for processing your case as well.

      b. CI Responses
    • If response from CI indicates approval to continue, attach response report to case file and continue normal processing.

    • If CI indicates not to proceed with Exam action, close IDRS controls, select appropriate FRP Master closing action code, close AIMS with DC 33 if applicable, recharge documents to CI and route entire case to FRP/CI Coordinator.

    Note:

    If return is unprocessed, purported to be a good return with a balance due and the taxpayer signature, forward for processing prior to closing AIMS and routing to FRP/CI Coordinator. The Z freeze will generate an unpostable TC 183, providing CI with an avenue to post or delete the assessment preventing barred assessments.

      c. Mail with open Z or –T freeze (TC 910, 914, 916 or 918)
    • DO NOT put "D" on the mail.

    • Enter pertinent information to FRP Master and select appropriate closing action code

    • Attach IDRS print to the mail that reflects the most recent, open TC 91X and Agent ID#

    • Route original mail to the FRP/CI Coordinator.

  2. Collections - Cases including collection notices or references to paying/not paying will be coordinated with Collections.

    Note:

    Frivolous arguments citing "Collection Due Process" (CDP) will be reviewed with Collections for possible referral to Appeals. Refer to IRM 5.19.8, Collection Appeals Rights Procedures, for additional information.

  3. Taxpayer Advocate Service - FRP case meeting the Taxpayer Advocate Service criteria will be referred appropriately. Refer to IRM 13.1.7, Taxpayer Advocate Case Criteria.

  4. Appeals - All individuals have the right to disagree with Service findings and request the Appeals Office review their cases. Appeals can settle most differences without expensive and time-consuming court trials. However, Appeals can not consider reasons for disagreeing with IRS findings if the reasons do not come within the scope of the tax law for example, if disagreements is based solely on moral, religious, political, constitutional, conscientious, or similar grounds (see Publication 1, Your Rights as a Taxpayer, Publication 594, The IRS Collection Process, and IRM 8.1.1.3.1, No Appeals Conference or Concession on Certain Arguments). Refer to IRM 8, Appeals, for additional information.

    1. Internal Revenue Service Publication 5, Your Appeals Rights and How to Prepare a Protest If You Don't Agree, provides guidance to taxpayers on how to prepare a formal request for appeal when they do not agree with Service findings. It also states that Appeals can not consider reasons for disagreeing if the reasons do not come within the scope of tax law (frivolous arguments).

    2. Internal Revenue Service Publication 5 provides that taxpayers may request a meeting or a telephone conference with the supervisor of the person who issued the findings in their case. These informal requests do not require a referral to the Appeals office for resolution; however, this provision does not extend to requests based upon frivolous arguments.

    3. Requests for Appeal, based upon frivolous arguments, will not be given consideration and do not require a formal disallowance. Process as follows:
      If the taxpayer contact is by telephone, explain the taxpayer's rights regarding account information and the process for receiving notification of examination actions as well as the potential repercussions for maintaining a frivolous tax position, e.g., 30/90 day letter with subsequent assessment of tax and application of IRC Section 6702 penalty assessment for each frivolous tax return or specified frivolous submission.
      For Ogden Campus Exam employees working frivolous filings only: If the taxpayer contact is by frivolous correspondence, destroy correspondence.

    4. Requests for Appeal based upon non-frivolous arguments will be given consideration and should be referred to Appeals.Refer to IRM 4.4.5.4, Non-Docketed Cases, for guidance.

    5. If the taxpayer contact is by telephone, advise taxpayer to submit written request.

4.10.12.2.6  (02-23-2012)
Civil Fraud

  1. See IRM 25.1.6, Civil Fraud, and IRM 4.19.16.1.3, Criminal Investigations (CI) Referral Non-EITC 1040X, for processing cases with potential civil fraud .

  2. Frivolous filings will be carefully reviewed to determine if appropriate to refer for potential civil fraud.

  3. Route any cases meeting the established criteria for civil fraud referral through the FRP Senior Technical Advisor.

4.10.12.2.7  (02-23-2012)
Unpostables

  1. Refer to IRM 3.12.179, Unpostable Resolutions, for additional information on unpostable conditions and procedures.

4.10.12.3  (02-23-2012)
Screening Correspondence

  1. Mail will be counted when it is received in the FRP Program and the volume will be entered to FRP Master using "Held Unassigned" option on FRP Master.

  2. Correspondence will be reviewed for legitimate issues or information that has impact on the tax or penalty assessment on the taxpayer's account and worked appropriately. It will also be reviewed for potential promoter/preparer investigation referrals.

  3. Correspondence that poses no legitimate tax or account questions and has no impact on the computation of tax and/or penalty assessments but is merely presenting an argument that has no basis in law or fact for the express purpose of expressing dissatisfaction with substance, form or administration of the tax laws is considered frivolous and will be destroyed.

    1. Do Not Destroy correspondence received on cases where the Fraud indicator is present on FRP Master, mail will be routed to the tax examiner working the potential fraud case.

    2. Although frivolous correspondence is excluded from Action 61 criteria, every attempt will be made to respond within 30 days of the IRS received date. IRM Refer to IRM 21.3..3.2,"What is Correspondence - Policy Statement P-6-12 Exclusion List."

  4. Screen new correspondence to determine if frivolous.

  5. If frivolous, update FRP Master to reflect all issues.

  6. If not frivolous, do not create new FRP Master account; if account exists on FRP Master, update to reflect appropriate non-frivolous information.

  7. Address all issues raised including, but not limited to:

    • Freedom of Information Act (FOIA), Privacy Act, 5 U.S.C. Section 552(a), IRC Section 6103 /IRC Section 6203 , and Federal/State/Foreign Agency Requests - Input mail on FRP Master with earliest IRS received date. Attach SUMRY print to front of mail and write, "Input to FRP Master" on upper right-hand corner of print. Write, "Considered in Exam" on document itself. Ensure FRP received date is on document but do not include initials, dates or other information on the FOIA request. Route to FRP Disclosure Coordinator for coordination with Disclosure Office.

    • CI Freezes and/or Criteria – Refer to IRM 4.10.12.2.5, "Case Referrals to and from Other Programs" , for additional information.

    • Collection Due Process (CDP) or Collection Appeals Request (CAP) – Input mail on FRP Master with earliest IRS received date. Attach ENMOD print to front of mail, highlight BOD at top center of print and write "Input to FRP Master" on upper right-hand corner of print. Write, "Considered in Exam" on document itself. Route to Collections Miscellaneous Department. Refer to IRM 4.10.12.5(7) for additional instruction.

    • Response to Collections Notices (CP 504, CP 518, CP 15) - Input mail received date on FRP Master. Write "Input to FRP Master" in upper left-hand corner. Route per local procedure.

      Note:

      : Do not route anything that indicates the receiving area has already seen the correspondence, e.g., Collections has taken their action concerning a response to CP 515, do not route back to Collections.

    • Frivolous Forms 8300 issued against an IRS official or employee will be provided to management for proper disposition.

    • Informant items are considered - Form 3949/3949A Information Referrals including correspondence that is not requesting a reward - Route to: IRS 5045 E Butler Stop C2008 Fresno, CA 93727; Form 211/211A Application for Reward for Original information – Route to: IRS, Whistleblower Office, SE: WO 1111 Constitution Ave., NW, Washington, DC 20224; or Informant correspondence requesting a reward – Route to ICE Team Coordinator

    • Unprocessed POA requests - Check CFINK to ensure pertinent changes have been input. If information has not been updated, fax form to POA unit and destroy request.

    • Bankruptcy Information – Refer to IRM 4.27 Bankruptcy for additional information. • KITA - Route to KITA Coordinator.

    • Hardship/TAS Criteria - Ensure FRP Master data is input and contact TAS. Refer to http://tasnew.web.irs.gov/index.asp

    • Existing control outside of FRP - Input required data to FRP Master and contact controlled employee to determine appropriate processing of correspondence.

    • Existing controls within FRP - Input required data to FRP Master and destroy frivolous correspondence - do not route unless correspondence has a direct impact on tax and/or penalty assessment.

    • Address Changes - Updates to addresses can only be made in accordance with IRM 4.19.3.20.1.6, Address Updates; however, alternate addresses must be entered to FRP Master using the Alt Address tab

  8. Screen correspondence for pertinent case information utilizing IDRS command codes SUMRY/TXMOD/IMFOLI to determine open years, controls and freezes. Route to controlled area or freeze condition area as appropriate.

  9. For uncontrolled IMF correspondence without freeze conditions, if frivolous:

    1. Ensure FRP Master is updated to reflect earliest IRS received date, Program Code, Tax Period(s) - enter year(s) referred to in correspondence if available, Preparer/Promoter Name if available and Action Code - Select action code from drop down menu

    2. Refer to IRM 4.10.12.3.1, Frivolous Correspondence for further guidance.

    3. Destroy correspondence if not needed for further case building.

  10. Correspondence not deemed frivolous will be:

    • routed to assigned control if present,

    • routed to Audit Recon if in response to a closed Exam case,

    • routed appropriately per local routing procedures

  11. Non-frivolous correspondence will be counted out of inventory upon disposition using "Held Unassigned" option on FRP Master, volume must be input as a negative.

  12. Charge time spent screening, working and counting correspondence to OFP code 91853 (91853(C) on FRP Master).

4.10.12.3.1  (02-23-2012)
Frivolous Correspondence

  1. Correspondence indicating unwillingness to file or pay taxes based on frivolous arguments will be worked under this category. Frivolous correspondence is not subject to the frivolous return penalty except as noted below.

    Note:

    Correspondence purports to be "in lieu of" a tax return or informal claims are subject to the Section 6702 penalty but otherwise worked as correspondence.

  2. When the Service receives frivolous correspondence, Letter 3175C is sent to inform taxpayers that their positions are frivolous and that further correspondence regarding frivolous issues will not received responses. This letter constitutes outreach education for frivolous filings.

    Note:

    Systemic issuance of Letter 3175C may be conducted as deemed appropriate.

  3. Process frivolous correspondence as follows:

    1. Review mail to ensure it is frivolous.

    2. Route non-frivolous, mis-routed mail to appropriate area using local procedures.

    3. Research IDRS for case controls, freezes and histories that may affect processing the case. (e.g., TC 971 AC 281 on Enmod indicates a Fraud case is in development. Coordinate as appropriate.)

    4. Enter pertinent information to FRP Master and select appropriate closing action code.

    5. Destroy any frivolous correspondence that has no direct bearing on tax and/or penalty assessment.

      Note:

      If correspondence will be used to document civil or criminal fraud, Do Not Destroy.

    6. Refer to IRM 4.10.12.3, Screening Correspondence and IRM 4.10.12.2.5, Case Referral for further guidance.

  4. Charge time spent screening, working and counting correspondence to OFP code 91853 (91853 on FRP Master).

4.10.12.3.2  (02-23-2012)
Screening Returns and Claims

  1. Designated employees will timely review all program receipts to determine appropriate handling including referrals to the SB/SE LDC. The nature of frivolous filings requires careful consideration of the inventory as a whole; therefore, screening will be conducted on documents prior to their assignment out to program employees. Review the entire population of new receipts to identify:

    • like characteristics

    • similar handwriting

    • geographic similarities

    • similar printing fonts

    • promoter names and/or websites

    • promotion characteristics

    • preparers

    • informant items

    • any information that would identify an Abusive Tax Avoidance Transaction (ATAT) promotion, promoter, or preparer.

  2. Filings will also be screened for International implications and subsequent coordination with International Exam. International Valid, frivolous filings require processing at the appropriate Campus handling International returns. International filings include:

    • Form 2555

    • Form 1040NR

    • Tax Treaties

    • Foreign Income

    • Foreign address including APO/FPO such as for military personnel

  3. Contact filers by telephone, when appropriate, to determine preparer, promoter, what was paid, how the promotion was detected, etc.

  4. Screen new returns and claims to determine if frivolous.

    1. If not frivolous, process as appropriate ensuring all taxpayer issues are addressed.

    2. If frivolous, determine argument code, preparer/promoter if applicable and update FRP Master, Initiate the compliance check and process accordingly using the applicable Section of the IRM; Conducting Compliance Checks, IRM 4.10.12.4.2, Reparations and Other Illegal Credit Filings, IRM 4.10.12.4.3, Valid, Frivolous Returns, IRM 4.10.12.4.4,Invalid, Frivolous Returns, IRM 4.10.12.4.5 and Frivolous Amended Returns and Claims, IRM 4.10.12.4.6 .

  5. Review for legitimate issues or information that has impact on the tax or penalty assessment on the taxpayer's account and work appropriately.

  6. If taxpayer address appears to have been changed to that of a promoter/preparer, do not change IDRS address. Add promoter/preparer address to FRP Master as an alternate address.

  7. When new frivolous arguments are identified:

    • Obtain Chief Counsel Opinion that determines they are frivolous.

    • Identify appropriate argument code.

    • Issue FRP Alert describing new argument to educate FRP employees.

    • Apprise FRP Coordinators, CI, TEC, SB/SE LDC as appropriate.

    • Issue SERP Alert/Hot Topic if impact on Service is significant.

    • Update training materials and IRM.

    • Notify Chief Counsel to update Service websites and/or create revenue rulings if appropriate

  8. When new preparers or promoters are identified, enter the name and promotion on FRP Master Project Status Listing (PSL).

  9. Coordinate civil investigations with SB/SE LDC as appropriate.

4.10.12.3.3  (02-23-2012)
Employee Frivolous Filings

  1. Frivolous filings received from Service employees may be identified through FRP employee research, outside referrals such as CI, Customer Service, TAS, Field Agent reports, computer database matching, etc.

  2. Any frivolous return meeting this criteria must be processed, regardless of its validity before referral. Refer to IRM 4.10.12.4.8 for processing instructions. Once processing is completed, original returns will be forwarded to TIGTA. Forward a copy of the return to Field Function for Audit.

  3. Under the guidelines for working RRA98 Section 1203 allegations, frivolous filings received from Service employees will be reported promptly and directly to TIGTA, with clear annotation that the audit needs to be referred to their local PSP per IRM 4.1.4.2.10 Employee Audits. When referring to TIGTA, annotate that the IRC § 6702 penalty will need to be addressed at the conclusion of the field audit, if the employee maintains their frivolous position.

4.10.12.3.4  (02-23-2012)
C-Fillings

  1. C-Filings (generally considered confused filings) are broken down into three categories:

    1. Those that make claims for various types of deductions, credits or overpayments/refunds that have no relation to reality. The Service will treat these as any other frivolous filing, pre-notify and allow the filer to correct. If they do not comply, assert the penalty and initiate SFR, if applicable.

    2. Those that have entity information, but basically nothing else or little else or those that have nonsensical or rambling statements or outrageous arguments. Use judgment in determining if the filer may be "confused" . If the Technician believes the filer may not be competent, return the document to the filer with a No Consideration letter and assert no penalty. If the Technician concludes the filer is responsible, pre-notify and proceed as normal. However, if doubt exists, do not impose the penalty

    3. Those that have no identifying information for the taxpayer that would allow the Service to correspond. Treat as having no legal value and destroy.

4.10.12.4  (02-23-2012)
Case Processing

  1. Returns not eliminated from FRP inventories during initial review should be timely processed according to their filing type. Research should be conducted to determine suitability for continued Exam processing based upon income verification and related account attributes.

  2. Process cases as follows:

    1. Ensure all taxpayer issues are addressed as appropriate.

    2. Ensure any taxpayer responses are associated and considered prior to determining next action.

    3. Research IDRS for relevant case controls, T-signs, freezes and histories that may affect processing the case. Coordinate as appropriate.

    4. See IRM 4.19.13.3, Researching Cases

    5. Review each document to determine if frivolous.

  3. If filings appear potentially frivolous but do not fall under existing processing guidance, elevate through FRP Technical Advisor to HQ Exam Policy Program Analyst for appropriate action.

  4. If not frivolous, process as appropriate using IRM 4.10.12.1.3.(7) ensuring all taxpayer issues are addressed.

  5. If frivolous, determine if the return is valid, invalid or processable, See IRM 4.10.12.1.3.

    1. Control cases on IDRS and FRP Master within 15 business days of FRP received date. See IRM 4.10.12.4.1, Control of Inventory, for additional information

    2. Ensure appropriate notification is sent to taxpayer on each year of each tax period within 30 days of FRP received date.

      Note:

      When the Service receives what it determines to be a frivolous filing under IRC Section 6702, the Service issues Letter 3176C. The letter 3176C informs taxpayers that their return is frivolous and subject to a $5000 civil penalty under Section 6702. The letter also gives the taxpayer the opportunity to submit non-frivolous returns or statements within 30 days of the date of the letter to avoid assessment of the penalty. The issuance of this letter is not a statutory requirement and failure to issue the letter does not indicate the penalty should be abated.

    3. Conduct the compliance check, IRM 4.10.12.4.2, to determine if any potential frivolous returns were processed in error. Returns not filed are addressed through an automated process.

  6. Document all actions taken on Form 12616 Correspondence Exam History Sheet, FRP Master and IDRS

  7. For additional case processing instruction see the appropriate section of the IRM for the type of case you are working:

    • IRM 4.10.12.4.3, Reparations and Other Illegal Credit Filings

    • IRM 4.10.12.4.4, Valid, Frivolous Returns

    • IRM 4.10.12.4.5, Invalid, Frivolous Returns

    • IRM 4.10.12.4.6, Frivolous Amended Returns and Claims

4.10.12.4.1  (02-23-2012)
Control of Inventory

  1. Maintain current inventory information on FRP Master to ensure taxpayers receive accurate and consistent treatment. Individuals not in compliance for two consecutive years (filing and paying taxes) will be monitored for subsequent compliance.

    1. Cases will be assigned into FRP inventory within 15 business days, during periods of high volumes, using FRP Master and IDRS controls as appropriate. Every effort will be made to assign cases into FRP inventory within five business days.

    2. To initially control cases on specific IDRS accounts, determine the following using Document 6209 (Section 13) and the IDRS Command Code Job Aid on SERP as needed -Status code - A , Control Category - AUDT, Activity Code - ASSIGN, Unit or employee IDRS number, Earliest IRS Received Date of frivolous document.

  2. Input TC 599-17 or TC 599-94 within 15 business days of FRP received date. Input of the TC 599-17 and 599-94 indicates a return has been secured and prevents issuance of collection notices requesting a return be filed for the delinquent tax module. Ensure appropriate follow-up action is taken on the module.

  3. Input a TC 810 on approved promotions, using jurisdiction code "4" for all years with potential for refund, unless one already exists. TC 810 must be reversed when the RSED expires, or when a taxpayer comes into compliance.

4.10.12.4.2  (02-23-2012)
Conducting Compliance Checks

  1. Cases will be researched to establish compliance for filing requirements based on income verification and appropriate return expenses and credits on filed processed returns to identify any potential frivolous returns that were processed in error. Ensure all related TINs and prior/subsequent years filing history are researched for compliance, as well as additional sources of income such as K-1’s, income reported on related business TIN’s, income from erroneous refunds, etc. See IRM 4.19.17.1.2.2, Conducting Compliance Checks, for more information.

  2. A compliance check is an analysis of all tax periods where IRP is currently available to identify any potential frivolous returns that were processed in error. Non-filed tax years are addressed through an automated process. Review Posted Return column on CC IMFOLI on primary and secondary TIN to determine which years will require additional research. Use a TE worksheet to compile all the information.

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    Use the criteria listed below to decide if there is SFR potential on frivolous returns processed in error:

    1. If the tax year indicates no return posted (NONE): Do not research further.

    2. If the tax year indicates return has been filed (ELF, SUBST4, or POSTED).

      Note:

      Systemic compliance checks may be conducted as deemed appropriate.

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  5. Enter results from TE worksheet on FRP Master in the compliance history field.

  6. If the compliance check reveals deficiency potential for Campus examination, select case(s) for examination processing. See IRM 4.10.12.6

  7. Sources of Taxable Income:

    • Medical payments — Form 1099-MISC, compensation paid to doctors, dentists, and others in the medical profession; subject to self-employment tax unless clear indication taxpayer is not in a medical profession.

    • Wages, Tips and Other Compensation — Form W2, (Include wages paid during the year (prior to payroll deductions), non-cash payments (including fringe benefits), total tips reported, and certain employee business expense reimbursements. Sick pay is considered taxable wages unless it is clearly identified as employee paid sick leave. Wages may be fully or partially reported on tax return wage lines, as other income on Form 1040, on Schedule C or F, or as income on attachments. See current tax law for allocated tip income

    • Dividends, Interest, and Original Issue Discount — Form 1099-DIV, Ordinary dividend distributions, capital gain distributions, and nontaxable distributions (not included as income). Consider OID only when reported by a financial institution.

    • Capital Gain Distributions — Form 1099-DIV; see current tax law for taxable portion.

    • State or Local Income Tax Refunds (SITR) — Form 1099-G, if taxpayer itemized in prior year.

    • Agricultural Subsidies (AGSUB) — Form 1099-G, Government payments to farmers or businesses to assist in a policy deemed advantageous to the public; subject to self-employment tax.

    • Patronage Dividends — Form 1099-OATR, paid by cooperatives. Considered income unless attributable to family items, capital assets or depreciable assets used in taxpayers business; may be subject to self-employment tax.

    • Rents/Royalties —Form 1099-MISC, not usually subject to self-employment tax unless taxpayer is in business of rental property and has reported rental income on Schedule C or F; may be subject to self-employment tax

    • Pensions and Annuities — Form 1099-R or W-2P; see current tax law for taxable portion.

    • IRA Distributions –Form 1099-R or W2-P; see current tax law for taxable portion.

    • Lump-Sum Distributions — Income received within one tax year from an employer’s qualified pension, stock bonus, or profit-sharing plan, including employee savings plans. The case minor may reflect both ordinary income (ORINC) and capital gains (CG).

    • Conduit Income — Schedule K-1, taxpayer portion from a partnership, estate, trust, or small business corporation. Do not include negative amounts; may be subject to self-employment tax.

    • Non-employee Compensation (NEC) — Form 1099-MISC, fees, commissions, or any other compensation paid by a business to an individual that is not an employee; subject to self-employment tax.

    • Unemployment Compensation — Form 1099-G, repayments of overpaid unemployment compensation made during the tax year are treated as a reduction of the gross amount received.

    • Social Security/Railroad Benefits — Form SSA/RRD, see current tax law for taxable portion.

    • Fishing Income — Form 1099-MISC, income earned by fishing boat crew members; subject to self-employment tax.

    • Prizes and Awards — Form 1099-MISC, the fair market value of the prize or award.

    • Gambling Income — Form W2-G, gross winnings from a gambling activity.

    • Forgiveness of Federal Indebtedness (FOFI) — Form 1099-G, considered income if a debt owed to the Federal government was declared uncollectible.

    • Debt Out/Debt Satisfied/Fair Market Value (FMV) — Form 1099-A, acquisition or abandonment of property that is security for a debt for which the payer is the lender. Do not include negative amounts.

    • Taxable Grants — A grant determined to be taxable by the payer and is considered income to the taxpayer

    • Stocks/Bonds — Form 1099-B, proceeds from security sales involving stocks, bonds, other debt obligations, commodities, or forward contracts.

    • Bartering — Form 1099-B, an exchange of one taxpayer’s property or services for another taxpayer’s property or services. The fair market value of property or services received through bartering is taxable.

    • Crop Insurance — Form 1099-MISC, amounts received by farmers for destruction or damage to crops; subject to self-employment tax.

    • Other Portfolio Income — Schedule K-1, income derived in the ordinary course of the business and is not subject to the passive activity rules; may be only subject to capital gains tax.

    • Forfeitures — An early withdrawal penalty is a forfeiture of interest income due to premature withdrawal of capital on a time savings account. Penalty can exceed amount of interest paid to the taxpayer for the year.

    • IRA/SEP Distribution — Form 1099-R; see current tax law for taxable portion. • Realized 89 (or other tax year) — Income received from the sale of an item. • Real Estate (Real es sl) — Form 1099-S, the sale or exchange of one to four family real estate transactions.

    • Golden Parachute Payment (IRC 280G & IRC 4999) — Payments in the nature of compensation to a disqualified individual. Disqualified individual means an officer, shareholder, or independent contractor whose employment has been discontinued due to a change in ownership or control of the corporation. They are severance pay and should be reported as income.

    • ORINC/ORD Income (Ordinary Income) — Form 1099-DIV, income received within one tax year from an employer’s qualified pension, stock bonus, or profit-sharing plan, including employee savings plans.

    • Permanent Dividend Fund (State of Alaska) — Form 1099-MISC, dividend income from the State of Alaska paid to eligible Alaska residents. Not subject to self-employment tax.

    • Non-employee Comp (State of Alaska longevity bonus) — Form 1099-MISC, paid to qualified Alaska residents at least 65 years of age and living in Alaska 20 years. Not subject to self-employment tax.

    • Dependent Care (Depend Care) — Dependent care benefits paid by the taxpayer’s employer • Amt of Contract — Form 8596, contract with the Federal Government (IRC 6050(m)).

    • Non-IRP Income Sources - Self-assessed income reported by taxpayer, erroneous refund income received as a result of a frivolous filing.

  8. Include self-employment, 10% early distribution tax, and excise tax where applicable.

  9. Do not include duplicate or rollover items, bad payer information, or items where the payer name is garbled, missing, incorrect, or incomplete.

4.10.12.4.2.1  (02-23-2012)
Area Office Procedures

  1. If the compliance check reveals case meets criteria for deficiency potential for area office examination, process as follows:

    1. Continue Frivolous procedures, pre-notify and assess penalty using IRM 4.10.12.5, if applicable.

    2. If referral to classification and/or compliance check results in referral to area office exam, transship to area office PSP via Form 3210.

    3. If case has an open AIMS in an area office – AMSOC to appropriate PBC, SBC, and EGC, then send case to area office.

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.10.12.4.3  (02-23-2012)
Reparations and Other Illegal Credits Filings

  1. Reparations claims received after April 14, 2002, are subject to assertion of IRC Section 6702 penalties consistent with all other frivolous filings.

  2. When working a return or claim containing a Form 1099-OID, DO NOT use either the income or the withholding as entered on the document for purposes of determining deficiency. In the event the false Form 1099 was processed and shows on IRP, ignore it completely.

    Note:

    Enter the amount claimed as a refund in the "revenue protected" field on FRP Master. Refer to IRM 4.10.12.2.3(9) for more information.

  3. Never update an address to Federal office address. Do not update a name line to any Treasury executive or managerial official. In the event that the address or name line has been updated with either of these scenarios, take corrective action to reflect the taxpayer's correct information.

  4. All reparation claims or claims for refund based on Form 2439, regardless of return type or correspondence received will be worked under OFP 91852 or 91854, unless filed on a BMF form, in which they will be worked under 91858. Cases will be controlled on IDRS on TXMOD to an assigned technician. Input "F2439" as the activity on TXMOD.

  5. Ensure returns include signature (both signatures are required on a joint return) , claim amount, and claim year. If the jurat has been altered, or any of the preceding conditions are not met, the return is not a valid claim. Use judgment to determine the taxpayers intent when working these claims

  6. Routine research will be performed when working the claims. TXMOD/IMFOL should be used to determine if the filing is an original filing or if there is a record of an original filing, if there are any freeze codes present that may affect processing of the claim. compliance checks will be performed to ensue the taxpayer has not filed any additional frivolous returns. If there is an indication of CI involvement, route the cases to the FRP CI Coordinator for further action. If there is an open examination route the case to the team lead for further action.

  7. Watch for returns with preparer, promoter involvement. If the taxpayer submits documents supporting his/her frivolous return prepared by a third party, copy and route to the FRP Coordinator or Sr. Technical Advisor unless there is a red check mark in the lower left hand corner, indicating a copy has already been provided.

  8. To determine processing of the claim:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

    ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡

4.10.12.4.4  (02-23-2012)
Valid, Frivolous Returns

  1. Frivolous returns that have been determined to be valid filings by Counsel will be worked under this category using Program Code 91852.

  2. Valid frivolous returns are subject to the frivolous return penalty and begin the statute of limitations under IRC Section 6501.

  3. Control case for assessment statute (ASED). ASED begins with receipt of valid returns requiring proper control and timely processing (see IRM 25.6, Statute of Limitations).

  4. Send letter 3176C (including Publication 3498) to inform taxpayer of frivolous position within 30 days of FRP received date and request non-frivolous return. Suspend case for 45 days. If taxpayer or the taxpayer's representative calls, during the 30 day period,and states they are gathering information to submit a corrected return and they need additional time, allow the taxpayer an additional 15 days from the original 30 days period to file a corrected return. Suspend the case for 60 days from the date of the Letter.

  5. If response is received with a processable, non-frivolous return, process through regular return procedures and

    1. Do not assess the frivolous return penalty.

    2. Verify taxpayer filed a correct and accurate return.

    3. Stamp non-frivolous returns with FRP cleared, include last 5 digits of IDRS number in the upper left corner. Attach original frivolous return to the back of the non-frivolous return. Indicate "Do Not Detach" on top of the frivolous return.

    4. If return has questionable expense/credit items, refer to Campus Classifier for determination of case selection and referral to area office.

    5. Notate actions taken on Form 12616 Correspondence Exam History Sheet, update FRP Master, and ensure revenue protection is recorded.

    6. Close case controls.

    Note:

    If a good return/claim is received and cannot be worked within the 30 day time frame, a L1721C must be generated to notify the taxpayer that a refund is being held.

  6. If letter 3176C was previously sent and a frivolous response is received or no response is received after 45 day suspense period has expired:

    1. Ensure frivolous return penalty assessment is made immediately on the original frivolous return as well as any frivolous return received in response to the Letter 3176C. See IRM 4.10.12.5.2 Penalty Case Creation.

    2. Update Form 12616 Correspondence Exam History Sheet, IDRS and FRP Master with actions taken.

    3. If a frivolous return is received and it is processable, edit return for processing.

    4. Ensure all documents are statute cleared prior to forwarding to Submission Processing.

    5. Send return to Submission Processing for initial processing requirements using editing instructions listed below. See IRM 4.10.12.4.8 Editing Instructions. Returns will be coded and edited to reflect specific guidance for Submission Processing systems. These codes allow returns to validate under various conditions after manual review. The codes are listed in Document 6209.

    6. If the compliance check reveals deficiency potential for Campus examination, initiate Examination Case Processing procedures, see IRM 4.10.12.6, if appropriate

    7. If the compliance check reveals deficiency potential for area office examination, route to appropriate area office

    8. Valid, frivolous IMF returns requiring processing will be referred by Ogden Compliance Service to Fresno Submission Processing for expedited handling. FRP will perform all Code & Edit activities prior to shipment to Fresno. See 4.10.12.1.3.2 for more information.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.10.12.4.5  (02-23-2012)
Invalid, Frivolous Returns

  1. Frivolous returns that have been determined to be invalid filings by Counsel will be worked under this category using Program Code 91852.

  2. Invalid frivolous returns are subject to the frivolous return penalty but do not begin the statute of limitations under IRC Section 6501. Refer to IRM 25.6.1.6.14 Criteria for Establishing a Statute of Limitation Period.

  3. Send letter 3176C (including Publication 3498) to inform taxpayer of frivolous position within 30 days of FRP received date and request non-frivolous return. Suspend case for 45 days.

  4. If response is received with a processable, non-frivolous return, process through regular return procedures and:

    1. Do not assess the frivolous return penalty.

    2. Verify taxpayer filed a correct and accurate return.

    3. Stamp non-frivolous returns with FRP cleared, include last 5 digits of IDRS number in the upper left corner. Attach original frivolous return to the back of the non-frivolous return. Indicate "Do Not Detach" on top of the frivolous return

    4. If return has questionable expense/credit items, refer to Campus Classifier for determination of case selection and referral to area office.

    5. Notate actions taken on Form 12616 Correspondence Exam History Sheet, update FRP Master and ensure revenue protection is recorded.

    6. Close case controls

  5. If letter 3176C previously sent as required, a frivolous response is received or no response is received after 45 day suspense period has expired:

    1. Ensure frivolous return penalty assessment is made immediately on the original frivolous return as well as any frivolous return received in response to the Letter 3176C.

    2. Update Form 12616 Correspondence Exam History Sheet, IDRS, RGS and FRP Master with actions taken.

    3. If a frivolous return is received and it is processable, edit return and have processed.

    Note:

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.10.12.4.6  (02-23-2012)
Frivolous Amended Returns and Claims

  1. Forms 1040X, 843, and subsequent filings to original 1040’s based on frivolous arguments will be worked under this category. Enter on FRP Master using Program Code 91854(I).

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. Frivolous F1041s (Argument Codes 33,34 and 46) will be treated as claims when entering the document on FRP Master, regardless of whether or not the filing is an original or a subsequent filing on MFT 05. Input as program code 91854(B), without exception.

  3. Frivolous amended returns and claims are subject to the frivolous return penalty.

  4. Send appropriate letter 3176C (including Publication 3498) to inform taxpayer of frivolous position within 30 days of FRP received date. Suspend case for 45 days.

  5. If response is received indicating taxpayer wants to rescind frivolous position:

    1. If an A freeze exists, Input TC 290 .00 with blocking series 05.

    2. Do not assess the frivolous return penalty.

    3. Select appropriate closing action code on FRP Master.

    4. Attach frivolous document to controlling DLN.

    5. Close case controls.

  6. If letter 3176C previously sent as required, a frivolous response is received or no response is received after 45 day suspense period:

    1. Assess the frivolous return penalty on the original frivolous claim as well as any frivolous claim received in response to the letter 3176C

    2. Additional frivolous claims for the same tax periods do not require an additional letter 3176C be sent; however, each frivolous claim filed is subject to the frivolous return penalty.

    3. If an A freeze exists, input TC 290 .00 with blocking series 05 on MFT 30.

    4. Select appropriate closing action code on FRP Master.

    5. Attach frivolous document to controlling DLN.

    6. Conduct compliance check and process accordingly.

  7. Non-frivolous claims received after original FRP assessmentswill be routed to Audit Reconsideration for consideration.

  8. The frivolous return penalty is generally not subject to the Service’s post-assessment penalty appeals program. generally to challenge the imposition of the penalty, the taxpayer must pay the penalty in full, file a claim for refund, and file suit in a Federal District Court or the U.S. Court of Federal Claims following the general claim procedures of IRC Section 6511 and the general refund suit rules of IRC Section 6532. However, a request for Appeals consideration should be considered and reviewed as outline in IRM 4.10.12.5.5 Post Penalty Assessment Processing.

4.10.12.4.7  (02-23-2012)
Fraudulent, Frivolous Returns

  1. Returns and/or documentations will be reviewed for potential fraud penalty assertions. This section pertains to frivolous filing promotions approved to be worked as fraud penalty cases within FRP. Approval to work frivolous filing promotions as fraud penalty cases within the FRP must be secured by HQ before initiation.

  2. HQ will coordinate with FRP Senior Technical Advisor, local Campus Fraud Coordinator (CFC) and Area Counsel in the development of Form 886A language for specific promotions before fraud cases are assigned for development within the FRP.

  3. Once approval has been secured from HQ, cases will be worked under Program Code 91856

  4. Determine validity of filings and, if appropriate, correct accounts of processed returns. See IRM 4.10.12.7.6 Back-off Procedures for Processed, Invalid Returns

  5. Determine whether the filing was received from a community property state. If so, coordinate with campus CFC for appropriate split.

  6. Prepare and send applicable pre-notification letters. (See IRM 4.10.12.4(5) b), Letter 3164 and any other letters or attachments as specified for particular promotion.

  7. Prepare Form 12616 Correspondence Exam History Sheet with suitable information (i.e., X-reference SSN, compliance history and statute date.) Initiate SFR or audit procedures as appropriate for specific promotion. Establish AIMs

  8. Prepare and forward Form 12175, Third Party Contact Report, to campus coordinator.

  9. Prepare third party contact letter, if applicable to specific promotion. Suspend case for 15 days.

  10. If no response received from third party contact, initiate follow up communication telephonically if possible, by mail if not. Suspend case for 15 days.

  11. Upon confirmation of income or expiration of second suspense period, prepare Forms 13549 and 11660, updating Form 12616 history sheet with suitable information. Forward case to FFC/CFC for approval.

  12. Upon approval for fraud development, update AIMS to project code 0076 and status 17 using applicable tracking codes.

  13. Prepare Form 4700 Examination Work papers, updating as appropriate.

  14. Prepare report to include assertion of applicable fraud penalties (e.g., I.R.C. § 6651 (f) - Fraudulent Failure to File with I.R.C. § 6663 as alternate position or vice versa), Form 886A (developed for specific promotion), Letter 1862 and Form 4549. (Include any other applicable penalties in alternate position as well.) Consider all applicable income. Suspend case for 30-day review by CFC and FTA

  15. Once 30 day suspense period has expired, prepare 90 day Packet (Form 4549 with abbreviated Form 886A language pulled from FRP Master). Report will require hand-typing and must include Form 5600 for any manual penalty assessments, ensuring data matches report.

  16. Once CFC approval has been given, forward case file to Area Counsel for review, updating work papers accordingly.

  17. Once Counsel has approved fraud penalty case, forward to appropriate function for 90 day suspense period. Once suspense period has expired, close case accordingly.

4.10.12.4.8  (02-23-2012)
Editing Instructions

  1. Current year, valid frivolous returns requiring processing will be edited as follows:

    1. Ensure received date is correct (earliest date) and in red on the return. Circle out any other dates.

    2. Verify withholding is correct. Taxpayers may include amounts withheld for Social Security, Medicare, or state tax and should not be allowed. Indicate on Form 4227 to allow only correct withholding amount.

    3. Stamp return "FRP" cleared, include last 5 digits of IDRS number on top left to ensure Processing employees identify.

    4. Edit return as follows:

      a. Computer Condition Code (CCC) "3" in red below the entity portion in the center of the return. This code freezes refunds.
      b. Return Processing Code (RPC) "L" in the right-hand margin next to Total Income (Line 22 on Form 1040) for blank returns. This code indicates the return is blank or contains all zeros or insignificant entries other than entity information.
      c. RPC "G" in right-hand margin next to Total Income if the return reflects withholding. This code forces the return to post and bypass certain error checks.
      d. Action Code "331" edit in red in the bottom left margin of the return. This code causes the return to reject for further handling.
      e. Complete Form 4227, Intra SC Reject or Routing Slip, and staple to return in the center left side.

      • Name-Unit – enter your TE# and FRP

      • Date – enter current date

      • Route to – check "Reject Correction"

      • Other activity – write "Attention Rejects"

      • Other (explain) – enter the argument code used, CCC-3 and 331.

  2. Edit prior year returns just as current year returns with the exception that they must have the tax year underlined in red and the line item numbers must be corrected to match current filing year returns.

4.10.12.4.9  (02-23-2012)
Statutes

  1. Every effort will be made to work returns within the normal three year statute of limitations in assessment under IRC Section 6501. See IRM 25.6, Statute of Limitations, for additional information.

  2. Original returns:

    1. Valid frivolous return filings begin the assessment statute of limitations under IRC Section 6501. See IRM 4.10.12.4.4 for the definition of a valid frivolous return.

    2. Invalid frivolous return filings do not begin the assessment statute of limitations under IRC Section 6501. See IRM 4.10.12.4.5 for the definition of an invalid frivolous return. Although these returns do not begin the statute, every attempt will be made to work the cases under the normal three year statute of limitations. However, if an invalid return is not worked within the normal statute date, an SFR can still be initiated after the normal statute expiration date. See IRM 25.6.1.9.4.5 Substitute for Return (SFR).

  3. Claims: Timely filed frivolous amended returns and claims have the same assessment statute considerations as valid returns except when refund has been held or offset.

  4. Penalties

    1. As a general rule, the statute of limitations to assess IRC Section 6702 penalty begins with a valid return filing; however, if an exception applies, e.g. taxpayer files an amended return on the last day eligible to file, contact Counsel for a determination.

    2. If there has not been a valid return filed, there is no statute of limitations for assessing IRC Section 6702 penalty.

  5. Specific cases may fall under the extended statute of limitations provided in IRC Section 6501(c) (1). To rely on this extended statute of limitations, the IRS must have proof that the taxpayer has filed a false or fraudulent return. The government must prove fraud or that actions taken by the taxpayer show intent to evade or defeat the tax. The IRS has the burden of proof on this issue. Determinations under this code Section must be made on a case-by-case basis.

4.10.12.4.10  (02-23-2012)
Outgoing Correspondence

  1. Outgoing correspondence must address all taxpayer issues, request additional information, if needed. Follow guidelines per IRM 4.10.1.5.3.2, Written Communication.

  2. All letters used in FRP are selected and approved by SB/SE Headquarters, Compliance Policy.

  3. Taxpayer contact, made by Exam, generally requires appeals rights notification per IRM 4.10.1.6.3, Notification of Appeal Rights.

4.10.12.5  (02-23-2012)
Frivolous Return Penalties Overview

  1. Returns and/or documents meeting the criteria for frivolous return penalties will be worked under this category. Time will be charged to OFP 91855.

  2. IRC Section 6702 provides for an immediate assessment of a $5000 civil penalty against individuals who file frivolous documents. The penalty is not based on tax liability. There does not need to be an understatement of liability in order for the penalty to be imposed and the penalty is imposed in addition to any other penalty.

  3. Penalties will be assessed on each frivolous filing received for which the filer does not file a corrected return or rescind the frivolous position within the prescribed time period. See IRM 4.10.12.5.1. This includes additional frivolous filings received.

  4. Penalties will be assessed without regard to whether the claim is a copy or an original, whether the signature on the claim is a copy or an original or whether there has been an IRC Section 6702 penalty previously assessed for the same tax period.

  5. If unable to determine whether the filing is an additional claim for refund or a response to a Service request for a copy of a previous filing, Do Not assess the penalty.

  6. The penalty should be assessed against each spouse (both primary and secondary taxpayers) who file a purported joint return that is frivolous.

    Note:

    Make a copy of the return to be used as the source document on a secondary taxpayer penalty assessment.

  7. Certain Collection due process (CDP) issues or equivalent hearing requests (EH) received on or after March 16, 2007 are subject to the Frivolous Submission Penalty under section 6702(B). These issues are generally CDP(Appeal) requests, Offers-In-Compromise requests, Installment Agreement requests, ATAOs, etc.

    1. The FRP will receive either original submissions or copies of submissions from Collections after they’ve reviewed the CDP/EH request. Generally, CDP/EH request is made on a form 12153. The submissions will be clearly annotated that Collections and/or Appeals has seen the case and has taken appropriate actions by submitting a Form 5402, Appeals Transmittal and Case Memo that will include a statement that Appeals has determined that the issues raised in the CDP/EH request were either a "specified frivolous position" , identified by the IRS in Notice 2010–17 http://www.irs.gov/irb/2010-17_IRB/ar13.html or other subsequent Notices generated by the Office of Chief Counsel, or a disagreement listing moral, religious, political constitutional, conscientious or similar grounds that reflects a desire to delay or impede the administration of Federal tax laws. The referral will also include a copy of the taxpayer’s request for appeal, a copy of the letter Appeals issued when soliciting a withdrawal of the taxpayer’s "specified submission" or delaying or impeding position. If there is no indication on a CDP or EH (Form 12153) request that Collections or Appeals has worked the case, it will be routed to the appropriate office.

    2. When received, pre-notification will be provided by Collections. Assess IRC Section 6702 penalty on MFT 55 (IMF) and MFT 13 (BMF) using Penalty Reference Code 543. The frivolous document will be attached as the source document for the penalty assessment.

    3. FRP Master entry will be completed within 15 days of receipt into FRP inventory and case will be entered as argument code 49. Technicians will use Collection Penalty Referral Program Code 91755 when working the case.

  8. See IRM 20.1.6 and IRM 20.1.10.10"Penalty Handbooks" , for additional information.

4.10.12.5.1  (02-23-2012)
Pre-notification Procedures

  1. Returns and/or documents meeting the criteria for pre-notification will be worked under this category. Time will be charged to OFP 91852, 91854(I), or 91854(B)

  2. When a frivolous return is received, the taxpayer may be given the opportunity to rescind the frivolous position. The pre-notification letter is a warning that a frivolous penalty will be assessed based on the frivolous position.

  3. Research account for freezes or controls that impact the case for example, Z freeze, . Route as appropriate.

  4. Research FRP Master. An additional pre-notification letter is not necessary if the taxpayer has been pre-notified within the past 12 months for the same tax period.

  5. Send letter 3176C and Publication 2105 (Why Do I Have to File Taxes) to the taxpayer to allow them 30 days to withdraw their frivolous position. If taxpayer or the taxpayer's representative calls during the 30 day period and states they are gathering the information to submit a corrected return and they need additional time, allow the taxpayer an additional 15 days form the original 30 days suspense period to file a corrected return. suspend the case for 60 days form the date of the letter. Note: It is not mandatory to notify taxpayers that filings are frivolous but is provided based on policy decision.

  6. Suspend case for 45/60 days, this allows 15 additional days for internal routing of mail from the 30 day timeframe.

  7. If no response or frivolous response is received within the 30/45 day timeframe (IRS received date) provided for rescinding their position, send for penalty case creation. See IRM 4.10.12.5.2

  8. No penalty will be assessed if a response is received and the taxpayer has filed a good return or written a letter reversing their frivolous stance.

  9. Update FRP Master to indicate type of response received. Close issue.

4.10.12.5.2  (02-23-2012)
Penalty Case Creation

  1. Frivolous returns/claims will have been screened and forwarded for penalty processing after one of the following scenarios:

    1. Suspense period of letter 3176C has expired and no response received.

    2. Taxpayer responded to letter 3176C with frivolous return or correspondence.

    3. Letter 3176C was sent within the past 12 months.

    Note:

    If the taxpayer responds with non-frivolous corrected return, within 30/45 days from the date of the 3176C or the CP 72 notice, the case will be processed as such and no penalty assessed.

  2. Create a new issue on FRP Master under 91855 and select applicable action code, for each penalty being assessed from the list available on FRP Master.

  3. Review case file to ensure taxpayer received notification at least once for the tax year you are working. Ensure the notice that was previously issued was for the correct Civil Penalty amount. If previous letter indicated penalty amount of $500 would be assessed, but you are now working a frivolous return that was received after March 17, 2007 send a different notice stating that $5,000 will be assessed

  4. If altered jurat is an issue, make sure that taxpayer was afforded the opportunity to properly sign the return even if notification has been previously sent for another frivolous filing.

  5. Review any taxpayer replies to ensure that penalties are not assessed if any corrected, non-frivolous returns were filed.

  6. Review taxpayer account for pertinent freezes or controls and work accordingly.

  7. Prepare Form 8278, Computation and Assessment of Miscellaneous Penalties, indicating:

    • Taxpayer name

    • Tax Year

    • SSN

    • Next to "6702 (a) Frivolous tax return" input the form that is frivolous and received date

    • Input ‘1’ for "Number of Violations"

    • Input either ‘$500’ or ‘$5,000’ for the "Amount Assessed"

    • In the "Remarks" section write "signature date" and the date the return/claim was signed by the taxpayer. If no signature, write "N/A" .

    • "Originator" : Technician’s name

    • Date: todays date

    • Organization Code: Employee IDRS number

    • Phone: Technician or manager’s phone number

    Note:

    If assessing more than one tax year, fill out a separate Form 8278 for each tax period. Multiple assessments of identical penalties for the same taxpayer in the same tax period may be consolidated on Form 8278 as a single assessment if assessed at the same time. There must be an indication of approval on Form 8278. Pursuant to IRC 6751(b), written management approval must be indicated before assessing the IRC 6702 penalty.

  8. Establish TXMOD control for MFT 55 using CC ACTON. Establish entity if none exists.

    Note:

    For joint filing status frivolous returns, assess penalty on each taxpayer by creating TXMOD MFT 55 on each SSN.

  9. Submit case for management approval on Form 8278.

4.10.12.5.3  (02-23-2012)
Penalty Assessment

  1. Upon approval of Form 8278, input adjustment (Form 12775, Adjustment Document) indicating:

    • Tax Examiner Number/Input Date

    • TIN

    • MFT - 55 • Period (YYMM)

    • Name - Ctrl

    • Seq Number (Indicates the number of the adjustment for that day input by that employee

    • Blocking Series 52 (Blocking series 53 if subsequent penalty assessment).

    • RS Rec Date – IRS received date of return

    • Category - AUDT

    • Activity - CVPN/Arg#__ 0 (Number that corresponds with the argument). .

    • TC - 290

    • Amount - .00

    • Hold Cd - 0

    • CD – (Penalty Reference Code) 666 or 543 Collection Issues

    • Amount - 5,000.00 (If assessing more than one penalty, input the total amount for all penalties.)

    • Source Doc Attached - Associate penalty assessment documents with TC 240 adjustment.
      -No Audit/SFR Potential – Remarks = IRC Section 6702 penalty, 1040 dtd MM-DD-YYYY.
      -Secondary taxpayer penalty assessment
      - –Remarks = IRC Section 6702 penalty, 1040 dtd MM-DD-YYYY under primary SSN XMM-DD-YYYY.
      -If more than one penalty is being assessed, input all the received dates separated with a comma.

    • Non-Source Doc - Remarks = NSD IRC Section 6702 penalty, 1040 dtd MM-DD-YYYY. Admin file with MFT 30.
      -If more than one penalty is being assessed, input all the received dates separated with a comma
      -Notate where the frivolous filing is attached if it is not attached to the MFT 30 account (e.g., Friv rtn attached to secondary TIN XMM-DD-YYYY, MFT 30).

    Note:

    For penalty assessed on secondary SSN of a joint return, use command code REQ77 to input 971 057 to reference primary SSN on the MFT 30 side. Associate copy of penalty assessment documents to TC 240 adjustment, if no TC 150, TC 290, or Tc 300 are present on the MFT 30..

  2. Penalty assessment documents will be kept with the case file until the tax (audit) case is completed or with the MFT 55 DLN associated with TC 240 when there is no audit case to associate to. Use Form 10550, Employee Source Document Label, attached to gusset folder for MFT 55 files.

  3. Input TXMOD control "FRVPNMFT55" to show the penalty has been assessed.

  4. Close FRP Master issue and input revenue protected for each penalty assessed.

4.10.12.5.4  (02-23-2012)
Penalty Case Closing Actions

  1. Annotate Form 12616, Correspondence Examination History Sheet, with comments, action taken.

  2. Stamp frivolous filing with "Frivolous Tax Penalty Assessed" in lower left margin of the front of the return.

  3. Stamp return with "Considered in Examination" in lower left margin of the front of the return.

  4. Notate "Copy" on copy of original return used for secondary taxpayer penalty assessment.

  5. Select appropriate closing action code on FRP Master.

    Note:

    Ensure excessive credit claimed is appropriately addressed prior to closing.

  6. If the case is not going to be set up as an audit or SFR, update TXMOD control MFT 30 "ASSC2MFT55, C" . If there is a TC 599-17, it needs to be satisfied with a Collection Status Code. If a TC 971-089 was used to create, you must reverse with a TC 972 -089 to remove frivolous indicator.

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  7. If there is audit or SFR potential, refer to IRM 4.10.12.6.

  8. If no audit or SFR actions assemble penalty case file in the following order:

    • Form 12775

    • Original filing

    • File Copy letter

    • Form 8278,

    • Form 12616 Correspondence Exam History Sheet

4.10.12.5.5  (02-23-2012)
Post Penalty Assessment Processing

  1. Responses to IRC Section 6702 penalty assessments commonly fall into one of three categories and will be worked under this category using Program code 91855 on FRP Master. The categories are Requests for Management Intervention, Requests for Appeals, and Claims

    1. Requests for Management Intervention - Management intervention may be granted in the form of telephone calls; however, requests for face-to-face meetings when the taxpayer position is based upon a frivolous argument will not be granted.

      a. Contact taxpayer and attempt to resolve issue by explaining their rights regarding account information and the process for receiving notification of examination actions as well as the potential repercussions for maintaining a frivolous tax position, e.g., 30/90 day letter with subsequent assessment of tax and application of IRC Section 6702 penalty assessment for each frivolous tax return/claim.

      Note:

      Blocking series 53 is used on IRC Section 6702 penalty abatements.


      b. If contact results in abatement of penalty or requires additional development of case, coordinate with team manager.
      c. If contact results in sustaining original assessment, explain taxpayer rights per penalty notice:

      1. The taxpayer must pay the entire penalty

      2. File a claim for a refund on Form 843 within 3 years from the time a return associated with the penalty was filed or 2 years from the date the penalty was paid, whichever period expires later.

      3. If the taxpayer’s claim is pending for six months or more and the IRS has not issued a notice of claim disallowance with regard to the claim, the taxpayer may file suit in a United States District Court or the United States Court of Federal Claims to contest the assertion of the penalty at any time.

      4. Once the IRS issues a notice of claim disallowance, however, the taxpayer must file suit in a United States District Court or the United States Court of Federal Claims within 2 years of the date the IRS mails the notice of disallowance denying the refund claim. See IRC section 6511, 6703, 7422, and 6523(a).

    2. Request for Appeals - Requests for Appeals consideration will be reviewed as follows:

      Note:

      There are no administrative appeals provisions for requests based on frivolous positions. See , Administrative Waiver.


      a. Non-frivolous requests for Appeals consideration will be granted and forwarded to Appeals. See IRM 4.4.5.4, Non-Docketed Cases, for guidance.
      b. Requests for abatements that meet abatement criteria will be processed by FRP. See claims abatement below.
      c. Frivolous requests for appeals will not be granted. See Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don’t Agree, which states that Appeals cannot consider your reasons for not agreeing if they don’t come within the scope of the tax laws (for example, if you disagree solely on moral, religious, political, constitutional, conscientious, or similar grounds).
      d. If appeals request contains any frivolous basis for appeal, destroy the frivolous portion of the correspondence.

    3. Claims (See Relief from Penalties, and IRM 20.1.10.10 Penalty Relief) - Review case for specific processing requirements. Refer to IRM 21.5.3, General Claims Procedures, and IRM 4.19.16, Claims, for additional processing information. Claims are usually filed on Form 843, Claim for Refund and Request for Abatement, but may be made in an informal inquiry. Claims will be worked in the following order:
      a. Claims for abatement: Review claim case for administrative errors (See IRM 20.1.1.3.4, Service Error, and IRM 20.1.1.3.4.2, Taxpayer Entitled to Relief, for additional information). Note that cases meeting criteria for administrative abatement are not required to be paid first. Consider penalty abatement in cases where an incorrect account was assessed, taxpayer proves they were not responsible for the penalized action, or taxpayer filed a timely, non-frivolous, corrected return or waiver of claim. Coordinate all abatements with team manager. NMF penalty abatement will be worked per IRM 3.17.46.2.6 (33900) and NMF Adjustment IRM 21.7.12.4.2 (36852).

      Note:

      For abatement on account before Penalty Reference Number (PRN) 666 or (PRN) 543 for Collection Issues became the sole reference number, abate with the PRN that was originally used to assess the penalty. Use a "- " (minus) sign with the PRN. This will systemically create a TC 241.


      b. Claims based upon frivolous arguments: Will not be considered or responded to if taxpayer previously received notification of frivolous position. They are subject to an additional Section 6702 penalty.
      c. Claims with penalty not paid: If claim does not meet abatement criteria, is not based upon a frivolous position, and the penalty has not been paid, issue Letter 105C citing no consideration until penalty is paid.
      d. Claims with penalty paid: If claim does not meet abatement criteria, is not based upon a frivolous position and the penalty has been paid, issue claim denial (See IRM 4.19.16.1.4.1, Claims Contact Procedures, for processing guidance). Dispose of processable but disallowed claims with "No Consideration," "Disallowance," or "Partial Disallowance" letters, depending on the facts and circumstances of each case. Refer to IRM 21.5.3.4.6,No Consideration and Disallowance of Claims and Amended Returns, for processing guidance

  2. If case file is present, annotate Form 12616 Correspondence Exam History Sheet with case action comments and dates.

  3. If no case file associate with controlling DLN.


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