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Part 8. Appeals

Chapter 7. Technical and Procedural Guidelines

Section 7. Claim and Overassessment Cases

8.7.7  Claim and Overassessment Cases

8.7.7.1  (10-26-2007)
Introduction to Appeals Consideration of Claim and Overassessment Cases

  1. Appeals considers claim and overassessment cases on any taxes or other matters that the Service considers. Exceptions to this general authority are in Delegation Order 66, as revised.

  2. Claims can be:

    1. part of a case file received by Appeals, or

    2. filed by the taxpayer during Appeals consideration.

  3. A case becomes an overassessment case when there is a refund indicated.

  4. An Appeals overassessment case is not a claim for refund. Instead it is an overassessment determined by the SB/SE Area Director or the Director, Field Operations.

  5. Claims for abatement filed with reasons acceptable to an SB/SE Area Director, Director of Field Operations, SB/SE or W&I Campus Director, or the Compliance Area Director, SB/SE, Compliance Area 15 are considered by Appeals on their merits, if protested.

  6. IRM 8.7.7 basically covers three separate categories of information - (1) general information pertaining to claims and overassessments; (2) specific procedures for processing regular claim and overassessment cases; and (3) specific procedures for processing claims for abatement of interest.

8.7.7.1.1  (10-26-2007)
Claims in Docketed Cases

  1. An abatement claim filed on a docketed case does not protect the petitioner unless the issue in the claim is included in the U. S. Tax Court petition.

  2. See IRM 8.4.1.39, Docketed Cases with Claims, for details on working and closing docketed cases with claims.

8.7.7.2  (10-26-2007)
Periods of Limitation in Claim and Overassessment Cases

  1. In the Internal Revenue Service Restructuring and Reform Act of 1998, Section 3202, ( IRC 6511(h), the statute of limitations for refunds may be suspended during the time a taxpayer is unable to handle his or her financial affairs for either of the following reasons:

    • mental or physical impairment that is medically determinable, and is expected to continuously last for not less than twelve months; or

    • mental or physical impairment that is medically determinable, and may result in the death of the taxpayer. (See Rev. Proc. 99-21, 1999-1–C.B. 960 or it's successor regarding the statements to be submitted with the refund claim regarding the medical determination of impairment.)

  2. A claim for refund (or credit) submitted on a delinquent original income tax return must be filed within three (3) years of the return due date (plus extensions) to obtain a refund of the prepaid credits (income tax withholding and estimated tax payments) for purposes of IRC 6511(b)(2)(A) [the three year look back rule].

    Note:

    IRC 7502 (the timely mailing equals timely filing rule ) applies to a refund claim postmarked within the 3 year period. See AOD CC-2000–09, Weisbart v. United States Department of Treasury and Internal Revenue Service (November 13, 2000).

8.7.7.2.1  (10-26-2007)
Statutory Period For Assessment Remaining—Claims and Overassessments

  1. Appeals does not accept claim or overassessment cases if less than 180 days remain on the statute for assessment or collection, as applicable.

  2. This 180 day provision applies when expiration of the statute could result in loss of an assessment or liability.

    If... Then...
    less than 180 days remain in the statute for assessment or collection Appeals will not accept the claim or overassessment.
    less than 180 days remain for filing a claim in an overassessment case acceptance of the case requires approval from the Appeals Area Director.
    less than 180 days remain for filing suit in a case involving a claim previously disallowed by a function other than Appeals acceptance of the case requires approval from the Appeals Area Director.

8.7.7.2.2  (10-26-2007)
Securing Consents in Claim and Overassessment Cases

  1. The Service does not secure consents extending the period for assessment in cases involving claims or overassessments unless final disposition will possibly result in a deficiency or additional tax.

  2. The exceptions to this rule are:

    1. Joint Committee cases; and

    2. Closing Agreement cases.

      Note:

      Both the Form 872 , Consent to Extend the Time to Assess Tax, and Form 872-A, Special Consent to Extend the Time to Assess Tax, provide that a taxpayer may file a claim for credit or refund and the Service may credit or refund the tax within six (6) months after the respective agreement ends. As to any claim filed within this extended period, the amount of the credit or refund is limited to: (1) the portion of the tax paid after the execution of the extension agreement and before the filing of the claim; plus (2) the portion of the tax recoverable under the rules pursuant to IRC 6511(b)(2), if the claim had been filed on the date the agreement was executed.

  3. If there is no possibility of a deficiency in an overassessment case, advise the taxpayer in writing about protecting his or her interest by filing a protective claim for refund.

8.7.7.2.3  (10-26-2007)
Extension of Period of Limitations for Filing Suit on Form 907

  1. Under IRC 6532(a)(2), the period of limitations for filing suit on a disallowed claim may be extended.

  2. The taxpayer may file for extension on Form 907 , Agreement to Extend the Time to Bring Suit, as long as the taxpayer and the Service execute Form 907 before the 2-year period expires.

  3. Multiple Form 907's may be executed by the Service and the taxpayer to extend the period to file a refund suit under IRC 6532(a)(2) as long as each extension is executed before the period previously agreed upon has expired.

8.7.7.3  (10-26-2007)
APS Receipt of Claim or Overassessment Case

  1. Taxpayers can file a claim on Form 843, Claim for Refund and Request for Abatement; Form 1040X , Amended US Individual Income Tax Return or Form 1120X. US Corporation Income Tax Return. Correspondence from the taxpayer can be determined to be an "informal" claim by the Appeals Officer.

  2. Claims are received in Appeals from Area Compliance and Campuses. Claims received from Compliance (Exam) are controlled on AIMS. Campus Claims are not controlled on AIMS.

  3. Upon receipt of a claim or overassessment case verify the contents of the administrative file to determine if all documents, returns, etc. listed on transmittal Form 3210 are present in the file.

  4. Determine if the items listed on the Form 3210 were received, sign the acknowledgment copy of the Form 3210 and return it to the originator by mail or fax. Keep a copy of the Form 3210 in the case file.

8.7.7.4  (10-26-2007)
APS Establishes Claim or Overassessment on ACDS

  1. The claim amount disallowed by Exam is found on page 2 of the AMDISA. Enter this amount in the DDAMTCLM field at the return level on ACDS.

  2. Establish the case on ACDS following normal procedures except for the following, at the return level:

    • STATUTE DATE - enter the statute date if it has not expired, if the statute has expired, leave blank

    • STATCODE -CLAIM

    • DDAMTCLM - enter the amount of the claim for Compliance cases (found on page 2 of the AMDISA)

    • APPEALS AMTCLM - enter the amount of the claim if claim received was received from a Campus and is not on AIMS

8.7.7.5  (10-26-2007)
Sending the New Case to the Appeals Team Manager (ATM)

  1. Before sending the case to the ATM for assignment to an Appeals Officer (AO), the APS employee prepares Form 3210. He/she continues to monitor every case leaving APS going to the Appeals Team Managers (ATM) and/or their employees (Appeals and Settlement Officers, Tax Computation Specialists, etc.) for assignment, rework, etc. regardless of whether or not they are physically located in the same office.

  2. Electronically generate these forms using the ACDS Form 3210 feature.

  3. A follow-up must be done on all unacknowledged Form 3210s ten days old or older, utilizing Form 10946 to maintain an audit trail.

  4. For detailed information on what the ATM does with the case upon receipt for assignment, see IRM 1.4.28, Resource Guide for Managers.

8.7.7.6  (10-26-2007)
Actions by AO on Claim or Overassessment Cases

  1. When an AO is assigned a claim or overassessment case, he/she follows the same procedures outlined in IRM 8.2.1, Agreed Pre-90-Day Income Tax Cases to -

    • determine if the case is adequately developed.

    • review the administrative file contents.

    • ensure a Uniform Acknowledgment Letter (UAL) was sent to the taxpayer.

    • conduct the conference

8.7.7.7  (10-26-2007)
Securing an Agreement Form

  1. If an agreement is reached on a claim or an overassessment without a claim, secure an agreement form using the standards for agreement in a pre-90 day case. (Form 870 or 870-AD)

  2. Under Rev. Rul. 68-65, 1968–1 C.B. 555, a signed agreement Form 870 or Form 890 series is a claim for refund to the extent that any Service determined overassessment shown is an overpayment.

  3. The date of the claim for refund is the date of receipt of the signed agreement form, or the date it is postmarked, if mailed before the due date and received after that due date.

8.7.7.8  (10-26-2007)
Form 2297, Waiver of Statutory Notification of Claim Disallowance

  1. In cases where a claim for refund is disallowed in whole or in part, the Appeals Officer (AO) may request that the taxpayer execute Form 2297, Waiver of Statutory Notification of Claim Disallowance.

  2. Follow these procedures when securing a Form 2297:

    1. complete in duplicate,

    2. attach the original to the claim, and

    3. retain a copy in the administrative file.

  3. If the taxpayer chooses not to sign Form 2297, issue a notice of claim disallowance using Letter 1363 or Letter 1364, even if an agreement form is submitted. See IRM 8.17.4 for the language and process for issuing the statutory notice of claim disallowance.

  4. When a claim issue is allowed, but offsetting adjustments reduce or eliminate the refund, secure a Form 2297 or issue a notice of claim disallowance (Letter 1363 or 1364).

  5. There are many exceptions to the use of this form, most of which are listed in the following subsections.

8.7.7.8.1  (10-26-2007)
When Form 2297 Is Not Secured

  1. Do not secure Form 2297 or issue a notice of claim disallowance for:

    1. claim for abatement;

    2. claim not timely filed;

    3. claim for abatement of interest; (The only appropriate disallowance notices for abatement of interest claims are Letter 2391 (partial allowance) or Letter 2392 (full disallowance.)

    4. claim for a year docketed before the United States Tax Court; except if the issue raised in a claim pertains to a carryback which is not in issue before the Tax Court. In this case, secure a Form 2297 or issue a notice of claim disallowance ( Letter 1363 or Letter 1364);

    5. claim with an issue allowed in full without offsetting adjustments but the taxpayer overstated the amount of the claim;

    6. informal claim;

    7. claim previously disallowed in whole or in part by a notice of claim disallowance; or

    8. claim previously disallowed in whole or in part and signed Form 2297 obtained.

8.7.7.8.2  (10-26-2007)
Form 2297 Not To Be Secured—Decision Within 6 Months

  1. Do not use Form 2297 if the decision is made to fully or partially disallow a claim before the end of the initial six (6) month period after the filing of the claim.

  2. The only form issued for disallowed claims in this time period is a Notice of Claim Disallowance because the time frame for filing suit after disallowance of a claim can only be shortened to less than six (6) months if a "decision of the IRS " is reached before the six (6) month period expires.

  3. Waivers Form 2297 or Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit, do not constitute a "decision of the IRS" .

  4. Do not use the claim disallowance notice to ensure that taxpayers who wish to file suit before the end of the six (6) month period are able to do so.

8.7.7.8.3  (10-26-2007)
Form 2297 Requests in Joint Committee Cases

  1. Do not request Form 2297 in cases requiring Joint Committee review until the Joint Committee has released the case unless the Form 2297 is modified as follows: "This waiver takes effect on the same date the Agreement Form (fill in appropriate form number) used in this case becomes effective. "

8.7.7.8.4  (10-26-2007)
Form 2297 Not Secured in Pre-Refund Cases

  1. In agreed cases under the pre-refund examination program, an original return showing an overpayment of tax may represent a claim for refund or credit.

    1. Consider this claim allowed in full when all or part of the amount is applied against a deficiency determined upon examination.

    2. The remainder, if any, is refunded.

  2. Under this procedure, do not secure a Form 2297 or issue a notice of claim disallowance.

8.7.7.8.5  (10-26-2007)
More Than One Overassessment Agreement Obtained—Form 2297

  1. Occasionally, an agreement form is received in an overassessment case and it becomes necessary to secure another agreement for a lesser refund.

  2. The first agreement constitutes a claim for refund or credit, secure a Form 2297 or issue a notice of claim disallowance.

8.7.7.8.6  (10-26-2007)
Partial Allowance of Refunds or Credits on Overassessments

  1. Service policy on partial allowance of refunds or credits on overassessments is found in Policy Statement P–4–41 and Rev. Rul. 54-378, 1954–2 C.B. 246.

  2. Refunds of partial overassessments are only recommended in those cases where there is agreement on the issue or issues resulting in the partial overassessment.

  3. The partial overassessment allowed is net of any potential deficiencies which could result from other proposed adjustments.

  4. Partial overassessments are not recommended in potential Joint Committee cases except as provided in IRM 8.7.9, Appeals Joint Committee Case Procedures.

8.7.7.8.7  (10-26-2007)
Appeals Officer Processing Partial Allowances of Refunds or Credits

  1. When the taxpayer agrees to the allowance of a partial overassessment, secure an appropriate agreement form. Prepare Form 5403, Appeals Closing Record, showing the agreed overassessment.

  2. Prepare a customized Form 5402, Appeals Transmittal and Case Memo, which discusses the agreed upon issues as part of the final closing package.

8.7.7.9  (10-26-2007)
Settlement Computations For Claims and Overassessment Cases

  1. This section provides guidance on the preparation of settlement computations on cases involving claims and overassessment cases. It is intended for Appeals employees who prepare settlement computations.

  2. A current transcript of account is required for all cases. Analyst the transcript of account if there is a question about the timeliness of a claim for refund or payments, etc. In this type of case, consider preparing a statement of account which, when completed, shows the amount of overpayment, if different from the overassessment, and whether or not the claim is timely.

  3. If an abatement of a previously assessed amount is needed on Non-Master File, such as in the case of a non-petitioning spouse, prepare appropriate Form 1331, Notice of Adjustment. Form 706, U.S. Estate Tax Return, Form 709, U.S. Gift Tax Return and Form 2290, Heavy Vehicle Use Tax Return do not require Form 1331. See Document 6209, IRS Processing Codes and Information.

8.7.7.9.1  (10-26-2007)
Disposition of Claims in Settlement Computations

  1. It is recommended that the settlement computation contain a brief statement regarding the final disposition of any claim filed but not processed. This information is provided at the bottom of Form 3610 .

  2. When a claim is allowed in full, use a statement similar to the following on the Form 3610:

    "Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in full by Appeals in the preparation of this settlement computation."

  3. When a claim is disallowed in full and there are no other adjustments, include a statement similar to the following on the Form 3610:

    "Your claim for refund totaling $(amount) for (tax year ended) has been considered and disallowed in full by Appeals in the preparation of this settlement computation."

  4. When a claim is allowed in full or part but offset by other adjustments, add a statement similar to the following to the bottom of Form 3610:

    "Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in full (in part) by Appeals. However, the total amount of refund is increased (or decreased) by other adjustments shown in this settlement computation."

  5. When a claim is allowed in part, show a statement similar to the following on the Form 3610:

    "Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in part by Appeals in the preparation of this settlement computation."

8.7.7.10  (10-26-2007)
Disposition of Claims for Refund or Credit

  1. Notices of claim disallowance are issued if a total or a partial disallowance of claims for refund or credit is to be made in unagreed non-docketed cases not involving deficiencies.

  2. The letter to be issued is:

    1. Letter 1363 or Letter 2683, Notification of Partial Claim Disallowance, or

    2. Letter 1364 or Letter 2681, Notification of Full Claim Disallowance.

    Note:

    Certain claim disallowances require review by Counsel. Refer to IRM 8.17.4, Notices of Deficiency Procedures, for a list.

  3. Full claim allowance cases use Letter 2682 .

8.7.7.10.1  (10-26-2007)
Unagreed Deficiency Cases Involving Claims

  1. If a notice of deficiency is issued and there is a claim for refund on the same year and tax as the proposed deficiency, insert a paragraph about the claim in the statement attached to the notice of deficiency.

  2. Sample paragraphs for insertion in the notice of deficiency and details on how to handle claims when a case in unagreed are found in IRM 8.17.4.9.8, Claims for Refund When Notice of Deficiency is Issued.

8.7.7.10.2  (10-26-2007)
Disposition of Agreed or Defaulted 90-Day Cases Involving Claims

  1. If, in response to a notice of deficiency, the taxpayer submits an agreement or fails to file a petition within the time provided, a notice of claim disallowance must be issued before the case is forwarded for assessment, unless the taxpayer submits Form 2297.

8.7.7.10.3  (10-26-2007)
Unagreed Deficiency Cases With Overassessments

  1. Where a pre-90 day case includes years with proposed overassessments and years with proposed deficiencies, do not include the overassessments in the notice of deficiency.

  2. See IRM 8.17.4 for information involving the claim invitation letter. Send the letter to taxpayers who have not submitted protective claims.

8.7.7.11  (10-26-2007)
APS Procedures for Closing Campus Claims

  1. Campus claims are not controlled on AIMS.

  2. No Form 5403 is required for closing.

  3. Use the following documents to adjustment or update the IDRS account:

    1. Form 3870, Request for Adjustment

    2. Customized Form 5402 for Claims

    3. Form 8485, Assessment Adjustment Case Record.

  4. Process multiple tax periods on one form; however, to satisfy Campus requirements for a source document, make a copy of the adjustment form for each tax period and highlight applicable tax period on each copy.

  5. Date and mail the closing letter prepared by the AO which will be Letter 2681, Letter 2682, or Letter 2683. Appeals disallowance letters remind the taxpayer they have two (2) years from the date of the Campus letter to go to Claims Court or District Court. Send the letter by regular mail. Generally, the Campus has already issued the certified claim disallowance letter giving the taxpayer an opportunity to go to Claims Court or District Court.

  6. These cases are not held for suspense

  7. The following are the ACDS entries required at closing:.

    1. ACDS Closing Codes

      Closing Code Definition
      14 Full Disallowance
      15 Full Allowance
      16 Partial Allowance

    2. Paycode = 7 (not applicable)

    3. RevsdTax—enter the negative amount approved for abatement/refund. (Full disallowance would be $–0–.)

    4. APPEALS AMTDIS—enter only the amount of the claim disallowed by Appeals.

    5. Prepare closed office file per IRM 8.2.1.16.

8.7.7.12  (10-26-2007)
Reconsideration of Disallowed Claims in General

  1. Taxpayers may ask Appeals to reconsider a claim disallowed by an Area office or an IRS Campus site. A taxpayer must make this request within the period for bringing suit.

  2. Appeals may refuse to reconsider a case if less than 120 days remains in the two year period for filing suit.

  3. Reconsideration of the claim by Appeals does not extend the period in which suit may be filed.

  4. Do not issue a second notice of claim disallowance when a claim is reconsidered. This can confuse the taxpayer and extend the statutory period for filing suit.

8.7.7.12.1  (10-26-2007)
Reconsideration of Claim Disallowed by SB/SE Area Director or Director, Field Operations

  1. Appeals reconsiders claims disallowed by the SB/SE Area Director or Director, Field Operations if they were not previously considered by Appeals.

  2. Appeals also may reconsider claims previously considered by Appeals when justified.

  3. Provide the following information to the taxpayer when a decision is made not to reopen the claim:

    1. amount of the reconsidered claim for refund,

    2. tax periods in the request,

    3. date the notice of disallowance was sent along,

    4. if a Form 2297 was previously filed by the taxpayer, the date of the Statutory Notice of Claim Disallowance related to this claim,

    5. additional legal action that can be taken related to the disallowed claim and the relationship to a signed Waiver of Notice of Disallowance (Form 2297).

8.7.7.12.2  (10-26-2007)
Reconsideration of Claim Disallowed by SB/SE and W&I Campuses

  1. Taxpayers have the right to request reconsideration of claims disallowed by SB/SE or W&I Campus sites. The notice of claim disallowance issued by SB/SE and W&I Campuses advises them of this procedure.

  2. Claims previously disallowed by the SB/SE and W&I Campuses is considered on their merits. Ordinarily, no agreement form is required on these cases. If one is needed, use the agreement form described in IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form.

  3. Most SB/SE and W&I Campus reconsideration cases are handled by correspondence or telephone. However, a face-to-face conference is provided if the taxpayer or their representative requests one and it is deemed necessary by the Appeals Officer.

  4. Letter 2681(CG), Letter 2682(CG) and Letter 2683(CG) are used to advise the taxpayer of the decision on a case. These letters are found in APGolf, a sub-system of ACDS.

  5. The customized Form 5402, Appeals Transmittal and Memorandum, is the appropriate form to use with SB/SE and W&I claim cases.

8.7.7.12.3  (10-26-2007)
Reconsideration of Claim Disallowed by Appeals

  1. SB/SE Area Offices, LMSB Field Operations, and SB/SE and W&I Campuses forward Appeals all requests for reconsideration of claims disallowed in whole or in part by Appeals.

  2. Appeals determines if mutual concessions were previously made to settle the case.

  3. If concessions were made, Policy Statement P–8–3 (formerly P-8-50) found in IRM 1.1.2,is followed regarding reopening of cases.

8.7.7.13  (10-26-2007)
Claims Filed in Cases Previously Considered by Appeals

  1. The SB/SE Area Directors or Directors of Field Operations forward to Appeals, without action, claims filed in cases previously closed by Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and Acceptance of Overassessment, where the issue in the claim is not specifically addressed in the agreement.

  2. The advice or concurrence of Appeals is sought by the SB/SE Area Directors or Directors of Field Operations in certain other claims filed in cases previously considered by Appeals.

8.7.7.13.1  (10-26-2007)
Audit Reconsideration Cases

  1. An audit reconsideration case is the reevaluation of the results of a prior audit when a taxpayer disagrees with the original determination by providing information not previously considered during the original examination. Or, it is the process the IRS uses when the taxpayer contests an Automated Substitute for Return (ASFR) or Substitute for Return (SFR) determination by filing an original delinquent return, and the assessment remains unpaid or, as a result of the assessment, the tax credit is reversed. .

    Note:

    Audit reconsiderations are not formal claims since the tax liability in dispute has not been paid.

  2. There are two types of audit reconsideration cases:

    1. Cases previously considered by Appeals,.

    2. Cases not previously considered by Appeals

  3. Cases not previously considered by Appeals may include:

    • Reconsideration of a campus claim

    • Underreporter case

    • Correspondence examination

    • Compliance examination, SFR or ASFR.

  4. Follow normal ACDS procedures to establish these cases. They may or may not be on AIMS.

  5. When the Campus Central Reconsideration Units (CRUs) receive audit reconsideration requests on cases previously closed by Appeals, they return to Appeals only those relating to the following types of closed cases. These are the only types of cases Appeals will reconsider: (See IRM 4.13 Audit Reconsiderations.)

    1. Agreed non-docketed cases - unless closed with a Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment, orForm 906,Closing Agreement on Final Determination– (see bullet below), and

    2. Defaulted statutory notice of deficiency (SND) sent by Appeals.

  6. Audit reconsiderations on cases closed by Appeals as dismissals for lack of jurisdiction do not come back to Appeals. The CRUs send these to the originating function that issued the SND for review first. If that function doesn’t resolve the audit reconsideration, the taxpayer can appeal the result of the audit reconsideration.

  7. The CRUs do not send Appeals any requests for audit reconsiderations on cases that Appeals closed with finality. This includes Appeals closures using:

    • Form 870-AD,

    • Closing agreements,

    • Decision documents,

    • Dismissals for lack of prosecution, or

    • Tried cases.

  8. :Follow Appeals procedures for closing these cases in IRM 8.2.1.16.

8.7.7.13.1.1  (10-26-2007)
Procedures for Audit Reconsiderations

  1. When the CRUs receive audit reconsideration requests, they forward the case to Appeals. The IRM instructs the CRUs to secure the full administrative file and send it to Appeals with the reconsideration request IRM 4.13.3, Request for Appeal.

  2. The Appeals Office receiving the audit reconsideration cards the case and forwards for assignment.

  3. The Appeals Officer assigned the case does the following:

    1. Reviews the request and the file information to determine if reconsideration is appropriate

    2. Sends the taxpayer/power of attorney a letter explaining the taxpayer does not qualify for the reconsideration then returns the case to the CRU using Form 5402. A copy of the letter sent to the taxpayer/power of attorney must be included in the case file being returned to the CRU.

    3. If the taxpayer qualifies for the reconsideration, work the case following the same procedures used for working claims for abatement.

8.7.7.14  (02-19-2008)
Abatement of Interest Claims

  1. IRC 6404(e)(1) was added by the Tax Reform Act of 1986 to provide for abatement of interest on deficiencies or payments attributable to errors or delays in the performance of ministerial acts by the Service.

  2. Delegation Order 228 in IRM 1.2.51.2, Delegation of Authorities for Penalty and Interest Activities, provides the authority for handling abatement of interest claims.

  3. A ministerial act is a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all prerequisites to the act have taken place. See Rev. Proc. 87-42 and Treasury Reg. section 301.6404–2 for guidance.

  4. The Service has the authority to abate only the amount of interest that accrued during the period attributable to an error or delay in performing the ministerial or managerial act. IRC 6404(e)(1) applies only to an error or delay that occurs after the date the Service contacts the taxpayer in writing with respect to the deficiency or payment.

  5. Interest abatement claims ( Form 843, Claim for Refund and Request for Abatement) are generally filed with the Campus where the original return was filed or, if unknown, the Campus where the taxpayer last filed.

  6. Taxpayers have full appeal rights on these claims whether the account is paid, or assessed (and unpaid). If the interest has not been assessed but the case is otherwise agreed, the claim is considered. If there is no assessment and the case is unagreed, inform the taxpayer the claim is premature. Taxpayers appealing denials of claims for abatement or refund of interest must provide a brief written statement specifying why the claim denial should be reconsidered.

  7. The Taxpayer Bill of Rights 2, granted the Tax Court jurisdiction to determine whether the Service's failure to abate interest was an abuse of discretion and to order an abatement. To bring an action under IRC 6404(h), the taxpayer must file a petition for review with the Tax Court within 180 days after the date of the mailing of the Service's final determination not to abate. This provision is effective for requests for abatement made after July 30, 1996, or pending and not denied as of July 30, 1996. Letter 2391 and Letter 2392 were revised to reflect this guidance.

  8. The abatement of interest provision is applicable in the context of a TEFRA partnership audit.

  9. Interest on employment, excise, and other taxes that are not subject to deficiency procedures do not qualify for abatement of interest under IRC 6404(e). However, the IRS has authority to abate interest under IRC 6404(a) if the interest is:

    • excessive in amount;

    • assessed after the expiration of the applicable period of limitations; or

    • erroneously or illegally assessed.

8.7.7.14.1  (02-19-2008)
Appeals Responsibility for Abatement of Interest Cases

  1. Requests for an appeal of disallowed abatement of interest claims may be received from the Campus or local Compliance functions.

  2. Appeals employees charged with making decisions regarding errors or delays on the part of IRS employees from functions outside of Appeals should consider the relevant function's procedures, time frames, and case-specific unusual circumstances not clear from the case file.

  3. Abatement of interest claims concerning actions of Appeals employees is worked by Compliance.

  4. If a disallowed abatement of interest claim concerning an Appeals employee's actions is appealed, the claim is forwarded to the Appeals Area Director having jurisdiction over that employee. Although the Area Director must sign all closing documents, the actual review of the claim maybe done by another office at the request of the Area Director.

  5. When an Appeals Officer has a work unit with tax issues under consideration and abatement of interest is raised as a new issue the following must occur:

    1. Return the interest issue to the Compliance or Campus function where the alleged error or delay occurred for their review and initial determination.

    2. Send Criminal Investigation and Counsel cases to the Compliance Examination function.

    3. Attempt to resolve the tax issues in the work unit and bring that aspect to a conclusion under normal Appeals case management procedures.

  6. In cases where the interest was assessed and/or the case is otherwise agreed, the Appeals Officer may work both issues. However, consider the issues as separate and independent, so the resolution of either does not affect the outcome of the other. Local offices have the option of having a designated Appeals Officer handle all abatement of interest cases to avoid this problem.

  7. If the interest was not assessed and the case is not otherwise agreed, inform the taxpayer the abatement request is premature. Suggest the taxpayer submit a Form 843 requesting an abatement of interest when the underlying tax matter is resolved.

  8. To ensure uniformity and consistency within Appeals, assignment of abatement of interest issues are centralized to the maximum extent possible.

8.7.7.14.2  (10-26-2007)
Receipt of Abatement of Interest Cases

  1. Abatement of interest claims are established as a separate work unit even if received with another type of case, i.e. income tax.

  2. Follow the same general procedures used to establish normal cases found in IRM 8.20.5, Processing Receipts with the following exceptions:

    • Type code is ABINT

    • Return level information screen:

      ACDS return Field Entry Information
      Aims indicator E return not controlled on AIMS
      Tax Period Enter tax period for which the claim is filed
      DDAMTCLM Amount of the claim shown on Form 843 "Claim for Refund "
      Duplication Leave blank
      Statute Date/Code ABINT if the 180-Day letter was not issued, or if the 180-Day letter was issued enter that date. (see note below)

      Exception:

      If the Appeals Officer determines there is a specific statute date, enter the corrected date.

  3. Generally these cases come to Appeals in proposed disallowance status so the statute is not a problem. However there are two situations that may occur which impact the statute expiration entered on the case:

    1. If the formal disallowance letter was issued, the 180-day period is running and Appeals may not have time to work the case;

    2. Reconsideration of disallowed interest claims received with less than 120 days remaining on the 180-day period for instituting suit may be returned to the referring office.

      Note:

      Acceptance of this type case is subject to the approval of the Appeals Area Director. See IRM 8.7.7.2.1. If Appeals accepts reconsideration of the case, the AO informs the taxpayer that the period for filing suit is not extended and that no additional final determination letter will be issued.