8.7.17 Appeals Remittance Procedures

Manual Transmittal

September 28, 2016

Purpose

(1) This document transmits revised IRM 8.7.17, Technical and Procedural Guidelines, Appeals Remittance Procedures.

Material Changes

(1) Revised and reorganized IRM 8.7.17 for clarity and current information. Added new information and removed duplicate and outdated information based on procedures required by Submission Processing, IRC and IRM guidance, Revenue Procedures, etc. Some of the changes are identified in the following paragraphs.

(2) Added an Introduction section (see new IRM 8.7.17.1) that contains information moved from other parts of IRM 8.7.17. Also included information from service-wide IRM guidance, including IRM 3.8.47, Manual Deposit for Field Office Payment Processing, and references to guidance on unique circumstances requiring different procedures.

(3) Included in new IRM 8.7.17.2 a separate section on the Appeals Technical Employee’s Responsibilities. Included reminder from IRM 1.4.28.11 of the ATM’s responsibility for ensuring procedures are in place for timely processing remittances.

(4) In new IRM 8.7.17.3.1, changed option to check the 316c box, and not the 318c box (described in old IRM 8.7.17.1.2), on Form 3244-A. If checked, the designated IRS Compliance Campus will mail to the taxpayer Letter 0316c, Taxpayer Made Tax Payment in Advance. Added information for determining when to use Designated Payment Codes (DPCs) and where to locate DPC descriptions. Revised the condition for applying payment to TC 680.

(5) Included in IRM 8.7.17.4 instructions for preparing remittance packages and added hyperlinks for locating Submission Processing’s latest instructions and current contacts.

(6) For IRM 8.7.17.5, changed title from "Advance Payments" to "Advance Payments and IRC 6603 Deposits" .

(7) Included in IRM 8.7.17.5.3 a separate section on IRC 6603 Deposits Received Prior to Issuance of Notice of Deficiency.

(8) Moved information from old IRM 8.7.17.1.4 to different parts of this revised IRM 8.7.17 for topics covering deposits, undesignated remittances, cash bond under Rev. Proc. 2005-18 applied as payment, etc.

Effect on Other Documents

This IRM supersedes IRM 8.7.17, Appeals Remittance Procedures, dated October 24, 2013.

Audience

Appeals

Effective Date

(09-28-2016)


John V. Cardone
Director, Policy, Quality, and Case Support

Introduction

  1. This section contains information on processing remittances received by Appeals.

  2. The Appeals Technical Employee (ATE) must determine whether a remittance is a deposit or a payment of tax. Both types of remittances will be posted to a taxpayer’s account as of the date of receipt, and both will stop the running of interest on a deficiency from the date the remittance is received. Per IRC 6603 , a taxpayer may make a cash deposit with IRS which may be used to pay any income, estate, gift, or excise tax (under Chapter 41, 42, 43, or 44). Deposits are potential payments towards potential underpayments. Rev. Proc. 2005-18 refers to remittances designated as deposits as designated remittances and remittances that are not designated as deposits as undesignated remittances. See IRM 8.7.17.5.1, Determining Whether Remittance is a Payment or IRC 6603 Deposit. If the remittance is a payment of tax (not a deposit), the ATE must determine if the payment is an advance payment on a deficiency or subsequent payment (i.e. after the tax assessment).

  3. Per IRM 3.8.47.2, Remittance Policy, the Service is committed to a 24 hour deposit standard for tax payments collected. The standard is for remittances collected in field offices to be processed on the day of receipt or by the next business day. Appeals employees will send all Master File remittances to the Kansas City Submission Processing Center via overnight service. Per IRM 3.17.46, Automated Non-Master File Accounting, the Cincinnati Submission Processing Campus (CSPC) is responsible for all Non-Master file processing. Therefore, Appeals will send remittances for Non-Master File accounts to this campus. See IRM 8.7.17.4 IRM 8.7.17.4 , Preparing Remittance Packages for Mailing.

    Exception:

    An Appeals office located in the same building as a Submission Processing Center can continue to hand carry remittances for processing to the Field Office Payment Processing Unit to save overnight mailing costs.

  4. The Electronic Federal Tax Payment System (EFTPS) processes electronic remittances listed in IRM 3.17.277.1, Electronic Federal Tax Payment System (EFTPS).

  5. The following IRM sections identify unique circumstances that require different procedures:

    IRM Section Description
    IRM 3.8.45.6.29 Single Remittances of 50 Million Dollars or More
    IRM 3.8.47.11.4 Post-Dated Checks
    IRM 3.8.47.15 Offshore Voluntary Disclosure Program (OVDP)
    IRM 3.8.47.16 Frivolous Checks
    IRM 3.8.47.18 Erroneous Refund Repayment
    IRM 3.10.72.5.5.1 Large Dollar Remits
    IRM 8.23.1.4.1.1 Processing OIC Payments
    IRM 21.1.7.9.17 Unacceptable Payments
    IRM 21.1.7.9.17.2 Incomplete Checks
    IRM 21.1.7.9.30 Criminal Restitution Program Payments
    IRM 25.15.8.7.1.1 Application of Payments from NRS

The Appeals Technical Employee’s Responsibilities

  1. The Appeals Technical Employee (ATE) will encourage the taxpayer to pay the total tax, penalty and interest due on agreed deficiency cases. This will reduce the taxpayer's overall cost. For the meaning of Appeals Technical Employee, see Exhibit 8.1.1-1 , Common Terms Used in Appeals. Because Appeals does not have a teller function, cash payments cannot be accepted. Taxpayers who want to pay in cash need to convert the cash into a postal money order, bank cashier’s check, money order or some other negotiable instrument. If the taxpayer is unable to pay the deficiency in full, discuss alternatives such as installment agreements or offers-in-compromise.

  2. Except on criminal investigation or prosecution cases described in (3) below, do not hold remittances longer than the first workday following receipt. Prepare Form 3244-A, Payment Posting Voucher - Examination, or Form 3244, Payment Posting Voucher. Depending upon local procedures, forward payment and payment posting voucher to the person responsible for submitting payment to Submission Processing. See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244. Advise the taxpayer of the action taken.

    Reminder:

    Per IRM 1.4.28.11, Timely Processing of Remittances, ATMs must ensure that procedures are in place for the timely processing of remittances.

  3. A successful criminal investigation or prosecution may be imperiled by the receipt and disposition of advance payments on a case with criminal fraud implications. Prior to processing the payment, consult with Counsel on an expedited basis. Appeals will not notify the taxpayer of the receipt or disposition of the remittances. When processing, note "Fraud Case" in the "Remarks" section of Form 3244-A or Form 3244.

  4. When an advance payment is received after agreement is tentatively reached, but before review and approval of the determination, a new agreement form reflecting receipt of the payment is not necessary.

  5. Use Form 5402, Appeals Transmittal and Case Memorandum, to identify information pertaining to remittances on cases in Appeals. See IRM 8.6.2.2.3, Using Form 5402 as an Alert. If Form 5402 is prepared before receipt of the payment, revise it to reflect the receipt and process the remittance. The following are situations that should be annotated on Form 5402:

    1. Remittances received while the case is in Appeals.

    2. Information pertaining to remittances identified by the taxpayer but not found on the transcript of account.

    3. Whether it is a designated or undesignated remittance, whether it is treated as a payment or IRC 6603 deposit, amount of remittance, and tax and period to which the remittance applies.

    4. The disputable tax, date of the statement explaining the disputable tax or the presence of a copy of the 30-day letter received by the Service with the designation (date stamped), for IRC 6603 deposits.

      Note:

      Without this information, APS cannot identify the deposits that qualify for overpayment interest at the short-term federal rates under IRC 6603. See IRM 8.7.17.7 (4).

  6. For nondocketed cases, do not assess the liability for advance payments made after the issuance of the notice of deficiency unless specifically requested. See IRM 8.7.17.5, Advance Payments and IRC Deposits. An assessment will not deprive the taxpayer who files a petition of Tax Court jurisdiction. However, the assessment is usually not made until the case is closed, unless there is a large deficiency.

  7. The procedure in docketed cases generally is the same as in nondocketed cases. Assessment may be made at any time upon a specific request from Counsel or from the taxpayer.

  8. If it is determined that a remittance was made to a Compliance office or Campus on an Appeals case, whether before or during Appeals consideration, and no evidence of the remittance is contained in the file, contact the office who received the remittance to determine its disposition.

Forms 3244–A and 3244

  1. When Appeals receives a remittance, an ATE will prepare Form 3244-A, Payment Posting Voucher-Examination, or Form 3244, Payment Posting Voucher. The ATE can use either form. However, Form 3244-A must be used if the ATE has determined the remittance is a deposit. Complete a separate Form 3244-A or Form 3244 for each tax period and/or type of tax. Generate two copies of each payment posting voucher. See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, for instructions on preparing the payment posting voucher.

  2. For assistance in determining whether the remittance is a payment or deposit, see IRM 8.7.17.5.1, Determining Whether Remittance is a Payment or IRC 6603 Deposit.

Preparing Forms 3244-A and 3244

  1. Ensure the "Transaction Received Date" on Form 3244-A or 3244 reflects the correct date the payment was received. Submission Processing Centers will credit customers for the earliest Official IRS Received Date. If an error is discovered in the "Transaction Received Date" after the payment has been processed, request a change in payment dates on Form 2424, Account Adjustment Voucher. See IRM 3.17.21.3.3, Form 2424.

    Note:

    Form 2424 must be digitally signed by the manager.

  2. Complete these entries on Form 3244-A or Form 3244:

    1. SSN/EIN - see note below

    2. Form number/MFT

    3. Tax Period

    4. Plan/Report Number (if applicable)

    5. Transaction/Received date

    6. Taxpayer’s full name and address

    7. Transaction data, including:
      - Remittance amount(s) allocated to specific transaction code(s)
      - Total remittance amount
      - Designated payment code (DPC) - see IRM 8.7.17.3.1 (5)

    8. Remarks
      - Special instructions

      - 6603 block (Form 3244-A only) - see IRM 8.7.17.5.1
      - 316(C) block (Form 3244-A only) - check only if directing the Campus to mail to the taxpayer Letter 0316-C, Taxpayer Made Tax Payment in Advance. See IRM 21.5.3.4.16.9, Receipt of Deposits. When necessary, include additional instructions about the selectable language.

    9. Prepared by—name of the employee preparing the document and the Appeals Office Code (AOC). For AOCs, see Section 13.2 (Appeals Codes) of Document 6209, IRS Processing Codes and Information.

    • Note:

      If applicable, include in the SSN/EIN field a file source such as the following:
      - N for Non-Master File
      - V for Form 706
      - * for invalid SSN
      - W for invalid Form 706 TIN
      - P for IRA account

  3. Following are conditions for entering remittance amounts on the payment posting voucher next to Transaction Code(TC) 640, TC 670, and/or TC 680:

    IF the remittance is THEN enter dollar amount opposite
    to pay tax, penalty, and/or interest before assessment, TC 640
    to pay tax, penalty, and/or interest after assessment, TC 670
    applied against interest [see IRM 8.7.17.3.1 (4)] TC 680

    Note:

    See IRM 8.7.17.5.3 (2) for additional information on a remittance treated as a deposit for non-docketed deficiency case.

  4. The request to designate all or part of the remittance to "interest" is honored if one of the following conditions is met:

    1. The taxpayer agrees to assessment by executing a waiver of restrictions; or

    2. The taxpayer pays the underlying tax with respect to the amount to be designated as interest and the amount designated does not exceed the amount of interest that has accrued on the tax being paid. See IRM 20.2.5.1.1.1, Allocation of Payments.

  5. See Section 11 of Document 6209, IRS Processing Codes and Information, for detailed information on Designated Payment Codes (DPCs). Per this guidance, the use of a DPC on all posting vouchers is mandatory with certain Transaction Codes (TCs), including TC 640, 670, and 680. Enter a DPC to the right of the TC on the payment posting voucher. DPCs are two digit codes used to:

    1. Facilitate identification of payments designated to trust fund or non-trust fund employment taxes. DPCs are input with payments for the following liabilities:
      - Form 941, Employer’s Quarterly Federal Tax Return (MFT 01)
      - Form 720, Quarterly Federal Excise Tax Return (MFT 03)
      - Form CT-1, Employer’s Annual Railroad Retirement Tax Return (MFT 09)
      - Form 943, Employer’s Annual Tax Return for Agricultural Employees (MFT 11)
      - Form 1042, Annual Withholding Tax Return for U. S. Source Income of Foreign Persons (MFT 12)

    2. Indicate application of a payment to a specific liability when the civil penalty contains both a Trust Fund Recovery Penalty (TFRP) and any other type of civil penalty. In these cases, they are input to MFT 55 only.

    3. Identify the event which resulted in a payment.

      Note:

      For DPCs and their definitions, see:
      - Document 6209 - Section 11.10, Designated Payment Codes (DPC); or
      - Exhibit 21.1.7-5, Designated Payment Code (DPC)

  6. Special procedures apply for OIC payments. See IRM 8.23.1.4.1.1, Processing OIC Payments.

Preparing Remittance Packages for Mailing

  1. IRM 3.8.47.5.4, Procedures for Sending Tax Receipts to Submission Processing Centers and Addresses for Field Office Employee-Collected Remittances, contains procedures for sending tax receipts to Submission Processing Centers for posting to Master File accounts. All Appeals offices are aligned under the Kansas City Submission Processing Center for Master File account remittances. See paragraph (2) of IRM 3.8.47.5.4.1, Submission Processing Center / Field Office Alignment for Form 809 and Other Tax Payments. Except for Appeals offices meeting the exception in IRM 8.7.17.1 (3), see the following information for addressing mailing envelopes:

    Outside Envelope Label Inside Label

    Internal Revenue Service
    Stop 7777
    333 W. Pershing Road
    Kansas City, MO 64108

    Note:

    Envelope should not indicate that a remittance is included.


    Internal Revenue Service
    Stop 7777
    333 W. Pershing Road
    Kansas City, MO 64108
    Attention: Operations Manager Receipt and Control

    Note:

    Submission Processing recommends that "LARGE" be annotated on envelopes containing a single remittance of $100,000 or more or if the aggregate total of remittances is $100,000 or more.

    Note:

    For large dollar remittances of $100,000 or more, also send an email to the following Outlook email address: *CTR KC field Office Teller Team to notify the team that a large dollar remittance is being sent for processing. Include the package tracker number in the email.

  2. All Non-Masterfile remittances should be forwarded to the Cincinnati Submission Processing Center, with the envelopes addressed as follows:

    Outside Envelope Label Inside Label

    Internal Revenue Service
    Attention: Operations Manager, Receipt and Control
    Stop 31 - Team 31405 (see note)
    201 W. Rivercenter Blvd.
    Covington, KY 41011

    Note:

    Use Stop 31, if remittance is less than one million dollars. Use Stop 317, if remittance is one million dollars or more. Envelope should not indicate that a remittance is included.


    Internal Revenue Service
    Stop 31 - Team 31405 (see note)
    201 W. Rivercenter Blvd.
    Covington, KY 41011

    Note:

    Use Stop 31, if remittance is less than one million dollars. Use Stop 317, if remittance is one million dollars or more.

    Note:

    For large dollar remittances of $100,000 or more, also send notice to the following Outlook mail address: *W&I CAS:SP:CN:RC to notify the team that a large dollar remittance is being sent for processing. Include the package tracker number in the email.

  3. For the most current information and/or Submission Processing contact persons, visit the following web pages:

    1. Wage & Investment < CAS < Submission Processing < Standard Procedures & Aids < Field Office Payment Processing < Appeals for Appeals Field Office Payment Processing, or

    2. Servicewide Electronic Research Program (SERP) - See Who/Where tab for Appeals Field Office Remittance Processing Address (for masterfile and nonmaster file accounts).

  4. Include a completed Form 3244, Payment Posting Voucher, or Form 3244-A, Payment Posting Voucher - Examination, to ensure proper crediting of taxpayer accounts.

  5. Send remittances and payment posting vouchers by an overnight traceable method with an approved carrier. Regular mail or other delivery methods that do not provide "overnight and tracking" service are not acceptable.

  6. Attach a completed Form 3210, Document Transmittal, that includes the following:

    1. Detailed list of items sent, including the dollar amount of each check

    2. "APPEALS MAIL REMITTANCE(S) RECEIVED mm/dd/yyyy" entered in the remarks section

    3. Sender’s name

    4. Sender’s return address

    5. Sender’s telephone number

    6. Sender’s EEFax or fax number

    Note:

    If the remittance and payment posting voucher are hand carried to the remittance processing function, they will date a copy of Form 3244–A or Form 3244.

  7. Attach copy of payment posting voucher to the tax return or substitute document and retain it in the administrative file. Appeals will retain a signed copy of Form 3210 on all payments sent to the remittance processing function.

  8. Sending offices must establish a control to ensure delivery of tax receipts during transit, and follow-up timely. The control must include amounts of taxpayer receipts, listed separately, and taxpayer identification numbers that are correlated to the package tracer information.

Advance Payments and IRC 6603 Deposits

  1. Advance payments are defined as payments, not IRC 6603 deposits, that are intended for application to anticipated, pending, or proposed deficiencies or additional assessments.

  2. Per IRC 6603, a taxpayer may make a cash deposit with IRS that can be used to pay an income, estate, gift, or estate tax (under Chapter 41, 42, 43, or 44) that has not been assessed at the time of the deposit. To the extent that the deposit is used by IRS to pay tax, for purposes of IRC 6601 (relating to interest on underpayments), the tax should be treated as paid when the deposit is made.

  3. See IRM 8.7.17.5.1, Determining Whether Remittance is a Payment or IRC 6603 Deposit.

  4. Prepare Form 3244-A, Payment Posting Voucher - Examination, for processing advance payments and IRC 6603 deposits. See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244.

    Note:

    For subsequent payments (i.e. payments after liability assessment), prepare Form 3244-A or Form 3244, Payment Posting Voucher.

Determining Whether Remittance is a Payment or IRC 6603 Deposit

  1. Per IRC 6603, Deposits Made to Suspend Running of Interest on Potential Underpayments, a taxpayer may make a cash deposit with the Secretary which may be used to pay a tax that has not been assessed at the time of the deposit. Rev. Proc. 2005-18, 2005-13 IRB 798, provides guidance on IRC 6603. For a remittance to be treated as an IRC 6603 deposit, the remittance must be accompanied by a written statement designating it as an IRC 6603 deposit. The statement must identify the:

    1. Type(s) of tax,

    2. Tax period(s), and

    3. Amount and basis for the disputable tax (enclosing the 30-day letter is sufficient).

  2. Per IRC 6603(d)(2), the term "disputable tax" means the amount of tax specified at the time of the deposit as the taxpayer’s reasonable estimate of the maximum amount of any tax attributable to "disputable items" . In the case of a taxpayer who has been issued a 30-day letter, the maximum amount of the "disputable tax" shall not be less than the amount of the proposed deficiency specified in such letter. The term "30-day letter" means the first letter of proposed deficiency which allows the taxpayer an opportunity for administrative review in the IRS Office of Appeals.

    Note:

    For more information and the definition of the term "disputable item" , see Section 7.02 of Rev. Proc. 2005-18 and IRC 6603(d)(2).

  3. If a taxpayer fails to identify the "amount" and "nature" of the disputable tax in writing or provide a copy of the 30-day letter at the time of the deposit, the payment of interest will not be allowed if the deposit is later withdrawn by the taxpayer unless the taxpayer subsequently provides the Service a written statement identifying and describing the amount of the disputable tax. Interest will be allowed on the deposit under IRC 6603(d)(2) as of the date on which the amount and nature of the disputable tax is identified. See IRM 8.7.17.7, Interest.

  4. Correspondence that includes such statements as the following is sufficient to designate the remittance as a deposit:
    - "Pursuant to IRC 6603"
    - "Rev. Proc. 2005-18"

Cash Bond Converted to IRC 6603 Deposit

  1. Section 5 of Rev. Proc. 2005-18 contains guidance on designating a deposit made under Rev. Proc. 84-58 as a deposit under IRC 6603. Cash bonds made on or before October 22, 2004 which were not converted to deposits by the written request of the taxpayer will continue being cash bonds and will not bear interest under IRC 6603(d). If a request to convert a cash bond following section 5.02 of Rev. Proc. 2005-18 is received, the cash bond will be converted to a deposit and bear interest as of the date the written request is received by the Service. Otherwise, it will continue to be treated as a cash bond. The statement must include the:

    1. Date(s) and amount(s) of the original deposit(s) in the nature of a cash bond;

    2. Type(s) of tax to which the deposit in the nature of a cash bond was applied;

    3. Tax year(s) to which the deposit in the nature of a cash bond was applied; and

    4. Amount and basis for the disputable tax (enclosing the 30-day letter is sufficient). See Section 7.02 of Rev. Proc. 2005-18 and IRC 6603(d)(2), Disputable Tax.

  2. Rev. Proc. 2005-18 is effective as of March 28, 2005. Section 10 provides "transition rules" for deposits made after October 22, 2004 and before March 28, 2005.

    Note:

    See IRM 20.2.4.8.2.4, Designating a Deposit Made Under Rev. Proc. 84-58 (Cash Bond) as a Deposit Under IRC 6603.

IRC 6603 Deposits Received Prior to Issuance of Notice of Deficiency

  1. IRC 6603 deposits received prior to the issuance of a statutory notice of deficiency will be considered a payment of tax (to the extent of the determined deficiency, penalty, and interest) upon the expiration of the 90/150 days, unless the taxpayer has petitioned (before the 90 or 150-day period expires) the United States Tax Court to redetermine the deficiency and has requested in writing (before the 90 or 150-day period expires) that the Service continue the treatment as a deposit.

    1. If the taxpayer petitions the Tax Court but does not timely submit a written request to continue the treatment as a deposit before the 90 or 150-day period expires, the tax will be assessed and the deposit will be applied as payment of tax. See section 4.02 of Rev. Proc. 2005-18.

  2. In order to ensure a notice of deficiency is issued in appropriate cases, a pre-notice remittance treated as an IRC 6603 deposit must be posted with TC 640 (advanced payment on deficiency), blocking series 999 and Designated Payment Code (DPC) 12. This transaction code is used even though the remittance is a deposit, not an advance payment. See IRM 8.17.3.6.2, Identifying Deposits on Transcripts. Interest will continue to accrue on accrued interest. In order to stop the running of any further interest, a taxpayer must make a remittance sufficient to cover all accrued interest as of the date of remittance as well as the entire amount of the underlying tax and penalty (if applicable).

    Note:

    An undesignated remittance made after the mailing of a notice of deficiency will be considered a payment of tax, will be posted to the taxpayer’s account as soon as possible, and will not deprive the Tax Court of jurisdiction over the deficiency.

Request for Return of a Deposit Made Under IRC 6603

  1. A taxpayer may request the return of all or part of a deposit at any time before the Service has applied the deposit as a payment of tax. The deposit will be returned to the taxpayer upon receipt of a written request, unless collection of the tax is determined to be in jeopardy. For more information, see Section 6 of Rev. Proc. 2005-18. Also, see IRM 21.5.3.4.16.13, Honoring Request for Return of Deposits.

    Note:

    A taxpayer cannot receive a refund of a payment of tax without following the claim for refund procedures. See IRC 6511, Limitations on Credit or Refund.

Procedure for Assessing Advanced Remittances

  1. Advance payments made on processed returns are treated as credits, and additional steps must be taken to have the tax assessed. Ordinarily, if a nondocketed case is closed promptly and the advance payment is equal to or less than the proposed deficiency and interest, Account Processing and Support (APS) will assess the liability when they close the case. However, in all docketed cases and in nondocketed cases where closing will be delayed, or where the payment might exceed the tax due, the liability will be assessed promptly. In such cases, the ATE will prepare instructions on the Form 5402 directing the assessment of the liability for the advance payment.

Deposit Made Under Rev. Proc. 1984-58 (Cash Bond) or IRC 6603 Deposit Applied as Payment

  1. Once the taxpayer, who made a deposit, agrees to the full amount of the proposed deficiency, the liability is assessed. The deposit is applied against the assessed liability as a payment of tax as of the assessment date. See Section 4.02(1) of Rev. Proc. 2005-18.

  2. A taxpayer can have any part of a deposit that exceeds the amount of tax liability applied against another assessed or unassessed liability. For example, the taxpayer under examination can request that a deposit made for one type of tax in one year be applied to another type of tax in another year. The request must be in writing and must be directed to the same office where the original deposit was made. When any excess deposit is moved, it will be considered a deposit as of the date it is moved. See Section 4.02(3) of Rev. Proc. 2005-18.

Application of Undesignated Remittances

  1. If the taxpayer has not signed an agreement form but has submitted a remittance without specifically addressing how to apply the remittance, the ATE must still process the payment within 24 hours. If necessary, the Designated Payment Code (DPC) can be changed at a later date by completing and forwarding Form 2424, Account Adjustment Voucher, to the address previously used for the remittance and payment posting voucher.

  2. Undesignated (those not designated as a deposit) voluntary payments are treated as payments and are applied by the Service against any outstanding liabilities, unless one of the exceptions described in sections 4.04(1) and 4.05(3) of Rev. Proc. 2005-18 applies. Per Rev. Proc. 2002-26, the Service will apply undesignated payments to periods in the order of priority that the Service determines will serve its best interest. If a payment is not specifically designated, allocate the payment to the earliest unpaid and collectible liability owed and due as of the payment availability date, i.e. oldest open Collection Statute Expiration Date (CSED) in the order - tax, penalty and interest. Also, see IRM 20.2.5.1.1, Application of Payments.

  3. The undesignated remittance treated as a payment is considered when determining the existence of a deficiency and whether a notice of deficiency is required to be issued. See section 4.03 of Rev. Proc. 2005-18.

Interest

  1. Special rules apply for interest on cash bonds and IRC 6603 deposits. Per IRC 6603(a), a taxpayer may make a cash deposit with IRS which may be used to pay an income, estate, gift, or excise tax (under Chapter 41, 42, 43, or 44) which has not been assessed at the time of the deposit. For cash bonds, see IRM 20.2.4.8.1, Cash Bonds.

  2. Except in a case where IRS determines that collection of tax is in jeopardy, IRS can return to the taxpayer any amount of the deposit (to the extent not used for payment of tax) which the taxpayer requests in writing. For IRC 6603 deposits, see IRC 6603(d), Return of Deposit. Deposits shall be treated as used for the payment of the tax in the order deposited [i.e. last-in, first-out (LIFO) basis], except as otherwise provided by the taxpayer. See IRC 6603(e).

  3. Underpayment Interest (IRC 6601), - IRC 6603 deposits will be posted to a taxpayer’s account as of the date of receipt and will stop the running of interest on a deficiency from the date the remittance is received. Deposits are potential payments towards potential underpayments. The tax shall be treated as paid on the date of deposit to the extent the deposit is used by IRS to pay the tax. See IRC 6603(b).

  4. Overpayment Interest (IRC 6611) - A deposit which is returned to a taxpayer shall be treated as a "payment of tax" for any period to the extent (and only to the extent) attributable to the "disputable tax" for such period. The overpayment interest shall be the Federal short-term rate determined under IRC 6621(b), compounded daily. See IRC 6603(d), Payment of Interest. Rules similar to the rules of IRC 6611(b)(2) will apply. For additional information, see the following in IRM 20.2.4, Overpayment Interest:

    IRM Section Description
    IRM 20.2.4.8 Special Rules
    IRM 20.2.4.8.1 Cash Bonds
    IRM 20.2.4.8.2 IRC 6603 Deposits
    IRM 20.2.4.8.2.1 Identification and Rate of Interest for 6603 Deposits
    IRM 20.2.4.8.2.2 Applying an Excess 6603 Deposit Against Another Liability
  5. For additional information, see IRC 6603, Deposits Made to Suspend Running of Interest on Potential Underpayments.

Remittances After Case Is Closed

  1. When a remittance is received after the case is closed, send it to Submission Processing in accordance with instructions in IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, and IRM 8.7.17.4, Preparing Remittance Packages for Mailing. Forward any IRS notices or other information furnished by the taxpayer with the payment to ensure credit to the proper account, and acknowledge receipt. If the remittance represents a partial payment, inform the taxpayer where to make future payments. The transmittal letter to the taxpayer must include their name, type of tax and tax period.

Payments Intended for Lockboxes

  1. A Lockbox is a non-IRS facility. Generally, it is a commercial bank that accepts and processes payments only from taxpayers or tax professionals, for specific form types. This method of processing payments serves to accelerate the handling and deposit of funds received and forwarded to Treasury.

  2. A Lockbox does not acknowledge Form 3210 or process Form 3244 or Form 3244-A. Payments sent directly to a Lockbox by an IRS office are generally forwarded to a Submission Processing center for processing, delaying the posting of the payment to the taxpayer's account. As a result, the taxpayer may incur penalty and interest that will later need to be corrected.

  3. Payments intended for Lockboxes that are received by Appeals should be processed as indicated in IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, and IRM 8.7.17.4, Preparing Remittances Packages for Mailing.