Internal Revenue Manual - 4.4.22 Non-Master File (NMF) Processing

Part 4. Examining Process
Chapter 4. AIMS Processing
Section 22. Non-Master File (NMF) Processing

4.4.22.1 (02-08-1999)
Introduction

This chapter contains procedures on Non-Master File processing.
Some returns have not yet been programmed to the Master File (MF) . Also, certain Examination deficiencies cannot be processed to the MF. Adjustments to these returns and returns for pre-ADP periods require forms and procedures different from those used in adjusting MF returns. Some additional code and edit procedures are necessary and blocking and numbering requirements are different.

4.4.22.1.1 (02-08-1999)
1999 Changes

Document 6209 is being revised to include a NMF section.
CC RMREQ can be used to determine which centers have NMF accounts open on a specific taxpayer.

4.4.22.2 (02-08-1999)
NMF Research and Transcripts

Researching NMF accounts is also different. There is a system consisting of Index Cards and Unit Ledger Cards (ULC) and an automated system, Manual Accounting Replacement System (MARS).

4.4.22.2.1 (02-08-1999)
MARS

Because MARS provides the service centers and offices the capability for nationwide on-line research and on-line transcript requests of NMF accounts, it is no longer necessary to submit requests to the Accounting Branch for most transcripts or copies of NMF accounts.
1. All NMF accounts open in your service center or have been closed since the implementation of MARS in your service center are available for immediate research or transcript requests on a MARS terminal.
2. Accounts closed prior to MARS and all NMF accounts in service centers that have not implemented MARS are still requested using Form 4338.
To use the MARS system, obtain a unique login from the Automated Systems Branch. You will assign your own password which must be entered with the login each time you access MARS.
1. The MARS system allows you to read any entity or transaction on the file by following the instructions displayed with the "Research NMF" option.
2. With the "Query" command, you can search for a desired entity by entering the DLN or TIN, MFT, and tax period of the desired record. If you have only partial information, enter the data for any field(s) shown on the screen, then page for the record you need.
3. Use the "NMF Transcript" option to request a printed transcript (not a certified transcript) that will be delivered from the NMF unit on the next day. The MARS system does not provide the "print screen" capability that would allow you to copy what you see on the research screen.
NMF transcripts are not screen prints. The transcripts are produced from the data base as part of the nightly batch processing and will be available the next day. Accounting will distribute the transcripts, sorted within TIN within the employee’s number. The employee number is an input field for transcript requests and will be the same as the current IDRS number. There is no unique employee number for MARS. Out of service center transcripts will be mailed on a daily basis to the appropriate service center.
For complete instructions for researching NMF accounts on MARS, refer to IRM 3.17.46, Automated Non-Master Accounting, or contact the NMF unit in the Accounting Branch in the Service Center.

4.4.22.3 (02-08-1999)
NMF Assessments and Overassessments

Perform all processing, code and edit functions for all years in file requiring NMF assessment or overassessment for one or more years. Years or periods in the case file not requiring NMF assessment or overassessment should be processed for numbering and blocking in the regular series.
Closely examine the name and address line of all documents. In estate tax cases, the name and address must be that of the estate and executor rather than that of the decedent. The taxpayer’s address must accompany the adjustment document forwarded to the service center. This may require entering the address on the label attached to the adjustment document.

4.4.22.3.1 (02-08-1999)
Assessments

Determine the appropriate dates and compute the interest on a deficiency requiring NMF assessment.
Interest amounts of less than $1.00 will not be shown on Forms 5344, 5403 unless the amount has been paid.
Form 2467 (see Exhibit 4.4.22–1) is to be affixed to the return and initialed. Show increases in tax, penalty and interest, add them, and show the total. If the IRC Section authorizing the assessment is known, insert it. The date of assessment is the 23C date. The new DLN is the account number.

4.4.22.3.1.1 (02-08-1999)
Spousal Assessments

See the Innocent Spouse Chapter and the 90-Day Chapter for special processing instructions.

4.4.22.3.1.2 (02-08-1999)
NMF Assessment Verification

Case Processing Support will establish an Assessment Verification (AV) file for all NMF assessments processed via Form 5734. The Service Center Accounting function will send part 4 of Form 6335 and, if appropriate, related documents to Case Procesing Support to verify that the assessment has been made. If verification is not received follow up action will be initiated no later than 15 workdays from the date of the initial submission of Form 5734.

4.4.22.3.2 (02-08-1999)
Overassessments

A transcript of account (photocopy of unit ledger card) is required in the following instances.
1. If the return was not full-paid or overpaid.
2. If there is a record of an additional assessment having been made without a record of payment.
3. Exception:
  
  No transcript is needed if there is a verified advance payment which completely paid the additional assessment.
A check for outstanding accounts, both MF and NMF, is required if the overpayment would result in a refund of $1,000 or more, including allowable interest.
Form 1331 or 1331–B must be prepared with entries in Section 1 of the form in agreement with the amounts on the overassessment label. See Exhibits 4.4.22–2 and 4.4.22–3.
1. Refund-only Forms 1331, and strictly credit and abatement Forms 1331 should be blocked separately. If there is a combination refund, credit and/or abatement on the Form 1331, this is blocked separately from either of the above. Forms 1331 should be completely filled out, with the exception of the schedule number and date certified, down to and including the "Total abated and credited" line. The name and address and refund amount should be typed in and all other information should be either typed or written with a pen. They should be neatly prepared without corrections or deletions. The first name line on estate tax cases must show the name of the person to receive the check. A transcript of the account may be used for the record of assessment.
2. Compute the interest allowable on refunds, using the applicable space on the back of Form 1331. Enter in the "date" column the date to which interest is computed on the overpayment. Allowable interest is computed from the paid date or the due date, whichever is later, to the schedule date if a refund is involved, or the due date of the other account if a credit is involved.
3. If the account is not paid, the overpayment is entered as an abatement on the Form 1331. A copy of the ULC or a certified transcript of account is to be stapled to the reverse side of Form 1331 for the account to be abated and to the posting copy. If the account is in "Notice" status, the list week is to be shown.
4. If the account is paid but there are other outstanding accounts for the same taxpayer, the overpayment is entered as a credit on Form 1331. This will normally result in an accrual of interest or an abatement of interest on the account receiving the credit. If the account receiving the credit is another NMF account and there is enough credit to apply to accrued interest, the interest can be accrued on Form 1331 by entering it in the credit column, circling the amount in red on the posting copy, and entering code "Al" adjacent to the interest figures. When overpayments are credited to written off accounts, use code "TA" adjacent to the figure in the credit column and circle in red the amount on the posting copy of Form 1331. For credits applied to outstanding liabilities, enter on separate lines in the "Amount Credited" column that part of the unpaid liability, tax, penalty, and interest which are to be satisfied from the current overpayment. The status of the NMF account must be entered on the posting copy of Form 1331. If an abatement of interest is involved, it is necessary to prepare a Form 1331–B to decrease the interest on the other account.
5. If the overassessment is on an account that is paid in full, and there are no other outstanding accounts for the taxpayer, the overpayment is scheduled for refund.
6. If interest was assessed on the account that has an overpayment, interest should be decreased proportionately unless a restricted condition prohibits it. An exception is encountered when an estate tax (Form 706) assessment is paid by treasury bonds. In these situations send a copy of page 1, Form 706 to the service center Accounting Branch with a memorandum giving all pertinent information. Interest will not be computed on these cases.
Affix Form 2468 to the return and initial the label. See Exhibit 4.4.22–4. Show the decrease in tax and/or penalty. After computing interest on the correct tax liability, compare it with the interest previously assessed and enter the overassessment of assessed interest, if any. Do NOT enter interest allowable on any overpayment. Make no entry for the schedule number.

4.4.22.3.3 (02-08-1999)
Combination Cases— Assessments and Overassessments

When both assessments and overassessments are involved in the same case, the earliest overpayments are applied to the earliest assessments on the Form 1331 by completing the credit portion on the bottom and entering the DLN or account number of the assessment that is being credited. The record of assessments and payments is to be completed (back of file copy of Form 1331) showing the account being credited and the status of the account. If it is an account being assessed at this time, the new DLN and 23C date of the account will be entered by the Accounting Branch. If a transcript of an old account was requested and it does not show the status, request Examination at the service center to identify the unit to be contacted to obtain the current status.
1. Assessment: Interest is computed on the assessment from the due date of the deficiency to the date the overpayment was available. Any amount not covered by credit will have interest computed in the normal manner. If the available date of the overpayment is before the due date of the assessment, no interest is due on the assessment.
2. Overpayment: Allowable interest is computed on the overpayment from the paid date or the due date of the return, whichever is later, to the due date of the deficiency. If the deficiency is due before the available date of the overpayment, no interest is allowed on the overpayment unless the overpayment is greater than the assessment(s). Then, interest is allowed on the balance in the normal manner. Interest is allowed on the overpayment applied to interest assessed on a deficiency for another period to the date the interest is assessed, except no interest can be allowed past the schedule date.
3. Exception:
  
  These instructions are not applicable where one taxpayer agrees to the application of credit to a deficiency for another taxpayer. In this case, interest is computed on the deficiency without regard to the overpayment and interest is allowed on the overpayment to the schedule date. The tax and allowable interest are then credited to the deficiency through entries in the credit column on the Form 1331.
When an overpayment is to be applied to an assessment that has not been made, it is necessary to keep the file together until the deficiency is numbered so that the assessment number can be entered on the Form 1331 with the 23C date of the assessment; the assessment and overassessment must have the same 23C date. The posting copy is not acceptable without this information.

4.4.22.4 (02-08-1999)
Quick Assessments

NMF quick assessments are processed in the same manner as MF, except the numbering is different and abstract codes are required for IMF and BMF adjustments. See IRM 3.17.46.
Assessment verification on NMF quick assessments will be executed in the same manner as they are for MF quick assessments. Refer to Quick Assessments for those procedures.

Note:

Form 6335 is the billing received by the taxpayer on NMF quick assessments.
If there has been a NMF assessed advance payment paying tax, penalty and interest in full it is not necessary to use quick assessment procedures because the assessment will have already been made as of the 23C date shown on the copy of part 1 of Form 3244–A. These should be numbered and processed as any other NMF assessment. If the advance payment does not pay the tax, penalty and interest in full, quick assessment procedures should be used. The request should specify the amount of payment for accounting to allow credit against the assessment.
Where the quick assessment is for tax shown on a delinquent NMF return, the return will be submitted with Form 2859 in lieu of Form 5344 or 5403. After the original delinquent return is processed, requisition the return. When the return is received, process Form 5344 or 5403.

4.4.22.5 (02-08-1999)
NMF Unapplied Advance Payments Follow-up

Semiannually, the Service Center Accounting Branch prepares a list of unapplied NMF advance payments which have been held six months or more to ascertain whether these payments apply to cases previously processed or through some error the payment is still classified as an advance payment. The Service Center Accounting Branch will forward the original and triplicate of the list to Case Processing Support.

4.4.22.5.1 (02-08-1999)
ESP Procedures

Furnish the current status of each case under the "Remark" column of the list.
Examine the AIMS data base, both MF and NMF, to determine status or disposition of the case.
Research MF and NMF, to determine if assessment was made.
Annotate both copies of the list to show the status or disposition (including dates).
Retain triplicate of the list.
Return original of the list to the Service Center Accounting Branch for processing.
Maintain the triplicate of the list until receipt of the next semiannual list.
Compare the data from the current list with any prior lists to determine if duplicate reference is contained on the new list.
If research on the previous list provided the status of the case, transfer this information to the new list and follow up to assure that the research is still accurate.

4.4.22.6 (02-08-1999)
NMF AIMS Closings

NMF cases are closed using Form 5344 for examined and Form 5351 for non-examined cases.

Exception:

See Text IRM 4.4.22.6.2 for Disposal Code 28 cases. The processing functions perform the following tasks after completing code and edit of the NMF closing documents.

4.4.22.6.1 (02-08-1999)
NMF Examined Closings

Sort returns by NMFT.
Then sort into the groups listed below. Each group requires a separate block. A maximum of 50 closings may be combined in one block.
- Deficiencies or additional tax cases
- No change cases
- Overassessments to be refunded
- Overassessments with credit applied to another account, and abatements
- Cases protested to Appeals Office
- Cases with advance payments— full payment
- Cases with advance payments— partial payment
Assign appropriate blocking series.
Log the blocking series on Form 3539. See Exhibit 4.4.22–5.
Close through terminals.
Number the closures with the generated DLN. See Text 4.4.22.6.4.
Forward cases to service center processing. Service center processing will associate and compare closed blocks with related Forms 813B (if errors exist, return block for correction). Service center will forward closed cases to NMF Accounting function.

4.4.22.6.2 (02-08-1999)
NMF Non-Examined Closings

Sort closing documents by NMFT Code.
Then sort into the groups listed below. Each group requires a separate block. A maximum of 50 closings may be combined in one block.
- Cases with Disposal Codes 28. See Text 4.4.22.6.2.1.
- All other non-examined disposal codes
Assign appropriate blocking series.
Log the blocking series on Form 3539. See Exhibit 4.4.22–5.
Close through terminals.
Annotate the closure with the generated DLN. See Text 4.4.22.6.4.
Prepare Form 813 and associate with closed cases. See Text 4.4.22.9.
Forward NMF non-examined cases to NMF Accounting function for indexing.

4.4.22.6.2.1 (02-08-1999)
Disposal Code 28

Disposal Code 28 is used to dispose of a NMF AIMS data base that was established for control purposes only. Form 10904 is the closure document. The closing function will perform the following tasks:
1. Sort first by NMF MFT, then by File Source (N and –D) to create blocks for terminal input.
2. Assign a blocking series of 100 to the first block, 101 to the next, etc. until all blocks have been assigned a number.
3. Input through the terminal.
4. After terminal closure, retain these forms in searchable order and dispose of them in accordance with IRM 1.15, Records Disposition Handbook. At the option of area offices, arrangements may be made to have the forms numbered and closed to service centers for retention (this would necessitate the manual preparation of Forms 813B) . See IRM 4.4.22.9.1.

4.4.22.6.3 (02-08-1999)
Terminal Closure

Once a block of NMF examined or non-examined closings have been input, the terminal operator receives an AMBLK print-out (which should be attached to the block), showing the first DLN, the last DLN, the total examination results, total assessments, and credits for the block. It provides information needed to physically number the closings with the refile DLN.
As a result of the terminal input, an Examination Document Register, Form 813B, is generated by computer for NMF examined closings.
A Form 813 must be prepared manually for nonexamined closings (except Disposal Code 28) closed through the terminal. See Text 4.4.22.9.

4.4.22.6.4 (02-08-1999)
Stamping the DLN

Stamp the DLN number on the closing document and the tax return when present. The ink color used to stamp the DLN represents the year of numbering as follows:

IF last digit of the year is	THEN use
1 or 6	purple ink
2 or 7	red ink
3 or 8	black ink
4 or 9	blue ink
5 or 0	green ink

Line out all earlier DLNs. Keep the documents in order so that the DLN stamped on the document is in the same sequence as assigned by the terminal.

4.4.22.7 (02-08-1999)
Prompt, Quick, and Jeopardy Assessments

Use the appropriate area office code and tax class. Use Document Code 51 instead of 47. The Julian date of the DLN is determined in the normal manner except that the current date is used for Jeopardy or immediate assessments and for deficiencies over $50,000.

4.4.22.8 (02-08-1999)
NMF Returns

In addition to the return, stamp the DLN (except those in a non-refile series) on these documents.
- Assessment document (Form 5344 or 5403).
- Form 1296 (constitutes return), if present.
- Form 2467 or 2468, if present.
When more than three penalties are shown for a period, assign a second DLN to the excess penalties.
The regular weekly 23C date for NMF assessments and overassessments is the Monday of the third week following the week in which the Form 5344 or 5403 is released to the NMF Accounting function. Monday is used as the 23C date even though it may be a holiday.
Number NMF cases transferred to Appeals in the 1XX blocking series. Form 5344 remains in the case file and accompanies the return to Appeals.
The DLN is assigned by the terminal and is comprised of the appropriate two digit area office code, Tax Class 6, Document Code 47 and the Saturday date prior to the 23C or schedule date. Areas use the prior Sunday date. Serial numbers will be assigned in the range 00–99.

4.4.22.9 (02-08-1999)
Form 813, Document Register— NMF

When an NMF examined closing is input at the terminal, a Form 813B is automatically generated at the service center.

4.4.22.9.1 (02-08-1999)
813B Association

When an NMF block is received at the service center for association with the generated Form 813B, the block is compared to the generated Form 813B for accuracy.
The function responsible for association must follow up within a prescribed time frame if the block is not received. The time frame will be determined locally on normal mailing time.
Once the returns are associated with the Forms 813B, they are routed to the service NMF Accounting function.
Agreement may be secured from the NMF Accounting function in the individual service centers to allow area offices to manually prepare Form 813B and ship directly to the NMF Accounting function. Generated Forms 813B for cases from areas using the manually prepared Form 813B should be destroyed.
Form 813B generated for NMF closings to Appeals are not needed and should be destroyed. They can be identified by the NMFT code, the 100 blocking series, and the lack of adjustment data.

4.4.22.9.2 (02-08-1999)
Case File Shipments

When closed blocks of NMF cases are to be associated with systematically generated Forms 813B, areas must ship the closed blocks within two workdays from the date of closure through the terminal.
If a shipment date cannot be met or if it becomes necessary to cancel a block, areas must immediately notify the service center function responsible for 813B association by telephone.
If it is necessary to return a case to the area, Form 3210 will be used for control purposes.

4.4.22.9.3 (02-08-1999)
Manually Prepared Form 813 for NMF Examined Closings

Situations may exist when it is necessary to prepare Form 813 for NMF adjustments that are not input on the terminal.
When Form 813 is prepared on NMF accounts write the type of action, as described below, near the form title "Document Register."
1. "NMF Assessment (23C date)"
2. "NMF Refund (scheduled or 23C date)— Overassessment"
3. "NMF Abatement and Credit (schedule or 23C date)— Overassessment"
4. "NMF No Change"
5. "NMF Assessed Advance Payments (23C date)"
6. "NMF Quick Assessment"
Additional instructions include the following:
1. Prepare a Form 813 for each numbered block. A separate Form 813 is required for each MFT code.
2. When practical, block deficiencies, overassessments and no-change cases on separate Forms 813.
3. List deficiencies (debits) with no sign and overassessments (credits) with a minus sign. Note the block total "net debit" or "net credit" as appropriate for mixed blocks. If the block is not mixed note the block total "debit" or "credit" . Label a block total of zero as "debit" .
4. A no-change document will occupy a blank line with a non-key sign.
5. If both debit and credit tax, penalty and/or interest adjustments apply for one tax period, enter the net amount from Item 12 of the Form 5344.
6. List any change in credits (Item 15 on Form 5344) in a column to the left of tax adjustment amounts. List increases with no sign and decreases with a minus sign. Write "credit changes" to the left of this column. Do NOT combine or net credit changes with tax, penalty and/or interest. Enter the column total for the block in the lower-left corner. Write "Credit Change Increase" or "Credit Change Decrease" as appropriate after the amount and underline it.
See Exhibit 4.4.22–6 for an example of Form 813.