Cases that are determined to have discrepancies or that are referred by SSA, are loaded onto the CAP (CAWR Automated Program) Tier II SUN domain at Enterprise Computing Center-Memphis (ECC-MEM). For more information on the CAP system, see IRM 4.19.8 CAP (CAWR Automated Program) Technical System Procedures.

CAP is a computer (inventory, correspondence, reporting, document preparation, and updates to Master File) application that houses the CAWR programs.

All Master File actions that affect the taxpayer's account for the year(s) being worked will result in an update to the CAP system. This includes Entity changes, IDRS adjustments, and additional Forms W–3, Transmittal of Wage and Tax Statement, and Forms W–2, Wage and Tax Statement, processing by SSA.

The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

Refer taxpayers to the Local Taxpayer Advocate (see IRM part 13, Taxpayer Advocate Service) when the contact meets TAS criteria see IRM 13.1.7, Taxpayer Advocate Service Case Criteriaand you can't resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. "Same day" cases include cases you can completely resolve in 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issues. Do not refer these cases to TAS unless they meet the TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.4Same-Day Resolution by Operations. When referring cases to TAS, use Form 911, Request for Taxpayer Advocate Service Assistance and forward to TAS in accordance with your local procedures. Also see IRM 21.1.3.18Taxpayer Advocate Service (TAS) Guidelines, for more information.

If you want to report a systemic problem to TAS, you can do so by using SAMS, the Systemic Advocacy Management System, a web based method of identifying, prioritizing, and working issues that affect multiple taxpayers. The SAMS application is available on the Systemic Advocacy pages at http://tas.web.irs.gov/ or you may call 1–877–777–4778 or TTY/TDD 1–800–829–4059. When submitting issues through SAMS, do not include taxpayer information.

Taxpayers can use the internet versions of SAMS on the Systemic Advocacy pages of http://www.irs.gov/advocate/. Those without internet access can obtain the Systemic Advocacy Issue Submission Form, Form 14411, by calling 1–800–TAX-FORMS. If you suggest the taxpayers report a systemic problem by using SAMS, remind taxpayers to not include taxpayer information in their submissions.

When working a response directly from TAS make every effort to communicate with the TAS representative to resolve the case prior to rejecting the OAR.

The following IDRS Command Codes (CC) are to be utilized during the screening process: (This list is not all inclusive)

If Large Corporation Indicator (LCI) is present on the module see IRM 4.19.4.2.1.1 The LCI with a campus code on each taxpayer's case can be found on the following IDRS screens:

ORS data is obtained through accessing the SSA database. Instructions for accessing ORS and updating your password can be located at http://wc.web.irs.gov/CAWR-SSA/CAWR%20Training%20Guides/ORSGuide%20for%20IRS%20(3).pdf ORS data will be accessed during all phases of the CAWR program.

Some common reasons to access ORS/ERQY are:

Review the copies for obvious errors, some of which are listed below:

The following chart shows common resolution procedures for cases in the initial screening phase after all research (ORS) has been completed and received.

When the only (or only remaining) discrepancy is for FIT and the exact amount is reported as Back Up With Holding, BUWH, on the Form(s) 945 and no other BUWH is required to be reported:

When the BUWH is more than the discrepant amount, and PMFOL shows the remaining BUWH amount on another information return, follow (1) above.

When the BUWH is less than the discrepant amount, or there are other fields that remain discrepant, issue correspondence.

If the entity is Virgin Island, Puerto Rico, Guam, or American Samoa and if FIT is the only discrepancy, do not send a notice. Close the case using the appropriate closing codes.

Follow Campus procedures for routing Compliance cases. The priority for Compliance cases is:

When there is an indication that a taxpayer is no longer in business, research IDRS CC ENMOD to check for the Currently Not Collectable "CNC" Indicator and check CC BMFOL definer I for Status 22 and a T- Freeze. Check that Module, using BMFOL definer " T" for TC 530:

Bankruptcy cases (Chapter 7 and Chapter 13) are assigned to the Centralized Insolvency Operation (CIO) at the Philadelphia Campus. All mail and phone communications relating to these cases must be directed to the Philadelphia Campus.

Bankruptcy Cases (TC 520/521) — An employer has filed for bankruptcy if TC 520 with closing code(s) (cc) 60–67, 83, 85–89 (-V freeze), 81, or 84 (-W freeze) is present in the module without a TC 521. Research CC MFTRA/CFOL for TC 520/521. Refer to Bankruptcy IRM 21.5.6.4.35 when assessing a liability.

Contact the CIO Unit via the SERP link for appropriate actions.

We will not assess a Civil Penalty in these instances (SSA-CAWR cases), but try to obtain the Forms W-3/W-2. Follow the same procedures as shown in See IRM 4.19.4.2.15., Federal Agency Screening. Send a 99C letter and explain the need for the taxpayer's cooperation in obtaining the Forms W-2.

When the taxpayer files Schedule H with his/her Form 1040 there will be a number shown on the MFT & ADJ Screen on CAP, in the Secondary SSN field. Use this SSN to research CC IMFOLR, page 2. This should be where the Schedule H information is shown. The Forms W-2 may be reported under this SSN and processed by SSA as an EIN. Additional research must be done in both BMF and IMF to compare and resolve any SS wage tax and/or Medicare tax out of balances.

When a Taxpayer Identification Number (TIN) is found to resolve the case, input this TIN in the X-REF field on the CAP Detail Screen. If the TIN found belongs to a taxpayer unrelated to the account it must be corrected on IDRS. See IRM 21.6.4.4.8.2 for instruction on how to correct an EIN on a Sch H case.

CC BMFOL definer U research must be done and compared with IMF records. The first column will show Posted 94X dollar amounts for:

CC IMFOL definer R must be researched for Schedule H information. Page 2 provides the (rounded) dollar amounts that were on the Schedule H:

Compare the CC IMFOLR money fields to the CC BMFOLU POSTED 94X for dollar amounts.

Compare the entries in the W-3 and W-2 BMFOLU columns to CC IMFOLR fields. If they do not match:

If more information is needed for these cases, see IRM 21.6.4.4.8,Schedule H, Household Employment Taxes and 21.7.4.4.1.11.4, BMF Schedules H Processed in 1998 and Subsequent

An EIN must be present on Schedule H. If found through research, input the correction of the EIN on Schedule H. When adjusting a previously filed Schedule H, input of the EIN is not required. If Schedule H was not filed with the original return, the EIN must be input on the adjustment:

If an out of balance condition still exists, issue correspondence.

A third party will often pay disability insurance benefits to employees as the employer's agent or as the insurance provider. Portions of these benefits can be subject to Social Security and medicare taxes if the employer pays a portion of the premium. Under agreements made between the employer and the third party agent or the disability insurance provider, they may report the following to the IRS under different EINS:

You may be able to resolve a case during screening if you check the tax return data base (TRDB) for electronically filed employment tax returns and BMFOLU, page 1 for Third Party Sick pay. You may need to check subsequent quarters' returns to make this determination.

Discrepancy cases generate when the sick pay Forms W-2 are filed under the employer's EIN but a portion of the social security and medicare taxes and any FIT is reported on the third party's return.

Many times employers will include social security tips in the social security wage field of the Forms W-2. SSA always combines tips into medicare wages even if the Forms W-2 show the correct amounts.

When the total of Form 94X social security tips and social security wages equal the total social security wages, reported by SSA, close the case with the appropriate closing code. Prepare a Form 6209 to adjust the social security wages for the Forms W-3/W-2 and the medicare wages and tips if applicable.

If an out of balance condition still exists, issue correspondence.

Large food and beverage establishments are required to report allocated tips under certain circumstances.

A large food or beverage establishment is one that provides food or beverages for consumption on the premises, where tipping is customary and where the employer normally employed more than 10 employees on a typical business day during the preceding calendar year.

Generally if tipped employees do not report tips totaling 8% or more of gross receipts (less carry out sales and sales with 10% or more service charge added), the employer must allocate to the employees an amount equal to the difference between the above 8% and the total tips reported by the employees.

Allocated tips are not subject to withholding and should not be reported on Forms 941, Employer's Quarterly Federal Tax Return, or Form W-2 as social security wages, social security tips, or medicare wages and tips. CAWR discrepancies occur when an employer includes them incorrectly.

Send appropriate correspondence to the taxpayer.

The taxpayer must file Form 941X and/or Forms W-2c if allocated tips were reported incorrectly.

If the taxpayer does not respond with this information:

Line adjustments occur when employers attempt to correct Social Security, Medicare, Federal Income Tax Withheld, or Advanced Earned Income Credit. Line adjustments are also used to report Third Party Sick pay and various other types of adjustments.

If there is a posted line adjustment to a Form 94X account for the tax year being worked, it will show on the CAP MFT & ADJScreen.

Line adjustments are indicated on IDRS on the second page of BMFOLR or the first page on BRTVUE as ATFI or ATWH or BMFOLU.

CC BMFOLA can be used to research on-line adjustments that have been made.

Verify the line adjustment made by ordering the adjustment or original document using CC ESTAB or by researching the Tax Return Data Base (TRDB) for electronically filed employment tax returns.

If the line adjustments are accurate, adjust the reference fields accordingly.

If an out of balance condition still exists, issue correspondence.

The CAWR unit receives all copies of Forms W-3/W-2/W-2c/W-3c received in the Submission Processing Campuses without correspondence attached.

If Loose Forms W-2, W-3, W-3c, and W-2c are received, process them as follows based on the tax year involved.

All loose Forms W-2 must be entered into the CAP system for the tax years being worked before screening can begin. If the Loose Forms W-2 indicator is present on CAP that means loose Forms W-2 have already been input and must be retrieved and reviewed to determine if they balance the case prior to taxpayer contact. All loose Forms W-2 belonging to another site must be forwarded to that site once the information is entered into CAP.

If you have the Loose Forms W-2 indicator on your CAWR cases and your campus does not have them in the file, check on Windows drop-down menu Edit and click on Loose W-2. Do a search on the Loose W-2 number. It will tell you which campus has the actual documents. Call the campus at the number listed on the CAWR/FUTA home page http://wc.web.irs.gov/CAWR-SSA/Address%20and%20mail%20stop.htm and request that they mail or fax them to you.

Loose Forms 941 Schedule D — Loose Forms 941 Schedule D are routed to CSC CAWR. CSC will sort and route these forms to the applicable campus using the state mapping guide located at http://serp.enterprise.irs.gov/databases/who-where.dr/transshipment.dr/campus_locator_guide.doc . The clerical staff at the receiving site will sort the Forms 941 Schedule D by tax year and maintain a file in EIN order.

At the April 2009 Startup for the new tax years, prior to screening , designated Tax Examiners will research each Schedule D on CAP to determine if a CAWR discrepancy exists.

Duplicate Return — The following chart shows resolution procedures for cases in the initial screening phase for entities with a TC 976 present.

Offer in Compromise (OIC) cases are cases where the taxpayer and the Service have agreed that the taxpayer will pay a lesser amount than the original amount due.

A TC 480 indicates that an Offer in Compromise is being considered. Continue normal processing.

A TC 780/788 (unreversed by TC 781) indicates that an Offer in Compromise has been accepted. If a TC 780/788 (unreversed by a TC 781) is present on any module of the tax year you are working:

Only SSA-CAWR case Type 08 without compliance indicators , have automatic notices (CP 253) generated.

SSA-CAWR case type 08 will have automatic notices generated at a determined volume per week, the CAWR Coordinator determines the number of cases to be systemically generated each week up to and including cycle 33.

All other case SSA-CAWR case types , must be screened using all available research tools. If research balances the case, close the case with closing code 99.

When the case has a compliance indicator, use the procedures for Screening Identified Compliance Cases. See IRM 4.19.4.2.4.

If the case is not closed through research, correspond using a CP 253 for SSA case types (03, 05, 07, 12) and 99C for IRS case types (02, 04, 06, 10, 11,13).

For Intentional Disregard Failure to File Forms W-2 Penalty See LEM 4.19.4.2.14.

See LEM 4.19.4.2.14. Provide the Forms W-2 (or information received/found) to SSA.

Employers that are Federal Agencies are identified not only by their names but BOD Code TEGE and a Client Code F.

Although the law allows us to assess tax, we can not assess any type of penalty on Federal Agencies, therefore it must be strongly encouraged to balance the discrepancy, and/or to file the necessary Forms W-3/W-2/W-3c/W-2c in order for their employees to get proper credit.

Send a 99C letter, using the fill-in addition for the appropriate paragraphs, and explain the need for their cooperation in obtaining the Forms W-2 and/or resolving the discrepancy.

The Case Header Screen contains the Automated Under Reporter (AUR) Payer Agent List (PAL) which alerts the user that there is information available concerning the CAWR discrepancy.

The PAL information may be used to resolve the CAWR issue for Forms W-2 wages and withholding (1099-R and W-2G) information.

Access ORS if there is an indication that the problem may be with wages for work performed by a family member ie., Sole Proprietors.

If ORS data indicate the discrepancy is due to a family employment situation, check the Form W-2 and check the Date of Birth (DOB) using CC INOLE.

Determine if the employee is a child, parent, or spouse. Refer to Publication 15 (Circular E), Employer's Tax Guide, for more information. See table below:

If both spouses jointly own and operate a business they may be taxes as partners in a partnership. Beginning in 2007, if they are also married filing jointly they may make a joint election to be taxed as a "qualified joint venture" instead of a partnership. Payments for services performed for the partnership or qualified joint venture are NOT subject to social security or medicare taxes under FICA, though they are subject to self-employment tax.

Covered service of a child, parent, or spouse:

Issue the appropriate correspondence if not closing the case in the screening phase.

Resolution: If the only problem with the case involves family employment, prepare Forms 6209 and 6494 and close the case with the appropriate status code on CAP.

Certain Foreign Students/Non-Resident Visitors are exempt from social security (FICA) and medicare tax

Check TXMODA for an adjustment (as shown below).

Check CC IRPTRL on the student's SSN. There should be a Form W-2 for the adjusted reference amount from the EIN (employer) on the CAWR case.

These cases should be identified in CAP and IDRS by the following:

State and local government employees are subject to both social security and medicare taxes if:

Other state and local government employees are subject to Medicare Tax, if they were hired after March 31, 1988. Refer to Publication 963, Federal-State Reference Guide, for more information.

See IRM 21.7, Business Tax Return and Non-Master File Accounts, for exceptions.

If there is a discrepancy solely in social security wages and medicare wages and tips and the employer is a local or state government where research indicates the employees are social security exempt:

When the Forms W-3/W-2 exceed Forms 94X:

When the X-Ref EIN is not on CAP:

If the case is a Large Corporation (LCI indicator present on TXMOD or ENMOD) or a subsidiary of one, the information may be filed by a parent corporation or another EIN (due to an entity change), follow the procedures in See IRM 4.19.4.2.1.1. After coordinating with the Technical Large Corp contact and agreeing the taxpayer must be contacted, correspond for the EIN and validate information. If an employment code "S" is present for any SSA-CAWR/SSA Indicator 2 case, a penalty assessment cannot be made to that EIN/TIN on MFT 13. Do the following:

An election of exemption from social security and medicare taxes may be filed via Form 8274, Certification by Churches and Qualified Church Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes.

The employee, unless otherwise exempt, must still pay self-employment tax on the income if the employee is paid $108.28 or more in a year from a Church or a qualified Church controlled organization. However, an employee who is a member of a qualified religious group can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.

Churches established after October 1, 1984 must file no later than the day before the due date of their first quarterly employment tax return. Elections filed after these deadlines will be void. Additional information can be found in IRM 21.7, Business Tax Return and Non-Master File Accounts.

When there is a CAWR discrepancy on a possible non-profit organization's account, research to determine if the exemption is valid:

If the exemption is valid follow the steps below:

If the exemption is not valid issue the appropriate correspondence.

When the status of the case changes to status code 11 or a 98 with a Gen code D located on the detail screen, it means that the CAWR module is now in balance at master file.

If no taxpayer contact has occurred on this case, remove the case from your batch.

As you work an IRS-CAWR batch, you may find the SSA IND has updated from blank to "1" or "2" .

The Service assesses penalties for cases referred by the Social Security Administration (SSA) when there is a discrepancy between wages reported on Forms W-2 and what is reported to the Service on Forms 94X. SSA will make two attempts to contact the employer to resolve the discrepancy.

If the discrepancy is not resolved by either the filing of the missing Forms W-2, an amended Form 94X, or by providing an explanation of the discrepancy, the Service is directed to assess a penalty.

The taxpayer is given 45 days to answer the CP 253 or Letter 99c. If the taxpayer does not respond to the notice/letter by the end of the suspense period (11 cycles from notice date) the case becomes a No Reply. Status code 91 automatically posts to CAP and is updated to BMF. The Intentional Disregard Penalty automatically assesses when the BMF posts status code 91 based on the following criteria:

If the taxpayer agrees with our proposed increase (whether or not a Form 941c/941X has been filed or a payment was made), the adjustment is interest free, if the discrepancy is in Federal Income Tax Withholding, Social Security Tax, or Medicare Tax. Input the adjustment using the earliest IRS Received date plus 7 days as the interest computation date.

If the taxpayer does not pay the entire balance by this due date, interest will accrue from this date onward. Whenever tax adjustments are made, penalties and interest must also be considered. Input the assessment to the last available quarter.

Do not work another campuses' CAWR reply. Send the reply, after entering the received date onto CAP, to the campus identified when the reply date is input.

When a late reply has been received for another campus, the case must be sent to the appropriate campus.

For Late Replies you must follow the procedures in See IRM 4.19.4.6.

See CAWR/FUTA home page http://wc.web.irs.gov/ for a listing of the SB/SE Campus telephone and FAX numbers.