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4.119.4  BMF Underreporter (BMF-AUR) Program

Manual Transmittal

September 02, 2016

Purpose

(1) This transmits revised IRM 4.119.4, BMF Liability Determination, BMF Underreporter (BMF-AUR) Program.

Material Changes

(1) The following changes were made from IPU 15U1437, effective 09-25-2015.

  • IRM 4.119.4.2.2(5) revised as the case is worked.

  • IRM 4.119.4.21.1.11(4) added as an attachment deleted authorized representative.

  • IRM 4.119.4.21.1.14(4) 4) deleted Form 12864 Case History Sheet.

  • IRM 4.119.4.21.2(3) deleted "closing."

  • IRM 4.119.4.21.2.2(3) added access specific account information.

  • IRM 4.119.4.21.2.2(4) added asking for name.

  • IRM 4.119.4.21.2.2(4) added Exception POA/TIA not required to provide taxpayer address.

  • IRM 4.119.4.21.2.4(1) a) new issues that do not require accessing taxpayers account. Revised alpha list.

  • IRM 4.119.4.21.2.5(1) cannot be answered without reviewing the account.

  • IRM 4.119.4.21.2.5(3) deleted "closing."

  • IRM 4.119.4.21.2.5(18) added IAT Disclosure Tool.

  • IRM 4.119.4.21.2.6(4) deleted Form 12864 Case History Sheet.

  • IRM 4.119.4.21.2.6(4) Reminder added IAT Disclosure Tool.

  • IRM 4.119.4.21.2.6(5) deleted Form 12864 Case History Sheet.

  • IRM 4.119.4.21.2.6(7) deleted Form 12864 Case History Sheet.

  • IRM 4.119.4.21.2.6(8) c) deleted Form 12864 Case History Sheet.

  • IRM 4.119.4.21.2.6(9) 1) deleted Form 12864 Case History Sheet added Document the call.

  • IRM 4.119.4.21.2.6(9) 3) added Annotate DCI with phone call date.

  • IRM 4.119.4.21.4(1) added Caution Prior to closing the case.

  • IRM 4.119.4.21.5(6) added input assessments on agreed responses.

  • IRM 4.119.4.21.5(6) added input assessments on agreed responses.

  • IRM 4.119.4.21.6(7) deleted and renumbered.

  • IRM 4.119.4.21.11(7) revised step list and deleted table.

  • Exhibit 4.119.4-3 revised 034 description Interest and no one-income meets the 50% criteria.

  • Exhibit 4.119.4-7 5BXRTCONNN corrected Category Code BUR0.

  • Exhibit 4.119.4-7 5BXESTMMDD corrected IPC/PC 45RR.

(2) The following changes were made from IPU 15U1571, effective 10-28-2015.

  • IRM 4.119.4.4.7 revised Nominee Recipient procedures.

  • IRM 4.119.4.8.4.1(7) 7) table second row "If" column. Deleted PROCEEDS added COST&BASIS.

  • IRM 4.119.4.18.3(4) changed 475A to 4755.

  • IRM 4.119.4.19(12) revised amended process codes in "Then" table.

  • IRM 4.119.4.20(2) revised amended process codes in "Then" table.

  • IRM 4.119.4.21.1.5(5) e) changed 45RN to 4675 and 47SR to 4875.

  • IRM 4.119.4.21.6(5) changed 45RN to 4675 and 47SR to 4875 in "Then" table.

  • IRM 4.119.4.21.6(6) changed 45RN to 4675 and 47SR to 4875 in"Then" table.

  • IRM 4.119.4.21.6(7) changed 45RN to 4675 and 47SR to 4875.

  • IRM 4.119.4.21.6.1(3) deleted alpha list and added"If/Then" table decreasing tax deficiency after Statutory Notice of Deficiency.

  • IRM 4.119.4.21.7.6 revised Nominee Income procedures.

  • Exhibit 4.119.4-5 deleted IPCs 41TL, 43TL, 45TL, 47TL, 45RN and 47SR.

  • Exhibit 4.119.4-6 revised amended process codes ending in "A" .

  • Exhibit 4.119.4-6 added process codes 4675 and 4875.

  • Exhibit 4.119.4-7 revised amended process codes ending in "A" .

  • Exhibit 4.119.4-10 revised Paragraph 25.

  • Exhibit 4.119.4-10 revised Paragraph 75.

(3) The following changes were made from IPU15U1767, effective 12-10-2015.

  • IRM 4.119.4.4.9(7) new added Sensitive Case criteria.

  • IRM 4.119.4.6(1) b) new Reminder Sensitive Case criteria.

  • IRM 4.119.4.16.1(2) added TY 2014 compute Failure to File Penalty on Recomputed Letter 2030.

  • IRM 4.119.4.21.1(3) d) deleted Note: fax criteria for tax increase more than $250,000.

  • IRM 4.119.4.21.2.5(5) deleted Caution: fax criteria for tax increase more than $250,000.

  • IRM 4.119.4.21.5(1) c) second Note: fax criteria for tax increase more than $250,000.

  • IRM 4.119.4.21.6.1(2) c) new Beginning TY 2014 Recompute Letter 2030 will include Failure to File Penalty.

  • IRM 4.119.4.21.7(11) added example supporting documentation information.

  • IRM 4.119.4.21.7(11) b) deleted example.

  • IRM 4.119.4.21.7.6(8) reversed steps 3) and 4).

  • IRM 4.119.4.21.7.6(9) deleted 45 days.

(4) The following changes were made from IPU16U0442, effective 03-02-2016

  • IRM 4.119.4.16.3.1(6) changed Caution to paragraph (7).

  • IRM 4.119.4.16.3.1(7) new Reminder to check Penalty Waiver Box.

  • IRM 4.119.4.16.3.2(6) added Reminder to check Penalty Waiver Box.

  • IRM 4.119.4.21.2.5(11) added step list to request case.

  • IRM 4.119.4.21.2.5(15) Note deleted TC 470.

  • IRM 4.119.4.21.2.5(18) deleted representative.

  • IRM 4.119.4.21.2.5(20) new documenting representative information.

  • IRM 4.119.4.21.10(1) new Reminder annotated penalty amount on DCI.

  • IRM 4.119.4.21.11.2(2) corrected step list.

  • Exhibit 4.119.4-6 deleted process codes 4970 and 4980.

  • Exhibit 4.119.4-7 added 49TI.

(5) The following changes were made from IPU16U0682, effective 04-05-2016.

  • IRM 4.119.4.1.5(2) added IDRS CC:REQ54 and CC:REQ77.

  • IRM 4.119.4.2.1(2) added Process Codes are required and Exhibit information.

  • IRM 4.119.4.2.1(5) b) new Input TC 925 instruction and Exhibit information.

  • IRM 4.119.4.2.1(8) a) added Exhibit PC Consistency Chart information.

  • IRM 4.119.4.2.1(8) b) Input TC 925 instruction.

  • IRM 4.119.4.2.5(1) table new added input TC 925 instruction to step list.

  • IRM 4.119.4.3.2(12) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.2(13) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.2(15) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.2(6) deleted Note.

  • IRM 4.119.4.3.3(7) new Image not available via AMS or MeF.

  • IRM 4.119.4.3.3(7) (a) new Input TC 925 instruction.

  • IRM 4.119.4.3.3.(7) b) new annotate case folder and DCI.

  • IRM 4.119.4.3.3(9) revised added Input TC 925 instruction and annotate case folder and DCI.

  • IRM 4.119.4.3.3(11) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.3(15) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.4(7) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.4(8) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.4(12) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.3.4(15) new TC 925 universal indicator.

  • IRM 4.119.4.3.4(16) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4(5) table added instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.1.3(2) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.2(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.5(5) table added step list to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.6(15) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.6(16) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.8(3) added Reminder instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.9(1) added PC 4260.

  • IRM 4.119.4.4.9(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.4.9(6) added Reminder instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.8.6.2(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.8.6.5(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.15.2(4) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.16.5(4) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.16.5(6) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.18.1(6) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.18.2(7) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.18.3(2) deleted "generally" Amended notices are created.

  • IRM 4.119.4.18.3(3) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(5) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(6) table added PC’s 4520 and 4850.

  • IRM 4.119.4.19(6) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(7) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(9) deleted PC’s Other Closure PC’s and added Bankruptcy Closure PC’s.

  • IRM 4.119.4.19(9) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(10) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(12) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(14) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(15) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.19(16) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.20(2) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.1.4(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.5(5) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.5(6) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.5(8) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.5(9) deleted alpha list and created table. Added step list within table to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.5(13) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.6(1) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.7 revised created table and included instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.9(4) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.9(5) deleted alpha list and created table. Added step list within table to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.1.9(6) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.2.5(8) deleted duplicate of (11).

  • IRM 4.119.4.21.2.5(20) deleted "and address" .

  • IRM 4.119.4.21.2.6(5) revised wording added "follow Default instruction."

  • IRM 4.119.4.21.3.7(2) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.3.18(2) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.3.18(4) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.3.19(1) deleted alpha list and created table. Added step list within table to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.3.19(2) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(2) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(7) deleted alpha list and created table. Added step list within table to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(8) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(9) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(10) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(11) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(12) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(13) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.4.1(14) added step list instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.5(8) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(3) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(5) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(6) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(7) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(9) table added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6(10) table added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6.1(2) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.6.1(3) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7(6) table added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7(13) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.2(1) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.3(6) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.3(9) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.6(2) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.6(5) table added instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.6(6) table added instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.6(9) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.7(2) added table instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.7(4) a) added instruction to issue Letter, input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.8(2) deleted step 4) in step list deleted Caution and Note and created table.

  • IRM 4.119.4.21.7.9(1) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.9(2) 3) added instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.7.9(2) 4) added alpha list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.8(1) c) added instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.9(3) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.11(6) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.11(7) added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.11.1(1) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.21.11.1.1(5) added step list instruction to input TC 925. Added Reminder Input TC 925.

  • IRM 4.119.4.21.11.1.2(3) added step list instruction to input TC 925.

  • IRM 4.119.4.21.11.2(2) 2) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.22(7) added step list instruction to input TC 925.

  • IRM 4.119.4.22(8) table added step list instruction to input TC 925 and annotate case folder and DCI.

  • IRM 4.119.4.23(2) deleted.

  • IRM 4.119.4.23(3) deleted "25 (25R)."

  • IRM 4.119.4.23(3) b) deleted.

  • IRM 4.119.4.23(4) deleted "for 25R/27F."

  • IRM 4.119.4.23(6) revised sentence.

  • IRM 4.119.4.23.1(3) deleted "25 or AMRH27."

  • IRM 4.119.4.23.1(3) 4) added step list instruction to input TC 925 and annotate case folder and DCI

  • IRM 4.119.4.24.1(2) 2) table added IRM reference Controlling Reconsideration.

  • IRM 4.119.4.24.1(3) revised account has been accessed.

  • IRM 4.119.4.24.2.1(3) table added PC 4050 and definition.

  • IRM 4.119.4.24.2.1(4) new RECON tax examiner will establish TC 925.

  • IRM 4.119.4.24.2.1(4) Note new Input TC 925 Process Code.

  • IRM 4.119.4.24.4(2) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.1(1) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.2(1) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.3(1) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.5(1) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.7(2) added step list instruction to input TC 925 and Posting Delay.

  • IRM 4.119.4.24.6.7(3) added step list instruction to input TC 925 and Posting Delay.

  • Exhibit 4.119.4-6 added PC’s 4030 and 4050, revised PC descriptions.

  • Exhibit 4.119.4-7 added BURTASMMDD in all phases.

  • Exhibit 4.119.4-7 added 9BXRTCONN.

  • Exhibit 4.119-4-14 New Process Code Consistency Chart.

(6) The following changes will be effective upon the publication of IRM 4.119.4.

  • IRM 1.119.4.1(12) new Data Collection Instrument (DCI).

  • IRM 4.119.4.1.3(2) revised IRM reference for Frivolous Return Program.

  • IRM 4.119.4.1.6(1) added case history notes.

  • IRM 4.119.4.3.2(13) added closing codes 76 and 77.

  • IRM 4.119.4.4.2(1) revised IRM reference for Frivolous Return Program.

  • IRM 4.119.4.4.9(4) c) added with an amount greater than zero.

  • IRM 4.119.4.4.9(4) d) revised response or no response to Schedule PH.

  • IRM 4.119.4.4.10 new Erroneous Refunds.

  • IRM 4.119.4.4.10.1 new "Refund Intercept File" information moved to "Stopping Refunds."

  • IRM 4.119.4.6(1) d) new cases involving Schedule PH.

  • IRM 4.119.4.7 revised merged Form 1041 and Form 1120 analyzation procedures and listed income types in alphabetical order.

  • IRM 4.119.4.7.3(3) a) deleted Gross Receipts or Sales, replaced with Business Income.

  • IRM 4.119.4.7.8.6(1) added Exception: Don’t give credit for amounts identified as a different income type.

  • IRM 4.119.4.7.8.6(4) 2) added Exception: Don’t give credit for amounts identified as a different income type.

  • IRM 4.119.4.7.11(1) Note added Amount Type BDPMTAXEXM.

  • IRM 4.119.4.7.14(2) new Form 1099Q IR may display distribution types, renumbered.

  • IRM 4.119.4.7.14.1(1) added TRUSTEE ROLLOVER BOX CHECKED.

  • IRM 4.119.4.7.14.1(3) deleted, renumbered.

  • IRM 4.119.7.19.1(9) 2) added Exception: Don’t give credit for amounts identified as a different income type.

  • IRM 4.119.4.8 new Net Operating Loss (NOL) Recovery.

  • IRM 4.119.4 9(1) note added 2015.

  • IRM 4.119.4.11(d) 3rd bullet added Reminder: If the taxpayer filed Schedule PH.

  • IRM 4.119.4.12(1) added 2015 tax rate table.

  • IRM 4.119.4.14.1(2) added 2015 NIIT threshold.

  • IRM 4.119.4.14.1(6) added 2015 NIIT threshold.

  • IRM 4.119.4.16.1(2) a) added Caution Before computing FTF penalty review the entity portion.

  • IRM 4.119.4.16.1(2) c) revised penalty abatement procedure.

  • IRM 4.119.4.16.1(2) 2nd Exception changed CC:TRDBV to CC:BRTVU.

  • IRM 4.119.4.16.1(3) revised added new minimum penalty amount.

  • IRM 4.119.4.16.3.2(1) updated penalty assertion date.

  • IRM 4.119.4.16.3.2(2) updated penalty assertion date.

  • IRM 4.119.4.16.6(2) new Note interest-free period on a deficiency assessment when TC 840 or 846 without credit interest is present on the module.

  • IRM 4.119.4.16.6(3) Note revised credit elect is applied only when the first installment and the TC 836 date posted is the date of the first installment.

  • IRM 4.119.4.18.3(3) 2) revised to remove update IDRS activity.

  • IRM 4.119.4.18.3(3) 3) deleted.

  • IRM 4.119.4.18.3(3) 4) table revised wording in example.

  • IRM 4.119.4.19(2) added 49X, 59X and 79X batch information.

  • IRM 4.119.4.19(7) 2) deleted.

  • IRM 4.119.4.19(8) added TC 976 amended return procedures.

  • IRM 4.119.4.19(9) added Exception to address -V and -W freeze codes.

  • IRM 4.119.4.19(10) new added bankruptcy freeze codes.

  • IRM 4.119.4.21.1(13) added record correspondence IRS Received Date when case is assigned to tax examiner/team.

  • IRM 4.119.4.21.1.6(1) revised Appeals instruction and added table.

  • IRM 4.119.4.21.1.7(1) table added closing codes "76" and "77."

  • IRM 4.119.4.21.6(6) table 2) revised to issue FYI Letter 2030.

  • IRM 4.119.4.21.6(7) 2) revised to issue FYI Letter 2030.

  • IRM 4.119.4.21.7.3(5) change year in example.

  • IRM 4.119.4.21.7.7 revised merged (2), (3) and (4).

  • IRM 4.119.4.21.10(1) d) replaced reference number 680 with 787.

  • IRM 4.119.4.21.10(15) table replaced reference number 680 with 787 and deleted "Negligence."

  • IRM 4.119.4.21.11(7) 3) deleted.

  • IRM 4.119.4.21.1.12(5) new subsequent letters must be issued.

  • IRM 4.119.4.21.1.3(3) Note revised to "point of due diligence."

  • IRM 4.119.4.21.1.3(3) Note revised to "that address as well."

  • IRM 4.119.4.21.2.5(20) deleted "On calls relating to open cases."

  • IRM 4.119.4.21.2.5(20) added Exception It is not necessary to document phone calls on closed cases.

  • IRM 4.119.4.21.2.5(21) deleted.

  • IRM 4.119.4.21.3.16(3) revised wording and added Note: If an adjustment to the TXI is necessary.

  • IRM 4.119.4.21.3.17(5) added IRM references.

  • IRM 4.119.4.21.4.(2) new Note: Input TC 925.

  • IRM 4.119.4.21.6.1(1) d) revised "when the negligence or disregard of rules or regulations penalty applies."

  • IRM 4.119.4.21.6.1(2) b) Reminder: added Schedule PH.

  • IRM 4.119.4.21.7(13) added statement to table.

  • IRM 4.119.4.21.7(14) new corrected/amended Schedule K-1.

  • IRM 4.119.4.31.7.3(9) c) table deleted MISCELLANEOUS DEDUCTIONS, added NET OPERATING LOSS DEDUCTION.

  • IRM 4.119.4.21.7.7 revised (2) (3) and (4) added fiscal filer information.

  • IRM 4.119.4.21.8(1) c) Reminder revised wording changed "must" to "may."

  • IRM 4.119.4.21.8(2) updated IRM reference.

  • IRM 4.119.4.21.11.2(2) revised step list, and added table with freeze code and TC 976 information.

  • IRM 4.119.4.21.11.2(3) new added default action step list.

  • IRM 4.119.4.21.11.2(6) deleted Form 1041.

  • IRM 4.119.4.21.11.2(6) revised determining ASED date.

  • IRM 4.119.4.21.11.2(7) deleted renumbered.

  • IRM 4.119.4.22(7) 1) deleted, renumbered.

  • IRM 4.119.4.22(7) 2) added stopped notice process codes.

  • IRM 4.119.4.24.6 (1) table last column in the Note change "statue" to "statute."

  • IRM 4.119.4.24.6.1(1) added blocking series "15" or "17."

  • IRM 4.119.4.24.6.1(1) added Exception: contact CDP coordinator prior to making an adjustment.

  • IRM 4.119.4.24.6.2(1) 2) added blocking series "15" or "17."

  • IRM 4.119.4.24.6.2(1) 2) added Exception: contact CDP coordinator prior to making an adjustment.

  • IRM 4.119.4.24.6.2(1) 3) deleted Letter 106C, added the appropriate C-Letter.

  • IRM 4.119.4.24.6.3(1) 1) deleted Letter 105C, added the appropriate C- Letter.

  • IRM 4.119.4.24.6.3(1) 2) added only when the paper return has been secured.

  • IRM 4.119.4.24.6.4(2) Reminder: added MeF if applicable.

  • IRM 4.119.4.24.6.4(3) new added Document Disposition IRM reference.

  • IRM 4.119.4.24.6.5(1) 3) new Input TC 290 for .00 using blocking series "15" or "17."

  • IRM 4.119.4.24.6.7(2) changed alpha list to step list.

  • IRM 4.119.4.24.6.7(3) new added Explanation of BMF AUR adjustment.

  • IRM 4.119.4.24.6.7(4) deleted unrestricted interest.

  • IRM 4.119.4.24.6.7(4) 1) added Exception: If the account contains restricted interest.

  • IRM 4.119.4.24.6.7(4) 5) added Document Disposition IRM reference.

  • IRM 4.119.4.24.6.8(3) new refile all secured documents.

  • IRM 4.119.4.25.4 deleted, moved "Refund Intercept File" information to Stopping Refunds.

  • Exhibit 4.119.4-3 revised Title to include Subfile/Sub Category Code.

  • Exhibit 4.119.4-3 revised Definition for Subfile "X."

  • Exhibit 4.119.4-3 added Subfile "N" and "P."

  • Exhibit 4.119.4-4 revised NRC 7. Deleted "not on payer agent list."

  • Exhibit 4.119.4-7 added Exception to IPC 47LT and IPC 47PH.

  • Exhibit 4.119.4-7 added 94TCORESP.

  • Exhibit 4.119.4-8 deleted "1X" 1040X referral.

  • Exhibit 4.119.4-8 added "NL" NOL referral.

  • Exhibit 4.119.4-9 revised "Type Definition" to Batch Types 49X, 59X and 79X.

  • Exhibit 4.119.4-10 revised Paragraph 70 added new minimum penalty amount.

  • Exhibit 4.119.4-12 added Qualified Education Program Payments amount incorrect to Code 41 and 43N.

  • Exhibit 4.119.4-14 added PC 4050 to follow PC’s 4590 and 4800.

(7) Editorial changes have been made throughout this IRM, including IRM references.

Effect on Other Documents

IRM 4.119.4 dated 09/11/2015 (effective date 09/11/2015) is superseded. The following IRM Procedural Updates (IPUs) issued from September 25,2015 through April 5,2016 have been incorporated into this IRM: IPU 15U1437, IPU 15U1571, IPU 15U1767, IPU 16U0442, and 16U0682.

Audience

BMF-AUR tax examiners at the Small Business and Self-Employed site.

Effective Date

(09-02-2016)

John Caggiano
Acting Director, Exam-Field & Campus Policy
SE:SE:E:HQ:EFCP

4.119.4.1  (09-02-2016)
Overview

  1. This Internal Revenue Manual (IRM) provides instructions for the Business Underreporter (BMF-AUR), the analysis and processing of potential underreported (U/R) issues identified through information return (IR) matching.

  2. Avoid AUDITING RETURNS. All returns in the BMF-AUR inventory were previously screened for unallowable items and audit potential. They were not selected for action in either event. See IRM 4.119.4.21, Taxpayer Responses, for additional information.

  3. BMF-AUR cases are built from two primary sources:

    • The Business Master File (BMF) which contains information reported to the IRS by taxpayers

    • The Information Return Master File (IRMF) which contains information submitted by payers

  4. The BMF file contains information reported on Form 1120, U.S. Corporation Income Tax Return, and Form 1041, U.S. Income Tax Return for Estates and Trusts.

  5. The IRMF information is matched with the BMF information to verify all income is reported. A BMF-AUR case results when computer analysis detects a discrepancy between the two data sources. Examples (not all inclusive) of the information in the IRMF are:

    • Form 1099-MISC, Miscellaneous Income

    • Form 1099-PATR, Taxable Distributions Received From Cooperatives

    • Schedule K-1, Shareholder's Share of Income, Deduction, Credits, etc.

    • Form 1099-DIV, Dividends and Distributions

    • Form 1099-INT, Interest Income

  6. After cases are selected from the inventory, they are worked according to procedures in this IRM.

  7. BMF-AUR Operations, located at the Ogden Campus, compile and control selected cases.

    1. Form 4251 (Return Charge-Out), contains a Taxpayer Identification Number (TIN), tax year, and other case identification information.

    2. Federal Records Center (FRC) pulls and forwards paper returns to the Campus Files function for routing to BMF-AUR.

    3. Cases are controlled on IDRS.

  8. The tax examiner (TE) performs an in-depth analysis of each case. The TE determines if the income/deductions in question is satisfactorily identified on the tax return. If so, close the case. If reasonable doubt remains that the income/deductions are included on the return, send taxpayer either:

    • A Letter 2030, Initial Notice Issued to Request Verification for Unreported Income, Deductions, Payments and/or Credits on BMF Income Tax Returns Matched to Payer Information Documents or

    • A Letter 2531, Initial Contact for Potential Discrepancy of Income, Deductions and/or Credits Claimed on BMF Income Tax Returns Matched to Payer Information Documents

      Note:

      A Letter 3219B, Statutory Notice of Deficiency may be sent as a follow up to the Letter 2030.

  9. Tax examiners also use Correspondex (CRX) letters to obtain or provide additional information. In order to distinguish guidelines relative to Letter 2531, Letter 2030 and/or Letter 3219B from guidelines relative to Correspondex letters, the following statements in this IRM are true.

    1. Any references to "notice" or "notices" refer to Letters: 2531, 2030 and/or 3219B (unless otherwise specified).

    2. Any references to "letter" or "letters" refer to Correspondex (CRX) letters (unless otherwise specified).

  10. Process Codes (PC) are used to provide an audit trail for BMF-AUR case processing.

  11. Internal Processing Codes (IPC) are codes used in BMF-AUR for internal processing.

  12. Tax examiners use the Data Collection Instrument (DCI) to record actions taken.

  13. See Exhibit 4.119.4-1, Abbreviations, and Exhibit 4.119.4-2, Glossary, for a list of abbreviations and definitions used in BMF-AUR processing.

4.119.4.1.1  (09-11-2015)
Taxpayer Advocate Service (TAS)

  1. Even though the IRS strives to improve its systems and provide better service, some taxpayers still have difficulty in getting solutions to their problems or appropriate responses to their inquiries. The purpose of the Taxpayer Advocate Service (TAS) is to give taxpayers someone to speak for them within the Service - an Advocate. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

  2. TAS and SB/SE have a Service Level Agreement (SLA) between them that outlines the procedures and responsibilities for the processing of TAS cases whenever the statutory or delegated authority to complete case transactions rests outside of TAS. The SB/SE SLA covers the BMF-AUR operation. An Addendum to the SLA lists contacts from various Operations in the Ogden Service Center. Visit the Service Level Agreement (SLA) at http://tas.web.irs.gov/policy/sla/default.aspx.

  3. Refer taxpayers to the Taxpayer Advocate Service (TAS), when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service Case Criteria), and you cannot resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. Same day cases include cases you can completely resolve within 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issues. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4, Procedures -Same-Day Resolution by Operations.

  4. All potential TAS referrals must be approved by the BMF-AUR TAS Liaison.

    1. Update IDRS Activity and /or Category Code as Appropriate, See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Update DCI.

    3. Update case folder.

  5. The BMF-AUR TAS Liaison will complete Sections I, II and III of Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order) and forward to TAS. The taxpayer's problem and the taxpayer's relief sought must be clear and specific in Items 12a and 12b of Section I. The Liaison is also required to document the reason why the relief action was not taken.

    Note:

    It is important that all IRS employees handle cases with the taxpayer's best interest in mind.

4.119.4.1.1.1  (09-17-2014)
Operations Assistance Request (OAR), Form 12412

  1. A Form 12412, Operations Assistance Request, is sent by TAS for cases when there is an issue that they do not have the authority to resolve. An OAR can be received by fax, mail or E-mail and will have a Form 3210, Document Transmittal, attached.

  2. The Form 12412 will contain the name, telephone, and fax number of the TAS employee making the request. An OAR package will also include an explanation of what is being requested and any documentation obtained by the TAS employee.

  3. Form 12412 is to be acknowledged within 1 day for expedited cases or 3 days for all other cases. The acknowledgement on the Form 3210 sent with the OAR, and will include the name and phone number of the assigned person (or team/manager).

  4. The following are addressed when working an OAR:

    1. An expedited Form 12412 has three days to be completed.

    2. After the period: for a non-expedited Form 12412, the SB/SE employee assigned the OAR will negotiate with the TAS employee a reasonable time frame for OAR resolution.

    3. Sections V and VI of Form 12412 must be completely filled out by a BMF-AUR employee, including any actions taken and the reasons behind those actions.

    4. A file copy of the OAR is kept by BMF-AUR for 6 months.

    5. The completed OAR package is returned to the TAS employee.

4.119.4.1.2  (09-17-2014)
Statute Awareness Program

  1. The Statute Awareness Program was created to minimize barred assessments and erroneous abatements. Because of the time lag involved in the processing of BMF-AUR issues, BMF-AUR employees must be particularly watchful for conditions that may indicate statute imminent cases.

  2. Employees must be personally knowledgeable of the rules that govern the Assessment Statute Expiration Date (ASED). These rules are outlined in IRM 25.6, Statute of Limitations.

    Note:

    The ASED can be found using IDRS CC:TXMOD. The date should always be verified.

  3. Each functional area should ensure that an adequate number of "Statute Specialists" are assigned.

  4. On a quarterly basis, verification that the Operation has completed the required search for cases that are statute imminent is sent to the Planning and Analysis (P&A) Staff. The P&A staff forwards a consolidated Campus report to the Headquarters Statute Analyst.

4.119.4.1.3  (09-02-2016)
Related IRMs and Publications

  1. Before disclosing any tax information, ensure the caller is the taxpayer or the authorized representative. See the Taxpayer Authentication guidelines in IRM 21.1.3.2.3, Required Taxpayer Authentication or IRM 21.1.3.2, General Disclosure Guidelines, for further information.

    • See IRM 11.3.2.6.1, Leaving Information on Answering Machine/Voice Mail, for proper disclosure protocols before leaving messages on a taxpayer's answering machine

    • See IRM 11.3.1.11, Facsimile Transmission of Tax Information, for proper disclosure protocols before faxing confidential information to the taxpayer

  2. The following additional IRMs and publications/documents are listed as a convenience when BMF-AUR determines that in-depth research is required to resolve unusual technical issues not covered in this IRM. When reference to one of the related IRMs is required for BMF-AUR processing, the complete IRM reference will be stated in this IRM:

    Note:

    Technical issues that occur frequently should be brought to the attention of the IRM 4.119.4, BMF Underreporter (BMF-AUR) Program, author for consideration for inclusion in this IRM.

    • IRM 2.3, IDRS Terminal Responses

    • IRM 2.4, IDRS Terminal Input

    • IRM 3.13.62, Campus Document Services - Media Transport and Control

    • IRM 3.42.4, Electronic Tax Administration - IRS e-file for Business Tax Returns

    • IRM 4.13.1, Audit Reconsiderations - Introduction

    • IRM 4.19.3, IMF Automated Underreporter Program

    • IRM 4.119.1, BMF Underreporter (BMF-AUR) Control

    • IRM 4.119.4, BMF Underreporter (BMF-AUR) Program

    • IRM 5.9, Bankruptcy and Other Insolvencies

    • IRM 8.20, Account and Processing Support (APS)

    • IRM 10.5, Privacy, Information Protection and Data Security (PIPDS)

    • IRM 10.8.1, Information Technology (IT) Security, Policy and Guidance

    • IRM 11.3, Disclosure of Official Information

    • IRM 13.1.7, Taxpayer Advocate Case Procedures - Taxpayer Advocate Service (TAS) Case Criteria

    • IRM 20.1, Penalty Handbook

    • IRM 20.2, Interest

    • IRM 21.1.1, Accounts Management and Compliance Services Operations - Accounts Management & Compliance Services Overview

    • IRM 21.1.3.18, Operational Guidelines Overview, Taxpayer Advocate Service (TAS) Guidelines

    • IRM 21.3.3, Taxpayer Contacts - Incoming and Outgoing Correspondence/Letters

    • IRM 21.3.7.1.3, Processing Third Party Authorizations onto the Centralized Authorization File (CAF) What is A Third Party Authorization Processing sites (CAF Function)

    • IRM 21.4.4, Refund Inquiries - Manual Refunds

    • IRM 21.4.5, Erroneous Refunds

    • IRM 21.5, Account Resolution

    • IRM 21.6, Individual Tax Returns

    • IRM 21.7, Business Tax Returns and Non-Master File Accounts

    • IRM 25.1.2.3, Fraud Handbook - Recognizing and Developing Fraud, Indicators of Fraud

    • IRM 25.6, Statute of Limitations

    • IRM 25.16, Disaster Assistance and Emergency Relief

    • IRM 25.25.10, Revenue Protection - Frivolous Return Program

    • Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G

    • Publication 542, Corporations

    • Publication 544, Sales and Other Dispositions of Assets

    • Publication 550, Investment Income and Expenses

    • Publication 559, Survivors, Executors, and Administrators

    • Document 6209, IRS Processing Codes and Information

4.119.4.1.4  (09-11-2015)
Modernized e-File (MeF)

  1. Modernized e-File (MeF) is a web based system that allows electronic filing of Tax Returns through the Internet. MeF documents can be obtained on-line using the Employee User Portal (EUP). Click the following link to access EUP: https://eup.eps.irs.gov/eup_login.

  2. The following forms can be e-filed through the MeF platform:

    • Corporations - Form 1120, Form 1120-F and Form 1120-S and related forms and schedules

    • Partnerships - Form 1065 and Form 1065-B and related forms and schedules

    • Individuals - Form 1040 and related forms and schedules

    • Estates and Trust - Form 1041 and related forms and schedules

    Note:

    See IRM 3.42.4.2.1.7, Modernized e-file (MeF) System Functionality, for additional information.

  3. Electronically transmitted returns are identified by a unique Document Locator Number (DLN). The first two digits represent the File Location Code (FLC). Use the FLC shown below for the electronic filing of income tax returns. The second number listed is the rollover FLC used when a site exhausts the regular FLC for a given processing date.

    • CSC - 26, 27, 35, 38

    • OSC - 60, 78, 88, 92, 93

  4. An attachment or association form cannot be used to file information such as loose forms, schedules, and correspondence to a MeF return. They must be filed separately.

4.119.4.1.5  (04-05-2016)
Integrated Data Retrieval System (IDRS)

  1. The Integrated Data Retrieval System (IDRS) is a computer system that contains the most accurate and current information for each taxpayer’s account.

  2. The most common command codes are:

    • CC:ACTON: Used to open, update and close controls on IDRS

    • CC:CFINK: Displays a list of Third Party Information and authorizations present for the taxpayer

    • CC:ENMOD: Displays name, address, and other entity information

    • CC:ESTAB: Used to request a document from Files

    • CC:INOLE: Displays name line information available for any account associated with that Tax-payer Identification Number (TIN)

    • CC:IRPTR: Displays on-line payee transcripts of income reported on various documents types

    • CC:REQ54: Used to input an adjustment on IDRS

    • CC:REQ77: Used to request a format to input a transaction

    • CC:SUMRY: A summary of all Taxpayer Information File (TIF) modules available

    • CC:TRDBV: A display of the returns/schedules/forms

    • CC:TXMOD: Request a display of tax information for a specific Business Master File (BMF) module

4.119.4.1.5.1  (09-17-2014)
Integrated Automation Technologies (IAT)

  1. BMF-AUR employees are mandated to use the Integrated Automation Technologies (IAT) tools when an action must be taken on IDRS. The IAT tools assist with IDRS research and input.

  2. Cases should be worked using IDRS when the IAT tool is not functioning properly.

4.119.4.1.6  (09-02-2016)
Accounts Management System (AMS)

  1. Is a web-based system which provides the capability to record case history notes, collect, retrieve, view and manage taxpayer account information through a single user interface. It includes automated inventories such as correspondence imaging (CIS), 4442 and e911 referrals, and transcripts. Additional case resolution tools such as automated forms, pre-formatted letters, worksheets, checklists, payoff calculator, tax return data, and IDRS alerts are all available in AMS. AMS interfaces with a variety of systems including IDRS, ACSWeb, AUR, ATFR, RCA, ANMF, and ELITE. See IRM 4.119.4.3.5, Correspondence Imaging System (CIS) Documents, for additional information.

4.119.4.2  (09-17-2014)
Case Information

  1. Each BMF-AUR case contains information for a single BMF account.

4.119.4.2.1  (04-05-2016)
Controlling Work

  1. Underreporter cases to be analyzed by BMF-AUR tax examiners are assembled into batches, which are then divided into work units.

  2. Activity Codes/Category Codes and Process Codes are required to provide an audit trail for BMF-AUR case processing. See Exhibit 4.119.4-7, Activity Codes/Category Codes, and Exhibit 4.119.4-6, BMF-AUR Process Codes (PC), for further instructions.

  3. When assigning a work unit from a batch, verify that there is a case folder for every TIN shown on the Work Unit Listing and that the TIN on the case folder matches the TIN on the Work Unit Listing BEFORE updating the control on IDRS. If a case folder is missing (or there is an extra folder) see IRM 4.119.4.2.3, Lost Case.

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

    Note:

    If the case folder is missing either a DCI or a paper filed tax return or contains an incorrectly associated paper tax return, see IRM 4.119.4.2.3, Lost Case.

  5. Whenever an action is taken on a case:

    1. Update IDRS Activity and/or Category Code as appropriate. See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Input TC 925 with the applicable Process Code using IDRS CC:REQ77/FRM77. See Exhibit 4.119.4-6, BMF-AUR Process Codes (PC), and Exhibit 4.119.4-14, Process Code Consistency Chart, for additional information.

    3. Update the DCI.

    4. Update the case folder.

  6. When it is necessary to refer the case to another user:

    1. Update IDRS Activity Codes with the appropriate referral action.

    2. Annotate DCI and case folder with applicable referral IPC. See Exhibit 4.119.4-5, BMF-AUR Internal Process Codes (IPC).

  7. When it is necessary to transfer the case to another program area outside of BMF-AUR (i.e., Appeals, Exam, etc.) see IRM 4.119.4.21.1.1.4, Case Transfer to Another Area.

  8. When the income or deduction(s) in question are satisfactorily identified on the tax return or analysis identifies acceptable information return reporting, the case is closed and the taxpayer is not contacted.

    1. Close the case using the appropriate Process Code (PC). See Exhibit 4.119.4-6, BMF-AUR Process Codes (PC), and Exhibit 4.119.4-14, Process Code Consistency Chart, for additional information.

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

    3. Update the activity code and close the control base. See Exhibit 4.119.4-7, Activity Codes/Category Codes, for further information.

    4. Annotate the DCI and case folder with the appropriate Process Code (PC).

4.119.4.2.2  (09-25-2015)
Case Contents

  1. Each case consists of tax year information for the current BMF-AUR processing year. The contents of the case folder include:

    • Form 1120 or Form 1041, if it was a paper filed tax return

    • DCI

  2. Tax examiners are responsible for printing the following documents for each case folder:

    • Current IDRS CC:IRPTR prints

    • Current IDRS CC:ENMOD prints

      Caution:

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

    • Current IDRS CC:TXMOD prints

    • Current IDRS CC:CFINK prints

  3. Ensure that the Tax Return and IDRS; CC:IRPTR, CC:TXMOD, CC:ENMOD and CC:CFINK prints are all for the same entity and for the correct tax year. If any of the IDRS prints are for the incorrect entity or tax year, obtain the correct prints. Use CC:IRPTRL to secure the correct Information Return (IR) data.

  4. Some cases may have an amended return attached to the original income tax return.

    If And Then
    There is an indication that the amended return was filed to claim a tentative carryback or carryfoward credit, research IDRS CC:TXMOD for a corresponding TC 976 and TC 295. TC 976 and TC 295 are present Leave the amended return attached and continue working the case.
    There is an indication that the amended return was filed to claim a tentative carryback or carryfoward credit, research IDRS CC:TXMOD for a corresponding TC 976 and TC 295. TC 976 and TC 295 are not present The carryback has not been processed. See IRM 4.119.4.21.7.3, NOL Carryback/Carryforward, for further instructions.
    The amended return was processed,   consider it in the BMF-AUR case resolution and refile separately when the case is closed.
    The amended return was not processed, the issue(s) do not meet CAT-A criteria as identified in IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General. Incorporate the amended return issues in the BMF-AUR case processing and leave the amended return attached to the original tax return when the case is closed.
    The amended return was not processed, the issue(s) meet CAT-A criteria as identified in IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General. Refer the case to the Lead Tax Examiner for review. The Lead Tax Examiner will determine if the case should be transferred to the TCO for further action.
  5. An action trail MUST be made part of the case file. As the case is worked, document actions taken.

    Note:

    Case notes are part of the official case file and may be viewed by the taxpayer.

4.119.4.2.3  (09-17-2014)
Lost Case

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

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

    Note:

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

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

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

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

    The Lead Tax Examiner cannot locate the paper filed tax return
    1. Update IDRS activity with 4XLCMMDD (X represents the phase). See Exhibit 4.119.4-7, Activity Codes/Category Codes.

    2. Return the case folder to the Lead Tax Examiner who will route to the Clerical Function.

    Note:

    If the Clerical Function is unable to locate the case, they will update IDRS back to their control.

4.119.4.2.4  (09-17-2014)
Wrong Pulls in Screening (WP)

  1. If the original tax return DLN and the Form 4251 DLN do not match.

    1. Leave the Form 4251 attached to the tax return and annotate WP in the upper right corner.

    2. Update IDRS activity with 41WPMMDD.

    3. Annotate IPC 41WP on the case folder and the DCI.

      Note:

      The tax return will be sent to Federal Records Center (FRC).

4.119.4.2.5  (04-05-2016)
Mixed Entity/Period

  1. If the tax return was processed to the incorrect entity or tax year/period, research IDRS to determine if the mixed issue (entity or period) has been corrected:

    If Then
    The mixed issue has been corrected Continue normal processing.
    The mixed entity/period is not corrected
    1. Close the case using PC 4290.

    2. Input TC 925 with PC 4290 using IDRS CC:REQ77/FRM77.

    3. Annotate PC 4290 on the DCI and case folder.

    4. Complete Form 3465, Adjustment Request, and route to Accounts Management. See IRM 4.119.4.2.5.1, Form 3465, Adjustment Request, for further information.

4.119.4.2.5.1  (09-17-2014)
Form 3465, Adjustment Request

  1. Prepare Form 3465, Adjustment Request, when an adjustment action is needed. The following fields must be completed:

    1. Enter the taxpayer's name.

    2. Enter the Document Locator Number (DLN).

    3. Check Routing box for "Accounts Management."

    4. Enter the TIN.

    5. Enter the MFT.

    6. Enter the period ending, year and month.

    7. Enter the tax form number.

    8. In the "Remarks" area, thoroughly explain the problem Include any pertinent research that will help resolve the issue.

    9. Complete the blocks for Signature, Unit, Phone and Date.

  2. Assemble the following items together, in the order listed below, and route to Accounts Management:

    1. Form 12634, OIRSC Campus Document Transmittal.

    2. Form 3465, Adjustment Request.

    3. Tax return or MeF printout.

  3. Paper tax returns must be recharged to Accounts Management. Enter BMF AM in the "RECHARGE DOCUMENT TO" box on the Form 4251, RETURN CHARGE OUT, and route to the Files function.

4.119.4.3  (12-11-2014)
TXMOD Review

  1. IDRS CC:TXMOD displays posted information from the taxpayer's Master File account. It contains return amounts, transactions, and other current data.

  2. Compare the Taxable Income on the return with the Taxable Income on IDRS CC:TXMOD. A mismatch could be due to a taxpayer and/or processing error. The BMF-AUR Function is responsible for issuing a Letter 2030 to correct these types of errors.

    Note:

    If the processing error resulted in an erroneous refund, transfer to the Erroneous Refund Coordinator.

4.119.4.3.1  (09-11-2015)
Power of Attorney (POA)

  1. A numeric indicator displays in the Centralized Authorization File (CAF) field of IDRS CC:TXMOD when a POA is on file. See Document 6209, IRS Processing Codes and Information, for the applicable POA indicators.

  2. In addition to CAF indicators, the following transaction codes may also be present on the account:

    • TC 960 is a CAF Indicator (POA on file)

    • TC 961 reverses the CAF Indicator (POA revoked)

    • TC 962 updates the CAF (POA revised)

  3. CAF must always be researched to determine if there is a valid POA (who is authorized to receive notices) on file, before issuing a notice. Indications that a POA is authorized to receive notices include:

    • IDRS CC:CFINK for a specific tax year displays "YES" in the Notice field

    • IDRS CC:CFINK summary screen displays "N" in the Receipt Code (RCTS) field

    • IAT Disclosure Tool displays "N" for notice

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

  5. If an original POA is found attached to the tax return (not detached during processing), take the following actions:

    1. Fax Form 2848 to the POA team as soon as possible but no later than 24 hours of receipt.

    2. Annotate (in Red) "Faxed POA" , and the date in the upper right corner of the Form 2848.

    3. Leave the original POA in the case file.

    4. Input a History item on IDRS stating "POA faxed."

  6. Disregard invalid POAs.

  7. Consider valid POAs approved.

  8. Check Yes or No on the POA section of the DCI to indicate if a POA is authorized to receive notices.

4.119.4.3.2  (09-02-2016)
Freeze Codes

  1. Review IDRS CC:TXMOD for Transaction Codes (TC), Freeze Codes, or for Indicators that may require research, referral, or other specific actions.

  2. If any of the following conditions are present on the current year follow the instructions below to perform required actions.

  3. If Freeze Code -A is present, this indicates an amended return was filed. See IRM 4.119.4.3.3, Transaction Codes Reflecting Tax Liability, for further instructions.

  4. If Freeze Code -F is present, this indicates that an advanced payment (TC 640) has posted to the account. See IRM 4.119.4.3.4, Other Transaction Codes and Math Error Codes, for further instructions.

  5. If Freeze Code -I is present, a Manual Interest computation is required at the time of assessment.

    Note:

    If a Manual Interest computation is required, consult with the Lead Tax Examiner.

  6. Freeze Code “-L” (Audit Indicators TC 420 or 424, not reversed by TC 421) indicates the return is currently being requested or possibly audited by Exam. Take the following action when this Freeze Code is present:

    Before a Notice has been issued (Screening Phase): After a Notice has been issued:
    1. Research IDRS CC:TXMODA for a pending TC 421 that will reverse the “-L” freeze. If there is a reversal or CURRENT-STATUS-CD is 08 or less, continue normal processing.

    2. If there is NO reversal, determine if the case is controlled by the Tax Equity and Fiscal Responsibility Act (TEFRA) function. These cases are identified on IDRS by a “33” or “34” under the CURRENT-STATUS-CD/DATE field on IDRS CC:AMDISA. If the case is controlled by TEFRA, continue normal processing. Do not use the Exam transfer PC's to close TEFRA cases.

    3. If the conditions above are not met refer to the Lead Tax Examiner who will contact the appropriate Exam area to determine further case action.

    1. Review IDRS CC:AMDISA to determine the Primary Business Code (PBC), Secondary Business Code (SBC) and Employee Group Code (EGC).

    2. Use the PBC, SBC and EGC information from CC:AMDISA to locate the correct Exam contact by accessing the following website:
      http://mysbse.web.irs.gov/exam/mis/contacts/empgroupcode/default.aspx

    3. If Exam wants the case, use PC 4380 (Letter 2531), PC 4570 Letter 2030) or PC 4790 (Letter 3219B Statutory Notice). See IRM 4.119.4.21.1.1.4, Case Transfer to Another Area, for additional information.

      Exception:

      If a STAT notice has been issued, place the case in suspense and allow the statutory period to expire before closing the case PC 4790.

    4. If Exam does not want the case, leave a case note using Form 12864Case History Sheet and continue normal processing.

  7. Freeze Code -O is a Disaster Indicator set by TC 971 AC 086 or 087 on IDRS CC:ENMOD. See IRM 4.119.4.4.3, Declared Disaster Areas, for further instruction.

  8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. Freeze Code -S identifies tax returns filed within a declared disaster area and is set with a TC 971 AC 688 on CC:ENMOD. See IRM 4.119.4.4.3, Declared Disaster Areas.

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

  11. Freeze Code -U indicates the Erroneous Refund area is monitoring a case for available credits. Transfer to the Erroneous Refund Coordinator.

  12. Freeze Code -V and/or TC 520 (not reversed by TC 521 or 522), a Bankruptcy condition is present. If identified on the IDRS CC:TXMOD:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

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

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

  13. Freeze Code -W and/or TC 520 (not reversed by TC 521 or 522) with closing code 60 -67, 70-81, 84, 85 or 89 indicates that a Bankruptcy or litigation is present. If present:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

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

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

  14. Freeze Code -Y indicates that the taxpayer filed an Offer-in-Compromise with the service. See IRM 4.119.4.3.4, Other Transaction Codes and Math Error Codes, TC 780 for further guidance.

  15. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

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

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  16. Refer to Document 6209, IRS Processing Codes and Information, for additional information regarding any other Freeze Codes not mentioned above.

4.119.4.3.3  (04-05-2016)
Transaction Codes Reflecting Tax Liability

  1. A TC 150 indicates a return was filed and posted to the Master File. The TC 150 amount is the tax assessed when the original return was filed.

  2. TC's 290 and 300 indicate additional tax was assessed after the original return was filed. Add these amounts to the TC 150 amount to determine the total tax per return. If TC 290/300 source document is present, determine if the adjustment source document (Form 5147, Form 5344, Examination Closing Record, amended or duplicate return) resolves the U/R issue(s).

  3. TC's 291 and 301 indicate a portion or all of a previously assessed tax was abated after the original return was filed. If the TC 291/301 source document is present, determine if the adjustment source document (Form 5147, Form 5344, Examination closing Record, amended or duplicate return) resolves the U/R issue(s). Subtract these amounts from the TC 150 amount to determine the total tax per return. If the Total Income on the Tax Module:

    1. Differs from the tax return, order the TC 291/301 document without screening for income discrepancies.

    2. Matches the tax return, screen for income discrepancies and see (8) below.

  4. When to order: If the adjustment source document is missing from the case file, order the TC 290/291 or TC 300/301 prior to either the issuance of a notice or PC 4200 action.

  5. TC 290 for .00 adjustment source documents should be ordered when one of the following is present:

    Form 1120 Form 1041
    1. Corresponding TC 976.

    2. TC 971 Action Code (AC) 010 or 012 through 016.

    3. TC 766/767 without a Credit Reference Number (CRN) and a TC 290 for .00.

    4. MeF return and the Blocking Series of the TC 290 for .00 is "00" or "15" .

    1. Corresponding TC 976.

    2. TC 971 Action Code (AC) 010 or 012 through 016.

    3. TC 806/807 and a TC 290 for .00.

    4. MeF return and the Blocking Series of the TC 290 for .00 is "00" or "17" .

  6. IDRS CC:TXMOD will indicate if the adjustment source document is a Correspondence Imagining System (CIS) document. If it is determined the adjustment is a CIS document, view/print the CIS print utilizing AMS view image. See IRM 4.119.4.3.5, Correspondence Imaging System (CIS) Documents, for further information.

  7. If image is not available via AMS or MeF, close the case PC 4290.

    1. Input TC 925 with PC 4290 using IDRS CC:REQ77/FRM77.

    2. Annotate PC 4290 on the DCI and case folder.

  8. Do not order TC 290 for .00 adjustment source documents for the following:

    1. The TC 290 for .00 adjustment source document is for changes to refundable credits (i.e., TC 766/767 with a Credit Reference Number (CRN)) and there is no change to TXI.

    2. The TC 290 for .00 adjustment source document is for changes to Withholding Credits (i.e., TC 806/807) and there is no change to TXI only.

    3. The TC 290 for .00 has a corresponding TC 971 AC 270. These are cases where the amended return was sent back to the taxpayer.

    4. The TC 290 for .00 is in the 98 blocking series (adjustment made without the original return) and there is a RC 062. These are penalty abatement request disallowances and have no impact on our BMF-AUR case.

    5. The adjustment is a TC 290 for .00 with a corresponding TC 971 AC 142. This is a true duplicate return.

  9. Do not order the TC 290/291 (or TC 300/301) source document for the following situations:

    1. The adjustment changes the amount(s) or item(s) back to the original figures on the return (changes may have resulted from a math error code or unallowable code). The TXI and Tax (TC 150 minus TC 291) should equal the amounts on the original tax return.

    2. The difference between the TXI on the return and the TXI shown on the Tax Module matches the discrepant amount within ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ . Consider the amount in question reported and close the case using PC 4210 if there are no other related issues.

    3. The adjustment is a TC 291/301 when the TXI and the tax has been reduced to zero. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

  10. Request an amended return to resolve the case, if necessary. To request an amended return:

    1. Use IDRS CC:ESTAB.

      Exception:

      Do Not order MeF returns or CIS document. See IRM 4.119.4.1.4, Modernized e-File (MeF), or IRM 4.119.4.3.5, Correspondence Imaging System (CIS) Documents.

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

    3. Annotate the DCI and case folder with IPC 41RR, 43RR, 45RR or 47RR as appropriate.

    4. If the DLN of the amended return is the control DLN on the Tax Module, attach the original return behind the amended return and refile together under the control DLN. Otherwise, refile them separately.

  11. Review all adjustment documents to determine if the U/R amount has already been taken into consideration. If so, close the case using PC 4210. If a document has been requested, refile it separately when the case is closed.

    1. Input TC 925 with PC 4210 using IDRS CC:REQ77/FRM77.

    2. Annotate PC 4210 on the DCI and case folder.

  12. Consider all previous changes to income, deductions, refundable/non-refundable credits, taxes, and penalties when a Letter 2030 is to be issued.

  13. When a TC 300/301 is present on the Tax Module with a TC 421 and no -L freeze, a Disposal Code displays on the Tax Module. If pursuing U/R income, determine the Disposal Code. The Disposal Code is located under the column titled "DIS CD" in the transaction section of the Tax Module:

    1. If the Disposal Code is 01 - 13, review the attached audit papers to determine if the U/R amount has been addressed. If there is still a U/R amount after review, issue a notice. Consider all changes made by Exam per the TC 300/301.

    2. If the Disposal Code is 20 - 99, no audit was performed. Continue processing the case.

  14. If a TC 300/301 and a TC 577 with Julian date 999 is displayed on the tax Module (no "-L" Freeze present) the U/R income has not been addressed by Examination Function. Review the papers to determine what changes were made and take those changes into consideration when calculating U/R income adjustments.

  15. If a duplicate/amended return is filed (TC 976 or 971 AC 010 or 012 through 016), a TC 290/291 is present, the duplicate or amended return is not in the case file AND you are contacting the taxpayer (i.e., issuing a Letter 2531, Letter 2030 or adjusting withholding (W/H) using PC 4200):

    1. Order the duplicate/amended return by requesting the TC 290/291 DLN unless the conditions in (8) above apply.

    2. Close the case using PC 4290 if the duplicate/amended return is not available.

    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.

  16. If a duplicate/amended return is posted (TC 976 or TC 971 AC 010 or 012 through 016), a Letter 2030 or Letter 2531, is to be issued or closing case using PC 4200, a TC 290/291 is NOT present, AND the duplicate/amended return is not in the case file:

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

    2. Monitor the case for 45 days.

    3. If the TC 290/291 posts, order the adjustment source document.

    4. If the TC 290/291 does not post, continue processing the case.

  17. TC 295 indicates an abatement of tax, based on a tentative allowance, input by Accounts Management. TC 299 indicates an abatement of the original tax. If there is a TC 295 or 299 unreversed, (or only partially reversed) by TC 294 or 298, and there is U/R income, issue a notice. Subtract the TC 295 (plus the TC 299) amount minus the TC 294/ TC 298 amount from the TC 150 amount to determine the total tax per return.

  18. TC 305 indicates an abatement of tax, based on a tentative allowance, input by Exam. TC 309 indicates an abatement of the prior tax assessment (with an interest computation date). If there is a TC 305 or 309 unreversed, (or only partially reversed) by TC 304 or 308, and there is U/R income, issue a notice. Subtract the TC 305 (plus the TC 309) amount minus the TC 304/TC 308 amount from the TC 150 amount to determine the total tax per return.

4.119.4.3.4  (04-05-2016)
Other Transaction Codes and Math Error Codes

  1. Other TC's shown on the Tax Module may require additional action.

  2. TC 160 or 166 indicates a Delinquency/Failure to File Penalty was assessed. TC 161 or 167 means a portion or all of the penalty has been abated. When a U/R issue exists, compute or recompute the Delinquency/Failure to File Penalty when required. If the Delinquency/Failure to File penalty is restricted by a TC 160/161 and applicable, enter the amount on the adjustment or it will unpost. See IRM 4.119.4.16.1, Failure to File Penalty (FTF), for additional information.

  3. TC 170 or 176 indicates an Estimated Tax (ES) Penalty was assessed. TC 171 or 177 means a portion or all of the penalty has been abated.

  4. TC 270 or 276 indicates a Failure to Pay Penalty (FTP) was assessed. TC 271 or 277 means a portion or all of the penalty is abated.

  5. TC 460 indicates a request for extension of time to file was approved. The extension date appears at the end of the transaction code line in the EXT-DT field.

  6. TC 480 (not reversed by TC 481 or 482) indicates the taxpayer has filed an "Offer in Compromise (OIC)" with the Service. Continue normal BMF-AUR processing. A TC 29X may be input on these type cases. Send copies of the case data to Collection OIC function upon their request.

  7. TC 530 (not reversed by TC 531 or 532) with a closing code 07 or 10, indicates that the account is considered uncollectible.

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

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

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

  8. TC 604 (not reversed by TC 605) indicates that assessed debit has been cleared.

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

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

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

  9. TC 640 indicates an advanced payment of an underreporter proposal. The TC 640 payment sets an -F freeze and is released with a TC 29X in a BMF-AUR blocking series.

  10. TC 670 indicates a subsequent payment. When a payment relating to the BMF-AUR issue posts as a TC 670, input a TC 570 to prevent the payment from refunding.

  11. TC 766 or 767 indicates substantiated payment credits, including withholding (W/H). W/H may need to be adjusted due to the BMF-AUR processing. Before proposing a change to W/H, be certain that the adjustment has not been previously allowed.

  12. TC 780 indicates that the Service accepted an Offer In Compromise(OIC) from the taxpayer. If an unreversed TC 780 is present, take the following action:

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

      Exception:

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

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

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

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

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. TC 806 credits the tax module for W/H claimed on a Form 1041 tax return. TC 807 reverses the TC 806 credit in whole or in part. W/H may need to be adjusted due to the BMF-AUR processing. Before proposing a change to W/H, be certain that the adjustment has not been previously allowed.

  14. TC 830 or 836 identifies the credit elect amount on the overpaid module and TC 710 or 716 identifies the posting of the prior year credit elect to the BMF-AUR tax year module.

  15. TC 925 was created as a universal indicator of BMF–AUR IDRS activity. TC 925 displays process codes in a string of up to 10 process codes, allowing IDRS users to know the extent of BMF–AUR activity on the account (i.e., case open, Letter 2030 issued, closed agreed, etc.).

  16. TC 971 Action Code 375, 376 or 377 (not reversed by TC 972), indicates that a Form 1120-S was converted to Form 1120 tax return.

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

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

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

  17. TC 971 Action Code 653 indicates that Rev. Rul. 99-40, (May Sequa), has been considered on the module. Manual Interest determination is required when inputting the assessment. See IRM 4.119.4.16.6, Revenue Ruling 99-40 and Credit Elects (MaySequa), for additional information.

  18. If a Transaction Code other than those explained in IRM 4.119.4.3.3, Transaction Codes Reflecting Tax Liability, or IRM 4.119.4.3.4, Other Transaction Codes and Math Error Codes, are indicated on the IDRS CC:TXMOD, refer to Document 6209, IRS Processing Codes and Information.

  19. If there is a math error code present, it displays in the MATH-STS-CD field of IDRS CC:TXMOD. See Document 6209, IRS Processing Codes and Information, for a full definition of Math Error Codes.

  20. When preparing a Letter 2030, use "per return" figures from the filed tax return, however, when "per return" amounts on the Letter 2030 differ from those shown on the original return because of a processing change (Math Error Code present), previously filed amended return, or other adjustment, and:

    If Then
    The taxpayer was notified of the adjustment. Indicators that the taxpayer was notified of the adjustment include:
    1. Presence of a TC 290 or 291, generally due to filing of an amended return. OR

    2. Presence of a TC 300 or 301, due to prior Examination. OR

    3. TXMOD shows MATH-STS-CD > 3

    Include PARAGRAPH 30 on the Letter 2030.

    Note:

    PARAGRAPH 30 reminds the taxpayer that the “per return” amounts shown on the Letter 2030 differ from the originally filed tax return due to prior adjustments to the account.

    The taxpayer was not notified of the adjustment Include PARAGRAPH 31 on the Letter 2030.

    Note:

    There must be a significant difference (i.e. more than $1) between the “per return” amount used on the Letter 2030 and the corresponding amount on the originally filed tax return.

4.119.4.3.5  (09-17-2014)
Correspondence Imaging System (CIS) Documents

  1. The Correspondence Imaging System (CIS) is used to manage scanned images of amended returns, documents and electronic case files.

  2. When a duplicate/amended return (TC 976 or TC 971 with AC 010 or 012 through 016 and a posted TC 290/291) is present, IDRS CC:TXMODA will display an indicator 1 in the CIS-IND field indicating that a CIS document is available.

  3. If a CIS document is indicated, take the following actions:

    1. Access IDRS.

    2. Access AMS.

    3. From the AMS screen, click on "Cases by TIN" in the Case Management section.

    4. In the Taxpayer Lookup screen, enter the taxpayer TIN in the "Request by TIN" field and then click on go or press enter on the keyboard.

      Note:

      This will allow the taxpayer account screen to appear.

    5. In the Alert section, click on the view pages link.

    6. Select the tax year to review the CIS image list and click on "Open Image."

      Caution:

      If an amended return is not present, check EUP to see if it is an MeF return. See IRM 4.119.4.1.4, Modernized e-File (MeF), for further instructions.

      Note:

      The thumbnail view can be used to view each page.

    7. Compare the amended return to the U/R issues to determine if any or all issues are addressed. Continue normal processing.

  4. To exit AMS click on the Exit Account link in the upper right hand corner. In the Taxpayer Lookup window, click on the Log off link to exit the system.

4.119.4.4  (04-05-2016)
Analysis Procedures

  1. The following instructions are for use by BMF-AUR tax examiners. They are to be used in conjunction with training materials:

    1. An UNDERREPORTED (U/R) condition exists when there is income shown on the IR(s) that was not reported by the taxpayer on the tax return. Proposed tax adjustments are based on these U/R amounts, as well as on reported income amounts for which the taxpayer failed to include any required additional taxes.

    2. An OVER-DEDUCTED (O/D) condition exists when the taxpayer claims more of a deduction than is substantiated by IR(s) and/or allowed by law.

    3. An UNDERCLAIMED (U/C) condition exists when the taxpayer does not claim all the payments to which they are entitled.

    4. An OVERCLAIMED (O/C) condition exists when the taxpayer reduces their tax liability by an amount that either exceeds the amount shown on the IRs, and/or the amount cannot otherwise be substantiated.

  2. Analyze income elements on the IR(s) following the guidelines for specific income types as provided in this IRM.

  3. Proposed adjustments on the Letter 2030, or Letter 2531 may require an explanation to the taxpayer. There is only one set of explanation paragraphs for both the Letter 2030 and Letter 2531.

    • Letter 2030, Letter 2531 paragraphs are annotated in this IRM as "PARAGRAPH."

      Note:

      See Exhibit 4.119.4-10, CP PARAGRAPHS, for a listing of available CP Paragraphs.

    • Miscellaneous Notice or Letter paragraphs are annotated as "Special Paragraph."

    Note:

    The verbiage provided in this IRM for a "Special Paragraph" is for example only and can be modified as needed.

  4. When issuing a notice for underreported issues, enclose the applicable IR(s) using IDRS CC:IRPTRW.

  5. Tax returns with a calendar year of less than 12 months are considered short year returns. Calendar dates are listed at the top of the tax return below the title. Take the following action when a short year return is identified:

    If And Then
    Form 1041   Continue normal processing.
    Form 1120 The return shows that it is an "initial return" as identified by a check mark on Form 1120, Section E, box 1. Continue normal processing.
    Form 1120 The return is other than "initial return."
    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

4.119.4.4.1  (09-17-2014)
Fraud Referral Program

  1. The primary objective of the National Fraud Program is to foster voluntary compliance through the recommendation of a criminal investigation and/or civil penalties against taxpayers who evade the assessments and/or payment of taxes known to be due and owing.

  2. Tax fraud is often defined as an intentional wrongdoing on the part of a taxpayer, with the specific purpose of evading a tax known or believed to be owing. Tax fraud requires both a tax due and fraudulent intent.

  3. The objective of the Campus Fraud Referral Program is to:

    1. Identify cases with potential fraud.

    2. Develop potential fraud cases with guidance from the Campus Fraud Technical Advisor.

    3. Refer potential fraud cases to Field Exam for further development.

    4. Develop fraud guidance to ensure campus employees are properly trained on the indicators of fraud.

  4. The Fraud Technical Advisor (FTA) assists with the development of fraud in the Campus Examination environment.

  5. The Functional Fraud Coordinator (FFC) is a fraud specialist assigned to a specific function or operation within the Campus. The FFC is responsible for reviewing Form 13549, Campus Fraud Lead Sheet, for potential fraud issues, conducting research to establish a pattern of non-compliance and, when appropriate, referring cases to the Campus Fraud Coordinator.

  6. The Campus Fraud Coordinator (CFC) is a fraud liaison assigned to each SB/SE Campus. The CFC is the main point of contact with the FTA assigned to that campus.

4.119.4.4.1.1  (09-17-2014)
Identifying and Developing Fraud in BMF-AUR

  1. During the course of BMF-AUR case work, situations may be encountered involving potential fraud, referred to as indicators of fraud. Although only a small percentage of cases are fraudulent, it is essential to detect and report any potential fraudulent activities. IRM 25.1.2.2, Fraud Handbook - Recognizing and Developing Fraud, Indicators of Fraud, provides several lists of Fraud Indicators. The following list has been developed for BMF-AUR and identifies examples of indicators of fraud that are most likely to be found in a campus environment (this list is not all inclusive and may involve a promoter/return preparer):

    • Altered Documents

    • False deductions/adjustments to income

    • False basis in assets

    • Concealing assets

    • False transaction date for asset disposition

    • False statements made by taxpayer

    • False business, rental, or farm expenses

    • False or overstated refundable credits

    • Amended returns with any of the above

    • Understating Income

    • Failure to cooperate

    • Maintaining inadequate records

    • Inconsistent or implausible explanations

    • Engaging in illegal activities

    • Concealment of activities

    • Preparer schemes

  2. Fraud cases are developed by trained Fraud caseworkers until it is determined that affirmative acts (deceit, subterfuge, camouflage, concealment or some attempt to color or obscure events or to make things seem other than they are) exist. The Service must prove that the taxpayer acted deliberately and knowingly with the specific intent to violate the law. Once a suspicion or indicator of fraud is found, it is essential that the case be transferred to the designated Fraud Coordinator for further development.

  3. See IRM 25.1.1.3, Indicators of Fraud vs. Affirmative Acts of Fraud.

4.119.4.4.1.2  (09-17-2014)
BMF-AUR Tax Examiners Fraud Responsibilities

  1. Identify indications of fraud that are uncovered through regular case processing. Use the list in IRM 4.119.4.4.1.1, Identifying and Developing Fraud in BMF-AUR.

  2. Discuss the indicators of fraud with the Lead Tax Examiner (i.e., Approving Official) The Lead Tax Examiner will then make the determination if the case should be transferred to the Tax Compliance Officer (TCO) for further action. If the approving official concurs, the tax examiner will refer the case to the designated individual responsible for working/monitoring fraud cases by:

    1. Completing Sections I, II, III, and item 1 of Section V of Form 13549, Campus Fraud Lead Sheet and submitting to the approving official for approval.

    2. The approving official will forward the approved Form 13549 and case file to the designated BMF-AUR Functional Fraud Coordinator (FFC).

  3. Documentation is critical in the development of fraud. Maintain complete and accurate case notes on Form 12864Case History Sheet, that include each of the following:

    • All case actions

    • All documents received

    • All contacts must be adequately documented (e.g., changes to entity information were recognized/updated)

    • All conversations with the taxpayer, representative, return preparer, and third parties must be recorded (what was discussed and the responses)

4.119.4.4.1.3  (04-05-2016)
BMF-AUR Fraud Coordinator Responsibilities

  1. The BMF-AUR Functional Fraud Coordinator (FFC) is responsible for developing fraud cases. The FFC is responsible for conducting preliminary screening of Form 13549 to determine if the referral should be forwarded to the Campus Fraud Coordinator (CFC). The FFC will:

    1. Review the Form 13549 and case file to determine if indicators of fraud exist.

    2. Complete, document and attach research information, including, but not limited to IDRS transcripts, ACCURINT prints, and relevant web searches. Research will help to establish a pattern of non-compliance.

    3. Complete Section IV of the Form 13549, (Developmental Actions) and item 3 in Section V.

    4. The FFC has ten business days from the receipt date of a case and Form 13549 to evaluate a fraud referral and make a determination whether to accept or decline the referral.

    5. If the FFC accepts referral then acceptance is noted in item 3b, Section V, and the form and case file are forwarded to the CFC for final fraud determination.

    6. If the FFC declines the referral then item 3a in Section V is completed along with a written explanation for the declination in Section VI and returned to the initiator through the approving official. The case will be reassigned to the initiator’s Standard Employee Identifier (SEID).

    7. Update the Fraud Referral Monitoring Report (FRMF).

    8. Maintain a copy of each Form 13549.

    9. Track all BMF-AUR fraud leads, including those declined/returned to BMF-AUR and those accepted for further Fraud development.

    10. Submit information on Fraud referral/accepted/declined cases to Headquarters by the fifth day of each month.

      Note:

      The CFC is required to make a determination to accept or decline the fraud referral, within 21 business days of receipt of the case from the FFC.

  2. If the CFC accepts the fraud referral for further development, they will request the case be reassigned and ensure the case is established on Audit Information Management System (AIMS). The BMF-AUR FFC will:

    1. Close the case using Fraud Closing PC 4140, 4370, 4580, or 4770 as appropriate.

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

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

    4. Annotate the Form 13549 and keep a copy for the BMF-AUR records.

    5. Make and send a copy of the Form 13549 to the initiator through the initiator's manager.

    6. Ensure the entire case contents are forwarded.

  3. If the CFC declines the fraud referral they will return the Form 13549 with a written explanation to the BMF-AUR FFC. The BMF-AUR FFC will return the Form 13549 to the initiator through the approving official and transfer the case to the initiating tax examiner’s SEID.

4.119.4.4.2  (09-02-2016)
Frivolous Return Program (FRP)

  1. A frivolous return 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. If in doubt about whether the return is frivolous, consult with the Lead Tax Examiner, TCO or manager. If it is determined during screening that the return is frivolous, close the case with PC 4130.

    1. Input TC 925 with PC 4130 using IDRS CC:REQ77/FRM77.

    2. Annotate PC 4130 on the DCI and case folder.

    3. Annotate the DCI and case folder with “FRP to Ogden.”

  2. If the return is determined NOT to be frivolous, continue normal processing.

  3. If FRP requests a BMF-AUR case after contacting the taxpayer, close the case with the appropriate PC (4570 or 4790), annotate the case folder and DCI for clerical "FRP to Ogden" See IRM 4.119.4.21.1.1.4, Case Transfer to Another Area, for additional information.

4.119.4.4.3  (09-11-2015)
Declared Disaster Areas

  1. BMF-AUR Coordinator alerts tax examiners of ZIP Codes for specific declared disaster area situations as necessary based on IRS Disaster Relief Memos. Follow Coordinators instruction on proper handling of declared disaster area cases.

  2. Possible Disaster case impact:

    If And Then
    Freeze Code -S is present on IDRS CC:TXMOD A notice is to be issued Continue processing by issuing the applicable notice (i.e., Letter 2531, Letter 2030, or Letter 3219B).
    Freeze Code -S is present on IDRS CC:TXMOD The Stat notice suspense time frame has elapsed but the disaster time frame has NOT expired
    1. Update IDRS activity with 47MRDSMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes, and Exhibit 4.119.4-8, Definer Codes.

    2. Suspend the case until the Disaster date expires.

    3. Once the Disaster end date has passed, complete the default action on the case.

    Freeze Code -O is present on IDRS CC:TXMOD  
    1. Do not issue a notice nor assess by default.

    2. Update IDRS activity with 47MRDSMMDD. See Exhibit 4.119.4-7, Activity Codes/Category Codes, and Exhibit 4.119.4-8, Definer Codes.

    3. Suspend the case until the Disaster date expires.

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

    Note:

    See IRM 4.119.4.21.1.9, Disaster Area, if correspondence is received during the Disaster time frame.

4.119.4.4.4  (09-11-2015)
Consolidated Returns Form 851 Affiliation Schedule

  1. An affiliated group of corporations can elect to file a consolidated income tax return.

  2. Refer all cases with Form 851, Affiliation Schedule, to the Lead Tax Examiner or Tax Compliance Officer (TCO) for analysis.

  3. The consolidated return must include all the income of the parent plus the income of each subsidiary for the portion of such taxable year during which it was a member of the group. Lead Tax Examiner or Tax Compliance Officer (TCO) for analysis will:

    1. Obtain IDRS CC:IRPTR prints for each listed affiliated TIN(s).

    2. Consider all information returns as part of the case review.

  4. When issuing a notice include the following Special Paragraph: "Our records show you filed Form 851, Affiliations Schedule, with your tax return. We have enclosed transcripts of information for each entity shown on your affiliations schedule. All income reported on a consolidated return must include the income of the parent plus the income of each subsidiary for the portion of the taxable year during which it was a member of the group."

4.119.4.4.5  (04-05-2016)
Information Returns - Review

  1. The initial review of information returns (IR(s)) is accomplished using IDRS Command Code (CC) IRPTRL. Print a complete copy for the case file.

    Caution:

    Be aware of Payer Agent information. See IRM 4.119.4.5, Payer Agent, for further instruction.

  2. Compare payer information to the tax return and take the correct action if there are any discrepancies.

    Note:

    All IR(s) with the same document type are sorted in payer Employer Identification Number (EIN) sequence.

  3. When comparing income from payers to the tax return, discrepancies may be discovered. Discrepancies can occur for a variety of reasons. The most common causes for discrepancies are:

    • Misplaced entries

    • Entries added incorrectly

    • Income not carried forward from attached schedules

    • Incorrect information from payers

    • Omission of information

  4. Review each IR document for validity prior to determining any unreported amounts. Annotate the IRPTR print with the following status codes to indicate the result of the review:

    1. "R" to indicate reported.

    2. "U" to indicate underreported.

    3. "X" to indicate deleted.

  5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ if any of the following conditions are present:

    Condition... And...
    The payee area indicates that the income belongs to a retirement plan. Indicators may include the following terms:
    • Retirement Plan

    • Retirement Rollover

    • Profit Sharing Plan (PSP)

    • Defined Benefit Pension Plan

    • Defined Benefit Plan (DFB or DBP)

    • Employee Benefit Plan (EBP)

    • Keogh (HR-10) or Tax Shelter Annuities (403(b)

    • Simplified Employee Pension (SEP) or Individual Retirement Accounts (IRA)

    • 401 (k) Plans

    Note:

    The above list is not all inclusive.

    Note:

    Consider all abbreviations and/or variations of terms.

     
    The payer area identifies the income as deriving from a Municipal Bond or a Capital Construction Fund (CCF) account.  
    The payee name line(s) is obviously not the taxpayer, even though the EIN matches.

    Exception:

    If it is obvious that the Payee may be an owner of the business. For example, the business is a medical practice and the name listed is one of the physicians.

     
    The Payer EIN is 99–9999999, foreign income Another EIN is present for the same payer.

    Note:

    Income dollar amounts may vary due to currency exchange rates. Foreign source IRs are treated the same as domestic source IRs. Therefore, do not delete a foreign source IR unless another related IR from the same payer is present. See (8) below for additional information.

    The money amount on a single IR equals $999,999,999, unless the taxable income on the tax return supports this amount (this may be an indicator the information return is incorrect).  
    If all elements (TIN, name, amount, account number, income type, etc.) on any two IRs are identical:
    • Including the source, delete one IR.

    • Except the source, delete the paper source.

     
    The IR is found on the Payer Agent listing Instructions state to delete the IR.

    Note:

    If all U/R income is from identified Payer Agents and the Payer Agent listing contains instructions to delete the IR(s): close the case with PC 4240, input TC 925 with PC 4240 using IDRS CC:REQ77/FRM77, annotate PC 4240 on the DCI and case folder.

    There is an indication in the payee area that the income is not attributable to the taxpayer. Indicators may include the following terms:
    1. Escrow.

    2. Trust For (TR).

    3. In Trust For (ITF).

    4. Trust Account.

    5. Trust.

    6. Workers Compensation.

    Note:

    The above list is not all inclusive.

    Note:

    Consider all abbreviations and/or variations of terms.

    Exception:

    If there is an indication that the income is attributable to the taxpayer, then consider the IR as belonging to the taxpayer. For example: the taxpayer is ABC Corp and the payee area displays: "XYZ Corp ITF ABC Corp." In this instance ABC Corp is responsible for reporting the income.

    ONLY when working Form 1120 cases.
    All elements on any two IRs are identical except that one does not contain an account number. Delete the IR without the account number.  
    If all elements (except the account numbers) of any two IRs are the same It can be determined that the account numbers of both IRs contain the same sequence of numbers or characters, delete one of the IRs.
    Form 1099-MISC and Schedule K-1 information returns are present with identical elements (TIN, name, amount, income type, etc.) It appears that one of the IRs is fully reported, delete the other. Otherwise pursue the income from both IRs.
  6. Consider the IR valid (as belonging to the taxpayer) when ANY of the following conditions are present:

    1. The payer's name is garbled, missing, or incomplete. Use the TIN to research IDRS for the proper payer name. If the income is U/R include a special paragraph to explain the proper name of the payer TIN being shown on the IR.

    2. The payee name is in a different order on the IR.

    3. Only a name control is showing as the payee name and it matches the Entity name.

    4. The name on the IR is different and a review of IDRS CC:ENMOD and/or IDRS CC FINDE (when working Form 1120 cases) shows it as a prior name.

    5. If it is obvious that the Payee name may be an owner of the Business (e.g., the Business is a medical practice and the name listed is the Physicians.)

  7. Foreign source income IRs may be identified by:

    • A payer TIN of “99-9999999”

    • An unusual payer name (e.g., Bundesent fer Finazen, Banque de Quebec) or a payer name indicating a foreign country (e.g., French Dividends, German Securities, United Kingdom Royalties)

    • Foreign country abbreviation in the State field on the payer address

    • Account Code Type “T”

    Reminder:

    Foreign source IRs are treated the same as domestic source IRs. Therefore, do not delete a foreign source IR (even if the payer name appears unclear or garbled) unless another related IR from the same payer is present.

  8. See IRM 4.119.4.4.5.1, Amended/Corrected Original Submission IRs, when the IR is an amended or corrected original submission.

  9. Compare all valid IR’s to amounts on the tax return and related schedules. Use instruction for the particular type of income involved.

4.119.4.4.5.1  (09-17-2014)
Amended/Corrected Original Submission IRs

  1. The IDRS CC:IRPTR transcript displays the following payer information return submission types:

    1. ORIGINAL SUBMISSION.

    2. CORRECTED ORIGINAL SUBMISSION.

    3. AMENDED SUBMISSION.

  2. When an IR is either an amended (or corrected original) submission, determine if an original submission IR is also present. Delete original submission IR(s) when there is a matching amended (or corrected original) IR(s). Both IRs must have:

    • The same payer name and/or TIN

    • The same account number (if present)

    • The same type of income if the money amount changes or different amount type’s when the money amount stays the same (i.e., amending a Form 1099-MISC from NONEMP COM to RENTS)

  3. Pursue all IRs if the amended (or corrected original) does not match an original, or if the amended (or corrected original) IR matches more than one of the other IRs.

  4. Consider a valid payer document attached to the tax return marked "Corrected" more accurate than the IDRS CC:IRPTR original submission information.

  5. Amended IRs may reflect incomplete information; neither amount literals nor $0 (zero dollar amounts) are present. If such an IR is present, assume the payer attempted to zero out an incorrect income amount previously reported.

4.119.4.4.6  (04-05-2016)
Comparison of Information Returns with Return Information

  1. The following general rules apply to the analysis of all types of IRs:

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

    2. Consider an IR reported if the taxpayer reports the same amount of income but under a different payer name.

    3. Allow a tolerance of $1 (rounding) for each IR.

    4. Consider Payer Agent criteria when evaluating IRs.

    5. Place an "R" on the IR for reported, a "U" for underreported or "X" to delete.

      Caution:

      Be sure that income identified on attachments are appropriately carried forward and included in the total income when applicable.

  2. Misplaced entries on the tax return are frequent causes of U/R discrepancies. Taxpayers report income in a variety of places. It is important to thoroughly review the ENTIRE return. Consider all attached schedules, forms, documents and statements before identifying income as being underreported.

  3. For IRs with multiple Amount Types (e.g., Form 1099-MISC or Schedule K-1) consider each component of the IR separately.

  4. Whenever possible attempt to match IR amounts to a specific line on the tax return. For example, match the sum of INTEREST Amount Types to the amount reported on Form 1120, line 5 or Form 1041, line 1.

  5. When comparing IRs with entries on any line not specifically identified for that Amount Type, the amount must match within $1 or be clearly identified as the income type in question.

    1. If the amount matches within $1, consider the IR reported.

    2. If the amount does not match within $1, but the income has been clearly identified, consider the IR(s) reported if the entry is a larger amount, or consider the IR partially U/R if the entry is a lesser amount.

  6. When payer documents are attached to a paper return, consider them more accurate than the IR UNLESS:

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

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ continue processing and consider the IR most accurate.

    3. There is an amended IR that corresponds with the payer document. Consider the amended IR the most accurate.

    4. They appear to be for an incorrect tax year.

  7. If the return is missing supporting forms or schedules, research IDRS. If the information is not available, take the following action(s):

    1. Give credit for amounts based on the available tax return information.

    2. Compute if the necessary supporting schedule or form is missing.

    3. Include a Special Paragraph requesting the missing forms or schedules from the taxpayer and apologize for the inconvenience.

  8. Group same amount types together when a breakdown has not been provided and it is necessary to compare a total money amount for related IRs with a single or multiple line entries on the tax return e.g., MED PAYMTS and NONEMP COM will often be combined when the business is medical.

    1. If the group total amount is larger than the single line entry on the return, consider the difference underreported.

    2. If the group total amount is smaller than the single line entry on the return, consider the issue resolved.

  9. If a Form 1099-MISC IR has two identical money amounts (e.g., Nonemployee Compensation is $500 and Medical Payment is $500) and the taxpayer reports one of the amounts, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  10. If a Form 1099-K and Form 1099–MISC are present with identical money amounts, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. A photocopy of a prior year Letter 2030 or Letter 2531 response may be attached to the return. Consider the information in the previous year's response. This information may result in resolving the U/R issue(s).

  12. When a U/R issue for the same Amount type from the same payer was resolved per a copy of a Letter 4552C response from a prior year attached to the return, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. If a prior year BMF-AUR closure Letter 4551C is attached to the return, request the prior year tax return to see if the resolved issue(s) corresponds to the current BMF-AUR year discrepancy. If so, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  14. If all IRs are matched exactly, but there is still a U/R amount:

    1. Add the amounts reported on the return. There has probably been a math error.

    2. Pursue the U/R issue.

    3. Include a special paragraph to advise the taxpayer of the error.

  15. If the discrepancy is totally resolved, close the case using PC 4210.

    1. Input TC 925 with PC 4210 using IDRS CC:REQ77/FRM77.

    2. Annotate PC 4210 on the DCI and case folder.

  16. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

  17. If the taxable income per return is a negative amount include PARAGRAPH 32 on the Letter 2030.

4.119.4.4.6.1  (09-17-2014)
Service Center Recognition/Image Processing System (SCRIPS)

  1. The following procedures apply to the analysis of Service Center Recognition/Image Processing System (SCRIPS) IRs.

  2. Tax examiners should screen SCRIPS IR(s) with EXTREME care.

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ :

    1. Obvious decimal point errors. A decimal error may be identified by multiplying the U/R amount by 1.111 and the result equals the IR (within $1).

    2. Commas read as numeric (i.e., $1,050 read as $12050, etc.). U/R amounts that are a multiple of one-thousand (1,000) is an indication that the comma was misread as a numeric.

      Example:

      SCRIPS IR displays as 21230 (comma misread as the digit "1" ), the taxpayer reports 2230 with a resulting U/R of 19000.

    3. Dollar signs read as numeric. When a dollar sign is misread as a numeric, the U/R amount is a multiple of 10, 100, 1,000, 10,000, etc., depending upon the number of digits in the SCRIPS IR.

      Example:

      SCRIPS IR displays 587 (dollar sign misread as the digit "5" ), the taxpayer reports 87 with a resulting U/R of $500.

    4. Duplicate money amounts for both income and withholding.

    Note:

    If a SCRIPS IR is U/R and none of these conditions are present, consider the IR valid and pursue the issue using normal procedures.

4.119.4.4.7  (10-28-2015)
Nominee Recipient

  1. When a taxpayer indicates they received income on behalf of 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.

  2. When an attachment or statement indicates that the taxpayer acted as a nominee recipient, and:

    1. Includes sufficient information about the intended recipients (name and/or TIN and amount distributed): 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 recipients and the amount is equal to or greater than the U/R amount Consider the U/R discrepancy resolved.
      Form 1099 payments are present 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.

      3. If the income cannot be accounted for on the recipient’s return, pursue the U/R discrepancy in full and include PARAGRAPH 25.

    2. Does not include sufficient information about the intended recipients to research IDRS, pursue the nominee income as U/R and include PARAGRAPH 25.

4.119.4.4.8  (04-05-2016)
Grantor Trusts

  1. A Grantor Trust is a trust in which all income is distributed to the beneficiaries and not taxable to the trust.

  2. If the entire trust is a Grantor Trust, taxpayers are instructed to fill in only the entity portion of the return and not have any entries on Form 1041, lines 1 through 22.

  3. Treat Form 1041 as a Grantor Trust ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ when the taxpayer checks Grantor Trust box in Form 1041, Section A and:

    Note:

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

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

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

    Reminder:

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

  4. When the taxpayer checks the Grantor Trust box and another box in Form 1041, Section A and reports income/deductions, this is an indication that a portion of the trust is taxable. If part of the trust is taxable, the income, deductions, etc., that are taxable to the trust are reported on Form 1041. The amounts that are taxable directly to the grantor are shown on an attachment to the return or can be a statement indicating a percentage allocable to them.

    1. When screening the various amount types on IDRS CC:IRPTR determine if the trust reported the appropriate portion on the Form 1041.

      Example:

      Attached statement says 50% distributed to beneficiaries, IR for $5,000 Interest and $2,500 is reported on Form 1041, line 1.

    2. Consider the IR fully resolved if the portion allocable to the trust is reported.

    3. If the IR cannot be fully accounted for, pursue the entire difference.

  5. If none of the above conditions apply, pursue the U/R income in full.

4.119.4.4.9  (09-02-2016)
Miscellaneous

  1. If IRC 6501(d), Request for Prompt Assessment, is noted on the tax return, or there is a statement requesting a prompt assessment ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

  2. When there is an indication on the tax return that income was reported on another return see IRM 4.119.4.4.7, Nominee Recipient, for additional information.

  3. When an attachment indicates the income in question is nontaxable and the taxpayer cites the Internal Revenue Code (IRC), Regulations, Revenue Rulings, or a court case, etc., research the IRC to determine its validity. Consult with the Lead Tax Examiner if necessary.

    Exception:

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

    1. If the IRC is not valid, pursue the issue and include a Special Paragraph to inform the taxpayer that the explanation is not acceptable. Leave a case note using Form 12864, Case History Sheet, to clearly document your findings.

    2. If the IRC is valid, accept the taxpayer’s statement.

  4. Refer Form 1120 cases with the following conditions to the Lead Tax Examiner who will determine if the case should be transferred to the TCO for consideration:

    1. Response (or no response to Letter 2531) cases involving the use of Form 1120 Schedule O to determine tax when a Letter 2030 (or recomputed Letter 2030) is needed. See IRM 4.119.4.18.2, Letter 2030 Preparation.

      Caution:

      When taxpayers file Schedule O and also check the "qualified personal service corporation" box on Form 1120, Schedule J, line 2, the QPSC indicator takes priority over Schedule O. Do not refer to the TCO, unless the case meets another condition for referral. See IRM 4.119.4.9.2, Form 1120 Schedule O, Consent Plan and Apportionment Schedule for a Controlled Group, for further information.

    2. Form 851, Affiliations Schedule.

    3. Form 4626, Alternative Minimum Tax - Corporations with an amount greater than zero on Form 1120 Schedule J line 3.

    4. Response (or no response to Letter 2531) cases involving the use of Schedule PH, U.S. Personal Holding Company (PHC) Tax.

  5. Various conditions may exist that warrant TCO review. Any potential TCO referral (for any reason) cannot be directly transferred to the TCO. All potential TCO referrals MUST first be referred to the Lead Tax Examiner for review and approval prior to transfer to the TCO.

  6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

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

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

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Caution:

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

    Reminder:

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

  7. If a case meets sensitive case criteria (i.e., high dollar, high profile or affects a large number of taxpayers) consult with the Lead Tax Examiner for determination and referral. See IRM 4.119.4.21.1.14, Sensitive Case, for additional information.

4.119.4.4.10  (09-02-2016)
Erroneous Refunds

  1. 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 taxpayers own money. An erroneous refund may occur when:

    • The statute of limitations has expired and a refund is issued

    • There are misapplied payments

    • The BMF - AUR adjustment erroneously releases a credit hold

    • The BMF - AUR payment posted with TC 670 or TC 610

  2. When an erroneous refund is identified and the TC 846 has not posted, use the IAT "Stop Refund" tool to stop the refund. See IRM 4.119.4.4.10.1, Stopping Refunds, for additional information.

  3. When an erroneous refund is identified and the TC 846 has posted, see IRM 21.4.5, Erroneous Refunds, for additional information.

4.119.4.4.10.1  (09-02-2016)
Stopping Refunds

  1. IDRS CC:NOREF is used to stop a refund check from being sent and must be input by 4:00 p.m. Eastern Standard Time (EST), the Thursday prior to the TC 846 for taxpayer Master File (BMF).

  2. IDRS CC:NOREF cannot be initiated more than 10 days prior to the 23C date of the TC 846 being stopped.

  3. Complete all account actions, except credit transfers, when requesting to stop a refund. Utilize a post delay code of 4 and hold code 2 on IDRS CC:REQ54 adjustments to delay posting and notice issue prior to the TC 841 posting the account. Transfer a credit after the TC 841 posts. If the account action will result in a balance due, input TC 470 to hold any balance-due notices that may generate. It takes 4-6 weeks for the TC 841 to post.

  4. Employees stopping the refund will maintain an open control on all cases where a IDRS CC:NOREF is input. The employee places the open control in "B" or "M" status. The case can be closed when confirmation is received that the refund has been stopped.

    • The controlling employee must monitor for the TC 841 and take appropriate action. If there is an adjustment on the module and the control is in background, the tax examiner should make the adjustment based on the information provided by the taxpayer.

    • Utilize IAT for resolving or stopping refunds, erroneous refund procedures and manual refund.

4.119.4.5  (09-17-2014)
Payer Agent

  1. The Payer Agent file is a compilation of Payer Information Return (IR) documents which have been verified as erroneously filed or processed. The BMF-AUR Payer Agent file is tax year specific.

  2. Payer Agent listing is currently maintained by the IMF-AUR program. Any updates made by either the AUR or BMF-AUR Payer Agent Coordinator will be available to both programs.

  3. Taxpayers and/or Payers may contact or notify IRS BMF-AUR that a discrepancy with documents or the filing of the Information Returns for a tax year has occurred; examples are duplicate IRs, incorrect Amended IR, or IRs with incorrect information.

4.119.4.5.1  (09-17-2014)
Tax Examiner - Instructions

  1. Access the Payer Agent listing when questionable IR(s) are present.

  2. During the screening phase, the tax examiner may identify questionable Information Returns (IRs) which appear to be erroneous. When the IRs appears to be questionable or erroneous forward the case and any additional supporting information documents to the Lead Tax Examiner for determination.

  3. During the response phase, the tax examiner may receive information from the payer or the taxpayer indicating the proposed U/R is the result of a payer reporting error. Forward a copy of the case and any additional supporting information documents to the Lead Tax Examiner and continue processing.

4.119.4.5.2  (09-17-2014)
BMF-AUR Site Payer Agent Coordinator - Instructions

  1. The BMF-AUR Payer Agent (P/A) Coordinator will perform the following tasks.

    1. Take action on all IRs referred by tax examiners as questionable/suspicious Payer Agent data.

    2. Sort and review the screen prints received from tax examiners deemed questionable/suspicious. Begin research when four or more screen prints with the same EIN are identified. The BMF-AUR Site P/A Coordinator should attempt to make a determination about the discrepant IRs. If payer contact is necessary to determine the impact, check IDRS for a telephone number or call XXX-555-1212 (XXX represents the area code of the city/state being called).

      Note:

      Revised Third Party procedures allow for the administrative action of verifying information received from Employers/Payers. This verification is not considered a third party contact if the purpose of the contact is to process information received from the source and/or to ensure its validity/correctness.

    3. Add new or update existing information to the Payer Agent Listing as appropriate.

  2. At the end of the BMF-AUR program for the tax year, print a copy of the Payer Agent Listing and retain in the Payer Agent file for three years.

4.119.4.6  (09-02-2016)
Determination of Letter 2531 Issuance

  1. Letter 2531 (PC 4300) is required as the first taxpayer contact for the following conditions:

    1. On Form 1120, the U/R income results in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. On Form 1041, the U/R income results in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Reminder:

      If a case meets sensitive case criteria (i.e., high dollar, high profile or affects a larger number of taxpayers) consult with the Lead Tax Examiner for determination and referral. See IRM 4.119.4.21.1.14, Sensitive Case, for additional information.

    3. Cases involving the use of Schedule O to determine tax. See IRM 4.119.4.9.2, Schedule O, Consent Plan and Appropriation Schedule for a Controlled Group, for further information.

      Reminder:

      When taxpayers file Schedule O and also check the "qualified personal service corporation" box on Form 1120, Schedule J, line 2, the QPSC indicator takes priority over Schedule O.

    4. Cases involving Schedule PH, U.S. Personal Holding Company (PHC) Tax. Include the following Special Paragraph: "According to our records, you filed Schedule PH, U.S. Personal Holding Company (PHC) Tax. Send us a revised Schedule PH using the underreported income as shown on this notice. If we don’t receive your revised Schedule PH, we’ll determine any additional tax due by treating the underreported income as undistributed PHC income."

    5. Cases involving ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 4.119.4.15.2, Withholding - Miscellaneous, for further information.

    6. Cases resulting in an ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. In certain situations, a Letter 2531 may be issued as the initial taxpayer contact since it is an inquiry instead of a proposal of assessment. If in doubt, consult the Lead Tax Examiner for guidance.

4.119.4.7  (09-02-2016)
Analysis of Income Types

  1. BMF-AUR evaluates third party income from information returns (IRs) against amounts reported on the income section of Form 1041, U.S. Income Tax Return for Estates and Trusts, and Form 1120, U.S. Corporation Income Tax Return, for the following areas of income to determine the Underreported amount (U/R) for each income type:

    Form 1041 Form 1120
    • Interest income, line 1

    • Total ordinary dividends, line 2a

    • Business income or (loss), line 3

    • Capital gain or (loss), line 4

    • Rents, royalties, partnerships, other estates and trusts, line 5

    • Farm income or (loss), line 6

    • Ordinary gain or (loss), line 7

    • Other income, line 8

    • Gross Receipts or Sales, line 1a

    • Dividends, line 4

    • Interest, line 5

    • Rents, line 6

    • Royalties, line 7

    • Capital Gain net income, line 8

    • Net gain (or loss) from Form 4797, line 9

    • Other Income, line 10

  2. The following instructions are used to process the various U/R income amounts by each income type. Review the complete return including all attached statements and schedules to make determinations.

  3. Analyze all income elements on all of the IR(s) following the guidelines for specific income types as provided in this IRM.

  4. See IRM 4.119.4.15, Withholding (W/H) - General, anytime the taxpayer claims withholding or the Information Return contains Amount Type (IRPTR Literal) FED TAX W/H.

4.119.4.7.1  (09-02-2016)
Aggregate Profit or Loss on Contracts - General

  1. Transactions relating to regulated futures contracts, section 1256 option contracts and foreign currency contracts are taxable under IRC Section 1256 and are generally referred to as "Section 1256 Contracts" . Payers report these transactions on Form 1099-B, boxes 8-11. The overall aggregate profit or loss on contracts is reported in box 11.

  2. Aggregate Profit or Loss on Contracts are identified with Document Type 1099-B and Amount Type (IRPTR Literal) PROFT&LOSS.

    Note:

    UNREAL PY, REALIZED, and UNREAL CY are for information purposes only.

4.119.4.7.1.1  (09-02-2016)
Aggregate Profit or Loss on Contracts - Analyzation

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

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

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

  3. When more than one information return containing Aggregate Profit Or Loss On Contracts is present and the taxpayer does not provide a breakdown:

    1. Group all Aggregate Profit or Loss on Contracts together.

    2. Compare the group total amount to the total reported Aggregate Profit or Loss on Contracts on Form 1041, line 4 or Form 1120, line 8.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  4. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.1.2  (09-02-2016)
Aggregate Profit or Loss on Contracts - Miscellaneous

  1. If Aggregate Profit or Loss on Contracts Income is U/R, enter the following on the Letter 2030:

    1. Select AGGREGATE PROFIT & LOSS from the drop down menu in the "Your income and deductions" field.

    2. Enter the gross reported amount in the "Shown on return" field.

    3. Enter the total of all U/R Aggregate Profit or Loss on Contracts IR amounts PLUS the "Shown on return" amount in the "As corrected by IRS" field.

      Caution:

      It may be necessary to include any additional amounts identified on the return.

    4. Verify the "Difference" field matches the U/R amount.

  2. Include PARAGRAPH 14 when Aggregate Profit or Loss is U/R.

4.119.4.7.2  (09-02-2016)
Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans - General

  1. Agriculture Payments are governmental subsidies paid to farmers and agricultural businesses to supplement their income. Market Gain on Commodity Credit Corp (CCC) Loans are the market gain associated with the repayment of a CCC loan.

  2. Agriculture Payments and Market Gain on Commodity Credit Corp (CCC) Loans display on IDRS CC:IRPTR with the following Amount Type and Document Type:

    Income Type Amount Type (IRPTR Literal) Document Type
    Agriculture Payments AG SUBS 1099-G
    Market Gain on Commodity Credit Corporation loans repaid using cash or CCC certificates MRKGAINCCC 1099-G

4.119.4.7.2.1  (09-02-2016)
Form 1041 Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - Analyzation

  1. Compare Agriculture Payments and/or Market Gain amounts with entries on:

    1. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    2. Form 1040, Schedule E, Part I, line 3. Group all farm related Amount Types from all IR(s) with any other rental related Amount Types IR(s) present.

      Exception:

      Do not allow credit for any amount reported on Form 1040, Schedule E, Part I, line 3 if the taxpayer has reported farming income elsewhere on the return.

    3. Form 1040, Schedule E, Part II. If the income is from a farming business, consider the Agriculture Payments and/or Market Gain amount reported.

    4. Form 4835, Farm Rental Income and Expenses line 3a (line 3b if line 3a is zero or blank).

    5. Form 1041, line 6.

    6. Form 1040, Schedule E, Part V, line 42:

    If the amount reported on Schedule E, Part V, line 42 is Then
    Equal to or greater than the sum total of all farm related Amount Types from all IR's Consider the income discrepancy resolved.
    Less than the sum total of all farm related Amount Types from all IR's Pursue the IR amount(s) in full DO NOT give credit for any amount reported on this line.

    Exception:

    Do not allow credit for any amount reported on Form 1040, Schedule E, Part V, line 42 when the taxpayer has reported farm income elsewhere on the return.

  2. Agriculture Payments and/or Market Gain comparisons for the following entries must match within $1 or be CLEARLY IDENTIFIED:

    1. Form 1040 Schedule F, lines 8 or 43. Form 1040 Schedule F, lines 2 or 37 (agricultural payments reported as commodities).

    2. Form 4835, Farm Rental Income and Expenses, line 6.

    3. Form 1041, line 8.

      Note:

      Give credit for amounts reported on Form 1041, line 8 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

  3. Agricultural subsidy payments made to members of federally recognized Native American Tribes under programs administered by the Department of Agricultures Stabilization and Conservation Service are exempt from federal income taxes when the subsidy is received as a result of activity occurring on the individual's allotted land. Do not pursue apparent U/R Agricultural subsidy payments amounts if information on the return or attached schedules/statements references Rev. Rul. 69-289.

  4. When more than one information return containing Agriculture Payments and/or Market Gain amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Agriculture Payments and/or Market Gain together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  5. When an attachment or statement indicates Nominee income. See IRM 4.119.4.4.7, Nominee Recipient, for further instruction.

4.119.4.7.2.2  (09-02-2016)
Form 1120 Agricultural Payments and Market Gain on Commodity Credit Corp. (CCC) Loans - Analyzation

  1. Compare Agriculture Payments and/or Market Gain amounts with entries on:

    1. Form 1120, line 10. Taxpayers are instructed to identify any amounts reported on Form 1120, line 10. DO NOT give credit for any unidentified amounts reported on line 10, unless there is a $1 match.

    2. Form 1040, Schedule F, lines 4a (line 4b if line 4a is zero or blank) or line 39a (line 39b if line 39a is zero or blank).

    3. Form 4835, line 3a (line 3b if line 3a is zero or blank).

      Note:

      Give credit for amounts reported on Form 1120, line 10 when identified as Gross Farm Income ONLY when Form 1040, Schedule F or Form 4835 is not attached.

    4. Form 1120, line 1a when the taxpayer name or Business Activity as shown on Form 1120, Schedule K, lines 2a – 2c relates to farming activity. See IRM 4.119.4.7.10, Form 1120 Gross Receipts or Sales (Bartering/Payment Card Transactions/Attorney's Proceeds/Fishing Proceeds/Medical Payments/Nonemployee Compensation) - General, for additional information. Consider any other Gross Receipts and farming related IRs when determining the total amount to compare to Form 1120, line 1a.

      Exception:

      Do not give credit for any amounts reported on Form 1120, line 1a when the taxpayer has reported farming income on Form 1120, line 10.

  2. When more than one information return containing Agriculture Payments and/or Market Gain amounts are present and the taxpayer does not provide a breakdown:

    1. Group all Agriculture Payments and/or Market Gain together.

    2. Compare the group total amount to the total reported.

    3. If the group total is smaller, consider the issue resolved.

    4. If the group total is larger, consider the difference underreported.

  3. When an attachment or statement indicates Nominee income see IRM 4.119.4.4.7, Nominee Recipient, for further instruction.


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