4.75.37 Claims, Requests for Abatement and Audit Reconsiderations

Manual Transmittal

May 11, 2017

Purpose

(1) This transmits a partial revision and table of contents and text for IRM 4.75.37, Exempt Organizations Examination Procedures, Claims, Requests for Abatement and Audit Reconsiderations dated April 7, 2017.

Material Changes

(1) As of the publication of this manual, TE/GE is undergoing a restructure which will affect titles, authorities, and offices.

  • All references to The Examination Program and Review (EPR) and the authorities granted to the manager of that office will be changed, pending announcement for the authorized replacement.

  • All references to Examination Special Support (ESS) are changed to "EO Closing Unit," EGC 7997.

  • All references to "EO Classification-Referrals" are changed to "EO Referrals Group" .

  • All references to EO Case Selection and Delivery (CS&D) are changed to "EO Classification" or "Classification."

(2) The terms "agent" or "agents" replaces "examiner" or "examiners" , and is intended to include GS-0512, GS-0526, GS-0592, or GS-0987 series employees. The terms "audit" , "auditing" , or "audited" replaces "examine" , "examination" , "examining" or "examined" where appropriate, in compliance with the Plain Language Act. see www.plainlanguage.gov. Generally, official titles and designations do not reflect this change.

(3) Added Internal Controls into new IRM section 4.75.37.1, per IRM 1.11.2, Internal Revenue Manual (IRM) Process.

(4) Revised IRM 4.75.37.8. Incorporated new procedures for processing IRC 4962 Abatement Requests over $200,000, no longer requiring Technical Advice.

(5) Added guidance for the processing of Requests for Withdrawal of Abatement Requests in new IRM section 4.75.37.11.

(6) Incorporated the contents of Interim Guidance Memorandum TEGE-04-1214-0031, Offer in Compromise Doubt as to Liability (DATL) Procedures into new IRM section 4.75.37.12.

(7) Added Exhibit 4.75.37-1, Form 1271, Rejection or Withdrawal Memorandum, Completion Instructions.

(8) Added Exhibit 4.75.37-2, Form 3870, Request for Adjustment, Completion Instructions.

(9) Added Exhibit 4.75.37-3, Form 7249, Offer Acceptance Report, Completion Instructions.

(10) Added Exhibit 4.75.37-4, Form 7122, Offer in Compromise (Doubt As Liability) Checksheet.

(11) Removed Exhibit 4.75.37-11.

(12) Updated to meet the requirements of P.L. 111-274 (H.R. 946), the Plain Writing Act of 2010. The Act states writing must be clear, concise, well-organized, and follow other best practices appropriate to the subject or field and intended audience.

Effect on Other Documents

The material updates and replaces IRM 4.75.37, EO Examination Procedures, Claims, Requests for Abatement and Audit Reconsiderations, dated August 21, 2014.
Interim Guidance Memorandum (IG Memo) TEGE-04-1214-0031, Offer in Compromise Doubt as to Liability Procedures, dated December 16, 2014 is superseded.
IG Memo TEGE-04-1015-0025, Team Examination Program Claims Processing, dated October 23, 2015 is obsoleted. The EO Team Examination Program (TEP) is discontinued.
IG Memo TEGE-07-0117-0006, Reissuance of Internal Revenue Manual Sections Impacted by the Realignment of Work between the Tax Exempt and Government Entities Division (TE/GE) and the Office of Associate Chief Counsel (Tax Exempt and Government Entities), dated January 26, 2017 is incorporated.

Audience

TE/GE Exempt Organizations Examining Agents

Effective Date

(05-11-2017)

Margaret Von Lienen
Acting Director, Exempt Organizations
Tax Exempt and Government Entities (EO)

Program Scope and Objectives

  1. Purpose: This manual focuses on EO procedures outlining the processing of Claims, Abatements and Audit Reconsiderations. Topics addressed include:

    • Auditing claims.

    • Surveying claims.

    • Processing requests for abatements cases.

    • Processing audit reconsiderations cases.

    • Processing Offer in Compromise (DATL) cases.

    Note:

    For IRC 45R credit for small tax-exempt employers, refer to IRM 4.75.38.

  2. Audience: The procedures in this manual apply to Exempt Organizations Examination employees in the following series:

    • GS-512

    • GS-526

    • GS-987

  3. Policy Owner: Director, Exempt Organizations

  4. Program Owner: Exempt Organizations

Authority

  1. The authorities for the procedures outlined in this manual are:

    1. California Thoroughbred Breeders Association v. Commissioner, 47 TC 355 (1996)

    2. Delegation Order 7-11

    3. IRC 4962

    4. IRC 6404

    5. IRC 6511

    6. IRC 6513

    7. IRC 6532

    8. IRC 7121

    9. IRC 7122

    10. IRC 7429(a)(2)

    11. IRC 7459

    12. Policy Statement 4-103

    13. Policy Statement P-4-88

    14. Tax Increase Prevention and Reconciliation Act of 2005

Responsibilities

  1. During an audit of a claim, agents are responsible for:

    1. Working claims as high priority cases. Taxpayers may sue for a refund if we don’t take action within six months of a claim filing.

    2. Opening claims within 30 days of receipt (put in AIMS status 12).

    3. Limiting the scope of the audit to the claim issue.

      Exception:

      If you find signs of non-compliance, discuss expanding the scope of the audit with your group manager.

    4. Considering both the Assessment Statute Expiration Date (ASED) and Refund Statute Expiration Date (RSED).

    5. Closing the claim:

      • Survey, after assignment,

      • Allowed in full,

      • Disallowed in full or part, or

      • Assess additional tax

  2. During an audit of an abatement request, agents are responsible for:

    1. Reviewing the audit file.

    2. Contacting the taxpayer and obtaining any necessary additional information.

    3. Evaluating the information and fully documenting your work.

    4. Making a final determination.

  3. During an audit of an Offer in Compromise (Doubt as to Liability) case, agents are responsible for:

    1. Working the file as a high priority case.

    2. Contacting taxpayer and obtain additional information, if necessary.

    3. Adhering to time frames, as outlined in IRM 4.75.37.13.3 (2).

    4. Fully documenting your work.

    5. Completing Offer in Compromise checksheet, when required.

    6. Making final determination.

Program Controls

  1. Agents should consult the Related Sources listed in IRM 4.75.37.1.5 to insure accurate case processing and consistent application of the law.

Acronyms

  1. The table lists commonly used acronyms and their definitions.

    Acronym Definition
    AIMS Audit Information Management System
    AOIC Automated Offer in Compromise
    ASED Assessment Statute Expiration Date
    BMF Business Master File
    CS&D Case Selection and Delivery
    DATL Doubt As To Liability
    DC Disposal Code
    EO Exempt Organizations
    EPIC/EOIC Employee Plans Inventory Controls/Exempt Organizations Inventory Controls
    EPMF Employee Plans Master File
    EPR Examination Programs and Review
    FICA Federal Insurance Compensation Act
    IAR Independent Administrative Review
    IDRS Integrated Data Retrieval System
    IMF Individual Master File
    IRC Internal Revenue Code
    IRM Internal Revenue Manual
    IRS Internal Revenue Service
    JC Joint Committee
    LB&I Large Business and International
    MFT Master File Tax
    NOL Net Operating Loss
    OCEP Office/Correspondence Examination Program
    OIC Offer in Compromise
    OSC Ogden Service Campus
    PARP Pre-Approval Request Package
    RBP Revenue Base Protection
    RCCMS Reporting Compliance Case Management System
    RGS Report Generation Software
    RSED Refund Statute Expiration Date
    SRS Specialist Referral System
    TEGE Tax Exempt and Government Entities
    TIN Taxpayer Identification Number
    TIPRA Tax Increase Prevention and Reconciliation Act of 2005

Related Sources

  1. The following are related sources that provide guidance on the procedures outlined in this IRM section:

    • IRM 1.2.13, Servicewide Policies and Authorities, Policy Statements for the Examining Process.

    • IRM 1.2.46, Servicewide Policies and Authorities, Delegation of Authorities for Rulings and Agreements Process.

    • IRM 4.5.2, TE/GE Examined and Non-Examined Closures.

    • IRM 4.10.8, Examination of Returns, Report Writing.

    • IRM 4.23.13, Employment Tax Refund or Abatement Claims.

    • IRM 4.24.10, Excise Tax Examination Reports, Case Closing and Appeals Procedures.

    • IRM 4.36.3, Joint Committee Procedures, Examination Team Responsibilities.

    • IRM 4.75.15, Exempt Organizations Examination Procedures, EO Closing Letters and Reports of Examinations.

    • IRM 4.75.16, Case Closing Procedures.

    • IRM 4.75.21, EO Special Examination Procedures.

    • IRM 4.75.38, Small Employer Health Care Tax Credit Under Section 45R.

    • IRM 5.8.8, Offer in Compromise-Acceptance Processing.

    • IRM 5.19.7, Monitoring Offer in Compromise.

    • IRM 8.7.7, Technical and Procedural Guidelines, Claim and Overassessment Cases.

    • IRM 20.1.1, Penalty Handbook, Introduction and Penalty Relief.

    • IRM 20.1.5, Penalty Handbook, Return-Related Penalties.

    • IRM 20.2.7, Abatement and Suspension of Interest.

    • IRM 21.5.4, General Math Error Procedures.

    • IRM 21.5.9, Account Resolution, Carrybacks.

    • IRM 21.6.6, Individual Tax Returns, Specific Claims and Other Issues.

    • IRM 25.5.9, Summons Handbook, Fees and Costs for Summoned Witnesses.

    • IRM 25.6.1, Statute of Limitations Processes and Procedures.

    • IRM 25.6.23, Statute of Limitations, Examination Process-Assessment Statute of Limitations Controls.

Terminology

  1. Claim: Request for a refund or credit of an overpayment of amounts already assessed and paid. This includes tax, penalties, and interest. It may be a request for an adjustment of tax paid or credit not previously reported or allowed. A claim can be formal or informal.

  2. Formal Claim: Claim submitted either on an amended return or on Form 843, Claim For Refund and Request for Abatement.

  3. Informal Claim: Request for refund that does not satisfy all of the formal requirements, but that courts have found is sufficient to put the Service on notice of the claim and, thereby, to toll the period of limitations. The Service may require compliance with the formal requirements before allowing the claim. See IRM 25.6.1.10.2.6.3, Informal Claims.

  4. Protective Claim: Formal claim filed to preserve the taxpayer’s right to claim a refund when the taxpayer's right to the refund is contingent on future events and may not be determinable until after the statute of limitations expires. See IRM 25.6.1.10.2.6.5, Protective Claims. Taxpayers file protective claims based on expected changes in a:

    • Current IRC section.

    • Current Regulation.

    • Pending legislation.

    • Current litigation.

  5. Requests for Abatement: Request where we've assessed the taxes, interest, or penalties but the taxpayer hasn’t paid. It isn’t a claim because the tax isn't paid. A taxpayer can:

    1. File a request for abatement on a Form 843 or via an amended return.

    2. Make an informal request as long as we have all the necessary information including the tax year, issue, and amount.

    3. For requests relating to employment taxes, refer to IRM 4.23.13, Employment Tax Refund or Abatement Claims.

    4. For requests relating to Form 4720, excise taxes, see IRM 4.75.37.8.

  6. Claims don’t include:

    • Requests for adjustments that increase the balance on an account, such as tax increases or credit decreases.

    • Requests to correct math errors. See IRM 21.5.4, General Math Error Procedures.

    • Requests for abatement. See IRM 4.75.37.8.

    Note:

    A taxpayer may mistakenly request an abatement even though the account is full paid. A review of the transcript of account should disclose that the submission should be treated as a claim for refund.

  7. Audit Reconsiderations: A taxpayer request to reevaluate the results of a prior audit with additional tax assessments that remain unpaid, or with reversed tax credits. The taxpayer must provide information not previously considered during the original audit.

Claims Received During an Audit

  1. If you receive a claim during your audit:

    1. Verify the claim is timely filed. See IRM 4.75.37.4.

    2. Continue your audit. Don’t limit the scope of the audit as directed in IRM 4.75.37.1.2 (1).

    3. Verify whether the claim is on AIMS.

      • If on AIMS, update via RCCMS or Form 5598, TE/GE Correction Request. Input the claim amount.

      • If not on AIMS, establish on AIMS via RCCMS or Form 5597, TEGE IMF/BMF/EPMF Request. Input the claim amount.

    4. If the claim received is a protective claim, send the claim to Classification. Put into AIMS status code 38, Suspense, All Other.

    5. You may close claims you receive on returns not under audit separate from (and before) the rest of the audit.

Statute of Limitations (IRC 6511)

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

    • Three years from the filing of the original tax return.

    • Two years from the payment of tax.

    Note:

    See IRM 25.6.1.6.15, When a Document Is Treated As Filed Under the IRC, for the rules for determining when a return is filed.

  2. 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.

  3. 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:

    1. Three years prior to the filing of the claim, plus any extensions of time for filing (IRC 6511(b)(2)(A)).

      Note:

      Statute of limitations (SOL) on Form 990-T is governed by the SOL of the Form 990 series return, if filed.

      See, California Thoroughbred Breeders Association v. Commissioner, 47 TC 335 (1966).

    2. Two years (IRC 6511(b)(2)(B)).

    3. If making a downward adjustment without a claim having been filed, either the three year period above or the two year period, depending on when the allowance (in other words adjustment) is made (IRC 6511(b)(2)(C)).

  4. 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.

  5. This chart shows general rules governing a refund claim:

    RETURN FILED CLAIMED FILED MAXIMUM AMOUNT OF REFUND OR CREDIT ALLOWABLE
    On or before due date Within 3 years from due date of return Taxes paid within the 3 year period. IRM 4.75.37.4 (3)(a).
    On or before due date More than 3 years from due date of return Taxes paid within the 2 years prior to filing. IRM 4.75.37.4 (3)(b).
    On or before due date None If allowance is within 3 years from due date of return, limited to the taxes paid within the 3 year period. IRM 4.75.37.4 (3)(c). If allowance is more than 3 years from due date of return, limited to the taxes paid within the 2 years prior to the allowance. IRM 4.75.37.4 (3)(c).
    After the due date Within 3 years from filing of return Taxes paid within the 3 year period. IRM 4.75.37.4 (3)(a).
    After the due date More than 3 years from filing of the original return Taxes paid within the 2 years prior to filing. IRM 4.75.37.4 (3)(b).
    After the due date None If allowance is within 3 years from filing of the return, limited to the taxes paid within the 3 year period. IRM 4.75.37.4 (3)(c). If allowance is more than 3 years from due date of return, limited to the taxes paid within the 2 years prior to the allowance. IRM 4.75.37.4 (3)(c).
    None (such as, deficiency assessment) Within 2 years from the date the tax was paid Taxes paid within the 2 years prior to the filing. IRM 4.75.37.4 (3)(b).
    None (such as, deficiency assessment) None Taxes paid within the 2 years prior to the assessment. IRM 4.75.37.4 (3)(c).
  6. The filing of a claim doesn't affect the ASED.

    Note:

    If a return is filed within the last 60 days before expiration of the ASED, then we have 60 days from the date received to make the assessment.

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

  8. Timely filed claims provide an open statute for auditing 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.

  9. 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).

Refunds Barred by the Statute of Limitations

  1. 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)).

  2. 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).

  3. 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.

  4. 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.

  5. To close a claim case with a barred refund:

    1. Issue Letter 3602, Claim Disallowance.

    2. Insert the applicable form number in the letter.

    3. Mandatory Review issues Letter 906 Final Full Claim Disallowance on unprotested cases.

    4. Check box next to Prepare/Issue Letter on the Form 3198-A, TE/GE Special Handling Notice.

    5. Write in the blank to the right, "906 –Final Full Claim Disallowance."

Procedures on Processing Claims for Refund

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

  2. Verify that the claim was timely filed.

  3. 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.

  4. Determine if the ASED is open. If open, include any other large, unusual, or questionable items as warranted.

    Note:

    The Service doesn’t normally secure consents to extend the ASED in claim cases, unless there may be an additional deficiency. Exceptions to this are: a) Joint Committee cases; and b) Closing Agreement cases

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

  5. You aren't limited to the issues raised in the claim, but can also expand the audit 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 4.75.37.6.2.5, Claim Allowed in Full with Offsetting Adjustments.

  6. 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.

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

  8. Only the group manager may survey the claim before assignment. The group manager must approve any survey after assignment.

  9. 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 4.5.2.3.1.37, Revenue Base Protection Section (RBP).

  10. 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.

    Note:

    Form 1139, Corporation Application for Tentative Refund, isn't an amended return. The campus must process Form 1139 within 90 days of receipt. Any amounts refunded may be reassessed provided the ASED is open. See IRM 21.5.9.5.34, Reassessing Carryback Form 1045 and Form 1139.

Survey After Assignment

  1. Use the procedures below to close a claim surveyed after assignment. This allows the claim in full.

    1. Stamp the return with the appropriate survey stamp. Sign in the stamped area.

    2. Complete either Form 1900, Income Tax Survey After Assignment, or Form 2503, Survey after Assignment-Excise or Employment Tax, to explain the reason for surveying the return. For additional instructions on surveys, see IRM 4.75.16.

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

      1. Enter TIN, MFT, Tax Period, Name Control and Name.

      2. Enter DC 34 (RCCMS 103) in Item 13.

      3. Enter the claim amount in Item 21.

      4. Enter Special Project Code, if applicable in Item 40.

      5. Enter Employee Group Code in Item 50.

      6. Don’t make entries in Items 22, 23, 24, 28, and 30.

      7. Don’t make entries in Items 31 and 33.

      8. When surveying a Request for Tax Abatement, enter 2 in Item 7. In Remark, enter, tax abatement only- NO tax refund.

    4. See IRM 4.5.2.3.1, Completion, Edit and Review of Form 5599, TE/GE Examined Closing Record.

    Note:

    Audit report forms are not required for surveyed claims.

  2. Don’t survey the following claims:

    1. Claims including interest and/or penalties. Close as a partial disallowance. See IRM 4.75.37.6.2.3.

    2. Claims received after an audit is closed, but still on AIMS. Return to the agent. Consider the issues, and include any allowable adjustment in the audit report.

Audited Claims

  1. To disallow a claim in full or in part, solicit:

    1. Form 2297, Waiver of Statutory Notification of Claim Disallowance.

    2. Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit.

    3. See IRM 4.10.8.9.4.1, Instructions for Completing Form 2297, and IRM 4.10.8.9.5.1, Instructions for Completing Form 3363.

  2. To assess additional tax, see the table below for the type of tax and form to solicit:

    Type of tax Forms to use (agreed) Forms to use (unagreed)
    Income Form 4621, Form 4549 Form 4549-A, Form 870
    Excise tax (Chapter 42) Form 4883, Form 870-E Form 4883, Form 870-E
    Excise tax (gaming) Form 5384 Form 5385, Form 2504-E
  3. Use Report Generation Software (RGS) to generate:

    1. Form 4549, Income Tax Examination Changes.

    2. Form 4549-A, Income Tax Discrepancy Adjustments.

  4. Refer to the IRMs below for instructions to complete the required forms.

    1. Form 4883, Exempt Organizations Excise Tax Audit Changes - IRM 4.75.15, Closing Letters and Reports of Examination.

    2. Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, and Form 870-E, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessment -IRM 4.10.8.4.3, Instructions for Completing Waiver.

    3. Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, and Form 5385, Excise Tax Examination Changes - IRM Exhibit 4.24.10-1, Instructions for Completing Forms 5384 and 5385.

  5. Complete Form 5599 to close all claims.

    1. Enter Items 12, 13, 15, 20–24, 31–33, 39, 40, 42 and 50 as needed.

    2. All non-claim related audit items should be entered on Form 5599.

    3. Enter time spent on the claim in Item 23.

    4. Enter time spent on exam issues in Item 28.

    5. If using DC 03 (RCCMS - 102), enter at least one hour in Item 28. You must also enter 1- Fully Paid in Item 42.

    If you expand the scope of the audit beyond claim issues, address all non-claim related audit items on Form 5599. Enter time spent on the claim in Item 23. Enter time spent on exam issues in Item 28. If using DC 03 (RCCMS-102), enter at least one hour in Item 28.

  6. Refer to the following table for the DC to use. RCCMS codes are in parenthesis:

    Claim Disposal code
    Allowed in full 03 (102)
    Partially allowed - agreed 03 (102)
    Partially allowed - unagreed 07 (601) or 10 (604) for unagreed cases
    Disallowed in full 01 (210) for agreed cases, 07 (601) or 10 (604) for unagreed cases
    Additional assessment 03 (102) for agreed cases, 07 (601) or 10 (604) for unagreed cases

    Note:

    If multiple years are open, you may have a different DC for each year.

    Example:

    You may have an agreed claim disallowance for one year (DC 01 (210)), and an agreed claim disallowance along with an agreed additional tax assessment in another year (DC 03 (102)).

  7. Refer to IRM 4.75.15 for report writing procedures.

Claim Disallowed in Full without Additional Tax Due
  1. Issue Letter 3602, Claim Disallowance

    1. Check the box for full disallowance.

    2. Insert the applicable form number in the letter.

    If Form 2297 is... If Form 3363 is... Then...
    Signed Signed Close as agreed.
    Signed Not signed Close as agreed. See note below.
    Not signed Signed Close as unagreed without protest.
    Not signed Not signed Close as unagreed without protest. See Note below.

    Note:

    If the taxpayer files a protest, close the case as unagreed - protest to Appeals.

  2. The taxpayer doesn't need to sign an agreement/waiver form (Forms 870, 870-E, 2504-E, 4549, or 5384) for an agreed closure. However, EO Closing Unit needs the form for input onto IDRS.

  3. If the issue is unagreed:

    1. Prepare a Form 886-A, Explanation of Items.

    2. Close the case to Mandatory Review.

    3. On Form 3198-A, TE/GE Special Handling Notice.

      1. Check the Mandatory Review Unagreed Case and Proposed Adverse boxes.

      2. Check the Claim Case box under Expedited Processing.

      3. Check the Close to REVM box under EPIC/EOIC Instructions. Enter your name and telephone number.

  4. If the issue is unagreed without protest:

    1. On the Form 3198-A, TE/GE Special Handling Notice.

    2. Mandatory Review will prepare and issue Letter 906, Final Full Claim Disallowance.

      Note:

      Close the case as unagreed without protest, if no response is received after 30 days.

  5. Refer to IRM 4.75.37.6.2, Audited Claims, for the DC.

Claim Disallowed in Full with Additional Tax Due
  1. Issue Letter 3602-B, Claim Disallowance with Additional Tax Due.

    1. Check the box for full disallowance with additional tax due.

    2. Insert the applicable form number in the letter.

  2. Form 4621, Report of Examination, or Form 4883, Exempt Organizations Excise Tax Audit Changes, as appropriate.

  3. Prepare Form 886-A, Explanation of Items.

  4. In the table below substitute Form 870, Form 870-E, Form 2504-E, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, or Form 5384 for Form 4549 as appropriate.

    If Form 2297 is... If Form 3363 is... If Form 4549 is... Then...
    Signed Signed Signed Close as agreed.
    Signed Signed Not signed Close as unagreed without protest. See Notes 1 and 3.
    Signed Not signed Signed Close as agreed. See Note 1.
    Signed Not signed Not signed Close as unagreed without protest. See Notes 1 and 3.
    Not signed Signed Signed Close as unagreed without protest. See Notes 1 and 2.
    Not signed Signed Not signed Close as unagreed without protest. See Notes 1, 2, and 3.
    Not signed Not signed Signed Close as unagreed without protest. See Notes 1 and 2.
    Not signed Not signed Not signed Close as unagreed without protest. See Notes 1 2, and 3.

    Note:

    1) If the taxpayer files a protest, close the case as unagreed - protest to Appeals. On Form 3198-A, check "Forward to Appeals" .

    Note:

    2) If the claim disallowance is unagreed, Mandatory Review issues a statutory notice of claim disallowance. On Form 3198-A, check "Prepare/Issue Letter" . To the right, write "906 - Final Full Claim Disallowance."

    Note:

    3) If the additional tax is unagreed, Mandatory Review issues a statutory notice of discrepancy. On Form 3198-A, check "Prepare/Issue Letter" . To the right, write "Statutory Notice of Deficiency."

    Note:

    Close the case as unagreed without protest, if no response is received after 30 days.

  5. All unagreed cases are closed to Mandatory Review.

    1. On Form 3198-A check the "Mandatory Review, Unagreed Case, and Proposed Adverse" boxes.

    2. Check the Claim Case box under Expedited Processing.

  6. Refer to IRM 4.75.37.6.2 Audited Claims, for the DC.

Claim Partially Disallowed without Additional Tax Due
  1. Issue Letter 3602, Claim Disallowance.

    1. Check the box for a partial disallowance.

    2. Insert the applicable form number in the letter.

  2. Prepare Form 886-A Explanation of Items, if the case is unagreed.

  3. In the table below substitute Form 870, Form 870–E, Form 2504-E, or Form 5384 for Form 4549 as appropriate.

    If Form 2297 is... If Form 3363 is... If Form 4549 is... Then...
    Signed Signed Signed Close as agreed.
    Signed Signed Not signed Close as agreed.
    Signed Not signed Signed Close as agreed.
    Signed Not signed Not signed Close as unagreed without protest.
    Not signed Signed Signed Close as unagreed without protest.
    Not signed Signed Not signed Close as unagreed without protest.
    Not signed Not signed Signed Close as unagreed without protest.
    Not signed Not signed Not signed Close as unagreed without protest. See Note below.

    Note:

    If the taxpayer files a protest, close the case as unagreed - protest to Appeals.

    Note:

    Close the case as unagreed without protest, if no response is received after 30 days.

  4. All unagreed cases are closed to Mandatory Review.

    1. On Form 3198-A check the "Mandatory Review, Unagreed Case, and Proposed Adverse " boxes.

    2. Check the "Claim Case" box under "Expedited Processing" .

  5. If the issue is unagreed without protest:

    1. On the Form 3198-A check the box "Prepare/Issue Letter."

    2. Write in the blank to the right "905 – Final Partial Claim Disallowance."

    3. Mandatory Review will prepare and issue the Letter 905, Final Partial Claim Disallowance.

  6. Refer to IRM 4.75.37.6.2, Audited Claims, for the DC.

Claim Partially Disallowed with Additional Tax Due
  1. Issue Letter 3602-B, Claim Disallowance with Additional Tax Due.

    1. Check the box for a partial disallowance with additional tax due.

    2. Insert the applicable form number in the letter.

  2. Prepare Form 4621, Report of Examination or Form 4883, Exempt Organizations Excise Tax Audit Changes, as appropriate.

  3. Prepare Form 886-A, Explanation of Items.

  4. In the table below substitute Form 870, Form 870-E, Form 2504-E, or Form 5384 for Form 4549 as appropriate.

    If Form 2297 is... If Form 3363 is... If Form 4549 is... Then...
    Signed Signed Signed Close as agreed.
    Signed Signed Not signed Close as unagreed without protest. See Notes 1 and 3.
    Signed Not signed Signed Close as agreed. See Note 1.
    Signed Not signed Not signed Close as unagreed without protest. See Notes 1 and 3.
    Not signed Signed Signed Close as unagreed without protest. See Notes 1 and 2.
    Not signed Signed Not signed Close as unagreed without protest. See Notes 1, 2, and 3.
    Not signed Not signed Signed Close as unagreed without protest. See Notes 1 and 2.
    Not signed Not signed Not signed Close as unagreed without protest. See Notes 1 2, and 3.

    Note:

    1) If the taxpayer files a protest, close the case as unagreed - protest to Appeals. On Form 3198-A, check "Forward to Appeals" .

    Note:

    2) If the claim disallowance is unagreed, Mandatory Review issues a statutory notice of claim disallowance. On Form 3198-A, check "Prepare/Issue Letter" . To the right, write "905 - Final Partial Claim Disallowance."

    Note:

    3) If the additional tax is unagreed, Mandatory Review issues a statutory notice of deficiency. On Form 3198-A, check "Prepare/Issue Letter" . To the right, write "Statutory Notice of Deficiency."

  5. Close the case as unagreed without protest, if there is no response after 30 days.

  6. Close all unagreed cases to Mandatory Review.

  7. On the Form 3198-A check the "Mandatory Review, Unagreed Case, and Proposed Adverse" boxes.

  8. Check the "Claim Case" box under "Expedited Processing" .

  9. For unagreed without protest cases, Mandatory Review prepares and issues the Letter 905 or Statutory Notice of Deficiency or both as directed.

  10. Refer to IRM 4.75.37.6.2, Audited Claims for the DC.

Claim Allowed in Full with Offsetting Adjustments
  1. When allowing a claim in full, if proposing offsetting adjustments which reduce the amount refundable, treat the claim as a partially or fully disallowed claim. Follow the procedures for claims disallowed in full or in part as applicable. See IRM 25.6.1.10.2.5.6.1, Claim for an Amount Paid Before the ASED, for the offset of a refund with a time-barred upward adjustment from the same time period.

Claim Allowed in Full
  1. Forms 2297 and 3363 aren’t required.

  2. While Form 4549 is required, no signature is necessary on Form 4549 (or equivalent agreement/waiver form).

    Exception:

    Joint Committee cases require a signature.

  3. Prepare and issue Letter 3601, Examination Report (Claim Allowed in Full).

  4. Prepare and include with Letter 3601, Form 886-A, showing analysis, facts, and law.

  5. Close the case as agreed.

  6. Refer to IRM 4.75.37.6.2, Audited Claims for the DC.

Other Claim Procedures

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

Requests for Reconsideration of Disallowed Claims

  1. Don’t treat requests for reconsideration as original claims.

    1. The issuance of the final notice of claim disallowance starts the two year period of limitations in IRC 6532(a) for a taxpayer to file suit.

    2. There’s no provision in the law or regulations authorizing or requiring the issuance of a certified notice of the denial or disallowance of a customer's request for reconsideration of a claim for refund previously disallowed by certified notice.

    3. Your report must not state or imply that the IRS will issue a certified notice of disallowance.

Request For Withdrawal of a Claim

  1. If a taxpayer files a request for withdrawal of a claim, the only action required is issuance of a certified notice of claim disallowance.

  2. If the taxpayer advises that they filed the claim for the sole purpose of instituting suit and that they don't wish to exercise appellate rights, state this in the "Other Information" section of the audit report.

  3. Close the case to Mandatory Review to issue Letter 906, Final Full Claim Disallowance. In the letter, Mandatory Review lists as the reason for disallowance "the taxpayer withdrew the claim request" .

  4. Use DC 01 (RCCMS - 210).

  5. If this is a church tax inquiry, create a memo to the file to explain the circumstances of the closing. Approval from area counsel, area manager, Mandatory Review manager, and the group manager is required on the memo. Also, when the EO Closing Unit receives the file, the manager of the EO Closing Unit initials the use of DC 01.

Adjudication of a Claim

  1. If a claim under audit is placed in suspense pending adjudication of an issue upon which the claim was based, and Counsel or a Campus processes the claim outside of the audit process as ordered by the federal courts, there is no further auditing of the claim issue. Assuming there are no other issues, close the audit as follows:

    1. If allowing the claim in full or in part, verify payment of the claim using IDRS command code BMFOLT.

    2. Notify any project or program analysts or team leaders of the IRS posting of the court order or settlement in IDRS.

    3. Indicate a zero claim amount by processing Form 5598, CC AMAXUO.

    4. If in AIMS Status 12, close the claim as a no-change, DC 02 (107).

    5. If in AIMS Status 10, delete the claim account using Form 10904 with DC 33 (901). See IRM 4.75.16.3.1.2, Disposal Code 33 Procedures.

    Example:

    An example of a claim issue previously placed in suspense pending judicial decision was the medical resident FICA claims issue. See IRM 21.6.6.3.40, Federal Insurance Compensation Act (FICA) Claims from Medical Residents.

Case File Assembly - Claims

  1. Use pink case file folders for claims.

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

Joint Committee Cases

  1. You are responsible for determining whether a claim case falls under Joint Committee (JC) jurisdiction. A case with a refund or credit in excess of $2 million ($5 million for C corporations) is a JC case. Refer to IRM 4.36.2, Identification of Joint Committee Cases.

    Note:

    Always use Form 4549-A and Form 870 instead of Form 4549 for JC income tax cases.

  2. Go onto the Special Referral System (SRS) and submit a request to have a Joint Committee (JC) Specialist assigned to your case for an In-process Review.

  3. A JC specialist will instruct you to mail them certain documents. He/she will provide you with a list of documents they need.

  4. You are responsible for the statute of limitations. If a case has a short statute, the JC Specialist won't be able to update the case to their status code. Consequently the case stays in AIMS status 12 while the JC Specialist works the case.

  5. Refer to IRM 4.36.1, Joint Committee Process Overview, which describes the entire process.

    Note:

    An inquiry from the Joint Committee on Taxation (JCT) is treated as a congressional inquiry. Therefore, treat any inquiry from the JC Specialist, JC Review Staff or the JCT as a high priority.

  6. Additional sources for information on Joint Committee procedures include the following:

    • Examiner’s responsibilities are provided in IRM 4.36.3, Joint Committee Procedures, Examination Team Responsibilities.

    • Refer to http://lmsb.irs.gov/pa/east/Joint_Committee/.

    • E-mail your inquiry to the mailbox at *lbi.joint.committee.assistance@irs.gov LB&I Joint Committee Assistance.

    • Mail your inquiry to:


      Internal Revenue Service
      Attn: LB&I:PFTG:JC:1956
      Mailstop 1987 CHI, Room 2200
      230 South Dearborn Street
      Chicago, IL 60604

  7. Close all JC cases to Mandatory Review. Mandatory Review doesn't review these cases unless you indicate on Form 3198-A that the case is subject to review for one of the other reasons listed in IRM 4.75.16.6 (1).

    • Note on Form 3210 that this is a Joint Committee case.

    • Note on Form 3198-A, the case is a Joint Committee case.

    • Check the restricted interest box on Form 3198-A if applicable.

Requests for Abatement under IRC 4962

  1. 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:

    • Due to reasonable cause.

    • Not due to willful neglect.

    • Corrected within the appropriate correction period.

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

    • IRC 4942(a).

    • IRC 4943(a).

    • IRC 4944(a).

    • IRC 4945(a).

    • IRC 4955(a).

    • IRC 4958(a).

    • IRC 4966(a).

    • IRC 4967(a).

    Note:

    These requests don’t apply to taxes assessed under IRC 4941(a). If a taxpayer or their POA makes a request for abatement for IRC 4941(a) taxes, deny the request. Also, for other Chapter 42 taxes, if neither the taxpayer nor the POA submitted the request, deny it. Prepare and issue the Improper Request under IRC 4962 letter in Exhibit 4.75.37-8. Close the case with DC 01 (RCCMS - 210). These cases are not subject to mandatory review.

    Note:

    Form 5774-A, Private Foundation - IRC 4962 Abatements don’t include IRC sections 4966 and 4967 taxes. Write-in or enter these taxes anywhere in the Applicable Internal Revenue Code Section(s) portion of the form.

  3. Follow the instructions on IRM 4.75.37.8.1 for approval of IRC 4962 abatement requests.

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

  5. 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.

Working the Request

  1. Classification assigns the case with a source code of 30, Claims for Refund.

  2. If the taxpayer paid any part of the tax for which an abatement is sought, treat the request as a claim. Approval of abatements under IRC 4962 are still required in accordance with IRM 4.75.37.8.3.

  3. The Director, Exempt Organizations holds the authority to abate a qualified first-tier Chapter 42 excise tax over $200,000, as per Delegation Order 7-11 (IRM 1.2.46.12, Delegation Order 7-11 (formerly DO-237, Rev. 2)).

  4. The Manager, Examination Programs and Review (EPR) holds the authority to abate a qualified first-tier Chapter 42 excise tax of $200,000 or less, as per Delegation Order 7-11 (IRM 1.2.46.12, Delegation Order 7-11 (formerly DO-237, Rev. 2)).

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

  6. Contact the taxpayer and obtain any necessary additional information.

  7. Evaluate the information and make a determination. Fully document your work in your workpapers.

  8. See IRM 20.1.1.32, Penalty Handbook, Introduction and Penalty Relief, for discussion on reasonable cause.

Full Denial

  1. Prepare Form 886-A.

  2. Prepare and issue 30-Day Letter - Full Denial IRC 4962 in Exhibit 4.75.37-5, along with Form 870-E. Indicate Request for IRC 4962 Abatement Denied in Full, in the IRC section column. Indicate zeros in the amount of tax and penalty columns.

  3. If the taxpayer:

    1. Signs Form 870-E, prepare and issue closing letter, Agreed Full or Partial Denial of Abatement in Exhibit 4.75.37-6. Use DC 01 (RCCMS – 210), Regulatory/Revenue Protection. Follow normal case closing procedures in IRM 4.75.16, Case Closing Procedures.

    2. Files a formal protest, follow the normal case closing procedures in IRM 4.75.16.

    3. Doesn't respond to the 30-day letter or doesn't file a formal protest, close the case with DC 10 (RCCMS - 604), Unagreed-Without Protest. Close the case to EO Closing Unit.

Full Abatement

  1. Prepare an audit report including:

    • Form 870-E.

    • Form 4621.

    • Form 4883.

    • Form 886-A.

  2. The taxpayer’s signature on Form 870-E isn’t necessary because we're giving a full abatement.

  3. Form 886-A shows the amount of the decrease in tax.

  4. Ensure the taxpayer understands we won’t issue a refund because the amount wasn’t paid.

  5. Obtain the abatement approval before issuing a report to the taxpayer by submitting a Pre-Approval Request Package.

  6. A Pre-Approval Request Package (PARP) consists of the following:

    • Form 5774-A, Private Foundation - IRC 4964 Abatements.

      Note:

      Until Form 5774-A is revised, use the Tools feature in Adobe Acrobat, to edit the form, to include the appropriate taxes to be abated.

    • For abatement requests of $200,000 or less, prepare a memo to the Manager, EPR, stating the amount to be abated (labeled as either in full or in part), and explaining the reasons for allowing the abatement.

    • For abatement request of more than $200,000, prepare a memo to the Director, EO, stating the amount to be abated (labeled as either in full or in part), and explaining the reasons for allowing the abatement.

    • A copy of the draft audit report as shown in IRM 4.75.37.8.3 (1).

  7. The Manager, EPR holds the authority to abate qualified first-tier Chapter 42 excise tax of $200,000 or less, per Delegation Order 7-11 (IRM 1.2.46.12).

    1. The Group Manager, secure emails the PARP to the Manager, EPR.

    2. The Manager, EPR, notifies the manager of either denial or approval.

    3. If abatement is denied, follow the steps in IRM 4.75.37.8.2.

    4. If abatement is approved, follow the steps below:

      1. Prepare and issue Letter 2738, Audit Reconsideration - Complete Abatement. Inclusion of the reports prepared in IRM 4.75.37.8.3 (1) is optional.

      2. If the taxpayer signs Form 870-E, prepare and issue closing letter, Agreed Full or Partial Denial of Abatement IRC 4962 in Exhibit 4.75.37-6. Close the case with DC is 03 (RCCMS – 102), Agreed Tax or Penalty Change. Follow normal case closing procedures in IRM 4.75.16.

      3. If the taxpayer files a formal protest, follow the normal case closing procedures in IRM 4.75.16.

      4. If the taxpayer doesn't respond to the 30-day letter or doesn't file a formal protest, close the case with disposal code 10 (RCCMS - 604), Unagreed – Without Protest. Close the case to the EO Closing Unit.

  8. The Director, Exempt Organizations holds the authority to abate a qualified first-tier Chapter 42 excise tax over $200,000, as per Delegation Order 7-11 (IRM 1.2.46.12).

    1. The Group Manager, secure emails the PARP to the Manager, EPR.

    2. The Manager, EPR secure emails the PARP to the Senior Program Analyst for the Director, EO Examinations.

    3. The Senior Program Analyst secure emails the PARP to the Technical Advisors for the Director, EO.

    4. The Technical Advisors for the Director, EO secure emails the PARP to the Director, EO for final approval.

    5. The Manager, EPR, notifies the manager of either denial or approval.

    6. If abatement is denied, follow the steps in IRM 4.75.37.8.2.

    7. If abatement is approved, follow the steps below:

      1. Prepare and issue Letter 2738, Audit Reconsideration - Complete Abatement. You may optionally include the reports prepared in IRM 4.75.37.8.3 (1).

      2. If the taxpayer signs Form 870-E, prepare and issue closing letter, Agreed Full or Partial Denial of Abatement IRC 4962 in Exhibit 4.75.37-6. Close the case with DC is 03 (RCCMS – 102), Agreed Tax or Penalty Change. Follow normal case closing procedures in IRM 4.75.16.

      3. If the taxpayer files a formal protest, follow the normal case closing procedures in IRM 4.75.16.

      4. If the taxpayer doesn't respond to the 30-day letter or doesn't file a formal protest, close the case with disposal code 10 (RCCMS - 604), Unagreed – Without Protest. Close the case to the EO Closing Unit.

Partial Abatement

  1. Prepare an audit report including:

    • Form 870-E.

    • Form 4621.

    • Form 4883.

    • Form 886-A.

  2. Form 886-A is to show the amount of the decrease in tax.

  3. Ensure the taxpayer understands we won't issue a refund because the amount wasn't paid.

  4. Obtain the abatement approval prior to issuing a report to the taxpayer, by submitting a Pre-Approval Request Package.

  5. A PARP consists of the following:

    • Form 5774-A, Private Foundation - IRC 4962 Abatements.

      Note:

      Until Form 5774-A is revised, use the Tools feature in Adobe Acrobat, to edit the form, to include the appropriate taxes to be abated.

    • For abatement requests of $200,000 or less, prepare a memo to the Manager, EPR, stating the amount to be abated (labeled as either in full or in part), and explaining the reasons for allowing the abatement.

    • For abatement request of more than $200,000, prepare a memo to the Director, EO, stating the amount to be abated (labeled as either in full or in part), and explaining the reasons for allowing the abatement.

    • A copy of the draft audit report as shown in IRM 4.75.37.8.3 (1).

  6. The Manager, Examination Programs and Review (EPR), holds the authority to abate qualified first-tier Chapter 42 excise tax of $200,000 or less per Delegation Order 7-11 (IRM 1.2.46.12).

    1. The Group Manager, secure emails the PARP to the Manager, EPR.

    2. The Manager, EPR, notifies the manager of either denial or approval.

    3. If abatement is denied, follow the steps in IRM 4.75.37.8.2.

    4. If abatement is approved, follow the steps below:

      1. Prepare and issue 30-Day Letter - Partial Abatement IRC 4962 in Exhibit 4.75.37-7

      2. If the taxpayer signs Form 870-E, prepare and issue closing letter, Agreed Full or Partial Denial of Abatement IRC 4962 in Exhibit 4.75.37-6. Close the case with DC is 03 (RCCMS – 102), Agreed Tax or Penalty Change. Follow normal case closing procedures in IRM 4.75.16.

      3. If the taxpayer files a formal protest, follow the normal case closing procedures in IRM 4.75.16.

      4. If the taxpayer doesn't respond to the 30-day letter or doesn't file a formal protest, close the case with disposal code 10 (RCCMS - 604), Unagreed – Without Protest. Close the case to the EO Closing Unit.

  7. The Director, Exempt Organizations holds the authority to abate a qualified first-tier Chapter 42 excise tax over $200,000, as per Delegation Order 7-11 (IRM 1.2.46.12).

    1. The Group Manager, secure emails the PARP to the Manager, EPR.

    2. The Manager, EPR secure emails the PARP to the Senior Program Analyst for the Director, EO Examinations.

    3. The Senior Program Analyst secure emails the PARP to the Technical Advisors for the Director, EO.

    4. The Technical Advisors for the Director, EO secure emails the PARP to the Director, EO for final approval.

    5. The Manager, EPR, notifies the manager of either denial or approval.

    6. If abatement is denied, follow the steps in IRM 4.75.37.8.2.

    7. If abatement is approved, follow the steps below:

      1. Prepare and issue 30-Day Letter- Partial Abatement IRC 4962 in Exhibit 4.75.37-7.

      2. If the taxpayer signs Form 870-E, prepare and issue closing letter, Agreed Full or Partial Denial of Abatement IRC 4962 in Exhibit 4.75.37-6. Close the case with DC is 03 (RCCMS – 102), Agreed Tax or Penalty Change. Follow normal case closing procedures in IRM 4.75.16.

      3. If the taxpayer files a formal protest, follow the normal case closing procedures in IRM 4.75.16.

      4. If the taxpayer doesn't respond to the 30-day letter or doesn't file a formal protest, close the case with disposal code 10 (RCCMS - 604), Unagreed – Without Protest. Close the case to the EO Closing Unit.

Informal Request for Abatement of Income Taxes

  1. 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 consider an informal request 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.

  2. When assigned, the case has a source code of 30, Claims for Refund

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

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

  5. Contact the taxpayer and obtain any necessary additional information.

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

  7. 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.

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

    Other Information Section Entries: Amounts:
    Accuracy Related Penalty as Corrected $200
    Amount Previously Assessed $500
    Adjustment (reduction) in Accuracy Related Penalty ($300)
  9. 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.

  10. 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.

  11. If making an adjustment:

    1. Notate on Form 3198-A, TE/GE Special Handling Notice, Supplemental Report - Reduction of Previously Assessed Tax.

    2. Use DC 03 (RCCMS - 102), Agreed Tax or Penalty Change.

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

Request for Abatement - Audit Reconsideration

  1. In order to request an audit reconsideration:

    1. The taxpayer must file a return.

    2. The IRS assessed currently unpaid amounts, or the IRS reversed tax credits the taxpayer is disputing.

    3. The taxpayer must identify the disputed adjustments.

    4. The taxpayer must provide additional information not previously considered during the original audit.

    Note:

    If the taxpayer is filing the request under IRC 4962, see IRM 4.75.37.8.

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

    1. The taxpayer submits information not previously considered.

    2. The taxpayer files an original delinquent return as a result of an Substitute for Return assessment.

    3. There was an IRS computational or processing error.

  3. Don't consider a request for reconsideration if:

    1. We've already granted the taxpayer an audit reconsideration, and the taxpayer didn't provide any additional information with his/her current request that would change the results.

    2. We made the assessment as a result of a closing agreement entered into under IRC 7121. These agreements use Form 906, Closing Agreements on Final Determination Covering Specific Matters, or Form 866, Agreement as to Final Determination of Tax Liability, or some combination of the two forms.

    3. We made the assessment as a result of a compromise under IRC 7122. These agreements are final and conclusive. You can identify a final compromise determination on IDRS by the posting of a TC 788.

    4. We made the assessment as the result of final TEFRA administrative proceedings. This applies to joint ventures and partnerships that the EO may be part of.

    5. We made the assessment as a result of the taxpayer entering into an agreement on Form 870-AD, Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax. (Appeals and LB&I use this form.)

    6. The United States Tax Court entered a decision that becomes final, or a District Court or the United States Court of Federal Claims rendered a judgment on the merits that becomes final.

    Note:

    Forward to the Office of Associate Area Counsel any request for reconsideration on cases settled by Tax Court, District Court, or Court of Federal Claims.

    Note:

    When the Tax Court dismisses a case for lack of jurisdiction, it doesn't enter a decision and doesn't dismiss the case on the merits. See IRC 7459(d). Likewise, when a District Court or the United States Court of Federal Claims dismisses a case for lack of jurisdiction, the court doesn't dismiss the case on the merits.

  4. Per Policy Statement 4-103, (IRM 1.2.13.1.31, Policy Statement 4-103) where we made an assessment of excise or employment tax as a result of an audit 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:

    1. A jeopardy assessment is involved. See Policy Statement P-4-88, (IRM 1.2.13.1.27, Policy Statement 4-88). For certain excise taxes subject to the deficiency procedures, see IRC 7429(a)(2).

    2. The taxpayer establishes a meritorious reason for considering the request, such as failure to receive a proposed tax change (30-day letter).

    Note:

    For employment tax cases, refer to IRM 4.23.13, Employment Tax Refund or Abatement Claims, for additional information.

Working the Request

  1. Classification assigns the case with a source code of 73, Taxpayer Request. If the case is on RCCMS, Classification asks the AIMS Analyst to retrieve the file from the RCCMS Library.

  2. Your group manager reviews the case upon receipt and assigns it within 15 days.

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

  4. Call or write the taxpayer within 15 days of receipt. Inform them that EO Examinations received their case.

  5. Document your work in your workpapers.

  6. Evaluate the information and make a determination. Request additional documentation if necessary:

    1. Schedule an appointment when appropriate.

    2. Send a letter to the taxpayer confirming the appointment.

    3. Use Letter 3399, Audit Reconsideration-Request for Further Documentation, to obtain additional information.

  7. Close the case using DC 01 if the taxpayer doesn't:

    1. Furnish the additional information by the agreed upon deadline.

    2. Keep the scheduled appointment without adequate explanation.

    Use DC 01 to close the audit reconsideration request.

  8. The taxpayer may request a conference with your manager if they disagree with your findings.

  9. The taxpayer may submit a formal protest to Appeals for full or partial disallowances. Follow the Appeals procedures in IRM 4.75.15.11, Valid Formal Protest and IRM 4.75.15.12, Rebuttals to Formal Protests.

  10. Refer to the following table to determine the correct letter and DC to issue:

    Closing as: Closing Letter Actions:
    Full Abatement Letter 2738 with the RAR.
    1. Prepare the appropriate waiver/agreement form (follow the guidance in IRM 4.75.15 to determine the correct forms to use).

    2. Because we're reducing the tax, the taxpayer's signature isn't required. See note below for further instructions.

    3. Use DC 03 (RCCMS -102), Agreed Tax or Penalty Change.

    4. Follow normal case closing procedures.

    Full Denial Issue Full Denial - IRC 4962 30-day letter in Exhibit 4.75.37-5 with Form 886-A.
    1. Prepare Form 886-A.

    2. Use DC 01 (RCCMS -210), Regulatory/Revenue Protection, if the taxpayer doesn’t file a protest.

    3. If taxpayer:

    • Files a protest, close the case to Mandatory Review.

    • Doesn’t file a protest, close the case to the EO Closing Unit.

    Partial Abatement Issue Audit Reconsideration - Partial Abatement 30-day letter in Exhibit 4.75.37-7.
    1. Prepare the appropriate waiver/agreement form (follow the guidance in IRM 4.75.15 to determine the correct forms to use).

    2. Because we're reducing the tax, the taxpayer's signature isn't required. See note below for further instructions.

    3. Use DC 03 (RCCMS -102), Agreed Tax or Penalty Change, if the taxpayer doesn't file a protest.

    4. If taxpayer:

    • Files a protest, close the case to Mandatory Review.

    • Doesn't file a protest, close the case to the EO Closing Unit.

    Note:

    For partial or full abatements, make sure the taxpayer understands the amount won't be refunded, because it's unpaid. The report simply reduces the existing balance due. Clearly reflect the reduction in amounts in your report.

    Note:

    The "Per Return or As Previously Adjusted" amounts for both the taxable income and tax are the amounts shown on the previous report or notice of deficiency. Enter only adjustments to the previous report or notice of deficiency as adjustments.

  11. For agreed partial or full abatements, notate on Form 3198-A in the Other section: "Supplemental Report - Reduction of Previously Assessed Amounts" .

Request for Withdrawal of an Abatement Request

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

    1. The taxpayer must provide a signed statement of withdrawal.

    2. Upon receipt, prepare and issue Letter 693. Check the box, "You didn’t provide the information we requested, therefore, we can take no further action on your request" .

    3. Prepare Form 886-A.

      1. Provide the date of the withdrawal.

      2. State that the taxpayer is withdrawing their abatement request.

      3. List the effected returns and year of the returns.

    4. Complete Form 5598.

    5. Complete Form 10904.

Case File Assembly - Abatements

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

Offer in Compromise - Doubt as to Liability (OIC-DATL)

  1. 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, Offer in Compromise (Doubt as to Liability). A taxpayer’s offer to compromise a tax liability should:

    1. Set forth the legal grounds for compromise.

    2. Provide enough information for the IRS to determine whether the offer fits within its acceptance policies.

  2. Doubt as to liability:

    1. Exists when there is a genuine dispute as to the existence or amount of the correct tax debt under the law.

    2. Doesn’t exist if a final court decision or judgement determines the existence and amount of the debt.

  3. 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.

  4. If the 24 month period expires while an employee works the offer, the employee coordinates with their manager and the EPR Staff Assistant to prepare the paperwork required to accept the offer. See IRM 5.8.8.12.1 and IRM 5.8.8.12.2 for directions.

OIC-DATL Terminology

  1. Submission: A valid submitted DATL offer package consists of:

    • A Form 656-L, signed under penalties of perjury.

    • A written statement explaining why the tax debt or portion of the tax debt is incorrect.

    • Supporting documentation or evidence that identifies the reason(s) for the doubt.

    • The taxpayer must offer more than zero ($0).

      Note:

      No deposit or application fee is required for a DATL offer. If the IRS rejects or returns the offer or the taxpayer withdraws the offer, the IRS will return a deposit or application fee mistakenly paid with the offer. If the taxpayer agrees in writing, the IRS applies the amount paid with the offer to the amount owed.

  2. Withdrawal: If you can resolve the issue to the mutual satisfaction of the taxpayer and the IRS, a compromise is unnecessary. In these cases, take the appropriate action as agreed and request that the taxpayer withdraw the offer. See IRM 5.19.24.14, Withdrawn DATL Offers.

  3. Rejection: If you believe the tax is correct as assessed, reject the offer if the taxpayer doesn’t agree with the proposed adjustment (or non-adjustment). Rejections confer appeal rights.

  4. Acceptance: The IRS accepts a DATL offer when there is a genuine dispute as to the existence or amount of the correct tax liability under the law and the offer amount reasonably reflects the amount the IRS would expect to collect through litigation.

  5. Returning an Incomplete Offer: If the taxpayer doesn’t provide the necessary information, or files multiple and/or repetitive offers to substantially delay collection, you may request to return the offer to the taxpayer. When requesting to return the offer, fully document your reasons for doing so. Returning an offer confers no appeal rights.

OIC-DATL Initial Processing

  1. The DATL unit in Brookhaven processes taxpayer offers for doubt as to liability. The DATL unit:

    1. Determines whether the offer is processable.

    2. Returns any offers unable to be processed and perfects those offers where the offer is improperly prepared or submitted without any supporting documentation.

    3. When processable, sends the offer to the Manager, EPR, who gives the offer to the EPR Staff Assistant.

EPR Staff Assistant
  1. When you receive a DATL offer in compromise, you have 15 days to send the case to EO Classification, or return the case to the DATL unit.

    1. Enter an Automated Offer in Compromise (AOIC) Remark to indicate receipt of the case.

    2. Confirm whether the DATL is processable. See IRM 5.19.24.6.1 for the checklist. If not processable, return the case to the DATL unit.

      Note:

      The DATL unit determines processability. If EPR determines a case doesn’t meet the criteria in IRM 5.19.24.6.1, contact the DATL team before returning the case. You’ll rarely receive a case like this.

    3. If the file contains Form 12153, Request for a Collection Due Process or Equivalent Hearing, follow procedures in IRM 5.19.24.6.5 (4)(e). You’ll rarely receive a Form 12153.

    4. Ensure that the AOIC audit case checklist is in the file. If it isn’t, print a copy and place it in the file. Fully document all actions you take on AOIC.

    5. Send the case file to the EO Classification. When returning a case to DATL, update the AOIC assignment number to the DATL number.

    6. Document all actions taken on a case in the AOIC remarks section. Remarks must reflect the name of the person, location, and the contact or assignment information.

      Note:

      All deadlines are in calendar days.

EO Case Selection and Delivery
  1. Manager, EO Classification: Upon receipt, you have 15 days to assign the case to a classifier. Send any paper files to the classifier via next day air.

  2. Classifier:

    1. You have 15 days to request the RCCMS file from the AIMS Analyst. Use the claim reopening procedures in RCCMS Advisory 54. Manually reopen RCCMS Library cases on RCCMS only. If no record exists, establish a new module on RCCMS and request the return from the Ogden Service Campus (OSC) Files Unit.

    2. When establishing OIC cases on RCCMS (Update AIMS stays unchecked), use: source code 45, the original activity and project codes, tracking code 6506.

    3. If less than 210 days remain on the assessment statute expiration date (ASED), use Alpha Code "FF" .

    Note:

    All deadlines are in calendar days.

Initial Review - Classifier
  1. Upon receipt of the prior audit file, you have 15 days to complete your review of the file.

  2. Review the offer and the prior audit documentation to determine whether to:

    • Forward the offer to the field for further analysis.

    • Recommend returning the offer to the taxpayer if the taxpayer is solely attempting to delay collection. See IRM 5.19.24.6.4.

  3. Reasons for returning the offer include, but aren’t limited to:

    • Frivolous or groundless offers.

    • Offers failing to raise a valid liability issue.

    • Offers submitted to delay collections (multiple, repeated offers after a rejection).

    • Offers where the taxpayer is in bankruptcy.

    • Offers where a federal court rendered a final determination of liability.

    • Offers where the IRS and the taxpayer entered into a closing agreement.

    • Exemption for a revoked organization (requires forwarding to Small Business/Self Employed Planning and Special Programs (SB/SE PSP)).

    • Foundation status reclassification or a newly reclassified private foundation.

    • Abatement of Chapter 42 second tier taxes when correction isn’t made.

    Note:

    All deadlines are in calendar days.

Case Movement Decision - Returning the Offer
  1. Classifier:

    1. Document the reason for the return in the" Remarks" field of the AOIC Exam Case Checklist.

    2. Create a new closing record.

    3. Use DC 45 and closing with, 7 - Paperless Non-Examined.

  2. Manager, EO Classification: Send the case to EPR Staff Assistant.

  3. EPR Staff Assistant:

    1. Document the reason for returning the case on AOIC.

    2. Return case to the DATL Unit.

Case Movement Decision - Field Work
  1. Classifier:

    1. Check AIMS to identify which group worked the case.

    2. Record your action on Form 5464, Case Chronology Record.

  2. Manager, EO Classification:

    1. Send offers for prior Financial Investigations Unit (FIU) to the groups that last worked the cases.

    2. For all other cases, send the Offer and prior audit file to the group responsible for the zip code where the taxpayer is located.

    3. Transmit cases via RCCMS, as per normal operational procedures.

    4. Notify the EPR Staff Assistant of the case disposition.

OIC-DATL Field and OCEP Processing

  1. EO Exam Group Manager:

    1. Assign the case to an agent of appropriate grade level, within 15 days of receipt of an Offer case file from EO Classification.

    2. Don’t return cases to the EO Referrals Group or Classification.

    3. If unable to handle the case in your group, coordinate with your Area Manager to transfer the Offer to another group in the same area.

    4. Notify EPR Staff Assistant of the case assignment, any reassignment and updates of case status, every 60 days.

  2. EO Exam Agent:

    1. Process the Offer case file as a high priority case. Delay all other actions on other cases. Postpone and reschedule any upcoming audit appointments for at least a month. Document all actions on Form 5464, Case Chronology Record.

    2. Review the prior audit file and the proposed offer. Evaluate supporting documents. Determine whether the taxpayer needs to provide additional documentation.

    3. Contact taxpayer within 30 days of receipt of the Offer case file. Notify them that you’re reviewing the Offer.

    4. Request additional documentation, as needed.

    5. If you don’t need additional documents, you have 30 days from the date of contact to render your decision as to whether to adjust the tax.

      Note:

      This includes any calculations needed to arrive at the new debt amount.

    6. If needed, prepare Form 4564, Information Document Request (IDR), and send to the taxpayer.

    7. Give taxpayer up to 30 days to provide additional documents.

    8. If the taxpayer doesn’t provide the requested documents within 30 days, you may provide an extension of another 15 days, with your manager’s approval.

    9. Schedule an appointment to meet with the taxpayer if preferable to receiving the documents by mail. Schedule appointments within 60 days from current date.

    10. Within 30 days from the date of receipt of the additional documents, decide either by mail or in person and complete any calculations.

    11. If the taxpayer fails to provide the requested documents by the end of the second time frame, determine whether the taxpayer’s argument and documentation merits an adjustment to the tax liability within 30 days from the second deadline. If the lack of documentation prevents and adjustment, return the Offer as incomplete.

    Note:

    All deadlines are in calendar days.

Offer in Compromise - Adjustments
  1. Offer considerations normally involve reductions of assessed liabilities based on additional taxpayer supplied documentation. If unable to determine the correctness of the tax liability, advise the taxpayer that we may accept the offer, pending further review.

  2. If proposing a reduction in liability other than down to the amount offered, determine whether the taxpayer agrees with the adjustment. If the taxpayer:

    1. Agrees: Ask the taxpayer to submit or fax a written request to withdraw the offer.

    2. Doesn’t agree: Advise the taxpayer that further review is required and treat the case as a rejection.

  3. If the amount of the offer is greater than the final adjusted tax liability, solicit a withdrawal of the offer.

  4. If the taxpayer doesn’t submit a request to withdraw the Offer, treat the case as a rejection.

  5. If the documents provided with the Offer or in response to any IDR don’t support as doubt as to liability offer, reject the offer.

  6. If the IRS rejects or returns the offer or if the taxpayer withdraws the offer, the IRS will return a deposit or application fee mistakenly paid with the offer. If the taxpayer agrees in writing, the IRS applies the amount paid with offer to the amount owed.

Case Resolution - Returning an Incomplete Offer
  1. EO Exam Agent:

    1. Complete the OIC Checksheet attached to the folder.

    2. Create a new closing record.

    3. Use DC 45 to close the case and closing with "7- Paperless Non-Examined" .

    4. Close the case to your manager.

  2. Group Manager:

    1. Review the case.

    2. Send the paper file to the EPR Staff Assistant.

    3. Approve the case closure on RCCMS.

  3. EPR Staff Assistant:

    1. Update the AOIC to reflect the return of the offer to the Doubt as to Liability (DATL) Unit.

    2. Send case to the DATL Unit.

Case Resolution - All Other Situations
  1. EO Exam Agent:

    1. Complete Form 1271, Rejection or Withdrawal Memorandum for withdrawals and rejections.

    2. Complete Form 7249, Offer Acceptance Report for accepted offers.

    3. Prepare Form 3870, Request for Adjustment for all cases. Complete the form to adjust the liability to the correct amount regardless of whether the taxpayer withdraws the offer.

    4. Prepare the following forms to reflect the adjustments for EO Closing Unit input as applicable:

    • Form 4549, Income Tax Examination Changes.

    • Form 4883, Exempt Organizations Excise Tax Audit Changes.

    • Form 4667, Examination Changes - Federal Unemployments Tax.

    • Form 4668, Employment Tax Examination Changes Report, or

    • Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection.

  2. Group Manager:

    1. Review the Offer case file in 10 days.

    2. Upon approval of the closure, send the case to Mandatory Review in Dallas.

    3. Close the RCCMS controls to Mandatory Review.

    4. If Form 7249, Offer Acceptance Report is present, sign the form if you agree with the agent.

    5. Notify the EPR Staff Assistant of the case disposition.

    Note:

    All deadlines are in calendar days.

OIC-DATL Final Processing

  1. The IRS is required under IRC 7122(e) to provide an independent administrative review of all proposed rejections of an offer in compromise before communicating the rejection to the taxpayer. Mandatory Review serves in this role.

EO Mandatory Review, Manager
  1. Assign the case to a Reviewer within 15 days of receipt of the Offer case file.

  2. Notify the EPR Staff Assistant of the case assignment.

    Note:

    All deadlines are in calendar days.

Case Resolution - Reviewer
  1. Treat the case as your highest priority work item.

  2. Review the Offer case file, within 15 days. Determine the following:

    • Did the taxpayer establish sufficient doubt as to the correctness of the liability?

    • Did the agent follow the IRM requirements?

    • Did the agent correctly consider and apply the tax law?

    • Did the agent thoroughly develop/document the facts and circumstances?

  3. Verify the accuracy of any adjustments.

  4. Ensure the following documents are in the file:

    • Form 656-L, Offer in Compromise (Doubt as to Liability).

    • Withdrawal letter from the taxpayer, if applicable.

    • AOIC Exam Case Checklist.

    • Form 1271, Rejection or Withdrawal Memorandum or Form 7249, Offer Acceptance Report, for accepted offers.

    • Form 2848, Power of Attorney and Declaration of Representative, if applicable.

    • Tax return (original, copy, TRDBV print).

    • Original audit case file.

    • Form 3870.

    • Form 4549.

    • Form 4883.

    • Form 4667.

    • Form 4668 and/or

    • Form 5384.

  5. If the 24 month period expired, verify the acceptance paperwork required under IRM 5.8.8.12 is in the file.

  6. Sign Form 1271 in the field marked "Signature of Reviewer " or Form 7249 in the field marked "Signature (2nd level review)" if approving the agent’s determination.

  7. Prepare a second folder containing: a copy of the Form 2848 (if applicable), the tax return, the original audit case file, Forms 656-L (copy), 3870, 4549 (4883/4667/4668/5384).

  8. Write your name in the field for" Independent Administrative Reviewer (IAR)/Technical Reviewer" . Write the date you complete your review. Check the box for sustained or not sustained. Verify the field agent completed the disposition of deposit and remarks fields.

  9. If the Offer involves a total liability of $50,000 or more (before or after adjustment), send the case files to Area Counsel for approval.

  10. Forward the closed case to the Manager, EO Mandatory Review.

Case Resolution - EO Mandatory Review, Manager
  1. Review case. If the 24 month period expired, forward the case file to the National Offer in Compromise Program Director.

  2. If issues remain, return the files to the Reviewer.

  3. If no issues remain, forward the first file folder to the DATL Unit for issuance of the closing letter.

  4. For cases involving rejections, wait for the Doubt as to Liability (DATL) unit to notify you as whether the taxpayer is appealing the rejection. If the taxpayer files an appeal, forward the second folder to the DATL Unit for association with the first folder before the DATL Unit sends the files to Appeals.

  5. For cases involving acceptances, non-appealed rejections and withdrawals, forward the second folder to EO Closing Unit for input.

  6. Notify the EPR Staff Assistant of the case’s disposition.

Returning Case to the Group - Reviewer
  1. Prepare Form 5456, Reviewer’s Memorandum - EP/EO, if issues are present that require returning the case to the group.

  2. Sign the Form 5456 and obtain the Manager, EO Mandatory Review’s counter signature.

  3. Place the signed Form 5456 on top of the files and ship them to either:

    • The field group that reviewed the Offer.

    • EO Classification for assignment if the Classifier rejected the Offer.

  4. Have the case controls on RCCMS transferred to the appropriate unit.

Case Return Receipt - Agent
  1. Review Form 5456 and follow provided guidance.

  2. Prepare and sign Form 5457, Response to Reviewer’s Memorandum - EP/EO.

  3. Obtain manager’s signature. Electronic signatures are acceptable.

  4. Put Form 5457 on top of case file and close case back to Mandatory Review.

Case Return Receipt - EO Classification Classifier
  1. Assign case to the field.

  2. No Form 5457 is needed.

  3. Attach new OIC Checksheet on top of the old checksheet. Enter the date the case was received from Mandatory Review.

EO Closing Unit
  1. Input adjustments from Form 3870.

  2. Organize RCCMS file and return to RCCMS Library.

  3. Complete OIC Checksheet and send to EPR Staff Assistant.

Form 1271, Rejection or Withdrawal Memorandum, Completion Instructions

Enter the following information into the form as directed:

Field Entry
Case Number Leave Blank
Date of Rejection or Withdrawal Letter Leave Blank
Offer to Compromise Liability of Enter taxpayer name and address
Employer Identification Number Enter if applicable
Social Security Number Enter if applicable
Jurisdictional Office TE/GE EO Examinations
Organization Symbols SE:T:EO:E
District or Service Center Enter your post of duty city
Description of Liability: Period Enter the tax year ending (mm/dd/yyyy)
Description of Liability: Kind of Tax Enter Income or Excise or Employment
Description of Liability: Date Assessed Enter the transaction code (TC) 300 date
Description of Liability: Outstanding Liability Enter the BMFOLT/IMFOLT balance
Description of Liability: Totals Sum the amounts outstanding
Amount of Offer in Compromise Enter the amount offered (Form 656-L)
Place Where Notice of Lien Filed, Date Leave blank
Recommend Offer be Rejected/Withdrawn Check the appropriate box
Signature of Examining Officer Sign or e-sign
Signature of Examining Officer: Title Enter Revenue Agent
Signature of Examining Officer: Date Enter the date of the signature
Signature of Reviewer Leave blank (for Mandatory Reviewer)
Signature of Reviewer: Date Leave blank (for Mandatory Reviewer)
Signature of Delegated Official Leave blank
Remarks Leave blank

Form 3870, Request for Adjustment, Completion Instructions

Form 3870 contains instructions on the fourth and final page of the PDF file. These instructions supplement and/or override those provided with the form.

Field Entry
1. TIN The taxpayer’s employer identification number (EIN) or Social Security Number (SSN)
1. Cross Reference TIN The spouse’s SSN, if applicable
2. Name The taxpayer’s name per INOLES
2. Street Address, City, State, Zip Code The taxpayer’s current address
2. Telephone Number The taxpayer’s daytime phone number
3. Originating Office Your post duty city and your badge number
Check TC, enter 780 (acceptance)/482 (withdrawal)/481 (rejection)
4. MFT 01 (941), 10 (940), 34 (990-T), etc.
5. Period Ending Only one tax year per Form 3870
6. Assessment Date The transaction code (TC) 300 assessment date
7. Source Write OIC to the right of Other
8. DLN The TC 300 Document Locator Number
9. Renumbered DLN Leave blank for EO Closing Unit entry
10. Personal Contact Check yes/no
11. Reason for Adjustment "Abate TC 300 $ (amount of abatement) for Offer in Compromise acceptance" ( or withdrawal or rejection)
12. Signature of Taxpayer, Date Leave blank
13. Signature of Preparer, Date Your signature and date
13. Telephone (work)/(FAX) The office phone & group e-fax numbers
14. Approving Official Signature and Title Mandatory Reviewer’s signature and date
Assessment, Item, or Credit Adjustment Processing Information Leave blank for EO Closing Unit entry

Form 7249, Offer Acceptance Report, Completion Instructions

Enter the following information into the form as directed:

Field Entry
Taxpayer(s) Name Enter as per INOLES
Employer Identification Number Enter if applicable
Social Security Number Enter if applicable
City Per the taxpayer’s current address
State
ZIP code
Offer number Enter if present from the Form 656-L, Offer in Compromise (Doubt as to Liability)
Type of Tax Income or Excise or Employment
Taxable Period(s) Enter the tax year in mm/dd/yyyy format
Date Assessed Use the date of the transaction code (TC) 300
Balance as of Use the current amounts from BMFOLT
Total Sum of the above balances
Terms of this offer Enter the terms from the Form 656-L
Name (recommending employee) The Agent’s name
Signature (recommending employee) Manually or digitally sign (date & time)
Date Enter if manually signing
Name (GM/ATM/ATCL) The Group Manager’s name
Signature (GM/ATM/ATCL) Manually or digitally sign
Date Enter if manually signing
Name/Title 2nd level review, if appropriate) The Mandatory Reviewer’s name
Signature (2nd level review, if appropriate) Manually or digitally sign
Date Enter if manually signing

IRC 7122 Offer In Compromise (Doubt As To Liability) Checksheet

IRC 7122 Offer In Compromise (Doubt As Liability)
Name of Organization
Year(s) of Offer
Action Date Initials
Form 656-L Stamped As Received:
Form 656-L Transferred to Classification:
(≤ 15 Days)
Form 656-L Received by Classification:
Form 656-L Assigned to Classifier:
(≤ 15 Days)
Form 656-L Sent to Field:
(≤ 15 Days)
Form 656-L Received in Field Group:
Form 656-L Assigned to Agent:
(≤ 15 Days)
Initial Contact Made With Taxpayer:
(≤ 30 Days)
A Additional Documents Due By: (≤ 30 Days)
Second Document Deadline: (≤ 30 Days)
B Appointment Scheduled For: (≤ 60 Days)
Case Closed to Manager:
(≤ 30 Days)
Case Forwarded to Mandatory Review (MR):
(≤ 10 Days)
Case Received in MR:
Case Assigned to MR:
(≤ 15 Days)
Case Returned to Field:
(≤ 15 Days)
Case Received In Field Group:
Case Reassigned to Agent:
(≤ 15 Days)
Secondary Contact With Taxpayer:
(≤ 30 Days)
A Additional Documents Due By: (≤ 30 Days)
Second Document Deadline: (≤ 30 Days)
B Appointment Scheduled For: (≤ 60 Days)
Case Closed to Manager:
(≤ 15 Days)
Case Forwarded to MR:
(≤ 10 Days)
Case Received in MR:
Case Assigned to MR:
(≤ 15 Days)
Case Sent to Manager, MR:
(≤ 15 Days)
Form 656-L Package Sent to COIC:
(≤ 10 Days)
Case Closed to EO Closing Unit:
(≤ 10 Days)
Adjustments Input into IDRS:
Checksheet Given to EPR Staff Assistant:

30-Day Letter - Full Denial - IRC 4962

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
[Insert agent's street address]
[Insert city, state, and zip code]
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert ID number]
Contact Numbers:
Telephone: [Insert phone number]
Fax: [Insert fax number]
Manager's Name/ID Number:
[Insert name]
[Insert ID Number]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
Manager's Contact Number:
[Insert phone number]
Response Due Date:
[Insert date]
Dear [Enter name]:
Why you’re receiving this letter
We've reviewed your request for the abatement of excise taxes under IRC Section 4962.
We've determined that the information provided doesn't justify an abatement. The attached Form 886-A, Explanation of Items, explains how and why we made our decision.
What you need to do if you agree
If you agree with our findings, please sign the enclosed Form 870-E, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment, and return it to the contact person at the address listed above within 30 calendar days from the date of this letter. Enclose payment of any applicable tax, interest, and penalties. Please make your check or money order payable to the United States Treasury. Publication 3498, The Examination Process, provides additional payment information.
If you can’t pay the full amount, please call the contact person at the telephone number shown above to discuss different methods of paying, such as in installments. If you don’t enclose payment, we’ll bill you for any unpaid amounts. See Publication 594, The IRS Collection Process.
What you need to do if you disagree
1. You may request a meeting or telephone conference with the manager identified above.
2. You may file a protest with the Appeals office of the IRS by submitting a written request within 30 calendar days from the date of this letter to the contact person at the address listed above. A valid protest must contain:
a statement of the facts you don't agree with, if any
the applicable law, if any, on which you are relying
arguments in support of your position
a penalty of perjury statement
For more detailed information regarding what is required for a valid protest, see Publication 3498, The Examination Process.
The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498, generally doesn't apply after issuance of this letter.
3. If you believe your disputed issue isn’t addressed in published precedent or is being treated inconsistently by the IRS, you may request technical advice, if it hasn’t already been submitted for technical advice. If you’d like to know more about this process, please notify the contact person. If you disagree with the technical advice decision, you may appeal that decision to the Appeals office, as explained above.
4. Pay the full amount due and file a claim for refund. You must file your claim within three years from the date the return was filed or two years from the date you paid the tax, whichever is later.
If you don't respond to this letter
If we don't hear from you within 30 calendar days from the date on this letter, we will process your case based on the recommendations shown on Form 886-A and this letter will become final.
Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you’ve tried but haven’t been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.
For additional information
If you have any questions, contact the person listed at the top of this letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations
Enclosures:
Form 886-A
Form 870-E

Closing Letter - Agreed Full or Partial Denial of Abatement - IRC 4962

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
1100 Commerce Street, MS 4900 DAL
Dallas, Texas 75242-1100
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
[Insert ID number]
Contact Numbers:
Telephone [Insert phone number]
Fax: [Insert fax number]
Dear [Enter name]:
The enclosed report explains the agreed upon full or partial denial of your request for abatement of excise taxes under IRC Section 4962 for the form and year(s) listed above.
__
|__|
Thank you for your payment. If there is any additional tax, interest, or penalties owed, we’ll send you a bill.
__
|__|
We’ll send you a bill for the additional tax and any applicable penalties, plus interest.
If you have any questions, contact the person at the top of this letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations

30-Day Letter - Partial Abatement - IRC 4962

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
[Insert agent's street address]
[Insert city, state, and zip code]
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert ID number]
Contact Numbers:
Telephone: [Insert phone number]
Fax: [Insert fax number]
Manager's Name/ID Number:
[Insert name]
[Insert ID Number]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
Manager's Contact Number:
[Insert phone number]
Response Due Date:
[Insert date]
Dear [Enter name]:
Why you’re receiving this letter
We've reviewed your request for the abatement of excise taxes under IRC Section 4962.
We've determined that the information provided justifies a partial abatement. The attached report explains the amount of the abatement as well as how and why we made our decision.
What you need to do if you agree
If you agree with our findings, please sign the enclosed Form 870-E, Waiver of Restrictions on Assessment and Collection of Deficiency and Acceptance of Overassessment, and return it to the contact person at the address listed above within 30 calendar days from the date of this letter. Enclose payment of any applicable tax, interest, and penalties. Please make your check or money order payable to the United States Treasury. Publication 3498, The Examination Process, provides additional payment information.
If you can’t pay the full amount, please call the contact person at the telephone number shown above to discuss different methods of paying, such as in installments. If you don’t enclose payment, we’ll bill you for any unpaid amounts. See Publication 594, The IRS Collection Process.
What you need to do if you disagree
1. You may request a meeting or telephone conference with the manager identified above.
2. You may file a protest with the Appeals office of the IRS by submitting a written request within 30 calendar days from the date of this letter to the contact person at the address listed above. A valid protest must contain:
a statement of the facts you don't agree with, if any
the applicable law, if any, on which you are relying
arguments in support of your position
a penalty of perjury statement
For more detailed information regarding what is required for a valid protest, see Publication 3498, The Examination Process.
The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498, generally doesn't apply after issuance of this letter.
3. If you believe your disputed issue isn’t addressed in published precedent or is being treated inconsistently by the IRS, you may request technical advice, if it hasn’t already been submitted for technical advice. If you’d like to know more about this process, please notify the contact person. If you disagree with the technical advice decision, you may appeal that decision to the Appeals office, as explained above.
4. Pay the full amount due and file a claim for refund. You must file your claim within three years from the date the return was filed or two years from the date you paid the tax, whichever is later.
If you don't respond to this letter
If we don't hear from you within 30 calendar days from the date on this letter, we will process your case based on the recommendations shown in the report of examination and this letter will become final.
Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you’ve tried but haven’t been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.
For additional information
If you have any questions, contact the person listed at the top of the letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations
Enclosures:
Report of Examination
Form 870-E

Improper Request Under IRC 4962

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
[Insert agent's street address]
[Insert city, state, and zip code]
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
[Insert ID number]
Contact Numbers:
Telephone: [Insert phone number]
Fax: [Insert fax number]
Dear [Enter name]:
Why you’re receiving this letter
We've reviewed your request for the abatement of excise taxes under IRC Section 4962. We are denying the request for the reason checked below.
__
|__|
This abatement request was for the initial self-dealing taxes imposed under IRC Section 4941(a). We can't consider this request as there is no abatement provisions for this type of tax as indicated in IRC Section 4962(b).
__
|__|
This request wasn't made by the appropriate person. The person responsible for the tax would have to file this request.
If you don't agree
If you don't agree with our determination, the person responsible for this tax can, after paying the additional tax due, file an amended return or a claim for refund. A claim or amended return must be filed within three years from the date the return was filed or two years from the time the tax was paid, whichever is later.
If you have any questions, contact the person listed at the top of the letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations
Enclosures:
RAR

Audit Reconsideration Letter - Full Denial

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
[Insert agent's street address]
[Insert city, state, and zip code]
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert ID number]
Contact Numbers:
Telephone: [Insert phone number]
Fax: [Insert fax number]
Manager's Name/ID Number:
[Insert name]
[Insert ID Number]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
Manager's Contact Number:
[Insert phone number]
Response Due Date:
[Insert date]
Dear [Enter name]:
Why you’re receiving this letter
We reviewed the request for audit reconsideration for the year(s) shown above. However, we decided the tax amount is correct. The attached Form 886-A, Explanation of Items, explains how and why we made our decision.
What you need to do if you agree
If you agree, please pay the amount due. Please make your check or money order payable to the United States Treasury. Publication 3498, The Examination Process, provides additional payment information.
If you can't pay the full amount, please call the contact person at the telephone number shown above to discuss different methods of paying, such as in installments. If you don't enclose payment, we'll bill you for any unpaid amounts. See Publication 594, The IRS Collection Process.
What you need to do if you disagree
1. You may request a meeting or telephone conference with the manager identified above.
2. You may file a protest with the Appeals office of the IRS by submitting a written request within 30 calendar days from the date of this letter to the contact person at the address listed above. A valid protest must contain:
a statement of the facts you don't agree with, if any
the applicable law, if any, on which you are relying
arguments in support of your position
a penalty of perjury statement
For more detailed information regarding what is required for a valid protest, see Publication 3498, The Examination Process.
The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498, generally doesn't apply after issuance of this letter.
3. Pay the full amount due and file a claim for refund. You must file your claim within three years from the date the return was filed or two years from the date you paid the tax, whichever is later.
If you don't respond to this letter
If we don't hear from you within 30 calendar days from the date on this letter, this letter will become final and we will continue with Collection.
Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you’ve tried but haven’t been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.
For additional information
If you have any questions, contact the person listed at the top of the letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations
Enclosures:
Form 886-A

Audit Reconsideration Letter - Partial Abatement

Internal Revenue Service
Tax Exempt and Government Entities Division
Exempt Organizations: Examinations
[Insert agent's street address]
[Insert city, state, and zip code]
Department of the Treasury
Date: [Insert date] Taxpayer Identification Number:
[Insert TIN]
Form:
[Insert Form Number]
Tax Periods Ended:
[Insert Periods]
Person to Contact/ID Number:
[Insert name]
[Insert ID number]
Contact Numbers:
Telephone: [Insert phone number]
Fax: [Insert fax number]
Manager's Name/ID Number:
[Insert name]
[Insert ID Number]
[Insert name of entity]
[Insert c/o or Attn: and name]
[Insert street address]
[Insert city, state, and zip code]
Manager's Contact Number:
[Insert phone number]
Response Due Date:
[Insert date]
Dear [Enter name]:
Why you’re receiving this letter
We reviewed the request for audit reconsideration for the periods shown above. We've determined that the information provided justifies a partial abatement. The attached report explains the amount of the abatement as well as how and why we made our decision. Because we reduced the original amount owed, you don't need to sign and return the report.
What you need to do if you agree
If you agree, please pay the amount due. Please make your check or money order payable to the United States Treasury. Publication 3498, The Examination Process, provides additional payment information.
If you can't pay the full amount, please call the contact person at the telephone number shown above to discuss different methods of paying, such as in installments. If you don't enclose payment, we'll bill you for any unpaid amounts. See Publication 594, The IRS Collection Process.
What you need to do if you disagree
1. You may request a meeting or telephone conference with the manager identified above.
2. You may file a protest with the Appeals office of the IRS by submitting a written request within 30 calendar days from the date of this letter to the contact person at the address listed above. A valid protest must contain:
a statement of the facts you don't agree with, if any
the applicable law, if any, on which you are relying
arguments in support of your position
a penalty of perjury statement
For more detailed information regarding what is required for a valid protest, see Publication 3498, The Examination Process.
The Appeals office is independent of the Exempt Organizations division and resolves most disputes informally. Publication 3498 also includes information on your rights as a taxpayer and the IRS collection process. Please note that Fast Track Mediation referred to in Publication 3498, generally doesn't apply after issuance of this letter.
3. Pay the full amount due and file a claim for refund. You must file your claim within three years from the date the return was filed or two years from the date you paid the tax, whichever is later.
If you don't respond to this letter
If we don't hear from you within 30 calendar days from the date on this letter, we will process your case based on the recommendations shown in the report of examination and this letter will become final.
Contacting the Taxpayer Advocate Office is a taxpayer right
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS that can help protect your taxpayer rights. TAS can offer you help if your tax problem is causing a hardship, or you’ve tried but haven’t been able to resolve your problem with the IRS. If you qualify for TAS assistance, which is always free, TAS will do everything possible to help you. Visit www.taxpayeradvocate.irs.gov or call 1-877-777-4778.
For additional information
If you have any questions, contact the person listed at the top of the letter.
Sincerely,
[Insert name]
Director, Exempt Organizations Examinations
Enclosures:
Form 886-A