5.1.12  Cases Requiring Special Handling (Cont. 1)

5.1.12.16  (05-20-2008)
Non-Receipt of Refund Check

  1. Instruct a taxpayer to do the following if the taxpayer claims not to have received a refund shown as transaction code (TC) 840 or 846 on the account:

    1. Prepare Form 3911, Taxpayer Statement Regarding Refund, or

    2. Call the IRS toll-free line 1-800-829-1040 and request a refund trace.

  2. Advise the taxpayer regarding the various ways to obtain Form 3911:

    • Call the toll-free number 1-800-829-1040.

    • Call 1-800-TAX-FORM (1-800-829-3676) to request the Form 3911 by mail.

    • Access the Form 3911 at http://www.irs.gov.

  3. Refer to the procedures in IRM 21.4.2, Refund Trace and Limited Payability, for further guidance. See IRM 21.4.2.3, Refund Trace Process and IRM 21.4.2.4.4, Responding to Taxpayers' Subsequent Inquiries.

5.1.12.17  (08-05-2014)
Erroneous Refund Procedures for the Field

  1. When an individual receives money from the Service to which the recipient is not entitled, an erroneous refund has occurred.

  2. This definition includes all erroneous refunds regardless of the taxpayer’s intent or whether the error that caused the erroneous refund was made by the IRS, the taxpayer or a third party.

  3. IRM 21.4.5.2, Examples and Causes of Erroneous Refunds, provides a complete discussion of erroneous refunds, including examples.

  4. When you discover an Erroneous Refund situation, document the ICS (Integrated Collection System) case history and the AMS (Account Management System) and complete and process Form 12356 Erroneous Refund Worksheet.

5.1.12.17.1  (08-05-2014)
Completing and Processing Form 12356, Erroneous Refund Worksheet

  1. Complete Form 12356, Erroneous Refund Worksheet, Parts 1 and 13-15. See IRM 3.17.80.2.4.2, Undeliverable or No Taxpayer Reply, Figure IRM 3.17.80-45, for instructions for completing Form 12356.

  2. Send completed Form 12356 to the Accounts/Erroneous Refund (A/ER) Unit identified in Exhibit 3.17.80-4, Erroneous Refund Coordinators.

  3. If necessary, contact the A/ER Unit noted above for assistance in completion of Form 12356.

  4. To determine the appropriate campus/contact, use the 8th and 9th position of the Refund Schedule Number (RSN). See Exhibit 3.17.79-5, Refund Schedule Number Format.

    Example:

    A refund has an RSN showing 2010046281Z. The 8th and 9th position is 28, which represents Philadelphia.

    Note:

    Due to Submission Processing consolidation, the RSN may not correspond to the site where the Form 12356 is to be sent. See the following table:

    If RSN shows the following Submission Processing site: Then send Form 12356 to the following Submission Processing site:
    Atlanta Kansas City
    Brookhaven and Memphis Cincinnati
    Andover Fresno
    Philadelphia Ogden
  5. When contacting the A/ER, request input of TC 971 cc 663, TC 844, and TC 470 on the account. The TC 971 cc 663 identifies the case as an erroneous refund case, the TC 844 generates a –U freeze on the account and the TC 470 will stop all systemic notices and collection processes. The A/ER Unit will complete the remainder of the Form 12356. Once the TC 470 has been input, the module will go into status 53.

  6. Do not issue L1058 or use administrative lien or levy action to collect these taxes. Do not issue a summons to secure records of any type. If any of these administrative actions have been taken, contact Advisory.

  7. If necessary, consult with the Collection Campus Liaison in your area. See http://mysbse.web.irs.gov/collection/projects/projover/contacts/16616.aspx for assistance in the preparation and perfection of Form 12356.

5.1.12.18  (08-05-2014)
False Refund Claim

  1. A return with a “false refund claim” occurs when taxpayers overstate their federal income tax withholding or federal refundable credits.

    1. Returns with false federal income tax withholding such as W2, Wage and Tax Statement, and 1099OID, Original Issue Discount, are assessed under IRC 6201(a). See IRM 21.4.5.4.3, Category B Erroneous Refunds.

    2. Returns with false refundable credits such as F2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, are assessed under IRC 6213 (b). See IRM 4.10.12.4.3, Reparations and Other Illegal Credit Filings.

    3. Returns with other false refundable credits such as F4136, Credit for Federal Tax Paid on Fuels, are subject to statutory notice of deficiency procedures.

    .

  2. False refund claim cases:

    • are assigned to Field Collection for refund recovery. In certain cases jeopardy levy procedures may apply.

    • may lead to criminal prosecution. Contact the Fraud Technical Advisor for guidance on the potential for fraud development, if warranted.

5.1.12.18.1  (05-20-2008)
False Refund Claim Procedures

  1. Identify false refund claim cases by the following BAL DUE issuance codes:

    • N — False refund claim BAL DUE

    • TRSF–N — False refund claim BAL DUE transferred from another office

    • 914–N — False refund claim BAL DUE where Criminal Investigation is involved with another module in the account.

  2. Handle false refund claim cases on a priority basis. They are a priority because of the potential impact on compliance.

    Note:

    False refund claim cases are exempt from the normal BAL DUE tolerances.

  3. Attempt immediate personal contact with the taxpayer.

    Exception:

    Do not attempt immediate personal contact on 914–N coded cases. See further guidance below.

  4. Take appropriate enforcement action to collect the assessment plus accruals if the taxpayer does not voluntarily resolve his/her balance due account.

5.1.12.18.1.1  (05-20-2008)
Code 914–N Procedures

  1. Contact Criminal Investigation (CI) before attempting contact with the taxpayer on all cases coded 914-N. You may contact Advisory to determine whether the taxpayer has filed other false claims.

  2. Arrange for a CI Special Agent to accompany you when attempting contact with the taxpayer if the case involves a potentially dangerous taxpayer (PDT).

  3. See IRM 5.1.3.3, Taxpayer in the Employee Protection System Database, for guidance on potentially dangerous taxpayers.

  4. See IRM 5.1.3.5, Armed Escort to Contact a Taxpayer, for guidance on securing armed escorts.

5.1.12.19  (09-20-2012)
Manual Refund

  1. A manual refund is a refund that is not generated through normal Master File processing. IRM 21.4.4.2, Why Would A Manual Refund Be Needed? discusses various reasons for issuing a manual refund, including hardship.

  2. A taxpayer may request a manual refund upon the filing of a tax return under certain circumstances. Some of the most common reasons for manual refunds are as follows:

    • the taxpayer has a hardship situation that necessitates a quicker refund than normal systemic processing can provide,

    • systemic constraints are preventing a normal computer-generated refund, e.g., the taxpayer’s account has a bankruptcy freeze, or

    • the taxpayer is affected by a federally declared disaster.

  3. A taxpayer may obtain a manual refund upon the filing of a tax return when hardship exists under the following circumstances:

    • no tax liability exists and the taxpayer owes no debt under certain agreements for either past-due Child Support Obligation debts or debts owed to other federal agencies as provided under IRC 6402(c) or IRC 6402(d).

      Note:

      IRC 6402(c), (d), and (e) require the Service to offset a debt for past-due support, a debt owed to a federal agency under certain agreements, or a state income tax obligation. The Code requires that excess credits be applied to tax debt first, then to the past-due support obligation, federal agency debt, or state income tax obligation. Any amount of the excess credit may be refunded to the taxpayer after all tax and non-tax debts (Debtor Master File accounts) have been paid.

  4. Hardship for purposes of requesting a manual refund is economic hardship. Economic hardship is defined as the taxpayer’s inability to meet reasonable basic living expenses. Hardship is not based on the amount of the refund or the taxpayer’s desire to avoid further interest payments.

  5. In rare instances when economic hardship exists, a manual refund may be issued upon the filing of a tax return and prior to assessment of that return without first satisfying any outstanding tax liability. This type of refund is called an Offset Bypass Refund (OBR). See IRM 5.1.12.20.2

  6. Otherwise, follow the procedures below in IRM 5.1.12.20.1 to prepare requests for manual refunds.

5.1.12.19.1  (08-05-2014)
Manual Refund Procedures

  1. This IRM subsection provides general manual refund procedures.

  2. Follow these procedures to process a manual refund when the taxpayer does not owe a federal tax liability.

    Exception:

    The Service has levied and has made a determination under IRC 6343(d) that a manual refund should be issued to return the funds even if the taxpayer owes a federal tax liability..

  3. Refer to IRM 5.1.12.18.2, Offset Bypass Refund Procedures, which provides specific procedures for an Offset Bypass Refund (OBR) when the taxpayer owes a federal tax liability. 

    Exception:

    The manual refund process should be used instead of the offset bypass refund process when the taxpayer owes a federal tax liability if a determination is made by the Service to return levy proceeds for economic hardship.

  4. Determine if a manual refund is appropriate.

  5. Do not do either of the following:

    1. bypass a Treasury Offset Program (TOP) obligation, and/or

    2. refund credits holding on an account to the extent that they will satisfy a TOP obligation.

  6. Refer to the following for additional guidance:

    • IRM 3.13.222.15.1, Offset Bypass Refund (OBR)

    • IRM 3.17.79.6.4.2, Certifying ACH/Direct Deposit Hardship Refunds

    • IRM 21.4.4.2 I, Why Would A Manual Refund Be Needed?

    • IRM 13, Taxpayer Advocate Service.

5.1.12.19.1.1  (08-05-2014)
Make an Economic Hardship Determination

  1. To determine economic hardship, consider any information provided by the taxpayer as outlined in Treasury Regulation 301.6343-1(b)(4)(ii), including the following:

    1. the taxpayer's age, employment status, employment history, ability to earn, number of dependents, and status as someone else's dependent

    2. the amount reasonably necessary for food, clothing, housing, medical expenses, transportation, current tax payments, alimony, child support or other court ordered payments, and expenses necessary to the taxpayer's production of income

    3. the cost of living in the taxpayer's geographic area

    4. the amount of property exempt from levy and available to pay the taxpayer's expenses

    5. extraordinary circumstances, such as special education needs, medical catastrophe, or natural disaster.

    6. other factors that show an economic hardship.

  2. Evaluate the financial statement, i.e., Form 433-A and Form 433-B, as applicable.

  3. Refer to IRM 5.11.2.3, Returning Levied Property to the Taxpayer, for additional guidance in cases where the IRS took a levy action.

  4. Make the hardship determination yourself unless it is for a direct deposit manual refund:

    1. All manual refund requests except hardship direct deposit manual refunds can go directly to Submission Processing (SP), where they will receive expedited processing regardless of the originating office. For hardship direct deposit manual refunds, the Taxpayer Advocate Service (TAS) must process the manual refund. Thus, all hardship manual refund direct deposit cases should be referred to TAS.

    2. Refer a non-direct deposit hardship determination to the TAS only when the case meets TAS referral criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), and you cannot resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve In 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issues. Do not refer "same day" cases to TAS unless the taxpayer asks to be transferred to TAS and the case meets TAS referral criteria. Refer to IRM 13.1.7.4, Same Day Resolution by Operations.

    3. When you refer cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order).

  5. Refer a hardship determination to TAS only if:

    1. you cannot take steps to begin resolving the taxpayer’s issue within 24 hours, or

    2. the taxpayer asks to be referred to TAS.

5.1.12.19.1.2  (05-20-2008)
Bypass the Freeze Code

  1. Do not issue a manual refund without following these procedures if certain freeze codes exist on an account.

  2. Check with the controlling function if any of the following freeze codes or case conditions exist:

    1. "-Z" or "Z-" freeze, (Criminal Investigation function).

    2. "V" freeze, (Bankruptcy—Insolvency function).

    3. "-U" freeze (Erroneous Refund—TC 844).

    4. "-Q" freeze (Unallowable Hold—TC 574, do not include the TC 576 amount in the refund).

    5. The statute for refund has expired.

    6. Invalid Social Security Number (SSN) condition.

  3. Determine if you can bypass the freeze code.

    1. Proceed processing the manual refund if you get approval from the controlling function to bypass the freeze code.

    2. Cease processing the manual refund if you do not get approval from the controlling function to bypass the freeze code.

5.1.12.19.1.3  (05-20-2008)
Review the Return

  1. Ensure the return is complete by checking that all line entries appear to be completed and the return includes all of the appropriate following items:

    • signatures,

    • schedules,

    • documents which verify the taxable income and credits claimed, e.g., Form W-2 and Form 1099, and

    • necessary calculations.

  2. Research IDRS and/or MFTRA as appropriate.

  3. Verify the following are correct:

    • income and deduction items (whenever possible),

    • calculations of AGI, taxable income, tax, and credits

    • the estimated tax credits, and/or

    • the carry-over credits claimed by the taxpayer.

5.1.12.19.1.4  (08-05-2014)
Make Your Recommendation

  1. Use extreme care in recommending the issuance of a manual refund pursuant to a request from a taxpayer.

  2. Attempt to determine if economic hardship exists.

  3. Look for indication that income, assets, or other resources may be available to avoid the hardship..

  4. Make your recommendation carefully by taking the appropriate action displayed in the following table:

    When the taxpayer has an open BAL DUE
    If Then
    Assigned to you... Make a determination based on the available information.
    Assigned to another revenue officer or other employee... Contact the individual or unit the BAL DUE is assigned to for:
    • information, and

    • a recommendation of the appropriate action you need to take.

5.1.12.19.1.5  (05-20-2008)
Prepare a Report Memorandum

  1. Prepare a report to your group manager (GM) in memorandum format to request approval of a manual refund once you have determined that a manual refund is appropriate.

  2. Include all of the following information in your report:

    1. Taxpayer Identification Number — e.g., SSN or EIN

    2. Return Period — Enter as "YY/MM"

    3. Master File Tax Code Name of Taxpayer — As shown in the Master File

    4. Address of Taxpayer — As shown on the Master File

    5. Form number of the return

    6. Document Locator Number of the return

    7. Make check payable to — Advise when the payee is someone other than the taxpayer.

    8. Amount of overpayment or erroneous payment — Amount to be refunded, without consideration of additional interest to be calculated

    9. Reason for manual refund — Specify the hardship condition or processing error warranting expedite processing.

    10. Interest date — Specify the date from which interest is to be computed; e.g., from the date money is seized.

  3. Attach a scanned copy of the portion of the case file justifying manual refund processing, (e.g., history sheet, taxpayer correspondence) to your report.

  4. Save the Report Memorandum as a PDF file.

5.1.12.19.1.6  (09-20-2012)
Prepare Form 5792

  1. Complete Form 5792, Request for IDRS Generated Refund. If necessary, consult with the Collection Campus Liaison in your area (see http://mysbse.web.irs.gov/collection/projects/projover/contacts/16616.aspx) to assist in the preparation and perfection of this form. See Exhibit 5.1.12-3, Instructions for Use of Form 5792.

    Note:

    Even though instructions for completing Form 5792 are located in IRM 21.4.4, those IRM instructions do not clearly specify which employee is responsible for completing which fields. This exhibit contains specific instructions for Field Collection (FC) processing of Form 5792 .

  2. Save Form 5792 as a PDF file.

5.1.12.19.1.7  (07-02-2010)
Prepare Form 3753

  1. Complete Form 3753, Manual Refund Posting Voucher, if the refund is $10 million or more, a direct deposit is necessary, or the module(s) is(are) not on IDRS.

  2. Save Form 3753 as a PDF file.

5.1.12.19.1.8  (08-05-2014)
Forward the Request for Manual Refund

  1. Prepare a secure email message to your GM to request his/her approval of the request for manual refund.

  2. Type "Request for Approval of Manual Refund" in the subject line of the message.

  3. Attach the following to the secure email message:

    1. PDF Form 5792

    2. PDF Form 3753, if applicable

    3. Report Memorandum

  4. Send the message to your GM via secure email.

    Note:

    Requests for manual refund must be sent by email unless it is not practical (e.g., the Report Memorandum attachment is too large or a scanner is not available to scan the relevant documentation).

    Note:

    The GM is responsible for ensuring good judgment in manual refund processing and following the applicable procedures in the table below. Additionally:
    The GM will provide the revenue officer (RO) with a courtesy copy when he/she sends the request for manual refund to the Territory Manager (TM).
    The TM will provide the RO and the GM with a courtesy copy when he/she sends the request for manual refund to the Area Director (AD).
    The AD will provide the RO and the GM with a courtesy copy when he/she sends the approved/disapproved request for manual refund back to the TM.

    Request for Approval of Manual Refund
    GM Processing
    (1) Review the message from the RO. Prepare a "Forward" message.
    (2) Indicate approval or disapproval in the body of the message.
    1. If approved, go to Step 3.

    2. If disapproved, indicate disapproval by returning the PDF form(s) back to the RO and include the reason for disapproval in the body of the message. Do not continue with Steps 3 and 4.

    (3) Attach the following to the message:
    1. Approved Form 5792

    2. Approved Form 3753, if applicable.

    3. Report Memorandum

    (4) Forward the message (and the attachments) to the TM via secure email with a copy to the RO.
    TM Processing
    (1) Review the message from the GM. Prepare a "Forward" message.
    (2) Indicate approval or disapproval in the body of the message:
    1. If approved, go to Step 3.

    2. Indicate disapproval by returning the PDF form(s) back to the GM (with acopyto the RO). Include the reason for disapproval in the body of the message. Do not continue with Steps 3 and 4.

    (3) Attach the following to the message:
    1. Approved Form 5792

    2. Approved Form 3753, if applicable.

    3. Report Memorandum

    (4) Forward the message (and the attachments) to the AD via secure email with acopyto the RO and the GM.
    AD Processing
    (1) Review the message from the TM. Prepare a "Forward" message.
    (2) Indicate approval or disapproval in the body of the message:
    1. Approval — print out a hard copy of Form 5792 and, if applicable, a hard copy of Form 3753.

    2. Indicate approval by physically signing the printed PDF Form 5792 and, if applicable, Form 3753.

      Note:

      At this time, the use of the digital signature feature is not acceptable for the AD. The AD must actually sign the document(s) with pen & ink.

      Note:

      The Approving Official's physical signature certifies to the Accounting Function that the form was reviewed for accuracy and completeness and is correct.

    3. Scan the signed PDF form(s) for inclusion as an email attachment.

    1. Disapproval — Indicate disapproval by returning the unsigned PDF form(s) back to the TM (with a copy to the GM and the RO).

    2. Include the reason for disapproval in the body of the message.

    3. Do not continue with Steps 3 and 4.

    (3) Attach the following to the message:
    1. Approved Form 5792

    2. Approved Form 3753, if applicable.

    3. Report Memorandum

    (4) Forward the message (and the attachments) to the TM via secure email with a copy to the RO and the GM.
  5. Take the following action once you receive approval from the GM, the TM, and the AD.

  6. Forward approved Forms 5792 , Request for IDRS Generated Refund, including those for wrongful levies, to *SBSE PSC CSCO Man Ref, via secure email.

  7. Send Form 3753, Manual Refund Posting Voucher, by USPS to IRS, MS 6250, 1973 N. Rulon White Blvd., Ogden, UT 84404 or by FAX to 801-620-7905 or 7609.

  8. Include the following:

    1. Approved Form 5792

    2. Approved Form 3753, if applicable.

    3. Do not transmit the Report Memorandum to the POC.

    Note:

    The campus only requires the approved form(s); the campus does not require the Report Memorandum.

  9. Follow these procedures when emailing the request for manual refund to *SBSE PSC CSCO Man Ref is not practical.

  10. Access the Campus Program Locator Guide at:http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/01_cplg_toc.htm .

  11. Determine the campus Point of Contact (POC), fax number, and campus address for a manual refund request generated by FC:

  12. Follow these steps to locate the campus POC:

    1. Click on the section entitled "SBSE Compliance Services " .

    2. Click on the section entitled "Key Area Office Task Processing " .

    3. Scroll down to the bottom of Page 40 to locate the campus POC contact information.


    or

    1. Access the "Key Area Office Task Processing" page directly at:: http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/40_key_area_task.htm.

    2. Scroll down to the bottom of Page 40 to locate the campus POC contact information.

  13. Follow one of the following procedures:

    • Send the request via fax to the appropriate fax number when emailing is not practical, or

    • Send the request via mail to the appropriate mailing address when faxing is not practical.

5.1.12.19.2  (09-20-2012)
Offset Bypass Refund Procedures

  1. This IRM section provides specific procedures for processing an Offset Bypass Refund (OBR). As discussed above, an OBR may be processed in cases of economic hardship even if the taxpayer owes a tax liability.

    1. Any IRS employee may request the issuance of the OBR. Refer to IRM 21.4.6.5.12.1, Offset Bypass Refund .

    2. An OBR cannot be issued, when there is past-due child support (as defined in section 464 of the Social Security Act), a federal agency non-tax debt, or a state income tax obligation to be collected.

      Note:

      Section 464 of the Social Security Act defines past due support as the amount of a delinquency for support and maintenance of a child and the parent with whom the child is living as determined by a court order or other state administrative procedure.

    3. The Service may issue a manual refund of excess credits without first satisfying (offsetting) outstanding federal tax liabilities and, instead, refund the overpayment to the taxpayer.

  2. Follow these Offset Bypass Refund (OBR) procedures when the taxpayer owes a federal tax liability but requires a manual refund to be issued upon the filing of a tax return prior to assessment of the return.

    Note:

    Follow the general manual refund procedures in the preceding subsection to process a manual refund when the taxpayer does not owe a federal tax liability. The manual refund procedures should also be followed when the taxpayer owes a federal tax liability and the Service has levied if a determination has been made to return the levy proceeds under IRC 6343(d).

  3. Determine if an OBR is appropriate.

  4. Refer to IRM 3.13.222.15.1, Offset Bypass Refund (OBR), and IRM 21.4.6, Refund Offset, for guidance on OBR processing.

  5. Do not do the following:

    1. bypass a Treasury Offset Program (TOP) obligation, and/or

    2. refund credits holding on an account to the extent that they will satisfy a TOP obligation.

  6. Prepare a report to your manager in memorandum format to request approval of an OBR once you have determined that an OBR is appropriate.

  7. Include all of the information listed in IRM 5.1.12.18.1.5 , Prepare a Report Memorandum, in your report except for items (f) and (j).

  8. Attach the following to your report:

    1. Copy of the portion of the case file justifying OBR processing, (e.g., history sheet, taxpayer correspondence),

    2. Copy of the return,

    3. Copy of any IDRS or CFOL research confirming credits claimed on the return,

    4. Copy of Form 433-A and Form 433-B completed by the taxpayer, if available,

    5. Copy of any documentation of the condition causing economic hardship,

    6. Request for terminal input of TC 971 (VV FRM77) Action Code (AC) 36, IRS Offset Bypass Refund.

  9. Forward the request to your manager for approval.

    Reminder:

    Immediately request input of TC 972 AC 36 to reverse the identification of the type of manual refund if the request for refund is rejected.

5.1.12.20  (07-02-2010)
Refund Offset

  1. When a taxpayer owes a liability and an overpayment is available, the Master File generally recognizes this and prevents a refund from being issued. The refund is applied to the outstanding liability. These refund offsets usually happen automatically; however, Collection employees must recognize cases when the offset will not happen automatically. In those cases, input of a TC 130 must be requested to stop a refund from being issued to a taxpayer with a liability.

  2. Several conditions exist which may cause the same refund to be offset. The priority in deciding where to apply the money is:

    • Automatic offset within the Master File

    • Automatic offset across the Master Files

    • Offset requested using TC 130 to pay outstanding taxes which are not offset automatically

    • Offset requested by Financial Management Service (FMS) to pay debts other than taxes, e.g., child support and student loans

  3. Be alert for case situations when the offset will not happen automatically.

  4. Request input of TC 130 to stop a refund from being issued to a taxpayer with a liability according to the following procedures.

5.1.12.20.1  (07-02-2010)
Types of Refund Offset

  1. There are four types of refund offset:

    • IMF Automatic Refund Offset

    • Offset into a BMF Module

    • Offset out of a BMF Module

    • Offset across both IMF and BMF.

  2. Each type of offset is discussed below.

  3. Follow the applicable procedures for each type of offset.

5.1.12.20.1.1  (07-02-2010)
Individual Master File Automatic Refund Offset

  1. When an IMF taxpayer files a refund return:

    • the Master File automatically recognizes whether the taxpayer owes for another module within the IMF,

    • the refund is offset to pay the amount owed on the other module, and

    • the campus will send an automated notice to the taxpayer which shows where the refund was applied.

  2. A refund on an IMF return will be offset without a TC 130 in certain situations. The following example explains those situations. In all of the following situations, TC 130 input is not required for IMF refund offset. The offset will happen automatically.

    Example:

    Richard and Mary Brown owe a joint IMF liability and then subsequently:

    • Richard and Mary Brown file a joint return.

    • Richard and Mary file a joint return as Mary and Richard Brown (primary and secondary switch positions on the return).

    • Richard Brown files a refund return separately from Mary.

    • Richard Brown files a joint return as the primary taxpayer with a new secondary taxpayer.

    • Mary Brown files a refund return separately from Richard.

5.1.12.20.1.2  (08-05-2014)
Offset into a Business Master File Module

  1. When a balance due return is filed on the BMF and the credits claimed agree with the credits posted, the module will allow offsets into it.

  2. When a balance due return is filed on the BMF and the credits claimed do not agree with the credits posted, the campus will send an automated notice to the taxpayer which shows the total amount of credits posted to the module.

    Note:

    If this notice is sent, offsets are not allowed into the module until the taxpayer has a chance to respond.

  3. Once the notice is sent, offsets will be allowed into the module if:

    • the taxpayer does not respond to the notice within 10 cycles, or

    • the taxpayer acknowledges that the amount is owed.

  4. Handle a BAL DUE like any other payment tracer or adjustment case when the taxpayer says the amount is not owed.

  5. Request input of TC 130 when the BMF Name Control does not match the IMF Name Control.

    Reminder:

    When the LLC is a disregarded entity, the single member owner remains liable for tax periods ended before January 1, 2009 for any outstanding employment tax liabilities. For tax periods beginning on or after January 1, 2009, the LLC is the liable taxpayer. Since the individual is not liable, TC 130 should not be requested. See IRM 5.1.21, Collecting from LLCs, to identify the liable taxpayer.

5.1.12.20.1.3  (07-02-2010)
Offset Out of a Business Master File Module

  1. If there is an overpayment on a BMF module and the credits claimed on the return filed agree with the credits posted, the taxpayer can request the overpayment be transferred to another module with a balance due. Any remaining overpayment will be applied to other balance due modules. If there are no other balance due modules, the overpayment will be refunded.

  2. If there is an overpayment on a BMF module and the payments claimed on the return filed do not agree with the amounts credited, the campus will send an automated notice to the taxpayer which shows the amount of credits posted to the module. The notice will,

    • list all credits posted (if there is enough room), or

    • show only the total credit (if there is not enough room to list all credits posted), and

    • ask where the overpayment should be applied.

    Note:

    If this notice is sent, offsets are not allowed out of the module until the taxpayer has a chance to respond.

  3. Once the notice is sent, offsets will be allowed out of the module if:

    • the taxpayer does not respond to the notice within 10 cycles, or

    • the taxpayer acknowledges there is an amount owed on another module.

  4. Apply the overpayment as requested by the taxpayer if the taxpayer says where the overpayment should be applied.

  5. Refund the overpayment if the taxpayer asks for a refund and there are no BAL DUE modules.

  6. Request input of TC 130 when the BMF Name Control does not match the IMF Name Control.

    Reminder:

    For an LLC, request input of TC 130 only when an individual owner is identified as the liable taxpayer for liabilities assessed in the name and EIN of the LLC. For excise tax periods beginning on or after January 1, 2008 and for employment tax periods beginning on or after January 1, 2009, the LLC is the liable taxpayer, so TC 130 should not be requested. See IRM 5.1.21, Collecting from LLCs.

5.1.12.20.1.4  (07-02-2010)
Offset Across the Individual and Business Master Files

  1. When an IMF refund return is filed and it includes an Employer Identification Number (EIN) on a Schedule C or F, this EIN is automatically checked for any amounts owed for BMF taxes. If there are BMF taxes owed, the IMF refund will generally be offset to the BMF to pay the BMF taxes. However, no automated notice will be sent by the campus.

  2. If the IMF refund is not automatically offset to the BMF to pay the BMF taxes, it is never "too late" to input TC 130. You can request input of TC 130 any time within the applicable period of limitations.  However, if the existence of a relationship of liability has not been previously established, offset(s) is (are) not allowed into a module until the taxpayer has had a chance to confirm or deny the existence of a relationship of liability. Offsets will be allowed into a module when a taxpayer acknowledges that the BAL DUE(s) is (are) owed.

  3. Request input of TC 130 only if:

    1. either the IMF or BMF return(s) reflect(s) a cross-referenced TIN,

    2. review of INOLES confirms matching name and address information, or

    3. you make personal contact with either the IMF or BMF taxpayer to confirm the existence of a relationship of liability.

    Example:

    Several years ago, a taxpayer filed a final Schedule C for his business along with his Form 1040. The business still had a balance due. The IMF refund was not offset for several years. Then the revenue officer (RO) working the BMF BAL DUE realized TC 130 needed to be input on the IMF because he/she obtained a copy of the Form 1040 and Schedule C that reflected the BMF TIN. The RO ensured the BMF BAL DUE(s) was (were) the result of voluntarily filed returns, and the notice of the assessments was sent to the current IMF address on INOLES. The RO requested TC 130 input and the taxpayer's refund was offset the subsequent year and full paid the BMF BAL DUE.

    Note:

    If the taxpayer's Form 1040 return has multiple Schedules C or F attached, only the EIN from the first one will be input for offset.

  4. Request current BMF address information and explain the impact on the taxpayer regarding the cross-referencing of IMF and BMF entities prior to requesting input of TC 130 when:

    1. the IMF and BMF addresses on INOLES do not match, and

    2. the BMF assessment(s) is (are) not the result of voluntarily filed returns.

  5. Request input of TC 130 only if you confirm the existence of a relationship of liability.

5.1.12.20.1.4.1  (08-05-2014)
Limited Liability Company Offset

  1. The widespread adoption of limited liability companies (LLCs) has caused frequent failure of IMF refunds to automatically offset to BMF liabilities, when appropriate.

  2. When the owner of an LLC is the liable taxpayer and reports employment taxes in the owner's name, the BMF Name Control (NC) will match the IMF NC. If there are BMF taxes owed, the IMF refund will generally be offset to the BMF to pay the BMF taxes.

  3. When the liability of an individual owner of an LLC is reported in the name of the LLC, the BMF NC is different from the IMF NC and the system will not perform the offset. Input of TC 130 should only be requested for those tax periods where an individual owner is identified as the liable taxpayer for liabilities assessed in the name and EIN of the LLC.

    Reminder:

    When the LLC is a disregarded entity, the single member owner remains liable for tax periods ended before January 1, 2009 for any outstanding employment tax liabilities. For tax periods beginning on or after , the LLC is the liable taxpayer. Since the individual is not liable, TC 130 should not be requested. See IRM 5.1.21, Collecting from LLCs.

  4. For excise tax periods beginning on or after January 1, 2008 or employment tax periods beginning on or after January 1, 2009, the LLC is the liable taxpayer. TC 130 should not be requested, except before the assessment of a Trust Fund Recovery Penalty, as described below.

5.1.12.20.2  (07-02-2010)
Determine if TC 130 Input is Necessary

  1. Screen your assigned BAL DUEs periodically to determine if it is necessary to request input of TC 130.

    Note:

    When a new inter-Area transfer-in BAL DUE is issued, it will already have TC 130 input by the Campus Compliance Services (CCS).

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  3. Request input of TC 130 if an overpayment can reasonably be expected as a credit to the outstanding liability before the expiration of the statute.

    Note:

    Do not request input of TC 130 if less than six months remain on the collection statute.

  4. Request input of TC 130, if applicable, when you:

    • report a BAL DUE(s) currently not collectible, or

    • enter into an installment agreement for longer than six months.

  5. Be alert to situations where a taxpayer submits a refund return and the refund would normally be offset within the Master File without a TC 130, but because of the timing, the refund may be issued.

    Example:

    Taxpayer submits a refund and a balance due return at the same time. The refund return may post before the balance due return. To prevent the refund from being issued, input TC 130 so the refund will be held until the balance due return posts.

    Example:

    Taxpayer files a refund return and the refund has not been issued yet. Then the taxpayer files a balance due return. To prevent the refund from being issued, request input of TC 130.

  6. Request input of TC 130 when a refund:

    1. may be issued before the assessment of a Trust Fund Recovery Penalty. See IRM 5.7.4.7, Notification of Proposed Assessment.

    2. will be issued because a taxpayer with an outstanding liability files a refund return with you.

  7. Close a BAL DUE by requesting input of TC 470 CC 93 if the taxpayer files a refund due return with you and:

    • the return appears to be prepared correctly, and

    • the refund will full pay the BAL DUE.

5.1.12.20.3  (07-02-2010)
Request Refund Offset with TC 130

  1. Follow the appropriate procedures below to request input of TC 130 to offset a refund.

5.1.12.20.3.1  (07-02-2010)
TIN Not on MF

  1. Sometimes a taxpayer's Taxpayer Identification Number (TIN) is not established on the Master File.

  2. Follow these procedures to request input of TC 130 on a taxpayer whose Taxpayer Identification Number (TIN) is not established on the Master File:

  3. Request input of TC 130 and:

    1. request input of TC 000 with a mail filing requirement of 3, and

    2. include the taxpayer's last known address on the TC 000 request.

5.1.12.20.3.2  (07-02-2010)
Offset an IMF Refund

  1. Request input of TC 130 to offset an IMF refund in the situations displayed in the following table. Otherwise, any overpayment will be refunded without TC 130 present on the account.

    Example:

    John and Carol Blue owe a joint liability. John dies and Carol marries Tom Green. Unless a TC 130 is input on Tom Green's SSN, any overpayment on a Tom and Carol Green return (Carol as secondary taxpayer) will be refunded.

    Example:

    Diane Yellow owes a single liability. She marries William Red. Unless a TC 130 is input on William Red's SSN, any overpayment on a William and Diane Red return (Diane is the secondary taxpayer) will be refunded.

    Example:

    Steven and Marcia Orange owe a joint liability. They divorce and Marcia marries James Purple and they file a joint return as Marcia (primary) and James (secondary) Purple. Unless a TC 130 is input on Marcia's SSN, the refund will be issued.

    Note:

    Even though certain IMF refunds are automatically offset against BMF liabilities as discussed above, there are exceptions.

    Example:

    Timothy Black is the single member owner of an LLC, and is identified as the liable taxpayer for unpaid employment taxes. Unless a TC 130 is input on Timothy Black's SSN, any overpayment on a Timothy and Bridgette Black income tax return will be refunded.

    When to Request TC 130 Input to Offset an IMF Refund
    If Then
    (1) A taxpayer owes outstanding joint IMF liabilities and then the taxpayer filed as a secondary taxpayer with someone not liable for the amount due. Request input of TC 130 on the primary individual's SSN so any overpayments will be applied to the outstanding joint IMF liabilities.
    (2) A taxpayer owes outstanding joint IMF liabilities, and the secondary taxpayer filed as a primary taxpayer on a joint return with someone other than the spouse who was liable for the tax. Request input of TC 130 on the primary individual's SSN so any overpayments will be applied to the outstanding joint IMF liabilities.
    (3) A taxpayer owes Non-Master File (NMF) liabilities. Request input of TC 130 on the individual's SSN so any overpayments will be applied to the outstanding NMF liabilities.
    (4) A taxpayer is a partner in a partnership and owes partnership liabilities. Request input of TC 130 on the general partner's SSN so the refund will offset to the outstanding partnership liability when outstanding partnership liabilities exist and the general partner files a personal refund return.
    (5) A taxpayer is a sole proprietor and owes sole proprietor liabilities. Request input of TC 130 on the sole proprietor's SSN so the refund will offset to the outstanding liability when outstanding sole proprietor liabilities exist and the proprietor files a personal refund return without a Schedule C or F.
    (6) A taxpayer is the single member owner of an LLC, and the owner is liable for its employment taxes. Request input of TC 130 on the owner's SSN so the refund will offset to the outstanding liability assessed in the name and EIN of the LLC when the owner is identified as the liable taxpayer for employment taxes and files a personal refund return.

    Reminder:

    For tax periods ended prior to January 1, 2009, the single member owner would still be liable for any outstanding employment tax liabilities. After that time, if the LLC is identified as the liable taxpayer, the individual is not liable and TC 130 should not be requested. See IRM 5.1.21, Collecting from LLCs.

5.1.12.20.3.3  (07-02-2010)
Offset a BMF Refund

  1. Request input of TC 130 to offset a BMF refund in the situations displayed in the following table, otherwise, any overpayment will be refunded without TC 130 present on the account.

    When to Request TC 130 Input to Offset a BMF Refund
    If Then
    (1) A taxpayer owes IMF liabilities and also has an active sole proprietorship. Request input of TC 130 on the individual's Employer Identification Number (EIN) so any overpayments on the BMF will be applied to the IMF liabilities.
    (2) A taxpayer owes Individual Retirement Account File (IRAF) liabilities and also has an active sole proprietorship Request input of TC 130 on the individual's EIN so any overpayments on the BMF will be applied to the IRAF liabilities.
    (3) A taxpayer owes Non-Master File (NMF) liabilities and also has an active sole proprietorship Request input of TC 130 on the employer identification number so any overpayments will be applied to the NMF liabilities.
    (4) A taxpayer owes BMF liabilities under more than one Employer Identification Number (EIN). Request input of TC 130 on the other EIN(s) so any overpayments will be applied to any outstanding liabilities.
    (5) A taxpayer owes IMF liabilities and is identified as the liable taxpayer on the BMF as the single member owner of an LLC Request input of TC 130 on the EIN of the LLC where the individual is identified as the liable taxpayer so any overpayments on the BMF will be applied to the IMF liabilities.

    Reminder:

    Overpayments from BMF tax periods where the LLC is identified as the liable taxpayer should not be applied to IMF liabilities.

5.1.12.20.4  (08-05-2014)
Document Preparation to Request TC 130

  1. Use Form 3177, Notice of Action for Entry on Master File, for all other requests for input of TC 130.

    Exception:

    The following procedure applies for reporting a BAL DUE account Currently Not Collectible (CNC).

  2. Use Form 53, Report of Currently Not Collectible Taxes , to request input of TC 130 when you are reporting a BAL DUE account CNC.

    Note:

    ICS will electronically submit Form 3177 to CCP.

  3. See IRM 5.1.12.20.3.1 for guidance on requesting input of TC 130 on a taxpayer whose Taxpayer Identification Number (TIN) is not established on the Master File.

  4. Include the following on all documents requesting input of TC 130:

    • Form number, tax period, and Taxpayer Identification Number of the cross-referenced liabilities, and

    • Social Security Number and name of each taxpayer responsible for any joint liability.

      Note:

      Always request input of the TC 130 on the primary number if a joint return is filed.

  5. Do not request any other type of input on the same document.

  6. If you prepare a manual Form 53 (not on ICS), send Form 3177 by secure email to Centralized Case Processing (CCP).

5.1.12.20.5  (07-02-2010)
Use TC 131 to Release a TC 130 Freeze

  1. Request release of the TC 130 freeze when:

    1. the liability is paid or abated in full before receipt of CP 44, 188, or NMFL transcript, or

    2. the liability is closed by an adjustment (TC 470 CC 90).

  2. Use Form 3177 with a TC 131 in the "Other" block to release the TC 130 freeze.

  3. Request input of TC 131 if a TC 130 was input in anticipation of assessing a Trust Fund Recovery Penalty (TFRP) pursuant to IRM 5.7.4.7, Notification of Proposed Assessment, and IRM 5.1.12.20.2(6), Offset Bypass Refund Procedures, and:

    1. the recommendation to assess the TFRP is rejected,

    2. the penalty is not assessed within two weeks after Campus Compliance Services (CCS) contacts the revenue officer about a refund that has been frozen, or

    3. the TFRP is assessed, unless it is assessed against a person who files as a secondary taxpayer, and the spouse is not assessed, then overpayments will be refunded if a TC 130 is not present.

  4. Include an explanation about why you are requesting TC 131 on the Form 3177.

  5. Record the date and reason in the case history.

  6. Send Form 3177 requesting input of TC 131 by secure email to Centralized Case Processing (CCP).

5.1.12.20.6  (07-02-2010)
Procedures upon Receipt of CP 44 or CP 188

  1. After offset within the Master File, Master File entities containing a TC 130 are frozen from refunding. A notice is generated when a frozen credit is available:

    • Notice CP 44 is generated for IMF cases, and

    • Notice CP 188 is generated for BMF cases.

  2. Non Master File Liability (NMFL) transcripts are generated when a second credit posts to a module after a CP 44 or a CP 188 is issued and the frozen credit condition is unreversed. A TC 740 causes a transcript to be generated, but a CP 44 or a CP 188 is not issued.

  3. Campus Compliance Services (CCS) processes all CP 44 and CP 188 notices and NMFL transcripts.

  4. The CP 44 and CP 188 notices and NMFL transcripts:

    • indicate that a refund credit is available for offset against a "130 case" , and

    • serve as a turnaround document informing CCS where to apply the overpayment.

  5. Use Part 2 of the CP 44/188 or the NMFL transcript to:

    • request transfer of the credit,

    • notify CCS to release the frozen credit, or

    • request input of TC 131.

  6. Send Parts 2 and 3 of the CP 44/188 and/or the NMFL transcript to Advisory via Form 3210, Document Transmittal .

    Note:

    You can send these to Advisory on a daily basis, or you can accumulate them and send them on a weekly basis. Advisory will send Parts 2 and 3 of the CP 44/188 and/or NMFL transcripts to CCS via Form 3210, Document Transmittal.

5.1.12.21  (09-20-2012)
U.S. Tax Court Subpoena

  1. At the request of a Chief Counsel attorney, Internal Revenue Service employees may be called upon to serve a subpoena issued by the United States Tax Court.

    1. Subpoenas are available to Chief Counsel attorneys through the office of the Clerk of the Court and also may be downloaded directly from the Tax Court web site. A Chief Counsel attorney will forward the subpoena to the Field Territory Manager for the vicinity in which the witness resides.

    2. The letter or memorandum to the Field Territory Manager transmitting the subpoena for service will contain any special instructions that Area Counsel wishes communicated to the official serving the subpoenas, or to the witness.

    3. The Field Territory Manager should promptly assign Tax Court subpoenas using Form 2209, Courtesy Investigation.

  2. See IRM 5.1.8, Courtesy Investigations.

5.1.12.21.1  (05-20-2008)
U.S. Tax Court Subpoena Procedures

  1. Accomplish service by personally showing the witness the original subpoena and delivering a copy of the subpoena to the witness.

  2. Mark "Return on Service" on the original subpoena.

  3. Acknowledge such return before a Service official authorized to administer oaths.

  4. Forward the original to the Chief Counsel attorney after you have properly served a copy of the subpoena.

5.1.12.22  (08-05-2014)
Backup Withholding — Overview

  1. Financial Institutions (including banks) and other businesses that pay certain kinds of income must file an information return with the IRS. Generally, these income payments are not subject to withholding; however they may be subject to "backup withholding (BWH)."

  2. The IRS has two separate Backup Withholding (BWH) programs that require payers to withhold at the BWH rate from payment of certain Form 1099 income. They are:

    • BWH "B" -- Notice Incorrect/Missing TIN process, and

    • BWH "C" -- Notice Underreporter/Nonfiler process.

5.1.12.22.1  (08-05-2014)
"B" Backup Withholding Program

  1. The "B" BWH program provides notices to payers (a financial institution, business or person) who file information returns (the Forms 1099 listed below) with incorrect or missing Taxpayer Identification Numbers (TINs). Payers are required to send notices pursuant to Treasury Regulation 31.3406(d)-5(d).

  2. Notices CP 2100 and CP 2100A advise payers that BWH could become necessary if a payee (the recipient of a Form 1099) fails to certify his/her TIN.

  3. The "B" BWH program includes the following information returns:

    • Form 1099-B,

    • Form 1099-DIV,

    • Form 1099-INT,

    • Form 1099-MISC,

    • Form 1099-OID, and

    • Form 1099-PATR.

  4. Refer to the BWH "B" procedures contained in IRM 5.19.3.4.1, TIN-Related "B" BWH Notices (CP 2100 & CP 2100A), when you have a BWH "B" BAL DUE assigned to you.

  5. Find more detailed information on the BWH B rules and procedures for payers in Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s).

5.1.12.22.2  (08-05-2014)
"C" Backup Withholding Program

  1. The "C" BWH program provides notices to payees (recipients of the Forms 1099 listed below) who have underreported their interest or dividend income or failed to file a tax return reporting such income when required. Pursuant to Treasury Regulation 31.3406 (c)-1, payers are required to send notices.

  2. These notices inform payees that they are subject to BWH, and what payees can do to prevent BWH.

  3. The "C" BWH program includes the following information returns:

    • Form 1099-DIV,

    • Form 1099-INT,

    • Form 1099-OID, and

    • Form 1099-PATR.

  4. Refer to the BWH "C" procedures contained in IRM 5.19.3.4.2, Underreporter/Nonfiler "C" BWH Notices, when you have a case involving BWH "C" assigned to you.

  5. Find additional information for payers who need to start BWH "C" in Publication 1335, Underreporter Backup Withholding Questions and Answers.

5.1.12.22.3  (08-05-2014)
"C" Program Backup Withholding Procedures

  1. When a taxpayer requests to have BWH discontinued, and you have determined that one of the satisfying transactions listed in IRM 5.19.3.4.2.9, "C" BWH Satisfying Transactions, has posted to the taxpayer's account, prepare Form 4442, Inquiry Referral.

  2. Forward the completed Form 4442 to the Compliance Services Collection Operations (CSCO) operations in KCSC or PSC. See IRM 5.19.3.4.2.11(4), "C" BWH Procedures.

  3. Advise the taxpayer that he/she may file (or ask you to complete on his/her behalf) Form 911, Request for Taxpayer Advocate Service Assistance and Application for a Taxpayer Assistance Order. Explain that TAS only takes cases that meet its case criteria as explained in IRM 13.17.7. Situations where TAS case handling is appropriate include those where:

    1. the taxpayer is experiencing or may experience economic harm because he/she has limited income which is needed to meet necessary living expenses,

    2. BWH at the applicable rate will cause significant over-withholding, or

    3. the IRS office will not grant the relief requested or will not grant the relief in time to avoid the economic harm.

      Example:

      A taxpayer on a fixed income dealing with a catastrophic illness (and the related costly unreimbursed medical expenses) may want to file Form 911.

5.1.12.23  (08-05-2014)
Indian Tribal Governments

  1. IRC 7871,Indian Tribal Governments Treated as States for Certain Purposes, creates a unique relationship between Indian tribal governments and the United States government.

  2. The Indian Tribal Governments (ITG) office in the Tax Exempt and Government Entities (TE/GE) Operating Division was established in 2000 to assist Indian tribes with federal tax issues. The ITG office coordinates all aspects of tax administration as it impacts Indian tribes including direct assistance, indirect assistance, compliance checks, and examination of returns. The ITG office:

    • is responsible for ensuring that the Service is in compliance with the various Executive Orders outlining the relationships and protocols required in working with Indian tribes,

    • provides primary front-line service by five field groups which are aligned respective to tribal affiliations wherever possible, and

    • serves as the central point for all Service contacts with federally recognized Indian tribes.

  3. Refer to the following IRM sections for additional information:

    • IRM 4.86.1, Indian Tribal Governments Administration, and

    • IRM 4.88.1, Examination Issues Pertaining to ITG Cases.

5.1.12.23.1  (05-20-2008)
The Role of the ITG Specialist

  1. Indian tribal governmental accounts can be complex and involve an array of legal issues. The Indian Tribal Governments (ITG) personnel (i.e., ITG specialists) are specially trained in the unique areas of tax law and protocol that apply to Indian tribes.

  2. The ITG specialist will:

    • act as a liaison and central point of contact between the Indian tribal officials and the revenue officer (RO) assigned to the case and will advise the officials in advance of a visit from the RO.

    • assist the RO with case-related technical issues specific to Indian tribes.

  3. Tribal constitutions or tribal resolutions may designate a specific person to address tax matters. Land ownership legalities are outlined by treaty to ensure that legal rights are not violated. Technical issues specific to Indian tribes are listed below. This list is not all-inclusive.

    • Determining appropriate contacts within a tribe

    • Determining land ownership legalities unique to Indian tribes

    • Filing requirements

    • Conducting full compliance checks

    • Identifying leviable and non-leviable assets

    • Regulations

    • Treaties

    • Court decisions

    • Statutes

    • Tax law

    • Disclosure issues

  4. Special rules apply to Indian tribes for some tax returns. See IRM 4.88.1.5.3, Filing Requirements.

5.1.12.23.2  (08-05-2014)
Indian Tribal Government Procedures

  1. Identify Indian tribal government entities on IDRS by the business operating division (BOD) code "TE" and the employment code" I."

  2. Refer to IRM 4.88.1.4, Federal Tax Status Of Indian Tribal Governments, for information on federal taxation issues involving Indian tribal governments.

  3. Contact the local Area ITG group manager before making initial contact on Indian tribal government (ITG) accounts. Access the "How to Contact ITG" page at http://www.irs.gov/Government-Entities/Indian-Tribal-Governments/How-to-Contact-ITG to determine the appropriate ITG field contact.

    Note:

    The ITG Manager will assign an ITG specialist to work with you.

  4. Contact the ITG specialist when you:

    1. need to visit an individual tribal member on tribal land to work an IMF account,

    2. have questions about specific filing requirements, or

    3. you are contemplating taking any enforcement action.

  5. Do not assume that the CFO, Treasurer, or Tribal Administrator is the designated tribal contact.

  6. Work closely with an ITG specialist to determine the appropriate contacts within the tribes because the specific person to address tax matters with may be designated in a tribal constitution or through a tribal resolution.

  7. Coordinate with the ITG specialist as your central point of contact with the tribal officials. The ITG specialist will advise the officials of your planned visit.

  8. Keep the ITG specialist involved in material interactions between you, as the representative of the Service, and the tribal government.

  9. Maintain contact with the ITG specialist regarding:

    1. updated plans of action, and

    2. general case developments such as receipt of a new BAL DUE or DEL RET.

  10. Have the ITG specialist assist you in conducting a full compliance check.

  11. Inform the ITG specialist about any new ITG case issuances that are not properly identified as Indian tribal government accounts.

5.1.12.23.2.1  (08-05-2014)
Enforcement Action on ITG Cases

  1. The Service must comply with Presidential Executive Orders. See IRM 4.86.1.5, Tribal Sovereignty Overview.

  2. Special care must be taken to avoid violating Indian tribal legal rights because there are tribal sovereignty and land ownership legalities unique to Indian tribes which are outlined by treaty.

  3. Work closely with the ITG specialist before you take any enforcement action on an ITG account, including

    • filing a Notice of Federal Tax Lien

    • serving a levy

    • serving a summons

    • considering a seizure

    • assessing a Trust Fund Recovery Penalty (TFRP)

    .

  4. Ensure that you secure approval of the ITG Director before serving a summons, including summonses on tribal government or a third party for information concerning a tribal government.

5.1.12.24  (08-05-2014)
Outgoing Mutual Collection Assistance Requests

  1. The U.S. Tax Treaties with Canada, Denmark, France, the Netherlands, and Sweden provide that the treaty partner may request assistance from the IRS in collecting taxes owed to the treaty partner by its own citizens or residents, or other persons owing taxes to the treaty partner. This subsection discusses Mutual Collection Assistance Requests (MCARs) in general and specifically outgoing MCARs .

  2. The United States has entered into a number of bilateral tax treaties that contain broad provisions for assistance in collection. We currently have five mutual collection income tax treaty partners:

    1. Canada,

    2. Denmark,

    3. France,

    4. The Netherlands, and

    5. Sweden.

  3. The U.S. tax treaties with Canada, Denmark, France, the Netherlands, and Sweden provide that the treaty partner may request assistance from IRS in collecting taxes owed to the treaty partner by U.S. citizens residing in the United States. Such requests from the treaty partner to the United States are referred to as incoming Mutual Collection Assistance Requests.

  4. See IRM 5.1.8.7.7, Incoming Mutual Collection Assistance Requests (MCARs).

  5. The IRS can request assistance from our treaty partners to collect taxes owed by individuals residing and/or having assets in the treaty country. Such requests are outgoing mutual collection assistance requests. Outgoing mutual collection assistance requests are discussed below.

  6. These treaties provide that each country, upon request by the United States, may take whatever actions it would take to collect its own taxes in order to collect on behalf of a treaty partner (when requested to do so). This includes the collection of U.S. taxes through the treaty partner's bankruptcy proceedings.

    Exception:

    The treaties for Canada and Denmark provide that they will not collect from taxpayers who were Canadian and Danish citizens at the time the tax liability arose, regardless of what their citizenship may be now. The treaties for France, the Netherlands, and Sweden provide that they will not collect from their own citizens.

    Note:

    The treaties for France, the Netherlands, and Sweden provide that they will not collect from taxpayers who are respectively French, Dutch, and Swedish citizens at the time that the U.S. makes the collection request regarding the U.S. tax liability. .

  7. If a taxpayer was a dual citizen of the U.S. and the foreign country at the time the tax was due, consult the MCAR Coordinator assigned to the foreign country for advice on whether you can pursue collection. In general, when in doubt about the prior or present citizenship status of a taxpayer for whom you are considering an Outgoing MCAR referral, consult with the MCAR Coordinator.

  8. Both international revenue officers and domestic revenue officers who are trying to reach income or assets located in MCAR treaty partner countries can generate outgoing MCAR requests.

  9. All outgoing MCAR requests require coordination with the MCAR Coordinator.

5.1.12.24.1  (08-05-2014)
Role of the MCAR Coordinator

  1. The MCAR Coordinator will:

    • review all referred cases to ensure that they meet the MCAR criteria, and

    • handle the referred cases as displayed in the following table:

    MCAR Coordinator Action
    If Then
    The case is accepted The Coordinator will open a Collection Information Program (CIP) Case and document the ICS history.
    The case does not meet MCAR criteria The Coordinator will document the ICS history with the reason and return the referral to the originator.

    Note:

    It is important that the CIP, when created, be properly coded as France - Incoming, France - Outgoing, Canada- Incoming, etc. It is also important that the RO charge time accurately when working the CIP. This will allow accurate reporting of the resource hours given to working the MCAR program.

  2. The MCAR Coordinators are listed on the Mutual Collection Assistance Requests (MCAR) web page. The direct link to the page is: http://mysbse.web.irs.gov/Collection/international/mcar/default.aspx

5.1.12.24.2  (08-05-2014)
Coordinating with the MCAR Coordinator to Contact Treaty Partners

  1. Coordinate with an MCAR Coordinator when you:

    1. have any questions on the MCAR program, and/or

    2. need to make contact with a treaty partner.

  2. Do not make any contact with treaty partners. An MCAR coordinator will work with LB&I, Exchange of Information (EOI), for all contacts with the treaty partner..

  3. The MCAR Coordinators are listed on the Mutual Collection Assistance Requests (MCAR) web page. The direct link to the page is: http://mysbse.web.irs.gov/Collection/international/mcar/default.aspx.

5.1.12.24.3  (08-05-2014)
Outgoing MCAR Case Criteria

  1. This subsection discusses outgoing MCAR requests. In general, the outstanding balance, including accruals, must exceed the amount in IRM 5.1.8, Courtesy Investigations, in order to refer an outgoing MCAR case.

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

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

      Exception:

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

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

      Note:

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

  3. Contact the MCAR Coordinator via email at *SBSE International MCAR Coordinator. The MCAR Coordinators are listed on the Mutual Collection Assistance Requests (MCAR) web page. The direct link to the page is: http://mysbse.web.irs.gov/Collection/international/mcar/default.aspx .

  4. The type of U.S. taxes that can be collected by these treaty partners on behalf of the U.S. under an MCAR differs depending on the applicable treaty. See the table below.

  5. Refer the type of BAL DUE accounts displayed in the table below through the MCAR Coordinator.

    Exception:

    You may be able to transfer the case to an International collection group rather than to the MCAR Coordinator if you have verified that the taxpayer resides in a treaty country. See IRM 5.1.8.1.4, Account Transfers to International.

    :

    MCAR Referral to Countries with Treaty Collection Assistance
    Country Type of Taxes
    (1) Canada Any type of tax (including IMF & BMF)

    Exception:


    Do not refer Canadian corporations. In a case involving corporate taxpayers, provide evidence that the corporation is not a Canadian corporation.

    (2) Denmark Income Tax — IMF only
    (3) France Income Tax — IMF only, Estate Tax, and/or Gift Tax
    (4) The Netherlands Income Tax — IMF only
    (5) Sweden Income Tax — IMF only
  6. Outgoing MCAR referrals should not be made until all domestic sources of collection have been exhausted.

  7. Do not refer DEL RET accounts as treaty provisions prohibit the referral of DEL RETs.

5.1.12.24.4  (08-05-2014)
Procedures for Preparing an Outgoing MCAR Request

  1. Follow these procedures to request assistance from our treaty partners to collect taxes owed by individuals residing and/or having assets in the treaty country.

  2. Complete a Data Sheet for each case that you select for referral to a treaty partner. Exhibit 5.1.12-2, Outgoing MCAR Data Sheet, provides a Data Sheet template and instructions.

  3. Provide enough details on the Data Sheet so that the treaty partner will have adequate information to collect the tax on our behalf. Provide:

    1. details about the taxpayer,

    2. details about the tax assessment, and

    3. explanations about each of the liabilities you refer to the treaty partner.

  4. Do not provide the taxpayer's Taxpayer Identification Number (TIN) on the Data Sheet. 

    Note:

    Instead of including the taxpayer's TIN on the Data Sheet, include it in a secure email message to the MCAR Coordinator. See IRM 5.1.12.23.5, Procedures for Forwarding an Outgoing MCAR Request.

  5. Obtain MFTRA-U from IDRS to verify the taxpayer's citizenship, and document the Data Sheet.

  6. Attach the appropriate documentation to the Data Sheet based on the type of assessment as displayed in the following table.

    Attachments by type of assessment
    Type of Assessment Attachment(s)
    (1) TC 290 Adjustments IRPTR-O or MFTRAJ for each tax period.

    Note:


    Attempt to secure the Revenue Agent Report (RAR) if IRPTR-O or MFTRAJ are not available.

    (2) TC 300 Exam Assessments Revenue Agent Report (RAR) for each tax period (i.e., each TC 300 assessment), if available.
    (3) TC 290 or TC 300 SFR Assessments TXMOD (TC 150 followed by 0.00 and the Letters SFR at the end of the line)
  7. Proceed with an MCAR referral even if you are in doubt about whether or not it will be accepted (because of the exception above regarding the taxpayer's citizenship).

  8. Access the SB/SE MCAR web page at: http://mysbse.web.irs.gov/Collection/international/mcar/default.aspx and locate a blank data sheet by clicking on the MCAR Data Sheet link.

  9. Forward the Data Sheet (and attachments) as shown below

  10. See additional post-referral procedures below.

5.1.12.24.5  (08-05-2014)
Procedures for Forwarding an Outgoing MCAR Request

  1. Prepare a secure email message to your manager to forward the Data Sheet (and attachments).

    1. Name the pertinent country in the "Subject" line of the message.

    2. Include the taxpayer's Taxpayer Identification Number (TIN) in the body of the secure email message.

      Note:

      The MCAR Coordinator needs the taxpayer's TIN, however the treaty partner does not need the taxpayer's TIN.

    3. Request your GM to signify his/her approval of the outgoing MCAR request by "forwarding" the message to the MCAR Coordinator at: *SBSE C MCAR using secure email.

    4. Request your GM to include you on the "cc" line of the message.

      Note:

      Outgoing MCAR referrals generally should not be made until all domestic sources of collection have been exhausted.

  2. Send the message (and attachments) to your group manager (GM) using secure email.

  3. Ensure that you receive a copy of the forwarded message.

    Note:

    Follow up with your GM, if needed.

5.1.12.24.6  (05-20-2008)
Post-Referral Procedures

  1. Keep the domestic BAL DUE account open after you refer the outgoing MCAR case to the MCAR Coordinator until you have exhausted all domestic avenues for collection.

  2. Close the case appropriately once you have exhausted the domestic collection potential, i.e., as currently not collectible, continuous levy, etc.

  3. Keep the MCAR Coordinator informed of any changes to the account (i.e., funds collected, 53, etc.).

5.1.12.25  (09-20-2012)
Form 1127, Application for Extension to Pay Due to Financial Hardship

  1. IRC 6161(a)(1) provides that the IRS may extend the time for payment of the amount of the tax shown, or required to be shown, on any return for a reasonable period not to exceed 6 months from the date payment is due. Such extension may exceed 6 months in the case of a taxpayer who is abroad.

  2. IRC 6161(b)(1) provides generally that the IRS may extend the time for the payment of an amount determined as a deficiency of a tax for a period not to exceed 18 months from the date payment of the deficiency is due. In exceptional cases, this time period may be extended for a further period not to exceed 12 months.

    Note:

    If the deficiency is due to negligence, intentional disregard of rules and regulations, or to fraud with intent to evade tax, no extension shall be granted. IRC 6161(b)(3).

  3. An application for an extension of time to pay certain tax liabilities under IRC 6161 is made by timely filing Form 1127 (Rev. 02-2010), Application for Extension of Time for Payment of Tax Due to Undue Hardship. The types of taxes for which an extension to pay may be requested on Form 1127 are listed in the instructions to the form. These include income taxes, gift taxes, and certain excise taxes.

    Note:

    While IRC 6161 also provides for extensions of time to pay estate tax, such extensions must be requested on Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes. See IRM 5.5.5, Processing Estate Tax Extensions.

  4. Treas. Reg. 1.6161-1(b) provides that an extension to pay shall be granted only upon a satisfactory showing that payment on the due date will result in an undue hardship. The extension will not be granted upon a general statement of hardship.

    1. The term “undue hardship” means more than an inconvenience to the taxpayer.

    2. It must appear that substantial financial loss, for example, loss due to the sale of property at a sacrifice price, will result to the taxpayer from making payment on the due date.

    3. If a market exists, the sale of property at the current market price is not ordinarily considered as resulting in an undue hardship.

5.1.12.25.1  (09-20-2012)
Processing Form 1127 Applications

  1. With the exception of applications for an extension of time to pay a gift tax, all Form 1127 applications must be filed with the Advisory Group for the area where the taxpayer maintains his or her legal residence or principal place of business. See Pub 4235, Collection Advisory Group Addresses.

  2. Form 1127 applications for an extension to pay a gift tax reportable on Form 709 must be filed with the Estate and Gift Tax Unit in the Cincinnati campus.

  3. If a Form 1127 application is received in the wrong office, the receiving office will promptly forward the application to the correct office for processing.

  4. Treas. Reg. 1.6161-1(c) provides that Form 1127 applications will be examined, and within 30 days, if possible, will be denied, granted, or tentatively granted subject to certain conditions of which the taxpayer will be notified. The appropriate box at the bottom of Form 1127 must be checked to indicate whether the application has been approved, denied, or returned. A summary of the reason(s) for this determination should be included on the form and more specifically explained in a cover letter sent to the taxpayer.

5.1.12.25.2  (09-20-2012)
Returning Form 1127 as Nonprocessable

  1. The Form 1127 application must clearly be a request under IRC 6161 for an extension of time to pay due to undue hardship. These applications are often used incorrectly by taxpayers and their representatives. For example, Form 1127 may not be used to request an extension of time to file a return.

  2. Examples of possible incorrect uses of Form 1127 are listed in the Determination Chart on page three of the form. The chart also lists the correct forms to use, or actions to take, in order to obtain the relief incorrectly being sought by the taxpayer on Form 1127.

  3. There are strict time requirements for when a Form 1127 application must be filed with the IRS. If the form is not timely filed, it will be returned as nonprocessable. Use the postmark date of the application to determine whether it was timely filed.

    If Then
    the taxpayer is requesting an extension of time to pay a tax due on an upcoming return, the Form 1127, with supporting documents, must be filed on or before the due date of that return, not including extensions.
    the taxpayer is requesting an extension of time to pay an amount determined as a deficiency, the Form 1127, with supporting documents, must be filed on or before the due date for payment indicated in the tax bill.
  4. In addition to timely filing, there are a number of requirements for the Form 1127 application to be processable. The Form 1127 application must include the following information:

    • Taxpayer's name, address, and Tax Identification Number (TIN).

      Note:

      If the application is for a tax shown on a joint return or a joint liability for a deficiency, then both spouse's names should be included on the form in the order in which the names appear or will appear on the tax return, with the TIN of the spouse whose name appears first.

    • Whether the extension is being requested for a tax shown or required to be shown on a return, or for an amount determined as a deficiency.

    • The due date of the return or the due date for paying the deficiency.

    • The extension date proposed by the taxpayer.

      Note:

      An extension of more than six months to pay the tax shown on a return will generally not be granted. However, except for taxes due under IRC § 4981, 4982, and 5881, an extension for more than six months may be granted if the taxpayer is out of the country. An extension to pay a deficiency is generally limited to 18 months. However, in exceptional circumstances, an additional 12 months may be granted.

    • The amount of the tax liability for which an extension to pay is being requested.

    • The form number relating to the tax.

    • The calendar year or fiscal year of the tax.

    • An explanation of the undue hardship that will result to the taxpayer if the extension is denied.

  5. The following supporting documents must be filed with the Form 1127 in order for the application to be processable:

    • A statement of the taxpayer's assets and liabilities.

    • An itemized list of the taxpayer's income and expenses for each of the three months prior to the due date of the tax.

  6. The application must be signed by the taxpayer(s) or the taxpayer(s)' representative under penalties of perjury and dated.

  7. If the Form 1127 application does not meet the requirements listed above, it will be returned to the taxpayer(s) as nonprocessable. Check the "Returned" box at the bottom of the form and provide the reason(s) why the application is being returned.

  8. Applications that are nonprocessable may be signed by the Advisory Group Manager and returned to the taxpayer by form letter under the signature of the Advisory Group Manager. See Exhibit 5.1.12-4, Sample Letter Returning Form 1127 Application as Nonprocessable.

  9. Record the actions taken in the ICS history.

5.1.12.25.3  (09-20-2012)
Approving or Denying Form 1127 Applications

  1. If the Form 1127 application is processable, Advisory will determine whether the taxpayer has made a satisfactory showing of "undue hardship." See IRM 5.1.12.24, above.

    If Then
    Advisory determines that a taxpayer has made a satisfactory showing of undue hardship, the advisor or tax examiner will prepare a recommendation that the application be approved and forward the recommendation and the application through the Advisory Group Manager to the Advisory Territory Manager for final approval and signature. The advisor or tax examiner will also prepare a cover letter to the taxpayer for the signature of the Advisory Territory Manager.
    Advisory determines that the taxpayer has not made a satisfactory showing of undue hardship, the advisor or tax examiner will make a recommendation that the application be denied and obtain the concurrence and signature of the Advisory Group Manager. The advisor or tax examiner will also prepare a cover letter for the signature of the Advisory Group Manager explaining to the taxpayer the reason(s) why the application is being denied.
  2. The recommendation prepared by the advisor or tax examiner as to whether a taxpayer's application should be approved or denied must be in writing, but the format of the recommendation and the manner in which it is forwarded for review and approval may be established at the local level.

  3. Once a determination is made, the Form 1127 will be completed (marked "Approved" or "Denied" with a brief explanation) and signed by the appropriate IRS official. The advisor or tax examiner will prepare a cover letter for the signature of the Advisory Group Manager or the Advisory Territory Manager, as appropriate, informing the taxpayer whether the application has been approved or denied. The cover letter will be forwarded to the taxpayer along with a copy of the completed Form 1127. See Exhibit 5.1.12-5 Sample Letter Denying Form 1127 Application, and Exhibit 5.1.12-6, Sample Letter Approving Form 1127 Application.

  4. Document the ICS history with the actions taken. Retain a copy of the letter sent to the taxpayer and the Form 1127 with supporting documents in conformance with existing document retention guidelines.

5.1.12.25.4  (09-20-2012)
Processing Approved Form 1127 Applications

  1. If a Form 1127 application for an extension to pay for six months is approved, Advisory will prepare two Forms 4844, Request for Terminal Action. The first Form 4844 will request that a Transaction Code (TC) 470, no closing code, be input to the module and an Integrated Data Retrieval System (IDRS) control base opened. The IDRS control base will be assigned to the 10-digit IDRS number of the advisor or tax examiner requesting input of the TC 470, along with a request for input of the literal activity code “F1127EXT.” In addition, the Form 4844 will include a request for input of history bases with the following information: F1127EXT PAYMTDUE MMDDYYYY. The history base(s) will document the extended due date granted in case the taxpayer fails to submit payment when due. See Exhibit 5.1.12-7, Sample Form 4844, First Request for Terminal Action for Approved Form 1127 Extension.

  2. Ensure that the account is in status 20, 21, 54, 56 or 58 at input so that the status changes to status 47 as needed to keep the account in suspense. The TC 470 will delay issuance of the Taxpayer Delinquent Account (TDA). Request input of a second TC 470 after 11 weeks to ensure that the account remains suspended in status 47 as required. This will delay the TDA for a total of 26 weeks.

    Note:

    Without the control base, the TC 470 would release in only nine weeks, and three TC 470s would be needed.

  3. If an extension for a longer period of time is approved, request input of a TC 470 as needed to delay issuance of the TDA for the period of the extension.

    Note:

    Approval of the extension does not relieve the taxpayer from liability for interest that accrues during the period of the extension, but does provide relief from the failure to pay (FTP) tax penalty to the extended due date, even if the taxpayer fails to submit full payment by that date.

  4. To keep the FTP tax penalty from accruing, Advisory will prepare a second Form 4844 requesting input of TC 270, with $0.00 as the amount. See Exhibit 5.1.12-8, Sample Form 4844, Second Request for Terminal Action for Approved Form 1127 Extension. If the taxpayer fails to submit full payment of the tax due by the Form 1127 extension date, manual computations of the FTP tax penalty will be required thereafter. The FTP tax penalty starts accruing after the extension date. The IDRS command code COMPAF is used to complete manual computations of FTP tax penalties. See IRM 20.1.2, Penalty Handbook, Failure to File/Failure to Pay Penalties, for more information regarding the computation of the FTP tax penalty.

  5. Advisory is responsible for requesting input of the appropriate case controls, and manually monitoring the case to ensure the case controls reflect the extension. Advisory will request the abatement of the FTP tax penalty if erroneously assessed for the period the extension was granted. Additionally, Advisory will document the ICS history with the actions taken.

Exhibit 5.1.12-1 
Suggested Text for Letter to Taxpayer to Apply for Exemption for Religious Reasons

  1. Use Area Office letterhead paper to prepare a letter to notify the taxpayer to apply for exemption.

  2. The following table displays suggested content for this letter.

Suggested Text for Letter to Taxpayer to Apply for Exemption
Letter Content
Name and address of taxpayer
[Insert appropriate salutation]
Federal tax law exempts members of certain religious sects or divisions from paying social security and Medicare tax if they file an application that is approved on Form 4029, Application for Exemption from Social Security and Medicare Taxes and Waiver of Benefits.
We understand you may be eligible for exemption, but we have no record of receiving a Form 4029 from you. If you want to apply for exemption from social security and Medicare tax, please complete the enclosed Form 4029 and return it, with a copy of this letter, by the date shown below. An addressed envelope is enclosed for your convenience.
If we do not receive your application by the date shown, we will have to collect the social security and Medicare tax.
If you have any questions, please contact me at the telephone number shown above.
Thank you for your cooperation.
Sincerely yours,
[Space for signature]
Revenue Officer
Enclosures:
Form 4029
Copy of this letter
Envelope
Last day for filing Form 4029:

Exhibit 5.1.12-2 
Outgoing MCAR Data Sheet

  1. Use the information in the following table as a template for preparing a Data Sheet for an Outgoing Mutual Collection Assistance Request.

    Outgoing MCAR Data Sheet
    Data Sheet Content
    (1) Treaty Partner:
    (2) Date:
    (3) Taxpayer Identification Number:
    Do not include the taxpayer's Taxpayer Identification Number (TIN) on this Data Sheet.
    Instead, as directed in paragraph (4) of IRM 5.1.12.23.4, include the TIN in the body of the secure email message.
    IRM 5.1.12.23.4.
    (4) Name of Taxpayer:
    (5) Taxpayer’s Address:
    (6) Telephone/Fax Numbers:
    (7) Provide either of the following:
    Date and Place of Birth (individuals):
    Place of Incorporation (corporations):
    (8) Has the taxpayer been identified as potentially dangerous?
    (9) Specify any known income or assets the taxpayer may have in the treaty partner country.
    (10) What is the basis for the liability? Be specific, e.g., tax on return, SFR, unreported income, disallowed items, etc.
    (11) Notice of Federal Tax Lien Filing:
    When:
    Where:
    (12) Delinquent Account Information:
    Type of Unpaid Balance Accruals
    Statute of Tax Period of Assessments
    To:
    Total Due:
    Limitations Date:
    Total:
    (13) Is there any other information that the treaty partner should know?
    (14) Originating Office:
    (15) Name of Originator:
    (16) Originator's Telephone Number:
    (17) Originator's Signature:
    (18) Group Manager's Signature:
    (19) MCAR Coordinator's Signature:
    This information is being provided pursuant to the Income Tax Treaty in force between our two countries. The use and disclosure of this information must be governed by the provisions contained in the Income Tax Treaty.
  2. Follow the instructions in the following table for handling a Data Sheet.

Outgoing MCAR Data Sheet
Data Sheet Instructions
(1) The treaty partners and the types of tax covered are as follows:
- Canada: All Taxes
- Denmark: Income Tax
- France: Income, Estate, & Gift Taxes
- The Netherlands: Income Tax
- Sweden: Income Tax
(2) Include an address where the treaty partner can reach the taxpayer, including sending notices, even if the address is in the United States.
(3) Obtain the date of birth from INOLE-S or obtain the date of birth form MFTRA-U which also provides the place of birth.
(4) Include enough information so that we can explain the assessment to the taxpayer if they raise questions when he/she is contacted by the treaty partner. Identify:
- the income items used for an SFR, or
- the items disallowed, etc., from an Exam Report.

Note:

Include information on the corporation, other officers, etc.

if it is a TFRP assessment - only for a Canadian referral.
(5) File a NFTL before making a referral if appropriate, and include a copy with the referral.
(6) Calculate accruals to 180 days from the date of preparation of the form in item 2.

Note:

Calculate the accruals as of the date of preparation of the form - only for a Canadian referral.

Exhibit 5.1.12-3 
Field Collection Processing of Form 5792

  1. Use Form 5792 to request an IDRS manual refund. In Field Collection (FC), the form initiator (i.e., the revenue officer) requesting the manual refund will not complete the entire form because the form initiator will not be the form processor (i.e., the employee inputting CC RFUND). Additionally, Advisory personnel may need to complete certain information on the form.

  2. Use Form 3753, in conjunction with Form 5792, if:

    1. the refund is $10 million or more,

    2. a direct deposit is necessary, or

    3. the module(s) is(are) not on IDRS.

  3. Follow these instructions to properly prepare Form 5792:

    1. Prepare Form 5792 in triplicate.

    2. Complete each block on Form 5792 carefully and ensure all of the entries are legible.

      Note:

      Accounting will reject Form 5792 if the document contains any alterations such as white out, strike through or correction tape. See IRM 21.4.4.5.1 , Monitoring Manual Refunds, for controlling and monitoring requirements.

    3. Follow these line-by-line instructions:

      Section I — Account Information

      1. Block 1: Enter the Taxpayer Identification Number (TIN) and File Source of the account from which the refund will be issued.

      2. Block 2: Enter the Master File Tax Code (MFT).

      3. Block 3: Enter the tax period as YYYYMM. Exception: period ending for MFT 52 is always "000000" .

      4. Block 4: Enter the plan/report number, applicable for MFTs 46,74 and 76.

      5. Block 5: Enter the name control.

      6. Block 6: Leave blank. Campus personnel will enter the TC 840 amount (overpayment, plus allowable interest).

      7. Block 7: Leave blank. Campus personnel will enter the TC 770 amount (allowable interest). If no interest is being computed, campus personnel will enter "0" or ".00."

      8. Block 8: Enter the overpayment amount, (i.e., the amount being refunded, less allowable interest).

      9. Block 9: Enter the appropriate line number; follow these steps to determine the line number:

        • See Exhibit 12 in IRM 2.4.20, Command Codes RFUND and REFAP

        • Locate the MFT code for the applicable form number (i.e., Form 1040, 941, etc.) that corresponds to the MFT code from Block 2.

        • Locate the row that describes the reason for the refund in the columns entitled:

          • "Type of Refund"

          • "Description and Transaction Codes"

        • Use "Type of Refund" = "Other" when requesting a manual refund of levy proceeds.

      10. Block 10: Interest indicator must be entered.

        • Use an "N" for normal interest when interest is payable.

        • Use a "0" (zero) for no interest.

        • Use an "R" for restricted interest.

        Note:

        When requesting a manual refund of levy proceeds there is no interest paid.

        Note:

        If interest will be paid, you must also enter an interest "from" date in Section III. See IRM 20.2, Interest, for interest computations.

        Note:

        If any portion of the overpayment in Block 7 is attributable to a Telephone Excise Tax Refund (TETR), see IRM 21.6.3.5.13, TETR Interest - General Information , for information on TETR interest computations.

      11. Block 11: Leave blank. The form processor (i.e., the person who inputs the RFUND command code to IDRS) will complete this block.

      12. Block 12: Leave blank . The form processor (i.e., the person who inputs the RFUND command code to IDRS) will complete the sequence number.

      13. Block 13: Enter the block series, if needed. Use block series = "3, 4, 6, or 9" to identify why the refund is being issued. The fourth exhibit in IRM 2.4.20, Input Format, CC RFUND, defines some of the block series indicators.

        Note:

        Use block series "9" if the refund is to be issued in an injured spouse case. In most other cases, you will probably not need to complete this item. Enter a Bypass Indicator (BPI) code of "1, 2, 5, or 6" in Block 11, Section II, if you use block series = "9" . See IRM 21.4.6.4.2.1, TOP Offset Bypass Indicator (BPI).

      14. Blocks 14 -19: Enter the name and address of the payee:

        • Print using capital, block letters.

        • Use the ENMOD or INOLES information unless there is a name change, different address, or the refund is being issued to an injured spouse or third party. Ensure the address on Form 5792 (and Form 3753, if applicable) matches the address on Master File. Provide an explanation in the Remarks Section, Block 20, when the address does not match.

        • Do not address the first name line to a deceased taxpayer. Use the name and title, if appropriate, of the person claiming the refund as the payee for refunds issued on decedent accounts. See the following table of examples:

        Example:

        Person claiming the refund is: 1st name line 2nd name line
        Surviving spouse Jane Doe John Decd and Jane Doe
        Executor Jim Jones, Executor Peggy Jones, Decd
        Executrix Pamela Adams, Executrix Donald Duckworth, Decd
        Administrator Harry Johnson, Admin Fred Smith, Decd
        Court appointed or personal representative Joseph Long Ann Sterling, Decd
        Claimant Shelly Smith Jack Black, Decd
      15. Block 20: Annotate the specific reason for the refund in the remarks field. Include all pertinent information. Accounting will need to verify the interest dates are correct and the credit is available for refund.

      16. Block 21: Enter the initiating Business Operating Division (BOD)

      17. Block 22: Enter the document locator number (DLN) of the return or the credit. If the only DLN available is that of an electronically filed return, leave the field blank.

      18. Block 23: Check if the account has a bankruptcy indicator:

      19. Block 24: Check if the account contains a TC 130

        Section II — Manual Refund Authority

      20. Enter the IRM reference in Block 1c and complete all of the other applicable items. Seek Advisory assistance, if necessary:

        • Refer a large dollar manual refund, i.e., $1 million or more, that contains credit interest to Advisory for the interest computation and/or review and approval. See paragraph (6) of IRM 21.4.4.4, Preparation of Manual Refund Forms.

        • Follow these steps when requesting manual refund of levy proceeds:

          • Enter "IRM 5.11.2.3.5" in block 1c.

          • Check all other applicable boxes.

          • Do not request Advisory review/approval if the refund is under $1 million.

        Section III — Interest Computation

      21. Leave blank unless interest will be paid. Follow these steps if interest will be paid:

        • Enter the interest "From" date. See IRM 20.2, Interest, for interest computations.

        • Copy and paste the COMPA calculation into the "Remarks" block of Form 5792 (i.e., Block 20, Section I).

        • Campus personnel will compute the interest for the TC 770 amount and enter it in Block 7, Section I.

        • If the COMPA information will not fit in Block 20, paste it into the body of the transmittal email message.

        • Refer a large dollar manual refund (i.e., $1 million or more) that contains credit interest to Advisory for the interest computation and/or review and approval.

        • See IRM 21.4.4.4(5), Preparation of Manual Refund Forms.

        • Do not request Advisory review/approval when requesting a manual refund of levy proceeds if the refund is under $1 million.

        Note:

        No interest is paid on a manual refund of levy proceeds.

        Section IV — Manual Refund Approval

      22. Block 1: Leave blank. The form processor (the employee inputting CC RFUND) will enter his/her IDRS number.

      23. Block 2-3: Enter your name, employee IDRS number or badge number, and phone number.

      24. Blocks 4, 4a, and 5: Leave blank. The Area Director (AD) will sign in block 4, print his/her name in Block 4a, and enter the date in Block 5. Campus personnel will ensure the Approving Official who signs the refund is on the Authorized Signature List maintained by the Manual Refund Unit in the Campus Accounting Function.

  4. Review Form 5792 (and Form 3753, if applicable) to verify you completed any necessary IDRS research and completed the form accurately and legibly.

  5. Forward the form to Advisory, if applicable, via secure email.

  6. Secure approval from the group manager (GM), the Territory Manager (TM), and the Area Director (AD). IRM 5.1.12.20.1.8.

    Note:

    The Approving Official (i.e., the AD) will sign in block 4, print his/her name in Block 4a, and enter the date in Block 5. The Approving Official's signature certifies to the Accounting Function that the form was reviewed for accuracy and completeness. Campus personnel will ensure the Approving Official who signs the refund is on the Authorized Signature List maintained by the Manual Refund Unit in the Campus Accounting Function.

  7. Forward Form 5792 (and Form 3753, if applicable), to the Manual Refund Function for processing via secure email. IRM 5.1.12.20.1.8.

    Note:

    Accounting will validate the CC RFUND input with CC REFAP. If the data inputs for both CC RFUND and CC REFAP do not match, the TC 840 will unpost. See IRM 3.17.79.4.2 , RFUND/REFAP Mismatch .

Instructions for Advisory Personnel

Section I

  1. Ensure the form initiator made all the necessary entries on Form 5792 (and Form 3753, if applicable) appropriately and correctly; make corrections to the form(s), if necessary.

    Section II

  2. Ensure all applicable boxes are checked, including the IRM reference in Block 1c; make corrections to the form(s), if necessary.

    Section III

  3. Confirm the form initiator entered the correct "From" date, if applicable. Campus personnel will compute all the interest for the TC 770 amount, if applicable, and will enter the TC 770 amount (allowable interest) in Block 6, Section 1.

    Section IV

  4. Ensure the form initiator appropriately completed his/her name, employee IDRS number or badge number, and phone number in Block 2-3; make corrections to the form(s), if necessary.

  5. Review Form 5792 (and Form 3753, if applicable) to verify that:

    1. the manual refund is appropriate,

    2. proper IDRS research was completed, and

    3. the form(s) was(were) completed accurately and legibly.

  6. Forward Form 5792 (and Form 3753, if applicable), to the revenue officer, via secure email, to secure approval from the GM, the TM, and the AD.

Instructions for Form Processor

  1. The form processor will follow the applicable campus procedures.

Exhibit 5.1.12-4 
Sample Letter Returning Form 1127 Application as Nonprocessable

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Exhibit 5.1.12-5 
Sample Letter Denying Form 1127 Application

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Exhibit 5.1.12-6 
Sample Letter Approving Form 1127 Application for Extension of Time for Payment of Tax

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Exhibit 5.1.12-7 
Sample Form 4844, First Request for Terminal Action for Approved Form 1127 Extension.

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Exhibit 5.1.12-8 
Sample Form 4844, Second Request for Terminal Action for Approved Form 1127 Extension

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