8.7.7  Claim and Overassessment Cases

Manual Transmittal

December 11, 2013

Purpose

(1) This transmits revised IRM 8.7.7, Technical and Procedural Guidelines, Claim and Overassessment Cases.

Material Changes

(1) This IRM was revised as follows:

Subsection Description of Change
IRM 8.7.7 Made editorial changes throughout this IRM section.
IRM 8.7.7.1 Revised these IRM subsections for clarification and included reference for whipsaw situations. Also, removed references to the CSED since Appeals is not responsible for monitoring the CSED for cases falling under IRM 8.7.7.
IRM 8.7.7.1.1 Revised title to read as follows: "Claims in Docketed Cases or Requests for Abatement."
IRM 8.7.7.1.1(1) Revised paragraph for clarification.
IRM 8.7.7.2 Revised paragraphs and included additional information for clarification of the time limits for filing a claim and the limitation on the amount(s).
IRM 8.7.7.2.1 Revised table regarding Appeals' acceptance of cases with less than 180 days remaining on the time for filing a claim or the time for filing a refund suit.
IRM 8.7.7.2.2 Revised paragraphs (3) and (4) and included example in paragraph 3 for clarification.
IRM 8.7.7.2.3 Revised paragraphs and included additional information for clarification.
IRM 8.7.7.3 Revised IRM 8.7.7.3 as a result of the APS IRM reorganization. Also, changed title from "Account and Processing Support (APS) - Receipt of Claim or Overassessment Case" to "General Information About Refund Claims and Overassessment Cases" .
IRM 8.7.7.3(1) Updated information about claim form types and added reminder about "informal claims" .
IRM 8.7.7.3 (4) Added instructions for the ATE to verify beginning claim amounts with IDRS information.
IRM 8.7.7.4 (old) Moved IRM 8.7.7.4, APS Establishes Claim or Overassessment on ACDS to IRM 8.20.5 as a result of the APS IRM reorganizaton.
IRM 8.7.7.5 (old) Moved IRM 8.7.7.5, Sending the New Case to the ATM to IRM 8.20.5 as a result of the APS IRM reorganization.
IRM 8.7.7.4 (new) Renumbered IRM 8.7.7.6, Actions by the ATE on Claim or Overassessment Cases as IRM 8.7.7.4. Updated section requiring ATE to ensure that a copy of the UAL was sent to the authorized representative (if applicable). Added information about the requirement for completing Form 10495.
IRM 8.7.7.5 (new) Renumbered IRM 8.7.7.7, Securing an Agreement form as IRM 8.7.7.5.
IRM 8.7.7.6 (new) Renumbered IRM 8.7.7.8, Form 2297 - Waiver of Statutory Notification of Claim Disallowance as IRM 8.7.7.6. Revised the new IRM 8.7.7.6 for preparation of Form 2297.
IRM 8.7.7.6.1 - IRM 8.7.7.6.5 (new) Also, renumbered IRM 8.7.7.8.1 through IRM 8.7.7.8.5 as IRM 8.7.7.6.1 through IRM 8.7.7.6.5.
IRM 8.7.7.6.1 (new) Changed title to "When a Statutory Notice of Claim Disallowance is Not To Be Mailed and Form 2297 Is Not to Be Secured" for consistency with similar titles. Replaced comment in paragraph (1)(c) with IRM reference for a statutory notice involving a claim for abatement of interest.
IRM 8.7.7.6.2 (new) Deleted paragraph (4) because it is no longer necessary.
IRM 8.7.7.7 (new) Renumbered IRM 8.7.7.8.6 as IRM 8.7.7.7, Partial Allowance of Refunds or Credits on Overassessments. Added cite for clarifying Revenue Ruling 2007-51 and replaced paragraph (3) with language from this revenue ruling.
IRM 8.7.7.8 (new) Renumbered IRM 8.7.7.8.7 as IRM 8.7.7.8, ATE - Processing Partial Allowances of Refunds or Credits. Included additional processing instructions for AIMS-controlled versus non-AIMS cases.
IRM 8.7.7.9.1 Changed title for IRM 8.7.7.9.1 to Statements Regarding Final Disposition of Refund Claims.
IRM 8.7.7.10 Removed "Note" from IRM 8.7.7.10(2) that referred to IRM 8.17.4.28, Counsel Review of Notices since this guidance isn't needed under IRM 8.7.7.
IRM 8.7.7.10.1 Moved IRM 8.7.7.10(2) through (4) to IRM 8.7.7.10.1, Closing Letters for Disposition of Claims.
IRM 8.7.7.10.1(1) Moved information for selecting the appropriate claim closing letter to a table format.
IRM 8.7.7.10.2 (new) Moved IRM 8.7.7.10.1 to IRM 8.7.7.10.2, Unagreed Deficiency Cases Involving Claims.
IRM 8.7.7.10.3 (new) Moved IRM 8.7.7.10.2(1) to IRM 8.7.7.10.3, Disposition of Agreed or Defaulted 90-Day Cases Involving Claims. Added reference to notice of deficiency paragraphs in IRM 8.17.4.11.8.
IRM 8.7.7.10.4 (new) Moved IRM 8.7.7.10.3 to IRM 8.7.7.10.4, Unagreed Deficiency Cases with Overassesments. Included reference for whipsaw situations and references to IRM 8.17.4 involving language includible in the notice of deficiency. Also, included additional information about the claim invitation letter.
IRM 8.7.7.10.5 (new) Moved IRM 8.7.7.10.2(2) to IRM 8.7.7.10.5, Expedite Closing of Large Dollar Examination-Sourced Overpayment Cases. Clarified expedite requirement for APS to assign Joint Committee review cases on PEAS as a "high priority" .
IRM 8.7.7.10.6 (new) Moved IRM 8.7.7.11 to IRM 8.7.7.10.6 and changed title to Procedures for Closing Claim Cases. Revised section as a result of the APS IRM reorganization and added additional information for AIMS controlled versus non-AIMS claim closing procedures.
IRM 8.7.7.11 (new) Renumbered IRM 8.7.7.12 as IRM 8.7.7.11 and revised new IRM 8.7.7.11(2) to reflect that Appeals may reconsider a claim with less than 180 days remaining on the two year period for filing a refund suit under IRC 6532.
IRM 8.7.7.11.1 Revised titles to refer to the originating office(s) as "Compliance" , "Compliance Field Operations" or "Compliance Campus Operations" .
IRM 8.7.7.11.2 Revised titles to refer to the originating office(s) as "Compliance" , "Compliance Field Operations" or "Compliance Campus Operations" .
IRM 8.7.7.11.3 Revised titles to refer to the originating office(s) as "Compliance Operations" .
IRM 8.7.7.12 (new) Renumbered IRM 8.7.7.13 as IRM 8.7.7.12, Claims Filed in Cases Previously Considered by Appeals. Revised titles to refer to the originating office(s) as "Compliance Operations," "Compliance Field Operations Area Directors" or "Directors of Compliance Campus Operations"
IRM 8.7.7.12.1 (new) Revised "note" to state that audit reconsiderations are not "claims for refund or credit of an overpayment" .
IRM 8.7.7.13 (new) Renumbered IRM 8.7.7.14 as IRM 8.7.7.13, Abatement of Interest Claims.
IRM 8.7.7.13.2 (new) Moved ACDS card-in procedures for interest abatement cases from IRM 8.7.7.14.2 (old) to IRM 8.20.5, and revised new IRM 8.7.7.13.2. Removed guidance for the ATE to consider the need to notify Compliance of a short CSED for an interest abatement case.
IRM 8.7.7.13.3 (new) Revised IRM new 8.7.7.13.3(10) and (11) to clarify methods of resolution for interest abatement claim cases.
IRM 8.7.7.13.4 (new) Moved old IRM 8.7.7.14.5, IRM 8.7.7.14.6, IRM 8.7.7.14.7 (except for Form 5402 information), and Exhibit 8.7.7-1 to IRM 8.20.7, APS General Closing Procedures. Moved Form 5402 information from IRM 8.7.7.14.7(5) to IRM 8.7.7.13.4.

Effect on Other Documents

This IRM supersedes IRM 8.7.7, Technical and Procedural Guidelines, Appeals Claim and Overassessment Cases, dated August 10, 2012.

Audience

Appeals

Effective Date

(12-11-2013)


Susan L. Latham
Director, Policy, Quality and Case Support

8.7.7.1  (12-11-2013)
Introduction to Appeals Consideration of Claim and Overassessment Cases

  1. Appeals considers claim and overassessment cases on any taxes or other matters considered by the Internal Revenue Service. Exceptions to this general authority are in Delegation Order (DO) 8-8 (formerly DO-66). See IRM 1.2.47.9.

  2. IRM 8.7.7 basically covers three separate categories of information as follows:

    1. general information pertaining to claims and overassessments,

    2. general information pertaining to audit reconsideration cases, and

    3. specific procedures for claims for abatement of interest under IRC 6404(e).

  3. Claims or Overassessments can be:

    1. part of a case file received by Appeals,

    2. filed by the taxpayer during Appeals consideration, and/or

    3. pursued by the taxpayer for the same period for which Compliance proposed a deficiency.

    Note:

    The term "Compliance" refers to the "originating function" , as defined in IRM 8.1.10.1(6).

  4. An overassessment case becomes an overpayment case when there is a refund indicated. If an overpayment exists for a tax period, the time limits prescribed by law apply for making a refund or credit of an overpayment. See IRC 6401 for amounts treated as overpayments.

  5. An overassessment could be considered an abatement if the assessment is unpaid. An abatement is the reduction or elimination of an assessment. The time limits - under IRC 6511 and IRC 6532(a) which, per IRC 6514, indicates the Service has no authority to issue a refund or credit if a suit has not been filed within the two year period (or extended period) after the notice of claim disallowance was mailed. These statutory time limits don't apply to "requests for abatement" . See IRM 25.6.1.10.1, Requests for Abatement.

  6. An overassessment could be determined by Compliance or Appeals. If a claim for refund or credit of an overpayment is not filed - as required under IRC 6511, a refund or credit of an overpayment could be allowable if made before "the time for filing a claim" has expired. A refund or credit of an overpayment might also be allowable - where a refund claim was not timely filed - if the service secures an agreement form before the time for filing a claim for refund or credit of overpayment expires. See IRM 8.7.7.5, Securing an Agreement Form.

  7. Requests for abatement - filed with reasons acceptable to Compliance - are considered by Appeals on their merits, if protested. Also, see IRM 1.2.12.1.15, Policy Statement 3-15 (formerly Policy Statement 2-89) - Reconsideration of an Unpaid Assessment .

  8. For an overassessment involving a whipsaw situation, see IRM 8.2.3.12, Overassessment Resulting from Adjustment to a Related Return and IRM 1.2.13.1.13, Policy Statement 4-34.

8.7.7.1.1  (12-11-2013)
Claims in Docketed Cases or Requests for Abatement

  1. Neither a claim for refund or credit nor a request for abatement filed on a docketed case will protect the petitioner, unless the claim or abatement issue is included in the U. S. Tax Court petition.

  2. See IRM 8.4.1.32.4, Docketed Cases with Claims for details on working and closing docketed cases with claims.

8.7.7.2  (12-11-2013)
Periods of Limitation in Claim and Overassessment Cases

  1. If the claim is for a period with a proposed deficiency, the Appeals Technical Employee (ATE) will determine the need to protect the assessment statute. Appeals does not accept claim or overassessment cases if Compliance has proposed a deficiency and less than 180 days remain on the statute for assessment.

  2. The tax law imposes various deadlines for performing certain acts for making a refund or credit of an overpayment. These limitations include the following:

    1. Time period for filing a refund claim; [See IRC 6511(a) and IRC 6511(b)(1)).]

    2. Limitation on a claim amount; [See IRC 6511(b)(2).]

    3. Time period for filing a refund suit; [See IRC 6532.] and

    4. Inadvertently making a refund or credit of an overpayment after the expiration of the time periods. [See IRC 6514.]

  3. Under IRC 6511(h), the statute of limitations for filing a claim for refund or credit of an overpayment may be suspended during the time a taxpayer is unable to handle his or her financial affairs for either of the following reasons:

    1. mental or physical impairment that is medically determinable which has lasted or is expected to continuously last for not less than twelve months; or

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

    • Note:

      IRC 6511(h) does not affect the time for filing a refund suit under IRC 6532.

      Note:

      See IRM 25.6.1.10.2.5.1.1, Appeals Determinations to identify the information needed to move a payment from the Excess Collection file to allow for a refund under IRC 6511(h).

  4. A claim for refund or credit of an overpayment must be filed within 3 years after the filing of the original return or within 2 years after payment, whichever is greater. If the overpayment is shown on a delinquent return, the refund claim is timely filed within the 3-year period required under IRC 6511(a). No consideration is given to the filing extension period for determining the 3-year period for filing a refund claim. A timely filed claim could result in no refund or overpayment allowable, if the payments fall outside the lookback period described under IRC 6511(b)(2). See paragraph 6 below. See also IRC 6511(d) for other filing time limits that might apply.

  5. IRC 7502 (the timely mailing equals timely filing rule) applies to a refund claim postmarked within the 3 year period after the original return's filing date. See AOD 2000–09, Weisbart v. U. S. Dep't of Treasury, 222 F.3d 93 (2d Cir. 2000), action on dec., 2000-09 (November 13, 2000). See also Treasury Regulation Section 301.7502-1(f).

  6. IRC 6511(b)(2) imposes a limitation on the amount available for refund or credit of an overpayment, and the filing extension period is considered in determining the look-back period described in IRC 6511(b)(2). See IRM 25.6.1.10.2.7.2.1, Three-year Rule at (2) Example (b) for determining the limitation on the amount under the three-year rule. Also, see IRM 25.6.1.10.2.7.2.2, Two-year Rule.

  7. Filing extensions are specifically excluded in determining the statutory payment date for "estimated income taxes" . See IRC 6513(b). This provision indicates the possibility that "income taxes withheld" (with a deemed statutory payment date that considers a filing extension) could fall within the look back period and that "estimated tax payments" (with a different deemed statutory payment date - that doesn't consider a filing extension) could fall outside the "look back period" .

8.7.7.2.1  (12-11-2013)
Statutory Period For Assessment Remaining—Claims and Overassessments

  1. Appeals does not accept claim or overassessment cases if Compliance has proposed a deficiency for the claim period and if less than 180 days remain on the statute of limitations for assessment (ASED). See IRM 8.21.1 for Appeals Statute Responsibility.

  2. This 180-day provision applies when Compliance has proposed a deficiency for the claim period and the expiration of the statute could result in loss of an assessment or liability. If the case does not involve a proposed deficiency for the claim period, this provision (for not accepting the case) will not apply.

  3. The following table reflects Appeals' policy for accepting claim and overassessment cases that involve expiring statutes of limitations:

    If... Then...
    Compliance has proposed a deficiency for the claim period and less than 180 days remain on the ASED Appeals will not accept the case. [See IRM 8.21.2.3.]
    the taxpayer appealed the denial of a request for refund or credit of an overpayment (where a claim has not been filed) and less than 180 days remain for filing a claim (RSED) Appeals can accept the request, but a refund or credit must be made before the RSED expires. [See IRC 6514(a)(1)].

    Reminder:

    The taxpayer is responsible for protecting his or her interest by timely filing a claim before the refund statute expires. See also IRM 8.7.7.3(1).

    the taxpayer appealed the denial of a claim for refund or credit of an overpayment and less than 180 days remain for filing suit Appeals can accept the "previously disallowed claim" , but a refund or credit of an overpayment must be made before the time for filing a refund suit expires. [See IRC 6514(a)(2).]

    Reminder:

    The taxpayer is responsible for protecting his or her interest by timely filing a refund suit within the time allowed under IRC 6532.

8.7.7.2.2  (12-11-2013)
Securing Statute Consents in Claim and Overassessment Cases

  1. The Service does not secure consents to extend the period for assessment (ASED) in cases involving claims or overassessments, unless Compliance has proposed a deficiency and final disposition could 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. See IRC 6511(c). 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 and an overpayment might exist, advise the taxpayer in writing about protecting his or her interest by filing a claim for refund. If a claim has not been filed, the "timely filing requirement" could be met if an agreement form is secured before the "time for filing a claim" has expired. See IRM 8.7.7.5 , Securing an Agreement Form.

    Example:

    An ATE is considering a deficiency case for a taxpayer who requested (during the examination process) additional deductions and/or credits. The examiner previously considered and denied the request. If Appeals' settlement results in an overpayment and a refund claim was not filed, a refund or credit of an overpayment is barred if the time for filing a refund claim expires for the refund or credit is made. See IRC 6514(a)(1).

  4. The ATE should complete Form 10495, Memorandum Re: Statute Paragraph when at least 120 days remain on the assessment statute, no statute protection is necessary, and the ACDS STATUTE DATE field contains a date. The Appeals Team Manager (ATM) countersigns the form, and a copy is retained in the administrative case file. See IRM 8.21.3.1.3.7, Cases Where a Consent is Not Necessary. Form 10495 is not required if the ACDS STATUTE DATE field is blank and the word "CLAIM" is shown in the STATCODE field.

8.7.7.2.3  (12-11-2013)
Limitations on Refunds or Credits of Overpayments

  1. IRC 6511 through IRC 6514 impose limitations on refunds or credits of overpayments, as follows:

    1. IRC 6511 imposes time limits for filing a claim for refund or credit of an overpayment and limits the"dollar amount" of such claim.

    2. IRC 6512 imposes limitations in the case of a petition to Tax Court.

    3. IRC 6513 covers the time a return is deemed filed and the time certain taxes are considered paid.

    4. IRC 6514 identifies when a refund is considered erroneous and when an overpayment is considered void.

  2. If the Service disallows any portion of a claim for refund or credit of an overpayment, the Service must notify the taxpayer (by certified or registered mail) of the claim disallowance. Per IRC 6402(l), this legal notice must include an explanation of the reason for the disallowance. The taxpayer may waive the mailing requirement by signing Form 2297, Waiver of Statutory Notification of Claim Disallowance. See IRM 8.7.7.6.1 for instances where a notice of claim disallowance or Form 2297 is not required.

  3. IRC 6532 imposes a 2-year time limit on the taxpayer to file a refund suit from the date of mailing of the statutory notice of claim disallowance. This 2-year period begins on the date of mailing of the legal notice of claim disallowance (sent by certified or registered mail) or the date that the Service received Form 2297. The time for filing a refund suit is not extended by the reconsideration or action on the claim that occurs after the mailing of a notice of disallowance. IRC 6532 allows the parties to extend the time for filing suit by mutual written agreement. See IRM 8.7.7.2.4.

  4. IRC 6514 limits the time for making a refund or credit of an overpayment. This provision states that a refund is considered erroneous and a credit is considered void if the taxpayer failed to meet certain time limits listed under IRC 6514. This includes a refund or credit of an overpayment made under the following circumstances:

    1. The refund or credit of an overpayment was made after the period for filing has expired, and a claim was not filed within the time prescribed by law, or

    2. The claim was timely filed and disallowed by the Secretary, and the time for filing a refund suit has expired (unless a refund suit was timely filed under IRC 6532). See IRM 25.6.1.10.2.5.5, Reconsideration of a Disallowed Claim.

    Caution:

    These limitations don't apply to requests for abatement or to claims for overpayment interest under IRC 6611. See IRM 25.6.1.10.2.12, Claims Against the Government Processed by the Service under Title 28 (6 years).

8.7.7.2.4  (05-15-2012)
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. The ATE should carefully consider the need to extend the time for filing suit. The following are examples of satisfactory reasons for extending the time for filing suit under IRC 6532:

    1. If the disposition of a request for reconsideration of a disallowed claim is contingent on a pending court decision, the taxpayer should be given the opportunity of submitting a properly executed Form 907.

    2. The Service had under consideration a change in position requiring the suspension of action in all similar cases.

    3. When an extension will prevent possible inequities to taxpayers.

  2. The taxpayer and the Service may extend the time for filing suit by executing Form 907, Agreement to Extend the Time to Bring Suit, as long as the parties execute Form 907 before the 2-year period expires.

  3. Multiple Forms 907 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.

  4. Form 907 must be signed by the taxpayer or by an attorney, agent, trustee, or other fiduciary acting on the taxpayer's behalf pursuant to a Power of Attorney, Form 2848. Rev. Rul. 76-60 requires the inclusion of special language on Form 2848 to authorize an individual to sign Form 907 on the taxpayer's behalf.

  5. Appeals Area Directors are authorized to execute Form 907 to extend the time for filing suit. See Delegation Order 8-4 (formerly DO 171, Rev. 2) at IRM 1.2.47.5.

8.7.7.3  (12-11-2013)
General Information About Refund Claims and Overassessment Cases

  1. Taxpayers can file a claim for refund and/or request for abatement for a redetermination of certain liabilities that have not been closed with finality. The form type would depend on the circumstances. Also, correspondence from the taxpayer can be determined to be an "informal" claim by the ATE, or Compliance could have made an earlier determination regarding an informal claim. The consideration of the issue might constitute the filing of an informal claim. See IRM 25.6.1.10.2.6.3, Informal Claims. The following are some of the claim forms that taxpayers might file to pursue a claim and/or abatement issue:

    1. Form 843, Claim for Refund and Request for Abatement

    2. Form 1040X, Amended U.S. Individual Income Tax Return

    3. Form 1120X, Amended U.S. Corporation Income Tax Return

    4. Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund

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

  3. APS will establish a claim or overassessment case on ACDS, based on procedures in IRM 8.20.5 , Processing and Establishing New Receipts. APS will send the case to the ATM for assignment. The ATE can refer to IRM 8.20.5 to determine the need to update the case information on ACDS. For Trust Fund Recovery Penalty (TFRP) cases, see IRM 8.20.5.37.2.3 to determine the appropriate statute date shown on ACDS.

  4. The ATE should verify that the beginning amounts are properly shown on the amended return (i.e. the "Per Return Amounts" or "Previously Adjusted Amounts" match information on IDRS). See IRM 21.5.3.4.5(2).

8.7.7.4  (12-11-2013)
Actions by the Appeals Technical Employee (ATE) on Claim or Overassessment Cases

  1. When an ATE receives a claim or overassessment case, he/she follows the procedures outlined in IRM 8.2.1, Agreed Pre-90-Day Income Tax Cases. The procedures include the following:

    1. Ensure a Uniform Acknowledgment Letter (UAL) was sent to the taxpayer and a copy to the authorized representative (if applicable);

    2. Review the administrative file contents and determine if the case is ready for Appeals' consideration;

    3. Validate all critical data fields on ACDS; and

    4. Conduct the conference.

  2. The ATE will ensure that an accurate statute is reflected on Appeals Centralized Database System (ACDS) and determine the need to protect a statute. If no statute protection is needed, the ATE will determine the need to complete Form 10495, Memorandum Re: Statute Paragraph. See IRM 8.7.7.2.2 (4).

8.7.7.5  (05-15-2012)
Securing an Agreement Form

  1. If an agreement is reached on an overassessment (without a claim filed), secure an agreement form using the standards for agreement in a pre-90 day case. (i.e. Form 870 or Form 870-AD ). If Form 870 or Form 870-AD is not appropriate, consider the case type to identify the appropriate form for securing an agreement.

  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, provided the form is executed and filed within the period of limitations for filing a claim for credit or refund .

  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.

8.7.7.6  (12-11-2013)
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 ATE may request that the taxpayer execute Form 2297, Waiver of Statutory Notification of Claim Disallowance. Do not follow these procedures if a claim disallowance letter was previously issued or a Form 2297 was previously filed.

  2. Follow these procedures when securing a Form 2297:

    1. Prepare three copies, including a copy for the taxpayer. If appropriate, send a copy to the authorized representative;

    2. Attach an 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 (Form 870 type, etc.) is submitted.

  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.

8.7.7.6.1  (12-11-2013)
When a Statutory Notice of Claim Disallowance is Not To Be Mailed and Form 2297 Is Not to Be 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; [See IRM 8.7.7.13.3 (11).];

    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 an 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 - with no 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 was obtained.

8.7.7.6.2  (12-11-2013)
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. A statutory notice of claim disallowance is the only form issued during the initial six (6) month period after the filing of the claim. The time frame for filing suit 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, Waiver of Statutory Notification of Claim Disallowance and/or Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit do not constitute a "decision of the IRS" .

8.7.7.6.3  (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."

8.7.7.6.4  (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. See IRM 21.5.10.3.2, Pre-Refund Audits.

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

    2. The remainder, if any, is refunded.

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

8.7.7.6.5  (05-15-2012)
More Than One Overassessment Agreement Obtained—Form 2297

  1. Occasionally, an agreement form is received in an overassessment and/or overpayment 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 statutory notice of claim disallowance. See IRM 8.7.7.5 for the need to secure an agreement form before the "time for filing a claim" has expired - for an overpayment, if no refund claim has been filed.

8.7.7.7  (12-11-2013)
Partial Allowance of Refunds or Credits on Overassessments

  1. The Service's policy on partial allowance of refunds or credits on overassessments is found in Policy Statement P–4–41 (shown at IRM 1.2.13.1.17) and Rev. Rul. 54-378, 1954–2 C.B. 246 or as clarified in Rev. Rul. 2007–51, 2007-2 C.B. 573.

  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. Revenue Ruling 2007-51 holds that the Service may credit an overpayment against unassessed internal revenue tax liabilities that have been determined in a statutory notice of deficiency sent to the taxpayer.

  4. Partial overassessments are not recommended in potential Joint Committee cases, except as provided in IRM 8.7.9, Joint Committee (JC) Cases.

8.7.7.8  (12-11-2013)
Appeals Technical Employee (ATE) - Processing Partial Allowances of Refunds or Credits

  1. When the taxpayer agrees to the allowance of a partial overassessment, secure an appropriate agreement form. See IRM 8.7.7.5 for the need to secure an agreement form before the "time for filing a claim " has expired for an overpayment - if no refund claim has been filed.

  2. If the case is on AIMS, include instructions for Form 5403, Appeals Closing Record, showing the agreed overassessment. See IRM 8.2.1.12, Processing a Pre-90-Cay Case - APS. Also, see IRM 8.20.3.3.57.1, AIMS to assist in determining whether a case is on AIMS.

  3. If the case is not on AIMS, prepare Form 3870, Request for Adjustment.

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

8.7.7.9  (05-15-2012)
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. Analyze the transcript of account if there is a question about the timeliness of a claim for refund or payments, etc. Statements of accounts are required in docketed cases involving overpayments. See IRM 8.17.3.1, Explanation of the Statement of Account.

  3. If an abatement of a previously assessed amount is needed on Non-Master File (or a separate Master File 31 account) - such as in the case of a non-petitioning spouse, APS will prepare the appropriate form.

8.7.7.9.1  (12-11-2013)
Statements Regarding Final Disposition of Refund Claims

  1. It is recommended that the settlement computation contain a brief statement regarding the final disposition of a claim for refund or overpayment. One of the following statements could be included in the settlement document, depending on the disposition:

    • Claim is Allowed in Full (with no Offset)

      "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."

    • Claim is Disallowed in Full (and No Other Adjustments)

      "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."

    • Claim is Allowed in Full or Part (but Offset by Other Adjustments)

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

    • Claim is Allowed in Part (with no Offset)

      "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  (12-11-2013)
Disposition of Claims for Refund or Credit

  1. A statutory notice of claim disallowance is issued if a total or a partial disallowance of a claim for refund or credit (of an overpayment) is to be made in an unagreed non-docketed case, not involving a deficiency.

  2. Do not issue a statutory claim disallowance letter if this letter was previously issued or Form 2297, Waiver of Statutory Notification of Claim Disallowance was filed. See IRM 8.7.7.6.1 for other instances where a statutory claim disallowance letter will not be mailed and Form 2297 is not secured.

  3. See IRM 8.7.7.10.1 for the letters required for closing claim cases.

  4. The ATM is the lowest level of authority for signing the statutory claim disallowance letters. See IRM 8.7.7.10.1 (2).

  5. See IRM 8.7.7.10.2 for information on unagreed deficiency cases involving claims.

  6. See IRM 8.7.7.10.3 for the disposition of a deficiency case involving a claim where the taxpayer agreed to the deficiency after the Notice of Deficiency was mailed or the Notice of Deficiency defaulted.

  7. See IRM 8.7.7.10.4 for information on unagreed deficiency cases with overassessments.

  8. Appeals will expedite the closing of "large dollar" examination-sourced overpayment cases. See IRM 8.7.7.10.1.

8.7.7.10.1  (12-11-2013)
Closing Letters for Disposition of Claims

  1. Appeals will mail one of the following closing letters, depending on the prior action taken for the claim:

    If ... And ... Then Prepare...
    A statutory claim disallowance letter was not previously mailed or Form 2297 was not previously received Appeals partially sustains the disallowed claim Letter 1363, Appeals Partial Disallowance of Claim - Certified Letter.
    A statutory claim disallowance letter was not previously mailed or Form 2297 was not previously received Appeals fully sustains the disallowed claim Letter 1364, Appeals Full Disallowance of Claim - Certified Letter.
    A statutory claim disallowance letter was previously mailed or Form 2297 was previously received If Appeals partially sustains the disallowed claim Letter 2683, Appeals Partial Disallowance After Previous Claim Disallowance.
    A statutory claim disallowance letter was previously mailed or Form 2297 was previously received If Appeals fully sustains the disallowed claim Letter 2681, Appeals Full Disallowance After Previous Claim Disallowance.
    A disallowed claim is appealed If Appeals fully allows the disallowed claim - with no offsets Letter 2682, Appeals Full Claim Allowance.

  2. Similar to a notice of deficiency, the ATM is the lowest level of authority for signing the statutory claim disallowance lettersLetter 1363 and Letter 1364. In addition, the ATM's signature is required on letters Letter 2682 and Letter 2683 to allow the claim in full or in part.

    Caution:

    Do not mail a statutory claim disallowance letter if this letter was previously issued or Form 2297 was previously received for the taxpayer's same period and/or same issue(s). See IRM 8.7.7.6.1 (g) and (h.

8.7.7.10.2  (10-26-2007)
Unagreed Deficiency Cases Involving Claims - Language Required in Notice of Deficiency

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

    Note:

    See IRM 8.17.4.11.8, Claims for Refund When Notice of Deficiency is issued for sample paragraphs for insertion in the notice of deficiency.

8.7.7.10.3  (12-11-2013)
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, Waiver of Statutory Notification of Claim Disallowance.

    Note:

    See IRM 8.17.4.11.8 for sample paragraphs that notify the taxpayer that an official notice of claim disallowance will be issued by certified mail if a petition is not filed in response to the notice of deficiency.

8.7.7.10.4  (12-11-2013)
Unagreed Deficiency Cases With Overassessments

  1. Where a pre-90 day case includes years with proposed overassessments and years with proposed deficiencies, don't include the overassessment years in the notice of deficiency. See IRM 8.17.4.16, Overassessment Years in the Case. For exceptions, see IRM 8.17.4.14, Tentative Allowances and Other Carryback Claims in Notice of Deficiency Statement.

  2. Generally, if the adjustments are related, the Service will not process the overassessment until the deficiency can be assessed. See IRM 8.17.4 for information involving the claim invitation letter. Send the letter to taxpayers who have not submitted protective claims. If the issue generating the overassessment is not related to, or is not the result of, the deficiency proposed in the other year(s), then the overassessment may be processed.

  3. For an overassessment involving a whipsaw situation, see IRM 8.2.3.12, Overassessment Resulting from Adjustment to a Related Return and IRM 1.2.13.1.13, Policy Statement 4-34.

8.7.7.10.5  (12-11-2013)
Expedite Closing of Large Dollar Examination-Sourced Overpayment Cases

  1. The tax law provides for interest on overpayments in respect to any internal revenue tax, in accordance with IRC section 6611. For an examination-sourced case, Appeals will expedite the closing of an overpayment case that meets the “large dollar criteria” - described in IRM 4.4.18, AIMS Procedures and Processing Instructions, Large Dollar Cases and as shown on Exam’s Form 3198, Special Handling Notice for Examination Case Processing. An overpayment case meets the "large dollar criteria" if the total amount of a period’s tax overpayment plus penalties exceeds $100,000.

    Note:

    These procedures don't apply to cases requiring Joint Committee, except that APS will assign the case on PEAS as a "high priority" case - requiring expedite processing. See IRM 8.7.9.5, Appeals Responsibility in Joint Committee (JC) Cases.

    The expedite procedures apply to the following Appeals employees:

    1. Appeals Officer (AO)

    2. Appeals Team Case Leader (ATCL)

    3. Appeals Team Manager (ATM)

    4. Account and Processing Support (APS)

  2. Appeals Officer (AO) - The AO will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE"sticker" , "note" , or "tag" to the case file and - by including a notation similar to the following: "$100,000 overpayment" . The AO will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within five (5) calendar days of receipt of the agreement form. The AO will document the reason for the delay (if any) in the Case Activity Record and Timesheet (CARAT).

  3. Appeals Team Case Leader (ATCL) - The ATCL will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE"sticker" , "note" , or "tag" to the case file and - by including a notation similar to the following: "$100,000 overpayment" . The ATCL will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within ten (10) calendar days of receipt of the agreement form. The ATCL will document the reason for the delay (if any) in the CARAT.

  4. Appeals Team Manager (ATM) - The ATM will properly "flag" the case, if not properly "flagged" by the AO (as described above). The ATM will close the case within ten (10) calendar days of the AO’s receipt of the agreement form. The ATM will document the reason for the delay (if any) in the CARAT.

  5. Account and Processing Support (APS) - APS will expedite the closing of a "large dollar" overpayment case, as" flagged" by the Appeals employee. APS will assign the case on Appeals’ Processing Employee Automated System (PEAs) and identify the case as a "high priority" - requiring "expedite processing" . APS will make every effort to process a large dollar overpayment within 30 days of Appeals’ receipt of a waiver form and/or closing agreement.

8.7.7.10.6  (12-11-2013)
Procedures for Closing Claim Cases

  1. For AIMS-controlled cases, prepare the following:

    1. Form 5403 instructions. See IRM 8.2.1.12, Processing a Pre-90-Day Case - APS

    2. Appeals Case Memo (ACM) - as deemed necessary. See IRM 8.6.2.

    3. Form 5402, Appeals Transmittal and Case Memo.

    4. Settlement computations and/or Form 3870, Request for Adjustment - as deemed necessary. See IRM 8.6.2.6.

    5. The appropriate closing Letter. See IRM 8.7.7.10.1 for details.

  2. Campus claims are not controlled on AIMS. Therefore, Form 5403 instructions are not required. The ATE should prepare the following (if appropriate) to close a non-AIMS controlled claim case.

    1. Form 3870, Request for Adjustment.

    2. Appeals Case Memo (ACM) - as deemed necessary. See IRM 8.6.2.

    3. Form 5402, Appeals Transmittal and Case Memo.

    4. The appropriate closing Letter. See IRM 8.7.7.10.1 for details.

    Note:

    A separate Form 3870 is needed for each period. For no-change claim cases, the ATE might determine that a Form 3870 is not needed. For a non-AIMS claim case, the ATE could enter "TC 290 $0.00" on Form 5402, excluding Form 3870, to fully sustain the claim denial. If the claim is allowed (in full or in part), Form 3870 is required.

  3. The following are the ACDS entries required on Form 5402:

    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–.)

8.7.7.11  (12-11-2013)
General Guidelines for Appeals Consideration after the Mailing of a Statutory Claim Disallowance Letter

  1. Taxpayers could 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 because IRS employees cannot legally make a refund or credit an overpayment after the time for filing suit has expired. See IRM 8.7.7.2.3.

  2. Appeals can reconsider a claim with less than 180 days remaining on the two year period for filing a refund suit under IRC 6532. However, the taxpayer remains responsible for monitoring the deadline for filing a refund suit. See IRM 8.7.7.2.1.

  3. Any reconsideration of the claim by Appeals does not extend the period for filing a refund suit. IRC 6514 provides that a refund or credit is erroneous if made after the time for filing suit has expired, unless the taxpayer has initiated a suit within the limitations period.

  4. Do not issue a second notice of claim disallowance when a claim is reconsidered. This could confuse the taxpayer or result in the taxpayer missing the deadline for filing suit.

  5. The Form 5402- Customized, Appeals Transmittal and Case Memo is the appropriate form to use for all Appeals cases.

8.7.7.11.1  (12-11-2013)
Reconsideration of Claim Disallowed by Compliance Field Operations or Compliance Campus Operations

  1. Appeals reconsiders claims disallowed by Compliance Field Operations or Compliance Campus Operations - if they were not previously considered by Appeals. The ATE should determine whether a statutory claim disallowance letter was mailed or Form 2297 was filed. If either has occurred, the ATE should identify the time remaining for the taxpayer to bring suit under IRC 6532.

  2. Appeals also may reconsider claims previously considered by Appeals, when justified. See IRM 8.7.7.11.3.

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

    1. Amount of the claim for which reconsideration was requested;

    2. Tax periods in the request;

    3. Date the statutory notice of disallowance letter was sent (by certified or regular mail);

    4. Date the taxpayer previously filed Form 2297, in lieu of the of the statutory claim disallowance letter; and

    5. Additional legal action that the taxpayer can take related to the disallowed claim and the relationship to a statutory claim disallowance letter or a signed Waiver of Statutory Notification of Claim Disallowance (Form 2297).

    Note:

    The ATE should prepare Letter 2682, Full Disallowance After Previous Claim Disallowance.

    See IRM 8.7.7.10.

8.7.7.11.2  (12-11-2013)
Reconsideration of Claim Disallowed by Compliance Field Operations or Compliance Campus Operations

  1. Taxpayers have the right to request reconsideration of claims disallowed by Compliance. The statutory notice of claim disallowance - issued by Compliance - advises taxpayers of this procedure.

  2. Claims previously disallowed - by Compliance - are 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 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 ATE. See IRM 8.6.1, Conference and Issue Resolution for guidance.

  4. Letter 2681, Letter 2682, and Letter 2683 are used to advise the taxpayer of the decision on a case. These letters are found in APGolf, a sub-system of ACDS. See IRM 8.7.7.10.

8.7.7.11.3  (12-11-2013)
Reconsideration of Claim Disallowed by Appeals

  1. Compliance Operations will forward to Appeals all requests for reconsideration of "claims previously disallowed 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) limits the reopening of mutual concession cases only under certain circumstances. See IRM 1.2.17.1.3 for guidance.

8.7.7.12  (12-11-2013)
Claims Filed in Cases Previously Considered by Appeals

  1. Compliance Operations will 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 to Accept Overassessment where the issue in the claim is not specifically addressed in the Form 870-AD. See IRM 8.6.4.3, Agreements Forms Secured in Appeals Cases for agreement forms used when mutual concessions are made.

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

8.7.7.12.1  (12-11-2013)
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. The taxpayer should provide information "not previously considered during the original examination" . Also, "audit reconsideration" 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. See IRS Pub 3598, What you Should Know About the Audit Reconsideration Process.

    Note:

    Audit reconsiderations are not claims for refund or credit of an overpayment 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.

    • Case dismissed by the United States Tax Court for lack of jurisdiction.

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

  5. The Central Reconsideration Unit (CRU) works audit reconsideration cases for individual income tax returns previously worked by the Area Office or Campus Examination function. The CRU will not work requests for a "reconsideration of Appeals assessments" . However CRU will work cases dismissed by the Tax Court for lack of jurisdiction . See IRM 4.13.3.1, including IRM 4.13.3.1.3, Cases Closed in Appeals. The CRU will return the following types of closed cases to Appeals for reconsideration:

    1. Agreed non-docketed cases - unless closed with a Form 870-AD type agreement (described in IRM 8.6.4.3) orForm 906, Closing Agreement on Final Determination Covering Specific Matters; 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 directly to Appeals without consideration. The CRU will route these cases in accordance with IRM 4.13.2.2 for audit reconsideration. The taxpayer can appeal the result of the audit reconsideration.

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

    • Form 870-AD type agreements (described in IRM 8.6.4.3),

    • Closing agreements,

    • Decision documents,

    • Dismissals for lack of prosecution, or

    • Tried cases.

  8. Follow Appeals procedures for closing these cases in IRM 8.2.1.12, Closing the Case to APS.

8.7.7.12.1.1  (05-15-2012)
Procedures for Audit Reconsiderations

  1. When the taxpayer requests Appeals' consideration, the full administrative file should accompany the taxpayer's request. See IRM 4.13.3.16, Request for Appeal.

  2. The receiving Appeals Office cards the case on ACDS and forwards it for assignment.

  3. The ATE assigned the case does the following:

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

    2. If reconsideration is inappropriate, sends the taxpayer/power of attorney a letter explaining the taxpayer does not qualify for the reconsideration. The ATE will prepare Form 5402, Appeals Transmittal and Case Memo to return the case to the CRU. The ATE will include a copy of the letter (sent to the taxpayer/power of attorney) in the case file.

    3. If the taxpayer qualifies for reconsideration, works the case following the same procedures used for working claims for abatement. The ATE should prepare a closing letter to reflect the results of Appeals' consideration. A Letter 913 or similar closing letter could be used to notify the taxpayer that the case will be closed and to identify the change (if any) to the taxpayer's account. The ATE will prepare Form 5402, Appeals Transmittal and Case Memo.

8.7.7.13  (05-15-2012)
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. On July 30, 1996, the Taxpayer Bill of Rights 2 (TBOR 2) revised IRC 6404(e)(1) to allow the Service to abate interest attributable to unreasonable errors or delays by the Service in the performance of ministerial or managerial acts. This TBOR 2 amendment applies to interest accruing with respect to deficiencies or payments for taxable years beginning after 7/30/1996.

  2. Delegation Order 20-1 (formerly DO 228, Rev. 3), Delegation of Authorities for Penalty and Interest Activities identifies the individuals authorized to abate interest under IRC 6404(e)(1). See IRM 1.2.51.2.

  3. An error or delay in performing a ministerial or managerial act will be taken into account only if it occurs after the IRS has contacted the taxpayer in writing with respect to the deficiency or payment. No significant aspect of the error or delay can be attributed to the taxpayer or authorized representative. If the conditions of IRC 6404(e)(1) are met, IRS is authorized to abate interest assessed on a deficiency of income tax, estate tax, gift tax and/or certain excise taxes. See IRC 6211, Definition of a Deficiency.

  4. Ministerial act means 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 - such as conferences and review by supervisors - have taken place. A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act.

  5. Managerial act means an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act.

    Note:

    See Treasury Regulation section 301.6404-2(c) for examples of ministerial and managerial acts. Do not abate interest based on "reasonable cause criteria" .

  6. 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. See IRM 20.2.7.4 for additional information.

  7. Interest abatement claims (Form 843, Claim for Refund and Request for Abatement) are generally filed with the Campus where the taxpayer would be required to file a current tax return for which the claim or request relates.

  8. 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 tax and/or penalty assessment and the tax and/or penalty 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.

  9. 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.

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

  11. Interest on employment, excise, and other taxes that are not subject to deficiency procedures don't 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.

  12. IRC 6404(e)(2) imposes a requirement for the Secretary to abate interest assessed on an erroneous refund under IRC 6602, accrued to the date that demand for repayment is made. See IRM 20.2.7.5 for additional information. Appeals authority to abate interest under IRC 6404(e)(2) is delegated to the Chiefs of Appeals, Appeals Area Directors, and Deputy Appeals Area Directors. See IRM 1.2.53.7 for Delegation Order 30-6 (formerly DO 231, Rev. 4). Per IRC section 6404(e)(2), interest must be abated on an erroneous refund, unless --

    • The taxpayer or related party caused the erroneous refund; or

    • The erroneous refund exceeds $50,000.

    Note:

    For erroneous refunds greater than $50,000, the abatement of interest under IRC 6404(e)(2) is not required, but may be allowed on a case by case basis. See IRM 20.2.7.5 for additional information.

8.7.7.13.1  (05-15-2012)
Appeals Technical Employees' (ATEs) 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. ATEs - 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 - are worked by Compliance.

  4. IRC 6404(e)(1) applies only in respect to interest on a deficiency in income tax, estate tax, gift tax, and/or certain excise taxes. See IRC 6211 for the definition of a deficiency. The ATE should carefully consider whether the taxpayer's request is for an abatement of interest assessed or accrued on the type of tax for which an abatement is allowable under IRC 6404(e)(1). In addition, the ATE should review Treasury Regulation section 301.6404-2(a) to assist the ATE in determining whether the conditions exist for allowing an interest abatement due to an unreasonable error or delay in performing a ministerial or managerial act.

  5. 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 may be done by another Appeals office at the request of the Area Director.

  6. When an ATE has a work unit with unresolved tax and/or penalty issues and the taxpayer raises the "abatement of interest" 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.

  7. In cases where the interest was assessed and/or the underlying tax and/or penalty case is otherwise agreed, the ATE may work both issues. However, the ATE should 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 ATE handle all abatement of interest cases to avoid this problem.

  8. If the underlying tax and/or penalty matter is unresolved, inform the taxpayer that the abatement request is premature. Suggest the taxpayer submit a Form 843, Claim For Refund and Request for Abatement after the underlying tax and/or penalty matter is resolved.

  9. The ATE should determine the Appeals level of authority for abating interest, based on the area of the tax law. See the following:

    1. Per IRM 1.2.51.2, the following Appeals officials could abate interest under IRC 6404(e)(1): Chiefs of Appeals, Appeals Area Directors and Deputy Appeals Area Directors. This authority was re-delegated to Appeals Team Managers and to Appeals Team Case Leaders (as to their respective cases). See App 228-1 at http://appeals.web.irs.gov/about/delorder/default.htm.

    2. Per IRM 1.2.53.7, an Appeals Area Director (or higher level of authority) must approve a decision for Appeals to abate interest under IRC section 6404(e)(2).

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

8.7.7.13.2  (12-11-2013)
Receipt of Abatement of Interest Cases

  1. APS will establish an abatement of interest claim as a separate work unit - even if received with another type of case, i.e. income tax. The ATE should refer to IRM 8.20.5 for assistance in verifying information on ACDS.

  2. Generally, these cases come to Appeals in "proposed disallowance status" so the statute is not a problem. However, the "interest abatement case" could arrive in Appeals after a final determination letter has been mailed to disallow the claim for abatement. The following situations might occur, which impact the "statute expiration date" entered on ACDS for the case:

    1. If the formal disallowance letter was issued, the 180-day period (for petitioning the Tax Court) is running and Appeals may not have time to work the case.

    2. Reconsideration of disallowed interest claims in respect to IRC 6404(e)(1) - received with less than 120 days remaining on the 180-day period - may be returned to the referring office.

      Note:

      Acceptance of this type case is subject to the approval of the Appeals Area Director. If Appeals accepts the case for reconsideration (during the 180-day period), the ATE informs the taxpayer that the period for filing suit is not extended and that no additional final determination letter will be issued.

  3. The collection statute of limitations (CSED) is not suspended as a result of the taxpayer's request for interest abatement under IRC 6404(e)(1). Likewise, the CSED is not suspended (solely) as a result of the taxpayer's petition under IRC 6404(h). In the case of a timely petition, IRC 6404(h) allows the Tax Court to review the denial of the taxpayer's request for an abatement of interest. However, the Internal Revenue Code does not provide for a CSED suspension as a result of such a petition. If the interest abatement case is docketed, the ATE should consult with Area Counsel. The CSED could expire during the Tax Court's jurisdiction - that does not involve Collection Due Process (CDP).

    Note:

    A taxpayer could request an interest abatement for a Collection Due Process (CDP) case, so it is possible for the CSED to be suspended for an interest abatement request under CDP. See IRM 8.22.8 for considering interest abatement requests under CDP

    .

8.7.7.13.3  (12-11-2013)
Appeals Technical Employee (ATE)- Procedures and Methods of Resolution

  1. Guidelines for abating interest under IRC 6404(e)(1) are in Treasury Regulation Section 301.6404–2 for tax years beginning after July 30, 1996. Determinations are made on a factual basis. If the case file contains insufficient information to permit the ATE to fully consider the abatement of interest issue, either:

    1. Return the case file to the originating function as a premature referral as outlined in IRM 8.2.1, Agreed Pre-90-Day Income Tax Cases, or

    2. If the information needed can be expeditiously provided, request the information by telephone before returning the case.

  2. Formal conferences are generally not necessary to resolve an abatement of interest issue. However, at the taxpayer's request, an ATE may offer a conference when appropriate.

  3. The ATE may resolve an abatement of interest issue by sustaining in full, abating in full, or partially abating. Interest abatement requests must be specific concerning the alleged time frame(s) in which the unreasonable error(s) or delay(s) underlying the basis of the taxpayer's claim. Identify the principal amount on which the interest accrued, and abate only the interest attributable to the specific time frame(s) [i.e. "from date(s)" through "to date(s)" ] in which the unreasonable error or delay occurred. See also IRM 20.2.7.4.

  4. Request abatements on Form 3870, Request for Adjustment. Use a separate Form 3870 for each period. If a decision is made to abate interest, the ATE must decide whether to take one of the following actions:

    1. Submit an interim request for APS-CIT (APS-Complex Interest Team) to compute an "interest abatement amount" , or

    2. Prepare a final Form 3870 with a request for APS (during the closing process) to compute the interest abatement amount.

  5. When submitting an interim request or a final Form 3870 for APS to compute the interest abatement amount, the ATE must include the following on Form 3870:

    1. the principal amount(s) on which the interest abatement will be considered; and

    2. the interest suspension period(s), by listing the "from date" and "to date" .

    Note:

    The ATE might decide to submit an interim request to determine the interest abatement amount for settlement purposes and/or at the taxpayer's request. If the actual interest abatement amount is not needed prior to the case closure, the ATE should prepare a final Form 3870 to allow the computer to generate the interest abatement amount. If the interest abatement amount was not previously determined (during the interim), APS will input the "from and to dates" and the "principal amount" - based on information provided by the ATE.

  6. The ATE should carefully identify the "principal amount" on which the interest abatement amount will be determined. The "principal amount" will be considered based on the criteria for abating the tax under IRC 6404(e)(1) or IRC 6404(e)(2).

    Example:

    If the ATE concludes that there was an unreasonable IRS error or delay in performing a ministerial or managerial act in respect to a taxpayer's $25,000 income tax deficiency (i.e. TC 300 or TC 290 assessment), the ATE should identify the $25,000 as the "principal amount" .

    Example:

    If the ATE concludes that the taxpayer is entitled to interest on an erroneous refund of $40,000, the ATE should identify the erroneous refund amount as the "principal amount" . As in the case for abatements under IRC 6404(e)(1), the ATE must identify the interest suspension period to allow for the computation of the interest abatement amount under IRC 6404(e)(2) in respect to the erroneous refund.

  7. The final Form 3870 must be approved by the ATM or ATCL, unless a higher level of approval is needed. See IRM 8.7.7.13.1(5) and IRM 8.7.7.13.1(9) for conditions that require the Area Director's approval. ATM approval is not needed to obtain an interim computation.

  8. The ATE should use the following procedures to request an interest computation, if needed prior to the case closure:

    1. Submit an APS-CIT Referral Form (as an e-mail attachment) to *AP Complex Interest Mailbox, requesting an Interim Interest Computation. Include the following in the Remarks Section: dollar amount (i.e. the "principal amount" ) on which interest must be suspended, as well as the "start date" and "end date" of the interest suspension period. The ATE can obtain an APS-CIT Referral Form from the Appeals website.

  9. If the ATE reaches a settlement on the interest abatement amount, the ATE should enter this amount on Form 3870 for closure. Do not enter the interest suspension period. APS will process the abatement for the "agreed amount" .

  10. Prepare Form 3870 for each interest abatement year, regardless of the decision. Enter one of the Reason Codes (RC) in red (if possible) and include the appropriate Transaction Codes (TC) and interest abatement amount or interest suspension period (if applicable):

    1. If the interest abatement claim is... then, enter on Form 3870.. and enter on Form 3870..
      fully allowed RC 82 TC 290 $0.00 and TC 341 with the "abatement amount" , if computed (or enter principal amount with interest suspension period)
      disallowed in part RC 81 TC 290 $0.00 and TC 341 with the "abatement amount" ,
      fully disallowed RC 80 Include TC 290 $0.00.

      Note:

      If the ATE includes instructions for APS to compute the interest abatement amount at closing, the ATE should enter the principal amount with the interest suspension period).

  11. APGolf (a sub-system of ACDS) contains closing letters for abatement of interest cases. The ATE will prepare one of the following letters - to be mailed by APS at closing:

    1. If Abatement of Interest Claim is ... Then prepare...
      fully allowed Letter 2393, Abatement of Interest- Fully Allowed
      disallowed in part (with Tax Court rights) Letter 2391, Partial Allowance - Final Determination
      fully disallowed (with Tax Court rights) Letter 2392, Full Disallowance - Final Determination
      closed with agreement Form 906, Closing Agreement on Final Determination Covering Specific Matters. [See IRM 8.7.7.13.3(13).] Letter 913, Closing Letter - Agreed Cases

      Caution:

      Do not use Form 2297, Waiver of Statutory Notification of Claim Disallowance in connection with abatement of interest claims. Also, do not use any form of notice of claim disallowance letter that mentions a 2 year period for filing suit.

  12. Appeals settles these claims, when appropriate. If there are related tax issues, don't consider the abatement of interest issue settlement in any evaluations of the hazards of litigation affecting the tax issues. Don't interrelate tax issues and abatement of interest issues through mutual concessions, offsetting consideration, split issue settlements, etc.

  13. In some settled cases, the ATE may decide obtaining a Form 906 , Closing Agreement on Final Determination Covering Specific Matters is appropriate. See IRM 8.13.1, Processing Closing Agreements in Appeals for language to use in this situation. Don't issue the final determination notice (Letter 2391 or 2392), when executing a closing agreement.

8.7.7.13.4  (12-11-2013)
Appeals Technical Employee (ATE) - Closing Procedures for Abatement of Interest Cases

  1. The ACDS Form 5402,Appeals Transmittal and Case Memo is used for all abatement of interest claims. Include the following information on Form 5402.

    1. Closing code information, based on the method of resolution:

      Closing Code Method of Resolution
      03 agreed fully allowed abatement of interest non-docketed case - with closing Letter 2393
      05 defaulted disallowance letter for a fully disallowed or partially allowed abatement of interest case
      08, 10, 11, 12, or 17 closing codes for docketed abatement of interest case
      20 Premature Referral

    2. Paycode - 7 (not applicable)

    3. RevsdTAX - Enter the negative amount approved for abatement. (Fully sustained would have $–0–.)

    4. DD AMTDIS - Enter only the amount Disallowed.
      Full disallowance reflects the full amount of the claim
      Full allowance reflects $–0–.
      Partial allowance reflects the difference between the DDAMTCL and the RevsdTAX.

  2. Additional guidelines - for using the abatement of interest Form 5402 - are available on the ACDS utilities menu.

  3. The case memo, Form 5402, and other documents [i.e. Form 3870, appropriate pattern denial letter (Letter 2391 or Letter 2392), or Form 906] require the approval signature of the Appeals Team Manager (ATM) or ATCL.

  4. The Appeals Area Director (and not the ATM) must approve and sign any documents concerning claims for abatement of interest for actions involving Appeals employees. See IRM 8.7.7.13.1(5). In addition, the Appeals Area Director must approve any abatements involving erroneous refunds. IRM 8.7.7.13(12).

    Note:

    See IRM 8.22.8.18, Interest Abatement for procedures that involve an interest abatement claim under Collection Due Process (CDP).


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