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Part 8. Appeals

Chapter 4. Appeals Docketed Cases

Section 1. Processing Docketed Cases (Cont. 1)

8.4.1  Processing Docketed Cases (Cont. 1)

8.4.1.20  (10-26-2007)
Docketed Case For Assignment and Consideration After Answer

  1. After answer, Counsel sends the administrative file (or dummy file) for consideration DIRECTLY to the Appeals office and ATM identified in the Cover Sheet previously placed on top of the administrative file by APS. Counsel puts copies of the petition, Designation of Place of Trial, and answer in the administrative file for the Appeals Officer to use.

  2. Upon receipt of the file from Counsel after answer, the ATM and/or ATM secretary assigns the case to an Appeals Officer on ACDS.

    Note:

    Upon assignment, the FROMDATE field on the case inventory screen is systemically completed with the assignment date.

  3. While on ACDS, the ATM and/or ATM secretary issues the Uniform Acknowledgement Letter (UAL) and then gives/sends the administrative file to the Appeals Officer. Use care to ensure the Uniform Acknowledgement Letter is properly sent to any identified representative and that ACDS reflects the representative’s information. See IRM 1.4.28.3.

  4. When the ATM and/or AO receives the administrative file, they must identify any processing instructions or issues raised by Counsel for actions needed on non-petitioning spouse, non-petitioned years or abatement of premature assessments and alert APS immediately.

    Note:

    Read Form 1734 (Counsel Transmittal) to ensure there is no action needed on the case.

8.4.1.21  (10-26-2007)
Processing Administrative Files after Petition is Answered

  1. After Counsel answers the petition, the administrative file is returned to Appeals for consideration. When the administrative file is received from Counsel, ensure all returns, documents, and other papers (including a copy of the answer) are included and properly arranged in the file.

    Note:

    Read Form 1734 (Counsel Transmittal) to ensure there is no action needed on the case.

  2. Enter the date the file was received from Counsel in the FROMDATE field on the case inventory screen.

  3. Forward the administrative file and the case summary card to the ATM for assignment. The ATM assigns the case on ACDS and forwards it to the Appeals Officer.

8.4.1.22  (10-26-2007)
APS Sends New Case to the Appeals Team Manager (ATM)

  1. Before sending the case to the ATM for assignment to an AO, prepare Form 3210 and continue to monitor every case leaving APS to go to the ATM and/or their employees (Appeals and Settlement Officers, Tax Computation Specialists, etc.) for assignment, rework, etc. regardless of whether or not they are physically located in the same office.

  2. Generate the Form 3210 by using the ACDS "Form 3210 feature" .

  3. Follow-up on all unacknowledged Form 3210’s that are ten (10) days old or greater, by using Form 10946 to maintain an audit trail.

  4. The ATM promptly sends the acknowledgement letter and assigns the case to an AO. For details on the guidelines followed by the ATM, see IRM 1.4.28.3, Resource Guide for Managers, Appeals Managers Procedures.

8.4.1.23  (10-26-2007)
Appeals Officer's Preliminary Review of Assigned Docketed Case

  1. Promptly review all docketed cases when received to verify the timeliness of the petition and the completeness of the case.

8.4.1.23.1  (10-26-2007)
Preliminary Review for Timely Filing

  1. When the petition is not timely filed, immediately forward case to Area Counsel with a recommendation to file a motion to dismiss. Obtain and review the administrative file prior to a motion being filed.

  2. A dismissal for lack of jurisdiction may be predicated on circumstances which favor the taxpayer.

    For example,a deficiency notice may be determined to be invalid because it was not sent to the taxpayer's last known address.

    1. Last known address is defined in Treas. Reg. § 301.6212.2(c) as the address that appears on the taxpayer's most recently filed and properly processed tax return, unless the Service is given clear and concise notification of a different address.

    2. Notice to a third party of a new address is generally not notice to the Service. However, Treas. Reg. §301.6212–2(b) (2) provides an exception to this general rule by authorizing the Service to update taxpayer addresses by referring to data accumulated and maintained in the United States Postal Service National Change of Address database (NCOA database).

    3. The new address obtained from the NCOA database is the taxpayer's last known address, unless the Service is given clear and concise notification of a different address.

8.4.1.24  (10-26-2007)
Appeals Officer Preparing and Holding the Conference

  1. Follow procedures found in IRM 8.6.1, Conference and Issue Resolution; IRM 8.6.2, Appeals Case Memorandum (ACM) Procedures; and IRM 8.6.3, Appeals Rulings for information to assist in preparing and holding the conference with the taxpayer.

8.4.1.24.1  (10-26-2007)
Attorney of Record in Docketed Cases

  1. In a case docketed in the Tax Court, anyone other than the attorney of record must be eligible to practice before the IRS and, in order to be recognized must present a Form 2848 or other power of attorney plus a declaration.

  2. See the following table for additional information on an attorney of record:

    Scope of Practice Before IRS Source of Eligibility to Practice Required Evidence of Authority Required for Disclosure of Tax Information (No representational Authority) Appearance as Taxpayer's Witness
    Any IRS office Publication 216, 601.509 Power of attorney not required Form 8821 or equivalent Provides information - does not represent TP

8.4.1.24.2  (10-26-2007)
AO Request for Legal Advice

  1. Appeals cannot request a Technical Advice Memorandum (TAM) on any issue if the same issue is involved in a docketed case for any taxpayer for any taxable year. Instead, Appeals requests legal advice from Field Counsel.

  2. TAMs are advice furnished by the Office of Associate Chief Counsel concerning the interpretation and proper application of the tax law, tax treaties, regulations, revenue rulings, notices or other precedents published by the Associate Chief Counsel office to a set of specific facts involving a specific taxpayer.

  3. When requesting legal advice in a docketed case, send one information copy of the request for legal advice to the Associate Area Counsel office assigned to the docketed case.

  4. The Form 4368 must clearly indicate that the request involves a docketed case. In docketed cases, do not advise the taxpayer (petitioner) that legal advice was requested.

  5. See IRM 8.6.3, Appeals Rulings, for detailed information on requesting advice.

8.4.1.24.3  (10-26-2007)
New Issues in Docketed Cases

  1. A new issue in a docketed case is any possible adjustment to or change in an item affecting the taxpayer's tax liability which was not included in the notice of deficiency and is raised or discussed by the AO after the petition is filed.

  2. Whenever a petitioner attempts to raise an issue not previously examined or raised in the petition, Appeals must prepare a brief memorandum to Area Counsel. The memorandum must:

    1. describe the new issue,

    2. include and make a recommendation concerning whether Appeals believes the issue is susceptible to settlement,

    3. state whether additional factual development is necessary, and

    4. add any other observations and recommendations Appeals may have concerning the new issue.

  3. The burden of proof is upon the Government when it raises a new (affirmative) issue in a docketed case. Therefore, except in unusual circumstances, do not raise the issue unless necessary provable facts to sustain the issue are readily available. Merely because the burden of proof is not immediately upon the Government when a new issue is raised in a non-docketed case does not mean the standards for raising it is less restrictive than the standards for raising a new issue in a docketed case.

  4. Advise the petitioner no discussion will take place with respect to the newly raised issue until Counsel is consulted regarding the necessity for a formal amendment of the pleadings to raise the new issue pursuant to Tax Court Rule 41(a).

  5. Within ten (10) business days of receipt of the memorandum from Appeals, Area Counsel notifies Appeals in writing on whether Appeals may consider the newly raised issue in the absence of a formal amendment to the pleadings.

  6. Disagreements between Appeals and Area Counsel concerning the necessity for formal amendment of the pleadings are to be resolved by consultation between managers of the respective functions.

  7. The determination of whether Appeals will consider a newly raised issue in the absence of a formal amendment to the pleadings is to be based on, but not limited to, the following factors:

    1. whether the case is a regular case, "under $50,000" regular case, or small tax case;

    2. whether petitioner is represented by counsel;

    3. the significance of the issue involved;

    4. the amount of tax attributable to the new issue and its relation to the entire amount in dispute;

    5. the complexity of the new issue and the need for factual development; and

    6. the susceptibility of the new issue to settlement by Appeals.

  8. When the newly raised issue involves an issue in the Coordinated Industry Case (CIC), the Industry Specialization Program (ISP), an Appeals Coordinated Issue (ACI), or the issue involves large dollar amounts or is otherwise significant, Area Counsel resolves the question of whether a formal amendment to the pleadings is necessary in favor of requiring the amendment, unless a substantial reason exists for permitting Appeals to consider such an issue in the absence of a formal amendment of the pleadings.

  9. Where the taxpayer (or representative) offers to make payment of additional tax liability for slush fund or improper payment deductions, or reveals their existence to Appeals officials for the first time, Appeals consideration of the case is discontinued. Immediately contact the Counsel office for the Operating Division.

8.4.1.24.4  (10-26-2007)
Assistance to Counsel/Appeals

  1. There are a number of circumstances where Counsel and Appeals may request and provide assistance to each other in the working of docketed cases.

  2. Appeals may request the assistance of Counsel in docketed cases in the same manner as prescribed in IRM 8.2.1, Pre-90-Day Income Tax Cases.

  3. Counsel may request Appeals assistance during trial preparation of cases in which Appeals has developed knowledge and expertise that is beneficial to Counsel. If resources and workloads permit, Appeals assists Counsel as an advisor and, if appropriate, shares in some part of trial preparation.

8.4.1.25  (10-26-2007)
Settlement of Docketed Cases

  1. The settlement approach and elements of evaluation are not affected by the status of the case. An unacceptable settlement in non-docketed status does not become acceptable solely because it is reconsidered in docketed status; nor does it become more acceptable in a trial calendar period than it was in a prior period.

  2. This, of course, does not preclude recognition of changes in judicial interpretation of the law and changes in Service position. It is also recognized that in reconsideration of a case or trial preparation, additional facts may arise which can affect evaluation of the case. See IRM 8.6.4, Reaching Settlement and Securing an Appeals Agreement Form, for additional guidance on settling cases.

  3. Both a Form 870 and a stipulation of agreed issues, entered by the Tax Court, must be secured on docketed cases. See IRM 8.6.4 for additional information on securing an agreement form.

8.4.1.25.1  (10-26-2007)
Settlement of Related Cases

  1. No settlement offer will be accepted by Appeals where there is a related case in Counsel unless both offices agree that the offer is acceptable.

  2. Disagreements between Appeals and Counsel on whether a settlement offer should be accepted is resolved by Area Counsel, with the advice and assistance of the Appeals Area Director and the Associate Chief Counsel responsible for the issue.

  3. Counsel should review proposed Appeals Notices of Deficiency, claim disallowances, and final adverse letters for any case related to a docketed case.

8.4.1.25.2  (10-26-2007)
Stipulation/Decision Preparation

  1. In most docketed cases settled by Appeals, Appeals prepares the necessary settlement documents and has these documents executed by the taxpayer or counsel of record.

  2. Prepare simple settlement documents using the format approved by Counsel. Typically, the following simple stipulation decision documents are prepared by Appeals:

    • Deficiency in Income Tax (Simple Stipulation Decision)

    • Deficiency in Income Tax with Penalties and /or additions to tax

    • No Deficiency and No Overpayment

    • Multiple petitioners

    • Simple Innocent Spouse cases

    Note:

    In all cases where Appeals prepares a decision document for the taxpayer’s signature, Appeals must review source documents, such as the petition and any orders in the file, regarding the caption. In addition, Appeals must access www.ustaxcourt.gov to ensure the proper caption is used. If there is a discrepancy between the caption shown on source documents and the caption shown on the official Tax Court web site, Appeals contacts Counsel to determine the correct caption to use. Also, as a general rule, the Counsel signature block is left blank unless local arrangements were made.

  3. In complicated settlements, Appeals may ask Counsel to prepare the settlement documents. Complicated situations generally include, but are not limited to, the following:

    • Restricted Interest,

    • Tentative Carryback Allowance,

    • Jeopardy Assessments,

    • Prior Unpaid Assessments,

    • Excessive Claimed Withholding Tax

    • Estimated Tax Payments

    • Overpayment cases,

    • Transferee or Fiduciary Liability,

    • Complex Innocent Spouse cases

    • Section 531 cases

  4. For cases where Field Counsel is responsible for preparing the decision documents, Field Counsel will:

    1. prepare the settlement documents; and

    2. return the settlement documents to Appeals to secure signature from the taxpayer.

    Note:

    APS uses the ACDS action code PREPSTIP to reflect these cases.

  5. In general, on regular or small cases, prepare the settlement documents and seek the taxpayer's signature before the conclusion of the conference, if possible, or mail them directly to the taxpayer or representative.

  6. Where unusual or complex circumstances exist, proposed settlements of regular docketed cases are reviewed by the Appeals Team Manager (ATM) before the settlement documents are forwarded to the taxpayer for signing.

  7. Counsel reviews the format and accuracy of all settlement documents prepared by Appeals before filing with the Court.

  8. Procedures for stipulation/decision preparation for Campus Appeals "S" docketed cases are covered separately. IRM 8.4.2.

8.4.1.25.3  (10-26-2007)
Reconsideration of Docketed Case by Field Appeals

  1. In situations where the Campus Appeals office forwards a case to Field Counsel for "trial preparation" and, subsequently, the Petitioner or Counsel of Record desires to talk "settlement" , the local Field Appeals office:

    1. is responsible for any "reconsideration" activities

    2. conducts the settlement negotiations.

  2. If the local Field Appeals office receives a case from Field Counsel for "reconsideration" , the local Field Appeals office ensures the ACDS and AIMS databases are transferred to them. Seek assistance from APS if needed.

8.4.1.26  (10-26-2007)
Preparing Settlement Computations on Docketed Cases

  1. Appeals is responsible for preparing the necessary computations for docketed cases settled either by Appeals or by Counsel. Generally these computations are prepared by the Tax Computation Specialist (TCS).

  2. When the docketed case is settled as an agreed case, follow the normal procedures for preparing settlement computations found in IRM 8.17.2, General Settlement and Rule 155 Computations.

  3. The Taxpayer's (Petitioner's) name(s) is the name of the petitioner as it appears in the latest answer to the petition or motion filed with the United States Tax Court. This name is used on all forms contained in the computation.

  4. Enter docket number in the specified line of the Form 3610, Audit Statement.

8.4.1.26.1  (10-26-2007)
Tentative Allowances in Docketed Cases

  1. Handling tentative allowances in the settlement computations on docketed cases depends on how it was handled in the notice of deficiency. Although a tentative allowance on Form 1045 and/or Form 1139 may have been ignored when preparing a notice of deficiency, it may be provisionally allowed in a docketed settlement computation.

    IF... THEN...
    If the starting point is either the return or the statutory notice of deficiency where the tentative allowance was ignored ▸allow carryback up to the amount shown for each year on Form 1045 or Form 1139;

    ▸avoid allowing of an additional amount of carryback if there is doubt whether it would create a duplicate allowance for the taxpayer;

    ▸include TC 295 from the tentative allowance in the "tax per return or as previously adjusted" . This automatically creates a recapture that is reflected in the bottom line deficiency or overassessment amount of the settlement computation;

    ▸modify Form 3610 is to include the statement shown in IRM 8.17.5.3.1.
    If the starting point is the statutory notice of deficiency where the tentative allowance was included in the notice ▸adjust taxable income, if necessary, to eliminate the carryback from the computation.

    Note:

    If only a credit was allowed in the notice, no adjustment to taxable income is needed.



    ▸include the TC 295 from the tentative allowance in the "Tax per return or as previously adjusted" .

    Note:

    However, the decision of the Tax Court is final with respect to a claim for credit or refund, so a claim filed on a Form 1040X or Form 1120X cannot be provisionally allowed in a docketed settlement computation.

8.4.1.26.2  (10-26-2007)
Other Carryback Claims Allowed in Docketed Settlement Computations

  1. When a carryback is allowed by Appeals or Counsel in a docketed case and the starting point is the return -

    1. Allow the carryback up to the amount for each year as shown on Form 1040X or Form 1120X. Avoid allowing an additional amount in a tax year if there is doubt whether it creates a duplicate allowance for the taxpayer.

    2. "Tax per return or as previously adjusted" amount in the settlement computation must include the TC 291 or TC 299 generated by the carryback claim.

    3. Decisions of Tax Court are final so the claim cannot be provisionally allowed. Therefore, the paragraph in IRM 8.17.5.3.1 is not appropriate for use on Form 3610 for these cases.

  2. A carryback claim for credit or refund should not be ignored in a statutory notice of deficiency. However, a claim can be filed after a notice is issued or an error made when the notice is prepared that causes the claim to be inadvertently ignored in the notice. When a carryback is allowed by Appeals or Counsel in a docketed case and the starting point is the statutory notice of deficiency where the claim for credit or refund is ignored -

    1. Allow the carryback up to the amount for each year as shown on Form 1040X or Form 1120X. Avoid allowing an additional amount in a tax year if there is doubt whether it creates a duplicate allowance for the taxpayer.

    2. "Tax per return or as previously adjusted" amount on the settlement computation must include the TC 291 or TC 299 from the carryback claim.

    3. Decisions of the Tax Court are final so the claim cannot be provisionally allowed. Therefore, the paragraph in 8.17.5.3.1 is not appropriate for use on Form 3610.

  3. When a carryback is allowed by Appeals or Counsel in a docketed case and the starting point is the statutory notice of deficiency where the claim for credit or refund is included in the notice, no further action is necessary.

8.4.1.26.3  (10-26-2007)
Other Carryback Claims Not Allowed in Docketed Settlement Computations

  1. When a carryback is not allowed by Appeals or Counsel in a Docketed Case and the starting point is the return -

    1. Do not use net operating loss and capital loss carrybacks from the year giving rise to the claim for credit or refund to decrease taxable income or alternative minimum taxable income.

    2. Do not use credit carrybacks to decrease tax liability.

    3. "Tax per return or as previously adjusted" amount on Form 5278, Form 4549, etc. must include the decrease in tax attributable to the claim for credit or refund (TC 291 or TC 299).

  2. A carryback claim for credit or refund should not be ignored in a statutory notice of deficiency. However, a claim can be filed after a notice is issued or an error made when the notice is prepared that causes the claim to be inadvertently ignored in the notice. When a carryback is allowed by Appeals or Counsel in a docketed case and the starting point is the statutory notice of deficiency where the claim for credit or refund is ignored -

    1. Recapture the claim for credit or refund.

    2. "Tax per return or as previously adjusted" amount in the settlement computation must include the TC 291 or TC 299 from the carryback claim. This automatically creates a recapture that is reflected in the bottom line deficiency or overassessment amount of the settlement computation.

  3. When a carryback is not allowed by Appeals or Counsel and the starting point for the settlement computation is the statutory notice of deficiency where the claim for credit or refund is included in the notice -

    1. An adjustment to taxable income may be needed to eliminate the carryback from the computation. No adjustment to taxable income will be needed if only a credit carryback was allowed in the notice. However, if a loss carryback was included in the notice, then an adjustment to taxable income will be needed to eliminate the loss from the computation.

    2. Credit carrybacks that are not allowed should not be used to decrease tax liability.

    3. The "Tax per return or as previously adjusted" amount on the settlement computation should include the TC 291 or TC 299 from the carryback claim.

8.4.1.26.4  (10-26-2007)
Procedures for Computations on Separate to Joint Returns: Non-filers

  1. Office of Chief Counsel Notice N(35)8(11)-1 dated 3/20/89 set forth the policy of joint return election for non-filing taxpayers.

  2. If a taxpayer-husband and taxpayer-wife file an original return prior to submission of a case to court for decision, they will be allowed joint rates if they have not previously filed separate returns.

  3. If the joint return is filed after submission of a case to court for decision, the joint rates will not be allowed. The preparation of a return by the Commissioner on behalf of the taxpayer under IRC 6020(b) and the issuance of a statutory notice of deficiency do not constitute a prior return of the taxpayer in determining whether a joint return election is allowable.

8.4.1.26.4.1  (10-26-2007)
Computations When Notices of Deficiency Issued to Each Taxpayer

  1. Joint petition filed:

    1. If statutory notices of deficiency were issued to each taxpayer and they have filed a joint petition, address the settlement computation to the joint taxpayers.

    2. The starting point for adjustments can be either the taxpayer-husband's statutory notice of deficiency or zero ($ 0.00), since neither taxpayer filed a return.

    3. If using the taxpayer-husband's statutory notice as the starting point, add the taxpayer-wife's income, deductions, credits, etc. to his data.

    4. If using zero as the starting point, include taxpayer-husband and taxpayer-wife's income, deductions, credits, etc. and compute the deficiency.

  2. Separate petitions filed:

    1. If statutory notices of deficiency were issued to each taxpayer but separate petitions were filed, prepare a separate settlement computation for each petitioner.

    2. The starting point for adjustments can be either the statutory notices of deficiency or zero ($ 0.00), since neither taxpayer filed a return.

    3. The easiest method for computing the tax is to use zero as the starting point for adjustments. If using zero as the starting point, include taxpayer-husband's and taxpayer-wife's income, deductions, credits, etc. and compute the deficiency for each settlement computation using joint rates.

    4. If starting from the notices of deficiency, the taxpayer-husband's settlement computation would use the husband's statutory notice as the starting point and add the taxpayer-wife's income, deductions, credits, etc. to his data. The taxpayer-wife's settlement computation would use the wife's statutory notice as the starting point and add the taxpayer-husband's income, deductions, credits, etc. to her data.

    5. The taxpayers would be jointly and severally liable for the deficiency shown in each settlement computation. It is recommended that the following statement be added to Form 3610 of each taxpayer: "The deficiencies in income taxes and penalties are duplications of the deficiencies and penalties set forth in the case of underscore , Docket No. _______ . The petitioners in Docket Nos.________ and ________ are jointly and severally liable for said deficiencies and penalties, plus statutory interest, and the payment of the entire amount of said deficiencies and penalties, plus interest, by either petitioner, or by the petitioners jointly, will discharge the instant petitioner from liability."

  3. Only one spouse petitions:

    1. If statutory notices of deficiency were issued to each taxpayer but only one spouse petitions, address the settlement computation to only the petitioning taxpayer.

    2. If joint rates apply, the non-petitioning spouse's income, deductions, credits, etc., can be added to the petitioning spouse's data to compute the deficiency under joint rates. If using zero as a starting point, include both spouses' income, deductions, credits, etc. and compute the deficiency using joint rates.

    3. Assess the deficiency against the petitioning spouse on Master File using MFT 31. Since the deficiency shown in the notice of the non-petitioning spouse has already been assessed in a separate MFT 31 account, adjust the amount to reflect the corrected deficiency determined in the petitioning spouse's case.

8.4.1.26.4.2  (10-26-2007)
Computations When Notice of Deficiency Issued to One Taxpayer

  1. If a statutory notice of deficiency was issued only to one taxpayer, address the settlement computation to only the petitioning taxpayer. There is an exception. See IRM 8.4.1.19.4.3.

  2. The non-petitioning spouse's income, deductions, credits, etc., can be added to the petitioning spouse's data to compute the deficiency under joint rates.

  3. If using zero as a starting point, include both spouses' income, deductions, credits, etc. and compute the deficiency using joint rates.

  4. The assessment of the deficiency using joint rates can only be made against the petitioning spouse.

8.4.1.26.4.3  (10-26-2007)
Agreement of Non-Petitioning Spouse

  1. If a waiver is executed by the non-petitioning spouse (or some other comparable action is taken which allows a valid assessment to be made against the non-petitioning spouse), the Tax Computation Specialist can opt to address the settlement computation to both taxpayers.

  2. Regardless, the deficiency should be assessed against both taxpayers under a joint Master File account.

8.4.1.26.5  (10-26-2007)
Barred Overpayments and Deficiencies

  1. If it is determined that an overpayment or deficiency in a case is barred by statute, include special annotations on Form 3610 and if applicable, Form 3623.

  2. If the total overpayment or deficiency is barred, asterisk (*) the amount and add the following footnote to the Form 3610 and/or Form 3623:

    "Overpayment barred by statute of limitations."

  3. When the total overpayment is barred on a docketed case, completion of the bottom portion of the Form 3623 is not required.

  4. If only part of the overpayment or deficiency is barred, asterisk (*) the total amount and include a short summary of the barred amount at the bottom of the Form 3610 and/or Form 3623.

  5. The following is an example of the summary for a barred overpayment case:

    Overpayment 6,000.00
    Overpayment barred by statute of limitations 1,000.00
    Overpayment allowable 5,000.00
    =======

8.4.1.26.6  (10-26-2007)
Statements of Account for Docketed Cases

  1. In docketed cases a Statement of Account is generally required in cases involving:

    1. Deficiency in payment of assessed tax or penalty; (unpaid assessment-tax or penalty);

    2. Overpayments;

    3. Interim payments after mailing 90-day letter;

    4. Interim assessments after mailing 90-day letter;

    5. Rule 155 computations, except where a short-form computation may be used;

    6. Earned Income Credit;

    7. Additional Child Tax Credit;

    8. Jeopardy, termination, or prompt assessment cases.

  2. See IRM 8.17.3, Statements of Account, for details on preparing a statement of account.

8.4.1.27  (10-26-2007)
Determining if Refund is Allowed on Docketed Overpayment Cases - Non-Filing Taxpayers

  1. IRC 6512 governs overpayments allowable by the Tax Court. For tax years ending before 8/6/97, IRC 6512(b)(3)(B) and IRC 6511 entitle a taxpayer who does not file a return to receive a refund of taxes paid within two years prior to the date of the mailing of the notice of deficiency.

  2. If a statutory notice is issued to a non-filing taxpayer more than two but less than three years after the due date of the return and the taxpayer petitions the Tax Court, any payments made more than two years prior to the date of the issuance of the notice of deficiency (such as withholding) are barred from refunding.

    Note:

    If the taxpayer did not petition the Tax Court, IRC 6511 governs the refund and it is allowable.

  3. If the taxpayer files a return after the statutory notice is issued in the situation described in (b) above, the refund is still barred even if the return is filed within three years of the due date. (See Lundy, SCt, 96-1, USTC 50,035).

  4. To correct possible inequities, Congress modified IRC 6512(b)(3) in the '97 TRA:

    1. For tax years ending after 8/5/97, if a statutory notice is issued to a non-filing taxpayer more than two years but less than three years after the due date, and the taxpayer petitions the Tax Court, IRC 6512(b)(3)(B) now allows a refund of tax paid within the three year period prior to the deficiency notice.

  5. Carefully analyze the case file in all docketed cases involving overpayments where the taxpayer did not file a return, since it is possible the refund could be barred.

8.4.1.28  (10-26-2007)
Recovering Litigation Costs

  1. An award of litigation costs, attorney fees or court costs may be appropriate for docketed cases tried by the Tax Court or settled whether in Appeals or by Counsel.

  2. These cases require approval by Counsel and are forwarded to them for action.

  3. These cases are not input on CASES.

  4. See IRM 8.7.1.10.

8.4.1.29  (10-26-2007)
Interim Assessments for Docketed Cases

  1. An interim assessment is an assessment (other than a jeopardy assessment) of tax and penalty made after the issuance of the statutory notice.

  2. Examples of interim assessments:

    1. Amounts paid by the taxpayer on the deficiency determined by the Service are assessed.

    2. When a taxpayer has not filed a return before the statutory notice of deficiency was issued, and later files a return after the issuance of the notice of deficiency and the Campus assesses the tax shown in the delinquent return.

  3. If the interim assessment results in an overpayment, the case is closed as an overpayment case by Counsel. When a normal settlement computation is prepared remember to take the following actions:

    1. Include interim assessment in the "Total Tax Shown on Return or as Previously Adjusted" line of Form 5278, Form 4549, etc.

    2. Footnote to show the computation of the tax as previously adjusted, as outlined in IRM 8.17.2.6.

    3. Prepare a statement of account, Form 3623. See IRM 8.17.3 for details on preparing the statement of account.

  4. If there is a net deficiency after taking into consideration the interim assessment, the Counsel attorney must file documents that determine the deficiency without taking into consideration the assessment made subsequent to the mailing of the notice of deficiency.

    1. Follow procedures used to prepare a normal settlement computation.

    2. Modify Form 3610 to include the information shown in paragraph (1).

    3. Use any logical format that clearly presents the information. A suggested format is shown in See Exhibit 8.4.1-1., Form 3610 - Interim Assessment with Deficiency.

    4. Prepare a statement of account. See IRM 8.17.3, Preparing a Statement of Account, for details on preparing the statement of account.

8.4.1.29.1  (10-26-2007)
Advance Payment Remittances on Docketed Cases

  1. Procedures for advance payment remittances in docketed cases are the same as in non-docketed cases. Assessment may be made at any time upon a specific request from Counsel or from the taxpayer.

  2. For details on processing advance payment remittances, see IRM 8.20.6, Interim Actions, Remittances, Partials, Transfers and Returns.

8.4.1.30  (10-26-2007)
Letters Used on Docketed Cases

  1. The following are some of the letters commonly used in docketed cases available in the Appeals Generator of Letters and Forms (APGolf) sub-system of ACDS:

    Letter Number Purpose of Letter
    • Letter 1220 Use this letter to send settlement documents to taxpayers for review, signature and return. A Letter 1220 that includes a paragraph to provide an estimate of the total amount owed including tax, penalties and estimated interest is also available on APGolf.

    Note:

    If Letter 1220 is used the detailed computation of the estimated interest amount must be included.
    • Letter 971 Use to notify a petitioner that no settlement has been reached and that the case has been referred to Counsel for trial preparation.

8.4.1.31  (10-26-2007)
Closing Agreed Docketed Cases Settled by Appeals

  1. When the administrative file and approved Form 5402 are received for a settled case, take the following actions:

    1. Examine the file to ensure that all returns, documents, and other papers are included.

    2. Place the Form 5402 with the administrative file following local procedures for copy and location requirements.

    3. Retain any remaining copies of Form 5402 in APS for distribution after Counsel notifies Appeals that the stipulation was sent to the Tax Court.

    4. Send the administrative file to Counsel.

  2. Enter action code PREPSTIP or STIPFF and the TODATE (date case sent to Counsel) on the update case/returns screen.

    • PREPSTIP is used when Appeals settles the case, but Counsel will prepare the decision document.

    • STIPFF is used when Appeals settles the case and Appeals prepares and receives the signed decision document.

  3. Retain the original and all copies of any Form 5403, Appeals Closing Record, until Counsel returns the file after the decision is entered by the United States Tax Court.

8.4.1.31.1  (10-26-2007)
Disposition of Claims in Docketed Years

  1. Do not secure Form 2297 or formally disallow claims filed in docketed years.

  2. Explain to the taxpayer what is being done on the claim. Notification to the taxpayer is not required to be in writing.

8.4.1.31.2  (10-26-2007)
Closing Agreements in Docketed Cases

  1. See IRM 8.13.1, Closing Agreements, for procedures relating to securing closing agreements in docketed cases.

  2. A closing agreement may be entered into at any time before the tax period comes within the jurisdiction of an appropriate court and may thereafter be entered into in appropriate circumstances when authorized by the court (e.g., certain bankruptcy situations). For example, a closing agreement must not determine the amount of tax liability (or deficiency or overpayment) for any taxable period over which the United States Tax Court has jurisdiction since the liability for such docketed years is determined by the Tax Court.

8.4.1.32  (10-26-2007)
Closing the Non-Petitioning Spouse Case

  1. Prior to January 1, 2001, non-petitioning spouse assessments were made on a NMF account. After January 1, 2001, non-petitioning spouse assessments were made on an MFT 31 account.

  2. The petitioning spouse will be assessed in the same manner as the non-petitioning spouse, either on the NMF account or the MFT 31 account.

  3. When a non-petitioning spouse case is received for closing, compare the amount on the decision with the amount assessed previously on NMF or MFT 31.

    1. If the amount of tax/penalty on the decision document is different from the amount assessed, prepare three (3) Forms 5403 – one for the joint account, one for the petitioning spouse, and one for the non-petitioning spouse

    2. If the amount of tax/penalty on the decision document is the same as the amount assessed previously, prepare only two (2) Forms 5403 - one for the joint account and one for the petitioning spouse.

8.4.1.32.1  (10-26-2007)
Non-Petitioning Spouse Assessed on MFT 31

  1. If the non-petitioning spouse was assessed on MFT 31, the petitioning spouse will be assessed on MFT 31 also.

  2. Prepare Form 5403 for the joint account

    1. Check "AMCLSA"

    2. MFT = 30

    3. Item 12 = $0

    4. Item 15 – enter appropriate reference codes and amounts.

    5. Items 800 through 810 – show statistical data for the entire work unit.

    6. Item 811 – enter closing code based on the result of the docketed case: 08, 10, 11, 12 or 17. (See general closing instructions for closing codes)

    7. Item 42 – Enter appropriate code (was tax owed paid, not paid or partially paid).

    8. Item A—Cross-reference to the MFT 31 assessments of both petitioning and non-petitioning spouse.

  3. Prepare Form 5403 for the petitioning spouse:

    1. Check "AMCLSS"

    2. TIN = TIN of joint account

    3. MFT = 30

    4. Item 12 = tax and penalty on decision document

    5. Item 13 – enter disposal code

    6. Item 14 – enter statute date for petitioning spouse

    7. Item 15 – enter appropriate reference codes and amounts

    8. Item 800 through 811 – leave blank

    9. Item 42 – leave blank

    10. Item 56 – Check "PA" if the petitioning spouse is the primary SSN. Check "SA" if the petitioning spouse is the secondary SSN.

  4. If the tax/penalty on the decision document equals the amount assessed on the MFT 31 account, no Form 5403 will be prepared for the non-petitioning spouse.

  5. If the tax/penalty on the decision document is less than the amount assessed on the MFT 31 account BECAUSE the petitioning spouse is found to be an innocent spouse, do NOT adjust the non-petitioning spouse account. Do NOT prepare a Form 5403 for the non-petitioning spouse

  6. If the tax/penalty on the decision document is less than the amount assessed on MFT 31, and there is NO innocent spouse issue, prepare Form 5403 for the non-petitioning spouse:

    1. Check "AMCLSS"

    2. TIN = TIN of joint account

    3. MFT = 30

    4. Item 12 = TC is 301. Circle the minus sign. The amount is the difference between the amount assessed and the amount on the decision document.

    5. Item 13 – enter disposal code

    6. Item 15 – enter appropriate reference number and amount

    7. Item 800 through 811 – leave blank

    8. Item 56 – Check "PA" if the non-petitioning spouse is the primary SSN on the joint account. Check "SA" if the non-petitioning spouse is the secondary SSN on the joint account.

  7. APS will process the adjustments in the following manner:

    1. Establish MFT 31 account for petitioning spouse. Input TC 971, AC 103, XREF TIN = petitioning spouse TIN

    2. Identify both MFT 31 accounts as having duplicate assessments. Input TC 971, AC 110 on both MFT 31 accounts.

    3. Process the AMCLSS adjustments

    4. After MFT 31 assessments/adjustments post, process AMCLSA closing for joint account.

    5. Input TC 472 on both MFT 31 accounts to start collection activity.

8.4.1.32.2  (10-26-2007)
Non-Petitioning Spouse Assessed on NMF

  1. If the non-petitioning spouse was assessed on the NMF account, the petitioning spouse will be assessed on NMF also.

  2. Prepare Form 5403 for the joint account

    1. Check "AMCLSA"

    2. MFT = 30

    3. Item 12 = $0

    4. Items 800 through 810 – show statistical data for the entire work unit.

    5. Item 811 – enter closing code based on the result of the docketed case: 08, 10, 11, 12 or 17 (See Exhibit 8.20.7-1 for Form 5403 closing codes.)

    6. Item 42—Enter code appropriate for joint account.

    7. Item A—Cross-reference to NMF assessments of both petitioning and non-petitioning spouse.

  3. Prepare Form 5403 for the petitioning spouse:

    1. Check "Source Document Only"

    2. TIN = TIN of petitioning spouse with an "N"

    3. MFT = 20

    4. Item 12 = tax and penalty on decision document

    5. Item 13 – no entry

    6. Item 14 – enter statute date for petitioning spouse

    7. Item 15 – penalty amount, if any

    8. Item 800 through 811 – leave blank

    9. Item 42 – leave blank

    10. Item A – Write "Spousal Assessment" and cross reference the TIN, MFT and tax period of the non-petitioning spouse. Also write "Do Not Withhold Collection."

  4. If the tax/penalty on the decision document equals the amount assessed on the NMF account, no Form 5403 will be prepared for the non-petitioning spouse. A Form 3177 with TC 471"Resume Collection" will be sent to the NMF unit for the non-petitioning spouse.

  5. If the tax/penalty on the decision document is less than the amount assessed on the NMF account BECAUSE the petitioning spouse is found to be an innocent spouse, do NOT adjust the non-petitioning spouse account. Do NOT prepare a 5403 for the non-petitioning spouse. A Form 3177 with TC 471 "Resume Collection" will be sent to the NMF unit for the non-petitioning spouse.

  6. If the tax/penalty on the decision document is less than the amount assessed on the NMF account, and there is NO innocent spouse issue, prepare Form 5403 for the non-petitioning spouse:

    1. Check "Source Document Only"

    2. TIN = TIN of non-petitioning spouse with an "N"

    3. MFT = 20

    4. Item 12 = TC is 301. Circle the minus sign. The amount is the difference between the amount assessed and the amount on the decision document.

    5. Item 13 – no entry

    6. Item 15 – enter penalty, if any

    7. Item 800 through 811 – leave blank

    8. Item A – Write "Spousal Assessment – Resume Collection" and cross reference the TIN, MFT, and tax period of the petitioning spouse. The cross reference is necessary because the NMF unit must adjust the accounts each time a payment is received from either spouse. Also write "Form 1311 in process" .

    9. A Form 1331, Notice of Adjustment will be prepared to make the NMF abatement.

    10. If the NMF assessment was made at another Campus route the Form 5403 and Form 1331 directly to that Campus NMF unit OR through the Records section of the Appeals office that made the assessment with instructions to"forward to NMF Unit in your Campus" .

8.4.1.32.3  (10-26-2007)
Non-Petitioning Spouse NOT Assessed Previously

  1. If the non-petitioning spouse was NOT previously assessed and the statute on the non-petitioning IS STILL open, prepare one (1) Form 5403 to make the assessment on the joint account. Use the non-petitioning spouse statute on the Form 5403 and ACDS.

  2. If the non-petitioning spouse was NOT previously assessed and the statute on the non-petitioning spouse is NOT open, follow the instructions for preparing two (2) Forms 5403 - one for the joint account and one for the petitioning spouse (MFT 31). Notify the Support Team Manager that there is a barred statute (prepare a Form 3999).

8.4.1.32.4  (10-26-2007)
Closing ACDS on Non-Petitioning Spouse Case

  1. When closing a non-petitioning spouse case on ACDS, prepare three (3) Form 5403's. The following is an example:

    Example: Dan and Sandra Daisy filed a joint return. A notice of deficiency for $5,000 tax was issued to both taxpayers. Dan filed a petition with Tax Court. Sandra did not file a petition and was assessed $5,000 tax as a non–petitioning spouse on MFT 31. The docketed case for Dan Daisy is now in Appeals for closing. The Decision document for Dan Daisy shows a deficiency of $2,000 tax. There were NO innocent spouse issues in this case. The deficiency for both Dan and Sandra Daisy should be $2,000.
    Prepare three (3) Form 5403's as follows:

    • Joint account for $0

    • Assess Dan Daisy $2,000 on MFT 31

    • Abate Sandra Daisy's MFT 31 account by $3,000

  2. Close the joint key case on ACDS using general closing procedures. In addition:

    1. CLOSINGCD – use the code for the docketed case: 08, 11, 12, 17, or 21.

    2. ACTION – ACKCLS

    3. PAYCODE – Enter the appropriate payment code that applies to the petitioning spouse.

    4. REVSDTAX – Enter the correct joint liability amount as reflected in the Tax Court decision or Order.

  3. Close the petitioning spouse case on ACDS:

    1. CLOSINGCD – 08, 11, 12, 17 or 21

    2. ACTION – ACKCLS

    3. STATDATE – compute new statute with tack–on time

    4. REVSDTAX and Pen – zero (the revised tax/penalty is reflected on the joint key case)

  4. Close the non-petitioning spouse case on ACDS:

    1. CLOSINGCD – 45

    2. ACTION – ACKCLS

    3. REVSDTAX and Pen – zero (the revised tax/penalty is reflected on the joint key case)

Exhibit 8.4.1-1  (10-26-2007)
Form 3610 - Interim Assessment with Deficiency

Form 3610 Department of the Treasury - Internal Revenue Service
AUDIT STATEMENT		 Symbols:
XX:XX
Name of Taxpayer
John and Mary Doe
 SSN/EIN: Date Prepared:
Kind of Tax
Income 		Docket Number:
  DEFICIENCY (OVERASSESSMENT)
(Increase or decrease in Tax and Penalties)
Tax Year Ended Tax Addition to Tax IRC 6651(a)(1)    
12/31/2002 500.00 75.00    
12/31/2003 12,000.00 1,200.00    
12/31/2004 0.00 300.00    
         
         
         
Totals 12,500.00 1,575.00    
  □ Interest for (year)will be computed under _____ of the Internal Revenue Code.     
  □ The deficiency shown above for (year) does not take into account a payment of $_______ made on (date).
   
The deficiencies for 1998 and 2000 are shown above after taking into consideration the assessment subsequent to the mailing of the deficiency notice on 2/21/2003. See statement below for deficiencies before and after the interim assessment.
2002 Tax IRC 6651(a)(1)
Deficiency before interim assessment 13,000.00 1,950.00
Interim assessment 12,500.00 1,875.00
Deficiency after interim assessment 500.00
====== 		75.00
======
2004    
Deficiency before interim assessment 6,000.00 900.00
Interim assessment 6,000.00 600.00
Deficiency after interim assessment 0.00
====== 		300.00
======
        Form 3610

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