4.4.12  Examined Closings, Surveyed Claims, and Partial Assessments (Cont. 2)

4.4.12.5 
Examined Closings

4.4.12.5.21 
Item 12: Tax, Penalty and Interest Adjustments

4.4.12.5.21.4 
Penalty Transaction Codes

4.4.12.5.21.4.10  (06-01-2002)
TC 201 IMF Only

  1. Abates a previously posted TC 200 in full or in part.

4.4.12.5.21.4.11  (09-17-2015)
TC 234 BMF Only

  1. Assesses a manually computed $20 daily delinquency penalty up to a maximum of $10,000.

4.4.12.5.21.4.12  (06-01-2002)
TC 235 BMF Only

  1. Abates previously assessed daily delinquency penalty, TC 234 or (TC 238 - computer generated penalty) in whole or in part.

4.4.12.5.21.4.13  (09-17-2015)
TC 240

  1. TC 240 is a computer generated miscellaneous penalty not identified with its own transaction code or reference number. The TC 240 is generated based on the Penalty Reference Number (PRN) entered in Item 15 of Form 5344.

  2. TC 240 is also used to assess the IRC 6698, Failure to File Partnership Return and IRC 6699, Failure to File S-Corporation Return when the penalty is asserted for failure to include all required information with Form 1065, U.S. Return of Partnership Income or Form 1120S, U.S. Income Tax Return for an S Corporation. However, special procedures apply for these assessments. See IRM 20.1.2.3, Penalty Handbook-Failure to File/Failure to Pay Penalties, Failure to File a Partnership Return-IRC 6698, and IRM 20.1.2.5, Penalty Handbook-Failure to File/Failure to Pay Penalties, Failure to File S Corporation Return-IRC 6699.

  3. TC 240 should be used rarely. The majority of penalties now have their own penalty reference number (PRN). The PRN should be entered in Item 15 of Form 5344 with the corresponding amount of the penalty.

4.4.12.5.21.4.14  (09-17-2015)
TC 241

  1. Input the penalty reference number with a minus in Item 15 of Form 5344 and the computer will generate a TC 241. This action will abate a previously posted TC 240 in full or in part. Also abates TC 246 (Form 8752, Required Payments or Refund Under Section 7519 or Form 1065, U.S. Return of Partnership Income, penalty and the penalty for failure by large partnerships to file electronically identified by reference number 688.

4.4.12.5.21.4.15  (06-01-2002)
TC 270

  1. Assesses manually computed penalty for FTP tax.

  2. After TC 270 posts, all subsequent adjustments to penalties must be manually computed.

  3. Restricts penalty computation for the same module.

  4. TC 150 with Condition Code Z (combat zone) generates TC 270 for zero amount.

4.4.12.5.21.4.16  (09-17-2015)
TC 271

  1. Manual abatement of previously assessed FTP penalty. Restricts penalty computation for the same module.

    Exception:

    TC 271 does not restrict penalty computation if the penalty was abated for reasonable cause with Reason Code 062

    .

4.4.12.5.21.4.17  (09-17-2015)
TC 272

  1. Removes restriction on computation of FTP penalty on previously posted TC 270 or 271.

  2. Causes recomputation and allows normal computation of FTP penalty.

    Exception:

    TC 272 does not cause recomputation if the penalty was abated for reasonable cause with Reason Code 062. If the penalty was abated in error, it must be manually reassessed.

    .

4.4.12.5.21.4.18  (06-01-2002)
TC 281

  1. Abates previously posted TC 280 (manually computed penalty) and TC 286 (computer generated penalty) in full or in part.

  2. Will post prior to return (account with no TC 150) if it is the only transaction with TC 290, and the module contains TC 280 or 286 of equal or greater amount.

4.4.12.5.21.4.19  (06-01-2002)
TC 310 IMF Only

  1. Assesses penalty for failure to report tip income.

4.4.12.5.21.4.20  (06-01-2002)
TC 311 IMF Only

  1. Abates previously posted TC 310 in full or in part.

4.4.12.5.21.4.21  (09-17-2015)
TC 320

  1. Assesses fraud penalty.

  2. Restricts FTP penalty.

  3. May not be used with another penalty except TC 160, TC 170 or TC 180.

4.4.12.5.21.4.22  (06-01-2002)
TC 321

  1. Abates previously posted TC 320 in full or in part.

  2. Releases the restrictions on FTP penalty.

4.4.12.5.21.4.23  (09-17-2015)
TC 350

  1. Assesses negligence penalty for returns prior to 1989.

  2. A TC 350 and a TC 320 may be asserted on the same module but on different portions of the tax. See IRM 20.1.5, Penalty Handbook, Return Related Penalties, for more information.

4.4.12.5.21.4.24  (09-17-2015)
TC 351

  1. Abates previously posted TC 350 in full or in part.

  2. For tax years prior to 1988 the penalty includes 50% of the interest. This needs to be considered when abating part of the TC 350.

  3. For more information see IRM 20.2.5.3, Interest - Interest on Underpayments, Interest on Penalties and Additions to Tax.

4.4.12.5.22  (06-01-2002)
Item 13: Disposal Code

  1. 01–04, 07–13, or 34 is required on all examined closings.

4.4.12.5.22.1  (06-01-2002)
Validity Checks

  1. Certain validity checks must be met or the document will reject at the terminal.

  2. Disposal Codes 03, 04, 07–13, and 34 require Examination Results.

  3. Disposal Codes 09, 10 and 11 (all pertaining to Statutory Notices of Deficiency) are not valid with MFT codes in which stat notices are not issued (MFTs 01, 04, 09, 10, 11, 14, 16, 17, 18, 19, 71, 72, or 80).

  4. If Disposal Code is 01, 02, 07, or 11, Item 12 and/or Item 15 must not contain an amount that represents tax, penalty, or credits.

  5. If Disposal Code is 01, Item 12 must be blank but Item 15 may contain an entry other than credit reference numbers 301, 302, 303, 304, 307, 310, 312, 318, 680, 681, 682, 685, 686, 764, 765, 766, 767, 806, and 807.

4.4.12.5.22.2  (06-01-2002)
Agreed

  1. Use Disposal Codes 03, 04, 08 or 09.

4.4.12.5.22.3  (06-01-2002)
Appealed

  1. Use Disposal Code 07; Item 16, Appeals Office Code is required with DC 07.

4.4.12.5.22.4  (09-17-2015)
Changed Case/No Dollars

  1. Use Disposal Code 12.

  2. A changed case with no results requires an amount of $1 in Item 35, Manual Assessment Amount and Disposal Code 12 in Item 13. Some examples of these types of cases are:

    1. Barred assessment cases

    2. Interest assessment only

    3. Tax assessments offset by credits in the same tax period.

    4. Penalty assessment only.

  3. If applicable, enter an agreement date in Item 08.

4.4.12.5.22.5  (06-01-2002)
Defaulted Statutory Notice of Deficiency

  1. Use Disposal Code 10.

4.4.12.5.22.6  (09-17-2015)
No Change

  1. Use Disposal Code 01 or 02.

  2. PC 5 is automatically generated on all DC 01 and 02 returns. This allows the computer to automatically update the FTP penalty.

4.4.12.5.22.7  (06-01-2002)
Petitioned

  1. Use Disposal Code 11. Item 16, Appeals Office Code, on Form 5344, is required.

4.4.12.5.22.8  (08-01-2003)
Partial Assessments

  1. Only 03, 04, 08, 09, 10, and 13 are vaIid.

4.4.12.5.22.9  (09-17-2015)
Surveyed Claims

  1. Use Disposal Code 34.

  2. A claim amount must be present on AIMS.

  3. The net of tax and penalties in Item 12 and/or 15 must be negative or a positive credit amount.

  4. Items 12, 13, 15 (if applicable), 21 and 36, are required.

4.4.12.5.22.10  (06-01-2002)
Undeliverable Statutory Notice of Deficiency

  1. Use Disposal Code 13.

4.4.12.5.22.11  (06-01-2002)
Other IRM References

  1. See IRM 4.4.1, AIMS Procedures and Processing Instructions, Introduction.

  2. See IRM 4.4.4, AIMS Procedures and Processing Instructions, Claims, for information on the appropriate disposal code for claims and audit reconsiderations.

4.4.12.5.23  (09-17-2015)
Item 14: Statute Extended to

  1. If the statute expiration date has been corrected or extended, and has not been updated on AIMS, enter the extended date in Item 14.

  2. Failure to input a numeric date will cause an unpostable condition if the MF statute date has expired and an assessment attempts to post.

  3. If making an adjustment to an Individual Retirement Account (IRA) MFT 29 module, Item 14 is a required entry.

4.4.12.5.23.1  (09-17-2015)
Alpha Codes

  1. If the AIMS base contains an alpha character in the statute date that date must be updated to a numeric date prior to closing if an assessment is input.

    Exception:

    Currently a statute date with an alpha code of EE does not need to be updated to a numeric date when the input is a partial assessment. Effective 1/1/2016 a statute date with an alpha code of EE does not need to be updated to a numeric date for a final closure with an assessment.

4.4.12.5.23.1.1  (06-01-2002)
Master File Statute

  1. AIMS does not send a statute update to Master File if the AIMS statute date contains alpha codes.

4.4.12.5.23.1.2  (06-01-2002)
No Change Cases

  1. It is not necessary to update the alpha date on no change cases. AIMS does not send an alpha code to Master File and an TC 300 for zero will not unpost if the assessment statute expiration date (ASED) is expired.

4.4.12.5.23.2  (06-01-2002)
Claims

  1. Timely filed examined claims that result in a refund will post to Master File even when the ASED has expired.

4.4.12.5.23.3  (06-01-2002)
Form 872

  1. If there is a valid Form 872, Consent to Extend the Time to Assess Tax, in the file, if the correct ASED in not on AIMS, then the extended statute date must be entered to ensure Master File is correct.

4.4.12.5.23.4  (06-01-2002)
Form 872A

  1. Cases with a valid Form 872A, Special Consent to Extend the Time to Assess Tax, and the literal 872A in the AIMS statute date and the original statute date has expired or will expire within 90 days, should have a statute extended date entered in Item 14 that is approximately 90 days from the date the return will be closed through the terminals.

4.4.12.5.23.5  (06-01-2002)
TC 560

  1. When the entry in Item 14 is input and it is not the same date as the current ASED on AIMS, it will generate a new assessment statute date (ASED/TC 560) on the Master File.

4.4.12.5.23.6  (09-17-2015)
SFR Posted

  1. If the TC 150 is an SFR, an ASED date is not computed at Master File. See IRM 25.6.1.9.4.5, Statute of Limitations Processes and Procedures, Substitute for Return (SFR), for more information.

4.4.12.5.23.7  (09-17-2015)
Consent Indicator

  1. An indicator of X, R or I will appear after the ASED in the following situations:

    INDICATOR EXPLANATION
    X The statute date has been changed, for example, 04152015X.
    R The statute date has been updated with a Restricted Extension (Statute restricted to a set of issues or flow through entities.)
    I The statute date has been updated with an Inclusive Extension (872I).

4.4.12.5.23.8  (09-17-2015)
More Information

  1. See IRM 25.6, Statute of Limitations, for more information.

4.4.12.5.24  (06-01-2002)
Item 15: Credit and Tax Computation Adjustments

  1. Entries in this item are used to:

    • Update information fields on Master File (not applicable for non-taxable returns)

    • Adjust credits on individual, fiduciary and corporation returns

    • Post changes to adjusted gross income or self-employment tax on individual returns

    • Provide Master File a means to distinguish certain miscellaneous penalties on which to generate interest

    • And adjust and identify the types of tax being adjusted on excise or employment tax returns

4.4.12.5.24.1  (09-17-2015)
Maximum Number of Entries

  1. Eight entries can be input at one time.

  2. The examiner will identify the reference numbers that do not impact tax or penalties. For examiners using RGS see the RGS Article, Form 5344, New Procedures for Too Many Reference Codes. Be sure to annotate Form 3198 in the "Special Features" section on page 1 and check the box for "F5344, Item 15 more than 8 ref codes (REQ54 req'd)" .

  3. When there are more than eight references that impact tax (example: Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return), partial procedures will be used by CCP.

4.4.12.5.24.2  (06-01-2002)
Special Validity Checks

  1. A terminal reject will occur if any of the following conditions do not occur.

4.4.12.5.24.2.1  (06-01-2002)
Disposal Code 01

  1. MFT other than 03, an amount may be entered if it is other than a reference number that represents a penalty or credit such as 680 or 806.

  2. MFT 03, Item 15 may be entered but the net total of all Item 15 entries must equal zero.

4.4.12.5.24.3  (09-17-2015)
FUTA State Code also known as State Credit Reduction

  1. Federal Unemployment Tax Act (FUTA) state code is valid for MFTs 05, 10 and 30 and is required if the Disposal Code = 03, 07, 11 or 12. The state code is the postal two-letter state abbreviation, for example the state code for Colorado is CO.

  2. FUTA state code is invalid if the Disposal Code is 01 or 02.

  3. If you are adjusting FUTA Tax, a "T" for "taxes" for the primary taxpayer will be entered or a" Z" for taxes for the secondary taxpayer will be entered. If you are adjusting FUTA Wages, a "W" for "wages" for the primary taxpayer will be entered or a "Y" for wages for the secondary taxpayer will be entered.

  4. The total of FUTA State Code amounts for codes beginning with a "T" or "Z" must equal Item 12 Tax transaction amounts.

    Example:

    To enter an adjustment for FUTA taxes for the primary taxpayer in Item 15, enter at the left most position under "Ref. No." TCO which stands for "Tax Colorado" and the amount of FUTA taxes. The entry would appear as 15-TCO/100000. The corresponding Item 12 entry would be a TC 300 for 100000. For a tax adjustment for the secondary taxpayer substitute, a Z for the T.

  5. The total of FUTA State Code amounts for codes beginning with a "W" or "Z" will be entered in Item 15 as follows:

    Example:

    To enter an adjustment for FUTA wages for the primary taxpayer in Item 15, enter at the left most position under "Ref. No." WCO which stands for "Wages Colorado" and the amount of FUTA wages. The entry would appear as 15-WCO/7500000. For an adjustment to wages for the secondary taxpayer, substitute a Z for the W.

4.4.12.5.24.4  (09-17-2015)
Reference Number Definitions

  1. Refer to Document 6209, IRS Processing Codes and Information, Section 8C, Master File Codes, for a complete listing of Reference Numbers for several types of returns.

4.4.12.5.25  (06-01-2002)
Item C: Operator Employee No.

  1. This item is entered by the employee inputting Form 5344 at the terminal.

  2. The entry should include the operator's employee number and the date of input.

4.4.12.5.26  (06-01-2002)
Item D: Rej.

  1. This item is only to be completed if the Form 5344 is rejected at input.

  2. The employee enters the date rejected, the item number that rejected or a screen print of the reject message.

  3. The employee who corrects the item writes the correction date in Item F block and returns the form for input.

4.4.12.5.27  (09-17-2015)
Item E: Document Locator Number (DLN)

  1. A fourteen digit number by which returns can be stored and associated. See IRM 4.4.1, AIMS Procedures and Processing Instructions, Introduction, for more information on the DLN.

4.4.12.5.27.1  (09-17-2015)
Master File Cases

  1. A portion of the DLN is assigned by the computer. The remainder of the DLN (last digit or the block number, two digit serial number, and year digit) is assigned during the end of day computer processing.

  2. The refile DLN is not entered on Master File closing documents.

  3. The first two digits of the computer assigned DLN is normally the File Location Code (FLC) or Campus code. The computer keeps track of assigned blocks. When additional blocks are needed to accommodate the volume of closings being processed, the computer will continue to use a District Office Code or Universal Location Code (ULC), beginning with the lowest progressing sequentially to the highest numbered District Office Code valid for that Campus.

  4. See IRM 4.4.32, AIMS Procedures and Processing Instructions, AIMS, ERCS, and IDRS Data Processing, for additional information.

4.4.12.5.27.2  (06-01-2002)
Non-Master File (NMF) Cases

  1. The renumbered DLN will be entered for NMF examined cIosings.

4.4.12.5.28  (06-01-2002)
Item F: Cor.

  1. The date the correction is made will be placed in the corrected block by the person making the correction to the item rejected.

  2. The Form 5344 will then be reinput.

4.4.12.5.28.1  (06-01-2002)
More Information

  1. See IRM 4.4.32, AIMS Procedures and Processing Instructions, AIMS, ERCS, and IDRS Data Processing, for more information.


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