This section provides guidelines on employment tax refunds or abatement claims.

Centralized classification of all employment tax claims and amended returns is conducted at Campuses.

In accord with Policy Statement 4–103, after employment taxes have been assessed as a result of an examination action, the taxpayer will generally be required to pay the assessment and file a claim for refund before receiving any further consideration of the case. (See IRM 4.23.13.9). However, a claim for abatement of such an assessment will be considered on its merits if:

Taxpayers whose claims for abatement are not considered by Examination will receive a "no consideration" letter, Letter 924, No Consideration Letter on Abatement Claim - Excise and Employment Taxes.

When it is determined that a claim for abatement should be considered on its merits, the taxpayer will be afforded consideration by the Appeals Office.

See IRM 4.23.8.4.2 regarding employers' requests under IRC 3402(d) for relief from payment of income tax withholding. These requests constitute abatement claims and are usually handled at Campuses as adjustments. However, examiners do have the discretion to accept the Form 4669's and Form 4670 before the examination is closed to reduce and/or abate the appropriate portion of the assessment.

Upon receipt of a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, the SS-8 Program will acknowledge its receipt and notify the worker to file a protective claim using Form 1040-X, Amended U.S. Individual Income Tax Return. This will protect the statute of limitations for prior years until the determination of worker status is completed.

Upon receipt of the Form 1040-X, the campuses that handle protective claims will contact one of two SS-8 units to ascertain the status of the worker determination.

If a protective claim Form 843, Claim For Refund and Request for Abatement, is received and was filed by an employee to protect his claim for overpayment of SECA due to a reclassification issue, the form should be returned to the taxpayer with Notice 989, Commonly Asked Questions When IRS Determines Your Worker Status is Employee. This notice provides instructions to a reclassified worker if there are changes in employment status. See IRM 4.23.8.5.3.

No consideration will be given to a claim for refund of employment tax which:

If a claim for refund is within types (a) through (e) above, Letter 916 (C/DO) (with applicable box checked) will be issued to the taxpayer advising that no consideration can be given to the claim. The "no consideration" letter has the same effect as a final notice of claim disallowance for purpose of starting the two-year period under IRC 6532(a) for the claimant to file suit. There are certain exceptions to those claims described in (e) above based on:

If a claim is within types (f) and (g) above, a certified notice of claim disallowance Letter 906 will be issued and no other action needs to be taken. This also starts the two-year period under section 6532(a) to file suit.

If a claim is identified as type (h) above, Letter 916 will be issued. If the type 1(h) claim was filed solely as a protective claim on invitation of the Service, it will be associated with the case file without further audit action. A "no consideration " letter will not be issued to the claimant, but a memorandum for the file will be attached to the claim explaining why no action was taken. If the Letter 916 is issued from the group, a copy will be placed in the case file as a record of the action taken.

Letters 906 and 916 are required to be sent certified mail, as IRC 6532(a) requires the issuance of a certified notice of claim disallowance to start the two-year time period. The examiner will flag Form 3198 to notify Technical Services to issue the certified letter.

A type (i) claim above is a reconsideration of a claim previously disallowed. If the request for reconsideration is not considered, Letter 917 is issued with the appropriate box checked. If the claim is reconsidered in the group but a determination is made to not allow the claim, Letter 953 is issued. Neither Letter 917 or Letter 953 is required to be sent by certified mail, as a certified claim disallowance would have already been previously issued.

Claims involving years previously closed by Appeals Office will be handled as provided later in this section. See IRM 4.23.13.7.

Claims for refund of employment taxes may be "Surveyed After Assignment" if the examiner concludes after a review of the case file that the claim is clearly allowable in full and that the case does not otherwise warrant examination. Consideration should be given to the circumstances of selection and assignment (whether the case was selected and assigned only because of the filing of the claim) in determining whether it should be surveyed. Claims allowed in full on survey, after review and approval of the "Survey After Assignment" report, will be transmitted to a Campus for allowance of the overassessment.

In a survey after assignment of a claim, a survey report need not be prepared if the facts are such that it is clearly unnecessary for the examiner to record reasons for recommending the allowance of the claimed overassessment. In such cases, Form 5344, Examination Closing Record (or Form 5599, EO Examined Closing Record, for TE/GE), will serve as the administrative file record of the action taken.

Claims allowed in full on survey, after review and approval of Form 2503, Survey After Assignment — Excise or Employment Tax, will be processed and closed in the same manner as no-change or agreed cases.

The general procedures for examining returns, issuing preliminary letters and referring cases to Appeals apply in disposing of employment tax refund claims requiring examination. See IRM 4.10.8.9, Claims, for instructions on general claim procedure. See Exhibit 4.23.13-1 for additional general guidance for closing employment tax claims.

Begin examination or other action on claims for refund within 30 days after receipt. If the taxpayer is in balance due status, the revenue officer or Automated Collections Service (ACS) should be advised of the claim process and that a TC 470 and CC 90 should be input. The assigned officer will be advised of the resolution of the case.

If a claim is received on a case already under examination, it should be considered during such examination. If the claim pertains to an active case forwarded to Appeals, it should be referred to that Office for consideration in the disposition of the case. See IRM 4.23.13.7 for claims on cases previously closed by Appeals.

When a claim is examined, the examiner should consider other potential issues.

If an examiner determines that a claim should be disallowed in full and no adjustments to the tax liability are necessary, Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit and Form 2297, Waiver of Statutory Notice of Claim Disallowance, will be solicited using Letter 569 and Form 4666.

If the claim is disallowed in full and adjustments to the tax liability are also proposed, Letter 569 will be issued with Form 4666, Form 4668, Form 2297 and Form 3363. The agreement to the additional tax assessment is solicited on the appropriate Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment — Excise or Employment Tax. See IRM 4.23.10.12.11, Form 2504 and Form 2504-WC.

If the claim is disallowed in part, the examiner will issue Letter 569 with Forms 4666, 4668, 2297, 3363 and the appropriate Form 2504.

If the claim is allowed in full, the examiner will prepare Forms 4666 and 4668 and issue the report to the taxpayer. In addition, an undated Letter 570 will be prepared by the examiner and placed in the case file. The Letter 570 constitutes the final closing letter and is issued by Centralized Case Processing (CCP).

Form 2297, Waiver of Statutory Notification of Claim Disallowance will be solicited from a taxpayer in a partial or full claim disallowance case. Also, if at any time prior to the issuance of a statutory notice of claim disallowance the taxpayer volunteers to file the waiver, the taxpayer will be permitted to do so.

If the Form 2297 is not secured when a claim for refund is proposed for disallowance in whole or in part, or if the taxpayer signs Forms 3363 and/or Form 2504 but refuses to execute Form 2297, a certified notice of disallowance is issued after all other administrative action has been concluded. When a certified notice of disallowance is to be issued, Technical Services will be notified by use of Form 3198, Special Handling Notice or Form 9231, Collection - Employment Tax Examination Handling/Routing Instructions. Technical Services will issue Letter 905 for a partial disallowance case or Letter 906 for a full claim disallowance. If claims for more than one period, or more than one claim for a single period are involved, specific information for each claim should be furnished.

When a claim is disallowed because the taxpayer failed to appear for an interview or provide substantiation, the following explanation will be shown at the end of Letter 569:

If a claim on a case previously closed by an Appeals Office clearly falls within the circumstances described in IRM 4.23.13.4(1)(a) through (f), the claim will be processed as provided in IRM 4.23.13.4(2) through (5). All other claims on cases previously closed by Appeals will be processed as provided in (2) and (3) below. If there is a question as to the action to be taken, the Appeals Office which previously considered the case should be consulted.

If the Appeals closing involved a Form 2504 agreement and the claim does not relate to a matter involved in the Appeals closing, the claim may be processed as though Appeals had not previously acted on the case. If the claim relates to a matter previously considered by Appeals, the claim may be processed to a conclusion, subject to Appeals concurrence in any modification of any item previously considered by Appeals.

If the prior Appeals closing involved a Form 2504-AD , Excise or Employment Tax—Offer of Agreement to Assessment and Collection of Additional Tax and Offer of Acceptance of Overassessment, the claim and case file will generally be forwarded to Appeals without action. However, if the claim concerns only a matter outside the agreement, the claim may be processed to a conclusion without reference to Appeals. Claims involving returns on which additional tax may result will not be sent to Appeals if less than 180 days remain on the statute.

Technical advice may be requested from Associate Chief Counsel in the Headquarters Office on issues in claim cases in which the examination may process to a conclusion without reference to Appeals, as described in (2) and (3) above. Appeals concurrence is required to request technical advice on issues which may be modified only with Appeals concurrence, as described in (2) above. Examination will not request technical advice on claim cases that are required to be forwarded to Appeals for action, as described in (3) above.

A claim that has been disallowed in whole or in part will be reconsidered upon submission of additional facts by the claimant, provided such facts are received prior to the expiration of the statute of limitations for bringing suit. If the additional facts submitted warrant reopening of the claim, the claim will be reopened and appropriate adjustments will be made.

The disposition of a request for reconsideration of a disallowed claim will generally require one of the following types of action:

There is no provision in the Internal Revenue Code or regulations requiring the issuance of a certified notice of denial or disallowance of a claimant’s request for reconsideration of a claim for refund that has previously been disallowed by a certified notice. Therefore, requests for reconsideration of disallowed claims made on Form 843, or made otherwise, such as in a letter, brief or affidavit, will not be treated as original claims. Examiners’ reports on requests for reconsideration of disallowed claims must not contain any language from which the claimant may infer that a certified notice of the denial or disallowance will be issued.

The taxpayer will be notified on Letter 953 if, in the reconsideration of the claim, there are not sufficient grounds for changing the original decision. This is not considered certified notice of claim disallowance.

Letter 917 (DO) (with applicable box checked) will be issued to notify the taxpayer that no action can be taken on a request for reconsidering the claim if the request is based on IRM 4.23.13.4(1)(a) through (c) criteria, including:

When a Letter 917 (DO) is issued, a copy will be placed in the case file. This letter is not considered a certified notice of claim disallowance.

If the request for reconsideration concerns a claim previously considered and disallowed in whole or in part by Appeals, the claim will be associated with the case file and forwarded promptly to Appeals. If it is determined that a request for reconsideration of a disallowed claim should be disallowed in whole or in part, the claimant will have the same right of appeal within the Service as he/she had on the disallowed claim. However, if the period of limitation for instituting suit on the disallowed claim will expire in less than 6 months, the case will not be referred to Appeals unless that office agrees to accept jurisdiction. The right of appeal will not be available to claimants whose requests for reconsideration are denied under (4) above.

If a request for reconsideration is based on a claim that was the subject of a no-consideration letter under one of the contentions in types (a) through (i) of IRM 4.23.13.4(1) above, Letter 917(DO) (with applicable box checked) should be issued to the claimant denying the request and referring to the previous no-consideration letter. In this case, the claimant will not have the right of appeal referred to in (7) above.

If disposition of a request for reconsideration of a disallowed claim is contingent on a pending court decision, the taxpayer should be given the opportunity of submitting, in duplicate, a properly executed Form 907, Agreement to Extend the Time to Bring Suit. Form 907 agreements under IRC 6532(a)(2) may be entered into if there are satisfactory reasons for extending the period for filing suit. Examples of satisfactory reasons are:

Area offices should take the initiative in inviting agreements on Document 907 when such action will prevent possible inequities to taxpayers. Form 907 may be signed by the SB/SE Area Director, SB/SE Employment Tax Chief, or equivalent Tax Program Manager in LMSB or TE/GE. After the agreement is signed and the duplicate copy is sent to the taxpayer, the case will be sent to closed files awaiting further request by the taxpayer for reconsideration of the disallowed claim.

Generally, the United States Tax Court does not have jurisdiction over employment tax cases. However, for IRC 7436 cases where a Notice of Determination of Worker Classification is issued, the United States Tax Court does have jurisdiction. See IRC 7442 .

The taxpayer may litigate other types of employment tax cases in either the United States District Court or the United States Court of Federal Claims. Before taxpayers can initiate suit in either of these courts, they will have to pay, at a minimum, the employment tax assessment attributable to one employee for any one quarter and file a claim for refund of the tax. Once the claim for refund is denied or 6 months elapse without any action by the Service, the taxpayer may initiate suit.

A taxpayer is entitled to file a refund suit 6 months after the filing of the refund claim, if no action is taken by the Service, or within two years after the statutory notice of disallowance of the refund claim. After such a suit is filed, Chief Counsel’s office requests the administrative file from the Campus.

When the examiner or group manager is notified that a taxpayer has filed suit for recovery of taxes paid in a case involving an open claim for refund of employment tax, the case file will be expeditiously sent to Technical Services. A Form 3198 or Form 9231 will be attached to the file instructing Technical Services to issue a statutory notice of claim disallowance before sending the case file to Area Counsel and/or the Chief Counsel’s Office.

The Tax Relief and Health Care Act of 2006 made extensive changes to the whistleblower provisions of IRC 7623. All claims for reward must be coordinated with the IRS Whistleblower office upon receipt. See IRM 4.23.13.12.

IRC 7623 provides for the payment of rewards for information that leads to the "detection and punishment of persons guilty of violating internal revenue laws, or conniving at the same." Treas. Regs. §301.7623–1 provides that informants may file a claim for reward on Form 211, Application for Reward for Original Information.

Under no circumstances is any person authorized to make any offer or promise, or otherwise to bind the Service with respect to the payment of any reward or the amount thereof. An Internal Revenue Service employee will never indicate to the informant in any manner the amount of the probable tax recovery, or whether such recovery is based upon the information submitted by him/her. If inquiry is made as to the amount which may be received, the inquirer should be furnished with a copy of IRC 7623 and Treas. Reg. §301.7623–1. (See Delegation Order Number 204, Rewards for Informant Information, for those authorized to approve rewards.)

Cases where a claim for reward has been filed should be afforded confidential treatment. In any instance where the identity of an informant is indicated, the case file and all communication should be handled in a manner that will ensure complete protection of the informant’s identity. The informant’s identity should not be entered in the history sheet or anywhere in the case file.

Administrative control of Informants' claims is the responsibility of the Informants' Claim Examiner located in the Compliance Division of each Campus. See IRM 25.2, Information and Informants' Rewards, for detailed instructions on Informants' Claims.

On December 20, 2006, the Tax Relief and Health Care Act of 2006 was enacted. Section 406 of the Act amends IRC 7623 of the Internal Revenue Code concerning the payment of awards to whistleblowers. The amendment created significant changes to the whistleblower program and also required the established of a Whistleblower Office (WO) within the Internal Revenue Service that has responsibility for the administration of the award program. The Whistleblower Office is under Services and Enforcement (SE:WO).

The 2006 amendments re-designated the prior IRC 7623 as IRC 7623(a), which now includes interest in the collected proceeds, and added the new provisions as IRC 7623(b).

Section 7623(b) provides an award threshold based on information regarding tax law violations provided by individuals. To be eligible for an award under IRC 7623(b), the tax, penalties, interest, additions to tax, and additional amounts in dispute must exceed in the aggregate $2,000,000. If the taxpayer is an individual, the individual’s gross income must exceed $200,000 for any taxable year at issue.

The Whistleblower Office deals only with the informant and does preliminary screening and case building. If the initial claim is accepted, the claim will be forwarded for additional analysis by an operating division Subject Matter Expert (SME) with the assistance of a Counsel attorney.

The SME, with Counsel support, debriefs the Whistleblower to clarify the submission and obtain any additional supporting evidence. Counsel will evaluate the additional information and the SME will evaluate whether to forward to Exam.

Additional information can be found in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623, and on-line at: http://www.irs.gov/compliance/article/0,,id=180171,00.html .

Allowed in full — the examiner will issue Form 4666 and Form 4668 to the taxpayer. Examiner will prepare and CCP will issue Letter 570 upon final closing.

Rejected in full — the examiner will issue Letter 569 and use Form 2297, Form 3363 and Form 4666.

Allowed in part — the examiner will issue Letter 569 and use Forms 2297, 3363, 4666 and 4668.

Full disallowance with additional tax due — the examiner will issue Letter 569 and Forms 2297, 3363, 4666 and 4668.