21.5.2 Adjustment Guidelines

Manual Transmittal

September 11, 2017

Purpose

(1) This transmits revised procedure update to IRM 21.5.2, Adjustment Guidelines.

Material Changes

(1) Various grammatical, editorial, and link corrections throughout IRM 21.5.2.

(2) IRM 21.5.2.1 Added new information concerning internal controls.

(3) IPU 17U0125 issued 01-19-2017 IRM 21.5.2.3 Added lf control bases are CIS to CIS follow SERP - Case Management Guidelines Job Aid.

(4) IPU 17U0125 issued 01-19-2017 IRM 21.5.2.3 Added DO NOT initiate contact if the open control is assigned to a site "generic employee number" .

(5) IPU 17U0771 issued 04-28-2017 IRM 21.5.2.3 Revised to state DO NOT initiate contact by phone or email if a Form 4442, Inquiry Referral, or e-4442 is the proper action.

(6) IPU 17U0771 issued 04-28-2017 IRM 21.5.2.3 Added guidance for controlling "unsettled " 2016 balance due accounts to IDRS number 0140078949.

(7) IPU 17U1148 issued 07/14/2017 IRM 21.5.2.3 removed guidance to control "unsettled" 2016 balance due accounts to IDRS number 0140078949.

(8) IPU 17U0963 issued 06-06-2017 IRM 21.5.2.4.3 Added guidance to attach missing information and/or information received by the taxpayer to the CIS case as an attachment.

(9) IPU 16U1487 issued 10-05-2016 IRM 21.5.2.4.8.2(1) (e) added the number of weeks between each status.

(10) IPU 16U1487 issued 10-05-2016 IRM 21.5.2.4.9.2(4) (a) Added IRM reference for additional information on penalty relief.

(11) IPU 16U1697 issued 11-23-2016 IRM 21.5.2.4.10.1(3)(b) Added IRM reference for additional information.

(12) IPU 17U0963 issued 06-06-2017 IRM 21.5.2.4.15 Added note to provide additional information regarding hold codes and generation of CP 21A/CP 22A.

(13) IRM 21.5.2.4.20 Updated to add clarification to the note regarding generation of CP 21 or CP 22.

(14) IPU 16U1487 issued 10-05-2016 IRM 21.5.2.4.23.1(2) Updated with additional information on e-filed returns.

(15) IPU 16U1487 issued 10-05-2016 IRM 21.5.2.4.23.7(3) (a) Added to place the CIS ID in the upper left hand corner of the return.

(16) IPU 16U1697 issued 11-23-2016 IRM 21.5.2.4.23.7(4) (a) Added to place the CIS ID in the upper left hand corner of the return.

(17) IPU 16U1487 issued 10-05-2016 IRM 21.5.2.4.23.10(3) Deleted the sentence concerning the credit interest.

(18) IPU 17U0125 issued 01-19-2017 IRM 21.5.2.4.23.10(3) Removed input of TC 971 AC 030 on both accounts to cross reference the TC 848/849.

(19) IPU 17U0860 issued 05-16-2017 IRM 21.5.2.4.23.10(3) Added if TC 776 credit interest from the refund is posted on the secondary account input TC 772 on secondary account to reverse the credit interest.

Effect on Other Documents

IRM 21.5.2 dated September 19, 2016 (Effective date October 1, 2016) is superseded. The following IRM Procedural Updates (IPUs issued between October 05, 2016 and July 14th, 2017 have been incorporated into this IRM: 16U1487 (10/05/2016), 16U1697 (11/23/2016), 17U0125 (01/19/2017), 17U0771 (04/28/2017), 17U0860 (05/16/2017, 17U0963 (06/06/2017), 17U1148 (07/14/2017).

Audience

All IRS organizations - Small Business/Self Employed (SB/SE), Large Business & International (LB&I), Tax Exempt and Government Entities (TE/GE) and Wage and Investment (W&I), Appeals, Employee Plans (all employees performing account work).

Effective Date

(10-01-2017)

Kevin Morehead
Director, Accounts Management
Wage and Investment Division

Program Scope and Objectives

  1. Purpose: This Internal Revenue Manual (IRM) provides standard operating procedures for employees to follow when correcting, adjusting or resolving taxpayer accounts concerns. These guidelines provide step-by-step actions to take to attain resolution. There are links within subsections created to provide additional guidance if needed to help the employee reach resolution.

  2. Audience: The primary users of the IRM are all IRS employees in Business Operating Divisions (BODs) who are in contact with taxpayers by telephone, correspondence, or in person.

  3. Policy Owner: The Director of Accounts Management.

  4. Programmer Owner: Process and Program Management, Accounts Management, Wage and Investment (WI).

  5. Primary Stakeholders: The primary stakeholders are organizations that Accounts Management collaborates with; for example; Return Integrity & Compliance Services (RICS), Compliance and Submission Processing.

  6. Program Goals: Program goals for this type of work are included in the Accounts Management Program Letter as well as IRM 1.4.16, Accounts Management Guide for Managers.

Background

  1. Employees in the Accounts Management (AM) organization respond to taxpayer inquiries by telephone in our customer service centers, in person, at our walk-in assistance center, in addition to processing amended returns, claims, duplicate filed returns, loose forms, correspondence, etc., and address all other internal adjustment requests.

Authority

  1. Refer to IRM 1.2.21, Policy Statements for Customer Account Services Activities, for information.

  2. The Taxpayer Bill of Rights describes ten basic rights that all taxpayers have when dealing with the IRS. The Taxpayer Bill of Rights adopted by IRS in June 2014 and codified at IRC § 7803(a)(3), provides the taxpayers have the right to receive prompt, courteous, and professional assistance in their dealing with the IRS. They are to be spoken to in a way that is easily understood and any correspondence from the IRS must be clear and understandable. They have the right to speak to a supervisor whenever quality service is not received. For additional information, refer to the Taxpayer Bill of Rights.

Responsibilities

  1. The Wage and Investment Commissioner has overall responsibility for the policy related to this IRM which is published on a yearly basis.

  2. Additional information is found in IRM 1.1.13.9.4, Accounts Management and IRM 21.1.1, Accounts Management and Compliance Services Overview..

Program Controls

  1. Program Reports: The program reports provided in this IRM are for identification purposes for the Accounts Management Customer Service Representatives (CSRs) and Tax Examiners (TEs). For reports concerning quality, inventory aged listing, please refer to IRM 1.4.16, Accounts Management Guide for Managers. Aged listings can also be viewed by accessing Control Data Analysis, Project PCD, are on the Control-D/Web Access server, which has a login program control.

  2. Program Effectiveness: Program Effectiveness is determined by Accounts Management’s employees successfully using IRM guidance to perform necessary account actions and duties.

  3. Program Controls: Goals, measures and operating guidelines are listed in the yearly Program Letter. Quality data and guidelines for measurement are referenced in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax/Exempt/Government Entities, Return Integrity and Compliance Services (RICS) and Electronic Products and Services Support.

Acronyms

  1. For a Comprehensive listing of any IRS acronyms, please refer to the Acronym Database.

Related Resources

  1. Refer to IRM 1.4.2.15, Related Resources for information on related resources that impact internal controls.

What Are Adjustment Guidelines?

  1. Adjustment guidelines are a set of Internal Revenue Service (IRS) rules to follow when working with adjustments to an account. Specific topics are explained in more detail in chapters dealing with those topics.

Adjustment Guidelines – Research

  1. When processing general requests, all customer service representatives (CSRs) and tax examiners (TEs) must:

    1. Obtain all documents, returns, and taxpayer supplied information necessary to make adjustments.

      Exception:

      If you are staffing the toll-free lines and a document is needed that is not available on CIS, do not order any document that will not be received by close of business on the day of the taxpayer telephone contact. Complete Form 4442, Inquiry Referral, or e-4442 and route to the campus Accounts Management (AM) paper function within your directorate. Some local procedures allow for campus employees to order the document and keep the case in their individual inventory.

      Reminder:

      Do Not pull the taxpayer's return unless all other research fails to resolve the issue or as instructed by a subject specific IRM. Previous Correspondence Imaging System (CIS) cases may also provide information needed to resolve the case.

    2. Research IRS Publications, Internal Revenue Codes and other IRMs as appropriate.

    3. Obtain technical assistance, if the issue is beyond training level. See IRM 21.5.3.4.7.2.1, Examination Technical Assistance Request.

  2. Taxpayer inquiries are completed by the site receiving the call or correspondence. DO NOT refer cases to another campus or call site unless an IRM specifically instructs you to do so.

    Exception:

    Your campus may have a local agreement to send paper cases to another site or group. Those cases must be worked following the rules in the local agreement and not shipped to the campus that processed the original return.

    Note:

    Whenever possible, multiple claims from the same taxpayer will be processed by the same employee. Coordination of these same taxpayer, multi-year claims is necessary to ensure consistent processing.

    Note:

    Cases meeting Taxpayer Advocate Service criteria will be referred as outlined in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.


  3. Returns are kept at campuses for only a short time, dependent upon the storage space at that campus. Returns are subsequently sent to the Federal Records Center (FRC). The Service also transships returns from one campus to another to perform the original processing.

  4. If there is a transaction code (TC) 604 on the module, check with the proper Collection insolvency group to obtain approval to adjust the account. Ask Collections to reverse the TC 521 and TC 971 action code (AC) 031. This action needs to be taken to allow your adjustment to post. If this is an International account, contact the proper Collection insolvency group at the Philadelphia Campus, who processes and adjusts these type of accounts. Refer to the Insolvency (Bankruptcy) National Field/Centralized Site Directory under Who/Where on the Servicewide Electronic Research Program (SERP) for the updated telephone listing.

  5. Research may show an OPEN control base. ALWAYS contact the employee with an open control base prior to taking any action on a case, except in the following instances:

    1. DO NOT initiate contact if there is a HISTORY item but NO OPEN control.

    2. DO NOT initiate contact if the control is in "B" or "M" monitoring status.

      Exception:

      If control bases are CIS to CIS follow Case Management Guidelines, Job Aid, Section 2, Multiple Control Bases.

      Exception:

      If there is a TC 841 and a P freeze on the taxpayers’ account, complete Form 4442 , Inquiry Referral, or e-4442 with the information you obtain from the taxpayer and refer the case to the Refund Inquiry employee or unit with the open control.

      Exception:

      If any control bases are in Status A or B with identity theft involvement, the assigned employee must be contacted before taking action on the account, see IRM 25.23.4.7.7, Case Transfer within IDTVA.

    3. DO NOT initiate contact if the only open control is a nullified unpostable with category code NLUN.

    4. DO NOT initiate contact with the employee if the control is to a clerical unit. Clerical assignee numbers represent workflow designations rather than individual employees. These non-employee assignee numbers are frequently distinguished by zeros in the last five digits of the employee number; however, numerics other than zero may also be used. Lists of these numbers are provided in either campus IDRS bulletins or the IDRS MESSG file. Refer to IRM 21.5.2.4.3 (5), Adjustments Requiring an Amended Return or Taxpayer Documentation, for additional information on resolving the telephone inquiry.

    5. DO NOT initiate contact if the open control is assigned to the Accounts Management Centralized Distribution Site (CDS) or Site Specialization Number.

    6. The CDS uses individual's IDRS numbers as temporary holding numbers for specialized work until the case can be reassigned or distributed.

      Note:

      Accounts Management employees can reassign a case to the CDS temporary IDRS holding number. Employees are required to suspend the case to their manager or lead for approval.

      Reminder:

      AM managers or leads are reminded to “activate” the case to active inventory prior to reassigning it. Do not reassign the case directly from the Suspense inventory.

    7. Accounts Management also utilizes Site Specialization Numbers in which cases are assigned to a temporary holding IDRS number utilized for case assignment ONLY by the Inventory Control Manager (ICM) or Head Quarters (HQ). See Accounts Management CDS/Site Specialization Temporary Holding Numbers. The link provides a listing for the CDS and Site Specialization IDRS numbers.

    8. DO NOT initiate contact if the open control is assigned to a site "generic employee number" , see IRM 21.5.1.5.1(1), CIS General Guidelines.

    9. DO NOT initiate contact by phone or email if a Form 4442, Inquiry Referral, or e-4442 is the proper action based on Exhibit 21.3.5-1, Referral IRM Research List.

    10. DO NOT give employee phone numbers to taxpayers.

  6. 2016 balance due returns with TC 150 with “000000s” in the Posted Date field are “unsettled” balance due tax returns and the xClaim tool cannot determine what the current value is. Since these tax modules are actually “partially-posted” and NOT FULLY SETTLED, not all of the credits are posted on these accounts on TXMOD until the account is settled (i.e. EITC). DO NOT adjust the account until the account becomes settled. The account will stay unsettled for 2 cycles only. After the 2 cycles, the return will settle and the CP 14 is issued providing the module is still in balance due.

  7. Disclosure guidelines apply to ALL adjustment actions taken. Do not discuss the account with unauthorized parties.

Adjustment Guidelines – Procedures

  1. Use the guidelines in IRM 21.5.1, General Adjustments, when making account adjustments.

  2. For information on received dates when adjusting an account, refer to IRM 21.5.1.4.2.4, Received Date – Determination, and IRM 21.5.1.4.2.5, Received Date – Grace Periods.

  3. IRM 21.3.3.4.9, Taxpayer Inquiries and Complaints, contains information on the reasons taxpayers contact the IRS. It provides the IRMs, forms, letters, technical functions for referrals, and telephone numbers, which will enable you to contact a specific function for technical help.

Statutory Exceptions and Administrative Waivers

  1. Various administrative waivers and statutory exceptions assist in processing adjustment requests timely and efficiently. For additional information that are specific to penalties, refer to IRM 20.1.1.3.3, Statutory Exceptions and Administrative Waivers.

  2. We receive requests for adjustments to tax, penalty, interest, and other issues, in two main forms:

    • Written

    • Verbal

  3. Authorities and waivers are sometimes granted:

    1. For the good of the taxpayers.

    2. For the good of the Service.

    3. Or both.

Designation of Federal Tax Deposits (FTD)
  1. Under IRC § 6656 (e) and Rev. Proc. 2001-58, taxpayers may designate the period or periods to which the Service should apply a deposit. See IRM 21.5.2.4.9, Penalty Overview.

  2. The designation may be made orally or in writing. Oral statement ceiling amounts do not apply.

Administrative Waivers
  1. Administrative Waivers are granted by the Service for the benefit of the Taxpayer, the Service, or both. Refer to IRM 20.1.1.3.3, Statutory Exceptions and Administrative Waivers, for additional information.

  2. Action can be taken if the criteria given in the Waiver apply.

  3. Oral statement ceilings apply. Refer to IRM 20.1.1.3.1, Unsigned or Oral Request for Penalty Relief, for additional details.

Service Errors (Effect on Penalty and Interest)
  1. Sometimes the Service makes errors in the assessment of tax, penalty, or interest.

  2. When correcting these errors, oral statement ceilings do not apply.

  3. For additional information regarding the effects of service errors on penalty and interest, refer to the following:

    • IRM 20.2.7, Abatement and Suspension of Debit Interest

    • IRM 20.1.1.3.4, Correction of Service Error

Reasonable Cause
  1. For Reasonable Cause Criteria see IRM 20.1.1.3.2, Reasonable Cause.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , refer to Oral Statement and Penalty Relief Request (Reasonable Cause) FTF, FTP & FTD Penalties.

  3. For relief from penalties, see IRM 20.1.1.3, Criteria for Relief From Penalties.

Adjustments With Oral Statement

  1. The IRM 21.1.3.20, Oral Statement Authority, outlines the oral statement authorities for Accounts Management. This IRM contains the procedures that Accounts Management must apply to any questions concerning oral statement.

    1. Payment/Credit Transfers – There are no oral statement ceiling amounts/dollar limits. See IRM 21.5.8.1, Credit Transfers Overview.

    2. Credit Elect Problems – See IRM 21.4.1.5.6, Credit Elect Problems.

    3. Reverse Credit Elect Payments Shown on the Return – See IRM 21.4.1.5.6.1, Credit Elect Reversals.

    4. Invalid SSN refund releases – See IRM 21.6.1.5.7, Resolving CP 54 with Math Error Involvement.

    5. Withholding Adjustment (To ceiling amount) – See IRM 21.6.3.4.2.2, Withholding (W/H) Tax Credit, or IRM 21.5.1.4.12, Tolerances.

    6. Math Error Substantiated Protests – See IRM 21.5.4.4.4, Math Error Substantiated Protest Processing.

    7. Certain freeze releases – See IRM 21.5.6.4, Freeze Code Procedures.

    8. True duplicate return (Except Form 1065, U.S. Return of Partnership Income) – For Individual Master File (IMF), see IRM 21.6.7.4.14, True Duplicate Return. For Business Master File (BMF), see IRM 21.7.9.4.1.3, True Duplicate.

    9. Math errors/IRS errors/decimal point errors – See IRM 21.5.4, General Math Error Procedures.

    10. Penalty Relief Request – IRM 21.5.2.4.9.2, Oral Statement and Penalty Relief Request.

    11. Name, taxpayer identification number (TIN), address, filing status, and filing requirement changes – See IRM 3.13.5, Individual Master File (IMF) Account Numbers, and IRM 3.13.2, BMF Account Numbers, and IRM 21.6.1.3, Filing Status Research.

    12. BMF changes to item reference code/numbers (not tax) – See IRM 21.7.1.4, Business Master File (BMF) Non-Master File Adjustment Procedures.

    13. Earned Income Tax Credit – See IRM 21.6.3.4.2.7.13.1, EITC Math Error Reply.

  2. If an address change is necessary and the taxpayer requests the address change using an oral statement, the address change may be input to IDRS based on Rev. Proc. 2010-16, which superseded Rev. Proc. 2001-18. Refer to IRM 3.13.5.27, Oral Statement/Telephone Contact Address Change Requirements, (IMF) and IRM 3.13.2.3.6, Change of Address, (BMF) for additional information.

    Reminder:

    Once a taxpayer indicates they have an address change, discuss with the taxpayer whether the address change is a permanent or temporary address change (e.g., student at college). If taxpayer indicates a temporary address change, do not update the address on master file.

    Exception:

    If a Large Corp Indicator (LCI) is on the account, do not use oral statement authority to change address. Refer to IRM 21.7.1.4.11.3, Routing Large Corp Cases and Inquiries, for additional information.

  3. An oral statement adjustment made prior to the due date of a return does not constitute superseding information or a superseding return as outlined in IRM 21.6.7.4.10, Superseding Returns.

Case Files/Actions on-line with Oral Statement
  1. Adjustment actions completed on-line with an oral statement do not require case files unless required in specific IRM procedures. Do not prepare unnecessary case files. Oral statement adjustments are generally input as a Non-Source Document (NSD) adjustment. Refer to IRM 21.5.2.4.5, Source Documents, for more specific information.

  2. Create case files for actions not completed on-line. Using Form 4442, Inquiry Referral, or e-4442, describing inquiry and actions taken to resolve the account. Destroy the Form 4442 after review.

Adjustments Requiring An Amended Return or Taxpayer Documentation

  1. Adjusting an item not shown on the original return requires a signed amended return. Inform the taxpayer and order the required tax forms, if needed. See IRM 21.3.6, Forms and Information Requests.

  2. An amended return is not necessary:

    If ... Then ...
    The taxpayer listed the item on the original return, but did not include the necessary schedule 1. A math error notice will be issued.
    2. The item may not appear on RTVUE/BRTVU.
    The taxpayer provides substantiation in the case of a math error 1. Accept oral statement (up to the amount shown on the original return) even if the "–G" Freeze is no longer on the account.
    2. See IRM 21.5.4.4, Math Error Procedures Processing.
  3. The following actions require a written request:

    1. Penalty abatements (above ceiling amounts) for reasonable cause. Refer to IRM 21.5.2.4.9.2, Oral Statement and Penalty Relief Request, for additional information.

    2. Abatements of interest.

  4. Use the taxpayer’s written request as a source document. Refer to the following IRMs for additional information:

    • IRM 4.19.3, IMF Automated Underreporter Program

    • IRM 4.19.3.20.1.2, Abatement of Interest

    • IRM 20.1, Penalty Handbook

    • IRM 20.2.7, Abatement and Suspension of Debit Interest

    • IRM 4.19.10, Examination General Overview

  5. When speaking to the taxpayer and you realize the taxpayer's request requires written documentation/substantiation, you must determine if the documentation can be faxed while you are on the telephone with the taxpayer (e.g., penalty abatement based on reasonable cause over the oral statement allowable amount), follow the table below:

    If ... Then ...
    The required documentation can be faxed while you are on the telephone with the taxpayer
    1. Provide the specific fax number to the taxpayer.

    2. Retrieve the documentation.

    3. Adjust the account as necessary.

    4. Attach missing information and/or information received from the taxpayer to the CIS case as an attachment (if CIS access).

    The required documentation cannot be faxed while you are on the telephone with the taxpayer

    Note:

    When available, Enterprise Electronic Fax, (EEfax), must be used in lieu of manual faxing.

    1. Advise the taxpayer to call back when able to fax the required documents.

    2. If the taxpayer is unable to fax or prefers not to fax the required documents, advise the taxpayer to attach the required documentation to the notice and mail it to the address indicated on the notice.

    3. Advise the taxpayer of the normal processing time frame for a response to correspondence (30 days).

    4. Input a STAUP, if needed, as outlined in IRM 21.5.2.4.8.2, Suppressing Balance Due Notices.

    5. Do not open a control base.

    6. Do not complete a Form 4442 or e-4442.

    Reminder:

    Cases meeting Taxpayer Advocate Criteria (e.g., hardship situations) will be referred as outlined in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

Document Locator Number (DLN)

  1. The DLN for IMF and BMF account is distinct and contains information useful for processing cases.

  2. The DLN is the 14 digit number assigned to every return or document processed through the Automated Data Processing (ADP) system. DLNs are printed on computer documents in XXXXX-XXX-XXXXX-X format. Refer to DLN Composition in Document 6209, IRS Processing Codes and Information, for detailed information.

Source Documents

  1. Source documents, (SD) are required for some adjustments completed with an oral statement:

    1. Credit transfers, when the payment was applied to the wrong Taxpayer Identification Number (TIN) (non-related accounts) OR credit transfers on related accounts when the transfer creates a debit balance. See IRM 21.5.8.2.1, Determining Source Document Requirement for Credit Transfers.

    2. If an erroneous refund was issued, follow erroneous refund procedures. See IRM 21.4.5, Erroneous Refunds.

    3. Missing schedules.

    4. Penalty determinations – Refer to IRM 20.1.1.3.6.6, Attaching RCA Determination.

  2. Verify disclosure requirements before giving account information. Refer to IRM 21.1.3.2.3, Required Taxpayer Authentication, as applicable. Also, see IRM 21.1.3.2.4, Additional Taxpayer Authentication, and IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File (CAF).

  3. Request taxpayers send documentation required for adjustments listed in (1) above. The taxpayers may fax the information. Provide the taxpayers with your fax number, including area code. See IRM 21.5.2.4.3 (5), Adjustments Requiring an Amended Return or Taxpayer Documentation, and also refer to IRM 21.3.5, Taxpayer Inquiry Referrals Form 4442, for additional instructions.

    Note:

    When available, Enterprise Electronic Fax (EEfax), must be used in lieu of manual faxing.

Remarks Field

  1. Specific elements in the "Remarks" field are required for each type of IDRS input (entity, tax, penalty change, or credit transfer). Oral statement authority adjustments have different requirements. See IRM 21.1.3.20.1, Oral Statement Documentation Requirements, when inputting the remarks for an oral statement account change.

  2. If the input is not completed with an oral statement, input the adjustment with "SD" , "NSD" , or "SDR" in the remarks field (or Y, N, or R on the Command Code (CC) ADJ54 screen).

    • SD (Source Document) indicates the document is being forwarded to files for attachment to the IDRS transaction record

    • NSD (Non Source Document) indicates the document will not be attached to the IDRS transaction record, such as with an image in the Correspondence Imaging System (CIS)

    • SDR (Source Document Retained) indicates the document is being held for follow up case actions, but will later be attached to the IDRS transaction record

    Use the remaining positions in the remarks field to briefly explain the reason for the adjustment or credit transfer

  3. When completing both an adjustment and a credit transfer, input the required items on the adjustment and reference them in the "remarks" section of the credit transfer

Remarks on Type of Adjustment

  1. Briefly explain the reason the adjustment was made, such as "credit transfer" . Also, indicate per letter or other justification:

    If ... And ... Then ...
    You are taking multiple actions (e.g., TC 29X, 670/672, 971, etc.,) Actions are for the:
    1. Same taxpayer
    2. Same tax period,
    3. Same TIN,
    4. TC 29X is one of the TCs used
    1. Record the necessary elements in Command Code "ADJ54" Remarks Section.
    2. Indicate in the remark’s section for the related transactions, "NSD" and where the backup is for your actions.

    Exception:

    Disregard the instructions in the table above when making entity adjustments. Always record the necessary elements on all entity changes regardless of the source or the number of actions being taken.

  2. If there is a conflict between oral statement adjustments procedures in this IRM or in the specific IRMs, work the case according to specific IRMs.

Notice Suppression

  1. Notices are suppressed in various ways depending on the type of notice and the issue. Notices are suppressed with:

    • Command Code (CC) STAUP

    • Hold Codes

    • Notice Suppression Codes or Indicators

  2. The input screens for some IDRS CCs have a field which is overlaid to indicate if a notice should or should not be issued. Notice Suppression instructions are given as needed throughout the IRM 21.

  3. When CC STAUP cannot be used because actions will result in a settled module, and offset is likely (January - May for IMF, about 8 weeks after due dates for BMF), input a TC 470 without closing code.

  4. When a CC STAUP or a TC 470 is used to suppress a balance due notice, input a history item on the Account Management Services (AMS) to document the reason for the action (e.g., Taxpayer to file Form 1040X or Taxpayer to send check).

Notice Suppression Indicator
  1. A notice suppression indicator (NSI) is input in the CP-NTC-SUPP-IND field on the command code ADJ54 screen to suppress small balances from being printed on the adjustment notice.

    Note:

    Currently only used in Business Master File (BMF) applications.

  2. The specific requirements for BMF's use of the notice suppression indicator 1 are outlined in IRM 21.7.1.4.2, Notice Suppression Indicator (NSI).

Suppressing Balance Due Notices
  1. Suppress balance due IDRS Notices with Command Code (CC) STAUP. This includes cases referred to other functions or sites.

    1. If there is a balance due on the account, and the next Collection status for IMF is 20, 56, 58, or 22, or the next collection status for BMF is 21, 58, or 22, input CC STAUP in the next status to prevent further notices.

      Note:

      CC STAUP will only prevent an erroneous IDRS notice if it is input by the Friday before the erroneous notice is scheduled to generate (10 days prior to the 23C date).

    2. Use the following chart to determine the number of delay cycles to input:

      If ... Then ...
      Requesting documents from files Allow 15 cycles.
      Requesting information from the taxpayer 1. Allow 4 cycles when requesting information by telephone.
      2. Allow 6 cycles when requesting information by correspondence (allow additional time if taxpayer submitting overseas mail (2 cycles)).
      An adjustment or other action will not fully satisfy the balance due, and taxpayer is sending payment Allow 6 cycles.
      An adjustment or other action will not fully satisfy the balance due, and the taxpayer has not promised a payment Input a STAUP for 3 cycles to reduce the remaining cycles of any previously input STAUP.

      Note:

      If no STAUP has previously been input, the STAUP for 3 cycles is required to delay issuance of a balance due notice prior to the posting of any adjustment/case action, including the issuance of any correspondence.

      Exception:

      Staup is not required if the only action is the input of TC 290 .00 to release the -A freeze.

      The action taken creates a zero or credit balance Input STAUP for number of cycles needed for the action to post.

      Note:

      If STAUP is already on the account, no action is needed to release it.

      Correction of unpostable situation will satisfy balance due Allow 9 cycles.
      The taxpayer is submitting any other information to satisfy balance due Allow the number of cycles needed for information to post (allow additional time if taxpayer submitting overseas mail (2 cycles)).
      The taxpayer will full pay the balance due now Allow 8 cycles. Refer to IRM 21.3.12.3.1, Can Full Pay Balance Due Now (Payoff within 1 to 10 days) IMF and BMF.
      Taxpayer can full Pay within 11 to 59 days Refer to IRM 21.3.12.3.2, Taxpayer Can Full Pay Within 11 to 59 Days - IMF, BMF Out-of-Business or BMF In-Business Non-Trust Fund Accounts.
      The taxpayer is filing an IMF/BMF Original or Amended Return that will full pay tax, penalty, and interest on the balance due account Refer to IRM 21.3.12.3.3, Taxpayer Can Full Pay Within 60 to 120 Days - IMF, BMF Out-of-Business or BMF In-Business Non-Trust Fund Accounts.
      The taxpayer is filing an IMF/BMF Amended Return that does not full pay the balance due Refer to IRM 21.3.12.3, Determine the Earliest The Taxpayer Can Full Pay
      Routing balance due cases to other areas Input or reduce the STAUP to 9 cycles.
    3. When the STAUP is input for more than 9 cycles, a control base is needed or the STAUP will be released after 9 cycles.

    4. Advise the taxpayer another notice may be issued (STAUP may be input too late to stop the next notice). Also advise:

      If ... Then ...
      The action taken satisfies the balance due Advise taxpayer this notice may be ignored.
      Taxpayer submits the payment/information as you requested Advise taxpayer this notice may be ignored.
    5. If the time frame remaining before the next scheduled notice will allow time to complete the action, a STAUP is unnecessary. There are 5 weeks between each status, except status 58 to 22 there are 5 to 10 weeks.

      Note:

      A STAUP should only be input if you want to delay the next notice from generating. If it will take more than two weeks for the account to settle and it is in NOTICE status, you need to input a STAUP if another NOTICE is due to generate see IRM 5.19.10-1, Restrictive Conditions, for exceptions.

Clearance Tolerances
  1. When a module is in status 12, accrual amounts under ≡ ≡ ≡ are not displayed on TXMOD due to Master File tolerances. Accruals under this tolerance are displayed on BMFOLI/IMFOLI. Accounts in status 12 which contain accrual amounts less than ≡ ≡ ≡ ≡ will not continue to accrue penalty and interest. Overpayments which may become available will not offset to the status 12 account.

  2. Status 12 accounts are considered full paid and should not be addressed in balance due pay-off requests or installment agreements, unless the taxpayer is aware of the unpaid accruals as described in the 1st if/then statement in (3) below.

    Exception:

    Status 12 accounts with manually restricted interest or penalties (-I or G- freeze) are not considered full paid. A referral to the interest specialist is required for manual computation of the interest. Refer to IRM 21.5.6.4.18, -I Freeze, for additional information.

  3. Status 12 procedures are as follows:

    If ... And ... Then ...
    Taxpayer requests a balance due notice no other adjustment issue is involved 1. Check CC BMFOLI or CC IMFOLI for accruals; and
    2. Input a TC 290 .00 with PC 5 to force the computer to post unrestricted failure to pay penalty and interest; and
    3. Issue a balance due notice to the taxpayer.
    A payment posts to the account the posted module balance is under ≡ ≡ ≡ ≡ ≡ and the accruals are less than ≡ ≡ ≡ ≡ ≡ 1. A TC 606 will systemically generate to clear the account of the posted balance due.
    2. Input a TC 290 .00, PC 5, to force a reversal of the TC 606.
    3. Issue a correct balance due notice.
    You are telling the taxpayer his or her account is paid in full the account contains modules with accruals under ≡ ≡ ≡ Input a TC 290 .00, PC 5 and HC 3. The balance due will post and clear with a TC 606.

    Note:

    A notice will not be issued to the taxpayer.

    You are telling the taxpayer his or her account is paid in full

    Exception:

    Does not apply if the account contains manual interest or penalty computations. See exception in (2) above.

    the account contains modules with accruals greater than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 1. Do not input a TC 290 .00 with PC 5.
    2. No action is required on the account.
    3. Programming will remove the accrual balances.


  4. When inputting the priority code (PC) 5 to post accruals and also creating/releasing an overpayment on the same or another module, allow proper offsets in the subsequent cycle by using a posting delay code (PDC) of one cycle on the credit module.

  5. If the account is in Status 23, input of a TC 290 for zero with PC 5 will generate a balance due notice to the taxpayer and update accruals. See IRM 21.3.12.3.1, Can Full Pay Balance Due Now (Payoff within 1 to 10 days) IMF and BMF, for additional information.

Penalty Overview

  1. See IRM 20.1, Penalty Handbook, for more information. Always advise the taxpayer if there is a possibility of a penalty assessment. Explain why a penalty was asserted or assessed.

  2. To explain how a penalty was computed, use IDRS command code (CC) INTST or PINEX for FTP and Failure to File (FTF) and CC FTDPN, for Failure to Deposit (FTD), PIFTF, PIFTD, and PIEST can be used to research penalty assessments.

  3. IRC § 6656(1), provides an order for applying deposits that provides relief from so-called cascading penalties, in some situations; and, it also allows the person making such deposits to designate a different application within the time period provided in IRC § 6656(2). Rev. Proc. 2001-58 provides guidance on such applications. See IRM 20.1.4.26.3, Statutory Penalty Relief.

Unique Action Code (AC)
  1. TC 971 with AC 262 generates when the maximum FTP penalty accrues.

  2. When the account drops from IDRS TC 971 with the AC 262 will be visible on "Corporate Files On-Line (CFOL)" .

  3. The code will show on both BMF and IMF.

  4. When figuring FTP manually, TC 971 AC 262 can be input manually.

Oral Statement and Penalty Relief Request
  1. The Service considers granting penalty relief for several reasons including:

    • Administrative Waivers - First Time Abatement (FTA) is considered an administrative waiver

    • Reasonable Cause

    • Designation of Federal Tax Deposits


  2. Prior to the abatement of any penalty based on reasonable cause, the facts of the case must be determined and research completed to ensure the assertion of the penalties was appropriate. DO NOT use FTA or manually abate a penalty if the penalty will be systemically reversed once the situation causing the generation of the penalty is corrected. Manually adjusting a penalty or applying FTA criteria in these instances could have a negative impact on the taxpayer since they would no longer be eligible for FTA on a legitimate abatement claim.

    Example:

    The taxpayer has been charged FTF and FTP penalties. The taxpayer states he wants the penalties abated because his accountant files an extension every year along with an estimated payment for taxes owed. Research shows there is a payment received April 12th and extensions filed under all prior years. In this case if it is determined that an extension “more likely than not” was filed per IRM 20.1.2.1.3.1.1, Extension of Time to File Not Found, the resolution to the case for the FTF would be to input the extension with the TC 460. If the taxpayer requested an abatement of the FTP also, reasonable cause or first time abate would then be considered for FTP only.

  3. Once it is determined the penalties asserted are correct, Reasonable Cause Assistant program (RCA) MUST be used if available at the work site, see IRM 20.1.1.3.6, Reasonable Cause Assistant (RCA) for additional information. If using RCA, it must be utilized through to determination. RCA will provide the guidance for the actions to be taken. RCA determinations will be to:

    1. Abate for FTA or below tolerance.

    2. Abate for reasonable cause.

    3. Deny reasonable cause request.

    4. Suspend for additional information and/or for situations where Oral Statement Authority (OSA) is exceeded and a written statement is needed. See IRM 20.1.1.3.6.10, RCA Conclusions/Determinations, for additional information.


  4. Oral Statement Authority ceilings:

    1. Reasonable cause - When RCA is used the oral statement threshold is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Refer to IRM 20.1.1.3, Criteria for Relief From Penalties, and IRM 20.1.1.3.1, Unsigned or Oral Requests for Penalty Relief, for additional information.

    2. First Time Abatement (FTA) - Since FTA is considered an administrative waiver of penalty, it does not carry an oral statement authority dollar threshold for abatement. See IRM 20.1.1.3.6.1, First Time Abate (FTA).

    3. Denial of penalty relief - No threshold is applied to denials. See IRM 20.1.1.3.6.4,Oral Statement Ceiling Exceeded.

    4. For Service errors or designation of Federal tax deposits, there are no ceiling amounts for oral statement authority penalty relief.

  5. When considering an unsigned statement or oral request for penalty relief, it is important to remember that while there is a threshold for reasonable cause abatements, there are no ceiling thresholds for first time abatement or denial of penalty relief. This means if the account shows FTF assessed for $1,500, RCA must be accessed to determine if the taxpayer qualifies for FTA or the request for penalty abatement may be denied.

  6. Prior to determining if the taxpayer meets reasonable cause, RCA will make the determination as to whether the taxpayer qualifies for FTA. If the taxpayer qualifies for FTA, the assessed penalties will be abated at the time of request. There is no need to advise the taxpayer to full pay the account. Since FTA applies to the module, the taxpayer can contact the service again once the account is full paid to have the remaining penalties abated under FTA. See IRM 20.1.1.3.6.1, First Time Abate (FTA), for additional information.

  7. Reasonable Cause penalty relief must be considered with oral statement for the following penalties:

    1. Failure to Pay (FTP).

    2. Failure to File (FTF).

    3. Failure to Deposit (FTD).

    4. Daily Delinquency Penalty (DDP).

    Note:

    DDP penalty is an information return penalty and abatement cannot be considered with the RCA program.

  8. Do not advise the taxpayer to full pay the account prior to requesting penalty abatement for reasonable cause. Reasonable cause abatement still must be considered. If RCA determines the taxpayer meets reasonable cause, the abatement should include the entire related penalty computed on the underlying tax liability, even if that penalty has not yet been assessed (accruals). See IRM 20.1.2.1.4.1 (4), Penalty Abatements and Re-assessments for additional information.

  9. If RCA determines that OSA is exceeded and a written statement is needed, the statement represents the taxpayer’s request for abatement and should include the penalties to be abated, year(s), the reason and the taxpayer’s signature. If the facts given by the taxpayer will not meet reasonable cause, do not request a written statement simply because the amount is over threshold, continue to run RCA through to determination. See IRM 20.1.1.3.1, Unsigned or Oral Requests for Penalty Relief, for additional information.

  10. If the taxpayer is requesting the abatement based on reasonable cause, RCA may make the determination supporting documentation is needed. The request for supporting documentation may include such things as a doctor’s note, hospital records etc., Documentation supporting the claim of reasonable cause is not limited to those requests that exceed OSA. The need for supporting documentation will depend on the circumstances of the Reasonable Cause request. See IRM 20.1.1.3.6.5, Documentation, for additional information.

  11. If RCA determines the penalty should be abated and a signed statement and/or documentation are needed, ask the taxpayer if they can fax the information while they are on the phone. If unable to fax, advise the caller they can either call back when they can fax the information or submit the penalty relief request in writing.

  12. Suspend RCA so the information will be saved and the next employee can access the RCA determination. See IRM 20.1.1.3.1, Unsigned or Oral Requests for Penalty Relief, for additional oral statement information.

    Note:

    When available, Enterprise Electronic Fax (EEfax), must be used in lieu of manual faxing.

    Note:

    If RCA denies the penalty relief request, advise the taxpayer they will receive a letter of determination within a couple of weeks and the letter will provide them with a written explanation of the outcome of their request.

    Note:

    The BMFO RCA Tool is now mandated for phones when taxpayer is requesting abatement of FTF/FTP penalties based on reasonable cause on Forms 1065, Form 1120, Form 1041.

  13. If the taxpayer contacts the service prior to the assessment of the penalties, it may be possible to still consider the request and suppress the penalties. While RCA can not be utilized for accounts where there is no TC 150 on the module, it can be utilized if there is a TC 150 but the penalties have not posted to the account. See 20.1.1.3.6.7, Reasonable Cause Penalty Relief Request Prior to Penalty Assessment, for further guidance.

  14. Additional penalty information:

    If ... Then ...
    A Federal Tax Deposit was applied to a different period than the taxpayer designated Deposits can be moved as indicated in the designation.

    Note:

    Oral statement ceiling does not apply.

    Administrative Waivers are granted by the Service for the benefit of the taxpayer, the Service, or both. Penalties can be abated if the criteria given in the waiver apply.
    Daily Delinquency Penalty

    Note:

    DDP for Employee Plan (EP) Returns and Form 8955-SSA is listed below.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Daily Delinquency Penalty for Employee Plan (EP) Returns and Form 8955-SSA ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    The oral statement ceiling is exceeded See IRM 20.1.1.3.6.4, Oral Statement Ceiling Exceeded.
    Penalty was caused by service error Abate the penalty. Oral statement ceiling does not apply.
Partnership Penalty
  1. When a partner requests abatement of a partnership penalty for failure to file Form 1065, U.S. Return of Partnership Income, see IRM 20.1.2.3, Failure to File a Partnership Return - IRC 6698, and also refer to IRM 20.1.2.3.3, Penalty Relief and IRM 21.7.4.4.2.7, Partnership Penalties.

Interest Explanation

  1. IRM 20.2, Interest, provides detailed interest instructions. Interest is mandatory unless there is a legal exception. Read and become familiar with the IRM 20.2, and use this IRM following the general interest procedures when answering telephone calls and related interest questions.

  2. IDRS Command Code (CC) PICRD can be used to explain credit interest to the taxpayer. CC PICRD provides a computation display of any computer generated interest (TC 776) allowed on the refund.

  3. Penalty and Interest Explanation can be provided through IDRS CC PINEX. A PINEX explains how credit and debit interest was computed on an IMF account. CC FTDPN, is used to explain the Failure to Deposit (FTD) penalty.

Ministerial/Managerial Interest Abatement
  1. The taxpayer may request abatement of interest due to an error or delay in the performance of a ministerial or managerial act. Additional details can be found in IRM 20.2.7.4, IRC 6404(e)(1), Unreasonable Error or Delay in Performing a Ministerial or Managerial Act.

  2. Requests for interest abatement received via phone cannot be accepted. Advise the taxpayer to submit the request in writing. Send the taxpayer Form 843, Claim for Refund and Request for Abatement, to request the interest abatement.

    Note:

    This does not include inquiries concerning the computation of interest or restricted interest. See IRM 20.2, Interest, for calculation information and any necessary explanation to the taxpayer.

  3. When a Form 843 requesting interest abatement is received:

    1. If TC 971 AC 660 is not present, input using the received date of the Form 843 in the transaction date field. This TC 971 will document the receipt of the interest abatement claim.

      Note:

      The TC 971 AC 660 is only for use with Form 843 abatement claims.

    2. Forward the request to the Interest Abatement Coordinator (IAC) where the alleged delay/error occurred. Refer to IRM 5.1.15.16.3, Interest Abatement, for additional information on items that need to be attached. Contact information for the IACs is provided on the IAC Coor List.

      Example:

      If the request concerns an interest assessment made with an audit (TC 30X), close the case to Examination using activity code "2EXAM-IAC" .

      Example:

      If the request concerns an interest assessment made with an ordinary adjustment (TC 29X), treat as a technical question using activity code "2EXAM-IAC" . See IRM 21.5.3.4.7.2.1, Examination Technical Assistance Request.

      Example:

      If the request concerns an interest assessment made with an ASFR adjustment, close the case to Collection using activity code "2COLL-IAC" .

      Example:

      If the request concerns additional interest assessed due to an incorrect payoff, identify the area responsible for the incorrect payoff and forward to the appropriate IAC. Close the case with the appropriate activity code (e.g., 2-AM-IAC, 2EXAM-IAC, 2COLL-IAC)

    3. If processing the case where received, refer the case to your local IAC.

  4. If any request referred as a technical question is returned, follow the Examination determination to abate or not to abate. Examination will provide the reason not to abate.

Assessments or Refunds Over ≡ ≡ ≡ ≡ ≡ ≡

  1. Copies of all supporting documentation for each case with an assessment over ≡ ≡ ≡ ≡ ≡ where the taxpayer did not full pay in advance must be sent to:

    Internal Revenue Service
    CFO, Revenue Transactional Analysis Section
    Kansas City Campus
    ATTN: Chief, Revenue Transactional Analysis Section
    Stop S-2 1035
    333 W. Pershing Rd.
    Kansas City, MO 64108

  2. Refunds of ≡ ≡ ≡ ≡ ≡ ≡ ≡ dollars or more will not systemically generate (TC 846). A manual refund must be prepared with a Form 3753, Manual Refund Posting Voucher. Procedures are included in IRM 21.4.4.4.2, Preparation of the Form 3753, Manual Refund Posting Voucher. If the taxpayer included a Form 8302, Electronic Deposit of Tax Refund of $1 Million or More, refer to IRM 3.17.79.3.10.1, Form 8302, Electronic Deposit of Tax Refund of $1 Million or More.

    Note:

    An X- freeze is set when the module credit is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or more. Once this freeze is set, a manual refund is required, regardless of any account actions that may change the credit balance.

Form 8485, Assessment Adjustment Case Record— Purpose and Preparation

  1. The Form 8485, Assessment Adjustment Case Record, is the worksheet used by employees to record actions taken on taxpayer accounts. The case may be from taxpayer inquiries or in house transcripts. Employees may use other forms, notices, or transcripts to record information as noted in specific procedures.

  2. Prepare Form 8485 -- Required entries include Fields 1 through 4,17, and 18 and the following unnumbered boxes at the top of the form:

    • The name of the tax examiner

    • Employee number

    • Blocking series

  3. All other fields are used as applicable:

    • Section II is used to record secondary transaction codes.

    • Section III and IV are used to record the appropriate credit or item reference numbers.

    Note:

    When a TC 340 or TC 341 is on the account, the interest-to-date is entered at the center of the bottom margin.

Reinstating Retention Register Accounts

  1. Modules removed from the MF to Retention Register can be re-established by inputting command code (CC) IMFOLB for IMF or CC BMFOLB for BMF. For additional information, see IRM 21.2.2.5, Retention Register Research, and IRM 3.17.21.8, Reestablishment of Retention Register Accounts.

Retention Register, Penalty Computation Effect

  1. Freezes "G" and "I" are set on the module when it is restored from the Retention Register. This restricts the MF from computing FTP penalty and Interest.

    If ... And ... Then ...
    Your action makes a module balance due the case indicates imminent assessment or collection statute expiration 1. FTP and interest must be assessed within ten years from the assessment date of the unpaid tax.
    2. Refer to the Statute Function
  2. Assess the penalty and interest when appropriate.

    If ... And ... Then ...
    A TC 150 is posted on the restored module 1. Input Command Code (CC) REQ54 to assess the correct amount of interest, use TC 340.
    2. Refer to IRM 20.2, Interest, for detailed information.
    The restored module does not contain a TC 150 a return is input to generate a TC 150 1. Monitor the account until the TC 150 posts.
    2. Request Notice Review to pull, correct, and mail the MF notice in the cycle to show the assessed interest and penalties.
    3. Refer to IRM 20.2, Interest, and IRM 20.1, Penalty Handbook, for additional procedures.
    4. Input of adjusting entries to credit adjustment codes on Retention Register modules, is unnecessary.

Rules on Hold Codes (HC)

  1. Use caution when inputting hold codes (HC). Some rules to remember are:

    1. Do not hold notices for taxpayers entitled to refunds unless specifically excluded by separate IRM instructions. Write or call the taxpayer to clarify the notice, if necessary.

    2. Transfer any credit in which disposition cannot be determined to Unidentified or Excess Collections, whichever is appropriate.

    3. Ensure that action is taken to bring the module to an even/balance due condition.

    4. Use HC "0" if no other HC is appropriate.


  2. The HC field on the Command Code ADJ54 screen is a required entry. If the adjustment does not otherwise require a HC, input a HC zero (0). For additional information, see Hold Codes, in Document 6209, Master File Codes.

    Note:

    A CP 21A/CP 22A is not issued if the account balance is zero and an adjustment (command code ADJ54) for TC 290.00 is input with ONLY item reference numbers (IRN) changing numerical data - NOT TAX (e.g., IRN 886, 887, 888, 889, 892, 895, 896. etc.). However, a CP 21A/CP 22A WILL be issued if the account was in balance due status before the adjustment was input. If hold code 3 was used, correspondence must be sent to the taxpayer if a letter was required and a notice was held.

Priority Codes (PC)

  1. Use Priority Codes (PC) to post adjustments (Doc Code 47 or 54) to the MF when certain account conditions exist. For additional information, refer to Priority Codes, in Document 6209, Master File Codes.

Posting Delay Code (PDC)

  1. A Posting Delay Code (PDC) range of one (1) to six (6) will make some transactions post later than others when multiple transactions are required to adjust an account. See IRM 21.5.8, Credit Transfers, for the instructions from 1 to 6 cycles, when inputting credit transfers.

    Note:

    Input transactions will not post to MF until the indicated number of cycles (with respect to the first transaction to be posted) have expired.

  2. PDCs are applicable for IMF, BMF, and IRAF transactions in the following IDRS programs:

    • ADJ54 (Doc. Code 54)

    • INCHG, BNCHG, EOCHG (Doc. Codes 53, 63, 80, and 81)

    • FRM77 (Doc. Code 77 and 78)

  3. The PDC is not posted with the transaction or shown with the IDRS pending transaction. The pending (PN) MF posting cycle on the IDRS status transaction is extended to account for the PDCs.

Credit Reference Numbers (CRN), Abstract Codes, and
Item Reference Numbers (IRN)

  1. Use specific functional chapters for instructions on when and how to input numbers for specific types of adjustments. For a detailed listing, refer to Item Adjustment Codes and Credit Reference Numbers, in Document 6209, IRS Processing Codes and Information.

CRNs and IRNs for Forms and MFTs
  1. On Form 1120S, U.S. Income Tax Return for an S Corporation, the IRN 886, Taxable Income is called "Ordinary Income/Loss Amount."

  2. Refer to Form 720, Quarterly Federal Excise Tax Return, for definitions of the Abstract Numbers valid for MFT 03.

  3. For Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC, the sum of IRNs 151, 152, 153, 154,182, and 183 must equal the TC 29X amount.

  4. For Form 941, Employer’s QUARTERLY Federal Tax Return, and Form 944, Employer’s ANNUAL Federal Tax Return, refer to IRM 21.7.2.4.1, Item Reference Numbers (IRNs)and Credit Reference Numbers (CRNs) — Employment Taxes. For adjusting Form 943, Employer’s Annual Tax Return for Agricultural Employees, see (3) and (4) in IRM 21.7.2.4.8.3. For adjusting Form 945, Annual Return of Withheld Federal Income Tax, see IRM 21.7.2.4.10(6).

    Exception:

    If the TC 150 does not equal the posted IRNs on TXMODA, see IRM 21.7.2.4.1.4, IRNs Do Not Equal TC 150.

  5. Instructions for Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, IRN Codes:

    1. Input a "W" followed by a State code for adjustments resulting in a change in wages. A State code is the official postal service state abbreviation.

      Example:

      "WCA" is a wage adjustment for the state of California.

    2. Up to 53 different state codes can be used with the IRN code "W" . This IRN code adjusts the taxable wage amount in the MF and generates a credit reduction if the state and tax year indicate a reduction.

    3. A state code following a "T" is the portion of the tax increase or decrease attributable to the tax change for each state involved.

      Example:

      "TCA" is a tax adjustment for the state of California.

  6. For adjustments on the IRAF (MFT 29), the sum of the Abstract Codes 160,162,194, 195, 233, 235, 236, and 237 must equal the TC 29X amount.

  7. Adjustments involving the input of IRN 221 or 222 require the input of a TC 34X.

  8. For MFT 30, the CRN 334 is required when Reason Code (RC) 015 is input.

  9. IRNs 079 and 999 must be used with a reference amount of zero. The reference amounts for IRN 887 do not reflect dollars and cents and cannot be greater than an amount input in an "nn" format.

    Caution:

    Prior to January 1989, age and blindness are included in the total exemptions on MCC Transcripts, and CP Notices. See the Command Code "TXMOD" display before making IRN 887 adjustments.

    Note:

    Oral statement is acceptable for item reference numbers, but the reason for the request must be considered first. The IRM 21.1.3.20, Oral Statement Authority, outlines the authorities. If your situation does not meet these guidelines, then the request for adjustment must be in writing.

Verifying Complete Adjustments

  1. Address all issues before closing the case. For telephone contacts, if collection issues are involved, follow instructions in IRM 21.3.12, Accounts Management Balance Due Telephone Contacts, to collect any balance due or see IRM 5.19.2, Individual Master File (IMF) Return Delinquency, to secure missing returns. For correspondence, if collection issues are involved, follow procedures in IRM 21.3.3, Incoming and Outgoing Correspondence/Letters. Check all correspondence from the taxpayer, verifying that all necessary adjustments have been made and the taxpayer’s issue is settled.

    1. Input manual adjustments to penalties and interest only when required. IDRS will generate penalty and interest increases/decreases for most adjustments.

    2. Explain penalties or interest to the taxpayer.

    3. Inform the taxpayer of the date used to compute any balance due.

    4. Include any penalty and interest accruals when computing the balance due.

    Note:

    The word case pertains to the type of inquiry received. Taxpayer initiated contacts by telephone require resolution of ALL account issues. Taxpayer initiated contacts by correspondence require resolution of issues raised by taxpayers in their inquiries. If it becomes necessary to call the taxpayer in order to resolve an issue addressed in the correspondence, then the employee should address any additional issue(s) raised by the taxpayer during the call.

  2. Do not request the original return(s) if sufficient information is available to verify the request for adjustment.

  3. Take any of the following actions as necessary:

    1. Obtain additional information from the taxpayer.

    2. Request returns from Files or order transcripts.

    3. Research IDRS or other applicable systems (e.g., Correspondence Imaging System).

    4. Research IRS publications.

    5. Research the Internal Revenue Code.

    6. Research other IRMs, etc.

    7. Obtain technical assistance, if appropriate.

  4. Do not refer a case to another campus or call site, unless an IRM specifically instructs you to do so. Generally, the call site receiving the contact works the case.

  5. Close your control base when the case is resolved.

    Note:

    If all case actions have been completed and you are monitoring the account to ensure proper posting, close the case and establish a monitor base on IDRS using category code "MISC" with the current date as a received date.

CP 21/CP 22 – Source Codes (SC) and Reason Codes (RC) (3 numeric positions)

  1. The taxpayer is issued an adjustment notice when IRS takes action on the taxpayer’s account. The notice (CP 21A or CP 22A) is sent with an explanation of the action.

    Note:

    A CP 21A/CP 22A is not issued if the account balance is zero and an adjustment (command code (CC) ADJ54) for TC 290.00 is input with ONLY item reference numbers (IRNs) changing numerical data - NOT TAX (e.g., IRN 886, 887, 888, 889, 892, 895, 896, etc.,). However a CP 21A or CP 22A Will be issued if the account was in balance due status before the adjustment was input. If hold code 3 was used, correspondence must be sent to the taxpayer if a letter was required and a notice was held.

  2. See IRM 21.6.7.4.1, Source and Reason Codes – CP 21A/22A Notices, for additional details. Document 6209, IRS Processing Codes and Information, provides the specific language generated by the Source Codes and Reason Codes.

Individual Master File (IMF) Action for Command Code ADJ54

  1. Enter a source code (SC) and at least one reason code (RC) on command code (CC) ADJ54 when inputting:

    1. TC 290 for an amount with or without a secondary transaction and/or credit/item reference numbers.

    2. TC 290 for zero with a secondary transaction and/or credit/item reference numbers.

    3. TC 290 for zero to disallow a claim.

  2. The new Correspondence Imaging System (CIS) Indicator is now located on IDRS on the lower left hand side of the ADJ54 screen. When this indicator is present, there is a case open on CIS. Before taking any action you should check with the employee or unit with the open control.

Blocking Series (BS)

  1. Blocking series are used to indicate the nature of an adjustment. Refer to Adjustment Blocking Series, in Document 6209, IRS Processing Codes and Information, for a list of the blocking series used on account adjustments.

IMF Blocking Series 99 Special Consideration
  1. The original return is not in the case file if you see the following:

    • Reason Code 097, and

    • Blocking Series 99

  2. Blocking series 99 with reason code 097 is used with Innocent Spouse Relief and Separation of Liability and Equitable Relief cases. This action avoids the issuance of CP 55, Notice to Refile Return, when the tax period is more than 10 years old. The original return has been destroyed.

Reprocessing Returns/Documents

  1. The procedures in this section are for reprocessing documents after the return posted to an incorrect account, TIN, or tax period. Carefully read and follow all pertinent procedures in this process before obtaining the original return for reprocessing to the correct tax account(s). This may include recapturing an erroneous refund. Refer to IRM 21.4.5, Erroneous Refunds. The return(s) may be for current or prior years and may involve statutes or be subject to a penalty assessment. If unable to secure the return for reprocessing, see IRM 21.5.2.4.23.11, Reprocessing "Dummy" Returns.

    Note:

    If a return has never been processed (e.g., has not posted to another year or TIN), attach a Form 1725, Routing Slip, or local routing slip, and forward the return as received to Submission Processing. Ensure the IRS received date is entered on the return. If a Correspondence Imaging System (CIS) image is used and the return is signed, use the stamp edit tool on CIS and notate, "CIS IMAGE - Do not correspond for signature" on the return. Submission Processing will correspond for any missing information on these returns. Refer to IRM 21.5.1.5.5, Processing/Reprocessing CIS Tax Returns, for additional information regarding CIS returns.

  2. If you identify an IMF return that must be reprocessed while staffing the AM toll-free telephone lines, first address any other actions needed and then prepare Form 4442, Inquiry Referral or e-4442. You must also advise the taxpayer that they will receive a contact within 30 days. Forward the completed Form 4442 or e-4442 to the campus AM paper function within your directorate (unless IRM specific procedures apply). If your campus AM paper function no longer has Submission Processing, forward the Form 4442 or e-4442 as indicated below:

    • Andover – forward the Form to Fresno

    • Atlanta - forward the Form to Kansas City

    • Brookhaven – forward the Form to Fresno

    • Memphis – forward the Form to Fresno

    • Philadelphia – forward the Form to Kansas City

    Note:

    If you identify a BMF return that must be reprocessed while staffing the AM toll-free telephone lines, refer to IRM 21.7.1.4.4.1, Toll-free Calls when Return Needed.

    Exception:

    For mixed entities, follow the procedures in IRM 25.23.4.11, Mixed Entity Procedures, and for scrambled SSN cases, see IRM 21.6.2.4.2, Scrambled SSN Case Procedures.

  3. Any returns involving taxes or payments of $1 billion or more requires special processing and should be forwarded to the Philadelphia Campus, Attention TPR 503 - Drop Point - 3-L08.154. For additional information, refer to IRM 21.7.12.6.4, Procedures for Individual Taxpayer NMF Accounts Of $1 Billion or More - Overview.

  4. When a return unposts or posts to an incorrect account, it must be reprocessed to the correct account. If a refund was incorrectly issued from the account, refer to IRM 21.5.2.4.23.10, Moving Refunds, and IRM 21.4.5, Erroneous Refunds.

    Reminder:

    Check all related accounts (e.g., secondary TINs and receiving account) prior to reprocessing the return or moving any refunds.

  5. The items listed below must be properly corrected to avoid the UNPROCESSABLE CONDITIONS identified during original processing. If the unprocessable condition remains, the return is sent back to the employee that corrected it for reprocessing. Therefore, check each item below prior to releasing the return to Submission Processing.

    • Canceled DLNs

    • Posting to an incorrect TIN

    • Posting to an incorrect tax period

  6. When editing the return is complete, forward to the Batching function for reprocessing as an original return. If the return fails to post, it is returned to the employee that submitted the document for reprocessing.

    Reminder:

    Carefully prepare the returns for reprocessing. Ensure you follow the editing procedures and enter all edit marks in the correct area on the return. Double check before sending the return to Batching for reprocessing.

    Note:

    Clear IMF re-input and reprocessable statute imminent documents through the local Statute Unit prior to following procedures in IRM 21.3.3.3.5, Submission Processing Consolidation (Rampdown). When forwarding a statute imminent return, notate on the routing slip the received date of the case that created the need for reprocessing the document (e.g., 2005 -2012 needs reprocessing – part of Mixed Entity DUPF with received date MM/DD/YYYY).

  7. Control each return or block of reprocessable documents re-entered through the Batching function, using one Form 3893, Re-Entry Document Control, for IMF cases or a Form 13596, Reprocessing Returns, for BMF. These forms must be complete and placed on the top of the documents being reprocessed. See Exhibit 21.5.2-1., Preparing Form 3893, Re-Entry Document Control, and Exhibit 21.5.2-2, Preparing Form 13596 – Reprocessing Returns, for complete instructions on preparing these forms.

    Note:

    Use one Form 3893 for several documents from the same block unless some of the documents are not reprocessable.

  8. When reprocessing previously input documents:

    If ... Then ...
    Module contains a TC 150 Do not reprocess a return to that module.
    Module contains Document Codes 51 or 54 Do not reprocess a return to that module.
    Return or document did not post. Re-enter as a Reinput document.
    Return or document unposted. Re-enter as a Nullified Unpostable document.
  9. BMF only – FTD penalties must be considered carefully before the following returns are reprocessed:

    • Form 941, Employer’s QUARTERLY Federal Tax Return

    • Form 943, Employer's Annual Federal Tax Return for Agricultural Employees

    • Form 944, Employer's ANNUAL Federal Tax Return

    • Form 945, Annual Return of Withheld Federal Income Tax

    • Form 940, Employer’ s Annual Federal Unemployment (FUTA) Tax Return

    Refer to IRM 20.1, Penalty Handbook, for additional information.

Reprocessing Electronic Returns
  1. Prints of electronic returns can be reprocessed to a different account.

  2. Requesting graphic prints of IMF and BMF returns filed electronically through Modernized e-File (MeF) is available through the Return Request Display (RRD) via Employee User Portal (EUP) and command code (CC) TRPRT. Refer to IRM 21.2.4.3.23, Electronic Returns, and IRM 21.6.6.3.26(3), Electronic Filing System (e-file), for additional information on e-file. The TRPRT graphic is available regardless of where the return was filed. Additional information on Command Code TRPRT is located in IRM 21.2.2.4.4.6, TRDB CC TRPRT (Tax Return Print) Input.

    Note:

    Many BMF returns are also available through the Employee User Portal (EUP) as part of the Modernized e-File (MeF). Please refer to IRM 21.2.1.22, Modernized e-file (MeF/TRDB), and to IRM 3.42.4.2.1, Modernized e-File (MeF) Programs, for additional information.

  3. The TRPRT print is not considered the original return and will be labeled "TRPRT PRINT DO NOT PROCESS" . However, the TRPRT print will be utilized to reprocess an electronic return.

  4. Line through the "TRPRT PRINT DO NOT PROCESS" prior to forwarding the print for reprocessing. Additional editing information can be found in IRM 21.5.2.4.23.7, Coding and Editing Procedures.

  5. If the TC 976 is a MEF partnership return (DLN begins with 93) with 100 partners or more see IRM 21.7.9.4.10.1,TC 976 Return Intended as Original, for additional information.

    Note:

    Refer to IRM 21.6.6.3.26, Electronic Filing System (e-file), for information regarding electronically filed returns.


Amended or Subsequent Return
  1. When processing amended or subsequent returns, the following items must be completed to process the return as an original return:

    If ... Then ...
    Form 1040X, Amended U.S. Individual Income Tax Return The return must be signed, forms and supporting schedules must be attached, and dependents must be listed.
    Form 1040X has the same information in column A and column C

    Note:

    The 2009 version of Form 1040X will only contain the taxpayer's corrected figures.

    The information must be transferred to the Form 1040 or Form 6114, Prior Year and Conversion Form 1040 Edit Sheet.
    Form 1040X has only column C completed

    Note:

    The 2009 version of Form 1040X will only contain the taxpayer's corrected figures.

    The information must be transferred to the Form 1040 or Form 6114, Prior Year and Conversion Form 1040 Edit Sheet.
    Copy B of Form W-2, Wage and Income Tax Statement is attached The return must be signed, forms and supporting schedules must be attached, and dependents must be listed.

    Note:

    The above Form 1040X, Amended U.S. Individual Income Tax Return, conditions apply only when the amended return is the only return filed and is being reprocessed as the taxpayer's original return. Prior to converting the amended return to an original return, complete a thorough search for the original return under any related or invalid TINs.

  2. To prepare the document for transcription, transfer the following information onto the current Form 1040, U.S. Individual Income Tax Return, or Form 6114, Prior Year and Conversion Form 1040 Edit Sheet, and attach all current schedules behind the Form 1040.

    1. If valid, transfer the DLN from the Form 1040X to Form 1040 and line through the DLN on the Form 1040X. Refer to IRM 21.5.2.4.23.3, DLNs Used for Reprocessing Documents, to determine if the DLN is valid or if a new DLN is required.

    2. Recopy the DLNs.

      Note:

      Some campuses color-code DLNs. If the year is present on Form 1040X, recopy the DLN using the color according to local procedures. If the year is not present on Form 1040X, recopy the DLNs using the correct color. Refer to Exhibit 21.5.2-1, Preparing Form 3893, Re-Entry Document Control.

    3. Enter positive income not supported by a schedule or Form W-2 on the OTHER INCOME line of the prepared Form 1040.

    4. Withholding amounts of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ do not need verification.

    5. If a separate to joint return is being processed as the original, verification of the withholding previously allowed on the account being backed out is not needed. The Form 3893 should indicate in the Remarks area: "Withholding of $XXXX allowed from separate return."

    6. Staple the Form 1040X and all necessary forms to the back of the Form 1040.

    7. Edit the correct tax period ending at the top of Form 1040.

    8. To freeze refunds of any credits holding on the module, enter Computer Condition Code (CCC) 3 on the reprocessable return. See IRM 21.6.7.4.2, Amended Return – No Original – TRNS29 (Amended Return Posts to an Account With No Original Return Present).

    Note:

    To obtain a copy of the Form 6114, see Catalog Number 27910P.

  3. Transfer information on returns filed on mag-tape to the appropriate form for processing to the correct EIN and Tax Period. A photocopy or printout of mag-tape return must be attached behind the form as backup (with DLN voided.)

  4. When reprocessing employment tax forms, see IRM 20.1, Penalty Handbook, for instruction on possible manual adjustments to deposit penalties and "J" coding of return.

DLNs Used for Reprocessing Documents
  1. When reprocessing a document, use the original document locator number (DLN) whenever possible.

    Exception:

    All BMF returns being reprocessed will receive a new DLN. The original DLN should be lined through as outlined in IRM 21.5.2.4.23.7, Coding and Editing Procedures.

  2. If the original DLN is canceled, but is correct for the type of document to be reprocessed, it can be reused. Erase any line through on the number. If the DLN is still not legible, rewrite the same DLN above the original and include the list year digit.

  3. In certain instances, the original DLN is not valid for reprocessing. With a single stroke, line through the DLN (also applies to Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, if electronically filed) and properly edit the return if:

    1. The original DLN is incorrect for the type of document to be reprocessed. See IRM 3.10.73.8, Assignment of Document Locator Number (DLN), and applicable subsections for more information on when a new DLN should be requested.

      Example:

      You are reprocessing a Form 1040X, Amended U.S. Individual Income Tax Return, as the original return. A Form 1040 is prepared to reprocess the information on the Form 1040X. The DLN for the Form 1040X is now invalid to reprocess the Form 1040. A new DLN must be requested.

    2. The document was originally processed in another campus or with a DLN now reserved for another campus.

    3. The document is an early filed tax return and was processed to the incorrect year.

    4. The Document Code is 47, 51, or 54.

    5. The document is an electronically filed return.

  4. Documents to be reprocessed are input as non-remittance. If a payment was received with the original document, follow IRM 21.5.8, Credit Transfers.

Statute Imminent Documents
  1. Refer any reprocessable return for which the assessment statute expiration date (ASED) has expired or is imminent, to the Statute Unit. Do not use Form 3893, Re-Entry Document Control, or Form 13596, Reprocessing Returns, to reinput returns when the statute for assessing tax expires within six months. Do not abate tax on the incorrect module before referring the case to the Statute Function.

    Note:

    For specific reprocessing conditions applicable to Mixed Entity/Scrambled cases, see IRM 25.23.4.15.4, Determining When Specific Year Account Information Must Be Moved, and the applicable subsections.

  2. When forwarding a statute imminent return, notate on the routing slip the received date of the case that created the need for reprocessing the document (e.g., 2005 needs reprocessing – part of Mixed Entity DUPF with received date MM/DD/YYYY).

  3. See IRM 25.6, Statute of Limitations, and Document 7368, Basic Guide for Processing Statute Cases. IRM 25.6 contains Assessment Statute Expiration Date (ASED), Refund Statute Expiration Date (RSED), and Collection Statute Expiration Date (CSED) procedures.

    Note:

    Clear BMF reinput and reprocessable statute imminent documents through the local Statute Unit prior to following transhipping procedures.

    Note:

    Clear IMF re-input and reprocessable statute imminent documents through the local Statute Unit prior to following procedures in IRM 21.3.3.3.5, Submission Processing Consolidation (Rampdown). When forwarding a statute imminent return, notate on the routing slip the received date of the case that created the need for reprocessing the document (e.g., 2005 needs reprocessing – part of Mixed Entity DUPF with received date MM/DD/YYYY).

Accounts With Audit Activity
  1. When a return has a renumbered Document Code 47 and is processed to an incorrect TIN or tax period, take the following action:

    1. Secure the return and Form 5344, Examination Closing Record, from Files.

    2. Input the necessary adjustments to the tax module and prepare the appropriate reprocessing form to reprocess the return using the original DLN on the return. Form 3893, Re-Entry Document Control, is used for reprocessing an IMF return and Form 13596, Reprocessing Returns, is utilized for a BMF return. Refer to Exhibit 21.5.2-1, Preparing Form 3893, Re-Entry Document Control and Exhibit 21.5.2-2, Preparing Form 13596 – Reprocessing Returns for additional information on these forms. If the return is within 6 months of the ASED, follow IRM 21.5.2.4.23.4, Statute Imminent Documents.

    3. Forward the Form 5344 to Examination Classification to determine if the audit adjustment is valid on the new module.

  2. To forward the Form 5344 to Examination Classification:

    1. Use the Form 1725, Routing Slip, and indicate the correct TIN or tax period.

    2. State the incorrect TIN or tax period is zeroed or adjusted, as applicable.

    3. The case is to remain controlled to Accounts Management until selected by Examination.

    Note:

    It is your responsibility to follow-up with Examination on all cases you refer to them. If the case is not returned in five work days, you should contact the Exam person that signed for your case.

  3. If the case is not selected by Examination, forward the Form 5344 to the Automated Non-MF Accounting Function to correct the audit assessment and retain the 23C date.

  4. Exam should return the referred case to Accounts Management within five (5) work days. If the case is not returned, follow-up with Examination to secure the case.

Discriminate Index Function ((DIF) SCORE or CLASSIFICATION "Send Return(s) to Examination for Review"
  1. The Discriminate Information Function (DIF) score is a formula used by the IRS to select returns for review.

  2. If the return is not processed as an original, it has bypassed DIF scoring.

  3. Returns that bypassed DIF scoring should be forwarded to Examination for classification in the following instances:

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    See IRM 4.19.17, Non-Filer Program, for tolerance information before sending Substitute for Return (SFR) reconsiderations to Examination.

  4. After adjusting the account, route the returns to Examination classification when the returns have bypassed DIF scoring and meet the criteria above. Use priority code 1 unless Item Reference Number (IRN) 871 is required. If IRN 871 is required, use priority code 2. See IRM 20.1.2.1.6.3, Wrong Return Posted First. Do not use a hold code unless required to issue a manual refund or separate IRM instructions specifically provides guidance on input of hold code.

    Note:

    If using the CAT-A referral process through CIS, adjust the account and refer to CAT-A using suspense reason HQ Reserved 6. Use priority code 1 unless Item IRN 871 is required. If IRN 871 is required, use priority code 2. See IRM 20.1.2.1.6.3, Wrong Return Posted First. Do not use a hold code unless required to issue a manual refund or separate IRM instructions provide guidance.

    Exception:

    All International Identity Theft (IDT) cases will be referred to Exam using CAT-A referral reason "MRTCLMS" instead of HQ Reserved 6.

    Note:

    Do not input TC 971 AC 013 when "selected" by examination.

  5. SFR and ASFR are forwarded to the Examination and Collection functions.

    Exception:

    Section 6020(b) returns should be handled by reviewing IRM 21.5.3.4.10, Returns Prepared Under IRC Section 6020(b).

Coding and Editing Procedures
  1. A return must be complete before being sent for reprocessing. A reprocessable return has already been through Submission Processing initially and will typically be complete. However, if the return is missing information (e.g., signatures, schedules, forms) and correspondence has not previously been sent for the missing information, follow the steps below prior to forwarding the return for reprocessing.

    1. Telephone or correspond for the missing information.

      Reminder:

      Check the Correspondence Imaging System (CIS) for related cases. Any missing information, such as schedules, may be located on another CIS case.

    2. Suspend the case for 40 days (70 days for overseas taxpayers).

    3. If the missing information is received, complete the necessary edits and forward for reprocessing.

    4. If the missing information is not received, complete the necessary edits and enter any applicable Computer Condition Codes (CCC) prior to forwarding for reprocessing. Enter "Reprocessable" on the top of the return prior to forwarding the return. Refer to Section 3.5 of the Document 6209, for a listing of the different CCCs.

      Note:

      CCC "3" is used to freeze overpayments on IMF returns when the necessary signatures are missing. CCC "3" is also used to prevent credit interest on BMF returns. Incomplete IMF returns should also be coded with CCC "U" to prevent the generation of credit interest.

  2. Edit all BMF tax returns in green. Edit all other returns in red.

    Note:

    When reprocessing a CIS return, edits may be made electronically prior to forwarding to Submission Processing. Refer to IRM 21.5.1.5.5, Processing/Reprocessing CIS Tax Returns.

  3. When reprocessing a BMF return:

    1. Attach a completed Form 13596, Reprocessing Returns. Refer to Exhibit 21.5.2-2, Preparing Form 13596, Reprocessing Returns, for additional editing information.

      Note:

      If a return has never been processed (e.g., has not posted to another year or TIN), attach a Form 1725,Routing Slip, or other local routing slip, and forward the return as received to Submission Processing. Ensure the IRS received date is entered on the return. If a Correspondence Imaging System (CIS) image is used and the return is signed, use the stamp tool or Text tool in the CIS Document Viewer in CIS and notate, "CIS IMAGE - Do not correspond for signature" on the return and place the CIS case ID in the upper left corner of the return. Submission Processing will correspond for any missing information on these returns. Refer to IRM 21.5.1.5.5, Processing/Reprocessing CIS Tax Returns, for additional information regarding CIS returns.

    2. If the return was "G" coded, circle out the "G" code.

    3. Edit the received date, if necessary. A received date must be present on all reprocessed returns.

      Note:

      If a stamped date is lacking, handwrite the date (based on envelope stamp date, DLN, etc.,) in the middle of the return. State IRS Receive Date above the date written.

    4. Circle out the paid preparer information on Form 1041, Form 1065, Form 1120, and Form 1120-S if the "No" box is checked; neither box is checked; or both boxes are checked.

      Note:

      Do not circle out the paid preparer information on other Form 1120 series returns.

      Note:

      If the TC 976 is a MEF partnership return (DLN begins with 93) with 100 partners or more, edit the return with Computer Condition Code (CCC) 6 to ensure the Failure to File Electronically penalty is not assessed see IRM 21.7.4.4.2.8.1.1, Large Partnership Penalty for Failing to File Electronically, for more information on this penalty.

    5. Line through the DLN.

      Note:

      Do not block out the DLN as it may be needed for a future reference.

    6. No other edits are required.

    7. Forward to Submission Processing.

  4. When reprocessing an IMF return:

    1. Attach a completed Form 3893, Re-Entry Document Control, to the front of the document. Refer to Exhibit 21.5.2-1, Preparing Form 3893, Re-Entry Document Control.

      Note:

      Form 3893 can only be used for reprocessing a return with a valid DLN, as outlined in IRM 21.5.2.4.23.3, DLNs Used for Reprocessing Documents. If the DLN is not valid, complete all necessary edits and forward to Submission Processing using local routing slip.

      Note:

      If a return has never been processed (e.g, has not posted to another year or TIN), attach a Form 1725, Routing Slip, or local routing slip, and forward the return as received to Submission Processing. Ensure the IRS received date is entered on the return. If a Correspondence Imaging System (CIS) image is used and the return is signed, use the stamp tool or Text tool in the CIS Document Viewer in CIS and notate, CIS IMAGE - Do not correspond for signature on the return and place the CIS case ID in the upper left corner of the return. Submission Processing will correspond for any missing information on these returns. Refer to IRM 21.5.1.5.5, Processing/Reprocessing CIS Tax Returns, for additional information regarding CIS returns.

    2. Remittance – Circle the Remittance Processing System, (RPS) money amount, green rocker, or other remittance indicator to indicate a non-remittance return. Transfer the payment to the correct TIN or Tax Period. See IRM 21.5.7, Payment Tracers, and IRM 21.5.8, Credit Transfers, for additional information.

    3. Presidential Election Campaign – Circle out unless you are processing to a different tax period. See IRM 21.6.7.4.12, Presidential Election Campaign Fund (PECF).

    4. Received Date – Edit only if none present on the document.

      If ... And ... Then ...
      The return is received after the due date of the tax period 1. Enter the received date in the center of page one.
      2. See IRM 21.5.1.4.2.4, Received Date Determination and IRM 25.6.1.6.13, Determining the Received Date, for received date determination requirements.
      Return is timely filed 1. Do not edit the received date.
      2. See Note following this table.
      A numbered return is to be reprocessed was originally a remittance return Edit the received date as the calendar date of the Julian date in the original DLN.
      A numbered return is to be reprocessed was originally a non-remittance return Edit the received date
      as the calendar date of the Julian date in the original DLN minus 10 days.
      NOTE:
      Do not allow the received date to be earlier than the date the taxpayer signed the return.

      Note:

      When reprocessing a return prior to the due date of the tax period to which it posted, do not use the actual received date. Refer to IRM 21.5.1.4.2.4(3) IRM 21.5.1.4.2.4(3), Received Date-Determination. Mark the center of page one with the corrected received date. Also correct the Return Processable Date (RPD) if additional information is secured from the taxpayer. See IRM 21.5.1.4.2.4, Received Date Determination, for more information.

    5. Tax Period – Circle any incorrect tax period. You must always edit the tax period on prior year returns. If the return is for the current year and the tax period is incorrect, edit the tax period. Enter the tax period using a YYYYMM format to the right of the preprinted tax year.

    6. Name, Address, and TIN – Circle any incorrect taxpayer information such as name, address, and/or TIN and enter the correct information above the circle.

    7. Income, Tax, and Credits – Enter the tax information and any credit changes by putting an "X" to the left of the incorrect amounts. The correct amounts are put to the left of the "X" .

      Note:

      Consider previous adjustments to the account when editing the income, tax, and credits. Examples include previous adjustments due to an amended return or math error changes. Adjustments made by Examination will not be edited and must be reprocessed as outlined in IRM 21.5.2.4.23.5, Accounts With Audit Activity.

    8. Preparer and Third Party Designee information – Circle this information on TC 150 returns or when the return posted as a TC 976 because there is already a TC 150.

      Exception:

      Do not circle out Third Party Designee information if reprocessing the return to a different tax year or Taxpayer Identification Number (TIN). The Third Party Designee information may be needed to discuss tax issues at a later time.

    9. Return Processing Code (RPC) and Computer Condition Codes (CCC) – Normally input by the Returns Analysis Function. Document 6209, IRS Processing Codes and Information, explains the Computer Condition Codes and the Return Processing Codes.

    10. Miscellaneous Edits – Any previously edited items no longer desired can be edited by a circle. Circle (edit out) Computer Condition Code (CCC) "G" .

    Reminder:

    Edit all returns carefully using red for IMF returns and green for BMF returns.

IDRS Account Actions
  1. When reprocessing a return as an original, certain account actions are required.

  2. In order to prevent unpostable code 188, a name line for the year being reprocessed or an earlier name line must be established. If the necessary name line does not already exist, establish the name line through Command Code INCHG by inputting the taxpayer's name, filing status, and the year of the return being reprocessed.

  3. Input a Transaction Code (TC) 971, Action Code (AC) 017, on the tax module where the return will post (receiving tax module). The TC 971, AC 017, indicates that the return for the receiving tax module is being reprocessed from another tax period/TIN (losing tax module) and cross references that account. Refer to IRM 21.5.1.4.8, Transaction Code 971, for additional information.

    Note:

    The transaction date for the TC 971, AC 017, is the received date of the return being reprocessed from the losing tax module. Refer to IRM 21.5.1.4.2.4, Received Date – Determination, for additional information on determining received dates.

  4. If a TC 14X is on the IMF module, or if the BMF module shows current status 02 or 03, input a TC 599 with the appropriate closing code for your function. Accounts Management:

    • 094 Taxable return secured

    • 096 Non-Taxable return secured (Return shows no tax liability before prepaid credits)

    See IRM 2.4.26.3, Command Code FRM49, for format and instructions on inputting these transaction codes.

    For additional information see Document 6209, IRS Processing Codes and Information, under the TDI Closing Codes section. Only one TC 599 is required.

  5. Check for an extension of time to file (indicated by a TC 460). Verify that it should be removed and reinput to the correct tax module. Remove and reinput the extension using Command Code (CC) REQ77 with TC 460/462 on the gaining and losing modules, respectively. See IRM 2.4.19, Command Codes REQ77, FRM77 and FRM7A, for format and instructions for inputting a TC 460/462.

    Caution:

    Input of TC 460 using CC REQ77 could prevent MF from using the 90% and 100% paid checks (depending upon the DLN blocking series used) when determining the FTP Start Date. Analyze the module for FTP penalty considerations and adjust the penalty if necessary.

  6. The estimated tax penalty may need addressing on the losing module. Refer to IRM 20.1.3, Estimated Tax Penalties, for information on calculating the estimated tax penalty.

  7. See IRM 21.4.6, Refund Offset, when a refund offset occurred due to non-tax debt (TC 896 or TC 898 on the module).

  8. See IRM 21.4.6.5.7, Reasons to Reverse TOP Offset for additional information when there is a TC 896 or TC 898 on the module.

Moving Assessments
  1. Complete a Form 12810, Account Transfer Request Checklist, to request the assessment be moved from the incorrect module or period to the correct module or period. Include the following information:

    • DLN

    • TIN

    • MFT

    • Tax Period

    • Complete Entity Information

    • Civil Penalty Reference Number (if applicable)

    • Abstract or Reference Number (if applicable)

    • POA

    • MF Transcript of the Account

    • Transaction Codes

    Caution:

    Do not request a complete account transfer if the account includes a transaction code (TC) 606. Refer to IRM 3.17.21.7.1, Processing Account Transfers to the Master File (IMF/BMF), for additional information. For BMF accounts, penalty and interest accruals must first be brought up to date. The originator must either input a TC 290 for zero, with a priority code 5, or a TC 270 and TC 340 for the accrued amount if the account is restricted (G- or -I freeze). This action must be posted to the account before requesting an account transfer. Any BMF requests received that have not had the action taken to restrict the penalty and interest will be rejected back to the originator for resolution. For IMF the originator must either input a TC 290 for zero, with a priority code 5, or a TC 270 and TC 340 for the accrued amount if the account is restricted (G- or -I freeze). This action must be posted to the account before requesting an account transfer.

    Reminder:

    Input the applicable TC 971 codes on the losing and receiving modules.

Moving Refunds
  1. Procedures contained in this subsection must be used to move a refund.

    Note:

    If reprocessing a return and moving a previously issued refund, enter Computer Condition Code (CCC) O (use red if an IMF return and use green if a BMF return) in the filing status portion of the return to prevent a second refund.

  2. A credit transfer should be used instead of Form 12857, Refund Transfer Posting Voucher, to transfer a refund from the incorrect account for IMF and NMF only. This will systematically move the refund without the use of Form 12857. See IRM 21.5.8, Credit Transfers, for additional information.

  3. Use Command Code (CC) ADD48. Input TC 848 to reverse the TC 846 or TC 840, and input TC 849 to debit the account where the refund is being moved. Use the date of the TC 846 or TC 840 for the transaction date for the TC 848 or TC 849. If TC 776 credit interest from the refund is posted on the secondary account, input a TC 772 on the secondary account to reverse the credit interest and input a TC 770 on the primary account to credit the account with the credit interest. Input TC 570 if necessary to hold the credit until the second adjustment posts.

  4. Input TC 470 if necessary to hold balance due notices until the TC 848 posts.

    Note:

    When inputting an adjustment creating a credit and moving refund you MUST use a HC 1 to prevent an erroneous refund while waiting for the TC 849 to post.

  5. If not initiating a credit transfer to reverse the previously issued refund from the incorrect account or moving accounts on BMF, prepare Form 12857, Refund Transfer Posting Voucher.

    Note:

    The use of an IAT Fill Forms tool is mandatory whenever preparing Form 12857 to reverse the previously issued refund from the incorrect account. If moving a refund as part of the erroneous refund process, you can use the fill form option available within the IAT Erroneous Refund tool.

  6. Form 12857 has two parts:

    • Part A will list the information relative to the account the refund needs to be posted "To"

    • Part B will have the information relative to the account where the TC 840/846 is currently posted and being transferred "From"

      Note:

      For assistance in completing Form 12857, please see Austin AM web site for more information Preparing Form 12857

      .

  7. In addition to any other necessary remarks, include the split refund code (SPL-REF-CD on TXMOD) in box 9 of the Form 12857. The split refund code is needed to avoid unpostable code 138.

  8. Form 3809, Miscellaneous Adjustment Voucher and Form 3753, Manual Refund Posting Voucher, can be used in lieu of Form 12857. It is recommended to use Form 12857.

  9. Send Form 12857 to the Accounting function to initiate the manual process of posting the TC 840/841 using Form 3210, Document Transmittal.

    Note:

    For ID Theft cases, please annotate the remarks section of Form 3210 with "ID Theft - please expedite." Please include IDRS prints showing the refund that is being moved and a print showing that the module for the "to" side is established.

    Note:

    For Manual Refund Team Contact Information (Accounting Function), please see Exhibit 21.4.4-3, Accounting Function - Manual Refund Team Contact Information.

  10. Input TC 470 to hold balance due notices until the TC 840/841 post. When the TC 840/841 posts, the account will balance. Input TC 971 (action code 030) on both accounts to cross reference the TC 840/841 refund reversal. Use the transaction date of the TC 846.

    Note:

    Form 12857 is processed manually. The TC 840 and TC 841 may take 6-8 weeks to post to master file.

    Reminder:

    If an incorrect account number is referenced on TC 971 AC 030, please enter a new TC 971 AC 030 with the cross reference account number.

Reprocessing "Dummy" Returns
  1. You may be unable to secure a copy of a return needed for reprocessing. Available command codes, such as RTVUE/BRTVU or TRDBV, may provide sufficient information to recreate the return. If enough information is available, a "dummy" return can be completed and forwarded to Submission Processing for posting to the correct account.

    Note:

    Do not request the return from files. If the return is available on AMS, you can print and process the return.

    Note:

    If you are in contact with the taxpayer, request a faxed copy of the needed return or if you receive a copy of the return with a correspondence case. This faxed/correspondence copy may be reprocessed by following the applicable steps outlined below. The return information from the faxed returns does not have to be transferred to a new form.

  2. Prepare the "dummy" return for reprocessing as follows:

    1. Complete a tax return using the available information from the applicable command codes.

      Reminder:

      Ensure the tax return being completed is the same as the document submitted by the taxpayer – e.g., if the document submitted was a Form 1040EZ, use a Form 1040EZ for creating the "dummy" return. Do not use a Form 1040.

    2. Write the DLN from the document you could not secure across the top right hand corner of the "dummy" return.

      Exception:

      Some returns will require a new DLN. See IRM 21.5.2.4.23.3, DLNs Used for Reprocessing Documents, for additional information.

    3. Attach a print of the command code information to the back of the "dummy" return.

    4. On the signature line, indicate "Original signed – Dummy return to post information to the correct TIN/Tax Year – Do not correspond for signature" or something similar.

  3. Once completed, forward the return for reprocessing with the applicable form – Form 3893, Re-Entry Document Control for IMF, or Form 13596, Reprocessing Returns, for BMF. See IRM 21.5.2.4.23Reprocessing Returns/Documents, for additional information.

Shipment of Source Documents

  1. Return to the taxpayer any original documents (e.g., birth certificates, death certificates, drivers license, Social Security cards, cancelled checks, etc.,) upon resolution of the issue, unless the taxpayer indicates returning the document is unnecessary.

  2. Forward source documents (in separate folders labeled by type) to campus files within five (5) workdays of input.

  3. Mail/route source documents immediately after Quality Review is complete. If the source document will be retained beyond seven (7) workdays for completion of certain ADJ54 transaction cases, input "R" in the remarks field of the input screen. Notify the Files Management Unit immediately of any anticipated shipment delays.

  4. Route all adjustment documents to Files marked Attn.: Files Management Unit. Complete Form 4442, Inquiry Referral, or e-4442 or Form 8485, Assessment Adjustment Case Record. Include the IDRS sequence number in the top right corner before placing the documents in the employee folder.

  5. Prepare separate adjustment folders for each date and type of input. Label the outside of each folder as follows:

    1. IDRS number.

    2. Date.

    3. Category of source documents.

    4. Sequence numbers (e.g., 01 - 14QR).

    5. Release date (e.g., 09/30/12).

      Reminder:

      Local procedures may impose additional or alternate requirements.

  6. Prepare a separate folder for ADJ54 case actions. Date and sequentially number (legibly and readily available for files to recognize) the Form 8485 or other worksheets used to notate the case and account actions taken. This will help files maintain the integrity of the cases. Place other transactions (e.g., credit transfers) in a separate "Other Documents" folder and ship daily.

  7. Remember to insert your source documents into your folder as soon as you complete the IDRS account adjustment. If you forget to insert a document into the folder, do not destroy the document. Obtain the DLN and send to files to be associated with your case file. If the source document is not included in your folder, the Files Management Unit may contact you requesting the document.

Preparing Form 3893, Re-Entry Document Control

Prepare a Form 3893, Re-Entry Document Control, to reprocess the tax return. Complete all required blocks on Form 3893 as follows:

  1. File Type – Check the appropriate box for IMF or Other (for IRAF).

  2. Block 1 – Leave blank.

  3. Block 2 – Enter the first eleven digits of the document locator number (DLN).

  4. Block 3 – Leave blank.

  5. Block 4 – Document count not to exceed 100.

  6. Block 5 – Leave blank.

  7. Block 6 – Leave blank.

  8. Block 7 – Leave blank.

  9. Block 8 – Leave blank.

  10. Block 9 – Enter only if MFT 05, 06, 15, or 29; otherwise leave blank.

  11. Block 10 – Leave blank.

  12. Block 11 – Check appropriate box.

  13. Block 12 – Enter the 14th digit of the DLN from the source document. If the year digit is not shown, determine the correct year from the DLN color or from other information on the document.

    If the Color is ... Then the Year Digit is ...
    Green 0 or 5
    Purple 1 or 6
    Red 2 or 7
    Black 3 or 8
    Blue 4 or 9
  14. Block 13 – Leave blank.

  15. Block 14 – For all documents notate information needed to clarify the reason for processing or to preserve the audit trail.

  16. Block 15 – Always check "Non-remittance" .

  17. Block 16 – Enter digits 12 and 13 of the DLN.

  18. Block 17 – Enter your name or employee number, telephone number, and the current date. Mark the appropriate box for your organization.

  19. Block 18 – Leave blank.

  20. Block 19 – Mark the appropriate box to explain the action taken.

Preparing Form 13596 – Reprocessing Returns

Prepare a Form 13596, Reprocessing Returns, to reprocess a BMF return. Complete all required blocks on Form 13596 as follows:

  1. Employee number and date should be entered in the first two boxes.

  2. Correcting the TIN – Enter the correct TIN, if the TIN shown on the return is incorrect.

  3. Correcting yearly or quarterly returns – Enter the correct period for the return being reprocessed. If correcting a yearly return, use the "YYYYMM" format. If correcting a quarterly return, use "YYYY" format and check the appropriate quarterly box.

    Caution:

    Some returns may have a tax period ending prior to the last day of the month. Use the following table to determine the correct tax period for the 52 - 53 week return.

    If the tax period ended ... Then ...
    Less than 7 days before the end of the month that month is the end of the tax period
    Within the first 4 days of the month the previous month as the end of the tax period


  4. CP 190, Notification that an amended return was received but an original return was not received – box should be checked if reprocessing a TC 976 document as the original return.

  5. Reasonable cause – check the appropriate box if reasonable cause is being allowed.

  6. Remarks – enter any remarks, as needed to help process the return correctly.