4.13.3 Central Reconsideration Unit

Manual Transmittal

December 17, 2015

Purpose

(1) This transmits revised IRM 4.13.3, Audit Reconsideration, Central Reconsideration Unit.

(2) This section contains general information on procedures and administrative matters relative to the Central Reconsideration Unit.

Material Changes

(1) 4.13.3.1 - Added clarifying content.

(2) 4.13.3.1.2 (1) clarified statement on role of Taxpayer Advocate Service.

(3) 4.13.3.1.3 added clarifying content to Appeals closing code actions.

(4) 4.13.3.2 (3) Added instruction to include Form 12661 with 3338C letter.

(5) 4.13.3.2 (7) Corrected routing guidance for IRS employee reconsiderations.

(6) 4.13.3.2 (9) Added instruction on –W freeze litigation status cases.

(7) 4.13.3.3(1)(e) added new statement on TC 971 AC 560.

(8) 4.13.3.3.1.4 Clarified Action 61 guidelines and dates for interim letters.

(9) 4.13.3.5 (2) a and b removed RGS mailbox address and added instruction for CRU examiners to secure file through CEAS Field RGS.

(10) 4.13.3.5.1 - Corrected EGC codes and added clarifying content.

(11) 4.13.3.7 - Corrected IRM references.

(12) 4.13.3.7.1(1) (b) Added instruction to send Publication 3598 and Form 12661.

(13) 4.13.3.7.2 (1) Added clarifying content.

(14) 4.13.3.7.2 (2) Added instruction to research taxpayer telephone number.

(15) 4.13.3.8 - Added content on addressing penalties from the original examination.

(16) 4.13.3.8.1 (b) added new statement on TC 971 transaction codes.

(17) 4.13.3.8.2(a) Added instruction to enclose Publication 1.

(18) 4.13.3.8.2(c) extended collection hold to 9 cycles.

(19) 4.13.3.8.2 (g) added new statement on TC 971 transaction codes.

(20) 4.13.3.8.3(a) Added instruction to enclose Publication 1.

(21) 4.13.3.8.2(b) extended collection hold to 9 cycles.

(22) 4.13.3.8.3 (d) added new statement on TC 971 transaction codes.

(23) 4.13.3.8.4(a) Added instruction to enclose Publication 1.

(24) 4.13.3.8.4 (c) added new statement on TC 971 transaction codes.

(25) 4.13.3.8.5 added new section on TC 971 AC XX transaction codes applicable to audit reconsideration.

(26) 4.13.3.13 (1) Clarified Refund Statute of Limitations.

(27) 4.13.3.16 - Added content on re-inputting TC 470 when prior TC 470 is about to expire and note on Ex Parte communication with Appeals.

(28) 4.13.3.16 (d) Provided language for Letter 86C open paragraph when transferring to Appeals.

(29) 4.13.3.16 Added note on Ex parte communications at end of section.

(30) 4.13.3.18 Added clarity to EITC Two/Ten Year Ban and routing instruction.

(31) IPU 14U1698 issued 12-17-2014 IRM 4.13.3.1.3(1) updated phone number for Appeals Account Resolution Specialist in Fresno.

(32) IPU 13U0797 issued 04-24-2013 IRM 4.13.3.8.2 add new content to item d.

(33) IPU 101381 issued 09-30-2010 IRM 4.13.3.2(4) add new content to IF and THEN

(34) IPU 101381 issued 09-30-2010 IRM 4.13.3.8.1(2)(b) Delete the word universal.

(35) IPU 101381 issued 09-30-2010 IRM 4.13.3.5 - Complete Revision. Change Title to Area Office Reconsiderations, add new content and new subsection for Transfers to an Area Office.

(36) IPU 101381 issued 09-30-2010 IRM 4.13.3.18(1) - Revise second to last sentence.

(37) IPU 100934 issued 06-14-2010 IRM 4.13.3.19 Add new paragraph (2).

(38) IPU 100757 issued 05-11-2010 IRM 4.13.3.16(1) add new content after first sentence.

(39) IPU 100757 issued 05-11-2010 IRM 4.13.3.5(4)(f) add new content.

(40) IPU 100757 issued 05-11-2010 IRM 4.13.3.14(3) change IRM reference from 25.6.6.4.4 to 25.6.1.10.2.5.4

(41) IPU 100555 issued 04-05-2010 IRM 4.13.3.11 - Revise title.

(42) IPU 100555 issued 04-05-2010 IRM 4.13.3.11(1)(d) - Replace existing paragraph with new content.

(43) IPU 100429 issued 03-18-2010 4.13.3.2(4) First Read Procedures - Add exception after 1st paragraph in THEN box.

(44) IPU 100287 issued 02–25–2010 4.13.3.5 - Revise procedures

(45) IPU 100287 issued 02–25–2010 4.13.3.8.1 - Add note after (2)b.

(46) IPU 100287 issued 02–25–2010 4.13.3.8.2 - Add note after (1)h.

Effect on Other Documents

This material supersedes IRM 4.13.3, dated 12-31-2009.

Audience

Small Business/Self Employed and Wage and Investment Campus Compliance, Customer Account Services Employees, Appeals, TAS

Effective Date

(12-17-2015)


Scott E Irick
Director,
Examination/AUR Policy
Small Business/Self-Employed

General Information

  1. This chapter discusses the role of the Central Reconsideration Unit (CRU). The CRU works reconsideration cases for individual income tax returns previously worked by the Area Office or Campus Examination function.

Requests Not to be Worked

  1. The following requests are not considered audit reconsideration cases for our purposes and should be routed to the proper functions.

    1. The audit was for any tax form other than Form 1040.

    2. If training has not been provided to Campus Correspondence/CRU examiners for the reconsideration issue. These cases will be sent to the AO.

    3. The request is for a fully paid prior audit. This is a Formal Claim for refund. See IRM 4.19.16, Claims.

    4. The request is a math error protest. See IRM 21.5.4.1, General Math Error Procedures Overview.

    5. ASFR, AUR or Appeals assessments. Follow routing procedures under IRM 4.13.2.2, Function Responsible & Routing Instructions, for Contact Employees.

    6. Request for explanation of account balance.

    7. Refund inquiries.

Taxpayer Advocate Service (TAS)Cases

  1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. TAS helps taxpayers whose problems with the IRS are causing financial difficulties; who have tried but haven’t been able to resolve their problems with the IRS; and those who believe an IRS system or procedure isn’t working as it should. TAS uses the Operations Assistance Request (OAR) process to refer cases that lack either the statutory or delegated authority to resolve. TAS utilizes Form 12412,Operations Assistance Request, to initiate the OAR process. The Exam TAS liaison will assign and monitor the case through its conclusion.

  2. When you receive an OAR you must:

    1. Contact the Taxpayer Advocate employee listed on the OAR within 1 work day of receipt for TAS cases requiring expedite processing or within 3 days for all other cases. The OAR will list the Taxpayer Advocate worker and indicate whether the case requires expedite processing.

      Note:

      All TAS cases should be worked as a priority. For specific timeframes for case completion, see the SLA online at: http://tas.web.irs.gov/policy/sla/default.aspx

    2. OARs for examinations conducted in the AO will be worked in the SB/SE campus that is aligned to the AO that did the initial examination. If the campus examiners have not received training for the audit recon issue, the OAR will be forwarded by TAS to the appropriate AO.

  3. Supporting documents (if available) that must be attached to Form 12412 when TAS forwards a case are as follows:

    1. All pertinent information received from the taxpayer.

    2. Information not considered during the original audit.

    3. Copies of letters and reports received by the taxpayer.

    4. Copies of documents already submitted by the taxpayer.

    5. Amended return, if applicable.

    Note:

    The administrative file should not be requested. If you need the administrative file, contact TAS to secure the file.

  4. Do not contact the taxpayer. TAS will make any and all contacts with the taxpayer. Every effort must be made to expedite completion of OAR cases.

  5. When TAS receives a hardship request, they follow all the procedures necessary to verify the taxpayer meets hardship requirements; therefore the CRU should not revalidate the hardship.

  6. Review the TAS recommendations and accompanying documentation, and:

    1. If you agree with the recommendations, contact TAS and inform TAS of your determination, complete the OAR and return to TAS. Work the case to completion.

    2. If you do not agree with the recommendations, contact TAS and discuss your position, and attempt to reach a mutual determination. If you are unable to come to an agreement with TAS, then the case must be elevated to your manager. TAS and Examination managers are responsible for the final resolution. Suspend the case, and provide management with all pertinent information necessary to make a determination. A determination will be reached within 3 business days, at that time; the examiner will be informed on how to close the case. If agreement on the appropriate resolution cannot be reached within 3 business days, both managers will elevate the issue through the appropriate management channels within TAS and the Operating Division for resolution or the issuance of a Taxpayer Assistance Order.

    All TAS cases must be worked in adherence with the Service Level Agreement (SLA) and addendum between W & I, SB/SE, and TAS.

Cases Closed in Appeals

  1. TXMOD will show a three-digit office code, 1XX (non-docketed cases) or 2XX (docketed cases) when Appeals closes a case. The examiner in CRU must know the Appeals closing code to determine if the case will be forwarded to Appeals or worked in the CRU. The Appeals closing code can be determined by contacting the Appeals Account Resolution Specialist (AARS) in Fresno at (559) 233-1267. When a case must be forwarded to Appeals follow the guidelines for case building in IRM 4.13.3.16, Request for Appeal.

  2. An audit reconsideration received for an ASFR case that was closed in Appeals, should be routed to Exam Classification for correct disposition.

  3. On all Exam cases previously worked in Appeals, follow the guidelines in IRM 4.13.1.7, Acceptance of Request, IRM 4.13.1.8, Non-Acceptance of Request, and as shown in the table below.

    If the taxpayer requests an Appeals hearing and, you have followed instructions in paragraphs 2 through 4 above, and...

    The Appeals Closing Code is Description Action
    03 Agreed Nondocketed (no Form 906 or Form 870-AD) Send to Appeals
    03 Agreed Nondocketed (Form 906 or Form 870-AD) Do not sent to Appeals, deny request for reconsideration.
    04 Agreed Notice of Deficiency Send to Appeals if request is based on new information.
    05 Defaulted Notice of Deficiency Do not send to Appeals, If request is based on new information work as reconsideration. If Appeals settled, do not reconsider and issue 916C.
    08 Agreed Appeals, Docketed or Dismissed from Tax Court with Appeals time Do not send to Appeals. If dismissed for Lack of Jurisdiction (LOJ), work as audit reconsideration. If Appeals settled, do not reconsider and issue 916C.
    10 Counsel Settled Do not send to Appeals, do not reconsider. Issue 916C.
    11 Dismissed from Tax Court for Lack of Jurisdiction (LOJ), Appeals issued Notice Do not send to Appeals. If dismissed for LOJ, and request is based on new information, work as an audit reconsideration.
    12 Dismissed from Tax Court for Lack of Prosecution (LOP), Appeals issued Notice Do not send to Appeals, issue 916C
    17 Tried Tax Court Case Do not send to Appeals, do not reconsider. Issue 916C.
    18 TEFRA Key Case closed to Department of Justice (DOJ)/Claims Court Do not send to Appeals, do not reconsider. Consider whether to forward information to DOJ or IRS contact for DOJ/Claims Court.
    19 TEFRA Key Case closed to DOJ/District Court or Bankruptcy Do not send to Appeals, do not reconsider. Consider whether to forward information to DOJ or IRS contact for DOJ/Claims Court.
    21 Dismissed, Tried or Counsel Settled with no Appeals time Do not send to Appeals if dismissed for LOP, tried or Counsel settled. If request is based on new information and the case was dismissed for LOJ, work as an audit reconsideration.


    Note:

    Letter 916C should not contain language for an appeal if the case was closed with finality as addressed in IRM 4.13.1.8 ,Non-Acceptance of Request, and IRM 8.7.7, Claim and Overassessment Cases. If a final decision was made by a court, the 916C would not contain language about appeal rights or filing a refund claim. The criteria for not reopening a case closed with a Form 870-AD agreement also applies to other form types with “AD” in the form name. See IRM 8.6.4.3, Agreements Forms Secured in Appeals Cases, for details.

Timeliness

  1. Action 61 guidelines/Policy Statement P-21-3 apply to audit reconsideration requests. The general guidelines are:

    • A quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer’s issues, requests additional information from the taxpayer, or notifies the taxpayer we have requested information from outside the IRS.

    • A quality response is timely when initiated within 30 calendar days of the IRS received date.

    • When a quality response cannot be issued timely, an interim response is initiated by the 30th calendar day from the IRS received date. Issue a Letter 2645C.

    • In the interim letter, you must tell the taxpayer when they can expect a final resolution. The promised resolution date may be any number of days and can vary depending upon the program being worked. The promised resolution date does not have to be in increments of 30 days.

  2. You must issue subsequent interim letters with the specific reason for the delay if you cannot provide a final response by the promised resolution date. If subsequent letters are required, use Letter 2644C .

  3. Action 61 guidelines do not apply to Exam SFR non-filer reconsiderations. Acknowledgement and interim letters do not need to be sent.

Time Code

  1. The CRU will charge their time to the OFP codes as per the OFP manual.

  2. SBSE campuses will refer to the current fiscal year Operating Guidelines for a complete listing of OFP codes.

Point of Count

  1. Only those cases that are accepted into the audit recon inventory will be taken as a count for receipts and closings. Misroutes and unstarted transfers from first read will not be counted. WP & C will be used to record receipts and closures.

Controlling the Case

  1. Audit Reconsideration cases must be controlled on CEAS and/or IDRS (TXMOD) within 14 days of receipt. CEAS is used to retrieve the original audit workpapers/reports/letters, document the reconsideration results on a new "reconsideration workpaper" , and use Status Codes to capture the actions taken on CEAS reports. The CEAS Status Codes for Reconsiderations have been expanded to four digits. The table below outlines the valid Status Codes and their explanation for use.

    STATUS CODE TABLE:
    Status Code Open/Closed/Mail Transfer Explanation for Use
    7100 Open Case retrieved from Archive to be worked as Reconsideration.
    7154 Open Mail Received on case in 7100 waiting to be worked.
    7200 Closed Letter 3338C sent.
    7301 Mail Transfer Mail received in error and transferred to Appeals. Screened out in First Read (not opened in CEAS 7100).
    7302 Mail Transfer Mail received in error and transferred to Area Office. Screened out in First Read (not opened in CEAS 7100).
    7303 Mail Transfer Mail received in error and transferred to another campus. Screened out in First Read (not opened in CEAS 7100).
    7304 Closed Default Closing. Case opened in CEAS 7100 in "error" and needs to be closed out.
    7305 Closed Cases in Suspense 7700 systemically closed on CEAS after 45 days if no reply received.
    7400 Closed Case closed as Full Disallowance.
    7500 Closed Case closed as Partial Disallowance.
    7600 Closed Case Closed as Fully Allowed.
    7700 Open Suspense status. CRU responded, waiting for TP reply.
    7754 Open Mail received on suspense case 7700, waiting to be worked.

IDRS Adjustments

  1. Audit Reconsideration cases are adjusted on IDRS to facilitate resolution. See Exhibits 4.13.7-7 through 4.13.7-10 for job aids to help in adjusting the account on IDRS.

CEAS/RGS

  1. Audit Reconsiderations must be worked on CEAS/RGS. For detailed instructions on inputting, working and closing a case on CEAS please see the Job AID "Working Audit Recon Requests through CEAS" on SERP.

Workpapers

  1. All cases must be worked on RGS/CEAS and results of the audit reconsideration recorded. When recording the results of the audit reconsideration, the examiner will create a new issue under the De-Minimus IMF Code and rename it "MMDDYYYY 4700RECON" . They will record all the facts and circumstances of the case, as well as documenting their conclusion utilizing the "Word Doc" feature and saving to "Casefile Docs." When creating their 4700, they must click on the "Audit Recon Notes" first, before clicking on the original "4700" . This will ensure that the original 4700 is not overridden by the Audit Recon Issue. If this is a subsequent audit recon request, a new "4700" or "Issue" will not have to be created. The examiner can utilize the notes saved under the previous "Audit Recon Issue" , updating accordingly.

Management and Quality Review

  1. All reconsideration requests will be subject to the sample selection process for Quality Review and local management review.

First Read Procedures

  1. Reconsideration requests must be screened within 5 workdays of receipt to ensure they should be accepted and worked in CRU prior to opening in CEAS in Status Code 7100. The account should be reviewed to determine what function made the original assessment generating the reconsideration. Routing procedures are outlined under IRM 4.13.2.2, Function Responsible & Routing Instructions, for ASFR, AUR, Appeals, Campus and Area Office Examination assessments. Only Campus or Area Office Examinations (SBSE Campuses Only) will be worked in the Campus Exam Operations. Invalid referrals should be returned to referring area. Requests originating from Appeals, Area Office or another Campus will not be counted as receipts or closings but will be recorded as transfers in CEAS. Cases transferred using the CEAS transfer process are recorded on the archived account that the mail was received in the respective Campus and transferred to the appropriate area.

  2. Closed mail receipts can fall into 3 categories:

    1. Closed Case - mail received in response to an examination letter that is not received or updated to a mail status prior to the case closing.

    2. Claim - mail received disputing the exam results after exam is closed that have been full paid by payment/offset or is a response to an examined claim.

    3. Recon - mail received after exam is closed disputing exam results that remain unpaid or the exam resulted in a reversal of credits with no tax due.

      Note:

      Only mail under 2c above meets audit reconsideration criteria. Close case and claim mail should not be counted for WP&C or controlled on CEAS or IDRS as a Recon. Closed case and claim mail should be forwarded to the appropriate Team at the Managers discretion, and worked following IRM 4.19.13.9.5, Correspondence or Return Received on Closed Examinations Not Meeting Audit Reconsideration Criteria.

  3. For Audit Reconsideration requests received without documentation, the case will not be suspended waiting for documents. The following actions need to be taken:

    • Open and close the CEAS using Status Codes 7100 and 7200 and archive case. These cases will be reflected as receipts and closings on CEAS reports.

    • Issue Letter 3338C.

      Note:

      Be sure to include paragraph and enclosure for Form 12661, Disputed Issue Verification. Advise the taxpayer to fully explain the reason for disagreement with the audit adjustment on Form 12661.

    • Input TC 290 and associate paper case.

    • Open and close the IDRS TXMOD control with "3338C sent" as message.

  4. If the Reconsideration is generated from a different Campus assessment:

    IF THEN
    Reconsideration belongs to another Campus;
    1. If the receiving W & I Campus is knowledgeable in working the applicable exam program, keep reconsideration where received and work it.
      Exception: PC 1032 (The Third Party Affidavit) should be worked by the campus that performed the examination. Route PC 1032 recons to the originating campus based on the TC 420 DLN and PBC.

    2. If the receiving W & I Campus does not work the exam program that the reconsideration is for, the following procedures apply;

      • Transfer to the Campus responsible for the exam assessment.

      • Do not open in CEAS as Recon. Transfer in CEAS by updating Status Code to 7303. See CEAS Job Aid for Recons for additional information on completing transfers in CEAS.

      • Follow IRM 4.13.3.4, Routing Guidelines for CRU, for transferring paper case file.

    3. If a SBSE reconsideration, transfer to the campus responsible for the exam assessment. Route to the originating campus based on the TC 420 DLN and the PBC.

  5. If the Reconsideration is generated from an Area Office assessment and:

    IF THEN
    It is received in a W&I Campus:
    • Transfer to SBSE Campus responsible for that Area Office. See IRM Exhibit 4.13.7–3 , Routing of Area Office Reconsideration Requests.

    • Do not open in CEAS as Recon. Transfer in CEAS by updating Status Code to 7303. See CEAS Job Aid for Recons for additional information on completing transfers in CEAS.

    • Follow IRM 4.13.3.4,Routing Guidelines for CRU, for transferring paper case file.

    It is received in an SBSE Campus and the taxpayer requests a face to face or the issue(s) are not conducive to Campus Exam:
    • Do not open in CEAS as Recon. Requests will be counted as Transfers, not as Receipts and Closures.

    • Control on IDRS TXMOD.

    • Follow case building procedures, IRM 4.13.3.5., Area Office Reconsiderations.

    • After case building is complete:

    1. Transfer in CEAS by updating Status Code to 7302. See CEAS Job Aid for Recons for additional information on completing transfers in CEAS.

    2. IRM 4.13.3.5.Transfer to an Area Office for procedures to transfer paper case file.

    3. If a taxpayer request a face to face interview on a NRP case worked by the Campus, transfer the case to the applicable Area Office NRP Coordinator.

      Note:

      Any NRP case, Source Code 80/91, Project Code 0674, must be returned to the originating Examining Office regardless of the audit issues.

    It is received in an SBSE Campus and the issue(s) are conducive to Campus Exam:
    • Open as Recon in CEAS using project code 0001.

  6. If the reconsideration is generated from an Appeals assessment and:

    IF THEN
    The taxpayer requests an Appeal conference or determination is to Transfer to Appeals based on procedures for partial or full denials IRM 4.13.3.1.3., Cases Closed to Appeals:
    • Do not open in CEAS as Recon. Requests will be counted as Transfers, not as Receipts and Closures.

    • Control on IDRS TXMOD.

    • IRM 4.13.3.16., Request for An Appeal, to case build.

    • After case building is complete:

    1. Transfer in CEAS by updating Status Code to 7301. See CEAS Job Aid for Recons for additional information on completing transfers in CEAS.

    2. IRM 4.13.3.16., Request for Appeal, for procedures to transfer paper case file.

    New Documentation received supports full reversal of assessment:
    • Open in CEAS as Recon and process adjustment.

  7. Requests for an audit reconsideration submitted by IRS Employees will not be worked in the CRU. The CRU will screen the requests but will not assign or work the employee audit reconsideration cases. CRU employees will follow IRM 4.13.3.2(5), First Read Procedures, and IRM 4.13.3.5, Area Office Reconsiderations, in establishing AIMS controls and preparing the case. All employee reconsideration cases will be transferred to the appropriate PSP based on the current address of the employee/taxpayer. To ensure expeditious handling, use a delivery service that provides tracking capability when sending information to the Area office.

    Note:

    The First Read examiner should indicate when the clerical function needs to order the administrative file. Exhibit 4.13.7–12 , First Read Checksheet, may be used for this purpose. If the original examination was worked on CEAS, do not order the administrative file. Other instances where the file should not be ordered may include defaulted cases, cases where you have the exam report, and cases where IDRS, research and taxpayer correspondence are sufficient to make a determination. The administrative file may have to be ordered when a SFR case is not on CEAS, IRP transcripts can not be secured, and the taxpayer has not supplied sufficient information to make a determination.

  8. Form 3870 case referrals for audit reconsideration received from Collection revenue officers shall be screened and segregated by those cases with issues which are able to be examined by the campus CRU, and those cases with issues which will need to be transferred to an Area Office for resolution. Cases with issues that can be examined by campus CRU will be given priority, and will be started within 14 days of receipt of the referral in the campus CRU.

  9. -W Freeze

    If the module reflects a TC 520 with closing codes 70-77 or 80-82, the case is in litigation status. If the case is in litigation status, contact the applicable litigation contact based on the 520 closing code. See IRM 21.5.6.4.46, -W Freeze, for the litigation contacts.

    Allow 10 business days for a response from the litigation contact. In some cases it may take longer for a response. If response is not received, place another call. If no response is received by the 21st business day, forward the case to the applicable litigation contact via F3210. Include the following language on the 3210: TC520 on account, call was placed on MM/DD/YY & MM/DD/YY and no response. (See IRM 21.5.6.4.46, -W Freeze, for mailing address.)

    Whenever possible, litigation cases should be identified through the first read process.

    If the litigation contact instructs Exam to:

    IF Then
    Forward the case file without taking action
    • Do not open the case in CEAS as a reconsideration. (The request will be treated as a transfer.)

    • Forward the document based on the contact’s instructions.

    • Send 86C letter, advising the taxpayer of the transfer.

    Suspend action on the case
    • Do not open the case in CEAS as a reconsideration. (The request will be treated as a Transfer.)

    • Issue 916C letter, informing the taxpayer that Exam cannot take action on the case while litigation is pending.

    Note:

    If the TC 520 posts after the case has been assigned, close the case out of inventory using Status Code 7301 if instructed to "Forward Case Without Taking Action" or "Suspend Actions on Case" .

    Adjust the account
    • Include the case in Audit Reconsideration inventory.

    • Update the work paps to reflect the contact’s instructions.

    • Work the case using normal procedures.

Clerical Procedures

  1. When a reconsideration request is received in CRU:

    1. Open TXMOD control and assign to Examiner/Unit Control.

    2. Check TXMOD/CEAS for a CRU control on the same, subsequent or prior year(s). If found, open control on IDRS and CEAS (if prior or subsequent year), or associate and assign mail (same year) to Examiner/Unit as controlled on TXMOD/CEAS.

    3. If case is archived pull back and open as an audit recon.- (do not open AIMS). Update case information with any changed/new items. If Source Code 80/91, Project Code 0674, open the case on AIMS. For Campus cases approval must be secured from the Campus NRP Coordinator prior to opening the case on AIMS.

    4. If case is not archived, create case, archive and then retrieve case to enable the transfer of data to the CEAS database. Update the case information with the Taxpayer(s) address, telephone number, return type, received date, and POA information (do not open AIMS).

    5. Input a TC 971, Action Code 560 to indicate that the audit reconsideration is being initiated. Input the Exam received date as the Trans Date on the input screen.

      Note:

      The Exam received date is the date that the request was received in the operation, not the date that the request was received in CRU.

    6. Input a STAUP on TXMOD for 15 cycles if the collection status is below 22 and a TC 470 if in status 22 or 24. If the collection status is 26 coordinate with the Area Office Collection Officer. A collection hold is not input if the account is in status 60 (Installment Agreement) or there is less than one year remaining on the collection Statute (CSED).

    7. Complete actions as directed by first read examiner on first read check sheet.

    8. Send Interim Letter(s) to acknowledge receipt of correspondence, as needed.

    9. Folder correspondence and assign case to Examiner/Unit Control.

Routing Guidelines for CRU Units for Cases Transferred From One CRU to Another CRU

  1. When routing a reconsideration case from one CRU to another, the following procedures apply:

    1. Determine the audit reconsideration unit responsible for working the case, refer to IRM 4.13.2.2(3) , Function Responsible & Routing Instructions, for guidance. Complete Audit Reconsideration First Read Check sheet. Indicate Campus where the audit reconsideration should be sent.

    2. Send Letter 86C to advise taxpayer of case transfer to another office.

    3. Form 3210 will be completed for cases being transferred and should contain the following:

    • The SSN and tax period will be listed on Form 3210 for each case being sent.

    • The date and total count will be listed on Form 3210 for all cases being sent.

    • The Form 3210 must include the name of the team lead or manager, the routing coordinator, and their phone numbers.

    • Retain copies of Forms 3210 at both the shipping and receiving Campuses.

    Send cases weekly via overnight mail.

Area Office Reconsiderations

  1. All cases must first meet reconsideration criteria as defined in IRM 4.13.1.4, Criteria for Reconsideration.
    Route cases meeting the following criteria to the Area Office (AO):

    1. No-show/no-response cases closed from field that conducted the audit.

    2. Area audit reconsiderations with any adjustment not addressed on the original examination report (if the adjustment is related to the original examination and the disallowance would offset any part of the tax decrease created by the new information provided by the taxpayer).

    3. All Area Office audit reconsiderations in which the taxpayer requests a face-to-face meeting. The request must be in writing and additional documentation submitted.

    4. Area audit reconsideration where the case requires an examination of substantive books and records.

    5. Any audit reconsideration case involving a BMF entity.

    Note:

    The term “substantive” means the submission of the voluminous documentation through the mail places an undue burden on the taxpayer.

  2. Original examination was conducted by an Area Office:

    1. If the administrative file has not been secured, the CRU will perform an ESTAB request for the TC 300 document. Make two attempts, three weeks apart (the second request should be a special search). If the administrative file is not received from Files three weeks after the second request, the CRU will obtain the RGS administrative file through CEAS-VIEW CASE READ-ONLY FIELD.

    2. ALL SBSE CRU employees may have access to CEAS FIELD RGS and will no longer request through the RGS mailbox.

    3. After the administrative file and/or RGS detail is secured, the Campus will review the administrative file or RGS records to determine if the case should be worked in the Campus. If the Campus is unable to work the issues, forward the case to the appropriate AO.

    Note:

    If the AO worked multiple year packages, upon closing CCP enters a TC 971 AC 057 with a year. The year designates the closing document that contains the administrative workpapers for all years. If only one year is being opened for reconsideration, you must request the year with the workpapers attached as well. When the administrative file is received, detach the workpapers and attach to the reconsideration case file. Input TC 971 AC 057 on the year(s) not being reconsidered to indicate what year the workpapers are now associated with.

  3. If the determination is made that the reconsideration team should not work the reconsideration issue, transfer the case to the applicable Area PSP Office as outlined in IRM 4.13.3.5.1, Transfers to an Area Office.

  4. Complete the Reconsideration Check sheet for AO Transfers. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

  5. If requested documents are not received, place verification of the requests for the administrative file in the case file. If the RGS detail is incomplete, notate on the check sheet all information was not available thru RGS.

Transfers to an Area Office

  1. Area Office Cases:

    1. Case not aged off of AIMS:

      IF THEN
      Returning to the originating Area Office (AO) AMSTUR with an Aging Reason Code 53 to return the case to the appropriate AO. The AIMS record will be updated to SBC 87700 and EGC 1998/2998, and forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.
      Taxpayer current residence is in a different AO PBC. AMSTUR with an Aging Reason Code 53, AMSOC the database to the appropriate AO. AIMS will automatically update the EGC to 1998/2998 and Status 07 and should remain in EGC 1998/2998 Status 07. Forward to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.

      Note:

      When using AMSTUR, AIMS will reflect the original Source Code and Project Code and should not be changed. The status code will be 12 and should remain as status 12.

    2. Case aged off AIMS:

      IF THEN
      Returning to the AO that conducted the Original Audit Re-establish on AIMS in the originating PBC, Source Code 73, Aging Reason Code 53, SBC 87700 and EGC 1093/2093, Status 08. The case will be updated to EGC 1993/2993. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.
      If the Taxpayer has moved and forwarding case to a different AO Re-establish on AIMS in the originating PBC, Source Code 73, Aging Reason Code 53, SBC 87700 and EGC 1093/2093, Status 08. AMSOC the database to the correct AO. AIMS will automatically update the EGC to 1998/2998 and Status 07 and should remain in EGC 1998/2998 Status 07. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.
    3. Input TC 470 on TXMOD, if not already on the account. Annotate on the Transfer Check sheet the date the TC470 was input with the number of cycles Collections actions will be stopped.

    4. Open the IDRS control base with the activity that will indicate an Area Office reconsideration..

    5. The case file for prior AO examinations should include all taxpayer correspondence, copies of letters sent to the taxpayer by the campus (interim and/or transfer letters), and the administrative file.

    6. Send Letter 86C to advise the taxpayer of the transfer. Use an open paragraph to advise the taxpayer that a copy of the return, audit report and documentation should be available when the AO contacts them.

    7. Close IDRS/TXMOD control with activity of "TOAREAXXX". (XXX is the applicable AO PBC.)

    8. Prepare “Reconsideration Check sheet for Area Office Transfers”. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

    9. Prepare Form 3210, transmittal record.

    Note:

    If the administrative file is received by the Campus after the recon was sent to the AO, re-charge and forward the administrative file to the AO PSP office where the Recon was sent.

  2. If the original examination was conducted by a Campus follow the If/Then chart below:

    IF THEN
    POA or taxpayer requests an Area Office interview and the case is within the examining scope of the Campus CRU, (One Case or Multiple Cases by same POA)
    1. Telephone POA or taxpayer to provide assurance that the issue can be resolved at the Campus. Treat mass transfer requests on a case by case basis.

    2. If unable to contact taxpayer by telephone, issue Letter 3339C and include this wording: “We have considered your request to transfer your case to the Area Office for reconsideration. However, we ask that you try to work with this office to resolve this matter by mail. We encourage you to do this because the staff at this office is familiar with your case. It is likely that we can resolve the matter for you more promptly than if we transfer it to the local office. However, if you believe that there are special circumstances that would necessitate a face-to-face appointment, please let use know.”

    3. Suspend the case for 30 days.

    Taxpayer states undue burden due to voluminous records
    1. See IRM 4.19.13.14, Transfers to Area Office Examination or Appeals Office, follow a – f.

    2. Issue Letter 3339C suspend for 45 days.

    3. Complete the Reconsideration Check sheet for Area Office Transfers. Seehttp://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

    4. Obtain managerial approval to transfer.

    5. Transfer to Area Office where the taxpayer currently lives and send Letter 86C to the taxpayer.

    Taxpayer continues to insist on an interview at the Area Office when the CRU could handle the case
    1. See IRM 4.19.13.14, Transfers to Area Office Examination or Appeals Office, follow a – b.

    2. Document the reason and supporting items for transfer on workpapers.

    3. Obtain a Written Request to Transfer from the taxpayer to include reasons per IRM 4.11.29.7, Written Requests By The Taxpayer/Representative, (1),(a), (f), (g), Written Requests by the Taxpayer/Representative.

    4. Complete the Reconsideration Check sheet for Area Office Transfers. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

    5. Obtain managerial approval to transfer.

    6. Transfer to Area Office where the taxpayer currently lives and send Letter 86C to the taxpayer.

    Issue is too complex for correspondence, per the taxpayer or representative
    1. See IRM 4.19.13.14, Transfers to Area Office Examination or Appeals Office, follow a and b.

    2. Complete the Reconsideration Check sheet for Area Office Transfers. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

    3. Obtain managerial approval to transfer.

    4. Transfer to Area Office where the taxpayer currently lives and send Letter 86C to the taxpayer.

    Issue is too complex for correspondence, per the CRU examiner
    1. Prepare case for transfer to Area Office with complete explanation of complex issues.

    2. Complete the Reconsideration Check sheet for Area Office Transfers. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc.

    3. Obtain managerial approval to transfer.

    4. Transfer to Area Office where the taxpayer currently lives and send Letter 86C to the taxpayer.

    Note:

    The managerial approval can be done by the manager or someone designated by management. Managerial consent should be reflected on the Reconsideration Check sheet for Are Office Transfers.

  3. The following procedures apply if the original examination was conducted by a campus and is now being transferred to the Area Office.

    1. Case not aged off of AIMS:

      IF THEN
      Taxpayer lives within your servicing AO AMSTUR with an Aging Reason Code 53 to reopen the AIMS base at the campus that conducted the examination. AMSOC the data base to the appropriate AO. AIMS will automatically update the EGC to 2998 and Status 07 and should remain in EGC 2998 Status 07. Forward to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.
      Taxpayer lives outside your servicing AO AMSTUR with an Aging Reason Code 53, to reopen the AIMS base in campus that conducted the examination. AMSOC the database to the appropriate AO. AIMS will automatically update the EGC to 2998 and Status 07 and should remain in EGC 2998 Status 07. Forward to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.

      Note:

      When using AMSTUR, AIMS will reflect the original Source Code and Project Code and should not be changed. The status code will be 12 and should remain as status.

    2. Case aged off AIMS

      IF THEN
      Taxpayer lives within your servicing AO Re-establish on AIMS in the originating PBC, Source Code 73, Aging Reason Code 53, SBC 00000 and EGC 5XXX, Status 08. AMSOC the database to the correct AO. AIMS will automatically update the EGC to 2998 and Status 07 and should remain in EGC 1998/2998 Status 07. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.
      Taxpayer lives outside your servicing AO Re-establish on AIMS in the originating PBC, Source Code 73, Aging Reason Code 53, SBC 00000 and EGC 5XXX, Status 08. AMSOC the database to the correct AO. AIMS will automatically update the EGC to 2998 and Status 07 and should remain in EGC 1998/2998 Status 07. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.
    3. Input TC 470 on TXMOD, if not already on the account. Annotate on the Transfer Check sheet the date the TC470 was input with the number of cycles Collections actions will be stopped.

    4. Close the CEAS/RGS control base with Status Code 7302 for campus examinations.

    5. The case file should include all taxpayer correspondence, copies of letters sent to the taxpayer by the campus (interim and/or transfer letters), and the administrative file.

    6. Send Letter 86C to advise the taxpayer of the transfer. Use an open paragraph to advise the taxpayer that a copy of the return, audit report and documentation should be available when the AO contacts them.

    7. Close IDRS/TXMOD control with activity of “TOAREAXXX". (XXX is the applicable AO PBC.)

    8. Prepare “Reconsideration Check sheet for Area Office Transfers”. See http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/ReconChckShtForAOTransf.doc .

    9. Prepare Form 3210 , transmittal record.

    Note:

    Area Office will not allow a transfer of AIMS if the statue is expired or imminent. On any case where there 6 months or less in the statute, the AO Recon Coordinator must be contacted for agreement prior to transferring.

Examiner Procedures - Aspect/VMS Phones

  1. Examiners are responsible to return messages left by the taxpayer on the Aspect/VMS extension within three business days.

    1. The examiner will follow the procedures for Contact Employees in screening, routing and responding to the taxpayer.

Examiner Procedures

  1. If case is on CEAS, establish the audit recon record by retrieving the case from archive in Status Code 7100. If the case is not archived on CEAS, it will be necessary to manually create, archive and retrieve the case. The case should also be controlled on IDRS (TXMOD). Check to make sure the case is assigned and the collection hold has been input, if needed.

  2. Open the CEAS Audit Reconsideration Information Screen and check to ensure that the Original TC "300" reflects the deficiency amount of the audit report. If incorrect, correct to the deficiency amount (tax and credits).

  3. Verify/Input the correct tax period, and IRS and Exam received dates on the Audit Reconsideration Information Screen. Verify to ensure the "TC 300 or TC 290 (SFR)" dollar amount correctly reflects the deficiency amount of the report issued resulting from the audit that taxpayer is requesting reconsideration for. If SE tax and or credits are involved the assessment amount may be the credits or a net amount of the tax and credits reversed. If the TC 300 or TC 290 amount is not correct, change to reflect the deficiency amount.

  4. Create a new issue under the De-Minimus IMF Code and rename it "MMDDYYY 4700RECON" . When creating their 4700, they must click on the "Audit Recon Notes" first, before clicking on the original "4700" . This will ensure that the original 4700 is not overridden by the Audit Recon Issue. Subsequent Audit Recon requests can utilize the same notes saved under the previous Audit Recon Issue. No new 4700 or issue will have to be prepared.

    1. Managerial approval must be obtained before ordering the administrative file. Managerial approval must be documented in workpapers.

    2. If additional mail is received on open cases in Status Code 7100 or 7700, the Status Code should be updated to 7154 or 7754 (whichever is applicable) within 5 days of mail receipt.

    3. When fully allowing the Reconsideration request, a new audit report is not needed. Adjust the taxpayer's account to tax liability prior to the correspondence audit. Document workpapers with your decision and make the appropriate adjustment.

  5. When partially allowing the Reconsideration request, a new audit report must be generated and sent to the taxpayer. The Audit reconsideration report can be saved as "MMDDYYYYRECON4549" . The examiner must check IDRS to ensure the starting point of the report reflects the taxpayer’s account including all prior adjustments.

  6. Review applicable program procedures in IRM 4.19.13, General Case Development and Resolution, thru IRM 4.19.15, Discretionary Programs, when making determinations on Campus Exam cases. Examiners should seek technical assistance from the workgroup assigned to work specific discretionary programs, because special procedures have been developed to work the programs. (Example: PC133, CI Referrals, PC360/364-Tip Employees, PC402/405/406- Education Credits, etc.)

  7. The CEAS workpaper must be documented with the information requested on the original audit, subsequent documentation received with Reconsideration Request, and documentation still needed, and conclusion reached. Save as "RECON4700" .

  8. When suspending the case on CEAS/RGS the examiner will update to Status Code 7700 and must move the case off their desktop back to suspense file server. This will allow for the Autoclose to work if there is no response.

  9. On the Audit Recon Information Screen, record and validate the abatement amount to ensure population of the CEAS Reports. If no adjustment was made to the account input "0" in the Abatement Amount Field. If there was an adjustment to the account input the total adjustment to tax and credits.

  10. Close cases on both CEAS/RGS and IDRS. Ensure the case is re-archived.

  11. Both CEAS/RGS and IDRS controls must be closed when the case is completed. Ensure the CEAS case is re-archived. Close the CEAS/RGS control using the appropriate closed Status Codes (Do not check the "Update AIMS" box) outlined in the table below: following Status Codes:

    Closed Status Code Explanation for Use
    7200 Letter 3338C sent.
    7304 Case opened in 7100 in error and closed out.
    7305 Cases in Suspense 7700 systemically closed on CEAS after 45 days if no reply received.
    7400 Case closed as Full Disallowance.
    7500 Case closed as Partial Disallowance.
    7600 Case Closed Fully Allowed.
  12. Process Adjustment to Master File by inputting TC 29X with the applicable Reconsideration Reason Codes as follows:

    Reason Code Number Explanation for Use
    064 Reconsideration No Response
    066 Reconsideration Disallowed in Full
    067 Reconsideration Disallowed in Part
    068 Reconsideration Allowed in Full

    Note:

    Examiner should also use any other applicable reason code(s) up to a maximum of three to identify the issues involved in the Audit Reconsideration as outlined in the Document 6209.

No Documentation

  1. If a reconsideration request is received without any supporting documentation:

    1. Do not transfer case.

    2. Issue Letter 3338C. Select appropriate paragraphs based on disputed issues and include paragraph to enclose Pub 3598 and Form 12661. Be sure to include paragraph and Form 12661, Disputed Issue Verification. Advise the taxpayer to fully explain the reason for disagreement with the audit adjustment on Form 12661.

    3. CEAS controls - open in 7100 and close as 7200, Letter 3338C sent and archive case. Do not suspend.

    4. Close IDRS TXMOD control with message "3338Csent" .

    5. Input a TC 290 to file correspondence.

Insufficient/Partial Documentation

  1. A reconsideration request is received with some documents and a determination can be made using judgment based on the documentation received and available research (CEAS, DUPOL DDBOL, DDBKD, AIMS, TXMOD, IMFOL, RTVUE & INOLET, & MFTRA U). If a prior year was closed No Change, all available research should be utilized, i.e. RGS workpapers, copies of documentation to determine if the issue(s) and the substantiation supplied for the prior year is applicable to the reconsideration year. The reconsideration may be:

    1. Disallowed in full - If documentation/research does not support allowance of the disputed issue, or the taxpayer does not meet the criteria that is for that issue, disallow the request in full. Send Letter 3340C if there is an unpaid balance due or Letter 105C for zero balance accounts, i.e., EIC reversed advising the taxpayer of the disallowance. When sending Letter 3340C select paragraph to include Pub 1 as enclosure, Letter 105C encloses Pub 1 automatically. Both letters offer the taxpayer appeal rights if he/she does not agree with the determination. Use an open paragraph in the appropriate letter to inform the taxpayer of the specific reasons he/she did not qualify for the tax benefit or what specific information was missing that kept you from allowing the tax benefit. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer and document the workpapers to record the facts and circumstances supporting your decision. Do not suspend case. For closing actions, IRM 4.13.3.8, Closing Procedures Full Disallowance.

    2. Disallowed in part – If documentation/research supports the allowance of only part of the issues and there is no conflicting evidence present that the taxpayer is entitled to the issues contested, allow the portion of the request that the taxpayer is entitled to. Prepare Form 4549 and send with a cover letter. In the cover letter tell the taxpayer that they will be receiving a partial denial letter under separate cover.

      Send Letter 3340C if there is an unpaid balance or 106C for zero balance advising the taxpayer of partial disallowance. When sending Letter 3340C select paragraph to include Pub 1 as enclosure, Letter 106C encloses Pub 1 automatically. Both letters offer the taxpayer appeal rights if he/she does not agree with the determination. Explain to the taxpayer how you arrived at your decision. If the partial allowance was because the taxpayer did not qualify for a specific issue, make sure you provide a full explanation. If the partial disallowance was because of missing information, explain to the taxpayer what information is missing. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer. Document the Reconsideration workpapers with non-qualifying/missing information. Record the facts and circumstances supporting your decision. Do not suspend case. For closing actions, IRM 4.13.3.8.2, Closing Procedures for Partial Disallowance.

  2. A determination can not be made based on the documentation received and available research (CEAS, DUPOL DDBOL, DDBKD, AIMS, TXMOD, IMFOL, RTVUE & INOLET, & MFTRA U):

    1. If the Taxpayer’s phone number is in the case file one phone call attempt must be made in an effort to obtain missing documentation. If the taxpayer’s phone number is not in the case file refer to IRM 4.19.19.3.1 (6), Outgoing Calls, for search tools. Follow IRM 4.19.19.3, Other Requirements, to ensure taxpayer is authenticated and no inadvertent disclosure violations occur.

    2. Use judgment and professional decision making to come to a conclusion after speaking to the taxpayer. The facts and circumstances combined with oral testimony may substantiate entitlement to the issues being contested. Update workpapers with phone number, date and time called. If the taxpayer can be reached and they indicate they have the documents to send or fax, allow 10 days for a reply. Purge the case after 15 days. Document the workpapers with qualifying/non qualifying or missing information, and the facts and circumstances supporting your decision.

    3. If taxpayer can not be reached by phone, document the workpapers with non-qualifying or missing information, your decision and the facts and circumstances supporting your decision. Issue Letter 3339C requesting the missing information. Include a Pub 1 , Your Rights as a Taxpayer, as an enclosure. Allow a 45 day suspense period and update CEAS to Status Code 7700.

      Note:

      Cases updated to Status Code 7700 must be moved off the desktop to the Suspense File Server. This will allow the Autoclose to close the CEAS controls by systemically updating the case to Status Code 7305 and archiving the case. For additional information on the Autoclose functionality, IRM 4.13.3.8.4, Closing Procedures No Reply.

Full Documentation

  1. A reconsideration request is received with supporting documentation for all disputed issues. If documentation and research substantiates the issues and there is no conflicting evidence present, or after researching and considering all the facts and the preponderance of evidence indicates that the taxpayer is entitled to the adjustment being requested, allow the reconsideration. Document your workpapers with the information to record the facts and circumstances that support your decision. For closing actions IRM 4.13.3.8.1, Closing Procedures Full Allowance .

Closing Procedures

  1. After the determination is made, follow the applicable processing procedures below:

Closing Procedures Full Allowance

  1. If the request for abatement is accepted in full:

    1. Input TC 29X with Reason Code 068, Full Allowance on IDRS and the appropriate Item Reference number/Credit Reference Number for issues allowed/disallowed. Ensure all penalties assessed in the original examination are addressed and adjusted accordingly.

    2. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

    3. Close IDRS (TXMOD) control.

    4. Update abatement information in the CEAS audit recon information screen, validate the assessment information (tax & credits) is accurate, close CEAS with Status Code 7600, Full Allowance and archive case.

  2. If EITC is allowed in full the following IDRS actions are also needed:

    1. If TC 810 is present input TC 811 to reverse.

    2. Research AIMS for open year(s). If subsequent year(s) are open for related programs, leave a CEAS action note for cases both in batch and to the assigned examiner to inform them of the resolution of reconsideration cases(s). This action will reduce taxpayer burden and ensure consistent taxpayer treatment.

      Note:

      When processing timely filed reconsiderations and it appears the RSED has expired, see IRM 25.6.1.10.2.7.2.2 , Two-year Rule, or IRM 25.6.1.10.2.8.4, Foreign Tax Credit, for proper processing as applicable

Closing Procedures - Partial Disallowance

  1. If the request for abatement is denied in part:

    1. Send a Letter 3340C if there is a balance due, or a Letter 106C if the account is in zero balance to the taxpayer specifying the reason for disallowance. When sending Letter 3340C select paragraph to include Pub 1 as enclosure, Letter 106C encloses Pub 1 automatically. Both letters offer the taxpayer appeal rights if he/she does not agree with the determination.

    2. Prepare examination report (Form 4549) and enclose with a cover letter. Advise the taxpayer that Letter 3340C/106C will be sent under separate cover.

    3. To ensure that the taxpayer does not receive conflicting notices and to make sure that the taxpayer is not subjected to collection activity during his/her opportunity for appeal, make sure there is a STAUP for 9 weeks on the account or a new TC470 if the STAUP is not an option because of the taxpayer’s prior collection status.

    4. If only one of two qualifying children, or two of three qualifying children are being allowed for EITC, input a TC 971 with Action Code 135 and list the SSN of each qualifying child being allowed.

    5. If EITC is reduced for adjustments to income or expenses, the taxpayer will be required to recertify on the next return filed claiming EITC. Input a TC 971 with Action Code 156 to set the recertification indicator with a value of "9" .

    6. Input TC 29X with Reason Code 067 - Reconsideration Disallowed in Part, as well as any other applicable reason codes. Also include the Item Reference Number/Credit Reference Number for issues allowed/disallowed. Ensure all penalties assessed in the original examination are addressed and adjusted accordingly.

    7. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

    8. Close IDRS (TXMOD) control.

    9. Update abatement information in the CEAS audit recon record , validate the assessment information (tax & credits) is accurate and close CEAS by updating to Status Code 7500, Partial Disallowance and archive case.

      Note:

      When processing timely filed reconsiderations and it appears the RSED has expired, see IRM 25.6.1.10.2.7.2.2 , Two-year Rule, or IRM 25.6.1.10.2.8.4, Foreign Tax Credit, for proper processing as applicable.

Closing Procedures - Full Disallowance

  1. If the request for abatement is denied in full:

    1. Send a Letter 3340C (or Letter 916C in appropriate circumstances) to the taxpayer if there is a balance due or a Letter 105C if the account is in zero balance. The letter should specify the reason for the disallowance. Include a Publication 1, Your Rights as a Taxpayer, as an enclosure with the Letter 3340C. Letter 105C will include Pub 1 automatically. Both letters offer the taxpayer appeal rights if he/she does not agree with the determination. Specify in the appropriate letter the reason for disallowance.

    2. To ensure the taxpayer does not receive conflicting notices, reduce IDRS STAUP to 4 cycles.

    3. Input TC 29X with Reason Code 66 - Reconsideration Disallowed in Full. If Letter 3339C was issued and the taxpayer did not respond, also use Reason Code 064 – Reconsideration No Response and the appropriate Item Reference number/Credit Reference Number for Issues allowed/disallowed. Also include other appropriate reason code(s) for the issues involved.

    4. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

    5. Close IDRS (TXMOD) Control.

    6. Close CEAS case by updating to Status Code 7400- Full Disallowance and archive case.

Closing Procedures - No Reply

  1. After 45 days, cases in Status Code 7700 will be systemically closed into Status Code 7305 and archived in CEAS. It is important to move the cases off your desktop when updating to Status Code 7700 so the system can close and archive the CEAS case correctly if the TP does not reply. The system will bypass cases in Status Code 7754 indicating mail was received during the suspense time period. The autoclose functionality will only close CEAS. The Autoclose Report # 8872 is a monthly report broken down by cycle. The update is run on the weekend so this report should be pulled every Monday for a list of TINS that were systemically closed the prior week. The report should be used to pull the paper case file from Suspense and complete the remaining manual closing actions;

    1. Issue appropriate closing letter. Letter 105C should be sent for zero balance or Letter 3340C if there is an unpaid balance. Include Publication 1, Your Rights as a Taxpayer, with Letter 3340C.

    2. Input TC 290 to close case, with Reason Code 066, Disallowed in Full, Reason Code 064, Reconsideration No Response and any other appropriate reason codes. Attach paper case to file.

    3. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

    4. Close TXMOD control base with appropriate verbiage "3340C or 105C sent" whichever is appropriate.

      Note:

      If cases are not taken off desktop when put into Suspense Status Code 7700 the case will be systemically closed into 7305 but the Recon case cannot be systemically archived in CEAS. Cases left on the desktop in Status Code 7700 will need to have this step performed manually.

Reconsideration TC 971 Action Codes

  1. The examiner will input a TC 971 Action Code to indicate the case disposition. The action codes must be input at the point of case closure.

  2. The table below provides the valid Action Codes used for Reconsideration dispositions:

    Action Code Table
    Action Code Explanation for Use
    564 No Response - Campus
    565 No Response - Field
    566 Full Disallowance - Campus
    567 Full Disallowance - Field
    568 Full Allowance - Campus
    569 Full Allowance - Field
    570 Partial Disallowance - Campus
    571 Partial Disallowance - Field
    576 Letter 3338C sent

Telephone Contact

  1. If the taxpayer provides a phone number, at least one phone call must be made in an effort to secure missing information or clarify an unresolved issue relative to the reconsideration request before disallowing in full or in part due to lack of information. Before calling the taxpayer review the case file and advise the taxpayer what documentation is needed. Workpapers must be documented with the taxpayer's phone number, date and time of contact.

Open AIMS Control on Succeeding Year

  1. If there is an open AIMS control for a specific examiner on the succeeding year, leave a CEAS action note for the Correspondence examiner to inform them of the issues and resolution of the reconsideration case(s).

  2. If there is an open AIMS control and the case is in batch , leave an action note on disposition of prior year reconsideration.

Replies to Letter 3340C/Exam Procedures

  1. If the taxpayer provides further documentation in response to Letter 3340C:

    1. The new documentation received must be evaluated. Adjust account if the documentation supports a full abatement of tax or reversal of credits previously disallowed. If documentation supports only a partial abatement of tax or reversal of credit, adjust account accordingly and formally disallow with Letter 106C if account is full paid , send Letter 916C if the account is in balance due status for the issues that were not substantiated. Use an open paragraph to advise the taxpayer that the documentation does not permit any further adjustment to their account. Use paragraph advising of Appeal Rights and Claim Procedures. Also inform the taxpayer to refer to the enclosed Publication 1.

    2. If the documentation received is the same documentation as previously submitted or partial documentation that does not change the original determination formally disallow with Letter 105C/106C if account is fully paid or Letter 916C if the account is in balance due status. Use open selective paragraph to advise the taxpayer that the additional information submitted does not allow you to reverse the audit adjustment of the year they are contesting. Also inform the taxpayer to refer to the enclosed Publication 1 which explains the Appeals process and Claim Procedures for further consideration of their abatement request.

    3. When sending a 105C/106C use Exhibit 4.13.7-4 for the toll free number that should be entered on the letter.

    4. If the taxpayer indicates an inability to pay the balance in full, document the taxpayer's request for an installment agreement and forward a copy of the correspondence to the co-located Compliance Service Collection Operation (CSCO).

Replies to Disallowance Letters, (105, 106, & 916C)

  1. If the Taxpayer submits additional information that would result in a decrease to the Exam assessment after a disallowance letter has been issued, review CEAS to determine if the information sent is valid, and adjust accordingly. If a partial abatement, follow partial abatement procedures, and send Letter 916C. Advise the taxpayer of how you arrived at your decision and remind taxpayer of his/her appeal rights. If the partial disallowance was because the taxpayer did not qualify for a specific issue, make sure that you give a full explanation. If the disallowance was because of missing information, advise the taxpayer of the specific missing information. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer. Document workpapers with non-qualifying/missing information. Record the facts and circumstances that support your decision. Use an open paragraph to advise the taxpayer that the documentation does not permit any further adjustment to their account. Use paragraph advising of Appeal Rights and Claim Procedures. Also inform the taxpayer to refer to the enclosed Publication 1.

  2. If the taxpayer submits additional/same information that would not change the former audit results, notate CEAS and send Letter 916C. Use open selective paragraph to advise the taxpayer that the additional information submitted does not allow you to reverse the audit adjustment of the year they are contesting. Also inform the taxpayer to refer to the enclosed Publication 1 which explains the Appeals process and Claim Procedures for further consideration of their abatement request. Record the facts and circumstances that support your decision.

Statute of Limitations

  1. The Internal Revenue Code provides that the IRS will assess tax, make refunds or credits, and collect taxes within specific time limits. These limits are known as the Statutes of Limitations. Examiners must be aware of these limitations and the necessary steps required to be taken when these limitations are encountered.

    1. Often, an audit reconsideration request is requesting abatement of tax. The taxpayer has made no prior payments towards the liability. Any abatement that the IRS allows will lower or eliminate the balance due, rather than generate a refund. In that case, the Refund Statute of Limitations should not be a barrier to allowing the reconsideration or abating tax based on the information the taxpayer submits.

    2. In cases where the taxpayer has made prior payments and is asking for a tax decrease that could result in an overpayment, the examiner will have to determine if the taxpayer is entitled to receive a refund of that overpayment based on the statute of limitations. The statute of limitations that applies to overpayments is known as the Refund Statute Expiration Date (RSED). Generally, a claim for refund must be filed within three years from the time the original return was filed or two years from the time the tax was paid. There may be multiple RSEDs that apply to a taxpayer’s situation, depending on the dates the taxpayer made each payment.

    3. In the case of a delinquent return the refund statute is the later of three years from the date the return was filed or extended due date or two years from the date of the payment(s). Prepaid credits such as the Federal Income tax withholding, Earned Income Credit or the refundable Child Tax Credit are considered paid on the due date of the tax return.

    4. If the examiner determines that any portion of an overpayment may be barred because of an expired statute of limitation the examiner is required to have that excess credit applied to the Excess Collections File (XSF).

  2. If an adjustment is made to a taxpayer’s account and the result is an overpayment that can not be refunded due to the RSED the examiner is required to take the following actions:

    1. The taxpayer will be notified that the IRS adjusted the account, but that the overpayment being requested will not be refunded due to the Refund Statute of Limitations. Use 105C or 106C with the appropriate explanation. Taxpayers may appeal the IRS’ decision that the taxpayer filed his/her request after the RSED expired. Make sure that the letter includes an explanation of the available appeal rights.

    2. The excess credit will be applied to the Excess Collections File (XSF) via Form 8758. (See Exhibit 4.13.7-11 for instructions for Form 8758)

    3. All actions will be annotated in the workpapers and the case will be closed using the applicable CEAS status codes.

RSED on Original Return

  1. Original returns claiming a refund filed by a taxpayer are valid claims. If a notice of claim disallowance is not sent by registered or certified mail to the taxpayer and the refund claim on the original return is not properly disallowed in accordance with IRC Section 6532, then the statute of limitations for filing a refund suit has not expired under IRC Section 6532(a)(1). Until a notice of claim disallowance is sent, the two-year period of limitations for filing a refund suit does not begin to run. The notice of deficiency does not stop the refund statute from expiring, and is not a formal notice of claim disallowance.

  2. The above requirements apply only when the taxpayer supplies additional information to substantiate the original return as filed. It does not apply if any of the items as stated on the original return are amended.

  3. If a taxpayer submits a reconsideration request for reversal of an audit assessment or reversal of credits disallowed on the original return and we have not sent a formal disallowance letter, then the RSED is still open. See IRM 25.6.1.10.2.5.4, Reconsideration After the RSED Where Notice of Claim Disallowance Not Sent, for additional information and instructions on how to input the adjustment when the RSED is expired.

Statute for Refund after Certified Letter of Claim Disallowance

  1. The Service may reconsider a disallowance during the 2-year period in which the Taxpayer may file a refund suit. The 2-year period begins with the date on the certified letter of claim disallowance. The taxpayer is not entitled to a refund after that date. A TC 290 on IDRS with Reason Code 066, identifies the issuance of certified claim Letters 105C/106C. The letter date will be 14 days prior to the posting of TC 290.

  2. If the examiner knows that the RSED has expired, and there is a credit balance, document workpapers and prepare Form 8758 indicating the money amount to be transferred to Excess Collections. The form needs to contain the TIN, MFT, and Period, and the DLN of the 29X or 30X transaction that created the overpayment.

  3. If there is a credit balance and the Taxpayer is reporting an increase to the tax, assess the corrected tax, and transfer the excess credit to the Excess Collections using Form 8758. The form needs to contain the TIN, MFT, and Period, and the DLN of the 29X or 30X transaction that created the overpayment.

    If the assessment includes a tax increase for Self-Employment tax, IRS electronically transmits the change to Social Security Administration for 3 years after the due date of the return. After the 3- year period, instruct the taxpayer to contact SSA to have their records corrected.

  4. Documentation must also be noted on or attached to each Form 8758 indicating the research performed prior to the transfer request. The Form must contain the posted DLN transaction that generated. The DLN will not be available until the 2-week posting cycle has been completed for the adjustment generating the overpayment.

Request for Appeal

  1. If the taxpayer indicates they want their case to be reviewed by the Appeals Function, the taxpayer must show they have made an attempt to document their entitlement through the reconsideration process, and their request has been denied. All evidence provided by the taxpayers must be reviewed by the examiner before the referral to Appeals. Refer to IRM 8.2.1.5, Returning a Case to Examination - ATE, and IRM 8.2.1.6, Preliminary Review of a Case - ATE. For these cases and any case previously worked by Appeals case build as below before sending to Appeals.

    1. If TXMOD control is still open, close with message "ToAppeals " . Do not reverse TC 470. Input a new TC 470 to ensure that the taxpayer is not subjected to collection activity pending the appeal of the IRS determination.

    2. If TXMOD controls are closed, input TC 470 and put history item on TXMOD "ToAppeals" .

    3. Close CEAS/RGS control with Status Code 7301.

    4. Send Letter 86C to the taxpayer advising the case is being transferred to Appeals. Use an open paragraph to explain, "As you requested, we are transferring your case for a hearing with an independent appeals officer. During the time your case is in Appeals, we will not pursue any collection activity on your account. However, you should know that interest and penalties will continue to accrue if there is still a balance due after the appeals decision. Therefore, you might want to make voluntary payments during the time Appeals is considering your case to minimize any interest or penalties if you ultimately do owe."

    5. Forward the case to the appropriate Appeals Office per the Appeals Routing guidelines below.

    6. Open AIMS is not required for transfer.

    7. Complete Form 3210 including sender’s full name, stop number, mailing address and phone number along with a full description of items being sent. The Form 3210 should also include the taxpayer’s name, SSN and the tax period of cases being sent.

  2. Appeals Case Building Guidelines. The documents below may have to be requested from files or printed from CEAS. When building the case include the following:

    1. Taxpayer’s original return

    2. Original audit adjustment

    3. Audit Report(s) (example - F 4549)

    4. Audit Reconsideration Adjustment (if reply to audit recon disallowance)

    5. Workpapers

    6. Taxpayer Correspondence

    7. Letters; Initial contact, 30 day, etc.

    8. Statutory Notice of Deficiency

    9. IDRS research

    Note:

    If requesting administrative files, make two attempts three weeks apart (the second request should be a special search). If the administrative file is not received from Files three weeks after the second request, forward without the requested documents. Attach prints of ESTAB's and any Charge Outs from Files to verify that the documents were requested.

  3. Appeals Routing Guidelines. Ensure cases are routed to the correct Appeals office as identified by the Appeals Office code. Consult Appeals website at http://appeals.web.irs.gov/APS/caserouting.htm for case routing addresses. See IRM Exhibit 4.13.7–5, Appeals Account Resolution Specialist.

    Note:

    Communications between the referring function and Appeals that address the strengths and weaknesses of the issues and positions of the parties, accuracy of the facts, credibility or cooperation of the taxpayer, etcetera, are prohibited unless the information communicated has been shared with the taxpayer. However, communications between the referring function and Appeals relate to ministerial, administrative or procedural matters are permissible. Refer to sections 2.02(6) and 2.03(3) of Rev. Proc. 2012–18,Ex Parte Communications Between Appeals and Other Internal Revenue Service Employees, for additional discussion regarding ex parte communication with Appeals.

Audit Reconsiderations EITC 2/10 Year Ban

  1. Overview

    IRC 32(k) allows the IRS to prohibit a taxpayer from claiming EITC for a period of time if the IRS determines that the taxpayer intentionally or recklessly disregarded the rules for claiming EITC (2 year ban) or fraudulently claimed EITC (10 year ban). When the 2 or 10 year ban is applied to a tax year, the taxpayer is notified that the ban is being asserted no later than the Statutory Notice process. The letter must advise the taxpayer of the ban and describe the taxpayer’s conduct giving rise to the ban in the determination year. The original case file must also document managerial approval to impose the ban prior to Statutory Notice of Deficiency issuance per IRM 4.8.9.7.7, Proper Managerial Involvement. IMFOLE and ENMOD will carry an EITC-recertification Indicator “2” (2-year Ban) or “4” (10-year Ban) along with the year the Ban originated and the Ban expires. For additional information see IRM 20.1.5.2.1, Two and Ten Year Bans on Claiming the Earned Income Tax Credit (EITC), IRM 4.19.14.6.1, EITC 2/10 Year Ban - Correspondence Guidelines for Examination Technicians (CET), and IRC 32(k) (1) (B).

  2. Evaluating 2/10 Year Ban Audit Reconsiderations

    The taxpayer needs to address the conduct that was cited in the workpapers for the originating year the ban was imposed. In some cases, the taxpayer will request a reconsideration of the denial of the EITC for a year under the ban instead of the originating year. In that situation, send Letter 3338C or Letter 3339C to advise the taxpayer that he/she must address the imposition of the ban on the originating year before the IRS can consider the more current year when EITC was denied because of the ban. The Audit Recon examiner must request the administrative file or secure the CEAS workpaper and statutory notice, if available, to ascertain the taxpayer’s conduct giving rise to the assertion of the ban. A 10-year Ban was imposed; refer reconsideration to the applicable Area Office or Campus that asserted the ban to be worked.

    • W&I 10-year bans should be forwarded to Austin Campus for reconsideration, See IRM 4.19.10.4, Fraud Referrals.

    • SBSE Area Office 10-year bans should be forwarded to the applicable Area Office and case perfected in accordance with IRM 4.13.3.5, Area Office Reconsiderations prior to sending.

    • SBSE Campus 10-year bans should be routed to the campus that imposed the ban and referral made to the Campus Fraud Coordinator for determination.

    The examiner may allow or disallow the ban based on the explanation, testimony, and documentation the taxpayer provided and the facts and circumstances documented in the administrative file. The examiner should bear in mind that the IRS must show that the taxpayer was reckless or intentional (for 2-Year Ban) or fraudulent (for 10-Year Ban) to maintain the imposition of the ban in the reconsideration process.

  3. No Documentation - 2-Year Ban

    If a request for reconsideration of the Ban is received without any documentation, send Letter 3338Cor Letter 3339C, if applicable, and advise the taxpayer that they must provide documentation to show they were not reckless or intentionally disregarded the EITC rules for the year the Ban was imposed. Cite the taxpayer conduct as documented in the administrative file or the CEAS work paper. Follow procedures under IRM 4.13.3.7.1, No Documentation.

  4. Allow Audit Reconsideration

    Note:

    It is possible to remove the Ban and not reverse the previously disallowed EITC or to remove the Ban and reverse EITC depending on the information provided by the taxpayer.

    Remove 2-year Ban & Allowance of EITC


    If the taxpayer provided information on the ban to substantiate allowance of EITC, removal of the 2 year ban, the examiner will:

    1. Reverse the Ban with a TC 971 Action Code 56 to remove the recertification indicator.

    2. Allow the EITC with TC 764.

    3. Check TXMOD/IMFOLT for TC 420 in subsequent tax years. If open in Campus Exam send CEAS Action Note explaining Recon determination.

    4. If TXMOD/IMFOLT research indicates there are no open subsequent tax period(s) however, the taxpayer was disallowed EITC through Math Error or Exam, and the children were the same children claimed on the ban year, the examiner must allow EITC in the subsequent year. Notate CEAS and IDRS with appropriate reason and status codes.

    5. If TXMOD/IMFOLT research indicates there are no open subsequent tax period(s) however, the taxpayer was disallowed EITC through Math Error or Exam and the children were NOT the same children claimed on the ban year, and the taxpayer is not the custodial parent, the examiner will advise the taxpayer with Letter 3338C of the documentation needed to request a reconsideration of EITC for the applicable years. Notate CEAS and IDRS with appropriate reason and status codes. If research (DDBKD/DUPOL) shows taxpayer is the custodial parent allow the EITC claimed in the subsequent year.

  5. Removal of the 2-year Ban and Disallowance of EITC

    If the determination is made that the Ban was imposed in error, or other facts and circumstance dictate that the Ban should not be enforced, and the taxpayer did not provide information to support the reversal of the EITC disallowance:

    1. Reverse the Ban with a TC 971 Action Code 56 to remove the recertification indicator.

      Note:

      The Recertification indicator will not reset to one (1).

    2. Check TXMOD/IMFOLT for TC 420 in subsequent tax years. If open in Campus Exam send CEAS Action Note explaining Recon determination. If open in Field Exam office, AIMS status 12, send Form 1725 to notify the ban was removed and EITC allowed.

  6. Disallow Audit Reconsideration

    If the taxpayer failed to present any information to substantiate EITC entitlement for the year that triggered the ban and also fails to present any information to address the conduct that led to the imposition of the ban, the audit reconsideration will be disallowed. Follow instructions outlined in IRM 4.13.3, Central Reconsideration Unit, when disallowing reconsideration. Notate CEAS and IDRS with appropriate reason and status codes.

Identity Theft

  1. If correspondence is received in the reconsideration unit indicating that the Taxpayer is a victim of Identity Theft, and the Taxpayer can substantiate the Identify Theft claim, follow the procedures in IRM 4.19.13.25, W&I Campus Exam Identity Theft Referrals, in working the reconsideration case.

  2. If TAS criteria 5 - 7 is met AND ID Theft is involved, see IRM 4.19.13.25.1, Research.