4.19.13 General Case Development and Resolution

Manual Transmittal

February 09, 2018

Purpose

(1) This transmits revised IRM 4.19.13, Liability Determination, General Case Development and Resolution.

Material Changes

(1) Editorial changes were made throughout this IRM. The acronym table was moved from 4.19.13.6.7 to 4.19.13.1.6

(2) IPU 17U0092 issued 01-12-2017 IRM 4.19.13.25.3, Taxpayer Replies, Changed alpha lists to paragraph numbers and added new IRM references and table in new paragraph 5

(3) IPU 17U0107 issued 01-17-2017 IRM 4.19.13.9.7, Shared Responsibility Payment (SRP), Added new paragraphs (2) and (3) dealing with Credit Reference Numbers and Form 5344

(4) IPU 17U0120 issued 01-18-2017 IRM 4.19.13.4, Report Generation Software (RGS) System, Updated paragraph (4) regarding the saving of Form 886-A as a PDF in RGS

(5) IPU 17U0120 issued 01-18-2017 IRM 4.19.13.9.8, Repetitive Audits, Added new section

(6) IPU 17U0120 issued 01-18-2017 IRM 4.19.13.9, Taxpayer Replies, Updated IRM reference in paragraph (3) table for Stat 51, and added IRM reference in table for new section, 4.19.13.9.8

(7) IPU 17U0120 issued 01-18-2017 IRM 4.19.13.3, Researching Claims, Added paragraph (4) for taxpayer identifying numbers

(8) IPU 17U0140 issued 01-20-2017 IRM 4.19.13.23.8 General Examination Procedures for TE, Updated table in paragraph (4), first then statement regarding inputting hold codes to stop erroneous refunds

(9) IPU 17U0140 issued 01-20-2017 IRM 4.19.13.9.6 Taxpayer Requests Additional Time to Respond, Added IRM reference at the end of paragraph (1) for Non-Filers

(10) IPU 17U0140 issued 01-20-2017 IRM 4.19.13.4 Report Generation Software, Added internet links in paragraph (1)

(11) IPU 17U0140 issued 01-20-2017 IRM 4.19.13.5 Workpapers for All Cases, Changed "Federal Tax Credit" to "Fuel Tax Credit" in paragraph (7)

(12) IPU 17U0186 issued 01-26-2017 IRM 4.19.13.25.1, Research, Updated procedures in paragraphs (1) and (2) regarding IDT

(13) IPU 17U0186 issued 01-26-2017 IRM 4.19.13.25.2, Requesting Supporting Documentation, Updated procedures in paragraph (2) and added a Note, as well as a new paragraph (6)

(14) IPU 17U0186 issued 01-26-2017 IRM 4.19.13.25.4, Masterfile shows a SC Address as the Taxpayer’s Address, Updated procedures in Caution note in paragraph (1)

(15) IPU 17U0196 issued 01-30-2017 IRM 4.19.13.25.3 - Taxpayer Replies, Removed reference and note about 86C letter in paragraph (8).

(16) IPU 17U0196 issued 01-30-2017 IRM 4.19.13.30.1 - Request Supporting Documentation, Updated procedures in paragraph (1), (2), and (6)

(17) IPU 17U0196 issued 01-30-2017 IRM 4.19.13.30.2 - Taxpayer Replies, Updated procedures in paragraph (1) and (3)

(18) IPU 17U0219 issued 02-01-2017 IRM 4.19.13.22 - Innocent Spouse Relief/Joint and Several Liability, Added procedures to paragraph (1) regarding Form 8857, and changed 3rd and 4th bullet under paragraph (3)

(19) IPU 17U0282 issued 02-10-2017 IRM 4.19.13.10 - Monitoring Overage Replies, Updated number of days in If/Then table in paragraph (3)

(20) IPU 17U0368 issued 02-24-2017 IRM 4.19.13.9.2 - Evaluating Taxpayer Responses, Updated IRM reference links in paragraph (2)

(21) IPU 17U0368 issued 02-24-2017 IRM 4.19.13.9 - Taxpayer Replies, Updated IRM reference in table, paragraph (3)

(22) IPU 17U0368 issued 02-24-2017 IRM 4.19.13.2.7 - Case Administration, Clarified person to contact in the details box in the table in paragraph (3)

(23) IPU 17U0438 issued 03-06-2017 IRM 4.19.13.13 - Undeliverable Mail Updated procedures in paragraph (5)

(24) IPU 17U0438 issued 03-06-2017 IRM 4.19.13.9 - Taxpayer Replies Added new paragraph (5)

(25) IPU 17U0479 issued 03-10-2017 IRM 4.19.13.1.1 -Program and Source Codes Updated definitions for source codes 06 and 20

(26) IPU 17U0520 issued 03-17-2017 IRM 4.19.13.9.1 -Taxpayer Responses - Additional Information Needed Clarification added in (2) as to what documentation is needed for phone call attempts

(27) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.25.1 - Research, Clarification added in (1) and (2) regarding Action codes

(28) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.25.2 - Requesting Supporting Documentation, Moved paragraphs (5) and (6) to paragraph (3) and NOTE and renumbered

(29) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.25.3 - Taxpayer Replies, Updated procedures in paragraph (1), (4) and table and removed (8). Added reminder to end of new paragraph (11)

(30) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.25.4 - Masterfile shows a Service Center (SC) Address as the Taxpayers Address, Removed Caution in paragraph (1), updated (2), (3) and added reminder after (3)

(31) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.25.6 - IDTVA Returns a Case to Exam as not a true IDT, Updated IRM reference in NOTE, paragraph (2)

(32) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.30.1 - Requesting Supporting Documentation, Added bullet paragraph to paragraph (2), IRM reference to (3) and removed (10)

(33) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.30.2 - Taxpayer Replies, Added procedure to paragraph (1) under (c), removed (1)(f) and caution

(34) IPU 17U0555 issued 03-24-2017 IRM 4.19.13.30.4 - IDTVA Returns a Case to Exam as not a true RPM, Updated note in paragraph (2)

(35) IPU 17U0608 issued 04-03-2017 IRM 4.19.13.5 -Workpapers for all Cases Correction made in Acronym table under paragraph 7

(36) IPU 17U0608 issued 04-03-2017 IRM 4.19.13.7(2) -Power of Attorney and Other Third Party Authorizations Updated data under paragraph 2

(37) IPU 17U0608 issued 04-03-2017 IRM 4.19.13.9.1(2) -Taxpayer Responses - Additional Information Needed Updated table under paragraph 2

(38) IPU 17U0608 issued 04-03-2017 IRM 4.19.13.9.4 - Specific Guidance on Use of Faxes in Tax Administration Processes Updated procedures in paragraph (2), removed paragraph (3)

(39) IPU 17U0608 issued 04-03-2017 IRM 4.19.13.25.2(3) -Requesting Supporting Documentation Corrected IRM reference in paragraph 3

(40) IPU 17U0661 issued 04-10-2017 IRM 4.19.13.4(4) - Report Generation Software (RGS) System Adding clarification for naming Form 886-A in RGS

(41) IPU 17U0661 issued 04-10-2017 IRM 4.19.13.5.3 (8)(c) -Penalty Lead Sheet Documentation Updated procedures in paragraph (c)

(42) IPU 17U0661 issued 04-10-2017 IRM 4.19.13.13.(5) -Undeliverable Mail Corrected the Form number and clarified procedures in paragraph (5)

(43) IPU 17U0780 issued 5-01-2017 IRM 4.19.13.25.3Taxpayer Replies Added note in (1) and paragraph under (7)

(44) IPU 17U0780 issued 05-01-2017 IRM 4.19.13.5(b) - Workpapers for All CasesIRM 4.19.13.9.2(5) -Evaluating Taxpayer Responses Procedural clarification on input of telephone numbers

(45) IPU 17U0896 issued 05-23-2017 IRM 4.19.13.20(11) -Combat Zone Corrected the reference number of the exhibit

(46) IPU 17U0896 issued 05-23-2017 IRM 4.19.13.3(4) -Researching Cases Updated procedures in (4)

(47) IPU 17U0910 issued 05-24-2017 IRM 4.19.13.19(4) - Bankruptcy Removed SC from Letter 531

(48) IPU 17U1082 issued 06-29-2017 IRM 4.19.13.15.1(a) -Docketed Cases Status 90 Corrected the link

(49) IPU 17U1116 issued 07-06-2017 IRM 4.19.13.4(1)Report Generation Software (RGS) System Corrected several links

(50) IPU 17U1178 issued 07-24-2017 IRM 4.19.13.9.6(4) -Taxpayer Requests Additional Time to Respond Aging Reason code was changed to three digits

(51) IPU 17U1178 issued 07-24-2017 IRM 4.19.13.7(5) -Power of Attorney and Other Third Party Authorizations Updated IRM reference

(52) IPU 17U1300 issued 09-01-2017 IRM 4.19.13.11Monitoring Overage Replies Added new information in paragraphs 4 - 8

(53) IPU 17U1300 issued 09-01-2017 IRM 4.19.13.11.1Letter 3500, Interim Letter, When Additional Time to Reply is Needed Added new subsection

(54) IPU 17U1332 issued 09-15-2017 IRM 4.19.13.24.2Disaster Procedures - Beginning Suspense Period Updated the procedures in (3) - (8)

(55) IPU 17U1332 issued 09-15-2017 IRM 4.19.13.3.2 (c)Exam Cases with AUR involvement Corrected IRM reference

(56) IPU 17U1340 issued 09-18-2017 IRM 4.19.13.24.2(3) Disaster Procedures - Beginning Suspense Period Added additional information

(57) IPU 17U1372 issued 09-27-2017 IRM 4.19.13.9.6Procedures Regarding Letter 686B and Taxpayer Requesting Extension of Time to Reply to Audit Letter Updated section to include procedures for new Letter 686-B, when taxpayer requests an extension. Other paragraphs updated throughout as needed.

(58) IPU 17U1472 issued 10-19-2017 IRM 4.19.13.9.4(6)Specific Guidance on Use of Faxes inTax Administration Processes Removed paragraph (6).

(59) IPU 17U1489 issued 10-23-2017 IRM 4.19.13.9.6 Taxpayer Requests Additional Time to Respond Updated procedures throughout for clarification. Added note to end of paragraph (6) and (9).

(60) IPU 17U1494 issued 10-24-2017 IRM 4.19.13.29.1(5)Deceased Victims of Sept 11th, Oklahoma City and Anthrax Attacks Corrected IRM reference

(61) IPU 17U1494 issued 10-24-2017 IRM 4.19.13.29.1(1) Cases Identified in Campus Examination Inventory Corrected IRM reference in box one of the If and Then table; removed all of the information in box three of the same table

(62) IPU 17U1534 issued 10-30-2017 IRM 4.19.13.5.2Managerial Approval of Penalties/Bans Updated information in (2) and the note. Added (5).

Effect on Other Documents

This supersedes IRM 4.19.13 dated December 16, 2016(effective January 1, 2017). The following IPUs, issued from January 12, 2017 through September 27, 2017, have been incorporated into this IRM: 17U0092, 17U0107, 17U0120,17U0140, 17U0186, 17U196, 17U0219, 17U0282, 17U0368, 17U0438, 17U0479, 17U0520, 17U0555, 17U0608, 17U0661, 17U692, 17U0780, 17U0896, 17U0910, 17U1082, 17U1116, 17U1178, 17U1300,17U1332, 17U1340, 17U1372, 17U1472, 17U1489, 17U1494 and 17U1534..

Audience

Small Business Self-employed (SB/SE) and Wage and Investment (W&I) Campus Examination Operations.

Effective Date

(02-09-2018)

Michael Damasiewicz
Director, Examination Field and Campus Policy
Small Business Self Employed

Program Scope and Objectives

  1. This section contains information on Examination general procedures for administrative matters and provides a reference for common issues and related items that might be found on tax returns. Throughout this revision are references to other IRMs which may contain related information needed when working cases.

  2. Purpose: This transmittal is the revised IRM 4.19.13 General Case Development and Resolution.

  3. Audience: This IRM is intended for the use of the SB/SE (Small Business/Self-Employed) and W&I (Wage and Investment) Campus Examination.

  4. Primary Stakeholders: The primary stakeholders are SB/SE (Small Business/Self-Employed) and W&I (Wage and Investment) tax examiners. .

Background

  1. This section contains information on examination procedures and administrative matters relative to the Discretionary Programs and provides a reference for common issues and related items that might be found on tax returns.

Authority

  1. There are various code sections providing IRS authority to examine individual tax returns for correctness. See IRM 1.2.13, Policy Statements for the Examining Process.

Responsibilities

  1. Liability Determination - Discretionary Programs are used in Campus Examination Operations by managers, coordinators, examiners, and clerical staff to work, control, and monitor inventory for discretionary tax issues in both SB/SE and W&I.

Program Management and Review

  1. Program Reports: See IRM 4.4.27, Reports.

Program Controls

  1. See IRM 4.19.20, Automated Correspondence Exam (ACE) Processing Guidelines.

Terms/Definitions/Acronyms

  1. Although it is best to not use words that require interpretation, you may have to use them. If you do, you should include definitions for words which require interpretations. Consistency in preparing workpapers is critical in the examination process. The use of standard abbreviations and acronyms aids in consistency. The abbreviations and acronyms listed below may be used when preparing examination workpapers. When abbreviating, acronyms not listed below can be used if the definition is written out with the acronym next to it in parenthesis the first time used. Then, the acronym can be applied throughout the workpaper.

    Abbreviation/Acronym Definition
    AC Action Code or Activity Code
    ACCT Account
    ACE Automated Correspondence Exam
    ACM Alternative Calculation for Marriage
    ACTC Additional Child Tax Credit
    ADDL Additional
    ADDR Address
    ADJ Adjustment
    AGI Adjusted Gross Income
    AIMS Audit Information Management System
    AIS Automated Insolvency System
    AM Accounts Management
    AMS Account Management Services
    AMT Alternative Minimum Tax
    Amt. Amount
    AO Area Office
    AOTC American Opportunity Tax Credit
    AP Adjustment Pending
    APTC Advance Premium Tax Credit
    ASED Assessment Statute Expiration Date
    ASFR Automated Substitute for Return
    ATAA Alternative Trade Adjustment Assistance
    ATAO Application for Tax Assistance Order
    ATIN Adoption Taxpayer Identification Number
    ATTY Attorney
    AUR Automated Underreporter
    AVS Affordable Care Act Verification System
    BC Birth Certificate
    BOD Business Operating Division
    BOE Business Objects Enterprise
    CA Case Advocate (TAS)
    CAF Centralized Authorization File
    CAT A Category A
    CC Closing Code/Command Code (will depend on context)
    CCC Child and Dependent Care Credit
    CCEO Compliance Campus Examination Operations
    CCISO Cincinnati Centralized Innocent Spouse Operations
    CDR Coverage Data Repository
    CEAS Correspondence Examination Automation Support
    CET Correspondence Examination Technician
    CHG Change
    CI Criminal Investigation
    CIS Correspondence Imaging System
    CLCS Closing Cover Sheet
    CK Check
    CN Common Number
    COBRA Consolidated Omnibus Budget Reconciliation Act
    COMP Compensation
    CORR Correspondence
    CPA Certified Public Accounting
    CRD Correspondence Received Date
    CRN Credit Reference Number
    CSED Collection Statute Expiration Date
    CTC Child Tax Credit
    CY Calendar Year
    CZ Combat Zone
    DC Disposal Code
    DECD Deceased
    DEF Deferred
    DEP Dependent
    DOB Date of Birth
    DOC/DOCS Document(s)
    DOD Date of Death/Department of Defense
    DOL Department of Labor
    DUPTIN Duplicate TIN
    DV Disclosure Verified
    EBE Employee Business Expense
    EDU Education
    EGC Employee Group Code
    EIC Earned Income Tax Credit
    EICTRA Ineligible Earned Income Tax Credit Refund
    EIN Employer Identification Number
    EMP Employee
    EMT Erroneous Manual Refund
    EUP Employee User Portal
    EXAM Examination
    EXEMP Exemption
    EXP Expense
    EXT Extension
    F Form
    FEMA Federal Emergency Management Agency
    FERDI Federal Employee/Retiree Delinquency Initiative
    FFC Functional Fraud Coordinator
    FIFO First-In First-Out
    FOIA Freedom of Information Act
    FMV Fair Market Value
    FPL Federal Poverty Level
    FRV Frivolous Filer
    FS Filing Status
    FSA Flexible Spending Account
    FTC Fuel Tax Credit
    FTF Failure to File
    FTHBC First Time Homebuyer Credit
    FTP Failure to Pay
    FY Fiscal year
    HC Hold Code
    HCTC Health Coverage Tax Credit
    HHI Household Income
    HHS Health and Human Services
    HIP Health Insurance Premium
    HOH Head of Household
    HQ Headquarters
    HSA Health Savings Account
    HSH Household Help
    HUD Department of Housing and Urban Development
    IA Installment Agreement
    IAT Integrated Automation Technologies
    ICL Initial Contact Letter
    ID Identification
    IDRS Integrated Data Retrieval System
    IDT Identity Theft
    Immun. Immunization
    IMF Individual Master File
    INC Income
    INCL Including
    INFO Information
    INT Interest
    IRA Individual Retirement Account
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    ITIN Individual Taxpayer Identification Number
    K Thousand dollars

    Example:

    2K = $2,000

    KITA Killed in Terrorist Action
    LEM Law Enforcement Manual
    LTR Letter
    LTRC Long-Time Resident Credit
    LUQ Large Unusual Questionable
    ME Math Error
    MEC Minimal Essential Coverage
    MED Medical
    MeF Modernized E-File
    MF Master File
    MFJ Married Filing Joint
    MFS Married Filing Separately
    MFT Master File Transaction
    MIC Mortgage Interest Credit
    MOIC Monitoring Offers in Compromise
    MSA Medical Savings Account
    MSG Message
    MTG Mortgage
    MWPC Making Work Pay Credit
    NA Not Applicable
    NEC Non-Employee Compensation
    NF Non-filer
    NM CHG Name Change
    OAR Operations Assistance Request
    OIC Offer In Compromise
    ORG Organization
    PACER Public Access to Court Electronic Records
    PBGC Pension Benefit Guaranty Corporation
    PC Project Code
    PD Paid
    PH# Phone Number
    PN Pending
    POA Power of Attorney
    PREV ADJ Previously Adjusted
    PSSN Primary SSN
    PTC Premium Tax Credit
    PUB Publication
    PY Prior Year
    QC Qualifying Child
    QDRO Qualified Domestic Relations Order
    QFM Qualifying Family Member
    QMS Quality Measuring System
    QREL Qualifying Relative
    QRP Questionable Refund Program
    RCPT Receipt
    RECD Received
    RECON Audit Reconsideration
    REG Regulation
    REQ Request
    RES Residency
    REV Revenue
    Rev. Rul. Revenue Ruling
    RPAT Return Preparer Analysis Tool
    RPM Return Preparer Misconduct
    RRC Rebate Recovery Credit
    RTN Return
    RTAA Reemployment Trade Adjustment Assistance
    SC Status Code/Source Code (will depend on context)
    SCH Schedule
    SDC Scheme Development Center
    SE Self-employed
    SEHID Self-Employed Health Insurance Deduction
    SERP Servicewide Electronic Research Program
    SET Self Employment Tax
    SFR Substitute For Return
    SLCSP Second Lowest Cost Silver Plan - SLCSP
    SNOD Statutory Notice of Deficiency
    SP Submission Processing
    SPS Spouse
    SQP State Qualified Plan
    SRP Shared Responsibility Payment
    SS Social Security
    SSA Social Security Administration
    SSN Social Security Number
    SSSN Secondary Social Security Number
    ST Status
    STAT Statutory
    STMT Statement
    SWA State Workforce Agency
    TAA Trade Adjustment Assistance
    TAC Taxpayer Assistance Center/Tax Administrative Council
    TAS Taxpayer Advocate Service
    TC Transaction Code
    TE Tax Examiner
    TETR Telephone Excise Tax Refund
    TIN Taxpayer Identification Number
    TP Taxpayer
    TPA Third Party Administrator or Third Party Authorization
    TPH Taxpayer's husband
    TPW Taxpayer's wife
    TPXH Taxpayer's Ex-husband
    TPXW Taxpayer's Ex-wife
    TREAS Treasury
    TXI Taxable Income
    TXPD Tax Period
    TY Tax year
    UA Unallowable Code
    UNDEL Undeliverable
    UCP Unattended Case Processing
    UP Unpostable
    UPC Unpostable Code
    UTIL Utilities
    VEBA Voluntary Employees’ Beneficiary Association
    W/H Withholding
    W/O Without
    XREF Cross Reference
    XSPS Ex-Spouse
    YR Year

Related Resources

  1. For related resources such as IRMs, See Exhibit 4.19.13-2 Related Resources, Exhibit 4.19.13-3 W&I Form 4700, Examination Workpapers, and Exhibit 4.19.13-8 SB/SE Form 4700, Examination Workpapers.

Standard Procedures

  1. Standard examination procedures apply to all cases and include:

    1. Initiating examinations (including the use of initial contact letters)

    2. Dealing with Powers of Attorney

    3. Preparing audit forms, Form 4549 or Form 4549EZ, Income Tax Examination Changes, Form 886 (Series), etc.

    4. Handling undeliverable correspondence

    5. Responding to taxpayers' replies

    6. Following workpaper guidelines

    7. Handling special situations

    8. Adjusting penalties

    9. Performing follow-up actions

    10. Resolving No Response and Unagreed cases

    11. Issuing Statutory Notices

    12. Performing close out procedures

    13. Addressing statute control

    14. Monitoring QMS (Quality Measuring System) responsibilities (Manager, Examiner, Clerk)

    15. Following procedures for Fraud Referrals from Campuses to the Area Office Fraud Detection function

    16. Following procedures for Taxpayer Advocate Service Referrals

    17. Following established procedures throughout the audit to protect and communicate taxpayer rights and consider the taxpayer right implications of all their actions.

Program and Source Codes

  1. The following are Correspondence Examination Programs with corresponding Source Codes:

    Program and Source Codes
    Correspondence Examination Program Source Code
    Alternative Minimum Tax 26
    Alimony 06
    Claims 30, 31, 32, 35
    Criminal Investigation (CI) Referrals, i.e., Preparer Schemes 06, 08, 11, 70
    Dependent Database (DDb)/Discretionary Exam Business Rules (DEBR) Inventory 06
    DIF (Discriminant Function) CORR (Correspondence) Source 02 or 06
    DUPTIN (Duplicate Taxpayer Identification Number) (EITC (Earned Income Tax Credit) and Non-EITC) 06
    EITC, CTC/ATC and AOTC Ban Penalties (2 and 10) 06
    EITC Certification Programs 06
    EITC Recertification (Non-Claims – i.e., Project Code 0027, 0028, 0257, or 0694) CTC/ACTC and AOTC Recertification 06
    Employee Returns 46
    Erroneous Refund 20
    Estate and Gift Tax No Source Code
    Federal/State Cooperative 77
    Health Coverage Tax Credit Advance Credit and Year End 06
    Health Coverage Tax Credit Claims 30
    Health Coverage Tax Credit Unallowables 03
    High Underreporter Referrals 14
    Ineligible (EITCRA) (Earned Income Tax Credit Referral Automation) 70
    Informants 70
    Information Returns 85
    Manually Classified Returns 20
    Math Clerical Abatement 06
    Math Error Program 06
    Married Filing Separately 06
    Multiple Filer Source 04
    Non-Filers (i.e., TDI (Taxpayer Delinquency Investigation) Non-Filers, AEITC (Advance Earned Income Tax Credit) Non-Filers) 24
    Non-Filers – High Income Non-Filers Only (>$200K in Income) 25
    Qualified Personal Service Corporation No Source Code
    Research Programs and Tests 11
    Return Preparer Analysis Tool (RPAT) 49
    RICS-IVO Referral, Questionable Refund Program (QRP) No Source Code
    Self-Employment Tax 08
    Shared Responsibility Payment - MFT 35 (SRP) No Source Code
    Substitute For Return 24
    Taxable Gain on Sale of Residence 11
    Taxpayer Requests (i.e., Prompt Assessment Requests) 73
    Tip Income (Filed Returns) 06
    Tip Income (Non-Filers) 24
    Unallowable Items 03 or 48
  2. For a complete listing of all Source Codes available to Examination, please refer to IRM 4.4.1-19, Source Codes, and Document 6209, IRS Processing Codes and Information.

Integrated Automation Technologies (IAT) Tools

  1. Integrated Automation Technologies (IAT) tool are desktop productivity enhancing tools that will simplify taxpayer account processing. The IAT Website has a list of all available tools as well as a description and job aid for each tool. Refer to the http://iat.web.irs.gov/, IAT Website for more information.

  2. All Examination employees must use the IAT tools. Some tools are mandated to be used while others are suggested to be used.

  3. The mandatory tools to be used by Examination employees, and a brief description of each tool, are listed below:

    Mandatory Tools Exam Programs
    Address All programs or actions requiring address updates such as Discretionary, EITC, Audit Recon, Non-Filers, QRP, TAS, Telephone
    Credit Transfer All programs or actions requiring credit transfer such as Audit Recon, Non-Filers, TAS, Frivolous Return
    Disclosure Telephone
    Erroneous Manual Refund (EMT) All programs or actions requiring monitoring manual refunds such as Audit Recon, TAS
    Erroneous Refund Assists in the recovery of erroneous refunds. This tool automates processes related to Category D (Cat D) erroneous refund processing as outlined in IRM 21.4.5, ,Erroneous Refund.
    ESTAB All programs requiring ordering original returns, other source documents, and administrative files, such as Audit Recon, Classification, Non-Filers, and Frivolous Return
    Fill Forms All programs or actions requiring completion of forms, including Form 4442 inquiry, Form 8758 Transfer to Excess Collection, and Form 9856 to associate documents to returns in Files.
    Letters All programs or actions requiring C letters
    Refund Suite All programs or actions requiring manual refunds such as Audit Recon, TAS
    REQ54 All programs or actions requiring on-line adjustments to an account such as Audit Recon, Frivolous Return
    REQ77 All programs requiring input of TC 971 with action codes, TC 470 for collection activity holds, and TC 560 updating the ASED such as Audit Recon, Non-Filer, Frivolous Return
    Stop Refund (CC NOREF) Stops a Refund
    Manual Refund All programs requiring manual refunds such as Audit Recon, TAS. This tools automates the manual refund process. It auto-fills Form 5972 or Form 3753.
    xClaim All programs or actions requiring the processing of original delinquent returns received as reconsideration, amended returns or zeroing out an account such as Audit Recon, Frivolous Return, QRP, TAS
  4. The suggested IAT tools to be used by examination employees, and a brief description of each tool, are listed below:

    Suggested Tools Exam Programs
    Quick Command Code (CC) tool To generate any IDRS output
    Clerical To generate Correspondex letters in addition to opening control bases, inputting STAUPs and ESTABing for documents.
    CSI Code Search Index, at http://iat.web.irs.gov/codes/
    Mixed Entity Scrambled To determine the valid TIN assigned to the correct taxpayer
    Exam Batch To determine if an IMF account meets Exam Batch criteria
    Phone Number To research, update, and delete a phone number on taxpayers' accounts on IDRS
    Managers Tool To complete all of the routine IDRS security tasks

Seven Auditing Standards

  1. The seven auditing standards outline the criteria determined to produce a quality examination and are guidelines to assist examiners in completion of all cases. The seven auditing standards are used in conjunction with the applicable program procedures for evaluating case quality.

Standard 1 - Adequate Consideration of Significant Issues

  1. Purpose: This standard measures whether consideration is given to the Classified/Program as well as large, unusual or questionable (LUQ) items during the course of the examination.

  2. Overview: Consideration of all significant tax issues during the examination is required.

  3. The following table shows the key elements of Auditing Standard 1.

    Key Elements of Auditing Standard 1
    Key Elements Details
    Classified/Program Items Considered All Classified/Program Items (including flow-through adjustments for TEFRA (Tax Equity and Fiscal Responsibility Act )/Non-TEFRA) were considered.
    Scope of Examination was Appropriate Scope of Examination was limited or expanded to the point that all LUQ (Large Unusual Questionable) items were properly considered for the correct determination of tax liability. The scope of the examination should stay within the scope of the issues identified by Headquarters or the issues identified during manual classification. Consult your manager and secure approval to expand or limit the scope of the examination when other LUQ issues are present. The workpapers must reflect this decision. Sound judgment must be exercised when, in the course of the examination, additional issues appear to warrant expanding the examination.
    Consideration of Prior/Subsequent Year Returns Prior/Subsequent year returns containing the same or correlative issues as in the year examined were considered and/or pursued when appropriate. Computational adjustments to carryback/carryovers were considered.

Standard 2 - Examination Depth and Conclusions Reached

  1. Purpose: This standard measures whether the examined issues are completed to the extent necessary to provide the examiner sufficient information to determine the substantially correct tax based on the correct application of tax law.

  2. Overview: The depth of the examination is determined through inquiry, observation, and analysis of appropriate source documents, oral testimony, contacts etc., to ensure full development of relevant facts concerning significant issues. Conclusions are supported by applicable law, Regulations, court cases, Revenue Rulings, etc.

  3. The following table shows the key elements of Auditing Standard 2.

    Key Elements of Auditing Standard 2
    Key Elements Details
    Adequate Examination Techniques Used Appropriate examination techniques were utilized (e.g., oral testimony, inquiry, observation or analysis). The taxpayer’s records were reconciled to the tax return: taxpayer’s Schedule K-1 was reconciled to the tax return; sampling techniques were used; proper source documents were requested and evaluated; and taxpayer and/or third party contacts were made when appropriate.
    Correct Conclusions Reached The case file reflected application, interpretation, and explanation of applicable law, derived from developed facts and circumstances.

Standard 3 - Workpapers Support Conclusions

  1. Purpose: This standard measures documentation of the scope, depth, and conclusions reached in the examination.

  2. Overview: The workpapers provide the principal support for the examiner’s report and document the procedures applied, information obtained, and conclusions reached in the examination.

  3. The following table shows the key elements of Auditing Standard 3.

    Key Elements of Auditing Standard 3
    Key Elements Details
    Fully Disclose Examination Procedures, Audit Trail, Findings, and Conclusions The workpapers disclosed the scope, depth, judgment, examination techniques, and findings used in the examination of each significant item and the conclusions reached.
    Adjustments in Workpapers Agree with Report Adjustments in workpapers were reflected on the examination report if there is a report, or with the case disposition/case actions.
    Examination Activities Adequately Documented
    • The case actions or contacts were adequately documented (e.g., changes to entity information were recognized/updated). The case file showed complete and accurate documentation of case history (e.g., taxpayer, representative, or third party contacts as well as examination research).

    • In cases where the taxpayer entered an incorrect identifying number on their tax return, such as an SSN, EIN, Vehicle Identification Number (VIN), or any other identifying number that is germane to the audit, and the taxpayer has provided the correct number, examiners are to enter the corrected information on the workpapers.

    • Taxpayer/Representative telephone numbers were recorded and updated when necessary.

Standard 4 - Report Writing Procedures Followed

  1. Purpose: This standard measures the presentation of the examination findings in terms of content, format, and accuracy.

  2. Overview: This standard addresses the written presentation of examination findings in terms of content, format, and accuracy.

  3. The following table shows the key elements of Auditing Standard 4.

    Key Elements of Auditing Standard 4
    Key Elements Details
    Applicable Report Writing Procedures Followed Applicable report writing procedures including consideration of automatic adjustments and alternative positions were followed. Explanations, schedules, and attachments to the report were accurate, clear, concise, legible, and grammatically correct.
    Correct Tax Computation The tax computation was correct and used the method most beneficial to the taxpayer. All prior adjustments to the tax return were considered, including math corrections, amended returns and previous audit adjustments. Prior audit adjustments impacting base period income were considered in computing income averaging.
    Correct Credit Computation The credit computation was correct and used the method most beneficial to the taxpayer.

Standard 5 - Penalties Properly Considered

  1. Purpose: This standard measures whether applicable penalties are considered and applied correctly.

  2. Overview: The application of appropriate penalties is required to be considered during all examinations.

  3. The following table shows the key elements of Auditing Standard 5.

    Key Elements of Auditing Standard 5
    Key Elements Details
    Recognized, Considered and Applied Correctly The case reflected consideration of and, if applicable, assertion of all applicable penalties. Indicators of fraud were recognized and a referral was made, if warranted. The case file was documented sufficiently to support the decision whether or not to assert any penalties. Penalties that were assessed were abated when the audit resulted in a tax decrease.
    Computed Correctly The penalties were computed correctly.

Standard 6 - Timely Actions

  1. Purpose: This standard measures the utilization of time as it relates to the examination process.

  2. Overview: Timeliness of actions during the examination process is an essential component of each examination. Actions are initiated and completed within established time frames.

  3. The following table shows the key elements of Auditing Standard 6.

    Key Elements of Auditing Standard 6
    Key Elements Details
    Examination Actions Timely All requests for documentation/information/signature completed within established time frames and provided a date for response.
    Examination Response Timely
    • Paper response to taxpayer reply was made within established time frames (initial response 30 days).

    • Phone response to taxpayer telephone inquiries within established time frames (3 business days).

Standard 7 - Case Administration

  1. Purpose: This standard measures whether the administrative aspects of the case are addressed.

  2. Overview: This standard encompasses correspondence, statute control, case assembly, power-of-attorney (POA) disclosure procedures and closing procedures.

  3. The following table shows the key elements of Auditing Standard 7.

    Key Elements of Auditing Standard 7
    Key Elements Details
    Correspondence The appropriate letter was used to respond to the taxpayer’s inquiry or to notify the taxpayer of the results of the examination. Letters mailed on cases from Campus Correspondence Examination inventory will include the appropriate BOD (Business Operating Division) corporate toll free number, "Tax Examiner" as person to contact and the site specific identification number. The correspondence is legible, grammatically correct, addressed all issues and was sent to the correct address. If a letter is sent in reply to taxpayer correspondence, the letter and all letter attachments must identify the originating tax examiner in order to provide information for any subsequent contact if needed.
    Statute Control Followed The appropriate consent to extend the statute of limitations was prepared correctly and secured timely; consents were executed by authorized parties. Form 895, Notice of Statute Expiration, and/or statute identification procedures were followed in accordance with IRM procedures.
    Case Assembly All original documents were returned to the taxpayer.
    Case Completion Form 5344, Examination Closing Record, IDRS (Integrated Data Retrieval System) research (e.g., AIMS (Audit Information Management System), PCS (Partnership Control System), CFOL (Corporate Files On Line), TXMOD (Tax Module), etc.) inputs and updates were accurately completed in accordance with IRM procedures.
    POA/Disclosure Procedures Followed CAF (Centralized Authorization File) researched and POA (Power of Attorney) properly recognized and processed in accordance with IRM procedures. Examiner complied with disclosure guidelines involving third party contact.

Researching Cases

  1. Prior to taking action on a case (initiating, purging, working replies, or closing), examiners must perform IDRS research to check the validity of current AIMS data and to ensure that no activity has been taken on the taxpayer’s account that may affect the case under examination. If an open control already exists for another service employee, contact the other employee before taking any action. Examiners should research to verify the accuracy of items on the return when appropriate. All applicable research performed must be documented on Form 4700, Examination Workpapers. The following chart contains guidelines and is not all-inclusive. For additional information regarding the command codes listed, examiners should refer to Document 6209, IRS Processing Codes and Information.

    Command Codes
    To Determine: Research through IDRS Command Code(s) and Definer(s)
    Adoption Credit Claim Data ADOPT
    Full AIMS display including:
    • Mail received date

    • Current/prior AIMS Status

    • AIMS Freeze Codes

    • Primary Business Code

    • Employee Group Code

    • Project Code

    AMDISA
    Taxpayer’s phone number ENMOD
    Taxpayer's current address AMDISA, INOLES, IMFOLE, ENMOD
    Taxpayer's pending address ENMOD
    Taxpayer’s prior address RTVUE, TRDBV, IRPTRO
    Statute expiration date TXMODA, AMDISA, IMFOLT
    Date return was received TXMODA, AMDISA, IMFOLT, RTVUE
    Any secured amended returns TXMODA, AMDISA, IMFOLT
    Master File Freeze Codes TXMODA, IMFOLT, SUMRY, IMFOLI
    Refund status TXMODA, IMFOLT
    Status of account TXMODA, IMFOLT, SUMRY
    Other adjustments TXMODA, IMFOLT, IMFOLA
    IDRS control assignment TXMODA, SUMRY

    Note:

    If TXMOD is not available, then IMFOL has the most current posted information available. IMFOL will not show any pending transactions. When conducting research, do not use MFREQ to generate a TXMOD if it is not available.

    Recertification indicator present IMFOLE, ENMOD, INOLES
    Spouse’s SSN (Social Security Number) INOLE, IMFOLT, ENMOD, RTVUE, TRDBV
    Taxpayer’s name control (SSA (Social Security Administration) information) INOLE or most any IDRS Command Codes
    Pending transactions TXMODA, ENMOD, SUMRY
    Date of birth INOLES, RTVUE, DDBKD, TRDBV, MFTRAU
    Past filing status INOLE, IMFOLI
    Any other SSNs under which taxpayers have filed returns INOLE
    Duplicate use of SSN for EITC, Exemption DUPOL, DDBKD
    Dependent Database rules that have fired DDBOL
    Citizenship Code DDBKD, MFTRAU
    Cross-reference SSN on duplicate condition DDBOL, DUPOL, DDBKD
    KIDLINK (child’s Social Security application which indicates parents) DDBKD, MFTRAU
    Power of Attorney/Tax Information Authorization indicator AMDISA, TXMOD, IMFOLT, CFINK
    Income, withholding, and certain expenses (e.g., mortgage interest paid, higher education expenses) IRPTRO
    Purported relationship of dependents TRDBV
    SSN (e.g., for child’s parent) NAMES
    Annotations on Form 1040, U.S. Individual Income Tax Return, (e.g., identification of Other Income on Line 21 and Employee Business Expense on Schedule A) TRDBV
    FTHBC Claim Information FTBOL
    Education Credits Information DLITE
    Prisoner Data FTBOLP, DFAST, DLITE
    IDT ENMOD, INOLES, TXMOD, IRPTRO, TRDBV, FTBOLP, DLITE
  2. Research all related CEAS (Correspondence Examination Automation Support) records including any for prior or subsequent tax years, or cross-reference taxpayers to determine if they contain information relevant to the issues under examination.

  3. For issues that can be potentially claimed in multiple years (e.g., First-time Home Buyer Credit), check related years to ensure the issue was not allowed in a related year, prior to allowing it for the year under examination.

  4. Effective for any return of tax filed after December 18, 2015; in order to claim a credit for EITC, CTC, ACTC, or AOTC, any taxpayer identifying number (i.e. ATIN, ITIN, or SSN) must be issued before the due date of the tax return including extensions. If the taxpayer identifying number is secured after the due date, the credit is not allowable. Check INOLE to verify the Social Security number or taxpayer identifying number assignment date as necessary. Refer to IRM 2.3.47, Command Codes INOLE, EOGEN and SPARQ, and the IDRS Command Code Job Aid for more information. Currently the Social Security card provides the issuance date of the card, which may not be the date the taxpayer identifying number was assigned.

    Note:

    This is not an issue when the issuance date on the card is prior to the due date of the return.

Requesting Amended Returns

  1. When research results show that a taxpayer has filed an amended return, the amended return must be requested to determine the impact on the examination. The amended return may contain information directly related to the examination or change other items on the return.

  2. The following actions must be taken to request the amended return:

    Requesting Amended Returns
    If And Then
    TXMOD reflects a TC (Transaction Code) 97X with no subsequent TC 29X Open IDRS control is on TXMOD Contact the person that has the open control and request that the return be forwarded for incorporation into the examination.
    TXMOD reflects a TC 97X with or without subsequent TC 29X No open IDRS control on TXMOD Check AMS (Audit Management System) for the CIS (Correspondence Imaging System) document.
    1. If a CIS document exists, print or request CIS document and proceed with examination.

    2. If a CIS document does not exist, ESTAB the TC 97X DLN (Document Locator Number). Suspend case for 21 days. If document is not received or Form 4251, Return Charge-Out, states it is not in Files, do a special search. Allow 21 days for special search to be returned. If returned without document, request a copy from the taxpayer using Letter 418C, Amended/Original Return Unavailable, Copy Requested, letter. Use paragraphs I, and W when corresponding to the taxpayer. Allow 15 days for taxpayer response. Suspend case for 30 days.

Exam Cases with Automated Underreporter (AUR) Involvement

  1. A check for a TC 922 using command code (CC) TXMOD or IMFOLT will be completed every time an examination case is handled.

    1. There will be a TC922 on the TP’s account if there is AUR involvement. If no TC922 is posted on the account, then proceed with next action. If there is a TC922 on the account, the corresponding process code(s) will indicate the current status of the AUR exam. Refer to IRM 4.19.3-3, AUR Process Codes, for definitions. Review CC IRPTRO for related payer information. AUR issues may match the Exam issues or there may be additional issues to consider including in the Examination. If AUR has already issued their CP 2000 letter, access Account Management Services (AMS) to review an electronic copy of the letter on the case module.

    2. See below for general guidelines for handling open AUR and Exam combination cases:

      If process codes indicate: Then:
      AUR open, Statutory Notice of Deficiency (SNOD) not issued. Give a TXMOD print, with the TC 922 highlighted, and CC IRPTRO print to your work lead. Your work lead will contact the AUR Coordinator for the campus assigned to the case to close the AUR case. Determine the underreported issues to include in the Correspondence Examination and proceed.
      AUR open, AUR SNOD issued. Determine the AUR issues. If the AUR issues are the same or a substantial part of the Correspondence Examination issues, close the Exam case. If there are Exam issues other than those included in the AUR report, suspend action on the Exam case until the TC 922/AUR case closes, then follow AUR closed; assessment made (TC 290),below.
      AUR open, Correspondence Exam SNODissued. Exam will not pursue AUR issues identified after the issuance of the Exam Statutory Notice of Deficiency. Give a TXMOD print, with the TC 922 highlighted, and CC IRPTRO print to your work lead. Your work lead will contact the AUR Coordinator for the campus assigned to the case to close the AUR case or suspend action until the Exam case is closed.
    3. See below for general guidelines for handling closed AUR and open Exam combination cases:

      If process codes indicate: Then:
      AUR closed to Campus Exam Determine underreported or over-claimed issues to be included in the examination and proceed.
      AUR closed to Field or Office Audit Contact Field/Office assignee to coordinate issues and case actions.
      AUR closed with no taxpayer contact Determine underreported or over-claimed issues to be included in the examination, and proceed.
      AUR closed; assessment made (TC 290) Identify AUR issues and determine whether to proceed with the examination. If proceeding, update the RGS return setup to include the AUR assessment changes per the adjustment shown on TXMODA and continue with the examination.
      AUR closed no change Identify AUR issues and determine whether to proceed with the examination.
      AUR closed to Criminal Investigation or Fraud If the project code is not defined for CI or Fraud cases, coordinate the examination with Criminal Investigation or Fraud Coordinator prior to contacting taxpayer. If CI or Fraud project code, proceed with examination. See Project Code Search for definitions.
      Documented ID Theft Closure Follow IRM 4.19.13.25.3, Taxpayer Replies to close the case.
    4. If case details are not covered in general guidelines, consult with your Work Lead. If additional guidance is needed, your Work Lead will contact the applicable AUR Coordinator for assistance.

Report Generation Software (RGS) System

  1. For helpful information regarding downloading, new developments, system updates, read me files, etc., refer to these RGS (Report Generation Software System) website links:

  2. RGS/CEAS is utilized in the examination process to compute proposed tax adjustments, interest, and penalties. It has three permission levels: Manager, Examiner and Clerk. It generates various forms, letters and audit reports for mail out to the taxpayer. It allows examiners and reviewers the ability to document their actions and findings and stores the archived examination results. CEAS notes can be input on individual records, documenting telephone conversations with taxpayers. It creates numerous reports that can be printed to assist in monitoring inventories, from individual to operation levels. The various types of inventory reports include but are not limited to; weekly receipts, closures, case updates, weekly purges, aged inventory, discrepancies between AIMS and RGS/CEAS, etc.

  3. UCP (Unattended Case Processing)/ACE (Automated Correspondence Exam) receive data from the Dependent Database (DDb) and AM424 files to create the RGS/CEAS record in one of the designated RGS/CEAS processing "B" groups. See IRM 4.19.20, Automated Correspondence Exam (ACE) Processing Overview, for additional information. When UCP/ACE creates the RGS record:

    • In Group B0, the system will systemically compute the tax, generate all the letters and reports needed for printing at the Consolidated Print Site (CPS), create work center files and inventory records. It also stores related history and examination issue data for future population of manually created RGS Case History and Workpapers Reports. Case History and Workpaper Reports are not required on cases worked solely through automated means (for example, no-response cases worked through UCP/ACE processing).

    • In Group B1, the system will only create the work center files and inventory records. These cases need to be manually worked on RGS/CEAS by a tax examiner.

    • In Group B2, the system provides all of the functionality of B0 except CPS mail out. B2 audit reports require a manual review prior to issuing to the taxpayer. After the reports and letters are reviewed, the letters are mailed locally and the cases are placed into group B0 for aging to the next status.

  4. A copy of all letters, reports, revised reports, Form 886-A, case history and workpaper documents are saved to the RGS/CEAS electronic case file. Refer to IRM 4.19.13.18, Case File Assembly, for additional information. If the Form 886-A content is written specific by the examiner, save as a separate PDF document clearly named to identify what letter it was associated with, i.e; 886-A for L-566, YYYYMMDD.

    Note:

    Workpapers on all cases must be appropriately annotated to include all actions taken on the case. See IRM 4.19.13.6, Workpapers for All Cases.

Workpapers for All Cases

  1. UCP/ACE Processing will store history and examination issue date for cases established in Group B0. This data is stored for population into Case History and Workpaper reports that are manually generated in the future. Workpapers are not required on cases worked solely through automated means (for example, no-response cases worked through UCP/ACE). If B0, and the taxpayer does not respond to any correspondence, the RGS/CEAS system will automatically continue to update through the closing process. No manual tax examiner workpaper entries are required unless a response is received from the taxpayer. If B1, workpapers are initiated through RGS/CEAS and the tax examiners must continually update all actions taken.

    Note:

    If the first reply is a signed agreement, in accordance with IRM 4.19.13.9(3), this is not considered correspondence and workpaper creation or further annotation is not required.

  2. On all cases where tax examiners must make entries, include the following information:

    1. Taxpayer's name, address, and SSN

    2. Taxpayer's home, work and cell numbers (if available)

      Note:

      Only phone numbers that have been provided from the taxpayer as a response to the examination should be updated on IDRS/RGS. DO NOT update IDRS/RGS with phone numbers from supporting documentation which contain contact information.

    3. Address Change (if applicable)

    4. If POA is on file for the taxpayer, annotate the POA's name, address, telephone number, and Centralized Authorization File (CAF) number. If no POA is on file, no annotation is required.

    5. Tax year examined

    6. Project Code

    7. Date(s) work paper prepared

    8. Name of examiner

    9. Standard Employee Identifier (SEID). The SEID must precede the examiner's remarks in the "Conclusion" section.

    10. Issue(s) under examination

    11. Correspondence Received Date

    12. List or summary of correspondence received from taxpayer(s) and/or Authorized POA

    13. In cases where the taxpayer entered an incorrect identifying number on their tax return, such as an SSN, EIN, Vehicle Identification Number (VIN), or any other identifying number that is related to the audit, and the taxpayer has provided the correct number, examiners are to enter the corrected information on the workpapers.

    14. Determination and reason for determination based on correspondence and applicable tax law

    15. List additional documentation needed to substantiate the issue(s)

    16. Telephone attempts, See IRM 4.19.13.10.1, Taxpayer Responses - Additional Information Needed for more information

    17. Summary of phone call with taxpayer, including any additional information to be submitted

    18. IDRS/Research conducted

    19. Consideration and applicability of Failure to File, Failure to Pay, and Estimated tax penalties.

    20. Negligence penalty consideration, include a reference to the applicable penalty lead sheet

    21. Substantial Understatement penalty consideration, include a reference to the applicable penalty lead sheet

    22. Decision and reason to impose or not impose the EITC, CTC/ACTC or AOTC two year ban on applicable credit disallowances. .

    23. Consideration of the return-preparer penalty (if applicable). See IRM 4.19.10.6.1, Return Preparer Penalties, for more information

    24. Additional pertinent information, including 3rd party database research

  3. Consistent placement of information in the workpapers is crucial. When phone assistors are talking with a taxpayer, the workpapers should be clearly documented with the information received and any additional information needed. Examples of the how information must be placed on Form 4700, Examination Workpapers, are found in Exhibit 4.19.13-3, W&I Form 4700, Examination Workpapers, and Exhibit 4.19.13-6 , SB/SE Form 4700, Examination Workpapers.

  4. Work paper documentation is extremely important. Good workpaper documentation clearly outlines the actions and decisions of the case. It also will help telephone assistors resolve questions without requesting a call back. Ensure all adjustments are fully explained. Documentation is very important, especially if penalties, interest abatement or burden of proof ever become issues. Workpapers should show that examiners:

    1. Developed case appropriately.

    2. Performed the applicable tests.

    3. Considered fully all factors in making the determinations of an issue, and

    4. Applied tax law correctly based on the facts of the case.

  5. Document any third party contacts. A record of these contacts will be periodically provided to the taxpayer. Provide this information upon request of the taxpayer.

  6. For cases that are not worked in RGS, keep a copy of previous reports that have been modified — clearly marking old reports with an "X" .

  7. For cases worked in RGS, do not print out old reports. There will be no case folder. Annotate the Case History to indicate that a revised report was sent to the taxpayer. Save any revised reports under "Case File Documents." Rename the revised report using the following format: "Form4549MMDDYYYY" . Use the report revision date as the date of the report.

IRC 6404(g) Suspension of Interest and Certain Penalties

  1. IRC 6404(g) suspends interest and certain penalties in cases where the Service fails to provide a notice of liability to the taxpayer within the specified time period.

  2. In the case of an individual who files a timely return, the Service generally has 36 months (18 months for notices prior to November 26, 2007), beginning on the later of:

    1. The date the return is filed; or

    2. The due date of the return without regard to extensions,

    in which to provide notice to the taxpayer specifically stating the taxpayer’s liability and the basis for the liability. See IRM 20.2.7.7, IRC 6404(g) Interest Suspension, and Treas. Reg. §301.6404–4, for detailed rules on IRC 6404(g) and its notice deadlines for the Service.

  3. If the notice is not provided to the taxpayer before the close of the 36 month period (18 months for notices prior to November 26, 2007), interest and certain penalties are suspended for the following period:

    1. Beginning on the day after the close of the 36 month period, (18 months for notices prior to November 26, 2007) and

    2. Ending on the date which is 21 days after the date on which notice is provided to the taxpayer.

  4. The notice must specifically state the liability and the basis for the liability.

  5. The suspension applies to tax years ending after July 22, 1998.

  6. IRM 20.2.7, Abatement and Suspension of Debit Interest, contains information on when and how to input a TC 971 AC 064 on these cases.

Managerial Approval of Penalties/Bans

  1. In accordance with IRC 6751, Procedural Requirements:

    1. Each notice of penalty must include the name of the penalty, the IRC section for the penalty, and a computation of the penalty.

    2. In general, prior to assessment, the initial determination to assess the penalty must be personally approved, in writing, by the immediate supervisor of the individual making the initial determination. For exceptions to this rule, see IRM 4.19.13.6.2 (4), below.

      Note:

      IRC 6751 does not apply to the 2/10 year ban. See IRM 4.19.13.6.2.1, Managerial Approval Bans below.

  2. A manager will indicate their approval by leaving a CEAS non-action note specifically stating which penalty is approved. In a deficiency case, the CEAS non-action note must be input prior to issuing the SNOD that includes the penalty. Penalties proposed for assessment include:

    1. Substantial Understatement Penalty IRC 6662(d) ), See IRC 6662(d)) and/or IRM 20.1.5.8, IRC 6662 (d), Substantial Understatement Penalty.

    2. Negligence Penalty IRC 6662(c). See IRC 6662(c) and/or IRM 20.1.5.7, IRC 6662 (c), Negligence or Disregard of Rules or Regulations.

    3. Fraud Penalty IRC 6663, See IRC 6663 and/or IRM 20.1.5.14 Inconsistent Estate Basis Reporting, IRC 6663, Civil Fraud Penalty, and IRM 4.19.10.4, Fraud Referrals.

      Note:

      In lieu of CEAS non-action note, managerial approval of the fraud penalty can be documented in the paper case administrative file since these are typically worked by Campus Fraud Coordinators.

  3. IRC Section 6702, Penalties for Frivolous Tax Submissions, require written supervisory approval on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

  4. The following penalties are excluded from section 6751(b)’s written managerial approval requirement:

    1. Penalties assessed under IRC Section 6651, Failure to File/Failure to Pay, and IRC Section 6654Failure to Pay Estimated Income Tax, and IRC Section 6655, Failure by a Corporation to Pay Estimated Income Tax, are excluded from this requirement.

    2. Any other penalty automatically calculated through electronic means is also excluded from this requirement.

  5. Correspondence examination cases in which the Substantial Understatement Penalty is systemically asserted will fall within the exception for penalties automatically calculated through electronic means if the taxpayer does not submit any response to the 30-day letter proposing the penalty. However, if the taxpayer submits a response, written or otherwise, that challenges the penalty, or the amount of tax to which the penalty is attributable, then the immediate supervisor of the Service employee considering the response must input the CEAS non-action note specifically approving the penalty prior to the issuance of any SNOD that includes the penalty.

  6. Penalty Lead Sheet Guidance for Managers:

    1. Examiners must annotate the applicable penalty lead sheet to indicate the reasons for the assertion or non-assertion of the penalty, including methods and information utilized to support the conclusion.

    2. Penalties should not be asserted without an explanation. The explanation must agree with the facts and circumstances of the case. Standard statements are not sufficient. An example, the statement, "negligence penalty deemed not to be applicable" is not sufficient, because it doesn't state the reason it is not applicable.

    3. Non-assertion of Substantial Understatement Penalty requires managerial review when there is a substantial understatement of tax. See IRM 20.1.5.8, IRC Section 6662(d), Substantial Understatment, for substantial understatement criteria.

      Note:

      A CEAS non-action note must be input to indicate the manager's concurrence regarding the non-assertion of the penalty.

    4. For more information on penalty lead sheet procedures see IRM 4.19.13.6.3, Penalty Lead Sheet Documentation.

Managerial Approval of Bans
  1. A manager will indicate their approval by leaving a CEAS non-action note specifically stating which ban is approved. Bans proposed for assessment include:

    1. EITC 2 year ban IRC 32(k)(1)(B)(ii).

    2. EITC 10 year ban IRC 32(k)(1)(B)(i.

    3. CTC/ACTC 2 year ban IRC 24(g)(1)(B)(ii)

    4. CTC/ACTC 10 year ban IRC 24(g)(1)(B)(i)

    5. AOTC 2 year ban IRC 25A(i)(7)(A)(ii)(ll)

    6. AOTC 10 year ban IRC 25A(i)(7(A))(ii)(1)

    See IRM 4.19.14.6.1.2, 2/10 Year Ban - Correspondence Guidelines for Examination Techniques (CET), and IRM 20.1.5.2.1, Two and Ten Year Bans on Claiming the Earned Income Tax Credit (EITC).

Penalty Lead Sheet Documentation

  1. To ensure that the IRS applies accuracy related penalties in a consistent and impartial manner, Exam employees must complete penalty lead sheets on all cases worked through deficiency procedures.

  2. The accuracy-related penalties most frequently asserted by examiners are:

    1. IRC 6662(b)(1): Negligence or disregard of rules or regulations, and

    2. IRC 6662(b)(2): Any substantial understatement of income tax.

  3. Lead sheets must be prepared:

    1. With the status 22 report (if the report was prepared manually),

    2. With each reply subsequent to the Status 22 report, and/or

    3. Whenever there is an adjustment to the original report.

  4. The Substantial Understatement Penalty must be considered on all cases when the understatement is greater than $5,000.00 and the substantial understatement lead sheet must be prepared unless listed in paragraph 5 below.

  5. Lead sheets are not required for cases that are:

    1. Worked solely through automated means (for example, no-response cases worked through ACE or Batch Leveraging Process).

    2. No-changed based on examination of the taxpayer's initial response. However, the examiner must note in workpapers that penalties are not applicable due to no-change.

      Note:

      This includes accounts closed due to identity theft determinations.

    3. Closed Agreed, if the taxpayer has not submitted a response previously. If the taxpayer requests an Installment agreement, refer to IRM 4.19.13.10 (3), Taxpayer Replies.

  6. Before completing the lead sheets, examiners must review:

    1. The taxpayer's prior audit history (research CEAS/IDRS for the previous audit history),

    2. The proportion of the questioned items in relation to other items on the return, (e.g., the proportion of the taxpayer's income to the items in question), and

    3. Taxpayer correspondence

  7. Only one accuracy-related penalty may be asserted. When both Substantial Understatement and Negligence penalty applies, assert the penalty with the strongest position and document the alternative position on a separate lead sheet.

  8. On all cases requiring lead sheets, examiners must address the following issues:

    1. Case Facts: Update the lead sheet to reflect the facts that support the assertion/non-assertion of the penalty. The facts must be specific to the circumstances of the case.

    2. Conclusion: The following guidelines should be used:

      Penalty/Lead Sheet
      If Then
      The examiner determines that penalties should not be asserted The conclusion must clearly state why penalties are not appropriate based on the case facts and the applicable penalty standard. General statements, such as "Penalties deemed inapplicable" are not appropriate.
      The examiner determines that penalties should be asserted. The conclusion must clearly state why penalties are appropriate based on the facts and circumstances of the case and the applicable penalty standard.

      Note:

      Lead sheets must clearly explain the examiner's basis for the assertion or non-assertion of accuracy-related penalties.

    3. Taxpayer Position: The taxpayer's position must be addressed if the taxpayer responds to the Exam report and addresses the proposed penalty in a response. If the taxpayer does not address the penalty in a response, the examiner will indicate that as well.

      Note:

      If no penalty is proposed, no entry is required.

Reasonable Cause/Good Faith Criteria
  1. Accuracy related/fraud penalties should not be imposed if the taxpayer demonstrates that he acted with reasonable cause and good faith. (Reference: IRC 6664(c) and Treas. Reg. 1.6664-4).

  2. Reasonable cause and good faith must be considered on a case-by-case basis evaluating all relevant facts and circumstances.

  3. When determining if reasonable cause applies, the examiner must first determine the efforts that the taxpayer made to file a correct return. Circumstances that may indicate reasonable cause and good faith include:

    1. An honest misunderstanding of fact or law that is reasonable based on the facts and circumstances.

    2. An isolated computational error (e.g., reliance of tax preparation software that has been reliable in the past).

    3. Reliance on an information return or on advice of a professional tax preparer if, under the circumstances, such reliance was reasonable.

      Exception:

      Reliance may not be reasonable or in good faith if the taxpayer knew, or reasonably should have known, that the advisor lacked knowledge in the relevant aspects of tax law.

    4. The taxpayer's inability to obtain records necessary to determine the amount of tax due, for reasons beyond the taxpayer's control.

    5. The credibility of the taxpayer's reasons for not determining the correct tax liability.

      Note:

      This list is not all-inclusive. See Treas. Reg. 1.6664-4 for additional guidance.

  4. The taxpayer's compliance history, including prior audits, may also be useful in determining credibility and whether the taxpayer exercised ordinary business care and prudence in preparing the return. Disallowance for the same or similar issues may be considered in determining whether or not the taxpayer exercised ordinary business care. However, the fact that the taxpayer has never been examined does not, by itself, establish that the taxpayer meets reasonable cause/good faith criteria.

  5. All taxpayer requests for penalty abatement must:

    1. Be in writing, and

    2. Include the taxpayer's signature

  6. If the examiner determines that the penalty should not be asserted or should be abated, the examiner must fully document the taxpayer's position and the reason for the non-assertion or abatement on the applicable penalty lead sheet. The reason must be:

    1. Based on the tax law, and

    2. Specific to the facts of the case

    Note:

    Generic statements such as "Non-assertion (or abatement) of penalty per lead" or "Non-assertion (or abatement) of penalty due to reasonable cause" are not appropriate.

Additional Information
  1. For more information on penalties, please refer to:

    • IRM 1.2.20.1.1, Policy Statement 20-1 (Formally P-1-18)

    • IRM 20.1.1.3.1, Unsigned or Oral Requests for Penalty Relief

    • IRM 20.1.5.6.1, Reasonable Cause

    • IRM 20.1.5.6.2, Taxpayers' Effort to Report the Proper Tax Liability

    • IRM 20.1.5.6.3, Experience, Knowledge, Sophistication and Education of Taxpayer

    • IRM 20.1.5.6.4, Reliance on Advice

    • IRM 20.1.5-7, Determining Reasonable Cause and Good Faith

    • IRM 20.1.5.7, IRC 6662(c), Negligence or Disregard of Rules or Regulations

    • IRM 20.1.5.8, IRC 6662(d), Substantial Understatement

    • IRM 4.19.10.6.1, Return Preparer Penalties

    • IRM 4.19.13.3.5, Standard 5 - Penalties Properly Considered

    • IRM 4.19.13.6.2, Managerial Approval of Penalties/Bans

    • Treas. Reg. 1.6662-3(b)(1) and (2) - Definitions of Negligence and Disregard of Rules or Regulations

    • Treas. Reg. 1.6662-4 - Substantial Understatement

Initial Contact

  1. Unless otherwise noted, send an initial contact letter explaining the issue(s) under examination. Take the following steps:

    • If requesting information only, use appropriate initial contact letter as outlined in the program procedures, or utilize the appropriate Letter 566-S.

    • If proposing correction(s) to the account (and directed by another IRM section) asking for agreement and/or verification of the issue(s), use Letter 525 with an audit report, Form 4549, Income Tax Examination Changes).

    Reminder:

    Ensure appropriate POA/Tax Information Authorization (TIA) contacts are made. Do not include inserts of publications, public notices or blank forms with Letter 937, Transmittal Letter For Power of Attorney. See IRM 4.19.13.8, Power of Attorney and Other Third Party Authorizations, for more information.

  2. It is imperative the examiner verify if the case was created on RGS (Report Generation Software). If the case is not on RGS, follow the procedures in IRM 4.10.15, Report Generation Software, to create the case. After the case file is prepared, the examiner must annotate the actions taken, in Case History, (e.g., type of letter sent, date of letter, time spent working case, and the examiner's initials).

  3. Suspend action on the case awaiting taxpayer response. The suspense period begins with the date of the initial contact letter. Refer to IRM 4.19.10.1.6.1, Standard Suspense Periods for Correspondence Examination, for the appropriate suspense period for most letters. See IRM 4.19.16.1.4.1, Claims Contact Procedures, for claims case suspense.

Power of Attorney and Other Third Party Authorizations

  1. Refer to IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File (CAF), for additional information as well as the SERP IRM Supplement, Power of Attorney/Third Party Authorizations Toolkit.

  2. Research the Central Authorization File (CAF) for all cases to determine if there is a valid Power of Attorney (POA) or Tax Information Authorization (TIA) for the tax return under examination.

    Guidelines for Processing Powers of Attorney
    If Then
    The taxpayer sends a properly executed:
    • Form 2848, Power of Attorney and Declaration of Representative, or

    • Form 8821, Tax Information Authorization,

    • Consult IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File (CAF), and the SERP IRM supplement Power of Attorney/Third Party Authorizations Toolkit for processing procedures if the POA/TIA is not on the CAF.

    The document provided by the taxpayer matches an authorization already on the CAF Do not fax it for processing:
    • Retain the authorization for the file if the case is assigned to you and update the 4700 with the information.

    • Input a CEAS action note with the POA's/TIA's name and address if the case is not assigned to you and the information is not on the 4700.

    A general/durable POA is received without a Form 2848,
    • Advise the POA to file a Form 2848, (following the proper routing instructions for the form), so that the authorization will post on a servicewide system. Otherwise, only Exam personnel will have access to the information for the duration of the audit.

    • Retain the authorization for the file and input a CEAS action with the POA's name and address. If the case is not assigned to you, forward the document to the controlling Exam group.

    A POA/TIA with the authority to receive notices is on file for the tax return under examination,
    • Update the RGS Contacts section to reflect the POA's/TIA's name, address and other relevant information shown on CAF, CEAS note, or the document in hand.

      Note:

      This action must be performed in addition to procedures outlined in IRM 4.19.13.8, Power of Attorney and Other Third Party Authorizations. Otherwise, the name(s) and addresses will not automatically flow to the Letter 937 when it is generated.

    • Send the POA/TIA copies of all correspondence sent to the taxpayer using Letter 937 but do not include inserts (e.g., Pub 3498-A, The Examination Process (Audits by Mail), Notice 1155, Disaster Relief from the IRS, blank Form 1040-X, Amended U.S. Individual Income Tax Return, etc.) other than the return envelope with the package for mailing as these inserts are readily available to tax professionals.

    • (Manual cases only) Annotate Form 3198, Special Handling Notice for Examination Case Processing, and check "yes" on the workpapers.

    POA/TIA without notice authority is on file for the return under examination,
    • Update the RGS Contacts section to reflect the POA's/TIA's name, address and other relevant information shown on CAF, CEAS note, or the document in hand.

    • Check the box for Not authorized for notices/communications.

  3. Under the 2014 revision of Form 2848, taxpayers filing joint returns must complete and submit a separate Form 2848 to have their POAs recorded on the CAF. The following table provides procedures for documenting POAs for taxpayers filing joint returns.

    If Then And
    A Form 2848 is submitted for one spouse only Annotate the Batch History section of the workpapers to reflect the POA's name and address

    Note:

    If the Batch History section is not available, annotate in the Administrative section.

    Indicate the name and the SSN of the spouse that the POA represents.
    A separate Form 2848 is submitted for both spouses and both spouses are represented by the same POA Indicate that the POA represents both spouses.  
    A separate Form 2848 is submitted for both spouses and the spouses are represented by different POAs Indicate the name and the SSN of the respective spouse that each POA represents.  
  4. A TIA does not grant a third party appointee the authority to represent a taxpayer before the Service. A POA can have limited powers as well. It is important to review Form 2848, Form 8821, or the coding on the CAF to ensure the third party’s authority is not exceeded. The Third Party Designee (Check Box) authority on Form 1040/Form 1040A/Form 1040EZ, U.S. Individual Income Tax Return, does not apply to Compliance issues, including those under Examination.

  5. Refer to IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication, for information regarding third-party telephone contacts.

IRC 7602(c)(1) Third Party Contacts

  1. When third party contact is applicable, follow the procedures outlined in IRM 4.10.1.6.12, Third Party Contacts — Background. Use Letter 3164 (SC) to notify the taxpayer when initiating a request for contact with a third party.

Taxpayer Replies

  1. Perform first read screening on all taxpayer replies received in Examination within two work days.

  2. An Interim letter will generate on all cases when AIMS is updated to a mail status, 54, 55, 57 or 24 (with a Correspondence Received Date). See IRM 4.19.13.11, Monitoring Overaged Replies, for more information.

  3. A signed agreement (including an agreement with an installment agreement (IA) request enclosed) is not considered correspondence. Use the following guidelines:

    Guidelines for Working Agreements and IA Requests
    If Then
    Taxpayer submits a signed agreement (A signature on the designated line of the report or placed on the report indicates agreement)

    Note:

    If the taxpayer attaches documentation to the signed report, the case should not be worked as a signed agreed. Update the case to reply status as indicated below and work accordingly.

    Update the case to status 51, and follow IRM 4.19.13.27, Campus Exam Closing Actions.

    Reminder:

    On joint cases, both signatures must be secured unless the deficiency is full paid. SNOD procedures must be used for the unagreed spouse if deficiency is not full paid.

    Note:

    See IRM 4.19.13.12, No Response and Unagreed Cases, if a payment is received after a 90-day letter is issued but no signed agreement is received from the taxpayer.

    Taxpayer agrees with deficiency and requests an installment agreement, checks that he/she can pay within 120 days or states that he/she is unable to pay the proposed tax. Document the taxpayer's request for an installment agreement, 120 day payment extension or the taxpayer's statement that he/she is unable to pay the tax. Forward the installment agreement, or other document requesting an installment agreement and a copy of the proposed examination report Form 4549, Income Tax Examination Changes / Form 4549-EZ, Income Tax Examination Changes, to the co-located Compliance Service Collection Operation (CSCO).
  4. All replies should be worked consistently using the following guidelines:

    Guidelines for Working Taxpayer Replies
    If Then
    Taxpayer asks a question or the information requested is not case related Make a photocopy, mark area with the question or request and route to adjustment correspondence.
    The case should be referred to the Taxpayer Advocate Service (TAS) See IRM 4.19.13.24, Taxpayer Advocate Service (TAS) Procedures.
    A Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), is received from the taxpayer Expedite the form to the TAS Office in the Campus.
    A Form 14027-B, Identity Theft Case Referral, is received Route the form to the Exam ID Theft Liaison for prioritization and assignment. See IRM 4.19.13.26, Campus Exam Identity Theft.
    A Form 14039, Identity Theft Affidavit, is received or attached with other documents from the taxpayer Associate with case file and assign to tax examiner for priority ID theft processing. See IRM 4.19.13.26, Campus Exam Identity Theft.
    Reply relates to case Associate replies with case file within five business days of receipt in the Operation and update AIMS to correct Status Code, 54, 55, or 57, or add the Correspondence Received Date to Status 24 cases. Use the appropriate forms and follow special handling procedures.
    Reply is 30 days old or older Acknowledgment letter is sent advising taxpayer reply received and answer will be issued within 30 days (every effort must be made to respond within 30 days).
    Reply needs technical assistance or evaluation of records sent by taxpayer Assign to tax examiner on first in first out basis with frozen refunds taking priority.
    Taxpayer requests correction with no remittance Issue Letter 692 and revised report, if necessary.
    Remittance is attached to reply and was not deposited by Receipt and Control Branch with a TC 640 Follow instructions in the IRM 3.10.5, Batch/Block Tracking System (BBTS), and IRM 4.4.24, Payments and Remittances, to process remittance.
    Request is for additional explanation Forward to tax examiner to prepare correspondence to taxpayer (attempt to reach taxpayer by telephone if the number has been provided or can be found on ENMOD).
    Reply contains explanation of items questioned Analyze information provided and process accordingly.
    Documents received from the taxpayer are original documents Photocopy the documents for the case file and return the original documents to the taxpayer.
    Taxpayer states they were audited previously Refer to IRM 4.19.13.9.8, Repetitive Audits

    Reminder:

    If a taxpayer replies with insufficient documentation after the IRS sent an audit report, the examiner should attempt to contact the taxpayer by telephone. When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information. If additional guidance is needed, refer to IRM 4.19.13.10.1, Taxpayer Responses - Additional Information Needed.

    Note:

    The examiner should advise the taxpayer of the deadline to submit a request for an IRS appeals hearing in all contacts to ensure the taxpayer's right to an appeals hearing is protected.

  5. SB/SE and W&I Campus examiners should use the appropriate codes on Form 5344 when processing installment agreements. Use “C” when an installment agreement has been received and needs to be forwarded to Collections. Use “N” if no installment agreement is submitted.

Taxpayer Responses — Additional Information Needed

  1. Please see the "If And Then" Chart below on how to work the taxpayer responses. See IRM 4.19.10.1.6.1, Standard Suspense Periods for Correspondence Examination, for suspension periods applicable to the various statuses and time frames for issuing letters/notices.

  2. Attempt to contact the taxpayer or authorized power of attorney by telephone when the information provided is insufficient, and an audit report has been sent. Explain why the information sent is not sufficient and what is still needed. Document phone call in workpapers. The documentation should include the date, time and outcome of the phone call. The outcome would state whether or not the attempt to contact the taxpayer was successful/unsuccessful. If the attempt was successful, a brief synopsis of the phone call would be sufficient. If the attempt was unsuccessful, it should be recorded as well. Refer to note at end of IRM 4.19.13.10, Taxpayer Replies, for information concerning taxpayer appeals hearing rights.

    Note:

    A copy of any letter mailed to the taxpayer should also be sent to the taxpayer's authorized POA or representative on file.

    Guidelines for Working Taxpayer Responses When Additional Information is Needed
    If And Then
    Taxpayer or Power of Attorney contacts us by phone or replies to any initial contact letter in which the audit report was not issued with the letter Additional information is needed or agrees to our proposed changes
    • Taxpayer agrees to all issues by telephone or correspondence

    • Send Letter 525 with a Form 4549 / Form 4549-EZ, Income Tax Examination Changes.

    • State the "Correspondence Received Date" in the body of the Form 886-A, while acknowledging taxpayer reply. Explain to the taxpayer why the information is insufficient and what information is still needed.

    • Explain to the taxpayer what is needed to close out the examination as agreed and that the taxpayer needs to return the audit report with the appropriate signatures.

    • Update case to Status 22.

    Taxpayer replies to a letter where an audit report was issued

    Note:

    An amended return is correspondence and will be considered when revising the report.

    Additional information is needed and the report is revised
    • Send Letter 692 with revised report, Form 4549 /Form 4549-EZ.

    • Update case to Status 23.

    • Tell taxpayer why the information received is insufficient and what information is still needed. Leave the amended return in the casefile and notate on the workpapers what was allowed or disallowed.

    Taxpayer replies to a letter where an audit report was issued Additional information is needed and the report is not revised
    • Telephone attempts are unsuccessful

    • Send Letter 692 with a copy of the original report, Form 4549/ Form 4549-EZ.

    • Explain to the taxpayer why the information received is insufficient and what information is still needed.

    • Update case to Status 25.

    You successfully reach the taxpayer by telephone and
    • You discuss what items are still needed, and

    • State why the information received was not sufficient

    • Update the case to Status 25.

    • Negotiate with the taxpayer to agree on a mutually acceptable date by which the taxpayer will send the additional documentation.

    • Document the conversation with the taxpayer in the workpapers.

    Note:

    Do not send Letter 692 or a copy of the report.

    Taxpayer replies to the Letter 692 with inadequate documentation
    • Telephone attempts are unsuccessful or

    • Telephone attempts are successful and the information received is insufficient

    • Send the case for a SNOD (90-day) letter. Be sure to include the following verbiage on the Form 886-A (which will be included with the Notice of Deficiency letter):
      "Thank you for your information received on (Correspondence Received Date). After a review of your documents, we are unable to change our prior determination." Explain the reason why you could not change the determination.

    • Update status per local guidelines.

    Taxpayer replies to the Letter 692 The response allows the report to be adjusted Issue a new Letter 692 with a revised report.

    Note:

    If less than 45 days remain on the ASED, do not issue a new Letter 692. Issue a SNOD (90-day) letter. On the Form 886-A, inform the taxpayer of the items adjusted and the reasons that you could not accept the return as filed.

    Taxpayer replies after 90-day letter Additional information is needed and attempts to reach the taxpayer by telephone are unsuccessful
    • Send Letter 555.

    • Tell taxpayer specifically why the report is unchanged (e.g., The school records you sent are not for the year in question, i.e., 2003).

    • Include this paragraph with Letter 555 and remind taxpayer of the following if you talk to him/her on the telephone:
      "Your time to petition the United States Tax Court will end on _______. (Insert or tell taxpayer last date to petition .) However you may continue to work with us to resolve your tax matter, but we cannot extend your time to petition the United States Tax Court beyond _________. (Insert or tell taxpayer last date to petition.)"

    Taxpayer replies after 90-day letter and 90-day period to petition has elapsed Additional information is needed and attempts to reach the taxpayer by telephone are unsuccessful
    • Send Letter 555.

    • Tell taxpayer specifically why the report is unchanged (e.g., The school records you sent are not for the year in question, i.e., 2003).

    • Remind taxpayer of the following if you talk to him/her on the telephone: "Your time to petition the United States Tax Court expired on ________________. (Insert or tell taxpayer last date to petition.)." However, if new information is submitted, we will re-evaluate our determination accordingly.

    Note:

    If the correspondence received date is prior to letter date shown on the Letter 525, it will be considered a reply to a letter without an audit report.

Evaluating Taxpayer Responses

  1. Evaluate the taxpayer’s written correspondence and take the next action as soon as possible. If unable to do this in 30 days, initiate interim letter.

  2. Judgment must be used based on the facts and circumstances in each case to make a proper substantially correct determination. Workpapers must contain all determinations, facts and circumstances, pertaining to the case obtained either by telephone or written correspondence. Caution must be used when leaving messages on taxpayer answering machines or using cell phones. See IRM 11.3.2.7.1, Leaving Information on Answering Machines/Voice Mail, and IRM 11.3.2.7.2, Use of Cell Phones and Cordless Devices, for more detailed information.

  3. If submitted documentation is not sufficient, an audit report has been sent and a phone number is available, call the taxpayer and clearly explain what documentation they need to submit. However, if the attempt to reach the taxpayer by telephone is unsuccessful, send the request for additional information letter.

  4. All telephone contacts must be recorded in the case workpapers when the case is currently assigned on CEAS to the examiner receiving or making the call. If the case is not assigned to the phone assistor, they will record the call in CEAS notes. This allows all employees access to the case information if the taxpayer writes or calls back. See IRM 4.19.19.3.3, CEAS Notes.

  5. Telephone contacts should be made at appropriate times. If a case is being worked before 8:00 a.m. or after 9:00 p.m., local time at the taxpayer’s location, the case should be left for a daytime telephone call.

    Note:

    Update ENMOD to reflect the changes in the taxpayer's phone number. Phone numbers that have been provided from the taxpayer as a response to the examination should be updated in IDRS/RGS. DO NOT update IDRS/RGS with phone numbers from supporting documentation which contain contact information.

  6. See IRM 4.19.13.24, Taxpayer Advocate Service (TAS) Procedures, for additional information.

  7. If a Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), is received from the taxpayer, expedite the form to the TAS Office in the Campus.

Fax Signatures

  1. The Tax Administration Council (TAC) approved the expanded use of faxes for receiving information and documents from taxpayers and practitioners. The changes are aimed at reducing taxpayer/practitioner burden as well as reducing the time it takes to resolve taxpayer cases and inquiries. The receipt of faxes should not require any significant changes to how the IRS handles open cases with taxpayers. It was intended as another means to receive case information.

  2. These general guidelines are applicable to all divisions and cover operations related to income tax, employment tax, excise tax, estate tax, gift tax, and generation skipping tax, as well as tax exempt and employee plans determinations.

  3. Filing of original tax returns via fax will be allowed only as part of a return perfection process (e.g., securing missing schedule or missing signature) initiated by the IRS or in the post-filing/non-filing activities.

  4. This allowance applies to inquiries and interactions conducted by Field Assistance, Accounts Management, Compliance Services, Field Examination, Field Collection, Determinations Units, Appeals, and the Taxpayer Advocate Service. Documentation, forms, letters, and returns can be received via fax in these circumstances even if a taxpayer signature is required since Chief Counsel has advised that in circumstances where contact with the taxpayer has been made and documented, faxed signatures are legally sufficient.

  5. The IRS will not acknowledge faxes received from taxpayers in the course of tax administration activities by a return fax. Exceptions can be made in unusual circumstances as determined by IRS management.

  6. Submission of documentation, forms, letters, and returns related to post filing/ non-filing inquiries and interactions can be allowed via fax based on taxpayer or IRS request unless there is a specific prohibition. Examples of documents that can be provided by fax in routine operations include:

    • Form 2848 , Power of Attorney and Declaration of Representative,

    • Form 8821, Tax Information Authorization

    • Form 2553, Election by a Small Business Corporation

    • Appeals Conference Requests

    • Responses/documentation needed to resolve filing or post-filing questions or correspondence.

Specific Guidance on Use of Faxes in Tax Administration Processes

  1. The following documents/forms/letters can be accepted by fax if contact has been made with the taxpayer by phone or in-person, if the taxpayer history file is documented with the date of the contact, and if notation is made that the taxpayer wishes to send the documentation/form/letter by fax:

    • Form 8857, Request for Innocent Spouse Relief,

    • Form 3911, Taxpayer Statement Regarding Refund,

    • Form 433-D, Installment Agreement,

    • Letter to designate a payment

    • Letter to request non-assertion of penalty

    • Letter to provide reasonable cause statement

    • Form 941-X, Adjusted Employer’s QUARTERLY Federal Tax Return or Claim for Refund,

    • Form 944-X, Adjusted Employer’s ANNUAL Federal Tax Return or Claim for Refund,

    • Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund,

    • Form CT-1X, Adjusted Employer’s Annual Railroad Retirement Tax Return or Claim for Refund,

    • Form 2553, Election by a Small Business Corporation,

  2. If taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax, the IRS can accept by fax:

    1. consents to assess additional tax ((Form 4549, Income Tax Examination ChangesForm 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, and others) involving any amount of tax, and

    2. taxpayer closing agreements involving any amount of tax, and

    3. consents to extend the state of limitations for assessing tax Form 872, Consent to Extend the Time to Assess Tax, Form SS-10, Consent to Extend the Time to Assess Employment Taxes, and other consent forms.

    Note:

    Faxed Agreements require an entry on Form 5344, Examination Closing Record, Page 2, Item 416.

  3. Employee Plan and Exempt Organization determination letter applications will not be accepted via fax.

  4. Determination Letter Requests related to income tax, gift tax, estate tax, generation-skipping transfer tax, employment tax and excise tax matters will not be accepted via fax.

Correspondence or Return Received on Closed Examinations Not Meeting Audit Reconsideration Criteria

  1. Correspondence or returns received from taxpayers after the case is closed that does not meet audit reconsideration (see IRM 4.13.1.4, Criteria for Reconsideration, for replies that do meet audit reconsideration criteria) must be evaluated within 5 business days of receipt in the Operation. This correspondence consists of replies on:

    • Closed case mail/return, which is date stamped prior to the case being closed or the mail was received and stamped within seven calendar days of the Exam closing

    • Closed cases which show the assessment as full paid

    • A closed claim examination including responses to Letter 105C / Letter 106C.

    Note:

    These procedures are for working correspondence. Processable claims will continue to be forwarded to Accounts Management for processing per IRM 21.5.3.4, General Claims Procedures.

  2. Because the taxpayer is still waiting for a response, the reply must be evaluated and a determination made within 14 calendar days.

  3. If the response cannot be worked within 14 calendar days, take the following actions:

    • Ensure that the response is acknowledged as soon as possible. (Every attempt must be made to resolve the taxpayer's issue within 30 days from the receipt of the correspondence.)

    • Control Base on IDRS using Category Code "MISC" .

    • Input a STAUP for six cycles to delay the notices.

  4. The following table provides procedures for replies that have been scanned through the Correspondence Imaging System (CIS).

    If Then
    The receiving campus is knowledgeable in working the applicable program The reply will be retained and worked in the receiving campus.
    The receiving campus is not knowledgeable in working the program The reply will be forwarded to the originating campus.
Replies Received by IRS Prior to Case Closure
  1. Use the following procedures for processing replies received by IRS prior to case closure or received and stamped within seven days of the Exam closing:

    Procedures for Replies Received Prior to Closing Case
    If Then
    Taxpayer submitted documents already considered
    1. Send Letter 4306 using Check Box 2 to inform taxpayer the information provided does not change the previous determination. File documents and copy of Letter 4306 with TC 300 DLN.

    2. Input CEAS non-action note indicating records were previously considered and the Letter 4306 was sent to the taxpayer.

    The reply is an agreement
    1. Forward signed report to be associated with TC 300 DLN.

    2. Input CEAS non-action note that agreement was received after case was closed.

    Taxpayer submits new documents that were not previously considered during the examination but do not change our determination
    1. Input TC 29X 00 and attach documents to be filed.

    2. Send Letter 4306 disallowing the additional information. Explain in open paragraph that new information received relating to the examination did not change our determination and their case is now closed.

    3. Input CEAS non-action note documenting actions, documents received and decision.

    Taxpayer submits new information that results in an abatement of the TC 300.
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response, documents received and allowed issues.

    2. Send taxpayer No Change Letter 3581.

    3. Input TC 29X to abate the TC 300 assessment. Use appropriate IMF Reason Codes for issues adjusted.

    4. Update CEAS Status to 7020 and re-archive when closing case.

    Note:

    Recon Reason Codes should not be selected for closed mail processing.

    Taxpayer submits documents that partially change the determination of the previous assessment
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response and allowed issues. Generate a report for the partial adjustment as "No Signature Necessary" . Forward to taxpayer using Letter 4306, Check Box 1.

    2. Input TC 290 showing change and documents to be filed.

    3. Update CEAS Status to 7021 and re-archive when closing case.

    Note:

    Recon Reason Codes must not be selected for closed mail processing.

Replies Received on Full Paid Examination Assessments
  1. Use the following procedures for processing replies received on full paid examination assessments:

    Procedures for Replies on Full-paid Exam Assessments
    If Then
    Taxpayer submitted documents already considered
    1. Send Letter 4306 using Check Box 2 to inform taxpayer the information provided does not change the previous determination. File documents and Letter 4306 with TC 300 DLN.

    2. Input CEAS non-action note indicating records were previously considered and the Letter 4306 was sent to the taxpayer.

    The reply is an agreement
    1. Forward signed report to be associated with TC 300 DLN.

    2. Input CEAS non-action note that agreement was received after case was closed.

    Taxpayer submits new documents that were not previously considered during the examination but do not change our determination
    1. Input TC 290 0.00 and attach documents to be filed.

    2. Send Letter 105C disallowing the additional information. Explain in open paragraph that new information received relating to the examination did not change our determination and the case is now closed.

    3. Input CEAS non-action note documenting actions, documents received and decision.

    Taxpayer submits new information that results in an abatement of the TC 300
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response, documents received and allowed issues.

    2. Input TC 29X to abate the TC 300 assessment. Use appropriate IMF Reason Codes for issues adjusted. The TC 29X will generate a MF notice to the taxpayer with explanations based on the IMF Reason Codes selected.

    3. Update CEAS Status to 7024 and re-archive when closing case.

    Taxpayer submits documents that partially change the determination of the previous assessment
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response and allowed issues. Generate a report for the partial adjustment as "No Signature Necessary" . Forward to taxpayer using Letter 4306, Check Box 1. Update CEAS Status to 7025.

    2. Input TC 29X reflecting the change and associate documents.

    3. Obtain current research via CC SUMRY. Input Hold Code 2 if the module reflects a pending balance due.

    4. Send Letter 106C.

    Note:

    Recon Reason Codes must not be selected for closed mail processing.

Replies Received on Closed Claims, Including to Letter 105C / Letter 106C
  1. Replies received on closed claim examinations do not meet Audit Reconsideration criteria. These replies must also be evaluated using the following procedures:

    Procedures for Replies on Closed Claims
    If Then
    Taxpayer submits new documentation on a previously disallowed claim that changes our determination to allow the claim in full
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response and allowed issues. Update CEAS Status 7031.

    2. Input TC 29X for claim amount.

    3. Input IMF Reason Codes for the allowed claim issue(s). The TC 29X will generate a MF notice with explanations based on the IMF Reason Codes selected.

    Taxpayer submits new documentation on a previously disallowed claim that supports a partial allowance of the claim
    1. Pull original return back from CEAS archive. Answer "No" to question, "Is this an Audit Recon?" so case will be set up in Status 7000. Notate workpapers of response and allowed issues. Generate a report for the partial adjustment as "No Signature Necessary" . Forward to taxpayer using Letter 4306 Check Box 1.

    2. Input TC 29X showing change and documents to be filed.

    3. Update CEAS Status to 7025 and re-archive when closing case.

    Taxpayer submits documentation that doesn’t change the determination after a Letter 105C/Letter 106C has been issued
    1. Send Letter 4306 using Check Box 3.

    2. Input CEAS non-action note documenting the actions, documents received and decision.

    Note:

    Recon Reason Codes must not be selected for closed claim processing.

Additional Information
  1. CEAS Status Code definitions used for the above procedures are as follow:

    CEAS Status Code Definitions
    Status Code Definition
    Status 7000 Pulled back from Archive
    Status 7020 Closed case mail processed with a full TC 300 Abatement
    Status 7021 Closed case mail processed with partial TC 300 Abatement
    Status 7024 Closed with a full TC 300 Abatement
    Status 7025 Closed with a partial TC 300 Abatement
    Status 7031 Closed claims (including response to 105C / 106C letters).
  2. For W&I Campuses, charge time for EITC to 710/720 – 93600, and for Discretionary to 710/720 – 93400. For Small Business/Self-Employed (SB/SE) Campuses, charge time for EITC to 91695, for Discretionary to 91385, and for Substitute For Return to 91955.

  3. Use WP&C to drop volumes for receipts and closures per OFP Code.

Taxpayer Requests Additional Time to Respond

  1. Letter 686-B, Response to Taxpayer Request for Extension of Time to Reply During Audit, has been created (for SB/SE Campuses only), to respond to the taxpayer when they request an extension of time during the audit process. This letter must be sent within 1 business day of an examiner identifying the document as a request to extend the response timeframe; the letter must state request for extension. Letter 686-B must indicate whether the extension has been granted or denied. SB/SE phone scripts have been updated to give the taxpayer the option of mailing or faxing their extension request.

    Note:

    Letter 686-B is not currently in RGS. This will need to be saved to the TE’s desktop. Mailed or faxed extension requests will be handled as a reply and worked accordingly and the RGS casefile will be updated (i.e., Workpapers and Letters saved to casefile documents)

  2. If a taxpayer requests additional time to submit requested documentation, the taxpayer will be automatically granted an additional 30 days on the first request (from the original response due date shown on Letter 566 or 525, except for requests made after the 90 Day letter).

    Exception:

    If there are 180 days or less before the Statute of Limitations expires on the case, no extension will be granted unless Taxpayer agrees to extend the Statute of Limitations and facts in case warrant an extension.

    See IRM 25.6.22, Extension of Assessment Statute of Limitations By Consent and IRM 4.19.13.15.2, Transfer to Appeals. See IRM 4.19.17.5.1, Correspondence and Telephone Inquiries, for extension requests involving Non-Filer cases.

  3. Letter 686-B will be sent each time the taxpayer requests an extension regardless of whether the extension request was granted or denied Small Business/Self Employed (SB/SE examiners only). When an extension is granted, the Aging Reason Code 008 must be updated. Workpapers (Form 4700) must also be updated for ALL extension requests (written, faxed or verbally made).

  4. If subsequent time extensions are requested, judgment should be used based on the facts and circumstances for the individual case.

    Note:

    Cases where the SNOD has been issued, the taxpayer must be informed that the extension is to submit additional documentation and will not extend the time to petition Tax Court.

  5. If the request is made via a telephone call, an Action Note will be input to reflect that an extension to respond has been requested: The campus where the audit is being worked will address the request (e.g. approval/denial) and send Letter 686-B within 3 business days of the Action Note. For further information, refer to IRM 4.19.19.4.1, CEAS Action Note .

    Note:

    When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information.

  6. Utilizing the Query Screen in RGS, the appropriate amount of extension time will be added to the end of the response due date. This date will be input on Letter 686-B under “Response Due Date”.

    Note:

    The Response Due Date will be different than the internal Suspense Date. Remember the taxpayer is asking for time to be added on to the Response Date shown on the letter they received. When we grant them 30 days, we are granting them 30 additional days to that response date.

  7. If the suspense period has expired but the case has not yet been processed to the next status, back the case down if possible (i.e., if the next letter has not been issued or triggered to CPS), when granting the extension. If unable to back down, deny extension request. Send letter 686-B either way.

  8. If it is not possible to back the case down (i.e., next letter has already been triggered to CPS) the taxpayer must be contacted to inform them that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request.

  9. The Letter 686-B will include the name of the tax examiner completing the letter, under person to contact, not just the words Tax Examiner. The letter will have the signature of the Correspondence Examination Technician (CET) where the letter is mailed from (which should coincide with the Campus where the audit originated from).

    Note:

    The CET will input their Name and "Correspondence Examination Technician" , as title at bottom of the letter.

Shared Responsibility Payment (SRP)

  1. The Individual Shared Responsibility Payment (SRP) starts in TY 2014. This provision requires each individual to have minimum essential health coverage for each month, qualify for an exemption, or make a Shared Responsibility Payment when filing his or her federal income tax return. This provision applies to individuals of all ages, including children. An adult or married couple claiming a child or another individual as a dependent for federal income tax purposes is responsible for either providing coverage, requesting an exemption from the requirement to provide coverage, or making the shared responsibility payment if the dependent does not have coverage or does not qualify for an exemption.

    Note:

    If the taxpayer self-reports or makes an SRP, it will post to MFT 35. When the TC 150 posts to the MFT 30, a TC 971 AC 530 will generate in the same cycle. The following cycle, the MFT 35 will be established. Posted to MFT 35 will be; 1) A TC 290 0.00 with an "88888" contained within the DLN, and 2) A TC 240, with a CRN of 692, with the amount of the SRP included on the 1040 Line 61.

  2. CRN 869 will post to Form 5344 with one of the following values:

    • 1 - Taxpayer checked the box on their return indicating they had full year health coverage

    • 0 - Taxpayer did not check the box. Taxpayer may or may not have made a Shared Responsibility Payment (SRP)

  3. The CRN 869 must be removed from Form 5344 when closing a case Disposal Code (DC) 02 (No Change). Do not remove the CRN 869 or any other reference number when closing a case with any DC other than 02.

  4. Campus Exam will be required to adjust a self-reported SRP when the examination results in a change to income, exemptions, or filing status. This adjustment will be calculated and input after the Exam assessment has closed on AIMS. The taxpayer will receive separate notification of these changes through a Notice and Demand since the Individual Shared Responsibility Payment cannot be included with the SNOD.

    Note:

    When adjusting the SRP on accounts where the taxpayers have made a separate to joint election the procedures in IRM 21.6.1.5.3.1, Separate to Joint and Both Taxpayers Previously Filed, will be followed. See especially paragraph 2, subparagraph b.

  5. A monthly EOAD report will identify closed cases that might require an adjustment to the taxpayer’s self-reported SRP. Designated units at each campus will be responsible for recalculating the SRP when there are changes to income, exemptions, or filing status and for inputting the change to MFT 35 as needed.

  6. If the taxpayer self-reported an SRP on their return, their Initial Contact Letter and subsequent Exam reports will include a request for their SRP worksheet. When reviewing replies for TY 2014 and subsequent year returns, examiners will need to screen the reply for the presence of the taxpayer’s SRP worksheet. If the taxpayer submits a copy of their worksheet:

    • Notate the receipt of the SRP in the workpapers

    • Make a copy of the worksheet and route it to the team responsible for SRP adjustments

    • Do not make an SRP adjustment on an open exam. Continue working the other exam issues without regard to the SRP.

  7. If the taxpayer requests a change to their SRP on an amended return being processed in Exam and the CRN 869 indicator on Form 5344 is a 1, route a copy of the taxpayer’s SRP worksheet (if provided) to the team responsible for SRP adjustments along with a note saying that the taxpayer is requesting a change to the SRP and no SRP was present on the original return. If the CRN 869 indicator on Form 5344 is a 0, process the taxpayer’s request for a change to the SRP as in item 4 above.

Repetitive Audits

  1. Repetitive audits procedures apply to certain individual tax returns (See Exception list below), when the following criteria are met:

    1. An example of one or both of the two preceding tax years resulted in a no change, and

    2. The issues in either of the two preceding tax years are the same as the issues selected for examination in the current year.

      Note:

      Prior year surveys do not meet the criteria for repetitive audit procedures.

    Exception:

    Repetitive Audit procedures do not apply to Alimony, Tips, QRP, RPP, Non-Filers, Schedule C/F audits and Recertification cases.

  2. If there was a prior audit, examiners should thoroughly research the CEAS database to secure prior audit information,. In order for repetitive audit criteria to apply, the prior exam must have been conducted on the same issues and when applicable, the same dependent/relationship resulting in a no change.

  3. If the review indicated the taxpayer was audited in one or both of the two preceding years, determine if the taxpayer meets the criteria in IRM 4.19.13.9.8(1) and proceed as follows:

    1. If the taxpayer meets the criteria, examiners should survey the return. Examiners should follow the survey after assignment procedures in IRM 4.25.10.4.1, Case Closing Procedures for Survey After Assignment. Leave a CEAS note.

    2. If the taxpayer does not meet the criteria, examiners must proceed with the examination.

Monitoring Overaged Replies

  1. Monitoring procedures are used to ensure a response is initiated to taxpayers within 30 calendar days of the IRS received date of the correspondence.

  2. When any correspondence is received, the earliest IRS Correspondence Received Date (CRD) should be entered on AIMS within five (5) workdays from the date it is received in the Exam Operation.

  3. Make every effort to ensure all case related correspondence is considered prior to issuing a SNOD to a taxpayer.

  4. The Letter 3500, Interim Letter, notifies the taxpayer of the IRS’ receipt of their mail and advises them that IRS will respond within 45 days of the CRD. This allows the Campus a total of 75 days (30 + 45 = 75) to respond to the taxpayer.

    Note:

    IRM 4.119.1.3.1,Action 61/Policy Statement P-21- Guidelines, requires correspondence to be addressed within 30 calendar days of receipt

    .

  5. There may be times when default response timeframe of 75 days is not achievable. More time may be needed because of the volume of overaged inventory. See IRM 4.19.13.11.1, When Additional Time to Reply is Needed, for procedures on extending beyond the 75 day timeframe.

  6. The If and Then chart below is the current Standard Process using the 75-day response timeframe.

    Standard Process for Monitoring Overage Replies
    If Then
    The current date is less than 65 days from the CRD Update AIMS to Status Code 54.
    A reply is sent to the taxpayer within 22 days of the CRD No interim letter will be sent.
    No reply is sent to taxpayer, AIMS shows Status Code 54, and the CRD is at least 23 days from the current date but less than 65 days Acknowledgment Letter 3500 will automatically generate to the taxpayer and give a reply date of 75 days from the CRD.
    No reply is sent to taxpayer, AIMS previously updated to Status Code 54, and the CRD is at least 65 days from the current date but less than 115 days AIMS will automatically update to Status Code 55 and Interim Letter 3501 will generate and give a reply date of 107 days from the CRD.
    No reply is sent to taxpayer, AIMS previously updated to Status Code 55, and the CRD is more than 107 days from the current date but less than 120 days AIMS will automatically update to Status Code 57 and a second Interim Letter 3501 will generate and give a reply date of 150 days from the CRD.
    The CRD is being entered for the first time and the current date is more than 65 days from the CRD but less than 107 days Update AIMS to Status Code 55. Interim Letter 3500 will generate to the taxpayer and give a reply date of 107 days from the CRD.
    The CRD is being entered for the first time and the current date is more than 107 days from the CRD but less than 120 days Update AIMS to Status Code 57. Interim Letter 3500 will generate to the taxpayer and give a reply date of 150 days from the CRD.
    The CRD is being entered for the first time and the current date is more than 120 days from the CRD Update AIMS to Status Code 57. No Interim letter will generate. Take immediate action to contact taxpayer.
    Inventories contain mail that has been updated to AIMS Status Code 55 or higher Operations manager should use the weekly ARP2540 Report to identify cases.
  7. Cases in AIMS Status 24 with correspondence received must be worked as a priority, above other replies. Use weekly ARP2540 Report to identify these cases.

  8. The following actions apply when correspondence is received and AIMS Status Code is 24 (SNOD):

    Actions for Monitoring Overage Replies with AIMS Status Code 24
    If Then
    Correspondence is received within 50 days of the Status 24 date and the current date is less than 30 days from the CRD Input CRD on AIMS. Interim Letter 3500 will generate giving a reply date of 30 days from the CRD . Evaluate the case and mail response as early as possible. No additional interim letter will generate.
    Correspondence is received within 50 days of the Status 24 date and the current date is more than 30 days from the CRD but less than 51 days Input CRD on AIMS. Interim Letter 3501 will generate. Evaluate the case and mail response as early as possible. No additional interim letter will generate.
    Correspondence is received more than 50 days after the Status 24 date or the current date is more than 50 days from the CRD Input CRD on AIMS. No Interim letter will generate. Take immediate action to contact taxpayer, and consider the reply.
    Case is in AIMS Status 24 with a CRD Use the weekly ARP2540 Report to identify cases. Operations manager should use Table SC 35 to monitor inventories and ensure cases are worked promptly.

Letter 3500, Interim Letter, When Additional Time to Reply is Needed

  1. W&I HQ and SB/SE PPA/CEDWPA will determine the number of additional days that will be used in the interim letter advising the taxpayer when to expect a response from Exam during peak periods based on mail volumes.

  2. W&I HQ will make the determination using the Average Number of Days to Work Correspondence Report, PMAQ Exam Roll Schedule, and Mail Moved Weekly Report.

  3. SB/SE PPA/CEDWPA will make the determination using the Average Days Measures Report, Correspondence Exam Rolls Report, and Weekly Mail Monitoring Report.

    Example:

    W&I or SB/SE PPA/CEDWPA concludes a Campus needs an additional 30 days to work the taxpayer’s correspondence before a second interim letter (3501) is generated. The taxpayer will now be given a 105 day (75 + 30 ) timeframe of when to expect a response from us.

  4. W&I HQ and SB/SE PPA/CEDWPA will be responsible for submitting the change to the variable amount of days for the sites. HQ will:

    • Submit a KISAM ticket to request any change in date

    • Communicate the change in date in number of days to the PPA Manager/Chief/Operations Manager, via e-mail.

    • Maintain a spreadsheet of all timeframe changes.

      Note:

      The ticket must be submitted by COB Tuesday, of any given week, to ensure IT makes the change in time for the weekend file run. The verbiage required on the ticket is: "Please assign to the EOPS-ECC-MOB-IDSE group to update the AM21 card parm. File for (insert Campus) to (insert the new number of Days" .

      Example:

      "File for Atlanta to 140 days. File for Fresno to 130 days. File for Andover to 130, etc." .

      Note:

      The ticket can contain changes for one site or multiple sites.

No Response and Unagreed Cases

  1. Taxpayers do not always answer or agree to the initial contact letters, letters with reports of examination, and/or statutory notices. If the taxpayer does not answer by telephone or in writing:

    1. Follow up with a telephone contact as applicable on unagreed cases. See IRM 4.19.13.9, Taxpayer Replies, for more information.

    2. Use clerical resources whenever possible to prepare letters and reports.

    3. Issue a letter, appeal rights, and report of examination (see letters section for the proper letter for program).

    Actions to take on No Response and Unagreed Cases
    If Then
    Contact was Initial Contact Letter (ICL) and no response was received After the suspense period has expired, issue the 30-Day letter with proposed examination report, including appropriate enclosures based on examination issues for the case. Include:
    • Letter 525 (original and copy)

    • Proposed examination report

    • Form 886-A for explanations on disallowed items

    • Form 886-H for required documentation to submit

    • Publication 3498-A, The Examination Process

    • For EITC programs, Publication 4134, Low Income Taxpayer Clinic List

    Contact was letter 525 (30 Day) with proposed report and no response was received After the suspense period has expired, issue 90 Day, Notice of Deficiency, Letter 3219. Include:
    • Letter 3219 (original and copy)

    • Proposed examination report

    • Form 886-A with standard (non-soliciting) explanations on disallowed items

    • Publication 3498-A, The Examination Process

    • For EITC programs: Publication 4134, Low Income Taxpayer Clinic List

    Taxpayer requests an interview or Appeals conference See IRM 4.19.13.15.2, Transfer to Appeals, for more information.
    Notice of Deficiency has been issued and taxpayer remits full payment but does not sign the agreement/waiver In accordance with Rev. Proc. 2005–18, cases where a payment was received after a Notice of Deficiency was issued, the case cannot be closed until the period for filing a petition with Tax court has expired and no petition was filed. The case will then be closed as a default if no petition was filed.
    No response to Notice of Deficiency After the suspense period has expired, close file as default.

Statutory Notices

  1. IRC Section 6212 provides authority to issue Statutory Notices of Deficiency.

  2. Refer to IRM 4.8.9, Statutory Notices of Deficiency.

  3. Statutory Notices meeting certain criteria (over $100,000, fraud penalty, etc.) must be reviewed by Counsel prior to issuance. More detailed information regarding this review, including a complete list of the criteria, can be found in IRM 4.8.9.9.2.1, Mandatory Area Counsel Review. For more information regarding case reviews prior to preparing the Notice of Deficiency refer to IRM 4.8.9.7, Case Review Prior to Preparing Notices of Deficiency.

  4. Do not include any copies of prior letters or solicit documentation in Statutory Notice issuance.

RRA 98 Section 3201(d) Joint Notices

  1. ACE programs duplicate the Letter 3219(SC/CG) Statutory Notice of Deficiency for each individual filer of a joint return. The notices are mailed separately to each filer, even if they both reside at the same address. This is accomplished by use of a cover sheet, with only one of the joint names and the common address being printed on the cover sheet for each set of notices mailed. This separate mailing is required by RRA 98 (Restructuring and Reform Act of 1998) Section 3201(d). Statutory Notices not produced by ACE programs will require manual duplication and creation of individual cover sheets (only one joint filer name on each) to facilitate separate mailing of the notice to each taxpayer. No changes need to be made to the statutory notice(showing both of the joint names) that will be attached to each . The only requirement of RRA 98 Section 3201(d) is that it be mailed separately to each joint return filer.

Undeliverable Mail

  1. Taxpayers have a right to receive information concerning any federal taxes assessed against them. The Service is required to exercise due diligence to find and use taxpayer’s last known address. It is important that all Undeliverable Mail is worked as a priority to ensure that the SNOD is mailed to the taxpayer’s current address.

    Reminder:

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

  2. Review CC ENMOD or IMFOLE and AIMS for an Identity Theft (IDT) indicator. If an IDT indicator is present, do not update the address and route the undeliverable to the Specialized Team for technical review and required action.

  3. If the taxpayer is deceased, and there is no secondary taxpayer, POA, or fiduciary on file, do not re-mail the undeliverable notice. Instead, include the undeliverable notice in the case file. If there is a valid fiduciary or POA on file, re-mail the undeliverable to their address of record.

  4. All undeliverable certified or registered mail must be associated with the case file. Certified letters include SNODs and Notices of Claims Disallowance (letters 105C and 106C).

  5. IDRS research should be done utilizing the CC ENMOD or IMFOLE to see if there is a new address on file. If there is a new address then re-mail the undeliverable notice in a new envelope. Please see IRM 4.8.9.8.2.5, Establishing the "Last Known Address" , for more information.

  6. If the address on the USPS yellow address sticker is not on RGS/IDRS, (1) re-mail the undeliverable letter, (2) send Form 8822, Change of Address, to the TP, (3) add 30 days to the suspense date on RGS and (4) input a CEAS note documenting the actions taken.

    Reminder:

    Clerical Staff: Staple the two pages of the form together with the instruction page on top and highlight the following paragraph on the instruction page. “The use of this form is voluntary. However, if you fail to provide the Internal Revenue Service with your current mailing address, you may not receive a notice of deficiency or a notice and demand for tax. Despite the failure to receive such notices, penalties and interest still continue to accrue on the tax deficiencies”.

    Caution:

    DO NOT update MF strictly based on the yellow address sticker address provided by USPS. Use the address on USPS yellow address sticker to only reissue the letter after research is conducted, and it is determined that the USPS yellow address sticker is the most current.

  7. Update RGS:

    1. Update extension codes, per IRM 4.19.21.2, Processing Incoming Correspondence.

    2. Update the address, if the undeliverable notice or letter is within 30 days of the SNOD issuance, AIMS status 24.

    3. Leave CEAS Action Note with new address if case is assigned to technical unit.

    4. Leave CEAS Non Action Note or notation on Form 4700 notating all research and actions taken.

  8. If the undeliverable mail was returned because of a typographical error made by the IRS, update all systems and re-issue the SNOD, allowing the full 106-day suspense period.

  9. If the undeliverable letter was returned without a USPS yellow address label indicating a new address, but other information was included on the envelope, notate the information on the envelope by leaving a CEAS Non-Action Note or notation on the Form 4700.

  10. All research and any action(s) taken must be documented by leaving a CEAS Non-Action Note or notation on Form 4700, Examination Workpapers.

  11. For information on processing incoming undeliverable mail refer to IRM 4.19.21.2, Processing Incoming Correspondence.

  12. Undeliverable Statutory Notices of Deficiency may require special consideration and action. Please see IRM 4.8.9.21, Undeliverable Notice of Deficiency, IRM 4.8.9.21.1, In-House Address Information, and IRM 4.8.9.21.2, New Address Found.

Transfers to Area Office Examination or Appeals Office

  1. The following subsections contain procedures on transfers to Area Office Examination and Appeals.

Transfers to Area Office

  1. Transfers to Area Office:

    Note:

    Cases must have a minimum of 13 months remaining on the statute prior to transferring to an Area Office or must have a valid Form 872, Consent to Extend Time to Assess Tax. If the Statute of Limitations is less than 13 months, then send Letter 907, Request to Extend Assessment Statute, and Publication 1035, Extending the Tax Assessment Period, with Form 872 to taxpayer, completed in accordance with IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent, and executed per IRM 1.2.52.3, Delegation Order 25-2 (Rev. 2) (formerly DO-25 and DO-42, Rev. 28). Treas. Reg. 301.7605-1(e)(2) provides that a request by a taxpayer to transfer the place of examination for an office or field examination will generally be granted under certain circumstances. The procedures in IRM 4.11.29.4, Circumstances Which Permit A Transfer Of Examination, must be followed.

    Actions to take when Transferring Cases to Area Office
    If Then
    POA or taxpayer requests an Area Office interview (one case or multiple cases by same POA)
    • Telephone POA or taxpayer to ask why they want the case transferred. Need to inquire about what their concerns are and provide assurance that the issue can be resolved at the campus. Treat mass transfer requests on a case-by-case basis.

    • If unable to contact taxpayer by telephone, issue Letter 1654(SC), Reply to Taxpayer Who Requests Case be Transferred, and refile case for remaining suspense period.

    Taxpayer states undue burden due to voluminous records
    1. Obtain a listing of itemized expenses or deductions. Put case in Status 25 while waiting for response from taxpayer.

    2. Advise taxpayer they will be contacted when the itemized list is received.

    3. Inform taxpayer as to the supporting documentation to be submitted based on itemized list received.

    4. If itemized list indicates a sample can be requested then the case can be retained in the campus for completion.

    5. If no sampling can be performed, then document the reason and supporting items for transfer on workpapers.

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

    7. Complete the Transfer Alert Checksheet. See Exhibit 4.19.13-1.

    8. Obtain manager approval to transfer.

    9. Transfer to Area Office where the taxpayer lives. Hold Letter 528(SC), Letter to Transfer Taxpayers(s) Return as Requested, until any frozen refunds are released if applicable, otherwise issue letter to taxpayer.

    10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Taxpayer continues to request an interview at an Area Office
    1. Document the reason and supporting items for transfer on workpapers.

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

    3. Complete the Transfer Alert Checksheet. See Exhibit 4.19.13-1.

    4. Obtain manager approval to transfer.

    5. Transfer to Area Office where the taxpayer lives.

    6. Hold Letter 528 (SC) until any frozen refunds are released, otherwise issue letter to taxpayer.

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Issue is too complex for correspondence
    1. Document the reason and supporting items for transfer on workpapers.

    2. If taxpayer requests a transfer, obtain a written request from the taxpayer and evaluate the taxpayers' reasons.

    3. Complete the Transfer Alert Checksheet. See Exhibit 4.19.13-1.

    4. Obtain manager approval to transfer.

    5. Transfer to Area Office where the taxpayer lives.

    6. Hold Letter 528 (SC) until any frozen refunds are released, otherwise issue letter to taxpayer.

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    After SNOD has been issued and the taxpayer requests a transfer to the Area Office
    1. Send Letter 555 (SC) (use the most current revision date) advising the taxpayer of a choice to file a petition with tax court or request a rescission of the Statutory Notice.

    2. A rescission will only be offered to the taxpayer if the information provided by the taxpayer establishes the actual tax due is less than the amount in the Statutory Notice.

    3. If a supplemental report can be issued, send to the taxpayer.

    4. If a rescission applies and the case meets requirements for transfer above, then follow statute expiration guidance at the top of chart.

    5. Complete the Transfer Alert Checksheet. See Exhibit 4.19.13-1.

    6. Obtain manager approval to transfer.

    7. To rescind a Statutory Notice, follow the procedures outlined in IRM 4.8.9.28, Rescinding Notices of Deficiency, and executed per IRM 1.2.43.2, Delegation Order 4-1 (formerly DO-8, Rev. 11).

    Note:

    Managerial review will be performed, and if the request is not approved, then inform the POA or taxpayer of such decision.

  2. If Field Exam (Area Office) asks for control of a Campus Exam case, (usually because they want to work related years together and are in contact with the taxpayer). Then:

    1. Document the reason for transfer on the workpapers.

    2. Complete the Transfer Alert Checksheet. See Exhibit 4.19.13-1. Notate the transfer is at the request of Field Exam.

    3. Obtain manager approval to transfer.

    4. Transfer to the requesting office, following transfer procedures in IRM 4.11.29 ,Transfer of Returns Open for Examination, and IRM 4.4.33, Transfers.

    5. Field Exam does not have access to Campus RGS/CEAS. Include all Case File Documents, such as letters to the taxpayer, workpapers, case history, and CEAS notes.

    6. Contact your Campus AIMS Coordinator to complete the transfer.

Transfer to Appeals

  1. Transfers to Appeals Office - Pre-90-day Cases (Non-Docket)

    Note:

    Generally, a case being sent to Appeals must have a minimum of 12 months remaining on the statute of limitations as of the date the case is received in Appeals.

  2. If the Statute of Limitations is less than 12 months, then send Letter 907 (SC) and Publication 1035 Extending the Tax Assessment Period, with Form 872, to taxpayer, completed in accordance with IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent, and executed per IRM 1.2.52.3, Delegation Order 25-2 (Rev. 2) (Formerly DO-25-2 and D-42, Rev.28).

    Transfer to Appeals - Pre 90-day Status
    If And Then
    30-Day case and POA or taxpayer requests a transfer to Appeals (one case or multiple cases by same POA) Taxpayer has not provided any documentation Telephone taxpayer. If unable to reach taxpayer by telephone, respond with the applicable letter and the following explanation:" Appeals generally cannot consider your case until the IRS has the opportunity to review all your documents." If after you submit documents for review you still disagree with our findings, you can request to go to Appeals. The Publication 3498-A includes instructions on requesting an Appeal. Your request needs to outline what items you disagree with and the reasons why you disagree with our decision.
    Case is a 30 Day case and POA or taxpayer requests a transfer to Appeals (on case or multiple cases by the same POA) Taxpayer has provided documentation but does not identify disagreed issues and supporting position Telephone taxpayer. If unable to reach taxpayer by telephone, respond with the applicable letter. Include in the explanation that in order to transfer his/her case to Appeals the following information is needed:
    1. Written Request to transfer from the taxpayer that includes the changes the taxpayer disagrees with and why.

    2. The facts supporting the taxpayer's position on any disagreed issues, and the law or authority, if any, on which the taxpayer relies.

    3. If deficiency is $25,000 or less, include Form 12203, Request for Appeals Review.

    (See Pub 3498-A, The Examination Process for more information).
    30 Day case and POA or taxpayer requests a transfer to Appeals (one or multiple cases by the same POA) Taxpayer has provided documentation along with a written request for an appeal that includes:
    1. The changes the taxpayer disagrees with and why.

    2. The facts supporting the taxpayer's position on any disagreed issues, and the law or authority, if any, upon which the taxpayer relies, or taxpayer has submitted completed Form 12203, Request for Appeals Review.

    Refer case to Appeals, Go to Appeals Campus Case Routinghttp://appeals.web.irs.gov to determine where to send the case.

    Note:

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    Note:

    Communications between the referring function and Appeals relating to ministerial, administrative or procedural matters are permissible. However, communications specific to the merits of the case are prohibited ex parte communications unless the taxpayer of taxpayer's representative is offered the chance to participate in the communication. Such prohibited communications include those that address the strengths or weaknesses of the issues, the positions of the parties, the accuracy of the fact, or the credibility or cooperation of the taxpayer or taxpayer's representative, etc. Refer to IRM 4.2.7 , Ex Parte Communication Procedures, and sections 2.02(6) and 2.03(3) of Revenue Procedure 2012-18, Ex Parte Communications Between Appeals and Other Internal Revenue Service employees, for additional discussion regarding ex parte communications with Appeals.

  3. 90-day Cases

    Transfer to Appeals - Cases in 90-day
    If   Then
    90-day case and POA or taxpayer requests a transfer to Appeals (one case or multiple cases by same POA)   Telephone taxpayer. If unable to reach taxpayer by telephone respond with Letter 555 and include the following explanation: "We received your request for an Appeals hearing, however, we are unable to honor your request. In order to appeal our decision, you must petition the United States Tax Court. " Publication 3498-A, "The Examination Process, Audits by Mail, and the SNOD mailed on __________ (insert SNOD date) includes instructions to petition Tax court. However, you may continue to work with us to resolve your tax matter but, we can not extend the time to petition the United States Tax Court beyond________ (insert last day to petition)" .

    Note:

    When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information.

    Note:

    Upon transferring a case to Appeals, the original return must be requested. Do not hold case while waiting for the original return. Transfer case to Appeals and place a copy of the Form 2275 or ESTAB request in the case file. Managerial review and approval must be documented in the workpapers.

Non Docketed Cases Returned from Appeals
  1. An Appeals Officer (AO) will return non-docketed cases to Exam on Form 3210, Document Transmittal, when the taxpayer provides new documentation that was not previously submitted.

  2. The Campus Liaison (CL) will review the new documentation and determine if Correspondence Examination can proceed with the examination.

  3. If the campus cannot work the case:

    1. The liaison will explain the reason the case is being returned

    2. Sign Form 3210 and

    3. Return Form 3210 and the case file to Appeals

  4. If the CL determines the campus can proceed with the examination the CL will:

    1. Sign Form 3210 and return it to Appeals

    2. The CL will have the case updated on AIMS as appropriate and assigned to an examiner to work following normal examination procedures.

Docketed Cases

  1. An electronic list of docketed Tax Court cases is posted daily to the Appeals Centralized Database System.

  2. Daily, the Kansas City Exam Operation (KCSC) will pull the list and research each docketed Tax Court case. The centralized research eliminates the duplication of researching the same list at all Campuses.

  3. Using a Docket Information Management System (DIMS) Contact Listing, the researched list is sent as a secured e-mail to the appropriate Campus Contacts; Primary, Backup, and manager in the other 9 sites.

  4. All Campuses are responsible for compiling the administrative case files for all cases identified as originating from their Campus/Operation, and forwarding them to the correct Appeals Office.

  5. The Docket Clerks must update CEAS to Status 81 and either Disposal Code 07 or 11 before they ship a case to Appeals. See IRM 4.19.13.16.2, Docketed Case Review, prior to updating the case to Status 8X.

  6. See IRM 4.8.9.25, United States Tax Court Petition Filed, and IRM 4.8.10.15.6, Status 90 Cases, for specific procedures.

    Reminder:

    Priority will be given to researching docketed cases by KCSC. The sites should complete and forward the packages within 10 days of receiving the listing.

    Note:

    Communications between the referring function and Appeals relating to ministerial, administrative or procedural matters are permissible. However, communications specific to the merits of the case are prohibited ex parte communications unless the taxpayer or taxpayer's representative is offered the chance to participate in the communication. Such prohibited communications include those that address the strengths or weaknesses of the issues, the positions of the parties, the accuracy of the fact, or the credibility or cooperation of the taxpayer or taxpayer's representative, etc. Refer to IRM 4.2.7, Ex Parte Communication Procedures, and sections 2.02(6) and 2.03(3) of Revenue Procedure 2012-18, Ex Parte Communications Between Appeals and Other Internal Revenue Service employees, for additional discussion regarding ex parte communications with Appeals.

Docketed Cases Status 90

  1. Docketed cases reflecting status 90 with a disposal code 02 are no longer required to be forwarded to Appeals.

  2. Complete Form 14121, No Change Certification. Form 14121 must be faxed to the Assigned Area Counsel Office shown on the docket list (DIMS) AND the Appeals DIMS unit.

    1. Fax numbers for the assigned Area Counsel Office can be located at: http://employeeresources.prod.irscounsel.treas.gov/Pages/CCPhoneDirectory.aspx

    2. Fax numbers for the Appeals DIMS unit are: (559) 452-3241 or (559) 452-3266 and the e-Fax number is (877) 805-7796.

    Docketed case reflecting status 90 closed with any other disposal code see IRM 4.8.9.25.7, Status 90 Cases, for specific procedures.

Docketed Case Review

  1. Prior to updating a docketed case to Status 81, the case must be reviewed to ensure all mail has been considered and addressed.

    If And Then
    All mail has been addressed   Follow procedures as outlined in IRM 4.8.9.25 , United States Tax Court Petition Filed
    Mail has not been addressed, review mail as an expedite Mail does not change the determination Document workpapers with findings. Update to status 81 and forward to Appeals as outlined in IRM 4.8.9.25, United States Tax Court Petition Filed.
    Mail has not been addressed, review mail as an expedite Mail changes determination and case is a no change Document workpapers with findings. Call TP to inform him/her that documentation was reviewed and case will be no changed.

    Note:

    When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information.

    Explain to TP that a no change letter will be issued. If unable to contact TP, prepare no change Form 4549 and issue 555 with explanation that return has been accepted as filed based upon documentation received. Notate the information section "This Form 4549 is for your information only." Close case. Complete Form 14121, with applicable signatures and forward to Appeals as outlined in IRM 4.19.13.16.1, Docketed Cases Status 90.
    Mail has not been addressed, review mail as an expedite Mail partially changed determination Document workpapers with findings. Call TP to inform him/her that documentation was reviewed and to provide your findings. Prepare a supplement report. Prepare 555Ltr and Form 4549, mail to TP with explanation that case will be forwarded to Appeals. Update case to status 81 and forward to Appeals.

Special Handling Notice for Examination Case Processing, Form 3198

  1. Refer to instructions on Form 3198, regarding uses.

    Note:

    Filing Status changes must be annotated on the Form 3198.

  2. When the case is closed by someone other than the tax examiner who worked the case and special processing is required, attach Form 3198 to the outside of the file folder. The only forms not placed under the Form 3198 are:

    • Form 895, Notice of Statute Expiration.

    • Form 2859, Request for Quick or Prompt Assessment.

  3. If a case can be systemically closed using the RGS generated Form 5344, Examination Closing Record, the completion of the Form 3198 will not be required if no additional action is needed by the closing unit.

Case File Assembly

  1. Follow procedures outlined in IRM 4.4.1Case Assembly ,Exhibit 4.4.1-8, Case Assembly , for complete case assembly information for cases not established and worked using ACE Processing.

  2. It is imperative that all case history sheets (paper or electronic) be annotated to include date of letter and why it was sent, e.g., "Revised report issued or no change to previous determination."

  3. The RGS system maintains an electronic file of information generated through the system for the taxpayer under examination. Therefore, in lieu of establishing a case file for in process selected cases and printing an entire closing case file package, refer to IRM 4.19.13.18.1, RGS Case File Assembly, for cases that have been established and worked in the RGS system.

RGS Case File Assembly

  1. When cases are closed in RGS and the GII process is completed, a listing of all accepted closures will be created.

  2. A Form 13181, Closing Cover Sheet (CICS), will also be generated by RGS for every successful closure. The CICS is generated with all the information necessary for sending a case file to the Federal Records Center (Files).

  3. If the (SNOD) was generated by the STN02 program there will be an electronic copy of the SNOD in the RGS Case File documents folder. If the SNOD was generated by the STN01 program, there will not be an electronic copy in the RGS Case File Documents folder. A paper copy of the STN01 SNOD is kept on file per instruction in IRM 4.19.21.3 , SNODs. The CICS Form 13181 for cases with statutory notices generated by both the STN01 & STN02 programs are the same except the CICS for the STN02 program has an additional statement: The SNOD is attached to the RGS electronic case file.

  4. The blocking series input to the Form 5344 closing document determines whether the case is paperless (Form 13181 suppressed) or if there is a paper case file (Form 13181 available for printing). The status code extension on the ST24 case determines the blocking series to be used. The following status code extensions indicate that there is a physical case file on hand:

    1. 97 - Unclaimed

    2. 98 - Correspondence Received

    3. 99 - Undeliverable

  5. The paper case files are pulled and attached to the correct CICS document. Documents are attached to the Form 13181 using the guidelines outlined in Exhibit 4.4.1-2, Case Assembly. This constitutes the closing package for each TIN. Closing packages will be put in folders and sorted by input employee number/sequence number for forwarding to the local File Management & Services area.

Offers in Compromise

  1. Refer to IRM 5.19.7.2, Monitoring Offers in Compromise (MOIC), IRM 5.19.13.2.2, Expenses Overview, and IRM 4.18.1, Offers in Compromise Received in Exam, for additional information.

  2. Under IRC 7122 and Treas. Reg. §301.7122-1, the Service can compromise a liability for less than the full amount owed if:

    • There is doubt as to collectability of the liability where the taxpayer’s assets and income are less than the full amount of the liability.

    • There is a doubt as to the existence or amount of liability, or

    • Due to exceptional circumstances a compromise would promote effective tax administration.

    • .

    However, Campus Examination does not consider an Offer in Compromise.

    Actions to take regarding Form 656
    If Then
    The taxpayer requests a Form 656, Offer in Compromise, Advise the taxpayer that a Form 656 is available for download at www.irs.gov. If they cannot access the Internet, a Form 656 will be mailed.
    Completed Form 656 is received, Forward it to one of the centralized OIC sites – Memphis or Brookhaven – per the instructions in the Form 656 Booklet . Inform the taxpayer by phone or quick note that the form has been forwarded to the Collection Department for consideration.

Bankruptcy

  1. If there is an indication that the taxpayer under examination has filed for bankruptcy, the examiner should immediately contact the Examination Bankruptcy Coordinator. The Coordinator will determine if the bankruptcy is still pending and provide further instructions to the examiner.

  2. Indications of bankruptcy include:

    1. -V or -W Freeze on TXMOD

    2. TC 520 on TXMOD

    3. X or E Freeze on AIMS (BANKRUPTCY display in lower left hand corner of AIMS screen)

    4. Taxpayer indicates verbally or through correspondence that he is in bankruptcy

  3. The Examination Bankruptcy Coordinator will contact the appropriate Insolvency Unit to determine the status of the bankruptcy proceedings and furnish them with a copy of the Audit Report if necessary for the proof of claim. The Automated Insolvency System (AIS) and PACER (Public Access to Court Electronic Records) are used to locate the insolvency office and track the status of the bankruptcy case. The new Integrated Automation Technologies (IAT) tool can also be used to track the status of the cases.

    1. If the case has not been started and a determination is made to continue with the examination, an Audit Report must be prepared for the purpose of estimating the maximum adjustment for the proof of claim.

  4. For bankruptcy cases filed on or after October 17, 2005, the bankruptcy Statutory Notice of Deficiency (Letter 531 ) is not required for deficiencies related to post-petition taxes incurred by an individual or by the bankruptcy estate of an individual in a Chapter 7 or 11.

  5. If the taxpayer is in bankruptcy, the examination will continue. The ICL and the 30-day letter issuance should follow the normal auditing process. If the taxpayer agrees, the case may be closed agreed. If the taxpayer substantiates all issues, the case can be closed no change. If additional documentation is needed, the examiner will request the information from the taxpayer using the appropriate letter. The appropriate AIMS status and letter will be used as outlined in IRM 4.19.14.4.1, RPS Examination Process. Do not use suspense statuses on these cases.

  6. If the taxpayer is in bankruptcy and disagrees with the proposed examination changes included in the 30-day letter, the case must be transferred to the Bankruptcy EGC 5033.

    1. The Bankruptcy Coordinator will be responsible for preparing and issuing the Bankruptcy Statutory Notice of Deficiency, Letter 531, with Notice 1421, How Bankruptcy Affects Your Right to File a Petition in Tax Court in Response to a Notice of Deficiency, to the taxpayer. The Bankruptcy Statutory Notice will be issued instead of the 90-day letter Statutory Notice of Deficiency - Letter 3219.

    2. In the case of joint returns where only one spouse has filed for bankruptcy, the Bankruptcy Coordinator will ensure that the non-petitioning spouse is issued a 90-day Statutory Notice of Deficiency, Letter 3219, and that the assessment is made on the IMF Master File MFT 31 (in accordance with IRM 21.6.8, Split Spousal Assessments (MFT 31)), when the 90-day period expires.

    Note:

    If a MFT 31 needs to be established, the Bankruptcy Coordinator must contact CIO via e-mail at cioissues@irs.gov, at least 12 weeks prior to the expiration of the 90-Day SNOD.

  7. If the SNOD was issued to the taxpayer within 90 days of filing a bankruptcy petition, or the taxpayer files a bankruptcy petition before the SNOD is issued, the case cannot be defaulted (closed) while the bankruptcy’s automatic stay prohibits the taxpayer from petitioning the Tax Court, plus an additional 60 days after the stay ends. The case must be transferred to the control of the Bankruptcy Coordinator by updating the Employee Group Code (EGC) to 5033.

    Caution:

    For bankruptcy cases filed on or after October 17, 2005, the automatic stay may go into effect for only 30 days, or may not go into effect at all, if the taxpayer was an individual in a prior bankruptcy case that was pending within the preceding one year period. See 11 U.S.C.362 (c)(3) and (4). The stay may also not go into effect if the taxpayer was a debtor in a small business bankruptcy case within the preceding two year period. See 11 U.S.C. 362(n). Contact Counsel to determine the extent of the stay in these situations.

    1. In the case of joint returns where only one spouse has filed for bankruptcy, the Bankruptcy Coordinator will ensure that the assessment is made on the IMF Master File MFT 31 (in accordance with IRM 21.6.8, Split Spousal Assessments (MFT 31)), for the non-petitioning spouse when the 90-day period expires.

    2. The Bankruptcy Coordinator will issue the Bankruptcy Statutory Notice of Deficiency (Letter 531 with Notice 1421) to the taxpayer that filed bankruptcy in order to put him on notice of the suspension of the 90-day period and his options concerning the Tax Court and the Bankruptcy Court.

  8. For bankruptcies filed on or after October 22, 1994, the procedure in (7) above does not apply if the bankruptcy petition was filed after the expiration of the 90-day period. In this situation, the assessment can be processed any time after the expiration of the 90-day period because the bankruptcy automatic stay does not prohibit the assessment of tax. See 11 U.S.C. 362(b)(9)(D).

  9. The Bankruptcy Coordinator will hold the case in suspense until the automatic stay terminates due to one of the following: the bankruptcy is closed or dismissed, the debtor is granted or denied a discharge, or the stay is lifted by order of the Bankruptcy Court. The case will remain in Status 24 while the bankruptcy stay is in effect because the SNOD is being used to suspend the statute.

    1. If the bankruptcy case is dismissed, the Coordinator should contact the Insolvency Unit to determine if the case should be closed.

    2. If a case in bankruptcy is closed in error, the case must be reopened and updated on AIMS to the prior AIMS status. Example; If the case was in Status 24 prior to closing, open AIMS in ST 24.

  10. Monitoring Bankruptcy cases for updated information, by the Bankruptcy Coordinator:

    • PACER must be reviewed monthly on each case to verify current status.

    • SSIVL listing must be used weekly to identify; 1) Cases in EGC 5033, 2) Cases in ST 24 with an X freeze in EGC’s other than 5033, and 3) Cases in EGC 5033 with no X freeze.

    • 4.0 Listing must be used monthly to monitor potential barred statutes.

    • Bankruptcy IAT Tool may be used to identify in mass when a TC 520/521 is posted on an account. (PACER must be used to verify the information).

    • ARP0843 weekly report, on Control-D, may be used to identify the following action/transactions posting to the account; 1) Address change, 2) TC 976/977, 3) TC 604 and 4) TC 520/521

    Note:

    Statute Coordinator training is available on ELMS course #25473.

  11. The bankruptcy case does not suspend or extend the ASED (Assessment Statute Expiration Date) during the examination case. The ASED must be protected by either issuing a SNOD or securing a Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax. Refer to IRM 25.6.22, Statute of Limitations - Extension of Assessment Statute of Limitations by Consent, for more information. If the Statutory Notice is issued, AIMS must be updated to Alpha Code KK, when the remaining normal statute is within 180 days, per IRM 25.6.23.

    Caution:

    For those joint tax returns involving a non-bankrupt spouse, do not update to Alpha Code "KK" until the non-bankrupt spouse has been assessed.

  12. The ASED is suspended in a bankruptcy case if the SNOD was issued within 90 days before the filing of the bankruptcy petition or on or after the filing date as explained in paragraph (7) above. Upon the termination of the automatic stay, a new ASED must be calculated. The extended statute date must be addressed on Form 5344 when completing the case. The new ASED is calculated by adding the following to the original ASED:

    1. The number of days the taxpayer was prohibited by the automatic stay from commencing a Tax Court case, plus

    2. 60 days as provided by IRC 6213(f), plus

    3. 90 days as provided by IRC 6213(a), plus

    4. 60 days as provided by IRC 6503(a).

    See Rev. Rul. 2003–80 for a discussion of the effect of a bankruptcy on the running of the statute of limitations on assessment.

    Note:

    IRC Section 6213(a) provides that the period to file a petition to Tax Court is 150 days if the notice is addressed to a person outside the United States.

Combat Zone

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  3. The Combat Zone -C freeze and indicators are located on CC IMFOLE, Line 11. Combat Zone indicators are: "0" = Not a Combat Zone participant; "1" = Active and "2" = Inactive. Conflict indicator codes identify the combat zones(s) where the taxpayer served, See IRM 2.3.51-13, Command Code IMFOL Output Display - Entity, for a breakdown of the conflict codes.

  4. The combat zone -C freeze code is an entity freeze code that remains on the account for historical purposes, even with input of accurate entry and exit dates. The "-C" freeze can be set by a Transaction Code (TC) 500 in the following ways:

    1. Department of Defense (DOD) - A monthly systemic download places a TC 500 with an entry or exit date.

    2. Processing of an original or amended tax return where the taxpayer self-identifies by writing "Serving in Desert Storm/Shield, Bosnia, former Yugoslavia, Allied Force, Afghanistan, Enduring Freedom or Haiti/Operation Unified Response"

    3. Manual input of TC 500

  5. If the cases are not started and in AIMS Status 09 or below, survey them with AIMS Disposal Code 31.

  6. If the cases are started and in AIMS Status 10 or above, survey with AIMS Disposal Code 32 and send closing Letter 1024, Return Accepted as Filed, or Letter 4392, Combat Zone Examination Closed, for non-filers.

  7. If there is a frozen refund on the account, the TC 421 will release refunds on most accounts. Monitor accounts for release of credits. If the credits do not release, it will be necessary to input a TC 290 for zero.

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Input TC 500 with Closing Code 56 (the Closing Code for Afghanistan or Enduring Freedom and the current conflict in IRAQ are the same) to reflect when the taxpayer entered the Combat Zone. Do not input TC 500 if no entry date was provided.

    2. Input a TC 500 with Closing Code 57 and the exit date, if the taxpayer has exited the Combat Zone.

    3. For joint accounts, if an "S" appears in the CSED field following the Closing Code (CC: 56 CSED: S), this means that the spouse is in the Combat Zone. When updating the Combat Zone indicator for the spouse, you must enter an "S" in the CSED field so the action is applied to the spouse, not the primary taxpayer.

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Information Referrals - Form 3949-A

  1. Refer to IRM 21.1.3.19, Informant Contacts, for information to report possible instances of federal tax fraud by another individual using Form 3949-A, Information Referral.

  2. Information reporting alleged tax law violations is received via telephone calls, office visits (walk-ins) and correspondence. The information provided is documented and forwarded to the responsible function for the appropriate action.

  3. Informant claims for rewards submitted on Form 211, Application for Award for Original Information, must be forwarded to the Whistleblower Office at:
    Internal Revenue Service
    Whistleblower Office
    1973 N. Rulon White Blvd
    M/S
    Ogden, UT 84404

Innocent Spouse Relief/Joint and Several Liability

  1. If during an ongoing correspondence examination you receive a Form 8857, Request for Innocent Spouse Relief, from the taxpayer then:

    1. Keep a copy of the Form 8857 and any related correspondence for the case file.

    2. Notify the spouse making the claim that their request: 1) has been received and does not affect the examination in any way; the audit will continue, 2) will not be considered until after the audit is complete, and 3) is being forwarded to CCISO for consideration.

    3. Review the information submitted with the claim to determine whether the election to file a joint return is valid, and for any other information to the examination.

    Note:

    If it appears that a joint return election is invalid, then the change in filing status would be made as part of the exam. Notate the transmittal to CCISO that the filing status will be changed during the examination.

  2. Each Examination area will have an Innocent Spouse primary and back up Coordinator.

  3. The primary or back up Innocent Spouse Coordinator will be responsible for:

    • Date stamping the Form 8857, Request for Innocent Spouse Relief

    • Faxing the Form 8857 and any correspondence regarding Form 8857 within ten business days to Cincinnati Centralized Innocent Spouse Operations (CCISO) at (855) 233-8558, Attn: Innocent Spouse AUR/SCEB Coordinator.

      Note:

      If too large to fax, mail within ten business days, using internal mail, to:
      Cincinnati Submission Processing Center (CSPC)
      201 W. Rivercenter Blvd. Stop 840-F
      Covington, KY. 41012

    • Notifying CCISO when the exam is complete, and

    • Providing CCISO with the exam report and work papers through RGS or using other means once the exam is complete.

    Note:

    Forward any Innocent Spouse documents/correspondence scanned into the Correspondence Imaging System (CIS) immediately to CCISO.

  4. If Form 8857 is received on a closed correspondence examination and not open in any other function, then the case should be routed to CCISO within ten business days.

  5. See IRM 25.15.7.3, Automated Underreporter (AUR) or Compliance Campus Examination Operations (CCEO) Cases - Overview, for more information.

    Note:

    Innocent Spouse Coordinators and their back ups should become very familiar with this section.

Taxpayer Advocate Service (TAS) Procedures

  1. Taxpayers contact TAS for assistance in resolving problems when they:

    • Have been unsuccessful in resolving them through normal channels,

    • Are experiencing economic harm, or

    • Believe an IRS system or procedure is not working as it should.

  2. The request must meet criteria as listed in IRM 13.1.7.2, TAS Case Criteria. Taxpayers may request assistance during or after the examination. Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), will be prepared by TAS or by the identifying function.

  3. The National Taxpayer Advocate has reached an agreement with the Commissioners of the Wage and Investment (W&I) , Small Business Self Employed (SB/SE), and the Large Business and International (LB&I) Divisions, that outlines the procedures and responsibilities for the processing of TAS casework when either the statutory or delegated authority to complete case transactions rests outside of TAS. This agreement is known as a Service Level Agreement (SLA). These SLAs are located at http://tas.web.irs.gov under the heading "TAS Favorites" .

Referrals to TAS

  1. Refer taxpayers to TAS (See IRM 13.1, TAS Taxpayer Advocate Case Procedures) when the contact meets TAS criteria (See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria) and the taxpayer’s issue cannot be resolved the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases that can be completely resolved in 24 hours, as well as, cases in which you have taken steps within 24 hours to begin resolving the taxpayer’s issue. Do not refer "same day" cases to TAS unless the taxpayer asks to be transferred to TAS and the case meets TAS criteria. Refer to IRM 13.1.7.4, Same Day Resolution by Operations. When you refer cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and forward to TAS. For more information on Taxpayer Assistance Order (TAO) refer to IRM 13.1.20, TAS Taxpayer Assistance Order (TAO) Process.

  2. Taxpayers whose situations meet TAS criteria 5-7 AND involve identity theft will be considered meeting IPSU criteria, see IRM 21.9.2.9, Identity Theft Assistance Request (ITAR) - General Information. When you refer cases to IPSU, use Form 4442, Inquiry Referral. Follow IRM 4.19.24, Compliance Identity Theft, for Exam procedures for referring Form 4442.

Referrals from TAS

  1. When a case requires referral to the Examination function, the TAS employee prepares an Operations Assistance Request (OAR), Form 12412. Form 12412 identifies the taxpayer’s issue, specific assistance requested from the Operating Division or Function, TAS case criteria met, and recommendation for resolution. TAS will secure and forward copies of signed amended returns and/or any documentation necessary for the resolution of the OAR.

  2. OARs are mailed to the Exam Unit via a Form 3210, Document Transmittal. To the extent possible, the Form 12412 and attachments will be sent via encrypted e-mail. The Form 12412 and attachments may also be faxed, mailed or hand carried to Exam.

  3. Referrals from TAS will include:

    • Cases controlled on AIMS [Open L-Freeze].

    • Cases previously controlled on AIMS [Audit Reconsiderations].

    • Cases referred from another part of the Service [Accounts Management, AUR, or Collections] for Exam classification. Examples: CAT-A, EITC Form 1040-X, Amended U.S. Individual Income Tax Return, or Source Code 38.

Responsibilities of the TAS Case Advocate

  1. TAS Case Advocate will:

    1. Contact the taxpayer regarding issue(s) with the examination process such as refund or examination processing delays.

    2. Forward completed OAR Form 12412, Operations Assistance Request (OAR), with supporting documentation to Exam.

    3. Be the main conduit for all taxpayer contact. The TAS Case Advocate will forward any document request from the Examiner to the taxpayer and forward any information received from the taxpayer to the Examiner, unless otherwise specified.

    4. When working prior year over-aged inventory, or securing additional documentation, the TAS Case Advocate may facilitate a conference call with the taxpayer and the Examiner in order to expedite closing the case.

    5. Timely inform the Examiner if the taxpayer does not reply within the time frame agreed upon.

    6. Monitor for the adjustment(s) to post including TC 840 (Manual Refund transaction), after Examination has closed their case.

    7. Ensure Hold Codes are released.

Responsibilities of the Operational Liaison/Exam Coordinator

  1. Operational Liaison/Exam Coordinator is an Exam technical employee who will review the Form 12412, Operations Assistance Request (OAR), for completeness and correct routing. The OAR must contain:

    1. A written explanation of the request for assistance

    2. A due date for completion

    3. The name, telephone, fax number of the TAS employee making the request

    4. Documentation to resolve the TAS issue

  2. If the Form 12412, OAR, is incomplete, contact TAS within one (1) workday of the determination, and within one (1) workday of the receipt of the OAR in the case of expedite processing OARs, to obtain information. If TAS cannot provide the information needed for the liaison to assign and work the OAR, within three (3) workdays of the request, return the case to TAS.

  3. If an OAR is routed by TAS to the incorrect office or campus location, the W&I, SB/SE and or EITC Business Unit Liaison will reject and return the OAR to TAS within three (3) workdays of receipt or within one (1) workday where TAS has requested expedite processing. The appropriate Business Unit Liaison will complete Section VI of Form 12412 indicating the reason for the rejection, citing the W&I SLA Addendum, or SB/SE SLA Addendum and IRM references (when applicable). TAS will issue a new OAR with the correct routing information.

  4. If the Form 12412 is complete:

    1. Obtain AMDIS prints, if needed.

    2. Write or attach the AIMS Source Code, Status Code, EGC and Project Code on the top of Form 12412.

  5. If the case is in AIMS Status 00-09, the Operational Liaison or designee will screen the case and resolve if possible. See IRM 4.19.13.24.5, Premature Referral Cases, AIMS Status 00-09, for procedures.

  6. The Operational Liaison will determine which team/function is responsible for resolving the taxpayer issue. For OARs that require expedite processing, the receiving office will assign within one workday to a tax examiner (TE) upon receipt from TAS. All other cases will be assigned within three workdays.

  7. For all cases involving complete OARs, the Operational Liaison, or designee will

    1. Date stamp and record the OAR case information in the Compliance TAS database or TAS Ledger.

    2. Assign the OAR to the appropriate Exam team.

      Assignment Procedures
      If Then
      Currently assigned to an examiner Assign to the AIMS EGC.
      The case is in ACE and not previously assigned to an examiner Assign cases equitably to the units.
      The case is in clerical suspense Secure and refer to the last assigned (examiner) team.
      Audit Reconsideration cases Refer to Centralized Reconsideration Unit (CRU).
    3. Do not place TAS cases in a separate status code.

    4. Open or update IDRS control and notate history item with "911-TAS" .

    5. Attach Form 3198, Special Handling Notice for Examination Case Processing, to the outside of the folder and notate Form 12412, history sheet and place any attachments on the inside.

    6. Acknowledge receipt of the OAR by completing items 1-3 of Section V and entering action date in Section IV.

    7. Within three days of receipt, or within one workday when TAS has requested expedite processing, acknowledge receipt of the OAR and provide the team manager's name and telephone number for assigned OARs. If Form 3210 was received with the OAR, it will be returned by either fax or mail or an automated notification will be generated and sent via email to acknowledge receipt. Acknowledgement of eOARs may be made via email.

  8. For aging consistency purposes, all operations will use calendar days when counting the age of a case.

    Note:

    For reporting purposes – a case greater than 14 calendar days is considered an aged case.

    1. The start of the aging process will occur when the faxed or mailed OAR is received by the operational liaison from the TAS office.

    2. Day one of the process will be:

      Processing Procedures
      If Then
      An OAR is received before 2:30 p.m. in the time zone receiving the OAR It will be considered received that day.
      An OAR is received after 2:30 p.m. It will be considered received the following business day.
    3. End date will be the day the operational area completes IDRS input and records the OAR closing on the Compliance TAS database.

    4. The case age will be calculated by subtracting the Day One date from the End Date.

  9. Any OAR closed "No Relief Granted" will be closed out of the receiving area's inventory and returned to the TAS office. These cases should never be rejected back to TAS. If the taxpayer asks to reopen his case, and sends in new additional information/documentation, the incoming OAR will be opened and treated as a new request/case.

Premature Referral Cases, AIMS Status 00 – 09

  1. Upon receipt of an OAR case, research/review ACE Action Report or other IDRS prints as necessary for prior year examination closing action.

  2. If the prior year return was closed no-changed and the same information is reflected in the current year, close the case. Refer to IRM 21.4.4, Manual Refunds, if applicable and IRM 4.19.14.6, Recertification, for procedures on removing the recertification indicator.

  3. If the taxpayer was examined and the research indicates that one or more dependents were disallowed in the prior year, review CEAS or obtain copies of workpapers and RAR (Examination Report).

    • Verify the dependent SSN that was allowed from the prior year report and follow appropriate closing action.

    • Verify the dependent SSN that was disallowed from the prior year report. Inform TAS caseworker that a full examination will be conducted and assign case to an Exam team.

    • If a different child(ren) is (are) claimed, inform TAS caseworker that a full examination will be conducted and assign case to an Exam team to prepare the initial contact letter.

    Note:

    For expedited cases, respond to TAS within 1 workday.

Closing Procedures for Operational Liaison

  1. Operational Liaison will:

    1. Notate in the Compliance TAS database the date the case was closed and what action was taken to close.

    2. If the case was a no reply, notate that the case was returned to normal exam work, and

    3. Fax or generate automated transmission of the completed Form 12412, Operations Assistance Request (OAR), and hand carry or mail the case to the appropriate TAS office.

Clerical Procedures

  1. The completed folder is given to the clerk for input. Using information found on the Form 12412, OAR, the clerk will:

    1. Update TAS cases to special EGC, if applicable, as designated by the unit manager, so that the cases can be tracked easily.

    2. File the copies of the Form 12412 and the fax transmittal confirmation in the "OAR" log book.

    3. Prepare a Form 3210, Document Transmittal, if necessary, with the information notated by the Operational Liaison/Exam Coordinator and hand carry to the proper team for assignment to TE.

    4. When the case is closed by TE or by Operational Liaison/Exam Coordinator, the case will be returned to clerk for disposition.

General Examination Procedures for TE

  1. The TE will:

    1. Review the description of assistance requested by TAS and requested date of completion. The Exam TE and TAS Case Advocate will agree upon the time frames for follow-up based on the facts and circumstances of the particular case.

      Note:

      TAS will notify Exam when a taxpayer meets criteria for expedited processing. The examiner will make all determinations based on facts and circumstances of the case, IRM procedures and application of tax law. TAS will not make a determination on the issues but may recommend specific action(s) be taken. Contact TAS before closing case.

    2. Enter all documentation and information on RGS workpapers, as with any other case. For cases not on RGS, prepare manual workpapers.

    3. Research RGS, IMFOL, TXMOD, AMDIS and other sources as outlined under IRM 4.19.14.5, Evaluating EITC Taxpayer Responses.

    4. Respond within three workdays in writing, fax, or hand delivery to the TAS Case Advocate the relief/no relief decision if the case requires expedite processing

    5. Inform the TAS Case Advocate by the negotiated date of the resolution if the case does not require expedite processing.

  2. The TAS Case Advocate must be kept apprised of action and/or contacts made by the TE with the taxpayer or practitioner. Telephone contact with the TAS advocate will not be conducted using the toll-free telephone number.

  3. TE case evaluation of TAS referral steps:

    Steps for Case Evaluation of TAS Referrals
    If Then Follow
    The case results in Full Examination or a Revised Report can be issued based on the documentation provided
    • For expedite cases, forward an examination report and appropriate letter (30 day, 90-day, Letter 692) to the taxpayer within 3 workdays.

    • For all other cases, time frame as agreed upon by TE and TAS Case Advocate

    • IRM 4.19.14.4, RPS Casework Procedures, and other related sections for working the case.

    • IRM 4.13, for Audit Reconsideration, and

    • IRM 4.19.16, Claims, for CAT-A Claims.

    Additional Documentation is needed
    • Inform TAS in writing that additional documentation is needed to close or resolve the issue.

    • When appropriate, Examiner can request TAS Case worker to call the taxpayer to expedite obtaining the additional documentation.

    IRM 4.19.14.4.1, RPS Examination Process.
  4. Examination Closing of TAS referral steps:

    Steps for Closing Examination of TAS Referral
    If Then Follow
    The case can be closed No Change based on the information researched or documentation received from the taxpayer
    • The examiner will complete Section VI, Parts 1 (a and b) and 2 (a, b, and c) of the Form 12412, OAR.

      Note:

      If processing a manual refund, the examiner will input a Hold Code on the examination closing to prevent erroneous refunds from generating .

    • IRM 4.19.13.28, Campus Exam Closing Actions, for further procedures.

    • IRM 4.13, for Audit Reconsideration.

    Items questioned are fully or partially disallowed
    • Close case as per IRM guidelines.

    • The examiner will complete Section VI, Parts 1 (a and b) and 2 (a, b, and c) of the Form 12412.

    • IRM 4.19.13.28, Campus Exam Closing Actions, for further procedures.

    • IRM 4.13, for Audit Reconsideration.

  5. After all the closing actions have been completed, including inputting any adjustments:

    1. Close any IDRS controls on the case, note on the history item how case was closed.

    2. Complete items 4-10 of Section V of Form 12412

    3. Give the case along with the Form 12412 to the Operational Liaison.

    Reminder:

    The employee assigned the OAR is to complete Section VI of Form 12412 and return it to the Operational Liaison who will return it to the TAS case advocate assigned the case. The Form 12412 will be returned within three (3) workdays from the date all actions have been completed and transactions input.

Disaster Relief

  1. This is the general overview for Campus Examination in event of a federally declared disaster.

  2. Procedures for responding to federally declared disasters or other significant emergencies can be found in IRM 25.16, Disaster Assistance and Emergency Relief.

  3. A complete index of issued Disaster Relief Memorandums, Zip Codes, and suspension periods of enforcement activities for each disaster can be found at the disaster web site: http://www.icce.irs.gov/fema.

  4. Additional information is also available on the SB/SE Disaster Assistance and Emergency Relief Site.

Disaster Indicators and IDRS Freeze Codes

  1. The IRS identifies accounts impacted by a declared disaster by zip codes and inputs a TC 971 Action Code. Depending on the type of relief assigned to that zip code area, a master file -S or -O freeze will be generated.

    1. The -S freeze on the account stops interest and penalties for a determined timeframe but does not stop compliance activities or notices.

    2. The -O freeze on the account stops interest and penalties for a determined timeframe, stops compliance activities, and stops most notices.

  2. These freeze codes do not prevent cases from establishing on AIMS.

  3. The Disaster Indicators will post on the entity portion of IDRS, which are defined as follows:

    1. 1 = -S freeze active

    2. 2 = -O freeze active

    3. 3 = both -S and -O freezes are active

    4. 4 = not currently active.

  4. To set the freeze code you will take the following actions:

    1. Use CC ENMOD

    2. Input CC REQ 77

    3. Input TC 971

    4. Transaction date = input disaster start date

    5. Secondary date = input disaster end date

    6. TC 971 / 151 CD = input 087 for -O freeze

    7. Input appropriate FEMA NUMBER

  5. The freeze codes will be automatically removed when the disaster period ends.

    Note:

    If the suspension end date is extended the freeze codes may be removed in error. The freeze codes will be systemically re-input.

Disaster Procedures - Beginning Suspense Period

  1. For impacted taxpayers with an -S freeze on the account, Campus Examination will continue normal case processing. All contacts with the taxpayers during the disaster period will include Notice 1155, Disaster Relief from the IRS.

  2. For impacted taxpayers with an -O freeze on the account, Campus Examination will suspend normal case processing unless otherwise guided in this IRM sub-section.

    1. Contact with the taxpayer should be suspended until after the disaster ending date unless necessary to protect the statute of limitations.

      Caution:

      Monitor the IRS Disaster Assistance alerts and IRWeb for information regarding extensions to suspense periods.

    2. In addition to the master file codes, disaster coding will also be present on the following IDRS command codes:

    • ENMOD/IMFOLE - transaction code (TC) 971 and AC 087/688

    • ENMOD/IMFOLE - "2" - Account under special disaster processing per Section 7508A

    • AMDISA - "2" - Disaster Victim Code

  3. Update all -O freeze disaster cases in Status 10 and above to Employee Group Code 5055. Cases should remain in EGC 5055 throughout the entire Exam process.

  4. Exception:

    Cases in EGC 5033/5066/5077/5088 will not be updated to EGC 5055.

    If Case is in Status Then And Update Suspense Date
    00-09, 10, 22, 23, 25, 52 or 53 Leave in current status   To disaster ending suspense date.
    24 Leave in current status   To disaster ending suspense date.
    24 with correspondence Leave in current status Leave date in Corr Rec'd date field on AIMS and CEAS To disaster ending suspense date.
    51   The case can be closed agreed or no change, complete the closure.

    Note:

    All other types of closures will be suspended.

    Current Date, no suspense date needed
    54, 55 or 57 Update to status 56 Input Action Text with 'CRD MMDDYY' to identify the original Corr Rec'd Date. (This is necessary since status 56 will not keep CRD on the CEAS record) To disaster ending suspense date.
    56 If no correspondence, update to status 13 If in EGC 5066/5077/5088, follow identity theft procedures. To disaster ending suspense date.
  5. Any cases updated from status 24 in error should be corrected.

  6. Generally, there should be no correspondence sent to taxpayers in disaster areas during suspension period, unless responding to a taxpayer-initiated inquiry or to protect the statute of limitations. Correspondence received for case in EGC 5055 and/or with -O freezes will be screened for agreed, no change cases, and requests to continue their examination within 5 business days of receipt within the function. This includes audit reconsideration and closed case (status 90) mail correspondence.

Taxpayer Replies During the Suspense Period

  1. Taxpayer replies, including replies received in Status 24 - Agreed or No Change.

    1. Complete case actions for closure

  2. Taxpayer Replies - Disagreed or requests additional time.

    1. Open AIMS - If the taxpayer disagrees and provided information that changes the previous report, delay issuing the revised report for the duration of the notice suppression period. Update to status 56 per table above.

    2. Closed or No Aims - If the taxpayer provides information that changes the addressed report, complete the abatement. Keep the IDRS control base and CEAS record open and, document the action. The taxpayer will be issued the resolution notice after the suspension date ends.

  3. Taxpayer Replies - Requests for examination to continue

    1. Do not remove the disaster freeze codes.

    2. Do not update the case from EGC 5055.

    3. Clearly notate the workpapers to document the taxpayer's request.

    4. Continue to the next required actions,

    5. Prioritize the case by assigning it to a tax examiner to be worked right away.

    6. Case will require manual processing. Systemic processing cannot override the disaster coding on the account.

    7. Include Notice 1155 with any letters and reports to the taxpayer.

No Replies and Undeliverables
  1. No response from the taxpayer

    1. Take no action on no response cases until the suspension period has expired unless necessary to protect the statute of limitations

  2. Undeliverables - Suspend until the end of the disaster period.

Claims and Amended Returns

  1. Claims or Amended Returns - Work claims (1040X) that have sufficient documentation available to make a determination. Only allow or close claims that would benefit the taxpayer.

  2. Do not start any claims cases; Suspend all actions during the disaster period. The requirement for married filing joint taxpayers to provide a completed Form 3911, Taxpayer Statement Regarding Refund, does not apply when the taxpayer is inquiring about a refund that may have been lost, stolen, or destroyed.

Statute Awareness

  1. The disaster freeze codes do not extend the statute dates - ASED or CSED.

  2. Examination will protect imminent statutes by issuing statutory notices for taxpayers located in the affected counties during the compliance activity suspension period, if the statute of limitations will expire during that period and a statute extension cannot be secured.

  3. No statutory notices of deficiency will be issued during the compliance activity suspension period if the statute of limitations will not expire during that period.

  4. If the statute of limitations and the 90th day to petition tax court fall within the suspension period, the case(s) will be closed default with managerial approval.

  5. If the CSED or ASED statue is not extended by IRC 7508A, it may be necessary to retain evidence of the initial mailing of deficiency notices.

Disaster Telephone Procedures

  1. Contact with taxpayers impacted by a disaster must be made with caution and extreme sensitivity to the taxpayer's personal circumstances, using the "soft contact" procedures. See IRM 5.1.12.2.7, Soft Contact Procedures.

  2. If the taxpayer calls, explain their case has been suspended until the end of the disaster period. Provide the taxpayer with information available on Disaster Assistance and Emergency Relief for Individuals and Businesses at irs.gov. Pub 2194, Disaster Resource Guide for Individuals and Businesses, also contains information for impacted taxpayers. If the taxpayer suffered a loss, they may be able to take a casualty and theft loss.

    Note:

    When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information.

  3. Advise taxpayer to read Publication 3067 (EN/SP) Disaster Assistance - Federally Declared Disaster Area, and to call our IRS disaster line at 1–866–562–5227.

  4. Additional information can be found at Disaster Assistance and Emergency Relief Frequently Asked Questions at http://mysbse.web.irs.gov/opsupport/hc/facilitiesorganizationalsupport/continuityofop/disaster/default.aspx.

  5. If taxpayer states he or she would like the IRS to continue with the examination, we will proceed with the examination. If possible, obtain this request in writing. Provide the taxpayer with e-fax numbers when possible.

  6. For those taxpayers who indicate they have been impacted by the disaster, all compliance activity must be suspended. See IRM 25.16.1.2, Identification of "Covered Disaster Area" and "Affected Taxpayers" , for information regarding taxpayers eligible for disaster relief for self-identification. Taxpayer's self-identifying as impacted by the disaster will have the -O freeze manually placed on their account. See Disaster Freeze Code Instructions.

  7. If the taxpayer indicates hardship, refer to Taxpayer Advocate Service using Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order). Give the taxpayer advocate phone number 1–877–777–4778. The Form 911 should clearly state that the taxpayer made the request after the actual date of the disaster.

  8. Exam will initiate any case actions to provide hardship relief to the impacted taxpayers.

  9. All hardship manual refund requests do not have to go through TAS. Verify if the taxpayer would prefer the manual refund issued as a direct deposit for quicker receipt. See IRM 3.17.79.6.4.2, Certifying Automated Clearing House (ACH)/Direct Deposit Hardship Refunds.

Identity Theft/Return Preparer Misconduct Disaster Procedures

  1. Do not update cases to EGC 5055.

  2. Screen the identified cases for:

    1. A complete and signed Form 14039 or police report,

    2. authentication documents and

    3. TC 976 or unprocessed returns with refunds.

  3. If cases don't meet the requirements in (2), suspend the cases per the disaster procedures.

  4. Complete the determination process for ID theft cases meeting requirements in (2). For valid IDT determinations, complete the normal referral process. Notate on the top of the referral "Expedite" , and include the name of the current disaster in red.

  5. Return Preparer Misconduct (RPM) cases meeting requirements listed in (2) will be worked on a case-by-case basis. Before taking any actions on RPM cases, please contact your HQ analyst.

Disaster Suspension Period Ends

  1. At the end of the disaster suspension period, taxpayer contacts within the designated area must be made with caution and extreme sensitivity to the taxpayer's personal circumstances. Stress and fatigue are factors needing consideration, even in instances where taxpayers did not experience any personal, monetary or physical damage from the disaster.

  2. Before resuming action, review the IRS Disaster Assistance alerts posted and IRWeb for information regarding extensions to suspense periods..

  3. Resume normal examination procedures after the suspension period has expired.

Reviewing Replies after the Suspension Period Ends

  1. Use good judgement when reviewing documentation.

  2. Consider the taxpayer's situation and impact from the disaster. If the taxpayer states their records were lost or destroyed. Consider the documents required to substantiate the questionable item and determine if the taxpayer could reconstruct the information, without putting an undue burden on the taxpayer. For example: obtaining mortgage or charitable contributions statements from another source, or obtaining third party documentation to substantiate a child's residence for EITC.

  3. If insufficient or no documentation can be provided:

    1. Annotate work papers with the determination

    2. Managerial Approval is required to close a case no change. The manager needs to leave a CEAS non action note stating they agree to close this case and the reason for closing the case without appropriate documentation.

  4. Work case per IRM 4.19.13.10, Taxpayer Replies, for subsequent action.

  5. We will grant up to an additional 30 days if the taxpayer requests an extension to provide information. Use the following table if the taxpayer requests a reasonable period of time (30 days or less) to comply:

    If Then
    A notice of deficiency has not been issued and the current date is before January 15th of the statute year Grant the request.
    A notice of deficiency has not been issued, and the statute is imminent (current date is after January 15th of the statute year or less than 90 days remaining on the statute of limitations) Attempt to secure a statute extension. Refer to IRM 25.6.22, Statute of Limitations - Extension of Assessment Statute of Limitations by Consent, for more information.
    The statute is imminent (current date is after January 15th of the statute year or less than 90 days remaining on the statute of limitations), and an extension is not secured Issue SNOD
    A notice of deficiency has been issued and the current date is before January 15th of the statute year Grant the request. If the taxpayer files a Form 8626, Agreement to Rescind Notice of Deficiency, then consider the rescission. The date to file a petition in Tax Court cannot be extended. For further procedures on stat notice rescission please refer to IRM 4.19.13.25.10, below.
  6. The SNOD must be mailed to taxpayers at their last known address and duplicate notices mailed to all newly discovered addresses.

  7. Cases that were in Status 24 before or during the suspension period must have the default date extended. For the most part, the suspension date of declaration should result in the revised suspension date. The Service will default cases based on the extended Statutory Notice Period and make the assessments within the prescribed assessment period if the taxpayer has not timely petitioned the Tax Court. If warranted, compute the extended Statutory Notice Period using the following computation:

    1. 90th Day - Disaster Begin Date = Number of Days to Extend Stat Purge Date

    2. Disaster End Date + Number of Days to Extend Stat Purge Date + 16 = New Stat Purge Date

Taxpayer Requests Rescission of the Statutory Notice of Deficiency

  1. In some cases it will be necessary to rescind the SNOD by following procedures in IRM 4.8.9.28, Rescinding Notices of Deficiency.

  2. Procedures and guidelines for rescinding a SNOD:

    1. The taxpayer must initiate the rescission by filing Form 8626, Agreement to Rescind Notice of Deficiency.

    2. All criteria must be met in order to consider the rescission of the Notice of Deficiency. See IRM 4.8.9.28.1, Criteria for Rescinding.

    3. There has to be 90 days left on the Statute or a secured Form 872 or Form 872-A, Consent to Extend the Time to Assess Tax, signed by the taxpayer, or both taxpayers if a joint filed return. Refer to IRM 25.6.22, Statute of Limitations - Extension of Assessment Statute of Limitations by Consent, for more information.

    4. A rescission cannot be entered into if the taxpayer petitioned tax court or it has been 90 days (150 days for notice mailed to addresses outside the United States) since the notice was issued.

    5. If the notice of deficiency was issued to both a husband and wife, the rescission agreement must be signed by both spouses or authorized representative(s) for the parties.

    6. The rescission agreement must apply to the same tax periods as the notice of deficiency.

    7. The rescission agreement must reflect the same deficiency and penalties as the notice of deficiency.

    8. If all conditions above are met, the Form 8626 must be reviewed and agreed upon by a Group Manager or higher. Somebody delegated into the Group Manager position cannot enter into the rescission agreement.

    9. The date of rescission is the date that both parties enter into the agreement.

    10. Send Letter 2262 , Cover Letter for Transmitting Signed Rescission, with a copy of the executed rescission agreement to the taxpayer.

    11. If the Service does not agree, then Letter 2263 , Exception Letter to Notice of Deficiency Rescission, needs to be sent to advise the taxpayer that the rescission is not being granted and the notice of deficiency will remain in effect.

Campus Exam Identity Theft

  1. Taxpayers alleging to be victims of identity theft will be required to provide documentation to substantiate identity theft incidents before referring a case to Identity Theft Victim Assistance (IDTVA) in W&I Accounts Management.

Research

  1. When an Identity Theft (IDT) allegation (phone call or correspondence) is received in W&I Exam and IDT documents have not been submitted, research CC ENMOD/IMFOLE to ensure the account does not already have an IDT indicator; for both open or closed AIMS cases, and for the same tax year/incident. An IDT indicator is a TC 971 with an AC 501, 504, 505, 506, 522 or 524 for all cases reflecting an appropriate Tax Administration Source Code (INCOME, INCMUL, MULTFL, NOFR, DEC PRISNR, OTHER). See IRM 25.23.2.16, Tracking and Reporting Identity Theft Cases - Identity Theft Indicators.

    Note:

    A TC 972 AC 501/506/522 and the tax year of the IDT incident reflecting a Tax Administration Source Code NOIDT, IRSERR, FALSE, TPRQ, IRSDAM, or OTHER indicates an Identity Theft incident was not determined. Do not request the supporting documentation and continue in the normal Exam process. Once a case is determined to be IRSID, clearly document the work papers and prepare the case to be referred to IDTVA.

  2. The following are common indicators that may lead to an IRS-identified ID Theft (IRSID):

    • -A freeze or TC 976/977 Decedent accounts

    • Payments - TC 610, 640, or 670 posted on accounts where a TC 150 refund return was posted

    • Late filed balance due return posted on accounts where a TC 150 refund return was posted

    • Extension to file - TC 460 on an account with a timely (early) filed TC 150 return posted

    • Returns with filing pattern changes including different unrelated or deceased dependents

    • MFT 32 - houses current year fraudulent Identity Theft returns discovered by IRS

    Caution:

    Do not confuse questionable income, such as PC 0611, as being ID Theft related. Follow IRM 4.19.14.8, Questionable Refund Program.

Requesting Documentation

  1. Request Identity Theft documentation Form 14039, Identity Theft Affidavit. See IRM 25.23.2.17, Identity Theft Claims - Overview.

  2. If a taxpayer submits correspondence indicating they are a victim of IDT, request the documents on Form 886A and prepare the case for the next stage of the audit. If the case is in Status 24, use Letter 555 to request the Form 14039. Inform the taxpayer this does not extend the time to petition Tax Court, per IRM 4.19.13.9.1, Taxpayers Responses.

  3. If the request is made via telephone call, input an Action Note on CEAS to reflect the requested extension is being granted and for how long. See IRM 4.19.19.4.1, CEAS Action Note, if needed.

    • If the case is open at another Campus or not assigned to you, input a CEAS Action note to alert of the IDT allegation. They will be responsible for doing the updates to the account as appropriate.

      Note:

      When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer to prevent unauthorized disclosure of tax information.

  4. Utilizing the Query Screen in RGS, add the appropriate amount of extension time to the end of the suspense period regardless of how much time remains on the original suspense period.

    1. If the suspense period has expired but the case has not yet been processed to the next status, back the case down if possible (i.e., if the next letter has not been issued or triggered to CPS.).

    2. If it is not possible to back the case down (i.e., next letter has already been triggered to CPS) the taxpayer must be contacted to inform them that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request. Encourage the taxpayer to fax the documentation, if possible.

    3. Cases in AIMS status 24 will run concurrently with the 90 day suspense period. The status 24 suspense date is only adjusted if the 30 days ends after the 90 day suspense date.

    4. Update to Employee Group Code 5066 and input ARC 14 to indicate a taxpayer will provide or has provided the required documentation.

  5. All identified employee returns with Identity Theft allegations must be sent to the appropriate Area Office PSP Employee Audit Coordinator. Follow IRM 4.19.11.1.23, Employee Returns

Taxpayer Replies

  1. Note:

    All procedures are applicable to both W&I and SB/SE except where specifically identified by BOD.

    When the taxpayer submits the requested documents, prepare the case to be referred to Identity Theft Victim Assistance (IDTVA) in W&I Accounts Management:

    1. Ensure the Form 14039 is complete; the document is considered complete when sections A, B and C are filled out. See IRM 25.23.8.2, IDTVA Exam General Procedures.

      Note:

      A photo ID or a signature on the form is not required to make a referral to IDTVA.

  2. IRM 25.6, Statute of Limitations, provides the service-wide procedures for identifying and processing statute returns. Statute protection applies to ID Theft referrals if the Assessment Statute Expiration Date (ASED) is within 180 days of expiring. Exam will close the audit and refer to IDTVA in a Red folder.

  3. Notate CEAS Workpapers. See IRM 4.19.13.5, Workpapers for All Cases.

  4. Update to EGC 5066 and input ARC 14, if not already present, to indicate a taxpayer provided the required documentation.

  5. For W&I, Close AIMS using Disposal Code 12, TC 300 $0.00, Manual Assessment amount of $1, Hold Code 4, and Priority Code 1.

    • Input the TC 971 AC 010 to reset the -A freeze, only on cases that already have an -A freeze on the account. Use a posting delay code of 1 cycle to allow the TC 300 to post first.

    • Make a copy of the Form 14039 and any supporting documents, not available electronically, to be placed on the PAS wall with closing documents.

  6. For SBSE, Close AIMS using Disposal Code (DC) 37 AFTER completing the steps below.

    If AND THEN
    There is no -A freeze, refund needs to be held on the account post TC 570 to hold the refund (For status 24 cases, see IRM 4.19.13.25.2, Requesting Supporting Documentation)
    There is a -A freeze  
    1. Input the TC 290 0.00 with a Hold Code 4 BEFORE closing the return as a survey to ensure any frozen credits are not released. Wait until the 97X is no longer on the AMDISA before closing DC 37

    2. Re-input the TC 971 AC 010 to reset the -A freeze. This will need to have a posting delay code of 2 so the TC 421 (DC 37) will post before the –A or the TC 421 will unpost.

  7. For SBSE campuses, follow the additional procedures:

    • If the AIMS was re-opened (TC 300 indicator = 6 and there is time on AMDISA) and there is no additional adjustment to be made, close with DC used prior to re-opening.

    • Do not remove EITC, CTC/ACTC or AOTC Recertification indicator, if present on EITC cases.

    • RGS/CEAS workpapers will be notated with a detailed explanation of the closure as identity theft case to IDTVA for resolution. A lead/manager must authorize/approve the closure by leaving a CEAS Non-Action Note.

    • If time is charged on RGS, archive the record and then manually close AIMS with a non examined DC.

    • Case closed DC 37 is not counted as a Correspondence Examination case closure and therefore not reviewed in the National PAS review.

    • Statute imminent cases with less than 60 days will be transmitted separately to IDTVA using expedite procedures.

    • Issue Letter 086C to inform the taxpayer of the referral to IDTVA, use the address on Form 14039. If a SNOD has been issued, remind the taxpayer that this letter does not extend the time to petition the Tax Court. Follow IRM 21.3.3.4.2.1(6) Use of 086C Letter - Referring Taxpayer Inquiry/Forms to Another Office; the IRM provides the exceptions of when the 086C is not required to be sent.

      Caution:

      Issue Letter 086C to address the taxpayer has provided. The address on ENMOD may be incorrect. Do not update the address on master file.

  8. Leave a history item on TXMOD IDTVAREFRL.

  9. Input TC 971 AC 522 PNDCLM, if not already present, on ENMOD to identify a pending IDT claim when the IDT documents are received. Prior to marking the account, research ENMOD/IMFOLE to ensure the questionable tax year does not already have an IDT indicator for the same tax year.

    Caution:

    If the coding already exists, do not input a second duplicate code for the same tax year.

  10. Forward the Form 10439 and any supporting documents, not available electronically, to IDTVA via Form 3210. Cases can be sent via e-fax when available.

  11. If correspondence is received on a closed AIMS case (Closed Case Mail) and a Form 14039 or Police Report, with some indication that it is related to IDT, route to IDTVA via Form 3210 to be screened by IDTVA. Follow procedures outlined under IRM 4.19.13.25.1 , Research, and IRM 4.19.13.25.2 , Requesting Supporting Documentation, as applicable in authenticating and securing documentation.

    Reminder:

    Ensure the case has not been worked by IDTVA. Taxpayer account research, (e.g., IDRS, AMS and/or CIS) is necessary to determine if the case has been worked.

Masterfile shows a Service Center Address as the Taxpayer’s Address

  1. Integrity Verification Operation (IVO) in some cases updates a taxpayer’s address on master file to a campus address when they determine a taxpayer is a victim of ID theft and is unable to determine a valid address for the tax year they are addressing. They correct the account and place the IDT indicators on the record they are working. If Exam has other years open, the address change will impact the validity of the SNOD if it is not corrected from the campus address. In order for the SNOD to be valid, it must be issued to the last known verified address and not to the Service Center address.

  2. If the case contains IDT indicators on the account see IRM 4.19.13.26 , Research. Exam will close the AIMS record and route the physical case to IDTVA in AM, see IRM 4.19.13.26.3 , Taxpayer Replies.

    Note:

    IDTVA will make necessary changes to the name and/or the address on Masterfile,

  3. If the case DOES NOT contain IDT indicators, Exam will use the last known address to continue the audit. Search IDRS for the most recent filed return using appropriate CFOL and IDRS command codes including RTVUE, TRDBV and IRPTRO to support the last known address. Update the address on IDRS and RGS/CEAS from the Service Center address to the last known address on the return.

No Response to our Request for Documentation

  1. If the taxpayer does not provide the requested documentation in 30 days, update out of EGC 5066 and return to normal Exam processing and/or the next stage of the audit. The campuses are responsible for monitoring the suspense dates for timely action.

    1. The AIMS/Batch/RGS Coordinator will monitor and update batch cases out of EGC 5066 as appropriate.

    2. If the case is in a technical unit, they will monitor and update out of EGC 5066 as appropriate.

      Note:

      ARC 14 remains on these cases allowing tracking of how many alleged ID Theft cases were returned to normal Exam processing.

IDTVA Returns a Case to Exam as not a True IDT

  1. If IDTVA determines a taxpayer is not a victim of identity theft and the audit should continue, they will:

    • Notate all actions on AMS prior to returning a case to Exam.

    • Leave a TXMOD history item "Not IDT, refer back to Exam" .

    • Route the case to Exam Attn: AIMS Coordinator via Form 3210.

  2. The AIMS Coordinator, or an authorized employee, will restore the AIMS database in the appropriate status code, unarchive RGS/CEAS, and assign to a technical unit to resume the audit process as required.

    Note:

    If IDTVA identifies an unprocessed return after they resolve the ID Theft issue, they will refer the case using Classification procedures (IRM 21.5.2.4.23.6, DIF SCORES or CLASSIFICATION "Send Return(s) to Examination for Review" ).

Reporting Time with Identity Theft Involvement

  1. Follow the table below for recording time spent on IDT duties:

    Identity Theft Time Reporting
    707 93400 DISC PHONES-IDT Phone assistors
    707 93600 EITC PHONES-IDT Phone assistors
    710 93563 DISC ID Theft Correspondence
    710 93663 EITC ID Theft Correspondence
    720 93453 DISC ID Theft Support
    720 93653 EITC ID Theft Support

Mixed Entity Procedures

  1. A multiple filer condition (Mixed Entity) occurs when more than one individual files using the same TIN. If the account has an -A Freeze (TC 976), perform the following TIN-related research:

    1. Use CC IMFOL, RTVUE, NAMES, INOLE, and DUPOL to research taxpayer’s and other TINS listed on the return.

    2. Request all returns for the year(s) involved, including the TC 976 document.

    3. Request MFTRA, type "U" , to obtain NUMIDENT information.

  2. If research shows the same taxpayer created the duplicate filing condition, continue with the audit. If you are unable to make this determination or research shows more than one individual is using the same TIN, follow the mixed entity procedures below for the appropriate AIMS Status.

    Mixed Entity Procedures for appropriate AIMS Status
    If Then
    Case is in AIMS Status 09 or below
    1. Input TC 290 for 0.00, Hold Code 4, and Aging Reason Code (ARC) 09.

    2. Once the -A Freeze drops from AMDISA, close AIMS by using a Survey Disposal Code of 31 or 32.

    3. Forward original and 97X returns with the Numident print. If available electronically, no prints or copies are required of the returns or Numident, Refer using Form 3210, Document Transmittal, to AM Scrambled SSN Coordinator for account correction. Notate on Form 3210"– A Freeze Mixed Entity Case" .

    4. If a Discretionary case, add the following special instructions for AM on Form 3210: If a good SSN is found, return case to Exam after return is submitted for processing with correct TIN.

    Case is Status 10 or above (except Status 24)
    1. Input TC 300 for .00, Hold Code 4, Priority Code 01, DC 12, and Aging Reason Code (ARC) 09.

    2. Forward original and 97X returns with Numident print. If available electronically, no prints or copies are required of the returns or Numident. Refer using Form 3210, Document Transmittal, to AM Scrambled SSN Coordinator for account correction. Notate on Form 3210"– A Freeze Mixed Entity Case" .

    3. If a Discretionary case, add the following special instructions to Form 3210: If a good SSN is found, return case to Exam after return is submitted for processing with correct TIN.

    Case is in AIMS Status 24
    1. Allow the case to age through the SNOD process.

    2. When time to close, print the TXMOD showing the – A Freeze. Include the print in the case file being sent to AM.

      Note:

      AM will not accept case without this print.

    3. Input TC 300 for .00, Hold Code 4, Priority Code 01, DC 12, and Aging Reason Code (ARC) 09.

    4. Forward original and 97X returns with Numident print. If available electronically, no prints or copies are required of the returns or Numident. Refer using Form 3210, Document Transmittal, to AM Scrambled SSN Coordinator for account correction. Notate on Form 3210"– A Freeze Mixed Entity Case" .

    5. If a Discretionary case, add the following special instructions to Form 3210: If a good SSN is found, return case back to Exam after return is submitted for processing with correct TIN.

    Note:

    Cases should be forwarded to your co-located AM Scrambled SSN Coordinator. For Cincinnati Exam, refer cases to the Memphis Scrambled SSN Coordinator. For Ogden, refer cases to the Philadelphia Scrambled SSN Coordinator.
    If a Form 1040-X, Amended U.S. Individual Income Tax Return, is sent from AM to be associated with an open Exam case and the associated Form 1040X is a mixed entity issue, close the case to the originating AM to resolve.

  3. If the second return has not been processed to a TC 976 DLN on the account, complete and attach Form 3893 , Re-Entry Document Control and forward the original return to Submission Processing (SP). Keep a copy of the return when sending an original to SP aligned to your campus. Suspend the case pending the document processing.

    Note:

    On Form 3893 Box 14 Remarks, notate to return the original document when processing is complete. Enter any additional information needed to clarify the reason for re-entry or to preserve a proper audit trail.

  4. All incomplete case files will be returned by AM.

  5. It is important to make a distinction between a mixed entity case and cases that are actual identity theft. Do not confuse the issue of taxpayer having no knowledge of income earned or a return filed, with an assumption taxpayer is a victim of identity theft. Often the problem is created inadvertently and the problem is a Mixed Entity and/or Scrambled SSN case rather than an intentional use of a stolen identity. If the taxpayer states that he/she is a victim of identity theft, refer to IRM 4.19.13.26, Campus Exam Identity Theft.

Campus Exam Closing Actions

  1. Closing Instructions for Campus Exam:

    Closing Instructions for Campus Exam
    If Then
    Taxpayer replies to any letter and provides enough documentation and verification to no change the case Close case as No Change. Complete Form 5344 with:
    • DC 02

    • Technique Code 02

    • Input TC 300 for .00

    • Verify that appropriate "No Change" Issue Codes are correct.

    On TY 2014 and subsequent returns:
    • Remove the CRN 869 indicator from Form 5344

    The No Change Letter 3581 will be systemically generated at case closure.
    Taxpayer agrees by signing report before the issuance of the SNOD.

    Note:

    On a joint return both signatures must be present unless the deficiency, including penalty(s), is full paid. See full paid below. .

    • SNOD procedures must be used for unagreed spouse if deficiency, including penalty(s) is not full paid.

    Caution:

    If the taxpayer attaches documentation to the signed report, do not work as a signed agreed. Update the case to reply status and work accordingly.

    Close case as Agreed within 14 calendar days of receipt in the Operation. Complete Form 5344 with:
    • DC 04

    • Reference/Transaction Codes for changed items

    • Technique Code 02

    • Agreement Date

    • Fax Agreement indicator, if applicable

    • Input TC 30X

    The taxpayer full pays the deficiency, including penalty(s), before the issuance of the SNOD, but does not sign the agreement. Refer to IRM 20.2.4.8.1, Cash Bonds, to differentiate between a payment and a cash bond, TC 640 with blocking series 990-999 and designated payment code 12. Cash bonds are not considered agreed cases. The payment was made to stop the accrual of Interest. Close the case Agreed based on the payment. Complete Form 5344 with:
    • DC 04

    • Reference/Transaction Codes for changed items

    • Technique Code 09

    • Agreement Date

    • Input TC 30X

    The signed agreement is received in the IRS after the issuance of the Statutory Notice. Close case Agreed. Complete Form 5344 with:
    • DC 09

    • Reference/Transaction Codes for changed items

    • Technique Code 02

    • Agreement Date

    • Input TC 30X

    The taxpayer remits full payment of the deficiency, including penalty(s), after the issuance of the SNOD but does not sign the agreement/waiver in accordance with Rev. Proc. 2005-18. Refer to IRM 4.19.13.11No Response and Unagreed Cases. The case cannot be closed until the period for filing a petition with Tax Court has expired and no petition was filed. The case will be closed default if no petition was filed.
    The taxpayer signs the examination report/waiver sent with the SNOD. The case may be closed as Agreed, DC 09.
    Taxpayer does not agree and does not file a petition with the Tax Court after issuance of SNOD. Close case as Default after 105 days have expired from the date of Statutory Notice (165 days if Taxpayer is outside country). Complete Form 5344 as follows:
    • Taxpayer replied during examination - DC 10, Technique Code 02

    • Taxpayer did not reply during examination - DC 10, Technique Code 06

    • Undeliverable SNOD and taxpayer did not reply during examination - DC 13, Technique Code 07

    • Undeliverable SNOD and taxpayer replied during the examination - DC 10, Technique Code 2. Leave notation that Statutory Notice Undeliverable in RGS action text.

      Note:

      RGS extension code 99 should not be input if SNOD is undeliverable and there was prior correspondence. See IRM 4.19.20.1.6.2, Taxpayer Correspondence Received After the Issuance of the Statutory Notice of Deficiency Non - CPS Generated Mailing.

    • Input TC 30X.

    The taxpayer submits an amended tax return in response to a non claim examination letter; the assessment is processed before it reaches Exam, and resolves all examination issues. Close case using Disposal Code 01 and the appropriate Technique Code.
    • Input TC 300 for 0.00.

    • Input the TC 29X adjustment amount on Item 415 on the Form 5344. Refer to IRM 4.4.12.5.70, Item 415: Amended Return Amount.

    The taxpayer submits an amended return in response to a non claim examination letter; the assessment is processed before it reaches Exam and does not resolve all examination issues. You cannot close the case. Refer to IRM 4.19.13.10.1, Taxpayer Responses - Additional Information Needed.
    The taxpayer submits a Shared Responsibility Payment (SRP) worksheet with a reply or amended return. Verify that the SRP worksheet has been acknowledged in the workpapers and that a copy has been forwarded to the designated unit making SRP adjustments. Ensure that the CRN 869 indicator on Form 5344 is 0 before validating the form.

    Note:

    Any time the taxpayer replies, use Technique Code 02. It is very important that the appropriate technique code is used. Additional closing instructions can be found in IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments. In an instance of Negative Deficiency, specifically dealing with QRP, see IRM 4.19.14.8.5, QRP Negative Deficiency Procedures, for clarification.

  2. The responsibility of the designated unit will be to post the SRP adjustment to MFT 35. No other examiners should be making the SRP adjustments.

    Posting Adjustment of the SRP to MFT 35
    Input TC 29X with Penalty Reference Number 692. This will generate TC 240 with Penalty Reference Number 692. Use the following codes:
    1. Blocking Series - 05

    2. Category Code - UVAL

    3. Source Code - 2

    4. Reason Code 154 - SRP

    5. Hold Code - 0

Problem Correction Reports

  1. The Problem Correction Report accessed from Control D Web allows the sites to identify pre-refund cases where the refund, held with TC 810, may have been processed incorrectly. The report provides a listing of Discretionary Exam FTHBC and Adoption Credit cases. Neither credit has been refundable since 2011 and the report is no longer generated.

Victims of Terrorist Attacks

  1. The following sections deal with victims of terrorist attacks

Deceased Victims of September 11th, Oklahoma City and Anthrax Attacks

  1. Internal Revenue Code section 692(d) allows the forgiveness of income taxes for victims of the terrorist attacks against the United States that occurred on April 19, 1995 (Oklahoma City) or September 11, 2001 (9/11) who die as a result of wounds or injury sustained in these attacks. It also allows the forgiveness of income taxes for victims who die as a result of illness incurred as a result of an anthrax attack that occurred on or after September 11, 2001 and before January 1, 2002.

  2. Income tax is forgiven for 2000 and all later years up to and including the year of death for victims of the September 11th and anthrax attacks. Income tax is forgiven for 1994 and all later years up to an including the year of death for victims of the Oklahoma City attack. However, the law allows the IRS to refund taxes only for certain years. The normal statute of limitations rules for refunds apply to claims for refund.

  3. Individuals filing returns and amended returns for deceased victims of these three specific attacks claiming tax forgiveness should send them to the Kansas City Submission Processing Center (KCSPC) and should annotate them: "KITA – Oklahoma City" , "KITA - 9/11" "or" "KITA - Anthrax" . KITA means killed in terrorist attack. Some returns may also show the annotation "Sec. 692(d)(2) Payment" in the "Payments" section of Form 1040 or Form 1040X. TXMOD and ENMOD may show "KITA" in the top right corner.

  4. During processing, returns with the above annotations are routed to the KCSPC KITA Unit for verification and expedited processing. Forms 1040X should not be scanned into CIS.

  5. For more information, see Pub 3920, Tax Relief for Victims of Terrorist Attacks, and IRM 21.6.6.4.23.2, Killed in Terrorist Action (KITA)/Killed in Action (KIA) and Astronauts Killed in the Line of Duty.

Cases Identified in Campus Examination Inventory
  1. Follow instructions in the table below if any of the following are discovered or received:

    1. A return or amended return referencing KITA - Oklahoma City, "KITA - 9/11" , "KITA - Anthrax" , or "Sec. 692(d)(2) Payment" ,

    2. A return or amended return claiming tax forgiveness on behalf of a deceased victim of the Oklahoma City, September 11th, or anthrax attacks,

    3. Correspondence or a telephone call stating the taxpayer died as a result of injuries or illness from the Oklahoma City, September 11th, or anthrax attacks,

    4. TXMOD and ENMOD show "KITA" in the top right corner with an open control in IDRS category "KITA" .

      Cases Identified in Campus Examination Inventory
      If discovered or received in: Then:
      Cat-A CIS inventory Return the record to AM with instructions to follow IRM 21.6.6.4.23.2, Technical Unit or Designated Function KITA/KIA and Astronauts Killed in the Line of Duty
      Correspondence Examination Inventory (including unstarted, open, late reply or audit reconsideration) Contact the designated Campus Examination "KITA Coordinator per Who/Where" on SERP for guidance on proper case resolution.

Disabled Victims of Terroristic Actions - Cases Identified in Campus Examination Inventory

  1. Internal Revenue Code section 104(a)(5) allows the exclusion of disability income received prior to minimum retirement age by individuals for injuries incurred as a direct result of a terrorist action (including the September 11 attacks, anthrax attacks, and Oklahoma City attack) directed against the United States (or its allies). No specific annotations or processing instructions apply to these returns and amended returns, but taxpayers may reference "Publication 3920" or "IRC Section 104(a)(5)" .

  2. If a technician or Cat-A classifier discovers or receives a return, amended return, correspondence or a telephone call in Examination inventory or CIS inventory excluding terrorism-related disability income, normal Examination procedures apply.

Campus Exam Return Preparer Misconduct (RPM) Referrals

  1. Taxpayers alleging to be a victim of Return Preparer Misconduct (RPM) will be required to provide documentation to substantiate RPM incidents before referring a case to Identity Theft Victim Assistance (IDTVA) in W&I Accounts Management.

Requesting Supporting Documentation

  1. Request Return Preparer Misconduct (RPM) (via phone call or correspondence)Form 14157, Complaint: Tax Preparer, and Form 14157A, Tax Return Preparer Fraud, or Misconduct Affidavits. See IRM 25.24.1.3, RPM General Documentation Requirements, for additional information.

  2. If the request is made via a telephone call, input an Action Note on CEAS to reflect the requested extension is being granted and for how long. See IRM 4.19.19.3.3.1, CEAS Action Note.

    • If the case is open at another Campus or not assigned to you, input a CEAS Action note to alert them of the IDT allegation. See IRM 4.19.19.3.3.1, CEAS Action Note. They will be responsible for doing the updates to the account as appropriate. See IRM 4.19.19.3.2, Replying to Taxpayer Inquiries.

    Caution:

    When making or receiving phone calls, technicians must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information.

  3. If a taxpayer submits correspondence indicating they are victim of RPM, request Form 14157/14157-A on Form 886A and prepare the case for the next stage of the audit. If the case is in Status 24, use Letter 555 to request the required document. Inform the taxpayer this does not extend the time to petition Tax Court, per IRM 4.19.13.9.1, Taxpayer Responses - Additional Information Needed.

  4. Utilizing the Query Screen in RGS, add the appropriate amount of extension time to the end of the suspense period, regardless of how much time remains on the original suspense period.

  5. If the suspense period has expired but the case has not yet been processed to the next status, back the case down if possible (i.e., if the next letter has not been issued or triggered to CPS.).

  6. If it is not possible to back the case down (i.e., next letter has already been triggered to CPS) the taxpayer must be contacted to inform them that the extension cannot be granted and why. Every effort should be made to accommodate the taxpayer's request. Encourage the taxpayer to fax the documentation, if possible.

  7. Cases in AIMS status 24 will run concurrently with the 90 day suspense period. The status 24 suspense date is only adjusted if the 30 days ends after the 90 day suspense date.

  8. Encourage the taxpayer to send a signed Form 14157/14157A, a signed tax return, and/or a copy of the signed return they received from the tax preparer.

  9. Update to Employee Group Code 5088 and input ARC 96 to indicate a taxpayer will provide the required documentation.

    Caution:

    Do not confuse fraud schemes related to RPM claims and IDT. If a taxpayer authorized a preparer to file a return, but the preparer added or inflated deductions or credits to obtain a larger refund without the taxpayer's knowledge, this is not IDT. When situations like this are encountered, the examiner needs to consider all the facts and circumstances of the case and work them on a case by case basis.

Taxpayer Replies

  1. When the taxpayer submits the requested documents, prepare the case to be referred to Identity Theft Victim Assistance (IDTVA) in W&I Accounts Management:

    1. IRM 25.6, Statute of Limitations, provides the service-wide procedures for identifying and processing statute returns. Statute protection applies to RPM referrals if the Assessment Statute Expiration Date (ASED) is within 180 days of expiring. Exam will close the audit and refer to IDTVA in a Red folder.

    2. Notate CEAS Workpapers. See IRM 4.19.13.5, Workpapers for all Cases.

    3. Update to EGC 5088 and input ARC 96, if not already present, to indicate a taxpayer provide the required documentation.

    4. Close AIMS using Disposal Code 12, TC 300 $0.00, Manual Assessment amount of $1, Hold Code 4, and Priority Code 1. If not already present, include ARC 96 to indicate a taxpayer claimed an RPM allegation.

    5. Input the TC 971 AC 010 to reset the -A freeze, only on cases that already have an -A freeze on the account. Use a posting delay code of 1 cycle to allow the TC 300 to post first.

    6. Leave a history item on TXMOD "IDTVAREFRL" .

    7. Make a copy of Form 14157/14157A and any supporting documents, not available electronically, to be placed on the PAS wall with closing documents.

  2. Forward Form 14157/14157A and any supporting documents, not available electronically, to IDTVA via Form 3210.

    Note:

    Indicate if a case was previously in Status 24.

  3. If correspondence is received on a closed AIMS case (Closed Case Mail) and Form 14157/14157A or Misconduct Affidavits are attached, route to IDTVA via Form 3210 to be screened by IDTVA.

    Reminder:

    Ensure the case was not worked by IDTVA. Taxpayer account research (e.g. IDRS, AMS, and/or CIS) is necessary to determine if the case has already been worked.

No Response to our Request for Documentation

  1. If the taxpayer does not provide the requested documentation in 30 days, update out of EGC 5088 and return to normal Exam processing and/or the next stage of the audit.

    1. The RGS Coordinator will monitor and update batch cases out of EGC 5088 as appropriate.

    2. If the case is in a technical unit, they will monitor and update out of EGC 5088 as appropriate.

      Note:

      ARC 96 remains on these cases allowing tracking of how many alleged RPM cases were returned to normal Exam processing.

IDTVA Returns a Case to Exam as not a true RPM

  1. If IDTVA determines a taxpayer is not a victim of RPM and the audit should continue, they will:

    1. Notate all actions on AIMS prior to returning a case to Exam.

    2. Leave a TXMOD history item "Not RPM, refer back to Exam" .

    3. Route the case to Exam Attn: AIMS Coordinator via Form 3210.

  2. The AIMS Coordinator, or an authorized employee, will restore the AIMS database in the appropriate Status Code, unarchive RGS/CEAS, and assign to a technical unit to resume the audit process as required.

    Note:

    If IDTVA identifies an unprocessed return after they resolve the RPM issue, they will refer the case using Classification procedures (IRM 21.5.2.4.23.6, DIF SCORE or CLASSIFICATION "Send Return(s) to Examination for Review" ).

Reporting Time

  1. Use function 718 and the program code you are currently working when reporting time spent on RPM related cases.

Transfer Alert Checksheet

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Related Resources

Related Resources
IRM Section Number Section Title
IRM 1.2.20.1.1 Policy Statement
IRM 1.2.43.2 Delegation Order 4-1
IRM 1.2.52.3 Delegation Order 25-2
IRM 2.3.47 Command Codes
IRM 2.3.51-13 Command Code IMFOL Output Display-Entity
IRM 3.10.5 Batch/Blocking Tracking System
IRM 3.17.79.6.4.2 Certifying Automated Clearing House/Direct Deposit Hardship Refunds
IRM 4.10.1.6.12 Third Party Contacts - Background
IRM 4.10.15 Report Generation Software
IRM 4.11.29 Transfer of Returns Open in Examination
IRM 4.11.29.4 Circumstances Which Permit a Transfer of Examination
IRM 4.11.29.7 Written Requests by the Taxpayer
IRM 4.13.1.4 Criteria for Reconsideration
IRM 4.18.1 Offers in Compromise Received in Exam
IRM 4.19.10.16.1 Standard Suspense Periods for Correspondence Examination
IRM 4.19.10.4 Fraud Referrals
IRM 4.19.11.1.23 Employee Returns
IRM 4.19.14.4 RPS Casework Procedures
IRM 4.19.14.4.1 RPS Examination Process
IRM 4.19.4.5 Evaluating EITC Taxpayer Responses
IRM 4.19.14.6 Recertification
IRM 4.19.14.6.1 EITC 2/10 Year Correspondence Guidelines for Examination Techniques
IRM 4.19.14.8.5 QRP Negative Deficiency Procedures
IRM 4.19.16 Claims for CAT-A Claims
IRM 4.19.16.1.4.1 Claims Contact Procedures
IRM 4.19.19.3.3 CEAS Notes
IRM 4.19.20 Automated Correspondence Exam
IRM 4.19.20.1.6.2 Taxpayer Correspondence Received After the Issuance of Statutory Notice
IRM 4.19.21.2 Processing Incoming Correspondence
IRM 4.19.24 Compliance Identity Theft
IRM 4.19.3.3 AUR Process Codes
IRM 4.2.7 Ex Parte Communication Procedures
IRM 4.4.12 Examined Closings, Surveyed Claims and Partial Assessments
IRM 4.4.12.5.70 Item 415 Amended Return Amount
IRM 4.4.24 Payments and Remittances
IRM 4.4.33 Transfers
IRM 4.8.10.5.6 Status 90 Cases
IRM 4.8.9 Statutory Notices of Deficiency
IRM 4.8.9.21 Undeliverable Notice of Deficiency
IRM 4.8.9.21.1 In House Address Information
IRM 4.8.9.21.2 New Address Found
IRM 4.8.9.25 United States Tax Court Petition Filed
IRM 4.8.9.28 Rescinding Notices of Deficiency
IRM 4.8.9.7 Case Review Prior to Preparing Notices of Deficiency
IRM 4.8.9.8.2.5 Establishing the Last Known Address
IRM 5.19.13.1.2 Expenses Overview
IRM 5.19.7.2 Monitoring Offers in Compromise
IRM 11.3.2.7.1 Leaving Information on Answering Machines/Voice Mail
IRM 11.3.2.7.2 Use of Cell Phones and Cordless Devices
IRM 13.1.20 TAS Taxpayer Assistance Order
IRM 13.1.7.2 TAS Case Criteria
IRM 13.1.7.4 Same Day Resolution by Operations
IRM 20.1.1.3.1 Unsigned or Oral Requests for Penalty Relief
IRM 20.1.5.14 IRC 6663Civil Fraud Penalty
IRM 20.1.5.6.1 Reasonable Cause
IRM 20.1.5.6.2 Taxpayer’s Effort to Report the Proper Tax Liability
IRM 20.1.5.6.3 Experience, Knowledge, Sophistication and Education of Taxpayer
IRM 20.1.5.6.4 Reliance on Advice
IRM 20.1.5-7 Determining Reasonable Cause and Good Faith
IRM 20.1.5.7 IRC 6662 (c)Negligence or Disregard of Rules or Regulations
IRM 20.1.5.8 IRC IRC 6662 (d)Substantial Understatement Penalty
IRM 21.1.3.19 Informal Contracts
IRM 21.1.3.2.3 Required Taxpayer Authentication
IRM 21.3.3.4.2.1(6) Use of 86C Letter - Referring Taxpayer Inquiry/Forms to Another Office
IRM 21.3.7 Processing Third Party Authorizations onto the Centralized Authorizations File
IRM 21.4.4 Manual Refunds
IRM 21.4.5 Erroneous Refunds
IRM 21.5.2.4.23.6 DIF Scores in Classification "Send Return(s) for Review"
IRM 21.5.3.4 General Claims Procedures
IRM 21.6.1.5.3.1 Separate to Joint and Both Taxpayers Previously Filed
IRC 21.6.6.3.23 Killed in Terrorist Action/Killed in Action and Astronauts Killed in the Line of Duty
IRM 21.9.2.9 Identity Theft Assistance
IRM 25.16 Disaster Assistance and Emergency Relief
IRM 25.16.1.2 Covered Disaster Area
IRM 25.23.2.17 Identity Theft Supporting Documentation
IRM 25.23.8.2 IDTVA Exam General Procedures
IRM 25.24.1.3 RPM General Documentation Requirements
IRM 25.6 Statute of Limitations
IRM 25.6.22 Extension of Assessment Statute of Limitations by Consent

W&I Form 4700, Examination Workpapers - page 1

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W&I Form 4700, Examination Workpapers - page 2

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W&I Form 4700, Examination Workpapers - page 3

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SB/SE Form 4700, Examination Workpapers - page 1

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SB/SE Form 4700, Examination Workpapers - page 2

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SB/SE Form 4700, Examination Workpapers - page 3

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