4.19.16  Claims

Manual Transmittal

November 04, 2011

Purpose

(1) This transmits revised IRM 4.19.16, Examining Process, Liability Determination, Claims.

Material Changes

(1) IRM 4.19.16.1 (2) — Add IRM 25.6.1.10.2.7 reference for more information on processing claims involving statute periods.

(2) IRM 4.19.16.1 (4) — Add 1040 or 1040A (marked as Amended, Corrected, Revised, etc.)

(3) IRM 4.19.16.1.2 — Update section to include current claims processing procedures being followed in Accounts Management with the Correspondence Imaging System (CIS). Added the use of HQ 1 for all Operations Assistance Requests (OARS) routed to Exam Classification. IPU 080681, 101529, and 111170 incorporated into the section.

(4) IRM 4.19.16.1.3(d) — Rephrase information and include 106C for partial disallowance cases.

(5) IRM 4.19.16.1.4 and 4.19.16.1.4.1 — Provide additional detail on claims processing procedures, including adding claims disposal codes, and make editorial changes throughout the section.

(6) IRM 4.19.16.1.4.2 — Create a new section addressing claims contact responses, including a break out of claim allowance procedures from claim full/partial disallowance procedures. Revised the If and Then charts to improve claim response procedures. Incorporate IPU 101529 into the section.

(7) IRM 4.19.16.1.4.3 Moved previous section 4.19.16.1.4.2 to this section, updated section to include current procedures, and add reference to Statute IRM 25.6.1.5

(8) IRM 4.19.16.1.5.3 — Update this section to include current procedures for processing Medical and Dental Resident FICA claims.

(9) IRM 4.19.16.1.5.4 — Update this section to include current procedures for processing CSX/Quality Stores claims.

(10) IRM 4.19.16.1.5.5 and 4.19.16.1.5.5.1 — Removed section on City of Detroit Policeman Claims due to claims no longer coming into the campuses with this issue. Replaced with a new section addressing SBSE adoption credit claims.

(11) IRM 4.19.16.1.5.6 — New section created to address VA Disability Compensation for Veterans Separated due to Medical/Disability.

(12) Editorial changes were made throughout the IRM, as needed, during the update process for the IRM.

Effect on Other Documents

This IRM supersedes IRM 4.19.16 dated November 2, 2007.

Audience

This IRM is intended for the use of the SB/SE and W&I Campus Examination Operations.

Effective Date

(11-04-2011)

Jeff Basalla,
Director, Campus Reporting
Compliance SB/SE

4.19.16.1  (11-04-2011)
Claims

  1. Refer to IRM 21.5.3, General Claims Procedures, for additional processing information.

  2. Refer to IRM 25.6.1.10.2.7, Claims for Credit or Refund — General Time Period for Submitting a Claim for more information on claims involving statute periods.

  3. Claims are requests to reduce tax previously assessed and paid.

  4. Claims can be filed on:

    • Form 1040/1040A (marked as amended, corrected, revised, etc.) or 1040X ,

    • Form 843, or

    • In a letter or document with enough information to determine the reduction in tax

  5. Use Source Code 30 for Claims.

  6. Claims can no longer be automatically disallowed because the claim was filed later than the time prescribed in IRC Sec.6511(a). The statute is extended for that period if a taxpayer can show they were:

    1. physically or mentally impaired AND

    2. were unable to handle their financial affairs, AND

    3. If the physical or mental impairment is expected to result in death OR

    4. Is expected to last more than 12 months

    EXCEPTION: If a spouse or authorized person could act for the individual, then the period for filing a claim is not extended.

4.19.16.1.1  (11-04-2011)
Classification of Claims and Related Returns

  1. Classification Section, Examination Operation, will classify all claims not immediately processed for refund by the Document Perfection or the Accounts Management Operations. See IRM Exhibit 21.5.3-2, Examination Criteria (CAT A), for a complete list of all claims meeting Category A criteria.

  2. Protective Claims are filed to protect taxpayers from specific contingencies that affect the normal processing of the document or to extend the statute period due to pending court actions.

    1. If a protective claim cannot be closed due to contingency action, the claim is selected and forwarded to the appropriate area office or Operations Manager, Examination, for suspense.

    2. See IRM 21.5.3.4.7.3.2, Account Resolution, Processing Protective Claims, for additional information.

  3. Claim issues, previously decided during a prior audit, are reevaluated and accepted or selected based on additional information included with the claim and data included in the administrative file.

  4. Returns selected for reexamination are based on issue(s) involved rather than the tax change.

4.19.16.1.2  (11-04-2011)
Claims Processing in Accounts Management Branch

  1. Claims that are sent to Accounts Management Operation are scanned into the Correspondence Imaging System (CIS), located within the Accounts Management System (AMS). Excluded from being scanned are claims that are too large to scan which are kept as a paper case.

  2. Accounts Management Operation ensures that pages 1 and 2 of Forms 1040X and 1120X are complete and contain the required signatures, including all needed schedules and forms

  3. If the classifier determines that additional schedules are necessary, the case file will be returned to Accounts Management to secure the necessary schedule(s), via CIS or local routing procedures if it is a paper case.

  4. Non-EIC Forms 1040X are normally worked at the campus received and routed by Accounts Management to their campus Exam function. However, there may be times that these cases may be classified by another Exam Campus to balance inventories among the campuses.

  5. Take the following action based on the determination reached by Classification:

    1. For paper cases, claims that are "Accepted" are stamped so that the action and identifying mark of the classifier is readily visible. For CIS cases, select the" Accepted " radio button and include remarks if needed.

    2. For paper cases, notify Accounts Management of claims that are "Selected" and retained in Examination. For CIS cases, select the "Selected" radio button and include remarks if needed.

    3. For paper cases, claims that are Disallowed, "No Consider" or "Not CAT A" need to be returned to Accounts Management with an explanation of the law provided. For CIS cases, select the appropriate radio button and include remarks if needed.

    4. For paper cases, return claims that require additional information to Accounts Management using the Case Note Section. For CIS cases, select the appropriate radio button and include remarks if needed.

  6. Operations Assistance Request (OAR) cases will be routed to Exam with HQ Reserve 1 as the primary suspense reason on CIS. Refer to IRM 21.5.1.5.1(12).

  7. The order for classifying all CATA claims is by IRS received date.

    Note:

    TAS and RINT/TENT cases will be worked as first priority.

    .

  8. Category A Criteria allows for referrals for "Issues specified by the Campus Chief Compliance Division or the Compliance Campus Chief Examination Division" . All of these issues must be coordinated with and approved by Headquarters.

4.19.16.1.3  (11-04-2011)
Criminal Investigations (CI) Referral Non – EITC 1040X

  1. Claim referrals (1040X) from Criminal Investigation (CI) received in Correspondence Examination are part of a Preparer Scheme and contain similar issues as Return Preparer Program (RPP) referrals.

  2. Generally, the client 1040X consists of Schedule A issues, but may contain other issues, such as Education credit, Child Tax Credit etc. Referrals may contain both preparer signed and unsigned returns.

  3. Inventory Delivery and AIMS opening:

    1. This program includes claims where refunds were stopped (unpaid) and released (paid). However, for claims where refunds have been paid (released) returns will be accepted only if there is sufficient time remaining on the statute.

    2. The Fraud Detection Center (FDC) will ship paper returns or copies of returns to the appropriate W&I campus as directed by Exam Headquarters (HQ).

    3. The electronic listing of returns will be opened on AIMS with Project Code 361 and Source Code 30, along with a Scheme Number.

    4. Cases that are opened manually by the campus must be established on AIMS within 5 business days of receipt of referrals, with the Project Code and Source Code shown above.

      Note:

      Accounts with Z freezes require a Push Code 049.

    5. Any rejected inventory should be coordinated through the appropriate HQ. Exam analysts.

  4. Procedures for working the inventory:

    1. Multiple year returns should be worked together, when possible.

    2. See IRM 4.19.15.23 through 4.19.15.27 for working Schedule A issues and credits.

    3. For the initial contact, issue Letter 569 with Form 2297 and Form 3363.

    4. If no reply is received to the initial contact or it is determined the claim should be partially or fully disallowed, send the appropriate Letter 105C (full disallowance) or Letter 106C (partial disallowance) with the appropriate paragraphs Advise the taxpayer of his/her appeal rights in the letter.

    5. The scheme issues found on the return and the reason for disallowance should be notated on the RGS work papers or history sheet.

    6. Follow deficiency procedures to recover refunds which have been released for 1040X schemes. Refer to IRM 21.4.5.

4.19.16.1.4  (11-04-2011)
Claims Processing in Examination Operation

  1. Contact the taxpayer within 30 days of receipt in correspondence unit.

  2. To determine how to progress with the audit, do the necessary IDRS research to ensure that the amended return has not been previously processed.

  3. Case will be established on AIMS when selected. If case must be transferred, AIMS full display must be present before CC AMSOC is input. The RGS record will be created.

    Note:

    When retrieving from Archives previous examination records, retain the previous records and update the record to include information on the new claim.

  4. Use the following disposal codes when processing claims:

      Disposal Code: Explanation
    No Additional Tax Owed 1 Claims disallowed in full (agreed or not agreed)
    3 Claims allowed in full
    4 Agreed claims partially allowed
    8 Unagreed claims partially allowed
    Additional Tax Owed 4 Agreed claims partially allowed (before issuance of Statutory notice)
    9 Agreed (after issuance of Statutory notice)
    10 Unagreed (after issuance of Statutory notice)

4.19.16.1.4.1  (11-04-2011)
Claims Contact Procedures

  1. Use Letter 566(D) as the initial contact for the taxpayer.

  2. Suspend case for 45 days waiting for taxpayer response. Do not create an issue until a response is received from the taxpayer.

  3. If there is no response in 45 days, or if the response does not completely support the claim, issue Letter 569(SC) as outlined below.

  4. Take appropriate action (i.e. full allowance, partial allowance, or full disallowance) on all responses received from the taxpayer. Refer to IRM 4.19.16.1.4.2 for additional guidance.

  5. Document all work papers (RGS/Paper) with the specific documentation being requested.

  6. Use Letter 569(SC) to propose a claim disallowance (including partial disallowance) to the taxpayer. Send two copies of Letter 569(SC) to the taxpayer with a detailed explanation of the disallowance. Also send one copy of:

    • Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit, and

    • Form 2297, Waiver of Statutory Notice of Claim Disallowance, and

    • Publication 3498-A.

      Note:

      If the claim will be allowed in part, issue Form 4549 to explain the amounts disallowed.

  7. If it is determined that in addition to the claim, amounts from the original return are to be questioned, send Letter 569 as outlined in item 6 above. Indicate that the claim is being disallowed and an additional liability is being proposed. Prepare Form 4549 Report of Examination Changes to explain the amounts allowed and not allowed.

4.19.16.1.4.2  (11-04-2011)
Claims Contact Responses

  1. For claims being allowed in full (and no deficiency will be assessed) based upon the taxpayer response to Letter 569 (SC) or 566 (D), take the following actions:

    1. Close the case with a DC 03.

    2. Send Letter 570 (SC) to the taxpayer.

    3. Prepare Form 4549 with all issues to match the claim that you are allowing.

    4. Use the Add Record Option of Command Code (CC) DUPED to update DUPOL when a Form 1040X is allowed claiming additional dependents or an EITC qualifying child. Refer to IRM 2.4.53 for instructions on using CC DUPED to edit and correct information displayed by CC DUPOL.

  2. For claims being partially or fully disallowed based upon the information provided from the taxpayer, take the following actions:

    1. Accounts with NO additional tax due:

      If And Then
      The claim is to be disallowed in full The taxpayer does or does not respond
      1. If response does not include signed Form 2297, send Letter 105 (C), clearly explaining why the claim is being disallowed.

      2. If response includes signed Form 2297, enter the received date on Form 5344, box 20, Claim Rejection Date. Do not send Letter 105C.

      3. Close DC 01.

      The Claim is to be partially allowed The taxpayer does not respond or the response is incomplete or invalid, including responses with Form 2297
      1. Prepare Form 4549 Report to explain the amounts allowed and not allowed.

      2. If response does not include signed Form 2297, send Letter 106 (C), clearly explaining why the claim is being partially disallowed.

      3. If response includes signed Form 2297, enter the received date on Form 5344, box 20, Claim Rejection Date. Do not send Letter 106C.

      4. Close Case DC 08.

      The taxpayer responds with signed Form 3363 or 4549
      1. Prepare Form 4549 Report to explain the amounts allowed and not allowed.

      2. If response does not include signed Form 2297, send Letter 106 (C), clearly explaining why the claim is being partially disallowed.

      3. If response includes signed Form 2297, enter the received date on Form 5344, box 20, Claim Rejection Date. Do not send Letter 106 (C).

      4. Close Case DC 04.

    2. Accounts with additional tax due:

      If And Then
      The claim is to be partially or fully disallowed The taxpayer does not respond or the response is incomplete or invalid, including responses with Form 2297
      1. Prepare Form 4549 Report to explain the amounts allowed and not allowed.

      2. Issue Statutory Notice and follow normal statutory procedures for the liability.

      3. If response to Statutory Notice does not include signed Form 2297, send Letter 105 C or 106 C, clearly explaining why the claim is being partially or fully disallowed.

      4. If response includes signed Form 2297, enter the received date on Form 5344, box 20, Claim Rejection Date. Do not send Letter 105 C or 106 C.

      5. If response to Statutory Notice includes signed Form 4549, close case DC 09. Otherwise, close case DC10.

      The taxpayer responds with signed Form 3363 or 4549 before issuance of Statutory Notice
      1. Prepare Form 4549 Report to explain the amounts allowed and not allowed.

      2. If response does not include signed Form 2297, send Letter 105 C or 106 C, clearly explaining why the claim is being partially or fully disallowed.

      3. If response includes signed Form 2297, enter the received date on Form 5344, box 20, Claim Rejection Date. Do not send Letter 105 C or 106 C.

      4. Close case DC 04.

4.19.16.1.4.3  (11-04-2011)
Classification of Amended or Superseding Returns Showing Increases in Tax

  1. Accounts Management assesses amended returns with tax increase or credit decrease, except for certain Substitute for Return (SFR) accounts prior to being forwarded to Examination for association with the original return. Refer to IRM 21.5.3–1 for more information.

  2. If an amended estate tax return is received see IRM 4.25.2, Campus Procedures For Estate Tax.

  3. If the original return is in Centralized Files (CF&S), awaiting examination, the original return should be requested from CF&S, associated with the amended return, and sent to a classifier for review. Do not leave case in CF&S.

    Note:

    If the original return is awaiting classification, the assessed amended return is associated with the original return and becomes a part of the case file.

  4. If there is an indication that the taxpayer has already been contacted about the examination (AIMS status 10 and above), the examiner assigned to the examination must be contacted before making any assessment.

    IF AND THEN
    The original return is in Centralized Files Awaiting Classification
    1. Associate the assessed claim with the original return.

    2. Both returns will be reviewed by the Classifier and appropriate action taken.

    Selected for Examination
    1. Secure the original return from CF&S.

    2. The case file and amended return are reviewed by Campus Classification

    The original return is in Correspondence Examination Status 10 or above
    1. Associate the amended return with the case file.

    2. Forward the amended return to the assigned workgroup to be associated with the case file and reviewed.

    The original return is open in the Area Office Any Status Forward the amended return to the group based upon the:
    • BOD code,

    • PBC,

    • SBC and

    • EGC.

  5. Examination will be responsible for coordinating the correction of any Unpostable Examination Transactions caused by amended taxable return(s) with other functions.

  6. Follow normal claims contact procedures.

  7. Use the Exam Toll Free Number as the telephone contact information when issuing 105C or 106C letter.

  8. Refer to IRM 25.6.1.5, Basic Guide for Processing Cases with Statute of Limitation Issues, for cases with statute involvement. Consult with your statute specialist for further guidance if needed.

4.19.16.1.5  (11-04-2011)
Specialized Claims

  1. This section outlines the procedures for handling specific specialized claims issues.

4.19.16.1.5.1  (11-04-2011)
Maritime Claims

  1. Claims have been received from Maritime Personnel related to:

    • Expenses associated with traveling to and from union halls to seek employment (job search).

    • Refund claims for deduction of M&IE

4.19.16.1.5.1.1  (11-04-2011)
Issue 1: Per Diem Incidental Expenses

  1. Merchant mariners who file claims for incidental expenses while temporarily traveling away from home, (meals and lodging furnished by their employers) will be allowed at the daily amount equal to the "Incidental Expense" portion of the federal Meal and Incidental Expense per diem rates in the Federal Travel Regulations.

  2. Rates for localities in the Continental United States (CONUS) are $3 per day. Rates for localities outside the Continental United States (OCONUS) and non-foreign localities are published in the Per Diem Supplement to the Standardized Regulations, which can be found at http://www.gsa.gov/portal/category/21287 . These areas include:

    • Alaska,

    • Hawaii,

    • Puerto Rico, and

    • The possessions of the United States,

  3. Customer Account Services (CAS) will disallow claims without a breakdown of how the deduction was computed (days & rate). They will:

    1. Send a Letter 105C requesting the breakdown, and advise the taxpayer of the $3.00 per day incidental reimbursement provided for in the Revenue Rulings.

    2. Send any perfected claim or any claim for expenses associated with traveling to and from union halls to seek employment to Exam as CAT "A" .

  4. Exam correspondence will work the CAT "A" referrals using the following guidelines:

    • Claims received for incidental expenses using the CONUS rate of $3.00 a day (when in route), and

    • The OCONUS rate (if docked in a foreign or non foreign port, see web site in (2) above) will be allowed.

      Note:

      Only address the "foreign" rate if taxpayer initiates and has a copy of the ship's log or a contemporaneous record of the ship's movement.

  5. The claims may cite the following:

    • Revenue Procedures: 2000-39 for 10/1/2000 - 9/30/2000, 2001-47 for 10/1/2001 - 9/30/2002, 2002-63 for travel after 10/1/2002) or

    • Court Cases: Johnson v. Commissioner or Westling v. Commissioner .

4.19.16.1.5.1.2  (11-04-2011)
Issue 2: Travel Expenses to Union Halls

  1. In order to be deductible, travel expenses to a union hall must be both

    1. Away from home and

    2. Pursuant to the taxpayer’s trade or business.

    Note:

    Travel to the local union hall is not deductible.

  2. In working claims where the taxpayer claims meals and lodging expenses for travel to a union hall, a number of issues must be addressed:

    1. Were the expenses incurred while the taxpayer was searching for new employment in the same trade or business?

    2. The reasonableness of the need to obtain rest or sleep while traveling to the union hall.

    3. The taxpayer’s "home" or regular place of business.

    4. Were the trips to the union hall business or personal?

  3. These claims are of fact-intensive character and will need to be worked following sequential tests.

4.19.16.1.5.1.3  (11-04-2011)
CONUS Claims

  1. For CONUS claims that seek reimbursement of the full federal per diem rate (Meals & IE), and include a breakdown of the days and rate of reimbursement:

    1. Allow only $3.00 per day for incidental expenses.

    2. Send Letter 106C to disallow the inappropriate portion of the claim. Include the following wording in an open paragraph:
      "Claims for reimbursement of incidental expenses incurred by mariners temporarily away from home (when meals and lodging have been furnished by the employer), are limited to the federal per diem rate of $3.00 per day as specified in the Federal Travel Regulations for CONUS (Continental United States) travel. Expenses in excess of the incidental per diem rate must be supported by documentation."

4.19.16.1.5.1.4  (11-04-2011)
OCONUS Claims

  1. For OCONUS claims that seek reimbursement of the full federal per diem rate (Meals & IE) and include a breakdown of the days and rate of reimbursement, the taxpayer must:

    1. Present a copy of the ships log, or

    2. A reasonably contemporaneous record of ships movement.

  2. After verifying that the OCONUS rate is correct, allow the applicable OCONUS incidental rate in effect for that locality.

    Note:

    If the foreign locality is any other locality than those listed, we will use the rate of $3 per day for incidentals.

  3. Send Letter 105C if taxpayer has not provided the above mentioned documentation. Include the following wording in an open paragraph:
    "Claims for reimbursement of incidental expenses incurred by mariners temporarily away from home (when meals and lodging have been furnished by the employer), for OCONUS travel must include a copy of the ship's log or reasonably contemporaneous record of ship's movement, and a breakdown of the days and applicable rate in effect for that locality. Reimbursement is limited to the rate set by the Department of the State for incidental expenses only."

  4. If the taxpayer has requested full reimbursement of M&IE and provided documentation, send Letter 106C to disallow the inappropriate portion of the claim. Include in your letter the following:

    1. Explain in an open paragraph that reimbursement is limited to the rate set by the Department of the State.

    2. Reference the allowable rate in effect for the localities that the taxpayer has indicated on his claim.

4.19.16.1.5.1.5  (11-04-2011)
Actual Expense Claims

  1. Claims received for "actual" incidental expenses exceeding the daily per diem rate, must be accompanied by adequate documentary evidence. This documentation can include:

    • account books,

    • daily diary,

    • ship's log,

    • statement of expense,

    • trip sheet or

    • similar record.

  2. Claims received without documentary evidence will be disallowed in full.

    1. Send Letter 105C.

    2. Use the following wording in an open paragraph:
      "Claims for actual reimbursement of incidental expenses incurred by mariners temporarily away from home are subject to the full substantiation requirements of Treasury Regulation 1.274-5. This may be an account book, diary, ship's log, statement of expense, trip sheet or similar other documentation."

4.19.16.1.5.2  (11-04-2011)
Golden Parachute Payment – Claims for Refund

  1. A Golden Parachute payment is a payment in the nature of compensation, made to or for the benefit of a disqualified individual, contingent on a change in either the ownership or control of the corporation, or a substantial portion of the corporate assets.

  2. A taxpayer is a disqualified individual if the individual is an employee or independent contractor of the corporation and is a shareholder, officer, or highly compensated individual.

  3. The individual will report the payment as compensation, and is subject to a 20% excise tax in addition to income tax.

    1. The payment is not deductible by the corporation as a business expense.

    2. The definition of a corporation for purposes of section 280G includes any entity described in Reg. 301.7701-2(b), IRC 7701(a)(32) & IRC. 7701 (a)(5).

    3. For more information see Treasury Regulation 1.280G-1, and IRC Sections 280G & 4999

  4. Treasury Regulation 1.280G-1 defines a shareholder as a Taxpayer who owns stock of the corporation that exceeds 1% of the total fair market value of all outstanding shares of all classes of the corporation's stock.

    • The $1 million fair market value test was eliminated.

    • This is explained in Q/A-17 of the regulation.

    • The individual is no longer subject to the 20% excise tax, and the corporate entity is allowed the business expense.

    • The taxpayer can choose to follow guidance in either of the regulations.

  5. Claims received will indicate they are being filed on the basis of the 2002 proposed regulations (REG-209114-90), and IRC Sections 280G and 4999. For individual returns, a corrected W-2 should be attached. Forward all amended returns/claims (1040X & 1120X) to Exam as Category A. The following guidelines apply:

    1. A review of the books and records of the corporate entity will be performed before allowance of the individual claim.

    2. Corporate claims will be selected and sent to the Area Office.

    3. HQ will need to be informed of 1040X returns received.

    4. Campus Exam operations will suspense the individual claims until HQ notifies the Campus of the results of the Corporate reviews.

  6. Exam will correspond with the taxpayer upon receipt of the claim for the following information:

    • A corrected W-2 if not attached.

    • Statement certifying under penalties of perjury that they are not a disqualified individual and not liable for the excise tax under IRS Sections 280G and 4999 solely because the 2002 proposed Regulation (REG-209114-90) eliminated ownership of stock valued in excess of $1 million from the definition of a disqualified individual.

    • They must also state that they were not an officer or a highly compensated individual as defined in Q/A-18 or Q/A-19 of the proposed regulations.

  7. If the explanation on the amended return/claim is for any other issue addressed in the proposed regulations the return will be selected and transferred to the Area Office.

4.19.16.1.5.3  (11-04-2011)
Medical and Dental Resident FICA Claims

  1. 1) These claims are filed based on the position that medical resident students are exempt from paying FICA on their wages.

  2. See IRM 21.7.2.4.18.1.9 - Medical/Dental Residents Excess FICA Claims, for a more complete description and more information.

  3. When routing these cases, refer to IRM 21.7.2.4.18.1.9 (4).

  4. Forward all Medical and Dental Resident FICA claims for years ending after 12/31/2004 to TEGE with the following procedures:

    1. Place claims in SSN order in each box.

    2. Secure all pages of the claim and corresponding documentation together.

    3. Include all TINs on the Form 3210. Notate MEDICAL FICA CLAIMS across the top of the Form 3210.

    4. Follow normal shipping guidelines for boxing and shipping taxpayer data. Do not ship overnight. See http//publish.no.irs.gov/mailtran/PIIHardc.html

    5. Ship the claims to:
      IRS
      Attention: Liz Chatterton
      M/S 7700
      1973 N Rulon White Blvd
      Ogden, Utah 84404

    6. When cases are ready to be shipped, send an email with the number of boxes and date shipped to designated individual(s) as communicated by your local management.

4.19.16.1.5.4  (11-04-2011)
CSX Corporation/Quality Stores Claims

  1. Background: Claims are being filed for refunds or adjustments of FICA, RRTA (Railroad Retirement Tax Act) or FUTA based on CSX Corp litigation. These claims are based on the Court of Federal Claim's opinion in CSX Corp. v United States which addressed whether certain payments made pursuant to reduction in force programs are considered wages for purposes of FICA and FUTA taxes and compensation for purposes of RRTA taxes. A later decision of a U.S. district court in Quality Stores, Inc v. United States is generating additional Quality Stores claims. The Quality Stores decision is on appeal in the United States Court of Appeals No. 10–1563 for the Sixth Circuit. Due to the pending litigation, the examination function will suspend action on cases until the litigation is finalized. They are generally protective claims.

  2. The claims are being referred to Classification Exam per IRMs 21.7.2.4.18.1.11 and 21.7.2.4.18.1.11.1. Please follow local guidance in processing these claims.

4.19.16.1.5.5  (11-04-2011)
SBSE Adoption Credit Claims

  1. Accounts Management (AM) processing of adoption credit claims filed on Form 1040X will differ based upon the status of the adoption and the attachment of the adoption-related documents. An Integrated Automation Technology (IAT) xClaim tool will be available to review Examination criteria filters which will determine whether the claim is "auto-selected" for audit in Examination or forwarded to the CAT-A Classifiers for consideration. The IAT tool will also provide the appropriate routing guidance. Refer to IRM 21.5.3-6.

  2. SBSE “auto-selected” referrals will be rerouted in CIS to the designated Accounts Management Memphis Centralized Printer where the file will be printed and routed to Memphis Exam, Mail Stop 822.

  3. Memphis Correspondence Examination Clerical function will be responsible for retrieving the CAT A Criteria for Form 8839 from AMS CIS and printing the document to include in the case file.

  4. Cases will be opened in Status Code 06, Source Code 30 in Project Code 0355.

  5. SBSE Correspondence Examination Technicians are required to review the filter criteria identified on the CAT A Criteria for Form 8839 to assist with determining the validity of the claim.

4.19.16.1.5.5.1  (11-04-2011)
SBSE Adoption Credit Claims Contact Procedures

  1. If the taxpayer submitted valid adoption-related documentation with the amended return, send Form 886-H-Adopt-1 with the Initial Contact Letter (ICL) to request documentation to verify the adoption expenses.

  2. If the taxpayer did not submit documentation with the amended return or the documentation is incomplete or invalid, send Form 886-H-Adopt-0 with the ICL to request documentation to verify the adoption and the expenses claimed.

  3. Refer to IRM 4.19.16.1.4.1 for follow up actions and suspense time frames.

  4. Refer to IRM 4.19.15.7.3 when evaluating Adoption Credit claims responses.

4.19.16.1.5.6  (11-04-2011)
Veteran's Disability Compensation for Veterans Separated due to Medical/Disability

  1. Veterans who are separated from military service due to medical or disability reasons generally receive a retroactive disability pay expressed in percentages that relate to the degree of impairment. These veterans are not military retired. The gross income amount of their disability benefits are retroactively excluded from gross income from the date of application for VA disability.

  2. Public Law 104–201, Section 653(b) provides that once the veteran receives a determination letter from the Veterans Administration (VA) awarding a retroactive disability rating, the disability severance payment received upon discharge becomes nontaxable.

  3. Refer to IRM 21.6.6.3.20.2 for more guidance on these claims.

4.19.16.1.6  (11-04-2011)
Classification of Tentative Carryback Allowance Returns

  1. Allowances with related returns (carryback or carry over years) currently open in the Area Office will be forwarded to the Area Office. The tentative allowance cases will be classified with the loss year return only if the tentative allowance is based on net operating loss or a capital loss carryback.

  2. Tentative allowance cases will be classified with the year of the unused investment credit only if the tentative allowance is based on investment credit carryback.

  3. For selected returns, all affected carryback returns are associated prior to shipping to the area offices.

  4. Joint Committee Tentative Carryback Allowances to the same taxpayer must be selected and referred for examination.

  5. For bankruptcy cases:

    • A copy of the refund application and a copy of the loss year return should be sent to Examination Classification within 10 work days of receipt and before making the refund allowance.

    • The refund application, the loss year return, and any additional returns necessary should be classified.

    • The concerned Area Office may be contacted to determine the applicable classification Area Office.

    • Loss applications selected for examination are forwarded immediately to the appropriate Area Office in a folder marked, "Bankruptcy-Tentative Carryback Case" .

    • All Examination action must be completed and notification given to the Accounts Management Branch at the Campus within 90 days from the date the application was received by the Service.


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