5.1.12  Cases Requiring Special Handling

Manual Transmittal

August 05, 2014

Purpose

(1) This transmits revised IRM 5.1.12, Field Collecting Procedures, Cases Requiring Special Handling.

Material Changes

(1) IRM 5.1.12.1(2), Overview - Cases Requiring Special Handling, removed identity theft from list; these procedures have been moved to new IRM 5.1.28.

(2) Moved IRM 5.1.12.2, Identity Theft, in its entirety to new IRM 5.1.28.

(3) Added guidance to IRM 5.1.12.2, Disaster Assistance and Emergency Relief, most of which was previously contained in IRM 25.16.1.8.19, General CFf Operation Procedures (March 26, 2011).

(4) IRM 5.1.12.2.3, Field Collection (FC) Management Guidelines for Response to Disasters, added a new subsection.

(5) IRM 5.1.12.2.4, General Field Collection Operation Procedures, added a new subsection.

(6) IRM 5.1.12.2.5, Revenue Officer Inventory with “-O Freeze”, added a new subsection.

(7) IRM 5.1.12.3.2.1, Soft Contact, was moved and retitled to IRM 5.1.12.2.7, Soft Contact Procedures.

(8) IRM 5.1.12.2.6, Revenue Officer Inventory with “-S Freeze”, added a new subsection.

(9) IRM 5.1.12.2.8, Summons Enforcement, added a new subsection.

(10) IRM 5.1.12.3(1), Taxpayer Recording of Interviews, clarified that taxpayers have no specific right to make a video recording of an interview.

(11) IRM 5.1.12.17, Erroneous Refund Procedures For The Field, updated guidance added on how to detect and address erroneous refund situations.

(12) IRM 5.1.12.19.1.8, changed address for processing Form 3753, Manual Refund Posting Voucher, the form used to request manual refunds in excess of $10 million.

(13) IRM 5.1.12.24.1(1), Role of the MCAR Coordinator, added a note regarding the coding for a Collection Information Program.

(14) Updated addresses, hyperlinks, and IRM references throughout.

(15) Made editorial corrections throughout.

Effect on Other Documents

This IRM supersedes IRM 5.1.12, dated September 20, 2012. .

Audience

The target audience is revenue officers and other collection caseworkers in SB/SE Collection.

Effective Date

(08-05-2014)

Rocco A. Steco
Acting Director, Collection Policy
Small Business/Self Employed

5.1.12.1  (08-05-2014)
Overview — Cases Requiring Special Handling

  1. This IRM provides instructions and guidelines for working cases which require special handling. The procedures are written specifically for revenue officers; however, employees in other organizations and functions may also refer to these procedures if appropriate.

  2. Follow the appropriate procedures when you are working the specific type of case shown below:

    • Disaster/Emergency Relief

    • Taxpayer Request to Record an In-Person Interview

    • Authorized IRS e-file Provider

    • Income Tax Assessed Against a Child

    • Household or Agricultural Employee

    • Taxpayer in High Assault Risk Area

    • Innocent Spouse

    • Non-Petitioning Spouse

    • Child Support Obligation (CSO)

    • Taxpayer Exempt from Taxation for Religious Reasons

    • Insolvent Financial Institutions — Provisions of the IRS-RTC/FDIC Agreement

    • Foreign Insurance Company

    • Political Activity

    • Criminal Probation

    • Math or Clerical Error

    • Non-Receipt of Refund Check

    • False Refund Claim

    • Manual Refund

    • Refund Offset

    • U.S. Tax Court Subpoena

    • Backup Withholding (BWH)

    • Indian Tribal Governments

    • Mutual Collection Assistance Requests (MCARs)

  3. Refer to IRM 5.1.8.7, Courtesy Investigations Requiring Special Handling, for guidance on Courtesy Investigations which require special handling.

  4. Elevate any questions or concerns regarding these IRM procedures through your group manager (GM).

    Note:

    GMs must direct any procedural questions or concerns to the appropriate area contact for possible referral to Headquarters.

5.1.12.2  (08-05-2014)
Disaster Assistance and Emergency Relief

  1. This section contains disaster assistance and emergency relief operating guidance for Field Collection (FC) employees.

  2. Many taxpayers and tax practitioners in a covered disaster area may be unable to meet filing deadlines or make timely federal tax payments that become due shortly after the event.

  3. See IRM 25.16.1, Disaster Assistance and Emergency Relief, Program Guidelines, for administrative and policy procedures for the Disaster Assistance and Emergency Relief Program.

  4. See http://mysbse.web.irs.gov/supportingsbse/outcomact/outreach/disaster/default.aspx for additional disaster program information.

  5. See http://www.tris.irs.gov/fema/ for a listing of IRS assistance determinations by year.

5.1.12.2.1  (05-20-2008)
Disaster Freeze Codes

  1. There are two types of disaster freeze codes, the –O freeze and the –S freeze. Both freezes are established systemically for a specific period of time and for location(s) identified by postal zip code(s).

    1. The –O freeze provides systemic penalty, interest, and compliance relief and stops most compliance notices.

    2. The –S freeze will perform the same functions as the –O freeze but does not provide automatic compliance relief and will not stop generation of notices.

5.1.12.2.2  (05-20-2008)
Case Activity

  1. Cases remain in status 26 when the -O freeze is input. Group managers (GMs) may move cases out of revenue officer (RO) inventory into hold files pending the release of the -O freeze.

  2. Taxpayer contact is restricted on all –O freeze cases during the specified freeze period unless exigent circumstances apply, e.g., jeopardy condition, statute expiration, etc.

    Note:

    If the taxpayer initiates contact during the freeze period, interaction is permissible but agreements are voluntary and not enforceable for the period the -O freeze remains in effect.

5.1.12.2.3  (08-05-2014)
Field Collection (FC) Management Guidelines for Response to Disasters

  1. Within 24–48 hours following a major disaster, the Field Collection Territory Manager (TM) has the following options involving taxpayers residing in the general disaster area (by county or by zip code) pending receipt of the Disaster Relief Guidelines memorandum:

    1. Initiate Soft Contact Procedures per IRM 5.1.12.2.7 with the taxpayer to determine impact status prior to resumption of collection activity.

    2. Initiate an initial suspension of ALL collection activity (including soft contact) pending the initial determination of the exact disaster zip code areas and magnitude - no contact whatsoever.

  2. Based on the Disaster Relief Memorandum, the TM may be required to suspend compliance actions in each of the covered disaster zip code areas.

    Note:

    The -O freeze may cause drops in revenue officer case loads due to lack of assigned work when freeze is maintained in excess of 4–6 weeks.

5.1.12.2.4  (08-05-2014)
General Field Collection Operation Procedures

  1. If the taxpayer is affected in some way by the disaster, document the case history with information provided by the taxpayer and determine if a taxpayer needs any of the following:

    • Additional time to assess their impact of the disaster

    • An opportunity to provide a new financial statement to update their ability to pay

    • Information about filing a claim for a loss on his/her preceding year's income tax return.

  2. When collection activity is suspended because of a disaster:

    1. Do not initiate contact with taxpayers; however, taxpayers may wish to contact us to resolve their accounts.

    2. If a taxpayer-initiated contact occurs at any time after a disaster, use Soft Contact procedures per IRM 5.1.12.2.7 and ascertain the damage and hardship, if any, sustained by the taxpayer.

    3. If contacted by a taxpayer who states that they are not affected by the disaster, resume normal collection activity with managerial approval. Document the case history explaining the reason for the resumption of collection activity.

  3. At the end of the suspension period, resume taxpayer contacts within the covered disaster area, using Soft Contact procedures.

  4. When collection activity is not suspended during a disaster period:

    1. Commence taxpayer contact by using Soft Contact procedures and assessing the impact of the disaster event upon the taxpayer.

    2. Provide an opportunity, if appropriate, to defer action for a reasonable period of time.

    3. Resume normal collection activities if the taxpayer was not impacted.

    4. Review any outstanding letters/levies including those that were mailed immediately before the disaster since these are the most stressful to impacted taxpayers.

      Letters/levies issued just prior to the disaster may be rescinded immediately by the initiator to prevent any additional economic hardships to taxpayers unless it is known that the taxpayer has not been affected by the disaster event. Even when compliance activity has not been suspended, it may be appropriate to rescind certain letters or levies. Levies may be put on hold, as an interim measure, while determining whether to rescind or retain.

      Example:

      RO secured a Collection Information Statement (CIS) that indicates the case is Currently Not Collectible (CNC) but the taxpayer did not send in the verification of income and expenses by the deadline set by the RO and the levy was sent a few days prior to the disaster event. In this instance, since the CIS indicates this case is probably a CNC, the levy may potentially cause an additional hardship to the taxpayer if not released.

  5. Collection activities requiring action:

    1. Seizures in place during a disaster must be evaluated to ascertain possible seized property damage, security issues and, if applicable, disaster-related hardship conditions indicating that a release would be appropriate.

    2. For taxpayers whose addresses are not within a covered disaster area (and are not otherwise considered to be affected taxpayers), but who self-identify as being impacted and request disaster relief, input a disaster freeze code -S using the disaster relief dates as published in the Disaster Relief Memorandum. (See IRM 21.5.6.4.30(1) for information regarding the -S Freeze code.) The -O freeze may be input by Compliance employees if suspension of collection activities is warranted in accordance with the Disaster Relief Memorandum. (See IRM 21.5.6.4.37(7) for information regarding the -O Freeze code.) See disaster freeze input procedures at IRM 25.16.1.6 , Disaster Systemic Account Indicators.

5.1.12.2.5  (08-05-2014)
Revenue Officer Inventory with “-O Freeze”

  1. Upon expiration of the suspension of field collection contacts, implement Soft Contact procedures.

  2. If the contact results in information indicating that the taxpayer is not affected by the disaster and an -O freeze was placed on the entity:

    • Resume normal collection activity immediately with managerial approval. Do not remove the -O freeze as doing so will reinstate the penalty and interest that were previously waived.

    • Document the case history with the taxpayer's status regarding the disaster.

  3. Conversely, the taxpayer may provide information indicating that they have been impacted by the disaster event. If so:

    • Retain the -O freeze, do not take collection actions until after the predetermined release date has passed.

    • After the release date, ensure that the impact is not continuing prior to further collection action.

    • Document the case history with the taxpayer's status regarding the disaster.

  4. If an -O freeze is not present on the entity, but the taxpayer self-identifies as a disaster victim:

    • Establish a reasonable follow-up date with the taxpayer.

    • Submit Form 4844, Request for Terminal Action, to have a TC 971, Action Code 087 input on the tax account.

    • Document the case history with the taxpayer's status regarding the disaster.

5.1.12.2.6  (08-05-2014)
Revenue Officer Inventory with “-S Freeze”

  1. The -S freeze code provides filing and payment relief (interest and penalty relief) without systemically suspending collection activity.

  2. The -S freeze applies to returns and payments that are due during the disaster relief window. The -S freeze is not applicable to late filing and payment situations established prior to the filing and payment relief period that occurred in the Disaster Relief Memorandum.

5.1.12.2.7  (08-05-2014)
Soft Contact Procedures

  1. A soft contact entails approaching the taxpayer with caution and extreme sensitivity to their personal circumstances. Stress and fatigue are factors to consider even in instances where the taxpayer did not experience any personal, monetary, or physical damage from the disaster.

  2. Soft contact must be used when initiating a taxpayer contact to determine whether collection activity is appropriate. Soft contact is required in the following situations:

    1. Taxpayer is still affected by the disaster after the implementation of an -S freeze.

    2. Taxpayer is situated in an area where a disaster event has occurred, but collection activity has not been suspended.

    3. Taxpayer is situated in an area where collection activity was suspended, and the suspended end date has now passed.

    4. As a follow-up to a prior soft contact where it was determined that the taxpayer was affected by the disaster event at that point in time.

    5. Taxpayer initiated contact where the -O freeze is present.

    6. Voluntary commitments have not been made upon conclusion of the freeze.

  3. Any enforcement-related contact with a taxpayer in a covered disaster area must begin with an assessment of impact of the disaster on the taxpayer. The soft contact provides the opportunity to make that assessment on a case-by-case basis, enabling either:

    1. Resumption/initiation of collection activity because the disaster-related impact upon the taxpayer is no longer applicable.

    2. Postponement of collection activity to avert further hardship upon the taxpayer temporarily suffering the effects of a disaster event, or

    3. Identification of long-term disaster-related hardship that may indicate a currently not collectible case closure.

5.1.12.2.8  (08-05-2014)
Summons Enforcement

  1. If a summons was issued prior to the enforcement suspension period:

    1. Do not contact the taxpayer if located within the -O freeze area.

      Note:

      In the case of designated summons under IRC 6503(j), the statute of limitations on assessments is suspended for the period beginning when a lawsuit is filed in a court of law to either enforce or quash the summons. Discuss the proper enforcement action with your manager, Counsel, or other appropriate personnel

      .

    2. Do not enforce the summons.

    3. If the taxpayer initiates contact to comply with the summons, this is acceptable.

    4. If the taxpayer initiates contact to express inability to comply with the summons, attempt to reach agreement on a new enforcement date that falls after the suspension period. Reissue the summons after the suspension period for the agreed upon date, allowing for normal time lapse between service date after the suspension period ends and the summons appearance date. Confirm the taxpayer's future location for service of that summons.

    5. Once the suspension period has ended, a summons that was not complied with (other than designated under IRC 6503(j)) must be reissued.

5.1.12.3  (08-05-2014)
Taxpayer Recording of Interviews

  1. The taxpayer has the right under IRC 7521, Procedures Involving Taxpayer Interviews, to make an audio recording of an in-person interview. Under Notice 89-51, 1989-17 I.R.B. 21, ten calendar days advance written notice from the taxpayer is required.

  2. If the taxpayer does not provide ten calendar days advance written notice, then you have the option to either proceed with the interview as scheduled or to set a new date for the interview. The taxpayer must supply his/her own means of recording. The recording can be by tape, stenography, or other means at the taxpayer’s own expense. Taxpayers have no specific right to make video recordings of taxpayer interviews.

  3. The taxpayer or representative does not have the right to record a telephone interview, with or without the Service's knowledge. If a taxpayer begins to record a conversation during a telephone call, and you are aware of it, advise the taxpayer or representative that the recording must be stopped. If the recording is not stopped, politely terminate the call, and document your case history accordingly.

5.1.12.3.1  (08-05-2014)
Agree with the Request

  1. Agree to the request to record an interview after receiving GM approval. Upon receiving a proper written request, notify the GM, and ensure that the interview is scheduled for an IRS location and that working recording equipment will be available for the IRS to use to record the interview.

  2. When the recording equipment and/or a suitable location are not available, postpone and reschedule the meeting until the necessary equipment and a suitable location are available.

5.1.12.3.2  (09-20-2012)
Deny Requests for Video or Film Interviews

  1. Deny any request to videotape or film an interview.

  2. Attach a copy of the taxpayer's written request to film or videotape the interview to the case file.

5.1.12.3.3  (09-20-2012)
When to Interrupt the Recording

  1. The GM may stop an audio recording when the taxpayer’s behavior is clearly disruptive of the normal collection process.

  2. Attach a copy of the taxpayer's written request to make an audio recording of the interview to the case file.

  3. Note in your case history that your GM stopped the recording.

  4. Attach a copy of the recording to the case file.

5.1.12.3.4  (09-20-2012)
Audio Recording Procedures

  1. Arrange for your GM to be present at all times when a recording is being made.

    Exception:

    Arrange for another Service employee to be present if your GM is not available.

  2. Identify yourself, the date, time, place, and purpose of the meeting at the outset of the recording.

  3. Ask each participant in the meeting to do the following:

    1. identify themselves

    2. state their role in the proceeding

    3. acknowledge and consent to the making of an audio recording.

  4. Announce and identify additional participants when they arrive or when they leave during the meeting.

  5. Describe any written records presented during the proceeding in sufficient detail to make the verbatim recording a meaningful record when matched with the other documentation contained in the case file.

  6. State that the proceeding is completed and the recording is ended at the conclusion of the meeting.

  7. Turn the recording equipment off at the conclusion of the meeting.

  8. Attach a copy of the written request and the recording to the case file.

5.1.12.3.5  (05-20-2008)
Transcript of Recording

  1. Transcribe all or part of the recording when necessary to make the verbatim recording a meaningful record which can be matched with the documentation contained in the case file.

  2. The taxpayer may obtain a duplicate of the recording or a copy of our transcript of the interview provided the taxpayer pays for the cost of the reproduction or transcript in advance.

5.1.12.4  (05-20-2008)
Authorized IRS e-file Provider — Monitoring and Suitability

  1. The IRS performs monitoring and suitability checks on Authorized IRS e-file Providers. Monitoring may include reviewing IRS e-file submissions, investigating complaints, scrutinizing advertising material, checking adherence to electronic filing signature requirements, examining files, observing office procedures, and conducting suitability checks. Suitability checks are performed continuously regarding compliance issues.

  2. See IRM 3.42.10, Authorized IRS e-file Providers.

  3. See IRM 4.21.1, Monitoring the IRS e-file Program.

  4. Make a referral to the Andover Campus when you believe there are suitability issues regarding a Provider that need to be addressed:

    1. Send a suitability referral via email to "*IRS E~Helpmail " .

    2. Use secure email, as appropriate.

  5. Make a referral when you believe an e-file Provider requires monitoring.

    1. See IRM 4.21.1.4, Referrals .

    2. Exhibit 4.21.1-15, IRS e-File Monitoring Referral and Follow Up, contains the referral form template.

5.1.12.5  (09-20-2012)
Income Tax Assessed Against a Child

  1. IRC 6201(c), Compensation of Child, permits IRS to treat certain income tax assessed against a child, to the extent of the amount attributable to income included in the gross income of the child solely by reason of IRC 73(a), Treatment of amounts received , if not paid by the child, as having also been properly assessed against the parent.

  2. Refer to IRC 6201(c) and the related regulations for the authority to assess against a child and to treat such assessment as having been properly made against the parent.

  3. Attempt to collect income tax assessed against a minor child from the minor child. Use good judgment when collecting from the income/assets of a minor child.

  4. Attempt to collect income tax assessed against a minor child from the parent only if you are unable to directly collect it from the minor child.

  5. Do not assess any amount of unpaid estimated tax required to be paid under IRC 6654, Failure by individual to pay estimated income tax, or IRC 6655, Failure by corporation to pay estimated income tax.

    Note:

    Area Directors and Campus Directors are not allowed to assess any amount of unpaid estimated tax required to be paid under IRC 6654 or IRC 6655.

  6. Base any assessments on tax returns of the minor child rather than estimates.

5.1.12.6  (09-20-2012)
Household or Agricultural Employee

  1. Follow normal BAL DUE processing to collect tax on the wages of household or agricultural employees.

  2. To help prevent future delinquencies, ensure that taxpayers know about voluntary withholding of income tax from the wages of household and agricultural employees. .

  3. Follow these procedures if taxpayers' employees want their employers to withhold tax from their wages:

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

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

5.1.12.7  (08-05-2014)
Taxpayer in High Assault Risk Area

  1. lRM 5.1.3, Safety, Security, and Control, describes measures which may help ensure your safety in a HARA. The determination as to whether a particular area (i.e., a building(s) or zip code(s)) is a HARA will be made locally.

  2. Review IRM 5.1.3 and become aware of the measures which may help ensure your safety in a High Assault Risk Area (HARA).

  3. Use appropriate measures to ensure your safety when you attempt to collect on a case in a HARA.

  4. Develop awareness of the instructions in IRM 5.1.3 for reporting assaults or threats of force when you attempt to collect on cases in a HARA.

  5. Report any assault or threat of force which occurs during attempts to collect on cases in a HARA.

  6. Refer to IRM 1.4.50.10.4, Caseload Rotation, for further information regarding the periodic rotation of assignments located in a HARA.

5.1.12.7.1  (08-05-2014)
Coordinating with Examination on HARA Cases

  1. Follow these procedures when an Examination employee requests you to coordinate on an examination case on a taxpayer living in a High Assault Risk Area (HARA).

  2. Cooperate with any Examination employee who requests your assistance on an in-person taxpayer audit in the office.

    • In general, Examination is supposed to try to reduce the need for field Collection contacts by coordinating with revenue officers during the audit process when processing assessments on a taxpayer who lives in a HARA.

    • If Collection and Examination are in the same office, and the Examination employee is conducting an in-person taxpayer audit in the office, but the Examination employee cannot collect the balance due at the time of the audit, the Examination employee may request a Collection employee to meet with the taxpayer to attempt to secure levy sources and a payment agreement.

  3. Request that your manager create an ICS only case with pre-assessed balance due module(s) so levy sources will be available for cases which become BAL DUE.

    1. Use Form 4844 for levy source input to the IDRS Account Number File (ANF). These levy sources may come from an Audit Report, Form 9440, Taxpayer Levy Source and Contact Information , or current collection information obtained during such interviews described above.

    2. Be alert for HARA cases in which the proposed deficiency, including accruals, is less than BAL DUE deferral.

    3. Do not input any levy sources if the deficiency is below the routine BAL DUE issuance criteria included in paragraph (5). Even though the campus will generate a notice to the taxpayer, no BAL DUE will be issued in such cases.

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  5. Process payments received prior to receipt of the BAL DUE on Form 3244, Payment Posting Voucher:

    1. Request input of TC 640, and

    2. Use DPC 99 to denote advance payment of determined deficiency.

5.1.12.8  (08-05-2014)
Innocent Spouse Cases

  1. IRM 25.15, Relief from Joint and Several Liability, contains procedures for innocent spouse cases.

  2. Follow the procedures in IRM 25.15.8, Procedures for Working Innocent Spouse Relief Cases, and in the other IRMs, as applicable, to resolve cases with requests for relief from joint and several liability.

5.1.12.9  (05-20-2008)
Non-Petitioning Spouse Cases

  1. When one spouse files a U.S. Tax Court petition on a joint return deficiency and the other spouse agrees to the deficiency or takes no appeal action, two separate IMF MFT 31 BAL DUE cases will be issued. When the campuses prepare separate accounts, the BAL DUE and DEL RET separate accounts will be annotated as follows:

    1. One separate account will be annotated "Non-Petitioning Spouse" and the other separate account will be annotated "Petitioning Spouse" .

    2. Additionally, if two Areas are involved, both separate accounts will be annotated "two Areas" .

5.1.12.9.1  (08-05-2014)
Non-Petitioning Spouse Procedures

  1. There is no legal basis to abate the liability under IRC 6404. Instead, the payment by one spouse should be cross-referenced to the other, just as TFRP payments made by one responsible person are cross-reference to the other as provided in IRM 5.7.7.3, Cross-Referencing of Payments Made on Employer Balance Due and TFRP Accounts.

  2. Contact any other Area involved to determine if any collections have been made on the other spouse when these types of cases are in your inventory.

5.1.12.9.2  (05-20-2008)
Abatement of a Petitioning or Non-Petitioning Spouse's Liability

  1. Request a cross-reference of the payment to the other spouse's account when you collect some or all of the liability from either spouse.

  2. See IRM 5.7.7.3, Cross-Referencing of Payments Made on Employer Balance Due and TFRP Accounts.

5.1.12.9.3  (05-20-2008)
Additional Assessments to a Non-Petitioning Spouse’s Account

  1. Do not add additional assessments made as a result of a Tax Court decision to the non-petitioning spouse’s account.

  2. Consult Counsel if you have questions regarding the correct amount you should attempt to collect if a split-payment situation occurs.

  3. Prepare Form 3870, Request for Adjustment, to request any necessary adjustment.

  4. Attach a copy of the Tax Court decision to Form 3870.

5.1.12.10  (07-02-2010)
Child Support Obligation

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

  2. To meet Code requirements, Cincinnati Submission Processing will hold an account in Notice Status for 60 days after issuing notice and demand in the case of a first assessment against an individual.

  3. As new CSO certifications are received, but prior to assessing the liability, Cincinnati Submission Processing will send them to Campus Compliance Services (CCS) for review by a revenue officer.

  4. After assessing the liability, CSO BAL DUE cases will be assigned directly to Field Collection (FC).

  5. Upon issuance, CSO BAL DUE accounts are subject to immediate collection action by Field Collection (FC).

  6. BAL DUE accounts under this program will:

    1. reflect MFT 59, Tax Class 6

    2. bear the legend CSO, and

    3. include a copy of the certification sent to the revenue officer on a Form 3210, Document Transmittal, so that the pertinent information secured by the state agency will be available for revenue officer use.

  7. Since the CSO liability has been determined by a state court, the Service does not have abatement or compromise authority.

  8. In cases where a FC employee determines that there is an obvious error in the CSO assessment or the taxpayer produces evidence that he/she paid the respective state after the CSO assessment was made, any required changes to the amount of liability must be initiated by the state of jurisdiction. To modify or cancel a previous application, the state must submit a Form OCSE 20, Application for the Collection of Delinquent Support Payments by the Internal Revenue Service, to the Area Office of Child Support Enforcement (OCSE). In turn, the Area OCSE office will send the amended Form OCSE 20 to the Internal Revenue Service.

5.1.12.10.1  (07-02-2010)
Field Collection Review Prior to CSO Assessment

  1. Review any new CSO certifications you receive from Cincinnati Submission Processing.

    Reminder:

    Cincinnati Submission Processing may send new CSO certifications to Field Collection (FC) prior to assessing the liability as discussed above.

  2. Take the following action, as applicable:

    Field Collection Review Prior to CSO Assessment
    If Then
    The certification appears to be in order Return it to Cincinnati Submission Processing for assessment.
    1. Attach a copy of this IRM sub-section (IRM 5.1.12.10).

    The certification is not in order Return it to the approving Area official of the Office of Child Support Enforcement (OCSE), Department of Health and Human Services:
    1. Attach a cover memorandum explaining the reason for rejection.

    2. Send copies of the memorandum to Cincinnati Submission Processing and to the Campus Disclosure Officer for information purposes.

5.1.12.10.2  (09-20-2012)
Child Support Obligation Procedures

  1. Ensure the assignment of this type of case is appropriate for your grade level as these BAL DUE cases will not be generated with a predicted grade level.

    Note:

    Group managers will review the cases for level of difficulty and will assign the cases accordingly.

  2. Input TC 130, if it has not already been input, to put a freeze on any refund(s).

  3. Review all the state information forwarded with the certification.

  4. Follow normal field collection procedures in the collection of CSO BAL DUE cases subject to these five exceptions:

    1. Do not charge interest or penalties. See Treasury Regulation 301.6305-1(a).

      Exception:

      The penalty under IRC 6657 , Bad checks, for bad checks and the penalty under IRC 6332(d)(2), Penalty for violation, for failure to surrender property subject to levy, may be imposed.

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

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

    4. Do not apply IRC 6334(a), Property Exempt from Levy, with respect to unemployment benefits and certain annuity and pension payments to CSO liabilities.

      Note:

      See IRM 5.11.1.2.2.11, Issuing Notice of Intent to Levy for Child Support Obligation BAL DUEs, for further guidance.

    5. Do not abate or compromise a CSO liability. However, you may agree to an installment agreement with the taxpayer.

  5. Become familiar with the guidance in this subsection prior to making taxpayer contact.

5.1.12.10.2.1  (07-02-2010)
Contact with the Taxpayer

  1. Make contact with the taxpayer.

  2. Demand full payment.

  3. Make a collection determination:

    1. determine the maximum collection potential, as states are only to certify cases with good collection potential, and

    2. contact the state in cases where there does not appear to be good collection potential.

  4. Attempt to collect full payment.

  5. Take the following action, as applicable, if you do not collect full payment:

    1. Schedule a mandatory review when reporting a CSO BAL DUE currently not collectible for follow-up at intervals of no less than two years (unless the circumstances of a particular case indicate that such a review is unwarranted).

    2. Handle the account as a NMF installment agreement if you establish an installment agreement for regular payments. See IRM 5.14 , Installment Agreements.

  6. Follow the procedures below if you need to make contact with the OCSE Area representative or the state representative listed on the certification.

5.1.12.10.2.2  (07-02-2010)
Contact with the State on a Child Support Obligation

  1. Contact the OCSE Area representative whose name and telephone number are shown on the certification when it is necessary to discuss the case because:

    1. a CSO case has been in your inventory for 90 days,

    2. there is an obvious error in the assessment or the taxpayer produces evidence that he/she paid the respective state after the assessment was made,

    3. the case does not appear to have good collection potential,

    4. the state intervenes after the case has been certified to Collection (i.e., subsequent state court action, etc.), or

    5. you need to transfer a CSO account.

  2. Do not make inappropriate disclosures of taxpayer information.

5.1.12.10.2.2.1  (08-05-2014)
Appropriate Disclosure

  1. Refer to IRM 11.3.33, Other Disclosures to State and Local Governments, for guidance.

  2. Exercise care so that you disclose nothing more than the necessary CSO information, i.e., restrict disclosure to information specific to the CSO case including phone numbers, addresses, levy sources, etc.

  3. Disclose only activities relative to the collection of the CSO obligation to the state.

  4. Do not disclose information relative to the taxpayer's other tax obligations.

    Note:

    A good rule of thumb is, if in doubt about what information should be disclosed, forward the issue to the local Disclosure Office for review and approval prior to making the disclosure. The key is that any information to be disclosed will be limited to information about the investigation and collection of the CSO.

    Example:

    If the child support agency asked if the person owing the obligation owed any other federal taxes, that question would not relate to the CSO so no information in that regard should be disclosed.

5.1.12.10.2.2.2  (09-20-2012)
Contacting the State

  1. Contact the state child support agency by phone and/or mail to attempt to resolve a CSO issue.

  2. Prepare a brief narrative report in memorandum format if a phone call and/or letter with the state child support agency does not resolve the issue:

    1. outline the present status of the case, and

    2. define any issues.

  3. Route the memorandum as follows, via secure email:

    1. original — to the state — through the Area Disclosure Officer for review and mailing, and

    2. copy — to the Area Director's office — through your group manager and territory manager.

    Note:

    Your Area office will retain a copy of this report for possible review by Headquarters.

  4. Prepare Form 5482, Record of Disclosure, the first time you send a report to the state child support agency.

    Note:

    You do not need to complete a record of disclosure every time you contact a state child support agency.  See paragraph (5) of IRM 11.3.19.3, Form 5482 Procedure, to clarify when a record of disclosure might not be required.

  5. See IRM 11.3.19.3, Form 5482 Procedure, for further guidance.

5.1.12.10.2.2.3  (09-20-2012)
CSO Case in Inventory over 90 Days

  1. Prepare a brief narrative report in memorandum format outlining the present status of the case after a CSO case has been in your inventory for 90 days.

  2. Follow the steps listed above in IRM 5.1.12.10.2.2.2 regarding preparing and routing your report and preparing Form 5482 when you need to make a written report.

5.1.12.10.2.2.4  (09-20-2012)
Obvious Error in CSO Assessment or Paid CSO Assessment

  1. Follow these procedures after you make contact with the taxpayer if you determine that there is an obvious error in the CSO assessment or the taxpayer produces evidence that he/she paid the respective state after the CSO assessment was made:

    1. cease further collection action

    2. contact the Area OCSE representative whose name and telephone number are listed on the certification.

  2. Contact the state representative whose name and telephone number also appear on the certification if you were not able to resolve the problem with the Area OCSE representative.

  3. Follow the steps listed above in IRM 5.1.12.10.2.2.2 regarding preparing and routing your report and preparing Form 5482 when you need to make a written report.

5.1.12.10.2.2.5  (09-20-2012)
Case without Good Collection Potential

  1. Follow these procedures after you make contact with the taxpayer if you determine that the case does not appear to have good collection potential:

    1. contact the Area OCSE representative whose name and telephone number are listed on the certification, and

    2. determine if they can provide additional asset or income information.

  2. Follow the steps listed above in IRM 5.1.12.10.2.2.2 regarding preparing and routing your report and preparing Form 5482 when you need to make a written report.

5.1.12.10.2.2.6  (09-20-2012)
State Intervention after CSO Certification

  1. Follow these procedures if the state intervenes after the case has been certified to Collection (i.e., subsequent state court action, etc.):

    1. handle any request for state contact on a CSO BAL DUE assigned to you,

    2. contact the Area OCSE representative whose name and telephone number are listed on the certification

    3. determine what the issue is, and

    4. try to resolve the problem.

  2. Follow the steps listed above in IRM 5.1.12.10.2.2.2. regarding preparing and routing your report and preparing Form 5482 when you need to make a written report.

5.1.12.10.2.2.7  (09-20-2012)
Transferring a CSO Account

  1. Follow these procedures to transfer a CSO account:

    1. follow procedures for the transfer of NMF cases, and

    2. prepare a memorandum notifying the Area OCSE official of the transfer of the case.

  2. Follow the steps listed in IRM 5.1.12.10.2.2.2 above regarding preparing and routing your report and preparing Form 5482 when you need to make a written report.

5.1.12.11  (09-20-2012)
Taxpayer Exempt from Taxation for Religious Reasons

  1. Taxpayers can request exemption from social security and Medicare taxes for religious reasons. A taxpayer can request exemption from taxation by filing one of either of the two following forms:

    • Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or

    • Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.

  2. Refer to IRM 4.19.6, SSA Correspondence, Minister Waivers, and Application for Exemption from Social Security and Medicare. Sections 3 and 4 provide the actions the IRS takes to process these requests for exemption.

  3. Refer to Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, for more detailed information about Form 4361 and Form 4029 exemptions.

  4. See IRM 5.1.8.7.4, Exemption from Self-Employment Taxes, for procedures to follow when you receive a courtesy investigation on a religious exemption case.

5.1.12.11.1  (08-05-2014)
Form 4361 Exemption from Self-Employment Tax

  1. Form 4361 is submitted to apply for an exemption from self-employment tax by the following:

    • a duly ordained, commissioned, or licensed minister of a church

    • a member of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order)

    • a Christian Science practitioner..

  2. An applicant must certify that he or she, for reasons of either conscience or religious principles, is opposed to the acceptance (with respect to services performed in his or her capacity as a minister, member of a religious order not under a vow of poverty, or Christian Science practitioner) of any public insurance which makes payments in the event of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act)

5.1.12.11.2  (09-20-2012)
Form 4029 Exemption from Social Security and Medicare Taxes

  1. Form 4029 is submitted by members of recognized religious groups to apply for an exemption from Social Security and Medicare taxes. Form 4029 is first filed with the Social Security Administration (SSA), which determines whether the religious sect or division meets requirements for exemption. SSA then forwards Form 4029 to the Philadelphia Campus (the centralized Internal Revenue Service processing site for these forms) which is responsible for ensuring that:

    • the taxpayer is a member of the sect or division, and

    • the taxpayer waived all benefits and other payments under Titles II and XVIII of the Social Security Act.

    Note:

    While the IRS does keep track of whether a particular sect or a particular individual is exempt, it does not collect or maintain lists of members by religious sects or divisions.

    Note:

    The exemption does not apply to federal income tax.

5.1.12.11.3  (08-05-2014)
IDRS Religious Exemption Indicators

  1. Taxpayers are exempt from self-employment tax if the IRS approved their requests on Form 4361. These taxpayers are either:

    • ministers,

    • members of a religious order, or

    • Christian Science practitioners.

  2. Taxpayers are exempt from Social Security and Medicare taxes if they have an approved Form 4029 on file. These taxpayers are members of a sect or division that waived all benefits and other payments under Titles II and XVIII of the Social Security Act.

  3. IDRS should reflect an indicator if the taxpayer applied for an exemption from the following:

    • Social Security and Medicare taxes, or

    • self-employment tax.

  4. The indicator should reflect if the application was approved or denied.

  5. CC IMFOLE displays the "Ministerial SE Code." The display will show whether or not the taxpayer has filed for an exemption. It shows the "output code" as the "MINISTER SE CD." IMFOLE will display one of the following possible values:

    • 1 = Form 4361 Approved

    • 2 = Form 4361 Denied

    • 3 = Form 2031 Processed

    • 4 = Form 4029 Approved

    • 8 = Form 4029 Denied

    Note:

    The Form 2031, Waiver Certificate For Use By Ministers, Certain Members of Religious Orders, and Christian Science, indicator will remain on IDRS even though the form is now obsolete. This form will be reactivated for use if Congress passes a law for a to allow taxpayers to opt out of the exemption. Congress has done this twice:
    The Tax Relief Extension Act of 1999, Public Law 106–170 provided a limited period, during which ministers, certain members of religious orders, and Christian Science practitioners, who had an approved Form 4361 in place for tax year 1999, could file Form 2031 . This was an irrevocable election back into Social Security coverage for their ministerial earnings. This opportunity did not apply to Form 4029 filers.
    Congress provided a similar limited time waiver for ministers as a part of the Tax Reform Act of 1986 for tax years 1986 and 1987. Form 2031 was also used for this period.

5.1.12.11.4  (08-05-2014)
Religious Exemption Procedures

  1. Check for an indicator on IDRS to confirm that the taxpayer has received approval for exemption if a taxpayer states he/she is:

    1. exempt from Social Security and Medicare taxes, or

    2. exempt from self-employment tax.

  2. Find the "Ministerial SE Code" using CC IMFOLE to determine whether or not the taxpayer has filed for an exemption. It shows the "output code" as the "MINISTER SE CD." Check the value displayed on IMFOLE:

    • 1 = Form 4361 Approved

    • 2 = Form 4361 Denied

    • 4 = Form 4029 Approved

    • 8 = Form 4029 Denied

    Reminder:

    The Form 2031 indicator will remain on IDRS even though the form is now obsolete.

5.1.12.11.4.1  (05-20-2008)
Indicator is on IDRS

  1. Remember the following if an indicator is present:

    • An approved exemption only applies to earnings received for qualified services; it does not apply to any other income.

    • The exemption does not apply to federal income tax.

  2. Proceed with collection if the taxpayer owes federal taxes or federal tax returns for which he/she is not exempt.

5.1.12.11.4.2  (09-20-2012)
Indicator is not on IDRS

  1. Check IDRS for an indicator.

  2. Request that taxpayer provide an approved copy of his/her application if the indicator is not present or the taxpayer claims they received an exemption. Taxpayers must keep an approved copy of Form 4361 and 4029 in their permanent records.

  3. Request the taxpayer to prepare either Form 4361 or Form 4029 to request the appropriate exemption if the taxpayer does not provide an approved copy of his/her application.

  4. Obtain a completed Form 4361 or Form 4029, as applicable. Obtain the appropriate form in triplicate (an original and two copies).

5.1.12.11.4.2.1  (05-20-2008)
Form 4361

  1. Send the original and two copies of Form 4361 to the Philadelphia Campus Minister Waiver Unit. Philadelphia Campus P.O. Box 16325 Philadelphia, PA 19114-0425 Attn: BLN 4-G08-151 Minister Waiver Processing.

  2. Inform the taxpayer that after the IRS has reviewed Form 4361 and has made a determination, the IRS will return a copy of the Form 4361 to the taxpayer to inform him/her whether or not his/her exemption has been approved.

  3. If the copy of Form 4361 was not approved, the taxpayer is not exempt and is liable for all applicable taxes.

    Note:

    If the application was denied due to the lack of specific information, consider allowing the taxpayer to resubmit Form 4361. Be sure the taxpayer includes all required information that was lacking from the original submission.

  4. Proceed with collection if the taxpayer is not exempt.

5.1.12.11.4.2.2  (09-20-2012)
Form 4029

  1. See Exhibit 5.1.12-1 for suggested text to use for taxpayers seeking this exemption.

  2. Send Form 4029, the original and two copies, by mail to the SSA address in the Form 4029 instructions.

  3. Inform the taxpayer that before he/she will be notified by the IRS whether or not exempt status has been accepted:

    • SSA has to process Form 4029, and

    • IRS has to review Form 4029.

  4. The Commissioner of Social Security must determine that:

    • the sect or division has established teachings meeting exemption requirements,

    • it is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and

    • the sect or division has existed at all times since December 31, 1950.

  5. If the copy of Form 4029 was not approved, the taxpayer is not exempt and is liable for all applicable taxes.

    Note:

    If the application was denied due to the lack of specific information, consider allowing the taxpayer to resubmit Form 4029. Be sure the taxpayer includes all required information that was lacking from the original submission.

  6. Proceed with collection if the taxpayer is not exempt.

5.1.12.11.5  (05-20-2008)
Enforced Collection Action in Religious Exemption Cases

  1. Attempt to secure voluntary payment if the taxpayer:

    1. does not have an approved form, and/or

    2. does not file the appropriate form with you when requested to do so.

  2. Take any necessary enforced collection action within the limitations of IRM 5.11, Notice of Levy , if you do not secure voluntary payment.

5.1.12.12  (08-05-2014)
Foreign Insurance Company

  1. In accordance with Rev. Proc. 2003-78 and Rev. Proc. 2003-45 I.R.B. 1029, the Internal Revenue Service occasionally enters into agreements with foreign insurance companies (also known as captive insurance companies). One of the conditions of these agreements is that the insurance company provide a clean, irrevocable letter of credit to be held by the Area Director.

  2. Determine if a letter of credit is being held when you receive a BAL DUE on Form 720, Quarterly Federal Excise Tax Return, for a foreign insurance company with abstract number 30.

  3. Contact an Advisory and Insolvency (AI) Foreign Insurance Company advisor to help you make the determination and assist in the resolution of any BAL DUE/DEL RET issues.

    1. Advisory and Insolvency Foreign Insurance Company advisors are located in the Plantation, FL, post of duty.

    2. Click on the link below to take you directly to the Advisory and Insolvency web site: http://mysbse.web.irs.gov/AboutSBSE/Collection/fieldcoll/aiq/default.aspx.

5.1.12.13  (09-20-2012)
Political Organizations

  1. IRC 527 discusses political organizations . Public Law 93–625 established filing requirements for political organizations, such as committees, parties, associations, or funds, for tax years beginning after December 31, 1974.

  2. A political organization, whether or not it is tax-exempt, must file Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations, if it has any political organization taxable income.

    Note:

    An exempt organization that is not a political organization must file Form 1120-POL if it is treated as having political organization taxable income under IRC 527(f)(1).

  3. IRC 527(c) defines political organization taxable income as the excess of the following:

    1. gross income for the tax year (excluding exempt function income, defined below) over

    2. deductions directly connected with the earning of gross income (excluding exempt function income).

  4. Taxable income is figured with the following adjustments:

    1. A specific deduction of $100 is allowed (but not for newsletter funds),

    2. The net operating loss deduction is not allowed, and

    3. The dividends-received deduction and other special deductions for corporations are not allowed.

  5. Frequently, political organizations establish temporary entities during political campaigns. MFT 02 with a filing requirement 09 and a Computer Condition Code "G" identifies entities that are political organizations.

5.1.12.13.1  (09-20-2012)
Procedures for "G" Coded Political Activity Taxpayers

  1. Conduct a full compliance check on all "G" coded taxpayers.

  2. Recognize a "G" coded BMF taxpayer by TC 976.

    Note:

    The "G" code is placed on a return (by a campus employee during return processing) to indicate that the return is an amended, corrected, supplemental, tentative, or revised return. TC 976 is generated to replace a "G" coded TC 150 on the BMF. The "G" code applies to all BMF returns except setting of a freeze on Form 1065. The "G" code also applies to EPMF and IRAF. See Doc 6209 for more information.

  3. Review "G" coded accounts carefully for transferee situations, and pay particular attention to any periods not reflected on the "G" coded account.

  4. Process "G" coded accounts routinely in the absence of transferee situations.

5.1.12.14  (07-02-2010)
Criminal Probation

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

  2. For procedures relating to probation cases, see IRM 5.1.5, Balancing Civil and Criminal Cases.

5.1.12.15  (05-20-2008)
Math or Clerical Error

  1. Returns filed with math or clerical errors are usually corrected at the campus before notice and BAL DUE issuance, but sometimes a BAL DUE is issued before the error is resolved.

  2. The campus will input Freeze Code "G," on returns filed with math or clerical errors.

  3. Freeze Code "G" :

    • allows first notice issuance, and

    • suspends the account for 12 cycles.

  4. The 12-cycle suspense period is known as the "appeal period " .

  5. The campus will issue notices and a BAL DUE after the appeal period if:

    • the taxpayer responds within the appeal period and agrees with the assessment, or

    • the taxpayer does not respond within the appeal period.

  6. The campus will input TC 470 CC 94 "Claim Pending" if the taxpayer responds within the appeal period and does not agree with the assessment.

    Note:

    TC 470 CC 94 extends the appeal period with Freeze Code "J" .

  7. The campus will input TC 470 CC 94 "Claim Pending" if the taxpayer responds after the appeal period and does not agree with the assessment.

  8. The campus will abate the tax with TC 291:

    • if the taxpayer's claim is justified, the campus will issue a notice(s) and a BAL DUE(s) for that(those) module(s).

    • if the taxpayer’s claim is not justified, the campus will refer the case to Examination.

  9. The campus will freeze any existing credit while Examination works the case.

    Exception:

    Exempt organization returns are an exception, so any existing credit is not frozen.

    Note:

    The campus will issue notices and a BAL DUE for any module not affected by the claim.

  10. Refer to IRM 5.1.15, Abatements, Reconsiderations and Adjustments.

  11. TC 470 CC 90 is used for abatements, adjustments, and complicated payment tracers. TC 470 CC 90:

    • prevents the automatic offset of a credit balance on one module to a BAL DUE on another module,

    • changes a module to Status 53 on IDRS, and

    • is reversed by TC 472.

  12. The campus will input TC 470 CC 90 to restrict offset-in.

    Note:

    A credit may offset-in to a BAL DUE module when a credit or payment posts to a BAL DUE module that is full paid and the taxpayer has another open BAL DUE module(s); the computer offset process will offset the credit into the other BAL DUE(s). Offset-in happens when a taxpayer is due a refund on a module but has not paid another module(s). All or part of a refund may be used to pay all or part of a past-due amount. This includes past-due federal income tax, other federal debts (such as student loans), state income tax, and child and spousal support payments. The taxpayer will be notified if the refund he/she claimed is used to offset against a debt(s). See IRM 21.4.6, Refund Offset.

  13. Unless reversed sooner by TC 472, a module that was previously in:

    • Bal Due status will stay in Status 53 until resolved.

    • Notice status will remain in Status 53 until resolved, even after the restriction on offset-in expires.

  14. The restriction on offset-in caused by TC 470 CC 90 automatically expires after 26 cycles (weeks) for modules in notice status.

  15. There is no automatic reversal of the offset-in restriction for modules in BAL DUE status.

5.1.12.15.1  (05-20-2008)
Math or Clerical Error Procedures

  1. As noted above, the campus will input TC 470 CC 94 when they process a taxpayer response after the appeal period.

  2. Suspend collection action when you receive ICS notification TC 470 CC 94 input on a BAL DUE account.

  3. Do not take collection action against the portion of the liability affected by the math or clerical error.

  4. Contact the campus unit identified by the TC 470 CC 94 control base on IDRS if immediate collection action is necessary.

  5. Determine the amount affected by the claim and its status.

  6. Pursue collection only on the portion of the BAL DUE not affected by the claim.

  7. Do not pursue collection on the portion of the BAL DUE affected by the claim.


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