A POA is on file when an indicator is displayed in the Centralized Authorization File (CAF) Indicator field. The indicator is either alpha or numeric. See Document 6209 for the applicable POA indicators. A TC may also be present.

Prior to the issuance of a CP 2000/CP 2501 or Recomputation Notice, the CAF is automatically researched for the valid POA's name and address.

If issuing a notice, and there is a valid POA on file:

If an original POA is found attached to the tax return (not detached during processing), see IRM 4.19.3.20.1.20, Letters From a Third Party and Authorization From a Valid Power of Attorney (POA) and IRM 21.3.7, Taxpayer Contacts - Processing Third Party Authorizations onto Centralized Authorization File (CAF), for instructions on determining validity.

Disregard invalid POAs.

Consider "valid" POAs approved.

If certain Freeze Codes are present on the tax module, a message window displays on the Case Analysis screen when the SSN of the case is entered. Access the Tax Account screen to determine the proper action.

If there is a Freeze Code "-A" , the case is worked by AUR. See IRM 4.19.3.3.3.3 (16) and (17), Transaction Codes Reflecting Tax Liability, for further instructions.

A Freeze Code "-C " on the account indicates the taxpayer was involved in a military operation in a designated combat zone and is entitled to special tax treatment. Close the case using PC 15.

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

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

If a Freeze Code "-I" is present on Tax Account screen, and/or the NET CHANGE field on the Return Value screen is less than the TC 846 with a corresponding TC 776 that is ≡ ≡ ≡ ≡ ≡ ≡ ≡ on the Tax Account screen, then a Manual Interest computation is required. If there is UR income, input IPC MI (Manual Interest) only if a CP 2000 is being issued. If the case results in a refund, do NOT use IPC MI. Enter "0" in MANUAL INTEREST field of the Return Value or the Notice Summary Screens, and continue processing. Input PC 30, if issuing a CP 2501. See IRM 4.19.3.16.10, Manually Computed Interest for the CP 2000.

A Freeze Code "L-" identifies that an Innocent Spouse claim (Form 8857, Request for Innocent Spouse Relief) has been filed and is set by input of TC 971 AC 065. The TC 971 AC 065 also generates a TC 130 freezing the entire account for the non-requesting spouse.

Freeze Code "-L" (Audit Indicators TC 420 or 424, not reversed by TC 421) indicates the return is currently being requested or audited by Exam. During case analysis (screening phase), take the following action:

If the Freeze Code "-L" open TC 420/424 is present after an AUR notice has been issued, take the following actions:

A Freeze Code "-O" on the Tax Account screen, is a Disaster Indicator set by TC 971 AC 086 or 087. See IRM 4.19.3.4.6, Declared Disaster Areas, for more information.

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

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

A Freeze Code "-R" on Tax Account reflects Accounts Management Taxpayer Assurance Program (AMTAP) involvement and is identified with TC 971- AC 134, TC 971- AC 052 and TC 570 which indicates a frozen refund. Continue normal case processing.

A Freeze Code "-S " replaces the assignment of Computer Condition Codes to identify tax returns filed within a declared disaster area and is set with a TC 971 AC 688. The -S freeze does not suppress notices. Continue normal case processing.

A Freeze Code "-T" is present on Tax Account screen, there is a ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ entity freeze on the account, used for monitoring purposes only. Continue normal case processing.

If there is a Freeze Code "-U" , transfer to the Erroneous Refund Coordinator. Freeze Code "-U" indicates the Erroneous Refund area is monitoring a case for available credits and a closure may release needed credits.

If there is a Freeze Code "-V" and/or TC 520 (not reversed by TC 521 or 522), a Bankruptcy condition is present. If identified on the Tax Account screen;

If there is a Freeze Code "-W" and/or TC 520 (not reversed by TC 521 or 522) with cc 60 through 67, or cc 81, cc 84, or cc 89, a Bankruptcy condition is present. If identified on the Tax account screen;

A Freeze Code "-Y " on the account indicates that the taxpayer filed an Offer-in-Compromise with the service. See IRM 4.19.3.3.3.4 (6) , (11) and (12) , Other Transaction Codes and Math Error Codes, for additional information.

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

If a Freeze Code other than those explained in (2) through (20) above, are indicated on the Tax Account screen, refer to Document 6209.

A TC 150 indicates a return was filed and posted to the Master File. The TC 150 amount is the tax assessed when the original return was filed.

TCs 290 and 300 indicate that additional tax was assessed after the original return was filed. The system adds these amounts to the TC 150 amount to determine the total tax per return. If the TC 290/300 source document is present, determine if the adjustment source document (Form 5147, Form 5344, Examination Closing Record, amended or duplicate return) resolves the U/R issue(s).

TCs 291 and 301 indicate that a portion or all of a previously assessed tax was abated after the original return was filed. The system subtracts these amounts from the TC 150 amount to determine the total tax per return. If the TC 291/301 source document is present, determine if the adjustment source document (Form 5147, Form 5344, Examination Closing Record, amended or duplicate return) resolves the U/R issue(s). If the AGI/TXI on the Tax Account screen:

Order the missing TC 290/291 or TC 300/301 adjustment source document

Do not order the missing TC 290/291 or TC 300/301 source document for the following situations:

Order the TC 290-0 adjustment source documents when one of the following corresponding TCs is present:

Do not order TC 290-0 adjustment source documents for the following:

Beginning with TY 2008 the tax account screen will indicate if the adjustment source document is a CIS document. If it is determined the adjustment is:

Request an amended return to resolve the case, if necessary.

Review all adjustment documents to determine if the U/R amount has already been taken into consideration. If so, close the case using PC 21. If a document has been requested, refile it separately when the case is closed.

Consider all previous changes to income, deductions, refundable/non-refundable credits, taxes, and penalties when a CP 2000 is to be issued.

When a TC 300/301 is present on the Tax Account screen with a TC 421 and no -L freeze, a Disposal Code displays on the Tax Account screen. If pursuing U/R income, determine the Disposal Code. The Disposal Code is located under the column titled "DIS CD" in the transaction section of the Tax Account Screen.

If a TC 300/301 and a TC 577 with Julian Date 999 is displayed on the Tax Account screen (no -L Freeze present), the U/R income has not been addressed by the Examination Function. Review the papers to determine what changes were made and take those changes into consideration when calculating U/R income adjustments.

When a TC 896 with the literal "OFF to IRA" is present, the taxpayer has paid additional tax on excess contributions on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. This tax is posted to the taxpayer’s Master File Tax (MFT) 29 account and is not included in the TC 150 amount. The system adds this amount to the TC 150 amount to arrive at total tax per return.

If a duplicate/amended return is filed (TC 976/977 or TC 971 AC 010 or 012 through 016), a CP 2000/CP 2501, PC 20 is to be issued, a TC 290/291 is present, and the duplicate or amended return is not in the case file:

If a duplicate/amended return is posted (TC 976/977 or TC 971 AC 010 or 012 through 016), a CP 2000/CP 2501, PC 20 is to be issued, a TC 290/291 is NOT present, and the duplicate/amended return is not in the case file:

TC 295 indicates a tentative allowance from Form 1045, Application for Tentative Refund, was input on the taxpayer's account by Adjustments. TC 299 indicates an abatement of the original tax. If there is a TC 295 or 299 unreversed, or only partially reversed by TC 294 or 298, and there is U/R income, issue a notice.

TC 305 indicates a tentative allowance from Form 1045 was input on the taxpayer's account by Exam. TC 309 indicates an abatement of the original tax. If there is a TC 305 or 309 unreversed, or only partially reversed by TC 304 or 308, and there is U/R income, issue a notice.

Other TCs shown on the Tax Account screen may require additional action.

TC 160 or 166 indicates a Delinquency/Failure to File Penalty was assessed. TC 161 or 167 means a portion or all of the penalty has been abated. When a U/R issue exists, the system computes or recomputes the Delinquency/Failure to File Penalty when required. See IRM 4.19.3.16.1, Failure to File Penalty (FTF), for additional information.

TC 170 or 176 indicates that an Estimated Tax (ES) Penalty was assessed. TC 171 or 177 means a portion or all of the penalty has been abated. When a U/R issue exists, a recomputation of the ES penalty may be required. See IRM 4.19.3.16.3, Estimated Tax (ES) Penalty, for additional information.

TC 270 or 276 indicates a Failure to Pay Penalty (FTP) was assessed. TC 271 or 277 means a portion or all of the penalty is abated. See IRM 4.19.3.16.2, Failure to Pay Penalty (FTP), for additional information.

TC 460 indicates a request for extension of time to file was approved. The extension date appears in the Remarks column.

TC 480 (not reversed by TC 481 or 482) indicates the taxpayer has filed an "Offer in Compromise" (OIC) with the Service. Continue normal AUR processing. A TC 29X may be input on these types of cases. Send copies of the case data to Collection OIC function upon their request.

TC 540 indicates that the taxpayer is deceased. See IRM 4.19.3.4.5, Deceased Taxpayers, for further instructions.

TC 604 indicates either bankruptcy has been discharged/revoked or close-out of the MFT 30 module in preparation of mirroring to MFT 31.

TC 764 or 768 indicates Earned Income Credit (EIC) was allowed. TC 765 indicates the credit was fully or partially reversed. If TC 764, 765, or 768 is present, EIC may need to be computed or recomputed. See IRM 4.19.3.15.3, Earned Income Credit, for instructions.

TC 766 with:

If a TC 780 has been fully reversed by a TC 781 or 782, continue normal AUR processing.

If an unreversed TC 780 is present on the Tax Account screen, a warning message will display to close the case. Take the following action:

TC 806/800 credits the tax module for the amount of withholding tax (W/H) claimed on a tax return. TC 807/802 reverses the TC 806/800 credit in whole or in part. Withholding may need to be adjusted because of AUR processing. Before proposing a change to W/H, be certain that the adjustment has not been previously allowed. See IRM 4.19.3.15.1, Withholding - General, for instructions.

TC 971 with :

TC 972 with corresponding Action Code indicates Identity Theft has been reversed.

If a Transaction Code other than those explained in IRM 4.19.3.3.3.3, Transaction Codes Reflecting Tax Liability, or IRM 4.19.3.3.3.4, Other Transaction Codes and Math Error Codes, are indicated on the Tax Account screen, refer to Document 6209.

If there is a math error code in a case, the math error code number displays in the MATH ERROR CODE field of the Tax Account screen. If there are multiple math error codes, they display up to a maximum of five (5) codes in this field.

.

The Correspondence Imaging System (CIS) is used to manage scanned images of amended Individual Master File (IMF) returns, documents and electronic case files.

When there is a duplicate/amended return on Tax Account (TC 976/977 or TC 971 with AC 010 or 012 through 016 and a posted TC 290/291) an indicator 1 will be displayed in the Tax Account screen in the CIS column when a CIS document is available.

If a CIS document is indicated, take the following actions:

To exit AMS:

The following procedures apply to the analysis of Service Center Recognition/Image Processing System (SCRIPS) IRs.

The system displays a warning message when STATUS CODE "U" is assigned to a SCRIPS IR(s). When this message is received, the tax examiner should screen the related IR with EXTREME care.

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

If a SCRIPS IR is asterisked and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the other asterisked item(s) are reported or below tolerance, close the case. If the other asterisked item(s) are U/R, continue processing.

If a SCRIPS IR is U/R and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ are present, consider the IR correct and pursue the issue using normal procedures.

Do not send information regarding erroneous SCRIPS IRs to the AUR Payer Agent Coordinator, unless some other payer agent (P/A) condition exists.

During the course of AUR case work, situations may be encountered involving potential fraud, referred to as indicators of fraud. Although only a small percentage of cases are fraudulent, it is essential to detect and report any potential fraudulent activities. IRM 25.1.2.3, Fraud Handbook - Indicators of Fraud, provides several lists of Fraud Indicators. The following list has been developed for AUR and identifies examples of indicators of fraud that are most likely to be found in a campus environment (this list is not all inclusive and may involve a promoter/return preparer):

Fraud is developed by trained Fraud caseworkers until it is determined that affirmative acts (deceit, subterfuge, camouflage, concealment or some attempt to color or obscure events or to make things seem other than they are) exist. The Service must prove that the taxpayer acted deliberately and knowingly with the specific intent to violate the law. Once a suspicion or indicator of fraud is found, it is essential that the case be transferred to the designated AUR Functional Fraud Coordinator (FFC) for further development.

See IRM 25.1.1.2, Indicators of Fraud vs. Affirmative Acts of Fraud.

Identify indications of fraud that are uncovered through regular case processing. Use the list in IRM 4.19.3.4.8.1, Identifying and Developing Fraud in AUR.

Discuss the indicators of fraud with the group manager or lead. If the group manager or lead concurs:

Documentation is critical in the development of fraud. Maintain complete and accurate case notes that include each of the following:

The AUR Functional Fraud Coordinator (FFC) is responsible for developing fraud cases:

The AUR FFC is also responsible for monitoring and managing the Fraud Referral Program within the AUR Operation.

If the AUR FFC declines the fraud lead he/she will:

If the AUR FFC accepts the fraud lead, he/she will:

If the CFC accepts the fraud lead for further development, he/she will request the case be reassigned and ensure the case is established on AIMS. The AUR FFC will:

If the CFC declines the fraud lead, he/she will return the Form 13549, Campus Fraud Lead Sheet with a written explanation to AUR. The AUR FFC will:

Compare WAGES amount with entries on:

Wage comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED as wages:

When comparing reported wages to IRs, do not allow partial credit for unidentified amounts UNLESS the return is missing supporting Form(s) W-2. Returns that were processed through OCR or ELF may not have Form(s) W-2 attached. DO NOT request the Form(s) W-2 from FRC. Allow the taxpayer credit for amounts on Form 1040, line 7, Form 1040A, line 7, or Form 1040EZ, line 1. Issue a CP 2000 for discrepancies.

If the taxpayer reports the same amount of Form W-2 income as shown in the IR, but under a different payer name, consider the IR reported.

Consider any two WAGE IRs, for the same taxpayer, that contain identical income information, as duplicates even if the payer names and EINs are different. Take the following action:

If there are two WAGE IRs for the same taxpayer, from the same payer (payer name and EIN match) take the following action:

Allow taxpayers (i.e., police officers, firefighters, etc.) who have sustained injuries in the line of duty to reduce Form W-2, Box 1 Wages, by amounts indicated as line of duty injury payments when ALL of the following conditions are present:

Retired/non-active status members of the military employed as Junior ROTC (Reserve Officers Training Corps) instructors receive allowances for uniforms, housing, subsistence, etc. However, unlike active duty military personnel, these taxpayers CANNOT exclude these allowances. Disallow any excluded amounts and send PARAGRAPH 154 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

When wages or Social Security wages are U/R, and the taxpayer paid self-employment tax, or is now subject to self-employment tax, input/verify the appropriate entries in the SET SHORT/LONG SCHEDULE section of the Self-Employment Tax window.

Use Status Code "R" in the SSWAG and SSTIP literal when screening valid Wage IRs. Do not use Status Code "N" or "D" . Status Code "N" or "D" may result in an incorrect excess SST/RRT calculation.

The system automatically enters Status Code "R" on MCWGE and MCTXW. The Status Code can be changed to "D" if necessary.

If there are two or more fully U/R WAGE IRs with an out-of-state payee address beyond the reasonable commuting area of the taxpayer (for example, taxpayer lives in Pennsylvania and U/R IRs are for Georgia, etc.), send PARAGRAPH 167 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

When taxpayers exercise statutory (qualified) employee stock options, is generally excluded from ordinary income and the gain may be reported as a capital gain on Schedule D when the shares acquired upon exercise are sold.

When taxpayers exercise non-statutory (non-qualified) employee stock options, the gain upon exercise is reported as ordinary income. Employers include the exercised amount on Form W-2, Box 1 and identify the stock option amount in Box 12 using code "V" .

Whenever wages are U/R, compute withholding (W/H) or consider W/H.

For a list of the codes found in Box 12 of Form W-2, See Exhibit 4.19.3-14, Form W-2 - Box 12 Codes.

Consider wages U/R if wage amounts from attached Form W-2 are:

If it appears that the taxpayer reduced Form W-2 box 1 Wages by the amount in box 11 (Nonqualified Plans), pursue the difference as U/R wages and send PARAGRAPH 50 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

An O/R situation exists if the taxpayer's entry on Form 1040, line 7, Form 1040A, line 7, or Form 1040EZ, line 1 is greater than the total WAGE IR(s). Consider wage income O/R if you determine that the taxpayer:

The taxpayer may exclude certain types of income. Wages reported on Form W-2, Box 1 are generally reduced by the amount of excluded income. Some of these exclusions are:

Since the amount reported on Form W-2, Box 1 should reflect these exclusions from income, the taxpayer should not subtract the above items from the amount reported as wages.

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

If wages are U/R, check the attached Form W-2 and/or any attachments to determine if the taxpayer excluded the amount as sick pay.

If the taxpayer attaches a substitute Form W-2 and reports a lesser amount than shown on the IR from the same payer, consider the difference U/R.

Consider W-2 IRs fully reported when Wage or W/H amounts on the IRs are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

If the taxpayer participates in a nonqualified deferred compensation plan that does not meet all requirements as specified in IRC Section 409A, the employer must report the deferred compensation as income and the amount is subject to an additional tax.

Statutory employees are self-employed independent contractors, for purposes of reporting income and expenses on their tax returns, who are treated as employees for FICA tax purposes.

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and consider him/her a statutory employee if his/her occupation is listed in IRM 4.19.3.20.3.1.1 (2), Statutory Wages. Do not make any adjustments to the Schedule C/C-EZ and/or SE tax.

Statutory employees should receive a Form W-2 with the statutory employee box checked in Box 13. If the Statutory Employee box was checked, the SEI literal has a value of "1" displayed on the IR. If it was not checked, the SEI literal has a value of "0" (zero).

Statutory employees report their Form W-2 Wages on Schedule C or C-EZ, line 1, along with business expenses. This income is NOT subject to self-employment tax and business expenses are not subject to the 2% limitation for miscellaneous itemized deductions. This income is subject to social security and Medicare taxes that should be withheld at the source by the payer and shown on Form W-2 as SS/Medicare Tax Withheld, SS Wages, and Medicare Wages and Tips.

Performing artists are not statutory employees, but, they may report Form W-2 income on Schedule C (instead of Form 2106), if during the tax year ALL of the following conditions apply:

Cases involving wages of statutory employees are created when:

There is a discrepancy if there is a difference between the total of all wages (but not allocated tips) on all Form W-2 when the statutory employee indicator in Box 13 of Form W-2 is checked and the wages per return, Schedule C or C-EZ, line 1.

Input Income Identify Code"SW" in all U/R wages from Statutory Employee IRs if wages are U/R.

Consider wages from Statutory Employees U/R and send PARAGRAPH 115 (See Exhibit 4.19.3-10, CP PARAGRAPHS) if the Wage amounts from attached Form(s) W-2 are:

If the taxpayer combines non-statutory wages with statutory wages or self-employment income (i.e., NEC, OTINC, MED, etc.) on the same Schedule C, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

If the taxpayer includes only non-statutory wages on the Schedule C or C-EZ, disallow the expenses from Schedule C line 28 (or Schedule C-EZ line 2) and the amounts on Schedule C, lines 2, 4, and/or 30.

If an explanation attached to the return indicates the fellowship, grant, or stipend was used for tuition, fees, books, supplies, and equipment required for the course, AND:

If the taxpayer enters "SCH" next to Form 1040, line 7, accept as fully reported.

If no explanation is attached and the IR is not fully reported, pursue the amount not reported. Send PARAGRAPH 124 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

If Wages are U/R and the taxpayer has Form W-2 wages, determine if the taxpayer makes any reference to repayment of supplemental unemployment benefits. If the taxpayer correctly reported net wages after repayment of supplemental unemployment benefits, consider the wages reported.

If wages are U/R and the taxpayer is claimed as a dependent on another person's return, see IRM 4.19.3.11 (6), Standard Deduction, for further instructions.

If wages are U/R, the system requires that you analyze W/H. See IRM 4.19.3.15.1, Withholding - General, for further instructions.

If the taxpayer is a minister and has reported Form W-2 wages on a Schedule C:

If the taxpayer computes Social Security Tax on Tips on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, but did not include the tip income in the AGI, consider the tip income U/R.

If Wages are U/R, enter the return amount in the RETURN field on the Summary screen.

A taxpayer whose employer excludes earnings from taxable wages designated to pay for child care and/or care for a dependent(s) who is unable to care for himself/herself can exclude the amount of this benefit (within certain limits). The excluded amount is limited to the smaller of the taxpayer's earned income, the spouse's earned income, or $5,000 ($2,500 if married filing separately).

The Case Analysis screen displays this benefit with the literal "W-2" in the DOC TYPE field and the literal "DCB" in the INCOME TYPE field.

The gross benefit amount shows separately on Form W-2, Box 10. The wage amount on Form W-2, Box 1 SHOULD NOT INCLUDE the DCB for the tax year.

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

Taxpayers MUST complete Form 2441, Child and Dependent Care Expenses, Parts I, II, and III in order to compute the correct amount of Child Care Credit and excludable DCB.

The system computes the correct taxable amount of DCB. Input/verify the appropriate entries on the Dependent Care Benefits window. See IRM 4.19.7, IMF Automated Underreporter Technical System Procedures - Dependent Care Benefits.

If there is an indication that the taxpayer participated in one of the following Cafeteria Plans: flex plan, flex credits, or flex dollars (pre-tax deduction) for Dependent Care Benefits and the taxpayer IS NOT claiming Child Care Credit, consider the DCB reported.

If the taxpayer did not file Form 2441 and did not report DCB, the taxable portion is the DCB IR amount up to ≡ ≡ ≡ per payer and per taxpayer. Take the following action to determine if DCB is U/R:

If the taxpayer filed Form 2441 and Part III is blank or incorrectly completed, take the following action:

Taxpayers who receive DCB generally do not qualify for Child Care Credit. If the taxpayer claimed Child Care Credit, take the following action:

If the taxpayer reduced his/her wages by the DCB IR amount, pursue the issue as an U/R wage issue.

Employer-provided adoption benefits (EPAB) is available for taxpayers who adopt a child(ren) who is a U.S. citizen or resident or who adopt a foreign child(ren) if the adoption becomes final.

Taxpayers may receive a cash allotment of up to $13,170 for each child in an adoption, including a Special Needs child adoption.

Employer-provided adoption assistance payments are shown on Form W-2, Box 12 and are identified with a code "T" .

The wage amount on Form(s) W-2, Box 1 does not include the EPAB payments for the tax year.

Taxpayers must complete Form 8839, Qualified Adoption Expenses, Part I, II and III in order to compute the correct amount of taxable or excludable EPAB. If no Form 8839 is filed, consider the EPAB fully U/R.

Taxpayers should include this taxable benefit amount with wage income on Form 1040, line 7. They also write "AB" on the dotted line next to line 7.

The Case Analysis screen displays this benefit with the literal "W-2" in the DOC TYPE field and the literal "EPAB" in the INCOME TYPE field.

If Form 8839, line 27 is not reported on Form 1040, line 7, create a wage IR for that amount. Send PARAGRAPH 191 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

Access the EPAB window by entering a "U" in the IR CODE field.

Input/verify the appropriate entries on the EPAB window. See IRM 4.19.7, IMF Automated Underreporter Technical System Procedures - Employer-Provided Adoption Benefits.

If it can be determined the taxpayer reduced his/her wages by the EPAB payment, pursue the issue as U/R wages. Also pursue EPAB as a separate issue. Send PARAGRAPH 195 (See Exhibit 4.19.3-10, CP PARAGRAPHS).

PARAGRAPH 190 automatically generates when EPAB is U/R. See Exhibit 4.19.3-10, CP PARAGRAPHS.