25.25.7 Automated Questionable Credit Program

Manual Transmittal

September 13, 2017

Purpose

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

Material Changes

(1) Editorial changes made throughout the IRM section.

Effect on Other Documents

IRM 25.25.7 effective 09-27-2016 is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs) – 16U1744 issued 12-14-2016, 17U0158 issued 1-24-2017, 17U0488 issued 3-13-2017 and 17U1047 issued 6-22-2017

Audience

Campus employees in Integrity and Verification Operation (IVO), Return Integrity Operation (RIO), Return Integrity and Compliance Services (RICS).

Effective Date

(09-13-2017)

Michael C. Beebe
Director, Return Integrity and Compliance Services
Wage and Investment Division

Program Scope and Objectives

  1. Purpose and Program Goals: This IRM section provides guidance for Integrity and Verification Operation (IVO) 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 tolerances 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 IVO employees.

  3. Policy Owner: The Return Integrity and Compliance Services (RICS) is the policy owner of this program.

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

  5. 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. In order for cases to be considered for treatment by AQC, they must meet at least five of the following seven core AQC criteria:

    • A simple case (i.e., 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 (i.e., 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.

  6. 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.

  7. 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 105C, Claim Disallowed/ Letter 106C, Claim Partially Disallowed, and will make an immediate adjustment reflecting the claim disallowance.

  8. If the taxpayer does not respond to the Letter 3219C, Statutory Notice of Deficiency 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 & Compliance Services (RICS) 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.

  2. A quality program is in place to review all processes to ensure accuracy and effectiveness.

Authority

  1. Refer to the following:

    • IRM 1.2.13.1.10, Policy Statement 4-21

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

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

    • IRC 6402(a)

    • IRC 6401

    • IRC 6404

    • IRC 6413

  2. Refer to IRC GATT §32©(2)(B)(iv)for more information.

Responsibilities

  1. Return Integrity and Compliance Services (RICS) has responsibility for information in this IRM. Information is published in the IRM on a yearly basis.

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

  3. The Chief of the Data Management and Operation Staff (DMOS) is responsible for ensuring this IRM is timely submitted to publishing each year.

  4. More information can be found in IRM 1.1.13.7, Return Integrity and Compliance Services.

Acronyms

  1. For a list of Acronyms used throughout Integrity and Verification Operation (IVO) see IRM 25.25.1.1.5, Acronyms

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 tolerances.

    • 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.

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

    • 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 your dates of employment, wages paid, and withholding deducted.

    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.

    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)
    • Inventory cases with AOTC are typically cases that broke Dependent Database (DDb) Rule 7.

    • 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.

    • Copy of Form 1098T , 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) Exemptions, Standard Deduction, and Filing Information, to be a qualifying child/qualifying relative.

    • See IRM 4.19.14.5.6, Personal Exemptions and Dependents.

    Office of Child Support Enforcement (OCSE)
    • 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 your dates of employment, wages paid, and withholding deducted.

    Premium Tax Credit (PTC) PTC claimed on tax return.
    • Form 1095 A,

      Note:

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

    • 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.

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

    • See PTC above for required documentation.

    (PTC900) -DDb-PTC-Error-CD 900
    • PTC claimed on a joint return, where both taxpayers are considered full year prisoners.

    • Letter from the Prison showing dates of incarceration for at least one taxpayer (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 Codes (ERC) 191 and 195 (no reply received while in Error Resolution)
    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.

AQC Initial Case Processing

  1. These are cases that have been deemed to be non-compliant with the current tax regulations and have been forwarded to Automated Questionable Credit Program (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, "Taxpayer Inquiry Referrals" .

    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.

    • 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, AQC Inventory Types.

    • Input TC 971 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, 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, 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.).

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

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

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

    • Update the IDRS control activity to the suspense expiration date, "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2, 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/Letter 105C/Letter 106C 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 , AQC Statute Imminent / Statute Expired Cases.

    • Update the IDRS control activity to the suspense expiration date (if not sending a Letter 105C/Letter 106C), ("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.

  2. DDb Non-Compliant filter Rule7 (with both/either AOTC and ACTC credits) these 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 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. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

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 3219CStatutory Notice of Deficiency (90 day letter) or Letter 105C , Claim Disallowed or Letter 106C, 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 or "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 AM/other areas of what will be done with the inquiry/amended return (i.e., "amended return ok to adjust" , "PTC amounts differ from reported amounts" , etc., as appropriate).

  4. If a Form 1040X, Amended Return is received by IVO that does not only address the proposed change. the Tax Examiner (TE) will send the Form 1040X, Amended Return and 1040X Referral Return Form to Accounts Management (AM) or Submission Processing. See IRM 25.25.2-2, 1040X Referral Return Form and hold documentation until receipt is confirmed or 3 business days which ever is less.

    • 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 STARS disposition

    • Update AQC database

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

  5. If an AQC response IDRS control base is not open, open an IDRS control to IDRS number 1484177777, using one of the following category codes AQCA, for agreed AQCD for disagreed, AQCI for identity theft or AQCO for other not falling into the other 3 categories, with the received date of the correspondence.

    Note:

    All work will be initially assigned to the "1484177777" response queue. Cases will then be assigned to individual AQC TE 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 21.6.6.3.22.1, Updating the Entity on Decedent Accounts and IRM 21.6.6.3.22.2, Processing Decedent Account Refunds. If the response indicates Identity Theft, follow the procedures below.

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

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

    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 21.3.7.1, What is a 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 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.

    • 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.

    • Update the return in STARS to "QL".

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

    • Ensure all IVO 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 9645, 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.

    • Update the return in STARS to "QL".

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

    • Ensure all IVO 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.

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

    If the Taxpayer's Response is Incomplete And Then
    1
    • The taxpayer sends the Letter 4800C/ 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 25.25.7.2AQC Inventory Types.

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

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

    • Fax to: 855-855- 0616.

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

    • Update EFDS notes as appropriate.

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

    • Close “TPRQ” 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/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 131C , "Information Insufficient or Incomplete for Processing Inquiry" , to explain needed documentation see IRM 25.25.7.2, AQC Inventory Types.

    • Update EFDS notes as appropriate.

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

    • Close “TPRQ” 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.

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

    Caution:

    CC IRPTR research should not be conducted in order to release a refund until the taxpayer has provided a response to the IRS.

    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 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, 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.

    3. "Refile" the return in EFDS.

      Note:

      If the return is in STARS, update the disposition to "QL" and put the return information on the STARS delete listing 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, that is received before a 4800C letter has been sent to the taxpayer, is treated as "surveyed" within the database.

    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 4800C letter, send the next letter, either Letter 3219C/Letter 105C based on negative deficiency, 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 3219C letter,. follow the normal process in IRM 25.25.7.7, No Response Received to Letter 3219C (Notice of Deficiency).

      Note:

      A new 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 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 89C, "Amended Return Required to Correct Account."

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

    3. Do not update the QRPA control , if no QRPA control on account/open place on "Refer to Tool" spreadsheet.

    4. 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).

    5. Update EFDS notes.

    6. 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.

    5
    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 131C, Information Insufficient or Incomplete for Processing Inquiry, with an explanation of the proposed error.

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

    3. Do not update the "QRPA" control base.

    4. 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).

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

    6. Update EFDS notes as appropriate.

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

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

  11. 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 and 7F) 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 IVO IDRS control (NCAT, ECAT or NRAM), send the correspondence to the Inventory Control Team (ICT) following local procedures: See IRM 25.25.2–2, 1040X Referral Return Form.

    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 Scheme, Tracking And Referral System (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.

      • 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.

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

      • Update the activity code of "TPRQ" 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.

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

      • Update the activity code of "TPRQ" 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.

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

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

      • Close QRPA control using activity code "IDTCORR" .

      • Update AQC database as required.

  12. For Letter 105C/Letter 106C 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-F4442 referral will be received in the AQC queue:

    1. the taxpayer called and research showed documentation available on 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 (i.e., Letter 4800C, Letter 3219C) has been sent, and there are no AQC indicators (i.e., TC 971 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 EFDS notes or the date of the IRPTR documentation supports the refund release.

    1. Input transaction code (TC) 290 for .00 with no source document to release the refund.

    2. Update EFDS notes as appropriate.

    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.

    2
    • AQC indicators on the account and no initial contact letter has been issued.

    Exception:

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

    1. Place the required information (TIN, tax period, name control, work type, etc.) on the" Refer to Tool " spreadsheet for initial case actions.

    2. Update EFDS notes as appropriate.

    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.

    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 transaction code (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.

    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.

AQC STARS Closing Actions

  1. All AQC treatment streams (excluding those below) will be identified as disposition" AQ - Accepted into AQC" . . Once final determination of fraud is made, 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. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    Note:

    RICS Analyst will update STARS with final dispositions weekly.

  2. DDb Non-Compliant filter Rule 7 (with both AOTC and ACTC credits) these 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 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 following current STARS delete procedures. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    Note:

    RICS Analyst will update STARS with final dispositions weekly.

  3. The AQC treatment stream for PTC will be identified as CATG 8 Disposition "PT - Questionable Premium Tax Credit (In Process of fraud determination)" . Once 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 following current STARS delete procedures. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    Note:

    RICS Analyst will update STARS with final dispositions weekly.

  4. The AQC treatment stream for GATT will be identified as CATG 8 Disposition "TT - full year prisoner with refundable credits" . Once 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 following current STARS delete procedures. A reason must be entered in the return's STARS or EFDS Notes when requesting a return be deleted from STARS.

    Note:

    RICS Analyst 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:

    • 4800C letters

    • 3219C letters

    • 105C/106C letters

  4. Sort 3219C letters 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 105C/Letter 106C is returned Undeliverable/Unclaimed.
    • Destroy letter as classified waste. Follow IRM 21.5.1.4.10, Classified Waste .

    • Take no action on IDRS/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 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:

    IF AND THEN
    The case is Pre-refund. The actions will result in a Negative Deficiency, see IRM 4.19.14.8.5, 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 105C/Letter 106C with the appropriate paragraphs.

    • Close all IVO control bases.

    • Update AQC database as required.

    • Update STARS to disposition "QL"

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

    • Update the IDRS control activity to the suspense expiration date "XXMMDDYYYY" (XX = inventory number, see IRM 25.25.7.2, 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 25.25.7.2, 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 Letters 3219C manually generated in the AQC program will be reviewed daily using 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 3219C letters for each employee working the program are reviewed use CC LLIST to view letters generated by individual employees.

    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 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 the return in STARS to "QL".

    • Close all Integrity and Verification Operation (IVO) 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 IVO 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 21.6.3.4.2.13 , Premium Tax Credit,for general information, including qualifications, terms, Form 8962 sections and use of the Accounts Management System (AMS) PTC Calculator.

Premium Tax Credit (PTC) Error Codes (ERC) (associated with AQC)

  1. PTC error codes will be prioritized depending on the severity of the error.

    Note:

    ERC 191 and 195 will be worked by 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 attached), but no one claimed as an exemption on the Form 1040 or Form 1040A 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 902)

    • 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 901)

    • PTC claimed by taxpayers, both over 65 with no dependents (joint filing) (DDb-PTC-Error-CD 901)

    • 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, Initial Contact Letter (after notices received during processing) Follow IRM 25.25.7.3, AQC Initial Case Processing

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

    • Letter 3219C, 90 Day 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. 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) 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 CC TXMOD 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 TC 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. Command Code (CC) TXMOD PTC fields:

    • Total Advance Premium Tax Credit (APTC)

    • Total Premium Tax Credit (PTC)

    • APTC Repayment (Line 46 Form 1040) 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 (Line 46 Form 1040).

    • 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 (Line 69 Form 1040) is the computed amount from Line 26 Form 8962

    • 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. 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 "TPRQ" 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 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 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 Automated Questionable Credit (AQC) toll-free line should provide the caller with the toll free number 1-855-873-2100 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/Letter 3219C, 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.

  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. CSRs answering the AQC toll-free line for taxpayers having not received a letter or that are responding to the Letter 4800C/Letter 3219C, should follow the table below:

    If the Taxpayer's Response is: AND THEN
    1
    The taxpayer did not receive a letter
    the module contains a TC 971 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 CC IRPOL to verify PTC amounts claimed on Form 8962 match Marketplace data.

      If CDR information does not match original return:

    • Explain the documentation required to substantiate the credit claimed on the original return, per IRM 25.25.7.2, 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 IVO actions have been taken, initiate a Form e-4442 referral to AQC using category code "RICS IVO AQC" .

      If CDR information does match the original return Form 8962:

    • Initiate an e–4442 referral to AQC to expedite the release of the refund, using category code "RICS IVO AQC" .

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

    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, 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 IVO actions have been taken, initiate a Form e-4442 referral to AQC using category code "RICS IVO AQC" .

      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, 4800 Buford Highway, Stop 763, 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.

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

    • Mail to: Internal Revenue Service, 4800 Buford Highway, Stop 763, 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 21.3.12.3, Determine the Earliest The Taxpayer Can Full Pay.

      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 to #92015 (English) or #92016 (Spanish).

    • 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 (i.e., Copy of Form 1098T, Copy of Form 1095A, 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 1098T 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.

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

    • Have the taxpayer mail or fax the response to:

    • Mail to : Internal Revenue Service, 4800 Buford Highway, Stop 763, 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 21.3.12.3, Determine the Earliest The Taxpayer Can Full Pay.

      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 to #92015 (English) or #92016 (Spanish).

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

    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 1098T 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-4442 referral to AQC to expedite the release of the refund using category code "RICS IVO AQC" .

    • Notate 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/3219C as Disagreed or is submitting a signed statement.

    • Mail or fax the response with their explanation.

    • Mail to: Internal Revenue Service 4800 Buford Highway Stop 763 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 such as, "I didn’t file this return"
    • Follow procedures in IRM 25.23.3.2, Identity Theft Telephone Overview and General Guidance.

    • Mail to: Internal Revenue Service 4800 Buford Highway Stop 763 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/Letter 3219C indicated on 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 in December of 2016 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–4442 referral to AQC to expedite the release of the refund, using category code "RICS IVO AQC TC 971/AC140" .

    • 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 201719, but the taxpayer has documentation to substantiate the credit: offer the taxpayer the opportunity to fax the documentation to:
    855-855-0616.

  4. CSRs answering the AQC toll-free line for taxpayers responding to the 105C/106C letters, should follow the table below:

    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, AQC Inventory Types for acceptable documentation. OR

    • Research shows appropriate documentation on the system (IRP documents available after the posting of the TC 971 AC 140 or AC 122).

    • Mail or fax the response with their explanation.

    • Mail to: Internal Revenue Service 4800 Buford Highway Stop 763 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 –Unsubstantiated.
    The taxpayer has no new documentation that supports the claim.
    • The taxpayer should follow the Appeals instructions in the 105C/106C letter as directed.

      Note:

      See IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and 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 a Form e-4442, Inquiry Referral, to AQC using the appropriate referral category to request a response.

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

    • Copy of certified Letter 3219C or Letter 105C 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 *AP EEF APS PHI 6

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

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:

    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, AQC Initial Case Processing).
    • Send Letter 3219C 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 25.25.7.2, AQC Inventory Types, and MMDDYYYY = the current date plus 105 calendar days or plus 150 days for outside U.S.).

    • After the suspense time has expired, input the default adjustment to reverse the false wages/withholding/refundable credits, include Source Code (SC) "0" and Hold Code (HC) "0".

    • Close all Integrity and Verification (IVO) control bases.

    • Update AQC database as required.

    • If still open in STARS, close disposition "QL"

    Statute is Expired
    • Send Letter 105C with 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. See IRM 3.12.38.5.18.4.1, 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 IVO control bases.

    • Update AQC database as required.

    • If still open in 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. See IRM 3.17.220.2.11, Applying Amounts From the XSF - General.

Processing Late Replies

  1. 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.

    • 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)TXMOD
  • 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 TXMOD 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, Q, 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.

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

Previously Identified Identity Theft (IDT) Case Indicators
  • TC 971 /AC 501 Identifies an 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.

AQC Return Disposition Status Codes

Return Disposition Code Description
AQ Accepted by AQC
BQ Batch for AQC
CL Closed (Account Settled)
CQ Statute Imminent
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