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Part 4. Examining ProcessChapter 13. Audit Reconsideration

4.13.1. Examination Audit Reconsideration Process


4.13.1. Examination Audit Reconsideration Process

4.13.1 Examination Audit Reconsideration Process

Manual Transmittal

April 17, 2024

Purpose

(1) This transmits revised 4.13.1 Audit Reconsideration, Examination Audit Reconsideration Process.

Material Changes

(1) Updated Section Title from Introduction to Examination Audit Reconsideration Process.

(2) Added new content: The Introduction is now the Examination Audit Reconsideration Process, the IRM 4.13.1 has incorporated and added information from the prior IRMs 4.13.1, 4.13.2, 4.13.3, 4.13.5 and 4.13.6. This provides all of the Correspondence Exam Audit Reconsideration IRMs into one IRM location.

(3) Added new subsection 4.13.1.2, Overview, containing a basic overview of the criteria for an audit reconsideration. The overview was previously found in IRM 4.13.1.1, Overview.

(4) Added new subsection 4.13.1.3, Contact Employees, containing updated procedures and routing guidance for all contact employees. Guidance for contact employees were previously found in IRM 4.13.2, Contact Employees.

(5) Added new subsection 4.13.1.4, Central Reconsideration Unit (CRU), with updated processing procedures for the audit reconsideration requests and appeals procedures. These procedures were previously found in IRM 4.13.3, Central Reconsideration Unit, and IRM 4.13.6, Appeals.

(6) Added new subsection 4.13.1.5, Exam SFR Reconsiderations, with updated processing procedures for the SFR Reconsiderations. These procedures were previously found in IRM 4.13.5, Exam SFR Reconsiderations, and incorporated the prior memorandum of understanding.

(7) Added new exhibit 4.13-1, Routing of Campus and Area Office Reconsideration Requests.

Effect on Other Documents

This material supersedes IRM 4.13.1, dated 12-16-2015.

Audience

Small Business/Self Employed (SB/SE), Taxpayer Services Campus Examination Operations, Customer Account Services Employees.

Effective Date

(04-17-2024)


Heather J. Yocum
Director,
Examination Field and Campus Policy
Small Business/Self-Employed

Program Scope and Objectives

(1) Purpose: This IRM contains procedural steps for Contact Employees receiving phone calls requesting an audit reconsideration and Campus Exam employees processing Exam audit reconsideration cases.

(2) Audience: IRS employees responsible for processing Exam audit reconsideration cases in SB/SE and Taxpayer Services.

(3) Policy Owner: The Director, Examination - Field and Campus Policy, who is under the Director, Headquarters Examination.

(4) Primary Stakeholders:

  • SB/SE Campus Examination

  • Taxpayer Services Campus Examination

(5) Contact Information: To recommend changes or make any other suggestions to this IRM section, see IRM 1.11.6.5, Providing Feedback About an IRM Section - Outside Clearance.

Background

(1) This subsection is used by Small Business/Self Employed (SB/SE) and Taxpayer Services (TS) Campus Examination and Contact Employees for toll-free calls or to review and process audit reconsideration cases. Other IRM chapters will be referenced throughout this IRM to provide specific guidance for individual topics. Examination employees are responsible for researching and utilizing information contained in all reference materials. Legal citations, form and letter references, and IRM references are reviewed and updated as necessary.

Authority

(1) The Internal Revenue Service has the discretionary authority to abate an assessment of any tax if it is excess of the taxpayer's liability per IRC 6404(a) and Treas. Reg 301.6404-1. IRM 1.2.1.5, Policy Statements for the Examining Process.

Roles and Responsibilities

(1) Liability Determination - Discretionary Programs is used in Campus Examination Operations by managers, coordinators, examiners, and clerical staff to work, control, and monitor inventory for discretionary tax issues in both SB/SE and Taxpayer Services.

(2) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see the Taxpayer Bill of Rights.

Program Management and Review

(1) Program Reviews:

  • Campus program reviews are conducted to ensure case actions are in accordance with IRM procedures.

  • Examination quality reviews are conducted using IRM 21.10.1, Embedded Quality (EQ) Program for Accounts Management, Campus Collection, Campus Examination, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Services Support.

  • AIMS Centralized Information System (ACIS) reports are used by Headquarters Policy to review closure statistics and determine the effectiveness of each program.

(2) Program Reports:

  • See IRM 4.4.27, Reports.

  • Embedded Quality Review System (EQRS) Reports are used by managers and program analysts to identify error trends.

  • National Quality Review System (NQRS) Reports are used by managers and program analysts to identify error trends.

Program Controls

(1) Integrated Data Retrieval System (IDRS).

(2) Report Generation Software (RGS) is used for Campus Exam’s: open case control, monitoring incoming taxpayer’s correspondence, and manual review of case files.

(3) Follow proper retention and disposition requirements when utilizing Form 3210, Document Transmittal, as outlined in Document 12990, Records Control Schedules.

Term/Definitions/Acronyms

(1) Commonly used acronyms that may be within IRM 4.13.1 are shown in the table below.

ABBREVIATION/ACRONYM

DEFINITION

ACE

Automated Correspondence Examination

AGI

Adjusted Gross Income

AIMS

Audit Information Management System

AM

Accounts Management

AMT

Alternative Minimum Tax

AO

Area Office

AOTC

American Opportunity Tax Credit

ACIS

AIMS Centralized Information System

ARC

Aging Reason Code

ASED

Assessment Statute Expiration Date

ASFR

Automated Substitute for Return

AUR

Automated Underreporter

BMF

Business Master File

BOD

Business Operating Division

BSC

Brookhaven Service Center

CAS

Customer Accounts Service

CC

Command Code

CCP

Centralized Case Processing

CEAS

Correspondence Examination Automation Support

CRN

Credit Reference Number

CRU

Centralized Reconsideration Unit

CSC

Cincinnati Service Center

CSED

Collection Statute Expiration Date

DC

Disposal Code

DLN

Document Locator Number

EITC

Earned Income Tax Credit

ERSED

Erroneous Refund Statute Expiration Date

EQRS

Embedded Quality Review System

IDRS

Integrated Data Retrieval System

IMF

Individual Master File

LB&I

Large Business & International

MSC

Memphis Service Center

NRP

Notice Review Process

NQRS

National Quality Review System

OAR

Operations Assistance Request

OSC

Ogden Service Center

PBC

Primary Business Code

PC

Project Code

POA

Power of Attorney

PSC

Philadelphia Service Center

RGS

Report Generation Software

RSED

Refund Statute Expiration Date

SB/SE

Small Business / Self Employed

SERP

Servicewide Electronic Research Program

SFR

Substitute for Return

SLA

Service Level Agreement

TAS

Taxpayer Advocate Service

TBOR

Taxpayer Bill of Rights

TC

Transaction Code

TDC

Taxpayer Digital Communications

T S

Taxpayer Services

References

(1) Other IRM’s referenced within IRM 4.13.1 are

IRM NUMBER

TITLE

IRM 1.2.1

Servicewide Policy Statements

IRM 1.11.6.5

Providing Feedback About an IRM Section - Outside Clearance

IRM 21.10.1

Embedded Quality (EQ) Program for Accounts Management, Campus Collection, Campus Examination, Field Assistance, Tax Exempt/Government Entities, Return Integrity and Compliance Services (RICS), and Electronic Products and Service Support

IRM 4.4.27

Reports

IRM 1.2.1.4.15 Policy Statement 3-15 (Formerly P-2-89)

Reconsideration of an Unpaid Assessment

IRM 21.5.10.4.3

Audit Reconsiderations

IRM 25.6.1.5

Basic Guide for Processing Cases with Statute of Limitations Issues

IRM 25.6.1.7.2

Time When Payments and Credits are Considered to be Made

IRM 25.6.1.10.2.7

Claims for Credit or Refund - General Time Period for Submitting a Claim

IRM 21.5.10.4.4

Requests for Copies of Audit Reports

IRM 4.19.19

Campus Examination Telephone Contacts

IRM 5.19.10.6.3

Combat Zone Freeze Code

IRM 4.19.13

General Case Development and Resolution

IRM 8.6.4.4

Agreement Forms Secured in Appeals Cases

IRM 21.3.3.4.17

Outgoing Correspondence

IRM 21.5.6.4.46

-W Freeze

IRM 4.19.16

Claims

IRM 21.5.4.1

General Math Error Procedures Overview

IRM 21.1.3.2.3

Required Taxpayer Authentication

IRM 25.6

Statute of Limitations

IRM 21.4.4

Manual Refunds

IRM 8.2.1.5

Returning a Case to Examination - ATE

IRM 8.2.1.6

Preliminary Review of a Case - ATE

IRM 8.1.10

Ex Parte Communications

IRM 4.8.9.8.7

Proper Managerial Involvement

IRM 20.1.5.3.5

Two and Ten Year Bans on Claiming the Earned Income Tax Credit (EITC)

IRM 4.19.14.7.1

EITC 2/10 Year Ban - Correspondence Guidelines for Examination Technicians (CET)

IRM 4.19.10.4

Fraud Referrals

(2) Helpful information can be found on the Exam Research Portal, located on SERP at: http://serp.enterprise.irs.gov/databases/portals/compliance/exam/exam.html.

(3) Exam Project Codes can be found on SERP in the Exam Project Code Search.

Overview

(1) An audit reconsideration is the process the IRS uses to reevaluate the results of a prior audit where additional tax was assessed and remains unpaid, or a tax credit was reversed. If the taxpayer disagrees with the original determination, they must provide new information for the audited issue(s) not previously considered during the original examination. It is also the process the IRS uses when the taxpayer contests a substitute for return (SFR) determination by filing an original delinquent return or when there is an IRS computational or processing error in assessing the tax. Please see IRM 1.2.1.4.15, Policy Statement 3-15 (Formerly P-2-89), Reconsideration of an Unpaid Assessment. These procedures are directed at:

  1. Ensuring the amount of assessed tax is correct.

  2. Ensuring the collection process is suspended while the reconsideration request is being considered (when applicable).

  3. Ensuring that the procedures support the abatement of assessment in appropriate situations.

  4. Ensuring that cases are handled in a consistent manner.

Criteria for Reconsideration

(1) To request an audit reconsideration:

  1. The taxpayer must have filed a tax return and

  2. The assessment remains unpaid, or the IRS has reversed tax credits that the taxpayer is disputing and

  3. The taxpayer must identify which adjustments they are disputing and

  4. The taxpayer must provide new additional information for the audited issues not considered during the original examination or

  5. There was an IRS computational or processing error in assessing the tax during the examination.

Contact Employees

(1) This subsection discusses the role of contact employees. Contact employees (Customer Service Walk-In and Toll-Free call sites, Examination, Accounts Management, etc.) who receive inquiries from taxpayers regarding a disagreement with an Examination where additional tax was assessed and/or reversal of tax credits such as Earned Income Tax Credit (EITC).

Research/Initial Case Screening

(1) BMF Reconsideration cases will be routed through AM to follow IRM 21.5.10.4.3

(2) See IRM 4.13.1.2.1, Criteria for Reconsideration, to ensure request meets reconsideration criteria.

(3) If all criteria are met, then see IRM 4.13.1.3.2, Function Responsible and Routing Instructions, to identify where the reconsideration request should be routed.

(4) If criteria are not met:

  1. and a return has not been filed by the taxpayer, advise taxpayer to send a completed, signed tax return. Inform taxpayer that filing a return is a requirement for reconsideration.

  2. due to the account being full paid and there have not been any credits reversed; the request is a claim for refund. Inform the taxpayer that they must file a claim. Letter 89-C may be used for this purpose. Include Form 1040X and instructions as an enclosure.

  3. because the case is currently open in Exam, and there is no assessment posted to the taxpayer’s account, advise the taxpayer to correspond with the office that has the open Exam. If the taxpayer provides correspondence, date stamp and forward to the open control/office.

Function Responsible & Routing Instructions

(1) To determine an Automated Substitute for Return (ASFR) reconsideration, research Integrated Data Retrieval System (IDRS) for the following transaction code(s) (TC). (All must be present).

  1. TC Dummy 150 with 887 as the julian date

  2. TC 494

  3. TC 495

  4. TC 290 (tax assessment)

  5. TC 599 Closing Code (CC) 088

Route ASFR reconsideration returns based on the Document Locator Number (DLN) of the TC 150 and/or the TC 971 Action Code (AC) 143. For ASFR addresses, refer to SERP - ASFR Reconsideration Returns - Centralized Processing Sites - Who/Where (irs.gov).

Note: If the tax module has a previously posted TC 29X and/or a TC 599 CC 89, and the tax on the return does not match the tax posted to IDRS, then it is not an ASFR Reconsideration request. It is an amended return. Route the return to Accounts Management.

(2) To determine an Automated Underreporter (AUR) reconsideration, research Integrated Data Retrieval System (IDRS). The assessment will be a TC 290 preceded by a TC 922. The originating campus may be determined from the address in the upper left corner of the CP 2000 (if available) or from the first two digits of the TC 922 DLN. Correspondence requesting AUR reconsideration will be sent to the Campus where the assessment originated. A listing of addresses and contact phone numbers are available on SERP at SERP - AUR Reconsideration - Who/Where (irs.gov).

Note: Phone numbers on SERP are for internal contacts relating to AUR Reconsideration cases only. Route taxpayer phone calls to AUR toll free number 1-800-829-8310 for both Taxpayer Services and SB/SE AUR Operations.

(3) To determine an SB/SE Exam Substitute for Return (SFR), research Integrated Data Retrieval System (IDRS). SFR Examinations are identified by the following IDRS transaction codes:

  1. TC 150 .00 with SFR literal and 888 julian date

  2. TC 300 with an assessment

  3. TC 420/421

  4. PBC 295 through 299 and 201 through 207. The PBC is located to the right of the TC 420. NOTE: Exam SFR reconsiderations are the first original delinquent return submitted by the taxpayer. If there are multiple TC 300’s and/or a TC 971 Action Code 282 route per IRM 4.13.1.3.2, Function Responsible & Routing Instructions.

Note: All SB/SE Exam SFR Reconsiderations are worked in the Examination Operation, SFR Recon Team.

Route SB/SE SFR Reconsiderations to:
Internal Revenue Service
Examination Operation Stop 614
1040 Waverly Avenue
Holtsville, NY 11742

(4) To determine Campus Exam and Area Office (AO) Exam, research Integrated Data Retrieval System (IDRS). A TC 420 followed by a TC 300 and TC 421 indicates a previous audit was performed by Campus or Area Office Exam. Exam reconsiderations can be identified by a TC 300 with an amount or a TC 300 for zero with an adjustment to a refundable credit, such as the earned income credit (TC 765). The PBC of the TC 420 (or PBC is 6XX Appeals use TC 424) will assist with determining the correct campus for routing.

  1. Taxpayer Services Campus reconsiderations are worked in any Taxpayer Services campus, with the exception of PC 1032 (The Third-Party Affidavit). PC 1032 are routed to the campus that performed the examination based on the PBC of the TC 420.

  2. SB/SE Campus reconsiderations are worked in the campus that conducted the original audit, and must be routed to that campus.

  3. AO Exam reconsiderations are routed to the servicing SB/SE Campus based on the PBC of the TC 420. See Exhibit 4.13.1-1, to determine the campus that service area offices.

  4. For a complete list of Taxpayer Services and SB/SE Campus locations, refer to SERP - Audit Reconsideration Requests - Central Reconsideration Unit (CRU) Addresses - Who/Where (irs.gov).

Routing Instructions for Multiple Year and/or Assessments Reconsideration Requests

(1) When a reconsideration request is received that contains more than one tax year or more than one TC 30X, it is in the best interest of the taxpayer if we work the case in the same campus. Multiple year requests should not be separated. See table below for more information on multiple year and multiple assessments reconsiderations.

IF

AND

THEN

Multiple Year Reconsideration

has an open TXMOD control

send case to assigned examiner or campus

Multiple Year Reconsideration

doesn’t have an open TXMOD control

send case to the campus that performed the earliest audit

Multiple assessments

they are on the same tax year

send case to the campus that input the last adjustment

Multiple assessments

one account shows TC 30X for .00 and the other shows TC 30X with a dollar amount

send case to the campus with the dollar amount

Multiple assessments on one or more tax years

recon involves multiple tax years

send case to the campus with the earliest TC 300s

Role of Contact Employees when a Reconsideration Request is Received and the Examination was Performed in the Area Office or Campus Examination Function

(1) If a reconsideration request is generated from a phone call, or walk in and the taxpayer knows what issue is being contested or the contact employee can identify the disputed issues:

  1. Briefly discuss the issues with the taxpayer. Use any available research tools to obtain information pertaining to the taxpayer's case. Examples of available tools include: IDRS Research, Exam Project Code Search.

  2. Instruct the taxpayer to send in an Audit Reconsideration request along with any new documentation. Pub 3598, What You Should Know About the Audit Reconsideration Process, and Form 12661, Disputed Issue Verification, can be utilized to assist.

  3. Ask taxpayer if they would like a letter issued explaining the process. If yes, Letter 3338-C will be issued selecting the appropriate paragraphs that correspond with disputed issues. If no, sending Letter 3338-C is not required to be issued.

(2) If a reconsideration request is generated from a phone call, or walk in and the taxpayer does not know the disputed issues or the contact employee cannot identify the disputed issues: the employee will request that a copy of the Examination Report and Pub 3598 be sent to the taxpayer from the area that performed the examination via Form 4442, Inquiry Referral, see IRM 21.5.10.4.4, Requests for Copies of Audit Reports. Advise the taxpayer to follow procedures in Pub 3598 when requesting reconsideration.

(3) Do not input a collection hold at this time. Advise the taxpayer that collection activity will continue until we receive the requested documentation.

(4) If the taxpayer states they previously received a Letter 3338-C and it has been 3 weeks or more since they sent in the requested documents.

  • Check for an open TXMOD control to the Campus Exam Operation. If there is not an open TXMOD control,

  • input a STAUP for 3 weeks or a TC 470 (no CC) with a TC 472 (no CC) delayed 3 cycles on the account.

  • Advise the taxpayer that there has not been enough time elapsed for the correspondence they sent in to have been put on our system, and you will be delaying any collection action. They should check back in 2-3 weeks.

  • If 5-6 weeks have passed and there is no open TXMOD control in Exam indicating they have the correspondence, have the taxpayer fax the documents to you. Once the documents are received, complete Form 4442 and fax the form and documents to the appropriate Campus Exam Operation. If Form 4442 and documents cannot be faxed, route or mail to the appropriate Campus Exam Operation using the routing Form 1725, Routing Slip or Form 3210, Document Transmittal. If the taxpayer states they do not have access to a fax machine to fax in documents, they can mail copies of the documents previously sent directly to the appropriate Campus Exam Operation.

(5) If correspondence is received without supporting documentation: Employee must complete and send Letter 3338-C selecting the appropriate paragraphs that correspond with the disputed issues identified by the taxpayer and include Form 12661. Put in the return address code of the Centralized Reconsideration Unit (CRU) to whom the response should be directed.

(6) If correspondence is received with supporting documentation or the walk-in taxpayer has documentation, check TXMOD/IMFOL for the collection statute (CSED)

  1. If there is less than one year remaining, do not input a collection hold (i.e., STAUP or TC 470).

  2. If the account is in collection status below 22, input a STAUP for 15 cycles.

  3. If the account is in status 22 or 24, input TC 470.

  4. If the collection status is 26, coordinate with the Area Office Collection Revenue Officer.

  5. If the account is in status 60 (Installment Agreement) instruct the taxpayer to continue payments as outlined in the agreement, do not input a collection hold (i.e., STAUP or TC 470).

  6. If the taxpayer has a hardship situation, and you have received an OAR, input the appropriate collection hold. If resolution of this case does not involve a full abatement, the collection hold must be reversed when the case is closed.

  7. Complete Form 4442 and fax along with documentation to the appropriate Campus Exam Operation. If form and documents cannot be faxed, route or mail to the appropriate Campus Exam Operation using routing Form 1725, Routing Slip, or Form 3210.

  8. Advise the taxpayer they can get Pub 3598, What You Should Know About the Audit Reconsideration Process, by accessing the website at IRS.GOV or by calling 1-800-Tax-Form (1-800-829-3676).

Reconsideration Calls Received in Exam Operation

(1) If a call is received from the taxpayer requesting an audit reconsideration, research account to verify taxpayer meets reconsideration criteria. See IRM 4.13.1.2.1, Criteria for Reconsideration.

(2) If taxpayer meets audit reconsideration criteria and CEAS/ TXMOD does not show an open reconsideration case:

  1. Advise the taxpayer to send in a request for reconsideration, including any documentation not previously submitted

  2. Inform the taxpayer to include a phone number, and then send the response to the appropriate CRU

  3. Ask taxpayer if they would like a letter issued explaining the process:

  • If yes, send Letter 3338-C with Pub 3598, What You Should Know About the Audit Reconsideration Process, and Letter 12661, Disputed Issue Verification, to the taxpayer and advise them to follow procedures in the publication on how to file an audit reconsideration request. Advise the taxpayer to fully explain the reason for disagreement with the audit adjustment on Form 12661.

  • If no, sending Letter 3338-C is not required to be issued.

(3) The CEAS Status Codes can identify the actions taken on the audit reconsideration case. Refer to IRM 4.13.1.4.1.7, Controlling the Case, for Status Code Table and explanations.

(4) If the taxpayer does not know what information is specifically needed; review the CEAS/ RGS workpapers, and, advise the taxpayer what documentation is needed. If the case is not on CEAS, review IDRS for adjustments and/or Project Codes to assist in advising what is needed.

(5) The taxpayer states that they have already sent in everything requested in the Form 886-H or previously issued Letter 3338-C, the CET will review the CEAS Audit Reconsideration workpapers to ascertain if the information previously sent was determined by the examiner, to be complete and correct. If CEAS indicates that more information is needed:

  • Advise the taxpayer as to what additional information is needed, If the information previously sent was not sufficient to allow the deduction.

  • Advise the taxpayer why the reconsideration request was denied.

  • If the taxpayer does not agree, talk with the taxpayer about the possibility of providing alternative documents that will support their position. If the taxpayer’s explanation includes information that was not previously considered and might change the determination, suggest the taxpayer submit this information in writing.

  • If the taxpayer still does not agree, advise them of their right to appeal the decision and to reply to the letter sent to them notifying them of the partial/full disallowance.

(6) If the case is open on CEAS as Recon and the taxpayer insists on talking to the assigned examiner after a full explanation was provided follow existing phone procedures in IRM 4.19.19, Campus Examination Telephone Contacts, to send CEAS Action Note.

(7) If the taxpayer is under a 2 or 10 year ban (PC 0697 & 0698) and requesting a reconsideration advise them to request an audit reconsideration for the year the ban originated and submit documentation showing their entitlement.

Central Reconsideration Unit (CRU)

(1) This subsection will be utilized by the CRUs when processing reconsideration requests.

General Information

(1) This subsection discusses the role of the Central Reconsideration Unit (CRU). The CRU works reconsideration cases for individual income tax returns previously worked by the Area Office or Campus Examination function.

Special Circumstances

(1) Combat Zone Case

  1. If review of the taxpayer’s account indicates the taxpayer was in a combat zone during the original audit (plus 180 days after leaving the combat zone), reverse all assessments made by Exam. Review of the taxpayer’s account will show a TC 500 with closing codes 52, 54 and 56 that provides the entry and exit dates within the combat zone. The account will also have a -C freeze. Refer to IRM 5.19.10.6.3, Combat Zone Freeze Code.

  2. Normal combat zone procedures IRM 4.19.13.23, Combat Zone, do not apply to reconsideration cases, where the tax year(s) in question was not the same year(s) that the taxpayer was in a combat zone (plus 180 days after leaving the combat zone). For reconsideration requests other than the year(s) that combat zone procedures apply, continue to work and correspond with the taxpayer to resolve the reconsideration request.

(2) Disaster Case special procedures may apply to disaster situations. Refer to IRM 4.19.13.26, Disaster Relief, for guidance issued specific to the disaster.

(3) Identity Theft

  1. If correspondence is received in the reconsideration unit indicating that the Taxpayer is a victim of Identity Theft, and the Taxpayer can substantiate the Identify Theft claim, follow the procedures in IRM 4.19.13.27, Campus Exam Identity Theft, in working the reconsideration case.

  2. If TAS criteria 5 - 7 is met and ID Theft is involved, see IRM 4.19.13.27.1, Research.

Taxpayer Advocate Service (TAS) Cases

(1) All TAS cases must be worked in adherence with the Service Level Agreement (SLA) and addendum between Taxpayer Services, SB/SE and TAS. See TAS website for Service Level Agreements at: TAS, SLA or on the internet at Taxpayer Advocate Service Level Agreements. TAS utilizes Form 12412, Operations Assistance Request (OAR) to initiate the OAR process. The Exam TAS liaison will assign and monitor the case through its conclusion. See IRM 4.19.13.26, Taxpayer Advocate Service (TAS) Procedures.

Note: While TAS is responsible for keeping the taxpayer apprised of the progress of the case, direct contact with the taxpayer or representative may be made when necessary. The TAS Case Advocate must be kept apprised of actions and/or contacts made with the taxpayer or practitioner. Every effort must be made to expedite completion of OAR cases

(2) OARs for examinations conducted in the Area Office (AO) will be worked in the SB/SE campus that is aligned to the AO that did the initial examination. If the campus examiners have not received training for the audit recon issue, the OAR will be forwarded by TAS to the appropriate AO.

(3) Supporting documents (if available) that must be attached to Form 12412 when TAS forwards a case are as follows:

  1. All pertinent information received from the taxpayer.

  2. Information not considered during the original audit.

  3. Copies of letters and reports received by the taxpayer.

  4. Copies of documents already submitted by the taxpayer.

  5. Amended return, if applicable.

Note: On examination conducted in an AO, TAS should determine if a physical (i.e., paper) administrative file exists for the closed examination or if the case is an electronic (paperless) case with all case file documents saved in RGS/CEAS. For paper cases only, the administrative files must be provided to resolve the audit reconsideration. TAS will perform an ESTAB request for the TC 300 document. Make two attempts, three weeks apart. If unable to obtain the administrative file, the Report Generating Software (RGS) information must be reviewed in coordination with the CRU. On examinations conducted in a campus, examiners will attempt to resolve audit reconsideration requests by using Correspondence Examination Automation Support (CEAS) information, whenever possible. The administrative file may be requested by TAS, if RGS information is not available or is not sufficient to resolve the request.

Cases Previously Closed by the IRS Independent Office of Appeals

(1) For liability cases previously considered by the IRS Independent Office of Appeals (Appeals), determine how Appeals resolved the case in order to decide whether a liability issue can be reopened. The IRS will not reopen cases decided by the U.S. Tax Court (see exception for Tax Court dismissals for Lack of Jurisdiction), IRS closing agreement (Form 906, Closing Agreement on Final Determination Covering Specific Matters, or Form 866, Agreement as to Final Determination of Tax Liability), Appeals mutual concession settlement using a Form 870-AD, Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment, type agreement form (Form 870-AD, Form 890-AD, Form 2504-AD, or Form 2506-AD), or when a statute of limitation prevents the reopening of the issue.

(2) Research IDRS to determine whether Appeals previously considered the liability case. CC TXMOD will show a TC 30X and a three-digit office code 1XX (non-docketed cases) or 2XX (docketed cases) and disposal codes 01, 03 or 13 for Appeals closures processed through AIMS. For a list of Appeals Office Codes (AOC), see Section 13.2 of Document 6209, IRS Processing Codes and Information, or Exhibit 3.13.62-9. For non-AIMS assessments via CC REQ54, Appeals will input the IDRS adjustment with an employee group code beginning with 66XXX. 

(3) If the case file does not contain the Appeals closing documents (i.e. Appeals Case Memo, agreement form, etc.), contact the Appeals Account Resolution (AARS) team to determine if these documents were retained on Appeals Centralized Databased System (ACDS). Email requests for this information to Appeals *AP Inquiries Outlook mailbox.

(4) Review the taxpayer’s account transcript to identify the Appeals case closing code. If the closing code can’t be determined, request this information by sending an email to the Appeals *AP Inquiries Outlook mailbox.

(5) Once the decision is made that the issue can be reopened, send the audit reconsideration case to the CRU to consider the taxpayer’s new information. If the taxpayer protests the denial of the request to reduce the earlier audit adjustment, follow the guidelines for case building in IRM 4.13.1.4.11.1, Request for Appeal.

(6) For all audit reconsideration requests on closed Appeals cases, follow the guidelines as shown in the table below:

APPEALS CLOSING CODE

DESCRIPTION

ACTION

03

Agreed Non docketed (no Form 906 or Form 870-AD)

Send to Appeals, follow (7) below.

03

Agreed Non docketed (with Form 906 or Form 870-AD)

Do not send to Appeals, deny request for reconsideration, follow (8) below.

04

Agreed Notice of Deficiency

Send to Appeals if request is based on new information, follow (7) below.

05

Defaulted Notice of Deficiency

Do not send to Appeals, if request is based on new information work as reconsideration.

08

Agreed Appeals, Docketed or Dismissed from Tax Court with Appeals time

Do not send to Appeals. If dismissed for Lack of Jurisdiction (LOJ), work as audit reconsideration. If Appeals settled, follow (8) below.

10

Counsel Settled

Do not send to Appeals, follow (8) below.

11

Dismissed from Tax Court for Lack of Jurisdiction (LOJ), Appeals issued Notice

Do not send to Appeals. If dismissed for LOJ, and request is based on new information, work as an audit reconsideration.

12

Dismissed from Tax Court for Lack of Prosecution (LOP), Appeals issued Notice

Do not send to Appeals, follow (8) below.

17

Tried Tax Court Case

Do not send to Appeals, follow (8) below.

21

Dismissed, Tried or Counsel Settled with no Appeals time

Do not send to Appeals if dismissed for Lack of Prosecution (LOP), tried or Counsel settled, follow (8) below. If request is based on new information and the case was dismissed for LOJ, work as an audit reconsideration, follow (7) below.

Note: Letter 916-C must not contain language for an appeal if the case was closed with finality as addressed in IRM 8.7.7, Claim and Overassessment Cases. If a final decision was made by a court, the Letter 916-C, would not contain language about appeal rights or filing a refund claim. The criteria for not reopening a case closed with a Form 870-AD agreement also applies to other form types with “AD” in the form name. See IRM 8.6.4.4, Agreements Forms Secured in Appeals Cases, for details.

(7) In these cases, when you forward the audit reconsideration to Appeals, send the TP Letter 916-C and select the optional paragraph that reads: “Thank you for your audit reconsideration request dated..... “. The IRS Independent Office of Appeals (Appeals) previously considered and closed your case. We are forwarding your audit reconsideration case to the Appeals office, you should hear from them within 90 days.

(8) In these cases, send the TP Letter 916-C and select the optional open paragraph to read as follows: “The IRS Independent Office of Appeals (Appeals) or the United States Tax Court (Tax Court) previously considered your disagreement with the examination results and closed your case. That determination was final and we cannot reopen or reconsider your case.”

Note: This paragraph only applies to cases closed with a Court Decision (other than dismissal for LOJ), Form 870-AD or Form 906.

Timeliness

(1) IRM 1.2.1.13.3, Policy Statement 21-3 (Formerly P-6-12), Timeliness and Quality of Taxpayer Correspondence, apply to audit reconsideration requests. The general guidelines are:

  • A quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer’s issues, requests additional information from the taxpayer, or notifies the taxpayer we have requested information from outside the IRS.

  • A quality response is timely when initiated within 30 calendar days of the IRS received date.

  • When a quality response cannot be issued timely, an interim response is initiated by the 30th calendar day from the IRS received date. Issue a Letter 2645-C.

  • In the interim letter, you must tell the taxpayer when they can expect a final resolution. The promised resolution date may be any number of days and can vary depending upon the program being worked. The promised resolution date does not have to be in increments of 30 days.

(2) You must issue subsequent interim letters with the specific reason for the delay if you cannot provide a final response by the promised resolution date. If subsequent letters are required, use Letter 2644-C, Second Interim Response.

(3) Policy Statement 21-3 does not apply to Exam SFR non-filer reconsiderations. Acknowledgement and interim letters do not need to be sent.

Time Code

(1) The CRU will charge their time to the OFP codes as per the OFP manual.

(2) SB/SE campuses will refer to the current fiscal year Operating Guidelines for a complete listing of OFP codes.

Point of Count

(1) Only those cases that are accepted into the audit recon inventory will be taken as a count for receipts and closings. Mis routes and unstarted transfers from first read will not be counted. Work Planning & Control (WP&C) will be used to record receipts and closures.

Controlling the Case

(1) Audit Reconsideration cases must be controlled on CEAS and/or IDRS (TXMOD) within 14 days of receipt in the CRU. CEAS is used to retrieve the original audit workpapers/reports/letters, document the reconsideration results on a new "reconsideration workpaper”, and use Status Codes to capture the actions taken on CEAS reports. The table below outlines the valid Status Codes and their explanation for use.

STATUS CODE

OPEN/CLOSED/MAIL TRANSFER

EXPLANATION FOR USE

7100

Open

Case retrieved from Archive to be worked as Reconsideration.

7154

Open

Mail Received on case in 7100 waiting to be worked.

7200

Closed

Letter 3338-C sent.

7301

Case Transfer

Case received and transferred to Appeals.

7302

Case Transfer

Case received and transferred to Area Office.

7304

Closed

Default Closing. Case opened in CEAS 7100 in "error" and needs to be closed out.

7305

Closed

Cases in Suspense 7700 systemically closed on CEAS after 45 days if no reply received.

7400

Closed

Case closed as Full Disallowance.

7500

Closed

Case closed as Partial Disallowance.

7600

Closed

Case Closed as Fully Allowed.

7700

Open

Suspense status. CRU responded, waiting for TP reply.

7754

Open

Mail received on suspense case 7700, waiting to be worked.

(2) For Area Office reconsiderations the TXMOD control activity must indicate it is an Area Office case.

(3) Once the reconsideration is complete and sent to file server on CEAS, the case must be archived.

IDRS Account Actions

(1) Audit Reconsideration case actions are input on IDRS to facilitate resolution. See SERP - IDRS Command Code Job Aid - Job Aids and IRM 4.19.13.2.2, Integrated Automation Technologies (IAT) Tool, when taking actions on IDRS.

(2) When issuing CORRESPONDEX letters, see IRM 21.3.3.4.16, Outgoing Correspondence.

CEAS/RGS and Workpapers

(1) All cases must be worked on RGS/ CEAS and results of the audit reconsideration recorded. See IRM 4.19.13.5, Report Generation Software (RGS) System and IRM 4.19.13.6, Workpapers for All Cases.

Management and Quality Review

(1) All reconsideration requests will be subject to the sample selection process for Quality Review and local management review.

First Read Procedures

(1) Reconsideration requests must be screened within 5 workdays of receipt to ensure they will be accepted and worked in CRU prior to opening in CEAS in Status Code 7100. The account will be reviewed to determine what function made the original assessment generating the reconsideration.

  • Routing procedures are outlined under IRM 4.13.1.3.2, Function Responsible & Routing Instructions, for ASFR, AUR, Appeals, Campus and Area Office Examination assessments.

  • Only Campus or Area Office Examinations (SB/SE Campuses Only) will be worked in the Campus Exam Operations. Invalid referrals will be returned to referring area.

(2) For Audit Reconsideration requests received without documentation, the case will not be suspended waiting for documents follow IRM 4.13.1.4.6.1, No Documentation.

(3) If a request is received and a prior or subsequent year reconsideration is being worked in your campus, do not route the case. Assign the year(s) received to the examiner who is already working the case. If the audit reconsideration is generated from a program that was centralized, send the request(s) to the campus where the program was worked. See IRM 4.13.1.3.2.1, Routing Instructions for Multiple Year and/or Assessments Reconsideration Requests.

(4) If the reconsideration is generated from a different Campus assessment:

IF

THEN

Taxpayer Services reconsideration belongs to another Taxpayer Services Campus

If Taxpayer Services Campus is knowledgeable in working the applicable exam program, keep reconsideration where received and work it.

Exception: PC 1032 (The Third Party Affidavit) must be worked by the campus that performed the examination. Route PC 1032 recons to the originating campus based on the TC 420 PBC.

SB/SE reconsideration belongs to another SB/SE Campus

transfer to the campus responsible for the exam assessment. Route to the originating campus based on the TC 420 PBC.

(5) If the reconsideration is generated from an Area Office assessment and:

IF

THEN

It is received in a Taxpayer Services Campus

Forward to SB/SE Campus responsible for that Area Office. See Exhibit 4.13.1-1, Routing of Campus and Area Office Reconsideration Requests.

It is received in an SB/SE Campus and the taxpayer requests a face to face or the issue(s) are not conducive to Campus Exam:

  • Control on IDRS TXMOD.

  • Follow case building procedures, IRM 4.13.1.4.5, Area Office Reconsiderations.

  • After case building is complete, transfer in CEAS by updating Status Code to 7302.

  • IRM 4.13.1.4.5.1, Transfer to Area Office, for procedures to transfer case file.

  • If a taxpayer requests a face-to-face interview on a NRP case worked by the Campus, transfer the case to applicable AO NRP Coordinator.

    Note: Any NRP case, Source Code 80/91, Project Code 0674, must be returned to the originating Examining Office regardless of the audit issues.

It is received in an SB/SE Campus and the issue(s) are conducive to Campus Exam

Open as Recon in CEAS using project code 0001.

(6) If the reconsideration is generated from an Appeals assessment and:

IF

THEN

The determination is to transfer to Appeals based on procedures in IRM 4.13.1.4.1.3, Cases Closed in Appeals

Control on IDRS CC TXMOD. See IRM 4.13.1.4.11.1, Request for An Appeal, to case build and transfer.

The determination is to work as an audit reconsideration

Accept request as Recon.

The determination is to deny the request for reconsideration

Issue Letter 916-C with appropriate paragraph.

(7) Requests for an audit reconsideration submitted by IRS Employees will not be worked in the CRU. The CRU will screen the requests but will not assign or work the employee audit reconsideration cases. CRU employees will follow IRM 4.13.1.4.2(5), First Read Procedures, and IRM 4.13.1.4.5, Area Office Reconsiderations, in establishing AIMS controls and preparing the case. All employee reconsideration cases will be transferred to the appropriate PSP based on the current address of the employee/taxpayer. To ensure expeditious handling, use a delivery service that provides tracking capability when sending information to the Area office.

Note: If the original examination was worked on CEAS, do not order the administrative file. Other instances where the file will not be ordered may include defaulted cases, cases where you have the exam report, and cases where IDRS, research and taxpayer correspondence are sufficient to make a determination. The administrative file may have to be ordered when a SFR case is not on CEAS, IRP transcripts cannot be secured, and the taxpayer has not supplied sufficient information to make a determination.

(8) Form 3870, Request for Adjustment, case referrals for audit reconsideration received from Collection revenue officers will be started within 14 days of receipt in the campus CRU.

(9) -W Freeze: If the module reflects a TC 520 with closing codes 70-77 or 80-82, the case is in litigation status. If the case is in litigation status, contact the applicable litigation contact based on the 520 closing code. See IRM 21.5.6.4.46, - W Freeze.

Requests Not to be Worked

(1) The following requests are not considered audit reconsideration cases for our purposes and will be routed to the proper functions.

  1. The audit was for any tax form other than Form 1040.

  2. Closed Examination mail not meeting reconsideration criteria will be forwarded to the appropriate team at the managers discretion, See IRM 4.19.13.11.6, Correspondence or Return Received on Closed Examinations Not Meeting Audit Reconsideration Criteria.

  3. The request is for a fully paid prior audit (where an assessment was made during the audit). This is a Formal Claim for refund. See IRM 4.19.16, Claims.

  4. The request is a math error protest. See IRM 21.5.4.1, General Math Error Procedures Overview.

  5. ASFR or AUR assessments. Follow routing procedures under IRM 4.13.1.3.2, Function Responsible & Routing Instructions, for Contact Employees.

  6. Request for explanation of account balance.

  7. Refund inquiries.

Clerical Procedures

(1) When a reconsideration request is accepted for inventory in the CRU:

  1. Check TXMOD/ CEAS for a CRU control on the same, subsequent or prior year(s). If found, open control on IDRS and CEAS (if prior or subsequent year), or associate and assign mail (same year) to Examiner/Unit as controlled on TXMOD/ CEAS.

  2. Open TXMOD control and assign to Examiner/Unit Control.

  3. If case is archived (in CEAS) pull back and open as an audit recon. (do not open AIMS). Update case information with any changed/new items.

  4. If case is not archived, create case, archive and then retrieve case to enable the transfer of data to the CEAS database. Update the case information with the Taxpayer(s) address, telephone number, return type, received date, and POA information (do not open AIMS).

  5. Input a TC 971, Action Code 560 to indicate that the audit reconsideration is being initiated. Input the Exam received date as the Trans Date on the input screen.

    Note: The Exam received date is the date that the request was received in the operation, not the date that the request was received in CRU.

  6. Input a TC 470 on TXMOD. A collection hold is not input if the account is in status 26, 60,71,72, or there is less than one year remaining on the Collection Statute Expiration Date (CSED).

  7. Send Interim Letter(s) to acknowledge receipt of correspondence, as needed.

  8. Folder or associate correspondence to Examiner/Unit Control.

Routing Guidelines for CRU Units for Cases Transferred from One CRU to Another CRU

(1) When routing a reconsideration case from one CRU to another, the following procedures apply:

  1. The first read examiner must indicate Campus where the audit reconsideration will be sent.

  2. Send Letter 86-C to advise taxpayer of case transfer to another office.

  3. Form 3210, Document Transmittal, will be completed for cases being transferred.

Area Office Reconsiderations

(1) All cases must first meet reconsideration criteria as defined in IRM 4.13.1.2.1, Criteria for Reconsideration.

(2) Route cases meeting the following criteria to the Area Office (AO):

  1. No-show/no-response cases closed from field that conducted the audit.

  2. Area audit reconsiderations with any adjustment not addressed on the original examination report (if the adjustment is related to the original examination and the disallowance would offset any part of the tax decrease created by the new information provided by the taxpayer).

  3. All Area Office audit reconsiderations in which the taxpayer requests a face-to-face meeting. The request must be in writing and additional documentation submitted.

  4. Area Office audit reconsideration where the case requires an examination of substantial books and records (voluminous documentation that places undue burden on taxpayer if mailed).

(3) Original examination was conducted by an Area Office:

  1. The CRU will determine if a physical (i.e., paper) administrative file exists for the closed examination or if the case is an electronic (paperless) case with all case file documents saved in RGS/ CEAS.

  2. Note: AO electronic (paperless) cases will include a blocking series of 400-479 in the TC 421 DLN.

  3. For paper cases only, if the administrative file has not been secured, the CRU must perform an ESTAB request for the TC 300 document. Make two attempts, three weeks apart (the second request must be a special search, utilize Files Contact Listing (the former IPA), for where to send special search). If the administrative file is not received from Files three weeks after the second request, the CRU will review the RGS administrative file through CEAS-VIEW CASE READ-ONLY FIELD NRP (CEAS).

    Note: If an assessment was made after a no show/no response, then the CRU isn’t required to secure the administrative file.

  4. Review the administrative file or RGS records to determine if the case will be worked in the Campus. If the Campus is able to work the issue, see IRM 4.13.1.4.6, Examiner Procedures.

  5. If requested documents are not received, place verification of the requests for the paper administrative file in the case file.

  6. If received by Campus after the recon was sent to the AO, re-charge and forward to the AO where the recon was sent.

    Note: If the AO worked multiple year packages, upon closing CCP enters a TC 971 AC 057 with a year. The year designates the closing document that contains the administrative workpapers for all years. If only one year is being opened for reconsideration, you must request the year with the workpapers attached as well. When the administrative file is received, detach the workpapers and attach to the reconsideration case file. Input TC 971 AC 057 on the year(s) not being reconsidered to indicate what year the workpapers are now associated with.

  7. If the determination is made the CRU will not work the issue, transfer the case to the applicable AO based on taxpayer current residence, see IRM 4.13.1.4.5.1, Transfers to Area Office.

  8. Complete the Reconsideration Check sheet for AO Transfers. See Reconsideration Check Sheet for Area Office.

    Note: The managerial approval on a Campus case can be done by the manager or someone designated by management.

Transfers to Area Office

(1) Determine whether the case would be assigned to an RA EGC 1XXX or TCO EGC 2XXX based on original audit.

(2) Follow table below if AMDISA is still available:

IF

THEN

Returning to the originating Area Office (AO)

AMSTUR with an Aging Reason Code (ARC) 53 to return the case to the appropriate AO. The AIMS record will be updated to SBC 87700 and EGC 1998/2998, and forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.

Taxpayer current residence is in a different AO PBC

AMSTUR with an ARC 53, AMSOC the database to the appropriate AO. AIMS will automatically update the EGC to 1998/2998 and Status 07 and will remain in EGC 1998/2998 Status 07. Forward to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.

Original audit conducted by Campus and now being transferred to AO

AMSTUR with an ARC 53 to reopen the AIMS base at the campus that conducted the examination. AMSOC the data base to the appropriate AO. AIMS will automatically update the EGC to 2998 and Status 07 and will remain in EGC 2998 Status 07. Forward to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.

Note: When using CC AMSTUR, AIMS will reflect the original Source Code and Project Code, do not change. The Status Code will be 12, do not change.

(3) Follow table below if AMIDSA is no longer available:

IF

THEN

Returning to the AO that conducted the Original Audit

Re-establish on AIMS in the originating PBC, Source Code 73, A R C 53, SBC 87700 and Campus EGC 1093/2093, Status 08. The case will be updated to EGC 1993/2993. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.

If the Taxpayer has moved and forwarding case to a different AO

Re-establish on AIMS in the originating PBC, Source Code 73, A R C 53, SBC 87700 and Campus EGC 1093/2093, Status 08. AMSOC the database to the correct AO. AIMS will automatically update the EGC to 1998/2998 and Status 07 and will remain in EGC 1998/2998 Status 07. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 1993/2993.

Original audit conducted by Campus and now being transferred to AO

Re-establish on AIMS in the originating PBC, Source Code 73, ARC 53, SBC 00000 and EGC 5XXX, Status 08. AMSOC the database to the correct AO. AIMS will automatically update the EGC to 2998 and Status 07 and will remain in EGC 1998/2998 Status 07. Forwarded to the AO Reconsideration Coordinator listed on the AIMS EGC listing as the contact for EGC 2993.

  1. Input TC 470 on TXMOD, if not already on the account. Annotate on the Transfer Check sheet the date the TC 470 was input with the number of cycles Collections actions will be stopped.

  2. If Campus case, close the CEAS/ RGS control base with Status Code 7302 for campus examinations.

  3. The case file will include all taxpayer correspondence, copies of letters sent to the taxpayer by the campus (interim and/or transfer letters), and the administrative file.

  4. Send Letter 86-C to advise the taxpayer of the transfer. Use an open paragraph to advise the taxpayer that a copy of the return, audit report and documentation should be available when the AO contacts them.

  5. Close TXMOD control with activity indicating the Area office case was sent to. (i.e. "TOAREAXXX", with XXX applicable to AO PBC.)

  6. Prepare “Reconsideration Check sheet for Area Office Transfers”, Reconsideration Check Sheet for Area Office.

  7. Prepare Form 3210, Document Transmittal.

    Note: If case has potential imminent statue issues with less than six months remaining on ASED, coordination will need to be made to protect the statute.

(4) If the original examination was conducted by a Campus follow the chart below:

IF

THEN

POA or taxpayer requests an Area Office interview and the case is within the examining scope of the Campus CRU, (One Case or Multiple Cases by same POA)

  1. Telephone POA or taxpayer to provide assurance that the issue can be resolved at the Campus. Treat mass transfer requests on a case-by-case basis.

  2. If unable to contact taxpayer by telephone, issue Letter 3339-C and include this wording: “We have considered your request to transfer your case to the Area Office for reconsideration. However, we ask that you try to work with this office to resolve this matter by mail. We encourage you to do this because the staff at this office is familiar with your case. It is likely that we can resolve the matter for you more promptly than if we transfer it to the local office. However, if you believe that there are special circumstances that would necessitate a face-to-face appointment, please let us know.”

  3. Suspend the case for 30 days.

  4. Taxpayer insists, document the reason and supporting items on workpapers and transfer.

  5. Taxpayer agrees, follow normal CRU processing procedures.

Taxpayer states undue burden due to voluminous records

  1. Ensure a sampling of new documents were received with the request

  2. Document the reason and supporting items on workpapers and transfer

Issue is too complex for CRU

Prepare case for Area Office with complete explanation of complex issues and transfer

Examiner Procedures

(1) If case is on CEAS, establish the audit recon record by retrieving the case from archive in Status Code 7100. If the case is not archived on CEAS, it will be necessary to manually create, archive and retrieve the case. The case must also be controlled on IDRS (TXMOD). Check to make sure the case is assigned and the collection hold has been input, if needed.

(2) Open the CEAS Audit Reconsideration Information Screen and check to ensure that the Original TC "300" reflects the deficiency amount of the audit report. If incorrect, correct to the deficiency amount (tax and credits).

(3) Verify/Input the correct tax period, and IRS and Exam received dates on the Audit Reconsideration Information Screen. Verify to ensure the "TC 300 or TC 290 (SFR)" dollar amount correctly reflects the deficiency amount of the report issued resulting from the audit that taxpayer is requesting reconsideration for. If SE tax and or credits are involved the assessment amount may be the credits or a net amount of the tax and credits reversed. If the TC 300 or TC 290 amount is not correct, change to reflect the deficiency amount.

(4) Create a new issue under the De-Minimus IMF Code and rename it "MMDDYYYY 4700RECON". When creating their F4700, they must click on the "Audit Recon Notes" first, before clicking on the original "4700". This will ensure that the original 4700 is not overridden by the Audit Recon Issue. Subsequent Audit Recon requests can utilize the same notes saved under the previous Audit Recon Issue. No new 4700 or issue will have to be prepared.

(5) Managerial approval must be obtained before ordering the administrative file. Managerial approval must be documented in workpapers.

(6) If additional mail is received on open cases in Status Code 7100 or 7700, the Status Code will be updated to 7154 or 7754 (whichever is applicable) within 5 days of mail receipt.

(7) When fully allowing the Reconsideration request, a new audit report is not needed. Adjust the taxpayer's account to tax liability prior to the correspondence audit. Document workpapers with your decision and make the appropriate adjustment.

(8) When partially allowing the Reconsideration request, a new audit report must be generated and sent to the taxpayer. The Audit reconsideration report can be saved as "MMDDYYYYRECON4549". The examiner must check IDRS to ensure the starting point of the report reflects the taxpayer’s account including all prior adjustments.

(9) Review applicable program procedures in IRM 4.19.13, General Case Development and Resolution, thru IRM 4.19.15, Discretionary Programs, when making determinations on Campus Exam cases. Examiners will seek technical assistance from the workgroup assigned to work specific discretionary programs, because special procedures have been developed to work the programs. (Example: PC 133, CI Referrals, PC 360/ 364-Tip Employees, PC 402/405/406- Education Credits, etc.)

(10) The CEAS workpaper must be documented with the information requested on the original audit, subsequent documentation received with Reconsideration Request, and documentation still needed, and conclusion reached. Save as "RECON4700”.

(11) When suspending the case on CEAS/RGS the examiner will update to Status Code 7700 and must move the case off their desktop back to suspense file server. This will allow for the Autoclose to work if there is no response.

(12) On the Audit Recon Information Screen, record and validate the abatement amount to ensure population of the CEAS Reports. If no adjustment was made to the account input "0" in the Abatement Amount Field. If there was an adjustment to the account input the total adjustment to tax and credits.

(13) Both CEAS/ RGS and IDRS controls must be closed when the case is completed. Ensure the CEAS case is sent to file server. Close the CEAS/ RGS control using the appropriate closed Status Codes (Do not check the "Update AIMS" box) outlined in the table below:

CLOSED STATUS CODE

EXPLANATION FOR USE

7200

Letter 3338-C sent.

7304

Case opened in 7100 in error and closed out.

7305

Cases in Suspense 7700 systemically closed on CEAS after 45 days if no reply received.

7400

Case closed as Full Disallowance.

7500

Case closed as Partial Disallowance.

7600

Case Closed Fully Allowed.

(14) Process Adjustment to Master File by inputting TC 29X with the applicable Reconsideration Reason Codes as follows:

REASON CODE NUMBER

EXPLANATION FOR USE

064

Reconsideration No Response

066

Reconsideration Disallowed in Full

067

Reconsideration Disallowed in Part

068

Reconsideration Allowed in Full

Note: Examiner will use any other applicable reason code(s) up to a maximum of three to identify the issues involved in the Audit Reconsideration as outlined in the Document 6209.

No Documentation

(1) If a reconsideration request is received without any supporting documentation:

  1. Do not transfer case.

  2. Issue Letter 3338-C. Select appropriate paragraphs based on disputed issues and include paragraph to enclose Pub 3598 and Form 12661, Disputed Issue Verification. Be sure to include paragraph and Form 12661. Advise the taxpayer to fully explain the reason for disagreement with the audit adjustment on Form 12661.

  3. CEAS controls, Not Required– If case was opened in CEAS as 7100, close as 7200, Letter 3338-C sent and input a TC 971 with action code 576 on IDRS.

  4. Close TXMOD control to indicate 3338C sent.

  5. Input a TC 290.

Insufficient/Partial Documentation

(1) A reconsideration request is received with some documents and a determination can be made using judgment based on the documentation received and available research (CEAS, DUPOL DDBOL, DDBKD, AIMS, TXMOD, IMFOL, RTVUE & INOLET, & MFTRA). If a prior or subsequent year was closed No Change, all available research will be utilized, i.e. RGS workpapers, copies of documentation to determine if the issue(s) and the substantiation supplied for the prior or subsequent year is applicable to the reconsideration year. The reconsideration may be:

  1. Disallowed in Full - If documentation/research does not support allowance of the disputed issue, or the taxpayer does not meet the criteria that is for that issue, disallow the request in full. Use an open paragraph in the appropriate letter to inform the taxpayer of the specific reasons they did not qualify for the tax benefit or what specific information was missing that kept you from allowing the tax benefit. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer and document the workpapers to record the facts and circumstances supporting your decision. Do not suspend case. For closing actions, IRM 4.13.1.4.7.3, Closing Procedures Full Disallowance.

  2. Disallowed in Part – If documentation/research supports the allowance of only part of the issues and there is no conflicting evidence present that the taxpayer is entitled to the issues contested, allow the portion of the request that the taxpayer is entitled to. Use an open paragraph in the appropriate letter to inform the taxpayer how you arrived at your decision. If the partial allowance was because the taxpayer did not qualify for a specific issue, make sure you provide a full explanation. If the partial disallowance was because of missing information, explain to the taxpayer what information is missing. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer. Document the Reconsideration workpapers with non-qualifying/missing information. Record the facts and circumstances supporting your decision. Do not suspend case. For closing actions, IRM 4.13.1.4.7.2, Closing Procedures - Partial Disallowance.

(2) A determination cannot be made based on the documentation received and available research (CEAS, DUPOL DDBOL, DDBKD, AIMS, TXMOD, IMFOL, RTVUE & INOLET, & MFTRA U):

  1. If the taxpayer’s phone number is in the case file one phone call attempt must be made in an effort to obtain missing documentation or clarify an unresolved issue relative to the reconsideration request before disallowing in full or in part due to lack of information. Before calling the taxpayer review the case file and advise the taxpayer what documentation is needed.

    Note: If working a Taxpayer Digital Communications (TDC) case, a phone call is not required. See IRM 4.19.13.33.3, Deviations from Standard Procedures on TDC Cases. When making or receiving phone calls, examiners must follow IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure they are speaking to the appropriate taxpayer and to prevent unauthorized disclosure of tax information. Examiners are responsible to return messages left by the taxpayer on the IRS Desktop phone within three business days.

  2. Use judgment and professional decision making to come to a conclusion after speaking to the taxpayer. The facts and circumstances combined with oral testimony may substantiate entitlement to the issues being contested. Update workpapers with phone number, date and time called. If the taxpayer can be reached and they indicate they have the documents to send or fax, allow 10 days for a reply. Purge the case after 15 days. Document the workpapers with qualifying/non qualifying or missing information, and the facts and circumstances supporting your decision.

  3. If taxpayer cannot be reached by phone, document the workpapers with non-qualifying or missing information, your decision and the facts and circumstances supporting your decision. Issue Letter 3339-C requesting the missing information. Include Pub 1, Your Rights as a Taxpayer, as an enclosure. Allow a 45 day suspense period and update CEAS to Status Code 7700.

    Note: Cases updated to Status Code 7700 must be moved off the desktop to the Suspense File Server. This will allow the Autoclose to close the CEAS controls by systemically updating the case to Status Code 7305 and archiving the case.

Full Documentation

(1) A reconsideration request is received with supporting documentation for all disputed issues. If documentation and research substantiates the issues and there is no conflicting evidence present, or after researching and considering all the facts and the preponderance of evidence indicates that the taxpayer is entitled to the adjustment being requested, allow the reconsideration. Document your workpapers with the information to record the facts and circumstances that support your decision. For closing actions IRM 4.13.1.4.7.1, Closing Procedures Full Allowance.

Closing Procedures

(1) After the determination is made, follow the applicable closing procedures.

Closing Procedures - Full Allowance

(1) If the request for abatement is accepted in full:

  1. Input TC 29X with Reason Code 068, Full Allowance on IDRS and the appropriate Item Reference number/Credit Reference Number for issues allowed. Ensure all penalties assessed in the original examination are addressed and adjusted accordingly.

  2. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

  3. Close IDRS (TXMOD) control.

  4. Update abatement information in the CEAS audit recon information screen, validate the assessment information (tax & credits) is accurate, close CEAS with Status Code 7600, Full Allowance and archive case.

(2) If EITC is allowed in full the following IDRS actions are also needed:

  1. If TC 810 is present input TC 811 to reverse.

  2. Research AIMS for open year(s). If subsequent year(s) are open for related programs, leave a CEAS action note for cases both in batch and to the assigned examiner to inform them of the resolution of reconsideration cases(s). This action will reduce taxpayer burden and ensure consistent taxpayer treatment.

    Note: When processing timely filed reconsiderations and it appears the RSED has expired, see IRM 25.6.1.10.2.7.2.2, Two-year Rule, or IRM 25.6.1.10.2.8.4, Foreign Tax Credit, for proper processing as applicable.

Closing Procedures - Partial Disallowance

(1) If the request for abatement is denied in part:

  1. Send a Letter 3340-C if there is a balance due, or a Letter 106-C if the account is in zero balance to the taxpayer specifying the reason for disallowance. When sending Letter 3340-C select paragraph to include Pub 1, as enclosure, (Letter 106-C encloses Pub 1 automatically). Both letters offer the taxpayer appeal rights and the right to file suit if they do not agree with the determination.

  2. Prepare examination report Form 4549, Report of Income Tax Examination Changes, and enclose with a cover letter. Letter 4306, Reply to Closed Correspondence Examination Mail, or Form 5260, Quick Note, can be used for this purpose. Advise the taxpayer that Letter 3340-C /Letter 106-C will be sent under separate cover.

  3. If only one of two qualifying children, or two of three qualifying children are being allowed for EITC, input a TC 971 with Action Code 135 and list the SSN of each qualifying child being allowed.

  4. If EITC is reduced for adjustments to income or expenses, the taxpayer will be required to recertify on the next return filed claiming EITC. Input a TC 971 with Action Code 156 to set the recertification indicator with a value of "9”.

  5. Input TC 29X with Reason Code 067 - Reconsideration Disallowed in Part, as well as any other applicable reason codes. Also include the Item Reference Number/Credit Reference Number for issues allowed/disallowed. Ensure all penalties assessed in the original examination are addressed and adjusted accordingly.

  6. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

  7. Close IDRS (TXMOD) control.

  8. Update abatement information in the CEAS audit recon record, validate the assessment information (tax & credits) is accurate and close CEAS by updating to Status Code 7500, Partial Disallowance and archive case.

    Note: When processing timely filed reconsiderations and it appears the RSED has expired, see IRM 25.6.1.10.2.7.2.2, Two-year Rule, or IRM 25.6.1.10.2.8.4, Foreign Tax Credit, for proper processing as applicable.

Closing Procedures - Full Disallowance

(1) If the request for abatement is denied in full:

  1. Send a Letter 3340-C (or Letter 916-C in appropriate circumstances) to the taxpayer if there is a balance due or a Letter 105-C, if the account is in zero balance. The letter must specify the reason for the disallowance. Include a Publication 1, Your Rights as a Taxpayer, as an enclosure with the Letter 3340-C. Letter 105-C will include Pub 1 automatically. Both letters offer the taxpayer appeal rights and the right to file suit if they do not agree with the determination.

  2. Input TC 29X with Reason Code 066 - Reconsideration Disallowed in Full. If Letter 3339-C was issued and the taxpayer did not respond, also use Reason Code 064 – Reconsideration No Response and the appropriate Item Reference number/Credit Reference Number for Issues disallowed. Also include other appropriate reason code(s) for the issues involved.

  3. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

  4. Close IDRS (TXMOD) Control.

  5. Close CEAS case by updating to Status Code 7400- Full Disallowance and archive case.

Closing Procedures - No Reply

(1) After 45 days, cases in Status Code 7700 will be systemically closed into Status Code 7305 and archived in CEAS. It is important to move the cases off your desktop when updating to Status Code 7700 so the system can close and archive the CEAS case correctly if the TP does not reply. The system will bypass cases in Status Code 7754 indicating mail was received during the suspense time period. The autoclose functionality will only close CEAS. The Autoclose Report number 8872 is a monthly report broken down by cycle. The update is run on the weekend so this report will be pulled every Monday for a list of TINS that were systemically closed the prior week. The report will be used to pull the paper case file from Suspense and complete the remaining manual closing actions;

  1. Issue appropriate closing letter. Letter 105-C must be sent for zero balance or Letter 3340-C if there is an unpaid balance. Include Pub 1, Your Rights as a Taxpayer, with Letter 3340-C.

  2. Input TC 290 to close case, with Reason Code 066, Disallowed in Full, Reason Code 064, Reconsideration No Response and any other appropriate reason codes. Attach paper case to file.

  3. Input a TC 971 and the appropriate audit reconsideration action code to indicate how the reconsideration is being closed.

    Note: If cases are not taken off desktop when put into Suspense Status Code 7700 the case will be systemically closed into 7305 but the Recon case cannot be systemically archived in CEAS. Cases left on the desktop in Status Code 7700 will need to have this step performed manually.

Reconsideration TC 971 Action Codes

(1) The examiner will input a TC 971 Action Code to indicate the case disposition. The action codes must be input at the point of case closure.

(2) The Reconsideration TC 971 Action Code table below provides the valid Action Codes used for Reconsideration dispositions worked by the Campus:

ACTION CODE

EXPLANATION FOR USE

564

No Response - Campus

565

No Response - Field

566

Full Disallowance - Campus

567

Full Disallowance - Field

568

Full Allowance - Campus

569

Full Allowance - Field

570

Partial Disallowance - Campus

571

Partial Disallowance - Field

576

Letter 3338C sent

Replies to Letter 3340C/ Exam Procedures

(1) If the taxpayer provides further documentation in response to Letter 3340-C:

  1. The new documentation received must be evaluated. Adjust account if the documentation supports a full abatement of tax or reversal of credits previously disallowed. If documentation supports only a partial abatement of tax or reversal of credit, adjust account accordingly and formally disallow with Letter 106-C, if account is full paid, send Letter 916-C if the account is in balance due status for the issues that were not substantiated. Use an open paragraph to advise the taxpayer that the documentation does not permit any further adjustment to their account. Use paragraph advising of Appeal Rights and Claim Procedures. Also inform the taxpayer to refer to the enclosed Pub 1.

  2. If the documentation received is the same documentation as previously submitted or partial documentation that does not change the original determination formally disallow with Letter 105-C/ Letter 106-C if account is fully paid or Letter 916-C if the account is in balance due status. Use open selective paragraph to advise the taxpayer that the additional information submitted does not allow you to reverse the audit adjustment of the year they are contesting. Also inform the taxpayer to refer to the enclosed Pub 1 which explains the Appeals process and Claim Procedures for further consideration of their abatement request.

  3. When sending a 105-C/106-C use Exhibit 4.13.1-1 for the toll free number that will be entered on the letter.

  4. If the taxpayer indicates an inability to pay the balance in full, document the taxpayer's request for an installment agreement and forward a copy of the correspondence to the co-located Compliance Service Collection Operation (CSCO).

Replies to Disallowance Letters (105, 106 & 916-C)

(1) If the Taxpayer submits additional information that would result in a decrease to the Exam assessment after a disallowance letter has been issued, review CEAS to determine if the information sent is valid and adjust accordingly.

  • If additional information results in a partial abatement, follow partial abatement procedures, and send Letter 916-C. Use an open paragraph to advise the taxpayer of how you arrived at your decision and remind taxpayer of appeal rights in previous letter.

  • If the partial disallowance was because the taxpayer did not qualify for a specific issue, make sure that you give a full explanation. If the disallowance was because of missing information, advise the taxpayer of the specific missing information. If the taxpayer did present documentation intended to support the allowance of an issue, but you decided that the information was insufficient, address why the information did not fully support the allowance in your explanation to the taxpayer. Document workpapers with non-qualifying/missing information. Record the facts and circumstances that support your decision, and send Letter 916-C. Use an open paragraph to advise the taxpayer that the documentation does not permit any further adjustment to their account. Use paragraph advising of Appeal Rights and Claim Procedures. Also inform the taxpayer to refer to the enclosed Pub 1.

(2) If the taxpayer submits additional/same information that would not change the former audit results, notate CEAS and send Letter 916-C. Use open selective paragraph to advise the taxpayer that the additional information submitted does not allow you to reverse the audit adjustment of the year they are contesting. Also inform the taxpayer to refer to the enclosed Pub 1 which explains the Appeals process and Claim Procedures for further consideration of their abatement request. Record the facts and circumstances that support your decision.

Statute of Limitations

(1) All cases must be reviewed to ensure protection of the statute, see IRM 25.6, Statute of Limitations for specific instructions.

(2) Assessment Statute Expiration Date (ASED) normally expires three years from the date the original return was filed or three years from the due date of the return, whichever is later.

  1. Some conditions extend the ASED, such as bankruptcy, 25 percent omission, filing joint after filing separate, fraud. Refer to IRM 25.6.1.5, Basic Guide for Processing Cases with Statute of Limitation Issues, for additional information.

(3) Refund Statute Expiration Date (RSED) is generally, 3 years from the time the original return was filed or 2 years from the time the tax was paid, whichever is later. When a claim disallowance letter was issued the Service may reconsider a disallowance during the 2 year period in which the taxpayer may file a refund suit. The 2 year period being with the date on the certified letter of claim disallowance, see IRM 25.6.1.10.2.5.5, Reconsideration of a Disallowed Claim.

  1. When adjusting an account, the RSED may be imminent or may have expired. Refer to IRM 25.6.1.5, Basic Guide for Processing Cases with Statute of Limitations Issues, IRM 25.6.1.7.2, Time When Payments and Credits are Considered to be Made, and IRM 25.6.1.10.2.7, Claims for Credit or Refund - General Time Period for Submitting a Claim, for additional information.

  2. If a taxpayer submits a reconsideration request for reversal of an audit assessment or reversal of credits disallowed on the original return and we have not sent a formal disallowance letter, then the RSED is still open. See IRM 25.6.1.10.2.5.4, Reconsideration After the RSED Where Notice of Claim Disallowance Not Sent, for additional information and instructions on how to input the adjustment when the RSED is expired.

  3. The IRM may reconsider a disallowance during the 2-year period in which the taxpayer may file a refund suit. The 2-year period begins with the date on the certified letter of claim disallowance, see IRM 25.6.1.10.2.5.5, Reconsideration of a Disallowed Claim.

(4) If an adjustment is made to a taxpayer’s account and the result is an overpayment that cannot be refunded in full or in part due to the RSED the examiner is required to take the following actions:

  1. The taxpayer will be notified that the IRS adjusted the account, but the overpayment being requested will not be refunded in full or in part due to the Refund Statute of Limitations. Use Letter 105-C or 106-C with the appropriate explanation. Taxpayers may appeal the IRS’ decision that the taxpayer filed the request after the RSED expired. Make sure that the letter includes an explanation of the available appeal rights and the right to file suit.

  2. The excess credit(s) will be applied to the Excess Collections File (XSF) via Form 8758. See IRM 25.6.1.7.3, Excess Collection File (XSF) and Unidentified Remittance File (URF), for instructions.

  3. After the credit(s) have been moved to XSF, a manual refund must be initiated for any remaining refundable credit. See IRM 21.4.4, Manual Refunds, for instructions.

  4. All actions will be annotated in the workpapers and the case will be closed using the applicable CEAS status codes.

Appeal Rights

(1) This section discusses appeal rights. The Appeals mission is to resolve Federal tax controversies without litigation on a basis which is fair and impartial to both the Government and the taxpayer, promotes a consistent application and interpretation of, and voluntary compliance with, the Federal tax laws, and enhances public confidence in the integrity and efficiency of the IRS.

(2) An audit reconsideration case will be forwarded to Appeals, if requested following procedures in Publication 5, Your Appeal Rights and How to Prepare a Protest if You Disagree, if:

  1. The case is accepted for reconsideration, and

  2. The result of the reconsideration is that the taxpayer’s request is disallowed in full or part.

(3) An audit reconsideration case will not be forwarded to Appeals in the following circumstances:

  1. The case is accepted for reconsideration, but the taxpayer does not respond to the appointment letter or does not keep a scheduled appointment. If the taxpayer is unable to attend the meeting due to unavoidable circumstances such as severe weather conditions or a medical emergency, the appointment should be rescheduled.

  2. The case is not accepted for reconsideration for one of the reasons stated in IRM 1.2.1.4.15 Policy Statement 3-15 (Formerly P-2-89), Reconsideration of an Unpaid Assessment.

(4) If the taxpayer does not wish to appeal, but still wishes to dispute the audit reconsideration determination.

  1. The taxpayer must pay the full amount due and file a claim for refund with the Internal Revenue Service.

  2. Under IRC 6511(a), the taxpayer must file a claim for refund within three years from the time the return was filed or two years from the time the tax was paid, whichever expires later, or if no return was filed by the taxpayer, within two years from the time the tax was paid.

(5) The taxpayer’s new information must be considered before the case is sent to Appeals. In some instances, the taxpayer may provide Appeals with new information or new evidence related to a disputed issue that the taxpayer did not previously share with the examiner. If the Appeals Technical Employee believes the information merits additional analysis or investigative action by Examination, Appeals will release jurisdiction and return the case to the examiner to evaluate and make an audit determination. See IRM 8.6.1.7.5, Taxpayer Provides New Information.

(6) See IRM 4.13.1.4.11.1, Request for Appeals, for case building and routing instructions.

Note: For Non-Docketed Appeals: Communications between the referring function and Appeals that address the strengths and weaknesses of the issues and positions of the parties, accuracy of the facts, credibility, or cooperation of the taxpayer, etcetera, are prohibited ex parte communications unless the taxpayer or taxpayer's representative is offered the chance to participate in the communications. However, communications between the referring function and Appeals relating to ministerial, administrative, or procedural matters are permissible. Refer to sections 2.02(6) and 2.03(3) of Rev. Proc. 2012--18, Ex Parte Communications Between Appeals and Other Internal Revenue Service Employees, and IRM 8.1.10, Ex Parte Communications, for additional discussion regarding ex parte communication with Appeals.

Request for Appeals

(1) If the taxpayer indicates they want their case to be reviewed by the Appeals Function, the taxpayer must show they have made an attempt to document their entitlement through the reconsideration process, and their request has been denied. All evidence provided by the taxpayers must be reviewed by the examiner before the referral to Appeals. For these cases and any case previously worked by Appeals case build as below before sending to Appeals.

  1. If TXMOD control is still open, close with message to indicate sent to Appeals. Do not reverse TC 470. Input a new TC 470 to ensure that the taxpayer is not subjected to collection activity pending the appeal of the IRS determination.

  2. If TXMOD controls are closed, input TC 470 and put history item on TXMOD to indicate sent to Appeals.

  3. Close CEAS/RGS control with Status Code 7301.

  4. Send Letter 86-C to the taxpayer advising the case is being transferred to Appeals. Use an open paragraph to explain, "As you requested, we are transferring your case for a hearing with an independent appeals officer. During the time your case is in Appeals, we will not pursue any collection activity on your account. However, you should know that interest and penalties will continue to accrue if there is still a balance due after the appeals decision. Therefore, you might want to make voluntary payments during the time Appeals is considering your case to minimize any interest or penalties if you ultimately do owe.”

  5. Forward the case to the appropriate Appeals Office per the Appeals Routing guidelines below.

  6. Open AMDISA is not required for transfer.

  7. Complete Form 3210, Document Transmittal.

(2) Prior to sending case to Appeals, the case file must include the following: (The documents below may have to be requested from files or printed from CEAS.)

  1. Taxpayer’s original return

  2. Original audit adjustment

  3. Audit Report(s) (example - F 4549)

  4. Audit Reconsideration Adjustment (if reply to audit recon disallowance)

  5. Workpapers (original audit and audit reconsideration workpapers)

  6. Taxpayer Correspondence

  7. Letters; Initial contact, 30 day, etc.

  8. Statutory Notice of Deficiency

  9. IDRS research

    Note: If requesting administrative files, make two attempts three weeks apart (the second request must be a special search). If the administrative file is not received from Files three weeks after the second request, forward without the requested documents. Attach prints of ESTAB's and any Charge Outs from Files to verify that the documents were requested.

(3) Ensure cases are routed to the correct Appeals office as identified by the Appeals Office code. Consult Appeals website at: Appeals Case Routing, for case routing addresses.

Audit Reconsiderations EITC 2/10 Year Ban

(1) Overview: IRC 32(k), allows the IRS to prohibit a taxpayer from claiming EITC for a period of time if the IRS determines that the taxpayer intentionally or recklessly disregarded the rules for claiming EITC (2 year ban) or fraudulently claimed EITC (10 year ban). When the 2 or 10 year ban is applied to a tax year, the taxpayer is notified that the ban is being asserted no later than the Statutory Notice process. The letter must advise the taxpayer of the ban and describe the taxpayer’s conduct giving rise to the ban in the determination year. The original case file must also document managerial approval to impose the ban prior to Statutory Notice of Deficiency issuance per IRM 4.8.9.8.7, Proper Managerial Involvement. IMFOLE and ENMOD will carry an EITC-recertification Indicator “2” (2 year ban) or “4” (10 year ban) along with the year the Ban originated and the Ban expires. For additional information see IRM 20.1.5.3.5, Two and Ten Year Bans on Claiming the Earned Income Tax Credit (EITC), IRM 4.19.14.7.1, 2/10 Year Ban - Correspondence Guidelines for Examination Technicians (CET), and IRC 32(k) (1) (B).

(2) Evaluating 2 of 10 year ban Audit Reconsideration: The taxpayer needs to address the conduct that was cited in the workpapers for the originating year the ban was imposed. In some cases, the taxpayer will request a reconsideration of the denial of the EITC for a year under the ban instead of the originating year. In that situation, send Letter 3338-C or Letter 3339-C to advise the taxpayer that they must address the imposition of the ban on the originating year before the IRS can consider the more current year when EITC was denied because of the ban. The Audit Recon examiner must request the administrative file or secure the CEAS workpaper and statutory notice, if available, to ascertain the taxpayer’s conduct giving rise to the assertion of the ban. A 10 year ban was imposed; refer reconsideration to the applicable Area Office or Campus that asserted the ban to be worked.

  1. Taxpayer Services 10 year bans will be forwarded to Austin Campus for reconsideration, See IRM 4.19.10.4, Fraud Referrals.

  2. SBSE Area Office 10 year bans will be forwarded to the applicable Area Office and case perfected in accordance with IRM 4.13.1.4.5, Area Office Reconsiderations, prior to sending.

  3. SBSE Campus 10 year bans will be routed to the campus that imposed the ban and referral made to the Campus Fraud Coordinator for determination.

Note: The examiner may allow or disallow the ban based on the explanation, testimony, and documentation the taxpayer provided and the facts and circumstances documented in the administrative file. The examiner will bear in mind that the IRS must show that the taxpayer was reckless or intentional (for 2 year ban) or fraudulent (for 10 year ban) to maintain the imposition of the ban in the reconsideration process.

(3) No Documentation - 2 year ban: If a request for reconsideration of the Ban is received without any documentation, send Letter 3338-C  or Letter 3339-C, if applicable, and advise the taxpayer that they must provide documentation to show they were not reckless or intentionally disregarded the EITC rules for the year the Ban was imposed. Cite the taxpayer conduct as documented in the administrative file or the CEAS work paper. Follow procedures under IRM 4.13.1.4.6.1, No Documentation.

(4) If Audit Reconsideration allowed: Remove 2 year ban & Allowance of EITC. If the taxpayer provided information on the ban to substantiate allowance of EITC, removal of the 2 year ban, the examiner will:

  1. Reverse the Ban with a TC 971 Action Code 56 to remove the recertification indicator.

  2. Allow the EITC with TC 764.

  3. Check TXMOD/ IMFOLT for TC 420 in subsequent tax years. If open in Campus Exam send CEAS Action Note explaining Recon determination.

  4. If TXMOD/ IMFOLT research indicates there are no open subsequent tax period(s) however, the taxpayer was disallowed EITC through Math Error or Exam, and the children were the same children claimed on the ban year, the examiner must allow EITC in the subsequent year. Notate CEAS and IDRS with appropriate reason and status codes.

  5. If TXMOD/ IMFOLT research indicates there are no open subsequent tax period(s) however, the taxpayer was disallowed EITC through Math Error or Exam and the children were NOT the same children claimed on the ban year, and the taxpayer is not the custodial parent, the examiner will advise the taxpayer with Letter 3338-C of the documentation needed to request a reconsideration of EITC for the applicable years. Notate CEAS and IDRS with appropriate reason and status codes. If research (DDBKD/DUPOL) shows taxpayer is the custodial parent allow the EITC claimed in the subsequent year.

Note: It is possible to remove the Ban and not reverse the previously disallowed EITC or to remove the Ban and reverse EITC depending on the information provided by the taxpayer.

(5) Removal of 2 year ban and Disallowance of EITC: If the determination is made that the Ban was imposed in error, or other facts and circumstance dictate that the Ban should not be enforced, and the taxpayer did not provide information to support the reversal of the EITC disallowance:

  1. Reverse the Ban with a TC 971 Action Code 56 to remove the recertification indicator.

    Note: The Recertification indicator will not reset to one (1).

  2. Check TXMOD/ IMFOLT for TC 420 in subsequent tax years. If open in Campus Exam send CEAS Action Note explaining Recon determination. If open in Field Exam office, AIMS status 12, send Form 1725 to notify the ban was removed and EITC allowed.

(6) Disallow Audit Reconsideration: If the taxpayer failed to present any information to substantiate EITC entitlement for the year that triggered the ban and also fails to present any information to address the conduct that led to the imposition of the ban, the audit reconsideration will be disallowed. Follow instructions outlined in IRM 4.13.1.4, Central Reconsideration Unit, when disallowing reconsideration. Notate CEAS and IDRS with appropriate reason and status codes.

Exam SFR Reconsiderations

(1) A reconsideration occurs when the IRS processes a Substitute for Return (SFR) and the taxpayer subsequently files an original return.

(2) These procedures will ensure:

  1. The amount of tax assessed is correct.

  2. Cases are handled in a consistent manner.

Reconsiderations of Delinquent Returns Worked in a Taxpayer Services Campus

(1) All Taxpayer Services Exam SFR Reconsideration cases will be worked in the receiving campus.

(2) Refer complex issues to Classification. Review IRM 4.19.11.2.1, Procedures for Screening Individual Returns, to identify issues that are not conducive to a correspondence audit. Follow the “Accepted” instructions below for all other cases.

(3) The table below explains what action to take based on Classification’s determination:

IF

AND

THEN

Accepted,

N/A

Assign to CRU. Do not establish on AIMS. Make the appropriate changes to the account per the return filed.

Selected for Campus,

the only issue is income,

Do not establish on AIMS. Work the case following audit recon procedures.

Selected for Campus or Area Office,

the issues are additional income and expenses, and the expenses are being questioned,

If expenses are disallowed, establish case on AIMS. Follow Statutory Notice procedures to assess the income and disallow the expenses.

Selected for Campus or Area Office,

issues are selected other than income,

Establish case on AIMS. If the issues can be worked by the Campus, assign the case to Correspondence Examination. If the case contains complex issues that need to be worked in SBSE, assign the case to the appropriate Area Office or SBSE Campus.

Note: When transferring a case to the AO, see IRM 4.13.1.4.5.1, Transfer to Area Office

.

(4) The CEAS Audit Recon record will be updated accordingly.

  1. If the case is "Accepted" by Classification, the CEAS record must be updated with Status 7600 - Full Allowance. Also update the abatement field in the CEAS record. It is not necessary to send a revised report or acknowledgment letter on SFR returns that are accepted in full. The taxpayer will receive a computer-generated notice notifying them of the tax adjustment based on the acceptance of their delinquent filed return.

  2. If the case is "Selected" by Classification and the only issue, income, is allowed after Audit Reconsideration, update the CEAS record with Status 7600 – Full Allowance. Also update the Abatement field in the CEAS record.

  3. If the case is "Selected" by Classification and the only issue, income, is disallowed after Audit Reconsideration, update the CEAS record with Status 7400 – Full Disallowance.

(5) If an unsigned return is submitted in response to an SFR notice, whether it is a claim for a refund or reports additional tax due, do not accept or process. The return is invalid. Reject to the taxpayer with Form 3531, Request for Signature or Missing Information to Complete Return. Review the return for other missing items and request all missing required information. Form 3531 will include instructions to the taxpayer that they may fax the return or mail back to the reconsideration unit. Ensure the correct fax number and address with Stop numbered is included.

Exception: Do not mail back numbered returns or returns with date stamps. Correspond with the taxpayer for signature with jurat statement using Letter 2416-C. Suspend the case for 45 days with Status Code 7700. If the taxpayer does not respond to Letter 2416-C, treat the case as a full disallowance. For closing actions, see IRM 4.13.1.4.7.3, Closing Procedures - Full Disallowance. Document the workpaper with your decision.

Reconsiderations of Delinquent Returns worked in an SB/SE Campus

(1) An SFR reconsideration is the initial original delinquent return submitted by the taxpayer to contest a SFR assessment made by SB/SE Examination.

(2) All IMF SB/SE Examination SFR Reconsiderations are worked in the Examination Operation at the Brookhaven Campus.

(3) SBSE SFR reconsiderations are identified by the following IDRS transaction codes:

  1. A TC 150 followed by "0.00" and the literal "SFR" to the right of the TC 150 assessment Document Locator Number (DLN),

  2. Tax class 2 with Document Code 10 and Julian date of 888 in the DLN,

  3. Blocking Series 000-299,

  4. The tax amount assessed will appear as a TC 300 (Examination SFR Assessment) with blocking series 540-549 or 640-649,

  5. TC 420/421

  6. Primary Business Codes (PBC) 295 through 299 for SBSE campus and PBC 201 through 207 for Area Office assessments. The PBC is located to the right of TC 420.

(4) If the module contains multiple TC 300s and no Appeals code or a TC 971 AC-282 the taxpayer original return was received during the Non-filer examination and is not a SFR reconsideration. See IRM 4.13.1.3.2, Function Responsible & Routing Instructions.

(5) If the module contains a TC 300 SFR assessment and subsequently has a TC 599 CC 89 followed by a TC 29X adjustment, the taxpayer original delinquent return (SFR reconsideration) has already been processed. Returns will be forwarded to Accounts Management. If return figures match TC 29X adjustments, it is a duplicate and will be sent to Files for association.

(6) If the module contains a TC 290 SFR assessment see IRM 4.13.1.3.2, Function Responsible & Routing Instructions.

(7) If TC 300 follows a TC 29X adjustment route to Centralized Reconsideration Unit (CRU) per TC 420 PBC.

First Read Screening

(1) Reconsideration requests must be screened within 5 workdays of receipt of the Operation to ensure they will be accepted and worked in the centralized SBSE SFR Reconsideration unit prior to controlling on IDRS within 14 days of receipt. Reconsiderations are not controlled on CEAS.

(2) Initial Screening criteria includes attributes listed see IRM 4.13.1.5.2, Reconsideration of Delinquent Returns worked in SB/SE Campus. Verification includes analyzing return, IDRS and CEAS RGS file for:

  1. Signature on return. If the taxpayer submits an unsigned return in response to an SFR assessment, do not accept or process the return. The return is invalid and unprocessable by the IRS. Reject to the taxpayer with Form 3531. Review the return for other missing items and request all missing required information. Form 3531 will include instructions to the taxpayer that they may fax the return or mail back to the reconsideration unit. Ensure the correct fax number and address with Stop numbered is included.

    Exception: Do not mail back numbered returns or returns with date stamps. Correspond with the taxpayer for signature with jurat statement using Letter 2416-C.

  2. Verify TC 420 PBC, If PBC is Taxpayer Services, check CC SUMRY for open controls on other SFR years. If multiple SFR reconsiderations are present and one or more is SBSE, the Taxpayer Services SFR reconsideration will be worked in conjunction with SBSE reconsideration. If Taxpayer Services assessed the SFR but the reconsideration contains Schedule(s) C, E, F, or Form 2106, Employee Business Expenses, it will be worked by SBSE.

  3. Valid ASED

  4. Verify first original return on CEAS RGS for agreed Exam disposal codes. If taxpayer signed Form 4549 and did not submit return during non-filer examination, the return is an SFR reconsideration.

  5. Research spouse on Married Filing Joint Filing Status returns.

Processing Procedures for SB/SE Exam SFR Reconsiderations

(1) Cases will be worked in IRS receive date order with the following priority exceptions:

  • Tax increases

  • TAS cases

  • Form 3870 referrals from Revenue Officers

  • Expedites from Appeals, Bankruptcy, Office in Compromise, Revenue Officers, etc.

(2) When there are other open SFR tax modules on IDRS CC SUMRY, the returns must be worked together to provide better customer service.

(3) Collection hold will be input to accounts using TC 470. Use REQ77 to input. No collection hold can be placed on module when in Status 12, 26, 60, 71 and 72. No collection hold will be placed on Form 3870 referrals from Revenue Officers unless specifically directed by them in writing.

Exception: if the case will be worked and closed within one day, there is no requirement to input TC 470/ TC 472.

(4) The IAT xMend tool will be used to process the return.

(5) An AMS history must be input to annotate actions taken on a case.

(6) If there are no prior adjustments besides the original SFR assessment, blocking series 00 will be used unless stated otherwise. Blocking Series 05 will be used on joint filer back out.

(7) Pull TXMOD to check Freeze codes.

(8) Follow existing procedures to determine that SFR reconsideration return is the first original return submission from taxpayer such as verifying correct ASED, checking for TC 976 and viewing CEAS on Disposal code 10 with Technique Code 2 to ensure the first original return was not received during the Non-Filer examination. Check SUMRY for open controls to identify duplicate assignments and related tax years for primary taxpayer and when applicable secondary taxpayer.

(9) Prior to adjusting account, verify initial first read screen and review account and return for:

  • Income

  • SSN’s

  • Address

  • X-ref Spouse

  • Forms and/or Schedules

  • Signatures

Verify taxpayer name, address, social security number and make chances as necessary. It is not necessary to validate dependent TIN’s.

(10) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(11) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(12) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  • ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(13) Check all necessary supporting schedule and forms are present prior to processing. Follow guidance in IRM 5.18.1.9.2.3.20, Math Errors.

(14) Income will be verified for complete reporting on IDRS and also Form 4549 on CEAS. Follow guidance in IRM 5.18.1.9.2.3.21, Under/unreported Income.

Note: The xMend tool will math verify certain schedules.

(15) Accept taxpayer’s figure for estimated tax penalty if present on return. If blank, compute the penalty.

(16) If the Refund Statute Expiration Date (RSED) has expired, the allowable Rebate Recovery Credit (RRC) must be limited to the amount of any remaining tax due after all other credits have been applied to prevent any credit from refunding.

(17) If Schedule M for the Making Work Pay (MWP) credit is not attached, do not correspond. Allow the credit for the primary taxpayer and secondary, if applicable, since the SFR assessment included the benefit of the credit.

Area Office SFR Reconsiderations

(1) Primary Business Codes (PBC) 201 through 207 with EGC 1XXX or 2XXX are used to identify Area Office Reconsiderations. Requesting the administrative file is required on cases meeting Exam referral criteria.

(2) ESTAB to secure administrative file. Make two attempts, three weeks apart (the second request must be a special search). If the administrative file is not received from Files three weeks after the second request, obtain the RGS administrative file through CEAS-VIEW CASE READ-ONLY FIELD.

(3) After the administrative file and/or RGS detail is secured, review the administrative file or RGS records to determine if the taxpayer submitted a return during the examination.

(4) If determined return is reconsideration, process and route to Exam Classification for selection and transfer to Area Office.

Note: If the AO worked multiple year packages, upon closing CCP enters a TC 971 AC 057 with a year. The year designates the closing document that contains the administrative workpapers for all years. If only one year is being opened for reconsideration, you must request the year with the workpapers attached as well. When the administrative file is received, detach the workpapers and attach to the reconsideration case file. Input TC 971 AC 057 on the year(s) not being reconsidered to indicate what year the workpapers are now associated with.

Form 3870 from Revenue Officers

(1) Received from CFf Mailbox: The unit CFf coordinator screens all mailbox receipts. When a Revenue Officer (RO) secures a delinquent return, they will prepare Form 3870 and forward the return to the appropriate campus. The RO is responsible for making sure the return is signed correctly, all income is reported and contains correct SSN’s. Examiners must math verify all income, SSNs and appropriate schedules attached. If the return is incomplete, contact the RO and have the missing information faxed. If this can’t be done, reject the form back to the RO.

(2) Paper Form 3870: Tax examiners will contact RO if return is incomplete.

Processing Procedures for Litigation -W and -V Freezes

(1) If the taxpayer is in litigation in the tax court or bankruptcy court, examiners must receive approval prior to processing the return.

(2) If -W freeze, send E-mail to *AP Inquiries for approval to process. Request Appeals closing code and how case closed. Refer IRM 4.13.1.4.1.3, Case closed in Appeals.

(3) If -V freeze, call Centralized Insolvency Operation (CIO) for approval to process at phone number provided listed in the Insolvency (Bankruptcy) National Field/ Centralized Site Directory.

Processing Procedures for Special Conditions

(1) Joint Filer Backout when both taxpayers have SFR assessment:

  • Make a copy of the first and second page on the Form 1040

  • Address all payment on the secondary account

  • Process case through xMend and input TC 594/84 on the X-ref spouse

  • Send a Correspondex letter the secondary TP

  • Continue processing the primary taxpayer’s return

(2) Joint Filer Backout when only the Secondary taxpayer is SFR assessment:

  • Make a copy of the first and second page of the Form 1040

  • Address all payment on the secondary account

  • Process case through xMend and input TC 594/84 on the X-ref spouse

  • Send a Correspondex letter the secondary TP informing them that the account has been resolved and forwarded for processing, to reflect their joint filing status. Include, if needed, the phone number the TP can contact for a lien fee removal (1-800-913-6050). IRM 5.18.1.9.2.3.29.10, Lien Fee

  • Remove all SFR editing and write on top of the return “PROCESS AS ORIGINAL” in red

  • Circle the tax year and underline the Name Control in red

  • If any unreported income place red "D" on bottom of page 1 of return

  • Forward the original case for processing. Prepare a Form 3210, Document Transmittal, for Statutes (only on Statute years) to review and an additional Form 3210 so Statutes can forward the case

  • Send an Letter 86-C to the primary TP informing them that the case has been forwarded for processing, to reflect their joint filing status

(3) Abusive Tax Avoidance Transactions (ATAT):

  • An Abusive Tax Avoidance Transaction (ATAT) is any plan, or transaction designed, sold, or promoted by an individual, promoter, or return preparer for the purpose of circumventing tax laws or evading tax obligations, and offered to a person or entity with U. S. tax obligations to obtain tax benefits not allowed by law.

  • Per IRM 5.20.11.3, Substitute for Return Reconsideration, SFR assessments with an Exam ATAT project code will have identifier “OPEN ATAT” on TXMOD history.

  • Per IRM 5.20.11.3(6), Substitute for Return Reconsiderations, when a delinquent return with a History Item "OPENATAT" is received, the examiner will contact the ATAT Coordinator where the taxpayer is located to verify that the "OPENATAT" identifier is correct. A listing of ATAT coordinators is located at: ATAT Collection Coordinator Contacts by State

  • Process ATAT special condition returns as follows:

  • IF

    THEN

    The ATAT identifier is not correct, and a revenue officer or ATAT Coordinator informs the examiner that the "OPENATAT" control is incorrect,

    Process the delinquent return using existing procedures.

    The ATAT identifier is correct,

    1. Contact the ATAT Coordinator to obtain the name, phone number, and fax number of the revenue officer assigned to the account.

    2. Provide a copy of the return to the revenue officer by facsimile.

    3. Suspend the case for 15 days until pertinent information is received from the revenue officer.

    4. If pertinent information is not received within 15 business days, forward the return to Ogden: Internal Revenue Service Classification Team 101 Mailstop 47051973 N Rulon White Blvd Ogden, UT 84404.

    5. Prepare Special Handling Alert sheet and attach to the front of the case. Include a notation at the bottom of the ATAT Special Handling Alert "Pertinent information available but not received." The name and telephone number for the assigned revenue officer will be included.

    Note: All “OPENATAT” cases will be classified in Ogden.

  • Any ATAT SFR returns accepted by Ogden Classification will be processed expeditiously.

Recalculating SFR Penalties

(1) Computing the Failure to File Penalty (FTF)

  1. The FTF penalty is assessed on balance due returns filed after the due date or the extended due date. See IRM 20.1.2, Failure to File/Failure to Pay Penalties, for complete information.

  2. Exam SFR assessments usually post the FTF penalty manually with a TC 160.

  3. If the TC 300 has Priority code 9 or 3, input TC 162 .00 for correct calculation.

  4. If the TC 300 does not have Priority code 9 or 3, manually compute the FTF penalty.

(2) Computing the Failure to Pay Penalty

  1. The FTP penalty is assessed on tax not paid by the due date of the return, without regards to any extension to file. See IRM 20.1.2, Failure to File/Failure to Pay Penalties, for complete information on calculating the FTP.

  2.  If the TC 300 has Priority code 9 or 3, the FTP will systemically calculate on tax decreases. If tax is being increased, the FTP must be manually computed.

  3. If the TC 300 has no Priority code 9 or 3, manually compute the FTP. TC 272 will not be used if the Exam SFR assessment did not contain priority code 3 or 9. Instead, the penalty must be manually computed and adjusted.

(3) Computing the Estimated Tax (ES) Penalty

  1. Taxpayers are required to have tax withheld as income is received or make estimated tax payments during the year. When a taxpayer fails to take one of these actions, they may be subject to the ES penalty. See IRM 20.1.3, Estimated Tax Penalties, for complete information on computing the ES penalty.

  2. The ES penalty will always be manually computed.

  3. Priority code 8 needs to be input when adjusting all withholding tax with a TC 806/807.

(4) Previously Abated Penalties

  1. Cases that have penalty reversals that include A TC 290.00 with RC 065 and PRC 043 or 044 must not have the ES, FTF, or FTP penalties assessed on any balance due.

Statute of Limitation

(1) All returns must be reviewed to ensure protection of all statutes of limitation. See IRM 25.6, Statute of Limitations, for specific instructions on statute protection. See IRM 25.6.1.6.15, when a Document is Treated As Filed Under the IRC, to determine the return received date, and to determine the date the return is considered filed under the IRC.

Note: Per IRM 3.11.154.3.6, Statute Returns, No review for statute clearance is necessary for original returns secured by Compliance employees. Do not route to the Statute Control Unit any original return secured or any returns prepared under the authority of IRC 6020(b). Forward returns to files after input of adjustment.

(2) Refund Statute Expiration Date (RSED)

  1. The RSED is generally three years from the Return Due Date (RDD) for payments and prepaid credits if a return was filed, or two years from the payment date for other payments whichever is later. See IRM 25.6.1, Statute of Limitations Process and Procedures.

  2. SFR Reconsiderations are original returns. Generally, prepaid credits must be claimed within 3 years of the due date of the return with regard to extension. Therefore, if a SFR Reconsideration is received more than three years from the due date with regard to extensions, a refund of prepaid credits must not be made. There are conditions that extend the RSED, see IRM 25.6.1, Statute of Limitations Process and Procedures.

  3. Generally, the amount to be credited or refunded is limited to the tax paid during the three years immediately preceding the filing of a claim, plus the period of any extension of time to file. Therefore, even if prepaid credits are barred, available credits paid within three years of the received date of the SFR Reconsiderations are not barred.

  4. Do not allow any overpayment of prepaid credits or subsequent payments to refund or offset if the RSED has expired.

    Note: Do not solely rely on the RSED posted to TXMODA to determine if credits will be offset or refunded. Follow disallowance procedures in IRM 25.6.1, Statute of Limitations Process and Procedures.

  5. When barring a refund, take the following actions:

  1. Use Hold Code 4 on the ADJ 54 on IDRS- Hold Code 4 will hold the credit on the module and suppress the Notice of Adjustment.

  2. Send Letter 105-C with Appeal Rights. The Letter 105-C explains that the refund cannot be released.

  3. Prepare Form 8758, Excess Collection File Addition with as much information as possible at the time the adjustment is input. Form 8758 is used to transfer the barred credit from the module to the Excess Collection File (XSF).

  4. A copy of the prepared Form 8758 must be included in the closed case released for PAS review.

  5. The Form 8758 must be submitted for processing with five (5) business days of the adjustment posting.

(3) When the overpayment is partially barred, take the following actions:

  1. Use Hold Code 4 on the ADJ 54 on IDRS - Hold Code 4 will hold the credit on the module and suppress the Notice of Adjustment.

  2. Send Letter 106-C with Appeal Rights. The Letter 106-C explains that part of the refund cannot be released.

  3. Prepare Form 8758.

  4. A copy of the prepared Form 8758 must be included in the closed case released for PAS review.

  5. The Form 8758 must be submitted for processing within five (5) business days of the adjustment posting.

  6. After the expired credits have been moved to XSF, initiate a manual refund per IRM 21.4.4.2, What is a manual Refund?, using the Integrated Automation Technologies (IAT) Tool.

    Note: In the instance of a balance due return, where subsequent payments are barred, it will not be possible to complete box number 7 until the adjustment has posted.

(4) See IRM 25.6.1.7.3.1, Transferring Credit to XSF, for additional instructions on transferring credits to XSF.

(5) Assessment Statute Expiration Date (ASED)

  1. The general rule is that an assessment of tax must be made within three years from the date a return is filed or the due date of the return whichever is later. Generally, this means that tax must be posted or journalized to Master File within 3 years from the received date of the return. Additionally, the IRS has three years to assess additional tax due. See IRM 25.6.1, Statute of Limitations Process and Procedures, for exceptions to assessing additional tax within three years from the received date or due date of a return whichever is later.

  2. SFR default assessments and the SFR dummy TC 150 do not start the running of the ASED. Therefore, the ASED must be set when processing SFR Reconsiderations.

  3. SFR Reconsiderations that are tax increases must be posted to Master File within three years of the received date.

  4. If a return is received with an imminent ASED, see IRM 25.6.1.9.9.2, After Hours and Imminent Assessments. Imminent ASEDs are when the ASED is within 90 calendar days.

  5. When processing SFR reconsiderations, determine the ASED. If the ASED is not posted on IDRS or the ASED is not correct on IDRS, input the ASED on IDRS. Generally, the ASED is set three years from the received date of the return. See IRM 25.6.1, Statute of Limitations Process and Procedures to determine the date the return is considered filed under IRM when the return received is not valid.

    Note: Per IRM 3.11.154.3.6, Statute Returns, no review for statute clearance is necessary for original returns secured by Compliance employees. Do not route to the Statute Control Unit any original return secured or any returns prepared under the authority of IRC 6020(b). Forward returns to files after input of adjustment.

  6. To set the ASED input a TC 599 CC 89 using CC FRM49 with the received date of the return when processing.

  7. To correct an ASED posted to IDRS, input a TC 560 using CC REQ77.

Corresponding to the Taxpayer

(1) Correspondence may be issued to the taxpayer to:

  • Inform them that the return was processed but subject to changes due to math error.

  • Inform them that the return cannot be processed as submitted or refunds not issued due to statute time frames such as filing status changes separate to joint, credits or refunds barred.

(2) Disallowance letters based on statute time frames will contain the toll-free number. The taxpayer does not need to contact a specific employee to answer appropriately.

(3) If the return processed contains both math error and statute barred credits/refund, a Letter 474-C will be issued for the math error and the Letter 105-Cwill be issued for the barred credits/refund.

(4) If the taxpayer replies to a 105-C or 106-C letter requesting an Appeal, an administrative file must be created and routed to Appeals. For administrative file case building guidelines see IRM 5.18.1.9.2.1.4.1, Appeals Case Building.

IF

SEND LETTER

Disallowance of separate to joint returns

Letter 916-C to non-filer and Letter 105C to taxpayer who filed

Information is requested (missing Schedules, Forms, unreported income, etc.)

Letter 2416-C

Math error due to no reply from taxpayer for information requested

Letter 0474-C

Appeals & Tax Court cases

Letter 916-C Refer to IRM 4.13.1.4.1.3, Cases closed in Appeals

Disallowance of TETR credit

Letter 105-C

Refund barred

Letter 105-C

Joint filer back out

Letter 2358-C

Referrals to Examination

(1) All SFR Reconsiderations meeting local SFR Screening Matrix Criteria must be referred to Classification after the return has been processed and the adjustment posted to IDRS.

(2) When Examination Classification referral is needed:

  1. Input assessment

  2. Retain source document (Taxpayer’s Return)

  3. Use IDRS CC ESTAB (T) to recharge to Exam

  4. Use Form 5101 or local approved referral form to route cases to Exam

  5. Close any open SFR Reconsideration controls base on IDRS

  6. Attach IRPTR of SUPOL print for both primary and secondary taxpayers when under and unreported income is an issue

(3) Forward the closed case file to Exam Classification by use of Form 3210, Document Transmittal.

(4) Returns secured in reply to the SFR Program may appear to have suspicious or questionable expenses/credits/deductions claimed. Refer to IRM 25.1.2.3, Indicators of Fraud, for examples of Fraud indicators and on how to refer to the Campus/Exam Fraud Coordinator. In general, returns must be processed prior to referral.

Common Freeze Codes

(1) See Document 6209 Section 8A and IRM 21.5.6.4, Freeze Code Procedures, for complete information.

(2) Common Freeze Codes are:

IF

THEN

-W

Send email to *AP Inquiries for approval to process.

-V

Call Centralized Insolvency Operation (CIO) for approval to process.

-C

Combat Zone Balance Due: Give to lead to process Refund Due: Process following normal procedures Refer to IRM 5.19.10.6, Combat Zone Accounts.

-L

Make AMDISA prints and attach to the case. Forward to EGC/PBC located on SERP, Who/Where tab. Close control, leave history on IDRS & AMS. EXCEPTION: If there is a pending TC 300 it will be worked in SFR Reconsideration Unit.

-A

If the default assessment matches the return, input a TC 290 0.00 with a hold code 4, and a TC 599 cc 89. If return does not match, verify if this is reconsideration return. Check CIS for all TC 976/977 postings.

-Y

This master file freeze code identifies an account in offer status. The TC 480 identifies a pending offer. If the freeze is set due to TC 480, the return can continue being processed. If the freeze is set due to a TC 780 or TC 788, do not make any abatements or increases, these are barred with the offer acceptance. Input a TC 599 cc89 to establish ASED. Input TC 290 0.00 with blocking series 80. Issue Letter 916-C to taxpayer using language in the IRM 21.5.6.4.50, -Y Freeze, “Because your account reflects an accepted Office in Compromise, no further adjustments are permitted.” Complete AMS history and send the return to files.

-I

Restricted interest. Interest on adjustments input must be manually computed.

-E

If Project code is 311-313 on TXMOD Make a copy of the return. Input a TC 290 0.00 using xMend. Forward the original on a Form 3210, Document Transmittal, to Frivolous Filer Coordinator at Stop 613.

F-

Make a copy of the return. Input a TC 290 0.00 using xMend. Forward the original on a Form 3210 to the Frivolous Filer Coordinator at Stop 613.

-Z

Return can be processed. The adjustment will unpost and be routed to CI. CI will then receive direction from Special Agent.

Routing of Campus and Area Office Reconsideration Requests

(1) CRU addresses, Telephone and Fax Numbers are now listed at: SERP - Audit Reconsideration Requests - Central Reconsideration Unit (CRU) Addresses - Who/Where (irs.gov).

(2) Using the PBC of the TC 420 (or if PBC is 6XX Appeals use TC 424) will assist with routing to the correct campus. See table below for a list of PBC’s for the Taxpayer Services and SB/SE Campuses.

(3)

Taxpayer Services CAMPUS PBC’S

SB/SE CAMPUS PBC’S

190- Andover

295- Brookhaven

191- Atlanta

296- Cincinnati

192- Austin

297- Memphis

193- Fresno

298- Ogden

194- Kansas City

299- Philadephia

(4) Assessments made by SB/SE Area Office are sent to the servicing SB/SE Campus based on the PBC 201-207 in the table below:

Area Office PBC

201

202

203

204

205

206

207

Servicing Campus

BSC

CSC

PSC

CSC

MSC

OSC

OSC

Note: Cases worked in PBC 315 or 330 are LB&I cases. All LB&I cases are referred directly to the LB&I Reconsideration Team located at:

(5) 2970 Market Street

(6) Philadelphia, PA 19104

(7) Mail Stop 2-H08-200

(8) The Audit Recon/Claims Coordinators can be found at: Area Office/Campus Contacts. The NRP Coordinators can be found at: NRP Area Coordinators - Exam.

This data was captured by Tax Analysts from the IRS website on April 19, 2024.
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