8.20.7 Closing Procedures

Manual Transmittal

October 03, 2014

Purpose

(1) This transmits revised IRM 8.20.7, Account and Processing Support (APS), Closing Procedures.

Background

During Fiscal Year 2013, the Account and Processing Support (APS) Internal Revenue Manuals (IRM) were reorganized to incorporate all APS Guidance for Carding Actions into IRM 8.20.5, Interim Actions into 8.20.6, and Closing Actions into 8.20.7. The crosswalk of where each section was copied from and moved to in each APS IRM chapter is available in the revision identified below:

  • IRM 8.20.5 Revision Date November 5, 2013

  • IRM 8.20.6 Revision Date September 11, 2013

  • IRM 8.20.7 Revision Date November 13, 2013

Material Changes

(1) The following Exhibits are added to provided the reader with quick reference for general acronyms, ACDS Codes and acronyms, AIMS Codes and acronyms, and IDRS and CFOL Codes and acronyms referenced within this IRM:

Exhibit Number Exhibit Title
Exhibit 8.20.7-8 General Acronym Definitions Included in IRM 8.20.7
Exhibit 8.20.7-9 Appeals Centralized Database System (ACDS) Acronyms and Codes Included in IRM 8.20.7
Exhibit 8.20.7-10 Audit Information System (AIMS) Acronyms and Codes Included in IRM 8.20.7
Exhibit 8.20.7-11 integrated Data Retrieval System (IDRS) and Corporate Files On-Line (CFOL) Acronyms Included in IRM 8.20.7

(2) The title of this IRM is changed from General Closing Procedures, to Closing Procedures.

(3) Revision includes editorial and formatting changes made throughout to improve readability and comply with Plain Language Writing Style.

(4) Removed all references to Collection Due Process Tracking System (CDPTS) as Appeals no longer uses this system.

(5) This IRM revision incorporates all "APS-specific" guidance and procedure for closing Appeals cases and has been excerpted from the Appeals Part 8 source IRMs. APS employees must refer to this IRM as their primary source for guidance on closing Appeals cases.

(6) Guidance for APS to process original delinquent returns has been removed, the ATE will receive and submit any original delinquent returns to the Campus Remittance Function for processing upon receipt.

(7) IRM 8.20.7.1, a reminder is added to the introduction to clarify that policy and procedure guidance owned by the originating Business Operating Division will not be duplicated within IRM 8.20.7 but will be cross-reference when appropriate.

(8) IRM 8.20.7.1, (6) is added to establish the requirement for the APS TE to use PEAS Suspense and document the PEAS Case Activity Record as appropriate. (8), (11), and (14) are also added.

(9) IRM 8.20.7.2.2.4, updated location of guidance for procedures on AQMS selected cases with a related case with a different Work unit number (WUNO).

(10) IRM 8.20.7.2.2.6, added a note to clarify APS AQMS refile procedures for Non-Collection cases.

(11) IRM 8.20.7.2.5, AQMS Reviewed Cases Returned to APS for Correction (NEW), added to provide guidance for this process.

(12) IRM 8.20.7.4, Expedite Processing for Certain Large Dollar Cases <$100,000 (8.2.1.12.2), is updated and (6) and (7) are added

(13) IRM 8.20.7.4.1, Quick Assessment Requirements is added to provide guidance for APS to provide their manual interest computation to the taxpayer in compliance with IRC 6631, Notice Requirements.

(14) IRM 8.20.7.5, Form 3210, Document Transmittal Follow-up Requirement is added.

(15) IRM 8.20.7.6, Procedures for Shipping Personally Identifiable Information (PII) is added.

(16) IRM 8.20.7.7, Form 5403 Instructions to APS Worksheet is updated to clarify process when Report Generation Software (RGS) is used for the computation. Subsections have been updated with cross-references, links, and tables. (7) is added to further clarify why a Counsel Settled case may not include a Form 5403 Instruction Worksheet and how APS must document the PEAS Case Activity Record on these cases.

(17) IRM 8.20.7.7.1, Item Adjustment Codes and Credit Reference Codes , is a new section provided to include links to various types of returns processed by APS as well as links to source IRMs for information related to Account Resolution, IMF, BMF, and International return processing.

(18) IRM 8.20.7.7.2, General Individual Master File (IMF) Credit Reference and Item Reference Codes, is added to provide specific information for the most common Credit Reference and Item Reference Numbers.

(19) IRM 8.20.7.7.5, Refundable Credit Adjustments (8.17.5.2.12), is updated with a table for the CRNs and their Definition.

(20) IRM 8.20.7.7.6, Item Reference Numbers for Estate Tax and Gift (E&G) Tax (8.17.5.2.3), is updated to clarify the use of Estate and Gift tax Item Reference Numbers (IRN).

(21) IRM 8.20.7.7.7, Reference Number 321 for Personal Holding Company Tax (8.17.5.2.8) is moved into this section.

(22) IRM 8.20.7.7.8, Restricted Interest and Special Processing Cases (8.17.5.2.9) includes (4) to provide guidance on IRC 6631, Notice Requirements.

(23) IRM 8.20.7.8, Integrated Automation Technology (IAT) is added.

(24) IRM 8.20.7.9, Integrated Data Retrieval System (IDRS) Command Code Job Aid is added.

(25) IRM 8.20.7.10.1, Forms Prepared in Appeals Cases includes a Reminder for APS to transmit a duplicate Original Closing Agreement for compliance with retention guidelines.

(26) IRM 8.20.7.11, AIMS CC: AMCLSA General Processing (8.2.1.12.1), is renamed to differentiate between AIMS General Processing and Non-AIMS General Processing. (2) is added to clarify that APS TE's must review both the AIMS and TXMODA to identify and resolve any account conditions which would cause their account closing to be incorrect or delayed due to an unpostable condition.

(27) IRM 8.20.7.11, AIMS CC: AMCLSA General Processing (8.2.1.12.1), also contains 3 new subsections to provide guidance on Non-AIMS Adjustment processing requirements, and the APS TE responsibility for ensuring the taxpayer's account is processed to conclusion to reflect the final disposition, issuance of the balance due notice, or issuance of the refund, whichever is appropriate.

(28) IRM 8.20.7.12, Bankruptcy Examination Case Closing Procedures is reorganized and updated.

(29) IRM 8.20.7.13, Civil Penalty MFT 13 (BMF) MFT 55 (IMF) Closing Procedures (8.11.1.1.9), is updated and reorganized. (9) is added to provide guidance on the PEASE Suspense and Monitoring requirement.

(30) IRM 8.20.7.14, Claim Case Closings, is updated to clarify PEAS inventory priority for large dollar overpayments. Subsections also include additional guidance for ensuring the taxpayer's refunds are released timely, and Claim Disallowance Letters are issued appropriately.

(31) IRM 8.20.7.15, Closing Agreements (CA) (8.2.1.17) is updated.

(32) IRM 8.20.7.16, Collection Appeal Program (CAP) Case Closing Procedures (8.24.1.4) is updated to incorporate changes based on Internal Guidance Memorandum AP-08-0514-0002.

(33) IRM 8.20.7.17, Collection Due Process (CDP) Overview of Back-End Processing (8.22.3.1), includes new subsections to clarify the PEAS Suspense and Monitoring requirements for all Non-AIMS account adjustments and account updates. Subsections are reorganized to provide a logical flow of information. Installment Agreement procedures are updated and reorganized. Instructions are included for entry of TC 971 AC 280 when a determination letter is issued.

(34) IRM 8.20.7.17.8, CDP Rapid Response Appeals Process (RRAP) APS Closing Procedures (8.22.3.6) is updated.

(35) IRM 8.20.7.17.9.1, ACS Notification of CDP and EH Closures Via Eefax (8.22.3.7.1) is added.

(36) IRM 8.20.7.17.14.2.1.1, Automated Substitute for Return (ASFR) Program (8.22.3.11.3.1.1) includes a "Reminder" to clarify that a tax abatement processed after the Assessment Statute Expiration Date (ASED) has expired cannot be reversed.

(37) IRM 8.20.7.17.17.1.3, Automated Offer in Compromise (AOIC) - Accepted CDP OIC's, is updated.

(38) IRM 8.20.7.17.17.2.2, ACDS and IDRS Inputs for Rejected CDP OICs (8.22.3.12.2.1), includes guidance for the input of TC 481 and a Caution is added.

(39) IRM 8.20.7.17.17.4, Sanitized TDS or MFTRAX Transcript (8.22.3.12.4) is updated to remove the list of specific items the ATE will redact, and insert a link to IRM 5.8.8.6, Required Actions Prior to Closing an OIC as an Acceptance.

(40) IRM 8.20.7.18, Conversion of Tax Return Cases and subsections are updated to remove outdated information and provide links to applicable source IRMs.

(41) IRM 8.20.7.19, Criminal Investigation Division (CID) Master File "-Z" , or "Z-" Freeze is a new section added to provide guidance for APS.

(42) IRM 8.20.7.21.2, Dismissed for Lack of Jurisdiction Case Closing (8.4.1.30.4), is updated with procedures on how to access the United State Tax Court (USTC) web site.

(43) IRM 8.20.7.21.6, Sealed Case is a new section added to provide guidance for APS.

(44) IRM 8.20.7.27, Estate Tax and Gift Tax Case Closing, and subsections are updated and reorganized.

(45) IRM 8.20.7.27.7, Gift Tax MFT 51/MFT 54 Item 422 and Item 425 Entries, is added.

(46) IRM 8.20.7.28, Excise Tax IRC 4251 - Direct Assessment, is updated and includes guidance for processing Telephone Excise Tax Refund (TETR) adjustments, and a new subsection 2 for MFT 40 Ultimate Purchaser Claims.

(47) IRM 8.20.7.29, Fast Track Mediation Case Closing Procedures (8.26.3.8.1) is reorganized.

(48) IRM 8.20.7.30, Fast Track Settlement (FTS) SB/SE Cases ,is reorganized.

(49) IRM 8.20.7.32.1, FBAR Closing - Premature Referral (8.11.6.8.1)(6) is updated to replace the P.O. Box with a street address.

(50) IRM 8.20.7.34.4, Identify Theft - Additional References is added to provide quick reference to applicable IRMs.

(51) IRM 8.20.7.36.1, Innocent Spouse/CDP Case Closing (25.15.12.16.2) is updated to clarify that a CDP case which is for the Requesting Spouse, must be forwarded to Florence Campus APS for closing. This distinction is made throughout the IRM.

(52) IRM 8.20.7.37, Installment Agreements (IA) (8.22.3.11.1), is updated to include cross-references to source IRMs for IA command codes, additional guidance for processing all types of IAs, and the requirement to input TC 971 AC 043 when appropriate.

(53) IRM 8.20.7.43, Non-Filer Barred Refund Statute Expiration Date (RSED) Overpayment Cases is updated to remove outdated examples and include links to applicable IRMs for quick reference.

(54) IRM 8.20.7.45, Offer in Compromise (OIC) Non-CDP Cases (8.23.6.2), is updated to clarify and streamline APS procedures and remove instructions for making an alternative agreement when a Non-CDP OIC is rejected or withdrawn in compliance with AJAC guidelines.

(55) IRM 8.20.7.46, Penalty Appeal (PENAP) Case Closing Procedures (8.11.4.1.8), is updated and includes a requirement for APS to close their IDRS Control Base upon posting of the adjustment(s).

(56) IRM 8.20.7.47, Petitioning/Non-Petitioning Spouse Case (8.4.1.34), is updated to clarify ACDS update and closing guidance, provide instruction for entry of Item 57 on Form 5403 when Item 56 SA is selected, and provide procedures when the originating function did not properly process the non-petitioning spouse SND under their jurisdiction.

(57) IRM 8.20.7.47.5, MFT 31 Spousal Assessments Additional References is added to provide quick referenced to applicable IRMs.

(58) IRM 8.20.7.49, Reference Returns (8.2.1.12.3), is moved from the Non-Docketed Case Processing section and is not a separate subsection.

(59) IRM 8.20.7.50, Statutory Notice of Deficiency (SND) 90-Day/150-Day Case Closing, is reorganized and updated with additional guidance.

(60) IRM 8.20.7.53, Tax Exempt and Government Entity (TEGE) Cases, is updated to include correct addresses and mandatory account monitoring procedures.

(61) IRM 8.20.7.54, Termination and Jeopardy Assessment Case Processing (8.7.1.6.5), is updated.

(62) IRM 8.20.7.55, Transferee/Transferor Case Closing (8.7.5.11), is updated.

(63) IRM 8.20.7.56, Trust Fund Recovery Penalty (TFRP) Cases (8.25.3.5), is updated.

(64) IRM 8.20.7.57, Unpostables, is a new section which includes guidance and procedures for APS. This section includes clarification for mandatory account monitoring responsibility, online research resources, and explains the APS Unpostable Team Procedures.

(65) IRM 8.20.7.57, Unpostables is a new section added to provide APS with guidance and procedures for monitoring account adjustments and correcting unpostable transactions.

(66) Exhibit 8.20.7-1Form 5403, Appeals Closing Record Instructions is updated with additional Priority Code entry instructions and obsolete closing codes have been removed.

(67) Exhibit 8.20.7-1, Form 5403, Appeals Closing Record (Instructions) is updated to remove outdated information and add updated information.

Effect on Other Documents

This IRM supersedes IRM 8.20.7 dated November 13, 2013.

Audience

Appeals

Effective Date

(10-03-2014)

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

Introduction to Closing Procedures

  1. Account and Processing Support (APS) is responsible for the following closing actions:

    • Processing Master File (MF) and Non-Master File (NMF) account updates and adjustments for all docketed and non-docketed cases in the Appeals work streams

    • Closing Audit Information Management System (AIMS) controls

    • Updating and closing Appeals Centralized Database System (ACDS)

    • Updating and closing Partnership Control System (PCS)

    • Updating Automated Offer In Compromise (AOIC)

    • Updating Innocent Spouse Tracking System (ISTS)

  2. The term Appeals Technical Employee (ATE), used throughout this IRM and is defined in exhibit IRM 8.1.1-1, Common Terms Used in Appeals.

  3. Closing procedure details vary based on the type of case being processed, the presence or absence of Audit Information Management System (AIMS) Controls, the Master File Tax (MFT) Code, and final disposition of the case.

  4. In addition to researching the Appeals specific IRM's, APS TE's must also research the appropriate non-Appeals IRM's for general Integrated Database Retrieval System (IDRS), AIMS, and account processing guidance. Non-Appeals specific IRM guidance is owned by the originating Business Operating Divisions (BOD's) and must be referenced as the source information to ensure that all users adhere to the same policy and procedure throughout the Service.

    Reminder:

    Policy and procedural guidance owned by another BOD will not be duplicated within the Appeals Account and Processing Support (APS) IRM's, but will be cross-referenced when appropriate.

  5. Actions that generally apply to every case closed from Appeals:

    • Update and close ACDS

    • Confirm critical data fields for Appeals Inventory Validation Program (AIVP)

    • Date and mail closing letters (if applicable)

    • Transmit Form 5402, Appeals Transmittal and Case Memorandum and attachment(s) per ATE instruction

    • Update and close AIMS Control

    • Analyze IDRS transcript to identify account status and take all necessary adjustment/update actions

    • Identify and resolve Master File Freeze Codes when release of the refund or notice is appropriate

    • Process and monitor Non-AIMS Adjustments until posted

    • Update Tracking Systems (AOIC, ISTS)

    • Process Appeals/Counsel/Tax Court final decision on taxpayer's account(s)

    • Follow Disclosure Guidelines

    • Transmit Administrative File and account adjustment documents

    • Submit cases selected for Appeals Quality Measurement Systems (AQMS) to designated reviewer

    • Update and close Processing Employee Automated System (PEAS)

  6. When the APS TE completes a processing action and can take no further action on the case until adjustment verification is received, or the input transaction posts, they must properly notate the PEAS CAR, and place the case in PEAS Suspense for the appropriate timeframe. PEAS also has a Follow-up Date option which is recommended for the most efficient inventory management. The APS TE must determine the appropriate Follow-up Date based upon the reason they are placing the case in PEAS Suspense.

  7. Types of Appeals Specialized Case Closings and Account Adjustments:

    • Bankruptcy IRM 8.20.7.12

    • Civil Penalty IRM 8.20.7.13

    • Claims IRM 8.20.7.14

    • Closing Agreements IRM 8.20.7.15

    • Collection Appeal Program (CAP) IRM 8.20.7.16

    • Collection Due Process (CDP) IRM 8.20.7.17

    • Conversions IRM 8.20.7.18

    • Department of Justice (DOJ) IRM 8.20.7.20

    • Docketed IRM 8.20.7.21

    • e-file IRM 8.20.7.22

    • Early Referral IRM 8.20.7.23

    • Earned Income Credit (EIC) and Earned Income Tax Credit (EITC) Recertification Program IRM 8.20.7.24

    • Employee Tax Compliance (ETC) IRM 8.20.7.25

    • Employment Tax IRM 8.20.7.26

    • Estate Tax & Gift Tax (E&G)IRM 8.20.7.27

    • Excise Tax including Dyed Diesel Fuel Penalty IRM 8.20.7.28

    • Fast Track Mediation (FTM) IRM 8.20.7.29

    • Fast Track Settlement (FTS) SB/SE IRM 8.20.7.30

    • Fast Track Settlement (FTS) TE/GE IRM 8.20.7.31

    • Foreign Bank and Financial Accounts (FBAR) Penalty IRM 8.20.7.32

    • Freedom of Information Act (FOIA) IRM 8.20.7.33

    • Identity Theft (IDT) IRM 8.20.7.34

    • Individual Retirement Account (IRA) IRM 8.20.7.35

    • Innocent Spouse (INNSP) IRM 8.20.7.36

    • Installment Agreements (IA) IRM 8.20.7.37

    • IRC 7430 Administrative Cost IRM 8.20.7.38

    • Joint Committee IRM 8.20.7.39

    • MFT 31 Separate Assessments IRM 8.20.7.40

    • Manual Refund IRM 8.20.7.41

    • Non-Docketed IRM 8.20.7.42

    • Non-Filer Barred Refund IRM 8.20.7.43

    • Non-Master File IRM 8.20.7.44

    • Offer In Compromise (OIC) IRM 8.20.7.45

    • Penalty Appeal (PENAP) IRM 8.20.7.46

    • Petitioning/Non-Petitioning Spouse IRM 8.20.7.47

    • Premature/Improper Referrals IRM 8.20.7.48

    • Statutory Notice of Deficiency (90/150-Day) Letter IRM 8.20.7.50

    • Tax Equity and Fiscal Responsibility Act (TEFRA) IRM 8.20.7.51 and IRM 8.20.7.52

    • Tax Exempt and Government Entity (TEGE) IRM 8.20.7.53

    • Termination and Jeopardy IRM 8.20.7.54

    • Transferee/Transferor IRM 8.20.7.55

    • Trust Fund Recovery Penalty (TFRP) IRM 8.20.7.56

    • Unpostables IRM 8.20.7.57

  8. The Appeals Team Manager (ATM) will enter the ACAPDATE on the Appeals Centralized Database System (ACDS) prior to forwarding the case to Account and Processing Support (APS) for closing actions.

    • The ACAP action is required for all CLS and INT processing actions submitted to APS for processing.

    • The ACAP entry generates a PEAS unassigned record for the Processing Team Manager who assigns the case to an APS TE.

  9. Upon receipt of the case, verify that the Assessment Statute Expiration Date (ASED) is correctly reflected on both ACDS and AIMS (when applicable) and ensure that the file contains all returns identified for the Work Unit (WUNO) per ACDS and Form 3210, Document Transmittal. See IRM 8.21.2, Account and Processing Support (APS) Statute Responsibility , for guidance on APS Tax Examiner (TE) statute verification responsibilities.

  10. Each administrative file may contain the following items:

    • Appeals generated forms, letters, waivers, notices, and Form 5402, Appeals Transmittal and Case Memorandum (ACM)

    • Statute Extension form(s)

    • Form 5403 Instruction Worksheet

    • Form 3870Request for Adjustment prepared and signed by the ATE

    • Interest Related Forms and Worksheets

    • Counsel generated forms, letters, settlement computations and transmittal

    • Tax Court Entered Decision or Order Entered document and/or settlement computations

    • Compliance generated forms, letters, waivers, notices and work papers

    • Integrated Data Retrieval System (IDRS) and AIMS prints utilized by other IRS and Appeals personnel to perform their job duties throughout the casework cycle

    Note:

    The ATE is responsible for organizing the administrative file contents in a logical and chronological order prior to submitting the case to their Appeals Team Manager (ATM) for review and approval.

  11. In docketed cases, verify that the decision document, settlement computation and Form 5403Appeals Closing Record all contain the same:

    • Taxpayer Identification Number (TIN)

    • Taxpayer Name

    • Tax Period

    • Tax Adjustment Amount

    • Penalty Adjustment Amount

    Note:

    If the case has never been assigned to an ATE and there is no Appeals Time Applied, a Form 5402, Appeals Transmittal and Case Memorandum will not be included with the case.

  12. All Non-Docketed cases must contain the ACDS computer generated Form 5402, Appeals Transmittal and Case Memorandum. Verify that signatures have been entered on Form 5402, Appeals Transmittal and Case Memo or other transmittal document. If signatures are missing, contact the ATE. Once signatures have been provided and verified, enter the date the case and administrative file is closed from ACDS in the upper right corner of Form 5402.

  13. In agreed non-docketed cases, verify that the signed and executed agreement form, settlement computation and Form 5403, Appeals Closing Record, all contain the same:

    • Tax

    • Penalty

    • TIN

    • Tax period

    • Taxpayer name

  14. The ATE will prepare a Form 5402 on Non-Docketed cases and Docketed Appeals Settled Cases. When the Form 5402, Appeals Transmittal and Case Memo provides instructions to send a copy of the Form 5402 and ACM back to the Compliance Function, make a copy of the Form 5402, Appeals Transmittal and Case Memo and Appeals Case Memo (ACM) and retain the originals in the administrative file. Several work streams i.e. IC and CIC case types among others, require the ATE forward the Form 5402 and ACM to the Compliance Function and in these cases, APS will not have instructions to forward the Form 5402.

  15. General Form 5402 distribution procedures are detailed below:

    1. Transmit all documentation containing Personally Identifiable Information (PII) via Form 3210, Document Transmittal. In a high volume office the Form 5402, Appeals Transmittal and Case Memo and ACM Feedback Copies can be batched and submitted to the appropriate office weekly. In a lower volume office, each Form 5402, Appeals Transmittal and Case Memo "Feedback Copy" may be transmitted individually. Local procedures should be implemented and followed based on efficiency, accuracy and mail cost savings.

    2. Use Form 3210, Document Transmittal, for the purpose of transmitting ACM Feedback Copies which list the name control and TIN of each case for which PII is being transmitted. Follow existing Form 3210, Document Transmittal suspense and follow-up guidance to verify the PII is received by the designated recipient and the acknowledgement copy is returned timely. In addition, maintain a copy of the Feedback Loop Form 3210, Document Transmittal, in a separate binder to verify the feedback was sent to the address designated by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

      Caution:

      Do not send the administrative file to the address on the Form 5402 line identified as "APS Mail/FAX Form 5402 and ACM To:"

  16. The employee who is responsible for processing the AIMS adjustments must review the Fed/State Disclosure criteria to determine if the IRS has an existing Fed/State Disclosure Agreement applicable to the taxpayer based on their address at the time their return was filed. The link to the Docketed and Non-Docketed Disclosure spreadsheets and the Disclosure Codes is available on the APS web page at http://appeals.web.irs.gov/APS/default.htm. Follow the Docketed or Non-Docketed Disclosure guidance provided for the state in which the taxpayer lived at the time they filed their return. If there is an existing Fed/State Agreement in place for the State and type of tax return being processed, the spreadsheet will identify the type(s) of documents you must copy and include in the Disclosure Package. The spreadsheet will also provide the address to which the Disclosure Package must be mailed. All documents containing PII must be transmitted via Form 3210, Document Transmittal. Each time you perform a disclosure, you must document the taxpayer's account by entering the applicable State Disclosure Code in Item 39 on Form 5403, Appeals Closing Record.

  17. If Compliance sends a disk containing the work papers, RAR, etc., leave the disk in the administrative file.

  18. Valid ACDS Closing Codes:

    • 03 - Agreed Pre-Ninety

    • 04 - Agreed Statutory Notice of Deficiency/Non-Filer

    • 05 - Defaulted Statutory Notice of Deficiency

    • 08 - Agreed Docketed

    • 10 - Settled by Counsel

    • 11 - Dismissed for Lack of Jurisdiction

    • 12 - Dismissed for Lack of Prosecution

    • 13 - Unagreed Pre-Ninety/CDP Disregarded Request/Section 6330(g)

    • 14 - Claim Fully Disallowed/OIC Rejected/Penalty Appeal Fully Sustained

    • 15 - Claim Fully Allowed/OIC Accepted/Penalty Appeal Fully Abated

    • 16 - Claim Partially Allowed/OIC Withdrawn/Penalty Appeal Partially Abated

    • 17 - Tried Tax Court Case

    • 18 - TEFRA key/other Department of Justice (DOJ) case Claims Court

    • 19 - TEFRA key/other Department of Justice (DOJ) District Court/Bankruptcy

    • 20 - Premature Referral/Returned to Campus Function

    • 21 - Premature Referral/Returned to Compliance Technical Services

    • 30 - Transfer

    • 40 - Reassigned

    • 42 - Docketed Appeals Jurisdiction

    • 43 - Docketed Counsel Jurisdiction (Trial Prep)

    • 45 - Reference/Team Member Closing

    • 98 - Reject Corrected

    • 99 - Removed

Appeals Inventory Validation System (AIVP)

  1. A closing validation is required on all Appeals Cases using the Validation System on ACDS. The ATE first conducts a validation and submits the case for approval. Once the ATM has approved the case, it is then routed to the APS TE for an additional validation. Detailed explanations of these validations are discussed in IRM 8.10.3, Appeals Inventory Validation Process .

Appeals Quality Measurement System (AQMS) Review

  1. AQMS relies on a statistically valid sample of closed cases in completing the quality review of the Appeals process. AQMS selects cases for review by setting a unique skip interval of closed cases for each area on ACDS. These individual skip intervals are monitored throughout the year and are adjusted accordingly by AQMS.

  2. The validity of the statistical sample is critical to AQMS and the receipt of selected cases directly impacts the ability to achieve a statistically valid sample. In order to ensure the validity of the reviews, the Director, AQMS periodically sends a report of cases selected but not received to the Director, APS for appropriate follow-up.

Automated AQMS Coversheet

  1. When APS closes a case on ACDS and the case is selected for AQMS Review, an automated partially completed AQMS Coversheet will appear on the screen indicating where to send the case for AQMS Review. See Exhibit 8.20.7-2 for a sample of the AQMS Coversheet which auto-populates with the name of the AQMS Reviewer and his/her office location.

  2. The APS employee closing the case will:

    • Print, complete and attach the AQMS Coversheet to the front of the case file.

    • Process the case and make applicable copies as outlined below for the different types of processing required, i.e., closed by APS on ACDS but not processed by APS, or closed by APS on ACDS and processed by APS.

Cases Selected for AQMS Review

  1. Three types of cases will be identified for AQMS review:

    1. Cases closed on ACDS but not processed by APS - These cases are normally Collection cases. See IRM 8.20.7.2.2.1 for instructions on closing Collection cases selected for AQMS Review.

    2. Cases closed on ACDS and processed by APS - These cases are normally non-Collection cases on AIMS but may include some Collection cases that require APS to process account adjustments. When a case is selected for AQMS review, the case will be identified via the AQMS Coversheet (Exhibit 8.20.7-2) and a six-digit number listed on the AQMSSELECT line located on the case summary card. After APS has processed the adjustments, verified that all adjustments have posted to the account, and AIMS controls are closed as appropriate. The entire administrative file is forwarded by APS to the AQMS Reviewer.

      Reminder:

      APS must suspense and monitor the case until all required Appeals adjustments, credit transfers, etc., are posted to the account(s) before submitting the case to AQMS.

    3. Cases closed for trial preparation and forwarded to Area Counsel - These cases will not be part of the AQMS selection process until they are finally closed. Although these cases are closed with closing code 43, which moves the case to Part 3 on ACDS, this is an interim action, not a final closing action. When a Part 3 case is finally closed on ACDS and selected for AQMS review, the automated AQMS Coversheet will be generated. The case summary card will show a six-digit number generated/displayed at the AQMSSELECT line area. The case will then be closed using the applicable procedures for the case type.

AQMS Cases Closed on ACDS But No Tax, Penalty, or Interest Adjustments are Processed by APS
  1. The following are specific types of cases in which APS does not process the adjustments:

    Type of Case Action
    Collection:
    • Offer in Compromise (OIC)

    • Collection Due Process (CDP)

    • Equivalent Hearing (EH)

    • CDP and EH

    • CDP with OIC

    • CDP with liability issue or penalty appeal

    • Trust Fund Recovery Penalty (TFRP) (also see additional instructions below)

    • TFRP Claim

    • Collection Appeal Program (CAP)

    • Print, complete and attach the AQMS Coversheet to the front of the file.

    • Process all required Appeals account updates (suspense and monitor the case until all account updates are posted i.e., credit transfers, TC 481, 521, 571 etc..., before submitting the case to AQMS).

      Note:

      EH Cases with Related CDP Cases Selected for Review - Attach the EH AQMS Coversheet generated on the AQMS selected case to the CDP case and annotate "EH selected for AQMS review forward to AQMS upon final closure of the related CDP case" .

    Trust Fund Recovery Penalty (TFRP)
    • Print, complete and attach the AQMS Coversheet to the front of the file.

    • Send the original Trust Fund Recovery Penalty case directly to the AQMS Reviewer with a copy of the Appeals generated documents and applicable adjustment document(s).

    • At the time the case file is sent to the AQMS Reviewer, send the original adjustment document(s) with a completed Form 2275Records Request Charge and Re-Charge , along with copies of all necessary documents listed below, to the Collection contact/office in order to implement the Appeals settlement.

    • Normally, the file sent to Collection will include copies of the following:
      - ACM
      - Form 5402
      - Determination Letter/Waiver Forms
      - Other Closing Letters and Agreement Forms
      - A copy of the ATE's Case Activity Record and CASES Case Summary Card stapled to the left side of the file.

    TFRP TBOR2 cases in which the ASED will expire within 30 days from the date the ATM signed Form 5402, Appeals Transmittal and Case Memo
    • Print, complete and attach the AQMS coversheet to the front of the file.

    • Fax Form 5402 and Form 2749Request for Trust Fund Recovery Penalty Assessment(s) to Technical Services Advisory (TSA) at the fax number listed in the "To" box on the Form 5402.

    • Request verification of the assessment from Technical Services Advisory (TSA) before submitting the case to AQMS

    • Upon receipt of the assessment verification from TSA, associate the faxed request for assessment from APS (acknowledged F-3210, F-2749, F-5402) to TSA, and the faxed verification of the assessment from TSA, with the case file to be reviewed so AQMS has the information needed to complete their review.

    Note:

    AQMS will review the case on a priority basis and forward it to Collection expeditiously, so there should be no significant delay in returning the files to Technical Services Advisory. AQMS also must confirm during their review that Appeals took the appropriate action to timely request the assessment in TFRP TBOR2 cases with short ASEDs. Since these quick assessments do not post to IDRS for several cycles, APS must include their original fax request for the assessment as well as the assessment verification document(s) returned by TSA. If the assessment request from APS to TSA is submitted by other than a fax, the signed acknowledgment copy of Form 3210Document Transmittal, is required to determine the date on which APS requested the assessment.

    Dyed Diesel Fuel
    • Send the original case file to the originating function.

    • Send the AQMS Coversheet and copies of the file to the AQMS Reviewer.

  2. Form 3210 Procedures for Returning cases after AQMS review: When the APS Tax Examiner closes a case type identified above for AQMS Review, the following procedures apply:

    • Complete Form 3210, Document Transmittal for the AQMS Reviewer to use when shipping to the recipient. Ensure the proper address, return information and your return address is notated with your name, phone and fax numbers as the releasing official.

    • Prepare a separate Form 3210, Document Transmittal for each recipient, if the case requires multiple recipients.

    • Sign and address the Form 3210, Document Transmittal as the Releasing Official. Send all 4 parts of the Form 3210, Document Transmittal to the AQMS Reviewer.

    • Ship the case to the AQMS Reviewer with all Form 3210s in an envelope/file folder notated "Form 3210" and the Reviewer's name.

      Note:

      If there are any potential errors, the AQMS Reviewer may return the case to the originating APS office for corrective action.

    Form 3210 Part Purpose
    Part 1 For the recipient(s) records.
    Part 2 For the AQMS Reviewer to retain for his/her records.
    Part 3 For the recipient(s) to acknowledge receipt of the case and return to the originator.
    Part 4 For the AQMS Reviewer to return to the APS TE upon shipment of the case to the recipient(s). In addition, the AQMS Reviewer will provide a copy of the UPS Shipping Receipt listing the UPS tracking numbers or submit Form 12634, Routing Sheet when tracking is not applicable.

    Note:

    The return of Part 4 of Form 3210, Document Transmittal along with a copy of the UPS shipping receipt from the AQMS Reviewer will provide notification of the date the AQMS Reviewer shipped the case to the recipient(s). Perform Form 3210, Document Transmittal follow-up as needed after receipt of those documents.

  3. Upon completion of the AQMS review, the AQMS reviewer will use the Form 3210, Document Transmittal prepared by APS to transmit the case to the campus files and/or field function as appropriate. If APS did not provide the Form 3210, Document Transmittal for AQMS to transmit the reviewed file to the campus files function, AQMS will return those files to the originating APS office.

AQMS Cases Closed on ACDS and Processed by APS
  1. When identified as an AQMS selected review case, the following actions will be taken:

    1. Attach the automated AQMS Coversheet to the file. See Exhibit 8.20.7-2.

    2. Process all required Appeals adjustments (APS must suspense the case until all required Appeals adjustments, credit transfers, etc., are posted on the transcript before sending the case to AQMS).

    3. Make the required copies for the applicable AQMS TE/TCS packages (See Exhibit 8.20.7-3 for a listing of required documentation when a manual interest computation is prepared.)

    4. Attach the ATE's Case Activity Record (CAR) and the CASES Case Summary Card to the Form 5403, Appeals Closing Record or appropriate closing document and also attach the AQMS Coversheet to the front of the file.

    5. Recharge the file to the AQMS Reviewer assigned to the case at the time of closing. Prepare a Form 2275, Records Request, Charge and Recharge including the AQMS Reviewer's name and office address on the Form 2275 for case tracking purposes. Include a copy of Form 2275, Records Request, Charge and Recharge with the case when it is forwarded to AQMS.

Controlling Cases Shipped to AQMS Reviewers
  1. Take the following actions on ACDS for cases selected for AQMS review:

    • Update the LACTION field in CASES to QXXX, with XXX equal to the AQMS Reviewer's POD initials.

    • Prepare Form 3210, Document Transmittal when sending the case to the AQMS Reviewer and monitor the Form 3210, Document Transmittal, suspensed copy to verify receipt of the acknowledgement copy returned by AQMS.

    • Enter LACTION To Date - the date the case is sent to the AQMS Reviewer.

    • Enter LACTION From Date - the date the Form 3210, Document Transmittal acknowledgment is received from the AQMS Reviewer.

    • Update the ACKCLS FROMDATE upon receipt of the Form 3210, Document Transmittal acknowledgement received from the Campus Files Function to avoid cases aging on the ACDS ACKCLS follow-up report during the AQMS review timeframe.

Related Cases with a Different WUNO
  1. Send related cases with a different WUNO to the AQMS Reviewer. The Reviewer will determine if the case file forwarded to AQMS contains sufficient information for conducting a review. In general, the AQMS Reviewer needs all items that were produced by the ATE, such as Form 5402, Appeals Transmittal and Case Memo, ACM, settlement computation, Appeals correspondence/issue files, etc. for the AQMS selected case as well as what was received from the originating function (e.g., tax returns, administrative/workpaper files obtained from the Revenue Agent, Revenue Officer or Service Center). Complete case file information also includes the Appeals case files for any cases related to the case selected for AQMS review.

  2. Examples of related cases include:

    Type of Case Types of Related Cases
    Non-Collection Cases
    • Flow Through Entities such as Partnerships, "S" Corporations, Trusts/Estates

    • Examinations of Individuals and Corporations with proposed offsetting, whipsaw and other types of issues

    • Employment Tax Cases

    Collection Cases
    • OICs filed during CDP cases and the related CDP case

    • Related CDP lien and levy cases

    • Timely CDP and related Equivalent Hearing cases

    • Related officer files for TFRP cases

    • Related OIC files (i.e., if husband and wife have separate offers, AQMS needs the related file)

  3. Contact the AQMS Reviewer for clarification if any questions arise as to which specific related case(s) should be sent with the AQMS selected case.

Shipping Cases to the AQMS Reviewer
  1. Each Area Office has specific AQMS Reviewers assigned based on the type and grade of the case. The AQMS Reviewer's name and POD are found on the generated selection sheet.

  2. Use the following instructions for the shipment of cases to the AQMS Reviewer:

    1. Forward the AQMS selected case along with all related cases to the attention of the AQMS Reviewer listed on the AQMS Coversheet.

    2. Enter the AQMS Reviewer's name and office location on the Form 3210, Document Transmittal, and annotate "AQMS REVIEW - NOT FOR CARDING BY APS" .

    3. List the AQMS selected case along with the related cases (if applicable) on the Form 3210, Document Transmittal.

    4. Add the AQMS Reviewer's name on the shipping envelope/boxes to facilitate easy identification of the work.

    5. For non-Collection cases, include copies of various documents for the AQMS TE/TCS Reviewers. Refer to Exhibit 8.20.7-3 for details.

Ten Box Rule
  1. Ten Box Rule - for large cases, such as Appeals Team Case Leader (ATCL) cases, if there are ten (10) or fewer boxes, send the AQMS Reviewer all boxes associated with the AQMS selected case and the related case(s) (if applicable). If there are more than ten (10) boxes, contact the AQMS Reviewer prior to shipping the boxes, This will allow the AQMS Reviewer to determine how many of the boxes are needed for review purposes.

AQMS Refile Procedures for Non-Collection Cases
  1. The AQMS Reviewer will send all non-Collection cases to the Campus Files Function identified by the APS TE on the Form 3210, Document Transmittal, prepared by APS for AQMS.

    Note:

    If Appeals has been alerted to forward the closed case to a function other than Campus Files, the APS TE will prepare a Form 2275RECORDS REQUEST, CHARGE AND RECHARGE, as well as the applicable Form 3210, Document Transmittal(s)

    .

  2. When the APS Tax Examiner (TE) closes a case identified for AQMS Review, the following procedures apply:

    • Make necessary copies for the AQMS TE/TCS packages. See Exhibit 8.20.7-3 for details.

    • Prepare Form 9856, Attachment Alert or Form 10023, Attachment Alert, etc. and attach it to the front of each return.

    • Prepare Form 2275 to recharge the returns to the appropriate AQMS Reviewer.

    • Ship Form 5403, Appeals Closing Record to the Campus with Form 2275 attached.

    • Attach a copy of Form 2275 with the renumbered DLN to the front of each Form 9856 or Form 10023. The AQMS Reviewer will remove this Form 2275 prior to shipping the case to Campus Files to avoid the return of the case to them. Case file assembly procedures must be followed for multiple returns.

    • Complete Form 3210, Document Transmittal, for the AQMS Reviewer to use when shipping the case to Campus Files. Ensure the proper Campus address, return information, refile DLN and your return address are notated with your name, phone and fax numbers as the releasing official.

    • Sign and address the Form 3210, Document Transmittal, as the Releasing Official. Send all 4 parts of the Form 3210, Document Transmittal, to the AQMS Reviewer. See the table in IRM 8.20.7.2.2.1 (2) for information on the purpose of the four parts of Form 3210, Document Transmittal.

    • Ship the case to the AQMS Reviewer with all Campus refile Form 3210s in an envelope/file folder notated "Campus Refile Form 3210s" and the Reviewer's name.

      Note:

      If the appropriate Forms(s) are not attached to the returns and/or the Form 3210s are not included, the AQMS Reviewer will return the case to the originating APS office for refile action. In addition, if there are any potential errors, the AQMS Reviewer may return the case to the originating APS office for corrective action.

ATCL Cases Selected for AQMS
  1. The following is a general list of items (not all-inclusive) that are required by the AQMS Reviewer for ATCL cases selected for AQMS Review. This information is in addition to the packages needed by the AQMS TCS Reviewer and the AQMS TE Reviewer, which are separate lists with different information required for each package. See Exhibit 8.20.7-3.

    • Tax returns for selected case (e.g., Form 1120, Form 1139, Form 1120X)

    • Form 5402, Appeals Transmittal and Case Memo with Appeals Case Memorandum (ACM) and Schedule of Adjustments

    • Agreement Forms (e.g., Form 870-AD, Form 906 Closing Agreement, etc.)

    • Joint Committee information (e.g., Letter, Spreadsheet, etc.)

    • Tax computations/settlement computation/BNA Disk (if applicable)

    • TCS binder or folder (if available)

    • 30-day Letter/RAR/IE RAR/Engineer/Financial Products/Economist's Reports/Transmittal Letter

    • Protest and Rebuttal to Protest

    • Statutory Notice of Deficiency/Petition/Answer/Decision Document (if applicable)

    • ATCL correspondence files/Work Plan/Inventory Management Schedule

    • ATCL/ATE issue folders

    • Related case files/information (if applicable)

    Note:

    Cases are selected for AQMS Review based on the WUNO. Therefore, the items required by the AQMS Reviewer for a particular work unit number (WUNO) may be contained in another case file (e.g., key case, later cycle for the same taxpayer and/or a related taxpayer). If this situation applies to the case selected for AQMS review, the related case information must also be furnished to the AQMS Reviewer.

AQMS Standard 8 Collection Cases (8.1.7.4.7)

  1. Standard 8 measures the following actions taken by APS employees on Collection cases:

    • Compliance with processing procedures for CDP/EH, OIC, CAP and TFRP cases

    • Accuracy of adjustments

    • Appropriateness of time spans

  2. Standard 8 is rated at the maximum allowable score when the following occurs:

    1. Front-end and back-end processing procedures for Collection cases are correctly applied

    2. Adjustments are accurately processed prior to sending the case to AQMS and

    3. APS employee's actions are timely and appropriate

AQMS Standard 8 Non-Collection Cases (8.1.7.3.8)

  1. Standard 8 measures the following actions taken by Tax Examiners (TE) and Tax Specialists (TS):

    • Accuracy of interest computations

    • Accuracy of ACDS Updates

    • All final closing documents and instructions present

    • Computational and assessment/abatement procedures followed

    • Accuracy and timeliness of assessments/abatements

    • Appropriate time spans and time applied

  2. Standard 8 is rated at the maximum allowable score when the following occurs:

    1. Interest is correctly computed by the TE and TS

    2. ACDS is updated with the revised statute date and tax/penalty/claim amount

    3. All final closing documents and instructions are in the administrative file

    4. Proper procedures for assessment/abatements are applied

    5. Assessments/abatements are completed timely and accurately

    6. Time span and time applied are appropriate

AQMS Reviewed Cases Returned to APS for Correction (NEW)

  1. AQMS reviewed cases requiring account correction(s) will be returned to APS.

  2. AQMS will:

    • Email the Potential Error Report (PER) to the APS Director

    • Ship the administrative file to the APS Office to the attention of the PTM or Tax Examiner

    • Notify the PTM if PTM is not co-located with the TE, and transmit the administrative file to the TE

  3. APS will:

    • Verify the ASED for each tax period requiring correction

    • Import and Assign as a New Case on PEAS, do not reopen the closed PEAS case, and ensure the correct ASED is reflected for each tax period to be corrected as required by the AQMS Potential Error Report (APERT)

      Exception:

      Reopening a new PEAS record for AQMS corrections, is different from other Post Closing procedures outlined in IRM 8.20.10.6.2.3, Import and Assign where the prior PEAS Record is reopened.

    • Identify the case as a Post Closure case by using the PEAS Feature Code PC

    • Process the correction(s) to the taxpayers' account as identified by AQMS

    • Document the PEAS Case Activity Record to reflect actions taken and apply direct time

    • Place case in PEAS Suspense and monitor adjustments until fully posted

    • Notify PTM when account corrections have posted

    • Close case on PEAS and send to campus files or refile as appropriate

Balance Due < $10 Million Additional Closing Requirements (8.7.11.13 (3) & 8.2.1.18)

  1. When a case has a balance due over $10 million, including interest and penalty, APS will follow the procedures in Examining Process - AIMS Procedures and Processing Instructions - Large Dollar Cases IRM 4.4.18.5 and send a copy of the following forms:

    • Form 5402, Appeals Transmittal and Case Memo

    • Appeals Case Memorandum (ACM)

    • Settlement Computations

    • Agreement or Decision Document

    • Form 2859, Request for Quick or Prompt Assessment

    • Special Handling Instructions

    to the Chief Financial Office Staff at the following address:


    Office of Unpaid Assessment Analysis
    Attn: OS:CFO:R:R:B
    333 W. Pershing Road
    Mail Stop S-2 1035
    Kansas City, MO 64108-4302

Expedite Processing for Certain Large Dollar Cases <$100,000 (8.2.1.12.2)

  1. Upon receipt of an Agreed and Unpaid (Income, Gift, Estate and certain Excise Taxes as defined in IRC 6211*) Deficiency <$100,000 case, APS will assign the case on PEAS for expedite processing.

  2. The assessment of an agreed and unpaid deficiency must be posted with a 23C Date prior to the waiver + 30 day date to avoid deficiency interest suspension under IRC 6601(c).

  3. If processing the adjustment via CC: AMCLSA will cause the 23C date of the assessment to be later than the waiver + 30 day date, the assessment must be processed via Form 2859Request for Quick or Prompt Assessment, in order to avoid suspension of deficiency interest accruals. See IRM 20.2.8.7, 870 Waiver Interest Suspension Periods and IRM 4.4.25.2.1, Agreed Unpaid Deficiencies Greater Than $100,000 for additional information.

  4. Upon receipt of a Large Dollar Overpayment <$100,000 case, APS will assign the case on PEAS for expedite processing. Expedite processing of Large Dollar Overpayments reduces the amount of credit interest accrual the government must pay under IRC 6611. See IRM 21.4.4, Refund Inquiries, Manual Refunds for guidance on Manual Refund processing.

  5. Managerial review is mandatory for each tax periods with an adjustment greater than $100,000

  6. PEAS Fields are identified as follows:

    • PEAS Type = CLS

    • PEAS SubType:
      SP for normal interest
      RI for restricted interest
      NR for net rate netting

    • PEAS Feature Code:
      MR for a Manual Refund
      Blank for a Quick Assessment

    • Priority:
      Statute — Imminent Statute
      <100k — Deficiency over one hundred thousand dollars but less than one million dollars
      <1m — Deficiency over one million dollars but less than ten million dollars
      <10m — Deficiency over ten million dollars
      TAMRA — Refund of overpayment plus interest due within 120 days after the courts' decision becomes final

    • Priority Date — date associated with the priority or date identified by management as the priority date. For example, if the priority is statute, the priority date is the earliest statute date for the returns included in the PEAS case. If the priority is expedite, the priority date is determined by management.

    • PEAS Suspense - use the appropriate Suspense Code

    • Document the PEAS Case Activity Record (CAR) with applicable information to clearly address special case issues or contacts made to resolve questions or problems associated with accurate processing of the case.

      Example:


      PEAS CAR entry on 12/15/2013 — Form 2285 included with the administrative file was incomplete/incorrect. Contacted TCS Jane Doe via email 12/15/2013 and confirmed via telephone to request a corrected Form 2285. Follow-up date 12/22/2013. (PEAS Suspense Code S10)
      PEAS CAR entry on 12/21/2013 — Corrected Form 2285 received and Quick Assessment (MAAS) prepared and submitted with a 12/30/2014 23C Date. Follow-up date 12/30/2014. PEAS Suspense Code S09)

  7. The APS TE will place the case in PEAS Suspense for monitoring until the required account adjustment verification is received.

  8. APS will monitor all manual assessments and manual refunds until DLN verification of the transaction is received.

Quick Assessment Requirements

  1. The APS Tax Examiner prepares the Form 2859, Request for Quick or Prompt Assessment which requires a complete manual re-computation of the interest for the account. The interest transaction code (TC) and interest amount are entered in Item 17 using Transaction Code (TC) 190 (manually computed interest not restricted), or 340 (manually computed interest restricted).

    Note:

    IRC 6631, Notice Requirements applies to this adjustment action since the interest has been manually calculated instead of computer generated. When the IDRS programming computer generates the interest, the schedule of interest is automatically included with the adjustment notice mailed to the taxpayer. This computer generated notice which includes the interest schedule, meets the IRC 6631, Notice Requirements.

  2. When a manual interest computation is required, IRC 6631 applies. The tax examiner who manually calculates the interest, must also prepare Letter 3535, Interest Computation Cover Letter and associate the ACT Report 490 Activity Summary for mailing to the taxpayer.

  3. Letter 3535, Interest Computation Cover Letter can be accessed via the IRS publishing web site, or ACDS APGolf.

    Access Point for Letter 3535 Procedure Steps
    IRS Publishing Website From the IRS Web Home Page:
    1. Click on the Forms, Pubs, and Docs tab (left side of the screen)

    2. Scroll down to Media and Publications IR Web site (MYM&P)

    3. Click on the Forms/Pubs/Products Repository - electronic publishing catalog of all IRS published products

    4. In the Product Catalog Information, under the View by Product Number section, select Product Type "Letter"

    5. In the Enter product number field, type 3535

    6. Click submit

    7. The Letter 3535 Product Information Page will open

    8. Under the Electronic Availability section, click on the current revision hyperlink

    9. A "fillable" pdf of Letter 3535 will open on your screen

    10. Complete the entries as appropriate for the case

    ACDS From the ACDS Homepage:
    1. Click on the APGolf tab

    2. In the Select Category drop down menu (left side of the screen) click on Closing

    3. Under the Select Form/Letter menu, scroll down to and then select Letter 3535 Interest Computation

    4. Within the Forms/Letters Generator - Select A Case screen, enter the WUNO and all other appropriate search criteria

    5. Complete the fill-in form and under the Signature Block click on the radio button for Other, enter you name and your title

    6. In the Enclosures section, enter Interest Computation Report

    7. Identify cc recipient if applicable

    8. Click on the Generate Letter/Form button

    For additional information on the requirement to provide manual interest computations to the taxpayer, see IRM 20.2.8.3(14) Manual Computations.

  4. See IRM 4.4.25.11, Quick Assessment Procedures, CCP or Campus Examination Procedures for additional guidance of preparation of the Form 2859, Request for Quick or Prompt Assessment.

Form 3210, Document Transmittal Follow-up Requirement

  1. See IRM 21.1.7.11.4, Suspense Copies, Form 3210, Document Transmittal, for procedures on monitoring and acknowledgement follow-up requirements.

Procedures for Shipping Personally Identifiable Information (PII)

  1. The Shipping Policy for PII Documents is located at: http://publish.no.irs.gov/mailtran/piihardcopy.html

  2. Employee Toolkit Shipping Procedures for Personally Identifiable Information (PII)

Form 5403 Instructions to APS Worksheet

  1. Form 5403 Instructions to APS Worksheet is completed by the ATE or TCS who prepares the settlement computation. The Form 5403 Instructions to APS Worksheet provides specific account adjustment information for each tax period being submitted for processing and is meant to assist APS in preparing Form 5403 Appeals Closing Record.

  2. The APS TE is responsible for the following actions:

    • Verify the Form 5403 Instructions to APS Worksheet information is accurate and complete prior to transferring the codes and adjustment amounts to the Form 5403, Appeals Closing Record.

    • Analyze and compare the Form 5403 Instructions to APS Worksheet information with the current account transcript to ensure inputting the data will not create an unpostable on the account and will correctly update the taxpayer's account.

    • Resolve discrepancies or omissions upon their discovery.

    • On an Appeals Settled case, when the Form 5403 Instructions to APS Worksheet has not been included within the administrative file, APS will request the Form 5403 Instructions to APS Worksheet via secure e-mail, from the ATE.

    • If RGS is used for the computation, instead of entering the Item 15 Reference Number information on the Form 5403 Instruction Worksheet, the ATE or TCS may print either the RGS Form 5403, Appeals Closing Record or the RGS Form 5344, Examination Closing Record and attach one of them to the Form 5403 Instructions Worksheet. The Form 5403 Instructions Worksheet has a line to indicate that the RGS Form 5403, Appeals Closing Record or Form 5344, Examination Closing Record is attached.

    • See IRM 8.17.5.2, Form 5403 Instructions to APS Worksheet for additional information.

    • On a Counsel Settled case, process the settlement as agreed and do not further adjust the Item Reference Code amounts except as needed to avoid an unpostable condition. When a case is settled by Counsel for a specific dollar amount agreed to by both parties, TCS is not required to prepare Form 5278, Statement - Income Tax Changes or provide amounts to change reference codes since they may not be determinable.

  3. Counsel Settled cases will most often, not have a Form 5403 Instruction Worksheet included because the Appeals Tax Computation Specialist (TCS) may not have been involved in determining the tax settlement amount. When a tax deficiency amount is settled for a certain dollar amount by Counsel, instead of calculated by identifying each taxable item under consideration, the APS Tax Examiner will not be provided with the item entries for entry in Item 15 of the Form 5403. APS should not submit a request to TCS for a Form 5403 Instruction Worksheet on these case closings.

  4. When the APS TE processes a Counsel Settled case, instead of submitting a request to TCS for a Form 5403 Instruction Worksheet, they will make an entry in the PEAS Case Activity Record to document that they cannot identify Item 15 entries, because the Counsel Settled case did not include a Form 5403 Instruction Worksheet. This PEAS CAR entry will serve to meet the AQMS Standard 8 for Form 5403 Item 15 accuracy.

Item Adjustment Codes and Credit Reference Codes

  1. Each tax return/tax class has a variety of Item Adjustment Codes and Credit Reference Codes which populate and/or update the associated field on the transcript of account when reported on a filed return, or adjusted during the IRS review, correction, or audit process.

  2. Document 6209, IRS Processing Codes and Information contains a detailed listing of Item Adjustment Codes and Credit Reference Codes for the following types of Tax Returns:

    • Form 706, United States Estate (and Generation Skipping Transfer) Tax Return

    • Form 709, United States Gift (and Generation Skipping Transfer) Tax Return

    • Form 720, Quarterly Federal Excise Tax Return

    • Form 940, Employer's Annual Federal Unemployment Tax Return

    • Form 941, Employer's Quarterly Federal Tax Return

    • Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees

    • Form 944, Employer’s Annual Federal Employment Tax Return

    • Form 945, Annual Return of Withheld Federal Income Tax

    • Form 990, Return of Organization Exempt From Income Tax

    • Form 1040, U.S. Individual Income Tax Return

    • Form 1041, U.S. Income Tax Return for Estates and Trusts

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

    • Form 1120, U.S. Corporate Income Tax Return

    • Form 5329, Return for Individual Retirement Arrangement Taxes

    See http://serp.enterprise.irs.gov/databases/irm.dr/current/6209.dr/6209minitoc.htm, Section 8C - Master File Codes, for each code and code definition.

  3. For additional information on account analysis and account codes, see:

    • IRM 21.5, Account Resolution

    • IRM 21.6, Individual Tax Returns

    • IRM 21.7, Business Tax Returns and Non-Master File Accounts

    • IRM 21.8, International

General Individual Master File (IMF) Credit Reference and Item Reference Codes

  1. The Credit Reference and Item Reference Codes listed below are the most common adjustments on IMF and BMF Income Tax cases:

    Item/Credit Reference Code Definition Type of Change to Tax Account
    764 Earned Income Credit (EIC) Increase Credit Increase
    Posts a (TC 764) refundable credit amount that is first applied to pay any tax deficiency, and is refundable if the remaining credit amount exceeds the final balance due.
    765 Earned Income Credit (EIC) Decrease Credit Decrease
    Posts a reversal (TC 765) of a previously posted EIC TC 764/768. An EIC decrease cannot exceed the total amount of EIC already posted to the account.
    806 W-2 Withholding Tax and/or Excess FICA Contribution Credit Credit Increase
    Posts a (TC 806) refundable credit amount that is first applied to pay any tax deficiency, and is refundable if the remaining credit amount exceeds the final balance due.
    807 W-2 Withholding Tax and/or Excess FICA Contribution Debit Credit Decrease
    Posts a reversal (TC 807) of a previously posted Withholding (WH) TC 806. A WH decrease cannot exceed the total amount of WH already posted to the account.
    886 Taxable Income (TXI) Posts the TXI field in the Return Information Section of a TXMODA. This Item Reference Number is input with a "+" to increase, and a "-" to decrease the current TXI amount reflected on TXMODA and cannot be reduced below zero.
    887 Number of Exemptions Posts the number of Exemptions in the Return Information Section of a TXMODA. This Item Reference Number is input with a "+" to increase, and a "-" to decrease the current number of exemptions reflected and cannot be reduced below zero.
    888 Adjusted Gross Income (AGI) Posts the AGI field in the Return Information Section of a TXMODA. This Item Reference Number is input with a "+" to increase, and a "-" to decrease the current AGI amount reflected on TXMODA. This field can be reduced below zero, and when input, will automatically make an equal adjustment to TXI unless an 886 is input for a different amount, or 0.00.
    • See IRM 8.20.7.7.3, Employee Share of FICA Tip Income (8.7.16.26.1) for additional information.

    • See IRM 8.20.7.7.4, Self-Employment Tax Adjustment (8.7.16.26.6) for additional information.

    • See IRM 8.20.7.7.5, Refundable Credit Adjustments (8.17.5.2.12) for additional information.

    Reminder:

    The APS TE must always verify the Item Reference Numbers (IRN) and Credit Reference Numbers (CRN), their associated amounts, and "+/-" provided on the Form 5403 Instruction Worksheet before inputting the entries on the adjustment document to ensure the entry of the code(s) or amount(s) will not cause an unpostable condition.

Employee Share of FICA Tip Income (8.7.16.26.1)

  1. Employee Share of FICA adjustments due to tip income are entered on the Form 5403, Appeals Closing Record using reference number entries in Item 15. The ATE or TCS who prepares the settlement computations provides the correct reference numbers and amounts:

    1. Item Reference Number 891 = unreported tip income for the primary taxpayer

    2. Item Reference Number 892 = unreported tip income for the secondary taxpayer

    3. Item Reference Number 898 = unreported tip income for the primary taxpayer that is subject to medicare tax

    4. Item Reference Number 899 = unreported tip income for the secondary taxpayer that is subject to medicare tax

  2. See Exhibit 8.20.7-1 for instructions on preparing Form 5403, Appeals Closing Record for these cases.

  3. See IRM 8.17.5.2, Form 5403 Instructions to APS Worksheet for additional information.

Self-Employment Tax Adjustment (8.7.16.26.6)

  1. Self-employment adjustments for returns posted after December 31, 1985, are updated using reference numbers on the Form 5403, Appeals Closing Record in Item 15. The ATE or TCS who prepares the settlement computations provides the correct reference numbers and amounts via the Form 5403 Instructions to APS Worksheet:

    1. Reference Number 878 - net increase/decrease of self-employment income for primary taxpayer that is subject to social security tax. The amount entered must not reduce the Primary Taxpayer's Self-Employment Income as currently posted below zero, nor increase it above the maximum amount subject to the social security portion of self-employment tax for the respective tax year.

    2. Reference Number 879 - net increase/decrease of self-employment income for secondary taxpayer that is subject to social security tax. The amount entered must not reduce the Secondary Taxpayer's Self-Employment Income as currently posted below zero, nor increase it above the maximum amount subject to the social security portion of self-employment tax for the respective tax year.

      Note:

      Document 6209 Section 3 Tax Return Information provides a Social Security Tax Rate Table (Formerly FICA) of Self-Employment Wage Limitations.

    3. Reference Number 895 - net increase/decrease in self-employment income for primary taxpayer that is subject to medicare tax (there is no maximum amount).

    4. Reference Number 896 - net increase/decrease in self-employment income for secondary taxpayer that is subject to medicare tax (there is no maximum amount).

    5. Reference Number 889 - total net increase/decrease in self-employment tax for both primary taxpayer and secondary taxpayer. If self-employment income is less than $400, Item 15 is left blank. If the adjustment reduces the self-employment income to less than $400, enter the amount needed to reduce the self-employment income to zero.

  2. The Form 5403, Appeals Closing Record, for a no-change case with self-employment income/tax adjustments must still reflect Reference Numbers 878 or 879 and 889. Complete as follows for Items 12, 13, and 15:

    1. Item 12 - Enter TC 300 for 0.00

    2. Item 13 - Enter 12

    3. Item 15 - Enter appropriate Reference Numbers and amounts

  3. See IRM 8.17.5.2, Form 5403 Instructions to APS Worksheet for additional information.

Refundable Credit Adjustments (8.17.5.2.12)

  1. See IRM 8.17.5, Special Computation Formats, Forms and Worksheets for additional information on the following topics:

    • Refundable Credit (Prepayment Credit) Adjustments

    • Adjustments to Refundable Credits Not Included in the Statutory Notice of Deficiency

    • Adjustments to Refundable Credits Included in the Statutory Notice of Deficiency

    • Pre-Refund Cases (Frozen Refund Cases)

  2. In addition to Earned Income Credit (EIC) and Withholding (WH), the tax account may be adjusted by other refundable credits. The table below identifies the credit reference numbers (CRN), and their definition.

    Refundable Credits, Credit Reference Numbers (CRN), and Definitions

    CRN Definition
    250 Increase (Decrease) In Health Coverage Tax Credit
    252 Increase (Decrease) In Excess Social Security & RRTA Tax (If return posted after 12/31/2006)
    253 Increase (Decrease) In Telephone Excise Tax Refund (TETR) - Tax
    254 Increase (Decrease) In Telephone Excise Tax Refund (TETR) - Interest
    255 Increase (Decrease) In Prior Year Minimum Tax Credit
    256 Increase (Decrease) In Recovery Rebate Credit
    257 Increase (Decrease) In Recovery Rebate Credit
    258 Increase (Decrease) In First Time Homebuyer Credit
    259 Increase (Decrease) In Making Work Pay & Government Retiree Credits
    260 Increase (Decrease) In American Opportunity Tax Credit
    261 Increase (Decrease) In Adoption Credit
    336 Increase (Decrease) In Additional Child Tax Credit
    338 Increase (Decrease) In Recovery Rebate Credit
    766 Increase In Corporation - accelerated AMT and research credit
    766 Increase In Regulated Investment Company Credit on F-2439
    767 Decrease In Corporation - accelerated AMT and research credit
    767 Decrease In Regulated Investment Company Credit on F-2439
    766/767 Used for other credit adjustments as appropriate
    Various Increase (Decrease) In Fuel Tax Credit (see Form 4136 for Fuel Type)


Item Reference Numbers for Estate Tax and Gift (E&G) Tax (8.17.5.2.3)

  1. Item reference numbers (IRN) for Form 706 Estate Tax Return and Form 709 Gift Tax Return, are provided by the TCS or the ATE who prepare the computations and Form 5403 Instruction Worksheet.

  2. Estate and Gift tax item reference numbers are used to identify adjustments to each specific tax type:

    • 074 - Generation Skipping Tax (MFT 51 and MFT 52)

    • 076 - Net Estate Tax (MFT 52)

    • 077 - Net Gift Tax (MFT 51)

  3. IRN 074 when entered on either an Estate Tax or Gift Tax adjustment will be combined with the IRN 076 or IRN 077 amount to = the TC 300 amount.

  4. IRN 076 is required on all Estate Tax adjustments and will = the TC 300 amount unless IRN 074 is also entered.

  5. IRN 077 is required on all Gift Tax adjustments and will = the TC 300 amount unless IRN 074 is also entered.

  6. The employee who prepares the settlement computation is responsible for completing the Form 5403 Instruction Worksheet. If a Counsel case is received by APS and the Form 5403 Instruction Worksheet is not included, APS can submit a Form 3608, Request for TCS Service to request a Form 5403 Instruction Worksheet.

Reference Number 321 for Personal Holding Company Tax (8.17.5.2.8)

  1. See IRM 8.17.5.2.9, Reference Number 321 (Personal Holding Company Tax) for additional information.

    Note:

    The Item Reference Number 321 and applicable adjustment amount are entered in Item 15 of Form 5403, Appeals Closing Record.

Restricted Interest and Special Processing Cases (8.17.5.2.9)

  1. Restricted interest and/or special processing actions may apply to a variety of case types. APS TE's will perform interest computation and special processing actions as appropriate to each tax period. The TCS prepares the following forms and/or notates the Form 5403 Instructions to APS Worksheet when specific interest provisions apply:

    • Form 2285, Concurrent Determinations of Deficiencies (Increases in Tax) and Overassessments (Decreases in Tax) in Cases Involving Restricted Interest Provisions of the Internal Revenue Code

    • Sequa Worksheet when Revenue Ruling 99–40 applies

    • IRC 6404(g), Interest Suspension Worksheet when applicable on an Individual Master File account.

    • Earliest 30-Day or 90-Day Notice Date and Amount when IRC 6621(c) Large Corporate Underpayment Interest applies.

    Note:

    Interest and Special Processing actions required for specific case types processed by APS, i.e. Employment Tax, Estate and Gift Tax, Innocent Spouse, TEFRA, etc., are provided in alphabetic order by topic later in this IRM Chapter.

  2. See IRM 8.17.6, Interest Issues in Settlement Computations for additional information.

  3. See IRM 20.2, Interest for service-wide guidance and procedures for all "Interest-related" topics.

  4. See IRM 20.2.8.3(14) Manual Computations for information on the requirement to provide the manual interest computation to the taxpayer under IRC 6631, Notice Requirements.

Form 5403, Appeals Closing Record, Item 08 Entry When There Are Two Agreements
  1. When closing a case with two agreements special processing steps must be taken to ensure both timely assessment and accurate interest application.

  2. To avoid unnecessarily restricting IDRS programming from performing interest computation take the following steps to process each agreement separately whenever possible:

    1. Process the first agreement as a partial assessment and enter the applicable agreement date in Item 08 on Form 5403, Appeals Closing Record. This will allow AIMS to remain open, as well as associate the earliest agreement date with the first amount of agreed deficiency.

    2. Once the partial assessment for the first agreement has posted, process the second agreement for the additional deficiency agreed to as the final closing and enter the second agreement date in Item 08 on Form 5403, Appeals Closing Record.

    3. When appropriate, the second adjustment for final closing can be input within the same cycle as the partial adjustment as long as the appropriate Posing Delay Code (PDC) is entered on Form 5403, Appeals Closing Record, in Item 43 to ensure that both transactions do not attempt to post to the account within the same cycle.

    4. Ensure that the total tax posted to the account will not exceed the total amount of tax agreed to by the taxpayer.

    5. If the Assessment Statute Expiration Date (ASED) will not provide enough time to process both the first and the second agreement as two different adjustments, the combined amount of tax from the separate agreements can be assessed as one TC 30X, however, the deficiency interest must be manually computed to ensure accurate application of the agreement date to each respective tax amount. Once the total interest amount in determined, the interest assessment can then be posted with a TC 340. This will set the Master File (MF) "-I" Freeze on the account. The TE must determine if "Non-Restricting TC 340" procedures must be used whenever possible to avoid unnecessarily restricting the module to allow MF to generate future interest calculations on the account.

    See IRM 20.2.8.11, Non-Restricting Transaction Code (TC) 340, for additional information on using a Non-Restricting TC 340.

  3. When closing a case where Appeals secured and assessed a partial agreement (1st Agreement), enter the following on Form 5403, Appeals Closing Record:

    1. Item 12 = Final Tax to be assessed according to the second agreement;

    2. Item 800 = Final settlement amount to be assessed PLUS the partial agreement amount previously assessed by Appeals;

    3. Item A - Special Handling Instructions = Enter partial agreement date and amount. If more than one partial agreement, list separately.

    4. Determine if master file can computer generate the interest computation and if not, follow restricted interest computation and assessment actions.

Railroad Retirement Tax (8.7.16.26.1)

  1. If the adjustment involves railroad retirement tax, the ATE or ATCL will prepare the information for APS to forward to the Railroad Retirement Board (RRB) at the following address:

    Chief Financial Officer
    Railroad Retirement Board
    844 N. Rush Street
    Chicago, IL 60611

  2. See Exhibit 8.20.7-1 for instructions on preparing Form 5403, Appeals Closing Record for these cases.

Integrated Automation Technology (IAT)

  1. Integrated Automation Technology (IAT) is available to all IDRS users and use of IAT is mandatory for all APS employees effective October 1, 2014. IAT automates many of the AIMS and IDRS command code input screens, provides real-time analysis of the taxpayer's account to identify account condition(s) which may case an unpostable and auto-populates field entries to reduce keystrokes and eliminate input errors.

  2. For additional information, visit the IAT Home Page.

  3. The following Command Codes (CC) are available via IAT:

    Type of Input Action Command Code
    AIMS and Non-AIMS Adjustments to Tax, Penalty, Item Codes and Reference Codes AMCLS
    ADJ54
    CMODE
    TSCHG
    TSCLS
    AIMS Status AMSOC
    AMSTU
    Control Base Actions ACTON
    Credit Transfers ADD24
    ADD34
    ADD48
    DRT24
    DRT48
    FRM34
    Entity Changes BNCHG
    INCHG
    Installment Agreements IADIS
    IAGRE
    IAPND
    IAREV
    Manual Refund Forms 3753 and 5278 Form Completion Only
    Request or Re-Charge a Return ESTAB
    Stop Computer Generated Refund TC 846 NOREF
    Suspend Notice and Collection Action STAUP
    STATI
    STATB
    Unpostables UPTIN

Integrated Data Retrieval System (IDRS) Command Code Job Aid

  1. For a complete listing of AIMS and IDRS Command Codes, their purpose and the applicable field names and descriptions applicable for each CC, click on the link provided. IDRS Command Code Job Aid

Administrative File Closing Assembly Order (8.2.1.13)

  1. When closing an Appeals (non-collection source) case, the APS TE will place the Appeals administrative file in the following order based upon the documents and items included within the file. The list below is not all inclusive but is intended to serve as a guide for the APS TE when closing their case.

  2. The listing below describes the order of documents from the top to the bottom.

    Assembly Order for Non-Collection Cases

    Order Document Type
    1 Current Adjustment Document Adjustment Type
    Form 5403 AIMS Adjustment
    Form 8485 Non-AIMS Adjustment
    Form 3870 Non-AIMS Adjustment
    Form 8278 Civil Penalty Adjustment
    2 Legal Document Filed by Taxpayer Return Type
    Form 1040Form 1120 Income Tax Return
    Form 709 Gift Tax Return
    Form 706 Estate Tax Return
    Form 940Form 941 Employment Tax Return
    Form 720 Excise Tax Return
    Form 5500 Series Employee Plan/Exempt Organization Return
    Other Tax Return Document and Type Not Specifically Listed or Identified
    3 Attachments to Return Document Type
    Folded in half affixed to front of page 1 Prior Account Adjustment(s) Form 5344Form 5403Form 8485
    Form 2859Form 5792Form 3753
    Affixed to back of page 1 Statute Extension(s) Authority
    Affixed to back of page 1 Power of Attorney Authorization
    Affixed to back of page 1 Form 2285(s)
    Affixed to back of page 1 Restricted Interest Computation(s)
    Behind last page of return Amended Taxable Return
    Behind last page of return Claim
    4 Current IDRS Research Only include most current research as appropriate for case type
    5 Authority for Adjustment Authority Type
    Agreed/Settled Executed Waiver of Assessment
    Agreed/Settled Claim Allowance/Disallowance
    Decision Entered/Order Entered Tax Court Decision/Order
    Default Statutory Notice of Deficiency
    Dismissed Tax Court Dismissal
    6 Audit Statement Report and Tax Computations
    7 Form 5402 Appeals Transmittal and Case Memorandum
    8 Appeals Closing Letter Signed and Dated
    9 Appeals work papers
    10 Compliance work papers
    11 When multi-period cases are closed, always associate the work papers with the latest deficiency tax period and input a TC 971 AC 057 on each of the other tax periods to cross-reference the location of the work papers.
    Additional assembly guidance for specific forms and case types is provided below


Forms Prepared in Appeals Cases

  1. Below is a list of forms prepared in different cases but not necessarily in every case. The following guidance is provided for handling these forms.

    1. Agreement Forms with AD Extensions Form 870-AD, Form 2504-AD, etc...) – Send a copy of the agreement form to the taxpayer with the closing letter. Include the original agreement in the administrative file.

    2. Form 5403 - Attach Form 5403 and Form 5403 Instructions to APS Worksheet , on top of the return.

    3. Form 2285 (for Restricted Interest) - Attach original form to reverse side of the front page of return.

    4. Form 1331 or Form 1331-B, Notice of Adjustment - Attach the original to Form 5403.

    5. Form 885-E, Schedule for FICA Tax Adjustment of Wages not Previously Reported - Attach behind the return or to the face of the return.

    6. Form 885-F, Self-Employment Tax Adjustment - Attach behind the return or to the face of the return.

    7. Form 885-T, Adjustment of Social Security Tax on Tip Income Not Reported to Employer - Attach behind the return.

    8. Form 866 and Form 906 (Closing Agreements) - Attach a copy of the closing agreement to each applicable return. Include a copy with the closing letter. Send a copy to Compliance if noted on Form 5402, Appeals Transmittal and Case Memo by the ATE.

    Reminder:

    Since APS no longer creates a Closed Office File, the APS TE must transmit one of the duplicate Original Closing Agreements to the address below, using Form 3210, Document Transmittal , where all Closing Agreements will be retained for 6 years to comply with the Appeals Records Control Schedule retention period.
    Appeals
    Attn: Rhonda Caldwell
    55 North Robinson
    Oklahoma City, OK
    73102-9226

Closing Letter

  1. A closing letter is sent to notify taxpayers Appeals has taken final closing actions on their case. At the time of closing, date the closing letter addressed to the taxpayer and distribute it as follows:

    1. Mail the original and one copy to the taxpayer and/or representative as indicated on the Power of Attorney. If there is no Power of Attorney, mail the original to the taxpayer.

    2. Include copies of applicable enclosures (870-AD, 2504-AD, Form 906 Closing Agreement, Form 872-T, etc) as stated on the closing letter.

Form 872–A Special Consent to Extend the Time to Assess Tax

  1. If the statute is open under a Form 872-Aand the return is closed no-change, the ATE will prepare a Form 872-T which APS will mail to the taxpayer with the closing letter.

  2. Exercise caution prior to sending a Form 872-T on a no change case. You must ensure carryback years with statutes controlled by the originating year Form 872-A are protected or assessed. The statute date for any carryback returns open under an originating year Form 872-A is 90 days from the date Form 872-T is mailed.

AIMS CC: AMCLSA General Processing (8.2.1.12.1)

  1. Verify that all required forms and documents necessary for processing and closing the case are included, contain the correct taxpayer name and entity information, and include all necessary signatures.

    • Form 5402, Appeals Transmittal and Case Memorandum is signed and dated

    • Form 5403 Instructions to APS Worksheet, if applicable

    • Form 5403, Appeals Closing Record

    • Interest related worksheets and forms i.e. 6404(g) Worksheet, Sequa Worksheet, Form 2285, specialized forms required for specific case types and return types, as applicable

    • Agreement Form (signed), Entered Decision, or Defaulted SND as appropriate to legally authorize the account adjustment(s) and closing action(s)

  2. Review AIMS and IDRS prints for each tax period to identify AIMS and Master File freeze codes and account conditions, which require special actions to accurately process the account adjustments.

  3. Verify item and credit adjustments will correctly adjust the respective field on the account without creating an unpostable condition.

    • IRN 886 reduction (-) cannot be for an amount greater than the Taxable Income (TXI) Field Amount currently posted.

    • IRNs for Self Employment Income (SEI) increase cannot cause the total SEI amount to exceed the maximum SEI for the tax period.

    • IRNs for secondary self-employment income, and/or secondary medicare income adjustments cannot be made to an account with a filing status other than Married Filing Joint.

    • CRN 764 cannot increase a refundable credit i.e. Earned Income Credit, to an amount greater than the maximum allowed amount for the respective tax period.

    • CRN reductions cannot decrease an existing credit below 0.00.

    • See http://core.publish.no.irs.gov/docs/pdf/d6209--2014-01-00.pdf for specific information on Transaction Codes, Credit Reference Numbers, Item Reference Numbers, MF Freeze Codes, and Unpostable Codes.

  4. Exhibit 8.20.7-1 provides instructions for completing Form 5403, Appeals Closing Record.

    Note:

    If there are two or more agreements on the case, see IRM 8.20.7.7.8.1, Form 5403, Item 08 Entry When There Are Two Agreements.

  5. Form 2285 is needed for cases involving carry-back adjustments. The TCS function completes the top portion of the form and will provide APS with all prior Form 2285(s) as appropriate when there have been multiple carry-back transactions posted to the account. APS is responsible for performing the complete module recomputation using ACT/DMI and attaching the interest computation along with the Form 2285(s) behind the front page of the return.

  6. Verify the agreement form, settlement computation and Form 5403, Appeals Closing Record all have the same:

    • Tax amount

    • Penalty amount

    • TIN

    • Tax period

    • Taxpayer name

  7. Verify signature and date on Form 5402, Appeals Transmittal and Case Memo.

  8. Ensure there are sufficient copies of Form 5402, Appeals Transmittal and Case Memo or other transmittal, and mark each copy for transmittal to the designated persons. Follow local office procedures for distribution. Generally the distribution of the Form 5402 is:

    1. original Form 5402, Appeals Transmittal and Case Memo remains in the administrative file

    2. copy of Form 5402, Appeals Transmittal and Case Memo is transmitted to the office identified by the ATE.

      Note:

      Follow local procedures for routing Form 5402(s) for Campus cases.

  9. Affix the completed AMCLSA adjustment source document on top of the applicable return. Follow appropriate administrative file procedures for cross-referencing the location of the workpapers.

  10. Access the Docketed/Non-Docketed Disclosure Spreadsheet http://appeals.web.irs.gov/APS/default.htm applicable to the type of case you are processing to determine if the adjustment meets the disclosure criteria. If the disclosure criteria are met, enter the applicable Disclosure Code in Item 39 on Form 5403, Appeals Closing Record and transmit copies of all required documents to the address provided on the Disclosure Spreadsheet using Form 3210, Document Transmittal.

  11. Monitor account adjustment posting and update/suspense/close PEAS timely in compliance with current APS policy and procedure.

  12. See IRM 21.1.7.11.4, Suspense Copies, Form 3210, Document Transmittal, for procedures on monitoring and acknowledgement follow-up requirements.

Non-AIMS Adjustments General Closing

  1. Account and Processing Support (APS) also receives cases for closing action which are not controlled on AIMS.

  2. These Non-AIMS adjustment closings are explained within this IRM under each case type:

    • Abatement of Interest Claim

    • Campus Source Claim

    • Collection Due Process

    • Identity Theft

    • Rejected Offer in Compromise

    • Penalty Appeal (PENAP)

Non-AIMS CC: REQ54/ADJ54

  1. Form 3870, Request for Adjustment is prepared and approved by the ATE/ATM and is submitted to APS for processing Non-AIMS account adjustments via CC: REQ54/ADJ54. The Approving Official Signature authorizes APS to process the account adjustments requested by the ATE.

  2. IRM 2.4.16, IDRS Terminal Input - Command Codes REQ54 and ADJ54 provides detailed item entry instructions and explanations for reference by APS TE's authorized to input Non-AIMS adjustments.

  3. APS must verify the following items when entered by ATE, or complete the following items on Form 3870 as follows:

    • Item 15 Sequence Number, identified by IDRS upon completion of the adjustment input action.

    • Item 16 Blocking Series, 05X, 15X, 18X, 96X, 97X, 98X, 99X.

    • Item 17 Deficiency Interest to Date, MM-DD-YYYY when restricted interest TC 34X is adjusted.

    • Item 18 Source Code, this is a required field for IMF TC 29X adjustments. The Source Code (SC) chooses the beginning explanation appearing on the taxpayer's adjustment notice with the reason code (RC) completing the statement. See Document 6209, Section 8C - Master File Codes, Source Codes, Reason Codes, Hold Codes and Priority Codes to identify the appropriate Source Code for the Appeals adjustment. The most common SC used for Appeals adjustments is "02" which begins the adjustment notice with "We changed your [YYYYMM]" account to correct your [RC].

    • Item 19 Reason Code, this is a required entry and up to 3 RC's may be input and when a Penalty RC is also appropriate, it is entered in position #4. When multiple RC's are input, enter them in numeric order from lowest number to highest number. RC 099 is used when other RC's do not apply and to complete the notice statement with "Account Information" . See Document 6209, Section 8C - Master File Codes, Source Codes, Reason Codes, Hold Codes and Priority Codes to identify the appropriate Reason Code for the Appeals adjustment.

    • Item 21 Hold Code, is entered when appropriate. See Document 6209, Section 8C - Master File Codes, Source Codes, Reason Codes, Hold Codes and Priority Codes to identify the appropriate Hold Code for the Appeals adjustment.

    • Item 23 Priority Code, is entered by APS and must be used when certain conditions exist on the module. The most common PC used on Appeals non-AIMS adjustments is "1" . See Document 6209, Section 8C - Master File Codes, Source Codes, Reason Codes, Hold Codes and Priority Codes to identify the appropriate Priority Code for the Appeals adjustment.

    • Item 24 Posting Delay Code, is entered by APS when the adjustment is input in during the current cycle, but the posting of the transactions must be delayed from 1-6 cycles. A PDC is only entered when needed.

    • Item 25 Source Document (SD) Attached, this is a required entry.
      "Y" , means the SD will be submitted to files for association with the REQ54/ADJ54 Form 5147, IDRS Transaction Record
      "N" means no SD "NSD" will be submitted to files
      "R" , means the SD is being retained by the input function

    • Item 29 TC No. is where the Transaction Code(s) being adjusted are entered along with the increase or decrease dollar amount for each respective TC entered on the associated row i.e. 291, 161, 271, 341, etc.

    • Item 29 Ref. No. Item Adjustment is where the IRN(s) being adjusted are entered along with the increase or decrease amount for each respective IRN i.e. 888, 886, 889, 878, 887, etc.

    • Item 29 Ref. No. Credit Adjustment is where the CRN(s) being adjusted are entered along with the increase or decrease amount for each respective CRN i.e. 807, 765, 338, 256, 257, etc.

    • Item 30 Remarks is used to identify any other specific information needed to complete the adjustment i.e. Refund Statute Control Date (RFSCDT), TCB-DT, and other information not specifically provided an item entry.

    • Item 31 Complete as appropriate.

  4. A Form 8485, Assessment Adjustment Case Record can be prepared by APS, based on the Form 3870 provided by the ATE, to process the Non-AIMS account adjustments if additional fields are needed since the Form 3870 only allows for 4 TC Numbers to be entered.

  5. The APS TE must verify that their adjustments have posted to the account before closing the PEAS record. PEAS Suspense must be used as appropriate. See IRM 8.20.10, Account and Processing Support - Processing Employee Automated System (PEAS), for additional information.

  6. All adjustments AIMS and Non-AIMS must have the Adjustment Source Document associated with the administrative file as well as a copy of the Adjustment Source Document sent to Campus Files for association with the Form 5147, IDRS Transaction Register when Item 25 SD = "Y" .

    Exception:

    Non-AIMS Adjustments input with "NSD" in CC: ADJ54 Remarks, do not require that the Adjustment Source Document be sent to files because the Form 5147, IDRS Transaction Register will not print out for the Files Operation to associate with the Source Document.

  7. The adjustment source document must be placed on top of the return or if no return is present, on top of the case closing package serving as the administrative file under Appeals jurisdiction.

Final Disposition of the Taxpayer's Account Balance

  1. When a case is decided or determined with finality, by Appeals, Counsel, or the United States Tax Court (USTC), the APS Tax Examiner is responsible for taking the following actions:

    • Analyze each tax account to identify Master File (MF) Freezes or other account conditions which may impact the current account adjustment(s)

    • Identify the appropriate processing codes to use when processing the adjustment(s) to avoid an unpostable condition, and or a delay in the release of the refund or notice to the taxpayer

    • Process the legally authorized account adjustment(s) on each respective tax period, which, upon posting will result in the final settlement of the taxpayer's account.

  2. When the taxpayer's account after posting of the adjustment(s) results in a balance due, a notice to the taxpayer is computer generated unless a hold code 2, 3, or 4 is input with the adjustment transaction(s).

  3. When the taxpayer's account after posting of the adjustment(s) results in a credit balance, IDRS will (in most cases) offset the credit to any outstanding balance due account(s) for the taxpayer, and then refund the remaining credit with applicable overpayment interest unless a hold code 2 is input with the adjustment transaction(s).

  4. A Hold Code should only be used when appropriate. When the APS TE uses a Hold Code for a specific reason i.e., to hold a credit balance until the credit can be offset to an outstanding balance, the APS TE must ensure that upon completion of the transfer action, the Hold Code is released to allow final settlement of the taxpayer's account.

  5. When the taxpayer's accounts require manual processing of the offset of credit to an outstanding balance due account, the tax examiner performing the account adjustment(s) must ensure that their action fully resolve the taxpayer's accounts before the PEAS record is closed.

Bankruptcy Examination Case Closing Procedures (8.7.6.9)

  1. Bankruptcy cases require unique processing and statute controls. This section explains the APS procedures for closing Appeals bankruptcy examination cases.

  2. The bankruptcy automatic stay does not prohibit assessments that are allowed to be immediately assessed absent a bankruptcy. The Trust Fund Recovery Penalty (TFRP) and most excise taxes do not involve deficiency procedures and are immediately assessable. See IRM 8.25.1.2, Trust Fund Recovery Penalty (TFRP) Authority for additional information.

Identifying Bankruptcy Cases (8.7.6.9.1)

  1. The ATE will identify a bankruptcy case on Form 5402, Appeals Transmittal and Case Memo.

  2. The following conditions identify a bankruptcy filing:

    • Transaction Code TC 520 with bankruptcy closing codes (CCs 60-67, 81, and 83-89) on TXMODA

    • "-V" freeze or a "-W" freeze for CCs 81 and 84 on TXMODA

    • "Bankruptcy" on the 1st page of the AMDISA.

    • "E/BNK" Status Code on ACDS which is defined as "Inactive, TP in Bankruptcy"

Bankruptcy Case Closing Procedures (8.7.6.9.2)

  1. Bankruptcy cases require unique processing, statute control and closing procedures.

  2. The ATE will address all Bankruptcy conditions on their case prior to forwarding the case to APS for processing actions whether the case is agreed, or unagreed. The Service is not prohibited from making assessments and the ASED is not suspended as a result of the bankruptcy filing. APS must be aware that on Non-docketed cases, the assessment must be made or the Statutory Notice of Deficiency (SND) must be issued prior to the existing ASED.

    Reminder:

    A bankruptcy filing does not suspend the ASED.

    • Agreed cases, the ATE will identify the date the taxpayer filed bankruptcy.

      Note:

      If the ATE did not identify the bankruptcy date, request clarification from the ATE.

    • Unagreed field sourced cases are returned to Compliance Technical Services (CTS) as directed by the ATE for monitoring and statute control.

    • Unagreed campus sourced cases are returned to the originating campus as directed by the ATE for monitoring and statute control.

Bankruptcy - Agreed Closing Procedure (8.7.6.9.3)

  1. Form 5402, Appeals Transmittal and Case Memo, Form 5403, Appeals Closing Record, and closing letter are forwarded to APS by the ATE. The ATE will identify the correct ASED for APS in Item A on the Form 5403, Appeals Closing Record.

    Caution:

    The agreed assessment must be processed timely to ensure posting of the assessment prior to the ASED identified by the ATE. APS must use Quick Assessment procedures if the ASED will expire in 60 days or less.

  2. APS will otherwise use general closing procedures to complete the case processing.

Bankruptcy - Unagreed Case Processing/Closing (8.7.6.9.5)

  1. When the ATE submits the unagreed case to APS for issuance of the Statutory Notice of Deficiency (SND), APS will take the following steps:

    • Issue the SND using Letter 1384, Notice of Deficiency provided by the ATE.

      Note:

      The SND MUST be issued within the normal statute of limitations.

      Reminder:

      When a SND is issued on a bankruptcy case, the case will not be placed in SND suspense but instead the case is forwarded according to the ATE instruction.

    • Return field sourced cases to Compliance Technical Services (CTS).

    • Return campus sourced cases to the originating campus function.

    • Close ACDS using Closing Code = 05, Defaulted SND.

    • If Compliance established the AIMS Controls, use CC: AMSTUB to update AIMS controls to appropriate AIMS Status.

    • Field Examination Technical Services are updated to AIMS Status 21

    • Campus Cases are updated to AIMS Status 20

    • If Appeals established the AIMS Controls, use CC: AMSOCA to remove the record from the AIMS database via Disposal Code (DC) 33.

  2. If, the taxpayer files an objection to the Government’s claim during the time the case is in the ATE's active inventory, , the ATE will stop working the case, identify the Counsel or the Department of Justice Office address where the administrative file must be sent after issuance of the notice, and forward the case to APS for the following actions:

    • Issue a SND using the Letter 1384, Notice of Deficiency prepared by the ATE. The filed will not be suspended.

    • Close ACDS using CLOSINGCD = 19.

    • Close AIMS via CC: AMCLSA using Form 5403, Appeals Closing Record:
      Use the "Copy" Blocking Series 79X,
      Item 12 = TC 300 0.00
      Enter Closing Code 19 in Item 811.

    • Attach a copy of the face of the return and Form 2275, Records Request, Charge and Recharge, to the Form 5403, Appeals Closing Record.

      Reminder:

      The office and address where the administrative file is transmitted to must be included on Form 2275, Records Request, Charge and Recharge.

    • Form 2275 is forwarded to Campus Files for association with the Form 5147, Transaction Record to identify that the administrative file has been "recharged" to either Counsel or the Tax Division, U.S. Department of Justice.

    • Transmit the administrative file to the Counsel Office or Department of Justice Office identified by the ATE, using Form 3210, Document Transmittal.

Bankruptcy - Dismissed Docketed Case Closing Procedure (8.7.6.5.5.2)

  1. Certain docketed cases may be dismissed by the Tax Court due to lack of jurisdiction.

  2. Bankruptcy Code IRC 362(a)(8), states that a case may not be filed with the Tax Court if the automatic stay is in place due to a bankruptcy filing.

  3. To identify these cases, the typical wording from the court on its order of dismissal will state "On (MM-DD-YYYY), respondent filed a Motion To Dismiss for Lack of Jurisdiction, on the ground that the petition was filed in violation of the automatic stay imposed under 11 U.S.C.§362(a)(8). Respondent states in the motion to dismiss that petitioners do not object to the granting of the motion. ORDERED that respondent's Motion To Dismiss for Lack of Jurisdiction is granted and this case is dismissed for lack of jurisdiction."

  4. APS will not process the assessment on these cases.

  5. Docketed cases that are dismissed due to this reason must be returned to the originating function to monitor the bankruptcy. When the automatic stay is lifted or terminates, the originating function will make the assessment at the appropriate time or send the case back to Appeals as a new docketed case if the taxpayer repetitions the Tax Court.

  6. Field sourced cases will be returned to Compliance Technical Services Bankruptcy Coordinator. http://mysbse.web.irs.gov/exam/tip/bankruptcy/contacts/12268.aspx

  7. Campus sourced cases will be sent back to the campus functional unit that issued the SND.

    • Automated Under Reporter (AUR) http://serp.enterprise.irs.gov/databases/who-where.dr/aur-bankruptcy-coordinators.htm

    • Automated Substitute for Return (ASFR) http://serp.enterprise.irs.gov/databases/who-where.dr/asfr-contacts.htm

    • Correspondence Exam (CORR EXAM) Search Page for Originating Correspondence Exam Location.

  8. To return the case to the originating function, APS will take the following actions:

    Processing Steps for Dismissed Docketed Bankruptcy Cases

    Step Action
    Update AIMS or Close AIMS:
    Compliance Status (21)
    or
    Close AIMS with Disposal Code 33.
    If the campus functions, established the case on AIMS, update the AIMS controls to Status 21 using CC: AMSTUB.
    If Appeals established the AIMS control, close the AIMS control via CC: AMSOCA and Disposal Code "33" Erroneous AIMS Account.
    Close the ACDS database ACDS is closed using CC 21 unless the ATE has charged time on the case, then use CC 08.
    ACDS NOTE field Enter a remark in the NOTE field that the case is being returned to either the Exam Technical Services coordinator or the campus function (ASFR, AUR, CORR EXAM) that issued the stat notice. In the NOTE field, place the name of the function and the address where the case is being sent.
    Make a copy of the statutory notice of deficiency (SND) Make a copy of the SND and any other document that may be necessary in the event a protective assessment must be processed by APS. Associate these documents with the Form 3210 follow-up for receipt verification. Once the receiving office acknowledges receipt of the file, the documents associated with the Form 3210 must be shredded in compliance with PII protection measures. The receipted Form 3210 is maintained in compliance with the Appeals Records Control Schedule guidance.
    Prepare Form 3210, Document Transmittal Complete Form 3210 following the instructions below. Place one copy of Form 3210 on the outside of the case file and place one copy inside the case file.


  9. Complete Form 3210, Document Transmittal in the following manner:

    1. In the "To" field, place the name and address of the Exam Technical Services coordinator or the name and address of the appropriate campus function where the file is being returned as identified by the ATE.

    2. In the "Remarks" field, place the following text "Tax Court petition filed in violation of the bankruptcy automatic stay" .

    3. In the body of the Form 3210, Document Transmittal place the exact name of the taxpayer as it is listed on the stat notice and list the tax year or years as listed on the SND.

    4. Below the listing of the taxpayer's name and tax year, place the following text:

    • "APPEALS HAS NO JURISDICTION" .

    • "The U.S. Tax Court has dismissed this petition due to lack of jurisdiction" .

    • "This case is being returned to the originating function due to an erroneous Tax Court filing. The automatic stay provisions of bankruptcy code section 362(a)(8) preclude a debtor from filing a petition with the U.S. Tax Court until the stay is lifted or is terminated. The stay in this case remains in effect. The taxpayer may re-file a valid Tax Court petition upon the lifting or termination of the stay. The bankruptcy should be monitored so that the assessment is made at the appropriate time. " .

  10. Complete the remaining fields of Form 3210, Document Transmittal as appropriate.

    Figure 8.20.7-1

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    Please click here for the text description of the image.

Civil Penalty MFT 13 (BMF) MFT 55 (IMF) Closing Procedures (8.11.1.1.9)

  1. This section provides procedures for processing both pre-assessed and post-assessed Civil Penalty (CVPN) Appeals.

  2. When a CVPN case is submitted to APS for processing, APS must identify if the CVPN module(s) have already been created or if the Appeals determination will require the CVPN module be established.

  3. There are several CVPN codes which carry an Assessment Statute Expiration Date (ASED) and for those cases, ASED protection and assessment time frames apply. The ATE will validate the ASEDs upon receipt and assignment of the case. Upon closing, the ATE will also enter the ASED for each period on the respective closing document.

  4. When a Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties (Rev. 12–2013) is used, the ATE will complete the following items:

    • If the CVPN adjustment does not have an ASED, the ATE will check the box in Item 4 "Check if no ASED"

    • If the CVPN adjustment does have an ASED, the ATE will enter the ASED in Item 6 "Statute date (mandatory) (mmddyyyy)"

    .

  5. A pre-assessed CVPN Appeals determination, will likely require that the MFT 13 or MFT 55 CVPN Module be established for each period being closed.

  6. A post-assessed CVPN Appeals determination, will likely require that the existing MFT 13 or MFT 55 CVPN module be adjusted for a partially sustained or full allowed case, or closed with a TC 290 0.00 when the Compliance determination is fully sustained.

  7. Post-assessment CVPN cases are generally submitted to Appeals as a PENAP case, (Ogden PENAP work stream).

  8. When APS receives the case for closing, APS will:

    1. Assign the case to an APS employee on Processing Employee Automated System (PEAS)

    2. Review closing documents for special instructions

    3. Review and update ACDS with the closing information according to the Form 5402

    4. Input the Civil Penalty Account adjustments using IDRS CC:REQ54

    5. ACTION - enter ACKCLS

    6. RevisedPen - enter the amount of the penalty sustained

    7. Send feedback to Compliance when an address is provided by the ATE in the Route To: field on the Form 5402, Appeals Transmittal and Case Memo

    Note:

    APS will process all miscellaneous civil penalties covered by the Civil Penalty Module (CPM) system through IDRS, using the customized Form 5402, Appeals Transmittal and Case Memo and Form 8278, Computation and Assessment of Miscellaneous Penalties, as the source document.

  9. All Non-AIMS adjustments must be monitored until they are posted to the account. When the CVPN adjustment(s) is input, place the case in PEAS Suspense with a follow-up date for no later than the applicable 23C Date.

Abusive Transaction IRC §6707A Penalty Closing Procedures (8.11.7.1.4)

  1. The ATE will prepare and provide Form 5402, Appeals Transmittal and Case Memo with the revised penalty amounts APS needs to update ACDS.

  2. Depending on the resolution, Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties when prepared by the ATE, is processed by APS.

    1. If the Abusive Transaction Penalty is fully or partially sustained, assess per Form 8278 using TC 240 and Penalty Reference Number (PRN) 648, Failure to Disclose Reportable Transaction with Return (Form 8886).

  3. The following closing codes apply to the Abusive Transaction Penalty WUNO:

    Determination Made Closing Code
    Sustained (penalties are not removed) 14
    Abated (penalties are fully removed 15
    Partially Abated (only part of the penalties are removed) 16
  4. If there is a related income tax work unit, regular closing codes and procedures apply.

  5. Use general closing guidelines for additional ACDS updates required at closing.

Accelerated International Penalty Case Closing Procedures (8.11.5.8.2)

  1. Expedited processing is required for these cases.

  2. All adjustments must be made within 5 business days of receipt of the case in APS.

  3. The ACDS Closing Codes for these types of cases are as follows:

    ACDS Closing Code Description
    14 penalty fully sustained
    15 penalty fully conceded
    16 penalty compromised
  4. APS will send a copy of the Form 5402, Appeals Transmittal and Case Memo and ACM to the Compliance location identified by the ATE in the remarks section.

Return Preparer Penalty Closing Procedures (8.11.3.5)

  1. Return Preparer Penalties are closed the same as other civil penalty cases with the following additions:

    1. Form 5402, Appeals Transmittal and Case Memo, will be included in the closing package from the ATE. It should include information on the revised penalty amounts needed to update ACDS.

    2. Depending on the resolution, Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties when prepared by the ATE, is processed by APS.

    3. Update ACDS following general closing procedures.

  2. The following closing codes apply:

    Determination Made CLOSINGCD
    Sustained (penalties are not removed) 14
    Abated (penalties are fully removed) 15
    Partially Abated (only part of penalties are removed) 16
  3. Forward copy of ACM and Form 5402, Appeals Transmittal and Case Memo to Compliance per the instructions on the Customized Form 5402.

  4. APS will assess or abate the penalty per the ATE prepared Form 5402, Appeals Transmittal and Case Memo and Form 8278 instructions.

    1. Penalties are assessed using TC 240 and the applicable reference code via IDRS CC: REQ54 adjustment.

    2. If the MFT 55 (for IMF) or MFT 13 (for BMF) account has not been established, APS will need to use IDRS CC: MFREQD to create a dummy module.

Claim Case Closings

  1. Several types of Claim cases are worked in Appeals:

    • Agreed or Defaulted 90-Day Cases Involving Claims

    • Abatement of Interest

    • Claim Campus Source

    • Claim Field Source

Agreed or Defaulted 90-Day Cases Involving Claims Expedite the Processing of Large Dollar Cases (8.7.7.10.2) (8.7.7.10.3)

  1. 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, unless the taxpayer submits Form 2297, Waiver of Statutory Notification of Claim Disallowance.

  2. The tax law provides for interest on overpayments in respect to any internal revenue tax, in accordance with IRC 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.

    Note:

    These procedures do not apply to cases requiring Joint Committee Review. See IRM 8.7.9.5, Appeals Responsibility in Joint Committee (JC) Cases.

    The expedite procedures include the following:

    • Account and Processing Support (APS) - APS will expedite the closing of a "large dollar" overpayment case, as" flagged" by the ATE. APS will assign the case on 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.

Abatement of Interest Claim Cases (8.7.7.13.3 & 8.7.7.13.4)

  1. Under IRC 6404(e)(1), the Service has the authority to abate interest in certain situations.

  2. The ATE will provide APS with an Abatement of Interest customized Form 5402, Appeals Transmittal and Case Memo, an ACM, and Form 3870, Request for Adjustment for each abatement of interest claim. Claims for abatement of interest for actions involving Appeals employees must be approved and signed by the appropriate Appeals Area Director.

  3. For abatement of interest claims allowed in full:

    1. Date and send closing Letter 2393, Abatement of Interest - Fully Allowed or Letter 913, Closing Letter - Agreed Cases by regular mail.

    2. Review the adjustment document (Form 3870) for the appropriate closing codes, based on the ATE's conclusion to fully allow the interest abatement claim - TC 290 $0.00 and TC 341 with the amount of the interest to be abated. Note "Reason Code (RC) 82" on the adjustment form.

  4. For abatement of interest claims allowed in part:

    1. Close as a defaulted disallowance letter, tried case, Counsel settled case, or dismissed from Tax Court. (See below for ACDS closing codes.)

    2. Process the adjustment document with TC 290 $0.00, TC 341 interest abatement amount, RC 81 (partially abated), or RC 82 (fully abated), if the Tax Court decides further abatement if allowed.

    3. Process the adjustment document with TC 290 $0.00, if the Tax Court decides that no further abatement is warranted or the case is closed as a default or dismissal.

      Note:

      A partial abatement of interest must have been done earlier (with TC 341, RC 81) when Letter 2391, Partial Allowance Letter Abatement of Interest was issued.

  5. For abatement of interest claims disallowed in full:

    1. Close as a defaulted Letter 2392, Disallowance Letter for Abatement of Interest, tried case, Counsel settled case, or dismissed from Tax Court. (See table below for ACDS closing codes.)

    2. Process with TC 290 $0.00, RC 80 on the adjustment document.

  6. Update ACDS for all abatement of interest closings using general closing procedures and the following closing codes:

    Closing Code Definition
    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 cases
    20 Premature Referral
    1. RevsdTAX - enter the negative amount approved for abatement, e.g. fully sustained will have $-0-.

    2. DDAMTDIS - enter only the amount disallowed, e.g. full disallowance reflects the full amount of the claim and full allowance reflects $-0-. Partial allowance reflects the difference between the DDAMTCL and the RevsdTAX.

  7. The APS TE must resolve all freeze codes on the taxpayer's account to ensure that any refund due to the taxpayer is released and refunded timely.

  8. Use PEAS Suspense when an account adjustment must be monitored until fully posted.

  9. Upon completion of the account adjustment and verification that the appropriate refund amount has been released to the taxpayer, remove the case from PEAS suspense and close PEAS.

Methods and Examples for Computing Interest Abatement

  1. See Exhibit 8.20.7-7, for guidance on processing an Interest Abatement case which can be submitted to APS as a partial (interim) or a final determination closing.

Claim Cases - Campus Source

  1. Campus claims are normally not controlled on AIMS.

    Note:

    If AIMS controls have been established process the closing via CC: AMCLSA using Form 5403, Appeals Closing Record.

  2. When AIMS controls have not been established, process the adjustment to IDRS using Non-AIMS CC: REQ54:

    1. Form 3870, Request for Adjustment or Form 8485, Assessment Adjustment Case Record .

    2. Form 5402, Appeals Transmittal and Case Memo.

  3. A separate Form 3870 or Form 8485 is needed for each tax period being adjusted.

  4. Date and mail one of the following closing letters, prepared by the ATE:

    • Letter 2681, Appeals Full Disallowance After Previous Claim Disallowance

    • Letter 2682, Appeals Full Claim Allowance

    • Letter 2683, Appeals Partial Disallowance After Previous Claim Disallowance

    ,.

    Note:

    An Appeals disallowance Letter 2681 or Letter 2683 will contain a reminder that the taxpayer has two (2) years from the date of the statutory claim disallowance letter (usually Letter 105-C or Letter 106-C) to file suit in either the U. S. Court of Federal Claims or a U.S. District Court. Generally, the Compliance Campus has already issued the statutory claim disallowance letter (by certified or registered mail) giving the taxpayer an opportunity to go to Claims Court or District Court. Therefore, send the closing letter by regular mail.

  5. These cases are not held for suspense.

  6. The following are the ACDS entries required at closing:

    1. ACDS Closing Codes

      Closing Code Definition
      14 Full Disallowance
      15 Full Allowance
      16 Partial Allowance
    2. RevsdTax - enter the negative amount approved for abatement/refund. e.g. full disallowance would be $–0–.

    3. APPEALS AMTDIS - enter only the amount of the claim disallowed by Appeals.

    Note:

    Follow these procedures for non-AIMS controlled claim cases, if a claim disallowance letter was not previously mailed or Form 2297, Waiver of Statutory Notification of Claim Disallowance was not signed. The ATE will prepare the appropriate closing letter and provide the appropriate closing instructions on Form 5402, Appeals Transmittal and Case Memo. If the claim case is controlled on AIMS, follow the general procedures for closing AIMS-controlled cases. The ATE could make a determination to secure an agreement form and/or send (by certified or regular mail) a statutory claim disallowance letter (or secure a Form 2297 in lieu of the statutory claim disallowance letter).

Claim Cases - Field Source

  1. Claims for abatement or refund may require the following actions:

    • Issuance of a certified letter of claim disallowance

    • Account adjustments/abatements

Claim Closing When AIMS Controls Are Open
  1. For claim cases originating from filed Compliance, the amount of the claim that Compliance disallowed will be on the second page of the AMDISA. Close the case on ACDS by following normal closing procedures (docketed or non-docketed). In addition:

    1. RevsdTax - enter the net deficiency or overassessment with a (-) sign.

    2. DDAMTDIS - enter the claim amount disallowed by Appeals. This amount cannot be more than the claim amount shown on the second page of the AMDISA. (If a deficiency is to be assessed, enter the full amount of the claim.)

    3. Appeals AMTDIS - enter only the amount of Appeals AMTCLM (claim filed directly with the ATE - hasn't been seen by Exam) which was subsequently disallowed by Appeals. (If a deficiency is to be assessed, enter the full amount of the claim.)

  2. Prepare Form 5403, Appeals Closing Record according to Exhibit 8.20.7-1 to include applicable Claim related entries. The Form 5403, Appeals Closing Record claim entries are:

    1. Item 20 - "MM-DD-YYYY" = date the signed Form 2297, Waiver of Statutory Notification of Claim Disallowance was received in Appeals or the date the claim disallowance letter was issued

    2. Item 808 - amount of claim from Compliance that Appeals disallowed

    3. Item 809 - (if applicable), the amount of a new claim received by the ATE after assignment of the case. This amount will not be reflected on page 2 of the AMDISA under Exam Claim Amount Disallowed)

    4. Item 810 - amount in Item 809 that Appeals disallowed, if applicable

    Note:

    Item 809 and 810 are only used if during the Appeals Hearing, the taxpayer submits a new claim/additional claim which was not previously considered by Compliance.

  3. Date and mail the closing letter:

    1. Letter 913 - letter for allowed claims or Form 2297 received

    2. Letter 1363 - partial claim disallowance letter sent certified mail

    3. Letter 1364 - full claim disallowance letter sent certified mail

      Note:

      The certified claim disallowance letters are not suspensed in the same way a Statutory Notice of Deficiency. Once the certified claim disallowance letter is issued, the case is closed on ACDS and the final determination is processed via AIMS or Non-AIMS as applicable.

Closing Agreements (CA) (8.2.1.17)

  1. APS will take the following actions for a case settled via a Form 906, "Closing Agreement" :

    • Scan the signed Form 906, Closing Agreement and Form 4222, Closing Agreement Checklist (all pages)

    • Attach the scanned file to the applicable ACDS case record

    • In PEAS, select CA for the PEAS Feature Code

    • Use IDRS CC: FRM77 to input a TC 971 AC 256 for each tax period covered by the CA

    • Update the PEAS Case Activity Record (CAR) to document the actions taken

    • Affix the original Closing Agreement to the most recent tax return (latest tax period) covered by the Closing Agreement

    • Forward a copy of the Form 5402, Appeals Transmittal and Case Memo, the ACM, and an Original of the Form 906, Closing Agreement, with Form 4222, Closing Agreement Checklist, to the office identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo

      Note:

      Always use Form 3210, Document Transmittal when transmitting taxpayer information (PII).

    Reminder:

    Since APS no longer creates a Closed Office File, the APS TE must transmit one of the duplicate Original Closing Agreements to the address below, using Form 3210, Document Transmittal .

  2. All Closing Agreements will be retained for 6 years to comply with the Appeals Records Control Schedule retention period.

    Appeals

    Attn: Rhonda Caldwell

    55 North Robinson

    Oklahoma City, OK 73102–9226

Collection Appeal Program (CAP) Case Closing Procedures (8.24.1.4)

  1. The ATM will enter the ACAPDATE on ACDS, and forward the closed CAP file, via encrypted email to APS for processing.

  2. The critical CAP time restraints require the closing of a CAP case in APS by the end of the business day following the date the case was received in APS.

  3. APS will close the case on ACDS using closing instructions as provided by the ATE on Form 5402, Appeals Transmittal and Case Memo.

  4. The ACDS CASES Type Codes used to track this program are identified in the table below:

    ACDS Code Is used for
    CAPLV levies, third party claims to property under IRC 6343(b), taxpayer requests for return of property under IRC 6343(d)
    CAPLN liens, lien issues, denied discharges under IRC 6343(b)(4), denied subordinations under IRC 6325(d)
    CAPSZ seizures
    CAPIA rejected, modified, proposed for modification, terminated and proposed for termination installment agreements
  5. ACDS Closing Codes are identified and explained in the table below:

    If the Collection Action is Use Closing Code When
    Fully sustained 14 The collection action is supported with no change.
    Not sustained 15 The collection action is completely overturned. For example, closing code 15 would be used when a levy is released.
    Partially sustained 16 Only minor changes are made in the collection action. For example, if filing of a Notice of Federal Tax Lien is proposed, a minor change would be to give the taxpayer 10 more days to come up with the funds before the lien is filed.
  6. APS will forward the following items via encrypted email to the originating function:

    • Form 5402, Appeals Transmittal and Case Memo

    • Closing Letter

    • Appeals Case Memorandum (if provided)

Collection Field CAP Case Closing (8.24.1.2.4)

  1. Collection Field CAP cases are transmitted via encrypted email to the originating Revenue Officer (RO) identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

  2. APS is responsible for entering the Date on the Closing Letter by using the Typewriter Feature in Adobe.

  3. APS will send an encrypted email to the originating RO with a Cc: to the RO Group Manager and include the following attachments:

    • Form 5402, Appeals Transmittal and Case Memo

    • "Dated" Closing Letter

    • Appeals Case Memorandum (ACM), if one is prepared by the ATE

  4. APS will activate the "Request a Delivery Receipt" option to track the email.

  5. APS will also transmit the Closing Letter to the taxpayer and/or their Power Of Attorney (POA) via fax or mail (if a fax number is not provided), on the same day as the email is sent.

  6. The electronic CAP case can be purged after 30 days.

  7. For additional information on the Step-by-Step Paperless CAP Process (For Field Sourced Cases) see IRM 8.24.1, Exhibit 8.24.1-3.

Automated Collection System (ACS) CAP Case Closing (8.24.1.2.5 (5))

  1. Upon closing an ACS CAP case, the Form 4442, Inquiry Referral if used, will be returned via encrypted email to the sending ACS CAP coordinator together with the Form 5402, Appeals Transmittal and Case Memo and a copy of the closing letter.

  2. For additional information on the Step-by-Step Paperless CAP Process (For Non-Field Sourced Cases) see IRM 8.24.1, Exhibit 8.24.1-2.

Accounts Management CAP Case Closing (8.24.1.2.6 (6))

  1. Upon closing an Accounts Management CAP case, the Form 4442, Inquiry Referral will be returned via encrypted email to the initiating CAP coordinator together with the Form 5402, Appeals Transmittal and Case Memo and a copy of the closing letter.

  2. For additional information on the Step-by-Step Paperless CAP Process (For Non-Field Sourced Cases) see IRM 8.24.1, Exhibit 8.24.1-2.

Collection Due Process (CDP) Overview of Back-End Processing (8.22.3.1)

  1. To properly close a CDP case, Account and Processing Support takes the following actions when applicable:

    • Issue Notice(s) of Determination by certified mail

    • Input TC 971 AC 277 to indicate that Appeals has completed their consideration and issued a determination letter.

    • Monitor the case during the suspense period and if the taxpayer files a Tax Court petition, until the Tax Court decision becomes final and the file is returned from Counsel

    • Accurately input TC 521 CC 76 and/or CC 77, to end the suspension of the collection statute

    • Input of any collection alternatives or adjustments to IDRS, e.g. IA, CNC, Form 3870

    • Close a CDP OIC off of the Automated Offer in Compromise system (AOIC)

    • Input TC 481 for CDP OIC cases that are not loaded on the AOIC system

    • Transmit an accepted CDP OIC file to Memphis or Brookhaven MOIC

    • Forward the case(s) to the Florence Campus Appeals office, or other APS office as directed by management, where an Innocent Spouse (IS) issue was raised

    • Input the closing information to ACDS and close PEAS

    • Close the IDRS control base on CDP or EH cases originating from ACS

  2. When there is a related innocent spouse case, a timely CDP offer case, or an equivalent hearing case associated with the CDP case, the related cases may be closed off ACDS at the time the Notice of Determination is issued. However, the case files should be kept together with the CDP case during the monitoring period.

    Note:

    The CDP must be for the Requesting Spouse.

  3. APS instructions relating to the issuance of a Bankruptcy Resolution Notice of Determination are contained in IRM 8.20.7.17.7, CDP Bankruptcy Case Closing Procedures (8.7.6.2.10).

  4. All CDP NOD's are issued and suspensed by the APS Campus teams. The date of the Notice of Determination Letter and the postmark must be the same. If the taxpayer does not petition Tax Court for a review of the Appeals determination within 30 days after the CDP Notice of Determination is issued, the field offices will send the CDP case to one of the Appeals campus CDP units for back-end processing.

    Note:

    Additional suspense time is required for the following Notice of Determination combination letters as identified below:

    • Letter 4390 for Innocent Spouse cases (suspended for 90 days)

    • Letter 4389 for Abatement of Interest cases (suspended for 180 days)

    • Letter 4439 for EH Innocent Spouse cases (suspended for 90 days)

    • Letter 4440 for EH Abatement of Interest cases (suspended for 180 days)

  5. Brookhaven, Florence, Fresno, Memphis and Philadelphia APS teams process CDP and EH case closures.

  6. This section provides guidance for APS employees on closing responsibilities for CDP and EH cases and for processing collection alternatives and adjustments.

CDP Case Closing Actions (8.22.3.2)

  1. APS campus sites complete back-end closing actions on CDP and EH cases that originate both in field Collection and the Automated Collection System (ACS).

Processing Employee Automated System (PEAS) (8.22.3.2.1)
  1. Assign the CDP WUNO on PEAS when received in the centralized APS campus office.

  2. The PEAS type will be "CLS." The subtype selected will reflect the action required on the case:

    • "ACDS Only"

    • Special Processing – if adjustments or account action is required

  3. APS employees will:

    1. Close cases from ACDS

    2. Determine and input the TC 521 date

    3. Input adjustments to accounts

    4. Input collection alternatives

    5. Close the AOIC database if applicable

  4. The case will not be closed out of the TE’s inventory on PEAS until all actions have been completed and all IDRS transactions have fully posted.

  5. If the record has multiple years, each year may be closed as action has been completed; the entire case must not be closed if actions, including cycling adjustments, have not been completed.

  6. Suspense PEAS, if necessary, during the process.

CDP Cases Chosen for AQMS Review (8.22.3.8)

  1. See IRM 8.20.7.2.2.1, Cases Closed on ACDS But No Tax, Penalty, or Interest Adjustments are Processed by APS for additional information.

ACDS Entries: CDP, EH, RJ and CDPTD (8.22.3.3)

  1. This section provides guidance for ACDS entries for closing CDP, EH, RJ and CDPTD cases.

ACDS Closing Codes (8.22.3.3.1)
  1. CDP cases are closed with the following closing codes:

    Closing Code Action
    04 Agreed with waiver (Form 12257)
    05 Defaulted determination letter
    10 (Docketed) Agreement Secured - Used for a case settled with a secured agreement, whether it was secured by Appeals or Counsel
    11 Dismissed - Lack of Jurisdiction
    12 Dismissed - Lack of Prosecution
    13 Disregarded Hearing Request
    16 Withdrawn (Form 12256 or other written withdrawal)
    17 Tried Case - Used for any cases tried by Counsel which resulted in a court rendered decision
    20 Premature referrals or rescinded CDP cases
    42 Remanded cases (interim)
    43 Petitioned cases (interim)
  2. EH cases are closed with the following closing codes:

    Closing Code Action
    13 Disregarded Hearing request
    14 Fully sustained
    15 Partially or not sustained
    16 Withdrawal
    20 Premature Referral
  3. RJ cases are closed with the following closing codes:

    Closing Code Action
    14 Collection is following Appeals' CDP determination
    15 Collection is not following Appeals' determination
    16 Appeals' CDP determination is revised in cases involving change in circumstances
  4. Separate Timeliness Determination (CDPTD) cases are closed with the following closing codes:

    Closing Code Action
    14 Appeals agrees with Collection's timeliness determination
    15 Appeals disagrees with Collection's timeliness determination
    16 Appeals partially agrees with Collection's determination
ACDS Dates and Action Codes (8.22.3.3.2)
  1. This section provides guidance on ACDS dates and action codes for CDP closing types.

CDP Default: CLOSING CD = 05 (8.22.3.3.2.1)
  1. ACDS Entries:

    • LACTION = TC 521

    • LTODATE = Enter the date of the TC 521

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

CDP Waiver Form 12257: CLOSING CD = 04 (8.22.3.3.2.2)
  1. ACDS Entries:

    • LACTION = TC 521

    • LTODATE = Date ATM or ATE signed Form 12257

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

CDP or EH Closed With Form 12256 Withdrawal: CLOSING CD = 16 (8.22.3.3.2.3)
  1. ACDS Entries:

    • LACTION = TC 521

    • LTODATE = Date Appeals received Form 12256

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

CDP or EH Closed as a Disregarded Hearing Request: CLOSING CD = 13 (8.22.3.3.2.4)
  1. ACDS Entries:

    • LACTION = TC 522

    • LTODATE = Enter date TC 522 is input

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

CDP or EH Closed as a Premature Referral: CLOSING CD = 20 (8.22.3.3.2.5)
  1. ACDS Entries:

    • LACTION = TC 522

    • LTODATE = Enter date TC 522 is input

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

  2. See IRM 8.20.7.17.5, Inputting TC 522 for Disregarded and Non-Processable Hearing Requests for information on the use of TC 522 for CDP cases closed using Closing Code 20.

EH Closure: CLOSINGCD = 14 (sustained) or cc 15 (not sustained) (8.22.3.3.2.6)
  1. ACDS Entries:

    • LACTION = Leave blank

    • LTODATE = Leave blank

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

Retained Jurisdiction: CLOSINGCD = 14, 15, or 16 (8.22.3.3.2.7)
  1. ACDS Entries:

    • LACTION = Leave blank

    • LTODATE = Leave blank

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

CDPTD: CLOSINGCD = 14, 15, or 16 (8.22.3.3.2.8)
  1. ACDS Entries:

    • LACTION = Leave blank

    • LTODATE = Leave blank

    • DATECLOSED: Enter date closed in APS

    • ACTION: ACKCLS

    • TODATE: Date case sent for closing

Determine the TC 521 Date (8.22.3.4.1)

  1. The TC 521 date is the date the determination becomes final. APS must input the TC 521 date and monitor IDRS to verify it posted to the taxpayer's account.

    Note:

    When calculating the TC 521 date, APS should only use the "Target Date" calculator on ACDS and not the date listed in the SNEXPDATE field.

  2. If the taxpayer does not file for a judicial review, compute the TC 521 as follows:

    If Then
    Letter 3193 Notice of Determination is issued and CDP case is closed CC 05 TC 521 = 30 days after the letter is issued
    Form 12257 Waiver of Right to Judicial Review is secured and CDP case is closed using CC 04 TC 521 = date ATM or Hearing Officer signed Form 12257
    Form 12256 or a withdrawal is received and CDP case is closed CC 16 TC 521 = the date Appeals received the withdrawal as shown on Letter 4383, Withdrawal Acknowledgment.
    CDP/IS Combo Letters Letter 5390 or Letter 4439 is issued as closing letter because the CDP taxpayer raised a spousal issue TC 521 = Notice of Determination Letter date + 90 days if the taxpayer does not petition Tax Court
    CDP/ ABINT Combo Letter 4389 or Letter 4440 is issued as closing letter because the CDP taxpayer raised an abatement of interest issue TC 521 = Notice of Determination Letter date + 180 days if the taxpayer does not petition Tax Court
    The CDP case is closed as a premature referral (CC 20) do not input TC 521, input TC 522 with same date as TC 520.
    The CDP case is closed as a disregarded hearing request (CC 13) do not input TC 521, input TC 522 with same date as TC 520.
  3. If the taxpayer requested judicial review, the TC 521 date will be computed as follows:

    If Then
    The Tax Court decision reads "Pursuant to the agreement of the parties" without an IRC 6330(e) waiver paragraph and the taxpayer does not petition a higher court (CC 10) TC 521 = Date decision entered + 90 days
    The Tax Court decision reads "Pursuant to the agreement of the parties" with an IRC 6330(e) waiver paragraph (CC 10) TC 521 = Date decision entered.
    The Tax Court decision reads "Pursuant to the determination of the court" and is only signed by the judge (CC 17) TC 521 = Date decision entered + 90 days
    A Tax Court decision for dismissal and the taxpayer does not petition a higher court TC 521 = Date decision entered + 90 days

    Note:

    If a taxpayer appeals a Tax Court decision to a U.S. Court of Appeals and/or U.S. Supreme Court, the above time periods will be extended. A chart referencing the various situations that may arise can be found in Chief Counsel Directives Manual CCDM 36.2.5.3. Use this chart to assist in the determination of the TC 521 date. Counsel will generally hold cases until the decision of the Tax Court is final. The TC 521 date should be determined after Counsel returns the case. If there is a question in determining the TC 521 date, consult with APS management or contact the Counsel attorney directly for assistance in determining the correct date.

  4. The Collection Statute Expiration Date (CSED) will systemically be computed by IDRS with the input of the TC 521.

  5. A manual computation is ONLY required when the account is joint and only the Primary (P) or Secondary (S) taxpayer requested the hearing.

    Note:

    A manually computed CSED is input on IDRS via CC: REQ77 TC 550.

  6. The new CSED can be manually computed using the following tools:

    1. ACDS Utilities "Number of Days" calculator. This tool calculates the number of days between the TC 520 and TC 521 dates.

    2. ACDS Utilities "Target Date" calculator. This tool calculates the new CSED date when the number of days the CSED is suspended (see (a) above) is added to the current CSED.

  7. If the CSED was suspended for only "P" or "S" , a new CSED is input via REQ77 with TC 550.

Input of TC 522 for Disregarded and Non-Processable Hearing Requests (8.22.3.4.3)

  1. APS will input a TC 522, to the periods on any CDP case where the ATE closes the case as a disregarded hearing request using closing code 13. A disregarded hearing request is one submitted by a taxpayer where all the taxpayer's issues are considered frivolous or raised with a desire to impede collection. TC 522 does not require a closing code. It reverses the input of all prior TC 520's to that period. The net result of TC 522 input is that there is no suspension of the collection statute.

  2. APS will input a TC 522, to the periods on any CDP case where the ATE closes the case as a premature referral, using closing code 20.

  3. TC 522 is input using the same date as the TC 521 via IDRS CC: FRM77.

Closing ACS-originated Control Bases (8.22.3.5)

  1. ACS generally establishes and assigns an IDRS control base to the Brookhaven, Florence, Fresno, Memphis or Philadelphia APS team when they forward a CDP or EH case to the respective site, following IRM 5.19.8.4.9.

    ACS will reassign to APS using the following codes:

    APS Campus Location IDRS Unit Code
    Brookhaven 66195
    Florence 66196
    Fresno 66269
    Memphis 66211
    Philadelphia 66199
  2. APS uses IDRS Command Code ACTON to close the IDRS control base at the conclusion of CDP back-end processing on all ACS originated cases..

    Example:

    ACTON, C##,C

  3. See IRM 2.3.12, IDRS Terminal Responses, Command Code ACTON, Exhibit 2.3.12–2 for ACTON format.

CDP and EH Bankruptcy Case Closing Procedures (8.7.6.2.10)

  1. When a CDP Letter 4299, Bankruptcy Resolution Notice of Determination (BKNOD), has been issued and the 60-day suspension period has concluded, take the following actions:

    1. If the ATE or APS receives correspondence from the taxpayer within 30 days of the issuance of the BKNOD, the case will be returned to the ATE to resolve the taxpayer's issues.

    2. If the taxpayer did not respond, at the completion of the 60-day monitoring period described above, follow established procedures for closing CDP cases, updating ACDS, reversing the TC 520 and returning field cases to the RO and by sending a copy of the Form 5402, Appeals Transmittal and Case Memo to ACS for ACS sourced cases.

    3. Send a copy of the BKNOD to the Insolvency Unit address provided on the Bankruptcy Resolution Transmittal Memorandum.

  2. For Equivalent Hearing (EH) cases, the ATE will issue Letter 4300, Bankruptcy Resolution Decision Letter and send a copy to the Insolvency unit assigned the case. The ATE will retain the case file in inventory for thirty days. Once all issues have been resolved, the case will be submitted to APS for closing. The ATE will have a copy of the letter in the administrative file. APS does not need to issue any letters. This will be annotated on the Form 5402, Appeals Transmittal and Case Memo by the ATE. Follow established procedures for closing CDP/EH cases

  3. APS will not receive requests for abatements from the ATE based upon bankruptcy "dischargeability" determinations. If an ATE believes that a particular tax year was dischargeable and should be abated, the abatement has to be completed by the Insolvency function. If APS receives such a request by the ATE, the case should be sent back to the ATE to resolve the "dischargeability" issue with Insolvency.

  4. "Dischargeability" issues may arise on a CDP case if the taxpayer petitions the Tax Court. If APS receives a stipulated decision or directives from Counsel that a tax year was dischargeable and should be abated, APS will contact the Centralized Insolvency Organization (CIO) to coordinate with the appropriate Insolvency office to have the liability abated. APS will provide the following documentation to CIO:

    • Name of the Counsel Attorney for the case

    • Closing instruction from Counsel

    • Stipulated Decision

    The Insolvency function will contact APS once the requested abatements are completed. The Insolvency function will only make adjustments based upon "dischargeability" determinations and will not make any adjustments based upon tax recomputations. Adjustments based upon tax recomputations will be processed by APS. To contact the Centralized Insolvency Organization by phone, go to the Who/Where tab on SERP and click on the Insolvency (Bankruptcy) Tools. Then go to Insolvency (Bankruptcy) National Field/Centralized Site Directory where the telephone number for the CIO will be listed http://serp.enterprise.irs.gov/databases/who-where.dr/inslvncy-bnkrptcy/national_insolvency_field.htm.

  5. The Insolvency function is the only function that can input bankruptcy transactions onto IDRS. APS must not input requests for TC 520/521 with bankruptcy closing codes nor should APS input any TC 971 with abatement or partial abatement action codes.

    Note:

    See IRM 21.5.6.4.44, -V Freeze guidance provided to prevent action on a case that has been referred to the Department of Justice.

CDP Rapid Response Appeals Process (RRAP) APS Closing Procedures (8.22.3.6)

  1. Appeals Team Managers will transmit RRAP cases to APS on an RRAP cover sheet.

  2. Upon receipt of the RRAP case from the ATM, APS will take the following actions:

    • Issue the appropriate letter within ten (10) calendar days of the ACAPDATE.

    • If a Notice of Determination (NOD) is issued, suspend the case for a total of sixty (60) days.

    • If the taxpayer does not petition the United States Tax Court (USTC), overnight the case to the Fresno APS unit within two (2) business days of the expiration of the sixty (60) day suspense period.

    • If the taxpayer petitions the USTC, take no action until the Tax Court case is closed and Counsel has returned the case to Appeals. Once the case is returned, overnight the case to the Fresno APS unit.

    • If a Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1) is secured, overnight the case to Fresno APS.

    • When transmitting the case to the Fresno APS unit, ensure the RRAP cover sheet is attached to the outside of the case file to properly identify the case as needing RRAP handling by the unit.

    • The address for the Fresno APS unit is:

      IRS Appeals Office

      Attn: APS RRAP PTM

      5045 East Butler Avenue

      Stop 55202

      Fresno, CA 93727

  3. Fresno APS will close the case after the decision is final. Fresno APS will fax copies of the Appeals closing documents listed below to the originating Revenue Officer:

    • The fax cover sheet prepared by the RO

    • Form 5402, Appeals Transmittal and Case Memo

    • Letter 3193, Notice of Determination Concerning Collection Actions Under Sections 6320 and 6330 with enclosure or

    • Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1) with cover letter or

    • Form 12256, Withdrawal of Request for Collection Due Process or Equivalent Hearing with cover letter

    • Appeals Case Memorandum (ACM)

    • Other documents obtained by Appeals during the CDP hearing process

      Note:

      If the "other documents" exceed fifteen (15) pages, they may be mailed to the RO. However, the first six (6) items must always be faxed to the RO.

CDP Closing Actions for the Case File (8.22.3.7)

  1. Whenever there is judicial review of a CDP or an EH with a related case that has judicial review, the case files should be kept together until the suspense period expires or the matter is resolved in the courts.

  2. Close PEAS:

    1. Use PEAS Closing Code 03

    2. "Complete Date" for a CDP or an EH case is the date APS closes the case off PEAS.

  3. For cases originated by ACS, on IDRS input a TC 290 0.00 with hold code 3 and blocking series 18X.

    Exception:

    If the ATE provides written instruction that no Hold Code should be entered, APS will not use HC 3 but instead, leave the HC field entry blank.

  4. All Non-AIMS adjustments (TC 29X), and account updates (TC 52X, TC 971) must be placed in PEAS suspense until all input transactions have fully posted.

  5. APS will establish an appropriate follow-up date to access the taxpayer's account and verify all transactions have posted.

  6. Close PEAS once suspense and monitoring actions are completed.

ACS Notification of CDP and EH Closures Via Eefax (8.22.3.7.1)
  1. ACS case files will not be returned to ACS. ACS case files will be sent to the "files" section. Related OIC cases will also be sent to "files" if the offer was not accepted. CDP OIC files are not sent back to COIC. If the CDP OIC was accepted, only the OIC file is sent to MOIC and the CDP file is sent to "files" .

  2. APS will use Eefax to provide the ACS CDP Coordinator with a copy of Form 5402, Appeals Transmittal and Case Memo and Form 3210, Document Transmittal instead of batching and mailing the paper documents on a weekly basis.

    Reminder:

    The Eefax transmission can be performed daily, but at a minimum, must be performed once a week.

    Installment Agreements, secured by the ATE and not input by APS, (DDIA/MMIA) must be included in the Eefax transmission and identified on the Form 3210, Document Transmittal.

    • Direct Deposit Installment Agreements (DDIA) are transmitted to ACS by APS via Eefax.

    • DDIAs must be identified on the Form 3210, Document Transmittal.

    • DDIAs are input by ACS.

    • Manually Monitored Installment Agreements (MMIA) are transmitted to ACS by APS via Eefax.

    • Form 433-D, must be identified on the Form 3210, Document Transmittal.

    • ACS submits MMIAs to Centralized Case Processing (CCP) for input on IDRS.

  3. The ACD Support CDP Coordinators Eefax numbers are listed below:

    • Cincinnati - 866–722–5542

    • Fresno - 855–230–8299

    • Kansas City - 855–231–5296

    • Philadelphia - 855–347–8434

  4. APS will maintain a physical copy of the Form 5402, Appeals Transmittal and Case Memo and the Form 3210, Document Transmittal in a designated binder, filed oldest release date in front and most current release date in back to ensure timely Form 3210, Document Transmittal receipt verification follow-up and efficiency of files management and purging actions.

  5. For CDP cases where the taxpayer has raised frivolous or hybrid issues, the ATE will indicate such on the Form 5402, Appeals Transmittal and Case Memo and the following documents must be sent to ACS in addition to the Form 5402:

    • Copy of the taxpayer's frivolous CDP hearing request

    • Copy of Letter 4380, Appeals Received Your Request for a Collection Due Process and/or Equivalent Hearing and a copy of Letter 3846, Appeals Received Your Request for a Collection Due Process Hearing if issued

    • Copy of the Notice of Determination

    • Copy of the case history

    • Copy of any written communications received from the taxpayer as a result of the withdrawal solicitation in either Letter 4380 or Letter 3846

Revenue Officer Notification of CDP and EH Closures (8.22.3.7.2)
  1. Revenue Officer Collection case files will be returned to the originating Revenue Officer (RO) after the case is closed in Appeals. Related OIC case files will be sent to MOIC if the offer is accepted or be sent with the CDP case file to the Revenue Officer if the OIC is rejected.

  2. Prepare Form 3210, Document Transmittal with the address of the originating RO (found on the Form 5402, Appeals Transmittal and Case Memo) and mail the original administrative file to the RO.

    Exception:

    If the case is selected for AQMS review, the administrative file should be sent to the requesting reviewer prior to being returned to the Revenue Officer.

CDP Closing Letters (8.22.1.3)

  1. A closing letter is prepared for most CDP and Equivalent Hearing closings. The type of letter and mailing requirements for each letter are discussed below.

    Note:

    The only exception where a closing letter is not required is for withdrawn CDP cases that did not receive an Appeals acknowledgment letter and Collection Due Process Timeliness Determination (CDPTD).

  2. When a closing letter is issued on a CDP case, a copy of the letter will be included within the administrative file upon mailing of the letter.

CDP Equivalent Hearing: Decision Letters (8.22.1.3.4)
  1. Stand-alone EH cases (Letter 3210, Decision Letter Concerning Equivalent Hearing Under Section 6320 and/or 6330/Letter 5145 , Agreed Equivalent Hearing Closing Letter) are closed and processed by APS CDP Back-End Campus offices.

  2. Combination EH and Innocent Spouse or EH and Abatement of Interest claim (Letter 4440, Decision Letter - Equivalent Hearing & Interest Abatement and Letter 4439, Decision Letter - Equivalent Hearing & Innocent Spouse) are processed by Campus back-end APS AFTER the suspense period for the NODs.

  3. If a case has both EH and CDP work units, close the EH work unit. Do not hold the EH work unit pending the resolution of the CDP unless it has been chosen for AQMS review.

    Caution:

    If the EH WUNO is closed separate from the CDP WUNO, copy a complete set of documents and place it with the CDP WUNO.

  4. An EH WUNO must be suspended with a related ABINT or IS WUNO. The EH WUNO cannot be closed on ACDS until the related ABINT or IS WUNO is also closed.

  5. To update an EH WUNO on ACDS input the appropriate closing code.

  6. APS will input TC 971 AC 280 to each applicable tax period to indicate that Appeals has completed their consideration and issued a determination letter.

  7. APS will place the PEAS record in PEAS suspense until all input transaction have posted.

  8. Upon posting of the input transaction, close PEAS with closing code 03 and a completed date equal to the current date.

CDP/EH Withdrawal Acknowledgement Letter (8.22.1.3.5)
  1. In all cases where Appeals has previously sent the taxpayer the Uniform Acknowledgement Letter (UAL) or combination UAL-Substantive Contact Letter, the ATE will prepare a Letter 4383, Collection Due Process/Equivalent Hearing Withdrawal Acknowledgement if a Form 12256, Withdrawal of Request for Collection Due Process or Equivalent Hearing is secured.

  2. The Letter 4383, Collection Due Process/Equivalent Hearing Withdrawal Acknowledgement:

    1. Provides the taxpayer with the date Appeals received the withdrawal

    2. Provides Account and Processing Support with the date Appeals received the withdrawal. The received date of the withdrawal is used for input of the TC 521 cc 76/77

    3. Will be signed by either the ATE or the collection specialist

    4. If joint taxpayers are living at the same address, send a single letter addressed to both taxpayers

    5. If joint taxpayers are not living at the same address, send separate letters

  3. Do not enclose a copy of Form 12256.

  4. Send the taxpayer the original closing letter with a copy to their authorized representative, if applicable.

  5. Appeals will not send the taxpayer Letter 4383 if the withdrawal was received before Appeals acknowledged receipt of the case with either the UAL or combination UAL-SCL.

CDP/EH OIC Acceptance Letter (8.22.1.3.6)
  1. The ATE will prepare the OIC acceptance Letter 673, for CDP/EH OICs they accept.

  2. APS will date and issue the OIC acceptance letter to the taxpayer as an attachment to the CDP Notice of Determination, EH Decision letter, or Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1).

    Note:

    The CDP Letters and the OIC Acceptance Letter must have the same date.

Form 12257 Waiver Closing Letter (8.22.1.3.7)
  1. The ATE will prepare closing Letter 4382, Closing Letter for Form 12257 if a Form 12257 is secured.

  2. The closing letter requires the ATM or ATE's signature.

  3. Send the taxpayer the original closing letter and the original waiver with a copy to the authorized representative, if applicable.

  4. If joint taxpayers are living at the same address, send a single letter addressed to both taxpayers at that address.

  5. Send separate letters to joint taxpayers who are not living at the same address and enclose Form 12257 with each.

Retained Jurisdiction Closing Letter (8.22.1.3.8)
  1. The ATE will prepare an Appeals Case Memorandum and a CAP type closing letter for an RJ case.

  2. The Form 5402, Appeals Transmittal and Case Memo may suffice as the ACM.

  3. Send the taxpayer the original closing letter with a copy to their authorized representative, if applicable.

CDP Timeliness Determination (CDPTD) Closing Procedures (8.22.1.4)

  1. CDPTD cases will not have a closing letter. Appeals does not communicate with the taxpayer regarding timeliness determinations. Appeals timeliness determination is provided to Collection who relays the information to the taxpayer.

  2. Use Form 5402, Appeals Transmittal and Case Memo to close the case on ACDS. The Form 5402, Appeals Transmittal and Case Memo will not have an ATM signature; no review is necessary.

  3. Separate Timeliness Determination (CDPTD) cases are closed with the following closing codes:

    Closing Code Description
    14 Appeals agrees with Collection's timeliness determination
    15 Appeals disagrees with Collection's timeliness determination
    16 Appeals partially agrees with Collection's determination
  4. Shred Form 5402, Appeals Transmittal and Case Memo after case is closed on ACDS.

CDP Notices of Determination (NOD) Default Closing Procedures (8.22.1.5.2)

  1. After the applicable suspense periods for the CDP NOD has expired and no petition has been filed, close the WUNO on ACDS using Closing Code = 05.

CDP Case Tax Court Decision Closing Procedure (8.22.3.9)

  1. Counsel will hold cases until the decision becomes final, which is 90 days after the decision is entered in Tax Court, plus 10 days to allow for mailing. If the taxpayer appeals the decision of the Tax Court, this time period will be extended. See CCDM 36.2.5.3.

  2. When the Tax Court decision is final, Counsel will return the case to Appeals on Form 1734, Transmittal Memorandum.

  3. Review Form 1734 and input the appropriate ACDS closing code:

    • A "Docketed Case" requiring closing code 10 is one that was docketed but was settled with an agreement. Docketed cases are generally settled with a decision document beginning with the words "Pursuant to the agreement of the parties in this case..." , or similar wording and are signed by the judge, the taxpayer and Counsel.

    • A "Tried Case " requiring closing code 17 is one that was docketed and not settled, was tried and received a court rendered decision. Cases requiring closing code 17 are those with a decision document from the court beginning with the words "Pursuant to the determination of the Court..." , or similar wording, are signed only by the judge and do not first refer to an agreement.

  4. Input TC 521 with a closing code 76 or 77, as appropriate. The date of TC 521 will be the date the Tax Court decision became final. Consult with APS management or contact the Counsel attorney if assistance is needed in determining the correct TC 521 date. See IRM 8.20.7.17.4, Determine the TC 521 Date (8.22.3.4.1).

    Caution:

    If the case does not contain a waiver paragraph, and Counsel submits the case to APS prior to the date on which the decision becomes final, APS must suspense the case for the remainder of the 90 days plus 10 days, because the TC 521 cannot be input with a future date.

  5. If a decision document contains a waiver of the restrictions on collection in accordance with IRC 6330(e), which would be placed below the judge's signature, the collection statute starts on the date the decision is entered.

  6. A Tax Court may grant litigation fees and costs to a petitioner (taxpayer) in a CDP case. The field attorney who handled the case, not APS, is responsible for handling litigation fees and costs.

  7. An Order of Dismissal is a Tax Court decision. Dismissal reasons include one of the following:

    1. Petition not timely filed (dismissed for lack of jurisdiction)

    2. Filing fee not paid (dismissed for lack of jurisdiction)

    3. Petition not filed in the correct court (dismissed for lack of jurisdiction)

    4. An unexcused absence, taxpayer did not appear for the trial (dismissed for lack of prosecution)

CDP Appealed Tax Court Decision Closing Procedures (8.22.3.9.1)
  1. A Tax Court decision can be appealed by either the petitioner or the U.S. Government.

    Note:

    "S" cases cannot be appealed.

  2. Counsel holds case files for at least 90 days after the Tax Court decision is entered.

  3. Counsel will notify Appeals when the decision becomes final (after the case is finished in the U.S. Court of Appeals and/or Supreme Court). At this point, the TC 521 date must be determined. If there is a question in determining the TC 521 date, consult with APS management or contact the Counsel attorney directly for assistance in determining the correct date.

  4. See IRM 8.20.7.17.4, Determine the TC 521 Date (8.22.3.4.1) for additional information.

CDP Assessment of Civil Penalties under IRC §6673 Closing Procedures (8.22.3.9.2)
  1. The Tax Court may impose a penalty against a taxpayer not exceeding $25,000 under IRC 6673(a)(1) if:

    • a taxpayer institutes or maintains a proceeding primarily for delay

    • takes a position that is frivolous or groundless

    • unreasonably fails to pursue available administrative remedies

    Note:

    A penalty award under section IRC 6673(a)(1) is not asserted against the taxpayer in any notice issued by the IRS. The government can request the penalty in its pleadings or the penalty can be imposed by the Tax Court on its own.

  2. If a court other than the Tax Court, including appellate courts, determines that the taxpayer is proposing a frivolous or groundless suit, the court may award sanctions, penalties, or costs not exceeding $ 10,000 under its rules. IRC 6673(b)(2) and (3) allow the "award" to be assessed and collected like a tax.

  3. APS will assess civil penalties asserted under IRC 6673(a)(1) and 6673(b)(2) and (3).

  4. The ATE will clearly document on Form 5402, Appeals Transmittal and Case Memo and the Appeals CDP Case Closure Sheet that an IRC 6673 penalty was asserted and must be assessed.

  5. The penalties will be assessed on a Civil Penalty Module:

    • MFT 13 (Business Master File)

    • MFT 55 (Individual Master File)

  6. Since the IRC 6673 penalty is not associated with a particular tax year before the court, but are sanctions imposed by the court for groundless delay, the penalties are assessed using the month and the year of the Court's order imposing the IRC 6673 penalty.

    IMF Entities (MFT 55) Any Month Can Be Used To Identify The Tax Period
    IF Ordered Entered by the Court on THEN Use Period
    June 6, 2014 201406
    December 7, 2013 201312
    February 22, 2012 201202
    BMF Entities (MFT 13) Calendar Year End Month Is Used To Identify The Tax Period
    IF Ordered Entered by the Court on THEN Use Period
    April 14, 2014 201412
    August 6, 2013 201312
    November 22, 2012 201212
  7. If the Civil Penalty (CVPN) account is not yet established, reference the following IRMs and take the appropriate action(s) to establish the CVPN account for assessment of the IRC 6673 penalty:

    • IRM 20.1.7.1.9 - Creating Entities or Name Lines for Non-Return Civil Penalty Cases

    • IRM 20.1.7.1.9.1 - BMF Entities

    • IRM 20.1.7.1.9.2 - IMF Entities

    • IRM 20.1.10.6.1 - IRC 6673(a) Tax Court Proceedings

    • Document 6209 - Penalty Reason Code Chart

  8. Assess the civil penalty:

    1. Research IDRS command codes BMFOL, IMFOL, INOLE, NAMES/E to ensure the penalty is being assessed on the correct filer’s account.

    2. Use IDRS CC: ADJ54 to input the carrier transaction TC 290 0.00*.

    3. Input the appropriate penalty reference code:
      643 for Tax Court (6673(a))
      644 for other than Tax Court (6673(b))

    4. Input the dollar amount of the penalty.

    5. Input appropriate blocking series, priority code, posting delay code and hold code when required to avoid an unpostable.

    Note:

    *The TC 290 0.00 will serve as the carrier transaction code (TC) for the penalty and post the penalty as a TC 240 with the penalty assessment amount.

  9. Use blocking series 52X if this is the first Civil Penalty (CVPN) assessment to the MFT 13 (BMF) or MFT 55 (IMF) for the respective taxpayer and tax period; all additional assessments to the CVPN module will use a blocking series 53X.

  10. For computation of the IRC 6673 civil penalties refer to Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

CDP Statute of Limitations for Assessing Costs Under Section 6673(b)(2) (8.22.3.9.2.1)
  1. There is no return of tax to trigger the running of the statute of limitations prescribed by IRC 6501. The costs to be assessed under the authority of IRC 6673(b)(2) are not reported on any document filed by a taxpayer. Additionally, the costs are neither related to nor based on a tax return filed by taxpayer.

  2. APS will assess the IRC 6673(b)(2) penalty promptly upon receipt of the judgment (i.e. order of the court).

CDP or EH Collection Alternatives and Reporting an Account Currently Not Collectible (8.22.3.11)

  1. Collection Alternatives or back-end processing that may be requested on CDP or EH cases include:

    • Currently Not Collectible (CNC)

    • Tax Abatement

    • Penalty Abatement

    • Interest Abatement (ABINT)

    • Innocent Spouse (IS)

    • Installment Agreements (IA)

    • Offer in Compromise (OIC)

    • Credit transfers

Currently Not Collectible (CNC) (8.22.3.11.2)
  1. The ATE will enter a CNC closing code on Form 5402, Appeals Transmittal and Case Memo. The ATE will also indicate in the "Remarks" section of Form 5402, any non-CDP periods which should also be placed into CNC status.

  2. Use IDRS Command Code REQ77 to place an account into CNC status via input of TC 530 with the closing code provided by the ATE (01-39).

    Note:

    For additional information on CC: REQ77, refer to IRM 2.4.19, IDRS Terminal Input, Command Codes REQ77, FRM77 and FRM7A, or http://serp.enterprise.irs.gov/databases/irm-sup.dr/job_aid.dr/command-code.dr/idrs_command_codes_job_aid.htm.

  3. The ATE must prepare a paper Form 53, Report of Currently Not Collectible Taxes if they request a mandatory follow-up. Send the paper Form 53 to ACS or the originating Revenue Officer to forward to Compliance Case Processing (CCP) for input.

  4. When CNC requests are made for one taxpayer on a joint liability, the account must be mirrored. APS will not mirror these accounts and will process these requests through the Compliance Revenue Officer (RO) and ACS.

CDP or EH Adjustments (8.22.3.11.3)
  1. An account adjustment on a CDP or EH may involve tax, penalty and/or interest.

  2. IRM 21.5, Account Resolution, contains the guidelines for processing adjustments and will tell you if an action may be taken. Follow these guidelines when working with adjustments.

  3. You may also need to reference other IRMs, such as:

    • IRM 3.8, Deposit Activity

    • IRM 5.19, Liability Collection

    • IRM 20.1, Penalty Handbook

    • IRM 20.2, Interest

    • IRM 20.2.3, PINEX and Related Command Codes

    • IRM 21.1.2, Reference Materials Overview

    • IRM 21.1.3, Operational Guidelines Overview

    • IRM 21.5.3, General Claims Procedures

    • IRM 21.5.4, General Math Error Procedures

    • IRM 21.5.6, Freeze Codes

    • IRM 21.6, Individual Tax Returns

    • IRM 21.6.2.4.2, Multiple Individuals Using the Same TIN (Identity Theft)

    • IRM 21.7, Business Tax Returns and Non Master File Accounts

    • IRM 25.6, Statute of Limitations

CDP With Related Liability WUNO (8.22.3.11.3.1)
  1. Tax issues heard within CDP will generally have a separate WUNO if the ATE determines that the assistance of another ATE is required to determine the correct tax liability.

  2. APS will process tax abatements and other adjustments to the account as directed by the ATE.

  3. The following documents are used to request adjustments:

    1. Form 3870 - Request for Adjustment

    2. Form 2424 - Account Adjustment Voucher

    3. Form 4159 - Payment Tracer Request

    4. Form 4549 - Income Tax Examination Changes

  4. Assign the CDP and Income Tax WUNO to the TE on PEAS for closing with PEAS TYPE "CLS" and the appropriate Sub TYPE for the case.

  5. Follow general procedures for closing the Income Tax WUNO.

Automated Substitute for Return (ASFR) Program (8.22.3.11.3.1.1)
  1. The ASFR program is a non-filer or return delinquency program Compliance uses to assess tax against taxpayers who have not filed or refuse to file individual income tax returns.

  2. If the ATE secures a valid return from the taxpayer, the return will be sent by the ATE to the ASFR Recon Team for processing. The ASFR Recon Team will make all of the necessary adjustments to the account. The ASFR Contacts are available at ASFR Contacts.

  3. If it is decided that the liability issue will be worked by an ATE, APS will make additional tax abatements or other adjustments to the account as directed by the ATE via Form 3870, Request for Adjustment.

  4. If the taxpayer is allowed to raise the liability under CDP, APS will abate the SFR/ASFR assessment and reverse withholding as requested and approved by the ATE via Form 3870, Request for Adjustment.

    Note:

    If a taxpayer files a valid return after the SFR assessment, the SFR assessment is not abated but will be raised or lowered by the difference between the amount of tax assessed on the SFR by the amount accepted on the taxpayer's return.

    Reminder:

    APS must always ensure there is written authority to process a tax abatement or process a tax assessment. If a tax abatement is authorized by the ATE after the Assessment Statute Expiration Date (ASED) has expired, the abatement can be processed, however, it cannot be reversed by a later tax assessment under the expired ASED.

  5. Close the case on ACDS according to the Form 5402, Appeals Transmittal and Case Memo prepared by the ATE.

  6. APS must monitor the account adjustment(s) and when all actions are completed and all account adjustments are fully posted, APS will close the case on PEAS.

CDP With Related PENAP WUNO (8.22.3.11.3.2)
  1. The ATE will prepare Form 3870, Request for Adjustment with the abatement information.

  2. The ATE will request blocking series 96X (penalty abatement refusal) for the TC 290 (-0-) transaction if they deny a penalty abatement.

    Note:

    This will prevent a later abatement of a penalty sustained by Appeals.

  3. If Appeals determines later to abate a penalty previously sustained by Appeals, The ATE will prepare Form 3870, Request for Adjustment with the abatement information. APS will use IDRS CC: REQ54 to input a TC 290 0.00, enter the penalty abatement TC's and amounts as determined by the ATE, and use blocking series 97X (reversal of penalty abatement refusal) on the adjustment document.

    Note:

    Only Appeals personnel can use blocking series (BS) 96X (Penalty Abatement Refusal Indicator), and (BS) 97X, (Reversal of Penalty Abatement Refusal Indicator).

  4. APS will never process Trust Fund Recovery Penalty adjustments. APS will send Form 3870, Request for Adjustment (completed and approved by the ATE) and a copy of Form 5402 , Appeals Transmittal and Case Memo and ACM to the Control Point Monitor (CPM) that originally sent the case to Appeals or to the CPM in the state where the taxpayer resided at the time of assessment. The CPM address will be indicated by the ATE on Form 3870. If the address is not listed, see the "Control Point Monitoring Technicians" contact listing at Control Point Monitor for ATFR - Collection: AI Advisory.

CDP With Related Abatement of Interest WUNO (8.22.3.11.3.3)
  1. The ATE will determine the resolution of an abatement of interest case by one of the following :

    1. Fully Sustained

    2. Fully Abated

    3. Partially Abated

  2. Interest abatement cases are controlled on a separate WUNO using type code ABINT and feature code DP.

  3. Request for abatements are made on Form 3870, Request for Adjustment, or Form 8485, Assessment Adjustment Case Record.

    Note:

    The amount of interest to be abated may have been previously computed on some of the cases Appeals will handle. In those cases in which it has not, the ATE will determine the "from" and "to" dates for the interest abatement and the amount of tax on which to compute the interest. In some settled cases, the ATE may obtain a Form 906, Closing Agreement.

  4. Refer to the following for guidance on interest abatement:

    • IRM 1.2.51.2, Delegation Order 20-1, (Rev. 2, formerly DO-228, Rev. 3), D.O. 228, Abate Interest Due to IRS Error or Delay

    • IRM 20.2, Interest Handbook

    • IRM 20.2.7, Interest, Abatement and Suspension of Debit Interest, IRC 6404 and IRC 7508

    • IRM 8.7.7.14, Claim and Over Assessment Cases

    • Exhibit 8.20.7-7, APS Instructions - Method and Example For Computing Interest Abatement (8.7.7-1)

  5. Close the case as follows:

    Step Action Additional Instructions
    1. Control the CDP and ABINT case Use separate work unit numbers
    2. Cross-reference the WUNOs of the CDP and ABINT in Notes on the CSC
    3. Assign the CDP WUNO to the TE on PEAS for closing Use PEAS TYPE "CLS"
    4. Assign the appropriate SubTYPE for the case Use PEAS SubTYPE ACDS "Only"
    5. Assign the ABINT WUNO to the TE on PEAS, using PEAS TYPE "SND" PEAS SubTYPE "Issue"
    6. Issue the determination letter See IRM 8.20.6 for instructions on issuing the ABINT determination letter
    7. Close the CDP WUNO on ACDS
    8. Suspend the CDP case on PEAS Use Suspense Reason Code S99-Other
    9. Add a PEAS follow up date equal to the ABINT default date The default date is the SNDATE plus 240
  6. Suspend the CDP file with the ABINT file until the ABINT case defaults or is closed from Court.

  7. Close the ABINT work unit.

CDP With an Innocent Spouse Claim (8.22.3.11.4)
  1. The CDP APS Campus sites will send all CDP/IS cases where the CDP is for the Requesting Spouse (RS) to the Florence Campus Appeals APS unit for final closure.

  2. The Florence Campus Appeals APS unit will:

    1. Control the CDP/IS (RS) case on PEAS

    2. Update the Innocent Spouse Tracking System (ISTS)

    3. Update IDRS

    4. Input CDP/IS (RS) adjustments, as needed

    5. Close the CDP/IS (RS) case on ACDS

    6. Suspend the CDP/IS (RS) case on PEAS with Suspense Reason Code S07 – Waiting on Account Transfer

    7. Add a PEAS follow-up date equal to the expected posting date

    8. Close the CDP/IS (RS) case on PEAS after adjustments post

    9. File the CDP/IS (RS) administrative file according to standard procedures

    10. Perform all back end closing actions for CDP/IS (RS) cases

CDP With an Installment Agreement

  1. See IRM 8.20.7.37, Installment Agreements (IA) (8.22.3.11.1) for guidance.

CDP Premature Referral (8.22.3.10)

  1. A CDP Hearing request may be classified as a Premature Referral (PR) and returned to Collection if the ATE determines that a CDP notice was issued in error.

  2. The Appeals ATE will no longer rescind CDP notices they determine were issued in error but only send the case back as a premature referral.

  3. APS will take the following actions on premature referrals:

    1. Reverse the TC 520 with TC 522. Use TC 520 date as TC 522 date

    2. Close on ACDS with Premature Referral Closing Code 20

    3. Close IDRS control base

    4. Transmit case to originating function per Form 5402, Appeals Transmittal and Case Memo instruction from ATE

CDP and EH Offer in Compromise (OIC) Processing: Overview (8.22.3.12)

  1. An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS that settles their tax liability for less than full payment. Taxpayers may submit an OIC as an alternative to collection in a CDP or EH hearing.

  2. The Centralized Offer In Compromise (COIC) Unit will, with few exceptions, investigate all CDP or EH OICs which meet COIC criteria to determine if the OIC is accepted or rejected.

  3. After COIC completes the investigation and makes their determination to accept or reject the OIC, COIC will return all rejected offers to Appeals for consideration.

  4. In cases where COIC accepts the offer, COIC will complete all back-end processing and return a copy of the accepted OIC document(s) to the ATE for association with the CDP case.

  5. In cases where COIC rejects the offer, the ATE will make the final determination which will be one of the following:

    • Accept the OIC

    • Reject the OIC

    • Withdraw the OIC

  6. The ATE will also make the final determination on all CDP OICs that do not meet COIC criteria.

  7. CDP OICs which were rejected by COIC and have not already been processed must be processed by the APS TE assigned to close the CDP/OIC case.

    Note:

    The ATE will not separate the OIC from the CDP case when submitting to APS for processing of their determination on the CDP and OIC WUNOs.

  8. Characteristics of a CDP case with a related OIC:

    1. The CDP and OIC are controlled under separate WUNOs

    2. Both WUNOs have a Feature Code of DP

    3. When COIC investigates the OIC, both the CDP and OIC WUNO will also have Feature Code CO

    4. The CDP and OIC WUNOs include a cross-referenced to each other in "Notes" on the case summary card

      Note:

      Any TFRP assessment determined as a result of a filing of an OIC in a CDP case, must be forwarded to the appropriate Advisory unit to process the TFRP adjustments.

  9. APS is now responsible for closing CDP OICs that have been loaded onto the AOIC database by Collection.

CDP OIC Processing: Accepted OIC (8.22.3.12.1)
  1. Back-end processing on OIC cases accepted by COIC is completed by COIC.

  2. Back-end processing on OIC cases rejected by COIC and accepted by Appeals is completed by APS.

  3. Back-end processing of the CDP and EH portion of the case will not change regardless of which function processes the accepted OIC.

Accepted OIC - COIC Investigated (8.22.3.12.1.1)
  1. COIC will take the following actions on CDP or EH OICs they accept:

    1. Issue the OIC acceptance letter.

    2. Forward original documents (Form 7249, Offer Acceptance Report, et al) to the Monitoring OIC (MOIC) unit.

    3. Forward the required documents to the Public Inspection File.

    4. Return to Appeals, copies of the acceptance letter, Form 7249, Offer Acceptance Report and amended Form 656, if applicable.

    5. input STAUP on CDP periods to status 71 (prevents periods from reverting to collection status when TC 520 cc 76/77 is reversed).

    6. Close the case on AOIC as accepted.

  2. The Appeals CDP or EH OIC file where COIC accepted the OIC should contain the following copies of OIC documents:

    Note:

    The following copies will stay with the CDP or EH case file. APS is not required to send any documents on COIC-accepted OICs to MOIC.

    • Form 656 and amended Form 656, Offer in Compromise

    • Form 7249, Offer Acceptance Report

    • Acceptance Letter 673, signed by the authorized party

    • Financial statements

    • Asset, Income and Equity tables

  3. The Appeals CDP or EH file where COIC accepted the OIC should contain the following original CDP/EH documents:

    1. Closing letter, i.e., Waiver Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1)

    2. Customized CDP Form 5402, Appeals Transmittal and Case Memo

    3. Separate ACM, if applicable

    4. Case Activity Record

    5. Original correspondence between the Service and the taxpayer

    6. Form 12153, Request for a Collection Due Process or Equivalent Hearing (or other written request)

    7. Form 12153A, Transmittal of CDP/Equivalent Request Hearing/ Form 12153B, Referral Request for CDP Hearing from ACS Support (with instructions)

  4. APS will take the following closing actions on CDP or EH cases where COIC investigates and accepts the OIC:

    1. Issue the CDP Notice of Determination, EH Decision Letter or Form 12257 Waiver following established procedures.

    2. Close the OIC WUNO on ACDS.

      Note:

      Since COIC issues the acceptance letter, APS will issue only the applicable CDP or EH closing letter. COIC is solely responsible for AOIC closing actions on offers they accept.

  5. ACDS inputs for accepted OIC WUNO:

    Note:

    Immediately close the CDP OIC WUNO on ACDS when the CDP is closed with a Form 12257 Waiver. Suspend the OIC documentation with the CDP WUNO where the CDP is closed with a Notice of Determination.

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt: = No entry

    3. RevsdTax = Entries as follows:

      Enter the amount of the accepted offer in the field for the earliest tax period

      Enter 0 (zero) for any other tax periods

      Note:

      The accepted offer amount entered into the RevsdTax field will populate the WUaccptOfrAmt field.

    4. NOTES – COIC accepted OIC. Direct ship by COIC to MOIC

      Note:

      APS will not have IDRS-input requirements on COIC accepted OICs.

Accepted OIC - Appeals Considered (8.22.3.12.1.2)
  1. When Appeals accepts an OIC associated with a CDP and EH case, the following original documents will be included in the file by the ATE:

    • Form 656 and amended Form 656, Offer in Compromise

    • Form 7249, Offer Acceptance Report

    • OIC Form 5402, Appeals Transmittal and Case Memo

    • Appeals Case Memo

    • Acceptance Letter 673 signed by the authorized party

    • Financial statements

    • Asset, Income and Equity tables

    • Sanitized TDS transcript

  2. When a CDP Notice of Determination (NOD) is issued, both the CDP and the OIC file must be suspensed together pending the entry of final decision by the USTC.

  3. Upon the earlier of the expiration of the NOD default period or when a final decision has been entered by the USTC, APS will send a photocopy of the Form 656, Form 7249, Offer Acceptance Report and acceptance letter to the appropriate MOIC unit to initiate monitoring of the accepted offer.

  4. If the CDP NOD was issued by a Field APS office, APS will transmit both files to the APS CDP Campus site after the suspense period and the offer file should then be sent to MOIC.

  5. Local APS sites will promptly send to the APS CDP Campus sites for back-end processing EH cases and CDP cases where a Form 12257 Waiver is secured.

  6. APS will ensure the case is ready and complete for closing by verifying inclusion of:

    1. Form 5402, Appeals Transmittal and Case Memo for both CDP and OIC; STAUP 71 information

    2. Acceptance Letter 673

    3. Form 7249, Offer Acceptance Report including Counsel signature, when applicable

    4. ACM

    5. Sanitized TDS or MFTRAX transcript

    6. ATM's approval

  7. APS will date and issue the OIC acceptance letter to the taxpayer as an attachment to the CDP Notice of Determination or EH Decision letter or Form 12257.

    Note:

    The CDP Letters and the OIC Acceptance Letter must have the same date.

  8. The APS CDP Campus site will process three (3) separate files:

    1. OIC acceptance file

    2. CDP case file

    3. OIC Public Inspection File

  9. OIC acceptance file - Forward the following documents on Form 3210, Document Transmittal to the Campus Monitoring OIC (MOIC) unit at the campus, Brookhaven or Memphis, that will monitor future compliance. See "Offer-in-Compromise (OIC) Compliance Campus Locations for Back-end" at the SERP "Who/Where" tab. These are original documents unless indicated otherwise:

    • Form 656 and any amendments to the original Form 656

    • Form 7249, Offer Acceptance Report

    • OIC Form 5402, Appeals Transmittal and Case Memo (copy)

    • Appeals Case Memo (copy)

    • Acceptance Letter 673, signed by the ATM; it may also be signed by the Area Director, Director, Field Operations or the Director, Campus Operations (copy)

    • CDP determination or decision letter and attachment or Form 12257 Waiver (copy)

    • Sanitized TDS or MFTRAX transcript

    • Form 656-A hardship waiver of the application fee, if claimed

    • Financial statements

    • AET and IET schedules

    • ACDS history (copy)

    Note:

    APS will update and close AOIC on all Appeals accepted CDP related offers that have been loaded on AOIC and have not been accepted by Collection.

  10. CDP or EH administrative file - OIC documents for the CDP or EH administrative case file are as follows. These are copies of the original documents:

    1. Form 656, Offer in Compromise and amendments

    2. Form 5402, Appeals Transmittal and Case Memo for OIC WUNO

    3. Form 7249, Offer Acceptance Report

    4. TDS or MFTRAX transcript

    5. Signed and dated Acceptance Letter 673

    6. Collateral agreements, if applicable

  11. Public Inspection File - See "Advisory Units Contact List" at Who/Where tab on SERP on where to send these documents:

    1. Copy of Form 7249, Offer Acceptance Report which has been redacted by the ATE

    2. Sanitized transcripts

  12. ACDS inputs for accepted OIC WUNO:

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = Entries as follows:

      Enter the amount of the accepted offer in the field for the earliest tax period

      Enter 0 (zero) for any other tax periods

      Note:

      The accepted offer amount entered into the RevsdTax field will populate the WUaccptOfrAmt field.

    4. NOTES – Accepted OIC file to MOIC (Memphis or Brookhaven)

  13. Process any OIC payments to the campus OIC unit noted on the acceptance letter.

  14. Input STAUP 71 on all CDP periods to prevent levy action.

    Caution:

    The TC 521 input on the CDP periods will return the periods to their pre-CDP status until MOIC inputs TC 780. The taxpayer may receive a notice to pay or be subject to erroneous levy action if STAUPs are not in place. Also, verify STAUP 71 and TC 480 inputs on all non-CDP periods.

  15. For information AIOC Closing Procedures and Validating Procedures for an Accepted Offer, see IRM 8.20.7.45.2.1, and IRM 8.20.7.45.2.2.

Automated Offer in Compromise (AOIC) - Accepted CDP OIC
  1. APS is now responsible for closing actions on AOIC for any CDP offer accepted by Appeals that has been loaded onto AOIC.

  2. This section provides general information for closing an accepted OIC case on the AOIC system.

  3. Accepted CDP OICs must be closed, validated and released on AOIC and the OIC case file sent to the appropriate MOIC campus for monitoring. It is critical that the actions are promptly taken to close the case on AOIC and the case immediately sent to MOIC because:

    • IRS releases a tax lien once the taxpayer pays the accepted offer amount in full, and

    • MOIC is responsible for monitoring the taxpayer's compliance with the terms and conditions of the offer, so the closing information and case file are needed for this purpose, and

    • The need to close aged case inventory as soon as possible.

  4. Follow the table below for general input actions related to closing accepted OIC cases on the AOIC system:

    Screen Input Fields
    Query Enter TIN
    AO Offer Query Results Select case from list
    AO Offer Update
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and move to "Input" screen

    Update AO Offer
    • Offer amount (if changed)

    • Select Original or Amended Offer

    • Verify "Offer Type"

    • Select Submit and return to "AO Offer" screen

    AO Offer Select MFT Tab
    MFT Summary
    • Update "Accrued Date"

    • Update liability amounts

    • Save inputs and return to "AO Offer" screen

    AO Offer
    • Verify total liability amounts (from Form 7249, Offer Acceptance Report) See Note Below

    • Select "Terms"

    • Select "Update Terms"

    • Verify "Terms Type"

    • Input payment terms (from Form 7249)

    • Input Collateral Agreement terms, if any. Include the form number of the collateral agreement (Form 2261, Form 2261–A, Form 2261–B etc.)

    • Select "Submit"

    AO Offer
    • Select Remarks

    • Add remarks to state "Accepted in Appeals - Sending to the MOIC unit" (Brookhaven MOIC or Memphis MOIC)

    • Select "Save"

    Remarks & Case History
    • Select "Remarks and Case History"

    • Print one copy of Remarks and Case History screen (page 1 only) and include this print in the administrative file.

    • Return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer Select "Final Disposition"
    Update Final Disposition
    • Select "2 - Accepted by Appeals"

    • Input the mail date of the rejection with appeal rights letter. Enter the date that collection generated but did not issue the rejection letter. This date can be obtained by accessing the remarks or history information on AOIC.

    • Input the mail date of the Appeals acceptance letter

    • Was the offer accepted under ETA/DCSC criteria? Select answer from drop-down menu.

    • Select "Submit " and return to "AO Offer" screen

    AO Offer
    • From this screen, verify the case is closed.

    • Also from this screen, check for related offers. If applicable, take necessary closing actions for related offers.

    • Print one coy of the final ATE Offer screen and insert the print in the administrative file.

    Note:

    During the course of an offer investigation, if a TIPRA payment(s) (which includes the initial payment submitted with the offer, subsequent periodic installment payments, and/or the payment submitted with an amended offer) contributes to the full payment of a tax period, that period must remain part of the offer and must be listed on any subsequent amended Form 656 or addendum and the Form 7249. Even though the tax debt is fully paid, the payment or payments used to satisfy the tax debt are still part of the overall offer amount, so all satisfied periods must remain part of the offer.

  5. As soon as possible after closing the closed accepted offer on AOIC, validate and release it to the appropriate MOIC campus for monitoring. Validation and release on AOIC is required and may be performed by the APS employee or the PTM at the discretion of APS management. See Validating Accepted Offers on AOIC below for guidance.

  6. Once the case is validated, control of the offer goes to MOIC and the file must be sent to them as soon as possible. Use the destination list from the drop down menu to determine where the file must be sent.

    Note:

    If there are related cases with different business operating division (BOD) codes (W&I and SBSE), the SB campus will monitor both offers.

  7. Prepare Form 3210 and mail to the appropriate MOIC campus. Be sure the file contains the original copies of:

    • Initial Form 656, Offer in Compromise

    • Amended Form 656, if applicable

    • Signed Acceptance Letter 673 (may be a signed copy)

    • Form 7249, Offer Acceptance Report

    • Collateral agreement, if applicable

Validating Accepted CDP Offers on AOIC
  1. Follow the steps below to validate an accepted CDP offer on the AOIC database:

    1. Sign on to the AOIC database and navigate to the main Appeals Menu screen.

    2. Select the SWITCH USER LOC field.

    3. Select the AOIC CDP OIC Area 21.

    4. Select VALIDATE & RELEASE.

    5. All of the cases recently closed as an acceptance will be listed. Find the case you are closing on the list by confirming the Offer Number, Offer TIN, Name Ctrl and AO Closed Date fields.

    6. Select the RELEASE CODE box next to your case.

    7. Navigate to the bottom of the page and select SUBMIT. The case is now validated and released to MOIC.

Rejected CDP OIC Processing (8.22.3.12.2)
  1. The back-end processing instructions are the same for CDP or EH OICs investigated by COIC and returned with a rejection recommendation and CDP or EH OICs considered and rejected by Appeals because Appeals makes the final determination on all OICs.

  2. A rejected CDP or EH OIC will have a separate file, but the file is not returned to COIC. The rejection file remains with the CDP or EH file.

  3. The rejected OIC will not have a rejection letter separate from the determination or decision letter. The ATE discusses the rejection in the attachment to the decision or determination letter.

    Note:

    If the expiration of the TIPRA statute is imminent, the ATE may choose to issue a Letter 5197, Offer in Compromise Rejection rejecting the offer directly to the taxpayer so that the TIPRA statute is protected. Upon resolution of the CDP, the ATE will still close the cases as discussed in (2) above and the date of the TC 481 should be the date the Letter 5197 was issued. If the taxpayer has filed for bankruptcy protection, the ATE will close the CDP OIC WUNO, retain pertinent documents in the CDP file and forward the CDP OIC WUNO to APS for all closing actions.

  4. All OIC documents remain with the CDP or EH file.

Automated Offer in Compromise (AOIC) - Rejected CDP OIC
  1. APS is now responsible for closing actions on AOIC for CDP offers rejected by Appeals that have been loaded onto AOIC.

  2. This section provides general information for closing a rejected CDP OIC case on the Automated Offer in Compromise (AOIC) system.

  3. Follow the steps in the table below for general instructions for closing AOIC for rejected OIC cases.

    Note:

    Make sure all screens are updated if an amended offer was secured.

    Screen Input Actions
    AO Offer Select "Remarks" and indicate the offer was rejected
    Remarks and Case History Select "Submit" and return to "AO Offer" Screen
    AO Offer Select "Update Offer"
    Update AO Offer Final Disposition
    Update Final Disposition
    • Select "3 - Rejection Sustained"

    • Input the mail date of the rejection letter with appeal rights. Enter the date that collection generated but did not issue the rejection letter. This date can be obtained by accessing the remarks or history information on AOIC.

    • Input the mail date of the Appeals rejection letter

    • Input the RCP amount (from Form 5402). If "0" or no amount is given on the Form 5402, use the IMFOLI/BMFOLI "total assessed balance" from IDRS)

    • Select "Submit" and return to AO Offer screen

    Query Input TIN
    AO Offer Query Results Select case from list
    AO Offer
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Verify the case is closed
  4. See IRM 8.20.7.45.4.1, AOIC Closing Procedures for Rejected Offers (8.23.6.2.5.1) for additional information.

  5. TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  6. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

ACDS and IDRS Inputs for Rejected CDP OIC (8.22.3.12.2.1)
  1. Close the CDP or EH OIC on ACDS when issuing the Notice of Determination or Decision Letter.

  2. ACDS inputs for rejected OIC WUNO:

    • CLOSINGCD = 14 (OIC Rejected)

    • WUaccpOFRAmt = 0 (zero)

  3. IDRS inputs for a rejected OIC are completed after the suspense period expires and if the taxpayer petitions Tax Court, after the Tax Court decision becomes final.

    1. If the case was opened on AOIC, the AOIC database will input the TC 481 systemically upon closure. If the case was not opened on the AOIC database, input TC 481 on each tax period included in the rejected OIC.

      Caution:

      Sometimes COIC will input a TC 480 manually. TC 480s that were input manually to IDRS will not systemically reverse when closing AOIC. In these instances, the correct reversal code must be input manually on IDRS. If the TC 480 was manually input, there should be a notation in the AOIC remarks.

    2. The date of the Notice of Determination or Decision Letter = date of TC 481 and closing date of OIC WUNO.

Withdrawn OIC (8.22.3.12.3)
  1. A withdrawn CDP or EH OIC will have a separate file, but the file is not returned to COIC. The withdrawn OIC file will remain with the CDP file.

  2. The withdrawn OIC will not have a withdrawal letter separate from the Notice of Determination or Decision letter. The ATE discusses the withdrawal in the attachment to the decision or determination letter.

    Note:

    If the expiration of the TIPRA statute is imminent on an Appeals considered CDP/EH offer, the ATE may choose to issue a Letter 241 Withdrawal letter to the taxpayer to protect the statute. Upon resolution of the CDP, the ATE will still close the cases as discussed in (2) above and the date of the TC 482 should be the date the Letter 241 was issued unless the withdrawal was sent via certified mail or hand delivered, in which case the TC 482 is the IRS received date.

Automated Offer in Compromise (AOIC) - Withdrawn CDP OIC
  1. As with accepted and rejected CDP offers, withdrawn offers must be closed on AOIC by APS if Collection loaded the offer onto the AOIC database.

  2. This section provides general information for closing a withdrawn CDP OIC case on the Automated Offer in Compromise (AOIC) system.

  3. AOIC INPUT (Query Offer Number)

    Screen Input Actions
    Query Input TIN
    AO Offer Query Results
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer
    • Select "Update Offer"

    • Select "Final Disposition"

    • Select "9 - Withdrawal"

    • Input the mail date of the rejection letter with appeal rights

    • Input the mail date of the Appeals withdrawal letter

    • Input the legal date of the withdrawal (indicated on the withdrawal letter)

    • If a deposit was made, select the appropriate response from the drop-down menu

    • Select "Submit" and return to AO Offer screen

    AO Offer Verify the case is closed

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  4. See IRM 8.20.7.45.3.1, AOIC Closing Procedures for a Withdrawn Offer (8.23.6.2.4.1) for additional information.

  5. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

ACDS and IDRS Inputs for Withdrawn CDP OIC (8.22.3.12.3.1)
  1. The CDP or EH OIC should be closed both on IDRS and ACDS when issuing the Notice of Determination or Decision Letter.

  2. ACDS inputs for withdrawn OIC WUNO:

    • CLOSINGCD = 16 (OIC Withdrawn)

    • WUaccpOFRAmt = 0 (zero)

  3. IDRS inputs for withdrawn OIC:

    1. If the case was opened on AOIC, the AOIC database will input the TC 481 systemically upon closure. If the case was not opened on the AOIC database, input TC 481 on each tax period included in the rejected OIC.

      Caution:

      Sometimes COIC will input a TC 480 manually. TC 480s that were input manually to IDRS will not systemically reverse when closing AOIC. In these instances, the correct reversal code must be input manually on IDRS. If the TC 480 was manually input, there should be a notation in the AOIC remarks.

    2. Where the OIC withdrawal was sent via certified mail or hand delivered, the date of the TC 482 is the IRS received date.

    3. Where the request for withdrawal was received via fax, phone or regular mail, the TC 482 date is the same as the date of the Notice of Determination or Decision Letter and the closing date of the OIC WUNO.

Sanitized TDS or MFTRAX Transcript (8.22.3.12.4)
  1. A sanitized TDS or MFTRAX transcript will be secured by the ATE and will have the applicable items "blacked out" (redacted) so that they are unreadable and not available in the public inspection file in compliance with IRM 5.8.8.6, Required Actions Prior to Closing an OIC as an Acceptance.

AOIC Closing Procedures for a Potential Default Case (8.23.6.1.4 and new 8.23.6.2.7.1)
  1. When an OIC case is returned to Appeals as a potential default, take the following AOIC closing actions when the case is ready to be closed.

    1. Screen Input Actions
      AO Offers Query TIN
      AO Offer Select "Remarks"
      Add Remark to Case History
      • Select "Add Remark" and state: Defaulted or Not Defaulted.

      • If applicable, state that a compromise of a compromise was accepted.

      • State also that the case was returned to MOIC (Brookhaven or Memphis)

      • Save

TIPRA Statute Considerations (8.23.6.1.6 and new 8.23.6.1.3)
  1. The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) created IRC 7122(f), which provides that if the IRS does not reject the OIC within 24 months from the date it is received by the IRS, it will be statutorily accepted. It is effective for all OICs received on or after July 16, 2006.

  2. If a liability included in the offer is disputed in any court proceeding, that time period is omitted from the calculation of the two-year period. In the event the taxpayer disputes in court a tax liability included in the OIC, the 24 month period will not run while the case is in litigation. Additionally, when the IRS issues a rejection letter for a non-CDP offer, the 24 month period ends and does not run during the period a non-CDP rejected OIC is being reviewed by Appeals.

  3. Cases received with an open TIPRA statute are subject to special consideration when in Appeals.

  4. Cases with an open TIPRA statute are subject to the same back-end processing time frames as are listed in IRM 8.21.3.1.7, Closings and IRM 8.21.4.2, Appeals Team Manager (ATM) which means:

    1. The written concurrence of the ATM is required to keep the OIC case open beyond 120 days remaining on the 24-month TIPRA statute period.

    2. The ATE is responsible for ensuring the OIC case is presented to APS for closing with at least 90 days remaining prior to the expiration of the 24-month TIPRA statute period.

    3. If less than 90 days remain on a TIPRA statute, the PTM must be notified via encrypted e-mail when the case is to be presented to APS. To verify receipt of the case, APS should ensure a Form 3210, Document Transmittal is received from the ATM or ATE.

    4. APS should ensure timely closing actions are taken on the case.

    5. Responsibility for such statutes is jointly held by the PTM and the ATM.

Conversion of Tax Return Cases

  1. This subsection provides guidance for the various types of conversions that may occur in cases considered by Appeals. It covers converting one type tax return to another; converting separate returns to joint returns; and converting joint to separate returns.

  2. See IRM 4.4.6, AIMS Procedures and Processing Instructions, Conversion of Returns, for additional information.

Form 1041 to Form 1120 Conversion

  1. When Appeals sustains conversion of Form 1041, U.S. Income Tax Return for Estates and Trusts to Form 1120, U.S. Corporation Income Tax Return the case requires the following special processing:

    1. There should be Form 1120 prepared by Compliance in the file and marked "1041 converted to 1120 by Compliance." Forward the form to the Campus for processing to master file. Retain a copy for closing.

    2. Prepare Form 2363, Master File Entity Change, and input TC 016 (CC ENREQ/BNCHG) to eliminate Form 1041 filing requirements.

    3. After the return posts to master file, input TC 424 to establish the Form 1120 account on AIMS.

    4. After the AIMS account is fully established, prepare Form 5403, Appeals Closing Record following normal procedures. Annotate Item A "Form 2363 to eliminate Form 1041 FR prepared/input by Appeals."

    5. Process the AIMS closure on the MFT 02 account per the Appeals Settlement.

Form 1120S to Form 1120 Conversion

  1. When Appeals sustains the conversion from Form 1120S, U.S. Income Tax Return for an S Corporation to Form 1120, U.S. Corporation Income Tax Return, the case requires the following two steps:

    1. Prepare Form 2363, Master File Entity Change and input TC 091 to change the filing requirements to corporation.

    2. Process Form 2363, Master File Entity Change and Form 5403, Appeals Closing Record in the same cycle.

    3. Send the following notification to Entity Control Section at the Campus: "Form 1120S converted to Form 1120 by Appeals. Please update Form 2553, Election by Small Business Corporation."

  2. Furnish the following information:

    1. TP name, address, and TIN

    2. Effective date of termination

    3. Reason for termination

    4. Appeals Office

    5. Statement indicating that Form 2363 has been input

  3. Prepare Form 5403, Appeals Closing Record in the usual manner. Annotate the following in Item A: "Form 2363 to change FR (filing requirement) from Form 1120S to Form 1120 prepared/input and Entity Control notified by Appeals."

  4. Process the AIMS closure on the MFT 02 account per the Appeals Settlement.

Joint to Separate Return Conversion

  1. Taxpayers who originally file a joint return, may NOT change the filing status to separate once the time for filing the return of either spouse expires.

    Note:

    A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return. The personal representative has one year from the due date of the return (including extensions) to make the change.

    Example:

    Mr. and Mrs. J. filed their 200912 joint return on 02/15/2010. Mr. and Mrs. J's 200912 return may not be converted to separate after 04/15/2010.

    The following instructions apply when it is deemed appropriate to convert the filing status from joint to separate.

  2. Process Form 5403, Appeals Closing Record for the spouse’s account being adjusted. Remove the other spouse’s name in Item 4. Annotate "Joint to Separate" in Item A.

  3. If there is an unfiled separate return for the other spouse, send it to the appropriate Campus for processing. Received date is the same date as the joint return.

  4. Prepare Form 2363, Master File Entity Change and input name change and filing status change via IDRS.

  5. Update ACDS using the Form 5402 , Appeals Transmittal and Case Memo entries provided by the ATE to close the case.

    1. DO NOT change name line. Leave the joint names and primary SSN because ACDS must reflect the filed return under consideration in Appeals.

    2. RevsdTax - the combined liability amount.

    3. NOTES - Enter a brief description to explain the disposition, i.e., "Conversion to separate filing status." Separate revised deficiency amounts may also be entered i.e., "Primary TP - $1200, Secondary TP - $1000."

  6. See IRM 21.6.1.4.4, Statute of Limitations Procedures for Separate to Joint for additional information.

Separate to Joint Return Conversion

  1. Taxpayers may elect to go from separate filing status to joint filing status if the following apply in that taxable year:

    1. Joint return is filed within three (3) years of the due date of the return

    2. Neither spouse files a petition in Tax Court after a notice of deficiency is issued (this applies where returns are filed - see note below)

    3. Neither spouse has a suit in any Court for a claim (recovery of tax)

    4. Neither spouse has entered into a closing agreement

    5. For returns beginning before July 30, 1996, the tax shown on the joint return is paid in full

      Note:

      A substitute for return (SFR) prepared by the IRS does not constitute a taxpayer filing a return. Therefore, where no return was filed previously, taxpayers may elect to file joint returns even if the case is in Tax Court.

  2. See IRM 21.6.1.4.3, Processing Separate-to-Joint Adjustments for additional information.

Separate to Joint Return When Both Primary TP and Secondary TP Filed
  1. If both taxpayers filed separate returns and there are two AIMS accounts, prepare a Form 5403, Appeals Closing Record for each spouse’s return.

  2. Prepare a Form 5403, Appeals Closing Record for the primary taxpayer's (PTP) account as follows:

    1. Item 4 - Add secondary taxpayer's (STP) name

    2. Item 12 - Enter the adjustment amount to equal the correct tax and penalty minus that assessed on the PTP's return

    3. Item 15 - Enter the amount of the STP's unrefundable withholding credits. Circle the plus (+) sign

    4. Items 800 through 811 - Enter statistical data

    5. Prepare Form 2363, Master File Entity Change and input name change and filing status change using IDRS

  3. Prepare a Form 5403, Appeals Closing Record for the STP's account. This form becomes a tax adjustment document.

    1. Item 12 - Enter the amount necessary to reduce all assessed tax and penalties to zero.

    2. Item 15 - Enter the amount necessary to reduce the unrefunded prepayment credit by the amount allowed as a credit on the joint return (STP's credits). Circle the minus (–) sign. Also enter reference number 999 (with blank amount in (–) field). This entry prevents the case from subsequently appearing in the Campus Multiple-Filer Program.

    3. Items 800 through 811 - Enter statistical data.

    4. Item A - Check "Other" block and enter "Change from separate to joint return. See Form 5403 for (PTP's Name)-(SSN)." If the STP made payments of estimated tax or if there are payments on the return, request that Form 2424, Account Adjustment Voucher, transfer the credits as requested by the ATE.

  4. Update ACDS using general closing instructions. In addition:

    1. NOTES - Add a brief statement to each spouse’s case to explain the disposition, i.e., "Converted to joint filing status under SSN (enter PTP's SSN)." Also indicate the amount of the total joint liability, i.e., "Joint liability assessed is $1,000."

    2. RevsdTax - Half the joint liability for each spouse’s case.

  5. See IRM 21.6.1.4.3.1, Separate to Joint and Both Taxpayers Previously Filed for additional information.

Separate to Joint Return When Only One Spouse Filed
  1. If only one spouse filed a return, process one Form 5403, Appeals Closing Record.

    1. Prepare Form 2363, Master File Entity Change to change the filing status to joint, and add the spouse's name and SSN to the joint account.

    2. Item 4, Form 5403 - Include both spouse's names.

    3. Item 12, Form 5403 - Enter the adjustment amount to equal the correct tax and penalty minus the amounts assessed on the filed return.

    4. Item 15, Form 5403 - Enter the change to adjusted gross income (AGI) and taxable income (TXI) and circle the plus (+) sign. Account and Processing Support (APS) is responsible for transferring credits to the joint account.

  2. Follow general closing instructions to close ACDS. In addition:

    1. DO NOT change name line. Leave only the name of the Primary Taxpayer because ACDS must reflect the filed return under consideration by Appeals.

    2. NOTES - Add a brief statement to explain the disposition, i.e., "Converted to joint filing status (both taxpayer's names)."

    3. RevsdTax - Enter the total joint liability amount.

  3. See IRM 21.6.1.4.3.2, Separate to Joint and One Taxpayer Did Not Previously File for additional information.

Criminal Investigation Division (CID) Master File "-Z" , or "Z-" Freeze

  1. Appeals and the Tax Court receive and make determinations on Civil Tax Cases. Occasionally, a Criminal Investigation is opened during the time the Civil Tax case is also open. When this happens, CID posts one of the following transaction codes on the Civil Tax Entity or Master File Account:

    • TC 914 Module Freeze "-Z"

      Caution:

      Only CID can reverse this freeze with a TC 912. When a tax module has a MF "-Z" Freeze, all account adjustments will unpost IMF Unpostable Code 183, BMF Unpostable Code 333.

    • TC 916 Refund Freeze "Z-"

      Caution:

      Only CID can reverse this freeze with a TC 915 Partial Reversal or TC 917 Full Reversal.

    • TC 918 Refund Scheme Freeze "Z-"

      Caution:

      Only CID can reverse this freeze with a TC 915 Partial Reversal or TC 919 Full Reversal.

  2. If a Civil Tax Case is open in Compliance at the time the CID Freeze is posted to the account, the case will be routed by Compliance to their Fraud Suspense Unit. On rare occasions, a Civil Tax Case is not properly placed in Fraud Suspense and can enter Appeals inventory (Non-Docketed), or be routed to Counsel as (Docketed).

    Example:

    Civil Penalty Case (MFT 55/13) may be assigned to a Revenue Agent who does not know there is a CID Freeze on the Income Case and the Examination Return Control System (ERCS) isn't programmed to identify or flag a Civil Penalty Case when a CID Freeze is placed on the Income Case.

    Example:

    Taxpayer files a Petition on a Compliance Issued Statutory Notice of Deficiency and Docketed procedures require the case be transmitted to Counsel to Answer the petition.

  3. IRM 1.2.13.1.11, Policy Statement 4–26 (Formerly P-4-84) requires that when a case has a CID Freeze MF "-Z" or "Z-" , coordination between the responsible functions is necessary. This coordination must be initiated by the Appeals Technical Employee who is assigned the case, or the Counsel Attorney who is preparing the Answer to the Petition. For additional information, see IRM 8.7.1.9, Cases Involving Criminal Prosecution and Restrictions on Appeals Jurisdiction in Criminal Cases and Chief Counsel Directives Manual (CCDM) 38.3.1.8, Balancing Criminal and Civil Aspects.

    If And Then
    Tax Period has an open CID Freeze CID Approval to allow the Civil Enforcement Action is not provided by the ATE or Counsel Attorney Notify your PTM via encrypted email and include the earliest ASED in the subject line
    Place the case in PEAS Suspense "S01" , or "S02" as appropriate.
    The PTM forwards the email to the respective ATM or Counsel Attorney for response.
    ATM or Counsel Attorney has not previously coordinated the civil action with CID The Assessment Statute Expiration Date (ASED) is more than 90 days from current date APS will reject the case back to the ATM, ATE, or Counsel Attorney as appropriate and close PEAS with Closing Code 20.
    ATM or Counsel Attorney has not previously coordinated the civil action with CID The ASED is 90 days or less from the current date APS will fax the Form 5402 and the Authority for Assessment document* to the ATM or Counsel Attorney for immediate coordination with CID.
    *Signed Agreement
    *Defaulted SND
    *Entered Tax Court Decision or Dismissal
    APS will place the case in PEAS Suspense "S01" , or "S02" as appropriate.
    APS will set a PEAS Follow-up for 1 week and involve the PTM if a response is not received from the ATM/ATE, or Counsel Attorney by the follow-up date.
    ATE or Counsel Attorney has previously coordinated the civil action with CID The written approval to proceed with the civil action is included in the file APS will process the Appeals determination, Counsel settlement, or Entered Tax Court Decision and fax the written approval to proceed with the civil action to the Scheme Development Center (SDC) contact for the campus location where the adjustment was input.

Department of Justice Cases

  1. Appeals is notified when the case jurisdiction changes to Department of Justice (DOJ).

  2. The ATE prepares the case for release to DOJ, and forwards the case to APS for ACDS and AIMS closing.

  3. Update ACDS following general closing instructions:

    1. CLOSINGCD - 18 or 19, as appropriate

    2. ACTION - ACKCLS

    3. TODATE - Date administrative file is transmitted to Counsel

    4. FROMDATE - Date acknowledgment received from Counsel

  4. APS will prepare Form 5403, Appeals Closing Record to close the AIMS controls using Copy Blocking Series 79X and complete the following entries:

    1. Item 9 - Priority Code (2 or 3 as appropriate)

    2. Item 12 - Enter TC 300 for $0

    3. Item 13 - Disposal Code 01

    4. Items 800 through 810 - Enter appropriate statistical information

    5. Item 811 - Enter closing code 18 or 19, as appropriate

  5. Attach a copy of the face of the return and Form 2275, Records Request, Charge and Recharge, to the Form 5403, Appeals Closing Record.

  6. Forward Form 2275 to the Campus to "recharge" the administrative file and original return to Department of Justice.

  7. Upon completion of the closing actions, APS will transmit the administrative file to the Counsel Office identified by the ATE on Form 5402.

  8. The above instructions apply only to cases in Appeals jurisdiction. If a taxpayer petitions the District Court or Claims Court while in Examination jurisdiction, the DOJ transfer is coordinated between Examination and Counsel without involvement by Appeals. The case WILL NOT be controlled on ACDS.

Docketed Cases

  1. APS is responsible for final processing actions on all Docketed Cases.

  2. The APS Reports Team performs TLCATS research weekly to identify all tax litigation cases nationwide on which a Decision or Order has been entered. Upon review of the report, the APS Report Team updates ACDS for each case identified as having an Entered Decision or Entered Order. In addition, the Reports Team TE enters an LACTION of "COMING" along with a TODATE to identify the date on which the Counsel Office is shipping the administrative file to the respective APS Office for processing of the decision. Upon receipt by APS, the case is assigned on PEAS, to an APS TE for processing and closing actions.

Docketed Cases: Appeals Campus and Appeals Field Closing (8.4.2.8)

  1. Counsel sends all tax court cases back to Appeals for final processing of the decision and closing actions once a dismissal, decision, or order has been entered. Counsel routes all cases according to the information provided on the Orange Routing Sheet placed on the cases by APS at the time the case is originally forwarded to Counsel.

  2. The Form 1734, Transmittal Memorandum prepared by Counsel, must include the time applied and grade of attorney information.

  3. If the Docketed case is received by an APS Office other than the one identified on the Orange Routing Sheet, the case will not be re-routed or rejected. The APS office receiving the case will take the necessary steps to update ACDS and process all applicable account actions and assure timely assessment of the deficiencies in the case.

  4. All Docketed closings will include an Entered Decision or Order of Dismissal.

Dismissed for Lack of Jurisdiction Case Closing (8.4.1.30.4)

  1. The following APS instructions are for Tax Court dismissals that are not CDP cases.

  2. If the Order of Dismissal for Lack of Jurisdiction does not specify the tax/penalty amount to assess:

    • The APS TE will identify the reason for the dismissal. The motion to dismiss indicates the reason for the dismissal.

    • If the Order of Dismissal is not included with the case file, access the United States Tax Court web site http://www.ustaxcourt.gov/, then click on the Docket Inquiry tab to open a search options screen. Click on Docket Number and then enter the docket number and click on search. Scroll down to the bottom of the table, and click on the view option on the Entered Order row to open a printable version of the dismissal.

    • Assessments made as the result of a "prematurely" defaulted statutory notice of deficiency (SND) when the taxpayer has timely filed a petition are not legal/valid assessments. When an assessment is determined to be the result of a prematurely defaulted SND, the APS TE must secure written approval from their Processing Team Manager (PTM), the Appeals Team Manager (ATM) , or the Counsel Attorney prior to abating the assessment.

      Caution:

      The correct Assessment Statute Expiration Date (ASED) applicable to the tax period in question, must be determined and considered prior to processing any abatement(s). If in fact, the petition was late filed, the assessment may in fact be valid and the ASED may have since expired. Abating the assessment(s) after an ASED has expired may result in a barred statute of limitation to process another assessment.

      Example:

      A "Valid" assessment is made timely, prior to the ASED and in compliance with all applicable laws and statutes.

      Example:

      An "Invalid" assessment is either not made prior to the ASED or not in compliance with applicable laws and statutes. One example of an invalid assessment is when a SND is processed as defaulted when in fact the taxpayer has filed a timely petition. If the function responsible for issuing and suspending the SND for the duration of the period during the which the taxpayer has the right to petition, processes the SND as a default assessment and the taxpayer has filed a petition near the end of the SND suspense time-frame, the assessment process and petition identification process can overlap and result in an invalid assessment.

  3. If the case was dismissed because the petition was not timely filed or because the petitioner did not pay the filing fee:

    • Pull a current TXMODA and check the transcript to see if the notice of deficiency has been assessed.

    • If the tax/penalty on the notice of deficiency is assessed and it is a valid assessment, it does not need to be abated and re-assessed. Prepare Form 5403, Appeals Closing Record for $0. Note in Item A - "Tax/penalty assessed previously on (23C Date of assessment)" .

    • If the account is not open on AIMS, and the PTM, ATM, or Counsel Attorney has provided written authority to allow the existing account adjustments to remain as posted, prepare Form 8485, Assessment Adjustment Case Record, to post a TC 290 0.00 with the following entry in the "Remarks" field: "Tax/penalty assessed previously on (Date)" .

    • If there is an invalid assessment, APS will follow the written authority from the PTM, ATM, or Counsel Attorney to process any abatement, and re-assessment prior to the expiration of the ASED.

    • If the tax/penalty on the notice of deficiency has NOT been assessed, prepare Form 5403, Appeals Closing Record to make the assessment through AIMS. See Exhibit 8.20.7-1 for instructions. Form 5403, Appeals Closing Record:

    1. Item 08 - leave blank

    2. Item 12 - use the SND for the tax/penalty amounts

    3. Item 14 - enter the correct statute date and only use tack-on-time when necessary

    4. Item 811 - 08 (if there is ATE time) or 10 (if there is no ATE time)

  4. If the petition filed by the taxpayer is dismissed for lack of jurisdiction because the Service did not issue a SND, the ASED is not suspended and the case must be returned to the originating function:

    1. For cases not open on AIMS, prepare and input Form 8485, Assessment Adjustment Case Record with TC 290 0.00 and enter the following in Remarks "Petition Dismissed for Lack of Jurisdiction - SND was not issued to the taxpayer." . Since the case must be returned to the originating function, also enter "NSD" to notify campus files there will be no source document submitted for association with the Form 5147, IDRS Transaction Record.

    2. If AIMS controls are open in Appeals Status, use AIMS CC: AMSTU to update AIMS to Compliance Technical Services Status 21 and transmit the case using Form 3210, Document Transmittal.

  5. Close the case on ACDS using general closing instructions and verify that the correct ASED is reflected for each return. In addition: CLOSINGCD =

    Closing Code Description
    21 Case is not assigned to an ATE
    08 Case is assigned to an ATE and SNTYPE = 090D or 090S
    12 Case is assigned to an ATE and SNTYPE = 090A

Dismissed for Lack of Jurisdiction for Assessment of Less than the Notice of Deficiency Amount (8.4.1.30.3)

  1. Unless there is concern about an imminent statute of limitations, cases in which additional consideration results in a reduced deficiency are closed by simply assessing a reduced amount. Written ATE, ATM, or Counsel approval is required when a lesser amount of tax than the SND amount is to be assessed.

    IF AND THEN
    Additional consideration of a case results in a reduced deficiency There is no concern about an imminent statute of limitations The case is closed by assessing a reduced amount
    Additional consideration of a case results in a reduced deficiency An imminent statute of limitations is involved It may be necessary to assess the tax reflected in the notice of deficiency and to work the case as an informal claim for abatement
  2. Charge time to the docketed workunit and when consideration of the case is complete, close the case on ACDS with the appropriate closing code.

    Closing Code Description
    08 Dismissed Compliance Area or Campus issued notice with Appeals time
    11 Dismissed for Lack of Jurisdiction and Appeals issued notice
    12 Dismissed for Lack of Prosecution and Appeals issued notice
    21 Dismissed Compliance Area or Campus issued notice with no Appeals time

Dismissed for Lack of Prosecution Case Closing (8.4.1.30.5)

  1. This type of dismissal is used when the taxpayer did not pursue their case in the manner required by the Tax Court rules and procedures, for example, failure to appear at calendar call.

  2. The Order of Dismissal for Lack of Prosecution states the tax/penalty amounts to assess.

  3. Close the case following general closing instructions. In addition, the entries for Form 5403, Appeals Closing Record are:

    1. Item 08 - Leave Blank

    2. Item 12 - enter tax/penalty to be assessed

    3. Item 14 - enter the correct statute date and only use tack-on-time when necessary

    4. Item 811 - 08 (if there is ATE time) or 10 (if there is no ATE time)

  4. Close ACDS using general closing instructions. In addition:

    Closing Code Description
    21 Case is not assigned to an ATE
    08 Case is assigned to an ATE and SNTYPE = 090D or 090S
    12 Case is assigned to an ATE and SNTYPE = 090A

Docketed Personal Holding Company Tax Cases (8.4.1.32.2)

  1. In cases where the liability in personal holding company tax has been established by a decision of the United States Tax Court (USTC) but deficiency dividends have not been paid and a Form 976, Claim of Deficiency Dividends Deductions by a Personal Holding Company has not been filed, APS will:

    1. Prepare Form 5403, Appeals Closing Record.

    2. Assess the gross deficiency according to the entered decision.

    3. Enter Hold Code 3 in Item 07 on Form 5403, Appeals Closing Record. Hold Code 3 prevents the issuance of a notice for the adjustment transaction on which it is entered but does not prevent the issuance of any other notice.

    4. Close the case on ACDS.

    5. Send the administrative file after assessment by Form 3210, Document Transmittal , to the Compliance function identified by the ATE to await the filing of Form 976, Claim for Deficiency Dividends Deductions by a Personal Holding Company, Regulated Investment Company, or Real Estate Investment Trust by the taxpayer.

  2. See the following IRM references for additional information:

    • IRM 4.10.8.10.4, United States Tax Court Cases: Area Compliance Responsibilities

    • IRM 8.6.4.7.1, Form 2198 Agreement - Personal Holding Company Tax

    • IRM 8.7.1.2, Personal Holding Company Tax Alleviated by Deficiency Dividend

Sealed Case

  1. A docketed case can be "sealed" by a USTC Judge. The Counsel Attorney will notify their designated APS PTM to redact the ACDS record and overlay all identifying information as determined by Counsel. The WUNO will stay the same for inventory control purposes.

  2. APS will process the Entered Order or Entered Decision following normal processing guidelines and update the taxpayer's accounts to reflect the Court's determination per the Entered Order or Entered Decision.

  3. APS will document the PEAS Case Activity Record to state that they were not able to apply the Fed/State Disclosure guidelines to this case because the case is Sealed.

    Caution:

    Do not share the case name or any other case information with anyone except your Processing Team Manager (PTM) and only on a need to know basis.

  4. The APS TE must process the account adjustments and place the case in PEAS Suspense until all adjustments post.

  5. Upon verifying that all adjustment have posted to the account, take the following actions to physically seal the case for transmission to campus files:

    • Associate all documents according to closed case assembly guidelines

    • Enclose each tax period separately in opaque material (brown paper, brown folder, etc...)

    • Use shipping tape to affix opaque material around each tax period

    • Clearly annotate the following information on the top of the opaque material:
      "Sealed Case"
      "Appeals WUNO (enter complete WUNO)"
      "Controlling DLN (enter complete Controlling DLN for each applicable package)"

  6. Prepare Form 3210, Document Transmittal according to general procedure with the following exceptions:

    • Instead of using the taxpayer name or name control, use "Sealed Case"

    • Include the WUNO for reference and privacy of case identification

    • Identify each tax period and include the controlling DLN for each tax period

    • Enter a Remark on the Form 3210, Document Transmittal "This case has been sealed by the Tax Court, do not open sealed items and do not disclose case information."

e-file Procedures (8.7.13.7)

  1. The following guidelines are provided for closing e-file cases off of the Appeals Centralized Database System (ACDS). The file must contain the appropriate APGolf letter generated to the appellant and the POA, and in most cases, a Decision on Appeal (if applicable) and an e-file case narrative.

    1. Mail the original and one copy of the letter and Decision (if applicable) to the appellant and power of attorney. Place one copy of the letter, Decision document, and the e-file transmittal form in the file.

    2. If there is no power of attorney, mail the original letter and Decision document to the appellant. Place one copy of the letter, Decision document, and the e-file transmittal form in the file.

    3. Forward a copy of the Decision, e-file narrative and closing letter to the applicable e-Help Office or the appropriate SB/SE e-file monitoring Coordinator identified by the ATE on the Form 5402.

  2. When closing the case off of ACDS, the employee will select each case to be closed by the WUNO. Update the following fields:

    1. Closing cd-

      Closing Code Definition
      14 Rejection/Reprimand Sustained
      15 Rejection/Reprimand Not Sustained
      16 Partially Sustained
      20 Premature Referral
    2. DATECLSD – Date case is closed must be in the current month

    3. ACAPDATE – The Appeals Team Manager enters the ACAPDATE prior to submitting the case to APS

    4. ACTION – ACKCLS

    5. TODATE – Date case is closed

Early Referral (ER) Case Closing Procedures (8.26.4.9)

  1. APS follows the general procedures found in IRM 8.20.7, Account and Processing Support (APS), Closing Procedures, to close an ER case.

  2. ER issues are controlled on AIMS by Compliance Examination or Compliance Collection, so APS will does not prepare or process Form 5403, Appeals Closing Record.

  3. In addition to the general closing procedures, ACDS is updated as follows:

    • CLOSINGCD - 03 (agreed) or 13 (unagreed)

    • RevsdTax - Revised dollars is computed the same way as the proposed deficiency except use the amount determined by Appeals for an agreed case. For an unagreed case, enter the proposed deficiency.

  4. Forward the original documents to Compliance Examination or Compliance Collection using Form 3210, Document Transmittal.

Earned Income Credit Adjustment With a Tax Adjustment

  1. Earned income credit is an adjustment included in the deficiency amount. However, the reversal of the credit is separate from the tax assessment.

  2. For example, if the settlement is:

    Item Amount
    Increase (decrease) to EIC (750)
    Tax (deficiency) 1,000

    Separate EIC from the tax so Form 5403 looks like this:

    Item Amount
    Item 12 (tax) - TC 300 250.00 +
    Item 15 (EIC recapture) - REF 765 750.00 –
    Item 800 - Appeals Results 1,000.00
  3. There are other refundable credits such as the additional child tax credit, first time homebuyer credit, and recovery rebate credit which also require an entry in Item 15 on Form 5403, Appeals Closing Record. See IRM 8.17.5.17.2, Adjustments to Refundable Credits Included in the Statutory Deficiency for additional information.

Earned Income Tax Credit EITC Recertification Program

  1. When the EIC is denied, an Earned Income Tax Credit Recertification Indicator is automatically placed on the National Account Profile (NAP) - part of Master File. The Recertification indicators, found on ENMOD and IMFOLE, are as follows:

    1. 0 (or blank) - Recertification not required

    2. 1 - EIC denied for 1 year after the disallowed year

    3. 2 - EIC denied for 2 years after the disallowed year

    4. 4 - EIC denied for 10 years after the disallowed year

    5. 8 - Reserved

  2. Once the EIC is denied for the following year (or years), taxpayers complete Form 8862, Information to Claim Earned Income Credit After Disallowance, to recertify they are eligible to receive the EIC.

  3. To close a case with EIC recertification, follow general closing instructions. In addition, do the following:

    1. Verify Recertification Indicator 1, 2 or 4 appears on IMFOLE or ENMOD (if not there, recertification is not an issue).

    2. Retain a copy of Form 8862, Information to Claim Earned Income Credit After Disallowance in the administrative file.

  4. The ATE will annotate one of the following on Form 5402, Appeals Transmittal and Case Memo:

    • "Reverse Recertification Indicator, Input TC 971, AC 56"

    • "Do Not Reverse Recertification Indicator"

    • "Recertification Ban Was Not Imposed"

  5. Input TC 971, AC 56, if requested by the ATE, using REQ77/FRM77.

Employee Tax Compliance (ETC) Case Closing Procedures (8.1.8.9)

  1. Upon receipt of the closed case in Atlanta, APS will:

    • Close case off of ACDS

    • Input the Status Code 21 into the Audit Information Management System (AIMS)

    • Mail the closing letter to the taxpayer and/or POA

    • Process and close the case following the Appeals determination

    • Forward all ETC cases to Compliance at the following address:
      Internal Revenue Service
      Attn: Technical Services
      31 Hopkins Plaza
      Baltimore, MD 21201

Employment Tax Case Closing (8.7.16.26)

  1. Both Examination and Collection examine employment tax cases. If the case originated in Collection, send a copy of the Form 5402, Appeals Transmittal and Case Memo and the closing agreement, to the Employment Tax Examinations (ETE) Coordinator, Collection.

FICA - Employee Share of FICA Tax Assessment (Form 1040) (8.7.16.26.3)

  1. When an income tax case also contains an adjustment for the employee’s share of FICA tax, prepare two Form 5403s. The assessments are done separately because the 30-day interest free waiver period (agreement date) does not apply to the employee FICA tax. Prepare Form 5403, Appeals Closing Record for the FICA tax assessment as follows:

    1. Check "AMCLSF"

    2. Item 08 - leave blank

    3. Item 12 - TC 300 amount should reflect only the amount of the Employee Share of FICA Tax to be assessed identified on Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment

    4. Item 16 - no entry

    5. Item 800 through 811- leave blank

    6. Item A Note “Form 885-E included See 2nd Form 5403 for income tax deficiency”

  2. Prepare Form 5403, Appeals Closing Record for income tax assessment:

    1. Check "AMCLSA"

    2. Item 08 - enter agreement date

    3. Item 12 - TC 300 amount = income tax assessment only (FICA tax assessment must not be duplicated on AMCLSA Form 5403)

    4. Item 800 - total assessment of fica tax, income tax and penalty

    5. Complete the Form 5403, Appeals Closing Record with all other appropriate closing information provided via the Form 5403 Instruction Worksheet

    6. Item A - Note "See 1st Form 5403, Appeals Closing Record for Employee Share of FICA Tax assessment "

  3. If only the Employee Share of FICA tax is being assessed, prepare one Form 5403, Appeals Closing Record and leave Item 08 blank.

  4. Form 2504, Agreement to Assessment or Collection of Additional Tax and Acceptance of Overassessment, reflecting taxpayer’s agreement to the FICA tax must be present in the administrative file. Since Employee Share of FICA tax is not an income tax it is not subject to deficiency procedures and cannot be included on a SND. When a SND is being issued, the ATE will notify APS to process the Employee Share of FICA as a partial assessment.

FUTA (Federal Unemployment Tax Adjustments) on Form 940 (8.7.16.26.4)

  1. Prepare Form 5403, Appeals Closing Record as follows:

    1. Enter the appropriate reference code for all increases or decreases in FUTA tax or wages in Item 15. The reference code(s) reflect the state for which the tax/wages are being adjusted.

    2. The three digit reference code for the tax portion of the adjustment is comprised of a "T" followed by the two character state code, e.g. California is TCA; New Jersey is TNJ, etc. The total of the tax (T) reference code amount must equal the TC 300/301 tax adjustment. If the "T" reference code amount does not equal the tax amount or is not entered, the adjustment will reject.

    3. If the adjustment is due to an increase or decrease in wages, a wage reference code(s) is also required. The three digit reference code for the wage adjustment is comprised of a "W" followed by the two character state code.

    4. If adjustments are made to more than one state, the appropriate reference code(s) and the tax and/or wage adjustment amount(s) attributed to each state is required.

IRC §6205 Interest-Free Adjustments (8.7.16.26.5)

  1. IRC 6205 Interest-Free Adjustment cases are identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

  2. Prepare Form 5403, Appeals Closing Record following general closing instructions. In addition:

    1. Item 11 - the date the signed Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment is received by Appeals

    2. Item 12 - TC 308 (instead of TC 300) with the tax amount

  3. See the following references for additional information:

    • IRM 8.7.16.23, Interest-Free Adjustment under Section 6205(a)

    • IRM 20.2.12.2, Underpayment Adjustments

    • IRM 20.2.12.5, Underpayments of FICA and RRTA Taxes

Estate Tax and Gift Tax Case Closing

  1. Estate Tax and Gift Tax returns are often worked together. Closing procedures for both Estate Tax (Form 706) and for Gift Tax (Form 709) are provided within this section.

  2. Appeals Technical Employees (ATE) will use the customized Form 5402, Appeals Transmittal and Case Memo and provide special processing instructions to APS for processing and closing the following types of Estate and Gift Tax Cases:

    • IRC 6161, Extension of Time to Pay Estate Tax

    • IRC 6166, Election to Make Installment Payment

    • IRC 2032A, Notice of Special use Valuation Election

    • IRC 2057, Notice of Special use Valuation Election

  3. APS will code and edit Form 5403, Appeals Closing Record using the information provided by the ATE or TCS on the Form 5403 Worksheet.

Docketed Estate Tax IRC§ 6161 Closing (8.7.4.2.9)

  1. Upon resolution of a Docketed Estate Tax case on which IRC 6161 is applied, APS will:

    • Process the tax and penalty adjustments as determined in the Stipulated or Entered Decision Document using Form 5403, Appeals Closing Record CC: AMCLSA.

    • Enter a TC 340 0.00 in Item 12 of Form 5403 because the Interest on the account must be calculated and posted by the Estate and Gift Tax Unit located at the Covington Campus.

    • Close ACDS using the information provided on the Form 5402, Appeals Transmittal and Case Memo.

    • Make a copy of the adjustment authority and adjustment document to send to campus files for association with the Form 5147, Transaction Register.

    • Use CC: ESTAB to re-charge the administrative file to the Estate and Gift Tax Unit.

Docketed Gift Tax IRC§ 6161 Closing (8.7.4.2.9)

  1. The closing procedures for agreed docketed IRC 6161 cases are different for Estate Tax and Gift Tax cases. For procedures on closing agreed docketed estate tax cases, see IRM 8.7.4.4.12.1 , Closing Agreed Docketed Estate Tax IRC 6161 Cases. For procedures on closing agreed docketed gift tax cases, see IRM 8.7.4.4.12.2, Closing Agreed Docketed Gift Tax IRC 6161 Cases.

Non-Docketed Estate Tax IRC §6161 Closing (8.7.4.2.9)

  1. Non-Docketed Estate Tax IRC §6161 cases are submitted to APS for ACDS closing actions via a customized Form 5402, Appeals Transmittal and Case Memo. APS will update ACDS using the Closing Code provided on the Form 5402, Appeals Transmittal and Case Memo.

    • Closing Code 14 if unagreed (i.e. extension denied)

    • Closing Code 15 if agreed (i.e. extension granted)

  2. APS will re-charge the case to the Advisory Employee identified by the ATE using:

    • IDRS CC: ESTAB

    • Form 3210, Document Transmittal

  3. If the Estate Tax IRC 6161 case is related to an Estate Tax Deficiency case, there will be one WUNO for each type.

  4. APS will process the Estate Tax deficiency based upon the final disposition document, (agreement, default, entered tax court decision) but an Estate Tax IRC 6161 closing by itself requires no AIMS or IDRS update.

Non-Docketed Gift Tax IRC § 6161 Closing (8.7.4.2.9)

  1. Non-Docketed Gift Tax IRC 6161 cases are submitted to APS for ACDS closing actions via a customized Form 5402, Appeals Transmittal and Case Memo. APS will update ACDS using the Closing Code provided on the Form 5402, Appeals Transmittal and Case Memo:

    • Closing Code 14 if unagreed (i.e. extension denied)

    • Closing Code 15 if agreed (i.e. extension granted)

  2. APS will re-charge the case to the Advisory Employee identified by the ATE using:

    • IDRS CC: ESTAB

    • Form 3210, Document Transmittal

  3. If the Gift Tax IRC §6161 case is related to an Gift Tax Deficiency case, there will be one WUNO for each type.

  4. APS will process the Gift Tax deficiency based upon the final disposition document, (agreement, default, entered tax court decision) but a Gift Tax IRC 6161 closing by itself requires no AIMS or IDRS update.

IRC 2057 or IRC 2032A Closing

  1. For IRC 2057 and IRC 2032A cases, the ATE will prepare a customized Form 5402, Appeals Transmittal and Case Memo, that includes IRC 2057, and IRC 2032A closing procedure instructions for APS:

    • Update and close ACDS according to Form 5402 instructions

    • Prepare and process Form 5403, Appeals Closing Record as appropriate and input via CC: AMCLSA

    • Make a copy of the closing documents to send to Campus Files for association with the Form 5147"Transaction Record" generated by the CC: AMCLSA adjustment

    • Transfer control of the case by recharging the return to Estate and Gift using IDRS CC: ESTAB

    • Prepare Form 3210, Document Transmittal to send the administrative file to the Estate and Gift Examiner identified on the Form 5402, Appeals Transmittal and Case Memo

  2. Estate and Gift will process the case pursuant to IRM 4.25.11.1, 4.25.11.1 (01-07-2014) IRC 2032A Special Use Valuation Election, and IRM 5.5.8.4, Special Valuation Estate Tax Lien Under IRC § 6324B.

  3. To properly close estate tax cases, it is important to understand the definitions of net deficiency/overassessment and gross deficiency/overassessment:

    1. Net deficiency/overassessment - the amount determined when the maximum amount of state or foreign death taxes is allowed as a credit in the settlement computation

    2. Gross deficiency/overassessment - the amount determined when the settlement computation only allows the amount of state or foreign death taxes that have been paid

  4. When closing a net deficiency estate tax case, show the "net" deficiency in Item 12 of Form 5403, Appeals Closing Record if either of the following two situations exists:

    1. substantiation of payment of state or foreign death taxes is not required; or

    2. substantiation of payment of state or foreign death taxes is required, but the waiver provides for an additional assessment in event substantiation is not timely submitted, and ample time remains for assessment of the unsubstantiated credit.

  5. For estate cases that do not involve state or foreign death tax credits, enter the "gross" deficiency/overassessment in Item 12, Form 5403, Appeals Closing Record.

  6. In docketed cases, whether settled or tried, if required substantiation of state or foreign death tax has not been submitted, make the assessment for gross deficiency or gross overpayment and follow the same credit procedure as in agreed nondocketed cases. The petitioner may obtain credit for state inheritance taxes after the decision is entered in the United States Tax Court case if a claim is submitted to the Service within the statutory period.

  7. Enter the "net" deficiency or overassessment in Item 800/801, Form 5403, Appeals Closing Record.

  8. Appeals will expedite the closing of a certain "agreed and unpaid deficiency" or overpayment case, if the case meets the "large dollar" criteria described in IRM 8.2.1.11.1, Expedite Processing for Certain Large Dollar Cases and IRM 8.2.1.12.2, Expedite Processing for Certain Large Dollar Cases.

    Note:

    This guidance does not apply to a deficiency and/or overpayment case that requires Joint Committee. See IRM 8.7.9.2, Cases Requiring JC Review

    .

Restricted Interest in Estate Tax Cases
  1. Interest may be limited to specific time periods or rates, or it may be statutorily prohibited; this gives rise to the term "restricted interest." Restricted interest is subject to the same variables (time, rate, amount) as "normal" interest. The primary difference between normal and restricted interest is that the computer may not be able to identify all conditions involved in a restricted interest situation and therefore restricted interest computations may have to be performed manually.

  2. See IRM 8.7.4, Technical and Procedural Guidelines, Appeals Estate and Gift Tax Cases, Exhibit 8.7.4-4 Restricted Interest Provisions for Estate Tax for additional information.

  3. If the case involves any of the Code Sections listed in IRM 8.7.4-4, the TCS or ATE will prepare Form 1366, Tax Analysis Worksheet for Overassessment of Estate Tax Involving Restricted Interest, as part of the settlement computation for use by APS in computing the restricted interest.

  4. The TCS or ATE will also notate that restricted interest applies on the Form 5403 Instruction Worksheet. This alerts APS to look for the Form 1366.

  5. The ATE is responsible for ensuring that the Form 1366 is attached to the Form 5403 Instruction Worksheet and that both documents are attached to the inside left flap of the administrative file folder when the case is closed.

  6. See IRM 20.2.8, Restricted Interest, for further information concerning restricted interest computations.

  7. See IRM 20.2.10.1.5, Interest on Estate Tax Returns, Combination Adjustments, for further information concerning Form 1366.

Gift Tax Case Closing (8.7.4.2.4)

  1. The special purpose agreement form for gift tax cases is Form 870-AD or a Form 890. Form 890 is only used when the only issue is the amount of the exemption and there is no tax due.

  2. The detailed instructions for preparing Form 5403, Appeals Closing Record are found in Exhibit 8.20.7-1, Form 5403 - Appeals Closing Record (Instructions.).

  3. Appeals will expedite the closing of a certain "agreed and unpaid deficiency" or overpayment case, if the case meets the "large dollar" criteria. For additional information, see IRM 8.2.1.11.1, Expedite Processing for Certain Large Dollar Cases and IRM 8.2.1.12.2, Expedite Processing for Certain Large Dollar Cases.

    Note:

    This guidance does not apply to a deficiency and/or overpayment case that requires Joint Committee. See IRM 8.7.9.2, Cases Requiring JC Review

    .

Gift Tax MFT 51/MFT 54 Item 422 and Item 425 Entries

  1. The ATE or TCS who prepares the tax computations and the Form 5403 Instruction Worksheet will identify the correct Item Reference Number and adjustment amount when there are updates required to the Unified Credit via Item 422 and/or the Deceased Spousal Unused Exclusion (DSUE) Item 425.

  2. The Form 5403, Appeals Closing Record revision 10,2014 is updated to include Item 422 and Item 425 when an adjustment to either item is identified by the ATE/TCS via the Form 5403 Instruction Worksheet.

Excise Tax IRC 4251 - Direct Assessment

  1. Excise tax imposed by IRC 4251 is assessed directly against the user of communications facilities and services if the tax is not paid to the collecting agency. Although liable for the tax, the user is not required to file an Excise Tax Return, nor is the tax assessed against an MFT 03 account.

  2. Process the assessment as a Non-Master File (NMF) assessment in the name of the person against whom the direct assessment is to be made using Form 1331, Notice of Adjustment.

  3. If there is an overassessment of a NMF direct assessment, process the overassessment on Form 1331, Notice of Adjustment.

  4. If NMF AIMS controls are open, use Form 5403, Appeals Closing Record to close AIMS via CC: AMCLSA.

  5. Apply these procedures to other direct assessments. See IRM 4.24.6.7.6, Direct Assessment Procedures Under IRC 4251, 4261, and 4271 for more information regarding direct assessments.

  6. Letter 4451, Employment Tax Closing Letter Unagreed Non WC, will be used for unagreed cases. Letter 913, Closing Letter - Agreed Cases, will be used for agreed cases. APS will date and mail all copies of the closing letter addressed to the taxpayer.

  7. See the following IRMs for additional information on Telephone Excise Tax Refund (TETR) case processing:

    • IRM 20.2.10.3.4, Telephone Excise Tax Refund (TETR) Claims

    • IRM 20.2.10.3.4.3, Computing TETR Credit Interest

    • IRM 21.6.3.5, Telephone Excise Tax Refund (TETR) - General

    • IRM 21.6.3.5.14, TETR Adjustments - General Information

    • IRM 21.6.3.5.14.2, TETR - Adjusting the Account

    • IRM 21.7.4.4.23, Telephone Excise Tax Refund (TETR)

    • IRM 21.7.4.4.23.5.2, Adjusting the TETR Tax/Interest

  8. Additional TETR processing information is available at the following link: http://lmsb.irs.gov/hq/pqa/4/downloads_TETR/TETRDetailedProcedures.asp#Transaction.

Excise Tax - Preparing Form 1331 (8.7.10.13)

  1. This form is a three-part assembly, and depending upon local arrangements, may be prepared in part by the Account and Processing Support (APS) and in part by the Campus on Non-Master File overassessments. The form is not required for an overassessment for which a restricted interest worksheet is prepared. Form 1331-C, Notice of Adjustment (Wage or Excise Tax) is used for excise tax cases.

  2. For excise tax cases involving restricted interest, the ATE will use the Form 5402, Appeals Transmittal and Case Memo and also the Form 5403 Instructions to APS Worksheet to provide notification to APS of the interest restriction. The ATE will Include the type of tax and IRC Section or applicable regulation authorizing the restriction of interest in the "Special Handling Instructions" section of the Form 5403 Instructions Worksheet to APS spreadsheet.

Dyed Diesel Fuel Penalty Case Closing (8.7.10.11.6)

  1. APS will update and close ACDS according to the Form 5402, Appeals Transmittal and Case Memo instructions provided by the ATE.

  2. APS will not make the assessment of the penalty in these types of cases, or make any entries on IDRS. Only the closing information will be input on ACDS.

  3. All closed files are to be sent to:

    Internal Revenue Service
    National FCO Territory, Stop 694D
    5240 Snapfinger Park Dr., Suite 190
    Decatur, GA 30035-4059

  4. Use Form 3210, Document Transmittal to transmit the closed file per the ATE instructions.

MFT 40 Ultimate Purchaser Claims

  1. See IRM 21.7.8.4.5.1, MFT 40, Ultimate Purchaser Claims for processing procedures on an MFT 40 account.

Fast Track Mediation Case Closing Procedures (8.26.3.8.1)

  1. APS will update and close ACDS according to the instructions provided by the ATE on Form 5402, Appeals Transmittal and Case Memo.

  2. Use one of the following Closing Codes:

    • 14 - Case fully resolved

    • 15 - Case not resolved

    • 16 - Case partially resolved

    • 20 - Withdrawals

OIC Fast Track Mediation (FTM) WUNO Closing Procedures (8.26.9.2.2.4)

  1. Use one of the following Closing Codes:

    • 14 - Case fully resolved

    • 15 - Case not resolved

    • 16 - Case partially resolved

    • 20 - Withdrawal

  2. Collection already received a copy of the Form 13370, Fast Track Mediator's Report at the conclusion of the FTM session, so APS does not need to send anything to Collection as part of closing the FTM OIC WUNO.

TFRP Fast Track Mediation (FTM) WUNO Closing Procedures (8.25.3.5.1)

  1. APS will update and close ACDS according to the instructions provided by the ATE on Form 5402, Appeals Transmittal and Case Memo.

  2. Use one of the following Closing Codes:

    • 14 - Case fully resolved

    • 15 - Case not resolved

    • 16 - Case partially resolved

    • 20 - Withdrawals

  3. Collection already received a copy of the Form 13370, Fast Track Mediator's Report, so APS does not need to forward anything to Collection as part of closing the FTM TFRP WUNO.

Fast Track Settlement (FTS) SB/SE Cases

  1. The Appeals Technical Employee will prepare the "SB/SE FTS Closing Package" .

Fast Track Settlement (FTS) SB/SE Closing Package (8.26.2.15.2)

  1. The "SB/SE FTS Closing Package" includes the following documents:

    • Form 5402, Appeals Transmittal and Case Memo - signed by the FTS Appeals Official

    • Form 14000, Fast Track Session Report (signed by all parties)

    • ACM- Required on a hazards settlement

    • Special Appeals Agreement Forms (AD) or Form 906/866 Closing Agreement (if required)

    • Letter 1595, Draft Closing Agreement Request for Taxpayer Signature Transmittal Letter to transmit a copy of executed Closing Agreement to the taxpayer

Fast Track Settlement (FTS) SB/SE Closing Procedures (8.26.2.15.1 combined with 8.26.2.15.3)

  1. The Proposed and Revised Adjustment dollars are provided by the ATE on the FTS Session Report or the Form 5402, Appeals Transmittal and Case Memo.

    Note:

    Appeals does not receive an administrative file in an SB/SE FTS case, however APS must take the appropriate action to close the case off of ACDS. APS does not process account adjustments based on the agreement reached during the FTS session.

  2. The Appeals Official (ATE) will :

    1. Prepare a Form 5402, Appeals Transmittal and Case Memo and include the following entries:

      1. Proposed and the Revised FTS Adjustment dollars

      2. Item 11 remarks: SB/SE Fast Track Settlement Case

      3. Closing Codes for SB/SE FTS cases are as follows:

        • 14 - Fully resolved

        • 15 - Not Resolved - Including taxpayer withdrawal

        • 16 - Partially Resolved

        • 20 - Withdrawn for procedural reasons (further development, bankruptcy)

    2. Give APS a copy of the Form 5402, Appeals Transmittal and Case Memo, Form 14000, Fast Track Session Report, and the Case Activity Record in order to close the case off of ACDS. If a hazards settlement, the Appeals Official will also provide APS with any Special Agreement Forms and a copy of the ACM.

    3. Forward the "SB/SE FTS Closing Package" to the SB/SE Examiner/Group Manager using Form 3210, Document Transmittal.

    4. Send a copy of the Form 14000 , Draft Closing Agreement Request for Taxpayer Signature Transmittal Letter and a copy of the Form 5402, Appeals Transmittal and Case Memo, and the ACM if required, to the Tax Policy Procedure SB/SE FTS Program Manager.

TE/GE FTS Case Closing Procedures (8.26.7.8)

  1. Although Appeals does not receive an administrative file in a TE/GE FTS case, APS must take appropriate action to close the case off of ACDS using the information provided by the ATE on Form 5402, Appeals Transmittal and Case Memo.

    Note:

    APS does not process account adjustments based on the agreement reached during the Fast Track Settlement session.

Closing Procedures for Terminated, Withdrawn, or Unresolved TE/GE FTS Cases

  1. TE/GE FTS cases that are terminated, withdrawn, or fully unresolved will be closed on ACDS and returned to TE/GE for appropriate action.

  2. The FTS ATE will prepare a "TE/GE FTS Closing Package" , which contains the following documents:

    1. Form 14000, Fast Track Settlement Report signed by all parties.

    2. Two copies of Letter 5203, Unagreed Fast Track Settlement Closing Letter one copy addressed to the taxpayer and the other copy to TE/GE.

  3. The FTS ATE will route the original "TE/GE FTS Closing Package" to TE/GE through the Appeals Team Manager (ATM).

  4. The FTS ATE will send a copy of the Form 14000, Fast Track Session Report and Form 5402, Appeals Transmittal and Case Memo to the Tax Policy & Procedure TE/GE FTS Program Manager.

  5. The ATM will send a copy of the "TE/GE FTS Closing Package" to APS to close the case off of ACDS.

  6. APS will update and close ACDS using the following information provided on the Form 5402, Appeals Transmittal and Case Memo:

    • Proposed FTS Adjustment dollars which will be the same amount on both the Form 5402, and the Form 14000.

    • Item 11 remarks: TE/GE Fast Track Settlement Case

    • Closing codes:

      • 15 - Unresolved or voluntary withdrawal

      • 20 - Withdrawn or terminated for procedural reasons

Closing Procedures for Fully or Partially Resolved TE/GE FTS Cases

  1. For TE/GE FTS cases that are fully or partially resolved, the FTS Appeals Official will prepare a "TE/GE FTS Closing Package" , which contains the following documents:

    1. Form 14000, Fast Track Session Report signed by all parties.

    2. Two copies of Letter 5202, Agreed Fast Track Settlement Closing Letter one addressed to the taxpayer and the other to TE/GE.

    3. A Form 5402, Appeals Transmittal and Case Memo with the following entries:

      • Proposed and the Revised FTS Adjustment dollars

      • Item 11 remarks: TE/GE Fast Track Settlement Case

      • Closing codes:

        • 14 - Fully resolved

        • 16 - Partially Resolved

    4. A brief Appeals Case Memorandum (ACM), if the issues were resolved based on hazards of litigation (whether factual or legal).

    5. Closing Agreement(s), if applicable.

      • If the FTS ATE resolves the issues using mediation techniques only, TE/GE will secure the appropriate agreement form.

      • If the FTS ATE settles the issues using Appeals settlement authority and/or the settlement is based on hazards of litigation, the FTS ATE will secure the appropriate special agreement documents, such as Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment, Form 866, Agreement as to Final Determination of Tax Liability, or Form 906, Closing Agreement on Final Determination Covering Specific Matters.

      • On Joint Committee Cases, Appeals does not execute any closing agreement until the settlement is cleared by Joint Committee. In those cases, the FTS Appeals Official will prepare a Form 5402, Appeals Transmittal and Case Memo which states, "This case may not be closed until Joint Committee approval is received. Upon receipt of the Joint Committee letter, Appeals will execute a closing agreement and the case may then proceed through TE/GE closing procedures" .

  2. The FTS Appeals Official will route the original "TE/GE FTS Closing Package" to TE/GE through the Appeals Team Manager (ATM).

  3. The FTS ATE will send a copy of the Form 14000, Fast Track Session Report and Form 5402, Appeals Transmittal and Case Memo to the Tax Policy & Procedure TE/GE FTS Program Manager.

  4. The ATM will send a copy of the "TE/GE FTS Closing Package" to APS to close the case off of ACDS.

  5. APS will update and close ACDS using the following information provided on the Form 5402, Appeals Transmittal and Case Memo:

    • Proposed and the Revised FTS Adjustment dollars

    • Item 11 remarks: TE/GE Fast Track Settlement Case

    • Closing codes:

      • 14 - Fully resolved

      • 16 - Partially Resolved

Foreign Bank and Financial Account (FBAR) Penalty Case Closing Procedures (8.11.6.8)

  1. There are three types of closing for an FBAR penalty case. Determine the type of case and follow those instructions outlined in the following sections:

    • Premature Referral

    • Pre-Assessment

    • Post-Assessment

  2. ACDS Closing Codes for FBAR cases:

    Determination Made CLOSINGCD
    Agreed or No Change - valid only for pre-assessment case 03
    Unagreed or Partially Sustained valid only for pre-assessment case 13
    Sustained in Full valid only for post-assessment case 14
    Not Sustained valid only for post-assessment case 15
    Partially Sustained valid only for post-assessment case 16
    Premature Referral valid for either pre-assessment or post-assessment 20

FBAR Closing - Premature Referral (8.11.6.8.1)

  1. When Appeals receives the income tax case or international penalty case along with the FBAR case, and the ATE determines it is a premature referral, special procedures must be followed.

  2. See the table below for information on closing the premature referral:

    If Premature Referral- jurisdiction is released on the Then
    Combined FBAR case with related case
    • close combined cases

    • return to the originating Compliance office, generally the Technical Services

    • ATE prepares Form 5402Appeals Transmittal and Case Memo, to notify the Enterprise Computing Center (ECC) FBAR Penalty Coordinator jurisdiction is released

    FBAR case only is being returned as a premature referral
    • return to the originating group

    • ATE prepares Form 5402 , Appeals Transmittal and Case Memo, to notify the ECC FBAR Penalty Coordinator jurisdiction is released

  3. ACDS field entries for closing the premature referral. Case level entries are:

    • Closing Code: 20 - Premature Referral (Jurisdiction Released)

    • Date Closed : Date case sent to the Technical Services

    • ACAPDATE : Date ATM signed Form 5402, Appeals Transmittal and Case Memo

    • Action : ACKCLS

    • TODATE: Date case sent to Technical Services

    • FROMDATE: Date the receipted Form 3210, Document Transmittal is received

  4. No entries are required at the return level.

  5. Transmit the Form 5402, Appeals Transmittal and Case Memo and (ACM) via fax or email to Enterprise Computing Center (ECC):

    • Fax Number - 313-234-2278

    • Email Address - *SBSE BSA Compliance-FBAR Penalty Coordinator

  6. Send the FBAR file with transmittal Form 3210, Document Transmittal to Technical Services .

    Internal Revenue Service

    Attn: FBAR Penalty Coordinator

    985 Michigan Avenue

    Detroit, MI 48226

FBAR Closing - Pre-Assessment Case (8.11.6.8.2)

  1. The ATE will prepare the closing letter and Form 5402Appeals Transmittal and Case Memo.

  2. There are two types of Agreed Pre-Assessed FBAR cases:

    • Agreed with signed waiver Form 13449, Agreement to Assessment and Collection of Penalties Under 31 U.S.C. 5321(a)(5) and 5321(a)(6).

    • No Change case - FBAR is not sustained and signed Form 13449 is not required.

  3. An unagreed case is when the FBAR penalty is fully or partially sustained. Form 13449 is not required.

  4. The ATE will date and mail the letter prior to the submitting the case to APS for closing actions.

  5. ACDS Closing entries:

    • Closing Codes: see IRM 8.20.7.32(2)

    • Date Closed : Date Case sent to ECC

    • ACAPDATE: Date the ATM approves the case and signs Form 5402, Appeals Transmittal and Case Memo

    • ACTION: ACKCLS

    • TODATE: Date case was sent to the FBAR Penalty Coordinator at ECC

    • FROMDATE: Date the receipted Form 3210, Document Transmittal, was acknowledged by ECC

    • Revised Penalty - Def/OA:

      Pre-Assessment Closing Codes (cc) Dollar entry for each tax period
      Agreed with waiver (cc 03) enter total amount of penalty agreed to
      No Change (cc 03) enter zero (0)
      Unagreed (cc 13) total amount of the penalty imposed
  6. The FBAR administrative file is prepared by the ATE and will contain the following additional documents when submitted to APS for closing:

    • Form 13449, Agreement to Assessment and Collection of Penalties under 31 USC 5321(a)(5) and 5321(a)(6) and itemized attachment

    • Form 5402, Appeals Transmittal and Case Memo and settlement memorandum

    • FBAR penalty computation, if any changes were made

    • Appeals closing letter - dated

    • Original and copy of any delinquent FBAR(s) secured by Appeals

  7. APS sends the FBAR file by UPS Ground with Form 3210, Document Transmittal to:

    Internal Revenue Service

    Enterprise Computing Center

    Attn: FBAR Penalty Coordinator 313-234-1611

    985 Michigan Ave

    Detroit, MI 48232

FBAR Closing - Post-Assessment Case (8.11.6.8.3)

  1. Post-assessment FBAR cases are priority cases and require expedite handling.

    • Assignment to ACAPDate = 120 days

    • ACAPDate to Date Closed = 10 days

    Note:

    Pay special attention to those cases where the FBAR assessment if more than 180 days old.

  2. The ATE will prepare the closing letter and Form 5402, Appeals Transmittal and Case Memo

  3. The ATE will mail the closing letter prior to submitting the case to APS for closing.

  4. ACDS field entries for closing post-assessment FBAR cases:

    • Closing Codes:

      ACDS Closing Code Closing Code Definition
      14 sustained in full
      15 not sustained
      16 partially sustained
    • Date Closed: Date case sent to the FBAR Penalty Coordinator at ECC

    • ACAPDATE: Date the ATM approves the case and signs Form 5402, Appeals Transmittal and Case Memo

    • Action: ACKCLS

    • TODATE: Date the case was sent to the FBAR Penalty Coordinator at ECC

    • FROMDATE: Date receipted copy of Form 3210, Document Transmittal received from ECC

    • Revised Penalty amounts:

    • Post-assessment Closing Codes (cc) Dollar entry for each tax period
      Sustained in full (cc 14) enter total amount of penalty agreed to
      Not Sustained (cc 15) enter zero (0)
      Partially Sustained (cc 16) revised penalty amount
  5. The FBAR administrative file is prepared by the ATE and will contain the following additional documents when submitted to APS for closing:

    • Form 13449, Agreement to Assessment and Collection of Penalties under 31 USC 5321(a)(5) and 5321(a)(6).

    • Form 5402, Appeals Transmittal and Case Memo and settlement memorandum

    • FBAR penalty computation, if any changes were made

    • Appeals closing letter - dated

    • Form 13448, Penalty Assessment Certification Summary (Title 31 "FBAR)"

  6. Transmit the Form 5402, Appeals Transmittal and Case Memo and (ACM) via fax or email to Enterprise Computing Center (ECC):

    • Fax Number - 313-234-2278

    • Email Address - *SBSE BSA Compliance-FBAR Penalty Coordinator

  7. APS sends the FBAR file by UPS Ground with Form 3210, Document Transmittal to:

    Internal Revenue Service

    Enterprise Computing Center

    Attn: FBAR Penalty Coordinator 313-234-1611

    985 Michigan Ave

    Detroit, MI 48232

Freedom of Information Act (FOIA) Case Closing

  1. All FOIA cases are closed on ACDS by the Fresno APS Team.

  2. After the ATE makes a determination on the Administrative Appeal, the ATM reviews the determination, signs, dates and mails the Closing Letter and distributes all copies as appropriate.

  3. Upon receipt of the completed FOIA case, APS closes the case on ACDS according to the Form 5402, Appeals Transmittal and Case Memo.

ID Theft Liability Adjustments (8.6.5.6)

  1. Brookhaven APS is responsible for all processing and adjustments on ID Theft cases in Appeals jurisdiction. These cases are identified on ACDS with a feature code "ID" and a TC 971 AC 522 on ENMOD.

  2. Prior to submitting the ID Theft case to Brookhaven APS, the ATE must:

    • Ensure the taxpayer's address in IDRS is correct. Failure to verify and update IDRS to the taxpayer's correct address may result in the ID thief getting the taxpayer's mail from the IRS, including the Identity Protection Personal Identification Number needed to file in future years.

    • The ATE will prepare and sign Form 3870, Request for Adjustment if needed and as appropriate to accomplish correction of the taxpayer's account.

  3. Unless the ATE specifies otherwise, APS will:

    • Utilize the ID Theft streamlined process

    • Utilize the Campus BSC address for the IRSN since Appeals does not have a name, SSN or address for the bad taxpayer

    • Assume the ATE verified the good taxpayer via their request for an Appeals hearing, Form 14039, Identity Theft Affidavit and the proof of ID provided

    • Assume the ATE verified the taxpayer's correct address in IDRS on receipt of the case and at closing

  4. APS will resolve any problems with the adjustment requests with the ATE initiator. If the ATE initiator is not responsive or the issue remains unresolved, raise the issue to the PTM / ATM level.

  5. When utilizing Form 12810 Account Transfer Request Checklist, APS must note "IDT Case, please expedite" on the top of the form.

  6. The ATE information within the subsections below is included for APS reference to verify the type of "ATE-prepared" documents and instructions that are required for each type of ID Theft case.

ID Theft Income Related Adjustment (8.6.5.6.1 (1))

  1. When it is confirmed that an ID thief used the taxpayer's SSN to earn income, the ATE must provide instructions to APS, (see Step Table below for reference) for adjusting the account to reflect the taxpayer's correct account information and to remove the "bad" transactions :

    Step Process
    1 The ATE will:
    • Prepare Form 3870 and write "ID theft adjustment" at the top. Identify the bad transaction(s) that must come off of the account.

    Example:

    "Reverse the TC 290/300 assessed including interest and penalties. "

    2 The ATE will
    • Prepare Form 4844 for APS to input TC 971 AC 501 after the account is adjusted.

    3 The completed case will be forwarded to Brookhaven APS for processing after it has been ACAP'd.

ID Theft Return Related Adjustment-Taxpayer Didn't File (8.6.5.6.2 (1))

  1. When it is confirmed that an ID thief used the taxpayer's SSN to file a fraudulent return AND the taxpayer had no filing requirement, the ATE must instruct APS to adjust the liability to make the taxpayer whole:

    Step Process
    1 The ATE will:
    • Prepare Form 3870 and write "ID theft adjustment-treat this fraudulent return as a nullity" at the top.

    • Identify the bad transaction(s) that must come off of the account.

    • Address any refunds, prepayment credits or payments on the account.

    Example:

    The bad taxpayer got a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year that the good taxpayer owes for. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

    The good taxpayer had refunds or payments applied to the liability. Those credits must be returned. Direct APS whether and where to move the good taxpayer's credits

    2 The ATE will prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully adjusted.
    3 The completed case will be forwarded to Brookhaven APS for processing.

ID Theft Return Related Adjustment-Multiple Returns Filed (8.6.5.6.3 (1))

  1. When it is confirmed that an ID thief used the taxpayer's SSN to file a fraudulent return and the taxpayer also filed, the ATE must instruct APS to adjust the liability to make the taxpayer whole:

    Step Process
    1 The ATE will:
    • Prepare Form 3870 and write "ID theft adjustment-treat this fraudulent return as a nullity" at the top.

    • Identify the bad transaction(s) that must come off of the account.

    • Address any refunds, prepayment credits or payments on the account.

    Example:

    The bad taxpayer got a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year that the good taxpayer owes for. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

    The good taxpayer had refunds or payments applied to the liability. Those credits must be returned. Direct APS whether and where to move the good taxpayer's credits.

    2 The ATE will:
    • Prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully abated/adjusted.

    3 The ATE will:
    • Attach a copy of the good taxpayer's "duplicate" TC 976 return (electronic or paper) or the taxpayer's original return if not posted as a "duplicate" TC 976 return.

    4 The completed case will be forwarded to Brookhaven APS for processing.

Identity Theft - Additional References

  1. The links provided below provide additional references and information for processing IDT Cases:

    • IRM 2.4.61, IDRS Terminal Input, Command Code IDT48/IDT58

    • IRM 3.28.4, Special Processing Procedures - Identity Theft Returns for Submission Processing

    • IRM 10.5.3, Identity Protection Program

    • IRM 21.4.5, Refund Inquiries, Erroneous Refunds

    • IRM 21.9.2, Specialized Accounts Management Programs, Individual Master File (IMF) Accounts Management Identity Theft

Individual Retirement Account (IRA) Closing Procedure (8.7.10.18.1)

  1. Examination of Form 1040, Individual Income Tax Return, for 1975 and subsequent tax periods may require adjustments to the IRA Master File (IRA MF) in addition to the normal adjustment to the Individual Master File (IMF) account.

  2. Separately post the following adjustments to the IRA MFT 29:

    1. 6% tax when the taxpayer contributes more than the maximum amount to the retirement fund

    2. 50% tax when the taxpayer does not take enough money out of the retirement fund (distributions are required at a certain age)

    3. when the taxpayer takes out too much money from the retirement fund (too much of the funds are distributed)

    4. when the taxpayer takes out too much money in a lump-sum distribution

    Note:

    DO NOT separately post the 10% tax on early distribution (taxpayer took money from the retirement fund before the proper age was reached). This tax is included in the deficiency and is posted to the MFT 30 account.

  3. See IRM 4.4.14.3.2.1.1, MFT 29 Account Exists and IRM 4.4.14.3.2.1.2, MFT 29 Account Does Not Exist for additional information.

  4. When joint filers each have separate IRA accounts and both are adjusted, prepare two Form 5403s for the IRA accounts. Check AMCLSI Box on the top of each form. Process these forms before processing the joint Form 5403, Appeals Closing Record.

    1. Item 1 - If the IRA adjustment is to the account of the spouse with the secondary SSN on Form 1040, line through the primary SSN.

    2. Item 2 - Enter MFT 30. After completion of CC: AMCLSI, MFT 29 is generated systemically to the IRA record for transfer to Master File. MFT 29 is never reflected on the terminal screen.

    3. Item 4 - Enter the name control.

    4. Item 01 - If the IRA adjustment is to the account of the spouse with the secondary SSN on Form 1040, enter the SSN of the spouse. If the IRA adjustment is to the primary SSN, leave this item blank.

    5. Item 12 - Enter the "excess contribution tax" in the plus or minus field, whichever is applicable. Valid TC’s are 300, 301, 340, 341, 342, 770, and 772.

    6. Item 15 - Enter the reference number and amounts, either increase or decrease. The amount entered for reference number 160 or 162 must be the same as in Item 12.

      Ref No. Definition
      160 Increase or decrease 6% tax on excess contributions
      162 Increase or decrease 50% tax on under distribution
      194 Increase or decrease in tax on excess regular distribution
      195 Increase or decrease in tax on excess lump-sum distribution
    7. Items 800 through 811 - Omit entries.

    8. Item A - Enter "IRA adjustment." cross reference the IMF account with the name and TIN of the related Form 1040.

  5. Prepare Form 5403, Appeals Closing Record for income tax adjustments in the usual manner. Include the IRA adjustments in results (Item 800/801).

  6. Additional IRM Reference for IRA Accounts and IRA Adjustments:

    • IRM 4.4.14, AIMS/Processing Handbook, Individual Retirement Account (IRA), Education Savings Accounts and Medical Savings Account Adjustments

    • IRM 21.6.5, Individual Tax Returns, Individual Retirement Arrangements (IRA), Coverdell Education Savings Accounts (ESA), Archer Medical Savings Accounts (MSA) and Health Savings Accounts (HSA)

Innocent Spouse Case Closing Overview (25.15.12.26)

  1. This section contains instructions for the processing of innocent spouse cases after the request is determined to be disallowed, partially disallowed, nonqualifying, or allowed in full and the modules are not mirrored. For instructions on processing mirrored modules see IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability.

  2. Allocation of liability could apply to either allowed or partially allowed requests. A partial allowance occurs when the taxpayer does not qualify for full relief but is entitled to some, but not full, relief. Partial allowance does not include a situation where a taxpayer is eligible for full relief under IRC 6015(c), but the taxpayer does not qualify for a refund of payments/offsets made against the liability because refunds are not allowed under IRC 6015(c). This determination is made by the ATE.

  3. Assessments against only one spouse of a joint return were made:

    1. Prior to January, 2001, on the separate Non-Master File (NMF) MFT 20 account.

      Note:

      If NMF was used to assess one spouse, NMF is used to assess the other spouse.

    2. Effective January 2001, on the separate Master File MFT 31 account.

    3. See IRM 8.20.7.40, Separate Assessment Module Overview for additional information.

Innocent Spouse/CDP Case Closing (25.15.12.16.2)

  1. All Innocent Spouse cases along with related CDP cases are routed to the Florence APS for closure and should remain together.

    Reminder:

    The CDP must be for the Requesting Spouse (RS). See IRM 25.15.12.16, CDP/EH and Innocent Spouse Cases for additional information.

  2. APS will:

    1. Close the CDP and IS work units on ACDS.

    2. Update the Innocent Spouse Tracking System (ISTS). See IRM 25.15.14, Innocent Spouse Tracking Systems Inventory Validation Instructions for procedures.

    3. Input all required IS and CDP adjustments/transactions. See IRM 8.20.7.12, Collection Due Process (CDP) Overview of Back-End Processing, for additional information on CDP transactions.

    4. When all adjustments/account transfers have been completed and posted to IDRS close IS and CDP work units on PEAS.

    5. The administrative files should be filed according to standard procedures.

    Note:

    A MFT 31 account does not automatically mean the case is an INNSP case. If a previous determination was made and the case is only in Appeals as a CDP case, do not send the case to Florence Campus APS for processing.

Innocent Spouse Routing for Closure (25.15.12.26.1)

  1. Florence Campus APS closes and processes innocent spouse cases in Appeals. This includes closing ACDS, processing account adjustments, and updating ISTS. Florence Campus APS processes these types of cases when:

    1. Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases is received

    2. Taxpayer now accepts Compliance's preliminary determination and asks Appeals to close out their case

    3. Request for relief is unprocessable or does not meet the basic requirements

    4. There is an invalid joint election

    5. The final determination letter defaults

    6. The U.S. Tax Court enters a decision

    7. A Circuit Court enters a decision regarding a Tax Court decision

  2. If a final determination letter was issued, and by the 121st day, no notification is received that the Requesting Spouse (RS) has petitioned the Tax Court, APS purges the case within seven (7) calendar days and closes the case as a defaulted determination letter.

  3. If a petition with the Tax Court is filed in response to the final determination letter, the issuing APS office updates ACDS and sends the administrative file to Counsel for "Answer" and trial preparation no later than two days after notification is received the case is docketed.

Innocent Spouse APS Statute Responsibility (25.15.12.26.2)

  1. APS is responsible for verifying and monitoring the statute dates on all tax periods and returns under their jurisdiction. Correct statute dates must be promptly determined and updated on ACDS and IDRS (AIMS) following the requirements in IRM 8.21.2.5, Updating Statutes on ACDS and AIMS and the procedures contained in the Pipeline Training Course Material.

  2. Information for determining and updating statues on post-assessed cases can be found in Exhibit 8.20.7-4, Innocent Spouse - ACDS Statute Date/Code Table.

  3. For pre-assessed cases, statute dates should be computed and updated in the following order when sufficient time remains on the statute to allow for normal processing through IDRS:

    1. Normal statute (never shorten the normal 3 year statute)

    2. Normal or extended statute plus 150 days

    3. Decision/Dismissal entered date plus 150 days

    4. Tack-on time (computations must be signed and approved by manager)

      Note:

      A notice of deficiency must have been issued in order for the additional 150 days or tack-on time to apply. If no SND has been issued, the normal 3 year statute applies.

  4. ACDS is programmed to enter a statute date equal to 150 days from the decision entered date; this date is a conservative action that aids in the statute monitoring process. APS is responsible for reviewing and determining the actual ASED and updating as follows.

  5. Decision entered on a petitioned Tax Court case:

    • Enter a date 150 days from what the normal or extended statute date was before the notice of deficiency was issued or 150 days from the decision entered date, whichever is later.

    • Delete the statute code DOCKT. If less than 60 days remain on the statute, compute the statute date using tack-on procedures.

    • If using a tack-on statute date, also input statute code FINAL.

    • See IRM 8.21.2.5, Updating Statutes on ACDS and AIMS and Exhibit 8.20.7-4, Innocent Spouse - ACDS Statute Date/Code Table.

Innocent Spouse Preliminary Closing Procedures (25.15.12.26.3)

  1. Upon receipt of an administrative file for closing, the innocent spouse case is assigned to an APS employee on PEAS. That employee is responsible for closing ACDS, processing account adjustments, and update of appropriate systems including IDRS and ISTS.

  2. First, the assigned employee reviews the closing instructions. The instructions must address:

    1. Transaction codes: which transactions are to be transferred to MFT 31 or state the Entire Account must be transferred. Entire Account means the TC 150 and all subsequent transactions must be transferred to MFT 31.

    2. Payments: which payments must be transferred to MFT 31 and which payments must be refunded. Allocation of any payments and credits must be identified. If this information is not available on the closing instructions, reject the case back to the ATE.
      See IRM 25.15.9.1.15, Credit and Payment Disposition, for additional information.
      See IRM 25.15.9.1.16, Credit Transfers, for instructions on credit transfers.
      See IRM 25.15.9.1.17, Manual Refunds, for instructions on manual refunds.

    3. Freeze codes: "-L" (AIMS), "-Z" , and "Z-" (all are Criminal Investigation (CI) freezes). The ATE must have contacted CI and documented the conversation and if account adjustments are needed, CI must have agreed to allow the account to be mirrored (which temporarily removes the CI freeze), or the case must be rejected to the ATE.

    4. If CI will not allow the account to be mirrored, the ATE should process the case as a premature referral and return it to CCISO for suspense.

  3. The assigned employee reviews the file to:

    1. Verify the appropriate closing documents are in the administrative file, i.e., agreement form, a final determination letter, or an entered decision. Verify any current Power of Attorney(s) (POA(s)).

    2. Verify Transaction Code (TC) 971, Action Code (AC) 065 is posted correctly. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972, for TC 971 AC 065 instructions.

    3. Verify TC 130 is posted correctly on Command Code (CC) ENMOD. See IRM 25.15.2.4.3, TC 130 Entire Account Frozen From Refunding, for additional information on TC 130 and TC 131.

      Note:

      If TC 130 is incorrect and must be re-input, input TC 131. Then input new TC 130 using a posting delay code of 1 cycle.

    4. Check for freeze codes (-A, -L, -Y, -Z, Z-) which could change prior closing instructions. See IRM 25.15.9.1(5), Overview: Accounts Processing of Innocent Spouse Cases.

    5. Identify and review the account for transactions involving levies, liens, OICs, IAs, missing payments, and collection statute expiration dates. Any problems with these transactions must be coordinated with the ATE for resolution.

    6. Identify whether any payments and credits must be allocated. If this information is not available on the closing instructions, reject back to the ATE.

    7. Resolve account problems. (See IRM 25.15.9.1(3), Overview: Accounts Processing of Innocent Spouse Cases and IRM 25.15.9.1.1, Account Problems, for guidance in resolving account problems.)

  4. Refer to IRM 25.15.9.1(8), Overview: Accounts Processing of Innocent Spouse Cases, for a number of additional IRM resources to use when processing Innocent Spouse cases.

  5. Refer to IRM 25.15.7.10.2.1.1, Form 12412, Operations Assistance Request (OAR), for instructions on Form 12412, Operations Assistance Request (OAR).

Innocent Spouse ACDS Closing (25.15.12.26.4)

  1. Close the key case account on ACDS following general closing instructions and follow the additional instructions described below:

    • CLOSINGCD - Enter the appropriate closing code for the innocent spouse determination which includes 03, 04, 05, 08, 10, 11, 12, 17, 18, 19 or 21 (See general closing instructions for closing code description and the link to the ACDS Closing Code Definitions / Business Rules posted on the ACDS page on the Appeals web site at http://appeals.web.irs.gov/BusinessSystemPlanning/acds.htm.)

    • Revised Tax Def/-OA - Figure 8.20.7-2, Revised Dollars

    • Revised Pen Def/-OA - Figure 8.20.7-2, Revised Dollars

    • APPEALS AMTCLM - Leave blank

    • APPEALS AMTDIS - Leave blank

      Figure 8.20.7-2

      Revised Dollars

      Pre-assessment Post-assessment
      Revised Tax Enter the revised deficiency of tax as shown on the appeals report Leave blank
      Revised Penalty Enter the revised penalty amount, if any, as shown on the appeals report Leave blank

  2. Close the non-key cases on ACDS:

    1. CLOSINGCD- 45

    2. Revised Tax Def/OA- Leave blank

    3. Revised Pen Def/OA Leave blank

    4. APPEALS AMTCLM- Leave blank

    5. APPEALS AMTDIS- Leave blank

Innocent Spouse Unprocessable Requests for Relief and Requests Not Meeting Basic Requirements (No Consideration) (25.15.12.26.5)

  1. When the ATE determines the request for relief is unprocessable or does not meet the basic requirements, APS will:

    1. Input TC 290 0.00. If relief is nonqualifying for multiple years, input one TC 290 on the latest nonqualifying year. See IRM 21.5.2, Adjustment Guidelines, for additional instructions on posting the TC 290. Enter the following on the TC 290 adjustment document:
      Blocking Series (BS) 00 (with original return) or 05 (without original return) or 99 (if tax period is more than 10 years earlier and the original return has been destroyed)
      Reason code (RC) = 97
      Source Documents (SD) = Y
      Source Code (SC) = 2
      Hold Code (HC) = 3

    2. Assemble the file. See IRM 25.15.9.1.25, Case File Assembly, for case assembly instructions.

    3. Reverse TC 971 AC 065 if one is on the account, by inputting TC 972 AC 065. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972 and IRM 25.15.9.1.23, Final Purge/Transfer Completed, for additional information.

    4. Reverse TC 130, if appropriate. See IRM 25.15.9.1.5.1(7)(c), Denied under IRC 6015.

    5. Update ISTS to Stage 29 including the appropriate activity code and Stage 30, Activity NOACCTP. See IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions for information on the ISTS.

    6. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

Innocent Spouse Invalid Joint Election (25.15.12.26.6)

  1. A return may contain an invalid joint election if the filing status is joint but the return was processed without a signature or if the taxpayer states he/she did not sign the return and there is no indication of intent to file a joint return. The following situations could be determined to be an invalid joint election:

    • An original or amended joint return was filed and processed with only one signature.

    • The return was signed, however, it was established that the signature was forged and there was no tacit consent.

    • The return was signed under duress.

  2. A return may contain an invalid joint election if the taxpayer filed a joint return, but had no legal right to file jointly. This situation occurs when the taxpayers were not married the year the joint return was filed. If the taxpayer seeks to invalidate the joint election the taxpayer must submit verification. The taxpayer must provide an allocation of all income, credits, and payments. See IRM 25.15.7.5.6, Invalid Joint Election, for a list of states and if they recognize common law marriages. Also see IRM 25.15.7.10.13.5.2, Invalid Joint Election When RS and NRS Were Not Married, for information on invalid joint elections when the RS and NRS were not married.

  3. When it is determined the secondary taxpayer is not liable because of an invalid joint election, APS will:

    1. Correct the entity to remove the secondary taxpayer's name, taxpayer identification number, and change the filing status to 1, 3, 4, or 6 as applicable. To remove the secondary taxpayer's taxpayer identification number (TIN), input 000-00-0001 in the SPOUSES-TIN field on ENREQ if filing status is changed to 6. Filing Status 6 applies to forgery cases only.

    2. Process any adjustment, if needed, such as a credit transfer or manual refund.

    3. Input TC 290 0.00 with the following entries:
      BS = 00 (with original return) or 05 (without original return) or 99 (if tax period is more than 10 years earlier and the original return has been destroyed
      RC = 03/97 (unless the ATE specifies another reason code)
      SC = 2
      HC = 3

    4. Reverse TC 971 AC 065 if one is on the account, by inputting TC 972 AC 065. Do not extend the Collection Statute Expiration Date (CSED) since IRC 6015 was not applicable. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972 and IRM 25.15.9.1.20, Final Purge/Transfer Complete, for additional information.

    5. Reverse TC 130, if appropriate. Do not remove if there are other innocent spouse years open. See IRM 25.15.9.1.5.1(c), Denied under IRC 6015(b), (c), or (f).

    6. Update ISTS to Stage 29, Activity INVA and Stage 30, Activity ACCTCORR.

    7. Close the IDRS control base.

    8. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

  4. When it is determined the primary taxpayer is not liable because of an invalid joint election, APS will:

    1. Update ISTS to Stage 29 with activity "INVA" and then to Stage 27.

    2. Request a transfer to Master File Tax (MFT) Code 31 for the secondary spouse.

    3. Transfer any credits and/or issue refunds as instructed. IRM 25.15.9.1.16, Credit Transfers and IRM 25.15.9.1.17, Manual Refunds, for additional instructions.

    4. Prepare Form 12810, Transfer Request Checklist. See IRM 25.15.9.1.19, Form 12810 - Special Considerations, for detailed instructions.

    5. Update ISTS to Stage 28.

    6. Document PEAS activity record with actions taken and suspense the case on PEAS.

  5. Refunds due a taxpayer for payments made with respect to a tax liability stemming from invalid joint elections are available if the claim was received within 3 years of the date the return was filed, or 2 years from the payment date, whichever is later, and a married filing separate (MFS) return was filed, or the taxpayer was not required to file a return.

Innocent Spouse Relief Allowed in Full (25.15.12.26.7)

  1. Instructions are provided for closing a fully allowed innocent spouse case when the tax was assessed on the joint account (either from the tax on the return not being paid or from an additional assessment).

  2. Claims are considered fully allowed when the RS is granted full relief from all the items giving rise to a deficiency or to the entire underpayment reported on the joint return, regardless of whether the RS has made payments towards the liability. This includes cases where the RS is granted relief from the entire deficiency under IRC 6015(c), or when a RS is entitled to receive a refund because the refund is barred by IRC 6511. The important thing to remember is that "relief" relates to whether the RS remains liable for any of the deficiency or underpayment, not whether the RS is eligible for a refund.

  3. APS will:

    1. Review the case and account information to make sure the transaction codes (TC 971 AC 065, TC 971 AC 104 and TC 130) are posted correctly whether the case is partially allowed or fully allowed. If not, make the appropriate changes. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972 and IRM 25.15.9.1.20, Final Purge/Transfer Complete, for additional instructions.

      Note:

      If TC 971 AC 104 has been input with an incorrect date - do not make a correction to correct the date. A programming problem has been identified and an attempt to re-input the TC 971 AC 104 will unpost. If this does occur and the MFT 31 account was established with the first input, the transfer can still be done. If TC 971 AC 104 has been input in error - a TC 972 AC 104 must be input on both MFT 30 and MFT 31 accounts to reverse the TC 971 AC 104.

    2. If the account is mirrored input the TC 290 0.00 to MFT 31 of RS. See IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability, for additional required transactions.

    3. If the account can be mirrored see IRM 8.20.7.40.2, Mirrored Accounts, for mirroring instructions. Once the account is mirrored input the TC 290 0.00 to MFT 31 of RS. See IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability, for additional required transactions.

    4. If the account cannot be mirrored input TC 290 0.00 on MFT 30 (BS 00 or 05, RC 98, SD Y , SC 2, and HC 3) on the primary master file account, for each year the request was allowed. On the joint account, use command code REQ77/FRM77 to input TC 971, AC 103, XREF TIN = non-requesting spouse TIN (this will create an MFT 31 account). Prepare and process Form 12810, Account Transfer Request Checklist, to the campus (this will move the liability to the non-requesting spouse's account). After the liability has been transferred, if a TC 470 is on the account, use command code REQ77/FRM77 to input TC 472 to start collection activity. Do not reverse the IDRS transaction codes until the TC 402 posts.

    5. Research to determine if the TC 130 is still needed on the account. Do not remove if there are other innocent spouse years open. Check ISTS to ensure all innocent spouse years are in stage 30. Do not remove TC 130 if input by another campus unless the DLN of the TC 971 AC 065 and the TC 130 DLN are for the same center and posting cycle of the TC 130 is one cycle later than the posting cycle of the TC 971 AC 065.

      Note:

      Do not remove if a "2" is in the ninth digit of the TC 130 DLN. This means the TC 130 was input by NMF and they will reverse it when required.

    6. Mail the appropriate closing letters.

    7. Update ISTS, see IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions and the Innocent Spouse Tracking System Reference Guide for additional ISTS information.

    8. Close ACDS and PEAS.

    9. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

Innocent Spouse Relief Denied in Full (25.15.12.26.8)

  1. Instructions are provided for closing a fully denied innocent spouse case.

  2. APS will:

    1. Adjust the account(s) as required.

    2. If the account is mirrored input the TC 290 0.00 to MFT 31 of RS.

    3. If the account can be mirrored see IRM 8.20.7.40.2, Mirrored Accounts, for mirroring instructions. Once account is mirrored input the TC 290 0.00 to MFT 31 of RS.

    4. If the account cannot be mirrored input the TC 290 0.00 to MFT 30 (BS 00, 05, 98 or 99, SD Y, RC 97, SC 2, and HC 3) on the primary master file account, for each year the request was disallowed.

    5. Input TC 972 AC 065. See IRM 8.20.7.36.14, Inputting TC 972, IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972 and IRM 25.15.9.1.20, Final Purge/Transfer Complete, for additional instructions.

    6. Research to determine if the TC 130 is still needed on the account. Do not remove if there are other Innocent Spouse years open. Check ISTS to ensure all Innocent Spouse years are in Stage 30. Do not remove TC 130 if input by another campus unless the DLN of the TC 971 AC 065 and the TC 130 DLN are for the same center and posting cycle of the TC 130 is one cycle later than the posting cycle of the TC 971 AC 065.

      Note:

      Do not remove if a "2" is in the ninth digit of the TC 130 DLN. This means the TC 130 was input by NMF and they will reverse it when required.

    7. Mail the appropriate closing letters.

    8. Update ISTS, see IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions and the Innocent Spouse Tracking System Reference Guide for additional ISTS information.

    9. Close ACDS and PEAS.

    10. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

  3. See IRM 8.20.7.36.20, Innocent Spouse Case File Assembly for additional information.

Innocent Spouse Relief Partially Allowed (25.15.12.26.9)

  1. Partial relief occurs when the RS remains liable for some portion of the deficiency or underpayment, regardless of whether the RS is eligible for a refund of any payments the RS made towards the liability.

  2. A claim is considered to be a partial if any part of a tax assessment (including EITC reversal, withholding credit, accuracy-related penalty, etc.) is allocated between the spouses' mirrored accounts before considering any payments by the RS.

  3. APS will:

    1. Adjust the account(s) as required.

    2. If the account is mirrored input the TC 290 0.00 to MFT 31 of RS. See IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability , for additional required transactions.

    3. If the account can be mirrored see IRM 8.20.7.40.2, Mirrored Accounts, for mirroring instructions.

    4. If the account can not be mirrored input the TC 290 0.00 to MFT 30 (BS 00, 05, 98 or 99, SD Y, RC 97 and 98, SC 2, and HC 3) on the primary master file account, for each year the request was partially disallowed. Input TC 971 AC 103 to establish MFT 31 for the NRS. Prepare Form 12810, Transfer Request Checklist and route to the Account Transfer Team. See IRM 25.15.9.1.19.1, Routing Form 12810 to Account Transfer Team, for additional information.

    5. Input TC 972 AC 065 after all adjustment transactions are posted to both the MFT 30 and MFT 31 accounts. See IRM 8.20.7.36.14, Inputting TC 972, IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972 and IRM 25.15.9.1.23, Final Purge/Transfer Complete, for additional instructions.

    6. Research to determine if the TC 130 is still needed on the account. Do not remove if there are other innocent spouse years open. Check ISTS to ensure all Innocent Spouse years are in stage 30. Do not remove TC 130 if input by another campus unless the DLN of the TC 971 AC 065 and the TC 130 DLN are for the same center and posting cycle of the TC 130 is one cycle later than the posting cycle of the TC 971 AC 065.

      Note:

      Do not remove if a "2" is in the ninth digit of the TC 130 DLN. This means the TC 130 was input by NMF and they will reverse it when required.

    7. Mail the appropriate closing letters.

    8. Update ISTS. See IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions and the Innocent Spouse Tracking System Reference Guide for additional ISTS information.

    9. Close ACDS and PEAS.

    10. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

  4. See IRM 8.20.7.36.20, Innocent Spouse Case File Assembly for additional information.

Innocent Spouse Pre-Assessment Cases (25.15.12.26.10)

  1. The following instructions are provided for when the assessment has NOT been made and innocent spouse is allowed in part or in full.

  2. If Innocent Spouse relief is granted on a pre-assessment case, APS will process the case using normal procedures for making an assessment to MFT 31. Pay particular attention to the other information section of the Form 5278, Statement - Income Tax Changes and Form 5402, Appeals Transmittal and Case Memo for instructions on how the tax is to be assessed to the taxpayers. Examples of situations that can occur (not all-inclusive):

    • An assessment against the NRS only

    • An assessment against the NRS and an assessment against the joint account.

    • An assessment against the NRS and an assessment against the RS

    • An assessment against the NRS and an overassessment against the RS

Innocent Spouse AIMS Closings (25.15.12.26.11)

  1. If Appeals denies relief and no account adjustment is needed, and the case is on AIMS, APS prepares/inputs a Form 5403, Appeals Closing Record TC 300 $0.00 for the joint account when:

    1. the determination letter defaults

    2. the taxpayer asks Appeals to close out their request for innocent spouse consideration

    3. the Tax Court determines that innocent spouse does not apply

  2. If an account adjustment is needed, and the case is on AIMS, APS will:

    1. Close ACDS.

    2. Use command code REQ77/FRM77 to input TC 971, AC 103, XREF-TIN = TIN of non-requesting spouse (this will establish the MFT 31 account).

    3. Process Form 5403, Appeals Closing Record for each account with AMCLSS.

    4. Process Form 5403, Appeals Closing Record with AMCLSA after MFT 31 assessment posts.

    5. After the MFT 31 assessment posts, use command code REQ77/FRM77 to input TC 472 on the MFT 31 account (this will resume collection).

    6. Mail the appropriate closing letters.

    7. Update ISTS. See IRM 25.15.14, Innocent Spouse Tracking System Inventory Validation Instructions and the Innocent Spouse Tracking System Reference Guide for additional ISTS information.

    8. Process Form 3177 using REQ77/FRM77 to release the L– innocent spouse freeze on the account with TC 972.
      See IRM 8.20.7.36.14, Inputting TC 972. This section provides procedures for determining the correct transaction date.

    9. Transmit the administrative file to Campus Files, using Form 3210, Document Transmittal.

  3. See IRM 8.20.7.36.20, Innocent Spouse Case File Assembly for additional information.

  4. When the case is open on AIMS, close the case through AIMS using Form 5403, Appeals Closing Record. Prepare the first Form 5403, Appeals Closing Record for the joint account. Prepare a second Form , Appeals Closing Record for the non-requesting spouse: If both spouse's are granted innocent spouse relief, prepare a third Form 5403 for the other spouse. An open AIMS case needs to be mirrored.

    1. Prepare Form 5403, Appeals Closing Record to remove "-L" freeze using CC: AMCSLA

    2. Once TC 300 for zero posts, See IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability, for the mirroring process.

  5. Additional Form 5403, Appeals Closing Record instructions are provided in the tables below:

    Form 5403 Instructions
    Joint Account:
    Check AMCLSA At the top of Form 5403, Appeals Closing Record
    TIN TIN of joint account
    MFT 30
    Item 12 TC 300 = amount for which both spouse's are liable
    Item 14 Enter statute date
    Item 800 or Item 801 Amount Appeals Results/Counsel Results
    Item A Note: "TPW or TPH is innocent spouse – Transfer liability of $__ to (culpable spouse's) MFT 31 account."
    Non-requesting spouse:
    Check AMCLSS At the top of Form 5403, Appeals Closing Record
    TIN TIN of joint account
    MFT 30

    Note:

    Although MFT 30 is used on the Form 5403, Appeals Closing Record he assessment will be made on MFT 31.

    Item 12 TC 300 = tax to be assessed against this spouse only
    Item 14 Enter statute date
    Item 800 or Item 801 Amount Appeals Results/Counsel Results
    Item 56 Check PA if NRS is the primary TIN OR check SA if NRS is the secondary TIN. Checking PA or SA will determine where the assessment is made.
    Item 57 Name control of secondary spouse when NRS is secondary spouse
    Other spouse (if both spouse's are granted relief):
    Check AMCLSS At the top of Form 5403, Appeals Closing Record
    TIN TIN of joint account
    MFT 30

    Note:

    Although MFT 30 is used on the Form 5403, Appeals Closing Record, the assessment will be made on MFT 31.

    Item 12 TC 300 = tax to be assessed against this spouse
    Item 14 Enter statute date
    Item 800 or Item 801 Amount Appeals Results/Counsel Results
    Item 56 Check PA if non-requesting spouse is the primary TIN OR check SA if non-requesting spouse is the secondary TIN. Checking PA or SA will determine where the assessment is made.
    Item 57 Name control of secondary spouse when NRS is secondary spouse
    Form 5403 Disposal Codes for Innocent Spouse Cases
    Description Disposal Code
    Allowed in full 01
    No change 01
    Disallowed in full - Agreement or no response to 30-day letter 02
    Change to Tax and/or Penalty 03
    Defaulted on final determination letter 10
    Petitioned 11
    Change to Reference Codes Only 12

Innocent Spouse NMF Account Processing (25.15.12.26.12)

  1. Accounts were assessed on NMF prior to January 2001. The following instructions are provided for tax assessed on NMF and innocent spouse relief is allowed for all or part of the tax.

  2. Prepare Form 5403, Appeals Closing Record to abate the tax/penalty on the innocent spouse:

    1. TIN = innocent spouse TIN with an "N"

    2. MFT = 20

    3. TC 301 = amount of tax to be abated

    4. Note in ITEM A: "TPW (or TPH) is granted innocent spouse relief for this liability"

  3. Attach a copy of the NMF transcript to the Form 5403, Appeals Closing Record.

  4. Prepare a Form 1331, Notice of Adjustment, and forward it with the Form 5403, Appeals Closing Record to the Florence Campus Accounting Branch , Stop 21, to process the abatement.

  5. Mail the appropriate closing letter to the requesting spouse. Mail a separate letter to the non-requesting spouse.

  6. Process Form 3177, Notice of Action for Entry on Master File using REQ77/FRM77 to release the "L–" innocent spouse freeze on the account with TC 972. See IRM 8.20.7.36.14, Inputting TC 972. This section provides information on determining the correct transaction date.

    Caution:

    Do not reverse the TC 971 or input a reversal of any other IDRS transaction codes until the TC 402 posts.

  7. Update ISTS.

  8. Close ACDS.

Innocent Spouse Inputting TC 972 (25.15.12.26.13)

  1. When a Form 8857, Request for Innocent Spouse Relief, is received, a TC 971 AC 065 is input in the account to represent the beginning of the CSED suspension period. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972, for TC 971 AC 065 instructions. A TC 972 AC 065 needs to be input before the AIMS or IDRS closing. The TC 972 AC 065 represents the ending date of the CSED suspension period.

  2. The RS's CSED is suspended for the period during which the Service is prohibited from collecting pursuant to IRC 6015(e)(1)(B) plus 60 days. IRC 6015(e)(5). The prohibition on collection runs from the time the claim is filed under IRC 6015 until:

    • the date the Service signs Form 870-IS, Waiver of Collection Restriction in Innocent Spouse Cases on behalf of the Commissioner

    • the 90 day period for petition the Tax Court expires

    • if a Tax Court petition is filed, until the Tax Court decision becomes final

  3. Although the Service is not permitted to collect against the RS while the claim is pending, collection actions against the NRS during this period are not prohibited and should continue.

  4. Because of the amendment of IRC 6015(e) and the revision to Form 8857, Request for Innocent Spouse Relief, treat any claim for relief filed on or after December 20, 2006, as suspending the CSED from the date the claim was received, no matter which revision of Form 8857, Request for Innocent Spouse Relief is used by the RS.

  5. For claims for relief filed before December 20, 2006, for which the RS only requested relief under IRC 6015(f), the prohibition on collection and suspension of the CSED start on December 20, 2006, and not on the date the claim for relief was received.

  6. If the claim for relief was filed before December 20, 2006, and also included an election under (b) or (c), then the prohibition on collection and suspension of the CSED do begin on the date the claim for relief was received.

  7. The TC 972 AC 065 transaction date for IRC 6015 claim is determined by one of the following:

    1. Notice of Final Determination date + 150 days (for cases in which the RS didn't petition the Tax Court)

    2. Tax Court Decision + 150 days (for cases in which the RS did petition the Tax Court)

      Note:

      See IRM 25.15.2.4.2(7), Innocent Spouse Indicator Transaction Code (TC) 971/972, for further information, especially for situations where the RS filed a Notice of Appeal from the Tax Court decision.

    3. The date the Appeals Team Manager (ATM) signed Form 870-IS, Waiver of Collection Restrictions in Innocent Spouse Cases plus 60 days

  8. When the CSED is not being extended, the TC 972 AC 065 transaction date is the same transaction date used for the TC 971 AC 065.

  9. See IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972, for more information on the tolling of the Collection Statute Expiration Date (CSED) during the pendency of innocent spouse cases.

Innocent Spouse Form 12810 Procedures (25.15.12.26.14)

  1. Form 12810, Account Transfer Request Checklist, is used to request transfer of part or all of a tax assessment to MFT 31 or NMF 20. See IRM 25.15.9.1.19, Form 12810 - Special Considerations.

  2. Once the Form 12810, Account Transfer request is submitted to the Account Transfer Unit, the APS TE will monitor for TC 400 and TC 402 posting. Once posted, the case is ready for final closure. Follow the instructions contained in IRM 25.15.9.1.19, Form 12810 - Special Considerations, IRM 25.15.9.1.19.1, Routing Form 12810 to Account Transfer Team, and IRM 25.15.9.1.20, Final Purge/Transfer Complete.

Innocent Spouse Collection Statute Expiration Date (CSED) Expired (25.15.12.26.15)

  1. The CSED is suspended upon receipt of Form 8857, Request for Innocent Spouse Relief so if the CSED was open when the claim was received, the claim must be evaluated by the ATE.

  2. If the CSED expired for the RS prior to the filing of Form 8857, Request for Innocent Spouse Relief, the ATE will return the case to CCISO as a premature referral.

  3. (3) The most common conditions that could affect the CSED are:

    • TC 290 (Additional tax assessment)

    • TC 300 (Additional tax assessment by Compliance)

    • TC 340 (Restricted Interest)

    • TC 480 (OIC)

    • TC 520 (Bankruptcy)

    • TC 550 (Waiver to extend to CSED)

    • TC 971 AC 065 (Innocent Spouse Claim)

    • CDP Hearing Request

    • Combat Zone - multiple deployments

    • Pending Installment Agreements

  4. Refer to IRM 25.15.9.1.8, Collection Statute Expiration Date (CSED), for guidance on determining the last CSED.

  5. For additional information on CSED Determination see the following IRM sections:

    • IRM 5.1.19.2.2, Integrated Data Retrieval System (IDRS) Transaction Codes (TC) That Suspend Or Extend A CSED

    • IRM 5.1.19.3, Case Actions That Can Suspend And/Or Extend A CSED

    • IRM 5.19.10.4, Collection Statute Expiration Date (CSED) Verification and Correction

    • IRM 5.19.10.4.1, Transaction Codes with a Ten-Year CSED

    • IRM 5.19.10.4.2, Transaction Codes and Case Actions that Suspend or Extend the CSED

    • IRM 5.19.10.4.3, CSED Fields on Integrated Data Retrieval System (IDRS)

    • IRM 5.19.10.4.4, Determining the Correct CSED

    • IRM 5.19.10.4.4.2, MFT 31 Issues

    • IRM 5.19.10.4.5.1, Correcting an Existing CSED, No TC 550 on Account

Innocent Spouse Special Processing Instructions (25.15.12.26.16)

  1. IRM 25.15.9, Account Processing of Requests for Relief from Joint and Several Liability contains processing instructions for cases needing special processing consideration. This list is not all inclusive.

    • Barred Statute One Signature (BSOS)- See IRM 25.15.9.1.4, Barred Statute One Signature (BSOS), for the procedures APS will follow in these cases.

    • Bankruptcy - See IRM 25.15.9.1.9, Bankruptcy -V/-W Freeze.

    • Offer in Compromise - See IRM 25.15.9.1.10, Offer in Compromise (OIC) -Y Freeze.

    • Decedents- See IRM 25.15.9.1.11, Decedents.

    • Penalty Considerations - See IRM 25.15.9.1.12, Penalty Considerations.

    • Interest Considerations - See IRM 25.15.9.1.13, Interest Consideration, and IRM 25.15.9.1.14, Non-restricting TC 340.

    • Liability Application - See IRM 25.15.9.1.18, Liability Application.

    • Manual Refunds - See IRM 25.15.9.1.17, Manual Refunds.

Innocent Spouse Validation Reports (25.15.12.27)

  1. Validation reports may be generated from either the ACDS AMATCH sub-system or ISTS.

  2. APS is responsible for working the validation reports.

  3. The ACDS AMATCH sub-system matches ACDS information against data received from the Innocent Spouse Tracking System (ISTS) to ensure cases are received and in the proper status on ISTS.

  4. The following ACDS/ISTS AMATCH report listings are available:

    • On ISTS Not on ACDS Open

    • On ACDS Open Not on ISTS

    • ISTS Stage 07 List

    • Mismatched Data

  5. Validation reports generated from ISTS may be periodically sent to Appeals to be worked. IRM 25.15.14.5, Validating the Inventory Validation Listing (IVL) - Area Offices, contains the procedures to follow when an ISTS inventory listing is received that must be validated.

Innocent Spouse Reconsideration Closing Procedures (25.15.12.28.11)

  1. When the reconsideration determination is no change to the prior determination and a final determination letter is not issued, APS will follow normal closing procedures and also associate the claim with previous Transaction Code (TC) 290, using Form 10023–B, Attachment (To Be Associated With Return).

Innocent Spouse Case File Assembly

  1. When forwarding the case to Files, assemble it in the following manner:

    1. Form 11272, Associable IDRS Input Document Label

    2. If not mirrored, use controlling DLN document

    3. If mirrored, refile all previous adjustment documents including original return

      Note:

      Do not staple the original return to your case file.

    4. Form 8857, Request for Innocent Spouse Relief, with original correspondence or statement "Original Form 8857 and Workpapers Are With The XXXX Tax Year" if needed

    5. ISTSR Input Record

    6. History Sheet

    7. Account Management Services (AMS) Workpapers

  2. Other documentation the IS case file assembly may include:

    • IRPTRL Prints

    • Divorce Decree

    • Questionnaires

    • Form 12508, Innocent Spouse Information Request

    • AMS Prints

    • Allocation Worksheet(s)

    • Phone logs

    • Form 3465, Adjustment Request

      Note:

      Do not include any Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return. These documents must be filed separately.

      Exception:

      If the Requesting Spouse (RS) claims forgery, include a copy of Form 8453 in case file.

      Note:

      If IRS employee, leave the case in the white folder and place in a security envelope. Write in red "Employee Case" on the envelope. Seal the envelope and place the envelope in the folder for files with the other closures for that day.

Installment Agreements (IA) (8.22.3.11.1)

  1. Installment Agreements are arrangements where the Service allows taxpayers to pay liabilities over time. When an ATE receives an I/A on their assigned case, they will take appropriate action(s) and notify their designated APS Office if a specific account action is required.

Installment Agreement (IA) APS General Information (8.22.3.11.1.1)

  1. APS will input IDRS-monitored IMF and BMF agreements upon notification by the ATE. For a description, format, "History Item" entries and response for the Command Codes relating to Installment Agreements, see:

    1. IRM 2.4.30, IDRS Terminal Input, Command Codes IAGRE, IAORG, IAPND, IAREV, IADFL ,and IADIS

    2. IRM Exhibit 2.4.30 (1 through 9)

      Command Code IRM Reference
      Command Code IAGRE Input Request IRM 2.4.30-1
      Command Code IAGRE Response IRM 2.4.30-2
      Command Code IAORG IRM 2.4.30-3
      Command Code IAPND IRM 2.4.30-4
      Command Code IAREV IRM 2.4.30-5
      Command Code IADFL IRM 2.4.30-6
      Command Code IADIS Input Request IRM 2.4.30-7
      Command Code IADIS Output Request for Active or Defaulted Modules IRM 2.4.30-8
      Command Code IADIS Output Request for Deferred Modules IRM 2.4.30-9
    3. SERP Job Aids http://serp.enterprise.irs.gov/databases/portals.dr/AM/imf/Installment_Agreement_Input.htm

  2. All installment agreements require a paper document, either Form 433-D, Installment Agreement or Form 2159, Payroll Deduction Agreement.

  3. Payroll Deduction Installment Agreements (PDIA) or Direct Debit Installment Agreements (DDIA) require a taxpayer signature.

  4. Direct Debit Installment Agreements (DDIAs) allow the Service to debit a taxpayer’s checking account for the agreed upon installment amount and also require a taxpayer signature. See (5) Note below.

  5. DDIAs for Collection field sourced cases are processed in the CSCO sites. Fax the installment agreement along with the routing and account number (usually a voided check) to a DDIA coordinator for input. The DDIA Coordinator information is located via, http://serp.enterprise.irs.gov/databases/who-where.dr/ddia_liaison.htm. For ACS sourced cases, affix the original DDIA documents to a copy of Form 5402, Appeals Transmittal and Case Memo and batch and mail once per week to the originating ACS location. Identify the cases with a DDIA attached on the Form 3210, Document Transmittal.

    Note:

    There is a legal requirement for any DDIA to have the taxpayer’s signature. The IRS can accept an original signature, electronic signature or faxed signature.

    Reminder:

    To ensure that the taxpayer's account correctly reflects that an Installment Agreement is pending, input a TC 971 AC 043 via CC: REQ77. Monitor the account to verify posting of the TC then close PEAS.

  6. Installment Agreements not compatible with IDRS-monitoring are designated as Manually Monitored Installment Agreements (MMIAs). The ATE will identify an MMIA on the CDP Form 5402, Appeals Transmittal and Case Memo by selecting MMIA from the Installment Agreement drop down menu.

    Note:

    Installment Agreement requests for only one spouse on a joint liability must be mirrored and are considered to be an MMIA. APS is not responsible for mirroring accounts in these situations.

    Reminder:

    To ensure that the taxpayer's account correctly reflects that an Installment Agreement is pending, input a TC 971 AC 043 via CC: REQ77. Monitor the account to verify posting of the TC then close PEAS.

  7. Centralized Case Processing (CCP) will only accept MMIAs for processing from Revenue Officers or ACS. As a result, APS will not input an MMIA to status 60. APS will send a copy of the Form 5402, Appeals Transmittal and Case Memo and administrative file to the Revenue Officer identified by the ATE for submission to CCP. For ACS cases, APS will return a copy of the Form 5402, Appeals Transmittal and Case Memo and Form 433-D, Installment Agreement to ACS for processing.

  8. There are four types of status codes for Installment Agreements:

    1. Status 60 – Active agreement

    2. Status 61 – Suspended agreement

    3. Status 63 – Deferred agreement

      Note:

      Status 63 is used to cross reference TINs where collection activity has been deferred until modules under related accounts have been satisfied. These IAs are common on business taxpayers where the officer has a related Trust Fund Recovery Penalty (TFRP) assessment.

    4. Status 64 – Defaulted agreement

  9. When the ATE denies the taxpayer an IA, reverse TC 971 AC 043 with TC 972 AC 043. The 971/972 input dates need not be the same.

  10. Input TC 972 AC 043 with the same date as the TC 971 AC 043 when:

    1. The 30-day suspense period for filing for a judicial review concludes

    2. The Tax Court case decision is entered, if a petition is filed

    3. A Form 12257, Summary Notice of Determination, Waiver of Right to Judicial Review of a Collection Due Process Determination, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation in Section 6330(e)(1) is secured

    4. A withdrawal is received

  11. For additional information pertaining to IDRS inputs for all types of Installment Agreements see:

    • IRM 5.19.1.5.4.5, Account Statuses Affecting IAs

    • IRM 5.19.1.5.4..6.1, User Fee Modules (MFT 13 and MFT 55)

    • IRM 5.19.1.5.4.12, Innocent Spouse — IA Request

    • IRM 5.19.1.5.4.12.1, Front End Mirror Assessments Process for IA and CNC Closures

    • IRM 5.19.1.5.4.12.1.1, Back End Mirror Assessments Process for IA Closures

    • IRM 5.19.1.5.4.13, Input of IA

    • IRM 5.19.1.5.4.13.1, IA Originator Codes

    • IRM 5.19.1.5.4.14, DDIA

    • IRM 5.19.1.5.4.15.1, Input of PDIA

    • IRM 5.19.1.5.4.19, MMIAs

    • IRM 5.19.1.5.4.22.1, Withdrawal of IA Requests

    • IRM 5.19.1.5.5, PPIA

    • IRM 21.3.12.4.5.3, Front End Mirror Assessments Process for Installment Agreements (IA) and Currently Not Collectible Hardship Closures (CNC)

    • IRM 21.3.12.4.5.4, Manually Monitored Installment Agreements

Installment Agreement in a CDP Case - APS Processing Information (8.22.3.11.1.2)

  1. Use the following procedures when closing a CDP case with an installment agreement:

    1. Close the case on ACDS

    2. Suspend the case on PEAS with Suspense Reason Code S09 – Monitoring On-Line Adjustment

    3. Add a PEAS follow-up date equal to the expected TC 521 posting date

    4. Once the TC 521 posts, input Command Code IAGRE with the terms of the Form 433-D (Posting issues may arise if the I/A is input prior to the TC 521)

      Note:

      The TC 971 AC 063 will post systemically as a result of input of CC IAGRE.

    5. On the date the IA is input, remove the case from PEAS suspense and close PEAS

    Note:

    Entities with a "-A" master file freeze code the tax module will now update to Status 60 without the reversal of the "-A" freeze code.

  2. If an OIC was also submitted through CDP and rejected, then the TC 480 must also be reversed via TC 481 and must also post before an Installment Agreement can be input.

  3. If both a CDP TC 521 and an OIC TC 480 reversal is required, input both reversals, suspend the case for posting of the reversals, then input the Installment Agreement per (1)d) above.

Installment Agreement in a CDP/OIC Case - APS Processing Information

  1. Use the following procedures when closing an OIC IA included with a CDP case:

    1. Close the case on ACDS

    2. Suspend the case on PEAS with Suspense Reason Code S09 – Monitoring On-Line Adjustment

    3. Add a PEAS follow-up date equal to the expected TC 481 posting date

    4. Once the TC 481 posts to remove the Master File "-Y" freeze, input Command Code IAGRE with the terms of the Form 433-D (Posting issues may arise if the I/A is input prior to the TC 481 posting)

      Note:

      The TC 971 AC 063 will post systemically as a result of input of CC IAGRE.

    5. On the date the IA is input, remove the PEAS case from suspense and close PEAS

    Note:

    Entities with a "-A" master file freeze code the tax module will now update to Status 60 without the reversal of the "-A" freeze code.

IRC 7430 Docketed Case — ACDS Update Request (8.7.15.1.3 (3))

  1. When appropriate, the ATE will request that APS enter "7430 qualified offer" in the notes section of the ACDS Record.

IRC 7430 Administrative Cost Case Closing (8.7.15.1.7)

  1. The ATE forwards the IRC 7430 Administrative Cost Closing Package to the Appeals Tax Policy and Procedure (TPP) Program Analyst, who then forwards the approved claim to the Treasury Judgement Fund for processing a payment of the award.

  2. The ATE will provide the closing package to APS for ACDS closing.

  3. APS will update ACDS per the ATE closing instruction:

    1. CLOSINGCD
      14 - if the request was disallowed
      15 - if the request was allowed
      16 - if the request was partially allowed

    2. DATECLSD
      If allowed - enter the date agreement (Form 9333) is signed by the Area Director, Appeals Team Manager or Appeals Team Case Leader
      If disallowed - enter the date of the letter to the taxpayer

    3. ACTION – ACKCLS

    4. TODATE – Enter the date mailed to Collection, Campus and Appraisal Services for payment or the date a partial or full disallowance letter is issued

    5. FROMDATE – Enter the date receipt is acknowledged

    6. APPEALS AMTDIS – Enter the amount disallowed (If the full amount of the claim is allowed, no entry is made on the return information screen)

Joint Committee (JC) Cases

  1. Cases with adjustments exceeding a designated threshold must be submitted to the Joint Committee for review and approval. Once the JC approves the adjustment(s), the ATE will forward the case to APS for processing of the adjustment(s) and closing of the case.

Non-Docketed JC Case Closing Procedures (8.7.9.10.1(3)-(7))

  1. Assign to an APS employee on PEAS.

  2. ACDS will be closed following general closing instructions and will include final processing of adjustments and update of appropriate systems.

  3. On each Form 5402, Appeals Transmittal and Case Memo, make an appropriate notation that "Joint Committee’s clearance letter dated -----," and distribute Form 5402, Appeals Transmittal and Case Memo.

  4. Date and mail the (Letter 1537, Joint Committee No Exception.

  5. Prepare Form 5403, Appeals Closing Record to close to AIMS:

    1. Item 12 - process adjustment(s) cleared by the JCT

      Caution:

      If a partial account adjustment (assessment/abatement) was previously processed, only process the remaining assessment/abatement as authorized.

    2. All partial assessments/abatements will be incorporated in the Item 800/801 amount

    3. All other items on the Form 5403, Appeals Closing Record are completed using general closing procedures

MFT 31 Separate Assessment Module Overview (25.15.12.19)

  1. MFT 31 contains split spousal assessments previously processed to the Automated Non-Master File (ANMF) which meet one or more of the following conditions:

    • Collection action is prohibited against only one spouse

    • Each spouse is liable for different amounts

    • Extensions or suspensions result in different Collection Statute Expiration Dates (CSED) or Assessment Statute Expiration Dates (ASED) for each spouse

  2. See IRM 21.6.8, Split Spousal Assessments (MFT 31), for detailed information about MFT 31 accounts.

  3. Check non-master file (NMF), as well as MFT 30 and MFT 31 to verify information relating to joint accounts.

MFT 31 Conditions (25.15.12.19.1)

  1. MFT 31 is an individual (IMF) master file tax (MFT) account code. MFT 31 is used for assessments against an individual taxpayer on a joint module and is generated by one or more of the following:

    • Bankruptcy - either spouse is discharged or dismissed from bankruptcy

    • Offer in Compromise (OIC) - either spouse makes an offer on a liability

    • Criminal Restitution - an assessment of criminal restitution ordered payable to the IRS has been made

    • Tax Court - either spouse is going to Appeals or petitions the tax court. (Exam/Appeals/Automated Underreporter (AUR))

    • Innocent Spouse - an assessment is made against a joint module but one spouse is relieved of the liability fully or partially

    • Exam agreed/unagreed cases - when only one spouse agrees to the tax deficiency, while the other spouse does not agree, but does not appeal or file a petition

    • Taxpayer Assistance Order- either spouse files Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order)

    • Installment Agreement - either spouse requests an installment agreement

    • Currently Not Collectible (CNC) - account qualifies for CNC based on either spouse's financial status

  2. There are three types of MFT 31 accounts:

    • Split/Transfer - MFT 31 accounts created or in process prior to January 2005 or a qualifying NMF MFT 20 account (CSED expired after January 1, 2005)

    • Mirrored - Bankruptcy by only one spouse, innocent spouse claim, agreement to tax adjustment by only one spouse, OIC filed by only one spouse, joint OIC defaulted by one spouse, Form 911 filed by only one spouse, one spouse requests an installment agreement or one spouse qualifies for CNC

    • Exam / Appeals / AUR - one spouse is going to Appeals or petitions the tax court, or a court order of criminal restitution

  3. The TC 971 action code will identify the triggering event. See IRM 21.6.8.3(3), What is MFT 31, for a list of triggering events.

MFT 31 Mirrored Accounts (25.15.12.19.3)

  1. Master File programming for the MFT 31 allows for the systemic "mirroring" of the MFT 30 module.

  2. Mirrored modules are created when certain events occur resulting in one or both spouses being fully or partially liable.

  3. The mirroring process creates two MFT 31 accounts; one for each spouse’s Taxpayer Identification Number (TIN). It provides a greater ability to systemically handle separate treatment of spouses; while maintaining a necessary cross-referencing capability.

  4. The purpose of mirroring a joint MFT 30 module into separate, but identical MFT 31 modules is to allow for the correct computation of each taxpayer’s Collection Statute Expiration Date (CSED). Mirroring also allows collection activity to continue for the non-requesting spouse (NRS).

  5. See IRM 21.6.8.5.1, Mirrored Accounts, or IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability, for the details of how the mirroring process occurs.

  6. Some situations prevent mirroring of modules. The modules which can not be mirrored will have to be transferred to NMF using existing procedures. Exceptions to mirroring modules are discussed in IRM 25.15.15.2.1, Exceptions to Mirroring Modules.

  7. Some situations require additional actions prior to mirroring:

    • Modules with a credit balance. See IRM 25.15.15.8, Resolving Credit Balances

    • Modules with an unresolved unpostable condition. See IRM 25.15.15.7, Resolving Mirroring Unpostable Transaction Codes

  8. The mirroring process occurs through a series of transactions:

    1. Two TC 971s are input on the MFT 30 account. Each TC 971 contains a XREF-TIN field entry, one with the primary TIN and the second with the secondary TIN.

    2. The TC 971 action code of 100, 101, 104, or 106 on the MFT 30 account indicates the account is mirrored on MFT 31. The action code (AC) identifies the reason.

    3. A TC 971 AC 145 input on the MFT 30 account triggers the mirroring process, generates a TC 400 on the MFT 30 account, and copies all transactions on the MFT 30 account to the two MFT 31 accounts. An "M-" Freeze is generated on all three accounts. Credits are generated to all three accounts, making them appear to be in zero balance.

      Caution:

      The account is not full paid. Any balance due is re-established when the M- freeze is released.

    4. TC 971 AC 110 is generated to both MFT 31 modules and allows a systemic cross-referencing for payments unless the payment has a Designated Payment Code (DPC) of 31.

    5. A pending TC 971 AC 10X on the MFT 30 joint account indicates an MFT 31 account(s) is being created.

  9. See IRM 25.15.15.2, First Read , for procedures on mirroring modules.

MFT 31 Exam/Appeals/AUR modules (25.15.12.19.4)

  1. Exam/Appeals/AUR MFT 31 modules are created when only one spouse petitions Tax Court with regard to a proposed tax adjustment or agrees to a tax adjustment.

  2. The modules are systemically established but not mirrored.

  3. Exam/Appeals/AUR MFT 31 accounts are established using similar procedures as for mirrored accounts, except the account is not mirrored because only one TC 971 AC 102 or 103 is input. The non-petitioning spouse's TIN is input as the TC 971 cross-reference TIN.

Manual Refund Processing

  1. See IRM 21.4.4, Refund Inquiries, Manual Refunds, for guidance on processing manual refunds.

Non-Docketed Case Closing

  1. APS is responsible for processing closing actions on all Non-Docketed cases within Appeals.

  2. The term Non-Docketed encompasses all cases on which the taxpayer requests an Appeals Hearing and have not submitted a petitioned to the United States Tax Court (USTC).

Agreed Pre 90-Day Case Processing Procedures (8.2.1.12)

  1. This section contains he general ACDS closing guidance for cases on which a Statutory Notice of Deficiency has not been issued by Compliance, or Appeals.

Closing the Case on ACDS (8.2.1.12.4)
  1. Select "Close All Cases in WUNO" . However, if all cases in the work unit are not being closed, select "Closings Update" .

  2. Select the case to be closed.

  3. Update the following fields if they are active (not greyed out)

    1. CLOSINGCD -

      Pre-90 (non–docketed) Closing Codes
      Closing Code Description
      03 Agreed Pre-Ninety
      04 a) Agreed Notice of Deficiency
      b) non-filer case where the agreement constitutes the delinquent return
      05 Defaulted Notice or Determination letter
      14 Campus Claim Fully Disallowed/Penalty Appeal Fully Sustained
      15 Campus Claim Fully Allowed/Penalty Appeal Fully Abated
      16 Campus Claim Partially Allowed/Penalty Appeals Partially Abated
      20 Premature Referral
      30 Transfer
      40 Re-assignment
      45 Reference return closing (TYPE = REF)
      98 Reject Corrected and closed
      99 Case removed (erroneously established on ACDS)
    2. DATECLSD – Date case is closed

    3. ACAPDATE – Date ATM or Appeals Team Case Leader (ATCL) approved case (signed 5402)

    4. ACTION – ACKCLS

    5. TODATE – Date case is closed

    6. FROMDATE – Enter the same date as the TODATE on all cases being fully processed by APS and sent to Campus Files. The FROMDATE on all cases being sent to another function (Compliance, AOIC, Exam, Collection, etc...) is the date of the acknowledged Form 3210, Document Transmittal. This includes premature referrals going back to the originator.

    7. STATDATE – statute date

    8. CODE – statute code

    9. RevsdTax– revised tax

    10. Revsdpen – revised penalty

    11. DD AMTDIS – amount of claim disallowed (claim received from Examination)

    12. APPEALS AMTDIS – amount of claim disallowed (claim received from a Campus or directly from a taxpayer)

    13. Select Submit Return

    14. Select "Quit" to close another case or select "Return to Main Menu"

  4. After the TE updates the case for Closing, a Closing Validation will be required. The TE will be prompted to confirm that all original and updated data fields match the source documents. If the ACDS data is correct, the TE will select "Validate" from the screen menu and submit. ACDS will be updated in "real time" .

  5. APS will transmit the closed administrative file to the appropriate Campus Files using Form 3210, Document Transmittal.

Non-Filer Barred Refund Statute Expiration Date (RSED) Overpayment Cases

  1. IMPORTANT: When the ATE, Counsel, or the USTC determines with finality that an overpayment is due to the taxpayer and the RSED has expired, , the resulting credit must be moved to "Excess Collections File" if it is not needed to full pay the tax, penalty or interest owing on the respective tax module. Barred Refunds, cannot be offset to another tax period as a credit and may not be released for refund to the taxpayer.

  2. It is also important to remember the distinction between docketed/non-docketed non-filer returns:

    1. A docketed case for tax year ending before August 5, 1997 has an RSED of 2 years prior to the notice of deficiency.

    2. A docketed case for tax year ending after August 5, 1997 has an RSED of 3 years prior to the notice of deficiency.

    3. A non-docketed case has an RSED of 3 years prior to the notice of deficiency.

  3. The following IRMs provide additional information for barred refund case processing:

    • IRM 25.6.1.7.3.1, Transferring Credit To XSF

    • IRM 25.6.1.7.3.2, Researching The XSF

    • IRM 25.6.1.7.6, Excess Collection File (XSF) and Unidentified Remittance File (URF)

  4. If the RSED has expired and is identified as such by the ATE or Counsel Attorney, no refund can be issued to the taxpayer even though the tax liability has been overpaid. On Form 5403, Appeals Closing Record, enter the following:

    1. Item 07 Hold Code = 4

    2. Note in Item A – "Expired RSED"

    If after a credit which is barred from refund and has been moved to excess collections, a deficiency is subsequently determined for the same taxpayer and the same tax period, the barred refund amount which had previously been transferred to excess collections can be requested back from excess collections in order to pay the balance due. The APS TE must calculate the balance due as of the credit availability date and only request the amount of the credit required to full pay the balance on the respective account. Any credit barred from refund is also barred from offset to a different tax period's outstanding balance. If only a portion of the credit is needed to full pay the account balance, request only the amount needed and the remaining credit which is barred from refund will remain in the excess collection account. To request a transfer of a credit which had been moved in excess collections, the APS TE will prepare and submit Form 8758, Excess Collections File Addition. See IRM 3.17.220, Accounting and Data Control, Excess Collections File, and IRM 3.17.220.2, Excess Collections File for additional information.

  5. See IRM 21.5.11.23.1.2, Refund Statute Expiration Date for additional information.

Delinquent Return Cases Processed in Appeals

  1. If a delinquent return is received by Appeals after a Substitute for Return (SFR) TC 150 has posted, the ATE must determine the Return Received Date and the disposition of the delinquent return as well as any impact to the existing case before Appeals. Since an SFR TC 150 was posted, the case will have been opened on AIMS by Compliance prior to transmitting the case to Appeals.

  2. APS does not process original delinquent returns, however, the ATE may have accepted and date stamped an Original Delinquent Return and submitted it to the Remittance Processing Function for processing during the time the Appeals case was open for consideration.

  3. Upon receiving a case for closing on which an Original Delinquent Return was received by Appeals and processed by the respective Remittance Processing Function, analyze a current transcript to ensure all tax and credits shown on the delinquent return along with any applicable penalties (as directed by the ATE) have been assessed and considered within the Appeals tax computation.

  4. The ATE and/or TCS are responsible for ensuring that the final Appeals decision and determination accurately reflect the correct and final tax and penalty amounts to be processed by APS.

  5. General closing instructions apply to the case. Prepare Form 5403, Appeals Closing Record using Exhibit 8.20.7-1.

  6. If the case is being closed non-docketed, Form 5403, Appeals Closing Record will be completed as follows:

    1. Item 08 – Enter agreement date if an additional deficiency is to be assessed in Item 12

    2. Item 12 – enter tax and penalty that has not been assessed yet

    3. Item 14 = delinquent return received date + 3 years

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15

  7. If the case is being closed docketed, prepare the Form 5403, Appeals Closing Record using general guidelines and in addition enter the following:

    1. Item 08 – Enter decision entered date if an additional deficiency is to be assessed in Item 12

    2. Item 12 – enter amount of tax and penalty that has not been assessed yet

    3. Item 14 – compute using tack–on time (normal statute date is delinquent return received date + 3 years)

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15

    5. Item A-Enter "Original delinquent return processed and assessed ___(23c Date)"

  8. If entity changes are necessary, prepare Form 2363, Master File Entity Change and input the changes (name, TIN, address, filing status, etc.) to correct Master File.

  9. Close ACDS following general closing instructions.

  10. If conversion of filing status from separate to joint is required on Master File, follow instructions outlined in IRM 8.20.7.18, Conversion of Tax Return Cases.

Substitute for Return (SFR) Cases Processed in Appeals

  1. When SFR returns are prepared by the originating Business Operations Division (BOD), they are responsible for processing the SFR to the Master File (MF) via TC 150 0.00. Once the SFR TC 150 0.00 is posted, the originating BOD must establish AIMS controls prior to submitting the administrative file to Appeals.

  2. The originating BOD must update the AIMS Status to 81 via CC: AMCLSF with Disposal Code 07, Non-Docketed Appeals, or Disposal Code 11, Docketed Appeals.

  3. If entity changes are necessary, The ATE will notify APS. APS prepares Form 2363, Master File Entity Change and input the changes (name, TIN, address, filing status, etc.) as requested by the ATE.

  4. If both AIMS and MF are established, prepare Form 5403, Appeals Closing Record (use the blocking series for original return "70X" ).

  5. In a non-docketed SFR case, the ATE may get a signed agreement instead of having the taxpayer file a delinquent return. In these cases, the signed agreement constitutes the delinquent return.

  6. When a signed agreement is deemed to constitute the filing of a delinquent return, APS will input TC 971 AC 282 via CC: REQ77 with the transaction date = to the Agreement Date. This sets the Return Received Date on the taxpayer's account. Enter this TC 971 AC 282 information for each tax period to which the agreement applies.

  7. Prepare Form 5403, Appeals Closing Record as usual. In addition:

    1. Item 08 – leave blank

    2. Item 14 – 3 years from the date the agreement was received

    3. Item 811 – 04 (will also be CLOSINGCD on ACDS)

  8. On docketed SFR cases, the taxpayer(s) may elect "joint" status; however, since a notice of deficiency was issued, the election must be made on a return. A Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, or a stipulated decision document does not constitute a return for this purpose. The file must include a PROCESSED (delinquent) return.

  9. Prepare Form 5403, Appeals Closing Record for a docketed SFR case following Exhibit 8.20.7-1. In addition:

    1. Item 08 – enter date decision was entered

    2. Item 14 = decision date + 3 years + 150 days

  10. Close ACDS following general closing instructions and update the Statute Code to "SUB" .

Non-Master File (NMF) Processing

  1. NMF processing is required for several types of account adjustments:

    • Form 2438, Regulated Investment Company Undistributed Capital Gains Tax Return

    • Form 1296, Assessment Against Transferee or Fiduciary

    • Form CT-2, Employee Representative’s Quarterly Railroad Retirement Tax Return

    • IRC 4251, Excise Tax Direct Assessment

    • An MFT 30 Joint Account on which one of the taxpayer's is deceased

    • When an MFT 31 Account cannot otherwise be created

  2. Additional forms are required for processing the NMF returns and documents below.

    Form NMFT Code
    All pre-ADP from Document 6209
    Form 2438 -, Regulated Investment Company Undistributed Capital Gains Tax Return 38
    Form 1296, Assessment Against Transferee or Fiduciary MFT of Transferor
    Form CT-2, Employee Representative’s Quarterly Railroad Retirement Tax Return 72
  3. The APS TE will prepare a Form 2859, Request for Quick or Prompt Assessment, to include all adjustments to be posted to the NMF account.

  4. The APS TE will prepare a Form 1331-B, Notice of Adjustment, when requesting a Non-Master File Abatement.

  5. Interest must be computed and will be posted with a TC 340. Allow at least 7 days for the NMF Team when determining the 23C Date.

  6. The APS TE will prepare a Form 3177, Notice of Action for Entry on Master File with a TC 130 to cross-reference the master file account and also a TC 470 to hold collection.

  7. To request the NMF assessment or NMF abatement, the APS TE will fax the Form 2859, Request for Quick or Prompt Assessment/Form 1331-B, Notice of Adjustment and the Form 3177, Notice of Action for Entry on Master File to Accounting:
    ATTN: Cincinnati Submission Processing
    Accounting Operations
    Acctg. Control Department 1
    RACS Team 101
    Fax Number: 859-669-5390

  8. Upon receipt of the NMF Assessment DLN, affix the assessment/overassessment document to the front of the return.

  9. Coordinate cases involving NMF assessments where collection action is to be withheld with the Collection Division using appropriate memorandum.

  10. See IRM 4.4.22, AIMS/Processing Handbook, Non-Master File (NMF) Processing, for additional information.

Offer in Compromise (OIC) Non-CDP Cases (8.23.6.2)

  1. This section provides procedures for closing out completed OIC cases, except for offers worked as part of a CDP or EH case. CDP/EH offer procedures are in IRM 8.20.7.11.1.

    Caution:

    TC 480s that were input manually to IDRS will not reverse when closing AOIC. The correct reversal code must be input manually.

  2. The following types of offers originate in the Collection function and are controlled on the Automated Offer in Compromise (AOIC) system:

    • Doubt as to Collectibility (DATC)

    • Effective Tax Administration (ETA) based upon both economic hardship and public policy/equity considerations

  3. DATL offers involving Trust Fund Recovery Penalty (TFRP) or Personal Liability for Excise Tax (PLET) assessments are processed by the Collection function and are controlled on AOIC.

  4. DATL offers involving liabilities other than TFRP and PLET assessments originate in the Compliance function and are controlled on AOIC.

  5. APS is responsible for verifying and monitoring the Statute Date on all tax periods and returns under their jurisdiction in accordance with IRM 8.21.2Account and Processing Support (APS) Statute Responsibility.

Year-End OIC Acceptance Processing (8.23.6.2.2)

  1. Appeals staff preparing acceptance letters can generally help ensure they contain the correct tax years by ensuring cases are received by APS, with all approvals, by the second Friday of December. Cases that cannot be received by APS by the second Friday of December should have acceptance letters that reflect the following calendar year as the year in which the offer is accepted.

  2. If a new calendar year has begun and the acceptance letter contains the wrong years, at local discretion, APS may return the case file to the ATM to have the acceptance letter corrected, or advise the ATM via encrypted E-mail that the letter needs to be corrected, and the ATM's office may sign and mail the corrected letter to APS.

Collection Originated OIC Acceptance Procedures (8.23.6.2.3)

  1. The work unit will be assigned to the Tax Examiner on the Processing Employee Automated System (PEAS) for closing, with PEAS TYPE "CLS" and the appropriate SubTYPE for the case. Since APS is responsible for backend AOIC closing, the PEAS SubTYPE "SP" will apply.

  2. For an accepted OIC, the case will flow as follows:

    1. The ATE completes the case and submits it to the ATM for approval.

    2. The ATM signs the Form 7249, Offer Acceptance Report, Letter 673, OIC Acceptance Letter, dates and signs the Form 5402, Appeals Transmittal and Case Memo and enters the ACAPDATE on ACDS.

    3. The ATM submits the case to APS for final closing.

  3. The OIC case file will contain the following documents:

    • Original Letter 656, Offer in Compromise

    • Original Amended Form 656, Offer in Compromise if applicable

    • Original Form 7249, Offer Acceptance Report

    • Redacted copy of Form 7249, Offer Acceptance Report attached to redacted copies of TDS or MFTRAX transcripts

    • Collection rejection letter

    • Taxpayer's written request for appeal and envelope used for mailing the taxpayer's request for appeal

    • Form 5402, Appeals Transmittal and Case Memorandum

    • Appeals Case Memorandum, if applicable

    • Financial information, including Form 433-A and/or Form 433-B, bank statements, property records, and other information used to make the acceptability determination

    • Copy of the OIC acceptance letter

  4. If an offer is received from one spouse on a joint liability, the MOIC site is responsible for creating mirror assessments on the accepted OIC.

  5. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402 , Appeals Transmittal and Case Memo or Form 7249, Offer Acceptance Report under "Terms of this Offer" ). Enter –0– (zero) for all other tax periods

    4. NOTE - "AOIC closed, accepted OIC file to Memphis MOIC" or "AOIC closed, accepted OIC to Brookhaven MOIC."

    Note:

    Monitoring Offer in Compromise (MOIC) locations for accepted offers are located on SERP:http://serp.enterprise.irs.gov/databases/who-where.dr/coic_backend.htm

  6. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on closing applicable cases on AOIC.

  7. Date and mail the acceptance letter to the taxpayer and/or POA and include as attachments:

    1. A copy of the Form 656or amended Form 656

    2. A copy of the collateral agreement Form 2261, Collateral Agreement - Future Income (Individual) if applicable (collateral agreements are not common)

  8. Make copies of the above and the Form 7249, Offer Acceptance Report for the administrative file.

  9. Send one copy of the redacted Form 7249, Offer Acceptance Report attached to copies of the redacted TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the public inspection file. The address list for where to send the OIC public inspection file is in the APS section on the Appeals web site at OIC Public Inspection File Locations.

  10. Fax a copy of the Form 5402, Appeals Transmittal and Case Memo and ACM to the Collection function analyst named on the Form 5402, Appeals Transmittal and Case Memo.

  11. Send the case file to the appropriate campus MOIC unit based on the state where the taxpayer resides. http://serp.enterprise.irs.gov/databases/who-where.dr/coic_backend.htm.

  12. Close PEAS using Closing Code 03 with a completion date equal to the date the above actions were completed.

  13. The ATE will process any OIC payments upon receipt via Form 3244, Payment Posting Voucher. After the case is closed, the taxpayer should send payments directly to the campus identified on the acceptance Letter 673.

  14. The Collection function also works Doubt as to Liability (DATL) offers when the tax debt involves a trust fund recovery penalty (TFRP) or personal liability for excise tax (PLET) assessment. These cases are also loaded on AOIC.

  15. Closing procedures foran OIC that are part of a CDP case is located in IRM 8.20.7.17.17, CDP and EH Offer in Compromise (OIC) Processing: Overview (8.22.3.12).

AOIC Closing Procedures for Accepted Offer (8.23.6.2.3.1)
  1. This section provides general information for closing an accepted OIC case on the AOIC system.

  2. As soon as possible after the Acceptance Letter 673 is issued, the case must be closed, validated and released on AOIC and the case file sent to the appropriate MOIC campus for monitoring. It is critical that the actions are promptly taken to close the case on AOIC and the case immediately sent to MOIC because:

    • IRS releases a tax lien once the taxpayer pays the accepted offer amount in full, and

    • MOIC is responsible for monitoring the taxpayer's compliance with the terms and conditions of the offer, so the closing information and case file are needed for this purpose, and

    • The need to close aged case inventory as soon as possible.

  3. Follow the table below for general input actions related to closing accepted OIC cases on the AOIC system:

    Screen Input Fields
    Query Enter TIN
    AO Offer Query Results Select case from list
    AO Offer Update
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and move to "Input" screen

    Update AO Offer
    • Offer amount (if changed)

    • Select Original or Amended Offer

    • Verify "Offer Type"

    • Select Submit and return to "AO Offer" screen

    AO Offer Select MFT Tab
    MFT Summary
    • Update "Accrued Date"

    • Update liability amounts

    • Save inputs and return to "AO Offer" screen

    AO Offer
    • Verify total liability amounts (from Form 7249, Offer Acceptance Report) See Note Below

    • Select "Terms"

    • Select "Update Terms"

    • Verify "Terms Type"

    • Input payment terms (from Form 7249)

    • Input Collateral Agreement terms, if any. Include the form number of the collateral agreement (Form 2261, Form 2261-A, Form 2261-B etc.)

    • Select "Submit"

    AO Offer
    • Select Remarks

    • Add remarks to state "Accepted in Appeals - Sending to the MOIC unit" (Brookhaven MOIC or Memphis MOIC)

    • Select "Save"

    Remarks & Case History
    • Select "Remarks and Case History"

    • Print one copy of Remarks and Case History screen (page 1 only) and include this print in the administrative file.

    • Return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer Select "Final Disposition"
    Update Final Disposition
    • Select "2 - Accepted by Appeals"

    • Input the mail date of the rejection with appeal rights letter

    • Input the mail date of the Appeals acceptance letter

    • Was the offer accepted under ETA/DCSC criteria? Select answer from drop-down menu.

    • Select "Submit " and return to "AO Offer" screen

    AO Offer
    • From this screen, verify the case is closed.

    • Also from this screen, check for related offers. If applicable, take necessary closing actions for related offers.

    • Print one coy of the final ATE Offer screen and insert the print in the administrative file

    Note:

    During the course of an offer investigation, if a TIPRA payment(s) (which includes the initial payment submitted with the offer, subsequent periodic installment payments, and/or the payment submitted with an amended offer) contributes to the full payment of a tax period, that period must remain part of the offer and must be listed on any subsequent amended Form 656 or addendum and the Form 7249, Offer Acceptance Report. Even though the tax debt is fully paid, the payment or payments used to satisfy the tax debt are still part of the overall offer amount, so all satisfied periods must remain part of the offer.

  4. As soon as possible after closing the closed accepted offer on AOIC, validate and release it to the appropriate MOIC campus for monitoring. Validation and release on AOIC is required and may be performed by the APS employee or the PTM at the discretion of APS management. See IRM 8.20.7.45.2.2, Validating Accepted Offers on AOIC for guidance.

  5. Once the case is validated, control of the offer goes to MOIC, and the file must be sent to them as soon as possible. Use the destination list from the drop down menu to determine where the file must be sent.

    Note:

    If there are related cases with different business operating division (BOD) codes (W&I and SBSE), the SB campus will monitor both offers.

  6. Prepare Form 3210, Document Transmittal and mail to the appropriate MOIC campus. Be sure the file contains the original copies of:

    • Initial Form 656, Offer in Compromise

    • Amended Form 656, if applicable

    • Signed Acceptance Letter 673 (may be a signed copy)

    • Form 7249, Offer Acceptance Report

    • Collateral agreement, if applicable

Validating Accepted Offers on AOIC (8.23.6.2.3.2)
  1. Follow the steps below to validate an accepted offer on the AOIC database:

    1. Sign on to the AOIC database and navigate to the main Appeals Menu screen.

    2. Select the SWITCH USER LOC field.

    3. Select the AOIC area location of where the case was worked (e.g. Area 05 = Gulf States; Area 17 Memphis).

    4. Select VALIDATE & RELEASE.

    5. All of the cases recently closed as an acceptance will be listed. Find the case you are closing on the list by confirming the Offer Number, Offer TIN, Name Ctrl and AO Closed Date fields.

    6. Select the RELEASE CODE box next to your case.

    7. Navigate to the bottom of the page and select SUBMIT. The case is now validated and released to MOIC.

Collection Originated Withdrawn OIC Procedures (8.23.6.2.4)

  1. The case file for a withdrawn Offer in Compromise should contain:

    • Form 5402, Appeals Transmittal and Case Memo

    • ACM

    • Withdrawal Letter 241, Offer in Compromise Withdrawal signed by the ATM

    • Collection/COIC rejection letter

    • Taxpayer's request for appeal and envelope with postmark

    • Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, if applicable

  2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or Collection is responsible for mirror assessment actions on a withdrawn OIC.

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 16 (OIC withdrawn)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Withdrawn offer closed on AOIC and file sent to __(enter identifying code) drop point" (For Collection Field cases) or "Withdrawn offer closed on AOIC and file sent to _(enter identifying code) COIC" (For Collection Campus cases use Memphis or Brookhaven COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Field Collection sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  4. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on closing applicable cases on AOIC.

  5. Date and mail the Letter 241, Offer in Compromise Withdrawal and place a copy in the administrative file.

  6. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

  7. The Collection function also processes Doubt as to Liability (DATL) offers when the tax debt involves a TFRP or PLET assessments. These cases are also loaded on AOIC.

AOIC Closing Procedures for a Withdrawn Offer (8.23.6.2.4.1)
  1. This section provides general information for closing a withdrawn OIC case on the Automated Offer in Compromise (AOIC) system.

  2. AOIC INPUT (Query Offer Number)

    Screen Input Actions
    Query Input TIN
    AO Offer Query Results
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Select "Update Offer"
    Update AO Offer
    • Select "Update Offer"

    • Select "Final Disposition"

    • Select "9 - Withdrawal"

    • Input the mail date of the rejection letter with appeal rights

    • Input the mail date of the Appeals withdrawal letter

    • Input the legal date of the withdrawal (indicated on the withdrawal letter)

    • If a deposit was made, select the appropriate response from the drop-down menu

    • Select "Submit" and return to AO Offer screen

    AO Offer Verify the case is closed
    AO Offer Add remarks - Withdrawn in Appeals and file is being sent to (appropriate address)

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization will be included in the file and routed to the appropriate MOIC campus that processed the payment.

  3. Print the first page of AOIC for the case and attach it to the front of the closed file. Route the case file back to the Area Office/COIC Offer Coordinators. They will maintain the closed offer and ship it to the FRC. Attaching the first page from AOIC will assist them in routing the case properly.

    Note:

    Field Collection sourced cases that have been withdrawn are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

Collection Originated Rejected OIC Procedures (8.23.6.2.5)

  1. The file for a case where Appeals sustained the Collection function's rejection of the offer should contain:

    • Form 5402, Appeals Transmittal and Case Memo

    • ACM

    • Appeals rejection Letter 5197, Offer in Compromise Rejection signed by the ATM

    • Form 1271, Rejection or Withdrawal Memorandum prepared by the Collection function

    • Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability if applicable

    • Collection/COIC rejection letter

    • Taxpayer's written request for appeal and envelope with postmark

    • Financial information

  2. If an offer is received from one spouse on a joint liability, mirror assessment procedures apply. COIC or field Collection is responsible for creating mirror assessments on a withdrawn OIC.

  3. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 14 (OIC rejection sustained)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as the proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Rejected offer closed on AOIC and file sent to __(enter identifying code) " (For Collection Field cases, insert the Collection Drop Point location) or "Rejected offer closed on AOIC and file sent to __(enter identifying code) COIC" (For Collection Campus cases, insert Brookhaven or Memphis COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Field Collection sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  4. Generally, all offers will be established by the Collection function on the AOIC database. APS is responsible for closing the AOIC database for offers worked to conclusion in Appeals. The next section of this IRM contains information on actually closing applicable cases on AOIC.

  5. Date and mail the Appeals OIC rejection Letter 5197, Offer in Compromise Rejection to the taxpayer and/or POA concurrent with closing the case on ACDS. Retain a copy of the letter in the administrative file.

  6. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on AOIC.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  7. Close PEAS using PEAS closing code 03 with a completion date equal to the date the above actions were completed.

  8. The Collection function also works Doubt as to Liability (DATL) offers when the tax debt involves a TFRP or PLET assessments. These case are also loaded on AOIC.

AOIC Closing Procedures for Rejected Offers (8.23.6.2.5.1)
  1. This section provides general information for closing a rejected OIC case on the Automated Offer in Compromise (AOIC) system.

  2. Follow the steps in the table below for general instructions for closing AOIC for rejected OIC cases.

    Note:

    Make sure all screens are updated if an amended offer was secured.

    Screen Input Actions
    AO Offer Select "Remarks" and indicate the offer was rejected
    Remarks and Case History Select "Submit" and return to "AO Offer" Screen
    AO Offer Select "Update Offer"
    Update AO Offer Final Disposition
    Update Final Disposition
    • Select "3 - Rejection Sustained"

    • Input the mail date of the rejection letter with appeal rights

    • Input the mail date of the Appeals rejection letter

    • Input the RCP amount (from Form 5402). If "0" or no amount is given on the Form 5402, use the IMFOLI/BMFOLI "total assessed balance" from IDRS)

    • Select "Submit" and return to AO Offer screen

    Query Input TIN
    AO Offer Query Results Select case from list
    AO Offer
    • Select case from list

    • Reassign case to Appeals closures

    • Select "Submit" and return to "AO Offer" screen

    AO Offer Verify the case is closed
  3. TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization must be included in the file and routed to the appropriate MOIC campus that processed the payment.

  4. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

OIC Premature Referrals
  1. Hearing officers may determine that an OIC case must be returned to the originating function as a premature referral. Some of the reasons for this can be:

    • The taxpayers' request for an Appeals hearing was not timely

    • The taxpayer did not request Appeals consideration

    • The offer was never rejected by the IRS

  2. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 20 (OIC Premature Referral)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, the entry is the same as the proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = $0

    4. NOTE - "Premature referral, offer reassigned to Area Office XX on AOIC and file sent to the XXXXXXXX office Drop Point" (For Collection Field cases, insert the Collection Drop Point location) or "Premature referral, offer reassigned to Area Office XX on AOIC and file sent to XXXXX COIC" (For Collection Campus cases, insert Brookhaven or Memphis COIC). The notation will inform the reader where the case was shipped or how it was closed.

      Note:

      Collection Field sourced cases resolved in any manner other than an acceptance are returned to the Collection function by using the Collection Drop Points for Appeals listing located on the Appeals website under the APS tab and the section titled "APS Only Case Routing" .

  3. Close PEAS using PEAS closing code 03 with a completion date equal to the date the above actions were completed.

AOIC Closing Procedures for Premature Referrals
  1. When returning an OIC as a premature referral, the AOIC database is not closed but updated to reflect the Area office assignment number for premature referrals. To return an offer to the originating Area office on AOIC, take the following actions:

    1. Select the Area office that worked the offer

    2. Select "AO Offers" under the AOIC OFFERS column

    3. Query the database for the case you want to close. You can search by using the TIN, offer number, name control

    4. When the desired case is located, click on the offer number

    5. Then select "Update Offer"

    6. In the "Assign to:" field, search for the area office assignment number for "Premature Appeals Referrals" in the drop down menu. The number will begin with the Area office number and be followed by several other numbers. For example, a case being returned to the Brookhaven COIC unit will have an assignment number of 1801009089. Area office 05 for the Gulf States will have a number of 0501009089.

    7. Once the Premature Appeals Referrals assignment number has been located, select "SUBMIT" . The case will now be assigned back to the originating Area office.

    Note:

    Currently for Area 21 cases, there is no mechanism in AOIC to send cases back to the Collection function as premature referrals. Instances for sending a CDP/OIC back as a premature referral should be rare. Should a situation arise where this would need to be done, raise the event through the management chain for resolution.

Examination Originated DATL OIC Cases (8.23.6.3)

  1. DATL offers originating in Compliance will now be controlled on the Automated Offer in Compromise (AOIC) system as well as ETA offers based upon public policy/equity consideration.

  2. DATL offers may be open on AIMS and will require an AIMS Closing action upon conclusion of the Appeals case.

  3. DATL offers may require account adjustments as determined by the ATE.

  4. The work unit will be assigned to the APS Tax Examiner on PEAS for closing with PEAS TYPE "CLS" and the appropriate SubTYPE for the case.

  5. These DATL offers will be identified on ACDS by using feature code "LI" .

  6. The AOIC system will reverse the TC 480s systemically upon closure. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:

    1. Manually input TC 481 using the date the case is closed/ Appeals rejection letter date

    2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter

    Caution:

    AOIC will not reverse a manually input TC 480. If AOIC was not used to input the TC 480, it must be reversed on IDRS manually.

Non-Examination Originated DATL OIC Cases (8.23.6.3.1)
  1. The Collection function handles DATL offers involving TFRP and PLET liabilities.

  2. These DATL offers will be identified on ACDS by using feature code "LI" .

    Note:

    For DATL offers, TFRP and PLET liabilities are loaded onto AOIC, so follow the AOIC closing procedures for accepted (IRM 8.20.7.45.2.1), withdrawn (IRM 8.20.7.45.3.1) and rejected (IRM 8.20.7.45.4.1) cases.

  3. When closing a rejected or withdrawn non-AOIC DATL case, manually input on IDRS the following, as needed:

    1. Manually input TC 481 using the date the case is closed/Appeals rejection letter date

    2. Manually input TC 482 using the withdrawal date that is indicated on the closing letter

      Caution:

      AOIC will not reverse a manually input TC 480. If AOIC was not used to input the TC 480, it must be reversed on IDRS manually.

Examination Originated OIC Acceptance Procedures (8.23.6.3.2)
  1. The OIC case file will contain the following documents:

    • Original Form 656, Offer in Compromise

    • Amended Form 656, Offer in Compromise if applicable

    • Original Form 7249, Offer Acceptance Report

      Note:

      Counsel review is required when the total unpaid liability (including all assessed and accrued penalties and interest) for all related offers on the same taxpayer is $50,000 or more.

    • Redacted copy of Form 7249, Offer Acceptance Report, attached to redacted TDS or MFTRAX transcripts

    • Form 5402, Appeals Transmittal and Case Memorandum

    • Appeals Case Memorandum, if applicable

    • Examination rejection letter

    • Taxpayer's written request for appeal and envelope with postmark (if applicable)

    • Acceptance Letter 673, signed by the ATM

  2. If the case is controlled on AIMS, close the case on AIMS according to standard procedures.

    Note:

    If it is determined that a DATL offer acceptance is appropriate, the agreement between the taxpayer and the Internal Revenue Service settles the tax debt for less than the full amount owed and adjustments to tax are generally not done.

  3. Close the OIC work unit on ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 15 (OIC Accepted)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax = For the earliest tax period, enter the amount of the accepted offer (see Form 5402, Appeals Transmittal and Case Memo or the "Terms of this Offer" section on Form 7249, Offer Acceptance Report). For all other tax periods, enter -0- (zero).

  4. The following closing actions should occur on the date the case is closed on ACDS:

    1. Date and mail the acceptance letter to the taxpayer and/or POA and include copies of the Form 656 or amended Form 656 and any collateral agreements as attachments.

    2. Copy the acceptance letter with attachments for the administrative file.

    3. Send one copy of the redacted Form 7249, Offer Acceptance Report attached to redacted copies of TDS or MFTRAX transcripts to the applicable Area Collection Field Office for filing in the Public Inspection File. The case file should already contain a copy of the redacted Form 7249, Offer Acceptance Report and redacted TDS or MFTRAX transcripts. The address list for where to send the OIC Public Inspection Files is in the APS section on the Appeals web site at OIC Public Inspection File Locations.

    4. Ensure the OIC file contains the information in (1) above (except TDS or MFTRAX).

    5. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    6. Return the case file to the originating Compliance office.

    7. Process any OIC payments to the campus OIC unit. After the case is closed, the taxpayer should send payments directly to the campus OIC unit.

Examination Originated Withdrawn OIC Procedures (8.23.6.3.3)
  1. When the ATE and the taxpayer reach an agreement on the correct tax liability, a "compromise" is not required and the taxpayer will generally withdraw the OIC. The tax is adjusted to the correct amount via Form 3870, Request for Adjustment.

  2. The case file for a withdrawn OIC should contain:

    1. Form 5402, Appeals Transmittal and Case Memo

    2. ACM, if information not already contained in Form 5402, Appeals Transmittal and Case Memo

    3. Withdrawal Letter 241, Offer in Compromise Withdrawal signed by the ATM

    4. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable

    5. Compliance rejection letter

    6. Taxpayer's written request for appeal and envelope with postmark

    7. Form 3870, Request for Adjustment, if applicable

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 16 (OIC withdrawn)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax for earliest tax period = Should be the same as proposed tax. The "total assessed balance" from IMFOLI or BMFOLI may also be used. RevsdTax for other periods = $0

  4. The ATE will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.

  5. For a case that is not on AOIC, manually input TC 482 using the same date as the withdrawal date that is indicated in the closing letter.

    Note:

    The legal withdrawal date is the IRS received date if the taxpayer's withdrawal letter was mailed certified or hand delivered, in which case the date should be indicated by the ATE in the body of the Letter 241. If the request to withdraw was received by any other method, the withdrawal date is the date the Letter 241 is mailed to the taxpayer.

  6. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  7. Date and mail the Withdrawal Letter 241 to the taxpayer and/or POA. Keep a copy in the administrative file.

  8. Return the case to the originating Compliance office.

  9. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    Note:

    When Compliance has worked the offer to conclusion before it was sent to Appeals, APS will return the case file to the originating Compliance function upon completion of all closing actions. If Appeals determined the liability and is the first evaluator of the offer, APS will send the case file to "files" upon the completion of all closing actions.

Examination Originated Rejected OIC Procedures (8.23.6.3.4)
  1. A case is processed as Appeals sustaining rejection of the offer when the taxpayer does not agree with the conclusion of the ATE and does not otherwise withdraw the offer.

  2. The case file for a rejected Offer in Compromise should contain:

    1. Form 5402, Appeals Transmittal and Case Memo

    2. Appeals rejection Letter 5197 signed by the ATM

    3. ACM

    4. Form 1271, Rejection and Withdrawal Memorandum

      Note:

      The Form 1271 in the file will be prepared by Exam.

    5. Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, or other written authorization to apply the deposit, if applicable

    6. Compliance rejection letter

    7. Taxpayer's written request for appeal and envelope with postmark

    8. Form 3870, Request for Adjustment, if applicable

  3. Close ACDS following general closing instructions. In addition:

    1. CLOSINGCD = 14 (OIC rejected)

    2. WUaccptOfrAmt = No entry

    3. RevsdTax for earliest tax period = same as proposed tax (which should be the amount of the total unpaid liability). RevsdTax for other periods = 0

  4. For a case that is not on AOIC, manually input TC 481 using the same date the case is closed/Appeals rejection letter date.

  5. The ATE will indicate if adjustment actions are required. If yes, input the appropriate adjustments to IDRS.

  6. If an offer deposit was made and it was input onto AOIC, direct the disposition of the payment by selecting the appropriate option on ACDS.

    Note:

    TIPRA 20% down payments are not refundable. An amount paid in excess of the 20% that is designated as an offer deposit is normally refunded unless the taxpayer provided written authorization allowing the IRS to apply the deposit to the existing tax liability. A Form 3040 is typically used, but any written authorization satisfies the requirement. The Form 3040 or other written authorization should be included in the file and routed to the appropriate MOIC campus that processed the payment.

  7. Date and mail the Appeals OIC Rejection Letter 5197, Offer in Compromise Rejection to the taxpayer and/or POA and place a copy in the administrative file.

  8. Return the case to the originating Compliance office.

  9. Close PEAS using PEAS Closing Code 03 with a completion date equal to the date the above actions were completed.

    Note:

    When Compliance has worked the offer to conclusion before it was sent to Appeals, APS will return the case file to the originating Compliance function upon completion of all closing actions. If Appeals determined the liability and is the first evaluator of the offer, APS will send the case file to "files" upon the completion of all closing actions.

Penalty Appeal (PENAP) Case Closing Procedures (8.11.4.1.8)

  1. When APS receives the PENAP case for closing from the ATM, APS will:

    1. Assign the case to an APS employee on Processing Employee Automated System (PEAS).

    2. Determine if there is an Open Control Base on IDRS. (IDRS # 66###). If a control base is opened under an Appeals IDRS number, the TE must close the control base as part of their case processing actions. The Control Base can be closed using one of the two following methods:
      Use CC: ACTON to close the control base
      Use CC: ACTON to assign the control base to your IDRS Number

      Note:

      When you input the ADJ54 adjustment(s), IDRS will close the control base.

      Note:

      Also see IRM 2.3.12-2, ACTON Sample Inputs.

    3. Review closing documents for special instructions.

    4. Update and Close ACDS as appropriate.

    5. ACDS update and closing information is outlined below:

      Determination Made Closing Code
      Sustained (penalties are not removed) 14
      Abated (penalties are fully removed) 15
      Partially Abated (only part of the penalties are removed) 16
    6. Verify that the ACAPDATE is entered by the Appeals Team Manager (ATM) as a result of closing the case on the ATM module

    7. Enter in the field ACTION- ACKCLS

    8. Enter in RevisedPen, the amount of the sum of the penalties sustained for each tax period. This is taken from the Form 5402, Appeals Transmittal and Case Memo or Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

      Form What to enter in RevisedPen
      Form 5402 use the total for each period in the AMT SUS (amount sustained column)
      Form 8278 subtract the amount abated from the amount assessed
    9. Send feedback to Compliance when an address is provided in the Route To: field on the Form 5402, Appeals Transmittal and Case Memo.

  2. Multiple tax periods may be listed on Form 5402, Appeals Transmittal and Case Memo. If multiple tax periods are being adjusted for the same taxpayer, the workpapers will be associated with the latest period and that period will be input as a source document. All other related tax periods require the input of the literal "NSD" within the remarks field to satisfy Campus Files requirements. A TC 971 AC 057 to cross reference the tax period associated with the workpapers must also be input for each non-workpaper tax period.

    Example:

    Form 5402, Appeals Transmittal and Case Memo, identifies penalty abatements for the following tax periods: 200412, 200512, 200612, 200712, 200812, 200912.

    • 200412 ADJ54 Remarks ="NSD" and a TC 971 AC 057 XREF 200912 is posted

    • 200512 ADJ54 Remarks ="NSD" and a TC 971 AC 057 XREF 200912 is posted

    • 200612 ADJ54 Remarks ="NSD" and a TC 971 AC 057 XREF 200912 is posted

    • 200712 ADJ54 Remarks ="NSD" and a TC 971 AC 057 XREF 200912 is posted

    • 200812 ADJ54 Remarks ="NSD" and a TC 971 AC 057 XREF 200912 is posted

    • 200912 will be input as a source document and sent to files

  3. For "Fully Abated" , Closing Code 15, input a TC 290 0.00 and the appropriate TC's for the penalty abatements, use the appropriate Blocking Series. A second adjustment with Blocking Series 96X is not required since all penalties will be abated.

  4. For "Fully Sustained" , Closing Code 14, input a TC 290 0.00 and use Blocking Series 96X to set the "-N" freeze on the account.

  5. For "Partially Sustained" , Closing Code 16, input a TC 290 0.00 and the appropriate TC's for the partial penalty abatements. Use the appropriate Blocking Series to process the partial penalty abatement(s) identified on the Form 5402, Appeals Transmittal and Case Memo and then as a second adjustment, use Blocking Series 96X to set the "-N" freeze on the account.

  6. The "-N" freeze can only be reversed by Appeals via the input of a TC 290 0.00 adjustment with a Blocking 97X.

    Note:

    Once the "-N" freeze is on the account reflecting Appeals determination, penalties cannot be abated by any other function without Appeals involvement. If an ATE/ATM determines that additional penalty adjustments are appropriate, APS will input TC 290 $0.00 with Blocking Series 97X, and then input the additional penalty abatement amount from the Form 5402, Appeals Transmittal and Case Memo.

  7. Additional information on adjustment actions are found in IRM 20.1.2, Failure To File/Failure To Pay Penalties, and IRM 2.4.16, Command Codes REQ54 and ADJ54.

Petitioning/Non-Petitioning Spouse Case (8.4.1.34)

  1. Non-petitioning spouse assessments are made on an MFT 31 account. See IRM 8.20.7.40, MFT 31 Separate Assessment Module Overview (25.15.12.19) for additional guidance on MFT 31 accounts.

  2. When a non-petitioning spouse case is received for closing, compare the amount on the decision with the amount assessed previously MFT 31.

    1. If the amount of tax/penalty on the decision document is different from the amount assessed, prepare three (3) Form 5403s, Appeals Closing Record
      - one for the joint account (MFT 30)
      - one for the petitioning spouse (MFT 31 "PS" )
      - one for the non-petitioning spouse (MFT 31) "NPS"

    2. If the amount of tax/penalty on the decision document is the same as the amount assessed previously, prepare only two (2) Forms 5403 - one for the joint account and one for the petitioning spouse.

Non-Petitioning Spouse (NPS) Assessed on MFT 31 (8.4.1.34.1)

  1. If the non-petitioning spouse was assessed on MFT 31, the petitioning spouse will also be assessed on MFT 31.

  2. Prepare Form 5403, Appeals Closing Record for the joint account:

    1. Check "AMCLSA"

    2. MFT = 30

    3. Item 12 = $0

    4. Item 15 – enter appropriate reference codes and amounts

    5. Items 800 through 810 – show statistical data for the entire work unit

    6. Item 811 – enter closing code based on the result of the docketed case: 08, 10, 11, 12 or 17

    7. Item 42 – Enter appropriate code (was tax owed, paid, not paid or partially paid)

    8. Item A - Cross-reference to the MFT 31 assessments of both petitioning and non-petitioning spouse

  3. Prepare Form 5403, Appeals Closing Record for the petitioning spouse:

    1. Check "AMCLSS"

    2. TIN - TIN of joint account

    3. MFT - 30

    4. Item 08 - Agreement Date if the IRC 6213 waiver paragraph is included on the Entered Decision Document

    5. Item 08 - Agreement Date is left blank if the IRC 6213 waiver paragraph is not included on the Entered Decision Document

    6. Item 12 - tax and penalty on decision document

    7. Item 13 – enter disposal code

    8. Item 14 – enter statute date for petitioning spouse

    9. Item 15 – enter appropriate reference codes and amounts

    10. Item 800 through 811 – leave blank

    11. Item 42 – leave blank

    12. Item 56 – Check "PA" if the petitioning spouse is the primary SSN. Check "SA" if the petitioning spouse is the secondary SSN.

      Reminder:

      If "SA" is checked, the Name Control for the Secondary SSN must be entered as Item 57. (The 1-2010 revision of Form 5403 does not include Item 57, however the CC: AMCLS programming requires this entry. The next revision of Form 5403 will include Item 57 with a four field entry for the SA Name Control.

  4. If the tax/penalty on the decision document equals the amount assessed on the MFT 31 account, Form 5403, Appeals Closing Record will not be prepared for the non-petitioning spouse.

  5. If the tax/penalty on the decision document is less than the amount assessed on the MFT 31 account BECAUSE the petitioning spouse is found to be an innocent spouse, do NOT adjust the non-petitioning spouse account. Forward the case to the Florence APS team for processing and closing.

  6. If the tax/penalty on the decision document is less than the amount assessed on MFT 31, and there is NO innocent spouse issue, prepare Form 5403, Appeals Closing Record for the non-petitioning spouse:

    1. Check "AMCLSS"

    2. TIN = TIN of joint account

    3. MFT = 30

    4. Item 12 = TC is 301. Circle the minus sign. The amount is the difference between the amount assessed and the amount on the decision document.

    5. Item 13 – enter disposal code

    6. Item 15 – enter appropriate reference number and amount

    7. Item 800 through 811 – leave blank

    8. Item 56 – Check "PA" if the non-petitioning spouse is the primary SSN on the joint account. Check "SA" if the non-petitioning spouse is the secondary SSN on the joint account.

    Reminder:

    If "SA" is checked, the Name Control for the Secondary SSN must be entered as Item 57. (The 1-2010 revision of Form 5403 does not include Item 57, however the CC: AMCLS programming requires this entry. The next revision of Form 5403 will include Item 57 with a four field entry for the SA Name Control.

  7. APS will process the adjustments in the following manner:

    1. Establish MFT 31 account for petitioning spouse. Input TC 971, AC 103, XREF TIN = petitioning spouse TIN

    2. Identify both MFT 31 accounts as having duplicate assessments. Input TC 971, AC 110 on both MFT 31 accounts

    3. Manually credit any payments posted prior to the TC 971 AC 110 date to the respective MFT 31 Account using guidance provided in IRM 21.6.8.7.1, "Missing Payments"

    4. Process the AMCLSS adjustments

    5. After MFT 31 assessments/adjustments post, process AMCLSA closing for joint account

    6. Input TC 472 on both MFT 31 accounts to start collection activity

Non-Petitioning Spouse (NPS) Assessed on NMF (8.4.1.34.2)

  1. If the non-petitioning spouse was assessed on the NMF account, the petitioning spouse will be assessed on NMF also.

  2. Prepare Form 5403, Appeals Closing Record for the joint account:

    1. Check "AMCLSA"

    2. MFT = 30

    3. Item 12 = $0

    4. Items 800 through 810 – Show statistical data for the entire work unit

    5. Item 811 – Enter closing code based on the result of the docketed case: 08, 10, 11, 12 or 17 (See Exhibit 8.20.7-1 for Form 5403 closing codes.)

    6. Item 42- Enter code appropriate for joint account

    7. Item A-Cross-reference to NMF assessments of both petitioning and non-petitioning spouse

  3. Prepare Form 5403, Appeals Closing Record for the petitioning spouse:

    1. Check "Source Document Only"

    2. TIN = TIN of petitioning spouse with an "N"

    3. MFT = 20

    4. Item 12 entries = tax and penalty on decision document

    5. Item 13 – no entry

    6. Item 14 – enter statute date for petitioning spouse

    7. Item 15 entry – penalty amount, if any

    8. Item 800 through 811 – leave blank

    9. Item 42 – leave blank

    10. Item A – Write "Spousal Assessment" and cross reference the TIN, MFT and tax period of the non-petitioning spouse. Also write "Do Not Withhold Collection."

  4. If the tax/penalty on the decision document equals the amount assessed on the NMF account, no Form 5403, Appeals Closing Record is prepared for the non-petitioning spouse. A Form 3177, Notice of Action for Entry on Master File with TC 471" Resume Collection" is sent to the NMF unit for the non-petitioning spouse.

  5. If the tax/penalty on the decision document is less than the amount assessed on the NMF account BECAUSE the petitioning spouse is found to be an innocent spouse, do NOT adjust the non-petitioning spouse account. Forward the case to the Florence APS team for processing and closing. The APS TE who closes the case will send a Form 3177, Notice of Action for Entry on Master File with TC 471 "Resume Collection" to the NMF unit for the non-petitioning spouse.

  6. If the tax/penalty on the decision document is less than the amount assessed on the NMF account, and there is NO innocent spouse issue, prepare Form 5403, Appeals Closing Record for the non-petitioning spouse:

    1. Check "Source Document Only"

    2. TIN = TIN of non-petitioning spouse with an "N"

    3. MFT = 20

    4. Item 12 = TC is 301 circle the minus sign. The amount is the difference between the amount assessed and the amount on the decision document.

    5. Item 13 – no entry

    6. Item 15 – enter penalty, if any

    7. Item 800 through 811 – leave blank

    8. Item A – Write "Spousal Assessment – Resume Collection" and cross reference the TIN, MFT, and tax period of the petitioning spouse. The cross reference is necessary because the NMF unit must adjust the accounts each time a payment is received from either spouse. Also write "Form 1311 in process" .

    9. A Form 1331-B, Notice of Adjustment must be prepared to make the NMF abatement

    10. If the NMF assessment was made at another Campus route the Form 5403, Appeals Closing Record and Form 1331-B, Notice of Adjustment, to that Campus NMF unit

Non-Petitioning Spouse (NPS) NOT Assessed Previously (8.4.1.34.3)

  1. Various operations throughout the Service, issue Statutory Notices of Deficiency (SND) on Married Filing Joint (MFJ) Returns (MFT 30 Filing Status 2). Each function has established internal policy and procedure which requires that the Non-Petitioning Spouse (NPS) be held for default or agreement, when the other spouse files a timely Petition to the United States Tax Court (USTC). On occasion, both the PS and "unprocessed" NPS are transmitted to Appeals without the proper action(s) being taken on the NPS.

  2. All non-petitioning spouse (NPS) assessments must be made timely by the function that issued the SND upon the receipt of the signed waiver, or upon default of the SND for the NPS. This process is required to make a timely and legal assessment prior to the expiration of the NPS ASED.

    Reminder:

    If the function that issued the SND has not made a timely Non-Petitioning Spouse (NPS) assessment via MFT 31, immediately notify your Processing Team Manager via encrypted/secure email. Include the correct Assessment Statute Expiration Date (ASED) in the Subject Line of the email. Do not include PII in the subject line as this can constitute a PII disclosure. All PII information must be included within the body of the encrypted email.

  3. If the NPS was NOT previously assessed and the NPS ASED IS STILL Open for assessment (not expired) take immediate action upon approval by the PTM, to make the assessment prior to the expiration of the NPS ASED.

    Caution:

    Ensuring the timely assessment of the NPS liability may require a quick assessment be processed. The APS TE will take appropriate action(s) to make the timely NPS assessment upon discovering that the action had not previously been taken.

  4. An "unassessed" NPS "defaulted SND" or "agreed SND" case transmitted to Appeals along with the Petitioning Spouse SND in error, can result in a BARRED ASED for the NPS tax and penalty amount(s). The APS TE must notify their PTM of the problem on each applicable case for appropriate feedback to the originating function. APS Operations can assign this feedback responsibility to the appropriate APS Area TA instead of the PTM.

  5. Upon receipt of the Entered Decision for the Petitioning Spouse, if the NPS agreed or default assessment has not been processed and the NPS ASED is still open, then one assessment document can be prepared to assess the joint return for the same tax and penalty amounts. Prepare one (1) Form 5403, Appeals Closing Record or Form 2859, Request for Quick or Prompt Assessment as appropriate to make the assessment on the MFT 30 joint account. The NPS (earliest) ASED will control the assessment date for AIMS, IDRS, and ACDS.

  6. If the entered decision for the Petitioning Spouse is for a lesser amount than the NPS agreed or defaulted amount, assess the MFT 30 account for the lesser amount as legally determined. When a NPS is assessed an agreed/defaulted amount and the PS receives a decision for a lesser amount, the NPS MFT 31 account must be abated to equal the final tax amount for the MFT 30 joint liability so in the event there will be only one assessment on the MFT 30, it should be for the legally determined amount.

  7. If the non-petitioning spouse was NOT previously assessed and the statute on the non-petitioning spouse is NOT open, follow the instructions for preparing two (2) Forms 5403 - one for the joint account and one for the petitioning spouse (MFT 31). Alert the Processing Team Manager immediately that there is a barred statute for which a Form 3999, Statute Expiration Report must be prepared.

Closing ACDS on Non-Petitioning Spouse Case (8.4.1.34.4)

  1. When closing a non-petitioning spouse case on ACDS, update and close both MFT 31 records as well as the key case MFT 30 record..

    Example:

    Dan and Sandra Daisy filed a joint return. A statutory notice of deficiency for $5,000 tax was issued to both taxpayers. Dan filed a petition with Tax Court. Sandra did not file a petition and upon default of the SND, was assessed $5,000 tax as a non–petitioning spouse on MFT 31. The docketed case for Dan Daisy is now in Appeals for closing. The Decision document for Dan Daisy shows a deficiency of $2,000 tax. There were NO innocent spouse issues in this case. The deficiency for both Dan and Sandra Daisy should be $2,000.


    Prepare three (3) Form 5403s Appeals Closing Record as follows:

    • Joint account for $0

    • Assess Dan Daisy $2,000 on MFT 31

    • Adjust Sandra Daisy's MFT 31 account from $5,000.00 to $2,000.00 via TC 301 for $3,000.00-

  2. Close the joint key case on ACDS using general closing procedures. In addition:

    1. CLOSINGCD – use the code for the docketed case: 08, 11, 12, 17, or 21

    2. ACTION – ACKCLS

    3. REVSDTAX – Enter the correct joint liability amount as reflected in the Tax Court decision or Order

  3. Close the petitioning spouse case on ACDS:

    1. CLOSINGCD – 08, 11, 12, 17 or 21

    2. ACTION – ACKCLS

    3. STATDATE – compute new statute with tack-on time.

    4. REVSDTAX and Pen – zero (the revised tax/penalty is reflected on the joint key case)

  4. Close the non-petitioning spouse case on ACDS:

    1. CLOSINGCD – 45

    2. ACTION – ACKCLS

    3. REVSDTAX and Pen – zero (the revised tax/penalty is reflected on the joint key case)

  5. When the APS TE completes a processing action and can take no further action on the case until adjustment verification is received, or the input transaction posts, they must properly notate the PEAS CAR, and place the case in PEAS Suspense for the appropriate timeframe. PEAS also has a Follow-up Date option which is recommended for the most efficient inventory management. The APS TE must determine the appropriate Follow-up Date based upon the reason they are placing the case in PEAS Suspense.

MFT 31 Spousal Assessments Additional References

  1. IRM 21.6.8, Individual Tax Returns, Split Spousal Assessments (MFT 31) .

  2. IRM 21.6.8.4, Split/Transfer Account Overview.

  3. IRM 21.6.8.5, Mirrored Account Overview.

  4. IRM 21.6.8.6, Exam/Appeals/AUR MFT 31 Account Overview.

Premature Referrals or Improper Referrals

  1. When it is determined that a case was improperly or prematurely sent to Appeals, the case should be returned to the originating office (Compliance, Collection, EP, EO, etc.) for further consideration.

  2. ACDS is closed using the information provided by the ATE via Form 5402, Appeals Transmittal and Case Memo.

Jurisdiction Released on Premature or Improper Referrals

  1. If Appeals is releasing jurisdiction to the originating office, APS will close the case off ACDS and update the AIMS status following the instructions provided by the ATE on Form 5402, Appeals Transmittal and Case Memo.

  2. Close ACDS following general closing procedures. In addition:

    1. CLOSINGCD = 20 (premature referral Campus Contact) or 21 (premature referral Field Technical Services)

    2. ACTION = ACKCLS

    3. No entries are required on the return level – use zeroes for the revised tax/penalty

  3. APS will prepare Form 3210, Document Transmittal to return the case to the originating office as identified by the ATE on Form 5402, Appeals Transmittal and Case Memo.

    1. Compliance cases – update AIMS to status 20 (for cases being returned to a Campus) or status 21 (for cases being returned to Technical Services) using AMSTUB.

    2. EP/EO cases – if on AIMS, update to status 20. These cases are usually returned to the originating office.

    3. Campus compliance cases are generally not returned to the Campus for further development. The ATE will identify the where the case will be sent to for corrective action.

    4. Collection cases are not on AIMS and are returned to the originating office identified by the ATE on Form 5402, Appeals Transmittal and Case Memo.
      For CDP cases, if the TC 520 cc 76/77 is input include a note on the transmittal that "The CSED reflected in the TC 520 cc 76/77 may have been prematurely suspended and requires reversal and further review by Collection" .

  4. On cases where Appeals releases jurisdiction, Appeals is responsible for the statute of limitations ONLY until a copy of the Form 3210, Document Transmittal is acknowledged. The Form 3210, Document Transmittal must clearly identify the earliest ASED for each tax period being returned to the originating function.

Jurisdiction Not Released on Premature or Improper Referrals

  1. If the ATE determines that Appeals will retain jurisdiction of the case but send the file back to the originating office for further development, then jurisdiction is not released. ACDS is kept open and AIMS is usually not changed (if case is on AIMS).

  2. Generally, when cases are controlled on AIMS, the AIMS data base will remain in the current Appeals status while the originating office considers the Appeals request.

  3. Appeals is responsible for the statute of limitations on cases where Appeals retains jurisdiction.

  4. Update ACDS:

    1. ACTION = DDJRET

    2. TODATE = date case sent to originating office

Reference Returns (8.2.1.12.3)

  1. Returns associated with protested or petitioned cases for information purposes only (no proposed dollar adjustment), are "reference" returns. These reference returns include Form 1120-S, U.S. Income Tax Return for an S Corporation and Form 1065, U.S. Return of Partnership Income.

  2. Reference returns are controlled on AIMS in status 80.

  3. Although reference returns controlled on AIMS are generally in status 80, there may be older inventory still in status 86 which may (other than return Form 1120-S and Form 1065) be closed using Form 5570, Appeals Short Closings. All non-taxable returns Form 1120-S and Form 1065 must be closed using Form 5403, Appeals Closing Record in order to provide information in Item 802, "Appeals Adjustment Amount Non-Taxable" , and Item 805, "Counsel Adjustment Amount Non-Taxable" .

  4. If Compliance closes the reference returns on AIMS prior to sending the case to Appeals, APS will request the AIMS database from Compliance.

  5. Close reference returns from ACDS using CLOSINGCD 45.

Statutory Notice of Deficiency (SND) 90-Day/150-Day Case Closing

  1. This section provides closing instructions for the following:

    • Agreed 90/150 Day SND

    • Defaulted 90/150 Day SND

    • Defaulted 90/150 Day SND involving a Claim

APS Procedures to Close Agreed SND 90-Day/150-Day Cases (8.2.2.10)

  1. If the taxpayer agrees to the SND during the 90-day (150-day) period, process the assessment within 30 days of receiving executed waiver of agreement.

  2. Compare the agreement form with the copy of the notice of deficiency to ensure the amounts of deficiency and overassessment, if any, are the same. If they differ, call this to the attention of the your PTM, or the ATM, for resolution of the discrepancy.

    Note:

    For jointly filed returns, both spouses must sign the waiver.

  3. Compute the new statute as follows:

    Example:

    Revised Statute = Agreement received date + 60 days, or the original statute date, whichever is later. If the statute was previously opened under Form 872-A, the revised ASED is 60 days from the Agreement received date.

    Reminder:

    When the Assessment Statute Expiration Date (ASED) is open under a Form 872-A, Special Consent to Extend the Time to Assess Tax, the issuance of a Statutory Notice of Deficiency (SND) is the legal action which closes the open ended consent. Once the SND is issued, the ASED is suspensed until the next legal action occurs:
    • An agreement to the SND is received, or
    • A petition if filed, or
    • The SND defaults.

  4. Update ACDS as follows:

    • STATDATE - Revised Statute Date (60 days from agreement, or normal ASED whichever is later)

    • CLOSINGCD - 04

    • ACTION - ACKCLS

    • STATDATE - Revised Statute Date (Default ASED) (See IRM Exhibit 8.20.7-1)

    • RevsdTax/Pen/Claim - enter the amounts from the SND

  5. Ensure the correct updated ASED is entered in Item 13 of Form 5403, Appeals Closing Record which when input via AIMS CC: AMCLSA will update the ASED on both AIMS and IDRS. See IRM 8.21.2.9.2, Agreement Received During 90(150)-day Notice Period for guidance.

  6. APS will expedite the processing of the case when the ATE has annotated Form 5402, Appeals Transmittal and Case Memo with language similar to the following to indicate the new statute date.

    "Agreed SND, must to be assessed within 60 days of the agreement received date of MM-DD-YYYY"

    Note:

    If 60 days or less remain on the updated ASED, the agreed assessment must be processed following Quick Assessment procedures, using Form 2859, Request for Quick or Prompt Assessment.

  7. Prepare Form 5403, Appeals Closing Record as shown in the instructions in IRM Exhibit 8.20.7-1.

  8. Close the case on ACDS and open in PEAS using general closing instructions. Use FROMDATE= current date MM-DD-YYYY.

  9. Close the case on PEAS upon input of the account adjustments unless mandatory monitoring actions are necessary such as when a Quick Assessment is processed.

  10. When the APS TE completes a processing action which requires mandatory monitoring, and can take no further action on the case until adjustment verification is received, they must properly notate the PEAS CAR, and place the case in PEAS Suspense for the appropriate timeframe. PEAS also has a Follow-up Date option which is recommended for the most efficient inventory management. The APS TE must determine the appropriate Follow-up Date based upon the reason they are placing the case in PEAS Suspense.

Defaulted Statutory Notice of Deficiency (SND) 90/150-day Cases (8.2.2.15)

  1. Upon the SND Default Date (90/150) plus 30 days (120/180), a case that does not appear on the Docket List is considered defaulted.

  2. When the 120 or 180-day period expires in these cases, assess the deficiency by default if the taxpayer has not filed a petition with the United States Tax Court. A defaulted case is a case where a party fails to timely file a valid petition as required under IRC §6213(a).

  3. Update ACDS using general closing instructions. In addition input the following:

    1. CLOSINGCD - 05

    2. ACTION - ACKCLS

    3. STATDATE - Revised Statute Date (Default ASED) (See IRM Exhibit 8.20.7-1)

    4. RevsdTax/Pen/Claim - enter the amounts from the notice of deficiency

    5. SN Defaulted - Y indicates that a 90 day letter was issued

  4. Prepare Form 5403, Appeals Closing Record for assessment. If the revised ASED is >60 days the assessment must be processed using a Form 2859, Request for Quick or Prompt Assessment. When a Quick Assessment is processed, the Form 5403, Appeals Closing Record is used to update applicable Item and Reference Amounts on the taxpayer's account as well as to post the corrected ASED, and close the AIMS Controls via posting of the TC 421.

  5. Close the case on PEAS upon input of the account adjustments unless mandatory monitoring actions are necessary such as when a Quick Assessment is processed.

  6. When the APS TE completes a processing action which requires mandatory monitoring, and can take no further action on the case until adjustment verification is received, they must properly notate the PEAS CAR, and place the case in PEAS Suspense for the appropriate timeframe. PEAS also has a Follow-up Date option which is recommended for the most efficient inventory management. The APS TE must determine the appropriate Follow-up Date based upon the reason they are placing the case in PEAS Suspense.

Statutory Notice of Deficiency (SND) Disposition of Agreed or Defaulted SND Cases Involving Claims (8.2.2.15.1)

  1. If, in response to a statutory notice of deficiency, the taxpayer submits an agreement or fails to file a petition within the time provided, the notice of claim disallowance prepared by the ATE and included within the suspensed case, must be issued before the SND tax periods are assessed, unless the taxpayer submits Form 2297, Waiver of Statutory Notification of Claim Disallowance.

Tax Equity and Fiscal Responsibility Act (TEFRA) Investor Case Closings (8.19.6.11)

  1. The ATE will determine the proper routing of the investor case file by researching the Partnership Control System (PCS). The ATE will note the proper routing in the remarks of the Form 5402, Appeals Transmittal and Case Memo for APS. After closing, APS will forward cases with an open TEFRA linkage to the appropriate destination as follows:

    1. CIC corporation, Joint Committee, or other corporate specialty case files should be sent to the appropriate Examination Technical Services unit based on the location of the originating Examination group.

    2. All other case files should be sent to the key case Campus Tefra Function (CTF).

      Note:

      Instructions for determining the key case CTF may be found on the Appeals TEFRA website

      .

  2. If a TEFRA audit remains open, the assessments to the non-TEFRA issues must be done as partials. However, the ACDS closings will be done as a full closure. For details on closing procedures, refer to IRM 8.19.6.9.2, Non-TEFRA Issues Resolved Before TEFRA Issues---Agreed Cases.

  3. For partnership tax years beginning after August 5, 1997, in the case of a partner's settlement under IRC 6224 (c), interest is suspended under IRC 6601(c) starting 30 days after the settlement agreement is executed by the Commissioner's delegate and ending with notice and demand. In the case of a CIC corporation, Joint Committee, or other corporate specialty case, when the taxpayer enters into a TEFRA settlement, the ATE assigned the partner return will secure a computation and assessment of the deficiency as quickly as possible in order to minimize the loss of interest. If the ATE deems it necessary to extend the one-year assessment date to avoid the expense of time consuming computations while the investor case is in Appeals for non-TEFRA consideration, the ATE will encourage an advance payment of tax.

    Note:

    The ATE will include a comment in the remarks of the Form 5402, Appeals Transmittal and Case Memo alerting Account and Processing Support (APS) to use restricted interest when interest suspension under IRC 6601(c) applies. The comment will include the amount of deficiency from each TEFRA linkage to be assessed, the name of the TEFRA key case, and the date the settlement agreement accepted on behalf of the Commissioner. If multiple TEFRA linkages will be assessed, there must be an IRC 6601(c) comment for each TEFRA linkage to which IRC 6601(c) suspension of interest applies.

  4. In a very rare instance, Appeals will make the computation and assessment of a deficiency from TEFRA adjustments when the partner is not a CIC corporation, Joint Committee, or other corporate specialty case. For timely filed individual returns for tax years ending after July 22, 1998, interest is suspended if IRS did not give an IRC 6404(g) notice within 18 months of the filing date or due date (without regard to extensions), whichever is later. The interest suspension ends 21 days after IRC 6404 (g) notice is given. For TEFRA partnerships, IRC 6404(g) notice is the earlier of the Form 5701, Notice of Proposed Adjustment, 60-day letter, Appeals Settlement Letter, or Final Partnership Administrative Adjustment (FPAA). Notice is deemed given to the partners when the notice is given to the TMP provided the notice includes the reason for the liability. Even though the TEFRA notice does not include the partner's liability, the partner can compute the liability from the adjustments to the partnership return. For timely filed individual returns with tax years ending after July 22, 1998, the ATE will note on the Form 5402, Appeals Transmittal and Case Memo in remarks that IRC 6404(g) applies and refer APS to the IRC 6404 (g) worksheet attached. The worksheet will include the following information in respect to the TEFRA partnership:

    1. Name of TEFRA partnership

    2. IRC 6404(g) notice date and form of notice (Form 5701, Notice of Proposed Adjustment, 60-day letter, Appeals Settlement Letter, or FPAA)

    3. Amount of deficiency to which IRC 6404(g) applies for this TEFRA partnership

      Note:

      If multiple TEFRA partnership linkages will be assessed on a timely filed individual taxpayer with a tax year ending after July 22, 1998, an IRC 6404(g) worksheet must be included for each partnership.

ACDS Processing (8.19.6.18.1)

  1. The ATE will verify the TYPE TEFRAP for TEFRA penalty only cases and for affected item only cases.

    1. The investor case may be either docketed or non-docketed.

    2. Since the investor will have resolved the partnership issues, the statute for a non-docketed investor case is the one-year assessment date or as extended depending on the type of event that started the one-year assessment statute expiration date.
      Form 872–F, Consent to Extend the Time to Assess Tax Attributable to Items of a Partnership That Have Converted Under Section 6231(b) of the Internal Revenue Code,
      Form 872, Consent to Extend the Time to Assess Tax, or
      Form 872–A, Special Consent to Extend the Time to Assess Tax.

    3. The statute for a docketed case is the same as any other deficiency determined under IRC 6503, IRC 7481, and IRC 7483. The issuance of an affected item notice of deficiency during the one year period will suspend the period for assessment under IRC 6503 in the same manner as a normal notice of deficiency.

  2. For partnership tax years ending after August 5, 1997, penalties are assessed when the tax from the partnership items is assessed. Any partner who objects to the penalty must pay the tax and file a claim for refund. The investor cases will be claims cases.

Closing the CIC Corporation, Joint Committee or Other Corporate Specialty Investor Case (8.19.6.20)

  1. If the investor defaults on a statutory notice of deficiency for penalties or other affected items, APS will prepare the case for final closing.

    1. Use ACDS closing code 45 to close the related non-key case summary card.

    2. After verification that the assessment was made, APS must update PCS using the Form 8339, PCS Change which is prepared by the ATE to reflect the new one-year assessment date of "11111111" , and close the linkage.

  2. If the investor petitions the Tax Court in response to a statutory notice of deficiency for penalties or other affected items, APS will take the following actions:

    1. Create a new work unit for the docketed case. Use the date Appeals receives the petition for the date received.

    2. Close the related non-key case summary card on ACDS using closing code "45" .

    3. Follow the general procedures for carding new case receipts in IRM 8.20.5, Account and Processing Support (APS), Carding New Receipts.

  3. If the TEFRA issues are completed prior to the non-TEFRA issues, use interim procedures to process the TEFRA issues. See IRM 8.20.6.35.1.1, TEFRA Issues Resolved Before Non-TEFRA Issues (8.19.6.9.1). The ATE will prepare a Form 8339, PCS Change for PCS closing. The ATE will note on Form 5402, Appeals Transmittal and Case Memo in remarks that APS is to update PCS according to the Form 8339(s) attached.

  4. When the non-TEFRA issues are subsequently completed (after the completion of the TEFRA issues discussed in paragraph (3) above) and there are no remaining open TEFRA linkages, the ATE will forward the case to APS for closing. APS will:

    1. Process Form 5403, Appeals Closing Record following normal closing procedures provided in Exhibit 8.20.7-1.

    2. Check the TSCLS box on Form 5403, Appeals Closing Record.

    3. Update the Partnership Control System (PCS) using CC: TSCLS prior to inputting the AIMS closing.

    4. Update the Partnership Investor Control File (PICF) Indicator from 5 to 7, or from 6 to 8 prior to inputting the CC: AMCLS.

    5. Update ACDS with ACTION= ACKCLS, TODATE, Closing Code, Date Closed, Revised Tax & Penalty as appropriate.

    6. Close the related non-key case summary card for the investor case, using ACDS closing code "45" .

    7. See IRM 4.29.3.4.3, Partnership Investor Control File (PICF) Indicator for additional information when needed.

    Note:

    Form 8339, PCS Change is not needed for the investor case.

  5. When the TEFRA issues are completed prior to the non-TEFRA issues, and the computation of the partnership item adjustments causes no change in the investor’s tax (perhaps due to an unused net operating loss or credits) the procedures are different.

    1. The ATE will submit a package to APS that includes a Form 5402, Appeals Transmittal and Case Memo requesting an update of ACDS due to the no change, a copy of the settlement computation and a Form 8339, PCS Change to update the one-year assessment date on PCS to "11111111" and the dollars to NC. The ATE will include a remark on Form 5402, Appeals Transmittal and Case Memo to update PCS according to the attached Form 8339, PCS Change.

    2. APS should update PCS to show a new one-year assessment date of "11111111." Do not update AIMS because AIMS will not accept an interim assessment of transaction code 300 for 0.00. APS will also update the related non-key case summary card to show a CODE of "ASESD" and remove the statute date.

  6. If the non-TEFRA issues are completed prior to the TEFRA issues, and there are open TEFRA linkages remaining, prepare the case for partial closing as follows:

    1. Prepare Form 5403, Appeals Closing Record following partial procedures. In item A, Special Handling Instructions, write "TEFRA Linkage [Insert CIC 1120, Joint Committee, or Other Corporate Specialty Case] - After Partial Closing, Forward to Examination Technical Services." For this purpose, an other corporate speciality investor case only includes Form 1120, U.S. Corporation Income Tax Return followed by a letter (other than A, S, or X)--it does not include corporations with AIMS activity codes of 219 or higher.

    2. After the partial assessment has been input, APS will update the AIMS database to status 21 usign CC: AMSTU. AIMS will reset to the closing PBC.

    3. APS will forward the administrative file via Form 3210, Document Transmittal to the appropriate Examination Technical Services unit based on the location of the originating Examination group. Ensure a copy of the input Form 5403, Appeals Closing Record is attached to the face of the return. Examination Technical Services will forward the case to the appropriate group, who will place the file in suspense awaiting the outcome of the TEFRA examination.

  7. If the non-TEFRA issues and the TEFRA issues are completed at the same time, prepare the case for final closing. The ATE will note on the Form 5402, Appeals Transmittal and Case Memo in remarks that this is a final closing. The ATE will attach Form 8339(s), PCS Change for APS to use to close the TEFRA linkages on PCS.

    1. APS will prepare the key case and the Form 5403, Appeals Closing Record following general closing procedures in IRM 8.20.7, Closing Procedures

    2. APS will update PCS using CC: TSCLS to update the PICF code 5 to 7 or 6 to 8 prior to inputting the AIMS closing.

    3. Close the related non-key case summary card with the corporate case using ACDS closing code "45."

  8. There should be two audit statements in the file, one for the non-TEFRA adjustments and the other for the TEFRA adjustments. If there is one combined statement, there should be a statement identifying the deficiency attributable to the TEFRA issues for each partnership for each tax year.

    1. Update ACDS to reflect the revised tax and penalties attributable to the non-TEFRA adjustments.

    2. Use the Form 8339, PCS Change provided by the ATE to reflect the revised tax attributable to the TEFRA adjustments and to close the linkage with a statute date of "11111111" .

  9. If the non-TEFRA issues case is transferred to associate area counsel jurisdiction before all TEFRA partnership issues are resolved, APS will return the case to the ATE to take additional action. The ATE will ensure Counsel is aware of the transfer of statute responsibility for the TEFRA adjustments prior to returning the case to APS for transfer to Associate Area Counsel.

Closing Package (8.19.9.9.6)
  1. Account and Processing Support (APS) is responsible for the following items when the ATE prepares the closing package for mailing:

    1. ensure all documents listed on the Form 3210, Document Transmittal are attached,

    2. send the completed package to the Campus TEFRA Function (CTF) and/or examiner by controlled mail, and

    3. monitor the return of the acknowledged Form 3210, Document Transmittal.

  2. APS is not responsible for the completeness of the closing package when the Appeals TEFRA Team (ATT) ATE transmits the closing package electronically. If the closing package is transmitted electronically, Form 14298, Appeals Notice Package Check Sheet is used in place of Form 3210, Document Transmittal.

  3. The ATT ATE will indicate on the Form 5402, Appeals Transmittal and Case Memo the date the closing package was transmitted electronically.

  4. Using instructions and information from the closing package that is prepared by the ATE, the key case CTF and/or the examiner will mail agreements to investors that they are holding in suspense. If the key case was linked on PCS, the key case CTF will release the "H" freeze on the key case once the results of the examination of the key case have been associated with the last investor and the last investor one-year assessment date field is updated to 22222222.

Tax Equity and Fiscal Responsibility Act (TEFRA) Defaulted Cases (No Petition Filed) (8.19.12.11)

  1. Laguna Niguel APS will monitor the docket lists. If a petition has not been identified within 180 days, Laguna Niguel APS will forward the administrative file to the ATT ATE for preparation of the default package along with the appropriate Form 3210, Document Transmittal, or Form 14298, Appeals Notice Package Check Sheet.

  2. Notification of a default may also come from the key case CTF if they issued the FPAA to the TMP.

    Note:

    A petition must be filed within 150 days of when the FPAA is mailed to the TMP. The 180 days mentioned above allows an additional 30 days before defaulting the case.

  3. The Laguna Niguel ATT ATE will enter the one-year date on the Form 3210, Document Transmittal or Form 14298, Appeals Notice Package Check Sheet as applicable and will also update the statute date on ACDS.

Closing the Case after FPAA Defaults (8.19.12.11.2)

  1. All TEFRA key cases must be closed by Laguna Niguel APS.

  2. After Laguna Niguel ATT ATE has prepared the default package, they will forward the case to Laguna Niguel APS for closing.

  3. See Exhibit 8.20.7-1, for instructions in completing Form 5403, Appeals Closing Record, in addition, enter "TEFRA Key Case Closing" in the Special Handling section.

    Caution:

    The revised tax is not actually assessed against the partnership and should not be entered on Form 5403, Appeals Closing Record.

  4. After the key case CTF has input the one-year assessment date on PCS for all direct partners and has released the AIMS "H" freeze, Laguna Niguel APS will close the case from AIMS unless it has a PICF code of 4 or 5.

  5. If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and has to be sent to the key case CTF. Instructions for identifying the key case CTF may be found on the Appeals TEFRA website. Instructions for sending the case to the key case CTF are as follows:

    1. Prepare Form 5403, Appeals Closing Record following partial procedures. In item A, Special Handling Instructions, write "TEFRA Linkage – After Partial Closing, Forward to CTF" .

    2. Update the AIMS database to status 34. Update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF).

    3. Forward the administrative file via Form 3210, Document Transmittal to the appropriate CTF. Ensure that a copy of the input Form 5403, Appeals Closing Record is attached to the face of the return. The CTF will place the file in suspense awaiting the outcome of the TEFRA examination.

  6. Laguna Niguel APS ensures that copies of the following documents are in the administrative file before it is closed:

    1. Appeals Form 4605-A, Examination Changes - Partnerships, Fiduciaries, Small Business Corps. & Domestic Intl. Sales Corp. (Unagreed and Excepted Agreed)

    2. Appeals Form 886-Z, TEFRA Partners' Shares of Income

    3. Appeals Case Memorandum

    4. Affected item Appeals Case Memorandum (if applicable)

    5. Form 5402, Appeals Transmittal and Case Memo

    6. All agreement forms or closing agreements for partners who agreed

    7. Form 5403, Appeals Closing Record

    8. Partnership statute extensions

  7. APS closes the case from ACDS as follows:

    • Closing code 05 and date closed

    • ACTION-ACKCLS & TODATE

    • RevsdTax-Enter revised tax from Form 5402, Appeals Transmittal and Case Memo (also enter PropdTax if not previously entered)

Petition to the U.S. Court of Federal Claims or a U.S. District Court (8.19.12.13)

  1. See IRM 8.19.12.13, Petitions to the U.S. Court of Federal Claims or a U. S. District Court for additional information.

  2. See IRM 8.20.7.52.4, Preparing Administrative File and Closing Package (8.19.12.13.2) for additional information.

Authorization to Send Administrative File (8.19.12.13.1)

  1. Petitions to the U.S. Court of Federal Claims or a U. S. District Court may be listed on the Electronic Docket List (EDL).

  2. If there is no listing on the EDL, a copy of the first page of the petition will be accepted by APS as authorization to close these cases from ACDS.

  3. See IRM 8.20.7.52.4, Preparing Administrative File and Closing Package (8.19.12.13.2) for additional information.

Preparing Administrative File and Closing Package (8.19.12.13.2)

  1. If a valid petition is filed with one of these courts, the ATT ATE will prepare and mail or electronically transmit the closing package to the key case CTF in order that the partners may be assessed whether or not the deposit was paid.

  2. Filing a petition with the U.S. Court of Federal Claims or with a U. S. District Court does not trigger the one-year assessment date. However, for control purposes the ATT ATE will enter a one-year assessment date on the Form 3210, Document Transmittal (closing package transmitted via mail) or on the Form 14298, Appeals Notice Package Check Sheet when the closing package is transmitted electronically, instructing the CTF to enter a one-year assessment date on PCS. The ATT ATE will use a one-year assessment date that is 60 days after the date that the closing package is mailed to the CTF.

  3. After the ATT has prepared the closing package and the Form 3210, Document Transmittal for mailing the closing package, APS will ensure that the documents listed on the Form 3210 are included in the closing package.

  4. It is not necessary to prepare a new Form 5402, Appeals Transmittal and Case Memo. The Form 5402, Appeals Transmittal and Case Memo that was previously prepared is sufficient to close the case.

Closing the TEFRA Case (8.19.12.13.3)

  1. Once APS has received an acknowledged Form 3210, Document Transmittal from the CTF, APS will forward the administrative file to associate area counsel via Form 2828, Transmittal Memorandum. Associate area counsel will forward the file to the Department of Justice. APS may then close the case from ACDS as follows:

    • ACTION - ACKCLS

    • Statute Code - DOCKT

    • For cases petitioned to the U.S. Court of Federal Claims, input Docket Number 99999-99C and Closing Code 18

    • For cases petitioned to a U. S. District Court, input Docket Number 99999-99D and Closing Code 19

    • Closing date-enter date closed off ACDS.

    • Notes: enter "Department of Justice--Petitioned U.S. Court of Federal Claims or U. S. District Court," whichever is applicable

    • Action - ACKCLS

    • To Date - Date closed

    • Statute Date - remove any date

    • RevsdTax - Enter revised tax from Form 5402, Appeals Transmittal and Case Memo (also enter PropdTax if not previously entered); if the Form 5402, Appeals Transmittal and Case Memo does not contain the revised tax, notify the ATE to compute the amount using Exhibit IRM 8.19.10–1, Formula for Assigning Dollar Value to Partnership Case for ACDS.

      Caution:

      The revised tax is not actually assessed against the partnership and should not be entered on Form 5403, Appeals Closing Record.

    • See Exhibit 8.20.7-1, Form 5403, Appeals Closing Record (Instructions) for instructions for completing Form 5403. In addition, enter "TEFRA Key Case Closing" in the Special Handling section.

  2. After the key case CTF has input the one-year assessment date on PCS for all direct partners and has released the AIMS "H" freeze, APS will close the case from AIMS unless it has a PICF Code of 4 or 5.

  3. If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and must be updated on AIMS to the key case CTF (even though the file is sent to associate area counsel). Instructions for identifying the key case CTF are found on the Appeals TEFRA website. Instructions for updating the case to the key case CTF are as follows:

    1. Prepare Form 5403, Appeals Closing Record following partial procedures to keep AIMS controls open. In item A, Special Handling Instructions, write "TEFRA Linkage – After Closing, Forward to CTF" .

    2. Update the AIMS database to status 34 and update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF).

      Note:

      If the case will be updated on AIMS to the key case CTF, APS must contact the TEFRA Coordinator at the key case CTF to explain why this was done.

  4. Refer to IRM 8.19.13.3, Department of Justice Cases for procedures to follow when the case is resolved by the Department of Justice and is returned to Appeals through associate area counsel.

Preparation of Key Case Administrative File (8.19.12.13.4)

  1. Ensure that the following documents are prepared and are in the file before closing the case:

    1. Form 3210, Document Transmittal to key case CTF

    2. Form 5403, Appeals Closing Record

    3. Form 5402, Appeals Transmittal and Case Memo

    4. Appeals Form 4605-A, Examination Changes - Partnerships, Fiduciaries, Small Business Corps. & Domestic Intl. Sales Corp. (Unagreed and Excepted Agreed)

    5. Appeals Form 886-Z, TEFRA Partners' Shares of Income

    6. Appeals Case Memorandum (ACM)

    7. Form 2828, Transmittal Memorandum

    8. Copies of all FPAAs that were issued

    9. Copy of Electronic Docket Listing (EDL) or first page of petition/complaint

    10. Form 2275, Records Request, Charge and Recharge

    11. Affected item Appeals Case Memorandum (if applicable)

  2. Refer to Figure 8.20.7–2 and Figure 8.20.7–3 for the number and distribution of copies.

    Figure 8.20.7-3

    Required Forms for Processing Cases to the U.S. Court of Federal Claims or a U. S. District Court

    Description Original Copies
    Form 3210 to CTF X 2
    Form 5403 X 2
    Form 5402 * X 3
    Form 4605–A * X 2
    Form 886–Z* X 2
    Appeals Case Memo * X 3
    Form 2828 X 2
    FPAA 2
    EDL or first page of complaint/petition 3
    Form 2275 X 2
    Penalty ACM, if applicable X 2
    Small return envelope X
    * These documents should be clearly marked "Information Only-Do Not Mail to Taxpayer."

    Figure 8.20.7-4

    Distribution of Documents For CTF Package and Administrative File

    Documents Package to CTF Administrative File
    Form 3210 to CTF Original 1 copy acknowledged
    Form 5403 Original
    Form 5402 1 copy Original
    Form 4605-A 1 copy Original
    Form 886-Z 1 copy Original
    Appeals Case Memorandum 1 copy Original
    Form 2828 Original and 1 copy
    FPAA 1 copy Original
    EDL or first page of complaint/petition 1 copy 1 copy
    Form 2275 Original
    Penalty ACM 1 copy Original
    Small return envelope 1

Tried Cases or Counsel Settlement (8.19.13.2.13 (2) & (10))

  1. When the decision becomes final (90 days after the Tax Court entered the decision unless an appeal is filed), Laguna Niguel APS will:

    1. Update the statute on ACDS to reflect the one-year assessment date. In computing the one-year assessment date, one day should be subtracted from the date that is one year from when the decision became final.

      Example:

      If the decision was entered by the Tax Court on August 31, 2009, the one-year assessment date should be computed as follows: August 31, 2009 + 90 days = November 29, 2009 + 1 year = November 29, 2010 - 1 day = November 28, 2010.

    2. Return the case to the ATT to prepare and transmit a closing package to the CTF. The ATT ATE will use Form 14298, Appeals Notice Package Check Sheet when electronically transmitting the closing package to CTF.

  2. When the ATT ATE transmits the closing package via the mail, Laguna Niguel APS will ensure that the documents listed on the Form 3210, Document Transmittal are included in the closing package. Laguna Niguel APS will mail the closing package to the key case CTF within 5 workdays after receipt of the file from the ATE, using the Form 3210, Document Transmittal prepared by the TCS or the ATT.

Tax Court Decision Appealed (8.19.13.2.14 (2), (10), (11))

  1. After notification of the appeal is received, Laguna Niguel APS will:

    1. Update ACDS with ACTION = APPEALED and TODATE

    2. Update the remarks section of ACDS

    3. Return the case to the ATE to prepare and transmit a closing package to the CTF. The ATT ATE will use Form 14298, Appeals Notice Package Check Sheet when electronically transmitting the closing package to CTF

  2. When the ATT ATE transmits the closing package via the mail, Laguna Niguel APS will ensure that the documents listed on the Form 3210, Document Transmittal are included in the closing package. Laguna Niguel APS will mail the closing package to the key case CTF within 5 workdays after receipt of the file from the ATT, using the Form 3210, Document Transmittal prepared by the TCS or the ATT. Instructions for monitoring the return of the Form 3210, Document Transmittal by APS may be found in IRM 8.19.13.2.4, Closing Package to the Campus TEFRA Function (CTF).

  3. After mailing the closing package to the key case CTF, Laguna Niguel APS will return the file to associate area counsel unless the Form 9724, TEFRA Cases Only (Memorandum) provides other instructions for where the file should be sent.

    Caution:

    The case should not be closed from AIMS or from ACDS at this time.

Final Decision from Appeal of Tax Court Decision (8.19.13.2.15 (2), (9), (10))

  1. When the decision becomes final (90 days after the Tax Court entered the decision), Laguna Niguel APS will:

    1. Update the statute on ACDS to reflect the one-year assessment date. In computing the one-year assessment date, one day should be subtracted from the date that is one year from when the decision became final.

      Example:

      If the decision was entered by the Tax Court on August 31, 2009, the one-year assessment date should be computed as follows: August 31, 2009 + 90 days = November 29, 2009 + 1 year = November 29, 2010 - 1 day = November 28, 2010.

    2. Return the case to the ATT to prepare and transmit a closing package to the CTF. The ATT ATE will use Form 14298, Appeals Notice Package Check Sheet when electronically transmitting the closing package to CTF.

  2. When the ATT ATE transmits the closing package via the mail, Laguna Niguel APS will ensure that the documents listed on the Form 3210, Document Transmittal are included in the closing package. Laguna Niguel APS will mail the closing package to the key case CTF within 5 workdays after receipt of the file from the ATT, using the Form 3210, Document Transmittal prepared by the TCS or the ATT. Instructions for monitoring the return of the Form 3210, Document Transmittal by APS may be found in IRM 8.19.13.2.4, Closing Package to the Campus TEFRA Function (CTF).

  3. At their option, in lieu of using a Form 3210, Document Transmittal, the ATT may use the secure server to transmit the documents.

Closing Docketed TEFRA Cases (8.19.13.2.16 (2), (3), (5)-(10))

  1. Local APS enters the following in the ACDS fields:

    • ACTION: Area location - LGN (example: ship AUS-LGN)

    • TODATE: Date local APS ships the administrative file to Laguna Niguel APS

    • Local APS ships the administrative file to Laguna Niguel APS

    • ACDS database for ATE and AIMS remain open (not closed or transferred)

  2. Laguna Niguel APS, upon receipt of the administrative file, enters the following in the ACDS fields:

    • FROMDATE: Date received in Laguna Niguel APS

    • LACTION: LGN-ATT

    • LTODATE: Date given to ATT Secretary/Screener/ATM

    • Forwards the administrative file to the Appeals TEFRA Team

  3. See Exhibit 8.20.7-1, Form 5403, Appeals Closing Record (Instructions) for instructions on completing Form 5403, Appeals Closing Record, and also enter "TEFRA Key Case Closing" in the Special Handling section.

    Caution:

    The revised tax is not actually assessed against the partnership and should not be entered on Form 5403, Appeals Closing Record.

  4. After the key case CTF has input the one-year assessment date on PCS for all direct partners and has released the AIMS “H” freeze, APS will close the case from AIMS unless it has a PICF Code of 4 or 5. The case should not be sent to the key case CTF unless it has a PICF Code of 4 or 5.

  5. If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and has to be sent to the key case CTF. Instructions for identifying the key case CTF may be found on the Appeals TEFRA website. Instructions for sending the case to the key case CTF are as follows:

    1. Prepare Form 5403, Appeals Closing Record following partial procedures. In item A, Special Handling Instructions, write "TEFRA Linkage – After Partial Closing, Forward to CTF."

    2. Update the AIMS database to status 34 and update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF).

    3. Forward the administrative file via Form 3210, Document Transmittal to the appropriate CTF. Ensure that a copy of the input Form 5403, Appeals Closing Record is attached to the face of the return. The CTF will place the file in suspense awaiting the outcome of the TEFRA examination.

  6. Laguna Niguel APS will ensure that copies of the following documents are in the administrative file before it is closed:

    1. Appeals Form 4605-A, Examination Changes - Partnerships, Fiduciaries, Small Business Corps. & Domestic Intl. Sales Corp. (Unagreed and Excepted Agreed)

    2. Appeals Form 886-Z, TEFRA Partners' Shares of Income

    3. Appeals Case Memorandum

    4. Affected item Appeals case Memorandum (if applicable)

    5. Form 5402, Appeals Transmittal and Case Memo

    6. Form 5403, Appeals Closing Record

    7. All agreement forms or closing agreements for partners who agreed (Tax Court Rules 248(b) or 248(c))

    8. FPAA issued to the TMP

    9. Certified mailing list

    10. Tax Court petition

    11. Dated/entered decision (or motion and decision) for each Court

    12. Counsel settlement memorandum (if applicable)

    13. Stipulation signed by the TMP (Tax Court Rule 248(a) only)

    14. Form 9724, TEFRA Cases Only (Memorandum) (Counsel memorandum), if applicable

    15. Acknowledged Forms 3210, Document Transmittal

  7. To close ACDS, Laguna Niguel APS will input the appropriate Closing Code:

    • Closing Code 08 - docketed Appeals settlement

    • Closing Code 10 - Counsel settled

    • Closing Code 11 - dismissed for lack of jurisdiction

    • Closing Code 12 - dismissed for lack of prosecution

    • Closing Code 17 - tried case

  8. Laguna Niguel APS will also input the following on ACDS:

    • ACTION ACKCLS & TODATE

    • RevsdTax--Enter revised tax from Form 5402, Appeals Transmittal and Case Memo (also enter PropdTax if not previously entered); if the Form 5402, Appeals Transmittal and Case Memo does not contain the revised tax, have the ATT compute the amount using Exhibit IRM 8.19.10–1, Formula for Assigning Dollar Value to Partnership Case for ACDS .

Department of Justice TEFRA Cases (8.19.13.3 (2), (3), (10) & (11))

  1. When a decision is final for a case for which an FPAA was issued by Appeals and which was petitioned to a U. S. District Court or the U. S. Court of Federal Claims (or a case appealed from these courts), the Department of Justice may return the case to Appeals through Counsel if assistance is needed to complete the processing of the partnership items of the partners and to process the penalties and other affected items. The cases should be sent to Laguna Niguel APS. The Appeals TEFRA Team (ATT) will assist, if necessary, in preparing the cases for closing.

  2. When the decision becomes final (60 days after the Court entered the decision), Laguna Niguel APS will:

    1. Create a new workunit on ACDS using the information from the previously closed workunit.

    2. Update the statute on ACDS to reflect the one-year assessment date. In computing the one-year assessment date, one day should be subtracted from the date that is one year from when the decision became final.

      Example:

      If the decision was entered by the U. S. Court of Federal Claims on August 31, 2009, the one-year assessment date should be computed as follows: August 31, 2009 + 60 days = October 30, 2009 + 1 year = October 30, 2010 - 1 day = October 29, 2010.

    3. Return the case to the ATT to prepare and transmit a closing package to the CTF.

  3. Laguna Niguel APS will ensure that the documents listed on the Form 3210, Document Transmittal are included in the closing package. Laguna Niguel APS will mail the closing package to the key case CTF within 5 workdays after receipt of the file from the ATT, using the Form 3210, Document Transmittal prepared by the TCS or the ATT. Instructions for monitoring the return of the Form 3210, Document Transmittal by APS may be found in IRM 8.19.13.2.4, Closing Package to the Campus TEFRA Function (CTF).

  4. If the case is not on AIMS, then it can be closed to files.

Closing the Case (8.19.11.8.3)

  1. All TEFRA key cases must be closed through Laguna Niguel APS. The ATE should follow these closing procedures only if the ATE did not use the ATT and TEFRA ATE team member in working the case. If the ATE used the ATT and TEFRA ATE team member, then follow the procedures posted to the ATT SharePoint site. A link to the SharePoint site is found on the Appeals TEFRA website.

  2. After the key case CTF has received signed agreement forms from all direct partners and has input a one-year assessment date on PCS for all direct partners, the ATE will close the case through the ATM to local APS. Copies of the agreement forms that were received from the key case CTF will be retained in the file. The ATE inputs AC-TF on ACDS.

  3. The ATM signs the Letter 913, Closing Letter - Agreed Cases and Form 5402, Appeals Transmittal and Case Memo and forwards the administrative file to local APS. The AC-FR and ACAP codes are not input at this time.

    Reminder:

    When the ATE has not used the ATT, the following remarks will be entered on the Form 5402: For procedural closing review – ATT not utilized, one-year assessment date posted and H freeze has been released.

  4. After the key case CTF has received signed agreement forms from all direct partners, has input a one-year assessment date on PCS for all direct partners, and the CTF has released the AIMS “H” freeze, local APS will:

    • Place a copy of the dated letter in the administrative file

    • Mail the Letter 913, Closing Letter - Agreed Cases to the TMP and POA (if applicable

    • Mail the closing package to the CTF

    • Transmit the administrative file to Laguna Niguel APS

    • Not update the ACDS database for ATE and the AIMS controls remain open (not closed or transferred)

  5. Local APS enters the following in the ACDS fields:

    • ACTION: Area location – LGN (example: ship AUS-LGN)

    • TODATE: Date local APS ships the administrative file to Laguna Niguel APS.

  6. Laguna Niguel APS, upon receipt of the administrative file, enters the following in the ACDS fields:

    • FROMDATE: Date received in Laguna Niguel APS

    • LACTION: LGN-ATT

    • LTODATE: Date given to ATT Secretary/Screener/ATM

    • Forwards the administrative file to the ATT

  7. The ATT performs a procedural review. The ATT ATM will notify the field when it is time to enter AC-FR and ACAP. When it is verified those codes have been entered, the ATT will forward the administrative file to Laguna Niguel APS.

  8. Laguna Niguel APS closes the case from ACDS as follows.

    • Closing code 03 and date closed

    • ACTION - ACKCLS & TODATE

    • RevsdTax - Enter revised tax from Form 5402, Appeals Transmittal and Case Memo (also enter PropdTax if not previously entered); if the Form 5402, Appeals Transmittal and Case Memo does not contain the revised tax, have the Appeals TEFRA Team compute the amount using Exhibit IRM 8.19.10-1, Formula for Assigning Dollar Value to Partnership Case for ACDS .

      Caution:

      The revised tax is not actually assessed against the partnership and should not be entered on Form 5403.

    • See Exhibit 8.20.7-1, Form 5403, Appeals Closing Record (Instructions) for instructions on completing Form 5403, Appeals Closing Record and in addition, enter "TEFRA Key Case Closing" in the Special Handling section.

  9. Laguna Niguel APS will close the case from AIMS unless it has a PICF Code of 4 or 5. The case should not be sent to the key case CTF unless it has a PICF Code of 4 or 5.

  10. If the case has a PICF Code of 4 or 5, it is a partner in another TEFRA partnership and has to be sent to the key case CTF. Verify there are no other open TEFRA linkages. Instructions for identifying the key case CTF may be found on the Appeals TEFRA website. Instructions for sending the case to the key case CTF are as follows:

    1. Prepare Form 5403, Appeals Closing Record following partial procedures. In item A, Special Handling Instructions, write "TEFRA Linkage – After Partial Closing, Forward to CTF " .

    2. Update the AIMS database to status 34 and update the PBC to 295 (for the Brookhaven CTF) or 398 (for the Ogden CTF).

    3. Ensure that a copy of the input Form 5403, Appeals Closing Record is attached to the face of the return. The CTF will place the file in suspense awaiting the outcome of the TEFRA examination.

    4. Forward the administrative file via Form 3210, Document Transmittal to the appropriate CTF.

  11. Laguna Niguel APS ensures that copies of the following documents are in the administrative file before it is closed:

    1. Appeals Form 4605-A, Examination Changes - Partnerships, Fiduciaries, Small Business Corps. & Domestic Intl. Sales Corp. (Unagreed and Excepted Agreed)

    2. Appeals Form 886-Z , TEFRA Partners' Shares of Income

    3. Appeals Case Memorandum (and Counsel Settlement Memorandum, if applicable)

    4. Affected Item Appeals Case Memorandum (if applicable)

    5. Form 5402, Appeals Transmittal and Case Memo

    6. All agreement forms or closing agreements for partners who agreed

    7. Closing letter to the TMP (Letter 913, Closing Letter - Agreed Cases)

    8. Form 5403, Appeals Closing Record (original)

    9. Partnership statute extensions

Tax Exempt and Government Entity (TEGE) Cases

  1. TE/GE cases are processed by the Boston Account and Processing Support (APS) Team.

  2. See IRM 4.5.1, TE/GE AIMS Manual, TE/GE AIMS Processing for additional guidance.

Employee Plans Exempt Organizations (EP/EO) Examination Taxable Returns (8.7.8.1.2)

  1. Both EP and EO examinations involve imposing various taxes due to the plan (EP) or organization (EO) engaging in financial transactions.

    1. Examination cases are generally non-docketed, but it is possible to have excise tax and unrelated business income tax issues in docketed status.

    2. Examination cases are on AIMS, some accounts are Master File (MF) and others are Non-Master File (NMF). NMF is used for inventory control purposes.

EP and EO General Case Closing Procedures (8.7.8.10)

  1. When closing EP and EO cases, in addition to the general closing procedures, there are several specialized procedures that must be followed and are explained in this subsection.

  2. The ATE submits an agreed case to APS with the Form 5402, Appeals Transmittal and Case Memo and ACDS closing instructions. APS will process the agreement for each applicable account and use PEAS Suspense to control and monitor the account until the adjustments post. APS will forward the administrative file to the controlling Campus Files Function for association with the Form 5147, IDRS Transaction Record.

  3. Cases where final adverse letters pursuant to IRC 7476, or a notice of deficiency is issued are closed when the earliest of the following events occurs:

    • agreement to the notice of deficiency is received

    • default the notice of deficiency when 120 days have elapsed from the date the notice or letter was issued

    • a tax court decision is entered

  4. Upon receipt of an agreement to a notice of deficiency, APS will process the agreement for each applicable account and use PEAS Suspense to control and monitor the account until the adjustments post. APS will forward the administrative file to the controlling Campus Files Function for association with the Form 5147, IDRS Transaction Record.

  5. Upon default of a notice of deficiency, APS will notate the Form 5402, Appeals Transmittal and Case Memo with the Default Date in Remarks. APS will process the default assessment for each applicable account and use PEAS Suspense to control and monitor the account until the adjustments post. APS will forward the administrative file to the controlling Campus Files Function for association with the Form 5147, IDRS Transaction Record.

  6. If the ATE identifies on Form 5402, Appeals Transmittal and Case Memo that issues remain unresolved on a case after Appeals consideration, close the case using the ACDS Closing Code identified by the ATE and transmit the case to the originating TE/GE office for their action.

  7. Ensure that the Form 5402, Appeals Transmittal and Case Memo, and the Appeals notification or determination letter sent to the employer or sponsor is included in the administrative file before closing the case.

EP and EO Determination Case Closing Procedures (8.7.8.10.2)
  1. Determination cases are not on AIMS and Form 5403, Appeals Closing Record is not prepared. Close ACDS using the information provided by the ATE on the Form 5402, Appeals Transmittal and Case Memo and transmit the case to EP or EO. (APS does not make adjustments to the account.)

  2. Ensure the application form is fastened on top of the documents in the administrative file.

  3. ACDS is closed using on of the following Closing Codes:

    1. 03 - Agreed/Approved

    2. 05 - Adverse determination letter is defaulted

    3. 17 - Tried case with an entered decision

  4. Send the EP determination file to:




    Internal Revenue Service

    Employee Plans

    Attn: Inez Dillingham

    550 Main St. Room 7008

    Cincinnati, Ohio 45202-3222

  5. Send the EO determination file to:




    Internal Revenue Service

    Exempt Organizations

    Attn: Sandy Wood

    550 Main St. Room 7008

    Cincinnati, Ohio 45202-3222

  6. When it is determined the taxpayer should have filed taxable returns but did not, the ATE annotates on Form 5402, Appeals Transmittal and Case Memo that one of the following forms (with a copy of the revocation letter) must be forwarded to Examination:

    • Form 5666, EP Information Report (EP cases)

    • Form 5349, Examination Information Report (EO cases)

  7. Upon receipt of the administrative file from Appeals, Examination will initiate the deficiency procedures as appropriate.

  8. APS will mail a copy of the final adverse letter to the appropriate state official as identified on the APS Disclosure Spreadsheet.

EP and EO Revocation Case Closing Procedures (8.10.8.10.3)
  1. Revocation cases include returns which are on AIMS and require the following actions:

    1. Prepare Form 5403, Appeals Closing Record and enter Item 12 tax amount 0.00. Input Form 5403 using AIMS CC: AMCLSA to close AIMS controls.

    2. If the revocation is sustained, or if there is a change in the exempt status (EO) or plan status (EP), forward a completed Form 2363-A, Request for IDRS Input for BMF/EO Entity Change to:

    Internal Revenue Service

    TEGE

    1100 Commerce Street

    M/S 4920

    Dallas, TX 75242–1027

EP and EO Examination Cases (8.7.8.10.4)
  1. EP and EO examination cases are closed the same way as other examination cases. The assessment if needed, is made on the taxable return Master File account:

    • Form 990-T, Exempt Organization Business Income Tax Return

    • Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

    • Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the IRC

    • Form 1120, U.S. Corporation Income Tax Return

    • Form 1041, U.S. Income Tax Return for Estates and Trusts

    • Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

    • Form 941, Employer's Quarterly Federal Tax Return

    • Form 730, Monthly Tax Return for Wagers

    The non-taxable returns are closed on Form 5403, Appeals Closing Record, Item 12 TC 300 = 0.00

    • Form 990, Return of Organization Exempt From Income Tax

    • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation

    • Form 5500, Annual Return/Report of Employee Benefit Plan

  2. All taxable returns, with the EXCEPTION of Form 5330, Return of Excise Taxes Related to Employee Benefit Plans and Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Person, are assessed on the Master File (MF) account (the Non-Master File (NMF) AIMS is for inventory control purposes only it is not where the assessment is made).

  3. If NMF AIMS controls are established, close the NMF AIMS controls by preparing a Form 5403, Appeals Closing Record with Item 12 TC 300 = 0.00. Note in Item A: "AIMS closing only."

  4. NMF assessments for Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Person and Form 5330, Return of Excise Taxes Related to Employee Benefit Plans are processed at the Cincinnati Campus. Prepare Form 5403, Appeals Closing Record for the NMF account with the tax assessment.

    Note:

    If no assessment needs to be made, close the NMF AIMS and do not prepare a Form 5403, Appeals Closing Record for the MF account.

  5. APS does not process original returns. If the ATE receives an original return during the hearing, the ATE must forward the unprocessed original return to the appropriate Campus Function for processing. When a return has not been previously filed, there will not be a TC 150 posted with a Return Received Date on the module to start the running of the ASED. Once the original return has posted, APS is responsible for making adjustments to the account according to the ATE's determination.

  6. If the AIMS control for the taxable return is on the MF account, prepare Form 5403, Appeals Closing Record using Exhibit 8.20.7-1, Form 5403, Appeals Closing Record (Instructions).

  7. Close the case following general closing instructions.

  8. See Exhibit IRM 8.7.8–1, List of Employee Plans and Exempt Organizations Areas for additional information.

Termination and Jeopardy Assessment Case Processing (8.7.1.6.5)

  1. These cases will not be controlled on AIMS unless the taxpayer files a return with Compliance for the full taxable year. If the taxpayer does file, Compliance will establish the full year return on AIMS.

  2. Appeals findings will result in one of the following actions:

    • Compliance action sustained in full

    • Compliance action sustained in part

    • Jeopardy or Termination assessment not warranted (the collection of the tax was not in jeopardy)

    • Taxpayer agreement with the action taken

  3. If Appeals sustains the Compliance action in full (taxpayer does not agree):

    1. Close ACDS following general closing instructions CLOSINGCD = 20.

    2. Return the file to originating Compliance Function, identified by the ATE on Form 5402, Appeals Transmittal and Case Memo.

  4. If Appeals sustains the Compliance action in part (taxpayer does not agree):

    1. The ATE will request, via Form 5402, Appeals Transmittal and Case Memo that the Compliance Function make the appropriate abatement.

    2. Close ACDS following general closing instructions. CLOSINGCD = 13.

    3. Return the file to originating Compliance Function, identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

  5. If Appeals finds that the jeopardy or termination assessment was not warranted:

    1. The ATE will request via Form 5402, Appeals Transmittal and Case Memo, that Compliance abate the entire assessment, release liens and any levies, as appropriate, and effect appropriate refund or credit.

    2. Close ACDS following general closing instructions. CLOSINGCD = 03.

    3. Return the file to originating Compliance Function, identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

  6. If Appeals reaches agreement with the taxpayer:

    1. The ATE will request via Form 5402, Appeals Transmittal and Case Memo, that Compliance abate any excessive tax assessed.

    2. Close ACDS following general closing instructions. CLOSINGCD = 03.

    3. Return the file to originating Compliance Function, identified by the ATE on the Form 5402, Appeals Transmittal and Case Memo.

  7. If the taxpayer files a civil suit at any time prior to the conclusion of the administrative appeal, Collection (Advisory) will request the entire file, including Form 5402, Appeals Transmittal and Case Memo. The Appeals Hearing will be suspended.

  8. Retain a copy of the file to issue a statutory notice of deficiency within the required period for issuance, which, for a termination assessment, is 60 days after the later of the date the taxpayer files a return for the full taxable year or the due date of the return as extended. The 60-day period does not commence until a return for the taxpayer’s annual accounting period is filed. For a jeopardy assessment, the statutory notice of deficiency must be issued within 60 days after the assessment is made. Send a copy of any report prepared by the ATE to Counsel within 24 hours. On ACDS, enter:

    1. ACTION = DDJRET

    2. TODATE = the date the case file was sent to special procedures function, Collection Division

  9. Send the following to the Compliance Area Director identified by the ATE:

    1. Copies of reports of reconsideration by Appeals

    2. Copies of any statutory notices issued by Appeals on cases under Appeals jurisdiction

  10. The ATE will coordinate requests for abatements with Compliance prior to notifying APS to returning the case files. APS will prepare Form 5403, Appeals Closing Record, marking the "Source Document Only" box at the top of the page.

    1. In Item 12 enter TC 301 and the amount to be abated

    2. Make no entry in Item 800-811

    3. In Item A, enter the following: "Abate excessive portion of jeopardy assessment. Full year return has not been filed. Do not process through terminal"

    4. Prepare Form 1331, Notice of Adjustment

  11. Prepare Form 5403, Appeals Closing Record for any full year returns established on AIMS. In Item 12 enter TC 300/301 for the amount of the NET deficiency/overassessment. Consider the amount previously assessed (including the termination assessment) and the tax liability on any tax return filed for the full year.

  12. Show the following computation in Item A or as an attachment, cross-referenced in Item A. Include a transcript of account in the administrative file.

    1. Termination Assessment (adjusted for any overassessment allowed) $___

    2. Liability per full year return (assessed or unassessed) $____

    3. Total of 1 and 2 $___

    4. Correct liability $____

    5. Item 12 amount (+ or –) $____

Notice of Deficiency Involving Termination Assessment under IRC 6851 (Termination of Taxable Period)

  1. See IRM 8.17.4.24, Notice of Deficiency Involving Termination Assessment under IRC 6851 (Termination of Taxable Period) for Tax Computation Specialist (TCS) case preparation for APS.

  2. If any part of the termination assessment is determined by the ATE, to be in excess of the statutory deficiency, then a Form 5403, Appeals Closing Record reflecting the overassessment to be abated will be processed by Account and Processing Support (APS) when the case is closed. If all or any part of such excess has been paid, no refund is allowed until the case is closed.

Jeopardy Assessment Notice of Deficiency (8.17.4.18)

  1. See IRM 8.17.4.23, Notice of Deficiency on Jeopardy Assessment Case for Tax Computation Specialist (TCS) case preparation for APS.

  2. If the ATE determines that the deficiency for any year is either greater or less than the corresponding jeopardy assessment, the notice should reflect such determined deficiency. If any part of the jeopardy assessment is determined to be in excess of the statutory deficiency, Form 5403, Appeals Closing Record, reflecting the overassessment to be abated should be processed by APS. If all or any part of such excess has been paid, no refund is allowed until the case is closed.

Transferee/Transferor Case Closing (8.7.5.11)

  1. If the transferee is on AIMS, prepare Form 5403, Appeals Closing Record for the transferor following IRM Exhibit 8.20.7-1. Also make the following entries:

    1. Item 12 - Enter TC 300 and the tax assessment to be made against the transferor

    2. If no tax assessment is to be made against the transferor, enter TC 300 0.00

    3. Complete Items 800 through 811 as appropriate

    4. Item A - enter the cross reference information for the transferee, when applicable, and enter "Total transferee liability exceeds transferor liability"

  2. If the transferee(s) is/are not on AIMS, no Form 5403, Appeals Closing Record is prepared for the transferee, instead, assess each transferee on NMF using the information provided on Form 1296, Assessment Against Transferee or Fiduciary. See IRM 8.7.5.6.3, Form 1296, Assessment Against Transferee or Fiduciary for additional information.

  3. Forward the Form 1296, Assessment Against Transferee or Fiduciary, and Form 5403, Appeals Closing Record for the transferor to the appropriate Campus function.

  4. Update ACDS using general closing instructions. In addition make the following entries:

    1. RevsdTax for the transferor case - enter the amount of tax to be assessed against transferor. If no tax is to be assessed against transferor, enter $ 0.00 (same as Form 5403).

    2. RevsdTax for the transferee cases - enter the amount from Form 1296, Assessment Against Transferee or Fiduciary (amount of unpaid tax liability). If no tax is due (Form 1296 is not prepared) enter $ 0.00.

    Note:

    The ATE or TCS who prepared the tax computation, also prepares the Form 1296, Assessment Against Transferee or Fiduciary.

  5. See IRM 8.7.5, Technical and Procedural Guidelines, Transferee and Transferor Liabilities, for additional information.

Jurisdiction of Tax Court (8.7.5.10)

  1. Tax Court has jurisdiction to redetermine the deficiency determined by the Service. In a case commenced in the Court by a transferee or fiduciary, jurisdiction depends upon the issuance by the Commissioner of a notice of liability to the transferee or fiduciary.

  2. The ATE or Counsel may prepare the settlement documents on cases involving transferee or fiduciary liability.

  3. If a transferee petitions the united States Tax Court (USTC), a "dummy" docket number is added to the transferor (key case). Upon request by the ATE, APS will update the AIMS to status 82 (if on AIMS). The transferee(s) carries the actual docket number, revised statute date, and notice of deficiency information. Upon notification by the ATE, APS will use closing code 43 to move the work unit to Part 3, Counsel Jurisdiction on ACDS.

Trust Fund Recovery Penalty (TFRP) Cases (8.25.3.5)

  1. APS will return the original TFRP case file to the Technical Services Advisory Control Point Monitor (CPM) address listed in the "To" box on the customized Form 5402, Appeals Transmittal and Case Memo.

  2. APS will update ACDS for the reference files associated with each responsible individual:

    • CLOSINGCD = 45

    • Because there are no returns associated with reference files, there is no revised penalty amount

    • Reference files are returned, via Form 3210, Document Transmittal, to the originating Advisory office

  3. TFRP cases are subject to the guidance included in IRM 8.21.2, Appeals Statute Responsibility, and IRM 8.2.1.11.1, Expedite Processing for Certain Large Dollar Cases.

    Reminder:

    Only Collection has the authority to make assessments or adjustments to trust fund recovery penalties.

TFRP Closing Actions-TBOR2 (pre-assessment) Appeals (8.25.3.5.2)

  1. In closing TBOR2 (pre-assessment) appeals, the ATE working the case will complete the customized Form 5402, Appeals Transmittal and Case Memo, for each responsible individual and Form 3210, Document Transmittal. The revised findings penalty section will reflect the trust fund recovery penalty to be assessed. Update ACDS following the closing instructions provided below:

    ACDS Closing Code 03, 13, or 20 Action
    STATDATE = the Form 5402, or Form 866 approval date plus 30 days, or the normal statute, whichever is later
    REVSDPEN = the amount of the trust fund recovery penalty to be assessed for each tax period

    Note:

    Post-Appeals Mediations of TBOR2 TFRP appeals are closed out by the ATE or Mediator (Team Member) prior to submitting the remaining TBOR2 TFRP case for normal closure. APS employees follow the TBOR2 closing procedures described in this section.

  2. The following expedite closing procedures apply to TFRP TBOR2 cases in which the ASED will expire 30 days after the ATM’s approval signature on Form 5402, Appeals Transmittal and Case Memo or Form 866, Agreement as to Final Determination of Tax Liability.

    Note:

    ACDS is programmed to remove the TBOR2 statute code when the ACAPDATE is entered by the ATM and to add 30 days to the ACAPDATE to set the ACDS Statute Date. This date is entered in the Earliest Statute Date field and covers all periods. An e-mail will be sent notifying the selected PTM that a TBOR2 case has been approved by the ATM and is being forwarded to Account and Processing Support for the PTM to assign. This notification includes the WUNO and revised statute date of the approved case. The ATM should ensure that the approval signature dates on Form 5402, Appeals Transmittal and Case Memo and Form 866, Agreement as to Final Determination of Tax Liability, match the Appeals Closing Approval (ACAPDATE).

    Note:

    If local agreement does not specify that the ATM will complete steps 1 and 2, or the case arrives in APS for processing without these steps completed, then APS is responsible for ensuring these steps are taken.

    APS Tax Examiner (TE) assigned to process the case will:
    Step Action
    1) Upon receipt of the case or the assessment documents, immediately fax Form 5402 and Form 2749 to the Control Point Monitor in Advisory at the fax number listed in the "To" box on Form 5402.
    2) Call the Advisory Control Point Monitor to verify receipt of the assessment documents. Document the following on Appeals' copy of Form 3210:
    Name of the employee/manager who made the follow-up call
    Name and location of Advisory employee who confirmed receipt
    Date of Call
    3) Date and mail the closing letter to the taxpayer/power of attorney.
    4) Mail the entire case file back to the Advisory Control Point Monitor within 15 days of the ACAPDATE. The Form 3210, Document Transmittal must be marked: "ASED - Expedite" .

    Note:

    If the Advisory Control Point Monitor is co-located in the same building with APS, do not mail the case, instead, hand-deliver the entire case file.

    Note:

    Whenever possible, APS will transmit the complete collection file to Advisory, however, the expedited procedures may result in separation of the items being returned to Advisory.

TFRP TBOR2 Cases for Appeals Quality Measurement System (AQMS) Review (8.25.3.5.2.1)
  1. If the TFRP TBOR2 case is selected by AQMS for review:

    1. The ATM or APS will include the following statement on a fax transmittal to CPM Advisory: "The TFRP case was systemically selected for review by Appeals Quality Measurement System (AQMS). AQMS will complete its review expeditiously, (normally within 30 days), and mail the TFRP case to the attention of the Control Point Monitor (CPM) in the applicable Advisory office."

    2. The ATM or APS employee will immediately fax Form 3210, Document Transmittal, Form 5402, Appeals Transmittal and Case Memo and Form 2749, Request for Trust Fund Recovery Penalty Assessment(s), to the CPM reflected on Form 5402, and follow up with a telephone call to confirm receipt. Document the following on Appeals' copy of Form 3210, Document Transmittal:
      Name of the employee/manager who made the follow-up call,
      Name and location of Advisory employee who confirmed receipt, and
      Date of Call.

    3. The ATM/APS will place copies of the Fax Transmittal, attachments, and receipt confirmation with the TFRP TBOR2 case file and send it via Form 3210, Document Transmittal to AQMS.

    4. APS will prepare Form 3210, Document Transmittal for the AQMS Reviewer to use when shipping the case to the applicable Collection contact/office. APS will enter their own return address information and sign the Form 3210, Document Transmittal as the Releasing Official. Send all 4 parts of the Form 3210, Document Transmittal to the AQMS Reviewer.

    5. At the conclusion of the review, AQMS will mail the TFRP TBOR2 case, via ground mail, to the applicable Advisory Office. AQMS will inform Advisory via Form 3210, Document Transmittal that the assessment documents were previously faxed to the CPM by Appeals and the case file was delayed due to Appeals' Quality Review random selection process. The AQMS Reviewer will also return the originator copy of Form 3210, Document Transmittal back to the APS originating office for receipt monitoring.

    6. APS will enter the FROMDATE on ACDS for the TFRP closure upon receipt of the acknowledged Form 3210, Document Transmittal from Collection.

TFRP Closing Actions-Jeopardy Assessment Reconsiderations (8.25.3.5.3)

  1. TFRP cases are not controlled on AIMS.

  2. Appeals findings will result in one of the following actions:

    • Compliance determination is sustained in full

    • Compliance determination is sustained in part

    • Jeopardy assessment not warranted (the collection of the tax was not in jeopardy)

    • Taxpayer agrees with the action taken

  3. If Appeals sustains the Compliance determination in full (taxpayer does not agree):

    1. Close ACDS following general closing instructions. CLOSINGCD = 20

    2. Return the file to originating Control Point Monitor (CPM) Advisory Unit

  4. If Appeals sustains the Compliance determination in part (taxpayer does not agree):

    1. On Form 5402, Appeals Transmittal and Case Memo the ATE will request that the Compliance Function make the appropriate abatement.

    2. Close ACDS following general closing instructions. CLOSINGCD = 13.

    3. Return the file to Control Point Monitor (CPM) Advisory Unit.

  5. If Appeals finds that the jeopardy assessment was not warranted:

    1. On Form 5402, Appeals Transmittal and Case Memo, the ATE will request that the Control Point Monitor (CPM) Advisory Unit abate the entire assessment, release liens and any levies, as appropriate, and effect appropriate refund or credit.

    2. Close ACDS following general closing instructions. CLOSINGCD = 03.

    3. Return the file to Control Point Monitor (CPM) Advisory Unit.

  6. If Appeals reaches agreement with the taxpayer:

    1. On Form 5402, Appeals Transmittal and Case Memo the ATE will request the Control Point Monitor (CPM) Advisory Unit abate any excessive tax assessed.

    2. Close ACDS following general closing instructions. CLOSINGCD = 03.

    3. Return the case to the Control Point Monitor (CPM) Advisory Unit.

TFRP Closing Actions-Claims and Claim Reconsiderations (8.25.3.5.4)

  1. Normal claim closing actions apply to TFRP claim cases.

  2. APS employees will date and mail the closing letter prepared by the ATE:

    • For claims not previously considered, the following letters are prepared by the ATE and sent via certified mail:
      Letter 1363, Appeals Partial Disallowance of Claim - Certified Letter,
      Letter 1364, Appeals Full Disallowance of Claim - Certified Letter, or
      Letter 2682, Appeals Full Claim Allowance.

    • For claim reconsiderations, the following letters are prepared by the ATE and sent via certified mail:
      Letter 2681, Appeals Full Disallowance After Previous Claim Disallowance
      Letter 2682, Appeals Full Claim Allowance, or
      Letter 2683, Appeals Partial Disallowance After Previous Claim Disallowance, which can be sent by regular mail.

  3. These cases are not held for suspense.

  4. The following are the ACDS entries required at closing:

    ACDS Category Enter
    Closing Code
    • 14 - Full Disallowance;

    • 15 - Full Allowance; or

    • 16 - Partial Allowance

    RevsdTax Enter the negative amount approved for abatement/refund.

    Example:

    A full disallowance would be $–0–.

    APPEALS AMTDIS Enter the amount of the claim disallowed by Appeals.
TFRP Claim and Claim Reconsideration Cases for AQMS Review (8.25.3.5.4.1)
  1. APS will follow procedures in IRM 8.20.7.56.1.1, TFRP TBOR2 Cases for Appeals Quality Measurement System (AQMS) Review, if a TFRP Claim or Claim Reconsideration case is selected by AQMS for review.

  2. AQMS will complete its review expeditiously (normally within 30 days) and mail the TFRP case, via ground mail, to the attention of the CPM in the applicable Advisory office.

Unpostables

  1. Unpostable (UP) transactions occur when the input transaction fails to bypass one or more validity checks programmed into IDRS for the purpose of ensuring Master File account accuracy.

  2. Unpostables must be avoided to ensure the Assessment Statute Expiration Date (ASED) is protected, and to ensure the taxpayer receives a timely and accurate resolution to their Appeals or United States Tax Court case.

  3. APS Unpostables are categorized into two general categories for monitoring and corrective actions:

    • AIMS Unpostables (UP) - corrected by the APS Unpostable Team

    • Online Input/Non-AIMS Unpostables (UP) - corrected by the APS TE who input the adjustment


    Caution:

    APS TEs who have mandatory monitoring requirements for specific work types, must coordinate correction of any AIMS UP with the APS Unpostable Team.

    Exception:

    APS Complex Interest Team (CIT) TE's must monitor and correct all of their AIMS and Online Input/Non-AIMS adjustments.

  4. On a weekly basis, the APS Unpostable Team performs monitoring and correction of all APS generated AIMS Unpostables.

  5. On a monthly basis, the APS Area Managers will provide the CCA 42-43 - IDRS Overage Report (Non-AIMS UP's) to each Processing Team Manager (PTM) for assignment and correction of the online input/Non-AIMS UPs.

  6. The APS Unpostable Team actions do not relieve or replace the APS TE responsibility for monitoring the transaction(s) input on their assigned inventory.

  7. Online Input/Non-AIMS step-by-step monitoring process is provided in IRM 8.20.7.57.2, APS Online Input and Non-AIMS Adjustment Monitoring Procedures.

Online Research Resources for Unpostables

  1. The following references are used to identify, research, and correct Unpostables:

    • IRM 1.4.22.3.3, CCA 42-43 - IDRS Overage Report

    • IRM 2.3.37, IDRS Terminal Responses, Command Code UPTIN for the GUF System

    • IRM 2.9.1.14.2, IDRS Case Control Inventory Reports and Overage Listings

    • IRM 2.9.1.15.1, General IDRS Transaction Input

    • IRM 2.9.1.15.2, Cycling of IDRS Transactions

    • IRM 3.12.32, General Unpostable Framework (GUF)

    • IRM 3.12.32.28, (GUF 11-40) New Unpostable Report and Summary

    • IRM 3.12.32.46, (GUF 55-40) UP Employee Assignment/Aged Listing and (GUF 55-42) Summary

    • IRM 3.12.32.50, (GUF 55-47) Nullified Distribution Listing and (GUF 55-46) Nullified Distribution Summary

    • IRM 3.12.38.5.5.1, IDRS Procedures

    • IRM 3.12.166, EPMF Unpostables

    • IRM 3.12.179, Error Resolution, Individual Master File (IMF) Unpostable Resolution

    • IRM 3.12.179.3.7.1, Aged Inventory

    • IRM 3.12.278, Exempt Organization Unpostable Resolution

    • IRM 3.12.279.7, Unpostable Closures

    • IRM 3.12.279.8, Generalized Unpostable Framework (GUF)

    • IRM 3.12.279.50, BMF Unpostables Resolution

    • IRM 3.12.279.220, Unpostable Category

    • IRM 3.13.2.6.1.13, CC UPTIN

    • IRM 3.13.2.6.1.14, CCs UPDIS/UPRES

    • IRM 8.21.2, Account and Processing Support, (APS) Statute Responsibility

    • IRM 8.21.2.11.4, Unpostable Closings

    • IRM 21.2.4.2, Unpostable IRMs

    • IRM 21.5.5.1, Unpostables Overview

    • IRM 21.5.5.2, What Is An Unpostable?

    • IRM 21.5.5.3, Unpostables Research

    • IRM 21.5.5.3.1, Identifying Unpostables

    • IRM 21.5.5.3.1.1, IDRS Pending Transaction Identification Codes

    • IRM 21.5.5.3.1.2, Unpostables Nullified Distribution Listing (GUF 55-47)

    • IRM 21.5.5.3.2, Researching Unpostables on IDRS

    • IRM 21.5.5.3.2.1, Unpostable IDRS Command Codes

    • IRS Processing Codes and Information Document 6209, Section 8B Master File Codes (Unpostable and Resequence), provides a listing of Unpostable Codes (UPC), Unpostable Reason Codes (UPC RC), and an explanation of the cause and corrective action.

APS Online Input and Non-AIMS Adjustment Monitoring Procedures

  1. An online input transaction is made using the following command codes:

    • FRM77/REQ77
      TC 47X
      TC 48X
      TC 52X
      TC 55X
      TC 56X
      TC 97X

    • ADD24/34/48

    • DRT24/48

    • ENMOD
      INCHG
      BNCHG

  2. If the online input transaction fails one or more IDRS validity checks, it becomes unpostable and an IDRS Control Base "NLUN" will be opened under the input employee's IDRS Number. The APS TE must close this control base using CC: ACTON.

  3. A Non-AIMS adjustment is processed using CC:ADJ54/REQ54.

  4. When the APS TE processes a Non-AIMS adjustment, the IDRS control base will default to "C" which closes the IDRS Control Base assigned to their IDRS Number.

  5. APS TE's are required to place the PEAS case in Suspense for Monitoring.

    Reminder:

    Monitoring all online input transactions and Non-AIMS adjustments until fully posted, is mandatory and required. See IRM 8.21.2, Account and Processing Support, (APS) Statute Responsibility, for additional information.

  6. When the transaction(s) post, remove the PEAS case from Suspense and close the PEAS record.

  7. If the online input transaction, or Non-AIMS adjustment goes Unpostable (UP), the APS TE must:

    • Use CC: TXMODA and CC: UPTIN to research the cause of the UP.

    • Verify that an IDRS Control Base, Category = "NLUN" is opened and assigned to their IDRS number.

    • Check CC: UPTIN to verify that the UP has been Auto Voided (closed) so it does not erroneously appear on future General Unpostable Framework (GUF) Report(s).

    • Research and perfect the adjustment to resolve all potential unpostable conditions.

    • Reinput the corrected online input or corrected Non-AIMS adjustment to resolve the UP and use CC: ACTON to close the "NLUN" IDRS Control Base when necessary.

      Reminder:

      If the IDRS "NLUN" Control Base is not closed by the APS TE timely, it will generate to the CCA 42-43 IDRS Overaged Report, which is sent to the appropriate APS Area Managers for distribution to the respective PTM and APS TE for resolution. See IRM 8.20.7.57, Unpostables and the Exception and Reminder below for additional information.

    • Place the case in PEAS Suspense for Monitoring.

    • Refile corrected source documents as appropriate.

    • Close PEAS when the adjustment has posted.

    Exception:

    When the APS Area Manager distributes the Non-AIMS Adjustment UP Report to the PTM, if the PEAS Case has been closed prematurely, the PTM must reopen the PEAS Case and use PEAS Feature Code PC to identify it as a "Post Closure" case.

    Reminder:

    For statute protection purposes, cases must be reopened and assigned on PEAS within 2 business days of the APS Area Manager receiving the report.

APS Unpostable Team - AIMS Unpostable Procedures

  1. The APS Unpostable Team works the following GUF Reports on a weekly basis:

    • New Unpostable Report and Summary GUF 11-40

    • UP Employee Assignment/Aged Listing GUF 55-40

    • Unpostables Nullified Distribution Listing GUF 55-47

    • CCP, Exam & Appeals UP Inventory GUF 55-50

    The reports are generated using Control-D (SYSM and SYSL) and imported into a file which is then sorted and all cases identified are imported and assigned on PEAS to each APS UP Tax Examiner (TE) for research and correction of the UP. For statute protection purposes, all unpostables must be assigned on PEAS within 3 business days of the report date.

  2. The APS UP PTM enters Feature Code PC to identify the case as a "Post Closure" case.

  3. The APS UP TE will:

    • perform IDRS and UPTIN research

    • identify the status of the UP

    • identify corrective action(s) to resolve the UP condition

    • reinput the adjustment(s) to bypass the UP condition and complete the adjustment(s) to the taxpayer's account

    • monitor the adjustment(s) until posted

    • refile corrected source documents as applicable

    • apply direct time for the action(s) taken

    • close PEAS

  4. The APS Unpostable Team TE does not correct APS-CIT Unpostables, however, the APS UP Team PTM does notify the CIT TE via encrypted email of their UP case and reassigns the UP on UPTIN to the APS-CIT TE.

  5. The APS UP TE will keep the UP case open on PEAS and contact the originating APS TE when coordination of the account correction is appropriate.

Form 5403, Appeals Closing Record (Instructions)

(1) General Instructions
(a) All AIMS Partial Adjustments and AIMS Final Closings require a Form 5403, Appeals Closing Record be prepared to reflect the applicable entries for input of the adjustments to the taxpayer's account.

Reminder:

On each tax period being processed, the APS TE must review each entry on the Form 5403 to verify the appropriate account is identified for the adjustment action. The APS TE completing the Form 5403 must also:
Analyze the current account transcript (CC: TXMODA)
Verify accuracy of all Form 5403 entries
Recognize and resolve all account conditions, including Master File Freeze Codes
Use the appropriate priority code necessary to bypass all account conditions which can cause an unpostable

(2) Specific Instructions
(a) CC TSCLS Box - Check if PICF code 6 or 8 (NON-TEFRA ONLY).
(b) CC AMCLSA Box - Check for all final closures.
(c) CC AMCLSF Box - Check if an interim assessment (Partial Account Adjustment) is being made. Used when an assessment/abatement is being made when AIMS controls must remain open. See IRM 8.20.6 for Interim Actions.
(d) CC AMCLSI Box - Check if Form 5403 is being used to process IRA adjustments. See IRM 8.20.7.35.
(e) Source Document Only Box - Check when Form 5403 will not be used for terminal input.
(f) CC AMCLSU Box - Check if Form 5403 is used to correct an unpostable.
(g) Items 1, 2, 3, and 4 - Attach a status label if available or complete Items 1, 2, 3, and 4 as shown below:
ITEM 1 - Taxpayer’s Identification Number
(a) Enter the TIN for the account. EIN format is EI-NNNNNNN. SSN format is SSN-NN-NNNN.
(b) If the return is non-master file, enter "N" immediately after the TIN.
(c) If the TIN is known to be invalid, enter an asterisk (*) immediately after the last digit of the TIN.
(d) For Form 706, U.S. Estate Tax Return, use the SSN of the decedent and for Form 709, U.S. Gift Tax Return, use the SSN of the donor.
A "V" should be entered immediately after the TIN.
A "W" should be entered immediately after the TIN if the TIN is invalid.
ITEM 2 – MFT OR PLAN NUMBER – Enter:
a) the two-digit master file tax account code (MFT) (30, 02, 01, 10, 06, etc.), or
b) the non-master file tax account code (NMFT) (20, 32, 17, 80, etc.)
applicable to the tax return in the case file. See Section 2, Document 6209, ADP and IDRS Information, for NMFT and MFT codes.
c) For Employee Plan cases enter the 3 digit plan number.
ITEM 3 - TAX PERIOD
(a) Identify tax years by a six-digit group, the first four identifying the year and the last two identifying the month. Thus, calendar year 2009 is 200912; March 31, 2010 fiscal year is 201003; October 31, 2011, fiscal year is 201110.
(b) If the adjustment is going to change tax period from period used on return, check "Other" block in Item A and complete a Form 2363, Master File Entity Change. Always use the appropriate Posting Delay Code (PDC) when account updates must be cycled in a specific order to avoid an unpostable or an account update error.
(c) The tax period for an estate tax cases is "000000" . Estate Tax cases are controlled on ACDS by date of death but Master File requires all MFT 52 tax period be "000000" .
(d) Quarterly Returns i.e. (Form 941, and Form 720, require the tax period identify the appropriate quarter being adjusted.

Example:

The tax period for a Quarterly Form 941 Return ending March 31, 2012 is entered as 201203.

(e) For Form 2290, Heavy Highway Vehicle Use Tax Form, use the beginning of the taxable period rather than the ending of period, e.g., period beginning April 1, 2012, is shown as 201204.
(f) In gift tax cases, show period covered, e.g., calendar year 2011 is shown as 201112.
(g) For 52–53 week fiscal years use the numeric designation of the month, the last day of which is closest to the actual ending date of the fiscal year, e.g., if ending date is October 3, 2012, use 201209; if October 16, 2011, use 201110.
ITEM 4 - NAME CONTROL
a Enter Name Control.
b Enter taxpayer’s full name under Name Control,
"Doe, John P. and Jane L" .
BLOCKING SERIES - This entry is determined by APS and will be one of the following:
Return Type Being Adjusted Non-TEFRA TEFRA
Original Return 700–749 750–759
(Includes electronically filed returns if accompanied by Form 8453.)
Copy of Return 790–799 760–769
(Includes cases where RTVUE/BRTVU or MACs print were used in lieu of return.)
No Return 780–789
(Partial assessment)
ITEM 01 - IRA ACCOUNT-If IRA account is being adjusted, enter secondary spouse’s SSN in NNNNNNNNN format. Otherwise, leave this item blank.
ITEM 02 - PENALTY REASON CODE (PRC) - Entry must be made on every case with penalty abatement. The ATE will identify the appropriate Penalty Reason Code on Form 5402. Appeals will use PRC 40-42 when another reason code is not applicable.
PRC 22 - Taxpayer exercised ordinary business care and prudence/first time filer non-compliance.
PRC 23 - Relied on practitioners erroneous tax advise OR relied on third-party who failed to meet the requirement to file/pay/deposit.
PRC 24 - Death or illness in immediate family or party responsible for filing/paying/depositing.
PRC 25 - Records inaccessible, damaged, destroyed, or lost.
PRC 26 - Unavoidable absence of party responsible for filing return.
PRC 27 - Post Office did not deliver timely or mailed to other taxing agency with extenuating circumstances/relied on erroneous date for other federal/state agency (SSA W–2’s).
PRC 28 - Disaster area.
PRC 29 - Undue economic hardship/inability to pay.
PRC 30 - Other reasonable cause.
PRC 31 - Erroneous oral advice from the Service.
PRC 40 - Appeals abatement or waiver of proposed penalty.
PRC 41 - Appeals sustained penalty.
PRC 42 - Appeals partially sustained penalty.
PRC 43 - Administrative Waiver.
PRC 44 - Legislative Waiver.
PRC 45 - Service Error.
ITEM 03 – LETTER DATE – Applicable for large corporate filing requirement returns only. Entry by APS only when Compliance did not correctly enter ITEM 03. This field = the date of the earliest 30-day or 90-day letter issued to the Large Corporate Taxpayer "C-Corp" . Appeals will enter this date when it has not previously been entered by the Compliance Function. Large Corporate Taxpayers, will not be under Appeals Jurisdiction as a Non-Docketed or as Docketed case unless Compliance has previously issued a 30 day letter (taxpayer may submit a protest and request an Appeals hearing) or a 90 day letter (taxpayer may file a petition to the USTC). Entry of this Item sets a Status 30 in the Notice History Section of TXMODA and should always be completed by Compliance prior to forwarding the case to Appeals via Disposal Code 07 or 11. As of May 21, 2014, an erroneous 2% trigger date can be removed and/or corrected. See http://serp.enterprise.irs.gov/databases/irm.dr/current/alerts.dr/alert14A0244.htm
ITEM 04 – LETTER AMOUNT – Entry by APS – This field = the amount (to include penalties) of the 30-day or 90-day letter. Appeals will only enter this amount on cases received from Compliance prior to July 1, 1991 OR those not previously closed to Appeals thru AIMS by Compliance, i.e., cases established by Appeals or on which Appeals issues the first notice. (Large Corporate Filing Requirement returns only)
ITEM 05 – 2% INTEREST DATE – Entry by APS. This field = the 2% interest date, which is the trigger date plus 30 days. Only entered when TC 340 is required for the interest adjustment. (Large Corporate Filing Requirement returns only)
ITEM 06a – DEBIT INTEREST TO DATE – Entry by APS. Enter the "TO" date used to manually compute debit interest. This entry is required whenever TC 34X is entered. If the TC 34X amount is zero, enter current date. The date will be passed to master file and reflected on transcripts of accounts. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340).
ITEM 06b – CREDIT INTEREST TO DATE – Entry by APS – Valid for IMF and BMF input. Enter the "TO" date used to manually compute credit interest. This entry is required when TC 770 is input for an amount other than zero. This entry is NOT REQUIRED for TC 770 with a zero amount. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340).
ITEM 06c - COMPUTE INTEREST AMOUNT – Entry by APS – Valid for IMF and BMF input. Enter the amount which will include the manually computed interest (TC 340 amount and any TC 772 netted interest amount), module balance, accrued and assessed interest, and assessed FTP. If the taxpayer does not pay the bill within 21 days from the 23C date, this entry allows the computer to systemically update the interest. See IRM 20.2.8.11, Non-Restricting Transaction Code (TC) 340, for additional information.
ITEM 07 – HOLD CODE – Enter if appropriate.
a) Hold Code 1 will hold the credit and set the MF "-K" Freeze.
b) Hold Code 2 will hold the credit and prevent the notice from going out to the taxpayer.
The hold code will delay systemic releases until the required offsetting action is taken. These brief descriptions are very general. For more specific information, see Document 6209, Section 8C - Master File Codes.
ITEM 08 - AGREEMENT DATE (MMDDYYYY FORMAT) - The date entered in Item 08 is of critical importance because it reflects the date of a legal agreement enacted by the Service and the taxpayer for deficiency interest computation purposes. The date entered in Item 08 is reflected on the taxpayer's account and the IDRS interest programming routine uses the agreement date to systemically calculate deficiency interest as well as systemically suspend deficiency interest if an unpaid assessment is not posted within 30 days of the waiver date. The procedure for applying IRC 6601(c), is explained in IRM 20.2.8.7, IRC 6601(c) Waiver-Interest Suspension Periods. When restricted interest is required, the Agreement Date associated with each respective tax adjustment and reflected on TXMODA is used by the Restricted Interest Technician to accurately perform a complete module recomputation in compliance with the Services' interest accuracy policy and procedure.
(a) Form 870, Form 890, Form 4089, etc. – enter date agreement received. When the agreement contains instructions as to the effective date of the agreement, enter the effective date. These agreement forms apply to deficiencies in income tax, estate tax, gift tax, and Chapter 42 excise tax cases and does not apply to employment and excise cases.
(b) Form 870-AD, Form 890-AD, Form 4089-AD Form 4089–AD, as well as any other agreement form with –AD). Enter date of acceptance, which is the date the Appeals Team Manager (ATM) signs the form.
(c) Stipulation/Decision – Enter date of entry of Tax Court decision.
EXCEPTION: make NO entry if the waiver paragraph is not included on the decision document. The waiver paragraph, when included references to IRC 6213(a).
(e) Joint Committee cases -If waiver is to take effect on date Joint Committee completes its review, see IRM 8.7.9, Joint Committee (JC) Cases. Enter the date shown in Joint Committee approval stamp. The date of acceptance by the Joint Committee is the date of agreement.
(f) Closing Agreements (CA) determining tax liability-Enter the effective date of the CA.
(g) More than one agreement covering the deficiency – enter the date of the most recent agreement. In Item A, list each agreement date with the amount of each deficiency.

Note:

Two-Agreement Cases require that the interest be manually calculated. Whenever possible, post the TC 340 Interest using "Non-Restricting TC 340 Procedures" . See IRM 20.2.8.7 (6) and IRM 20.2.8.11, Non-Restricting Transaction Code (TC) 340 for guidance.

(h) If the Appeals Technical Employee receives an advance payment and accepts the payment as constituting an agreement, the ATE will notify APS via Form 5402, to enter the advance payment date as the agreement date when closing the case.
(i) Leave Blank for the following cases:
1) Defaults (ACDS closing code 05)
2) Tried Tax Court Case (ACDS closing code 17)
3) Unagreed non-docketed cases (ACDS closing code 13)
4) Dismissals from Tax Court
5) Employment tax cases (940, 941, 942 and 943 returns)
6) Excise tax cases (720 and CT–1 returns)
7) Overassessment cases (tax is being reduced)
8) No change cases (Item 12 is $0)
9) Pre–90 day non-filer cases where the signed agreement constitutes the return (ACDS closing code 04)
ITEM 09 - PRIORITY CODE - An entry is necessary to bypass many of the most common unpostable conditions.
(a) Enter Priority Code "1" if an amended return or claim for refund has been filed for the tax year or if a MF "-A" freeze code is present on the account.
(b) Enter Priority Code "2" if:
the return is a copy (BS 79X), AND is being closed as a No-Change (DC 01), or
the return is a copy (BS 79X), being closed as a change case and requires an entry in Item 10 Settlement Amount. PC 2 will bypass the Unpostable caused by the Settlement Amount being more than $10.00 difference from the correct Settlement Amount.
(c) Enter Priority Code "3" if both PC 1 and PC 2 are needed on the same adjustment:
an amended return or claim for refund has been filed (MF "-A" freeze) (PC 1), AND
return is a copy (PC 2), and the tax adjustment is either a No-Change or Tax Assessment.
If both PC 1 and PC 2 are needed, and the adjustment is for a Tax Abatement, do not use PC 3 unless the abatement is due fully to an IRS Initiated Adjustment since PC 3 will systemically stop credit interest from accruing on any overpayment 45 days earlier than normal the normal credit interest "To Date" .
If both PC 1 and PC 2 are needed, and the adjustment is for a Tax Abatement that is Taxpayer Initiated, you will need to input a partial AIMS or Non-AIMS adjustment (29X/30X 0.00) with a Priority Code 1 and appropriate hold code to release the MF "-A" freeze, and then use the appropriate Posting Delay Code (PDC) to cycle the final closing with the Priority Code 2 for the AMCLSA input with the copy blocking series 79X.
(d) Enter Priority Code 8 when adjusting TC 764/765, 806, 807 and other refundable credits or when there is a prior assessment/abatement on the account within $10.00 of the adjustment being made. This is most commonly required when a premature assessment was made on a SND case.
(e) Enter Priority Code 9 if the failure to pay penalty (IRC 6651(a)(2)) is to be automatically computed from the due date of the return.
(f)

Reminder:

Priority Codes (PC) allow the adjustment to bypass one or more unpostable conditions which requires analysis of the current transcript for accurate application of adjustments. When more than 1 PC is needed to bypass multiple unpostable conditions, it may be necessary to process an interim adjustment TC 29X/30X $0.00 with a PC 1 to release the MF "-A" freeze remembering to also hold the notice and any credit by using the appropriate Hold Code. Process the final adjustment with the second PC and the appropriate posting delay code. When processing cycled adjustments, it is mandatory for the tax examiner to properly monitor the account for posting of each adjustment prior to closing the case on PEAS.

ITEM 10 - SETTLEMENT AMOUNT (COPY OF RETURN) – Enter the "Settlement Amount" when the return is closed using a copy (BS 79X) and the TC 30X amount is other than 0.00. RTVUE, BRTVU and MAC prints are considered copies of return.
The Item 10 amount = TC 150 amount plus or minus any TC 29X or TC 30X amounts posted on the current transcript.

Caution:

The Settlement Amount must match the tax per return or as previously adjusted amount entered on the following forms:
Form 4549 - Line 12
Form 4549-A - Line 12
Form 5278 - Line 19

If the tax per return or as previously adjusted amount differs between what is posted on the taxpayer's account and what is reflected on the Appeals report/statement or account, notify the ATE because the Statement of Account may not include all tax adjustments posted.
If the return is a copy (BS 79X) and is closed as a "no change" , DO NOT enter a "Settlement Amount" because it is not required.
ITEM 11 - INTEREST COMPUTATION DATE – Entry by APS. (APS will enter the interest start date applicable for a TC 304, TC 305, TC 308, or TC 309 entered in Item 12.
ITEM 12 - TAX LIABILITY ADJUSTMENT
a) Enter the increase or decrease to tax and penalties in the "Dollars and Cents" field. Circle the "+" or "−" sign, as appropriate, for each transaction code.
b) For "no change" cases enter zeroes in the last 3 spaces and circle "+" .
c) Adjustments to EIC, Advanced Child Tax Credits, Education Credits, Withholding and other refundable credits are separately adjusted by their individual reference numbers and must not be included in the TC 30X tax adjustment amount.
c) Do not make "interest" entries unless the interest (TC 77X credit "I-" /TC 34X debit "-I" ) is already restricted or must be restricted for the current adjustment.
e) Tax and penalties are coded under the 3 digit "Code" field as follows:
Transaction Code
Increase Decrease
(a) General Adjustment Tax 300 301
(b) IRC 6651(a)(1), Delinquent Return 160* 161*
(c) IRC 6651(a)(2), Failure to Pay 270* 271*
(d) IRC 6652(b), Failure to Report Tips 310 311
(e) **IRC 6653(b)(1)(A), Fraud 320** 321**
(f) **IRC 6653(b)(1)(B), Fraud 320** 321**
(g) IRC 6654/6655, Estimated Tax Penalty 170* 171*
(h) IRC 6656, Deposit Penalty 180* 181*
(i) IRC 6676, Taxpayer Identifying Number 200 201
(j) Misc. penalties not designated by a unique
Transaction or Reference Code 240 241
See Item 15 below for Reference Numbers which apply for some penalties, including:
IRC 6662, Accuracy Related Penalty (REF# 680)
IRC 6651(f), Fraudulent Failure to File (REF# 686)
Note: if there is a penalty applicable to the tax period, an entry is required in Item 02.
* Whenever a TC 160, 170, 180, or 270 has posted to a module, all subsequent adjustments to these penalties must be manually computed and input with the proper TC.
**Fraud and Negligence Penalty Information
For Returns due:
after 12/31/86 TC 320 or 321 may be used with TC 170, 180, 350, and 160
after 12/31/88 Interest will accrue from the due date of the return
after 12/31/89 a) IRC 6662, Accuracy Related Penalty is assessed using
REF# 680 in Item 15
b) IRC 6663, Fraud replaces IRC 6653(b).
TC 320 is still used to assess Fraud
c) IRC 6662 shall not apply to any portion of underpayment on which IRC 6663 fraud is imposed
ITEM 13 – DISPOSAL CODE =
"03" if there is a tax, penalty, interest, or prepayment credit adjustment amount in Item 12 or Item 15
"01" if there is "no change" in tax, penalty, and interest in Item 12 or Item 15 fields
"12" if there is "no change" in tax and/or penalties but Item 15 contains Item Reference Number (IRN) adjustments i.e. 886, 888, 878, 879, or 889
ITEM 14 - STATUTE EXTENDED TO DATE (MMDDYYYY FORMAT) – This entry, used to update AIMS and master file, must be the EXTENDED statute date. An entry in Item 14 posts a TC 560 to the TXMODA and updates the ASED field.
(a) Basic Statute of Limitations - A tax increase transaction will not post to the master file if the Assessment Statute Extension Date (ASED) reflected on the account is expired, and the correct ASED is not included in Item 14.
(b) Exceptions to (a) above are:
(1) When the basic period is extended by special code provisions such as 25% omission or mitigation of effect of limitations, you should enter the extended statute date in Item 14 and indicate in Item A the appropriate code section which substantiate the extended ASED.
(2) Statutes extended because of fraud provisions should be cited in Item A as follows: "Item 14 - Fraud."
(d) How to determine an extended period:
(1) Pre–90 day, excise or employment cases:
a. Form 872 - use the extended ASED shown on the form
b. Special Provision—use the date fixed by Code section as shown in (b) above
c. Form 872-A - calculate the ASED by adding 90 days to the date the closing adjustment is input. This will post a TC 560 to the account, and update the ASED field on TXMODA. The final assessment of tax is one of the legal actions which close the open ended statute extension consent.
(2) Ninety-Day and Docketed Cases:
a. Defaulted Case - Compute the extended statute date by adding 150 (210 for foreign taxpayers) days to the normal or extended statute date prior to issuance of the notice of deficiency. (See note below).
b. Agreed 90-Day - Compute the extended statute date by adding 60 days to the receipt date of the agreement form. (See note below).
c. Docketed Cases (Not Appealed) - Compute the extended statute date by adding 150 days to the normal or extended statute date prior to issuance of the notice of deficiency OR 150 days from the Tax Court Decision Entered Date, whichever is later. (See note below).
Note: The number of days remaining on the normal or extended statute date when the SND was issued is referred to as "tack-on" time.
Tack-on time is only used when necessary to avoid processing a quick assessment and when "tack-on" time is not needed, it is neither calculated nor used.
When the use of "tack-on" time is necessary to avoid processing a quick assessment, the "tack-on" time ASED must be verified by the PTM or their designee.
APS must always verify the ASED and ensure that the tax assessment is processed timely.
For additional information on Calculating the ASED, see IRM 8.21.2, Account and Processing Support (APS) Statute Responsibility, and IRM 25.6, Statute of Limitations.
ITEM 15 - CREDIT AND TAX COMPUTATION ADJUSTMENT-Enter the reference number and amount and circle the + or − sign for each reference number.

Note:

Please refer to Document 6209, IRS Processing Codes and Information, Section 8C, Master File Codes for a complete list of Item Adjustment Codes & Credit Reference Numbers applicable to each MFT.

Also, see IRM 21.6, Individual Tax Returns, or IRM 21.7, Business Tax Returns and Non-Master File Accounts for more detailed information related to each MFT/NMFT.
(a) Reference codes and numbers for Form 940 Item amounts for reference codes "T" must equal the TC 30X amount entered in Item 12.
(1) "T" plus the two character state code – FUTA tax adjustment.
(2) "W" plus the two character state code – FUTA wage adjustment.
(b) Reference numbers for Forms 941, 942, 943, and CT–1 Total item amounts for reference numbers 003, 007, and 008 must equal the TC 30X amount entered in Item 12 when used with MFT 01.
003* - Adjusted total income tax withheld (MFT’s 01, 04, 11)
004* - Taxable FICA wages paid - 9103 and prior (MFT 01)
004* - SSA wages - 9102 and subsequent (MFT 01)
004* - Taxable case wages (MFT’s 04 and 11)
005* - Taxable tips reported (MFT 01)
007* - Adjusted total FICA tax (MFT’s 01, 11)
007* - Adjusted total FICA tax - 9103 and prior (MFT 04)
007* - Adjustment to SSA & Medicare tax - 9102 and subsequent (MFT 04)
008* - Adjusted backup withholding (MFT 01)
070* - Adjusted total of railroad retirement tax (MFT 09)
071* - Adjusted total of railroad unemployment repayment tax (MFT 09)
072* - Tips deemed to be wages - 8102 and subsequent (MFT 01)
073* - Taxable hospital insurance wages - 9103 and prior (MFT 01)
073* - Medicare wages & tips - 9102 and later (MFT 01)
079* - ETE/ETAP IRC 3509 Rate (MFT’s 01, 04, and 11)
111 - Total Income Tax Withheld (MFT's 01, 04, and 11)
112 - Total Social Security and Medicare Tax (MFT's 01, 04, and 11)
184* - Adjustments to withholding (MFT’s 01 and 11)
185* - Adjustments to FICA (MFT’s 01 and 11)
766 - Substantiated payment credits (MFT 01) See (f) below.
767 - Substantiated payment credits (MFT 01) See (f) below.
(c) Reference numbers for Forms 706 and 709
074* - Generation skipping tax - 8610 and subsequent (MFT’s 51 and 52)
076* - Net Estate tax (MFT 52)
077* - Net Gift tax (MFT 51)
Note: The total tax adjustment may consist of one or all reference numbers 074–077, types of tax depending on the dates of validity and whether adjustment to a specific tax is warranted. The SUM of the reference number amount(s) used to reflect the change to the appropriate type of tax must EQUAL the TC 300/301 amount being processed. The ATE must provide these entries or provide the necessary information to make the entry.
(d) Reference numbers for other IMF, BMF, and IRAF cases:
011* - Gross income paid (MFT 12)
160* - IRA Accounts - Increase or decrease in 6% tax on excess contributions (must equal Item 12 tax amount) (MFT 29)
162* - IRA Accounts - Increase or decrease 50% tax on under distribution (must equal Item 12 tax amount) (MFT 29)
194* - Excess regular distribution tax (must equal Item 12 tax amount) (MFT 29)
195* - Excess lump sum distribution tax (must equal Item 12 tax amount) (MFT 29)
221* - Portion of tax deficiency attributable to TMT. IRC 6621(c) was repealed by the Revenue Reconciliation Act of 1989. This reference number is not valid for returns due after 12/31/89. (MFT’s 02, 05, and 30).
222* - TMT - Amount of 120% interest. IRC 6621(c) was repealed by the Revenue Reconciliation Act of 1989. This reference number is not valid for returns due after 12/31/89 (MFT’s 02, 05, and 30).
258 - First-time Homebuyer Credit (FTHBC)
259 - Making Work Pay Credit
260 - Refundable Education Credit
261 - Adoption Credit
301 - 310, 312 - See Form 4136
314* - Energy conservation credit (7810–8712) (MFT 30)
315* - Renewable energy source credit (7810–8712) (MFT 30)
316* - Energy credit carryover (7810–8712) (MFT 30)
317* - Energy credit computer field (7810–8712) (MFT 30)
318 - Qualified Diesel Fuel Tax Credit (8408 and later) (MFT 30)
319 - Obsolete for all tax periods and all MFT’s use reference number 312
320* - Accumulated Earnings Tax (AET)valid for returns due prior to 1/1/86 (MFT 02)
321* - Personal Holding Company (PHC) Tax (MFT 02)
325* - Environmental tax credit valid for tax periods 1/31/87 and later (Forms 990C and 990T) (MFT 02)
326 - Obsolete for all tax periods and all MFT’s use reference number 301
327 - Obsolete for all tax periods and all MFT’s use reference number 301
402 - Increase in Refundable Energy Investment Credit (7810 thru 8011) (MFT 30)
403 - Decrease in Refundable Energy Investment Credit (7810 thru 8011) (MFT’s 02 and 30)
680 - Increase or decrease to Gross Valuation Overstatement Penalty IRC 6659 see Note 3 for returns due after 12/31/89
681 - Increase or decrease to Substantial Understatement Penalty IRC 6661 see Note 3 for returns due after 12/31/89
685 - Penalty for Failure to Notify Internal Revenue Service of Claimed Tax Treaty Provisions
MFT 02 - valid for periods 8710 and later
MFT 30 - valid for periods 8709 and later
686 - Increase or decrease to Fraudulent Failure to File Penalty IRC 6651(f) for returns due after 12/31/89. Valid for all MFT’s
764 - Increase in earned income credit valid for 7512 and subsequent returns (MFT 30 and 31)
765 - Decrease in earned income credit valid for 7512 and subsequent returns (MFT 30 and 31)
766 - Substantial payment credits-increase see (f) below (MFT 30 and 31)
767 - Substantial payment credits-decrease see (f) below (MFT 30 and 31)
806 - Withholding credit increase (MFT’s 05, 30, and 31)
807 - Withholding credit decrease (MFT’s 05, 30, and 31)
878* - Self-employment income adjustment (primary taxpayer)
Reference number 889 must also be entered
No entry if total SE income is less than $400 (MFT 30, and 31)
879* - Self-employment income adjustment (secondary taxpayer)
Reference number 889 must also be entered
The amount should be the total adjustment to earning subject to social security or the amount that brings the total to the maximum dollar limitation-whichever is less
No entry if total SE income is less than $400 (MFT 30 and 31)
881* - Total Positive Income (TPI) (MFT 30 and 31)
882* - All Savers Interest Exclusion
Enter the amount of change (limitation $1,000 for single and $2,000 for joint) 8112 thru 8412 (MFT 30)
883* - Alternative Fuels Production Credit Change (8001 and later)
884* - Alcohol Fuels Credit Change (8010 and later)
885* - Change in Advanced Earned Income Credit (7912 and later) (MFT 30)
886* - Net change to the applicable income field not the total corrected amount of income
MFT 02 - net taxable income, valid for all periods
MFT 05 - income after deductions, valid for all periods
MFT 07 - income after deductions, valid for all periods after 8811
MFT 30 - taxable income, valid for all periods after 7711
887* - Number of Exemptions Change (7712 and later)
The increase or decrease in the number of exemptions will be entered in the cents column, right justified, and must NOT be preceded by a "0" (MFT 30)
888* - Change in adjusted gross income, valid for periods 7412 thru 7511 and 7712 and later. The reference amount will be the NET change to AGI NOT the total corrected AGI. See Note 2 below (MFT 30)
889* - Change in self-employment tax, valid for periods 7412 thru 7511 and 7712 and later. See Note 1 below (MFT 30)
890* - Backup withholding indicator to identify Exam deficiencies which are the result of underreported interest dividends and/or patronage dividend income beginning with tax year 1984 returns. Amount entered must be more than $500. (MFT 30)
891* - Adjustment to primary taxpayer’s unreported tip income. Used to systemically inform SSA of the unreported tip income - 9012 and later. (MFT 30)
892* - Adjustment to secondary taxpayer’s unreported tip income. Used to systemically inform SSA of the unreported tip income - 9012 and later. (MFT 30)
895* - Amount of self-employment income adjustment for the primary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation-periods 9112 and later. (MFT 30)
896* - Amount of self-employment income adjustment for the secondary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation-periods 9112 and later. (MFT 30)
898* - Amount of unreported tip income adjustment for the primary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation (tax periods 9112 and later). (MFT 30)
899* - Amount of unreported tip income adjustment for the secondary taxpayer that is subject to Medicare tax. Do not enter an amount that will cause the total to exceed the maximum dollar limitation (tax periods 9112 and later). (MFT 30)
999* - When separate returns are converted to joint status, enter reference number with "0" amount for the spousal account being reduced to zero. Circle"—" sign to show decrease and enter in right-hand space of cents.
* Reference numbers marked with an asterisk are used to update information fields and/or alert master file to make special interest computations. They DO NOT effect Item 800/801, Appeals/Counsel results.
(e) Reference numbers for Form 720 (Quarterly Federal Excise Tax Return) are the Internal Revenue Service numbers on Form 720, preceded by "0" . The codes are used to update the excise trust funds. They do not adjust tax, credits, or Item 800/801, Appeals/Counsel results.
(f) Reference number 766 or 767 is used when no other reference number is applicable. For example, in claim of right (IRC 1341) cases when an adjustment to credit is needed to satisfy the amount of decrease in tax.
Note:
1. Changes in self-employment income and tax liability will be reflected in Item 15 on Form 5403, for 1985 tax year and subsequent returns. APS is responsible for verifying the accuracy of these entries when present on the Form 5403 Instruction Sheet and correctly coding these entries in Item 15 of Form 5403 to avoid an unpostable condition.
2. Forms 1040 and 1040A, tax periods ending 7412 thru 7511, closed with change in tax liability and with Disposal Code 03, require that any net increase or decrease in Adjusted Gross Income be entered in the increase or decrease line of Item 15, Form 5403. For tax periods 7712 and subsequent, this entry is made for only IMF and only if an AGI figure is presently shown on master file transcript. No entry is made when there is no change in AGI.
3. The Revenue Reconciliation Act (RRA) of 1989 established the Accuracy Related Penalty (ARP) (IRC Sec. 6662). This legislation repealed several penalties and consolidated them into the ARP. Reference number 680 will be used to input the accuracy related penalty for returns due after 12/31/89. For returns due prior to 12/31/89, penalties and corresponding reference numbers or transaction codes are shown below. (These are replaced by ARP and will be input by Ref #680 for returns due after 12/31/89).
Penalty-IRC Code Sec. TC/Ref. No.
Negligence-IRC 6653 350/351
Valuation Overstatement-IRC 6659 680
Substantial Understatement-IRC Sec. 6661 681
E&G Valuation Understatement-IRC Sec. 6660 682

Item 15 Refundable Credit Reference Numbers (CRN)

CRN Increase (Decrease) NAME OF CREDIT
336 Increase (Decrease) In Additional Child Tax Credit
260 Increase (Decrease) In American Opportunity Tax Credit (a/k/a refundable Education Credit or refundable Hope Education Credit)
261 Increase (Decrease) In Adoption Credit (refundable only in tax periods 2010 and 2011)
766 Increase In Corporation - accelerated AMT and research credit
767 Decrease In Corporation - accelerated AMT and research credit
764 Increase In Earned Income Credit
765 Decrease In Earned Income Credit
252 Increase (Decrease) In Excess Social Security & RRTA Tax Withheld (if return posted after 12/31/2006)
806 Increase In W-2 Withholding and Excess Social Security & RRTA Tax (if return posted 12/31/2006 and prior)
807 Decrease In W-2 Withholding and Excess Social Security & RRTA Tax (if return posted 12/31/2006 and prior)
258 Increase (Decrease) In First Time Homebuyer Credit
*** Increase (Decrease) In Fuel Tax Credit Adjustment identified on Form 4136, Credit for Federal Tax Paid on Fuels. See Exhibit IRM 3.17.41-4, Credit Reference Numbers for a listing of the various Fuel Tax Credits and their respective Credit Reference Numbers.
250 Increase (Decrease) In Health Coverage Tax Credit
*** Increase (Decrease) In Recovery Rebate Credit
766 Increase In Regulated Investment Company Credit Form 2439
767 Decrease In Regulated Investment Company Credit Form 2439
253 Increase (Decrease) In Telephone Excise Tax Refund (TETR) - Tax
254 Increase (Decrease) In Telephone Excise Tax Refund (TETR) - Interest

*** Three asterisks will be shown on the Form 5403 Worksheet. The correct Fuel Tax Credit Reference Number must be identified by reviewing Form 4136, Credit for Federal Tax Paid on Fuels, to identify the applicable type of Fuel Tax Credit being adjusted. Contact the ATE, or TCS for assistance if necessary.

ITEMS 15A, 15B, 15C- Reserved for entry by terminal operator.
ITEM 56 SSN–IND – Used when assessing an MFT 31 account. Check PA if the MFT 31 account is the primary SSN. Check SA if the MFT 31 account is the secondary SSN.
ITEM 57 SSN-IND - Current revision of Form 5403 (Rev. 10-2014), includes Item 57. for entry of the Secondary SSN Name Control.
ITEM 16 - APPEALS CODE - Enter the three-digit Appeals Office Code (AOC) reflected on AIMS.
ITEM 20 - CLAIM REJECTION DATE (MMDDYYYY FORMAT) - Enter date of statutory notice of claim disallowance letter, or
date of receipt of Form 2297, Waiver of Statutory Notice of Claims Disallowance.
ITEM 800 - APPEALS RESULTS - Enter total tax and penalty for all Appeals closures (all closing codes EXCEPT 10 and 17). If case is a no-change closure, -0- entry is required. Circle the + or − sign, as appropriate. The total includes:
(a) All Item 12 amounts (plus and minus netted) except interest
(b) All partial assessments processed by Appeals whether master file or non-master file (includes partials for Appeals agreed issues on Counsel cases with closing codes 10 and 17)
(c) Item 15 amounts NOT marked with an asterisk (*) above. The Item 15 amounts included must be netted against Item 12 amounts, if appropriate. (Note: Results for estate tax cases should reflect the net deficiency or overassessment after allowing maximum state death tax credit).
ITEM 801 - COUNSEL RESULTS - Enter total tax and penalty for Counsel closures (closing codes 10 and 17). If the case is a no-change closure, entry of -0- is required. Circle + or − sign, as appropriate. The total includes (a) thru (c) above.
ITEM 802 - APPEALS ADJUSTMENT AMOUNT (NON-TAXABLE) – This item is only completed for Forms 1065, 1120-S and other non–taxable returns in which case the entry in Item 800 would be "0" . Enter total adjustment amount (Sum of lines 2 and 5, Form 4605–A, "Examination Changes-Partnerships, Fiduciaries, Small Business Corporations, Domestic International Sales Corporation" or computer generated format, if used).
ITEM 803 - APPEALS GRADE - Enter last digit of assigned ATE’s grade. (Only number 1 thru 5 are valid.) If no ATE was ever assigned, leave blank.
ITEM 804 - APPEALS TIME - Enter total hours expended on tax period by ATE. If only total hours for work unit is available, enter the average number of hours per tax period (total work unit time divided by total tax periods being closed). If ATE was assigned but no time charged, enter zero. If no ATE was assigned, leave blank.
ITEM 805 - COUNSEL ADJUSTMENT AMOUNT (NON-TAXABLE) – Enter total adjustment amount (Sum of lines 2 and 5, Form 4605–A or computer generated format). This item is ONLY completed for return Forms 1065, 1120–S, and other non-taxable returns in which case entry in Item 801 would be "0" AND will only apply if the case is settled or tried by Counsel.
ITEM 806 - COUNSEL GRADE - Enter last digit of Counsel attorney’s grade as provided by Counsel. (Numbers 0–9 are valid.) If no attorney was ever assigned, leave blank.
ITEM 807 - COUNSEL TIME - Enter the average number of hours per tax period. (Total work unit time as provided by Counsel divided by total tax period being closed.) If attorney was assigned but no time charged, enter zero. If no attorney was assigned, leave blank.
*ITEM 808 - EXAM CLAIM-DISALLOWED AMOUNT - Enter the amount of claim disallowed (whole dollars) by Appeals. (When Item 12 reflects a deficiency (TC 300), the amount entered in Item 808 is the full amount of the claim. When Item 12 reflects an overassessment (TC 301) and there are no Appeals claims, the amount entered in Item 808 is the amount of the claim minus the TC 301 amount). Entry valid only if "Claim Amount Disallowed" field on Examination’s AIMS record (page 2 of the AMDISA) contains an amount equal to or greater than this entry. (See note, Item 810).
*ITEM 809 - APPEALS/COUNSEL CLAIM AMOUNT – If the claim was filed directly with Appeals or Counsel while the return was under consideration, enter the amount of claim for refund or abatement (whole dollars).
*ITEM 810 - APPEALS/COUNSEL CLAIM DISALLOWED AMOUNT - Enter the amount of claim disallowed (whole dollars). (See explanation of amount in Item 808.) Note: If entry is made in items 808 and/or 810, a corresponding entry is generally required in Item 20 above.
* These fields reflect Revenue Base Protection (RBP) amounts. IRM 8.20.3, Account and Processing Support (APS), Appeals Centralized Database System (ACDS). for RBP definitions.
ITEM 811 - CLOSING CODE-Enter the applicable two digit Appeals closing code:
Description Closing Code
Agreed Pre-Ninety 03
Agreed Stat. Notice/Non-filer 04*
Defaulted Stat. Notice 05
Agreed Appeals Docketed 08
Dismissed from Court and:
ATE has time on the case, AND
SNTYPE = 090S or 090D
08
District Counsel Settlement 10
Dismissed from Court and:
there is NO ATE time on the case
10
Dismissed from Court for Lack of Jurisdiction, and:
SNTYPE = 090A ("A" ppeals issued notice)
11
Dismissed from Court for Lack of Prosecution, and:
SNTYPE = 090A (Lack Prosec) ("A" ppeals notice cases only)
12
Unagreed Pre-Ninety 13
Erroneous AIMS Account 33
* Includes all nondocketed non-filers (both 90-day and pre-90-day) where signed agreement constitutes delinquent return. See Item 08(i)(9).
** Closing codes 14, 15, and 16 apply only to, SC Disallowed Claims, PENAPs, and OIC cases. Generally, these cases are not on AIMS.
Note: To ensure the accuracy of AIMS, systemic checks have been incorporated to ensure consistency between the status and closing code. Closing codes not applicable to the current status will cause the CC: AMCLSA adjustment to reject at the terminal. The allowable combinations follow:
AIMS Status Valid Closing Code
80 03–05, 13–16, 18, 19, 33
82 08, 10–12, 14–19, 33
ITEM 36 - HASH TOTAL– Entry by APS
ITEM 39 - DISCLOSURE CODE – Entry by APS
ITEM 42 - ARDI INDICATOR – Entry is required on all closed cases except non-taxable entities. The Accounts Receivable Dollar Inventory (ARDI) indicator will record whether an advance payment of tax and penalty was received by Appeals or Counsel for the tax period being closed and the type payment received as follows:
1 = Full Paid
2 = No Paid
3 = Partial paid
4 = Installment with payment
5 = Installment without payment
6 = OIC in hand (OIC received in Appeals instead of payment)
7 = no payment applicable
ITEM 43 - POSTING DELAY CODE – Entry by APS. Valid entry 1 thru 6. APS will enter if multiple adjustments are required on an account and some must post in later cycles than others. Will allow cycling systemically be entering number of weeks (up to 6) adjustment should be delayed.
ITEM A - SPECIAL HANDLING - Check blocks are given for the more common special handling situations. "Other" block may be used for any