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4.119.4  BMF Underreporter (BMF-AUR) Program (Cont. 4)

4.119.4.21 
Taxpayer Responses

4.119.4.21.3 
Instructions Specific to Income/Issue Types

4.119.4.21.3.13  (09-11-2015)
Qualified Personal Service Corporation (QPSC) Tax Rate Form 1120 ONLY

  1. A Qualified Personal Service Corporation (QPSC) is a Corporation that satisfies the function test and the ownership test.

  2. A Corporation meets the function test if 95% or more of the time spent by employees is devoted to the performance of services in one or more of the following qualifying fields:

    • Health (including ambulance services)

    • Law

    • Engineering (including surveying and mapping)

    • Architecture

    • Accounting

    • Actuarial science

    • The performing arts (excluding athletes)

    • Consulting (providing advice or counseling services, including financial planners but not brokerage)

    • Veterinary (per Rev. Rul. 91–30, as modified by Rev. Rul. 92–65)

  3. A Corporation meets the ownership test if at least 95% of the corporation’s stock is directly or indirectly owned by its employees, retired employees, the estate of those persons, or any other person who acquired such stock by reason of the death of an employee or retired employee (but only for the 2-year period beginning on the date of the death of date of such individual).

  4. A taxpayer is identified as a QPSC by checking the qualified personal service corporation box on Form 1120, Schedule J, line 2.

    Note:

    QPSCs are taxed at a flat 35% rate.

    Note:

    When the taxpayer checks this box the tax return is flagged and the following codes are uploaded to Masterfile: ALBM CD 400 and CONTROL GRP CD 2.

  5. Due to Original Processing errors, it is possible that the taxpayer indicated that they are a QPSC but did not use the 35% tax rate to calculate their base tax. Validate that the proper tax rate is used.

  6. If the taxpayer disputes the application of the 35% QPSC tax rate, consider the following when evaluating their response:

    1. Is the corporation’s trade or business a service activity that is described in the list of qualifying items?

    2. Did the owners/employees own, directly or indirectly, at least 95% of the stock of the corporation?

    3. Was 95% or more of the time spent by employees engaged in the performance of services of the corporation in one or more qualifying fields?

    4. Is the principal business at least 95% of all business activity for the corporation?

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Reminder:

    If in doubt, 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.

4.119.4.21.3.14  (09-17-2014)
Real Estate Sales

  1. Revise the U/R when the taxpayer provides the necessary documentation of basis to compute the gain or loss.

  2. If the taxpayer does not provide the necessary documentation of basis to compute the gain or loss, contact the taxpayer to obtain the information needed to make the adjustment using normal processing procedures.

  3. Accept the explanation when the taxpayer states the cost of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.119.4.21.3.15  (09-17-2014)
Rent/Royalty Form 1041 ONLY

  1. Accept the taxpayer explanation when:

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

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

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

4.119.4.21.3.16  (09-02-2016)
Securities Sales and Cost Basis

  1. If the taxpayer provides broker statements or other information (in lieu of a revised Form 8949), use the information to determine the revised underreported securities sales amount. Use the cost basis provided by the taxpayer to adjust any U/R securities sales amounts.

    Caution:

    Capital losses are not allowed on Form 1120. Limit any additional cost basis to reduce overall net capital gain income to zero.

    Note:

    If issuing a recomputed notice ensure PARAGRAPH 13 is not sent.

  2. If the taxpayer provides a revised Form 8949 and/or, Schedule D compare securities sales amounts with entries on:

    1. Form 8949, Part I, line 1, column d.

    2. Form 8949, Part II, line 1, column d.

    3. Schedule D, Part I, lines 1a - 3, column (d).

    4. Schedule D, Part II, lines 8a - 10, column (d).

    Note:

    Use the cost basis provided by the taxpayer to adjust any U/R securities sales amounts.

    Caution:

    Capital losses are not allowed on Form 1120. Limit any additional cost basis to reduce overall net capital gain income to zero.

    Note:

    If issuing a recomputed notice ensure PARAGRAPH 13 is not sent.

  3. Issue a recomputed notice for the revised U/R amount and include PARAGRAPH 38 (unless the response meets agree or partial agree criteria). See IRM 4.119.4.21.5, Agreed Responses or IRM 4.119.4.21.6, Partially Agreed Responses, for further instructions.

    Note:

    If an adjustment to the TXI ONLY is necessary, see IRM 4.119.4.21.6, Partially Agreed Responses, for further information.

  4. When the taxpayer disagrees with the U/R securities sales, accept the statement when:

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

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

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

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

4.119.4.21.3.17  (09-02-2016)
Schedule D Changes Form 1041 ONLY

  1. When the taxpayer responds with a new or revised Form 1041, Schedule D, determine the amount of capital gain or loss allocable to the Estate of Trust.

    1. Review to determine that all of the U/R issues are addressed.

    2. Accept any offsets (i.e., additional cost basis offsetting PROCEEDS U/R amounts).

  2. If the new/revised Form 1041, Schedule D is an overall gain, the amount from line 19, column 3 is reported on Form 1041, line 4.

  3. If the new/revised Form 1041, Schedule D is an overall loss, the amount (limited to $3,000) from line 20 is reported on Form 1041, line 4.

    Note:

    If the total capital loss is more than the total capital gains, the capital loss is allowed as a deduction but only to the extent of the smaller of the net loss or $3,000. Any additional losses are carried forward to the subsequent year.

  4. Compare the new/revised Form 1041, Schedule D amount to the original. The difference is the amount of additional income (or allowable loss) that impacts the TXI.

  5. Issue a recomputed notice for the revised U/R amount (unless the response meets agree or partial agree criteria). See IRM 4.119.4.21.5, Agreed Responses or IRM 4.119.4.21.6, Partially Agreed Responses, for further instructions.

    Note:

    If an adjustment to the TXI ONLY is necessary, see IRM 4.119.4.21.6, Partially Agreed Responses, for further instructions.

  6. If the new/revised Form 1041, Schedule D qualifies the taxpayer to compute their tax using the maximum capital gains rates (i.e., Part V is completed), manually verify the accuracy of the computation.

  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer identifies that the U/R gains from PROCEEDS, CAPTL GAIN, REAL ES SL or Schedule D NONEMP COM income can be reduced by current unused Schedule D losses and states any of the following:

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

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

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

      Caution:

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

4.119.4.21.3.18  (04-05-2016)
Withholding Overclaimed (O/C)

  1. Schedules K-1 may contain backup withholding (BUWH). Accept the taxpayer’s response if it includes a copy of the following:

    1. Form 1041 Schedule K-1 contains an amount in box 13, with code "B" .

    2. Form 1065 Schedule K-1 contains an amount in box 15, with code "O" .

    3. Form 1120-S Schedule K-1 contains an amount in box 13, with code "O" .

  2. If the taxpayer responds to a notice issued solely for O/C questionable W/H and provides the necessary documentation:

    1. Close the case No Change.

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

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

  3. If the taxpayer responds to a notice issued for O/C questionable W/H, provides SOME or NONE of the necessary documentation≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If the taxpayer responds to a Letter 2030 that includes O/C questionable W/H and does not provide the necessary documentation, or ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    If Then
    O/C W/H was the only issue
    1. Assess the undocumented O/C W/H amount. See IRM 4.119.4.21.10, Adjustments, for further information.

    2. Issue Letter 2893C. Inform the taxpayer that we have disallowed the undocumented additional W/H, they will receive an adjustment notice and they may file an amended return when the necessary documentation is obtained.

    3. Close the case with PC 4680.

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

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

    The notice contains other issues and the tax increase is above tolerance
    1. Ensure that the AGREE criteria is met before inputting the assessment. See IRM 4.119.4.21.5, Agreed Responses for further information.

    2. Continue processing if the AGREE criteria is not met.

    The notice contains other issues and the tax increase is below tolerance.
    1. Input the adjustment for the O/C W/H only.

    2. Issue Letter 2893C. Inform the taxpayer that we have disallowed the undocumented additional W/H, they will receive an adjustment notice and they may file an amended return when the necessary documentation is obtained.

    3. Close the case with PC 4680.

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

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

    Note:

    A Letter 3219B, Statutory Notice of Deficiency, cannot be issued when there is no tax increase (or the tax increase is below tolerance). The taxpayer has no appeal rights concerning withholding.

4.119.4.21.3.19  (04-05-2016)
Withholding Underclaimed (U/C)

  1. If the taxpayer responds to a Letter 2531 that was issued only for U/C questionable W/H or U/C questionable W/H with U/R issue(s) that result in a below tolerance net tax change:

    And Then
    Provides documentation or acknowledges that the U/C W/H should have been reported on the return, allow the additional U/C W/H. See (2) below for further instructions.

    Example:

    Taxpayer signs the Letter 2531 and makes no indication of disagreement.

    Fails to address/verify the U/C W/H.
    1. Close the case with PC 4400.

    2. Issue Letter 4551C to inform the taxpayer that we have concluded our investigation and they may file an amended return if they have any additional information they want us to consider.

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

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

    Only addresses SOME of the U/C W/H.
    1. Input the adjustment for the additional documented/acknowledged W/H ONLY.

    2. See (2) below for further instructions. Issue Letter 2893 to explain the W/H adjustment allowed and instruct the taxpayer to file an amended return if they have any additional information they want us to consider.

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

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

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

  2. If all other issues have been resolved or result in a below tolerance net tax change and allowable U/C withholding is still an issue:

    Exception:

    If the taxpayer responds with an acceptable amended return or provides revised figures, pursue all issues.

    1. Input the adjustment for the U/C withholding amount only. See IRM 4.119.4.21.10, Adjustments, for further information.

    2. Issue Letter 2893C to advise the taxpayer of the changes.

    3. Close the case with PC 4470 (Letter 2531), PC 4680 (Letter 2030) or PC 4880 (Statutory Notice).

    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.

4.119.4.21.4  (09-02-2016)
Discrepancy Explained (No Change) - General

  1. Close a case with no change to original tax liability if a response to the notice contains an acceptable explanation for the full amount in question.

    Caution:

    Prior to closing the case, ensure there is no other outstanding tax related issue(s) (e.g., NIIT tax not correct on original return, incorrect tax rate, etc.). See IRM 4.119.4.21.6, Partially Agreed Responses, for further information.

  2. Use the following Process Codes to indicate that the case is being closed No Change and that we are accepting the tax return as originally filed:

    • PC 4400 when the response is to a Letter 2531

    • PC 4600 when the response is to a Letter 2030

    • PC 4810 when the response is to a Letter 3219B, Statutory Notice of Deficiency

    Note:

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

  3. A TC 290 for .00 is required for all No Change cases. See IRM 4.119.4.21.10, Adjustments, for further information.

  4. Always send the taxpayer Letter 4551C to acknowledge the receipt of the correspondence and that we are accepting the tax return as originally filed.

  5. Include a No Change Reason Code on the DCI when appropriate. See Exhibit 4.119.4-4, No Change Reason codes (NRC), for further information.

4.119.4.21.4.1  (04-05-2016)
Discrepancy Explained (No Change) - Analysis

  1. Use the following examples of acceptable explanations as a guide for evaluating taxpayer responses. These examples are not all inclusive.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer states that the income or loss amount was netted against other reportable items of expense or deduction/depreciation≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Issue Letter 4551C and include the following Special Paragraph "Items of income and expenses must be separately stated in the appropriate section of the return and should not be netted."

    2. Close the case with the appropriate N/C Process Code.

    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 and include NRC 5.

    Note:

    See IRM 4.119.4.21.7, Responses Needing Further Actions, when the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. The income in question is nontaxable, and information sources (the Internal Revenue Code, etc.) confirm the nontaxability. No NRC is needed.

  5. The same issue was addressed in a prior year and was correctly closed No Change. Use appropriate NRC based upon research completed.

  6. If the taxpayer replies that the U/R income belongs to another recipient and provides: the name and/or TIN of the recipient and supporting documentation (e.g., letter from payer, billing agreement/arrangement, etc.) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  7. The taxpayer disclaims knowledge of the income and any of the following conditions are present:

    And Then
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 9.

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 8.

    Master File shows an indication of a mixed entity situation.
    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 6.

    1. Note:

      If the above conditions do not apply see IRM 4.119.4.21.7.5, Third Party Contacts, for further instruction.

  8. The income is erroneous and information on the Payer Agent list confirms the taxpayer's statement:

    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 7.

  9. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

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

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

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

    Note:

    Check the Payer Agent listing; if the information is not present, route a copy of the documentation provided by the taxpayer/payer to the BMF-AUR Payer Agent Coordinator.

  11. The amount(s) in question is (are) reported on the return, and after reviewing the return, all proposed U/R income is located.

    1. Send Letter 4551C including the following Special Paragraph: "To avoid receiving similar notices from the Internal Revenue Service in the future, please report the specific income type with their corresponding line on your tax return."

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 1.

  12. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

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

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

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

  13. Accept the taxpayer's explanation when ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 8.

  14. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of U/R foreign income for: currency rates fluctuation-Income partially reported on the return and the taxpayer states that different currency rates caused the difference in the income.

    1. Issue Letter 4551C.

    2. Close the case with the appropriate N/C Process Code.

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

    4. Annotate the case folder and DCI with N/C Process Code and include NRC 8.

4.119.4.21.5  (04-05-2016)
Agreed Responses

  1. An agreed response must contain no disputing comments and must meet ONE of the following conditions:

    Note:

    If the only disputing comments are concerning interest, treat as an agreed response. The taxpayer does not have to consent to the assessment of interest as this is a statutory adjustment. Issue Letter 4551C to inform the taxpayer. See IRM 4.119.4.21.1.2, Abatement of Interest.

    1. Be full paid, prior to issuance of the Letter 3219B, Statutory Notice of Deficiency, for tax and all penalties, except the following: ES Penalty, Accuracy Related Penalty Due to Negligence/Substantial Understatement if evidence of reasonable cause is provided and accepted and FTF/FTP relating solely to adjustments to W/H.

      Caution:

      Full payment received after issuance of the Letter 3219B, Statutory Notice of Deficiency, cannot be accepted as agreement to the tax increase. Attempt to contact the taxpayer by phone to request missing signature(s). See IRM 4.119.4.21.2.6, Out Calls.

    2. Be a signed Form 433-D, Installment Agreement, or Form 9465, Installment Agreement Request, attached to a notice with no taxpayer comments. See IRM 4.119.4.21.1.10, Installment Agreements, for further instruction.

    3. Contain signature on a Letter 2030 with no disputing comments.

      Note:

      A statement or similar document must contain (in addition to the signature) the tax year, the tax increase amount, and applicable penalties unless attached to the notice.

    4. A signature on a Letter 2531does not meet agreed criteria for assessment of tax/penalties unless the taxpayer provides a computation of tax and penalty (if applicable).

  2. The signature of a third party is acceptable if a Power of Attorney has been filed authorizing the third party to sign.

  3. 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 an agreed Process Code, even if the taxpayer has fully agreed. 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.

  4. If the taxpayer agrees and indicates they would like to talk to someone:

    1. Contact the taxpayer by phone (only one attempt is required), and

    2. Take the appropriate action.

  5. If the taxpayer requests that the subsequent year's refund be applied to the deficiency:

    1. Close the case agreed.

    2. Issue Letter 4551C informing them that there may not be enough time to deduct the liability from this year's refund.

  6. Input assessments on all agreed responses from BT 510, 511, 710 or 711 within 30 days of the IRS received date. See IRM 4.119.4.21.10, Adjustments, for more information.

  7. If the taxpayer does not request an Installment Agreement, but indicates that they can pay the balance due within 120 days, forward the extension to pay to Collection for processing.

    1. Issue a Letter 4551C with the following Special paragraph "We referred your request for an extension to pay to the appropriate office."

    2. Leave a case note stating "Extension to Pay to Coll" or similar verbiage.

  8. Close the case with the applicable Agreed Process Code 4470, (Letter 2531 phase), 4670 (Letter 2030 phase), or 4870 (Stat phase). Annotate the DCI and case folder.

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

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

4.119.4.21.6  (09-02-2016)
Partially Agreed Responses

  1. A response is considered partially agreed when the taxpayer includes acceptable explanations for SOME of the amounts in question. Recompute the tax on the remaining BMF-AUR issues.

    Note:

    An amended return can be considered a partially agreed response.

    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.

  2. TCO approval is required when the taxpayer response includes additional expenses, deductions and/or allowances ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 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 (3) 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 (ex: 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.

  3. If the taxpayer responds to a Form 1041 notice, agreeing to the U/R income and allocating 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 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 the suspense period, take the next action.

  4. When the response includes a calculation of the new tax liability, ALWAYS verify the correct tax figures.

  5. If the taxpayer's calculation of new tax matches the verified revised tax figures:

    If Then
    The "agree criteria" is met. See IRM 4.119.4.21.5, Agreed Responses, for additional information

    Reminder:

    Taxpayer must also agree to any remaining applicable penalties: (e.g., Accuracy Related penalty).

    1. Process the assessment based on the recomputed tax figures. See IRM 4.119.4.21.10, Adjustments, for additional information.

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

    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 "agree criteria" is not met.
    1. Issue a recomputed Letter 2030 using PC 4520 (Letter 2030 after Letter 2531 phase), 4530 (Letter 2030 phase) or 4750 (Stat Notice phase).

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

    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.

  6. If the taxpayer's calculation of the new tax does not match the revised tax figures, take the following action:

    If Then
    The taxpayer’s revised tax figures are ≡ ≡ ≡ ≡ ≡ ≡ of the verified revised tax calculation and the "agree criteria" is met. See IRM 4.119.4.21.5, Agreed Responses, for additional information

    Reminder:

    Taxpayer must also agree to any remaining applicable penalties (e.g., Accuracy Related penalty).

    1. Process the assessment using the taxpayer's figures as the new tax liability. See IRM 4.119.4.21.10, Adjustments, for additional information.

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

    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 taxpayer’s revised tax figures are ≡ ≡ ≡ ≡ ≡ ≡ of the verified revised tax calculation and the "agree criteria" is not met.
    1. Issue a recomputed Letter 2030 with the taxpayer's figures using Process Code 4520 (Letter 2030 after Letter 2531 phase). 4530 (Letter 2030 phase) or 4750 (Stat Notice phase).

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

    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 taxpayer's revised tax figures are ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the verified revised tax calculation.
    1. Issue a recomputed Letter 2030 with the corrected figures using Process Code 4520 (Letter 2030 after Letter 2531 phase), 4530 (Letter 2030 phase) or 4750 (Stat Notice phase).

    2. If necessary, include an explanation paragraph regarding the difference in the calculation.

    3. Update IDRS Activity Code as appropriate. See Exhibit 4.119.4-7, Activity Code/Category Codes, for additional information.

    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.

    The verified revised tax calculation is LESS THAN the taxpayer’s calculation and the "agree criteria" is met. See IRM 4.119.4.21.5, Agreed Responses, for additional information

    Reminder:

    Taxpayer must also agree to any remaining applicable penalties (e.g., Accuracy Related penalty).

    1. Process the assessment based on the verified revised tax calculation. See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Issue a For Your Information (FYI) Recomputed Letter 2030 with the revised tax calculation. Include an explanation regarding the difference in the tax calculation.

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

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

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

    The verified revised tax calculation is LESS THAN the taxpayer's calculation and the "agree criteria" is not met.
    1. Issue a recomputed notice with the corrected figures using Process Code 4520 (Letter 2030 after Letter 2531 phase), 4530 (Letter 2030 phase) or 4750 (Stat Notice phase).

    2. If necessary, include an explanation paragraph regarding the difference in tax calculation.

    3. Update IDRS Activity Code as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    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.

  7. If the taxpayer's acceptable response results in no tax deficiencies (i.e., tax decrease), with or without a signed consent, take the following action:

    1. Input the adjustment on IDRS. See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Issue a For Your Information (FYI) Recomputed Letter 2030 with the revised tax amount. Inform the taxpayer that we have input the revised tax amounts and that they can expect a refund if they don't owe any outstanding tax liabilities.

    3. Update IDRS Activity Code as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

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

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

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

  8. If the recomputed net tax change (deficiency) is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the taxpayer has not signed a consent to tax increase nor fully paid with no disputing comments, recompute the tax and issue a revised Letter 2030 (for taxpayer’s signature), even if the overall balance due ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . See IRM 4.119.4.21.6.1, Recomputed Notice/Supplemental Report, for additional information.

    Example:

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

  9. If the recomputed net tax change is below tolerance and the taxpayer does not submit a payment, or does not request a bill/notice, close the case No Change:

    If Then
    An adjustment to prepayment credits and/or Total Income is NOT necessary.
    1. Close the case using PC 4400 (Letter 2531 phase), PC 4600 (Letter 2030 phase) or PC 4810 (Stat Notice phase).

    2. Issue Letter 4551C.

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

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

    An adjustment to prepayment credits IS necessary.
    1. Close the case using PC 4470 (Letter 2531 phase), PC 4680 (Letter 2030 phase) or PC 4880 (Stat Notice phase).

    2. Send Letter 4551C include an explanation regarding the prepayments adjustment.

    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.

    An adjustment to TXI ONLY is necessary and the tax change is zero (for example: the taxpayer agrees to unreported income and they have a negative TXI that remains negative).
    1. Input the TXI adjustment on IDRS. See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Close the case using with PC: 4420 (Letter 2531 phase), 4610 (Letter 2030 phase) or 4820 (Stat Notice phase).

    3. Send Letter 4551C to advise the taxpayer of the adjustment to TXI.

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

    5. Annotate the case folder and DCI with the appropriate PC and include NRC 10.

    Reminder:

    Do not include TXI changes for amounts that the taxpayer has not agreed to. For example: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  10. If the recomputed net tax change is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and the taxpayer or authorized representative acknowledges the existence of a remaining balance due/refund (e.g., submits a payment, a signed amended return or requests a "bill" or "notice" ) and;

    If Then
    The recomputation is equal to or less than the payment amount (or the taxpayer did not submit a payment).
    1. Input the applicable changes on IDRS. See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Send Letter 4551C to advise the taxpayer of the adjustment.

    3. Close the case with the applicable PC.

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

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

    Exception:

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

    The recomputation is more than the payment amount.
    1. Consider the payment amount as the tax change and update IDRS accordingly See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Send Letter 4551C to advise the taxpayer of the adjustment.

    3. Close the case with the applicable PC.

    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.

    Exception:

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

  11. If there is a recomputed refund less than $1 and the taxpayer requests a refund, issue it using manual refund procedures in IRM 21.5.1, General Adjustments, IRM 21.4.4, Manual Refunds, and IRM 21.5.2, Adjustments Guidelines.

  12. Whenever processing the assessment on a partially agreed response, issue closing Letter 4551C, acknowledging the taxpayer response. Inform them that we have assessed the revised tax, and close the IDRS control base.

    Note:

    All case closures require a TC 29X (including a TC 290 .00 when closing the case No Change). See IRM 4.119.4.21.10, Adjustments, for additional information.

4.119.4.21.6.1  (09-02-2016)
Recomputed Notice/Supplemental Report

  1. Rework the case and take the appropriate actions to:

    • Recompute the tax when the taxpayer's response is partially agreed

    • Correct an erroneous Letter 2030 or Letter 3219B, Statutory Notice of Deficiency

    • Obtain the taxpayer's signature, if the taxpayer agreed to the notice but failed to sign (a letter may also be sent for this purpose)

  2. When a condition exists that requires a Recomputed Notice:

    1. There are two Recompute Letter 2030 and two Recompute After STAT Letter 2030 Master Letter templates based on tax return type. Use the appropriate version for the desired Letter Mailout date.

    2. Complete the template.

      Reminder:

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

    3. Beginning in TY 2014, the Recompute Letter 2030 and Recompute After STAT Letter 2030 will include Failure to File (FTF) penalty, when applicable. See IRM 4.119.4.16.1, Failure to File Penalty, for further information.

      Reminder:

      Use the "FTF calculator tool" to calculate additional FTF penalty. However, if a TC 276 or TC 270 is posted on the account and a FTF penalty applies a manual calculation is required.

    4. 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 or disregard of rules or regulations 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.

    5. When the taxpayer submits a payment subsequent to the initial contact notice, include PARAGRAPH 102.

      Note:

      When the taxpayer's response indicates a payment was made, research IDRS for payments previously made.

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

    7. Amount types that were not part of the IRPTRW print sent with the original Letter 2030 can be included on the Recomputed Notice for clarification.

      Reminder:

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

    8. See IRM 4.119.4.18.2, Letter 2030 Preparation, for additional instruction regarding all steps necessary to create and mail a recomputed Letter 2030 (including all enclosures).

    9. Input TC 925 with the applicable Process Code PC 4520 (Letter 2030 after Letter 2531), PC 4530 (recomputed Letter 2030) or PC 4750 (recomputed Letter 2030 after Stat Notice) using IDRS CC:REQ77/FRM77.

    10. Update IDRS Activity Code as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

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

  3. If a decrease to the tax deficiency is necessary after the Letter 3219B, Statutory Notice of Deficiency was mailed and:

    If Then
    There is sufficient time left on the Statutory Notice suspense period
    1. Issue the recomputed Letter 2030 for the lower deficiency amount using PC 4750.

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

    3. Input TC 925 with PC 4750 using IDRS CC:REQ77/FRM77.

    4. Update the DCI and case folder with Process Code 4750.

      Caution:

      A recomputed notice sent after the Letter 3219B has been issued cannot have a deficiency greater than the original deficiency amount.

    There is insufficient time remaining on the Statutory Notice suspense period
    1. Suspend the case until the statutory period has expired.

    2. Assess for the revised amount. See IRM 4.119.4.21.10, Adjustments, for additional information.

    3. Send Letter 4551C. Include an explanation advising the taxpayer of the revised figures.

    4. Close the case with Process Code 4840.

    5. Input TC 925 with PC 4840 using IDRS CC:REQ77/FRM77.

    6. Annotate PC 4840 on the DCI and case folder.

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

    Exception:

    Recomputed notices issued after a Letter 3219B are suspended back to the original Statutory Notice date. 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.

4.119.4.21.7  (09-02-2016)
Responses Needing Further Action

  1. BMF-AUR receives responses that require additional action before the case can be closed. Additional action may include:

    • Correspondence with the taxpayer via a letter or Recomputed Notice

    • Correspondence with a payer

    • Research

    • Referral

    • Routing of information, including non-IRP related inquiries

    • Address updates

    • Extension of the Letter 2030 suspense period

    • Telephone contact

  2. Tax examiners determine if further taxpayer contact would help to resolve the U/R issue. Issue a letter or contact the taxpayer by telephone when:

    • A response indicates the taxpayer does not understand the notice

    • The taxpayer requests further information regarding taxability

    • Further contact will help resolve the U/R issue

      Note:

      Document any telephone contacts.

      Caution:

      When making an outgoing call, you must ensure that you are speaking to an authorized individual. See IRM 4.119.4.21.2.2, Disclosure and IRM 4.119.4.21.2.6, Out Calls, for further information.

  3. TCO approval is required when the taxpayer response states that the income or loss amount was netted against other reportable items of expense or deduction/depreciation ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Refer these cases to the Lead Tax Examiner for additional review.

  4. If the taxpayer requests a copy of the tax return for the open BMF-AUR tax year, send a photocopy of the return to the taxpayer at no charge.

  5. If the taxpayer requests an explanation for the amount of time it took the IRS to notify them of the unreported income, issue a Letter 4550C. If issuing a recomputed notice, include PARAGRAPH 105.

  6. If the taxpayer states U/R income was reported on the tax return:

    1. Review the return and IDRS for applicable adjustments.

    2. The response may indicate that the U/R income is reported on another line of the tax return. As part of the review, consider IRs previously considered reported before determining that the U/R is resolved.

      Example:

      The taxpayer states that U/R Dividends were reported as Interest. Consider both Interest and Dividend IRs amounts when comparing to the tax return amount.

    3. Based on the review of the return, take the following actions:

      If Then
      If the U/R income cannot be found
      1. Send Letter 4550C.

      2. Include the following Special Paragraph "You indicated that the income in question was reported. However, we are unable to find this income on your return. Please indicate where on your return the income is located."

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

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

      If the U/R income is found reported on an incorrect line and is completely accounted for
      1. Consider the issue resolved.

      2. Close the case with the applicable No Change Process Code.

      3. Send Letter 4551C including the following Special Paragraph: "To avoid receiving similar notices from the Internal Revenue Service in the future, please report the specific income type with their corresponding line on your tax return."

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

      5. Annotate the case folder and DCI with the appropriate PC and include NRC 1.

      If the U/R income is found reported on an incorrect line, but there is still an underreporter issue Pursue the outstanding underreported income issue(s). See IRM 4.119.4.21.6.1, Recomputed Notice/Supplemental Report, for further instruction.
  7. If a non-BMF-AUR related inquiry is included with the response:

    1. Photocopy the inquiry and route to the appropriate function. Include the Business name, address, TIN, and the Received Date.

    2. Send an acknowledgment letter to the taxpayer.

  8. If an original current year return is attached to a response, route it to the appropriate area for processing.

  9. If the taxpayer requests a copy of a 1099 series, Schedule K-1 or other payer documents, advise them to request a duplicate copy from the payer. If issuing a recomputed notice, include PARAGRAPH 106. Whenever possible, provide the taxpayer with the payer's name and address.

    Note:

    If the taxpayer states the income was not reported because they did not receive an income document, and a recomputed notice is being issued, include PARAGRAPH 103. If issuing a Correspondex Letter, ensure the letter includes wording similar to PARAGRAPH 103.

  10. If the U/R issue is resolved, but the taxpayer states that another amount was not claimed, underclaimed, or overstated on the original return, and the taxpayer provides sufficient information, make the adjustment. Use good judgment in determining if the taxpayer is entitled to this adjustment. If questionable issues are involved discuss with the Lead Tax Examiner.

  11. If the taxpayer replies that the U/R income belongs to another recipient and does not provide the name and/or TIN of the recipient and supporting documentation (e.g., letter from payer, billing agreement/arrangement, etc.):

    1. Accept the taxpayer's explanation if the U/R income in question ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , send a Letter 4550C to request the name and TIN of the recipient responsible for the income and supporting documentation.

    3. If the taxpayer responds to the Letter 4550C and provides the name or the TIN of the other recipient AND the supporting documentation, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. If the taxpayer responds to the Letter 4550C and does not provide the name or the TIN of the other recipient AND supporting documentation, contact the payer. See IRM 4.119.4.21.7.5, Third Party Contacts, for additional information.

  12. If the taxpayer indicates they received Form 1099 for amounts that belong to another entity/person because they acted as an intermediary, agent, or broker for that entity/person, see IRM 4.119.4.21.7.6, Nominee Income, for further instructions.

  13. If the taxpayer provides a corrected/amended Form 1099:

    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 Send Letter 4552C to the payer. See IRM 4.119.4.21.7.5, Third Party Contacts, for additional information.
  14. If the taxpayer provides a corrected/amended Schedule K-1, see IRM 4.119.4.21.3.11, Partnership/Trust/S-Corporation Conduit Income, for additional information.

  15. If the taxpayer states that the U/R income was reported in another tax year, see IRM 4.119.4.21.7.9, Income Reported in a Different Tax Year, for further instructions.

  16. If the taxpayer replies that a payment was submitted, but there is no indication on the IDRS that the payment was received and at least three weeks have passed since the IRS Received Date:

    1. Research the payment on IDRS. The payment may show as pending or unpostable.

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

    3. If no record of the payment is found, issue a Letter 4550C to request a copy of the front and back of the canceled check.

    4. When the Taxpayer replies with the copy of the front and back of the check, use the encoding on the check to determine where the payment has posted. The back of the check should display the following information Name Control or CK Digit, the DLN, the Transaction Code, the MFT Code, the TIN, the Tax Period and the Posting Date.

    Note:

    The Remittance Tracking Research (RTR) System provides 3 years of check images (from ISRP and Lockbox Bank processing sites) and may be used to research the payment.

  17. If the taxpayer replies that they submitted a payment electronically, but there is no indication on IDRS that the payment was received and at least 10 days have passed since the payment was made, research using IDRS CC:EFTPS:

    1. Use Definer T if the taxpayer provides payment date and payment amount or

    2. Use Definer E if the taxpayer provides the 15 digit EFT trace number.

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

    4. Always research the account thoroughly including previous and subsequent tax years. If there is an EFTPS payment for $0.00 with the same payment date, refer to the Lead Tax Examiner for further research before contacting the taxpayer.

    5. If the payment is not found; issue Letter 4550C requesting a bank statement or other documentation that shows the withdrawal.

    6. When the taxpayer replies with the requested documentation, refer to the Lead Tax Examiner.

  18. If the taxpayer wants to talk to (or have their case reviewed by) a manager, refer the case to the Lead Tax Examiner. They will attempt to resolve the issue(s) by telephone contact.

  19. If the taxpayer wants their case sent to their local Area Office, attempt to resolve the issue(s) by telephone contact. If the telephone contact does not resolve the issue(s) consult with Lead Tax Examiner for referral to the TCO/Revenue Agent (RA) for further action.

  20. See IRM 4.119.4.21.7.6, Nominee Income, when the response from an Oil and Gas Industry related corporation states that the income was distributed to other entities.

4.119.4.21.7.1  (09-17-2014)
Discovered Remittance

  1. Discovered remittance is a response and/or correspondence with an original form of payment attached such as a personal check, money order or cashier’s check. Also, a loose check(s) discovered in an envelope or attached to a blank piece of paper.

  2. When a remittance is discovered, complete two copies of Form 3244, Payment Posting Voucher. Complete the following fields:

    • TIN

    • Form number/MFT

    • Tax Period

    • Transaction/Received date (IRS received date)

    • Taxpayer name, address, and ZIP code

    • Transaction Data - Enter the remittance amount next to code 640 (Advance Payment of Deficiency)

    • Remarks (the team manager’s phone number and Mail Stop)

    • Prepared by

  3. After completing Form 3244 take the following steps:

    1. Attach one copy (original) to the remittance and give it to the Manager/Lead Tax Examiner to be given to the Clerical Manager/Lead Clerk to put in a locked box (Lock Box).

    2. Attach the second copy of Form 3244 to the response.

    Note:

    Form 4287, Record of Discovered Remittance, is completed daily by the Clerical Function to log all discovered remittance when appropriate.

  4. IRS CHECKS - Returned IRS refund checks are handled differently than regular discovered remittance. If an IRS refund check is found, take it to the team Manager/Lead Tax Examiner to be routed to the Refund Inquiry Unit.

  5. VOIDED CHECKS - If the response has a "VOIDED" personal check attached, remove the check from the response and attach it to the Installment Agreement (IA) request. Route the "VOIDED" check with the IA to Collections.

4.119.4.21.7.2  (04-05-2016)
Extension Requests

  1. When the taxpayer requests an extension to respond to the notice, or indicates they will obtain information and send it later, take the following action(s) using one of the following charts as appropriate:

    Written Response
    If Then
    The taxpayer requests an extension to respond to the Letter 2531:
    1. Issue a Letter 2030 (recomputed) using PC 4520. Include the following Special Paragraph "Based on your request for an extension we have issued this notice which allows you additional time to respond."

    2. Update IDRS activity with FCP30MMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Input TC 925 with PC 4520 using IDRS CC:REQ77/FRM77.

    4. Annotate the DCI and case folder with PC 4520.

    The taxpayer requests an extension to respond to the Letter 2030:
    1. Issue a Letter 4550C informing the taxpayer their request for an extension has been granted.

    2. Update IDRS activity with 45EXLTMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    3. Annotate the DCI and case folder with 45LT.

    Note:

    DO NOT grant multiple extensions, unless extenuating circumstances apply.

    The taxpayer requests an extension to respond to the Letter 3219BStatutory Notice of Deficiency:
    1. Issue a Letter 4550C advising the taxpayer that the period of time to petition the US Tax Court cannot be extended.

    2. Update IDRS activity with 47LTMMDD and then update the IDRS activity with STATMMDD (MMDD is the original STAT Purge Date). See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    3. Annotate the DCI and the case folder with 47LT.

      Reminder:

      All Letter 3219B, Statutory Notice of Deficiency, responses are worked on an expedite basis.

    Telephone Response
    If And Then
    The taxpayer requests an extension to respond to the Letter 2531:  
    1. Advise the caller that they have been granted a 15 day extension.

    2. Advise the caller to respond as soon as possible and if the response is not received, a subsequent contact will be initiated.

    3. Send Letter 4550C, when necessary. Print a copy of Letter 4550C and associate with the case file.

    4. Document the call activity.

    The taxpayer requests an extension to respond to the Letter 2030: The Activity Code on IDRS is NOT 59XXXXWUXX or STATMMDD
    1. Inform the caller they have an additional 30 days to respond to the notice.

    2. Send Letter 4550C, when necessary. Print a copy of Letter 4550C and associate with the case file.

    3. Document the call activity and indicate extension granted.

    4. Update the IDRS activity with 45EXMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    Note:

    DO NOT grant multiple extensions, unless extenuating circumstances apply.

    The taxpayer requests an extension to respond to the Letter 2030: The Activity Code on IDRS IS 59XXXXWUXX or STATMMDD
    1. Inform the caller they will be receiving a Letter 3219B, Statutory Notice of Deficiency, and this will allow them an additional 90 days (150 days if the notice is addressed to a person outside the U.S.) to respond.

    2. Send Letter 4550C, when necessary. Print a copy of Letter 4550C and associate with the case file.

    3. Document the call activity.

    The taxpayer requests an extension to respond to the Letter 3219B, Statutory Notice of Deficiency:  
    1. Advise the caller that the period of time to petition the US Tax Court cannot be extended.

    2. Send Letter 4550C, when necessary. Print a copy of Letter 4550C and associate with the case file.

    3. Document the call activity.

4.119.4.21.7.3  (09-02-2016)
NOL Carryback/Carryforward (or Carryover)

  1. Taxpayers can have a Net Operating Loss (NOL), unused credits, a Net Capital Loss (NCL) or an overpayment of tax due to Claim of Right that will result in a negative taxable income or overpayment of tax. They can choose to apply the loss, excess, or overpayment to prior (carryback) or future (carryforward) years.

    1. An NOL or NCL changes the taxable income and the total tax for the year it is affecting.

    2. Unused credits or a Claim of Right will have a direct effect on the total tax.

  2. A corporation can file Form 1139, Corporation Application for Tentative Refund, (referred to as a TENT) or Form 1120X (referred to as a RINT) to apply their carryback. A TENT has a 90-day statutory processing requirement.

    Note:

    Both RINTS and TENTS must be processed within the 45 - Day Interest Free period. Work these cases on an expedited basis.

  3. An Estate or Trust can file Form 1045, Application for Tentative Refund, (referred to as a TENT) or an Amended Form 1041 (referred to as a RINT) to apply their carryback. A TENT has a 90-day statutory processing requirement.

    Note:

    Both RINTS and TENTS must be processed within the 45 - Day Interest Free period. Work these cases on an expedited basis.

  4. When the taxpayer’s response includes a request to carryback a subsequent year’s overpayment or loss in order to offset the results of the Underreporter issue(s), the BMF-AUR issues and the carryback request will be treated separately.

  5. A TENT must be filed within one year from the end of the loss year (e.g., a TENT filed for Tax Year 2015 must be filed before December 31, 2016). If the response includes a TENT that is not timely filed:

    1. Return it to the taxpayer.

    2. Issue the appropriate Correspondex Letter and inform the taxpayer that we are returning the form because the application was filed more than 12 months after the end of the tax year from which the carryback resulted and that they need to file an amended tax return.

    3. Update IDRS with TC 971 AC 270.

    4. Leave a case note on Form 12864Case History Sheet documenting the actions.

    5. Continue processing the BMF-AUR case.

  6. If the taxpayer’s response resolves the BMF-AUR issues (i.e. allows the case to be closed; fully agreed, partial agreed or no change) and includes a RINT/TENT:

    1. Rework the case per the taxpayer's response.

    2. Photocopy the RINT/TENT to be retained with the case file.

    3. Send the original request to the CIS Team for scanning and routing to the appropriate Carryback Team. Include a cover page indicating the originating area (BMF-AUR), contact number and include the following statement: "Assessment Pending."

      Exception:

      If closing the case No Change, use the following statement on the cover page: "No Pending Assessment."

    4. Issue Letter 4551C. In addition to informing the taxpayer that we are processing their agreement to the underreporter issue(s), include the following statement:

      If Then
      The carryback claim was filed as a TENT: "We have forwarded your request for a tentative refund for processing. Please be advised that you will receive balance due notices until your request for a tentative refund has been approved and processed."
      The carryback claim was filed as a RINT: "We have forwarded your amended return for processing. Please be advised that you will receive balance due notices until your amended return has been approved and processed."
    5. Close the case with the applicable Process Code.

      Reminder:

      Carryback claims must be expedited in order to meet the 45-Day Interest Free requirement as well as the 90-day statutory requirement for tentative carryback .

    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.

  7. If the taxpayer’s response does not resolve all (or part) of the U/R issues (i.e., the case cannot be closed as an agree, partial agree or no change) and includes a RINT/TENT:

    1. Continue processing the BMF-AUR case.

    2. Return the RINT/TENT to the taxpayer.

    3. Issue the appropriate Correspondex Letter. Include a paragraph informing the taxpayer to resubmit their request when they have addressed the unresolved U/R issues.

    4. Update IDRS with TC 971 with AC 270.

    5. Leave a case note on Form 12864, Case History Sheet, documenting the actions.

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

    7. Annotate the DCI and case folder.

  8. The Accounts Management Carryback Team contacts BMF-AUR when they receive a RINT/TENT and the case is open for the BMF-AUR tax year.

    If Then
    The RINT/TENT includes a response that fully resolves the BMF-AUR issues (i.e., the case can be closed agreed, partially agreed or no change).
    1. Work the case and complete all IDRS actions.

    2. Advise the Carryback Team to monitor IDRS for posting of BMF-AUR closing actions.

    The RINT/TENT does not include a response or includes a response that does not fully resolve the BMF-AUR issue (i.e., the case cannot be closed agree, partially agree or no change).
    1. Advise the Carryback team that BMF-AUR will notify the taxpayer that the claim cannot be processed.

    2. Follow the procedures in (7) above.

      Note:

      Provide the taxpayer with a copy if the RINT/TENT. See IRM 4.119.4.3.5, Correspondence Imaging System (CIS) Documents, for further information.

  9. When the taxpayer's response includes an increase to the NOL deduction claimed on the tax return review all subsequent tax year(s) to verify the available prior year NOL carryover amount.

    Note:

    Taxpayers are not required to file an amended return to claim carryforward credits.

    1. On a subsequent year(s) Form 1120 tax return(s), review both Form 1120, 29a (NOL deduction claimed) and Schedule K, line 12 (prior year NOL carryover available) to determine the amount of NOL carryover available to offset the BMF-Underreporter issues(s).

      Note:

      NOL deductions and carryover information for Form 1120 are available on IDRS CC:BRTVU.

      Exception:

      Consult with the Lead Tax Examiner for referral to the TCO if there is evidence that the taxpayer claimed a RINT or TENT (i.e., TC 295/299 or 305/309 present on the account).

    2. Consult with the Lead Tax Examiner for referral to the TCO for further action when the taxpayer increases their NOL deductions on Form 1041, line 15b.

    3. Take the following actions once you have determined the available NOL carryover:

      If Then
      The available NOL carryover is enough to grant the taxpayer's request in full.

      Example:

      Taxpayer requests that we apply their prior year NOL carryover to offset the proposed $25,000 U/R income. Review of the subsequent year(s) returns show: $150,000 prior year NOL available and the taxpayer claimed $47,000 NOL deduction. The amount of available carryover NOL that can be applied to the BMF-Underreporter issue(s) is $103,000 ($150,000 - $47,000).

      1. Allow the additional NOL deduction.

        Note:

        This will generally result in closing the case No Change.

      2. Continue processing the case.

      3. Include the following Special Paragraph: "We applied your available prior year Net Operating Loss (NOL) carryover to reduce our proposal. Please correct your NOL carryover records to account for this change. The NOL applied to this tax period cannot be used as a deduction for any subsequent tax returns."

      The available NOL carryover is enough to grant some of the taxpayer's request.

      Example:

      Taxpayer requests that we apply to their prior year NOL carryover to offset the proposed $15,000 U/R income. Review of the subsequent year(s) returns show $20,000 prior year NOL available and the taxpayer claimed $13,000 NOL deduction. The amount of available carryover NOL that can be applied to the BMF-Underreporter issue is $7,000 ($20,000 - 13,000).

      1. Allow the additional NOL deduction up to the available amount.

      2. Issue a recomputed Letter 2030 using PC 4520 (Letter 2030 after Letter 2531), PC 4530 (recomputed Letter 2030) or PC 4750 (recomputed Letter 2030 after Stat Notice). Select "NET OPERATING LOSS DEDUCTION" from the drop down menu in the "Your income and deductions" field to display the allowable NOL deduction. See IRM 4.119.4.21.6.1, Recomputed Letter/Supplemental Report.

      3. Include a special paragraph to explain the issue.

      4. Update IDRS Activity Code as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

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

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

      The taxpayer used all available prior year carryover NOL in the subsequent year.

      Example:

      Taxpayer requests that we apply their prior year NOL carryover to offset the proposed $30,000 U/R income. Review of the subsequent year(s) returns shows: $75,000 prior year NOL available and the taxpayer claimed a $75,000 NOL deduction. The amount of available carryover NOL that can be applied to the BMF-Underreporter issue is $0 ($75,000-$75,000).

      1. Deny the request.

      2. Send Letter 4550.

      3. Include the following Special Paragraph: "We cannot apply the Net Operating Loss (NOL) amount you requested to reduce our proposal because it has been used in another tax year. To change this election, please file an amended tax return for the year where the loss was applied. Once we receive your amended return we’ll correct our proposed changes."

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

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

4.119.4.21.7.4  (12-11-2014)
Adjustments to Non - Refundable Credits

  1. If the taxpayer’s response states that we did not adjust non-refundable non-carryfoward credit(s):

    1. Review the tax return to confirm the taxpayer’s statement.

    2. Adjust the refundable credit(s) to take into account any additional allowable credit(s) the taxpayer is entitled to claim.

    3. Refer the case to the Lead Tax Examiner if a recomputed Letter 2030 is needed.

  2. If the taxpayer's response states that we did not adjust the non-refundable carryforward credit(s):

    If the taxpayer... And... Then...
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡  
    1. Adjust the refundable credit(s) to take into account any additional allowable credit(s) the taxpayer is entitled to claim.

    2. Refer the case to the Lead Tax Examiner if a recomputed Letter 2030 is needed.

    Does not address the subsequent year carryforward credit issue, research the subsequent tax year (using IDRS CC:BMFOL) for evidence that an amended return was filed. A TC 976 or TC 971 AC 010 or 012 - 016 posted, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    1. Adjust the refundable credit(s) to take into account any additional allowable credit(s) the taxpayer is entitled to claim.

    2. Refer the case to the Lead Tax Examiner if a recomputed Letter 2030 is needed.

    Does not address the subsequent year carryforward credit issue there is no indication that the subsequent year return was amended or if the subsequent year tax return has not been filed.
    1. Issue Letter 4550C. Inform the taxpayer that we cannot adjust the allowable amount of credit until either the filed subsequent year tax return has been amended or a signed statement is received confirming that the carryforward credit records have been corrected.

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

    3. Annotate the DCI and case folder.

4.119.4.21.7.5  (09-17-2014)
Third Party Contacts

  1. RRA '98 Section 3417 added a provision to IRC 7602 requiring taxpayer notification prior to making a third party contact.

  2. If the taxpayer disputes the amount and does not provide documentation to support the claim, contact taxpayer and request the needed documentation.

  3. If the taxpayer disclaims knowledge or denies receipt of the income determine if the IR is valid for this taxpayer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ if any of the following conditions are present:

    1. IR does not belong to the taxpayer.

    2. The IR is TIN perfected.

    3. A Payer Agent indicator is present with instructions to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. The discrepancy ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If the IR is determined to be valid, take the following actions:

    1. Research IDRS CC:INOLE or CC:ENMOD to obtain the most current payer address.

    2. Issue Letter 3404C to the taxpayer advising them of the payer(s) we need to contact in order to resolve the issue.

    3. Wait 10 days and then issue Letter 4552C to the payer(s). Select applicable paragraphs to compose the letter.

      Note:

      DO NOT issue a Letter 4552C when the taxpayer disagrees with our proposal because they did not receive the Information Return document. Inform the taxpayer that they are responsible for reporting all taxable income received.

    4. Complete and forward Form 12175, Third Party Contact Report Form, to the designated Campus Third Party Coordinator.

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

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

  5. Take the following actions when the payer responds to the Letter 4552C:

    1. If the information provided by the payer indicates the income does not belong to the taxpayer,≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . If the payer indicates the same situation occurred in a subsequent year, send a copy of the response from the payer and the IR(s) to be associated with the subsequent year's return.

    2. If the information provided by the payer indicates that the income DOES belong to the taxpayer, issue a Letter 4550C to inform the taxpayer that the payer verified that the income belongs to them. Include a copy of the payer(s) response.

      Note:

      If the taxpayer responds to the Letter 4550C and disagrees with the amount of income in question, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. If it cannot be determined that the income belongs to the taxpayer OR if the payer refuses to furnish the necessary information ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.119.4.21.7.6  (04-05-2016)
Nominee Income

  1. When the taxpayer indicates they received Form 1099 for amounts that belong to another entity/person because they acted as an intermediary, agent, or broker for that entity/person they are considered a nominee recipient.

    Note:

    Consider the taxpayer a nominee recipient when their explanation states that the income was: held in escrow, received but are not entitled to its use, or other statements that the income was passed through to another recipient.

    Caution:

    If the taxpayer indicates that their business activity relates to distributing funds to multiple recipients (e.g., fund-raising, crowdfunding, etc.) consult with the Lead Tax Examiner. The Lead Tax Examiner will determine if the case should be transferred to a TCO for further action.

  2. If the response indicates the corporation is related to the Oil & Gas Industry (as shown by the Business Activity on Form 1120, Schedule K lines 2a - 2c) and they acted as a broker, agent or middleman for other entities, research IDRS CC:PMFOLS and IDRS CC: IRPTRI to determine if the taxpayer issued nominee Forms 1099-MISC.

    If Then
    The total money amount of the Form 1099-MISC payments is equal to or larger than the U/R amount
    1. Accept the taxpayer’s response and consider the U/R discrepancy resolved.

    2. Issue closing Letter 4551C.

    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 the appropriate N/C Process Code and include NRC 4 (nominee).

    The money amount of the Form 1099-MISC payments is less than the U/R amount
    1. Pursue the difference as U/R income.

    2. Issue a recomputed notice and include the following Special Paragraph: "We have allowed credit for the Form(s) 1099-MISC income you distributed to the nominee recipient(s)."

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

    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.

    The IDRS research does not indicate any distribution of Form 1099-MISC payments
    1. Pursue the U/R discrepancy in full.

    2. Send Letter 4550C and include Paragraph "V" .

      Note:

      If Letter 3219B, Statutory Notice of Deficiency was issued, include a paragraph stating that this letter does not extend the period in which the taxpayer may petition the U.S. Tax Court.

  3. When the taxpayer is not related to the Oil & Gas Industry (as shown by the Business Activity on Form 1120, Schedule K lines 2a - 2c) and the response indicates that they acted as a broker, agent or middleman for other entities, follow the procedures in (4) - (7) below to determine the actions needed to resolve the U/R issue.

  4. If the response does not include any supporting information (i.e., Forms 1099 and/or sufficient information about the intended recipient(s) of the income (e.g., name and/or TIN and amount distributed (if more than one recipient)), contact the taxpayer to obtain additional information. Issue Letter 4550C and include Paragraph V.

    Note:

    If issuing a recomputed notice, include PARAGRAPH 25.

    Note:

    If a Letter 3219B, Statutory Notice of Deficiency, was issued, include a paragraph stating this letter does not extend the period in which the taxpayer may petition the U.S. Tax Court.

  5. If the response includes Forms 1099 issued to the intended recipients: research IDRS CC:PMFOLS/CC:IRPTRI and CC:IRPTRL (for the recipient/payee) to determine if the taxpayer issued Forms 1099 to the intended recipients.

    Note:

    The Forms 1099 issued to the intended recipients should be the same type as the Form 1099 received by the taxpayer.

    If Then
    IDRS research confirms the presence of the Form 1099 for the intended recipient and the amount is equal to or greater than the U/R amount.
    1. Consider the issue resolved.

    2. Send Letter 4551C and include Paragraph "L" .

    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 the appropriate N/C Process Code and include NRC 4 (nominee).

    Form 1099 payments are present for the intended recipient(s) and the amount is less than the U/R amount OR IDRS research does not indicate any distribution of payments.
    1. Attempt to verify that the income was reported on the recipient’s tax return. See IRM 4.119.4.21.7.7, Income Reported on Another Return (Not Nominee).

    2. If the income can be accounted for on another return, then consider the U/R discrepancy resolved. Send Letter 4551C and include Paragraph "L" . Close the case with the applicable N/C Process Code. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77. Annotate the DCI and case folder with the appropriate N/C Process Code and NRC 4 (nominee).

    3. If the income cannot be accounted for on another return, then consult with the Lead Tax Examiner. The Lead Tax Examiner will determine if the case should be transferred to a TCO for further action.

  6. If the response does not include Forms 1099, but includes sufficient information about the intended recipients (name and/or TIN and amount distributed (if more than one recipient)): research IDRS CCPMFOLS/CC:IRPTRI and CC:IRPTRL (for the recipient/payee) to determine if the taxpayer issued Forms 1099 to the intended recipients.

    Note:

    The Forms 1099 issued to the intended recipients should be the same type as the Form 1099 received by the taxpayer.

    If Then
    IDRS research confirms the presence of the Form 1099 for the intended recipients and the amount is equal to or greater than the U/R amount.
    1. Consider the issue resolved.

    2. Send Letter 4551C and include Paragraph "L" .

    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 the appropriate N/C Process Code and include NRC 4 (nominee).

    Form 1099 payments are present are for the intended recipients and the amount is less than the U/R amount OR IDRS research does not indicate any distribution of payments.
    1. Attempt to verify that the income was reported on the recipient’s tax return. See IRM 4.119.4.21.7.7, Income Reported on Another Return (Not Nominee).

    2. If the income can be accounted for on another return, then consider the U/R discrepancy resolved. Send Letter 4551C and include Paragraph "L" . Close the case with the applicable N/C Process Code. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77. Annotate the DCI and case folder with the appropriate N/C Process Code and NRC 4 (nominee).

    3. If the income cannot be accounted for on another return, then pursue the U/R discrepancy in full. Send Letter 4550C and include Paragraph "V" .

      Note:

      If issuing a recomputed notice, include PARAGRAPH 25.

      Note:

      If Letter 3219B, Statutory Notice of Deficiency was issued, include a paragraph stating that this letter does not extend the period in which the taxpayer may petition the U.S. Tax Court.

  7. If the taxpayer provides documentation that cannot be verified through IDRS research (e.g., cancelled checks, contracts, and/or agreements) consult with the Lead Tax Examiner. The Lead Tax Examiner will determine if the case should be transferred to a TCO for further action.

    Caution:

    Ensure information provided in the response is complete before referring. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ If necessary contact the taxpayer for the needed additional information.

    Reminder:

    If the taxpayer indicates that their business activity relates to distributing funds to multiple recipients (e.g., fund-raising, crowdfunding, etc.) consult with the Lead Tax Examiner. The Lead Tax Examiner will determine if the case should be transferred to a TCO for further action.

  8. Take the following actions when it is necessary to contact the alleged nominee recipient:

    1. Research IDRS CC:INOLE or CC:ENMOD to obtain the most current address of the alleged nominee recipient.

    2. Issue Letter 3404C to the taxpayer advising them of the need to contact the nominee recipient in order to resolve the issue.

    3. Wait 10 days and then issue Letter 4552C to the alleged nominee recipient.

    4. Complete Form 12175, Third Party Contact Report. Forward the completed form to the Clerical Function for routing to the designated Campus Third Party Coordinator.

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

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

  9. Take the following action when the alleged nominee recipient responds to Letter 4552C or the suspense time frame has expired.

    If Then
    The alleged nominee recipient does not respond to the Letter 4552C or disputes the existence of the nominee arrangement
    1. Send Letter 4550C and include Paragraph "W" .

    2. Attach a copy of the nominee recipient’s response (if available).

    Exception:

    If a Letter 3219B, Statutory Notice of Deficiency, was issued, do not use Paragraph "W" . Instead, inform the taxpayer that we are unable to confirm the nominee arrangement. Also include a paragraph stating this letter does not extend the period in which the taxpayer may petition the U.S. Tax Court.

    The alleged nominee recipient responds to the Letter 4552C and confirms that the arrangement is valid
    1. Send Letter 4551C to BMF-AUR taxpayer. Include Paragraph "L" .

    2. Close the close case using the applicable N/C Process Code.

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

    4. Annotate the case folder and DCI with the appropriate N/C Process Code and include NRC 4 (nominee).

4.119.4.21.7.7  (09-02-2016)
Income Reported on Another Tax Return (Not Nominee)

  1. Be aware of nominee situations even if "nominee" is not directly mentioned in the response. If the response includes any indication that income was transferred, allocated or distributed to another entity, see IRM 4.119.4.21.7.6, Nominee Income.

    Caution:

    See IRM 4.119.4.21.1.5, Amended Returns, or IRM 4.119.4.21.6, Partially Agreed Responses, for additional information when the Form 1041 response indicates that the U/R income was distributed to beneficiaries.

  2. When the taxpayer response states that the underreported (U/R) income was reported on another return:

    1. Research IDRS CC:TRDBV for the affected taxpayer(s):

      Caution:

      It may be necessary to perform additional IDRS research to determine the primary account holder.

      Caution:

      IDRS CC:TRDBV displays information from original filing. Additional IDRS research is needed if the return was amended or adjusted.

      If Then
      The IDRS CC:TRDBV information for the affected taxpayer(s) matches the income type and income amount provided by the taxpayer

      Example:

      U/R income is interest for $7,567. Taxpayer states that the income was reported by John Smith. IDRS CC:TRDBV shows $7,567 interest reported on John Smith’s return.

      1. Consider the response confirmed.

      2. Issue Letter 4551C.

      3. Close the case with the appropriate 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 the appropriate PC and include NRC 2.

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

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

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

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

      The IDRS CC:TRDBV information for the affected taxpayer(s) DOES NOT match the income type and amount provided by the taxpayer

      Example:

      U/R issue is Non-Employee Compensation of $15,800. The taxpayer states that the income was reported by ABC Company. IDRS CC:TRDBV shows $100,125 Gross Receipts reported on ABC Company’s return.

      1. Obtain IDRS CC:IRPTR payer income information for the affected taxpayer's TIN. If the affected return is an individual tax return (i.e., Form 1040 or Form 1040A), also obtain IDRS CC:IRPTR payer income information for the spouse's SSN (for Married Filing Joint)

      2. Review the IRPTR data to determine presence of amended and/or replacement Information Returns.

      3. Combine the U/R income with the related IDRS CC:IRPTR payer income information for the taxpayer (and the spouse if appropriate when reviewing an Individual tax return) and compare to the amount reported on the Form or Schedule.

        Note:

        Consider Amended Information Returns that may be attempts to reduce or zero-out income amounts.

    2. Based on the results of the comparison of the return amounts with the IDRS CC:IRPTR information:

      If And Then
      The amount reported on the affected taxpayer’s return is equal to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ the sum of the U/R income and IRPTR payer information  
      1. Consider the response confirmed.

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

      3. Issue Letter 4551C.

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

      5. Annotate the case folder and DCI and include NRC 2.

      The amount reported on the affected taxpayer’s return is less than the sum of the U/R income and IRPTR payer income information: The other return is our taxpayer’s individual tax return
      1. Issue Letter 4550C and include PARAGRAPH X. In the fill-in enter the return type (i.e., 1040, 1040A, or 1040EZ).

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

      3. Annotate the DCI and case folder.

      The amount reported on the affected taxpayer’s return is less than the sum of the U/R income and IRPTR payer income information: The other tax return is NOT our taxpayer’s individual tax return ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.119.4.21.7.8  (04-05-2016)
Prior and/or Subsequent Year Impact

  1. If the taxpayer's response indicates that the same error of income omission was made on a subsequent and/or prior tax year:

    1. Process the Current year BMF-AUR issue(s) per normal procedures.

    2. Send the appropriate letter and inform the taxpayer to file an amended return to include the omitted income in the affected tax year.

      Exception:

      If the response includes a signed amended return, for a prior or subsequent year send it to Accounts Management for processing. Inform the taxpayer the request was sent to another area for processing.

  2. If the taxpayer's response includes acceptable explanations for some or all of the BMF-AUR issues AND indicates that the same erroneous payer information will occur in the subsequent year, take the following action:

    1. Leave a case note using Form 12864, Case History Sheet, explaining that a copy of the taxpayer's response was sent to be associated with the subsequent year tax return.

    2. Advise the taxpayer that a copy of their response has been forwarded to be associated with their subsequent year’s tax return.

    3. Research IDRS for the subsequent year tax return DLN in order to forward a photocopy of the response to the Campus Files Function.

      If Then
      The subsequent year tax return was Electronically filed. Use IDRS to post a TC 290 for .00 with a blocking series "15" (Form 1120) or "17" (Form 1041). Do not use an attachment or association form.
      There is an indication that the subsequent year’s return has not yet been filed. Correspond with the taxpayer and advise them to include a copy of their explanation/documentation with their tax return.

    Exception:

    If the response includes a signed amended return, for a prior or subsequent year send it to Accounts Management for processing. Inform the taxpayer the request was sent to another area for processing.

4.119.4.21.7.9  (09-02-2016)
Income Reported in a Different Tax Year

  1. When the taxpayer indicates that the U/R income was reported in another year and/or provides accounting records showing BMF-AUR tax year deposits versus subsequent (or prior) year deposits or other evidence that the income was not received in the BMF-AUR tax year.

    If Then
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    Accounting methods are indicated on Form 1120, Schedule K, line 1.

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

      Caution:

      See (3) below if the subsequent year return has not yet been filed.

    2. Close the case with the applicable No Change Process Code.

    3. Issue Letter 4551C and include the following Special Paragraph: "Under the cash basis accounting method, you include in your gross income all items of income you actually or constructively receive during the tax year. To avoid receiving similar notices from us in the future, please report all income in the year it was actually (or constructively) received. See Publication 538, Accounting Periods and Methods, for additional information."

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

    5. Annotate the case folder and DCI with the appropriate PC and include NRC 2.

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

    Note:

    Accounting methods are indicated on Form 1120, Schedule K, line 1.

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

    2. Close the case with the applicable No Change Process code.

    3. Issue Letter 4551C.

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

    5. Annotate the case folder and DCI with the appropriate PC and include NRC 2.

  2. When the taxpayer response states that the U/R income was reported in a subsequent tax year, research IDRS:

    1. Obtain tax return information (including accompanying forms and schedules) and related IDRS CC:IRPTR payer income information for the year(s) in question.

      Caution:

      See (3) below if the subsequent year return has not yet been filed.

    2. Combine the U/R income with the related IDRS CC:IRPTR payer income information for the indicated tax year and compare to the amount reported on tax return.

      Reminder:

      Review the IDRS CC:IRPTR data for amended and/or replacement Information Returns that may be attempts to reduce or "zero-out" income amounts.

    3. If the amount reported on the tax return is equal to or greater than the sum of the U/R income and IRPTR payer information ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Caution:

      If the taxpayer used a cash basis accounting method, issue Letter 4551C and include the following Special Paragraph: "Under the cash basis accounting method, you include in your gross income all items of income you actually or constructively receive during the tax year. To avoid receiving similar notices from us in the future, please report all income in the year it was actually (or constructively) received. See Publication 538, Accounting Periods and Methods, for additional information."

    4. If the amount reported on the tax return is less than the sum of the U/R income and IDRS CC:IRPTR payer income information, send Letter 4550C and include the following special paragraph "You indicated the income in question was reported on your [enter BMF-AUR tax year] tax return. However, we are unable to locate this income. Please provide us with a complete breakdown of all income and where on your return the income in question is reported."

      If Then
      The taxpayer responds to the Letter 4550C and does not provide sufficient information Continue processing.
      The taxpayer responds to the Letter 4550C and provides the requested information Review for validity:
      1. If verified, close the case using the applicable No Change Process Code.

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

      3. Annotate case folder and DCI with the appropriate PC and include NRC 2.

        Caution:

        If the taxpayer used a cash basis accounting method, issue Letter 4551C and include the following Special Paragraph: "Under the cash basis accounting method, you include in your gross income all items of income you actually or constructively receive during the tax year. To avoid receiving similar notices from us in the future, please report all income in the year it was actually (or constructively) received. See Publication 538, Accounting Periods and Methods, for additional information."

      4. If not verified, contact the taxpayer and continue processing.

      The taxpayer does not respond to the Letter 4550C Continue processing.
  3. When the taxpayer response states that the U/R income was reported in a subsequent tax year and IDRS research shows no record of a filed tax return:

    1. Consider the income reportable in the BUR tax year and continue processing.

    2. Include the following Special Paragraph: "We are unable to change our proposal because we can't verify the information you provided in your response. Under the cash basis accounting method, you include in your gross income all items of income you actually or constructively receive during the tax year. See Publication 538, Accounting Periods and Methods, for additional information."

4.119.4.21.8  (09-02-2016)
Disagreed Responses

  1. A response is disagreed when:

    1. The taxpayer clearly does not agree with at least some part of the adjustment (excluding interest) and does not provide an acceptable explanation.

    2. The taxpayer makes any comment that they do not intend to waive their appeal rights, even if the Consent to Tax Increase is signed, or the tax and all penalties have been fully paid.

    3. The taxpayer submits full payment after issuance of the Letter 3219BStatutory Notice of Deficiency and the necessary signature is not present. Issue a Letter 4550C to acknowledge payment and request missing signature. If the suspense time frame has expired default the case with PC 4850. Input TC 925 with PC 4850 using IDRS CC:REQ77/FRM77. Annotate PC 4850 on the case folder and DCI.

      Reminder:

      A telephone call may be made in lieu of issuing Letter 4550C to request missing signature.

      Caution:

      When making an outgoing call, you must ensure that you are speaking to an authorized individual. See IRM 4.119.4.21.2.2, Disclosure and IRM 4.119.4.21.2.6, Out Calls for further information.

  2. A frivolous return or response is defined as noncompliance with filing and/or paying tax based on unfounded legal or constitutional arguments per IRM 25.25.10, Revenue Protection-Frivolous Return Program, Objecting to paying interest/penalty, being upset because they were not notified sooner, using off-color language, etc., are not frivolous and should be handled with a normal reply to the taxpayer. If in doubt about whether the return and/or response is frivolous, consult with the Lead Tax Examiner. If it is determined that the return or response is frivolous, refer a photocopy of the return and/or response to the Frivolous Tax Team and continue normal processing.

4.119.4.21.9  (04-05-2016)
Creating Correspondex Letters

  1. If subsequent correspondence (other than a Recomputed Notice or Supplemental Report) on a response case requires a reply from the taxpayer, or payer:

    1. Create the appropriate Correspondex letter select all applicable paragraphs. If none of the paragraphs are applicable, use a Special Paragraph.

    2. Print a copy of the Correspondex letter to include with the case file.

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

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

  2. When acknowledging the taxpayer's response input the date using the following priority:

    1. The date the taxpayer entered on their most recent correspondence.

    2. Envelope postmark date.

    3. Three days prior to the IRS Received Date.

    4. Current date.

  3. There are some situations where it is necessary to issue a letter and take another action on the case at the same time. Create the Correspondex letter on IDRS and then take the subsequent action (e.g., issuing a Letter 3219B, Statutory Notice of Deficiency).

    1. Update the IDRS Activity Code with 4XLTMMDD (X represents the phase) AND

    2. Update the IDRS Activity Code with the subsequent action taken (for example STATMMDD to indicate the Letter 3219B, Statutory Notice of Deficiency).

    3. If there is a Process Code related to the subsequent action, input TC 925 with the Process Code using IDRS CC:REQ77/FRM77 (e.g., PC 4700 when issuing Letter 3219B, Statutory Notice of Deficiency).

    4. Annotate the DCI, and case folder with both actions taken in the following order; letter action first followed by the subsequent action (e.g., 45LT followed by PC 4700).

  4. If the information provided by the taxpayer does not justify a change in the tax deficiency, and it is necessary to send Letter 4550C for further information, always send the Consent to tax increase paragraph.

    Note:

    If a Letter 3219B, Statutory Notice of Deficiency, was issued include a paragraph stating this letter does not extend the period in which the taxpayer may petition the US Tax Court.

  5. A letter sent to a taxpayer requesting information should have the following paragraphs, as applicable, in addition to other paragraphs sent for a specific condition:

    1. A paragraph that informs the taxpayer when a response is required.

    2. A paragraph requesting the taxpayer's telephone number and the most convenient time to call.

    3. If a payment was submitted, a paragraph acknowledging the payment.

    4. If the taxpayer submitted a request for a payment plan, a paragraph informing the taxpayer their request was forwarded to the proper department and a fee may be charged for processing the request.

      Note:

      Leave a case note on Form 12864, Case History Sheet, stating that payment plan request was forwarded to proper department.

    5. When a response from the taxpayer is required, include a paragraph stating a return envelope is enclosed.

  6. When a correspondex letter is returned undeliverable update the IDRS Activity Code/Category Code and continue processing. See Exhibit 4.119.4-7, Activity Codes/Category Codes,for additional information.

4.119.4.21.10  (09-02-2016)
Adjustments

  1. When responses are closed, use the IAT Tool to input an adjustment on IDRS CC:REQ54 to file no change responses and process necessary adjustments:

    1. Input TC 29X.

    2. Input TC 766/767 (Form 1120) or 806/807 (Form 1041) as applicable for W/H adjustments.

    3. Input CRN 886 to adjust taxable income.

    4. Input reference number 787 for the Accuracy-Related Penalty amount.

      Reminder:

      Annotate the Accuracy Related Penalty in the "Assessed Penalty" field of the DCI.

  2. BLOCKING SERIES - The following blocking series are used for BMF-AUR adjustments:

    1. Blocking Series - 55 (550-569) BMF-URP Refile DLN is used for BMF Form 1120 cases with a paper filed tax return.

    2. Blocking Series - 57 (570-579) BMF-URP Non-Refile DLN is used for BMF Form 1120 cases with a MeF tax return.

    3. Blocking Series - 58 (580-589) BMF-URP Adj Letter 3219B, Statutory Notice of Deficiency, Refile DLN is used for BMF Form 1120 cases with a paper filed tax return.

    4. Blocking Series - 59 (590-599) BMF-URP Adj Letter 3219B, Statutory Notice of Deficiency, Non-Refile DLN is used for BMF Form 1120 cases with a MeF tax return.

    5. Blocking Series - 64 (640-649) BMF-URP Refile DLN is used for all assessments made to: Form 1040 series and Form 1041 cases both paper filed and MeF tax returns.

  3. CORRESPONDENCE DATE - This date is required on all BMF-AUR assessments when the taxpayer has submitted a response. Input using the following priority:

    1. The date the taxpayer entered on their most recent correspondence.

    2. Envelope postmark date or the date stamped by the Fax machine.

    3. Three days prior to the IRS Received Date.

    4. Current date.

      Note:

      Use the posted payment date from IDRS CC:TXMOD when the taxpayer’s correspondence is not present and the account is full paid to the BMF-AUR notice.

      Note:

      In subsequent notices to the taxpayer, provide the date of the correspondence that was used for the assessment.

  4. IRS RECEIVED DATE - The IRS Received Date is required on all BMF-AUR assessments resulting from taxpayer correspondence If it is necessary to enter the IRS received date, determine the date using the following priority:

    1. Received date stamped on correspondence.

    2. Envelope postmark date or the date stamped by the Fax machine.

    3. Signature date.

    4. Current date.

      Note:

      Use the posted payment date from IDRS CC:TXMOD when the taxpayer’s correspondence is not present and the account is full paid to the BMF-AUR notice.

  5. 2% INTEREST DATE – A 2% Interest date is required when the taxpayer is subject to 2% LCU. See IRM 4.119.4.16.5, Form 1120 2% Large Corporate Underpayment (LCU) – 2% LCU, for further instructions.

    1. The 2% INTEREST DATE is the date of the last (i.e., first deliverable) Letter 3219B, Statutory Notice of Deficiency, mailed to the taxpayer plus 30 days.

    2. If it is determined that a 2% INTEREST DATE that has previously posted to Masterfile is no longer applicable, enter 99999999 (eight 9’s) in the 2% INTEREST DATE field. A TC 340 or 341 is required.

  6. TCB-DT (CREDIT INTEREST DATE) - Enter the taxpayer agreement date in the TCB-DT field on all other than full paid balance due assessments based on taxpayer correspondence. The TCB-DT field must be left blank for the following conditions.

    Note:

    Use the IRS Received Date as the taxpayer agreement date. See the instructions in (4) above for additional information.

    1. When the case is being assessed by Default (i.e., PC 4850).

    2. Interest stops automatically at the date of the payment on fully paid assessments. This applies whether the payment was timely or not. Full paid is defined as payment for tax, penalty, and interest.

    3. On all tax decrease/overall refund cases.

      Note:

      The entry will post as CR-INT-TO-DT.

  7. OVERRIDE CODE - An Override Code is required when the IRS Received Date is over one year old and on cases when the statute has expired.

    1. R -Allows IRS Received Date to be older than a year in the past.

    2. S -Allows current date and the Refund Statute Control Date (RSCD) to be later than the Refund Statue Expiration Date (RSED).

      Note:

      Multiple Override Codes may be used when applicable.

  8. REFUND STATUTE CONTROL DATE - Refund Statute Control Date (RFSCDT) is required when the RSED is expired.

    Note:

    If both the current date and the RFSCDT are later than the RSED, OVERRIDE-CODE S must also be input.

  9. AMENDED CLAIMS DATE - Enter the IRS Received date when the adjustment results in a refund.

    1. Amended Claims Date identifies the time period for credit interest paid on tax adjustments that result in a refund.

    2. A TC 290 or 291 must be present.

    3. The date cannot be later than the current date.

  10. DEBIT INTEREST TO DATE - Debit Interest to Date is the date Manual Interest was computed to. It is a required field when a TC 340 or 341 is input.

  11. TRANSACTION CODES - Input transaction code(s) in the TC> field(s) as applicable. Input the corresponding transaction amount in the AMT> field:

    1. TC 290/291 - Adjusts the tax.

    2. TC 170/171 - Adjusts the ES Penalty when a penalty was previously assessed and there is a change to W/H.

    3. TC 160/161 - Adjusts the Failure to File Penalty.

    4. TC 270/271 – Adjusts the Failure to Pay Penalty.

    5. TC 340/341/342 – Manual Debit Interest.

  12. REASON CODES - The Reason Code(s) determine the explanation that prints on the adjustment notice. See Document 6209, IRS Processing Codes and Information, for valid codes. BMF requires reason codes when abating penalties.

    Example:

    TC 161 reason code 062 is required in the first position for reasonable cause abatements with a corresponding reason code in the fourth position. Statutory non-reasonable cause abatements require a reason code in the fourth position only.

    Example:

    Reason Code 074 is required in the first position when TC 34X is included as part of the IDRS CC;REQ54.

  13. HOLD CODES - Use Hold Codes with TC 29X adjustments to prevent or delay the issuance of a refund and/or notice. See Document 6209, IRS Processing Codes and Information, for a list of valid codes.

    Exception:

    When Priority Code 2 or 3 are required use Hold Code is 4.

  14. PRIORITY CODES - Input the following Priority Codes when certain module conditions exist. Failure to use the Priority Code when specified will cause the transactions to unpost:

    1. Use Priority Code 1 when there is an -L freeze. See IRM 4.119.4.3.2, Freeze Codes, for further instructions. Adjustments with no tax increase/decrease (TC 290 for .00) do not require Priority Code 1.

    2. Use Priority Code 3 when issuing a refund.

      Exception:

      Do not use Priority Code 3 when refunding a payment.

    3. When a Priority Code 1 and 3 are necessary use a Priority Code 2.

    4. Priority Code 8 must be input when a BMF-AUR tax increase/decrease is within $10 of a previous significant TC 290/291 adjustment.

    5. Priority Code 8 is needed when there is a change to W/H credits (TC 806/807) and a TC 170/171 or TC 176/177 is present on the account, but an adjustment to the ES Penalty (TC 170/171) is not necessary.

  15. REFERENCE NUMBER - Input the following Credit or Item Reference Numbers in the CD> field(s) as applicable. Input the corresponding adjustment amount in the AMT> field(s):

    Reference Number Description/Additional Information
    787 Assesses the Accuracy-Related Penalty due to Substantial Understatement. IDRS converts a 787 to a TC 240.
    886 Adjusts taxable income (TXI) (increases or decreases).
       
    766 Form 1120 Adjusts additional underclaimed withholding.
    767 Form 1120 Adjusts disallowed overclaimed withholding.
       
    806 Form 1041 Adjusts additional underclaimed withholding.
    807 Form 1041 Adjusts disallowed overclaimed withholding.
    861 Form 1041 Adjusts Net Investment Income (increases or decreases).
    862 Form 1041 Adjusts Net Investment Tax (increases or decreases).

    Note:

    See Document 6209, IRS Processing Codes and Information, when adjusting Reference Numbers other than those listed above.

  16. SOURCE DOC - This is a required field and is used to inform the Campus Files function when an assessment(s) with a source document (tax return, correspondence, etc.) is routed there for attachment of Form 5147.

  17. REMARKS - This is a required field and is used to leave an action trail concerning the adjustment. It is recommended that BUR ADJ be used on all BMF-AUR adjustments.

  18. Verify that all fields in the IDRS CC:REQ54 are correct. This ensures an accurate adjustment to the taxpayer's account.

  19. All adjustments to the tax and/or penalty (including a TC 290.00 No Change) must be entered on the DCI. When inputting an adjustment other than TC 290 .00 (No Change) include the IDRS CC:ADJ54 print-out in the case folder.

  20. All assessments other than TC 290.00 (No Change) are reviewed for accuracy.

4.119.4.21.11  (09-02-2016)
Letter 3219B Statutory Notice of Deficiency Preparation

  1. Before generating a Letter 3219B, Statutory Notice of Deficiency, research IDRS for updates or changes that may affect the BMF-AUR account. See IRM 4.119.4.19, No Response, and IRM 4.119.4.20, Undeliverable Notices, for additional information.

    Caution:

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

    Reminder:

    If a TC 276 or TC 270 is posted on the account and a FTF penalty applies a manual penalty calculation is required. See IRM 4.119.4.16.1, Failure to File Penalty, for further instruction.

  2. Select the Letter 3219B Master Letter Template for the desired Letter Mailout Date and complete the template.

  3. A Letter 3219B, Statutory Notice of Deficiency, includes the following:

    1. Letter 3219B, Statutory Notice of Deficiency, which explains how and when to file a petition with Tax Court.

    2. Form 4089, Notice of Deficiency - Waiver, which is the consent to assess and collect.

    3. A copy of the latest Letter 2030 or Recomputed Letter 2030 except page 1 and the Response Page.

    4. The current CC:IRPTRW prints.

    5. Pub 1, Your Rights as a Taxpayer.

    6. Notice 1214, Helpful Contacts for Your "Notice of Deficiency."

  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 3219B and all other attachments. See IRM 4.119.4.3.1, Power of Attorney (POA), for additional information.

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

  6. When issuing a Letter 3219B update the following:

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

    2. IDRS Category Code BURS.

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

    4. Input TC 925 with PC 4700 using IDRS CC:REQ77/FRM77.

    5. Annotate the DCI and case folder with PC 4700.

  7. Every Letter 3219B is reviewed before being mailed. If an error is found:

    1. The case will be returned to the originator for corrective action.

    2. If the Letter 3219B needs to be corrected, the original Letter 3219B file must be deleted from the BMF-AUR Letter repository.

    3. Update IDRS activity with 5BXRWKMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

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

    5. Prepare a new Letter 3219B for the next available Letter Mailout Date.

    6. Update IDRS activity with STATMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    7. Input TC 925 with PC 4700, Posting Delay Code (PDC) “1” using IDRS CC:REQ77/FRM77

    8. Annotate the DCI and case folder with PC’s 4710 and 4700.

  8. Input TC 971 Action Code 257 and the Letter 3219B date on IDRS CC:REQ77 when issuing a Letter 3219B on Form 1120 cases with a tax deficiency of $100,000 (or more).

    Caution:

    DO NOT INPUT TC 971 Action Code 257 until the notice has been mailed.

  9. The Clerical Function suspends the Letter 3219B for 105 days (165 days for foreign or APO/FPO address).

4.119.4.21.11.1  (04-05-2016)
Instructions Specific to Letter 3219BStatutory Notice of Deficiency/Responses

  1. When the taxpayer response is a signed amended return with a tax increase greater than the tax increase on the Letter 3219B, Statutory Notice of Deficiency, review IDRS to determine if the adjustment has posted:

    If Then
    The amended return has not posted
    1. Math verify the taxpayer's figures.

    2. Ensure all BMF-AUR issues are addressed.

      Reminder:

      Taxpayer must also agree to any applicable penalties: (i.e., Accuracy Related penalty).

    3. Enter the adjustment per the amended return. See IRM 4.119.4.21.10, Adjustments, for additional information

    4. Close the case using PC 4880

    5. Input TC 925 with PC 4880 using IDRS CC:REQ77/FRM77.

    6. Annotate the DCI and case folder with PC 4880.

    The amended return has postedAND all BMF-AUR issues are included

    Reminder:

    Taxpayer must also agree to any remaining applicable penalties: (ex: Accuracy Related penalty).

    See IRM 4.119.4.21.1.5, Amended Return, for additional information.
    1. Close the case using PC 4810.

    2. Do not issue a closing letter to the taxpayer

    3. Input TC 925 with PC 4810 using IDRS CC:REQ77/FRM77.

    4. Annotate PC 4810 on the DCI and case folder.

    The amended return has postedAND all BMF-AUR issues are not included Issue a recomputed notice for outstanding issues. See IRM 4.119.4.21.6.1, Recomputed Notice/Supplemental Report, for additional information.
  2. Consider the Assessment Statute Expiration Date (ASED) before inputting any adjustments:

    • If the ASED is greater than ninety (90) days, the statute is not imminent. Process the case using normal procedures.

    • If less than 90 days remain until the ASED, prepare the case for adjustment and route to the Accounting function for input.

  3. For a Letter 3219B, Statutory Notice of Deficiency, with a subsequent agreement received prior to expiration of the 90 days (150 days if the notice is addressed to a person outside the U.S.), the assessment period is extended for the number of days the Letter 3219B, Statutory Notice of Deficiency, was outstanding (from the issue date to the taxpayer's reply date), PLUS 60 additional days allowed for processing the case.

4.119.4.21.11.1.1  (04-05-2016)
Rescinding Letter 3219BStatutory Notice of Deficiency

  1. After a Letter 3219B, Statutory Notice of Deficiency, is mailed, it may be necessary to rescind the notice. The taxpayer or the IRS may initiate rescission of a Letter 3219B, Statutory Notice of Deficiency. The decision to rescind is discretionary on the part of the IRS, is made on a case-by-case basis, and requires the taxpayer's written consent. BMF-AUR tax examiners will NOT rescind Letter 3219B, Statutory Notice of Deficiency, without prior managerial approval confirmed in a case note using Form 12864, Case History Sheet. When a taxpayer requests the rescission of a Letter 3219B, Statutory Notice of Deficiency, the first step is to attempt taxpayer contact to resolve the taxpayer's concern/issue.

  2. A rescission may be agreed to if:

    1. The notice was issued as a result of an administrative error (to the wrong taxpayer, for the wrong tax period or without considering a properly executed Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax).

      Note:

      If the Letter 3219B, Statutory Notice of Deficiency, was issued for the wrong taxpayer or wrong tax period, close the case with the applicable No-Change process code.

    2. The taxpayer submits information establishing the actual tax due is less than the amount shown in the notice.

      Note:

      Issue a recomputed notice for the lesser amount.

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to the Letter 3219B, Statutory Notice of Deficiency. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , leave a case note using Form 12864, Case History Sheet, and process the case on the original deficiency.

    3. The taxpayer requests a conference with Appeals (for the purpose of entering into settlement negotiations - as determined by Appeals) and the case will be received in Appeals with at least 365 days remaining on the statute of limitations.

      Note:

      If there is less than 365 days remaining on the statute of limitations a rescission may be agreed to if the Appeals Office also agrees with the decision to rescind.

    4. If TC 971 AC 257 was input and Letter 3219B, Statutory Notice of Deficiency, will be rescinded due to an administrative error, input a TC 972 AC 257.

  3. A rescission will not be considered when:

    1. On the date of the rescission, 90 days or less remain before the expiration date of the period of limitations on assessment; however, a notice of deficiency may be rescinded in these circumstances if, before rescission, the taxpayer and the Service execute a consent to extend the period of limitations on Form 872Consent to Extend the Time to Assess Tax, or Form 872-A, Special Consent to Extend the Time to Assess Tax;

    2. The 90-day (or 150-day for taxpayers living outside the U.S.) petition period has expired and the taxpayer has not filed a petition with the Tax Court;

    3. The taxpayer has petitioned Tax Court or;

    4. The taxpayer and the Service, prior to issuance of the notice of deficiency, executed a Form 872-A, Special Consent to Extend the Time to Assess Tax, covering any of the tax years in the notice.

  4. After all the conditions in (1), (2), and (3) have been considered (managerial approval is required), follow these steps to obtain the taxpayer's consent:

    1. Complete a Letter 2264 in duplicate (one copy for the taxpayer and the other to be attached to the file copy of the Letter 3219B, Statutory Notice of Deficiency).

    2. Prepare a Form 8626, Agreement to Rescind Notice of Deficiency, in duplicate. Attach one copy to the Letter 2264 and attach the other copy to the file copy of the Letter 3219B, Statutory Notice of Deficiency.

    3. Send the Letter 2264 with a copy of the Form 8626, Agreement to Rescind Notice of Deficiency, and a return envelope to the taxpayer that day.

    4. Enter a case note using Form 12864, Case History Sheet, ensure copies of the forms and letters are in the case file.

    5. Update IDRS activity with 47PHMMDD and then update the IDRS activity with STATMMDD (MMDD is the original STAT Purge Date). See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    Note:

    If communicating with the taxpayer pending receipt of the rescission agreement, be sure to include notification that the 90-day period to petition Tax Court is still in effect.

  5. When the taxpayer returns the signed Form 8626, Agreement to Rescind Notice of Deficiency, it must be countersigned by the Director Compliance Service, Field or designated official. The rescission is effective on the date the Director or designated official countersigns the form:

    1. Complete a Letter 2262 in duplicate.

    2. Send the taxpayer one copy of the letter and a copy of the countersigned Form 8626, Agreement to Rescind Notice of Deficiency.

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

    4. Maintain copies of the Form 8626, Agreement to Rescind Notice of Deficiency, and a Letter 2262 in the case file.

    5. Update IDRS activity with PC 4730 followed by the next action activity code. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    6. Update the Category Code back to BUR0.

    7. Input TC 925 with PC 4730 using IDRS CC:REQ77/FRM77.

    8. Annotate the DCI and case folder with PC 4730.

    9. Take next action.

    10. Annotate DCI and case folder with applicable PC or IPC.

      Reminder:

      Input TC 925 if the next action taken is a process code action.

4.119.4.21.11.1.2  (04-05-2016)
Docketed Cases

  1. When the taxpayer files a petition with the U.S. Tax Court, the newly docketed Tax Court cases are uploaded to the Tax Litigation Automatic Tracking System (TLCATS) New Docketed Case listing.

  2. The Clerical Function is responsible for monitoring the daily TLCATS listing and preparing identified cases for transfer to Appeals.

  3. When a docketed case is received for review, take the following actions:

    1. Determine if there is an overclaimed withholding issue. If not, return the case immediately to the designated clerk.

    2. Input a partial assessment on IDRS for any overclaimed withholding ONLY.

      Note:

      Changes to withholding are not considered a deficiency under IRC 6211Definition of a Deficiency and are not included on the Stat Notice.

    3. Print a copy of the IDRS CC:REQ54 and IDRS CC:TXMOD showing the pending assessment (highlight the pending adjustment) and include with the case file.

    4. Issue Letter 4551C explaining the partial assessment and advise the taxpayer that the remaining issues will be addressed as part of the docketed case process.

    5. Print a copy of the letter and include it in the case file.

    6. Leave a case note using Form 12864, Case History Sheet, documenting the actions taken.

    7. Print a copy of all prior notices and include them in the case file.

    8. Include the original tax return. If the return was electronically filed, you MUST include the MeF print of the entire return (including all schedules/forms and attachments) for the case file.

    9. Close the case with PC 4800.

    10. Input TC 925 with PC 4800 using IDRS CC:REQ77/FRM77.

    11. Update the DCI and case folder to PC 4800 and make a copy to send to Appeals.

      Note:

      Ensure the original DCI is retained in the case folder.

    12. Return the case to the designated clerk.

4.119.4.21.11.2  (09-02-2016)
Default Letter 3219BStatutory Notice of Deficiency

  1. 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), 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.

  2. Thoroughly review each case to ensure that:

    1. The suspense time frame of 105 days (165 days if the notice is addressed to a person outside the U.S.) has elapsed.

      Note:

      If the time frame has not elapsed, hold the case until the suspense time frame has expired before taking any default action.

    2. There aren’t any account activities that would impact the processing of the default assessment (i.e., disaster related Freeze Codes or indication that the taxpayer filed an amended return).

      If Then
      Freeze Code -S or -O is present on IDRS CC:TXMOD Do not take any further action until the disaster end date has passed. See IRM 4.119.4.4.3, Declared Disaster Areas, for additional information.
      IDRS CC:TXMOD shows a TC 976 See IRM 4.119.4.19, No Response, for additional information.

    Caution:

    Full payment received after issuance of a Letter 3219B, Statutory Notice of Deficiency, cannot be considered agreement to the tax increase. Since the necessary signature(s) were not obtained, these cases will be closed as Defaults.

    Note:

    See IRM 4.119.4.19, No Response, for additional information.

  3. Take the following actions when defaulting:

    1. Assess the tax increase and applicable penalties. See IRM 4.119.4.21.10, Adjustments, for additional information.

    2. Input TC 925 with PC 4850 using IDRS CC:REQ77/FRM77.

    3. Annotate PC 4850 on the DCI and case folder.

    4. Review the correspondence. See IRM 4.119.4.21, Taxpayer Responses, for additional Information.

  4. Verify the ASED of each default case.

    1. If the ASED is more than 90-days, the statute is not imminent. Process the case using normal procedures. TC 560 IS NOT NEEDED ON THESE CASES. If there are five work days or less before the ninety (90) day time frame, input the adjustment immediately.

    2. If the ASED is less than 90-days, recompute the ASED and input TC 560.

      Note:

      The assessment (TC 290) on a default case that needs a TC 560 cannot be input until the TC 560 has posted.

      Caution:

      The TC 560 should be input before the expiration date of the existing ASED.

  5. Compute the EXDATE (Extended Statute Expiration Date) for a Defaulted 90-Day Letter with an original ASED of 0X-15-201X as follows:

    1. Determine the original ASED and convert to the Julian date.

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. The EXTENDED ASED is the sum of steps 1 and 2.

    4. Convert the sum to a calendar date.

      Example:

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

  6. Input the applicable 2% LCU date and TC 340 Manual interest adjustments if appropriate on Form 1120 cases. See IRM 4.119.4.21.10, Adjustments, for further information.

  7. If the account module contains a TC 830 or 836, then Rev. Rul. 99–40 may apply. Refer to Lead Tax Examiner for additional determination.

4.119.4.22  (09-02-2016)
Letter 2531 and Letter 2030 Review

  1. A statistically valid sample of cases is produced for review. This is a product review toward perfecting the quality of notices. In the review, the case is reworked from the beginning, including the determination of the U/R amount.

  2. The selection of sample notices is performed from all Letter 2531 and Letter 2030 mail out dates.

  3. The reviewer will review all the sampled cases.

    1. The Letter 2531 case file will be built into BT 681.

    2. The Letter 2030 case file will be built into BT 682.

  4. The reviewer verifies the Letter 2531 or Letter 2030 for correctness and overall quality by reworking the case.

  5. If no error is found, no action is necessary.

  6. If an error is found, complete Form 5963, Quality Assurance Review Notice, with the applicable Notice Review Error Code. See Exhibit 4.119.4-12, Notice Review Error Codes.

    1. Errors that impact the proposed balance due are considered critical. Delete the original notice file from the BMF-AUR Letter repository.

    2. Errors that don’t impact the proposed balance due are considered non-critical. On a case-by-case basis, determine whether the non-critical error will hamper the taxpayer's ability to understand the notice. Only delete the original notice file if it is determined that the non-critical error will cause the taxpayer difficulties in understanding the issues on the notice.

  7. If the original file is being deleted:

    1. Update IDRS activity with 31XRWKMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Input TC 925 with the applicable Stopped Notice (Notice Not Mailed) Process Code: 4310 (Letter 2531 not mailed) or 4510 (Letter 2030 not mailed) using IDRS CC:REQ77/FRM77.

    3. Annotate the DCI and case folder with the applicable Stopped Notice (Notice Not Mailed) PC.

    4. Return the case to the originator for corrective action.

  8. The originator will rework the case.

    If Then
    A notice is needed
    1. Prepare a new notice for the next available Letter Mailout Date.

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

    3. Input TC 925 with the applicable Process Code, Posting Delay Code (PDC) "1" 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) was created in error and 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, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

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

  9. On a weekly basis, the BMF-AUR Campus will provide Headquarters with the results of the review.

    1. Include only those cases that are found in error.

    2. Use the appropriate error codes. See Exhibit 4.119.4-12, Notice Review Error Codes.

      Reminder:

      "Critical" errors affect the proposed balance due. "Noncritical" errors DO NOT affect the proposed balance due.

  10. If the critical error rate exceeds 10%, BMF-AUR Campus will determine a plan of corrective action. Within 2 days, advise Headquarters of the error rate and describe the corrective action(s) taken.

4.119.4.23  (04-05-2016)
Overview of AMRH Transcripts

  1. The AMRH transcripts generate to identify over aged freezes and unsettled conditions that failed to be resolved following normal procedures and processing as a result of oversight, procedural shortcomings, systemic issues, etc.

    Caution:

    IT IS CRITICAL TO WORK THESE TRANSCRIPTS TIMELY AND COMPLETELY TO RESOLVE A CASE BEFORE THE ASSESSMENT STATUTE DATE EXPIRES.

  2. The AMRH transcripts with TC 925 (IRP/BMF-AUR) posted are transferred or forwarded to BMF-AUR to identify unresolved accounts that were not closed within a certain length of time. For any additional specific instructions, refer to IRM 21.2.4, Master File Accounts Maintenance, or IRM 25.6, Statute of Limitations, which contains instructions to transfer AMRH transcripts with TC 925 in module(s) to BMF-AUR for processing.

  3. An unresolved TC 925 condition exists when:

    1. There is a credit balance (surplus) on the module. This condition creates the AMRH transcript. A credit balance may be caused by a variety of conditions (i.e., an unreversed TC 640, Advance Payment of Determined Deficiency or BMF-AUR Proposal, erroneous no change closure, etc.)

    2. An AMRH transcript is also created when a closing assessment PC is posted, but an adjustment in the BMF-AUR blocking series is not on the account.

  4. AMRH transcripts are routed directly to the BMF-AUR by Information Systems. BMF-AUR must handle these transcripts to completion.

  5. Take the necessary action to review the following conditions:

    • The BMF-AUR issue is resolved

    • All appropriate closing PCs are in the last position of the TC 925 string

    • Required adjustments are posted in a BMF-AUR blocking series

    • There is no credit balance

    • No freeze codes are present

  6. If all of the above conditions are met, discard the transcript.

  7. For any case where there is no longer a BMF-AUR issue, but there is a freeze code present that cannot be resolved by BMF-AUR, direct the transcript back to the appropriate area. If a required adjustment has unposted or did not post to an account and there is more than 90 days before the statute expiration date, input the adjustment using an BMF-AUR blocking series.

4.119.4.23.1  (04-05-2016)
General Procedures

  1. Review AMRH transcripts to determine the last PC reflected on the TC 925.

  2. If the tax module on IDRS reflects a TC 925 without Process Codes, research CC:BMFOLT.

  3. When reviewing AMRH transcripts, be alert for cases open on AIMS (Source Code 14 or 85). If open on AIMS:

    1. Rework the case and input an assessment if necessary.

      Exception:

      Do not input an assessment on cases that were closed with PC 4800 or with a TC 520 present on the module.

    2. Close the case with PC 4260, 4460, 4660, or 4890 as appropriate.

    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.

  4. Review IDRS to determine the actions needed to resolve the account. In most situations the return is not necessary. The transcript can be used as the source document for many adjustments. If an adjustment is necessary using a BMF-AUR blocking series AND the return is not needed then:

    1. Complete Form 2275, Records Request, Charge and Recharge, if a paper return was filed, to associate the original return to the assessment DLN.

    2. Form 4251 can be used as the source document, if an MeF return was filed. Make the following notation, "Original return was filed electronically" or similar wording.

      Note:

      Ensure all closing actions have been taken. After the necessary actions to resolve the account have been taken, close all related control bases.

  5. If the case is open and currently being processed, take the following actions:

    1. Discard the transcript in accordance with local classified waste procedures.

    2. Close all related control bases on IDRS.

    Exception:

    If the ASED is imminent, ensure that all required adjustments and actions are completed before the statute expires.

  6. If a "No Change" process code has unposted or has posted out of sequence, input a TC 290 for .00 in a BMF-AUR blocking series to resolve the account.

  7. If a required adjustment has unposted or did not post to an account and there is more than 90 days before the statute expiration date, input the adjustment using a BMF-AUR blocking series.

    Note:

    If less than 90 days remain until the ASED, prepare the case for adjustment and route to the Accounting function for input.

    Note:

    For short statute cases (less than 60 days) penalties and interest must be manually computed and input. For example, a late filed case must have a FTF penalty input on Form 2859, Request for Quick or Prompt Assessment. Use TC 190 for interest whenever possible.

  8. If a required adjustment has unposted or did not post to an account and the statute has expired, prepare for processing as a barred assessment by completing Form 9355, Barred Statute Report, or Form 3999, Statute Expiration Report, as appropriate, for their function, and forward to Accounts Management (AM) Statute Function.

    Note:

    After statute processing it may be necessary to input a TC 290 .00 using a BMF-AUR blocking series to clear the account.

  9. If a TC 640 payment needs to be released, input a TC 290 for .00 adjustment using a BMF-AUR blocking series.

    Exception:

    If the case was closed in error (i.e., taxpayer recomputed the amount of tax owed) and there is remittance, input the adjustment using a BMF-AUR blocking series.

  10. Bankruptcy and merged accounts may require additional research. Take all necessary actions to ensure that all related accounts and issues are resolved.

  11. If a TC 780 Offer in Compromise (OIC) has posted to the account, discard the transcript (in accordance with local classified waste procedures) and close all BMF-AUR and/or transcript control bases.

    Note:

    An adjustment with a BMF-AUR blocking series will not post to these accounts.

  12. If the return was timely filed (not on extension), the case is statute imminent on March 15th (Form 1120) or April 15th (Form 1041) of the Statute year. However, if a Letter 3219B, Statutory Notice of Deficiency, was issued on a BMF-AUR case, the assessment period is suspended and BMF-AUR can work the case past the statute expiration date. A Letter 3219B, Statutory Notice of Deficiency, increases the assessment period for the number of days from the date of the letter/notice until the taxpayer responds with an agreement, PLUS the 60 days mandated by the Internal Revenue Code.

  13. To compute the ASED on cases where the taxpayers signed agreement is received prior to the expiration of the 90 days:

    1. Determine the original ASED (using the Julian Date).

    2. Determine the number of days from the date of the Letter 3219B, Statutory Notice of Deficiency, to the taxpayer reply date. Add this to the original ASED.

    3. Add ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ processing days.

      Note:

      The general rule for disagreed or defaulted cases is to ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ to the normal statute date if the return is filed timely. This determines the taxpayer's new ASED.

      Caution:

      An assessment CANNOT NOT be made on IDRS within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

  14. A TC 560 MUST be input on IDRS by March 15th (Form 1120) or April 15th (Form 1041) to EXTEND the ASED before any assessment can be made. If TC 560 was not input to extend the ASED, prepare a manual assessment Form 2859, Request for Quick or Prompt Assessment, and route to the Accounting Operations for assessment via Form 3552, Prompt Assessment Billing Assembly.

    • Input TC 560 on IDRS using CC REQ77 in Blocking Series 700. Up to 100 cases can be input daily using CC REQ77 or

    • Input TC 560 on IDRS using CC REQ77 up to 10,000 assessments can be input daily using CC:REQ77

4.119.4.23.2  (09-17-2014)
Resolving AMRH Transcripts

  1. AMRH transcripts or DIAG Q transcripts are received from Accounts Managements. These accounts are BMF-AUR cases that have been closed but there is now a freeze code or other conditions that needs to be reviewed/addressed.

  2. Freeze Code -F is set when a TC 640 payment is posted to the account.

  3. Freeze Code -R is set when a payment is received after an account is full paid.

  4. Perform the necessary research, to determine the correct action. Verify the case was closed correctly. This may require requesting the return to determine whether the BMF-AUR issue was erroneously closed as a no change instead of being assessed.

  5. Take the following action once it is determined why the freeze was set:

    1. If the payment should be refunded, input a TC 290 for .00 with the appropriate blocking series, to release the freeze. Create a Form 4251 to attach the adjustment to the return.

    2. If payment was received after case was closed no change and taxpayer agrees and the U/R issue is full paid, input the adjustment on IDRS with the appropriate blocking series. Create a Form 4251 from the BMF-AUR system to attach the adjustment to the return.

    3. If research indicates an adjustment is needed and the previous tax examiner closed case in error, feedback needs to be given to the previous tax examiners Lead Tax Examiner or Manager. The previous tax examiner will need to input the adjustment on IDRS. For example, tax examiner closed case no change and taxpayer sent in a small payment for a below tolerance issue.

      Note:

      Cases with a short ASED should be assessed before sending the feedback to the previous tax examiners Lead Tax Examiner or Manager.

  6. Freeze Code -A indicates a duplicate/amended return was filed. Review account for TC 976 or TC 971 with closing codes 010-014, that may have generated the -A freeze. Determine if the amended return was used in the BMF-AUR adjustment.

    1. If the amended return was used, input a TC 290 for .00 with the appropriate blocking series to release the freeze.

    2. If the amended return was not used, check for CIS document and print if available. Give to clerical to be built as a RECON batch.

4.119.4.24  (09-17-2014)
BMF-AUR Reconsideration Cases

  1. BMF-AUR reconsideration cases (RECON) are responses received after the case has been closed (assessment or no change) on the BMF-AUR program. A RECON is a claim for a credit or refund not previously reported or allowed, or a request for abatement of tax, penalty, and/or interest. Use the same guidelines in making determinations for reconsideration correspondence as when working open BMF-AUR cases.

    Note:

    See IRM 4.119.4.24.1, Prior Appeals Closures, for further information, when the BMF-AUR case was closed with PC 4590 or 4800.

  2. When working with non-current BMF-AUR tax year requests for reconsideration, as a general rule, the tax examiner should apply the most current BMF-AUR procedures in the processing of the reconsideration. The tax examiner needs to consider specific regulations regarding limitations, phase-outs, etc.

4.119.4.24.1  (04-05-2016)
Prior Appeals Closures

  1. If the case was closed with PC 4590 (non docketed Appeals request) or PC 4800 (docketed Appeals request), research to determine if the case can be worked as a BMF-AUR Reconsideration.

    1. Cases that are closed with finality (including dismissals for lack of prosecution) cannot be considered for reconsideration.

    2. Cases identified as closed/dismissed due to lack of jurisdiction, will be worked using the BMF-AUR Reconsideration process.

  2. To determine if a prior Appeals closure case can be worked as a BMF-AUR reconsideration, research IDRS for the presence of a TC 300 assessment for the BMF-AUR amount:

    If Then
    The TC 300 assessment is not present:
    1. Forward the correspondence to the appropriate Appeals Office. See IRM 4.119.4.21.1.6, Appeals, for instructions on determining the appropriate Appeals Office.

    2. Close the case PC 4940 (Recon Referral). See IRM 4.119.4.24.2.1, Controlling Reconsiderations, for further instructions,

    The TC 300 assessment is present:
    1. Access the US Tax Court website at www.ustaxcourt.gov.

    2. Click on the tab titled "Docket Inquiry."

    3. Select "Docket Number" or "Corporate Name Keyword."

    4. Enter the docket number and click "search." The docket listing will display. The last entry identifies the type of resolution and provides a link to view and print the decision document.

  3. Once the taxpayers account has been accessed, read the court’s decision to determine if the case was closed due to lack of jurisdiction or closed with finality.

    Note:

    The decision of the Tax Court will become final 90 days from the date the decision is entered unless either party files a timely notice of appeal.

    Caution:

    Unlike a regular case (non-S case), an S case (i.e., a case with a docket number that ends with S) can not be appealed.

    1. If the decision indicates the case was dismissed for lack of jurisdiction, continue processing as an BMF-AUR reconsideration.

      Note:

      Use TC 29X when adjusting the original BMF-AUR assessment

      .

    2. If the decision indicates that the case was closed with finality (including dismissals for lack of prosecution), issue Letter 916C to the taxpayer denying the reconsideration. Include the following Special Paragraph: "Your request for reconsideration is denied. Our records indicate you filed a claim with the U.S. Tax Court regarding this issue. The Court has entered a final decision which cannot be appealed."

4.119.4.24.2  (09-17-2014)
RECON Receipt, Tracking and Reporting

  1. Correspondence is initially sorted by the Clerical Function based on whether or not the BMF-AUR case is still open. If open, the correspondence is batched with regular BMF-AUR receipts. If the BMF-AUR case is closed, the correspondence is considered a RECON. Correspondence for RECONs may also be sorted by tax year.

  2. A First-Read of all correspondence received on closed cases will be performed. Requests that do not meet the true criteria of reconsideration request, (i.e., installment agreement, misrouted mail, etc.) will be handled as part of the first read process. Accurate counts of first read volumes will be maintained.

  3. RECONs must be controlled no later than 14 days from the BMF-AUR received date.

  4. BMF-AUR RECONs are subject to Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61). See IRM 4.119.4.21.1.12, Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61). Taxpayer contact must be made within the 30 days criteria:

    1. Letter 86C is used to inform the taxpayer that their correspondence is being routed to another area.

    2. Letter 4314C is sent to the taxpayer as a first or second interim letter.

  5. Phone call RECONS must be controlled by the tax examiner receiving/working the case. Incoming phone calls or responses for multiple years or taxpayers, qualifying as a RECON must be counted into the inventory. A case count is taken for each account that requires an action. Report each new RECON receipt to the Lead Tax Examiner or manager. It is recommended that an action be taken within one day of receipt of these cases.

    Note:

    Phone call initiated RECONS must be controlled on IDRS if held for further action.

  6. IDRS actions are necessary on certain BMF-AUR RECON cases. If IDRS actions are necessary on an assigned RECON case, the control base on IDRS must be either updated or closed using IDRS CC:ACTON:

    1. Use the ACTIVITY field to document actions and pending dates. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    2. When suspending a case, ordering a document or contacting the payer, update the status control to "M" (monitor).

    3. Use IDRS history items to document additional information when appropriate.

  7. Cases are considered aged when the IRS received date is greater than 45 days.

  8. REASON CODES - The Reason Code(s) determine the explanation that prints on the adjustment notice. For valid codes see Document 6209, IRS Processing Codes and Information. BMF requires reason codes when abating penalties.

    Example:

    Abating Failure to File penalty: TC 161 reason code 062 can be used in the first position for reasonable cause abatements with a corresponding reason code in the fourth position. Statutory non-reasonable cause abatements need only a reason code in the fourth position.

    Caution:

    BMF-AUR reconsideration Reason Codes CANNOT be entered in the fourth position (IDRS CC:REQ54 ). The fourth position in IDRS CC:REQ54 is reserved for penalty reason codes only.

4.119.4.24.2.1  (04-05-2016)
Controlling Reconsiderations

  1. IDRS is used to control, monitor and track closed correspondence received in BMF-AUR for reconsideration of the assessment.

  2. Update the Activity Code to 94XRCNMMDD and the Category Code to BURC. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

  3. Internal Process Codes and Process Codes have been designated for use with cases as follows:

    IPC/PC Definition
    4050 Reconsideration Received
    4900 Reconsideration Full Abatement
    4910 Reconsideration Partial
    4920 Reconsideration No Change to BMF-AUR Assessment
    4930 Reconsideration Information Request/Misc
    4940 RECON Referral - Non-BMF-AUR Issue
    49LT Reconsideration Additional Correspondence (example Payer Letter)
    49RR Reconsideration Research Request for tax Return and/or Transcripts
    49TC TCO Referral
    49TI TCO Issued Form 4564 (IDR)
    49TR Reconsideration Technical/Manager referral within BMF-AUR

    Note:

    PC 4910 should be used when the original BMF-AUR closure was closed as a No Change and the reconsideration results in a change to the account.

  4. RECON Tax Examiners are responsible to establish a new TC 925 with Process Code 4050 using IDRS CC:REQ77/FRM77. This will create a second TC 925 on the tax account that will allow input of RECON related Process Codes.

    Note:

    To avoid delaying the processing of a RECON case, work the case first and then input all TC 925 Process Code actions at the same time, using Posting Delay Code(s) (PDC).

4.119.4.24.3  (09-11-2015)
Initial Case Actions

  1. If IDRS research shows the taxpayer's account is in notice status (balance due), input IDRS CC:STAUP with a definer "S" to prevent the taxpayer from receiving additional notices while the response is being worked.

    Exception:

    If the case is in collection status input TC 470.

    Caution:

    Use extreme caution when adjusting an account that is in Collection Status 26.

  2. Prior to making an adjustment to an account that is in Collection Status 26, consult with the Lead Tax Examiner who will contact the Revenue Officer to whom the case is assigned.

  3. When closing the case reduce the IDRS CC:STAUP based on the closing process code.

    Reminder:

    If the case is in Collection status input a TC 472 to reverse the previously posted TC 470.

  4. When suspending cases for payer contact, additional research, returns, etc., a record of case actions must be maintained:

    1. A Form 12864, Case History Sheet completed and attached to the case.

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

    3. Annotate the DCI and case folder.

    Note:

    Worksheets used in recomputation or any case notes should be maintained with the case.

  5. Correspondence sent to the taxpayer must address all questions and adjustment requests.

4.119.4.24.4  (04-05-2016)
Routing/Work Flow Determination

  1. When the case needs to be referred within the Operation:

    1. Update the IDRS activity with 49TRXXMMDD (XX represents the definer code). See Exhibit 4.119.4-8, Definer Codes, for additional information.

    2. Annotate the DCI and case folder with 49TR.

  2. When the case needs to be routed to another area:

    1. Send IDRS Letter 86C to the taxpayer.

    2. Input a STAUP for 9 - 15 cycles, as needed.

    3. Document the reason for routing in the case file using Form 12864, Case History Sheet.

    4. Close the case using PC 4940.

    5. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    6. Input TC 925 with PC 4940, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    7. Annotate the DCI and case folder with PC 4940 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

4.119.4.24.5  (09-17-2014)
Multiple Controls

  1. If the case was originally transferred to Exam during original BMF-AUR processing, research the account. Forward the new information to the office that made the adjustment (TC 30X). Print the IDRS CC:AMDISA first page and attach it to the correspondence.

  2. Open Appeals cases should be routed to the controlling Area Office through the Campus Appeals. These cases can be identified by an open TC 420/424 with an entry in the Appeals code field or has an IDRS control base assigned to 66XXXXXXXX. A TC 520 with an action code 70 thru 81 or 84.

  3. NOL CB/CF issues see IRM 4.119.4.21.7.3, NOL Carryback/Carryforward, for additional information.

  4. For all other scenarios contact the area with the open control and coordinate.

4.119.4.24.6  (09-11-2015)
Evaluating RECON Correspondence

  1. As with all taxpayer correspondence, determine if BMF-AUR is the appropriate area to respond to the taxpayer's need. Carefully read the correspondence and/or listen to the taxpayer. Perform appropriate research so timely actions can be taken.

    Note:

    Full and partial adjustment refers to the BMF-AUR assessed amount.

    Caution:

    When W/H is an issue, verify the information provided by the taxpayer before adjusting.

    Note:

    When fully or partially disallowing reconsideration requests, use the appropriate C-Letter.

  2. An erroneous refund is any receipt of money from the service to which the recipient is not entitled. It includes all erroneous payments to the taxpayer, even if the erroneous refund involves returning the taxpayer’s own money.

  3. When adjusting an account, the Assessment Statue Expiration Date (ASED) and/or the Refund Statute Expiration Date (RSED) may be imminent or may have expired.

    ASED - Assessment Statute Expiration Date RSED - Refund Statute Expiration Date
    The ASED normally expires three years from the date the original return was filed, or three years from the due date of the return, whichever is later.

    Caution:

    If the Assessment Statute date expires within 90 days, and there is an increase to tax, the case will need to be sent to the Accounting function for Assessment. Refer these cases to the BMF-AUR Statute Coordinator for preparation of Form 2859, Request for Quick or Prompt Assessment.

    Generally a claim for refund must be filed within three years from the time the original return was filed or two years from the time the tax was paid, whichever is later. Claims for refunds must be filed on or before the RSED.

    Note:

    Even if the claim was timely filed, the amount of the refund allowed may be limited based on when the claim was filed and when the tax was paid.

    1. If the claim was filed within three years of filing the return, the refund is limited to the tax paid within three years (plus any time of extension the taxpayer had in filing the return) of the claim.

    2. If the claim was not filed within three years of filing the return, the refund is limited to tax paid within two years of the claim.

    3. If no return was filed, the refund is limited to tax paid within two years of the claim.

    4. If no claim was filed, the refund is limited to the amount allowable if the claim was made on the date the refund is allowed.

    Note:

    RSED cases must be statute cleared. If a timely claim is received after the RFSCDT, then use Override Code "S" . If the override code is not entered, the following error message displays; "Override Needed." A resulting credit balance is frozen at Masterfile with a "-D" freeze that will stop any payments from refunding.

4.119.4.24.6.1  (09-02-2016)
Full Adjustment Determinations

  1. If the taxpayer provides acceptable explanations or there is enough information to fully reverse the BMF-AUR assessment:

    1. Input a reversal of the BMF-AUR assessment using blocking series 15(Form 1120) or 17 (Form 1041).

      Exception:

      If IDRS CC:TXMOD displays Freeze Code -W and/or TC 520 (not reversed by TC 521 or 522) with closing code 76 or 77 (Collection Due Process (CDP)), contact Automated Collection Service CDP coordinator prior to making adjustment.

      Reminder:

      Manual Interest computation is required when a TC 340 or 341 displays on IDRS CC:TXMOD.

      Note:

      The taxpayer will receive a CP 210/CP 220 as notification of the adjustment.

    2. If the reversal of a BMF-AUR assessment is over $10 million dollars, photocopy the response and make prints of IDRS CC:TXMOD, Case Notes, and Case History. 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.

    3. Update IDRS CC:STAUP to 3 cycles.

    4. Close the case using PC 4900.

    5. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    6. Input TC 925 with PC 4900, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    7. Annotate the DCI and case folder with PC 4900 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

4.119.4.24.6.2  (09-02-2016)
Partial Adjustment Determinations

  1. If the taxpayer provides acceptable verification for some of the issues or does not address all of the BMF-AUR issues:

    1. If the taxpayer provides a computation, rework and math verify all figures. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. Input the allowable adjustment on IDRS, including any penalty and interest adjustments, if needed using blocking series 15 (Form 1120) or 17 (Form 1041).

      Exception:

      If IDRS CC:TXMOD displays Freeze Code -W and/or TC 520 (not reversed by TC 521 or 522) with closing code 76 or 77 (Collection Due Process (CDP)), contact Automated Collection Service CDP coordinator prior to making adjustment.

      Reminder:

      Manual Interest computation is required when a TC 340 or 341 displays on IDRS CC:TXMOD.

    3. Send the appropriate C-Letter to explain the adjustment that was made. Include a statement that the taxpayer may send in additional information for consideration if appropriate.

    4. If the partial reversal of a BMF-AUR assessment is over $10 million dollars, photocopy the response and make prints of IDRS CC:TXMOD, Case Notes, and Case History. 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.

    5. Update IDRS CC:STAUP to 3 cycles.

    6. Close the case using PC 4910.

    7. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    8. Input TC 925 with PC 4910, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    9. Annotate the DCI and case folder with PC 4910 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

    Note:

    PC 4910 should be used when the original BMF-AUR closure was closed as a No Change and the reconsideration results in a change to the account.

4.119.4.24.6.3  (09-02-2016)
No Adjustment Determinations

  1. If the taxpayer states they do not agree with the BMF-AUR assessment, but does not provide an acceptable explanation or documentation:

    1. Send the appropriate C-Letter to explain why an adjustment is not being made.

    2. Input a TC 290 for .00 with blocking series 99 only when you have secured the original paper filed tax return. Otherwise use blocking series 98.

    3. Update IDRS CC:STAUP to 3 cycles.

    4. Close the case using PC 4920.

    5. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    6. Input TC 925 with PC 4920, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    7. Annotate the DCI and case folder with PC 4920 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

4.119.4.24.6.4  (09-02-2016)
Ordering Returns

  1. Order the tax return if information is missing or there is not enough information present to work the case.

  2. When ordering the tax return:

    Reminder:

    If an amended return is posted and there is an indication that it is a CIS document, view the return using AMS and/or MeF if applicable.

    1. Order the tax return using IDRS CC:ESTAB.

    2. Send Letter 4314C (interim) to the taxpayer, as needed.

    3. Update IDRS activity with 94XESTMMDD (X represents the return type). See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    4. Monitor for 30 days. If the return is not received, make a second request.

      Note:

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

    5. Check the STAUP and extend, if needed.

    6. Annotate IPC 49RR on DCI and case folder.

  3. See IRM 4.119.4.24.6.8, Document Disposition for additional information when taking closing action on the reconsideration case.

4.119.4.24.6.5  (09-02-2016)
Taxpayer Contact for Additional Information

  1. When the taxpayer correspondence does not include all the necessary information to make a redetermination and it is not necessary to keep the case open:

    1. Contact the taxpayer by telephone or send a Letter 916C and inform them that the information received was not sufficient to address their issues.

      Note:

      If making telephone contact ensure that disclosure procedures are followed. See IRM 4.119.4.21.2.2, Disclosure.

    2. Update the IDRS CC:STAUP to 3 cycles.

    3. Input a TC 290 for .00 using blocking series "15" (Form 1120) or "17" (Form 1041).

    4. Close the case using PC 4920.

    5. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    6. Input TC 925 with PC 4920, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    7. Annotate the DCI and case folder with PC 4920 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

  2. When the taxpayer correspondence does not include all the necessary information to make a redetermination and it is necessary to keep the case open (i.e., complex TCO case):

    1. Contact the taxpayer by telephone or send a Letter 4550C to request the additional information to resolve their issues.

    2. Check the STAUP and extend, if needed.

    3. Update IDRS Activity Code to 49LTMMDD or 49PHMMDD as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    4. Annotate the DCI and case folder.

    5. Suspend and monitor the case for 45 days pending the taxpayer's response.

4.119.4.24.6.6  (09-17-2014)
Payer Contact

  1. Prior to initiating payer contact, make sure the information was not verified during the original BMF-AUR case processing.

  2. If payer contact is needed:

    1. See IRM 4.119.4.21.7.5, Third Party Contacts, for further information.

    2. Check the STAUP and extend, if needed.

    3. Update IDRS Activity Code to 49LTMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for additional information.

    4. Annotate the DCI and case folder.

    5. Monitor the case for 60 days pending the payer's response.

  3. If the payer does not respond within the 60-day suspense, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4.119.4.24.6.7  (09-02-2016)
Miscellaneous RECON

  1. Manual Refunds are issued based on specific criteria. Some examples of situations when a manual refund should be issued are:

    1. Taxpayer requests a refund amount below one dollar.

    2. The refund is to be issued in a name and/or address other than the one on Master File.

    3. The account was pulled from the retention register.

    Note:

    See IRM 21.4.4, Manual Refunds, for more information.

  2. If the taxpayer requests an adjustment notice:

    1. Send a transcript of the account to the taxpayer using Transcript Delivery Systems (TDS).

    2. Update IDRS CC:STAUP to 3 cycles.

    3. Close the case using PC 4930.

    4. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    5. Input TC 925 with PC 4930, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    6. Annotate the DCI and case folder with PC 4930 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

      Note:

      To refile taxpayer correspondence, see IRM 4.119.4.24.6.8, Document Disposition, for additional information.

  3. If the taxpayer requests an explanation of BMF - AUR adjustment:

    1. Send the requested information using the appropriate "C" Letter.

    2. Update IDRS CC:STAUP to 3 cycles.

    3. Close the case using PC 4930.

    4. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    5. Input TC 925 with PC 4930, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    6. Annotate the DCI and case folder with PC 4930 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

      Note:

      To refile taxpayer correspondence, see IRM 4.119.4.24.6.8, Document Disposition, for additional information.

  4. If the taxpayer requests a computation of Penalties and/or Interest:-

    1. Send a transcript of the account to the taxpayer using IDRS CC:PINEX.

      Exception:

      If the account contains restricted interest (TC 340 or 341) obtain a copy of the manual interest document and provide a copy to the taxpayer.

    2. Close the case using PC 4930.

    3. Input TC 925 with PC 4050 using IDRS CC:REQ77/FRM77.

    4. Input TC 925 with PC 4930, Posting Delay Code (PDC) "1" using IDRS CC:REQ77/FRM77.

    5. Annotate the DCI and case folder with PC 4930 and include the applicable Reconsideration Issue Code. See Exhibit 4.119.4-11, BMF-AUR Reconsideration Issue Codes.

      Note:

      To refile taxpayer correspondence, see IRM 4.119.4.24.6.8, Document Disposition for additional information.

4.119.4.24.6.8  (09-02-2016)
Document Disposition

  1. Relevant material that has a direct bearing on the case should be retained. Attach the documents to the adjustment (including 290 for .00).

  2. If not making an adjustment, attach the information to the original return by completing a Form 9856, Attachment Alert.

    Caution:

    Information cannot be attached to an MeF return.

  3. Refile all secured documents (i.e., paper filed tax returns and controlling DLN documents) back to Files Function separately from the BUR RECON closing action.

4.119.4.25  (09-17-2014)
Unpostable BMF-AUR Transactions

  1. Unpostable transactions are those which failed validity checks to allow them to be posted to the Master File. Unpostables that cannot be resolved by the Unpostable Function are closed to the initiating function for correction. A Form 4251 is usually generated to pull source documents from Files and return them to the initiating function.

    Reminder:

    Unpostables should be handled in 7 calendar days to avoid possible statute cases.

  2. Most unpostables are controlled on IDRS to the employee who input the transaction. These controls are listed on the CCA reports (age listings). Input of STAUP and interim letters should be addressed if applicable.

  3. Unpostable Codes (UPC) identify the condition that caused the transactions to be unpostable. The Form 4251 shows the 3-digit unpostable code and a 1-digit unpostable reason code (RC) next to the unpostable code. Refer to the unpostable section in Document 6209, IRS Processing Codes and Information, Section 8, for interpretation of these codes:

    1. Find the 3-digit number in the "UPC" column.

    2. Find the 1-digit number in the "RC" column.

    3. The explanation in the corresponding "Description" column will identify the cause of the unpostable condition.

  4. The CCA 4243 age listing should be monitored to ensure all unpostable transactions are resolved.

  5. Unpostables are identified on IDRS by the following Pending Transaction Identification Codes:

    • UNNN (U = unpostable, NNN = the numeric unpostable code) - This is an open unpostable case

    • CU - Corrected Unpostable - this shows the transaction should post to the module in the cycle appearing to the right of the transaction

    • NU - Nullified Unpostable - this case has been referred to the responsible function for correction

    • DU - Deleted Unpostable - this case has been closed and deleted from the ECC-MTB Unpostables tape - research to determine appropriate action

    • DN - Transaction deleted by IDRS daily TIF batch processing

    • DJ - A transaction deleted through normal weekly updates

    • RJ - Reject transaction - case referred to Rejects Function

    • DC - Transaction deleted by ERS or SC Reject Processing

    Note:

    These codes are displayed in front of the unpostable transaction. Rarely will DN or DJ impact an unpostable BMF-AUR transaction.

4.119.4.25.1  (09-17-2014)
Basic Steps for Resolving Unpostables

  1. To determine why the transaction did not post, consider the description for the UPC/RC and determine if the previous transaction was in error. See Document 6209, IRS Processing Codes and Information, for a complete list of Unpostable Codes, Reason Codes and a brief description of each.

  2. If the Form 4251 with the source document was not returned to the BMF-AUR function, attempt to resolve the issue without these items. If the unpostable was an adjustment to the account and can be resolved without the source document, complete Form 2275 to instruct Files to pull the unpostable document (DU or NU DLN) and attach it to the corrected adjustment. This is required since the DLN of the unpostable transaction will not be retained once the account is resolved. If the source document is required to resolve the unpostable condition, request the document (DU or NU DLN) using IDRS CC:ESTAB.

  3. If the unpostable is an adjustment to the account, attach the Form 4251 to the back of the case file and line through the incorrect DLN. On the 5147 (IDRS generated document that is attached to any backup material, such as the original return) carefully line through the DLN, as it should still be readable. Make a note above or next to the incorrect DLN.

  4. Input new adjustment with the correct information.

    Note:

    Ensure that the new adjustment does not exceed the original assessment amount and notify the taxpayer of the change, if applicable.

  5. If the unpostable is a credit transfer, review both accounts/modules for erroneous refunds and/or to ensure that both sides unposted. If one side did not unpost, take to the Lead Tax Examiner.

  6. Reinput the credit transfer with the correct information.

  7. If the unpostable is an address change, TC 844/845, etc., (any action that would not generate a control base), reinput the transaction and then close the unpostable control base (if appropriate). These transactions may be identified on the CCA 4243 age listing as MFT 00 and period 0000, referring to an open control on IDRS CC:ENMOD.

    Note:

    BMF-AUR Unpostable transactions should be resolved in 7 calendar days to ensure minimum impact to BMF-AUR and to the taxpayer.

4.119.4.25.2  (09-17-2014)
Unpostables IDRS Command Codes

  1. Use CC UPTIN, UPDIS (UPRES), and UPCASZ to research/resolve unpostables.

  2. UPTIN: This command code displays all open unpostable cases for the input TIN. Closed unpostables for the input TIN are displayed for three months before dropping off IDRS. Research IDRS CC:UPTIN for the following information:

    • The unpostable sequence number of an open case

    • The case status (open, suspended, or closed)

    • The employee assignment number

    • The corrective action taken to resolve a previously closed case, when IDRS CC:UPDIS can no longer be accessed

  3. UPDIS: This command code displays unpostable records. When IDRS CC:UPDIS is input, the automatic screen display IDRS CC:UPRES appears. Research IDRS CC:UPDIS for the following information:

    1. To display a specific closed unpostable for the input sequence until the correcting action is included in the Thursday night correction tape run.

    2. The information displayed on IDRS CC:UPDIS varies depending on the type of unpostable. IDRS CC:UPDIS must also be used as a prerequisite for IDRS CC:UPRES and IDRS CC:UPCASZ.

    Note:

    IDRS CC:UPDIS may be used via IDRS Universal Access.

  4. UPCAS: This command code is used for:

    • Requesting an MRS transcript of the unpostable record

    • Requesting a document or return

    • Placing or updating a case in suspense status

    • Adding information to aid the Unpostables Function in the resolution of the unpostable condition

      Note:

      Use IDRS CC:UPCAS with the definer "Z" to input message/history information; up to 80 characters are available.

  5. For a closed case, research IDRS CC:UPTIN to determine how it was closed.

4.119.4.25.3  (09-17-2014)
Guidelines for Preventing Unpostable IDRS Transactions

  1. The following list provides guidelines for preventing unpostable transactions:

    1. Use IDRS CC:TXMOD or CC:BMFOL prints when making an adjustment to a taxpayer's account.

    2. Ensure IDRS CC:TXMOD print is for the correct TIN and year.

    3. Do not attempt to move (credit) or remove (tax and/or penalty) for an amount larger than is shown on IDRS CC:TXMODA print. Rounding "up" frequently results in an unpostable.

    4. Review IDRS CC:TXMOD print for manual interest (TC 340). If there is a -I freeze due to a TC 340, interest will need to be manually updated with another TC 340. Refer to the Lead Tax Examiner if unable to work.

    5. Check for previous adjustments for the same amount.

    6. Check for and consider any previous adjustments when making the adjustment.

    7. If appropriate, input TC 570 (credit side) on credit transfers. This will help prevent an erroneous refund if the debit side goes unpostable. An alternate solution is to use Document Code 34 for credit transfers when possible. Use of Doc. Code 34 depends on the original posted transaction. This credit transfer document is considered a "two-sided" document because the credit does not attempt to post until the debit side has posted.

    8. Make sure hold codes and priority codes are used when necessary.

  2. Be especially watchful for the following transaction codes:

    • TC 160/161 - FTF penalty

    • TC 170/171 - ES penalty

    • TC 270/271- FTP penalty

    • TC 340/341- Restricted interest "-I" freeze

    • TC 420/424 or TC 576 "-L" or unallowable issue

  3. Additional information can be found in Document 6209, IRS Processing Codes and Information, under the Unpostables Codes.

Exhibit 4.119.4-1 
Abbreviations

Acronym Definition
AC Action Code
AIMS Audit Information Management System
AMRH Accounts Maintenance Research
AMS Accounts Managements Service
APO/FPO Army & Air force Post Office/ Fleet Postal
ARDI Alternative Receivable Dollar Inventory
AUR IMF Automated Underreporter
BMF Business Master File
BOD Business Operating Division
BT Batch Type
BMF-AUR BMF Automated Underreporter
CA Case Analysis
CAF Centralized Authorization File
CC Command Code
cc Closing Code
CCA Case Control Activity
CCC Commodity Credit Corporation
CCF Capital Construction Fund
CI Criminal Investigation
CP Computer Paragraph
CRP Conservation Reserve Program
CSN Case Sequence Number
CUSIP Committee on Uniform Security Identification Procedures
DIMS Docket Information Management Systems
DIV Dividends
DLN Document Locator Number
DOC Document
DPAD Domestic Production Activity Deduction
ECC-MEM Enterprise Computing Center at Memphis
ECC-MTB Enterprise Computing Center at Martinsburg
EGC Employee Group Code
EIN Employer Identification Number
ES Estimated Tax
EXAM Examination
FEMA Federal Emergency Management Agency
FMS Financial Management Service
FMV Fair Market Value
FRC Federal Records Center
FRP Fraud Referral Program
FTF Failure to File Penalty
FTP Failure to Pay Penalty
HQ Headquarters
IDRS Integrated Data Retrieval System
IA Installment Agreement
ID Identify, Identification
IMF Individual Master File
IND Indicator
INT Interest
IPC Internal Process Code
IR Information Return
IRC Internal Revenue Code
IRM Internal Revenue Manual
IRMF Information Return Master File
IRP Information Return Processing
ISRP Integrated Submission and Return Processing
LC Lost Case
LR Lost Response
MeF Modernized e-Filed
MISC Miscellaneous
N/C No Change
NOL Net Operating Loss
O/C Overclaimed
OCR Optical Character Recognition
O/D Over deducted
OID Original Issue Discount
PC Process Code
PIK Payment in Kind
POA Power of Attorney
RC Reason Code
RECON Reconsideration
RF Refile Case
SBSE Small Business/ Self Employed
SBC Secondary Business Code
SC Service Center
SCRIPS Service Center Recognition/ Image Processing System
SEID Standard Employee Identifier
SERP Servicewide Electronic Research Portal
SF Subfile
STAT Letter 3219B Statutory Notice of Deficiency
TAS Taxpayer Advocate Service
TC Transaction Code
TDA Taxpayer Delinquent Account
TE Tax Examiner
TEFRA Tax Equity Fiscal Responsibility Act
TIA Taxpayer information Authorization
TIF Taxpayer Information File
TIN Taxpayer Identification Number
TP Taxpayer
TXI Taxable Income
TY Tax Year
U/C Underclaimed
U/R Underreported
W/H Withholding

Exhibit 4.119.4-2 
Glossary

Accounting Method - Accrual Basis - A system of accounting based on the accrual principal, under which revenue is recognized (recorded) when earned not when payment is received, and expenses are recognized when incurred.

Accounting Method - Cash Basis - An accounting method in which income is recorded when cash is received, and expenses are recorded when cash is paid out.

Activity Code - Up to ten digits that identifies the status or action taken on a case on IDRS.

Agreed Cases - A response from the taxpayer with signature(s) agreeing to our changes with no disputing comments, OR full payment of tax and penalties received before the issuance of a Letter 3219B, Statutory Notice of Deficiency, with no comments, OR a completed Installment Agreement with signature(s) and no comments.

Audit Information Management System (AIMS) - An IDRS control system used by Examination.

Appealed Case - A case in which the taxpayer requests an Appeals hearing.

Assessments - A change to the amount of tax on the taxpayer's account; generates a bill or a refund, a new DLN, and/or releases payment and/or freeze code.

AUR (Automated Underreporter) - Inventory control system used in IMF Underreporter.

Batch - A collection of returns, correspondence, or cases that have been grouped together.

Batch Number - A six-digit number used to describe/define the type of batch and the sequential number of the batch or the physical location of the batch.

Batch Type (BT) - The first three-digits of a Batch Number that describe the type of work within the batch.

BMF - Business Master File.

Business Automated Underreporter (BMF-AUR) - Inventory control system used in BMF Underreporter.

BMF-AUR Received Date - The date the response is received in the BMF-AUR Campus.

Centralized Authorization File (CAF) - Houses Power of Attorneys (POA) and other authorized disclosure contacts for taxpayer accounts.

Case Analysis - The technical review of computer identified discrepancies compared to the tax return. The Screening phase of the Underreporter Program is referred to as either Screening or Analyzation.

Category Code - Four character code that identifies the phase of a BMF-AUR case.

Command Code (CC) - Used to make changes to IDRS accounts.

Correspondence Imaging System (CIS) - A Scanning system maintained by Accounts Management Branch in Ogden Campus.

Letter 2030 - A notice sent to the taxpayer proposing an adjustment to an item of income, deductions, and/or credit that includes an explanation of the adjustment and a tax computation reflecting the adjustment. If the taxpayer fails to respond or if the response is insufficient, the Service sends a Letter 3219B, Statutory Notice of Deficiency.

Letter 2531 - An initial notice sent to the taxpayer requesting an explanation to resolve a discrepancy between items reported by the taxpayer on the tax return and the information provided by third parties regarding those items. If the taxpayer fails to respond or if the response is insufficient, the Service sends a Letter 2030 notice proposing an adjustment.

Letter 3219B - Statutory Notice of Deficiency (SNOD) is legal notification sent to taxpayer's by Certified mail, which explains the taxpayer's right to file a petition with Tax Court and the IRS right to change tax without consent, if no timely petition is filed. A Statutory Notice of Deficiency includes a Letter 3219B, Form 4089, Notice of Deficiency - Waiver, and reprint of the Letter 2030.

Letter 525 - General 30 Day Letter is sent with Form 4549 Income Tax Examination Changes.

CSN - Case Sequence Number.

DCI - Data Collection Instrument.

Disagreed Case - A response from the taxpayer that does not agree to our proposed changes or has disputing comments attached. (Full payment received after issuance of the Stat Notice of Deficiency must be considered disagreed until signature(s) are obtained.)

Docket(ed) Cases - A tax case in the U. S. Tax Court assigned a docket number. When taxpayer files a petition with U. S. Tax Court, in response to a Notice of Deficiency, the court assigns a docket number, which is used to identify the court case.

Docket Information Management System (DIMS) - An automated program used to locate docketed administrative files. The program is maintained by Appeals and is a subsystem of the Appeals Centralized Database System (ACDS) system.

Document Locator Number (DLN) - The number assigned to all returns and documents input to the IRS computer system.

Default - Statutory Notice of Deficiency time frame has expired and an assessment is required.

Employer Identification Number (EIN) - Nine-digit number formatted xx-xxxxxxx used to identify taxpayer/taxpayers.

EFTPS - Electronic Federal Tax Payment System - Allows taxpayers to make electronic payments for federal taxes.

Federal Emergency Management Agency (FEMA) - The agency that helps with disaster relief.

Form 4251Return Charge Out - The form generated from IDRS tape, used by Files/FRC to pull the requested returns.

Federal Records Center (FRC) - A place where tax returns are stored outside the campuses.

Form 4549 - Income Tax Examination Changes is sent with Letter 525 General 30 -Day Letter.

Form 4564 - Information Document Request (IDR).

IMF - Individual Master File.

Integrated Automation Technologies (IAT) - IAT supplies automated tools to IRS employees that simplify research, reduce keystrokes, and increase the accuracy of regular work processes.

Internal process Code (IPC) - A numeric/alpha code used for tracking cases on the BMF-AUR system (does not upload to IDRS).

IRS Received Date - The date the IRS received the taxpayer's correspondence or notice in the campus. It can usually be found on the first page of the receipt and is a stamp containing the campus name and date the IRS received the correspondence in the campus.

Integrated Submission and Remittance Processing (ISRP) - The automated system that converts all paper documents to electronic form, including payments.

Lost Case (LC) - A case that cannot be located where the system indicates it should be.

Lost Response (LR) - A case is assigned to a response batch, but the response is not physically in the batch or case file.

MeF - Modernized e - File indicates the return was filed electronically.

Non-Docketed Case - A case in which the taxpayer requests an Appeals hearing (without filing a petition with Tax Court).

Process Codes (PC) - Numbers used to identify the action taken on a case. PCs reside in BMF-AUR and are uploaded to IDRS.

Recomputed Notice (Recomp) - A notice in which the original Letter 2030 figures were changed

Reconsideration Cases (Recon) - Responses received after the case has been closed (assessment or no change) on the BMF-AUR program.

Referral - A case sent to another area for technical determination.

Refile Case (RF) - An IPC used to return a case to suspense batch before further assignment.

Research - Request for additional information needed to continue processing.

Response - All correspondence received from or on behalf of taxpayer's.

Review Sampling - Cases to be reviewed by Management or quality reviewers.

RPS - The Remittance Processing System within ISRP.

Screening - A technical review of computer identified discrepancies compared against the tax return. The Screening phase of the Underreporter Program is also referred to as Case Analysis and Analyzation.

Standard employee identifier (SEID) - A four digit alpha/number that identifies an IRS Employee.

Sequence Number - Order in which cases are key entered or scanned into BMF-AUR.

Transaction Code (TC) - A information marker generated through IDRS to describe actions taken.

Taxpayer Delinquent account (TDA) - A Collection Status.

Taxpayer Information File (TIF) - Individual Master File data from ECC containing tax account and tax transaction information.

Taxpayer Identification Number (TIN) - A nine digit number used to Identify tax payers accounts.

Undeliverable (UNDL) - Correspondence returned from the post office that the taxpayer did not receive.

Exhibit 4.119.4-3 
BMF-AUR Category Code/Subfile Sub Category Code Descriptions

CODE NAME DESCRIPTION
004 Non-Employee Compensation Gross Receipts is the largest discrepancy, and there is an Non-employee Compensation IR with no other IR Amounts related to Gross Receipts/Other Income
010 Interest Interest is the largest amount of the total case discrepancy
011 Dividends Dividends is the largest amount of the total case discrepancy
012 Interest and Dividends Interest and Dividends are the largest amount of the total case discrepancy
017 Fishing Fishing Income is the largest discrepancy, and no other IR Amounts related to Gross Receipts/Other Income
018 Rents Rents is the largest amount of the total case discrepancy
019 Royalties Royalties is the largest amount of the total case discrepancy
020 Farming Farming Income is the largest discrepancy, and no other IR Amounts related to Gross Receipts/Other Income
021 Medical Payments Gross Receipts is discrepant, and there is a Medical Payments IR with no other IR Amounts related to Gross Receipts/Other Income
022 Positive Distributive Share Income Positive Distributive Share Income is the largest amount of the discrepancy
027 Misc Other Income Other Income is the largest discrepancy and Misc Other Income is the only IR for that line
031 Securities Security Sales is the largest amount of the total case discrepancy
032 Withholding Cases where withholding is the largest amount of the Total Case Discrepancy
034 Interest Combo Cases where interest is discrepant along with other discrepancies and no one income type meets the 50% criteria on the case.
040 Capital Gains Capital Gains is the largest amount of the total case discrepancy
043 Bartering Gross Receipts is the largest discrepancy, and there is a Bartering IR with no other IR Amounts related to Gross Receipts/Other Income
048 Payment Card Transactions Payment Card Transactions is the largest amount of the total case discrepancy
057 Gross Receipts/Other Income Combo Gross Receipts/Other Income types are the majority discrepancy, and there are more than one IR type present on the case for that issue
099 Other Cases not assigned to the above categories

Subfile Key Descriptions Chart

SUBFILE DEFINITION DESCRIPTION
B LB&I Cases with BOD code indicating LB&I case
7 Suspected Merchant Card Suspected underreported cases
8 Explicit Merchant Card Explicit underreported cases
E Exam The tax form is 1120S or 1065 with over $500K in Gross receipts and there is a mismatch of at least 50% of gross receipt OR there is a TC 420/424 on the tax module
X Personal Service Corp Tax Verification NAICS codes: 541110, 541190, 541211 - 541219, 541310 - 541380, 541400, 541511 - 541990, 621111 - 621498, 711100 - 711510 and Form 1120, Sch J, line 2 is < 35% of Form 1120 line 30
U Potential Unproductive Repeater Multi-Year Repeater Unproductive in one of the three proceeding years
L Low Dollar Yield Unreported Income of less than $3,000.
H High Under Reporter High Underreporter ($100,000 or more)
Y High Underreporter and Multi-year High Underreporter and Multi-Year Repeater
R Multi-Year Repeater Multi-Year Repeater
S Securities Cases with a Securities discrepancy $1,000 or more
M Payment Card Transactions Cases with a Payment Card Transactions discrepancy over $1,000
K K-1 Schedule K-1 discrepancy of $1,000 or more
C Schedule O Controlled Group (Sch O) is filed
W Withholding Withholding $350 or more
O Other Other (no previous subfile applies)
N NOL Repeater NOL deduction claimed and a prior year BMF AUR adjustment
P Medical Payments Medical payment discrepancy of $1,000 or more

Sub Category Code/ Potential Tax Change

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

Exhibit 4.119.4-4 
No Change Reason Codes (NRC)

NRC Description
1 Reported on another line.
2 Reported on another return - confirmed.
3 Reported on another return - unconfirmed.
4 Nominee.
5 Reporting Net.
6 Mixed Entity.
7 Payer reporting problem.
8 IR problems.
9 Tolerance.
10 Return amended no tax change.

Exhibit 4.119.4-5 
BMF-AUR Internal Process Codes (IPC)

Pre-Notice

41MR - Screening Miscellaneous Referral

41RR - Screening Research Request for Tax Return and/or Transcripts

41TR - Screening Technical/Manager Referral

41WP - Screening Wrong Pull

41LC - Lost Case

41TC - TCO Referral

Letter 2531

43LT - Letter 2531 Correspondex Letter

43MR - Letter 2531 Miscellaneous Referral

43PH - Letter 2531 Phone Call (Out Call)

43RR - Letter 2531 Research Request for Tax Return

43TR - Letter 2531 Technical/Manager Referral

43LC - Lost Case

43LR - Lost Response

43RF - Letter 2531 Refile Case

43TC - TCO Referral

43TI - TCO Issued Form 4564 (IDR)

43TX - TCO Accepted TP documentation in full

43UD - Letter 2531 Undeliverable

Letter 2030

45EX - Letter 2030 Extension Request

45LT - Letter 2030 Correspondex Letter

45MR - Letter 2030 Miscellaneous Referral

45PH - Letter 2030 Phone call (Out Call)

45RC - TCO Issued Letter 525/Form 4549

45RR - Letter 2030 Research Request - Tax Return and/or Transcript

45TR - Letter 2030 Technical/ Manager Referral

45LC - Lost Case

45LR - Lost Response

45RF - Letter 2030 Refile Case

45TA -TCO Agreed assessment based on TP agreement to Letter 525/Form 4549

45TC - TCO Referral

45TI - TCO Issued Form 4564 (IDR)

45TP - TCO Partial Agreed assessment based on TP partial agreement to Letter 525/Form 4549

45TX - TCO Accepted TP documentation in full

45UD - Letter 2030 Undeliverable

Statutory Notice

47LT - Stat Notice Correspondex Letter

47MR - Stat Notice Miscellaneous Referral

47PH - Stat Notice Phone Call (Out Call)

47RC - TCO Issued Letter 525/Form 4549

47RR - Stat Notice Research Request for Tax Return and/or Transcripts

47TA - TCO Agreed assessment based on TP agreement to Letter 525/Form 4549

47TC - TCO Referral

47TD - TCO Default Assessment based on TP no reply to Letter 525/Form 4549

47TI - TCO Issued Form 4564 (IDR)

47TP - TCO Partial Agreed assessment based on TP partial agreement to Letter 525/Form 4549

47TR - Stat Notice Technical/Manager Referral

47TX - TCO Accepted TP documentation in full

47LC - Lost Case

47LR - Lost Response

47RF - Refile Case

47UD - Stat Notice Undeliverable

Reconsideration - Closed Cases

49LT - Reconsideration Payer Letter

49PH - Reconsideration Telephone

49RR - Reconsideration Research Request for Tax Return and/or Transcripts

49MR - Reconsideration Miscellaneous Referral

49TC - TCO Referral

49TI - TCO Issued Form 4564 (IDR)

49TR - Reconsideration Technical/Manager Referral

Exhibit 4.119.4-6 
BMF-AUR Process Codes (PC)

Case Selected

4030 - BMF-AUR Selected Cases

4050 - Reconsideration Received

Pre-Notice Transfer/Referral/Closure

4100 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4110 - Closed to Field/office Audit

4130 - Closed to Campus Examination

4140 - Fraud - Transfer to Campus Examination

4150 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4160 - Survey Excess Inventory

4170 - HQ Identified Program Problem - Closure

Pre-Notice Closures

4200 - Adjustment (TC 290 with Reference 766/767 or 806/807) Withholding Discrepancy only

4210 - Discrepancy accounted for

4220 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4240 - Payer Agent

4260 - Other Closure (e.g., referral to another Area)

4270 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4290 - Return cannot be secured

Letter 2531 - Transfer/Referral/Closure

4300 - Letter 2531

4305 - Amended Letter 2531

4310 - Letter 2531 or Amended Letter 2531 generated but not mailed (PC 4300, 4305)

4320 - Letter 2030 generated but not mailed after Letter 2531 (PC 4520)

4330 - Reserved

4340 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4350 - Case closed to Field/Office Audit

4360 - Reserved

4370 - Fraud - Transfer to Campus Examination

4380 - Case Closed to Campus Examination

4390 - Reserved

4400 - No Change to original tax liability and all U/R resolved

4410 - Reserved

4420 - No Change to tax and change to TXI (partial agree)

4430 - Reserved

4440 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4450 - Reserved

4460 - Other Closure (e.g., referral to another area)

4470 - Amended return closed case

4480 - Reserved

4490 - Reserved

Letter 2030 - Transfer/Referral/Closure

4500 - Letter 2030

4505 - Amended Letter 2030

4510 - Letter 2030 generated but not mailed (PC 4500)

4520 - Letter 2030 after Letter 2531

4525 - Amended Letter 2030 after Letter 2531

4530 - Recomputed Letter 2030

4535 - Amended Recomputed Letter 2030

4540 - Amended or Recomputed Letter 2030 generated but not mailed (PC’s, 4505, 4525 4530 and 4535)

4550 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4560 - Case Closed Field/Office Audit

4570 - Case Closed to Campus Examination

4580 - Fraud - Transferred to Campus Examination

4590 - Disagreed Appeals Request Service Center Examination

4600 - No Change to original tax liability and all U/R resolved

4610 - No Change to tax and change to TXI (partial agree)

4620 - Reserved

4630 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4640 - Reserved

4650 - Reserved

4660 - Other Closure (e.g., referral to another area)

4670 - Fully Agreed

4675 - Agreed to Revised Tax (Partially Agreed)

4680 - Adjustment to Prepayment Credits Only closure

4690 - Reserved

Statutory Notice - Transfer/Referral/Closure

4700 - Statutory Notice

4705 - Amended Statutory Notice

4710 - Statutory Notice generated but not mailed (PC 4700, 4705)

4720 - Reserved

4730 - Statutory Notice Rescinded

4740 - Reserved

4750 - Recomputed Letter 2030 after Statutory Notice

4755 - Amended Recomputed Letter 2030 after Statutory Notice

4760 - Recomputed or Amended Letter 2030 generated but not mailed after Statutory Notice (PC 4750, 4755)

4770 - Fraud - Transferred to Campus Examination

4780 - Case closed to Field/Office Audit

4790 - Case closed to Campus Examination

4800 - Transfer Docketed Cases to Appeals

4810 - No Change to original tax liability and all U/R resolved

4820 - No Change to tax and change to TXI (partial agree)

4830 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4840 - Assessed by Default Revised Deficiency

4850 - Assessed by default

4860 - ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4870 - Fully Agreed

4875 - Agreed to Revised Tax (Partially Agreed)

4880 - Adjustment to prepayment Credits Only closure

4890 - Other Closure (e.g., referral to another area)

Reconsideration

4900 - Reconsideration: Full Abatement

4910 - Reconsideration: Partial Abatement

4920 - Reconsideration: No Change to assessment

4930 - Reconsideration: Information Request

4940 - Reconsideration: Referral

4950 - Reserved

4960 - Reserved

4990 - Reserved

Exhibit 4.119.4-7 
Activity Codes/Category Codes

The following list of Activity Codes will be used when updating IDRS control base.

Pre-Notice

Activity Code Category Code IPC/PC (for folder and DCI) Description Action Date
31XSCREEN (clerical use only) MISC   Case control open. (X = 0 for 1120 and 1 for 1041)  
31XNNNWUNN (clerical use only) MISC   Batched cases. (X = 0 for 1120 and 1 for 1041 and N = batch number and work unit number)  
34XNNNWUNN (clerical use only) MISC   Priority Batched cases. (X = 0 for 1120 and 1 for 1041 and N = batch number and work unit number)  
31XESTMMDD MISC 41RR Return ordered (X = 0 for 1120 and 1 for 1041) 6 weeks from the order date
31XRWKMMDD MISC   Case returned to the tax examiner to be reworked (X = 0 for 1120 and 1 for 1041) 7 days from the control update
31XRBTMMDD MISC   Case returned to reviewer, disputing error. (X = 0 for 1120 and 1 for 1041) 7 days from the control update
31XRTCONNN MISC   Batched TCO referral cases (X = 0 for 1120 and 1 for 1041 and N = the batch number)  
31XWPMMDD MISC   Return has been received 7 days from the control update
41WPMMDD MISC 41WP Wrong pull (Update control assignment to clerical) 60 days from the control update
41LCMMDD MISC 41LC Lost case 7 days from the control update
41MRXXMMDD MISC   Referral for assistance without a response. XX = 2 digit Definer Code (see Definer Code chart)  
41TCMMDD MISC 41TC TCO Referral 7 days from the control date

Letter 2531

Activity Code Category Code IPC/PC (for folder and DCI) Description Purge Date
CP2531MMDD BUR1 4300 Original Letter 2531 60 days from the notice date (90 days if foreign or APO/FPO address)
2CP31MMDD BUR1 4305 Amended Letter 2531 because of new address 60 days from the notice date (90 days if foreign or APO/FPO address)
43LTMMDD BUR1 43LT Correspondex letter sent requesting more information from the taxpayer 60 days from the notice date
43PHMMDD BUR1 43PH Phone call to the taxpayer 60 days from the notice date
43XRESP BUR1   Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
43XTCORESP BUR1   TCO Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
43LCMMDD BUR1 43LC Lost case 7 days from the control update
43LRMMDD BUR1 43LR Lost response 7 days from the control update
43MRXXMMDD BUR1 43MR Referral for assistance without a response. XX = 2 digit Definer Code (see Definer Code chart)  
43TCMMDD BUR1 43TC TCO Referral 7 days from the control date
43TIMMDD BUR1 43TI TCO issued Form 4564 (IDR) 45 days from the letter date
43TRXXMMDD BUR1 43TR Referral for assistance with a response. XX = 2 digit Definer Code (see Definer Code chart)  
BURTASMMDD BUR1   TAS Referral (MMDD OAR completion date)  
4BXRWKMMDD BUR1   Case returned to the tax examiner to be reworked (4B = the batch type 43X, 44X, 49X and X = 0 for 1120 and 1 for 1041) 7 days from the control update
4BXRBTMMDD BUR1   Case returned to reviewer, disputing error. (4B = the batch type 43X, 44X, 49X and X = 0 for 1120 and 1 for 1041) 7 days from the control update
4BXRTCONNN BUR1   Batched TCO referral cases (4B = the batch type 43X, 44X, 49X, X = 0 1120 and 1 for 1041 and N = batch number)  
4BXESTMMDD BUR1 43RR ESTAB done to request a return or other transaction. (4B = the batch type 43X, 44X, 49X and X = 0 for 1120 and 1 for 1041) 6 weeks from the order date
4BXNNNWUNN BUR1   Batched Cases (4B = the batch type 43X, 44X, 49X, X = 0 for 1120 and 1 for 1041 and N = the batch and work unit numbers)  

Letter 2030

Activity Code Category Code IPC/PC (for folder and DCI) Description Purge Date
CP2030MMDD BUR0 4500 Original Letter 2030 60 days from the notice date (90 days if foreign or APO/FPO address)
2CP30MMDD BUR0 4505 Amended Letter 2030 because of new address prior to Stat Notice 60 days from the notice date (90 days if foreign or APO/FPO address)
FCP30MMDD BUR0 4520 Letter 2030 follow up to Letter 2531 60 days from the notice date (90 days if foreign or APO/FPO address)
2CP30MMDD BUR0 4525 Amended Letter 2030 follow up to Letter 2531 because of new address prior to Stat Notice 60 days from the notice date (90 days if foreign or APO/FPO address)
RECOMPMMDD BUR0 4530 Recomputed notice, correspondence partial agree, etc. 60 days from the notice date (90 days if foreign or APO/FPO address)
2CP30MMDD BUR0 4535 Amended recomputed Letter 2030 because of new address prior to Stat Notice 60 days from the notice date (90 days if foreign or APO/FPO address)
45LTMMDD BUR0 45LT Correspondex letter sent requesting more information from the taxpayer 60 days from the letter date
45EXMMDD BUR0 45EX Extension 30 days from original suspense date
45EXLTMMDD BUR0 45LT Extension request with Correspondex letter. (Extension requested in writing) 60 days from letter date
45PHMMDD BUR0 45PH Phone call to the taxpayer 60 days from the call date
45LCMMDD BUR0 45LC Lost case 7 days from the control update
45LRMMDD BUR0 45LR Lost response 7 days from the control update
45MRXXMMDD BUR0 45MR Referral for assistance without a response. XX = 2 digit Definer Code (see Definer Code chart)  
45RCMMDD BUR0 45RC TCO issued Letter 525/Form 4549 60 days from the letter date
45TCMMDD BUR0 45TC TCO Referral 7 days from the control date
45TIMMDD BUR0 45TI TCO issued Form 4564 (IDR) 45 days from the letter date
45TRXXMMDD BUR0 45TR Referral for assistance with a response. XX = 2 digit Definer Code (see Definer Code chart)  
BURTASMMDD BUR0   TAS Referral (MMDD OAR completion date)  
53XRESP BUR0   Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
53XTCORESP BUR0   TCO Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
5BXRWKMMDD BUR0   Case returned to the tax examiner to be reworked (5B = the batch type 51X, 53X, 54X, 59X and X = 0 for 1120 and 1 for 1041) 7 days
5BXRBTMMDD BUR0   Case returned to reviewer, disputing error. (5B = the batch type 51X, 53X, 54X, 59X and X = 0 for 1120 and 1 for 1041) 7 days from the control update
5BXRTCONNN BUR0   Batched TCO referral cases (5B = the batch type 51X, 53X, 54X, 59X, X = 0 1120 and 1 for 1041 and N = batch number)  
5BXESTMMDD BUR0 45RR ESTAB done to request a return or other transaction. (5B = the batch type 51X, 53X, 54X, 59X and X = 0 for 1120 and 1 for 1041) 6 weeks from the ESTAB date
5BXNNNWUNN BUR0   Batched Cases (5B = the batch type 51X, 53X, 54X, 59X, X = 0 for 1120 and 1 for 1041 and N = the batch and work unit numbers)  

Statutory Notice

Activity Code Category Code IPC/PC (for folder and DCI) Description Purge Date
STATMMDD BURS 4700 Original Stat Notice 105 days from notice date (165 days if foreign or APO/FPO address)
2STATMMDD BURS 4705 Amended Statutory Notice because of new address 105 days from notice date (165 days if foreign or APO/FPO address)
RESTATMMDD BURS 4750 Statutory Recomputed Notice Original purge date
RESTATMMDD BURS 4755 Amended Statutory Recomputed Notice Original purge date
47LTMMDD BURS 47LT Letter sent requesting more information from the taxpayer Original purge date

Exception:

60 days from Letter date for BT 79X only (X = 0 for 1120 and 1 for 1041).

47PHMMDD BURS 47PH Phone call to the taxpayer Original purge date

Exception:

60 days from the call date for BT 79X only (X = 0 for 1120 and 1 for 1041).

47LCMMDD BURS 47LC Lost case 7 days from the control update
47LRMMDD BURS 47LR Lost response 7 days from the control update
47MRXXMMDD BURS 47MR Referral for assistance without a response. XX = 2 digit Definer Code (see Definer Code chart)  
47RCMMDD BURS 47RC TCO issued Letter 525/Form 4549 60 days from the letter date
47TCMMDD BURS 47TC TCO Referral 7 days from the control date
47TIMMDD BURS 47TI TCO issued Form 4564 (IDR) 45 days from the letter date
47TRXXMMDD BURS 47TR Referral for assistance with a response. XX = 2 digit Definer Code (see Definer Code chart)  
BURTASMMDD BURS   TAS Referral (MMDD OAR completion date)  
73XRESP BURS   Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
73XTCORESP BURS   TCO Response received on case in team/tax examiner suspense (X = 0 for 1120 and 1 for 1041)  
7BXRWKMMDD BURS   Case returned to the tax examiner to be reworked (7B = the batch type 71X, 73X, 74X, 79X and X = 0 for 1120 and 1 for 1041) 7 days
7BXRBTMMDD BURS   Case returned to reviewer, disputing error. (7B = the batch type 71X, 73X, 74X, 79X and X = 0 for 1120 and 1 for 1041) 7 days from the control update
7BXRTCONNN BURS   Batched TCO referral cases (7B = the batch type 71X, 73X, 74X,79X X = 0 1120 and 1 for 1041 and N = batch number)  
7BXESTMMDD BURS 47RR ESTAB done to request a return or other transaction. (7B = the batch type 71X, 73X, 74X, 79X and X = 0 for 1120 and 1 for 1041) 6 weeks from the ESTAB date
7BXNNNWUNN BURS   Batched Cases (7B = the batch type 71X, 73X, 74X, 79X, X = 0 for 1120 and 1 for 1041 and N = the batch and work unit numbers)  

Reconsideration

Activity Code Category Code IPC/PC (for folder and DCI) Description Purge Date
94XRCNMMDD BURC   The beginning of the reconsideration process, showing a true reconsideration case. Request case folder and DCI from Clerical. 7 days from the control update
94XESTMMDD BURC 49RR Return reordered (X = 0 for 1120 and 1 for 1041) 6 weeks from date of ESTAB
94XTCORESP BURC   TCO Response received on case in team/TE suspense. (X = 0 for 1120 and 1 for 1041)  
49LTMMDD BURC 49LT Letter 4552C (Payer/Nominee inquiry) or Letter 4550C (requesting additional taxpayer information) 60 days from the Letter 4552C date or 45 days from the Letter 4550C date
49PHMMDD BURC 49PH Phone call to the taxpayer 45 days from the call date
49MRXXMMDD BURC 49MR Referral for assistance without a response. XX = 2 digit Definer Code (see Definer Code chart)  
49TCMMDD BURC 49TC TCO Referral 7 days from the control date
49TIMMDD BURC 49TI TCO issued Form 4564 (IDR) 45 days from the letter date
49TRXXMMDD BURC 49TR Referral for assistance with a response. XX = 2 digit Definer Code (see Definer Code chart)  
BURTASMMDD BURC   TAS Referral (MMDD OAR completion date)  
9BXRTCONN BURC   Batched TCO referral cases (9B = the batch type 94X, X = 0 for 1120 and 1 for 1041 and N = the batch  

Exhibit 4.119.4-8 
Definer Codes

Definer Code Description Purge
AD ARDI referral 7 days from the control update
AP Appeals referral 7 days from the control update
AS Third Party Contact after Stat referral 7 days from the control update
BK Referral returned to TCO 7 days from the control update
CL Counsel referral 45 day from the control update
DS Disaster suspense disaster purge date provided
EF Erroneous Refund referral 4-6 week from the control update
EX Exam  referral 7 days from the control update
FD Fraud referral 21 days from the control update
HQ Head Quarters initiated suspense purge date provided
LD Lead referral 7 days from the control update
MI Manual Interest referral 7 days from the control update
MP Manual Penalty referral 7 days from the control update
NL NOL referral 7 days from the control update
PA Payer Agent referral 7 days from the control update
PC Pending Correspondence 14 days from the control update
PN Pending Action 45 days from the control update
RA Revenue Agent referral 7 days from the control update
RV RA review 7 days from the control update
ST Statute referral 7 days from the control update
TA TAS referral 7 days from the control update
TE Referral returned to tax examiner 7 days from the control update

Exhibit 4.119.4-9 
Batch Types

SCREENING

BATCH TYPE DEFINITION
31X Complete Screening Cases (X = 0 for 1120 and 1 for 1041)
34X Priority Screening (X = 0 for 1120 and 1 for 1041)

LETTER 2531

Batch Type Definition
41X Letter 2531 Remail/Recompute (X = 0 for 1120 and 1 for 1041)
43X Letter 2531 Response (X = 0 for 1120 and 1 for 1041)
44X Letter 2531 Priority Response (X = 0 for 1120 and 1 for 1041)
49X Aged Letter 2531/Letter 2030 Preparation (X = 0 for 1120 and 1 for 1041)

LETTER 2030

Batch Type Definition
51X Letter 2030/Recomputed Agreed Response (X = 0 for 1120 and 1 for 1041)
53X Letter 2030/Recomputed Disagreed Response (X = 0 for 1120 and 1 for 1041)
54X Letter 2030/Recomputed Priority Response (X = 0 for 1120 and 1 for 1041)
59X Aged Letter 2030/Recomp Stat Preparation (X = 0 for 1120 and 1 for 1041)

RESPONSE MISCELLANEOUS

Batch Type Definition
62X Re-mail Letter 2030/Recomputed (X = 0 for 1120 and 1 for 1041)
681 Letter 2531 Review
682 Letter 2030 Review

STAT NOTICE

Batch Type Definition
71X Statutory Agreed Response (X = 0 for 1120 and 1 for 1041)
73X Statutory Disagreed Response (X = 0 for 1120 and 1 for 1041)
74X Statutory Priority Response (X = 0 for 1120 and 1 for 1041)
79X Statutory Notice Defaults (X = 0 for 1120 and 1 for 1041)

STAT MISCELLANEOUS

Batch Type Definition
82X Re-mail Statutory Notice (X = 0 for 1120 and 1 for 1041)
831 Screening Disaster Suspense
833 Letter 2531 Disaster Suspense
834 Letter 2030 Disaster Suspense
838 Statutory Disaster Suspense

RECONSIDERATION

Batch Type Definition
940 Manual Reconsiderations
950 Reconsideration Unit Suspense
960 Reserved
970 Reconsideration Research Suspense
980 Closed Case First Read Closures
990 Closure Suspense After Reconsideration

Exhibit 4.119.4-10 
CP PARAGRAPHS

1- PAYMENT CARD AND THIRD PARTY NETWORK TRANSACTIONS You received Form 1099-K, Payment Card and Third Party Network Transactions, because you accepted payment cards for purchased transactions or because you received payments through a third party network. The Form 1099-K payment card and third party network transactions show gross proceeds and haven't been adjusted for authorized returns or allowances. If applicable, send us an explanation of the items included in the gross receipts on your tax return.

4- DIVIDENDS According to our records, there's a discrepancy in the dividend income you reported. We’ve compared the dividend income reported to us to the amount on your tax return on Form 1120, Schedule C, line 19, column a. For any unreported dividends eligible for a special deduction, list the following by payer name:

  • the dividends received

  • the percentage of deduction, and

  • the net reportable amount.

6- QUALIFIED DIVIDENDS Our records indicate you may be eligible for a lower tax rate since the Dividends reported to us contain Qualified Dividends. Let us know of any needed changes to the reported eligible Qualified Dividends.

8- CAPITAL GAINS LOSS ($3,000) LIMITATION The capital gains or securities (sale of stock), or both, shown on this notice were treated as ordinary income because of the loss limitations on your Schedule D. If you want to apply the loss to this income and you have any unused losses on your original Schedule D, you must correct other affected tax years. Send us an amended Schedule D in response to this notice.

To correct other affected tax returns you’ve already filed, send amended tax returns to the appropriate IRS Center.

If you haven’t yet filed the tax return for the affected year, send us a signed statement that you’ll correct your records.

9- PAYMENTS FROM QUALIFIED EDUCATION PROGRAMS Generally, distributions (including earnings) from Qualified Tuition Programs (QTPs) are tax exempt if they are used to pay expenses for qualified higher education expenses, transferred between trustees, or rolled over to another qualified tuition program within 60 days. If you didn’t use the distributions for the above purposes, you must include the earnings as income. See Publication 970, Tax Benefits for Education, for more information. If you believe that all or part of the QTP earnings qualify for tax exemption, send us a signed statement showing the qualified expenses or rollover documentation, or the computation that you used to determine the taxable portion.

12 - CAPITAL GAINS DISTRIBUTIONS You didn’t include the amount of capital gain distributions shown on your Schedule D, Capital Gains and Losses, on page 1 of your tax return.

13 - COST BASIS OF SECURITIES SOLD When determining the amount of unreported securities transactions, we took into account any cost basis the broker provided as shown on Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, box 3. If the broker didn’t provide an amount in box 3, we used a zero cost basis because we couldn’t otherwise determine the cost or adjusted basis of the securities sold. For each Form 1099-B transaction, provide us the asset name, the date you acquired the asset, and the cost or adjusted basis of your asset(s) shown on the attached pages of this notice.

14 - AGGREGATE PROFIT OR LOSS ON CONTRACTS Our records show you had transaction(s) relating to regulated futures contracts, section 1256 option contracts, or foreign currency contracts. You must report the aggregate profit or loss on these transactions on your tax return for the year the transaction(s) occur. Refer to Publication 550, Investment Income and Expenses, for information regarding the correct forms or schedules you need to report the income. Complete the appropriate form(s) or schedule(s) and send them to us.

18 - REAL ESTATE TRANSACTION Our records show you sold or transferred real estate. However, your tax return doesn’t show this transaction. You must report the gain from real estate transactions, in excess of any applicable exclusion amount, on your tax return for the year the transaction(s) occur. Refer to Publication 523, Selling Your Home, or Publication 544, Sales and Other Dispositions of Assets, for information about applicable exclusions and correct forms or schedules you need to report the sale. Complete the appropriate form(s) or schedule(s) and send them to us along with:

  • - verification of your cost or adjusted basis in the property,

  • - the date the asset was acquired for each Form 1099-S transaction shown on this notice, and

  • A statement as to how you used each property.

20 - CROP INSURANCE Our records show you received crop insurance proceeds. We’re unable to locate this amount on your tax return. If you elected to postpone reporting your crop insurance proceeds as income, please explain in a signed statement or send us a copy of the tax return where you reported the crop insurance as income.

24 - CANCELLATION OF DEBT If the canceled debt is excludable due to insolvency, please provide us with a breakdown of your total assets and liabilities immediately before the debt was discharged. You are insolvent to the extent that just prior to the debt cancellation your total liabilities exceeded your total assets (e.g., if your liabilities totaled $15,000 and your assets totaled $12,000, you are insolvent by $3,000). A worksheet that you may use for calculating insolvency is included in Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Debt cancellation is excludable only up to the insolvent amount. You must include any canceled debt that exceeds the amount of your insolvency as income on your tax return, unless an exclusion applies.

25 - NOMINEE INCOME ADDITIONAL DOCUMENTATION REQUIRED We are unable to fully reconcile the amounts paid to you with the amounts you indicated were allocated to other recipients. Please provide us with copies of the Forms 1099 you issued to the recipients. If you cannot provide the Forms 1099 issued to the recipients, please send us the following:

  • A list of recipient’s names, taxpayer identification numbers and amounts paid.

  • Copies of canceled checks (or other evidence of amounts paid) written to the recipient(s) AND

  • Contracts and/or agreements between you and the recipient that the income was allocated and/or distributed to.

Generally, if you receive a Form 1099 for amounts that actually belong to another person (or business), you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts allocable to each. You must also furnish a Form 1099 to each of the owners. See the General Instructions for Certain Information Returns (Form 1097, 1098, 1099, 3921, 3922, 6498, and W-2G) for more information.

30 - AMENDMENTS OR ADJUSTMENTS TO YOUR RETURN HAVE BEEN INCLUDED IN THIS NOTICE We considered previous changes to your original tax return in figuring the amounts shown in the explanation of changes section of this notice under the heading "Shown on Return" This may include any adjustments we made at the time you filed or changes you made at a later date by amending your return.

31 - WE CORRECTED YOUR TAXABLE INCOME During the processing of your tax return, we discovered a math error and made the necessary corrections for you. As a result, the taxable amount shown in the explanation of changes section differs from the amount you originally reported.

32 - POTENTIAL ADJUSTMENT OF NET OPERATING LOSS (NOL) Please review your tax return to determine if, based on our proposal, the changes will affect the Net Operating Loss (NOL) you reported. You may need to change the NOL amount or adjust the amount carried forward to a subsequent year. If you already applied the NOL to another tax year, you must file an amended tax return for the other year with the appropriate IRS Center. If you haven’t yet filed the tax return for the affected period, send us a signed statement that you’ve corrected your records.

33 - NET INVESTMENT INCOME TAX The Health Care and Education Reconciliation Act of 2010 added a Net Investment Income Tax (NIIT) for tax years beginning in 2013. The NIIT applies at a rate of 3.8% to the lesser of the estate or trust’s undistributed net investment income or the amount by which the adjusted gross income exceeds the highest tax bracket for the taxable year. In general, net investment income includes interest, dividends, capital gains, rental and royalties income, and non-qualified annuities and income from businesses in which the taxpayer doesn’t materially participate.

Changes to your investment income or AGI impact the amount of NIIT due. Send us a revised Form 8960, Net Investment Income Tax – Individuals, Estates, and Trusts using the underreported income as shown on this notice.

35 - QUALIFIED PERSONAL SERVICE CORPORATION According to the entries on Form 1120 Schedule J, line 2, you identified yourselves as a Qualified Personal Service Corporation; however, the tax paid per return doesn’t correspond with the flat 35% tax applicable to Qualified Personal Service Corporations. In order to determine if the 35% flat tax should be asserted on the return, provide the following responses along with a signed statement:

  1. What is the Corporation's principal business activity?

  2. Are there any other business activities for this Corporation?

  3. Provide the percentage of each business activity.

  4. Provide a list of Owners and the ownership percentages. Also, indicate if the Owner works for the Corporation and the percentage of time spent doing so.

  5. If applicable, provide an explanation of why the Corporation is not a Qualified Personal Service Corporation.

If we don’t receive this information, we’ll apply the 35% tax rate.

36 - SCHEDULE O - CONTROLLED GROUP According to our records, you used Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, to determine your tax. Send us a revised Schedule O using the underreported income as shown on this notice. If we don't receive your revised Schedule O, we’ll determine any additional tax due using a 35% allocation rate.

38- SECURITIES We recalculated your tax by including your capital gains and losses from the sale of your securities on Schedule D, Capital Gains and Losses.

40 - POTENTIAL ADJUSTMENT OF NON-REFUNDABLE CREDITS You may have unused non-refundable credits on your tax return. Please review your tax return to determine if, based on our proposal, the IRS needs to adjust any of these credits. In order to claim additional unused non-refundable credits, send us a signed statement showing the additional unused credits you want to use. If you’ve already applied the unused credits to another tax year, you need to file an amended tax return for the other year with the appropriate IRS Center. If you haven’t yet filed the tax return for the affected period, send us a signed statement that you’ve corrected your records.

60 - OVERCLAIMED WITHHOLDING Our records show you’re entitled to a lesser amount of withholding than the amount you claimed on your tax return. Send us a copy of Form(s) 1099, or other withholding documentation from the payer(s), or both, to verify the additional withholding claimed on your tax return.

61 - UNDERCLAIMED WITHHOLDING Our records show you may be entitled to a larger amount of withholding than the amount you claimed on your tax return. Compare the payer information provided in this letter with your records. If this payer information is incorrect, send us a statement so we can correct our records. If this payer information is correct, respond to this notice so we may make the necessary adjustments to your account.

70 - FAILURE-TO-FILE PENALTY - IRC SECTION 6651(a)(1) When you file your tax return after the due date, we charge a penalty of up to 5% of the unpaid tax per month for no more than 5 months or up to 25% of the unpaid amount.
If the return is more than 60 days late, we may charge the minimum of:

  • $135 or 100% of the unpaid tax, whichever is less, if the return due date is prior to 12/31/2015 or

  • $205 or 100% of the unpaid tax, whichever is less, if the return due date is after 12/31/2015

We count part of a month as a full month, (Internal Revenue Code section 6651).

If you believe we shouldn’t impose this penalty, send us a signed statement explaining why you filed your tax return late. We’ll review your explanation and determine if you had reasonable cause for filing late.

71 - FAILURE-TO-PAY PENALTY - IRC SECTION 6651(a) When you pay your taxes after the due date, we charge a penalty of 0.5% of the unpaid amount due per month, up to 25% of the amount due. We count part of a month as a full month, (IRC Section 6651).

If this penalty applies, we’ll bill you for this amount at a later date. Payments will be applied first to the oldest tax debt on your account to pay the tax you owe, then penalties, and then interest.

If you believe we shouldn’t impose this penalty, send us a signed statement explaining why you didn’t pay your tax. We’ll review your explanation and determine if you had reasonable cause for not paying your tax on time.

75 - ACCURACY-RELATED PENALTY DUE TO NEGLIGENCE An accuracy-related penalty is charged if there is any underpayment of tax on your return due to negligence or disregard of rules or regulations. This penalty is 20% of the net tax increase on the portion due to negligence or disregard of rules or regulations. (Internal Revenue Code section 6662(c)).
If both the accuracy-related penalty due to negligence or disregard of rules or regulations and the accuracy-related penalty due to substantial understatement of tax apply, we will charge only the larger of the two penalties.(Internal Revenue Code Section 6662(a)).
If you think we shouldn’t charge this penalty, please explain why, send any supporting documents, and request that we waive the penalty. We will review your request and determine if there is reasonable cause to waive the penalty.

76 - ACCURACY PENALTY FOR SUBSTANTIAL TAX UNDERSTATEMENT – IRC SECTION 6662(d) We're required by law to charge an accuracy-related penalty due to substantial understatement of tax if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on your return or $5000. In the case of a corporation (other than an S-Corporation or a personal holding company), an understatement of income tax is substantial when the understatement exceeds the lesser of 10% of tax required to be shown on the return (or, if greater, $10,000)or $10,000,000. We will impose a penalty equal to 20 percent of the underpayment of tax attributable to the understatement.

We may reduce or waive the penalty if you:

  • Provide the substantial authority (such as, Internal Revenue Code, Regulations, Revenue Rulings, Revenue Procedures, etc.) you used to decide how to treat your income or deduction, or

  • Tell us where on your return you clearly show the facts supporting your treatment of the income or deduction, or

  • Submit a signed statement that provides a clear explanation supporting your treatment of the understated income.

78 - ACCURACY-RELATED PENALTY WAIVED We reviewed the information you provided and determined that your failure to properly report income or deductions was based on reasonable cause and that you acted in good faith. Accordingly, we won’t impose an accuracy-related penalty, but, interest on the balance due will be charged, as required by law.

79 - ACCURACY-RELATED PENALTY NOT WAIVED We reviewed the information you provided and determined it didn’t provide reasonable cause for the omission of income or overstatement of deductions. As a result, the accuracy-related penalty is appropriate.

102 - PAYMENT YOU MADE We received your payment and applied it to your account. Payments are first applied to reduce your tax, then to any penalties and interest owed.

103 - PAYER DOCUMENTS NOT RECEIVED The law requires you to report your income correctly. If your payers didn’t send you a yearly income statement (Form 1099, etc.), you must use the information you have (monthly income statements, deposit slips, etc.) to estimate the total amount of income you received during the year.

105 - UNABLE TO CONTACT TAXPAYER SOONER We were unable to contact you sooner because of the time needed to compare information we received from your payers to the information on your tax return.

106 - REQUEST FOR INFORMATION DOCUMENT We’re unable to provide a copy of the information document you requested because we received this information on magnetic tape. To get a copy, please contact the payer.

110 - YOUR AMENDED FORM DID NOT INCLUDE PENALTIES We received your amended form in response to our previous notice. The amended form did not include penalties which are included in this notice.

Exhibit 4.119.4-11 
BMF-AUR Reconsideration Issue Codes

RECON Issue Code Text PC Compatibility
1 Accuracy Related Penalty abatement 4900, 4910
2 Accuracy Related Penalty abatement denied 4910, 4920, 4930
3 Corrected Payer document received 4900, 4910, 4930
4 Income included on IMF return (1040) 4900, 4910, 4930
5 Cash Basis/Income reported in year received 4900, 4910, 4930
6 Additional Expenses Claimed Allowed 4900, 4910, 4930
7 Additional Expenses Claimed Denied 4910, 4920, 4940
8 Income belongs to someone else (Nominee) 4900, 4910, 4920, 4930
9 Income belongs to someone else (NON-Nominee) 4900, 4910, 4920, 4930
10 Incorrect BMF-AUR Processing (tax examiner Error) 4900, 4910, 4940
11 Information request from taxpayer 4920, 4930
12 Information sent to taxpayer 4920, 4930, 4940
13 Interest abatement 4900, 4910, 4930, 4940
14 Interest abatement denied 4920, 4930, 4940
15 Other Penalty (non-Accuracy Related) abatement 4900, 4910, 4920, 4930
16 Other Penalty (non-Accuracy Related) abatement denied 4920, 4930
17 O/C W/H Verified 4900, 4910, 4930
18 U/C W/H Verified 4900, 4910, 4930
19 Released Freeze codes 4920
20 Income reported on Form 5500 4900, 4910, 4930
21 Tax Return filed was Part/Short year and/or Income reported on other BMF Tax return (filing requirement change) 4900, 4910, 4930
22 Form 8949 and Schedule D loss 4900, 4910, 4930
23 Form 8949 and Schedule D cost basis 4900, 4910, 4930
99 Other 4900, 4910, 4920, 4930

Exhibit 4.119.4-12 
Notice Review Error Codes

Critical Errors

CODE ERROR
1 Gross Receipts amount incorrect
2 Payment Card amount incorrect
3 Fishing income amount incorrect
4 Gross Medical Receipt amount incorrect
5 Nonemployee Compensation amount incorrect
6 Barter income amount incorrect
7 Dividend income amount incorrect
8 Capital Gain Distribution amount incorrect
9 Interest income amount incorrect
10 Rent income amount incorrect
11 Royalty income amount incorrect
12 Securities Sales income incorrect
13 Cost Basis incorrect
14 Cooperative Distribution amount incorrect
15 Patronage Dividend amount incorrect
16 Agricultural Payments amount incorrect
17 CCC Loan income amount incorrect
18 Crop Insurance amount incorrect
19 Cancellation of Debt amount incorrect
20 Taxable Grant amount incorrect
21 Other Income amount incorrect
22 Substitute Payment in Lieu of Dividend amount incorrect
23 Conduit income amount incorrect
24 Real Estate amount incorrect
25 Gambling income amount incorrect
25 Additional Tax amount incorrect
26 Alternative Minimum tax incorrect
27 Taxable Income per return amount incorrect
28 Tax per return amount incorrect
29 Nonrefundable credit amount incorrect
30 Foreign Tax credit incorrect
31 Miscellaneous credit incorrect
32 Other taxes amount incorrect
33 Withholding change amount incorrect
34 Estimated Tax Penalty amount incorrect
35 Letter 2531 generated erroneously – case should have been closed
36 Letter 2030 generated erroneously - case should have been closed
37 29X should have been ordered
38 Net Investment Income Tax incorrect
39 Letter 2030 generated erroneously - Letter 2531 should have been created
40 Letter 2531 generated erroneously - Letter 2030 should have been created
41 Qualified Education Program Payments amount incorrect
42 Incorrect tax rate computation
43 Entity information incorrect

Non-Critical Errors (No Change in tax)

CODE ERROR
1N Gross Receipts amount incorrect
2N Payment Card amount incorrect
3N Fishing income amount incorrect
4N Gross Medical Receipt amount incorrect
5N Nonemployee Compensation amount incorrect
6N Barter income amount incorrect
7N Dividend income amount incorrect
8N Capital Gain Distribution amount incorrect
9N Interest income amount incorrect
10N Rent income amount incorrect
11N Royalty income amount incorrect
12N Securities Sales income incorrect
13N Cost Basis incorrect
14N Cooperative Distribution amount incorrect
15N Patronage Dividend amount incorrect
16N Agricultural Payments amount incorrect
17N CCC Loan income amount incorrect
18N Crop Insurance amount incorrect
19N Cancellation of Debt amount incorrect
20N Taxable Grant amount incorrect
21N Other Income amount incorrect
22N Substitute Payment in Lieu of Dividend amount incorrect
23N Conduit income amount incorrect
24N Real Estate amount incorrect
25N Gambling income amount incorrect
25N Additional Tax amount incorrect
26N Alternative Minimum tax incorrect
27N Taxable Income per return amount incorrect
28N Tax per return amount incorrect
29N Nonrefundable credit amount incorrect
30N Foreign Tax credit incorrect
31N Miscellaneous credit incorrect
32N Other taxes amount incorrect
33N Withholding change amount incorrect
34N Estimated Tax Penalty amount incorrect
35N Letter 2531 generated erroneously – case should have been closed
36N Letter 2030 generated erroneously - case should have been closed
37N 29X should have been ordered
38N Net Investment Income Tax incorrect
39N Letter 2030 generated erroneously - Letter 2531 should have been created
40N Letter 2531 generated erroneously - Letter 2030 should have been created
41N Information Return omitted or incorrect information selected
42N Incorrect tax rate computation
43N Qualified Education Program Payments amount incorrect
44N Incorrect paragraph selected or omitted
45N POA letter not generated
46N Control Base not updated

Exhibit 4.119.4-13 
Notice Delay Actions (Reconsiderations)

Current IDRS Status Description Cycles to Next Status Next Status STAUP Required to Stop Next Notices Remarks
12 Full paid or Credit None N/A N/A There may be accruals Check IDRS:CC INTST
19 Balance Due before Due Date - MF Notice issued Later of: Return Due Date or 5 Cycles 20 STAUP20 1st IDRS notice will issue the later 5 Cycles after MF Notice or Return Due Date
20 First IDRS Notice - 501 5 56 STAUP56  
21 Balance Due - MF Notice issued 5 20 (IMF) 58 (BMF) STAUP20 STAUP58 This status for MF notices after return due date
22 TDA issued (ACS) Various 24 or 26 N/A Input TC 470
23 Balance Below $1,000 (BMF); $1,500 (IMF) None N/A N/A MF Notice issued yearly Aggregate Balance below $1,000 (BMF); $1,500 (IMF)
24 TDA (Queue) Various 26 N/A  
26 TDA (CFF) None N/A N/A Input TC 470
41/42
43/44
Stay of Collection Various 22 N/A  
47 Temp Collection Freeze - TC 470 26 or Manual Release Various N/A Review - Re-input TC 470 if required
48 Temp Notice Freeze - CC STAUP # Input (1-15) As Requested Various Review - Update if required
50 Causes module to be accelerated to requested notice/TDA status # Input (0) Various N/A  
51 Undeliverable Notices 1 22 N/A  
53 Temp Collect. Frz TC 470 - cc 90/93 26 or Manual Release (ST58) 20 N/A Review - Re-input TC 470 if required
53 TC 530 Account Uncollectable Various 22 N/A  
56 Third IDRS Notice - 503 5 58 STAUP58  
58 Final IDRS Notice 504 6 22 or 23 or 26 STAUP22  
60/61
63/64
Installment Agreement Various Various Collection Branch Collection Branch
71 Offer in Compromise Various Various Collection Branch Collection Branch
72 Bankruptcy Various Various Collection Branch Collection Branch
73 Coll/Offset Frz TC470 - CC99 Manual Release 58 N/A Freeze does not expire
76 Immediate TDA Pending 1 22 STAUP22 504 Notice & TDA next cycle
77 Accelerated TDA 3–8 58 STAUP58 504 is only IDRS notice
91 Criminal Investigation Various 22 CI Branch CI Branch
99 Out of service Center location Various Various   Review-input TC 470 if required

Exhibit 4.119.4-14 
Process Code Consistency Chart

This BUR PC Consistency Chart shall be used to determine which Process Code can follow a particular Process Code for when updating the TC 925 Process Code string on IDRS.

Current PC Current PC Description Process Codes that can follow the current PC
4030 BMF-AUR SELECTED CASES 4100, 4110, 4130, 4140, 4150, 4160, 4170, 4200, 4210, 4220, 4240, 4260, 4270, 4290, 4300, 4500
4050 RECONSIDERATION RECEIVED 4900, 4910, 4920, 4930, 4940
4100 #CLOSED TO CRIMINAL INVESTIGATION# -
4110 CLOSED TO FIELD/OFFICE AUDIT -
4130 CLOSED TO CAMPUS EXAMINATION -
4140 FRAUD - TRANSFERRED TO CAMPUS EXAMINATION -
4150 #DISASTER CLOSURE# -
4160 SURVEY EXCESS INVENTORY -
4170 HQ IDENTIFIED PROGRAM PROBLEM - CLOSURE -
4200 ADJUSTMENT (TC 290 WITH REFERENCE 766/767 OR 806/807) WITHHOLDING DISCREPANCY ONLY 4050
4210 DISCREPANCY ACCOUNTED FOR -
4220 #BALANCE DUE/REFUND BELOW TOLERANCE# -
4240 PAYER AGENT -
4260 OTHER CLOSURE (e.g., REFERRAL TO ANOTHER AREA) -
4270 #CASE CLOSED - BANKRUPTCY ISSUE NOT PURSUED# -
4290 RETURN CANNOT BE SECURED -
4300 LETTER 2531 4300, 4305, 4310, 4340, 4350, 4370, 4380, 4400, 4420, 4440, 4460, 4470, 4520
4305 AMENDED LETTER 2531 4300, 4305, 4310, 4340, 4350, 4370, 4380, 4400, 4420, 4440, 4460, 4470, 4520
4310 LETTER 2531 OR AMENDED LETTER 2531 GENERATED BUT NOT MAILED (PC 4300, 4305) 4100, 4110, 4130, 4140, 4150, 4160, 4170, 4200, 4210, 4220, 4240, 4260, 4270, 4290, 4300, 4305, 4500
4320 LETTER 2030 GENERATED BUT NOT MAILED AFTER LETTER 2531 (PC 4520) 4300, 4305, 4340, 4350, 4370, 4380, 4400, 4420, 4440, 4460, 4470, 4520
4340 #DISASTER CLOSURE# 4050
4350 CASE CLOSED FIELD/OFFICE AUDIT -
4370 FRAUD - TRANSFER TO CAMPUS EXAMINATION -
4380 CASE CLOSED TO CAMPUS EXAMINATION -
4400 NO CHANGE TO ORIGINAL TAX LIABILITY AND ALL U/R RESOLVED 4050
4420 NO CHANGE TO TAX LIABILITY AND CHANGE TO TXI (PARTIAL AGREE) 4050
4440 #CASE CLOSED - BANKRUPTCY ISSUE NOT PURSUED# 4050
4460 OTHER CLOSURE (e.g., REFERRAL TO ANOTHER AREA) 4050
4470 AMENDED RETURN CLOSED CASE 4050
4500 LETTER 2030 4500, 4505, 4510, 4530, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4505 AMENDED LETTER 2030 4500, 4505, 4530, 4540, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4510 LETTER 2030 GENERATED BUT NOT MAILED (PC 4500) 4100, 4110, 4130, 4140, 4150, 4160, 4170, 4200, 4210, 4220, 4240, 4260, 4270, 4290, 4300, 4500
4520 LETTER 2030 AFTER LETTER 2531 4320, 4520, 4525, 4530, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4525 AMENDED LETTER 2030 AFTER LETTER 2531 4520, 4525, 4530, 4540, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4530 RECOMPUTED LETTER 2030 4530, 4535, 4540, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4535 AMENDED RECOMPUTED LETTER 2030 4530, 4535, 4540, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4540 AMENDED OR RECOMPUTED LETTER 2030 GENERATED BUT NOT MAILED (PC’S 4505, 4525, 4530 AND 4535) 4505, 4525, 4530, 4535, 4540, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700
4550 #DISASTER CLOSURE# 4050
4560 CASE CLOSED TO FIELD/OFFICE AUDIT -
4570 CASE CLOSED TO CAMPUS EXAMINATION -
4580 FRAUD - TRANSFERRED TO CAMPUS EXAMINATION -
4590 DISAGREED - APPEALS REQUEST SERVICE CENTER EXAMINATION 4050
4600 NO CHANGE TO ORIGINAL TAX LIABILITY ALL U/R RESOLVED 4050
4610 NO CHANGE TO ORIGINAL TAX LIABILITY AND CHANGE TO TXI (PARTIAL AGREE) 4050
4630 #CASE CLOSED - BANKRUPTCY ISSUE NOT PURSUED# 4050
4660 OTHER CLOSURE (e.g., REFERRAL TO ANOTHER AREA) 4050
4670 FULLY AGREED 4050
4675 AGREED TO REVISED TAX (PARTIALLY AGREED) 4050
4680 ADJUSTMENT TO PREPAYMENT CREDITS ONLY CLOSURE 4050
4700 STATUTORY NOTICE 4700, 4705, 4710, 4720, 4730, 4750, 4770, 4780, 4790, 4800, 4810, 4820, 4830, 4840, 4850, 4860, 4870, 4875, 4880, 4890
4705 AMENDED STATUTORY NOTICE 4700, 4705, 4710, 4720, 4730, 4750, 4770, 4780, 4790, 4800, 4810, 4820, 4830, 4840, 4850, 4860, 4870, 4875, 4880, 4890
4710 STATUTORY NOTICE GENERATED BUT NOT MAILED (PC 4700, 4705) 4500, 4505, 4525, 4530, 4535, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680, 4700, 4705
4730 STATUTORY NOTICE RESCINDED 4500, 4505, 4520, 4530, 4550, 4560, 4570, 4580, 4590, 4600, 4610, 4630, 4660, 4670, 4675, 4680
4750 RECOMPUTED LETTER 2030 AFTER STATUTORY NOTICE 4730, 4750, 4755, 4760, 4770, 4780, 4790, 4800, 4810, 4820, 4830, 4840, 4850, 4860, 4870, 4875, 4880, 4890
4755 AMENDED RECOMPUTED LETTER 2030 AFTER STATUTORY NOTICE 4730, 4750, 4755, 4760, 4770, 4780, 4790, 4800, 4810, 4820, 4830, 4840, 4850, 4860, 4870, 4875, 4880, 4890
4760 RECOMPUTED OR AMENDED LETTER 2030 GENERATED BUT NOT MAILED AFTER STATUTORY NOTICE (PC 4750, 4755) 4730, 4750, 4755, 4770, 4780, 4790, 4800, 4810, 4820, 4830, 4840, 4850, 4860, 4870, 4875, 4880, 4890
4770 FRAUD - TRANSFERRED TO CAMPUS EXAMINATION -
4780 CASE CLOSED TO FIELD/OFFICE AUDIT -
4790 CASE CLOSED TO CAMPUS EXAMINATION -
4800 TRANSFER DOCKETED CASE TO APPEALS 4050
4810 NO CHANGE TO ORIGINAL TAX LIABILITY ALL U/R RESOLVED 4050
4820 NO CHANGE TO ORIGINAL TAX LIABILITY AND CHANGE TO TXI (PARTIAL AGREE) 4050
4830 #CASE CLOSED - BANKRUPTCY ISSUE NOT PURSUED# 4050
4840 ASSESSED BY DEFAULT REVISED DEFICIENCY 4050
4850 ASSESSED BY DEFAULT 4050
4860 #DISASTER CLOSURE# 4050
4870 FULLY AGREED 4050
4875 AGREED TO REVISED TAX (PARTIALLY AGREED) 4050
4880 ADJUSTMENT TO PREPAYMENT CREDITS ONLY CLOSURE 4050
4890 OTHER CLOSURE (e.g., REFERRAL TO ANOTHER AREA) 4050
4900 RECONSIDERATION FULL ABATEMENT -
4910 RECONSIDERATION: PARTIAL ABATEMENT -
4920 RECONSIDERATION: NO CHANGE TO ASSESSMENT -
4930 RECONSIDERATION: INFORMATION REQUEST -
4940 RECONSIDERATION: REFERRAL -

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