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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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If the taxpayer amended his/her prior year tax return(s) to include the portion of SS/RR for that year(s), check IDRS CC:IMFOL. If the adjustment(s) posted, then determine if the taxpayer reported the proper amount of SS/RR for the AUR tax year. If necessary, create a SS/RR IR for the benefits received in the AUR tax year.

If the prior year(s) accounts were not adjusted, issue a 2626C Letter. Advise the taxpayer that he/she may benefit by using the Lump Sum Election method to calculate Social Security Benefits. Include instructions from Publication 915 and the appropriate worksheets.

Accept the explanation if the taxpayer does not attempt to claim excess expenses over the reimbursement amount.

If the taxpayer attempts to claim excess expenses over the reimbursement amount and does not provide a completed Form 2106, do not allow the excess deduction. Send PARAGRAPH 159 ( See Exhibit 4.19.3-12) if issuing a recomputed notice, or use the content from PARAGRAPH 159 in the applicable Correspondex letter.

If the taxpayer disagrees that the $50,000 OTINC amount is taxable, advise the taxpayer that the settlement is taxable income as described in the letter they received.

If the taxpayer disagrees with the $12,500 OTINC amount, research IDRS CC:TXMOD for the prior year for the presence of a TC 660 (ES Tax Payment) for $12,500. Notate the date of ES Payment and advise the taxpayer that the $12,500 credited to their account as an estimated tax payment to defray the tax due on the $50,000 portion of the settlement is considered taxable income in the year it was applied. Inform the taxpayer of the date the amount was applied.

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Issue a recomputed notice for the remaining taxable DBTCN amount when the DBTCN amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Issue a 2626C Letter if Form 982 is submitted without a statement listing assets and liabilities.

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Deductible (e.g., mortgage interest, business loan, investment interest, etc.) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

There is no INTFG amount on the IR, issue a 2626C Letter to request the documentation.

Provides a Fair Market Value (FMV) amount that is larger than the DBTCN amount, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

The DBTCN was due to a non-recourse debt, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ See IRM 4.19.3.7.19.1 (9)

A worksheet for Foreclosures and Repossessions or a similar statement is attached, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

He/she is entitled to take any losses claimed, issue a 2626C Letter stating that losses are non-deductible, unless the property was held for use in a trade or business or for investment, in which case a portion of the loss may be deductible.

For single (or relatively few) STOCK IR discrepancies, adjust the U/R STOCK amount by the cost basis provided in the broker statement(s) OR

For multiple STOCK IR discrepancies, issue a 2626C Letter (or a recomputed notice, if appropriate) with the following Special Paragraph: " Your response did not include the requested completed Schedule D, detailing each securities sales transaction listed on our previous notice. When the necessary information is received, we will adjust your account accordingly. "

The original Schedule D was a gain (or Schedule D was not originally filed), use the cost basis to adjust the U/R STOCK amount(s).

The original Schedule D was a capital loss of less than $3,000 ($1,500 if MFS), use the cost basis to adjust the U/R STOCK amount(s) and See IRM 4.19.3.20.1.21(3) for further instructions.

The original Schedule D was limited to the maximum capital loss of $3,000 ($1,500 for MFS) See IRM 4.19.3.20.1.21.

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See IRM 4.19.3.7.26.2 for exceptions to the 10% additional tax.

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Compare the amount the TP paid for his/her health insurance coverage with the revised business profit and any other earned income (including wages from S Corporation), minus deductions claimed on Form 1040, lines 27 and 28, as filed or adjusted due to U/R processing.

The smaller of the two amounts is the new SEHID.

Compare the new SEHID to the amount originally claimed. If the SEHID changed, use the Misc Adjust/Sch C Exp window to reflect the difference.

Advise the taxpayer of the change to SEHID with an appropriate paragraph.

If the deductible loss on line 23 is equal to or greater than the loss on line 22, work the issue as a normal O/D case.

If the deductible loss on line 23 is less than the loss on line 22, the loss is subject to passive activity loss rules.

Accept the taxpayer's explanation regarding the U/R MID issue for the property(ies) in question and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ .

Include the following Special Paragraph: "Although the adjustment to the mortgage interest deduction does not affect your current year's taxable income, the passive loss carry forward for the property must be corrected. We have recorded the adjustment. Please make the necessary corrections to your passive loss carry forward worksheets."

Complete Form 5346, Examination Information Report. Include a narrative explaining the nature of the adjustment (to the passive loss carry forward), the amount of the adjustment, the related property that was affected, and all other return information required on the form.

Forward the completed Form 5346 to either the Chief, Classification or to the Chief, Planning and Special Programs (PSP) for review (per local determination).

Leave a Case Note documenting the actions taken.

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Issue a 2626C Letter.

Include the following Special Paragraph: Our records show that you were paid as an independent contractor, subject to self-employment tax. Please complete and return Form SS-8, Determination of Worker Status and attach it to a copy of this letter. To expedite processing please write " AUR" along the top of Form SS-8.

Ensure Form SS-8 is sent to the taxpayer.

Forward the Form SS-8 to the proper SS-8 Group (using 4442 Inquiry Referral) based on the payer’s location. See Form SS-8 instructions for further information.

Include a Case Note.

Manually issue a 4314C Letter to the taxpayer.

Provide the SS-8 Group Action 61 contact person/telephone number.

Suspend the case in the unit for 60 days and monitor.

If, after 60 days, the SS-8 group has not responded, contact SS-8 for determination status.

Issue a 2626C Letter and include the following open paragraph: " Our records indicate that a determination has been made that you are an independent contractor subject to self-employment tax."

Leave a Case Note.

Continue processing.

Use the Additional FICA Tax window to compute the employee share of FICA (7.65%) on the gross NEC instead of the originally proposed SET amount.

Change the Income Identify Code on NEC IR(s) subject only to FICA tax to "PE" or"SE" as applicable.

Select the SE Tax window and enter zeroes (0) in the primary and secondary SE TAX NOW fields. This prevents the system from assessing SET on the FICA income.

Send PARAGRAPH 163 ( See Exhibit 4.19.3-12).

Send the appropriate C-Letter advising the taxpayer to complete and submit the Form SS-8 per the instructions on Form SS-8. Include a statement that the process can take up to 180 days to be completed before a determination is rendered. Include Form SS-8.

Close the AUR control (assign IPC 9I for TY 2005 and subsequent).

Forward the Form SS-8 to the applicable SS-8 team, based on the payer location.

Send the taxpayer the appropriate C-Letter advising the taxpayer that the Form SS-8 has been forwarded for consideration and provide the TP with the SS-8 Action 61 contact. Include a statement that the process can take up to 180 days to be completed before a determination is rendered.

Close the AUR control (assign IPC 9I for TY 2005 and subsequent).

If the O/C W/H was the only issue, assess the undocumented O/C W/H amount. Issue a letter to inform the taxpayer that we have disallowed the additional W/H, he/she will receive an adjustment notice and that he/she may file an amended Form 1040X when the necessary documentation is obtained. Close the case with PC 53 (CP 2501) or PC 68 (CP 2000).

If the notice contains other issues, ensure that the AGREE criteria ( See IRM 4.19.3.20.5.) is met before assessing the account.

Ensure that the Return Value Screen correctly reflects the needed changes.

After committing Return Value Screen, access the Assessment window.

Confirm the presence of TC 290-0 and Reference Code 807 for the ES amount claimed erroneously.

If the taxpayer disputes the proposed adjustment, issue a letter to inform the taxpayer of the pending adjustment.

Close the case with PC 53 (CP 2501) or PC 68 (CP 2000).

Provides documentation or acknowledges that the U/C W/H should have been reported on the return, allow the additional U/C W/H. See (2) below for further instructions.

Fails to address/verify the U/C W/H, close the case with PC 52 (no closure letter). Send an 1802C Letter to inform the taxpayer that we have concluded our investigation and they may file a Form 1040X if they have any additional information they want us to consider.

Only addresses SOME of the U/C W/H, input the adjustment for the additional documented/acknowledged W/H ONLY on the ASSESSMENT window. See (2) below for further instructions. Send a letter to explain the W/H adjustment allowed and instruct the taxpayer to file a Form 1040X if they have any additional information they want us to consider.

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Complete and commit Return Value screen.

Access the Assessment Window.

Input Priority Code "3" .

Close the case with PC 53 (CP 2501), PC 68 (CP 2000) or PC 88 (Statutory Notice).

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Master File shows an indication of a mixed entity situation.

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All screens and windows used in the initial analysis of the case are available to the response tax examiner.

After the case is reworked and if the proposed Social Security Tax on Tips Penalty and/or FTF penalty still need to be partially or fully abated, select the Limit Penalties window. See IRM 4.19.3.16.8 for further instructions. See IRM 4.19.7, Limit Penalties window.

Input/verify the total of all payments credited towards the taxpayer's current AUR account received subsequent to our initial contact notice in the AMOUNT PREVIOUSLY PAID field on the Return Value or Summary Screen.

Input Amended Indicator A and Notice Indicators 0 - 8 in the appropriate INDICATOR field(s) on the Summary screen.

Use PC 57 when inputting Notice Indicator 2 or 3.

Use PC 95 when inputting Notice Indicator 1.

Use PC 59 when inputting Notice Indicator 4, 5 or 6.

Use IPC SR when inputting Notice Indicator 0 (zero).

Use IPC RN (SR if Statutory phase) when inputting Notice Indicator 7 or 8.

Input IPC SR and Notice Indicator 0 (zero); OR,

Send an 1151C Letter to the taxpayer(s) and input IPC "8M" .

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The taxpayer supplies revised tax figures, See IRM 4.19.3.20.11 (14).

Process the AUR issue(s) per normal procedures.

Send the appropriate letter and inform the taxpayer to file a Form 1040X to include the omitted income in the affected tax year.

Leave a Case Note explaining that a copy of the taxpayer’s response was sent to be associated with the subsequent year tax return.

Advise the taxpayer that a copy of his/her response has been forwarded to be associated with his/her subsequent year’s tax return.

Research IDRS for the subsequent year tax return DLN in order to forward a photocopy of the response to the Campus Files Function.

Use the Delete Record sequence to delete any applicable enterable field in the Assessment window.

Commit the window and Exit.

Blocking Series 5X for CP 2000 responses that are both TIMELY (within 30 days of the notice date) and FULL PAID (in their entirety) and for TC 291 (tax decrease).

Blocking Series 55 for CP 2501 responses or CP 2000 responses that are OTHER THAN FULL PAID.

Blocking Series 6X for Statutory Notice responses that are FULL PAID. A full payment is equal to or more than the balance due on the CP 2000.

Blocking Series 65 for Statutory Notice responses that are OTHER THAN FULL PAID.

The system uses Blocking Series 05 for pre-Stat no change closures for ELF and Form 1040EZ returns to file correspondence in Document Retention.

The date the taxpayer entered on his/her most recent correspondence.

Envelope postmark date.

Three days prior to the IRS Received Date.

Current date.

Received date stamped on correspondence.

Envelope postmark date.

Signature date.

Current date.

Verify the correct agreement date is present in the Assessment window on all other than full paid agreed assessments . Ensure that the CREDIT INTEREST DATE field is blank if the case is being assessed by Default (For example, PC 94).

Verify that the CREDIT INTEREST DATE field is blank on fully paid assessments; interest stops automatically at the date of the payment. This applies whether the payment was timely or not. Full paid is defined as payment for tax, penalty, and interest.

Verify that the CREDIT INTEREST DATE field is blank on tax decrease cases.

Verify that the CREDIT INTEREST DATE field is blank on W/H and/or SST adjustments with a TC 290-0 (zero).

Verify the CREDIT INTEREST DATE is blank when inputting a TC 290-.00 on a pre-Stat No Change ELF or Form 1040EZ closure to file correspondence in Document Retention. This prevents an unpostable condition.

TC 290/291 - Adjusts the tax.

TC 170/171 - Adjusts the ES Penalty when a penalty was previously assessed and there is a change to W/H.

TC 160/161 - Adjusts the Failure to File.

TC 310 - Assesses the SS Tip Penalty. In order to post this penalty, a Reference Code 891/892 with an amount must be input. Leave an action trail indicating the SS Tip Penalty has been assessed.

TC 766 (with Credit Reference Number 252) - Adjusts Excess SST/RRT.

TC 766/767 (with Credit Reference Number 336) - Adjusts the Additional Child Tax Credit.

Use Priority Code 1 when there is an -L freeze. See IRM 4.19.3.3.3.2 for further instructions. Adjustments with no tax increase/decrease (TC 290-0) do not require Priority Code 1.

Use Priority Code 3 when issuing a refund.

Priority Code 8 is system generated when there is an increase to EIC (TC 764/768 is present on the Tax Account screen).

Priority Code 8 automatically generates when there is a change to W/H credits and/or Excess SST credits and a TC 170/171 is present on the Tax Account screen, but no adjustment to the ES Penalty (TC 170/171) is necessary.

Priority Code 8 must be input when an AUR tax increase/decrease is within $10 of a previous TC 290/291 adjustment.

The correct negligence penalty displays in the MANUAL NEGLIGENCE PENALTY field on the Limit Penalty window. Compare this amount with the 680 amount on the Assessment window and correct the 680 amount if necessary. If the 680 is not present, use INSERT RECORD to add the 680 and corresponding amount.

Refer to See IRM 4.19.3.16.5. to determine if the Substantial Understatement penalty still applies. If applicable, manually compute the Substantial Understatement penalty by multiplying the NET CHANGE field in Return Value by 20%. Correct the 680 amount if necessary. If the 680 is not present, use INSERT RECORD to add the 680 and corresponding amount. If the penalty no longer applies, use DELETE RECORD to delete the 680 and the corresponding amount. If both the Negligence and the Substantial Understatement penalties apply to a given underpayment, only one 20% penalty may be imposed.

If the adjustment is a decrease, the taxable income cannot be adjusted to less than zero (0). The module shows the TXI as zero (0) even if the taxpayer's TXI on the return is a negative amount.

If the adjustment is an increase which will change a zero (0) or negative taxable income per return, the 886 amount is the amount of the new corrected taxable income.

Place the cursor in the field of the change.

Use the [F3] (Delete Record) key to delete a TC and/or amount or a Ref Code.

Use the [F5] (Clear Field) key to delete any other fields in the Assessment Screen.

Input the appropriate entry or leave blank.

Commit the screen.

Place the cursor in the last TRANS CODE or REFERENCE CD field which contains an entry.

Use the INSERT RECORD function. The cursor moves to the next blank field.

Input new Transaction/Reference Code and Amount.

Commit the screen.

The notice was issued as a result of an administrative error (to the wrong taxpayer, for the wrong tax period or without considering a properly executed Form 872, Consent to Extend the Time to Assess Tax, or Form 872-A).

The taxpayer submits information establishing the actual tax due is less than the amount shown in the notice.

The taxpayer requests a conference with Appeals (for the purpose of entering into settlement negotiations - as determined by Appeals) and the case will be received in Appeals with at least 180 days remaining on the statute of limitations.

On the date of the rescission, 90 days or less remain before the expiration date of the period of limitations on assessment; however, a notice of deficiency may be rescinded in these circumstances if, before rescission, the taxpayer and the Service execute a consent to extend the period of limitations on Form 872 or Form 872-A;

The 90-day (or 150-day for taxpayers living outside the U. S.) restriction period under IRC Section 6213(a) has expired and the taxpayer has not filed a petition with the Tax Court;

The taxpayer has petitioned Tax Court or;

The taxpayer and the Service, prior to issuance of the notice of deficiency, executed a Form 872-A covering any of the tax years in the notice.

Complete a 2264(SC) Letter in duplicate (one copy for the taxpayer and the other to be attached to the file copy of the Statutory Notice).

Prepare a Form 8626, Agreement to Rescind Notice of Deficiency, in duplicate. Attach one copy to the 2264(SC) Letter and attach the other copy to the file copy of the Statutory Notice.

Send the 2264(SC) Letter with a copy of the Form 8626 and a return envelope to the taxpayer that day.

Enter a Case Note and ensure the file copies are in the case file.

Use IPC 8S to resuspend the case.

Complete a 2262 (DO) Letter in duplicate.

Send the taxpayer one copy of the letter and a copy of the countersigned Form 8626.

Leave a Case Note.

Maintain copies of the Form 8626 and a 2262 (DO) Letter in the case file.

There is no agreed response from the taxpayer(s). If there is an agreed response, process the case using agreed response procedures. Do not use default instructions to process the case.

The suspense time frame (105 days) has elapsed, before assigning PC 90. If not, use IPC "RF" to continue the suspense time frame.

If the ASED is more than 90 days, the statute is not imminent. Process the case using normal procedures. TC 560 IS NOT NEEDED ON THESE CASES. If there are five work days or less before the ninety (90) day time frame, input the adjustment immediately.

If the ASED is less than 90 days, recompute the ASED and input TC 560.

Determine the original ASED and convert to the Julian date (April 15 = 105th Julian date).

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Assess the entire amount of the remittance as TC 290.

Restrict the interest using TC 340-0, and

DO NOT issue a notice to the taxpayer(s). Use the appropriate hold code to suppress the notice from generating.

Close the IRP control base on IDRS if not already closed.

Close the IDRS control base created by generation of the AM transcript(s). (Generally, these control bases are identified by AM27 or ST27.)

If found, close the IRP and AM bases.

If not found, follow instructions in IRM 4.19.3.22.2.2 (5) below.

If other PCs are present, notate the PC and secure the return.

If PCs are the same, notate the current notice date and research for any taxpayer correspondence.

If an unresolved unpostable condition is present, coordinate with the Unpostables Function to resolve the unpostable condition as quickly as possible.

If a deleted unpostable, attempt to secure the return to resolve the unsettled conditions.

If TC 290/291 or TC 300/301 did not post, secure the original return. If the original return cannot be secured, research case history for assessment record information. Use this information to input the assessment manually on IDRS.

Indicate the batch and work unit number on the folder and insert the cases in the folder. The system indicates the batch is complete.

Close the batch using the CLOSE option.

The system updates the batch status to AB (Associated Batch).

Indicates if the previous work unit has reached maximum size, or

Displays a message indicating the SSN's are being added to a previous work unit.