5.19.11  Withholding Compliance Program

Manual Transmittal

May 7, 2012

Purpose

(1) This transmits revised IRM 5.19.11, Liability Collection, Withholding Compliance Program.

Material Changes

(1) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.1.1 - Added Withholding Compliance Referral

(2) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.1.2 - Deleted employer definition

(3) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.3.1 - Updated Telephone Contact Procedures

(4) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.3.3 - Updated Case Documentation Procedures

(5) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.3.6.1 - Updated TAS Referral Procedures

(6) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.3.7 - Updated Installment Agreement procedures

(7) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.3.9 - Updated Rev. Proc. citation

(8) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.5 - Deleted NLW processing

(9) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.5.3.2(3) - Updated exceptions for lock-in letters

(10) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.5.3.3(2) - Updated SSN procedures

(11) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.6.1.3(1) - Updated contact information for WHC

(12) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.6.2.2(5) - Clarified WHC Referral processing procedures

(13) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.6.2.3(3) - Updated disposition procedures for Form 9045

(14) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7(15) - Updated SSN procedures

(15) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7.1(7) - Clarified verification requirements

(16) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7.1.1(2) - Clarified verification requirements

(17) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7.1.2.1(1) - Updated earnings amounts

(18) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7.1.4(2) - Added release procedures

(19) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.7.3 - Added note for taxpayers who are not subject to withholding

(20) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.10.7(2) - Changed disposition code to ERR

(21) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.10.8(5) - Added clarification on processing Clergy Taxpayers

(22) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.10.10 - Added section for Cautious Upon contact (CAU)

(23) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.10.14 - Revised entire section for ID Theft processing

(24) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.11.1.1 - Updated IRM reference for establishing a new account

(25) IPU 12U0572 issued 03-15-2012 IRM 5.19.11.11.3 - Revised language for civil penalty abatements

(26) IPU 12U0409 Updated IRM 5.19.11.7.3(1) - Release of Lock-in

(27) IPU 12U0281 Update IRM 5.19.11.7(9) - Responses and Redeterminations

(28) IPU 11U1751 issued 11-01-2011 IRM 5.19.11.6.2.2 - Updated to replace previously omitted procedures.

(29) IRM 5.19.11.6.2.2 - Updated to replace previously omitted procedures.

(30) IRM 5.19.11.6.1.1 - Updated referral criteria

(31) IRM 5.19.11.6.2.2 - Updated referral processing procedures.

(32) IRM 5.19.11.3.1 - Updated citation for delinquent return procedures.

(33) IRM 5.19.11.3.2.1 - Added reference to WHCS User Guide for additional information when updating WHCS.

(34) IRM 5.19.11.3.4(8) - Changed requirement to use Letter 4243C instead of Letter 3064C when notifying taxpayer that a third party inquiry was received.

(35) IRM 5.19.11.3.6 - Added procedures for referral to Identity Protection Specialized Unit (IPSU).

(36) IRM 5.19.11.5 - Added instructions for cases with scrambled SSN issues.

(37) IRM 5.19.11.5.3.2(3) - Added instruction to exclude employers making one-time payments to taxpayers from lock-in letter issuance when working Outcome 3 listings.

(38) IRM 5.19.11.7 - Updated citation to minimum wage requirements for lock-in issuance. Added instruction to send employer Letter 4074C if employer does not honor taxpayer's W-4 that results in more withholding than provided by the lock-in letter.

(39) IRM 5.19.11.7.1.2 - Added instructions for instances where the taxpayer requests modification to fewer allowances than calculated.

(40) IRM 5.19.11.7.1.2.1 - Added instruction to modify taxpayer who cannot provide enough information to find the EIN of the spouse's employer to Married with zero allowances. Added instructions for instances where the taxpayer requests modification to fewer allowances than calculated.

(41) IRM 5.19.11.7.1.3 - Clarified paragraph.

(42) IRM 5.19.11.7.1.4 - Added instructions when the taxpayer informs you that they have returned to work for an employer that had previously responded that the taxpayer no longer works.

(43) IRM 5.19.11.9(4) - Added instructions for processing Letter 4243C returned as undelivered mail with no forwarding address. Added instructions for processing undelivered Letter 2800C where subsequent Letters 2808C or 2809C were issued.

(44) IRM 5.19.11.10.5 - Added reminder not to use the term, Illegal Tax Protester, when documenting AMS.

(45) IRM 5.19.11.10.7 - Revised decedent procedures for clarity. Added instruction to input TC 972 AC 146 with disposition code "NLW" when reported wages belong to the decedent.

(46) IRM 5.19.11.10.13 - Updated instructions for inputting identity theft indicators.

(47) IRM sections were reordered and IRM citations were updated throughout.

(48) Editorial changes have been made throughout for clarity.

Effect on Other Documents

IRM 5.19.11, Withholding Compliance Program, dated 12-31-2010 , is superseded. All IRM Procedural Updates (IPU) published on SERP since the previous version dated 12–31–2010 have been incorporated--12U0572 (03/15/2012), 12U0409 (02/13/2012), 12U0281 (02/10/2012), 11U1751 (11/01/2011), 11U1686 (10/24/2011), 11U1632 (10/13/2011), and 110324 (02/09/2011).

Audience

Wage and Investment (W&I) and Small Business/Self-Employed (SB/SE) employees in Compliance and Customer Account Services (CAS). Large Business and International (LB&I) and Tax Exempt and Government Entities (TE/GE) employees working withholding compliance issues.

Effective Date

(05-07-2012)


Dagoberto Gonzalez
Director, Filing and Payment Compliance
Wage and Investment Division

5.19.11.1  (11-01-2008)
Withholding Compliance Program

  1. The mission of the Withholding Compliance program is to ensure that taxpayers who have serious under-withholding problems are brought into compliance with federal income tax withholding requirements. The program uses Form W-2, Wage and Tax Statement (W-2), information to identify taxpayers with insufficient withholding. The goal is to correct withholding to ensure that taxpayers have enough income tax withheld to meet their withholding tax obligations.

5.19.11.1.1  (03-15-2012)
Background

  1. The Withholding Compliance program replaced the Questionable W-4 (QW-4) program.

  2. The QW-4 program was designed to address those taxpayers attempting to circumvent the income tax withholding requirement by overstating their withholding allowances, or improperly claiming to be exempt from withholding. It was authorized by Treasury regulation (TD 7682) in 1980, with minor changes in subsequent years.

  3. Under the QW-4 program, employers were required to submit to the Internal Revenue Service (IRS) all Forms W-4, Employee's Withholding Allowance Certificate, that claimed complete exemption from withholding on wages of more than $200 per week or claimed more than 10 allowances.

  4. Under the QW-4 program, after making a determination based on the taxpayer's Form W-4, Employee's Withholding Allowance Certificate, the Service could issue a notice, commonly known as the "lock-in letter" . This notice directed the employer to disregard the taxpayer's Form W-4 and withhold using the marital status and number of allowances specified by the Service.

  5. After reviewing the program, the General Accountability Office (GAO) issued a report which questioned the effectiveness of the program. Among the issues raised by GAO were

    • Accuracy: IRS had no means to determine employer compliance with submission requirements.

    • Currency: IRS had no means to update information if the taxpayer subsequently submits a non-questionable Form W-4 to his/her employer.

    • Fairness: IRS only reviewed taxpayer data from employers who submit QW-4’s.

  6. In response to the report, the Service conducted a comprehensive review of the QW-4 program and developed the Withholding Compliance (WHC) program. WHC identifies potential withholding non-compliance cases based on a review of Form W-2, Wage and Tax Statement, rather than using Forms W-4, Employee's Withholding Allowance Certificate.

  7. Temporary regulations (TD 9196), which took effect on April 14, 2005, eliminated the requirement for employers to routinely submit copies of questionable Forms W-4 to the IRS. After review and consideration of comments responding to the notice of proposed regulations, final regulations (TD 9337) were issued on July 13, 2007. Employers are required to submit copies of any currently effective withholding exemption certificates only if directed to do so in a written notice from the Service to the employer, or if directed to do so under any published guidance.

  8. The Service will use information reported on Forms W-2 to more effectively identify taxpayers with withholding problems. In instances where a serious under-withholding problem exists for a particular taxpayer, the Service may issue a lock-in letter to the employer.

  9. Service employees can also refer taxpayers to the WHC program, when appropriate, for the issuance of a lock-in letter and/or assertion of a $500 civil penalty under IRC Section 6682 for providing false information on Form W-4 with respect to the taxpayer's withholding. All Service employees should consider making a referral (using the current version of Form 9045, Withholding Compliance Referral. See IRM 5.19.11.6.

5.19.11.1.2  (03-15-2012)
Authority Under the Internal Revenue Code (IRC) and Regulations

  1. Internal Revenue Code (IRC) Section 3402 and IRC Section 3403 provide the legal authority for the withholding of federal income tax from wages and other forms of income. IRC Section 3402 specifies the general form and content of withholding allowance certificates and outlines the basis for claiming withholding allowances or exemption from withholding.

  2. Regulations in 26 CFR Part 31, Employment Taxes and Collection of Income Tax at Source, provide guidance for implementation of IRC Section 3402.

  3. Section 31.3402(f)(2)–1(a) requires each employee to furnish his or her employer with a signed withholding exemption certificate on or before starting employment. The maximum number of withholding allowances to which an employee is entitled depends upon the following:

    • Marital status

    • Filing status

    • Number of dependents

    • Number of allowances claimed by a spouse (if any) on a Form W-4

    • Estimated itemized deductions, tax credits, and certain other deductions from income

  4. The requirement for employers to routinely submit copies of questionable Forms W-4, Employee's Withholding Allowance Certificate to the IRS has been eliminated. Regulations, as set forth in Section 31.3402(f)(2)–1(g), require employers to submit copies of any currently effective withholding exemption certificates only if directed to do so in a written notice to the employer or if directed to do so under any published guidance.

  5. An employer must honor a valid withholding allowance certificate furnished by an employee until the Service provides the employer with written notice to disregard it (a lock-in letter). The IRS may issue such a notice after it determines that an employee's withholding claim is unjustified based on IRS records without first obtaining a copy of the Form W-4, Employee's Withholding Allowance Certificatefrom the employer.

    1. The employer is required to withhold at the status and number of allowances specified in our notice. However, if the status and allowances claimed on the employee's current Form W-4, Employee's Withholding Allowance Certificate or a new Form W-4, Employee's Withholding Allowance Certificate will result in MORE income tax withholding than at the status and allowances specified in our notice, the employer must honor the Form W-4, Employee's Withholding Allowance Certificate.

    2. If an employee disagrees with our determination, he or she must contact the Withholding Compliance Unit and provide information supporting a change to the status and allowances specified in our notice.

  6. Section 31.3402(m)–1 of the Employment Tax Regulations specifies items used to compute withholding allowances. Estimated amounts of deductions, losses, and credits used to compute withholding allowances may not be more than:

    1. The amount claimed on the prior year tax return (or, if not yet filed, the tax return for the preceding taxable year) which the employee reasonably expects to show on the current year tax return, plus

    2. Additional amounts that are demonstrably attributable to identifiable events.

  7. An employee may claim exempt from withholding by furnishing the employer with a valid exempt Form W–4, Employee's Withholding Allowance Certificate, certifying that he/she:

    1. Had no tax liability for the preceding taxable year, and

    2. Expects no tax liability for the current taxable year.

  8. Exempt Forms W–4, Employee's Withholding Allowance Certificate, generally expire on February 15th of the year after they were furnished by the employee. If an employee fails to furnish a new Form W–4, Employee's Withholding Allowance Certificate the employer is required to withhold as if no valid Form W–4, Employee's Withholding Allowance Certificate was in effect, "single" status with"zero" withholding allowances. If, however, a prior Form W-4, Employee's Withholding Allowance Certificate is in effect for the employee, the employer must continue to withhold based on the prior Form W-4, Employee's Withholding Allowance Certificate. Refer to Publication 15, (Circular E), Employer's Tax Guide, for additional guidance.

  9. IRC Section 6682 and the related tax regulations allow the assessment of a $500 civil penalty on an individual for furnishing a false Form W–4,Employee's Withholding Allowance Certificate if:

    1. The statement made on the Form W-4, Employee's Withholding Allowance Certificateresults in less income tax withheld than would have been withheld if the Form W-4, Employee's Withholding Allowance Certificate had been correctly completed, and

    2. There was no reasonable basis for such a statement at the time that the statement was made.

  10. IRC Section 3403 makes an employer liable for tax imposed under IRC Section 3402 and the related tax regulations:

    1. The employer is liable for the appropriate amount of withholding whether or not it is actually deducted from the employee’s pay. This liability includes tax computed according to the withholding instructions we give the employer in a lock-in letter.

    2. Assessments under IRC Section 3403 are made by Employment tax examiners in the Technical Support function and by Revenue Agents in Examination.

5.19.11.2  (05-01-2006)
Overview of Withholding Compliance Processing

  1. This IRM section explains the Withholding Compliance process.

5.19.11.2.1  (02-10-2012)
Withholding Compliance Case Creation Using Forms W–2, Wage and Tax Statement

  1. Employers are required to give Forms W-2, Wage and Tax Statement to their employees by January 31st of the year following the year in which the wages were paid. A copy of Form W-2, Wage and Tax Statement must also be filed with the Social Security Administration (SSA) by the last day of February of the following year (March 31st if filed electronically). Form W-2, Wage and Tax Statement records filed with the SSA are subsequently transmitted to the IRS and loaded into the Information Returns Master File (IRMF).

  2. The Enterprise Computing Center (ECC) puts the Form W-2,Wage and Tax Statement record into a unique format for WHC. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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  3. The Form W-2, Wage and Tax Statement records are then sorted by Social Security Number (SSN) and Name Control. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Once the Forms W-2, Wage and Tax Statement are selected, ECC creates an inventory record using Form W-2, Wage and Tax Statement and Master File (MF) data and the following business rules are applied:

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      Note:

      BDAR = Transaction Code (TC) 150 amount – TC 430 and TC 670 prepayments paid before due date of return – TC 706 & TC 806 credits - TC 610 payments)

  4. Application of the WHC business rules results in three potential outcomes:

    • Outcome 1 : No tax compliance problem is indicated.

    • Outcome 2 : Withholding compliance problem was identified; lock-in letter systemically issued.

    • Outcome 3 : Withholding compliance problem was identified; manual review required prior to the lock-in letter issuance.

  5. WHC cases are created each August and December. Each calendar year, ECC will update all tax year dates to correspond to the current calendar year.

  6. Forms W-2, Wage and Tax Statement received from SSA after the initial case creation are considered "Additional Forms W-2" (AW2) and are processed by WHC at the end of each calendar year following the year in which the wages were paid.

5.19.11.2.2  (12-31-2010)
Campus Case Processing Overview

  1. WHC cases will be worked by the Withholding Compliance Unit at the Andover Compliance Campus.

  2. Organization Function Program (OFP) codes have been established for WHC.

  3. The following 97X transaction codes (TC) have been designated to identify actions on WHC cases:

    TC 97X Action Code Manual/Systemic Description
    971 146 Manual/Systemic
    • Lock-in Letter issued

    972 146 Manual/Systemic
    • Lock-in released

    • Lock-in issued in error

    971 147 Systemic
    • Outcome 3 case; listing generated

    971 148 Manual
    • Lock-in rate modified

    • Lock-in rate reviewed with no change

    971/972 149 Manual/Systemic
    • Reserved

  4. Taxpayers with unreversed TC 971 Action Code (AC) 146 transactions are identified by the following Individual Master File (IMF) entity indicator codes:

    • Integrated Data Retrieval System (IDRS) Command Code (CC) ENMOD screen: WHCCI>1

    • Corporate Files On Line (CFOL) CC IMFOLE screen: WHC

    Note:

    The entity indicator will be set on Outcome 3, referrals and other manually input cases when the TC 971 AC 146 transaction posts.

  5. TC 971 with AC 147 will be used to generate listings of Outcome 3 cases to the site to be worked. The transaction shows the reason code for Outcome 3 selection.

  6. Transaction Code (TC) 971 with Action Code (AC) 146 will post to Master File to identify Outcome 2 cases where a lock-in letter has been systemically issued. The transaction will appear on the year in which the taxpayer was locked in and will provide the following information:

    • TC 971 transaction date

    • Employer Identification Number (EIN) of taxpayer's employer(s)

    • Lock-in status and the number of allowances

  7. Subsequent transactions will be posted to the year in which the taxpayer was locked in.

  8. WHC case inventory will come from three sources:

    • Taxpayer correspondence and telephone calls

    • Listings containing Outcome 3 cases requiring manual review

    • Referrals, including special projects. See IRM 5.19.11.6, Referrals and Special Projects, for referral procedures.

  9. Cases will be batched through Account Management Services (AMS) and assigned to a tax examiner. AMS will open an IDRS control base using the year in which the lock-in letter was issued.

  10. Tax examiners will

    • Make lock-in determinations and issue lock-in letters

    • Reconsider previous lock-in determinations based on information supplied by the taxpayer

    • Assess and abate Form W-4, Employee's Withholding Allowance Certificate civil penalties

    • Address the entire taxpayer account by addressing all balance due and/or unfiled return issues

    • Update IDRS, Withholding Compliance System (WHCS), Account Management Services (AMS) as applicable

5.19.11.2.3  (12-31-2010)
WHC Letters and References

  1. WHC outgoing correspondence consists of the Correspondex generated letters shown below. Current versions of the letters are available on Servicewide Electronic Research Project (SERP) using the Forms/Letters/Pubs tab.

    Exhibit Letter
    Exhibit 5.19.11–1 Letter 2800C, WHC Lock-in Letter (To Employer)
    Exhibit 5.19.11–2 Letter 2801C, WHC Lock-in Letter (To Employee)
    Exhibit 5.19.11–3 Letter 2808C, WHC Modified Lock-in (To Employer)
    Exhibit 5.19.11–4 Letter 2812C, WHC Modified Lock-in (To Employee)
    Exhibit 5.19.11–5 Letter 2810C, WHC No Change (To Employee)
    Exhibit 5.19.11–6 Letter 2809C, WHC Release of Lock-in (To Employer)
    Exhibit 5.19.11–7 Letter 2813C, WHC Release of Lock-in (To Employee)
    Exhibit 5.19.11–8 Letter 2804C, Form W-4 Penalty Abatement Denied (To Employee)
    Exhibit 5.19.11–9 Letter 2811C, Form W-4 Penalty Abatement Accepted (To Employee)
    Exhibit 5.19.11–10 Letter 3042C, Information on the Legal Authority for the IRS Withholding Compliance Program (To Employee)
    Exhibit 5.19.11–11 Letter 4074C, WHC - Reply to Employer Inability to Change Automated W-4 System
    Exhibit 5.19.11–12 Letter 4243C, Withholding Compliance Additional Information Request

  2. The following forms and publications and notices are also used:

    • Publication (Pub.) 17, Your Federal Income Tax (For Individuals)

    • Pub. 5, Your Appeal Rights and How To Prepare A Protest If You Don't Agree

    • Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

    • Pub. 505, Tax Withholding and Estimated Tax

    • Pub. 514, Foreign Tax Credit For Individuals

    • Pub. 515, Withholding of Tax on Nonresident Aliens and Foreign Entities

    • Pub. 2105, Why Do I Have to Pay Taxes?

    • Pub. 15 (Circular E), Employer's Tax Guide

    • Pub. 972, Child Tax Credit

    • Pub. 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN)

    • Withholding Pay Period Calculator

5.19.11.3  (05-01-2006)
General Case Processing

  1. This section contains procedures for working withholding compliance cases.

5.19.11.3.1  (12-31-2012)
Telephone Contact Procedures

  1. In order to deliver quality customer service, address all of the taxpayer's issues related to withholding, filing and payment. To accomplish this, take all appropriate actions to correct withholding, address any balance due account(s) and/or solicit unfiled returns while the taxpayer is on the telephone.

    Note:

    If you determine that the taxpayer has obtained the WHC unit toll-free number erroneously and does not have a withholding issue, determine the taxpayer's specific issue. When you have determined the taxpayer's issue (i.e. backup withholding, balance due concern) transfer the call or provide him with the appropriate toll-free number. See Publication 4255, IRS Tax Help Bookmark.

  2. If translation is needed for non-English speaking taxpayers, offer the taxpayer Over-the-Phone Interpreter Service (OPI).

  3. The following steps should be taken on all calls:

    • Greet the taxpayer - Be sure to provide your name and identification number at the beginning of the call. For additional information, see IRM 21.1.1.7, Communication Skills.

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

    • To contact IRS, hearing impaired callers may choose to use the Federal Relay Service (FRS), a state relay service or any other relay service, or any third party assistant (friend or family). For further instructions concerning Hearing Impaired Calls refer to IRM 21.2.1.60, Hearing Impaired Callers and TTY/TDD Equipmentand IRM 21.3.8.5.1.2(3), Hearing Impaired Customers and TDD Equipment.

    • When contacted by an employer ask the caller for the name and Social Security Number (SSN) of the taxpayer to which the call relates, then document the taxpayer case as appropriate. If the employer calls for verification of a modification, provide the employer with the modified withholding status and allowances, only. Do not discuss Form W-4 calculations or case selection criteria. If an employer calls with a general question regarding WHC or the lock-in letter, document AMS under the EIN.

    • Disclosure verification must occur before assisting taxpayer on account related calls. Follow procedures in IRM 21.1.3.2.3, Required Taxpayer Authentication. If talking to the taxpayer's representative follow procedures in IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication then see IRM 5.19.11.3.4, CAF/POA Requirements.

    • Verification of the taxpayer’s phone number on ENMOD is required on all account related calls in which disclosure verification has occurred. When necessary, update this information. If ENMOD or IDRS is currently unavailable, follow-up action will be performed when systems become available.

    • Check Case Status - Check SUMRY and/or CC IMFOLI for any filing and/or payment delinquencies. See IRM 5.19.11.7, Responses and Redeterminations, for delinquent return procedures. See IRM 5.19.11.3.7, Installment Agreement (IA) Taxpayers, for installment agreement procedures.

  4. Key points for every call:

    • Maintain professional courtesy and tone.

    • Control direction of the call, keep focused on resolution of taxpayer’s issues.

    • Give accurate and complete assistance.

    • Place the taxpayer on hold when needed to perform research or complete case actions. Use the hold feature, not the mute feature. Advise the taxpayer of the reason for the delay (e.g., additional research needed, etc.), ask for permission to place the taxpayer on hold and wait for a response. Thank him or her for holding.

    • Take all appropriate steps to address any delinquencies while the taxpayer is on the telephone. Confirm to the taxpayer all the actions taken with the taxpayer.

  5. When working balance due accounts, follow procedures in IRM 5.19.11.3.7.1, WHC Initiated Installment Agreements. When working return delinquency accounts, follow procedures in IRM 5.19.11.7, Responses and Redeterminations. Document AMS with actions taken.

  6. If all case actions cannot be completed (i.e. breaks, lunch, tour of duty), insert case on AMS as correspondence and complete actions as soon as possible after your scheduled phone time.

5.19.11.3.2  (12-04-2009)
Case Research

  1. In order to make proper case decisions, research the systems shown below.

5.19.11.3.2.1  (02-09-2011)
WHCS

  1. WHCS provides information on the taxpayer, his/her employers, lock-in and/or other WHC letters issued, transaction dates, and lock-in rate, if applicable.

  2. See the WHCS User Guide for instructions on adding or updating taxpayer records.

5.19.11.3.2.2  (05-12-2010)
AMS

  1. WHC case actions are documented in the AMS history. WHC histories can be identified by the literal "WHC" .

5.19.11.3.2.3  (12-04-2009)
IDRS

  1. The TC 971 transactions are shown on IDRS.

  2. Case information can be verified through various command codes, including, but not limited to IRPTR, RTVUE, IMFOL, NAMES, and ENMOD.

5.19.11.3.3  (12-31-2010)
Case Documentation

  1. Complete and accurate case documentation promotes quality and consistency in working WHC cases.

  2. Document each taxpayer contact and/or action taken on the case in the AMS history.

  3. History entries will contain enough information so that any person subsequently reading the history can easily determine what decisions were made, why those decisions were made, what actions were taken, and what further actions are required to resolve the case.

  4. Complete documentation includes, but is not limited to the following:

    • A listing of verification documents or information requested from the taxpayer and/or employer

    • Taxpayer deadlines and follow-up dates

    • Telephone numbers provided in taxpayer contact

    • Address source, if other than ENMOD

    • Letters issued to the taxpayer and/or employer with EIN

    • Letters not issued to the taxpayer and/or employer with EIN

    • TC 971/972 AC 146/148 codes with appropriate disposition codes

    • Line by line summary of W-4 Worksheet calculations supporting any change in the lock-in rate

    • The specific reason for release of a lock-in letter

  5. Add or update case information to WHCS as appropriate. See the WHCS User Guide for instructions. Update IDRS and AMS as appropriate.

5.19.11.3.4  (02-09-2011)
CAF/POA Requirements

  1. Accountants, attorneys, enrolled agents, or other persons acting as representatives through whom a taxpayer requests assistance from the Service, must have a valid Power of Attorney (POA). For Centralized Authorization File (CAF) purposes, representative must submit a Form 2848, Power of Attorney and Declaration of Representative. Taxpayers may also authorize the release of their tax information to representatives and others through the use of a Form 8821, Tax Information Authorization. We refer to powers of attorney as "POAs" and tax information authorizations as "TIAs" .

    Reminder:

    Form 8821, Tax Information Authorization does not authorize discussion of collection issues.

  2. Any form used in lieu of these two forms should contain the following information:

    1. Name, and mailing address of the taxpayer

    2. Identification number of the taxpayer ( e.g., Social Security Number, Individual Taxpayer Identification Number (ITIN), Employer Identification Number)

    3. Name and mailing address of the representative(s)/appointee(s)

    4. The type of tax involved, the federal tax form number, the specific year(s)/period(s) involved (in estate matters the decedent's date of death), and specific tax matter or actions to be performed

    5. The taxpayer's(s') signature(s)

    6. In the case of a Form 2848, Power of Attorney and Declaration of Representative a completed Declaration of Representative (Part 2)

    Note:

    Item 2(g) above DOES NOT APPLY TO TIAs.

  3. The tax year listed on the POA or TIA must match the year in which you are working the withholding issue.

    Example:

    We issued Letters 2800C/2801C on a TY 2009 case in October, 2011. The POA or TIA form should contain the following information: Form 1040, Income Tax, for Calendar Year 2011.
    In the above example, if the letters were issued in January, 2012, the form should contain the following information: Form 1040, Income Tax, for Calendar Year 2012.

  4. If the POA or TIA form only includes the current year, you cannot discuss any other years. Ask the taxpayer's representative to submit a new form to cover the years to be discussed. Use general information to explain the Withholding Compliance program.

  5. If you are speaking to the taxpayer's representative by telephone, research IDRS using CC CFINK to determine if the POA or TIA is already on file. If the POA or TIA is on file, verify that it includes the correct tax period. If it does not include the correct tax period, or there is no record on CC CFINK, advise the taxpayer's representative to submit a new or updated signed form.

  6. If correspondence is received from a third party and there is no record on CC CFINK, or no Form 2848, Power of Attorney and Declaration of Representative or Form 8821, Tax Information Authorization attached, use Letter 135C to advise the third party that we do not have a POA form on file. Use paragraphs E or F, and H, as part of your response.

  7. If the Form 2848, Power of Attorney and Declaration of Representativeis attached to the taxpayer's correspondence, compare the information on the form with that found on CFINK to verify it is for the same tax period. If not present on CFINK and the form is acceptable, photocopy the form, attach the copy to the correspondence, and then fax the original to the POA functional processing area as specified in the Form 2848,Power of Attorney and Declaration of Representative instructions for processing.

  8. If authorization as in (2) above is not attached, before replying to a person other than the taxpayer who states he/she has a POA or TIA for the taxpayer, research the CAF using CC CFINK. Ensure that we have his/her POA or TIA on file before sending any information. If there is no POA or TIA, send the information directly to the taxpayer. Notify the taxpayer using Letter 4243C that a third party inquiry was received from (name), we have no record of a POA or TIA, and without a POA or TIA we are not permitted to furnish information to a third party.

5.19.11.3.5  (05-12-2010)
Invalid Form W-4

  1. DO NOT initiate a lock-in letter, reconsider or modify any previously issued lock-in letter, or process any referral based on an invalid Form W-4,Employee's Withholding Allowance Certificate.

  2. Any alteration of, or unauthorized addition to a Form W-4,Employee's Withholding Allowance Certificatemakes it invalid.

  3. Invalid Forms W-4,Employee's Withholding Allowance Certificatecan be recognized by

    • Deletion of the language of the jurat. For example: crossed out penalty of perjury statement above the signature

    • Defacement of the certificate

    • Any writing on the Form W-4,Employee's Withholding Allowance Certificate other than the entries requested

  4. An employer who receives an invalid Form W-4,Employee's Withholding Allowance Certificate from an employee must take the following actions:

    1. Inform the employee that the Form W-4,Employee's Withholding Allowance Certificate is invalid

    2. Request another Form W-4, Employee's Withholding Allowance Certificate from that employee

    3. Until the employee furnishes a new Form W-4, Employee's Withholding Allowance Certificate, withhold tax from the employee's wages at marital status single, with zero (0) allowances

    4. If, however, a prior Form W-4,Employee's Withholding Allowance Certificate is in effect for the employee, the employer must continue to withhold based on the prior Form W-4

  5. If an invalid Form W-4, Employee's Withholding Allowance Certificateis submitted with a referral, reject the referral. Notify the originator to advise the employer to follow the procedures outlined in (4) above.

  6. If the taxpayer submits an invalid Form W-4, Employee's Withholding Allowance Certificatein response to a lock-in letter, or with a request for reconsideration of a previously issued lock-in letter, issue Letter 4243C to advise the taxpayer that the Form W-4, Employee's Withholding Allowance Certificateis invalid and ask for a new one. DO NOT process any request for reconsideration based on an invalid Form W-4,Employee's Withholding Allowance Certificate.

5.19.11.3.6  (02-09-2011)
Taxpayer Advocate Service (TAS) and Identity Protection Specialized Unit (IPSU) Procedures

  1. TAS will forward Form 12412, Operations Assistance Requests (OAR), to the WHC TAS Liaison on Form 3210, Document Transmittal.

  2. The OAR will be assigned to the designated WHC employee(s) on a rotating basis for control.

  3. OAR cases take priority over other withholding compliance work.

  4. Review the OAR to see what action has been requested, research the taxpayer account on IDRS and the WHC database to determine what actions need to be taken. In most instances you will work the OAR as a redetermination request.

  5. If you can resolve the withholding compliance case from available information follow general case processing procedures.

    Reminder:

    You must print and attach any WHC letters you issue when working a TAS case.

  6. If additional taxpayer contact is needed, DO NOT contact the taxpayer yourself unless you have conferred with the TAS caseworker first.

  7. Once you have completed all actions necessary to close your case, update WHCS, notate your actions on AMS and also in Section VI, Part 1a, of Form 12412, Operations Assistance Requests (OAR).

  8. Regulations permit taxpayers to claim only the number of withholding allowances to which they are entitled. Withholding tax cannot be construed as a hardship.

5.19.11.3.6.1  (03-15-2012)
Referrals to TAS

  1. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7.2, TAS Case Criteria) and you can’t resolve the taxpayer’s issue the same day. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations.

  2. If the taxpayer's situation involves identity theft and meets TAS criteria 5 through 7, refer to Identity Protection Specialized Unit (IPSU). SeeIRM 5.19.11.3.6.1.1, Referrals to Identity Protection Specialized Unit (IPSU) .

5.19.11.3.6.1.1  (02-09-2011)
Referrals to Identity Protection Specialized Unit (IPSU)

  1. 1)As part of the Identity Theft Program, the Accounts Management (AM) IPSU Team will begin assisting taxpayers whose situations meet TAS criteria 5 -7 AND involve identity theft. Applicable cases will now be considered IPSU criteria. See the TAS Interim Guidance Memorandum (IGM) Control No.: TAS-13.1.16-1011-011 for TAS authority on what is eligible and what is not eligible for referral to IPSU.

    • See IRM 13.1.7.2, TAS Case Criteria regarding TAS criteria 1-4.

    • See IGM for the 8 exceptions to IPSU Processing.

  2. If a case meets IPSU criteria, refer the case to AM IPSU using Form 4442, Referral. The referral can be sent via secure e-mail to *W&I-ITAR when available, or by fax to the ID Theft fax line (978)247-9965 by COB the day the criteria was identified. The referral MUST contain all taxpayer’s correspondence with any attachments/documentation received with the case. An 86C letter or other applicable letter to the taxpayer is required.

5.19.11.3.6.1.2  (02-09-2011)
Processing Form 14103, Identity Theft Assistance Request (ITAR), Received From the IPSU

  1. The designated function employee will:

    1. Acknowledge receipt of identity theft cases referred using Form 14103, Identify Theft Assistance Request (ITAR), within 5 business days via secured email or fax number provided by the AM IPSU employee on the Form 14103, Identify Theft Assistance Request (ITAR),, Section II, Box 3.

    2. Process identity theft cases referred using Form 14103, Identify Theft Assistance Request (ITAR), as priority (similar to a TAS OAR).

    3. Review Section IV, Specific Assistance Requested, and determine whether the recommended action is appropriate and the requested completion date is reasonable.

    4. Contact the IPSU employee shown in Section II if there are questions regarding the recommended action or if additional time is required. The function and IPSU employees should reach an agreement on the substantive case issues, recommended actions and follow-up and completion dates.

    5. Provide the taxpayer with official closing documents as directed in their IRM and providing copies to the AM IPSU Caseworker.

5.19.11.3.7  (12-31-2010)
Installment Agreement (IA) Taxpayers

  1. Check case status on SUMRY. If status is 60, the taxpayer has an approved installment agreement. Work according to general processing procedures unless the taxpayer raises a concern about his/her ability to meet established IA payments.

  2. If the taxpayer raises this concern, use the Withholding Per Pay Period calculator to determine the taxpayer's new estimated take-home pay amount. Advise the taxpayer of the new estimated take-home pay amount and ask him or her how much he/she can continue to pay based on this amount.

    1. See IRM 5.19.11.3.7.1(2)(3), WHC Initiated Installment Agreements to determine if the taxpayer's new payment amount meets streamlined or regular IA criteria. Follow directions for the completion of the Form 4442, Inquiry Referral. On the referral form, request that the user fee be waived for any revised IA.

5.19.11.3.7.1  (02-10-2012)
WHC Initiated Installment Agreements

  1. If the taxpayer has a balance due account that is in status 22, refer them to the appropriate Automated Collection System (ACS) toll-free number.

  2. If the taxpayer has a balance due account which is not in status 22, the balance is less than $25,000.00 per SUMRY, has no missing returns for the past six years and will full pay within 60 months (balance divided by 60), complete Form 4442, Inquiry Referral. Forward the Form 4442,Inquiry Referral to the Balance Due section for resolution. Note WHC originator code "31" on Form 4442, Inquiry Referral. The Balance Due section will input the WHC originator code when the installment agreement is established.

  3. If the taxpayer has a balance due account which is not in status 22 and the balance is more than $25,000.00 per SUMRY, complete Form 4442, Inquiry Referral. Forward Form 4442,Inquiry Referral to the Balance Due section for resolution. Note WHC originator code "30" on Form 4442Inquiry Referral. The Balance Due section will input the WHC originator code when the installment agreement is established.

5.19.11.3.8  (12-31-2010)
Cases Assigned to Collection Field function

  1. When working a WHC case with at least one balance due module in status 26 and/or a Taxpayer Delinquency Investigation (TDI) assigned to Collection Field function (CFf) you must contact the Revenue Officer (RO) assigned the case.

    1. Research the RO by TSIGN/ZIP/STATE on SERP at http://serp.enterprise.irs.gov/cgi-bin/ROZIP_Search.cgi to identify the employee assigned the case.

    2. Before taking any further action on the case, advise the field employee of WHC case actions taken to date. Coordinate any additional WHC case actions with the employee.

  2. If the RO directs you to release the lock-in(s) take the following actions:

    1. Document the employee's name, employee number, and telephone number in the AMS history along with the actions requested and taken.

    2. Update WHCS.

    3. Resolve the case as directed.

  3. If the RO agrees that the lock-in(s) should remain in place and he or she can provide additional information to assist in the resolution of the WHC case, document the AMS history with the employee's name and employee number along with the additional information provided. Proceed to resolve the WHC case.

  4. If the RO does not respond to your initial contact attempt within one week, make a second call. Each attempted contact must be documented on AMS. AMS will update the status code on IDRS. Use CC ACTON to update the IDRS Control Base and History Information with the appropriate activity.

    • If you are still unable to reach the RO, leave a message requesting a return call within two days.

    • Advise him or her that you will proceed with general WHC case processing if he or she does not respond.

    • Document these actions in AMS.

  5. When working a WHC telephone call where the taxpayer account meets the conditions in (1) above, take the following actions:

    1. While the taxpayer is on the telephone, secure and document in AMS all necessary information to resolve the WHC case.

    2. Advise the taxpayer that you will coordinate with the assigned RO to resolve his or her case and he or she will be notified by mail of withholding case resolution.

    3. Follow procedures in (1) through (4) above.

5.19.11.3.9  (03-15-2012)
Lock-In Letters

  1. Letter 2800C and Letter 2801C, mailed to the employer and the taxpayer, respectively, are commonly known as the "lock-in letters" . Letter 2800C instructs the employer to disregard the Form W-4, Employee's Withholding Allowance Certificate submitted by the taxpayer and withhold at the marital status and the number of allowances determined by the Service. Letter 2801C advises the taxpayer that the employer has been instructed to disregard the Form W-4, Employee's Withholding Allowance Certificate submitted by the taxpayer and withhold at the rate specified in Letter 2800C, unless the Form W-4, Employee's Withholding Allowance Certificate results in more tax withheld than the lock-in letter.

  2. Mail Letter 2801C to the taxpayer's last known address as defined by Treas. Reg. Sec. 301.6212-2. As a general rule, the last known address is the address that appears on the taxpayer's most recently filed tax return or as updated by the National Change of Address (NCOA) database. For further guidance regarding the definition of the last known address see Rev. Proc. 2010-16, 2010-1 IRB 664.

    1. If the taxpayer's name and social security number (SSN) do not match, always use the Master File address (including reverse validity) belonging to the case SSN.

    2. If the last known address can not be determined (there is no entity on Master File), the Service may use the address on the majority of Form W-2s, Wage and Tax Statement for mailing the lock-in letter to the taxpayer. If each Form W-2, Wage and Tax Statement shows a different address, use the address on the Form W-2,Wage and Tax Statement showing the most wages. DO NOT update the taxpayer's address of record on Master File, but add the address information to the AMS history and to WHCS.

  3. Letter 2800C and Letter 2801C are mailed at the same time.

    • Letter 2801C instructs the taxpayer to respond to us within 30 days if he/she wishes to request a modification.

    • Letter 2800C instructs the employer to lock-in the employee starting with the first pay period ending on or after 60 days from the date of the letter. This ensures that the taxpayer has ample time to respond to the proposed lock-in.

5.19.11.4  (05-19-2010)
Outcome 2 Cases

  1. These cases meet lock-in criteria. Cases are systemically loaded into WHCS. They are designated as Outcome 2 on the WHCS Taxpayer Summary screen and WHCCI>1 on ENMOD. The TC 971 AC 146 appears on the tax year that the letter is issued.

  2. Letters 2800C and 2801C are systemically issued.

  3. See IRM 5.19.11.7, Responses and Redeterminations, for guidance in working telephone and/or paper responses to the letters.

5.19.11.5  (12-31-2010)
Outcome 3 Case Processing

  1. These cases meet lock-in criteria but fall into categories which require manual review by tax examiners before issuing Letter 2800C and Letter 2801C, commonly known as the lock-in letters.

  2. Outcome 3 cases will be issued on a weekly listing. The listing will contain the following literals identifying the category type: CID, DIS, SSN, IRS, ADD, AW2. Thoroughly research the account as the preceding Outcome 3 category types are not mutually exclusive.

  3. When working the listing, only research and work those employers shown on the listing. Research WHCS and IDRS to eliminate those employers who were issued lock-in letters in the past twelve (12) months. To determine whether a lock-in was previously issued, look for an unreversed TC 971 AC 146, cross-referenced to that employer, within this period. For those employers eliminated, update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

  4. Multiple taxpayers using the same SSN when filing their tax returns are classified as mixed entity or scrambled SSN cases. A mixed entity case is created when two or more taxpayers complete a tax return with the same TIN. The case becomes a scrambled SSN case when the true owner of the SSN cannot be identified.

    Caution:

    Do not take any action on cases with an open control base to the Scrambled SSN unit. Document AMS. Update WHCS with TC 972 AC 146 and disposition code "SSN" and close the case.

  5. If a lock-in letter to an employer was issued more than twelve months ago take the following actions:

    1. If your research shows that the lock-in rate has been modified within the past six months, as evidenced by a TC 971 AC 148, cross-referenced to that employer, do not issue another lock-in letter. Update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

    2. If your research shows that the lock-in rate has not been modified within the past six months and the taxpayer does not meet the exception criteria in (9) below, issue another lock-in letter at the single and zero rate. Add or update case information to WHCS as appropriate. See the WHCS User Guide for instructions. Update IDRS and AMS as appropriate.

  6. In some instances, Forms W-2 are issued on one-time payments to taxpayers. An example is proceeds from class action settlements suits. Eliminate this employer. Update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

    Note:

    A single payment received on an annual basis does not meet this criteria.

  7. If there is no evidence of a prior lock-in on WHCS or IDRS and the taxpayer has filed and full paid the most recent tax year due at the time you review the case, do not issue lock-in letter(s). Document the AMS history and update all employers on WHCS with TC 972 AC 146 and disposition code "CPL" . Do not update IDRS.

  8. Issue lock-in letters to all remaining employers on the Outcome 3 listing.

    Exception:

    Taxpayer is a statutory employee ( See IRM 5.19.11.10.11) or a household employee ( See IRM 5.19.11.10.6) or a 3rd party sick pay employee ( See IRM 5.19.11.10.12.) The Form W-2 was issued by an organization listed in Exhibit 5.19.11-13, International organizations Exempt from Federal Withholding Requirements. Update WHCS with TC 972 AC 146 and disposition code "NSW" and document AMS. Do not update IDRS.

    Reminder:

    When issuing the lock-in letter, always post the 971 transaction to the current calendar year.

  9. In addition, while working Outcome 3 cases, tax examiners must keep alert for those cases requiring special handling for issuance of lock-in letter. They are

    • Bankruptcy

    • Offer in compromise

    • Potentially dangerous taxpayers (PDT)

    • Cautious Upon Contact (CAU)

    These cases are generally identified by freeze codes or other indicators on IDRS. See IRM 5.19.11.10, Special Situations.

  10. All decisions NOT to issue a lock-in letter, except as specified in (3) through (10) above, require managerial approval. The basis for the decision must be fully documented in AMS.

  11. The following category types are designated as Outcome 3:

5.19.11.5.1  (12-31-2010)
Criminal Investigation Cases (CID)

  1. These cases are identified by the literal "CID" on the Outcome 3 listing.

  2. Verify on IMFOLI and/or ENMOD that the open CI indicators "-Z" or "Z-" are present. If one is present, print the IMFOLI or ENMOD screen, highlight the applicable indicator and route to the lead. The lead will follow local guidelines for contacting the appropriate CI function, if CI fails to respond to lead, close case as TC 972/146, ERR. If the indicator is not present, follow general processing procedures.

5.19.11.5.2  (05-19-2010)
Disaster Relief Cases (DIS)

  1. These cases are identified by the literal "DIS" on the Outcome 3 listing.

  2. Check IMFOLI for the "-O" freeze code. If one is present, take the following actions:

    1. Check IMFOLE for the most recent Transaction Code 971 with Action Code 086 and 087.

    2. Look for the disaster ending date, identified by the literal "DIS-END-DT:" mmddyyyy.

    3. If the current date is beyond the disaster ending date, then the disaster relief period has ended. Follow general case processing procedures.

    4. If the disaster relief period has not ended, do not issue lock-in letters. Update WHCS with TC 972 AC 146 and disposition code “ERR”. Document AMS. Do not update IDRS.

  3. If the taxpayer self-identifies and qualifies for an "-O" freeze but no "-O" freeze is present, verify that the taxpayer’s zip code is among those of the affected areas during the disaster period. See IRM 25.16.1.7.5(4), Accounts Management for instructions on manually setting the "-O" freeze.

  4. The "-S" freeze is the disaster Indicator for taxpayers in a minor disaster area. This freeze does not stop WHC processing.

5.19.11.5.3  (12-04-2009)
SSN Issues (SSN)

  1. These cases are identified by the literal "SSN" on the Outcome 3 listing.

  2. This category includes taxpayers with

    1. More than twenty Form W-2 records associated with their SSN's in a given tax year

    2. Missing SSN's

    3. SSN and name mismatches

5.19.11.5.3.1  (06-07-2010)
Missing SSN's

  1. If the SSN is missing or is all zeros, research using CC NAMES to find a valid Taxpayer Identification Number (TIN).

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

    Note:

    Add the valid TIN to the Other TIN field on the WHCS Taxpayer Detail screen.

5.19.11.5.3.2  (02-09-2011)
SSN and Name Mismatches

  1. A WHC mismatch is defined as those instances where the taxpayer's name on the Form W-2, Wage and Tax Statement, does not match the name associated with that SSN on Master File.

    Reminder:

    Research IDRS for reverse validity of the SSN. If the TC 971 AC 147 is found on the reverse validity, document AMS on both valid and reverse validity sides.

  2. Work only the name on the Outcome 3 listing.

  3. Issue letters to all employers on the listing unless

    1. A lock-in letter was issued more than eighteen months ago and your research shows that the lock-in rate has been modified within the past six months, as evidenced by a TC 971 AC 148, cross-referenced to that employer, do not issue another lock-in letter. IRM 5.19.11.5(6), Outcome 3 Case Processing

    2. the taxpayer is a statutory employee, household employee, or receives 3rd party sick pay.IRM 5.19.11.5(7),Outcome 3 Case Processing Or

    3. The Form W-2, Wage and Tax Statementwas issued by an organization listed in Exhibit 5.19.11-13, International Organizations Exempt from Federal Withholding Requirements.IRM 5.19.11.10.14,Taxpayers Employed by International Organizations.

    4. One-time payment to taxpayer on Form W-2. IRM 5.19.11.5(7), Outcome 3 Case Processing.

  4. Issue Letter 2801C to the name on the listing using the Master File address. If there is no account on Master File, use the address shown on the majority of Forms W-2, Wage and Tax Statement. If each Form W-2, Wage and Tax Statement shows a different address, use the address on the Form W-2, Wage and Tax Statement showing the most wages.

  5. Input the appropriate transaction code to IDRS using the SSN on the listing. If there is no account on Master File do not input TC 971.

  6. Document AMS with the name from the listing to which the WHC letters were issued as well as all actions taken. Update WHCS.

5.19.11.5.3.3  (12-04-2009)
Working Responses

  1. If the taxpayer has filed under a different TIN (such as an ITIN, Temporary TIN, other SSN) verify that the wages shown on the Form(s) W-2, Wage and Tax Statement were reported. If the wages were reported follow procedures in the table below:

    If Then
    The taxpayer has filed and paid the most current return due Release the lock-in.
    • Issue Letters 2809 and 2813

    • Input TC 972 AC 146 with TC 972 Disposition Code "CPL"

    • Close the case on WHCS using Referral Disposition Code "RJ2"

    • Update AMS with the TIN the taxpayer files under and the actions taken.

    Advise the taxpayer that if future Forms W-2 and TINS do not match, they may be locked in again.
    If the taxpayer has filed the most current return due but has a balance due Follow general procedures compute allowances and issue modification letters as appropriate.
    Advise the taxpayer that if future Forms W-2 and TINS do not match, they may be locked in again.

  2. If the taxpayer has not filed

    1. Advise the taxpayer that all income must be reported on a tax return.

    2. Refer him or her to the Social Security Adminstration (SSA) for help in getting an SSN. Any employee who is legally eligible to work in the United States and does not have a social security number can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. The taxpayer can get this form at SSA offices, by calling 1-800-772-1213, or from the SSA website at www.socialsecurity.gov. If the taxpayer is not eligible to obtain an SSN, refer the taxpayer to the IRS toll-free number or www.irs.gov for information about getting an ITIN. See Pub 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN) for additional information.

    3. Set deadline for filing.

    4. Follow general procedures to compute allowances and issue modification letters as appropriate.

  3. If taxpayer has obtained both a valid SSN and an ITIN, encourage the taxpayer to contact the ITIN Unit to have the valid SSN credited for returns filed under the ITIN. Explain and encourage the taxpayer to report all wages and file all future returns using the valid SSN.

5.19.11.5.4  (12-04-2009)
IRS Employees (IRS)

  1. These cases are identified by the literal "IRS" on the Outcome 3 listing.

  2. Check IMFOLI for the IRS employee indicator: the literal "IRS Employee." If present, print the IMFOLI screen, highlight the indicator and route to the lead.

  3. Because of the sensitivity of these cases, the lead will assign them to a designated WHC employee.

  4. Work these cases using general procedures.

    Note:

    These accounts and related correspondence and documents must be kept in a locked file cabinet. Maintain the files for one year. Dispose of files older than one year using established procedures for "secure shredding."

5.19.11.5.5  (03-15-2012)
Incomplete or Foreign Address (ADD)

  1. These cases are identified by the literal "ADD" on the Outcome 3 listing.

  2. The following case types are included in this category:

    • Incomplete taxpayer address or missing Master File entity

    • Incomplete employer address or missing Master File entity after Payer Master File (PMF) research

    • Foreign address

    • Army Post Office (APO) and Fleet Post Office (FPO) addresses

  3. Take the following actions for incomplete employer address cases:

    1. Conduct research using available internal sources such as CFOL CC BMFOLE, CC PMFOL and CC NAMEE. If unsuccessful, eliminate that employer. Update WHCS with TC 972 AC 146 and disposition code “ERR”.

    2. Once you have found a good address, follow general procedures.

  4. Conduct research using available internal sources such as CFOL CC IMFOLE and CC NAMES for incomplete taxpayer address cases.

  5. When requesting a Correspondex letter addressed to a taxpayer with foreign address, make sure that the address is formatted correctly. If necessary, enter the Foreign Address indicator (#) and then format the City, State, & Zip field as needed in order to properly address the letter.

  6. Provide overseas taxpayers with the WHC local telephone number, (978) 474-1622, instead of the toll-free number.

5.19.11.5.6  (05-28-2010)
Additional Forms W-2 (AW2)

  1. Additional Forms W-2 (AW2) received from SSA after initial case creation are processed by ECC at the end of each calendar year. Processing results in one of the following:

    • A new WHC case is created on a taxpayer who did not meet lock-in criteria during the initial case creation

    • The AW2 must be added to the WHCS taxpayer record of a case created during the preceding case creation

    • The AW2 is dropped

  2. AW2 records for current year Outcomes 2 and 3 cases that have not yet been sent to Detroit Computing Center (DCC) and input to WHCS are added systemically. An annual listing is generated for cases that have already been added to WHCS by DCC.

  3. The AW2 records on the listing require manual input to WHCS. Each record on the listing contains the following data elements:

    1. Outcome type

    2. Taxpayer TIN

    3. Taxpayer name

    4. Employer name and address

    5. Employer EIN

  4. For each AW2 on the listing, research the case on WHCS and take the following actions:

    1. If there is no case on WHCS for this taxpayer, add the case using SOURCE "W2" and OUTCOME 3/REF CODE "AW2 " . Follow general processing procedures, issuing lock-in letters to the new employers as appropriate.

    2. If there is a SOURCE "W2" case on WHCS and the tax year of the AW2 matches the tax year on the TAXPAYER SUMMARY screen, add the AW2 to that case. Follow general processing procedures, issuing lock-in letters to the new employers as appropriate.

    3. If there is a case on WHCS for a tax year earlier than the tax year of the AW2, treat the AW2 as a new case, add the case to WHCS and follow general case processing procedures.

      Note:

      If the WHCS case is a referral opened within the last twelve months, take no action on the AW2.

5.19.11.6  (05-28-2010)
Referrals and Special Projects

  1. This subsection contains procedures for preparing and processing referrals submitted to the Withholding Compliance (WHC) program.

  2. Section 31.3402(f)(2)-1(g)(2) of the Employment Tax Regulations provides that the IRS may issue a notice, commonly referred to as a "LOCK-IN LETTER" , to an employer specifying the marital status and maximum number of withholding allowances permitted for a specific employee (taxpayer). All IRS employees should address under-withholding as part of a full compliance check and consider referring taxpayers to the Withholding Compliance Unit, when appropriate, for the

    • Issuance of the lock-in letter and/or

    • Assertion of a $500 civil penalty for providing false information on Form W-4, Employee's Withholding Allowance Certificate with respect to the taxpayer's withholding.

      Note:

      IRC Section 6682 and related tax regulations allow for the assessment of a $500 civil penalty for furnishing a false Form W-4, Employee's Withholding Allowance Certificate if the statement made on the Form W-4,Employee's Withholding Allowance Certificate results in less tax withheld than would have been withheld if the Form W-4, Employee's Withholding Allowance Certificate had been correctly completed, and there was no reasonable basis for such a statement at the time that the statement was made.

  3. After reviewing the referral, tax examiners in the Withholding Compliance Unit will determine whether the taxpayer's withholding should be adjusted and the lock-in letter issued and/or whether to assert the penalty.

  4. Incorrectly prepared referrals or referrals that do not meet referral criteria in IRM 5.19.11.6.1.1, Referral Criteria will be rejected.

  5. The outcome of your referral will be documented on AMS. Referrals received from Insolvency will also receive a Withholding Compliance Referral Response form.

5.19.11.6.1  (05-28-2010)
Preparation and Submission for Originator

  1. The following subsections provide instructions for IRS employees who submit referrals to WHC.

5.19.11.6.1.1  (10-13-2011)
Referral Criteria

  1. Employees working collection cases must research tax account and return information and document the taxpayer's filing and/or payment non-compliance. Specifically address non-compliance with federal withholding requirements. The Withholding Compliance Unit will research the compliance status of non-collection cases. If you are requesting penalty assertion, address criteria set forth in IRM 5.19.11.11(5), Civil Penalty Determinations. Include any other information which supports your request.

  2. Referrals must meet the following guidelines:

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

      Reminder:

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

      ≡ ≡

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

    3. Verify taxpayer is not currently in any of the following special situations:
      Combat Zone (-C freeze)
      Disaster (-O freeze)
      Killed in Terrorists Action (KITA)
      Offer in Compromise (-Y Freeze)
      W-2 wages listed as statutory employee, household employee, 3rd party sick pay, or a W-2 issued by an organization listed in Exhibit 5.19.11-13, International Organizations Exempt from Federal Withholding Requirements.

    4. The referral is not based on an invalid Form W-4, Employee's Withholding Allowance Certificate. See IRM 5.19.11.3.5, Invalid Form W-4 for the invalid Form W-4 identification criteria and procedures.

    5. Wages must be equal to or greater than 75% of the individual's total income. Use the most recent IRPTR information.

      Example:

      wages; $50,000 + misc income; $40,000 = total income; $90,000 x .75 = $67,500, since wages are less than 75% of total income, taxpayer does not qualify.

  3. Submissions which do not meet the above criteria will be rejected. The reason for rejection will be documented on AMS.

5.19.11.6.1.2  (05-28-2010)
Completing Form 9045

  1. Referrals must be submitted on the current version of Withholding Compliance Referral Form 9045, Catalog No. 21238C. Referrals submitted on obsolete forms will not be processed. A fillable PDF version of the form is available on the Electronic Publishing website which can be accessed through SERP using the Form/Letters/Pubs tab. The form is also available as an Integrated Automation Technologies (IAT) tool. See the IAT website at http://idap.web.irs.gov/iat/ for instructions to get the tool.

  2. Complete one form per taxpayer (employee). If the spouse meets lock-in criteria independently, complete a separate referral form.

  3. Part 1 of the form establishes the basis for the referral. Do not refer the taxpayer if the guidelines in IRM 5.19.11.6.1, Preparation and Submission for Originator are not met, or if you answer NO to any of questions 1 through 4 in Part 1 of Form 9045, Withholding Compliance Referral.

  4. For the referred individual named in Part II, lines 5 and 6, list the EIN and company name of employers shown on the most recent IRPTR in Part III. Also list any current employers not shown on IRPTR. The WHC unit will issue lock-in letters to all employers listed on the referral who were not issued lock-in letters within the past 12 months.

  5. To determine if a lock-in letter was issued to an employer listed in Part III, check the taxpayer's Master File account for a TC 971 AC 146, cross-referencing that employer’s EIN, within the past 12 months. In general this requires checking current and previous tax years. If a letter was issued check the box to the right of the employer's name.

    Reminder:

    If all employers listed in Part III were issued lock-in letters within the past 12 months, do not refer.

  6. Unless otherwise specified, the taxpayer will be locked in at marital status single with zero (0) allowances. A request for lock-in other than "single and zero" must be justified by a completed Form W-4 worksheet or other computation and submitted with the referral.

  7. If you are requesting assertion of the civil penalty complete Part IV. A copy of the taxpayer's original signed Form W-4, Employee's Withholding Allowance Certificate as submitted by the taxpayer to his/her employer (or a hardcopy of the electronic Form W -4 and a statement that, to the best of the employer's knowledge, the electronic Form W -4 was filed by the named employee), must be attached or the referral for the penalty assessment will be rejected. Forms requesting both lock-in and penalty assertion where the Form W-4, Employee's Withholding Allowance Certificate is not attached, will be processed as a lock-in only.

  8. Incomplete forms will be returned to the originator. Forms without originator information cannot be processed and will be destroyed.

5.19.11.6.1.3  (03-15-2012)
Submitting Form 9045

  1. When submitting a referral, use either e-mail or fax, but not both. E-mail submissions must be sent via secure messaging. If you do not have secure messaging submit the referral by fax.

    1. E-mail to *W&I Andover WHC Referral on Outlook using secure messaging, or

    2. Fax to (855) 202-8300

  2. Referral with attachments should always be submitted by fax. Include the taxpayer's name and SSN on all attachments. Only the following should be attached:

    • Additional sheets with employer information that did not fit on the referral form

    • Justification of lock-in rates other than marital status single with zero (0) allowances, i.e. worksheets/computations

    • Copy of Form W-4 as submitted to the employer for assessment of the civil penalty

  3. Contact the Withholding Compliance Unit for instructions before submitting referrals for 10 or more employees for one employer. See the Who/Where section of SERP (Servicewide Electronic Research Project) for contact information if you have any questions.

5.19.11.6.2  (05-28-2010)
WHC Processing

  1. The following subsections provide instructions for Withholding Compliance Unit employees who process referrals.

5.19.11.6.2.1  (05-28-2010)
Clerical Processing

  1. Referrals must be submitted to the WHC unit using the current version of Form 9045, Withholding Compliance Referral.

  2. Review the referral for completeness. Reject the following referrals back to the originator:

    • Obsolete form was used

    • Parts I, II, III and V are incomplete

    • "NO" checked in Part I, Basis for Referral

  3. Forms missing originator information will be destroyed.

  4. Forms submitted via unsecured e-mail will be processed accordingly and notify originator when an unsecured e-mail is received.

  5. Referrals will be batched through AMS for assignment to a tax examiner. The tax examiner will add the case to WHCS.

5.19.11.6.2.2  (03-15-2012)
Referral Case Processing

  1. If the case is not in WHCS, add it using Source Code "RF" and appropriate originator source code from Form 9045, Withholding Compliance Referral. If the lock-in is warranted issue lock-in letters to all employers shown on Form 9045, Withholding Compliance Referral plus those listed on the most recent IRPTR, as appropriate. Complete Part VI of Form 9045, Withholding Compliance Referral document AMS, update WHCS and close the case.

    1. Do not add any forms missing originator information to WHCS. Document AMS and close the case on IDRS, destroy the Form 9045, Withholding Compliance Referral.

  2. If the case is already in WHCS as an Outcome 2, 3 or previous referral, and lock-in letter(s) have been issued, and there are no new employers listed on Form 9045, Withholding Compliance Referralor most recent IRPTR, document AMS, close case on IDRS, destroy Form 9045, Withholding Compliance Referral. Exception: If lock-in letters have been issued more than 12 months ago, re-issue lock-in letters.

  3. If the case is already in WHCS as an Outcome 2, 3 or previous referral and lock-in letter(s) have been issued, and there are new employers listed on Form 9045, Withholding Compliance Referral or most recent IRPTR, take the following actions:

    1. Open a new case on WHCS using Source Code "RF" and appropriate originator code from Form 9045 Withholding Compliance Referral.

    2. Add all new employers shown on the referral form or most recent IRPTR. Also, issue new lock-in letters to any employers who had previously been issued a lock-in letter more than 12 months ago, unless there was a modification letter issued in the past 6 months. Otherwise, Follow general processing procedures, issuing lock-in letters as appropriate.

    3. In some instances, Forms W-2 are issued on one-time payments to taxpayers. An example is proceeds from class action settlements suits. Eliminate this employer. Update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

    4. Complete Part VI of Form 9045, Withholding Compliance Referral document AMS, update WHCS and close the case.

  4. After adding to WHCS, reject referrals which meet any of the following conditions:

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

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

    3. Wages must be equal to or greater than 75% of the individuals total income. Use the most recent IRPTR information.

      Example:

      wages; $50,000 + misc income; $40,000 = total income; $90,000 x .75 = $67,500, since wages are less than 75% of total income, taxpayer does not qualify.

    4. An invalid Form W-4, Employee's Withholding Allowance Certificate is submitted with a referral.

    5. Taxpayer is currently in any of the following special situations:
      Combat Zone (-C freeze)
      Disaster (-O freeze)
      Killed in Terrorists Action (KITA)
      Offer in Compromise (-Y Freeze)
      W-2 wages listed as statutory employee, household employee, 3rd party sick pay, or a W-2 from any organization listed in Exhibit 5.19.11-13, International Organizations Exempt from Federal Withholding Requirements.

    6. The referral has a bankruptcy indicator and was submitted by a function other than Insolvency.

  5. If the taxpayer does not meet any of the rejection criteria in (4) above, analyze account information. This may include calculation of the Form W-4 worksheet.

    1. If lock-in is warranted, follow general case processing procedures.

    2. If lock-in is not warranted, close the case.

  6. Complete Part VI of Form 9045, Withholding Compliance Referral document AMS and update WHCS for all referrals, added to WHCS.

    Note:

    For referral from Insolvency, complete the Withholding Compliance Referral Response form and send to the originator.

  7. If the case is already in WHCS as an Outcome 3 or previous referral, and lock-in letter(s) have not been issued, take the following actions:

    1. Open a new case on WHCS using Source Code "RF" and the appropriate originator source code from Form 9045, Withholding Compliance Referral.

    2. Add all employers shown on the referral form and most recent IRPTR. Follow general processing procedures, as appropriate.

    3. Complete Part VI of Form 9045, Withholding Compliance Referraldocument AMS, update WHCS and close case.

  8. Managerial approval is required for all penalty assertions and abatements.

5.19.11.6.2.3  (05-28-2010)
Disposition of Form 9045

  1. Retain all Forms 9045, Withholding Compliance Referralincluding printed copies of all electronically received referrals, in a centralized location on site for two calendar years from the date the referral is closed.

  2. Maintain separate files for lock-ins, rejections and penalty assertions. File each category of forms by calendar year, in Taxpayer Identification Number (TIN) order.

  3. If referral previously rejected, and there are no new employers listed on the referral or IRPTRL, and the case is confirmed to meet rejection criteria, destroy referral.

5.19.11.7  (02-10-2012)
Responses and Redeterminations

  1. Responses will generally result from taxpayers' correspondence or telephone contact as a result of the systemic issuance of lock-in letters on Outcome 2 cases or the manual issuance of lock-in letters on Outcome 3 cases and referrals. Responses and redeterminations are worked the same way and resolved in one of the following three ways:

    • Modify lock-in by changing the marital status and/or number of withholding allowances previously specified

    • No change

    • Release of lock-in

    Note:

    In some instances taxpayers may call in repeatedly. AMS documentation must be accurate and complete so that the next tax examiner answering the call can understand the decisions made and information previously shared with the taxpayer. Do not consider a redetermination unless there is new information supporting a change. Make sure all information is documented according to IRM 5.19.11.3.3, Case Documentation

  2. When the taxpayer responds that they no longer work for all of the employers listed who were issued lock-in letters, instruct the taxpayer to submit a correct and valid Form W-4, Employee’s Withholding Allowance Certificate to their new employer, offer to assist the taxpayer with the Form W-4, Employee’s Withholding Allowance Certificate to be submitted to their employer. Document AMS.

  3. Work responses promptly since the employer has been instructed to adjust the taxpayer's withholding starting with the first pay period ending on or after 60 days from the date of the lock-in letter.

  4. When correspondence is received and contact cannot be made within 30 days from the earliest IRS received date, initiate an interim response using Correspondex Letter 2645C in accordance with Action 61 guidelines as set forth in IRM 21.3.3.4, Correspondence Procedures.

  5. An interim response must

    • Be initiated within 30 days of the earliest IRS received date

    • Specify the date when the final determination will be mailed

    • Provide the taxpayer with WHC contact information

    Note:

    AMS will not be issuing interim letters on WHC cases.

  6. Be alert for indicators of fraud. See IRM 25.1.2.2 , Fraud Development Procedures for further information on recognizing fraud. If a potential fraud referral exists, DO NOT solicit the return. Complete all withholding compliance actions and prepare a fraud indicator checksheet. Forward the checksheet to the Collection Function Fraud Coordinator (CFFC).

  7. If the taxpayer responds in writing questioning the legal authority supporting the Withholding Compliance program, send Letter 3042C.See IRM 5.19.11.10.5. , Frivolous Correspondence

  8. When working requests for redetermination from taxpayers who have filed the most recently due return jointly and both spouses work, compute the number of allowances using one worksheet and lock in both spouses.

    1. Add the spouse to WHCS as a separate case. Include cross-reference SSN on both records.

    2. Document AMS history with a cross-reference to the other spouse's account.

  9. If an employer responds that a taxpayer no longer works there, document AMS and close the case. Do not update IDRS or WHCS. All "no longer works here information sheets" from previous revisions of L2800, will be destroyed, with no further action

  10. If the employer says that he or she has no record of the taxpayer ever working there, call the employer to verify to whom the Form W-2, Wage and Tax Statement was issued. Make two attempts to call the employer. If unable to contact the employer, close the case. If you determine that the taxpayer is still employed advise the employer to honor the lock-in letter. Document AMS.

  11. If you determine that Letter 2800C was issued using an incorrect name, add the taxpayer to WHCS as a new case using the correct name using Source Code "MM" .

    1. If the taxpayer meets minimum wage requirements as shown in IRM 5.19.11.6.1.1(2)(a), Referral Criteria, reissue the lock-in letter using the name provided by the employer or the name from the Form W-2. Update the new record on WHCS with the letter information. Update AMS. Input TC 972 AC 146 with Disposition Code "SSN" to the existing WHCS employer record. Do not update IDRS.

    2. If the taxpayer does not meet minimum wage requirements for lock-in letter issuance, Input TC 972 AC 146 with Disposition Code "SSN" to the existing WHCS employer record and IDRS. Input TC 972 AC 146 with Disposition Code "LEM" to WHCS on the new case.

  12. In some instances you may need additional information from the taxpayer to make a case determination. Make at least two attempts to contact the taxpayer by telephone at different times of the day/evening before writing to the taxpayer. Each attempt to contact must be documented on AMS.

  13. If you are unable to contact the taxpayer by telephone, send Letter 4243C listing the information required to resolve the case. Document AMS with requested information.

    Reminder:

    Issue an interim response for written responses from the taxpayer on or about the 23rd day if you can't resolve the case within 30 days.

  14. If the taxpayer has filed under a different TIN (such as an ITIN, Temporary TIN, other SSN) verify that the wages shown on the Form(s) W-2, Wage and Tax Statement were reported. If the wages were reported follow procedures in the table below:

    If Then
    The taxpayer has filed and paid the most current return due Release the lock-in
    • Issue Letters 2809 and 2813

    • Input TC 972 AC 146 with TC 972 Disposition Code "CPL"

    • Update the WHCS Taxpayer Detail screen with the TIN the taxpayer files under

    • Update AMS on both TIN's that the taxpayer files under and the actions taken


    Advise the taxpayer that if future Forms W-2 and TIN's do not match, they may be locked in again.
    If the taxpayer has filed the most current return due but has a balance due Follow general procedures, compute allowances and issue modification letters as appropriate.
    Advise the taxpayer that if future Forms W-2 and TINS do not match, they may be locked in again.

  15. If the taxpayer has not filed

    1. Advise the taxpayer that all income must be reported on a tax return.

    2. Refer him or her to the Social Security Adminstration (SSA) for help in getting an SSN. Any employee who is legally eligible to work in the United States and does not have a social security number can can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. The taxpayer can get this form at SSA offices, by calling 1-800-772-1213, or from the SSA website at www.socialsecurity.gov. If the taxpayer is not eligible to obtain an SSN, refer the taxpayer to the IRS toll-free number or www.irs.gov for information about getting an ITIN. See Pub 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN) for additional information.

    3. Set deadline for filing.

    4. Follow general procedures to compute allowances and issue modification letters as appropriate.

  16. When speaking to the taxpayer, use SUMRY and IMFOLI to determine if there are delinquent returns and/or balances due.

    1. For delinquent returns, instruct the taxpayer to file and set a deadline of 30 days.

    2. Advise the taxpayer that failure to file by the deadline could result in substitute for return processing, referral to Examination, or summons. Enter deadline date in AMS history.

    3. See IRM 5.19.11.3.7, Installment Agreement (IA) Taxpayers for installment agreement requests and revisions procedures.

  17. The "-S" freeze is the disaster Indicator for taxpayers in a minor disaster area. This freeze does not stop WHC processing. If the taxpayer self-identifies and qualifies for the "-S" freeze, verify that the taxpayer’s zip code is among those of the affected areas during the disaster period. See http://www.icce.irs.gov/fema/ for affected zip codes. See IRM 25.16.1.7.5(4), Accounts Management for instructions on manually setting the "-S" freeze.

  18. If the taxpayer calls after modification has been processed and says that the employer will not honor the Form W-4 submitted by the taxpayer that results in MORE income tax withholding than was specified in the modification letter, send Letter 4074C to the employer.

  19. Correspondence or telephone calls received from IRS employees will be reassigned to a designated WHC employee. See IRM 5.19.11.5.4., IRS Employees (IRS)


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