4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 2)

4.119.4.14 
Penalties and Interest

4.119.4.14.5  (10-01-2012)
Accuracy-Related Penalty Due to Negligence or Disregard of Rules or Regulations (Negligence Disregard Penalty)

  1. Disregard of rules or regulations relates to the taxpayer’s failure to follow the appropriate law in completing the return, and reflects a disregard of the Code, temporary or final regulations, revenue rulings or notices (other than notices of proposed rule making). The term "disregard" includes careless, reckless, or intentional disregard.

  2. The negligence disregard penalty is 20% of the portion of the underpayment attributable to negligence or disregard of rules or regulations. In the BMF-AUR program, this penalty applies to REPEATER CASES in Subfiles "R" and "Y" only. (A repeater case is identified by a "R" or "Y" in the TC 925 HIST field of the Tax Account screen.) For instructions on completing the Negligence screen, see IRM 4.119.4.14.6, Determine Negligence Status Screen.

  3. The negligence disregard penalty is proposed as applicable, on ALL U/R income or O/C deduction issues in Subfiles "R" and "Y" if the issues result in an underpayment of tax.

    Note:

    The Negligence Disregard Penalty may be proposed on returns that are also subject to the Failure to File Penalty.

  4. Any portion of an underpayment may be subject to only one accuracy penalty even though that portion may be attributable to both negligence and a substantial understatement of tax. However, one portion of an underpayment may be attributable to negligence and a different portion to a substantial understatement of tax. See IRM 4.119.4.14.4, Accuracy-Related Penalty Due to Substantial Understatement of Tax.

    1. If both penalties apply to a given underpayment, only one 20% penalty may be imposed.

    2. The system determines the greater of the two penalties and displays it on the notice.

    3. PARAGRAPH 77 automatically generates.

  5. The negligence disregard penalty is NOT proposed if reasonable cause exists for the U/R or O/C item. The most common reasonable cause issues for waiving the penalty - if they occurred at the time of filing - are as follows:

    • Death (taxpayer or Corporate Officer responsible for filing and paying taxes)

    • Serious Illness (taxpayer or Corporate Officer responsible for filing and paying taxes)

    • Disaster (i.e. fire, floods, tornadoes)

    • Unavoidable Absence (taxpayer or Corporate Officer responsible for filing and paying taxes)

    • Inability to obtain records due to reasons beyond the taxpayer’s control

    See IRM 20.1.5, Penalty Handbook - Return Related Penalties, for details on reasonable cause criteria.

    Note:

    Generally reasons such as forgetfulness, ignorance of the law, mistakes (e.g., the taxpayer/preparer forgot to include the income or thought the income was nontaxable) or reliance on Professional Tax Advice or Tax Preparation Software do not qualify for penalty relief because these actions do not demonstrate ordinary business care and prudence.

  6. The system automatically suppresses the negligence penalty when the penalty is $50 or less. When the penalty is greater than $50, it displays in the NEGLIGENCE PENALTY field on the Limited Penalty window and in the ACCURACY-RELATED PENALTY field on the Summary screen.

  7. PARAGRAPH 75 automatically generates when the negligence penalty applies.

  8. When the taxpayer's account is assessed through the Assessment window, a Reference Code of "680" displays for the negligence penalty. In certain situations it may be necessary to change or delete the Reference Code 680. See IRM 4.119.4.18.10.1, The Assessment Window, for more information.

4.119.4.14.6  (10-01-2012)
Determine Negligence Status Screen

  1. The BMF-AUR system identifies cases on which the Accuracy-Related Penalty Due to Negligence may be assessed. After all IRs are marked with a UR Status Code and the Return Value option is selected, the Determine Negligence Status screen displays if applicable.

    Note:

    This screen only displays on cases where the Accuracy-Related Penalty due to Negligence is applicable.

  2. The IRs displayed here are the IRs that have an UR status of "Underreported" entered on the Case Analysis screen. The total U/R of each IR displays in the TOTAL UNDERREPORTED field. IRs that are grouped in Case Analysis, only display one IR from the group, but the group U/R total displays in the TOTAL UNDERREPORTED field.

  3. The NEGLIGENCE U/R AMOUNT field shows the total U/R for each IR. If reasonable cause applies, the displayed amount needs to be changed to reflect only the U/R attributable to negligence. Use the criteria in IRM 20.1.5.6.1, Penalty Handbook - Return Related Penalties, to determine if reasonable cause applies. See below when the taxpayer requests waiver of the Accuracy Related Penalty due to Negligence.

    1. If the taxpayer did not provide reasonable cause for ANY of the U/R IRs, the TOTAL U/R AMOUNT field must equal the NEGLIGENCE U/R AMOUNT field.

    2. If the taxpayer provided reasonable cause for ALL of the U/R IRs, enter a "check mark" in the ACCURACY PENALTY OVERRIDE field.

    3. If the taxpayer provided reasonable cause for SOME of the U/R IRs, determine the negligence amount for each income type by subtracting the reasonable cause amount from the TOTAL UR AMOUNT field and enter the result in the NEGLIGENCE UR AMOUNT field.

  4. Based on the information entered on the Determine Negligence Status screen, the system computes the accuracy penalties and PARAGRAPH 75 or 76 automatically generates, as appropriate.

  5. The Limit Penalties window contains additional fields to track instances where the taxpayer requests waiver of the Negligence Penalty and whether the request has been granted or denied. When the taxpayer makes this request and the tax examiner determines:

    1. The request will be granted, check the box next to the PENALTY WAIVED field in the Limit Penalties window

      Note:

      Only check the box when the penalty is still applicable, but is being suppressed. Do not check the box if the penalty is no longer applicable (i.e. case is being closed no change).

    2. The request is denied or only partially waived, check the box next to the PENALTY NOT WAIVED field in the Limit Penalties window.

      Note:

      The NEGLIGENCE PENALTY field must contain a value greater than zero in order to check the PENALTY NOT WAIVED field. Managerial approval is required when denying the taxpayer's request. See IRM 4.119.4.18.1.4, Accuracy-Related Penalties, for additional information

4.119.4.14.7  (10-01-2013)
Limited Penalties

  1. The Limit Penalties window is used to fully or partially abate the Failure to File Penalty, and/or the Manual Accuracy Related Penalty. This window is only used in special circumstances when the system computed penalties need to be overridden.

  2. Manually select the Limit Penalties window only after all other applicable windows in Return Values are accessed. The system computed penalties display in the appropriate fields. If the amounts are incorrect or need to be abated, make the necessary changes. See IRM 20.1, Penalty Handbook, for further information on how to manually compute penalties.

  3. Once a penalty is manually limited, it stays limited as long as the manually input amount is present. To allow the system to compute the penalty, the manually computed penalty must be deleted, leaving the field blank.

4.119.4.14.8  (10-01-2012)
Computer Generated Interest for CP 2030

  1. Interest on CP 2030 Notices is generated by the IDRS interest program.

  2. Corporations are subject to a 2% increase above the prevailing underpayment rate when:

    1. A notice of underpayment or proposed deficiency is greater than $100,000 (determined without regard to interest, penalties, or additions to the tax), AND

    2. The amount shown on a proposed deficiency is not paid within 30 days from the notice date.

  3. Certain conditions require the interest be computed manually see IRM 4.119.4.14.9, Manually Computed Interest for the CP 2030, for further instructions.

4.119.4.14.9  (10-01-2013)
Manually Computed Interest for the CP 2030

  1. There are certain restrictive conditions on an account which cause the IDRS interest program to reject the CP 2030 without computing the interest. When these conditions are present, the interest must be computed manually.

  2. The posting of certain freeze codes prevent the computer from calculating normal interest. As a result, interest must be manually computed. The following conditions require manual interest calculation:

    1. -I Freeze - Debit Interest restricted

    2. I- Freeze - Credit interest restricted

    3. TC 846 and TC 776 are present, and the TC 846 is greater than or equal to the proposed tax increase, and the TC 776 is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    If the above conditions are present the system displays an alert in the Return Values screen.

  3. Input IPC 4XMI.

  4. Cases with IPC 4XMI are batched in BT 860 (Manual Interest batch). These cases are worked by designated tax examiners.

  5. Compute the interest on the proposed balance due. As necessary, refer to IRM 20.2, Interest.

  6. The interest is computed to reflect 45 days from the locally designated notice date.

  7. If a notice is issued (PC 4500, 4520, 4530, 4750, IPC 45RN or 47SR), input the manually computed interest in the MANUAL INTEREST field of the Return Values screen .

    Exception:

    IPC 45RN and 47SR do not require a Manual Interest amount when Notice Indicator "6" is input.

4.119.4.15  (10-01-2012)
Business Underreporter (BMF-AUR) Rejects

  1. For reject cases, BMF-AUR generates a weekly listing with the EIN and Reject Code.

  2. These cases are worked based on the reject condition codes listed in IRM 4.119.1, BMF Automated Underreporter (BMF-AUR) Control System.

4.119.4.15.1  (10-01-2012)
Batch Type 841 (Screening Cases with New Actions)

  1. During batch assembly by the control function, the system identifies cases with new Payer Agent information and new transactions received from Master File subsequent to the tax examiner's evaluation of the case.

  2. Each of these cases should be reviewed for possible closure.

  3. Cases with new Payer Agent information are identified by the control function indicating "PA" on the Form 4251. Review new Payer Agent information and rework the case as necessary.

  4. Cases with new transactions (from Master File) have "New Trans" indicated on the Form 4251. These cases have new actions (TC's, payments, etc.) which may effect the case. Rework the case if necessary.

    Note:

    More than one condition may exist on the case; however, the control function notates only one condition on the Form 4251.

  5. For no response batches, see IRM 4.119.4.17.1, No Response BT 843, 845, and 848.

4.119.4.15.2  (10-01-2012)
Letter Rejects

  1. When letters are sent to the taxpayer (e.g., Letter 4550C, Letter 4314C, etc.) and errors are discovered during review, or IDRS incompatibility causes the letter to reject, the letters or cases are returned to the tax examiner who issued the letter.

4.119.4.15.3  (03-13-2013)
Stop Notice Functionality

  1. Use the Stop Notice window if it is determined that a notice should not be mailed to the taxpayer. When an EIN is entered on the Stop Notice window, the system automatically assigns the appropriate "not mailed" PC.

    Caution:

    This option MUST be used no later than 2 Fridays before the scheduled notice date.

    Note:

    PCs 4320, 4310, 4510, 4540, 4710, and 4760 (notice not mailed PCs) are systemically assigned when EIN's are committed to the Stop Notice window.

  2. Correct the information on the Case Analysis and/or Return Values screen.

    1. Make the necessary changes (U/R amount, paragraphs, IRs that need to be included on the notice, etc.).

    2. If a notice is being amended, enter the applicable amended PC.

  3. PCs 4320, 4310, 4510, 4540, 4710, or 4760 (the stop notice/notice-not-mailed PCs) moves the case(s) into the appropriate Unit Suspense batch.

  4. The notice-not-mailed PCs 4320, 4310, 4510, 4540, 4710, and 4760 must be followed by an appropriate PC in order to release the case(s).

4.119.4.16  (10-01-2012)
CP 2531 and CP 2030 Information

  1. The following instructions are used to process a taxpayer response to the CP 2030, CP 2531 in the BMF-AUR Program.

4.119.4.16.1  (10-01-2012)
CP 2531

  1. The CP 2531 is the notice sent to a taxpayer to obtain additional information prior to issuing a CP 2030.

  2. Publication 3498-A, The Examination Process, is mailed as an enclosure with all CP 2531 notices.

  3. All cases are worked through Return Values and the Summary screen must be completed through entering all necessary return amounts and all applicable PARAGRAPHS.

4.119.4.16.2  (10-01-2012)
CP 2030

  1. The CP 2030 is sent to the taxpayer to propose a change to income tax liability because of income that is not identified or does not appear to be fully reported on the tax return.

  2. Publication 3498-A, The Examination Process, is mailed as an enclosure with all CP 2030 notices.

4.119.4.16.3  (03-13-2013)
Summary Screen

  1. For cases requiring a notice, the system compiles the data from the screens and windows used in the analysis of the case and displays it on the Summary screen. The system does not allow entry of an applicable PC until the Summary screen is accessed and committed.

    1. Select the Summary screen.

    2. Review the displayed data.

    3. If any data is incorrect, return to the applicable screen or window and make the appropriate corrections.

    4. Paragraphs are added or deleted on the Summary screen by accessing the Paragraphs window.

      Note:

      The system can accommodate a Special Paragraph of up to 2,000 characters (including spaces and punctuation).

    5. All data must be accurate, since the information on the Summary screen is used to create the Notice that is sent to the taxpayer.

    6. Input the amount reported on the taxpayer's return for each discrepant income type in the RETURN field.

    7. The system uses the amount entered to compute the REPORTED TO IRS field.

    8. The system will not allow a negative amount in RETURN and REPORTED TO IRS fields.

      Note:

      The BMF-AUR system does not allow amounts over $999,999,999 to be input. Cases with amounts of this size are referred to the manager or Technical Lead Tax Examiner since they require special review and processing.

    9. If the REPORTED TO IRS and/or RETURN field(s) should be negative but the system will not allow a negative amount, use the following procedures: if the INCR/DECR field is a positive amount (U/R income), enter zero (0) in the RETURN field; if the INCR/DECR field is a negative amount (O/R income), enter the O/R amount (as a positive) in the RETURN field.

    10. If unable to issue a notice showing the exact figures reported on the return, a Special Paragraph must be sent to the taxpayer explaining the adjustment.

  2. The Notice Indicator is used to identify the type of Notice issued.

    1. BMF-AUR Notice Indicator Description Related PC or IPC
      0 The system defaults the Notice Indicator to 0 (zero). Notice Indicator 0 (zero) indicates an initial notice (CP 2531, CP 2030 or Stat Notice).
      • 4300 for initial CP 2531

      • 4500 for initial CP 2030

      • 4700 for initial Stat Notice.

      1 Used to generate a CP 2030 as a result of taxpayer response to CP 2531 or to generate a recomputed CP 2030
      • 4520 for CP 2030 after CP 2531

      • 4530 for recomputed CP 2030

      2 Used to generate a CP 2030 as a result of no response to a CP 2531
      • 4520 for CP 2030 after CP 2531

      3 Used to generate a recomputed CP 2030 due to response to Stat Notice and the 90-day period is still in effect
      • 4750 for recomputed Stat Notice

      4 Used to generate a recomputed CP 2030 due to response to Stat Notice and the 90-day period has expired
      • IPC 47SR for recomputed Stat Notice

      5 Used to generate an "FYI ONLY" CP 2030 due to t/p partially agreeing to the CP 2030 notice
      • IPC 45RN for recomputed CP 2030

      • IPC 47SR recomputed Stat Notice

      6 Used to close a case when the taxpayer partially agrees to the CP 2030 or Stat Notice and the MISCELLANEOUS ADJUSTMENT field in Return value screen is used to make the system match the taxpayer's figures. This notice indicator suppresses the generation of a subsequent notice.

      Caution:

      Notice indicator "6" should only be used when the MISCELLANEOUS ADJUSTMENT field is used to make the system match the taxpayer's figures. In these situations, issue Letter 4551C, explaining that we used the information/computation the taxpayer provided to make the necessary assessment to their account.

      • IPC 45RN for recomputed CP 2030

      • IPC 47SR for recomputed Stat Notice.

  3. Use the applicable amended PC to indicate that a notice is amended.

    1. When an original CP 2531 is amended, also notate the case folder with "430A" .

    2. When an original CP 2030 is amended, also notate the case folder with "450A" .

  4. Notices requiring special handling are sorted into groups when a local Sort code displays or is input in the LOCAL SORT CODES field.

    1. Input Local Sort Code "1" for cases requiring enclosures. If sending a recomputed notice and a Sort Code was on the notice, remove the Local Sort Code if it no longer applies.

    2. Provide specific details for required clerical actions.

    3. Other Local Sort Codes are designated by local management.

      Note:

      Use a single digit numeric Sort Indicator (other than "1" ) or an alpha Sort Indicator.

  5. Input/verify the total of all payments credited toward the taxpayer's current BMF-AUR account received after the initial contact notice in the AMOUNT PREVIOUSLY PAID field on the Summary Screen.

  6. When working cases in BT 860, Manual Interest, input/verify the manually computed interest in the MANUAL INTEREST field on the Summary screen.

  7. When the Summary screen is completed and committed, access the Process Code window and input the appropriate Process Code. If the notice should not be sent and another action is necessary, access the Process Code window and input the appropriate Process Code. See Exhibit 4.119.4-5, BMF-AUR Process Codes. For a list of Internal Process Codes (IPC), See Exhibit 4.119.4-4, BMF-AUR Internal Process Codes. Input these codes on the Process Code window when you complete all actions necessary for the current situation of the case (e.g., enter a research IPC if you are requesting research):

    • The system validates that proper actions have been taken before a Process Code or Internal Process Code is entered

    • Entering a Process Code is required to complete working a case, except when a case is transferred to another user or yourself in the Unit Suspense batch

    • The system does not allow you to release a work unit if a case that needs a Process Code is in the work unit

4.119.4.16.4  (03-13-2013)
Amended/Corrected CP 2030, CP 2531 Notices

  1. If a notice is incorrect, an amended/corrected notice can be generated. Multiple amended/corrected notices can be generated if necessary.

  2. If corrections are necessary, return to the applicable screen(s) or window(s) and make the appropriate correction(s).

  3. The system is updated to reflect the new amount(s) so that any subsequent notices or disclosure records are correct.

  4. A new notice date is assigned by the system.

  5. Amount Types not sent on the original notice can be selected for inclusion on the amended/corrected notice. Mark the Amount Types with a "check mark" in the Send fields.

  6. The amended notice capability is also used to update the interest computation if the original CP 2030 was not mailed within five (5) days of the notice date.

  7. Enter the applicable amended PC.

4.119.4.16.5  (10-01-2013)
CP 2030, CP 2531 History Screens

  1. The CP 2030, CP 2531 History screens display all the information contained on the notice sent to the taxpayer(s).

  2. Select the Case History from the Case Analysis menu or directly from the BMF AUR menu tree to view the history of a case.

  3. Updates are not allowed in any field on these screens.

  4. The CP 2030, CP 2531 History screen can only be used to view the notice history of a case.

    Note:

    The CP 2030 History screen is the only screen that provides the total tax due plus interest (the bottom line, balance due/refund amount) as it appears on the notice.

4.119.4.17  (10-01-2012)
No Response/Undeliverables

  1. Generally, when there is no response to a BMF-AUR Notice, the case is systemically updated to the next phase.

  2. Prior to updating the case, if certain conditions are present, the system alerts the Clerical Function to build the case into a Batch that requires additional tax examiner review.

4.119.4.17.1  (10-01-2013)
No Response BT 843, 845, and 848

  1. For screening cases with new transactions (BT 841), see IRM 4.119.4.15.1, Batch Type 841 (Screening Cases with New Actions).

  2. If new transactions are present, the case has a new Transaction Code (TC) from Master File which may affect the case.

    1. If the taxpayer submitted a full payment before issuance of a Statutory Notice of Deficiency, for the tax and related penalties and there was no balance due prior to the notice,≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and input Process Code 4470, 4670 or 4870 as appropriate, UNLESS the TC 640 payment has a blocking series of 990-999 indicating it is a IRC 6603 deposit. Issue Letter 4550C to acknowledge payment and request missing signature.

      Caution:

      Full payment received after issuance of a Statutory Notice cannot be accepted as agreement to the tax increase. Issue a Letter 4550C to acknowledge payment and request missing signatures. If the suspense time frame has expired, default the case.

    2. If the taxpayer submitted a partial payment, do not request the payment document. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ if the account was in Zero Balance prior to the notice, or if the payment Blocking Series is 300-399. Issue a CP 2030 if the case is from a CP 2531 No Response (BT 843) or issue a Letter 4550C requesting taxpayer's signature to consent, if the case is from a CP 2030 No Response (BT 845). Input the appropriate Process Code.

      Note:

      If the partial payment is indicated during the Statutory Notice default process (BT 848), input PC 4850 to assess by default.

    3. If Tax Account screen shows a TC 976, research AMS and/or MeF as applicable for the Form 1120-X. If unable to locate, correspond with the taxpayer to request a signed copy of the Form 1120-X.

    4. If the new transaction code contains a Freeze Code see IRM 4.119.4.3.4.2, Freeze Codes, for instructions.

  3. If a TC 520 and Freeze Code "-V" or TC 520 with CC of 81 or 84 only and Freeze Code "-W" is present ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ as appropriate.

  4. If a TC 604 is present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ as appropriate.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  6. If new Payer Agent information was received, review new Payer Agent information and rework the case as necessary.

  7. If a new address is present, use the following procedures.

    1. Rework the case to generate an amended CP 2030.

    2. Enter the applicable amended PC.

  8. If the CP 2030 History data is incomplete, an auto assessment for fully agreed is not possible. Input an assessment on the Compute Assessment window and close the case using PC 4680, 4880, or 4840 as applicable.

  9. If the tax increase is $1 million or more, review, and rework if necessary, to ensure the accuracy of the case.

  10. If the net tax increase is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    Note:

    Check the Display Case History screen for an indication of an undeliverable Action Code. If the Case History shows Action Code "U" , a newer address is available. Reissue the notice (PC 430A for an amended CP 2531 or PC 450A for an amended CP 2030) to the newer address. If the Action Code is blank or "T" (true undeliverable) follow the steps below.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Issue Letter 4551C and include the following Special Paragraph: "We did not make any adjustments to the tax or prepaid credits because you did not respond to our previous notice."

    3. Close the case with PC 4420 or 4610.

    Note:

    A Statutory Notice of Deficiency cannot be issued when the tax change is ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  11. When working a no response to a CP 2531(BT 843), if the notice was issued for questionable underclaimed withholding, the taxpayer did not respond ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    Note:

    Check the Display Case History screen for an indication of an undeliverable Action Code. If the Case History shows Action Code "U" , a newer address is available. Reissue the notice (PC 430A) to the newer address. If the Action Code is blank or "T" (true undeliverable) follow the steps below.

    1. Issue Letter 4551C and include the following Special Paragraph: "We did not make any adjustments to the tax or prepaid credits because you did not respond to our previous notice."

    2. Close the case with PC 4420.

    Caution:

    If the return is a MeF and there are no loose forms, schedules or correspondence to be associated with the case, ensure that the SOURCE DOC field in the Display Process Code window is blank.

  12. When working a no response to CP 2030(BT 845), if the notice was issued for questionable overclaimed withholding, the taxpayer did not respond ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    Note:

    Check the Display Case History screen for an indication of an undeliverable Action Code. If the Case History shows Action Code "U" , a newer address is available. Reissue the notice (PC 450A) to the newer address. If the Action Code is blank or "T" (true undeliverable) follow the steps below.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Complete Return Values screen. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The only remaining issue should be the overclaimed withholding.

    3. Input/verify the appropriate entries on the Compute Assessment window.

    4. Blocking Series "55" for paper filed tax returns or "57" for MeF tax returns.

    5. TC 290 for .00.

    6. Reference Number 767 for the amount of overclaimed withholding.

    7. Close the case with PC 4680.

    Caution:

    If the return is a MeF and there are no loose forms, schedules or correspondence to be associated with the case, ensure that the SOURCE DOC field in the Display Process Code window is blank.

4.119.4.17.2  (03-13-2013)
Undeliverable

  1. The Address File updates weekly on the BMF-AUR system. New addresses loaded onto the system between the time a case is worked and the time the notice is printed automatically reflect the new address.

  2. The control function handles most undeliverable notices. However, when recomputed notices or additional correspondence are returned undeliverable, the cases can be assigned to a tax examiner for further review.

  3. If a new address is found from previous correspondence, input the appropriate change on the Update Address window (Undeliverable) and enter the applicable amended PC.

  4. If a new address is NOT found for an undeliverable notice, input the appropriate PC.

    Caution:

    Do not issue status/interim letters on undeliverable cases.

  5. If the Post Office returns mail as "unclaimed" rather than undeliverable, continue processing the case using normal procedures. An additional address check is not necessary.

    Note:

    As the IRS receives weekly address update information from the Post Office, special instructions for forwarding orders expired are no longer needed.

4.119.4.18  (10-01-2012)
Taxpayer Responses

  1. Most taxpayer explanations are self-explanatory and acceptable at face value. It is not necessary to verify everything the taxpayer says. As a general rule, the issue of questionable items (those not clearly allowable) is not raised.

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

    Exception:

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

4.119.4.18.1  (10-01-2013)
Taxpayer Responses - Overview

  1. The primary purpose of the BMF-AUR Program is to account for discrepancies between amounts on IRs and amounts on the tax return.

  2. Review carefully what the response is trying to tell you and research all related information.

  3. A taxpayer's response to a BMF-AUR notice can be:

    1. A copy of the BMF-AUR notice (CP 2030, CP 2531).

    2. The taxpayer response page (CP 2030, CP 2531).

    3. A copy of the Notice of Deficiency (Statutory Notice).

      Note:

      THE STATUTORY NOTICE IS A LEGAL DOCUMENT. If the taxpayer sends the original of the Statutory Notice OR the CP 2030 DO NOT make any marks or corrections on either. The taxpayer is allowed 90 days (150 days if the notice is addressed to a person outside the U.S.) to petition the Tax Court. The taxpayer cannot receive an extension of this statutory period.

    4. A letter, note, or fax.

      Note:

      A consent to assess additional tax of $250,000 or less can be accepted by fax if taxpayer contact has been made and case history documents the date of contact. If the tax increase is more than $250,000, original signatures are required, ask the taxpayer to submit their response by mail.

    5. A Form 1120-X or amended return.

    6. A telephone call.

    7. A Form 4442, Inquiry Referral, from Customer Service.

  4. The taxpayer's response (and all attachments) should be retained as part of the case file. If it can be determined that the taxpayer has submitted original documents make a copy for the case file and mail the originals to the taxpayer with a cover letter.

    Exception:

    Do not return original Information Return documents.

  5. If the taxpayer includes a telephone number in the response to any notice and it is appropriate, call them to resolve the outstanding U/R issue(s) before sending any written correspondence. You should enter a Case Note when a phone call is made or attempted. Only one attempt is required. An attempt must be made even when the taxpayer provides only an evening phone number for a day shift tax examiner or a day phone number for a swing (night) shift tax examiner.

    Note:

    Always identify yourself by title (e.g., Mr., Mrs. or Ms.) and last name or first and last name, employee identification (ID) Number, and as an IRS employee during telephone contact with the taxpayer. Provide the taxpayer with a telephone number to contact the Service about their case if needed. Always use courteous behavior when speaking to a taxpayer via the telephone. See IRM 4.119.4.18.2, Telephone Responses, for additional telephone and mandatory Disclosure procedures that must be followed.

  6. When evaluating responses, review the Payer Agent information if Payer Agent Indicators are present on the Case Analysis screen for the IR(s) in question.

  7. While evaluating the taxpayer's response, make changes to the Case Analysis and Return Values screens when appropriate. The system uses data from the screens and windows to display on the Summary screen. This action verifies that revised calculations of the U/R amount, adjustments, tax, credits, and balance due/refund amounts are accurate. It also leaves an audit trail of your actions and will make assessment information correct, if needed.

    Note:

    See IRM 4.119.4.18.4, Discrepancy Explained (No Change) - General, for additional information regarding responses that result in a No Change closing.

  8. If additional returns or adjustment documents were requested during case analysis and:

    1. The case is being closed with an assessment in the Underreporter blocking series, leave the documents with the BMF-AUR case file.

    2. The case is being closed without an assessment, refile them separately.

  9. If the taxpayer writes in with a question or requests assistance on a Non-BMF-AUR related matter:

    1. Photocopy the question/request.

    2. Notate taxpayer name, EIN, and address on the photocopy.

    3. Forward the photocopy to the appropriate area for response and leave the original in the case file.

    4. Follow Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) for responding to the taxpayer. See IRM 4.119.4.18.1.5, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

  10. Any response may require a new address be entered on the Update Address window. See IRM 4.119.4.18.1.6, Address Updates.

  11. If a notice is generated, but NOT YET MAILED to the taxpayer, and information from the response makes it necessary to prevent the notice from being mailed, use the Stop Notice option. THIS OPTION MUST BE USED NO LATER THAN TWO FRIDAYS BEFORE THE SCHEDULED NOTICE DATE. See IRM 4.119.4.15.3, Stop Notice Functionality, for additional information.

  12. When an original payment is included with the taxpayer response see IRM 4.119.4.18.7.1, Discovered Remittances., for additional information.

  13. When working with correspondence that has not been processed through the Clerical Function (i.e., a faxed response sent directly to a specific tax examiner), ensure that an IRS Received Date is recorded on the BMF-AUR system

    Exception:

    A faxed Form 2848, Power of Attorney and Declaration of Representative, with no explanation is not considered correspondence for purposes of updating the BMF-AUR Received Date.

4.119.4.18.1.1  (10-01-2012)
Controlling Responses

  1. In the response phase, certain situations require specific procedures. The following instructions cover responses that need special handling, Lost Responses, and Refiling Cases.

    Note:

    See IRM 4.119.4.2.2, Lost Cases, for additional information on handling Lost Cases.

4.119.4.18.1.1.1  (10-01-2013)
Responses - Special Handling

  1. Responses associated with the wrong case folder - If the EIN on the response is assigned to the batch, but is enclosed in the wrong folder, take the following action:

    Note:

    Check Case History to see if the folder belongs in the batch. If the folder belongs to the batch, associate it to the correct work unit.

    1. Remove the response from the case file (folder).

    2. Route the incorrect case file to the Clerical Function to refile.

    3. Contact clerical to obtain the correct case file for that response.

    4. If the case file cannot be located and the case can be worked, print a Form 4251 to be used as the response cover sheet.

  2. If the case file is not obtained and the response cannot be worked (processing cannot continue) until the case file is located:

    Note:

    Ensure Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) requirements are followed.

    1. Print the Case History Screen and attach it to the response.

    2. Enter IPC "4XLC" (Lost Case) on the Process Code window.

    3. Route the response to the Clerical Function.

  3. If the response is in the correct folder, the tax return is missing and appropriate action can be determined without the tax return continue normal processing.

  4. If the response is in the correct folder, the tax return is missing and appropriate action cannot be determined without the tax return:

    Note:

    If necessary, issue an interim letter to the taxpayer following Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

    1. Print the Case History screen.

    2. Notate "No Return" on the case folder.

    3. Enter IPC "4XLC" on the Process Code window.

    4. Route the folder to the Clerical Function.

    Note:

    These instructions do not apply to MeF returns.

4.119.4.18.1.1.2  (10-01-2012)
Lost Responses

  1. During the Response phase a case may not contain the taxpayer's response, the case may contain the wrong response or the case may contain an extra response.

  2. If the case does not contain the taxpayer's response, per the EIN assigned to the batch, notify the Lead Tax Examiner (who will search for the response in the batch). If the response is not located:

    1. Contact the taxpayer, apologize for the inconvenience and request the taxpayer resubmit their response.

    2. Assign IPC 43LT, 43PH, 45LT, 45PH, 47LT, or 47PH, as appropriate.

  3. If the case contains the wrong response:

    1. Remove the wrong response and check the Case History to see if the response belongs to another case in the batch.

    2. If the response belongs in the batch, associate the response.

    3. If the response does not belong in the batch, print and attach the Case History and route to the assigned location or to clerical, as appropriate.

    4. See (2) above when the response for your case is not located.

  4. If the case contains an extra response:

    1. Remove the extra response and check the Case History to see if the response belongs to another case in the batch.

    2. If the response belongs in the batch, associate the response.

    3. If the response does not belong in the batch, print and attach the Case History and route to the assigned location or to clerical, as appropriate.

4.119.4.18.1.1.3  (10-01-2012)
Refiling Cases (Internal Process Code 4XRF)

  1. Refile cases to the previous BMF-AUR suspense batch (except for Lost Case, Lost Response, and all Unit Suspense type batches) using IPC "4XRF " .

  2. If the suspense batch has aged (time frame has expired or passed) a message will display "Invalid process code-batch is aged" . IPC "4XRF" cannot be used. take necessary action to issue a letter or move the case to the next phase.

4.119.4.18.1.2  (10-01-2012)
Abatement of Interest

  1. IRC 6404 (e)(1) provides information for abatement of interest on deficiencies or payments of deficiencies attributable to any unreasonable error or delay by the Service in performing a ministerial or managerial act.

  2. A ministerial act is a procedural or mechanical action that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer's case after all prerequisites to the act have taken place.

  3. A managerial act is an administrative action that occurs during the processing of a taxpayer case and that involves the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. Interest attributable to a general administrative decision, such as the Service's decision on how to organize the processing of tax returns, may not be abated.

  4. IRC 6404 also provides several exceptions to the IRC 6601 general requirement that interest be charged from the due date of the return until the balance due is paid in full. Annotate and route taxpayer's requests and claims for abatement of interest to the Campus Interest Abatement Coordinator (IAC) for processing.

4.119.4.18.1.3  (10-01-2013)
Large Dollar Guidelines

  1. The Service must strive to minimize the volume of unresolved large dollar debit and credit modules/issues in the inventory. Therefore, it is necessary to ensure that all proposed assessments involving a balance of $1,000,000 and over are expeditiously resolved.

  2. When the clerical function processes Agree or Stat Notice Default batches, the system identifies cases that meet Large Dollar criteria. The clerical function forwards identified cases to the TCOs for special handling.

  3. Take the following action for any cases (including fully agreed cases) that were not systemically identified as meeting Large Dollar criteria:

    1. Input a Case Note that the large dollar issue has been referred to the TCO for special handling.

    2. Transfer the case to the TCO for specialized handling.

    3. If necessary, issue an interim letter to the taxpayer following Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

  4. The TCO should take the following actions:

    1. Review the proposed assessment for technical and mathematical accuracy

    2. Analyze the taxpayer's account to ensure that all affected tax periods process appropriately.

    3. Verify that the payer information is accurate.

      Note:

      For fully agreed cases, contact the taxpayer if necessary. However, for disagreed cases, telephone contact with the taxpayer (if possible) MUST be made as part of the case resolution. Input a Case Note to document the contact, including if telephone contact could not be made.

    4. Enter a case note to indicate the disposition of the case review.

    5. When the case evaluation is completed, take the appropriate case action (i.e., input the assessment, revise the proposal and issue a Recomputed Notice, or close the case No Change) using standard processing procedures.

    Note:

    If the case is being closed with an assessment of over $10 million dollars, photocopy the entire case contents. Make prints of the: Tax Account, Information Returns, Case Notes, Case History and CP 2030 or CP 2531 Notice. Send the copies/prints to the Chief Financial Office Staff at the following address:
    IRS
    CFO, Business Analysis & Support Section
    Stop S-2, 1035
    333 W. Pershing Rd
    Kansas City, MO 64108

    Reminder:

    Include a Case Note that the case information was sent to CFO.

4.119.4.18.1.4  (10-01-2013)
Accuracy-Related Penalties

  1. IRC 6751 (b)(1) provides that, in general, no Accuracy-Related Penalties shall be assessed without prior written managerial approval. However, even though the Code refers to assessment, managerial approval is needed at the time the penalty is being asserted unless the following exceptions apply:

    1. A penalty notice may be issued in the initial letter to the taxpayer proposing a deficiency for Substantial Understatement, if the taxpayer did not attach any evidence of substantial authority (even if it is evidence that you would reject) to the tax return and did not make a disclosure (even if it is not adequate) on that return. If the taxpayer does not provide any explanation or excuse for the understatement in response to the notice or to a subsequent Statutory Notice of Deficiency, the Accuracy-Related penalty may be assessed without written managerial approval.

    2. A penalty notice may be issued (in the initial letter to the taxpayer proposing a deficiency) for negligent conduct when the determination is automatically made because the taxpayer failed to report income reported on a third party IR for a second tax year. If the taxpayer does not provide any explanation or excuse for the conduct in response to the notice or to a subsequent Statutory Notice of Deficiency, the accuracy-related penalty may be assessed without written managerial approval.

  2. If the taxpayer provides an explanation or excuse, written managerial approval is needed at the time the tax examiner determines to continue processing the case and issues a Letter 4550C explaining why the taxpayer's request for penalty waiver was denied.

    Note:

    If a Recomputed CP 2030 is issued and the penalty waiver is denied, send PARAGRAPH 79.

  3. Depending on the taxpayer's response, the Accuracy-Related Penalty Due to Negligence or Disregard of Rules or Regulations and/or the Accuracy-Related Penalty Due to Substantial Understatement of Tax could be:

    • Assessed

    • Determined to be not applicable

    • Waived for reasonable cause, or

      Note:

      See IRM 4.119.4.14.6, Determine Negligence Status Screen, if the penalty is being suppressed due to reasonable cause.

    • One penalty may be replaced by the other

    Note:

    Use the Determine Negligence Status screen to indicate if the IR(s) are considered negligent. See IRM 4.119.4.14.6, Determine Negligence Status Screen.

  4. If the taxpayer's response claims/cites substantial authority, See IRM 4.119.4.14.4, Accuracy-Related Penalty Due to Substantial Understatement of Tax.

  5. Waive the penalty if the taxpayer provides an explanation that meets reasonable cause criteria. Consider ALL facts and circumstances of each case on an IR by IR basis in determining reasonable cause. Refer to IRM 20.1, Penalty Handbook, for uniform application of reasonable cause criteria. See IRM 20.1.1.3, Penalty Handbook - Relief from Penalties, in general.

  6. If reasonable cause is established for only some of the IRs, all additional taxes, tax credits, and prepayment credits must be allocated between the IRs with reasonable cause and those without.

  7. If a CP 2030 is issued and the substantial understatement penalty is waived, enter a zero (0) in the SUBSTANTIAL UNDERSTATEMENT PENALTY field on the Limit Penalty window.

    Note:

    See IRM 4.119.4.14.4, Accuracy-Related Penalty Due to Substantial Understatement of Tax, if the penalty is being suppressed due to reasonable cause.

    Send PARAGRAPH 78.

  8. The Limit Penalties window contains additional fields to track instances where the taxpayer requests waiver of the Accuracy Related penalty due to Negligence or Substantial Underpayment and whether the request has been granted or denied. When the taxpayer makes this request and the tax examiner determines:

    1. The request will be granted, check the box next to the PENALTY WAIVED field in the Limit Penalties window.

      Note:

      Only check the box when the penalty is still applicable, but is being suppressed. Do not check the box if the penalty is no longer applicable (i.e. the case is being close No Change or the threshold for applying the penalty is no longer applicable).

    2. The request is denied or only partially waived, check the box next to the PENALTY NOT WAIVED field in the Limit Penalties window.

      Note:

      The NEGLIGENCE PENALTY or SUBSTANTIAL UNDERPAYMENT PENALTY field must contain a value greater than zero in order to check the PENALTY NOT WAIVED field. Managerial approval is required when denying the taxpayer's request.

4.119.4.18.1.5  (10-01-2013)
Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61)

  1. Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) are the result of a task force initiated to provide timely, quality responses to taxpayer correspondence. The general guidelines are:

    • a quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer issues

    • requests additional information from the taxpayer, or

    • notifies the taxpayer we have requested information from outside the IRS

  2. A quality response is timely when initiated within 30 calendar days of the IRS Received Date.

  3. When a quality response cannot be issued timely, an interim response must be initiated by the 30th calendar day from the IRS Received Date. Issue a Letter 4314C.

  4. All interim letters should inform the taxpayer when a final response can be expected and provide a contact name and number for additional inquiries.

    Reminder:

    Screen taxpayer responses to BMF-AUR notices received after the BMF-AUR case is closed (BMF-AUR Reconsideration cases) to ensure cases are worked on a first in, first out basis. Control the case on IDRS with the IRS received date no later than 14 days from the BMF-AUR received date (and send an interim letter if the 30-day criteria outlined above cannot be met). See IRM 4.119.4.21, BMF-AUR Reconsideration Cases, for additional information about BMF-AUR Reconsideration cases.

  5. The BMF-AUR system automatically generates a Letter 4314C when the most recent IRS Received Date ages beyond the Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) Age Date input by the BMF-AUR Coordinator.

4.119.4.18.1.6  (10-01-2013)
Address Updates

  1. When a taxpayer contact includes clear and concise notification of an address change, including foreign address change, input the appropriate entries on the Update Address window to update Master File (use Address Type Code M). When a taxpayers notification of address change is a foreign address, the foreign address box must be "Checked" to display the foreign address screen format.

    Note:

    Information regarding state and address abbreviations, and Major City Codes can be found in Document 7475, State Abbreviations, Major City Codes and Address Abbreviations.

    Note:

    Changes to a name line due to a spelling error can be input on BMF-AUR by selecting ADDRESS TYPE "M" (name line change). However do not change the first four characters of the name line (i.e., the name control). The authority for making changes to a primary name line is delegated to the BMF Entity function. Any correspondence received after an EIN has been assigned, requesting a change to the primary name line, that affects the name control, must be routed to the appropriate BMF Entity function. See IRM 21.7.13.7.2.4, Cases Forwarded to Submission Processing BMF Entity.

  2. For certain notices, such as the Statutory Notice of Deficiency, the Internal Revenue Code provides that when the notice is sent to the taxpayer's last known address (LKA), the notice is legally effective even if the taxpayer never receives it.

    Note:

    As a point of reasonable diligence, if there is taxpayer correspondence with a different address mail a copy of the statutory Notice to that address, using the Address Update window to enter a Temporary Address, see (6) below. Do not update Master File without clear and concise notification from the taxpayer.

  3. Contacts that are considered clear and concise notification of an address change include the following:

    1. The taxpayer returns an IRS initiated correspondence (including notices) that solicits or requires a response to IRS with corrections marked on their address information. The taxpayer's signature on the correspondence (for this purpose) is not required.

    2. A return (including an amended return, Form 1120-X) filed by a taxpayer with new address information. Update the Master File for address changes on any amended returns, including Form 1120-X, that bypass normal pipeline processing and are processed as a response.

    3. Form 8822, Change of Address, when received in conjunction with a BMF-AUR case. Use the Address Update window with Address Type I to update the Master File.

    4. Oral notification made in response to a BMF-AUR notice which meets appropriate disclosure guidelines or if a taxpayer is contacted by phone by an IRS employee in connection with the taxpayer's account (not related to an address change). The taxpayer may provide a change of address to the IRS employee who responded to the phone call or initiated the phone contact. See IRM 4.119.4.18.2, Telephone Responses, for additional information regarding telephone responses.

      Note:

      If the notification for an address update is made on a closed BMF-AUR case, the address update must be done using IDRS CC ENMOD.

    5. Notification of an address change made by the U.S. Postal Service.

      Caution:

      Always verify the name on the Post Office notification with the name on the notice before updating the address.

      Note:

      A new address indicated as a return address on the envelope or in the letterhead of the taxpayer's correspondence is not, by itself, clear and concise notification and is not sufficient to change an address of record.

  4. Clear and concise notification, whether written or oral, must contain the following:

    1. The Business's full name.

      Note:

      Corporations that have changed names should provide the prior name shown on the most recently filed return and the new name.

    2. For written requests, the signature of an authorized representative. For oral requests, successful completion of the disclosure notification when calling in reference to a CP notice.

    3. The taxpayer's new address.

    4. The taxpayer's old address, unless you can determine it from the posted data. Do not request the old address from the taxpayer.

    5. The taxpayer Identification number (TIN).

  5. If any of the information from (3) or (4) above is missing from the taxpayer's request, do not update Master File. Input the appropriate entries on the Address Update window to make a temporary address change (use Address Type "T" ). Send the appropriate letter to the taxpayer, at the new address, using a Special Paragraph to advise them of the information needed. Enclose Form 8822, Change of Address.

  6. If the taxpayer provides a temporary address, a beginning and ending date of when the taxpayer will be using that address should be given. Input the temporary address on the Update Address window, using Address Type T. Do not update Master File. If the taxpayer does not provide an ending date, input a date that is 60 days from the current date.

  7. Any time doubt exists as to whether an address should be changed, discuss it with your manager who will either provide an answer or refer the question to the Disclosure Office.

  8. If a document is received containing a name or address change which does not meet the specific requirements for updating Master File, the information should be noted and maintained in the BMF-AUR case file. If a notice is returned, the Service is required to use due diligence in locating the taxpayer, which includes a search of existing records to locate any updated information supplied by the taxpayer.

4.119.4.18.1.7  (10-01-2013)
Adjustment Cases Relating to BMF-AUR

  1. Accounts Management frequently receives Form 1120-X or correspondence from taxpayers who received BMF-AUR notices. Multiple assessments could result if both Adjustments and BMF-AUR simultaneously work these cases.

  2. To eliminate multiple assessments:

    1. Accounts Management may route cases related to an OPEN BMF-AUR case to BMF-AUR. Work these cases following normal BMF-AUR procedures.

    2. Always check AMS and/or MeF if applicable if any indication that a Form 1120-X has been filed.

    3. Accounts Management will work responses or Form 1120-X related to a CLOSED BMF-AUR case as part of the subsequent adjustment.

    4. Accounts Management will forward all reconsideration cases to BMF-AUR prior to any new adjustment.

  3. Responses that deal with multiple tax years are treated as separate responses whenever feasible. In such instances, photocopy the response so each tax year has the appropriate response to resolve the case. Route copies of the responses that are non-BMF-AUR to Accounts Management.

    Exception:

    Coordinate Net Operating Losses (NOL) and carryback/carryforward (CB/CF) issues between Accounts Management and BMF-AUR. Exercise caution with regard to Statute of Limitations and payment of interest. The program redistribution may impact working cases with NOL and CB/CF issues.

4.119.4.18.1.8  (10-01-2012)
Appeals

  1. If the taxpayer makes a non-docketed appeals request (i.e., specifically requests a hearing with an Appeals Officer or submits a Form 12203, Request for Appeals Review), prior to issuance of a Statutory Notice attempt to resolve the issue(s) by telephone. Document the call(s) with Case Note(s). If it is still necessary to transfer the case to Appeals:

    Note:

    See IRM 4.119.4.1.2, Statute Awareness Program, for Statute guidelines. See IRM 4.119.4.18.2, Telephone Responses, for telephone procedures.

    1. Research the following web site: http://appeals.web.irs.gov/APS/caserouting.htm. Select the "Campus Case Routing" link to find the appropriate Campus Appeals office based on the IRS Campus source of the case.

    2. Prepare a Form 3210, Document Transmittal.

      Note:

      Based on PC assignment, clerical prints the Tax Account, Info Returns, Case Notes, Case History, CP 2030, CP 2531 from BMF-AUR; and sends the entire case contents.

    3. Close the case with PC 4590.

  2. If the taxpayer makes a non-docketed appeals request (i.e., specifically requests a hearing with an Appeals Officer or submits a Form 12203, Request for Appeals Review, after the issuance of a Statutory Notice:

    1. Issue a Letter 4550C advising the taxpayer that their request cannot be honored and that they need to file a petition with the U. S. Tax Court within the period specified (usually 90 days) and following the instructions in the Statutory Notice they received.

    2. Inform the taxpayer that as part of the petitioning process, their case will be reviewed by the Appeals Office.

    3. Continue processing, refiling the case as necessary for the remainder of the Statutory Notice suspense period.

    Note:

    If less than 30 days remains on the 90-day period, the tax examiner must attempt to contact the taxpayer by telephone to advise them that their request has been denied. Leave a Case Note documenting the contact.

    Note:

    See IRM 4.119.4.1.2, Statute Awareness Program, for Statute guidelines. See IRM 4.119.4.18.2, Telephone Responses, for telephone procedures.

    Note:

    DO NOT USE PC 4800 FOR NON-DOCKETED CASES.

4.119.4.18.1.9  (10-01-2012)
Bankruptcy Procedures - Responses

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when Tax account screen displays the following Bankruptcy indicators:

    1. Freeze code -V and/or TC 520 (not reversed by TC 521 or 522).

    2. Freeze code -W and/or TC 520 (not reversed by TC 521 or 522) with cc 60 through 67,70,75, 78-81, cc, 85 or cc 89.

  2. If the taxpayer states Bankruptcy was filed and there are no indicators of Bankruptcy on the Tax Account Screen, request verification of the Bankruptcy and continue processing. If the requested documentation is provided, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.119.4.18.1.10  (10-01-2012)
Congressional Cases

  1. A case is considered a Congressional if correspondence/inquiry is received on U.S. Congressional Letterhead or attached to U.S. Congressional Letterhead.

  2. If you discover a Congressional case, immediately give the case to the BMF-AUR Taxpayer Advocate liaison for expedite handling.

    Note:

    Do not consider a case a Congressional if the taxpayer states they sent a copy of the BMF-AUR notice to a member of Congress or the White House, or contacted or is going to contact a member of Congress or the President, or threatens to do so if the case is not resolved. See IRM 13.1.7, Taxpayer Advocate Case Procedures -Taxpayer Advocate Service (TAS) Case Criteria, for cases meeting the (TAS) criteria.

4.119.4.18.1.11  (05-06-2013)
Deposits to Stop the Accrual of Interest – Section 6603

  1. A taxpayer may stop the further accrual of interest while the case is being resolved by making either a payment or an IRC 6603 deposit.

  2. IRC Section 6603 allows taxpayers to submit deposits to suspend the running of interest on potential underpayments.

    1. IRC 6603 deposits are identified on the Tax Account screen by a TC 640 with a Blocking series of 990-999, or TC 640 with DPC 12.

    2. The taxpayer must use the specific designation for the payment to be considered an IRC 6603 payment.

    3. Unlike Cash Bonds, the taxpayer may be entitled to credit interest on any refunded portion of the IRC 6603 deposit.

  3. A taxpayer may request the return of all or part of a IRC 6603 deposit before the deposit is used for a payment of tax. The requests must be in writing and include the following:

    1. The date(s) and amount(s) of the original deposit(s);

    2. The type(s) of tax to which the deposit was intended to be applied;

    3. The tax year(s) to which the deposit was intended to be applied.

  4. If the taxpayer requests a return of a IRC 6603 deposit, interest must be manually computed and input, and a manual refund is required. See IRM 21.4.4, Manual Refunds, IRM 20.2.4.8.2.2, Request for Return on an IRC 6603 Deposit, IRM 21.5.1, General Adjustments, and IRM 21.5.2, Adjustment Guidelines, for more information.

    Note:

    The accrual of interest stops only on the amount actually remitted by the taxpayer on the date the remittance is received. Interest continues to accrue on other unpaid amounts, including accrued interest.

4.119.4.18.1.12  (12-04-2012)
Disaster Area

  1. If the case is identified as entitled to disaster relief (either systemically or through taxpayer self-identification) and a response is received indicating the taxpayer’s record keeping location was lost, destroyed or not accessible due to the disaster, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Caution:

    IRS disaster relief memos usually grant special treatment to those taxpayers who self-identify; therefore, the system does not always identify impacted taxpayers by zip code.

4.119.4.18.1.13  (10-01-2013)
Amended Return

  1. If the taxpayer responds to a BMF-AUR notice with a Form 1120-XAmended U.S. Corporation Income Tax Return or an amended return, review the Tax Account screen to determine if the adjustment posted.

    Note:

    See IRM 4.119.4.18.11, Instructions Specific to Statutory Notices/Responses, for amended returns that exceed the tax increase shown on the Statutory Notice of Deficiency.

  2. If the Form 1120-X adjustment did not post and the taxpayer responds with a mathematically correct Form 1120-X or a signed statement that recalculates the tax on some but not all of the U/R issues, or does not address the penalties, send the appropriate notice to the taxpayer for signature. Send PARAGRAPH 110 to address penalties not included on the amended return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Advise the taxpayer that the Form 1120-X information was included in the proposed adjustment.

    Note:

    If the Form 1120-X is received on or before the BMF-AUR contact date, do not pursue penalties.

  3. If the taxpayer submits a Form 1120-X that includes all U/R issues, math verify the Form 1120-X.

    1. Ensure it is for the correct tax year, verify the name and address

    2. The amounts on lines 1 - 4, Column A should match the original return (+ or - any subsequent adjustments).

    3. The amounts on lines 1 - 4, Column B should reflect the taxpayer's changes.

    4. The amounts on lines 1 - 4, Column C should be the total of column A and B.

    5. Payments and Credits Lines 5a - 5g, Column A should match the original return (+ or - any subsequent adjustments).

    6. Payments and Credits Lines 5a - 5g, Column B should match the taxpayer's changes.

    7. Payments and Credits Lines 5a - 5g, Column C should be the total of column A and B.

    8. Ensure that the Form 1120-X is signed.

    9. Part II, Explanation of Changes to Items in Part I, should include all items affected by the U/R issue(s).

  4. In order to accept the amended return as an agreed response, the tax change shown on the amended return must agree with the tax change computation on the BMF-AUR system ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If not, advise the taxpayer of the discrepancy and continue processing the case. If the amended return is acceptable, update Case Analysis and Return Values screens and:

    1. If the amended return is in response to a CP 2531, access and commit the Compute Assessment window and input PC 4470.

    2. If the amended return is in response to a CP 2030, input a "5" in the NOTICE INDICATOR field on the Summary screen and input IPC 45RN.

    3. If the amended return is in response to a Statutory Notice of Deficiency, input a "5" in the NOTICE INDICATOR field on the Summary screen and input IPC 47SR.

    Note:

    If the system is unable to compute the same amounts the taxpayer did, see IRM 4.119.4.18.6, Partially Agreed Responses.

  5. If the Form 1120-X information results in a zero (0) tax change and a TC 976 or TC 971 AC 010 or 012 - 016 posted, input/verify TC 290 for .00 on the Compute Assessment window to release the A Freeze. Close the case with the appropriate process code. If a change to TXI ONLY is necessary see IRM 4.119.4.18.6, Partially Agreed Responses.

    Caution:

    Do not use IPC 45RN or 47SR to create the assessment record when the tax change is zero. See IRM 4.119.4.18.6, Partially Agreed Responses, for further information.

  6. If a taxpayer response includes a Form 1120-X that offsets more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ refer to TCO for review before accepting taxpayer's figures.

  7. If the Form 1120-X adjustment posted and:

    1. Form 1120-X correctly includes all U/R issues, close the case with the appropriate Process Code.

    2. Form 1120-X addresses all U/R issues but not the Accuracy related penalties, only pursue the penalty if the Form 1120-X was filed after the BMF-AUR contact. Close with the appropriate PC and pursue the penalty through the manual process. This may include issuing Correspondex letters through IDRS and creating a Manual Stat Notice (STN90) and monitoring the case through to default, if necessary.

    3. There are other U/R issues besides those reported on Form 1120-X, adjust the U/R by reworking the case and send the appropriate notice for the taxpayer's signature.

  8. The taxpayer replies that they filed an amended return which included the U/R income in question, review the Tax Account screen.

    1. If the Tax Account screen shows a TC 290, and the tax increase due to U/R income matches the TC 290, close the case.

    2. If the Tax Account screen shows a TC 290, and the tax increase due to U/R income does NOT match the TC 290, order the TC 290 DLN.

    3. If the Tax Account screen shows a TC 976 or TC 971 AC 010 or 012 - 016 with no corresponding TC 290 and there is an indication that it is a CIS document order the return. See IRM 4.119.4.3.4.5, Correspondence Imaging System (CIS) Documents, for more information.

    4. If the Tax Account screen does not show a TC 976 or TC 971 AC 010 or 012 - 016, or the Form 1120-X cannot be obtained, send Letter 4550C to request a signed copy from the taxpayer. Include the following Special Paragraph: "You indicated that the income in question was reported on your amended return, however, we are unable to locate it. Please send or fax us a signed copy of your Form 1120-X attached behind a copy of this letter."

  9. If the Form 1120-X is not acceptable or all BMF-AUR issues are not addressed and case results in a tax decrease, send the appropriate letter with a Special Paragraph informing the taxpayer that we are unable to process the Form 1120-X as filed since they did not address all of the issues shown on our notice.

    Caution:

    Be aware of the date the Form 1120-X was submitted and the date the notice was issued when creating the Special Paragraph.

  10. If the U/R issue is resolved, but the taxpayer states that another amount was NOT CLAIMED, UNDERCLAIMED, OR OVER-STATED on the original return AND:

    1. The taxpayer provides sufficient information, make the necessary adjustment. Use good judgment to determine if the taxpayer is entitled to this adjustment. If necessary, discuss with TCO to determine action to be taken.

      Note:

      BE ALERT TO STATUTE LIMITATIONS.

    2. It may be necessary to input changed amounts in Case Analysis or Return Value screens. If the necessary adjustment cannot be made by using specific screens or windows, use the Miscellaneous Adjustment/Deduction Adjustment window in Case Analysis and/or the MISCELLANEOUS ADJUSTMENT field in Return Values screen to arrive at the correct tax.

    3. If the taxpayer does not provide all of the necessary information, contact the taxpayer for the missing information and/or documentation.

4.119.4.18.1.14  (10-01-2012)
Installment Agreements

  1. If the taxpayer AGREES (contains signature and no disputing comments) to the proposed BMF-AUR adjustment and STATES they cannot pay, will pay later, or submits a specific request for an installment agreement (IA) or a payment plan, close the case agreed and:

    1. Route the IA request to Service Center Collection Operations.

    2. Leave BMF-AUR Case Note "IA to Coll" or similar wording.

    3. Issue a Letter 4551C to advise the taxpayer that their payment plan request has been referred to the proper area.

4.119.4.18.1.15  (10-01-2013)
Letters From a Third Party and Authorization From a Valid Power of Attorney (POA)

  1. Information supplied by an unauthorized third party may be used. However, SEND NO TAX INFORMATION TO, OR DISCUSS TAX INFORMATION WITH, AN UNAUTHORIZED PERSON. Any further correspondence required must be sent directly to the taxpayer.

  2. The Third Party Designee (Check Box) authority on Form 1120, does not apply to Compliance issues, including BMF-AUR. Therefore do not send copies of BMF-AUR correspondence to a Third Party Designee and do not disclose specific case or tax return information based on a Third Party Designee check box.

  3. In order to respond to the Service on behalf of a taxpayer, a person must be an attorney, certified public accountant (CPA), enrolled agent, or enrolled actuary and must be authorized by Form 2848, Power of Attorney and Declaration of Representative. A Form 2848 also authorizes the representative to receive confidential tax return information from the Service. A taxpayer may authorize the Service to discuss and provide specific confidential tax return information to any individual, corporation, firm, trust, partnership, or organization designated on Form 8821, Tax Information Authorization, but this form does not authorize the person to respond to the Service on behalf of the taxpayer if the response constitutes practice before the Service. A document/letter request may be used in lieu of Form 2848 or Form 8821, provided it contains all of the information described below.

    Note:

    The taxpayer may give oral authorization to address issues with a third party.

  4. The Form 2848, Form 8821, or a document/letter in lieu of these two forms, a facsimile (FAX), or photocopy of these forms should contain relevant information requested of a signatory by a Form 2848 or Form 8821, including:

    • Name, EIN, and mailing address of the corporation

    • Name and mailing address of the designated representative Power of Attorney (POA) or Tax Information Authorization (TIA)

    • Type of tax and the Federal tax form number

    • Tax year(s) or period(s) or specific use (POA) or specific matter (TIA)

    • Corporate Officer signature and date of signature

    • In the case of a Form 2848, a completed Declaration of Representative (Part II)

    Note:

    If the POA/TIA is determined to be invalid, return it to the taxpayer or authorized representative and send a Letter 2627C.

    Note:

    If the Form 2848 or Form 8821 is identified as being used for a specific use only by the taxpayer marking Box 4 DO NOT SEND it to the CAF function.

  5. If the POA/TIA is attached to the return, and the POA contains all of the above items, fax the authorization to the CAF Function for further processing and leave a Case Note.

  6. If the POA/TIA is received without a return or document, and contains all of the items shown above, fax it to the CAF Function and leave a Case Note.

  7. If a letter request is used in lieu of Form 2848 or Form 8821 and contains all of the items shown above, fax the request to the CAF Function for processing and leave a Case Note.

  8. When a valid POA/TIA is received, input the information on the Update Address window, selecting Address Type P1 or P2 for First or Second POA.

    Note:

    When the valid POA/TIA is received specifically for the BMF-AUR notice, the POA/TIA should remain with the case file. Do not fax to the CAF Function.

    Caution:

    Do not update the address if the taxpayer indicates on the POA/TIA that they do not want copies of notices sent to the appointee.

  9. When a valid POA authorized to receive notices is processed, the system generates a copy of all notices to both the taxpayer and the designated representative. The POA address(es) automatically displays when sending a letter, but the tax examiner must select the address.

  10. If the taxpayer or POA/TIA writes in and requests that a current POA be revoked and that no further information should be sent to this POA, handle the revoked POA request by the following instructions:

    1. Fax the POA revocation request to the CAF Function for processing.

    2. Ensure information is not sent to the revoked POA.

  11. When a POA/TIA request is included in the response that does not relate to the BMF-AUR case (ie: for another taxpayer, another tax return type or different tax year, etc), route (do not FAX) the form(s) to the CAF unit for processing. DO NOT Leave a copy in the BMF-AUR Case file.

4.119.4.18.2  (10-01-2013)
Telephone Responses

  1. The purpose of the BMF-AUR toll-free telephones is to assist taxpayer's and/or their authorized representatives who call IRS regarding BMF-AUR initiated contacts. Use instructions for written responses as guidance for telephone responses/accepting oral statements.

    Note:

    Written documentation may be requested if unable to determine if the oral statement is valid.

    Caution:

    When these instructions refer to the taxpayer, the instruction also applies to the authorized representative who calls for the taxpayer. See IRM 4.119.4.18.2.2, Disclosure, for additional information regarding authorized representatives.

  2. Hearing-impaired callers may be speaking through a relay operator. The operator will announce they are calling as a relay operator on behalf of a taxpayer as soon as you answer. Perform disclosure verification as if you were talking directly to the taxpayer and continue with the conversation. Inform the caller of the following: You have placed this call with the assistance of a Relay Service Operator (RSO). We assume that in doing so, you have consented to the disclosure of your return information to the Relay Services Operator to the extent necessary to assist you with your question.

    Caution:

    If the customer does not give oral consent, apologize to the customer (through the RSO) for the inconvenience. Because of disclosure rules, we cannot provide the requested information through this connection without oral consent. These rules were established to protect the privacy of all taxpayers.

  3. Oral Statement Authority is acceptance of information provided verbally to resolve account inquiries.

    Note:

    An Oral Statement can not be used to close a case fully agreed. A signature must be secured.

  4. The BMF-AUR ASPECT telephone system has been updated to always advise the taxpayer that the telephone call does not extend the 90-day period in which they have to petition the Tax Court as specified in the Notice of Deficiency. The caller will always hear this announcement prior to speaking with an assistor. Should the taxpayer question this announcement, inform the taxpayer that this is a requirement and answer any other related questions.

  5. If taxpayer calls and indicates they wish to fax their response/agreement to the BMF-AUR issue, a case note should be used to clearly document the date of contact and the taxpayer's intent to fax a signed consent. A faxed consent to assess additional tax (CP 2030, CP 4550C, CP 3219B (Stat Notice) or Form 433–D) can be accepted by fax if contact was made and the case history documents the date of contact.

  6. When accessing a case due to a phone call, "check mark" the PHONE field. The BMF-AUR program will extract telephone contact data based on this entry.

4.119.4.18.2.1  (10-01-2013)
Answering the Telephone

  1. The Restructuring and Reform Act of 1998 (RRA '98) requires that IRS employees use a unique identifier in written or verbal communications with taxpayers. The last seven digits of the Position Identification (PID) will be used as the EMPLOYEE IDENTIFICATION. When speaking with a taxpayer, ALWAYS identify yourself by title and last name or first and last name and PID. Be courteous, polite and professional.

  2. Important steps to provide quality telephone assistance include the following:

    1. Greet the taxpayer: Identify yourself, including employee identification (badge) number, and indicate a willingness to help.

    2. Respond to the taxpayer's opening statement: Actively listen to the caller; deal with the taxpayer's feelings, if appropriate, and, acknowledge the ability to help. If appropriate, apologize for any mistakes made by IRS.

    3. Target the taxpayer's questions: Listen to the taxpayer's opening statement; form and use confirming questions; gain agreement from the taxpayer; and determine any targeting required to better identify the taxpayer's issue.

    4. Get the necessary facts: Ask the right questions and use appropriate hold procedures. Do not keep the caller on hold for more than a few minutes without giving them an explanation and apology. If additional research time is or will be too lengthy, offer to return the call with the requested information.

    5. Provide assistance: Provide accurate and complete assistance and/or appropriately refer the taxpayer to another source, if required.

    6. Close the conversation: Verify the taxpayer's understanding and conclude the contact courteously.

  3. Telephone assistors are expected to handle account actions while the taxpayer is on the phone. Telephone actions should be taken in Talk or Hold status. Wrap time is appropriate when:

    • the caller does not wish to stay on the line,

    • the case is complex requiring significant time to complete documentation or research, or

    • the taxpayer is abusive or is using inappropriate language and the phone assistor has to end the call.

    Note:

    Muting a call is not appropriate when research is being conducted. The caller should be placed on hold unless the caller specifically requests not to be placed on hold.

  4. When you receive a call from a taxpayer regarding his/her tax account information, you are under no obligation to determine if the taxpayer is using an unsecured platform such as a cell phone. However, if you become aware that the taxpayer is using a cell phone (e.g., the taxpayer states he/she is calling from a cell phone, etc.), you may advise the taxpayer of the disclosure risk of using the cell phone to discuss his/her account information.

4.119.4.18.2.2  (10-01-2013)
Disclosure

  1. When responding to telephone inquiries, disclose no tax return information until you are sure the person making the inquiry is an officer of the corporation or their authorized representative. Most calls to the BMF-AUR toll-free number are in response to BMF-AUR Notices and are not considered high risk.

    Reminder:

    The Third Party Designee check is intended to facilitate the processing of tax returns and does not cover Compliance issues, including BMF-AUR. Do not disclose specific case or tax return information to a Third Party Designee.

  2. The system will provide you with a verification screen. Follow the prompts to complete disclosure verification. You must complete the disclosure verification process to access the account. See IRM 4.119.4.18.2.2.1, Disclosure Verification Screen for further instruction.

  3. If a person states he/she is the authorized representative, request the taxpayer's name and TIN to check the Tax Account screen, Taxpayer Information screen, and/or Update Address window to determine if a POA or authorized party was filed for that person to represent the taxpayer.

    Caution:

    The Third Party Designee (check box) authority on the tax return does not apply to compliance issues.

    1. If the POA is not reflected on the screens/windows, research using IDRS CC CFINK before requesting the taxpayer or POA to submit Form 2848.

    2. If the CFINK screen shows there is a valid POA or authorized party for the tax year being worked, ask the POA to verify their CAF number or if they do not have their CAF number available, their name and address. The information may be discussed after verification of the identity of the person who is listed as the representative. Check the Update Address window for the representative.

    3. If there is no POA or authorized party on file, the taxpayer's information such as tax figures or case information may be discussed ONLY with a corporate officer.

  4. ORAL DISCLOSURE CONSENT - Treasury Reg. 301.6103(c) -1(c) authorizes the IRS to accept verbal consents authorizing the disclosure of return information to third parties assisting taxpayers in resolving Federal tax matters.

    Note:

    Do not solicit verbal authorization from the taxpayer.

    1. If the taxpayer wishes to verbally authorize a third party to assist them with BMF-AUR related matters, ensure that they understand that this consent will allow BMF-AUR to continue discussion with the designated third party until the issue is resolved. If the taxpayer still wants the authorization, input the following information on the BMF-AUR Case Note Window: "ORAL DISCLOSURE" or similar wording and the designee's full name and telephone number (including area code) in Address Update window.

    2. If the taxpayer indicates that they want the designee to act for the taxpayer in matters beyond BMF-AUR, ensure that the taxpayer understands that this consent will allow the IRS to continue discussion with the designated third party until this particular tax matter is resolved. If the taxpayer still wants the authorization, record the Oral Disclosure Consent on IDRS, using IDRS CC ACTON to input History Items on each tax module (TXMOD) under consideration. Follow instructions in See IRM 4.119.4.18.2.3, General Inquiries, for actions relating to non-BMF-AUR inquiries.

4.119.4.18.2.2.1  (10-01-2012)
Disclosure Verification Screen

  1. Beginning with TY 2012 case processing, tax examiners must complete phone call disclosure using the Disclosure Verification Screen.

  2. The Disclosure Verification Screen automatically displays when the "PHONE" field is checked and "GO" is selected.

  3. The Disclosure Verification Screen contains information that allows the phone assistor to perform disclosure without accessing the taxpayer's account. This will eliminate inadvertent disclosure prior to verifying the caller’s identity.

  4. As disclosure questions are verified the phone assistor clicks on the corresponding box to the right of the field title (i.e. TIN, NAME ADDRESS, etc.) and a check mark will then display in the box to indicate that particular disclosure questions have been verified.

  5. If the caller provides information that requires updating the address, the phone assistor can check the "CHANGE ADDRESS" box (after disclosure is complete) and the Update Address Window displays. Once changes have been made and committed, the system defaults back to the Disclosure Verification Screen.

  6. From the drop down menus IDENTIFY THE TYPE OF ENTITY and IDENTIFY THE SOURCE OF CONTACT.

  7. Only verify the POA NAME if the phone assistor has selected Power of Attorney (CAF) from the IDENTIFY THE SOURCE OF CONTACT drop down menu.

  8. When disclosure has been completed, click on the "DISCLOSURE COMPLETE" box.

    1. If the required disclosure has been met, the system allows the phone assistor to access case information (ie: Case History, Case Analysis, etc.).

    2. If the required disclosure has not been met the following message displays: "ERROR: DISCLOSURE INCOMPLETE." Verify that you have asked the required disclosure questions and checked the corresponding boxes. If caller fails disclosure, normal procedures for failed disclosure should be followed.

  9. If the caller is an unauthorized party providing information on the taxpayers case, access the case after the call has ended. Leave a case note and take any necessary actions on the case.

4.119.4.18.2.2.2  (10-01-2012)
Contact Recording

  1. Contact Recording is a telephone application/tool/system that records incoming toll free telephone contacts for the purpose of possible subsequent monitoring. When the taxpayer calls the BMF-AUR toll-free number, they are notified that their call may be recorded.

    1. If the taxpayer objects to being recorded, use the "Stop Recording" icon on your desktop to disable the contact recording feature.

    2. If the call is transferred, advise the caller that they will have to restate their request that they do not wish to be recorded.

    3. If the caller also asks to record the conversation, advise the caller that they may not record the call; however, they may request a copy of the call under the Freedom of Information Act (FOIA). This request must be in writing and contain the date, name, identification number of the employee, and the approximate time of the call. See IRM 21.1.3.17.1 (3), Freedom of Information Act (FOIA), for FOIA recording requests.

4.119.4.18.2.3  (10-01-2013)
General Inquiries

  1. If the taxpayer's call is a general inquiry or they request information about:

    1. Account related issues that do not pertain to the BMF-AUR case: provide the Customer Service number, 1-800-829-1040 for IMF and 1-800-829-4933 for BMF.

    2. Tax forms: provide the toll-free number for forms, 1-800-829-3676, or provide the IRS web site address" www.irs.gov" .

    3. Tax transcripts: provide the toll-free number, 1-800-908-9946 for IMF and 1-800-829-4933 for BMF, or provide the IRS web site address, "www.irs.gov" .

    4. Federal Tax Questions (other than employment taxes): transfer callers to Accounts Management by pressing #92030 for English or #92031 for Spanish.

    5. Federal Tax Questions (related to employment taxes): transfer callers to Accounts Management by pressing #92025.

    Note:

    If a phone call is received asking for a change to the primary name line, advise the taxpayer the request must be made in writing. Advise the taxpayer to send the request to the BMF Entity function. If the entity is a corporation or an LLC, advise them to include a copy of the amendment to their Articles of Incorporation or Articles of Organization showing the entity's correct name.

    Caution:

    Only TAX LAW, Refund or Balance Due questions are to be transferred, always inform the taxpayer that they are being transferred.

4.119.4.18.2.4  (10-01-2013)
Case Specific Inquiries

  1. If the taxpayer has questions relating to their case, access the Taxpayer Information Window.

    1. Use the Case Note section to document any pertinent information, i.e., any statement by the taxpayer that provides information to allow the tax examiner to make a change to the case. The information entered will append to the Case Note screen.

      Note:

      Case notes remain a part of the case file. These notes can be viewed by other areas such as the United States Tax Court (in the event the taxpayer files a petition), or by taxpayers through the Freedom of Information Act, etc. Caution should be used when Case Notes are written.

    2. Secure/verify and input/enter the phone number and contact hours for the taxpayer when the taxpayer requests a call back or is told the tax examiner will call them back. Inform the taxpayer a call will be returned within a specified amount of time. Notate the time frame as part of the Case Note.

    3. If the taxpayer provides a new address, click on the address change box and use the Update Address screen following guidelines in IRM 4.119.4.18.1.6, Address Updates.

    4. The latest address displays. This may not, however, be the address that received a notice.

  2. When the information you requested is available, return the taxpayer's call within the specified time frame. Advise the taxpayer when a delay is experienced in obtaining the requested information.

    1. Ask the caller to identify their position in the corporation by stating their full name, EIN and relationship to the Corporation. Never discuss or give specific information on the taxpayer's account to anyone other than a corporate officer without a valid Power of Attorney (POA) or a completed authorization statement.

    2. Inform the taxpayer that you have the information necessary to discuss their case.

  3. When returning the taxpayer's/representative's call and if it is necessary to leave a message on an answering machine or voice mail:

    1. Leave your name, phone number, indicate that you are calling from the IRS and the name of the person you are calling.

      Caution:

      DO NOT divulge that you had previous contact with the corporate officer/representative unless you have verified that the number reached was the one given for contact purposes (i.e. the taxpayer identifies themselves in the greeting) AND that the corporate officer is the only person with access to the voice mail or answering machine.

      Caution:

      DO NOT provide any information about the specific tax matters involved nor indicate exactly why you need to speak to the corporate officer/representative.

  4. If the taxpayer agrees with the proposed changes, instruct the taxpayer to sign, date, and return the consent to tax increase.

  5. If the taxpayer agrees but states they cannot pay or requests a payment plan, instruct the taxpayer to sign and date the notice in the space provided and complete a Form 433–D.

  6. If the taxpayer states they are making a payment other than electronically, provide check annotation information if needed. The BMF-AUR phone script provides check annotation information if the taxpayer selects the "Agree" path or chooses to speak with a tax examiner. You are not required to address this subject unless the taxpayer asks a specific question. To respond to the taxpayer's specific question, refer them to the consent page of the notice or advise them to make the check or money order payable to the "United States Treasury" and include the EIN, Form type and tax year from the Notice.

  7. If the taxpayer inquires about paying electronically:

    1. Advise the taxpayer to call 1-800-555-4477 to speak with a representative from the Electronic Federal Tax Payment System (EFTPS).

    2. Advise the taxpayer that the EFTPS representative will provide any additional information.

    3. Advise the taxpayer to sign and return the consent to tax page in order to complete action on their case.

  8. If the taxpayer requests the balance due amount, provide the CP 2030 amount and advise that penalty and interest continue to accrue. If the taxpayer requests a specific payoff amount computed to certain date, use CC INTST if the BMF-AUR assessment has posted or CC COMPA on open BMF-AUR cases.

  9. If the taxpayer states the balance due has already been paid AND the payment is displayed on the Tax Account screen, close the case, using "Agreed Response" criteria. See IRM 4.119.4.18.5, Agreed Responses, for more information.

    Exception:

    A signature is required if full payment was received after the Statutory Notice was issued.

  10. If the taxpayer states they have paid the balance due in full and now received a bill for additional interest, research IDRS using CC TXMOD to determine if a TC 276 has posted after the BMF-AUR adjustment. If a TC 276 has posted inform the taxpayer that per the paragraph titled Failure To Pay Penalty -IRC 6651(a) on their notice an additional penalty (FTP) was assessed on their account. Payments received are applied in the following order:

    1. Tax.

    2. Penalties.

    3. Interest.

  11. If the taxpayer states a payment was sent and the payment is NOT shown on the Tax Accounts Screen, determine if it has been at least two weeks since the taxpayer mailed their payment or one week since the scheduled date of an authorized electronic payment:

    1. If not, ask the taxpayer to call back at that time.

    2. If yes, research IDRS CC TXMODA, BMFOLI, BMFOLP, BMFOLT or EFTPSE (using the 15 digit confirmation number) before requesting the taxpayer send a copy of the front and back of the cancelled check. If the payment is found posted on another tax module (i.e., subsequent year) ensure that the payment is transferred to the correct tax module.

    Note:

    If the taxpayer paid electronically, request that they sign and return the consent to tax page in order to complete action on their case.

  12. If during the telephone call, it is determined the taxpayer is due a refund or expects a refund, inform the taxpayer the refund will be issued if they owe no other taxes or federal obligations.

  13. Accept from the taxpayer or a third party oral statements which result in revising or closing a case as No Change (no increase in tax). If the taxpayer agrees to the proposed assessment during the phone conversation, they may fax the signed agreement if tax increase is $250,000 or less.

  14. If during a phone call, BMF-AUR or IDRS research shows the taxpayer's account balance due status is the result of a BMF-AUR assessment and the taxpayer provides documentation to resolve/change the assessment or agrees to send in documentation, ensure input of IDRS CC STAUP or TC 470, if appropriate, to prevent issuance of additional notices while the case is being worked. Allow the STAUP (or TC 470) to be effective for up to 6 cycles, unless the situation warrants a longer period.

4.119.4.18.2.4.1  (10-01-2012)
Out Calls

  1. During the response phase there may be times when calling the taxpayer will expedite the resolution of the case.

    Example:

    Taxpayer responds to notice but inadvertently omitted required information or signatures delaying the action on the case.

  2. Out calls also provide better topic and time control of a conversation.

  3. It may be beneficial to make an out call in lieu of sending the taxpayer a letter to resolve their account when the taxpayer has provided telephone contact information, and the information needed can be provided orally or by fax.

4.119.4.18.2.4.1.1  (10-01-2013)
Out Calls - Calling the Taxpayer

  1. There are times during the response phase when you must attempt to call the taxpayer to resolve the issue. You must always document the attempt in a Case Note. You must attempt to call the taxpayer when the taxpayer:

    Note:

    Normal telephone procedures should be followed when making an out call. Secure/verify and input/enter the phone number and contact hours for the business.

    1. Requests an appeal of our findings.

      Note:

      Attempt to resolve the issue(s) by phone prior to forwarding the appeals request. See IRM 4.119.4.18.1.8, Appeals , for additional information.

    2. Requests a phone call.

      Note:

      An attempt must be made even when the taxpayer provides a contact time which is outside the tax examiner's shift.

    3. Fully agrees - but is missing required signature(s).

  2. There are times during the response phase when you may attempt to call the taxpayer to resolve the issue. You must always document the attempt in a case note. You may attempt to call the taxpayer when the taxpayer:

    Note:

    If unable to reach the taxpayer by phone and you are requesting a missing signature for a case in Statutory Notice phase where the suspense time frame has expired, do not issue a Letter 4550C, input PC 4850 and default the case.

    1. Submits full payment after a Statutory Notice is issued, without the required signature(s).

    2. Omits requested information or documentation.

      Note:

      If unable to reach the taxpayer by phone, issue a Letter 4550C to request the missing signature(s) and/or /information.

  3. Access the Case Note window and leave an Action trail in the Case History window.

  4. When you initiate an outgoing phone call, the taxpayer may be reluctant to provide their Taxpayer Identification Number (TIN). To ease any concerns that the taxpayer may have, provide the taxpayer with the last four digits of the TIN and request that the taxpayer verify the first five digits. After you verify the TIN, follow IRM 4.119.4.18.2.2, Disclosure and IRM 4.119.4.22.2, Disclosure verification Screen.

  5. If taxpayer is still reluctant to provide information, leave a detailed case note outlining the information that is needed from the taxpayer. Provide the taxpayer with the BMF-AUR toll free number. The taxpayer can then call the toll free number and the assistor can inform the TP what is needed.

  6. Use the following guidelines when leaving messages that contain confidential information on answering machines/voice mail. These guidelines are consistent with prudent business practices and disclosure rules while still providing good customer service.

    1. While tax information generally may not be left on an answering machine or voice mail, there are exceptions. If the employee "reasonably believes" he or she has reached the taxpayer’s correct answering machine or voice mail, it is acceptable to leave the employee’s name, telephone number, any appropriate reference number for the inquiry, the fact that he or she works for the IRS (identifying the function of the calling employee is permissible), and the name of the person who should return the call. Additional information can be left on the recording if the taxpayer has given prior approval to leave such information on voice mail or the answering machine.

    2. "Reasonable belief" is supported by the greeting on the answering machine or voice mail refers to the taxpayer being contacted or the taxpayer has indicated that this is the telephone number where he or she may be reached directly.

    3. A detailed Case Note should document the taxpayer’s telephone number, his/her approval to call that number, and the taxpayer’s permission for IRS to leave information on the recording.

    4. If the employee does not have a reasonable belief he or she has reached the correct taxpayer, no tax or other confidential information should be disclosed on the message.

  7. If the taxpayer indicates they will be faxing missing information/documentation or signature transfer the case to unit suspense, hold for up to 5 days. If the information is not received within the 5 days continue normal processing.

4.119.4.18.3  (10-01-2012)
Instructions Specific to Income/Issue Types

  1. The following instructions provide guidelines for working specific BMF-AUR issues.

  2. See IRM 4.119.4.4.5, Fraud Referral Program, for potential FRAUD referrals.

4.119.4.18.3.1  (10-01-2012)
Dividends

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    • The income in question was earned on an IRA, Keogh (HR-10), SEP, SIMPLE Plan, pension plan or profit sharing plan (including a 401(k) plan) or 403(b) plan

    • Dividend income is a nontaxable distribution

    • Income is from a CCF account

    • If an attachment states that the dividend income was received from a Domestic Corporation and was a licensee under the Small Business Investment Act

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    • Taxpayer’s explanation states that dividends were from a mutual savings bank and was reported as interest and it can be identified

    • Dividends qualified for a deduction under IRC 243 and IRC 245

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer indicates that a portion of the dividends qualify for a special deduction (ex: Form 1120, Schedule C).

4.119.4.18.3.2  (10-01-2012)
Interest

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    1. The income in question was earned on an IRA, Keogh (HR-10), SEP, SIMPLE Plan, pension plan or profit sharing plan (including a 401(k) plan) or 403(b) plan.

    2. The taxpayer is an attorney and states that the interest earned on an escrow account was paid to the Bar Association.

    3. They elected to report bond interest or discount on savings bonds each year as it accrued.

      Note:

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

    4. The taxpayer reported short-term OID/obligation each year as it accrued.

      Note:

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

    5. The income in question is from a municipal bond and is nontaxable.

    6. The income in question is accrued interest that was paid when the stock or bond was purchased.

    7. A lesser amount of interest was reported because the obligation was a short term OID/obligation.

    8. Income is from a CCF account.

    9. The taxpayer reported a lesser amount of interest as they amortized the premium. This treatment offsets the interest includable as income.

4.119.4.18.3.3  (10-01-2012)
Rental Income

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. The rent was reported on Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, Passive Activity Loss Limitations.

    2. The rent was reported on Form 8582, Passive Activity Loss Limitations.

    3. Taxpayer netted the Amount Type SECTION 179 DEDUCTION and reported the difference.


More Internal Revenue Manual