25.25.7 Automated Questionable Credit Program

Manual Transmittal

September 26, 2019

Purpose

(1) This transmits revised IRM 25.25.7, Revenue Protection, Automated Questionable Credit Program.

Material Changes

(1) IRM 25.25.7.1 Corrected Policy Owner name, added stakeholders, added goals and link to manager IRM, corrected letter links.

(2) IRM 25.25.7.1.1 Corrected Policy Owner name.

(3) IRM 25.25.7.1.2 Corrected Policy Owner name, added link to manger IRM, added link to Embedded Quality IRM.

(4) IRM 25.25.7.1.3 Added link to Servicewide Delegations of Authority, added section symbol for IRCs, spelled out acronyms.

(5) IRM 25.25.7.1.4 Corrected Policy Owner name, corrected IRM links.

(6) IRM 25.25.7.1.5 Corrected Policy Owner name.

(7) IRM 25.25.7.1.6 Added paragraph and link to Taxpayer Bill of Rights, corrected policy owner.

(8) IRM 25.25.7.2 Spelled out acronyms, corrected form links and provided form titles.

(9) IPU 18U1428 issued 11-06-2018 IRM 25.25.7.2(1) table add Pub 519 requirements for EIC.

(10) IPU 19U0728 issued 06-06-2019 IRM 25.25.7.2(1) table add exception for ITIN.

(11) IPU 19U0728 issued 06-06-2019 IRM 25.25.7.2(1) add IRM link for Rule 7T process.

(12) IRM 25.25.7.3 Spelled out acronyms, corrected form and letter links and provided titles, corrected IRM links.

(13) IPU 18U1428 issued 11-06-2018 IRM 25.25.7.3(1) box 5 update AQC 6X.

(14) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.3(1) add new box 4 and box 5 for AQC6P.

(15) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.3(1) box 6 add link to IRM 25.25.3.4.

(16) IPU 19U0749 issued 06-10-2019 IRM 25.25.7.3(1) box 6 add reject criteria.

(17) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.4 update markup.

(18) IRM 25.25.7.4 Added reference for TC 971 AC 120 with XRET, spelled out acronyms, corrected form and letter links and provided titles, corrected IRM links.

(19) IPU 18U1428 issued 11-06-2018 IRM 25.25.7.4(9) add agreed exception.

(20) IPU 19U0728 issued 06-06-2019 IRM 25.25.7.4(11) add box 4 for ITIN and renumber box 5 and 6.

(21) IRM 25.25.7.4.1 Spelled out acronyms, corrected form and letter links and provided titles, corrected IRM links.

(22) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.4.1(2)(b) box 2 added AQCX.

(23) IRM 25.25.7.4.2 Spelled out acronyms.

(24) IRM 25.25.7.5 Corrected letter links and added titles, corrected IRM links, spelled out acronyms.

(25) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.6 update IRM link.

(26) IRM 25.25.7.6 Corrected letter links and added titles, corrected IRM links, spelled out acronyms.

(27) IRM 25.25.7.7 Corrected letter links and added titles, spelled out acronyms.

(28) IRM 25.25.7.8 Corrected form link and added title.

(29) IRM 25.25.7.8.1 Spelled out acronyms, corrected form links and provided titles.

(30) IRM 25.25.7.8.3 Corrected IRM and letter links, added letter titles.

(31) IRM 25.25.7.8.4 Spelled out acronyms.

(32) IRM 25.25.7.8.5 Spelled out acronyms.

(33) IPU 19U0728 issued 06-06-2019 IRM 25.25.7.9 add e-4442 timeframe.

(34) IRM 25.25.7.9 Added paragraph for no AQC response control, added instruction to have the taxpayer provide their identification information or copy of letter, corrected IRM and letter links, added letter titles.

(35) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.9(1) add link to erroneous refund procedures.

(36) IPU 19U0364 issued 03-19-2019 IRM 25.25.7.9(3) box 1 add reminder for premium tax credit.

(37) IPU 18U1428 issued 11-06-2018 IRM 25.25.7.9(3) box 7 update link.

(38) IRM 25.25.7.10 Corrected form and letter links, added letter titles, corrected and restricted email address.

(39) IRM 25.25.7.11 Spelled out acronyms, corrected form and letter links and added letter titles.

(40) IPU 19U0728 issued 06-06-2019 IRM 25.25.7.11(1) box 1 remove after suspense process.

(41) IRM 25.25.7.12 Spelled out acronyms.

(42) Exhibit 25.25.7-1 Corrected definition of TC 971 AC 501.

(43) Exhibit 25.25.7-2 Spelled out acronyms.

(44) Exhibit 25.25.7-3 Spelled out acronyms.

(45) Editorial changes made throughout the IRM section.

Effect on Other Documents

IRM 25.25.7 effective 09-17-2018 is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs) – IPU 18U1428 issued 11-06-2018, IPU 19U0364 issued 03-19-2019, IPU 19U0728 issued 06-06-2019.

Audience

Campus employees in Return Integrity Verification Operations (RIVO), Return Integrity Verification Program Management (RIVPM, Return Integrity and Compliance Services (RICS).

Effective Date

(10-01-2019)

Denise D. Davis
Director, Return Integrity Verification Program Management
Wage and Investment Division

Program Scope and Objectives

  1. Purpose and Program Goals: This IRM section provides guidance for Return Integrity Verification Operations (RIVO) employees when verifying individual master file returns for possible false income and withholding where a refundable credit is claimed. Individual master file returns are selected through the Dependent Database (DDb) or through the Return Review Program (RRP) system. These selection processes identify suspicious returns meeting certain criteria for false or inflated wages and/or withholding with a refundable credit claimed on the return.

  2. Audience: The audience intended in this IRM is RIVO employees.

  3. Policy Owner: The Return Integrity Verification Program Management (RIVPM) is the policy owner of this program.

  4. Program Owner: RIVPM is the program office responsible for oversight over this program.

  5. Primary Stakeholders; The primary stakeholders are Return Integrity Verification Operation (RIVO), and organizations such as Accounts Management, that collaborate with RIVO.

  6. Program Goals; Program goals for the program are in the Operation Guidelines as well as IRM 1.4.10, Integrity & Verification Operation Managers Guide.

  7. The Automated Questionable Credit (AQC) program is for certain types of work streams that do not meet the traditional Examination or Accounts Management work load. IDRS letters are issued to taxpayers proposing tax assessments. To be considered for treatment by AQC, cases must meet at least five of the following seven core AQC criteria:

    • A simple case (e.g., single issue case with low response rate and little or no documentation required)

    • Math-Error like conditions (i.e., Is the taxpayer eligible or not? Over the limit?)

    • High confidence in accuracy of data (e.g., low no change rate)

    • Refunds based on Verified False Income and Withholding (FI&W)

    • Refundable credits based on verified false income

    • A pre-refund opportunity to protect revenue

    • Issue generated from information on a return or in combination with 3rd party government data (data matching capabilities)

    Note:

    There may be certain exceptions when the opportunity is post-refund, an example is the Residential Energy Credit.

  8. All AQC cases will be issued a Letter 4800C, Questionable Credit 30 Day Contact Letter, informing the taxpayers of a proposed deficiency or disallowing a claim for refund or a credit for a subsequent period’s estimated tax.

  9. If the taxpayer does not respond to the Letter 4800C, then after the suspense period, the Service will send either a Letter 3219C, Statutory Notice of Deficiency, allowing the taxpayer 90 days to petition the Tax Court, or a Letter 0105C, Claim Disallowed or a Letter 0106C, Claim Partially Disallowed, and will make an immediate adjustment reflecting the claim disallowance.

  10. If the taxpayer does not respond to the Letter 3219C, after the suspense period, the Service will make an immediate adjustment reflecting the claim disallowance/assessment. No additional letter will be sent.

    Note:

    The Letter 3219C will include a paragraph disallowing a claim. This notice of claim disallowance triggers a two year period for the taxpayer to file suit in a district court or the Court of Federal Claims to contest those disallowed items. If the taxpayer files a petition to the Tax Court to contest the proposed deficiency and also wishes to contest all or part of the claim disallowance, the taxpayer may raise the disallowed issues in Tax Court to the extent provided by IRC § 6512.

Background

  1. Return Integrity Verification Program Management (RIVPM) strengthens the integrity of the tax system by:

    • Protecting the public interest by improving IRS’s ability to detect and prevent improper refunds

    • Serving the public interest by taking actions fairly and appropriately to identify, evaluate and prevent the issuance of improper refunds

    • Helping taxpayers understand the refundable tax credits for which they are eligible

Program Management and Review

  1. The program has reports to track the inventory, including receipts and closures. Additional report guidance is found in IRM 1.4.10, Integrity & Verification Operation Managers Guide.

  2. A quality control program, Embedded Quality, is in place to review all processes to ensure accuracy and effectiveness. Goals, measures, and operating guidelines are listed in the yearly Operation Guidelines and in IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Compliance, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support.

Authority

  1. Refer to the following:

    • IRM 1.2.2, Servicewide Policies and Authorities, Servicewide Delegations of Authority.

    • IRM 1.1.13, Organization and Staffing, Wage and Investment Division.

    • Various Internal Revenue Codes (IRC) including but not limited to:

    • IRC § 6402(a), Authority to make credits or refunds

    • IRC § 6401, Amounts treated as overpayments

    • IRC § 6404, Abatements of tax

    • IRC § 6213, Restrictions on assessments and math error authority

  2. Refer to IRC GATT § 32(c)(2)(B)(iv) for more information on General Agreement on Tariff and Trades (GATT) rule of disqualifying a prisoner’s income earned during incarceration for Earned Income Tax Credit (EITC).

Responsibilities

  1. Return Integrity Verification Program Management (RIVPM) has responsibility for information in this IRM. Information is published in the IRM on a yearly basis.

  2. The Director of RIVPM is responsible for the policy related to this IRM.

  3. The Chief of the RIVPM Policy & Analysis is responsible for ensuring this IRM is timely submitted to publishing each year.

  4. More information can be found in IRM 1.1.13.5, Return Integrity and Compliance Services.

Acronyms

  1. For a list of Acronyms used throughout Return Integrity Verification Operations (RIVO) see IRM 25.25.1.1.5, Acronyms.

Related Resources

  1. The related resources listed below may be utilized for account research and issue resolution. These related resources may be accessed through the IRS Intranet-Servicewide Electronic Research Program (SERP) site.

    • IRM 25.25, Revenue Protection

    • IRM 25.23, Identity Protection and Victim Assistance

    • IRM 21, Customer Account Services

    • IRM 2, Information Technology

    • IRM 3, Submission Processing

    • IRM 4, Examining Process

  2. IDRS restricted access accounts are accounts where a user must request special permissions to access the account through IDRS. Follow IRM 21.2.1.3.2, Authorized IDRS Access.

    Exception:

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

  3. The IRS adopted the Taxpayer Bill of Rights (TBOR) in June 2014. Employees are responsible for being familiar with and acting in accordance with taxpayer rights. See IRC § 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see The IRS outlines the Taxpayer Bill of Rights.

Automated Questionable Credit (AQC) Inventory Types

  1. There are several types of inventory that will be covered by Automated Questionable Credit Program (AQC). AQC inventory will be identified with a transaction code (TC) 971 action code (AC) 140 or a TC 971 AC 122 with the MISC field containing the inventory case type, and/or TC 971 AC 128 with a MISC field "AQCPTC191" or "AQCPTC195" and a TC 810 with a memo amount:

    Inventory Type Description "Required Documentation"
    AQC 16
    • Returns with verified bad wages and withholding and refundable credits meeting certain dollar criteria.

    • Copies of pay statements or check stubs that contain the date gross income was received, and the amount of income and withholding, OR

    • A statement on company letterhead from the employer that paid the questionable income that contains the dates of employment, wages paid and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an Individual Taxpayer Identification Number (ITIN).

    AQC16 partials (6P)
    • Returns with some (partial good) verified bad wages and/or withholding and refundable credits meeting certain dollar criteria.

    • Copies of pay statements or check stubs that indicate the date, gross income received, and withholding, OR

    • A notice on company letterhead from the employer that indicates the dates of employment, wages paid, and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    AQC16 XE with MISC field "XDDB"
    • Returns with verified bad wages and withholding and refundable credits meeting certain dollar criteria.

    • Copies of pay statements or check stubs that contain the date gross income was received, and the amount of income and withholding, OR

    • A statement on company letterhead from the employer that paid the questionable income that contains the dates of employment, wages paid and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    AQC6X (6X)
    • Form 1040X that cannot be verified within tolerance and the account contains prior Return Integrity Verification Operations (RIVO) involvement: including returns with or without refundable credits.

    • Copies of pay statements or check stubs that indicate the date, gross income received, and withholding, OR

    • A notice on company letterhead from the employer that indicates the dates of employment, wages paid, and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    AQC2
    • False Income and Withholding (FI&W) with NO refundable credits.

    • Copies of pay statements or check stubs that contain the date the gross income was received, and the amount of income and withholding, OR

    • A statement on company letterhead from the employer that paid the questionable income that contains the dates of employment, wages paid and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    General Agreement on Tariff and Trades (GATT11)
    • Prisoner with good income but a refundable credit that is not allowable based on income earned while incarcerated see IRM 25.25.9.4, General Agreement on Tariffs and Trade (GATT) Returns.

    • Letter from the Prison (government entity) showing dates of incarceration (less than full year prisoner) participation in work release and halfway house programs are still considered incarcerated, see Pub 596, Earned Income Credit (EIC), for additional requirements.

    Exception:

    If the taxpayer states they have never been incarcerated use local procedures to verify or the taxpayer may respond with a letter from the police/institution that they have not been incarcerated.

    American Opportunity Tax Credit (AOTC) (Pre-refund) (AOTC25–AOTC29) Additional Child Tax Credit (ACTC) or Earned Income Credit (EIC)
    • Inventory cases with refundable credits are typically cases that broke Dependent Database (DDb) Rule 7.

      Exception:

      A TC 971 AC 122 with MISC field 7V are accounts held by RIVO in December of 2017 and are not related to AQC.

    • 7B - AOTC27 - Claimed Social Security Benefits without withholding with AOTC only.

    • 7C - AOTC28 - 30+ years old with AOTC only.

    • 7D - AOTC29 - High risk preparer with AOTC.

    • 7E - AOTC25 - Claimed AOTC with no prior Form 1098T and under the age of 14.

    • 7F (7F)- Form 1040SS with ACTC.

    • 7T (7T) - Citizenship in question and claiming EIC

    • Copy of Form 1098-T, Tuition Statement, and proof of payment to higher education institution, or school transcript, etc. (If IRP documentation is not present). See IRM 4.19.15.3.1.1, Education Tax Credits - Evaluating Taxpayer Responses.

    • Copy of documentation showing the children claimed meet the tests outlined in Publication 501, (For 7F only) Dependents, Standard Deduction, and Filing Information, to be a qualifying child/qualifying relative.

    • See IRM 4.19.14.6.5, EITC - Personal Exemptions and Dependents, for examples of possible documentation that can be submitted to substantiate the claim.

    • For 7T only - The taxpayer needs to submit a copy of their social security card that does not contain a legend and copies of any dependent’s social security card. If the legend, "Not Valid for Employment." , appears on the card, the taxpayer is not eligible for the credit. See Pub 519, page 31, U.S. Tax Guide for Aliens, for additional requirements or IRM 4.19.14.6 (4), Evaluating EITC Taxpayer Responses.

    Office of Child Support Enforcement (OCSE18)
    • Returns with a TOPS offset for Child support (TC 898)

    • Returns with some (partial good) verified bad wages and/or withholding and refundable credits.

    • Manually referred from External Leads

    • Copies of pay statements or check stubs that indicate the date, gross income received, and withholding, OR

    • A notice on company letterhead from the employer that indicates the dates of employment, wages paid, and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    Premium Tax Credit (PTC) PTC claimed on tax return.
    • Form 1095-A, Health Insurance Marketplace Statement,

      Note:

      Form 1095-A must be verified (if not verified, additional documentation must be requested that justifies the form amounts). Additional documentation requirements are listed below.

      documentation proving enrollment in the marketplace and premium payments, invoices, or statements from the insurance providers that include the names of those covered by the benefits and dates of coverage. (Required for all PTCXX inventory types listed below).

    Reminder:

    The documentation submitted must match the original return amounts or an amended return will be required to claim a different amount of credit.

    AQC 17 (Premium Tax Credit)
    • False Income and Withholding (FI&W) with PTC as the ONLY credit.

    • Copies of pay statements or check stubs that contain the date the gross income was received, and the amount of income and withholding, OR

    • A statement on company letterhead from the employer that paid the questionable income that contains the dates of employment, wages paid and withholding deducted.

      Caution:

      A copy of a Form W-2 is not a substitute for the above, unless in substantiation of an ITIN.

    • See PTC above for required documentation.

    (PTC900) - Dependent Database (DDb)-PTC-Error-Code (CD) 900
    • PTC claimed, where the taxpayer is considered a full year prisoner.

    • PTC claimed on a joint return, where both taxpayers are considered full year prisoners.

    • Letter from the Prison showing dates of incarceration (less than full year) and

    • See PTC above for required documentation.

    (PTC901) DDb-PTC-Error-CD 901
    • The taxpayer is under the age of 18 and there is a record of Advance Premium Tax Credit (APTC) paid that was not reported on the tax return.

      Caution:

      PTC may not have been claimed on the return.

    • See PTC above for required documentation.

    (PTC904) DDb-PTC-Error-CD 904
    • No income was reported on the tax return and there is a record of APTC paid that was not reported on the tax return.

      Caution:

      PTC may not have been claimed on the return.

    • See PTC above for required documentation.

    (PTC902) DDb-PTC-Error-CD 902
    • The taxpayer is over the age of 65 and there is a record of APTC paid that was not reported on the tax return.

      Caution:

      PTC may not have been claimed on the return.

    • See PTC above for required documentation.

    (PTC903) DDb-PTC-Error-CD 903
    • A joint return, where both taxpayers are over the age of 65, and there is a record of APTC paid that was not reported on the tax return.

      Caution:

      PTC may not have been claimed on the return.

    • See PTC above for required documentation.

    Error Resolution Code (ERC) 191 (PTC91)
    • Verified income below the poverty level: the taxpayer is not eligible for the PTC.

    • See PTC above for required documentation.

    ERC 195 (PTC95)
    • PTC claimed with no record of a Marketplace purchase.

    • See PTC above for required documentation.

    Special Handling (AQC55) (This includes statute imminent and statute expired inventory)
    • Inventory cases that have been referred to AQC, that do not fit into normal AQC Inventory types listed above.

    • Various documents, based on case review of income/credits claimed.

Automated Questionable Credit (AQC) Initial Case Processing

  1. Automated Questionable Credit (AQC) cases are those that have been deemed to be non-compliant with the current tax regulations and have been forwarded to AQC for treatment. AQC Tax Examiners (TEs) will be responsible for reviewing the account and determining if appropriate documentation exists for the credit claimed. Use the following chart to initiate case actions:

    Note:

    DO NOT CREATE AQC cases from Operations Assistance Requests (OARs) or Form 4442, Inquiry Referral.

    If Then
    1
    Pre-refund initial case actions
    • Research account for reject criteria, see Exhibit 25.25.7-1, Inventory Reject Criteria, and reject the case if criteria is met.

      Note:

      Research account for -O freeze. Ensure to use special paragraph in the initial contact letter during the disaster relief period. Update control with "XXOFREEZE" , "XX" is the work type per IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Research to determine if payments have posted to the account. If payments are present that were not claimed on the return or are not for the AQC deficiency, see Exhibit 25.25.5-1, Triage Procedures , and take appropriate actions to refer the case for processing.

    • Open a control using category "QRPA" and use the inventory type as the activity field, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Input transaction code (TC) 971 action code (AC) 140 include inventory type in MISC field (if no TC 971 AC 122 or prior TC 971 AC 140), see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Input a TC 570 ( if one is not already present) to ensure the credit is held.

    • Input TC 971 AC 850 on current year returns.

      Exception:

      Do not input on AQC 6P - partials.

    • Bring back any offsets as necessary, see IRM 21.4.6.5, Refund Offset Procedures.

    • Send Letter 4800C, Questionable Credit 30 Day Contact Letter, with appropriate paragraphs.

    • Update the IDRS control activity to the suspense expiration date, "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 45 calendar days or plus 60 days for outside the U.S.).

    • Update AQC database as required.

    2
    Post refund initial case actions
    • Research account for reject criteria, see Exhibit 25.25.7-1, Inventory Reject Criteria , and reject the case if criteria is met. (Exception: continue processing even when module shows a refund/offset has been issued).

      Note:

      Research account for -O freeze. Ensure to use special paragraph in the initial contact letter during the disaster relief period. Update control with "XXOFREEZE" , XX is the work type per IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Open a control using category "QRPA" and use the inventory type as the activity field, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Input TC 971 AC 140 include inventory type in MISC field, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Send Letter 4800C, with the appropriate paragraphs.

    • Update the IDRS control activity to the suspense expiration date, "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 45 calendar days or plus 60 days if outside the U.S.).

    • Update AQC database as required.

    3
    Special Handling

    Note:

    Special Handling cases may not meet all AQC criteria, but will be worked through the AQC process

    • Upon receipt of the referral open a control. Open the control using category "QRPA" and use "AQCSPECRCV "in the activity field.

      Note:

      This control should be opened during triage to show receipt of the transferred case by AQC.

    • Input TC 971 AC 850 on current year returns.

    • Input TC 971 AC 140 include inventory type in MISC field, "SPECHAND".

    • Send Letter 4800C, Letter 3219C, Statutory Notice of Deficiency, Letter 0105C, Claim Disallowed, or Letter 0106C, Claim Partially Disallowed, with appropriate paragraphs.

      Note:

      The type of letter to send will depend on the type of case and the time remaining on the Assessment Statute Expiration Date (ASED). If the ASED is imminent see IRM 25.25.7.11, Automated Questionable Credit (AQC) Statute Imminent / Statute Expired Cases.

      Note:

      Research account for -O freeze. Ensure to use special paragraph in the initial contact letter during the disaster relief period. Do not issue a Letter 0105C, Letter 0106C, or Letter 3219C during the disaster relief period. Update control with XXOFREEZE, XX is the work type per IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Update the IDRS control activity to the suspense expiration date (if not sending a Letter 0105C or Letter 0106C), ("55MMDDYYYY" MMDDYYYY = the current date plus 45/105 calendar days, or plus 60/150 days, if outside the U.S.).

    • Update AQC database as required.

    4
    AQC 6P AND command code (CC) IRPTR wages and withholding match originally reported amounts within tolerance (only after CC IRPTR is available for good)
    • Release the refund, use TC 290 .00 with reason code (RC) 085 and priority code (PC) 8.

    • DO NOT send a letter.

    • Update the Electronic Fraud Detection System (EFDS) notes as appropriate. For Premium Tax Credit (PTC) cases input "PTC addressed" .

    • "Refile" the return in EFDS

      Note:

      If the return is in the Scheme Tracking and Referral System (STARS), update the disposition to "DL" to have the return deleted from STARS. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), with reason the refund was released.

    • Ensure all RIVO control bases are closed.

    • Update AQC database as required, using "surveyed" as the closing disposition. Do not input a protected dollar amount.

    5
    AQC6P AND the changes to income and or credits would result in a refund greater than that originally claimed
    • Do not send an Initial Contact Letter.

    • Input TC 290 for .00 with no source document to release the original refund. Use Reason Code "099" , Source Code "0" and Hold Code "3" , to hold the adjustment notice.

    • Update EFDS notes with reason the refund was released.

    • "Refile" the return in EFDS.

      Note:

      If the return is in STARS, update the disposition to "QL" .

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), with reason the refund was released.

    • Ensure all RIVO control bases are closed.

    • Update AQC database as required, using "surveyed" as the closing disposition. Do not input a protected dollar amount.

    6
    AQC 6X
    • Upon receipt of the control to 1487877777

      • Verify the account has been adjusted to the amended return, if not adjusted, reject back to AM or SP, as appropriate. Close the QRPA control. Open a new control back to AM/SP originator as "C#,1040XRJCT,A,XRET" . Leave appropriate AMS note explaining reject.

      • Verify there are RIVO markers. If no RIVO markers release the refund.

      • Verify income claimed, if income is verified within tolerance per IRM 25.25.3.4, Income Verification using Command Code (CC) IRPTR, update activity to "VERIFIED" , and release the refund.

    • Once the above steps have been completed determine the work type and follow processing in the table above.

Taxpayer Responses

  1. All Automated Questionable Credit (AQC) taxpayers will receive the Letter 4800C, Questionable Credit 30 Day Contact Letter. If the taxpayer does not agree to the proposed adjustments and does not provide a signed statement explaining the reason for the disagreement, the taxpayer will receive the Letter 3219C, Statutory Notice of Deficiency (90 day letter) or Letter 0105C, Claim Disallowed or Letter 0106C, Claim Partially Disallowed.

  2. Research the account for other active controls, such as -L Freeze greater than Status Code 08 or Automated Underreporter Control with Transaction Code (TC) 922 with closing code greater than 55, if either are present refer case to appropriate function and send any useful documentation received using Form 3210, Document Transmittal.

  3. Research for a -A freeze, a TC 971 action code (AC) 120 with "XRET" , or a "TPRQ" inquiry assigned to another area. The inquiry may be the response to the AQC letter. If the correspondence/amended return is in relation to the AQC issue; ensure appropriate notes are added to AMS to alert Accounts Management (AM)other areas of what will be done with the inquiry/amended return (e.g., "amended return ok to adjust" , "PTC amounts differ from reported amounts" , etc., as appropriate).

  4. If a Form 1040X , Amended U.S. Individual Income Tax Return, is received by Return Integrity Verification Operations (RIVO) that does not only address the proposed change, the Tax Examiner (TE) will send the Form 1040X, to AM or Submission Processing (SP). Hold documentation until AM or SP confirms receipt of the Form 1040X or until 3 business days have passed, whichever date falls earlier.

    • Verify the income and withholding reported on the amended return per IRM 25.25.3.2, Verification of Income

    • Input/Update AMS notes with "verified good" or "verified bad" information per IRM 21.2.2.4.5, Account Management Services (AMS)

    • Update Scheme Tracking and Referral System (STARS) disposition

    • Update AQC database

    If the Form 1040X was only submitted as an agreement to the proposed changes, treat the amended return as agreed and follow the table in Paragraph 9 below.

  5. If an AQC response IDRS control base is not open, open an IDRS control to IDRS number "1484177777" , with the received date of the correspondence. Use one of the following category codes: "AQCA" , for agreed "AQCD" for disagreed, "AQCI" for identity theft, "AQC1" for responses received from Wage and Withholding Only (WOW) or "AQCO" for all others.

    Note:

    All work will be initially assigned to the number of the employee with a control or to the "1484177777" response queue within 5 days of receipt. Cases will then be assigned to individual AQC TEs based on IDRS number.

  6. If the response indicates the taxpayer is deceased, follow normal procedures for processing the case per the charts below. In addition, see IRM 21.6.6.4.22.1, Updating the Entity on Decedent Accounts and IRM 21.6.6.4.22.2, Processing Decedent Account Refunds. If the response indicates Identity Theft, follow the procedures in paragraph 12 below.

  7. If the response indicates that the taxpayer has moved and provides a new address, ensure that the address is corrected/perfected before account actions are taken. Refer to IRM 3.13.5.49, Information Required to Complete Address Changes, for further information. If the address has been updated to the Austin Service Center, between the time the letter was sent and the response was received, ensure the address is corrected back to the original address used by AQC.

  8. Taxpayer responses to these letters will be grouped as described in the tables below. Responses are worked in prioritized order "Disagreed" , "Agreed" , then "IDT" "Other" .

  9. For "Agreed" taxpayer responses follow the table below:

    Exception:

    For responses received on work type AQC16 sent by the tool from February 2018 through June 2018 where the taxpayer agrees in full, but command code (CC) IRPTR shows the account should have been a partial, release the part of the refund the taxpayer is entitled to based on CC IRPTR.

    If the Taxpayer's Response is Agreed Then
    1
    • The taxpayer agrees to the proposal and has signed the letter or the letter has been signed by an Authorized Third Party, see IRM 3.42.9.3.8, Third Party Authorization.

    Exception:

    If the taxpayer has checked the "Agreed " box and has provided documentation that substantiates the claim, treat the response as "Disagreed" , and update the activity to "Disagreed" . Follow all other disagreed procedures.

    • Input the adjustment as a Source Document (SD) and do not send the taxpayer any subsequent letters.

      Note:

      If there is a remaining refund that needs to be released involving Premium Tax Credit (PTC) or an -E freeze on the module ensure a TC 811 for .00 with a posting delay of 2 is input to release any remaining credit and/or the freeze condition.

    • Update Electronic Fraud Detection System (EFDS) notes as appropriate. For PTC cases input "PTC addressed"

    • Update the return in STARS to "QL".

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Ensure all Integrity and Verification Operation (IVO) control bases are closed.

    • Update AQC database as required. Include the dollar amount protected.

    2
    • The taxpayer sends in full payment that posted to the account, but does not return the letter.

      Note:

      These are post refund cases.

    • IDRS reflects full payment received.

    • Input the adjustment as a Non-Source Document (NSD) and do not send the taxpayer any subsequent letters.

      Note:

      If there is a remaining refund that needs to be released involving PTC (TC 810) or an -E freeze on the module ensure a TC 811 for .00 with a posting delay of 2 is input to release any remaining credit and/or the freeze condition.

    • Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    • Update the return in STARS to "QL".

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Ensure all RIVO control bases are closed.

    • Update AQC database as required. Include the dollar amount protected.

    3
    • The taxpayer agrees to the proposal, has signed the letter and/or has submitted a request in writing or on Form 9465, Installment Agreement Request, for a payment plan.

    • Input the adjustment as a Source Document (SD) and do not send the taxpayer any subsequent letters.

      Note:

      If there is a remaining refund that needs to be released involving PTC (TC 810) or an —E freeze on the module ensure a TC 811 for .00 with a posting delay of 2 is input to release any remaining credit and/or the freeze condition.

    • Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    • Update the return in STARS to "QL".

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Ensure all RIVO control bases are closed.

    • Refer the installment agreement request to the Collections Function per the Mail Routing Guide.

    • Update AQC database as required. Include the dollar amount protected.

  10. For “Incomplete” taxpayer responses follow the table below:

    If the Taxpayer's Response is Incomplete And Then
    1
    • The taxpayer sends the Letter 4800C or Letter 3219C with no signature, or signed the letter but did not provide a statement or check a box.

    • You can reach the taxpayer by telephone, see IRM 21.1.3.2.3, Required Taxpayer Authentication.

    • Request a signed letter with an agreement or disagreement. If TP intends to send a response of disagreement advise TP to include supporting documents, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • If contact is made, request the taxpayer to fax or mail the information.

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855-855- 0616.

    • When a new taxpayer (TP) response is received, reevaluate for possible agreement / disagreement and follow the applicable table found in this section.

    • Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Close “AQCX” correspondence control. Leave “QRPA” control open.

    • If no QRPA control is open, create a new control using the original QRPA control received date and suspense activity as:
      "C#,XXMMDDYYYY,A,QRPA
      1487855555,MMDDYYYY"
      ("XXMMDDYYYY" = activity before control was closed and "MMDDYYYY " is the original received date of the case).

    • Update AQC database as required. Do Not update the disposition.

    2
    • The taxpayer sends the Letter 4800C or Letter 3219C with no signature, or signed the letter but did not provide a statement or check a box.

    • You cannot reach the taxpayer by telephone.

    • Send Letter 0131C, Information Insufficient or Incomplete for Processing Inquiry, to explain needed documentation see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Close “AQCX” correspondence control. Leave “QRPA” control open.

    • If no QRPA control open, create a new control using the original QRPA control received date and suspense activity as:
      "C#,XXMMDDYYYY,A,QRPA
      1487855555,MMDDYYYY"
      ("XXMMDDYYYY" = activity before control was closed and "MMDDYYYY " is the original received date of the case).

    • Update AQC database as required. Do Not update the disposition.

  11. Disagreed taxpayer responses fall into two categories – Substantiated or Unsubstantiated. For Disagreed taxpayer responses, follow the table below:

    Exception:

    On disagreed responses only, if research shows underreported income of more than $5000, DO NOT take any action, report the account to your lead for further review.

    If Taxpayer Response Then
    1
    Substantiated - (No Change to the original return filing) – The taxpayer replies to the letter and submits requested documentation.

    Exception:

    Taxpayer inquires do occur prior to the issuance of a letter, (i.e., DDb Rule 7X ARAP accounts prior to cycle 19).

    Reminder:

    If documentation for General Agreement on Tariff and Trades (GATT) does not match CC FTBOLP incarceration dates, or the taxpayer verifies there was no incarceration, follow local procedures to elevate for update to the prisoner database.

    If the return is "substantiated" , the documentation provided is verified as good, accept the documentation.

    Exception:

    If research shows the taxpayer is a full year prisoner per CC FTBOLP, and the original work type was AQC16 or AQC 6P, then follow the instructions in box 2 of this table.

    1. Input transaction code (TC) 290 for .00 with source document for the documentation provided for release of refund. Use reason code "085" and priority code "8" , to provide the taxpayer with confirmation of refund release.

      Note:

      To release the refund when PTC is involved (TC 810) ensure a TC 811 for .00 with a posting delay of 2 is input to release the credit.

      Reminder:

      If there is a I - freeze on the account, attributed to missing documentation, ensure that the correct return processable date is input on the adjustment. If the original figures were correct and no documents were missing use the original received date of the return.

    2. Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    3. "Refile" the return in EFDS.

      Note:

      If the return is in STARS, update the disposition to "DL" to have the return deleted from STARS. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    4. Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    5. Ensure all IVO control bases are closed.

    6. Update AQC database as required. Do not input a dollar amount.

      Reminder:

      Substantiated documentation, is treated as "surveyed" within the database if it is received before a Letter 4800C has been sent to the taxpayer.

    2
    Substantiated AQC16 or AQC 6P wages and withholding and the taxpayer has been incarcerated the entire year.
    • If this is in response to a Letter 4800C, send the next letter, either Letter 3219C or Letter 0105C, as a GATT work type. Follow the normal process in IRM 25.25.7.7, No Response Received to Letter 3219C (Notice of Deficiency).

    • If this is in response to a Letter 3219C, follow the normal process in IRM 25.25.7.7, No Response Received to Letter 3219C (Notice of Deficiency).

      Note:

      A new Letter 3219C is not necessary. Allow the wages and withholding, but remove the refundable credits as outlined in the original letter.

    • Input TC 972 AC 140/122 MISC "AQC16" or "AQC 6P" to reverse the prior work type.

    • Input a new TC 971 AC 140 MISC "GATT" .

    • Update database to GATT work type.

    • Add database note "Wages and withholding substantiated - TP full-time prisoner - change to GATT" .

    3
    Substantiated for Premium tax credit only - The taxpayer replies to the letter and submits requested documentation that will change both the proposed amount and the originally claimed amount due to the Alternative Calculation for Marriage (ACM) or contains an allocation condition.
    Follow direction in IRM 25.25.7.8.5, Premium Tax Credit (PTC) Referrals.
    4
    Substantiated for Individual Taxpayer Identification Number (ITIN) The taxpayer replies to the letter and submits requested documentation or a Form W-2
    • Research the ITIN through the Social Security Administration Online Retrieval System (SSA_ORS) database.

      If the income is substantiated, follow box 1 above.

      If the income is not substantiated, follow box 6 below.

    5
    Substantiated or Unsubstantiated - The taxpayer replies with or without documentation to amend the original return to something other than the proposal amount.
    1. Send the taxpayer a Letter 0089C, Amended Return Required to Correct Account.

    2. Close the “AQCX” control on IDRS with activity code "30XRETREQ" or "90XRETREQ" .

    3. Do not update the QRPA control. If no QRPA control on account place on "Refer to Tool" spreadsheet.

    4. Update EFDS notes. For PTC cases input "PTC addressed" .

    5. Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    6. Update AQC database as required. Do not update the disposition.

    6
    Unsubstantiated – The taxpayer replies to the letter and either submits information that is not related to the request, that is insufficient, or simply asks for further clarification.
    The return is "unsubstantiated" , take the following actions:
    1. If the taxpayer requests additional clarification send Letter 0131C , Information Insufficient or Incomplete for Processing Inquiry, with an explanation of the proposed error.

    2. Close IDRS "AQCX" control using one of the following activity codes: "30unsubdoc" or "90unsubdoc" .

    3. Do not update the "QRPA" control base. If no QRPA control on account, place on Refer to Tool spreadsheet.

    4. Unsubstantiated documentation should be treated as classified waste per IRM 21.5.1.4.10, Classified Waste .

    5. Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    6. Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    7. Update AQC database as required. Do not update the disposition, unless closing as default.

  12. For ID theft taxpayer responses follow the instructions below:

    Exception:

    For Statute Imminent Returns (less than 90 days on ASED) and All Rule 7 cases (AOTC25 – AOTC 29, 7F and 7T) follow procedures in IRM 25.25.4.5, Identity Theft (IDT) Category 7 — Single Return/Deceased/X-REF (No Lost Refund) Process.

    1. Designated Tax Examiners (TEs) will triage Identity Theft (IDT) replies per Exhibit 25.25.5–1, Triage Procedures.

    2. Input TC 971 AC 522 on CC ENMOD when the reply indicates ID Theft see Exhibit 25.23.2-10, IMF Only TC 971 /AC 522 Tax-Related Identity Theft, Case Status (Initial Claim/Suspicion).

      Note:

      Do not input a TC 971 AC 522 if one for that tax year already exists.

    3. If there is a -A freeze condition on the account and no history of an RIVO IDRS control (NCAT, ECAT or NRAM), send the correspondence to the Inventory Control Team (ICT) following local procedures.

    1. IF THEN
      1
      Return meets criteria for CATG 7 Disp S1 or SB (account will be resolved using the Return Integrity and Compliance Services (RICS) IDT Tool).
      • Update STARS to CATG7 Disp S1 or SB.

      • Place the reply in the holding bin (documentation will be attached to original return).

      • Close both the Correspondence and QRPA IDRS controls with "IDTCORR" as the activity code.

      • Update EFDS notes as applicable. For PTC cases input "PTC addressed" .

      • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

      • Close all IVO controls.

      • Update AQC database as required.

      2
      Return meets criteria for CATG7 Disp S2.
      • Place reply in bin labeled “S2” for IDT TE to resolve account.

        Note:

        Do not update STARS CATG or Disp, ID Theft TE will update STARS accordingly after account is resolved.

      • Update EFDS notes as applicable. For PTC cases input "PTC addressed" .

      • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

      • Update the activity code of "AQCX" control to "IDTS2" and re-assign to IDRS number "1484022222" .

      • Close QRPA control using activity code "IDTCORR" .

      • Update AQC database as required.

      3
      Return meets criteria for CATG7 Disp GB.
      • Place reply in bin labeled “GB” for IDT Theft TE to work.

        Note:

        Do not update STARS CATG or Disp, ID Theft TE will update STARS accordingly after account is resolved.

      • Update EFDS notes as applicable. For PTC cases input "PTC addressed" .

      • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

      • Update the activity code of "AQCX" control to "IDTGB" and re-assign to IDRS number "1484022222" .

      • Close QRPA control using activity code "IDTCORR" .

      • Update AQC database as required.

      4
      Return meets criteria for CATG 7 Disp BG.

      Note:

      If the taxpayer's good return is not attached to the correspondence, review IDRS for a posted TC 976.

      • Place reply in bin labeled "BG" for IDT Theft TE to work.

        Note:

        Do not update STARS CATG or Disp, ID Theft TE will update STARS accordingly after account is resolved.

      • Update EFDS notes as applicable. For PTC cases input "PTC addressed" .

      • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

      • Update the activity code of "AQCX" control to "IDTBG" and re-assign to IDRS number "1484022222" .

      • Close QRPA control using activity code "IDTCORR" .

      • Update AQC database as required.

  13. For Letter 0105C or Letter 0106C responses follow IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and 106C.

Taxpayer Responses via e-Form 4442 or e-Fax

  1. There are two reasons an e-Form 4442, Inquiry Referral, will be received in the Automated Questionable Credit (AQC) queue:

    1. the taxpayer called and research showed documentation available on command code (CC) IRPTR to substantiate the credit/withholding claimed

    2. the taxpayer called and there are AQC indicators on the account and no initial contact letter has been issued

    Note:

    If an e-Form 4442 is received and the taxpayer is inquiring about the status of their refund, and no AQC correspondence (e.g., Letter 4800C, Questionable Credit 30 Day Contact Letter, Letter 3219C, Statutory Notice of Deficiency) has been sent, and there are no AQC indicators (e.g., transaction code (TC) 971 action code (AC) 122, TC 971 AC 140, TC 971 AC 128 with MISC Field “AQCPTC191” or “AQCPTC195”,or DDb Rule 7 inventory types), reject the case as not meeting AQC criteria.

  2. There are two reasons why an e-Fax would be received from a taxpayer via the AQC e-Fax queue:

    1. the taxpayer received a letter from AQC and is providing documentation or making an inquiry. Follow the tables in IRM 25.25.7.4, Taxpayer Responses to resolve the account.

    2. the taxpayer called the AQC toll-free line before a letter has been issued and has documentation to substantiate the credit claimed.

      Reminder:

      When releasing refunds on accounts where the taxpayer has called the toll free line and no AQC contact letter has been issued, ensure to close these cases as "surveyed" in the AQC database.

    If the taxpayer called and research shows: Then
    1
    Documentation is available on CC IRPTR to substantiate the credit/withholding claimed.

    Reminder:

    Be sure that prior Electronic Fraud Detection System (EFDS) notes or the date of the CC IRPTR documentation supports the refund release.

    1. Input TC 290 for .00 with no source document to release the refund.

    2. Update EFDS notes as appropriate. For Premium Tax Credit (PTC) cases input "PTC addressed" .

    3. Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    4. Ensure all Return Integrity Verification Operations (RIVO) control bases are closed.

    5. Update AQC database as required.

    2
    AQC indicators on the account and no initial contact letter has been issued AND there is no substantiation.

    Exception:

    DDb Rule 7 inventory types (AOTC holds) should not be referred until after cycle 19 each year. Follow the January -R hold alert instructions.

    1. If no rejection criteria are met per Exhibit 25.25.7-1, Inventory Reject Criteria, then place the required information (taxpayer identification number (TIN), tax period, name control, work type, etc.) on the "Refer to Tool" spreadsheet for initial case actions.

    2. If rejection criteria are met per Exhibit 25.25.7-1, Inventory Reject Criteria, then initiate manual start procedures per IRM 25.25.7.3, Automated Questionable Credit (AQC) Initial Case Processing.

    3. Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    4. Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    5. Ensure all RIVO control bases are closed.

    6. Close the 4442 or AQCX control with "UNSUBDOC" .

    7. Update AQC database as required.

    3
    AQC indicators on the account, no initial contact letter has been issued AND documentation is available on CC IRPTR to substantiate the credit or the taxpayer can send documentation to substantiate the credit (generally these are DDb Rule 7 inventory types).
    1. Input TC 290 for .00 with no source document (NSD) (for CC IRPTR validation) or SD with documentation (received through e-Fax) to release the refund.

    2. Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    3. Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    4. Ensure all IVO control bases are closed.

    5. Update AQC database as required.

      Note:

      These are "surveyed" cases. Cases that are released before any letter is sent to the taxpayer and need to be closed as "surveyed" in the AQC database.

Automated Questionable Credit (AQC) Scheme Tracking and Referral System (STARS) Closing Actions

  1. All Automated Questionable Credit (AQC) treatment streams (excluding those below) will be identified as disposition "AQ - Accepted into AQC" . Once a final determination of fraud is made, the Scheme Tracking and Referral System (STARS) will be updated to Disposition "QL" as a final closing disposition. If a return is determined to be non-fraud, the return will be removed from STARS following current STARS delete procedures and updated in STARS to disposition "DL" . Enter a reason in the return's STARS or Electronic Fraud Detection System (EFDS) Notes when requesting a return to be deleted from STARS.

    Note:

    Return Integrity and Compliance Services (RICS) Analysts will update STARS with the final dispositions weekly.

  2. DDb Non-Compliant filter Rule 7 (with both American Opportunity Tax Credit (AOTC) and Additional Child Tax Credit (ACTC) credits) are non-income related issues. These cases will be identified as CATG 8 Disposition R7 (DDb Rule 7 In Process of fraud determination) in EFDS. Once a final determination of fraud is made, STARS will be updated to CATG 8 Disposition “QL” as a final closing disposition. If a return is determined to be non-fraud, the return will be removed from STARS by updating the disposition to "DL" . Enter a reason in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    Note:

    RICS Analysts will update STARS with final dispositions weekly.

  3. The AQC treatment stream for Premium Tax Credit (PTC) will be identified as CATG 8 Disposition "PT - Questionable Premium Tax Credit (In Process of fraud determination)" . Once a final determination of fraud is made, STARS will be updated to CATG 8 Disposition "QL" as a final closing disposition. If a return is determined to be non-fraud, the return will be removed from STARS by updating the disposition to "DL" . Enter a reason in the return's STARS or EFDS Notes when requesting a return to be deleted from STARS.

    Note:

    RICS Analysts will update STARS with final dispositions weekly.

  4. The AQC treatment stream for General Agreement on Tariff and Trades (GATT) will be identified as CATG 8 Disposition "TT - full year prisoner with refundable credits" . Once a final determination of fraud is made, STARS will be updated to CATG 8 Disposition "QL" as a final closing disposition. If a return is determined to be non-fraud, the return will be removed from STARS by updating the disposition to "DL" . Enter a reason in the return's STARS or EFDS Notes when requesting a return to be deleted from STARS.

    Note:

    RICS Analysts will update STARS with final dispositions weekly.

Unclaimed Mail / Undelivered Mail

  1. Taxpayers have a right to receive information concerning any Federal taxes assessed against them. The Service is required to exercise due diligence to find and use the taxpayers last known address. It is important that all undeliverable mail is worked as a priority to ensure that the statutory notice of deficiency is mailed to the taxpayer's current address.

    Note:

    A taxpayer could challenge an assessment in the appeals process or in the courts if the Service did not attempt to locate taxpayers last known address.

  2. Mail should have one of the following notations on the envelope:

    • New address found - The United States Postal Service (USPS) yellow address sticker with a new address on the original envelope.

    • No new address found

    • The reply indicates the taxpayer does not live at the address on the letter

    • Unclaimed

  3. Triage undeliverable mail into the following categories:

    • Letter 4800C, Questionable Credit 30 Day Contact Letter

    • Letter 3219C, Statutory Notice of Deficiency

    • Letter 0105C, Claim Disallowed, and Letter 0106C, Claim Partially Disallowed

  4. Sort Letter 3219C into the following categories:

    • With new address on the yellow label or envelope

    • No new address, not at this address or unclaimed

  5. Complete the following for each undeliverable letter:

    If   Then
    A Letter 4800C, Letter 0105C, or Letter 0106C is returned Undeliverable/Unclaimed.  
    • Destroy letter as classified waste. Follow IRM 21.5.1.4.10, Classified Waste .

    • Take no action on IDRS/Account Management Services (AMS).

  6. A Letter 3219C is returned as undeliverable, take the following actions:

    If And Then
    No new address indicated on the envelope or yellow label Envelope is marked "Unclaimed" , "Not at this address" or "No new address" .
    • Destroy letter as classified waste. Follow IRM 21.5.1.4.10, Classified Waste .

    • Take no action on IDRS/AMS.

    New address is indicated on yellow sticker from the post office or hand written on the envelope.

    Note:

    Do Not update the address on command code (CC) ENMOD.

     
    • Send a Letter 2475C, Address Change Request from an Undeliverable, with the appropriate paragraphs. Attach the original Letter 3219C as an enclosure to the letter. Include a Form 8822, Change of Address, to the taxpayer.

      Note:

      Do not send a Form 8822 to a prisoner.

    • Input IDRS history item: "H,UNDSTAT2TP."

    • Update IDRS control activity suspense date to 90 days from the issuance of the Letter 2475C.

    • After 105 days have elapsed from the date of the letter, follow IRM 25.25.7.7, No Response to the 3219C Letter (Notice of Deficiency).

No Response Received to Letter 4800C

  1. After the 45 day suspense period has expired (60 days if addressed to a person outside the U.S.) and no response has been received from the taxpayer, review the account for reject criteria, see Exhibit 25.25.7-1, Inventory Reject Criteria, and reject the case if criteria is met. If reject criteria is not met, take the following actions on the case:

    Note:

    Research account for a -O freeze. Do not send Disallowance or Notice of Deficiency Letters during the disaster relief period. Do not Disallow or Default an account during the disaster relief period, unless agreed to by the taxpayer. See FEMA, for disaster locations.

    IF AND THEN
    The case is Pre-refund. The actions will result in a Negative Deficiency, see IRM 4.19.14.9.5, QRP Negative Deficiency Procedures.
    • Input an adjustment as Non Source Document (NSD). Use a Hold Code (HC) "3" and a posting delay code of "1" .

    • Input a second adjustment with a Transaction Code (TC) 290/.00 with Blocking Series (BS) 98/99, Source Code (SC) "0" , HC "4" , for the disallowance letter.

    • Send a Letter 0105C, Claim Disallowed, or Letter 0106C, Claim Partially Disallowed, with the appropriate paragraphs.

    • Close all Return Integrity Verification Operations (RIVO) control bases.

    • Update Automated Questionable Credit (AQC) database as required.

    • Update the Scheme Tracking and Referral System (STARS) to disposition "QL" .

    The case is Pre-refund. The actions will not result in a Negative Deficiency.
    • Send Letter 3219C, Statutory Notice of Deficiency, with the appropriate paragraphs.

    • Update the IDRS control activity to the suspense expiration date "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2Automated Questionable Credit (AQC) Inventory Types,, and MMDDYYYY = the current date plus 105 calendar days or plus 150 days for outside U.S.).

    • Update AQC database as required.

    The case is Post-refund.  
    • Send the Letter 3219C with the appropriate paragraphs.

    • Update the IDRS control activity to the suspense expiration date "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 105 calendar days or plus 150 days for outside the U.S.).

    • Update AQC database as required.

No Response Received to Letter 3219C (Notice of Deficiency)

  1. After the 105 day suspense period (150 days if addressed to a person outside the U.S.) has expired and no response has been received from the taxpayer, review the account for reject criteria, see Exhibit 25.25.7-1, Inventory Reject Criteria, and reject the case if criteria is met. If reject criteria is not met, take the following actions on the account:

    Note:

    All Letter 3219C, Statutory Notice of Deficiency, manually generated in the Automated Questionable Credit (AQC) program will be reviewed daily using command code (CC) RVIEW for the previous days input. The review is to be performed to ensure the appropriate paragraphs have been selected, the correct dollar amounts are placed in the "as corrected" and "change" columns, and that the deficiency amount on the first page and final calculation match. To ensure all Letter 3219C for each employee working the program are reviewed use CC LLIST to view letters generated by individual employees.

    Note:

    Research account for a -O freeze. Do Not send Disallowance or Notice of Deficiency Letters during the disaster relief period. Do Not Disallow or Default accounts during the disaster relief period, unless agreed to by the taxpayer. See FEMA, for disaster locations.

    IF THEN
    The case is Pre-refund.
    • Input the default adjustment, include Source Code (SC) "0" and Hold Code (HC) "0" .

      Note:

      If there is a remaining refund that needs to be released involving Premium Tax Credit (PTC) or a -E freeze on the module ensure a transaction code (TC) 811 for .00 with a posting delay of 2 is input to release any remaining credit and/or the freeze condition.

    • Update the return in the Scheme Tracking and Referral System (STARS) to "QL".

    • Close all Return Integrity Verification Operations (RIVO) control bases.

    • Update AQC database as required.

    The case is Post-refund.
    • Input the default adjustment, include SC "0" and HC "0" .

    • Update the return in STARS to "QL".

    • Close all RIVO control bases.

    • Update AQC database as required.

Premium Tax Credit (PTC)

  1. The section addresses the premium tax credit, which was effective beginning in tax year 2014. See IRM 21.6.3.4.2.12, Premium Tax Credit, for general information, including qualifications, terms, Form 8962, Premium Tax Credit (PTC), sections and use of the Account Management System (AMS) PTC Calculator.

Premium Tax Credit (PTC) Error Codes (ERC) (Associated with Automated Questionable Credit (AQC))

  1. Premium Tax Credit (PTC) error codes will be prioritized depending on the severity of the error.

    Note:

    Error Reason Code (ERC) 191 and 195 will be worked by Automated Questionable Credit (AQC). ERC 197, ERC 198 and ERC 199 will be worked by Examination as of August 1, 2015. These cases will contain a MISC field literal of "AQCPTC19X" .

    • ERC 191 - Taxpayer's Household Income (HHI) as a percent of Federal Poverty Level (FPL) is less than 100 percent and all tax family members are U.S. citizens, but taxpayer is claiming PTC (Exchange data indicates coverage with no record of Advance Premium Tax Credit (APTC) received)

    • ERC 195 - Taxpayer claims PTC (Form 8962, Premium Tax Credit (PTC), attached), but no one claimed as an exemption on the Form 1040, U.S. Individual Income Tax Return, or Form 1040A, U.S. Individual Income Tax Return, was enrolled in a Qualified Health Plan (QHP) through the Exchange

    • ERC 197 - When Exchange data is available for all months, the taxpayer's annual premium amount does not equal the annual premium reported by the Exchange

    • ERC 198 - When Exchange data is available for all months, the taxpayer's annual premium of Second Lowest Cost Silver Plan (SLCSP) does not equal the annual SLCSP reported by the Exchange

    • ERC 199 - When Exchange data is available for all months, the annual APTC reported by the taxpayer does not equal the annual APTC reported by the Exchange

  2. Electronic Fraud Detection System (EFDS) Referrals with PTC

    Note:

    The PTC referrals listed below, excluding AQC17 will only be worked during Contingency.

    • PTC claimed under age 18 with no dependents (DDb-PTC-Error-CD 901)

    • PTC claimed with no income (DDb-PTC-Error-CD 904)

    • PTC claimed by a full year prisoner (single taxpayer) (DDb-PTC-Error-CD 900)

    • PTC claimed, both taxpayers are full year prisoner (primary and secondary joint filing) (DDb-PTC-Error-CD 900)

    • PTC claimed by taxpayer over 65 with no dependents (single taxpayer) (DDb-PTC-Error-CD 902)

    • PTC claimed by taxpayers, both over 65 with no dependents (joint filing) (DDb-PTC-Error-CD 903)

    • Verified Bad Income and Withholding with PTC as the ONLY credit claimed (AQC17)

Frozen Refund with Premium Tax Credit

  1. Transaction Code (TC) 971/ Action Code (AC) 128 will generate the TC 810 freezing the “Exposure Amount” and setting the —E freeze.

  2. If the credit module balance exceeds the frozen amount, the excess amount will be released via TC 811 with the released amount in the memo money amount.

Issuance of Letters

  1. Normal Automated Questionable Credit (AQC) Processing should be followed:

    • Letter 4800C, Questionable Credit 30 Day Contact Letter (after notices received during processing). Follow IRM 25.25.7.3, Automated Questionable Credit (AQC) Initial Case Processing.

    • Taxpayer correspondence received anytime during the process, follow IRM 25.25.7.4, Taxpayer Responses.

    • Letter 3219C, Statutory Notice of Deficiency. Follow IRM 25.25.7.6, No Response received to Letter 4800C.

    • No Response received after Statutory Notice, Follow IRM 25.25.7.7, No Response Received to Letter 3219C (Notice of Deficiency).

Adjusting Accounts with Premium Tax Credit (PTC)

  1. Premium Tax Credit (PTC) allowed on the original return posts as a computer-generated Transaction Code (TC) 766, credit reference number (CRN) 262. Advance Premium Tax Credit (APTC) is included in the TC 150.

  2. Posted PTC data, such as the premium tax credit (the computed amount (line 24 Form 8962, Premium Tax Credit) which is not the same as Net PTC (CRN 262)), APTC, and excess advance payment above limitation, can be viewed in the posted return section of command code (CC) TXMODA and CC IMFOLR.

  3. When adjusting PTC related data, use the following reference numbers, as appropriate:

    • 262 – adjust the Net PTC

    • 865 – adjust the total APTC

    • 866 – adjust the total PTC

    • 867 – adjust the Advance PTC Repayment

      Reminder:

      Whenever you have a CRN 867 you will have a corresponding tax increase (TC 290) for the same amount.

    • 868 – adjust the Excess Advance Payment Above Limitation

  4. When adjusting PTC related data, use the following reason codes, as appropriate:

    • 151 – Net PTC

    • 152 – Advance PTC Repayment

  5. CC TXMODA PTC fields:

    • Total APTC.

    • Total PTC.

    • APTC Repayment is reported as a tax before the non-refundable credits. This is the amount of the excess APTC after limitation has been applied that must be repaid by the taxpayer.

    • PTC Limitation Amount (Excess Advance Payment above the Limitation). This is the amount of the excess APTC that does not need to be repaid by the taxpayer.

    • Net PTC Credit.

    • PTC Exposure Amount.

  6. When adjusting an account with PTC and a -E Freeze, a TC 811 must be input for .00 with a posting delay of 2 to release any remaining refund and/or the freeze condition on the account.

Premium Tax Credit (PTC) Referrals

  1. Premium Tax Credit (PTC) responses received by Automated Questionable Credit Program (AQC) that use the Alternative Calculation for Marriage (ACM) or contain an allocation condition will be referred to the AQC Analyst for review.

  2. When Analyst referral is needed:

    • Update "AQCX" activity to "PTC2RVIEW" .

    • DO NOT close "QRPA" control.

  3. Scan a copy of the documentation provided and send via secure e-mail to the AQC Analyst.

  4. The AQC analyst will:

    • Review the documentation provided.

    • Provide the correct disposition for the account via e-mail.

    • Update the activity to "RVIEWDONE" .

  5. After disposition provided by the analyst, work the account the same as other taxpayer responses.

Phone Calls Received via Toll-Free line 855–873–2100

  1. Most questions should be answered during the phone call on the Automated Questionable Credit (AQC) toll-free line. There should be a minimal number of referrals made to AQC. Toll-Free Customer Service Representatives (CSRs) who are not designated to answer the AQC toll-free line should provide the caller with the toll free number 855-873-2100 and the hours of operation. The hours of operation for the new toll-free number are Monday through Friday 7:00 am to 9:00 pm CST. CSRs responding to AQC telephone inquiries should follow IRM 21.1.3.2.3, Required Taxpayer Authentication and if directed, IRM 21.1.3.2.4, Additional Taxpayer Authentication to authenticate the caller.

    Exception:

    Accounts that contain an AQC indicator, and research indicates the original refund was held but subsequently released, with or without the issuance of a Letter 4800C, Questionable Credit 30 Day Contact Letter, and/or Letter 3219C, Statutory Notice of Deficiency, require no additional action from the taxpayer. DO NOT refer these accounts to AQC. Advise the taxpayer the account issue has been resolved and that no further action is necessary. However, if you identify an Erroneous Refund, follow procedures in IRM 21.4.5.5, Erroneous Refund Categories and Procedures.

  2. If the caller is responding to a balance due owed based on an assessment by AQC and agrees with the assessment, DO NOT transfer the caller to the AQC line if you are trained to establish an installment agreement. Follow normal unassessed balance due procedures.

    Note:

    No account adjustment actions will be made by Accounts Management CSRs. All actions will be processed through the AQC teams. All cases require the taxpayer to provide documentation, either substantiation or the signature page agreeing or disagreeing with the proposal.

  3. Follow the table below to respond to the taxpayer regarding responses to the Letter 4800C or Letter 3219C, or if the taxpayer did not receive a letter:

    If the Taxpayer's Response is: AND THEN
    1
    The taxpayer did not receive a letter.
    the module contains a transaction code (TC) 971 action code (AC) 128 with MISC Field "AQCPTC191" , "AQCPTC195" or "AQCPTC9XX" .

    Note:

    if the module contains a TC 971 AC 128 with any other "AQCPTCXXX" , these cases should have a -L freeze and are worked by Exam.

    • Research Coverage Data Repository (CDR) or command code (CC) IRPOL to verify Premium Tax Credit (PTC) amounts claimed on Form 8962, Premium Tax Credit (PTC), match Marketplace data.

      If CDR information does not match the original return:

    • Explain the documentation required to substantiate the credit claimed on the original return, per IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Explain the taxpayer should receive a letter requesting this documentation or their refund in 4–6 weeks from the date of the TC 971 AC 128.

    • If 6 weeks have elapsed since the input of the TC 971 AC 128 and no Return Integrity Verification Operations (RIVO) actions have been taken, initiate an e-Form 4442, Inquiry Referral, to AQC using referral queue "RICS IVO AQC" . Allow 30 days for a response.

      If CDR information does match the original return Form 8962:

    • Initiate an e-Form 4442 to AQC to expedite the release of the refund, using referral queue "RICS IVO AQC" . Allow 30 days for a response.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    Reminder:

    These procedures are for Toll-Free Assistors only. AQC tax examiners (TEs) working PTC cases must follow procedures in IRM 21.6.3.4.2.12.4, Tools for Accessing ACA-Related Taxpayer Data. See IRM 25.25.7.8, Premium Tax Credit (PTC).

    2
    The taxpayer did not receive a letter.
    the module contains a TC 971 AC 122 or 140 with various MISC field types.
    • Explain the documentation required to substantiate the credit claimed on the original return, per IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types.

    • Explain the taxpayer should receive a letter requesting this documentation or their refund in 4–6 weeks from the date of the TC 971 AC 122/140.

    • If 6 weeks have elapsed since the input of the TC 971 AC 122/140 and no RIVO actions have been taken, initiate an e-Form 4442 to AQC using referral queue "RICS IVO AQC" . Allow 30 days for a response.

      If the taxpayer has the documentation necessary to verify the original amounts claimed:

    • Have the taxpayer mail or fax the response to:

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855–855–0616.

    • Advise the taxpayer to include their taxpayer identification number and tax period in their response.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    3
    The taxpayer agrees to the proposal.
    Confirm the taxpayer has signed the Letter 4800C or Letter 3219C or is submitting a signed statement.
    • Have the taxpayer mail or fax the response along with the AQC letter to:

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855–855–0616.

    • If the result will be a refund, advise the taxpayer to allow 6 weeks from the received date of the documentation for a refund to be issued.

    • If a balance due will result, follow IRM 5.19.1.6, Methods of Payment.

      Note:

      If not trained on balance due issues, tell the caller you will transfer them to someone who can set up an installment agreement. Transfer the caller per the Telephone Transfer Guide (TTG).

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    4
    Disagreed – Substantiated (no change).
    • The taxpayer has documentation that supports the claim (e.g., copy of Form 1098-T, Tuition Statement, copy of Form 1095-AHealth Insurance Marketplace Statement, proof of payment to higher education institution, letter from employer for wages and withholding, documentation from the health care provider, etc.).

      Exception:

      If documentation exists on the system, i.e. CC IRPTR follow procedures in box below.

      Note:

      If the scholarship/grant amount(s) on the Form 1098-T exceed the amount of qualified expenses and/or the amount billed, the student may not be qualified for the American Opportunity Tax Credit (AOTC) credit. Additional documentation of expenses should be submitted with the response.

    • Confirm the taxpayer has signed the Letter 4800C or Letter 3219C or is submitting a signed statement.

    • Have the taxpayer mail or fax the response along with the AQC letter to:

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855–855–0616.

    • If the result will be a refund, advise the taxpayer to allow 6 weeks from the received date of the documentation for a refund to be issued.

    • If a balance due will result, follow IRM 5.19.1.6, Methods of Payment.

      Note:

      If not trained on balance due issues, tell the caller you will transfer them to someone who can set up an installment agreement. Transfer the caller per the Telephone Transfer Guide(TTG).

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

      Note:

      If the taxpayer requests additional time, explain the process will continue until documentation is received.

    5
    Disagreed – Substantiated (no change).
    Research shows appropriate documentation on the system (i.e. IRP/Marketplace documents available).

    Note:

    If the scholarship/grant amount(s) on the Form 1098-T exceed the amount of qualified expenses and/or the amount billed, the student may not be qualified for the AOTC credit. Additional documentation of expenses should be submitted with the response.

    • Send e-Form 4442 to AQC to expedite the release of the refund using referral queue "RICS IVO AQC" . Allow 30 days for a response.

    • Notate CC IRPTR or Marketplace etc. documents available.

    • If the result will be a refund, advise the taxpayer to allow 6 weeks from the received date of the documentation for a refund to be issued.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    6
    Disagreed –Unsubstantiated.
    • The taxpayer has no documentation that supports the claim.

    • Confirm the taxpayer has signed the Letter 4800C or Letter 3219C as Disagreed or is submitting a signed statement.

    • Mail or fax the response with their explanation and the AQC letter.

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855-855-0616.

    • If the result will be a refund, advise the taxpayer to allow 6 weeks from the received date of the documentation for a refund to be issued.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    7
    Disagreed Identity Theft.
    The taxpayer claims identity theft stating for instance, "I didn’t file this return" .
    • Follow procedures in IRM 25.23.12.3, Identity Theft Telephone General Guidance, to advise the taxpayer to submit an identity theft claim.

    • Mail to: Internal Revenue Service Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855-855-0616.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    8
    The taxpayer inquires to the status of their refund, however no correspondence has been received (No Letter 4800C or Letter 3219C indicated on CC ENMOD).

    Exception:

    DDb Rule 7 accounts (AOTC holds) should not be referred until after cycle 19 if no letter has been sent. Follow the January -R hold alert instructions.

    Research shows AQC indicators TC 971 AC 140 or TC 971 AC 122 and no letter has been sent.

    Exception:

    A TC 971 AC 122 with MISC field 7V are accounts held by IVO and are not related to AQC.

    Exception:

    A TC 971 AC 122 with MISC field 7P, these are fiscal year PATH ACT accounts. See IRM 21.5.6.4.5.1, C- Freeze - Refund Holds.

    • Initiate an e-Form 4442 to AQC to expedite the release of the refund, using referral queue "RICS IVO AQC" . Allow 30 days for a response.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), use "Exam Assessment" when choosing an issue.

    Exception:

    For Rule 7 cases and it is prior to cycle 19, but the taxpayer has documentation to substantiate the credit: offer the taxpayer the opportunity to fax the documentation to:
    855-855-0616.

  4. Follow the table below to respond to the taxpayer regarding responses to the Letter 0105C, Claim Disallowed, or Letter 0106C, Claim Partially Disallowed, sent by AQC:

    If the Taxpayers Response is: AND THEN
    1
    The taxpayer agrees to the disallowance/partial disallowance.
     
    • No further action is needed by the taxpayer.

    2
    Disagreed – Substantiated (no change).
    • The taxpayer has documentation that supports the claim, See IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, for acceptable documentation.

    • Mail or fax the response with their explanation along with the AQC letter.

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway, Chamblee, GA 30341.

    • Fax to: 855-855-0616.

    • If the result will be a refund, advise the taxpayer to allow 6 weeks from the received date of the documentation for a refund to be issued.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS),, use "Exam Assessment" when choosing an issue.

    3
    Disagreed – Substantiated (no change).
    • Research shows appropriate documentation on the system (CC IRPTR documents available after the posting of the TC 971 AC 140 or AC 122).

    • Submit an e-Form 4442 to AQC using the appropriate referral category to inform them documentation supports the taxpayer’s request for a no change. Allow 30 days for a response.

    4
    Disagreed –Unsubstantiated.
    The taxpayer has no new documentation that supports the claim.
    • The taxpayer should follow the Appeals instructions in the Letter 0105C or Letter 0106C as directed.

      Note:

      See IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and Letter 106C, for additional information.

  5. If research indicates a response has been received from the taxpayer (i.e. category TPRQ control) and subsequent notification has not been sent within 45 days from the date of receipt, submit an e-Form 4442 to AQC using the appropriate referral category to request a response. Allow 30 days for the response.

  6. If the taxpayer previously responded to the letter, but there is no indication on the account that AQC has received it and it is 45 days or more since the taxpayer mailed or faxed the response, advise the taxpayer to resubmit the information.

AQC Docketed Appeals Case Identified

  1. When Return Integrity and Compliance Services (RICS) is notified that a case has been docketed for Appeals, the following documentation must be collected and sent as the "case file" within 10 days of the request.

    • Modernized e-File (MeF), TRPRT or original filed paper document (if original return must be requested send copy of CC ESTAB; DO NOT wait for receipt of paper document)

    • Certified mail listing, the certified mail listing will be maintained within the Operation for three years

    • Copy of certified Letter 3219C, Statutory Notice of Deficiency, or Letter 0105C, Claim Disallowed, from Control D file

    • Any responses received from the taxpayer, if applicable

    • Update IDRS control activity to "FWD2APPLS" in M status to reflect “file” has been sent

    • Monitor the account for the Appeals control before closing the monitoring control

  2. Fax/scan (send electronic files whenever possible) above documentation to Philadelphia for Docketed cases:

    • E-mailbox ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Send information on a Form 3210, Document Transmittal, or with cover information that reflects Automated Questionable Credit Program Docketed Appeals case with case number.

    • Notify the taxpayer by sending a Letter 0086C, Referring Taxpayer Inquiry/Forms to Another Office, when the case is sent to the Appeals office.

  3. RICS does not issue Letter 3219C on Married Filing Joint (MFJ) accounts thus Petitioning/Non-Petitioning Spouse Procedures are not included in this IRM section.

Automated Questionable Credit (AQC) Statute Imminent / Statute Expired Cases

  1. Returns that have been selected by Automated Questionable Credit (AQC) and/or previous Questionable Return Program (QRP) Examination returns that did not meet the 13 month assessment statute expiration date (ASED) expiration time frame with Statute Imminent or Statute Expired ASED will require special treatment. Follow the If/Then chart below:

    Reminder:

    Review the account for reject criteria, see Exhibit 25.25.7-1, Inventory Reject Criteria, and reject the case if criteria is met. If reject criteria is not met, take the following actions on the case:

    Note:

    Research account for -O freeze. Do Not send Disallowance or Notice of Deficiency Letters during the disaster relief period. Do Not Disallow or Default accounts during the disaster relief period, unless agreed to by the taxpayer. See FEMA, for disaster locations.

    If Then
    Statute is Imminent (at least 1 day is remaining on the Statute) (If ASED has 180 days or more complete normal processing per IRM 25.25.7.3, Automated Questionable Credit (AQC) Initial Case Processing).
    • Send Letter 3219C, Statutory Notice of Deficiency, with the appropriate paragraphs.

    • Update the IDRS control assignment number to the TE employee sending the letter and the activity to the suspense expiration date "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 105 calendar days or plus 150 days for outside U.S.).

    • Update AQC database as required.

    Statute is Expired
    • Send Letter 0105C, Claim Disallowed, the appropriate paragraphs.

    • Input an adjustment with a Transaction Code (TC) 290/.00 with Blocking Series (BS) 98/99, Source Code (SC) "0", HC "4", for the disallowance letter.

    • Move the overpayment for the disallowed amount to Excess Collections using Form 8758, Excess Collections File Addition. See IRM 3.12.38.5.19.4.1, Preparing Form 8758.

    • Input a closed control history, with activity "87582EXCES", and category "MISC", to track the Form 8758 submission to Excess Collection.

    • Close all Return Integrity Verification Operations (RIVO) control bases.

    • Update AQC database as required.

    • If still open in Scheme Tracking and Referral System (STARS), close disposition "QL"

    Note:

    If the taxpayer later provides sufficient documentation to support the claim, move the overpayment back to the account from Excess Collections using Form 8765 and allow the refund to be issued. Attach taxpayer correspondence to the Form 8765 and forward to accounting. Open a control in M status and monitor for the refund release. See IRM 3.17.220.2.12, Applying Amounts From the XSF - General.

Processing Late Replies

  1. Automated Questionable Credit (AQC) late replies occur when taxpayer correspondence is received after the case is closed. Sometimes the taxpayers moved and did not receive the correspondence from the IRS or they have new documentation to present that may change the IRS determination after the statutory time to petition Tax Court has expired.

  2. Review the taxpayer’s correspondence, and follow the table below:

    If Then
    The taxpayer is not submitting substantiation as previously requested.
    • Close the case as a "no consideration." Follow the procedures in IRM 21.5.3.4.6.3, No Consideration Procedures.

    • Update AQC database as required.

    The taxpayer is submitting substantiation as previously requested.
    • Accept the Documentation.

    • Input transaction codes (TC) to reverse previous adjustment with source document for the documentation provided.

    • Update EFDS notes as appropriate. For PTC cases input "PTC addressed" .

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS).

    • Reverse all AQC indicators.

    • Update AQC database as required.

Inventory Reject Criteria

The criterion for rejects in the table below is based on what the AQC.NET tool will reject. AQC TEs should resolve or route cases with freeze conditions as appropriate.

IDRS Research Reject the Following
Command Code (CC)TXMODA
  • Transaction Code (TC) 150 not posted (return not posted)

  • TC 29X posted or Pending (account adjusted)

  • TC 30X posted or Pending (exam closing)

  • Reject for TC 424, TC 425, TC 420 (open exam)

  • Reject if CC TXMODA shows any of the following freezes: A-, -A, B-, -B, D-, -D, E-, F-, -F (unless posted payment is for Automated Questionable Credit Program (AQC) case), G-, -G, I-, -I, K-, -K (only on Scrambled SSN accounts), -L, (more than status 08) M-, -M, -N, -O, Q, -S, T-, -T, -U, U-, V-, -V, W-, -W, X-, -X, Y-, -Y, Z-, -Z

    Reminder:

    Although these cases are not worked by the AQC tools, they must be routed/resolved per IRM 21.5.6.4, Freeze Code Procedures , for appropriate resolution.

  • Any control open to other than the .net tool

CC ENMOD
  • TC 971 Action Code (AC) 136 (Exam case)

Previously Identified Identity Theft (IDT) Case Indicators
  • TC 971 /AC 501 Taxpayer identified IDT case

  • TC 971 /AC 506 IRS identified IDT case; tax administration impact

  • TC 971 /AC 524 Locked taxpayer account

  • TC 971 /AC 525 is applied to the Social Security Number (SSN) owner when an Individual Taxpayer Identification Number (ITIN) taxpayer is using the SSN for employment

    Reminder:

    Although these cases are not worked by the AQC tool, they must be routed/resolved per IRM 25.25.4, Integrity & Verification Identity Theft Return Procedures , for appropriate resolution.

Unpostable Conditions
  • Individual Master File (IMF) Unpostable Code, (unless due to AQC payment posting or assigned to AQC Tax Examiner(TE))

  • See IRM 21.5.5.3.2, Researching Unpostables on IDRS, for more information on Unpostables using CC UPTIN

Automated Questionable Credit (AQC) Return Disposition Status Codes

Return Disposition Code Description
AQ Accepted by Automated Questionable Credit (AQC)
BQ Batch for AQC
CL Closed (Account Settled)
CQ Statute Imminent
DL Removed from Scheme Tracking and Referral System (STARS)
MQ AQC Manual Review
PQ Pending referral to AQC
PT Questionable Premium Tax Credit (In Process of fraud determination)
QL Closed (Account Settled on AQC)
TT Full year prisoner with verified good income and/ or withholding and a questionable refundable credit
WQ Statute Expired
XQ Rejected by AQC

Definitions for Automated Questionable Credit (AQC) Database

Case Status Definitions
1
Unassigned
No letter have been sent by Automated Questionable Credit (AQC) and no action has been taken on the account
2
Suspended:
A letter has been sent out and waiting for response
3
Rejected
Someone outside of AQC (any IDRS number not starting with 14841, 14842 or 1484046025) has resolved the case or it has been referred to another area for resolution
4
Closed:
AQC has resolved the case
Closing Types Definitions
5
Agreed
Taxpayer agrees to the proposed changes
6
Defaulted
The taxpayer has not provided a valid response and the suspense timeframe has passed
7
ID Theft
Taxpayer claims that return was not filed by them
8
No Change
Refund is released by AQC without adjustments
Dispositions Definitions
9
Surveyed
Refund released before first letter has gone out
10
No Change
Refund released by AQC after Letter 4800C, Questionable Credit 30 Day Contact Letter, or Letter 3219C, Statutory Notice of Deficiency, has gone out
11
Agreed after 30 day letter
Taxpayer agrees to proposed changes after Letter 4800C has gone out but before Letter 3219C has gone out
12
ID Theft after 30 day letter
Taxpayer claims to be victim of identity theft after Letter 4800C has gone out but before Letter 3219C has gone out
13
Disallowed
Account defaulted and Letter 0105C, Claim Disallowed, Letter 0106C, Claim Partially Disallowed, is sent before Letter 3219C is sent
14
Agreed after 90 day letter
Taxpayer agrees to proposed changes after Letter 3219C has gone out (This applies even if the taxpayer is responding to the Letter 4800C)
15
Default after 90 day letter
Account is adjusted to proposed changes and suspense timeframe has passed and no valid response from taxpayer
16
Petitioned
Taxpayer files petition in United States Tax Court
17
ID Theft after 90 day letter
Taxpayer claims to be victim of identity theft after Letter 3219C has gone out (This applies even if the taxpayer is responding to the Letter 4800C)
18
Appealed
Taxpayer responds to Letter 0105C or Letter 0106C appealing the decision to disallow the claim