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Part 5. Collecting Process

Chapter 1. General Collecting Procedures

Section 12. Cases Requiring Special Handling

5.1.12  Cases Requiring Special Handling

5.1.12.1  (06-17-1999)
Cases Requiring Special Handling

  1. Section 5.1.12 provides instructions and guidelines for working accounts on income tax assessed against a child, household or agricultural employees, taxpayers located in high assault risk areas, child support obligations, self-employment tax liabilities of Amish taxpayers, taxpayers entitled to installment billing, reopening Examination cases, insolvent financial institutions, foreign insurance company delinquent accounts, non-petitioning spouse cases, penalty adjustments, political activity cases, probation cases, combined annual wage reporting cases, cases with math or clerical errors, transaction to prevent offset-in, service of U.S. Tax Court subpoenas, backup withholding and Indian Tribal Government.

5.1.12.2  (06-17-1999)
Income Tax Assessed Against a Child

  1. Any income tax assessed against a child, to the extent of the amount attributable to income included in the gross income of the child solely by reason of IRC 73(a), if not paid by the child shall be considered as having also been properly assessed against the parent. See IRC 6201(c) and related regulations.

  2. Area Directors and Campus Directors are not allowed to assess any amount of unpaid estimated tax required to be paid under IRC 6654 or 6655. Assessments must be based on tax returns rather than estimates.

5.1.12.3  (06-17-1999)
Cases Involving Household or Agricultural Employees

  1. In general, follow normal Bal Due processing to effect collection of the tax.

    Note:

    To help eliminate future delinquencies, individuals making personal contact with taxpayers should inform them of the provisions for voluntary withholding income tax from the wages of household and agricultural employees.

  2. If taxpayers choose to request that their employers withhold tax from their wages:

    1. assist them in preparing Form W–4, Employee’s Withholding Allowance Certificate, and

    2. furnish them with a copy of Circular E, Employer’s Tax Guide for delivery with Form W–4 to the employer

5.1.12.4  (06-17-1999)
Accounts on Taxpayers Located in High Assault Risk Areas (HARAs)

  1. To reduce the need for field contacts by Revenue Officers, use the following procedures for Examination assessments in HARAs:

    1. If Collection and Examination are in the same office and Examination cannot collect the balance due at the time of the audit, Collection personnel will attempt to secure an agreement for payment and levy sources.

    2. Collection personnel should be alert for HARA cases in which the proposed deficiency including accruals is less than Bal Due deferral. The campus will generate a notice to the taxpayer but no Bal Due will be issued.

    3. Input levy sources: Request that your manager create an ICS only case with pre-assessed balance due module(s) so levy sources will be available for cases which become Bal Due. Use Form 4844 for levy source input to the IDRS Account Number File (ANF). These levy sources may come from a Form 4966, Form 1902–E, or the interview described in (1)a. above. However, there should be no IDRS ANF input if the deficiency is below Bal Due deferral.

5.1.12.4.1  (06-17-1999)
Additional Guidelines on Cases in High Assault Risk Areas (HARAs)

  1. Process payments received prior to receipt of the Bal Due on Form 3244 . Use TC 640 DPC 99 to denote advance payment of determined deficiency.

  2. lRM 5.1.3, Potentially Dangerous Taxpayers describes measures which may help ensure the safety of Revenue Officers in high risk areas.

  3. Periodically rotate assignments on HARA cases.

  4. Collection employees who enter high risk areas should make themselves aware of instructions in IRM 5.1.3 for reporting forcible assault or threat of force..

5.1.12.5  (06-17-1999)
Cases Involving an "Innocent Spouse"

  1. IRM 25.15 Relief From Joint and Several Liability, Chapter 8, contains collection procedures for "innocent spouse " cases.

5.1.12.6  (06-17-1999)
Child Support Obligation Bal Due Accounts

  1. IRC 6305 provides for the assessment and collection of certified Child Support Obligations (CSO) in the same manner, with the same powers and limits (such as CSED) as if the amount was a tax imposed by Subtitle C (Employment Taxes). The following exceptions apply to CSO Bal Due accounts:

    1. Charge no interest or penalties.

    2. IRC 6334(a) Property Exempt from Levy, does not apply with respect to unemployment benefits and certain annuity and pension payments.

    3. Do not levy upon salary, wages or other income being withheld pursuant to a judgement for the support of minor children.

    4. Do not request waiver of a CSED. Instead, the child support agency must recertify the liability, which begins a new ten year period for collection.

  2. To meet code requirements, the Campus Accounting Branch will hold an account, in the case of a first assessment against an individual for a particular person(s), in Notice Status for 60 days after issuing notice and demand. Once issued, CSO Bal Due accounts are subject to immediate collection action by field Collection.

  3. See IRM 5.11, Notice of Levy.

5.1.12.6.1  (06-17-1999)
Compliance Services Collection Operations (CSCO)

  1. As new CSO certifications are received, but prior to assessing the liability, the Campus Accounting Branch will send them to CSCO for the Revenue Officer to review.

    If Then
    the certification appears to be in order return it to the accounting branch for assessment with a copy of IRM 5.1.12.5
    the certification is not in order return it to the approving area official of the Office of Child Support Enforcement (OSCE), Department of Health and Human Services with a cover memorandum explaining the reason for rejection. Send copies of the memorandum to the Campus Accounting Branch and to the Campus Disclosure Officer for information purposes.

  2. Bal Due accounts under this program will:

    1. reflect MFT 59, Tax Class 6

    2. bear the legend CSO, and

    3. have a copy of the certification sent to the Revenue Officer on a Form 3210 so that pertinent information secured by the state agency will be available for Revenue Officer use.

    Note:

    CSO Bal Due cases will be assigned directly to Revenue Officers.

  3. The Revenue Officer should ensure that a TC 130 has been input.

5.1.12.6.2  (06-17-1999)
Collection Procedures for CSOs

  1. These Bal Due cases will not be generated with a predicted grade level. Group Managers will review the cases for level of difficulty and will assign the cases accordingly.

  2. Follow normal field collection procedures in the collection of CSO Bal Due cases subject to the qualifications in IRM 5.1.12.5.1.

  3. Since the liability has been determined by a state court, the Service does not have abatement or compromise authority. Changes to the amount of liability must be initiated by the state of jurisdiction. To modify or cancel a previous application, the state must submit a Form OCSE 20, Application for the Collection of Delinquent Support Payments by the Internal Revenue Service, to the area OCSE office which will send the form OSCE 20 to the Internal Revenue Service.

  4. If, after contact with the taxpayer, it is determined that there is an obvious error in the assessment or the taxpayer produces evidence that he/she paid the respective state after the assessment was made:

    1. Cease further collection action,

    2. Contact the area OCSE representative whose name and telephone number are listed on the certification, and if this does not resolve the problem, then

    3. Contact the state representative whose name and telephone number also appear on the certification.

  5. States are to certify only cases with good collection potential. Review all state information forwarded with the certification for maximum collection potential.

  6. The Revenue Officer reporting a CSO Bal Due currently not collectible will schedule a mandatory follow-up at intervals of no less than two years unless the circumstances of a particular case indicate that such a review is unwarranted.

  7. If an agreement is made for regular payments, handle the account as a NMF installment agreement.

  8. If the account is transferred, the Revenue Officer will:

    1. Follow procedures for the transfer of NMF cases,

    2. Prepare a memorandum, to be routed through the Area Disclosure Officer, notifying the area OCSE official of the status of the case.

5.1.12.6.3  (06-17-1999)
Coordination With States on CSOs

  1. If the state intervenes after the case has been certified to Collection, i.e., subsequent state court action, etc., the Revenue Officer should, if necessary, contact the OCSE Area Representative, whose name and telephone number are shown on the certification.

  2. Occasionally, the state may request information on a particular case. Such requests will be handled by the Revenue Officer to whom the Bal Due is assigned.

    Caution:

    Exercise care so that nothing more than CSO information is disclosed. All responses will be forwarded to the Area Disclosure Officer for review and mailing.

  3. After a CSO case has been in the Revenue Officer’s inventory for 90 days, prepare a brief narrative outlining the present status. Route original to the state, through Disclosure Officer. Route copy to Area Director's office, through Territory Manager and Group Manager. Area offices will retain copies of these reports for possible Headquarters review. See IRM 11.3.33.

  4. The Revenue Officer will prepare Form 5482, Record of Disclosure (Privacy Act of 1974), each time a report is sent to the state agency. See IRM 11.2.19.3.

5.1.12.7  (06-17-1999)
Self-Employment Tax Liabilities of Amish Taxpayers

  1. IRC 1402(g) exempts members of certain religious faiths (e.g., Amish) from self-employment tax. To qualify, individuals must file Form 4029, Application for Exemption From Tax on Self-Employment Income and Waiver of Benefits

  2. An individual who had self-employment income from any taxable year ending prior to December 31,1967, was required to file Form 4029 no later than December 31, 1968. The application must have been filed on or before the return due date (including any extensions) for the first taxable year for which the person had self-employment income. However, if Form 4029 was not filed by that date, it still may have been timely filed on or before the last day of the third calendar month following the month the taxpayer was first notified in writing by the Service that an application for extension for exemption was not filed.

  3. Bal Due cases should not normally be issued for taxpayers who have an approved application for exemption. However, if it is determined that the taxpayer may qualify under IRC 1402(g), collection action will be suspended and the taxpayer should be contacted to determine if Form 4029 has been filed. If it has not been filed, a personal interview should be held with the taxpayer as soon as possible and the provisions of the law explained. Further action should be taken as provided in IRM 5.1.12.6(5)(a) below.

  4. If the Form 4029 has been filed, verify by reviewing Copy B or C of the form. If the copy is not available, request a check of the campus records for current status of the application.

    1. If the application was not approved, attempt to secure payment before proceeding with enforced collection action.

    2. If the application was approved, prepare Form 3870, Request for Adjustment, for abatement of the assessment.

    3. If the application is still pending and a reasonable time for processing has elapsed, using the address on the General Instructions for Form 4029, contact the Social Security Administration to determine the status of the application.

  5. Taxpayers claiming eligibility for the exemption, who have not filed Form 4029 should do so.

    1. If a Form 4029 is secured, a waiver (Form 900, Tax Collection Waiver) should not be secured even though expiration of the collection period is imminent. In these cases, if notification is not received from the Social Security Administration as to action taken on the Form 4029 before the statutory period for collection expires, the account may be reported as currently not collectable.

    2. The taxpayer should be notified in writing if there is no record of an application for exemption (see Exhibit 5.1.12-1, Pattern Letter P-295). A written notification is required in every case even though the taxpayer was personally advised or has indicated that the application will not be filed. Collection action should be suspended during the three month period allowed in the written notification for filing Form 4029.

    3. If the Form 4029 is received from the taxpayer within the specified period, forward it to the appropriate campus, Attention: Correspondence function, and hold the related Bal Due in abeyance pending action on the application.

    4. If Form 4029 is not filed by the taxpayer within the specified period, effort should be made to secure voluntary payment. If that fails, enforced collection may be taken within the limitations in IRM 5.11, Notice of Levy.

5.1.12.8  (03-01-2006)
Taxpayers Entitled to Installment Billing

  1. The Internal Revenue Code authorizes automatic installment billing for the following types of tax if certain conditions are met:

    1. Form 706, U.S. Estate Tax return, if the taxpayer fulfills conditions set forth in IRM 5.5.6, Estate Tax Installments.

    2. Form 1041, U.S. Fiduciary Income Tax return (For Estates and Trusts), if the return is timely filed and the taxpayer elects to pay equal amounts on the return due date and on the 15th day of the third, sixth, and ninth months following the return due date.

    3. Form 2290, Federal Use Tax Return on Highway Motor Vehicles, if the return is timely filed and the remittance (plus 10% or $1000, whichever is less) equals or exceeds one-fourth of the tax due for July, August and September; one-third of the tax due for October, November and December; or, one-half of the tax due for January, February and March, and the taxpayer pays the balance of the tax in equal quarterly installments;

      Note:

      For taxable periods beginning after 10/22/2004, the American Jobs Creation Act of 2004 repeals the installment election.

    4. ERTA Tax Straddles — Form 1040, U.S. Individual Income Tax Return, Election for Extension of Time for Payment. In accordance with the Economic Recovery Tax Act of 1981, if the election is made, the taxable gain for the year for regulated futures contracts is taxed at the rates in effect for 1982. In addition, the portion of the tax attributable to gain from prior years rolled forward into 1981 may be paid in equal annual installments over a period of up to 5 years. An election under this section and the first installment of the tax on the pre-1981 gain must be made on or before the due date of the taxpayer’s return for the tax year including June 23,1981.

  2. If there is an open Bal Due for the current tax year Form 706, 1041, 2290, or for an ERTA tax straddle case, and the taxpayer is current with installment payments, determine if the Master File has been updated to Status 14.

  3. If the status has not been updated, prepare Form 4844, Request for Terminal Action, and forward to Case Processing for input of TC 488 to reestablish installment status.

5.1.12.8.1  (06-17-1999)
Defaulted Deferred Payments on Straddled Contracts

  1. Prompt contact is essential as the collection statute is not extended when this method of payment is elected. Final demand is not made prior to issuance of this type of NMF Account. Collection Field employees must ensure that a Final Demand has been made.

  2. Contact the Campus Accounting Branch for verification, if the taxpayer contends that payment has been made.

  3. Notice of Federal Tax Lien, Form 668, may be filed except when the unpaid balance of assessment will reflect the missed installment(s) only.

  4. Interest will accrue on the unpaid installment. TC 340 must be used to prevent an erroneous refund of interest at case closure.

  5. If it is determined that the taxpayer is in bankruptcy or an insolvency proceeding is pending, notify the CSCO and Insolvency Support so that a proof of claim can be filed for the amount of the unpaid liability. The Campus Accounting Branch must also be notified.

5.1.12.9  (03-01-2006)
Requests for Audit Reconsideration

  1. Treasury Regulation 301.6404–1 provides that the Area Director or the director of the campus may abate any assessment, or unpaid portion thereof, if:

    1. the assessment is in excess of the correct tax liability,

    2. the assessment is made subsequent to the expiration of the applicable period of limitations, or

    3. the assessment has been erroneously or illegally made.

  2. Directors should use their discretionary authority in determining whether tax assessments involving frivolous filers and taxpayers with a history of repeatedly ignoring statutory notices are to be reconsidered. Reconsideration will be based upon the facts and circumstances of the case.

  3. When exercising this discretionary authority, Service employees should consider the need and opportunity to bring noncompliant taxpayers into compliance.

  4. Abatement requests will not be considered if:

    1. the assessment was made as a result of a closing agreement under Section 7121 of the Internal Revenue Code or in which the tax liability was compromised under Section 7122 of the Internal Revenue Code;

    2. the assessment was made after final TEFRA administrative proceedings;

    3. the assessment was made as a result of the taxpayer entering into agreement on Form 870–AD, Offer of Waiver of Restrictions on Assessments and Collection of Deficiency in Tax of Acceptance of Overpayment;

    4. the assessment results from a final order of the United States Tax Court or other court.

  5. No claim for abatement may be filed with respect to income, estate, or gift tax.

5.1.12.9.1  (03-01-2006)
Requests for Reconsideration

  1. These procedures provide instructions for processing taxpayer requests for audit reconsideration. These procedures only apply to cases that are not fully paid. Cases paid in full are claims and should follow regular claim procedures. These procedures do not apply to requests for abatement of interest for ministerial or managerial delay under IRC Section 6404(e)(1). The responsibilities and procedures are directed at ensuring the amount of assessed tax is correct.

  2. Audit Reconsiderations are used:

    1. To reevaluate the results of a prior audit when a taxpayer disagrees with the original determination by providing information that was not previously considered during the original examination, or

    2. When the taxpayer contests an ASFR/SFR determination by filing an original delinquent return and the assessment remains unpaid or, as a result of the assessment, the tax credit is reversed.

  3. There are several reasons why a taxpayer might request audit reconsideration. For example, the taxpayer:

    1. Did not appear for the audit;

    2. Moved and did not receive the IRS correspondence;

    3. Disagrees with an assessment from an audit of their return and has additional information to be considered;

    4. Disagrees with an assessment created under the authority of Internal Revenue Code 6020 (b) (ASFR/SFR);

    5. Has been denied tax credits such as EITC claimed, during a prior examination.

  4. When taxpayer states a deficiency has been incorrectly assessed,

    1. Advise taxpayer that request must be in writing and

    2. Provide taxpayer with Publication 3598, ″What You Should Know About The Audit Reconsideration Process″.

  5. Prepare Form 3870, Request for Adjustment and identify it as " Taxpayer’s Request for Audit Reconsideration" .

    1. Attach a copy of the taxpayer’s request or original return and documentation to the form. Retain copies of Form 3870, a copy of the return or request, and all supporting documentation with the Collection case file. Request the input of TC 470cc90 to suspend collection on amounts reconsidered.

    2. Address potential statute issues before requesting the TC 470 cc 90 input.

  6. If the taxpayer filed a return for the period in question, advise the taxpayer to include the following in their request:

    1. A written request or amended return which identifies the prior examination issue(s) and the reason for the abatement request;

    2. The examination report Form 4549, Income Tax Examination Changes or Form 1902-B, Report of Individual Tax Examination Changes. If he does not have a copy, note your efforts on Form 3870 and forward your package without the original return.;

    3. Documents supporting their position.

  7. If the taxpayer never filed a return and Bal Due is the result of an SFR, request they file an original delinquent return. Review the taxpayer's substantiation and determine if it is sufficient to allow the Service to consider abatement of the previous assessment.

  8. For SFR assessments where an original return has now been secured:

    1. Prepare Form 3870, Request for Adjustment, and identify it as" Taxpayer’s Request for Reconsideration of SFR Deficiency Assessment " . .

    2. Attach a copy of the taxpayer's request or attach the original date stamped return and documentation.

    3. Retain copies of Form 3870, a copy of the return or request, and all supporting documentation with the Collection case file.

    4. Request the input of TC 470 cc90 to suspend collection on amounts reconsidered..

  9. To prepare a Form 3870, Request for Adjustment, identified as Taxpayer's Request for Reconsideration:

    1. Complete a separate Form 3870 for each tax period needing an adjustment.

    2. You may photocopy like information for multiple periods.

    3. TC 470 with closing code 90 must be indicated for balance due modules which will be full paid by the adjustment action.

    4. Complete Section 18 - briefly explain the reason for the request. This must be precise and legible. If interest or penalty is restricted, the interest and /or penalty adjustment must be manually computed; indicate the date to which the interest is computed (attach your computations).

    5. Complete Section 19 - sign and include phone number and FAX. The Centralized Reconciliation Unit (CRU) can contact the Revenue Officer in the event the Form 3870 cannot be processed prior to rejecting the request.

    6. State why the taxpayer should receive an audit reconsideration (i.e. no notice of audit received, hardship, taxpayer has evidence to prove he does not owe the tax assessed, etc.)

    7. Include the taxpayer's home and, if applicable, daytime telephone number.

    8. If the adjustment creates a credit balance, the Form 3870 must indicate whether it is to be applied or refunded.

    9. All supporting documentation to substantiate the request must be attached behind the Form 3870.

    10. A Collection Group Manager, as well as an Examination Group Manager must sign off on a Audit Reconsideration request before processing. Exam will process the request in accordance with IRM 4.1.4.27.1

    11. Retain a copy of Form 3870 and all supporting documentation with the Collection case file.

  10. Required attachments to Form 3870:

    1. Original return and audit papers. If unsuccessful in securing the original return and audit papers from the taxpayer, note your efforts on Form 3870 and forward your package without the original return.

    2. Current transcript or TXMOD.

    3. All substantiating documents relating to taxpayer's claim. If voluminous, review and return to the taxpayer for safekeeping. State on the Form that the documents have been reviewed and the taxpayer is holding them. Advise the taxpayer they must present all substantiation at the time of examination.

    4. Copy of Power of Attorney, if applicable.

  11. Determine the function responsible for the TC 290 or TC 300 assessment and forward the complete Form 3870 reconsideration package with Form 3210, Document Transmittal to them, as follows:

    • AUTOMATED SUBSTITUTE FOR RETURN (ASFR)- If the reconsideration issue is ONLY filing status or number of exemptions, the Revenue Officer, after verification, will adjust the module by completing the 3870, secure managerial approval, and process the 3870 adjustment to reduce the assessment

    • AUTOMATED SUBSTITUTE FOR RETURN (ASFR)-
      - TC Dummy 150 (TC 150 $0) present
      - TC 494
      - TC 495
      - TC 290 (assessment with DLN blocking series (9th - 11th digits) of 540-549 or 640-649)
      - TC 599 cc88
      If there is a Schedule C, E, F, or Forms 2106 or 2555 attached to the original return, route 3870 reconsideration package to:ASFR - Recon Operation, 1040 Waverly Avenue, Holtsville, NY 11742-9013Campus
      If there is NO Schedule C, E, F, or Forms 2106 or 2555 attached to the original return, route 3870 reconsideration package to:ASFR Unit Stop 81404, P. O. Box 24015, Fresno, CA 93779

    • SUBSTITUTE FOR RETURN FOR REVENUE OFFICERS (SFR FOR RO)-
      - TC Dummy 150 (TC 150 $0) present
      - TC 595
      - TC 420
      - TC 290/300 (assessment with DLN blocking series (1st two digits)49
      - TC 424
      Route 3870 reconsideration package to Examination Operations at the Memphis Campus, P. O. Box 30086 Stop 8223M, Memphis, TN 38130-0086

    • UNDERREPORTER (AUR)-
      - Assessment is a TC 290 preceded by a TC 922.
      Route reconsideration requests to originating AUR function to be worked. See IRM Exhibit 4.13.7-3 and -4.

    • CAMPUS & AREA OFFICE EXAMINATION-
      - TC Dummy 150 (TC 150 $0) present
      - TC 595
      - TC 420
      - TC 300 assessment
      - TC 424
      Examine DLN blocking series 1st two digits for source of assessment to be sent to that campus.
      Route reconsideration requests where an Area or District Office made the assessment to the SB/SE Campus based on back end state mapping. See IRM Exhibits 4.13.7-3 a and -4 to determine appropriate Campus and 4.13.7-4 for Campus CRU address.

    • APPEALS OFFICE-
      - TC 300 assessment preceded by another TC 300 with a zero dollar ($0.00) amount, closing the case from Examination to Appeals.
      Send the request to the Appeals Office that closed the case, identified by a three digit Appeals Office (APPL-CD. 1XX or 2XX) next to the 2nd TC 300 (Appeals assessment). See Document 6209 for Appeals Office codes.

  12. Secure payment or installment agreement for any deficiency not being reconsidered. Secure levy sources for future collection. Identify on the Form 3870 if a Federal Tax Lien has been filed. Suspend collection on the amount being considered.

  13. Advise the taxpayer that failure to respond to or cooperate with the examiner will result in the case being returned to Collection to resume collection action. No further consideration will then be given to the abatement request until the tax is paid in full.

  14. Advise taxpayer of where you sent the request for audit reconsideration, using Letter 2727(P) (Exhibit 5.1.12- 5)

  15. Appeal Rights -

    1. An appeal will be given, if requested, when the taxpayer is accepted for reconsideration, and the result of the reconsideration is that the taxpayer's request is disallowed in full or in part.

    2. An appeal will not be given if : Taxpayer is accepted for reconsideration but does not show up for the appointment, or does not respond to the appointment letter, or Is not accepted for reconsideration.

    3. If taxpayer disputes the audit reconsideration determination without an appeals conference, he must pay the full amount due and file a claim with the Service. A claim for refund must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid whichever expires later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.

5.1.12.9.2  (06-17-1999)
Premature Assessments in Tax Court Cases

  1. A notice account or Bal Due may be generated even though the taxpayer filed a timely Tax Court petition.

  2. If the taxpayer maintains that the deficiency is still being considered by the Tax Court, contact the responsible Appeals office and determine if the assessment was made prematurely.

  3. If the assessment is premature, request input of TC 470, CC90 and send the Bal Due or notice to closed files. Appeals is responsible for abating the premature assessment.

  4. If part of the assessment is correct, pursue collection of that portion only. Collection will not attempt to collect any deficiency which is still before the Tax Court.

5.1.12.9.3  (06-17-1999)
Other Cases Reopened by Examination

  1. If Examination initiates a reopening of a case and believes collection should be suspended, the PSP Support Manager will notify the Collection Territory Manager of the specific tax periods to be suspended. If the Field Territory Manager concurs, the Revenue Officer will request input of TC 470 with a CC 90 for the periods specified in the agreement. Bal Due cases closed using this procedure will be placed in closed files. Any related accounts not covered in the agreement remain assigned to the Revenue Officer.

  2. When a Revenue Officer learns of examination activity on a case in their assigned inventory, they should contact the Field Territory Manager to determine the anticipated outcome of the examination. If the revenue agent expects to reduce the liability on any period to zero, secure a copy of the agent’s report and secure Examination concurrence on a request for TC 470, CC 90, for the period(s) involved. Otherwise, collection should continue.

5.1.12.10  (06-17-1999)
Insolvent Financial Institutions — Provisions of the IRS-RTC/FDIC Agreement

  1. The Service has an agreement with the Resolution Trust Corporation (RTC) regarding liabilities of financial institutions under RTC control. The Federal Deposit Insurance Corporation (FDIC) is the successor to RTC in this agreement.

  2. This agreement provides that the Service will not pursue collection of income tax liabilities of the institution if the RTC/FDIC certifies that payment would ultimately increase the Treasury funds needed to pay depositors. This provision applies to:

    1. liabilities of the institution and its subsidiaries filing a consolidated return with it;

    2. the institution’s liability for a parent’s consolidated income tax.

  3. The agreement does not affect collection from other assets of the parent or its non-RTC/FDIC controlled subsidiaries.

  4. The agreement does not affect collection from institutions under control for which certification cannot be provided under the original RTC/IRS interagency agreement.

5.1.12.10.1  (06-17-1999)
General Procedures

  1. If you become aware of RTC/FDIC involvement with a taxpayer, contact Technical Services to ensure they are aware of the proceeding. Provide any additional information requested by Technical Services.

  2. Before taking any other action on these cases, review the following IRM sections as appropriate:

    1. IRM 5.12, Liens, before filing a notice of lien;

    2. IRM 5.11, Notice of Levy, before issuing a levy;

5.1.12.11  (06-17-1999)
Foreign Insurance Company Delinquent Accounts

  1. The Internal Revenue Service occasionally enters into agreements with foreign insurance companies. One of the conditions of these agreements is that the insurance company provide a clean, irrevocable letter of credit to be held by the Area Director.

  2. If a area office receives a Bal Due on Form 720, Quarterly Federal Excise Tax Return abstract number 30, for a foreign insurance company, contact the Director, International SBSE:IN:D:C:SS at 202–874–1348 to determine if a letter of credit is being held.

5.1.12.12  (03-01-2006)
Non-Petitioning Spouse Cases

  1. Separate IMF Bal Due cases (MFT 31) will be issued when one spouse files a U.S. Tax Court petition on a joint return deficiency and the other spouse agrees or takes no appeal action.

  2. The campus will:

    1. notate Bal Due and Del Ret accounts" Non-Petitioning Spouse" and "Petitioning Spouse"

    2. notate on the Bal Due and Del Ret accounts two areas, if two areas are involved

  3. Revenue Officers assigned these cases will contact any other area involved to determine if any collections have been made.

  4. Collection of liability from either spouse requires a corresponding abatement of the other spouse's liability.

5.1.12.12.1  (06-17-1999)
Requesting Abatement

  1. Adjustment documents for abatement requests on a non-petitioning spouse whose liability is being abated in full, must include the following:

    1. enter "N" after the taxpayer’s social security number

    2. request STAUP STATUS 89

    3. request input of account into STATUS 12 when the abatement has been completed

    4. attach a TXMOD from both spouse’s accounts

    5. attach IDRS COMPA showing that all tax, penalties and interest have been paid

5.1.12.12.2  (06-17-1999)
Additional Assessments

  1. Additional assessments made as a result of a Tax Court decision may not be added to the non-petitioning spouse’s account. Consult Counsel if questions arise regarding correct amounts to be collected if a split payment situation occurs.

  2. Attach a copy of tax court decisions for all adjustments to Form 3870, Request for Adjustment.

5.1.12.13  (06-17-1999)
Penalty Adjustments

  1. Adjusting penalties is the responsibility of Area Office and ACS personnel for the following:

    1. processing claims for abatement of penalties relating to Bal Due accounts in open or closed IDRS status

    2. Del Rets secured by the Area Office or ACS call site and cases where taxpayers request a personal contact

    3. abatement of penalty requests in the above categories received by a campus from a taxpayer (these requests will be forwarded to the Area Office by the campus).

5.1.12.14  (06-17-1999)
Bal Due Political Activity Cases

  1. Filing requirements for political organizations (committees, party, fund, etc. ) for tax years beginning January 1, 1975, were established in Public Law 93–625 (see IRC 527).

  2. Political organizations must file Form 1120 POL, U.S. Income Tax Return of Certain Political Organizations, only if taxable income is over $100.

5.1.12.14.1  (06-17-1999)
"G" Coded Taxpayers

  1. Recognize that "G" coded taxpayers frequently are temporary entities established during political campaigns. Transferee situations may arise.

  2. Process "G" coded accounts routinely, and conduct full compliance checks especially on periods not reflected on the "G" coded account.

5.1.12.15  (06-17-1999)
Probation Cases

  1. Following conviction for a criminal tax violation, the taxpayer will be sentenced. The sentence may include probation with specific conditions to be met by the taxpayer during a specified time period..

  2. Bal Due accounts subject to conditions of probation are controlled by TC 910 and a "–T" freeze. TC 910 appears only in the entity section of ACTRA. A "–T" freeze appears on SUMRY and TXMOD.

  3. Bal Due accounts should be prominently marked "Probation Case."

    If And Then
    A probation case is identified A copy of the probation memorandum is not attached Technical Services will be contacted for the conditions and length of probation

    If Then
    There are questions concerning the handling of these cases Technical Services will be contacted

  4. After review, Technical Services will refer the matter to the Criminal Investigation function, for appropriate action.

    If Then
    The taxpayer does not comply with the conditions of probation The Revenue Officer will advise Technical Services by memorandum, and provide a summary of the collection history and circumstances of non-compliance.

  5. Revenue Officers will report the method of disposition of Probation Bal Due accounts to Technical Services by memorandum. In addition, where a liability has not been fully satisfied 180 days prior to expiration of the probationary period, Technical Services must report to the Criminal Investigation function, payments made by the taxpayer and the extent and results of any collection action. In such cases, Revenue Officers will provide this information to Technical Services at least 195 days prior to the expiration of the probationary period.

  6. IRC 6103(h)(4) allows certain disclosures to a U.S. Probation Officer. Prior to any such disclosure, the extent of the disclosure, if any, will be coordinated with the appropriate Disclosure Officer. See IRM 11.3.22.

  7. Failure to comply with the terms of probation will be reported by the Criminal Investigation function, to counsel or the U.S. Attorney.

5.1.12.16  (06-17-1999)
Combined Annual Wage Reporting (CAWR) Cases