25.25.7 Automated Questionable Credit Program

Manual Transmittal

November 12, 2021

Purpose

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

Material Changes

(1) IRM 25.25.7.1.3 - IPU 21U0340 issued 03-04-2021 - Updated authority for GATT rule.

(2) IRM 25.25.7.1.5 - Added Acronym chart and definitions.

(3) IRM 25.25.7.1.6 - IPU 21U0340 issued 03-04-2021 - Added the Taxpayer Bill of Rights in its entirety.

(4) IRM 25.25.7.2 - IPU 20U1170 issued 10-29-2020 - Updated the required documentation for Inventory types.

(5) IRM 25.25.7.2 - IPU 20U1205 issued 11-05-2020 - Updated GATT procedures for prisoners incarcerated 11 months within calendar year.

(6) IRM 25.25.7.2 - IPU 21U0033 issued 01-04-2021- Updated procedures for accounts with Recovery Rebate Credit (RRC).

(7) IRM 25.25.7.2 - IPU 21U0444 issued 03-22-2021 - Updated work type names.

(8) IRM 25.25.7.2 - IPU 21U0806 issued 06-04-2021 - Procedural update to add link to new 25.25.7.2.1 and other clarifications throughout.

(9) IRM 25.25.7.2 - IPU 21U0906 issued 07-01-2021 - Procedural change to add AQC Segment codes.

(10) IRM 25.25.7.2 - IPU 21U1020 issued 08-05-2021 - Added AQCHQ , inventory type, segment code, description and added note to clarify procedures with multiple TC 971 AC122.

(11) IRM 25.25.7.2 - IPU 21U1082 issued 09-02-2021 - Updated GATT definition.

(12) IRM 25.25.7.2.1 - IPU 21U0806 issued 06-04-2021 - New IRM section for AQC Required Documentation.

(13) IRM 25.25.7.2.1 - IPU 21U1020 issued 08-05-2021 - Updated and clarified required documentation for AQCHQ and GATT11 inventory types.

(14) IRM 25.25.7.3 - IPU 20U1170 issued 10-29-2020 - Corrected STARS disposition code.

(15) IRM 25.25.7.3 - IPU 20U1205 issued 11-05-2020 - Updated procedures to initial case processing.

(16) IRM 25.25.7.3 - IPU 20U1282 issued 12-03-2020 - Updated procedures to include AQC Release Plan.

(17) IRM 25.25.7.3 - IPU 21U0033 issued 01-04-2021 - Updated procedures for initialing an account with RRC.

(18) IRM 25.25.7.3 - IPU 21U0085 issued 01-13-2021 - Updated procedures for returns with Schedule C, HSH and K-1 income.

(19) IRM 25.25.7.3 - IPU 21U0340 issued 03-04-2021- Updated the AQC initial case process for paragraphs.

(20) IRM 25.25.7.3 - IPU 21U0444 issued 03-22-2021 - Removed Rule RRC guidance.

(21) IRM 25.25.7.3 - IPU 21U0906 issued 07-01-2021 - Procedural change to update manual case processing, including new category AQC2 instructions.

(22) IRM 25.25.7.3 - IPU 21U0536 issued 04-06-2021 - Deleted boxes and updated numbers.

(23) IRM 25.25.7.3 - IPU 21U1020 issued 08-05-2021 - Procedural change added reminder to include Documentation Upload Tool paragraphs.

(24) IRM 25.25.7.3 - IPU 21U1082 issued 09-02-2021 - Updated ATAO open control procedures, added uploading computations to SharePoint, and included GATT in exception criteria.

(25) IRM 25.25.7.3 - Procedural change to add exception criteria for releasing refunds.

(26) IRM 25.25.7.3.1 - IPU 21U0906 issued 07-01-2021- Created New IRM section for AQC6X procedures.

(27) IRM 25.25.7.4 - IPU 21U0906 issued 07-01-2021 - Procedural changes to add 1040X MEF category codes and clarified responses when amended return is provided.

(28) IRM 25.25.7.4 - IPU 20U1276 issued 11-30-2020 - Updated response procedures for Letter 131C.

(29) IRM 25.25.7.4 - IPU 20U1282 issued 12-03-2020 - Updated procedures to include AQC Release Plan.

(30) IRM 25.25.7.4 - IPU 21U0444 issued 03-22-2021 - Added RRC guidance and Documentation Upload Tool procedures.

(31) IRM 25.25.7.4 - IPU 21U0536 issued 04-06-2021 - Updated digital file name and activity codes.

(32) IRM 25.25.7.4 - IPU 21U0806 issued 06-04-2021- Procedural update to remove DUT and clarification when unable to locate AQC correspondence.

(33) IRM 25.25.7.4 - IPU 21U1082 issued 09-02-2021 - Added additional 1040X category codes and updated routing Amended returns.

(34) IRM 25.25.7.4 - Procedural update to section, moved information into other subsections for clarity.

(35) IRM 25.25.7.4.1 - IPU 21U0340 issued 03-04-2021 - Updated AOTC cycle time.

(36) IRM 25.25.7.4.1 - IPU 21U0444 issued 03-22-2021 - Added word changes.

(37) IRM 25.25.7.4.1 - IPU 21U0806 issued 06-04-2021 - New IRM section for Documentation Upload Tool.

(38) IRM 25.25. 7.4.1 - Updated title and procedures on saving taxpayer responses in AQC.

(39) IRM 25.25.7.4.2 - Added new IRM section for processing taxpayers responses in AQC.

(40) IRM 25.25.7.4.3 - IPU 20U1170 issued 10-29-2020 - Added procedures for incorrect proposals.

(41) IRM 25.25.7.4.3 - IPU 21U0340 issued 03-04-2021 - Updated agreed respond procedures.

(42) IRM 25.25.7.4.4 - IPU 21U0033 issued 01-04-2021 - Updated procedures to add Form 12175, Third Party Contact procedures.

(43) IRM 25.25.7.4.4 - IPU 21U0142 issued 01-26-2021 - Updated procedures for researching Bogus Employers.

(44) IRM 25.25.7.4.4 - IPU 21U0173 issued 01-29-2021 - Updated paragraph to official use only.

(45) IRM 25.25.7.4.4 - IPU 21U0340 issued 03-04-2021 - Updated disagreed respond control base.

(46) IRM 25.25.7.4.4 - IPU 21U0444 issued 03-22-2021 - Corrected spelling.

(47) IRM 25.25.7.4.4 - IPU 21U1082 issued 09-02-2021 - Added Recertification reason codes.

(48) IRM 25.25.7.4.4 - Updated conditions for receiving taxpayer inquires referrals and operation assistance requests.

(49) IRM 25.25.7.4.5 - IPU 21U0906 issued 07-01-2021- Procedural changes to clarify disagreed responses with no amended return provided, including new AQC2 category code.

(50) IRM 25.25.7.4.5 - IPU 21U1082 issued 09-02-2021 - Added Recertification reason codes.

(51) IRM 25.25.7.4.6 - IPU 20U1170 issued 10-29-2020 - Updated taxpayer’s response and classified waste procedures.

(52) IRM 25.25.7.4.6 - IPU 20U1276 issued 11-30-2020 - Updated AQC mailing address for Atlanta.

(53) IRM 25.25.7.4.6 - IPU 21U0536 issued 04-06-2021 - Corrected spelling.

(54) IRM 25.25.7.4.6 - IPU 21U0806 issued 06-04-2021 - Editorial updates to AQC IDT response procedures.

(55) IRM 25.25.7.4.6 - IPU 21U0906 issued 07-01-2021- Procedural change to include AQC2 category code.

(56) IRM 25.25.7.4.7 - IPU 21U0906 issued 07-01-2021 - Procedural change to include AQC2 category code.

(57) IRM 25.25.7.5 - IPU 20U1170 issued 10-29-2020 - Updated procedures on handling unclaimed and undelivered mail.

(58) IRM 25.25.7.6 - IPU 21U0906 issued 07-01-2021 - Procedural change to include AQC2 category code.

(59) IRM 25.25.7.6 - IPU 21U1020 issued 08-05-2021 - Procedural change added reminder to include Documentation Upload Tool paragraphs.

(60) IRM 25.25.7.6 - IPU 21U1082 issued 09-02-2021 - Added Recertification Reason codes, clarified Negative Deficiency definition and added reminder to upload corrected computations to AQC SharePoint.

(61) IRM 25.25.7.6 - Clarified Negative Deficiency definition.

(62) IRM 25.25.7.7 - IPU 20U1170 issued 10-29-2020 - Revised procedures on handling no responses to Letter 3219C.

(63) IRM 25.25.7.7 - IPU 21U1082 issued 09-02-2021 - Added Recertification reason codes.

(64) IRM 25.25.7.8.1 - IPU 20U1170 issued 10-29-2020 - Revised procedures for PTC and ERC codes and Descriptions for PTC Inventory Types.

(65) IRM 25.25.7.8.1 - Updated Error Resolution Code 195 definition.

(66) IRM 25.25.7.9 - IPU 20U1170 issued 10-29-2020 - Updated documentation for working PTC cases.

(67) IRM 25.25.7.9 - IPU 20U1276 issued 11-30-2020 - Updated AQC mailing address for Atlanta.

(68) IRM 25.25.7.9 - IPU 21U0211 issued 02-05-2021 - Updated letter procedures and timeframe for correspondence.

(69) IRM 25.25.7.9 - IPU 21U0340 issued 03-04-2021 - Updated CSR assistors procedures. Update cycle time for AOTC.

(70) IRM 25.25.7.9 - IPU 21U0444 issued 03-22-2021 - Added word changes.

(71) IRM 25.25.7.9 - IPU 21U0033 issued 01-04-2021 - Updated call instructions for letters.

(72) IRM 25.25.7.9 - IPU 20U1205 issued 11-05-2020 - Updated format of procedures.

(73) IRM 25.25.7.9 - IPU 21U0806 issued 06-04-2021 - Procedural update to AQC toll free procedures, including reference to DUT for taxpayer responses.

(74) IRM 25.25.7.9 - IPU 21U0142 issued 01-26-2021 - Updated IRM link and procedures for substantiated income.

(75) IRM 25.25.7.9 - IPU 21U1020 issued 08-05-2021 - Updated note to clarify procedures with multiple TC 971 AC 122.

(76) IRM 25.25.7.10 - IPU 21U1082 issued 09-02-2021 - Added procedures when unable to locate SNOD.

(77) IRM 25.25.7.11 - IPU 20U1170 issued 10-29-2020 - Updated procedures for statute expired cases.

(78) IRM 25.25.7.11 - IPU 21U0033 issued 01-04-2021 - Updated procedures for statute imminent cases.

(79) IRM 25.25.7.11 - IPU 21U0085 issued 01-13-2021 - Updated IDRS control base procedures for Statute cases.

(80) IRM 25.25.7.11 - IPU 21U0906 issued 07-01-2021 - Procedural change to include AQC2 category code.

(81) IRM 25.25.7.11 - IPU 21U0806 issued 06-04-2021 - Editorial update to AQC statute, changed information layout and presentation.

(82) IRM 25.25.7.11 - IPU 21U1082 issued 09-02-2021 - Added reminder to review refund release procedure before issuing 3219C.

(83) IRM 25.25.7.11 - Procedural change to when to send Letter 106C and included additional closing actions.

(84) IRM 25.25.7.13 - IPU 21U0340 issued 03-04-2021 - Added new subsection to explain the tool reject process.

(85) IRM 25.25.7.13 - IPU 21U0444 issued 03-22-2021 - Added referral and reject procedures.

(86) IRM 25.25.7.13 - IPU 21U0806 issued 06-04-2021 - Procedural update to AQC assignment control number.

(87) IRM 25.25.7.13 - IPU 21U0906 issued 07-01-2021 - Editorial change to correct IRM number and title.

(88) Exhibit 25.25.7-1 - IPU 21U0806 issued 06-04-2021 - Procedural update to AQC.net Tool rejection criteria.

(89) Exhibit 25.25.7-1 - IPU 21U0536 issued 04-06-2021 - Added reject criteria.

(90) Exhibit 25.25.7-1 - IPU 20U1170 issued 10-29-2020 - Changed Title Name.

(91) Exhibit 25.25.7-3 - IPU 21U0906 issued 07-01-2021 - Procedural change to correct Disallowance definition.

(92) Exhibit 25.25.7-3 - IPU 21U0033 issued 01-04-2021 - Updated the AQC deposition definitions.

(93) Exhibit 25.25.7-3 - IPU 21U1082 issued 09-02-2021 - Updated Disallowed definition.

(94) Editorial changes made throughout the IRM section.

Effect on Other Documents

IRM 25.25.7, Automated Questionable Credit Program, dated 09-15-2020 (effective 10-01-2020) is superseded. This IRM also incorporates the following IRM Procedural Updates (IPUs): IPU 20U1170 (dated 10-29-2020), IPU 20U1205 (dated 11-05-2020), IPU 20U1276 (dated 11-30-2020), IPU 20U1282 (dated 12-03-2020), IPU 21U0033 (dated 01-04-2021), IPU 21U0085 (dated 01-13-2021), IPU 21U0142 (dated 01-26-2021), IPU 21U0173 (dated 01-29-2021), IPU 21U0211 (dated 02-05-2021), IPU 21U0340 (dated 03-04-2021), IPU 21U0444 (dated 03-22-2021), IPU 21U0536 (dated 04-06-2021), IPU 21U0806 (dated 06-04-2021), IPU 21U0906 (dated 07-01-2021), IPU 21U1020 (dated 08-05-2021), IPU 21U1082 (dated 09-02-2021).

Audience

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

Effective Date

(12-10-2021)

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, Return 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 workload. 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 105C, Claim Disallowed or a Letter 106C, 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 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, Return 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 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) and credits which utilize the EITC definition of earned income.

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 the Publishing Division each year.

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

Acronyms

  1. A list of acronyms and the definitions used in this IRM. This list is not all inclusive. For a complete listing of acronyms, please refer to the Acronym Database.

    Acronym Definition
    AC Action Code
    ACTC Additional Child Tax Credit
    AM Accounts Management
    AMS Accounts Management Services
    AOTC American Opportunity Credit
    AQC Automated Questionable Credit Program
    AQCDB Automated Questionable Credit Program Database
    ASED Assessment Statute Expiration
    AUR Automated Underreporter
    BS Blocking Series
    CC Command Code
    CE Contact Employer
    CSR Customer Service Representative
    CTC Child Tax Credit
    DDb Dependent Database
    DLN Document Locator Number
    DUT Documentation Upload Tool
    EFDS Electronic Fraud Detection System
    EITC Earned Income Tax Credit
    FEMA Federal Emergency Management Agency
    FTC Fuel Tax Credit
    GATT General Agreement on Tariffs and Trade
    HC Hold Code
    HSH Household Help
    IA Installment Agreement
    IAT Integrated Automation Technologies
    IDOC Income Document
    IDRS Integrated Data Retrieval System
    IDT Identity Theft
    IMF Individual Master File
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    IRS Internal Revenue Service
    ITIN Individual Taxpayer Identification Number
    MeF Modernized e-file
    OAR Operations Assistance Request
    PTC Premium Tax Credit
    PUB Publication
    RC Reason Code
    RICS Return Integrity & Compliance Services
    RIVO Return Integrity Verification Operations
    RIVPM Return Integrity Verification Program Management
    RRC Recovery Rebate Credit
    SERP Servicewide Electronic Research Project
    SNOD Statutory Notice of Deficiency
    SSA_OARS Social Security Administration Online Reporting System
    SSN Social Security Number
    STARS Scheme Tracking and Referral System
    TAS Taxpayer Advocate Service
    TC Transaction Code
    TE Tax Examiner
    TIN Taxpayer Identification Number
    USPS United States Postal Service
    WI Wage and Investment
    WOW Wage and Withholding Only
    XSF Excess Collection File

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 formally adopted a Taxpayer Bill of Rights in June 2014. In 2015, Congress codified the Taxpayer Bill of Rights into law and charged the Commissioner with ensuring that IRS employees are familiar with and act in accordance with the taxpayer rights as accorded by the Code. See IRC § 7803(a)(3), which refers to taxpayer rights afforded by other provisions of the IRC. Under these Code pro visions, in general, taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS. They are to be spoken to in a way that is easily understood and any correspondence from the IRS must be clear and understandable. They have the right to speak with a supervisor whenever quality service is not received. For additional information, refer to IRM 1.2.1.2.36, Policy Statement 1-236, Fairness and Integrity in Enforcement Selection; and the Taxpayer Bill of Rights at IRS.gov; and Pub 1, Your Rights as a Taxpayer.

Automated Questionable Credit (AQC) Inventory Types

  1. The Automated Questionable Credit Program (AQC) is made up of inventory that does not meet traditional Examination or Account Management treatment streams. The AQC inventory is grouped into types to identify the revenue protection issue that needs to be addressed. AQC inventory is identified with a transaction code (TC) 971 action code (AC) 140 or a TC 971 AC 122 with the MISC field containing the inventory type, or a TC 971 AC 128 with a MISC field "AQCPTC191" or "AQCPTC195" and a TC 810 with a memo amount. For a detailed description of required documentation, see IRM 25.25.7.2.1, AQC Required Documentation.

  2. In the table below is the inventory description and AQC Segment Code for each AQC Inventory Type:

    Note:

    If the module contains multiple TC 971 AC 122, work the case based on the AQC Inventory Type of the latest TC 971 AC 122.

    Inventory Type Inventory Description AQC Segment Code
    AQC16
    • Pre-refund returns where all wages and withholding have been verified bad with refundable credits.

      Note:

      The Recovery Rebate Credit (RRC) will be allowed if claimed on these returns. However, if CC TXMODA contains a TC 971 AC 122 MISC DDb Rule 7R Sub-rules 1,2, or 4, the RRC should also be disallowed for a full refund disallowance.

    16
    AQC17
    • Pre-refund returns with partially verified good and partially verified bad wages and/or withholding with refundable credits. These are returns where the refund is only partially disallowed.

    Note:

    If CC TXMODA contains a TC 971 AC 122 MISC DDb Rule 7R Sub-rules 1,2, or 4, the RRC should also be disallowed.

    17
    AQC25
    • Pre-refund returns where all wages and withholding have been verified bad with refundable credits originally meeting Exam criteria, rerouted to AQC based on no other compliance flags. These are returns where the refund could be fully or partially disallowed.

    Note:

    If the return claimed the RRC and CC TXMODA does not contain a TC 971 AC 122 MISC DDb Rule 7R Sub- rules 1,2, or 4, the RRC should be allowed as a partial refund.

    25
    AQC26
    • Pre-refund returns with partially verified good and partially verified bad wages and/or withholding with refundable credits originally meeting Exam criteria, rerouted to AQC based on no other compliance flags. These are returns where the refund is only partially disallowed.

    Note:

    If CC TXMODA contains a TC 971 AC 122 MISC DDb Rule 7R Sub-rules 1,2, or 4, the RRC should also be disallowed.

    26
    AQC6X
    • Pre-refund Form 1040-X, Amended U.S. Individual Income Tax Return, that has been previously adjusted but the wages and/or withholding could not be verified within tolerance by Submission Processing (SP) or Accounts Management (AM) and the account contains prior Return Integrity Verification Operations (RIVO) involvement: including returns with or without refundable credits. These are returns where the refund could be fully or partially disallowed.

    6X
    AQC02
    • Pre-refund returns with partially verified good and partially verified bad wages and/or withholding and the return does not contain refundable credits. These are returns where the refund could be fully or partially disallowed.

    02
    GATT11
    • Pre-refund Prisoner returns with verified wages and withholding, with or without Sch C or HSH income with refundable credits that are not allowable based on income earned while an inmate at the penal institution including amounts earned in a work release program, while in a halfway house or while in a community confinement program, see IRM 25.25.9.4, General Agreement on Tariffs and Trade (GATT) Returns, for more information.

    Reminder:

    If the Prisoner was incarcerated for 11 months within the same calendar year, they may be eligible for refundable credit, if the income was earned before or after the incarceration period.

    11
    AOTC27

    AOTC28

    AOTC29

    AOTC25
    • Pre-refund returns claiming the American Opportunity Tax Credit (AOTC) that “broke” a Dependent Database (DDb) Rule 7.

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

      AOTC28 - 30+ years old with AOTC only.

      AOTC29 - High risk preparer with AOTC.

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

    7B

    7C

    7D

    7E
    AQC7F
    • Pre-refund returns claiming the Additional Child Tax Credit (ACTC) on Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico, or Form 1040-PR, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico, (Puerto Rico version), that “broke” the DDb Rule 7.

    7F
    AQC7T
    • Pre-refund returns claiming the ACTC and/or the Earned Income Tax Credit (EITC) and the taxpayer’s citizenship is in question, that “broke” the DDb Rule 7.

    7T
    OCSE18
    • Post-refund returns with a TOP offset that has been recovered (TC 898) through the External Leads program from the Office of Child Support Enforcement (OCSE) with some partially verified good and partially verified bad wages and/or withholding and with refundable credits. These are returns where the refund is only partially disallowed.

    18
    7R1
    • Pre-refund return for a bona fide resident of Puerto Rico claiming a Recovery Rebate Credit (RRC) of $500 or more that already received the Economic Impact Payment (EIP) paid by the PR Hacienda and is not eligible for the RRC - Broke DDb Rule 7R Sub-rule 1.

    Note:

    Command Code (CC) TXMODA identifies these cases with a TC 971 AC 122 MISC DDb Rule 7R1.

    R1
    7R2
    • Pre-refund return for a bona fide resident of one of the Freely Associated States (FAS) of the Republic of Palau, Republic of Marshall Islands or the Federated States of Micronesia claiming an RRC of $500 or more that already received the EIP paid by their Territory and is not eligible for the RRC - Broke DDb Rule 7R Sub-rule 2.

    Note:

    Command Code (CC) TXMODA identifies these cases with a TC 971 AC 122 MISC DDb Rule 7R2.

    R2
    7R4
    • Pre-refund return claiming the RRC of $500 or more and the taxpayer’s citizenship is in question - Broke the DDB Rule 7R Sub-rule 4.

    Note:

    Command Code (CC) TXMODA identifies these cases with a TC 971 AC 122 MISC DDb Rule 7R4.

    Caution:

    These cases could also meet AQC7T, if applicable, credits should be included in the proposed changes.

    R4
    Premium Tax Credit (PTC)
    • PTC claimed on tax return.

    PT
    PTC900
    • 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.

    PT
    PTC901
    • 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.

    PT
    PTC902
    • 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.

    PT
    PTC903
    • 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.

    PT
    PTC904
    • 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.

    PT
    PTC91
    • Pre-refund returns claiming the PTC with verified income below 100% of the Federal Poverty Level and Exchange data indicates no record of Advanced Premium Tax Credit received: the taxpayer is not eligible for the PTC.

    91
    PTC95
    • Pre-refund returns claiming the PTC with no record of enrollment in a Qualified Health Plan purchased through an Exchange: the taxpayer is not eligible for the PTC.

    95
    AQC55
    • Pre-refund returns that are Statute Imminent or Statute Expired.

    55
    AQCHQ
    • Returns that require special handling referred to AQC for treatment. This inventory type is used only when directed by RIVPM Headquarters analyst.

    HQ

Automated Questionable Credit (AQC) Required Documentation

  1. The table below is the required documentation to substantiate the taxpayer’s claim for refund. The taxpayer must provide at least one of the listed documents unless otherwise stated:

    Caution:

    Copies of a Form W-2, Wage and Tax Statement, are not to be used as a substitute for the required documentation below. However, Form W-2 may contain a "work assumed" Social Security Number (SSN) for returns filed using an Individual Taxpayer Identification Number (ITIN) that may assist with research in SSA ORS or CC IRPTR to the verify wages and/or withholding. See IRM 25.25.3.13, Updating Individual Taxpayer Identification Number (ITIN) Income Documents (IDOCS), for further guidance.

    Inventory Type(s) Required Documentation
    AQC16
    AQC17
    AQC25
    AQC26
    AQC6X
    AQC02
    OCSE18
    AQC55
    • Copies of periodic pay statements or check stubs that clearly identify the dates of employment, the gross income received and the withholding.

    • A letter from the employer, on company letterhead or stationery, showing the dates of employment, the gross amount of wages paid and the withholding.

    • Bank statements showing payroll deposits that include the taxpayer’s name, bank’s name and phone number, and a contact person or address of the bank.

    • Copies of check images from the bank or deposit slips showing payroll deposits that include the taxpayer’s name and the bank’s name.

    GATT11 Letter from the Prison or government entity showing dates of incarceration (must be less than full year prisoner) and one of the following:
    • Copies of pay statements or check stubs that contain the date the gross income was received, and the amount of income and withholding.

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

    • Bank statements showing payroll deposits that include the taxpayer’s name, bank name, phone number, and contact person or address of the bank.

    • Copies of check images from the bank or deposit slips showing payroll deposits that include the bank name and the name of the taxpayer.

    Reminder:

    Participation in work release and halfway house programs, or community confinement are still considered incarcerated, See Pub 596, Earned Income Credit (EIC), and Pub 972, Child Tax Credit and Credit for Other Dependents.

    AOTC27
    AOTC28
    AOTC29
    AOTC25
    • Copy of Form 1098-T, Tuition Statement, if institution completed Box 1.

    • Proof of payment to the higher education institution, school transcript, etc. See IRM 4.19.15.3.1.1, Education Tax Credits - Evaluating Taxpayer Responses.

    Note:

    Additional documentation of qualified educational expenses should be submitted if the scholarship/grant amount(s) on the Form 1098-T exceed the amount of qualified expenses and/or the amount billed.

    AQC7F
    • Copy of documentation showing the children claimed for the ACTC meet the tests outlined in Pub 501, Dependents, Standard Deduction, and Filing Information, to be a qualifying child or 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.

    AQC7T
    • A copy of the Social Security card for the primary, secondary taxpayers and all qualifying children listed on Schedule EIC and/or Schedule 8812 that does not contain the legend “Not Valid for Employment”. If the legend, “Not Valid for Employment”, appears on the card, the taxpayer is not eligible for the credit. See IRM 4.19.14.6, Evaluating EITC Taxpayer Responses. See Pub 596, Earned Income Credit (EIC) and Pub 972, Child Tax Credit and Credit for Other Dependents.

    7R1
    • Copy of an unexpired U.S. Driver’s License with the taxpayer’s name and U.S. address dated on or before 12/31/2020.

    • Copy of medical records showing the taxpayer's name, U.S. address and dated after 12/31/2019 and before 01/01/2021.

    • Copy of U.S. Voters Registration Card showing the taxpayer’s name, U.S. address and issued after 12/31/2019 and before 01/01/2021.

    7R2
    • Copy of an unexpired U.S. Driver’s License with the taxpayer’s name and U.S. address dated on or before 12/31/2020.

    • Copy of medical records showing the taxpayer’s name, U.S. address and dated after 12/31/2019 and before 01/01/2021.

    • Copy of U.S. Voters Registration Card showing the taxpayer’s name, U.S. address and issued after 12/31/2019 and before 01/01/2021.

    7R4
    • A copy of the Social Security cards for the primary and secondary taxpayers, as well as Qualifying Children listed on Schedule EIC that does not contain a legend “Not Valid for Employment.” If the legend “Not Valid for Employment,” appears on the card, the taxpayer is not eligible for the RRC. See Pub 519, page 21, U.S. Tax Guide for Aliens, for additional requirements or IRM 4.19.14.6 (4), Evaluating EITC Taxpayer Responses.

    Premium Tax Credit (PTC)
    PTC901
    PTC904
    PTC902
    PTC903
    PTC91
    PTC95
    • Form 1095-A, Health Insurance Marketplace Statement

      Note:

      Form 1095-A must be verified. If not verified, additional documentation listed below must be requested, to justify the form amounts.

    • Additional documentation include; 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).

    Reminder:

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

    PTC900
    • Letter from the Prison showing dates of incarceration (less than full year), and

    • See PTC above for required documentation.

    AQCHQ
    • Various documents, to be specified by RIVPM Headquarters analyst upon assignment.

Automated Questionable Credit (AQC) Manual Case Processing

  1. Automated Questionable Credit (AQC) cases that cannot be worked systemically through the AQC.net tool are identified with Category Code "AQC2" and may require a manual letter. AQC Tax Examiners (TEs) will be responsible for researching the account, determining the appropriate documentation for each credit claimed and taking the appropriate actions based on their research.

    Note:

    If the account has a Category Code "QRPA" and requires a manual letter as stated in IRM 25.25.7.13, Manual Referrals and AQC.net Tool Rejects, update the "QRPA" control base to "AQC2" .

  2. Review the account for conditions TC 922, -L or -A as outlined in IRM 25.25.7.4.2, Processing Taxpayer Responses, if criteria are not met continue with procedures below.

  3. If any of the following criteria are met, release the refund, no manual letter is required for these cases:

    • AQC cases that are part of a RIVO implemented Release Plan, these cases are identified with IDRS Activity Code "SURVEYED."

    • Accounts where the income or withholding are verifiable within tolerance per IRM 25.25.2.3, Command Code (CC) IRPTR Return Verification During the Screening Process, including Schedule C, HSH or K1 income.

      Exception:

      This excludes 7F, 7R, 7T, and GATT inventory types

    • Accounts with only Schedule C, HSH or K-1 income.

      Exception:

      This excludes 7F, 7R, 7T, and GATT inventory types.

    • Accounts where the changes to income or credits would result in a refund equal to or greater than originally claimed

    Exception:

    Do not release the refund for cases with an open "ATAO" assigned to an AQC or RIVO TE. Close the "AQC2" control and take no further actions. The TE assigned to the "ATAO" control will resolve the case.


    Take the following actions to release the refund:
    • Input a TC 290 for .00 with no source document, use RC 085, SC 0 and PC 8 as necessary.

    • Update EFDS notes with reason the refund was released, for current year returns, "Refile" in EFDS. If the return is in the Scheme Tracking and Referral System (STARS), update the disposition to "DL".

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

    • Close all AQC related controls.

  4. Review the account for an "AQCA" , "AQCD" , "AQCO" , "AQCI" , or "AQC1" control. If present, review the case documents in SharePoint, if the documents substantiate the claim see IRM 25.25.7.4.2, Processing Taxpayer Responses. If the response does not result in case resolution, continue with procedures below.

  5. Research IRS systems to determine if the taxpayer claim can be substantiated. (i.e., the Coverage Data Repository (CDR) or CC IRPOLA verifies the Premium Tax Credit (PTC) amount, IRP/Marketplace). See IRM 25.25.7.2.1 , Automated Questionable Credit (AQC) Required Documentation, to determine the appropriate documentation. If the claim is substantiated follow (3) above to release the refund.

  6. For statute imminent cases and expired cases, see IRM 25.25.7.11, Automated Questionable Credit (AQC) Statute Imminent / Statute Expired Cases.

  7. Use the following table to determine the appropriate letter to issue:

    If Then
    The Letter 4800C, Questionable Credit 30 Day Contact Letter, has been issued Follow IRM 25.25.7.6, No Response Received to Letter 4800C.
    The Letter 4800C, Questionable Credit 30 Day Contact Letter, has not been issued Follow (8) below.

  8. Take the following account actions and issue the Letter 4800C, Questionable Credit 30 Day Contact Letter:

    Reminder:

    For AQC Inventory Types and Segment Codes see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types. For a list of required documentation based on the AQC Inventory Type, see IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation.

    Note:

    AQC cases are generally pre-refund but can be post refund or balance due. When needed, special instructions are outlined for accounts meeting post-refund or balance due conditions.

    • Research the account for a posted or pending 971 AC 122, 128 or 140. If none are present, input a 971 AC 140 with the appropriate AQC Segment Code in the MISC field.

    • Input a TC 570 if there is not a -R or -K freeze posted or pending.

    • Reverse any offsets as necessary. See IRM 21.4.6.5, Refund Offset Procedures, for more information.

      Exception:

      Do not bring back any offsets for Shared Responsibility Payment or on post-refund cases.

    • Research account for -O freeze. Ensure the special paragraph is used in the initial contact letter during the disaster relief period, see AQC Letters Paragraphs and Paragraphs Fill-ins Guide. Update the "AQC2" Activity Code with "SCOFREEZE" , where “SC” is the AQC Segment Code.

    • Research the AQC Inventory Type and compute the new tax and credit amounts based on the inventory descriptions. Use the AMS worksheets or X-claim tool to calculate the proposed changes. Upload your AMS worksheet or X-claim computation to the AQC SharePoint.

      Caution:

      Do not change the amount of Schedule C, HSH, or K-1 income when computing the proposal amount.

    • Determine the required documentation based on the AQC Inventory Type and issue the 4800C with the applicable paragraphs.

      Reminder:

      Include Documentation Upload Tool (DUT) paragraph for all AQC inventory types.

      Note:

      When corresponding on a decedent account, appropriate name formatting is required. See IRM 21.3.3.4.17.5, Corresponding on a Deceased or Legally Disabled Taxpayer’s Account, and IRM 21.3.3.4.17.6, Deceased Taxpayer Correspondence, Joint Return Filed, for more information.

    • Update the "AQC2" control base using the following format:
      CXX,SCMMDDYYYY,M,AQC2
      *
      XX = AQC2 control number
      SC = AQC Segment Code
      MMDDYYYY= the current date plus 46 calendar days (61 days for outside the U.S.)

    • Update AQC database, AMS and EFDS as appropriate.

Automated Questionable Credit (AQC) 6X Procedures

  1. Automated Questionable Credit (AQC) Inventory Type "AQC6X" are Form 1040X, Amended U.S. Individual Income Tax Return, that contain current or prior Return Integrity Verification Operations (RIVO) involvement. These accounts are referred to AQC by Submission Processing (SP) or Accounts Management (AM).

  2. These accounts can be identified with an open category code"AQC2" assigned to IDRS number 1487877777 and activity code "AQC6X" or "AQC6XATAO."

    Reminder:

    AQC6X inventory will not contain an -A freeze on the module, if present reject back to the originator following procedures in the if/then chart below. Do not reject any "PN" adjustments.

  3. Determine if a previous AQC letter has been issued and treat the amended return as a response. For 4800C or 3219C response procedures see IRM 25.25.7.4.2, Processing Taxpayer Responses, 105c or 106C response procedures see IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and Letter 106C.

  4. Use the following chart for appropriate treatment.

    Note:

    The amended return is considered "adjusted" ” if the AM/SP originator only inputs a TC 290 for .00.

    If Then
    AQC 6X and the account has not been adjusted to the amended return or the amended return contains only Schedule C, HSH or K-1 income.
    • Reject back to the originator by closing the "AQC2" control.

    • Open a new control back to the originator using the following format
      "C#,1040XRJCT,A,XRET XXXXXXXXXX,*"
      XXXXXXXXXX= IDRS number of the ACTION-EMP from the "AQC2" control.

    • Leave appropriate AMS notes explaining the reason for the rejection.

    • If the return is in the Scheme Tracking and Referral System (STARS), update to CATG 5 disposition "CL" .

    • Ensure all RIVO control bases are closed.

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

    AQC6X and the account has previous RIVO involvement and the corrected income and withholding claimed on the amended return, verifies within tolerance per IRM 25.25.3.4, Income Verification using Command Code (CC) IRPTR.

    Note:

    Math verify the adjusted Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC) are accurate based on the adjustments to income. If the EITC or ACTC are not correct, reject the case back to the AM/SP originator following the above box.

    • Do not send an initial contact letter.

    • Input a TC 290 for .00 with no source document, RC “085” and PC “8” to release the refund.

    • Leave appropriate AMS notes explaining the reason for the rejection.

    • If the return is in the Scheme Tracking and Referral System (STARS), update to CATG 5 disposition "CL" .

    • Ensure all RIVO control bases are closed.

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

    AQC6X and no previous AQC letters have been issued and the corrected income or withholding claimed on the amended return, does not verify within tolerance per IRM 25.25.3.4, Income Verification using Command Code (CC) IRPTR.
    • See IRM 25.25.7.3, Automated Questionable Manual Processing, to send an initial contact letter.

Taxpayer Responses

  1. The following section will be used to control, process and resolve taxpayer responses or inquiries received in the AQC program. The AQC program receives responses via paper correspondence, eFax and the Documentation Upload Tool (DUT).

  2. AQC issues the following letters:

    • Letter 4800C, Questionable Credit 30 Day Contact Letter.

    • Letter 3219C, Statutory Notice of Deficiency.

    • Letter 105C, Claim Disallowed.

    • Letter 106C, Claim Partially Disallowed.

    • Letter 131C, Information Insufficient or Incomplete for Processing Inquiry.

    • Letter 89C, Amended Return Required to Correct Account.

    • Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office.

    .

Saving Taxpayer Responses

  1. AQC employees will use the following procedures control and upload incoming taxpayer responses.

  2. Upon receipt, taxpayer responses are controlled to IDRS and sent to the AQC Taxpayer Correspondence SharePoint within 5 business days. Taxpayer responses are classified into one of the following categories:

    • Agreed

    • Disagreed

    • Identity Theft

    • Referred from WOW

    • Other

  3. Use the following chart to download, scan and save taxpayer responses.

    If Then
    Response is received via Documentation Upload Tool (DUT) Once the taxpayer’s response is saved in the received files location, take the following actions:
    • Load all digital files to: \Shared\ATL\ATL-AQC SCANNED CORRESPONDENCE INV\AQC Digital Mailroom\Received files.

    • Open each digital file and update the AQC spreadsheet.

    • Save the spreadsheet and email the file to the SharePoint.

    • Once all files are entered into SharePoint, they should be moved into the "Files Sent to SharePoint" folder.

    • Open the Downloads file folder and safe all files as a pdf. Using the procedures in IRM 25.25.7.4.1 (4), Controlling Taxpayers Responses.

    Response is received via eFax
    • Faxes are received through the eFax mailbox and saved to the Memphis shared drive: \Shared\MEM\Employees\AQC Efax Correspondence.

    • Pull a count of the faxes received for the prior day and notate on the eFax tracker document.

    • The eFax mailbox has subfolders for each month. After counting the new faxes, move them to the correct folder (create a new one if needed). Each received date should be worked separately to simplify this process.

    • Save new faxes using procedures in IRM 25.25.7.4.1 (4), Controlling Taxpayer Responses.

    Response is received via Paper Correspondence
    • Count and record incoming correspondence receipts.

    • Batch and scan incoming correspondence and send them to your IRS email address.

    • Once the entire batch is scanned, open each file and review the copy of the AQC letter. If no letter is found, check ENMOD for the letter. If no letter was sent, use the default Letter 4800C.

    • Save the scanned images using procedures in IRM 25.25.7.4.1 (4), Controlling Taxpayers Responses, to the Atlanta shared drive: \Shared\ATL\ATL- AQC SCANNED CORRESPONDENCE INV\AQC Scanned Correspondence\Scanned Documents.

  4. AQC employees will save the taxpayers responses to the SharePoint using the following format: "SSN-TaxPeriod-RcvdDate-CorrType-LetterType,ReceivedType" . Use the chart below for the appropriate field input.

    Example:

    999887777-2019-01012021-A-4-DC

    Field Input
    CorrType
    • A = Agreed

    • D = Disagreed

    • O = Other (including ID Theft and WOW)

    LetterType
    • 3= Letter 3219C

    • 4 = Letter 4800C

    • 5 = Letter 105C

    • 6 = Letter 106C

    ReceivedType
    • DC = DUT correspondence

    • EC = eFax correspondence

    • PC = paper correspondence

  5. Once all files are named and saved, email the files to SharePoint.

  6. Managerial staff or Leads will create an export list from SharePoint to run GII and import to the AQC database.

  7. Use the following procedures to control exported cases from SharePoint onto IDRS using GII:

    • Open an IDRS control to AQC clerical number “1484077777”. Use activity code “ECMMDDYYYY” (for eFax), “PCMMDDYYYY” (for paper correspondence) or "DCMMDDYYY" (for DUT), using the date the response was received for “MMDDYYYY.”

    • Use the category code listed in the chart below to classify the type of response received, these categories are also referred to as "AQCX" :

      AQC Determinations Category Codes
      Agreed AQCA
      Disagreed AQCD
      Identity Theft AQCI
      Referred from WOW AQC1
      Other AQCO

      Note:

      If an open IDRS control base is present on the module to a specific employee (disregard generic control bases), contact the controlling employee prior to resolution to coordinate efforts and prevent erroneous or duplicate adjustments or actions. Refer to IDRS - Unit and USR Database, to locate the employee.

Processing Taxpayer Responses

  1. When responses to Letter 4800C, Letter 3219C, or correspondence with open AQC indicators are assigned, AQC TEs will use the procedures in this IRM to resolve the case.

  2. All AQC cases that are part of a RIVO implemented Release Plan, will be identified with the following IDRS activity control “SURVEYED.” The cases with this IDRS activity control are in the process of being released. No referrals or additional contact should be issued on the “Release Plan” cases. For all other cases, follow the procedures below:

    Exception:

    If the case has the activity control “SURVEYED” and also has an open ATAO control, employees will need to conduct research and manually release refund on these cases. See IRM 25.25.7.3, CCCCCCCC, for more information.

    If Then
    1
    If TC 922 is present and the last Process Code is 30,34,54,55,57-60,75, 77-79,81,95,96 (with an open control to AUR employee), 97-99.
    • Update the return disposition in EFDS or STARS to “CAT 5 CL” and add appropriate notes.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to specify the AQC case has been rejected and referred to AUR.

    • Ensure all RIVO control bases are closed.

    • Update AQC database case status to “Rejected,” Reject Reason to “TC 922- Referred to AUR” and the Reject Date with the date of rejection. Do not input a protected dollar amount.

    2
    There is a - L freeze condition on the account.
    • Review CC AMDISA to determine the status of the Examination (Exam) case. Route the response to Exam, per the AIMS Status Code and the QRP Source and Project Code. See IRM 4.19.14.9.2, QRP Source Code and Project Codes, and My SB/SE Employee Group Code for additional guidance and routing information.

    • Update the return disposition in EFDS or STARS to “CAT 5 CL” and add appropriate notes.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to specify the AQC case has been rejected and referred to Exam.

    • Ensure all RIVO control bases are closed.

    • Update AQC database case status to “Rejected,” Reject Reason to “L freeze greater than status 08”, and the Reject Date with the date of rejection. Do not input a protected dollar amount.

    3

    There is an -A freeze, a TC 971 action code (AC) 120 or TC 971 (AC) 010, or a control base with category code XRET, TPRQ, MEFPS, MEFS, MEFA, MEFC, MEFR, MEFI, DUPF, IDT1, IDT3, XRET, MXEN, IDS1, IDT6, IDT8, IDS9, SCRM, and SSNA2 or assigned to another area.
    • Research the case. The correspondence may be in response to the AQC letter.

    • If the correspondence or amended return is related to the AQC issue; ensure appropriate notes are added to AMS. (e.g., “amended return, ok to adjust”, “PTC amounts differ from reported amounts”, etc.)

    • Update the return disposition in EFDS or STARS to “CAT 5 CL” and add appropriate notes.

    • Ensure all RIVO control bases are closed.

    • Update AQC database case status to “Rejected,” Reject Reason to “A- Reject code AFRZ” and the Reject Date with the date of rejection. Do not input a protected dollar amount.


    4
    If a Form 1040-X, Amended U.S. Individual Tax Return, is received; there is NO -A freeze, and the response is requesting a change other than the proposal.
    • Verify the income and federal withholding reported on the amended return per IRM 25.25.3.2, Verification of Income.

      Reminder:

      Do not send an unverifiable Form 1040-X, Amended U.S. Individual Tax Return, to SP or ICT. For unverifiable Form 1040-X, Amended U.S. Individual Tax Return, see Taxpayer Disagreed Response Procedures.

    • If there is no identity theft marker (TC 971 AC 501 or TC 971 AC 506) for any tax period on CC ENMOD, route the amended return or Form 1040-X, Amended U.S. Individual Tax Return, and envelope to the Submission Processing (SP) Batching Function per Exhibit 3.10.72-11. Edit the RIVO stamp or "IVO REV" in the upper left margin of the return prior to sending to SP. If there is an identity theft marker (TC 971 AC 501 or TC 971 AC 506) for any tax period, fax the amended return or Form 1040-X, Amended U.S. Individual Tax Return, and envelope to the Image Control Team (ICT) using theRICS IVO AR Adjustment Request Form and include the verified income/withholding information on the routing form. Edit the RIVO stamp or "IVO REV" and "IDT" in the upper left margin of the return prior to sending to ICT

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

    • Update the return disposition in EFDS or STARS to “CAT 5 CL” and add appropriate notes.

    • Ensure all RIVO control bases are closed.

    • Update AQC database case status to “Rejected”, Reject Reason to “Form 1040-X received-forwarded to AM”, and the Reject Date with the date of rejection. Do not input a protected dollar amount.

    5
    If a Form 1040-X, Amended U.S. Individual Tax Return is received; there is no -A freeze and addresses the proposed changes.

    Exception:

    If response is received after 105C/106C has been issued follow procedures in box below.

    • Follow , Taxpayer Agreed Response Procedures, or , Taxpayer Disagreed Response Procedures.


    6
    Response is to Letter 105C, Claim Disallowed or Letter 106C, Claim Partially Disallowed.
    • Follow IRM 21.5.3.4.6.2, Appeals and Responses to Letter 105C and Letter 106C


    7
    If response indicates taxpayer is deceased and a refund needs to be released and the return was filed by someone other than the surviving spouse. Otherwise, process following normal procedures.
    • Follow IRM 25.25.13.10, Manual Refund Criteria for Return Integrity Verification Operations.

    8
    Correspondence received from a taxpayer that cannot be subsequently located by the Tax Examiner assigned to the AQCX control.
    • Send Letter 131C, Information Insufficient or Incomplete for Processing Inquiry, to request the correspondence be resent by the taxpayer. Please see the RIVO Portal for Letter 131C information.

    • Update the "AQC2" control activity code to the suspense expiration date, "XXMMDDYYYY" (XX = Inventory Type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 46 calendar days or plus 61 days if outside the U.S.).

    • Close the AQCX control.

    Note:

    Letter 131C should only be sent to the taxpayer after all options to locate the correspondence have been exhausted and managerial approval has been obtained.

    9
    7R1 AND the resident of Puerto Rico claiming a Recovery Rebate Credit (RRC) sends documentation to substantiate the credit.
    • Do not send an Initial Contact Letter.

    • Input a TC 290 for .00 with no source document; Use Reason Code (RC) “99”; Source Code (SC) “0” and Hold Code (HC) “3”, to release the refund.

    • Update EFDS notes with reason the refund was released.

    • “Refile” the return in EFDS, if a current year return.

      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 to be deleted from STARS. See IRM 25.25.13-1, STARS Delete Reasons.

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

    10
    7R2 AND the resident of one of the Freely Associated States (FAS) of the Republic of Palau, Republic of Marshall Islands or the Federated States of Micronesia claiming a Recovery Rebate Credit (RRC) sends in documentation to substantiate the credit.
    • Do not send initial contact letter.

    • Input a TC 290 for .00 with no source document. Use Reason Code (RC) “99”; Source Code (SC) “0” and Hold Code (HC) “3”, to release the refund.

    • Update EFDS notes with reason the refund was released.

    • “Refile” the return in EFDS, if a current year return.

      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 to be deleted from STARS. See IRM 25.25.13-1, STARS Delete Reasons.

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

    11
    7R4 AND Taxpayer is claiming the RRC of $500 or more and the taxpayer sends in documentation which substantiate their citizenship for the credit.
    • Do not send an Initial Contact Letter.

    • Input a TC 290 for .00 with no source document. Use Reason Code (RC) “99”; Source Code (SC) “0” and Hold Code (HC) “3”, to release the refund.

    • Update EFDS notes with reason the refund was released.

    • “Refile” the return in EFDS, if a current year return.

      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 to be deleted from STARS. See IRM 25.25.13-1, STARS Delete Reasons.

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

Taxpayer Inquiries via e-Form 4442 or Operation Assistance Requests (OARS)

  1. A Form 4442 Inquiry Referral or Operation Assistance Request (OAR) is received in the Automated Questionable Credit (AQC) program when at least one of the following conditions are met:

    • The allotted 60-day time frame has expired, and taxpayer has not received a response.

    • The taxpayer called, there are AQC open indicators on the account and NO initial contact letter has been issued within the allotted 60-day timeframe from the date of the transaction code (TC) 971 action code (AC) 122, 140 or 128 with appropriate MISC Field.

    • The taxpayer called and research showed documentation available on command code (CC) IRPTR to substantiate the claim for refund.

    • The taxpayer is requesting an appeal on a previous adjustment or decision made by AQC.

    • The taxpayer is experiencing a hardship.

  2. Follow the chart below for the appropriate actions:

    Note:

    If an e-Form 4442, an e-Fax, correspondence or an OAR received is inquiring about the status of a 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 open 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.

    If the taxpayer called and research shows: Then
    1
    AQC open indicators on the account and no initial contact letter has been sent and the request is an OAR and there is no documentation available to substantiate the claim for refund.
    • Initiate manual start procedures per IRM 25.25.7.3, Automated Questionable Credit (AQC) Manual Case Processing, and close the OAR.

    • Update EFDS notes as appropriate.

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

    Note:

    TAS may open an additional request once the taxpayer has received the notice and is allowed the allotted time to agree or disagree with proposed changes.

    2
    AQC open indicators on the account and no initial contact letter has been issued AND documentation is not available on CC IRPTR or the “required documentation” per IRM 25.25.7.2.1 , Automated Questionable Credit (AQC) Required Documentation, to substantiate the claim for refund is not provided by the taxpayer.

    Exception:

    DDb Rule 7 inventory types (AOTC holds) should not be referred until after cycle 17 each year. Follow Alert 16A0041: -R Freeze hold on American Opportunity Tax Credit (AOTC).

    • If no AQC.net Tool 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.

    • If AQC.net Tool rejection criteria are met per Exhibit 25.25.7-1, Inventory Reject Criteria, or the account contains an AQC.net tool reject control (XXREJECT), then initiate manual start procedures per IRM 25.25.7.3, Automated Questionable Credit (AQC) Manual Case Processing.

    • Update EFDS notes as appropriate.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific documentation received and the reason(s) it did not substantiate the credit or refund claimed (e.g. Received copy of Form W-2, can not be used per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation.

    • Ensure all RIVO control bases are closed, if case is being placed on the "Refer to Tool" spreadsheet.

    • Close the e-4442 with note: “Return not substantiated, referred to have letter 4800C issued”, or AQCX correspondence control with "UNSUBDOC" .

    • Review IRM 21.5.1.4.10 Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856.

    • Update the AQC database as required.

    3
    AQC open indicators on the account and no initial contact letter has been issued AND documentation is available on CC IRPTR and/or the taxpayer has provided the “required documentation” per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation, to substantiate the claim for refund.

    Note:

    See IRM 25.25.3, Revenue Protection Verification Procedures for Individual Masterfile Returns.

    • Input TC 290 for .00 with no source document (NSD) for claims validated only using CC IRPTR or source document (SD) for claims validated using any documentation provided by the taxpayer to release the refund. Use RC "085" and PC "8" to provide the taxpayer with confirmation of the refund release.

    • Update EFDS notes as appropriate. Refile the return in EFDS for current year returns.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific documentation received (e.g. Received copy of paystubs).

    • 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 to be deleted from STARS, see Exhibit 25.25.13-1, STARS Delete Reasons.

    • Ensure all RIVO control bases are closed.

    • Update the AQC database as required.

      Note:

      Cases that are released before any letter is sent to the taxpayer are 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 Category (CAT) 8 Disposition (Disp) R7 (DDb Rule 7 In Process of fraud determination) in EFDS. Once a final determination of fraud is made, STARS will be updated to CAT 8 Disp “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 CAT 8 Disp "PT - Questionable Premium Tax Credit (In Process of fraud determination)" . Once a final determination of fraud is made, STARS will be updated to CAT 8 Disp "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 CAT 8 Disp "TT - full year prisoner with refundable credits" . Once a final determination of fraud is made, STARS will be updated to CAT 8 Disp "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.

Taxpayer Agreed Response Procedures

  1. For taxpayer responses agreeing to the proposed changes follow the table below:

    Exception:

    For AQC16 if Command Code (CC) IRPTR verifies the return, release the refund the taxpayer is entitled to, whether the taxpayer responded to the letter agreeing to a full return disallowance. See IRM 25.25.3.4, Income Verification using CC IRPTR.

    Note:

    When disallowing Earned Income Tax Credit, American Opportunity Tax Credit, or Child Tax Credit/Additional Child Tax Credit based on Statutory Deficiency Procedures, AQC TEs will use the following Reason Codes to place a recertification indicator on the Taxpayers account:
    RC 175 for AQC disallowance adjustments of EITC
    RC 178 for AQC disallowance adjustments of AOTC
    RC 181 for AQC disallowance adjustments of CTC/ACTC

    If Then
    1
    A Letter 4800C, Questionable Credit 30 Day Contact Letter, was issued with an incorrect proposal for the Inventory Type
    • After the 46-day suspense period expires, follow IRM 25.25.7.6 (1), No Response Received to Letter 4800C, using the correct computations and paragraphs.

    2
    A Letter 4800C, was issued with an incorrect proposal for the Inventory Type and the taxpayer agreed to the incorrect proposal
    • Disregard the agreement to the incorrect proposal.

    • Follow IRM 25.25.7.6 (1) , No Response Received to Letter 4800C, with the correct computations and paragraphs.

    • In an open paragraph, include: “We apologize, our previous proposal to change your tax return included an error. As a result of the error, we have disregarded your response to our previous proposal. This proposal includes the corrected tax computation and change to your tax.”

    3
    The taxpayer agreed to the proposal and signed the letter or the letter was 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 but provided documentation that substantiates the original claim, treat the response as "Disagreed" , and follow the procedures, see IRM 25.25.7.4.6, Taxpayer Disagreed Response Procedures.

    • Input the adjustment as a Source Document (SD) attaching the signed agreement as SD. Use Hold Code “0” and source code “0”.

    • Input Transaction Code (TC) 811 for zero (.00) with a posting delay code of “2”, if there is an -E freeze on the module to release the freeze and issue any remaining refund.

    • Update the Electronic Fraud Detection System (EFDS) notes as appropriate.

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

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

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

    • Update the Automated Questionable Credit (AQC) database as required. Include the dollar amount protected.

    4
    The taxpayer sent in full payment for a post-refund case that has posted to the account but did not return the letter this will be treated as an agreement.
    • Input a Non-Source Document (NSD) adjustment to adjust the account based on the inventory type. Use Hold Code “0: and Source Code “0”.

    • Input Transaction Code (TC) 811 for zero (.00) with a posting delay code of “2”, if there is an -E freeze on the module to release the freeze and issue any remaining refund.

    • 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 RIVO control bases are closed.

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

    5
    The taxpayer agreed to the proposal and signed the letter and/or submitted a signed written request or Form 9465, Installment Agreement Request, requesting a payment plan.
    • Input a Source Document (SD) adjustment attaching the signed agreement (or a copy of the Installment Agreement Request) as a SD. Use Hold Code “0” and Source Code “0”.

    • Input Transaction Code (TC) 811 for zero (.00) with a posting delay code of “2”, if there is an -E freeze on the module to release the freeze and issue any remaining refund.

    • 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 RIVO control bases are closed.

    • Forward the installment agreement request to the Collections Function per the Mail Routing Guide for processing.

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

Taxpayer Disagreed Response Procedures

  1. Disagreed taxpayer responses fall into two categories – Substantiated or Unsubstantiated.

    Note:

    When disallowing Earned Income Tax Credit, American Opportunity Tax Credit, or Child Tax Credit/Additional Child Tax Credit based on Statutory Deficiency Procedures, AQC TEs will use the following Reason Codes to place a recertification indicator on the Taxpayers account.:
    RC 175 for AQC disallowance adjustments of EITC
    RC 178 for AQC disallowance adjustments of AOTC
    RC 181 for AQC disallowance adjustments of CTC/ACTC

  2. For inventory types that involve false wages and/or withholding, verify any income document(s) sent in by the taxpayer (e.g. paystubs, letter from employer/payer, etc.) by following verifying per CC IRPTR see IRM 25.25.3.4, Income Verification using Command Code CC IRPTR. If you are unable to confirm the validity, the document(s) can not be used to substantiate the income on the tax return.

    Note:

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

    Reminder:

    If Third Party contact is necessary, please complete Form 12175, Third Party Contact Report. See IRM 25.25.3.9 (3), Manual Verification Procedures, for additional instructions.

  3. For Disagreed taxpayer responses, follow the table below:

    If Then
    1
    Substantiated- (No Change to the original return ) – The taxpayer replies to the letter, submits the requested documentation and it verifies as good.

    Exception:

    If research shows the taxpayer is a full year prisoner per CC FTBOLP, and the original inventory type was AQC16 or AQC17, then follow the instructions in box 2 of this table.

    Reminder:

    If documentation for Inventory Type GATT11 verifies that they were not incarcerated or a full year prisoner, follow the local procedures to update the FTBOL spreadsheet located on the shared drive.

    • Input a Transaction Code (TC) 290 for zero (.00) using the documents provided as the Source Document (SD) to release the refund. Use Reason Code (RC) “085” and Priority Code (PC) “8”, to provide the taxpayer with confirmation of the refund release.

    • Input TC 811 for zero (.00) with a posting delay code of 2, if there is an -E freeze on the module to release the freeze and issue any remaining refund.

     

    Reminder:

    If there is an L- 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.

    • Update the Electronic Fraud Detection System (EFDS) notes as appropriate.

    • For current year returns "Refile" the return in EFDS.

    • Input/Update Account Management Services (AMS) notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific documentation received (e.g. Received copy of paystubs).

    • If the return is in the Scheme Tracking and Referral System (STARS), update the disposition to “DL” to have the return deleted from STARS. Update STARS or EFDS notes, when a return is being deleted from STARS, see Exhibit 25.25.13-1, STARS Delete Reasons.

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

    • Update the Automated Questionable Credit (AQC) database as required. Do not input a protected dollar amount.

    2
    Substantiated AQC16 or AQC17 wages and withholding and the taxpayer has been incarcerated the entire year.
    • If the response is to a Letter 4800C, follow IRM 25.25.7.6, No Response Received to Letter 4800C, and send Letter 3219C or Letter 105C, or Letter 106C, as a "GATT" inventory type.

    • If the response is 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 IRM 25.25.9.4, General Agreement on Tariffs and Trade (GATT) Returns.

    • Input TC 972 AC 140/122 MISC "AQC16" or "AQC17" to reverse the prior inventory type.

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

    • Send a request to your local AQC database Administrator to update the work type to "GATT11" , per local procedures.

    • Add an AQC 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 25.25.7.8.4, Premium Tax Credit (PTC) Referrals.
    4
    Substantiated for Individual Taxpayer Identification Number (ITIN) - The taxpayer replies to the letter and submits the requested documentation or a Form W-2, containing a “work assumed” Social Security Number (SSN).
    Research CC IRPTR data or the Social Security Administration Online Retrieval System (SSA_ORS) database.

    Note:

    If a “work assumed” SSN is found, update EFDS return notes with the “work assumed” SSN.


    If the income is substantiated, follow box 1 above.
    If the income is unsubstantiated, 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 and no amended return is provided.
    • Send the taxpayer a Letter 89C, Amended Return Required to Correct Account.

    • Close the "AQCX" control on IDRS with activity code "30XRETREQ" , if only a Letter 4800C was issued OR"90XRETREQ" , if a Letter 3219C was issued.

    • Leave "QRPA" or "AQC2" control open

      Reminder:

      Do not reassign the "QRPA " control base.

    • Review IRM 21.5.1.4.10, Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856.

    • Update EFDS notes as appropriate.

    • Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific documentation received and the reason(s) it did or did not substantiate the credit or refund claimed (e.g. Received copy of Form W-2, cannot be used per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation.

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

    6
    Unsubstantiated – The taxpayer submits information that is unrelated to the proposal, unverifiable (including an amended return) or asks for further clarification.
    • Send Letter 131C, Information Insufficient or Incomplete for Processing Inquiry, with an explanation of the proposed error. Do not send Letter 131C, if the suspense date has expired.

    • Close the IDRS "AQCX" control using one of the following activity codes: "30UNSUBDOC" , if only a Letter 4800C has been issued OR"90UNSUBDOC" , if a Letter 3219C has been issued.

    • Leave the "QRPA" or "AQC2" control open.

      Reminder:

      Do not reassign the "QRPA " control base.

    • Review IRM 21.5.1.4.10, Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856.

    • Update EFDS notes as appropriate.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific documentation received and the reason(s) it did not substantiate the credit or refund claimed (e.g. Received copy of Form W-2, cannot be used per IRM 25.25.7.2.1 , Automated Questionable Credit (AQC) Required Documentation.

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

Taxpayer Claiming Identity Theft Response Procedures

  1. For identity theft taxpayer responses follow the instructions below:

    Exception:

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

    1. If there is a -A freeze condition on the account and no history of a Return Integrity Verification Operations (RIVO) IDRS control in categories NCAT, ECAT or NRAM, send the correspondence to the Inventory Control Team (ICT) following local procedures and take no additional actions on the case.

    2. Input a transaction (TC) 971 action code (AC) 522 on command code (CC) ENMOD when the reply indicates IDT, 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 already exists for that tax year.

    3. Designated Tax Examiners (TEs) will triage Identity Theft (IDT) replies per Exhibit 25.25.5-1 , Triage Procedures, and follow procedures in (2) and (3) below based on the EFDS Disposition.

  2. If the return meets criteria for Category (CAT) 7 Disposition (Disp) "S1" or "SB" , then the account will be resolved using the Return Integrity and Compliance Services (RICS) IDT Tool, take the following actions:

    • Update the Scheme Tracking and Referral System (STARS) to CAT 7 Disp "S1" or "SB" , respectively.

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

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

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

    • Close both the correspondence and "QRPA" or "AQC2" IDRS controls with "IDTCORR" as the activity code.

    • Close all RIVO controls.

    • Update the AQC database as required.

  3. If the return meets criteria CAT 7 Disp "S2" , "GB" , or "BG" , take the following actions:

    Note:

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

    • Do not update the Scheme Tracking and Referral System (STARS), the IDT TE will update accordingly after the account is resolved.

    • Place the reply in the bin labeled "S2" , "GB" ,or "BG" , respectively, for the IDT TE to resolve the account.

    • 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 "AQCX" IDRS control with "IDTS2" , "IDTGB" or "IDTBG" , respectively, and re-assign to IDRS number "1484022222" .

    • Close the "QRPA" or "AQC2" control using activity code "IDTCORR" .

    • Update the AQC database as required.

Taxpayer Incomplete Response Procedures

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

    If 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 the taxpayer intends to send a response of disagreement advise the taxpayer to include supporting documents, see IRM 25.25.7.2.1 , Automated Questionable Credit (AQC) Required Documentation.

    • Inform the taxpayer to either fax or mail the information, but not both.

    • Mail to: Internal Revenue Service, Stop 763, 4800 Buford Highway NE, Atlanta, GA 39901.

    • Fax to: 855-855- 0616.

    • Update the Electronic Fraud Detection System (EFDS) notes as appropriate.

    • Input/Update the Account Management Services (AMS) notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include the specific instructions provided to the taxpayer.

    • Close the "AQCX" correspondence control with “Incomplete.”

    • Review IRM 21.5.1.4.10, Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856, Attachment Alert.

    • Leave the “QRPA” or "AQC2" control open.

      Reminder:

      Do not reassign the "QRPA " control base.

    • Update the Automated Questionable Credit (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 taxpayer by telephone.
    • Send Letter 131C, Information Insufficient or Incomplete for Processing Inquiry, to explain the needed documentation, see IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation .

      Exception:

      Do not send Letter 131C if the suspense period has expired, allow the next case action to take place.

    • Update EFDS notes as appropriate.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to include why the response was incomplete for processing (e.g. Received letter 4800C, no box was checked).

    • Close "AQCX" correspondence control with “Incomplete”.

    • Review IRM 21.5.1.4.10, Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856.

    • Leave the “QRPA” or "AQC2" control open.

      Reminder:

      Do not reassign the "QRPA " control base.

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

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 unclaimed or undeliverable mail returned to the Service be worked as a priority to ensure that notices are mailed to the taxpayer's current address.

  2. Returned mail may have one of the following notations on the envelope indicating the address used for the taxpayer is no longer accurate:

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

    • No new address found.

    • An indication the taxpayer does not live at the address on the letter (e.g. “No longer at this address”, “Not at this address”, etc.).

    • Unclaimed - Certified mail that was not claimed by or was refused by the recipient. Unclaimed does not necessarily mean undeliverable.

  3. Use the table below to resolve unclaimed or undeliverable correspondence returned to the Service:

    If And Then
    1
    The taxpayer’s name printed on the correspondence and printed on the “yellow label” is an exact match.
    Or
    The taxpayer’s address on IDRS differs from the “yellow label” and the name printed on the “yellow label” is an exact match to the correspondence
     
    • Update the taxpayer’s address to the “yellow label” address on IDRS.

    • Remail the original, returned correspondence to the taxpayer’s updated mailing address.

    • For Letter 4800C/3219C: Update the QRPA control activity code to the new suspense expiration date - “XXMMDDYYYY” (XX = inventory type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 46/106 calendar days (plus 61/151 calendar days for outside U.S.).

    • Input IDRS history item: “H, UNDLTR2TP” to indicate the returned correspondence was remailed to the taxpayer.

    • Update AQC database as required. For 3219C, select “yes” under the Undeliverable dropdown.

    2
    The taxpayer’s first name on the “yellow label” is like what’s on IDRS but the last name on the “yellow label” is an exact match.
    Research of IRS records do not show any other taxpayers with a similar first name and the exact same last name at the same address.
    • Update the taxpayer’s address to the “yellow label” address on IDRS.

    • Remail the original, returned correspondence to the taxpayer’s updated mailing address.

    • For Letter 4800C/3219C: Update the QRPA control activity code to the new suspense expiration date “XXMMDDYYYY” (XX = inventory type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 46/106 calendar days (plus 61/151 calendar days for outside U.S.).

    • Input IDRS history item: “H,UNDLTR2TP” to indicate the returned correspondence was remailed to the taxpayer.

    • Update AQC database as required. For 3219Cs, select “yes” under the Undeliverable dropdown.

    3
    There is no “yellow label” on the envelope or none of the “yellow label” scenarios above apply but a new address is indicated on the envelope.
     
    • Send Letter 2788C, Undeliverable Mail - New Address Verification, to the address indicated on the envelope with the appropriate paragraphs, attaching the original, returned correspondence using Form 5703, IDRS Letter Enclosure, and Form 8822, Change of Address, as enclosures.

    • Do not update the address on IDRS.

    • For Letter 4800C/3219C: Update the QRPA control activity code to the new suspense expiration date “XXMMDDYYYY” (XX = inventory type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 46/106 calendar days (plus 61/151 calendar days for outside U.S.).

    • Input IDRS history item: “H, UNDLTR2TP” to indicate the returned correspondence was remailed to the taxpayer.

    • Update AQC database as required. For 3219C’s, select “yes” under the Undeliverable dropdown.

    4
    The scenarios in Boxes 1 through 3 above, do not apply.
    You can locate a new address for the taxpayer through IDRS research (e.g. CCs IRPTR, INOLES, etc.)
    • Send Letter 2788C, Undeliverable Mail - New Address Verification, to the address indicated on the envelope with the appropriate paragraphs, attaching the original, returned correspondence using Form 5703, IDRS Letter Enclosure, and Form 8822, Change of Address, as enclosures.

    • Do not update the address on IDRS.

    • For Letter 4800C/3219C: Update the QRPA control activity code to the new suspense expiration date “XXMMDDYYYY” (XX = inventory type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 46/106 calendar days (plus 61/151 calendar days for outside U.S.).

    • Input IDRS history item: “H, UNDLTR2TP” to indicate the returned correspondence was remailed to the taxpayer.

    • Update AQC database as required. For 3219Cs, select “yes” under the Undeliverable dropdown.

    5
    The scenarios in Boxes 1 through 4 above do not apply and you cannot locate a new address for the taxpayer through IDRS research (e.g. CC IRPTR, INOLES, etc.)
     
    • Complete Form 9856, Attachment Alert, to send the returned correspondence to Files to associate it with the return for audit trail purposes.

    • Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), detailing the research taken to locate a new address for the taxpayer.

    • Input IDRS history item: “H,ADDRNOTFND” to indicate a new address was unable to be located.

    • Update AQC database as required. For 3219C’s, select “yes” under the Undeliverable dropdown.

    6
    The correspondence was returned by the USPS as unclaimed or refused.
     
    • Complete Form 9856, Attachment Alert, to send the unclaimed correspondence to Files to associate it with the return for audit trail purposes.

    • Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to indicate the correspondence was unclaimed.

    • Update AQC database as required. For 3219C’s, select “yes” under the Undeliverable dropdown.

No Response Received to Letter 4800C

  1. After the 46-day suspense period has expired (61 days for outside the U.S.) and no substantiated response was received from the taxpayer, determine if the case will result in a Negative Deficiency. See IRM 4.19.14.9.5(1), QRP Negative Deficiency Procedures, for more information regarding Negative Deficiency.

  2. The Negative Deficiency occurs when all of the following are met:

    • There was tax on the original return (TC 150 greater than zero).

    • The false wages are fully or partially removed, reducing the original tax to zero.

    • The reduced amount of EITC, ACTC and other credits is less than the original tax amount.

  3. Follow the chart below to take the appropriate actions.

    Reminder:

    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. Include Documentation Tool (DUT) paragraph for all AQC inventory types.

    Note:

    When disallowing Earned Income Tax Credit, American Opportunity Tax Credit, or Child Tax Credit/Additional Child Tax Credit based on Statutory Deficiency Procedures, AQC TEs will use the following Reason Codes to place a recertification indicator on the Taxpayers account:
    RC 175 for AQC disallowance adjustments of EITC
    RC 178 for AQC disallowance adjustments of AOTC
    RC 181 for AQC disallowance adjustments of CTC/ACTC

    If And Then
    The case is Pre-refund. The proposal will result in a Negative Deficiency.
    • Input a Non Source Document (NSD) adjustment to adjust the account based on the Inventory Type. Use a Hold Code (HC) "3" to hold the adjustment letter.

    • For partial disallowances, use Blocking Series (BS) “00”, for electronically filed returns or “18” for paper filed returns.

    • For full disallowances, use BS “99”, for electronically filed returns or “98” for paper filed returns.

    • Send a Letter 105C, Claim Disallowed, or Letter 106C, Claim Partially Disallowed, with the appropriate paragraphs.

    • Input/Update AMS notes per IRM 21.2.2.4.5, Accounts Management Services (AMS), to indicate the case was defaulted, because no substantiated response was received.

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

    • Update the Automated Questionable Credit (AQC) database as required. Include the dollar amount protected.

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

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

      Reminder:

      If the first computation was incorrect recompute and upload the corrected computation to the AQC SharePoint.

    • Update the "AQC2" control activity code to the suspense expiration date "XXMMDDYYYY" (XX = inventory type, see IRM 25.25.7.2 Automated Questionable Credit (AQC) Inventory Types,, and MMDDYYYY = the current date plus 106 calendar days or plus 151 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 "AQC2" control activity code to the suspense expiration date "XXMMDDYYYY" (XX = inventory type, see IRM 25.25.7.2, Automated Questionable Credit (AQC) Inventory Types, and MMDDYYYY = the current date plus 106 calendar days or plus 151 days for outside the U.S.).

    • Update AQC database as required.

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

  1. After the 106 day suspense period (151 days for outside the U.S.) has expired and no substantiated response was received from the taxpayer, take the following actions on the account:

    Reminder:

    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.

    Note:

    When disallowing Earned Income Tax Credit, American Opportunity Tax Credit, or Child Tax Credit/Additional Child Tax Credit based on Statutory Deficiency Procedures, AQC TEs will use the following Reason Codes to place a recertification indicator on the Taxpayers account.:
    RC 175 for AQC disallowance adjustments of EITC
    RC 178 for AQC disallowance adjustments of AOTC
    RC 181 for AQC disallowance adjustments of CTC/ACTC

    If Then
    The case is Pre-refund.
    • Input an adjustment as a Non-Source Document (NSD) to adjust the account based on the inventory type. Use Source Code (SC) "0" and Hold Code (HC) "0" .

    • Input Transaction Code (TC) 811 for .00 with a Posting Delay Code ‘2’, if there is an -E freeze on the module to release the freeze and issue any remaining refund.

    • Input/Update Account Management Services (AMS) notes per IRM 21.2.2.4.5, Account Management Services (AMS), to indicate the case was defaulted, because no substantiated response was received.

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

    • Update the Automated Questionable Credit (AQC) database as required. Include the dollar amount protected.

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

    The case is Post-refund.
    • Input an adjustment as a Non-Source Document (NSD) to adjust the account based on the inventory type. Use SC "0" and HC "0" .

    • Input/Update AMS notes per IRM 21.2.2.4.5, Account Management Services (AMS), to indicate the case was defaulted, because no substantiated response was received.

    • Close all RIVO control bases.

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

    • Update the return in STARS to "QL".

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" .

    Error Reason Codes Definition
    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 a dependent on the Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, 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 will only be worked during Contingency.

    PTC Inventory Types Description
    (PTC12) - Dependent Database (DDb)- PTC-Error-Code (CD) 900 (PTC12)-Dependent Database (DDb)-PTC-Error-Code (CD) 900 PTC claimed, where the taxpayer is considered a full year prisoner PTC claimed, where the taxpayer is considered a full year prisoner
    (PTC13) - DDb-PTC-Error-CD 900 (PTC13)-DDb-PTC-Error-CD 900 PTC claimed on a joint return, where both taxpayers are considered full year prisoners PTC claimed on a join return, were both taxpayers are considered full year prisoners
    (PTC18)- DDb-PTC-Error-CD 901 (PTC18)-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. 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.
    (PTC20)-DDb-PTC-Error-CD 904 (PTC20)-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. 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.
    (PTC65)-DDb-PTC-Error-CD-902 (PTC65)-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. 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.
    (PTC66)-DDb-PTC-Error-CD 903(PTC66)-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. 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.

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.

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 an AQC Analyst referral is needed:

    • Update the"AQCX control" activity code to "PTC2RVIEW" .

    • DO NOT close “QRPA” control.

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

  3. The AQC Analyst will:

    • Review the documentation provided.

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

    • Update the “AQCX” control activity code to "RVIEWDONE" .

  4. After the disposition is provided by the AQC Analyst, follow IRM 25.25.7.4.2, Processing Taxpayer Responses, to resolve the response based on the disposition.

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

  1. Toll-Free Customer Service Representatives (CSRs) trained to work the Automated Questionable Credit (AQC) line should be able to answer most questions during the phone call on the AQC toll-free line. AQC toll-free line only answers questions related to letters 3219C, 4800C, 105C and 106C issued by AQC or cases with AQC indicators as described in (3) below.

    Reminder:

    Do not refer the taxpayer if the account has an AQC indicator but the original refund was released, regardless of whether an AQC letter was issued, see IRM 21.5.6.4.35.3.1(4), -R Freeze Phone Procedures for Accounts With Return Integrity Verification Operations (RIVO) Involvement for more information. However, if you identify an Erroneous Refund, follow procedures in IRM 21.4.5.5, Erroneous Refund Categories and Procedures.

  2. Toll-Free CSRs not designated to answer the AQC toll-free line provide the caller with the toll free number 855-873-2100 and the hours of operation of Monday through Friday 7:00 am to 9:00 pm CST for AQC questions related to letters 3219C, 4800C, 105C and 106C.

  3. The following are AQC indicators:

    • TC 971 AC 140

    • TC 971 AC 122

    • TC 971 AC 128 with specific MISC fields "AQCPTC191" , "AQCPTC195" or "AQCPTC9XX" , or

    • Accounts with an open control category code "QRPA" or "AQC2"

  4. CSRs designated to respond 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. When transferring a caller to the Spanish speaking line use transfer IUP #1248.

  5. If the caller is responding to a balance due notice based on an assessment by AQC and agrees with the assessment, do not transfer the caller to the AQC line. Follow normal balance due procedures, see IRM 5.19.1.6, Methods of Payment.

    Note:

    No account adjustments will be made by Accounts Management CSRs if there are any AQC open indicators present. All account adjustments will be processed by the AQC teams only.

  6. Responses to AQC letters should be submitted via the Documentation Upload Tool (DUT) at https://www.irs.gov/reply. The DUT is a fast and safe reply method where taxpayers can submit their response by simply scanning or taking a photograph of their signed letter, written statement or any supporting documentation, and completing the upload form. Taxpayer’s must include their taxpayer identification number (TIN) and tax period on each page of their response. If the taxpayer is responding to a 105C/106C or a letter has not been issued, advise the taxpayer to select "4800C" as the form number they are responding to.

    Only if the taxpayer states they do not have internet access or they attempted to access DUT but their browser is not supported, provide the option to respond via mail to Internal Revenue Service, Stop 763, 4800 Buford Highway NE, Atlanta, GA 39901, or fax to (855) 855-0616.

    Note:

    The taxpayer should only respond by one of the methods, multiple responses will delay case processing.

  7. If the taxpayer requests more time to respond, advise the taxpayer we are unable to extend the time frames, our review will continue until the documentation is received or the time frame on the notice expires.

  8. All AQC toll-free calls require a history narrative on AMS. Input AMS history narrative and choose “Exam Assessment” as the issue description, see IRM 21.2.2.4.5, Account Management Services (AMS), for more information.

  9. If the taxpayer has not been issued or has not received a Letter 4800C or Letter 3219C (as indicated on CC ENMOD) , then research the account to determine if the appropriate documentation for the inventory type per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation, indicated in the MISC field of the TC 971 AC 122 or AC 140, is available on IRS systems (i.e. researching the Coverage Data Repository (CDR) or command code (CC) IRPOLA to verify Premium Tax Credit (PTC) amounts claimed, IRP/Marketplace documents available or verified per CC IRPTR).

    Note:

    AQC inventory types AOTC25, AOTC27, AOTC28, and AOTC29 should not be referred until after cycle 18, if no letter has been sent.

    Reminder:

    TC 971 AC 122 with a MISC field of "7S", "7S1", or " 7V" are not AQC cases unless a subsequent TC 971 AC 122 posts with another AQC Inventory type in the MISC Field.

    If Then
    The IRS systems do not substantiate the refund claimed and it has been 60 days or less since the TC 971 AC 122 or AC 140 posted
    • Advise the taxpayer that they should receive a letter requesting additional documentation or their refund 60 days from the date of the TC 971 AC 122.

    • Provide the documentation required to substantiate the credit claimed on the original return, per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation.

    • If they are unable to provide supporting documents, advise them to respond by explaining the issue and how they figured the amount.

    • Advise the taxpayer to respond as outlined in (6) above.

    • Advise the taxpayer to allow 120 days from the received date of their documentation to receive their refund or a letter.

    The IRS systems do not substantiate the refund claimed and it has been more than 60 days since the TC 971 AC 122 or AC 140 posted
    • Initiate an e-Form 4442 to AQC using referral queue "RICS RIVO AQC" .

    • Advise the taxpayer to allow 60 days for a letter or their refund.

    • Provide the documentation required to substantiate the credit claimed on the original return, per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation.

    • If they are unable to provide supporting documents, advise them to respond by explaining the issue and how they figured the amount.

    • Advise the taxpayer to respond as outlined in (6) above.

    • Advise the taxpayer to allow 120 days from the received date of their documentation to receive their refund or a letter.

    The IRS systems do substantiate the refund claimed and it has been 60 days or less since the TC 971 AC 122 or AC 140 posted
    • Advise the TP no further actions are required and to allow the IRS 60 days to resolve the account.

    The IRS systems do substantiate the refund claimed and it has been more than 60 days since the TC 971 AC 122 or AC 140 posted
    • Initiate an e-Form 4442 to AQC using referral queue "RICS RIVO AQC" , notate what documents are available to substantiate the claim in the referral narrative (i.e. CC IRPTR, Marketplace, etc.).

    • Advise the taxpayer to allow 60 days for their refund.

  10. If the taxpayer received a Letter 4800C or Letter 3219C and disagrees with the proposal, then research the account to determine if the appropriate documentation for the inventory type per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation , indicated in the MISC field of the TC 971 AC 122 or AC 140, is available on IRS systems (i.e. IRP/Marketplace documents available or verified per CC IRPTR).

    Note:

    For inventory type GATT11, if the taxpayer disagrees with the incarceration dates, they need to provide documentation showing their incarceration dates, such as a letter from the penal institution. If the taxpayer states they were never incarcerated, they need to sign the Letter 4800C or Letter 3219C or provide a written statement denying they were incarcerated and a copy of their driver’s license.

    If Then
    The IRS systems do not substantiate the refund claimed
    • Advise the taxpayer to sign the Letter 4800C or Letter 3219C or include a signed statement indicating their disagreement and supporting documentation.

    • If they are unable to provide supporting documents, advise them to respond by explaining the issue and how they figured the amount.

    • Advise the taxpayer to respond as outlined in (6) above.

    • Advise the taxpayer to allow 120 days from the received date of their documentation to receive their refund or an additional letter.

    The IRS systems do substantiate the refund claimed
    • Initiate an e-Form 4442 to AQC using referral queue "RICS RIVO AQC" , notate what documents are available to substantiate the claim in the referral narrative (i.e. CC IRPTR, Marketplace, etc.).

    • Advise the taxpayer to allow 60 days for a response.

  11. If the taxpayer received a Letter 4800C or Letter 3219C and agrees with the proposal.

    • Advise the taxpayer to sign the Letter 4800C or Letter 3219C or submit a signed written statement and to clearly indicate their agreement.

    • Advise the taxpayer to respond as outlined in (6) above.

    • If the result will be a balance due, follow IRM 5.19.1.6, Methods of Payment if trained on balance due issues. Otherwise, transfer the call per the Telephone Transfer Guide (TTG).

  12. If the taxpayer claims identity theft stating, for instance, "I didn’t file this return" or a similar statement, regardless of whether an AQC letter was issued.

    • Follow procedures in IRM 25.23.12.3, Identity Theft Telephone General Guidance, to advise the taxpayer how to submit an identity theft claim.

    • Advise the taxpayer to submit a copy of their AQC letter, or written statement explaining that no AQC letter was received, and Form 14039, Identity Theft Affidavit, as outlined in (6) above.

  13. If the taxpayer received a Letter 105C, Claim Disallowed, or Letter 106C, Claim Partially Disallowed, sent by AQC and disagrees, then research the account to determine if the appropriate documentation for the inventory type per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation , indicated in the MISC field of the TC 971 AC 122 or AC 140, is available on IRS systems (i.e. IRP/Marketplace documents available or verified per CC IRPTR).

    Note:

    If the taxpayer agrees with the disallowance or partial disallowance no further action is needed.

    If Then
    The IRS systems do not substantiate the refund claimed and the taxpayer does have additional documentation not previously considered.
    • Advise the taxpayer to respond as outlined in (6) above.

    • Advise the taxpayer to allow 120 days from the received date of their documentation to receive their refund or an additional letter.

    The IRS systems do not substantiate the refund claimed and the taxpayer does not have additional documentation.
    • Advise the taxpayer to follow the Appeals instructions in the Letter 105C or Letter 106C as directed.

    Note:

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

    The IRS systems do substantiate the refund claimed (e.g. CC IRPTR documents available after the posting of the TC 971 AC 140 or AC 122).
    • Initiate an e-Form 4442 to AQC using referral queue "RICS RIVO AQC" , notate what documents are available to substantiate the claim in the referral narrative (i.e. CC IRPTR, Marketplace, etc.).

    • Advise the taxpayer to allow 60 days for a response.

  14. Taxpayer responses to AQC cases can be identified by one of the following category codes:

    • AQCD - AQC letter response disagreed

    • AQCA - AQC letter response agreed

    • AQCO - AQC letter response other

    • AQCI - AQC letter response identity theft

    • AQC1- Referred from WOW

    • TWRO - Initiated electronic 4442

  15. If the taxpayer inquires about the status of their response, advise the taxpayer to allow up to 120 day from the date of the response. The taxpayer should not resubmit their response, this could cause additional delays.

    Exception:

    If there is no open control indicating that AQC has received a response and it is more than 60 days since the taxpayer sent their response, advise the taxpayer to resubmit their response and apologize for the inconvenience.

  16. If it has been more than 120 days from the correspondence received date, there is an open control indicating a response to the AQC case was received and the case has not been resolved, submit an e-Form 4442 to AQC using referral queue “RICS RIVO AQC”. Advise the taxpayer to allow an additional 60 days for a response and apologize for the delays.

  17. If an e-Form 4442, Inquiry Referral, was issued and the timeframe has passed, follow the procedures in IRM 21.1.3.18, Taxpayer Advocate Service (TAS) Guidelines, and advise the taxpayer you are referring their case to Taxpayer Advocate Service (TAS).

AQC Docketed Appeals Case Procedures

  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 to the Office of Appeals within 10 days of the request.

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

    • A redacted copy of the Certified Mail -Listing (CML). The CML will be maintained within the Operation for three years.

    • Copy of certified Letter 3219C, Statutory Notice of Deficiency, or Letter 105C, Claim Disallowed, from the Control D file.

      Note:

      If you are unable to locate a copy of the AQC letter or it is not available, notate "SNOD not available" on the Form 3210, Document Transmittal.

    • Any responses received from the taxpayer, if still available.

    • Update or open a new QRPA control with activity code to "FWD2APPLS" and the status code M (Monitor) to reflect the documentation has been sent to Appeals.

    • Monitor the account until the Appeals freeze posts before closing the monitoring control.

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

    • E-mailbox ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • Notate the Form 3210, Document Transmittal, with the Docketed Appeals case number.

    • Send Letter 86C, Referring Taxpayer Inquiry/Forms to Another Office, to notify the taxpayer their request has been forwarded to Appeals.

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

  1. Returns 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 will require special treatment. If the ASED has 90 days or more follow procedures in IRM 25.25.7.3, Automated Questionable Credit (AQC) Manual Case Processing.

    Reminder:

    AQC Statute imminent cases should not be referred to the AQC.net Tool.

    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.

  2. For statute Imminent cases (the ASED will expire within 90 days of today’s date) take the following actions:

    Reminder:

    Before issuing a 3219C on Statute Imminent cases review IRM 25.25.7.3 (3), Automated Questionable Credit (AQC) Manual Case Processing, for refund release criteria.

    • Send Letter 3219C, Statutory Notice of Deficiency, with the appropriate paragraphs.

    • Update the IDRS "AQC2" control assignment number to the Tax Examiner (TE) sending the letter and update the activity code to the suspense expiration date "55MMDDYYYY", and MMDDYYYY = the current date plus 106 calendar days (151 days for outside U.S.).

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

  3. Use the following chart when working response or non-response to Letter 3219C, Statutory Notice of Deficiency:

    If Then
    The taxpayer response to the Letter 3219Cbefore the ASED expires Follow procedures in IRM 25.25.7.4.2, Processing Taxpayer Responses.
    The taxpayer response to the Letter 3219Cafter the ASED expires follow procedures in (4) below.
    The taxpayer does not respond to the Letter 3219C and the suspense period has expired follow procedures in (4) below.

  4. Use the following chart for AQC cases where the ASED has expired:

    Reminder:

    Do not adjust tax or credits, other than withholding.

    If Then
    The case results in a partial disallowance and does not result in a change to total tax and only decreases withholding,
    • Adjust the account to allow the portion of the refund the taxpayer is entitled to based on the available account information (e.g. IRPTR, CDR data, etc.).

    • Use Hold (HC) “3”, Blocking Series (BS) “00”, for electronically filed returns or “18” for paper filed returns.

    • Send Letter 106C, Claim Partially Disallowed, with the appropriate paragraphs.

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

    • 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”.

    The case results in partial disallowance and results in a change to total tax or a decrease in credits
    • Move the overpayment for the disallowed amounts to Excess Collections to decrease the module balance to the amount of the refund the taxpayer is entitled to using Form 8758, Excess Collections File Addition for each credit being moved. See Exhibit 25.25.13-2, Transferring Credits to Excess, for credit transfer ordering to Excess and IRM 3.12.38.5.19.4.1, Preparing Form 8758. Update the "AQC2" control with activity “87582EXCES”, and “M” status to track the Form 8758 submission to Excess Collection.

    • If no open QRPA control, open one with activity “87582EXCES” and “M” status.

    • Send Letter 106C, Claim Partially Disallowed, with the appropriate paragraphs.

    • Monitor for posting of the disallowed amounts to Excess Collection.

      Exception:

      OARs Only: if TAS is requesting a manual refund please see IRM 25.25.13.10 (6), Manual Refund Criteria for Return Integrity Verification Operations

    • After amount(s) sent to Excess Collection have moved off the module, adjust the account to the correct figures based on the available account information (e.g. IRPTR, CDR data, etc.).

    • Input a Transaction Code (TC) 290 for .00 using HC “3”, with the applicable reason codes, BS “00”, for electronically filed returns or “18” for paper filed returns to release the remainder of the refund.

    • Continue to monitor the adjustment until the module is at a zero-balance ensuring the refund released.

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

    • Close all RIVO control bases.

    • Update AQC database as required.

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

    Full disallowance
    • Send Letter 105C, Claim Disallowed, with the appropriate paragraphs.

    • Input TC 290 for .00. Use the appropriate Reason Codes for the items being disallowed, HC “4”, BS “99”, for electronically filed returns or “98” for paper filed returns.

    • Move the disallowed credits to Excess Collections to reduce the module balance to zero ($.00) using Form 8758, Excess Collections File Addition for each credit being moved. See Exhibit 25.25.13-2 See IRM 3.12.38.5.19.4.1, Preparing Form 8758.

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

    • Close all RIVO control bases.

    • Update AQC database as required.

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

  5. If the taxpayer later provides the required documentation to support their original claim and the total tax and/or credits were previously removed. See SERP Portal Barred/Quick Assessment Referral Guide for procedures.

Processing Late Replies

  1. Automated Questionable Credit (AQC) late replies are replies that are received after the case has been closed.

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

    If Then
    The taxpayer did not provide the required documentation, per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation, to substantiate the refund claimed on the original return, 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.

    • Close the “AQCX” control with “LPUNSUBDOC” in the activity code.

    • Review IRM 21.5.1.4.10, Classified Waste, to determine if the documentation meets classified waste criteria. If the documentation does not meet classified waste criteria and needs to be associated with the return for audit trail purposes, complete Form 9856, Attachment Alert, to send the documentation to Files.

      Exception:

      For E-fax responses, mark the fax with a red “X”, your Employee Identification Number and move it to your “Classified Waste” folder. Do not complete Form 9856.

    • Update the Electronic Fraud Detection System (EFDS) notes as appropriate.

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

    • Update AQC database as required.

    The taxpayer provided the required documentation, per IRM 25.25.7.2.1, Automated Questionable Credit (AQC) Required Documentation and it substantiates the refund claimed on the original return.
    • Input an adjustment using the documents provided as a source document to reverse the previous adjustment.

    • Update EFDS notes as appropriate.

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

    • 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, see Exhibit 25.25.13-1, STARS Delete Reasons.

    • Update AQC database as required.

Manual Referrals and AQC.net Tool Rejects

  1. Returns that cannot be worked via the AQC.net Tool or have been referred to the AQC process from External Leads or Manual Referral Process, will be assigned using a spreadsheet process and will be resolved following the chart below:

    Note:

    Research account for -O freeze. Do not send disallowance during the disaster relief period. Do not disallow or default accounts during the disaster relief period, unless agreed to by the taxpayer. See for disaster locations.

    If Then
    1
    The account has an open control, or freeze code, or has been resolved by an outside RIVO.
    • Update Electronic Fraud Detection System (EFDS) return notes as appropriate.

    • If the return is in the Scheme Tracking and Referral System (STARS), update STARS to “CL”. Update Category Code to “5”.

    • Leave AQC database case status as “Rejected”.

    • Select appropriate reject reason.

    • Leave AQC database notes as appropriate.

    • Close all RIVO control bases.

    2
    There is an open control to 1484077777, ATAO, or is already assigned to an AQC employee.
    • Take no action on the account.

    • Do not update the AQC database.

    • Close the AQC Reject control as “CL2CORR” or “CL2EFAX”, if closing to any type of correspondence.

    3
    The return information can be verified per Command Code (CC) IRPTR data or information in Contact Employer (CE), see IRM 25.25.3, Revenue Protection Verification Procedures for Individual Master File Returns and Does NOT require a Letter 4800C.
    • Release the refund per IRM 25.25.13.9, Releasing the Refund.

    • Update EFDS Return notes as appropriate.

    • “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 to be deleted from STARS.

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

    • Close all RIVO control bases.

    4
    The return information cannot be verified per CC IRPTR data or CE, see IRM 25.25.3, Revenue Protection Verification Procedures for Individual Master File Returns and does require a Letter 4800C.
    • Follow IRM 25.25.7.3, Automated Questionable Credit (AQC) Manual Case Processing

    5
    The account return information cannot be verified per CC IRPTR data or CE, see IRM 25.25.3, Revenue Protection Verification Procedures for Individual Master File Returns, and has previously been issued a Letter 4800C.
    • Follow IRM 25.25.7.6, No Response Received to Letter 4800C

    6
    The account return information cannot be verified per CC IRPTR data or CE, see IRM 25.25.3, Revenue Protection Verification Procedures for Individual Master File Returns and has previously been issued a Letter 3219C.
    • Follow IRM 25.25.7.7, No Response Received to Letter 3219C (Notice of Deficiency).

    7
    The account information indicates the taxpayer is claiming identity theft, such as notes in Accounts Management Services (AMS).
    • Follow IRM 25.25.7.4.7, Taxpayer Claiming Identity Theft Response Procedures.

AQC.net Tool Inventory Reject Criteria

Not all AQC case processing can be worked systemically though the AQC.net Tool. To resolve cases meeting rejection criteria, see IRM 25.25.7.13, Manual Referrals and AQC.net Tool Rejects. The table below describes the AQC.net Tool reject criteria:

IDRS Research Rejection Criteria
CC TXMODA
  • TC 150 has not posted.

  • TC 29X posted or pending.

  • TC 30X posted or pending.

  • TC 424, TC 425, or TC 420 posted or pending.

  • TC 740 or TC 841 with DLN julian date "999" .

  • Any of the following freezes are present: 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, -L, 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 open control with a Category Code other than “QRPA” or “AM01” through “AM09”.

CC ENMOD
  • TC 971 Action Code (AC) 136 referral to Exam.

  • TC 971 AC 501 Taxpayer identified IDT case.

  • TC 971 AC 506 IRS identified IDT case.

  • 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 Social Security Number (SSN) for employment.

CC UPTIN
  • Any Individual Master File (IMF) Unpostable Code, (unless due to AQC payment posting or assigned to AQC TE). See IRM 21.5.5.3.2, Researching Unpostables on IDRS, for more information.

AQC17 In addition to the criteria listed above:
  • TC 150 (original total tax) greater than zero (0).

  • Amended Form W-2 reported on command code (CC) IRPTR for the tax period in question.

  • Fraudulent Payer Taxpayer Identification Number (TIN) showing in CC IRPTR for the tax period in question.

  • Taxpayer using prior year income to compute current year Earned Income Tax Credit (EITC).

  • Returns claiming Schedule C losses.

  • Returns claiming Household Income (HSH).

  • TC 766 CRN 336 and CRN 173, returns claiming both the Additional Child Tax Credit (ACTC) and Credit for Other Dependent (ODC).

  • TC 766 CRN 262, returns claiming the refundable Premium Tax Credit (PTC).

  • TC 766 CRN 336, returns claiming ACTC with three or more Qualifying Children and IRPTRL wages is $2,500.00 or less.

  • TC 766 CRN 256, returns claiming Recovery Rebate Credit.

  • Returns claiming a refundable credit on Form 4136, Credit for Federal Tax Paid on Fuels. See Form 4136 for applicable CRNs.

  • Any tax return prior to tax year 2017.

Rule 7T and Rule 7R Unable to work these AQC work types through the AQC.net tool.

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 letters 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 has resolved the case or it has been referred to another area for resolution
4
Closed:
AQC has resolved the case
Types of Responses Definitions
5
Agreed
Taxpayer responded to the AQC letter and agreed to the proposed changes
6
Disagreed Substantiated (No Change)
Taxpayer responded to the AQC letter that substantiated the original claim and the refund is released by AQC without an adjustment.
7
ID Theft
Taxpayer responded to the AQC letter and claims to be a victim of identity theft.
8
No Change
Refund is released by AQC without an adjustment.
Dispositions Definitions
9
Surveyed
Refund released before Letter 4800C, Questionable Credit 30 Day Contact 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
The taxpayer has not responded to the 4800C letter and the suspense time has passed. The Letter 105C, Claim Disallowed, or Letter 106C, Claim Partially Disallowed, is sent due to a negative deficiency.
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
Letter 3219C suspense timeframe has passed with no substantiated response from taxpayer and the account was adjusted to the proposed changes.
16
Petitioned
Taxpayer filed a 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 105C or Letter 106C appealing the decision to disallow the claim