4.19.4  CAWR Reconciliation Balancing (Cont. 1)

4.19.4.3 
Replies

4.19.4.3.4  (04-04-2013)
Replies — Including Amended/Corrected Returns, Form 843, Claims, and Form W-3C/W-2C

  1. This section should be used for working 94X-X or 843 replies.

    Note:

    Effective January 2009, Forms 941-X, 943-X, 944-X, 945–X, CT1-X were introduced to replace Form 941-C. which is obsolete. The new forms were developed to simplify the correction process for the tax payer and will better identify the changes being made for the tax examiner.

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

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

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

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

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

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

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

    Social Security Administration

    Division of Employer Services

    4-E16 NB Metro West Building

    300 N. Green Street

    Baltimore, MD 21290-0300

  4. Employers often send copies of previously filed Forms 941-C/94X-X to support their explanation of the out of balance condition. Frequently these are not marked as copies and do not have signatures. Care must be taken to ensure these are properly considered. If copies of previously filed Forms 941-C/94X-X are received, verify that the adjustments were accurately recorded by the Service. When corresponding tax adjustments are found on tax accounts, do not assume that the reference lines were recorded correctly. IRS processing errors in recording Forms 941-C/94X-X are often the source of out of balance conditions. It may be necessary to math verify the reference lines entered with previous 29X adjustments and/or request the document for further research. Take action as appropriate to correct any errors discovered. IRM 21.7.2.4.7.8.1Form 941-X Tax Decreases-Adjusted Employment Tax Return.

  5. If the taxpayer states that all Forms W-2 have been filed, are correct and provides Forms 94XX or 843 to correct the account:

    1. Work in accordance with DP Tax Adjustments IRM 21.7, Business Tax Return and Non-Master File Accounts and IRM 21.5 Account Resolution.

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

    IF THEN
    The reply is received with Form 94X-X requesting an increase in Social Security wages/tips, Medicare wages and/or federal income tax withheld.
    1. Consider the Forms 94X-X under agreed assessment procedures in IRM 4.19.4.3.2. Use the IRS Received date as the Amended Claims date.

      Note:

      Forms 94X-X requesting tax increases which are less than the identified discrepancy will require two adjustments: a TC 298 for the agreed portion and a TC 290 for the unagreed portion.

    2. Close CAP using the appropriate closing code.

    The reply is received with Forms 94X-X and/or Form 843 requesting a decrease and an Authorized Original Signature is present:
    1. Input a TC 291 for the appropriate money amount and the applicable item adjustment codes using blocking series 55 with the correct correspondence and IRS received date. Use the IRS Received as the amended claims date.

    2. Input the appropriate adjustment amount and the number of quarters adjusted on the CAP Detail Screen.

    3. Close CAP using the appropriate closing code.

      Reminder:

      DO NOT decrease the Form 94X account below the amounts reported on the Forms W-3/W-2 and W-3C/W-2C

    The reply is received with Forms 94X-X and/or Form 843 requesting a decrease and an Original Authorized Signature is not present with the case.
    1. Return Form 94X-X and/or Form 843 to the taxpayer for an authorized signature.

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

    the Form 94X-X is adjusting a 6020(b) return
    1. Adjust the return using the procedures above and input a TC 560 to set the ASED three years from the received date.

    2. IRS-CAWR Cases: assess for any remaining discrepancy.

    3. SSA-CAWR: adjust the return and charge a civil penalty if there is still a discrepancy.

    the taxpayer responds with a Form 941 with amounts that differ from already posted on IDRS See IRM 21.7.2.4.6.7.6 "Amended/Supplemental" Form 94X with or without Forms 941C except use the 2057C letter to contact the taxpayer.
    A signed adjusted employer's tax return is received and is intended to be an original return and no TC 150 is posted.
    1. Manually prepare a "dummy" return using the corrected information from the "X" form. On the signature line, indicate "Dummy Return - Do not correspond for signature".

    2. Attach applicable 94X-X form to the back of the "dummy" return. Edit (in green) a line across the applicable 94X-X form and notate "Do Not Detach" in the margin.

    3. Process the "dummy" return as the original.

    4. Ensure all applicable deposits are correctly applied.

    5. Input a TC 971 AC 002 to prevent a duplicate filing condition from generating when the "dummy" return posts.

    6. Make a copy of all forms and file according to the "No Assessment Case Closing Procedures" .

4.19.4.3.5  (05-21-2008)
Working Replies - Cross Reference (X-Ref) Cases/Filed With Another EIN

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

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

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

    2. Access ORS for the X-Ref number (if needed).

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

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

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

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

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

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

    1. assess the necessary tax and /or penalty.

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

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

4.19.4.3.6  (04-03-2012)
Replies Received On Missing Tax Return Issues

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

    IF THEN
    The employer replies, and furnishes the missing returns whether or not they balance the case.
    1. Check to ensure a signature is present and the return is an original.

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

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

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

    5. Edit the return underlining the EIN, tax period, name control and IRS received date, if not present. In the left hand margin of the return write "599" with appropriate closing code indicator. Make a copy to attach to the case file.

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

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

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

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

      Note:

      File correspondence using the "No Assessment needed " case processing procedures. See IRM 4.19.4.7.1. if case is in balance.

      Note:

      Assess the case following "IRS-CAWR Assessment Needed " case processing procedures. See IRM 4.19.4.7.1 if case remains out of balance.

    The reply states the return is for one tax period, but the actual return shows another tax period.
    1. Edit the correct tax period on the return and process as instructed above.

      Note:

      This allows Submission Processing to process the returns accurately.

    The employer states they filed the returns in question and the return posted to Master File.
    1. File correspondence using the "No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    it is determined the form is processed incorrectly to another tax year
    1. See IRM 21.5.2.4.23 Reprocessing Returns/Documents

    Exception:

    If the taxpayer is a Form 941 filer and submits a Form 944, reject the Forms 944 back to the TP and request the applicable form.

4.19.4.3.7  (04-04-2013)
IRS-CAWR Replies with Forms W-3/W-2/W-3C/W-2C

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

    If the reply 6209 6494 Corr. Code IRS-CAWR ADJ. Issue Corro Comments
    is Forms W-2/W-3/W-2C/W-3C correcting Social Security wages, Medicare wages, Social Security tips, AEIC and/or Federal Income tax withheld balancing the case Y Y (see Note) 5 No Assessment needed 4.19.4.7.1 Y or send copies of Forms W-3C/W-2C
    is voiding Form(s) W-2 processed in error and the information balances the case Y Y (see note) 4 No Assessment needed 4.19.4.7.1 Y If exact duplicates, Form 6494 is not needed
    is indicating Forms W-3 and /or W-2 were processed under an incorrect EIN and the information will balance the case Y Y 3 No Assessment needed 4.19.4.7.1 Y  
    consists of information submitted on magnetic media, Full Size Tape Reel, Compact Disc, Floppy Disk     N/A YES Assessment needed 4.19.4.7.1 Y Inform the taxpayer, SSA no longer accepts magnetic media and they must provide the IRS with paper copies of Forms W-2, or a listing and Form W-3. Properly dispose of magnetic media
    is a wage listing showing all required information to balance the account Y Y 7 No Assessment needed 4.19.4.7.1 Y Attach wage listing (6494). Highlight and Identify the data on the first employee for SSA .
    Form 6494 is sent only for Forms W-2C.
    includes Form(s) W-2 that balances the case or takes the case below tolerance N Y 7 No Assessment needed 4.19.4.7.1 Y 6209 for W-2C only
    includes Form(s) W-2C that balances the case or takes the case below tolerance Y Y 5 No Assessment needed 4.19.4.7.1 Y  
    includes Forms W-2 that increases Social Security wages/tips, Medicare wages, AEIC and/or Federal Income tax to more than the 94X amounts N Y 5 YES Assessment needed 4.19.4.7.1 Y 6209 for W-2C only
    indicates Social Security wages were reported over the maximum and the information balances the case Y N N/A No Assessment needed 4.19.4.7.1 Y Explain the Social Security maximum wage amounts to the taxpayer. Refer to Document 6209 Section 3.12, Social Security tax rates.

4.19.4.3.8  (04-01-2010)
Corporations - New Owners Reply

  1. An entity that incurs a tax liability or a civil penalty is responsible for paying it even if there was a change in ownership. This is true regardless of whether the involved parties entered into a private agreement between themselves as to which party would be responsible. Such private agreements may be grounds for one of the parties to file civil suit against the other, but has no impact on the legal obligation of the party that incurred the liability to pay the amounts owing to the government

    Example:

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

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

  3. Review IRM 21.7.13.4.3 Entity Classification and Ownership Changes and succeeding sections to determine if a new EIN was required on these cases.

    If And Then
    the current/previous taxpayer claims they are not liable for the discrepancy and may or may not have established a payment arrangement, the arrangement does not impact on whether we can assess. the taxpayer states they are a corporation
    1. Send 2057C closing letter on CAP, explaining the corporation is liable.

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

      the taxpayer states they are other than a corporation and If a new EIN was not required
    1. Send 2057C closing letter on CAP, informing the taxpayer they should have requested a new EIN when purchasing the business.

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

      the taxpayer states they are other than a corporation and if a new EIN was required
    1. follow procedures above

      Exception:

      If a new EIN was required, and the contact is from the prior owner about a tax period after the business changed hands and they provide proof of the ownership change but cannot provide the EIN for the new owner, research for another EIN. If necessary, send a referral to BMF Entity for possible assignment of an EIN for the new owner.

    You receive Forms W-2C and Forms 941-X taxpayer provides new EIN
    1. Make the appropriate adjustments on IDRS See IRM 4.19.4.3.4. or transfer the return(s) to the new EIN if necessary using Form 12810.

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

    3. Send a 2057C closing letter explaining the adjustments made to the taxpayer’s account.

    4. close the case on CAP using the appropriate closing code. See IRM 4.19.4.7 Case Closing Procedures.

    5. Forward Forms W-2C to SSA on Form 6494.

    taxpayer does not provide information necessary to resolve the case  
    1. Send a 2057C closing letter explaining why the reply was insufficient requesting the appropriate forms to resolve the discrepancy.

    2. See IRM 4.19.4.7 Case Closing Procedures.

    taxpayer provides a Schedule D resolves the discrepancy
    1. Enter the x-ref EIN onto the CAP detail screen.

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

      does not resolve the discrepancy
    1. Assess the case using "IRS-CAWR Assessment Needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.9  (02-01-2008)
Replies Indicating TIPS Incorrectly Reported

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

    IF THEN
    The reply indicates tips and no Forms W-3C/W-2C were received

    Note:

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

    1. Send a 2057C closing letter explaining that when we receive additional information we will reconsider the adjustment to their account. If the taxpayer states the discrepancy is due to allocated tips explain amounts should be reported on the Allocated tips Line 8 on Forms W-2.

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

    The reply indicates tips were incorrectly reported and Forms W-3C/W-2C were received,
    1. Prepare automated Form 6209 to adjust all appropriate fields based on the Forms W-3C/W-2C amounts.

    2. Prepare Form 6494 using the correction code 5.

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

4.19.4.3.10  (04-10-2014)
Replies Including Schedule H, Household Employment Tax Issues

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

  2. Fiscal year filers must report wages paid on a calendar year basis. Fiscal year taxpayers filing individual income tax returns must include a Schedule H covering the period January 1 through December 31. Check to see if your discrepancy can be resolved by finding Forms W-2 filed under the prior or subsequent year due to the taxpayer being a fiscal year filer.

  3. The household employment tax is reported on the appropriate line of Form 1040 and included in the TC 150 amount. If an adjustment is necessary, use Blocking Series 05, Reason Code (RC) 171, and Source Code 2 to adjust the appropriate line for employment taxes from Schedule H.

  4. When making adjustments to Forms 1041 household employment tax from Schedule H, use Blocking Series 55, reason code 171.

  5. Schedules H filed with Form 1040, Refer to IRM 21.6.4.4.8, Individual Tax Returns.

  6. Schedules H filed With Form 1041, Refer to IRM 21.7.4.4.1.11, Social Security Domestic Employment Reform Act (SSDERA) and BMF Schedules H .

  7. The interest free provisions for adjustments on BMF employment taxes are in effect for errors discovered on IMF, Schedules H. Refer to IRM 21.6.4.4.8.6, Schedule H, Household Employment Taxes, - Interest - Free Provisions - Underpayments , for procedures. Reference Codes for Adjusting Schedule H are as follows:

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

    Note:

    See IRM 21.6.4.4.8.2 and IRM 21.6.4.4.8.1 for additional instructions on adjusting Schedule H accounts.

4.19.4.3.11  (04-03-2012)
State and Local Governments Replies

  1. Taxpayers must provide documentation they are covered under a state or political subdivision retirement system, or qualify for one of the exceptions listed in IRM 21.7.2.5.15 , IRM 21.7.2.4.11.3.1 and IRM 3.13.12.6.29.11 for additional information. When the reply indicates the employees are Social Security exempt and the discrepancy is only in Social Security and Medicare wages for an employer see the table below.

    IF THEN
    The documentation in (1) above is provided :
    1. Prepare automated Form 6209 if applicable.

    2. Prepare Form 6494 to adjust the Social Security and/or Medicare wages if applicable.

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

    If the documentation in (1) above is not provided
    1. Assess the case using "IRS-CAWR Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

4.19.4.3.12  (04-04-2013)
Statute Issues/Imminent Assessments

  1. The Statute Awareness Program was created to minimize barred assessments and erroneous abatements. The download will contain cases which have two statute situations that must be addressed. Cases where the statute date bars within 120 days will be worked on a priority basis. Refer to IRM 25.6, Statute of Limitations. Two types of statutes addressed in the CAWR processing are listed below.

  2. The Assessment Statute Expiration Date (ASED). In general, the ASED is 3 years from the filing of the return, unless the return is filed before the due date (determined without regard to any extension of time to file), in which case the ASED is 3 years from the due date.

  3. Refund Statute Expiration Date (RSED) A claim for credit or refund must be filed 3 years from the time the return was filed or two years from the time the tax was paid, whichever is later. If the claim is filed within the 3 year period, the amount to be credited or refunded is limited to the tax paid during the 3 years immediately preceding the filing of the claim plus the period of any extension of time to file (the 3 year look back rule). If the claim for refund is filed within the two year period, the amount is limited to the portion of tax paid during the 2 years immediately preceding the filing of the claim (the 2 year look back rule).

    Reminder:

    The claim can be for payment of tax, penalties or interest.

  4. Untimely claims for credit or refund will be formally disallowed (fully or partially). However, in some situations a claim will be timely but a refund or credit of the overpayment will not be allowable due to when the credit was deemed available. In those situations, this credit will be moved to the Excess Collection Files (XSF) and cannot be used to offset liabilities for other periods.

  5. ASED Procedures —See Table Below:

    If the case is ... Then ...
    Within 90–60 days of the ASED
    1. Provide the designated individuals with the assessment information for direct IDRS input.

    2. Monitor to ensure posting of the adjustment.

    59 or less days of ASED
    1. Prepare Form 2859

    2. Submit to coordinator who will forward to RACS

    3. Ensure confirmation and DLN of the adjustment is received.

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

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

  8. Reference the following IRMs, as necessary, in regards to erroneous abatements. The CAWR unit management will need to determine who takes care of the forms and where to send them. For assistance, see the CAWR/FUTA Web page http://wc.web.irs.gov/CAWR-SSA/Address%20and%20mail%20stop.htm

    • IRM 21.6, Individual Tax Returns

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

    • IRM 21.4.4 , Refund Inquires - Manual Refunds

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

    • IRM 25.7 , Statutes of Limitations

  9. Statute Searches: All Tax Examiners are responsible to expedite statute imminent cases. Each tax examiner is to perform a statute search on their inventories (paper and electronic) beginning 90 days prior to the statute expiration date as illustrated below. In addition, all new receipts to their inventory must be reviewed for statute criteria.

    Program Begin Searching Frequency of Searches to be Performed
        Biweekly Weekly Daily
    SSA-CAWR 12/1/XXXX 12/1–1/19 1/20–2/20 2/21–2/28
    IRS-CAWR 1/15/XXXX 1/15–3/6 3/7–4/7 4/8–4/15

    Each search is to be documented using Form 11122 which will be maintained by management. See the CAWR/FUTA Home page http://wc.web.irs.gov/ for Forms 11122 and additional statute guidelines.

4.19.4.3.13  (02-01-2008)
Replies With PAL Indicator Present

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

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

    Note:

    Take into consideration the reason the PAL indicator is present

    Note:

    This indicator is automatically downloaded by Automated Under Reporters (IMF)

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

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

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

    The CAWR case has a PAL indicator (identified after screening) the reply does not resolve the discrepancy.
    1. Assess and close the case using the appropriate case processing procedures. See IRM 4.19.4.7.

4.19.4.3.14  (04-04-2013)
Replies Received For Delete Cases

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

    IF THEN
    A CAWR issue unrelated to previous correspondence
    1. work the case according to the taxpayer's intent.

    Correspondence is not a CAWR issue
    1. forward the correspondence to the appropriate area.

    2. Issue 86C letter if necessary.

    the case has been "deleted" on Master File. (CAP shows closing code 11)
    1. Send a 2057C letter explaining IRS received additional information balancing your account. No further information will be necessary.

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

4.19.4.3.15  (04-01-2010)
Replies Indicating Sole Proprietorship

  1. A Sole Proprietorship is a business operated by the owner and as such has wage reporting requirements similar to a single member Limited Liability Corporation (LLC). The owner of a Sole Proprietorship and the single member LLCs must include all income and expenses on the owner's tax return.

    Note:

    The Sole Proprietor, who withdraws income from the business and reports total income and loss on Form 1040, acquires income from the business in the form of gains, not wages.

    Reminder:

    A Schedule C taxpayer (Sole Proprietor/LLC) does not issue a Form W-2 to themselves or file Form 94X when the owner is the only worker. The taxpayer must file Forms W-2C, Forms 941-X, and Form 1040X as appropriate to resolve the incorrect reporting situation.

  2. The wages a Sole Proprietor pays to his or hers employees should match the Schedule C wages, the Forms W-2, and the Form 94X wages.

  3. The owner is the only one authorized to sign the tax returns unless there is an authorized POA or RAA on file. With respect to income tax returns on forms in the 1040 series, a POA entitles someone other than the owner to sign the return only under certain circumstances. See "Authority to Sign Your Return" section of Form 2848 instructions.

  4. See IRM 21.7.13.5.4 , EIN Assignment: Limited Liability Company (LLC), for more information on these types of taxpayers.

  5. The Sole Proprietor is the owner and must show wages on Schedule C. If the Sole Proprietor has employees he must file Forms 941 and Forms W-2 for his/her employees. File Correspondence following the "No Assessment needed" case processing procedures. See IRM 4.19.4.7. Research CC NAMEE to determine if the Sole Proprietor/LLC had a previous EIN.

4.19.4.3.15.1  (02-01-2008)
Decedents — Sole Proprietorship Responses

  1. IF THEN
    The information provided resolves the discrepancy
    1. Process the information and close the case using the applicable No Assessment needed case processing procedures. See IRM 4.19.4.7.

    The case discrepancy is not resolved through research or by the correspondence received:
    1. Assess and close the case using the applicable Assessment needed case processing procedures. See IRM 4.19.4.7.

    2. Forward a copy of the case to ACS using local procedures to accelerate processing.

    3. Input a history item on TXMODA using CC ACTON "DEC'D Sole P. Referred to ACS on IDRS."

    4. Do not input a STAUP.

4.19.4.3.16  (09-29-2011)
Responses Identifying Third Party Sick Pay

  1. If the taxpayer responds and explains that the discrepancy is due to a Third Party Sick Pay reporting problem follow the procedures below: IRM 4.19.4.2.8

    If... And ... Then ...
    employer is an insurance company involved in paying disability benefits
    OR,
    There is an amount in Box 14 of Form W-3 that is equal to the FIT discrepancy
    the only discrepancy can be attributed to the Federal Income Tax Withheld sick pay issue
    1. File the correspondence following the "IRS-CAWR No Assessment needed" case processing procedures. See IRM 4.19.4.7.1.

    The discrepancy is an incorrect line adjustment the correct tax has been paid
    1. Input TC 290 for $.00 and adjust the wages.

    2. Send Letter 2057C explaining actions taken and close the case on CAP and IDRS.

    employer did not report the wages or the tax,  
    1. Send Letter 2057C explaining actions taken and close the case by assessing the sick pay wages and half the tax (6.2% for Social Security and 1.45% for Medicare) on the employer's account.

      Note:

      For tax year 2011 only the employee share of Social Security tax is 4.2%

    the correct tax has not been paid third-party sick pay wages are not reported on lines 5a and 5c of the Form 941, but the credit was taken on line 7b of Form 941,
    1. assess the sick pay wages and the full tax (12.4% for Social Security and 2.9% for Medicare) on the employer's account.

      Reminder:

      For tax year 2011 only the Social Security tax is 10.4%

    employer states that there is a discrepancy for income tax withheld by the third-party, This type of discrepancy cannot be avoided and does not indicate a reporting error by the employer. If no other discrepancies exist  
    1. accept the employer's word

    2. Input a TC 290 for .00 on the employer's account

    Note:

    Refer to IRM 21.7.2.4.2, Sick Pay and Publication 15-A, Employers' Supplemental Tax Guide for any additional information needed for working the case that are not covered here.

4.19.4.3.17  (04-04-2013)
Wages Earned vs. Wages Paid Replies

  1. Forms W-2 should be issued to employees for the wages actually or constructively paid during a calendar year, not the wages earned during that time. Discrepancies may result if employers report earned, rather than paid, wages on Forms W-2.

  2. If the taxpayer states that the wages were earned in the current CAWR tax year being worked, but reported on a Form 941 for a different year:

    IF THE REPLY THEN
    The tax was paid in subsequent tax year periods, indicating Wages Earned vs. Wages Paid.
    1. Research CC TXMODA to make sure the proper amount of tax was paid in the subsequent tax year.

    2. When payments are identified, send a 2057C Letter informing the taxpayer of the adjustment made to their account and explain that the same discrepancy situation will occur for the subsequent tax year.

    3. Input the appropriate adjustment amount you will be assessing on the CAP Detail Screen and close the case with the appropriate closing code.

    4. Once an amended return is received, input (TC 291) for appropriate money amount (with a credit bar) using BS 55 to decrease the quarter to which the wages were erroneously paid on the subsequent tax year.

    5. Transfer the credit amount using the appropriate payment transfer codes to the prior tax period using the credit transfer IAT.

    6. Input (TC 298) interest free assessment using BS 55 on the prior tax period and the appropriate interest computation date or payment date.

    7. Input TC 180 for .00 to suppress the penalty.

4.19.4.3.18  (04-03-2012)
Replies Indicating Advanced Earned Income Credit (AEIC)

  1. Eligible employees may receive EIC through tax year 2010 on their Form 1040 or may have received AEIC during the year from their employer. AEIC was eliminated for 2011 and subsequent.

  2. If the employer pays AEIC to the employee, this is shown as a credit on the employer's Form 941.

  3. AEIC is indicated by Transaction Code (TC) 766 on the module.

  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. Use the web site http://iors.web.irs.gov/homeIUUD.aspx to obtain the Criminal Investigation Fraud Detection Center (CIFDC) for your campus. This web site provides the following CIFDC information:

    • Manager name,

    • Drop points, and

    • Telephone numbers.

    Reminder:

    Use TC 766 to increase AEIC and TC 767 to decrease this credit.

  6. If Forms W-2C are received, but they do not resolve the discrepancy and they cause the Form W-2 AEIC to exceed the Forms 941, creating a credit owed to the employer, a Form 843, amended Form 941, or Form 941-X is needed before the credit (TC 766) can be allowed on the account.

    1. Enter the amount of the TC 29X adjustment on the CAP detail screen.

    2. See Circular E and IRM 21.7.2.4.3, Advance Earned Income Tax Credit (AEITC) – Forms 941, 943, 944, and Schedule H, for more information on this subject.

  7. If Forms W-2C are received, but they do not resolve the discrepancy and they cause the Form W-2 AEIC to be less than Forms 941, creating a debit to the employer, assess the account using TC 767.

    Reminder:

    The TC 767 amount cannot exceed the TC 766 amount reported for a specific quarter. Multiple quarters may need adjusting when assessing AEIC.

  8. Correspond with the taxpayer, explaining the adjustment.

    1. Enter the amount of the TC 29X adjustment and on CAP detail screen.

      Reminder:

      Do not add AEIC amounts to any TC 29X adjustment amount. This is a separate figure.

    2. See Circular E and IRM 21.7.2.4.3, Advance Earned Income Tax Credit (AEITC) – Forms 941, 943, 944, and Schedule H, for more information on this subject.

    IF THEN
    the reply shows there is more AEIC on Forms W-2 than on Forms 941 and the taxpayer submits Forms W-2C decreasing AEIC to match the Forms 941:
    1. Prepare automated Form 6209 to decrease AEIC. Do not use the minus sign.

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

    the taxpayer submits Form 941-X or Form 843 to increase the AEIC amounts to agree with the Forms W-2:
    1. Close CAP with the appropriate closing code.

    2. Input TC 290 for .00 with a Reference Number (RN) 766 to increase the AEIC using BS 55 to the appropriate quarter(s) based on Form 941-X or Form 843.

    there is less AEIC on Forms W-2 than on Forms 941 and the taxpayer submits an amended Form 941 or Form 941-X to decrease AEIC to match Forms W-2
    1. Close the case using the appropriate closing code.

    2. Input TC 290 .00 with Reference Number (RN) 767 (with a credit bar after the $ amount) to decrease AEIC using BS 55 to decrease the appropriate quarter(s) based on Form 941-X.

    3. The decrease should not exceed the amount of AEIC shown on the quarter being adjusted. If the TC 767 amount exceeds the TC 766 amount reported for a specific quarter, the adjustment will unpost. Adjust multiple quarters, if necessary, according to Form 941-X.

    the AEIC on Forms W-2 are less than AEIC on Forms 941 and the taxpayer submits Forms W-2C increasing AEIC on Forms W-2 to match Forms 941.
    1. Prepare automated Form 6209 to increase AEIC (using the minus sign).

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

4.19.4.3.19  (04-01-2011)
Family Employment Related Case Replies

  1. IF THEN
    The reply states the discrepancy is related to family employment but the age of the child is not given.

    Note:

    A child under age 18 working for a parent causes most family employment discrepancies.

    1. Verify the age and date of birth of the child using IDRS CC INOLE definer S

      • Be sure you compute the child's age for the year the wages were earned, not the year the case is being worked.

      • If the child turns 18 during the tax year for which you are working, and the taxpayer supplies the breakdown of wages earned before their 18th birthday, you can assess for the quarter(s) after the child turned 18, If the breakdown is not supplied, assess for the entire year.

      .

    Exempt wages and non-exempt wages are reported on Form W-2.
    1. Form W-2C should be filed to correct the discrepancy.

    2. See Items 2 through 4 below.

    The child is under 18,
    OR
    The child is between 18 and 21 and services are not in the course of the parent's trade or business.

    Exception:

    Wages are subject to Social Security Medicare tax even if the child is under 18 if services are in the course of the parent's trade or business, and the business is neither a sole proprietorship nor a partnership in which both partners are parents of the child.

    1. Wages are exempt.

    2. See Items 2 through 4 below.

    The child is older and the work is done in the course of the parent's trade or business.
    1. Wages are subject to Social Security (FICA) taxes

    2. Prepare automated Form 6209, if appropriate.

    3. Prepare Form 6494, if applicable. Attach copies of the appropriate Form W-2 behind Form 6494 to correct SSA records.

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

4.19.4.3.20  (09-29-2011)
Agricultural Employers (Form 943) Replies

  1. Occasionally, discrepancies occur because the employer reports wages less than $150 incorrectly. To determine if farm workers are subject to FICA and Income Tax Withholding see IRM 21.7.2.4.8.1

  2. For assistance in working these case types, see the table below:

    IF THEN
    The total amount of wages paid (under $150) is the amount of the discrepancy and no tax was reported on Forms W-2.
    1. Prepare automated Form 6209 , if applicable.

    2. Prepare Form 6494 using the appropriate correction code.

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

    Wages (under $150) were reported incorrectly.
    1. Determine if the employee(s) with (less than $150) are subject to Social Security and Medicare taxes.

    Social Security tax has been reported on Forms W-2 for agricultural wages under $150.
    1. Send a 2057C closing letter to determine if any of these employees receiving less than $150 meet the four conditions in IRM 21.7.2.4.8.1 required for exemption if the employer paid agricultural wages totaling ( $2,500 or more).

    The four conditions in IRM 21.7.2.4.8.1 (2) were not met and the employer paid agricultural wages totaling $2500 or more
    1. The employees are subject to Social Security and Medicare tax.

    2. Prepare automated Form 6209 to adjust the CAWR module.

    3. Prepare Form 6494

    4. On MFT 11, assess and close the case using "IRS-CAWR Assessment needed" case processing procedures. IRM 4.19.4.7.1

    The taxpayer states all employees with wages (less than $150) are exempt:
    1. File Correspondence following the "IRS-CAWR No Assessment needed" case processing procedures.

4.19.4.3.21  (04-01-2010)
Replies — Payment of Employee's Share of Social Security and Medicare Taxes Paid by Employer

  1. At times, employers pay the employees' share of the Social Security and Medicare tax without withholding it from his or her wages. When this happens, there are two ways to calculate the correct amounts to be shown on the Form W-2 .

  2. The taxes on the Social Security and Medicare wages are not to be included in the Social Security and Medicare wage box on Form W-2 if the employee did not have the Social Security and Medicare taxes withheld from his or her salary and the following conditions apply:

    • The employee is a household employee and the employer files Form 1040 Schedule H or

    • The employer files Form 943, Employer's Annual Tax Return for Agricultural Employees.

      Example:

      In 2008, a household or agricultural employee is paid $2,000. The Social Security tax rate for that year is 6.2% and the Medicare tax rate is 1.45% for a total of 7.65%. The amounts to be entered in each of the boxes on Form W-2 are as follows:

      W-2 Information fields Amount fields
      Total Compensation $2,153.00
      Social Security Wages $2,000.00
      Medicare Wages $2,000.00
      Social Security Tax $124.00
      Medicare Tax $29.00

    1. The first figure above is arrived at by using the following calculation:
      • The sum of $2,000 multiplied by 7.65% added to $2,000 = $2,153.00.

    2. The second and third figures above are the amount actually paid to the employee.

    3. The fourth figure above is arrived at by using the following calculation:
      • $2,000 multiplied by 6.2% = $124.00
      • $2,000 multiplied by 1.45% = $29.00

  3. If the employer is a Form 941/944 filer and Social Security and Medicare taxes are not withheld from the employees' salary, include the amount on which the Social Security and Medicare taxes are figured in both the Total Compensation box and the Social Security and Medicare wages box on Form W-2.

    Example:

    In 2008, an employee is paid $2,000. The total tax rate is 7.65%. The amounts to be entered in each of the boxes on Form W-2 are as follows:

    W-2 Information fields Amount fields
    Total Compensation $2,165.67,
    Social Security Wages $2,165.67
    Medicare Wages $2,165.67
    Social Security Tax $134.27
    Medicare Tax $31.40

    1. The first three figures above are arrived at by using the following calculation:
      • $2,000 divided by (1.0 − .0765 = .9235) = $2,165.67

    2. The tax figures shown above are computed at the usual 6.2% and 1.45%, respectively.

  4. Forms W-2C are required if Form W-2 have been completed incorrectly because of a situation in either of the preceding examples. The employer is required to report and pay taxes on the amounts reported in the Social Security and Medicare wage box of Form W-2 in the second example.

4.19.4.3.22  (02-01-2008)
Installment Agreements — IRS-CAWR and SSA-CAWR Replies

  1. If the taxpayer requests an installment agreement, either in his reply or by submitting a Form 9465determine:

    1. The taxpayer has provided adequate information, either in writing or by phone, for positive identification.

      Note:

      Name, TIN, and tax year of the reply matches the case.

    2. The CAWR tax discrepancy to be covered by the installment agreement in a tax period is also the tax period of the CAWR discrepancy case.

    3. The taxpayer has proposed a monthly or other periodic payment for a specific amount.

    4. Assess and close the case as appropriate.

    5. Input a TC 971 with AC 043.

    6. Send a copy of the case to Campus Installment Agreement Unit (CIAU) for processing utilizing Form 3210.

    7. Send a 2057C Letter to the taxpayer explaining that his/her request for an installment agreement is being processed and he/she will be contacted later by another IRS office.

      Reminder:

      The CIAU will correspond with the taxpayer regarding their inability to grant the installment agreement.

4.19.4.3.23  (10-19-2011)
Faxed Signatures — Replies

  1. Faxed Signature General Guidelines — These general guidelines are applicable to all divisions and cover operations related to income tax, employment tax, excise tax, estate tax, gift tax, and generation skipping tax, as well as tax exempt and employee plans determinations.

  2. In certain situations, submission of documentation, forms, letters, and returns related to CAWR inquires and interactions can be allowed via fax through taxpayer or IRS request. Chief Counsel has advised that in circumstances where contact with the taxpayer has been made and documented, faxed signatures are legally sufficient.

  3. Taxpayer signed agreements (assessments or abatement) involving tax amounts of $250,000 or less can be accepted by fax if taxpayer contact has been made, the case history documents the date of contact, and the desire of the taxpayer to submit the consent by fax. A faxed signature for a Form 941-X decrease where we are only lowering the wages and no refund will be issued is acceptable.

  4. The Deputy Commissioner of Services and Enforcement limited accepting faxes for consents to assess additional tax of $250,000 or less. Any agreement of over $250,000 should be secured with original signatures that are delivered in person or by mail.

  5. Faxed signatures will not be accepted for any tax decreases (this is not an abatement of tax assessed and not yet paid, but a decrease to what is already on Master File) in which the taxpayer would be issued a refund of the taxes he/she has paid.

    Exception:

    If the employee is in telephonic communication with the taxpayer, a faxed signature is acceptable for a tax decrease or credit increase adjustment.

    IF THEN
    Taxpayer contact has been made; Document the date of contact and the desire of the taxpayer to submit by fax
    1. Assessments of tax are acceptable.

    A Form 941-X decrease (we are only lowering the wages, no refund will be issued)
    1. A faxed signature is acceptable.

    A Form 941-X shows a decrease in tax, the taxpayer would be issued a refund of taxes paid.

    Note:

    This is not an abatement of tax assessed and not yet paid, this would be a decrease to what the TC 150 is already showing on Master File.

    1. A faxed signature is not allowed.

4.19.4.3.24  (04-10-2014)
Foreign Students/Non-Resident Visitors

  1. When an employer states any or all of their employees are foreign students they may be exempt from SSA and Medicare tax. The procedures in this subsection are necessary.

    IF AND THEN
    Social Security and Medicare tax is erroneously withheld by the employer The foreign student is unable to obtain reimbursement from the employer The student files Form 843 to receive a refund of the erroneously withheld taxes.

  2. Check TXMODA for an adjustment containing information defined below.

    • 291 10162003 1,721.24- 200340 98154-123-45678-3

    • 004 22,499.77- 007 1,721.24-

    • 073 22,499.77-

    • 820 01312004 200340 98 (or 60, 78, or 66)124-123-45678-3

    • XREF-TIN> 123-45-6789 XREF-MFT> 30 XREF-TX-PRD> 200312

  3. Research adjustment to verify the below criteria.

    • The Reference amounts (004, 005, 073) may match the Form 941/944/W-2 CAWR discrepancy

    • The tax amount is 1/2 of the Social Security and Medicare tax amount (wage amount X 7.65%)

    • A TC 820, Credit Transfer, has been input with X-Ref SSN (The Foreign Student's SSN) to X-Ref MFT 30.

    • The DLN begins with 98, 60, 78, or 66.

    • The original adjustment is done in Philadelphia, Cincinnati or Ogden.

  4. Check CC IRPTRL on the student's SSN. There should be a Form W-2 for the adjusted reference amount from the EIN (employer) on the CAWR case.

    IF THEN
    see the adjustment above is present
    1. Complete Form 6209 to decrease Social Security and Medicare wages. In the remarks, select "Other" and enter "Exempt Foreign Student."

    2. Complete Form 6494 using correction code 4 and notate the need to cancel the Form W-2 due to the foreign student criteria.

    3. Attach a copy of the Form W-2 or give employee name, SSN, and wage amount to be canceled.

    4. Send a 2057C letter to notify the employer, the employee's half of the Social Security and Medicare tax was refunded to his foreign employee. Inform the employer they must file a claim on Form 941-X within three years of when the tax return was filed or two years from when the tax was paid if they wish to request a refund of the employer’s half of the Social Security and Medicare taxes.

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

    If the employer files a Form 941-X / Form 843 for his half of the tax,
    1. Send 2057C letter explaining actions taken and close CAP with the appropriate closing code.

    2. Input TC 291 with item adjustment code 112 for the tax amount. Do not decrease the Reference amounts 004, 073, or 005 a second time.

    Note:

    if the adjustment document is requested (using CC ESTAB) and the DLN begins with 98 it should show a copy of the student's Form W-2 and VISA. In addition a letter stating the foreign student was unable to obtain reimbursement from their employer along with Form 843.

4.19.4.3.25  (09-22-2009)
Replies Received Directly From SSA

  1. SSA will remove the Form W-2 submitted and notate on the reply that the Forms W-2 were received by SSA.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. Do not penalize these employers. Assume the submitted forms resolved the SSA issue.

4.19.4.3.26  (04-01-2009)
Taxpayer Reply Identifying Payroll Services

  1. At times a taxpayer may state their case was being worked by their Payroll Service

    IF THEN
    info has not corrected the discrepancy
    1. Assess and close the case using the appropriate assessment needed case processing procedures. IRM 4.19.4.7

    2. Send a 2057C closing letter explaining actions taken. Inform the employer that the information provided did not resolve the issue and that they may need to contact their payroll service to investigate the issue further.

    info provided corrects the discrepancy
    OR
    updates to the module have balanced the case
    1. Determine the effects on the case.

    2. Input automated Form 6209 if necessary.

    3. Prepare Form 6494 if applicable.

    4. Assess or file the correspondence using the applicable case processing procedures. IRM 4.19.4.7

4.19.4.3.27  (04-01-2011)
Bankrupt or Defunct CAWR Replies

  1. If the taxpayer is bankrupt or the business is defunct, research IDRS CC ENMOD to check for the CNC Indicator utilizing the TC 520/530 IAT.

    IF THEN
    IRS-CAWR TC 530 cc 07 or 10 is present on any prior or subsequent module
    1. Send a 2057C closing letter explaining actions taken

    2. Close the case on CAP using CC 98.

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

      Exception:

      If the taxpayer's reply requests a tax increase ie. Form 941X, make the adjustment.

    IRS-CAWR TC 530 with a cc other than 07 or 10
    1. Close the case on CAP using CC 98.

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

    3. On IDRS, re-input the TC 530 with CC REQ77 with the Responsible Unit Code (RUC) 3 and a Posting Delay Code "2"

    IRS-CAWR TC 520 with cc 72 or 74 is present.
    1. The case is in tax court. Close CAP 98.

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

    IRS-CAWR TC 520 with any other cc than 72 or 74.
    1. Liabilities, as well as deficiencies should be assessed. Contact Insolvency prior to making assessment so they can amend their proof of claim if applicable.

    2. Input closing code 98 on the CAP.

    3. Send a 2057C closing letter informing the taxpayer of the assessment and explain payment of tax is his/her responsibility.

    4. Assess and close the case using "IRS-CAWR Assessment needed " case processing procedures. IRM 4.19.4.7.1

    SSA-CAWR TC 530 cc 07 or 10 is present on any prior or subsequent module
    1. Close the case on CAP using the CC 98.

    2. File correspondence using the "SSA-CAWR – No Penalty needed" case processing procedures. IRM 4.19.4.7.2

      Exception:

      If the taxpayer's reply requests a tax increase ie. Form 941X, make the adjustment.

    SSA-CAWR TC 530 with a cc other than 07 or 10
    1. Close the case on CAP using CC 98.

    2. Assess a civil penalty following "SSA-CAWR – Intentional Disregard Penalty Assessment" case processing procedures. IRM 4.19.4.7.1

    3. If tax is also due, follow IRS-CAWR procedures.

    SSA-CAWR with TC 520 and any CC present
    1. We will not assess a civil penalty in these instances but try to obtain the Forms W-3/W-2.

    2. Send a 2057C letter and explain the need for the taxpayer's cooperation in obtaining the Forms W-2.

    3. File correspondence using the "SSA-CAWR – No Penalty needed" case processing procedures. IRM 4.19.4.7.2

  2. If a payment posted to the account or is moved into the account, the TC 530 will release and the account will return to notice status.

    Reminder:

    BE EXTREMELY CAREFUL WHEN MOVING PAYMENTS FROM ONE ACCOUNT TO ANOTHER.

4.19.4.3.28  (04-01-2009)
Replies Identified As FDIC

  1. The following procedures are for handling CAWR cases with any proposed penalties against institutions that are under the control of the Federal Deposit Insurance Corporation (FDIC).

  2. FDIC cases are self identified by the taxpayer. No indicator shows on CAP for FDIC cases, therefore when an indication is notated on the correspondence, accept the taxpayer's word and follow the procedures below.

    Note:

    See http://wc.web.irs.gov/CAWR-SSA/ECS%20Contacts%20for%20FDIC%20cases.doc for ECS contacts.

    DETERMINE IF THEN
    A tax assessment is needed
    1. Assess and close the case using "I RS-CAWR Assessment needed" case processing procedures. IRM 4.19.4.7.1

    2. Print a copy of the CAP CDC and the taxpayer's correspondence, if applicable, forward the copies to the Examination Classification Specialist (ECS) identified for your Campus.

    a civil penalty (RN 549) assessment is required
    1. Assess a civil penalty following "SSA-CAWR – Intentional Disregard Penalty Assessment" case processing procedures. IRM 4.19.4.7.2

    2. Print a copy of the CAP CDC case and the taxpayer's correspondence, if applicable, and Forward the copies to ECS following local procedures.

4.19.4.3.29  (09-22-2009)
Reply States Taxpayer Already Filed Forms W-2

  1. When the employer states they have already filed Forms W-2 and gives an indication that the Forms W-2 were filed under another name, EIN, etc., research using information provided. If necessary, correspond with the taxpayer and request additional information needed to locate forms (i.e., EIN used, date filed, entity name used, copies of the Forms W-3/W-2, etc.).

  2. If the forms are found, notate in the remarks section of the case file and include any pertinent material. If they are not located, assess the penalty.

    Reminder:

    LOOSE FORMS W-2 have been entered onto CAP. There will be an indicator and a serial number on CAP which alerts that there are loose Forms W-2 from the employer.

  3. If the taxpayer states they filed Forms W-2 with SSA research ORS, ERQY or prepare Form 9337 , Social Security Administration (SSA) Reconciliation Referrals, and submit it to SSA via fax. If no new is information is recovered, follow (2) above.

  4. A maximum of two cases (or EINs) can be entered on each Form 9337.

    1. DO NOT USE THIS FORM — If the taxpayer does not state he filed with SSA.

    2. DO NOT USE THIS FORM — If the taxpayer responds by sending the Forms W-2 or provides the information in another form, such as a list.

  5. Complete all the information requested:

    1. Item 1 — Write the EIN of the employer.

    2. Item 2 — List any other EINs the employer may have supplied. Check CC BMFOL or access ORS data to ensure the Forms W-2 are not under the new EIN before forwarding the request to SSA

    3. Item 3 — Tax year of the case.

    4. Item 4 — Notate Tape or Paper if the method of submission to SSA is known. Leave this item BLANK if not known.

    5. Item 5 — Answer all the questions a, b, and c.

    6. Item 6 — Answer if known.

    7. Leave the SSA Response and For SSA Use Only blank.

    8. Under the For IRS Use Only — This section must be filled out entirely if a reply is expected. SSA has received many forms with only a name of the tax examiner. Please give SSA the information it needs to respond back to IRS.

    9. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    10. SSA will FAX the Form 9337 back to inform the examiner of the information already posted as well as any additional information they have received from the taxpayer since referring the case to IRS.

4.19.4.3.30  (04-01-2010)
CAWR Replies Requesting Additional Time

  1. When a reply is received requesting additional time and an assessment is required, suspend the case for 30 days from the date of the employer's correspondence.

  2. After the 30 days suspense period expires, assess the case following normal procedures outlined in IRM 4.19.4.7.

4.19.4.3.31  (04-01-2009)
Employer's Reply Requests for Copies of Forms W-3/W-2

  1. Review the CC BMFOLU for the page with the TC 980. Research ORS, ERQY, or CC IRPTRR with Doc Code WW, and when received, review them utilizing ORS screening procedures found in IRM 4.19.4.2.2. Otherwise follow items (2) through (5) below.

  2. Route Employer Requests for copies of Forms W-3/W-2 as follows:

    1. If the request is based on a discrepancy case (ie., the employer needs the copies before he/she can respond to a CAWR letter), the IRS site receiving the request will service it.

    2. If the employer's request does not specify a certain group of forms to be provided, attempt to contact the taxpayer if a telephone number can be located. If not, attempt to determine his/her needs by analyzing the discrepancy case.

  3. If copies of each document he/she filed cannot be provided, explain the reason and prepare a listing of copies not being sent. Include the following information:

    • Establishment number (if present);

    • Number of Forms W-2 reported;

    • Form W-3 FICA (Social Security) wages amount;

    • Form W-3 Federal Income Tax amount; and,

    • Form W-3 Medicare wages amount.

  4. Once the data is received and provided to the taxpayer assess the case following the appropriate closing procedures in IRM 4.19.4.7

4.19.4.3.32  (04-01-2011)
Replies Identified As Non-Profit Organizations

  1. Taxpayers reporting exempt wages incorrectly may cause discrepancies. Some of the mistakes commonly made are:

    1. Form W-2 wages not reported in Box 1.

    2. Social Security wages not reported in Box 3.

    3. Medicare wage not reported in Box 5, other than zero.

  2. IRM 4.19.4.2.21 to determine the individual's exemption status. When it is determined the individual is exempt, follow the chart below:

    If ... And ... Then ...
    the discrepancy amount is found belongs to a clergyman (Form W-2 indicates Minister, Pastor, Father) or Form W-2 is showing no Social Security Tax withheld and Federal Income Tax Withheld is balanced. You may need to research IDRS CC IRPTRL to confirm.
    1. Prepare automated Form 6209.

    2. Prepare 6494 (attaching Form W-2) to correct the Social Security and Medicare wages using CC 4.

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

    the discrepancy amount is not found  
    1. Assess and close the case using "IRS-CAWR Assessment needed" case processing procedures. IRM 4.19.4.7.1

    2. Send a Letter 2057C letter requesting a copy of the Form W-2C or the Clergyman's name and SSN.

4.19.4.3.33  (02-01-2008)
Replies Identified as Backup Withholding

  1. Discrepancies are usually caused by the withholding on Forms 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (Doc Type 98), or Forms W-2G, Certain Gambling Winnings (Doc Type 32) if reported as Backup Withholding. The amounts reported on Forms 1099-R and W2-G are not subject to Backup Withholding, so the amount shown is Federal Income Tax Withheld. Once the withholding is verified as Federal Income Tax Withheld process the case accordingly.

    IF THEN
    A Form 945 was previously filed and the taxpayer states that Federal Income Tax Withheld is included in/or reported as Backup Withholding on Form 945.
    1. Research IDRS CC TXMOD on MFT 16 for the year worked to verify.

    2. Send a 2057C informing the taxpayer that Forms 1099R are not subject to Backup Withholding and that we have adjusted their account accordingly.

    3. Close the case on CAP using the appropriate closing code.

    4. Input a TC 290 .00 with Reference Code 003, (positive amount) and Reference Code 008 (negative amount) to correct the out of balance condition on MFT 16 using blocking series 55.

    5. Close any open CAWR controls on MFT 01.

4.19.4.3.34  (04-03-2012)
Replies relating to Forms 945/1099R

  1. Discrepancies are usually caused when the taxpayer fails to file Forms 945/1099R or has a third party administrator.

    If ... Then ...
    The reply shows Forms 941/943/944 and Forms W-2 are in balance but Forms 1099R are on file with no corresponding Form 945, but the taxpayer provides a cross-reference (x-ref) EIN for a third party administrator (401k) plan that resolves the discrepancy
    1. Verify third party EIN.

    2. Do not prepare automated Form 6209 or Form 6494.

    3. Send a 2057C closing letter explaining actions taken.

    4. Close the case on CAP with the appropriate closing code.

    5. Input a TC 290 for .00 on MFT 01 with BS 55 for the appropriate tax year.

    6. Input a TC 971 on IDRS using CC REQ 77 with Action Code 017, identifying the Cross-reference (x-ref) EIN to the last available return quarter posted for the appropriate tax year.

    The reply shows 945 filed but Forms 1099R (Doc Code 98) money amounts are more than Form 945 and does not provide information to resolve the discrepancy
    1. Input the appropriate adjustment amount you will be assessing on the CAP Detail Screen.

    2. Send 2057C explaining actions taken and close the case on CAP with the appropriate closing code.

    3. On MFT 16, input a TC 290 for the appropriate money amount and the applicable item adjustment codes using blocking series 55 with the correct correspondence and IRS received date.

    4. Assess FTD Penalty if necessary. Refer to 4.19.4.7.3.

4.19.4.3.35  (04-01-2009)
Federal Labor Law Replies

  1. Certain government agencies are empowered to collect, from employers, wages erroneously not paid to employees (or former employees). IRM 21.7.2.5.7 Federal Labor Laws-Wage Payments Made by Federal Agencies. Agencies are allowed to disburse these wages to the employees concerned, and withhold income taxes and employee’s share of FICA tax. Agencies allowed to take this action and the provisions which allow such action are:

    • Department of Labor - Fair Labor Standards Act

    • General Accounting Office - Davis-Bacon Act

    • National Labor Relations Board - Labor Management Relations Act.

    1. When the reply indicates Federal Labor Law, check for line item adjustments.

    IF THEN
    The amounts were reported on the original returns
    1. Follow Third Party Sick Pay instructions.

    The out of balance was caused by a subsequent adjustment
    1. Order the TC 290 adjustment if necessary to verify Form 941-C/941-X notation "Department of Labor" (DOL).

    Forms W-2 were filed by the employer, and "Department of Labor" (DOL).
    1. Prepare Form 6494 to notify SSA DOL filed Forms W-2.

    2. Notify the employer not to file Forms W-2, DOL already filed.

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

    The discrepancy amount is Federal Income Tax Withheld (only) and the amounts match Federal Income Tax Withheld on the DOL and they fall under the corresponding provisions:
    1. Do not assess the employer for Federal Income Tax Withheld.

    2. File Correspondence following the applicable No Assessment needed case processing procedures. IRM 4.19.4.7

    Note:

    Do not prepare an automated Form 6209.

4.19.4.3.36  (04-04-2013)
Large Corporation/ Large Dollar Replies

  1. When an SSA-CAWR case type 08 (without Compliance Indicator) contains either a Large Corporation Indicator (LCI) or a proposed tax and/or penalty assessment of $1 million dollars or more that cannot be resolved through the information provided in the response, you must coordinate with your local Large Corporation Coordinator. IRM 4.19.4.2.1.1 and IRM 4.19.4.7.

    Note:

    Coordination with the LCTU is required during screening for all cases other than SSA-CAWR case type 08 (without Compliance Indicator). Since Case Type 08 (without Compliance Indicator) letters are auto-generated they are the only cases that need to be referred to the Large Corp. Unit during the reply or late reply phase of the CAWR program.

  2. Certain portions of the IRS-CAWR inventory is now auto generated. Refer all IRS-CAWR reply cases that were auto generated to Large Corp, if either a Large Corporation Indicator (LCI) is present or a proposed tax and/or penalty assessment of $1 million dollars or more is needed when the case cannot be resolved through the information provided in the response.

  3. Research on IDRS and CAP to determine if the case was previously referred to Large Corp. If the case was referred during the screening phase, it does not need to be referred to Large Corp again.

  4. Prior to inputting any tax or civil penalty adjustment of $100,000 or more, you MUST obtain a signature showing managerial approval that the case was reviewed on the adjustment/history sheet.

  5. Follow the procedures below for cases that contains either a Large Corporation Indicator (LCI) or a proposed tax and/or penalty assessment of $1 million dollars or more below:

    IF THEN
    The reply resolves the discrepancy.
    1. Large Corp Contact is not necessary.

    2. Utilize the information provided in the reply and take the necessary actions.

    3. File Correspondence following the appropriate case processing procedures. IRM 4.19.4.7

    The reply brings the case below a $100,000 civil penalty (PRN 549) or tax increase,
    1. Utilize the information provided in the reply and take the necessary actions.

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

    The reply leaves the case above $100,000 civil penalty (PRN 549) or tax increase,
    1. Contact the officer of the corporation/business and explain the need for the adjustment.

    2. Consider any additional information supplied.

    3. Ensure proper managerial signatures are obtained.

    4. Assess and close the case using the applicable Assessment needed case processing procedure. IRM 4.19.4.7

  6. If the assessment is over $10 million dollars, send a complete copy of the case file to the following address on Form 3210 Document Transmittal.

    Business Analysis & Support Section

    333 W Pershing Road

    Kansas City, MO 64108

    ATTN: Sonja Coombes Stop 1035 S2

    OS:CFO:R:R:B

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

4.19.4.3.37  (04-04-2013)
SSA-CAWR Replies with Payment of Civil Penalty

  1. When the taxpayer responds and includes a payment to the Civil Penalty (PRN 549):

    1. Research IDRS and use the payment tracer IAT to locate the payment.

    2. When the payment is posted to the incorrect module, transfer the payment to the MFT 13 using the credit transfer tool IAT prior to assessing the civil penalty.

    3. Follow the SSA-CAWR Intentional Disregard Penalty needed case processing procedures if the reply didn't resolve the discrepancy. IRM 4.19.4.7.2

4.19.4.3.38  (04-01-2009)
Employer Reply Requesting Blank Forms W-3C/W-2C

  1. When taxpayers or their representatives request Blank Forms W-3C/W-2C in order to correct a discrepancy, provide the IRS web site to the taxpayer to obtain the forms they are requesting. The web site is www.irs.gov or have them call 1 800 TAXFORM (829-3676).

4.19.4.3.39  (04-01-2009)
Processing Miscellaneous Forms Received With Replies

  1. If the correspondence is from a Power of Attorney (POA) or other third party make sure the criteria in IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File is adhered to.

  2. Form 2848: for multiple years or a series of inclusive periods, including quarterly periods, the taxpayer may list 2004 through 2006. See example below. For fiscal years, enter the ending year and month, using the YYYYMM format. Form 941 must show 1st, 2nd, 3rd, and 4th quarters of a specific tax year using YYYYMM format. Annual returns (Forms 943, 944, 945, 1041 on BMF and Form 1040 on IMF), the (POA) must enter the ending year using a specific YYYY format.

    Example:

    2004 through 2006 or 2nd 2005-3rd 2006

    Reminder:

    Do not disclose information to the POA if it is completed using general references such as ("All years" , "All periods" , or "All taxes" or an entire tax year i.e. 2004).

    IF THEN
    A taxpayer or his representative sends Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization Research IDRS CC CFINK for POA registration on the Central Authorization File (CAF).
    The POA is registered on CAF for the specified quarters and/or tax periods.
    1. Keep a copy of the Form 2848 or 8821 with the case file.

    2. Work the case using normal procedures.

    The POA is not registered on CAF for the specified quarters and/or tax periods.
    1. Keep a copy of the Form 2848 or 8821 with the case file.

    2. Send or fax the original form to the CAF Unit for processing.

    3. Work the case using normal procedures. An authorization may be limited to a specified quarter, tax period, or specified tax issue. The CAF can be updated to show authorization for Civil Penalty (PRN 549) issues, as well as specific tax issues.

4.19.4.3.40  (04-04-2013)
Miscellaneous Reference Material

  1. Specific instructions for the following types of adjustments and other subjects are listed here or in IRM 21.5.1, General Adjustments:

    1. IRM 20.1 , Penalty Handbook— Penalties are applicable when taxpayers fail to: file timely, make deposits, or pay taxes when due unless that failure is due to reasonable cause and not willful neglect

    2. IRM 20.2 , Interest — Interest may be charged on the additional tax that resulted from the examination of a return. Interest is figured from the due date of the return to the date of full payment. If the employer discovers an error and corrects it in the same tax period, interest is figured from the due date of the return for that tax period

    3. IRM 21.5.5 , Unpostables — An input transaction that fails to pass a series of validity checks on Master File at the Enterprise Computing Center-Martinsburg (ECC-MTB) is called an unpostable. A 3 digit unpostable code is given to the unpostable transaction

    4. IRM 21.5.7, Payment Tracers — Payments that are not applied to balances within one year from the time they are received are put in the Unidentified Remittance File (URF) and are transferred to the Excess Collection File.

    5. CC BMFOL — CC BMFOLU contains CAWR modules for the current CAWR and two other processing years. Tax years are available until December, four years after the tax year. Make adjustments to all years on CC BMFOL via Forms 6209.

    6. IRM 21.7.9 - BMF Duplicate Filing Conditions

    7. IRM 21.7.2 - Employment and Railroad Tax Returns

4.19.4.3.41  (02-01-2008)
Processing Forms W-2G and 1099R Received After IRP Processing

  1. Copy A of original Forms W-2G, 1099-R or a photocopy of an unprocessed Form 1096 may be received in the CAWR unit.

  2. These are forwarded to the CAWR unit because they have not been received in time to process through the normal processing for information returns; therefore, the information has not been available for the reconciliation phase of the CAWR program.

  3. Forms W-2G may be received from Receipt and Control stating that the information is really for a tax year CAWR is working although it is on the wrong year's form. The date in the "Date Won" box will verify which tax year is affected.

  4. To avoid erroneous taxpayer contact, or failure to consider the additional information received, process them as follows:

    1. If a tax year prior to the current processing year for CAWR is received, determine if it is a late reply or a reply to an assessment.

      If ... Then ...
      a TC 29X in Blocking Series 55 is found
      • determine if the information from the returns affects the CAWR case and follow procedures in See IRM 4.19.4.6

      there is not a TC 29X adjustment
      • Follow procedures in IRM 1.15.1, Records Control Schedule 206 for Service Campuses/Centers

      the forms are not needed for a CAWR discrepancy case
      • forward them to the Campus IRP Civil Penalty unit.

  5. Never prepare a Form 6209 for Forms 1099R or W-2G.

4.19.4.3.42  (04-01-2009)
Forms W-2, W-3, W-2C, and W-3C Received Prior to SSA Processing

  1. Forms W-2C/W-3C should not be forwarded to SSA unless Social Security amounts have changed or if the employee SSN is being changed.

  2. When the employee's SSN is the only change on the form, write "URI" across the top of the Form W-2C/W-3C and give to clerical for proper routing to SSA.


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