The Service has the authority to prepare returns for any person who fails to submit a return required by Internal Revenue law or regulation at the time prescribed, or makes (willfully or otherwise), a false, or fraudulent return. The return is prepared from the personal knowledge of the Service's employee or from information which can be obtained through testimony or otherwise.

IRC § 6020(b) provides that the return is prima facie good and sufficient for all legal purposes, however despite this language, for most purposes of the IRC, the section 6020(b) return is not treated as a return filed by the taxpayer. For example be aware of the following:

IRC § 6020(b) pertains to individual income tax returns. Such returns may be automatically generated by the Campus or manually prepared with reports of proposed tax adjustments.

When the taxpayer has not filed an individual income tax return, the Service needs to create a valid IRC § 6020(b) return to apply the Failure to Pay (FTP) Penalty.

The Tax Court does not consider a mere assessment of tax or FTP penalty to constitute a "return" under the provisions of IRC § 6651(a) (2) and will not sustain the penalty. Therefore, to sustain a FTP penalty on a taxpayer who has not filed a return, the Service must, IN ALL CASES, properly process an IRC § 6020(b) return according to the following Form 13496 Certification procedures or have the taxpayer sign an appropriate return .

There are two different processes for certifying a valid IMF IRC § 6020(b) return. The first is the Report Generation Software (RGS)/Automated Correspondence Exam (ACE) procedure, the other is Form 13496, IRC Section 6020(b) Certification.

Electronic Form 13496 - The RGS/ACE IRC § 6020(b) Certification and attached documents are generated systemically. Under Exam RGS/ACE procedures, the data that constitutes a valid return under IRC § 6020(b) includes computation of the taxpayer’s tax liability for the tax period in question and a completed Electronic Certification form with the electronic signature of the delegated IRS employee.

Paper Form 13496 Procedures - Form 13496 MUST be completed with a live signature if not generated systemically through RGS/ACE and MUST be dated on or after the date the 30-day letter (or revised 30-day letter) is signed and dated such that the date of the certification is identical to, or later than, the 30-day letter. The completed Form 13496 MUST:

Form 13496 may not be prepared or dated after the date of the 90-day letter.

Whenever the examiner revises a report of proposed adjustments that increases the total tax liability of the taxpayer (without regard to whether or not the revised report is reissued to the taxpayer), a re-certification is required on another Form 13496 dated on (or after) the same day as the revised report.

When the report of proposed adjustments involves more than one tax year, create a separate Form 13496 for each year and attach each one to a photocopy of the report for each year.

Headquarters Examination establishes the priority of cases to be selected based on the availability of cases identified through the Collection Inventory and other Compliance Service initiatives for investigation by Examination.

Headquarters Examination Workload Selection performs periodic reviews of inventory selected, addresses inventory selection concerns and improves case selection by modifying selection criteria or suggests new initiatives.

See IRM 4.19.13.4, Report Generation Software (RGS) System, for guidance for creating the examination report, including categorization of issues.

Generally all income from transcripts will be included on the report. Reported cost basis will be considered when determining gains on securities.

Accounts selected for the Exam Non-filer program will be established on AIMS for each tax year as follows:

The filing status will be Single or MFS

The following letters are used most often in the Non-filer Program and have the same suspense time frames as other Correspondence Exam letters, i.e. 45 days for most letters except Statutory Notice Of Deficiency (SNOD), which is suspended for 105 days, or 165 days for a foreign address. A few letters, such as Disallowance letters, will not be suspended.

Source Code 24, Substitute for Return, and 25, Non-filer Strategic Initiative-High Income Non-filer are used for Non-filer program work. Do not update from Source Code 25 to another Source Code or to Source Code 25 from another Source Code.

Source Code 24 with Project Code 0277 will be used for initiating additional Non-filer cases identified during the course of working other program work upon acceptance by Classification.

Project Codes 0277, Non-filers, and 0422, State RAR Initiative, are commonly used for identifying projects worked within the Non-filer program.

Refund Hold cases will be placed in Project Code Project Code 0277 with Tracking Code 0911 in SBSE. Project Code 0655 was previously used in W&I.

The Source and Project code will remain the same on Non-filer cases when additional issues such as large, unusual, or questionable (LUQ), are selected based on the delinquent return for program tracking purposes.

Technique codes can be found in IRM 4.4.12.5.39.4, Campus Exam (EGC 5XXX). The following Technique Codes (TC) will be used when closing Non-Filer cases:

See IRM 4.19.17.6, Non-Filer Closures, for commonly used Disposal Codes (DCs).

Workpaper documentation is extremely important as it leaves an audit trail of the actions taken by the Correspondence Examination Technician. Refer to IRM 4.19.13.5Work papers for All Cases, for guidance. Common items that must be documented on the Non-filer workpapers are:

Below are examples of appropriate workpaper documentation:

Use partial assessment procedures to assess the secured delinquent return if a SFR has posted and the examination is continuing or the taxpayer is appealing the reasonable cause determination.

Ensure the return has been validated, prior to making a partial assessment per the return.

DO NOT resolve credit balances on partial assessments until final case closure.

Update filing status and name line, if applicable, and Assessment Statute Expiration Date (ASED) as appropriate.

Do not update the activity code until after the examination is completed.

Several reviews are mandatory during Non-Filer case processing:

Due to system restraints, the maximum amount of a single assessment is $99,999,999.99. Therefore, if the assessment is $100 Million dollars or more it needs to be input with two separate transactions, one for $99,999,999.99 and a separate one for the difference between the total assessment and $99,999,999.99, Whenever the assessment is over $100 million the case must:

All returns must be reviewed to ensure protection of all statutes of limitation. See IRM 25.6, Statute of Limitations, for specific instructions on statute protection. See IRM 25.6.1.6.15, When a Document is Treated as Filed under the IRC, to determine the return received date, and to determine the date the return is considered filed under the IRC.

Follow IRM 4.19.13.13, Undeliverable Mail.

The initial request for relief may occur either during or after an examination.

When the tax liability has been resolved, the FTF and FTP penalties are applied unless the taxpayer has provided an explanation and documentation for Reasonable Cause (RC).

Refer to IRM 20.1.1.3, Criteria for Relief from Penalties, as a resource guide for the non-assertion of penalties due to RC.

If the taxpayer is entitled to penalty relief, document work papers that RC was considered, and how RC was established.

If the taxpayer is not entitled to penalty relief, document work papers that RC was considered and why RC does not apply and what penalties are to be assessed when the case is forwarded to AIMS as both partial and final assessments. Also include the date to start the FTP penalty if the FTP penalty applies.

When responding to telephone inquiries, disclose no tax return information until reasonably certain the person making the inquiry is the taxpayer or his/her authorized representative. For complete disclosure information, see IRM 21.1.3.2 , General Disclosure Guidelines.

During the telephone contact: and telephone inquiries on Non-filer cases without a return will often ask general questions such as how to secure prior year forms, requests for extension, or explain why the taxpayer is not required to file. The table below provides a list of the most common taxpayer replies and guidelines on how to respond.

Document workpapers for telephone calls and correspondence to/from the taxpayer with actions taken and decisions made.

Delinquent returns can be received directly in the Operation from the taxpayer, posted to Master File as a duplicate return (TC 976/977), routed from Accounts Management (AM), or from the Taxpayer Advocate Service via Operations Assistance Request (OAR) after TC 976/977 post.

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Professional judgment should be used in the review, acceptance, and selection of return(s) with LUQ issues. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

A return is not considered filed for interest computation purposes until the return is received in processable form.

A return is in processable form if it:

If the requested information is received after the return due date, the return is processed with a "Return Processable Date (RPD)" reflecting the date the information was received. This date is also known as the "Correspondence Received Date (CRD)." The CRD is used to calculate interest the IRS owes on refunds.

Form 5351, Examination Non-Examined Closings, is used as an input document to close non-examined cases off of AIMS.

Address and resolve account credits and payments as applicable. If RSED (Refund Statute Expiration Date) has expired, see IRM 25.6.1.7, Credits and Payments, for more information.

There are four types of closures after a return has been received. They are:

Refer to IRM 4.19.17.3.4, Non-Filer Technique Codes, and include appropriate code upon case closure.

Refund Hold (RH) inventory occurs when the Service holds individual income tax refunds and credit elects when a current or prior year refund return is filed and the taxpayer's account has at least one unfiled tax return within the five years prior to the current tax year. The refund is used to offset any balance due on the delinquent return(s). If there is no balance due, or an amount remains after offsetting, the refund is released to the taxpayer. If after initial contact, the delinquent return(s) are not filed, a Statutory Notice of Deficiency may be issued. Once issued, the refund can be transferred to the tax year of the proposed deficiency(ies). It will remain there until a return is filed or the Service imposes the proposed assessment after the appropriate suspense period.

Refer to multifunctional IRM 25.12.1, Processing Refund Hold Program Inventory, for specific information.

Each functional area that is assigned a RH case is responsible for monitoring its cases and ensuring disposition of the case is expeditious and timely.

The Frivolous Return Program (FRP) teams in Ogden process frivolous filer correspondence and/or tax returns received from taxpayers in the Campuses.

The Non-filer audit and the assessment of the Section 6702, Frivolous Return Penalty, are separate issues and can be performed independently and simultaneously.

The Campuses are not to work any frivolous filer issues received from taxpayers. If your operation has an embedded FRP Coordinator, route it to the coordinator to determine if it needs to be sent to Ogden. If your operation does not have an embedded coordinator, this information MUST be forwarded to the Ogden FRP Team.

Tax Returns or Correspondence – Correspondence Examination Technician

Tax Returns and Correspondence – Clerk

Returns secured in the Non-filer Program may appear to have suspicious or questionable expenses/credits/deductions claimed. Refer to IRM 25.1.2.3, Indicators of Fraud, for examples of Fraud indicators and on how to refer to the Campus/Exam Fraud Coordinator.

Work papers must be documented before and after a return is referred to the Campus Fraud Coordinator for potential Fraud. Documentation should include actions taken and decisions made.

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

Refer to IRM 5.18.1.8.2.3.10, Freedom of Information Request, for handling any response from the taxpayer requesting information and citing the FOIA or Privacy Act.

Taxpayers file Form 2848 , Power of Attorney and Declaration of Representative, to notify the IRS of their authorized representative.

Refer to IRM 4.19.13.7, Powers of Attorney, and IRM 21.3.7, IRM Processing Third Party Authorizations on the Centralized Authorization File, for guidelines on processing Powers of Attorney and additional information.

Refer to IRM 4.19.13.19 , Bankruptcy.

If the taxpayer states they are a victim of identity theft, or someone is using their SSN illegally, refer to IRM 4.19.13.25, General Case Development and Resolution, Campus Exam Identity Theft, for acceptable documentation and guidance.

Follow correspondence procedures and telephone procedures outlined in IRM 4.19.13, General Case Development and Resolution .

Pay special consideration to the Auditing Standards laid out in:

Secured delinquent returns in Non-filer cases are processed by Examination, see IRM 4.19.17 , Campus Examination Non-Filer Program. If a dummy/SFR was previously processed and a Transaction Code (TC) 150 has posted, the delinquent return cannot be forwarded to the Campus for processing. The amount of tax shown on the return and any applicable penalties will be assessed by Examination.

Do not waive penalties in Non-filer cases without reasonable cause.Whether a taxpayer has met the reasonable cause and good faith exception is a facts and circumstances determination made on a case by case basis. The most important factor is the extent of the taxpayer's effort to assess the proper tax liability. Taxpayers are required to exercise ordinary business care and prudence, i.e., taking that degree of care that a reasonable, prudent person would exercise. It is the examiner's responsibility to solicit and evaluate the taxpayer's explanation for the position taken with respect to an issue or with respect to late filing. However, it is the taxpayer's responsibility to support his or her explanation. Regardless of the reasons advanced, the taxpayer must have exercised ordinary business care and prudence. IRM 20.1, Penalty Handbook, will provide assistance and should be used as a resource guide for the assertion or non-assertion of penalties and correct calculations of appropriate penalties in Non-filer cases. Remember that the taxpayer must be given appeal rights, as per Pub 1 , Taxpayer Rights.

The taxpayer may request an abatement of penalties even after the examination is closed using Form 843, Claim for Refund and Request for Abatement. The taxpayer will still bear the same burden to demonstrate the reasonable cause exception is met.

Respond to unagreed correspondence using Letter 692, Revised Report/Additional Information, or Letter 555, , Notification of Findings based Upon Taxpayer’s Recent Data Re Tax Liability, when the Notice of Deficiency has been issued.

Since the proposed adjustment is based on amounts the taxpayer has reported to the Commonwealth of Puerto Rico, generally documents submitted by the taxpayer will not reduce their assessment. Include standard paragraphs 2503 and 7401 in the explanation to the taxpayer. Ask the taxpayer to submit a copy of the return filed with the Commonwealth of Puerto Rico, if they dispute our calculation.

The tax was paid under the secondary taxpayer's account. Verify the situation by:

The tax is owed by the secondary taxpayer. Verify the situation by:

There are estimated tax payments on the taxpayer's account. Verify the situation by:

The taxpayer submitted a return, which was processed after the “Substitute for Return” posted. Verify the situation by:

Part or all of the income from self-employment was earned as a notary public. Verify the situation by:

The taxpayer works for the Puerto Rico Departamento de Salud (Department of Health) and is being treated as a statutory employee for the purpose of Puerto Rico taxes. Verify the situation by checking:

Bona Fide residents of Puerto Rico who are not subject to Chapter 1 Federal income tax and exclude income under IRC 933 must have at least three qualifying dependent children under age 17 and have paid FICA or Self-Employment taxes in order to claim the refundable child tax credit. See IRC 151/152 and IRC 24(d). Our taxpayers may wish to claim this credit in order to offset a portion of the exam assessment. They must file Form 1040SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico), to claim this credit. Verify the situation by:

The Additional Child Tax Credit is a prepayment credit and will affect the calculation of the Failure to File, Failure to Pay, and Estimated Tax penalties.

All delinquent secured Non-filer returns with Form 2555 or Form 2555-EZ will be classified for international issues in the Philadelphia Campus Classification function.

If International issues do not warrant examination, the return will be screened for domestic LUQ issues before sending to Corr Exam for processing.

Classification will process the International Non-filer return following the determination table below.

All International returns (using the International Referral Criteria above) that are secured by TAS on an open Exam Non-filer case will be routed to PSC. The AIMS Coordinator (AC) in PSC will contact the AC in the Campus with the open AIMS database. The AIMS database will be transferred to PSC using AIMS transfer information discussed above.