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Part 4. Examining Process

Chapter 13. Audit Reconsideration

Section 2. Contact Employees

4.13.2  Contact Employees

4.13.2.1  (10-01-2006)
Research/Initial Case Screening

  1. This chapter discusses the role of contact employees. Contact employees (Customer Service Walk-In and Toll-Free call sites, Examination, Accounts Management, etc.) who receive inquiries from taxpayers regarding disagreement with additional tax assessments and/or reversal of tax credits such as EITC, will be responsible for responding to requests.

    Note:

    W&I Examination Telephone Assistors are not considered contact employees. See 4.13.2.4 for procedures applicable to telephone assistors.


    Use the following criteria to screen requests:

    1. The Taxpayer has filed an individual income tax return, and the examination has been completed and assessed, and

    2. The taxpayer has a copy of the report or knows what issues he/she is contesting, and

    3. The taxpayer does not agree with the assessment and/or reversal of tax credits, such as EITC, and

    4. The taxpayer has additional information that was not previously considered, that would change the assessment/tax credit reversal, and

    5. The assessment remains unpaid or as a result of the examination the tax credit(s) are reversed.

4.13.2.1.1  (10-01-2006)
Criteria Met

  1. If all of the above apply, go to Function Responsible (4.13.2.2) section to identify the function responsible for originating the assessment.

4.13.2.1.2  (10-01-2006)
Criteria Not Met

  1. Cases not meeting the above criteria should be processed as follows:

    1. If a return has not been filed by the taxpayer, advise taxpayer to send a complete, signed tax return. Inform taxpayer that the filing of a return is a requirement for reconsideration.

    2. If the taxpayer does not know what issues they are contesting and they state they do not have or did not receive copy of the examination report, print a copy from CEAS/RGS (including Forms 886) and mail to the taxpayer. Include Publication 3598. If the case was not archived on CEAS/RGS or access to CEAS is not available, request a copy of the Examination Report and Publication 3598 be sent to the taxpayer from the RAIVS unit via Form 4442/4442C, seeIRM 21.5.10.4.7. Advise the taxpayer to follow procedures in Publication 3598 in requesting reconsideration. Inform the taxpayer to include a day or evening phone number with their correspondence for the most efficient customer service.

    3. If the taxpayer has paid the assessment, and there have not been any credits reversed the request is a claim for refund, inform the taxpayer that he/she must follow claim procedures. Letter 89C may be used for this purpose. Include Form 1040X and instructions as an enclosure.

    4. If the case is currently open in Exam, and there is no assessment posted to the taxpayer’s account, advise the taxpayer to correspond with the office that has the open Exam. If the taxpayer provides correspondence, date stamp and forward the correspondence to the open control/office.

    5. If the taxpayer does not have any additional information to support his/her position, issue Letter 3338C. Select paragraphs that correspond to the disputed issues. Input the return address of the CRU Unit determined by referring to Exhibits 7-2, 7-3 and 7-4.

    6. If correspondence is received and the disputed issues cannot be identified, send Letter 3338C. Select paragraph "s" to include Form 12661, "Disputed Issue Verification" . Input return addresses code of CRU, determined by referring to Exhibits 7-2, 7-3 & 7-4.

    7. If a loose Form 8862 is received from an Accounts Management employee, return the correspondence to the originating stop number. Accounts Management is responsible for issuing the taxpayer a 3338C letter.

4.13.2.2  (10-01-2006)
Function Responsible & Routing Instructions

  1. AUTOMATED SUBSTITUTE FOR RETURN (ASFR)

    To determine if the return or correspondence received is an ASFR Reconsideration, research IDRS for the following transaction codes. All must be present if the response is an ASFR Reconsideration.

    • TC Dummy 150

    • TC 494

    • TC 495

    • TC 290

    • TC599 cc 88

    W & I ASFR reconsideration requests will be routed to the ASFR units at the Fresno campus. SB/SE ASFR reconsideration requests will be routed to the ASFR units at the Brookhaven Campus. Route international reconsideration requests to the Brookhaven campus. See Exhibit 4.13.7-1 for ASFR addresses.

    Note:

    If the tax module has a previously posted TC 29X and/or a TC 599 89, and the tax on the return does not match the tax posted to IDRS, then it is not a ASFR Reconsideration request. It is an amended return. Route the return to Accounts Management.

  2. UNDERREPORTER (AUR)

    The Assessment will be a TC 290 preceded by a TC 922. The originating campus may be determined from the address in the upper left corner of the CP 2000 (if available) or from the 1st two digits of the TC 922 DLN. Correspondence requesting a reconsideration will be forwarded to the Campus where the assessment originated. Refer to Exhibit 4.13.7-6 for AUR addresses Route phone calls to AUR toll free numbers. The W&I toll free number is 1-800-829-3009, and the SB/SE toll free number is 1-800-829-8310.

  3. APPEALS OFFICE

    1. The Assessment will be a TC 300 preceded by another TC 300 for zero closing the case from Examination to Appeals. Next to the second TC 300 (Appeal assessment) will be a three digit Appeal Office code. (APPL-CD>1XX or 2XX identifying the office that closed the case.

    2. TXMOD will show a three-digit Office code, 1XX (non-docketed cases) or 2XX (docketed cases) when Appeals closes a case. The examiner in CRU must know the Appeals closing code to determine if the case will be forwarded to Appeals or worked in the CRU. The appeals closing code can be determined by contacting the Appeals Account Resolution Specialist (AARS) in Fresno at (559) 456-5931.

    3. For AUR cases that went to Appeals, the TC 300 (Appeals assessment) with an Appeals office code will be preceded by a TC 922). Forward these cases to Appeals.

      Exception:

      Forward TC 300 (Appeals assessment) with a preceding TC 922 to AUR ONLY when there is an indication that the Appeals assessment was due to dismissal from Tax Court for Lack of Jurisdiction (LOJ).

    4. For ASFR cases that went to Appeals, there will be a TC 300 (Appeal assessment) with an Appeals Office code. Forward these cases to Appeals.

      Exception:

      Forward TC 300 (Appeals assessment) that originated in ASFR to ASFR ONLY when there is an indication that the Appeals assessment was due to dismissal from Tax Court for Lack of Jurisdiction (LOJ).

      If the taxpayer requests an Appeals hearing and...

      The Appeals Closing Code is Description Action
      03 Agreed Nondocketed (No Form 906 or From 870-AD) Send to Appeals
      04 Agreed Notice of Deficiency or Non-filer where Agreement Constitutes Original Return Send to Appeals
      05 Defaulted Notice of Deficiency Send to Appeals
      08 Agreed Appeals, Docketed or Dismissed from Tax Court with Appeals time Do not send to Appeals. If Dismissed for LOJ work as Audit Reconsideration. If Appeals Settled, issue 916C
      10 Counsel Settled with no Appeals time Do not send to Appeals, issue 916C
      11 Dismissed from Tax Court for Lack of Jurisdiction (LOJ), Appeals issued Notice Do not send to Appeals. If Dismissed for LOJ work as Audit Reconsideration.
      12 Dismissed from Tax Court for Lack of Prosecution (LOP), Appeals issued Notice Do not send to Appeals, issue 916C
      17 Tried Tax Court Case Do not send to Appeals, issue 916C
      18 TEFRA Key Case closed to DOJ/Claims Court Do not send to Appeals, issue 916C
      19 TEFRA Key Case closed to DOJ/District Court or Bankruptcy Do not send to Appeals, issue 916C
      21 Dismissed, Tried, or Counsel Settled with no Appeals time Do not send to Appeals. If Dismissed for LOJ work as Audit Reconsideration. If Tried or Counsel settled, issue 916C

    5. Ensure cases are routed to the correct Appeals office as identified by the three digit Appeals Office code. Consult Appeals web page at http://appeals.web.irs.gov/APS/caserouting.htm for case routing addresses. See Exhibit 13.7-5. When routing cases be sure to follow the guidelines in Exhibit 13.

  4. CAMPUS & AREA OFFICE EXAMINATION

    1. To determine the Examination area responsible for the audit reconsideration, research is required to identify the area responsible for adjustment to the taxpayer’s account. In making this determination examiners must consider the type of adjustment – Is there a TC 300 on the account? If the only adjustment after the taxpayer’s original filing is a TC 290, this is not an audit reconsideration for Examination.

      TC 300 – In almost all cases a TC 300 indicates a previous audit was performed by Campus or Area Office (AO) Exam. However, a TC 300 adjustment could be reflected on a case that was worked in AUR. If the TC 300 is preceded by a TC 922 and TC 520, this indicates an AUR case where the taxpayer petitioned tax court. These cases should be routed to Appeals for reconsideration, unless there is an indication that the assessment was due to a dismissal from Tax Court for Lack of Jurisdiction (LOJ). An ASFR case assessed by a TC 300 with an appellate code of 2XX should be routed to Appeals, unless there is an indication that the assessment was due to a dismissal from Tax Court for Lack of Jurisdiction (LOJ).

    2. TC 290 – This adjustment could reflect a previous reconsideration made by Exam or an adjustment originated by another function such as AUR (usually preceded by TC 922) Collection or AM.

    3. If a Z freeze is present in the module and there was a prior TC 300 assessment, this may indicate the assessment was a prior questionable refund examination. The reconsideration request should be routed to Examination to be worked.

    4. Reconsideration requests where a Campus conducted the original examination – Campus exam reconsiderations can be identified as a TC 300 with an amount (or a TC 300 for zero with an adjustment to a refundable credit such as the earned income credit (TC 765) . In addition, the TC 420 will reflect an EGC of 5XXX. Campus exam reconsiderations should be addressed by the campus that performed the examination based on the DLN of TC 420 and EGC.

    5. Area Office reconsiderations are similar to campus reconsiderations with the following exceptions. The TC 420 will reflect an EGC of 1XXX or 2XXX and the PBC will range from 201-215. The TC 420 and EGC will be used to determine the campus that services that AO. Exhibit 4.13.7-3, "Routing of Area Office Reconsideration Requests" , or the Campus Locator Guide (page 29) on SERP can be used to determine the servicing campus Any SB/SE campus can route an AO reconsideration that is not conducive to correspondence exam to the responsible AO. The reconsideration does not have to be routed to the servicing campus just to be routed to the AO. W&I Campuses receiving AO reconsiderations will continue to send them to the SB/SE campus based on back-end mapping. The SB/SE campus will make the determination whether to work it in the campus or send it to the AO. Only issues that are conducive to correspondence exam and for which training has been provided should be worked in the campus. Some examples of issues conductive to correspondence are most Schedule A (itemized deductions) issues, Exemptions, filing status, Earned Income Credit, Child care credit, Child tax credit, Self-employment tax (if this is the only issue, Alternative minimum tax and certain Schedule C issues.

    6. Reconsideration requests where an Area Office PSP conducted the original examination are closed in one of two Centralized Case Processing sites, Memphis or Cincinnati. Memphis Campus (MSC) closes all SB/SE Exam cases from ALL areas EXCEPT the Central Area, Specialty, and International Cases, (prior SB/SE Areas 203, 206, and 215). Central Area, Specialty, and International closings are being done at Cincinnati Campus (CSC).

    7. If the audit reconsideration is not conducive to correspondence examination, the reconsideration should be established on AIMS and routed back to the Area Office PSP that conducted the original examination based on the PBC of the TC 420 (except if the TC 420 shows EGC of 1069 or 2069). The examiner will have to secure the administrative file to determine the responsible Area Office if the EGC reflected on the TC 420 is 1069 or 2069.

4.13.2.2.1  (10-01-2006)
Routing Instructions for Multiple Year Reconsideration Requests

  1. When a reconsideration request is received that contains more than one tax year, it is in the best interest of the taxpayer if we work the case in the same Campus. Multiple year requests should not be separated. If a request is received and a prior or subsequent year reconsideration is being worked in your campus, do not route the case. Assign the year(s) received to the examiner who is already working the case. If the audit reconsideration is generated from a program that was centralized (i.e.: POC), send to the request(s) to the Campus where the program was worked.

  2. If there is an open IDRS control, and phone contact has determined that a reconsideration request is being worked in the campus, contact the campus working the reconsideration to inform them that you will be sending a prior or subsequent year request to be consolidated.

  3. If there is no open IDRS control, multiple year reconsideration requests will be routed to the campus/area office that conducted the earliest audit. (the campus with the earliest dated TC 300).

  4. If there are multiple assessments for the same tax year, route to the campus that input the last adjustment. The exception to this will be if there are multiple assessments in one year(s) and multiple year reconsideration requests send all years to the campus with the earliest TC 300.

  5. If there is one TC 300 for 0, and one TC 300 with a money amount, route to the campus that input the TC 300 with the money amount. The exception to this will be if there are multiple assessments in one year(s) and multiple year reconsideration requests send all years to the campus with the earliest TC 300.

  6. If both TC 300’s contain a money amount, route to the campus that input the last adjustment.

    TAS cases are an exception. If there is an open TAS control on IDRS, and a subsequent or prior year reconsideration request has been received do not route the reconsideration request(s) to TAS or elsewhere.

4.13.2.3  (10-01-2006)
Role of Contact Employees when a Reconsideration Request is Received and the Examination was Performed in the Area Office or Campus Examination Function

  1. If a reconsideration request is generated from a phone call, or walk in and the taxpayer knows what issue is being contested and states that he/she has additional information to be considered (in the case of a walk-in, the taxpayer does not have the documentation with him):

    1. Briefly discuss the issues with the taxpayer. Use any available tools to research information pertaining to the taxpayer’s case. Confirm by sending Letter 3338C and select the appropriate paragraphs that correspond with the disputed issues identified by the taxpayer. See Exhibits 4.13.7-14 through 4.13.26 for paragraphs.

    2. Advise the taxpayer that you will be sending a letter outlining the specific documentation they will need to include in their response. Advise them to return the information and include their day and evening phone number, along with the best time to call. To determine the correct campus address See Exhibits 4.13.7-2 , 4.13.7-3 and 4.13.7-4 .

    3. Do not input a collection hold at this time. Advise the taxpayer that collection activity will continue until we receive the requested documentation. If the taxpayer has a hardship situation, contact TAS for instructions on how to proceed.

  2. If correspondence is received without supporting documentation:

    1. Send Letter 3338C and select the appropriate paragraphs that correspond with the disputed issues identified by the taxpayer. See Exhibits 4.13.7-14 through 4.13.26 for paragraphs. If it cannot be determined what issues are being contested, send Letter 3338C, selecting paragraph "s" to include Form 12661 "Disputed Issue Verification " . Put in the return address code of the CRU to whom the response should be directed.

  3. If correspondence is received with supporting documentation or the walk-in TP has documentation:

    1. Check TXMOD/IMFOL for the collection statute (CSED). If there is less than one year remaining, do not input a collection hold (i.e. STAUP or TC 470). If the account is in collection status below 22, input a STAUP for 15 cycles. If the account is in status 22 or 24, input TC 470. If the collection status is 26, coordinate with the Area Office Collection Revenue Officer. If the account is in status 60 (Installment Agreement) instruct the taxpayer to continue installment payments as outlined in the agreement, do not input a collection hold (i.e. STAUP or TC 470). If the taxpayer has a hardship situation, and you have received an OAR, input the appropriate collection hold. If resolution of this case does not involve a full abatement, the collection hold must be reversed when the case is closed.

    2. Route correspondence with documentation to the CRU using Form 1725 (routing slip). Send 3338C on correspondence without documentation. Do not forward the case.

    3. Advise the taxpayer that they can get Publication 3598, " What You Should Know About the Audit Reconsideration Process" , by accessing the website at http://www.irs.gov or by calling 1-800-Tax-Form (1–800–829–3676).

4.13.2.4  (10-01-2006)
Cold Call Function

  1. If a cold call is received from the taxpayer requesting an audit reconsideration, and

    1. CEAS does not show the receipt of new documentation, or the case is not on CEAS, advise the taxpayer to send in a request for reconsideration in writing, including the documentation not previously received and include a copy their examination report if available. Inform the taxpayer to include their day and evening phone number, and send the response to the address on the Letter/Audit Report received. Send Publication 3598 to the taxpayer and advise them to follow procedures in the publication on how to file an audit reconsideration request.

    2. A non-action note must be left on CEAS to document the phone and the advice that was given to the taxpayer. (i.e. the specific documentation needed for possible reconsideration).

    3. The following are CEAS Status Codes that will identify the status of the reconsideration case:
      Status 70 – Retrieve
      Status 71 – Open Case
      Status 72 – Letter 3338C – case closed
      Status 73 – No Reply – case closed (used also when transferring a case or for a case opened in error.
      Status 74 – Full Disallowance – case closed
      Status 75 – Partial Disallowance – case closed
      Status 76 – Full Allowance – case closed
      Status 77 – Case in suspense

    4. The taxpayer does not know what information is specifically needed: Review the CEAS Audit Reconsideration workpapers, and advise the taxpayer what documentation is needed. If the case is not on CEAS review the request for documentation (Form 886-H or previously issued Letters 3338C & 3339C) with the taxpayer and identify the items the taxpayer has not submitted.

    5. The taxpayer states that they have already sent in everything requested in the Form 886-H or previously issued Letter 3338C, the assistor will review the CEAS Audit Reconsideration workpapers to ascertain if the information previously sent was determined by the reconsideration examiner, to be complete and correct. If CEAS indicates that more information is needed, advise the taxpayer as to what additional information is needed. If the information previously sent was not sufficient to allow the deduction, advise the taxpayer why the reconsideration request was denied.

    6. If the case is open on CEAS and the Taxpayer still insists on talking to the assigned examiner after a full explanation was provided to the taxpayer, route the call to the examiner’s extension only if one is identified in the Recon case file.

  2. If the taxpayer is under a 2/10 yr. ban (PC 697 & 698), requesting reconsideration of EITC, inform the taxpayer that they are under the 2 or 10 yr ban and cannot claim EITC until the ban expires. A recertification indicator of 2 for the 2-yr ban or 4 for the 10 yr ban will show on ENMOD, along with the year on which the ban originated.

    1. If the taxpayer is contesting the 2-year ban, advise the taxpayer to request an audit reconsideration for the year the ban originated, and submit documentation showing their entitlement to EITC. Advise W & I taxpayers to forward their reconsideration request and documentation to Austin, and SB/SE taxpayers to forward their reconsideration request and documentation to Brookhaven.

    2. If the taxpayer is contesting the 10-year ban, advise the taxpayer to request audit for year the ban originated, and include documentation showing their entitlement to EITC. Advise W & I taxpayers to forward to Austin, and SB/SE taxpayers to forward to Brookhaven.


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