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4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 3)

4.119.4.17  (09-17-2014)
Letter Rejects

  1. When letters are sent to the taxpayer (e.g., Letter 4550C, Letter 4314C, etc.) and errors are discovered during review, or IDRS incompatibility causes the letter to reject, the letters or cases are returned to the tax examiner who issued the letter.

4.119.4.18  (12-11-2014)
Letter 2531 and Letter 2030 Information

  1. The following instructions are used to process taxpayer contact by generating a Letter 2030 or Letter 2531 in the BMF-AUR Program.

4.119.4.18.1  (04-05-2016)
Letter 2531 Preparation

  1. Letter 2531 is sent to a taxpayer to obtain additional information prior to issuing a Letter 2030.

    Caution:

    If Freeze Code -O is present on IDRS CC:TXMOD, see IRM 4.119.4.4.3, Declared Disaster Areas, for additional information.

  2. Select the Letter 2531 Master Letter template for the desired Letter Mailout Date.

    1. Select the applicable "Form Type."

    2. Complete the template.

    3. On a case by case basis, include any additional explanation paragraph(s) that will assist the taxpayer to understand the underreported issue(s).

      Reminder:

      Written managerial approval is required when the negligence disregard penalty applies. Include PARAGRAPH 75 on the notice. See IRM 4.119.4.16.3.2, Accuracy-Related Penalty Due to Negligence or Disregard of Rules or Regulations (Negligence Disregard Penalty), for additional information.

    4. Edit IRPTRW print IR's to only show the discrepant amount type on the IR using the advanced editing tool when creating the notice.

  3. Complete Letter 937, Transmittal Letter For Power of Attorney, for cases that have a valid POA authorized to receive correspondence and attach a copy of the Letter 2531. See IRM 4.119.4.3.1, Power of Attorney (POA), for additional information.

  4. Upload the completed template, IRPTRW prints and Letter 937 (if applicable) to the BMF-AUR Letter Repository.

  5. Publication 1, Your Rights as a Taxpayer, is mailed as an enclosure with Letter 2531.

  6. When issuing Letter 2531 update the following:

    1. IDRS activity with CP2531MMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for further information.

    2. IDRS category to BUR1.

    3. Assign the case to the designated generic notice team number on IDRS.

    4. Input TC 925 with PC 4300 using IDRS CC:REQ77/FRM77.

    5. Annotate the DCI and case folder using PC 4300.

  7. The Clerical Function suspends the Letter 2531 for 60 days (90 days for foreign or APO/FPO address).

4.119.4.18.2  (04-05-2016)
Letter 2030 Preparation

  1. Letter 2030 is sent to the taxpayer to propose a change to income tax liability because of income that is not identified or does not appear to be fully reported on the tax return.

    Caution:

    If Freeze Code -O is present on IDRS CC:TXMOD, see IRM 4.119.4.4.3, Declared Disaster Areas, for additional information.

  2. There are two initial Letter 2030 Master Letter templates based on tax return type.

  3. Select the applicable Letter 2030 Master Letter template based on the tax return for the desired Letter Mailout Date.

    Reminder:

    Refer any cases involving the use of Schedule O to determine tax to the Lead Tax Examiner who will determine if the case should be transferred to a TCO.

    1. Complete the template.

    2. On a case by case basis, include any additional explanation paragraph(s) that will assist the taxpayer to understand the underreported issue(s).

      Reminder:

      Written managerial approval is required when the negligence disregard penalty applies. Include PARAGRAPH 75 on the notice. See IRM 4.119.4.16.3.2, Accuracy-Related Penalty Due to Negligence or Disregard of Rules or Regulations (Negligence Disregard Penalty), for additional information.

    3. Edit IRPTRW print IR's to only show the discrepant amount type on the IR using the advanced editing tool when creating the notice.

    Caution:

    When preparing a Letter 2030 based on a no reply to a Letter 2531, review the case to determine the correct underreported amounts.

  4. Complete Letter 937, Transmittal Letter For Power of Attorney, for cases that have a valid POA authorized to receive correspondence and attach a copy of the Letter 2030. See IRM 4.119.4.3.1, Power of Attorney (POA), for additional information.

  5. Upload the completed template, IRPTRW prints and Letter 937 (if applicable) to the BMF-AUR Letter Repository.

  6. Publication 1, Your Rights as a Taxpayer, is mailed as an enclosure with Letter 2030.

  7. When issuing Letter 2030 update the following:

    1. IDRS activity with CP2030MMDD or FCP30MMDD (Letter 2030 after Letter 2531). See Exhibit 4.119.4-7, Activity Codes/Category Codes, for further information.

    2. IDRS category to BUR0.

    3. Assign the case to the designated generic notice team number on IDRS.

    4. Input TC 925 with PC 4500 or 4520 (Letter 2030 after Letter 2531), as applicable using IDRS CC:REQ77/FRM77.

    5. Annotate the DCI and case folder using PC 4500 or 4520 (Letter 2030 after Letter 2531).

  8. The Clerical Function suspends the Letter 2030 for 60 days (90 days for foreign or APO/FPO address).

4.119.4.18.3  (09-02-2016)
Amended/Corrected Letter 2030 and Letter 2531

  1. If a notice is incorrect, an amended/corrected notice can be created. Multiple amended/corrected notices can be created if necessary.

  2. Amended notices are created when either the notice is returned as undeliverable and the Clerical Function has found a new address or a new address is found during the no response notice preparation process. See IRM 4.119.4.20Undeliverable Notices, or IRM 4.119.4.19, No Response, for further instructions.

  3. When it is necessary to correct a notice that has not been mailed:

    1. Delete the original file from the BMF-AUR Letter repository.

    2. Input TC 925 with the applicable Stopped Notice (Notice Not Mailed) PC: 4310 (Letter 2531 or Amended Letter 2531 not mailed), 4320 (Letter 2030 after a Letter 2531 not mailed), 4510 (Letter 2030 not mailed), 4540 (Amended or Recomputed Letter 2030 not mailed), 4760 (Recomputed Letter 2030 or Amended Letter 2030 after Statutory Notice not mailed) using IDRS CC:REQ77/FRM77. See Exhibit 4.119.4-14, Process Code Consistency Chart, for additional information.

    3. Annotate the DCI and case folder with the Stopped Notice (Notice Not Mailed) process code.

    4. Determine the next action:

      If Then
      A notice is needed
      1. Prepare a new notice for the next available Letter Mailout Date. See IRM 4.119.4.18.1, Letter 2531 Preparation, or IRM 4.119.4.18.2Letter 2030 Preparation, for additional information.

        Reminder:

        Refer any cases involving the use of Schedule O to determine tax to the Lead Tax Examiner who will determine if the case should be transferred to a TCO.

        Caution:

        There must be sufficient time remaining on the Statutory Notice of Deficiency suspense period to issue another recomputed notice (i.e., PC 4750).

      2. Update IDRS activity with the applicable Action Code. See Exhibit 4.119.4-7Activity Codes/Category Codes.

      3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

      4. Annotate the DCI and case folder with the appropriate PC.

      The case should be closed
      1. Close the case with the appropriate closing process code.

        Example:

        If the Letter 2030 (or Letter 2531) is not needed because all the U/R was accounted for on the tax return, then close the case with PC 4210.

      2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

      3. Annotate the DCI and case folder with the appropriate PC.

  4. The Clerical Function suspends the amended/corrected notice for 60 days (90 days for foreign or APO/FPO address).

    Note:

    An amended/corrected Letter 2030 after a Stat Notice (PC 4750 or 4755) does not extend the period of time the taxpayer has to petition the U.S. Tax Court.

4.119.4.19  (09-02-2016)
No Response

  1. When there is no response to a BMF-AUR notice, the case is moved to the next phase. Next phase is generally defined as:

    1. Letter 2531 no response, issue a Letter 2030. See IRM 4.119.4.18.2, Letter 2030 Preparation, for further information.

    2. Letter 2030 no response, issue a Letter 3219BStatutory Notice of Deficiency. See IRM 4.119.4.21.11, Letter 3219B Statutory Notice of Deficiency Preparation, for further information.

    3. Letter 3219B no response, assess the additional tax within 10 days. See IRM 4.119.4.21.11.2, Default Letter 3219B Statutory of Deficiency, for further information.

  2. At the end of every mail out date suspense period, the Clerical Function batches any remaining cases for tax examiner review.

    1. No Response Letter 2531 cases are built to Batch Type 49X (X = 0 for 1120 and 1 for 1041), Aged Letter 2531/2030 Preparation - No Response.

    2. No Response Letter 2030 cases are built to Batch Type 59X (X = 0 for 1120 and 1 for 1041), Aged Letter 2030/Recomp Stat Preparation - No Response.

    3. No Response Letter 3219B cases are built to Batch Type 79X (X = 0 for 1120 and 1 for 1041), Statutory Notice Defaults.

  3. Prior to processing the case to the next phase, review the account for any activity since the notice was issued.

  4. Review current IDRS CC:TXMOD, CC:ENMOD and CC:CFINK for any recent changes that would impact the processing of the case to the next phase. If changes are present make a print for the case file.

    Reminder:

    If IDRS CC:ENMOD displays indicator PDT (Potentially Dangerous Taxpayer), see IRM 25.4.1, Potentially Dangerous Taxpayer, for additional information. If IDRS CC:ENMOD displays indicator CAU (Caution Upon Contact), see IRM 25.4.2, Caution Upon Contact Taxpayer.

  5. If IDRS CC:TXMOD shows the taxpayer submitted full payment for the tax and related penalties (i.e., TC 640 or TC 670) before issuance of a Letter 3219BStatutory Notice of Deficiency, and there was no balance due prior to the notice:

    Exception:

    If the TC 640 payment has a blocking series of 990-999 indicating it is a IRC 6603 deposit, issue Letter 4550C to acknowledge payment and request missing signature.

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

    2. Input the adjustment using IDRS CC:ADJ54. See IRM 4.119.4.21.10, Adjustments, for further information.

    3. Close the case with Process Code 4470, 4670 or 4870 as appropriate.

      Caution:

      Full payment received after issuance of Letter 3219B, Statutory Notice of Deficiency, cannot be accepted as agreement to the tax increase. Issue a Letter 4550C to acknowledge payment and request missing signature. If the suspense time frame of 105 days (165 days if the notice is addressed to a person outside the U.S.) has expired, default the case.

    4. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    5. Annotate the DCI and case folder with the appropriate PC.

  6. If the taxpayer submitted a partial payment, do not request the payment document. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ if the account was in Zero Balance prior to the notice, or if the payment Blocking Series is 300-399.

    If Then
    The case is a no response to a Letter 2531 Issue a Letter 2030 (PC 4520).
    The case is a no response to a Letter 2030 Issue Letter 4550C requesting the taxpayer's signature to consent.
    The case is a no response to a Letter 3219B See IRM 4.119.4.21.11.2, Default Letter 3219B Statutory Notice of Deficiency (PC 4850).
    1. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the appropriate PC.

  7. If full or partial payment posts AFTER the creation of the Letter 3219B but before the Stat Notice is mailed:

    1. Delete the Letter 3219B from the BMF-AUR Letter Repository.

    2. Input TC 925 with PC 4710 using IDRS CC:REQ77/FRM77.

    3. Request the case file from the Clerical Function.

    4. When the case file is received, update IDRS activity with 45MRPCMMDD. See Exhibit 4.119.4-8Definer Codes.

    5. If two weeks have passed and correspondence has not been received, see (5) or (6) above.

    6. If the correspondence is received, rework the case per the correspondence.

  8. If IDRS CC:TXMOD shows a TC 976, research AMS and/or MeF as applicable:

    1. If the amended return is available, see IRM 4.119.4.21.1.5, Amended Returns, for further information.

    2. If the amended return is not available, suspend action on case for 14 days. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes. After the 14 days have passed:

    If Then
    The amended return is available See IRM 4.119.4.21.1.5, Amended Returns, for additional information.
    The amended return is not available
    1. Correspond with the taxpayer to request a signed copy of the amended tax return.

    2. Update IDRS activity with the appropriate Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

  9. If a new Freeze Code is present, see IRM 4.119.4.3.2, Freeze Codes, for instructions.

    Exception:

    See (10) below when Freeze Codes -V or -W are present.

  10. Take the following actions when IDRS CC:TXMOD displays indicators of Bankruptcy or litigation:

    If Then
    1. Freeze code -V and/or TC 520 (not reversed by TC 521 or 522) is present.

    2. Freeze code -W and/or TC 520 (not reversed by TC 521 or 522) with closing code 60-67, 70-81, 84, 85 or 89 is present.

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

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

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

  11. If a TC 604 is present, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ as appropriate.

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

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the appropriate PC.

  12. If a Letter 4552C was issued to the payer and no response was received:

    1. And the taxpayer disclaims knowledge of or denies receipt of the income, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    2. If the taxpayer disputes the amount of income in question ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. If a new address is present, review all prior notices to determine if a notice was previously mailed to that address.

    If Then
    A prior notice was issued to the address shown as the new address.
    1. Process the case to the next phase. DO NOT reissue the same notice.

    2. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

    A prior notice was not mailed to the address shown as a new address.
    1. Reissue the notice to the new address using the appropriate Amended Letter PC: 4305 (amended Letter 2531), 4505 (amended Letter 2030), 4525 (amended Letter 2030 after Letter 2531), 4535 (amended recomputed Letter 2030), 4705 (amended Stat Notice), 4755 (amended recomputed Letter 2030 after Stat Notice).

      Caution:

      There must be sufficient time remaining on the Statutory Notice of Deficiency suspense period to issue another recomputed notice (i.e., PC 4755).

    2. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the case folder and DCI with the appropriate PC.

  14. If a Form 1120 case has a proposed adjustment of $1,000,000 (or more) or a Form 1041 case has a proposed adjustment of $100,000 (or more), do not close the case with default Process Code 4850. The case requires special handling.

    1. See IRM 4.119.4.21.1.14.2, Form 1120 Large Dollar Guidelines, for additional information.

    2. See IRM 4.119.4.21.1.14.3, Form 1041 Accounts Receivable Guidelines (ARDI), for additional information.

  15. If the net tax increase is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    If the notice was returned as undeliverable and a newer address is available see (12) above. If a newer address is not available, follow the steps below.

    1. Issue Letter 4551C and include the following Special Paragraph: "We did not make any adjustments to the tax or prepaid credits because you did not respond to our previous notice."

    2. Close the case with PC 4400 or 4600.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

      Reminder:

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

  16. When working a no response to a Letter 2531, if the notice was issued for questionable underclaimed withholding, the taxpayer did not respond ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    Reminder:

    If the notice was returned as undeliverable and a newer address is available, reissue the notice to the newer address. Update the activity code and DCI as applicable. If a newer address is not available, follow the steps below.

    1. Issue Letter 4551C and include the following Special Paragraph: "We did not make any adjustments to the tax or prepaid credits because you did not respond to our previous notice."

    2. Close the case with PC 4400.

    3. Input TC 925 with PC 4400 using IDRS CC:REQ77/FRM77.

    4. Annotate PC 4400 on the DCI and case folder.

  17. When working a no response to a Letter 2030, if the notice was issued for questionable overclaimed withholding, the taxpayer did not respond ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

    Reminder:

    If the notice was returned as undeliverable and a newer address is available, reissue the notice to the newer address. Update the activity code and DCI as applicable. If a newer address is not available, follow the steps below.

    1. Input the adjustment using IDRS CC:ADJ54. See IRM 4.119.4.21.10, Adjustments, for further information.

    2. Close the case with PC 4680.

    3. Input TC 925 with PC 4680 using IDRS CC:REQ77/FRM77.

    4. Annotate PC 4680 on the DCI and case folder.

  18. When working a Form 1120 no response to Letter 2030 or Letter 3219B and the taxpayer is subject to 2% LCU. See IRM 4.119.4.16.5, Form 1120 2% Large Corporate Underpayment (LCU) – 2% LCU, for additional information.

4.119.4.20  (04-05-2016)
Undeliverable Notices

  1. The Clerical Function researches all BMF-AUR notices returned by the U.S. Postal Service as undeliverable for a new address.

    1. If a new(er) address is not available, the notice is returned to the notice mail date until the end of the notice suspense period.

    2. If a new(er) address is found, the notice (and case) is built into a batch for tax examiner review.

    3. The Clerical Function will annotate the DCI and case folder with 4XUD (X represents the phase).

    4. The Clerical function updates the IDRS Category Code to "UNDL" when appropriate.

      Caution:

      Correspondex Letters returned as undeliverable are NOT researched for a new(er) address.

  2. When Clerical determines that the undeliverable notice contains a new(er) address, the case is built into the applicable Undeliverable batch (BT 410/411, BT 620/621 or BT 820/821). The tax examiner will review all prior notices to determine if a notice was previously mailed to that address.

    If Then
    A prior notice was issued to the address shown on the new address.
    1. Process the case to the next phase. DO NOT reissue the same notice.

    2. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

    A prior notice was not mailed to the address shown as a new address.
    1. Reissue a notice to the new address with the applicable Amended Notice PC: 4305 (amended Letter 2531), 4505 (amended Letter 2030), 4525 (amended Letter 2030 after Letter 2531), 4535 (amended recomputed Letter 2030), 4705 (amended Stat Notice), 4755 (amended recomputed Letter 2030 after Stat Notice).

      Caution:

      There must be sufficient time remaining on the Statutory Notice of Deficiency suspense period to issue another recomputed notice (i.e., PC 4755).

    2. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

  3. When working a case that is either in a response or no response batch and an undeliverable notice is present:

    Caution:

    DO NOT treat Stat Notices stamped as "UNCLAIMED or REFUSED" as an undeliverable.

    Note:

    If a notice addressed to a POA is returned as undeliverable, do not take any action to research for better POA address. Retain the undeliverable in the case file.

    If Then
    The undeliverable notice is the most recent notice and in the same phase as the case.
    1. Update the IDRS Category Code to "UNDL."

    2. Annotate the case folder and DCI with the applicable undeliverable IPC: 43UD (Letter 2531), 45UD (Letter 2030) or 47UD (Stat Notice).

    3. Follow normal procedures based on the case status (i.e., response batch or no response batch). See IRM 4.119.4.21, Taxpayer Responses, or IRM 4.119.4.19, No Response, for additional information.

    The undeliverable notice IS NOT in the same phase as the case or IS NOT the most recent notice.
    1. If not already present on the case folder and DCI, annotate the case folder and DCI with the applicable IPC: 43UD (Letter 2531), 45UD (Letter 2030) or 47UD (Stat Notice).

    2. Follow normal procedures based on the case status (i.e., response batch or no response batch). See IRM 4.119.4.21, Taxpayer Responses, or IRM 4.119.4.19, No Response, for additional information.

  4. Occasionally the Clerical Function receives an undeliverable notice for a case that is assigned to a tax examiner.

    Caution:

    DO NOT treat Stat Notices stamped as UNCLAIMED or REFUSED as an undeliverable.

    Note:

    If a notice addressed to a POA is returned as undeliverable, do not take any action to research for better POA address. Retain the undeliverable in the case file.

    If Then
    The undeliverable notice is in the most recent notice and in the same phase as the case.
    1. Associate the undeliverable with the case.

    2. Update the IDRS Category Code to "UNDL."

    3. Annotate the case folder and DCI with the applicable undeliverable IPC: 43UD (Letter 2531), 45UD (Letter 2030) or 47UD (Stat Notice).

    4. Follow normal procedures based on the case status (i.e., response batch or no response batch).See IRM 4.119.4.21, Taxpayer Responses, or IRM 4.119.4.19, No Response, for additional information.

    The undeliverable notice IS NOT in the same phase as the case or IS NOT the most recent notice.
    1. Associate undeliverable with the case.

    2. Annotate the case folder and DCI with the applicable undeliverable IPC: 43UD (Letter 2531), 45UD (Letter 2030) or 47UD (Stat Notice).

    3. Follow normal procedures based on the case status (i.e., response batch or no response batch).

  5. If the Post Office returns mail as "UNCLAIMED or REFUSED" rather than undeliverable, continue processing the case using normal procedures. An additional address check is not necessary.

4.119.4.21  (09-11-2015)
Taxpayer Responses

  1. Most taxpayer explanations are self-explanatory and acceptable at face value. It is not necessary to verify everything the taxpayer says.

    1. The tax examiner should consider the reasonableness of the explanation. It may be necessary to consult with the Lead Tax Examiner. The Lead Tax Examiner will then make the determination if the case should be transferred to the Tax Compliance Officer (TCO) for further action.

    2. If other Exam issues are discovered during BMF-AUR processing, consult with the Lead Tax Examiner. Then, if necessary, consult with an Exam representative to decide the appropriate actions(s) to take.

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

    Exception:

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

4.119.4.21.1  (09-02-2016)
Taxpayer Responses - Overview

  1. The primary purpose of the BMF-AUR Program is to account for discrepancies between amounts on IRs and amounts on the tax return.

  2. Review carefully what the response is trying to say and research all related information.

  3. A taxpayer's response to a BMF-AUR notice can be:

    1. A copy of the Letter 2030 or Letter 2531.

    2. The taxpayer response page from the Letter 2030 or Letter 2531.

    3. A copy of the Letter 3219BStatutory Notice of Deficiency.

      Note:

      Taxpayers may submit their response through electronic media (ex: thumb drives, diskettes, flash memory etc.). See IRM 10.8.1, Information Technology (IT) Security, Policy and Guidance, for additional information.

      Note:

      The taxpayer is allowed 90 days (150 days if the notice is addressed to a person outside the U.S.) to petition the Tax Court. The taxpayer cannot receive an extension of this statutory period.

      Note:

      THE STATUTORY NOTICE IS A LEGAL DOCUMENT. If the taxpayer sends the original Letter 3219BStatutory Notice of Deficiency OR the Letter 2030 DO NOT make any marks or corrections on either response.

    4. A letter, note, or fax.

    5. An amended return.

    6. A telephone call.

    7. A Form 4442, Inquiry Referral, from Customer Service.

  4. The taxpayer's response (and all attachments) should be retained as part of the case file. If it can be determined that the taxpayer has submitted original documents make a copy for the case file and mail the originals to the taxpayer with a cover letter.

    Exception:

    Do not return original Information Return documents.

  5. If the taxpayer includes a telephone number in the response to any notice and it is appropriate, call them to resolve the outstanding U/R issue(s) before sending any written correspondence. Document when a phone call is made or attempted. Only one attempt is required. An attempt must be made even when the taxpayer provides only an evening phone number for a day shift tax examiner or a day phone number for a swing (night) shift tax examiner. See IRM 4.119.4.21.2.6, Out Calls, for further instruction.

    Note:

    Always identify yourself by title (e.g., Mr., Mrs. or Ms.) and last name or first and last name, employee identification (ID) Number, and as an IRS employee during telephone contact with the taxpayer. Provide the taxpayer with a telephone number to contact the Service about their case if needed. Always use courteous behavior when speaking to a taxpayer via the telephone. See IRM 4.119.4.21.2, Telephone Responses, for additional telephone and mandatory Disclosure procedures that must be followed.

  6. When evaluating responses, the tax examiner must review current BMF-AUR tax account activity for any changes.

    • Review IDRS CC:TXMOD for any new transaction codes, freeze codes, etc. that may impact processing

    • Review IDRS CC:ENMOD for any changes to the taxpayer's address

      Reminder:

      If IDRS CC:ENMOD displays indicator PDT (Potentially Dangerous Taxpayer), see IRM 25.4.1, Potentially Dangerous Taxpayer, for additional information. If IDRS CC:ENMOD displays indicator CAU (Caution Upon Contact), see IRM 25.4.2, Caution Upon Contact Taxpayer.

    • Review IDRS CC:CFINK for any changes to the taxpayer authorized representatives

  7. When evaluating responses, it may be necessary to review the Payer Agent List.

  8. While evaluating the taxpayer's response, verify revised calculations of the U/R amount, adjustments, tax, credits, and balance due/refund amounts are accurate. Leave an audit trail of all actions, if needed.

    Note:

    The following method may be used when processing a No Change case: All taxpayer addressed IRs that are now resolved (i.e., no longer U/R) should be marked with "Reported" , "Deleted" or "NonTaxable" , before using a Process Code to close the case.

  9. If additional returns or adjustment documents were requested during case analysis and:

    1. The case is being closed with an assessment in the Underreporter blocking series, leave the documents with the BMF-AUR case file.

    2. The case is being closed without an assessment, refile them separately.

  10. If the taxpayer writes in with a question or requests assistance on a Non-BMF-AUR related matter:

    1. Photocopy the question/request.

    2. Annotate taxpayer name, EIN, and address on the photocopy.

    3. Forward the photocopy to the appropriate area for response and leave the original in the case file.

    4. Follow Policy Statement P-21-3 (Action 61) Guidelines for responding to the taxpayer. See IRM 4.119.4.21.1.12, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61).

  11. Any response may require a new address. See IRM 4.119.4.21.1.3, Address Changes.

  12. When an original payment is included with the taxpayer response, see IRM 4.119.4.21.7.1, Discovered Remittances, for additional information.

  13. When working with correspondence that has not been processed through the Clerical Function (i.e., a faxed response sent directly to a specific tax examiner or correspondence received after a case/batch that has been assigned to a tax examiner/team), ensure that an IRS Received Date is recorded on IDRS.

    Exception:

    A faxed Form 2848, Power of Attorney and Declaration of Representative, with no explanation is not considered correspondence for purposes of updating the BMF-AUR Received Date.

4.119.4.21.1.1  (09-17-2014)
Controlling Responses

  1. Response cases to be analyzed by the BMF-AUR tax examiner are assembled into batches, which are then divided into work units. See IRM 4.119.4.2.1Controlling Work, for additional information regarding, updating: IDRS, DCIs and case folders for various actions.

  2. When assigning a work unit from a response batch, verify that there is a case folder for every TIN shown on the Work Unit Listing and that the TIN on the case folder matches the TIN on the Work Unit Listing BEFORE updating the control on IDRS. If a case folder is missing (or there is an extra folder) see IRM 4.119.4.21.1.1.1Lost Cases (Responses).

  3. Update the IDRS Control for the case folders that are verified against the Work Unit Listing.

    Note:

    If the case folder is missing either a DCI or a paper filed tax return or contains an incorrectly associated paper tax return, see IRM 4.119.4.21.1.1.1Lost Cases (Responses).

4.119.4.21.1.1.1  (09-17-2014)
Lost Cases (Responses)

  1. When a TIN is assigned to a response batch, but the corresponding case (i.e., case folder, DCI, and/or paper filed tax return) is missing, it is considered a "lost" case. Lost case includes incorrectly associated paper tax return in the case folder or incorrect case folder in the work unit (based on Work Unit listing verification).

    Note:

    See IRM 4.119.4.21.1.1.2Lost Responses, if the case file is missing taxpayer correspondence.

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

    Note:

    If only the DCI is missing, the Lead Tax Examiner will obtain a new DCI from the Clerical Function.

    If Then
    The Lead Tax Examiner locates the case Continue processing.
    The Lead Tax Examiner cannot locate the case folder
    1. Update IDRS activity with 4XLCMMDD (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Ensure that the IDRS control remains in the Clerical IDRS control number.

    3. Print IDRS CC:TXMOD and give to the Lead Tax Examiner who will route to the Clerical Function.

    The Lead Tax Examiner cannot locate the paper filed tax return Continue working the case. If necessary use IDRS CC:TRDBV to obtain tax return information.

    Note:

    These instructions do not apply to MeF returns.

4.119.4.21.1.1.2  (09-17-2014)
Lost Responses

  1. During the Response phase a case may: contain an extra response, a wrong response or a response may be missing.

  2. If the case contains an extra response:

    1. Give the extra response to the Lead Tax Examiner who will research to determine if the response belongs to another case in the batch.

    2. If the extra response does not belong in the batch, the Lead Tax Examiner will print and attach the IDRS CC:TXMOD to the correspondence and route to the Clerical Function.

  3. If the case contains the wrong response:

    1. Give the wrong response to the Lead Tax Examiner who will research to determine if the response belongs to another case in the batch.

    2. If the wrong response does not belong in the batch, the Lead Tax Examiner will print and attach the IDRS CC:TXMOD to the correspondence and route to the Clerical Function.

    3. If the case no longer contains a valid response, the case must be refiled back to the previous status.

    4. Update IDRS activity with the Activity Code reflecting the prior case status.

      Example:

      CP2XXXMMDD or STATMMDD as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    5. Annotate the DCI and case folder with 4XRF (X represents the phase).

    6. Route the case to the Clerical Function.

  4. If the case is missing the taxpayer's response (per the TIN assigned to the work unit) notify the Lead Tax Examiner who will search for the response in the batch. If the response is not located:

    1. Update the IDRS activity with 4XLRMMDD (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Annotate the DCI and case folder with 4XLR (X represents the phase).

    3. Give the case to the Lead Tax Examiner who will route the case to the Clerical Function.

    4. The Clerical Function will attempt to locate the missing response and will return the case file back to the originating tax examiner.

      If Then
      The Clerical Function locates the missing response. Continue processing.
      The Clerical Function cannot locate the missing response.
      1. Contact the taxpayer, apologize for the inconvenience and request the taxpayer resubmit their response.

      2. Update IDRS with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

      3. Annotate on the DCI and case folder 4XLT or 4XPH (X represents the phase), as appropriate.

4.119.4.21.1.1.3  (12-11-2014)
Refiling Cases (Internal Process Code 4XRF)

  1. There are occasions when a case needs to be refiled back to its previous status (e.g., a duplicate correspondence is received).

  2. When refilling a case to its previous status take the following actions:

    1. Update the IDRS activity with the previous suspense status.

      Example:

      CP2XXXMMDD or STATMMDD as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Annotate the DCI and case folder with 4XRF (X represents the phase).

    3. Route the case to the Clerical Function.

    Caution:

    If the Letter 2531,Letter 2030, or Letter 3219B has aged (time frame has expired or passed), do not refile the case. Continue processing. See IRM 4.119.4.19No Response or IRM 4.119.4.21.11.2, Default Letter 3219B Statutory Notice of Deficiency, for further information.

4.119.4.21.1.1.4  (04-05-2016)
Case Transfer to Another Area

  1. When transferring a case to another area (i.e., Appeals, Exam, Accounts Management, etc.), close the case with the appropriate transfer Process Code.

    1. Do Not input a TC 290 when transferring to another area.

    2. Close the IDRS control base.

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

    5. If the taxpayer has been contacted (i.e., Letter 2531, Letter 2030, etc.) issue Letter 4551C to inform the taxpayer we have transferred the case to another area.

      Exception:

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

    Reminder:

    When transferring a case in Stat Notice phase to Exam, place the case in suspense and allow the statutory period to expire before closing the case PC 4790. See IRM 4.119.4.3.2, Freeze Codes.

  2. When transferring a case to another area the case file must be complete. In addition to the current case contents the case file must include the following:

    1. Prints of all notices issued.

    2. Copy of DCI.

      Note:

      Ensure the original DCI is retained in the case file.

4.119.4.21.1.2  (09-17-2014)
Abatement of Interest

  1. IRC 6404(e)(1) provides information for abatement of interest on deficiencies or payments of deficiencies attributable to any unreasonable error or delay by the Service in performing a ministerial or managerial act.

  2. A ministerial act is a procedural or mechanical action that does not involve the exercise of judgment or discretion, and that occurs during the processing of a taxpayer's case after all prerequisites to the act have taken place.

  3. A managerial act is an administrative action that occurs during the processing of a taxpayer case and that involves the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. Interest attributable to a general administrative decision, such as the Service's decision on how to organize the processing of tax returns, may not be abated.

  4. IRC 6404 also provides several exceptions to the IRC 6601 general requirement that interest be charged from the due date of the return until the balance due is paid in full.

  5. Annotate and route taxpayer's requests and claims for abatement of interest to the Interest Abatement Coordinator (IAC) for processing.

    Note:

    If taxpayer requests interest abatement, address this in an open paragraph.

    Note:

    The assessment of interest is mandatory, unless the law specifically permits suspension, waiver or reduction of interest. The law does not permit the reduction of interest for reasonable cause.

4.119.4.21.1.3  (09-02-2016)
Address Changes

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

  2. Changes to the taxpayer name line due to a spelling error should also be made. However, do not change the first four characters of the name line (i.e., the name control).

    1. The authority for making changes to a primary name line is delegated to the BMF Entity function.

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

    3. See IRM 21.7.13.7.2.3, Cases Forwarded to Submission Processing BMF Entity, for additional information.

  3. For certain notices, such as the Letter 3219B, Statutory Notice of Deficiency, the Internal Revenue Code provides that when the notice is sent to the taxpayer's last known address (LKA), the notice is legally effective even if the taxpayer never receives it.

    Note:

    As a point of due diligence, if there is taxpayer correspondence with a different address mail a copy of the Letter 3219B, Statutory Notice of Deficiency to that address as well. Do not update Master File without clear and concise notification from the taxpayer.

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

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

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

    3. Form 8822-B, Change of Address, when received in conjunction with a BMF-AUR case.

    4. Oral notification made in response to a BMF-AUR notice which meets appropriate disclosure guidelines or if a taxpayer is contacted by phone by an IRS employee in connection with the taxpayer's account (not related to an address change). The taxpayer may provide a change of address to the IRS employee who responded to the phone call or initiated the phone contact. See IRM 4.119.4.21.2, Telephone Responses, for additional information regarding telephone responses.

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

      Caution:

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

      Note:

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

  5. Clear and concise notification, whether written or oral, must contain the following:

    1. The Entity's full name.

    2. For written requests, the signature of an authorized representative. For oral requests, successful completion of disclosure verification. See IRM 4.119.4.21.2.2, Disclosure, for additional information.

    3. The taxpayer's new address.

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

    5. The taxpayer identification number (TIN).

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

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

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

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

4.119.4.21.1.4  (09-17-2014)
Adjustment Cases Relating to BMF-AUR

  1. Accounts Management frequently receives amended returns or correspondence from taxpayers who received BMF-AUR notices. Multiple assessments could result if both Adjustments and BMF-AUR simultaneously work these cases.

  2. To eliminate multiple assessments:

    1. Accounts Management may route cases related to an OPEN BMF-AUR case to BMF-AUR. Work these cases following normal BMF-AUR procedures.

    2. Always check AMS and/or MeF (if applicable) for any indication that an amended return has been filed.

    3. Accounts Management will work responses or amended return related to a CLOSED BMF-AUR case as part of the subsequent adjustment.

    4. Accounts Management will forward all reconsideration cases to BMF-AUR prior to any new adjustment.

  3. Responses that deal with multiple tax years are treated as separate responses whenever feasible. In such instances, photocopy the response so each tax year has the appropriate response to resolve the case. Route copies of the responses that are non-BMF-AUR to Accounts Management.

    Exception:

    Coordinate Net Operating Losses (NOL) and carryback/carryforward (CB/CF) issues between Accounts Management and BMF-AUR. Exercise caution with regard to Statute of Limitations and payment of interest.

4.119.4.21.1.5  (04-05-2016)
Amended Return

  1. If the taxpayer responds with an amended return, review IDRS CC:TXMOD to determine if the adjustment posted. Math verify any tax adjustments.

    Note:

    See IRM 4.119.4.21.11.1, Instructions Specific to Statutory Notices/Responses, for amended returns that exceed the tax increase shown on the Letter 3219BStatutory Notice of Deficiency.

  2. If the adjustment did not post and the taxpayer responds with a mathematically correct amended return or a signed statement that recalculates the tax on some but not all of the U/R issues, or does not address the penalties, send the appropriate notice to the taxpayer for signature. Include PARAGRAPH 110 to address penalties not included on the amended return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Advise the taxpayer that the amended return information was included in the proposed adjustment.

    Note:

    If the amended return is received on or before the BMF-AUR contact date, do not pursue penalties.

    Reminder:

    Written managerial approval is required when the negligence disregard penalty applies. Include PARAGRAPH 75 on the notice. See IRM 4.119.4.16.3.2, Accuracy-Related Penalty Due to Negligence or Disregard of Rules or Regulations (Negligence Disregard Penalty), for additional information.

  3. TCO approval is required when the taxpayer responds with a Form 1120X≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ U/R income included on our original notice AND ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Refer these cases to the Lead Tax Examiner for additional review.

    Exception:

    TCO approval is ALWAYS required when the originally filed return was for zero income and the taxpayer is now claiming more income than the U/R.

    Note:

    See IRM 4.119.4.21.3.16, Securities Sales and Cost Basis, when the taxpayer is claiming additional Cost Basis.

    Caution:

    Taxpayers may use an amended return to further support their explanation of how income was treated on the originally filed return (e.g., netting, nominee recipient, income on another return, reported in a different tax year, etc.). Follow the instruction in the applicable IRM section when the taxpayer's explanation addresses these issues BEFORE considering a TCO referral.

  4. TCO approval is required when the taxpayer responds with an amended Form 1041≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ U/R income included on our original notice AND ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Refer these cases to the Lead Tax Examiner for additional review.

    Exception:

    TCO approval is ALWAYS required when the originally filed return was for zero income and the taxpayer is now claiming more income than the U/R.

    Note:

    Form 1041, line 18 is not considered an expense or deduction. It is a distribution of income to beneficiaries. See (6) below for additional information.

    Note:

    See IRM 4.119.4.21.3.16, Securities Sales and Cost Basis, when the taxpayer is claiming additional Cost Basis.

    Caution:

    Taxpayers may use an amended return to further support their explanation of how income was treated on the originally filed return (e.g., netting, nominee recipient, income on another return, reported in a different tax year, etc.). Follow the instruction in the applicable IRM section when the taxpayer's explanation addresses these issues BEFORE considering a TCO referral.

  5. If the taxpayer submits an amended return that has not posted to IDRS and includes all U/R issues:

    1. Ensure it is for the correct tax year.

    2. Verify the name and address.

    3. Math verify for revised tax and applicable penalties (e.g., Accuracy Related penalty).

      Note:

      See IRM 4.119.4.21.6, Partially Agreed Responses, if the taxpayer's calculation of new tax does not match the verified revised tax figures and/or does not include applicable penalties.

    4. Once verified, process the assessment based on the recomputed tax figures. See IRM 4.119.4.21.10, Adjustments, for additional information.

      Caution:

      The response must contain a signature of agreement (including claims for refunds). If signature is missing, issue a new notice with revised figures. See IRM 4.119.4.21.6.1, Recomputed Notice/Supplemental Report.

      Note:

      If for any reason the amended return is not clear or complete, correspond for missing information.

    5. Close the case using Process Code 4470 (Letter 2531 phase) 4675 (Letter 2030 phase) or 4875 (Stat Notice phase).

    6. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    7. Annotate the DCI and case folder with the appropriate PC.

  6. If the taxpayer submits an amended Form 1041, agreeing to all the U/R income and allocates it to the beneficiaries:

    If Then
    They also provide amended Schedule K-1(s) for all the U/R income.
    1. Accept the explanation.

    2. Send Letter 4551C with the following special paragraph "Please advise the impacted beneficiaries to amend their tax return based on the amended Schedule K-1(s) you provided."

    3. Close the case with the applicable N/C Process Code.

    4. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    5. Annotate the case folder and DCI with appropriate N/C Process Code and include NRC 10.

    If all the amended Schedule K-1(s) are not provided.
    1. Send Letter 4550C requesting the amended Schedule K-1(s).

    2. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Annotate DCI and case folder with appropriate IPC.

    4. Suspend and monitor. If no activity at the end of suspense period, take next action.

  7. In order to accept the amended return as an agreed response, the tax change shown on the amended return must agree with the manually computed tax change ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and must address applicable penalties (e.g., Accuracy Related penalty). If not, advise the taxpayer of the discrepancy and continue processing the case.

  8. If the amended return information results in a zero (0) tax change and a TC 976 or TC 971 AC 010 or 012 - 016 posted, input/verify TC 290 for .00 to release the A Freeze.

    1. Close the case with the appropriate Process Code. If a change to TXI ONLY is necessary. See IRM 4.119.4.21.6, Partially Agreed Responses.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the appropriate PC.

  9. If the adjustment has posted:

    And Then
    The amended return correctly includes all U/R issues.
    1. Close the case with the appropriate N/C Process Code.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the case folder and DCI with the appropriate Process Code and include NRC 10.

    The amended return addresses all U/R issues but not the Accuracy Related penalty.
    1. Pursue the penalty if the amended return was filed after the BMF-AUR contact.

    2. Issue Letter 4550C advising the taxpayer that they are subject to the Accuracy Related penalty.

    3. Prepare a Letter 3219B, Statutory Notice of Deficiency for the penalty amount. Continue processing the case through to default (if necessary).

    There are other U/R issues besides those reported on the amended return. Adjust the U/R by reworking the case and send the appropriate notice for the taxpayer’s signature.
  10. The taxpayer replies that they filed an amended return which included the U/R income in question, review IDRS CC:TXMOD.

    1. If IDRS shows a TC 290, and the tax increase due to U/R income matches the TC 290, close the case.

    2. If IDRS shows a TC 290, and the tax increase due to U/R income does NOT match the TC 290, order the TC 290 DLN.

    3. If IDRS shows a TC 976 or TC 971 AC 010 or 012 - 016 with no corresponding TC 290 and there is an indication that it is a CIS document order the return. See IRM 4.119.4.3.5, Correspondence Imaging System (CIS) Documents, for more information.

    4. If IDRS does not show a TC 976 or TC 971 AC 010 or 012 - 016, or the amended return cannot be obtained, send Letter 4550C to request a signed copy from the taxpayer. Include the following Special Paragraph: "You indicated that the income in question was reported on your amended return, however, we are unable to locate it. Please send or fax us a signed copy of your amended return attached behind a copy of this letter."

  11. If the amended return is not acceptable or all BMF-AUR issues are not addressed and case results in a tax decrease, send the appropriate letter with a Special Paragraph informing the taxpayer that we are unable to process the amended return as filed since they did not address all of the issues shown on our notice.

    Caution:

    Consider the date the amended return was submitted and the date the notice was issued when creating the Special Paragraph.

  12. If the U/R issue is resolved, but the taxpayer states that another amount was NOT CLAIMED, UNDERCLAIMED, OR OVER-STATED on the original return AND:

    1. The taxpayer provides sufficient information, make the necessary adjustment. Use good judgment to determine if the taxpayer is entitled to this adjustment. If necessary, discuss with the Lead Tax Examiner to determine action to be taken.

      Note:

      STATUTE OF LIMITATIONS MUST BE CONSIDERED.

    2. If the taxpayer does not provide all of the necessary information, contact the taxpayer for the missing information and/or documentation.

  13. If the amended return results in a no change to tax:,

    1. Close the case with the appropriate Process Code.

    2. Input TC 925 with the applicable closing Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the case folder and DCI with the appropriate Process code and include NRC 10. See IRM 4.119.4.21.6, Partially Agreed Responses, for additional instructions.

  14. CAT-A criteria identifies issues that require a referral to the Examination Classifiers prior to allowing a taxpayer claim, including protective claims and requests for abatement of CAT-A criteria penalties as identified in IRM Exhibit 21.5.3-2Examination Criteria (CAT-A) – General. If a response is received with CAT-A criteria refer the case to the Lead Tax Examiner for review. The Lead Tax Examiner will determine if the case should be transferred to the TCO for further action.

4.119.4.21.1.6  (09-02-2016)
Appeals

  1. If the taxpayer makes a non-docketed appeals request (i.e., specifically requests a hearing with an Appeals Officer or submits a Form 12203, Request for Appeals Review), prior to issuance of a Statutory Notice take the following actions:

    If Then
    There are less than 365 days left on the ASED.
    See IRM 4.119.4.1.2, Statute Awareness Program, for Statute guidelines.
    1. Attempt to resolve the issue(s) by telephone. See IRM 4.119.4.21.2.6, Out Calls, for further information.

    2. Advise the taxpayer that Appeals does not accept non-docketed cases when there are less than 365 days left on the statute.

    3. If the taxpayer still wants Appeals to consider their case, inform the taxpayer that they will receive a Statutory Notice of Deficiency that will allow for them to appeal their case to the U.S. Tax Court.

    4. Issue Letter 3219B, Statutory Notice of Deficiency.

    There are 365 days or more left on the ASED.
    1. Attempt to resolve the issue(s) by telephone. See IRM 4.119.4.21.2.6, Out Calls, for further information.

    2. If it is still necessary to transfer the case to Appeals, research the following website: http://appeals.web.irs.gov/APS/caserouting.htm. Select the Case Routing Addresses and Instructions link to access the Appeals Case Routing sharepoint site, and select the Spreadsheet Tool to launch the Case Routing Guide. Select Campus Source Exam for the type of Case, and the appropriate Campus Location to find the Campus Appeals office based on the IRS Campus source of the case.

    3. Complete Form 3210, Document Transmittal, and see IRM 4.119.4.21.1.1.4, Case Transfer to Another Area, for additional information on preparing the case for transfer.

    4. Close the case with PC 4590.

    5. Issue Letter 4551C to inform the taxpayer we have transferred the case to another area.

    6. Input TC 925 with PC 4590 using IDRS CC:REQ77/FRM77.

    7. Annotate PC 4590 on the DCI and case folder.

    8. Give the case to the Clerical Lead for the establishing of the AIMS control.

  2. If the taxpayer makes a non-docketed appeals request (i.e., specifically requests a hearing with an Appeals Officer or submits a Form 12203, Request for Appeals Review, after the issuance of a Statutory Notice:

    1. Issue a Letter 4550C advising the taxpayer that their request cannot be honored and that they need to file a petition with the U.S. Tax Court within the period specified (usually 90 days) and following the instructions in the Letter 3219B, Statutory Notice of Deficiency, they received.

      Note:

      The taxpayer has 150 days to petition the U.S. Tax Court if the notice is addressed to a person outside the U.S.

    2. Inform the taxpayer that as part of the petitioning process, their case will be reviewed by the Appeals Office.

    3. Continue processing, refile the case as necessary for the remainder of the Statutory Notice suspense period.

    Note:

    If less than 30 days remain on the 90-day period (150 days if the notice is addressed to a person outside the U.S.), the tax examiner must attempt to contact the taxpayer by telephone to advise them that their request has been denied. See IRM 4.119.4.21.2.6, Out Calls, for further information.

    Note:

    See IRM 4.119.4.1.2, Statute Awareness Program, for Statute guidelines.

    Note:

    DO NOT UPDATE DCI WITH PC 4800 FOR NON-DOCKETED CASES

    .

4.119.4.21.1.7  (09-02-2016)
Bankruptcy Procedures - Responses

  1. When the taxpayer indicates that they filed for bankruptcy:

    If And Then
    IDRS CC:TXMOD displays the following Bankruptcy indicators:
    1. Freeze code -V and/or TC 520 (not reversed by TC 521 or 522).

    2. Freeze code -W and/or TC 520 (not reversed by TC 521 or 522) with closing code 60-67, 70-81, 84, 85 or 89.

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

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FM77.

    3. Annotate the DCI and case folder with the appropriate PC.

    Bankruptcy indicators are not present on IDRS CC:TXMOD The taxpayer does not provide documentation Request verification of the Bankruptcy and continue processing.
    Bankruptcy indicators are not present on IDRS CC:TXMOD The taxpayer provides documentation
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FM77.

    3. Annotate the DCI and case folder with the appropriate PC.

4.119.4.21.1.8  (09-11-2015)
Deposits to Stop the Accrual of Interest - Section 6603

  1. A taxpayer may stop the further accrual of interest while the case is being resolved by making either a payment or an IRC 6603 deposit.

  2. IRC Section 6603 allows taxpayers to submit deposits to suspend the running of interest on potential underpayments:

    1. IRC 6603 deposits are identified on IDRS CC:TXMOD by a TC 640 with a Blocking series of 990-999, or TC 640 with DPC 12.

    2. The taxpayer must use the specific designation for the payment or conversion of a cash bond to be considered an IRC 6603 payment.

    3. Unlike Cash Bonds, the taxpayer may be entitled to credit interest (at a lower 6603(d)(4) rate) on any refunded portion of the IRC 6603 deposit that was made for a disputable tax.

  3. A taxpayer may request the return of all or part of a IRC 6603 deposit before the deposit is used for a payment of tax. The requests must be in writing and include the following:

    1. The date(s) and amount(s) of the original deposit(s),

    2. The type(s) of tax to which the deposit was intended to be applied,

    3. The tax year(s) to which the deposit was intended to be applied.

  4. If the taxpayer requests a return of a IRC 6603 deposit, a manual refund is required. Interest must be manually computed and input. See IRM 21.4.4, Manual Refunds, IRM 20.2.4.8.2.2, Request for Return on an IRC 6603 Deposit, IRM 21.5.1, General Adjustments, and IRM 21.5.2, Adjustment Guidelines, for more information.

    Note:

    The accrual of interest stops on the date of the taxpayer remittance. Interest continues to accrue on any unpaid amounts, including accrued interest.

4.119.4.21.1.9  (04-05-2016)
Disaster Area

  1. The BMF-AUR Coordinator will monitor ZIP Codes for specific declared disaster area situations as necessary based on IRS Disaster Relief Memos.

  2. The BMF-AUR Coordinator will provide the tax examiners instruction for the states that have declared disasters.

  3. Review FEMA website at http://www.fema.gov for special case handling requirements.

    Reminder:

    IDRS CC:TXMOD displays a disaster related Freeze Code (-S or -O) on impacted accounts.

  4. The taxpayer corresponds before the disaster start date and a Freeze Code -O is present on the account:

    If Then
    The response results in a closure (i.e., No Change, Fully Agreed or Partially Agreed)
    1. Close the case with the appropriate Process Code.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the appropriate PC.

    The response does not result in a closure (i.e., recomputed notice or additional correspondence is needed)
    1. Update IDRS activity with 4XMRDSMMDD (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes and Exhibit 4.119.4-8, Definer Codes.

    2. Suspend the case until the Disaster date expires.

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

  5. The taxpayer corresponds during the disaster time frame:

    If Then
    The response results in a closure (i.e., No Change, Fully Agreed, or Partially Agreed)

    Reminder:

    Do not assess the case by default until the disaster expiration date has passed. See IRM 4.119.4.4.3, Declared Disaster Areas, for additional information.

    1. Close the case with the appropriate Process Code.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the appropriate PC.

    The response does not result in a closure. Correspond for additional information (CRX Letter or next notice) as appropriate.

    Exception:

    See (6) below if the response indicates that the taxpayer’s place of business or records was lost, destroyed or not accessible due to the disaster.

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

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with the appropriate PC.

    Caution:

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

4.119.4.21.1.10  (12-11-2014)
Installment Agreements

  1. If the taxpayer AGREES (contains signature and no disputing comments) to the proposed BMF-AUR adjustment and STATES they cannot pay, will pay later, or submits a specific request for an installment agreement (IA), a payment plan, or requests the additional tax due to be added to an existing installment agreement (IA) close the case agreed and:

    1. Route the IA request to Compliance Service Collection Operation (CSCO).

      Note:

      If the Form 433-D or Form 9465 is the signature document used to agree to the tax increase, make a copy to send to CSCO. Use red ink to annotate the copy of the Form 433-D or Form 9465 with "Pending BUR Assessment." Annotate the original Form 433-D or Form 9465 that a copy was sent to Collection.

    2. Leave BMF-AUR Case Note "IA to Coll" or similar wording.

    3. Issue a Letter 4551C to advise the taxpayer that their payment plan request has been referred to the proper area.

4.119.4.21.1.11  (09-25-2015)
Letters From a Third Party and Authorization From a Valid Power of Attorney (POA)

  1. Information supplied by an unauthorized third party may be used. However, SEND NO TAX INFORMATION TO, OR DISCUSS TAX INFORMATION WITH, AN UNAUTHORIZED PERSON. Any further correspondence required must be sent directly to the taxpayer.

  2. The Third Party Designee (Check Box) authority on the tax return, does not apply to Compliance issues, including BMF-AUR. Therefore do not send copies of BMF-AUR correspondence to a Third Party Designee and do not disclose specific case or tax return information based on a Third Party Designee check box.

  3. In order to respond to the Service on behalf of a taxpayer, a person must be an attorney, certified public accountant (CPA), enrolled agent, or enrolled actuary and must be authorized by Form 2848, Power of Attorney and Declaration of Representative. A Form 2848 also authorizes the representative to receive confidential tax return information from the Service. A taxpayer may authorize the Service to discuss and provide specific confidential tax return information to any individual, corporation, firm, trust, partnership, or organization designated on Form 8821, Tax Information Authorization, but this form does not authorize the person to respond to the Service on behalf of the taxpayer if the response constitutes practice before the Service. A document/letter request may be used in lieu of Form 2848 or Form 8821, provided it contains all of the information described below.

    Note:

    The taxpayer may give oral authorization to address issues with a third party.

  4. The Form 2848, Form 8821, or a document/letter in lieu of these two forms, a facsimile (FAX), or photocopy of these forms should contain relevant information requested of a signatory by a Form 2848 or Form 8821, including:

    • Name, EIN, and mailing address of the entity

    • Name and mailing address of the designated representative Power of Attorney (POA) or Tax Information Authorization (TIA)

      Caution:

      DO NOT SEND copies of notices or Correspondex letters to the designated representative when the box on Form 2848 Part I, section 2 or Form 8821 box 5a is not marked.

    • Type of tax and the Federal tax form number

    • Tax year(s) or period(s) or specific use (POA) or specific matter (TIA)

    • Authorized signature and date of signature

    • In the case of a Form 2848, a completed Declaration of Representative (Part II)

    Caution:

    If the POA/TIA is determined to be invalid, return it to the taxpayer unless there is an indication that Form 2848 or Form 8821 has been sent to CAF for evaluation. Include the invalid POA/TIA as an attachment to Letter 2627C.

  5. If the POA/TIA is attached to the return, and the POA contains all of the above items, fax the authorization to the CAF Function for further processing and write "Faxed to POA" on the form and leave it in the case folder.

  6. If the POA/TIA is received without a return or document, and contains all of the items shown above, fax it to the CAF Function and leave a Case Note.

  7. If a letter request is used in lieu of Form 2848 or Form 8821 and contains all of the items shown above, fax the request to the CAF Function for processing and Write "Faxed to POA" on the letter and leave it in the case folder.

  8. When a valid POA/TIA is received specifically for the BMF-AUR notice (ex: checks the "Specific Use" box in Form 2848, Part I, section 4 or indicates that the representative is only authorized to discuss the BMF-AUR notices) Do not fax to the CAF Function.

  9. If the taxpayer or POA/TIA writes in and requests that a current POA be revoked and that no further information should be sent to this POA:

    1. Fax the POA revocation request to the CAF Function for processing.

    2. Ensure information is not sent to the revoked POA.

  10. When a POA/TIA request is included in the response that does not relate to the BMF-AUR case (i.e., for another taxpayer, another tax return type or different tax year, etc.) route (do not FAX) the form(s) to the CAF unit for processing. DO NOT leave a copy in the BMF-AUR case file.

4.119.4.21.1.12  (09-02-2016)
Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61)

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

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

    • Requests additional information from the taxpayer, or

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

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

  3. When a quality response cannot be issued timely, an interim response must be initiated by the 30th calendar day from the IRS Received Date. Issue a Letter 4314C.

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

    Reminder:

    Screen taxpayer responses to BMF-AUR notices received after the BMF-AUR case is closed (BMF-AUR Reconsideration cases) to ensure cases are worked on a first in, first out basis. Control the case on IDRS with the IRS received date no later than 14 days from the BMF-AUR received date (and send an interim letter if the 30-day criteria outlined above cannot be met). See IRM 4.119.4.24, BMF-AUR Reconsideration Cases, for additional information.

  5. Subsequent interim letters must be issued when a final resolution cannot be provided as indicated in the previous interim letter.

4.119.4.21.1.13  (09-11-2015)
Relief from Accuracy Related Penalties

  1. If the taxpayer’s response claims or cites substantial authority as the basis for tax treatment of an item, see IRM 4.119.4.16.3.1, Accuracy-Related Penalty Due to Substantial Understatement of Tax.

  2. Accuracy-related penalties will not apply to any portion of the understatement if the taxpayer demonstrates that there was reasonable cause for the understatement and the taxpayer acted in good faith. The most common reasonable cause issues for waiving the penalty (if they occurred at the time of filing) include:

    1. Death (taxpayer or individual responsible for filing and paying taxes).

    2. Serious illness (taxpayer or individual responsible for filing and paying taxes).

    3. Disaster (i.e., fire, flood, tornadoes, etc.).

    4. Unavoidable absence (taxpayer or individual responsible for filing and paying taxes).

    5. Inability to obtain records due to reasons beyond the taxpayer’s control.

      Note:

      See IRM 20.1.1, Penalty Handbook - Introduction and Penalty Relief, for more information regarding reasonable cause criteria in general.

      Note:

      See IRM 20.1.5, Penalty Handbook - Return Related Penalties, for exceptions to the Substantial Understatement Penalty.

  3. Depending on the facts and circumstances of each case, the tax examiner has the following choices:

    1. Denying the request for penalty relief on the entire or a portion of the understatement.

      Note:

      Per IRC 6751(b), written managerial approval is required at the time that the tax examiner determines to deny the taxpayer’s request for penalty relief. The signed approval must be included with the case file.

    2. Waiving the penalty in its entirety.

    Caution:

    If the substantial understatement or negligence disregard penalty can be waived, and a recomputed Letter 2030 is needed, see the Lead Tax Examiner for additional information.

  4. Advise the taxpayer of the status of their request to have the penalty waived:

    1. If the penalty is fully waived, include PARAGRAPH 78 on the revised Letter 2030.

    2. If the request is denied, include PARAGRAPH 79 when issuing a revised Letter 2030.

      Note:

      If the taxpayer agrees with the proposed tax increase and the penalty request is denied, issue Letter 4550C advising the taxpayer why the Accuracy – Related Penalty was not waived.

4.119.4.21.1.14  (09-25-2015)
Sensitive Case

  1. Sensitive Case Reports (SCR) are used to notify Leadership of the existence of a case where a notice has been issued with a potential balance due that is likely to attract media or stakeholder attention.

  2. Generally, a sensitive case meets one or more of the following criteria:

    1. Likely to attract media or Congressional attention. See IRM 4.119.4.21.1.14.1, Congressional Cases, for additional information.

    2. Proposed assessment of $1 Million or more. See IRM 4.119.4.21.1.14.2, Form 1120 Large Dollar Guidelines, or IRM 4.119.4.21.1.14.3, Form 1041 Accounts Receivable Guidelines (ARDI), for additional information.

    3. Affects a large number of taxpayers.

  3. If the BMF-AUR case meets the sensitive case criteria, consult with the Lead Tax Examiner for determination and referral.

  4. Take the following action to determine if a SCR is needed:

    1. Review the proposed assessment for technical and mathematical accuracy.

    2. Analyze the taxpayer’s account to ensure all affected tax periods are processed appropriately.

    3. Verify the payer information is accurate.

    4. If the taxpayer provides an unacceptable response (or states they disagree without giving a reason) an attempt to resolve the issue(s) by telephone MUST be made. Document the contact, including if telephone contact could not be made.

    5. When the evaluation is completed, and it is determined that an SCR is needed, notify BMF-AUR Headquarters of the proposed action and any updates for review prior to distribution of the report to local management.

4.119.4.21.1.14.1  (09-17-2014)
Congressional Cases

  1. A case is considered a Congressional if correspondence/inquiry is received on U.S. Congressional Letterhead or attached to U.S. Congressional Letterhead.

  2. If a Congressional case is discovered, immediately give the case to the BMF-AUR Taxpayer Advocate liaison for expedite handling.

    Note:

    Do not consider a case a Congressional if the taxpayer states they sent a copy of the BMF-AUR notice to a member of Congress or the White House, or contacted or is going to contact a member of Congress or the President, or threatens to do so if the case is not resolved.

  3. The case may require a Sensitive Case Report (SCR). See IRM 4.119.4.21.1.14, Sensitive Case, for additional information.

4.119.4.21.1.14.2  (12-11-2014)
Form 1120 Large Dollar Guidelines

  1. The Service must strive to minimize the volume of unresolved large dollar debit and credit modules/issues in the inventory. Therefore, it is necessary to ensure that all proposed assessments involving a balance of $1,000,000 and over are expeditiously resolved.

  2. Take the following action for any cases (including fully agreed cases) that meet Large Dollar criteria:

    1. Leave a case note using Form 12864, Case History Sheet, stating that the large dollar issue has been referred to the TCO for special handling.

    2. Transfer the case to the Lead Tax Examiner for referral to the TCO.

    3. Update IDRS activity with the applicable Activity Code. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    4. If necessary, issue an interim letter to the taxpayer. See IRM 4.119.4.21.1.12, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61), for additional information.

  3. The TCO will take the following actions:

    1. Review the proposed assessment for technical and mathematical accuracy.

    2. Analyze the taxpayer's account to ensure that all affected tax periods process appropriately.

    3. Verify that the payer information is accurate.

    4. If the taxpayer provides an unacceptable response (or states they disagree without giving a reason) an attempt to resolve the issue(s) by telephone MUST be made. Input a Case Note using Form 12864, Case History Sheet, to document the contact, including if telephone contact could not be made.

      Note:

      For fully agreed cases, contact the taxpayer if necessary.

    5. Leave a case note using Form 12864, Case History Sheet.

      Note:

      The case may require a Sensitive Case Report (SCR). See IRM 4.119.4.21.1.14, Sensitive Case, for additional information.

  4. If the case is being closed with an assessment of over $10 million dollars, photocopy the entire case contents. Make prints of IDRS CC:TXMOD, Information Returns, Case Notes, Case History and Letter 2030 or Letter 2531. Send the copies/prints to the Chief Financial Office Staff at the following address:
    IRS
    CFO, Business Analysis & Support Section
    Stop S-2, 1035
    333 W. Pershing Rd
    Kansas City, MO 64108

    Reminder:

    Include a case note using Form 12864, Case History Sheet, indicating the case information was sent to CFO.

4.119.4.21.1.14.3  (12-11-2014)
Form 1041 Accounts Receivable Guidelines (ARDI)

  1. Due to the adverse impact on Accounts Receivable (ARDI), the Service must strive to minimize the volume of unresolved large dollar debit and credit modules/issues in the inventory. Therefore, in accordance with prevailing guidelines and in tandem with all other processing timeliness requirements (i.e., first in, first out, etc.), it is necessary to ensure that all modules/issues involving a balance of $100,000 and over are expeditiously resolved.

  2. Most of the cases that meet the large dollar case criteria (the proposed assessment is $100,000 or more) require special case processing.

  3. Cases identified that require special handling, the tax examiner should:

    1. Indicate "ARDI" on the case folder.

    2. Leave a case note using Form 12864Case History Sheet.

    3. Transfer the case to the Lead Tax Examiner who will refer to a locally designated ARDI Coordinator for specialized processing.

    4. If necessary, issue an interim letter to the taxpayer. See IRM 4.119.4.21.1.12, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61), for additional information.

  4. The ARDI Coordinator will take the following actions:

    1. Review the proposed assessment for technical and mathematical accuracy.

    2. Analyze the taxpayer's account to ensure that all affected tax periods process appropriately.

    3. Verify that the payer information is accurate.

      Note:

      For fully agreed cases, contact the taxpayer if necessary. However, for disagreed cases, if possible telephone contact with the taxpayer MUST be made as part of the case resolution.

    4. Leave a case note using Form 12864, Case History Sheet.

    5. When the case evaluation is completed, take the appropriate case action (i.e., input the assessment, revise the proposal and issue a Recomputed Notice, or close the case No Change) using standard processing procedures.

      Note:

      If the proposed adjustment is $1 Million or more the case may require a Sensitive Case Report (SCR). See IRM 4.119.4.21.1.14, Sensitive Case, for additional information.

  5. If the case is being closed with an assessment of over $10 million dollars: photocopy the entire case contents, make prints of the IDRS CC:TXMOD, Information Returns, Case Notes and Letter 2030/Letter 2531 and send the copies/prints to the Chief Financial Office Staff at the following address:
    IRS
    CFO, Business Analysis & Support Section
    Stop S-2, 1035
    333 W. Pershing Rd
    Kansas City, MO 64108

    Reminder:

    Leave a case note using Form 12864, Case History Sheet, indicating that the case information was sent to CFO.

4.119.4.21.2  (09-25-2015)
Telephone Responses

  1. The purpose of the BMF-AUR toll-free telephones is to assist taxpayer's and/or their authorized representatives who call IRS regarding BMF-AUR initiated contacts.

    Note:

    Written documentation may be requested if unable to determine if the oral statement is valid.

    Caution:

    When these instructions refer to the taxpayer, the instruction also applies to the authorized representative who calls for the taxpayer. See IRM 4.119.4.21.2.2, Disclosure, for additional information regarding authorized representatives.

  2. Hearing-impaired callers may be speaking through a relay operator. The operator will announce they are calling as a relay operator on behalf of a taxpayer as soon as you answer. Perform disclosure verification as if talking directly to the taxpayer and continue with the conversation. Inform the caller of the following: You have placed this call with the assistance of a Relay Service Operator (RSO). We assume that in doing so, you have consented to the disclosure of your return information to the Relay Services Operator to the extent necessary to assist you with your question.

    Caution:

    If the customer does not give oral consent, apologize to the customer (through the RSO) for the inconvenience. Because of disclosure rules, we cannot provide the requested information through this connection without oral consent. These rules were established to protect the privacy of all taxpayers.

  3. Oral Statement Authority is acceptance of information provided verbally to resolve account inquiries. The Toll Free BMF-AUR tool will be used to determine situations that will allow the Telephone Assistor to take actions on cases.

    Note:

    An Oral Statement cannot be used to close a case fully agreed. A signature must be secured.

  4. The BMF-AUR ASPECT telephone system has been updated to always advise the taxpayer that the telephone call does not extend the 90-day period in which they have to petition the Tax Court as specified in the Notice of Deficiency. The caller will always hear this announcement prior to speaking with an assistor. Should the taxpayer question this announcement, inform the taxpayer that this is a requirement and answer any other related questions.

  5. If taxpayer calls and indicates they wish to fax their response/agreement to the BMF-AUR issue, clearly document the date of contact and the taxpayer's intent to fax a signed consent. A faxed consent to assess additional tax (Letter 2030, Letter 4550C, Letter 3219B (Stat Notice) or Form 433–D) is acceptable if contact was made and the case history documents the date of contact.

4.119.4.21.2.1  (12-11-2014)
Answering the Telephone

  1. The Toll Free BMF-AUR tool will be used to determine situations that will allow the Telephone Assistor to take closing actions on cases.

  2. The Restructuring and Reform Act of 1998 (RRA '98) requires that IRS employees use a unique identifier in written or verbal communications with taxpayers. The entire 10 digits of the Position Identification (PID) will be used as the EMPLOYEE IDENTIFICATION. When speaking with a taxpayer, ALWAYS identify yourself by title and last name or first and last name and PID. Be courteous, polite and professional.

  3. Important steps to provide quality telephone assistance include the following:

    1. Greet the taxpayer: Identify yourself, including employee identification (badge) number, and indicate a willingness to help.

    2. Respond to the taxpayer's opening statement: Actively listen to the caller; deal with the taxpayer's feelings, if appropriate, and, acknowledge the ability to help. If appropriate, apologize for any mistakes made by IRS.

    3. Target the taxpayer's questions: Listen to the taxpayer's opening statement; form and use confirming questions; gain agreement from the taxpayer; and determine any targeting required to better identify the taxpayer's issue.

    4. Get the necessary facts: Ask the right questions and use appropriate hold procedures. Do not keep the caller on hold for more than a few minutes without giving them an explanation and apology. If additional research time is or will be too lengthy, offer to return the call with the requested information.

    5. Provide assistance: Provide accurate and complete assistance and/or appropriately refer the taxpayer to another source, if required.

    6. Close the conversation: Verify the taxpayer's understanding and conclude the contact courteously.

  4. Telephone assistors are expected to handle account actions while the taxpayer is on the phone. Telephone actions should be taken in "Talk or Hold status." Wrap time is appropriate when:

    • The caller does not wish to stay on the line,

    • The case is complex requiring significant time to complete documentation or research, or

    • The taxpayer is abusive or is using inappropriate language and the phone assistor has to end the call

    Note:

    Muting a call is not appropriate when research is being conducted. The caller should be placed on hold unless the caller specifically requests not to be placed on hold.

  5. When a call is received from a taxpayer regarding his/her IDRS CC:TXMOD information, there is no obligation to determine if the taxpayer is using an unsecured platform such as a cell phone. However, if the tax examiner becomes aware that the taxpayer is using a cell phone (e.g., the taxpayer states he/she is calling from a cell phone, etc.), the tax examiner may advise the taxpayer of the disclosure risk of using the cell phone to discuss his/her account information.

4.119.4.21.2.2  (09-25-2015)
Disclosure

  1. Disclosure is defined as making known to any person, in any manner, a return or return information.

  2. When responding to telephone inquiries, disclose no tax return information until you are sure the person making the inquiry is authorized to receive the information. Most calls to the BMF-AUR toll-free number are in response to BMF-AUR notices and are not considered high risk.

    Reminder:

    The Third Party Designee check is intended to facilitate the processing of tax returns and does not cover Compliance issues, including BMF-AUR. Do not disclose specific case or tax return information to a Third Party Designee.

  3. Telephone assistors must use the IAT Disclosure tool to complete disclosure. This is mandatory for all cases that require access to specific account information in order to resolve the caller’s issue(s).

  4. Using the IAT Disclosure tool, determine who the caller is by asking for their name and title. The following chart is a list of those who may be authorized to receive tax information.

    Reminder:

    Disclosure also requires that the caller give the entity name, EIN and address.

    Exception:

    The POA/TIA is not required to provide the taxpayer address.

    Form 1120 Corporation
    • President

    • Officer authorized to legally bind the corporation. The authority to bind means the ability to execute agreements that are binding and legally enforceable against corporation under state law

    • Employee who signed the return and retains authority

    • Power of Attorney

    • Reporting Agent File

    • Third Party Designee

    • Oral Disclosure Consent

    Form 1041 Estate or Trust
    • Administrator, executor or trustee or personal representative whose name is listed in the entity portion of Master file. For banks listed as a trustee or a fiduciary ("ABC Bank Trust," ) ensure the caller is a trust department employee not any bank employee/officer

    • Any heir at law, next of kin, or beneficiary who establishes material interests must submit their requests in writing

    • Power of Attorney authorized after death

    • Reporting Agent File

    • Third party designee

    • Oral Disclosure Consent

  5. If a person states he/she is the authorized representative, request the taxpayer's name and TIN. Use the IAT disclosure tool to determine if a POA or authorized third party was filed for that person to represent the taxpayer.

  6. If they state they can fax a POA, provide them with the appropriate fax number. When POA is received see IRM 4.119.4.21.1.11, Letters From a Third Party and Authorization From a Valid Power of Attorney (POA), for further processing.

    Reminder:

    When responding to telephone inquiries, disclose no tax return or account information until you are sure the person making the inquiry is authorized to discuss this information. Complete disclosure using IAT.

  7. If disclosure is not passed, there is no POA or authorized third party on file, taxpayer information such as tax figures or case information may be discussed ONLY with the taxpayer.

  8. ORAL DISCLOSURE CONSENT - Treasury Reg. 301.6103(c) -1(c) authorizes the IRS to accept verbal consents authorizing the disclosure of return information to third parties assisting taxpayers in resolving Federal tax matters.

    Note:

    Do not solicit verbal authorization from the taxpayer.

    1. If the taxpayer wishes to verbally authorize a third party to assist them with BMF-AUR related matters, ensure that they understand that this consent will allow BMF-AUR to continue discussion with the designated third party until the issue is resolved. Annotate the taxpayers verbal authorization of the designated third party to discuss BMF-AUR related matters, and record the BMF-AUR specific authorization using IDRS CC:ACTON.

    2. If the taxpayer indicates that they want the designee to act for the taxpayer in matters beyond BMF-AUR, ensure that the taxpayer understands that this consent will allow the IRS to continue discussion with the designated third party until this particular tax matter is resolved. If the taxpayer still wants the authorization, record the Oral Disclosure Consent on IDRS, using IDRS CC:ACTON to input History Items on each tax module (TXMOD) under consideration. See IRM 4.119.4.21.2.4, General Inquiries, for further actions relating to non-BMF-AUR inquiries.

4.119.4.21.2.3  (09-17-2014)
Contact Recording

  1. Contact Recording is a telephone application/tool/system that records incoming toll free telephone contacts for the purpose of possible subsequent monitoring. When the taxpayer calls the BMF-AUR toll-free number, they are notified that their call may be recorded.

    1. If the taxpayer objects to being recorded, use the "Stop Recording" icon on your desktop to disable the contact recording feature.

    2. If the call is transferred, advise the caller that they will have to restate their request that they do not wish to be recorded.

    3. If the caller also asks to record the conversation, advise the caller that they may not record the call; however, they may request a copy of the call under the Freedom of Information Act (FOIA). This request must be in writing and contain the date, name, identification number of the employee, and the approximate time of the call. See IRM 21.1.3.17.1, Freedom of Information Act (FOIA), for FOIA recording requests.

4.119.4.21.2.4  (09-25-2015)
General Inquiries

  1. If the call is a general inquiry or a request for information about:

    1. BMF Underreporter issue(s) that do not require accessing the taxpayer’s account (e.g., "Where do I mail or fax my response?" , etc.): respond to the issue(s).

    2. Account related issues (other than IMF-AUR) that do not pertain to the BMF-AUR case: provide the Customer Service number, 1-800-829-1040 for IMF and 1-800-829-4933 for BMF.

    3. IMF-AUR related, (i.e., CP2501, CP2000, CP 3219-A, etc.): transfer the call to IMF-AUR #92341 for English or #92342 for Spanish.

      Note:

      If the taxpayer does not want to be transferred or is calling outside the AUR operational hours (7:00 a.m. - 8:00 p.m. local time) provide the toll free number 1-800-829-8310.

    4. Tax forms: provide the toll-free number for forms, 1-800-829-3676, or provide the IRS web site address www.irs.gov.

    5. Tax transcripts: provide the toll-free number, 1-800-908-9946 for IMF and 1-800-829-4933 for BMF, or provide the IRS web site address, www.irs.gov.

    6. Balance Due (non - status 22): transfer call to Accounts Management #92030 for English or #92031 for Spanish.

    7. Combined Annual Wage Reporting (CAWR) employee wage information reported by employer, transfer call to Accounts Management #92030 for English or #92031 for Spanish.

    8. Balance Due (status 22): transfer call to Automated Collection System #92085 for English or #92076 for Spanish.

    9. Exam inquires (open TC 420 or -L Freeze): transfer call to Exam #92461 for English or #92462 for Spanish.

    10. Tax Law questions can be transferred to Accounts Management under certain conditions. See 2 below for additional information regarding when a tax law related question can be referred to Accounts Management.

    11. The "Source for Telephone Numbers" at http://gatekeeper.web.irs.gov/plList.asp provides a listing of telephone numbers most frequently requested by taxpayers (including National Taxpayer Advocate, federal Trade Commission (identity theft), Practitioner Priority Services (PPS), etc.).

      Reminder:

      When transferring a call always inform the caller that they are being transferred.

  2. Accounts Management only answers specific tax law questions during filing season. Use the chart below to determine actions to take when the call is related to Tax law.

    If And Then
    The call is during the filing season (January 15th - April 16th)   Transfer the caller to Accounts Management by pressing #92194 for English or #92195 for Spanish. If unable to transfer to #92194 or #92195, use #92001.

    Reminder:

    When transferring a call, always inform the caller that they are being transferred.

    The call is after the filing season (i.e., after April 16th) The call is related to the following topics:
    • Tax Exempt Government Entities (TEGE)

    • Special Services: Military or Civilian Combat, Federally Declared Disaster

    • Affordable Care Act (ACA)

    • International Tax Law (overseas calls only)

    Transfer the call to Accounts Management by pressing #92001.

    Reminder:

    When transferring a call, always inform the caller that they are being transferred.

    The call is after the filing season (i.e., after April 16th) The tax law question is other than those above. Inform the caller that you cannot provide assistance on that topic and refer them to www.irs.gov and recommend they select any of the following:
    1. "Help & Resources" tab on the home page. Options are listed on the left side of the page, or

    2. Interactive Tax Assistant: Enter "ITA" into the Search feature, or

    3. IRS Tax map - Enter "IRS Tax Map" into the Search feature for more detailed information.

  3. If a phone call is received asking for a change to the primary name line, advise the taxpayer the request must be made in writing. Advise the taxpayer to send the request to the BMF Entity function. If the entity is a corporation or an LLC, advise them to include a copy of the amendment to their Articles of Incorporation or Articles of Organization showing the entity's correct name.

    Exception:

    Changes to the taxpayer name line due to a spelling error should be made. However do not change the first four characters of the name line (i.e., the name control). See IRM 4.119.4.21.1.3, Address Changes, for further information.

4.119.4.21.2.5  (09-02-2016)
Case Specific Inquiries

  1. If the taxpayer has questions/information relating to a BMF-AUR case that cannot be answered without further reviewing the account, access the taxpayer account on IDRS and the Letter repository to determine how to help them.

    Reminder:

    If the caller is inquiring about multiple tax years, be certain that he/she has proper authority for each tax year in question and is entitled to receive information on those periods.

  2. If the taxpayer calls and disagrees with the proposed change, refer to the consent page of the notice which provides complete information. Instruct the taxpayer to sign, date, and fax or return any information to resolve the issue. Document the contact.

  3. The Toll Free BMF-AUR tool will be used to determine situations that meet Oral Statement Authority to allow the Telephone Assistor to take actions on cases (based on the taxpayer’s oral statements).

    If Then
    The taxpayer’s account cannot be resolved based on the oral statement:
    1. Ask the taxpayer/representative to mail or FAX the information.

    2. Provide the general toll free e-FAX number to the caller.

    3. Document the call activity.

    The taxpayer’s account can be resolved based on the oral statement:
    1. Document the call activity and the action being taken.

    2. Request the case file from the Clerical Function.

    3. When the case file is received, complete case processing using the documented call activity as the taxpayer’s response.

  4. If the taxpayer asks for an extension see IRM 4.119.4.21.7.2, Extension Requests, for further instructions.

  5. If the taxpayer calls and agrees with the proposed changes, instruct the taxpayer to sign, date, and fax or return the consent to tax increase, or refer the taxpayer to the consent page of the notice which provides complete information. Tell the taxpayer they should send in payment to stop the accrual of interest and penalties.

  6. If the taxpayer requests the balance due amount, provide the Letter 2030 amount and advise that penalty and interest continue to accrue. If the taxpayer requests a specific payoff amount computed to certain date, use IDRS CC:INTST if the BMF-AUR assessment has posted or IDRS CC:COMPA on open BMF-AUR cases.

    Caution:

    If the account contains restricted interest, ensure that the payoff amount correctly accounts for the restricted items.

  7. If the taxpayer agrees but states they cannot pay or requests a payment plan, advise them to complete and submit Form 433-D, Installment Agreement, along with the signed consent to tax increase.

  8. If the taxpayer states they are making a payment other than electronically, provide check annotation information if needed.

    1. The BMF-AUR phone script provides check annotation information if the taxpayer selects the "Agree" path or chooses to speak with a tax examiner. The tax examiner is not required to address this subject unless the taxpayer asks a specific question.

    2. To respond to the taxpayer's specific question, refer them to the consent page of the notice or advise them to make the check or money order payable to the "United States Treasury" and include the TIN, Form type and tax year from the notice.

  9. If the taxpayer inquires about paying electronically:

    1. Advise the taxpayer to call 1-800-555-4477 to speak with a representative from the Electronic Federal Tax Payment System (EFTPS).

    2. Advise the taxpayer that the EFTPS representative will provide any additional information.

    3. Advise the taxpayer to sign and return the consent to tax page in order to complete action on their case.

  10. If the taxpayer states the balance due has already been paid AND the payment is displayed on IDRS CC:TXMOD,

    1. Document the call activity and the action being taken.

    2. Request the case from the Clerical Function.

    3. When the case file is received, close the case using "Agreed Response" criteria. See IRM 4.119.4.21.5, Agreed Responses, for additional information.

    Exception:

    A signature is required if full payment was received after the Letter 3219B, Statutory Notice of Deficiency, was issued.

  11. If the taxpayer states they have paid the balance due in full and now received a bill for additional interest, research IDRS CC:TXMOD to determine if a TC 276 has posted after the BMF-AUR adjustment. If a TC 276 has posted inform the taxpayer that per the paragraph titled Failure To Pay Penalty - IRC 6651(a) on their Letter 2030 an additional penalty (FTP) was assessed on their account. Payments received are applied in the following order:

    1. Tax.

    2. Penalties.

    3. Interest.

    Caution:

    If TC 276 is not present, and if appropriate, inform the caller that interest is compounded daily until the entire amount is paid, including penalties and interest.

  12. If the taxpayer states a payment was sent and the payment is NOT shown on IDRS, determine if it has been at least two weeks since the taxpayer mailed their payment or one week since the scheduled date of an authorized electronic payment:

    If Then
    The above time frame has not been met Ask the taxpayer to call back at that time
    The above time frame has been met and the taxpayer paid by check
    1. Research IDRS CC:TXMODA, CC:BMFOLI, CC:BMFOLP or CC:BMFOLT.

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

    3. If the payment cannot be located ask the taxpayer to send a copy of the front and back of the cancelled check.

    The above time frame has been met and the taxpayer paid electronically EFTPS
    1. Research IDRS CC:EFTPS with definer E and ask the taxpayer for the 15 digit confirmation code.

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

    3. If the payment cannot be located ask the taxpayer to send in a copy of the bank statement or other documentation that shows the withdrawal.

    Note:

    Advise the taxpayer to sign and return the consent to tax page in order to complete action on their case.

  13. If during the telephone call, it is determined the taxpayer is due a refund or expects a refund, inform the taxpayer the refund will be issued if they owe no other taxes or federal obligations.

  14. If during a phone call, IDRS research shows the taxpayer's account balance due status (i.e., 21 or 58) is the result of a BMF-AUR assessment and the taxpayer agrees to provide documentation to resolve/change the assessment, input IDRS CC:STAUP to prevent issuance of additional notices while the case is being worked.

    Exception:

    If the account is in Collection status 22 or 26, input TC 470 on IDRS. See Exhibit 4.119.4-13, Notice Delay Actions (Reconsiderations), for additional information.

    Note:

    Allow the STAUP to be effective for up to six cycles, unless the situation warrants a longer period.

  15. When the taxpayer requests a call back or is told the tax examiner will call them back, inform the taxpayer you will return the call after you receive the information. Transfer the case to suspense, hold for up to 5 days. If the information is not received within the 5 days continue normal processing. Document the time frame as part of the call activity.

  16. When returning the taxpayer's/representative's call and if it is necessary to leave a message on an answering machine or voice mail:

    1. Leave your name, phone number, indicate that you are calling from the IRS and the name of the person you are calling.

    2. DO NOT divulge previous contact with the taxpayer/representative unless it is verified that the number reached was the one given for contact purposes (i.e. the taxpayer identifies themselves in the greeting) AND that the taxpayer/representative is the only person with access to the voice mail or answering machine.

    3. DO NOT provide any information about the specific tax matters involved nor indicate exactly why you need to speak to the taxpayer/representative.

  17. Input/verify the taxpayer telephone number using the IAT Disclosure Tool or IDRS CC:TELEA/TELEC.

  18. If the taxpayer provides a new address, update address on IDRS. See IRM 4.119.4.21.1.3, Address Changes. The latest address displays on IDRS CC:ENMOD. This may not be the address that received a notice.

  19. Verify the representative’s telephone number using the IAT Disclosure Tool.

    1. If the representative provides a new telephone number and/or address, document the information as part of the call activity.

    2. Inform the representative to file an amended Form 2848 or Form 8821 to have telephone number and/or address information updated.

  20. Document any information the caller provides, even if they do not pass disclosure.

    Exception:

    It is not necessary to document phone calls on closed cases. Advise the taxpayer/representative to mail or Fax any additional information. Provide the general toll free e-fax number.

4.119.4.21.2.6  (04-05-2016)
Out Calls

  1. During the response phase there may be times when calling the taxpayer will expedite the resolution of the case.

    Example:

    Taxpayer responds to notice but inadvertently omitted required information or signatures delaying the action on the case.

  2. Out calls also provide better topic and time control of a conversation.

  3. It may be beneficial to make an out call in lieu of sending the taxpayer a letter to resolve their account when the taxpayer has provided telephone contact information, and the information needed can be provided orally or by fax.

  4. There are times during the response phase when you must attempt to call the taxpayer to resolve the issue. Always document the attempt. You must attempt to call the taxpayer when the taxpayer:

    Reminder:

    Normal telephone procedures should be followed when making an out call. Input/verify the taxpayer telephone number using the IAT Disclosure Tool or IDRS CC:TELEA/TELEC.

    1. Requests an appeal of our findings. Tax examiners must attempt to resolve the issue(s) by phone prior to forwarding the appeals request. See IRM 4.119.4.21.1.6, Appeals, for additional information.

    2. Requests a phone call. Tax examiners must attempt a call even when the taxpayer provides a contact time which is outside the tax examiner's shift.

    3. Fully agrees - but is missing required signature(s).

  5. There are times during the response phase when you may attempt to call the taxpayer to resolve the issue. Always document the attempt. Attempt to call the taxpayer when the taxpayer:

    1. Submits full payment after the Letter 3219B, Statutory Notice of Deficiency, is issued, without the required signature(s).

      Note:

      If unable to reach the taxpayer by phone and you are requesting a missing signature for a case in Letter 3219B, Statutory Notice of Deficiency, phase where the suspense time frame has expired, do not issue a Letter 4550C. See IRM 4.119.4.21.11.2, Default Letter 3219B Statutory Notice of Deficiency, for additional information.

    2. Omits requested information or documentation.

      Note:

      If unable to reach the taxpayer by phone, issue a Letter 4550C to request the missing signature(s) and/or /information.

  6. When an outgoing phone call is initiated, the taxpayer may be reluctant to provide their Taxpayer Identification Number (TIN). To ease any concerns that the taxpayer may have, provide the taxpayer with the last four digits of the TIN and request that the taxpayer verify the first five digits. After verification of the TIN, follow, IRM 4.119.4.21.2.2, Disclosure, and use IAT and the Toll Free BMF-AUR Script tool.

  7. If taxpayer is still reluctant to provide information, leave a detailed case note outlining the information that is needed from the taxpayer. Provide the taxpayer with the BMF-AUR toll free number. The taxpayer can then call the toll free number and the assistor can inform the taxpayer what is needed.

  8. Use the following guidelines when leaving messages that contain confidential information on answering machines/voice mail. These guidelines are consistent with prudent business practices and disclosure rules while still providing good customer service.

    1. While tax information generally may not be left on an answering machine or voice mail, there are exceptions. If the employee "reasonably believes" he or she has reached the taxpayer’s correct answering machine or voice mail, it is acceptable to leave the employee’s name, telephone number, any appropriate reference number for the inquiry, the fact that he or she works for the IRS (identifying the function of the calling employee is permissible), and the name of the person who should return the call. Additional information can be left on the recording if the taxpayer has given prior approval to leave such information on voice mail or the answering machine.

    2. "Reasonable belief" is supported by the greeting on the answering machine or voice mail refers to the taxpayer being contacted or the taxpayer has indicated that this is the telephone number where he or she may be reached directly.

    3. Document the taxpayer’s telephone number, his/her approval to call that number, and the taxpayer’s permission for IRS to leave information on the recording.

    4. If the employee does not have a reasonable belief he or she has reached the correct taxpayer, no tax or other confidential information should be disclosed on the message.

  9. When the out-going call results in the taxpayer agreeing to submit additional information (i.e., additional documentation, signed consent to additional tax, etc.), suspend activity on the case to allow the taxpayer time to reply.

    1. Document the call.

    2. Update IDRS activity with 4XPHMMDD (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Annotate the DCI with the phone call date and 4XPH (X represents the phase).

    4. Annotate the case folder with 4XPH (X represents the phase).

    5. Suspend the case file until the purge date.

    6. When the information is received, call the taxpayer if the taxpayer requested receipt confirmation.

4.119.4.21.3  (09-17-2014)
Instructions Specific to Income/Issue Types

  1. The following instructions provide guidelines for working specific BMF-AUR issues. These instructions apply to processing responses to either Form 1120 or Form 1041 tax returns unless, otherwise stated.

  2. See IRM 4.119.4.4.1, Fraud Referral Program, for potential FRAUD referrals.

4.119.4.21.3.1  (09-02-2016)
Aggregate Profit Or Loss On Contracts

  1. An adjustment is required when the taxpayer agrees that an amount was U/R or omitted and provides sufficient information to determine the taxable gain or loss.

  2. If the taxpayer does not provide sufficient information to determine taxable gain or loss, contact the taxpayer to obtain the information needed to make the adjustment using normal processing procedures.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Form 6781, Form 8949, and/or Schedule D reporting Aggregate Profit or Loss on Contracts.

4.119.4.21.3.2  (09-17-2014)
Agriculture Payments

  1. ≡ ≡ ≡ ≡ ≡ ≡ taxpayer statement that their agriculture payments ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ any of the following:

    1. Surface Mining Control and Reclamation Act of 1977 (Rural Abandoned Mine Program).

    2. Water Bank Act.

    3. Agricultural Credit Act of 1978, Title IV (Emergency Conservation Measures Program).

    4. Soil Conservation and Domestic Allotment Act (Agricultural Conservation Program).

    5. Soil Conservation and Domestic Policy Act, Section 16 (Great Plains Conservation Program).

    6. Cooperative Forestry Assistance Act of 1978, Section 4 (Forestry Incentives Program).

    7. Watershed Protection and Flood Prevention Act.

    8. Agricultural, Rural Development, and Related Agencies Appropriations Act (Experimental Rural Clean Water Program).

    9. The Agriculture payment is not subject to federal income tax per the provisions outlined in Rev. Rul. 69-289. The subsidy payment was made to a member of a federally recognized Native American tribe in connection with activity occurring on allotted or restricted lands and is not subject to taxation.

    10. Food Security Act of 1985, Federal Agriculture Improvement and Reform Act of 1996 and Farm Security and Rural Investment Act of 2002 (Wetlands Reserve Program, Conservation Reserve Program, Forest Land Enhancement Program).

    11. Federal Agricultural Improvement and Reform Act of 1996 (Environmental Quality Incentives Program, or Wildlife Habitat Incentive Program).

    12. Agricultural Risk Protection Act of 2000 (Soil and Water Conservation Assistance Program or Agricultural Management Assistance Program).

    13. Colorado River Basin Salinity Control Act.

4.119.4.21.3.3  (09-17-2014)
Cancellation of Debt

  1. If the taxpayer responds with a completed Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Exception:

    If Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) box 1b (insolvency) is checked, see (3) below.

  2. Accept the explanation when the taxpayer states ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. If the taxpayer claims insolvency, they MUST provide a statement listing assets and liabilities. The taxpayer is considered insolvent when total liabilities exceed the fair market value (FMV) of assets before the debt was cancelled. The taxpayer may only exclude cancelled debt up to the insolvent amount.

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

    2. Issue a recomputed notice for the remaining taxable cancelled debt when the amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. Issue a Letter 4550C if Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), is submitted without a statement listing assets and liabilities.

  4. If the taxpayer reduces the cancelled debt by interest forgiven (as shown on the IR), accept the revised amount. If the IR does not show Amount Type (IRPTR Literal) INT FORGVN, correspond and request the additional documentation.

  5. If the taxpayer's response indicates that the cancelled debt was for a foreclosure or repossession and:

    1. Provides a Fair Market Value (FMV) amount that is larger than the cancelled debt amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. The cancelled debt was due to a non-recourse debt, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. A worksheet for Foreclosures and Repossessions (or a similar statement is included), ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. They are entitled to take any losses claimed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    If not, issue Letter 4550C stating that losses are non-deductible. See IRM 4.119.4.7.4.1, Cancellation of Debt - Analyzation, for further information.

  6. If the taxpayer states that the discharge of debt is from a Qualified Farm Debt or real property taxpayer indebtedness, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. Do not delete the issue if the taxpayer provides a statement from the creditor/collection agency stating the settlement was paid in full. Issue a Letter 4550C to inform the taxpayer the difference between the original debt and the settlement offer amount is considered taxable income.

4.119.4.21.3.4  (09-17-2014)
Dividends

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    • Dividend income is a nontaxable distribution

    • Income is from a CCF account

    • If an attachment states that the dividend income was received from a Domestic Corporation and was a licensee under the Small Business Investment Act

    • The income in question was earned on an IRA, Keogh (HR-10), SEP, SIMPLE Plan, pension plan or profit sharing plan (including a 401(k) plan) or 403(b) plan

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    • Taxpayer’s explanation states that dividends were from a mutual savings bank and was reported as interest and it can be identified

    • Form 1120 ONLY: Dividends qualified for a deduction under IRC 243 and IRC 245

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the Corporation indicates that a portion of the dividends qualify for a special deduction (e.g., Form 1120, Schedule C).

  4. The Form 1041 response may state that the taxpayer is entitled to qualifying dividends or additional qualifying dividends. The QUALIFIED DIVIDEND is the amount of ORDINARY DIVIDEND that is eligible for the capital gain rate. If the taxpayer did not claim qualifying dividend on the original return and now states they want the capital gain rate. Determine the revised tax using the Capital Gain tax rate.

4.119.4.21.3.5  (09-17-2014)
Fishing

  1. Accept the taxpayer explanation that ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If the income is NONEMP COM or FISH INC accept the response when it states the taxpayer is a fisherman and one of the following:

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      IRC 6050A requires the boat captain to issue a Form 1099-MISC when the crewman (sternman) sells his/her portion of the catch for CASH. However, the buyer also issues a Form 1099.

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

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

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

4.119.4.21.3.6  (09-17-2014)
Form 1099-K Payment Card Transactions and Third Party Network Payments

  1. If the taxpayer’s response indicates that there is a duplicate reporting of Payment Card Transactions on both Form 1099-K and Form 1099-MISC, review the IRs.

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

  3. If Form 1099-K and Form 1099-MISC IRs with duplicate amounts are not present and the taxpayer provided sufficient information to identify the affected IRs, contact the payers of both the Form 1099-K and Form 1099-MISC income. See IRM 4.119.4.21.7.5, Third Party Contacts, for additional information.

  4. If Form 1099-K and Form 1099-MISC IRs with duplicate amounts are not present and the taxpayer did not provide sufficient information to identify the affected IRs, correspond with the taxpayer.

4.119.4.21.3.7  (04-05-2016)
Grantor Trusts

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the taxpayer checks Grantor Trust box in Form 1041, Section A and:

    Note:

    In lieu of checking the box, the taxpayer writes Grantor Trust on the return or cites IRC 671-678.

    1. Reports no income or deductions. If the only entry is for the exemption on Form 1041, line 20 consider this the same as reporting no income/deductions.

    2. Taxpayer reports income and then distributes the entire amount on Form 1041 line 18 and includes related Schedule K-1’s.

  2. When the taxpayer indicates the Grantor Trust was a combination of taxable and non taxable income and difference is due to the distribution of income to the beneficiaries:

    If Then
    They also provide amended Schedule K-1(s) for all the U/R income.
    1. Accept the explanation.

    2. Send Letter 4551C with the following special paragraph "Please advise the impacted beneficiaries to amend their tax return based on the amended Schedule K-1(s) you provided."

    3. Close the case with the applicable N/C Process Code.

    4. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77.

    5. Annotate case folder and DCI with appropriate N/C Process Code and include NRC 10.

    If all the amended Schedule K-1(s) are not provided
    1. Send Letter 4550C requesting the amended Schedule K-1(s).

    2. Update IDRS activity with 4XLT (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Annotate DCI and case folder with 4XLT (X represents the phase).

    4. Suspend and monitor. If no activity at the end of suspense period, take next action.

  3. If the taxpayer response indicates they are changing the status of the trust to a Grantor Trust refer to the Lead Tax Examiner who then make a determination if the case should be transferred to the TCO for further action.

4.119.4.21.3.8  (09-11-2015)
Interest

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when:

    • The taxpayer is an attorney and states that the interest earned on an escrow account was paid to the Bar Association

    • Series E bonds were converted to Series H bonds. Therefore, the interest is not taxable upon the conversion

    • They elected to report bond interest or discount on savings bonds each year as it accrued

      Note:

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

    • The taxpayer reported short-term OID/obligation each year as it accrued

      Note:

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

    • The income in question is from a municipal bond and is nontaxable

    • The income in question is accrued interest that was paid when the stock or bond was purchased

    • A lesser amount of interest was reported because the obligation was a short term OID/obligation

    • Income is from a CCF account

    • The taxpayer reported a lesser amount of interest as they amortized the bond premium or acquisition premium. This treatment offsets the interest or OID includable as income

    • The income in question was earned on an IRA, Keogh (HR-10), SEP, SIMPLE Plan, pension plan or profit sharing plan (including a 401(k) plan) or 403(b) plan

4.119.4.21.3.9  (09-17-2014)
Medical Payments Form 1120 ONLY

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer States that the income is due to a liability of adjustment for Medicare/Medicaid due to offsets, other allowances, etc. that reduce the gross receipts reported by the payer. Include the following Special Paragraph in the closing letter (or with the recomputed notice, if there are other unresolved issues) "Items of income and expenses must be separately stated in the appropriate section of the return and should not be netted."

    Example:

    Company X submitted Medicare claims of $1,000 for payment. The claims were processed and approved for payment, however there is a prior year amount due the program of $300. The $300 amount is offset against the $1,000 due the provider, and a payment of $700 is authorized. Since the provider received benefit of $1,000 ($700 in cash and $300 reduction of a liability) the amount of payment that is required to be reported to the IRS on Form 1099 is $1,000. They should offset the $300 as an expense.

4.119.4.21.3.10  (04-20-2015)
Net Investment Income Tax (NIIT) Form 1041 ONLY

  1. Adjustments to the Net Investment Income Tax (NIIT) must be considered when the taxpayer’s response includes changes to investment income and/or deductions on Form 1041.

  2. Select the correct Income Discrepancy Amount Types when preparing a recomputed/revised Letter 2030.

  3. Use the "Miscellaneous" options available in the Letter 2030 dropdown menu in the "Your income and deductions" field, when the underreported issue is other than a specific Amount Type (e.g., Interest, Dividends, Rent, Capital Gains, etc.).

    1. Miscellaneous Adjustment: Select this option from the dropdown menu when revising non-investment income that is not included on the dropdown menu.

      Example:

      When an adjustment to Business Income/Loss (Form 1040, Schedule C) or Farm Income/Loss (Form 1040, Schedule F) is needed.

    2. Miscellaneous Investment Income Adjustment: Select this option from the dropdown menu when revising investment income that is not included in the dropdown menu.

      Example:

      When an adjustment to Supplemental Income/Loss (Form 1040, Schedule E), Ordinary Gain/Loss (Form 4797) or pensions/annuities on Form 1099R (with COD D) is needed.

    3. Miscellaneous Deductions: Select this option from the dropdown menu when revising deductions on Form 1041, lines 10 through 20.

      Note:

      Each "miscellaneous" option can only be listed once on the notice.

      Note:

      Always include a Special Paragraph explaining the adjustment whenever any of these options are selected.

4.119.4.21.3.11  (09-02-2016)
Partnership/Trust/S-Corporation Conduit Income

  1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer:

    1. States that the income or loss amount was netted against other reportable items of expense or deduction/depreciation. Verify that the income was fully reported prior to netting and accept the explanation. Send a closing letter with a Special Paragraph "Items of income and expenses must be separately stated in the appropriate section of the return and should not be netted."

      Example:

      Taxpayer netted the Amount Type SECTION 179 DEDUCTION and reported the difference.

    2. Does not agree with the amount of income or loss adjustment and provides a copy of the original or amended K-1 document for reconciliation.

    3. The distributive shares reported on the return were adjusted by Form 6198, At-Risk Limitations.

    4. The Partner, Beneficiary or Shareholder filed Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request (AAR), or uses terminology such as: "inconsistent treatment" or "administrative adjustment request (AAR)."

    5. Cites IRC 751 or IRC 754, or states the Sch K-1 (1065) was an "entire disposition", or the taxpayer states that they disposed of their entire ownership in the partnership.

    6. The Sch K-1 (1065) information return was from a Publicly Traded Partnership (PTP).

    7. States that the discrepancy is due to the Partnership, S-Corp or Estate/Trust filing a fiscal year Schedule K-1.

    8. The Partner or Shareholder filed a Form 8082 AND indicates an election under Rev. Proc. 2003-79 to apply a ratable 4-year spread to the share of the income attributable to a change in the annual accounting period or uses similar terminology.

    9. The income was reported on Form 8582, Passive Activity Loss Limitations.

    10. The rent was reported on Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation, Passive Activity Loss Limitations.

  2. If the taxpayer provides a corrected/amended Schedule K-1:

    And Then
    The response IS accompanied by a letter from the payer ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

    The response is NOT accompanied by a letter from the payer Research IDRS and or MeF to determine if the payer filed an amended return (i.e., amended Form 1120S, 1041, or 1065).
    1. If the amended return is present, accept the amended document.

    2. If the amended return is not present, send Letter 4552C to the payer. See IRM 4.119.4.21.7.5, Third Party Contacts, for additional information.

4.119.4.21.3.12  (09-17-2014)
Qualified Education Payment Program (QTP) Distributions Form 1041 ONLY

  1. Accept the explanation when the taxpayer states:

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

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

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


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