4.19.25 Information Return Penalty (IRP) Procedures

Manual Transmittal

August 21, 2017

Purpose

(1) This IRM supersedes the information in IRM subsection 4.19.6.5, Information Return Penalty (IRP) Campus Procedures.

Material Changes

(1) 4.19.6.5, Information Return Penalty (IRP) Campus Procedures - This information has been revised to add clarity and is now provided in 4.19.25.2 and renamed Information Return Penalty (IRP) Overview/Scope.

  1. 4.19.6.5.1, Related IRMs and Publication, - This subsection has been revised to add clarity and is now provided in 4.19.25.1.7 and renamed Related Resources.

  2. 4.19.6.5.2, IRP General Overview, 4.19.6.5.3, IRP-Philadelphia Campus Information Return Penalty (Consolidated Site) Overview, and 4.19.6.5.3.1, 972CG Overview: These three subsections have been revised to add clarity and consolidated into 4.19.25.2, 972CG Overview.

  3. 4.19.6.5.3.2, IRP Penalties not Part of the 972CG Process - This subsection has been revised to add clarity and is now provided in 4.19.25.2.1 and renamed IRP Penalties Not Included on the Notice 972CG.

(2) 4.19.6.5.4, 972CG Mail-out Procedures - This subsection has been revised to add clarity and is now provided in 4.19.25.2.2, 972CG Mail-out Procedures.

  1. 4.19.6.5.4.1, Special 972CG Notice Review Procedures - This subsection has been revised to add clarity and is now provided in 4.19.25.2.2.1, Special 972CG Notice Review Procedures.

  2. 4.19.6.5.4.2, 972CG Recreate Requests - This subsection has been revised to add clarity and is now provided in 4.19.25.2.3, 972CG Recreate Requests.

(3) 4.19.6.5.5, Penalty Dollar Amount and Limitations - This subsection has been revised to add clarity and is now provided in 4.19.25.3, Penalty Dollar Amount and Limitations.

(4) 4.19.6.5.6, Intentional Disregard of Rules and Regulations - This subsection has been deleted.

(5) 4.19.6.5.7, 972CG Reply Procedures - This subsection has been revised to add clarity and is now provided in 4.19.25.5, 972CG Reply Procedures.

  1. 4.19.6.5.7.1, Taxpayer Requests Additional Time to Respond to 972CG - This subsection has been revised to add clarity and is now provided in 4.19.25.5.6, Taxpayer Requests Additional Time to Reply to Notice 972CG.

  2. 4.19.6.5.7.2, Taxpayer Doesn’t Understand Penalty - This subsection has been revised to add clarity and is now provided in 4.19.25.5.1, IRP Cases Needing Further Action, and information regarding suspending a case is now provided in 4.19.25.11, Suspense Procedures.

  3. 4.19.6.5.7.3, Taxpayer Requests Information from the IRS - The information has been revised to add clarity and is now included in 4.19.25.5, 972CG Reply Procedures, and its subsections.

  4. 4.19.6.5.7.4, Taxpayer States and Extension to File or Waiver Was Granted by IRS - This subsection has been revised to add clarity and is now provided in 4.19.25.5.7, Taxpayer States and Extension to File or Waiver Was Granted by IRS.

  5. 4.19.6.5.7.5, Full Paid - This subsection has been revised to add clarity and is now provided in 4.19.25.7 and has been renamed Agreed Replies (Including Full Paid).

  6. 4.19.6.5.7.6, Full Agreed - This subsection has been revised to add clarity and is now included in 4.19.25.7, Agreed Replies (Including Full Paid).

  7. 4.19.6.5.7.7, Partial Agreed - This subsection has been revised to add clarity and is now provided in 4.19.25.8 and renamed Partially Agreed Replies.

  8. 4.19.6.5.7.8, Disagreed - This subsection has been revised to add clarity and is now provided in 4.19.25.9 and renamed Disagreed Replies.

  9. 4.19.6.5.7.9, Suspense Procedures (Reply Stage Only) - This subsection has been revised to add clarity and is now provided in 4.19.25.11 and renamed Suspense Procedures.

  10. 4.19.6.5.7.10, Installment Agreements - This subsection has been revised to add clarity and is now provided in 4.19.25.5.1, IRP Cases Needing Further Action.

(6) 4.19.6.5.8, Information Return Penalty-Reasonable Cause - This subsection has been revised to add clarity and is now provided in 4.19.25.6, Request for Reasonable Cause.

  1. 4.19.6.5.8.1, Replies for IRP Late Penalty - This subsection has been revised to add clarity and is now provided in 4.19.25.6.1 and renamed Late Filing Penalty (PRN 500).

  2. 4.19.6.5.8.2, Replies for IRP Electronic Media Penalty - This subsection has been revised to add clarity and is now provided in 4.19.25.6.2 and renamed Magnetic Media Penalty (PRN 501).

  3. 4.19.6.5.8.2.1, IRP Electronic Media Penalty for Form 1042-S Filers - This subsection has been revised to add clarity and is now provided in 4.19.25.6.2.1 and renamed Magnetic Media Penalty for Form 1042-S Filers.

  4. 4.19.6.5.8.3, Responsible Manner for IRP-TIN Penalty - This subsection has been revised to add clarity and is now provided in 4.19.25.6.3 and renamed Missing or Incorrect TIN Penalty (PRN 503).

(7) 4.19.6.5.9, 972CG No Reply Procedures - This subsection has been revised to add clarity and is now provided in 4.19.25.12 and renamed 972CG No Replies.

(8) 4.19.6.5.10, General Undeliverable Procedures - This subsection is now under 4.19.25.20.2 and renamed Undeliverables - General.

  1. 4.19.6.5.10.1, Notice 972CG Undeliverable Procedures - This subsection has been revised and divided between two new subsections. Tax Examiner responsibilities are under 4.19.25.13, Notice 972CG Undeliverables - Tax Examiner Responsibilities, and clerical responsibilities are under 4.19.25.20.2.1, Notice 972CG Undeliverables - Clerical Function.

  2. 4.19.6.5.10.2, CP 15/215 Undeliverable Procedures - This subsection has been deleted.

(9) 4.19.6.5.11, Processing 972CG Late Replies - This subsection has been completely revised to add clarity and is now provided in 4.19.25.15 and renamed Reconsiderations - Overview. The following corresponding subsections are also new:

  1. 4.19.25.15.1, Evaluating Reconsideration Correspondence

  2. 4.19.25.15.1.1, Reconsiderations - Cases Needing Further Action

  3. 4.19.25.15.1.2, Full Abatement Determinations

  4. 4.19.25.15.1.3, Full Disallowance Determinations

  5. 4.19.25.15.1.4, Partial Abatement/Partial Disallowance Determinations

  6. 4.19.25.15.1.5, No Adjustment Determinations

  7. 4.19.25.15.2, Requesting Adjustment Documents

  8. 4.19.25.15.3, Appeals Cases - General Guidelines

  9. 4.19.25.15.3.1, Appeals Cases - Tax Examiner Responsibilities

  10. 4.19.25.15.3.2, Appeals Cases - Coordinator Responsibilities

  11. 4.19.25.15.4, Civil Penalty Statute of Limitations

  12. 4.19.25.15.4.1, Assessment Statute Expiration Date (ASED)

  13. 4.19.25.15.4.2, Refund Statute Expiration Date (RSED)

(10) 4.19.6.5.12, Exceptions and Special Rules - The entire subsection has been divided into three separate subsections:

  1. Applicable de minimis procedures have been revised to add clarity and are now provided in (4) in 4.19.25.5.1, IRP Cases Needing Further Action.

  2. Paragraphs (6) and (7) have been deleted.

  3. Paragraph (8) has been moved to (6) in 4.19.25.5.1, IRP Cases Needing Further Action.

(11) 4.19.6.5.13, Late Filing Penalty-Prior Year Information Returns (1096s) - This subsection has been revised to add clarity and is now provided in 4.19.25.18 and renamed Excessively Late Filed Information Returns (1096s from Submission Processing.

  1. 4.19.6.5.13.1, Replies to Late Filing Penalty-Prior Year Information Returns (1096s) - This subsection has been deleted because replies to excessively late penalty assessment are processed using normal Reconsideration procedures which are covered in 4.19.25.15, Reconsiderations - Overview, and the corresponding subsections.

(12) 4.19.6.5.14, Failure to File in the Proper Format (1865C Responses) Philadelphia Campus Procedures - This subsection has been revised to add clarity and is now provided in 4.19.25.16 and renamed Failure to File in the Proper Format (Letter 1865C).

  1. 4.19.6.5.14.1, Replies to Failure to File in the Proper Format (1865C Responses) - This subsection has been revised to add clarity and is now provided in 4.19.25.16.1 and renamed Replies to Failure to File in the Proper Format (Letter 1865C).

(13) 4.19.6.5.15, Form 3491-Consumer Cooperative Exemption Application - This subsection has been revised to add clarity and is now provided in 4.19.25.17.

  1. 4.19.6.5.15.1, IRP Civil Penalty Abatement Requests Based on Form 3491 - This subsection has been revised to add clarity and is now provided in 4.19.25.17.1.

  2. 4.19.6.5.15.2, Processing Forms 3491 - This subsection has been revised to add clarity and is now provided in 4.19.25.17.2.

(14) 4.19.6.5.16, Appeals of Disallowances - This subsection has been revised to add clarity and is now provided in 4.19.25.15.3 and renamed Appeals Cases-General Guidelines. Subsection 4.19.25.15.3 also has two new subsections:

  1. 4.19.25.15.3.1, Appeals Cases - Tax Examiner Responsibilities

  2. 4.19.25.15.3.2, Appeals Cases - Coordinator Responsibilities

(15) 4.19.6.5.17, Powers of Attorney for Civil Penalties - This subsection has been revised to add clarity and is now provided in 4.19.25.5.5 and renamed Letters from a Third Party or Authorized Representative.

(16) 4.19.6.5.18, IRP-CSR Overview - This subsection and all corresponding subsections have been deleted:

  1. 4.19.6.5.18.1, 972CG Penalties

  2. 4.19.6.5.18.1.1, 972CG Reduction of the Penalties

  3. 4.19.6.5.18.1.2, 972CG - Late Penalty

  4. 4.19.6.5.18.1.2.1, Taxpayer Responses to Late Penalty

  5. 4.19.6.5.18.1.3, 972CG - Electronic Media Penalty

  6. 4.19.6.5.18.1.3.1, Taxpayer Responses to Electronic Media Penalty

  7. 4.19.6.5.18.1.4, 972CG - TIN Penalty

  8. 4.19.6.5.18.1.4.1, Taxpayer Responses to TIN Penalty

(17) 4.19.6.5.19, Inventory Management - This subsection has been revised to add clarity and is now provided in 4.19.25.19. The following new subsections have been added under 4.19.25.19. The list below also includes a new subsection for inventory management related to the Clerical Function:

  1. 4.19.25.19.1, Tax Examiner Inventory Management

  2. 4.19.25.19.1.1, IRP Program Organization Function Program (OFP) Codes

  3. 4.19.25.19.1.2, The CCA 42-43 IDRS Inventory Report

  4. 4.19.25.19.2, IRP Program Management

  5. 4.19.25.20.3, Inventory Management - Clerical Function

(18) 4.19.6.5.20, Civil Penalty Statute of Limitations - This subsection has been revised to add clarity and is now provided in 4.19.25.15.4.

  1. 4.19.6.5.20.1, ASED (Assessment Statute Expiration Date) - This subsection has been revised to add clarity and is now provided in 4.19.25.15.4.1.

  2. 4.19.6.5.20.2, RSED (Refund Statute Expiration Date) - This subsection has been revised to add clarity and is now provided in 4.19.25.15.4.2.

(19) 4.19.6.6, Manager/Coordinator Responsibilities - This subsection has been revised to add clarity and is now provided in 4.19.25.21 and renamed Manager/Coordinator Responsibilities - General. The corresponding subsections are also new.

(20) 4.19.6.6.2.2, Confirmation Receipt of FAX Prompt Assessment-Statute Coordinator - This subsection has been moved to 4.19.25.21.4.3.

(21) 4.19.25.1, Program Scope and Objectives - This is a new subsection. This subsection also includes new subsections 4.19.25.1.1 through 4.19.25.1.7 and provides the required Internal Controls information for the IRP program:

  1. 4.19.25.1.1, Background

  2. 4.19.25.1.2, Authority

  3. 4.19.25.1.3, Responsibilities

  4. 4.19.25.1.4, Program Reports

  5. 4.19.25.1.5, Terms

  6. 4.19.25.1.6, Acronyms

  7. 4.19.25.1.7, Related Resources

  8. 4.19.25.1.8, Taxpayer Advocate Service (TAS)

  9. 4.19.25.1.8.1, Operations Assistance Request (OAR), Form 12412

(22) 4.19.25.2.4, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) - This is a new subsection that provides guidance regarding the issuance of timely, quality responses to taxpayer correspondence.

(23) 4.19.25.4, Controlling IRP Cases - This is a new subsection that provides guidance on controlling IRP cases.

(24) 4.19.25.4.1, Lost and/or Extra Cases - This is a new subsection that provides guidance on the handling of lost and extra cases identified during processing.

(25) 4.19.25.5.1, IRP Cases Needing Further Action - This is a new subsection that provides guidance on specific issues on IRP replies that require additional action(s).

(26) 4.19.25.5.2, Information Returns Potentially Subject to Multiple Penalties - This is a new subsection that provides guidance on IRP cases subject to more than one penalty type.

(27) 4.19.25.5.3, Responses Indicating Multiple Impacted Taxpayers - This is a new subsection that provides guidance on responses that identify multiple impacted taxpayers with information returns filed by the same Third Party Agent (TPA) and each of the impacted taxpayers received a Notice 972CG.

(28) 4.19.25.5.4, Address Changes - This is a new subsection that provides guidance on processing address change requests submitted by the taxpayer.

(29) 4.19.25.5.5, Letters from a Third Party or Authorized Representative - This is a new subsection that provides guidance on processing cases submitted by a third party or authorized representative.

(30) 4.19.25.5.8, FEMA Declared Disaster Areas - This is a new subsection that provides guidance on processing cases within Federal Emergency Management Area (FEMA) declared disaster areas.

(31) 4.19.25.5.9, Researching Payments - This is a new subsection that provides guidance for researching payments.

(32) 4.19.25.5.10, Discovered Remittance - This is a new subsection that provides guidance for handling an original form of payment discovered in a case.

(33) 4.19.25.10, Replies Needing Correspondence - This is a new subsection that describes the specific CRX letters used within the IRP program and when to use them.

  1. 4.19.25.10.1, Creating Correspondex (CRX) Letters - This is a new subsection that describes the requirements for issuing CRX letters.

(34) 4.19.25.11, Suspense Procedures - This is a new subsection that provides guidance for suspending cases.

(35) 4.19.25.14, IDRS Adjustments - This is a new subsection that provides guidance for inputting IRP adjustments on IDRS.

(36) 4.19.25.15, Reconsiderations - Overview - This is a new subsection that provides guidance for processing requests for reconsideration. The corresponding subsections are also new:

  1. 4.19.25.15.1, Evaluating Reconsideration Correspondence

  2. 4.19.25.15.1.1, Reconsiderations - Cases Needing Further Action

  3. 4.19.25.15.1.2, Full Abatement Determinations

  4. 4.19.25.15.1.3, Full Disallowance Determinations

  5. 4.19.25.15.1.4, Partial Abatement/Partial Disallowance Determinations

  6. 4.19.25.15.1.5, No Adjustment Determinations

  7. 4.19.25.15.2, Requesting Adjustment Documents

  8. 4.19.25.15.3, Appeals Cases - General Guidelines

  9. 4.19.25.15.3.1, Appeals Cases - Tax Examiner Responsibilities

  10. 4.19.25.15.3.2, Appeals Cases - Coordinator Responsibilities

  11. 4.19.25.15.4, Civil Penalty Statute of Limitations

  12. 4.19.25.15.4.1, Assessment Statute Expiration Date (ASED)

  13. 4.19.25.15.4.2, Refund Statute Expiration Date (RSED)

(37) 4.19.25.19.1, Tax Examiner Inventory Management - This is a new subsection that provides guidance on managing inventory for Tax Examiners.

  1. 4.19.25.19.1.1, IRP Program Organization Function Program (OFP) Codes - This is a new subsection that provides information on the applicable OFP codes used in the IRP program.

  2. 4.19.25.19.1.2, The CCA 42-43 IDRS Inventory Report - This is a new subsection that provides specific information regarding the CCA 42-43 report and direction for completing the weekly CCA 42-43 review.

(38) 4.19.25.19.2, IRP Program Management - This is a new subsection that provides high level IRP program information.

(39) 4.19.25.20, IRP Clerical Procedures - This is a new subsection that provides guidance for the Clerical Function. The corresponding subsection are also new:

  1. 4.19.25.20.1, Controlling Incoming Mail - This subsection provides guidance on controlling incoming mail.

  2. 4.19.25.20.1.1, Controlling Incoming 1865C and Excessively Late 1096 Receipts - This subsection provides guidance on controlling incoming 1865C and Excessively Late 1096 receipts.

  3. 4.19.25.20.2, Undeliverables - General - This subsection provides general information regarding undeliverables.

  4. 4.19.25.20.2.1, Notice 972CG Undeliverables - Clerical Function - This subsection provides guidance for processing undeliverable 972CG notices.

  5. 4.19.25.20.3, Inventory Management - Clerical Function - This subsection provides guidance on inventory management as it applies to the Clerical Function.

(40) 4.19.25.21, Manager/Coordinator Responsibilities - General - This subsection is a revision of 4.19.6.6, Manager Coordinator Responsibilities. The corresponding subsections are new:

  1. 4.19.25.21.1, Employee Performance Reviews

  2. 4.19.25.21.1.1, Workload Management/Inventory Reviews

  3. 4.19.25.21.1.2, Mandatory Evaluative Reviews

  4. 4.19.25.21.1.3, Non-Evaluative or Coaching Reviews

  5. 4.19.25.21.2, Operational Reviews

  6. 4.19.25.21.3, Other Reviews

  7. 4.19.25.21.3.1, Physical Inventory Review

  8. 4.19.25.21.3.2, Program Reviews

  9. 4.19.25.21.4, Miscellaneous Manager/Coordinator Responsibilities

  10. 4.19.25.21.4.1, Statute of Limitations - Manager/Statute Coordinator

  11. 4.19.25.21.4.2, Statute Searches

  12. 4.19.25.21.4.3, Confirmation Receipts of FAX Prompt Assessments - Statute Coordinator

  13. 4.19.25.21.5, Inventory Reports

  14. 4.19.25.21.5.1, CCA 42-42 IDRS Inventory Control Report

  15. 4.19.25.21.5.2, CCA 42-43 IDRS Overage Report

  16. 4.19.25.21.5.3, CCA 42-44 IDRS Multiple Case Control Report

(41) List of Exhibits - Eight new exhibits were added to centralize information, add clarity, and provide specific guidance when needed:

  1. 4.19.25-1, IRC 6721 Penalty for Large Businesses with Gross Receipts Over $5 Million - This exhibit provides late filing penalty limitation guidance for large businesses with gross receipts over $5 million.

  2. 4.19.25-2, IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million - This exhibit provides late filing penalty guidance for small businesses with gross receipts less than or equal to $5 million.

  3. 4.19.25-3, Activity Codes for IRP Processing - This exhibit identifies specific information used in updating the Activity Field of IDRS controls or when inputting IDRS adjustments.

  4. 4.19.25-4, Penalty Reference Numbers Used in the IRP Program - This exhibit identifies and defines the penalty reference numbers used in the IRP program.

  5. 4.19.25-5, Acronyms - This exhibit lists and defines acronyms used in the IRP program.

  6. 4.19.25-6, Notice Delay Actions (Reconsiderations) - This exhibit outlines notice delay requirements.

  7. 4.19.25-7, Physical Inventory Certificate - This exhibit provides the certification used by employees during the quarterly physical inventory certification process.

  8. 4.19.25-8, Wall Inventory Instruction and Certification - This exhibit is used by Department Mangers to summarize and certify the quarterly physical inventory certification process for their respective department.

Effect on Other Documents

This material supersedes IRM 4.19.6.5, dated October 18, 2016. The following IRM Procedural Updates (IPUs) issued from October 18, 2016 through June 1, 2017 have been incorporated into this IRM: IPU 16U1676 and 16U1742. The content of 4.19.25 was removed from 4.19.6, revised, and placed in 4.19.25. The content of 4.19.25 is not new, only the IRM number is new.

Audience

Information Return Penalty (IRP) program employees at the Small Business/Self Employed site.

Effective Date

(08-21-2017)

Michael W. Damasiewicz
Director, Exam Field and Campus Policy
Small Business Self Employed

Program Scope and Objectives

  1. Purpose. This IRM transmits IRM 4.19.6.5, Information Return Penalty (IRP) Campus Procedures. It provides instructions to employees in the SB/SE Information Return Penalty (IRP) program in the IRP process. This includes the application of reasonable cause criteria in all instances of penalty relief consideration.

  2. Audience. These procedures apply to IRS employees who are responsible for making IRP determinations including:

    • Management Officials

    • Lead Tax Examiners

    • Tax Examiners

    • Lead Clerks

    • Clerks

  3. Policy Owner. The Office of Servicewide Penalties, under Small Business/Self-Employed Operations Support provides overall penalty guidance, including information return related penalties.

  4. Program Owner. BMF Document Matching, under Exam Field and Campus Policy is responsible for the content of this IRM and providing guidance for administering the IRP program.

Background/Overview

  1. Payer Master File (PMF) generates Notice 972CG to filers of information returns that are either filed late, on incorrect media, or with missing or incorrect Taxpayer Identification Numbers (TINs).

    1. Notice 972CG proposes civil penalties for each incorrectly filed information return according to the guidelines within IRC 6721.

    2. The Philadelphia BMF Document Matching Operation processes replies to the Notice 972CG. Tax examiners determine whether reasonable cause criteria has been met according to IRC 6724, and waive, abate, or assess the civil penalties as appropriate.

  2. Generally, the IRP function assesses information return penalties in the 500-514 Penalty Reference Number (PRN) series, including penalties for prior year returns. The penalties are input to the Civil Penalty Module (MFT 13 for BMF or MFT 55 for IMF).

    Exception:

    Starting in TY 2009, cases involving PRN 511 are not worked in the IRP Function.

  3. First Time Abate (FTA) administrative waiver procedures do not apply to information return penalties. The filing history should be considered, but penalties should not be waived or abated citing the first time filing criteria alone.

  4. All available IAT/Quick CC tools must be used when working IRP cases.

Authority

  1. IRC 6721 contains the provisions for penalty application for the information return penalties covered in this IRM.

  2. Treas. Reg. 301.6724-1 defines reasonable cause. IRC 6724(a) provides that the IRC 6721 penalties shall not be imposed if the failure is due to reasonable cause and not due to willful neglect. Reasonable cause criteria must be applied in all instances of penalty relief consideration.

Responsibilities

  1. The Director, Small Business/Self-Employed (SB/SE), Examination Operations is the executive responsible for the IRP program.

  2. Management officials are responsible for:

    1. Providing internal controls relating to each program, process or activity.

    2. Ensuring the instructions are communicated to and carried out by the proper officers and employees.

Program Reports

  1. Information return data is processed and stored on the Payer Master File (PMF). PMF is a file consisting of a composite of payer interest, partnership and S corporation distributions, gambling winnings, and miscellaneous/other categories of information returns filed by businesses, corporations, banks, credit unions, and other pays of these types of income. Proposed penalty notices (Notice 972CG) are generated from this data. PMF maintains data covering the five most current tax years of information return data, including generated penalty assessment or proposal amounts.

  2. Once proposal notices are issued, inventory is monitored through the use of the Control-D reporting system.

Terms

  1. Information Return - any statement, form, or return as described in Treasury Regulation 301.6721-1(g) and IRC 6724(d)(1).

  2. Information Return Penalty - For purposes of the Information Return Penalty (IRP) program, these are penalties applied when payers:

    • File an information return late

    • File an information return on incorrect media

    • File an information return with a missing or incorrect payee TIN

  3. Penalty Reference Number (PRN) - a three-digit number assigned to a specific penalty.

  4. Payer Master File (PMF) - a database that maintains documents covering five tax years of information return data. Data is accessed through the use of IDRS CC:PMFOL. The data is the primary source for the IRP program.

  5. Technical Services Operation (TSO) - TSO serves as a focal point for electronic processing related to IRP. TSO coordinates, develops, maintains, and controls operational aspects of IRP where businesses, financial institutions, and federal, state, and local governments submit information returns electronically through the Filing Information Returns Electronically (FIRE) System.

  6. Online Retrieval System (ORS) - A database owned by the Social Security Administration (SSA) that can be researched for specific paper-filed Form W-3 information.

  7. Employer Report/Adjustment Query (ERQY) - A database owned by SSA that can be researched for specific Form W-2 and Form W-2 information.

Acronyms

  1. See Exhibit 4.19.25-5, Acronyms, for a list of acronyms and definitions used in this IRM and for IRP processing.

Related Resources

  1. The following additional IRMs and publications/documents are listed when IRP function determines that in-depth research is required to resolve unusual technical issues not covered in this IRM. When reference to one of the related IRMs is required for IRP function processing, the complete IRM reference will be stated in this IRM.

    Note:

    Technical issues that occur frequently should be brought to the attention of the IRM 4.19.25, Information Return Penalties (IRP) Campus Procedures, author for consideration for inclusion in this IRM.

    IRM Title
    IRM 21.5.2 Adjustment Guidelines
    IRM 11.3.1 Introduction to Disclosure
    IRM 25.6.1 Statute of Limitations Processes and Procedures
    Pub 1586 Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs
    Pub 1220 Specifications for Filing Forms 1098, 1099, 5498, and W-2G Electronically
    Document 6209 IRS Processing Codes and Information

Taxpayer Advocate Service (TAS)

  1. Even though the IRS strives to improve its systems and provide better service, some taxpayers still have difficulty in getting solutions to their problems or appropriate responses to their inquiries. The purpose of the Taxpayer Advocate Service (TAS) is to give taxpayers someone to speak for them within the Service - an Advocate. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

  2. TAS and SB/SE have a Service Level Agreement (SLA) between them that outlines the procedures and responsibilities for the processing of TAS cases whenever the statutory or delegated authority to complete case transactions rests outside of TAS. The SB/SE SLA covers the IRP program. An Addendum to the SLA lists contacts from various Operations in the Philadelphia Service Center. Visit the Service Level Agreement (SLA) at http://tas.web.irs.gov/policy/sla/default.aspx.

  3. Refer taxpayers to the Taxpayer Advocate Service (TAS), when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service Case Criteria), and you cannot resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. Same day cases include cases you can completely resolve within 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issues. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Procedures -Same-Day Resolution by Operations.

  4. All potential TAS referrals must be approved by the IRP TAS Liaison.

  5. The IRP TAS Liaison will complete Sections I, II and III of Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order) and forward to TAS. The taxpayer's problem and the taxpayer's relief sought must be clear and specific in Items 12a and 12b of Section I. The Liaison is also required to document the reason why the relief action was not taken.

    Note:

    It is important that all IRS employees handle cases with the taxpayer's best interest in mind.

Operations Assistance Request (OAR), Form 12412
  1. A Form 12412, Operations Assistance Request, is sent by TAS for cases when there is an issue that they do not have the authority to resolve. An OAR can be received by fax, mail or E-mail and will have a Form 3210, Document Transmittal, attached.

  2. The Form 12412 will contain the name, telephone, and fax number of the TAS employee making the request. An OAR package will also include an explanation of what is being requested and any documentation obtained by the TAS employee.

  3. Form 12412 is to be acknowledged within 1 day for expedited cases or 3 days for all other cases. The acknowledgement on the Form 3210 sent with the OAR, and will include the name and phone number of the assigned person (or team/manager).

  4. The following are addressed when working an OAR:

    1. An expedited Form 12412 has three days to be completed.

    2. After the period: for a non-expedited Form 12412, the SB/SE employee assigned the OAR will negotiate with the TAS employee a reasonable time frame for OAR resolution.

    3. Sections V and VI of Form 12412 must be completely filled out by an IRP employee, including any actions taken and the reasons behind those actions.

    4. A file copy of the OAR is kept for at least 6 months.

    5. The completed OAR package is returned to the TAS employee.

Notice 972CG Overview

  1. Notice 972CG, Notice of Proposed Civil Penalty, includes proposed penalties for filers of information returns that were filed late, were not filed on electronic media when required, or for filing information returns with missing or incorrect TINs. The taxpayer may be subject to a single type of penalty, or a combination of two or more of the different types of penalties.

  2. The notice provides the taxpayer with an opportunity to establish reasonable cause for waiver of penalties prior to assessment. The penalty is assessed when reasonable cause is not established or when no response is received to the notice.

  3. The IRP function assesses civil penalties based on systemically (computer) generated Notice 972CG, which may include infractions identified for:

    1. Failure to timely file (PRN 500).

    2. Failure to file on proper media (PRN 501).

    3. Missing or Incorrect Taxpayer Identification Number (TIN) (PRN 502).

    4. Improper Format (PRN 503).

      Note:

      The penalty for improper format (PRN 503) is not included on the Notice 972CG. It is based on information provided by Submission Processing on Letter 1865C. See IRM 4.19.25.16, Failure to File in the Proper Format (Letter 1865C), for more information. See IRM 4.19.25.2.1, IRP Penalties Not Included on Notice 972CG, for more information.

    5. Combination of two or more of the above penalties (PRN 504 - 510, and 512 - 514).

      Note:

      See Exhibit 4.19.25-4, Penalty Reference Numbers Used in the IRP Program, for a complete listing of all PRNs.

  4. Notice 972CG, Notice of Proposed Civil Penalty, is mailed out annually, normally the year after the return processing year.

    Example:

    TY 2016 payer information returns are filed in calendar year 2017. TY 2016 Notices 972CG are mailed in calendar year 2018.

  5. When a taxpayer is subject to the penalty for missing or incorrect TIN, the Notice 972CG includes:

    1. A listing of payee records (provided on CD if more than 250 records) and

    2. Pub 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect TINs.

  6. Taxpayers are allowed 45 days to respond to the notice (60 days if overseas) and explain why the penalty should be waived. Taxpayers may also submit a payment if they fully or partially agree, or sign a consent to allow the IRS to send a bill for the balance due.

  7. Notice 972CG is not posted to the Master File or shown on any IDRS or CFOL Command Codes.

  8. The Campus opens an IDRS control base on MFT 13 (BMF) or MFT 55 (IMF) after the Notice 972CG is mailed. See IRM 4.19.25.19.2, IRP Program Management, for more information.

  9. The Clerical Function opens an IDRS control base when a reply to the Notice 972CG is received.

  10. The Campus does NOT maintain a copy of the Notice 972CG, TIN listings (if applicable), or CP 15 or CP 215.

IRP Penalties Not Included on the Notice 972CG

  1. Although not included on the Notice 972CG, the IRP program also addresses the following civil penalties:

    1. Late filing of prior year information returns referred by the Submission Processing (SP) sites. See IRM 4.19.25.18, Excessively Late Filed Information Returns (1096s from Submission Processing), for more information.

    2. Failure to file in the proper format (PRN 503). See IRM 4.19.25.16, Failure to File in the Proper Format (Letter 1865C), for additional information.

972CG Mail-out Procedures

  1. Notice 972CG is generated from the Payer Master File (PMF). The National Print Site (NPS) is responsible for mailing all notices except those requiring special handling.

Special 972CG Notice Review Procedures
  1. Any Notice 972CG that requires special handling will be referred to the IRP function. These notices must be reviewed to separate notices that can be mailed from those that may require a change in name (entity) or address on the notice before mailing.

  2. The review must be timely, and the notices must be mailed out the week before the date on the notices.

  3. Each of the reviewed notices must be mailed with a bar-coded return envelope.

    Note:

    Enclose Pub 1586 with notices containing a missing or incorrect TIN penalty (PRN: 502, 505, 507 or 510).

  4. Married Filing Joint Accounts and Non-Linked Accounts - Penalties cannot be assessed on married filing joint accounts using MFT 55 therefore special procedures are necessary to address the problem that occurs with IMF notices on joint accounts and non-linked accounts. These conditions require the manual review of the entity to ensure that the name on the notice is correct.

  5. IMF notices with joint names (and other non-linked conditions) will be sorted separately (except for those that already have a Civil Penalty Name line on Master File) to identify the liable spouse.

    1. Review the entity on these notices prior to mailing out.

    2. The name line on Notice 972CG will be changed so that it agrees with the name of the spouse who will be assessed the penalty.

  6. Extract and review any IMF notices where any of the following conditions are present:

    1. Joint Name Lines - Verify which spouse is accountable for the penalty. Prepare a new mail label including the name of the liable spouse. Cover the old name and address with the label and mail the notice.

    2. Business Names - If a business name is the only name present, research for the name of an individual associated with that SSN. If found, prepare a mail label with the individual's name, including the business name on the second name line. Cover the old name and address with the new label and mail the notice.

      Caution:

      Consider the possibility that the TIN shown is an EIN instead of SSN (the TIN may appear in SSN format). Research to determine whether the name/TIN is a valid BMF entity. If so, mail the notice.

    3. Garbled Information - Research to find or verify the correct individual name associated with the SSN. If found, prepare a mail label with the individual's name. Cover the old name and address with the new label and mail the notice.

      Note:

      Any notices selected that have an individual name, or have a business name in addition to an individual name, may be mailed without change.

      Note:

      If unable to find a valid name associated with the TIN, DO NOT mail the notice. DO NOT establish a control if the notice is not mailed.

  7. If an address change is identified during research, verify the name and correct the address on the label.

  8. If a penalty is assessed on these accounts, it will be necessary to establish the account and/or to create a Civil Penalty Name line.

972CG Recreate Requests

  1. Taxpayers may contact either the Campus or the Technical Services Operation (TSO) to request recreates (copies) of Notice 972CG and/or TIN listings. These requests may be received at any time after the initial mailing of the notices.

  2. If a request for a recreated Notice 972CG is received at the campus:

    The Tax Examiner Will: The Campus Designated Liaison Will:
    1. Notify the campus designated liaison of the request.

    2. Input the following two-line IDRS History Item: "RECREATE" and "REQUESTED" .

    3. Take any additional case action(s) based on the correspondence or phone call.

    4. Send Letter 1948C to inform the taxpayer their request is being processed.

    5. Close the IDRS control base.

    1. E-mail the request to the TSO contact in Martinsburg.

    2. The TSO contact will provide written confirmation.

    Note:

    If the request is made within 45 days of the original 972CG notice date, open a new "972CG_SENT" control base, using the date of the TSO confirmation e-mail as the IRS Received Date.

Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61)

  1. Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) are the result of a task force initiated to provide timely, quality responses to taxpayer correspondence. The general guidelines are:

    • A quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer issues and uses language the taxpayer can understand.

    • Requests additional information from the taxpayer, or

    • Notifies the taxpayer we have requested information from outside the IRS.

  2. A quality response is timely when initiated within 30 calendar days of the IRS Received Date.

  3. When a quality response cannot be issued timely, an interim response must be initiated by the 30th calendar day from the IRS Received Date.

    1. An interim letter (Letter 2645C or Letter 5825C when it becomes available) is generated when the Clerical Function controls an incoming reply.

    2. Subsequent interim letters (Letter 2644C or Letter 5825C when it becomes available) must be issued when a final resolution cannot be provided as indicated in the previous interim letter.

  4. All interim letters should inform the taxpayer when a final response can be expected and provide a contact name and number for additional inquiries.

Penalty Dollar Amounts and Limitations

  1. Information returns that are not timely and/or correctly filed by their respective due dates are subject to penalties as outlined in IRC 6721.

  2. The penalties are impacted by the following:

    1. A time sensitivity factor. The penalty rate may be reduced based on when the corrected information was filed.

    2. A maximum penalty amount.

    3. Small Business Limitation - See (4) below.

  3. Assess only one penalty amount per information return.

  4. Small Business Limitation - If the taxpayer’s average annual gross receipts for the three most recent taxable years do not exceed $5,000,000, the maximum penalty in each of the three penalty categories will be reduced. Refer to Exhibit 4.19.25-1, IRC 6721 Penalty for Large Businesses with Gross Receipts Over $5 Million, and Exhibit 4.19.25-2 , IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million, for specific penalty dollar amounts and limitations.

    Note:

    See IRM 4.19.25.5.1, IRP Cases Needing Further Action, when the taxpayer disputes the large business designation on the Notice 972CG.

Controlling IRP Cases

  1. IRP cases are assembled into batches.

  2. Activity Codes and/or IDRS History Items provide an audit trail for case processing. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for more information.

  3. The Lead Tax Examiner/Manager assigns inventory to the Tax Examiner. Verify that there is a case for every TIN listed on the Batch TIN Listing. If a case is missing or there is an extra case NOT on the Batch TIN Listing, see IRM 4.19.25.4.1, Lost and/or Extra Cases, for more information.

  4. Whenever an action is taken on a case, update IDRS Activity Field and/or Status Code as appropriate. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for more information.

Lost and/or Extra Cases

  1. When a TIN is assigned to a batch, but the corresponding case is missing, it is considered a "lost" case.

  2. When a lost case is identified, provide the information to the Lead Tax Examiner who will attempt to locate the case:

    IF THEN
    The Lead Tax Examiner locates the case Continue processing.
    The Lead Tax Examiner cannot locate the case (972CG Reply)
    1. Send Letter 1948C advising the taxpayer to resubmit their response and any supporting documentation.

    2. Update the IDRS control base with the activity code "LSTCSEMMDD" where "MMDD" represents the end of the suspense period.

    3. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

    The Lead Tax Examiner cannot locate the case (Reconsideration) Send Letter 3025C advising the taxpayer to resubmit their response and any supporting documentation and close the IDRS control base.
  3. If a case is identified that is NOT on the Batch TIN Listing, research IDRS and determine the proper location of the case.

    IF THEN
    The case is not batched (activity shows "972CG_SENT" in "M" status)
    1. Open an IDRS control to yourself.

    2. Update the activity field to the same batch number as on the Batch TIN Listing.

    3. Close the control base for "972CG_SENT" .

    4. Inform the Lead Tax Examiner/Manager of the additional receipt.

    The case is not batched (activity shows "972CG_SENT" in "M" status)
    1. Open an IDRS control to yourself.

    2. Update the activity field to the same batch number as on the Batch TIN Listing.

    3. Close the control base for "972CG_SENT" .

    4. Inform the Lead Tax Examiner/Manager of the additional receipt.

    The case is batched, but not assigned to a Tax Examiner (e.g., on the inventory wall) Give the case to the Lead Tax Examiner/Manager for association.
    The case is batched and assigned to another Tax Examiner Give the case to the Lead Tax Examiner/Manager for association.

972CG Reply Procedures

  1. When the taxpayer responds to the notice of proposed penalty, the response must be reviewed to determine if the taxpayer addressed the proposed penalty and the response is complete.

  2. All Notice 972CG responses, including Reasonable Cause penalty waiver/abatement requests, must be made in writing; however, a signature is not required.

  3. There may be times during the reply phase when calling the taxpayer will expedite the resolution of a case. For example; when taxpayers respond to a notice, they may inadvertently omit required information, delaying the action on the case. If additional information is required to resolve a case, you may attempt to contact them by phone prior to making the assessment on the account.

  4. The penalty will be assessed/waived/abated/sustained using command code ADJ54. See IRM 4.19.25.14, IDRS Adjustments.

  5. Correspondex letters will be used to provide the taxpayer with additional information. See IRM 4.19.25.10.1 , Creating Correspondex (CRX) Letters, for further instruction.

  6. Whenever a taxpayer makes a reference to any of his forms being fraudulently filed by another party or claims there is a fraud or identity theft issue, refer the case to headquarters via the Technical Advisor.

IRP Cases Needing Further Action

  1. IRP receives responses that require additional action before the case can be closed. Additional action may include (this list is not all inclusive):

    • Correspondence with the taxpayer

    • Research

    • Routing of information

    • Address updates

    • Telephone contact

  2. If a non-IRP related inquiry is included with a reply:

    1. Photocopy the inquiry and route to the appropriate function. Include the business name, address, TIN, and the received date.

    2. Send Letter 1948C to inform the taxpayer that their inquiry has been routed to the proper area.

  3. If the taxpayer wants to talk to (or have their case reviewed by ) a manager, refer the case to the Lead Tax Examiner. They will attempt to resolve the issue(s) by telephone contact.

  4. De Minimis Exception: may apply to a limited number of incorrect information returns remaining after the reasonable cause waiver has been applied. It is only applicable to information returns that were filed, had missing or incorrect information AND the corrected information returns were filed by August 1st of the filing year.

    1. The de minimis exception may apply if the information returns were: filed, had missing or incorrect information AND the corrected information returns were filed by August 1st of filing year.

    2. The maximum number of corrected information returns to which the de minimis exception applies cannot exceed the greater of: 10 or one-half of one percent (.005) of the total number of returns required to be filed during that calendar year.

      Note:

      Generally taxpayers are not aware of the incorrect filing until after the August 1st deadline for filing corrected information returns. Therefore this exception would rarely apply to taxpayers identified in the IRP Program.

  5. Indication of Federal or Quasi Government Agencies: Do not assess information return penalties against any federal or quasi-government agencies. Federal Agencies are identified with Employment Code F. Quasi-Government Agencies are identified with Employment Code Q.

    Note:

    Employment codes are located on IDRS CC:TXMODA in the EMP CD field.

    1. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

      Note:

      Do not input a Reason Code (or Penalty Reason Code).

    2. Send Letter 1948C. Inform the taxpayer that we are not pursing the penalty proposed on the Notice 972CG.

      Exception:

      Do not issue Letter 1948C if closing the case as a no reply.

  6. Bankruptcy Conditions: Review each case for bankruptcy conditions prior to assessing a civil penalty.

    IF THEN
    A TC 520 with closing code(s) 60-67, 83, 85-89 (-V Freeze), 81, or 84 (-W Freeze) is present, AND there is no corresponding TC 521 on the account.
    1. Do not assert the penalty. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

      Note:

      Do not input a Reason Code (or Penalty Reason Code).

    2. Send Letter 1948C. Inform the taxpayer that we are not pursing the penalty proposed on the Notice 972CG.

      Exception:

      Do not issue Letter 1948C if closing the case as a no reply.

    A TC 520 with closing code(s) 60-67, 83, 85-89 (-V Freeze), 81, or 84 (-W Freeze) is present on the account, AND a corresponding TC 521 has posted on the account. Process the case following normal procedures.
    A TC 520 with closing code(s) 60-67, 83, 85-89 (-V Freeze), 81, or 84 (-W Freeze) is present on the account, and a PENDING TC 521 is present on the account.
    1. Monitor the case for up to 30 days to determine if the TC 521 posts.

    2. If the TC 521 posts, continue processing the case.

    3. If a TC 521 does NOT post, close the case without assessing the penalty (see above).

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

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

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Exception:

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

  9. Installment Agreement Request: If the taxpayer requests an installment agreement (IA), either in their response or by submitting Form 9465 (or Form 433-D), and the case is being closed:

    1. Use IDRS CC:REQ77 to input TC 971 with Action Code (AC) 043.

    2. Use Form 3210, Document Transmittal to route the IA request to Compliance Services Collection Operation (CSCO).

      Note:

      If the IA request is part of the response, make a copy to send to CSCO. Keep the original response with the case file. Annotate on the original that a copy was sent to CSCO.

    3. Send Letter 1948C to the taxpayer explaining that their request for an installment agreement is being processed and he/she will be contacted at a later date by another IRS office.

  10. Responds using Magnetic Media: If taxpayers respond using any form of magnetic media (CD, DVD, thumb drive, etc.), take the following actions:

    1. Send Letter 1948C and include a statement that explains that the IRS cannot accept information on electronic media and they must provide paper copies of the information.

    2. Return the magnetic media to the taxpayer.

    3. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

  11. If the taxpayer response indicates that they don’t understand the penalty or are requesting additional information:

    1. Issue Letter 1948C explaining the penalty and the information that should be provided in order to establish reasonable cause.

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

  12. Voluntarily Filed IRs: Treas. Reg. 1.6041-3 identifies various payment types for which no information return is required to be filed. Some of these information returns are filed late or incorrectly and are systemically included in the Notice 972CG process. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Since there are a variety of payment types that are exempt from filing requirements, it is not possible to pre-determine if a particular IR was required to be filed.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡

  13. Collectability Conditions:≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Exception:

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

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  14. Associations: When the Clerical Function identifies a piece of incoming mail that belongs to a case that is already in process or under an active control, they input an IDRS History Item "ASSOCAVAIL" .

    1. If the account shows History Item "ASSOCAVAIL" , ensure that the case file includes the additional receipt.

    2. If missing, refer to the Lead Tax Examiner to contact the Clerical Function.

  15. Small Business Limitations: The maximum penalty limitation will be reduced when the taxpayer’s average annual gross receipts for the three most recent tax years does not exceed $5,000,000. The Notice 972CG determines if the taxpayer is a "large business" or "small business" and calculates the penalty limitation accordingly. If the taxpayer disagrees with the large business designation on the notice, research IDRS CC:INOLES to determine the filing requirements. Look for income tax related returns in the Form 1120 series, Form 1065 series, Form 990-T series, or Form 1040 series.

    Note:

    If the "FILING REQUIREMENTS" field shows "1120-14" , that is an indication that the taxpayer is a subsidiary of a parent corporation. Research both the parent company and affiliated subsidiaries (including the taxpayer’s company). The Gross Receipts are the sum total of the gross receipts from all of the parent company and all subsidiaries.

    Note:

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

    1. Once you have determined the income tax return type, research IDRS CC:BMFOLI to determine the three most recent taxable years.

      Example:

      If the taxpayer uses a calendar year for tax purposes, and the calendar year the return is required to be filed is 2015, then, the most recent three taxable years would be: 2014, 2013 and 2012.

    2. Research IDRS CC:BRTVU for each of the three most recent taxable years.

    3. Total the amounts reported on line 1c (IDRS CC:BRTVU "PER COMPTR NET RECEIPTS" ) and divide by 3.

    Note:

    IRC 448(c)(3)(C) states that gross receipts shall be reduced by returns and allowances.

    IF THEN
    The result is more than $ 5 million
    1. Attach a copy of the IDRS research to the case file.

    2. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments.

    3. Send Letter 854C. Include an open paragraph to explain the reason for the denial based on the IDRS research.

    The result is $5 million or less

    Note:

    Refer to Lead who will contact Headquarters prior to taking any action to adjust the penalty.

    1. Attach a copy of the IDRS research to the case file.

    2. Determine the reduced penalty amount based on the limitation for small business. See Exhibit 4.19.25-2, IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million.

    3. Assess the reduced penalty. See IRM 4.19.25.14, IDRS Adjustments.

    4. Send Letter 1948C or Letter 854C (if the response includes other issues that were denied).

Information Returns Potentially Subject to Multiple Penalties

  1. If an information return is potentially subject to more than one penalty, consider reasonable cause or acting in responsible manner to determine which penalty(ies) can be waived/abated. Then apply the penalty using the following criteria:

    1. If it is determined that the late-filing penalty should be waived, then the next penalty to be considered is the missing or incorrect TIN penalty.

    2. If it is determined that the missing or incorrect TIN penalty should be waived, then the next penalty to be considered is the incorrect media penalty.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Example:

      (For returns required to be filed on or after January 1, 2011 and before January 1, 2016)

      If 500 Forms 1099-DIV were electronically filed late on April 25th, and 50 of those late returns had incorrect TINs, the proposed penalty on the Notice 972CG would be calculated as follows:

      50 x $100 (TINs) plus
      450 x $30 (late, tier 1)

      If the taxpayer submits a satisfactory explanation for the 50 incorrect TINs, but not for the late filing, the penalty should be recalculated as follows:

      500 x $30 (late, tier 1)

Responses Indicating Multiple Impacted Taxpayers

  1. Third Party Agents (TPA) is a general term used to describe independent agencies that perform employment related services (e.g.: making required tax deposits and filing information returns) on behalf of their clients. Examples of Third Party Agents include: Reporting Agents, Payroll Service Providers, outside vendor/contractor, etc.

  2. Since Notice 972CG are issued to individual taxpayers, a TPA may submit a response on behalf of all of their clients that received a Notice 972CG, rather than having all impacted taxpayers submit individual responses. Therefore it is important to recognize and take appropriate action when this type of response is received, to ensure that all impacted taxpayers are addressed and treated in a consistent manner.

  3. When a response indicates that more than one taxpayer is impacted (or received a Notice 972CG) refer the response to the Lead Tax Examiner for further research and action. The Lead Tax Examiner will update the case control to themselves.

  4. If the response indicates multiple impacted taxpayers and DOES NOT include the Names/TINs of the other impacted taxpayers, the Lead Tax Examiner will contact (via telephone contact if possible) the TPA and request that they provide the names/TINs of the other impacted taxpayers. Otherwise issue Letter 1948C and request that the third party agent submit a listing of all impacted.

    Reminder:

    Do not disclose any information about the case unless the TPA is an authorized representative. See IRM 4.19.25.5.5, Letters from a Third Party or Authorized Representative, for additional information.

  5. Once the name/TIN information for the other impacted taxpayers is obtained, determine the number of impacted taxpayers:

    IF THEN
    The number of impacted taxpayers is 500 or less The Lead Tax Examiner will discuss with manager and determine who will be assigned the cases and update the control for all impacted taxpayers to the designated tax examiner.
    1. Photocopy the response to be used for each impacted taxpayer.

    2. Update any tracking reports to account for multiple response receipts.

    3. The tax examiner will evaluate the response and take appropriate action as outlined in this IRM.

    The number of impacted taxpayers is more than 500 The Lead Tax Examiner will alert local management to contact Headquarters to determine next steps.

Address Changes

  1. When a taxpayer contact includes clear and concise notification of an address change, including foreign address change, input the appropriate new address on IDRS CC:ENREQ.

  2. Changes to the taxpayer name line due to a spelling error should also be made. However, do not change the name control. On BMF accounts, the name control is the first four characters of the business name. On IMF accounts, the name control is the first four characters of the taxpayer’s last name.

    1. The authority for making changes to the name control is delegated to the IMF/BMF Entity function.

    2. Any correspondence received after an SSN/EIN has been assigned, requesting a change to the primary name line that affects the name control, must be routed to the appropriate IMF/BMF Entity function.

  3. Contacts that are considered clear and concise notification of an address change include the following:

    1. The taxpayer returns an IRS initiated correspondence that solicits or requires a response to IRS with corrections marked on their address information. The taxpayer's signature on the correspondence (for this purpose) is not required.

    2. A return (including an amended return) filed by a taxpayer with new address information. Update the Master File for address changes on any amended returns, that bypass normal pipeline processing and are processed as a response.

    3. Form 8822-B, Change of Address, when received in conjunction with an IRP case.

    4. Notification of an address change made by the U.S. Postal Service.

      Caution:

      Always verify the name on the Post Office notification with the name on the notice before updating the address.

      Note:

      A new address indicated as a return address on the envelope or in the letterhead of the taxpayer's correspondence is not by itself, clear and concise notification and is not sufficient to change an address of record.

  4. Clear and concise notification must contain the following:

    1. The Entity's full name.

    2. The signature of an authorized representative.

    3. The taxpayer's new address.

    4. The taxpayer's old address, unless it can be determined from the posted data. Do not request the old address from the taxpayer.

    5. The taxpayer identification number (TIN).

  5. If any of the information from (3) or (4) above is missing from the taxpayer's request, do not update Master File. Send the appropriate letter to the taxpayer, at the new address, using a Special Paragraph to advise them of the information needed. Enclose Form 8822-B, Change of Address.

  6. If the taxpayer provides a temporary address, a beginning and ending date of when the taxpayer will be using that address should be given. Do not update Master File.

  7. Any time doubt exists as to whether an address should be changed, discuss it with the manager who will either provide an answer or refer the question to the Disclosure Office.

  8. If a document is received containing a name or address change which does not meet the specific requirements for updating Master File, the information should be noted and maintained in the IRP case file. If a notice is returned, the Service is required to use due diligence in locating the taxpayer, which includes a search of existing records to locate any updated information supplied by the taxpayer.

Letters from a Third Party or Authorized Representative

  1. No tax information can be sent to or discussed with an unauthorized third party. All correspondence should be sent directly to the taxpayer. Include a paragraph to notify the taxpayer that we have no record that the third party is authorized to act for them, and that we have replied directly to the taxpayer.

  2. Accountants, attorneys, enrolled agents, or other representatives from whom a taxpayer has requested assistance on tax issues submit inquiries to the IRS. The third party representative expects a reply to the inquiry so that the issue can be explained to the taxpayer.

  3. To authorize the third party reply, the representative may submit a:

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

    • Form 8821, Tax Information Authorization.

    Note:

    The power of attorney (POA) requests are referenced as "POAs" and the tax information authorization (TIA) requests are referenced as "TIAs."

  4. POA documentation may be received with a response to a civil penalty notice. The POAs or TIAs cannot be entered on the Centralized Authorization File (CAF) because civil penalties are asserted against non-return information documents. To ensure valid POAs/ TIAs are recognized, the POA/TIA should be kept with the IRP case file.

  5. If the taxpayer submits a complete Form 2848, or a Form 8821, that lists tax matters other than civil penalty issues, check to see if the authorization is on file. If not, fax the form for processing based on the state mapping table in IRM 21.3.7-1, State Mapping, Where To File, and keep the original with your case file.

  6. CAF Unit addresses and fax numbers can be found in IRM 21.3.7.1.3, Processing Sites (CAF Function).

Taxpayer Requests Additional Time to Reply to Notice 972CG

  1. The Notice 972CG informs the taxpayer that they have 45 days from the notice date to provide a response.

  2. When the taxpayer requests additional time or an extension to respond to the notice:

    1. Send Letter 1948C. Inform the taxpayer that they have an additional 30 days to respond to the notice and if a response is not provided by the extended due date, the IRS will continue processing the case.

      Exception:

      If the taxpayer requests a specific number of days (or a specific future date), grant the extension for the days requested up to 90 days from the date of the notice.

      Note:

      If the requested date has passed, grant an additional 30 days.

    2. Update the IDRS control base with activity code "EXTENDMMDD" where "MMDD" represents the last day of the extension suspense period.

    3. Update the IDRS control base status code to "S" .

    4. Suspend the case for the number of days granted to the taxpayer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. Monitor the case until the taxpayer responds or the extension suspense period ends. See IRM 4.19.25.11, Suspense Procedures, for more information.

      Note:

      DO NOT grant multiple extensions unless there are extenuating circumstances.

Taxpayer States an Extension to File or Waiver Was Granted by IRS

  1. Taxpayers submit requests for extensions by either:

    1. Filing Form 8809, Application for Extension of Time to File Information Returns, or

    2. Applying for an extension using the Filing Information Returns Electronically (FIRE) system.

  2. All current year late-filing penalty cases are compared to the extensions of time to file that post to the PMF prior to the generation of penalty notices.

  3. If the taxpayer’s response indicates that they are not subject to the late filing penalty because they were granted an extension to file their information return documents, verify the TIN against the listing of approved extensions provided by TSO. Take the following actions:

    Note:

    If the TIN listing doesn't validate the taxpayer’s claim, refer the case for further research with the FIRE liaison.

    1. If the TIN is verified, waive/abate the late filing penalty and send Letter 1948C.

    2. If the TIN cannot be verified, assess the late filing penalty and send Letter 854C.

    Note:

    See IRM 4.19.25.14, IDRS Adjustments, for additional information.

FEMA Declared Disaster Area

  1. Taxpayers residing in a ZIP Code included in a Federal Emergency Management Agency (FEMA) Declared Disaster will have a disaster related Freeze Code posted to their account. There are two types of disaster freeze codes, the "–O" freeze and the "–S" freeze.

    1. The –O Freeze Code is used for significant major disasters (examples include Hurricane Katrina in 2005 and Super Storm Sandy in 2012). As a general rule no compliance action is taken after the relief time frame has expired.

    2. The –S Freeze is used for other federally declared disaster areas. Impacted taxpayers are granted additional time to perform time sensitive actions. Unless an act is specifically listed in Rev. Proc. 2007-56, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098, or 1099 series; to Forms 1042-S, 3921, 3922, 8025, or 8027; or to employment and excise tax deposits.

      Note:

      IDRS CC:TXMODA displays a disaster related Freeze Code (-S or -O) on impacted accounts for the duration of the disaster relief time frame.

  2. The IRP Technical Coordinator will monitor ZIP Codes for specific declared disaster area situations as necessary based on IRS Disaster Relief Memos.

  3. The IRP Technical Coordinator will provide the tax examiners instruction for the states that have declared disasters.

  4. Additional information (including special case handling requirements) is provided on the FEMA website at http://www.fema.gov.

  5. The taxpayer responds to the Notice 972CGbefore the disaster start date and a Freeze Code "-O" is present on the account:

    IF THEN
    The response results in a waiver, abatement, or a full agreed Close the case following normal processing guidelines.
    The response does not contain enough information to make a determination or the tax examiner denies penalty relief
    1. Update IDRS activity with "FEMA-OMMDD" (MMDD represents the Disaster end date).

    2. Monitor the case until the Disaster date expires.

    3. Once the Disaster end date has passed, continue normal processing.

  6. The taxpayer responds to the Notice 972CGduring the disaster time frame (Freeze Code "-S" or "-O" , follow normal procedures.

    Exception:

    See (7) below if the response indicates that the taxpayer’s place of business or records was lost, destroyed or not accessible due to the disaster.

  7. If the case is identified as entitled to disaster relief (based on FEMA ZIP codes or through taxpayer self-identification) and a response indicates that the taxpayer's place of business or records was lost, destroyed or not accessible due to the disaster:

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Caution:

    IRS disaster relief memos usually grant special treatment to those taxpayers who self-identify; therefore, IRP does not always identify impacted taxpayers by ZIP code.

Researching Payments

  1. If the taxpayer replies that a payment was submitted, but there is no indication on IDRS that the payment was received and at least three weeks have passed since the IRS receive date:

    1. Research the payment on IDRS. The payment may show as pending or unpostable.

    2. If payment is found posted on another tax module (e.g., subsequent year) ensure the payment is transferred to the correct module using the IAT Credit Transfer Tool.

    3. If no record of the payment is found, issue a Letter 1948C to request a copy of the front and back of the canceled check.

    4. When the Taxpayer replies with the copy of the front and back of the check, use the encoding on the check to determine where the payment has posted. The back of the check should display the following information: Name Control or CK Digit, the DLN, the Transaction Code, the MFT Code, the TIN, the Tax Period and the Posting Date.

Discovered Remittance

  1. Discovered remittance is a response and/or correspondence with an original form of payment attached such as a personal check, money order or cashier’s check, or loose check(s) discovered in an envelope or attached to a blank piece of paper.

  2. When a remittance is discovered, complete three copies of Form 4287, Record of Discovered Remittance.

    1. Make a copy of the remittance to remain with the case file.

    2. Make a copy of the correspondence.

    3. Attach the live remittance and a copy of the correspondence to the three copies of Form 4287 and give to the Clerical Function.

Request for Reasonable Cause

  1. Generally, an information return penalty may be waived or abated if it can be shown that the error was due to reasonable cause and not due to willful neglect.

    Reminder:

    "First Time Abate (FTA) administrative waiver" procedures do not apply to information return penalties.

  2. Treas. Reg. 301.6724-1 provides that Reasonable Cause for information return penalties exists when the taxpayer:

    1. Acted in a responsible manner (both before and after the failure occurred), AND

    2. There were significant mitigating factors or circumstances beyond the taxpayer’s control.

  3. When evaluating a response to determine if the proposed penalty can be waived/abated due to Reasonable Cause, the fact that the error occurred does not prevent the possibility for the penalty to be waived/abated. The tax examiner has to evaluate the explanation to determine if the taxpayer meets the criteria to have the penalty waived (i.e.: acted in a responsible manner AND had significant mitigating factors (or circumstances beyond their control).

  4. The taxpayer is considered to have acted in a “Responsible Manner” when the response to the Notice 972CG relating to the late filing and/or the magnetic media penalties addresses actions that they took when the error was first identified AND subsequent actions taken to prevent future occurrence.

    Note:

    Where a penalty is imposed for missing or incorrect TINs, a taxpayer must comply with special rules for acting in a responsible manner - see IRM 4.19.25.6.3, Missing or Incorrect TIN Penalty (PRN 502).

    1. Did the taxpayer react timely upon discovery of the error in an attempt to correct/address the error? (Yes or No)

    2. Did the taxpayer take actions to prevent future occurrence? (Yes or No)

    Note:

    Since the Notice 972CG does not provide a detailed explanation of Reasonable Cause requirements, the taxpayer’s response may not always address both aspects of the “acting in a responsible manner” requirement under Treas. Reg. 301.6724-1.

    1. If the taxpayer’s response addresses both issues, then consider the "acting in a responsible manner" requirement as fully met.

    2. If the taxpayer’s response does not address the "react timely upon discovery of the error" portion of the "acting in a responsible manner" requirement, issue Letter 1948C and advise the taxpayer that we need additional information about what took place at the time the error was discovered. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

    3. If the taxpayer’s response does not address the "actions taken to prevent future occurrence" portion of the "acting in a responsible manner" requirement, research the subsequent year’s filing.

    IF THEN
    The subsequent year’s filing shows timely filing, Consider that the taxpayer took the appropriate measures/actions to prevent future occurrence of the issue that resulted in the incorrect filing.

    Example:

    If the Notice 972CG was issued for failure to timely file IRs and research of the subsequent year indicates that the IRs were not filed late, then consider the "actions to prevent future occurrence" requirement was met.

    The subsequent year’s filing indicates the same incorrect filing that resulted in the Notice 972CG.
    1. Do not consider this requirement met.

    2. Issue Letter 1948C and advise the taxpayer that we need additional information about the actions taken after the error occurred.

    3. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

  5. Events generally considered Significant Mitigating Factors include, but are not limited to:

    1. First Time Filer: The taxpayer had not previously been required to file the information return(s) in question.

    2. Good Compliance History: The taxpayer has a history of complying with the information return reporting requirements. The taxpayer's history of compliance should be considered whether or not the taxpayer specifically requests waiver on this basis.

  6. Events generally considered to be Circumstances Beyond the Taxpayer’s Control include (but are not limited to):

    1. Actions by the IRS: The taxpayer relied on erroneous written information provided by the IRS. The response needs to include a copy of the information provided to the IRS and the IRS’s written response.

    2. Actions by an agent: The taxpayer relied on an independent agent to comply with filing requirements. This would include payroll agents, independent contractors, outside vendors, etc. The agent has to then demonstrate that they acted in a responsible manner and encountered significant mitigating factors or circumstance beyond their control.

      Note:

      A taxpayer who used an agent and cannot establish reasonable cause based on the actions of the agent, may be able to demonstrate reasonable cause on his/her own merit by having an established history of complying with the information reporting requirements, and otherwise acting in a responsible manner both before and after the failure occurred.

    3. Unavailability of Business Records: As a result of unforeseen circumstances, the inability to access business records affected the taxpayer’s ability to comply with the filing requirements.

    4. The taxpayer was located in a FEMA Declared Disaster area that impacted their ability to comply with the filing requirements or impacts their ability to obtain the necessary documentation to support their disagreement to the application of the penalty. See IRM 4.19.25.5.8, FEMA Declared Disaster Area, for additional information.

    5. The taxpayer suffered a fire or other casualty that impacted their ability to comply with the filing requirements or impacts their ability to obtain the necessary documentation to support their disagreement to the application of the penalty.

    6. The taxpayer suffered a death, serious illness or unavoidable absence affecting their ability to comply with the filing requirements.

    7. Undue Economic Hardship (Electronic Media Penalty only) - see IRM 4.19.25.6.2, Magnetic Media Penalty (PRN 501).

  7. The Information returns were erroneously addressed to the state taxing agency or to the incorrect IRS processing center. This does not in itself constitute Reasonable Cause for late filing. However, it should be considered with other factors to determine if Reasonable Cause criteria has been met.

  8. A waiver should not be automatically granted where the taxpayer claims ignorance of the filing requirements. However, ignorance of the law may be considered as one factor which may indicate that the taxpayer acted in a responsible manner if all the other facts support this contention.

Late Filing Penalty (PRN 500)

  1. Taxpayers are required to file most information returns by:

    • February 28 (or February 29 during Leap Year) of the processing year if filing via paper

    • March 31 of the processing year if filing electronically

      Exception:

      Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding is due by March 15th of the processing year (paper or electronically filed).

      Note:

      Starting with TY 2016, Form W-2 and Form 1099-MISC (reporting Non-employee compensation) must be filed by January 31 (paper or electronically filed) of the processing year.

  2. If the filing date falls on a Saturday, Sunday or legal holiday, then the filing date becomes the next business day. A business day is any day that is not a Saturday, Sunday or legal holiday. The following is a breakdown of required filing dates for the three current IRP Program processing years:

    1. IRs other than Form 1042-S:

      Tax Year Paper Electronically
      2013 February 28, 2014 March 31, 2014
      2014 March 2, 2015 March 31, 2015
      2015 February 29, 2016 March 31, 2016
    2. Form 1042-S:

      Tax Year Paper and Electronically
      2013 March 17, 2014
      2014 March 16, 2015
      2015 March 15, 2016

      Note:

      Taxpayers meet the requirement to timely file if the form is properly addressed and mailed on or before the due date (IRC 7502).

  3. Any penalty for failing to file information returns timely ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. The Late Filing Penalty is tiered based on when the information returns were filed.

    • Tier 1: Not more than 30 days late

    • Tier 2: 31 days late through August 1

    • Tier 3: After August 1

    Note:

    See Exhibit 4.19.25-1, IRC 6721 Penalty for Large Businesses with Gross Receipts Over $5 Million, and Exhibit 4.19.25-2, IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million, for additional information.

  5. The penalty is $100 per IR (TY 2010 through TY 2014) or $260 per IR (TY 2015). The penalty is reduced based on when the information returns were filed as per the tier rate in (4) above. The following is a breakdown of applicable penalty amounts ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for the three current IRP Program processing years:

    Tax Year Not more than 30 days late (Tier 1) 31 days late to August 1st (Tier 2) After August 1 (Tier 3)
    2013 $30 per IR $60 per IR $100 per IR
    2014 $30 per IR $60 per IR $100 per IR
    2015 $50 per IR $100 per IR $260 per IR
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
        ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
        ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
  6. Research IDRS CC:PMFOLS and CC:PMFOLD to confirm IRS received dates for IRs other than Forms W-2.

  7. Duplicate Filing: If IDRS research indicates a duplicate filing, take the following action:

    IF THEN
    The original submission was timely
    1. Waive (or abate) the penalty in full. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 1948C.

    The original submission was also submitted late
    1. Only assess the penalty against the originally filed late submission. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Adjust the number of impacted IRs and the Tier Rate accordingly.

    3. Send Letter 1948C or Letter 854C as appropriate.

  8. If the taxpayer states that they mailed paper IRs (other than Forms W-2) timely,

    Note:

    Don’t confuse with statement that the taxpayer timely mailed the information return documents to the individual payees.

    Reminder:

    See IRM 4.19.25.6, Request for Reasonable Cause, if the taxpayer’s response indicates that the IRs were erroneously mailed to the state tax agency or incorrect IRS processing center.

    IF THEN
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    The proposed penalty is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Request the Information Return transcript (Form 1096, Form 1042-T, etc.) Use IDRS CC:ESTAB with definer "S" to request the imaged information (transcript) from the Service Center Recognition/Image Processing (SCRIPS) system.

      Note:

      A Universal Access Routing Indicator (UARI) is needed. The UARI must be input on line 3 in the two spaces following the "@" symbol. See IRM 2.3.26, Command Code ESTAB, for additional information.

    2. Update IDRS control base activity. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for additional information.

    3. Monitor the case for 10 business days.

      Note:

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


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

    ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. If the taxpayer acknowledges that the IRs (other than W-2) were mailed late, but disagree with the penalty rate because they were mailed before the Tier level cutoff date:

    1. Request the Information Return transcript (Form 1096, Form 1042-T, etc.). Use IDRS CC:ESTAB with definer "S" to request the imaged information from the Service Center Recognition/Image Processing (SCRIPS) system.

      Note:

      A Universal Access Routing Indicator (UARI) is needed. The UARI must be input on line 3 in the two spaces following the "@" symbol. See IRM 2.3.26, Command Code ESTAB, for additional information.

    2. Update IDRS control base activity. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for additional information.

    3. Monitor the case for 10 business days.

      Note:

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


      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

        Reminder:

        ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  10. If the taxpayer states that they electronically filed the IRs (other than Form W-2) timely, or they acknowledge that the IRs were filed late but disagree with the penalty rate because they were filed before the Tier level cutoff date, AND:

    IF AND THEN
    The response included supporting documentation the documentation supports the explanation
    1. Waive/abate the penalty. (See IRM 4.19.25.14, IDRS Adjustments).

    2. Issue Letter 1948C.

    Reminder:

    Reduce the penalty if the documentation shows that the filing occurred in an earlier Tier rate range than as proposed on the Notice 972CG.

    The response included supporting documentation the documentation does not support the explanation
    1. Assess the penalty See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 854C. Include an open paragraph to explain the reason for denial.

    The response did not include supporting documentation The taxpayer did not use the Filing Information Returns Electronically (FIRE) system Issue Letter 1948C and request documentation to support the date of filing (including approved extension requests). See IRM 4.19.25.11, Suspense Procedures, for additional information.
    The response did not include supporting documentation The taxpayer used the FIRE system Consult with the Lead Tax Examiner. The Lead Tax Examiner will work with the FIRE contact to obtain any supporting documentation (including any approved extensions) to verify the filing date. Retain copies of the FIRE information in the case file.
    1. If the FIRE information supports the explanation, waive/abate (or reduce) the penalty.

    2. If the FIRE information does not support the explanation: assess the penalty (see IRM 4.19.25.14, IDRS Adjustments), and issue Letter 854C. Include an open paragraph to explain the reason for the denial based on the information from FIRE.

    Reminder:

    Reduce the penalty if the FIRE information shows that the filing occurred in an earlier Tier rate range than as proposed on the Notice 972CG.

  11. Forms W-2 are filed with the Social Security Administration (SSA).

    1. Research ERQY (Employer Report Query) when the Forms W-2 are electronically filed to validate receipt dates.

    2. Research ORS (On-Line Retrieval System) when the Forms W-2 are paper filed to validate receipt dates.

  12. If the taxpayer states that they electronically filed their W-2 package timely, or they acknowledge that the W-2s were filed late, but disagree with the penalty rate because they were filed before the Tier level cutoff date, use ERQY to determine the received date of the Forms W-2. The ERQY date is posted ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    IF THEN
    The ERQY posted date indicates timely filed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Attach a copy of the ERQY print to the case file.

    2. Waive/abate the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    3. Send Letter 1948C.

    The ERQY posted date is after the due date
    1. Attach a copy of the ERQY print to the case file.

    2. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    3. Enter a two-line History Item to record the date that SSA received the electronically filed W-2s (Ex: "ERQYW2RCVD" and "MM/DD/YYYY" ).

    4. Send Letter 854C. Include an open paragraph to explain the reason for the denial based on the ERQY information.

    Reminder:

    Reduce the penalty if the ERQY information shows that the filing occurred in an earlier Tier rate range than as proposed on the Notice 972CG.

  13. If the taxpayer states that they mailed paper W-2 package timely, use ORS to determine the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is generally stamped in the "For Official Use Only" box in the lower right-hand portion of the Form W-3.

    Note:

    Don’t confuse with statement that the taxpayer timely mailed the Forms W-s to the employees.

    IF AND THEN
    The Form W-3 is:
    • not stamped,

    • the stamp date is illegible, or

    • the stamp date indicates timely filed

     
    1. Attach a copy of the W-3 to the case file.

    2. Waive/abate the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    3. Send Letter 1948C.

    The Form W-3 stamp date is AFTER the due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Attach a copy of the W-3 to the case file.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 4.19.25.14, IDRS Adjustments, for more information.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    The Form W-3 stamp date is AFTER the due date ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Attach a copy of the W-3 to the case file.

    2. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    3. Enter a two-line History Item to record the date that SSA received the paper filed W-3 (Ex: "ORSW3RCVD" and "MM/DD/YYYY" ).

    4. Send Letter 854C. Include an open paragraph to explain the reason for the denial.

  14. If the taxpayer acknowledges that they mailed paper W-2 package late but disagree with the penalty rate because they were mailed before the Tier level cutoff date, use ORS to determine the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is generally stamped in the "For Official Use Only" box in the lower right-hand portion of the Form W-3.

    ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  15. Waive (or abate previously posted) late filing penalty when the explanation for submitting the IRs late meets reasonable cause. See IRM 4.19.25.6, Request for Reasonable Cause, for additional information.

Magnetic Media Penalty (PRN 501)

  1. Per IRC 6011(e), taxpayers who submit 250 or more information returns for a specific information return type are required to file them electronically (on magnetic media).

    Exception:

    Beginning in TY 2014, financial institutions filing Form 1042-S must file the IRs electronically, regardless of the number of IRs filed. See IRM 4.19.25.6.2.1, Magnetic Media Penalty for Form 1042-S Filers, for additional information.

  2. The magnetic media penalty applies to the number of IRs over 250 forms.

    Example:

    The taxpayer submits 377 Form 1099-MISC IRs on paper. The penalty applies to 127 IRs (377 - 250 = 127).

  3. Generally, taxpayers must establish reasonable cause for this penalty to be abated. See IRM 4.19.25.6, Request for Reasonable Cause, for more information. In addition, consider any explanation where the taxpayer indicates that they would suffer undue economic hardship to acquire the necessary equipment/software in order to comply with the electronic media filing requirement. This explanation needs to include cost estimates from two separate providers.

    IF THEN
    The response does NOT include two cost estimates
    1. Issue Letter 1948C and request that the taxpayer provide two cost estimates.

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

  4. The electronic media filing requirement does not apply if the taxpayer applies for and receives a hardship waiver. The taxpayer must file Form 8508, Request for Waiver from Filing Information Returns Electronically, at least 45 days before the due date of the returns. The waivers are evaluated on a case-by-case basis and are approved or denied based on Treas. Reg. 301.6011-2(c)(2).

  5. All potential electronic filing penalty cases are compared to the waivers of the electronic media filing requirement that post to the PMF prior to the generation of Notice 972CG . IDRS CC:PMFOLS contains a field "W" that indicates if the taxpayer submitted a waiver to file IRs other than on magnetic media. The "W" field appears to the right of the "WITHHELD" field. Directly below the "W" , either a "Y" (for Yes) or "N" (for No) will display for each of the IR types.

  6. If the taxpayer’s response indicates that they are not subject to penalty because they were granted a waiver to file on magnetic media, check to see if the taxpayer’s TIN appears on the waiver listing provided by TSO.

    IF THEN
    The taxpayer’s TIN appears on the listing
    1. Waive/abate the penalty as appropriate. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 1948C.

    The taxpayer’s TIN does NOT appear on the listing
    1. Issue Letter 1948C and request a copy of the approval letter or other supporting documentation.

    2. Suspend the cases. See IRM 4.19.25.11, Suspense Procedures, for more information.

  7. If a taxpayer responds with an approval letter from the Technical Services Operation (TSO) granting a waiver of the electronic filing requirement, waive the penalty.

  8. If the taxpayer’s response indicates that they experienced an unexpected increase in business activity during the year (ex: The taxpayer had an unexpected increase in hiring), research IDRS CC:PMFOL (or ORS/ERQY for Forms W-2) in the prior year.

    IF THEN
    The prior year research shows that the taxpayer filed 250 IRs or less
    1. Waive the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 1948C.

    The prior year research shows that the taxpayer filed more than 250 IRs
    1. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 854C and explain why the request is being denied.

  9. Duplicate Submissions: If the taxpayer's response indicates that duplicate data was provided on paper and on electronic media:

    1. Research IDRS CC:PMFOL and any supporting documentation sent by the taxpayer. If the duplicate filing is verified, waive/abate the penalty. See chart below.

    2. If IDRS CC:PMFOL research is not successful, refer the case for further research with the TSO liaison. Provide the TSO liaison with: the taxpayer’s name, TIN, Transmitter Control Code (TCC) if available, tax year, type of return, and number of returns filed.

      IF THEN
      TSO verifies the duplicate filing
      1. Waive/abate the penalty as appropriate. See IRM 4.19.25.14, IDRS Adjustments, for more information.

      2. Issue Letter 1948C. Advise the taxpayer to take steps to ensure that they don’t file paper IRs if they are an electronic filer.

      TSO cannot verify the duplicate filing
      1. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

      2. Issue Letter 854C and advise the taxpayer that the duplicate filing could not be verified.

  10. If the taxpayer requests a copy of the Form 1096 submission, request a SCRIPS print (using IDRS CC:ESTABDS) and send it to the taxpayer. The DLN of the Form 1096 can be found on the IDRS CC:PMFOLD.

    Note:

    If the SCRIPS print of Form 1096 is not available, sanitize the page(s) of the PMF transcript containing the Form 1096 record(s) relevant to the penalty and send the taxpayer a copy with an explanation.

  11. If the taxpayer requests a copy of the Form W-3 submission, print the Form W-3 information from ORS and send it to the taxpayer.

    Note:

    If the Form W-3 is not available, sanitize the page(s) of the PMF transcript containing the Form W-2 record(s) relevant to the penalty and send the taxpayer a copy with an explanation.

  12. If the taxpayer states that the magnetic media penalty was unavoidable because the previous year’s notification (Notice 972CG) was not received until after the current year IRs had already been filed, research IDRS CC:PMFOL prior year history for the same issue.

    IF THEN
    IDRS CC:PMFOL shows that the magnetic media penalty was proposed only in the preceding year

    Example:

    TY 2015 case and IDRS CC:PMFOL shows penalty was proposed in TY 2014 only.

    1. Waive/abate the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 1948C.

    IDRS CC:PMFOL shows a history of magnetic media penalties in any year(s) other than OR in addition to the preceding year

    Example:

    TY 2015 case and IDRS CC:PMFOL shows penalty was proposed in TY 2013.

    Example:

    TY 2015 case and IDRS CC:PMFOL shows penalty was proposed in TY 2014 and TY 2012.

    1. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 854C and explain the reason for the denial.

Magnetic Media Penalty for Form 1042-S Filers
  1. The electronic media penalty applies to information returns that were not filed in the required manner. The penalty generally applies to the number of paper returns over 250 that were filed. However, beginning with Tax Year 2014, financial institutions that are required to report Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding payments, must electronically file Form 1042-S regardless of the number of forms to be filed.

  2. Financial Institutions include, but are not limited to:

    • Depository institutions (for example, banks)

    • Custodial institutions (for example, mutual funds)

    • Investment entities (for example, hedge funds or private equity funds)

    • Certain types of insurance companies that have cash value products or annuities

  3. Form 1042-S is identified as Doc Code 02 on IDRS CC:PMFOL.

  4. Notice 972CG is issued to any taxpayer paper filing Form 1042-S and their North American Industry Classification System (NAICS) code is classified as relating to a financial institution.

    Note:

    NAICS codes may be found in the US Census website at: www.census.gov.

  5. Civil penalties must be assessed on these cases regardless of the number of information returns filed unless any of the following situations apply:

    1. The taxpayer establishes reasonable cause. See IRM 4.19.25.6, Request for Reasonable Cause, for additional information.

    2. The taxpayer provides a copy of timely filed Form 8508, Request for Waiver From Filing Information Returns Electronically. See IRM 4.19.25.6.2, Magnetic Media Penalty (PRN 501) for additional information.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Missing or Incorrect TIN Penalty (PRN 502)

  1. A Missing or Incorrect TIN generally occurs when:

    1. The payee fails to provide a TIN to the payer,

    2. The payee provides an incorrect name/TIN to the payer, or

    3. The taxpayer makes an error when inputting the name/TIN when creating the information return data to send to the IRS.

  2. A CP 2100 or CP 2100A is issued prior to the generation of a Notice 972CG, to alert the taxpayer that they may be responsible for backup withholding when a missing or incorrect TIN is identified for certain information returns. The following IRs may be subject to Backup Withholding (BWH):

    • Form 1099-B, Proceeds From Broker and Barter Exchange Transactions

    • Form 1099-DIV, Dividends and Distributions

    • Form 1099-INT, Interest Income

    • Form 1099-K, Payment Card and Third Party Network Transactions

    • Form 1099-MISC, Miscellaneous Income

    • Form 1099-OID, Original Issue Discount and

    • Form 1099-PATR, Taxable Distributions Received from Cooperatives

    Note:

    The e-services TIN Matching Program is available to taxpayers to validate TINs for information returns that are subject to BWH. Prior to filing an information return, a taxpayer may check the TIN furnished by the payee against the name/TIN combination contained in the TIN Matching Program’s database.

  3. When a penalty is imposed for missing or incorrect TINs, a taxpayer must comply with special rules for acting in a responsible manner. In general, if the taxpayer failed to include a TIN or if the taxpayer was notified of an incorrect TIN (ex: receipt of CP 2100 or CP 2100A), they will have acted in a responsible manner by making solicitations to obtain the correct TIN information as outlined under Treas. Reg. 301.6724-1(e) and Treas. Reg. 301.6724-1(f).

    1. A solicitation is a request by a payer for a payee to furnish a correct TIN.

    2. An initial solicitation must be made by a payer for a correct TIN when a transaction with an information reporting requirement is made unless the payer has the payee’s TIN and uses that TIN for all transactions with the payee.

    3. When a payee’s TIN is missing or incorrect, the payer generally will need to conduct annual solicitations for a correct TIN. However, annual solicitations are not required if the taxpayer is sending B notices in response to CP 2100 notices for the same tax year or received in the same calendar year, for the same incorrect payee TIN.

  4. When the taxpayer requests a waiver/abatement of the penalty for missing or incorrect TINs:

    1. Evaluate the response to determine if the taxpayer acted in a responsible manner AND

    2. Research IDRS to determine Notice 972CG history and related actions taken on the account.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

      1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. If the taxpayer’s explanation lacks sufficient detail to determine that they acted in a responsible manner:

    IF THEN
    The response indicates that the taxpayer could provide additional information
    1. Issue Letter 1948C and request proof of solicitations (e.g.: "B Notices" for IRs subject to BWH and/or solicitation letters for non-BWH related IRs).

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for more information.

    The response indicates that the taxpayer is unable to provide additional information

    Note:

    Discuss with Lead Tax Examiner if unsure.

    1. Deny the request for relief.

    2. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

    3. Issue Letter 854C.

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

    IF THEN
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Issue Letter 1948C to obtain the number of impacted IRs. Advise the taxpayer that we cannot adjust the penalty proposed on the Notice 972CG without this additional information.

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for additional information.

Agreed Replies (Including Full Paid)

  1. If the taxpayer checks the "agree" box and/or signs the "Total Agreement with the Proposed Penalty" section, AND does not include any disputing comments, assess the penalty (using Blocking Series 52) proposed on the Notice 972CG. See IRM 4.19.25.14, IDRS Adjustments, for further information.

    Note:

    The CP 15 (or CP 215) will address any payments posted on the account and advise of any balance due. Therefore, it is not necessary to send additional correspondence to acknowledge any payment on an "agreed" case.

  2. Taxpayers frequently submit full payment of the proposed penalty without submitting any correspondence. Assess the proposed penalty in the same manner as a as a fully agreed response. See IRM 4.19.25.14, IDRS Adjustments, for further information.

  3. If the response includes an indication of total agreement, and another issue is present, assess the penalty and send Letter 1948C to acknowledge any payment and address the other issues. See IRM 4.19.25.14, IDRS Adjustments, and IRM 4.19.25.10, Replies Needing Correspondence, for more information.

Partially Agreed Replies

  1. A partially agreed reply may include the taxpayer agreeing to part of the penalty and establishing reasonable cause for the remainder OR the tax examiner determines that the abatement request is partially denied because reasonable cause was not fully established.

  2. If the taxpayer agrees with part of the proposed penalty and establishes reasonable cause (or shows that they are not liable) for the remainder of the penalty, input the assessment (using blocking series 52) for the reduced (agreed upon) penalty amount. See IRM 4.19.25.14, IDRS Adjustments, for more information. Send Letter 1948C. Inform the taxpayer that we accepted their explanation and include the agreed penalty amount.

  3. If the taxpayer agrees with part of the penalty and does NOT establish reasonable cause to waive the disagreed portion of the penalty, then two adjustments are required:

    1. One adjustment (using blocking series 52) to assess the penalty amount and a second adjustment (using blocking series 98) to post the reason for denying the request to waive/abate the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 854C. Inform the taxpayer of the specific reason(s) the explanation was not accepted and the amount assessed.

  4. If the taxpayer agrees with part of the penalty and additional information is needed to complete the evaluation of the response:

    1. Issue Letter 1948C and request the additional information.

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for additional information.

Disagreed Replies

  1. The taxpayer may completely disagree with the proposed penalty and:

    1. Provide an explanation with (or without) supporting documentation to show they are not subject to the penalty, OR

    2. Request that the penalty be waived based on reasonable cause consideration. See IRM 4.19.25.6, Request for Reasonable Cause, for more information.

  2. Evaluation of the disagreed response may result in:

    1. Waiving the penalty in full,

    2. Denying the request to waive the penalty either in full or in part, OR

    3. Requesting additional information to complete the evaluation of the response.

  3. If the response is sufficient to completely waive the penalty:

    1. Input a TC 290 .00 in blocking series 05 (IMF account) or 15 (BMF account). See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 1948C to explain that we have accepted the explanation and waived/abated the penalty.

    Note:

    If a TC 640 payment has posted to the module, use the IAT Credit Transfer Tool to convert the transaction to a TC 670 payment which will release the "-F" freeze code and refund the payment to the taxpayer.

  4. If the taxpayer disagrees with the proposed penalty and the penalty is NOT being waived, assess the penalty with two adjustments:

    1. One adjustment (using blocking series 52) to assess the penalty amount and a second adjustment (using blocking series 98) to post the reason for denying the request to waive/abate the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Issue Letter 854C. Inform the taxpayer of the specific reason(s) the explanation was not accepted and the amount assessed.

  5. If the taxpayer disagrees with the proposed penalty and additional information is needed to complete the evaluation of the response:

    1. Issue Letter 1948C and request the additional information.

    2. Suspend the case. See IRM 4.19.25.11, Suspense Procedures, for additional information.

Replies Needing Correspondence

  1. There are two primary Correspondex (CRX) letters used during the Notice 972CG reply phase:

    1. Letter 1948C, Civil Penalty Explained.

    2. Letter 854C, Penalty Waiver or Abatement Disallowed/Appeals Procedures Explained.

    Note:

    Letter 2645C (or Letter 5825C when it becomes available) is used to advise the taxpayer that additional time is needed to complete the review of the response. See IRM 4.19.25.2.4, Policy Statement P-21-3 (Formerly P-6-12) Guidelines (Action 61), for additional information.

  2. Tax examiners use Letter 1948C to:

    1. Request additional information to complete the evaluation of the response. See IRM 4.19.25.11, Suspense Procedures, for additional information.

    2. Answer any additional questions included in a response.

    3. Notify the taxpayer that the penalty will be fully waived or completely abated.

    4. Notify the taxpayer that we accepted their partially agreed explanation.

  3. Tax examiners use Letter 854C when a request for penalty waiver or abatement of previously assessed penalty is fully or partially denied. This letter provides the taxpayer with their appeal rights and the procedures they must follow if they wish to appeal the IRS’s decision.

    Note:

    Use Letter 854C any time the penalty is being assessed for other than an "agreed" or "partially agreed" closing.

    Note:

    Evaluate Letter 854C replies to determine if the information provided will allow an assessed penalty to be fully or partially abated or if the case needs to be referred to Appeals. See IRM 4.19.25.15.1, Evaluating Reconsideration Correspondence, and IRM 4.19.25.15.3, Appeals Cases - General Guidelines, for more information.

Creating Correspondex (CRX) Letters

  1. When acknowledging the taxpayer's response input the correspondence date using the following priority:

    1. The date the taxpayer entered on their most recent correspondence.

    2. Envelope postmark date.

    3. Three days prior to the IRS Received Date.

    4. Current date.

  2. A letter sent to a taxpayer requesting information should have the following paragraphs, as applicable, in addition to other paragraphs sent for a specific condition:

    Note:

    If none of the standard paragraphs are applicable, use the "open" paragraph feature to create a special paragraph.

    1. A paragraph that informs the taxpayer when a response is required.

    2. A paragraph requesting the taxpayer's telephone number and the most convenient time to call.

    3. If a payment was submitted, a paragraph acknowledging the payment.

    4. When a response from the taxpayer is required, include a paragraph stating a return envelope is enclosed.

  3. ALWAYS print a copy of the CRX letter issued to the taxpayer and keep it with the case file.

    Exception:

    Do not print a copy of interim letters (Letter 2645C or Letter 5825C).

Suspense Procedures

  1. Issue Letter 1948C when additional information is needed to complete evaluation of the Notice 972CG response.

    1. Clearly request all missing information.

    2. Update IDRS control base with activity code "1948CMMDD" where the "MMDD" represents the last day of the suspense period.

    3. Update the IDRS control base status code to "S" .

    4. Suspend cases for 30 calendar days (60 calendar days if overseas). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. Monitor until the taxpayer responds or the suspense time frame has ended.

      Note:

      Do not suspend cases more than once unless there are extenuating circumstances. For example, the taxpayer was granted an extension to respond to the Notice 972CG and the resulting response is insufficient to make a determination. In this case, another Letter 1948C is needed to request the missing information.

      Note:

      Do not suspend Reconsideration cases.

  2. If the taxpayer responds to Letter 1948C, evaluate the response and take appropriate action.

  3. If the taxpayer does NOT respond by the end of the Letter 1948C suspense period, research IDRS CC:TXMOD or CC:BMOLT for any conditions that would impact the closing of the case:

    1. Ensure the IRP penalty has not been previously assessed.

    2. Disaster indicator "-O" freeze is present. See IRM 4.19.25.5.8, FEMA Declared Disaster Area, for more information.

    3. Bankruptcy indicators are present. See IRM 4.19.25.5.1, IRP Cases Needing Further Action, for more information.

    4. Collectability Conditions are present. See IRM 4.19.25.5.1, IRP Cases Needing Further Action, for more information.

    If there are no conditions that prevent the closing of the case:

    1. Assess the penalty. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 854C.

972CG No Replies

  1. A case is considered a no reply when the taxpayer has not responded to the Notice 972CG.

  2. The proposed penalty will be assessed in full.

  3. Research IDRS to ensure that there are no conditions that would impact the penalty assessment.

  4. The Reason Code and Penalty Reason Code fields will be left blank.

  5. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

  6. Do not create any CRX letters.

Notice 972CG Undeliverables - Tax Examiner Responsibilities

  1. When working a Notice 972CG undeliverable batch, a tax examiner will research for a better address using:

    • IDRS CC:INOLE will provide the most current posted entity information on the National Account Profile (NAP).

    • IDRS CC:ENMOD may reflect a recently input address change that has not posted to INOLE.

    • IDRS CC:IRPTR will provide a current address for the taxpayer from an information return filed for the most recent processing year.

  2. If a better address is found:

    1. Cross out the notice date on the Notice 972CG and notate the current date beside it.

    2. Re-mail the notice (include the original envelope).

    3. Using IDRS CC:ACTON, take the following actions to update the control base:

      CC:ACTON Field Action Taken
      Activity Code "972CG_SENT"
      Status Code "M"
      IRS Received Date Current date
    4. Update the History Item to "UNDEL-BAF" .

    Note:

    See IRM 4.19.25.5.4, Address Changes, if an address update is needed.

  3. If a better address is NOT found:

    1. Assess the penalty in full.

    2. Update the Activity Code to "972CGUNDEL" .

    3. Input Hold Code 3 to prevent the issuance of another notice to the incorrect address.

    Note:

    See IRM 4.19.25.14, IDRS Adjustments, for more information.

  4. If the case has already been closed:

    1. Research IDRS for the controlling DLN.

    2. Prepare a Form 9856, Attachment Alert.

    3. Send the completed Form 9856, Attachment Alert, and the undeliverable information to the Campus Files Operation to be attached to the controlling DLN.

IDRS Adjustments

  1. Use the IAT tool to input adjustments on IDRS CC:REQ54 to file fully waived responses and to process necessary penalty adjustments.

    Note:

    Some responses require the input of two adjustments. The first adjustment is input to assess a penalty amount and a second to post the reason for denying the taxpayer’s request for waiving or abating the penalty. See IRM 4.19.25.6, Request for Reasonable Cause, for additional information.

  2. SEQ-NUM< Sequence Number: Start each day with sequence number “1” and number each subsequent adjustment input in the same day in sequence order (ex: 1, 2, 3, 4, etc.)

  3. BLK< Blocking Series (BS): The following blocking series (BS) are used for IRP adjustments:

    1. Blocking Series 05: Used for full penalty waivers on IMF accounts.

    2. Blocking Series 15: Used for full penalty waivers on BMF accounts. It is also used for Reconsideration responses where the explanation is insufficient to make a determination.

    3. Blocking Series 52: Used for first assessment (full or partial change) on the module.

    4. Blocking Series 53: Used for any subsequent adjustments based on a Reconsideration on a module with a previous blocking series 52.

    5. Blocking Series 98: Used when disallowing the taxpayer’s request for waiving/abating the penalty (based on reasonable cause).

      Note:

      When inputting two adjustments (ex: BS 52 and BS 98), ALWAYS associate the taxpayer response to the BS 98 adjustment.

  4. CORRSP-DT< Correspondence Date: Input the date of the taxpayer’s response. Input using the following priority:

    1. The date the taxpayer entered on their most recent correspondence.

    2. Envelope postmark date or the date stamped by the Fax machine.

    3. Three days prior to the IRS Received Date.

    4. Current date.

      Note:

      Use the posted payment date from IDRS CC:TXMOD when the taxpayer’s correspondence is not present and the account is full paid to the Notice 972CG.

      Note:

      Leave this field blank when inputting “No Reply” adjustments.

  5. CASE-STS-CD< Case Status Code: Enter “C” to close the case control.

    Note:

    Use “C” for any assessment made to the account (waiver, assessment, abatement or denial).

  6. IRS-RCVD-DT< IRS Received Date: The IRS Received Date is required on all assessments resulting from taxpayer correspondence If it is necessary to enter the IRS received date, determine the date using the following priority:

    1. Received date stamped on correspondence.

    2. Envelope postmark date or the date stamped by the Fax machine.

    3. Signature date.

    4. Current date.

    Note:

    Use the posted payment date from IDRS CC:TXMOD when the taxpayer’s correspondence is not present and the account is full paid to the Notice 972CG.

    Note:

    Leave this field blank when inputting “No Reply” adjustments.

  7. CTRL-CAT< Case Control Category Code: Input “IRP-“ for all IR Penalty related adjustments.

  8. ACTIVITY< Case Control Activity Code: Input the action taken on the account. The activity code cannot be more than 10 characters. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for further information.

  9. TC< Transaction Code (TC): All IR Penalty adjustments will include TC 290 with AMT< .00

  10. RSN-CDS< Reason Code (RC): Input reason codes and penalty reason codes as applicable. The reason code generates explanation statements on the CP 215 or CP 15 adjustment notice. The most commonly used PRCs in the IR penalty program are:

    Note:

    When inputting an adjustment using BS 98, ALWAYS input RC 062 in the first position and leave the fourth position blank.

    • The PRCs below are used when waiving/abating penalties due to reasonable cause:

      IMF RC
      (1st position)
      BMF RC
      (1st position)
      PRC
      (4th position)
      Description
      062 062 022 Normal business care and prudence followed, but taxpayer was still unable to comply due to circumstances beyond his or her control.
      062 N/A 024 IMF only -Death, serious illness, or unavoidable absence of the taxpayer or a member of his or her immediate family.
      062 062 025 Records inaccessible. Unable to obtain records. Records destroyed by fire or other casualty.
      N/A 062 026 BMF only -Death, serious illness, or unavoidable absence of the person
      062 062 030 Other - Combination of mistakes. Normal business care and prudence followed, but documentation shows non-compliance was due to circumstances beyond the taxpayer’s control.
    • The PRCs below are used when waiving/abating penalties for criteria other than reasonable cause:

      IMF RC
      (1st position)
      BMF RC
      (1st position)
      PRC
      (4th position)
      Description
      065 None 023 Taxpayer relied on practitioner or third party advice.
      065 None 027 Timely mailed/timely filed.
      065 None 028 Official FEMA declared disaster area.
      065 None 045 IRS error. Math error in computing penalty(ies).

    Note:

    See Document 6209 for additional reason codes.

  11. HOLD-CD< Hold Code: Hold Codes are used to prevent or delay the issuance of a refund or a notice. Use a Hold Code 3 anytime you are also generating a CRX explanation letter to the taxpayer (e.g., Letter 1948C or Letter 854C). See Document 6209 for additional information.

  12. PSTNG-DLAY-CD< Posting Delay Code (PDC): Use PDC “1” when inputting a second assessment in BS 98 in the same week as inputting an adjustment in BS 52 or 53.

  13. CD< Penalty Reference Number (PRN): Input the appropriate penalty reference number. See Exhibit 4.19.25-4, Penalty Reference Numbers Used in the IRP Program, for further information. Input the penalty amount in the AMT< field:

    • Input a positive amount to assess (i.e., charge) a penalty.

    • Input a negative amount to abate (i.e., remove) a previously charged penalty.

    • Input a zero (.00) to waive (not charge a penalty) or when not adjusting a previously charged penalty (i.e., no consideration).

  14. SOURCE-DOC-ATTACHED?<: This is a required field and is used to inform the Campus Files Function when an assessment with a source document (e.g., correspondence, copy of CRX Letter, IDRS print, etc.) is routed to them.

    • Enter “Y” if including information to be associated with the adjustment.

    • Enter “N” if there is no information to be associated with the adjustment.

    Reminder:

    When inputting two adjustments (i.e.: assessing a penalty due to denying reasonable cause) ALWAYS associate the taxpayer response to the BS 98 adjustment. Enter “N” in the “SOURCE-DOC-ATTACHED?” field of the BS 52/53 adjustment and enter “Y” in the “SOURCE-DOC-ATTACHED?” field of the BS 98 adjustment.

  15. REMARKS<: This is a required field and must contain at least three characters. Enter "IRP-ADJ" for all adjustments.

  16. ALWAYS include a print of the IDRS CC:PMFOLS and/or CC:PMFOLD screen(s) with the adjustment based on denying a taxpayer’s request to waive a penalty.

  17. Certain closing actions require that you generate a CRX Letter. ALWAYS include a copy of the created CRX Letter with the adjustment.

  18. On a case-by-case basis, input History Items on IDRS to explain actions taken on the case.

Reconsiderations - Overview

  1. IRP reconsideration cases (Recon) are responses received after the case has been closed (assessment or waiver). A RECON is a request for abatement of the penalty, and/or interest. Use the same guidelines in making determinations for reconsideration correspondence as when working open IRP cases.

  2. When working non-current Notice 972CG tax year requests for reconsideration, as a general rule, the tax examiner should apply the most current IRP procedures in the processing of the reconsideration. The tax examiner needs to consider tax year specific regulations regarding penalty rates.

Evaluating Reconsideration Correspondence

  1. IRP Recons are subject to Policy Statement P-21-3 (formerly P-6-12) guidelines. See IRM 4.19.25.2.4, Policy Statement P-21-3 (Formerly P-6-12) Guidelines (Action 61), for more information.

  2. Use the procedures/guidelines in IRM 4.19.25.5, 972CG Reply Procedures, (including the subsections) and IRM 4.19.25.6, Request for Reasonable Cause, (including the subsections) to evaluate requests for reconsideration.

  3. Reconsideration responses result in one of the following:

    1. Fully abating the previously assessed penalty. See IRM 4.19.25.15.1.2, Full Abatement Determinations.

    2. Fully disallowing the claim for reconsideration. See IRM 4.19.25.15.1.3, Full Disallowance Determinations, for more information.

    3. Partially abating the previously assessed penalty or partially disallowing the claim for reconsideration. See IRM 4.19.25.15.1.4, Partial Abatement/Partial Disallowance Determinations, for more information.

    4. No consideration. See IRM 4.19.25.15.1.5, No Adjustment Determinations, for more information.

  4. If IDRS research shows the taxpayer's account:

    1. Is in notice status (balance due), input IDRS CC:STAUP with a definer "S" to prevent the taxpayer from receiving additional notices while the response is being worked. See Exhibit 4.19.25-6, Notice Delay Actions (Reconsiderations), for the appropriate action.

    2. If the case is in collection status, input TC 470. See Exhibit 4.19.25-6, Notice Delay Actions (Reconsiderations), for the appropriate action.

  5. When closing the case reduce the IDRS CC:STAUP.

    Reminder:

    If the case is in Collection status input a TC 472 to reverse the previously posted TC 470.

Reconsiderations - Cases Needing Further Action
  1. Accounts in Collection Status - Ensure that any Collection activity is suspended by inputting IDRS CC:STAUP or a TC 470 while the case is being evaluated. See Exhibit 4.19.25-6, Notice Delay Actions (Reconsiderations), for more information.

  2. Recons may also be received on Form 4442, Inquiry Referral. Provide taxpayers with interim responses (by telephone or in writing) if Tax Law Referrals of Recons cannot be resolved within seven (7) calendar days or Account Referrals of Recons cannot be resolved with fifteen (15) calendar days.

  3. When a related case is being worked by Field functions, the Tax Examiner/Revenue Officer (RO) may submit a Form 3870, Request for Adjustment, to request an adjustment or abatement of the IRP civil penalty. These cases will be worked within 45 days of receipt in a first-in-first-out basis while workload permits. Interim Letter 2645C or Letter 5825C when it becomes available, is not required on these cases since the Tax Examiner/RO has already made contact with the taxpayer.

  4. Bankruptcy Indicator - If the account shows indicators of bankruptcy, contact the Centralized Insolvency Operation for direction. Bankruptcy indicators include: TC 520 with Closing Code(s) 60-67, 83, 85-89 (-V Freeze), 81, or 84 (-W Freeze) is present AND there is no corresponding TC 521 on the account.

Full Abatement Determinations
  1. A full abatement determination results when the taxpayer provides enough information to fully reverse the IRP assessment. Input a reversal of the IRP assessment using BS 53. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    Reminder:

    Input the PRN for the same amount as the previously posted penalty as a negative value.

    Note:

    The taxpayer will receive a CP 15/CP 215 as notification of the adjustment. Therefore, DO NOT issue Letter 1948C unless the taxpayer asks questions or raises other issues that require a response.

  2. Update IDRS CC:STAUP to 3 cycles or reverse the TC 470 as applicable.

Full Disallowance Determinations
  1. A full disallowance determination results when the taxpayer’s request for reconsideration of the previously assessed penalty is invalid (ex: the taxpayer claims that they timely filed; however, the evidence does not support the claim) or does not meet reasonable cause.

  2. When the determination results in a full disallowance:

    1. Input an adjustment using BS 98. See IRM 4.19.25.14, IDRS Adjustments, for more information.

    2. Send Letter 854C and include specific reason(s) the abatement request is being denied.

    3. Update IDRS CC:STAUP to 3 cycles or reverse the TC 470 as applicable.

Partial Abatement/Partial Disallowance Determinations
  1. A partial abatement determination results when the taxpayer agrees with a portion of the previously posted penalty and establishes reasonable cause (or shows that they are not liable) for the remainder of the penalty.

    1. Input the partial abatement using BS 53. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

      Reminder:

      Input the PRN for the abated amount as a negative value.

    2. Send Letter 1948C.

    3. Update IDRS CC:STAUP to 3 cycles or reverse the TC 470 as applicable.

  2. A partial disallowance determination results when the taxpayer’s request for reconsideration of the previously assessed penalty is insufficient to fully abate the penalty. In this situation, two adjustments are required:

    1. One adjustment (using BS 53) to abate the portion of the penalty based on reasonable cause and a second adjustment using BS 98 to post the reason for denying the request to abate the remainder of the penalty. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

      Reminder:

      Input the PRN for the abated amount as a negative value.

    2. Send Letter 854C. Inform the taxpayer of the specific reason(s) the explanation was not accepted and the amount abated.

    3. Update IDRS CC:STAUP to 3 cycles or reverse the TC 470 as applicable.

No Adjustment Determinations
  1. A no adjustment determination results when the taxpayer does not provide sufficient information to make a determination.

    1. Input an adjustment using BS 15 (BMF account) or BS 05 (IMF account) to file the response. See IRM 4.19.25.14, IDRS Adjustments, for additional information.

      Note:

      Ensure that the PRN amount and the Reason Code fields are blank.

    2. Send Letter 1948C. Inform the taxpayer that the information provided was insufficient and explain what is needed.

    3. Update IDRS CC:STAUP to 3 cycles or reverse the TC 470 as applicable.

  2. DO NOT suspend RECON cases when sending Letter 1948C to request additional information.

Requesting Adjustment Documents

  1. While most requests for reconsideration can be worked from the information provided and IDRS research, there are times when it may be necessary to order the original IRP assessment.

    Example:

    The taxpayer requests reconsideration for a tax year where IDRS CC:PMFOL information is no longer available.

    1. Order the IRP adjustment document.

    2. Update IDRS control base activity. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for additional information.

    3. Monitor for 30 days. If the document is not received, submit a second request.

      Note:

      If the document is not received after the second request, confer with the Lead Tax Examiner or the Manager to determine next steps.

    4. Check the STAUP and extend, if needed.

Appeals Cases - General Guidelines

  1. Requests for relief from civil penalty assessments received after the initial request for relief has been denied through the issuance of Letter 854C are generally considered an appeal of the previous penalty relief denial.

  2. The Appeals Coordinator acts as the liaison between the Operation and Appeals.

Appeals Cases - Tax Examiner Responsibilities
  1. When a response to Letter 854C is received, determine if the penalty was previously sustained in Appeals. This may be identified by the presence of PRC 041/042 followed by a TC 290 for $0.00 with a Blocking Series 96X and a -N Freeze Code on the account. If this information is present, forward the request to the appropriate Appeals office.

    Note:

    Ensure the case is being routed to the correct Appeals office as identified by the 3-digit Appeals Office Code. Consult the Campus Case Routing page on the Appeals web site.

  2. When a response to Letter 854C is received, disagreeing with the penalty, and the penalty was not previously sustained in Appeals, review the correspondence for any information that would allow the penalty to be abated.

    Note:

    It may be necessary to request the original penalty adjustment document from the Files Function in order to complete the review.

  3. If the information provided meets penalty relief, abate the penalty(ies).

    Reminder:

    Re-file the original penalty adjustment document back to the Files Function separately under its own DLN.

  4. If the information provided does not meet penalty relief, prepare the case for transfer to the Appeals Coordinator. The case needs to include the following items:

    • Signed statement from the taxpayer (or authorized representative) requesting an Appeal. See (5) below for further information.

    • The original reasonable cause denial penalty assessment. See (6) below for further information.

    • A copy of the original Letter 854C.

  5. The response requesting an appeal must be signed by the taxpayer or an authorized Power of Attorney (POA) with a valid Form 2848 on file. If the response does not contain the necessary Appeals request, contact the taxpayer and explain what is needed in order for the taxpayer to appeal the penalty determination.

    Caution:

    A Form 8821 or Form 2848, Level H, is not considered an authorized POA.

    IF AND THEN
    The response includes a telephone contact number, attempt a phone contact The contact is successful
    1. Inform the taxpayer to FAX their signed request for Appeals within 3 business days.

    2. If the FAX is not timely received, issue Letter 1948C and close case control.

    3. If the FAX is timely received go to (6) below.

    The response includes a telephone contact number, attempt a phone contact The contact is unsuccessful
    1. Issue Letter 1948C.

    2. Close case control.

    The response does not include a telephone contact number  
    1. Issue Letter 1948C.

    2. Close case control.

  6. When you have secured the taxpayer’s signed request for Appeals:

    1. Order the penalty adjustment document processed in the 98 Blocking Series.

    2. Update IDRS control base activity. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for additional information.

    3. Monitor the case for 30 days.

    IF THEN
    The Files function provides the source document or provides a blank charge out (indicating that the source document is unavailable), Provide the Appeals Coordinator with the source document or the blank charge out.
    The Files function does not respond after 30 days Initiate a second request.
    The Files function does respond after the second attempt, Provide the Appeals Coordinator with the copy of the document request.

    Note:

    If the document request is received after the case has been forwarded to Appeals, refer the document to the Appeals Coordinator.

  7. Once all of the items in (4) above are secured, transfer the case to the Appeals Coordinator.

Appeals Cases - Coordinator Responsibilities
  1. When a tax examiner has completed their required actions on a case that requires transfer to Appeals, the case will be transferred to the Appeals Coordinator. The Coordinator will review the file to determine if all appropriate steps have been taken and if all required documentation is present. The case file must include the following:

    1. The letter requesting an appeal, signed by the taxpayer or an authorized Power of Attorney (POA) (with a valid Form 2848 on file.)

      Caution:

      A Form 8821 or Form 2848, Level H (Unenrolled Return Preparer), is not considered an authorized POA.

    2. A copy of the previous denied penalty relief request (the TC 290 .00 in BS 98 Source Document). If the Source Document is not available, a copy of the Files charge-out information should be present.

    3. A copy of the original Letter 854C.

  2. If the case file is incomplete, return it to the tax examiner to complete the required actions.

  3. Completed case files based on taxpayer response to Letter 854C will be forwarded to the Ogden Appeals Campus Office:

    1. Close any open IRP controls.

    2. Open a new control base to Appeals, assign the case to 6629800000, and control category "APPZ" .

    3. Input a TC 971 with Action Code 251 for each case.

    4. Input TC 470 with Closing Code 90, if applicable.

    5. Issue Letter 86C to the taxpayer and use 90 days as the contact time frame. The phone number for contact is 559-456-5931. The address is:
      IRS Appeals Office
      1973 N Rulon White Blvd
      Stop 8500
      Ogden, UT 84404

    6. Complete Form 12835, Transmittal of a Case to Appeals, for each case.

    7. Complete one Form 3210, Document Transmittal, for the group of cases being sent to Appeals. Ship the cases to the address of the Ogden Appeals office.

    8. Complete Form 9814, Request for Mail/Shipping Service, for clerical to package the Appeals case(s) for shipping.

Civil Penalty Statute of Limitations

  1. IRP penalties must be assessed within 3 years after the due date of the return or the date filed, whichever is later.

  2. A claim for credit or refund must be filed within 3 years from the time the return was filed or 2 years from the time the penalty was paid, whichever is later.

Assessment Statute Expiration Date (ASED)
  1. IRC 6501(a) provides that for missing or incorrect information on a filed information return, the penalties must be assessed within 3 years after the due date of the information return or the date filed, whichever is later.

  2. Once the 3 year period has passed, the only adjustment that can be made to the account is to reduce or remove the penalty.

Refund Statute Expiration Date (RSED)
  1. IRC Section 6511(a) provides that a claim for credit or refund must be filed within 3 years from the time the return was filed or 2 years from the time the penalty was paid, whichever is later.

  2. Penalties should not be abated on a full paid account if the overpayment created is barred from refunding because the RSED has passed and no condition exists that will extend the refund period. This is true even if the taxpayer’s claim for penalty abatement is based on reasonable cause.

  3. When a request for reconsideration is received after the RSED has expired AND reasonable cause has been established, see IRM 25.6.1, Statute of Limitations Processes and Procedures, for more information.

Failure to File in the Proper Format (Letter 1865C)

  1. The penalty for failure to file in the proper format is assessed for unprocessable paper and electronic returns identified by Submission Processing and TSO. This penalty is manually assessed by the IR Penalty Unit. It is not preceded by a Notice 972CG.

    1. The documents are returned to the taxpayer (during initial processing) using Letter 1865C. The letter explains the problem and requests that the taxpayer resubmit the corrected forms within 30 days of the letter date. The taxpayer is also advised of the applicable penalties for not re-submitting the returns timely.

    2. Unprocessable returns are referred to the IR Penalty Unit for the improper format penalty if they are still unprocessable at the Submission Processing cut off for the year.

    3. The de minimis exception does not apply to the improper format penalty.

  2. Only the actual returns that cannot be processed will be subject to the failure to file in the proper format penalty and will be forwarded to the IR Penalty Unit for penalty consideration via transmittal. A copy of the Letter 1865C should be included along with a notation that the returns are subject to penalty due to lack of response from the taxpayer.

  3. The IR Penalty Unit will apply the penalty for each unprocessable return received.

    1. Identify the reason for the unprocessable condition, based on the description in the Letter 1865C. Reasons can include the following (this list is not all inclusive):

      Unprocessable Conditions Description
      Payer and recipient information reversed This occurs when the payer information is present on the recipient section and the recipient information is present on the payer section of the information return(s).
      No income shown This occurs when the taxpayer is reporting federal income tax withheld in box 4 without reporting any income.
      Substitute forms used The taxpayer submitted the returns on unauthorized forms.
      Mixed year The year on the Form 1096 does not match the year on the individual information returns.
      The printed information doesn’t align to the proper box(es). Occurs when the taxpayer did not properly align the form in the printer. The amounts are printed either above or below the proper box.
      Multiple payers This occurs when the information returns reflect multiple payers.
      Too many "voids" This occurs when the taxpayer submitted too many "voided" information returns when attempting to make corrections.
    2. Determine the total penalty amount based on the impacted IRs.

    3. Input the penalty assessment on the applicable civil penalty module for the proper tax year. See IRM 4.19.25.14, IDRS Adjustments, for more information.

      Note:

      Input "1865CPURGE" in the activity field and "503" in the penalty reference number field.

    4. Input IDRS History Items with the following:

      History Item Needed Example
      The unprocessable information return type. "1099MISC" , "1099INT" , etc.
      The reason for the unprocessable condition. "MIXEDYEAR" , "MULT-PAYER" , "NOINCOME" , etc.
      The date Letter 1865C was issued. "1865CSENT" and
      "MM-DD-YYYY"
    5. DO NOT send a Correspondex letter. The taxpayer will receive a CP 15 or CP 215 to advise them of the penalty assessment.

Replies to Failure to File in the Proper Format (Letter 1865C)

  1. Generally taxpayers must establish reasonable cause for the penalty to be abated. Use the procedures/guidelines in IRM 4.19.25.5, 972CG Reply Procedures, (including the subsections) and IRM 4.19.25.6, Request for Reasonable Cause, (including the subsections) to evaluate the response. If the penalty can be fully abated, see IRM 4.19.25.15.1.2, Full Abatement Determinations, for more information.

  2. If the taxpayer submits corrected returns in response to the penalty adjustment notice (CP 15/CP 215). Receipt and Control will notate on the CP 15/CP 215 notice, "Processable returns submitted" , and also notate the received date and the number of returns submitted.

    1. Review the taxpayer's response to determine if the explanation establishes reasonable cause.

    2. If the taxpayer's explanation does not establish reasonable cause and the received date indicates that the penalty should be reduced, recalculate the penalty using the information in Exhibit 4.19.25-1, IRC 6721 Penalty for Large Businesses with Gross Receipts Over $5 Million, and Exhibit 4.19.25-2, IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million as appropriate. The penalty should only be adjusted for the number of processable returns received as noted on the CP 15/CP 215 notice. See IRM 4.19.25.15.1.4, Partial Abatement/Partial Disallowance Determinations, for more information.

      Example:

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

    3. Also include the following explanation: "We received your corrected information returns on MMDDYYYY. The penalty you were previously assessed for filing unprocessable Forms XXXX has been reduced to $XX.XX per return. You will receive an adjusted balance due notice."

  3. If the taxpayer’s explanation does NOT meet reasonable cause regardless of whether they include processable returns, disallow the claim. See IRM 4.19.25.15.1.3, Full Disallowance Determinations, for more information.

Form 3491 - Consumer Cooperative Exemption Application

  1. Cooperatives are entitled to an exemption from filing Form 1099-PATR, Taxable Distributions Received from Cooperatives, if 85% of the cooperative's gross receipts for the preceding year, or 85% of its total gross receipts for the preceding 3 tax years, were from retail sales of goods or services that are generally for personal, living or family use.

  2. The cooperative files Form 3491Consumer Cooperative Exemption Application, to file for this exemption.

IRP Civil Penalty Abatement Requests Based on Form 3491

  1. If the cooperative indicates they have an approved exemption, and a copy is included, waive or abate the penalty.

  2. If the cooperative indicates they have an approved exemption, and a copy is not included, treat correspondence as an insufficient reply.

Processing Forms 3491

  1. Upon receipt of an unprocessed Form 3491, evaluate the form for completeness and validity.

  2. The Form 3491 is considered complete when the taxpayer fills out section 1a, Name of Organization, through section 6, Gross Receipts, AND must include the signature of the officer under the penalties of perjury jurat statement.

  3. The Form 3491 is considered valid when the percentage shown on line 6a, column 4, is 85% or more. Verify this percentage by:

    1. Dividing the amount on line 6a, column 1, by the entry in line 6a, column 3.

    2. If the entries on line 6a (first preceding year) do not result in 85% or more, then divide the entry on line 6d, column 1 by the entry on line 6d, column 3.

    3. If the entries on line 6d (total) do not result in 85% or more, then the Form 3491 is invalid and the taxpayer is not entitled to the exemption.

  4. If the Form 3491 is incomplete and/or invalid, return it to the taxpayer with Letter 131C. Do NOT make any annotations on the Form 3491.

    1. On Letter 131C, include a detailed explanation explaining why the form is being returned (Ex: The form is missing the signature of the officer, the percentage of gross receipts from retail sales is less than 85% of the total receipts, etc.)

    2. Input the following two-line IDRS History Item to the MFT 13 for the tax period of the requested exemption: "FORM3491" and "NOTAPPROVD" .

  5. If the Form 3491 is complete AND the 85% rule is met, the request will be approved.

    1. Check the "We have approved your application" box on both copies.

    2. Stamp the Director’s signature on both copies.

    3. Enter the current date on the Director’s signature line of both copies.

    4. Return the original Form 3491 to the taxpayer with Letter 1948C explaining that the Form 3491 was approved and to be retained for their records.

    Input the following adjustment on MFT 13 for the tax period of the approved exemption:

    1. BLK< 15 for BMF account

    2. ACTIVITY< "PATREXEMPT"

    3. TC< 290 .00.

    4. CD (PRN)< 600

    5. REMARKS< "Exemption from filing Form 1099-PATR"

    Note:

    Attach one copy of the signed Form 3491 as the source document for the adjustment. See IRM 4.19.25.14, IDRS Adjustments, for more information.

Excessively Late Filed Information Returns (1096s from Submission Processing)

  1. Some information returns are filed so late that they are not included in the IRP process. These information returns are processed by Submission Processing, then scanned and referred to the IR Penalty Unit to assess the late filing penalty (PRN 500).

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Exception:

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

  3. If correspondence is attached to the information returns, review and evaluate for indications of Reasonable Cause. See IRM 4.19.25.6, Request for Reasonable Cause, and IRM 4.19.25.6.1, Late Filing Penalty (PRN 500), for more information.

  4. Do not assess late filing penalties when:

    • These information returns were already posted to IDRS CC:PMFOL.

    • The maximum civil penalty has already been reached before assessing any further penalties.

    • The Form 1096 is annotated with "Penalty Considered" and/or is coded "E" (penalty considered by Exam), "C" (penalty considered by Collection), or "N" (penalty considered by Receipt and Control).

    • It can be determined that the returns are corrections of previously filed IRs.

    • The Form 1096 does not contain an IRS Received Date.

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      See IRM 4.19.25.5.1, IRP Cases Needing Further Action, for additional conditions that may impact the penalty assessment.

  5. Assess the penalty on the appropriate civil penalty module (MFT 13 for BMF or MFT 55 for IMF) for the applicable tax year. See IRM 4.19.25.14, IDRS Adjustments, for more information. Input the following:

    1. BS 52

    2. PRN 500

    3. Penalty amount: (# of late information returns x applicable late penalty rate)

    4. Activity Code: "LATE-F1096"

    5. Input the following four IDRS History Items: "LATE-F1096" , form type (Ex: "1099INT" ), "RECEIVE-ON" , "MM-DD-YYYY" .

    6. Send Letter 1948C. Inform the taxpayer that they have been charged a late filing penalty under IRC 6721. Ensure the letter includes the document type, the number of IRs, and the amount of the penalty.

    7. If the taxpayer responds, follow the guidelines in IRM 4.19.25.15, Reconsiderations - Overview (including subsections), for more information.

Inventory Management

  1. The success of the IRP program is dependent upon the effective management of inventory.

  2. Tax Examiners are responsible for monitoring the cases assigned to their individual IDRS number to ensure all appropriate actions are taken and mandated time frames are met.

  3. There are various tools/reports that employees use to effectively manage their individual inventory and that management uses to monitor the over program inventory.

Tax Examiner Inventory Management

  1. Aged criteria - Notice 972CG replies and requests for reconsideration will be considered aged at 45 days from the IRS Received Date.

  2. Tax Examiners track the time spent performing IRP-related activities based on the applicable Organization Function Program (OFP) code.

  3. Tax Examiners record the volume of cases worked on a daily basis using an Inventory Tracker (Ex: Feeder Sheet).

  4. Tax Examiners use the CCA reports to monitor and manage their individual inventories.

IRP Program Organization Function Program (OFP) Codes
  1. OFP codes are used in preparation of the business operating divisions work plans/work schedules. This data shows historic staff-hour and volume usage. Because of the many uses for this data it is imperative that reporting be as accurate, consistent and error free as possible.

  2. Organization, Function, and Program (OFP) codes are recorded on Form 3081, Employee Time Report, to identify IRP programs IRS employees perform daily.

    • An organization code is a five-character code used to describe where the work is being performed, (e.g., 84000 CAWR/FUTA)

    • A function code is a three-digit code used to describe what is being done, (e.g., 700 Telephone Activity, 710 Tax Account Activity, 790 Clerical Activity, etc.)

    • A program code is a five-digit code that used to describe the program being worked

    OFP-Program Code and Description
    • 44610 - 972CG Replies

    • 44612 - 972CG No Replies

    • 44614 - 972CG Undeliverables

     
    • 44651 - 972CG Reconsiderations

     
    • 44661 - 1096/1865C

    • 44662 - 1096/Excessively Lates

The CCA 42-43 IDRS Inventory Report
  1. This report contains all cases controlled to an IDRS employee number. Tax examiners/Managers use this report to:

    • Identify cases that require action

    • Identify specific cases for review

    • Determine if employees are working inventory in the proper order

    • Set closure expectations

    • Identify potential management problem cases

  2. This report is available in Control-D every Monday morning:

    • Report Name: "OVERAGE REPORT"

    • Job Name: "CCA 4243"

  3. The report lists cases assigned to IDRS employee numbers. For each case shown, the following information is provided:

    • Team – The team the cases are assigned to

    • EMP – Employee’s IDRS number

    • TIN – Employer Identification Number

    • MFT – Master File Tax Account Code

    • TXPD - Tax period on assigned account

    • NAME - Name Control on taxpayer’s account

    • Freeze Codes – Freeze Codes that are on the IDRS account

    • Age – Number of days case has aged on IDRS

    • IRS Rcd Date – The date the IRS received the case

    • Assign Date – The date the case was assigned to an examiner

    • Activity Code – A 10-character field on IDRS the tax examiner uses to enter actions taken on the case

    • Status – Case History Status Code (A – Active, B – Background, C – Closed, M, Other long term delay, and S – Suspense)

    • Category – Category of case

    • Action Date – Last action that was input on account

    • BMF Mod Balance – Module balance on IDRS

    • Stat Age – Indicates statute conditions for current and previous year returns – over, expired, or days remaining on statute

    • STAUP Cycle – Stops notices from generation until cycle listed

    • C Letter and Date – Date and type of CRX letter that has been sent

    • BOD – Business Operating Division

    • CLC – Client Code

    • Plan No – If applicable. Integrated Data Retrieval System 11884-102 7-8

  4. Each tax examiner is responsible to ensure the control assigned to them on IDRS is physically in their possession and can be retrieved at any time:

    1. If the case on the CCA listing is NOT in your physical possession, research IDRS to determine the current case status.

      IF THEN
      The case was already assessed, but the control was not closed Close the IDRS control.
      An IDRS control is still open and the penalty has not been addressed See IRM 4.19.25.4.1, Lost and/or Extra Cases, and follow the guidelines for a Lost Case.
    2. If the case is physically in your possession, but NOT on the CCA report, research IDRS to determine the current case status and consult with the Lead Tax Examiner or Manager for direction, if necessary.

  5. Review the CCA 42-43 for the following activity and take corrective action as appropriate:

    IF THEN
    The case is aged Take the next appropriate action.
    Freeze codes are present (e.g., Disaster, Bankruptcy, etc.) Take the appropriate action.
    The Activity Field suspense period (Ex: "1948CMMDD" ) has expired Take the appropriate action.
    The ASED is statute imminent Process the case accordingly.
    The case has an incorrect Status or Activity Code Take corrective actions to update the control.
    An unpostable condition is present Treat the case as priority inventory and take the appropriate action(s).
  6. Manager/Lead provides the tax examiner with the page(s) of the CCA 42-43 report where the cases are controlled to their IDRS number. Tax examiner will notate the actions taken on each case worked. Annotations should include:

    • "C" - Case moved to closed status.

    • "M" - Case moved to monitor status.

    • "S" - Case moved to suspense status.

  7. Cases must be worked in the following priority order:

    1. Cases controlled using category code "NLUN" .

    2. Cases with an ASED that will expire within 180 days.

    3. Cases where the taxpayer was contacted and the suspense date (Ex: "1948CMMDD" ) has expired.

    4. Cases with mismatched (erroneous) case controls, Category Codes, and/or Activity Codes.

    5. Remaining cases in oldest IRS received date order.

  8. Annotate the CCA report with all actions taken for each case and return to the manager by the end of the employee’s work week.

IRP Program Management

  1. PCD - each year, all "972CG no reply" , "972CG reply" and "972CG undeliverable (assessments)" cases must be resolved by July 15th following the mail-out date.

  2. Age criteria - IRP replies and Reconsideration replies will be considered aged at 45 days from the IRS received date.

  3. Prior to the first 972CG mail-out date, MITS provides the campus with a database file containing the TINs of all the taxpayers that will be sent a notice, broken out by notice date. This information will be used to open a control base for each case with:

    1. Activity Code - "972CG_SENT"

    2. Status Code - "M"

    3. IRS Received Date - the notice date

    4. Category Code - "IRP-"

    5. Assigned Employee Number - "0583700000"

    Note:

    All cases with the same notice date must be controlled a week prior to the notice date.

  4. Default assessment time frames - IRP cases meeting "No Reply" criteria should be monitored using the CCA 4243 listing, and should be purged and assessed no sooner than 83 days from the date of the Notice 972CG.

IRP Clerical Procedures

  1. The IRP Clerical Function sorts incoming mail into the following categories:

    1. IRP mail vs. non IRP.

    2. Agreed Notice 972CG responses vs. disagreed Notice 972CG responses.

    3. Undeliverable mail.

    4. Letter 854C responses.

    5. Failure to file in the proper format (Letter 1865C cases).

    6. Excessively Late Form 1096 cases.

  2. The main sorts are then broken down into a finer sort by program type, IRS received date, and tax year.

  3. Incoming mail is stamped with the PSC Operation received date.

  4. Incoming mail is bundled into batches of no more than 25 and filed to be queued for input into the IAT Batcher Tool.

  5. The IAT Batcher Tool is utilized to control incoming mail. See IRM 4.19.25.20.1, Controlling Incoming Mail, for more information.

    Exception:

    The IAT Batcher tool currently cannot be used for: Failure to File in the Proper Format (Letter 1865C cases) and Excessively Late Form 1096 cases. See IRM 4.19.25.20.1.1, Controlling Incoming 1865C and Excessively Late 1096 Receipts.

  6. Work is staged to make it available to the technical units.

  7. Assessment packages are routed to the Files Function.

Controlling Incoming Mail

  1. All clerical processing of Notices 972CG replies and Recons must be completed within 14 business days of IRS receipt or 3 business days from receipt into the operation, whichever is later.

  2. Use the IAT Batching Tool to:

    1. Build a 972CG Reply batch.

    2. Build a 972CG RECON batch.

    3. Build a 972CG Undeliverable batch.

    4. Build a 3870 batch.

    5. Assign 854C responses to the originating tax examiner.

    6. Generate an interim Letter 2645C or Letter 5825C when it becomes available.

      Note:

      Interim letters must be initiated by the 30th calendar day from the IRS received date.

    7. Generate IDRS CC:STAUP.

    8. Identify mail that is already in process or under an active control (e.g., Associations or suspense cases).

  3. When the IAT Batching Tool identifies mail as an Association:

    1. Print a copy of IDRS CC:TXMOD and attach it to the front of the Association.

    2. Input an IDRS history item of "ASSOCAVAIL" at the time the Association is identified.

    3. Locate the original case and attach the Association within 5 business days.

      Note:

      If the case is assigned to a tax examiner, route the Association to the appropriate technical unit.

  4. Route Form 4442, Inquiry Referral, to the appropriate technical unit.

  5. Additional research may be required to ensure the mail belongs to the IRP program. Route all other mail as appropriate.

Controlling Incoming 1865C and Excessively Late 1096 Receipts
  1. Clerical processing of incoming 1865C and Excessively Late 1096 receipts must be completed within 14 business days of IRS receipt or 3 business days from receipt into the operation, whichever is later.

  2. This inventory must be controlled prior to giving the receipts to the appropriate IRP Technical unit.

  3. Use IDRS CC:ACTON to open the control to the applicable Civil Penalty Module (MFT 13 for BMF or MFT 55 for IMF) as follows:

    Note:

    It may be necessary to establish a Dummy Account prior to opening the control.

    Receipt Type IDRS CC:ACTON
    1865C Receipts C#,1865CNRPLY,M,IRP-
    XXXXX44662,MMDDYYYY
    Excessively Late 1906 Receipts C#,LATE-F1096,M,IRP-
    XXXXX44662,MMDDYYYY
  4. These receipts are not considered responses. DO NOT issue an interim letter for these cases.

  5. On a daily basis, report the volume of 1865C and Excessively Late 1096 receipts to your Lead Clerk/Manager. Be sure to report the volumes separately for each type of receipt.

Undeliverables - General

  1. All clerical processing of undeliverable Notices 972CG must be completed within 14 business days of IRS receipt or 3 business days from receipt into the operation, whichever is later.

  2. IDRS CCs INOLE, ENMOD or IRPTR should be used to perform research for a new address.

    1. CC "INOLE" will provide the most current posted entity information on the National Account Profile (NAP).

    2. CC "ENMOD" may reflect a recently input address change that has not posted to INOLE.

    3. CC "IRPTR" will provide a current address for the taxpayer from an information return filed for the most recent processing year.

  3. The clerical function will treat any undeliverable CP 15 or CP 215 adjustment notices received as classified waste. Dispose of them in the designated "classified waste" container.

Notice 972CG Undeliverables - Clerical Function
  1. When an undeliverable Notice 972CG is received, the clerical staff will research for a better address using IDRS CCs INOLE, ENMOD, and IRPTR. See IRM 4.19.25.20.2, Undeliverables - General, for more information.

    IF THEN
    A better address was found
    1. Stamp the PSC Operation Received Date on the undeliverable notice and re-mail the notice (include the original envelope).

    2. Input IDRS history item "972CG-BAF" .

    A better address was not found
    1. Stamp the PSC Operation Received Date on the undeliverable notice.

    2. Input an IDRS history item "972CG-NAF" .

    3. Use the IAT Batcher Tool to batch the undeliverable notices (including all enclosures and original envelope).

    Note:

    Do not complete any address change on IDRS.

  2. In the event that a re-mailed Notice 972CG is returned as undeliverable a second time:

    1. Input an IDRS history item of "972CG-BAR" .

    2. Use the IAT Batcher Tool to batch the undeliverable notices (including all enclosures and original envelope).

  3. If Letter 1948C or Letter 854C is returned as undeliverable, return to the appropriate technical unit.

    Caution:

    DO NOT change or update the IDRS control base.

Inventory Management - Clerical Function

  1. The following Organization Function Program (OFP) codes should be used with the 790 (tax account support activity - clerical) function code:

    OFP-Program Code and Description
    • 44610 - 972CG Replies

    • 44614 - 972CG Undeliverables

     
    • 44651 - 972CG Reconsiderations

  2. Completed work must be staged within 3 business days of being controlled/updated.

  3. Associations must be completed within 5 business days of being identified as an Association.

Manager/Coordinator Responsibilities - General

  1. Managers are responsible for:

    • Evaluating employees

    • Managing inventories within their responsibility

    • Managing resources within their responsibility

  2. The IRP Coordinator is responsible for:

    • Setting up the IRP inventory

    • Acting as a liaison with other program areas (e.g., Headquarters, Appeals, TSO, etc.)

    • Monitoring the status of IRP inventory

    • Serves as the statute coordinator for the Operation

Employee Performance Reviews

  1. Managers perform the following types of reviews:

    • Workload reviews

    • Evaluative case reviews

    • Non-evaluative case reviews

    Note:

    For additional information refer to the Training Course 22394-002, Employee Performance Feedback for Correspondence Examination Managers.

  2. Managers are required to perform a minimum of two workload reviews per quarter for each employee. These workload reviews consist of:

    • Bin reviews

    • Day after/time utilization reviews

  3. Managers are required to perform evaluative case reviews. See IRM 4.19.25.21.1.2, Mandatory Evaluative Reviews, for more information.

  4. The primary purpose of a non-evaluative review is to help the employee develop and enhance their job skills. See IRM 4.19.25.21.1.3, Non-Evaluative or Coaching Reviews, for more information.

  5. The number of reviews should be increased when warranted.

  6. These reviews, as in all case reviews, should be documented in a Performance Review Worksheet.

Workload Management/Efficiency Reviews
  1. Workload reviews are performed primarily for the following reasons:

    • Make an objective assessment of an employee's performance

    • Protect the rights of customers

    • Identify training needs

  2. Work reviews should focus on effective case resolution according to IRM guidelines.

  3. In addition, reviews should focus not only on the employee's ability to complete his/her assignments, but also on their ability to set priorities and complete assignments independently and expeditiously.

    Note:

    Perform workload reviews for each employee a minimum of two times per quarter. Conduct a balance of these reviews throughout the year and include a variety of types of reviews.

Mandatory Evaluative Reviews
  1. Evaluative reviews must be recorded in accordance with the National Agreement established between National Treasury Employees Union (NTEU) and management.

  2. Conduct a minimum of two mandatory EQRS reviews for each employee per month. Additional reviews may be completed as needed.

  3. Evaluative reviews must be conducted by a manager or an individual in an official acting manager capacity.

  4. When conducting reviews, ensure recordation is input into the Embedded Quality Review System (EQRS).

    Note:

    EQRS is a standardized data repository with trend analysis capabilities and reporting capabilities to use for employee evaluations.

  5. Use the Employee Feedback Report on EQRS for sharing evaluative review results within the required time frame as outlined in the National Agreement. Notate the reason on the review sheet if you do not meet these time frames, (e.g., due to unexpected leave, etc.)

  6. Obtain the employee's acknowledgment on the designated form. Provide one copy to the employee and retain the other copy for the Employee's Performance Folder (EPF). Be sure to sanitize when appropriate.

Non-Evaluative or Coaching Reviews
  1. The primary purpose of a non-evaluative review is to help the employee develop and enhance their job skills as determined by the manager. Effective non-evaluate reviews foster open lines of communication between the employee, the manager, and the lead technical employee. This enables the manager and/or their lead to receive employee feedback and transfer operational goals informally.

  2. Non-evaluative reviews do not contain a written rating. Share the results orally. Some documentation is appropriate to establish that it actually occurred. (EQRS may be used to track employee development for this purpose.) Have the employee initial and date any documentation. Provide one copy for the employee and retain the other copy in the employee's drop file.

Operational Reviews

  1. An operational review is a review of a subordinate manager and his/her organizational component and is imperative for his or her growth. It provides an opportunity to improve overall effectiveness of the team and/or department. The review should cover Employee Satisfaction in the unit and include receiving feedback from the manager’s employees.

  2. Be sure to praise all accomplishments, identify areas needing improvement, target completion dates established and schedule a follow-up review.

  3. These reviews may be of organizational as well as individual performance. These reviews should be:

    • Evaluative and direct

    • Completed annually unless more frequent reviews are warranted either to address inexperience or poor performance.

  4. The scope of operational/team reviews by upper management should include at least the following issues. Others may be added at the discretion of the reviewer:

    • Desk instructions (adequacy, need, technical accuracy) maintained in the unit

    • Work schedules (timeliness, how backlogs are handled)

    • Schedule of employee work reviews

    • Quality of supporting narratives for workload reviews in EPFs

    • Quality of supporting documentation for annual ratings (relationship between EPF documentation and assigned ratings)

    • Communications within the unit (meeting minutes, floor supervision, informal communication, listening skills, etc.)

    • Use of time, identification of problems, implementation of solutions

    • A sampling of work (open and closed cases)

    • Timekeeping and employees' time reporting

    • The unit manager's technical and/or administrative skills

    • Staff utilization

    • Use of management information reports

    • Clerical support

    • Cover a representative sampling of all work under the jurisdiction of the team or group manager being reviewed

Other Reviews

  1. Management performs other reviews that are not employee performance related.

Physical Inventory Review
  1. Management must sort the weekly CCA 42-43 report by tax examiner IDRS number. Provide a copy of each listing to the appropriate tax examiner by either printing or sending an electronic copy to them to review.

  2. In addition, each manager will sign and complete a Quarterly "Physical Inventory Certification" sheet after receiving their employee’s inventory forms and submit to the Department Manager for consolidation. See Exhibit 4.19.25-7, Physical Inventory Certificate, for more information. Management must complete a Wall Inventory, by running the CCA 42-43. See below:

    1. Sort the program listing by age beginning with the earliest received date.

    2. Verify each of the cases on the wall to the cases listed on the CCA 42-43.

    3. Verify the count in each open batch listed in the log book with the CCA 42-43.

    4. Provide results to the Department Manager.

      Note:

      The Overage Report Compiler and Sorter (ORCAS)-Manager can be utilized to review the CCA report on a weekly basis.

  3. The Department Manager will:

    1. Consolidate all tax examiner and the "Wall" physical inventory results.

    2. Complete Exhibit 4.19.25-8, Wall Inventory Instruction and Certification.

    3. Submit the completed certification to the Operation for signature.

  4. The Operation will notify their Director’s Office this was completed 10 business days following the end of each quarter and provide his/her office documentation for review.

  5. All results of the physical inventory review must be shared with the IRP Coordinator to ensure all necessary actions are taken to update the WP&C.

Program Reviews
  1. Headquarters plans to conduct program reviews for each Campus at least once per fiscal year. The reviews will target recommendations made during the prior visitations, resource expenditures from fiscal year allocations, work plan schedules and accomplishments, adherence to the IRM and Policy directives, movement of inventory, manager and employee reviews and feedback, and any areas of concern.

Miscellaneous Manager/Coordinator Responsibilities

  1. Below you will find additional Coordinator/Manager duties which need to be assigned to a specific person to ensure the program runs smoothly.

Statute of Limitations - Manager/Statute Coordinator
  1. Statute Awareness - Communicating the importance of statutes to all employees is very important and the responsibility of every manager/statute coordinator. On an annual basis, management is expected to issue Statute reminders to the employees. These reminders will be procedures which include contact information, phone numbers, coordinator name, tour of duty (TOD), instructions to follow for last minute statutes discovered, and the local routing procedures to the statute unit or RACS (depending on time frame). Contact names and numbers can be located on the CAWR/FUTA Web page. It is the responsibility of the campus to alert the web master if a change in contact information is necessary.

  2. Document 7368, Basic Guide for Processing Statute Cases, is available to all campuses and area offices. Management must maintain a sufficient supply of this document from the National Distribution Center using catalog number 10296C. Document 7368 contains valuable information on statute-specific topics; therefore, a copy will be given to each employee. No Statute imminent case will be transshipped within 90 days of the statute expiration date, the case must be worked by the campus with current ownership.

  3. Campuses will work together to ensure Statutes receive priority.

Statute Searches
  1. Statute Searches must be performed beginning 90 days prior to statute expiration date. All inventories (paper and electronic) must be reviewed for statute imminent criteria and documented.

  2. In addition, all new receipts must be reviewed as received, prior to controlling to a tax examiner. If the case is statute imminent, it needs to be labeled as such and expedited for processing.

  3. Use the following Forms and Procedures for Statute searches:

    1. Form 11122, Employees Statute Certification: Campuses must have all employees complete Form 11122, taking responsibility and documenting the biweekly statute searches beginning 90 days prior to the statute expiration date. These searches are to be increased to weekly searches 30 days prior to the statute expiration date. During the final week prior to the statute expiration date, increase the searches to daily. Each search performed must be documented.

    2. Form 11122A, Managers Statute Certification: Campuses must have two levels of management complete Form 11122A, taking responsibility and documenting the biweekly statute searches beginning 90 days prior to the statute expiration date. These searches are to be increased to weekly searches 30 days prior to the statute expiration date. During the final week prior to the statute expiration date, increase the searches to daily. Each search performed must be documented.

    3. The Operation is to confirm to HQ the statute searches have been completed via faxing the results within 10 business days following the end of each quarter.

    4. The Operation Manager is to ensure Forms 11122 and Forms 11122A are completed and maintained in the employee’s/manager’s Unofficial Personnel Folder drop file for three years. After three years, dispose of forms using classified waste procedures.

Confirmation Receipts of FAX Prompt Assessments - Statute Coordinator
  1. Confirmation must be made and documentation saved on all Forms 3210, Document Transmittal, faxed to accounting for "Prompt Assessments" .

    1. Ensure an electronic receipt is requested on all faxes sent to accounting.

    2. Save a copy of the FAX confirmation sheet along with the dated Form 3210.

  2. The signed Form 3210 should be sent back from accounting notated with the DLN of the prompt assessment

    1. Attach a copy of the confirmed fax to the signed Form 3210 with the DLN of the adjustment(s).

  3. If you do not receive confirmation, you must follow up with accounting to ensure it was received by:

    1. Calling the appropriate accounting site to confirm receipt of the Prompt Assessment forms that need to be made before the ASED expires.

    2. Securing confirmation from the appropriate Accounting Unit for all Prompt Assessments faxed to that office by requesting they fax you the signed Form 3210 with DLNs.

    3. Notating on the Form 3210 the date, time of call and who is confirming the receipt of the faxed Prompt Assessment next to each TIN on the Form 3210.

      Note:

      For multiple TINs listed on one Form 3210, ensure each Prompt Assessment case has a copy of the Form 3210 with notations and a confirmation sheet attached.

  4. Depending on the ASED Expiration date, confirmation calls should be made:

    1. immediately after faxing

    2. within 12 hours

    3. within 24 hours

    4. no longer than 48 hours after faxing

      Note:

      If the Prompt Assessment is faxed on April 15, ensure when the call for verification receipt is made, and there is enough time to re-fax documents if the Accounting Unit did not receive them.

  5. Manager, Technical Advisor or Designated Employee will serve as backups in the event the Statute Coordinator is unavailable to make confirmation calls.

Inventory Reports

  1. There are various CCA reports used to track and manage inventory within the IRP program:

    • CCA 42-42: IDRS Inventory Control Report

    • CCA 42-43: IDRS Overage Report

    • CCA 42-44: IDRS Multiple Case Control Report

  2. These reports are available on a weekly basis on Control D.

    Note:

    The ORCAS-Manager can be utilized to review the CCA report on a weekly basis.

CCA 42-42 IDRS Inventory Control Report
  1. This report summarizes inventory, receipts, closures, and age by category. It gives a broad picture of the inventory in the entire operation by category.

  2. This report is available on Control-D on Monday mornings, Report Name: "Team Inv Report" , Job Name: CCA4242D.

  3. Items on the Report - For each case shown, the following information is provided:

    • Case Category - Category of case (See Document 6209, Section 13, IDRS).

    • Begin on Hand - Ending inventory volume from prior week's report.

    • Total Receipts - Total number of new cases for current report.

    • Aged Receipts - Number of cases aged as determined by category code.

    • Case Transfer In/Out - Number of cases transferred in or out from one team to another.

    • Category Change - Number of cases transferred from one category to another.

    • Cases Closed - Total number of cases closed.

    • Ending on Hand - Ending inventory volume.

    • Status of Cases in Ending Inventory - Suspense, Assigned, Background Monitoring.

    • 0 Days - Number of cases in ending inventory within that age range.

    • 1-99 Days - Number of cases in ending inventory within that age range.

    • 100 Days or Over - Number of cases in ending inventory within the age range.

    • Stat Age - Number of cases that fell within the statute age range.

  4. The Manager/Lead should utilize CCA 42-42 as a tool to identify the weekly receipts and closures under each category and the number of cases that are aged upon receipt. No annotation is needed on this report; however, this report is a tool to monitor inventories and should be reviewed within 30 days of receipt.

  5. It has been suggested that the Department Manager or a delegate should review the report to monitor the number of cases and age of inventory in each category to determine if resource changes are needed. The Department Manager should maintain a copy of these reports for one year.

CCA 42-43 IDRS Overage Report
  1. This report contains all cases controlled to an IDRS employee number and can be used to:

    • Identify cases that require action.

    • Identify specific cases for review.

    • Monitor the size of the employees' inventories.

    • Determine if employees are working inventory in the proper order.

    • Set closure expectations.

    • Identify potential management problem cases.

    • Monitor for the prevention of premature STAUP/TC 470.

  2. This report is available on Control-D every Monday morning, Report Name: "Overage Report" , Job Name: CCA 4243D. The ORCAS coordinator will load the CCA report through the ORCAS delivery database. Then the CCA report will be available to the ORCAS managers and ORCAS TE.

  3. Items on the Report - For each case shown, the following information is provided:

    • TIN - Taxpayer Identification Number

    • IRS Rcd Date - The date IRS received the case

    • Status - Case History Status Code (A - Active, B- Background, C - Closed, M - Other long term delay, and S - Suspense)

    • BOD - Business Operating Division

    • CLC - Client Code

    • Category - Category of case

    • Freeze Codes - Freeze Codes that are on the IDRS account

    • MFT - Master File Tax

    • Mod Per - Tax Period on assigned account

    • Assigd Date - The date the case was assigned to a tax examiner

    • Plan No - If applicable

    • Activity Code - A 10 character field on IDRS that the tax examiner uses to enter actions taken on the case

    • Name Ctrl - Name Control on taxpayer's account

    • Action Date - Date of last action input on the account

    • Age - Number of days case has aged on IDRS

    • MF Mod Balance - Module Balance on IDRS

    • Stat Age - Indicates statute conditions for current and previous years returns - over, expired, or days remaining on statute

    • STAUP Cycle - Stops notices from generating until cycle listed

    • C Letter and Date - Date and type of CRX letter sent

  4. The Manager/Lead must review this report to ensure cases are being worked according to IRS receive dates. Annotate cases for follow-up actions by COB Monday. The reports should be maintained for two months. Highlight the cases on the report where:

    • The TE has failed to take timely actions such as follow-up on a case when the purge date has passed.

    • The case is in Nullified Unpostable (NLUN) category over 14 days old.

    • The Statute of Limitations will expire within 180 days.

    • The STAUP has expired or there is no STAUP on a balance due account.

  5. Manager/Lead will provide the tax examiner with the page(s) of the report where the cases are controlled to their IDRS number. Tax examiner will notate the actions taken on each case worked. Annotations should include:

    • "C" - Case moved to closed status.

    • "M" - Case moved to monitor status.

    • "U" - Updated activity (e.g., received an ATAO request).

    • "S" - Case moved to suspense status.

  6. The report should be returned to the Manager/Lead by the end of the employee’s work week. The tax examiner should work cases in the following priority order:

    • NLUN category cases.

    • The statute will expire within 180 days.

    • Taxpayer was contacted and purge date has passed.

    • Remaining cases in oldest date received order.

CCA 42-44 IDRS Multiple Case Control Report
  1. This report identifies cases when two or more employees have an open control base on the same TIN. It identifies the employee's IDRS numbers, tax year, and category for the duplicate controls.

  2. This report is available on Control-D every Monday morning. Report Name: "Multi Case Report" , Job Number: CCA 4244D.

  3. Items on the Report - For each case shown, the following information is provided:

    • TIN - Taxpayer Identification Number

    • BOD - Business Operating Division

    • BOD CLC - Business Operating Division Client Code

    • F/S - File Source

    • MFT - Master File Tax Account Code

    • Tax Period - Identifies the tax period that was controlled

    • PLN - Plan number, if applicable

    • N/C< - Name Ctrl

    • C# - Control Base Number

    • Employee # - Employee number whom case is assigned to

    • Status - Case History Status Code

    • Category - Category of first case

    • IRS Rcd Date - The first IRS received date

    • C# - Second Control Base Number

    • Employee # - Second employee number whom case is assigned to

    • Status - Second Case History Status Code

    • Category - Category of second case

    • IRS Rcd Date - The second IRS received date

  4. The Manager should:

    • Provide the report by COB Monday to the employee identified as having controls on the case, highlighting the control number assigned to their team member.

    • Instruct the employee to write the actions taken on the case on the report and return the annotated report to the Manager no later than close of business Wednesday.

    • After it is returned by the employee, review the report to determine if the correct actions were taken or return to the employee with feedback on the actions that need to be taken.

    • Maintain these reports for three months.

IRC 6721 Penalty for Large Businesses with Gross Receipts Over $5 Million

Time of Filing Returns Due Between 01-01-2011 (TY 2010) through 12-31-2015 (TY 2014) Returns due on or after 01-01-2016 (TY 2015) Returns due on or after 01-01-2017 (TY 2016)
Not more than 30 days late $30 per return
$250,000 maximum
$50 per return
$529,500 maximum
$50 per return
$532,000
31 days late - August 1 $60 per return
$500,000 maximum
$100 per return
$1,589,000 maximum
$100 per return
$1,596,500 maximum
After August 1 $100 per return
$1,500,000 maximum
$260 per return
$3,178,500 maximum
$260 per return
$3,193,000 maximum

IRC 6721 Penalty for Small Businesses with Gross Receipts Less Than or Equal to $5 Million

Time of Filing Returns Due Between 01-01-2011 (TY 2010) through 12-31-2015 (TY 2014) Returns Due on or After 01-01-2016 (TY 2015) Return due on or after 01-01-2017 (TY 2016)
Not more than 30 days late $30 per return
$75,000 maximum
$50 per return
$185,000 maximum
$50 per return
$186,000 maximum
31 days late - August 1 $60 per return
$200,000 maximum
$100 per return
$529,500 maximum
$100 per return
$532,000 maximum
After August 1 $100 per return
$500,000 maximum
$260 per return
$1,059,500 maximum
$260 per return
$1,064,000 maximum

Activity Codes for IRP Processing

The following Activity Codes provide additional information about the action taken on the case. They will be used, along with appropriate History Items to leave an adequate audit trail. This will assist with any subsequent review of the account (ex: taxpayer request for reconsideration). This list is not all inclusive:

Suspense and Monitoring Activity Codes (IDRS CC:ACTON): Use this information to update the IDRS control base and/or to manage suspense inventory to take next action in a timely manner.

Activity Code Status Code Description
1948CMMDD "S" Letter 1948C sent where "MMDD" represents the end of the suspense period.
EXTENDMMDD "S" Taxpayer was granted an extension. "MMDD" represents the last day of the extension suspense period.
FEMA-OMMDD "S" Disaster case identified. "MMDD" represents the disaster end date.
LSTCSEMMDD "S" When requesting a copy of lost taxpayer correspondence using Letter 1948C and where "MMDD" represents the end of the suspense period.
ESTABMMDD "M" When requesting a prior penalty assessment/abatement where "MMDD" represents the end of the monitoring period.
SCRIPSMMDD "M" When requesting paper filed Form 1096 package where "MMDD" represents the end of the monitoring period.
2275#1MMDD "M" The first Form 2275 request period ("MMDD" is 30 days from the request input date).
2275#2MMDD "M" The second Form 2275 request ("MMDD" is 30 days from the request input date).
972CG_SENT "M" Use when researching an undeliverable and a better address is found. See IRM 4.19.25.13, Notice 972CG Undeliverables - Tax Examiner Responsibilities.

Adjustment Activity Codes (IDRS CC:ADJ54): Use the following Activity Codes when inputting adjustments:

Activity Code Status Code Description
FULLWAIVE "C" Use with BS 05 (IMF) or BS 15 (BMF) adjustment when the taxpayer provides sufficient information to fully waive the penalty.
TPAGREES "C" Use with BS 52 adjustment when taxpayer fully agrees to the proposed penalty.
FULLPAID "C" Use with BS 52 adjustment when the taxpayer paid the penalty, a payment voucher was included, and no other correspondence is present.
972NOREPLY "C" Use with BS 52 adjustment when the taxpayer did not reply to the Notice 972CG
854CSENT "C" Use with BS 98 adjustment when denying the taxpayer’s request to waive/abate the penalty.
FULLASSESS "C" Use with BS 52 adjustment when:
  1. Fully denying the taxpayer’s request for penalty waiver, OR

  2. Letter 1948C was previously issued and either the taxpayer did not respond or did not provide the requested information.

PARTAGREE "C" Use with BS 52 adjustment when taxpayer agrees with a portion of the original penalty.
PARTASSESS "C" Use with BS 52 adjustment when taxpayer disagrees with the penalty and a portion of the original penalty is assessed.
PARTABATE "C" Use with BS 53 adjustments (Reconsideration) to identify a partial abatement of the previously assessed penalty.
FULLABATE "C" Use with BS 53 adjustments (Reconsideration) to identify a full abatement of the previously assessed penalty.
INSUFFINFO "C" Use with BS 05 (IMF) or 15 (BMF) adjustment when the taxpayer did not provide enough information to make a determination during the Reconsideration phase.
1865CPURGE "C" Used when assessing penalties for improper format PRN 503 (Letter 1865C). See IRM 4.19.25.16, Failure to File in the Proper Format (Letter 1865C).
LATE-F1096 "C" Excessively late filed Form 1096 received from Submission Processing. See IRM 4.19.25.18, Excessively Late Filed Information Returns (1096s from Submission Processing).
S/CERROR "C" Use with BS 53 adjustment when taking corrective action on an erroneous assessment (e.g., double assessment).
≡ ≡ ≡ ≡ ≡ ≡ ≡

≡ ≡ ≡ ≡ ≡ ≡ ≡
"C" ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
BANKRPTCY "C" Use when waiving/abating the penalty due to bankruptcy.
EMP-CD-F
OR
EMP-CD-Q
"C" Use when waiving/abating the penalty due to federal agency or quasi government status.

Penalty Reference Numbers Used in the IRP Program

PRN Title Definition: A penalty is charged for each IR defined under IRC 6724(d) that was:
500 Late Filing penalty Not timely filed.
501 Magnetic Media Penalty Not filed electronically as required by IRC 6011(e)(2)(A).
502 Missing or Incorrect TIN penalty Submitted with missing or incorrect TIN information.
503 Improper Format Submitted in an improper format.

Note:

This penalty is not included on the Notice 972CG. It is based on information supplied by Submission Processing. See IRM 4.19.25.16, ,Failure to File in the Proper Format (Letter 1865C), for more information.

504 Late & Magnetic Media Combination of not timely filed and not filed electronically.
505 Late & Missing or Incorrect TIN Combination of not timely filed and missing or incorrect TIN information.
506 Late & Improper Format Combination of not timely filed and submitted in an improper format.
507 Magnetic Media & Missing or Incorrect TIN Combination of not filed electronically and missing or incorrect TIN information.
508 Magnetic Media & Improper Format Combination of not filed electronically and submitted in an improper format.
509 Missing or Incorrect TIN & Improper Format Combination of submitted with missing or incorrect TIN information and in an improper format.
510 Late, Magnetic Media & Missing or Incorrect TIN Combination of not timely filed, not filed electronically and submitted with missing or incorrect TIN information.
511
(TY 2008 and prior only)
Late, Magnetic Media & Improper Format Combination of not timely filed, not filed electronically and submitted in an improper format.

Note:

Starting in TY 2009, PRN 511 is used for the penalties for Failure to Furnish Payee Statements – Intentional Disregard under IRC 6722(e). This penalty is not part of the IRP Program.

512 Late, Missing or Incorrect TIN & Improper Format Combination of not timely filed, submitted with missing or incorrect TIN information and in an improper format.
513 Magnetic Media, Missing or Incorrect TIN, & Improper Format Penalty Combination of not filed electronically, submitted with missing or incorrect TIN information and in an improper format.
514 Late, Magnetic Media, Missing or Incorrect TIN, & Improper Format Penalty Combination of not timely field, not filed electronically and submitted in an improper format.

Acronyms

Acronym Definition
ASED Assessment Statute Expiration Date
BMF Business Master File
CAF Centralized Authorization File
CC Command Code
CI Criminal Investigation
CP Computer Paragraph
DLN Document Locator Number
EIN Employer Identification Number
ERQY Employer Report/Adjustment Query
FIRE Filing Information Returns Electronically system
FTA First Time Abate
IAT Integrated Automation Technologies
IDRS Integrated Data Retrieval System
IMF Individual Master File
IPU IRM Procedural Update
IRC Internal Revenue Code
IRP Information Return Penalty
MFT Master File Tax Account Code
NAICS North American Industry Classification System
NAP National Account Profile
NPS National Print Site
OFP Organization Function Program
ORCAS Overage Report Compiler and Sorter
ORS Online Retrieval System
PCD Program Completion Date
PMF Payer Master File
POA Power of Attorney
PRC Penalty Reason Code
PRN Penalty Reference Number
PSC Philadelphia Service Center
RC Reason Code
RO Revenue Officer
RSED Refund Statute Expiration Date
SP Submission Processing
SSA Social Security Administration
SSN Social Security Number
TCC Transmitter Control Code
TIA Tax Information Authorization
TIN Taxpayer Identification Number
TOD Tour of Duty
TSO Technical Services Operation
TY Tax Year

Notice Delay Actions (Reconsiderations)

Current IDRS Status Description Cycles to Next Status Next Status STAUP Required to Stop Next Notices Remarks
12 Full paid or Credit None N/A N/A There may be accruals Check IDRS CC:INTST
19 Balance Due before Due Date - MF Notice issued Later of: Return Due Date or 5 Cycles 20 STAUP20 1st IDRS notice will issue the later 5 Cycles after MF Notice or Return Due Date
20 First IDRS Notice - 501 5 56 STAUP56  
21 Balance Due - MF Notice issued 5 20 (IMF) 58 (BMF) STAUP20 STAUP58 This status for MF notices after return due date
22 TDA issued (ACS) Various 24 or 26 N/A Input TC 470 CC 90
23 Balance Below $1,000 (BMF); $1,500 (IMF) None N/A N/A MF Notice issued yearly Aggregate Balance below $1,000 (BMF); $1,500 (IMF)
24 TDA (Queue) Various 26 N/A  
26 TDA (CFF) None N/A N/A Input TC 470 CC 90
41/42
43/44
Stay of Collection Various 22 N/A  
47 Temp Collection Freeze - TC 470 26 or Manual Release Various N/A Review - Re-input TC 470 CC 90, if required
48 Temp Notice Freeze - CC STAUP # Input (1-15) As Requested Various Review - Update if required
50 Causes module to be accelerated to requested notice/TDA status # Input (0) Various N/A  
51 Undeliverable Notices 1 22 N/A  
53 Temp Collect. Frz TC 470 - cc 90/93 26 or Manual Release (ST58) 20 N/A Review - Re-input TC 470 CC 90, if required
53 TC 530 Account Uncollectable Various 22 N/A  
56 Third IDRS Notice - 503 5 58 STAUP58  
58 Final IDRS Notice 504 6 22 or 23 or 26 STAUP22  
60/61
63/64
Installment Agreement Various Various Collection Operation Collection Operation
71 Offer in Compromise Various Various Collection Operation Collection Operation
72 Bankruptcy Various Various Collection Operation Collection Operation
73 Coll/Offset Frz TC470 - CC99 Manual Release 58 N/A Freeze does not expire
76 Immediate TDA Pending 1 22 STAUP22 504 Notice & TDA next cycle
77 Accelerated TDA 3–8 58 STAUP58 504 is only IDRS notice
91 Criminal Investigation Various 22 CI Operation CI Operation
99 Out of service Center location Various Various   Review-input TC 470 if required

Physical Inventory Certificate

Tax Examiner Name:
IDRS#:
Date of CCA 4243:
Number of cases listed on your CCA 4243:
Action Taken YES/NO
Verify received dates are correct.  
Verify case was classified as correct program.  
Correct MFT was input.  
If case is missing, have followed the missing case procedure?  
Ensured all appropriate interim letters have been issued.  
Verified need for STAUPS and input if necessary.  
Ensured you are working your cases in FIFO (First-In-First-Out) order.  
Are cases in the correct status? (A-Assigned, M-Monitored, S-Suspense, etc)  
Program (IRP) Number of cases
Cases listed on your CCA 4243  
Missing  
Closed  
Added (newly controlled)  
TOTAL  
Number of cases currently in your possession:
I certify I have taken all actions stated above.
Print Name:
Sign Name:
Date:

Wall Inventory Instruction and Certification

Print Name:
Sign Name:
Date:
Wall Instruction and Certification

Run the CCA 42-43 for IRP. Sort the listing by age beginning with the earliest received date. This simplifies the process to verify each of the cases on your wall to the cases listed on the CCA 42-43.

Verify that the count in each open batch listed in the log book matches with the CCA 42-43.

IRP Program Number of Cases
Cases listed on your CCA 42-43  
Missing  
Closed  
Added (Newly Controlled)  
Total  

I certify that I have reviewed the process used to complete this physical inventory and am confident it reflects true volumes currently in the Operation. I certify the actions taken by the TEs are correct and warranted.

Department Manager Signature:
Date:
Operation Manager Signature:
Date: