5.1.11  Delinquent Return Investigations

Manual Transmittal

April 23, 2014


(1) This transmits a complete revision of IRM 5.1.11, Field Collection Procedures, Delinquent Return Investigations.

Material Changes

(1) IRM deleted - SUPOL no longer available. Subsequent sub subsections renumbered.

(2) New added for new "FRAUDULENT EIN" indicator on IRPTR.

(3) IRM added for taxpayers who are victims of identity theft.

(4) IRM, Frivolous Nonfilers, expanded.

(5) IRM added for cross reference to IRM, Revenue Officers and Insolvency for additional responsibilities when a Del Ret taxpayer files bankruptcy.

(6) Reference to new IRM, IRS Employee Referrals, added to exception at IRM

(7) IRM updated.

(8) New IRM, Taxpayers Who Are Federal Contractors, added.

(9) IRM b. updated to reflect current number of IRP documents for an ASFR referral.

(10) Exception added at IRM to incorporate interim guidance, International Del Ret Meeting ASFR Referral Criteria.

(11) Address updated at IRM

(12) IRM updated to add e. for an International Del Ret as ineligible for referral to ASFR.

(13) IRM a. updated to reflect current number of IRP documents for an ASFR referral.

(14) New IRM, IRS Employee Referrals, added.

(15) IRM updated for Employment Tax Program examiners determining the employer liable for employment taxes in a third-party payer arrangement.

(16) IRM updated to not ask for taxpayer records when how the taxpayer is treating individuals performing services is questioned.

(17) IRM updated for current Delegation Order 5-2 (Rev. 2).

(18) Note added at IRM about taxpayer payroll records.

(19) Previous IRM deleted and subsequent entries renumbered.

(20) Note: at IRM revised to list the forms for which CCP will perform the IRC 6020(b) clerical and review process.

(21) "the taxpayer's records" deleted at as a source used to determine the amounts of wages paid, etc.

(22) IRM deleted, the basis for assessment is documented in the ICS history when the returns are initiated under IRC 6020(b).

(23) Note added at IRM that dated, IRC 6020(b) returns with the electronic signature will be processed.

(24) Table in IRM updated to correct steps to create a manual Del Ret in special circumstances.

(25) Editorial changes and link updates made throughout.

Effect on Other Documents

This material supersedes IRM 5.1.11, dated March 13, 2013. This IRM incorporates Collection Interim Guidance Memorandum SBSE-05-1013-0078, Reissuance of Interim Guidance: International Cases Meeting ASFR Referral Criteria dated October 31, 2013.


SB/SE Collection

Effective Date


Dretha Barham
Director, Collection Policy
Small Business/Self-Employed  (06-02-2004)
Return Delinquency Program

  1. Achieving full compliance is the goal of the Return Delinquency Program, including securing full payment of the tax liability with the delinquent return. Cases created by the Return Delinquency Program are worked in most functions of the Service. Delinquent return cases are created when a return is not filed by the program completion date (PCD) for Campus processing of timely filed returns. Delinquency checks are run against the Master File shortly after the PCD to identify individual and business taxpayers who have not filed their returns.  (01-15-2010)
Case Creation and Notice Issuance

  1. There are two types of delinquency checks for individuals. Case creation uses information obtained from both delinquency checks in the Case Creation Nonfiler Identification Program (CCNIP).

  2. The CCNIP identifies individual taxpayers from:

    • Those who filed an individual income tax return the previous year, but failed to file a current return.

    • Taxpayers for whom IRS received third party Information Returns Program (IRP) documents such as Form W-2 and Form 1099. The IMF delinquency checks using IRP are generally run 10 months after the due date of the return.

  3. The BMF case creation program identifies business taxpayers who have an open filing requirement for a return that is not filed. BMF delinquency checks are made 16 weeks after the due date of each return and tax period.

  4. The BMF delinquency check assimilates third party information (CAWR data, 1099 IRP, and Payer Master File Processing) in the case creation program to identify productive BMF nonfiler cases. This process is known as the Business Masterfile Case Creation Nonfiler Identification Process (BMF CCNIP).  (06-02-2004)
Taxpayer Delinquency Investigations (TDI/Del Ret)

  1. Nonfilers generally receive one or two notices about their delinquent return. When the taxpayer fails to resolve the delinquency during the notice process, a delinquent return (Del Ret) module is generated and assigned an Inventory Delivery System (IDS) case prioritization code that determines where it will be assigned.

  2. You must investigate all unresolved previous and subsequent tax periods when a Del Ret module is issued on a taxpayer for a specific tax period. The goal of your investigation is to bring the taxpayer into full filing and paying compliance.

  3. Del Ret cases are worked as a standalone investigation or in combination with a balance due (Bal Due) account or other investigation (OI). The latter is referred to as a "combo case."  (11-29-2011)
Initial Analysis

  1. Review the complete case history when a Del Ret case is first assigned to you. In addition to the case history, several research tools are available on IDRS and CFOL to help in the initial analysis of your case. The Initial Analysis Tool (IAT) is also a useful tool for verifying compliance. Document the following during your initial analysis:

    • All filing requirements

    • All filing and payment compliance issues

    • A plan of action to resolve the case


    For a Form 1120 series filing requirement, check ICS Entity Detail to determine which form the taxpayer is liable to file.  (06-02-2004)
IDRS/CFOL Command Codes (CC)

  1. Use IDRS/CFOL command codes to determine the types of tax and the periods for which the taxpayer may be liable. CFOL command codes are available even when IDRS is unavailable. See the IDRS Command Codes Job Aid for command code display screens and field definitions at http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/command-code.dr/idrs_command_codes_job_aid.htm

  2. Refer to IRM 2.3, IDRS Terminal Responses, for a complete command code list with definitions.

  3. Consider researching the following IDRS command codes:

    • ENMOD

    • NAMES

    • NAMEE

    • SUMRY

    • TXMOD

    • TDINQ

  4. Helpful CFOL command codes are as follows:

    • INOLE

    • BMFOL

    • IMFOL

    • RTVUE

    • BRTVU

    • IRPTR  (04-23-2014)
Command Code IRPTR

  1. Command Code (CC) IRPTR (Information Returns Processing Transcript Requests) allows IDRS users to request either on-line or hardcopy Information Returns Processing (IRP) transcripts from the Information Returns Master File (IRMF).

  2. CC IRPTR can be used to request data, either online or hardcopy transcripts, for a particular Payee (online or Hardcopy) or Payer (Hardcopy only) using Taxpayer Identification Number (TIN) along with one or more Tax Years (TY).

  3. Use IRPTR to request a particular Payee or Payer Taxpayer Identification Number (TIN) for up to six prior tax years.

  4. Valid IRPTR definers are shown below:

    • "E" Payee hardcopy (paper) transcript request

    • "H" Initial help screen

    • "J" Payee nonfiler summary request

    • "L" Summary request IRPOL

    • "O" Payee online transcript request

    • "R" Payer hardcopy transcript request

    • "W" Payee online sanitized transcript request

  5. Hardcopy transcripts have a scheduled shipping date and requests are processed every Wednesday at noon EST. Allow up to 1 to 2 weeks from shipping date for receipt. Contact your distribution center for the status of your transcripts.

  6. Beginning with tax year 2013, "FRAUDULENT EIN" appearing on BMF income documents on IRPTR indicates the EIN was obtained using fabricated business information. Do not use these documents to verify information reported on tax returns. If a current year income document is marked, then consider all previous year income documents to be fraudulent.

  7. For further details on CC IRPTR, see IRM 2.3.35,Command Code IRPTR.  (04-23-2014)
IRP Selection Criteria Codes

  1. The Selection Code is a two-digit code indicating the criteria for creation of the Del Ret.

    1. IRP Selection Criteria Codes are defined in Document 6209, Section 11. 7.

    2. The IMF Del Ret Selection Code is found on the ICS Del Ret Module Summary screen.

    3. The BMF CCNIP Selection Code is found in the TXMOD "MASTER FILE HISTORY SECTION" (CCNIP-SELECT-CD); it identifies the specific third party source data used to determine whether the taxpayer may be liable to file. The criteria for BMF Selection Codes are in Document 6209, Section 11.7.8.  (04-23-2014)
State Reverse File Matching Initiative (SRFMI)

  1. SRFMI data on IRPTR is provided by participating state agencies for taxpayers who,

    1. Filed a state tax return, but have not filed a federal tax return

    2. Reported higher amounts on a state return than on the federal return

  2. SRFMI documents are identified as such on IRPTR at the top and bottom of the screen.

  3. The SRFMI Document code fields on IRPTR are as follows:

    1. Doc code 30 - wages, taxable interest, business income, capital gain/loss., etc., reported on the state individual income tax return

    2. Doc code 33 - gross receipts, compensation of officers, salary and wages paid, etc., reported on the state corporate tax return

    3. Doc code 34 - state wages and state income tax withheld reported on the state withholding tax return

    4. Doc code 35 - gross sales and services, taxable sales and services, etc., reported on the state sales, service or transaction information return  (04-23-2014)
Taxpayer Contact

  1. Attempt initial contact with the taxpayer at the taxpayer’s residence or place of business in accordance with guidelines and procedures set forth in IRM 5.1.10,Taxpayer Contacts. Observe the following during a field contact:

    • Taxpayer’s standard of living

    • Filing requirements

    • Assets

    • Number of employees

    • Type of business, e.g., construction, sales, consulting

    • Potential income sources and amounts

    • Potential expenses and exemptions, and

    • Other pertinent information that will help determine potential liability and collection potential


    IRC 7602(e) prohibits the Service from using financial status or economic reality techniques to determine if the taxpayer received unreported income, absent a "reasonable indication" that there is a likelihood of such unreported income.

  2. Contact third parties if the Del Ret is not resolved during initial contact. The field investigation should include contacts with third parties (e.g., neighbors, business associates, employers, financial institutions) as necessary to resolve the Del Ret through other means. Always follow the Service’s third party contact procedures for advising the taxpayer that third parties may be contacted and for keeping a record of such contacts. See IRM,Third Party Contacts, for further guidance.

  3. Document your case history with all contacts and appropriate cross-reference information. Local management may provide additional tools for ensuring proper documentation of these actions. Provide a cross-reference in the case history so that the information can be readily located.

  4. Tax Examiners working Field Collection corporate inventory are not required to make contact in the field with the taxpayer or representative. If a liability determination cannot be made using internal or external data, then the Del Ret can be returned to the Queue. Internal and external data includes data obtained:

    • Online

    • By phone

    • Through the mail, or

    • By interviewing the taxpayer in the office

  5. When the taxpayer states he or she is the victim of identity theft, follow the guidelines in IRM, Identity Theft, for standard documentation requirements and case resolution procedures.  (06-02-2004)
Taxpayer Rights

  1. Observe taxpayer rights when conducting delinquency investigations.

  2. Verify at first contact that the taxpayer has received Publication 1, Your Rights as a Taxpayer. If first contact is by telephone and the taxpayer has not received a copy of the publication, the interview may continue; however, Publication 1 should be sent to the taxpayer.

  3. Document the case history that the taxpayer has been provided Publication 1 and any questions the taxpayer had were answered.  (03-13-2013)
Taxpayer Interviews

  1. Give taxpayers who reach an impasse during an interview an opportunity to meet with the supervisory official. Advise taxpayers of their appeal rights even if they do not request a higher level of review.

  2. The taxpayer may be represented during a taxpayer interview by any of the following who is not disbarred or suspended from practice before the Service, and has a properly executed power of attorney from the taxpayer:

    • Attorney

    • Certified public accountant

    • Enrolled agent

    • Full-time employee of the taxpayer

    • Immediate family member

    • Or other person permitted to represent a taxpayer before the Service.


    If a taxpayer does not have a representative, they may be eligible for assistance from a Low Income Taxpayer Clinic (LITC). For LITC eligibility guidelines see IRS Pub 4134, Low Income Taxpayer Clinic List


  3. Suspend an interview if the taxpayer clearly indicates that he/she wishes to consult with a representative.

  4. Serve a collection summons if you believe the taxpayer abuses this process through repeated delays or suspensions of interviews. Document the reasons for non-issuance in such circumstances.


    Absent a summons, the taxpayer cannot be required to accompany the representative to the interview.

  5. Notify the taxpayer if you believe the representative is responsible for unreasonable delay or hindrance. Request that the taxpayer appear for an interview and inform the taxpayer that a collection summons requiring the taxpayer’s appearance at an interview may be issued. Refer to IRM,By-passing a Taxpayer's Representative, for more information and by-pass procedures

  6. When appropriate, continue with IRC 6020(b) procedures or referrals to Examination or Criminal Investigation while addressing delays by the taxpayer’s representative.  (06-02-2004)
Full Compliance Check

  1. Determine and document whether all returns are filed and paid during initial contact. A full compliance check will include, as appropriate, reference to the following:

    1. All required IMF and BMF returns including information returns

    2. Timely payment of estimated taxes and federal tax deposits

    3. Timely submission of Forms 1099

    4. Employer's retention and submission of Form W-4

  2. Determine and document the root cause for the tax delinquency and instruct the taxpayer to take the necessary corrective steps.  (01-15-2010)
Documentation of Compliance

  1. Confirm all tax periods are filed for the preceding six-year period and secure a copy of the taxpayer's return if necessary. Check compliance through the current tax period including periods previously closed as surveyed or shelved. List all delinquent tax periods and determine the taxpayer’s compliance with other types of taxes appropriate for their personal or business activity.

  2. Document full compliance again after initial contact and periodically as the case progresses, particularly when closing the delinquent return investigation. The ICS history picklist "Full Compliance Check" can be used for compliance documentation.

  3. Document payment compliance for returns secured with a pre-assessment collection determination.  (08-15-2001)
Unable to Locate

  1. Use all reasonable efforts to locate the taxpayer before closing the case as unable to locate. See IRM 5.1.18,Locating Taxpayers and Their Assets, for appropriate locator sources. Asset and IRP research may also provide helpful information for locating a taxpayer. See IRM, if assets and/or levy sources are located for an unable to locate/contact taxpayer.

  2. Group manager approval is required for unable to locate/contact closures.  (08-15-2001)
Cases Requiring Special Handling

  1. Use special processing guidelines when working cases of a unique, sensitive or complex nature. For example, taxpayers who

    • Are potentially dangerous

    • Use frivolous legal arguments to delay collection

    • Are under investigation for potential tax fraud

    • Are in bankruptcy

    Special processing guidelines may apply to cases worked under Compliance Initiative Projects (CIP). See IRM  (05-27-1999)
Restricting Field Contact (PDT/Frivolous Legal Arguments)

  1. Avoid field contact, if possible, when working cases on potentially dangerous taxpayers and taxpayers who use frivolous legal arguments to delay collection. Use field contact only after office methods, such as correspondence, telephone contact, and office appointments, have proven unsuccessful. See IRM,Armed Escort to Contact a Taxpayer, for armed escort procedures.  ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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Frivolous Nonfilers

  1. Frivolous nonfilers are taxpayers who refuse to file or who file non-processable returns based on arguments not supported by tax law. Review Policy Statement 5–133, at IRM, and follow the appropriate actions specified in IRM, to secure a delinquent return when working frivolous nonfiler cases.

  2. If you determine that a taxpayer has submitted a tax return (original or amended) taking a frivolous position, stamp the return with the date received. Do not send the return to Submission Processing. Instead, send the complete original or amended return with all attachments, including the envelope, to the Frivolous Return Program (FRP) unit address below. Maintain a copy of the return in the case file.

    Internal Revenue Service

    Frivolous Return Program

    1973 N. Rulon White Blvd.

    M/S 4450

    Ogden, Utah 84404


    For frivolous returns received on ATAT cases, refer to IRM 5.20.10, Abusive Tax Avoidance Transactions, Identification and Processing of Frivolous Documents.

  3. IRC 6702(a) provides that a person who files a purported tax return (original or amended) based on one or more positions the IRS has identified as frivolous under IRC 6702(c) will be subject to a penalty of $5,000, if the return,

    1. Does not contain information on which the substantial correctness of the return can be judged, or

    2. Contains information that on its face indicates that the self-assessment is substantially incorrect

    See Notice 2010-33, 2010-17 I.R.B. 609 for positions the IRS has identified as frivolous.

  4. The penalty may also be assessed if the purported return is not based on a position listed in Notice 2010–33, but it meets either a) or b) immediately above and reflects a desire to delay or impede tax administration.

  5. The IRC 6702 penalty is assessed by the FRP unit at the Ogden Compliance Services Campus.

  6. The FRP unit mails a Letter 3176, Response to Frivolous Documents/Returns Received from Taxpayers, along with Publication 2105, Why do I have to Pay Taxes? to the taxpayer informing them of the frivolous argument and requesting they rescind their position and submit any non-filed returns. The FRP unit will monitor for a response from the taxpayer.

  7. Monitor IDRS for assessment of the IRC 6702(a) penalty (TC 240, PRN 666). If there is no assessment after ten weeks, contact the Ogden Compliance Service Center FRP Coordinator to determine the status. Locate the coordinator on the FRP website at http://mysbse.web.irs.gov/AboutSBSE/aboutccs/ccsprog/frp/contacts/17538.aspx

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Exempt Organizations

  1. Refer a case to Examination on Form 5666, TE/GE Referral Information Report, if the following occurs:

    1. The organization claims to be a church, religious order, or affiliate of a church and no ruling or determination letter is available. Secure a written statement from a responsible officer that the organization is exempt from filing information returns under IRC 6033(a).

    2. The organization has a ruling or determination letter that it is a Private Foundation, but fails to file Form 990–PF or it claims not to be a private foundation.

    3. The organization claims it is only subject to file Form 990-N or otherwise not required to file Form 990, but gross receipts are normally greater than the amount on this page http://www.irs.gov/Charities-&-Non-Profits/Annual-Electronic-Filing-Requirement-for-Small-Exempt-Organizations-Form-990-N-(e-Postcard)

    4. The organization claims it is no longer in existence, and there is either,
      • No articles of dissolution or resolution of dissolution
      • No final return, or
      • No record of final disposition of assets

    5. If a person or entity claims the Del Ret organization has merged with another organization, then note the name and EIN of the surviving organization as well as the merger details. There should be Articles of Merger or a similar document.

    6. The organization claims to be an instrumentality or governmental unit, its status is questionable, and there is no ruling or determination letter about its governmental status or the exclusion of income under IRC 115.

    7. The organization claims to be a subordinate in a group exemption ruling (e.g., local post or chapter) and fails to file returns.

    8. A tax-exempt charitable organization described under IRC 501(c)(3) is supporting or opposing candidates for public office.

  2. Contact TE/GE Customer Account Services at 877–829–5500 in Cincinnati and notify them of any changes that would affect their Exempt Organization Master File.  (11-29-2011)
Revocation of Tax Exempt Status

  1. If an organization fails to file the following returns for three consecutive years, it will automatically lose its tax exempt status:

    1. Form 990,Return of Organization Exempt from Income Tax

    2. Form 990–EZ,Short Form Return of Organization Exempt from Income Tax

    3. Form 990–PF,Return of Private Foundation

    4. Form 990–N,e-Postcard

  2. The tax-exempt status is revoked as of the filing due date of the third year. The Form 990 filing requirement will convert to a Form 1120 or Form 1041 filing requirement effective beginning with the tax year after the revocation.

  3. Review the taxpayer's Form 990 filing history, filing requirements, delinquent periods, and the due date of the delinquent return(s). See this link for Form 990 series filing requirements, http://www.irs.gov/Charities-&-Non-Profits/Form-990-Series-Which-Forms-Do-Exempt-Organizations-File%3F-(Filing-Phase-In)

  4. Determine whether the tax-exempt status has been or will be revoked for failure to file Form 990 series return for three consecutive years, and the due date (or extended due date) of the third year's filing has passed.

    1. The tax-exempt status has been systemically recognized as revoked if Exempt Organization status code 97 appears on the following:
      • CC ENMOD (EO-STAT)
      • CC INOLES (STS-CD)
      • CC BMFOLO (Current Status CD)

    2. If the taxpayer has not filed the required Form 990 series for three consecutive years, and if the due date (or extended due date) of the third year’s filing has passed, the tax-exempt status will be revoked, even though status code 97 has not been generated.


      A prior year closed Del Ret filing requirement does not mean a return was filed.

  5. If the tax exempt status has been or will be revoked, no further action is required to secure a return or initiate a referral. Select "Shelved" from the "Close Del Ret" menu. ICS generates a TC 598 cc 057 to IDRS.

  6. If a Form 990 series return has been filed for one or two of the three previous years, then the tax exempt status is retained and a Form 990 is due for the unfiled year(s). Contact the taxpayer to secure the unfiled return(s). See IRM, Referrals to Tax Exempt and Government Entities (TE/GE), for referral procedures if the taxpayer refuses to file.


    If the taxpayer is a Form 990–N filer, do not secure a return.

    For a current year Form 990–N, ask the taxpayer to submit the electronic Form 990–N, or "e-Postcard," on the IRS website at http://www.irs.gov/Charities-&-Non-Profits/Annual-Electronic-Filing-Requirement-for-Small-Exempt-Organizations-Form-990-N-(e-Postcard).  (11-29-2011)
Wagering Taxes

  1. Field Collection is responsible for securing delinquent wagering, occupational, and/or excise tax returns, except when:

    1. Evidence of criminal activity or fraud is discovered.

    2. Notification is received advising that the taxpayer is the subject of a criminal investigation.

    3. Extensive scrutiny of records requires Examination involvement.

    4. The taxpayer is a tribal entity or tribal casino. Contact the assigned Indian Tribal Government field manager for the state where the tribe is located to coordinate securing the return. Locate the name of the manager on this link https://organization.ds.irsnet.gov/sites/tege-cl/ITG/itg-org.pdf  (04-23-2014)
Bankruptcy Cases

  1. Stop all balance due enforcement actions upon learning that the taxpayer has filed a petition under any chapter in bankruptcy.

    1. Secure and process all delinquent returns in accordance with IRM

    2. Determine the petition date and docket number.

    3. Do not demand payment for pre-bankruptcy periods.

  2. See IRM, Revenue Officers and Insolvency, for additional information and necessary actions.  (04-23-2014)
IRS Employee Return Delinquency

  1. IRS employee Del Rets are identified by specific Selection Codes. Refer to Document 6209, Section 11.7, for the Selection Code assignment by Delinquent Tax Year and Business Operating Division (BOD).

  2. Area offices will designate an experienced revenue officer and back-up to work IRS employee cases.

  3. IRS employee cases bypass ACS and are systemically assigned to the Area ICS/Entity Quality Analyst (IQA) via the Integrated Collection System (ICS).

    1. The IQA is responsible for receipt, control, and assignment of these cases.

    2. The IQA will notify the Area Director (AD) or a designated member of the AD's staff by secure email of all IRS employee cases within their area.

    3. These cases are identified by Taxpayer Identification Number, name, and address as shown on the latest tax return.

    4. The AD will ultimately be responsible for identifying any conflict of interest in assignment of IRS employee cases.

  4. Potential violations under RRA '98 §1203 (b)(8), "willful failure to file a federal tax return," or (b)(9), "willful understatement of federal tax liability" are generally identified through the Employee Tax Compliance (ETC) program. Do not refer these cases to TIGTA.


    Refer the taxpayer to Criminal Investigation (CI) if elements of potential fraud are identified. See IRM, for guidance in preparing and processing CI referrals.

  5. IRS employee cases are worked like any other taxpayer delinquent return investigation.


    IRS employee cases are systemically blocked from closure:
    • Under the provisions of Policy Statement 5-133
    • As Unable to Locate, TC 593
    • As Surveyed, TC 597
    • As Shelved, TC 598


    IRS employee cases cannot be transferred to Automated Substitute for Return (ASFR). For IRS employee enforcement referral, see IRM

  6. Follow the procedures in IRM, when a delinquent return is secured. Record the following information in the ICS history:

    1. Date the return was secured

    2. Amount of tax, penalty, and interest due identified by "T P I DUE"

    3. Amount of refund due identified as "REFUND"

    4. Amount due "AMT. DUE"

    5. Date paid "DATE PD"

    6. "EMPLOYEE DECEASED" when applicable

  7. Always protect against inappropriate disclosures due to the sensitive nature of IRS employee cases.

  8. If the taxpayer is no longer an employee of the IRS or the secondary coded case is on an ex-spouse and there are no outstanding joint liabilities with the IRS employee, request input of TC 972, AC 191 on Form 4844 to turn off the IRS Employee Indicator. Note in the Remarks section of the form "Reversing IRS employee Indicator." Allow two cycles for removal of the indicator.

  9. Remove the FED Indicator by requesting TC 972, AC 51 only if the taxpayer is not a federal employee or retiree.  (05-27-1999)
Delinquent Return Transfers

  1. Intra-Area Del Ret transfers are input using ICS and require managerial approval.

  2. Initiate a Courtesy Investigation (see also IRM,Originating Office Procedure) to propose a transfer if:

    1. The taxpayer fails to acknowledge receipt of Letter 729, Requesting Delinquent Return, sent to the new address, or

    2. You are unable to confirm a change of address.

  3. Indicate the potential taxpayer address in the "Action Information" portion, and specify the action required in the "Action Requested" portion of the request for a Courtesy Investigation.  (05-27-1999)
Transfer Without Prior Courtesy Investigation

  1. Del Rets may be transferred without first requesting a Courtesy Investigation if:

    1. They accompany Bal Dues on the same taxpayer that are being transferred

    2. The Del Rets, as issued, show an address in another area, and

    3. Terminal research does not show a more current address within your area, the taxpayer is not incarcerated, and the address is not a P.O. Box or in care of a motel or hotel, or employer, or

    4. The transferee office requests or agrees to the transfer, or

    5. Correspondence received from the taxpayer or personal contact with the taxpayer provides a new address.

    Change the taxpayer's address on ICS before the transfer. Select the reason for the transfer and secure managerial approval

  2. Transfer corporate Del Rets only if the corporation itself, not merely one or more officers, is located in the transferee area’s territory.

  3. Transfer joint or partnership Del Rets only if all the taxpayers reside in the transferee area’s territory.

  4. Transfer a Del Ret if the taxpayer acknowledges receipt of Letter 729 or a similar letter, but does not respond sufficiently to close the Del Ret.  (03-13-2013)
Military Personnel

  1. If a military taxpayer is stationed within the United States and correspondence does not resolve the case, initiate a Courtesy Investigation proposing transfer.

  2. If a military taxpayer requests personal contact and is stationed outside the United States, initiate a Courtesy Investigation requesting assignment to A/C International, Area 35.


    Transfer of the Del Ret to Area 35 is not permitted  (04-23-2014)
Other International Delinquent Returns

  1. Initiate a request for a Courtesy Investigation for possible transfer by choosing on ICS "Puerto Rico" or "A/C International" if the:

    1. Taxpayer has moved to an unconfirmed address outside the United States,

    2. Del Ret cannot be resolved through correspondence,

    3. Del Ret meets the following criteria:

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


      For combo cases, see IRM,Account Transfer to International.

  2. Give specific instructions in the "Action Requested" box on the Courtesy Investigation request for each return to be secured or action to be taken.

  3. If the address is confirmed and the Del Ret cannot be resolved through correspondence, then transfer the Del Ret per the procedures in IRM  (01-15-2010)
Delinquent Return Refund Hold Program

  1. Refer to Delinquent Return Refund Hold procedures found in IRM 25.12.1,Processing Refund Hold Program Inventory. This IRM section contains the criteria for holding a taxpayer's refund while investigating the delinquent return(s) and the functional procedures for screening, working, and monitoring cases.

  2. The Service holds individual income tax refunds, debtor Master File offsets, and credit elects when a current or prior year return is filed with a refund ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ that is not barred by statute and the taxpayer has a return delinquency in the five years prior to the current filing year. Refund hold modules can be identified by the following:

    1. Freeze code "-R" on the IDRS module for the year of the refund being held

    2. TC 570 with 999 in the Julian date of the document locator number

  3. The Delinquent Return Refund Hold program delays issuing an income tax refund up to six months while the Service investigates a return delinquency. The refund is released to the taxpayer after it is used to offset any balance due on the delinquent return(s).

  4. If you are unsuccessful in securing the return(s), refer any select code standalone Del Ret module with a Refund Hold indicator to the Automated Substitute for Return (ASFR) or the appropriate Examination process using the applicable ICS closure. See IRM  (04-23-2014)
Taxpayers Who Are Federal Contractors

  1. See IRM, Identifying Federal Contractor Cases, for information on the Masterfile that identifies the taxpayer as a federal contractor.

  2. Per IRM, Secured Delinquent Returns, prompt assess unpaid delinquent returns secured from a federal contractor or vendor. See IRM, Prompt Assessment.


    Follow normal return processing procedures if prompt assessing will not facilitate collection, i.e., balance due nominal or will be included in an installment agreement or reported currently not collectible.  (03-13-2013)
Secured Returns

  1. Advise the taxpayer that all tax, penalty, and interest is immediately due when a delinquent return is secured.


    The taxpayer is in bankruptcy and the secured returns are for pre-petition periods.

  2. If a taxpayer advises you he/she is in bankruptcy, check IDRS prior to submitting the return(s) to make sure a TC 520 cc XXX has been input. If a delinquent balance due return(s) is secured and there is no TC 520 cc XXX, contact Centralized Insolvency by telephone so they can determine if a freeze code is necessary before sending the return to the campus for processing. Close the Del Ret module on ICS using the appropriate submenu option for Bankruptcy. Send a copy of all balance due returns to Insolvency. See IRM,Revenue Officers and Insolvency.

  3. Date-stamp all delinquent returns secured in Collection with an official "Received" date stamp.


    If an official "received" date stamp is not available, then write the following on the face of the tax return in the upper margin on the left side: "Received," the date received, your signature and title.

  4. Write TC 599 and the applicable closing code (cc) on the upper left margin of the return and close the Del Ret module on ICS using the "Return Secured" closing option and appropriate submenu option. See IRM

  5. Refer a return to Criminal Investigation (as described in IRM if a delinquent return appears to have fraud potential related to a questionable refund.

  6. If balance due and refund returns are secured,

    1. Complete the contact information on Form 13133, Expedite Processing Cycle, and

    2. Attach Form 13133 to the balance due returns to expedite processing.

    The refund returns will subsequently post and offset to the balance due module.

  7. Acceptance of faxes and signature stamps on secured delinquent returns and to resolve post-filing issues is allowed in the following instances:

    • Filing of original tax return via fax is allowed as part of a return perfection process (e.g., securing missing schedule or missing signature) initiated by the IRS or in post-filing/nonfiling activities where contact with the taxpayer has been made and documented.


      Label the top of IMF return(s) with the faxed signature "Process as original."

    • Return preparers may sign original returns, amended returns, or requests for filing extensions using a signature stamp, mechanical device, or computer software program; however, taxpayers must continue to sign their returns with an original signature or other authorized alternative (e.g., PIN).

    • Corporate officers or duly authorized agents may sign Form 94X series, Form 1042, Form 8027, Form CT-1 or any variant of such designated forms by rubber stamp, mechanical device, or computer software program.

    • Preparer/taxpayer signature stamps will not be permitted when signing other documents such as powers of attorney or inquiry/resolution related documents.  (01-15-2010)
Returns With Payment

  1. Compute and include all penalties and interest in the full amount due.

  2. Apply partial payments secured on multiple returns first to the oldest return in order of tax, penalty, and interest, unless the taxpayer specifically designates otherwise.

  3. See IRM, for ICS module closure instructions.  (03-13-2013)
Returns Without Full Payment

  1. Contact the taxpayer and demand full payment (see IRM 5.1.10,Taxpayer Contacts) when a return is received without full payment of tax, penalty, and interest. If full payment is not secured, make all reasonable efforts to collect full payment. If the taxpayer is unable to pay the liability in full, resolve the liability in one of the following ways:

    1. Grant an installment agreement (see IRM 5.14,Installment Agreements)

    2. Report the account currently not collectible (see IRM 5.16,Currently not Collectible )

    3. Continue the investigation

  2. Write "TC 599 cc 069" on the upper left margin of the secured return and close the ICS Del Ret module per IRM

  3. If a Collection Information Statement (CIS) is secured, verify the information contained on the CIS without delaying the processing of the return.

  4. Open an "ICS Only Pre-Assessed" module to complete the investigation if the liability is not resolved by full payment.

  5. If the subsequent investigation reveals assets that can be used to collect the liability, then request the issuance of the Bal Due through your group manager via CC STAUP.

  6. If enforced collection action will be taken, then request a prompt assessment per IRM 5.1.4,Jeopardy, Termination, Quick and Prompt Assessments.

  7. If the taxpayer is in bankruptcy, then write TC 599 and the appropriate taxable or nontaxable cc on the return. Assessments can be made on returns where the bankruptcy was filed on or after October 22, 1994. See IRM,BRA94 and BAPCPA's Effect on Assessments.

  8. See IRM, and IRM, for the appropriate case and ICS closing actions for returns prepared and filed under IRC 6020(b).

    1. Write TC 599 cc 063 on the upper left margin of the return if unagreed or no response.

    2. Write TC 599 cc 064 on the upper left margin of the return if agreed or signed by the taxpayer.

  9. BMF or IMF Del Rets closed with closing codes 063 or 064 with TC 599 receive a first notice from the Master File with Publication 1 and are then accelerated to Bal Due status 26 the following week.

  10. Initiate a Trust Fund Recovery Penalty investigation on any secured trust fund returns, if required.  (01-15-2010)
Referrals of Underreported Tax

  1. You may periodically encounter tax returns with potential underreported tax. This may happen when you are:

    • Working an assigned Del Ret and the taxpayer files an original return

    • Working an SFR Bal Due and the taxpayer files an original return for reconsideration of the SFR assessment

    • Comparing financial documents with a previously filed return

  2. If this occurs, do not attempt to audit, examine, or verify the correctness of the return secured. If omitted taxable income appears to be at least ≡ ≡ ≡ or overstatement of credits exceeds ≡ ≡ , consider a referral to Examination. Do ensure the secured return is valid (signed and complete) and attempt to resolve with the taxpayer any discrepancies or omissions.

  3. Upon receipt of an original return filed for reconsideration of an SFR assessment do the following:

    1. Compare the income reported on the return with the information on IRPTR and attempt to resolve obvious omissions and discrepancies

    2. Ensure that the proper schedules are filed according to the types of income shown on IRPTR

    3. Determine if any income that has not been subject to withholding or reported on Form 1099 or other such IRP documents has been reported on the return

    4. Compare withholding reported to the IRS to that stated on the return


    Follow the procedures in IRM, Substitute for Return (SFR) and Automated Substitute for Return (ASFR) Reconsiderations, or IRM,Business Master File (BMF) IRC 6020(b) Adjustments, to process an original return filed to request reconsideration of an SFR assessment. Unresolved discrepancies or omissions may result in rejection by the campus of the reconsideration request.

  4. In all investigations, be alert to discrepancies that may indicate underreporting on a tax return.


    Bank statements used to verify income reported on Form 433–A show deposits far in excess of the income claimed on the tax return.


    Bank statements do not show payments for expenses claimed such as alimony, medical or Schedule C expenses.  (11-29-2011)
Audit Referral Preparation and Processing

  1. A referral of underreported tax can be made to Correspondence Examination or Field Examination depending on the type of tax and complexity of the issues involved.


    Correspondence Examination works Form 1040 and Schedules A and C only and is the most efficient audit option for Form 1040.

  2. A return is eligible for referral to Correspondence Examination when the following conditions exist,

    1. Form 1040 and/or related Schedule A and/or C

    2. At least 18 months remains on the Assessment Statute Expiration Date (ASED)
      • For timely filed returns, the ASED is three years from the return due date
      • For late filed returns, the ASED is three years from the date the return was filed
      • For all returns, if the amount of unreported income exceeds 25 percent of the gross income on the return, then the ASED is six years
      See IRM 25.6.1,Statute of Limitations Processes and Procedures, for more information on determining ASEDs.

    3. Potential underreported tax is sufficient to warrant the cost of an audit

    4. Documentation supports the referral

    5. Collection potential exists

  3. For a referral to Correspondence Examination, mail Form 3449, Referral Report, with documentation to:
    Internal Revenue Service
    201 West Rivercenter Blvd.
    Covington, KY 41017
    Mail Stop 8201G

  4. For IMF and BMF (Form 1065, 1120, 1120S) referrals to Field Examination, do the following:

    1. Consider the ASED, see (2) b. above

    2. Consider collectibility

    3. Complete Form 3449, Referral Report

    4. Attach all documentation to Form 3449

    5. Secure group manager approval

    6. Forward Form 3449 and documentation to the local Planning and Special Programs (PSP) coordinator for screening and subsequent classification in the Brookhaven campus. Locate the PSP mailing address for your area at the intranet link: http://mysbse.web.irs.gov/AboutSBSE/Exam/epd/psp/10485.aspx

  5. Refer underreported tax on employment tax returns (Form 940, 941, 943, 944, and 945) to the Employment Tax Examination Program electronically using this intranet link: https://srs.web.irs.gov/.


    Refer underreported tax on employment tax returns for Indian Tribal Government (ITG) entities to the ITG Classification Office electronically via this intranet through the Manager, Compliance Program Management (CPM) on Form 3449, Referral Report. Locate the Manager, CPM on this link https://organization.ds.irsnet.gov/sites/tege-cl/ITG/itg-org.pdf.

  6. To refer an Estate or Gift tax underreporting issue (filed or unfiled return) do the following:

    1. Prepare a memorandum to the Estate and Gift Tax Examination Unit and include: taxpayer name and address; a detailed description of the potential non-compliance; sources of the lead and/or information; your name and phone number; your group manager's approval.

    2. Forward the memorandum with copies of all documentation supporting the potential non-compliance attached on Form 3210, Document Transmittal, to the following address:
      Internal Revenue Service
      Attention E&G Team 105
      STOP 824-G
      201 West Rivercenter Blvd.
      Covington, KY 41011–1430  (03-13-2013)
No Return Secured

  1. Do not solicit delinquent returns when information is discovered that a taxpayer’s failure to file a required return is willful or there is any indication of fraud. Suspend compliance activities, promptly report the findings to the Area Fraud Coordinator and process a referral to Criminal Investigation if warranted. See IRM 25.1,Fraud Handbook, and IRM

  2. If during initial contact the return is not secured, no willful failure to file is established, and no indications of fraud exist, then set a specific date for the taxpayer to file the return(s).

  3. Inform the taxpayer that failure to file the delinquent return(s) by the specific date is considered a refusal to file under the provisions of the Internal Revenue Code and that enforcement action may be taken.

  4. Determine the extent of enforcement activity when a taxpayer is advised to file all required delinquent returns but neglects, refuses, or states an inability to file within the established time frame. See IRM, to make an enforcement determination.


    If necessary, assist taxpayers who state an inability to file by providing them with any income information reported to IRS for the delinquent year and directing them to IRS.gov to obtain tax forms.

  5. Enforcement actions pursued by Collection employees include:

    1. Summons to appear on a given date to give testimony or produce existing books, papers and records or both, see IRM 5.17.6,Summonses

    2. IRC 6020(b) authority to prepare and process employment, excise tax and partnership returns, see IRM

    3. Referral

  6. A referral decision to enforce filing requirements is based on the type of return, characteristics, and the complexity of the unfiled return. Depending on the type of return, characteristics and complexity of the case, non-fraud referrals are appropriate to one of the following functions or processes:

    1. Automated Substitute for Return (ASFR) unit, (IMF only); see IRM

    2. Examination Referral to Memphis Campus (IMF only); see IRM

    3. Examination Referral IMF (F3449); see IRM

    4. Examination Referral BMF (F3449); see IRM, IRM, IRM  (01-15-2010)
Enforcement Determination

  1. The determination to pursue or not pursue a return will depend upon the facts of each case. Review Policy Statement 5–133 (P-5-133) (see IRM for general guidelines and factors to consider when determining whether to pursue enforcement of filing requirements and secure a return.

  2. The specific factors that must be considered when making an enforcement determination are as follows:

    1. Degree of flagrancy

    2. History of noncompliance

    3. Impact on future voluntary compliance

    4. Whether the delinquency involves trust fund monies collected

    5. Special circumstances peculiar to a specific taxpayer, class, industry or type of tax

    6. Existence of income from illegal sources

    7. Minimal or no Tax due

    8. Cost to the service to secure a return with respect to anticipated tax revenue

    9. Bankruptcy (contact Insolvency)

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Enforcement of filing requirements will normally be pursued for a six year period. Always request all (non-fraudulent) unfiled returns. The taxpayer may file for all open periods regardless of the age of the delinquency.

  5. Document the case history with the facts and reasons supporting your decision. If after consideration of the factors above, a determination is made that more or less than six years of filing requirements will be enforced, then managerial approval is required.

  6. Calculate the six year period for enforcement by starting with the tax year that is currently due and go back six years.


    If making a field call on October 1, 2013, the enforcement period will cover tax years 2007 through 2012.

  7. P-5-133 allows an investigating employee to close a Del Ret without enforcement because the non-filing is not willful, and:

    1. There would be no tax due on the delinquent return; or

    2. There would be minimal net tax due on the return (see IRM above); or

    3. The cost to the Service to secure a return would exceed anticipated revenue.


      Examine and calculate anticipated revenue on a case-by-case basis over the length of the Collection Statute for both the potential Bal Due and all other Bal Dues already on the entity.


      Consider the impact of not filing a Notice of Federal Tax Lien for assessments not pursued based on a P-5-133 determination.

  8. Generally, when closing a Del Ret under (7) c. above, the nonfiler's current ability to pay will not be the primary factor in determining whether or not to secure less than six years of returns. On a case-by-case basis, apply prudence when it is clear from information available that the nonfiler does not have or will not have the ability to pay some if not all of the potential tax liability over the 10 year statutory collection period (CSED).

  9. The following are examples of situations where we would not pursue returns because the cost to secure the return would exceed anticipated revenue:

    1. A defunct corporation where no assets exist to satisfy any part of a tax liability and there is no possibility of a transferee or trust fund recovery penalty assessment.

    2. A deceased taxpayer where no estate exists to satisfy any part of a tax liability and there is no possibility of a transferee assessment.

    3. A foreign national taxpayer who has departed the United States with no expectation of return and no identifiable assets exist in the United States to satisfy any part of the tax liability, or collection cannot be pursued abroad through terms of a tax treaty or lack of a tax treaty.

    4. A taxpayer whose minimum incarceration is a period equal to or exceeding the normal collection period and no identifiable assets exist to satisfy any part of the tax liability.

    5. A taxpayer who has minimal assets and earning potential due to advanced age, illness, or debilitating condition which will permanently diminish income producing potential.

    6. A taxpayer with minimal assets and earning potential who has substantial assessments with established CSEDs that will not allow for collection of any more than minimal amounts of the potential balance due arising from a new assessment.

  10. The following returns must be secured and should not be closed under the provisions of P-5-133:

    1. Nontaxable returns such as those in Form 990 series

    2. Form 1065, U.S. Return of Partnership Income

    3. IRS employee returns

  11. "Net tax due" on employment tax returns is determined before the application of credits. See IRM, above for P-5-133 thresholds.

  12. Inform taxpayers personally contacted on a potential refund return that a refund will only be issued if a return is filed within three years of the due date of the return.  (05-07-2002)
Enforcement Not Pursued: Policy Statement 5–133 Closures

  1. Take the following actions for each Del Ret closed under the provisions of Policy Statement 5–133:

    1. Document the result of the field contact or, if applicable, the reasons why a field call was not made, along with the reason for closure under the provisions of P-5–133 (see 6.1(7) above)

    2. Compute the anticipated tax due for each period and include in the ICS closing narrative history

    3. Select No Return Secured, and the P-5-133 submenu closing action (see IRM

    4. Secure managerial approval  (03-01-2007)
Pursue Enforcement: A Return Must Be Secured

  1. Enforcement actions pursued by Collection employees include:

    1. Summons (IRM 5.17.6, Summonses)

    2. IRC 6020(b) authority (IRM

    3. Referral (IRM through IRM

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