- 8.7.7 Claim and Overassessment Cases
- 18.104.22.168 Introduction to Appeals Consideration of Claim and Overassessment Cases
- 22.214.171.124 Periods of Limitation in Claim and Overassessment Cases
- 126.96.36.199.1 Statutory Period For Assessment RemainingClaims and Overassessments
- 188.8.131.52.2 Claim and Overassessment Cases Involving Expiring Statute of Limitations
- 184.108.40.206.3 Securing Statute Consents in Claim and Overassessment Cases
- 220.127.116.11.4 Limitations on Refunds or Credits of Overpayments
- 18.104.22.168.5 Extension of Period of Limitations for Filing Suit on Form 907
- 22.214.171.124.6 New Issue Raised by Taxpayer in Appeals for Refund Claim Case
- 126.96.36.199 General Information About Refund Claims and Overassessment Cases
- 188.8.131.52 Actions by the Appeals Technical Employee on Claim or Overassessment Cases
- 184.108.40.206 Securing an Agreement Form
- 220.127.116.11 Form 2297, Waiver of Statutory Notification of Claim Disallowance
- 18.104.22.168.1 When a Statutory Notice of Claim Disallowance is Not To Be Mailed and Form 2297 Is Not to Be Secured
- 22.214.171.124.2 Form 2297 Not To Be SecuredDecision Within 6 Months
- 126.96.36.199.3 Form 2297 Requests in Joint Committee Cases
- 188.8.131.52.4 Form 2297 Not Secured in Pre-Refund Cases
- 184.108.40.206.5 More Than One Overassessment Agreement ObtainedForm 2297
- 220.127.116.11 Partial Allowance of Refunds or Credits on Overassessments
- 18.104.22.168 Processing Partial Allowances of Refunds or Credits
- 22.214.171.124 Settlement Computations For Claims and Overassessment Cases
- 126.96.36.199 Disposition of Claims for Refund or Credit
- 188.8.131.52.1 Closing Letters for Disposition of Claims
- 184.108.40.206.2 Unagreed Deficiency Cases Involving Claims - Language Required in Notice of Deficiency
- 220.127.116.11.3 Disposition of Agreed or Defaulted 90-Day Cases Involving Claims
- 18.104.22.168.4 Unagreed Deficiency Cases With Overassessments
- 22.214.171.124.5 Expedite Closing of Large Dollar Examination-Sourced Overpayment Cases
- 126.96.36.199.6 Procedures for Closing Claim Cases
- 188.8.131.52 General Guidelines for Appeals Consideration after the Mailing of a Statutory Claim Disallowance Letter
- 184.108.40.206.1 Reconsideration of Claim Disallowed by Compliance Field Operations or Compliance Campus Operations
- 220.127.116.11.2 Reconsideration of Claim Previously Disallowed and Previously Considered by Appeals
- 18.104.22.168.3 Claims Disallowed by Compliance Based on Timeliness Determinations
- 22.214.171.124 Audit Reconsideration Cases
- 126.96.36.199 Abatement of Interest Claims
- 188.8.131.52.1 Appeals Technical Employees' Responsibilities for Abatement of Interest Cases
- 184.108.40.206.2 Appeals Level of Authority for Abating Interest Under IRC 6404(e)
- 220.127.116.11.3 Receipt of Abatement of Interest Cases
- 18.104.22.168.4 Procedures and Methods of Resolution
- 22.214.171.124.5 Closing Procedures for Abatement of Interest Cases
- Exhibit 8.7.7-1 IRS Claim Disallowance Letters that Begin the 2-Year Period for Filing a Refund Suit
Part 8. Appeals
Chapter 7. Technical and Procedural Guidelines
Section 7. Claim and Overassessment Cases
June 02, 2015
(1) This transmits revised IRM 8.7.7, Technical and Procedural Guidelines, Claim and Overassessment Cases.
(1) Revised IRM 126.96.36.199 (4) to remove reference to IRC 6401 for amounts treated as an overpayment. Removed from IRM 188.8.131.52(5) information about overassessments since this is covered in paragraph (4).
(2) Revised IRM 184.108.40.206.1(1) to include non-acceptance criteria for estate cases and IRC 6206 cases.
(3) Revised IRM 220.127.116.11.4(1), Limitations on Refunds or Credits of Overpayments to include information in a table format and added IRC 6532 to the list of relevant IRC sections.
(4) Revised IRM 18.104.22.168.4 (3) to refer to the exhibit that identifies some of the statutory claim disallowance letters.
(5) Added IRM 22.214.171.124.6, New Issue Raised by Taxpayer in Appeals for Refund Claim Case.
(6) Corrected reference in IRM 126.96.36.199 (3) for TFRP case card-in procedures.
(7) Included in IRM 188.8.131.52 a reminder for Appeals employees to determine whether the time for filing a refund suit has expired.
(8) Revised IRM 184.108.40.206 (4) to change the word "refund" to "overpayment" .
(9) Changed title in IRM 220.127.116.11 to "Processing Partial Allowances of Refunds or Credits" and corrected reference in paragraph (2) for assistance in determining whether a case is on AIMS.
(10) Updated IRM 18.104.22.168.1 (2) to remove requirement for the ATM to sign the non-statutory claim closing Letter 2682 or Letter 2683. This doesn't affect the requirement for the ATM to sign Form 5402.
(11) Added IRM 22.214.171.124.3 (2) for refunds disallowed by Compliance based on timeliness determinations in respect to delinquent returns.
(12) Revised IRM 126.96.36.199 (5) to clarify when an audit reconsideration is inappropriate.
(13) Revised IRM 188.8.131.52 (7), IRM 184.108.40.206 (8), and IRM 220.127.116.11 (9) for clarification.
(14) In IRM 18.104.22.168 (12), corrected reference to IRM 20.2.7.
(15) Removed IRM 22.214.171.124.1 (3) that states Compliance will work "Abatement of Interest" (ABINT) claims concerning actions of Appeals employees. Paragraph (5) [renumbered as paragraph (4)] is sufficient to cover ABINT claims concerning Appeals employees' actions. Revised new paragraphs (4) and (5) for clarification.
(16) Removed IRM 126.96.36.199.1 (6) that addresses the taxpayer raising the ABINT issue before the tax and/or penalty issues are unresolved. The process for filing an ABINT claim is covered in IRM 188.8.131.52(7) and (8), and additional guidance is shown in IRM 184.108.40.206.1(8) [renumbered as paragraph 6].
(17) Renumbered IRM 220.127.116.11.1 (10) as paragraph (7).
(18) Updated and moved information to a table format from IRM 18.104.22.168.1(9), renumbered as IRM 22.214.171.124.2 , Appeals Level of Authority for Abating Interest Under IRC 6404(e).
(19) Renumbered IRM 126.96.36.199.2 as IRM 188.8.131.52.3, Receipt of Abatement of Interest Cases.
(20) Renumbered IRM 184.108.40.206.3 as IRM 220.127.116.11.4, and changed title to "Procedures and Methods of Resolution" .
(21) Renumbered IRM 18.104.22.168.4 as IRM 22.214.171.124.5, and changed title to "Closing Procedures for Abatement of Interest Cases" .
(22) Added Exhibit 8.7.7-1, IRS Claim Disallowance Letters that Begin the 2-Year Period for Filing a Refund Suit.
John V. Cardone
Director, Policy, Quality and Case Support
Appeals considers claim and overassessment cases on any taxes or other matters considered by the Internal Revenue Service. Exceptions to this general authority are in Delegation Order (DO) 8-8 (formerly DO-66). See IRM 126.96.36.199.
IRM 8.7.7 basically covers three separate categories of information as follows:
General information pertaining to claims and overassessments,
General information pertaining to audit reconsideration cases, and
Specific procedures for claims for abatement of interest under IRC 6404(e).
Claims or Overassessments can be:
Part of a case file received by Appeals,
Filed by the taxpayer during Appeals consideration, and/or
Pursued by the taxpayer for the same period for which Compliance proposed a deficiency.
An overassessment case becomes an overpayment case when there is a refund indicated. If an overpayment exists for a tax period, the time limits prescribed by law apply for making a refund or credit of an overpayment.
An abatement is the reduction or elimination of an unpaid assessment. The statutory time limits described in IRM 188.8.131.52.4 don't apply to requests for abatement. Also, see IRM 184.108.40.206.1, Requests for Abatement.
An overassessment could be determined by Compliance or Appeals. If a claim for refund or credit of an overpayment is not filed - as required under IRC 6511, a refund or credit of an overpayment could be allowable if made before the time for filing a claim has expired. A refund or credit might also be allowable - where a refund claim was not timely filed - if the service secures an agreement form before the time for filing a claim for refund or overpayment expires. See IRM 220.127.116.11, Securing an Agreement Form.
Requests for abatement - filed with reasons acceptable to Compliance - are considered by Appeals on their merits, if protested. Also, see IRM 18.104.22.168.15, Policy Statement 3-15 (formerly Policy Statement 2-89) -Reconsideration of an Unpaid Assessment.
For an overassessment involving a whipsaw situation, see IRM 22.214.171.124, Overassessment Resulting from Adjustment to a Related Return and IRM 126.96.36.199.13, Policy Statement 4-34.
See IRM 188.8.131.52.1, Statutory Period For Assessment Remaining - Claims and Overassessments for Appeals’ policy on accepting claim and overassessment cases involving expiring statutes of limitations.
Neither a claim for refund or credit nor a request for abatement filed on a docketed case will protect the petitioner, unless the claim or abatement issue is included in the U. S. Tax Court petition.
See IRM 184.108.40.206.4, Docketed Cases with Claims for details on working and closing docketed cases with claims.
If the claim is for a period with a proposed deficiency, the Appeals technical employee will determine the need to protect the assessment statute. Appeals does not accept claim or overassessment cases if Compliance has proposed a deficiency and the number of days remaining on the statute for assessment is less than 365 days (270 days in estate cases or IRC 6206 cases) for a new receipt or less than 180 days for a case being returned from Compliance after their consideration of a new issue. See IRM 220.127.116.11.1, Statutory Period For Assessment Remaining—Claims and Overassessments for additional information.
The tax law imposes various deadlines for performing certain acts for making a refund or credit of an overpayment. These limitations include the following:
Time period for filing a refund claim; [See IRC 6511(a) and IRC 6511(b)(1).]
Limitation on a claim amount; [See IRC 6511(b)(2).]
Time period for filing a refund suit; [See IRC 6532.] and
Making a refund or credit of an overpayment after the expiration of the time periods. [See IRC 6514.]
Under IRC 6511(h), the statute of limitations for filing a claim for refund or credit of an overpayment may be suspended during the time a taxpayer is unable to handle his or her financial affairs for either of the following reasons:
Mental or physical impairment that is medically determinable which has lasted or is expected to continuously last for not less than twelve months; or
Mental or physical impairment that is medically determinable and can be expected to result in the death of the taxpayer. (See Rev. Proc. 99-21, 1999-1 C.B. 960 or its successor regarding the statements to be submitted with the refund claim regarding the medical determination of impairment.)
A claim for refund or credit of an overpayment must be filed within three years after the filing of the original return or within two years after payment, whichever is later. If the overpayment is shown on a delinquent return, the refund claim is timely filed within the three-year period required under IRC 6511(a). No consideration is given to the filing extension period for determining the three-year period for filing a refund claim. A timely filed claim could result in no refund or overpayment allowable, if the payments fall outside the lookback period described under IRC 6511(b)(2). Refer to IRM 18.104.22.168.2.7, Claims for Credit or Refund - General Time Period for Submitting a Claim, and see paragraph 6 below regarding the limitation on the amount. See also IRC 6511(d) and IRM 22.214.171.124.2.8 for other filing time limits that might apply.
IRC 7502 (the timely mailing equals timely filing rule) applies to a refund claim postmarked within the three-year period after the original return's filing date. See IRM 126.96.36.199.188.8.131.52 , Examples for the Three-Year Period. A claim filed on a delinquent original income tax return that is postmarked on the last day of the three year period, is deemed to be filed on the postmark date. See AOD 2000–09, Weisbart v. U. S. Dep't of Treasury, 222 F.3d 93 (2d Cir. 2000), action on dec., 2000-09 (November 13, 2000). See also Treasury Regulation Section 301.7502-1(f).
IRC 6511(b)(2) imposes a limitation on the amount available for refund or credit of an overpayment, and the filing extension period is considered in determining the lookback period described in IRC 6511(b)(2). See IRM 184.108.40.206.220.127.116.11., Three-year Rule at (2) - Example (b) for determining the limitation on the amount under the three-year rule. Also, see IRM 18.104.22.168.22.214.171.124, Two-year Rule.
Advance payments have "deemed payment dates" under IRC 6513 . See IRM 126.96.36.199.2(3) regarding filing extensions specifically excluded in determining the statutory payment date for “estimated income taxes”. Also, see IRC 6513(b). This provision indicates the possibility that "income taxes withheld" (with a deemed statutory payment date that considers a filing extension) could fall within the lookback period and that "estimated tax payments" (with a different deemed statutory payment date - that doesn't consider a filing extension) could fall outside the lookback period.
Appeals does not accept claim or overassessment cases if Compliance has proposed a deficiency for the claim period and the statute of limitations for assessment (ASED) has
Less than 365 days remaining for a new receipt (270 days in estate cases or IRC 6206 cases); or
Less than 180 days remaining for a case previously returned to Compliance for consideration of a new issue or new information.
Appeals can return a case to Compliance for consideration if the taxpayer raises a new issue or provides new information. For a deficiency case, 210 days must remain on the ASED at the time the case is received by the originating function in order to return the case to Compliance. 180 days must remain on the ASED for Appeals to accept the “returned case” after Compliance’s consideration of the new issue or new information. See IRM 8.21, Appeals Statute Responsibility.
If the case does not involve a proposed deficiency for the claim period, then paragraph (1) will not apply.
The following table reflects Appeals' policy on accepting claim and overassessment cases that involve expiring statutes of limitations:
If... Then... Compliance has proposed a deficiency for the claim period and less than 365 days (270 days in estate cases or IRC 6206 cases) remain on the ASED for a new receipt Appeals will not accept the case. See IRM 188.8.131.52.1.3, Cases Not Accepted by Appeals. Compliance has proposed a deficiency for the claim period and less than 180 days remain on the ASED for a “returned case” Appeals will not accept the case. See IRM 184.108.40.206.1.3, Cases Not Accepted by Appeals. The taxpayer appealed the denial of a request for refund or credit of an overpayment (where a claim has not been filed) and less than 180 days remain for filing a claim (RSED) Appeals can accept the request, but if Appeals decides to allow the claim, a refund or credit must be made before the RSED expires. [See IRC 6514(a)(1)]. The taxpayer appealed the denial of a claim for refund or credit of an overpayment and less than 180 days remain for filing suit Appeals can accept the "previously disallowed claim" , but if Appeals decides to allow the claim, a refund or credit of an overpayment must be made before the time for filing a refund suit expires. [See IRC 6514(a)(2).]
The Service does not secure consents to extend the period for assessment (ASED) in cases involving claims or overassessments, unless Compliance has proposed a deficiency and final disposition could result in a deficiency or additional tax.
The exceptions to this rule are:
Joint Committee cases; and
Closing Agreement cases.
Both the Form 872, Consent to Extend the Time to Assess Tax and Form 872-A, Special Consent to Extend the Time to Assess Tax provide that a taxpayer may file a claim for credit or refund and the Service may credit or refund the tax within six (6) months after the respective agreement ends. See IRC 6511(c). As to any claim filed within this extended period, the amount of the credit or refund is limited to: (1) the portion of the tax paid after the execution of the extension agreement and before the filing of the claim plus (2) the portion of the tax recoverable under the rules pursuant to IRC 6511(b)(2), if the claim had been filed on the date the agreement was executed.
If there is no possibility of a deficiency and an overpayment might exist, advise the taxpayer in writing about protecting his or her interest by filing a claim for refund. If a claim has not been filed, the "timely filing requirement" could be met if an agreement form is secured before the "time for filing a claim" has expired. See IRM 220.127.116.11, Securing an Agreement Form.
An Appeals technical employee is considering a deficiency case for a taxpayer who requested (during the examination process) additional deductions and/or credits. The examiner previously considered and denied the request. If Appeals' settlement results in an overpayment and a refund claim was not filed, a refund or credit of an overpayment is barred if the time for filing a refund claim expires for the refund or credit is made. See IRC 6514(a)(1).
Complete Form 10495, Memorandum Re: Statute Paragraph when at least 120 days remain on the assessment statute, no statute protection is necessary, and the ACDS STATUTE DATE field contains a date. The Appeals Team Manager (ATM) countersigns the form, and a copy is retained in the administrative case file. See IRM 18.104.22.168.3.7, Cases Where a Consent is Not Necessary. Form 10495 is not required if the ACDS STATUTE DATE field is blank and the word "CLAIM" is shown in the STATCODE field.
The Internal Revenue Code imposes limitations on refunds or credits of overpayments under the following sections:
Code Section Description IRC 6511 Imposes time limits for filing a claim for refund or credit of an overpayment and limits the"dollar amount" of such claim. See IRM 22.214.171.124. If the taxpayer fails to meet this deadline, IRC 6514 applies. IRC 6512 Imposes limitations in the case of a petition to Tax Court. As a result of a timely petition for a deficiency case, the Tax Court will determine as part of its decision whether there's an overpayment. See IRC 6512(b)(3). IRC 6513 Covers the time a return is deemed filed and the time certain taxes are considered paid. See IRM 126.96.36.199 (7). IRC 6514 Identifies when a refund is considered erroneous and when an overpayment is considered void. See IRM 188.8.131.52.4 (4). IRC 6532 Imposes a time limit for filing a refund suit after IRS disallows a claim. After the time for filing suit has expired, IRC 6514 applies. See IRM 184.108.40.206.4 (3).
If the Service disallows any portion of a claim for refund or credit of an overpayment, the Service must notify the taxpayer (by certified or registered mail) of the claim disallowance. Per IRC 6402(l), this legal notice must include an explanation of the reason for the disallowance. The taxpayer may waive the mailing requirement by signing Form 2297, Waiver of Statutory Notification of Claim Disallowance. See IRM 220.127.116.11.1 for instances where a notice of claim disallowance or Form 2297 is not required.
IRC 6532 imposes a 2-year time limit on the taxpayer to file a refund suit from the date of mailing of the statutory notice of claim disallowance. See Exhibit 8.7.7-1 for some of the letters that IRS might issue to meet this statutory requirement. The 2-year period begins on the date of mailing of the legal notice of claim disallowance (sent by certified or registered mail) or the date that the Service received Form 2297. The time for filing a refund suit is not extended by the reconsideration or action on the claim that occurs after the mailing of a notice of disallowance. IRC 6532 allows the parties to extend the time for filing suit by mutual written agreement. See IRM 18.104.22.168.5.
IRC 6514 limits the time for making a refund or credit of an overpayment. This provision states that a refund is considered erroneous and a credit is considered void if the taxpayer failed to meet certain time limits listed under IRC 6514. This includes a refund or credit of an overpayment made under the following circumstances:
The refund or credit of an overpayment was made after the period for filing has expired, and a claim was not filed within the time prescribed by law, or
The claim was timely filed and disallowed by the Secretary, and the time for filing a refund suit has expired (unless a refund suit was timely filed under IRC 6532). See IRM 22.214.171.124.2.5.5, Reconsideration of a Disallowed Claim.
Under IRC 6532(a)(2), the period of limitations for filing suit on a disallowed claim may be extended. Carefully consider the need to extend the time for filing suit. The following are examples of satisfactory reasons for extending the time for filing suit under IRC 6532:
If the disposition of a request for reconsideration of a disallowed claim is contingent on a pending court decision, the taxpayer should be given the opportunity of submitting a properly executed Form 907.
The Service had under consideration a change in position requiring the suspension of action in all similar cases.
When an extension will prevent possible inequities to taxpayers.
The taxpayer and the Service may extend the time for filing suit by executing Form 907, Agreement to Extend the Time to Bring Suit, as long as the parties execute Form 907 before the 2-year period expires.
Multiple Forms 907 may be executed by the Service and the taxpayer to extend the period to file a refund suit under IRC 6532(a)(2) - as long as each extension is executed before the period previously agreed upon has expired.
Form 907 must be signed by the taxpayer or by an attorney, agent, trustee, or other fiduciary acting on the taxpayer's behalf pursuant to Form 2848, Power of Attorney. Rev. Rul. 76-60 requires the inclusion of special language on Form 2848 to authorize an individual to sign Form 907 on the taxpayer's behalf.
Appeals Area Directors are authorized to execute Form 907 to extend the time for filing suit. See Delegation Order 8-4 (formerly DO 171, Rev. 2) at IRM 126.96.36.199.
A claim must be timely filed and must set forth in detail each ground upon which a refund or credit of an overpayment is claimed. See 26 CFR 301.6402-2 and IRM 188.8.131.52.2.6.1, Background on the Acceptability of Claims Failing to Comply with Prescribed Requirements for the Content and Form.
IRM 184.108.40.206.4, Taxpayer Raises New Issue contains guidance for Appeals' consideration of new issues raised by the taxpayer for a case under Appeals jurisdiction. Don't consider a new issue raised in Appeals for a refund claim case if the time for filing a refund claim has expired.
If the taxpayer requests Appeals consideration of an issue not included in the refund claim or not raised during Compliance's consideration, consider the following:
If the... Then... Time for filing a refund claim has expired, Don't consider the new issue or send it to Compliance for consideration. Time for filing a refund claim hasn't expired and conditions in IRM 220.127.116.11.4 apply for returning the case, Ask the taxpayer to file another amended return to include the new issue before sending the case to Compliance. Time for filing a refund claim hasn't expired and the conditions in IRM 18.104.22.168.4 don't apply for returning the case, Ask the taxpayer to file an amended return to include the new issue, unless Appeals can complete the consideration and process a refund or credit of an overpayment before the "claim filing date expires" . Also, see IRM 22.214.171.124, Securing an Agreement Form.
An "informal claim" must have a written component apprising the Service that a refund is sought and describe the legal and factual basis for the refund so that the Service may investigate the claim. See IRM 126.96.36.199.2.6.3, Informal Claims.
See IRM 188.8.131.52.2.6.4, Supplemental Claims for information on supplementing a pending claim, submitting a new claim, and perfecting an informal claim.
If Appeals returns the case to Compliance to consider the new claim issue, follow the guidance in IRM 184.108.40.206.7, Jurisdiction Released. Include on Form 5402, Appeals Transmittal and Case Memo information about the refund statute for the new issue. See following sample language:
On MM/DD/YYYY, the taxpayer timely submitted another amended return to include a new issue before the time for filing a refund expires on MM/DD/YYYY; or
On MM/DD/YYYY, the taxpayer timely submitted an informal claim to include a new issue before the time for filing a refund claim expires on MM/DD/YYYY.
Taxpayers can file a claim for refund and/or request for abatement for a redetermination of certain liabilities that have not been closed with finality. The form type would depend on the circumstances. Also, correspondence from the taxpayer can be determined to be an "informal" claim by the Appeals technical employee, or Compliance could have made an earlier determination regarding an informal claim. Also, the consideration of the issue might constitute the filing of an informal claim. See IRM 220.127.116.11.2.6.3, Informal Claims. The following are some of the claim forms that taxpayers might file to pursue a claim and/or abatement issue:
Form 843, Claim for Refund and Request for Abatement
Form 1040X, Amended U.S. Individual Income Tax Return
Form 1120X, Amended U.S. Corporation Income Tax Return
Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund
Appeals receives claims from Area Compliance and Compliance Campuses. Claims received from Area Compliance (Exam) are controlled on AIMS. Campus Claims are not controlled on AIMS.
APS will establish a claim or overassessment case on ACDS, based on procedures in IRM 8.20.5, Carding New Receipts. APS will send the case to the ATM for assignment. Refer to IRM 8.20.5 to determine the need to update the case information on ACDS. For Trust Fund Recovery Penalty (TFRP) cases, see IRM 18.104.22.168.2.3 to determine the appropriate statute date shown on ACDS.
Verify that the beginning amounts are properly shown on the amended return (i.e. the "Per Return Amounts" or "Previously Adjusted Amounts" match information on IDRS). See IRM 22.214.171.124.5(2).
Upon receipt of a claim or overassessment case, follow the procedures outlined in IRM 8.2.1, Agreed Pre-90-Day Income Tax Cases. The procedures include the following:
Ensure a Uniform Acknowledgment Letter (UAL) was sent to the taxpayer and a copy to the authorized representative (if applicable);
Review the administrative file contents and determine if the case is ready for Appeals' consideration;
Validate all critical data fields on ACDS; and
Conduct the conference.
Ensure that an accurate statute is reflected on Appeals Centralized Database System (ACDS) and determine the need to protect a statute. If no statute protection is needed, determine the need to complete Form 10495, Memorandum Re: Statute Paragraph. See IRM 126.96.36.199.3 (4). For most refund claim cases, Appeals employees use CLAIM as the ACDS statute code where an assessment wasn't proposed. See exhibit in IRM 8.21.2, Account and Processing Support (APS) Statute Responsibility for a list of ACDS statute codes.
If an agreement is reached on an overassessment (without a claim filed), secure an agreement form using the standards for agreement in a pre-90 day case. (i.e. Form 870 or Form 870-AD ). If Form 870 or Form 870-AD is not appropriate, consider the case type to identify the appropriate form for securing an agreement.
Under Rev. Rul. 68-65, 1968–1 C.B. 555, a signed agreement Form 870 or Form 890 series is a claim for refund to the extent that any Service determined overassessmentshown is an overpayment, provided the form is executed and filed within the period of limitations for filing a claim for credit or refund.
The date of the claim for refund is the date of receipt of the signed agreement form, or the date it is postmarked, if mailed before the due date and received after that due date.
In cases where a claim for refund is disallowed in whole or in part, you may request that the taxpayer execute Form 2297, Waiver of Statutory Notification of Claim Disallowance. Do not follow these procedures if a claim disallowance letter was previously issued or a Form 2297 was previously filed.
Follow these procedures when securing a Form 2297:
Prepare three copies, including a copy for the taxpayer. If appropriate, send a copy to the authorized representative;
Attach an original to the claim; and
Retain a copy in the administrative file.
If the taxpayer chooses not to sign Form 2297, issue a notice of claim disallowance using Letter 1363 or Letter 1364, even if an agreement form (Form 870 type, etc.) is submitted.
When a claim issue is allowed - but offsetting adjustments reduce or eliminate the overpayment, secure a Form 2297 or issue a notice of claim disallowance (Letter 1363 or 1364).
There are many exceptions to the use of this form, most of which are listed in the following subsections.
Do not secure Form 2297 or issue a notice of claim disallowance for:
Claim for abatement;
Claim not timely filed;
Claim for abatement of interest; [See IRM 188.8.131.52.4 (11).];
Claim for a year docketed before the United States Tax Court; except if the issue raised in a claim pertains to a carryback which is not an issue before the Tax Court. In this case, secure a Form 2297 or issue a notice of claim disallowance (Letter 1363 or Letter 1364);
Claim with an issue allowed in full - with no offsetting adjustments, but the taxpayer overstated the amount of the claim;
Claim previously disallowed in whole or in part by a notice of claim disallowance; or
Claim previously disallowed in whole or in part and signed Form 2297 was obtained.
Do not use Form 2297, if the decision is made to fully or partially disallow a claim before the end of the initial six (6) month period after the filing of the claim.
A statutory notice of claim disallowance is the only form issued during the initial six (6) month period after the filing of the claim. The time frame for filing suit can only be shortened to less than six (6) months if a decision of the IRS is reached before the six (6) month period expires.
Waivers Form 2297, Waiver of Statutory Notification of Claim Disallowance and/or Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit do not constitute a decision of the IRS.
Do not request Form 2297 in cases requiring Joint Committee review until the Joint Committee has released the case, unless the Form 2297 is modified as follows: "This waiver takes effect on the same date the Agreement Form (fill in appropriate form number) used in this case becomes effective."
In agreed cases under the pre-refund examination program, an original return showing an overpayment of tax may represent a claim for refund or credit. See IRM 184.108.40.206.2, Pre-Refund Audits.
Consider this claim "allowed in full" when all or part of the amount is applied against a deficiency determined upon examination; and
The remainder, if any, is refunded.
Under this procedure, do not secure a Form 2297 or issue a notice of claim disallowance.
Occasionally, an agreement form is received in an overassessment and/or overpayment case and it becomes necessary to secure another agreement for a lesser refund.
The first agreement constitutes a claim for refund or credit. Secure a Form 2297, or issue a statutory notice of claim disallowance. See IRM 220.127.116.11 for the need to secure an agreement form before the time for filing a claim has expired - for an overpayment, if no refund claim has been filed.
The Service's policy on partial allowance of refunds or credits on overassessments is found in Policy Statement P–4–41 (shown at IRM 18.104.22.168.17) and Rev. Rul. 54-378, 1954–2 C.B. 246 or as clarified in Rev. Rul. 2007–51, 2007-2 C.B. 573.
Refunds of partial overassessments are only recommended in those cases where there is agreement on the issue or issues resulting in the partial overassessment.
Revenue Ruling 2007-51 holds that the Service may credit an overpayment against unassessed internal revenue tax liabilities that have been determined in a statutory notice of deficiency sent to the taxpayer.
Partial overassessments are not recommended in potential Joint Committee cases, except as provided in IRM 8.7.9, Joint Committee (JC) Cases.
When the taxpayer agrees to the allowance of a partial overassessment, secure an appropriate agreement form. See IRM 22.214.171.124 for the need to secure an agreement form before the "time for filing a claim " has expired for an overpayment - if no refund claim has been filed.
If the case is on AIMS, include instructions for Form 5403, Appeals Closing Record, showing the agreed overassessment. See IRM 126.96.36.199, Processing a Pre-90-Cay Case - APS. Also, see IRM 188.8.131.52.62.1, AIMS to assist in determining whether a case is on AIMS.
If the case is not on AIMS, prepare Form 3870, Request for Adjustment.
Prepare Form 5402, Appeals Transmittal and Case Memo, which discusses the agreed issues as part of the final closing package.
This section provides guidance on the preparation of settlement computations on cases involving claims and overassessment cases. It is intended for Appeals employees who prepare settlement computations.
A current transcript of account is required for all cases. Analyze the transcript of account if there is a question about the timeliness of a claim for refund or payments, etc. Statements of accounts are required in docketed cases involving overpayments. See IRM 184.108.40.206, Explanation of the Statement of Account.
If an abatement of a previously assessed amount is needed on Non-Master File (or a separate Master File 31 account) - such as in the case of a non-petitioning spouse, APS will prepare the appropriate form.
It is recommended that the settlement computation contain a brief statement regarding the final disposition of a claim for refund or overpayment. One of the following statements could be included in the settlement document, depending on the disposition:
Claim is Allowed in Full (with no Offset)
"Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in full by Appeals in the preparation of this settlement computation."
Claim is Disallowed in Full (and No Other Adjustments)
"Your claim for refund totaling $(amount) for (tax year ended) has been considered and disallowed in full by Appeals in the preparation of this settlement computation."
Claim is Allowed in Full or Part (but Offset by Other Adjustments)
"Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in full ( or in part) by Appeals. However, the total amount of refund is increased (or decreased) by other adjustments shown in this settlement computation."
Claim is Allowed in Part (with no Offset)
"Your claim for refund totaling $(amount) for (tax year ended) has been considered and allowed in part by Appeals in the preparation of this settlement computation."
A statutory notice of claim disallowance is issued if a total or a partial disallowance of a claim for refund or credit (of an overpayment) is to be made in an unagreed non-docketed case, not involving a deficiency.
Do not issue a statutory claim disallowance letter if this letter was previously issued or Form 2297, Waiver of Statutory Notification of Claim Disallowance was filed. See IRM 220.127.116.11.1 for other instances where a statutory claim disallowance letter will not be mailed and Form 2297 is not secured.
See IRM 18.104.22.168.1 for the letters required for closing claim cases.
The ATM is the lowest level of authority for signing the statutory claim disallowance letters. See IRM 22.214.171.124.1 (2).
See IRM 126.96.36.199.2 for information on unagreed deficiency cases involving claims.
See IRM 188.8.131.52.3 for the disposition of a deficiency case involving a claim where the taxpayer agreed to the deficiency after the Notice of Deficiency was mailed or the Notice of Deficiency defaulted.
See IRM 184.108.40.206.4 for information on unagreed deficiency cases with overassessments.
Appeals will expedite the closing of "large dollar" examination-sourced overpayment cases. See IRM 220.127.116.11.5.
Appeals will mail one of the following closing letters, depending on the prior action taken for the claim:
If ... And ... Then Prepare... A statutory claim disallowance letter was not previously mailed or Form 2297 was not previously received Appeals partially sustains the disallowed claim Letter 1363, Appeals Partial Disallowance of Claim - Certified Letter. A statutory claim disallowance letter was not previously mailed or Form 2297 was not previously received Appeals fully sustains the disallowed claim Letter 1364, Appeals Full Disallowance of Claim - Certified Letter. A statutory claim disallowance letter was previously mailed or Form 2297 was previously received If Appeals partially sustains the disallowed claim Letter 2683, Appeals Partial Disallowance After Previous Claim Disallowance. A statutory claim disallowance letter was previously mailed or Form 2297 was previously received If Appeals fully sustains the disallowed claim Letter 2681, Appeals Full Disallowance After Previous Claim Disallowance. A disallowed claim is appealed If Appeals fully allows the disallowed claim - with no offsets Letter 2682, Appeals Full Claim Allowance.
Similar to a notice of deficiency, the ATM is the lowest level of authority for signing the statutory claim disallowance lettersLetter 1363 and Letter 1364.
If a notice of deficiency is issued and there is a claim for refund for the same tax period, insert a paragraph about the claim in the statement attached to the notice of deficiency.
If, in response to a notice of deficiency, the taxpayer submits an agreement or fails to file a petition within the time provided, a notice of claim disallowance must be issued before the case is forwarded for assessment, a notice of claim disallowance must be issued before the case is forwarded for assessment, unless the taxpayer submits Form 2297, Waiver of Statutory Notification of Claim Disallowance.
Where a pre-90 day case includes years with proposed overassessments and years with proposed deficiencies, don't include the overassessment years in the notice of deficiency. See IRM 18.104.22.168, Overassessment Years in the Case. For exceptions, see IRM 22.214.171.124, Tentative Allowances and Other Carryback Claims in Notice of Deficiency Statement.
Generally, if the adjustments are related, the Service will not process the overassessment until the deficiency can be assessed. See IRM 8.17.4 for information involving the claim invitation letter. Send the letter to taxpayers who have not submitted protective claims. If the issue generating the overassessment is not related to, or is not the result of, the deficiency proposed in the other year(s), then the overassessment may be processed.
For an overassessment involving a whipsaw situation, see IRM 126.96.36.199, Overassessment Resulting from Adjustment to a Related Return and IRM 188.8.131.52.13, Policy Statement 4-34.
The tax law provides for interest on overpayments in respect to any internal revenue tax, in accordance with IRC section 6611. For an examination-sourced case, Appeals will expedite the closing of an overpayment case that meets the “large dollar criteria” - described in IRM 4.4.18, AIMS Procedures and Processing Instructions, Large Dollar Cases and as shown on Exam’s Form 3198, Special Handling Notice for Examination Case Processing. An overpayment case meets the "large dollar criteria" if the total amount of a period’s tax overpayment plus penalties exceeds $100,000.
These procedures don't apply to cases requiring Joint Committee, except that APS will assign the case on PEAS as a high priority case - requiring expedite processing. See IRM 184.108.40.206, Appeals Responsibility in Joint Committee (JC) Cases.
The expedite procedures apply to the following Appeals employees:
Appeals Officer (AO)
Appeals Team Case Leader (ATCL)
Appeals Team Manager (ATM)
Account and Processing Support (APS)
Appeals Officer (AO) - The AO will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE"sticker" , "note" , or "tag" to the case file and - by including a notation similar to the following: $100,000 overpayment. The AO will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within five (5) calendar days of receipt of the agreement form. The AO will document the reason for the delay (if any) in the Case Activity Record and Timesheet (CARAT).
Appeals Team Case Leader (ATCL) - The ATCL will "flag" the "large dollar" overpayment case - by attaching any EXPEDITE"sticker" , "note" , or "tag" to the case file and - by including a notation similar to the following: $100,000 overpayment. The ATCL will include a similar notation in the remarks section of Form 5402, Appeals Transmittal and Case Memo and close the case within ten (10) calendar days of receipt of the agreement form. The ATCL will document the reason for the delay (if any) in the CARAT.
Appeals Team Manager (ATM) - The ATM will properly "flag" the case, if not properly "flagged" by the AO (as described above). The ATM will close the case within ten (10) calendar days of the AO’s receipt of the agreement form. The ATM will document the reason for the delay (if any) in the CARAT.
Account and Processing Support (APS) - APS will expedite the closing of a "large dollar" overpayment case, as" flagged" by the Appeals employee. APS will assign the case on Appeals’ Processing Employee Automated System (PEAS) and identify the case as a high priority - requiring expedite processing. APS will make every effort to process a large dollar overpayment within 30 days of Appeals’ receipt of a waiver form and/or closing agreement.
For AIMS-controlled cases, prepare the following:
Form 5403 instructions. See IRM 220.127.116.11, Processing a Pre-90-Day Case - APS
Appeals Case Memo (ACM) - as deemed necessary. See IRM 8.6.2.
Form 5402, Appeals Transmittal and Case Memo.
Settlement computations and/or Form 3870, Request for Adjustment - as deemed necessary. See IRM 18.104.22.168.
The appropriate closing Letter. See IRM 22.214.171.124.1 for details.
Campus-sourced claims are not controlled on AIMS. Therefore, Form 5403 instructions are not required. Prepare the following (if appropriate) to close a non-AIMS controlled claim case.
Form 3870, Request for Adjustment.
Appeals Case Memo (ACM) - as deemed necessary. See IRM 8.6.2.
Form 5402, Appeals Transmittal and Case Memo.
The appropriate closing letter. See IRM 126.96.36.199.1 for details.
A separate Form 3870 is needed for each period. For no-change claim cases, you might determine that a Form 3870 is not needed. For a non-AIMS claim case, you could enter TC 290 $0.00 on Form 5402, excluding Form 3870, to fully sustain the claim denial. If the claim is allowed (in full or in part), Form 3870 is required.
The following are the ACDS entries required on Form 5402:
ACDS Closing Codes
Closing Code Definition 14 Full Disallowance 15 Full Allowance 16 Partial Allowance
RevsdTax — enter the negative amount approved for abatement/refund. (Full disallowance would be $–0–.)
Taxpayers may ask Appeals to reconsider a claim disallowed by Compliance. A taxpayer must make this request within the period for bringing suit because IRS employees cannot legally make a refund or credit an overpayment after the time for filing suit has expired. See IRM 188.8.131.52.4.
Appeals can reconsider a claim with less than 180 days remaining on the two year period for filing a refund suit under IRC 6532. However, the taxpayer remains responsible for monitoring the deadline for filing a refund suit. See IRM 184.108.40.206.2.
Any reconsideration of the claim by Appeals does not extend the period for filing a refund suit. IRC 6514 provides that a refund or credit is erroneous if made after the time for filing suit has expired, unless the taxpayer has initiated a suit within the limitations period.
Do not issue a second notice of claim disallowance when a claim is reconsidered. This could confuse the taxpayer or result in the taxpayer missing the deadline for filing suit.
The Form 5402 - Customized, Appeals Transmittal and Case Memo is the appropriate form to use for all Appeals cases.
Letter 2681, Letter 2682, and Letter 2683, are used to advise the taxpayer of the decision on claim or overassessment cases. See IRM 220.127.116.11.1.
Appeals reconsiders claims disallowed by Compliance Field Operations or Compliance Campus Operations if they were not previously considered by Appeals. The Appeals hearing officer should determine whether a statutory claim disallowance letter was mailed or Form 2297 was filed. If either has occurred, the Appeals hearing officer should identify the time remaining for the taxpayer to bring suit under IRC 6532. Appeals will not reconsider a claim for a case previously "closed with finality" . See IRM 18.104.22.168.2.
Compliance will forward claims filed in cases previously closed by Appeals. Compliance will not forward a claim for a case dismissed by the United States Tax Court for "lack of jurisdiction" . Compliance will follow the guidance in IRM 22.214.171.124.3, Cases Closed in Appeals to determine whether to route the case to Appeals.
Upon receipt, determine if the case was previously "closed with finality" as described in paragraph (3) below.
An issue is considered "closed with finality" if the issue was previously closed under the following circumstances:
Form 870-AD type agreements described in IRM 126.96.36.199; (See also IRM 188.8.131.52.3.)
Closing agreements under IRC 7121 described in IRM 184.108.40.206;
Dismissals for lack of prosecution;
The appealed issue would result in a refund or credit of an overpayment that is considered erroneous under IRC 6514; or
Any other closing process described under tax law and or other IRM guidance as a closure not subject to reopening.
If the case was not previously "closed with finality" and new information is provided requiring Compliance’s consideration, forward the case to Compliance to consider the new information. See IRM 220.127.116.11.5, Taxpayer Provides New Information and IRM 18.104.22.168.7, Jurisdiction Released for instructions on returning a case. Notify Compliance when the two-year period for filing a refund suit will expire, if the claim disallowance letter was previously issued or the taxpayer previously filed Form 2297. The taxpayer can appeal the unresolved issue. An unresolved issue is not appealable if the allowance of the claim would be time-barred. See also IRM 22.214.171.124.
If you determine that the issue was previously "closed with finality" , provide an explanation to the taxpayer of Appeals’ decision not to reopen the issue(s). Provide the taxpayer with the following information:
Amount of the claim(s) for which a refund was requested.
Tax periods in the request.
Date the statutory notice of claim disallowance letter was sent or date the taxpayer previously filed Form 2297, Waiver of Statutory Notification of Claim Disallowance.
Additional legal action (if any) that the taxpayer can take related to the disallowed claim and the relationship to the previously issued claim disallowance letter or previously filed Form 2297, Waiver of Statutory Notification of Claim Disallowance.
If the two-year period for filing a refund suit has not expired, prepare Letter 2682, Full Disallowance After Previous Claim Disallowance. See IRM 126.96.36.199.1. If the two-year period has expired for filing a refund suit and a suit has not been filed, advise the taxpayer that a refund or credit of an overpayment is barred by statute.
If the taxpayer appeals Compliance’s disallowance of a claim based solely on the decision that the claim was not timely filed and Appeals concludes that the claim was timely, Appeals will do the following:
Consider whether the issue was previously “closed with finality”, as described in IRM 188.8.131.52.2 (3);
Determine whether Compliance considered the merits of the claim.
IRM 184.108.40.206.3(1)(b) doesn't apply to a refund disallowed during the processing of an original return where Compliance did the following:
Processed an original delinquent return using Transaction Code (TC) 150;
Moved an overpayment to "excess collections" ; and
Issued a statutory claim disallowance letter (i.e. Letter 105-C) to disallow a refund or credit of an overpayment.
If all of the above apply and the delinquent return was filed before the time for filing a refund expired, process the refund. See IRM 220.127.116.11 (4). Include closing instructions to move the overpayment from "excess collections" , and follow the procedures in IRM 18.104.22.168.1 and IRM 22.214.171.124.6.
If the claim was timely filed and the merits were previously considered and accepted by Compliance, allow the claim with no further consideration if the issue(s) was not previously "closed with finality" .
If the claim was timely filed, and Compliance did not previously consider the merits, return the case to Compliance to consider the merits if the issue(s) was not previously "closed with finality" .
To return a claim for consideration of the merits, prepare Letter 5209 advising the taxpayer that Appeals has determined that their claim was timely filed and you are returning it to the originating function for consideration of the underlying merits of the claim. Prepare Form 5402 to return the case. The Form 5402 must include the following:
"Claim submitted timely. Jurisdiction released for consideration of underlying issue. Return to originator."
Closing Code 20
Feature Code "TC"
Indicate where the case is being sent.
For field-sourced work, return the case to the appropriate Technical Services. For campus-sourced work, refer to the "Case Routing" tab on the Appeals Home Page at http://appeals.web.irs.gov/APS/caserouting.htm.
If you determine that the claim was previously closed with finality, see IRM 126.96.36.199.2 (5).
An "audit reconsideration" case is the reevaluation of the results of a prior audit when a taxpayer disagrees with the original determination. The taxpayer should provide information "not previously considered during the original examination" . Also, "audit reconsideration" is the process the IRS uses when the taxpayer contests an Automated Substitute for Return (ASFR) or Substitute for Return (SFR) determination by filing an original delinquent return, and the assessment remains unpaid - or, as a result of the assessment, the tax credit is reversed. See IRS Pub 3598, What you Should Know About the Audit Reconsideration Process.
Audit reconsiderations on cases closed by Appeals as dismissed for lack of jurisdiction don't come directly to Appeals without consideration by Compliance. Compliance will route these cases in accordance with IRM 188.8.131.52, Function Responsible & Routing Instructions. The taxpayer can appeal the result of the audit reconsideration.
When the taxpayer requests Appeals' consideration, the full administrative file should accompany the taxpayer's request. See IRM 184.108.40.206, Request for Appeal. Compliance will follow the guidance in IRM 220.127.116.11.3, Cases Closed in Appeals to determine whether to route the case directly to Appeals without further action.
Upon receipt of the audit reconsideration, determine if the case was previously "closed with finality" as described in IRM 18.104.22.168.2 (3).
If the case was previously "closed with finality" , then follow the instructions in paragraph (5) below.
If the case was not previously "closed with finality" , then consider whether the taxpayer provided new information.
If IRS previously closed an issue with finality or the information provided was previously considered, send the taxpayer a letter explaining why the issue doesn’t qualify for reconsideration. Prepare Form 5402, Appeals Transmittal and Case Memo to close the case with no change to the account.
IRC 6404(e)(1) was added by the Tax Reform Act of 1986 to provide for abatement of interest on deficiencies or payments attributable to errors or delays in the performance of ministerial acts by the Service. On July 30, 1996, the Taxpayer Bill of Rights 2 (TBOR 2) revised IRC 6404(e)(1) to allow the Service to abate interest attributable to unreasonable errors or delays by the Service in the performance of ministerial or managerial acts. This TBOR 2 amendment applies to interest accruing with respect to deficiencies or payments for taxable years beginning after 7/30/1996.
Delegation Order 20-1 (formerly DO 228, Rev. 3), Delegation of Authorities for Penalty and Interest Activities identifies the individuals authorized to abate interest under IRC 6404(e)(1). See IRM 22.214.171.124.
An error or delay in performing a ministerial or managerial act will be taken into account only if it occurs after the IRS has contacted the taxpayer in writing with respect to the deficiency or payment. If the conditions of IRC 6404(e)(1) are met, IRS is authorized to abate interest assessed on a deficiency of income tax, estate tax, gift tax and/or certain excise taxes. See IRC 6211, Definition of a Deficiency.
Ministerial act means a procedural or mechanical act that does not involve the exercise of judgment or discretion and that occurs during the processing of a taxpayer's case after all prerequisites to the act - such as conferences and review by supervisors - have taken place. A decision concerning the proper application of federal tax law (or other federal or state law) is not a ministerial act.
Managerial act means an administrative act that occurs during the processing of a taxpayer's case involving the temporary or permanent loss of records or the exercise of judgment or discretion relating to management of personnel. A decision concerning the proper application of federal tax law (or other federal or state law) is not a managerial act.
The Service has the authority to abate only the amount of interest that accrued during the period attributable to an error or delay in performing the ministerial or managerial act. IRC 6404(e)(1) applies only to an error or delay that occurs after the date the Service contacts the taxpayer in writing with respect to the deficiency or payment. See IRM 126.96.36.199 for additional information.
Interest abatement claims (Form 843, Claim for Refund and Request for Abatement) are generally filed with the Campus where the taxpayer would be required to file a current tax return for which the claim or request relates. Compliance will consider the claim after the tax and/or penalty issues have been resolved.
After Compliance considers the claim, the taxpayer will have full appeal rights.
TBOR2 granted the Tax Court jurisdiction to determine whether the Service's failure to abate interest was an abuse of discretion and to order an abatement. To bring an action under IRC 6404(h), the taxpayer must file a petition for review with the Tax Court within 180 days after the date of the mailing of the Service's final determination not to abate. See IRM 188.8.131.52.4 (11) to determine the appropriate document for Appeals to close a non-docketed abatement of interest case.
The "abatement of interest" provision is applicable in the context of a TEFRA partnership audit.
Interest on employment, excise, and other taxes that are not subject to deficiency procedures don't qualify for abatement of interest under IRC 6404(e). However, the IRS has authority to abate interest under IRC 6404(a) if the interest is:
excessive in amount;
assessed after the expiration of the applicable period of limitations; or
erroneously or illegally assessed.
IRC 6404(e)(2) imposes a requirement for the Secretary to abate interest assessed on an erroneous refund under IRC 6602, accrued to the date that demand for repayment is made. For Appeals authority to abate interest under IRC 6404(e)(2), see IRM 184.108.40.206.2. Interest must be abated on an erroneous refund under IRC 6602, unless --
The taxpayer or related party caused the erroneous refund; or
The erroneous refund exceeds $50,000.
Appeals of "disallowed abatement of interest claims" may be received from the Campus or local Compliance functions.
Appeals technical employees charged with making decisions regarding errors or delays on the part of IRS employees from functions outside of Appeals should consider the relevant function's procedures, time frames, and case-specific unusual circumstances not clear from the case file.
IRC 6404(e)(1) applies only in respect to "interest on a deficiency" in income tax, estate tax, gift tax, and/or certain excise taxes. See IRC 6211 for the definition of a deficiency. Carefully consider whether the taxpayer's request is for an abatement of interest assessed or accrued on the type of tax for which an abatement is allowable under IRC 6404(e)(1). In addition, review Treasury Regulation section 301.6404-2(a) to assist in determining whether the conditions exist for allowing an interest abatement due to an unreasonable error or delay in performing a ministerial or managerial act.
If a disallowed abatement of interest claim "concerning an Appeals employee's actions" is appealed, notify the Appeals Area Director having jurisdiction over that employee. The actual review of the claim may be done by another Appeals office at the request of the Area Director, and the Area Director must sign all closing documents.
In cases where the interest was assessed and/or the "assessed underlying tax and/or penalty case" is also in Appeals for consideration, work both issues (if Compliance has already considered the issues). However, Appeals employees should consider the issues as separate and independent, so the resolution of either doesn't affect the outcome of the other. Local offices have the option of having a designated Appeals employee handle all abatement of interest cases to avoid this problem.
If the underlying tax and/or penalty matter is unresolved and the taxpayer requests an abatement of interest, inform the taxpayer that the abatement request is premature. Suggest the taxpayer submit a Form 843, Claim For Refund and Request for Abatement after the underlying tax and/or penalty matter is resolved.
To ensure uniformity and consistency within Appeals, assignment of abatement of interest issues is centralized to the maximum extent possible.
Determine Appeals level of authority for abating interest when the statutory conditions apply. See the following for determining who can abate and/or issue a notice of final determination under Delegation Order 20-1:
IRC Section Authority Delegated Appeals Officials IRM Section 6404(e)(1)
- To abate assessed and unassessed interest attributable to an unreasonable error or delay by IRS
- To issue notice of final determination not to abate interest
- Appeals Team Manager
- Appeals Team Case Leader
- Higher Level of Authority
IRM 220.127.116.11 (2) and (8)
- To abate interest on erroneous refunds
- Technical Advisor to Appeals Director
- Appeals Director
- Higher Level of Authority
APS will establish an abatement of interest claim as a separate work unit - even if received with another type of case, i.e. income tax. Refer to IRM 8.20.5, Carding New Receipts for assistance in verifying information on ACDS.
Generally, these cases come to Appeals in "proposed disallowance status" so the statute is not a problem. However, the "interest abatement case" could arrive in Appeals after a final determination letter has been mailed to disallow the claim for abatement. The following situations might occur, which impact the "statute expiration date" entered on ACDS for the case:
If the formal disallowance letter was issued, the 180-day period (for petitioning the Tax Court) is running and Appeals may not have time to work the case.
Reconsideration of disallowed interest claims in respect to IRC 6404(e)(1) - received with less than 120 days remaining on the 180-day period - may be returned to the referring office.
Acceptance of this type case is subject to the approval of the Appeals Area Director. If Appeals accepts the case for reconsideration (during the 180-day period), inform the taxpayer that the period for filing suit is not extended and that no additional final determination letter will be issued.
The collection statute of limitations (CSED) is not suspended as a result of the taxpayer's request for interest abatement under IRC 6404(e)(1). Likewise, the CSED is not suspended (solely) as a result of the taxpayer's petition under IRC 6404(h). In the case of a timely petition, IRC 6404(h) allows the Tax Court to review the denial of the taxpayer's request for an abatement of interest. However, the Internal Revenue Code does not provide for a CSED suspension as a result of such a petition. If the interest abatement case is docketed, consult with Area Counsel. The CSED could expire during the Tax Court's jurisdiction - that does not involve Collection Due Process (CDP).
A taxpayer could request an interest abatement for a Collection Due Process (CDP) case, so it is possible for the CSED to be suspended for an interest abatement request under CDP. See IRM 8.22.8, Liability Issues and Relief from Liability for procedures involving interest abatement requests under CDP
Guidelines for abating interest under IRC 6404(e)(1) are in 26 CFR 301.6404-2 for tax years beginning after July 30, 1996. Determinations are made on a factual basis. If the case file contains insufficient information to fully consider the abatement of interest issue, either:
Return the case file to the originating function as a premature referral as outlined in IRM 8.2.1, Agreed Pre-90-Day Income Tax Cases, or
If the information needed can be expeditiously provided, request the information by telephone before returning the case.
Formal conferences are generally not necessary to resolve an abatement of interest issue. However, at the taxpayer's request, a conference can be offered when appropriate.
Resolve an abatement of interest issue by sustaining in full, abating in full, or partially abating. Interest abatement requests must be specific concerning the alleged time frame(s) in which the unreasonable error(s) or delay(s) underlying the basis of the taxpayer's claim. Identify the" principal amount" on which the interest accrued, and abate only the interest attributable to the specific time frame(s) [i.e. "from date(s)" through "to date(s)" ] in which the unreasonable error or delay occurred. See also IRM 18.104.22.168.
Request abatements on Form 3870, Request for Adjustment. Use a separate Form 3870 for each period. If a "decision is made to abate interest" , also decide whether to take one of the following actions:
Submit an interim request for APS-CIT (APS-Complex Interest Team) to compute an interest abatement amount, or
Prepare a final Form 3870 with a request for APS (during the closing process) to compute the abatement amount.
When submitting an interim request or a final Form 3870 for APS to compute the interest abatement amount, include the following on Form 3870:
the principal amount(s) on which the interest abatement will be considered; and
the interest suspension period(s), by listing the "from date" and "to date" .
An Appeals technical employee might submit an interim request to determine the interest abatement amount for settlement purposes and/or at the taxpayer's request. If the actual interest abatement amount is not needed prior to the case closure, prepare a final Form 3870 to allow the computer to generate the interest abatement amount. If the interest abatement amount was not previously determined (during the interim), APS will input the "from and to dates" and the "principal amount" - based on information provided on Form 3870.
Identify the "principal amount" on which the interest abatement amount will be determined. The "principal amount" will be considered based on the criteria for abating the tax under IRC 6404(e)(1) or IRC 6404(e)(2).
If Appeals’ conclusion is that there was an unreasonable IRS error or delay in performing a ministerial or managerial act in respect to a taxpayer's $25,000 income tax deficiency (i.e. TC 300 or TC 290 assessment), identify the $25,000 as the "principal amount" .
If Appeals’ conclusion is that the taxpayer is entitled to interest on an erroneous refund of $40,000, identify the erroneous refund amount as the "principal amount" . As in the case for abatements under IRC 6404(e)(1), identify the interest abatement period to allow for the computation of the interest abatement amount under IRC 6404(e)(2) in respect to the erroneous refund.
The final Form 3870 must be approved by the ATM or ATCL, unless a higher level of approval is needed. ATM approval is not needed to obtain an interim computation. See IRM 22.214.171.124.1 (4) and IRM 126.96.36.199.2 for conditions that require the Area Director's approval.
Use the following procedures to request an interest computation, if needed prior to the case closure:
Submit an APS-CIT Referral Form (as an e-mail attachment) to *AP Complex Interest Mailbox, requesting an Interim Interest Computation. Include the following in the Remarks Section: dollar amount (i.e. the "principal amount" ) on which interest must be suspended, as well as the "start date" and "end date" of the interest abatement period. You can get an APS-CIT Referral Form from the Appeals website.
If you reach a settlement on the interest abatement amount, enter this amount on Form 3870 for closure. Don't enter the interest abatement period. APS will process the abatement for the "agreed amount" .
Prepare Form 3870 for each interest abatement year, regardless of the decision. Enter one of the following Reason Codes (RC) in red (if possible) and include the appropriate Transaction Code (TC) and interest abatement amount or interest abatement period (if applicable):
If the interest abatement claim is... then, enter on Form 3870.. and enter on Form 3870.. fully allowed RC 82 TC 290 $0.00 and TC 341 with the "abatement amount" , if computed (or enter principal amount with theinterest abatement period) disallowed in part RC 81 TC 290 $0.00 and TC 341 with the "abatement amount" , fully disallowed RC 80 Include TC 290 $0.00.
APGolf (a sub-system of ACDS) contains closing letters for abatement of interest cases. Prepare one of the following letters for APS to mail to the taxpayer(s) at closing:
If Abatement of Interest Claim is ... Then prepare... fully allowed Letter 2393, Abatement of Interest- Fully Allowed disallowed in part (with Tax Court rights) Letter 2391, Partial Allowance - Final Determination fully disallowed (with Tax Court rights) Letter 2392, Full Disallowance - Final Determination closed with agreement Form 906, Closing Agreement on Final Determination Covering Specific Matters. [See IRM 188.8.131.52.4 (13).] Letter 913, Closing Letter - Agreed Cases
Appeals settles these claims, when appropriate. If there are related tax issues, don't consider the abatement of interest issue settlement in any evaluations of the hazards of litigation affecting the tax issues. Don't interrelate tax issues and abatement of interest issues through mutual concessions, offsetting consideration, split issue settlements, etc.
In some settled cases, you might decide obtaining a Form 906, Closing Agreement on Final Determination Covering Specific Matters is appropriate. See IRM 8.13.1, Processing Closing Agreements in Appeals for language to use in this situation. Don't issue the final determination notice (Letter 2391 or 2392), when executing a closing agreement.
Use the ACDS Form 5402,Appeals Transmittal and Case Memo for all abatement of interest claims. Include the following information on Form 5402.
Closing code information, based on the method of resolution:
Closing Code Method of Resolution 03 agreed fully allowed abatement of interest non-docketed case - with closing Letter 2393 05 defaulted disallowance letter for a fully disallowed or partially allowed abatement of interest case 08, 10, 11, 12, or 17 closing codes for docketed abatement of interest case 20 Premature Referral
RevsdTAX - Enter the negative amount approved for abatement. (Fully sustained would have $–0–.)
DD AMTDIS - Enter only the amount Disallowed.
Full disallowance reflects the full amount of the claim
Full allowance reflects $–0–.
Partial allowance reflects the difference between the DDAMTCL and the RevsdTAX.
Additional guidelines - for using the abatement of interest Form 5402 - are available on the ACDS utilities menu.
The case memo, Form 5402, and other documents [i.e. Form 3870, appropriate pattern denial letter (Letter 2391 or Letter 2392), or Form 906] require the approval signature of the ATM or ATCL.
The Appeals Area Director (and not the ATM) must approve and sign any documents concerning claims for abatement of interest for actions involving Appeals employees. See IRM 184.108.40.206.1 (4). In addition, the Appeals Area Director must approve any abatements involving erroneous refunds. IRM 220.127.116.11.2.
|Letter Number||Letter Description||Issuer|
|Letter 105-C||Claim Disallowed||Compliance|
|Letter 106-C||Claim Partially Disallowed||Compliance|
|Letter 906||Final Full Claim Disallowance Letter||Compliance|
|Letter 905||Final Partial Claim Disallowance Letter||Compliance|
|Letter 1364||Appeals Full Disallowance of Claim||Appeals|
|Letter 1363||Appeals Partial Disallowance of Claim||Appeals|