AccessibilitySkip to Top NavigationSkip to Main ContentHome  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 4. Examining Process

Chapter 19. Liability Determination

Section 13. General Case Development and Resolution

4.19.13  General Case Development and Resolution

4.19.13.1  (10-01-2001)
Standard Procedures

  1. Standard examination procedures apply to all cases and include:

    1. Initiating examinations (including the use of initial contact letters)

    2. Dealing with Powers of Attorney

    3. Preparation of audit forms 1902, 4549/4549EZ, 886 (Series), etc.

    4. Taxpayer replies and responses

    5. Handling undeliverable correspondence

    6. Replying to taxpayers

    7. Work paper guidelines

    8. Special Handling situations

    9. Penalties

    10. Follow-up Actions (Form 3198 Notice)

    11. No Response and Unagreed cases

    12. Statutory Notices

    13. Close out Procedures

    14. Statute Control

    15. Responsibilities (Manager, Examiner, Clerk) — QMS monitoring (ref.)

    16. Procedures for Fraud Referrals from Campuses to the Area Office Fraud Detection function

    17. Procedures for Taxpayer Advocate Service Referrals

4.19.13.1.1  (01-01-2007)
Programs and Source Codes

  1. The following are Correspondence Examination Programs and corresponding Source Codes:

    Correspondence Examination Program Source Code
    Alternative Minimum Tax 26
    Alimony 06
    Claims 30, 31, 32, 35
    CI Referrals (i.e., QRP, Preparer Schemes, RPAT) 06, 08, 11, 70
    Dependent Database 06
    DIF CORR Source 02 or 06
    DUPTIN (EITC & Non-EITC) 06
    EITC Ban Penalties (2 yr. & 10 yr.) 06
    EITC Certification Programs 06
    EITC Recertification (Non-Claims – i.e., PC0027, 0028, 0257, or 0694) 06
    Employee Returns 46
    Erroneous Refund 20
    Estate and Gift Tax No Source Code
    Federal/State Cooperative 77
    Filing Analysis Module (FAM) Production 06
    Health Coverage Tax Credit Advanced Credit & Year End 06
    Health Coverage Tax Credit Claims 30
    Health Coverage Tax Credit Unallowables 03
    High Underreporter Referrals 14
    Ineligible (EITCRA) 70
    Informants 70
    Information Returns 85
    Math Clerical Abatement 06
    Math Error Program 06
    Married Filing Separately 06
    Midwest Automated Compliance System (MACS) Filters 11 or 20
    Multiple Filer Source 04
    Non-Filers (i.e., TDI Non-Filers, AEITC Non-Filers) 24
    Non-Filers – High Income Non-Filers Only (>$100K in Income.

    Note:

    changed to >$200K for FY 2007.

    )     		25
    Qualified Personal Service Corporation No Source Code
    Research Programs & Tests 11
    Self Employment Tax 08
    Substitute For Return 24
    Taxable Gain on Sale of Residence 11
    Taxpayer Requests (i.e., Prompt Assessment Requests) 73
    Tip Income (Filed Returns) 06
    Tip Income (Non-Filers) 24
    Unallowable Items 03 or 48

  2. For a complete listing of all Source Codes available to Examination, please refer to the AIMS Handbook at IRM 4.4.1-27, Document 6209, or http://sbse.web.irs.gov/AIMS/.

4.19.13.2  (10-01-2001)
Seven Auditing Standards

  1. The seven auditing standards outline the criteria determined to produce a quality examination and are guidelines to assist examiners in completion of all cases. The seven auditing standards are used in conjunction with the applicable program procedures for evaluating case quality.

4.19.13.2.1  (06-14-2005)
Standard 1 — Adequate Consideration of Significant Issues

  1. Purpose: This standard measures whether consideration is given to the Classified/Program as well as large, unusual or questionable (LUQ) items during the course of the examination.

  2. Overview: Consideration of all significant tax issues during the examination is required.

  3. Key Elements:

    1. Classified/Program Items Considered

      • All Classified/Program Items (including flow-through adjustments for TEFRA/Non-TEFRA) were considered.

    2. Scope of Examination was Appropriate

      • Scope of Examination was limited or expanded to the point that all LUQ items were properly considered for the correct determination of tax liability. The scope of the examination should stay within the scope of the issues identified by Headquarters or the issues identified during manual classification. Consult your manager and secure approval to expand or limit the scope of the examination when other LUQ issues are present. The workpapers must reflect this decision. Sound judgment must be exercised when, in the course of the examination, additional issues appear to warrant expanding the examination.

    3. Consideration of Prior/Subsequent Year Returns.

      • Prior/Subsequent year returns containing the same or correlative issues as in the year examined were considered and/or pursued when appropriate. Computational adjustments to carryback/carryovers were considered.

4.19.13.2.2  (10-01-2001)
Standard 2 — Examination Depth and Conclusions Reached

  1. Purpose: This standard measures whether the examined issues are completed to the extent necessary to provide the examiner sufficient information to determine the substantially correct tax based on the correct application of tax law.

  2. Overview: The depth of the examination is determined through inquiry, observation, and analysis of appropriate source documents, oral testimony, contacts etc., to ensure full development of relevant facts concerning significant issues. Conclusions are supported by applicable law, Regulations, court cases, Revenue Rulings, etc.

  3. Key Elements:

    1. Adequate Examination Techniques Used

      • Appropriate examination techniques were utilized (e.g. oral testimony, inquiry, observation or analysis). The taxpayer’s records were reconciled to the tax return: taxpayer’s Schedule K-1 was reconciled to the tax return; sampling techniques were used; proper source documents were requested and evaluated; and taxpayer and/or third party contacts were made when appropriate.

    2. Correct Conclusions Reached

      • The case file reflected application, interpretation, and explanation of applicable law, derived from developed facts and circumstances.

4.19.13.2.3  (01-01-2008)
Standard 3 —Workpapers Support Conclusions

  1. Purpose: This standard measures documentation of the scope, depth, and conclusions reached in the examination.

  2. Overview: The workpapers provide the principal support for the examiner’s report and document the procedures applied, information obtained, and conclusions reached in the examination.

  3. Key Elements:

    1. Fully Disclose Examination Procedures, Audit Trail, Findings, and Conclusions

      • The workpapers disclosed the scope, depth, judgment, examination techniques, and findings used in the examination of each significant item and the conclusions reached. Workpapers should be typed in proper format using upper and lower case letters.

    2. Adjustments in Workpapers Agree with Report

      • Adjustments in workpapers were reflected on the examination report if there is a report, or with the case disposition/case actions.

    3. Examination Activities Adequately Documented

      • The case actions or contacts were adequately documented (e.g. changes to entity information were recognized/updated). The case file showed complete and accurate documentation of case history (e.g. taxpayer, representative, or third party contacts as well as examination research).

      • Taxpayer/Representative telephone numbers were recorded and updated when necessary.

4.19.13.2.4  (10-01-2001)
Standard 4 — Report Writing Procedures Followed

  1. Purpose: This standard measures the presentation of the examination findings in terms of content, format, and accuracy.

  2. Overview: This standard addresses the written presentation of examination findings in terms of content, format, and accuracy.

  3. Key Elements:

    1. Applicable Report Writing Procedures Followed

      • Applicable report writing procedures including consideration of automatic adjustments and alternative positions were followed. Explanations, schedules, and attachments to the report were accurate, clear, concise, legible, and grammatically correct.

    2. Correct Tax Computation

      • The tax computation was correct and used the method most beneficial to the taxpayer. All prior adjustments to the tax return were considered, including math corrections, amended returns and previous audit adjustments. Prior audit adjustments impacting base period income were considered in computing income averaging.

    3. Correct Credit Computation

      • The credit computation was correct and used the method most beneficial to the taxpayer.

4.19.13.2.5  (10-01-2001)
Standard 5 — Penalties Properly Considered

  1. Purpose: This standard measures whether applicable penalties are considered and applied correctly.

  2. Overview: The application of appropriate penalties is required to be considered during all examinations.

  3. Key Elements:

    1. Recognized, Considered and Applied Correctly

      • The case reflected consideration of and, if applicable, assertion of all applicable penalties. Indicators of fraud were recognized and a referral was made, if warranted. The case file was documented sufficiently to support the decision whether or not to assert any penalties. Penalties that were assessed were abated when the audit resulted in a tax decrease.

    2. Computed Correctly

      • The penalties were computed correctly.

4.19.13.2.6  (10-01-2001)
Standard 6 — Timely Actions

  1. Purpose: This standard measures the utilization of time as it relates to the examination process.

  2. Overview: Timeliness of actions during the examination process is an essential component of each examination. Actions are initiated and completed within established time frames.

  3. Key Elements:

    1. Examination Actions Timely

      • All requests for documentation/information/signature completed within established time frames and provided a date for response.

    2. Examination Response Timely

      • Paper response to taxpayer reply was made within established time frames (initial response 30 days).

      • Phone response to taxpayer telephone inquiries within established time frames (3 business days).

4.19.13.2.7  (01-01-2008)
Standard 7 — Case Administration

  1. Purpose: This standard measures whether the administrative aspects of the case are addressed.

  2. Overview: This standard encompasses correspondence, statute control, case assembly, power-of-attorney (POA) disclosure procedures and closing procedures.

  3. Key elements:

    1. Correspondence

      • The appropriate letter was used to respond to the taxpayer’s inquiry or to notify the taxpayer of the results of the examination. The envelope and cover letter were completed correctly and included contact information and stop number. The correspondence was legible, grammatically correct, addressed all issues and was sent to the correct address. The Form 4549 must include the name and unique identifying number of the person to contact.

    2. Statute Control Followed

      • The appropriate consent to extend the statute of limitations was prepared correctly and secured timely; consents were executed by authorized parties. Form 895 and/or statute identification procedures were followed in accordance with IRM procedures.

    3. Case Assembly

      • All original documents were returned to the taxpayer.

    4. Case Completion

      • Form 5344, closing instructions, IDRS research (e.g. AIMS, PCS, CFOL, TXMOD, etc.) inputs and updates were accurately completed in accordance with IRM procedures.

    5. POA/Disclosure Procedures Followed

      • CAF file researched and POA properly recognized and processed in accordance with IRM procedures. Examiner complied with disclosure guidelines involving third party contact.

4.19.13.3  (10-01-2004)
Researching Cases

  1. Before evaluating the information in the case file and prior to evaluating the taxpayer’s response, examiners must perform IDRS research to check the validity of current AIMS data and to ensure that no activity has been taken on the taxpayer’s account that may affect the case under examination. All research performed must be documented on Form 4700 or Form 4318, Examination Workpapers. The following chart contains guidelines and is not all inclusive. For additional information regarding the Command Codes listed, examiners should refer to Document 6209, ADP and IDRS Information.

    To Determine: Research through IDRS Command Code(s) and Definer(s)
    Current AIMS status AMDISA
    Taxpayer address AMDISA, INOLES, IMFOLE, ENMOD
    Taxpayer's address pending ENMOD
    Full AIMS display AMDISA
    Mail received date AMDISA
    Prior AIMS status of case AMDISA
    AIMS Freeze Codes AMDISA
    Organization Code with AIMS assignment AMDISA
    Statute expiration date TXMODA, AMDISA, IMFOLT
    Date return was received TXMODA, AMDISA, IMFOLT, RTVUE
    Any secured amended returns TXMODA, AMDISA, IMFOLT
    Master File Freeze Codes TXMODA, IMFOLT, SUMRY, IMFOLI
    Refund status TXMODA , IMFOLT
    Status of account TXMODA, IMFOLT, SUMRY
    Other adjustments TXMODA, IMFOLT, IMFOLA
    IDRS control assignment TXMODA, SUMRY

    Note:

    If TXMOD is not available, then IMFOL has the most current information available. When conducting research, do not use MFREQ to generate a TXMOD if it is not available.

    Recertification indicator present IMFOLE, ENMOD, INOLES
    Spouse’s SSN INOLE, INFOLT, ENMOD, RTVUE
    Taxpayer’s name control (SSA information) INOLE
    Other Campus controls IMFOLI
    Pending transactions REMRQ, TXMODA, ENMOD, SUMRY
    Date of birth INOLE, RTVUE, MFTRAU
    Past filing status INOLE, IMFOLI
    Any other SSN’s under which taxpayers have filed returns INOLE
    Duplicate use of SSN for: — EITC — Exemption DUPOL
    Dependent Database rules that have fired DDBOL
    Citizenship Code DDBKD, MFTRAU
    Xref SSN on duplicate condition DDBOL, DUPOL

    • Social Security information

    • DDBOL accessed through child’s SSN

    • KIDLINK (child’s Social Security application which indicates parents)

    • Duplicate TIN information

    • Parents names

    • DDBKD

    • MFTRAU

4.19.13.4  (01-01-2007)
Report Generation Software (RGS) System

  1. For helpful information regarding downloading, new developments, system updates, read me files, etc., refer to the following (RGS) websites:

    • Systems Administrators — http://rgs.web.irs.gov/index.htm

    • Users — http://rgs.web.irs.gov/users/rgsws1.htm

  2. RGS batch processing is the systemic processing of audit cases. This system also creates inventory records and case data for every case that establishes in RGS for the Campus on a weekly basis.

  3. Records received from the Dependent Database (DDb), and certain other Batch Processing supported Project Codes, are established in one of the batch processing "B" groups. In B0, the process systemically computes tax, generates letters and reports for printing, creates work center files, creates case history reports, creates examination workpapers, creates inventory records and generates AIMS update records. If the taxpayer never responds to any correspondence, these cases will systemically move through the audit process to case closing.

  4. Records rejected from B0, and records created for other programs, are established in the batch processing B1 group. This process creates work center files and inventory records. The cases need to be manually worked on RGS by a tax examiner. Records directed to the B2 processing group are for programs that require a review of the audit report prior to issuing to the taxpayer. B2 provides all of the functionality of B0 except for CPS mail out. After the reports and letters are reviewed, the letters are printed and mailed locally and the case is placed into group B0 for aging to the next status.

  5. RGS creates numerous reports that can be printed to assist tax examiners and managers to monitor individual tax examiner inventories, weekly receipts, cases updated, unit inventories, section inventories, branch inventories, etc.

  6. A copy of all letters, except Letters 692 and 555 (workpapers must be appropriately notated), reports, revised reports, and workpapers must be saved to Case File Documents folder or Office Documents folder (whichever applicable) on RGS (CEAS).

    Note:

    Form 886-A issued with Letter 692 or 555 must be saved to the case.

4.19.13.5  (01-01-2006)
Work Papers for All Cases

  1. Cases established and worked through RGS Batch Processing will have work papers systemically created and annotated with actions completed. If B0, and the taxpayer does not respond to any correspondence, the RGS system will automatically continue to annotate workpapers through the closing process. No manual tax examiner entries are required unless a response is received from the taxpayer. If B1, workpapers are initiated through RGS, the tax examiners must continually update all actions taken.

  2. On all cases where tax examiners must make entries, include the following information:

    1. Taxpayer's name.

    2. Tax year examined.

    3. Date(s) work paper prepared.

    4. Name of examiner.

    5. Questionable items.

    6. Nature and date of correspondence.

    7. Decision and reason for determination on income tax liability.

    8. Taxpayer's home and work numbers.

    9. Address change.

    10. Decision and reason for determination and whether or not to impose the delinquency, estimated tax, negligence, accuracy related (returns filed after 01-01-90), substantial understatement of liabilities penalties or 2/10 year EITC ban.

    11. If POA is on file for the taxpayer, annotate "yes" along with the POA’s name and address. If no POA is on file, no annotation is required.

  3. Work paper documentation is extremely important. Ensure all adjustments are fully explained. Include the reasons for any penalties that are assessed and the taxpayer’s explanations. This documentation is very important, especially if interest abatement or burden of proof ever become issues. Work papers should show that examiners:

    1. Developed case appropriately.

    2. Performed the applicable tests.

    3. Fully considered all factors in making the determinations of an issue, and

    4. Applied tax law correctly based on the facts of the case. See IRM 4.10.9.1(3).

  4. Document any third party contacts. A record of these contacts will be periodically provided to the taxpayer. Provide this information upon request of the taxpayer.

  5. Keep a copy of previous reports that have been modified (or cases on RGS, before revising report, print out old report and put an x on the old report, then send for association).

  6. RGS archives and stores reports and case. Do not print out old reports. There will be no case folder. Annotate history that a revised report was sent to the taxpayer. Save any revised reports under "Case File Documents. " For any case files residing in RGS, do not print work papers, reports, etc. at closing. Do not make case folders. The case will store electronically.

4.19.13.5.1  (01-01-2007)
IRC Section 6404(g) Suspension of Interest and Certain Penalties

  1. IRC Section 6404(g) enacted by RRA 98, Section 3305, suspends interest and certain penalties in cases where the Service fails to provide a notice of liability to the taxpayer within the specified time period.

  2. In the case of an individual, the Service has 18 months, beginning on the later of:

    1. the date the return is filed; or

    2. the due date of the return without regard to extensions, in which to provide notice to the taxpayer specifically stating the taxpayer’s liability.

  3. If the notice is not provided to the taxpayer before the close of the 18-month period, interest and certain penalties are suspended for the following period:

    1. beginning on the day after the close of the 18-month period, and

    2. ending the date which is 21 days after the date on which notice is provided to the taxpayer.

  4. The notice must state the liability and the basis for the liability.

  5. The suspension applies to tax years ending after July 22, 1998.

  6. IRM 20.2.7 contains information on when and how to input a TC 971 AC 064 on these cases.

4.19.13.5.2  (10-01-2001)
Managerial Approval of Penalties

  1. For notices issued and penalties assessed after June 30, 2001, each notice of penalty must include the name of the penalty, the Internal Revenue Code Section for the penalty, and a computation of the penalty.

  2. Prior to assessment of any penalty, written supervisory approval is required by the immediate manager, or higher-level, official over the employee initially proposing the penalty.

    1. Penalties assessed under IRC Section 6651 (Failure to File/Failure to Pay), 6654 (Failure to Pay Estimated Income Tax), and 6655 (Failure by a Corporation to Pay Estimated Income Tax) are excluded from this requirement.

    2. Any other penalty automatically calculated through electronic means is also excluded from this requirement.

    3. This procedure applies to penalties on all cases including examination reports for TEFRA related partners and shareholders and non-TEFRA related partners and shareholders. It also applies to the 2-year and 10-year EITC bans.

    4. Manager must sign on Form 4700, Examination Workpapers, where the penalty needing approval is being stated.

  3. Cases worked in the Tip Program are excluded from this requirement. See IRM 4.19.15.30.3.

4.19.13.6  (01-24-2006)
Initial Contact

  1. Unless otherwise noted, send initial contact letter requesting information or explaining issue(s) under examination, correction(s) and asking for agreement or verification of issues.

    Reminder:

    Ensure appropriate POA contacts are made.

  2. For cases not established and worked in RGS, prepare case file, including Form 4607, Examination Action and Time Record and annotate history actions taken such as date letter is sent, initials of Preparer, and time spent on case.

  3. Suspend files awaiting taxpayer response.

  4. If no reply, purge file on the 45th day for tax examiner preparation of proposed report. If the initial contact letter (566B-EZ, 525, etc.) included an audit report, purge file on the 45th day for preparation of Statutory Notice of Deficiency.

4.19.13.7  (10-01-2001)
Powers of Attorney

  1. Refer to IRM 21.3.7, Processing Third Party Authorizations onto the Centralized Authorization File, for guidelines on processing powers of attorney and additional information.

    If Then
    The taxpayer sends a Form 2848, Power of Attorney and Declaration of Representative, Check IRM 21.3.7 for processing procedures if the POA is not on the CAF (Central Authorization File). Retain copy of Form 2848 for case file.
    The POA is on the CAF file and the information matches the Form 2848, It is not necessary to submit the form for processing. File the form with case.
    The Form 5546 or tax return indicates that a POA is on file, Research the CAF to identify the POA.
    Working cases with no tax returns or Form 5546 , Research to see if there is a POA on file.
    POA information is available for the taxpayer for the year under examination, It should be included on Form 3198, Special Handling Notice, and attached to the case folder. Also, annotate workpapers "yes" along with the POA’s name and address.
    No POA is on file for the taxpayer for the year under examination, No work paper annotation is required.
    There is a POA on file for the taxpayer for the year under examination and correspondence is sent to the taxpayer, Copies of the correspondence sent to the taxpayer must also be sent to the POA using Letter 937.
    The case is worked on RGS, The POA information must be input to generate correspondence to the POA.

4.19.13.8  (10-01-2001)
Section 7602(c)(1) Third Party Contacts

  1. When third party contact is applicable, the procedures outlined in IRM 4.10.1.6.12, Examination of Returns, should be followed. Letter 3164(SC) is used by Examination when initiating a request for contact with a third party.

4.19.13.9  (03-03-2006)
Taxpayer Replies

  1. Perform "first read" within 2 work days of receipt in Examination on all taxpayer replies. All replies should be worked consistently with the following guidelines:

    If Then
    Question asked or information requested not case related Photocopy, mark area with question or request and route to adjustment correspondence.
    During taxpayer contact or correspondence it appears there may be a hardship situation Complete Form 911, Request for Taxpayer Advocate Service Assistance, and refer the taxpayer to the Taxpayer Advocate Service (TAS). See IRM Part 13 or IRM 21.1.3.18 for more information.
    A Form 911, is received from the taxpayer Expedite the form to the TAS Office in the Campus.
    Reply relates to case Associate replies with case file within 5 days of receipt in branch and update AIMS to correct Status Code, 54, 55, or 57. Use the appropriate forms and follow special handling procedures.
    Reply is 30 days old or older Acknowledgment letter is sent advising taxpayer reply received and answer will be issued within 30 days (every effort must be made to respond within 30 days).
    Reply needs technical assistance or evaluation of records sent by taxpayer Assign to tax examiner on first in first out basis with frozen refunds taking priority.
    Reply is a signed agreement (either a signature on the designated line of the report or a signature anywhere in the correspondence that includes taxpayer comments that imply agreement) Close as agreed and complete Form 5344, Examination Closing Record.

    Reminder:

    On joint return cases, both signatures must be secured unless the deficiency is full paid. Statutory Notice of Deficiency procedures must be used for unagreed spouse if deficiency is not full paid.

    Note:

    See IRM 4.19.13.11 if a payment is received after a 90-day letter is issued but no signed agreement is received from the taxpayer.

    Taxpayer requests correction with no remittance. Issue Letter 692 and revised report, if necessary.
    Remittance is attached to reply and was not deposited by Receipt and Control Branch with a TC 640. Follow instructions in the IRM 3.10 and IRM 4.4.24 to dispose of remittance.
    Request is for additional explanation. Forward to tax examiner to prepare correspondence to taxpayer (attempt should be made to reach taxpayer by telephone if the number has been provided or can be found on ENMOD).
    Reply contains explanation of items questioned. Analyze information provided and process accordingly.
    Reply agrees with deficiency and taxpayer requests an installment agreement or states that he/she is unable to pay the proposed tax. Document the taxpayer's request for an installment agreement or the taxpayer statement that he/she is unable to pay the tax. Forward the installment agreement or other document requesting an installment agreement and a copy of the proposed examination report (4549/4549EZ) to the co-located Compliance Service Collection Operation (CSCO). Complete and issue Letter 86C to the taxpayer acknowledging the request for an installment agreement and informing the taxpayer the installment agreement has been forwarded to another office for processing. The toll free telephone recorded on the 86C letter should be based on the taxpayer's BOD shown on Masterfile. For Small Business/Self-Employed taxpayers, use 1-800-829-8374, and for Wage & Investment taxpayers, use 1-800-829-0922.
    Documents received from the taxpayer are original documents. Photocopy the documents for the case file and return the original documents to the taxpayer.

    Reminder:

    On all types of cases, if taxpayer’s telephone number is available, the taxpayer should be called, if warranted, to request additional information needed instead of sending Letter 692if the documentation received does not revise the exam report. However, if attempts to reach the taxpayer by telephone were unsuccessful, send Letter 692.

    Telephone contact should also be attempted, if warranted, after issuance of Notice of Deficiency if less than 15 days until default and information submitted is not sufficient to make a change. All telephone contacts must be documented in work papers.

4.19.13.9.1  (03-09-2006)
Taxpayer Responses — Additional Information Needed

  1. How to Work — Please see — If And Then — Chart below.

    If And Then
    Taxpayer replies to Letter 566 or any initial contact letter in which the audit report was not issued with the letter Additional information is needed:

    • attempt to reach the taxpayer by telephone is unsuccessful or

    • you reached the taxpayer by telephone and the information received is insufficient

    • Send Letter 525 with a Form 4549/4549EZ.

    • Update case to Status 22.

    • Tell taxpayer why the information he sent is not sufficient and what is still needed.

    • Suspend for 45 day period.
    Taxpayer replies to Letters 566B, 566B-EZ or 525 Additional information is needed and the report is revised

    • Send Letter 692 with revised report, Form 4549/4549EZ

    • Update case to Status 23.

    • Tell taxpayer why the information received is insufficient and what information is still needed.

    • Suspend for 30 day period.
    Taxpayer replies to CP 75 or CP 75A Taxpayer contacts us by either telephone or correspondence and agrees with all the issues

    • Send Letter 525 with a Form 4549/4549EZ, Do not use Letter 692.

    • Update the case to Status 22.

    • Suspend case for 30 day period.
    Taxpayer replies to CP 75 or CP 75A The taxpayer provides correspondence, but further verification of the issues is required

    • Explain to the taxpayer what additional information is needed.

    • Send Letter 525 with a Form 4549/4549EZ, Do not use Letter 692.

    • Update the case to Status 22

    • Suspend case for 30 day period.
    Taxpayer replies to Letters 566B, 566B-EZ or 525 Additional information is needed and the report is not revised

    • attempt to reach the taxpayer by telephone is unsuccessful or

    • you reached the taxpayer by telephone and the information received is insufficient

    • Send Letter 692 with a copy of the original report, Form 4549/4549EZ.

    • Update case to Status 25.

    • Tell taxpayer why the information he sent is not sufficient and what information is still needed.

    • Suspend for 15 day period.

    Note:

    If the taxpayer is reached by phone and agrees to send additional information, update the case to Status 25 and suspend for 30 days.

    Taxpayer replies to Letters 566B, 566B-EZ or 525 You successfully reach the taxpayer by telephone and

    • you discuss what items are still needed

    • and the taxpayer implies the documentation will be sent

    • Move the case to Status 25.

    • Suspend the case for 30 days and

    • Update the work papers documenting your conversation with the taxpayer.

    Note:

    Don't send Letter 692 or a copy of the report.
    The taxpayer replies to the first Letter 692 with inadequate documentation

    • Attempts to reach the taxpayer by telephone are unsuccessful or

    • You reached the taxpayer by telephone and the information received is insufficient

    • Send the case to 90 days. Be sure to include the following verbiage on the 886A (which will be included with the 90 day letter):
      "Thank you for your information dated xxxxxx. After a review of your documents we are unable to change our prior determination." Explain the reason why you could not change the determination.

    Taxpayer replies after 90-day letter Additional information is needed and attempts to reach the taxpayer by telephone are unsuccessful

    • Send Letter 555.

    • Tell taxpayer specifically why the report is unchanged (e.g. The school records you sent are not for the year in question, i.e. 2003).

    • Include this paragraph with Letter 555 and remind taxpayer of the following if you talk to him/her on the telephone:
      "Your time to petition the United States Tax Court will end on _______. (Insert or tell taxpayer last date to petition.) However you may continue to work with us to resolve your tax matter, but we cannot extend your time to petition the United States Tax Court beyond _________. (Insert or tell taxpayer last date to petition.)"

4.19.13.9.2  (01-01-2005)
Evaluating Taxpayer Responses

  1. Evaluate the taxpayer’s written correspondence and take the next action as soon as possible, but not later than 30 days from the Internal Revenue Service mail received date.

  2. Judgment must be used based on the facts and circumstances in each case to make a proper substantially correct determination. Workpapers must contain all determinations, facts and circumstances, pertaining to the case obtained either by telephone or written correspondence. Caution must be used when leaving messages on taxpayer answering machines or using cell phones. See IRM 11.3.2.6.1 and IRM 11.3.2.6.2 for more detailed information.

  3. If the taxpayer’s telephone number is provided on ENMOD or in the correspondence received, call the taxpayer if appropriate, to request additional information instead of sending a request for additional information letter if the documentation sent in does not revise the exam report. However, if the attempt to reach the taxpayer by telephone is unsuccessful, send the request for additional information letter.

    Reminder:

    Update ENMOD to reflect changes in the taxpayer's phone number.

    Note:

    Telephone contacts must be documented in the work papers.

  4. If during a taxpayer contact or correspondence a taxpayer asks to be referred to TAS or the taxpayer meets TAS case criteria outlined in IRM 13.1.7.2, complete Form 911, Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), and refer the taxpayer to TAS. See IRM 13.1.7, Taxpayer Advocate Case Processing, Taxpayer Advocate Service Case Criteria.

  5. If a Form 911 is received from the taxpayer, expedite the form to the TAS Office in the Campus.

4.19.13.9.3  (10-01-2003)
Fax Signatures

  1. The Tax Administration Council (TAC) approved the expanded use of faxes for receiving information and documents from taxpayers and practitioners. The changes are aimed at reducing taxpayer/practitioner burden as well as reducing the time it takes to resolve taxpayer cases and inquiries. The receipt of faxes should not require any significant changes to how the IRS handles open cases with taxpayers. It was intended as another means to receive case information.

  2. These general guidelines are applicable to all divisions and cover operations related to income tax, employment tax, excise tax, estate tax, gift tax, and generation skipping tax, as well as tax exempt and employee plans determinations.

  3. This allowance applies to inquiries and interactions conducted by Field Assistance, Accounts Management, Compliance Services, Field Examination, Field Collection, Determinations Units, Appeals, and the Taxpayer Advocate Service. Documentation, forms, letters, and returns can be received via fax in these circumstances even if a taxpayer signature is required since Chief Counsel has advised that in circumstances where contact with the taxpayer has been made and documented, faxed signatures are legally sufficient.

  4. The IRS will not acknowledge faxes received from taxpayers in the course of tax administration activities by a return fax. Exceptions can be made in unusual circumstances as determined by IRS management.

  5. Submission of documentation, forms, letters, and returns related to post filing/ non-filing inquiries and interactions can be allowed via fax based on taxpayer or IRS request unless there is a specific prohibition.

    • Power-of-Attorney ( Form 2848)

    • Taxpayer Authorization ( Form 8821)

    • 1120S Election ( Form 2553)

    • Appeals Conference Requests

    • Responses/documentation needed to resolve filing or post-filing questions or correspondence

4.19.13.9.4  (10-01-2004)
Specific Guidance on Use of Faxes in Tax Administration Processes

  1. The following specific documents/forms/letters will continue to be accepted by fax in routine operations:

    • Requests for Innocent Spouse Relief ( Form 8857 )

    • Taxpayer Statement About a Refund ( Form 3911)

    • Installment Agreements ( Form 433-D)

    • Letter to designate a payment

    • Letter to request non-assertion of penalty

    • Letter to provide reasonable cause statement

    • Supporting Statement to Correct Information ( Form 941C)

    • Election by a Small Business Corporation ( Form 2553)

  2. Consents to assess additional tax ( Form 4549 , Form 870, and others) of $25,000 or less can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax. Consents to assess tax in excess of $25,000 should be secured with original signatures that are delivered in person or by mail.

  3. Taxpayer closing agreements involving tax amounts of $25,000 or less can be accepted by fax if taxpayer contact has been made and the case history documents the date of contact and the desire of the taxpayer to submit the consent by fax. Closing agreements for tax amounts in excess of $25,000 should be secured with original signatures that are delivered in person or by mail.

    Note:

    Faxed Agreements require an entry on Form 5344, Page 2, Line 416.

  4. Employee Plan and Exempt Organization determination letter applications will not be accepted via fax.

  5. Determination Letter Requests related to income tax, gift tax, estate tax, generation-skipping transfer tax, employment tax and excise tax matters will not be accepted via fax.

4.19.13.10  (10-01-2004)
Monitoring Overage Replies

  1. Monitoring procedures are used to ensure a response is initiated to taxpayers within 30 calendar days of receipt of correspondence.

  2. When any correspondence is received, the earliest IRS correspondence received date (CRD) should be entered on AIMS within five (5) work days from the date it is received in Exam.

  3. When possible, CONSIDER all case related correspondence before a Statutory Notice of Deficiency is issued to a taxpayer.

    If Then
    The current date is less than 70 days from the CRD Update AIMS to Status Code 54
    A reply is sent to the taxpayer within 22 days of the CRD No interim letter will be sent
    No reply sent to taxpayer, AIMS shows Status Code 54, and the CRD is at least 23 days from the current date but less than 70 days Acknowledgment Letter 3500 will automatically generate to the taxpayer and give a reply date of 75 days from the CRD.
    No reply sent to taxpayer, AIMS previously updated to Status Code 54, and the CRD is at least 70 days from the current date but less than 115 days AIMS will automatically update to Status Code 55 and Interim Letter 3501 will generate and give a reply date of 115 days from the CRD.
    No reply sent to taxpayer, AIMS previously updated to Status Code 55, and the CRD is more than 115 days from the current date but and less than 120 days AIMS will automatically update to Status Code 57 and a second Interim Letter 3501 will generate and give a reply date of 150 days from the CRD.
    If the CRD is being entered for the first time and the current date is more than 70 days from the CRD but less than 115 days Update AIMS to Status Code 55. Interim Letter 3501 will generate to the taxpayer and give a reply date of 115 days from the CRD.
    If the CRD is being entered for the first time and the current date is more than 115 days from the CRD but less than 120 days Update AIMS to Status Code 57. Interim Letter 3501 will generate to the taxpayer and give a reply date of 150 days from the CRD.
    If the CRD is being entered for the first time and the current date is more than 120 days from the CRD Update AIMS to Status Code 57. No Interim letter will generate. Take immediate action to contact taxpayer.
    Inventories contain mail that has been updated to AIMS Status Code 55 or higher Operations manager should use the weekly ARP2540 Report to identify cases.

  4. The following actions apply when correspondence is received and AIMS Status Code 24 (Statutory Notice of Deficiency):

    If Then
    Correspondence is received within 50 days of the Status 24 date and the current date is less than 30 from the CRD Input CRD on AIMS. Interim Letter 3500 will generate giving a reply date of 30 days from the date CRD input. Evaluate the case and mail response as early as possible. No additional interim letter will generate.
    Correspondence is received within 50 days of the Status 24 date and the current date is more than 30 from the CRD but less than 51 Input CRD on AIMS. Interim Letter 3501 will generate. Evaluate the case and mail response as early as possible. No additional interim letter will generate.
    Correspondence is received more than 50 days after the Status 24 date or the current date is more than 50 from the CRD Input CRD on AIMS. No Interim letter will generate. Take immediate action to contact taxpayer, and consider the reply.
    Case in AIMS Status 24 with a CRD Use the weekly ARP 2540 Report to identify cases. Operations manager should use Table SC 35 to monitor inventories and ensure cases are worked promptly.

  5. Cases in AIMS Status 24 with correspondence received must be worked with priority, above other replies. Use weekly ARP2540 Report to identify these cases.

4.19.13.11  (01-24-2006)
No Response and Unagreed Cases

  1. Taxpayers do not always answer or agree to the initial contact letters, letters with reports of examination and/or statutory notices. If the taxpayer does not answer by telephone or in writing:

    1. Follow up with a telephone contact when possible.

    2. Use clerical resources whenever possible to prepare letters and reports.

    3. Issue a letter, appeal rights, and report of examination (see letters section for the proper letter for program).

    4. Use Letter 525(SC), with copies of initial contact and report of examination.

    If Then
    Contact was 30 day letter with report Issue Notice of Deficiency after 45 calendar days have passed and report sent.
    Taxpayer requests an interview or Appeals conference

    1. Make telephone contact to try to resolve issues before transferring case.

    2. The case file must contain enough information to support the transfer and workpapers should reflect manager’s approval. Transfer to appropriate Area Office for necessary action.

    3. If the case was worked in RGS download case information (exam report, workpapers, history sheet, etc.) to a disk.

    4. Release frozen refund on Unallowable, EITC and abatement returns.
    Taxpayer remits the correct amount but does not sign the agreement and Notice of Deficiency has not been issued Close the case as agreed.
    Notice of Deficiency has been issued

    1. If taxpayer signs the examination report/waiver sent with the Notice of Deficiency, the case may be closed agreed.

    2. If the taxpayer does not sign the agreement/waiver, in accordance with Rev. Proc. 84-58, cases where a payment was received after a Notice of Deficiency was issued, cannot be closed until the period for filing a petition with Tax Court has expired and no petition was filed. The case will then be closed as a default if no petition was filed.

    Note:

    If the correct payment was received prior to the date the Notice of Deficiency was issued which was not a cash bond, follow instructions above for taxpayer remits correct amount.

    No response to Notice of Deficiency Close file as default.

4.19.13.12  (01-01-2006)
Statutory Notices

  1. IRC Sections 6212 and 7522 provide authority to issue Statutory Notices of Deficiency.

  2. Refer to IRM 4.14.1 Statutory Notice of Deficiency for more information.

  3. Statutory Notices meeting certain criteria (over $250,000, fraud penalty, etc.) must be reviewed by Counsel prior to issuance. More detailed information regarding this review, including a complete list of the criteria, can be found in IRM 4.14.1.7.

  4. Do not include copy of Letter 566B or Form 886H in Statutory Notice issuance.

4.19.13.12.1  (10-01-2001)
RRA 98 Section 3201(d) Joint Notices

  1. Letter 3219 (SC/CG) Statutory Notice of Deficiency, input using Command Code AMSTUS and produced and printed by batch program STN90/STN01, is now duplicating notices for each individual filer of a joint return and is mailing them separately to each joint return filer, even if they both reside at the same address. This is accomplished by use of a cover sheet, with only one of the joint names and the common address being printed on the cover sheet for each set of notices mailed. This separate mailing is required by RRA 98 Section 3201(d). Statutory Notices not produced using STN90/STN01 will require manually duplicating and mailing separately to each joint return filer. The notice remains the same for each taxpayer (with the name line showing both of the joint names), the only requirement of RRA 98 Section 3201(d) is that it be mailed separately to each joint return filer.

4.19.13.13  (10-01-2001)
Undeliverable Mail

  1. Taxpayers have a right to receive information concerning any federal taxes assessed against them. The Service is required to exercise due diligence to find and use taxpayer’s last known address.

    Reminder:

    A taxpayer could challenge an assessment in the appeals process or in the courts if the Service did not attempt to locate taxpayer’s last known address.

  2. For undeliverable mail, do the following:

    1. Associate with case.

    2. Research IDRS for primary and secondary Social Security Number and last known address.

    3. Research IDRS Command Codes for a new address based on information documents.

    If Then
    New address found Readdress and mail undeliverable correspondence to taxpayer at new address, record new address in file, and notate file with actions taken.
    Research does not provide a new mailing address Proceed to the next stage of the examination. Continue to process the case and issue all letters/reports to the taxpayer’s last known address of record.
    The undeliverable envelope is stamped Unclaimed This is not considered an undeliverable letter, allow the case to default.
    A new address is obtained for an undeliverable Statutory Notice and there is sufficient time remaining on the statute Mail the original Statutory Notice to the new address.
    Sufficient time is not remaining on the statute to reissue the Statutory Notice The deficiency will be assessed by default upon expiration of the 90 day period.

  3. Refer to IRM 21.2.4.4.10, Undeliverable Mail Responses, for additional information.

4.19.13.14  (01-01-2008)
Transfers to Area Office Examination or Appeals Office

  1. Transfers are made to an Area Office or Appeals Office:

    If Then
    Taxpayer requests an Area Office interview

    • Telephone taxpayer to provide assurance that the issue can be resolved at the Campus.

    • If unable to contact taxpayer by telephone, issue Letter 1654 and refile case for remaining suspense period.

    Taxpayer insists on interview at an Area Office

    1. Document the reason and supporting items for transfer on workpapers.

    2. Obtain manager approval to transfer.

    3. Transfer to Area Office where the taxpayer lives.

    4. Send Letter 528(SC) to notify taxpayer of transfer.

    5. See LEM 4.19.1 – 4.19.13.14.
    Issue is too complex for correspondence

    1. Document the reason and supporting items for transfer on workpapers.

    2. Obtain manager approval to transfer

    3. Transfer to Area Office where the taxpayer lives.

    4. Attach Form 3198 to the case folder with instruction to hold Letter 528(SC).

    5. Release frozen refund on unallowable, EITC and abatement returns.
    Notice of Deficiency transfer request case

    1. Close out with Form 3198.

    2. Use Form 3210 as the controlling document to transfer case.

    Appeals Transfer Request Refer to IRM 4.4 for procedures on transferring cases to Appeals.

    Note:

    Cases must have a minimum of 13 months remaining on the statute prior to transferring to Area Office or must have a valid Form 872, Consent to Extend Time to Assess Tax.

4.19.13.15  (02-26-2007)
Docketed Cases

  1. An electronic list of docketed Tax Court cases is posted daily to the Appeals Centralized Database System.

  2. Daily the Kansas City Exam Operation (KCSC) will pull the list and research each docketed Tax Court case. The centralized research eliminates the duplication of researching the same list at all Campuses.

  3. Using a Docket Information Management System (DIMS) Contact Listing the researched list is sent as a secured email to the appropriate Campus Contacts; Primary, Backup, and manager in the other 9 sites.

  4. All Campuses will continue to be responsible for compiling the administrative case files for all cases identified as originating from their Campus/Operation, and forwarding them to the correct Appeals Office.

  5. Priority will be given to researching docketed cases by KCSC. The sites should complete and forward the packages within 10 days of receiving the listing.

  6. See IRM 4.14.1.21 and IRM 4.14.1.21.3 for specific procedures.

    Reminder:

    It is no longer necessary to send a docketed disk when transferring a case file to Appeals. Send only a paper file.

4.19.13.16  (10-01-2001)
Special Handling Notice Form 3198

  1. Refer to IRM Exhibit 4.4.1-18, Form 3198Uses.

    Note:

    Filing Status changes must be annotated on the Special Handling Notice, Form 3198.

  2. When the case is closed by someone other than the tax examiner who worked the case and special processing is required, attach Form 3198, Special Handling Notice, to the outside of the file folder. The only forms not placed under the Form 3198 are:

    • Form 895, Notice of Statute Expiration.

    • Form 2859, Request for Quick or Prompt Assessment.

  3. If a case can be closed using the RGS generated Form 5344, the completion of the Form 3198 will not be required if no additional action is needed by the closing unit.

4.19.13.17  (11-07-2005)
Case File Assembly

  1. Follow procedures outlined in IRM Exhibit 4.4.1–12, AIMS/Processing Handbook, for complete case assembly information for cases not established and worked using Batch Processing.

  2. A copy of Letters 692 and 555 do not need to be kept in the case file, whether it is paper or electronic. It is imperative that all case history sheets (paper or electronic) be annotated to include date of letter and why it was sent, e.g. revised report issued/no change to previous determination.

  3. The RGS system maintains an electronic file of information generated through the system for the taxpayer under examination. Therefore, in lieu of establishing a case file for in process selected cases and printing an entire closing case file package, the following procedures have been developed for use with cases that have been established and worked in the RGS system:

    • NO REPLY CASES: If the taxpayer has never responded to any correspondence, no file will be printed (except the Notice of Deficiency) until closing. At that time, the "Examination Report Generation Software (RGS) Closing Information" cover sheet ( See Exhibit 4.19.13-1) will be completed and forwarded to the local Files Management and Services area for association with the Computer Form (CF) 5147, IDRS Transaction Record. SCA TLN- 5679–99, Campuses Should Make Copy of Notice of Deficiency, states that campuses should print a duplicate of the original Notice of Deficiency at the time the original notice is printed. This duplicate original must be attached to the above referenced cover sheet forwarded to the Files area for association with the Computer Form (CF) 5147. These items will be submitted to the Files function, in folders by input employee number and, in sequence number order within date of input.

    • REPLY CASES: If the taxpayer has responded to any correspondence, the "Examination Report Generation Software (RGS) Closing Information" cover sheet will be completed. Attach to this cover sheet:

      • any correspondence received from the taxpayer,

      • any copies of documents received from the taxpayer,

      • a duplicate of the original Notice of Deficiency as described above.

      Note:

      A copy of the Notice of Deficiency does not have to be included in the case file if an electronic version of the Notice is stored in RGS, and any material that should be printed and included in the case file (such as a copy of the Form 4700, Examination Work Paper, if the accuracy-related penalty has been assessed).

  4. This will constitute a closing package file that should be forwarded to the local Files Management and Services area for association with the Computer Form (CF) 5147. These items will be submitted to the Files function, in folders by input employee number and, in sequence number order within date of input.

    Note:

    Case files that are needed at a later date will be requested from and printed by the Compliance Center maintaining the electronic RGS file.

4.19.13.18  (10-01-2001)
Offers in Compromise

  1. Refer to IRM 5.19.7.3, Offer in Compromise (OIC), IRM 5.19.1.6.2, Offer in Compromise, and IRM 4.18 Examination Offer in Compromise, for additional information.

  2. When the situation arises where an account receivable cannot be collected in full or there is a dispute as to what is owed, it is an accepted business practice to resolve collection and liability issues through compromise. However, Campus Examination does not make an Offer in Compromise.

    If Then
    The taxpayer requests a Form 656, Offer in Compromise, Advise the taxpayer that a Form 656 will be mailed.
    Completed Form 656 is received, Forward it to Collections and inform the taxpayer by phone or quick note that the form has been forwarded to the Collection Department for consideration.

4.19.13.19  (01-01-2008)
Bankruptcy

  1. If there is an indication that the taxpayer under examination has filled for bankruptcy, the examiner should immediately contact the Examination Bankruptcy Coordinator. The Coordinator will determine if the bankruptcy is still pending and provide further instructions to the examiner.

  2. Indications of bankruptcy include:

    1. V- Freeze on TXMOD.

    2. TC 520.

    3. X- Freeze on AIMS.

    4. Taxpayer indicates verbally or through correspondence that he is in bankruptcy.

  3. The Examination Bankruptcy Coordinator is to contact the appropriate Insolvency Unit to determine the status of the bankruptcy proceedings and to furnish them with a copy of the RAR if necessary for the proof of claim. The Automated Insolvency System (AIS) and PACER (Public Access to Court Electronic Records) can be used to locate the insolvency office and track the status of the bankruptcy case.

    1. If the case has not been started and a determination has been made to continue with the examination, an RAR should be prepared for purposes of estimating the maximum adjustment for the proof of claim.

  4. The Bankruptcy Statutory Notice ( Letter 1384 (SC)) is not required for deficiencies in post-petition taxes incurred during the administration by the bankruptcy estate of an individual in a Chapter 7 or 11 case or for post petition tax periods ending after October 17, 2005 if the bankruptcy petition is filed on or after October 17, 2005.

  5. If the taxpayer is in bankruptcy, the examination will continue. The Examiner will issue the 30-Day letter and close the case if the taxpayer agrees, or if it is determined that the taxpayer has substantiated all issues and the case can be closed no-change.

  6. If the taxpayer is in bankruptcy and disagrees with the proposed examination changes included in the 30-Day letter, the case must be transferred to the Bankruptcy EGC 5033.

    1. The Bankruptcy Coordinator will have the Bankruptcy Statutory Notice ( Letter 1384 (SC)) prepared and sent to the taxpayer instead of the 90-Day letter Statutory Notice of Deficiency.

    2. In the case of joint returns where only one of the spouses has filed for bankruptcy, the Bankruptcy Coordinator will ensure that the non-petitioning spouse is issued a 90-Day Statutory Notice of Deficiency and that the assessment is made on the IMF Master File MFT 31 (in accordance with IRM 21.6.8) when the 90-day period expires.

  7. If the taxpayer files a bankruptcy petition after a 90-Day (Statutory Notice of Deficiency) has been issued and before the 90-day period to petition the tax court has expired, the case cannot be defaulted (closed) while the taxpayer is in bankruptcy status because the bankruptcy automatic stay prohibits the taxpayer from petitioning, thereby suspending the period which the taxpayer may file the petition. The case must be transferred to the control of the Bankruptcy Coordinator by updating the Employee Group Code (EGC) to 5033.

    1. In the case of joint returns where only one of the spouses has filed for bankruptcy, the Bankruptcy Coordinator will ensure that the assessment is made on the IMF Master File MFT 31 (in accordance with IRM 21.6.8) for the non-petitioning spouse when the 90-day period expires.

    2. The Bankruptcy Coordinator will issue the Bankruptcy Statutory Notice ( Letter 1384 (SC)) to the taxpayer that filed bankruptcy in order to put him on notice that of the suspension of the 90-day period and his options concerning the Tax Court and the Bankruptcy Court.

  8. The procedure in (7) above does not apply if the bankruptcy petition was filed after the expiration of the 90-day period. In this situation, the assessment can be processed at any time after the expiration of the 90-day period because the bankruptcy automatic stay does not prohibit the assessment of tax. See 11U.S.C. § 362(b)(9)(D).

  9. The Bankruptcy Coordinator will hold the case in suspense until the automatic stay terminates due to one of the following: the bankruptcy is closed or dismissed, the debtor is granted or denied a discharge, or the stay is lifted by order of the bankruptcy court. The case will remain in Status 24 while the bankruptcy stay is in effect because the Statutory Notice is being used to suspend the statute.

    1. If the bankruptcy case is dismissed, the Coordinator should contact the Insolvency Unit to determine if the case should be closed.

  10. The bankruptcy case does not suspend or extend the ASED of the examination case. The ASED must be protected by either issuing a Statutory Notice of Deficiency or securing a Form 872 or Form 872A, Consent to Extend the Time to Access Tax. If the Statutory Notice is issued, AIMS can be updated to Alpha Code KK. However, the statute should not be updated to KK until 120 days remain on the normal statute.

  11. The ASED is suspended in a bankruptcy case if the Statutory Notice of Deficiency was issued within 90 days before the filing of the bankruptcy petition or on or after the filing date as explained in paragraph 7 above. Upon the termination of the automation stay, new ASED must be calculated. The new ASED is calculated by adding the following to the original ASED:

    1. the number of days remaining on the normal statute before the stay went into effect, plus

    2. 60 days as provided by Section 6213(f), plus

    3. 60 days as provided by Section 6503(a).

    See Rev. Rul. 2003-80 for a discussion of the effect of a bankruptcy on the running of the statute of limitations on assessment.

4.19.13.20  (01-01-2006)
Combat Zone

  1. Correspondence Examination. See LEM 4.19.1 – 4.19.13.20 (1).

  2. If you are working an audit, and there is no Combat Zone indicator, see LEM 4.19.1 – 4.19.13.20 (2).

  3. When working a recertification case, and the taxpayer attached Form 8862, follow the rules listed above to determine if they are in a Combat Zone. See LEM 4.19.1 – 4.19.13.20 (3).

    Note:

    IRM 4.4.1-14 for specific instructions on resolving cases with a Combat Zone freeze.

  4. For more information on TC 500 entry and exit dates, please see IRM 5.19.1.7.10. For more information on Combat Zones and Condition Codes, see IRM 3.0.273.31 and IRM 3.12.3.

4.19.13.21  (01-01-2006)
Informant Claims

  1. Refer to IRM 25.2 for information on Informants' Rewards.

    Note:

    Employees are referred to the entire section and not just Part 1 and 2.

  2. Information reporting alleged tax law violations are received via telephone calls, office visits (walk-ins) and correspondence. The information provided is documented and forwarded to the responsible function for the appropriate action.

  3. Informant Claims for rewards submitted on Form 211 are forwarded to the SB/SE Campus Informant Claim unit that supports the Area Office where the alleged violator lives.

4.19.13.22  (10-01-2003)
Innocent Spouse Relief/Joint and Several Liability

  1. If during an on going correspondence examination you receive a Form 8857 from the taxpayer then:

    1. Suspend activity on the case.

    2. Contact your Examination Branch’s primary or back-up Innocent Spouse Coordinator for advice.

    3. Follow this Coordinator’s advice on how to proceed with your examination, along with closing procedures.

    4. Review IRM 25.15.6 Relief from Joint and Several Liability-Field Examination Procedures.

  2. Each Examination Branch, with the exception of the Cincinnati Campus (CSC) will have an Innocent Spouse primary and back up Coordinator.

  3. The primary or back up Innocent Spouse Coordinator will be responsible for:

    • Date stamping the Form 8857.

    • Forwarding Innocent Spouse relief request to Cincinnati Centralized Innocent Spouse Operations (CCISO) to

      Internal Revenue Service,
      Stop 840F,
      PO Box 120053,
      Covington, KY 41012

    • Coordinating with CCISO on making the Innocent Spouse determination and incorporating the determination made by CCISO along with the statutory notice, if not previously issued.

    • Make taxpayer account adjustments based on instructions from CCISO.

    Note:

    Forward any Innocent Spouse documents/correspondence ran through the Correspondence Image System (CIS) immediately to CCISO.

  4. If Form 8857 is received on a closed correspondence examination then, the case should be routed to CCISO, if not open in any other function.

  5. See Innocent Spouse/Joint and Several Liability IRM 25.15.7 for more information.

    Note:

    Innocent Spouse Coordinators and their back ups should become very familiar with this section.

4.19.13.23  (01-01-2008)
TAS Procedures

  1. Taxpayers contact the Taxpayer Advocate Service (TAS) for additional assistance to resolve problems when they have been unsuccessful in resolving them through normal channels or if they are experiencing a hardship or if they believe that an IRS system or procedure is not working as it should.

  2. The request must meet criteria as listed in IRM 13.1.7.2. Taxpayers may request assistance during the examination or after the examination. Form 911, Request for Taxpayer Advocate Service , will be prepared by TAS or by the identifying function.

  3. See the TAS Web Site for the Service Level Agreement. The interactive SLA Addendum is on the W&I web site at: http://win.web.irs.gov/compliance/compdocs/ComplianceLiaisonListing_TAS.xls .

4.19.13.23.1  (01-01-2007)
TAS Referrals

  1. When a case requires referral to the Examination function, the TAS employee prepares an Operations Assistance Request (OAR), Form 12412. Form 12412 identifies the taxpayer issue, specific assistance requested from the Operating Division or Function, criteria met, and recommendation for resolution. TAS will secure and forward copies of signed amended returns and/or any documentation necessary for the resolution of the OAR.

  2. OARs are forwarded to the Exam Unit via a Form 3210. For Criteria 1 through 4 cases, the Form 3210 and attachments may be faxed or hand carried to Exam.

  3. Referrals from TAS will include:

    • Cases controlled on AIMS [Open L-Freeze].

    • Cases previously controlled on AIMS [Audit Reconsiderations].

    • Cases referred from another part of the Service [Accounts Management, AUR, or Collections] for Exam classification. Examples: CAT-A, EITC Form 1040X, or Source Code 38.

4.19.13.23.2  (01-01-2007)
Responsibilities of the TAS Case Advocate

  1. TAS Case Advocate will:

    1. Contact the taxpayer regarding issue(s) with the examination process such as refund or examination processing delays.

    2. Forward completed OAR Form 12412 with supporting documentation to Exam.

    3. Be the main conduit for all taxpayer contact. The TAS Case Advocate will forward any document request from the Examiner to the taxpayer and forward any information received from the taxpayer to the Examiner, unless otherwise specified.

    4. When working prior year over-aged inventory, or securing additional documentation, the TAS Case Advocate may facilitate a conference call with the taxpayer and the Examiner in order to expedite closing the case.

    5. Timely inform the Examiner timely if the taxpayer does not reply within the time frame agreed upon.

    6. Monitor for the adjustment(s) to post including TC840 (Manual Refund transaction), after Examination has closed their case.

    7. Ensure Hold Codes are released.

4.19.13.23.3  (02-07-2007)
Responsibilities Of the Operational Liaison/Exam Coordinator

  1. Operational Liaison/Exam Coordinator is an Exam technical employee who will review the Form 12412 for completeness and correct routing. The OAR on Form 12412 must contain:

    1. A written explanation of the request for assistance.

    2. A due date for completion.

    3. The name, telephone, fax number of the TAS employee making the request.

    4. Documentation to resolve the TAS issue.

  2. If the Form 12412 is incomplete or misrouted, return the case to TAS on Form 3210 within one workday

  3. If the Form 12412 is complete:

    1. Request clerk to obtain AMDIS prints, if needed.

    2. Write or attach the AIMS Source Code, Status Code, EGC and Project Code on the top of Form 12412.

    3. Acknowledge receipt using Form 3210 within 1 workday for cases involving Criteria 1 – 4 and within 3 days for Criteria 5 – 9.

  4. If the case is in AIMS Status 00-09, and the case is a PC 694 or a Pick up case, the Operational Liaison or designee will screen the case and resolve if possible. See IRM 4.19.13.23.4, Premature Referral Cases, AIMS Status 00-09 for procedures.

  5. The Operational Liaison will determine which team/function is responsible for resolving the taxpayer issue. For Criteria 1 – 4, the receiving office will assign within 1 workday to a TE upon receipt from TAS. Criteria 5 – 9 cases will be assigned within 3 workdays.

  6. For all cases, Operational Liaison will

    1. Date stamp and record the OAR case information in the Compliance TAS database.

    2. Assign the OAR to the appropriate Exam team.

      • If currently assigned to an examiner, assign to the AIMS EGC.

      • If the case is in Batch and not previously assigned to an examiner, assign cases equitably to the units.

      • If the case is in clerical suspense, secure and refer to the last assigned (examiner) team.

      • Audit Reconsideration cases will be referred to Centralized Reconsideration Unit (CRU).

    3. Do not place TAS cases in a separate Status Code.

    4. Open or update IDRS control and notate history item with " 911-TAS" .

    5. Attach Form 3198, Special Handling Notice for Examination Case Processing, to the outside of the folder and notate Form 12412, history sheet, and place any attachments on the inside.

    6. Acknowledge receipt of the OAR, completing Part V and entering dates in the specific action was completed.

    7. Send Form 3210 to the TAS office, providing the team manager’s name and telephone number for assigned OARs.

  7. For aging consistency purposes, all operations will use calendar days when counting the age of a case.

    Note:

    For reporting purposes – a case greater than 14 calendar days is considered an aged case.

    1. The start of the aging process will occur when the faxed or mailed OAR is received by the operational liaison from the TAS office.

    2. Day one of the process will be:

      • If an OAR is received before 2:00 p.m., it will be considered received that day.

      • If an OAR is received after 2:00 p.m., it will be considered received the following calendar day, OR

      • If the next calendar day is a non-business day, it will be receipted on the next business day.

    3. End date will be the day the operational area completes IDRS input and records the OAR closing on the Compliance TAS database.

    4. The case age will be calculated by subtracting the Day One date from the End Date.

  8. Any OAR closed "No Relief Granted" will be closed out of the receiving areas inventory and returned to the TAS office. These cases should never be rejected back to TAS. If the taxpayer asks to reopen his case, and sends in new additional information/documentation, the incoming OAR will be opened and treated as a new request/case.

4.19.13.23.4  (01-01-2007)
Premature Referral Cases, AIMS Status 00 – 09

  1. Upon receipt of an OAR case, research/review RGS Batch Action Report or other IDRS prints as necessary for prior year examination closing action.

  2. Follow one of the options listed below. For Criteria 1 – 4 cases, respond within 1 workday to TAS.

    1. If the prior year return was closed no-changed and the same information is reflected in the current year

      • See Examination Closing Procedures for manual refund, if applicable.

      • Remove Recertification Indicator (RI). See IRM 4.19.14.5 (Recertification), for instructions on the removal of the RI.

    2. If the taxpayer was examined and the research indicates that one or more dependents were disallowed in the prior year, review CEAS or obtain copies of work papers and RAR (Examination Report).

      • Verify the dependent SSN that was allowed from the prior year report and follow appropriate closing action.

      • Verify the dependent SSN that was disallowed from the prior year report. Inform TAS caseworker that a full examination will be conducted and assign case to an Exam team.

      • If different child(ren) are claimed, inform TAS caseworker that a full examination will be conducted and assign case to an Exam team.

      • Assign the case to an Exam team to prepare the initial contact letter.

    3. If no AIMS (Claims Classification) and the return is selected for Examination, establish AIMS. After AIMS is established, assign to an Exam team to prepare the initial contact letter for mailing.

4.19.13.23.5  (01-01-2007)
Closing Procedures for Operational Liaison

  1. Operational Liaison will:

    1. Notate in the Compliance TAS database the date the case was closed and what action was taken to close.

    2. If the case was a no reply, notate that the case was returned to normal exam work, and

    3. Fax the completed Form 12412 and hand carry or mail the case to the appropriate TAS office.

4.19.13.23.6  (01-01-2007)
Clerical Procedures

  1. The completed folder is given to the clerk for input. Using information found on the Form 12412, the clerk will:

    1. Update TAS cases to special EGC, if applicable, as designated by the unit manager, so that the cases can be tracked easily.

    2. File the copies of the Form 12412 and the Fax transmittal confirmation in the "OAR" log book.

    3. Prepare a Form 3210 if necessary, with the information notated by the Operational Liaison/Exam Coordinator and hand carry to the proper team for assignment to TE.

    4. When the case is closed by TE or by Operational Liaison/Exam Coordinator, the case will be returned to clerk for disposition.

4.19.13.23.7  (01-01-2007)
General Examination Procedures (TE)

  1. The examiner (TE) will:

    1. Review the description of assistance requested by TAS and requested date of completion. The Exam TE and TAS Case Advocate will agree upon the time frames for follow-up based on the facts and circumstances of the particular case.

      Note:

      TAS will notify Exam when a taxpayer meets specific economic burden criteria and request the case be evaluated expeditiously. The examiner will make all determinations based on facts and circumstances of the case, IRM procedures and application of tax law. TAS will not make a determination of issues but may recommend specific action(s) be taken.

    2. Enter all documentation and information on RGS workpapers, as with any other case. For cases not on RGS, prepare manual workpapers.

    3. Research RGS, IMFOL, TXMOD, AMDIS and other sources as outlined under IRM 4.19.14.4, Evaluating EITC Taxpayer Responses.

    4. If the case is Criteria 1 – 4, the TE will respond within (3) three workdays in writing, fax, or hand delivery to the TAS Case Advocate the relief/no relief decision.

    5. If the case is Criteria 5 – 9, the TE will inform the TAS Case Advocate by the negotiated date of the resolution.

  2. The TAS Case Advocate must be kept apprised of action and/or contacts made by the TE with the taxpayer or practitioner. Telephone contact with the TAS advocate will not be conducted using the toll-free telephone number.

  3. See the Service Level Agreement (SLA). When working prior year over-aged inventory or securing additional documentation, the examiner can request TAS Case Advocate to facilitate a conference call with the taxpayer in order to expedite closing the case.

  4. Evaluate any subsequent correspondence received within 3 workdays for Criteria 1 – 4 and within reasonable time frames as agreed upon by TE and TAS caseworker for Criteria 5 – 9.

  5. TE case evaluation of TAS referral steps:

    If Then Follow
    The case results in Full Examination or a Revised Report can be issued based on the documentation provided

    • For Criteria 1 – 4 forward an examination report and appropriate letter (30 day, 90 day, L692) to the taxpayer within 3 workdays.

    • For Criteria 5 – 9 in the time frame as agreed upon by TE and TAS Case Advocate.

    • IRM 4.19.14.3 RPS Casework Procedures and other related sections for working the case.

    • IRM 4.13 for Audit Reconsideration, and

    • IRM 4.19.16 for CAT-A Claims.
    Additional Documentation is needed

    • Inform TAS in writing that additional documentation is needed to close or resolve the issue.

    • When appropriate, Examiner can request TAS Case worker to call the taxpayer to expedite obtaining the additional documentation.

    		IRM 4.19.14.3.1, RPS Examination Process.

  6. Examination Closing of TAS referral steps:

    If Then Follow
    The case can be closed No Change based on the information researched or documentation received from the taxpayer and it is Criteria 1 – 4 case

    • The examiner will input a Hold Code on the examination closing to prevent erroneous refunds from generating.

    • The examiner will complete Section VI, Parts 1 (a & b) and 2 (a, b, & c) of the Form 12412.

    • IRM 4.19.14.4.4, EITC Taxpayer Replies – Closing Actions for further procedures.

    • For Audit Reconsideration procedures, see IRM 4.13 .

    The case can be closed No Change based on the information researched or documentation received from the taxpayer and it is not Criteria 1 – 4 case

    • Close case as per IRM guidelines.

    • The examiner will complete Section VI, Parts 1 (a & b) and 2 (a, b, & c) of the Form 12412.

    • IRM 4.19.14.4.4, EITC Taxpayer Replies – Closing Actions for further procedures.

    • For Audit Reconsideration procedures, see IRM 4.13 .

    Items questioned are fully or partially disallowed 30/90 day letter based on the documentation or lack of documentation and the taxpayer agrees to 30 day/90 day letter or other letters or does not reply

    • Close case as per IRM guidelines.

    • The examiner will complete Section VI, Parts 1 (a & b) and 2 (a, b, & c) of the Form 12412.

    • IRM 4.19.14.4.4, EITC Taxpayer Replies – Closing Actions for further procedures.

    • For Audit Reconsideration procedures, see IRM 4.13 .

  7. After all the closing actions have been completed, including inputting any adjustments:

    1. Close any IDRS controls on the case, note on the history item how case was closed.

    2. Give the case along with the Form 12412 to the Operational Liaison.

    3. Contact the TAS Case Advocate of the closing actions.

    Reminder:

    The TE employee assigned the OAR is to complete Section VI of Form 12412, Operations Assistance Request, and return it to the Operational Liaison who will return it to the TAS Case Advocate assigned the case. The Form 12412 will be returned within three (3) workdays from the date that all actions have been completed and transactions input.

4.19.13.24  (10-01-2005)
Disaster Relief

  1. Procedures for responding to disasters or other significant emergencies can be found in IRM 25.16.5 (Disaster Assistance and Emergency Relief).

4.19.13.25  (01-01-2008)
Identity Theft

  1. You can visit the Identity Theft website http://win.web.irs.gov/identity_theft.htm for a variety of information including what identity theft is, and how to prevent it.

  2. The Identity Theft Policy Statement 25-1 outlines the Service's policy for identity theft to provide assistance to victims of identity theft within the scope of our official duties and encouraging victims to report instances of known identity theft to other federal agencies.
    The Federal Trade Commission (FTC) is an appropriate agency to report instances of identity theft to. They can be reached at 1-877-438-4338 or http://www.ftc.gov/ .

  3. It is important to make a distinction between a Mixed Entity and/or Scrambled SSN case and those cases rising to the level of actual identity theft. Do not confuse the issue of taxpayer's having no knowledge of income earned or a return filed, with an assumption they must be a victim of identity theft. Often the problem is created inadvertently and the problem is a Mixed Entity and/or Scrambled SSN case rather than an intentional use of a stolen identity. Taxpayers must state they are a victim of identity theft, or documentation must support that determination.

  4. Taxpayers stating they are a victim of identity theft will be required to supply documentation to authenticate their identity and provide evidence of the identity theft.

  5. Acceptable documentation to authenticate a taxpayer's identity would be a copy of a valid federal or state issued identification such as:

    • Social Security Card

    • Passport

    • Driver's License

  6. Acceptable documentation to support evidence of identity theft is a copy of a police report reporting the crime or an affidavit of Identity Theft filed with the Federal Trade Commission (FTC).
    The following procedures should be followed:

    If ... Then ...
    The taxpayer states he or she is a victim of identity theft, or someone is using his/her SSN illegally and they provide the acceptable documentation. Input TC 971 AC 501. Follow Mixed Entity procedures to resolve account.
    The taxpayer states he or she is a victim of identity theft, or someone is using his/her SSN illegally but they do not provide acceptable documentation. Prepare Letter 239C selecting appropriate paragraphs to:

    • Give taxpayer contact information for phone, fax and mail address.

    • Outline the acceptable documentation for identity authentication and evidence of identity theft (Paragraphs U & V).

    • Give taxpayer 30 days to respond with requested documentation.
    Letter 239C issued. Suspend case for 45 days waiting for response.
    No response received to Letter 239C. Continue regular exam processing and move case to the next step.

  7. In FY2007, a TC 971 AC 501 will be input to track identity theft cases. The TC 971 AC 501 should be input after the taxpayer has submitted the appropriate documentation and an identity theft determination has been made.

Exhibit 4.19.13-1  (10-01-2001)
Examination Report Generation Software (RGS) Closing Information

This image is too large to be displayed in the current screen. Please click the link to view the image.

More Internal Revenue Manual