Breadcrumb Region

5.19.11 Withholding Compliance Program

Manual Transmittal

October 25, 2016

Purpose

(1) This transmits revised IRM 5.19.11, Liability Collection, Withholding Compliance Program,

Material Changes

(1) IPU 15U1679 issued 11-18-2015 IRM 5.19.11.1.1(10) b - Changed the Technical Support Function name to Technical Services in Examination Function.

(2) IPU 15U1679 issued 11-18-2015 IRM 5.19.11.2.3 - Changed Form 2809 to Letter 2809.

(3) IPU 15U1679 issued 11-18-2015 IRM 5.19.11.9 - Added batching criteria for specific letters.

(4) IPU 15U1679 issued 11-18-2015 IRM 5.19.11.9(6) - Added 2802C instructions for undelivered mail with a yellow forwarding address label from the USPS.

(5) IPU 15U1679 issued 11-18-2015 IRM 5.19.11.11.3(2) - Changed the Technical Support Function name to Technical Services in Examination Function.

(6) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.1 - Added the IRS Mission Statement.

(7) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.2.1(1) - Changed February to January 31st and deleted March.

(8) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.2.3 - Removed the word notice.

(9) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.1(4) - Added OPI instructions and renumbered section.

(10) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.1(7) - Added WHC and WHCC.

(11) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.1(9) - Corrected the link to 21.3.1.4.58

(12) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.1(11) - Corrected AUR Toll free number 1-800-829-8310.

(13) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.2.4 - Corrected the link from 5.19.1.1.7 to 5.19.1.1.8.

(14) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.4 - Corrected the dates.

(15) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.7.1(1) - Removed the word please.

(16) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.7.1(2) - Corrected IRM link in if/then table.

(17) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.3.8(4) - Added or send email.

(18) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.5(9) - Corrected Exhibit link.

(19) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.5.3.2 - Changed They to The.

(20) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.5.3.3 - Renamed title.

(21) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.5.5(6) - Corrected the phone number.

(22) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(2) - Clarified Spousal Consent.

(23) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(12) - Added for both taxpayers.

(24) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(14) - Changed two attempts to one.

(25) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(16) - Changed two attempts to one.

(26) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(18) - Corrected the identity theft IRM to 25.23.

(27) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7(19) - Corrected the identity theft IRM to 25.23.

(28) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1(1) - Added note that faxing was acceptable.

(29) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.2.1(1) d - Changed "d" to Note.

(30) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.2.1(2) (c) - Clarify Two-Earners/Multiple Jobs Worksheet instructions.

(31) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.2(2) - Changed two attempts to call taxpayer to one.

(32) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.2.2(2) - Changed the link to 4.19.14.5.7(2) and added 10 common law states.

(33) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.2(6) a - Corrected the spacing.

(34) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.1.4(5) - Removed last sentence in number 3 and deleted number 6 update WHCS with 2800 date.

(35) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3(1) - Removed generally cycle 39 or 52 from the 4th box.

(36) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3.1(1) - Changed the dates to correct years.

(37) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3.1(3) - Changed the dates to correct years.

(38) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3.2(1) - Updated all dates and Tax Years.

(39) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3.2(2) - Deleted last sentence in Note about the QW4 History section.

(40) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.7.3.2(3) - Updated all tax years and dates in Examples A-E.

(41) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.9 (5) - Reworded undelivered mail.

(42) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.9(6) - Added submit request to lead or manager.

(43) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.10.2(5) - Removed generally cycle 39 or 52.

(44) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.10.4.2(3) - Changed the second 2800 to 2801.

(45) IPU 16U1512 issued 10-11-2016 IRM 5.19.11.10.14(1) - Corrected the identity theft IRM to 25.23.17 & 18.

Effect on Other Documents

This IRM supersedes IRM 5.19.11 dated October 11, 2016. The following IRM Procedural Updates (IPU's), issued between November 18, 2015 through October 11, 2016, have been incorporated into this IRM: 15U1679 and 16U1512.

Audience

Small Business/Self-Employed (SB/SE) employees in Compliance working withholding compliance issues.

Effective Date

(10-25-2016)

Michelle C. Alvarado
Director, Collection Inventory Delivery & Selection
Small Business/Self Employed

Withholding Compliance Program

  1. The IRS Mission statement includes "enforcing the tax law with integrity and fairness to all" . A "fair and just tax system" is also a cornerstone in the Taxpayer Bill of Rights (TBOR). As IRS employees, we are expected to carry out our duties with integrity and fairness . Fairness and integrity therefore apply to how IRS administers tax laws to all taxpayers as well as IRS employees interact with each taxpayer and tax professional. Employees must exercise their professional judgement, not personal opinions, in conducting their enforcement responsibilities. There are three parts to enforcing the law with integrity and fairness:

    • ensure fairness to the taxpaying public

    • ensure an equitable process for all taxpayers

    • ensure fairness to each taxpayer

      For additional information refer to Policy 1-236

  2. The mission of the Withholding Compliance program (WHC) is to ensure taxpayers who have serious under-withholding problems are brought into compliance with federal income tax withholding requirements. The program uses Form W-2, Wage and Tax Statement, information to identify taxpayers with insufficient withholding.

  3. The goal is to correct withholding to ensure that taxpayers have enough income tax withheld to meet their withholding tax obligations.

Authority Under the Internal Revenue Code (IRC) and Regulations

  1. Internal Revenue Code (IRC) Section 3402 and IRC Section 3403 provide the legal authority for the withholding of federal income tax from wages and other forms of income. IRC Section 3402 specifies the general form and content of withholding allowance certificates and outlines the basis for claiming withholding allowances or exemption from withholding.

  2. Regulations in 26 CFR Part 31, Employment Taxes and Collection of Income Tax at Source, provide guidance for implementation of IRC Section 3402.

  3. Section 31.3402(f)(2)–1(a) requires each employee to furnish his or her employer with a signed withholding exemption certificate on or before starting employment. The maximum number of withholding allowances to which an employee is entitled depends upon the following:

    • Marital status

    • Filing status

    • Number of dependents

    • Number of allowances claimed by a spouse (if any) on a Form W-4

    • Estimated itemized deductions, tax credits, and certain other deductions from income

  4. The requirement for employers to routinely submit copies of questionable Form W-4 , Employee's Withholding Allowance Certificate to the IRS has been eliminated. Regulations, as set forth in Section 31.3402(f)(2)–1(g), require employers to submit copies of any currently effective withholding exemption certificates only if directed to do so in a written notice to the employer or if directed to do so under any published guidance.

  5. An employer must honor a valid withholding allowance certificate furnished by an employee until the Service provides the employer with written notice to disregard it (a lock-in letter). The IRS may issue such a notice after it determines that an employee's withholding claim is unjustified based on IRS records without first obtaining a copy of the Form W-4 from the employer.

    1. The employer is required to withhold at the status and number of allowances specified in our notice. However, if the status and allowances claimed on the employee's current Form W-4 or a new Form W-4 will result in MORE income tax withholding than at the status and allowances specified in our notice, the employer must honor the Form W-4.

    2. If an employee disagrees with our determination, he or she must contact the Withholding Compliance Unit and provide information supporting a change to the status and allowances specified in our notice.

  6. Section 31.3402(m)–1 of the Employment Tax Regulations specifies items used to compute withholding allowances. Estimated amounts of deductions, losses, and credits used to compute withholding allowances may not be more than:

    1. The amount claimed on the prior year tax return (or, if not yet filed, the tax return for the preceding taxable year) which the employee reasonably expects to show on the current year tax return, plus

    2. Additional amounts that are demonstrably attributable to identifiable events.

  7. An employee may claim exempt from withholding by furnishing the employer with a valid exempt Form W-4 certifying that he/she:

    1. Had no tax liability for the preceding taxable year, and

    2. Expects no tax liability for the current taxable year.

  8. Exempt W-4 forms , generally expire on February 15th of the year after they were furnished by the employee. If an employee fails to furnish a new W–4, the employer is required to withhold as if no valid W–4 was in effect, "single" status with "zero" withholding allowances. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4. Refer to Publication 15, (Circular E), Employer's Tax Guide, for additional guidance.

  9. IRC Section 6682 and the related tax regulations allow the assessment of a $500 civil penalty on an individual for furnishing a false W–4 if:

    1. The statement made on the Form W-4 results in less income tax withheld than would have been withheld if the Form W-4 had been correctly completed, and

    2. There was no reasonable basis for such a statement at the time that the statement was made.

  10. IRC Section 3403 makes an employer liable for tax imposed under IRC Section 3402 and the related tax regulations:

    1. The employer is liable for the appropriate amount of withholding whether or not it is actually deducted from the employee’s pay. This liability includes tax computed according to the withholding instructions we give the employer in a lock-in letter.

    2. Assessments under IRC Section 3403 are made by Employment tax examiners in the Technical Services in the Examination function .

Overview of Withholding Compliance Processing

  1. This IRM section explains the Withholding Compliance process.

Withholding Compliance Case Creation Using Forms W–2, Wage and Tax Statement

  1. Employers are required to give Form W-2, Wage and Tax Statement, to their employees by January 31st of the year following the year in which the wages were paid. A copy of Form W-2 must also be filed with the Social Security Administration (SSA) by January 31st of the following year. W-2 records filed with the SSA are subsequently transmitted to the IRS and loaded into the Information Returns Master File (IRMF).

  2. Application of the WHC business rules results in three potential outcomes:

    • Outcome 1: No tax compliance problem is indicated. A WHC case is not created.

    • Outcome 2: Withholding compliance problem was identified; lock-in letter systemically issued. Taxpayer has 60 days to respond to the letter before the case proceeds to the next step

    • Outcome 3: Withholding compliance problem was identified; manual review required prior to the lock-in letter issuance.

  3. WHC cases are created in June. Each calendar year, ECC will update all tax year dates to correspond to the current calendar year.

  4. W-2 forms received from SSA after the initial case creation are considered "Additional Forms W-2" (AW2) and are processed by WHC at the end of each calendar year following the year in which the wages were paid.

  5. The Enterprise Computing Center (ECC) puts the Form W-2 record into a unique format for WHC. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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  6. The Form W-2 records are then sorted by Social Security Number (SSN) and Name Control.

  7. Additional business rules are applied to filter records to:

    1. Determine whether the SSN is valid or invalid.

    2. Match SSN's against Master File (MF). If a record is found in the valid or invalid segments of MF, proceed with the compliance check. If there is no record on MF, select regardless of compliance check.

    3. Current year return was filed and not full paid.

    4. Current year return was not filed. Prior year return was not filed or was filed with a balance due.

    Note:

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  9. Taxpayers in the following statuses are excluded:

    • Combat Zone

    • Killed in Terrorist Action (KITA)

    • Offer in Compromise (OIC)

    • Bankruptcy

    • Date of Death (DOD) is less than 24 months

Campus Case Processing Overview

  1. WHC cases will be worked by the Withholding Compliance Unit at the Andover & Austin Compliance Campuses.

  2. Organization Function Program (OFP) codes have been established for WHC.

  3. The following 97X transaction codes (TC) have been designated to identify actions on WHC cases:

    TC 97X Action Code Manual/Systemic Description
    971 146 Manual/Systemic
    • Lock-in Letter issued

    972 146 Manual/Systemic
    • Lock-in released

    • Lock-in issued in error

    971 147 Systemic
    • Outcome 3 case; listing generated

    971 148 Manual
    • Lock-in rate modified

    • Lock-in rate reviewed with no change

    971/972 149 Manual/Systemic
    • Reserved

  4. Taxpayers with unreversed TC 971 AC 146 transactions are identified by the following IMF entity indicator codes:

    • CC ENMOD screen: WHCCI<1

    • CC IMFOLE screen: WHC

    Note:

    The entity indicator will be set on Outcome 3, referrals and other manually input cases, when the TC 971 AC 146 transaction posts.

  5. TC 971 AC 147 will be used to generate listings of Outcome 3 cases to the site to be worked. The transaction shows the reason code for Outcome 3 selection.

  6. TC 971 AC 146 will post to Master File to identify Outcome 2 cases where a lock-in letter has been systemically issued. The transaction will appear on the year in which the taxpayer was locked in and will provide the following information:

    • TC 971 transaction date

    • Employer Identification Number (EIN) of taxpayer's employer(s)

    • Lock-in status and the number of allowances

  7. Subsequent transactions will be posted to the year in which the taxpayer was locked in.

  8. WHC case inventory will come from three sources:

    • Taxpayer correspondence and telephone calls

    • Listings containing Outcome 3 cases requiring manual review

  9. Cases will be batched through Account Management Services (AMS) and assigned to a tax examiner. AMS will open an IDRS control base using the year in which the lock-in letter was issued.

  10. Tax examiners will

    • Make lock-in determinations and issue lock-in letters

    • Reconsider previous lock-in determinations based on information supplied by the taxpayer

    • Assess and abate Form W-4 civil penalties

    • Address the entire taxpayer account including all balance due and/or unfiled return issues

    • Update IDRS, Withholding Compliance System (WHCS) and AMS as applicable

WHC Letters and References

  1. WHC outgoing correspondence consists of the Correspondex generated letters shown below. Current versions of the letters are available on Servicewide Electronic Research Project (SERP) using the Forms/Letters/Pubs tab.

    • Letter 2800C, WHC Lock-in Letter to Employer. WHC Lock-in Letter (To Employer).

    • Letter 2801C, WHC Lock-in Letter to Employee. WHC Lock-in Letter (To Employee).

    • Letter 2802C, WHC Compliance Letter (Self Correct Notice).

    • Letter 2804C, Civil Penalty Abatement Denied .Form W-4 Penalty Abatement Denied (To Employee).

    • Letter 2805C, WHC Lock-in Letter to Employee (Spousal Consent letter).

    • Letter 2808C, WHC Modified Lock-in to Employer. WHC Modified Lock-in (To Employer).

    • Letter 2809C, WHC Release of Lock-in (Tp Employer). WHC Release of Lock-in (To Employer).

    • Letter 2810C, WHC No Change (To Employee). WHC No Change (To Employee).

    • Letter 2811C, WHC Penalty Abatement Accepted (To Employee). Form W-4 Penalty Abatement Accepted (To Employee).

    • Letter 2812C, WHC Redetermination Acceptance.. WHC Modified Lock-in (To Employee).

    • Letter 2813C, WHC Release of Lock-In (to Employee).. WHC Release of Lock-in (To Employee).

    • Letter 3042C, Regulatory Authority Information Letter. Information on the Legal Authority for the IRS Withholding Compliance Program (To Employee).

    • Letter 4074C, WHC - Reply to Employer Inability to Change Automated W-4 System. WHC - Reply to Employer Inability to Change Automated W-4 System.

    • Letter 4243C, Withholding Compliance Additional Information Request. Withholding Compliance Additional Information Request.

  2. The following forms and publications are also used:

    • Pub 17, Your Federal Income Tax (For Individuals)

    • Pub 5, Your Appeal Rights and How To Prepare A Protest If You Don't Agree

    • Pub 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

    • Pub 505, Tax Withholding and Estimated Tax

    • Pub 514, Foreign Tax Credit For Individuals

    • Pub 515Withholding of Tax on Nonresident Aliens and Foreign Entities

    • Pub 2105, Why Do I Have to Pay Taxes?

    • Pub 15 (Circular E), Employer's Tax Guide

    • Pub 972, Child Tax Credit

    • Pub 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN)

    • Withholding Pay Period Calculator

    • Form W-4, Employee's Withholding Allowance Certificate

General Case Processing

  1. This section contains procedures for working withholding compliance cases.

Telephone Contact Procedures

  1. In order to deliver quality customer service, take all appropriate actions to correct withholding, address any balance due account(s) and/or solicit unfiled returns while the taxpayer is on the telephone.

    Note:

    If you determine that the taxpayer has obtained the WHC unit toll-free number erroneously and does not have a withholding issue, determine the taxpayer's specific issue and transfer the call following the table in paragraph 9 below .

  2. When you identify the topic of the call:

    1. Advise the caller that you are transferring his/her call to the area that handles the question (identify the specific area).

    2. Transfer to a specific line by pressing "inside line" key

    3. Then, press #,

    4. Then, dial the appropriate five digit extension,

    5. Then, press the enter key,

    6. Then, press the transfer key

  3. If translation is needed for non-English speaking taxpayers, offer the taxpayer Over-the-Phone Interpreter Service (OPI).

  4. The IRS/OPI contract allows the disclosure of tax information to the OPI interpreter. The assistor should limit disclosure to only that information necessary to resolve the issue. The interpreters are not employees of IRS so communicate to them exactly as you would advise the taxpayer. To use OPI services, complete the following:

    1. USE CONFERENCE CALL HOLD or the OUTSIDE CALL BUTTON to place the non-English speaker on hold.

    2. Call new toll-free phone number: 1-888-563-1155 .

  5. Enter your PIN number (xxxx-xxxxx) - this is a unique personal PIN number for each employee. PINS have been distributed to the site management. If an employee doesn't have a PIN, management or local SA will contact coordinator to have one assigned, usually within 1 business day. Select language below:

    • Press 1 for Spanish

    • Press 2 for Creole

    • Press 3 for Mandarin

    • Press 4 for Korean

    • Press 5 for Vietnamese

    • Press 6 for Somali

    • Press 7 for Russian

    • Press 8 for French

    • Press 9 for Arabic

    • Press 0 for operator assistance (to address any other language needs or concerns

    1. An interpreter will be added to the call, summarize what you wish to accomplish

    2. Add the Non-English speaking taxpayer to the line by pressing the Conference button

  6. The following steps should be taken on all calls:

    • Greet the taxpayer - Be sure to provide your name and identification number at the beginning of the call. For additional information, see IRM 21.1.1.7, Communication Skills.

    • When you receive a call from a taxpayer regarding his/her tax account information, you are under no obligation to determine if the taxpayer is using an unsecured platform such as a cell phone. However, if you become aware that the taxpayer is using a cell phone (e.g., the taxpayer states he/she is calling from a cell phone, etc.), you may advise the taxpayer of the disclosure risk of using the cell phone to discuss his/her account information.

    • To contact IRS, hearing impaired callers may choose to use the Federal Relay Service (FRS), a state relay service or any other relay service, or any third party assistant (friend or family). For further instructions concerning Hearing Impaired Calls refer to IRM 21.2.1.57, Deaf/Hard of Hearing (DHOH) Callers and TTY/TDD Equipment and IRM 21.3.8.5.1.2 , Hearing Impaired Customers and TDD Equipment

    • When contacted by an employer ask the caller for the name and Social Security Number (SSN) of the taxpayer to which the call relates, then document the taxpayer case as appropriate. If the employer calls for verification of a modification, provide the employer with the modified withholding status and allowances, only. Do not discuss Form W-4 calculations or case selection criteria.

    • If an employer calls with a "general" question regarding WHC or the lock-in letter, document AMS under the EIN.

    • Disclosure verification must occur before assisting taxpayer on account related calls. Follow procedures in IRM 21.1.3.2.3, Required Taxpayer Authentication. If talking to the taxpayer's representative follow procedures in IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication then see IRM 5.19.11.3.4, CAF/POA Requirements .

    • Verification of the taxpayer’s phone number on ENMOD is required on all account related calls in which disclosure verification has occurred. When necessary, update this information.

      Note:

      If ENMOD or IDRS is currently unavailable, follow-up action will be performed when systems become available.

    • Check Case Status - Check SUMRY and/or CC IMFOLI for any filing and/or payment delinquencies. See IRM 5.19.11.7, Responses and Redeterminations, for delinquent return procedures. See IRM 5.19.11.3.7, Installment Agreement (IA) Taxpayers, for installment agreement procedures.

  7. Key points for every call:

    • Maintain a professional and courteous tone.

    • Control direction of the call, keep focused on resolution of taxpayer’s issues.

    • Give accurate and complete assistance.

    • Place the taxpayer on hold when needed to perform research or complete case actions. Use the hold feature, not the mute feature.

      Note:

      Advise the taxpayer of the reason for the delay (e.g., additional research needed, etc.), ask for permission to place the taxpayer on hold and wait for a response. Thank him or her for holding.

    • Take all appropriate steps to address any delinquencies while the taxpayer is on the telephone.

    • Confirm to the taxpayer all the actions taken before closing the call..

  8. When working balance due accounts, follow procedures in IRM 5.19.11.3.7.1, WHC Initiated Installment Agreements. When working return delinquency accounts, follow procedures in IRM 5.19.11.7, Responses and Redeterminations. Document AMS with actions taken.

  9. If all case actions cannot be completed (i.e. breaks, lunch, tour of duty), insert case on AMS as WHC correspondence (WHCC) and complete actions as soon as possible after your scheduled phone time.

  10. If the Taxpayer has a tax law question, verify the type of tax law before transferring the call as described in 9 below. Accounts Management will continue to answer tax law inquiries on a limited number of topics. These topics include:

    • Tax Exempt Government Entities (TEGE)

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

    • Affordable Care Act (ACA)

    • International Tax Law (overseas calls only)

    For all other tax law questions state: “I’m sorry, but we do not provide live assistance on this topic. For assistance, you can go to:

    • www.irs.gov - Select the Help & Resources’ tab on the irs.gov home page. Options are listed on the left side of the page

    • Interactive Tax Assistant- Enter "ITA" into the Search feature

    • IRS Tax Map- Enter "IRS Tax Map" into the Search feature for more detailed information

    • Tele Tax: 1-800-829-4477 for information on a variety of tax topics - If they don’t have internet access. After the selection of the language preference, press 2 to enter the Tele-Tax topics, then press 123 and follow the prompts to find the right Tele-tax topic. Also, suggest that many commercial software packages also provide answers to tax questions or seek help from a tax professional.

    Close the Call.

    Exception:

    If the caller does not want to be referred to the website: Transfer the call to: Out-of-scope automated message listed under #92194 (English) and #92195 (Spanish). If unable to transfer to #92194 or #92195 use #92001.

  11. All WHC issues should be addressed before transferring. The assistor should inform the taxpayer they are being transferred and advise caller of what topic to request after the transfer. The assistor should document AMS history with the reason for the transfer.

    When Issue is Function Use the following to resolve the call
    Balance Due (non Status 22) Accounts Management Toll Free Lines (AM)
    Hours of Operation are 7:00 a.m. to 7:00 p.m. local time. If outside of the hours of Operation, advise taxpayer of AM hours and call the appropriate AM toll free number 1–800–829–1040.
    #92010 English
    #92011 Spanish
    Account issues (Refunds and any account issues that do not pertain to the WHC case) #92020 English
    #92021 Spanish
    Balance Due (IDRS Status 22) ACS #92080 WI English
    #92071 WI Spanish
    #92085 SB English
    #92076 SB Spanish
    Open TC 420 or -L Freeze Exam Hours of Operation are
    (WI) 8:00 a.m. to 8:00 p.m. local time.
    (SBSE) 7:00 a.m. to 7:00 p.m. local time
    IRM 21.5.10–2, AIMS STATUS CODE GUIDE CORRESPONDENCE EXAM
    Accounts with an Open AUR account AUR Hours of Operation are 7:00 am to 8:00 p.m. local time. If outside of the hours of Operation, advise taxpayer of AUR hours and to call the AUR toll free number 1–800–829–8310 IRM 21.3.1.4.58, Copies of CP 2000, CP 2501, 2893C Letter
    FERDI accounts
    • "Federal Employee" in the Alerts box of the Account Summary Screen

    • ACSWEB - "FE" in the Alerts section

    • IDRS CC ENMOD screen - "FED-EMP<F"

    • CFOL CC IMFOLE screen - "FEDEMPLOY/RETIREE"

    ACS (Status 22) FERDI Issues IRM 5.19.18.2, Identifying FERDI cases #92082
    English/Spanish
    Out-of-scope automated message Intentionally Left Blank #92194 (English)
    #92195 (Spanish)

    Note:

    If unable to transfer to #92194 or #92195, use #92001.

Case Research

  1. In order to make proper case decisions, research and utilize the systems shown below.

WHCS
  1. WHCS provides information on the taxpayer, his/her employers, lock-in and/or other WHC letters issued, transaction dates, and lock-in rate, if applicable.

  2. See the WHCS User Guide for instructions on adding or updating taxpayer records.

AMS
  1. WHC case actions are documented in the AMS history. WHC histories can be identified by the literal "WHC" .

IDRS
  1. The TC 971 transactions are shown on IDRS.

  2. Case information can be verified through various command codes, including, but not limited to IRPTR, RTVUE, IMFOL, NAMES, and ENMOD.

IAT
  1. IAT is mandatory for Withholding Compliance. IAT tools simplify processing by assisting the user with IDRS research and input. The tools also reduce the chance of errors and improve productivity. When an action must be taken and an IAT tool is available, Campus Compliance employees with access to IAT tools are required to complete the action using the IAT tool. See IRM 5.19.1.1.8 ,Mandated IAT Tools, for a list of mandated IAT tools.

    Note:

    If an IAT tool is not functioning properly or it is determined not to be appropriate due to a specific situation, the case should be worked using IDRS. For more information on each tool as well as job aid for each tool, see IAT Website

Case Documentation

  1. Complete and accurate case documentation promotes quality and consistency in working WHC cases.

  2. Document each taxpayer contact and/or action taken on the case in AMS history.

  3. AMS history should contain enough information so that any person subsequently reading the history can easily determine what decisions were made, why those decisions were made, what actions were taken, and what further actions are required to resolve the case.

  4. Complete documentation includes, but is not limited to the following:

    • A listing of verification documents or information requested from the taxpayer and/or employer

    • Taxpayer deadlines and follow-up dates

    • Telephone numbers provided in taxpayer contact

    • Address source, if other than ENMOD

    • Letters issued to the taxpayer and/or employer with EIN

    • Letters not issued to the taxpayer and/or employer with EIN

    • TC 971/972 AC 146/148 codes with appropriate disposition codes

    • Line by line summary of Form W-4 Worksheet calculations supporting any change in the lock-in rate

    • The specific reason for release of a lock-in letter

  5. Add or update case information to WHCS as appropriate. See the WHCS User Guide for instructions. Update IDRS and AMS as appropriate.

CAF/POA Requirements

  1. Accountants, attorneys, enrolled agents, or other persons acting as representatives through whom a taxpayer requests assistance from the Service, must have a valid Power of Attorney (POA). For Centralized Authorization File (CAF) purposes, representative must submit a Form 2848, Power of Attorney and Declaration of Representative. Taxpayers may also authorize the release of their tax information to representatives and others through the use of a Form 8821, Tax Information Authorization. We refer to powers of attorney as "POAs" and tax information authorizations as "TIAs" .

    Reminder:

    Form 8821, Tax Information Authorization does not authorize discussion of collection issues.

  2. Any form used in lieu of these two forms should contain the following information:

    1. Name, and mailing address of the taxpayer,

    2. Identification number of the taxpayer ( e.g., Social Security Number, Individual Taxpayer Identification Number (ITIN), Employer Identification Number),

    3. Name and mailing address of the representative(s)/appointee(s) ,

    4. The type of tax involved, the federal tax form number, the specific year(s)/period(s) involved (in estate matters the decedent's date of death), and specific tax matter or actions to be performed,

    5. The taxpayer's signature(s),

    6. In the case of a Form 2848, Power of Attorney and Declaration of Representative a completed Declaration of Representative (Part 2).

    Note:

    Item 2(f) above DOES NOT APPLY TO TIAs.

  3. The tax year listed on the POA or TIA must match the year in which you are working the withholding issue.

    Example:

    We issued Letters 2800C/2801C on a TY 2014 case in October, 2015. The POA or TIA form should contain the following information: Form 1040, Income Tax, for Calendar Year 2015.
    In the above example, if the letters were issued in January, 2016 the form should contain the following information: Form 1040, Income Tax, for Calendar Year 2016.

  4. If the POA or TIA form only includes the current year, you cannot discuss any other years. Ask the taxpayer's representative to submit a new form to cover the years to be discussed. Use general information to explain the Withholding Compliance program.

  5. If you are speaking to the taxpayer's representative by telephone, research IDRS using CC CFINK to determine if the POA or TIA is already on file. If the POA or TIA is on file, verify that it includes the correct tax period. If it does not include the correct tax period, or there is no record on CC CFINK, advise the taxpayer's representative to submit a new or updated signed form.

  6. If correspondence is received from a third party and there is no record on CC CFINK, or no Form 2848 or Form 8821 attached, use Letter 0135C to advise the third party that we do not have a POA form on file. Use paragraphs E or F, and H, as part of your response.

  7. If the Form 2848 is attached to the taxpayer's correspondence, compare the information on the form with the information found on CFINK to verify it is for the same tax period. If no information present on CFINK and the form is acceptable, photocopy the form, attach the copy to the correspondence, and then fax the original to the POA functional processing area as specified on Form 2848, instructions for processing.

  8. If authorization as in (2) above is not attached, before replying to a person other than the taxpayer who states he/she has a POA or TIA for the taxpayer, research the CAF using CC CFINK. Ensure that we have his/her POA or TIA on file before sending any information. If there is no POA or TIA, send the information directly to the taxpayer. Notify the taxpayer using Letter 4243C that a third party inquiry was received from (name), we have no record of a POA or TIA, and without a POA or TIA we are not permitted to furnish information to a third party.

Invalid Form W-4

  1. DO NOT initiate a lock-in letter, reconsider or modify any previously issued lock-in letter, or process any referral based on an invalid Form W-4.

  2. Any alteration of, or unauthorized addition to a Form W-4 makes it invalid.

  3. Invalid W-4 forms can be recognized by

    • Deletion of the language of the jurat. For example: crossed out penalty of perjury statement above the signature

    • Defacement of the certificate

    • Any writing on the Form W-4 other than the entries requested

  4. An employer who receives an invalid Form W-4 from an employee must take the following actions:

    1. Inform the employee that the Form W-4 is invalid

    2. Request another Form W-4 from that employee

    3. Until the employee furnishes a new Form W-4, withhold tax from the employee's wages at marital status single, with zero (0) allowances

    4. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4

  5. If an invalid Form W-4 is submitted with a referral, reject the referral. Notify the originator to advise the employer to follow the procedures outlined in (4) above.

  6. If the taxpayer submits an invalid Form W-4 in response to a lock-in letter, or with a request for reconsideration of a previously issued lock-in letter, issue Letter 4243C to advise the taxpayer that the Form W-4 is invalid and ask for a new one. DO NOT process any request for reconsideration based on an invalid Form W-4.

Referrals to Taxpayer Advocate Service

  1. Refer taxpayers to the Taxpayer Advocate Service (TAS) (see IRM Part 13, Taxpayer Advocate Service) when the contact meets TAS criteria (see IRM 13.1.7.2, TAS Case Criteria) and you can’t resolve the taxpayer’s issue the same day. Refer to IRM 13.1.7.4, Same-Day Resolution by Operations.

Installment Agreement (IA) Taxpayers

  1. Check case status on SUMRY. If status is 60, the taxpayer has an approved installment agreement. Work according to general processing procedures unless the taxpayer raises a concern about their ability to meet established IA payments.

  2. If the taxpayer raises this concern, use the Withholding Per Pay Period calculator to determine the taxpayer's new estimated take-home pay amount. Advise the taxpayer of the new estimated take-home pay. If the TP needs to adjust their IA transfer the phone call according to IRM 5.19.11.3.7.1, WHC Initiated Installment Agreements.

WHC Initiated Installment Agreements
  1. If the taxpayer has a balance due account use the table in paragraph 2 below:

  2. All WHC issues should be addressed before transferring. The assistor should inform the taxpayer they are being transferred and advise caller of what topic to request after the transfer. Document AMS history with the reason for the transfer.

    When Issue is Function Use the following to resolve the call
    Tax Law (Default Screener) - Inform Taxpayer of the topic/issue they need to have addressed when transferred Accounts Management Toll Free Lines (AM)
    Hours of Operation are 7:00 a.m. to 7:00 p.m. local time. If outside of the hours of Operation, advise taxpayer of AM hours and call the appropriate AM toll free number 1–800–829–1040.
    #92001
    Balance Due (non Status 22) #92010 English
    #92011 Spanish
    Account issues (Refunds and any account issues that do not pertain to the WHC case) #92020 English
    #92021 Spanish
    Balance Due (IDRS Status 22) ACS #92080 WI English
    #92071 WI Spanish
    #92085 SB English
    #92076 SB Spanish
    Open TC 420 or -L Freeze Exam Hours of Operation are
    (WI) 8:00 a.m. to 8:00 p.m. local time.
    (SBSE) 7:00 a.m. to 7:00 p.m. local time
    IRM 21.5.10–2, AIMS STATUS CODE GUIDE CORRESPONDENCE EXAM
    Accounts with an Open AUR account AUR Hours of Operation are 7:00 a.m. to 8:00 p.m. local time. If outside of the hours of Operation, advise taxpayer of AUR hours and to call the appropriate AUR toll free number
    (W&I) 1–800–829–3009 (SBSE) 1–800–829–8310
    IRM 21.3.1.4.57, Copies of CP 2000, CP 2501, 2893C Letter
    FERDI accounts
    • "Federal Employee" in the Alerts box of the Account Summary Screen

    • ACSWEB - "FE" in the Alerts section

    • IDRS CC ENMOD screen - "FED-EMP<F"

    • CFOL CC IMFOLE screen - "FEDEMPLOY/RETIREE"

    ACS (Status 22) FERDI Issues IRM 5.19.18.2, Identifying FERDI Cases #92082
    English/Spanish

Cases Assigned to Collection Field function

  1. When working a WHC case with at least one balance due module in status 26 and/or a Taxpayer Delinquency Investigation (TDI) assigned to Collection Field function (CFf) you must contact the Revenue Officer (RO) assigned the case.

    1. Research the RO by TSIGN/ZIP/STATE on SERP to identify the assigned RO.

      Exception:

      There are 2 exceptions where a Status 26 is not assigned to an RO or group. MMIA with an assignment code of “35XX6XXX or ASFR where the last 4 digits of the assignment code is "8000" . Do not refer these cases to an RO.

    2. Before taking any further action on the case, advise the field employee of WHC case actions taken to date. Coordinate any additional WHC case actions with the employee.

  2. If the RO directs you to release the lock-in(s) take the following actions:

    1. Document the employee's name, employee number, and telephone number in the AMS history along with the actions requested and taken.

    2. Update WHCS.

    3. Resolve the case as directed.

  3. If the RO agrees that the lock-in(s) should remain in place and the RO can provide additional information to assist in the resolution of the WHC case, document AMS history with the employee's name and employee number and any additional information provided. Proceed to resolve the WHC case.

  4. If the RO does not respond to your initial contact attempt within one week, make a second call or send email. Each attempted contact must be documented on AMS. AMS will update the status code on IDRS. Use CC ACTON to update the IDRS Control Base and History Information with the appropriate activity.

    • If you are still unable to reach the RO, leave a message or email requesting a return call within two days.

    • Advise them that you will proceed with general WHC case processing if they do not respond.

    • Document these actions in AMS.

  5. When working a WHC telephone call where the taxpayer account meets the conditions in (1) above, take the following actions:

    1. While the taxpayer is on the telephone, secure and document in AMS all necessary information to resolve the WHC case.

    2. Advise the taxpayer that you will coordinate with the assigned RO to resolve their case and they will be notified by mail of withholding case resolution.

    3. Follow procedures in (1) through (4) above.

Lock-In Letters

  1. Letter 2800C and Letter 2801C, mailed to the employer and the taxpayer, respectively, are commonly known as the "lock-in letters" . Letter 2800C instructs the employer to disregard Form W-4 submitted by the taxpayer and withhold at the marital status and the number of allowances determined by the Service. Letter 2801C advises the taxpayer that the employer has been instructed to disregard Form W-4 submitted by the taxpayer and withhold at the rate specified in Letter 2800C, unless the Form W-4 results in more tax withheld than the lock-in letter.

  2. Mail Letter 2801C to the taxpayer's last known address as defined by Treas. Reg. Sec. 301.6212-2. As a general rule, the last known address is the address that appears on the taxpayer's most recently filed tax return or as updated by the National Change of Address (NCOA) database. For further guidance regarding the definition of the last known address see Rev. Proc. 2010-16, 2010-19 IRB.

    1. If the taxpayer's name and social security number (SSN) do not match, always use the Master File address (including reverse validity) belonging to the case SSN.

    2. If the last known address can not be determined (there is no entity on Master File), the Service may use the address on the most current Form W-2 for mailing the lock-in letter to the taxpayer. If each Form W-2 shows a different address, use the address on the one showing the most wages. DO NOT update the taxpayer's address of record on Master File, but add the address information to the AMS history and to WHCS.

  3. Letter 2800C and Letter 2801C are mailed at the same time.

    • Letter 2801C instructs the taxpayer to respond to us within 30 days if the taxpayer wishes to request a modification.

    • Letter 2800C instructs the employer to lock-in the employee starting with the first pay period ending on or after 60 days from the date of the letter. This ensures that the taxpayer has ample time to respond to the proposed lock-in.

Outcome 2 Cases

  1. These cases meet lock-in criteria. Cases are systemically loaded into WHCS. They are designated as Outcome 2 on the WHCS Taxpayer Summary screen and WHCCI<1 on ENMOD. The TC 971 AC 146 appears on the tax year that the letter is issued.

  2. Letter 2800C and Letter 2801C are systemically issued.

  3. See IRM 5.19.11.7, Responses and Redeterminations, for guidance in working telephone and/or paper responses to the letters.

Outcome 3 Case Processing

  1. These cases meet lock-in criteria but fall into categories which require manual review by tax examiners before issuing Letter 2800C and Letter 2801C, commonly known as lock-in letters.

  2. Outcome 3 cases will be issued on a weekly listing. The listing will contain the following literals identifying the category type:

    • CID - IRM 5.19.11.5.1, Criminal Investigation Cases (CID)

    • DIS - IRM 5.19.11.5.2, Disaster Relief Cases (DIS)

    • SSN - IRM 5.19.11.5.3, SSN Issues (SSN)

    • IRS - IRM 5.19.11.5.4, IRS Employees (IRS)

    • ADD - IRM 5.19.11.5.5, Incomplete or Foreign Address (ADD)

    • AW2 - IRM 5.19.11.5.6, Additional Forms W-2 (AW2)

  3. Thoroughly research the account as the preceding Outcome 3 category types are not mutually exclusive.

  4. When working the listing, only research and work those employers shown on the listing.

    1. Research WHCS and IDRS to eliminate those employers who were issued lock-in letters in the past twelve (12) months.

    2. To determine whether a lock-in was previously issued, look for an unreversed TC 971 AC 146, cross-referenced to that employer, within this period.

    3. For those employers eliminated, update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS.

    4. Do not update IDRS.

  5. Multiple taxpayers using the same SSN when filing their tax returns are classified as "mixed entity" or "scrambled SSN" cases.

    • A mixed entity case is created when two or more taxpayers complete a tax return with the same TIN.

    • The case becomes a scrambled SSN case when the true owner of the SSN cannot be identified.

    Caution:

    Do not take any action on cases with an open control base to the Scrambled SSN unit. Document AMS. Update WHCS with TC 972 AC 146 and disposition code "SSN" and close the case.

  6. If a lock-in letter to an employer was issued more than twelve months ago take the following actions:

    1. If your research shows that the lock-in rate has been modified within the past six months, as evidenced by a TC 971 AC 148, cross-referenced to that employer, do not issue another lock-in letter. Update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

    2. If your research shows that the lock-in rate has not been modified within the past six months and the taxpayer does not meet the special handling criteria in (10) below, issue another lock-in letter at the single and zero rate. Add or update case information to WHCS as appropriate. See the WHCS User Guide for instructions. Update IDRS and AMS as appropriate.

  7. In some instances, W-2 forms are issued on one-time payments to taxpayers (e.g. proceeds from class action settlements). Eliminate this employer. Update WHCS with TC 972 AC 146 and disposition code "ERR" and document AMS. Do not update IDRS.

    Note:

    A single payment received on an annual basis does not meet this criteria.

  8. If there is no evidence of a prior lock-in on WHCS or IDRS and the taxpayer has filed and full paid the most recent tax year due at the time you review the case, do not issue lock-in letter(s). Document the AMS history and update all employers on WHCS with TC 972 AC 146 and disposition code "CPL" . Do not update IDRS.

  9. Issue lock-in letters to all remaining employers on the Outcome 3 listing.

    Exception:

    See list below:

    If ... Then ...
    Taxpayer is a statutory employee See IRM 5.19.11.10.12, Statutory Employees
    Taxpayer is a Household employee See IRM 5.19.11.10.6, Household Employees
    Taxpayer is a 3rd party sick pay employee See IRM 5.19.11.10.13, Third Party Sick Pay
    The Form W-2 was issued by an organization listed in Exhibit 5.19.11-1 , International organizations Exempt from Federal Withholding Requirements Update WHCS with TC 972 AC 146 and disposition code "NSW" and document AMS. Do not update IDRS.

    Reminder:

    When issuing the lock-in letter, always post the 971 transaction to the current calendar year.

  10. In addition, while working Outcome 3 cases, tax examiners must keep alert for those cases requiring special handling for issuance of lock-in letter. They are

    • Bankruptcy

    • Offer in compromise

    • Potentially dangerous taxpayers (PDT)

    • Cautious Upon Contact (CAU)

    • Combat Zone (-C freeze)

    • Criminal Investigation (-Z freeze)

    • Disaster (-O freeze)

    These cases and others are generally identified by freeze codes or other indicators on IDRS. See IRM 5.19.11.10, Special Situations.

  11. All decisions NOT to issue a lock-in letter, except as specified in (3) through (10) above, require managerial approval. The basis for the decision must be fully documented in AMS.

Criminal Investigation Cases (CID)

  1. These cases are identified by the literal "CID" on the Outcome 3 listing.

  2. Verify on IMFOLI and/or ENMOD that the open CI indicators "-Z" or "Z-" are present. If one is present:

    • Print the IMFOLI or ENMOD screen

    • Highlight the applicable indicator

    • Route to the lead

  3. The lead will follow local guidelines for contacting the appropriate CI function.

    • If CI fails to respond to lead, close case as TC 972/146, ERR.

    • If the indicator is not present, follow general processing procedures.

Disaster Relief Cases (DIS)

  1. These cases are identified by the literal "DIS" on the Outcome 3 listing.

  2. Check IMFOLI for the "-O" freeze code. If one is present, take the following actions:

    1. Check IMFOLE for the most recent TC 971 AC 086 and 087.

    2. Look for the disaster ending date, identified by the literal "DIS-END-DT:" mmddyyyy.

    3. If the current date is beyond the disaster ending date, then the disaster relief period has ended. Follow general case processing procedures.

    4. If the disaster relief period has not ended, do not issue lock-in letters. Update WHCS with TC 972 AC 146 and disposition code “ERR”. Document AMS. Do not update IDRS.

  3. If the taxpayer self-identifies and qualifies for an "-O" freeze but no "-O" freeze is present, verify that the taxpayer’s zip code is among those of the affected areas during the disaster period. See IRM 25.16.1.7.2, -O Freeze, for instructions on calling the toll free line.

  4. The "-S" freeze is the disaster Indicator for taxpayers in a minor disaster area. This freeze does not stop WHC processing.

SSN Issues (SSN)

  1. These cases are identified by the literal "SSN" on the Outcome 3 listing.

  2. This category includes taxpayers with

    1. More than twenty Form W-2 records associated with an SSN's in a given tax year

    2. Missing SSN's

    3. SSN and name mismatches

Missing SSNs
  1. If the SSN is missing or is all zeros, research using CC NAMES to find a valid Taxpayer Identification Number (TIN).

    1. If you find a valid TIN, check whether the taxpayer is in compliance with filing and payment requirements for the most recent tax year due at the time you review the case. If so, do not issue lock-in letters. Close the case on WHCS using TC 972 AC 146 with Disposition Code "CPL" (taxpayer is in compliance). Update AMS with the TIN that the taxpayer files under and the actions taken

    2. If you do not find a valid TIN, or you find a valid TIN, but the taxpayer is not in compliance with filing and payment requirements for the most recent tax year due, work the case according to general procedures using the Form W-2 SSN.

    Note:

    Add the valid TIN to the Other TIN field on the WHCS Taxpayer Detail screen.

SSN and Name Mismatches
  1. A WHC mismatch is defined as those instances where the taxpayer's name on the Form W-2, Wage and Tax Statement, does not match the name associated with that SSN on Master File.

    Reminder:

    Research IDRS for reverse validity of the SSN. If the TC 971 AC 147 is found on the reverse validity, document AMS on both valid and reverse validity sides.

  2. Work only the name on the Outcome 3 listing.

  3. Issue lock-in letters to all employers on the listing unless

    1. A lock-in letter was issued more than twelve months ago and your research shows that the lock-in rate has been modified within the past six months, as evidenced by a TC 971 AC 148, cross-referenced to that employer, do not issue another lock-in letter. IRM 5.19.11.5, Outcome 3 Case Processing

    2. the taxpayer is a statutory employee, household employee, or receives 3rd party sick pay. For more information see IRM 5.19.11.5(9), Outcome 3 Case Processing Or

    3. The Form W-2 was issued by an organization listed in Exhibit 5.19.11-1, International Organizations Exempt from Federal Withholding Requirements. IRM 5.19.11.10.15, Taxpayers Employed by International Organizations.

    4. The payment on Form W-2 is a one-time payment to the taxpayer. IRM 5.19.11.5(7), Outcome 3 Case Processing.

    5. A lock-in letter was issued within the past twelve months. See IRM 5.19.11.5(4), Outcome 3 case processing.

  4. Issue Letter 2801C to the name on the listing using the Master File address. If there is no account on Master File, use the address shown on the most current W-2 forms. If each Form W-2 shows a different address, use the address on the Form W-2 showing the most wages.

  5. Input the appropriate transaction code to IDRS using the SSN on the listing. If there is no account on Master File do not input TC 971.

  6. Document AMS with the name from the listing to which the WHC letters were issued as well as all actions taken. Update WHCS.

Working Responses For Returns Filed Under Different TIN
  1. If the taxpayer has filed under a different TIN (such as an ITIN, Temporary TIN, other SSN) verify that the wages/income shown on the W-2 form(s) were reported. If the wages were reported follow procedures in the table below:

    If Then
    The taxpayer has a valid SSN to work and has filed and paid the most current return due under a valid ITIN Release the lock-in.
    • Issue Letter 2809C and Letter 2813C

    • Input TC 972 AC 146 with TC 972 Disposition Code "CPL"

    • Update AMS with the TIN the taxpayer files under and the actions taken.

    Reminder:

    Advise the taxpayer that if future W-2 forms and TINS do not match, they may be locked in again.

    If the taxpayer has filed the most current return due but has a balance due
    • Follow general procedures

    • Compute allowances and

    • Issue modification letters as appropriate

    Reminder:

    Advise the taxpayer that if future W-2 forms and TINS do not match, they may be locked in again.

    The non-owner of the SSN filed a return under ITIN
    • The individual calling is inappropriately using another taxpayer's SSN for purposes of employment and a Lock-In letter was issued on the borrowed SSN, do not disclose any of the SSN owner information.

    • The non-owner of the SSN will not be released or modified.

    Note:

    Refer them to the SSA for help in getting an SSN. Any employee who is legally eligible to work in the US and does not have a SSN can get one by completing Form SS-5, Application for a Social Security Card, and submit the necessary documentation. The taxpayer can get this form at SSA office, from the SSA website at www.socialsecurity.gov, or by calling 1-800-772-1213.

  2. If the taxpayer has not filed:

    1. Advise them that all income must be reported on a tax return.

    2. Refer them to the Social Security Administration (SSA) for help in getting an SSN.

      Note:

      Any employee who is legally eligible to work in the United States and does not have a social security number can get one by completing Form SS-5 , Application for a Social Security Card, and submitting the necessary documentation. The taxpayer can get this form at SSA offices, by calling 1-800-772-1213, or from the SSA website at www.socialsecurity.gov. If the taxpayer is not eligible to obtain an SSN, refer the taxpayer to the IRS toll-free number or www.irs.gov for information about getting an ITIN. See Pub 1915, Understanding Your IRS Individual Taxpayer Identification Number (ITIN) for additional information

      .

    3. Set deadline for filing.

    4. Follow general procedures to compute allowances and issue modification letters as appropriate.

  3. If taxpayer has obtained both a valid SSN and an ITIN,

    • Encourage the taxpayer to contact the ITIN Unit to have the valid SSN credited for returns filed under the ITIN.

    • Explain and encourage the taxpayer to report all wages and file all future returns using the valid SSN.

IRS Employees (IRS)

  1. An "IRS" literal can appear on Outcome 2, Outcome 3 and phone calls.

  2. If you do not know the IRS employee, work the cases using general procedures. Complete Form 11377, Taxpayer Data Access, and give to your manager.

  3. If you know the IRS employee, give the case to your lead for someone else to work.

Incomplete or Foreign Address (ADD)

  1. These cases are identified by the literal "ADD" on the Outcome 3 listing.

  2. The following case types are included in this category:

    • Incomplete taxpayer address or missing Master File entity

    • Incomplete employer address or missing Master File entity after Payer Master File (PMF) research

    • Foreign address

    • Army Post Office (APO) and Fleet Post Office (FPO) addresses

  3. Take the following actions for incomplete employer address cases:

    1. Conduct research using available internal sources such as CFOL CC BMFOLE, CC PMFOL and CC NAMEE. If unsuccessful, eliminate that employer. Update WHCS with TC 972 AC 146 and disposition code “ERR”.

    2. Once you have found a good address, follow general procedures.

  4. Conduct research using available internal sources such as CFOL CC IMFOLE and CC NAMES for incomplete taxpayer address cases.

  5. When requesting a Correspondex letter addressed to a taxpayer with foreign address, make sure that the address is formatted correctly. If necessary, enter the Foreign Address indicator (#) and then format the City, State, & Zip field as needed in order to properly address the letter.

  6. Provide overseas taxpayers with the WHC local telephone number, (978) 783-9447, instead of the toll-free number.

Additional Forms W-2 (AW2)

  1. Additional Forms W-2 (AW2) received from SSA after initial case creation are processed by ECC at the end of each calendar year. Processing results in one of the following:

    • A new WHC case is created on a taxpayer who did not meet lock-in criteria during the initial case creation

    • The AW2 must be added to the WHCS taxpayer record of a case created during the preceding case creation

    • The AW2 is dropped

  2. AW2 records for current year Outcomes 2 and 3 cases that have not yet been sent to Detroit Computing Center (DCC) and input to WHCS are added systemically. An annual listing is generated for cases that have already been added to WHCS by DCC.

  3. The AW2 records on the listing require manual input to WHCS. Each record on the listing contains the following data elements:

    1. Outcome type

    2. Taxpayer TIN

    3. Taxpayer name

    4. Employer name and address

    5. Employer EIN

  4. For each AW2 on the listing, research the case on WHCS and take the following actions:

    1. If there is no case on WHCS for this taxpayer, add the case using SOURCE "W2" and OUTCOME 3/REF CODE "AW2 " . Follow general processing procedures, issuing lock-in letters to the new employers as appropriate.

    2. If there is a SOURCE "W2" case on WHCS and the tax year of the AW2 matches the tax year on the TAXPAYER SUMMARY screen, add the AW2 to that case. Follow general processing procedures, issuing lock-in letters to the new employers as appropriate.

    3. If there is a case on WHCS for a tax year earlier than the tax year of the AW2, treat the AW2 as a new case, add the case to WHCS and follow general case processing procedures.

      Note:

      If the WHCS case is a referral opened within the last twelve months, take no action on the AW2.

Referrals and Special Projects

  1. Withholding Compliance (WHC) will no longer work referral cases sent after July 11, 2014 except Civil Penalty Cases seeIRM 5.19.11Civil penalty Determinations. All cases received after that will be destroyed.

Responses and Redeterminations

  1. Responses may result from taxpayers' correspondence or telephone contacts as a result of the systemic issuance of lock-in letters on Outcome 2 cases or the manual issuance of lock-in letters on Outcome 3 cases and referrals.

  2. Responses and redeterminations are worked the same way and resolved in one of the following three ways:

    • Modify lock-in by changing the marital status and/or number of withholding allowances previously specified

      Note:

      Once spousal consent is initially obtained, there is no need to request additional spousal consent before changing the number of the taxpayer's allowances if the taxpayer is married.

    • No change

    • Release of lock-in (Release the lock-in for both the taxpayer and the taxpayer's spouse if the spouse was added to the program as a result of a modification to the taxpayer's lock-in letter.)

    Note:

    In some instances taxpayers may call in repeatedly. AMS documentation must be accurate and complete so the next tax examiner answering the call can understand the decisions made and information previously shared with the taxpayer. Do not consider a redetermination unless there is new information supporting a change. Make sure all information is documented according to IRM 5.19.11.3.3, Case Documentation

  3. In some instances a Taxpayer or Employer will call and ask us to fax the letter immediately, inform them that the letter has no signature but can be faxed. Tell them we will fax the letter and also send the IDRS letter by mail with the correct signature.

  4. Do not use a Quick Note if there is an appropriate C letter available.

  5. A taxpayer may request a copy of a 280X letter because they never received the original. Explain that we can't send the original letter and we will issue a new letter but the dates will be different. Document AMS that a new letter was sent because they did not receive the original.

    Note:

    If the employer is calling for a copy, determine if the lock in has occurred and they just lost the original for their records. If they have not received the original and they are inquiring because the employee notified them, send them a new lock-in letter and ensure appropriate time frames are followed.

  6. When the taxpayer responds that they no longer work for all of the employers listed who were issued lock-in letters, instruct the taxpayer to submit a correct and valid Form W-4 to their new employer, offer to assist the taxpayer with the Form . Document AMS.

  7. Work responses promptly since the employer has been instructed to adjust the taxpayer's withholding starting with the first pay period ending on or after 60 days from the date of the lock-in letter.

  8. When correspondence is received and contact cannot be made within 30 days from the earliest IRS received date, initiate an interim response using Correspondex Letter 2645C in accordance with Policy Statement P-21-3. For more information see IRM 21.3.3.4.2, Policy Statement P-21-3 (formerly P-6-12) Procedures.

  9. An interim response must

    • Be initiated within 30 days of the earliest IRS received date

    • Specify the date when the final determination will be mailed

    • Provide the taxpayer with WHC contact information

    Note:

    AMS will not be issuing interim letters on WHC cases.

  10. Look for indicators of fraud and/or frivolous arguments. See IRM 25.1.2.2 , Fraud Development Procedures and IRM 5.19.11.10.5, Frivolous Communications, for further information.

    Note:

    If a potential fraud referral exists, DO NOT solicit the return. DO NOT modify or release the Withholding Compliance lock-in on the account. Complete a fraud indicator check sheet. Forward the check sheet to the Collection Function Fraud Coordinator (CFFC).

  11. If the taxpayer questions the legal authority supporting the Withholding Compliance program, send Letter 3042C. See IRM 5.19.11.10.5., Frivolous Correspondence for more information.

  12. When working requests for redetermination from a taxpayer who filed jointly on the most recently due return and both the taxpayer and the taxpayer’s spouse work, compute the number of allowances using one worksheet for both taxpayers to determine if the lock-in should be modified. You must get consent from the taxpayer’s spouse (x-ref spouse) before you lock-in the x-ref spouse and before you modify the taxpayer’s allowances:

    1. If you are unable to acquire verbal consent send Letter 2805C to the spouse for written consent and modify the TP to M000. Follow normal procedures in IRM 5.19.11.7.1.1, Information Required to Modify Lock-In.

    2. If the x-ref spouse provides verbal or written consent, add the spouse to WHCS as a separate case and follow the instructions under IRM 5.19.11.7.1.1, Information Required to Modify Lock-In. Include cross-reference SSN on both records.

    3. Document AMS history with a cross-reference to the other spouse's account.

  13. If an employer responds that a taxpayer no longer works there, Take no action and destroy unsolicited correspondence. Per IRM 1.4.6 management has responsibility for proper records management.

    Note:

    Do not update IDRS or WHCS. All "no longer works here information sheets" from previous revisions of Letter 2800, will be destroyed with no further action.

  14. If the employer says that he or she has no record of the taxpayer ever working there,

    • Call the employer to verify to whom the Form W-2 was issued.

    • Make "one" attempt to call the employer.

    • If unable to contact the employer, close the case.

    • If you determine that the taxpayer is still employed advise the employer to honor the lock-in letter.

    • Document AMS.

  15. If you determine that Letter 2800C was issued using an incorrect name, add the taxpayer to WHCS. Add the new case using the correct name by using Source Code "MM" .

    If ... Then ...
    If the taxpayer meets minimum wage requirements
    • Reissue the lock-in letter using the name provided by the employer or the name from the Form W-2.

    • Update the new record on WHCS with the letter information.

    • Update AMS.

    • Input TC 972 AC 146 with Disposition Code "SSN" to the existing WHCS employer record.

    • Do not update IDRS.

    If the taxpayer does not meet minimum wage requirements for lock-in letter issuance
    • Input TC 972 AC 146 with Disposition Code "SSN" to the existing WHCS employer record and IDRS.

    • Input TC 972 AC 146 with Disposition Code "LEM" to WHCS on the new case.

  16. In some instances you may need additional information from the taxpayer to make a case determination. Make at least one attempt to contact the taxpayer by telephone at different times of the day/evening before writing to the taxpayer. Each attempt to contact must be documented on AMS.

  17. If you are unable to contact the taxpayer by telephone, send Letter 4243C listing the information required to resolve the case. Document AMS with requested information.

    Reminder:

    Issue an interim response for written responses from the taxpayer on or about the 23rd day if you can't resolve the case within 30 days.

  18. Non-Owner of the SSN communicates with the IRS and claims the lock-In-letter is incorrect.

    1. If the individual calling is "inappropriately" using another taxpayer's social security number for purposes of employment and a Lock-In letter was issued on the "borrowed" social security number, do not disclose any of the SSN owners information.

    2. The non-owner of the SSN will not be released or modified.

    3. Refer them to the SSA for help in getting an SSN. Any employee who is legally eligible to work in the US and does not have a SSN can get one by completing Form SS-5, Application for a Social Security Card, and submit the necessary documentation. The taxpayer can get this form at SSA office, from the SSA website at www.socialsecurity.gov, or by calling 1-800-772-1213 .

    Note:

    For further guidance on ID Theft information refer to IRM 25.23, Identity Protection and Victim Assistance.

  19. If the taxpayer has filed under a different TIN (such as an ITIN, Temporary TIN, other SSN) verify that the wages shown on the W-2 form(s) were reported. If the wages were reported, follow procedures in the table below:

    If Then
    The taxpayer has a valid SSN to work and has filed and paid the most current return due under a valid ITIN Release the lock-in
    • Issue Letter 2809C and Letter 2813C

    • Input TC 972 AC 146 with TC 972 Disposition Code "CPL"

    • Update the WHCS Taxpayer Detail screen with the TIN the taxpayer files under

    • Update AMS on both TIN's that the taxpayer files under and the actions taken

    Note:

    Advise the taxpayer that if future W-2 forms and TIN's do not match, they may be locked in again.

    If the taxpayer has filed the most current return due but has a balance due
    • Follow general procedures

    • Compute allowances

    • Issue modification letters as appropriate

    Note:

    Advise the taxpayer that if future Forms W-2 and TINS do not match, they may be locked in again.

    The non-owner of the SSN filed a return under ITIN
    • The individual calling is inappropriately using another taxpayer's SSN for purposes of employment and a Lock-In letter was issued on the borrowed SSN, do not disclose any of the SSN owner information.

    • The non owner of the SSN will not be released or modified.

      Note:

      Refer them to the SSA for help in getting an SSN. Any employee who is legally eligible to work in the US and does not have a SSN can get one by completing Form SS-5, Application for a Social Security Card, and submit the necessary documentation. The taxpayer can get this form at SSA office, from the SSA website at www.socialsecurity.gov, or by calling 1-800-772-1213.

    • For further guidance on ID Theft information refer to IRM 25.23, Identity Protection and Victim Assistance.

  20. If the taxpayer has not filed

    1. Advise the taxpayer that all income must be reported on a tax return.

    2. Refer them to the Social Security Administration (SSA) for help in getting an SSN.

      Note:

      Any employee who is legally eligible to work in the United States and does not have a social security number can get one by completing Form SS-5, Application for a Social Security Card, and submitting the necessary documentation. The taxpayer can get this form at SSA offices, by calling 1-800-772-1213, or from the SSA website at www.socialsecurity.gov. If the taxpayer is not eligible to obtain an SSN, refer the taxpayer to the IRS toll-free number or www.irs.gov for information about getting an ITIN. See Pub 1915 , Understanding Your IRS Individual Taxpayer Identification Number (ITIN) for additional information.

    3. Set deadline for filing.

    4. Follow general procedures to compute allowances and issue modification letters as appropriate.

  21. When speaking to the taxpayer, use SUMRY and IMFOLI to determine if there are delinquent returns and/or balances due.

    1. For delinquent returns, instruct the taxpayer to file and set a deadline of 30 days.

    2. Advise the taxpayer that failure to file by the deadline could result in substitute for return processing, referral to Examination, or summons. Enter deadline date in AMS history.

    3. See IRM 5.19.11.3.7., Installment Agreement (IA) Taxpayers for installment agreement requests and revisions procedures.

  22. "-S" freeze is a disaster Indicator for taxpayers in a minor disaster area. This freeze does not stop WHC processing. If the taxpayer self-identifies and qualifies for the "-S" freeze, verify that the taxpayer’s zip code is among those of the affected areas during the disaster period. See IRS Disaster Assistance Program for affected zip codes. See IRM 25.16.1.7.1, -S Freeze for instructions on manually setting the "-S" freeze.

  23. If the taxpayer calls after modification has been processed and says that the employer will not honor the Form W-4 submitted by the taxpayer that results in MORE income tax withholding than was specified in the modification letter, send Letter 4074C to the employer.

  24. Correspondence or telephone calls received from IRS employees can be worked by any WHC employee if they don't know the IRS employee. See IRM 5.19.11.5.4., IRS Employees (IRS)

Modify Lock-in

  1. Taxpayers may call in or send the Service additional information and request that we reconsider our proposed or previous lock-in determination.

    Note:

    Faxed documentation is acceptable to process additional information requested. If the taxpayer faxes in an unfiled return send for processing.

  2. Look for special situations. Research IDRS for freeze codes associated with Outcome 3 cases. Follow instructions contained therein.

  3. In many instances the taxpayer's correspondence will contain a new Form W-4 and completed worksheet.

    1. Review the Form W-4 and worksheet for accuracy. DO NOT take any action based on an invalid Form W-4. See IRM 5.19.11.3.5, Invalid Form W-4 for more information.

    2. If the taxpayer did not submit a Form W-4 worksheet, prepare one based on current taxpayer information confirmed by taxpayer communication and/or your research. Use judgement in determining credibility and the need for verification. Follow guidelines in See IRM 5.19.11.7.1.2., Calculating Withholding Allowances, for calculating withholding allowances.

    Reminder:

    Base the withholding allowance calculation on the taxpayer's current situation.

    Example:

    If the taxpayer's most recently filed return showed itemized deductions of $50,000 confirm with the taxpayer that they project the same amount for the current year before using this amount for the withholding calculation.

  4. If the taxpayer calls, complete the worksheet while the taxpayer is on the telephone. Try to resolve the entire case by phone. Oral testimony is acceptable. Use judgement in determining credibility and the need for verification.

  5. If the taxpayer response states that they furnished a new Form W-4 to their employer, work the response as a redetermination.

  6. When verification is required on Personal Allowances worksheet items, attempt to validate the information from internal sources before contacting the taxpayer.

  7. When verification is required on Deductions and Adjustments worksheet items or Converting Credits to Withholding Allowances worksheet, allow only those amounts that can verified on the most recent return due, including RTVUE/TRDBV for returns in processing; or the immediate prior year return when the most recent return due is not available.

    Reminder:

    An Automated Substitute for Return (ASFR) return is not considered to be a return for verification purposes.

  8. When working correspondence, check the most recent IRPTR and WHCS to identify all current employers. When talking to the taxpayer on the telephone ask them for the names and addresses of all current employers.

    1. If not already listed, add these employers to WHCS and document the AMS history.

    2. If the taxpayer indicate they no longer work for an employer listed on the most current IRPTR, document AMS history.

  9. See IRM 5.19.11.7, Responses and Redeterminations, for procedures regarding modifying the lock-in if the taxpayer is married and wants to change the number of allowances.

Information Required to Modify Lock-in
  1. If the taxpayer has not filed the most recent return due or the information they provide does not match return or internal source information, the taxpayer must provide documentation, as applicable, to support the request for modification. See the table below for required documentation:

    If the taxpayer and then request
    Is married and previously filed "Single" status Intentionally left blank X-ref spouse's SSN and current year filing status. You will need spousal consent to add the x-ref spouse in order to modify the allowances to the maximum amount. If unable to get verbal consent on the phone send Letter 2805C for written consent and modify TP to "M000" .
    Can supply SSN(s) of all dependent(s) he or she wants us to consider when computing his or her withholding allowances The SSN(s) can be verified through internal sources No further action is necessary
    Has not supplied the SSN(s) of any dependent(s) he or she wants us to consider when computing his or her withholding allowances We are unable to verify SSN(s) and dependent status through internal sources Copies of birth certificate(s) and social security card(s)
  2. The following deductions and adjustments must be verified by the most recent return due, including RTVUE/TRDBV for returns in processing; or the immediate prior year return when the most recent return due is not available:

    • Child or dependent care expenses

    • Schedule A deductions (including home mortgage interest, charitable contributions, real estate, state and local taxes, medical and miscellaneous expenses)

    • Adjustments which decrease adjusted gross income such as alimony payments, student loan interest and Individual Retirement Account (IRA) contributions

  3. If the correspondence is insufficient to complete the worksheet, contact the taxpayer by telephone to secure the missing information.

  4. If you are unable to talk to the taxpayer and resolve the issue, send Letter 4243C requesting the required information.

    Reminder:

    Give the taxpayer a two week deadline to respond.

  5. Document AMS with the deadline set and specific information requested to complete the redetermination. When the taxpayer responds, any tax examiner can then complete the case.

Calculating Withholding Allowances
  1. The Form W-4 worksheet and, if required, the worksheets and tables in Publication 505, Tax Withholding and Estimated Tax, will be used to figure the correct status and number of withholding allowances for the taxpayer.

  2. Secure the information necessary to complete the worksheets from the taxpayer or their authorized representative.

    If ... Then ...
    Working correspondence and the information submitted by the taxpayer is insufficient to figure the correct number of withholding allowances
    • Contact the taxpayer or their authorized representative by telephone to obtain the additional information.

    • Make at least one attempt to reach the taxpayer by telephone before initiating correspondence.

    You are speaking to the taxpayer
    • Complete the worksheet at that time.

    • It is not necessary for the taxpayer to submit the form in writing.

    The taxpayer is current in filing
    • Compare the taxpayer's information regarding marital status, dependents, income, deductions and credits to the last return filed.

    • Research using CC RTVUE and CC IRPTR.

    • Discuss and resolve any significant discrepancies with the taxpayer.

    • Document the explanation in the history.

    The taxpayer is a nonfiler Explain to them that submission of the tax return will provide sufficient verification.

    Note:

    Ask the taxpayer to file the original return(s) according to the instructions on the Form 1040, U.S. Individual Income Tax Return or any notices he/she has received and fax or mail the Withholding Compliance Unit a copy.

  3. When appropriate, written verification should be requested . Examples are listed below but are not all inclusive.

    1. Current income has decreased more than 20% from the preceding year.

      Example:

      According to IRPTR, the taxpayer had wages of $75,000 last year. The taxpayer tells you his wages have decreased to $55,000. Request a recent pay stub from the taxpayer to verify. Destroy the documents once the information is added to AMS. Per IRM 1.4.6 management has responsibility for proper records management.

    2. Schedule A expenses have increased more than 20% from the preceding year.

      Example:

      The taxpayer tells you that his mortgage interest expense is currently $18,000 per year. According to IRPTR, the taxpayer paid $10,000 in the preceding year. Request verification ( e.g. A current copy of their bill showing interest and multiply by 12) of the mortgage interest amount. Destroy the documents once the information is added to AMS. Per IRM 1.4.6 management has responsibility for proper records management.

    3. Changes in filing status and/or number of dependents.

      Example:

      The taxpayer currently claims a different filing status and/or number of dependents from the preceding year. Verify the filing status of secondary spouse, if applicable. Ask the taxpayer for the SSN's and birth dates of dependents.

      Reminder:

      Child tax credits can only be claimed for dependents under age 17.

  4. APO/FPO addresses may indicate that the taxpayer is either in the military or works for the federal government. If the taxpayer is in the military or works for the federal government, they do not qualify for the foreign earned income or foreign housing exclusion (reported on Form 2555, Foreign Earned Income). If the taxpayer has an APO/FPO address, you must determine if they are in the military or working for the federal government through research or contact.

    1. If you determine that the taxpayer is not in the military or working for the federal government, the Form 2555 can be used for calculating withholding allowances.

    2. If you determine that the taxpayer is in the military or working for the federal government, Form 2555 should not be considered in calculating withholding allowances.

    Note:

    For joint filers, one spouse may qualify while the other does not. The qualifying spouse may complete a separate Form 2555. Disregard any erroneously filed Forms 2555 attached to the return when calculating the number of allowances.

    Example:

    Taxpayer A has an APO address. Research and contact confirms his employer is neither military nor federal government. Taxpayer filed Form 2555 which can be used to calculate appropriate withholding allowances based on current situation.

  5. After calculating the correct number of allowances, inform the taxpayer that we will send their employer(s) a letter revising the marital status and number of allowances previously specified in Letter 2800C.

  6. If the taxpayer requests fewer allowances than what was calculated to be the correct number, advise the taxpayer to submit Form W-4 claiming the requested number of allowances to his employer.

    1. Advise the taxpayer that our letters instruct the employer to honor the Form W-4 ,if the withholding rate, withholding allowances and any additional amount claimed on the employee’s current Form W-4 or a new Form W-4 will result in MORE income tax withheld than at the withholding rate and withholding allowances specified in the letter.

    2. Offer to send the employer Letter 4074C.

Calculating Allowances for Married Taxpayers or Taxpayers with More Than One Job
  1. You must complete the Two-Earner/MultipleJobs Worksheet on the back of the Form W-4 if

    1. The taxpayer filed the most recently due return jointly and both spouses work, or

    2. The taxpayer has more than one job, and

    3. The combined earnings from all jobs exceed the amounts listed on line H of Form W-4.

      Note:

      Verbal or written consent (Letter 2805C ) is necessary to lock-in the taxpayer's spouse (x-ref spouse).

  2. This worksheet will reduce the number of allowances the taxpayers are otherwise entitled to, in order to avoid having too little tax withheld. The IRS recommends that all the allowances be claimed for the highest paid job and zero allowances be claimed for the other jobs. However, the taxpayers may split the allowances any way they want.

    1. If no verbal or written consent is received from the x-ref spouse, advise the taxpayer that until the x-ref spouse provides the required consent, the taxpayer’s lock-in will be modified to Married with zero allowances.

    2. If consent is given by the x-ref spouse, but the taxpayer cannot provide a complete and accurate name of the x-ref spouse’s employer to enable the tax examiner to find an EIN, advise the taxpayer that until the taxpayer provides the required information, the taxpayer’s lock-in will be modified to Married with zero allowances.

    3. AMS documentation should include
      the basis for the Form W-4 calculation,
      the specific information
      and/or all documentation requested from the taxpayer.

    Note:

    For married taxpayers with multiple jobs or a taxpayer with more than two jobs, use each the two highest paying jobs for calculating allowances on the Two-Earner/Multiple Jobs Worksheet. Do Not compute lines 4 through 9 on the Two-Earner/Multiple Jobs Worksheet since the IRS may not require additional withholding above the amount withheld using the marital status and the number of allowances specified in the lock-in letter. However, advise the taxpayers that they may elect to have additional withholding by completing a new Form W-4, Employee’s Withholding Allowance Certificate and giving it to their employer.

  3. Either the taxpayer or spouse may provide the information necessary to calculate the allowances once the x-ref spouse has given consent. Under IRC Section 6103(h)(4) you may make disclosures regarding withholding exemptions of a spouse to the other spouse.

  4. After calculating the correct number of allowances, inform the taxpayer that we will send their employer(s) a letter revising the marital status and number of allowances previously specified in Letter 2800C.

    1. Issue Letter 2808C to the employer(s) and Letter 2812C to the taxpayer.

    2. Input TC 971 AC 148 with the modified lock-in rate and cross-reference the employer EIN.

    3. Notate your actions on AMS and update WHCS.

    Note:

    If the taxpayer requests fewer allowances than what was calculated to be the correct number, advise the taxpayer that the employer(s) letters instruct them that if the withholding rate, withholding allowances, and any additional amount claimed on the employee's current Form W-4 or a new Form W-4 will result in MORE income tax withheld than at the withholding rate and withholding allowances specified in the letter, they must honor it. Offer to send the employer the Letter 4074C.

  5. Send Letter 2801C to the x-ref spouse and Letter 2800C to the x-ref spouse's employer(s) to lock in their withholding as previously determined. Input TC 971 AC 146 with the lock-in rate and cross-reference the employer EIN. Notate your actions on AMS and update WHCS.

    Note:

    Regulations provide that the earliest the lock-in letter may be effective is 45 calendar days after the date of the letter. Letter 2800C requires that the employer(s) wait 60 days before adjusting the employee's withholding to the marital status and number of allowances specified in Letter 2800C .

Common Law Marriage
  1. The taxpayer may claim that they are common law married. In order to have a valid common law marriage, the taxpayer and common law spouse must

    • Live together for a significant period of time

    • Hold themselves out as a married couple

    • Intend to be married

  2. Not all states permit and/or recognize common law marriage. In order to be common law married, the taxpayers must live in a state where common law marriage is recognized or in the state where the common law marriage began. The ten states that recognize common law marriages are Al, CO, IA, KS, MT, OK, RI, SC, TX, UT and the District of Columbia. See IRM 4.19.14.5.7(2), Filing Status for a list of states where common law marriage is recognized.

  3. If the taxpayer meets all three conditions in (1) above and lives in a state that recognizes common law marriage, ask the taxpayer to provide at least two of the following types of documentation to substantiate a claim of common law marriage.

    • Deeds showing title to property held jointly by both parties to the common law marriage

    • Bank statements and voided checks showing joint ownership of the accounts

    • Insurance policies naming the other party as beneficiary

    • Birth certificates naming the taxpayer and the common law spouse as parents of their children

    • Employment records listing the common law spouse as an immediate family member

    • School records listing the names of both common law spouses as parents

    • Joint credit card accounts

    • Loan documents, mortgages, and promissory notes evidencing joint financial obligations

    • Mail addressed to the taxpayer and common law spouse as "Mr. and Mrs."

    • Any documents showing that one spouse has assumed the surname of the other spouse

  4. Destroy the documents once the information is added to AMS. Per IRM 1.4.6 management has responsibility for proper records management.

    Note:

    Verbal or written consent (Letter 2805C ) is necessary to lock-in the taxpayer's spouse (x-ref spouse/common law x-ref spouse).

  5. If the taxpayer meets the above criteria, treat the taxpayer as married when calculating allowances. See IRM 5.19.11.7.1.2.1., Calculating Allowances for Married Taxpayers or Taxpayers with More Than One Job for married taxpayer procedures.

  6. If the taxpayer does not meet the above criteria, treat them as single when calculating their allowances.

Procedures for QW-4 Program Cases
  1. When contacted by the taxpayer add the case to WHCS.

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for instructions on handling these cases.

  3. Cases where lock-in letters were issued by the QW-4 program will not have a TC 971 AC 146/147 transaction on Master File.
    You must input a TC 971 AC 146 to IDRS, using the current date on the current year, before inputting a modification or release transaction.
    It is not necessary to input the TC 971 AC 146 to WHCS, only the subsequent TC 97X AC 14X.

  4. When modifying a QW-4 lock-in, input TC 971 AC 148 with posting delay (1) on the current year to WHCS and IDRS.

  5. Update AMS history.

Processing the Lock-in Modification
  1. If a modification to the lock-in rate is justified, inform both the taxpayer and the employer.
    Send Letter 2808C to all employers considered in the Modification
    and send Letter 2812C to the taxpayer.
    If the taxpayer has more than one employer, send separate letters to each.

    Note:

    If the additional information does not justify changing our previous determination, notify only the taxpayer using Letter 2810C. Input TC 971 AC 148 to IDRS with the unmodified lock-in rate. Cross-reference the employer's EIN. Update WHCS. IRM 5.19.11.7.2, No Change.

  2. If the modification will result in no tax withheld from the taxpayer's wages, release the lock-in(s) following normal procedures using WHCS Disposition Code "NSW" . Document AMS that the allowance calculation results in no tax withheld.

    1. Only release if Withholding Calculator does not come to .00 and the current year return is filed by the due date and balance due(s) are not a result of under withholding or modification that may result in future underwithholding on wages. (Case creation only uses W2 income)

      Reminder:

      A current return must be paid/filed on time before release. See IRM 5.19.11.7.3.2, Release of Lock-in After Period of Continued Compliance, for "On time" definition.

    Note:

    Use the Withholding Per Pay Period calculator to compute the amount of tax that will be withheld from the taxpayer's wages.

  3. Input TC 971 AC 148 with the modified lock-in rate to IDRS and update WHCS. Cross-reference the employer's EIN. If the taxpayer has more than one employer, input TC 971 AC 148 with the modified lock-in rate and cross-reference the EIN, for each employer sent a letter.

  4. Ensure that all employers are considered when processing the taxpayer's request. Issue letters as shown in the table below:

    If Then
    Employer has received Letter 2800C previously
    1. Send Letter 2808C to the employer.

    2. Send the taxpayer Letter 2812C using paragraph "D" for multiple employers, if needed.

    3. Input TC 971 AC 148 with employer's EIN and modified lock-in rate to IDRS.

    4. Document the AMS history with the facts and data used to calculate the modified withholding rate.

    5. Update WHCS.

    Employer has not received Letter 2800C previously or received 2800C and responded NLW more than 12 months ago.
    1. Send Letter 2800C to employer with the modified lock-in rate.

    2. Send the taxpayer Letter 2812C instead of Letter 2801C using paragraph "D" for multiple employers.

    3. Conduct research necessary to complete the letters.

    4. Input TC 971 AC 146 with employer's EIN and modified lock-in rate to IDRS.

    5. Document the AMS history with names and EIN's of the additional employers and with the facts and data used to calculate the modified withholding rate.

    6. Add new employer(s) to WHCS and update letters and transaction codes.

  5. If the taxpayer informs you that they have returned to work for an employer who received Letter 2800C and that employer had previously responded that the taxpayer "no longer works" within 12 months of the modification request, take the following actions:

    1. Send Letter 2808C to employer with the modified lock-in rate.

    2. Send the taxpayer Letter 2812C using paragraph "D" for multiple employers.

    3. Research WHCS for the original Letter 2800C transaction date. Input TC 971 AC 146 using the original Letter 2800C transaction date, EIN and Single 00 rate to IDRS. .

    4. Input TC 971 AC 148, posting delay (1) with employer's EIN, current date and modified lock-in rate to IDRS.

    5. Document the AMS history with names and EIN's of all current employers and with the facts and data used to calculate the modified withholding rate.

    6. Update WHCS with the 2808C letter, transaction code, current transaction date and modification rate.

      Note:

      Regulations require that the employer furnish an employee that is not performing services for the employer as of the date of the notice with the “Employee’s Copy” of the lock in letter if the employer reasonably expects the employee to resume the performance of services for the employer within 12 months of the date of the notice (Lock-in letter).

No Change

  1. If you determine that the taxpayer's information does not support a change to the marital status and number of allowances

    1. Mail Letter 2810C to the taxpayer.

    2. Input TC 971 AC 148 to IDRS with the unchanged lock-in rate.

    3. Document the AMS history with the reasons the request for change was denied and update WHCS.

Release of Lock-in

  1. Release the lock-in in the following situations:

    If Then
    Taxpayer meets compliance criteria in ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ or IRM 5.19.11.7.3.2, Release of Lock-in After Period of Continued Compliance
    1. Input TC 972 AC 146 and enter Disposition Code "CPL "

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Taxpayer was erroneously locked in
    1. Input TC 972 AC 146 and enter Disposition Code "ERR"

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Insolvency Unit has instructed you to release the lock-in
    1. Input TC 972 AC 146 and enter Disposition Code "BNK"

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Taxpayer filed bankruptcy, other than Chapter 7, between the date that the Outcome 2 case was selected for the program and the date that the lock-in letter was issued. See IRM 5.19.11.10.2., Bankruptcy
    1. Input TC 972 AC 146 and enter Disposition Code "BNK"

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Taxpayer has a pending or approved Offer in Compromise (OIC) and OIC Unit has instructed you to release the lock-in. See IRM 5.19.11.10.9., Offer in Compromise (OIC) Taxpayers
    1. Input TC 972 AC 146 and enter Disposition Code "OIC"

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Taxpayer is not subject to withholding
    1. Input TC 972 AC 146 and enter Disposition Code "NSW"

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

    Note:

    Release lock-in using disposition code NSW when modification results in .00 withholding.

    Taxpayer is in Combat Zone with active freeze code. See IRM 5.19.11.10.3., Combat Zone
    1. Input TC 972 AC 146 and enter Disposition Code "COM "

    2. Cross-reference the employer's EIN

    3. Issue Letter 2809C to employer and Letter 2813C to taxpayer

    4. Document the AMS history with the reason for the release(s) and close the case on the WHCS

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

    Note:

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

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

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

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

Release of Lock-in After Period of Continued Compliance
  1. When contacted by the taxpayer, offer release of lock-in to those taxpayers who are tax compliant with all filing and payment requirements for the three tax years ending with the most recent return due. For withholding compliance purposes, a tax compliant taxpayer is defined as one who has filed all required returns and full paid all tax (i.e., Form 1040 liability), penalties, and interest on time.

    Note:

    If the taxpayer declines release, follow general case processing procedures to modify.

    • Determination of the "most recent return due" is illustrated by the following example: Between January 2, 2016 and April 15, 2016, TY 2014 is the most recent return due unless TY 2015 has been filed by the taxpayer. In that case, TY 2015 becomes the most recent return due. After April 15, 2016 , if the taxpayer filed an extension for TY 2015, the most recent return due is still TY 2014 until the extension expires. If no extension was filed, TY 2015 is the most recent return due.

    • "On time" is defined as all tax, penalties and interest paid by the due date of the return. If the taxpayer filed an extension, all tax, penalties and interest must be paid by the regular due date of the return. A late filed refund return will be considered as filed "on time" because the taxpayer is credited with his withholding on the due date of the return. A late filed return that was full paid after the due date or extended due date does not meet the "on time" definition. Additional assessments and/or adjustments to the return which were full paid will be considered as paid on time.

  2. For taxpayers meeting the conditions in (1) above, follow procedures in the table below:

    Note:

    Case records for lock-in letters issued after September 30, 2005 can be found in WHCS. If the taxpayer was locked in before October 1, 2005, the lock-in letter was issued by the defunct Fresno QW-4 program.

    If And Then
    Taxpayer requests release Lock in record is on WHCS
    • Release lock-in; see IRM 5.19.11.7.3(1), Release of Lock-in

    • Document AMS;

    • Update WHCS and IDRS

    Taxpayer requests release Lock in record is not on WHCS
    • Add case to WHCS using source code "FR"

    • Release lock-in; see IRM 5.19.11.7.3(1), Release of Lock-in

    • Document AMS;

    • Update WHCS and IDRS

  3. The following examples illustrate when the lock-in should be released.

    Example:

    Taxpayer "A" requests a release of lock-in on 5/15/16. They were locked in on 6/15/12 and did not file an extension for TY 2015. The most recent return due is TY 2015. Research shows they filed and full paid his 2013, 2014 and 2015 returns on time. Release the lock-in.

    Example:

    Taxpayer "B" requests a release of lock-in on 5/15/16. They were locked in on 6/15/12 and filed an extension for TY 2015. The most recent return due is TY 2014. Research shows that they filed and full paid their 2013 and 2014 returns on time, but there is a balance due on 2012. Do not release the lock-in. Modify, if appropriate.

    Example:

    Taxpayer "B" calls back on 11/15/16. The most recent return due is now TY 2015 and research shows that they filed a refund return for TY 2015. Tax years 2013, 2014 and 2015 were filed and full paid on time. Release the lock-in.

    Example:

    Taxpayer "C" requests a release of lock-in on 3/15/16. They were locked in on 2/16/2012 and filed a refund return for TY 2015 on 2/15/16. The most recent return due is TY 2015. Although they were under-withheld in TY 2013, they filed and full paid (tax and penalties) their TY 2013 return on 4/15/2014. They filed a refund return for TY 2014 late and meet the three-year compliance rule. Release the lock-in.

    Example:

    Taxpayer "D" requests a release of lock-in on 7/15/16. They were locked in on 2/16/2012 and did not file a return or extension for TY 2015 return. The most recent return due is TY 2015. They filed refund returns for TY 201 3 and TY 2014 and tells you that TY 2015 will be a refund return when they file. They do not meet the three-year compliance rule because TY 2015 is unfiled. Do not release the lock-in. Modify if appropriate.

    Example:

    Taxpayer "D " calls back on 9/1/16. Research shows that they filed a refund return for TY 2015 on 8/1/16. He now meets the three-year compliance rule. Release the lock-in.

    Example:

    Taxpayer "E" has their TY 2013 balance due and TY 2014 balance due satisfied by TY 2015 refund. They have not met the three year rule for filing and payment compliance, since TY 2015 has been their only compliant return. Do not release the lock-in. Modify if appropriate

Unpostable Transactions

  1. Each area is responsible for resolving its own unpostables.

  2. Unpostables are voided by the Unpostable function at the campuses and forwarded with a computer generated
    Form 5147, IMF–IDRS Transaction Record, and
    Form 4227, Intra-SC Reject or Routing Slip, or
    A computer-generated Form 4251, Return Charge Out.

    Note:

    Every unpostable on a 4251 is assigned a "category code." These two digit alpha numeric codes identify the area that will work the unpostable case.

  3. Only one unpostable code at a time can be indicated on Form 5147 or Form 4227.

    Reminder:

    Correct any other conditions which could cause the record to not post.

  4. See IRM 3.12.32, General Unpostables for a list of unpostable codes (UPC) and detailed processing instructions. Document 6209 also provides a brief description of each unpostable code.

  5. If a nullified unpostable penalty assessment or abatement is received with unpostable code 183, do not attempt to reinput the adjustment. Check IDRS for open CID activity and route case to the lead. The lead will contact CID for further processing instructions.

Processing Undelivered Mail

  1. Undelivered mail is any letter, notice or other correspondence sent to an individual or business taxpayer and returned to the IRS with an indication that the individual no longer resides, or the business is no longer located at the address where the mail was sent.

  2. The following sections contain instructions for handling the various kinds of letters returned by the United States Postal Service as undeliverable.

  3. Undeliverable mail is received in Receipt and Control Branch. For the Withholding Compliance program, this mail may include but is not limited to:

    • Letter 2800C

    • Letter 2801C

    • Letter 2802C

    • Letter 2804C

    • Letter 2805C

    • Letter 2808C

    • Letter 2809C

    • Letter 2810C

    • Letter 2811C

    • Letter 2812C

    • Letter 2813C

    • Letter 3042C

    • Letter 2645C

    • Letter 4243C

  4. Undelivered mail may contain a "yellow" forwarding label from the United States Postal Service (USPS) or a note indicating the party no longer resides there.

  5. All undelivered Withholding Compliance mail will be batched as undeliverable and reviewed except 2801, 2802, 2811, 2812, 2813 and 3042. If these letters do not have a forwarding address they will be destroyed and not batched. Per IRM 1.4.6 management has responsibility for proper records management.

    1. If a third party (practitioner, new occupant, ex-spouse) provides a new address, DO NOT update Master File. The address must be verified by the taxpayer or Power of Attorney before Master File can be updated.

  6. Undelivered mail will be processed as shown in the table below:

    Reminder:

    When required to input TC 972 AC 146 to IDRS, check IDRS to see if the TC 971 AC 146 corresponding to the transaction being reversed has posted. If there is no TC 971 AC 146, the TC 972 will unpost. To prevent this, input the TC 971 AC 146, then input the TC 972 with a posting delay of 1, then input the new TC 971 AC 146 with a posting delay of 2.

    If Then
    Letter 2800C is returned with yellow forwarding address label from the USPS
    • Submit request to Lead or Manager to update IDRS and WHCS with the forwarding address from the yellow label after verifying that the undelivered letter and yellow label is for the same employer

    • Input TC 972 AC 146 to IDRS with Disposition Code "UND" , cross-referencing the Employer Identification Number (EIN)

    • Update WHCS (Letters and Transactions section of the Employer Detail screen) with TC 972 AC 146, disposition code "UND"

    • Reissue letter to address indicated using current date

    • Input TC 971 AC 146 to IDRS using current date with posting delay of 1

    • Notate AMS history with "REISSUED" indicating letter number, EIN, new address and source of new address

    • Add reissued letter to WHCS

    • Destroy the letter

    Letter 2800C is returned with yellow forwarding address label from the USPS and research indicates Letter 2808C or Letter 2809C has been issued
    • Resend original letter to the new address

    • Extract contents of original envelope, highlight the issue date on the 2800C letter, staple envelope vertically to front of letter showing yellow sticker; fold letter and remail in an envelope labeled with new address

    • Notate AMS history with "REMAILED." Include
      letter number,
      original issue date and
      new address
      in AMS history.

    • Submit request to Lead or Manager to update IDRS and WHCS with the forwarding address from the yellow label after verifying that the undelivered letter and yellow label is for the same employer

    Note:

    This ensures employer has original lock-in letter for their files.

    Letter 2800C is returned with no forwarding address Research to see if employer is still in business.
    If employer is out of business:
    • Input TC 972 AC 146 to IDRS and WHCS with Disposition Code "OOB" , cross-referencing the employer's EIN

    • Notate the AMS history with actions taken and destroy letter

    If employer is still in business and a new address is found:
    • Input TC 972 AC 146 to IDRS and WHCS with Disposition Code "UND" , cross-referencing the employer's EIN

    • Reissue letter to address indicated using current date

    • Input TC 971 AC 146 to IDRS using current date with posting delay of 1

    • Notate AMS history with "REISSUED" indicating letter number, EIN, and new address

    • Add reissued letter to WHCS and destroy letter

    • DO NOT update the address on IDRS or WHCS

    If no new address is found
    • Input TC 972 AC 146 to IDRS and WHCS with Disposition Code "UND" , cross-referencing the employer's EIN

    • Notate the AMS history with actions taken and destroy letter

    Letter 2800C is returned with no forwarding address and research indicates Letter 2808C or Letter 2809C has been issued
    • If the telephone number is on Master File, research to get the current address

    • If unable to find a telephone number, research to find another address

    • Resend original letter to the new address

    • Extract contents of original envelope, highlight the issue date on the 2800C letter, staple envelope vertically to front of letter; fold letter and remail in an envelope labeled with new address

    • Notate AMS history with "REMAILED." Include letter number, original issue date and new address in AMS history.

    • DO NOT update the address on IDRS or WHCS

    • If no new valid address is found, update AMS history with actions taken and destroy letter

    Letter 2801C is returned with yellow forwarding address label from the USPS
    • Notate on AMS "UNDELIVERED 2801C" , cross- referencing the EIN

    • Update IDRS and WHCS with the forwarding address from the yellow label after verifying that the undelivered letter and yellow label is for the same taxpayer

    • Destroy letter

    Letter 2801C or Letter 2802C is returned with no forwarding address
    • Destroy letter

    Letter 2802C is returned with a forwarding address
    • Destroy letter

    Letter 2804C, Letter 2805C, Letter 2810C, Letter 2811C, Letter 2812C, Letter 2813C, Letter 3042C, or Letter 4243C are returned with yellow forwarding address label from the USPS
    • Resend letter to the new address

    • Extract contents of original envelope, staple envelope vertically to front of letter showing yellow sticker, fold letter and remail in an envelope labeled with new address

    • Notate AMS history with "REMAILED" with letter number and new address

    • Update IDRS and WHCS with the forwarding address from the yellow label after verifying that the undelivered letter and yellow label is for the same taxpayer

    Letter 2804C, Letter 2805C, Letter 2810C or Letter 4243C are returned with no forwarding address
    • Notate on AMS "UNDELIVERED XXXXC"

    • Research Command Codes (CC) IMFOLE/ENMOD and the most recent Information Returns Processing Transcripts (IRPTR) available and remail the letter to any new addresses found

    • Notate AMS history with "REMAILED" indicating letter number and new address

    • If no new address is found, notate the AMS history and destroy letter

    Letter 2811C, Letter 2812C, Letter 2813C or Letter 3042C are returned with no forwarding address
    • Destroy letter

    Letter 2808C or Letter 2809C is returned with yellow forwarding address label from the USPS
    • Resend letter to the new address.

    • Extract contents of original envelope, staple envelope vertically to front of letter showing yellow sticker, fold letter and remail in an envelope labeled with new address

    • Notate AMS history with "REMAILED" with letter number and new address

    • Update IDRS and WHCS with the forwarding address from the yellow label after verifying that the undelivered letter and yellow label is for the same employer

    Letter 2808C or Letter 2809C is returned with no forwarding address
    • If the telephone number is on Master File, research to get the current address

    • If unable to find a telephone number, research to find another address

    • Remail original letter to employer’s current address

    • Notate AMS history with "REMAILED" indicating letter number, EIN, and new address

    • DO NOT update the address on IDRS or WHCS

    • If no new valid address is found, update AMS history with actions taken and destroy letter

Special Situations

  1. While working correspondence or speaking to the taxpayer by telephone, special situations will arise which may require additional research and actions to resolve the case.

Payer Agent List (PAL)

  1. If the taxpayer claims that the wage and/or withholding amounts on the Form W-2 are incorrect, check the employer information against the Payer Agent List (PAL).

  2. If the information on the PAL confirms the taxpayer's claim, then redetermine the lock-in decision by calculating the correct number of allowances to which the taxpayer is entitled, based on the correct Form W-2 wage amount(s).

  3. If the calculation reveals that the taxpayer's current withholding rate is correct, take the following actions to release the lock-in:

    1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer.

    2. Input TC 972 AC 146 to IDRS with Disposition Code "ERR" , cross-referencing the employer's EIN.

    3. Update WHCS (Letters and Transactions section of the Employer Detail screen) with TC 972 AC 146, disposition code "ERR" .

    4. Notate AMS history with actions taken.

  4. If the taxpayer's current withholding rate is incorrect, take the following actions to modify the lock-in:

    1. Issue Letter 2808C to the employer and Letter 2812C to the taxpayer.

    2. Input TC 971 AC 148 to IDRS, cross-referencing the employer's EIN and entering the modified lock-in rate.

    3. Update WHCS (Letters and Transactions section of the Employer Detail screen) with TC 971 AC 148 and the modified lock-in rate.

    4. Notate AMS history with actions taken.

  5. If the information is not on the PAL then

    1. Request taxpayer fax or mail written verification from the employer as to the correct wages and withholding, including a copy of the corrected Form W-2c, Corrected Wage and Tax Statement. .

    2. If a Form W -2c is received, follow the instructions above to release or modify the lock-in based on the new amounts.

    3. Refer the Form W -2c information to the WHC PAL coordinator for inclusion in the PAL.

    4. If the requested documentation is not received, follow normal case processing procedures to modify the taxpayer based on the Form W-2 reported on CC IRPTR.

Bankruptcy

  1. The Service holds that withholding is not part of the bankruptcy estate. Issuance of the lock-in letter is not considered a violation of the automatic stay.

  2. If you are contacted by Insolvency, follow their instructions.

  3. If you are directed to release or modify the lock-in, follow general case processing procedures.

    • Document the AMS history with the name and contact information of the employee providing the direction.

  4. When working the Outcome 3 case listing, DO NOT issue a lock-in letter for a taxpayer in bankruptcy unless you have been previously directed to do so by a field bankruptcy specialist. Check IMFOLI for an open bankruptcy, identified by a literal "-V" . If present, document AMS and close the case.

  5. When working correspondence or incoming calls on Outcome 2 cases, if the taxpayer says that he or she is in bankruptcy and the bankruptcy was filed between the date that the Outcome 2 case was selected for the program and the date that the lock-in letter was issued, ask the taxpayer the chapter number of the bankruptcy proceeding and follow the instructions below:

    1. Chapter 7: Follow general case processing to determine whether lock-in should be modified or released.

    2. All other Chapters, or taxpayer doesn't know: Release lock-in. See IRM 5.19.11.7., Responses and Redeterminations for release procedures.

    Reminder:

    If you receive a request for reconsideration or release from a taxpayer in bankruptcy who was locked in prior to filing bankruptcy, DO NOT release the lock-in. Follow general case processing procedures as outlined in IRM 5.19.11.3, General Case Processing.

Combat Zone

  1. Combat Zone cases are identified by a "-C" freeze code on IMFOLI. See IRM 5.19.10.6.3, Combat Zone Freeze Code for additional information. If you see this freeze code, check the Combat Zone indicator field on IMFOLE to determine if the freeze code is still active: 1 = active and 2 = not active.

    1. If the indicator = 1, do not lock in. Take the following actions.

    2. Issue Letter 2809C to the employer(s) and Letter 2813C to the taxpayer, to release the lock-in.

    3. Input TC 972 AC 146 with disposition code "COM"

    4. Document the history and close the case.

    5. If the indicator = 2, then the taxpayer is no longer in Combat Zone status. Document the history and continue to work the case.

Civilians Working in a Combat Zone
  1. Civilian employees (including civilian defense contractors) serving in a combat zone or qualified hazardous duty area in support of the U.S. Armed Forces, are not exempt from withholding and filing requirements.

  2. However, they may be entitled to relief under IRC section 7508A. If the taxpayer meets the criteria specified in IRM 5.19.10.6.2 , Combat Zone Qualified Individuals and Areas, do not lock him or her in and release any lock-in letters already issued.

Spouses of Taxpayers Entitled to IRC Section 7508 Relief
  1. The spouses of taxpayers entitled to IRC Section 7508 relief are entitled to the same relief with two exceptions:

    • The relief does not apply to a spouse for any tax year beginning more than 2 years after the date the area ceases to be a combat zone, the operation ceases to be a contingency operation, or the operation ceases to be a qualified hazardous duty area.

    • The relief does not apply to a spouse for any period the qualifying individual is hospitalized in the United States for injuries incurred in a combat zone, a contingency operation, or a qualified hazardous duty area.

Foreign Income Issues

  1. This section contains guidance and procedures for working foreign income issues.

U.S. Citizens Working Abroad
  1. U.S. citizens working abroad may be exempt from or reduce the amount of their U.S. income tax withholding on wages if

    1. The taxpayer reasonably expects to exclude the income under either the foreign earned income exclusion or the foreign housing exclusion.

    2. The taxpayer plans to take a foreign tax credit, they may be eligible for and claim additional withholding allowances on Form W-4.

      Note:

      Using RTVUE, verify if Form 2555, Foreign Earned Income, was filed. In some instances a taxpayer may submit a Form 2555 without a return. Tell the taxpayer that they must file a return before we can use the Form 2555 in the withholding allowance calculation.

  2. The tests that must be met and amounts are covered in Pub 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

  3. The foreign earned income exclusion and foreign housing exclusion do not apply to wages received by employees of the U.S. Government or an agency thereof working in a foreign country.

Nonresident Aliens
  1. Resident aliens are subject to income tax withholding the same as U.S. citizens on their salaries, wages, bonuses, or other pay for personal services ("wages" ). Special rules apply to wages received by nonresident aliens. See Pub 901, U.S. Tax Treaties, and Pub 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

  2. The residency status assigned to an alien individual by the Service for income tax purposes is not always the same as the status assigned by the U.S. Citizenship and Immigration Services (USCIS) for immigration purposes. Under the Internal Revenue Code, an individual is considered a resident alien for U.S. tax purposes if they are not a citizen or national of the United States and meet either the "green card test" or the "substantial presence test" for the calendar year (January 1 - December 31).

    1. An individual will meet the green card test if they are a lawful permanent resident of the United States at any time during the calendar year.

    2. An individual will meet the substantial presence test if they have been physically present in the United States for at least 31 days during the current calendar year, AND for at least "183 days" (as specifically described below) during the three-year period that includes the current year and the two immediately preceding years.

      Note:

      For purposes of this "183 day" test, each day of presence in the current year is counted as a full day, while each day of presence in the first preceding year is counted as one-third of a day and each day of presence in the second preceding year is counted as one-sixth of a day.

    3. For certain classes of individuals ( e.g. teachers and students who enter the U.S. with F, J, M, or Q visas) special rules apply where the days may not be counted. See Pub 519, U.S. Tax Guide for Aliens, for further information.

  3. Taxpayers may not owe U.S. income tax based on a tax treaty between the U.S. and a foreign country. Research Pub 901, U.S. Tax Treaties, for the applicable treaty article.

    • If the taxpayer's Form W-4 is correct as furnished, send the taxpayer closing Letter 2813C , input appropriate case remarks and close the case. The taxpayer must file a Form 1040NR to claim the treaty benefits.

    • If the taxpayer's Form W-4 is incorrect, adjust the taxpayer's withholding accordingly and send lock-in Letter 2800C and Letter 2801C. Input the appropriate case remarks and close the case.

Wages Subject to Mandatory Withholding of Income Taxes of a Foreign Country
  1. Wages paid to U.S. citizens or resident aliens are not subject to the withholding of U.S. federal income taxes to the extent that such wages are already subject to the mandatory withholding of income taxes of a foreign country or U.S. possession. This exception does not apply if the recipient is a U.S. citizen who is a federal employee.

  2. If the taxpayer and/or representative states that he or she is subject to mandatory withholding of a foreign country, accept his or her word and take the following actions:

    1. Issue Letter 2809C to the appropriate employer and Letter 2813C to the taxpayer to release the lock-in.

    2. Input TC 972 AC 146 to IDRS with Disposition Code "NSW" .

    3. Update WHCS with letters sent and transaction codes input.

    4. Document in the AMS history that the taxpayer is subject to mandatory withholding, specifying the country. Also document the employer's name and EIN, that the appropriate letters were sent, and TC 972 AC 146 (NSW) was input.

    Reminder:

    If there are other wages which should be subject to income tax withholding, work those issues according to general procedures.

  3. If the taxpayer's and/or representative's response is that the taxpayer paid income taxes in a foreign country and there is no mention of the wages being subject to mandatory withholding, leave the lock-in in place and advise the taxpayer and/or representative that we need to see a copy of the return with Form 1116, Foreign Tax Credit, attached to modify the lock-in.

Frivolous Communications

  1. If the taxpayer's response contains frivolous arguments work the case according to general procedures. DO NOT modify or release the lock-in.

  2. Frivolous arguments may include:

    • Language objecting to Form W-4 requirements

    • Comments on the unconstitutionality of the tax law

    • Quotes or references to the IRC which indicate that the taxpayer is free of any obligation to pay income tax liabilities

    • Statements that the taxpayer is a citizen of an independent entity within the U.S. and not liable for Federal taxes

    • Statements, often in pseudo-legalistic language, that the taxpayer is not subject to appropriate legal action for the accuracy of his/her responses

  3. See IRM 21.5.3.4.16.7, Identifying Frivolous Returns/Correspondence and Responding to Frivolous Arguments for additional information on identifying frivolous arguments.

  4. If the taxpayer is questioning the IRS authority to issue a lock-in letter, send Letter 3042C to the taxpayer. Update AMS and WHCS.

  5. If the taxpayer requests a release or modification without any valid substantiation, send Letter 2810C. Update IDRS with TC 971 AC 148 (unchanged rate), AMS and WHCS.

  6. If both (4) and (5) above apply, send both letters. Update IDRS, AMS and WHCS.

    Reminder:

    When documenting AMS, do not use the term, Illegal Tax Protester (ITP), Fraudulent or similar designation. If you identify any such reference, immediately inform your manager. Terms such as "frivolous argument" or "tax avoidance argument" are acceptable terms to use.

  7. Upon completion of case processing, forward a copy of the correspondence to the Ogden Frivolous Filer Unit.

    • Prepare Form 3210

    • Use address: Ogden Compliance Campus
      1973 N Rulon White Blvd.
      M/S 4450, Attention: Frivolous Return Program
      Ogden, UT 84404

    • Note in the remarks section of Form 3210 that the attached is being sent for information purposes.

    • Forward the original with a fraud indicator check sheet to the Collection Function Fraud Coordinator (CFFC) for review.

    Note:

    If a communication is from a phone call, forward a copy of the AMS history (document the taxpayer's statements verbatim, if possible) along with the fraud indicator check sheet to the CFFC

  8. If you continue to receive frivolous correspondence from the taxpayer after the case is closed, send it on Form 3210 to the Ogden Frivolous Filer Unit at the address shown in (7) above. Ogden will document receipt of the correspondence and send Letter 3175C , if appropriate.

Household Employees

  1. Employers are NOT required to withhold federal income tax on wages paid to household employees.

  2. Household employees include, but are not limited to, housekeepers, maids, nannies, baby-sitters, private nurses, gardeners and any similar domestic worker. The work is performed in and around the employer's private home.

  3. If the taxpayer says they are a household employee and this is the taxpayer's only source of wages, suggest that the taxpayer talk to their employer about voluntary withholding, or offer to send the taxpayer Form 1040-ESEstimated Tax for Individuals.

  4. If lock-in letters have already been issued and you determine that the taxpayer is a household employee

    1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

    2. Input TC 972 AC 146 with Disposition Code "NSW" .

    3. Document the history and close the case.

  5. If the household employment is not the only source of wages, subtract the household wages from the total wages and take the following actions:

    1. Compute the number of withholding allowances based on the lesser amount of wages

    2. Issue either a 2800C and 2801C , or 2808C and 2812C , as appropriate

    3. Input the appropriate TC 97X AC 14X

    4. Document the history and close the case

  6. If lock-in letters have not been issued, document the history and close the case.

  7. Follow general lock-in procedures if you determine that the taxpayer is not a household employee.

Decedents

  1. WHC cases may be created if wages are reported for the taxpayer's SSN more than 24 months after the date of death. For Outcome 2 and Outcome 3 cases, the date of death is displayed on the WHCS Taxpayer Summary screen. It can also be found using IDRS Command Code INOLES.

  2. Decedents' wages are generally reported on Form 1041, U.S. Income Tax Return for Estates and Trusts.

    • If you are contacted by a third party representing the decedent, determine whether the wages reported belong to the decedent.

    • If the wages belong to the decedent, input TC 972 with disposition code "ERR" to IDRS and WHCS.

  3. Wages reported more than 24 months after the taxpayer's date of death may be an indication of identity theft.

    • If you are contacted by the taxpayer and you determine that they are not the true owner of the SSN,

    • follow general procedures for working responses and redeterminations.

Members of the Clergy and Religious Workers

  1. These taxpayers are generally NOT subject to federal income tax withholding if both the following conditions apply:

    • The taxpayer is a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner, and

    • The taxpayer's pay is for qualified services.

  2. Qualified services are defined as services performed by the taxpayer in exercise of their ministry or in carrying out their duties as required by the religious organization.

    Exception:

    Ministerial services performed as an employee of the United States, a state, or U.S. Territory or possession, or a political subdivision of the foregoing, the District of Columbia, or foreign government are NOT qualified services and are subject to withholding.

    Example:

    U.S. Army chaplain or a chaplain at a state prison.

  3. Work performed for a nonreligious organization is considered to be qualified services if the services are assigned or designated by the taxpayer's religious organization.

  4. See Pub 517, Social Security and Other Information for Members of the Clergy and Religious Workers, for more information.

  5. If the taxpayer meets the above criteria;

    1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

    2. Input TC 972 AC 146 with Disposition Code "NSW" .

    3. Document the history and close the case.

Vow of Poverty
  1. When the taxpayer indicates that a significant contribution was made by their employer to a religious order so that they can claim "exempt" , you must determine if they qualify for exemption from taxation based on a vow of poverty.

  2. They must meet the qualifications shown below. A taxpayer can legitimately claim exemption from taxation pursuant to a vow of poverty when the taxpayer performs qualified services as an agent of a church or church agency.

    Example:

    The employer looks directly to the religious order, rather than to the individual member/taxpayer, for performance of services.

    The taxpayer must show that:

    1. a contractual relationship existed between their secular employer and the religious order; and

    2. the religious order controlled or restricted use of the money turned over to it pursuant to the taxpayer's vow of poverty.

  3. If the taxpayer meets both of the criteria above, notate the case file and forward the case to the lead.

  4. Absent a qualified agency relationship, a member of a religious order under vow of poverty is subject to tax on income earned or received in their individual capacity. Proceed with general case processing.

  5. If the taxpayer indicates that contributions were made to a non-traditional church, proceed with general case processing unless the taxpayer provides documentation showing the church is exempt.

Offer in Compromise (OIC) Taxpayers

  1. Do not lock in a taxpayer who has submitted an OIC for consideration or has had an OIC accepted as identified by either an unreversed TC 480 or TC 780 on IDRS.

  2. Check IMFOLI for the OIC indicator: "-Y." If present, take the following actions:

    1. Issue Letter 2809C to the employer(s) and Letter 2813C to the taxpayer, to release the lock-in.

    2. Advise the taxpayer to adjust their withholding.

    3. Input TC 972 AC 146 with disposition code "OIC" .

    4. Document the history and close the case.

  3. If taxpayer responds that an OIC has been submitted and the OIC indicator is present on IMFOLI, take the actions in (2) above.

  4. If the taxpayer tells you that an OIC has been submitted and there is no evidence of it on IDRS, contact the Compliance Services Offer in Compromise Unit at the campuses. (See SERP under Who/Where tab for OIC Support locations) and follow their instructions.

  5. If you are instructed to release the lock-in, follow instructions in (2) above; document the history with the name of the employee providing the direction.

Cautious Upon Contact (CAU)

  1. The following criteria have been established for determining CAU status:

    1. Threat of physical harm that is less severe or immediate than necessary to satisfy PDT criteria;

    2. Suicide threat by the taxpayer; or

    3. Filing or threatening to file a frivolous lien or a frivolous criminal or civil legal action against an IRS employee or contractor or an IRS employee's or contractor's immediate family member.

  2. A taxpayer who meets any of the above criteria should be approached with caution. See IRM 25.4.2, "Cautious Upon Contact" Taxpayer, for additional information.

Potentially Dangerous Taxpayers (PDT)

  1. Check IMFOLI for the PDT indicator: the literal "PDT." If present,

    • Print the IMFOLI screen,

    • Highlight the indicator and

    • Route to the lead

  2. The lead will contact the Treasury Inspector General for Tax Administration (TIGTA) for information concerning the PDT prior to making any personal contact.

  3. After making contact, document the history and route to the Tax Examiner (TE) for appropriate action.

Statutory Employees

  1. Wages received as a statutory employee, under IRC Section 3121(d)(3) are exempt from income tax withholding.

  2. Statutory employees include: agent-drivers or commission drivers, full-time life insurance salespersons, home workers, and traveling or city salespersons. For details on statutory employees, see Pub 15-A, Employer's Supplemental Tax Guide (Supplement to Publication 15 (Circular E), Employer's Tax Guide).

  3. If the taxpayer says they are a statutory employee and there are multiple employers, verify which employer(s) is the statutory employer(s). Check IRPTR for the statutory employee indicator(s) for the tax year in question.

  4. If the indicator is present take the following actions:

    1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

    2. Input TC 972 AC 146 to IDRS with Disposition Code "NSW" .

    3. Document AMS with the employer name and EIN where the taxpayer is not subject to withholding, that appropriate letters were sent, and TC 972 AC 146 (NSW) was input.

    4. Update WHCS.

    Reminder:

    On Outcome 3 cases, do not issue lock-in letters to statutory employers. Update WHCS with TC 972 AC 146 and disposition code "NSW" and document AMS. Do not update IDRS.

  5. If the indicator is not present, tell the taxpayer that we need written verification from that employer (on employer letterhead) confirming the taxpayer's status as a statutory employee. Provide the taxpayer with the appropriate fax number and mailing address to send the documentation.

  6. If there are additional non-statutory employee Form W-2, Wage and Tax Statement, subtract the statutory employee Form W-2 wage amount from the total Form W-2 wage amount and follow general procedures for the remaining employer(s).

Third Party Sick Pay

  1. Third party sick pay payments are generally shown on IRPTR by the literal "3RD PARTY SICK PAY IND: YES" . Check IRPTR for the indicator. If present, take the actions shown below.

    1. If lock-in Letter 2800C and Letter 2801C have not been issued, document the history and close the case.

    2. If lock-in letters have already been issued
      1. Issue Letter 2809C to payer and Letter 2813C to the taxpayer to release the lock-in.
      2. Input TC 972 AC 146 with Disposition Code "NSW" .
      3. Document the history and close the case.

  2. If there is no 3RD PARTY SICK PAY IND on IRPTR , follow general case processing procedures.

  3. If there are other wages, subtract the 3rd Party Sick Pay amount from the total Form W-2 wages and take the following actions:

    1. Follow procedures in (1) above to release lock-in on the 3rd Party Sick Pay Form W-2

    2. Compute the number of withholding allowances based on the lesser amount of wages

    3. Issue either Letter 2800C and Letter 2801C, or Letter 2808C and Letter 2812C, as appropriate

    4. Input the appropriate TC 97X AC 14X

    5. Document the history and close the case

Identity Theft

  1. Beginning January 1, 2012, TC 971 AC 522 will include processes to flag accounts at different stages of processing from initial identity theft allegation to closure. Use the following directions when processing Identity theft issues:

    If And Then
    The taxpayer makes an allegation of identity theft Has not provided :
    • A copy of the U.S. Federal or State issued form of identification (i.e. driver's license, state identification card, social security card, passport)

    • A copy of a police report or IRS Affidavit Form 14039, Identity Theft Affidavit.

    Note:

    For more information on required documentation see IRM 25.23.2.18, Identity Theft and Supporting Documentation - Overview.

    1. Input TC 971 AC 522 containing the miscellaneous field PNDCLM). (See IRM25.23.2.17, Initial Allegation or Suspicion of Tax-Related identity Theft - Identity Theft Indicators, to determine if input of AC 522 PNDCLM is appropriate.)

    2. Request the taxpayer mail the required documentation.

      • A copy of the U.S. Federal or State issued form of identification (i.e. driver's license, state identification card, social security card, passport)

      • A copy of a police report or IRS Affidavit Form 14039, Identity Theft Affidavit

    3. If the case remains a balance due issue, provide the address for the CSCO balance due site. See http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/CSCO_IMF_Balance_Due_Consolidated_Programs.htm.

    4. If the case is a non-filer issue, provide the address for the CSCO non-filer site. See http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/CSCO_IMF_Return_Delinquency_Consolidated_Programs.htm .

    5. If the case is assigned to ACS, provide ACSS address. See http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide/WI_Consolidated_State_Mapping_for_ACS_Support_and_Collection_Due_Process.htm.

    6. For all other situations, refer to the mailing instructions in IRM 25.23.2.18(2) table, Identity Theft Supporting Documentation - Overview.

    7. Paper operations should Send a letter to taxpayer and request they provide the required documentation

    8. Document AMS

    Note:

    If IDT documentation is provided by fax or correspondence, the documentation must be given to the clerical unit to route to Fresno ACSS Specialized unit per IRM 5.19.16.4.1, Taxpayer Delinquent Account (TDA) Batching Procedures.

    The taxpayer makes an allegation of identity theft Has provided documentation:

    Note:

    There is a TC971 ID theft indicator present. (See IRM 25.23.2.17, Initial Allegation or Suspicion of Tax-Related identity Theft - Identity Theft Indicators, for more information on the AC codes.

    1. Inform Taxpayer that ID theft is being addressed by another area.

    2. Resolve WHC issue.

    3. Document AMS of actions taken.

  2. Non-Owner of the SSN communicates with the IRS and claims the Lock-In letter is incorrect.

    1. If the individual calling is "inappropriately" using another taxpayer's social security number for purposes of employment and a Lock-In letter was issued on the "borrowed" social security number, do not disclose any of the SSN owner information.

    2. The lock-in letter on the non-owner of the SSN will not be release or modified.

    3. Refer them to the SSA for help in getting an SSN. Any employee who is legally eligible to work in the US and does not have a SSN can get one by completing Form SS-5, Application for a Social Security Card, and submit the necessary documentation. The taxpayer can get this form at SSA office, from the SSA website at www.socialsecurity.gov, or by calling 1-800-772-1213.

Taxpayers Employed by International Organizations

  1. Wages paid by international organizations are not subject to federal withholding requirements.

  2. The term "international organization" means a public international organization, designated by Executive Order as being entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f). See Exhibit 5.19.11-1, International Organizations Exempt from Federal Withholding Requirements for a list of international organizations.

  3. If the taxpayer or employer responds that the taxpayer works for an international organization and you have confirmed that the organization is listed in Exhibit 5.19.11-1 take the following actions:

    1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer.

    2. Input TC 972 AC 146 to IDRS with Disposition Code "NSW" .

    3. Document in the AMS history that the taxpayer is employed by an international organization (specifying name and EIN) and is not subject to withholding on those wages. Close the case.

    4. Update WHCS with letters sent and transaction codes input.

    5. If the taxpayer has other wages which are subject to withholding, follow general case processing procedures.

  4. If the organization is not listed in Exhibit 5.19.11-1 verify the employer's status as an international organization. Generally, this will be the number of the Executive Order covering the international organization. Route the case to the lead who will forward this information to Headquarters for a final determination.

  5. If the taxpayer or employer does not furnish the above verification, follow general case processing procedures.

Litigation

  1. Taxpayers in litigation status are identified by a literal "-W" freeze.

  2. These taxpayers may be locked in if they meet lock-in criteria.

  3. Each "-W" freeze redetermination case will need to be considered on its own merits.

  4. The litigation TC 520 closing codes are 75-81 and 84.

Native American Tribal Income

  1. The following IRM references will provide the necessary information and guidance needed for verification or Exempt status or non Exempt status. They will explain what documentation is needed for proof of exemption from federal tax.

    • IRM 4.88, Indian Tribal Governments Examination Issues and Procedures.

    • IRM 4.88.1.10.2, Income Derived From Fishing Rights.

    • IRM 4.88.1–6, Tax Audit Guidelines for Internal Revenue Examiners.

  2. If the information received is enough to release TP issue Letter 2809C to the company and Letter 2813C to the taxpayer.

  3. Update WHCS and IDRS with TC 972 AC 146 and document AMS.

Civil Penalty Determinations

  1. IRC Section 6682 and related tax regulations allow the assessment of a $500 civil penalty for furnishing false information with respect to withholding if

    1. the statement made on the Form W-4, Employee’s Withholding Allowance Certificate results in less income tax withheld than would have been withheld if the Form W-4 had been correctly completed, and

    2. there was no reasonable basis for such a statement at the time that the statement was made.

  2. You may waive the penalty, in whole or in part, if the individual's income tax for the year is equal to or less than the sum of the credits under IRC Sections 21-54 and the estimated tax payments for that tax.

  3. Civil penalty determinations may be required in cases involving a non-payment history, unfiled return(s), frivolous arguments and repeated underwithholding. Penalties must be assessed for the year that appears on the face of the Form W-4, Employee’s Withholding Allowance Certificate.

    Example:

    If the Form W-4 is for tax year 2008, the year on the face of the Form W-4 is 2008. Assess the penalty on tax year 2008.

  4. If the taxpayer has furnished more than one false Form W-4 for the same year, more than one penalty may be assessed for that year.

    Note:

    You must have a copy of the Form W-4, that the taxpayer submitted to the employer in order to assert the civil penalty.

  5. Civil penalty determinations will only be made on referrals or special projects. Referring employees may request assertion of the penalty if they have reviewed the original Form W-4 submitted by the employee and the Form W-4 meets the criteria in (1) above. A copy of the Form W-4 must accompany the referral.

  6. All Civil Penalty determinations to assess or not-assess require managerial approval.

    Note:

    CP 15 is issued to the taxpayer identifying the specific civil penalty that has been assessed and provides appeal rights.

  7. If the penalty was not processed, notify the referring employee within 30 days of disposition. Document the history on AMS with disposition actions and the date you notified the referring employee.

Creating Entities or Name Lines for Non-Return Civil Penalties

  1. This section covers procedures for assessing civil penalties when there is no entity on IMF Master File.

Information on Establishing Entities
  1. If the taxpayer has no entity on IMF (full name and address showing on CC INOLE), you must establish the account on Master File prior to manually assessing the Withholding Compliance civil penalty on IDRS.

    1. To establish the account, follow TC 000 procedures. See IRM 3.13.5.115, Establishing a New Account (TC 000), for instructions on establishing a new account.

    2. Wait two (2) weeks for the account to post, then input the applicable tax year name line, only if needed.

      Note:

      When a tax return posts (TC 150), it creates a name line for that year.

    3. Wait two (2) weeks for the name line to post, then input the civil penalty.

    4. Place the IDRS control base into "M" status pending posting of the name line.

  2. If the taxpayer's account is established but no applicable tax year name line is present, follow the procedures in (1) b) and c) above.

  3. If the civil penalty needs to be assessed against a spouse (filing as secondary taxpayer on a joint 1040 tax return) and the spouse has no entity established on IMF:

    1. Establish their account on the valid SSN using TC 000 procedures. See IRM 3.13.5.115, Establishing a New Account (TC 000), for instructions on establishing a new account.

    2. Wait two (2) weeks for the account to post, then input the applicable tax year name line.

    3. Wait two (2) weeks for the name line to post, then input the civil penalty.

    4. Place the IDRS control base into "M" status pending posting of the name line.

  4. If the taxpayer's account is already established on IMF (module on Master File) and the applicable tax year name line is present, you can assess the civil penalty with no additional actions required.

  5. If the taxpayer's account is already on Master File and has a Civil Penalty (CVPN), the name line may need to be updated on CC ENREQ (INCHG). (e.g., taxpayer’s current account name is Mary Jones and the CVPN is Mary Smith).

    Example:

    1

    Situation Action
    A joint account is on Master File for John and Mary Doe (John’s is the controlling SSN). A penalty is to be assessed against John. The account has the applicable tax year name line (TC 150 posted). The penalty may be assessed immediately.

    Example:

    2

    Situation Action
    On the same joint account as above, the penalty is to be assessed against Mary Doe. Mary has an account on Master File under her own SSN with the name line of Mary Jones because she filed individually before filing jointly with John Doe. There is no CVPN on her account. Input a name change, address change, (if needed) and applicable tax year name line. Wait two (2) weeks for the updates to post, then assess the penalty.

    Example:

    3

    Situation Action
    On a joint account for John and Mary Doe, the penalty is to be assessed against Mary. However, Mary has no account under her SSN on the Master File. Establish an account for Mary on Master File using her SSN and TC 000 procedures. Wait two (2) weeks for the account to post, then input the applicable tax year name line. Wait two (2) more weeks for the name line to post, then assess the penalty.

    Example:

    4

    Situation Action
    John Doe has a separate account with the applicable tax year name line (TC 150 posted) and a penalty is to be assessed against John. No special action is required, the penalty may be assessed and a CVPN will be generated by Master File.

    Example:

    5

    Situation Action
    John and Mary Doe do not have an account on Master File since they are non-filers. A penalty is to be assessed against John. Establish the account using TC 000 procedures. Wait two (2) weeks for the account to post, then input the applicable tax year name line. Wait two (2) more weeks for the name line to post, then assess the penalty.

Assessment Procedures for Penalties

  1. Assess the IRC Section 6682 civil penalty using Master File Transaction (MFT) 55 for the calendar year for which the false Form W-4 , Employee’s Withholding Allowance Certificate was signed. Multiple penalties may be assessed on a given module, one for each false Form W-4.

    1. Use TC 290 with Reference Code 616 to assess the $500 civil penalty. IDRS generates a TC 240, Reference Code 616. The reference number uniquely identifies the penalty being assessed and serves as an indicator for generating the first notice to the taxpayer.

    2. Use IDRS CC ADJ54 to input W–4 civil penalty assessments. Use TC 290 with a zero amount to open the MFT 55 module. Enter the three-digit reference number, 616 for W–4, along with a positive money amount to generate a TC 240, Miscellaneous Penalty Assessment. Enter in the remarks area SD (source document) and the appropriate remarks, e.g., assess the W-4 civil penalty. This informs the Returns Files function that a document will be received for association with the adjustment Document Locator Number (DLN).

    3. The three-digit Reference Number 616 posts to the IMF and appears to the right of the TC 240. The TC 290 is a carrier record only and does not post. Place penalty assessments for each module in the 52X Blocking Series for the first assessment on a module, and in the 53X Blocking Series for subsequent assessments. Source code "0" and Reason Code "00" generate automatically.

  2. When assessing IRC Section 6682 civil penalty, input levy source information (the employer’s name, address, and EIN). Remember to update levy source information when a taxpayer informs you of a new or different employer than the one on the W–4.

Civil Penalty Abatements

  1. The IRC Section 6682 penalty may be abated if the taxpayer demonstrates having a reasonable basis for making the false statement(s) on Form W-4 when it was submitted to the employer. Requests for abatements will be received directly from the taxpayer or may be forwarded from other campuses via Form 3210, Document Transmittal.

  2. If a request for abatement is received, check IDRS for the TSIGN to see if it is assigned to a technical Services in the Examination function, as well as, verifying the penalty was not already abated.

    Note:

    If the penalty has been paid, the taxpayer’s request for waiver or "reasonable basis" abatement request is a claim for refund.

  3. You may find that there was sufficient withholding and credits at the time the W–4, was furnished to cover the liability for the tax year when the form was in effect.

    Example:

    An employee gives their employer a W–4 in November and the form was in effect until the end of the year. The amount of tax withheld up to the date of the W–4 was greater than the tax shown (TC 150) on the subsequently filed Form 1040, U.S. Individual Income Tax Return. The penalty should be waived if proposed, or abated if assessed.

    Note:

    It may still be appropriate to leave the lock-in in effect unless the employee provides additional information to support a redetermination.

  4. Penalties may be abated if there is a reasonable basis, which exists if:

    1. The number of allowances is computed in accordance with the form instructions. See Treas. Reg. 31.6682-1(a).

    2. The taxpayer justifies the withholding allowances claimed on the W–4.

    3. The taxpayer demonstrates that withholding computed at the adjusted or redetermined marital status and number of allowances is the same as or less than the withholding on the original W–4.

      Example:

      A taxpayer furnished an exempt W–4 and is penalized. In a subsequent redetermination and abatement request, the taxpayer shows they are entitled to nineteen allowances. At the taxpayer’s income, no tax would be withheld if withholding were figured at nineteen allowances. Adjust withholding to nineteen allowances, and abate the penalty.

    4. The taxpayer establishes that the W–4 was completed taking into account incorrect information received from a Service employee. See Declaration of Taxpayer Rights at VIII in Pub 1. The assertion that Service error is involved should be verifiable and credible under the circumstances. Misunderstanding publications or the law is not a reasonable basis for furnishing a false W–4.

  5. The reasonable cause standard, which is applicable to abate some penalties (for example, penalties for late filing or late payment) does not apply to the penalty for furnishing an incorrect Form W-4.

  6. The taxpayer's reasonable basis for furnishing an incorrect Form W-4 must be related to expected tax liability. The following lists provides examples of reasons taxpayers may offer for furnishing a false Form W-4 that do NOT meet the reasonable basis standard:

    1. Illness,

    2. Loss of records,

    3. Overpayment of a tax liability.

  7. Do not abate or waive the W–4 civil penalty on moral, religious, political, or constitutional arguments.

  8. Do not abate penalties for reasons relating to personal finances of the taxpayer, either at the time the false W–4 was furnished or in connection with the taxpayer’s ability to pay the penalty.

  9. Penalty abatements must be approved by the manager.

  10. If you decide to abate or waive the penalty, send Letter 2811C to the taxpayer. A notice of adjustment is also automatically generated to notify the taxpayer. If the request is denied, use Letter 2804C and document the case history.

Procedures for Inputting Abatements
  1. To input the abatement on unpaid penalties, use IDRS Command Code ADJ54.

    1. Use TC 290 with a zero amount to open the MFT 55 module.

    2. Enter the three-digit reference number, 616 for W–4,

    3. Place a minus sign (–) after the dollar amount on the ADJ54 screen.

    4. Enter SD (source document) and appropriate remarks, e.g., abate W–4 civil penalty.

    5. Forward the source document to files.

  2. Full or part paid penalties cannot be abated. The taxpayer must file a claim for refund using Form 843, Claim for Refund and Request for Abatement.

Penalty Appeal Procedures

  1. The taxpayer has the right to appeal denied requests for abatement of the civil penalty. Follow the procedures below for preparing and transmitting a case to Appeals for review.

Case File Preparation
  1. Include the following documents:

    • Form W-4 on which the penalty was based, submitted by the referring Service employee, if available

    • All taxpayer correspondence, including the request for abatement

    • All IRS correspondence

    • IDRS research

    • WHCS research

Transmittal of Case to Appeals
  1. Prepare Form 3210. Complete all applicable blocks on the form including

    • Sender's full name, stop number, mailing address and phone number

    • Full description of item(s) being sent including taxpayer's name, SSN and the tax period on which the penalty was assessed using format 55-yyyy12, where yyyy is the tax year.

  2. Attach Form 3210 to the case file and forward to the appropriate Appeals office. Visit Appeals website to locate the address of the appropriate Appeals office.

Case Processing Procedures
  1. Take the following actions:

    1. If TXMOD control is still open, close with message "To Appeals " .

    2. If TXMOD control is closed, input history item, "To Appeals " , on TXMOD.

    3. Send Letter 86C informing the taxpayer that the case is being transferred to Appeals.

    4. Update AMS history with "Sent to Appeals" and the date.

    5. Update WHCS with Letter 86C and the date.

International Organizations Exempt from Federal Withholding Requirements

International Organization Executive Order Number and Date
African Development Bank 12403 of February 8, 1983
African Development Fund 11977 of March 14, 1977
African Union
(formerly Organization of African Unity)
13377 of April 13, 2005 (revokes 11767 of February 19, 1974)
Asian Development Bank 11334 of March 7, 1967
Border Environmental Cooperation Commission 12904 of March 16, 1994
Caribbean Organization 10983 of December 30, 1961
Commission for Environmental Cooperation 12904 of March 16, 1994
Commission for Labor Cooperation 12904 of March 16, 1994
Commission for the Study of Alternatives to the Panama Canal 12567 of October 2, 1986
Customs Cooperation Council 11596 of June 5, 1971
European Bank for Reconstruction and Development 12766 of June 18, 1991
European Central Bank 13307 of May 29, 2003
European Space Agency (formerly the European Space Research Organization) 11318 of Dec. 5, 1966 and 12766 of June 18, 1991
Food and Agriculture Organization 9698 of February 19, 1946
Global Fund To Fight AIDS, Tuberculosis and Malaria 11395 of January 13, 2006
Great Lakes Fishery Commission 11059 of October 23, 1962
GRECO (Council of Europe in Respect of the Group of States Against Corruption) 13240 of December 18, 2001
Hong Kong Economic and Trade Offices 13052 of June 30, 1997
Inter-American Defense Board 10228 of March 26, 1951
Inter-American Development Bank 10873 of April 8, 1960 and 11019 of April 27, 1962
Inter-American Institute for Cooperation for Agriculture 9751 of July 11, 1946
Inter-American Investment Corporation 12567 of October 2, 1986
Inter-American Statistical Institute 9751 of July 11, 1946
Inter-American Tropical Tuna Commission 11059 of October 23, 1962
International Atomic Energy Agency 10727 of August 31, 1957
International Bank for Reconstruction and Development (World Bank) 9751 of July 11, 1946
International Boundary and Water Commission - the United States and Mexico 12467 of March 2, 1984
International Centre for Settlement of Investment Disputes 11966 of January 19, 1977
International Civil Aviation Organization 9863 of May 31, 1947
International Coffee Organization 11225 of May 22, 1965
International Committee of the Red Cross 12643 of June 23, 1988
International Cotton Advisory Committee 9911 of December 19, 1947
International Cotton Institute 11283 of May 27, 1966
International Criminal Police Organization (INTERPOL) (Limited Privileges) 12425 of June 16, 1983
International Development Association 11966 of January 19, 1977
International Development Law Institute 12842 of March 29, 1993
International Fertilizer Development Center 11977 of March 14, 1977
International Finance Corporation 10680 of October 2, 1956
International Food Policy Research Institute (Limited Privileges) 12359 of April 22, 1982
International Fund for Agricultural Development 12732 of October 31, 1990
International Hydrographic Bureau 10769 of May 29, 1958
International Joint Commission - the United States and Canada 9972 of June 25, 1948
International Labor Organization 9698 of February 19, 1946
International Maritime Organization (formerly the Intergovernmental Maritime Consultative Organization) 10795 of December 13, 1958
International Maritime Satellite Organization 12238 of September 12, 1980
International Monetary Fund 9751 of July 11, 1946
International Organization for Migration
(formerly Provisional Intergovernmental Committee for the Movement of Migrants for Europe and Intergovernmental Committee for European Migration)
10335 of March 28, 1952
International Pacific Halibut Commission 11059 of October 23, 1962
International Secretariat for Volunteer Service 11363 of July 20, 1967
International Telecommunications Satellite Organization (INTELSAT) 11718 of May 14, 1973 and 11966 of January 19, 1977
International Telecommunication Union 9863 of May 31, 1947
International Union for Conservation of Nature and Natural Resources (Limited Privileges) 12986, January 18, 1966
International Wheat Advisory Committee (International Wheat Council) 9823 of January 24, 1947
Interparliamentary Union 13097 of August 7, 1998
Israel-United States Binational Industrial Research and Development Foundation 12956 of March 13, 1995
ITER International Fusion Energy Organization 13451 of November 19, 2007
Korean Peninsula Energy Development Organization 12997 of April 1, 1996
Multilateral Investment Guarantee Agency 12467 of August 22, 1988
Multinational Force and Observers 12359 of April 22, 1982
North American Development Bank 12904 of March 16, 1994
North Pacific Anadromous Fish Commission 12895 of January 26, 1994
North Pacific Marine Science Organization 12894 of January 26, 1994
Organization for Economic Cooperation and Development (formerly the Organization for European Economic Cooperation) 10133 of June 27, 1950
Organization for the Prohibition of Chemical Weapons 13049 of June 11, 1997
Organization of American States (including Pan American Union) 10533 of June 3, 1954
Organization of Eastern Caribbean States 12669 of February 20, 1989
Pacific Salmon Commission 12567 of October 2, 1986
Pan American Health Organization (including Pan American Sanitary Bureau) 10864 of February 18, 1960
South Pacific Commission 10086 of November 25, 1949
United International Bureau for the Protection of Intellectual Property (BIPRI) 11484 of September 29, 1969
United Nations 9698 of February 19, 1946
United Nations Educational, Scientific, and Cultural Organization (UNESCO) 9863 of May 31, 1947
United Nations Industrial Development Organization 12628 of March 8, 1988
United States-Mexico Border Health Commission 11367 of December 21, 2004
Universal Postal Union 10727 of August 31, 1957
World Bank (see International Bank for Reconstruction and Development ) 9751 of July 11, 1946
World Health Organization 10025 of December 30, 1948
World Intellectual Property Organization 11866 of June 18, 1975
World Meteorological Organization 10676 of September 1, 1959
World Tourism Organization 125087 of March 22, 1985
World Trade Organization 13042 of April 9, 1997