4.71.8 EP Claims

Manual Transmittal

May 22, 2017

Purpose

(1) This transmits revised IRM 4.71.8, Employee Plans Examination of Returns, EP Claims.

Material Changes

(1) IRM 4.71.8.1, Program, Scope and Objectives, and the subsections thereunder, were added to meet the new internal controls requirements.

(2) IRM 4.71.8.10, Abatement of Penalties in Claims Cases, was added.

(3) This IRM has been revised for other minor editorial changes including plain language edits.

Effect on Other Documents

This supersedes IRM 4.71.8 dated January 20, 2016.

Audience

Tax Exempt and Government Entities
Employee Plans

Effective Date

(05-22-2017)


Lisa J. Beard
Acting Director, Employee Plans
Tax Exempt and Government Entities

Program, Scope and Objectives

  1. Purpose: IRM 4.71.8, Employee Plans Examination of Returns, EP Claims, provides the basic examination procedures that will enable Employee Plans (EP) agents and their managers to process claim cases.

  2. Audience: This IRM provides procedures for agents, managers, and support staff in EP Exam.

  3. Program Owner: Director, EP Examination sets the program for the EP examination program.

  4. Program Authority: EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

Background

  1. EP Examination’s authority to resolve issues is derived from its authority to make determinations of tax liability under IRC 6201.

Acronyms and Forms

  1. This manual uses the following acronyms and references the following forms.

    Acronyms

    Acronym Definition
    AIMS Audit Information Management System AIMS
    EIN Employer Identification Number
    EP Employee Plans
    ESSP Examinations Special Support and Processing (Closing Unit)
    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


    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 1900 Income Tax Survey After Assignment
    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
    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


Responsibilities

  1. In accordance with Policy Statement 4-117, EP examiners and managers:

    1. Have been given broad authority to consider and weigh conflicting factual information, data, and opinions.

    2. Will use professional judgement in accordance with auditing standards to make findings of fact and apply the Service’s position on issues of law to determine the correct tax liability.

    3. Will exercise this authority to obtain the greatest possible number of agreements to tax determinations without sacrificing the quality or integrity of those determinations, and to dispose of tax differences at the lowest level.

      Note:

      See IRM 1.2.13.1.34, Policy Statement 4-117.

  2. All examinations will be done in accordance with Policy Statement 1-236, Fairness and Integrity in Enforcement Selection. See IRM 1.2.10.37, Policy Statement 1-236.

  3. All examinations will be done in accordance with the Taxpayer Bill of Rights as listed in IRC 7803(a)(3).

    Note:

    Additional information may be found on the irs.gov website at www.irs.gov/taxpayer-bill-of-rights.

Overview for Working Claims

  1. This IRM provides guidance for EP agents to process claim cases and gives miscellaneous procedures for:

    1. Claims allowed in full without taxpayer contact (surveyed claims), allowed in full, and partial or full disallowance)

    2. Claims allowed in full with taxpayer contact

    3. Claims that are partially or fully disallowed

    4. Collection of deficiencies and installment agreements

    5. Interest abatement of claims

    6. Penalty abatement in claims cases

Claim for Refund

  1. 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:

    1. 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:

      This form can be used to request a refund and to abate taxes, interest and penalties.

    2. Form 1040X

    3. Form 1045

    4. Form 1120X

    5. Form 1139

    6. Amended Form 5330

    7. Form 990-T showing a decrease in tax liability

  2. 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.

    1. This is referred to as an informal claim.

    2. An informal claim must be in writing.

  3. 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

Statute of Limitations for Claims

  1. Taxpayers must file a claim per IRC 6511(a) before the later of:

    1. Three years from the date the return was filed

    2. Two years from the date the tax was paid

  2. When a claim is filed, it keeps the statute open only for the claim.

    1. 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.

    2. If the statute of limitations has expired, you may only make adjustments to the return up to the amount of the claim.

  3. The statute of limitations for filing a claim is suspended under certain circumstances:

    1. 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).

Working a Claim

  1. In general, work a claim as a limited scope correspondence exam.

    1. A claim case should have workpapers limited to the scope of the claim case. Workpapers, at minimum, should include a brief description of how the claim came about, what the issue was, what referrals were made (if any), who was contacted, what IDRS research was performed, and what conclusions were reached

    2. A claim case should be assembled in accordance with case file assembly procedures found in IRM 4.71.12.6, Special Case File Assembly Instructions for Claims.

    3. A separate case file folder should be maintained for each year and return type to which the claim applies.

  2. Research IDRS to ensure that all claim years you are working are properly established on AIMS and RCCMS.

    1. Secure an AMDISA print to ensure that all years for which a claim has been filed, have been properly established on AIMS.

    2. If the claim isn’t established, follow the procedures in IRM 4.71.8.4.1, Establishing Claims on AIMS and RCCMS.

  3. Report your time working the claim on your monthly WebETS time sheet and list:

    • Each year to which a claim applies

    • The applicable activity code for the return

    • Project code 6070

  4. Get a current transcript of the taxpayer’s account on all claims so that you can analyze the account activity.

    1. 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.

    2. See section 8 of Document 6209, IRS Processing Codes and Information, for a description of Master File transaction codes.

    3. Contact the EP AIMS Coordinator if you need help reading the transcript.

  5. 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. This will be closed by the group under normal closing procedures.

  6. Save copies of all workpapers, forms and letters in the RCCMS Office Documents folder using the RCCMS Naming Convention.

Establishing Claims on AIMS and RCCMS

  1. Classification will establish claims for:

    1. Forms 5330 per IRM 4.71.5.5, Overview of Establishing Forms 5330 on RCCMS and AIMS

    2. Forms 990-T per IRM 4.71.10.4.2, Establishing Forms 990-T on RCCMS and AIMS

  2. Use Form 5597 to establish claims (not already established) for Forms 1040 and 1120 that the Campus posted on the Master File.

  3. Establish claims on AIMS and RCCMS with:

    • Source code of 30

    • Project code of 6070

    • Statute of limitations alpha code of "AA"

      Example:

      12/AA/2014 designates a claim for refund/credit was filed timely by the taxpayer and you’ve 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 (10), 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 reflected

Claims Allowed in Full, No Taxpayer Contact

  1. You may close a claim after it’s assigned to you without contacting the taxpayer or POA if you determine that the claim issue is clearly allowable in full and that the return doesn’t otherwise warrant examination. These are referred to as "surveyed" claims.

    Note:

    These cases are usually worked by Classification.

  2. 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.

  3. 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.

    1. IRC 6405 provides that Joint Committee Review is required for refunds over $2,000,000.

    2. 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.

    3. Make referrals to the Joint Committee through the SRS at https://srs.web.irs.gov.

    4. When the Joint Committee Specialist receives the referral, he/she will advise the agent within five days of how the case should be processed.

    5. Process the case per the Joint Committee Specialist’s instruction.

    6. If you don’t hear from the Joint Committee Specialist within seven days, email Classification at: tege.ep.classification@irs.gov for assistance.

      Note:

      You can’t close Joint Committee cases without a Joint Committee Specialist’s approval.

      Note:

      See IRM 4.36, Joint Committee Procedures.

  4. When recommending a claim for refund be allowed in full without examination (i.e., the claim is being surveyed), prepare Form 1900 to explain the reasons. On Form 1900:

    1. Explain claim carry backs if they occur.

    2. Electronically sign it if you worked the case completely electronic (no paper files).

    3. Save it in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    4. See IRM 4.71.8 Exhibit 2 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 1900.

    5. The group manager must sign at the bottom of the form as "Approved by" .

  5. Use 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.

  6. Prepare Letter 570-A and place it in the file for ESSP to mail.

    Note:

    Do not date the letter. The letter will be dated by ESSP when the letter is mailed.

  7. Close the case using AIMS disposal code 34 (RCCMS disposal code 103), Claims Allowed in Full (Surveyed).

  8. Complete Form 5599, TE/GE Examined Closing Record, 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.

  9. Complete Form 3198-A and attach it to the outside of the case file per IRM 4.71.8.5.2, Completion of Form 3198-A.

  10. 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.

  11. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  12. Close the claim on RCCMS and AIMS to ESSP and update AIMS to status code 51.

    Note:

    Claims allowed in full aren’t subject to Mandatory Review.

Completing Form 5599 when Claim Is Allowed in Full Without Taxpayer Contact

  1. Unless stated otherwise in IRM 4.71.8.5.1 (2), complete the following line items on Form 5599: P7-18, P21-22, P24-29, P31-34, P52-54, C, 9, 11, 12, 13, 14, 15, 21, 23, 30, 31, 32, 33, 40, and 50.

  2. Note these items when completing these Form 5599 required line items:

    1. P52-54: Enter the three digit plan number of the related plan if the claim is for a Form 5330.

    2. 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.

    3. Item 11: Entry is required for carry backs. Use the received date of the loss year return.

    4. Item 12: Enter the amount of the claim allowed as a "Tax Liability Adjustment Decrease in Tax Dollars" with a Transaction Code of 301. Otherwise leave blank.

    5. Item 12: If penalties had previously been assessed, enter the amount to be abated as a negative (-). See section 8 of Document 6209 for applicable transaction codes.

    6. Item 12: With Forms 990-T involving a carry back, use Transaction Code 309 to report the reduction in taxable income as a negative.

    7. Item 13: Enter disposal code 34 (RCCMS disposal code 103).

    8. Item 14: If you’ve extended the statute of limitations, enter the statute expiration date. Otherwise leave blank.

    9. 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.

    10. Item 15: For Forms 990-T, input the reduction in taxable income as a negative with Reference Number 886.

    11. Item 21: Enter the amount of the claim requested.

    12. Item 32: Enter the grade of the case in the blocks from left to right as two digits (e.g., 11).

    13. Item 40: Enter the project code of 6070.

    14. Item 50: Enter the examiner’s group number.

  3. 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.

Completion of Form 3198-A

  1. Complete Form 3198-A and attach it to the outside of the case file with the following information in the "Required Entries" section:

    • Person to contact, phone number, and group number

    • Name of the taxpayer

    • EIN

    • MFT

    • Plan year and plan number (if applicable)

    • Indicate if there is a Power of Attorney

  2. In the "Other Instructions" section, write or type:

    • "Claim Has Been Considered" .

    • "The case (or any related case) has less than six months remaining on the statute of limitations date." (if there are six months or less remaining on the statute of limitations)

Processing a Claim when Taxpayer Contact Is Made

  1. If you need to contact the taxpayer (or POA) to obtain additional information, update the status code on AIMS to status 12.

  2. Verify that the statute date alpha codes on AIMS are "AA" or "BB" (as applicable), using the month and year of the statute expiration (for example, 12/AA/2014).

  3. 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.

  4. Use Form 5772 and Form 5773, and prepare supporting workpapers to properly document the issue.

  5. 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)

    • Complete the "Other Instructions" section according to IRM 4.71.8.5.2, Completion of Form 3198-A. Additionally indicate if the case (or any related case) is unagreed with less than one year remaining on the statute of limitations date.

      Note:

      Follow the Statute Control Procedures in IRM 4.71.9.

  6. 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.

  7. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  8. Prepare claims closing letters and place in the file for ESSP to mail.

    Note:

    Do not date the letter. This will be done by ESSP when the letter is mailed.

Taxpayer Contact Made, Claim Allowed in Full

  1. If the taxpayer (or POA) sends you additional information and you determine that the claim should be allowed in full and it relates to a Form 5330 return, prepare Form 5438.

    1. Prepare Form 5438 in duplicate.

    2. Include a statement about allowing the claim on Form 5438 in the "Other Information" section: "Claim Allowed in Full. On ____ (date) you filed a claim for a refund of $_____ (amount) for _____ (year). As the result of our examination, we allowed your claim in full, as shown in this report."

    3. Include a copy of the completed Form 5438 in the workpapers and mail a copy to the taxpayer with the closing letter.

      Note:

      See IRM 4.71.8 Exhibit 6 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 5438.

  2. You don’t have to secure agreement on Form 870-EP unless there are other agreed adjustments in addition to the claim issue.

  3. Refer to the Joint Committee when the refund of tax, penalties and interest exceeds $2,000,000.

    1. Make referrals to the Joint Committee through the SRS at https://srs.web.irs.gov.

    2. When the Joint Committee Specialist receives the referral, he/she will advise you within five days of how the case should be processed.

    3. Process the case per the Joint Committee Specialist’s instruction.

    4. If you don’t hear from the Joint Committee Specialist within seven days, email Classification at tege.ep.classification@irs.gov for help.

      Note:

      You can’t close Joint Committee cases without the Joint Committee Specialist’s approval.

  4. Prepare 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.

  5. Place Letter 570-A in the file for ESSP to mail.

    Note:

    Do not date the letter. This will be done by ESSP when the letter is mailed.

  6. Complete Form 5599 per IRM 4.71.8.6.2, Completing Form 5599 when Claim Is Allowed in Full and Taxpayer Contact Is Made.

  7. 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.

  8. Save copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention.

  9. Close the case to ESSP and update the AIMS status code to 51.

Completing Form 5599 when Claim Is Allowed in Full and Taxpayer Contact Is Made

  1. Complete Form 5599 for claims being allowed for Forms 5330, 990-T, 1040, or 1120 established on Master File.

    1. Complete these Form 5599 line items: P7-18, P21-22, P24-29, P31-34, P52-54, C, 12, 13, 14, 15, 21, 23, 24, 30, 31, 32, 33, 40, and 50.

      Note:

      List your time working the claim in item 23, not in item 28.

    2. Item 12: (Tax Liability Adjustment) - input code 301 and the amount of the claim allowed.

    3. Item 13: Enter AIMS disposal code of 03 (disposal code 102 on RCCMS), Agreed Tax Change.

    4. Item 15: Enter the difference in taxable income.

    5. Item 32: Enter the case grade in the blocks from left to right as two digits (for example, Grade 9 = 09).

    Note:

    Complete Form 5599 per IRM 4.71.8 Exhibit 4 except the AIMS disposal code is 03 (disposal code 102 on RCCMS).

Claims Disallowed in Full or in Part

  1. Prepare Letter 569-A with applicable attachments to notify the taxpayer of the disallowance or partial disallowance of the claim. See IRM 4.71.8 Exhibit 7 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 569-A.

    1. Taxpayers are entitled to an explanation of the specific reason for a claim’s disallowance or partial disallowance (IRC 6402(l)).

    2. This information will enable the taxpayer to respond appropriately to the IRS.

    3. Prepare and attach a RAR. The RAR should include the issue, a description of the facts surrounding the issue, an explanation of the law pertaining to 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.

    4. Give the taxpayer 15 days to respond.

    5. Attach Pub 1.

    6. Attach Pub 594, when applicable.

    7. Include a copy of the claim for refund.

    8. Attach all relevant forms as specified in IRM 4.71.8.6.3 (2) through IRM 4.71.8.6.3 (5) that follow.

    9. Get your manager’s approval before you sign and mail the letter.

  2. Prepare Form 2297 for cases that have a full or partial disallowance of a claim.

    1. See IRM 4.71.8.6.4, Completion of Form 2297, for instructions on how to complete Form 2297.

    2. See IRM 4.71.8 Exhibit 8 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 2297.

  3. 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.

    1. See IRM 4.71.8.6.5, Completion of Form 3363, for instructions on how to complete Form 3363.

    2. See IRM 4.71.8 Exhibit 9 at IRM 4.71 - Employee Plans Examination Exhibits for an example of a completed Form 3363.

  4. Complete Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, or Form 870-EP for claims disallowed in full and you’re proposing additional tax assessments.

    1. See IRM 4.71.8 Exhibit 10 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 2504.

    2. See IRM 4.71.8 Exhibit 11 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Form 870-EP.

  5. Use Form 4549-E for claims for Form 1040 or Form 1120 discrepancy adjustment. See IRM 4.71.4.10, Claims.

  6. If the taxpayer doesn’t respond after 15 days, call them.

  7. 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.

  8. If the taxpayer doesn’t sign and return Form 3363 and Form 2297, complete Form 5599 per IRM 4.71.8.6.2, Completing Form 5599 when Claim Is Allowed in Full and Taxpayer Contact Is Made, except for these items:

    1. Item 12: Leave blank if the claim is disallowed in full and there is no additional assessment.

    2. Item 13: Use disposal code 07 or 10 as applicable.

    3. Item 22: List claim amount disallowed.

    4. Item 23: List the number of hours worked on the claim.

    5. 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, and; "O" for other claims.

  9. If the taxpayer doesn’t sign and return Form 3363 and Form 2297:

    1. Update the status code on AIMS and RCCMS to 20.

    2. Attach Form 3198-A to the outside of the case file, identifying the case as "Mandatory Review" , and notate: "Unagreed Claim."

    3. If less than one year remains on the statute of limitations, see IRM 4.71.9, Statute Control Procedures, for special instructions.

    4. 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.

  10. If the taxpayer signs and returns Form 2297 and Form 3363, the case will be closed by the group as follows::

    1. Complete Form 5599 per IRM 4.71.8.6.2, Completing Form 5599 when Claim Is Allowed in Full and Taxpayer Contact Is Made, except:
      Close the case with disposal code 01, Regulatory/Revenue Protection (i.e., enter 01 on Form 5599, item 13)
      Enter the date the taxpayer signs Form 2297 and Form 3363 on Form 5599 item 20.
      Enter your time in item 23.

      Note:

      The examiner’s time should be entered in item 23 and not in item 28. Do not enter any time in item 28 of Form 5599.

    2. Prepare Letter 2087, and attach copies of Forms 3363 and 2297 if the claim applies to Form 5330.

      Note:

      See IRM 4.71.8 Exhibit 13 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 2087.

    3. Prepare Letter 2511, and attach copies of Forms 3363 and 2297 if the claim applies to Form 990-T.

      Note:

      See IRM 4.71.8 Exhibit 14 at IRM 4.71 - Employee Plans Examination Exhibits for an example of Letter 2511.

    4. Prepare the applicable claims closing letters as discussed above and leave them in the file for ESSP to mail.

      Note:

      Do not date the letter. The letter will be dated by ESSP when the letter is mailed.

    5. 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.

    6. Save all copies of all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention.

    7. Close the case to ESSP and update the AIMS status code to 51.

Completion of Form 2297

  1. 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.

  2. 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.

  3. When completing Form 2297:

    1. Enter the name, EIN or SSN, and address of taxpayer where indicated.

    2. 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, reflect the beginning and ending date (for example, 01/01/2014– 09/30/2014). In all other cases, list the period ending date (e.g., 12/31/2014).

    3. Kind of tax: Enter the type of tax covered by the return under exam, such as income or excise. You don’t have to show the return under exam form number or the type of income.

    4. Enter the claim amount and the amount of the claim disallowed where indicated.

    5. See instructions at the bottom of the form for taxpayer’s signature.

Completion of Form 3363

  1. Complete Form 3363 for cases where a claim is disallowed in full or in part and you 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.

  2. When completing Form 3363:

    1. Enter the name, EIN or SSN, and address of taxpayer where indicated.

    2. 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., 01/01/2015– 09/30/2015). In all other cases, list the period ending date (e.g., 12/31/2014).

    3. Date claim filed: Enter the date Form 843 or amended return was filed.

    4. Kind of tax: Enter the type of tax covered by the return under exam, such as income or excise. It is not necessary to show the form number of the return under examination or to identify the type of income.

    5. 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 claim states a definite amount as being claimed Enter this amount in the "amount of claim" space.
      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.
      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."
      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."
      A claim is filed for "entire amount of tax paid" Enter the entire amount of tax shown on the return.
      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.
    6. Amount of claim disallowed: Enter the amount of claim disallowed per the RAR.

    7. Amount of claim allowed: Enter the amount of claim allowed per RAR.

    8. Signature: See the Form 3363 instructions.

Effect of Claim on IRC 4971 or 4975 Tax

  1. IRC 4961 prohibits 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 concerning the first tier tax under those Code sections if the taxpayer timely pays the first tier tax and files a claim for refund.

  2. 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.

  3. If the taxpayer hasn’t corrected the 4971 or 4975 issue at that time, advise the taxpayer that if they don’t timely correct, any levy or court proceeding for the collection of the 100% tax will be prohibited pending the final resolution of court proceedings concerning the first tier tax if the taxpayer:

    1. Pays the first tier tax, and

    2. Files a claim for refund of the first tier tax within 90 days after the date the 100% tax is assessed.

Collection of Deficiencies and Installment Agreements

  1. If you receive tax payment, process checks per GAO recommendations:

    1. 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.

    2. 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.

    3. Complete Form 3244-A.

    4. Complete Form 3210 for the payment being sent to the Service Campus. The body of the Form 3210 should include 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.

    5. Ask your manager to: review the Form 3210, compare it to the Form 3244-A and sign the Form 3210 after you prepare these forms. The person who prepares the Form 3244-A can’t be the same person who signs the Form 3210.

    6. Make a copy of Form 3244-A, Form 3210 and the check and keep in the case file.

    7. 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) of this section.

      Note:

      If you can’t mail the check to the Service Campus the day you receive it, secure 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.

    8. Place the check in a separately addressed envelope with the completed Form 3244-A in the express mail envelope.

    9. 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.

  2. Mail remittance less than $100,000 to:

    IRS
    Attention: Teller Unit
    1973 N. Rulon White Blvd.,
    Mail Stop 1999
    Ogden, UT 84201-1000

  3. 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.

  4. 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.

  5. See IRM 5.14, Installment Agreements, for procedures for installment agreements.

Abatement of Interest Due to IRS Delay or Error

  1. 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) of this section (IRC 6404(e)(1)).

    Note:

    See IRM 20.2.7, Abatement and Suspension of Debit Interest, for additional information on this provision.

  2. A "ministerial act" is a procedural act or mechanical act that doesn’t involve the exercise of judgment or discretion and occurs when processing of a taxpayer’s case after all prerequisites to the act, such as conferences and reviews by supervisors, have taken place.

    Example:

    An audit selection letter is sent to the taxpayer’s old address and then 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.

  3. A "managerial act" is an administrative act that occurs during the 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 misplacement of the file.

  4. 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)).

    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.

    2. 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.

  5. The IRS has discretionary authority to allow claims for abatement of interest when all of the following conditions are met:

    1. The statutory period of limitations under IRC 6511 on filing a claim has not expired.

    2. The claim relates to interest on taxes described in IRC 6212(a), 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.

    3. An unreasonable error or delay occurred in relation to the performance of a ministerial or managerial act.

    4. Error or delay occurred after the taxpayer was contacted in writing with respect to the examination, deficiency, or payment.

    5. 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.

Claims for Abatement of Interest

  1. Taxpayers must request abatement of interest on Form 843. They should complete the claim as follows:

    1. File with the Campus where the tax return was filed, or, if the identity of that Campus is unknown, with the Campus where the taxpayer’s most recent tax return was filed.

    2. Clearly state across the top "Request for Abatement of Interest under Rev. Proc. 87-42."

  2. 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 (e.g., where two or more tax years were under exam), the taxpayer only needs to file one Form 843.

    1. Otherwise, the taxpayer should file a separate Form 843 for each tax period for each type of tax.

    2. The taxpayer doesn’t have to compute the dollar amount of interest for which they’re requesting abatement.

    3. Find instructions to complete Form 843 at the Electronic Publishing Product Catalog Information website at http://publish.no.irs.gov/catlg.html.

Abatement of Penalties in Claims Cases

  1. IRC 6651(a)(1) and IRC 6651(a)(2) penalties may be abated for reasonable cause.

    1. General guidance regarding EP related penalties is found in IRM 4.71.18, Employee Plans Examination of Returns, EP Penalties.

    2. Guidance for the abatement of penalties assessed under IRC 6651(a)(1) and IRC 6651(a)(2) is addressed in IRM 4.71.18.2, Failure to File and Failure to Pay - IRC 6651(a)(1) & (2).

    3. The reasonable cause standards are discussed in IRM 4.71.18.1.4 (3), Penalty Relief, and more extensively in IRM 20.1.1, Penalty Handbook, Introduction and Penalty Relief.

  2. 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 20.1.3.2.2.1 (3), Evaluating Claims for Abatement or Waiver of Estimated Tax.

  3. Requests for the refund or abatement of penalty assessments can be made by the taxpayer in a written letter and/or on Form 843.

    Note:

    Instructions to complete Form 843 are found at the Electronic Publishing Product Catalog Information website at http://publish.no.irs.gov/catlg.html.

  4. If the taxpayer provides evidence that the penalty was computed incorrectly, verify the penalty computed by the taxpayer and adjust as necessary.

  5. To prepare the case for penalty abatement:

    1. Enter transaction code 161 for IRC 6651(a)(1) penalties, and transaction code 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

    2. Enter transaction code 300 and $0 on Form 5599, Item 12 - Tax Liability Adjustment (+).

    Note:

    See IRM 4.71.18.2.2, Abatement of IRC 6651 Penalties, for instructions on the completion of Form 5599 when abating IRC 6651 penalties.

  6. The Penalty Relief - Reasonable Cause Lead Sheet has been prepared 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 may also be incorporated as part of the examination workpapers.