Purpose: This IRM section describes the processing of claims, abatements and examination reconsiderations. Topics addressed include:

Audience: The procedures are directed toward IRS employees authorized to conduct examinations. This manual is also a key reference for their managers and reviewers, as well as other TE/GE employees in supporting roles. These employees are:

Policy Owner: Director, Exempt Organizations and Government Entities.

Program Owner: Exempt Organizations and Government Entities.

Contact Information. To recommend changes or make any other suggestions to this IRM section, email the EO Examinations Mandatory Review office at *TEGE EO Review Staff.

If you receive a claim for refund during your examination:

A taxpayer must file a claim for credit or refund by the later of two periods:

See revised IRM 21.5.9.5.14.11 - Tax Cuts and Jobs Act of 2017 (P.L. 115-97), Sections Affecting Net Operating Losses and revised IRM 21.5.9.5.14.11.1 -Tax Cuts and Jobs Act - NOL Carryback and Carryforward Periods which provide important changes to the NOL rules. See IRM 25.6.1.10.2.8.1, Net Operating Loss (NOL) Carryback or Capital Loss Carryback to determine timely filed NOL or capital loss carryback claims for additional guidance.

The amount credited or refunded is limited under IRC 6511(b)(2) to the tax paid (which includes tax, penalties, and interest) during the period of:

Consider advance payments as made on the due date of the tax return per IRC 6513(a). See IRM 25.6.1.7.2, Time When Payments and Credits Are Considered to be Made.

This chart shows general rules governing a refund claim:

The filing of a claim doesn't affect the ASED.

The amount that may be claimed is limited. See IRM 25.6.1.10.2.7.3, Extension of Time by Agreement.

Timely filed claims provide an open statute for examining the claim, as reflected by the use of alpha codes, such as AA and BB. See IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS, for a list of alpha codes.

If you allow the claim, further action on that tax year is barred once the ASED expires. (For erroneous refunds, the government may bring suit to recover within the period provided in IRC 6532(b).

When a customer files a claim timely, the statute remains open for the IRS to examine it. If the IRS takes no action on the claim within six months from the time it was filed, the customer can file suit in court to recover the amount claimed. The period for filing suit lasts until two years after the date a certified notice of claim disallowance is mailed to the taxpayer or the date the taxpayer signed Form 2297, Waiver of Statutory Notification of Claim Disallowance. Additional information for Employment Tax Cases, see IRM 4.23.13.2.2.

An executed consent extends the time to file a claim. If a customer does not file for a claim within the time limits prescribed by IRC section 6511(a), the customer may still file a claim if the statute of limitation for assessment has been extended by agreement of the Service and the customer (IRC 6511(c)). This filing period will last until six months after the expiration of the extension period.

If, after the execution of a consent and within six months after the expiration of the extension period, a claim is filed, or a credit or refund is allowed when no claim is filed, the amount of credit or refund is limited. This limit is the portion of the tax paid after the execution of the consent and before the filing of the claim (or making of the credit or refund), PLUS the portion of the tax paid within the period which would be applicable under IRC section 6511(b)(2) if a claim had been filed on the date the consent was executed.

If the Service allows the claim (this could be done by at the Campus Center prior to the case being sent to the field for examination), it is no longer a claim. Generally, the Service must assess tax within two years from making the refund. See IRC 6502 and 6532(b).

Any tax withheld for a wage earner is deemed paid on the fifteenth day of the fourth month following the close of the wage earner’s taxable year (individual returns only)(IRC 6511 and IRC 6513(b)(1)).

Any estimated tax payments made during any calendar year are deemed paid on the last day prescribed for filing the return for that year without considering any extensions IRC 6513(b)(2).

If a taxpayer files a tax return more than three years after the due date for the return (including valid extensions), any overpayment due on the tax return is barred (forfeited) and won’t be refunded to the taxpayer.

Taxpayers can’t carry forward or back barred refund amounts to offset delinquent accounts or future tax liabilities. The refunds post to an excess collections account using Form 8758, Excess Collection File Addition.

If a taxpayer files a claim for refund after the RSED to perfect a claim filed before the RSED, the claim should be considered. A general claim may be amended after the RSED has expired, provided that the original claim has not been formally disallowed by the IRS at the time the amendment is filed and the amendment merely makes clear the specific matters the Service has already considered by investigating the original defective claim. The supplemental claim will not generally be considered an amendment if the Service took final action on the original claim by rejecting the original claim or allowing it in whole or in part. A final action disallowing a claim does not occur until the notice of claim disallowance is sent. If no formal disallowance was made, there is no specific time period within which the supplemental claim must be filed.

To close a claim case with a barred refund:

Upon receipt of a claim, check IDRS to ensure we haven't already paid, issued, or credited the claim.

If the SC is 30 and the claim has been paid, the SC needs to be updated to 31. The examiner should verify that the allowance of the claim was correct. If the SC is correct, the claim can be surveyed, once updated to SC 31 because the claim has been refunded to the T/P. If not correct, then the appropriate adjustment should be considered as part of the examination.

Verify that the claim was timely filed.

Review the original return, the claim, and notes from classifiers. Consider the issues raised by the claim. Decide if there is a basis for a change to the tax liability.

For Employment Tax Cases: When reviewing claims, you should:

Determine if the ASED is open. If open, include any other LUQs as warranted.

.
•See IRM 8.7.7.2.3, Technical and Procedural Guidelines, Claim and Overassessment Cases: Securing Statute Consents in Claim and Overassessment Cases.

For Employment Tax cases: If the taxpayer presents a valid claim for refund, an examination can include any other LUQs that warrant examination and isn’t limited to those issues raised in the claim. If the ASED has passed, the Service may net out the amount requested with adjustments, provided the refund involves the same taxpayer and the same tax period. Move the unassessable portion to XSF. See IRM 25.6.1.10.2 for more information.

You aren't limited to the issues raised in the claim, but can also expand the examination to make adjustments that can offset the claim in full which would result in additional tax deficiency. Discuss the expansion of the scope with and obtain approval from your manager. See IRM 4.75.37.5.2.9, Claim Allowed in Full with Offsetting Adjustments.

Verify the claim amount shown on AMDISA and Reporting Compliance Case Management System (RCCMS). Using RCCMS, correct the amount if wrong or missing. (Check the Update AIMS box.) Prepare a Form 5598, TE/GE Correction Request, to correct AIMS manually, if needed.

You may disallow the claim (fully or partially) or allow the claim in full. The group manager reviews all closed claims.

A claim may be surveyed. Before deciding to survey, examiners and managers must consider all case facts. Only the group manager approves the decision to survey a return and must document it in the RCCMS case file. Both managers and examiners must document the case file with all case actions.

If revenue base protection applies (money is prevented from leaving the Treasury), complete Form 5599, TE/GE Examined Closing Record, items 22, 23 and 24, and the corresponding fields on the Closing Record in RCCMS. See IRM 4.5.2.4.1.38, Revenue Base Protection Section (RBP).

Close claims to EO Closing Unit, unless subject to Mandatory Review. See IRM 4.75.16.6, Case Closing Procedures, for a list of Mandatory Review cases.

Form 94X-X series amended returns (including Form 941-X, 943-X, 944-X, 945-X and CT-1) permit t/ps to apply credit balances (refunds) to the Form 94X-X for the period during which the amended return was filed. The “X” forms allow the taxpayer to file either an “adjusted” (Box 1) or “claim” (Box 2) employment tax return. While the t/p’s selection between the two blocks doesn’t affect how the case is worked by the examiner, it does affect the final processing of the case. Returns with the “adjusted” block marked cannot result in a refund issued to the taxpayer. Any credit balance resulting from the exam or processing of the return MUST be moved to the quarter in which the “X” adjusted return was filed. Any credit balance transfer will be completed using a Form 3870 after the examination. The following additional procedures are necessary to ensure that the refunds are applied to the appropriate tax periods.

If the examiner determines that the credit is no longer needed to pay an unemployment tax liability, then an additional Form 3870 will need to be prepared to release the credit from the quarter the money was moved to.

There are additional procedures related to reconsideration of a claim and withdrawal of a claim.

A claim for abatement of an employment tax examination assessment (Examination Reconsideration) will be considered on its merits after employment taxes have been assessed and the circumstances in IRM 4.23.13.4, Employment Tax Abatement Claims, have been met. When it is determined that an examination reconsideration request should be considered on its merits, the taxpayer will be afforded consideration by the Appeals Office. Refer to IRM 4.23.13.3.5.

When it is determined that an abatement (Examination Reconsideration) request should not be considered on its merits, or there has been no previous examination action, the t/p will be issued a no-consideration letter and will not be afforded consideration by the Appeals Office. Use Letter 924, No Consideration Letter on Abatement Claim, for all claims for abatement of employment taxes that are not considered. Never use Letter 5376, Form 3363 and 2297, or any other letter that explains appeal rights. The customer has no appeal rights beyond the group level without paying the tax and filing a formal claim. This should be explained to the customer with the following paragraph: "If you do not agree with our determination, you may, after paying the additional tax due, file an amended return or claim for refund. If you file a claim or amended return, you should do so within three years from the date your return was filed or, if later, two years from the time the tax was paid."

The IRS has discretionary authority under IRC 4962(a) to not assess, or to abate or refund, any "qualified first-tier tax" (including interest) as long as the taxable event was:

Qualified First-tier Chapter 42 Excise Taxes described under IRC 4962(b) include the sections listed below:

Follow the instructions on IRM 4.75.37.9.1 for approval of IRC 4962 abatement requests.

A taxpayer’s requests under IRC 4962 must be worked as an abatement, whether the tax has or hasn’t been paid.

Taxpayers file these requests for abatement by filing a Form 843 or an amended return. The taxpayer may also make an informal request as long as we have all the necessary information including the tax year, issue, and amount.

A taxpayer can't file a claim for abatement of income tax under IRC 6404(b). However, because the IRS has the authority to abate the unpaid portion of tax under IRC 6404(a), the IRS may still consider an informal request filed by a taxpayer, for abatement of income taxes. See IRM 25.6.1.10.1, Requests for Abatement. This informal request should include the tax period involved, issue, and request to abate the tax.

When assigned, the case has a SC of 30, Claims for Refund

Verify on IDRS any payments the taxpayer made. If the taxpayer paid all of the prior assessments, follow the regular claim procedures.

Use project definer code 8499, Request for Abatement. The project code is 8089, Claims (Non-TEP).

Contact the taxpayer and obtain any necessary additional information.

Evaluate the information and make a determination. Document your work in your workpapers.

Prepare Form 4549, Income Tax Examination Changes, to reflect any adjustments to be made. If you determine there was an overassessment, your report should reflect a reduction in the unpaid tax. Clearly explain to the taxpayer that the overassessment won't be refunded and that it will only reduce or eliminate the existing balance due.

If there is a reduction in any penalties, the "Other Information" section of the report should clearly explain the reduction:

The taxpayer receives no judicial rights because IRC 6404(b) indicates the taxpayer can't file a claim for abatement of income taxes. The taxpayer's recourse if the tax isn't abated is to pay the tax, and then file a claim for refund, or file an amended return.

Prepare and issue Letter 693, Reply to Request for Reconsideration of Assessment. Select the appropriate box. No signature is required on the Form 4549 because any adjustments are in the taxpayer's favor.

If making an adjustment:

If disallowing the request for abatement, use DC 01 (RCCMS - 210), Regulatory/Revenue Protection.

In order to request an examination reconsideration:

Consider a request for reconsideration if any of the following apply:

Don't consider a request for reconsideration if:

Per Policy Statement 4-103, (IRM 1.2.1.5.31, Policy Statement 4-103) where we made an assessment of excise or employment tax as a result of an examination action, the taxpayer generally must pay the assessment and file a claim for refund prior to any further consideration of his/her case. Consider abatement requests only if:

If a taxpayer files a request for withdrawal of an abatement request:

See IRM 4.75.16, Case Closing Procedures for case file assembly guidelines.

If a taxpayer has a legitimate doubt that he/she owes part or all of the tax debt, he/she completes a Form 656-L, OIC-DATL. A taxpayer’s offer to compromise a tax liability should:

DATL:

The Tax Increase Prevention and Reconciliation Act (TIPRA) of 2005 established legislation requiring the IRS to render a decision and notify the taxpayer on all offers in compromise within 24 months of the date the IRS received the offer or the offer is considered accepted (IRC 7122(f)). Any period during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24 month period.

If the 24 month period expires while an employee works the offer, the employee coordinates with their manager and the FSL/ET Staff Assistant to prepare the paperwork required to accept the offer. See IRM 5.8.8.12.1(1) and IRM 5.8.8.12.2 for directions.