Zero out the incorrect joint account by preparing Form 5599 with the appropriate Transaction Codes(TC) and amount in Item 12 to reduce to zero all tax and penalties assessed.

Prepare and process a substitute return (TC 150 -0-) to set up the wife’s separate account. The received date for the substitute return should be the same as that of the joint return.

Public Law 91-679 provides that in certain cases a spouse will be relieved of liability arising from a joint income tax return. The three types of situations that can occur:

Cases must be flagged with a Form 3198–A, noted " P.L. 91-679," and the type of situation must be identified. An appropriate notation in Item 31, Form 5403 should identify Innocent Spouse cases received from Appeals. A transcript of the account must be secured before the adjustment(s) can be processed.

To quickly release 6405(a) refunds to the taxpayers, the expedite refund request procedures were instituted. Under the expedite refund request procedures, the Service may issue the refund if the Committee does not express an objection within 30 days from the time the report is submitted to them. However, the expedited refund procedures should not be applied in cases where the expiration of the statute of limitations is imminent, or where the Service may have difficulty in recouping the refund.

IRC 6405(b) provides a similar rule for Joint Committee review of a refund or credit made under IRC 6411, which relates to carry back adjustments. In such a case, if the net tentative refund or credit is more than $1,000,000 it will not be reported to the Joint Committee before making the refund or credit, but will be reported when the correct amount of tax is determined. If such determination results in a deficiency, but with a net refund or credit previously allowed under IRC 6411 (i.e., partial recoupment of the tentative allowance), the procedure as to Joint Committee review will be the same as with a refund or credit more than $1,000,000 not involving IRC 6411.

If more than one taxable year is involved, only the overpayment, for each taxable year is considered. Any taxable year, for which there is no net overpayment, is not considered.

After the case clears the Joint Committee on Taxation, the following documents should be in the case file:

Upon receiving the above documents, the Tax Examiner must compare the taxpayer’s name on the yellow copy of the report to the Joint Committee with that listed on the letter from the Joint Committee. The name on the Joint Committee letter should be compared exactly with that on the yellow copy. In the case of a variance in the names, return the cases to the Technical Staff for further guidance.

All Joint Committee cases require that a manual refund be issued if the monies have not already been refunded.

Upon receiving acknowledgment of receipt by the Joint Committee of an "Expedite Refund Request" report, the examining area office QMS should promptly forward a "dummy" work file to the closing function to start refund processing. The work file must be transmitted with Form 3198–A, specifying the scheduled date for the refund. The scheduled refund date should be 31 days from the day the Committee received the "Expedite Refund Request" report. The closing function must coordinate with the Campus Center to schedule the refund to go out on the specified date. If the area office QMS is notified that the Joint Committee objects to the release of the refund, QMS must immediately contact the closing function to stop the processing of the refund.

Campus Center personnel must scrutinize all requests for refunds (Form 843, Form 1045, and Form 1139). Campus Center personnel are responsible for processing tentative refunds and forwarding all other TE/GE types of claims to the Area Office. All Form 1040X and Form 1120X, indicating the original return is under TE/GE jurisdiction, must be forwarded to the Directors of the Business Units (i.e., EP, EO, FSLG, ITG or TEB).

In TE/GE, claims are generally filed for:

Taxable Increase Adjustment - An amended individual or corporation return which shows an increase (additional) tax over that reported on the original return.

Superseding Return - Any return filed prior to the due date changing the data reported on the original return.

When a Campus Center Adjustment Branch receives a timely filed TE/GE claim, they must secure the original return (Index Card and the ANMF transcript for NMF returns) and determine whether the organization or plan is under examination. If it is under examination (TC 420 in the module), they must forward the entire case to the Director of the Business Unit (EP, EO, FSLG or ITG). Forward TEB claims to the Manager of Field Operations.

If the organization/plan is NOT under examination, the entire case must be forwarded to the Campus Center Examination Branch for AIMS opening input. Campus Center personnel should not generate overassessment transactions on TE/GE returns, unless directed or requested by local TE/GE offices except for math or Campus Center errors.

Upon receipt, Campus Center Examination Branch must prepare and input the following Forms:

Claims should have a Source Code of 30 on Form 5546, Examination Return Charge-Out. After the account is established on AIMS and the charge-out is received, the entire case file must be forwarded to the specific Primary Business Code.

An amended return is a second return filed, after the due date, which changes information submitted on the original return. The taxpayer will send their amended return to the Campus Center where the original return was filed. The amended return should then be posted to the taxpayers account on MF with a TC 976/977. If TC 420 is present, then a TC 470 will post to MF.

In some instances, amended returns may require consideration by TE/GE to change tax liability on the IMF or BMF.

If an amended return is filed with the Examiner and an examination is not warranted, process the amended return directly to the Campus Center for input to the BMF/IMF/EPMF following the applicable delinquent return procedures in Section 2.3.19. Do not establish on AIMS.

Claims for refund, including amended returns and informal claims, other than TEB claims, may be surveyed after assignment if it is determined that the claim issue is clearly allowable in full and the return does not warrant examination.

The Examiner must complete Form 1900, Income Tax Survey After Assignment or Form 2503, Survey After Assignment-Excise or Employment Tax, for cases involving carry backs, if the information upon which the survey is based is not disclosed on the returns affected. The Examiner must also explain the reason for survey on Form 1900. The Group Manager must sign these forms.

If the correct claim amount is not shown on Form 5546 or AMDISA, Examiners must prepare a Form 5598, TE/GE Correction Request to update AIMS with the correct amount.

Form 1139, Corporation Application for Tentative Refund, is not treated as a claim when the amount requested has been refunded, although a claim form with the same issue and tax period was filed at the same time.

Surveyed claims require a DC of 34 in Item 13 of Form 5599. Other required entries on Form 5599 include P7-18, P21-22, P24-29, P31-34, C, P36, P38-40, P52-54 and Items 12 and 36. Additional optional entries include Items 02, 6a, 6b, 6c, 07, 09-11, 15, 39, 40, 43 and 50-54.

In cases involving the disallowance of a claim for refund, whole or in part, a notification letter must be issued to the taxpayer. The area office issues certified notices of disallowance. The Examiner prepares the following forms to inform the taxpayer of a full or partial disallowance of their claim.

If a certified notice of claim disallowance is issued, Form 3198–A, should notify the closing function or designee, with the appropriate blocks checked. The following letters are forwarded to the taxpayer by the closing function or designee to inform the taxpayer of the full or partial disallowance of their claim:

The reason for the disallowance must be at the bottom of the letter.

Specific provisions extending the time for filing claims are listed in the following cases:

Special rules are also provided for certain manufacturing sugar payments, for overpayments attributable to items of Federally registered partnerships for windfall profit tax, and trade rubber.

Windfall Profit Tax (WPT) - The statute is based on when the WPT was paid rather than the personal income tax payment date. Amounts of WPT withheld are treated as having been paid by the producer on the due date or extended due date of the income tax return. (The credit for overpayment of WPT has been repealed effective for tax periods beginning after August 1988.) All claims or requests for adjustments to WPT are forwarded to the Austin Campus Center (AUSC).

Self-Employment Tax - If an agreement by a state or subdivision, under Section 218 of the Social Security Act, covering its employees, results in a retroactive reduction of their self-employment taxes, an otherwise barred claim for refund will be timely if made by the last day of the second year after the calendar year of the agreement [IRC Section 6511(d)(5)].

If it is found that a corporation does not qualify as a small business and the business is terminated, Form 1120S Return must be converted to a regular Form 1120. The Examiner must identify the case by attaching a Form 3198–A to the file and should prepare Form 5598, to change the Form 1120S Activity Code to the appropriate code for Form 1120, as indicated on Form 3198–A.

Form 5599 for the Form 1120S Return should also be used for Form 1120. Tax Examiners must complete coding and editing in the normal manner.

For unagreed cases closed to the Appeals Office, the appropriate DC (07 or 11) must be entered on Form 5599.

For agreed cases, two additional steps are required:

This kind of case must be identified with Form 3198–A. The case file may include the original or a copy of Form 1120.

The procedures for conversion are as follows:

Examiners must identify conversion cases on Form 3198 attached to the file.

Agreed case files should contain a Form 1120 or a photocopy marked "Form 990 converted to Form 1120" . This kind of case must be identified with a Form 3198–A attached to the case file.

In order for the Form 1120 to post to MF, the MF should reflect compatible filing requirements and status.

Submit Form 5599 with Form 990 to close off the AIMS data base as a revocation, using DC 09. Item 414, Delinquent Return Amount on Form 5599 should reflect the tax liability and penalties of the delinquent Form 1120.

For unagreed cases, place the converted Form 1120 substitute for return in the case folder.

In the event that an examination results in the revocation of the exempt status of the trust, follow the procedures below in disposing of Form 1041, U.S. Fiduciary Income Tax Return. Form 5500 Series Returns will be closed upon final disposition of the examination.

When converting a Form 1041, the Campus Center will follow these procedures:

At the time of closing, the Examiner will print in the top margin of Form 1120 and on Form 3198, Special Handling Notice, "Form 1041 Converted to Form 1120 by TE/GE" . The Examiner will also add the activity code of the new Form 1120 to the Form 3198–A.

The "received date" on the new return is the date of the timely filed return, if the return being converted is timely filed. Otherwise, it is the date that the return being converted was filed. The amount of tax resulting directly from the conversion is shown in the tax computation of Form 1120 or Form 1041.

When evidence that a required return has not been filed, the Examiner will request a transcript of the account to document what action has been taken. The request can be submitted as follows:

Based on the above, a transcript of the account must accompany each delinquent or substitute for return. This transcript will be attached to the return when submitted to the Campus or the closing function. The transcript will be used by the Tax Examiner to perform their verification responsibilities and will be kept in a suspense file.

If a return has not been filed (TC 150), use Form 4844, Request for Terminal Action, to input the following codes into IDRS to close any Collection controls and halt any notice that may be issued requesting the return.

The current or appropriate year’s tax form should be used. Substitute for returns should contain entity information only. Do not attach additional schedules.

The Examiner will mail all delinquent return packages not under examination and delinquent/substitute return packages with payments to the appropriate Campus Center.

The Examiner will mail delinquent return packages under examination, without payments, to the closing function for review and perfection for processing.

Delinquent/Substitute Returns must be established on AIMS as soon as it is known that an examination will be made or when examination time is first applied. The appropriate Push Code must be used when establishing the case on AIMS in order to hold the TC 424 at the EPMF, BMF or IMF until the TC 150 posts. It is extremely important that the delinquent or substitute be submitted for processing since a CP 87 or CP 187 will be generated after the TC 424 posts, if a TC 150 has not posted. Establishing the returns on the EPMF, BMF or IMF, immediately establishes inventory controls and avoids unnecessary delays in closing.

The Tax Examiner must perform a review and perfection of the delinquent return package under examination upon receipt prior to being sent to the Campus Center for processing.

The following steps should be taken:

Tax Examiners must review and perfect the NMF delinquent return package under examination without payment, upon receipt prior to sending the package to the Campus Center for processing.

The following returns are processed in accordance with NMF procedures.

The Tax Examiner must take the following steps:

The tax return, with Document 13133, Form 3198–A, Form 4571 (if present), and research data must be forwarded to the Campus Center Receipt and Control Branch. If the Delinquent Return package requires quick assessment processing, do not send the package to the Receipt and Control Branch. Process the return in accordance with procedures contained in IRM 4.4. Quick Assessment Procedures would apply in the following situations:

Maintain a tickler file comprised of a copy of the entire package submitted to the Ogden Campus Center for posting of the TC 150.

Inform the Examiner when TC 150 posts to MF.

Examiners are responsible for insuring that any delinquent returns received with remittance are forwarded to the appropriate Campus Center by Certified Mail within one workday of receipt.

EP Form 5650 or TE/GE Form 5599 cannot be processed until TC 150 has posted to the MF and the MF control is fully established on AIMS.

Closing procedures are as follows:

For each type of return included in the case file, enter a " T" on the latest year closing record. Enter a " R" on all of the prior years closing records having the same MFT code as the closing record just marked with a"T" .

The Substitute for Return (SFR) is used when the employer or organization, upon receiving the due notice from the Service, refuses to file a required return. In such cases, the return must be prepared containing the following entries:

Attach a Form 3198–A, Special Handling Notice and a Document 13133, Expedite Processing Cycle, to the front of each SFR being submitted. Check the box for "Substitute for Return" on Document 13133. For EO and GE - Where an exempt organization or government entity refuses to file a required information return annotate on Form 3198–A, "ASSESS DELINQUENCY PENALTY."

For EP Form 5500 - If the return is not on AIMS, prepare Form 5597, TE/GE IMF/BMF/EPMF Request. Use a "1" or "3" for return not requested. Enter either Push Code 080 or Push Code 036 for substitute for return . In Item 22, Reason for Request, write "TE/GE-SFR."

For EO/GE and Form 5330 - If the return is not on AIMS, prepare Form 5597, TE/GE IMF/BMF/EPMF Request. Enter a"1" or "3" for return not requested. Enter Push Code 021 for substitute for return. In Item C, Reason for Request, write "TE/GE-SFR. "

Forward with the return package, a copy of a recent transcript (not more than sixty days old) which was used in the determination of the employer’s or organization’s failure to file.

The original substitute for return, Form 3198–A, Form 5597, transcript and Document 13133 are sent to the closing function onlywhen Push Codes 080 or 021 are used. The copy is kept by the Examiner and is closed out with the EP, EO or GE administrative file when the examination is completed. The filing of the return will establish filing requirements for the employer/organization.

If the return is examined, establish the return on AIMS using Form 5597. A copy of the original return will be kept by the Examiner and marked in red"COPY OF SUBSTITUTE FOR RETURN PREPARED BY TE/GE DIVISION."

Occasionally it may be necessary to process a case, where an examination has been made, but a return has not been filed or there is no requirement that a return be filed. Process these as described below.

If Collection refers a TDI case to EO or EO is working a case and it is identified as a TDI case, a TC 595 CC 88 must be entered to close the Collection TDI. Collection or EO must input the TC 595 depending upon local agreements.

The posting of a TC 150 for a Delinquent Return/Substitute for Return will not close the TDI. When the examination of any case identified as a TDI case is completed, a TC 599 CC 88 (Unagreed) or CC 89 (Agreed) must be input by EO.

If EO determines that the organization did not have a filing requirement, a TC 590 CC 75 must be entered. If a determination was made that the organization is no longer liable, input a TC 591 CC 75, which will satisfy this module and all subsequent modules for the same MFT.

Cases involving delinquent returns that are closed on a copy can also be referred to Appeals on a copy, unless a delinquency penalty is an issue.

Cases referred to Appeals, where a delinquency penalty is not an issue, should be processed as follows:

Cases referred to an Appeals Office, where a delinquency penalty is an issue, must be processed as follows:

Cases involving substitutes for returns referred to Appeals, must be processed according to (2) above.

All EO or GE Closing Agreements are approved by the Director of the Business Unit and reviewed by the EO or GE Closing Agreement Coordinator. After the Director or delegate has executed the agreement, the Coordinator will mail the Closing Agreement to the taxpayer. The Examiner will prepare a Closing Agreement package and forward with the case file to the Closing Function. The Closing Agreement package will contain:

The case file will consist of:

Once the package is received:

When an EO or GE Closing Agreement has been entered into for a taxable return, Form 5599 should contain:

When an executed EO or GE Closing Agreement involves the assessment of a non-tax amount for a Form 990, Form 990PF, Form 941 or Form 8038 Series, Form 5599 will be used to assess the liability.

Form 5599 must contain:

The closing unit will use Form 2859, Request for Prompt or Quick Assessment to make a manual assessment when the statute is imminent or to input Transaction Code (TC) 150 -0- to allow the closing assessment when there are problems with posting a return. If a manual assessment, enter the amount of the Closing Agreement liability in Item 35.

All other entries on Form 5599 must be reviewed for accuracy before submitting the closing package to the Terminal Operator.

Any Closing Agreement entered into for Form 990BL or Form 4720 under IRC 4912(b), IRC 4941(a), IRC 4944(a)(2), IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a) must be processed by quick assessment procedures outlined in IRM 4.4, Examining Process.

These returns are considered NMF returns and must be processed manually using Form 2859. An "N" should follow the EIN/SSN on Form 2859 and on Form 5599.

The closing unit will prepare and use Form 8485, Assessment Adjustment Request to assess the Closing Agreement liability for a return not on AIMS.

Form 8485 Preparation Instructions: