Accessibility Skip to Top Navigation Skip to Main Content Home  |  Change Text Size  |  Contact IRS  |  About IRS  |  Site Map  |  Español  |  Help  

Part 4. Examining Process

Chapter 8. Technical Support (Exam)

Section 5. Post Examination Case Processing Requirements

4.8.5  Post Examination Case Processing Requirements

4.8.5.1  (10-01-2003)
Overview

  1. This section outlines procedures for the review of cases that have special features requiring post examination processing procedures. The following types of cases are included:

    1. Innocent spouse,

    2. Bankruptcy cases,

    3. TEFRA cases,

    4. Fraud cases (civil and criminal),

    5. Grand jury cases, and

    6. Cases returned from Appeals.

4.8.5.2  (10-01-2003)
Innocent Spouse Cases

  1. IRM 25.15, Relief from Joint and Several Liability, contains detailed guidance for examining, processing, and reviewing innocent spouse cases.

4.8.5.2.1  (10-01-2003)
Case Subject to Review

  1. All IRC § 6013(e) and IRC § 6015 innocent spouse cases are subject to streamlined innocent spouse procedures outlined in IRM 25.15.10.1. Cases worked by Revenue Agents and Tax Compliance Officers should be forwarded to TS before any determination letters/notices are issued or assessments/abatements are made with respect to the innocent spouse issue, regardless of how the issue arose or the determination of the issue.

  2. IRM 25.15.10 details the innocent spouse cases subject to area TS review and/or centralized review. Centralized review procedures are outlined in IRM 25.15.10.8 through 25.15.10.13.

4.8.5.2.2  (10-01-2003)
Return of a Case to the Group

  1. Reviewers may return an innocent spouse case to the group manager for reconsideration of technical provisions or for additional factual development. The case may also be returned if account problems have not been resolved. If a case is returned to the group, the examiner is required to respond within 30 days of receipt.

4.8.5.2.3  (10-01-2003)
Collection Referral Cases

  1. Collection referral cases are reviewed using the same guidelines and standards specified for the area TS and centralized review. The Territory Manager may delegate TS review responsibility to a revenue agent at a local post of duty to expedite treatment of Collection referral cases.

4.8.5.3  (10-01-2003)
Bankruptcy Cases — General

  1. A bankruptcy petition filed by a business, joint entity, or individual generally operates as an automatic stay on any act to assess, collect, or recover tax due from the taxpayer. TS works very closely with Area Counsel and Insolvency.

4.8.5.3.1  (10-01-2003)
Case Reviews

  1. TS reviews bankruptcy cases using the quality standards outlined in IRM Exhibit 4.8.3–1.

  2. When the case is received in TS, the reviewer verifies the bankruptcy petition filing date and that the taxpayer is still in bankruptcy.

4.8.5.3.2  (10-01-2003)
Pre-October 22, 1994 Bankruptcy Filing

  1. Generally, the Bankruptcy Code prohibits assessments on cases in which the petition was filed prior to October 22, 1994 (if the automatic stay is still in place).

4.8.5.3.2.1  (10-01-2003)
Agreed Cases

  1. After review, the case is placed in Bankruptcy Suspense. A statutory notice of deficiency is not issued on agreed cases.

4.8.5.3.2.2  (10-01-2003)
Unagreed Cases

  1. After review, the reviewer prepares a statutory notice of deficiency using Letter 1384.

  2. The statutory notice is issued prior to the expiration of the normal statute of limitations.

  3. Written instructions to the 90-Day Unit include:

    1. The taxpayer is in bankruptcy, and

    2. The case file is to be returned to TS after the default of the 90-day period.

4.8.5.3.3  (10-01-2003)
Post-October 21, 1994 Bankruptcy Filing

  1. The Bankruptcy Reform Act of 1994 allows the assessment for any agreed tax and the issuance of notice and demand for such tax.

4.8.5.3.3.1  (10-01-2003)
Agreed Cases

  1. All agreed cases can be processed and the tax assessed even though the taxpayer is in bankruptcy.

  2. Upon receipt of the case, TS will verify the report agrees with the proof of claim in Insolvency.

  3. After review, the case file is forwarded for processing and assessment.

4.8.5.3.3.2  (10-01-2003)
Unagreed Cases

  1. Follow the same procedures as outlined in IRM 4.8.5.2.2 above.

4.8.5.3.4  (10-01-2003)
90-Day Default Cases

  1. Unless the taxpayer receives special permission from the Bankruptcy Court to petition the statutory notice of deficiency, the case defaults from the 90-Day Unit and is returned to TS.

4.8.5.3.5  (10-01-2003)
Bankruptcy Suspense Procedures

  1. Technical Services (TS) monitors and controls cases placed in Bankruptcy Suspense. See procedures outlined in IRM 4.8.2.10.8

  2. Monthly, a listing of cases in bankruptcy suspense is sent to Insolvency or the reviewer with access to the Automated Insolvency System (AIS) can verify cases are still in bankruptcy. Reviewers may also have access to PACER and RACER databases within their respective bankruptcy court districts. Do not rely on the absence of a TC 521 to determine if a case is still in bankruptcy.

  3. Cases in which the taxpayers are no longer in bankruptcy are removed from suspense and closed.

4.8.5.3.6  (10-01-2003)
Assessment Statutes

  1. In statutory notice cases, IRC § 6213 and IRC § 6503 prohibit the assessment of tax until the expiration of the period allowing the taxpayer to file a petition with the tax court. Bankruptcy law generally prohibits a taxpayer from petitioning the Tax Court while in bankruptcy status. Therefore, once released from bankruptcy, the taxpayer is allowed to file a petition with the tax court during the portion of the 90-day statutory period that was denied during the bankruptcy, plus an additional 60 days.

4.8.5.3.7  (10-01-2003)
Closing Cases from Bankruptcy Suspense

  1. The statute of limitations must be recalculated taking into consideration IRC § 6213 and IRC § 6503, as noted above. The new statute date is noted on Form 895, Notice of Statute Expiration, prior to closing the case.

  2. If the period in which the taxpayer is permitted to file a petition with the Tax Court has not expired, the case is forwarded to the 90-Day Unit for further suspense. Otherwise, the case is forwarded for assessment.

4.8.5.3.8  (10-01-2003)
Joint Returns

  1. When a bankruptcy involves a joint tax return, TS determines whether one or both spouses filed bankruptcy.

  2. If only one spouse filed bankruptcy:

    1. the statute on the non-bankrupt spouse continues to toll,

    2. the case file is forwarded for non-master file assessment against the non-bankrupt spouse, and

    3. the case is returned to TS after assessment for processing the bankrupt spouse to bankruptcy suspense.

4.8.5.3.9  (10-01-2003)
References

  1. Refer to IRM 4.27, Bankruptcy.

    Note:

    This IRM is to be renumbered as IRM 25.17.20 through .24.

4.8.5.4  (10-01-2003)
TEFRA Case Reviews

  1. After completion of the case by the examiner, the TEFRA key case is closed to TS.

  2. Reviewers performing reviews of TEFRA cases should be familiar with TEFRA proceedings. Complete instructions for TEFRA procedures are contained in IRM 4.31, Flow Through Entity Multifunctional Handbook.

4.8.5.4.1  (10-01-2003)
Completion of TEFRA Procedures by Examiners

  1. Reviewers ensure that the examiner performed specific TEFRA procedures and documented the case file appropriately. Reviews of TEFRA cases include, but are not limited to, the following items:

    1. Ensure the key TEFRA return is an entity subject to the TEFRA proceeding,

    2. Ensure examiners issued the proper letters for the TEFRA entity, (i.e., Notice of Beginning of Administrative Proceedings (NBAP), Summary Report, Consent Transmittal Letter, etc.),

    3. Ensure at least 120 days pass between the issuance of the NBAP to the last identified notice investor and the issuance of the Final Partnership (S-Corporation) Administrative Adjustment (FPAA or FSAA, as appropriate) to the Tax Matters Person (TMP),

    4. Ensure the TMP is properly designated in accordance with Treas. Reg. 301.6231(a)(7)–1, 26 CFR 301.6231(a)(7)-1 and Treas. Reg. 301.6231(a)(7)-2, 26 CFR 301.6231(a)(7)-2 and that there is sufficient documentation in the key TEFRA case file verifying the validity of the designation,

    5. Ensure the Forms 886-Z(c) are dated and certified by the Campus TEFRA Function (CTF) employee. The distributive share schedule must reflect all of the investors’ names and TINs. Verify that individual percentage interests total 100 percent. Obtain a TSUMYP as a check with the Forms 886-Z(c) or if Forms 886-Z(c) have not been generated by the CTF, and

    6. Determine if the Form 2848 is properly executed if case if unagreed. If not, solicit a new Form 2848 from the representative and explain that he/she will not be able to represent the taxpayer in Appeals or receive notices if not properly executed.

4.8.5.4.2  (10-01-2003)
No-Change TEFRA Cases

  1. Procedures for closing no-change TEFRA cases are outlined in IRM 4.31.1, Flow-Through Entity Multifunctional Handbook.

4.8.5.4.3  (10-01-2003)
Agreed TEFRA Cases

  1. Procedures for closing agreed TEFRA cases are outlined in IRM 4.31.1, Flow-Through Entity Multifunctional Handbook.

4.8.5.4.4  (10-01-2003)
Unagreed TEFRA Cases: 60-Day Letters

  1. 60-Day letters provide the TMP with a copy of the examination results for distribution to the investors, invite a protest, explain the taxpayer’s appeal rights, and offer the investors another opportunity to agree to the TEFRA issues.

  2. 60-Day letters will be issued to the TMP and all notice partners or shareholders that did not agree to the examination issues at the closing conference.

  3. A 60-Day letter package will be prepared and submitted to the campus or compliance center for issuance, following the guidelines outline in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

  4. Response to the 60-Day letter:

    1. ACCEPTANCE OF SETTLEMENT AGREEMENT — Procedures outlined in IRM 4.31.1 are to be followed.

    2. PROTESTED — If a protest is filed, a review will be conducted as outlined in IRM 4.31.1, and if valid, the case will be forwarded to Appeals.

    3. DEFAULT — A 150-Day letter (FPAA/FSAA) will be prepared if a valid protest is not received or not all of the partners/shareholders have agreed to the partnership or S-corporation issues.

4.8.5.4.5  (10-01-2003)
FPAA/FSAA: 150-Day Letters

  1. If a TEFRA entity proceeding is not resolved at the examination level, a Notice of Final Partnership Administrative Adjustments (FPAA) or Notice of Final S Corporation Administrative Adjustment (FSAA) will be issued. FPAA/FSAAs are equivalent to statutory notices of deficiency and should be prepared in a similar format.

  2. 150-Day letters are issued to the TMP and all notice investors that did not agree to the examination issues at the closing conference or when the 60-Day letter was issued.

  3. A 150-Day letter package will be prepared and processed as outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook. If there are fewer than 45 days remaining on the statute, then the TMP and investor letters should be mailed by the local office, using certified mail.

  4. Response to 150-Day letter:

    1. ACCEPTANCE OF SETTLEMENT AGREEMENT — Procedures are outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

    2. PETITIONED TAX COURT CASES — Procedures are Outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

    3. DEFAULT — Procedures are outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

4.8.5.5  (10-01-2003)
Fraud Cases

  1. Procedures for special handling of civil fraud cases are outlined in IRM 25.1, Fraud Handbook.

4.8.5.5.1  (10-01-2003)
Scope of Review

  1. All aspects of fraud, including the recognition of fraud indicators, factual development, case file documentation, and proper completion of procedures should be considered when reviewing cases.

4.8.5.5.2  (10-01-2003)
Case Return Criteria

  1. Cases may be returned to the examiner for further development or correction if there is evidence of fraud, malfeasance, collusion, concealment, or misrepresentation by the taxpayer or representative that has not been adequately addressed in the file.

4.8.5.5.3  (10-01-2003)
Cases Subject to Joint Investigation

  1. A case that has been the subject of a joint investigation and for which prosecution has been recommended is reviewed using the quality standards outlined in IRM Exhibit 4.8.3–1.

  2. After review of the case, the file is prepared for suspense pending resolution of the criminal prosecution action.

  3. Copies of the examiner’s report are forwarded to Criminal Investigation by the Fraud Referral Specialist (FRS).

  4. The administrative file should be assembled and, upon request of the Special Agent in Charge (SAC), forwarded to Area Counsel (copies of returns only).

  5. At a minimum, the suspensed file should include the following:

    1. Documentation that criminal action is pending,

    2. Copy of the examiner's report,

    3. Tax returns involved in the case,

    4. Form 2797, Fraud Referral, and

    5. Workpapers of sufficient depth to support the proposed civil adjustments.

  6. TS has responsibility for maintaining fraud suspense files, including:

    1. Inventory controls,

    2. AIMS updates for status codes, project and source codes, and statute dates,

    3. Protection of statutes of limitation and statute controls,

    4. Protection of confidential material in securely locked cabinets during the suspense period.

  7. TS has responsibility for making periodic evaluations of the case to determine if circumstances have changed and verify that the Government’s interests are adequately protected. See IRM 4.8.2.10.6.

  8. Upon receipt of a Criminal Investigation (CI) memorandum advising TS of the resolution of the criminal prosecution, the case file will be released from suspense and returned to the examiner for civil settlement. Notice of cases referred to the Department of Justice (DOJ) prior to July 2000 will be by Area Counsel memorandum.

4.8.5.6  (10-01-2003)
Grand Jury Cases

  1. Criminal Investigation (CI ) has complete jurisdiction over Grand Jury cases. Once a request has been approved, the CI Director of Field Operations will notify TS through the Fraud Referral Specialist (FSR) that a taxpayer is under grand jury investigation.

  2. The TS reviewer determines whether the taxpayer is under examination. If an examination is in process, the reviewer submits a written request to the group for the case to be submitted for suspense.

4.8.5.6.1  (10-01-2003)
Examiner Responsibilities

  1. Upon notification of the grand jury investigation, the examination of the taxpayer for all periods involving the same type of tax must be suspended. Before proceeding with an examination involving a different type of tax, as a related entity, contact CI for their recommendation.

  2. The examiner must ensure that all workpapers and documentation contained in the file are appropriately dated, initialed and indexed. This eliminates any doubt as to the origin of the information available for civil use.

  3. The examiner prepares a report using available information at that time. The examiner then forwards the report, along with the original returns and administrative file to TS.

4.8.5.6.2  (10-01-2003)
TS Responsibilities

  1. TS verifies the statute of limitations for all returns contained in the file.

  2. The reviewer also reviews the file and prepares a cover sheet submitting the case for grand jury suspense.

  3. The reviewer coordinates with CI on all imminent statutes. This coordination continues throughout the period the case is in suspense.

4.8.5.6.3  (10-01-2003)
Grand Jury Suspense

  1. The case status code is updated to status 36.

4.8.5.6.4  (10-01-2003)
Closing Cases from Grand Jury Suspense

  1. Upon completion of the grand jury proceedings, CI issues a memorandum to the area releasing the case for civil disposition.

  2. The case is returned to the group to resume the civil examination.

4.8.5.6.5  (10-01-2003)
References

  1. Refer to IRM 25.1, Fraud, for a complete discussion of Grand Jury procedures.

4.8.5.7  (10-01-2003)
Cases Returned from Appeals

  1. Areas have the authority to establish local procedures to control cases returned from Appeals. In the absence of local procedures, the following procedures in (2) below are suggested.

  2. Appeals may return cases to the areas for further development. Cases returned to Compliance are routed to TS and assigned to a reviewer for consideration. As Appeals does not use ERCS, the case may be updated on AIMS to status 20.

    Note:

    Appeals may update AIMS to status 23 for cases returned to the Campus TEFRA/non-TEFRA functions. The CTFs will update the cases to status 34 upon receipt of the database.

4.8.5.7.1  (10-01-2003)
Disagree with Appeals Request

  1. If the reviewer does not agree with the Appeals recommendation and the Technical Services Group Manager concurs, a responding or clarifying memorandum is prepared and returned to Appeals with the case file.

4.8.5.7.2  (10-01-2003)
Agree with Appeals Request

  1. If the reviewer agrees with the Appeals recommendations and the Technical Services Group Manager concurs, the case is returned to the examiner for completion of the required actions.

4.8.5.7.3  (10-01-2003)
Criteria for Returning Cases

  1. Cases should be returned to the group if the matter is factual, requires further development or verification of new information, and it is more efficient and/or expedient for the examiner to complete the work.

  2. Cases should not be returned to the group if the matter is one of legal interpretation and is not a matter of factual development.

4.8.5.7.4  (10-01-2003)
Case Return and Closing Procedures

  1. If Appeals released jurisdiction of the case, AIMS is updated and the case is returned to the field. Upon completion of the additional field work, the case closes either by using normal procedures without additional action by TS or by returning to TS for processing, depending upon the particular case.

  2. If Appeals did not release jurisdiction, the case is returned to the field. Upon completion of the required field work, the case closes to TS for transmittal to Appeals.

  3. TS monitors and follows-up on outstanding cases returned to the field.


More Internal Revenue Manual