IRM 5.19.28, Liability Collection – IRC 1062 Farmland Deferral, provides guidelines for working the IRC 1062 farmland deferral program.

Section 70437, Treatment of Capital Gains from the Sale of Certain Farmland Property, Public Law 119-21, Working Families Tax Cuts (WFTC), provides authority for this section.

The Director, Collection Policy, is responsible for overseeing program coordination for Collection IRC 1062 transfer agreements and acceleration of delinquent IRC 1062 accounts. The director establishes policies, strategies, objectives, and procedures. The director also addresses evolving program issues, collaborates with stakeholders to ensure IRC 1062 financial reporting requirements meet GAO and CFO standards, and clarifies tax code issues addressed in this IRM.

The Director, Collection, has administrative responsibility for all campus managerial and Collection IRC 1062 program responsibilities. The director makes sure there is adequate staffing for campus personnel to meet the required GAO and CFO standards regarding the IRC 1062 financial reporting requirements. The director also promotes adherence to IRC 1062 IRM program processes and procedures to ensure the IRS meets customer needs.

The Director, Campus Operations, has administrative responsibility for campus management and Collection IRC 1062 employees. The director maintains adequate IRC 1062 staffing, promotes adherence to IRC 1062 IRM program processes and procedures and certifies the accuracy and timeliness of IRC 1062 casework each quarter.

The campus operations manager oversees the Collection IRC 1062 department, team, and employee actions. The campus operations manager ensures employees receive the tools and training needed to perform their duties and ensures casework meets IRC 1062 IRM timeliness requirements. The campus operations manager also takes necessary action to maintain proper staffing levels.

The campus department manager oversees the Collection IRC 1062 team and employee actions. The campus department manager ensures employees receive the tools and training needed to perform their duties and ensures casework meets IRC 1062 IRM timeliness requirements. The campus department manager reviews local IRC 1062 program inventory and quality review reports to confirm accuracy, initiates and monitors actions to identify and resolve case errors, resolves internal campus IRC 1062 processing issues, and elevates complex IRC 1062 program questions to Collection Policy headquarters analysts.

The campus team manager supervises employees and program activity within the team. The campus team manager oversees employee actions and assigns inventory. The campus team manager ensures employees receive the tools and training needed to perform their duties and ensures casework meets IRC 1062 IRM timeliness requirements. The campus team manager also oversees preparation of IRC 1062 team quality review and inventory reports, reviews reports for accuracy, recommends actions to identify and resolve errors, resolves routine internal campus IRC 1062 processing issues, and elevates complex IRC 1062 program issues to the campus department manager.

Campus tax examiners work assigned cases in accordance with IRC 1062 IRM timeliness requirements. Campus tax examiners perform the following actions:

Program Reports: Local campus reports are submitted through the Batch/Block Tracking System (BBTS) to Work Planning and Control (WP&C) reports. WP&C reports are used to monitor receipts, closures, and rates to determine whether cases are received and closed timely. WP&C reports are available on the Business Objects platform. Accounts Management Services (AMS) reports provide information regarding inventory and inventory age. Integrated Data Retrieval System (IDRS) Case Control Activity (CCA) reports identify cases assigned to an operation, department, team, or employee. These reports are available on Control-D.

Program Effectiveness: Program effectiveness is monitored and tracked through the IRC 1062 inventory report. The report captures data weekly and rolls the data into monthly and cumulative yearly totals. Program goals and results are maintained on the Collection Program and Campus Reports SharePoint site in the Monthly Monitoring Report (MMR). The MMR captures monthly and cumulative inventory, rate data and periodic snapshots of aged case percentages. Operational and program reviews are conducted to ensure case actions are timely and follow the procedures in this IRM.

Campus operations, department, and team managers, along with Employment Tax Policy headquarters analysts, monitor the following inventory controls and employee actions:

For a list of commonly used IRC 1062 terminology, refer to Exhibit 5.19.28-1, IRC 1062 Terms.

For a list of commonly used acronyms in this IRM, refer to Exhibit 5.19.28-2, Acronyms.

This program may require research specific to the program including access and input to the Integrated Data Retrieval System (IDRS) with and without Integrated Automation Tools (IAT), the Account Management System (AMS), the Employee User Portal (EUP) and the Remittance Transaction Research System (RTR).

The IRC 1062 program involves both paper and telephone contact with internal and external customers and follows additional guidelines set forth in relevant IRM referenced in this document.

Taxpayers liable for the tax on the gain from the sale or exchange of qualified farmland property may pay using one of the following options:

Taxpayers must make the Section 1062 election by the due date of their income tax return for the taxable year in which the sale or exchange occurs, including extensions of time to file, if any.

Installment Payment Due Dates: If a taxpayer makes an election under IRC 1062, then the taxpayer must pay the first installment by the due date of the return for the taxable year in which the sale or exchange occurs, without regard to extension of time to file. The second through fourth installments are due on each succeeding tax year’s due date of the return, without regard to extension of time to file.

If additional tax is assessed based on failure to make timely payments under IRC 1062, or underpayment of an installment, then the unpaid portion of all remaining installments is due on the date the addition to tax is assessed on the untimely installment payment.

The IRC 1062 farmland tax can be reported on the following forms:

A taxpayer making a valid election must include the following items with the return for the taxable year of the sale or exchange:

Taxpayers must report 100% of the IRC 1062 farmland tax, which is included in Transaction Code (TC) 150. If the taxpayer elects to pay in four installments, a TC 766 with Credit Reference Number (CRN) 471 is posted for installments two through four as the deferred amount.

Annual installments for an IRC 1062 election are due on the unextended due date of the return each year. Failure to pay a required installment will result in a failure to pay penalty assessment, which may accelerate the unpaid portion of the taxpayer’s remaining IRC 1062 installments causing them to become due immediately.

Taxpayers are instructed to make two separate payments: one for the IRC 1062 farmland tax, identified as a TC 670 with Designated Payment Code (DPC) 25, and one for the remaining other income tax due.

Form 1062-T, Transfer Agreement Under IRC 1062 (b)(2)(c), are signed by both the transferor and transferee. Form 1062-T may be received electronically or via paper. The team clerk date stamps the paper forms when received.

IRC 1062 transfer agreements must be scanned and loaded into Inventory X within five working days of receipt under OFP 61532, establishing an open control.

In the event that a paper 1062-T agreement arrives in CSCO Brookhaven, the team clerk will log the transfer agreement into the inventory tracker. Paper agreements will be routed to the Inventory Control Coordinator for assignment.

Once agreements are assigned to TE, the TE will load the case information and scanned agreement into the SharePoint tracker.

The IRC 1062 transfer agreement inventory tracker is located on the IRC 1062 Farmland SharePoint site.

Employees must complete the following actions:

Create and send Letter 6700, Acknowledgment of Receipt of IRC 1062 Transfer Agreement, to both the transferor and transferee to acknowledge receipt of the IRC 1062 transfer agreement. Attach a copy of Letter 6700 to the SharePoint case file.

In addition to the transferor and transferee, send Letter 6700 to any valid power of attorney (POA) or tax information authorization (TIA) on file. Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, must be on file for the year of assessment, not for the year the installment payment is made or due. Refer to IRM 21.1.3.3, Third-Party (POA/TIA/F706) Authentication.

This section provides procedures for linking transferor and transferee accounts and assessing IRC 1062 applicable net tax liability to the transferee.

IRC 1062 election accounts may contain the following transaction codes:

The following Return Processing Code (RPC) for BMF and Form Processing Code (FPC) IMF are used to identify IRC 1062 tax returns and initiate specific processing through December 31, 2026:

Determine the transferee’s IRC 1062 assessment amount using the transfer agreement and Integrated Data Retrieval System (IDRS) data. The transferee assessment amount must equal the current transferor deferral balance. Typically, this amount is equal to or less than the amount shown on the transfer agreement.

Establish links between the transferor and transferee by inputting TC 971 Action Code (AC) 866 on both modules.

On the transferor election year module, use Command Code (CC) REQ77/FRM77 to input TC 971 AC 866 as shown in the following table:

Establish the transferee module by using CC REQ77/FRM77 to input TC 971 AC 866 as shown in the following table:

On the module established for the transferee, input the assessment of transferred IRC 1062 applicable net tax liability using Command Code (CC) REQ54/ADJ54, with TC 298 and the interest computation date. Use Credit Reference Number (CRN) 471 to defer the liability, which posts as TC 766 CRN 471. Use MFT 82 for IMF and MFT 83 for BMF.

Use the following procedures to assess a transferred IRC 1062 applicable net tax liability:

After completing the transferee assessment, send Letter 6699, Transferee Notice and Demand Under IRC 1062, and attach a copy of Letter 6699 to the SharePoint case file.

Leave history on IDRS and AMS. Update the SharePoint case status to "Transferee Assessed" and close the case on AMS.

When the transferor immediately ceases to exist, notify the HQ Employment Tax analysts before to taking any action on the transferor’s account. Suspend the case in Inventory X for 14 days to allow HQ time to respond.

Use Command Code (CC) REQ54/ADJ54, to remove the deferred amount. Use Credit Reference Number (CRN) 471 to reduce the deferred liability to zero, which posts as TC 767 CRN 471. Use the following procedures to reduce the IRC 1062 deferral:

Use Command Code (CC) REQ54/ADJ54, with TC 291 to reduce the transferred tax amount. Use the following procedures to reduce the IRC 1062 applicable net tax liability that was transferred:

Input TC 971 AC 867 to adjust the tax.

Input TC 767 Credit Reference Number (CRN) 471 on an account where an IRC 1062 liability payment posts to reduce the TC 766 CRN 471 deferral amount.

Payments that post as TC 670 Designated Payment Code (DPC) 25 systemically generate TC 767 CRN 471 to reduce the TC 766 CRN 471 deferral amount.

If TC 767 CRN 471 does not post systemically, or if the payment does not post as TC 670 DPC 25, then manually input TC 767 CRN 471 to reduce the TC 766 CRN 471 deferral amount.

Use Command Code (CC) REQ54/ADJ54 to complete an IRC 1062 TC 76X CRN 471 adjustment as follows:

When payments or credits post to an account with a transfer agreement, TC 971 AC 866, cross-reference the payment or credit to the applicable liability account. Cross-reference payments and credits using TC 290 $.00 and Credit Reference Number (CRN) 337 with the AMT> field showing the credit amount being cross-referenced.

Use Command Code (CC) REQ54/ADJ54 to input TC 766 CRN 337 on the IMF module as follows:

Use CC REQ54/ADJ54 to input TC 766 CRN 337 on the BMF module as follows:

Update the IRC 1062 SharePoint database with the next installment due date.

When a transferee with multiple assessments makes a lump-sum payment, the payment must be split between the transferors for cross-reference.

When the lump-sum payment amount exceeds the amount due and the taxpayer does not designate which liability to apply the excess payment to, determine the split of the excess amount by dividing the excess amount by the number of transferors.

When the lump-sum payment amount is less than the amount needed to full pay all installments, apply the payment to the installment with the earliest due date first. If multiple installments have the same due date, then apply the excess amount to fully pay the remaining installments, as appropriate.

When the lump-sum payment amount is less than the amount needed to full pay all installments, pay the installment with the earliest due date first.

Update the IRC 1062 SharePoint database with the next installment due date and close the case on AMS.

Headquarters filters the Custodial Detail Database (CDDB) extract provided by the Chief Financial Officer (CFO) for potential acceleration accounts. Cases are loaded into Inventory X for distribution to tax examiners for review. Work includes:

When an IRC Section 1062 transcript is received and the module reflects a balance due consisting of a missed annual installment and a Failure to Pay (FTP) penalty, take the following actions:

Suspend collection activity. Input TC 470, Closing Code 90, on the IRC Section 1062 module while payment research is completed.

Research the missing installment payment. Review available payment records to determine whether the taxpayer submitted the installment and whether the payment was applied to another tax period or module.

If the installment payment is located:

If the installment payment is not located:

Process the taxpayer’s response as follows:

Research the account using the Employee User Portal (EUP) to verify the accuracy of IRC 1062 transactions. Confirm the account has a posted TC 971 AC 867 and the appropriate TC 766 CRN 471 amounts posted.

Use the following research sources and return information:

Individual Master File (IMF) accounts with an IRC 1062 election will display the first installment, 25%, and the Applicable Net Tax Liability (ANTL), 100%, as shown below.

Business Master File (BMF) accounts with an IRC 1062 election will display the first installment, 25%, and the Applicable Net Tax Liability (ANTL), 100%, as shown below.

Check the module for freeze codes before accelerating the account.

If review shows acceleration is not necessary because of account errors, correct the account. Corrections are typically necessary when the account has any of the following errors:

Analyze installment payments before initiating acceleration procedures.

If an installment payment was paid in full but late, begin processing the acceleration case.

If an installment payment is missing, research the account for possible miscoded or misapplied IRC 1062 payments.

Use the following table to resolve possible misapplied IRC 1062 payments.

Use the following table to determine whether a payment is clearly identified as intended for IRC 1062.

Transfer the misapplied payment using the IAT Credit Transfer tool.

Credit transfers to MFT 82 or 83 only allow the following transactions.

IDRS systemically posts TC 767 CRN 471 when a TC 670 DPC 25 payment posts on an IRC 1062 module. IDRS uses the payment date as the TC 767 CRN 471 date.

Use the following rules to determine whether a manual adjustment is needed for TC 767 CRN 471.

Create and send the PDF version of Letter 6701, Notice of Intent to Accelerate, as the first notice for missing or late installment payments. In addition to the normal header information, Letter 6701 must include:

If Letter 6701 is returned as undeliverable, research IDRS for a different address.

If no other address is found, proceed with acceleration.

Letter 6701 allows the taxpayer 30 days to respond with the installment payment plus interest and show reasonable cause for failure to timely pay the required installment.

Attach a copy of Letter 6701 to the case file in SharePoint.

Establish an open control on the module to monitor the case 45 days after the letter issuance date.

Leave the IDRS history item "L6701" and add a history entry on AMS.

Monitor the weekly age listing and incoming correspondence for responses to outgoing letters.

Review correspondence to determine whether reasonable cause exists.

This subsection does not replace existing IRM guidance on reasonable cause. Employees must be familiar with the reasonable cause criteria in IRM 20.1.1.3, Criteria for Relief from Penalties.

Under Policy Statement 3-2, any reason for delinquency in making deposits or payments that establishes the taxpayer exercised ordinary business care and prudence but was nevertheless unable to comply within the prescribed time will be accepted as reasonable cause.

Policy Statement 3-2 provides that the following examples of sound causes will be accepted as reasonable cause for failure to comply with a payment requirement:

Apply this general guideline to the period before and including the payment due date. Reasonable cause does not exist if, after the facts and circumstances that explain the taxpayer’s noncompliant behavior cease to exist, and the taxpayer fails to comply with the tax obligation within a reasonable period. See IRM 20.1.1.3.2, Reasonable Cause.

When possible, use the Reasonable Cause Assistant (RCA) program to determine whether a penalty can be removed. See IRM 20.1.1.3.6, Reasonable Cause Assistant (RCA), for additional information.

After monitoring for 45 days for Letter 6701 cases, research all accounts again for a potential payment that may have been recently sent to the IRS.

If a payment is found that matches the request in Letter 6701 and is available for credit transfer, move the payment to the IRC 1062 election year.

If there is no reply to Letter 6701 or no reasonable cause request, accelerate the account.

To accelerate a module, input TC 298 .00 and CRN 471 to reverse the entire remaining deferral amount. This transaction will post on IDRS as TC 767 CRN 471.

The remaining deferral amount will equal the maximum deferral amount for the last installment due, or less if the taxpayer remitted more than what was due. The interest computation date will be the projected 23C date for the posting transaction. See Document 6209, IRS Processing Codes and Information, Section 16, Julian Date, Cycle and Notice Calendars.

Use hold code 0 with this transaction so the notice includes the failure to pay penalty and interest for the late installment amounts, along with the full remainder of the deferred IRC 1062 tax.

Use the following installment amounts table for the examples in this subsection.

Use the following examples to determine the appropriate input action.

TC 767 CRN 471 adjustments will unpost if:

Leave the IDRS history item "1062 Accel" and add a history entry on AMS.

Update the SharePoint case status to "Acceleration Pending" .

Monitor the module for the deferral adjustments to post and reduce the deferral amount to $0.

When the deferral amount is $0, update the SharePoint case status to "Deferral Reversed" .

Ensure the "Unpaid 1062" amount is updated on SharePoint.

The Document Upload Tool (DUT) is an application on IRS.gov that allows taxpayers to digitally upload requested or required documentation and transmit it to the IRS during or shortly after an interaction, such as a phone conversation or correspondence.

Provide taxpayers or their representatives with a unique, one-time-use access code and the corresponding link to www.irs.gov/sendmyreply to upload the required documents.

Tax examiners must complete a BEARS request before they access DUT. To generate the unique access code, tax examiners must sign in to DUT using the Documentation Upload Tool.

Use of DUT is voluntary for taxpayers but strongly recommended.

The DUT website reminds the taxpayer or power of attorney (POA) of the following requirements when using DUT: