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Part 8. Appeals

Chapter 20. Appeals Case Processing Manual

Section 5. Processing and Establishing New Receipts

8.20.5  Processing and Establishing New Receipts

8.20.5.1  (10-16-2007)
Overview

  1. As the Internal Revenue Service’s dispute resolution forum, Appeals receives a variety of cases. This section contains procedures for verifying administrative files on new Appeals receipts, acknowledging receipt of cases from the various Compliance functions, IRS campuses and other Appeals offices, establishing cases and returns on the Appeals Centralized Database System (ACDS).

8.20.5.2  (10-27-2006)
Receiving Returns and Administrative Files

  1. The administrative file is a file containing one or more examined tax returns, the examination report, and all papers, correspondence, and other documents relative to the taxpayer’s liability for the year or years involved.

  2. The administrative file may also consist of collection related documents such as history, correspondence, financial information and other documents related to collection action taken on the taxpayer.

  3. Acknowledge receipt of the work unit and return the transmittal to the originating office.

8.20.5.2.1  (10-27-2006)
Verifying Administrative File Contents

  1. Verify the contents of the administrative file to determine if all documents, returns, etc. which are listed on the transmittal Form 3210 are present in the file upon receipt.

  2. Determine the statute date and ensure that there are at least 180 days remaining on the statute before accepting the case. If there are less than 180 days remaining on the statute, do not accept the administrative file in Appeals. Prepare a new Form 3210, Document Transmittal, and return the file immediately to the originating function.

  3. Once the contents of the administrative file and the statute date are verified, sign the acknowledgment copy of the Form 3210 and return it to the originator. Make a copy of Form 3210 to remain in case file.

8.20.5.2.2  (10-27-2006)
Contents of the Administrative File

  1. Depending on the type of case, the administrative file may contain the returns of the taxpayer, consent to extend the statute if needed, examining officer's report, and other documents relating to the taxpayer's liability for the year or years involved, such as protests or petitions, claims for refund or abatement, and other pertinent documents or papers.

  2. With the exception of Collection, Penalty Appeals, and Campus Claim cases, administrative files are transmitted to Appeals, along with a full AMDISA for each return reflecting a current AIMS Status of 81, or an AMCLS print for each return. Update AIMS to Status 80, if the return is non docketed, or 82 if the return is docketed using IDRS command code AMSTUB. Verify the statute date on AIMS and, if necessary, update the statute date using command code AMSTUB.

  3. When necessary to request Form 8453 and/or Form W–2, secure a transcript to ensure that the return was electronically filed (see DLN information below). To secure Form 8453, some campuses require command code ESTAB procedures while others require use of command code ELFRQ.

8.20.5.2.3  (10-27-2006)
AIMS Prints in the Administrative File

  1. With the exception of Collection, Penalty Appeals, and Campus Claim cases, administrative files are transmitted to Appeals, along with a full AMDISA for each return reflecting a current AIMS Status of 81, or an AMCLS print for each return.

    1. Update AIMS to Status 80, if the return is non docketed, or 82 if the return is docketed using IDRS command code AMSTUB.

    2. Verify the statute date on AIMS and, if necessary, update the statute date using command code AMSTUB.

8.20.5.2.4  (10-27-2006)
Work Unit

  1. Work units will be established on ACDS as follows:

    1. Non-docketed — generally cases that have returns with the same TIN and MFT received at the same time (that are included in an RAR or other tax computation document) will be one work unit.

    2. Docketed — every docket number will be a separate work unit.

    3. Non-TEFRA Flow Through Entity Returns - will be a separate work unit.

  2. Special procedures will apply for the following types of cases and will be covered in subsequent sections:

    1. Trust Fund Recovery Penalty, IRM 8.25

    2. Innocent Spouse, IRM 25

    3. Transferee/Transferor, IRM 8.7.5

    4. Non-Petitioning Spouse, IRM 8.4

    5. Collection Due Process, IRM 8.22

    6. Collection Appeals Program, IRM 8.24

    7. Offer–In–Compromise, IRM 8.23

    8. Reference cases (excluding non-TEFRA flow through returns) will be combined into the primary work unit.

    9. Penalty Appeals, IRM 8.11

    10. Preparer Penalty, IRM 8.11.3

  3. In those special situations above where multiple cases are assigned to a work unit, the following rules apply:

    1. A work unit must have one case designated as the "key case" .

    2. Enter related cases first and the "key case" last. This enables the system to add all case dollars together and show the correct total on the"key case" .

8.20.5.3  (10-27-2006)
eCASE

  1. eCase allows for the electronic transfer of data from Appeals’ suppliers and customers to Appeals.

  2. Appeals receives data from ERCS (Exam) and AOIC (Automated Offer-in Compromise) and ACS (Automated Collection System).

  3. Rather than manually inputting data into ACDS, eCase automatically transfers specific data fields.

  4. The employee requesting transfer of the information from eCase must verify the data and enter additional information when necessary.

8.20.5.4  (10-27-2006)
Establishing Non-Docketed Cases

  1. Appeals’ responsibility includes but is not limited to cases that involve a tax liability. In most cases, a 30 or 60 day letter has been issued to the taxpayer by Compliance or a Campus Director. Taxpayers request an Appeals conference and, when required, file a protest against the proposed deficiency, overassessment, or determination. A non-docketed case is a protested case in which the taxpayer has not filed a petition with the United States Tax Court.

  2. Employee creating the record on ACDS will take the following actions:

    1. Complete items on the ACDS case inventory and return information screens as applicable. See IRM 8.20.3 Appeals Centralized Data System, for additional information on field requirements in ACDS.

    2. Verify the data is correct before executing the command to generate the case summary card. When the case summary card(s) is generated, attach it to the top of the administrative file.

    3. Forward the case to the Appeals Team Manager or designated official in the office who assigns the work unit to an appeals officer following local procedures. The appeals officer makes a preliminary review of the case, verifying the key taxpayer/tax period and the statute of limitations date for each return is correct. If corrections are required prepare the ACDS correction form and forward to the APS Mailbox.

8.20.5.4.1  (10-27-2006)
Substitute for Return (SFR) Program

  1. Usually these cases will be received from the Campus in docketed status. Although it is possible for the taxpayers to request an Appeals hearing, time constraints limit the number of cases received in non-docketed status.

  2. Usually they will be established on AIMS by Appeals (CC/AM424A) if not done by the Campus prior to sending the case.

  3. These cases will be IMF accounts only.

  4. They will be established on CASES following normal procedures except for:

    • FEATRCD — Enter "NF"

    • STATUTE CODE — Enter"DOCKT" or "SUB" as appropriate (if non-docketed and a return is signed by the taxpayer, the statute date will be entered -- three years from the received or signature date, whichever is later).

  5. Typically, the SFR will only involve one spouse even though both husband and wife may have petitioned the Tax Court. Until a joint filing status is approved by the appeals officer, only the name/TIN reflected on the SFR will be established on AIMS/ACDS. When appropriate, the case will be converted from Separate to Joint at closing.

8.20.5.4.1.1  (10-27-2006)
Substitute for Return under IRC §6020(b)

  1. These cases will be BMF accounts only (employment tax and some excise tax) and are only received in non-docketed status.

  2. They will be established on AIMS by Appeals (CC/AM424A) unless the case is already established on AIMS or will be returned to Compliance Collection for assessment (i.e., trust fund recovery). When AIMS control is necessary, the account will require monitoring until the TC 150 posts and then Appeals will establish AIMS control. (This must be done prior to closing if Appeals will be processing using Form 5403.)

  3. They will be established on CASES following normal procedures except for the following:

    • TYPE — Enter "EMPL" , or "EX" , or "TFRP" as appropriate.

    • FEATRCD — Enter "NF"

    • Statute Code — Enter "SUB (if a return is signed by the taxpayer, the statute date will be entered)"

8.20.5.4.1.2  (10-27-2006)
Delinquent Returns Secured by Compliance Subsequent to Processed SFR

  1. These cases will be both IMF and BMF accounts and received in either docketed or non-docketed status.

  2. They will generally be received from the Examination function with a good AIMS record established by Examination.

  3. They will be established on CASES following normal procedures except for the following:

    • FEATRCD — Enter "NF"

    • Statute Code — Enter "DOCKT" or statute date — three years from signature date, if non-docketed.

  4. If delinquent returns are secured while the SFR is being considered by Appeals, change the statute date on the non-docketed year(s) to three years from the received or signature date, whichever is later, and follow procedures in IRM 8.20.6.

8.20.5.4.1.3  (10-27-2006)
Withholding Compliance (WHC) Program

  1. This project is controlled by the Andover Compliance Campus. The cases are a penalty or determination for under-withheld taxpayers. The cases are a penalty or determination for:

  2. IRC §6682 allows for the assertion of a $500 civil penalty for filing a false Form W-4 if the statement made on the Form W-4 results in less tax withheld than would have been withheld if the Form W-4 had been correctly filed, and there was no reasonable basis for such a statement.

  3. A determination refers to the change the IRS made to the taxpayer's original W-4 for the marital status and number of exemptions claimed. If the taxpayer did not sufficiently verify that he or she was entitled to the claimed marital status and number of exemptions, the IRS changes the marital status to single and allows only one exemption for withholding.

  4. The administrative file will be transmitted to Appeals with:

    • Form 3210 identifying the type of case as either penalty or determination.

    • Taxpayer protest requesting an appeal

    • Correspondence from the taxpayer including any supporting documents

    • History of the case development prepared by the Campus;

    • Current transcript and two prior years to determine how the taxpayer filed

    • Information Returns Processing Transcript for the prior two or three years

  5. Establish the case on ACDS using normal procedures, except:

    • TYPE = PENAP

    • MFT = 55

    • SOURCE = SC

    • DO = 08

    .

  6. For determination cases, add the following entry:

    • LOC8 = WHC

  7. On the return information screen, input the AIMS indicator E, tax periods, and statute code ASESD for penalty cases and N/A for determination cases.

8.20.5.4.2  (10-27-2006)
Allocated Tip Tax Cases

  1. Employers are required to withhold and allocate 8% of gross income or tip tax. Rev. Proc. 86-21 provides that an employer may request administrative relief from this 8% requirement.

  2. Allocated Tip Tax cases have no returns, statutes or proposed deficiencies.

8.20.5.4.2.1  (10-27-2006)
Information Included in Allocated Tip Tax Files

  1. The files should include:

    1. The request for Appeals consideration.

    2. Compliance's denial.

    3. A statement from the responsible person who is authorized to make and sign a return, statement or other document: "Under penalties of perjury, I/We declare that I/We have examined this application including accompanying documents and to the best of my/our knowledge and belief, the facts present in support of this application are true, correct and complete."

    4. Employer's request for administrative relief and substantiation.

  2. The employers request should also include:

    • Type of restaurant, i.e., lounge, sandwich shop, coffee shop, etc.

    • Days and hours of operation.

    • A general description of the operation of the establishment, including the type of services provided by the staff, and the type of self service, if any.

    • To whom the customer pay the check, waiter or waitress, cashier, etc.; whether the check is paid before or after the meal.

    • Whether alcoholic beverages are available.

    • Total gross sales for the past year.

    • Total amount of charge sales for the past year.

    • Total amount of charge sales with charge tips for the past year.

    • Total amount of charge tips for the past year.

    • Total reported tips for the past year.

    • Total carry-out sales for the past year.

    • Percentage of sales representing breakfast, lunch and dinner business for the past year.

    • Average dollar amount of the guest check for the past year.

    • Percentage of sales with a service charge for the past year.

    • Type of clientele.

    • Copy of a representative menu for each meal.

8.20.5.4.2.2  (10-27-2006)
Establishing Allocated Tip Tax Cases

  1. On the case inventory screen, follow normal procedures except for the following:

    • TIN — The TIN will be followed by a modifier (A through J) to distinguish the tip tax case from other related returns.

    • TYPE — Enter EMPL.

  2. No data will be entered on the return information screen.

8.20.5.4.3  (10-27-2006)
Recovering Administrative and Litigation Costs

  1. IRC §7430 provides for the recovery of reasonable administrative costs and litigation costs. The procedures for recovering administrative costs require that a written request be filed with the IRS personnel that considered the underlying substantive claim. When these cases are received in Appeals, it is important to remember the following:

    1. An award of litigation costs, attorney fees or court costs may be appropriate for docketed cases tried by the Tax Court or settled whether in Appeals or by Counsel. These cases required approval by Counsel and will be forwarded to them for action. These cases will not be input on CASES.

    2. An award of administrative costs (including attorney fees) may also be appropriate for non-docketed cases. Appeals has sole jurisdiction in deciding these cases and they will be entered on CASES. (See Note below.)

    3. Any decision on administrative costs may be appealed to the Tax Court by the taxpayer, or his authorized representative.

    Note:

    If a petition is filed, they become litigation costs and jurisdiction is then transferred to Counsel.

  2. On the case inventory screen, follow normal procedures except for the following items:

    1. MFT — Enter the MFT of the initial case.

    2. TYPE — Enter 7430.

  3. On the return information screen, enter the following:

    1. AIMS Indicator — Enter E.

    2. TAX PERIOD — Enter the tax period involved in the original case. If there is more than one period, enter only the earliest period.

    3. STATUTE CODE — Enter CLAIM.

    4. SND — Enter N.

    5. APPEALS AMTCLM — Enter the total amount claimed.

8.20.5.4.4  (10-27-2006)
Delegation Order (DO) 4-25

  1. Delegation Order 4-25 provides settlement authority to Compliance, following approved Appeals settlement guidelines with the concurrence of Appeals Technical Guidance.

  2. These cases will be received electronically from the Appeals Technical Guidance Coordinator by the local Processing Team Manager. AIMS status will remain in Compliance.

  3. These cases are high priority and should be on ACDS ideally within 1-2 days following receipt of DO-4-25.

  4. The case will be controlled on ACDS following normal procedures except for the following:

    • REQAPPL - as shown on Section I of the Form

    • RECDATE - as shown on Section IV of the Form

    • FEATURE CODE - D5

    • AIMS – E

    • STATDATE—Leave Blank

    • PBC—Check AMDISA (Page 1)

    • STATCODE—enter EXAM

    • . PROPOSED DEFICIENCY—Leave blank initially; the TGC will provide at closing

8.20.5.4.5  (10-27-2006)
Audit Reconsideration Cases

  1. An audit reconsideration case is the reevaluation of the results of a prior audit when a taxpayer disagrees with the original determination by providing information that was not previously considered during the original examination. Or, it is the process the IRS uses when the taxpayer contests an ASFR/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.

  2. There are two types of audit reconsideration cases:

    1. Type 1 is the case that has already been closed by appeals.

    2. Type 2 is the case that not been to Appeals, it was a reconsideration as a Campus claim, an underreporter case, a correspondence examination, a Compliance examination, or a non-filer, substitute for return, automated substitute for return case.

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

8.20.5.4.6  (10-27-2006)
Freedom of Information Act Cases (FOIA)

  1. These cases usually are requested by the Disclosure office. They have no statute since they are a non-tax case. Follow normal procedures for establishing the case except for the following:

    1. TIN— If a TIN is not supplied enter 999–99–9999 for individuals or 99–9999999 for business return to correspond with the MFT entered on CASES.

    2. TYPE — Enter FOIA

    3. MFT — corresponding to the type of return. See Document 6209.

    4. KEYPER — Enter the current calendar year since there is no return associated with the case.

    5. FEATRCD — Enter the appropriate feature code for the case — AB — Abeyance case; FS — FOIA — Substantive case; FN — FOIA — Non-substantive case

    6. Source— Enter FE

    7. DO — Use the historic DO that corresponds to the location of the Disclosure Office where the request was originated

  2. No return information is entered.

8.20.5.5  (10-27-2006)
Reference Returns

  1. Reference returns should be controlled on ACDS.

  2. If the name and TIN on the reference return are the same as those on the case being established, the reference return will be controlled at the return level as part of the key case..

  3. If the name and TIN on the reference return are different, it will be established as a separate case within the work unit. In this situation, the TYPE = REF.

  4. In either situation, include the following information:

    • STATUTE DATE — Enter the actual statute date, if applicable.

    • STATUTE CODE — if statute is not open, enter RFRTN..

  5. Update AIMS to the STATUS 80, if required to be on AIMS. (Reference returns are non-docketed, and should be updated to STATUS 80 even if related to a docketed case which is in STATUS 82.)

8.20.5.6  (10-27-2006)
EIC Recertification Program

  1. Under the Taxpayer Relief Act of 1997, Public Law 105–34, taxpayers may be denied the Earned Income Credit (EIC) in part or in full, for a 1, 2 or 10 year period, depending on the Compliance or Campus determination. When the EIC is denied, the examiner determines if there is reckless, intentional, or fraudulent disregard of the earned income credit rules and regulations and places an Earned Income Tax Credit Recertification Indicator on the National Account Profile (NAP) — part of Master File. Additional information can be obtained from Form 8862, Information To Claim Earned Income Credit After Disallowance, and the Instructions for Form 8862.

  2. Earned Income Credit Recertification dispute issues can be:

    • Earned Income Credit and other related credits such as:
      Child and Dependent Care Credit;
      Adoption Credit; and
      Education Credit

    • Dependent exemption(s)

    • Filing status

    • Accuracy-related and/or other penalties

    • Recertification requirement of 1, 2 or 4 years

  3. EIC Recertification cases are on AIMS when received by Appeals.

  4. Secure a current ENMOD or IMFOLE to determine if an EIC Recertification Indicator is present. The Recertification indicators are:

    1. 0 (or blank) = Recertification is not required

    2. 1 = EIC is denied for 1 year after the disallowed year.

    3. 2 = EIC is denied for 2 years after the disallowed year.

    4. 4 = EIC is denied for 10 years after the disallowed year.

    5. 8 = Reserved

  5. When EIC Recertification Indicator 1, 2 or 4 is present, establish the case following normal procedures, except for the following:

    • FEATRCD - EI

8.20.5.7  (10-27-2006)
Non-TEFRA Flow Through Entity Returns

  1. A non-TEFRA flow through entity may be a partnership return (MFT 06), an S corporation (MFT 02) or a trust (MFT 05). Prior to January 1, 2002, these returns were reference returns linked to an investor key case in a work unit. Effective January 1, 2002, a non-TEFRA flow through entity return will be established as a separate work unit on CASES.

  2. On the case inventory screen, enter information following normal procedures except for the following:

    1. TYPE — Enter the code that represents the type of tax or penalty.

    2. FEATRCD — Enter SB for Subchapter S cases.

    3. NOTES — (Optional). You may wish to enter "Non-TEFRA Key Case" and "Related to: NNNNNNNNNN" . (NNNNNNNNNN = investor case work unit number(s)). You may include other identifying information as space permits.

  3. On the return information screen, follow normal procedures except for the following:

    1. AIMS Indicator — Non-TEFRA key cases are required to be on AIMS. Enter Y if the return is on AIMS or N if the return is not on AIMS. If the return is not on AIMS, take action to establish the case on AIMS.

    2. STATUTE DATE — Enter the actual statute date, if applicable.

    3. STATUTE CODE — Enter "RFRTN" .

8.20.5.7.1  (10-16-2007)
TEFRA Key Case

  1. A TEFRA keycase can be either a non-docketed or docketed case. It may be a 1065 or 1120S.

  2. The case can also be identified by the PICF code 1 on the AMDISA; however, a PICF code of 5 will override a PICF code of 1, when a partnership is an investor in another partnership. Anytime Form 1065 is received, you should verify whether it is a TEFRA keycase.

  3. Cases will be established on ACDS following normal procedures with the following exceptions:

    • TYPE = TEFRA

    • SNTYPE: FPAA (Appeals Issued) FPAD (Compliance Issued) or FPAS (Campus issued) (If DOCKETED)

    • PropDef: To be computed per TEFRA IRM 8.19

8.20.5.7.2  (10-16-2007)
TEFRA Investor Case (TEFRAI)

  1. If a TEFRA investor case is received in Appeals after the partnership examination is started, the PICF code on the AMDISA will be 5, there is an investor with at least one open TEFRA key case linkage.

  2. Cases will be established on ACDS following normal procedures with the following exceptions:

    • Type = TEFRAI

      Note:

      Include a TSUMYI print with the administrative file to alert Appeals Officer that it is a TEFRA investor.

  3. CEP, Joint Committee Case and other CORPORATE SPECIALITY TEFRA Investor Cases:

    • Cases identified as CEP, joint committee case and other corporate specialty investors cases when received in Appeals, will require the following information to determine if case needs to be carded to track the assessment statute of the investor.

    • AMDIS/AMDISA: Obtain an AMDIS or AMDISA print to check for PICF Code 5. PICF Code 5 indicates that the investor has at least one open TEFRA key case linkage. If there is an open TEFRA linkage(s), request a TSUMYI for the linkage information. The prints should be retained in the administrative file.

    • If an open TEFRA linkage exists, each TEFRA partnership listed on the TSUMYI will be carded as related non-key cases as follows:

      WUNO Enter WUNO of key case
      TSUMYI Key Linkage Field
      MFT TSUMYI MFT Field
      TYPE REF
      SOURCE Source code of Key Case
      DO Enter DO per TSUMYI
      KEYTP Enter the name of the keycase
      KEYTIN Enter the TIN of the key taxpayer
      KEYPERIOD: Enter earliest tax period of the key taxpayer
      TEFRA investor case  
      AIMS E
      TXPERIOD Enter all tax periods for which there is a TEFRA linkage
      STATDATE If one year statute date exists on TSUMYI Statute Field. Input that date
      STATCODE TFINV--if one-year statute date does not exist
      ROPOSED TAX Leave blank

    Note:

    If TSUMYI Statute field contains "11111111" for each tax period that has a TEFRA linkage, the tax has been assessed and the case will not be established as a related case.


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