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Part 8. Appeals

Chapter 20. Appeals Case Processing Manual

Section 7. General Closing Procedures

8.20.7  General Closing Procedures

8.20.7.1  (11-02-2007)
Introduction to Section on Closing Procedures

  1. This section includes information for preparing Form 5403, Appeals Closing Record. See Exhibit 8.20.7-1for line by line instructions. It also covers special actions required in cases.

  2. Many closing procedures are the same no matter what type of tax is involved. General procedures are covered in IRM 8.2.1, Pre-90-Day and 90-Day Cases, Agreed Pre-90-Day Income Tax Cases.

  3. Based on the restructuring of Part 8, different workstreams and/or special types of tax are categorized into separate subsections. Special closing procedures for these cases are found as follows:

    • Appeals Employment Tax Cases - IRM 4.23.16;

    • Appeals Docketed Cases - IRM 8.4.1;

    • Appeals Estate and Gift Cases - IRM 8.7.4;

    • Transferee/Transferor Cases - IRM 8.7.5;

    • Bankruptcy Cases - IRM 8.7.6;

    • Claims and Overassessment Cases - IRM 8.7.7;

    • Tax Exempt and Governmental Entities (TE/GE) - IRM 8.7.8;

    • Joint Committee Case Procedures - IRM 8.7.9;

    • Appeals Team Cases - IRM 8.7.11;

    • TEFRA Cases - IRM 8.19.6.7;

    • Innocent Spouse Cases - IRM 25.15.12.

  4. References to Appeals Officers used throughout this subsection also include the Appeals Team Case Leader positions.

8.20.7.2  (11-02-2007)
Form 5403 When There Are Two Agreements

  1. When closing a case with that has two agreements - one received but not assessed by Examination before the case came to Appeals and another received by Appeals - complete Item 08 of Form 5403 with the most recent agreement date. In Item A, Special Handling Instructions, clearly show both agreement dates and both amounts.

  2. When closing a case where Appeals secured and assessed a partial agreement, enter the following on Form 5403:

    1. Item 12 = Final settlement amount to be assessed;

    2. Item 800 = Final settlement amount to be assessed PLUS the partial agreement amount previously assessed by Appeals;

    3. Item A - Special Handling Instructions = Enter partial agreement date and amount. If more than one partial agreement, list separately.

  3. Example: On 1/13/2001, a delinquent return for $2,300 was received on an SFR case. The assessment was made on 2/15/2001. A decision was entered for an additional deficiency of $500. Take the following steps:

    1. Item 12 = $500

    2. Item 800 = $2,800

    3. Item A - Special Handling Instructions = Partial agreement received 1/13/2001 for $2,300

8.20.7.3  (11-02-2007)
Deficiencies from Adjustments to Carrybacks

  1. When deficiencies result solely from adjustments to carrybacks, it is important to follow these instructions when completing Item A of Form 5403, Appeals Closing Record:

    1. Check block for "Restricted Interest" and enter appropriate IRC Code section.

    2. Check block for "Other" and include a statement similar to the following: "Carryback from 199912, statute for assessment controlled by 199912."

8.20.7.4  (11-02-2007)
Conversions on Cases in Appeals

  1. This subsection provides guidance for the various types of conversions that may occur in cases considered by Appeals. It covers converting one type tax return to another; converting separate returns to joint returns; and converting joint to separate returns.

8.20.7.4.1  (11-02-2007)
Form 1041 to Form 1120

  1. When Appeals sustains conversion of Form 1041 to Form 1120, the case requires the following special processing:

    1. There should be Form 1120 prepared by Examination in the file and marked "1041 converted to 1120 by Examination." Forward the form to the Campus for processing to master file. Retain a copy for closing.

    2. Prepare Form 2363, Master File Entity Change, and input TC 016 (CC ENREQ/BNCHG) to eliminate Form 1041 filing requirements.

    3. After the return posts to master file, input TC 424A to establish the Form 1120 account on AIMS.

    4. After the AIMS account is fully established, prepare Form 5403 following normal procedures. Annotate Item A "Form 2363 to eliminate Form 1041 FR prepared/input by Appeals."

8.20.7.4.2  (11-02-2007)
Form 1120S to Form 1120

  1. When Appeals sustains the conversion from Form 1120S to Form 1120, the case requires the following two steps:

    1. Prepare Form 2363 and input TC 091 to change the filing requirements to corporation. Process Form 2363 and Form 5403 in the same cycle.

    2. Send the following notification to Entity Control Section at the Campus: "Form 1120S converted to Form 1120 by Appeals. Please update Form 2553, Election by Small Business Corporation."

    3. Furnish the following information:

  2. Furnish the following information:

    1. TP name, address, and TIN

    2. Effective date of termination

    3. Reason for termination

    4. Appeals Office

    5. Statement indicating that Form 2363 has been input

  3. Prepare Form 5403 in the usual manner. Annotate the following in Item A: "Form 2363 to change FR (filing requirement) from Form 1120S to Form 1120 prepared/input and Entity Control notified by Appeals."

8.20.7.4.3  (11-02-2007)
Joint to Separate Returns

  1. Taxpayers who originally file a joint return, may NOT change the filing status to separate once the time for filing the return of either spouse expires.

    1. For example: Mr. and Mrs. J. filed their 1999 joint return on 02/15/2000. Mr. and Mrs. J's 1999 return may not be converted to separate after 04/15/2000.

    The following instructions apply when it is deemed appropriate to convert the filing status from joint to separate.

  2. Process Form 5403 for the spouse’s account being adjusted. Remove the other spouse’s name from the name line in Item 4. Annotate "Joint to Separate" in Item A.

  3. If there is an unfiled separate return for the other spouse, send it to the appropriate Campus. Received date is the same date as the joint return.

  4. Prepare Form 2363 and input name change and filing status change via IDRS.

  5. Update ACDS to close.

    1. DO NOT change name line. Leave the joint names and primary SSN because ACDS must reflect the filed return under consideration in Appeals.

    2. RevsdTax - the combined liability amount.

    3. NOTES - Enter a brief description to explain the disposition, i.e., "Conversion to separate filing status." Separate revised deficiency amounts may also be entered i.e., "TPH – $1200, TPW - $1000."

8.20.7.4.4  (11-02-2007)
Rules for Converting Separate to Joint Return

  1. Taxpayers may elect to go from separate filing status to joint filing status if the following apply in that taxable year:

    1. Joint return is filed within three (3) years of the due date of the return.

    2. Neither spouse files a petition in Tax Court after a notice of deficiency is issued (this applies where returns are filed – see note below).

    3. Neither spouse has a suit in any Court for a claim (recovery of tax).

    4. Neither spouse has entered into a closing agreement.

    5. For returns beginning before July 30, 1996, the tax shown on the joint return is paid in full.

      Note:

      A substitute for return (SFR) prepared by the IRS does not constitute a taxpayer filing a return. Therefore, where no return was filed previously, taxpayers may elect to file joint returns even if the case is in Tax Court.

8.20.7.4.4.1  (11-02-2007)
Separate to Joint Return When Both Husband and Wife Filed

  1. If both husband and wife filed separate returns and there are two AIMS accounts, prepare a Form 5403 for each spouse’s return.

  2. Prepare a Form 5403 for the husband’s account as follows:

    1. Item 4 - Add wife’s name to name line.

    2. Item 12 - Enter the adjustment amount to equal the correct tax and penalty minus that assessed on the husband’s return.

    3. Item 15 - Enter the amount of the wife’s unrefundable withholding credits. Circle the plus (+) sign.

    4. Items 800 through 811 - Enter statistical data.

    5. Prepare Form 2363 and input name change and filing status change using IDRS.

  3. Prepare a Form 5403 for the wife’s account. This form becomes a tax adjustment document.

    1. Item 12 - Enter the amount necessary to reduce all assessed tax and penalties to zero.

    2. Item 15 - Enter the amount necessary to reduce the unrefunded prepayment credit by the amount allowed as a credit on the joint return (wife’s credits). Circle the minus (–) sign. Also enter reference number 999 (with blank amount in (–) field). This entry prevents the case from subsequently appearing in the Campus Multiple-Filer Program.

    3. Items 800 through 811 - Enter statistical data.

    4. Item A - Check "Other" block and enter "Change from separate to joint return. See Form 5403 for (Husband’s Name)—(SSN)." If the wife made cash payments of estimated tax or if there are cash payments on the return, request that Form 2424, Account Adjustment Voucher, be prepared to transfer these cash credits.

  4. Update ACDS using general closing instructions. In addition:

    1. NOTES - Add a brief statement to each spouse’s case to explain the disposition, i.e., "Converted to joint filing status under SSN (enter SSN)." Also indicate the amount of the total joint liability, i.e., "Joint liability assessed is $1,000."

    2. RevsdTax - 1/2 the joint liability for each spouse’s case.

8.20.7.4.4.2  (11-02-2007)
Separate to Joint Return When Only One Spouse Filed

  1. If only one spouse filed a return (either the husband or the wife), process one Form 5403.

    1. Prepare Form 2363 to change the filing status to joint, and add the spouse's name and SSN to the joint account.

    2. Item 4, Form 5403 - Include both spouse's names.

    3. Item 12, Form 5403 - Enter the adjustment amount to equal the correct tax and penalty minus the amounts assessed on the filed return.

    4. Item 15, Form 5403 - Enter the change to adjusted gross income (AGI) and taxable income (TI) and circle the plus (+) sign. APS is responsible for transferring credits to the joint account.

  2. Follow general closing instructions to close ACDS. In addition:

    1. DO NOT change name line. Leave only the name of the husband because ACDS must reflect the filed return under consideration by Appeals.

    2. NOTES - Add a brief statement to explain the disposition, i.e., "Converted to joint filing status (both taxpayer's names)."

    3. RevsdTax - Enter the total joint liability amount.

8.20.7.5  (11-02-2007)
Department of Justice Cases

  1. Appeals is notified when the case jurisdiction changes to Department of Justice (DOJ), exclusively.

  2. After the Appeals Officer prepares the case for release to DOJ, close the case on both AIMS and ACDS. Once this is complete and administrative file recharged, send the case to Counsel.

  3. Prepare Form 5403 to close the AIMS file. Use "copy" procedures:

    1. Item 12 - Enter TC 300 for $0.

    2. Items 800 through 810 - Enter appropriate statistical information.

    3. Item 811 - Enter closing code 18 or 19, as appropriate.

    4. Attach a copy of the face of the return and Form 2275, Records Request, Charge and Recharge, to the Form 5403. Forward Form 2275 to the Campus to "recharge" the administrative file and original return to Department of Justice.

  4. Update ACDS following general closing instructions:

    1. CLOSINGCD - 18 or 19, as appropriate.

    2. ACTION - ACKCLS.

    3. TODATE - Date administrative file is delivered to Counsel.

    4. FROMDATE - Date acknowledgment received from Counsel.

  5. The above instructions apply only to cases in Appeals jurisdiction. If a taxpayer petitions the District Court or Claims Court while in Examination jurisdiction, the DOJ transfer is coordinated between Examination and Counsel without involvement by Appeals. The case WILL NOT be controlled on ACDS.

8.20.7.6  (11-02-2007)
Handling Earned Income Credit in Closings

  1. Earned income credit is an adjustment included in the deficiency amount. However, the assessment is separate from the tax assessment.

  2. For example, if the settlement is:

    Increase (decrease) to EIC (750)
    Tax (deficiency) 1,000

    Separate EIC from the tax so Form 5403 looks like this:

    Item 12 (tax) - TC 300 250.00+
    Item 15 (EIC recapture) - REF 765 750.00–
    Item 800 - Appeals Results 1,000.00

8.20.7.6.1  (11-02-2007)
EIC Recertification Program

  1. When the EIC is denied, an Earned Income Tax Credit Recertification Indicator is automatically placed on the National Account Profile (NAP) - part of Master File. The Recertification indicators, found on ENMOD and IMFOLE, are as follows:

    1. 0 (or blank) - Recertification not required

    2. 1 - EIC denied for 1 year after the disallowed year.

    3. 2 - EIC denied for 2 years after the disallowed year.

    4. 4 - EIC denied for 10 years after the disallowed year.

    5. 8 - Reserved

  2. Once the EIC is denied for the following year (or years), taxpayers complete Form 8862, Information to Claim Earned Income Credit After Disallowance, to recertify they are eligible to receive EIC.

  3. To close a case with EIC recertification, follow general closing instructions. In addition, do the following:

    1. Verify Recertification Indicator 1, 2 or 4 appears on IMFOLE or ENMOD (if not there, recertification is not an issue)

    2. Retain a copy of Letter 3094 in the administrative file and the closed office file.

    3. Retain a copy of Form 8862 in the administrative file and the closed office file.

  4. Annotate one of the following on Form 5402:

    • "Reverse Recertification Indicator, Input TC 971, AC 56"

    • "Do Not Reverse Recertification Indicator"

    • "Recertification Ban Was Not Imposed"

  5. Input TC 971, AC 56, if indicated, using REQ77/FRM77.

8.20.7.7  (11-02-2007)
Non-Filer Returns Closed by Appeals

  1. IMPORTANT: Anytime the final settlement computation reflects an overassessment, check the Refund Statute Expiration Date (RSED) to ensure it has not expired. It is also important to remember the distinction between docketed/non-docketed non-filer returns:

    1. A docketed case for tax year ending before August 5, 1997 has an RSED of 2 years prior to the notice of deficiency.

    2. A docketed case for tax year ending after August 5, 1997 has an RSED of 3 years prior to the notice of deficiency.

    3. A non-docketed case has an RSED of 3 years prior to the notice of deficiency.

    Example 1 : Joe didn't file his 1995 return (due 04/15/1996) . The Campus issued a notice of deficiency on 05/15/1998 for $3,000 tax. Joe petitioned Tax Court and it was determined that there was actually an overpayment of $500. The overpayment was due to withholding credits, which are considered paid on 04/15/1996. Joe will NOT receive the $500 refund because the withholding credit was paid more than 2 years prior to 05/15/98 (Joe could only get a refund of money paid back to 05/15/1996).
    Example 2 : Steve didn't file his 1997 return (due 04/15/1998). The Campus issued a notice of deficiency on 05/15/2000 for $800 tax. Steve petitioned Tax Court and it was determined that there was an overpayment of $200. The overpayment was due to withholding credits, which are considered paid on 04/15/1998. Steve WILL receive the $200 refund because the withholding credit was paid within the 3 years prior to 05/15/2000.
    Example 3 : Jane didn't file her 1998 return (due 04/15/1999). The Campus issued a notice of deficiency on 06/20/2002 for $1,200 tax. The only payments on the account are withholding credits, which are considered paid 04/15/1999. It is subsequently determined that Jane actually overpaid her taxes for $600. Jane can only get a refund for money paid 3 years prior to the notice of deficiency, which would be 06/20/1999. The withholding credits were paid before that date. Therefore, she will NOTreceive the refund (whether she petitions Tax Court or defaults and later files a delinquent return).

  2. If the RSED has expired, no refund can be issued to the taxpayer. On Form 5403:

    1. Item 07 Hold Code = 4

    2. Note in Item A – "Expired RSED"

    The refund may be used to pay off a balance due on the module being processed but it CANNOT be used to offset outstanding balances due on any other tax period. APS must send the excess funds to Excess Collections via Form 8758. See IRM 3.17.21 and IRM 3.17.220 for further information on Form 8758.

  3. Specific processing instructions for tax examiners in APS, i.e., application of penalties, prepayment credits, refunds, etc., are found in IRM 4.4.9.

8.20.7.7.1  (11-02-2007)
Delinquent Returns Processed by Appeals

  1. If a delinquent return is received by Appeals after a substitute for return was previously processed, a partial assessment should have been made (See IRM 8.20.6.5).

  2. If no prior return was processed (there is no TC 150 in the account):

    1. Attach the delinquent return to Document 6469 and send it to the receipt and control unit at the Campus via Form 3210. The Appeals Officer should verify the name, TIN, address, and tax on the return.

    2. Request that the Campus "establish master file and post TC 150." Retain a copy of the return for the administrative file.

    3. When the TC 150 posts, establish AIMS using AM424A.

  3. Once master file and AIMs accounts are properly established and/or updated, general closing instructions apply to the return. Prepare Form 5403 using Exhibit 8.20.7-1.

  4. If the case is being closed non-docketed, Form 5403 will have:

    1. Item 08 – leave blank if delinquent return is accepted as filed and assessed. Enter agreement date if an additional deficiency is to be assessed in Item 12.

    2. Item 12 – enter tax and penalty that has not been assessed yet.

    3. Item 14 = delinquent return received date + 3 years.

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15.

  5. If the case is being closed docketed, prepare the Form 5403 as usual. In addition:

    1. Item 08 – leave blank if delinquent return is accepted as filed and assessed. Enter decision entered date if an additional deficiency is to be assessed in Item 12.

    2. Item 12 – enter amount of tax and penalty that has not been assessed yet.

    3. Item 14 – compute using tack–on time (normal statute field is delinquent return received date + 3 years).

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15.

    5. Item A—Enter "Original delinquent return processed and assessed ___(Date)."

  6. If entity changes are necessary, prepare Form 2363 and input the changes (name, TIN, address, filing status, etc.) to correct Master File.

  7. Close ACDS following general closing instructions.

  8. If conversion of filing status from separate to joint is required on Master File, follow instructions outlined in IRM 8.20.7.10.

  9. If, after Appeals consideration, it was determined that no return was due, mark any copy of return in the file "VOID" and securely fasten it in the administrative file. The master file account must also be updated by posting TC 59X with the appropriate closing code. Prepare Form 5403 as usual except:

    1. Item 800/801—Enter zero.

    2. Item A—Enter "Return Not Due."

8.20.7.7.2  (11-02-2007)
Substitute for Return Cases

  1. Substitute for Return case procedures are used when no return was filed by the taxpayer. If a return was filed, delinquent return procedures should be used. (See above).

  2. Generally, the SFR returns are posted to master file (TC 150 for $0) and established on AIMS before the administrative file is received in Appeals.

  3. If the account was not established on master file (no TC 150) and/or no AIMS was established, take the following steps:

    1. Attach the SFR return to Document 6469 and send it to the receipt and control unit at the Campus using Form 3210.

    2. Request that the Campus "establish master file and post TC 150." Retain a copy of the return for the administrative file.

  4. Once the TC 150 has posted to master file, establish AIMS using command code AM424A.

  5. If entity changes are necessary, prepare Form 2363 and input the changes (name, TIN, address, filing status, etc.) to correct Master File as directed in IRM 8.20.6.13.

  6. If both AIMS and MF are established, prepare Form 5403 (use blocking series for original return).

  7. In a non-docketed SFR case, the Appeals Officer may get a signed agreement instead of having the taxpayer file a delinquent return. In these cases, the signed agreement constitutes the delinquent return. Prepare Form 5403 as usual. In addition:

    1. Item 08 – leave blank

    2. Item 14 – 3 years from the date the agreement was received

    3. Item 811 – 04 (will also be CLOSINGCD on ACDS)

    Close an SFR defaulted notice of deficiency the same as any other default. See IRM 8.2.2.15.

  8. On docketed SFR cases, the taxpayer(s) may elect "joint" status; however, since a notice of deficiency was issued, the election must be made on a return. A Form 870 waiver or a stipulated decision document would not constitute a return for this purpose. The file should contain a PROCESSED (delinquent) return (See IRM 8.20.6.5 for processing delinquent returns).

  9. Prepare Form 5403 for a docketed SFR case following Exhibit 8.20.7-1. In addition:

    1. Item 08 – enter date decision was entered.

    2. Item 14 = decision date + 3 years + 150 days.

  10. Close ACDS following general closing instructions.

  11. If, after Appeals consideration, it is determined that no return was due, mark any copy of return in the file "VOID" and securely fasten it in the administrative file. The Master File account must also be updated by posting TC 59X with the appropriate closing code. Prepare Form 5403 with:

    1. Item 800/801—Enter zero.

    2. Item A—Enter "Return Not Due."

8.20.7.8  (11-02-2007)
Non-Master File (NMF) Processing

  1. Additional forms are required for processing the NMF returns and documents below.

      Form NMFT Code
    • All pre-ADP from Document 6209  
    • Form 1042 - US Annual Return of Income Tax to be Paid at Source (1984 and prior only). 12
    • Form 2438 -Regulated Investment Company Undistributed Capital Gains Tax Return 38
    • Form 3780 (Obsolete) - Interest Equalization Quarterly Tax Return 49
    • Form 3845 (Obsolete) - Interest Equalization Tax Brokers’ Quarterly Information Return 85
    • Form 1296 - Assessment Against Transferee or Fiduciary *
    • Form CT-2 - Employee Representative’s Quarterly Railroad Retirement Tax Return 72
    *MFT of transferor

  2. Other tax adjustments that are processed as NMF assessments are set out in IRM 8.20.6.

  3. If a NMF assessment is to be made, prepare Form 2467, Assessment Label (Red), and attach it to the return or assessment form (Form 1296, or Form 5403), if assessment is to be made against a person who did not file the return).

  4. On appropriate transmittal document, enter "prepare F3177 to input TC 130 to the cross-reference master file account" or, as a local option, input TC 130 to the cross-reference master file account via CC REQ77.

  5. If a NMF overassessment is to be allowed, prepare Form 2468, Overassessment Label (Green), and attach it to the return or other document as in (3) above. In addition, attach to the document a Notice of Adjustment ( Form 1331, Form 1331B, or Form 1331C).

  6. On cases involving NMF assessments where collection action is to be withheld, coordinate with the Collection Division through appropriate memorandum.

8.20.7.9  (11-02-2007)
Direct Assessment of Excise Tax

  1. Assess excise tax imposed by IRC 4251 directly against the user of communications facilities and services if the tax is not paid to the collecting agency. Although liable for the tax, the user is not required to file a return.

  2. Do not use a Form 720, Quarterly Federal Excise Tax Return, as a basis for these direct assessments of excise tax.

  3. Process a NMF Form 5403 in the name of the person against whom the direct assessment is being made.

  4. If there is an overassessment of a NMF direct assessment, show the overassessment on Form 5403 and attach a Form 1331, Notice of Adjustment.

  5. Apply these procedures to other direct assessments

8.20.7.10  (11-02-2007)
Premature Referrals or Improper Referrals

  1. When it is determined that a case was improperly or prematurely sent to Appeals, the case should be returned to the originating office (Examination, Collection, EP, EO, etc) for further consideration.

8.20.7.10.1  (11-02-2007)
Jurisdiction Released on Premature or Improper Referrals

  1. If Appeals is not going to maintain control of the case, the jurisdiction is released back to the originating office. The case is closed off ACDS and AIMS (if case is on AIMS).

  2. Close ACDS following general closing procedures. In addition:

    1. CLOSINGCD = 20 (premature referral)

    2. ACTION = ACKCLS

    3. No entries are required on the return level – keep zeroes for the revised tax/penalty

  3. Prepare the appropriate transmittal form to return the case to the originating office

    1. Examination cases – update AIMS to status 20 using AMSTUB. These cases are usually returned to quality measurement staff.

    2. EP/EO cases – if on AIMS, update to status 20. These cases are usually returned to the originating office.

    3. Campus examination cases – follow local procedures. Generally, cases are not returned to the Campus for further development. They may instead be forwarded to the local Examination office for Examination cases.

    4. Collection cases are not on AIMS and are generally returned to the originating office. On CDP cases, if the TC 520 cc 76/77 is input include a note on the transmittal that
      "The CSED reflected in the TC 520 cc 76/77 may have been prematurely suspended and requires reversal and further review by Collection" .

  4. On cases where Appeals releases jurisdiction, Appeals is responsible for the statute of limitations ONLY until a copy of the transmittal is acknowledged. The transmittal must indicate the earliest statute expiration.

8.20.7.10.2  (11-02-2007)
Jurisdiction Not Released on Premature or Improper Referrals

  1. If Appeals is going to keep control of the case but send the file back to the originating office for further development, jurisdiction is not released. ACDS is kept open and AIMS is usually not changed (if case is on AIMS).

  2. Generally, when cases are controlled on AIMS, the data base will remain in current Appeals status while the originating office considers the Appeals request. Local procedure dictates here.

  3. Appeals is responsible for the statute of limitations on cases where Appeals retains jurisdiction.

  4. Update ACDS:

    1. ACTION = DDJRET

    2. TODATE = date case sent to originating office

8.20.7.11  (11-02-2007)
Transfer of Work Units Between Areas in Appeals

  1. See IRM 8.20.6, Appeals Case Processing Procedures, Interim Actions - Remittances, Partials, Transfer and Returns.

Exhibit 8.20.7-1  (11-02-2007)
Form 5403, Appeals Closing Record (Instructions)

(1) General Instructions
  (a) Complete the original and submit with the administrative file to APS for final closing of any case controlled on AIMS.
(2) Specific Instructions
  (a) CC TSCLS Box—Check if PICF code 6 or 8 (NON-TEFRA ONLY).
  (b) CC AMCLSA BOX—Check with all final closures.
  (c) CC AMCLSF Box—Check if interim assessment is being made. Used when an assessment/abatement is being made but AIMS remain open because Appeals has not closed case. See text 8.20.6.2 for interim assessment processing.
  (d) CC AMCLSI Box—Check if Form 5403 is being used to process IRA adjustments. (See text 8.20.7.19)
  (e) Source Document Only Box—Check when Form 5403 will not be used for terminal input.
  (f) CC AMCLSU Box—Check if Form 5403 is being used to reinput unpostable.
  (g) Items 1, 2, 3, and 4—Attach a status label if available. If the name has been changed, line through the label name and enter the correct name above the lined through name. If a status label is not available, complete Items 1, 2, 3, and 4 as shown below:
ITEM 1—Taxpayer’s Identification Number
(a) Enter the applicable TIN. EIN format is EI–NNNNNNN. SSN format is SSN–NN–NNNN.
(b) If the return is non-master file, enter "N" immediately after the TIN.
(c) If the TIN is known to be invalid, enter an asterisk (*) immediately after the last digit of the TIN.
(d) For Form 706, U.S. Estate Tax Return, use the SSN of the decedent and for Form 709, U.S. Gift Tax Return, use the SSN of the donor.
A "V" should be entered immediately after the TIN.
A "W" should be entered immediately after the TIN if the TIN is invalid.
ITEM 2 – MFT OR PLAN NUMBER – Enter:
a) the two-digit master file tax account code (MFT) (30, 02, 01, 10, 06, etc), or
b) the non-master file tax account code (NMFT) (20, 32, 17, 80, etc)
applicable to the tax return in the case file. See Section 2, Document 6209, ADP and IDRS Information, for NMFT and MFT codes.
c) For Employee Plan cases enter the 3 digit plan number.
ITEM 3—TAX PERIOD
(a) Identify tax years by a six-digit group, the first four identifying the year and the last two identifying the month. Thus, calendar year 1999 is 199912; March 31, 1999 fiscal year is 199903; October 31, 2001, fiscal year is 200110.
(b) If the adjustment is going to change tax period from period used on return, check "Other" block in Item A and request Form 2363, Master File Entity Change.
(c) In estate tax cases, enter 000000 (cases are controlled on ACDS by date of death).
(d) In employment and excise tax cases, Form 720, 940, 941, 942, CT–1, and 943, set forth period covered, e.g., quarter ended March 31, 1999, should be shown as 199903.
(e) For Form 2290, show the beginning of the taxable period rather than the ending of period, e.g., period beginning April 1, 1999, should be shown as 199904.
(f) In gift tax cases, show period covered, e.g., calendar year 1999 should be shown as 199912.
(g) For 52–53 week fiscal years use the numeric designation of the month, the last day of which is closest to the actual ending date of the fiscal year, e.g., if ending date is October 3, 1999, use 199909; if October 16, 1999, use 199910.
ITEM 4—NAME CONTROL
(a) Enter Check Digit in positions 3 and 4.
(b) If Check Digit is not available enter Name Control.
(c) Enter taxpayer’s full name in space identified by Name. For example,
"Doe, John P. and Jane L" . Name changes will be indicated in Item A, Form 5403 and on Form 3198.
BLOCK NUMBER—This entry is determined by APS and will be one of the following:
  Non-TEFRA TEFRA
Original Return 700–749 750–759
(Includes electronically filed returns if accompanied by Form 8453.)
Copy of Return 790–799 760–769
(Includes cases where RTVUE/BRTVU or MACs print were used in lieu of return.)
No Return 780–789  
(Partial assessment)    
ITEM 01—IRA ACCOUNT—If IRA account is to be adjusted, enter secondary spouse’s SSN in NNNNNNNNN format. Otherwise, leave this item blank.
ITEM 02—PENALTY REASON CODE—Entry must be made on every case with penalties. Appeals should only use RC 40–42 when another reason code is not applicable.
RC 21—Penalty abated due to LEM tolerance.
RC 22—Taxpayer exercised ordinary business care and prudence/first time filer non-compliance.
RC 23—Relied on practitioners erroneous tax advise OR relied on third-party who failed to meet the requirement to file/pay/deposit.
RC 24—Death or illness in immediate family or party responsible for filing/paying/depositing.
RC 25—Records inaccessible, damaged, destroyed, or lost.
RC 26—Unavoidable absence of party responsible for filing return.
RC 27—Post Office did not deliver timely or mailed to other taxing agency with extenuating circumstances/relied on erroneous date for other federal/state agency (SSA W–2’s).
RC 28—Disaster area.
RC 29—Undue economic hardship/inability to pay.
RC 30—Other reasonable cause.
RC 31—Erroneous oral advice from the Service.
RC 40—Appeals abatement or waiver of proposed penalty.
RC 41—Appeals sustained penalty.
RC 42—Appeals partially sustained penalty.
RC 43—Administrative Waiver.
RC 44—Legislative Waiver.
RC 45—Service Error.
ITEM 03 – LETTER DATE – Applicable for corporation returns only. Entry by APS. This field = the date of the 30–day or 90–day letter, whichever is earlier. Appeals will only enter this date on cases received from Examination prior to July 1, 1991 OR not previously closed to Appeals thru AIMS by Examination, i.e., cases established by Appeals or on which Appeals issues the first notice. This date will update the 2% interest date on the transcript. However, once a date is input, it can not be changed.
ITEM 04 – LETTER AMOUNT – Entry by APS – This field = the amount (to include penalties) of the 30–day or 90–day letter. Appeals will only enter this amount on cases received from Examination prior to July 1, 1991 OR not previously closed to Appeals thru AIMS by Examination, i.e., cases established by Appeals or on which Appeals issues the first notice. (Corporation returns only.)
ITEM 05 – 2% INTEREST DATE – Entry by APS. This field = the 2% interest date, which is the trigger date plus 30 days. Only entered when TC 340 is used. (Corporation returns only.)
ITEM 06a – DEBIT INTEREST TO DATE – Entry by APS. Enter the "TO" date used to manually compute debit interest. This entry is required whenever TC 34X is entered. If the TC 34X amount is zero, enter current date. The date will be passed to master file and reflected on transcripts of accounts. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340.)
ITEM 06b – CREDIT INTEREST TO DATE – Entry by APS – Valid for IMF and BMF input. . Enter the "TO" date used to manually compute credit interest. This entry is required when TC 770 is input for an amount other than zero. This entry is NOT REQUIRED for TC 770 with a zero amount. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340.)
ITEM 06c—COMPUTE INTEREST AMOUNT – Entry by APS – Valid for IMF and BMF input. . Enter the amount which will include the manually computed interest (TC 340 amount and any TC 772 netted interest amount), module balance, accrued and assessed interest, and assessed FTP. If the taxpayer does not pay the bill within 21 days from the 23C date, this entry allows the computer to systemically update the interest.
ITEM 07 – HOLD CODE – Enter if appropriate.
a) Hold Code 1 will prevent a refund from going out to the taxpayer
b) Hold Code 2 will prevent a refund and a billing notice from going out to the taxpayer.
The hold code will delay systemic releases until the required offsetting action is taken. These brief descriptions are very general. For more specific information, see Document 6209, ADP and IDRS information.
ITEM 08—AGREEMENT DATE (MMDDYYYY FORMAT)—The date entered here is important since it is used for interest computations on deficiencies. The following rules apply.
(a) Form 870, Form 890, Form 4089, etc – enter date agreement received. When agreement contains instructions as to the effective date of the agreement, enter the effective date. These agreement forms cover deficiency in income, estate, gift, and Chapter 42 excise tax cases (it is not applicable to employment and excise cases).
(b) Form 870–AD, Form 890–AD, Form 4089–AD (and all agreement forms with –AD). Enter date of acceptance, which is the date the appeals team manager signs the form.
(c) Stipulation/Decision – Enter date of entry of Tax Court decision.
EXCEPTION: NO entry if waiver paragraph is not there. The waiver paragraph has a reference to IRC "Section 6213(a)" .
(e) Joint Committee cases—If waiver is to take effect on date Joint Committee completes its review (see IRM 8.9), enter date shown in Joint Committee approval stamp. The date of acceptance by the Joint Committee is the date of agreement.
(f) Closing agreements determining tax liability—Enter the effective date of waiver in accordance with IRM 8.13.1 Closing Agreements.
(g) More than one agreement covering the deficiency – enter the date of the most recent agreement. In Item A, list each agreement date with the amount of each deficiency.
(h) If Appeals receives an advance payment, but no agreement from the taxpayer, enter the advance payment date.
(g) Leave Blank for the following cases:
1) Defaults (AIMS closing code 05)
2) Tried Tax Court Case (AIMS closing code 17)
3) Unagreed non-docketed cases (AIMS closing code 13)
4) Dismissals from Tax Court
5) Employment tax cases (940, 941, 942 and 943 returns)
6) Excise tax cases (720 and CT–1 returns)
7) Overassessment cases (tax is being reduced)
8) No change cases (Item 12 is $0)
9) pre–90 day nonfiler cases where the signed agreement constitutes the return (AIMS closing code 04)
ITEM 09—PRIORITY CODE—An entry is necessary to override some of the most common unpostable conditions.
(a) Enter Priority Code "1" if an amended return or claim for refund has been filed for the tax year.
(b) Enter Priority Code "2" if:
the return is a copy, AND
the return is being closed no change (disposal code 01).
In addition, do NOT enter an amount in Item 10.
(c) Enter Priority Code "3" if all these conditions apply:
an amended return or claim for refund has been filed, AND
return is a copy, AND
return is being closed as "no change" (disposal code 01).
In addition, do NOT enter an amount in item 10.
(d) Enter Priority Code 9 if the failure to pay penalty (IRC 6651(a)(2)) is to be automatically computed from the due date of the return.
ITEM 10—SETTLEMENT AMOUNT (COPY OF RETURN) – Enter an amount when the return is a copy (not the original). RTVUE, BRTVUE and MAC prints are considered copies of return.
The Item 10 amount = TC 150 amount plus or minus any TC 29X or TC 30X amounts on the transcript. (This amount must agree with the amount on Line 12, Form 4862 or Line 18, Form 5278. If it doesn’t agree, notify the appeals officer.)
If the return is a copy closed as a "no change" , DO NOT enter an amount in this item (see priority code info above).
ITEM 11—INTEREST COMPUTATION DATE – Entry by APS.(APS will enter the date interest begins for TC 304, 305, 308, or 309.
ITEM 12—TAX LIABILITY ADJUSTMENT –
a) Enter the increase or decrease to tax and penalties in the "Dollars and Cents" field. Circle the "+" or "−" sign, as appropriate, for each transaction code.
b) For "no change" cases enter zeroes in the last 3 spaces and circle "+" .
c) Do not make "interest" entries.
d) Where the "two part" negligence or fraud penalty applies under IRC 6653(a)(1) and (2), or IRC 6653(b)(1) and (2), do not enter a penalty amount in Item 12. Note in Item A that this penalty applies and APS will compute the additional penalty to be assessed. Ensure Form 3198 is attached to the administrative file, annotated that a penalty computation is required by APS under the appropriate code section.
e) Tax and penalties should also be coded under the 3 digit "Code" field as follows:
    Transaction Code
    Increase Decrease
(a) Tax 300 301
(b) IRC 6651(a)(1), Delinquent Return 160* 161*
(c) IRC 6651(a)(2), Failure to Pay 270* 271*
(d) IRC 6652(b), Failure to Report Tips 310 311
(e) **IRC 6653(a)(1)(A), Negligence 350 351
(f) **IRC 6653(a)(1)(B), Negligence 350 351
(g) **IRC 6653(b)(1)(A), Fraud 320** 321**
(h) **IRC 6653(b)(1)(B), Fraud 320** 321**
(i) IRC 6654/6655, Estimated Tax Penalty 170* 171*
(j) IRC 6656, Depository Receipt 180* 181*
(k) IRC 6676, Taxpayer Identifying Number 200 201
(l) Misc. penalties not designated by a unique    
  Transaction or Reference Code 240 241
  See Item 15 below for Reference Numbers which apply for some penalties, including:
IRC 6662, Accuracy Related Penalty (REF# 680)
IRC 6651(f), Fraudulent Failure to File (REF# 686)
  Note: if there is a penalty on the case, an entry is required in Item 02.
  * Whenever a TC 160, 170, 180, or 270 has posted to a module, all subsequent adjustments to these penalties must be manually computed.
**Fraud and Negligence Penalty Information
For Returns due:
before 12/31/86 TC 320 or 321 may not be used with another penalty except TC 170 or 180.
after 12/31/86 TC 320 or 321 may be used with TC 170, 180, 350, and 160.
after 12/31/88 there is no second part (or part B) of the negligence and fraud penalty (this was the "50% of the interest on..." ). Interest will accrue from the due date of the return. Prior to 12/31/88 the interest would accrue from the assessment date.
after 12/31/89 a) IRC 6662, Accuracy–Related penalty replaces IRC 6653(a). TC 350 or 351 is no longer used. IRC 6662 is assessed using
REF# 680 in Item 15.
b) IRC 6663, Fraud replaces IRC 6653(b).
TC 320 is still used to assess Fraud.
c)IRC 6662 shall not apply to any portion of underpayment on which IRC 6663 fraud is imposed.
ITEM 13 – DISPOSAL CODE =
"03" if there is a tax, penalty or interest amount in Item 12 or Item 15.
"01" if there is "no change" in tax, penalty, and interest in Item 12 or Item 15 fields.
"12" if there is "no change" in tax and/or penalties but Item 15 contains adjustments reflected by reference numbers 886, 888, 878, 879, or 889.
ITEM 14—STATUTE EXTENDED TO DATE (MMDDYYYY FORMAT) – This entry, used to update AIMS and master file, must be the EXTENDED statute date or code.
(a) Basic Statute of Limitations—An adjustment will not post to the master file if the basic three year period of limitations has expired.
(b) Exceptions to (a) above are:
  (1) When the basic period is extended by special code provisions such as 25% omission or mitigation of effect of limitations, you should enter the extended statute date in Item 14 and indicate in Item A the appropriate code section which determined this date.
  (2) Statutes extended because of fraud provisions should be cited in Item A as follows: "Item 14—Fraud."
(d) How to determine an extended period:
  (1) Pre–90 day, excise or employment cases:
    a. Form 872—use the extended date shown on the form.
    b. Special Provision—use the date fixed by Code section as shown in (b) above.
    c. Form 872–A—for consents with revision dates of 3/79 or later, leave Item 14 blank. Consents with earlier revisions should have a date entered 90 days from notification of Appeals termination (date on Form 872–T).
  (2) Ninety-Day and Docketed Cases:
    a. Defaulted Case—Compute the extended statute date by adding 150 (210 for foreign taxpayers) days to the normal or extended statute date prior to issuance of the notice of deficiency. (See note below.)
    b. Agreed 90–Day—Compute the extended statute date by adding 60 days to the receipt date of the agreement form. (See note below.)
    c. Docketed Cases (Not appealed)—Compute the extended statute date by adding 150 days to the normal or extended statute date prior to issuance of the notice of deficiency OR 150 days from the Tax Court Decision date, whichever is later. (See note below.)
    Note: The number of days remaining on the normal statute date when the SNOD was issued is referred to as "tack-on" time. When applicable, "tack-on" time may be added to the extended statute date if it appears that a statute period may expire imminently or may have already expired. If ample time remains on the recomputed statute (120 days), "tack-on" procedures may be ignored.
ITEM 15—CREDIT AND TAX COMPUTATION ADJUSTMENT—Enter the reference number and amount. Circle the + or − sign for each reference number.
The MFT will be noted in () next to the reference number.
(a) Reference codes and numbers for Form 940 follow. Item amounts for reference codes "T" must equal the TC 30X amount entered in Item 12.
  (1) T plus the two character state code – FUTA tax adjustment.
  (2) W plus the two character state code – FUTA wage adjustment.
(b) Reference numbers for Forms 941, 942, 943, and CT–1 follow. Total item amounts for reference numbers 003, 007, and 008 must equal the TC 30X amount entered in Item 12 when used with MFT 01.
    003*—Adjusted total income tax withheld (MFT’s 01, 04, 11)
    004*—Taxable FICA wages paid—9103 and prior (MFT 01)
    004*—SSA wages—9102 and subsequent (MFT 01)
    004*—Taxable case wages (MFT’s 04 and 11)
    005*—Taxable tips reported (MFT 01)
    007*—Adjusted total FICA tax (MFT’s 01, 11)
    007*—Adjusted total FICA tax—9103 and prior (MFT 04)
    007*—Adjustment to SSA & Medicare tax—9102 and subsequent (MFT 04)
    008*—Adjusted backup withholding (MFT 01)
    070*—Adjusted total of railroad retirement tax (MFT 09)
    071*—Adjusted total of railroad unemployment repayment tax (MFT 09)
    072*—Tips deemed to be wages—8102 and subsequent (MFT 01)
    073*—Taxable hospital insurance wages—9103 and prior (MFT 01)
    073*—Medicare wages & tips—9102 and later (MFT 01)
    079*—ETE/ETAP IRC 3509 Rate (MFT’s 01, 04, and 11)
    184*—Adjustments to withholding (MFT’s 01 and 11)
    185*—Adjustments to FICA (MFT’s 01 and 11)
    766—Substantiated payment credits (MFT 01) See (f) below.
    767—Substantiated payment credits (MFT 01) See (f) below.
(c) Reference numbers for Forms 706 and 709follow:
    074*—Generation skipping tax—8610 and subsequent (MFT’s 51 and 52)
    075*—Section 4981A tax (MFT 52)
    076*—Net Estate tax (MFT 52)
    077*—Net Gift tax (MFT 51)
    681 —Increase or decrease to Substantial Understatement of Liability Penalty. Not valid for returns due after 12/31/89. See Note 3. (MFT 51 and 52)
    682*—Increase or decrease to Estate and Gift Valuation Understatement penalty (IRC Sec 6660). Not valid for returns due after 12/31/89. See Note 3. (MFT 51 and 52)
    Note: The total tax adjustment may consist of one or all reference numbers 074–077, types of tax depending on the dates of validity and whether adjustment to a specific tax is warranted. The SUM of the reference number amount(s) used to reflect the change to the appropriate type of tax must EQUAL the TC 300/301 amount being processed. The appeals officer must provide these entries or provide the necessary information to make the entry.
(d) Reference numbers for other IMF, BMF, and IRAF casesare listed below.
  011*—Gross income paid (MFT 12)
  160*—IRA Accounts—Increase or decrease in 6% tax on excess contributions (must equal Item 12 tax amount). 1975 and later periods (see text 8.20.7.19). (MFT 29)
  162*—IRA Accounts—Increase or decrease 50% tax on under distribution (must equal Item 12 tax amount). 1975 and later periods (see text 8.20.7.19). (MFT 29)
  194*—Excess regular distribution tax (must equal Item 12 tax amount). 1975 and later periods (see text 8.20.7.19). (MFT 29)
  195*—Excess lump sum distribution tax (must equal Item 12 tax amount). 1975 and later periods (see text 8.20.7.19). (MFT 29)
  221*—Portion of tax deficiency attributable to TMT. IRC Sec 6621(c) was repealed by the Revenue Reconciliation Act of 1989. This reference number is not valid for returns due after 12/31/89. (MFT’s 02, 05, and 30)
  222*—TMT—Amount of 120% interest. IRC Section was repealed by the Revenue Reconciliation Act of 1989. This reference number is not valid for returns due after 12/31/89. (MFT’s 02, 05, and 30)
  301–310, 312—See Form 4136.
  314*—Energy conservation credit (7810–8712) (MFT 30)
  315*—Renewable energy source credit (7810–8712) (MFT 30)
  316*—Energy credit carryover (7810–8712) (MFT 30)
  317*—Energy credit computer field (7810–8712) (MFT 30)
  318—Qualified Diesel Fuel Tax Credit (8408 and later) (MFT 30)
  319—Obsolete for all tax periods and all MFT’s. Use reference number 312.
  320*—Accumulated Earnings Tax (AET). Valid for returns due prior to 1/1/86. (MFT 02)
  321*—Personal Holding Company (PHC). Tax (MFT 02)
  325*—Environmental tax. Valid for tax periods 1/31/87 and later (Forms 990C and 990T). (MFT 02)
  326—Obsolete for all tax periods and all MFT’s. Use reference number 301.
  327—Obsolete for all tax periods and all MFT’s. Use reference number 301.
  402—Increase in Refundable Energy Investment Credit (7810 thru 8011). (MFT 30)
  403—Decrease in Refundable Energy Investment Credit (7810 thru 8011). (MFT’s 02 and 30)
  680—Increase or decrease to Gross Valuation Overstatement Penalty (IRC Sec 6659). See Note 3 for returns due after 12/31/89.
  681—Increase or decrease to Substantial Understatement Penalty (Internal Revenue Service Sec 6661). No longer valid for returns due after 12/31/89. See Note 3.
  685—Penalty for Failure to Notify Internal Revenue Service of Claimed Tax Treaty Provisions. MFT 02—valid for periods 8710 and later. MFT 30—valid for periods 8709 and later.
  686—Increase or decrease to Fraudulent Failure to File Penalty (IRC Sec. 6651(f) for returns due after 12/31/89. Valid for all MFT’s.
  764—Increase in earned income credit. Valid for 7512 and subsequent returns. (MFT 30 and 31)
  765—Decrease in earned income credit. Valid for 7512 and subsequent returns. (MFT 30 and 31)
  766—Substantial payment credits—increase. See (f) below. (MFT 30 and 31)
  767—Substantial payment credits—decrease. See (f) below. (MFT 30 and 31)
  806—Withholding credit increase. (MFT’s 05, 30, and 31)
  807—Withholding credit decrease. (MFT’s 05, 30, and 31)
  878*—Self employment income adjustment (primary taxpayer). Reference number 889 must also be entered. No entry if total SE income is less than $400. (MFT 30, and 31)
  879*—Self-employment income adjustment (secondary taxpayer). Reference number 889 must also be entered. The amount should be the total adjustment to earning subject to social security or the amount that brings the total to the maximum dollar limitation—whichever is less. No entry if total SE income is less than $400. (MFT 30 and 31)
  881*—Total Positive Income (TPI) (MFT 30 and 31)
  882*—All Savers Interest Exclusion. Enter the amount of change (limitation $1,000 for single and $2,000 for joint) 8112 thru 8412. (MFT 30)
  883*—Alternative Fuels Production Credit Change (8001 and later)
  884*—Alcohol Fuels Credit Change (8010 and later)
  885*—Change in Advanced Earned Income Credit (7912 and later). (MFT 30)
  886*—Net change to the applicable income field notthe total corrected amount of income (MFT 02—net taxable income, valid for all periods: MFT 05—income after deductions, valid for all periods; MFT 07—income after deductions, valid for all periods after 8811; MFT 30—taxable income, valid for all periods after 7711).
  887*—Number of Exemptions Change (7712 and later). The increase or decrease in the number of exemptions will be entered in the cents column, right justified, and must NOT be preceded by a "0" . (MFT 30)
  888*—Change in adjusted gross income, valid for periods 7412 thru 7511 and 7712 and later. The reference amount will be the NET change to AGI NOT the total corrected AGI. See Note 2 below. (MFT 30)
  889*—Change in self-employment tax, valid for periods 7412 thru 7511 and 7712 and later. See Note 1 below. (MFT 30)
  890*—Backup withholding indicator to identify Exam deficiencies which are the result of underreported interest dividends and/or patronage dividend income beginning with tax year 1984 returns. Amount entered must be more than $500. (MFT 30)
  891*—Adjustment to primary taxpayer’s unreported tip income. Used to systemically inform SSA of the unreported tip income—9012 and later. (MFT 30)
  892*—Adjustment to secondary taxpayer’s unreported tip income. Used to systemically inform SSA of the unreported tip income—9012 and later. (MFT 30)
  895*—Amount of self-employment income adjustment for the primary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation—periods 9112 and later. (MFT 30)
  896*—Amount of self-employment income adjustment for the secondary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation—periods 9112 and later. (MFT 30)
  898*—Amount of unreported tip income adjustment for the primary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation (tax periods 9112 and later). (MFT 30)
  899*—Amount of unreported tip income adjustment for the secondary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation (tax periods 9112 and later). (MFT 30)
  999*—When separate returns are converted to joint status, enter reference number with "0" amount for the spousal account being reduced to zero. Circle—sign to show decrease and enter in right-hand space of cents.
  * Reference numbers marked with an asterisk are used to update information fields and/or alert master file to make special interest computations. They DO NOT effect Item 800/801, Appeals/District Counsel results.
(e) Reference numbers for Form 720 (Quarterly Federal Excise Tax Return) are the Internal Revenue Service numbers on Form 720, preceded by "0" . The codes are used to update the excise trust funds. They do not adjust tax, credits, or Item 800/801, Appeals/District Counsel results.
(f) Reference number 766 or 767 is used when no other reference number is applicable. For example, in claim of right (IRC 1341) cases when an adjustment to credit is needed to satisfy the amount of decrease in tax.
  Note:
    1. Changes in self-employment income and tax liability will be reflected in Item 15, Form 5403, for 1985 tax year and subsequent returns. Appeals is responsible for these entries and their accuracy. (See IRM 8.20.7.15).
    2. Forms 1040 and 1040A, tax periods ending 7412 thru 7511, closed with change in tax liability and with Disposal Code 03, require that any net increase or decrease in Adjusted Gross Income be entered in the increase or decrease line of Item 15, Form 5403. For tax periods 7712 and subsequent, this entry is made for only IMF and only if an AGI figure is presently shown on master file transcript. No entry is made when there is no change in AGI.
    3. The Revenue Reconciliation Act of 1989 (ACT) established the Accuracy Related Penalty (ARP) (IRC Sec. 6662). This legislation repealed several penalties and consolidated them into the ARP. Reference number 680 will be used to input the accuracy related penalty for returns due after 12/31/89. For returns due prior to 12/31/89, penalties and corresponding reference numbers or transaction codes are shown below. (These are replaced by ARP and will be input by Ref #680 for returns due after 12/31/89).
  Penalty-IRC Code Sec. TC/Ref. No.
  Negligence—IRC 6653 350/351
  Valuation Overstatement—IRC 6659 680
  Substantial Understatement—IRC Sec. 6661 681
  E&G Valuation Understatement—IRC Sec. 6660 682
ITEMS 15A, 15B, 15C—Reserved for entry by terminal operator.
ITEM 56 SSN–IND – Used when assessing an MFT 31 account. Check PA if the MFT 31 account is the primary SSN. Check SA if the MFT 31 account is the secondary SSN.
ITEM 16—APPEALS CODE—Enter your three-digit Appeals code.
ITEM 20—CLAIM REJECTION DATE (MMDDYYYY FORMAT)—Enter date of statutory notice of claim disallowance letter, or
date of receipt of Form 2297, Waiver of Statutory Notice of Claims Disallowance.
ITEM 800—APPEALS RESULTS—Enter total tax and penalty for all Appeals closures (all closing codes EXCEPT10 and 17). If case is a no-change closure, -0- entry is required. Circle the + or − sign, as appropriate. The total includes:
(a) All Item 12 amounts (plus and minus netted) except interest;
(b) All partial assessments processed by Appeals whether master file or nonmaster file (includes partials for Appeals agreed issues on Counsel cases with closing codes 10 and 17).
(c) Item 15 amounts NOT marked with an asterisk (*) above. The Item 15 amounts included must be netted against Item 12 amounts, if appropriate. (Note: Results for estate tax cases should reflect the net deficiency or overassessment after allowing maximum state death tax credit).
ITEM 801—COUNSEL RESULTS—Enter total tax and penalty for Counsel closures (closing codes 10 and 17). If the case is a no-change closure, entry of -0- is required. Circle + or − sign, as appropriate. The total includes (a) thru (c) above.
ITEM 802—APPEALS ADJUSTMENT AMOUNT (NON-TAXABLE) – This item is only completed for Forms 1065, 1120-S and other non–taxable returns in which case the entry in Item 800 would be "0" . Enter total adjustment amount (Sum of lines 2 and 5, Form 4605–A, "Examination Changes—Partnerships, Fiduciaries, Small Business Corporations, Domestic International Sales Corporation" or computer generated format, if used).
ITEM 803—APPEALS GRADE—Enter last digit of assigned appeals officer’s grade. (Only number 1 thru 5 are valid.) If no appeals officer was ever assigned, leave blank.
ITEM 804—APPEALS TIME—Enter total hours expended on tax period by appeals officer. If only total hours for work unit is available, enter the average number of hours per tax period (total work unit time divided by total tax periods being closed). If appeals officer was assigned but no time charged, enter zero. If no appeals officer was assigned, leave blank.
ITEM 805—COUNSEL ADJUSTMENT AMOUNT (NON-TAXABLE) – Enter total adjustment amount (Sum of lines 2 and 5, Form 4605–A or computer generated format). This item is ONLY completed for return Forms 1065, 1120–S, and other non-taxable returns in which case entry in Item 801 would be "0" AND will only apply if the case is settled or tried by Counsel.
ITEM 806—COUNSEL GRADE—Enter last digit of counsel attorney’s grade as provided by Counsel. (Numbers 0–9 are valid.) If no attorney was ever assigned, leave blank.
ITEM 807—COUNSEL TIME—Enter the average number of hours per tax period. (Total work unit time as provided by Counsel divided by total tax period being closed.) If attorney was assigned but no time charged, enter zero. If no attorney was assigned, leave blank.
*ITEM 808—EXAM CLAIM—DISALLOWED AMOUNT—Enter the amount of claim disallowed (whole dollars) by Appeals. (When Item 12 reflects a deficiency (TC300), the amount entered in Item 808 is the full amount of the claim. When Item 12 reflects an overassessment (TC301) and there are no Appeals claims, the amount entered in Item 808 is the amount of the claim minus the TC301 amount.) Entry valid only if "Claim Amount Disallowed" field on Examination’s AIMS record (page 2 of the AMDISA) contains an amount equal to or greater than this entry. (See note, Item 810.)
*ITEM 809—APPEALS/COUNSEL CLAIM AMOUNT – If the claim was filed directly with Appeals or Counsel while the return was under consideraton, enter the amount of claim for refund or abatement (whole dollars).
*ITEM 810—APPEALS/COUNSEL CLAIM DISALLOWED AMOUNT—Enter the amount of claim disallowed (whole dollars). (See explanation of amount in Item 808.) Note: If entry is made in items 808 and/or 810, a corresponding entry is generally required in Item 20 above.
* These fields reflect Revenue Base Protection (RBP) amounts. See IRM 8.20.3.3.2.14 for RBP definitions.
ITEM 811—CLOSING CODE—Enter the applicable two digit Appeals closing code:
Description Closing Code
Agreed Pre-Ninety 03
Agreed Stat. Notice/Nonfiler 04*
Defaulted Stat. Notice 05
Agreed Appeals Docketed 08
Dismissed from Court and:
AO has time on the case, AND
SNTYPE = 090S or 090D 		08
District Counsel Settlement 10
Dismissed from Court and:
there is NO AO time on the case 		10
Dismissed from Court for Lack of Jurisdiction, and:
SNTYPE = 090A ("A" ppeals issued notice) 		11
Dismissed from Court for Lack of Prosecution, and:
SNTYPE = 090A (Lack Prosec) ("A" ppeals notice cases only) 		12
Unagreed Pre-Ninety 13
Fully Sustained or OIC Rejected 14**
Not Sustained or OIC Accepted 15**
Part. Sustained or OIC Withdrawn 16**
Tried 17
TEFRA or closed to Department of Justice—Pet’d Claims Court 18
TEFRA or closed to Department of Justice—Pet’d Dist Court or bankruptcy case 19
Erroneous AIMS Account 33
* Includes all nondocketed nonfilers (both 90-day and pre-90-day) where signed agreement constitutes delinquent return. See Item 08(k).
** Closing codes 14, 15, and 16 apply only to, SC Disallowed Claims, PENAP’S, and OIC cases. Generally, these cases are not on AIMS.
Note: To ensure the accuracy of AIMS, checks have been incorporated to ensure consistency between the status and closing code. Closing codes not applicable to the current status will cause the Appeals closing record to reject at the terminal. The allowable combinations follow:
AIMS Status Valid Closing Code
80 30–05, 13–16, 18, 19, 33
82 08, 10–12, 14–19, 33
ITEM 36—HASH TOTAL– Entry by APS.
ITEM 39—DISCLOSURE CODE – Entry by APS.
ITEM 42—ARDI INDICATOR – Entry is required on all closed cases except non-taxable entities. The Accounts Receivable Dollar Inventory (ARDI) indicator will record whether an advance payment of tax and penalty was received by Appeals or Counsel for the tax period being closed and the type payment received as follows:
  1=Full Paid
  2=No Paid
  3=Partial paid
  4=Installment with payment
  5=Installment without payment
  6=OIC in hand (OIC received in Appeals instead of payment)
  7=no payment applicable
ITEM 43—POSTING DELAY CODE – Entry by APS. Valid entry 1 thru 6. APS will enter if multiple adjustments are required on an account and some must post in later cycles than others. Will allow cycling systemically be entering number of weeks (up to 6) adjustment should be delayed.
ITEM A—SPECIAL HANDLING—Check blocks are given for the more common special handling situations. "Other" block may be used for any additional special instructions not specifically addressed.
(a) Restricted Interest—Where restricted interest computations are required, check "Restricted Interest" box and insert Code section. When restricted interest is required because of an overpayment from a cash bond remittance, check the "Restricted Interest" box and enter "see below" in the space designated for "Code Sec." On the lines below enter the wording "Per Rev. Proc. 84–58, compute interest on overpayment from MMDDYYYY." (The interest computation "from date" will be entered in Item 11, Form 5402.)
(b) Quick Assessment – A quick assessment is required when:
  1. Statute is within 60 days. The terminal will not accept an adjustment if the statute is within 60 days. This does not apply to overassessment and no change cases.
  2. Deficiency is:
a) over $50,000, and
b) is income tax, estate tax or gift tax, and
c) agreed, and
d) unpaid
If the assessment can be posted within 30 days of the agreement (23C date will be within 30 days) the amount in
(a) above is increased to $100,000.
The term "deficiency" above applies to the net assessment amount per year.
(c) Address per Power of Attorney—for temporary or special mailing address, i.e., per power of attorney, check box and enter temporary address in Item B.
(d) Address Change—Check block and enter correct address, of earliest period only, in Item B.
(e) Additional EO Closing Information on Page 2—EO Examination cases require entries as appropriate in items 702 thru 727 on page 2 of the Form 5403. Check this block as a flag for to post the page 2 information to the masterfile.
(f) Advance Payment—Check block if there is an unassessed advance payment. Note "Cash Bond" if applicable. Attach Part 2 of Form 3244–A, Payment Posting Voucher—Examination, to return or substitute assessment document.
(g) Potential Refund Litigation Case—Check box if the Appeals Officer has reason to believe that the taxpayer will file a suit for refund after agreeing to the deficiency.
(h) Other—Check this block and enter instructions for any special situations not covered elsewhere in this item:
  1. May be used in conjunction with Form 3198, Special Handling Notice.
  2. Docketed overpayment cases, enter "Process manual refund under 1988 TAMRA 120-day ruling" . (See IRM 8.20.7.12)
  3. Release From Estate Tax Liability—Indicate by use of "Other" box when Form 7990, United States Estate Tax Certificate of Discharge From Personal Liability, is required. Submit information concerning preparation and issuance by proper official of Form 7990 upon payment of liability for agreed estate tax cases where executor requested determination of amount of tax and discharge from personal liability therefor. See IRM 4395.
  4. Priority Abatement—Check this box when a premature assessment has been made and an abatement of the tax is necessary.
  5. If only a carryback is involved, enter under "Other" a statement similar to the following: "Carryback from 199912, statute for assessment controlled by 199912."
  6. RSED – Check this box on nonfiler cases which result in an overassessment. Enter "RSED-(date)." (See IRM 8.20.7.22.)
ITEM B – Enter taxpayer's address when:
1) the account is NMF, or
2) if quick assessment is required, or
3) if there is an address change.
Address labels may be used for this entry for NMF and quick assessment by lining through taxpayer’s name.
ITEM C—Enter your initials (or name) and date.
ITEM D—Reviewer should initial or sign and date.
ITEM E—Entry required by APS terminal operator.
ITEM F – APS Tax examiner should initial or sign and date.
ITEM 702—Enter the appropriate two-digit subsection code from the table below:
Code Code Section Code Code Section
01 501(c)(1) 14 501(c)(14)
02 501(c)(2) 15 501(c)(15)
03 501(c)(3) 16 501(c)(16)
04 501(c)(4) 17 501(c)(17)
05 501(c)(5) 18 501(c)(18)
06 501(c)(6) 19 501(c)(19)
07 501(c)(7) 20 501(c)(20)
08 501(c)(8) 21 501(c)(21)
09 501(c)(9) 40 501(d)
10 501(c)(10) 50 501(e)
11 501(c)(11) 60 501(f)
12 501(c)(12) 80 521
13 501(c)(13) 90 NECT
ITEM 703 – When closing a 990–PF account, enter the appropriate one-digit code from the table below. In all other instances, leave blank.
Code Asset Range
0 No Assets
1 Under $5,000
2 $5,000—$9,999
3 $10,000—$24,999
4 $25,000—$99,999
5 $10,000—$499,999
6 $500,000—$999,999
7 $1,000,000—$9,999,999
8 $10,000,000—$49,999,999
9 $50,000,000—and Over
ITEM 704 –
Enter 1 when closing a 990–T account related to a 990 examination, Enter 2 when closing a 990–T account related to a 990–PF examination.
In all other instances, leave blank.
ITEM 705—Enter the Key TE/GE Office Code supplied on the Form 5599, EO Examined Closing Record, received from the TE/GE office.
ITEM 28—Enter the Specialist’s Time supplied on the Form 5599, or if returned from service center for additional entries and information is not available from office file contact the specialist who conducted the examination.
Note: For the following items enter dollars only; right justify the entry; and, do not enter any leading zeros, commas, decimal points, or dollar signs. Indicate a positive (additional tax and/or penalty) amount with a "+" and a negative (overassessment) amount with a "−" in the box to the right of the amount entered. If the box is left blank, the amount will be assumed to be positive.
706 – Enter any additional tax deficiency determined from additional return(s) secured during the examination. If no additional return(s) were secured, or if no deficiency was determined, leave blank.
Note: Do not include the deficiency from previously filed return(s). Do not include the deficiency from the conversion of Form(s) 990, 990–C, or 990–PF—"Return of Private Foundation or Section 4947(a)(1) Trusts Treated as a Private Foundation" to Form(s) 1041 or 1120. This deficiency will be recorded in Item 707 (Liability Converted).
707—Enter any additional tax deficiency determined from the conversion of Form(s) 990, 990–C, or 990–PF to Form(s) 1041 or 1120. If no form(s) were converted, if the information necessary to make the determination was not available, if no deficiency was available, or if no deficiency was determined, leave blank.
Note: When EO forms are converted to 1041 or 1120, Examination must be notified. Use Form 5666 (EP/EO Information Report) for this purpose.
708—721  
  ANALYSIS OF CHANGE IN TAX LIABILITY: On appropriate line(s), enter the amount of any change(s) in tax liability resulting from the examination. For a non-tax issue or no-change closing, leave Items 708–721 blank.
  Note: For 4720 examination, complete Items 710, 711, 716–719, and 725 (as applicable) even if there is no change in the private foundation/organization’s 4720 tax liability.
708—Section 4911: For a 4720 examination, enter amount of 4911 deficiency or overassessment in Schedule F tax liability.
709—Section 4940: For a 990–PF or 5527 examination, enter the amount of 4940 deficiency or overassessment in tax liability.
710—Section 4941: For a 4720 examination, enter the amount of the initial deficiency or overassessment in 4720 (Part II) or 990–BL (Schedule A) tax liability.
711—Section 4941 Additional: For a 4720 examination, enter the amount of additional 4941 deficiency in 4720 (Part II) or 990–BL (Schedule A) tax liability.
712—Section 4942: For a 4720 examination, enter the amount of the initial 4942 deficiency or overassessment in 4720 (Part I) tax liability.
713—Section 4942 Additional: For a 4720 examination, enter the amount of additional 4942 deficiency in 4720 (Part I) tax liability.
714—Section 4943: For 4720 examination, enter the amount of the initial 4943 deficiency overassessment in 4720 (Part I) tax liability.
715—Section 4943 Additional: For a 4720 examination, enter the amount of additional 4943 deficiency in 4720 (Part I) tax liability.
716—Section 4944: For a 4720 examination, enter the amount of the initial 4944 deficiency or overassessment in 4720 (Part I & II) or 990–BL (Schedule A) tax liability.
717—Section 4944 Additional: For a 4720 examination, enter the amount of the initial 4944 deficiency or overassessment in 4720 (Part I & II) or 990–BL (Schedule A) tax liability.
718—Section 4945/ 4952: For a 4720 examination, enter the amount of the initial 4945 deficiency or overassessment in 4720 (Part I & II) or 990–BL (Schedule A) tax liability.
719—Section 4945/ 4952 Additional: For a 4720 examination, enter the amount of additional 4945 deficiency in 4720 (Part I & II) or 990–BL (Schedule A) tax liability.
720—990–T: For a 990–T examination, enter the amount of deficiency or overassessment in tax liability.
721—990–C: For a 990–C examination, enter the amount of deficiency or overassessment in tax liability.
722—Employment Tax: If you know, enter the amount of deficiency or overassessment in employment tax liability.
723—Section 507 Termination Tax: Enter the amount of the tax imposed.
724— Political Activity: Enter the amount of tax imposed (Form 1120–Pol Tax).
725—Section 6684 Penalty: Enter the total amount of 6684 penalty(s) assessed, including any 6684 penalty(s) recorded on Form 4881 Chapter 42 Taxes—Disqualified Person Foundation Manager.
726—Penalty (Other): Enter the total amount of penalty(s) assessed under any other code section. Include any 6651 penalty(s) recorded on Form(s) 4881.
727—Fair Market Value Property (Result of Correction): Enter the fair market value of any property recovered by the private foundation as a result of the correction of any Chapter 42 violation.
728—Section 4958: For a 4720 examination, enter the amount of the initial 4958 deficiency/overassessment in 4720 (Part II).
729—Section 4958 Additional: For a 4720 examination, enter the amount of additional 4958 deficiency in 4720 (Part II) tax liability.
730—Section 4955: For a 4720 examination, enter the amount of the initial deficiency/overassessment (Part I and II) tax liability.
731—Section 4955 Additional: For a 4720 examination, enter the amount of the additional 4955 deficiency (Part I & II)

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