5.21.7 Special Cases

Manual Transmittal

November 13, 2015

Purpose

(1) This transmits a revision of IRM 5.21.7, Special Cases, for collection employees.

Material Changes

(1) IRM 5.21.7.1(1) reworded for clarification.

(2) IRM 5.21.7.2(2), added new section to clarify cases controlled by Competent Authority.

(3) IRM 5.21.7.2(3), clarified Rev Pro 2006-54 and Rev Proc 2006-23.

(4) IRM 5.21.7.2(4), reworded for clarification.

(5) IRM 5.21.7.3.1(2), reworded for clarification.

(6) IRM 5.21.7.3.1(3), corrected Form 1042, line 67 as the new Form 1042 has changed.

(7) IRM 5.21.7.4 Added new subsection on Mutual Collection Assistance Requests. This section supersedes IRM 5.1.8.7.7 Incoming Mutual Collection Assistance Requests and IRM 5.1.12.25 Outgoing Mutual Collection Assistance Requests.

(8) The revision of this IRM section includes editorial changes and IRM reference corrections throughout.

Effect on Other Documents


IRM 5.21.7 supersedes IRM 5.21.7, dated 01-03-2014.

Audience

SB/SE Revenue Officers

Effective Date

(11-13-2015)

Kristen E. Bailey
Director, Collection Policy
Small Business/Self Employed

Introduction

  1. This IRM provides instructions and guidelines for working cases which have unusual international aspects that must be considered. The procedures are written for international revenue officers but also apply to domestic revenue officers. Employees in SB/SE and employees in other functions may also refer to these procedures.

Cases Controlled by the Competent Authority Office

  1. The Competent Authority office (CA) works with taxpayer cases that involve coordination between IRS and another government, and they intervene at the request of the taxpayer. The purpose of their intervention is to work with the other government to prevent an unjust double taxation situation for the taxpayer. See IRM 4.60.1.1.1, Exchange of Information.

  2. The Deputy Commissioner (International), LB&I is the CA charged with administering the provisions of tax treaties, interpreting and applying the tax treaties, and reaching mutual agreement in specific cases. The CA conducts the competent authority process through two offices, the Advance Pricing and Mutual Agreement Program (APMA) and the Treaty Assistance and Interpretation Team (TAIT). APMA has primary responsibility for cases arising under the business profits and associated enterprises articles of U.S. tax treaties. TAIT has primary responsibility for cases arising under all other articles of U.S. tax treaties. TAIT also has primary responsibility for cases arising under U.S. tax treaties with respect to estate and gift taxes. APMA and TAIT each can consider cases arising under the permanent establishment articles of U.S. tax treaties, and both offices will coordinate and collaborate on such cases and on any other cases as appropriate.

  3. Rev. Proc. 2006-54 contains the procedures that allow a U.S. taxpayer to request assistance from the U.S. Competent Authority on issues arising under a tax treaty between the United States and a foreign country. Rev. Proc. 2006-23 provides procedures for requesting assistance from the CA under the provisions of a tax coordination agreement between the United States and a U.S. Territory.

  4. Rev. Proc. 2006-54 or Rev. Proc. 2006-23"the IRS will postpone further administrative action with respect to the issues under Competent Authority consideration" . This postponement would include assessment or collection procedures if they impacted the issues under the CA jurisdiction, such as assessment and collection, unless otherwise instructed by the CA.

  5. Sometimes the cases being worked by CA are also assigned to a Revenue Officer (RO) - either status 26 or status 03. It is possible that the RO could pursue certain collection actions in these cases which would be counter-productive to the Service's interest or unfair to the taxpayer and, in fact, would violate the postponement guidelines in Rev. Proc. 2006-23.

Procedures for Working Competent Authority Cases

  1. The CA analyst working the case will identify Field status via IDRS. The CA analyst will send an encrypted e-mail to the Collection Policy (CP) analyst who acts as the insular area liaison.

  2. The CA e-mail will be worded as follows:

    COMPETENT AUTHORITY NOTE: Tax years ____ and ____ are currently under the jurisdiction of the U.S. Competent Authority (SE:LB&I:IN). Pursuant to Rev. Proc. 2006-54, , [or Rev. Proc. 2006-23, if applicable] "the IRS will postpone further administrative action with respect to the issues under Competent Authority consideration" such as assessment or collection procedures. Therefore, until negotiations are complete with the other taxing jurisdiction's Competent Authority, RO should contact the U.S. Competent Authority to discuss any contemplated collection action for these years before proceeding. The U.S. Competent Authority analyst on this case is ______________ and can be reached at _____________. Please make contact with this analyst as soon as possible to discuss any proposed actions on the case. You will be notified when the case is completed and Competent Authority jurisdiction relinquished.

  3. The CP analyst will copy the CA analyst's e-mail message, and paste it into the ICS history. It will be the obligation of the CA analyst to notify the CP analyst when the case is closed. The CP analyst will make a note about the closure in the ICS history.

  4. Consult your manager if you believe that postponement of collection activity will adversely impact the government's interest. If the manager agrees, the manager will contact the CA analyst to discuss the case and resolve any conflict. The CP analyst may be included in the discussion at the request of either party.

Qualified Intermediary Cases

  1. Qualified intermediary (QI) cases involve foreign entities that enter into a qualified intermediary agreement with the IRS.

  2. QIs file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons.

  3. QIs are assigned a special QI Employer Identification Number (EIN) ranging from 98-023XXXX to 98-033XXXX.

Procedures for Working Qualified Intermediary Cases

  1. Check IDRS command code AMDISA when there is a -L freeze on the account indicating open examination activity. If the case is assigned to a revenue agent, contact that agent before proceeding.

  2. Determine if the liability is correct and not the result of an error by the QI or IRS. QIs can claim the withholding credits even though they are not assuming primary withholding responsibility.

  3. Check Form 1042, line 67 to verify that the QI claimed the proper withholding credits. Also verify the credits in IRS systems by checking IDRS command code IRPTRL and / or Entellitrak (E-TRAK) system. The Accounts Management System (AMS) may contain some of the information you need.

  4. When ROs request the E-TRAK information, they must put something in the ICS history indicating that they sent the request to the group's E-TRAK resource person, and include that person's name. No GM approval is requested and there is no need for the E-TRAK resource person to access the case to verify completion of the request.

  5. Use internal sources such as IDRS to locate a telephone contact number for the QI or contact the QI team for assistance. If telephone contact is not successful, in order to meet your initial contact time requirement, you may send an appointment letter for a telephone meeting, and enclose Publication 1,Your Rights as a Taxpayer.

    Note:

    The RO may also enclose Letter 1058, Final Demand, with the appointment letter. However, the RO may not send L-1058 by itself on initial contact.

  6. Take the appropriate action in the following situations:

    1. If the QI did not have any credits, send L-1058 to the QI.

    2. If the QI claimed the credits correctly on Form 1042, line 67, and the RO has verified on E-TRAK that the credits are there, but the credit was not properly credited on IDRS, contact the QI Technical Advisor Team Manager.

      Note:

      Information to contact the QI manager and a list of QI Technical Advisors is located at http://lmsb.irs.gov/hq/pftg/qi/TA/TA.asp.

    3. If the QI mistakenly did not claim the credits, so there are no credits on line 67 of Form 1042, secure from the QI copies of Forms 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, a letter from the QI explaining the reason for requesting an adjustment, and a corrected Form 1042. You will need these documents to prepare an adjustment. See IRM 5.21.8.5, Adjustments on Qualified Intermediary Cases.

    4. Revenue Officers may not report a QI case Currently Not Collectible (CNC).

  7. Contact the QI team prior to taking any further case action if no response is received from the QI. The QI team will send a letter to the QI requiring them to contact the revenue officer.

  8. Verify that the QI did not contact the QI team before pursuing collection action.

  9. Continue with normal collection actions if the QI does not contact you within 60 days, such as filing the notice of federal tax lien, issuing levies, etc.

    Note:

    Do not assess the trust fund recovery penalty against the Qualified Intermediaries since the QI agreement contains provisions that penalize the QI for non payment of withholding taxes.

Mutual Collection Assistance Requests (MCAR)

  1. The United States has five bilateral tax treaties that contain broad provisions for mutual assistance in collection, also known as "MCAR" .

    Note:

    Most U.S. tax treaties contain limited, anti-abuse collection assistance provisions intended to prevent improper use of the treaties. These "limited collection" provisions focus on exemptions or reduced rates of tax granted under the treaty.

  2. MCAR is an agreement between the United States and the treaty partner to combat international tax avoidance and evasion. It is a mutual obligation to collect taxes on behalf of another country. The treaties provide that each contracting country can take whatever actions it would take to collect its own taxes in order to collect the taxes of a treaty partner. Each country uses its own unique collection tools to collect the tax of a treaty partner.

  3. There are currently five MCAR countries which have income tax treaties with the United States that provide for mutual collection assistance of income taxes and other taxes specified in the respective treaties.

    • Canada – All taxes including both individual and business

    • Denmark – Income taxes

    • France – Income taxes & estate taxes

    • The Netherlands – Income taxes

    • Sweden – Income taxes

      Note:

      On January 24, 2013, the United States and Japan signed a new Protocol to the tax treaty which contains a provision to permit the United States and Japan to collect taxes on behalf of each other. However, collection assistance will not occur until this new Protocol is ratified by both the United States and Japan. Once the new Protocol to the income tax treaty between the United States and Japan has been ratified, this section will be updated.

  4. The MCAR program is administered by Large Business & International (LB&I) Competent Authority with assistance provided by Small Business & Self Employed (SB/SE) Field Collection Area Operations.

    1. The Office of Competent Authority in LB&I is the coordinating authority with the foreign government. All MCAR referrals are received and processed through LB&I Competent Authority.

    2. SB/SE Western Field Collection assists LB&I Competent Authority in carrying out all the collection activities for MCAR Designated Revenue officer(s) in SB/SE International Field Collection act as MCAR coordinators to process and work all mutual collection assistance requests.

      Note:

      For a list of MCAR coordinators, refer to the following link:http://mysbse.web.irs.gov/Collection/international/mcar/contacts/20805.aspx

Inbound Mutual Collection Assistance Request

  1. ) Inbound Mutual Collection Assistance Requests provide that the treaty partner may request assistance from the United States in collecting taxes owed to the treaty partner by its own citizens or residents, or other persons owing taxes to the treaty partner.

  2. The Service will not pursue collection on behalf of the treaty partner if the individual subject to collection is a citizen of the United States.

    Exception:

    For MCAR cases received from Canada and Denmark, this provision only applies to individuals who were U.S. citizens at the time the tax liability arose.

  3. All requests for assistance in collection come through LB&I Competent Authority in the form of letters from the treaty partner. The incoming letters include a statement to the effect that the tax has been “finally determined,” as required by each treaty.

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  5. The MCAR coordinator receives the inbound MCAR referral which contains the following information:

    1. Name

    2. Address

    3. Type of tax and tax period(s)

    4. Amount(s) due in the currency of the treaty partner

    5. Date the Collection Expiration Statute Date (CSED) expires

      Note:

      The CSED for each MCAR is provided by the treaty partner. The statute date is shown on the U.S. dollar Assessments Certificates. No action is required by the Service to protect MCAR collection statutes.

      Note:

      If the CSED is about to expire within 12 months, the MCAR coordinator should request an updated CSED from LB&I Competent Authority. If the CSED has not been updated after 90 days after the request has been made, the MCAR coordinator should close the case.

    6. Any known levy sources or assets located within the United States

      All MCAR referrals are sent to LB&I Competent Authority who is the only IRS official authorized to receive such requests.. Competent Authority office will then forward such inbound MCAR requests to SBSE for collection action.

  6. Since the Internal Revenue Code requires an assessment before the Service can take any enforcement actions, the Service must prepare an Assessment Certificate under the authority provided by the tax treaty. The foreign tax liability is shown in U.S. dollars on an Assessment Certificate.

    An Assessment Certificate is prepared by the MCAR coordinator that includes the following:

    1. The foreign tax liability is converted into U.S. dollars using the exchange rate as of the date the assessment certificate is prepared.

    2. A taxpayer control number (TCN) is created as a taxpayer identifying number for the MCAR case. The format for the TCN is 98–MCA–NNNNN. If an U.S. SSN is known, this will also be included in the assessment certificate.

      Note:

      The inbound MCAR case may have three different control numbers. The treaty partner, and LB&I assigns their own taxpayer control number in addition to the TCN assigned by SBSE. The MCAR coordinator should refer to these control numbers when communicating with the treaty partner or LB&I.

    3. The assessment certificate is signed and dated by the MCAR coordinator.

      Note:

      The date the certificate is signed becomes the date of assessment for all enforcement actions taken by the Service in the United States, including Notice of Federal Tax Liens.

  7. A case is created on ICS as a Collection Initiative Program (CIP). ICS will be utilized to track inventory, maintain case histories, and charge time for the inbound MCAR cases. The grade of the inbound MCAR case will be determined based on the complexity of the case, using the same case grading criteria for domestic cases.

    Caution:

    Since MCARs are foreign assessments, the assessment will not be showing on IDRS.

  8. The MCAR coordinator will update the case code/sub code accordingly.

  9. Conduct research using IDRS, Accurint and other locator sources to locate the following information:

    • A U.S. social security number

    • Taxpayer’s citizenship

    • Taxpayer’s address and/or contact information

    • The latest return filed

    • Levy sources

    • Any open U.S. tax liability

      Note:

      The Service will always give priority to collecting taxes owed to the United States by the taxpayer before collecting the foreign taxes owed.

  10. The MCAR First Notice and the MCAR Final Notice are sent to the taxpayer. If the MCAR liability is not resolved after the MCAR First Notice, an MCAR Final Notice is sent to advise the taxpayer about possible distraint actions pertaining to the MCAR notices.

    1. MCAR First Notice informs the taxpayer that the Service is collecting the foreign tax liability on behalf of the treaty partner in accordance with the treaty. The MCAR coordinator prepares and sends the MCAR First Notice to the taxpayer. Include with the MCAR First Notice the following:
      •Copy of the Assessment Certificate
      •Pub 594, The IRS Collection Process
      •Pub 1660, Collection Appeal Rights

      Note:

      Do not provide Pub 1, Your Rights as a Taxpayer, as these are not U.S. tax delinquencies.


      •Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals

    2. MCAR Final Notice is sent certified to the taxpayer if no response or inadequate response from the MCAR First Notice. The MCAR Final Notice includes:
      •Copy of the Assessment Certificate
      •Pub 1660

      Caution:

      Taxpayers on inbound MCAR cases are not entitled to Collection Due Process Hearing since the tax liability are foreign tax liability but are entitled to Collection Appeals Program (CAP) rights. The Appeals Office does not have the authority to adjust a foreign tax liability, but does have the authority to advise the MCAR coordinator to revoke the MCAR Final Notice if appropriate collection procedures were not followed. See IRM 8.24.1.2, Collection Appeals Program.

  11. Depending on the response from the taxpayer will determine the next action on the MCAR case.

    1. Full pay
      The taxpayers has the option to make payments by check or money order, made payable to the treaty partner in either the currency of the treaty partner or in U.S. dollars. The MCAR coordinator will forward the payment directly to the treaty partner.

    2. Installment Agreement
      •Secure a complete Form 433-A, Collection Information Statement and verify all financial information in accordance with IRM 5.15.1, Financial Analysis, if the taxpayer cannot full pay the MCAR liability.
      •All installment agreements are approved and manually monitored by the MCAR coordinator for a period of 90 days. After 90 days, and/or having received three monthly payments, if the taxpayer is compliant with the terms of the payment agreement, the MCAR coordinator should close the inbound MCAR case and instruct the taxpayers to send future payments directly to the treaty partner.

    3. Disputed Tax Liability
      •Taxpayer may dispute the MCAR tax liability with the treaty partner. The United States has no statutory authority to adjust a foreign tax liability.

      Note:

      If after 90 days, the dispute is still unresolved, the MCAR coordinator should close the inbound MCAR case. The treaty partner may make a new request through LB&I Competent Authority when the dispute is resolved and the liability becomes final.

    4. United States Citizen
      •Secure evidence of U.S. Citizenship. If it is determined that the taxpayer is a U.S. Citizen, actions to collect the MCAR liability should cease and the case closed. Examples of proof of U.S. Citizenship are a copy of U.S. Passport or a copy of Certificate of Naturalization.

      Note:

      The treaties for France, The Netherlands and Sweden provide that the Service will not collect from U.S. citizens and the treaty partners will not collect from their citizens. The inbound MCAR case should be closed when the taxpayer provides proof of U.S. Citizenship.

      Note:

      The treaties for Denmark and Canada provide that the Service will not collect from taxpayers, who were U.S. citizens at the time the tax liability arose. A taxpayer that provides proof of U.S. citizenship at the time the Danish or Canadian tax liability arose, the MCAR coordinator should close the inbound MCAR case. If the taxpayer were a Canadian or Danish citizen at the time the tax liability arose, but subsequently became an U.S. citizen, the Service will still go forward with collecting the tax due.

      IF THEN
      The taxpayer is a U.S. Citizen by birth Secure a copy of taxpayer’s birth certificate or U.S. passport.
      The taxpayer is a naturalized U.S. Citizen Secure the number, date and place of issuance of the taxpayer’s Certificate of Naturalization or a copy of U.S. passport.
    5. Unable to Pay/Unable to locate/Currently Not Collectible
      •If the taxpayer does not have the ability to full pay or set up an installment agreement on the foreign tax liability, the MCAR coordinator should close the case as unable to pay. The taxpayer should have completed a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, to show an inability to pay. See IRM 5.16.1.2.9, Hardship, and IRM 5.15.1, Financial Analysis, for procedures to make a hardship determination. If the taxpayer cannot be located, follow the same procedures as working a domestic case for a UTL CNC. Advise the treaty partner that the taxpayer cannot be located in the United States.

    6. Bankruptcy
      •The taxpayer may file for bankruptcy The Service can submit a proof of claim to the appropriate U.S. Court on behalf of the treaty partner and advise the treaty partner of developments in the proceedings through the U.S. Competent Authority.
      •A decedent estate or insolvency proceeding will be handled in a similar manner.

    7. Offer in Compromise
      •The Service does not have the statutory authority to accept an offer to compromise a foreign tax liability. Therefore offer in compromise is not an option for the taxpayer to settle the liability. The MCAR coordinator must direct the taxpayer to the treaty partner for resolution of the account if Full Pay, Installment Agreement, or CNC are not appropriate.

Closing Letter

  1. Once a case is ready to be closed, the MCAR coordinator drafts official correspondence for the signature of the LB&I Competent Authority to close the case back to the treaty partner. The letter should contain an explanation regarding the disposition of the case.

  2. The MCAR coordinator will retain the closed case file for two years. After two years, the closed case file will be mailed to LB&I Competent Authority for association with the case file maintained by the Competent Authority.

Enforcement Action on MCAR

  1. After the MCAR Final Notice is sent to the taxpayer, and there is no response, or insufficient response from the taxpayer, the MCAR coordinator will, if possible, utilize internal and external locator sources to find levy sources and/or locate taxpayers.

  2. In situations where the notices are undelivered, the MCAR coordinator will issue a courtesy investigation to the appropriate Field Collection Area to make a field visit to taxpayer’s last known address.

  3. Consider taking the same enforcement actions as would be appropriate for a domestic Bal Due taxpayer, although the processing for certain distraint actions will differ slightly from that for domestic Bal Dues. See IRM 5.11.1.3.1, Pre-Levy Considerations.

  4. If enforcement action is not taken on any assets, document why enforcement action was not taken against a particular asset. This documentation will assure the treaty partner that all possible efforts were made to collect the foreign tax liability.

Levy on MCAR

  1. Prepare all notice of levy forms and follow the guidelines under IRM 5.11.2,Serving Levies, Releasing Levies and Returning Property ,with the following exceptions:

    1. Form 668-A, Notice of Levy
      •PrepareForm 668-A on a word document. ICS template for Form 668-A cannot be used.
      •Include in the comments section of the Form 668-A a special language pertaining to the specific treaty partner.

      Note:

      The Form 668-A should contain the following language:


      "THIS AMOUNT IS DUE, OWING AND UNPAID TO THE GOVERNMENT OF (Treaty Partner), AND IS BEING COLLECTED ON BEHALF OF (treaty partner) IN ACCORDANCE WITH ARTICLE (Section of the treaty partner agreement) OF THE USA-(treaty partner) INCOME TAX CONVENTION AND APPLICABLE INTERNAL REVENUE LAWS OF THE UNITED STATES OF AMERICA. PAYMENTS SHOULD BE MADE PAYABLE TO THE RECEIVER GENERAL OF (treaty partner), NOT THE IRS, BUT SHOULD BE MAILED TO THE ADDRESS CONTAINED HEREIN. THE IRS COORDINATOR WILL FORWARD THE PAYMENT TO (treaty partner)."
      •Forwarded levy payments to the MCAR coordinator
      •Close the MCAR case only if the levy payment fully pays the MCAR liability; otherwise, continue investigating other levy sources.

    2. Form 668-W, Notice of Levy on Wages, Salary and Other Income
      •Prepare Form 668-W on a word document. ICS template for Form 668-W cannot be used.
      •Include in the comments section of the Form 668-W, a special language pertaining to the specific treaty partner.

      Note:

      The Form 668-W should contain similar language for each of the treaty partners: "THIS AMOUNT IS DUE, OWING AND UNPAID TO THE GOVERNMENT OF (Treaty Partner), AND IS BEING COLLECTED ON BEHALF OF (treaty partner) IN ACCORDANCE WITH ARTICLE (Section of the treaty partner agreement) OF THE USA-(treaty partner) INCOME TAX CONVENTION AND APPLICABLE INTERNAL REVENUE LAWS OF THE UNITED STATES OF AMERICA. PAYMENTS SHOULD BE MADE PAYABLE TO THE RECEIVER GENERAL OF (treaty partner), NOT THE IRS, BUT SHOULD BE MAILED TO THE ADDRESS CONTAINED HEREIN. THE IRS COORDINATOR WILL FORWARD THE PAYMENT TO (treaty partner)."


      •Forward each levy payment to the MCAR coordinator.
      •Close the MCAR case only if the levy payment fully pays the MCAR liability.

      Reminder:

      MCAR coordinator should manually monitor the levy payments.

Filing Notice of Federal Tax Liens on MCAR

  1. Follow routine guidelines with respect to MCAR lien activity with the following exceptions:

    1. Notice of Federal Tax Lien (NFTL) filing determination should be made using the same criteria as if the tax liability is U.S. tax liability.

    2. Do not utilize the Automated Lien System (ALS) to file NFTL for MCAR liabilities.

      Note:

      See IRM 5.12, Federal Tax Liens, for the procedures for filing NFTL notices on MCARs.

    3. File a NFTL prior to a seizure against any of the taxpayer’s assets, real or personal.

    4. File a NFTL if the taxpayer has the ability to pay, but refuses to do so, and the taxpayer owns real property to which the NFTL will attach.

    5. File a NFTL if the MCAR case is currently not collectible and the taxpayer owns real property to which the NFTL will attach.

      Note:

      Although Field Collection Areas may file NFTLs for MCARs, The MCAR coordinator will be responsible for the release of these liens after the revenue officer has closed the MCAR OI.

      Caution:

      Do not generate a Collection Due Process (CDP) notice (giving a right to a CDP hearing) for a MCAR NFTL notice. The taxpayer does not have a CDP right for a foreign tax liability, but is entitled to Collection Appeals Program (CAP) rights. See IRM 8.24.1.2, Collection Appeals Program. The taxpayer should be directed to the treaty partner for any liability disputes.

Seizure and Sale on MCARs

  1. Procedures for the seizure and sale of personal and real property are found in IRM 5.10.1.10, Mutual Collection Assistance Requests, apply to MCARs with the following exceptions:

    1. Prior to taking seizure action:
      •Contact both the Property Appraisal and Liquidation Specialist (PALS) and MCAR coordinator.
      •Discuss the facts of the case, including the actions taken prior to the proposed seizure, the type and value of the property to be seized, and the expected revenue.

    2. If the MCAR coordinator concurs with the proposed seizure:
      •Submit the case for approval through your group manager (according to the current IRM provisions for managerial review).
      •Coordinate the seizure with MCAR coordinator and with the PALS. The PALS will also coordinate the sale with the MCAR coordinator.
      •Contact the OI originator if any questions or problems arise.

    3. Preparing Form 668-B, Levy:
      •Contact the MCAR coordinator to secure a sample of Form 668-B to assist in your seizure and sale preparation because all seizure and sale forms that are prepared must refer to the MCAR liability in a similar manner and contain no reference to U.S. taxes.
      •Do not bid in or purchase seized property on behalf of the U.S. government or its treaty partners in the event that the minimum bid is not received. If appropriate, the sale may be adjourned and rescheduled within the allowable one month time period under IRC 6335.
      •Process the seizure and sale documents in coordination with PALS, including expense vouchers found in IRM 5.10.6,Post Sales Actions and Responsibilities of Advisory.
      •Do not request input of TC 360 for seizure and sale expenses because expenses of seizures and sales will not be assessed against MCAR taxpayers. In addition, the foreign tax liability will not be on IDRS.
      •Forward monies collected immediately to the SB/SE MCAR coordinator.

  2. In the instance of separate liabilities owed by a taxpayer to both the U.S. Government and the treaty partner, apply the proceeds of sale first to the U.S. liability.

    1. Prepare the seizure forms showing the liability due and the TIN assigned by the U.S. Government.

    2. Prepare Form 668-A, Notice of Levy, for the MCAR liability to attach any surplus proceeds of the sale.

    3. Assess the expenses of sale against the taxpayer’s U.S. tax liability.

Outbound Mutual Collection Agreement Request

  1. Outbound Mutual Collection Assistance provides that the Service may request assistance from the treaty partner in collecting taxes owed by United States Citizens or Residents, or other persons owing taxes to the United States.

  2. These treaties provide that each country, upon request by the United States, may take whatever actions it would take to collect its own taxes in order to collect on behalf of a treaty partner (when requested to do so). This includes the collection of U.S. taxes through the treaty partner's bankruptcy proceedings.

    Exception:

    The treaties for Canada and Denmark provide that they will collect from taxpayers who were United States citizens at the time the tax liability arose, even though they subsequently became Canadian or Danish citizens. The treaties for France, the Netherlands, and Sweden provide that they will not collect from their own citizens.

    Note:

    The treaties for France, the Netherlands, and Sweden provide that they will not collect from taxpayers who are respectively French, Dutch, and Swedish citizens at the time that the U.S. makes the collection request regarding the U.S. tax liability. This treaty provision is reciprocal.

  3. If a taxpayer was a dual citizen of the U.S. and the foreign country at the time the tax liability arose, consult the MCAR coordinator assigned to the foreign country for advice on whether you can pursue collection.

    Note:

    In general, when in doubt about the prior or present citizenship status of a taxpayer when considering an Outbound MCAR referral, consult with the MCAR coordinator.

  4. Once the international or domestic revenue officer has reason to believe there are income or assets in the treaty partner countries, the revenue officer can prepare an outbound MCAR request for approval.

    Note:

    The revenue officer may issue an OI to international field collection to locate income or assets in the treaty partner country prior to referring the case for an outbound MCAR.

  5. All outbound MCAR requests require coordination with the MCAR coordinator.

  6. The MCAR Coordinators are listed on the Mutual Collection Assistance Requests (MCAR) web page. The direct link to the page is: http://mysbse.web.irs.gov/Collection/international/mcar/contacts/20805.aspx.

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  8. Do not refer Del Ret accounts as treaty provisions prohibit the referral of Del Rets.

  9. An International or domestic revenue officers should coordinate with the MCAR coordinator when they have any questions on the MCAR program or an MCAR case.

    Caution:

    Do not make any contact with the treaty partners. The MCAR coordinator will handle contacts with the treaty partners when appropriate.

Procedures for Requesting an Outbound MCAR

  1. Follow these procedures to request an outbound MCAR where the taxpayer is residing and/or having assets in the treaty country.

  2. Complete Form 14424, Mutual Collection Assistance Request Treaty Referral, and provide the following information:

    1. Name and address of taxpayer,

    2. Telephone number and/or fax,

    3. Date or place of birth or Place of incorporation,

      Note:

      Obtain MFTRA-U from IDRS to verify citizenship and document on Form 14424.

    4. Known income or assets in the treaty partner country, and

      Note:

      Do not use acronyms such as SFR, AUR, as the treaty partner will not understand. Explain how the liability arose/ or explain how the assessment was made.

      Caution:

      Do not provide the taxpayer's Taxpayer Identification Number (TIN) on the Form 14424. Instead, include it in secure e-mail message to the MCAR coordinator.

    5. Compute the accruals to 180 days from the date of the referral.

  3. ) Attach the appropriate documentation to Form 14224 based on the type of assessment in the following table.

    Type of Assessment Attachment(s)
    (1) TC 290 Adjustments IRPTR-O or MFTRA-J for each tax period.

    Note:

    Attempt to secure the Revenue Agent Report (RAR) if IRPTR-O or MFTRA-J are not available.

    (2) TC 300 Exam Assessments Revenue Agent Report (RAR) for each tax period (i.e., each TC 300 assessment), if available.
    (3) TC 290 or TC 300 SFR Assessments IDRS command code TXMOD (TC 150 followed by 0.00 and the Letters SFR at the end of the line)
  4. Prepare a secure email message to your group manager and include the following:

    1. Name the treaty country in the "Subject" line of the message.

    2. Include the taxpayer's Taxpayer Identification Number (TIN) in the body of the secure email message.

      Note:

      The MCAR coordinator needs the taxpayer's TIN, however the treaty partner does not need the taxpayer’s TIN.

    3. Request your Group Manager to electronically sign the Form 14424.

    4. Once approved, your manager should input an ICS history indicating their approval and forward Form 14424to the appropriate MCAR coordinator using secure email and also include you on the “cc” line of the message to indicate his approval.

  5. When the MCAR coordinator receives the Form 14424 the MCAR coordinator will:

    • review all referred cases to ensure that they meet the MCAR criteria, and

    • handle the referred cases as displayed in the following table:

      MCAR Coordinator Action
      If Then
      The case is accepted The Coordinator will open a Collection Initiative Program (CIP) Case and document the ICS history.
      The case does not meet MCAR criteria The Coordinator will document the ICS history with the reason and return the referral to the originator
  6. Once the MCAR coordinator accepts the outbound MCAR case, the case should remain open until all collection enforcement has been exhausted.

  7. Close the case appropriately when all the collection enforcement has been exhausted against available domestic income and assets. i.e., currently not collectible, continuous levy, etc,.

  8. The MCAR coordinator should be informed of any changes to the status of the case such as funds collected, inability to pay, etc,.

Processing MCAR Payments for Inbound MCAR cases

  1. All checks or money orders submitted voluntarily by taxpayers may be in either U.S. dollars or the foreign currency of the particular treaty partner, but the foreign currency is preferred.

  2. The check or money order should be made payable to the treaty partner rather than to the Service.

  3. Do notaccept payment in cash because Form 809, Receipt for Payment of Taxes, cannot be issued for MCAR liabilities.

  4. If taxpayer requests a receipt of payment, provide the taxpayer with a date-stamped photocopy of the check or money order.

Communications Between MCAR Coordinator and Treaty Partner

  1. Communication between the MCAR coordinator and their treaty partner counterpart should only be for administrative matters e.g., what payments have been received, the status of the case, and the current balance due.

    Caution:

    Only information relating to an existing MCAR tax period can be discussed with the treaty partner. Any new information e.g., a new tax period or a new MCAR request must be communicated to LB&I.

Procedures for Field Collection Area Offices Receiving MCAR Investigations

  1. Field Collection Area Offices may receive a Courtesy Investigation or Other Investigation (OI) according to the procedures in IRM 5.1.8.7, Courtesy Investigations Requiring Special Handling.

  2. Managers will assign the Courtesy Investigation according to the procedures in IRM 5.1.8.6, Discretionary Assignments, upon receipt. When the investigation is assigned, contact the MCAR coordinator and provide the investigating revenue officer's name and telephone number.

  3. The MCAR coordinator will provide guidance to the revenue officer on what actions to take regarding the OI.

  4. Do not close the OI without concurrence of the MCAR Coordinator.

MCAR Taxpayers in Bankruptcy

  1. Secure all information necessary for filing a proof of claim and forward the information to the originator if the investigation reveals that the taxpayer has entered into a bankruptcy proceeding.

    1. The MCAR coordinator will coordinate the filing of a proof of claim where appropriate, and will advise the treaty partner of developments in the proceedings through the U.S. Competent Authority.

    2. A decedent estate or insolvency proceeding will be handled in a similar matter.

  2. If the assigned Service employee in Insolvency determines that a taxpayer has assets in a foreign country, please refer to IRM 5.21.3, Collection Tools for International Cases.

  3. If the assigned Service employee in Insolvency learns of a pending foreign proceeding in which assets of the taxpayer are held, immediately notify your local Chief Counsel office for assistance.

    Note:

    Do not file any claim paperwork or documents in this foreign proceeding before consulting with your local Chief Counsel office. See IRM 5.9.7.3, Collecting Tax Debt in a Foreign Country When There is No U.S. Bankruptcy Proceeding.

  4. If the assigned Service employee in Insolvency learns that there is a pending Chapter 15 in the United States in which assets of the taxpayer are held, please refer to IRM 5.9.7.2, Chapter 15 - Ancillary.