- 8.2.2 Statutory Notice of Deficiency Cases
- 188.8.131.52 Introduction to Statutory Notice of Deficiency (SND) 90/150-Day Cases in Appeals
- 184.108.40.206 Appeals Jurisdiction on a Compliance Issued Statutory Notice of Deficiency (SND)
- 220.127.116.11.1 Appeals Conference and Settlement of Compliance Issued SND's
- 18.104.22.168.2 Appeals Settlement Computation on Compliance Issued SND Cases
- 22.214.171.124.3 Appeals Technical Employee (ATE) Procedures When Compliance Issued SND Case is Unagreed
- 126.96.36.199.4 Requests for Appeal from Taxpayer Outside the U.S. During the Compliance Issued SND Suspense Period
- 188.8.131.52 Appeals Issued Statutory Notice of Deficiency (SND)
- 184.108.40.206.1 Statutory Notice of Deficiency Issued by Appeals - Case Submitted to Counsel for Concurrence
- 220.127.116.11.2 Undeliverable or Unclaimed Appeals Issued Statutory Notice of Deficiency
- 18.104.22.168.3 Reconsideration of Appeals Issued Statutory Notice of Deficiency During Suspense Period
- 22.214.171.124.4 Tax Court Petition Filed During the "Appeals Issued" Statutory Notice of Deficiency Suspense Period
- 126.96.36.199 Statutory Notice of Deficiency Rescinded Under Rev. Proc. 98-54
- 188.8.131.52.1 Criteria for Rescinding a Statutory Notice of Deficiency
- 184.108.40.206.2 Basis for Rescission
- 220.127.116.11.3 Period of Limitation for Assessment Considerations
- 18.104.22.168.4 Form 8626, Agreement to Rescind Notice of Deficiency
- 22.214.171.124.5 Authority to Rescind and Sign Notices of Rescission
- 126.96.36.199 Statutory Notice of Deficiency Disposition and Closing
Part 8. Appeals
Chapter 2. Pre 90-Day and 90-Day Cases
Section 2. Statutory Notice of Deficiency Cases
May 29, 2014
(1) This document transmits revised IRM 8.2.2, Pre-90-Day and 90-Day Cases.
During FY 13, the Appeals Account and Processing Support (APS) guidance was reorganized into existing APS IRM Sections IRM 8.20.5 Carding New Receipts , IRM 8.20.6 Interim Actions , and IRM 8.20.7 General Closing Procedures . This IRM 8.2.2 update reflects the removal of all APS guidance, and update or clarification of existing guidance for Appeals Technical Employees (ATEs).
(1) IRM 8.2.2 is revised to remove Account and Processing Support (APS) guidance which was moved into IRM 8.20.5, Carding New Receipts, IRM 8.20.6, Interim Actions, and IRM 8.20.7 General Closing Procedures as a result of the FY 2013 APS IRM Reorganization Project.
(2) Editorial Changes have been made throughout.
(3) Additional emphasis has been inserted to clarify that when a Statutory Notice of Deficiency is mailed to an address outside of the United States, the taxpayer has 150 days in which to file a petition with the tax court.
(4) The term Appeals Officer (AO) has been replaced with the term Appeals Technical Employee (ATE).
(5) The term Examination has been replaced with the term Compliance.
(6) Sections covering Appeals Jurisdiction actions on "Compliance Issued Statutory Notices of Deficiency" are organized into one subsection (188.8.131.52).
(7) Additional emphasis has been incorporated into 184.108.40.206 require the Appeals Technical Employee confirms they've informed the taxpayer, that their deadline for petitioning the United States Tax Court (USTC) is neither suspended nor extended as a result of the Appeals consideration of the Compliance Issued Statutory Notice of Deficiency.
(8) The Appeals Technical Employee responsibility for requesting an ACDS update has been clarified for any "Appeals Issued Statutory Notice of Deficiency" case sent to Counsel for Concurrence when the case is not routed through APS (220.127.116.11.1).
(9) Guidance related to Undeliverable and Unclaimed SND's has been updated and clarified since APS no longer has primary mail handling responsibilities for receiving and distributing incoming mail (18.104.22.168.2).
(10) Cross-reference IRM citations have been added for all "APS-specific" guidance.
(11) Reference to FSAA Letter has been removed since TEFRA no longer applies to "S Corporations" .
Lisa L. Zannitto
Acting Director, Policy, Quality and Case Support
When a statutory notice of deficiency (SND) is issued to an address within the United States, the case is considered a 90-day case from the date the notice is issued until a petition is filed with the United States Tax Court or until expiration of the 90-day period. When a SND is mailed to an address outside of the United States or the taxpayer is out of the country, the taxpayer has 150 days to file a petition with the Tax Court. This section covers how to process 90/150-day cases that are both resolved and not resolved during the respective period for filing a petition.
A statutory notice of deficiency is generally referred to as a 90-day letter. For brevity and clarity, any reference to 90-day letter will be construed to mean 150-day letter when the respective mailing address or the respective taxpayer is outside of the United States.
If there is a deficiency in the case as defined in IRC 6211, IRC 6212 authorizes mailing a statutory notice of deficiency to the taxpayer's last known address using certified or registered mail.
Compliance issues a 90-day letter when a taxpayer does not respond to the 30-day letter, which transmits the Revenue Agent's Report (RAR). The taxpayer has 90 days from the date the statutory notice of deficiency is issued to file a petition with the Tax Court for redetermination.
Delegation Order No. 8–8 gives Appeals Area Directors authority to accept jurisdiction after Compliance issues a statutory notice of deficiency when the case is not docketed in the United States Tax Court and when the taxpayer does not agree with the determination of the Service and requests consideration by Appeals. See IRM 22.214.171.124, Delegation Order 8–8 (10-02-2000).
The 90-day or 150-day period allowed by law for the taxpayer to petition the United States Tax Court (USTC) on a Compliance-issued SND, is not extended or suspended when Appeals accepts jurisdiction due to the taxpayer filing a protest to Appeals. If Appeals receives a protest and accepts jurisdiction during the Compliance issued SND 90/150-day period during which the taxpayer may file a petition with the USTC, prompt action must be taken to assign the case to the Appeals Technical Employee (ATE) who must notify the taxpayer that the time for filing a petition to the USTC is not extended as a result of Appeals accepting jurisdiction of the case.
Appeals may relinquish the requested jurisdiction by waiver on any case where a statutory notice of deficiency was issued by the IRS, as long as the case is not docketed in Tax Court. No waiver is made on a case if it contains either of the following conditions:
Criminal prosecution recommended but not finally disposed of; or
Statutory notice of deficiency determination that includes a fraud penalty.
Appeals does not accept jurisdiction of a 90-day case with a belated protest from an IRS Campus function if the taxpayer did not submit all supporting information, explanations, or documents to the source function.
If Appeals does not accept the case during the 90-day period, Appeals sends written notification to the taxpayer explaining the reason for the denial making it clear the denial does not extend the 90-day period for filing a petition with Tax Court.
If the Appeals Area Director decides to consider a Compliance Issued SND case during the 90-day suspense period, the ATM immediately assigns the case.
The ATE immediately considers the case to ensure it is resolved prior to the expiration of the 90-day period using the procedures found in IRM 8.6, Conference and Settlement Practices.
Consideration and processing of a 90-day case is similar to a pre-90 day case. A Form 5402, Appeals Transmittal and Case Memo, is required. This form is part of all Appeals Case Memos (ACMs) and may be all that is needed, i.e., for a very simple case, or when the taxpayer concedes in full.
Generally, a longer narrative ACM is needed for a case when settlement is reached, i.e., if it involves a hazard settlement or contains complex legal or factual issues. See IRM 8.6.2, Appeals Case Memo Procedures, for more information.
A 90-day case must be given priority treatment because of the short time frames involved. Sufficient time should be allowed to insure that all case activities, including closing by APS, will be completed before the expiration of the statute of limitations.
When a case is settled during the 90-day period, the settlement computations must be handled as a priority. If a request for settlement computations is sent to the Tax Computation Specialist (TCS) function, mark the case and annotate the Form 3608 as a priority so the TCS manager can easily identify that the case is a priority. This will ensure it is correctly logged into the Technical Automated Control System (TACS).
No audit statement is required if the Commissioner's determination shown in the Compliance Issued SND is agreed in full either during the 90-day period or after filing a petition.
Generally, a Form 5402, Appeals Transmittal and Case Memorandum (ACM) is not required in a 90-day case when a settlement is not reached.
Prepare an informal memorandum (referred to as a 90–day memorandum) and a signed closing letter.
The memorandum lists the following:
the conferences held,
those present at the conferences,
the reason for assuming jurisdiction,
any proposal and/or counterproposal,
evidence or legal authority, and
an evaluation of the case.
The closing letter is mailed to the taxpayer at least 15 days prior to the expiration of the 90-day period.
If a taxpayer residing outside the United States requests that his/her case come to Appeals, the request is considered by the Appeals International Area Director.
If the Appeals International Area Director accepts the taxpayer's request for Appeals consideration during the Compliance Issued 90-day Suspense Period, the case is forwarded by Compliance to the Appeals Office designated by the Appeals International Area Director.
See IRM 126.96.36.199, Transfers of Cases Within Appeals, for additional guidance on transfer of cases.
When Appeals issues the statutory notice of deficiency, the case can be considered or reconsidered during the 90-day period.
Reconsideration of a case does not extend the 90-day time-frame in which the taxpayer may petition the Tax Court for a redetermination. Appeals employees responding to a taxpayer's request for reconsideration should clearly explain to the taxpayer that the timeframe for petitioning the USTC, cannot be extended or suspended and remind the taxpayer of the last date for filing a petition of the Appeals-issued SND.
Special procedures apply when issuing a statutory notice of deficiency on a Refund Suit. For additional information, see IRM 188.8.131.52.3, Refund Suits-Statutory Notice of Deficiency Issued.
Some notices of deficiency, as well as Employee Plans (EP) and Exempt Organizations (EO) final adverse determination letters, will go to Counsel for concurrence before the letter is issued. The administrative file sent to Counsel will contain the following:
Approved Form 5402 marked for Counsel concurrence and either a completed but unsigned statutory notice or a draft of paragraphs to be included in the statutory notice.
All returns and documents which were in the case file when it was received in the Appeals Office.
Copies of all correspondence received or sent while the case was in Appeals.
Since Appeals Field Offices are not always co-located with their servicing APS Team, but may be co-located with their servicing Counsel Office, it is not mandatory that cases sent to Counsel for Concurrence be routed through APS; however it is mandatory that ACDS accurately reflect the location of the administrative file.
The Appeals employee who forwards the case to Counsel for SND Concurrence must update ACDS with action code SNDC and the current date (date case sent to Counsel) to document the location of the administrative file.
When the SND is sent to Counsel, and the case will not be routed through the designated APS Office, the ATE must submit an ACDS Update Request to their servicing APS Office, requesting the ACDS record be updated with: Action Code = SNDC and a TODATE = to the date on which the file was transmitted to Counsel.
Upon return of the case from Counsel, ACDS must be updated with the date received in the FROMDATE Field. If the case is returned from Counsel directly to the ATE, the ATE must ensure the FROMDATE is entered on ACDS to reflect the return of the case to Appeals. If Counsel returns the case to Appeals through APS, the APS TE will update the FROMDATE on ACDS and forward the case to the ATE for further consideration and action.
On a monthly basis, the APS Reports Team will run the SNDC follow-up list to determine whether Counsel has returned the administrative file.
See IRM 184.108.40.206 for APS SND procedures.
Occasionally, the mail service is unable to deliver a statutory notice of deficiency (SND), either because the taxpayer cannot be located or because the taxpayer will not accept delivery. In these circumstances, the Post Office returns the SND to the Appeals Office Return Address provided on the envelope.
Whomever is responsible for receiving and distributing the Appeals office mail:
Date stamp but do not open the envelope.
Send an encrypted email to the ATE with a Cc to the ATM notifying them that the SND has been returned Undeliverable/Unclaimed. Include the taxpayer's name in the body of the email.
Ensure the ATE receives the Undeliverable/Unclaimed SND (UND/UNC SND) for their decision and timely action.
The ATE must give priority consideration to the review of the UND/UNC SND, determine whether it was mailed to the last known address for the taxpayer and identify the next action.
The ATE and ATM are the Appeals authority with responsibility for verifying that the taxpayer's last known address is identified on the SND and on the "right-sized" mailing envelope submitted to APS. APS is responsible for ensuring the last known address is reflected on the official outgoing mailing envelope if APS prepares the outgoing envelope.
If the ATE needs the administrative file to complete their review and decision, submit a written request for APS to pull the case from SND Suspense, forward the administrative file to them and update ACDS accordingly.
The If and Then Table below identifies decision points for the ATE to determine the next action.
IF THEN The SND was issued to the correct and last known address. Do not reissue the SND. Forward the UND/UNC SND to APS with written instruction to associate the UND/UNC SND with the suspensed Administrative File. The SND was issued to the last known address but a new address has been identified since issuance date. Do not reissue the SND; instead, instruct APS in writing to send a courtesy copy to the new address. Forward the UND/UNC SND to APS with a "right-sized" envelope prepared with the new address. The SND was not issued to the last known address and the ASED is open. Reissue the SND. Generate a new SND and "right-sized" envelope prepared with the new last known address. Secure ATM approval and submit the new SND package to APS. The SND was not issued to the last known address and the ASED has expired Immediately notify the ATM. The ATM will contact the PTM the same day to alert them of the potential barred statute and request the administrative file be pulled from suspense and returned to the ATE. See IRM 220.127.116.11.1Discovering a Potentially Barred Statute. Coordination between the ATM and PTM is required to ensure timely and accurate reporting of the potentially barred statute and accurate determination of the causation.
For additional information see IRM 18.104.22.168, Undeliverable Notice of Deficiency.
If the Appeals Team Manager (ATM) or Appeals Area Director decides to grant further consideration of a case during the suspense period, the ATE will:
Request the administrative file be pulled from SND suspense and returned to the Appeals Technical Employee (ATE)
APS will place a "Charge-Out" in the SND Suspense file in place of the administrative file. The "Charge-Out" will include the name of the case, the ATE who requested the file be pulled, and the date the case was pulled and transmitted to the ATE.
APS will also enter an alert in the Notes section of ACDS record that the case has been returned to the ATE for reconsideration.
If no agreement is reached after consideration or reconsideration in the suspense period the ATE will:
Prepare an informal memorandum and a signed closing letter for the unagreed case.
Secure the ATM signature and date the memorandum.
Mail the closing letter.
Associate the original memorandum and copy of the closing letter with the administrative file.
Return the administrative file to APS, using Form 3210 transmittal.
Upon receipt of the administrative file, APS will acknowledge the Form 3210, update ACDS Notes to reflect the administrative file has been returned by the ATE and re-suspense the case in place of the Charge-Out.
See IRM 8.20.6 for APS procedures.
APS will update ACDS and forward the administrative file to Counsel for Settlement or Trial Preparation.
If Counsel answers the petition and returns the administrative file to Appeals for a second attempt at settlement, APS will update ACDS with Closing Code 42 to put the case/record back in Part 2 of the ATE's inventory.
There may be instances when it is in the best interest of the Service and the taxpayer to rescind a statutory notice of deficiency.
Rev. Proc. 98-54, 1998-2 C.B. 531 provides taxpayers with instructions for entering into an agreement under IRC 6212(d) to rescind a statutory notice of deficiency.
Whether a statutory notice of deficiency will be rescinded is discretionary on the part of the Secretary. A statutory notice of deficiency is only rescinded with the agreement of the taxpayer, however, it may be initiated by either the taxpayer or the Service.
Notices in 90-day cases are only rescinded if Appeals has first decided the case is amenable to agreement.
Delegation Order No. 4-8 (See IRM 22.214.171.124, Delegation Order 4-8 (Formerly DO-77, Rev. 28) (02-10-2004)) authorizes Appeals Area Directors to rescind any statutory notice of deficiency. Appeals Team Managers can rescind statutory notices of deficiency issued on their respective employees' cases.
In the event Appeals rescinds a statutory notice per Form 8626, Agreement to Rescind Notice of Deficiency, APS will update ACDS as follows:
Remove 090A or 150A from SNTYPE field.
Remove date from SNDATE field.
In NOTE field enter "SND rescinded (date signed by Commissioner)."
Change Y to N in SND field.
If Form 872 or Form 872-A was also completed in conjunction with Form 8626, update the STATDATE or statute CODE as appropriate on ACDS.
See IRM 126.96.36.199.14, Rescinded "Appeals Issued" Notice of Deficiency Under Rev. Proc. 98-54 for APS procedures.
IRC 6212(d) states that the Secretary may, with the consent of the taxpayer, rescind any statutory notice of deficiency mailed to the taxpayer. Whether or not a statutory notice is rescinded is discretionary on the part of the Secretary. A notice of deficiency may only be rescinded with the consent of the taxpayer.
This provision allows the Service, through a rescission agreement, to treat a case as if a statutory notice of deficiency was never issued for purposes of -
IRC 6212(c)(1) - relating to further deficiency letters restricted;
IRC 6213(a) - relating to restrictions applicable to deficiencies and petitions to Tax Court; and
IRC 6512(a) - relating to limitations in case of petitions to Tax Court.
Limitations regarding credits, refunds, and assessments relating to the rescinded notice are void and the rights and obligations of the parties that existed prior to the issuance of the statutory notice of deficiency are reinstated. A statutory notice of deficiency may later be reissued for the same, or a greater or lesser, amount.
A taxpayer may exercise all administrative and statutory appeal rights from a reissued statutory notice of deficiency. However, the taxpayer has no right to file a petition with the Tax Court based on a rescinded notice.
The determination to rescind a statutory notice of deficiency should be made on a case-by-case basis. Both parties must agree to the rescission.
A rescission will not be entered into if:
It has been 90 days (150 days for notices mailed to addresses outside the United States) since the notice was issued.
The taxpayer has petitioned the Tax Court.
If the statutory notice of deficiency was issued to both husband and wife, the rescission agreement must be signed by both parties or authorized representative(s) for both parties.
The rescission agreement must cover all of the same tax periods shown in the statutory notice of deficiency.
The rescission agreement must reflect the same tax deficiency and penalties as the statutory notice of deficiency.
If the Service does not agree that a statutory notice of deficiency should be rescinded, the taxpayer will be notified in writing and the notice will remain in effect.
All questions regarding the propriety of a rescission agreement on any case should be discussed with Counsel.
There are basically three reasons that a notice is rescinded. They are as follows:
incorrect or insufficient amount;
an appeals conference is requested in a 90-day case and no petition was mailed or filed with Tax Court.
When an administrative error has occurred, the notice may be rescinded. The following are examples of administrative errors:
notice was issued to the wrong taxpayer;
notice was issued for the wrong tax period;
notice was prematurely issued due to failure of the Service to consider a properly filed Form 872, Consent to Extend the Time to Assess Tax.
If a statutory notice of deficiency has been issued for an incorrect or insufficient amount, the notice may be rescinded. However, the taxpayer must be advised that another notice, for a greater amount, may be subsequently issued.
If a taxpayer specifically requests a conference with Appeals for the purpose of entering into settlement negotiations, the notice may be rescinded. However, the notice will be rescinded only if Appeals is confident the case will result in an agreement. Appeals may request that the taxpayer submit, in writing, a protest or similar document that explains his or her position on the unagreed issues. See IRM 8.4.1, Processing Docketed Cases, for further 90-day case procedures.
If the normal three year period of limitations for assessment has expired do not enter into an agreement to rescind the notice.
If, on the date of rescission, 90 days or less remain before the expiration of the period of limitation on assessment the notice may be rescinded but only if the taxpayer and the Service execute a Form 872 to extend the limitation period. When determining how many days remain on the statute, do not consider the additional time created by the issuance of the notice of deficiency.
Generally, a statutory notice of deficiency will not be rescinded if there is an outstanding Form 872-A, Special Consent to Extend the Time to Assess Tax; however, see Rev. Proc. 98–54, 1998–2 C.B. 531 clarifying the Service's position in situations where notice revocations may be considered.
Form 8626, Agreement to Rescind Notice of Deficiency, will be used to secure an agreement between the taxpayer and the Government. When preparing Form 8626, care must be exercised to ensure the accuracy of the information contained within the document and its timely execution by both the taxpayer and the Government.
The rescission agreement form will be prepared in duplicate. Once executed, one copy of Form 8626 will be secured to the return for the latest year covered by the agreement. The second copy will be sent to the taxpayer by mail or given to the taxpayer in person. Copies of the executed rescission agreement will be attached to all other returns covered by that agreement.
One Form 8626 may be used as a rescission agreement for all years contained in the rescinded notice of deficiency. All years covered by the agreement will be entered below the first paragraph under "Tax Year Ended." The deficiencies and additions to tax, as shown on the notice of deficiency, will be entered below the appropriate column headings.
The effective date for a rescission agreement is the date on which the Commissioner or delegate signs the rescission form.
A taxpayer who believes that a statutory notice of deficiency should be rescinded because they wish to enter into settlement negotiations should contact Appeals and request Form 8626.
Authority to rescind statutory notices of deficiency is granted to the Secretary by IRC 6212(d). Delegation Order No. 4-8 (as revised) delegates this authority to Appeals Area Directors, Appeals Team Managers, and Appeals Team Case Leaders on their respective cases.
The authority to rescind does not apply to a Notice of Final Partnership Administrative Adjustment (FPAA).
Delegates listed in Delegation Order No. 4-8 (as revised) will manually sign their own name.
After a notice is issued on a case, disposition usually occurs in one of the following ways:
IF THEN taxpayer agrees to the deficiency within the 90-day (150-day) period by signing the appropriate agreement form the case is pulled from SND suspense and assigned to an APS TE for processing of the agreed SND assessment(s). taxpayer fails to file the petition with the United States Tax Court within the prescribed period. the case is pulled from SND suspense, defaulted, and assigned to an APS TE for processing of the defaulted SND assessment(s). taxpayer enters into agreement under IRC 6212(d) to rescind the Notice of Deficiency follow procedures in IRM 188.8.131.52.4 taxpayer files a timely petition and the case becomes docketed in the Tax Court the administrative file is pulled from SND suspense and transmitted to Counsel for preparation of pleadings and trial preparation. APS updates ACDS accordingly. APS Procedure APS IRM Non-Petitioned Year(s) in Multi-Year SND IRM 8.20.6 Non-Petitioning Spouse on an Appeals Issued SND IRM 8.20.6 APS Procedures to Close an Agreed SND IRM 8.20.7 APS Procedures to Close a Defaulted SND IRM 8.20.7 APS Procedures for Disposition of an Agreed or Defaulted SND Involving a Claim IRM 8.20.7