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Part 5. Collecting Process

Chapter 1. General Collecting Procedures

Section 8. Courtesy Investigations

5.1.8  Courtesy Investigations

5.1.8.1  (04-22-2008)
Form 2209, Courtesy Investigation and ICS Other Investigation (OI) Modules

  1. Other Investigations (Ols) may be assigned on Form 2209, Courtesy Investigation. Form 2209 is used to:

    • Request case assistance from another area office

    • Issue certain intra-area and Campus investigations

    • Conduct a full compliance check when there are no other open assignments

    • Control assignments and actions on Integrated Collection System (ICS) - usually used by Property Appraisal & Liquidation Specialists (PALS) for seizure related information, Tech Services for Trust Fund Recovery Penalty (TFRP) and Centralized Case Processing (CCP) for In-Business Trust Fund Installment Agreement (IBTF-IA)

  2. Other Investigations (OIs) can be assigned by one ICS user to another ICS user. This is accomplished by creating an outgoing OI on ICS. The originator and the recipient share all detail and history information available on ICS.

5.1.8.1.1  (04-22-2008)
Case Transfer without Courtesy Investigation

  1. A Courtesy Investigation is not required prior to transferring a case to a new location if the new address is verified on Form 4759, Postal Tracer, Letter 4156 is sent to the new address, and any of the following conditions are met:

    1. the taxpayer does not acknowledge receipt of the letter,

    2. the letter is not returned undeliverable by the post office,

    3. the post office does not provide an address change within 30 days, or

    4. the taxpayer acknowledges receipt of the letter but does not respond sufficiently to dispose of the investigation.

  2. Before transferring the case, the revenue officer will:

    1. thoroughly investigate all known assets in the transferor area (this may require search of local records) and ensure all appropriate enforcement action is taken, and

    2. obtain group manager approval.

  3. Automatic Collection Systems (ACS) accounts with domestic addresses may also be transferred without prior courtesy investigations.

  4. Non-ACS accounts with domestic addresses may be transferred without prior courtesy investigations if:

    1. the balance due including accruals exceeds the dollar criteria contained in LEM 5.1.8.1.1, and

    2. all known assets of the taxpayer within the transferor Area have been investigated and the Bal Due history documented, with the results of the investigation.

  5. Make a levy or seizure determination prior to transfer if the investigation reveals any assets within the jurisdiction of the territory transferor.

  6. See IRM 5.1.8.1.4., Account Transfers to International for accounts with foreign addresses.

5.1.8.1.2  (04-22-2008)
Additional Criteria for Transfer of Domestic Accounts

  1. The following applies to non-ACS accounts that meet the conditions of Section 5.1.8.1.1 of this IRM:

    If . . . Then. . .
    1. The receiving office requests or agrees to the transfer of specific accounts Transfer without a courtesy investigation
    2. The Bal Due was initially issued with an address outside the Area's jurisdiction and the new address is not a P.O. Box number or in care of a hotel or motel. Transfer without a courtesy investigation
    3. New address information appears on IDRS (usually as notified by the Daily Transaction Register); e.g., CFOL cc INOLE. Transfer without a courtesy investigation
    4. Letter 4156 is sent certified mail with return receipt requested to the new address and the taxpayer acknowledges the letter (by signed return receipt or other response) but fails to send full payment. Allow 45 days for a reply to ensure adequate time for delivery of the letter and for the taxpayers response. Transfer without a courtesy investigation

  2. Transfer the Bal Due without a courtesy investigation, if new address information is from correspondence with or personal contact from the taxpayer and:

    1. The statute of limitations for collection or assessment (Trust Fund Recovery accounts) will not expire within eight months from the date of transfer.

    2. The accounts are not in one of the following categories: awaiting adjustment or payment tracer action, deferred, military deferment, withheld collection action status, or those on which recommendations for legal action have been made.

      Note:

      Accounts in these categories will not be transferred until these actions are concluded.

    3. There are no indications in the address or case file that the taxpayer is incarcerated.

    4. A courtesy investigation is not outstanding or completed based on the same new address.

    5. For partnership or joint liabilities, all of the taxpayers involved reside in the transferee Area or the accounts are currently not collectible with respect to the taxpayers that reside in the transferor Area.

    6. For corporate liabilities, the address must be that of the corporation.

  3. CFf may transfer a case to ACS without an OI when a new address in another Area has been verified and requirements in (1) and (2) above have been met.

5.1.8.1.3  (04-22-2008)
Intra Area Transfers

  1. Intra Area transfers can be made when:

    1. The Bal Due was received in error as indicated by the Bal Due address, or

    2. Territory procedures permit the transfer.

5.1.8.1.4  (04-22-2008)
Account Transfers to International

  1. Transfer accounts having current addresses outside the United States to SB/SE International only when they meet all of the following conditions:

    1. The aggregate assessed balance of all delinquent accounts of the taxpayer equals or exceeds the tolerance criteria. LEM 5.1.8.1.4

    2. For each account, the statute of limitations for collection or assessment (trust fund accounts), will not expire within one year from the date of transfer.

      Note:

      If less than one year remains within the statutory period for collection or assessment, secure agreement from International prior to transferring the accounts.

    3. The accounts are not in offer-in-compromise status, withhold collection status, awaiting adjustment action, military deferment status, or those on which recommendations for legal action have been made.

    4. The grounds for determination that the taxpayer is outside the United States and the date (or approximate date) of departure are documented in the case history.

    5. Letter 1058(DO) must be sent by registered mail and sixty days allowed for taxpayer response.

    6. All known assets have been thoroughly investigated and the Bal Due history documented with the results. If the investigation reveals an asset anywhere in the United States, make a levy or seizure determination prior to transfer. This includes a check of all known assets shown on the taxpayer's return, cc IROLE, and real and personal property records.

    7. Copies of the related returns and revenue agent's reports are attached, if available. These include a copy of the last return filed (which must be determined) and copies of returns for each delinquent account (or copy of cc RTVUE screens); and

    8. In Trust Fund Recovery Penalty cases, attach a copy of the Trust Fund Recovery Penalty file, and the latest individual income tax return for the taxpayer (or a copy of the RTVUE screens). Also consider a check of cc PMFOL.

  2. Addresses outside the United States include:

    • APO or FPO addresses

    • Puerto Rico

    • Guam

    • American Samoa

    • the Virgin Islands

    • the Northern Mariana Islands

  3. To transfer the case use the following for ICS:

    1. Area 15 (AO 35)

    2. Assignment code 3597-6900

    3. The taxpayer's new address (including foreign addresses) as the address change

  4. Use Form 3210 , Document Transmittal, to transmit the paper files to International. The address is:
    Internal Revenue Service
    SE:S:C:PA:CNR:FASW
    500 N. Capitol Street,
    Room 1401
    Washington, DC 20001
    Do not use this address as the taxpayer's address when transferring an account to International.

5.1.8.1.5  (05-01-2007)
Transfer Following Courtesy Investigation

  1. The transferring office will send a courtesy investigation prior to transfer of an account that does not meet the conditions listed above.

5.1.8.1.5.1  (05-01-2007)
Transferor or Office Instructions

  1. When a courtesy investigation proposing transfer has been sent, transfer the account only when one of the following conditions has been met:

    1. Receiving office completes courtesy investigation and indicates willingness to accept transfer.

    2. Receiving office completes courtesy investigation indicating that the taxpayer is located within its jurisdiction but fails to furnish sufficient information to permit proper disposition of the account, or

    3. Receiving office fails to reply to a request for courtesy investigation within 45 days [six months for transfers to International] from the date of the request, or fails to request an extension of time for completion of the investigation.

  2. Prior to transferring a Bal Due, document the case history that all known assets of the taxpayer located within the transferor Area have been investigated. If the investigation reveals any asset within the transferor Area, make a levy or seizure determination prior to transferring the accounts.

  3. Upon receipt of the Form 2209 accepting transfer, the originating revenue officer will:

    1. Send the case file directly to the revenue officer who worked the Form 2209.

    2. Process Form 2650 in the normal prescribed manner.

  4. In all cases, transfer of accounts is prohibited where the statutory period for collection or assessment (trust fund accounts) will expire within eight months from the date of transfer, unless the approval of the manager of the receiving revenue officer is received prior to transfer.

  5. The originating office should expediteForm 2650 to effect transfer. If the statutory period for collection or assessment will expire in less than six months, secure a waiver prior to transfer.

  6. Transfer Bal Dues on resident taxpayers having current addresses in Puerto Rico or the Virgin Islands to:

    Use this address:
    P.O. Box 300
    Puerto Rico 00918
    Attn: Field Territory Manager

  7. Request a courtesy investigation before transfer when one the of the situations in See IRM 5.1.8.1.5.1., Transferor or Office Instructions exists (unless prohibited by IRM 5.1.8).

5.1.8.1.5.1.1  (05-01-2007)
Transferee Office Instructions

  1. Accept accounts transferred as a result of any of the situations stated in See IRM 5.1.8.1.6., Transfer of Accounts Reported Currently Not Collectible of this IRM.

  2. A group manager, who approves a Form 2209 ,Courtesy Investigation, accepting transfer of an account, will open a substitute assignment on the taxpayer pending receipt of the new Bal Dues.

    Note:

    In ICS Areas, close the incoming OI but do not close the ICS-only case. See ICS Area Office Procedures.

5.1.8.1.6  (05-01-2007)
Transfer of Accounts Reported Currently Not Collectible

  1. When a courtesy investigation establishes that the taxpayer has moved out of the originating Area’s jurisdiction, but the account should be declared currently not collectible, the originating Area will:

    1. Prepare and input Form 53 , Report of Currently Not Collectible Taxes, and

    2. Prepare Form 2363 , Master File Entity Change.

    3. Include the new address and the AOTO location on Form 2363 .

      Caution:

      Ensure that both the new address and the AOTO location code are entered correctly on Form 2363 .

  2. After input of the TC 530:

    If Then
    There is no mandatory follow-up Maintain the Form 53 and related documents in the originating Area's currently not collectible file until retired to the Federal Record Center
    There is a mandatory follow-up Forward the Form 53 and related documents directly to the receiving Area under cover of Form 3210(Part 5 of Form 53). However, if the case has been selected for NQRS review, do not forward it until the review is completed

5.1.8.1.7  (04-22-2008)
Preparation of Form 2650 for Bal Due Transfer

  1. Ensure one of the situations in IRM 5.1.8.1.5.1 above exists.

  2. See IRM 5.1.8.1.5.1., Transferor or Office Instructions.

  3. Prepare Form 2650 , Bal Due-Del Ret Transfer.

  4. Submit Form 2650 on Form 795 per IRM 5.1.2.

    If Then
    The account is being transferred as a result of a Form 2209, Courtesy Investigation, and the case is to be worked by CFf in the receiving Area The originating employee will annotate the face of the Form 2650with "T-SIGN TO CF"
    The account is being transferred from CFf to ACS The originating employee will annotate the face of the Form 2650 with "TSIGN TO ACS"

  5. New Bal Dues will be generated to the transferee office.

  6. Associate all open Bal Dues and Del Rets on the same entity at the time of transfer as all outstanding Bal Dues and Del Rets will be reissued to the transferee office.

  7. Occasionally on transferred cases the address on the Bal Due does not coincide with the AOTO of the Bal Due/Del Ret assignment code. As part of batch initialization, the Compliance Services Collection Branch (CSCO) will electronically verify the new address information. These verifications will prevent the Bal Due from being returned to the transferor Area.

  8. When Bal Dues are inadvertently assigned to the wrong Area office, send them to the correct Area office with original only of Form 1976 , Assignment Slip, after input of new assignment code.

  9. CSCO will handle transfers, via Form 1976 , between ACS and the Area when all productive actions have been taken.

    Note:

    In ICS Areas this process is automated.

5.1.8.1.7.1  (05-01-2007)
Management Approval of Form 2650

  1. Group Manager approval of revenue officer Forms 2650 is required if the statutory period for collection will expire within eight months from the date of transfer.

5.1.8.2  (04-22-2008)
Originating Office Procedure

  1. When using Form 2209 (non-ICS) procedures the employee initiating the Form 2209 will complete the face of the assembly, stating fully the nature of the investigation and any specific information which will be needed or helpful in the investigation. Use the "Remarks" section for supplementary information or attach a separate statement in duplicate. If the originator has a case on ICS and is issuing a Form 2209 to a non-ICS recipient, attach appropriate portions of the account transcript, including module detail and case history transcript.

  2. When using ICS Other Investigation (OI) procedures, the ICS originator will create an outgoing OI using the Create Modules option of the Collection Activities menu. The originator may choose to have ICS assign the outgoing OI based on the zip code of the action address, or the originator may specify a recipient by assignment number.

  3. Completion periods for Courtesy Investigations:

    If the action address is within: Thenthe OI must be completed by:
    the United States, Puerto Rico or the Virgin Islands 45 days after issuance
    any foreign country or any other US possession or territory 6 months after issuance

  4. Contact the proposed recipient area and verify that the address for the requested action is located in that area if the area of jurisdiction is not obvious.,

  5. Use the telephone number listed on IRS intranet: http://serp.enterprise.irs.gov, to make contact.

  6. Mail Form 2209 to the area having jurisdiction if using a paper Form 2209 .

  7. Find Area office addresses for administrative mail on IRS Intranet at: http://serp.enterprise.irs.gov .

    1. The mailing address located in Puerto Rico or the Virgin Islands is:
      Internal Revenue Service
      Mercantil Plaza 10th Floor
      2 Ponce de Leon Avenue
      San Juan, Puerto Rico 00918

    2. The mailing address for Form 2209 involving a taxpayer having a current address located in Guam, the Commonwealth of the Northern Mariana Islands, American Samoa and other territories of the United States is:
      Internal Revenue Service
      500 N. Capitol Street
      Room 1401
      Washington, D.C. 20001

  8. Send any relevant paper documents that the recipient of the ICS OI will need to conduct the investigation, send them to the group manager of the receiving group. The group manager of the receiving group is responsible for assigning the incoming ICS OI and for forwarding any paper documents that come in from the originator for the recipient. The mailing address of the receiving group can be found in the ICS Parameter Tables under the Employee Tables option. If the originator chooses to have ICS assign the OI, the originator may not know the receiving group number. In this case, the originator may access the module summary screen for the created OI to find the assignment number that ICS has assigned. An assignment number of 00000000 indicates ICS has not assigned the OI yet.

    • If the receiving area fails to timely complete the investigation and/or submit a timely request for extension, transfer the case to the CFf of the investigating area, bypassing ACS.

    • Transfer options available on ICS are:

    1. Transferee office - Request transfer

    2. Taxpayer contact - Requests transfer

    3. No TP contact - Assign to Queue (Out of Area) - Verification through correspondence

    4. Reassign to Area Queue - New address information appears on IDRS after transfer

    5. Transfer Non Baldue/Delret Inventory, examples would be OI or TFRP

  9. Enter the assignment number where the cases should be assigned on ICS. OI should be sent directly to the GM for RO assignment, even if the RO requests the transfer. This will assist the GM to control the inventory.

5.1.8.3  (01-01-2006)
Receiving Office — Action and Report

  1. Take the following action upon receipt of an Ol:

    1. Report the action taken to the originator within the period stated on Form 2209 or before the due date of the ICS OI.

    2. Submit a status report if the complete report will not be timely. Enter the report date in the ICS history and extend the OI due date. Submit the report on Form 2209-A , Status Report, if the investigation was initiated on Form 2209 .

    3. If it is determined the taxpayer is in another jurisdiction and the investigation should be transferred, document the taxpayer's correct location and close the ICS OI. The originator will issue another OI to the correct location. If the investigation was initiated on Form 2209 , compute the normal 45-day period for completion of the investigation from the date of the Form 2209-A used to transmit the investigation to the new jurisdiction.

    4. If Form 2209 are prepared to request extensions to secure Form 900 waivers, include: the taxpayer’s business name; EIN; name and SSN of the individual required to sign the waiver.

  2. The receiving office will deposit any collection made as a result of the investigation.

  3. Take the following action when cash is converted:

    1. Complete the applicable item on Part 3 of the Form 809, Receipt for Payment of Taxes, entering sufficient information to identify the bank draft or money order

    2. Annotate Part 1 of Form 809 to indicate that the collection relates to a Courtesy Investigation, and

    3. Annotate the case history with the conversion information

  4. Send all pertinent documents to the originator to be associated with the Bal Due/Del Ret case file when closing the Courtesy Investigation.

5.1.8.4  (01-01-2006)
Status Reporting by Originator

  1. The originator of the investigation should document the ICS history to request additional information or actions that were not requested when the OI was created. The originator should also contact the recipient to advise them of the additional request in the history.

5.1.8.5  (04-22-2008)
Mandatory Assignments

  1. Group managers will assign mandatory OIs listed in IRM 5.1.8.5.1 (below) to the next available revenue officer.

5.1.8.5.1  (04-22-2008)
Types of Mandatory OIs

  1. Case work from Technical Services Advisory that cannot be resolved without field actions (such as redemption investigations.)

  2. Service of U.S. Tax Court subpoenas.

  3. Counsel Collection referrals.

  4. Federal Contractors

  5. Form 4442,Inquiry Referral .

  6. Taxpayer Advocate referrals.

  7. Appeals Referral Investigation (ARI.)

  8. Corporate Trust Fund Offers in Compromise

  9. Pre-assessed Large and Mid-Size Business, SB/SE, Tax Exempt and Government Entities cases greater than the amount listed in LEM 5.1.8.5.1.

  10. The following Insolvency-generated investigations:

    1. Exempt property-personal residence-aggregate tax owed greater than the amount listed in LEM 5.1.8.5.1(a) and equity in asset greater than the amount listed in LEM 5.1.8.5.1(a) .

    2. Abandoned property-aggregate owed greater than the amount listed in LEM 5.1.8.5.1(b) and equity in asset greater than the amount listed in LEM 5.1.8.5.1(a) .

    3. Insolvency requests to address collection on businesses in reorganization bankruptcy (Chapters 11 and 13) when the taxpayer is not in compliance with filing, paying, and depositing requirements.

    4. Other key Insolvency processes. These include: Courtesy Investigations requiring court appearance in a remote area; records check or asset valuation that cannot be accomplished using in-house locator services; immediate lien filing.

  11. Lien discharge, subordination, and non-attachment applications will be worked in Technical Services Advisory. Revenue Officers will prepare Form 3033, Investigation of Request for Certification of Discharge or Subordination, on assigned cases for submission to Technical Services Advisory. Courtesy Investigations will only be issued if Technical Services Advisory cannot obtain the necessary information through informal contact with the submitting revenue officer, the Integrated Collection System, or other sources.

  12. Suit recommendations will be reviewed and processed in Technical Services Advisory upon receipt of the recommendation from the revenue officer. Courtesy Investigations will be issued only if Technical Services Advisory cannot obtain the necessary information through informal contact with the submitting revenue officer, the Integrated Collection System, or other sources.

  13. Advisory-initiated requests for a collection determination and resolution in cases where payment of a civil liability is a condition of criminal probation. Courtesy Investigations may also be issued for follow-up on court ordered restitution where no tax has been assessed when field contact is required to address specific issues raised by the Department of Justice.

  14. Judgment follow-up.

  15. Defaulted bankruptcy plan where indicators of fraud are present.

  16. Requests for trust fund recovery penalty determination for cases in bankruptcy. (These include supplemental 4180 interviews and investigations for subsequent delinquent accounts where a trust fund recovery penalty investigation was completed.)

  17. Request for a collection determination and resolution in cases involving taxpayers who are defense contractors with a Federal Payment Levy Program levy or levy attaching 100% of a contract payment where issues of national security or financial loss to the government exist.

5.1.8.5.2  (04-22-2008)
Tax Checks on Political Appointees and Government Employees

  1. This mandatory OI requires tax checks on individuals requested by the White House, the Executive Officer of the President, or the Department of Justice.

  2. Collection Policy will forward a memorandum to the Area Director where the taxpayer resides. The memorandum will include the following information:

    1. Taxpayer's name

    2. Address

    3. Social Security number

    4. Contact phone numbers

    5. Unfiled/unpaid tax period and

    6. The name of the Tax Check Unit and Collection Policy contacts

  3. The area will initiate a nondiscretionary Courtesy Investigation and assign it to a revenue officer

  4. Attempt contact with the taxpayer within 48 hours of the notification to the area. If the taxpayer indicates a return was filed, proof of filing, e.g., a copy of the cancelled check for the balance due on the return, will be secured. If such proof is not available or if the return was a refund return, a copy of the return will be secured and processed as a possible duplicate return.

  5. Send an e-mail message to the Tax Check Unit and advise them of the results of the contact immediately after contact with the taxpayer.

    Example:

    The e-mail message to the Tax Check Unit could include the following:

    1. Proof of filing secured

    2. Return Secured

    3. Commitment to file/pay by agreed date, etc

  6. Do not take enforcement action against the taxpayer during this time.

  7. Send an e-mail message to the Tax Check Unit and other appropriate Collection Policy contacts and advise how the investigation was resolved when the taxpayer complies and the investigation is closed.

  8. Make two additional contact attempts to resolve the delinquency if no contact is made or the taxpayer fails to meet the initial commitment.

    1. If a field call was not already made, one of the additional contact attempts must be a field call.

    2. If the delinquency remains unresolved, the Tax Check Unit and Collection Policy contact will be so advised by e-mail.

5.1.8.6  (01-01-2006)
Discretionary Assignments

  1. Managers will assign discretionary OIs listed in IRM 5.1.8.6.1to the next available revenue officer based on risk level.

  2. See IRM 5.1.8.6.1., Types of Discretionary OIs.

  3. The risk level, if known, should be entered manually by the initiator in the remarks section of the OI. If the risk level is not known, the receiving manager will determine the presumptive risk level of the underlying account based on established risk factors. If the manager is not currently assigning like-risk level cases, the case may be returned to the originator stating that there are insufficient resources to work the case.

5.1.8.6.1  (01-01-2006)
Types of Discretionary OIs

  1. Courtesy Investigations generated by a revenue officer for investigation in another area or territory.

  2. Collection against a non-petitioning spouse.

  3. Request to Secure Tax Returns

  4. Return Preparer Penalty

  5. Telephone Calls

  6. Unpostable Conditions

  7. Unassessable erroneous refunds

  8. Currently not collectible mandatory follow-up.

  9. Other Insolvency processes.

  10. Courtesy Investigations requiring special handling (described in IRM 5.1.8.7.)

5.1.8.7  (04-22-2008)
Courtesy Investigations Requiring Special Handling

  1. Some Courtesy Investigations are issued for particular purposes and require specific procedures.

  2. Courtesy Investigations described in this section are discretionary assignments.

  3. The following Courtesy Investigations require special handling:

    • Recovery of unassessable erroneous refunds

    • Failure of employer to furnish withholding statement

    • Social Security Administration preferential investigations

    • Exemption from self-employment tax

    • Form 1120S , U.S. Income Tax Return for an S Corporation (incorrect tax period or return filed)

    • Form 990 , Return of Organization Exempt From Income Tax, filed without list for "compensation of officers"

    • Mutual collection assistance requests (MCARs)

    • Investigations related to the Treasury Enforcement Communication System (TECS)

5.1.8.7.1  (04-22-2008)
Recovery of Unassessable Erroneous Refunds

  1. This subsection discusses erroneous refunds in general, and unassessable erroneous refunds in particular, and provides procedures for the recovery of unassessable erroneous refunds.

5.1.8.7.1.1  (04-22-2008)
Erroneous Refunds in General

  1. An erroneous refund is any receipt of money from the Service to which the recipient is not entitled.

  2. Erroneous refunds fall into one of two general categories for purposes of how the Service attempts recovery:

    • Assessable erroneous refunds, and

    • Unassessable erroneous refunds.

5.1.8.7.1.1.1  (04-22-2008)
Assessable Erroneous Refunds

  1. Assessable erroneous refunds can be placed in three categories:

    1. Substantive redetermination of tax — A substantive redetermination of tax involves a decision, no matter how cursory, that the taxpayer’s tax liability is less than the amount previously assessed from that reported by the taxpayer on the return or from that determined in an examination. The Service abates down the redetermined tax liability, but the decision turns out to be incorrect and the tax must be assessed as tax under the Internal Revenue Code within the period of limitations on assessment. The Service may have to follow the deficiency procedures, after which the tax may be collected by administrative lien or levy action.

    2. Other assessable liabilities — These include negative amounts of tax constituting a deficiency involving the Earned Income Credit ( IRC 6211(b)(4)), amounts under math error procedures ( IRC 6213(b)), and overstated income tax pre-payment credits ( IRC 6201(a)(3)).

    3. Prejudicial clerical error — If the refund results from a clerical error that abates tax and the taxpayer is prejudiced by the error, that tax must be reassessed.

5.1.8.7.1.1.2  (04-22-2008)
Unassessable Erroneous Refunds

  1. (1) Unassessable erroneous refunds are refunds that cannot be recovered by tax assessment procedures. They included the following:

    1. Refunds resulting from actions such as the misreading of an input document or a keypunch error that cause misapplied payments, misdirected direct deposits, or duplicate refunds.

    2. A payment that satisfies an assessment, but then is erroneously refunded to the taxpayer. The assessment is considered extinguished. As the tax has been paid, the Service cannot reassess in order to recover the refund. Bilzerian v. United States, 86 F.3d 1067 (11th Cir. Fla. 1996), acquiescence in result only, 1998 AOD LEXIS 8.

    3. Otherwise assessable amounts which became unassessable by expiration of the Assessment Statute Expiration Date (ASED).

      Note:

      The running of the period of limitations on assessments is not related to the Service’s error. In some cases the Service may have no real opportunity to make the assessment described in IRM 5.1.8.7.1.1.1.

  2. See IRM 5.1.8.7.1.1.1. Assessable Erroneous Refunds.

  3. The Service cannot take administrative lien or levy action to recover an unassessable erroneous refund.

    Note:

    Use of administrative lien or levy action to collect these debts is not permissible.

    Note:

    Use of a summons to secure records of any type is not permissible.

  4. The remedies generally available to the Service to recover unassessable erroneous refunds are:

    1. request that the taxpayer voluntarily repay the amount due ( Letter 510-C, Refund In Error; Return Check),

    2. file a civil suit as authorized by IRC 7405, Action for recovery of erroneous refunds, or

    3. use the common law right of offset. The government has the same common law rights as any other creditor to apply funds owed to its debtor against the debt owed. See United States v. Munsey Trust Co., 332 U.S. 234 (1947). See also 31 U.S.C. § 3711, which provides a statutory remedy for non-tax debts due the Government. (The statutory right of offset for tax debts provided by IRC 6402 does not permit an offset of a tax overpayment against a non-tax debt except in specific circumstances.)

  5. Unassessable erroneous refunds are subject to the Erroneous Refund Statute Expiration Date (ERSED).

    1. The IRC 7405, Action for recovery of erroneous refunds, civil suit is generally subject to a two-year statute of limitations for instituting a suit provided in IRC 6532(b), Suits by United States for recovery of erroneous refunds.

      Exception:

      Common law offset exception — If the error can be related to the claim for credit or refund of an overpayment because the error and claim are for the same year on the same tax account (i.e., the same taxpayer and type of tax) there may be no limitations period to contend with. The application of this exception is unlikely in regard to unassessable erroneous refunds, but contact Chief Counsel, Procedure and Administration, if your case involves an erroneous refund of overpayment interest.

      Note:

      See Chief Counsel’s nonacquiescence to Pacific Gas and Electric Company v. United States, 417 F.3d 1375 (Fed. Cir. 2005). See AOD 2006-02; 2006-26 IRB 1.

      Exception:

      The statute of limitations is five years if the erroneous refund was induced by fraud or misrepresentation of a material fact.

    2. Compute the ERSED from the day after issuing the refund check. This is the most conservative approach. Contact Chief Counsel, Procedure and Administration, if your case has a potential statute problem.

  6. Any amount recoverable by civil suit under IRC 7405, Action for recovery of erroneous refunds, accrues interest under IRC 6602, Interest on erroneous refund recoverable by suit, at the rate established by IRC 6621, Determination of rate of interest, from the date of the payment of the refund. The interest is collectible for voluntary payments or common law offsets, as well. If the erroneous refund is $50,000 or less, the Service must abate the interest accrued from the refund date to the date of the demand for repayment, unless the taxpayer (or a related party) in any way caused the erroneous refund under IRC 6404(e), Abatement of interest attributable to unreasonable errors and delays by Internal Revenue Service. If the refund is more than $50,000, interest abatement is not required, but may be allowed on a case by case basis.See IRM 20.2.7.5, Erroneous Refunds IRC Section 6404(e)(2).

5.1.8.7.1.2  (04-22-2008)
Campus Erroneous Refund Procedures

  1. The campus has different sets of procedures depending on whether or not IRC 6404(e)(2)interest abatement applies and on whether the case is identified as a potential fraud case.

  2. IRC 6404(e)(2) interest abatement applies — An initial Letter 510-Crequests return of the refund amount by a certain "Due Date" ; i.e., within 21 calendar days from the date of the letter. It provides an explanation that interest will be charged from the date of the letter if the erroneous refund is not repaid by the " Due Date." A second Letter 510-C is issued when the taxpayer does not pay the refund amount back to the IRS within the number of days in LEM 5.1.8, Courtesy Investigations. This letter includes interest from the date of the initial letter; i.e., the date of the notice and demand for payment.

  3. IRC 6404(e)(2) interest abatement does not apply — An initial Letter 510-C requests return of the refund amount and interest due on the refund from the date of the payment of the refund.

    1. Regular case — A second Letter 510-C is issued when the taxpayer does not pay the refund amount back to the IRS within the number of days in LEM 5.1.8, Courtesy Investigations, if the case is not identified as a potential refund fraud case.

    2. Potential fraud case — The second Letter 510-C will not be sent in cases where Criminal Investigation (CI) becomes involved with the case because of potential refund fraud.

  4. The campus will issue Form 2209, Courtesy Investigation, to Collection management to assign to attempt recovery of an erroneous refund.

5.1.8.7.1.3  (04-22-2008)
Unassessable Erroneous Refunds Recovery Procedures

  1. Collection management will receive a Form 2209 , Courtesy Investigation, for recovery of an erroneous refund and will assign it for prompt action.

  2. Contact the taxpayer and request voluntary repayment of the amount due, including applicable interest under IRC 6602 upon receipt of Form 2209, Courtesy Investigation.

    Note:

    You may attempt to contact the taxpayer by mail if you are unable to contact the taxpayer in person. To assist you in composing a letter to the taxpayer, you may use the language included in Letter 510-C. Letter 510-C is a correspondex letter with various suggested paragraphs; use the appropriate paragraphs. Letter 510-C is available on the IRWeb in the Servicewide Electronic Research Program (SERP).

    Caution:

    Do not use administrative lien or levy action to collect these debts.

    Caution:

    Do not use a summons to secure records of any type.

  3. Do not assess or attempt to collect the applicable interest for the period between issuance of the erroneous refund and the date repayment is demanded if the taxpayer remits the amount of the refund without the applicable interest and you determine that interest is to be abated under IRC 6404(e)(2)(for the period between issuance of the erroneous refund and the date repayment is demanded) because the taxpayer did not cause the erroneous refund, and the amount of the erroneous refund is $50,000 or less.

    Note:

    If the taxpayer did not cause the erroneous refund, and the amount of the erroneous refund is more than $50,000, the Service may abate the interest in its discretion.

  4. Abatement of the post-demand interest (charged from the date of the notice and demand for repayment to the repayment date) is not allowed. See IRM 20.2.7.5(3), Erroneous Refunds IRC Section 6404(e)(2). Paragraph (3) provides " Abatement of the post-demand interest (charged from the date of demand for repayment to repayment date) is not allowed."

  5. Take the following action, as applicable:

    • Secure full payment if possible.

    • Determine the taxpayer's ability to pay over time if immediate full payment is not possible.

    • Attempt to secure a voluntary repayment agreement from the taxpayer if the taxpayer cannot make immediate full repayment.

    • Consider recommending a suit if the taxpayer cannot or will not pay in full or enter into a voluntary repayment agreement.

  6. See the appropriate specific procedures below for each of these actions, as applicable.

5.1.8.7.1.3.1  (04-22-2008)
Secure Full Payment

  1. Secure full payment if possible.

  2. Process the payment if the taxpayer pays in full.

    1. List the payment on your Form 795, Daily Report of Collection Activity.

  3. Convert cash to a bank draft or money order if the taxpayer pays in cash.

    1. Give Part 2 of Form 809, Receipt for Payment of Taxes, to the taxpayer.

    2. Staple Part 1 of Form 809 to the reverse of Part 3 of Form 809.

  4. Close the Form 2209, Courtesy Investigation, when the full amount due is received.

    1. Forward the remittance, the Parts 1 and 2 of Form 2209, and the related collection case file to the campus on your Form 795,Daily Report of Collection Activity.

    2. Forward Parts 1 and 3 of Form 809 to the teller unit for retention if you issued a receipt.

5.1.8.7.1.3.2  (04-22-2008)
Determine the Taxpayer's Ability to Pay

  1. Determine the taxpayer's ability to pay over time if immediate full payment is not possible.

    1. Secure Form 433–A, Collection Information Statement for Individuals, and/or Form 433–B, Collection Information Statement for Businesses, if the taxpayer voluntarily discloses the information to complete the form(s).

      Caution:

      Do not use a summons to secure records of any type.

    2. Analyze the 433-A and/or the 433-B.

    3. Decide whether or not the taxpayer will be able to repay the erroneous refund.

    4. Follow the procedures in IRM 5.15.1, Financial Analysis Handbook, and IRM 5.16, Currently not Collectible, specifically IRM 5.16.1, Overview,to help you make your decision.

  2. Follow the procedures below in IRM 5.1.8.7.1.3.3, Secure a Voluntary Repayment Agreement, if the taxpayer agrees to repay the erroneous refund.

  3. Follow the procedures below in IRM 5.1.8.7.1.3.4, Recommend a Civil Suit, if the taxpayer will not agree to repay the erroneous refund.

5.1.8.7.1.3.3  (04-22-2008)
Secure a Voluntary Repayment Agreement

  1. The Service may solicit a voluntary repayment of the erroneous refund within two (or five) years from issuance of the erroneous refund in accordance with IRC 6532(b). The Service has long used consensual dispute resolution in lieu of litigation.

  2. Attempt to secure a voluntary repayment agreement from the taxpayer if the taxpayer cannot make immediate full repayment.

    Caution:

    Do notfile a Notice of Federal Tax Lien (NFTL).


    Caution:

    Do not serve a levy to collect.

    1. Request the taxpayer to submit a signed voluntary repayment agreement that provides for full payment of the erroneous refund and specifies the repayment terms as IRC 6159only authorizes installment agreements for the payment of "tax."

      Caution:

      Do not use Form 433–D, Installment Agreement.

    2. Use the language suggested in Exhibit 5.1.8-2 when a repayment agreement is required. See Exhibit 5.1.8-2, Unassessable Erroneous Refund Voluntary Payment Agreement.

    3. Attach Form 433–A and/or Form 433–B (if you secured one or both of them) to the signed voluntary repayment agreement.

    4. Grant an appropriate amount of time for the voluntary repayment agreement based on circumstances of the individual case.

    5. Ensure the voluntary repayment agreement provides for full payment at least six months before the two-year statute for instituting suit expires.

      Exception:

      The taxpayer may waive the two-year period of limitations established by IRC 6532(b) on the institution of suits to recover erroneous refunds. If the taxpayer executes a waiver of the limitations period as part of his or her agreement, such voluntary repayment agreements are acceptable.

    6. Secure a waiver from the taxpayer if the ERSED needs to be extended. Donotsecure a waiver under the circumstances discussed in LEM 5.1.8.7.1.3.3,Secure a Voluntary Repayment Agreement

    7. Follow the waiver procedures in IRM 5.1.8.7.1.3.3.1 , Waiver Procedures, below if you need to secure a waiver.

  3. Monitor the voluntary repayment agreement to receive the payments as scheduled in the agreement.

  4. Forward any partial voluntary repayments, as you receive them, to the campus with Form 2209–A, Status Report.

    1. Enter the following information in the "Remarks" section of Form 2209–A:

      • "Partial Voluntary Repayment on Erroneous Refund,"

      • the taxpayer’s identification number,

      • the tax period, and

      • the tax class

  5. Resolve the Form 2209, Courtesy Investigation, as follows:

    If Then
    The taxpayer pays in full

    • Close the Form 2209 when the full amount due is received.

    • Follow the closing procedures in IRM 5.1.8.7.1.3.1, Secure Full Payment, above.

    The taxpayer defaults

    • Do not file a Notice of Federal Tax Lien (NFTL).

    • Do not serve a levy to collect.

    • Take the action described below in IRM 5.1.8.7.1.3.4, Recommend a Civil Suit ,if the taxpayer defaults.

5.1.8.7.1.3.3.1  (04-22-2008)
Waiver Procedures

  1. Waivers should be requested only in limited circumstances, such as where a taxpayer agrees to repay the erroneous refund but needs additional time. These waivers should be short and have a specific end date (i.e. no open-ended extensions). Waivers under IRC 6532(b)should always contain an expiration date that accommodates the full payment plus an additional six months.

  2. Secure a waiver only when the taxpayer:

    1. agrees the refund was erroneous and is willing to repay the erroneous refund but needs time beyond the Erroneous Refund Statute Expiration Date (ERSED), or

    2. disputes that the refund is erroneous and the amount at issue is significant enough so the Service will file an erroneous refund civil suit if the taxpayer does not repay the erroneous refund.

  3. Do not secure a waiver under the circumstances discussed in LEM 5.1.8.7.1.3.3.1, Waiver Procedures.

  4. Follow these steps to prepare the waiver.

    1. Use the waiver language in Exhibit 5.1.8-1 when a waiver is required. See Exhibit 5.1.8-1., Unassessable Erroneous Refund Waiver.

    2. Prepare the waiver by printing the waiver language on a blank piece of IRS letterhead paper.

    3. Establish the waiver with an expiration date that accommodates the full payment plus an additional six months.

  5. Attach the signed waiver to the signed voluntary repayment agreement.

    Note:

    The agreement and waiver are subject to contract principals. Therefore, every effort should be made to ensure the information is clear. In particular, proper identification of the parties is critical. This is a factor where corporate reorganizations or dissolutions have occurred since the refund. A parent of a consolidated entity would have no authority through its role under the IRC to bind a member who received the erroneous refund. The Tax Matters Partner (TMP) of a partnership would have no authority through its role under the IRC to bind the partners on this matter.

    Note:

    If the taxpayer makes alterations on a document, it is preferred that a new document be prepared for the taxpayer’s signature. However, if the alterations on the document are acceptable to the Service, the taxpayer has initialed each alteration, and there is not sufficient time to perfect the document, the person signing for the Service could initial the alterations and sign the document.

    Note:

    If a Power of Attorney (POA) is going to execute a document for a taxpayer, the Form 2848, Power of Attorney and Declaration of Representative, must specifically authorize the POA to bind the taxpayer.

5.1.8.7.1.3.4  (04-22-2008)
Recommend a Civil Suit

  1. The Service may recover any erroneous refund by instituting an erroneous refund suit in accordance with IRC 7405. In order to be timely, an erroneous refund suit must be filed within two (or five) years from the date of payment of the erroneous refund.

  2. Consider the usual requirements for recommending a suit and also consider other action if the taxpayer:

    • refuses to pay on request,

    • refuses to make a voluntary repayment agreement, or

    • defaults on a voluntary repayment agreement.

  3. Refer to the following Law Enforcement Manual (LEM) 5.5 and IRM sources for information on litigation:

    • LEM 5.5.5,Litigation.

    • IRM 5.17.4, Legal Reference Guide for Revenue Officers - Suits by the United States. See IRM 5.17.4.14,Suits to Recover Erroneous Refunds. This IRM provides recovery by suit should be considered only if administrative recovery is barred by the statute of limitations or the erroneous refund is unassessable, and LEM criteria for filing a suit is met.

    • IRM 21.4.5,Refund Inquiries - Erroneous Refunds. See IRM 21.4.5.14,Collection Methods for Category D Erroneous Refunds. This IRM provides that suits to recover erroneous refunds are limited to those exceeding the litigating threshold established by Department of Justice (DOJ).

  4. Make a decision as to whether or not it would be in the government’s best interest to pursue a suit to recover the erroneous refund.

  5. Prepare a recommendation report to Advisory in the memorandum format.

  6. Recommend whether or not a suit or other action to recover the erroneous refund should be instituted. Contact Area Counsel to determine if any other actions may be appropriate in the case you are working.

  7. Include the following in your recommendation report (if available):

    1. name and address of the taxpayer,

    2. type of taxpayer (individual, partnership, corporation, etc.),

    3. tax class,

    4. amount of the erroneous refund listed by tax period (include accrued interest due on the erroneous refund as a separate item),

    5. a statement indicating that the taxpayer refused or neglected to make payment upon request (include any reasons known for the taxpayer’s action),

    6. schedule number and date refund was made,

    7. reason(s) refund arose, and

    8. premise upon which recovery is based.

    Exception:

    If you are notrecommending a civil suit or other action, you may limit your report to the first five items above (i.e., items a through e).

  8. Annotate Parts 1 and 2 of Form 2209"Suit Recommended" or "Suit not Recommended" as applicable.

  9. Close Form 2209.

    1. Forward Part 2 of Form 2209 on Form 795, Daily Report of Collection Activity.

    2. Forward Part 1 of Form 2209 along with your recommendation report and all the other attachments to Advisory.

    3. Include a copy of the letter (based on Letter 510-C, Refund in Error; Return Check), if you sent it to the taxpayer pursuant to IRM 5.1.8.7.1.3(2) , Unassessable Erroneous Refunds Recovery Procedures , above.

  10. Refer to IRM 25.6.7, Statute of Limitations - Erroneous Abatements (and Erroneous Refunds and Overstated Credits), for further information on potential statute cases. See IRM 25.6.7.4,Overview of Remedies for Recovering an Erroneous Refund.

    Note:

    Upon receipt of Form 2209 in Advisory, the Advisory manager will make the final determination as follows:

    If the RO: Then the Advisory manager will:
    Recommended a suit

    • Annotate Part 1 of Form 2209" Suit will be initiated."

    • Send Part 1 of Form 2209 to the campus.

    Did not recommend a suit

    • Annotate Part 1 of Form 2209" Suit will not be initiated."

    • Send Part 1 of Form 2209 to the campus along with the related case file.

5.1.8.7.2  (04-22-2008)
Failure of Employer To Furnish Withholding Statement

  1. Whenever a taxpayer corresponds with a Campus and indicates inability to secure a correct Form W-2 from his/her employer, the Campus Correspondence Section attempts to resolve the discrepancy. If this does not resolve the situation a Form 2209 is prepared and issued to the Collection Field function.

  2. If the employer has no records or the records are inadequate to accurately determine the employee earnings, secure an estimated Form W-2 from the employer.

  3. If the employer cannot be located, note this fact with a statement in the "Remarks" section of the Form 2209.

  4. Willful failure to furnish an employee with the required statement on Form W-2 may make an employer liable for a civil penalty imposed by IRC 6674 and/or a criminal liability provided by IRC 7204. Consider the assertion of these IRC 6674 penalties whenever an employer refuses to submit the required Form W-2 . Only CI may investigate and consider whether to assert IRC 7204.

  5. Failure to furnish or the furnishing of a false or fraudulent Form W-2 suggests the possibility that the employer may have omitted reporting the tax withheld on Form 941. Therefore, include in any field Courtesy Investigation an examination of the employer’s records to determine if all tax withheld has been accounted for and reported on the employer’s returns. If indications of fraud are discovered, apply the procedures in IRM 25.1, Fraud Handbook.

5.1.8.7.3  (04-22-2008)
Social Security Administration Preferential Investigations

  1. When certain conditions are met, the Social Security Administration (SSA) may ask the Internal Revenue Service to give preferential treatment to earnings discrepancy cases. These cases are originated on Form SSA 1273, Request for Preferential Investigation .

  2. The SSA will forward Form SSA 1273to the appropriate Campus. If there is no record of the return involved, the Campus will:

    1. Prepare Form 2209

    2. Attach Form SSA 1273 to Form 2209 and forward both to the Collection Field function (CFf).

  3. When CFf receives an earnings discrepancy case, it will:

    1. Accord them priority over any other SSA investigations

    2. Close them within 40 days of receipt, if possible

    3. Complete the reverse side of Form SSA 1273Form SSA 1273 before closing the investigation.

    4. Attach all parts of Form SSA 1273to Form 2209 .

5.1.8.7.4  (04-22-2008)
Exemption From Self-Employment Taxes

  1. Members of certain recognized religious groups that are opposed to public insurance have been exempted from paying social security and medicare tax on self-employment income. In order to establish this exemption, a taxpayer must file with the Internal Revenue Service a Form 4029 , Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, with the Internal Revenue Service. See IRM 5.1.12.12, Taxpayer Exempt for Religious Reasons.If the Campus cannot verify the applicant's membership, the case will be forwarded to Collection Field Function on Form 2209.

    Note:

    Form 2209 will have the following notation in the "Remarks" block: "A Form 4029, Application for Exemption From Social Security and Medicare Taxes and Wavier of Benefits, has been filed by the taxpayer named above. Upon contact, request the taxpayer to furnish the appropriate statement relative to his/her membership in the religious group indicated on the application. The IRS does not collect or maintain lists of members of religious sects that may be checked instead of making such a request."

  2. Contact the individual requesting exemption and advise him/her that the application cannot be processed because his/her name is not on the list supplied by the religious organization. The taxpayer should be requested to secure a statement signed by an authorized individual of the religious sect. This statement should include:

    • Name, address and area of the religious group

    • Title of the authorized individual

    • Name of the applicant

    • Statement that the applicant is a member of the religious group

  3. Attach this statement to Part 1 of Form 2209 before submitting the closed case on Form 795.

5.1.8.7.5  (04-22-2008)
Incorrect Tax Period or Return Filed — Form 1120/S

  1. CSCO will electronically prepare Form 2209, Courtesy Investigation, and forward it to the appropriate Collection function when a TC 610 posts to a Form 1120 or 1120S module in an unpostable status. The investigation will:

    1. Indicate that the taxpayer has either filed a return for an incorrect tax period or an incorrect return (e.g.,

      Example:

      A Form 1120Sin lieu of a Form 1120 .

    2. State the correct tax period or type of return, and

    3. Have a photocopy of the first page of the return, as filed, attached

  2. Secure a correct tax return to close the Form 2209.

5.1.8.7.6  (04-22-2008)
Form 990 Filed Without List for "Compensation of Officers "

  1. To meet the requirements of IRC 6033, an exempt organization must complete the return to provide all data asked for, if applicable.

    Note:

    The IRC 6652(c)(1)(A) imposes on an organization a failure to file penalty at paragraph (i) of that section, and a failure to include information penalty at paragraph (ii). The filing of an incomplete return constitutes "failure to file a return" for purposes of (i) in the amount listed in LEM 5.1.8.7.6 , if absent reasonable cause, the incompleteness of the return is due to the omission of material information that would hinder or preclude the Service from performing the duties and responsibilities placed upon it by Congress.

  2. Occasionally an annual return is received by the Service without the list for "Compensation of Officers." In this instance, the Campus corresponds with the organization and requests the missing list. If no satisfactory response is received within 60 days, the Campus will issue a Form 2209, Courtesy Investigation .

  3. Management will assign this type of investigation to a revenue officer.

  4. Take the following action upon receipt of an OI to secure the "Compensation of Officers" list:

    1. Encourage the organization to file (and to do so expeditiously).

    2. Recommend assessment of the late filing penalty or indicate that reasonable cause for failure to submit the list was established.

    If Then
    You recommend assertion of the penalty

    • Prepare a computation of the amount of penalty to be assessed

    • Attach it to the reverse of Part 1 of the Form 2209

    You recommend non-assertion of the penalty

    • Provide Form 4571 , Explanation for Filing Return Late or Paying Tax Late,to the exempt organization.

    • Secure Form 4571 or a written statement outlining the reasons for failure to submit the list from the exempt organization.

    • Record the recommendation for not assessing the penalty on the reverse side of the Form 4571 or statement.

    • Attach it to the reverse side of Part 1 of the Form 2209 .

  5. Close the Form 2209 if the exempt organization fails to submit the list within the required time after being advised of its responsibility to do so.

  6. Record the actions you took to attempt to get the organization to comply with the requirements in the "Remarks" section on the reverse side of Form 2209.

5.1.8.7.7  (04-22-2008)
Incoming Mutual Collection Assistance Requests

  1. The U.S. treaties with Canada, Denmark, France, Netherlands and Sweden provide for collection assistance whereby a treaty partner may send a Mutual Collection Assistance Request (MCAR) to the U.S. Competent Authority for tax treaties, Office of the Deputy Commissioner (International), LMSB.

    Note:

    This IRM section concerns incoming MCAR cases. See IRM 5.1.12.25, Outgoing Mutual Collection Assistance Requests, for procedures on outgoing MCAR cases.

  2. Generally, the Service will not pursue collection if an individual is a citizen of the United States. However, for MCAR cases received from Canada, and Denmark, this exception only applies to individuals who were U.S. citizens at the time the tax liability accrued.

  3. Our treaty partners will, on request, collect U.S. taxes from U.S. taxpayers or taxpayer assets located in their countries.

  4. The types of U.S. taxes that can be collected by these five treaty partners on behalf of the U.S. under MCAR differ depending on the applicable treaty.

    1. The U.S. treaties with Denmark, Netherlands and Sweden provide for collection of Income tax and other specified taxes.

    2. The U.S. treaty with France provides for collection of income tax, Estate & Gift tax, Wealth tax and other specified taxes.

    3. The U.S. treaty with Canada provides for collection of all taxes.

  5. All MCARs from the treaty partners are received and processed by the Office of the Deputy Commissioner (International) LMSB.

  6. MCAR assessments do not involve any Campus and are not recorded on Master File because these monies are collected and sent to foreign governments rather than to the United States Treasury. The assessments will not appear as accounts receivable on Service records.

5.1.8.7.7.1  (04-22-2008)
Processing of MCARs by International

  1. The foreign tax liability is treated as a assessment upon receipt and denominated in U.S. dollars by means of an assessment certificate, which is signed by the SBSE MCAR Coordinator who creates the certificate as a delegated officer for International. The assessment certificate is necessary in establishing an audit trail.

  2. The foreign tax liability is converted into U.S. dollars using the exchange rate as of the date the certificate is prepared using the dollar figure provided by the treaty partner.

  3. The date on which the assessment officer signs the certificate is the date of assessment.

  4. The SBSE MCAR Coordinator uses a taxpayer control number (TCN) as a taxpayer identifying number for MCARs. The format for the TCN is 98–MCA–NNNNN and is maintained by International. Use the TCN as a taxpayer identifying number on such documents as liens and levies if a taxpayer’s TIN is not known. The MCAR Coordinator will open a MCAR CIP on ICS to control the case.

  5. The statute expiration date for each MCAR is provided by the treaty country on its tax documents. The statute date is shown on the U.S. dollar assessments certificates. No action is required by the Service to protect MCAR collection statutes.

  6. International, standardized notices that are sent to taxpayers after U.S. dollar assessments are made. Each taxpayer is sent a 10-day first notice. If the MCAR liability is not resolved after the first notice, a final 30-day notice is sent to advise the taxpayer about possible distraint action pertaining to the MCAR. Taxpayers on incoming MCAR cases are not entitled to CDP rights but are entitled to CAP rights.

  7. In no response, insufficient response or undelivered mail situations, the MCAR Coordinator will, if possible, utilize internal and external locator sources to find levy sources and/or locate taxpayers.

  8. A Courtesy Investigation may be sent to the appropriate area office for taxpayer contact if the MCAR liability exceeds the amount listed in LEM 5.1.8.7.7.1.

  9. Taxpayers have the option to make payments by check or money order, made payable to the government of the treaty partner in either the currency of the treaty partner or in U.S. dollars. Payments in the foreign currency are preferable.

    Note:

    All MCAR payments, whether voluntary or involuntary, will be processed by the MCAR Coordinator who will forward them to the treaty partner.

  10. If payments are made over time, the MCAR Coordinator will secure, if necessary, an updated balance from the treaty partner and apply the current exchange rate.

5.1.8.7.7.2  (04-22-2008)
Procedures for Area Offices Receiving MCAR Investigations

  1. Assign the Courtesy Investigation for prompt action upon receipt. When the investigation is assigned, contact the SBSE MCAR Coordinator and provide the investigating revenue officers name and telephone number. See LEM section 5.1.8.7.7.2.6for procedures if a Courtesy Investigation is issued for an undelivered mail case.

    Note:

    Due to the sensitive nature and possible international implications of these cases, they should normally be assigned to an experienced revenue officer at the GS-12 level.

  2. Contact the taxpayer and request payment of the amount due.

    1. All checks or money orders submitted voluntarily by taxpayers may be in either U.S. dollars or the foreign currency of the particular treaty partner, but the foreign currency is preferred.

    2. The check or money order should be made payable to the treaty partner rather than to the Service, as directed by International.

  3. Do not accept payment in cash because Form 809 cannot be issued for MCAR liabilities.

  4. Provide the taxpayer with a date-stamped photocopy of the check or money order in lieu of Form 809 .

  5. Conduct a full compliance check for all U.S. tax liabilities upon contact with the taxpayer.

  6. Request the assignment of any related accounts on the taxpayer to be worked in conjunction with the MCAR. However, any U.S. tax liability takes precedence over any MCAR liability and should be addressed and collected before any foreign tax.

  7. Cease all actions to collect the MCAR liability if it is determined that the taxpayer is a U.S. citizen.

    1. Secure evidence of U.S. citizenship.

    2. Contact the SB/SE MCAR Coordiantor.

    Exception:

    IRM 5.1.8.7.7(2) for exception regarding MCARs on Canadian and Danish liabilities. See IRM 5.1.8.7.7., Income Mutual Collection Assistance Request.

    If Then
    The taxpayer is a U.S. Citizen by birth Secure a copy of the taxpayer's birth certificate or U.S. passport
    The taxpayer is a naturalized U.S. citizen Secure the number, date and place of issuance of the taxpayer’s Certificate of Naturalization or copy of U.S. Passport.

  8. Do not collect the MCAR liability if the MCAR is from Denmark, and it is determined that the taxpayer filed Form 1040 , U.S. Individual Income Tax Return, on which the taxpayer reported worldwide income and paid U.S. taxes for the years for which Danish tax is outstanding.

    1. Verify the filing of each return with an IDRS transcript.

    2. Attempt to secure a copy of each return from the taxpayer.

    3. Close the Courtesy Investigation

    4. Return the OI to the originator with the supporting documents.

  9. Secure a financial statement and a proposed plan for payment if the taxpayer cannot fully pay the MCAR liability.

  10. Verify all financial information in accordance with IRM 5.15, Financial Analysis.

    Note:

    All payment plans will be approved and manually monitored by the SB/SE MCAR Coordinator to which taxpayers will be instructed to send payments.

  11. Because the Service does not have the authority to compromise a treaty partner’s foreign tax assessment, offers in compromise are not considered for MCARs.

  12. Contact the originator to determine whether the investigation should be closed if a taxpayer claims to have made arrangements directly with the treaty partner to satisfy the foreign tax liability.

    1. Secure some kind of documentation as verification of arrangements.

  13. Enforce collection against the taxpayer if the taxpayer has the ability to pay but refuses to do so.

  14. Use the same actions as would be taken against a Bal Due taxpayer, although the processing for certain distraint actions will differ from that for domestic Bal Dues

  15. Conduct a complete public records check

    • Secure copies of all deeds, mortgages, encumbrances, etc.

    1. Contact the MCAR Coordinator if the taxpayer disputes the MCAR assessment

    2. Discuss the situation prior to taking any distraint action against the taxpayer

    3. Allow the taxpayer reasonable time to contact the treaty partner to resolve the liability if the taxpayer's argument is reasonable.

    4. Do not close the courtesy investigation without concurrence of the MCAR Coordinator.

      Note:

      The MCAR Coordinator will determine whether the Courtesy Investigation will remain open while the taxpayer corresponds with the treaty partner.

5.1.8.7.7.2.1  (04-22-2008)
Notice of Levy on MCARs

  1. Prepare all notice of levy forms as shown on the samples provided by International. Follow routine guidelines with respect to MCAR levy activity with the following exceptions.

    Form 668-A exceptions:

    1. Secure the levy payment, if any.

    2. Forward the payment to the MCAR Coordinator.

    3. Close the investigation only if the levy payment fully pays the MCAR liability; otherwise, continue investigating other levy sources.

    Form 668-W exceptions:

    1. Wait for two consecutive levy payments.

    2. Forward each payment to the MCAR Coordinator.

    3. Exhaust all other collection sources before closing the Courtesy Investigation even if the Form 668-W will fully pay the MCAR liability before that statue.

    4. Take no action to protect the MCAR collection statute.

    Collection Due Process (CDP) exception:

    1. Do not generate a Collection Due Process (CDP) notice (to give a right to a CDP hearing) for a MCAR levy.

5.1.8.7.7.2.2  (04-22-2008)
Filing Liens on MCARs

  1. Follow routine guidelines with respect to MCAR lien activity with the following exceptions:

    1. No lien determination is required for MCARs.

    2. File a notice of lien prior to a seizure action taken by the revenue officer against any of the taxpayer’s assets, real or personal.

    3. File a notice of tax lien, if the taxpayer has the ability to pay, but refuses to do so, and the taxpayer owns real property to which the lien will attach, and no seizure action is being taken against it.

    4. File a notice of tax lien if the revenue officer determines that the MCAR is currently not collectible and the taxpayer owns real property to which the lien will attach.

    5. Do not utilize the Automated Lien System (ALS) to file liens for MCAR liabilities. See IRM 5.12, for the procedures for filing liens on MCARs.

      Note:

      Although area offices may file liens for MCARs, International will be responsible for the refiling and release of these liens.

    6. Do not generate a Collection Due Process (CDP) notice (giving a right to a CDP hearing) for a MCAR lien.

5.1.8.7.7.2.3  (04-22-2008)
Seizure and Sale on MCARs

  1. Procedures for the seizure and sale of personal and real property as found in IRM 5.10, Seizure and Sale, apply to MCARs with the following exceptions:

    Prior to taking seizure action:

    1. Contact both the Property Appraisal and Liquidation Specialist (PALS) and MCAR Coordinator to

    2. Discuss the facts of the case, including the actions taken prior to the proposed seizure, the type and value of the property to be seized, and the expected revenue.

    If the SB/SE MCAR Coordinator concurs with the proposed seizure:

    1. Submit the case for approval through your group manager (according to the current IRM provisions for managerial review).

    2. Coordinate the seizure with SB/SE MCAR Coordinator and with the PALS. The PALS will also coordinate the sale with the SB/SE MCAR Coordinator.

    3. Contact the OI originator if any questions or problems arise.

    Preparing Form 668-B :

    1. Contact the SB/SE MCAR Coordinator to secure a sample of Form 668-B to assist in your seizure and sale preparation because all seizure and sale forms that are prepared must refer to the MCAR liability in a similar manner and contain no reference to U.S. taxes.

    2. Do not bid in or purchase seized property on behalf of the U.S. Government or its treaty partners in the event that the minimum bid is not received. If appropriate, the sale may be adjourned and rescheduled within the allowable 30 day time period.

    3. Process the seizure and sale documents in coordination with PALS, including expense vouchers found in IRM 5.10 , Seizure and Sale

    4. Do not request input of TC 360 for seizure and sale expenses because expenses of seizures and sales will not be accessed against MCAR taxpayers.

    5. Forward monies collected immediately to the SB/SE MCAR Coordiantor.

  2. In the instance of separate liabilities owed by a taxpayer to both the U.S. Government and a mutual collection treaty partner, apply the proceeds of sale first to the U.S. liability.

    1. Prepare the seizure forms showing the liability due and the TIN assigned by the U.S. Government.

    2. Prepare Form 668-A for the MCAR liability to attach any surplus proceeds of the sale.

    3. Assess the expenses of sale against the taxpayer’s liability.

5.1.8.7.7.2.4  (04-22-2008)
Distraint Action Not Taken

  1. Identify any assets and document why enforcement action was not taken against a particular asset if the taxpayer has any U.S. assets against which distraint action is not taken. This documentation will assure the treaty partner that all possible efforts were made to collect the foreign tax liability.

5.1.8.7.7.2.5  (04-22-2008)
MCAR Taxpayer in Bankruptcy

  1. Secure all information necessary for filing a proof of claim and forward the information to the originator if the investigation reveals that the taxpayer has entered into a bankruptcy proceeding.

    1. The SB/SE MCAR Coordinator will coordinate the filing of a proof of claim where appropriate, and will advise the treaty partner of developments in the proceedings through the U.S. competent authority.

    2. A decedent estate or insolvency proceeding will be handled in a similar manner.

5.1.8.7.7.2.6  (04-22-2008)
Undelivered Mail Cases

  1. International will request a Courtesy Investigation for MCARs where:

    • The liability exceeds the amount listed in LEM 5.1.8.7.7.2.6

    • At least one notice sent by International was returned undeliverable

    • International failed to find a new address for the taxpayer.

  2. Make an attempt to locate the taxpayer using all available locator sources, including a field visit to the taxpayer’s last known address.

  3. Do not make contact if you are successful in locating the taxpayer.

    1. Advised the OI originator of the new address information for notice processing.

      Note:

      The OI originator should not change the taxpayer the taxpayer's address in taxpayer's address in the Masterfile unless the taxpayer complies with the requirements for changing his/her last known address as set forth in Rev. Proc. 2001-18. Rather, the contact originator should send notices to the taxpayer at his/her last known address as well as to the new address. The contact notices must be sent to the taxpayer before any distraint action can be taken if the taxpayer refuses to pay.

    2. Conduct a preliminary asset check to determine real and personal property before returning the Courtesy Investigation to the SB/SE MCAR Coordinator if the taxpayer is located within the jurisdiction of your post of duty.

5.1.8.7.7.2.7  (04-22-2008)
Closing MCAR Courtesy Investigations

  1. Contact the originator for concurrence prior to closing a MCAR courtesy investigation.

  2. Locate contact information for the SB/SE MCAR coordinators on the SB/SE Collection Homepage:

    1. Click on "Collection Programs"

    2. Click on"MCAR Program."

5.1.8.8  (04-22-2008)
Treasury Enforcement Communications System

  1. The Treasury Enforcement Communications System (TECS) is a database owned by the Department of Homeland Security. TECS is discussed in IRM 5.1.12concerning how certain balance due taxpayers who reside or travel extensively abroad may be entered into this system. Customs and Border Protection (CBP) will notify IRS' TECS Coordinator when taxpayers placed on TECS travel into the US, and the TECS Coordinator is responsible for informing SB/SE field group managers of these taxpayer travel situations so that any necessary actions can be taken in a timely manner.

  2. SB/SE International group managers will, when they are informed by the TECS Coordinator concerning a foreign resident TECS taxpayer coming into the US, issue a Courtesy Investigation for any taxpayer contact and/or other actions that may be needed by Domestic group manages who supervise the locations where the taxpayer will be present during the stateside travel interval. A phone call or secure message e-mail from the International group manager to the group manager receiving the Courtesy Investigation is also recommended to ensure expeditious assignment. In instances where the TECS taxpayer is a US resident, the TECS Coordinator will directly notify the Domestic group manager who would be responsible for the taxpayer as part of his/her group assignment jurisdiction.

5.1.8.8.1  (04-22-2008)
TECS Coordinator's Involvement With Managers

  1. Visits to the United States by TECS taxpayers are often brief and require timely and effective coordination activities. Requests for contact with taxpayers and possible lien, levy and seizure requests via Courtesy Investigation need to be worked on a high priority basis when practical.

  2. When the TECS Coordinator is informed by CBP that a taxpayer in the TECS system is arriving in the US, he/she will inform the International group manager of the location where the taxpayer is staying and any other pertinent facts.

    1. For situations involving non-US residents, the TECS Coordinator will communicate the information to the International group manager who is responsible for cases in the taxpayer's foreign country of permanent residence. The International group manager will then contact the Domestic group manager responsible for the stateside location where the taxpayer will be staying and will request that a Courtesy Investigation be assigned to an RO as a priority.

    2. In instances where CBP informs the TECS Coordinator about the arrival into the US of a TECS taxpayer whose permanent address of record is actually within the US, the TECS Coordinator will call the Domestic group manager responsible for cases in the taxpayer's US residence location.

    3. The Domestic group manager will arrange for any necessary Courtesy Investigations to an RO in his/her group or to another Domestic group manager responsible for the location where the taxpayer is staying

      Note:

      Any debate regarding the relative priority of the Courtesy Investigation and whether it can or should be worked expeditiously will be resolved by Territory Manager responsible for the taxpayer case and the Territory Manager supervising the location where the Courtesy Investigation needs to be worked.

5.1.8.8.2  (04-22-2008)
Role of a Revenue Officer working a TECS-related Courtesy Investigation

  1. Upon being assigned a Courtesy Investigation concerning a TECS taxpayer, attempt to conduct a personal meeting with the taxpayer if appropriate. It will be necessary to determine that the time and date the taxpayer plans to depart the US, as well as the carrier on which the taxpayer will travel, have remained the same as were stated to CBP when he/she arrived.

    Note:

    When you speak to a taxpayer as a result of a TECS Courtesy Investigation, do not discuss or refer to the TECS system itself. Refer to IRM 5.1.12 for further guidance on this.

  2. Prior to conducting a full compliance check, it is recommended that you research the International filing requirements, if pertinent, and the specific tax forms that may be dictated by residency and other matters.

  3. It will be essential in making contact to determine the taxpayer's present and future rights to income, property and other assets located in the US. While many interviewed taxpayers will be interested in exploring realistic methods of discharging their tax liabilities, it may be necessary to issue a Summons to obtain financial information.

  4. If it is established that a taxpayer can pay all or a substantial part of the liability but refuses to do so, Area Counsel should be consulted immediately to determine whether it may be appropriate to reduce the tax claim to judgment in conjunction with other judicial remedies.

  5. When you determine that there are unfiled delinquent returns with balances due and/or that collection of the tax may be imperilled, consider whether it is a jeopardy situation. A referral to Criminal Investigation for violations of IRC 7203 (willful failure to file and/or pay tax) may need to be considered.

  6. In instances where the taxpayer may be evading your efforts or appears to be leaving the US with assets, an expeditious order of Writ Ne Exeat should also be considered. Refer to IRM 34.6.1.2.4 ,Use Of Writ Ne Exeat, for information on this procedure and contact Area Counsel for advice and coordination.

5.1.8.8.3  (04-22-2008)
Actions to Consider While Closing a TECS-related Courtesy Investigation

  1. Request that the taxpayer be removed from the TECS database immediately in instances where the taxpayer pays all NFTL-covered balances due in certified funds.

  2. Call the SB/SE TECS Coordinator and advise him/her of the need for prompt deletion.

  3. Find information on how to contact the TECS Coordinator can be found at http://sbse.web.irs.gov/Collection/Programs/TECS/Default.htm .

  4. Determine if any follow-up action needs to occur if a Notice of Federal Tax Lien needs to be refiled if the taxpayer is going to remain on TECS

5.1.8.9  (04-22-2008)
Courtesy Investigations to International

  1. Issue a courtesy investigation to International If an investigation reveals an address outside the United States may be the address of the taxpayer.

    Exception:

    A courtesy investigation is not required when an address outside the United States has been confirmed. The case should be transferred to International.

  2. Follow these procedures to use ICS to issue a Courtesy Investigation to International:

    1. Select option F Create Module

    2. Select option D Create OI

    3. Select option B Create Outgoing OI

    4. Select SB/SE Area 15 - International from the area list for the assignment number

    5. Select AC International 3502 from the choice list

  3. The OI will be systemically assigned to 35976900

Exhibit 5.1.8-1  (04-22-2008)
Unassessable Erroneous Refund Waiver

WAIVER

Full Name(s):
____________________________ ____________
and
_____________________________ ____________
Street Address: ________________________________ ____________
City: ________________ ____________
State: _________ ____________

Zip Code: ________ ____________

Social Security Number(s):
___________________ ____________
and
____________________ ____________
Other Taxpayer Identification Number: ___________________ ____________

I (we) hereby voluntarily waive the two year period of limitations established by IRC 6532(b) on the institution of suits by the United States to recover the erroneous refund(s) I (we) received on __________________________(refund date), until _______________ ____________(expiration date) as a condition of being considered for a voluntary repayment agreement. I (we) understand that by signing this waiver, the time for the United States to file a suit to recover the erroneous refund is extended through the date set forth above.

________________________ __________________________
Taxpayer’s Signature 		Date:

________________________ __________________________
Spouse’s Signature (if applicable) 		Date:

_______________________ __________________________
Representative’s Signature (if applicable) 		Date:

_______________________ __________________________
Area Director
By Delegated Representative:

__________________________________________________
Revenue Officer's Signature
 Date:

Exhibit 5.1.8-2  (04-22-2008)
Unassessable Erroneous Refund Voluntary Payment Agreement

VOLUNTARY REPAYMENT AGREEMENT

Full Name(s):
____________________________ ____________
and
_____________________________ ____________
Street Address: ________________________________ ____________
City: ________________ ____________
State: _________ ____________

Zip Code: ________ ____________

Social Security Number(s):
___________________ ____________
and
____________________ ____________
Other Taxpayer Identification Number: ___________________ ____________

I (We) hereby voluntarily agree to repay the erroneous refund that I (we) received on _________________________ [refund date], plus interest provided by law, as follows:
$______________ on _________________ [date] and
$______________ on the __________ [day 1st through 28th] of each month thereafter.

Payments are to be directed to: [insert address]
____________________________________
____________________________________
____________________________________

Taxpayer’s Signature:
________________________ __________________________ 		Date:

Spouse’s Signature (if applicable):
________________________ __________________________ 		Date:

Representative’s Signature (if applicable):
_______________________ __________________________ 		Date:

Agreement examined or approved by:
Name:
_________________________________________________________
Title:
_________________________________________________________
Signature:
_________________________________________________________ 		Date:

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