8.7.13  e-file Cases

Manual Transmittal

September 23, 2013

Purpose

(1) This transmits revised IRM 8.7.13, E-file Cases.

Material Changes

(1) IRM 8.7.13.5 - Moved the APS carding procedures to IRM 8.20.5.18.

(2) IRM 8.7.13.7 and IRM 8.7.13.6.2 - Moved the APS e-file closing procedures to IRM 8.20.7 and clarified the Appeals Officer's closing procedures.

(3) Made editorial changes throughout.

Effect on Other Documents

IRM 8.7.13 dated October 17, 2012 is superseded.

Audience

Appeals Employees

Effective Date

(09-23-2013)

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

8.7.13.1  (10-01-2012)
e-file Cases

  1. This IRM section describes the process for working Authorized IRS e-file Provider denial and sanction cases in Appeals. IRS e-file is a process by which tax returns are submitted to the IRS by way of data communications and processed electronically. Filing a tax return through IRS e-file can be accomplished by using an Electronic Return Originator (ERO). An ERO is the first point of contact for most taxpayers in filing a tax return and it is the Authorized IRS e-file Provider that originates the electronic submission of an income tax return to the IRS. Refer to IRM 3.42.10 , Authorized e-file Providers.

  2. Several sources of information are available to assist you in working e-file denial and sanction cases. IRM 3.42.10.1.2, IRS e-file Publications, provides a complete list of publications to be used in working e-file denial and sanction cases. In addition, the following will also assist you:

    • Rev. Proc. 2007-40 2007-26 I. R. B. 1488 (June 25, 2007)

    • Publication 1345, IRS e-file Handbook for Authorized IRS e-file Providers of Individual Income Tax Returns

    • Publication 3112, IRS e-file Application and Participation

    • In addition to the above, there are updates to IRS e-file which are posted to the Electronic Filing System Bulletin Board (EFS Bulletin Board) and the IRS web site at http://www.irs.gov.

  3. There are several court cases that will assist you in working e-file cases. Refer to:

    • Michael v. United States, 36 Fed. Appx. 821,89 AFTR 2d 2002-3066 (6th Cir. 2002)

    • Brenner Income Tax Centers, Inc. v. Director of Practice of the Internal Revenue Service, 87 F.Supp.2d 252, 2000-1, USTC P 50, 308 (S.D.N.Y. 2000)

    • Ekanem v. United States, 98-2 USTC P 50, 257 (D. Md. 1998)

    • Forehand v. United States, 877 F. Supp. 592, 75 AFTR 2d 95-1186 (M.D. Al. 1995)

    • Sabat v. United States, 2000-1 USTC P 50, 328 (W.D .Pa. 2000)

8.7.13.2  (10-01-2012)
IRS e-file Overview

  1. An Authorized IRS e-file Provider is a business authorized by the IRS to participate in IRS e-file. The business may be a:

    • sole proprietorship

    • partnership

    • corporation or

    • organization

    The business:

    1. Submits an application

    2. Is accepted or denied participating in IRS e-file

    3. If accepted, is assigned an Electronic Filing Identification Number (EFIN) and

    4. Receives credentials, i.e., an acceptance letter or a security letter that allows continued participation in IRS e-file

  2. The Internal Revenue Service reviews each Firm, Organization, Principal, and Responsible Official on the application. Suitability is used by the IRS to determine if the Firm or individuals listed on the applications are "suitable" to participate in IRS e-file. A suitability check is performed on every applicant, Principal, and Responsible Officer. Each can be denied participation in IRS e-file for a variety of reasons. For a complete discussion on suitability, refer to IRM 3.42, Electronic Tax Administration, Publication 3112IRS e-file Application and Participation, and Rev. Proc. 2007-40.

  3. Once the applicant is accepted to participate in e-file, the Provider must adhere to specific requirements in order to continue participation in IRS e-file. The IRS monitors Authorized IRS e-file Providers for compliance with the Revenue Procedures and IRS e-file requirements.

  4. The Internal Revenue Service may sanction an Authorized IRS e-file Provider, Principal, or Responsible Official for violating any provision of the Revenue Procedure as well as any publications or notices governing IRS e-file. Sanctions that the IRS may impose range from a written reprimand to expulsion, depending on the seriousness of the infraction. There are different categories of infractions:

    1. Level One – violations of the rules governing IRS e-file that have little or no adverse impact on the quality of electronically filed returns or IRS e-file. The IRS may send a letter of reprimand for a Level One infraction. Refer to IRM 3.42.10.23.11.1.

    2. Level Two- violations of the rules governing IRS e-file that have an adverse impact upon the quality of electronically filed returns or on IRS e-file. Depending on the infractions, the IRS may either restrict participation in IRS e-file or suspend the Provider, Principal, or Responsible Official from participation in IRS e-file for one year. Refer to IRM 3.42.10.23.11.2.

    3. Level Three – violations of the rules governing IRS e-file that have a significant adverse impact on the quality of electronically filed returns or on IRS e-file. Depending on the infractions, the IRS may suspend the Provider, Principal, or Responsible Official from participation in IRS e-file for two years, or depending on the severity of the infraction, i.e., fraud or criminal conduct, could result in expulsion from participating in IRS e-file without the opportunity for future participation. Refer to IRM 3.42.10.23.11.3 .

  5. Suspended Providers, Principals, and Responsible Officials may reapply to participate in IRS e-file after the suspension period ends, or sooner if they resolve the suitability issues.

8.7.13.3  (10-17-2012)
Origin of e-file Cases

  1. Appeals receives cases from the Director, Electronic Products & Services Support.

    All e-file cases will be sent to the following address to be carded in:

    Office of Appeals

    290 Broadway, 11th Floor

    New York, NY 10007

    Attn: Processing Team Manager, APS Unit

    The cases will be worked at:

    Office of Appeals

    50 Clinton Street, 3rd Floor

    Hempstead, NY 11550

  2. Each case received by Appeals from the Director, Electronic Products & Services Support will have the following information in it

    1. A copy of the application screen from TPDS which will contain the most current information for the Provider

    2. Copies of the most recent IDRS prints, when applicable

    3. Copies of all correspondence related to that particular sanction or any non-compliance history or suitability

    4. First appeal suitability recommendation worksheet and appeal rights suitability recommendation worksheet

    5. Any compliance memoranda issued with regard to the Provider (i.e., Criminal Investigation (CI) and Criminal Investigation Branch (CIB) memorandum and documentation)

    6. Copies of all tax returns secured by Andover e-Help

  3. For SB/SE Compliance cases only, copies of the SB/SE visitation worksheets and rebuttals.

8.7.13.4  (10-01-2012)
The Administrative Review Process

  1. An applicant and/or participant has a right to an Administrative Review when:

    1. The applicant is denied participation into IRS e-file and the applicant, Principal, or Responsible Official files a timely appeal or

    2. The Provider, Principal, or Responsible Official is suspended or expelled while participating in IRS e-file and files a timely appeal

  2. For a complete lists of IRS e-file letters, refer to the exhibit in IRM 3.42.10-15. For a complete list of suitability review letters, refer to IRM 3.42.10-10.

8.7.13.4.1  (10-17-2012)
Denial of Participation in IRS e-file

  1. All Authorized IRS e-file Providers, except those that function solely as a Volunteer Organization or as Software Developers, pass a suitability check on the firm as well as on all Principals and Responsible Officials of the firm prior to acceptance in IRS e-file. The IRS reviews each firm or organization, Principal, and Responsible Official listed on the IRS e-file Application. An applicant, Principal, or Responsible Official may be denied participating in IRS e-file for a variety of reasons that include, but are not limited to:

    1. An indictment or conviction of any criminal offense under the laws of the United States or of a state or other political subdivision, or an active IRS criminal investigation

    2. Failure to file federal, state or local tax returns

    3. Failure to pay any federal, state, or local tax liability unless appropriately addressed (e.g., installment agreement).

    4. Assessment of penalties

    5. Suspension/disbarment from practice before the IRS or before a state or local tax agency

    6. Disreputable conduct or other facts that may adversely impact IRS e-file

    7. Misrepresentation on an IRS e-file Application

    8. Unethical practices in return preparation

    9. Non-compliance with IRC 6695(g)

    10. Stockpiling returns prior to official acceptance to participate in IRS e-file

    11. Knowingly and directly or indirectly employing or accepting assistance from any firm, organization, or individual denied participating in IRS e-file, or suspended or expelled from participating in IRS e-file. This includes any individual whose actions resulted in the denial, suspension, or expulsion of a firm from IRS e-file

    12. Knowingly and directly or indirectly accepting employment as an associate, correspondent, or as a subagent from, or sharing fees with, any firm, organization, or individual denied participating in IRS e-file, or suspended or expelled from participating in IRS e-file. This includes any individual whose actions resulted in denial, suspension, or expulsion of a firm from IRS e-file

    13. Enjoined from filing returns by a federal or state court injunction or prohibited from filing returns by any federal or state legal action that prohibits them from participation. A type of such legal action is a Federal Executive Order such as Executive Order 13224 (September 23, 2001), which involves prohibitions directed at terrorist individuals and organizations

  2. IRM 3.42.10.23.5.4 addresses reasonable cause.

  3. An applicant, Principal, or Responsible Official who is denied participation in IRS e-file has the right to an administrative review. Within 30 calendar days of the date of the denial letter from the Director, Electronic Products & Services Support, they may mail a written response to the address shown on the denial letter. Upon receipt of the written response, the IRS will reconsider the denial of participation in IRS e-file. That denial may either be

    1. Withdrawn and the applicant accepted to participate in IRS e-file; or

    2. Sustained, and a second denial letter, providing the right to an appeal to the Office of Appeals.

  4. An applicant, Principal, or Responsible Official who receives a second denial letter from the Director, Electronic Products & Services Support, is entitled to an appeal. The appeal must be mailed to the address shown in the second denial letter within 30 calendar days of the date of the second denial letter. The written appeal must contain detailed reasons, with supporting documentation, showing why the recommended sanctioning should not be imposed. Failure to respond within 30 calendar days beginning with the date of the proposed sanctioning letter described above, terminates the right to an administrative review or an appeal.

8.7.13.4.1.1  (10-17-2012)
Sanctions of Providers

  1. Any Authorized IRS e-file Provider, Principal, or Responsible Official who has been advised of a proposed sanction has the right to an administrative review. If a Provider, Principal, or Responsible Official receives a letter proposing a sanction from the Director, Electronic Products & Services Support, they may mail a detailed written explanation with supporting documentation as to why the proposed sanction should be withdrawn within 30 calendar days of the date of the letter proposing the sanction. Upon receipt of the written response, the Internal Revenue Service will reconsider the proposed sanction and may either withdraw its proposed sanction or affirm it by issuing a recommended sanctioning letter depending on the severity of the infraction.

  2. If a Provider, Principal, or Responsible Official receives a recommended sanction letter affirming the sanctioning, they may appeal to the Office of Appeals at the address on the letter. The appeal must be in writing and mailed to the Internal Revenue Service office that issued the recommended sanctioning letter within 30 calendar days of the date of the letter recommending a sanction.

    Note:

    A sanction is a measure that may restrict or suspend the privileges of an Authorized IRS e-file Provider, Principal, or Responsible Official from participating in IRS e-file. Sanctioning may be a written reprimand, suspension, or expulsion from IRS e-file, depending on the seriousness of the infraction. Sanctions may be appealed through the administrative review process to include an initial review from the office proposing the sanctions. Suspensions and expulsions may have a subsequent review by the Office of Appeals.

  3. The Provider’s written appeal must contain detailed reasons, with supporting documentation, showing why the recommended sanctioning should not be imposed. Failure to respond within 30 calendar days beginning with the date of either the proposed sanctioning letter or the recommended sanctioning letter described above, terminates an Authorized IRS e-file Provider’s right to an administrative review or an appeal.

    Note:

    Beginning October 1, 2012, Principals and Responsible Officials with PTINs who have had their PTINs suspended or revoked by the Return Preparer Office (RPO) for personal tax non-compliance and had the right to an appeal of the PTIN suspension/revocation will also be suspended from IRS e-file but will not have a right to an e-file appeal of denial or suspension/expulsion from IRS e-file. Only the applicants or Providers (firms) that are other than sole proprietors on which they are Principals or Responsible Officials will be able to have an IRS e-file appeal.

8.7.13.5  (09-23-2013)
Verification of Case Summary Card Information in e-file cases

  1. For information regarding Account and Processing Support (APS) carding procedures, refer to IRM 8.20.5.18, e-file Cases.

  2. Upon receipt of the case in Appeals, the Appeals Technical Employee (ATE) will verify the case summary card information within five business days of receipt. The ATE will review the case file for e-file application information, for the name, address, and EFIN number(s).

    Note:

    The EFIN number(s) will always be 00 followed by a six-digit number

    Field Name Description
    TP Name The TP Name of the EFIN applicant
    TP Address The TP Address of the EFIN applicant
    Representative The Representative of the EFIN applicant
    WUNO Note: For each EFIN the taxpayer has, there will be a separate WUNO created
    Type Code DOP
    Source Code FE
    Category Other
    Subcategory DOP
    Appeals Officer The assigned Appeals Technical Employee (ATE)
    Date Assigned The date the case was assigned to the ATE
    Date Received The date the case was received in Appeals
    Date Created System generated - the date the case was created on ACDS
    ReqAppl date The date the EFIN applicant requested an appeal
    Key Period 2099

    Note:

    There will be no return level information entered, i.e., AIMS indicator, tax period, and statute code.

8.7.13.6  (10-01-2012)
Working e-file Cases in Appeals

  1. Ex parte communications - The legislative history of the ex parte provision in RRA-98 indicates that it is intended to apply to communications between Appeals and other IRS employees relating to specific taxpayers or tax determinations. IRS e-file does not address either specific taxpayers or tax determinations. Instead, with respect to the appellants, it is akin to determinations as to whether a particular individual's authorization to practice before the IRS should be suspended or revoked for cause.

  2. The transfer of responsibility from the Office of the Professional Responsibility to Appeals for the administrative review of proposed denial of entry into e-file or sanctions imposed on current Providers, Principals, or Responsible Officials does not change prior advice relating to the application of the ex parte provision. Communications with other IRS employees relating to these cases are not subject to ex parte restrictions.

  3. Please refer to Rev. Proc. 2012-18 or IRM 8.1.10 regarding Ex Parte Communications.

8.7.13.6.1  (10-01-2012)
Cases referred to Appeals without Criminal Investigation (CI) indicators

  1. Appeals Officers may receive the following types of e-file cases:

    1. Applicants denied from participation in IRS e-file

    2. Providers, Principals, or Responsible Officials sanctioned while participating in IRS e-file or

    3. Providers, Principals, or Responsible Officials asking for a reconsideration of a prior Appeals’ decision in an e-file case.

  2. The Appeals Team Manager or designee should issue the e-file acknowledgement Letter 4301 from APGolf. The purpose of the e-file acknowledgement letter is to provide a contact person’s name and phone number and inform the Provider what can be expected from Appeals in the resolution of the case.

  3. The Appeals Officer assigned to work the case will review the case file prior to issuing the conference Letter 4304. The conference letter will:

    1. Schedule a telephone, correspondence, or face to face conference

    2. Ask for any additional information, if applicable, with respect to the appeal of the case and

    3. Explain consequences of the appellant's failure to respond or participate in the conference

  4. At the conclusion of the conference, the Appeals Officer may prepare a Decision on the Appeal in each case. The Decision may be:

    1. A sustained sanction, including a lesser sanction

    2. A reconsideration of a former Decision made in Appeals or

    3. A denial of participating in IRS e-file

  5. Each Decision on Appeal should contain:

    1. The Revenue Procedure(s) prescribing the eligibility requirements to participate in the program

    2. The standard of conduct

    3. The scope of authority, circumstances and conditions under which a Provider, Principal, Responsible Official, or applicant may participate in IRS e-file to exercise the privilege of electronic filing federal income tax returns

    4. A brief synopsis explaining the information provided by Andover e-Help in each case and

    5. Considerations Appeals made in the case

    Note:

    If Appeals makes a decision to overturn a suspension to a reprimand, a Decision on Appeal is not required. A detailed Decision in this case may not be appropriate and a closing letter will suffice.

8.7.13.6.2  (09-23-2013)
Closing Letters and Closing the Case

  1. In each case, the Appeals Officer will document the case activity record on the outcome of the conference, prepare the appropriate closing letter on APGolf, and prepare a copy of the Decision entered on Appeal. Enter the appropriate closing code for the e-file case on the customized Form 5402:

    Closing Code Definition Letter
    14 Reconsideration Denied Letter 4303(a)
    14 Rejection/Reprimand Sustained Letter 4305(a)
    15 Rejection/Reprimand Not Sustained Letter 4305(c)
    16 Partially Sustained Letter 4305(b)
    20 Premature Referral Letter 4302(a), Letter 4302(b)or Letter 4303(a)
    20 Appeal Withdrawn Letter 4303(b)

  2. Prepare the following:

    1. Appropriate closing letter

    2. Decision on Appeal (if applicable)

    3. e-file narrative

    Note:

    Do not return case files to the Director, Electronic Products & Services Support.

8.7.13.6.3  (10-01-2012)
Premature Referral - Cases with Criminal Investigation (CI) Indicator(s)

  1. An e-file case may be received in Appeals with a CI indicator, a transaction code (TC) 914, 916 or 918. These modules will have a freeze code on the Integrated Data Retrieval System (IDRS).

    Transaction Code Freeze Indicator Definition
    914 -Z Active Criminal Investigation
    916 Z- A specific tax module may be part of a Refund Scheme
    918 Z- Establishes a Refund scheme freeze on all modules

  2. Any cases with a CI indicator will not be worked in Appeals as Appeals does not have jurisdiction over the case. The case will be returned to Andover e-Help as a Premature Referral. Appeals Officers will:

    1. Review the case file and determine if there is an active CI indicator on the IDRS prints

    2. Document the case activity record

    3. Use case closing code 20, premature referral

    4. Prepare closing Letter 4302(a) advising the case is being returned to Andover e-Help; and

    5. Prepare transmittal document

8.7.13.6.4  (10-01-2012)
Premature Referral – Appeal Not Timely

  1. Occasionally Appeals receives cases where the appeal was untimely. If the Appeals Officer determines the appeal is untimely, the Appeals Officer will:

    1. Document the case activity record and

    2. Prepare premature referral Letter 4303(a) on APGolf

    3. Use case closing code 20, premature referral

    4. Prepare transmittal document

8.7.13.6.5  (10-01-2012)
Premature Referral – Withdrawal of the Request for an Appeal

  1. When an appellant withdraws the request for an appeal, the appellant's appeal is now moot. If an appellant withdraws the request for an appeal, the Appeals Officer will:

    1. Document the case activity record and

    2. Prepare premature referral Letter 4303(b) on APGolf

    3. Use case closing code 20, premature referral

    4. Prepare transmittal document

8.7.13.6.6  (10-01-2012)
Premature Referral - Other Reasons

  1. Occasionally Appeals receives cases that are premature for consideration, such as incomplete compliance actions, pending claims for abatement/refund or an incomplete case file. If the Appeals Officer determines the case is not ready for Appeals consideration, the Appeals Officer will:

    1. Document the case activity record

    2. Prepare premature referral Letter 4302(b) on APGolf

    3. Use case closing code 20, premature referral

    4. Prepare transmittal document

8.7.13.7  (09-23-2013)
e-file Case Closing Procedures

  1. Refer to the Account and Processing Support (APS) e-file closing procedures in IRM 8.20.7 for information on how APS closes e-file cases.

  2. The closed case file must contain the appropriate APGolf letter generated to the appellant and the POA, and in most cases:

    1. Decision on Appeal (if applicable)

    2. Customized Form 5402

    3. e-file case narrative

  3. Submit the completed closed case file to the Appeals Team Manager for approval and closing.


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