4.71.8 EP Claims 4.71.8.1 Program, Scope and Objectives 4.71.8.1.1 Background 4.71.8.1.2 Acronyms, Abbreviations and Forms 4.71.8.1.3 Program Controls 4.71.8.1.4 Safeguarding Personally Identifiable Information (PII) 4.71.8.1.5 Contact Information for Individuals Business Units 4.71.8.1.6 Overview for Working Claims 4.71.8.2 Claim for Refund 4.71.8.3 Statute of Limitations for Claims 4.71.8.4 Working a Claim 4.71.8.4.1 Establishing Claims on AIMS and RCCMS 4.71.8.5 Claims Allowed in Full, No Taxpayer Contact 4.71.8.5.1 Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact 4.71.8.5.2 Completing the RCCMS Compliance Record when Claim Is Allowed in Full Without Taxpayer Contact 4.71.8.6 Processing a Claim when Taxpayer Contact Is Made 4.71.8.6.1 Taxpayer Contact Made, Claim Allowed in Full 4.71.8.6.2 Completing Form 5599 and RCCMS when Claim Is Allowed in Full and Taxpayer Contact Is Made 4.71.8.6.3 Claims Disallowed in Full or in Part 4.71.8.6.4 Completion of Form 2297 4.71.8.6.5 Completion of Form 3363 4.71.8.7 Effect of Claim on IRC 4971 or 4975 Tax 4.71.8.8 Collection of Deficiencies and Installment Agreements 4.71.8.9 Abatement of Interest Due to IRS Delay or Error 4.71.8.9.1 Claims for Abatement of Interest 4.71.8.10 Abatement of Penalties in Claims Cases Part 4. Examining Process Chapter 71. Employee Plans Examination of Returns Section 8. EP Claims 4.71.8 EP Claims Manual Transmittal December 17, 2019 Purpose (1) This transmits revised IRM 4.71.8, Employee Plans Examination of Returns, EP Claims. Material Changes (1) Removed reference in IRM 4.71.8.1.1 to IRM 1.2.10 and IRM 1.2.13 since the manual sections were obsoleted. (2) Revisions were made throughout the IRM to incorporate the October 2, 2018 memorandum from the Acting Director, Government Entities/Shared Services titled, Revised Process for Surveying a Case When Using Certain Non-examination Disposal Codes. (3) Updated IRM 4.71.8.5 (3) and IRM 4.71.8.6.1 to provide updated information on Joint Committee referrals. (4) Updated IRM 4.71.8.5.1 to provide additional guidance Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact. (5) Updated IRM 4.71.8.5.2 to provide additional guidance Completing the RCCMS Compliance Record when Claim Is Allowed in Full Without Taxpayer Contact. (6) Updated IRM 4.71.8.6.1 to remove the requirement to complete a F5438 when a Claim is Allowed in Full and Taxpayer contact has been made. (7) Updated IRM 4.71.8.6.2 (2) to provide the entries of the required Form 5599 fields that differed from IRM 4.71.8.5.1. (8) Updated IRM 4.71.8.6.2 (3) to provide information regarding the fields on the RCCMS compliance record that differed from IRM 4.71.8.5.2. (9) Updated IRM 4.71.8.6(3)(8)a to provide the entries of the required Form 5599 fields that differed from IRM 4.71.8.5.1. (10) Updated IRM 4.71.8.6(3)(8)b to provide information regarding the fields on the RCCMS compliance record that differed from IRM 4.71.8.5.2. (11) Updated IRM 4.71.8.6.3(10)a to provide the entries of the required Form 5599 fields that differed from IRM 4.71.8.5.1. (12) Updated IRM 4.71.8.6.3(10)b to provide information regarding the fields on the RCCMS compliance record that differed from IRM 4.71.8.5.2. (13) Updated IRM 4.71.8.6.3(10)c to require Letter 2841-A for a closing letter when the taxpayer signs and returns Forms 2297 and 3363 and there is no balance due on the applicable tax module. (14) Updated IRM 4.71.8.6.3(10)d to require that Letter 2511 be used as a closing letter when the taxpayer signs and returns Forms 2297 and 3363 and there is a balance due on the applicable tax module. (15) Updated IRM 4.71.8.7 to add a note regarding the effect of a Tax Court Petition. (16) Updated IRM 4.71.8.7 to add a note regarding the term "if ever qualified" . (17) Made editorial changes, including changes for Plain Language (the Plain Writing Act of 2010), throughout the document. Effect on Other Documents This supersedes IRM 4.71.8 dated December 6, 2018. Audience Tax Exempt and Government Entities Employee Plans Effective Date (12-17-2019) Catherine L. Jones Acting Director, Employee Plans Tax Exempt and Government Entities 4.71.8.1 (12-17-2019) Program, Scope and Objectives Purpose: IRM 4.71.8, Employee Plans Examination of Returns, EP Claims, provides the basic examination procedures to help Employee Plans (EP) agents and their managers process claim cases. Audience: This IRM provides procedures for agents, managers, and support staff in EP Exam. Program Owner: Director, EP Examinations. Program Authority: EP Examinations derives its authority to conduct examinations, resolve issues and determine tax liability from Title 26, Internal Revenue Code, Subtitle F – Procedure and Administration, which includes but is not limited to: IRC 7602 - Examination of books and witnesses, which falls under Chapter 78 - Discovery of Liability and Enforcement of Title. It gives agents the authority to: Audit any books, papers, records or other data necessary to complete an audit. Take testimony under oath to secure additional information needed. Issue summons for information necessary to complete an audit. Ask about any offense connected to the administering or enforcing of the Internal Revenue laws. IRC 6201 - Assessment authority, which falls under Chapter 63 - Assessment, gives EP Examinations authority to r This IRM section is written by EP Mandatory Review. For questions, information or suggestions, contact the manager of EP Mandatory Review. 4.71.8.1.1 (12-17-2019) Background EP Examinations determines if a retirement plan is qualified under IRC 401 and the underlying regulations, and therefore, exempt from tax under IRC 501. EP Examinations audit program’s primary objective is regulatory, emphasizing continued qualification of employee benefit plans (Policy Statement 4-119). EP Examinations selects and examines returns to: Promote the highest degree of voluntary compliance with the tax laws on plan qualification. Determine qualified plans’ extent of compliance and the causes of noncompliance with the tax laws. Determine whether such plans meet the applicable qualification requirements in operation. Under Policy Statement 4-117, EP agents and managers are: Given broad authority to consider and weigh conflicting information, data, and opinions. To use professional judgement according to examination standards to make findings of fact and apply the IRS’s position on issues of law to determine the correct tax liability. To exercise this authority to get the greatest number of tax determination agreements without sacrificing the quality or integrity of those determinations and to dispose of tax differences at the lowest level. All examinations are done per Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. 4.71.8.1.2 (12-17-2019) Acronyms, Abbreviations and Forms This manual uses the following acronyms and references the following forms. Acronyms Acronym Definition AIMS Audit Information Management System AIMS CCR Case Chronology Record EIN Employer Identification Number EP Employee Plans IDRS Integrated Data Retrieval System IRC Internal Revenue Code IRM Internal Revenue Manual MFT Master File Tax POA Power of Attorney RAR Revenue Agent Report RCCMS Reporting Compliance Case Management System SRS Specialist Referral System SSN Social Security Number TC Transaction Code Forms and Pubs Form Name Form 843 Claim for Refund and Request for Abatement Form 870-EP Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Over-assessment Form 990-T Exempt Organization Business Income Tax Return Form 1040 U.S. Individual Income Tax Return Form 1040X Amended U.S. Individual Income Tax Return Form 1045 Application for Tentative Refund Form 1120 U.S. Corporation Income Tax Return Form 1120X Amended U.S. Corporation Income Tax Return Form 1139 Corporation Application for Tentative Refund Form 2297 Waiver of Statutory Notification of Claim Disallowance Form 3198-A TE/GE Special Handling Notice Form 3210 Document Transmittal Form 3244-A Payment Posting Voucher - Examination Form 3363 Acceptance of Proposed Disallowance of Claim for Refund or Credit Form 4549-E Income Tax Discrepancy Adjustments Form 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts Form 5330 Return of Excise Taxes Related to Employee Benefit Plans Form 5438 Report of Examination - Excise Taxes on Employee Plans Form 5464 Case Chronology Record (CCR) Form 5597 TE/GE IMF/BMF/EPMF Request Form 5599 TE/GE Examined Closing Record Form 5772 EP/EO Workpaper Summary Form 5773 EP/EO Workpaper Summary Continuation Sheet Form 9814 Request for Mail/Shipping Service Pub 1 Your Rights as a Taxpayer Pub 5 Your Appeal Rights and How To Prepare a Protest If You Don't Agree Pub 594 The IRS Collection Process 4.71.8.1.3 (12-17-2019) Program Controls EP Examinations established two review groups to make sure agents conduct examinations per technical, procedural and administrative requirements: Mandatory Review, see IRM 4.71.14, Employee Plans Examination of Returns, EP Mandatory Review. Special Review, see IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures. Tax Exempt Quality Measurement System (TEQMS) is the quality control system TE/GE uses to oversee the entire examination program. For more information on TEQMS, see IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures. All examinations are done per the Taxpayer Bill of Rights as listed in IRC 7803(a)(3). Note: Find additional information at: Taxpayer Bill of Rights The IRS is fully committed to protecting the privacy rights of taxpayers and employees. Privacy laws are included in the IRC, the Privacy Act of 1974, the Freedom of Information Act, and IRS policies and practices. For more information about these laws, visit the IRS Electronic Freedom of Information Act Reading Room. For questions on privacy, email *Privacy. For question on disclosure, email *Disclosure. 4.71.8.1.4 (12-17-2019) Safeguarding Personally Identifiable Information (PII) When possible, mask the first five digits of a taxpayer’s SSN on letters, forms, notices, workpapers and emails. Example: XXX-XX-9999 . 4.71.8.1.5 (12-17-2019) Contact Information for Individuals Business Units Important contact information for individuals and business units referenced in this IRM are found in IRM 4.71.1 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits. 4.71.8.1.6 (12-17-2019) Overview for Working Claims This IRM provides guidance for EP agents to process claim cases and givesmiscellaneous procedures for: Claims allowed in full without taxpayer contact (surveyed claims) Claims allowed in full with taxpayer contact Claims that are partially or fully disallowed Collection of deficiencies and installment agreements Interest abatement of claims Penalty abatement in claims cases 4.71.8.2 (12-17-2019) Claim for Refund A claim is a request for a refund of a tax paid or for the abatement of tax and/or penalties that the IRS has previously assessed. Taxpayers can file claims on various forms: Form 843 Note: See IRM 4.71.8 Exhibit 1 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 843. Note: Taxpayers can use his form to request a refund and to abate taxes, interest and penalties. Form 1040X Form 1045 Form 1120X Form 1139 Amended Form 5330 Form 990-T showing a decrease in tax liability Taxpayers may also file a claim requesting a reduction in tax liability, by letter or other document, which contains all relevant facts for the requested reduction in tax liability. This is referred to as an informal claim and it must be in writing. In EP, claims are generally filed for: Form 5330 Form 990-T Form 1040 on a discrepancy adjustment case Form 1120 on a discrepancy adjustment case Form 5329 4.71.8.3 (12-17-2019) Statute of Limitations for Claims Taxpayers must file a claim per IRC 6511(a) before the later of: Three years from the date the return was filed Two years from the date the tax was paid When a claim is filed, it keeps the statute open only for the claim. If other issues exist and the statute on the original return is about to expire, secure a statute extension for the original return on which the claim is based. If the statute of limitations has expired, you may only make adjustments to the return up to the amount of the claim. The statute of limitations for filing a claim is suspended under certain circumstances: If a taxpayer makes a credible claim that he/she is unable to manage his/her financial affairs by reason of a medically determinable physical or mental impairment, he/she may be allowed additional time to file a claim. The statute of limitations is suspended for the time the taxpayer is "financially disabled." Note: An individual deemed "financially disabled," as defined in IRC 6511(h)(2), may file a claim later than the time specified in IRM 4.71.8.3 (1). 4.71.8.4 (12-17-2019) Working a Claim In general, work a claim as a limited scope correspondence examinations. Complete workpapers for the scope of the claim case. At a minimum, include in your workpapers: a brief description of how the claim came about, what the issue was, what referrals were made (if any), who you contacted, what IDRS research you did, and what conclusions you reached. Assemble the case file per IRM 4.71.12.6, Special Case File Assembly Instructions for Claims. Use a separate case file folder for each year and return type to which the claim applies. Research IDRS to ensure that all claim years are properly established on AIMS and RCCMS. Secure an AMDISA print to ensure that all years for which a claim has been filed are properly established on AIMS. If the claim isn’t established, follow the procedures in IRM 4.71.8.4.1, Establishing Claims on AIMS and RCCMS. Report your time working the claim on WebETS and list: Each year to which a claim applies The applicable activity code for the return Project code 6070 Get a current transcript (BMFOLT or IMFOLT for applicable tax years) of the taxpayer’s account on all claims so that you can analyze the account activity. See IRM 4.71.2.3, IDRS Command Codes, for information on obtaining BMFOLT (Forms 1120, 5330 or 990-T) or IMFOLT (Form 1040) transcripts. See section 8 of Document 6209, IRS Processing Codes and Information, for a description of Master File transaction codes. Contact the EP AIMS Coordinator if you need help reading the transcript. If the Ogden Service Campus (or other Campus) has already refunded the claim amount to the taxpayer and you agree that the claim should be allowed, close the case as a regular "no change" case. The group closes it under normal closing procedures. Save copies of all workpapers, forms and letters in the RCCMS Office Documents folder using the RCCMS Naming Convention. 4.71.8.4.1 (12-17-2019) Establishing Claims on AIMS and RCCMS Classification establishes claims for: Forms 5330 per IRM 4.71.5.5, Overview of Establishing Forms 5330 on RCCMS and AIMS Forms 990-T per IRM 4.71.10.4.2, Establishing Forms 990-T on RCCMS and AIMS Establish claims (not already established by Classification) for Forms 1040 and 1120 per IRM 4.71.4.4.2, Establishing the Case on AIMS and RCCMS. Establish claims on AIMS and RCCMS with: Source code 30 Project code 6070 Statute of limitations alpha code "AA" Example: 12/AA/2018 means the taxpayer timely filed a claim for refund/credit, you decided there are no other issues on the return which warrant an additional assessment and the claimed refund has not been paid to the taxpayer. Note: See IRM 4.71.9.9(9), Use of Alpha Codes, for an explanation of using alpha code "AA." Statute of limitations alpha code of "BB" (for example, 12/BB/2014) for all carry back claims The claim amount shown 4.71.8.5 (12-17-2019) Claims Allowed in Full, No Taxpayer Contact Although normally worked by Classification, you may close an assigned claim case without contacting the taxpayer or POA if you determine that the claim issue is clearly allowable in full and the return doesn’t otherwise warrant examination. These are referred to as "surveyed" claims. Generally, when there’s no indication that the case was selected because of the contents of the return, you can decide to "survey" the claim by considering the claim issue only. The only claims that may not be "surveyed" are those that require Appeals consideration, or which, if allowed would produce overpayments or credits requiring Joint Committee Review. IRC 6405 provides that Joint Committee Review is required for refunds over $2,000,000 ($5,000,000 for C Corporations). In computing the IRC 6405 jurisdictional amount, combine proposed refunds of penalties and previously assessed and paid interest with proposed tax refunds. Example: If a taxpayer files a claim for a tax assessment of $1,950,000 and previously assessed interest of $60,000, Joint Committee Review would be required since the combined amount exceeds $2,000,000. Make referrals to the Joint Committee by completing the TE/GE Joint Committee Electronic Referral Form and emailing it to lbi.joint.committee.paperless@irs.gov. See IRM 4.71.8 Exhibit 15 at IRM 4.71 - Employee Plans Examination Exhibits for an example of the form. When the Joint Committee Specialist receives the referral, he/she will advise you of how to process the case. Process the case per the Joint Committee Specialist’s instruction. If you don’t hear from the Joint Committee Specialist within 10 business days, email lbi.joint.committee.assistance@irs.gov for help. Note: You can’t close Joint Committee cases without a Joint Committee Specialist’s approval. Note: See IRM 4.36, Joint Committee Procedures or the Joint Committee Website at https://irssource.web.irs.gov/LBI/Lists/KMNECPA/AllItems.aspx for additional information. Close claims allowed in full without taxpayer contact (claim survey) electronically (100% paperless). You don’t need to prepare Form 1900 and Form 3198-A for surveyed claims, effective October 2, 2018. Prepare and mail Letter 570-A to inform the taxpayer of the claim allowance. See IRM 4.71.8 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 570-A. The group mails the closing letter after the group manager approves the case for closing and saves the letter in the Office Documents folder within the RCCMS activity. Document the CCR that the closing letter was mailed. Close the case using AIMS disposal code 34 (RCCMS disposal code 103), Claims Allowed in Full (Surveyed). Complete Form 5599 if the claim being allowed is for a Forms 5330, 990-T, 1040 or 1120. See IRM 4.71.8.5.1, Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact. When you validate a case for closure in RCCMS, you must complete any field that appears in red. These fields correspond to the required items on Form 5599. See IRM 4.71.8.5.2, Completing the RCCMS Closing Record. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention. Close the claim on RCCMS and AIMS to TE/GE Closing Group and update AIMS to status code 51. Note: Claims allowed in full aren’t subject to Mandatory Review. 4.71.8.5.1 (12-17-2019) Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact Unless stated otherwise in IRM 4.71.8.5.1 (2) below, complete the following line items on Form 5599: P7-18, P21-22, P24-29, P31-34, P53-55, C, 9, 11, 12, 13, 14, 15, 21, 23, 24, 30, 31, 32, 33, 40, and 50. Follow the additional instructions noted below for individual (required) line items: Item P7-18: Enter the taxpayer’s TIN. Note: Use a file source of "V " with an SSN (for example, XXX-XXXXXXV) Reminder: "V" is not used on the RCCMS tabs. Item P21-22: Enter the MFT. Item P24-29: Enter the tax period. Item P31-34: Enter the name control. P53-55: Enter the three digit plan number of the related plan if the claim is for a Form 5330. Item C: Enter the name of the taxpayer. Item 9: Leave blank if the file contains an original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "1" if the file contains an original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X. Enter "2" if the file contains a copy of the original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "3" if the file contains a copy of the original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X. Item 11: Entry is required for carry backs. Use the received date of the return with the loss. Item 12: Enter the amount of the claim allowed as a "Tax Liability Adjustment Decrease in Tax Dollars" with a Transaction Code (TC) of 301. Otherwise leave blank. Item 12: If penalties were previously assessed, enter the amount to be abated as a negative (-). See section 8 of Document 6209 for applicable transaction codes. Use TC 161 to abate failure to file penalties. Use TC 271 to abate failure to pay penalties. Item 12: With Forms 990-T involving a carry back, use TC 309 to report the reduction in taxable income as a negative. Item 13: Enter disposal code 34 (RCCMS disposal code 103). Item 14: If you’ve extended the statute of limitations, enter the statute expiration date. Otherwise leave blank. Item 15: For Forms 5330, input the decrease in the Form 5330 excise tax with the abstract code shown as the Reference Number. Find the applicable abstract code next to the lines where the tax is reported on Form 5330. Item 15: For Forms 990-T, input the reduction in taxable income as a negative with Reference Number 886. Item 21: Enter the amount of the claim requested. Item 23: Enter your claim case time. Note: Leave item 28 blank. Item 24: List the claim type code. Example: Common codes are: "C" for carry back or carry forward claims; "E" for claims involving excise tax; "O" for other claims Item 30: Enter the technique code: 2 – Correspondence Examination - full scope 4 – Field examination - full scope 6 – Correspondence Examination - limited scope/focused audit 7 – Field examination - limited scope/focused audit Item 31: Enter the agent’s grade. Item 32: Enter the grade of the case in the blocks from left to right as two digits (for example, 11). Item 33: Enter the agent’s last name; leave a space and then first initial. Item 40: Enter the project code of 6070. Item 50: Enter the examiner’s group number. See IRM 4.71.8 Exhibit 4 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5599 for a claim allowed in full without taxpayer contact. 4.71.8.5.2 (12-17-2019) Completing the RCCMS Compliance Record when Claim Is Allowed in Full Without Taxpayer Contact When you validate a case for closure in RCCMS, you must complete any field that appears in red and any field that corresponds to the required items on Form 5599. Compliance Activity: On the General (2 of 2) tab, ensure that the claim information has been completed: * Enter the claim date. * Enter the claim type. * Enter the claim amount. On the Codes/Check Sheets tab, ensure to update the status code to 51. "Closing Records Tab" : Complete the RCCMS closing record. The fields and entries of the RCCMS closing record are similar to the Form 5599 other than the disposal code. The RCCMS disposal code for an agreed tax change is 103. Ensure that the record is validated for closure and that all the fields highlighted in red are completed. Note: All the required fields may not be enabled or highlighted when "validating for closure." See IRM 4.71.8.5.1 for the Form 5599 required fields. Complete the following fields of the "General Tab" of the closing record: * Disposal code: Close the case using RCCMS disposal code 103, Claims Allowed in Full (Surveyed). * Closing With: Select option 7 –Paperless Non-examined Complete the following fields of the "Detail Tab" of the closing record: * Claim hours * Technique code * Examiner’s name * Examiner’s grade Note: Do not input time in the "examiner’s time" box. Complete the following fields of the "Individual/Bus.Tab" (1 of 3) in the closing record: * Transaction code and amount Note: This field represents item 12 of the Form 5599. See the instructions for the Form 5599 for guidance of appropriate transaction codes. * Reference number and amount Note: This field represents item 15 of the Form 5599. See the instructions for the Form 5599 for guidance of appropriate reference numbers. Close the claim on RCCMS and AIMS to the TE/GE Closing Group. See IRM 4.71.1 Exhibit 13, Important Contact Information for Individuals and Business Units, at IRM 4.71 - Employee Plans Examination Exhibits for the address when mailing a paper file. 4.71.8.6 (12-17-2019) Processing a Claim when Taxpayer Contact Is Made If you need to contact the taxpayer/POA to obtain additional information, update the status code on AIMS to status 12. Verify that the statute date alpha codes on AIMS and RCCMS are "AA" or "BB" (as applicable), using the month and year of the statute expiration (for example, 12/AA/2019). Note: Document your statute date alpha code verification on the CCR. Request additional information from the taxpayer either by calling or mailing Letter 1474-A (with Form 886-A). See IRM 4.71.8 Exhibit 5 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 1474-A. Use Form 5772-A and Form 5773-A, and prepare supporting workpapers to properly document the issue. See IRM 4.71.1.15, Workpaper Summary Forms. Note: Use of Form 5773-A is optional. Attach Form 3198-A to the outside of the case file with this information: Person to contact, phone number, and group number Name of the taxpayer Employer ID number Form number Plan year and plan number (if applicable) When you validate a case for closure in RCCMS, you must complete any field that appears in red and any field that corresponds to the required items on Form 5599. See IRM 4.71.8.5.1, Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention. Prepare and mail the claims closing letter. 4.71.8.6.1 (12-17-2019) Taxpayer Contact Made, Claim Allowed in Full Follow the procedures in this section when the taxpayer/POA send you additional information for a Form 5330 claim, and it proves that the claim should be allowed in full. Refer to the Joint Committee when the refund of tax, penalties and interest exceeds $2,000,000 ($5,000,000 for C corporations). See paragraph (3) of IRM 4.71.8.5, Claims Allowed in Full, No Taxpayer Contact, for guidance. Prepare and mail Letter 570-A to inform the taxpayer of the allowance of the claim. See IRM 4.71.8 Exhibit 3 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 570-A. The group will mail the closing letter after the group manager approves the case for closing and saves the letter in the Office Documents folder within the RCCMS activity. Document the CCR that the closing letter was mailed. Complete Form 5599 per IRM 4.71.8.6.2, Completing Form 5599 and RCCMS when Claim Is Allowed in Full and Taxpayer Contact Is Made. When you validate a case for closure in RCCMS, you must complete any field that appears in red and any field that corresponds to the required items on Form 5599. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention. Close the case to the TE/GE Closing Group and update the AIMS status code to 51. 4.71.8.6.2 (12-17-2019) Completing Form 5599 and RCCMS when Claim Is Allowed in Full and Taxpayer Contact Is Made Complete Form 5599 and the RCCMS closing record, following the same instructions reflected in IRM 4.71.8.5.1, Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact, and IRM 4.71.8.5.2, Completing the RCCMS Compliance Record when Claim Is Allowed in Full Without Taxpayer Contact, with the following additions/exceptions: Item 8: Enter the date the amended Form 843, Form 5330 or Form 990-T was signed by the taxpayer. Item 13: Enter AIMS disposal code of 03 (disposal code 102 on RCCMS), Agreed Tax Change. 4.71.8.6.3 (12-17-2019) Claims Disallowed in Full or in Part Prepare Letter 569-A with applicable attachments to notify the taxpayer of the claim disallowance or partial disallowance. See IRM 4.71.8 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 569-A. Taxpayers are entitled to an explanation of the specific reason for a claim’s disallowance or partial disallowance (IRC 6402(l)). This explanation allows the taxpayer to respond appropriately to the IRS. Prepare and attach an RAR. Include in the RAR: the issue, a description of the facts surrounding the issue, an explanation of the law for the issue, an explanation of the government’s position, including calculations clearly showing how you determined the partial disallowance (if the claim involves a partial disallowance), the taxpayer’s position and a conclusion. Give the taxpayer 15 days to respond. Attach Pub 1. Attach Pub 594, when applicable. Include a copy of the claim for refund. Attach all relevant forms as specified in paragraphs (2) through (5) below. Get your manager’s approval before you sign and mail the letter. Prepare Form 2297 for cases that have a full or partial disallowance of a claim. See IRM 4.71.8.6.4, Completion of Form 2297, for instructions on how to complete Form 2297. See IRM 4.71.8 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 2297. Prepare Form 3363 for cases that have a claim disallowed in full or in part and there are no other adjustments to the tax liability. See IRM 4.71.8.6.5, Completion of Form 3363, for instructions on how to complete Form 3363. See IRM 4.71.8 Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3363. Complete Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, or Form 870-EP for claims disallowed in full where you’re proposing additional tax assessments. See IRM 4.71.8 Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 2504. See IRM 4.71.8 Exhibit 11 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 870-EP. Use Form 4549-E for claims for Form 1040 or Form 1120 discrepancy adjustment. See IRM 4.71.4.10, Claims. If the taxpayer doesn’t respond after 15 days, call them. If the taxpayer doesn’t sign and return Form 3363 and Form 2297 within a reasonable time, prepare a 30 Day Letter package with these items: Letter 3602-A, 30-Day Letter - EP Claim Denied RAR in an Issue/Facts/Law/Government Position/Conclusion format Form 2297 Form 3363 Pub 1 Pub 5 Pub 594 Note: Leave the date, return address and the person to contact blank on the letter. Don’t mail the 30-Day Letter package. Place it in the case file for EP Mandatory Review to mail. Note: See IRM 4.71.8 Exhibit 12 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 3602-A. If the taxpayer doesn’t sign and return Form 3363 and Form 2297, complete Form 5599 per IRM 4.71.8.5.1, Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact, except for these items: Item 12: Leave blank if the claim is disallowed in full and there is no additional assessment. If there is an additional assessment, enter TC 300 and the additional amount of tax being assessed. Item 13: Use disposal code 07 (Unagreed - Protest to Appeals) or 10 (Unagreed - Without Protest) as applicable. Item 15: Leave blank if the dollar amount in item 12 is blank. If line 12 contains a dollar amount (for example, additional tax is being assessed), then put a reference number (manual abstract code) here with the additional amount of tax being assessed (additional tax being assessed is listed in both items 12 and 15). Item 22: Enter the claim amount disallowed. Complete the RCCMS record per IRM 4.71.8.5.2, Completing the RCCMS Compliance Record when Claim Is Allowed in Full Without Taxpayer Contact, except for these items: The RCCMS disposal code for "Unagreed – Protest to Appeals" is 610; the disposal code for "Unagreed - Without a Protest" is 604. Enter the amount of the claim being disallowed. This field is located in the closing record in the "Details" tab. If additional tax is being assessed, input the necessary assessment information on the "Individual/Bus." tab (1 of 3) in the closing record. Note: See IRM 4.71.8.5.2 for further guidance. If the taxpayer doesn’t sign and return Form 3363 and Form 2297: Update the status code on AIMS and RCCMS to 20. Attach Form 3198-A to the outside of the case file, identifying the case as "Mandatory Review" , and notate: "Unagreed Claim." If less than one year remains on the statute of limitations, see IRM 4.71.9, Statute Control Procedures, for special instructions. Close the case to EP Mandatory Review. Note: See IRM 4.71.12.6, Special Case File Assembly Instructions for Claims, for case file assembly instructions. If the taxpayer signs and returns Form 2297 and Form 3363, the case is closed from the group as follows: Complete Form 5599 per IRM 4.71.8.6.2, Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact, except: * Item 12: Leave blank if the claim is disallowed in full and there is no additional assessment. If there is an additional assessment, enter TC 300 and the additional amount of tax being assessed. * Item 13: Enter disposal code 01, Regulatory/Revenue Protection. * Item 15: Leave blank if the dollar amount in item 12 is blank. If line 12 contains a dollar amount (for example, additional tax is being assessed), then put a reference number (manual abstract code) here with the additional amount of tax being assessed (additional tax being assessed is listed in both items 12 and 15). * Item 20: Enter the date the taxpayer signs Form 2297 and Form 3363. * Item 22: Enter the claim amount disallowed. Complete the RCCMS record. The fields and entries of the RCCMS closing record are similar to the Form 5599 other than the disposal code and the claim disallowed amount. The RCCMS disposal code for a Regulatory/Revenue Protection change is 210. The claim disallowed amount is located on the detail tab of the closing record. See IRM 4.71.8.5.2 for further guidance. If the taxpayer has fully paid, prepare and mail closing Letter 2841-A. Note: See IRM 4.71.8 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 2841-A. If the taxpayer has a balance due, and the taxpayer has signed and returned Form 2297 and Form 3363, prepare and mail Letter 2511 and attach a copy of the examination report with a copy of the signed Form 2297 and Form 3363. See IRM 4.71.8 Exhibit 14 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 2511. The group mails the closing letter after the group manager approves the case for closing and saves the letter in the Office Documents folder within the RCCMS activity. Document the CCR that the closing letter was mailed. Save all copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention. Close the case to the TE/GE Closing Group and update the AIMS status code to 51. 4.71.8.6.4 (12-17-2019) Completion of Form 2297 Complete Form 2297 for cases that have a complete or partial claim disallowance. See IRM 4.71.8 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 2297. Attach Form 2297 to the applicable claim or amended return. Note: If you’re disallowing claims for multiple years, attach Form 2297 covering all years to the claim or amended return for the most recent year. When completing Form 2297: Enter the name, EIN or SSN, and address of taxpayer where indicated. Taxable Period Ended: List each year for which a claim has been filed and disallowed in part or in full on separate lines as follows: For a short period, show the beginning and ending date (for example, 01/01/2017– 09/30/2017). For all other cases, list the period ending date (for example, 12/31/2017). Kind of tax: Enter the type of tax covered by the return under examination, such as income or excise. You don’t have to show the return under examination, form number, or the type of income. Enter the claim amount and the amount of the claim disallowed where indicated. See instructions for taxpayer’s signature at the bottom of the form. 4.71.8.6.5 (12-17-2019) Completion of Form 3363 Complete Form 3363 for cases in which you disallowed a claim in full or in part and don’t have other adjustments to the tax liability. See IRM 4.71.8 Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 3363. When completing Form 3363: Enter the name, EIN or SSN, and address of taxpayer where indicated. Year or period: List each year for which a claim has been filed on separate lines as follows: For a short period, reflect the beginning and ending date (e.g., 01/01/2017– 09/30/2017). For all other cases, list the period ending date (for example, 12/31/2017). Date claim filed: Enter the date Form 843 or amended return was filed. Kind of tax: Enter the type of tax covered by the return under examination, such as income or excise. You don’t have to show the form number of the return under examination or identify the type of income. Amount of claim: Enter the amount of refund requested in the claim filed by the taxpayer. Determine the amounts to enter as claims under the following circumstances: IF ... THEN ... a. A claim states a definite amount as being claimed Enter this amount in the "amount of claim" space. b. An amended return shows the computation of the corrected amount as computed by the taxpayer Enter the tax as shown on the original return in the "amount of claim" space. c. A claim is filed for "$1 or more" and no details are shown as to the amount of reduction in income Enter $1 as "amount of claim." d. A claim is filed for "$1 or more" and details are provided as to the amount of reduction in income but computation of amount of tax refund is not shown on the claim Compute the amount of the claim based upon reduction of income shown by the taxpayer and enter this figure as "amount of claim." e. A claim is filed for "entire amount of tax paid" Enter the entire amount of tax shown on the return. f. A claim is filed for "such amount as may be due" and details are shown as to the reduction in income and computation of the tax refund can be made Enter the computed figure in "amount of claim" space. Amount of claim disallowed: Enter the amount of claim disallowed per the RAR. Amount of claim allowed: Enter the amount of claim allowed per RAR. Signature: See the Form 3363 instructions. 4.71.8.7 (12-17-2019) Effect of Claim on IRC 4971 or 4975 Tax IRS is prohibited from any levy or court proceeding for the collection of the 100% tax under IRC 4971 or IRC 4975 pending the final resolution of court proceedings on the first tier tax under those Code sections if the taxpayer timely pays the first tier tax and files a claim for refund (IRC 4961). IRC 6512(a) provides that where a taxpayer has filed a timely Tax Court petition, the IRS can’t make a refund or allow a credit for the tax that was ever an issue in the Tax Court petition unless there were a mathematical error reference IRC 6513. If you determine that the first tier tax under IRC 4971 or IRC 4975 should be imposed, solicit a delinquent Form 5330 and request payment of the tax. If the 4971 or 4975 issue hasn’t been corrected, advise the taxpayer that even if they don’t timely correct, the IRS can’t levy or have a court proceeding to collect the 100% tax when there is a pending court proceeding to resolve the first tier tax if the taxpayer both: Pays the first tier tax. Files a claim for refund of the first tier tax within 90 days after the date the 100% tax is assessed. IRC 4971(b) tax may be waived in certain situations per IRM 4.71.5.6.1, Waiver of the 100% 4971(b) Excise Tax. Note: Excise taxes imposed by IRC 4975 and IRC 4971 are dependent on whether a plan that was ever qualified under IRC 401(a) (or was determined by the Secretary to have been qualified) under IRC 401(a), or (2) satisfied (or was determined by the Secretary to have satisfied) the requirements of IRC 403(a). The term "if ever qualified" can take on many meanings dependent on the facts and circumstances. Generally, any plan that has ever had a determination letter regardless of whether the plan later ceased to be a qualified plan because of a form or operational defect and whether or not the determination letter is subsequently revoked meets the definition of "if ever qualified" . Other considerations are whether the employer ever took a deduction for contributions to a plan or made rollovers from the plan reference PLR 9724001. Accordingly, a claim filed requesting an abatement or refund of excise tax imposed by IRC 4975(a) and IRC 4971(a) is likely not allowable. There is nothing in the Code that provides relief from the first tier tax. If there is a question as to whether the plan was ever qualified, contact Area Counsel. 4.71.8.8 (12-17-2019) Collection of Deficiencies and Installment Agreements If you receive tax payment, process checks per GAO recommendations: Make sure the check is made out to the United States Treasury. If the payee line is blank or the check is made out to "IRS" , overstamp the check with the "United States Treasury" stamp. Enter the check information (date of check, check number, amount, payer, IRS recipient name and date received) into the logbook required to be maintained by the group. Complete Form 3244-A. Complete Form 3210 for the payment you’re sending to the Service Campus. Include in the body of the Form 3210: the taxpayer’s name, SSN/EIN, tax return form number, amount of payment, and check number. If the payment applies to more than one tax period, note and itemize the breakdown and details on the Form 3210. Ask your manager to: review the Form 3210, compare it to the Form 3244-A and sign the Form 3210. The person who prepares the Form 3244-A can’t be the same person who signs the Form 3210. Make a copy of Form 3244-A, Form 3210 and the check and keep in the case file. Send the check with the Form 3244-A and Form 3210 express mail (next day) to the Ogden Service Campus by the end of the next business day after receipt to the address listed in IRM 4.71.8.8 (2) or IRM 4.71.8.8 (3). Note: If you can’t mail the check to the Service Campus the day you receive it, place it in a locked file overnight. Note: Don’t send a copy of Form 4549-E with the payment package or the taxpayer may be assessed tax twice. Place the check in a separately addressed envelope with the completed Form 3244-A in the express mail envelope. If you don’t receive the Form 3210 acknowledgement copy from the Service Campus within 10 days, contact them to follow-up on their receipt of the check. Document your actions in the group logbook. Mail remittance less than $100,000 to: IRS Attention: Teller Unit 1973 N. Rulon White Blvd., Mail Stop 1999 Ogden, UT 84201-1000 If you receive remittance of $100,000 or more, mail the check to the same address in IRM 4.71.8.8 (2), but use Mail Stop 2003. Complete Form 9814. Address the "Recipient Name" on the form as "Mail Supervisor" and input the "Recipient Telephone Number" as 801- 620-3750, regardless of whether payment is remitted. See IRM 5.14, Installment Agreements, for procedures for installment agreements. 4.71.8.9 (12-17-2019) Abatement of Interest Due to IRS Delay or Error Interest on deficiencies or payments may be abated when the IRS makes an error or delays performing a ministerial or managerial act, as noted in IRM 4.71.8.9 (2) and IRM 4.71.8.9 (3) (IRC 6404(e)(1)). Note: See IRM 20.2.7, Abatement and Suspension of Debit Interest, for additional information on this provision. A "ministerial act" is a procedural act or mechanical act that doesn’t involve the exercise of judgment or discretion and occurs when IRS processes a taxpayer’s case after we’ve completed all prerequisites to the act, such as conferences and reviews by supervisors. Example: IRS sends an audit selection letter to the taxpayer’s old address and it’s forwarded to the new address. In response to the appointment letter, the taxpayer notifies the IRS of the new address and requests a transfer of the audit to an office closer to the new address. The group manager approves the transfer request. The IRS, in its discretion, may abate interest attributable to any unreasonable delay in transferring the case. A "managerial act" is an administrative act that occurs during IRS’s processing of a taxpayer’s case. It involves the temporary or permanent loss of records or the exercise of judgment or discretion of IRS management. Example: Continuing with the example in IRM 4.71.8.9 (2), after the manager approves the transfer of the case, the clerk misplaces the case file. The "misplacing of the file" is a managerial act. The IRS, at its discretion, may abate interest attributable to any unreasonable delay caused by the file’s misplacement. The IRS has the authority to abate the amount of interest that accrued during the period in which the unreasonable error or delay in performing a ministerial or managerial act occurred (IRC 6404(e)(1)). It applies only when an unreasonable error or delay occurred after the date the IRS contacts the taxpayer in writing for an audit deficiency or payment. Interest which already accrued from the return due date to when the IRS first contacts the taxpayer isn’t abated under this provision because the taxpayer is aware of the tax liability reported on the filed return as well as the consequences (which are penalties and interest) if they don’t pay the liability by the return due date. The IRS has discretionary authority to allow claims for abatement of interest when all of the following conditions are met: The statutory period of limitations under IRC 6511 on filing a claim has not expired. The claim relates to interest on IRC 6212(a) taxes, such as income, estate, gift and excise taxes under Chapters 41, 42, 43, and 44. Note: IRC 6404(e)(1) does not allow abatement of interest on employment tax deficiencies or payments. An unreasonable error or delay occurred in relation to the performance of a ministerial or managerial act. Error or delay occurred after the taxpayer was contacted in writing with respect to the examination, deficiency, or payment. No significant aspect of the error or delay can be attributed to the taxpayer/representative. Note: An interest abatement claim under IRC 6404(e)(1) not meeting all of the above criteria is automatically disallowed by law. 4.71.8.9.1 (12-17-2019) Claims for Abatement of Interest Taxpayers must request abatement of interest on Form 843. They should complete the claim as follows: File with the Campus where the tax return was filed, or, if unknown, with the Campus where the taxpayer’s most recent tax return was filed. Clearly state across the top "Request for Abatement of Interest under Rev. Proc. 87-42." If the interest assessed resulted from the IRS’s error or delay in performing a single ministerial or managerial act that affected a tax assessment for multiple tax years or types of tax (for example, where two or more tax years were under examination), the taxpayer only needs to file one Form 843. Otherwise, the taxpayer should file a separate Form 843 for each tax period for each type of tax. The taxpayer doesn’t have to compute the dollar amount of interest for which they’re requesting abatement. Find instructions to complete Form 843 at the Electronic Publishing Product Catalog Information website at http://publish.no.irs.gov/catlg.html. 4.71.8.10 (12-17-2019) Abatement of Penalties in Claims Cases IRC 6651(a)(1) and IRC 6651(a)(2) penalties may be abated for reasonable cause. Find general guidance on EP related penalties in IRM 4.71.18, Employee Plans Examination of Returns, EP Penalties. Find guidance for the abatement of penalties assessed under IRC 6651(a)(1) and IRC 6651(a)(2) in IRM 4.71.18.2, Failure to File and Failure to Pay - IRC 6651(a)(1) & (2). See the reasonable cause standards in IRM 4.71.18.1.7 (3), Penalty Relief, and in greater detail in IRM 20.1.1, Penalty Handbook, Introduction and Penalty Relief. All penalty abatement or waiver requests must be in writing, and if not part of the return, must be signed by the taxpayer. Note: See IRM 20.1.3.3.2.1, Evaluating Claims for Abatement or Waiver of Estimated Tax. The taxpayer may request the refund or abatement of penalty assessments in a written letter and/or on Form 843. Note: Find Form 843 instructions at the Electronic Publishing Product Catalog Information website. If the taxpayer provides evidence that the penalty was computed incorrectly, verify the penalty computed by the taxpayer and adjust as necessary. To prepare the case for penalty abatement: Enter TC 161 for IRC 6651(a)(1) penalties, and TC 271 for IRC 6651(a)(2) penalties, with the corresponding amount of penalties that are being abated for each penalty on Form 5599, Item 12 - Penalties (-), and Enter TC 300 and $0 on Form 5599, Item 12 - Tax Liability Adjustment (+). See the Penalty Relief - Reasonable Cause Lead Sheet to help you determine whether penalties should be waived or abated. Note: See IRM 4.71.18, Exhibit 36 at Employee Plans Examination Exhibits for an example of the Penalty Relief - Reasonable Cause Lead Sheet, which you may also incorporate into the examination workpapers. More Internal Revenue Manual
