25.15.19 Non-Qualifying Claims & Complex Account Issues

Manual Transmittal

December 06, 2016

Purpose

(1) This transmits new IRM 25.15.19, Non-Qualifying Claims and Complex Account Issues.

Background

IRM 25.15.19 provides guidance for resolving taxpayer issues when the Form 8857, Request for Innocent Spouse Relief does not qualify for consideration, yet the taxpayer has other account issues which require resolution.

Material Changes

(1) This new IRM 25.15.19 contains information needed by Cincinnati Centralized Innocent Spouse Operation (CCISO) technicians to resolve taxpayer account issues which do not involve making a determination of relief from joint and several liability (innocent spouse relief).

Effect on Other Documents

IRM 25.15.19 contains material from IRM 25.15.7, Compliance Campus Functions, and IRM 25.15.9, Account Processing of Requests for Relief from Joint and Several Liability in order to consolidate like topics and reduce duplication of content. New versions of IRM 25.15.7 and 25.15.9 are being published concurrently.

Audience

CCISO employees resolving taxpayer issues which do not involve making a determination of innocent spouse relief.

Effective Date

(12-06-2016)


Karen A. Turner
Acting Director, Examination, Field and Campus Policy
Small Business/Self Employed Division

Non-Qualifying Claims Overview

  1. This IRM section contains instructions for the Cincinnati Centralized Innocent Spouse Operation (CCISO) for processing innocent spouse cases when a request is determined to be non-qualifying. A request is non-qualifying if it fails to meet certain basic requirements for relief under section 6015.

  2. Requests with multiple years that do not qualify will be reflected on the Innocent Spouse Tracking System Record (ISTSR) on master-file.

  3. The ISTSR will be established for the most recent year, with the additional years noted in the comments. The reason code will be determined by the most recent non-qualifying year.

  4. Claim years that do not qualify do not require:

    • A folder.

    • Input of TC 971 AC 065 on the account.

  5. There may be more than one reason a request for innocent spouse relief is non-qualified. Choose the most relevant reason and address it accordingly. Additional reasons may be noted in the comments or history section.

    Reminder:

    If there is an open AUR or freeze code on the account indicating possible IRS actions, additional research is required to resolve the freeze.

Collection Statute Expiration Date (CSED) Expired

  1. When the CSED has expired and the Requesting Spouse (RS) made no payments, the claim is non-qualifying.

  2. When the CSED has expired and the Refund Statute Expiration Date (RSED) has expired on payments made by the RS, the claim is non-qualifying.

    Reminder:

    The Letter 3657-C, No Consideration Innocent Spouse Claim Letter, must have the appropriate Tax Court rights included when the RSED is expired.

  3. The most common conditions that could affect the CSED are:

    • TC 290 (Additional tax assessment).

    • TC 300 (Additional tax assessment by Examination or Collection).

    • TC 340 (Restricted Interest).

    • TC 480 (Offer in Compromise).

    • TC 520 (Bankruptcy) with Closing Code (CC) 60-67, 81, 83, or 85-89.

    • TC 550 (Waiver to extend the CSED).

    • TC 971 AC 065 (Innocent Spouse Claim).

    • CDP Hearing Request.

  4. See IRM 5.1.19.3, Case Actions That Can Suspend And/Or Extend A CSED, for additional information.

Full Paid Accounts

  1. A request for relief may be non-qualifying when if the account is full paid. If the account is full paid, additional account information must be considered to ensure the request is non-qualifying.

  2. The request for relief is non-qualifying if:

    1. The tax module reflects that an account is full paid (Status 12) and the RS did not make any payments or request a refund of payments.

    2. The RS made payments that do not fall within the RSED, which is within 2 years prior to the innocent spouse claim date, or three (3) years from the date the claim year return was filed, whichever is later.

      Note:

      To determine the refund availability for a TC 706 payment, look at the cycle date. See IRM 25.6.1.7.2, Time When Payments and Credits Are Considered to be Made, for more information.

    3. The account is full paid, and there is a joint TC 706 offset made prior to the innocent spouse claim received date:

      Reminder:

      If the account if full paid and there is a joint (RS and NRS) TC 706 applied to the claim year account after the claim was filed and the RSED is open, the RS must provide the allocation worksheet in order to consider the request for relief. If the RS does not provide the allocation worksheet, then the claim is non-qualifying.

    4. If the original liability was fully paid, and the AUR/Exam case closed with no additional assessment, the request for relief is considered a "Pre-Assessment No Deficiency."

      Note:

      In this situation, use activity code "PAND" for input of Stage 29 on ISTS.

    5. Accounts full paid after the claim was received, and Non-Requesting Spouse (NRS) made the payments, or RS made payments but did not request a refund.

      Note:

      Verify who made the payments by using the Remittance Transaction Record (RTR) if needed.

      Reminder:

      Issue Letter 3657-C, No Consideration Innocent Spouse Claim Letter, to the RS, with the appropriate paragraphs and Letter 3323-C, Notice to the Non-Electing Spouse of Final Determination, to the NRS. Suggested wording to the NRS: "Our records show the account was full paid after the innocent spouse claim was filed. We notified the person who was your spouse for the tax year(s) listed above that we are no longer considering their request for innocent spouse relief. No further action is necessary."

Additional Non-Qualifying Conditions

  1. If there is no joint return, or RS filed a separate return and does not live in a community property state.

  2. No changes in AUR or Exam cases; use the activity code "PAND" when updating ISTS to stage 29.

  3. If the request for relief includes a year where no return was filed.

  4. The account is on the Retention Register/Vestigial on master file.

  5. The request is for relief of a Civil Penalty Assessment (MFT 55) or NMF Civil Penalty (MFT 28).

  6. The request is for relief of MFT 35, which is the Affordable Care Act (ACA) Shared Responsibility Payment.

  7. The request is for relief of a BMF assessment (do not control any BMF modules).

  8. If the remaining balance is penalty and interest and the RS is requesting relief from penalties and interest only and is not disputing the underlying tax liability, then the account is considered full paid for innocent spouse purposes and the request is non-qualifying. This type of request is referred to Accounts Management (AM) as a Form 843, Claim for Refund and Request for Abatement.

  9. Injured Spouse relief applies if an overpayment from a joint module offsets to a separate liability belonging to the other spouse.

Freeze Codes

  1. Specific freeze codes require extra consideration before processing a request for relief. This section identifies the codes that require consideration.

Combat Zone (-C)

  1. The "-C" freeze stays on the account even after the taxpayer is no longer in the Combat Zone.

    • The tax account will reflect a TC 500 with a two-digit CC XX to reflect the date a combat zone was entered.

    • A second TC 500 CC XX will reflect the exit date.

    • On IMFOLT the CSED-CD is either a "P" or "S" to indicate which taxpayer is deployed.

    • When researching an account that contains a "-C" freeze, additional research is required to determine the taxpayer’s combat status.

    • Research CC IMFOLE (entity module) for the combat indicator on Line 11.

  2. CC IMFOLE and IMFOLT must be used to determine the status of both taxpayers. See IRM 5.19.10.7.2.2, Combat Zone Research, for more information.

  3. If Combat indicator is "1" then the taxpayer is still serving in a combat zone:

    • Send Letter 3659-C, Requesting Spouse Initial Contact, to RS.

    • Combat Zone cases are suspended until both taxpayers are available to participate.

    • Update claim to Stage 26 in ISTS using activity code "COMB" and input a history item to indicate "Combat Zone RS" or "Combat Zone NRS."

    • If Combat indicator is "2" , then the taxpayer is no longer in a combat zone. Follow normal IRM procedures to work the case.

  4. If contacted by a taxpayer or family member advising the taxpayer is in a combat zone, ask for documentation of the deployment. Once received:

    • Use the date of deployment to input TC 500 CC 56 on the account to cease enforcement activity.

    • Suspend the claim until the taxpayer returns.

  5. If the TC 500 CC 53, 55, or 57 is not present, send Letter 2761-C, Request for Combat Zone Service Dates, to the taxpayer requesting the combat zone exit date.

    • Once the exit date is provided, input the date using CC REQ77.

    • Input TC 500 using the appropriate closing code releasing the combat zone freeze code.

    • See IRM 5.19.10.6.5.1, Combat Zone IMF Procedures, for appropriate code.

Disaster Freezes (-O or -S)

  1. Disaster freezes limit IRS activities and often cases are suspended.

  2. See IRM 21.5.6.4.30, -O Freeze, and IRM 21.5.6.4.37, -S Freeze, for specific information on these freeze codes.

  3. Additional information can be found in IRM 25.16, Disaster Assistance and Emergency Relief.

  4. If the case is suspended, ensure follow up every six months to determine status of the freeze code.

Criminal Investigation Freeze (Z-, -Z)

  1. First Read or Full Scope technicians will suspend cases with "Z-" or "-Z" freezes.

    • Follow up every six (6) months to determine the status of the Criminal Investigation (CI) case per IRM 25.15.18.5.1.9, Criminal Investigation (CI) Cases.

    • Document all contacts made with CI.

Account Issues and Resolutions

  1. An account problem may be identified by either a First Read or Full Scope technician while researching the taxpayer’s account. Account problems are normally identified by the taxpayer but a technician may notice misapplied payments or multiple accounts for the same tax period (joint account and separate).

  2. Simple account problems should be addressed within the team.

  3. Complex account problems are referred to the Technical team. The technical referral should include:

    1. Entire case file.

    2. Documentation of the account problem described on the Innocent Spouse Technical Referral Form.

    3. Be in the appropriate colored folder.

    4. Control or re-control TXMOD with activity code "ACCTPROB" using the Form 8857, Request for Innocent Spouse Relief, received date.

    5. If applicable, update ISTS and the ISTSR Input Record to the appropriate stage with activity code "TECH" and input a comment entry on ISTS of "Account Problem."

  4. Certain account problems may be referred to other areas:

    • Requests for abatement of assessments made by Exam or AUR should be referred to the Audit Reconsideration Unit.

    • Returns filed after an ASFR assessment should be referred for processing. See IRM 21.5.1.5.5, Processing/Reprocessing CIS Tax Returns, for more information.

    • Amended returns filed for original assessments should be referred to AM.

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    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Erroneous Refunds

  1. Instructions to work erroneous refunds can be found in IRM 21.4.5, Erroneous Refunds.

  2. An erroneous refund is the receipt of money from the IRS to which the recipient is not entitled. Refer any erroneous refund as a technical referral. Examples of erroneous refunds are:

    • Misapplied payments that refunded.

    • A credit refund the taxpayer is not entitled to receive.

    • An incorrect tax assessment or adjustment causing an incorrect refund.

    • Taxpayer files a claim for a lost refund, receives replacement check and then finds the original and keeps both.

    • Barred statute refunds.

    • A taxpayer makes an advance payment against a pending tax increase and the money refunds before the tax assessment posts.

    • A taxpayer receives both a manual (TC 840) and computer generated (TC 846) refund for the same overpayment.

Joint Returns - Invalidated

  1. This section of the IRM provides guidance to resolve invalidated joint returns.

  2. There are three situations where a joint return is invalid:

    1. Invalid election - One of the individuals on the joint return did not elect to file a joint return.

    2. Forgery - One spouse did not sign the return.

    3. Unlawful - Taxpayers had no legal right to file jointly.

      Note:

      Tacit consent is a factor to consider for invalid elections and forgery allegations.

Tacit Consent Factors
  1. Did the RS have a filing requirement? Consult Pub 17, Your Federal Income Tax (For Individuals), for the year at issue to determine if the RS had a filing requirement. The filing requirement is not determined by whether or not the RS has taxable income. Did the RS file a Married Filing Separate (MFS) return?

    Note:

    In a community property state, both spouses are required to report their share of the community property income, not just their own income, on a MFS return.

  2. Check the filing status for prior and subsequent tax years.

  3. Did the RS participate in the preparation of the return by providing return information such as Form W-2s and/or Form 1099s?

  4. Was there a tax benefit to filing jointly, such as reduced income tax or Earned Income Tax Credit?

  5. Check the entire return for signature, forms filed after the return was filed, extension requests, and installment agreements.

  6. Check the entire return for schedules that belong to or include the RS. Were there any gains or losses belonging to the RS?

  7. Did RS have another reason to file jointly: for example, due to a divorce decree, or for immigration purposes or other reason?

Determining if Joint Election is Valid
  1. Filing a joint return is an election. A joint return must be signed under penalty of perjury by both taxpayers to be a valid election for joint filing status.

    Note:

    Substitute for Return (SFR) and Automated SFR (ASFR) filed by the Service are never a joint return, however, a joint return can be filed after the assessments (associated with the SFR or ASFR) have posted.

  2. Many returns will not have signatures since many returns are now filed electronically, so tacit consent must be considered in determining the validity of the joint filing status shown on the return.

  3. A joint return may contain an invalid joint filing status election if:

    • An original or amended joint return was filed and processed with only one signature on a paper filed return.

    • The return was signed, however, it is established that the signature was forged and there was no tacit consent.

    • The return was signed under duress.

    • One of the individuals filed a timely return using Single, MFS, or Head of Household (HOH) filing status.

      Reminder:

      Remember to complete IDRS research on both taxpayers’ SSNs.

  4. See the Job Aids Accounts Management web page on Common Law Marriage at http://serp.enterprise.irs.gov/databases/job-aids/am/state-information/common-law-marriage.html, to determine if the taxpayers resided in a state that recognizes common law marriage.

  5. If the election is valid, continue processing the request for innocent spouse relief by returning the request back to First Read with appropriate documentation as to the validity of the joint election on the return.

Joint Election is Invalid
  1. Invalid elections are often complicated by actions taken on the account by other IRS operations or action taken by one of the spouses.

  2. If a joint return is determined to be invalid then the request for innocent spouse relief is non-qualifying. Immediately close the ISTS record as non-qualified. Open an IDRS control using employee IDRS number with activity "INVA" to correct the account.

    • Update ISTS and the ISTSR Input Record to Stage 29 with activity code "INVA" and then to Stage 30 with activity code "ACCTCORR" .

  3. Determine if the return should be referred for audit in the Field or in CCEO:

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

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

  4. If audit referral criteria are not met consider fraud before correcting the account or accounts. See IRM 4.19.10.4, Fraud Referrals, for more information.

  5. To correct the account or accounts consider the following:

    • Determine the appropriate Filing Status (FS).

    • Determine the appropriate tax on the filed return as corrected.

    • Correct tax to the extent possible based on the tax currently assessed.

    • Ensure statute dates are correct.

    • Leave dependents on both returns if unable to correct tax and/or credits.

    • Determine appropriate EITC based on FS.

      Caution:

      Each situation is different and all scenarios cannot be addressed in the IRM. All accounts should be corrected using the facts and knowledge of the case. All decisions, facts, or findings must be documented.

  6. Follow IRM 21.6.7, Adjusting Individual Tax Accounts, when there are no additional adjustments on the account(s).

  7. The following table identifies account corrections and action needed based on the various scenarios where the joint return is invalid and the account reflects additional adjustments:

    IF THEN
    • Primary filed return without secondary’s knowledge.

    • Additional assessment based on secondary income.

    • Secondary does not have a filing requirement.

    • Adjust the joint account to correct FS.

    • Only decrease tax if applicable.

    • Adjust credits, if applicable.

    • Adjust gross income and Taxable Income (TXI), if applicable

    • Refund only payments that are identified as made by secondary.

    • Primary filed return without Secondary’s knowledge.

    • Additional assessment based on secondary income.

    • Secondary has a filing requirement.

    • Secondary did not file.

    • Adjust the joint account to correct FS.

    • Only decrease tax if applicable.

    • Refund only payments that are identified as secondary’s.

    • Notify secondary of the filing requirement.

    • If exam criteria is met, eFax Examination Referral Memo with the case to:

      • Field Exam Case Selection at 877-931-8825, or

      • Campus Exam Case Selection at *SBSE EEF Exam CCS CWI

      Note:

      For cases that are too large to be faxed, mail the cases using UPS Ground. The addresses for campus and field cases can be found on https://organization.ds.irsnet.gov/sites/SbseCCSCRC/FS/ISO/SitePages/Home.aspx.

    • Primary filed return without secondary’s knowledge.

    • Additional assessment based on secondary income.

    • Secondary has filing requirement.

    • Secondary filed.

    • Adjust the joint account to correct FS.

    • Only decrease tax if applicable.

    • Refund only payments that are identified as secondary’s.

    • Secondary’s return - verify return was properly processed.

    • Primary filed return without secondary’s knowledge.

    • Additional assessment based on secondary’s income or income from both.

    • Secondary has filing requirement.

    • Secondary filed, but return is not processed.

    • Adjust the joint account to correct FS.

    • Only decrease tax is applicable.

    • Refund only payments that are identified as secondary’s.

    • Check CC TRDBV for potential electronic return that may have been rejected. If found, notify taxpayer to file a paper return.

    • If exam criteria is met, eFax Examination Referral Memo with the case to:

      • Field Exam Case Selection at 877-931-8825, or

      • Campus Exam Case Selection at *SBSE EEF Exam CCS CWI

      Note:

      For cases that are too large to be faxed, mail the cases using UPS Ground. The addresses for campus and field cases can be found on https://organization.ds.irsnet.gov/sites/SbseCCSCRC/FS/ISO/SitePages/Home.aspx.

    • If paper return available send to receipt and control for processing.

    • Consider ASED if paper return is filed.

    • One spouse files using the other as primary (filing individual is secondary).

    • Primary has no knowledge.

    • Additional assessment based on primary’s income.

    • Primary has filing requirement and filed a separate return.

    • Move the filed return to the secondary SSN. See IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    • Monitor reprocessed return to ensure correct posting.

    • Adjust primary account per separate return by posting appropriate codes.

    • Correct the received date to ensure statutes are accurate.

    • Send the primary return to classification with a note "DIF By-Pass."

    • One spouse files using the other as primary (filing individual is secondary).

    • Primary has no knowledge.

    • Additional assessment based on primary’s income.

    • Primary has filing requirement and did not file.

    • Move the filed return to the secondary SSN. See IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    • Leave the additional assessment on the primary as is.

      Note:

      Do not issue any refunds to primary.

    • Notify primary of filing requirement.

    • If exam criteria is met, eFax Examination Referral Memo with the case to:

      • Field Exam Case Selection at 877-931-8825, or

      • Campus Exam Case Selection at *SBSE EEF Exam CCS CWI

      Note:

      For cases that are too large to be faxed, mail the cases using UPS Ground. The addresses for campus and field cases can be found on https://organization.ds.irsnet.gov/sites/SbseCCSCRC/FS/ISO/SitePages/Home.aspx.

    • One spouse files using the other as primary (filing individual is secondary).

    • Primary has no knowledge.

    • Additional assessment based on primary’s income.

    • Primary does not have a filing requirement.

    • Move the filed return to secondary SSN. See IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    • Monitor the secondary return for posting.

    • Back out the tax and/or credits reflected on the primary account after the secondary account is processed.

  8. The following table identifies account corrections and action needed based on the various scenarios where the joint return is invalid and the account does NOT reflect additional adjustments:

    IF THEN
    • Primary filed without secondary’s knowledge.

    • Secondary does not have a filing requirement.

    • Adjust the joint account to correct FS.

    • Refund only payments that are identified as secondary’s.

    • Primary filed return without secondary’s knowledge.

    • Secondary has filing requirement.

    • Secondary did not file.

    • Adjust the joint account to correct FS.

    • Only decrease tax if applicable.

    • Refund only payments that are identified as secondary’s unless payment appears to be an estimated payment.

    • Move estimated payments to secondary SSN MFT 30 for the year where the payment posted.

    • Notify secondary of filing requirement.

    • If exam criteria is met, eFax Examination Referral Memo with the case to:

      • Field Exam Case Selection at 877-931-8825, or

      • Campus Exam Case Selection at *SBSE EEF Exam CCS CWI

      Note:

      For cases that are too large to be faxed, mail the cases using UPS Ground. The addresses for campus and field cases can be found on https://organization.ds.irsnet.gov/sites/SbseCCSCRC/FS/ISO/SitePages/Home.aspx.

    • Primary filed return without secondary’s knowledge.

    • Secondary has filing requirement.

    • Secondary filed their own return.

    • Adjust the joint account to correct FS.

    • Only decrease tax if applicable.

    • Transfer payments that are identified as secondary’s.

      Caution:

      The same payments should not be reflected on both accounts and primary account may need to have payment reversed and not moved.

    • One spouse files using the other as primary (filing individual is secondary).

    • Primary has no knowledge.

    • Primary has filing requirement and filed their own return.

    • Move the filed "joint" return to the secondary SSN. See IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    • Ensure the primary return has been properly processed or process posting appropriate codes if ASED is still open.

    • Correct the received date on both entities to ensure statutes are accurate.

    • Correct primary account to reflect the primary filed return.

    • Send the primary return to classification with a note "DIF By-Pass" .

    • One spouse files using the other as primary (filing individual is secondary).

    • Primary has no knowledge.

    • Primary does not have a filing requirement.

    • Move the filed return to secondary SSN. See IRM 21.5.2.4.23, Reprocessing Returns/Documents.

    • Ensure secondary return is properly processed.

    • Back out filed joint return on the primary.

    Note:

    Input CC STAUP on taxpayers to prevent collection activity while the account is being corrected.

    Note:

    If the ASED is expired, use Form 12810, Account Transfer Request Checklist, to move the accounts. Accounting processes this form.

Forgery

  1. Individuals who allege that their spouse forged an electronic return or signed a paper return on their behalf may not be true forgery cases, provided there is tacit consent. The individual, in the course of the relationship, provided their personal information to their spouse. Individuals who allege the spouse forged a signature should be considered under invalid elections and not forgery.

  2. The burden of proof is on the taxpayer to prove forgery and no intent to file a joint return.

    • Compare the signature on the return or assessment document with the signature on Form 8857, Request for Innocent Spouse Relief. If the return was filed electronically and the signature comparison cannot be done, "tacit consent" factors should be considered. Refer to IRM 25.15.19.3.3.1, Tacit Consent Factors.

    • If it appears that the taxpayer alleging forgery signed the return or assessment document, or if the taxpayer intended to file a joint return (due to tacit consent), then advise the taxpayer and continue processing the claim for relief.

      Note:

      Signatures often change over the years. Documentation can be requested showing signatures; for example, a copy of a driver’s license, social security card or other documents containing the taxpayer’s signature. If "tacit consent" factors apply, however, this may not be necessary.

Determination of Forgery
  1. If there is a determination of forgery, do not correct the account. Forgery cases should be referred to the fraud coordinator or the field for audit.

    Note:

    Consider identity theft before referring case.

    • Input TC 470 to stop account actions, prevent offsets, set W- freeze, and hold the account for 9 cycles.

    • If account is in status 22, 24 or 26, notify the appropriate collection office that there are serious account issues.

    • Prepare memo for the field or fraud referral.

    • Issue Letter 3657-C, No Consideration Innocent Spouse Claim Letter, to non-qualify the claim.

    • Update ISTS to Stage 29 using activity code "ACTP" and then to Stage 30 using activity code "ACCTCORR."

Unlawful

  1. Unlawful returns are returns filed when the taxpayers were not legally married at the end of the tax year.

    Exception:

    If the taxpayers resided in a common law marriage state and presented themselves as married, then the return could be a legal return, but the joint election may be invalid. See the Job Aids Accounts Management web page at http://serp.enterprise.irs.gov/databases/job-aids/am/state-information/common-law-marriage.html for information on how to determine if there is a common law marriage.

  2. Obtain the following information if available:

    • ESTAB for all tax returns identified on the claim for relief.

    • Secure copy of court or legal documents showing that the couple was divorced, or the marriage was invalid or annulled.

    • Consider alternative documentation that might support the taxpayer’s signed statement that there was no marriage or no valid marriage. For example, look at ACCURINT to determine if property is in both names, marriage certificates, divorce decrees, or other information that may be available for that taxpayer.

  3. Once established that the return is unlawful, allocate all return items between the two taxpayers.

    • Allocate items of income and expense using CC IRPTR when possible.

    • Attribution of property generating income (for example rental property, farms, partnerships, capital gains/losses) may be resolved by using ACCURINT when possible. If unknown, allocate items fifty percent to each taxpayer.

    • Income from jointly owned assets can be divided evenly unless there is an indication that one individual owns a higher percentage, or a court document assigns the asset to one of the taxpayers.

      Exception:

      If the return was filed without the consent of one taxpayer, then the entire tax liability is allocated to the individual who filed the return.

      Caution:

      When correcting the account on the primary taxpayer the filing status must be changed to a status other than Married Filing Joint (filing status 2). The entity information must be changed concurrently. For the secondary taxpayer an entity account must be present, or established, prior to any account transfer.

Audit Referrals

  1. Cases involving invalid elections may need to be referred to Exam (field, campus examination or fraud coordinator) for audit.

    • Returns processed to an incorrect SSN must be corrected before referring to Exam.

    • Cases with short statutes cannot be referred unless approved by the Exam Coordinator.

    • Determine who to refer the case to depending on the complexity of the issues and whether there are indicators of fraud.

    • Do not classify the return for issues but prepare a memo stating the facts of the case and any areas of concern. The Exam Referral Memo template can be found on the Innocent Spouse Operation Sharepoint site at https://organization.ds.irsnet.gov/sites/SbseCCSCRC/FS/ISO/SitePages/Home.aspx.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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  4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

General Information

  1. This section describes other potential issues that could arise as the result of an innocent spouse claim for relief.

Community Property Overview

  1. Taxpayers who live in community property states report income based on state law on separately filed returns. Most community property states require each individual to report fifty percent (50%) of all income on their individual returns. There is no community property issue if a joint return is filed.

  2. If the RS requests relief for a year where there is no joint return and:

    • RS filed a return with filing status of 1, 3 or 4, and with a balance due, or

    • RS filed a return that was full paid with payments made after the return was filed, and

    • RS lived in a community property state for the year requested, then

    • Develop as an IRC 66, Treatment of Community Income, case rather than as an IRC 6015, Relief from Joint and Several Liability on Joint Return, case.

      Note:

      See IRM 25.15.5.2, Community Property States, for a list of community property states.

  3. Community property cases are worked by the technical team. Before referral to the technical team, First Read technician will:

    • Request the administrative file for both taxpayers.

    • Build the case as a qualifying claim.

    • Input TC 971 AC 065 on the RS’s account.

    • Note on ISTSR Input Record "Comm Prop" .

    • Notate history on ISTS "COMM PROP" .

  4. If the RS requested relief for a year for which there is no issue to consider under IRC 66(c), then non-qualify case for filing status. See IRM 25.15.18.8.1.2, Non-Qualifying Claims, for more information.

    • Update ISTS and ISTSR Input Record through Stage 29 with Activity Code "FS" and a history item "COMM PROP."

    • These cases require a TC 290 for .00. See IRM 25.15.9, Account Processing of Requests for Relief from Joint and Several Liability, for more information.

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

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Unable to Secure Administrative File

  1. If unable to secure the administrative file:

    1. Request a special search for the administrative file.

    2. Research IDRS and ACCURINT for the information to determine ownership of income or expenses.

    3. If unable to obtain the information and the claim cannot be worked without it, secure the information from the RS.

    4. If still unable to determine who the income or deductions are attributable to, leave the item(s) on the joint account. The RS has the burden to establish to whom the income or deduction belongs.