21.7.12 Non-Master File (NMF) Adjustments

Manual Transmittal

August 27, 2018

Purpose

(1) This transmits revised IRM 21.7.12, Business Tax Returns and Non-Master File Accounts, Non-Master File (NMF) Adjustments.

Material Changes

(1) Various editorial changes were made throughout the IRM. Also, cross references and hyperlinks were added, removed, or revised, as appropriate.

Subsection Change
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.2 Removed and updated case types processed in Accounts Management Non-Master File
IRM 21.7.12.2 Updated to change $1 billion to $100 billion due to IMF programming change
IPU 17U1473 issued 10-19-2017 IRM 21.7.12.3 Updated internal fax numbers for BMF/IMF Non-Master File
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.3 Added reference to Notice CP44
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.4.1 Removed (2) Log in request on High Profile Taxpayer data file
IRM 21.7.4.1 Removed section since information is outdated
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.5.1 Updated guidance for returning messages left on the Accounts Management Non-Master File phone line
IRM 21.7.12.5.1(1) Updated formatting of paragraph
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.5.5 Updated section to refer CSRs to follow guidance provided in IRM 21.8.2 when verifying credits
21.7.12.5.8(1)Note Updated formatting of note
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.5.8.3 Added reminder to research freeze codes in IRM 21.5.6.4, Freeze Code Procedures
IRM 21.7.12.5.8.3 Removed reference to obsolete IRM
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6 Added paragraph any cases/messages not related to AM IMF NMF must be forwarded to appropriate area using Form 4442. Added caution: Do not move accounts from NMF to MF without HQ approval
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.1 Remove section no longer processed on Automated Non-Master File (NMF Husband Only/Wife Only Assessments — Claims Filed)
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.1.1 Remove section no longer processed on Automated Non-Master File (NMF Husband Only/Wife Only Assessments — Claims Filed)
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.1 New IRM section 21.7.12.6.1 - Added caution information is provided for information purposes only child support cases are processed in Submission Processing Non-Master File
IRM 21.7.12.6.3 Updated to change $1 billion to $100 billion due to IMF programming change
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.3(2) Clarified instructions to include a referral to (3) for domestic TPs and (4) for international TPs
IRM 21.7.12.6.3.2 Updated to change $1 Billion to $100 Billion due to IMF programming change
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.3.4 Removed (2) Log in request on High Profile Taxpayer data file
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.6.3.5 Removed (2) Log in request on High Profile Taxpayer data file
IRM 21.7.12.6.4 Updated to change $1 Billion to $100 Billion due to IMF programming change
IRM 21.7.12.6.5(2)Table Updated tale to be consistent
IPU 18U0814 issued 05-14-2018 IRM 21.7.12.7.1.3 Added note to send loose IRC 663(b) elections to Alpha Files
IRM 21.7.12.7.1.3 Updated note to send loose IRC 663(b) elections to include a stop number and contact name.

Effect on Other Documents



IRM 21.7.12, dated August 14, 2017(effective October 1, 2017) is superseded. The following IRM Procedural Update (IPU), issued on October 19, 2017 through 5-14-2018, have been incorporated into this IRM: 17U1473, 18U0814.

Audience

The primary users of this IRM are Wage and Investment (W & I) Customer Account Services Employees.

Effective Date

(10-01-2018)


Karen Michaels
Director, Accounts Management
Wage and Investment Division

Non-Master File (NMF) Program Scope and Objectives

  1. Purpose: This IRM describes the process for certain returns not processed using a pipeline system for entry on the Master File (MF). These accounts must be recorded on a separate system called Non-Master File (NMF). Non-Master File (NMF) accounts are a collection of revenue accounting transactions whose sole purpose is to provide a means for the assessment of taxes and collection of revenue.

  2. Audience: The primary users of this IRM are Accounts Management customer service representatives (CSR) and Tax Examiners (TE) who process Individual and Business Non-Master File returns processed on Non-Master File. The IRM provides instructions for employees in Accounts Management who answer the NMF toll-free line and also request adjustments to accounts on NMF requiring a correction, abatement, or assessment for:

    • Tax, penalty, or interest

    • Withholding or other refundable credits

    • Miscellaneous taxes not requiring the filing of a regular return

  3. Policy Owner: Director of Accounts Management

  4. Program Owner: Accounts Management, Process and Program Management, Business Management.

  5. Primary Stakeholders: Wage and Investment (W&I), Small Business Self Employed (SBSE), Tax Exempt Government Entities (TEGE).

  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 correspondence and phone calls as well as process claims, certain applications and other internal adjustment requests.

  2. IRM 21.7.12 provides guidance to employees in Accounts Management Business Master File and Individual Master File assigned to Non-Master File teams.

Authority

  1. Refer to IRM 1.2.21, Servicewide Policies and Authorities, Policy Statements for Customer Account Services Activities for information.

Roles and 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 Management and Review

  1. IRM 1.4.16, Accounts Management Guide for Managers, provides guidance for program management and review of programs assigned to Accounts Management.

Program Controls

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

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

Terms/Definitions/Acronyms

  1. The Reference Net Legal and Tax Research Service page provides an Acronym Database to research acronyms found within this IRM.

Related Resources

  1. The following list of Internal Revenue Codes (IRC) provide additional instructions:

    • IRC 49.429-1

    • IRC 167(g)

    • IRC 168(k)

    • IRC 460(b)

    • IRC 663(b)

    • IRC 992(b) and (c)

    • IRC 1161

    • IRC 1491

    • IRC 4981

    • IRC 4982

    • IRC 5881

    • IRC 5891

    • IRC 6038(b)

    • IRC 6201

    • IRC 6305

      Note:

      Additional IRCs are cited in the IRM where they are applicable to the issue covered.

  2. The following list of IRM references provide additional instructions:

    • IRM 1.1.13.9.4, Accounts Management, provides various guidance for Accounts Management employees

    • IRM 1.4.16, Accounts Management Guide for Managers

    • IRM 1.4.3.3, Authorities

    • IRM 3.17.46, Automated Non-Master File Accounting

    • IRM 21.2.1.5, Non-Master File

    • IRM 21.5.2.4.23.9, Moving Assessments

    • IRM 13, Taxpayer Advocate Service

    • IRM 20.1, Penalty Handbook

    • IRM 20.2, Interest

    • IRM 21, Customer Service Account Services

    • IRM 21.8.1, IMF International Adjustments

    • IRM 21.8.2, BMF International Adjustments

    • IRM 25.6, Statute of Limitations

      Note:

      Additional IRMs are cited in the IRM where they are applicable to the issue covered.

Non Master File Overview

  1. Non-Master File is a system of accounting which provides for not only outstanding liabilities but for all types of return and tax adjustment processing that can not be processed on Master File. See IRM 3.17.46.1.1, Background, for additional information.

  2. Non-Master File Assessments are made as remainder assessments per IRC 6201.

  3. Non-Master File assessments are input on the Automated Non-Master File (ANMF). This is an independent research database which does not interface with Integrated Data Retrieval System (IDRS). ANMF was introduced in 1991 and contains all open, closed and archived Non-Master File (NMF) accounts processed.

  4. Many forms that were previously processed to NMF have been moved to Master File (MF). See prior revisions of this IRM for more information.

  5. As of September 22, 2006, all Non-Master File (NMF) processing has been centralized in the Cincinnati Submission Processing Center (CSPC). For more information regarding the types of accounts established on ANMF, see IRM 21.2.1.5, Non-Master File.

  6. Forward all new assessments and/or documents to establish accounts on NMF to:
    Cincinnati SPC
    P.O. Box 12267
    Covington, KY 41012

  7. NMF notices are generated in CSPC and mailed to the taxpayer. These notices contain an N after the taxpayer identification number (TIN). They can also be identified by a tax class (third digit) of 6 in the document locator number (DLN). There are three different ANMF/NMF notices. They are not computer paragraph (CP) notices, but rather are identified by a form number in the bottom right hand corner. The three notices are listed below.

    1. First notice - Form 6335, First Notice issued on Automated Non Master File.

    2. Fourth notice - Form 4840, Final Notice - Delinquent Account. (There are no second or third notices.)

    3. Annual reminder notice - Form 9774, Annual NMF Accrual Reminder Notice.

  8. A toll-free number (888-829-7434) appears on all NMF notices. Calls are routed based on the type of call (individual/business). Individual calls are routed to Philadelphia Accounts Management for resolution. As of March 2013, business calls and calls regarding the Foreign Investment of Real Property Tax Act, Form 8288, Form 8288-A, Form 8804, Form 8805, Form 8813, and other international issues are routed to Cincinnati Accounts Management for resolution.

    Note:

    NMF notices for Employee Plans (EP) reference has its own toll-free number, 877-829-5500

  9. If calls relating to NMF notices are received on a number other than 888-829-7434, questions can be answered if the employee has the ability and expertise to do so. If not, ask the taxpayer to please call 888-829-7434 where a specialist will be available to help. DO NOT REFER CALLS ON OTHER ISSUES TO THIS NUMBER. ALSO, THIS TOLL- FREE NUMBER IS FOR CALLS FROM TAXPAYERS OR TAXPAYER REPRESENTATIVES ONLY.

    Note:

    Please provide the following numbers for taxpayers outside of the United States:
    BMF 859-320-5252 (non toll-free)
    IMF 267-466-4777 (non toll-free)

  10. NMF Adjustment/Correspondence cases consist of responses or inquiries received from taxpayers concerning accounts housed on the Automated Non-Master File system. Taxpayer inquiries can be for issues related to IMF, BMF or International.

  11. NMF correspondence is routed to NMF teams in Accounts Management as follows:

    If The Issues Are: Then Route to:
    Business Master File (BMF) and BMF International Issues which include:
    • Form 1120-IC-DISC

    • Form 8404 (EIN)

    • Forms 8697 and 8866

    • BMF NMF Civil Penalty Assessment

    • Forms 8612 and 8613

    • Form 8725

    • Form 8831

    • Form 8924

    • Form 8928

    • Form 8876

    • FIRPTA Issues on accounts prior to January 1, 2006

    • Form 1040NR filed by a Fiduciary (Estate and Trust)

    • Form 926

    • Issues concerning IRC 1161 of the Taxpayer Relief Act of 1997

    • IRC 663(b) elections


    Cincinnati Campus, CAMC
    201 W. Rivercenter Blvd Stop 6111G, Team C103
    Covington, KY 41011
    Individual Master File (IMF) and IMF International Issues which include:
    • Individual Taxpayer Accounts of $100 Billion or more - After January 1, 2009

      Note:

      Prior to January 1, 2009 Individual Taxpayer Accounts of $100 Million or more were processed on NMF.

    • Form 1040NR returns incorrectly processed to IMF Master File

    • Child Support Obligation (processed in Submission Processing)

    • IMF NMF Civil Penalty Assessment

    • Form 8404 (SSN)

    • Form 8697 and 8866


    Philadelphia Campus, PAMC
    2970 Market St., Mail Stop BLN 3-J23.134, Team 407
    Philadelphia, Pa 19104
  12. When an adjustment is required, the adjustment document is prepared and forwarded to the ANMF team in CSPC Accounting for input to NMF.

  13. All adjustment documents and forms sent to Non-Master File (NMF) Accounting for processing must have a copy of a current NMF transcript or computer display copy attached. Any document received without a transcript attached is returned to the originator. The transcript identifies whether it is a Non-Master File (NMF) account. Transcripts attached to the documents ensure timely processing of refunds, credits and abatements to the ANMF database.

    Note:

    Adjustments are sent to the address on the User Friendly NMF transcript, which should show Cincinnati campus. A User Friendly NMF transcript can be requested on ANMF.

NMF Adjustments Research

  1. Use ANMF to research cases. In addition, check MF using IDRS command codes (CCs) SUMRY and/or TXMOD with definer "N" to show when a case has been assigned to the field or correspondence/call is received by an employee. NMF tax account codes can be found in Section 7 of Document 6209, IRS Processing Codes and Information.

  2. Transaction Code (TC) 130 or a V- freeze can indicate a NMF account is present. (CCs) IMFOLE, BMFOLE or ENMOD display this TC. A TC 130 in Blocking Series (BS) 200-299 indicates a NMF account.

    1. TC 130 is applied to MF accounts to prevent refunds when there are other balance due accounts present.

    2. TC 130 is generally input by the campus Collection Function and creates a V- Freeze.

    3. TC 130 is followed by a designation number of the campus which input the TC 130.

      Caution:

      These cases are not worked in Accounts Management, and must be routed per the instructions in IRM 21.1.7-16, Computer Paragraph (CP) Notices - Routing Guide (TC130/CP188/CP44).

  3. Employees must be alert for inquiries when the taxpayer has received a notice with an "N" after the Taxpayer Identification Number (TIN) or a Document Locator Number (DLN) with a tax class (third digit of DLN) of 6. If so, research NMF. If additional research is needed, the employee prepares Form 4442 and routes via EEFax to the following campus per case type:

    Case Type Campus Fax Number
    (Internal Use Only)
    Business and Business International Non-Master File Cincinnati ≡ ≡ ≡ ≡ ≡ ≡ ≡
    Individual and Individual International Non-Master File Philadelphia ≡ ≡ ≡ ≡ ≡ ≡ ≡
  4. A TC 300 for .00 posted to a zero balance MF account does not necessarily mean no tax is due. Perform NMF research before providing the taxpayer a complete response.

    1. A zero balance MF account with a TC 400 and an M- freeze could indicate the account was transferred to NMF.

    2. TC 400 can indicate a "false credit" posted to the account to zero out the liability and move the balance to another MF or NMF account.

    3. Perform further research on the BS (9th and 10th digit of DLN). See the table below for possible scenarios.

    TC 400 with a BS of Indicates
    00 A transfer from MF to NMF.
    05 An Offer in Compromise, MF to NMF.
    09 A transfer from MF to NMF, but is a special project.
    99 An overflow account necessitating a move to NMF. See IRM 3.17.46, Automated Non-Master File Accounting, for additional information on overflow accounts.
  5. Complete Form 12810, Accounts Transfer Request Checklist, to request an assessment be moved from MF to NMF, or NMF to MF. Route to CSPC, Stop 21, Attn: Credit & Account Transfer Unit. See IRM 21.5.2.4.23.9, Moving Assessments, for further instructions.

Taxpayer Advocate Service

  1. The Taxpayer Advocate Service (TAS) provides assistance to taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that the IRS has not resolved through normal channels or believe that an IRS system or procedure is not working as it should.

  2. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7.2, Taxpayer Advocate Service (TAS) Case Criteria), and you cannot resolve the taxpayer’s issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issue. Do not refer these cases to TAS, unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward to TAS in accordance with your local procedures.

  3. For additional information on TAS see IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

General NMF Procedures

  1. The following subsections contain information for designated employees in Accounts Management who prepare documents for input to ANMF and who answer calls on the toll-free and non toll-free line.

NMF Toll-Free and Non Toll-Free Number

  1. The following procedures are for employees receiving inquiries on the NMF toll-free number, 888-829-7434 and non toll-free numbers for taxpayers outside of the United States:

    • BMF 859-320-5252 (non toll-free)

    • IMF 267-466-4777 (non toll-free)

    Note:

    Calls to these numbers are routed based on the type of call to either the Cincinnati BMF NMF Team or the Philadelphia IMF NMF Team. Taxpayers are instructed to leave a message regarding Non-Master File only. Any messages related to Non-Master file will be returned within (3) three business days.

  2. Employees must respond to all questions regarding Accounts Management Non-Master File (AM NMF). If the message is regarding an issue not related to AM NMF, the employee does not have the expertise to answer the NMF questions for the specific case type, or does not have the necessary access to the ANMF database, prepare Form 4442, Inquiry Referral, with all necessary information and EEFAX it to the appropriate campus. See IRM 21.3.3.4.16, Taxpayer Inquiry Referrals, IRM 21.1.7-17, Forms - Routing Guide, and/or IRM 21.7.12.3, NMF Adjustments Research, for additional information.

    Example:

    Taxpayer leaves a message on the AM BMF NMF line that is a AM IMF NMF issue - transship referral to Philadelphia using Form e4442/4442, Inquiry Referral, EEFax (Enterprise EE-Fax). Philadelphia will return the call to the taxpayer.

    Example:

    Taxpayer leaves a message on either AM NMF line (IMF/BMF) relating to another business units Non-Master File issue, or a Master File issue - transship referral to Philadelphia using Form e4442/4442, Inquiry Referral, EEFax (Enterprise ee-Fax), and forward to appropriate area.

  3. If any of the situations below are indicated, follow procedures in IRM 5.19.1.4.1.1, NMF Notice Responses.

    1. Inability to pay

    2. Additional time to pay is needed

    3. Installment agreement requested

    4. Bankruptcy

    5. Taxpayer is deceased or incarcerated

  4. Whenever an adjustment to an account is required, prepare the proper form and route to the Cincinnati Submission Processing campus at:
    201 Rivercenter Blvd Stop 21
    Covington KY 41011.

  5. For specific case information see the following sections of this IRM.

NMF Overassessments

  1. An overassessment (OA) is the portion of the assessment in excess of the correct tax liability. The method of adjusting OAs varies, depending on whether the amount has been paid, or whether the taxpayer is indebted for other accounts.

    Note:

    The amount to be abated is not limited to the outstanding balance on the account, but before issuing a refund or allowing a credit, check to ensure all penalty and interest accruals are up to date and the Refund Statute Expiration Date (RSED) has not expired.

  2. Adjust OAs by:

    1. Abating the OA if the liability is paid or unpaid

    2. Crediting the OA if the liability has been paid, but should be applied to another liability of the same taxpayer for some other tax period or type of tax

    3. Refunding the OA if the liability has been paid and should not be applied as a credit to another liability

  3. When an overassessment is determined, priority for application of the credit is as follows:

    1. Abatement of the outstanding amounts created from the assessment document.

    2. Credit to any other outstanding liabilities for the same taxpayer for any taxable periods. The credit must be applied by the collection statute expiration date. The oldest 23C date must be paid first. If the 23C dates are identical apply to the oldest tax period first.

    3. Refund of any excess amount not needed for "a" or "b" in (2) above.

  4. Use Form 1331-B, Notice of Adjustment, to adjust the account based on a review of the research information received.

  5. Action required:

    • Prepare abatements for entire amounts of OAs.

    • Indicate the necessary TCs on the posting copy of Form 1331-B.

    • Insert principal and interest in the correct columns, if a payment has been made and a refund is in order.

    • Enter the appropriate refund line item number (Section I area on Form 1331-B).

    • Prepare Form 3753, Manual Refund Posting Voucher, or Form 5792, Request for IDRS Generated Refund (depending on the requirements of the Cincinnati Accounting Function), when the disposition of the OA results in a refund to the taxpayer.

      Reminder:

      All unpaid portions of assessed tax must be abated before any portion of the total OA can be credited or refunded.

      Note:

      Search outstanding MF and NMF accounts when an OA involves a refund ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before completing the allowance document and scheduling the refund.

    • Route to the Cincinnati Accounting Function at:
      201 Rivercenter Blvd, Stop 21/T203
      Covington KY, 41011.

NMF Assessments

  1. Various types of NMF assessments are explained in the following subsections.

Current Assessments
  1. These are assessments of paid or unpaid tax liability, except deficiency or additional assessments resulting from regular examination.

  2. Remittances received with the tax returns are assessed as current assessments, regardless of whether the return is:

    • Full paid

    • Overpaid

    • Part paid

    • Delinquent

    • Tentative

    • Subject to installment privileges

Deficiency Assessments
  1. Deficiency Assessments are deficiencies in income, estate, gift taxes, and certain excise taxes (including assessable penalties and interest), assessed on the basis of determination made by:

    • Examination findings

    • Appeals findings

    • Tax Court decisions (IMF are being processed to MFT 31)

  2. This category also includes:

    • Transferee assessments

    • Assessments based on remittances received with signed waivers indicating agreement on Examination deficiencies

    • Assessments based on remittances tendered by taxpayers as payments on Examination deficiencies, as opposed to deposits made under IRC 6603

      Note:

      If an undesignated remittance is made in the full amount of a proposed liability, such as an amount proposed in a revenue agent's or examiner's report, the undesignated remittance will be treated as a payment of tax, a notice of deficiency will not be mailed, and the taxpayer will not have the right to petition the Tax Court for a redetermination of the deficiency (Rev. Proc. 2005-18 section 4.03).

Additional Assessments
  1. These are additional taxes, penalties, and interest assessed on employment and excise tax cases. See IRM 21.7.12.5.3.2, Deficiency Assessments, for the description of determinations made by entities and the categories they include.

Quick Assessments
  1. Quick assessments are made to assess:

    • Additional taxes and agreed deficiencies when the statutory period will expire before assessment procedure can be completed under normal processing

    • Deficiencies involving bankruptcy and receivership cases under IRC 6871

    • Additional and delinquent taxes in bankruptcy cases

    • Over $100,000 agreed deficiency that cannot be assessed within 30 days from the agreement date under normal processing procedures

Prompt Assessments
  1. Prompt assessments are made on the basis of an administrative determination that an assessment cannot be delayed, but the account does not qualify for a jeopardy or quick assessment.

  2. Notices sent for prompt assessments are not mailed to the taxpayer but instead are hand delivered. The same form and interest computation is used as with a quick assessment.

Jeopardy Assessments
  1. These assessments are made under IRC 6851, IRC 6861, IRC 6862. They are made when it is determined collection will be endangered if normal procedures are followed. They include assessments on (this list is not all inclusive):

    • Current returns

    • Cases involving termination of taxable periods

    • Deficiencies

    • Additional or delinquent taxes

Processing Additional NMF Assessments
  1. Additional assessment cases are generated from various sources, including Form 3870, Request for Adjustment, Form 3465, Adjustment Request, taxpayer letters, and remittances. Most NMF assessments worked in Accounts Management are additional assessments.

  2. Action required:

    1. Research all necessary Index Cards or request NMF transcripts, if necessary.

    2. Request the return, if filed (if necessary).

    3. Manually compute applicable tax, penalty, and interest.

    4. Prepare Form 5734, Non-Master File Assessment Voucher, listing the increase in tax, penalty, and interest.

    5. Attach Form 5734 to the front of the return or adjustment document.

Taxpayer Inquiry Letters

  1. Analyze the letter to determine proper disposition. Use the table below.

    If Then
    Questions are of a general nature and can be answered by Accounts Management Correspond with or phone the taxpayer.
    Questions concerning the law surrounding a specific IRS assessment (including protest of the assessment) 1. Route to Exam.
    2. Send Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, to advise the taxpayer of the transfer, if routed to Area Office Exam.
    Questions concerning any Alcohol and Tobacco Tax and Trade Bureau (formerly ATF) forms 1. Forward to:
    Alcohol and Tobacco Tax and Trade Bureau, (TTB)
    Room 8002 FOB
    550 Main Street
    Cincinnati, OH 45202
    ATTN: Chief, Technical Services
    2. Send Letter 86C to advise the taxpayer of the transfer.
    If during a taxpayer contact it is determined the case meets TAS Criteria and the issue cannot be resolved in the same day

    Note:

    The following two situations meet the definition of "Same Day Resolution:" The issue can be resolved within 24 hours or the IRS takes steps within 24 hours to resolve the taxpayer's issue.

    Complete Form 911, Request for Taxpayer Advocate Service Assistance, and refer the taxpayer to the Taxpayer Advocate Service (TAS). See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, or IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines.

Substantiation of Unapplied Credits

  1. For cases where the taxpayer substantiates unapplied credits by sending in Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, or Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, follow guidance provided in IRM sections below:

    • IRM 21.8.1.21.1, Claims for FIRPTA Credits

    • IRM 21.8.1.22, Withholding Tax on Foreign Partners - Form 8804, 8805 and 8813

    • IRM 21.8.2.11.2, Claims for FIRPTA Credits

    • IRM 21.8.2.12.2, Form 1042

    • IRM 21.8.2.12.2.1, Forms 1042-S

    • IRM 21.8.2.12.2.3, FATCA - Programming Affecting Certain Forms 1120-F

    • IRM 21.8.2.12.2.7, FATCA Form 1042-S Accounts Management Form 1120-F Amended Returns (New Form 1042-S Credits)

  2. Once verified, prepare Form 3809 for the appropriate amount. The debit portion references the "6550 ACCOUNT" and no TC is needed. Credit the taxpayer's account using TC 800, and identify the source of credit in the "Remarks" section of the Form 3809 (i.e., Form 1042-S, Form 8805 and Form 8288-A) and identify filing location code (FLC) 18, 20, 21, 28, 29, 60, 66, 78, or 98 as appropriate.

  3. If the credit transfer results in an overpayment, Form 3753 must be prepared for a manual refund, unless the taxpayer requests a credit elect to the next tax year or has an outstanding liability on another account (MF or NMF). See IRM 21.4.4.5.2, Preparation of Form 3753, Manual Refund Posting Voucher, for additional information.

  4. When the adjustment results in a refund that will include interest, manually compute interest using CC COMPAC for computing credit interest before January 1, 1999 and COMPA for interest beginning on or after January 1, 1999.

    Note:

    On January 1, 1999, the overpayment and underpayment interest rates for non-corporate taxpayers were equalized.

  5. For corporate overpayment interest rules, see IRM 20.2.4.9, Special Credit Interest Rules for Corporations. The currently supported interest software is Integrated Data Retrieval System (IDRS) CCs (e.g., COMPA) and Automated Computational Tool (ACT/DMI) InterestNet by Decision Modeling, Inc. See IRM 20.2.1.6,Interest Computation Tools and Reports: Manually and Systemically Calculated Interest.

    1. Determine the amount of tax that was withheld. Then determine the correct tax rate and tax taking into account the applicable tax treaty rate in Pub 901, U.S. Tax Treaties.

    2. Prepare four-part Form 5205, Information About Your Income Tax Refund.

    3. Prepare Form 1042-S.

    4. Prepare two Form 3809 documents. The first Form 3809 must credit the taxpayer's Non-Master File (NMF) account for the amount of interest paid using a TC 770 and debit (TC not necessary) the 6520 account. The second Form 3809 must debit the taxpayer's NMF account for the amount of interest withheld using a TC 772 and credit the 4610 account using TC 700 transferring tax withheld on interest.

      Note:

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

    5. Follow the chart below for determining overpayment interest.

    If Computing Credit Interest Then Utilize
    Before 01/01/1999 for a Non-Corporate taxpayer COMPAC
    On or after 01/01/1999 for a Non-Corporate taxpayer COMPA
    Before 01/01/1995 for a Corporate taxpayer, regardless of the overpayment amount (see IRM 20.2.4.9, Special Credit Interest Rules for Corporations, for the definition of "Corporate" taxpayer.) COMPAC
    On or after 01/01/1995 for a Corporate taxpayer and the overpayment amount is less than or equal to $10,000

    Caution:

    If the General Agreement on Tariff and Trades Overpayment Interest (GATT) threshold has been met, the overpayment will be computed at the GATT interest rate (COMPAG), regardless of the overpayment amount. See IRM 20.2.4.9.2, Determining the GATT Threshold.)

    COMPAC
    Credit interest after 12/31/1994 for a Corporate taxpayer and the overpayment amount is greater than $10,000, or the GATT threshold has previously been met (See IRM 20.2.4.9.2, Determining the GATT threshold.) COMPAG (GATT)

    Note:

    Add the COMPAC (first $10,000) with the GATT interest (over $10,000) for the total interest allowed.

  6. Prepare the Form 3753, Manual Refund Posting Document.

    1. The overpayment amount must be the amount of the available credit.

    2. The TC 770 amount is the net interest (after the withholding is computed).

    3. The TC 840 is the total of these two amounts.

  7. Submit the refund document and related forms, along with the case itself, to the manager for review. After managerial review, forward Form 1331-B, Form 5205, Form 1042-S, the refund document, both Form 3809 documents, and a copy of (interest computation) COMPAC or COMPAD/COMPAG to Accounting.

    Caution:

    All adjustment work sent to Accounting must have a current ANMF transcript and the correct BOD code entered on the NMF documents.

Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation

  1. Form 926 is a return that is filed to report certain transfers of tangible and intangible property to a foreign corporation when required by IRC 6038B. Form 926 is processed under MFT 81.

  2. In the past, taxpayers making a transfer to a foreign trust, estate, or partnership also used Form 926 to report the transfer. However, IRC 1491 was repealed with respect to transfers to foreign trusts, estates and foreign partnerships after August 4, 1997. New forms have been developed for transfers to foreign trusts or estates, and foreign partnerships.

  3. Taxpayers making a transfer to a foreign trust, or taxpayers receiving certain large gifts or bequests from certain foreign persons, must file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.

  4. Taxpayers making a transfer to a foreign partnership may be required to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

  5. Due to their potential use in classifying Forms 1040NR, route all Forms 926 to:
    Philadelphia Service Center
    Examination CF&S Unit 4.E08.141
    2970 Market Street
    Philadelphia, PA 19104

Additional Assessment or Claim on Amended Form 8404, Interest Charge on DISC - Related Deferred Tax Liability

  1. Form 8404 is filed by shareholders of IC-DISCs to figure and report their interest owed on DISC-related deferred tax liability

  2. Form 8404 is due by the due date of the federal income tax return for the tax year that ends with or includes the Form 1120-IC-DISC's tax year end. Form 8404 is processed under MFT 23

  3. Form 8404 for corporations, trusts, decedent estates and Individuals are filed with Cincinnati Submission Processing.

    • Form 8404 for corporations, trusts, decedent estates are processed in Cincinnati.

    • Form 8404 for individuals are processed in Philadelphia.

  4. A DISC shareholder may defer a portion of its income attributable to DISC activities by paying, in the manner described in IRC 992(c)(2)(B). Certain interest is charged based on the amount of tax postponed. The assessment of the interest is made via NMF when Form 8404, Interest Charge on DISC-Related Deferred Tax Liability, is filed.

  5. If the shareholder underpays the interest as a result of an audit adjustment, amended return, carryback, etc., or because the original amount reported was based on an estimate or any other reason, the shareholder must file an amended Form 8404 to increase the assessment. Prepare Form 5734, Non-Master File Assessment Voucher, and route to Cincinnati Accounting for assessment.

  6. If the shareholder overpays the interest, Form 843, Claim For Refund and Request for Abatement, should be filed to claim the overpayment. Action required:

    1. Request the original Form 8404

    2. Compute the amount by which interest will be decreased using the information on the Form 843. Refer to IRM 20.2, Interest, for methods of computing interest.

    3. Prepare Form 1331-B, Notice of Adjustment, noting the reason for the decrease in interest.

    4. Route to Cincinnati Accounting.

Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts

  1. A Form 8697 is filed by an individual, corporation, estate, trust or a pass through entity (partnership or S corporation) that is not closely held. A pass through entity is considered closely held if at any time during any tax year for which there is income under the contract, 50% or more (by value) of the beneficial interests in the entity is held either directly or indirectly by five or fewer persons. Form 8697 is used to figure interest due or to be refunded under the look-back method as outlined in IRC 460(b)(2) on certain long-term contracts that are accounted for under either the percentage of completion method or the percentage of completion-capitalized cost method.

    Note:

    Section 2023, Special Rules for Long-Term Contract Accounting, of the Small Business Jobs Act, P.L. 111-240, enacted special rules for the cost of property eligible for bonus depreciation and placed in service after December 31, 2009. See IRM 20.2.11.12, Look-Back Interest, for additional information on interest. Bonus depreciation is an allocable contract cost in computing income using the percentage of completion method under IRC 460(b) for long term contracts, except for bonus depreciation of certain qualified property placed in service in calendar years 2010, or 2013 and 2014.

  2. The interest computation under the look-back method is the process used to determine the interest underpayment/overpayment due on income allocated over the taxable years of the contract when the estimated contract price and costs during the contract period are compared against the actual contract price and costs determined when the contract is completed.

  3. Taxpayers complete either Part I, Regular Method, or Part II, Simplified Marginal Impact Method, of Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts.

  4. In Part I, Regular Method, the amount due or to be refunded is computed by applying the actual tax rate for the particular prior year(s) against the revised taxable income.

  5. In Part II, Simplified Marginal Impact Method, an assumed marginal tax rate is applied to the difference between the estimated and actual contract price and costs. Generally, this tax rate is the highest statutory tax rate in effect for the particular prior years(s). The tax rates for Part II computations are listed in the Instructions for Form 8697.

  6. Section 2023 of the Small Business Jobs Act of 2010 provides that solely for purposes of determining the percentage of completion under IRC 460(b)(1)(A), the cost of qualified property is taken into account as a cost allocated to the contract as if bonus depreciation had not been enacted. Qualified property is property otherwise eligible for bonus depreciation that has a Modified Accelerated Cost Recovery System (MACRS) recovery period of 7 years or less and that is placed in service after December 31, 2009, and before January 1, 2011 (January 1, 2012, in the case of property described in IRC 168(k)(2)(B)). The Tax Increase Prevention Act of 2014 extended this rule for property placed in service after December 31, 2013 and before January 1, 2015 (before January 1, 2013 in the case of longer production period property as defined by IRC 168(k)(2)(B)). The Protecting Americans from Tax Hikes (PATH) Act of 2015, P.L. 114-113 (DIV Q) Section 143(a) and (b) extended this rule for property placed in service after December 31, 2014 and before January 1, 2020 (before January 1, 2021 in the case of longer production period property as defined by IRC 168(k)(2)(B)).

  7. Section 331(b), Special Rules For Federal Long-Term Contracts, of the American Taxpayer Relief Act of 2012, P.L. 112-240, extended the special rule for the allocation of bonus depreciation. Qualified property is property otherwise eligible for bonus depreciation that has a MACRS recovery period of 7 years or less and that is placed in service after December 31, 2009, and before January 1, 2011 [January 1, 2012, in the case of property described in IRC 168(k)(2)(B)], or after December 31, 2012, and before January 1, 2014 [January 1, 2015, in the case of property described in IRC 168(k)(2)(B)]. The Tax Increase Prevention Act of 2014 extended this rule for property placed in service after December 31, 2013 and before January 1, 2015 (before January 1, 2016 in the case of longer production period property as defined by IRC 168(k)(2)(B)). The Protecting Americans from Tax Hikes (PATH) Act of 2015, P.L. 114-113 (DIV Q) Section 143(a) and (b) extended this rule for property placed in service after December 31, 2014 and before January 1, 2020 (before January 1, 2021 in the case of longer production period property as defined by IRC 168(k)(2)(B)).

  8. A pass-through entity (partnership, S corporation, or trust) that is not closely held must apply the look-back method at the entity level to any contract for which at least 95-percent of the gross income is from U.S. sources. A pass-through entity is considered closely held if, at any time during any tax year for which there is income under the contract, 50-percent or more (by value) of the beneficial interest in the entity is held (directly or indirectly) by or for, five or fewer persons.

  9. Form 8697 must be filed for each tax year in which the taxpayer completed a long-term contract entered into after February 28, 1986 that is accounted for using either the percentage of completion method or the percentage of completion-capitalized cost method for federal income tax purposes. Taxpayers must also file Form 8697 for any tax year in which the contract price or contract costs are adjusted for one or more of these long-term contracts from a prior year.

  10. If the taxpayer owes interest, or if no interest is to be refunded to the taxpayer, the taxpayer (other than partnerships that are not electing large partnerships) is directed to include any interest due in the bottom margin of the tax return (or the section specified in the instructions for Form 8697 and/or the tax form instructions), and attach a check or money order for the full amount payable to the "United States Treasury."

  11. If interest is to be refunded, taxpayers are instructed not to attach Form 8697 to their income tax return. It should be filed separately with the IRS at one of the addresses below:

    Individuals Business
    Internal Revenue Service Philadelphia, PA 19255-0001 Internal Revenue Service Cincinnati, OH 45999-0001
  12. All BMF Forms 8697 and any BMF Form 8697 correspondence scanned into CIS are controlled to 0241326771 for NMF processing.

Form 8697 - Treatment of Interest
  1. IRC 460(b)(3), provides any interest required to be paid by the taxpayer is treated as an increase in tax imposed for the taxable year in which the contract was completed. The due date for Form 8697 is the same date that the related income tax return is due, including extensions.

  2. Look-Back interest owed to the taxpayer is not treated as an overpayment because it is not interest that has been paid. Interest the taxpayer received under the look-back method is treated as taxable income, not a reduction in tax liability. A Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, showing a look-back interest refund is not a tax return or claim for refund. It is a non-tax claim against the government to which IRC 6511 does not apply. IRC 6611, which allows interest on any overpayment of an internal revenue tax, does not apply to look-back interest due to a taxpayer. Under applicable regulations, rules similar to those under IRC 6611 apply. Accordingly, applying a rule similar to that of IRC 6611(e), the Service should allow no interest on the look-back interest refunds if it pays the look-back interest (or makes an offset) within 45 days after the taxpayer files the claim.

From 8697 With Additional Interest Due or if No Interest is Due to be Refunded
  1. If interest is due to IRS, the taxpayer is instructed to file Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, with the related income tax return. A balance due Form 8697 is not to be filed separately. The amount due is included in the "total tax" (TC 150) line. Therefore, full paid (or for zero amount) originals are filed as an attachment to the related income tax return.

  2. Prior to January 1, 2005, a separately-filed balance due Form 8697 or Form 8697 that was inadvertently detached from the related income tax return may have been processed under NMF procedures, resulting in possible duplicate assessments. Research Master File and Non-Master File and reverse any duplicate assessments on NMF.

  3. Computer Condition Code (CCC) "K" indicates that a Form 8697 was attached to an original filed Form 1120. CCC "K" is not edited on amended Forms 1120, Form 1120X or any other income tax return.

  4. If the ASED has expired or is within 60 days of the expiration date, route the case to Statute for the assessment to be made. Notate the case that it is a Form 8697 Look-Back interest assessment.

  5. If a loose Form 8697 is received in Accounts Management, research as instructed in (3) above. Research the related income tax return and verify that the Form 8697 liability is included in the total tax liability. Request the appropriate income tax return if necessary. Refer to IRM 20.2.11.12, Look-Back Interest, for Form 8697 interest computation procedures. If the liability is not included on the return, assess the look-back interest amount with a TC 290 and allow the computer to assess debit interest (TC 196) on the look-back interest amount. If interest is restricted on the module, compute interest on the TC 290 look-back interest amount and input with TC 340. Do not input credit reference number 251 with the adjustment.

  6. If a balance due Form 8697 is filed separately before the related income tax return is posted, input a TC 930 push code to have the return sent to you after the TC 150 posts. When the return is received, determine if the Form 8697 liability has been included in the TC 150 amount. If it has been assessed, attach Form 8697 to the return. If it has not been assessed, follow the instructions in paragraph (5) directly above.

  7. A partnership may report look-back interest due. However, the TC 150 on the account of a Form 1065, U.S. Return of Partnership Income, cannot be greater than zero or it will unpost. If look-back interest is reported on a Form 1065, the return and Form 8697 are routed to Accounts Management for Assessment as noted below:

    If the return was filed Then
    On paper, Code and Edit tax examiners will edit CCC "X" , detach the Form 8697, and photocopy page 1 of Form 1065. Forward to Accounts Management for assessment.
    Electronically, ERS will code the return with Action Code 420 and CCC "X" will be used to reject the return. Rejects tax examiners will send a copy of the return along with Form 8697 to Accounts Management.

    Note:

    A TC 290 for the dollar amount on the Form 8697 with blocking series 17 is used to include look-back interest due.

  8. Per Treas. Regs. section 1.460-6(f)(1) and (2), estimated tax penalties do not apply to the increased tax reported on the taxpayer's return due to a balance due on a Form 8697. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If you receive a taxpayer inquiry questioning the ES Penalty, subtract the Form 8697 amount from the total TC 150 amount first, then calculate the appropriate ES Penalty amount. The ES Penalty is only calculated on the tax reported on the return and does not include the Form 8697 information. Adjust the ES Penalty amount as appropriate based on service center error and apologize for the inconvenience.

Processing Form 8697 Claim for Refund, No TC 150 Posted on Master File (MF)
  1. Prior to January 1, 2005, all refunds claimed on Form 8697 were processed NMF to MFT 69. Beginning January 1, 2005, refunds claimed on Form 8697 relating to Form 1040, Form 1041, Form 1065 and Form 1120 are processed on the related income tax module if a TC 150 has posted. If a TC 150 has not posted on the BMF or IMF account, then the refund is processed on NMF.

    Reminder:

    When researching IDRS for TC 150, ensure to review any freeze codes on Master File. See IRM 21.5.6.4, Freeze Code Procedures, for additional information.

  2. Form 8697 requesting a refund may be filed before the due date of the related income tax return. When a Form 8697 or an amended return containing Form 8697 is received requesting a refund, research the appropriate income tax return module on Master File and Non-Master File (NMF) to determine if a manual refund was previously issued. If a refund was previously issued, advise the taxpayer. If not, continue processing.

  3. Research MF and NMF to determine if a refund was previously issued. If a refund has been previously issued, notify the taxpayer. If it is determined that a refund has not been previously issued and a TC 150 has not posted to the related income tax account, process the claim for refund on NMF. The related income tax return can be determined by the entry on Line 1 of Form 8697 below the heading of "filing year."

  4. A Form 8697 claim for refund is not required to be filed with an income tax return and therefore should not be rejected back to the taxpayer because a TC 150 did not post to Master File. If the form is received within 30 days of the due date of the respective income tax return due date, monitor the account for the posting of the original return for 30 days. If a TC 150 does not post, process the requested refund on Non-Master file.

  5. Verify the taxpayer's hypothetical overpayment of tax. For each column of the Form 8697, Part I, if line 2 is a negative amount then line 6 generally should also be a negative amount. If line 2 is positive and line 6 is negative, refer to exam as Category A. For each column of the Form 8697, Part I, verify that if line 2 is a negative amount then line 6 should also be a negative amount. For each column of the Form 8697, Part II, verify that line 1 and line 2 amounts are either both negative or both positive.

    • Verify using an IMFOLT for individual tax returns or BMFOLT for business tax returns that the corresponding income tax return has sufficient tax liability for the decrease in tax. The decrease in tax is reflected as negative numbers on line 6, Part I, and line 7, Part II. The transaction code (TC) 150 plus/minus any adjustments, TC 290 through TC 309. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. After comparing the liabilities as described in the previous paragraph, determine if discrepancies exist between the liabilities reported by the taxpayer on the overpaid or amended Form 8697 and the related income tax accounts.

    If And Then
    Discrepancies exist   Close to Examination using local routing procedures.
    NO discrepancies exist
    IMF - The claim is ≡ ≡ ≡ ≡ ≡ or more.
    BMF - The claim is ≡ ≡ ≡ ≡ or more.
    Refer to Examination as CAT A criteria.
    NO discrepancies exist
    IMF - The claim is less than ≡ ≡ ≡ .
    BMF - The claim is less than ≡ ≡ ≡ ≡ ≡ ≡ .
    Process following normal adjustment procedures.
  7. If no CAT A criteria are found, research MF and NMF for any outstanding balance due. If an outstanding balance due is found, prepare Form 2424, Account Adjustment Voucher, to offset to the balance due. Ensure that accrued penalties and interest have been taken into consideration when offsetting the credit. Only offset enough credit to full pay any account that shows an outstanding balance due. See IRM 20.2.4, Overpayment Interest, and IRM 20.2.5, Interest on Underpayments, for additional information regarding offsets and interest.

  8. For estimated tax computation procedures, see IRM 20.1.3.1.5, Form 8697.

  9. For Form 8697 interest computation procedures for cases assessed on NMF, see IRM 20.2.11.12, Look-Back Interest. Input TC 290 for $.00 with credit reference number 251, which generates a TC 766 credit for the amount of look-back interest. Interest allowable on the look-back interest amount is manually computed and input with TC 770.

  10. If the Refund Statute Expiration Date (normal RSED period) has expired on the account and you are inputting an adjustment with CRN 251 that will result in an overpayment and a refund on the account, you must input the RSED date shown on the account (minus one day) in the "RFSCDT" field on ADJ54. You must input the RSED date minus one day, instead of the IRS received date of the claim, in order to prevent the refund from being systemically stopped by the computer and from generating a ST29 Transcript in the Statute unit.

  11. Utilize the following procedures when processing a claim for refund on Form 8697 and no TC 150 has posted to Master File:

    1. Complete Form 1331-B, Notice of Adjustment, and attach the following:
      •Form 8697
      •Look-back Excel calculation of interest
      •Add-on interest computation (COMPA)
      •Copy of completed manual refund Form 3753, Manual Refund Posting Voucher

    2. Complete Form 3753 using normal manual refund procedures as outlined in IRM 21.4.4.4, Preparation of Manual Refund Forms, and attach the following:
      •Form 8697
      •Look-back Excel calculation of interest
      •Add-on interest computation (COMPA)
      •INOLE and BMFOLI/IMFOLI
      •First page of completed Form 1331-B

    3. Complete Form 10869, Returns or Other Documents Transmittal, and attach the following:
      •Form 3753 and attachments
      •Form 1331-B and attachments

    4. Route Form 10869 and attachments to Cincinnati Submission Processing, Manual Refund, Stop 2107.

  12. Documentation of CIS of the actions taken on the NMF account is required. Document the CIS case with the following history items:

    • Form 8697 NMF

    • Prepared Form 1331B

    • Prepared Form 3753

    • TC840xxxxx (Input the money amount in whole dollars)

    • TC770xxxxx (Input the money amount in whole dollars)

    • TC766xxxxx (Input the money amount in whole dollars)

  13. Monitoring of the manual refund must be completed as per IRM 21.4.4.6.1, Monitoring Manual Refunds, until the TC 840 posts. Once posted, update and close the IDRS base per IRM 21.4.4.6.1(2), Monitoring Manual Refunds.

Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method

  1. Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method, is used to figure the interest due or to be refunded under the look-back method of IRC 167(g)(2) for property placed in service after September 13, 1995, that is depreciated under the income forecast method as described in IRC 167(g).

    Exception:

    The look-back method does not apply to any property with an unadjusted cost basis of $100,000 or less.

  2. The income forecast method is limited to depreciation of:

    • Motion Picture Film or Videotape

    • Video Tapes

    • Sound Recordings

    • Copyrights

    • Books

    • Patents

    • Theatrical Productions

  3. Form 8866 is a form similar to Form 8697. It is almost identical to the Part I, Regular Method, on Form 8697.

  4. The taxpayer is instructed to file Form 8866 with the appropriate income tax return if additional interest is owed. If the taxpayer is due a refund, Form 8866 is filed separately.

  5. Prior to January 1, 2005, a Form 8866 claiming look-back interest was processed under Non-Master File with the interest issued using "manual refund" procedures. Effective January 1, 2005, look-back interest adjustments are processed under Master File and posted to the applicable income tax return for the taxpayer required to file Form 8866.

    Exception:

    If the taxpayer is claiming a refund of interest and a TC 150 has not posted to Master File, the refund must be processed to NMF. See IRM 21.7.12.5.8 IRM 21.7.12.5.8, Form 8697, Interest Computation Under the Look-Back Method for Completed Long-Term Contracts, for processing procedures for Form 8866, which are the same as those to process a Form 8697 claim for refund.

  6. If interest is due to the IRS, the taxpayer is instructed to file Form 8866 with the related income tax return. The amount due should be included in the "total tax" (TC 150) line. A balance due Form 8866 is not filed separately unless the related income tax return has previously been filed and the balance amount on the Form 8697 was not included on the original return (TC150).

  7. A partnership may report look-back interest due. However, the TC 150 on the account of a Form 1065, U.S. Return of Partnership Income, cannot be greater than zero or it will unpost. If look-back interest is reported on a Form 1065, the return and Form 8866 are routed to Accounts Management for Assessment as noted below:

    If the return was filed Then
    On paper, Code and Edit tax examiners will edit CCC "X," detach the Form 8866, and photocopy page 1 of Form 1065. Forward to Accounts Management for assessment.
    Electronically, ERS will code the return with Action Code 420 and CCC "X" will be used to reject the return. Rejects tax examiners will send a copy of the return along with Form 8866 to Accounts Management.

    Note:

    A TC 290 for the dollar amount on the Form 8866 with blocking series 17 is used to include look-back interest due.

Form 8866 Refund Request, No TC 150 Posted on Master file
  1. A claim for refund received on Form 8866, Interest Computation under the Look-Back Method for Property Depreciated under the Income Forecast Method, is processed in the same manner as a claim for refund received on Form 8697.

  2. All Forms 8866 and Form 8866 correspondence scanned into CIS are controlled to 0241326771 for NMF processing.

  3. Follow the procedures in IRM 21.7.12.5.9 for processing a refund request received on Form 8866.

  4. A Form 8866 claim for refund with no TC 150 posted is processed on Non-Master File (NMF) on MFT 69.

MF Return Posted to NMF

  1. Occasionally, a MF return is erroneously posted as a NMF return. Input these returns to MF as original or amended returns, depending on the information available.

  2. Action required:

    1. Research all related Index Cards if the return was not a balance due.

    2. Request a transcript of the ANMF account.

    3. Prepare Form 1331-B, Notice of Adjustment, to abate the NMF assessment.

    4. Input a credit transfer using Form 3809, Miscellaneous Adjustment Voucher, to transfer any payment to MF.

    5. Prepare a corrected return and route to MF as non-remit. Staple the NMF return behind it.

Stopping NMF Notices

  1. Follow the procedures below to stop NMF notices:

    1. Prepare Form 3177, Notice of Action for Entry on Master File, with TC 470 to notify Cincinnati Accounting to stop notices when an adjustment is pending on any NMF account.

    2. Include the reason to stop notices and the amount of adjustment using the "Other" line of Form 3177.

    3. Include your name and phone number. This information is included in the History section of the NMF account when NMF inputs the TC 470.

IMF NMF Procedures

  1. The following subsections contain information for designated employees in Accounts Management who prepare documents for input to ANMF for adjustment to Individual accounts.

  2. Any cases or messages not related to Accounts Management IMF NMF must be forwarded to the appropriate area using Form 4442. See IRM 21.3.3.4.16, Taxpayer Inquiry Referrals, IRM 21.1.7-17, Forms - Routing Guide and/or IRM 21.7.12.3, NMF Adjustments Research, for additional information.

    Caution:

    With the exception of Form 1040NR returns incorrectly processed to IMF, do not move an account from Master File to Non-Master File without Headquarters approval.

Child Support Obligation

  1. IRC 6305 authorizes IRS to assess and collect child support payments ordered by state courts, but which have fallen into arrears. When certified by the Secretary of Health and Human Services, the arrearage is treated as taxes collectible.

  2. The assessment is processed to NMF on MFT 59.

  3. A first notice and Letter 753(C), Child Support Payments Assessed (NMF), are prepared to inform the taxpayer of the reason for the assessment. It advises the taxpayer to contact the State Child Support Collection Office if there are questions regarding the assessment.

  4. Any decrease to the original assessment must be initiated by the originating state office. IRM 3.17.46, Automated Non-Master File Accounting, contains detailed information and procedures.

    Caution:

    The above is provided for informational purposes only. Accounts Management NMF does not have the authority to process or abate child support cases.

Joint Civil Penalty Assessment

  1. Joint civil penalty assessments must be processed on NMF since MF civil penalty modules (MFT 13 or 55) cannot accommodate joint liabilities. These modules appear as MFT 28 on NMF. The reason can be identified by the abstract number. See IRM 3.17.46, Automated Non-Master File Accounting, for more information and procedures.

Procedures for Individual Taxpayer NMF Accounts Of $100 Billion or More - Overview

  1. As of January 1, 2009, Form 1040, U.S. Individual Income Tax Returns, with a module balance of $100 billion or greater must be processed on ANMF. To provide this group of taxpayers the same level of service as other customers, a centralized team of contact representatives was established in the Philadelphia campus in November 2006. This team of representatives is considered the liaison for these taxpayers.

    Note:

    Any Form 1040, U.S. Individual Income Tax Return, and Form 1040X, Amended U.S. Individual Income Tax Return, with a module balance of $100 Million or greater, for tax periods prior to January 1, 2009 must be processed on ANMF.

  2. If an inquiry is received from taxpayers with taxes or payments of $100 billion or more, provide the taxpayer with the telephone number of the team (see paragraph 3 for domestic taxpayers and 4 for international taxpayers) and complete Form 4442, Inquiry Referral. Send Form 4442 to the Philadelphia campus at the address below:


    Internal Revenue Service
    2970 Market St.
    Drop Point: 3-J23.134 - NMF Team 407
    Philadelphia, PA 19104

  3. Domestic Taxpayers and/or their authorized representatives can leave a message on 888-829-7434 (toll-free) and a NMF employee must return their call within three (3) business days.

  4. International Taxpayers and/or their authorized representatives can leave a message on 267-466-4777 (non toll-free) and a NMF employee must return their call within three (3) business days.

  5. Original returns, Form 1040X, Amended U.S. Income Tax Return, Form 8802, Application for United States Residency Certification, Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, and other related correspondence are received at the address above.

  6. This team conducts the following:

    • Locates and applies payments

    • Provides IRS communications

    • Secures taxpayer income verification

    • Secures transcripts of taxpayer accounts

    • Provides general guidance

    • Resolves account problems, and

    • Transfers payments between MF and NMF, etc.

    Caution:

    Joint Committee Cases (JCC) must be expedited to Examination due to interest consideration, if over $2,000,000.00 (aggregate).

Types of Individual Master File (IMF) NMF Account Work Received - Paper
  1. Once mail is received in the Technical Unit, it is sorted by categories:

    • Original return without remittance

    • Original return with remittance

    • Amended return and/or Form 1040X without remittance

    • Amended return and/or Form 1040X with remittance

  2. The types of work and instructions for these customer service representatives (CSRs) are provided in the following subsections.

Original IMF NMF Return Without Remittance
  1. Take the following action on original return received without remittance:

    1. Date stamp the return.

    2. Update log to indicate name, SSN, tax year, etc., and make a copy of return.

    3. Open control base on 0537120020.

    4. Research IDRS for payments on MF and/or notices on primary and/or secondary SSNs.

    5. Input TC 594 closing code (cc) 84 on spousal MF.

    6. Input TC 971 action code (AC) 502 on CC ENMOD.

      Note:

      TC 971 action code (AC) 502 indicates a case of $100 million or more on NMF.

  2. Take the following action, if the return shows an overpayment:

    If Then
    Refund is requested Prepare Form 3753, Manual Refund Posting Voucher, with authorized signature.

    Note:

    If the 45-day interest-free period is in jeopardy, EXPEDITE to Cincinnati NMF if the overpayment to be refunded is $5,000 or more. Refunds of $100 million or more must have prior approval from Examination.

    Payment is located on Master File (MF) Prepare all documents needed to transfer payments, credit elects, etc., from MF to NMF accounts and input history on MF to show moving credit to NMF. Make a special note to NMF that all credits have been verified and credits are being transferred from MF. Annotate the account "Taxpayer is NOT to be billed."
    Credit elect is requested and under $100 billion Prepare Form 3809, Miscellaneous Adjustment Voucher, to transfer from the current NMF to MF for the next year.
    Credit elect requested is $100 billion or more Prepare Form 3809, Miscellaneous Adjustment Voucher, to transfer credit elect to NMF. Input history on MF to indicate credit elect on ANMF.
  3. If credit amounts are insufficient, indicate correct amount of bill to be issued to taxpayer.

  4. Complete Form 3210, Document Transmittal, for all original returns and overnight/express mail to Cincinnati ANMF.

Original IMF NMF Return With Remittance
  1. Date stamp original return.

  2. Prepare Form 3210, Document Transmittal, and hand carry payment to Campus Support.

  3. Follow the same steps for original return without remittance as previously provided in IRM 21.7.12.6.3.2, Original IMF NMF Return Without Remittance.

Amended IMF NMF Return Without Remittance on ANMF
  1. Amended return received without remittance. Take the following actions:

    1. Date stamp return.

    2. Check MF for any payments or balances.

    3. Check MF for TC 594 closing code (cc) 84 on spousal SSN.

    4. Check for TC 971 action code (AC) 502 on CC ENMOD.

    5. Open control base on CC ENMOD under 0537120020.

    6. Verify power of attorney (POA), if necessary.

    7. Prepare adjustment request.

    8. Transfer payment from MF and note "Bill to Taxpayer" , if the adjustment results in a balance due.

  2. If the adjustment results in an overpayment, see the table in IRM 21.7.12.6.3.2.

Amended IMF NMF Return with Remittance on ANMF
  1. Take the following action if the return is received with remittance:

    1. Date stamp return.

    2. Complete Form 3210, Document Transmittal, and hand carry payment to Campus Support.

    3. Check MF for any payments or open balances.

    4. Check MF for TC 594 closing code (cc) 84 on spousal SSN.

    5. Check for TC 971 action code (AC) 502 on CC ENMOD.

    6. Open control base on CC ENMOD under 0537120020.

    7. Verify power of attorney (POA), if necessary.

    8. Prepare adjustment request.

    9. Transfer payment from MF and note "Bill to Taxpayer" , if the adjustment results in a balance due.

  2. If the adjustment results in an overpayment, see the table in IRM 21.7.12.6.3.2.

Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return)
  1. If Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, is received:

    • Date stamp form.

    • Input TC 460 on MF using Command Code REQ77 to indicate an extension was received. See IDRS Command Codes Job Aid for proper input of the transaction code, extension date, transaction date, and DLN code.

Other Paper Correspondence
  1. Take the following action for other correspondence:

    1. Date stamp correspondence.

    2. Open control base on CC ENMOD under 0531720020.

    3. Check POA, if necessary.

    4. Review for issues, then phone/write and make appropriate adjustments.

    5. Check MF for open balances or payments and check ANMF for same.

    6. Check for open control bases on MF.

    7. Check for TC 594 closing code (cc) 84 on spousal SSN.

    8. Check for TC 971 action code (AC) 502 on CC ENMOD.

    9. Prepare Form 4442, Inquiry Referral, to refer to Cincinnati ANMF (if needed).

Telephone Calls Received on Accounts over $100 Billion on NMF

  1. Take the following action on calls received from POA or taxpayer:

    1. Verify POA on IDRS using Command Code CFINK.

    2. Review issue/request transcript from ANMF.

    3. Review MF for issue and check for TC 594 closing code (cc) 84 on spousal SSN.

    4. Check for TC 971 action code (AC) 502 on ENMOD.

    5. Complete Form 4442, Inquiry Referral, if needed, to refer to Philadelphia ANMF.

  2. Take the following action on calls to POA and taxpayer:

    1. Verify the POA on IDRS using command code (CC) CFINK.

    2. Make two (2) attempts to reach caller.

    3. Follow the IRM 21.3.10.7, Returning Calls to Practitioners, guidelines.

Form 1040NR Returns Incorrectly Processed to IMF

  1. If NMF Form 1040NR is processed incorrectly as an Individual Master File (IMF) 1040NR under an invalid Social Security Number (SSN), transfer the account from Master File (MF) to NMF using the following procedures:

    1. Request original return or have the taxpayer provide a copy.

    2. Abate the incorrect Master File tax, if necessary. Use hold code 4, source code 1, reason code 99 and the appropriate blocking series (BS) to freeze credits and notices.

    3. Code the return for reprocessing by lining through the Document Locator Number (DLN), entering the TIN followed by the letter "N" in brown pencil, and correcting the Entity portion. "X" out multiple stamped received dates, other than the original IRS received date.

      Reminder:

      Attach prints of the Master File adjustment.

    4. Route the return to the Cincinnati Submission Processing Center Receipt and Control area for batching and numbering. Indicate on the routing slip that the return was incorrectly processed as Master File, and process as NMF (MFT 20).

    5. Monitor for the posting of the NMF return if credits must be transferred from MF to NMF.

      Note:

      Do not transfer credits until the return posts on NMF. If the account shows payments or credits, transfer them using Form 2424, Account Adjustment Voucher.

  2. Process cases where payments were misapplied, and the taxpayer provided a copy of the front and back of the cancelled check or money order, using payment tracer procedures in IRM 21.5.7, Payment Tracers.

    If Then
    Payment is located on MF and it posted as TC 610, TC 640, TC 660, TC 430, or TC 670 Prepare Form 2424, Account Adjustment Voucher, to debit MF and use corresponding credit transaction to credit NMF.
    Payment on MF posted as TC 700, TC 710, TC 716, or TC 706 Prepare Form 3809, Miscellaneous Adjustment Voucher, to debit MF and use TC 820 to credit NMF.

BMF NMF Procedures

  1. The following subsections contain information for designated employees in Accounts Management who prepare documents for input to ANMF for adjustment to business accounts.

Fiduciary Filed Form 1040NR, U.S. Nonresident Alien Income Tax Return

  1. If the Form 1040NR is being filed by an estate or trust, the fiduciary is responsible for filing the Form 1040NR on behalf of the estate or trust.

  2. Fiduciary filed Form 1040NR returns will have some or all of the following characteristics:

    • Name Line(s) may consist of numbers or a combination of letters and numbers

    • Account, Trust Grantor or Nominee may be indicated

    • Name line(s) may indicate Estate of

    • No exemptions may be shown

    • The return may have an Employer Identification Number (EIN) instead of a Social Security Number (SSN)

    • The box for Estate or Trust at the top of the form is checked

    • The trust may show deductions for distributions made to U.S. or foreign beneficiaries.

    • Check IDRS for the filing of Form 3520 or Form 3520-A filed with the trust’s name

      Note:

      A Form 3520 will not be filed under the foreign trust’s name but the name of the trust may appear on line 2(a) of the Form.

    • Trust may state that it is a grantor trust with a foreign owner

  3. Every nonresident alien having fiduciary income, either effectively or not effectively connected with a trade or business in the United States, must file Form 1040NR. Forms 1040NR filed by individuals are processed on Master File. See IRM 21.8.1, IMF International Adjustments, for additional information.

    1. Effectively connected income is all income, gain, or loss that is derived in connection with the conduct of a trade or business within the United States. See IRM 21.8.1.11.10, Effectively Connected Income, for additional information.

    2. Non-effectively connected income is income not effectively connected with a trade or business in the United States. See IRM 21.8.1.11.11, Non-Effectively Connected Income, for additional information.

  4. These forms are handled as Business Master File (BMF) NMF.

  5. Fiduciary filed Forms 1040NR are processed to Non-Master File under Master File Tax (MFT) 20 tax class 2.

    1. Returns reflecting only income that is not effectively connected with a U.S. trade or business are processed with Document Code 72 and have a due date that is 6 1/2 months after the end of the taxable year.

    2. Returns reflecting income that is effectively connected with a U.S. trade or business are processed with Document Code 73 and have a due date that is 4 1/2 months after the end of the taxable year.

    3. The statute of limitations period is 3 years after the due date of the return or 3 years after the IRS received date, whichever is later.

Adjusting Fiduciary Filed Form 1040NR
  1. Process amended returns or claims filed for fiduciary filed Form 1040NR as follows:

    1. Request a transcript of the account from ANMF.

    2. Request the original return.

    3. Review the amended return or claim for CAT A criteria and route as appropriate. See IRM 21.8.2.2.12, Examination Criteria, for a listing of BMF International CAT A criteria.

    4. Immediately prepare and forward a paper Form 3177 with Transaction Code (TC) 470 to notify Accounting to stop notices. Refer to IRM 21.7.12.5.11, Stopping NMF Notices.

    5. Prepare Form 1331-B, Notice of Adjustment, to decrease tax, penalty and/or interest. Route the completed Form 1331-B to Accounting for input.

    6. Prepare Form 5734, Non-Master File Assessment Voucher, to assess tax, penalty and interest. Route completed form to Accounting for input.

    7. Review the account for any outstanding balance due issues on both NMF and MF. See IRM 21.4.4.4.2, Outstanding Balances/Duplicate Refunds, for additional information.

    8. Prepare Form 3809, Miscellaneous Adjustment Voucher, or Form 2424, Account Adjustment Voucher, whichever is appropriate, to transfer any payments not correctly posted to the account.

    9. Prepare Form 3753, Manual Refund Posting Voucher, if the amended return or claim results in a refund. See IRM 21.4.4.4.2, Preparation of the Form 3753, Manual Refund Posting Voucher, for additional information.

    10. For name and/or address changes, prepare Form 2363, Master File Entity Change. Attach current Integrated Data Retrieval System (IDRS) and Automated Non-Master File (ANMF) transcripts and route to Accounting.

Form 1040NR Claims for Abatement of Penalty and Interest
  1. Claims for abatement of penalty and/or interest are usually requested when the taxpayer's income was incorrectly classified and/or reported as effectively connected.

  2. Process cases where the taxpayer adequately substantiates this claim as follows:

    1. Request transcript of account from ANMF.

    2. Request original return.

    3. Verify the tax computation on page 4, Form 1040NR.

    4. Prepare Form 1331-B, Notice of Adjustment, to adjust penalties and interest as appropriate.

      Note:

      You must enter the Taxpayer Identification Number (TIN) on the Form 1331-B and the business operating division (BOD) code from Command Code (CC) TXMOD on all NMF documents.

IRC 663(b) Elections
  1. The executor of an estate or trust must submit a written election to treat any amount paid or credited to a beneficiary within 65 days following the close of the tax year as being paid or credited on the last day of the tax year.

  2. The election is not valid if filed after the due date (or extended due date) of the Form 1040NR Fiduciary.

    Caution:

    See IRM 21.7.12.7.1 (5) to determine the due date of the return.

    Note:

    Loose IRC 663(b) elections must be sent to Alpha Files, Stop 2800F, Attention: Joi Gibson.

  3. Once the election is made it is irrevocable.

  4. If the election is timely filed, complete Form 9856, Attachment Alert, to attach the election to the last filed Form 1040NR Fiduciary return.

  5. If the election is not filed by the due date or extended due date of the Form 1040NR Fiduciary return, issue a Letter 105C to inform the taxpayer that the election was not timely filed and provide information on how to file a timely election for future reference.

Section 1161 of the Taxpayer Relief Act of 1997
  1. Per section 1161 of the Taxpayer Relief Act (TRA) of 1997, a trust that was in existence on August 20, 1996, and was treated as a domestic trust (Form 1041 Filer) on August 19, 1996, may elect to continue treatment as a domestic trust by attaching a statement to the Form 1041 filed for either the 1997 or 1998 taxable years.

  2. It is unlikely that returns will any longer be filed that are subject to the instructions in section 1161. However, it is important to acknowledge that certain trusts that do not meet the definition of a U.S. person under IRC 7701(a)(30)(E) can still be treated as a domestic trust, if an election was properly made.

Form 1120-IC-DISC, Interest Charge Domestic International Sales Corporation Return and Form 4876-A, Election to be Treated as an Interest Charge DISC

  1. A corporation files Form 4876-A to elect to be treated as an interest charge domestic international sales corporation (IC-DISC). The election must be filed within 90 days after the beginning of the tax year if it is the taxpayer's first tax year or during the 90 days preceding the first day of the tax year if this is not the taxpayer's first tax year. There are no indicators on MF or NMF to indicate that the Form 4876-A is being processed.

  2. The Form 4876-A election determination is made by Cincinnati Submission Processing. A "data file" is kept by Code and Edit during the processing of these forms. For additional information see IRM 3.11.16.34, Form 4876-A - Election To Be Treated as an Interest Charge DISC/Scope (CSPC Only).

  3. When a call is received concerning the status of the Form 4876-A, ask the taxpayer for the date the Form 4876-A was mailed and follow the chart below:

    If Then
    Less than 30 days have lapsed since the form was mailed 1) Notify the taxpayer that the Service has not had sufficient time to process the election request.
    2) Determine the number of days remaining for processing.
    3) Notify the taxpayer to allow "XX" number of days before making any additional inquiries.

    Example:

    A taxpayer files Form 4876-A on May 3, 2011. The Service receives an inquiry on the status of the election on May 24, 2011. The 30-day processing time has not yet expired. Notify the taxpayer to allow an additional 10 days to process the election request. If they have not received notification on the status of the Form 4876-A after those 10 days have expired they can then follow up on the status of the election request.

    More than 30 days have lapsed since the form was mailed 1) Prepare, print Form 4442, and forward to Code and Edit, Stop 34.
    2) Notify the taxpayer that a response should be received within 30 days.

    Note:

    Submission Processing will initiate a letter to notify the taxpayer of the status of their Form 4876-A.

  4. Form 1120-IC DISC must be filed if the corporation elected, by filing Form 4876-A to be treated as an interest charge domestic international sales corporation (IC-DISC), and such election is in effect for the tax year the corporation is a former IC-DISC or the corporation is a former DISC.

  5. The Form 1120-IC DISC return is due the 15th day of the ninth month after the tax year ends. The first Form 1120-IC-DISC filed by a corporation establishes the taxable year ending.

    Note:

    No extension of time to file are allowed.

  6. Penalties and interest associated with Form 1120-IC DISC are processed on NMF (MFT 23). In various instances, Accounts Management can be required to assess penalties and interest, resolve duplicate filing conditions, and process amended returns. Use the following information and procedures when processing this form.

Assessing Penalties, Form 1120-IC-DISC
  1. Form 1120-IC DISC, filers can be liable for penalties assessed under IRC 6686. These penalties apply if the taxpayer fails to provide necessary information or fails to file a return.

  2. The Document Perfection department determines if the corporation is liable for these penalties and routes Form 3465, Adjustment Request, to the Accounts Management department for assessment.

  3. Action required:

    1. Review Form 3465, Adjustment Request, and compute the correct penalty assessment. See IRM 20.1.9, International Penalties.

    2. Prepare Form 5734, Non-Master File Assessment Voucher, to assess the penalty. Enter TC 240 in Item 10 to indicate a penalty assessment.

    3. Enter tax class 6, document code 55, and BS 190–199 as the adjustment DLN and route to Cincinnati Submission Processing, Accounting Operations, NMF Team 104, Stop 21.

Assessing Interest on Form 1120-IC-DISC, IRC 992(c) Distributions
  1. Under certain circumstances, IRC 992(c) provides that a corporation that fails to satisfy certain conditions to qualify as a Domestic International Sales Corporation (DISC) for a taxable year specified in IRC 992(a)(1) can qualify as a DISC for that taxable year if it makes a distribution to its shareholders. If the corporation makes the distribution after the 15th day of the 9th month after the close of the taxable year to which the distribution applies, the corporation must also pay a charge (which is treated as interest) within a 30-day period beginning with the day on which such distribution is made. See IRC 992(c)(2)(B).

  2. Normally, the Clearing and Deposit department receives a payment and letter/form from the corporation identifying the payment as interest on a distribution made under IRC 992(c). This payment and letter/form are separated and the payment is sent to Accounting/NMF for processing to the ANMF system. The letters and forms are sent to Accounts Management NMF for processing of Form 5734.

  3. Actions required by Accounts Management Non-Master File:

    1. Prepare Form 5734, Non-Master File Assessment Voucher, to assess the payment as interest using TC 340.

    2. Research the ANMF data base for the DLN of the latest Form 1120 series return filed by the corporation and request the return. If the DLN is not located on the ANMF database request a transcript from the index card system for the DLN of the original return. Then prepare a form 2275 to request the return from files.

    3. Send the letter and return to the Exam Classification department. Note on the routing slip that the taxpayer is claiming benefits of IRC 992(c), the amount of interest assessed, and the date the payment was received.

    4. Route Form 5734 and a copy of the letter/form as backup documentation to support the assessment on Form 5734.

    Note:

    If the original return is charged out to Exam, notate the routing slip with the same information in 3) above, and send the letter to the area where the return is charged.

Processing Form 1120-IC-DISC Duplicate Filing Conditions
  1. When a return marked "amended" or "duplicate" is found in Submission Processing, it is sent to the Accounts Management department without being numbered.

  2. Action required:

    1. Secure the original return, if not attached, using the DLN from Form 1120-IC DISC, Alpha Index File, located in Files Function.

    2. Attach the amended return to the original return and send them to the Exam Classifier. (Form 1120-IC-DISC is nontaxable but is considered Exam criteria.)

    3. Line through "amended" or "duplicate" and input as the original, if there is no record of an original return being filed.

Form 1040NR Filed by a Fiduciary - Carryback RINT/TENT Processing (CAMC Only)

  1. A fiduciary who files a Form 1040NR may also file a Form 1045, Application for Tentative Refund, (TENT) or an amended Form 1040NR (RINT) to request a refund resulting from:

    • The carryback of a Net Operating Loss (NOL)

    • The carryback of a Net Capital Loss (NCL)

    • The carryback of an unused general business credit

    • The carryback of a net section 1256 contracts loss, or

    • An overpayment of tax due to a claim of right adjustment under §1341(b)(1)

  2. The processing of a RINT/TENT requires coordination between the Cincinnati BMF Non-Master File (NMF) team and the Cincinnati Carryback team. When a Carryback for Form 1040NR filed by a Fiduciary is received in the BMF NMF team, notify the BMF NMF team manager. The BMF NMF team manager will coordinate the processing of the carryback with the Cincinnati Carryback team.

    Caution:

    A RINT or TENT must be processed expeditiously in order to meet the 45-day interest-free period. Additionally, a TENT is required to be processed within a statutory 90-day processing period.

  3. RINT/TENT cases received for Form 1040NR filed by a Fiduciary will be recontrolled to 0241326771 for NMF assistance. The transcripts necessary to complete the review of the RINT/TENT must be attached to the CIS case.

  4. Upon completion of the review of the RINT/TENT by the carryback team, prepare Form 1331-B, Notice of Adjustment, and Form 3753, Manual Refund Posting Voucher, based on the information received from the Carryback team and forward to Accounting for processing.

Form 706 Series Returns Processed on Non-Master File

  1. The following Form 706 series returns are processed on NMF:

    • Form 706-A, United States Additional Estate Tax Return

    • Form 706-D, United States Additional Estate Tax Return - Under Code Section 2057

    • Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return

    • Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts

  2. Prepare Form 4442, following the direction in IRM 21.7.5.3.5, and recontrol CIS cases to 0283000000.

Excise NMF Procedures

  1. The following subsections contain information for designated employees in Accounts Management who prepare documents for input to ANMF for adjustment to excise tax accounts.

Transportation Tax and Communications Tax Assessments

  1. When a person refuses to pay the excise tax on air transportation or a communications service, the airline or communications service provider reports the information to IRS. A list of these individuals is sent to Accounts Management from Examination and Document Perfection functions.

  2. Action required:

    1. Examine the lists ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ within any given quarterly tax period (January–March, April–June, July–September, October–December). Do not accumulate amounts from one quarter to another.

    2. Prepare Form 5734, Non-Master File Assessment Voucher, for each person identified and attach to the related list.

    3. Route Form 5734 to Receipt and Control for numbering. Use MFT 46 and tax class 6.

    4. Route to Cincinnati Accounting for billing, after numbering.

NMF Letter 898 (DO) Cases - Claims Filed
  1. When a collecting agent fails to collect tax, or the person liable for the tax refuses to pay, the tax is assessed against the person liable for the tax. See Treas. Reg. 49.4291-1 (Facilities and Services Excise Taxes Regulations).

Form 8612 and Form 8613 Processing

  1. Form 8612, Return of Excise Tax on Undistributed Income of Real Estate Investment Trusts (REITs), is used by a REIT to compute and pay the excise tax on undistributed income imposed under IRC 4981.

  2. Form 8613, Return of Excise Tax on Undistributed Income of Regulated Investment Companies (RICs), is used by a RIC to compute and pay the excise tax on undistributed income under IRC 4982.

  3. REITs and RICs are required to distribute a certain percentage of their ordinary income (taxable income) and their capital gain net income to their shareholders. The 4% excise tax is applied against the excess of the required distributions (line 4) over the actual distributed amounts (line 8).

  4. Form 8612 and Form 8613 are due by March 15 following the calendar year to which the excise tax liability applies. They are subject to late filing and payment penalties. Refer to IRM 20.1.2, Failure to File/Failure to Pay Penalties. An extension of time to file can be requested by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, by the return due date.

  5. Both forms are processed on NMF. Follow normal NMF procedures for any adjustments required.

    • Form 8612 is MFT 89, document code 21, tax class 6.

    • Form 8613 is MFT 14, document code 22, tax class 6.

  6. If an amended Form 8612 or Form 8613 are received accept the forms as filed and process the request.

Form 8725, Excise Tax on Greenmail

  1. Form 8725, Excise Tax on Greenmail, is used to report and pay the 50% excise tax imposed under IRC 5881. The term "greenmail" means any amount a corporation (or any person acting in concert with a corporation) pays directly or indirectly to acquire its stock from any shareholder if:

    1. The transferring shareholder held the stock for less than two years before entering into the agreement to make the transfer of stock.

    2. The shareholder, or any person acting in concert with the shareholder, or any person related to any of such persons, made or threatened to make a public tender offer for stock of the corporation, at some time during the two year period ending on the date of acquisition.

    3. The acquisition was made under an offer that was not made on the same terms to all shareholders.

  2. Form 8725 is due by the 90th day following receipt of any portion of the greenmail. (A separate Form 8725 must be filed for each agreement to transfer stock.) It is subject to late filing and payment penalties. Refer to IRM 20.1.2, Failure to File/Failure to Pay Penalties. An extension of time to file can be requested by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns, by the return due date.

  3. The amount of (excise) tax (line 6) is a flat 50% of the total gain or other income (line 5).

  4. The tax period is the "Date of initial receipt of greenmail" listed at the top of Form 8725. For example, if the taxpayer enters November 2012, the tax period is 201211.

  5. Form 8725 can be filed under either an employer identification number (EIN) or social security number (SSN), depending on the type of entity filing the return. Returns are processed NMF. Follow normal NMF procedures for any adjustments required.

    • MFT 27

    • Document code 21

    • Tax class 6

  6. For resolution of taxpayer questions and issues on Form 8725, forward an encrypted email with details of the taxpayer's question, tax period, form, etc., to the Cincinnati NMF Planning and Analysis Analyst (P&A), Gary Weber, and carbon copy the BMF NMF Team manager. The P&A Analyst will contact the Form 8725 Technical Specialist for assistance with resolving the issue.

  7. Request all applicable NMF transcripts that will be included when forwarding the case to the Form 8725 Technical Specialist for review.

Form 8831, Excise Taxes on Excess Inclusions of REMIC Residual Interests

  1. Form 8831, Excise Taxes on Excess Inclusions of REMIC Residual Interests, is used to report and pay excise taxes on any transfer of a residual interest in a REMIC to a disqualified organization, or any transfer of a residual interest to a pass-through entity with a disqualified organization as a record holder.

  2. The due date of the return is based on the portion of the return required to be completed by the taxpayer.

    If Then
    Sections B or C are completed The due date is April 15 of the year following the calendar year in which the residual interest is transferred to a disqualified organization.
    Part II is completed The due date is the 15th day of the 4th month following the close of the tax year of the pass-through entity during which the disqualified person is a record holder.
  3. An extension of time to file can be requested by filing Form 7004,Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.

  4. Forms 8831 are processed NMF as:

    • MFT 89

    • Document (Doc.) code 21

    • Tax class 6

    • Abstract number 221

    • BS 000 - 399 without remittance, 400 - 499 with remittance

  5. All refund claims, amended returns, or claims requiring penalty computations are routed to the BMF NMF Team in Accounts Management.

  6. Form 8831 is subject to late filing and late payment penalties. Refer to IRM 20.1.2,Failure to File/Failure to Pay Penalties.

  7. When correspondence or a telephone call from the taxpayer is received on Form 8831, Excise Taxes on Excess Inclusions of REMIC Residual Interests, for Resolution Trust Corporation Receivership (RTC) cases, be certain the first notice was generated to the taxpayer (either the original first notice, if no amended return, or the first notice after an amended return was processed). Then prepare Form 3177, Notice of Action for Entry on Master File, and forward for input of TC 530 Closing Code (cc) 15 to the Cincinnati Accounting NMF Unit. (Per an inter-agency agreement between IRS and the Federal Depositing Insurance Corporation (FDIC), no annual reminder notice is required.)

  8. For resolution of taxpayer questions and issues on Form 8831, forward an encrypted email with details of the taxpayer's question, tax period, form, etc., to the Cincinnati NMF Planning and Analysis (P&A) Analyst, Gary Weber, and carbon copy the BMF NMF Team manager. The P&A Analyst will contact the Form 8831 Technical Specialist for assistance with resolving the issue.

  9. Request all applicable NMF transcripts that will be included when forwarding the case to the Form 8831 Technical Specialist for review.

Form 8924, Excise Tax on Certain Transfers of Qualifying Geothermal or Mineral Interests

  1. Form 8924, Excise Tax on Certain Transfers of Qualifying Geothermal or Mineral Interests, is used to report and pay the excise tax on certain transfers of qualifying geothermal or mineral interests. This form was created because of a tax provision in Division C, Title IV, section 403(c) of the Tax Relief and Health Care Act of 2006 entitled "Tax Incentive For Sale Of Existing Mineral And Geothermal Rights To Tax-Exempt Entities."

  2. The Form 8924 is applicable only for specific, eligible federal lands as described in Section 403(a) of Public Law 109-432. The eligible federal lands subject to the filing of a Form 8924 are located in Montana.

  3. The return is due by the 90th day following the taxable transfer. See IRM 3.17.46.5.33, Form 8924, Excise Tax on Certain Transfers of Qualifying Geothermal or Mineral Interests, for additional information.

  4. Forms 8924 are subject to late filing and late payment penalties. Refer to IRM 20.1.2.2, Failure to File a Tax Return or to Pay Tax - IRC 6651, for more information. An extension of time to file can be requested by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

  5. Forms 8924 are processed to NMF as:

    • MFT 41

    • Doc. code 40

    • Tax class 6

    • Abstract number 012

    • Blocking Series (BS) 300 - 399 without remittance and BS 400 - 499 with remittance

  6. To amend a previously filed Form 8924, taxpayers can file a corrected return and write "Amended" at the top of the form. All amended returns, claims and correspondence are routed to the NMF team in Accounts Management. Normal NMF procedures must be followed for any adjustments required.

  7. For resolution of taxpayer questions and issues on Form 8924, forward an encrypted email with details of the taxpayer's question, tax period, form, etc., to the Cincinnati NMF Planning and Analysis (P&A) Analyst, Gary Weber, and carbon copy the BMF NMF Team manager. The P&A Analyst will contact the Form 8924 Technical Specialist for assistance with resolving the issue.

  8. Request all applicable NMF transcripts that will be included when forwarding the case to the Form 8924 Technical Specialist for review.

Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code

  1. Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code, is used to report and pay the excise tax on certain failures by group health plans or employers. This form was enacted due to the Tax Relief and Health Care Act of 2006 (P.L. 109-432), Section 403. The due date of the return is dependent on the Section as follows:

    Section Due Date of Form 8928
    4980B or 4980D On or before the due date for the person's federal income tax return [single employer or other person responsible for providing or administering benefits under the plan (such as an insurer or TPA)].
    On or before the last day of the seventh month following the end of the plan year (multi employer or multiple employer plans).
    4980E or 4980G On or before the 15th day of the fourth month following the calendar year in which the non-comparable contributions were made

    See IRM 3.17.46.5.34, Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code, for additional information.

  2. Forms 8928 are subject to late filing and late payment penalties. Refer to IRM 20.1.2.2, Failure to File a Tax Return or to Pay Tax - IRC 6651, for more information. An extension of time to file can be requested by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

  3. Forms 8928 are processed to NMF as:

    • MFT 41

    • Appropriate abstract numbers:

      Abstract Number Section
      126 4980B
      127 4980D
      128 4980E
      137 4980G
    • Doc. code 39

    • Tax class 6

    • Blocking Series (BS) 000–099 without remittance and BS 400-499 with remittance

  4. To amend a previously filed Form 8928, taxpayers can file a corrected return and write "Amended" at the top of the form. All amended returns, claims and correspondence are routed to the NMF team in Accounts Management. Normal NMF procedures must be followed for any adjustments required.

  5. A Form 8928 filed to claim a refund or credit must include a detailed statement of the reason(s) for the refund claimed. The statement must include the reason(s) for filing the claim and provide supporting documentation. Review the claim to determine if the required statement has been included.

    If And Then
    The taxpayer is filing a claim for refund The required statement is not included Return the claim to the taxpayer with a 916C Letter. Include in an open paragraph that a detailed statement of the reason(s) for claiming a refund must be included with the claim
    The taxpayer if filing a claim for refund The required statement is included Follow the guidance in (6) below
    The taxpayer is reporting an increase   Follow the guidance in (6) below
  6. For resolution of taxpayer questions and issues on Form 8928, send an encrypted email with details of the taxpayer's question, tax period, form, etc., to the Cincinnati NMF Planning and Analysis (P&A) Analyst, Gary Weber, and carbon copy the BMF NMF Team manager. The P&A Analyst will contact the Form 8928 Excise Tax Headquarters Policy Analyst for assistance with resolving the issue.

  7. Request all applicable NMF transcripts that will be included when forwarding the case to the Excise Tax Headquarters Policy Analyst for review.

Form 8876, Excise Tax on Structured Settlement Factoring Transactions

  1. Form 8876, Excise Tax on Structured Settlement Factoring Transactions, is used to report and pay 40% excise tax imposed under IRC Section 5891. The Excise tax is equal to 40% of the undiscounted amount of the payments being acquired, over the total amount actually paid to acquire them. The return is due by the 90th day following the receipt of structured settlement payment rights in a structured settlement factoring transaction. (A separate Form 8876 must be filed for each date on which you received structured settlement payment rights in one or more structured settlement factoring transactions.)

  2. An extension of time to file can be requested by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.

  3. Forms 8876 are subject to late filing and late payment penalties. Refer to IRM 20.1.2.2, Failure to File a Tax Return or to Pay Tax - IRC 6651, for more information.

  4. Forms 8876 can be filed under either an EIN or SSN, depending on the type of entity filing the return. Returns are processed to NMF as follows:

    • MFT 27

    • Doc. code 21

    • Tax Class 6

    • Abstract number 234

    • Blocking Series (BS) 000-099 without remittance and BS 400-499 with remittance

    .

  5. For resolution of taxpayer questions and issues on Form 8725, forward an encrypted email with details of the taxpayer's question, tax period, form, etc., to the Cincinnati NMF Planning and Analysis (P&A) Analyst, Gary Weber, and carbon copy the BMF NMF Team manager. The P&A Analyst will contact the Form 8876 Technical Specialist for assistance with resolving the issue.

  6. Request all applicable NMF transcripts that will be included when forwarding the case to the Form 8725 Technical Specialist for review.