4.25.9. Requests for Abatement, Claims for Refund, and Doubt as to Liability Offer in Compromise in Estate and Gift Tax Cases

(1) General Overview - This IRM provides information about estate and gift related requests for audit reconsideration, claims for refund, protective claims for refund, and doubt as to liability offer in compromise examination procedures.

(2) Purpose - This IRM explains estate and gift claim, audit reconsideration and analysis and doubt as to liability, offer in compromise examination responsibilities so that managers, senior-level officials and estate, gift and generation skipping transfer tax examiners will be better equipped to prepare and submit accurate an appropriate penalty assessments.

(3) Audience - This IRM is for Estate and Gift Specialty Tax managers, examiners and personnel at the campus who process estate, gift and generation skipping transfer tax returns, refunds and claims.

(4) Policy Owner - Director, Examination - Specialty Policy is responsible for the administration, procedures and updates related to the technical guidance and information processing steps and methods specific to estate and gift tax examiner responsibilities, IRM subsections, and forms created for the examination of returns and claims.

(5) Program Owner - Director, Examination - Specialty Examination owns Estate and Gift Tax Examination.

(6) Primary Stakeholders - Advisory Collections, Appeals, Counsel, Estate and Gift Tax Workload Selection and Delivery, Specialty Examination, SB/SE Examination Quality & Technical Support, and Collection Policy are the primary stakeholders for this IRM.

(1) Taxpayer who have an unpaid module balance, but believe their assessed liability exceeds the correct amount, can file an amended return or request for abatement. A request for abatement results in an accounting decrease in an assessed tax and/or penalty liability that remains unpaid.

(2) IRC 6404(b) provides that taxpayers have no right to file a claim for abatement of estate or gift tax. While there is no provision in the IRC for filing an abatement of estate or gift tax, IRC 6404(a) authorizes the IRS to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, which is:

• Excessive in amount, or

• Assessed after the expiration of the period of limitation properly applicable thereto, or

• Erroneously or illegally assessed

(3) However, a taxpayer or taxpayer’s representative may file a request for abatement in the following situations:

• The taxpayer is requesting an abatement of interest relating to estate, gift, and/or generation-skipping deficiency whose accrual is attributable to any unreasonable error or delay in performing a ministerial or managerial act. See IRC 6404(e).

• The taxpayer or taxpayer’s fiduciary is seeking an abatement of any penalty or addition to tax (but not the tax) attributable to erroneous written advice from the Service pursuant to a specific written request and upon which the taxpayer reasonably relied. See IRC 6404(f).

• The request for abatement of penalty or interest is requested as a result of the taxpayer being granted relief because of a Presidentially declared disaster or a terroristic or military action. See 7508A(a)(2).

• The request is an abatement of a "math error" assessment (any reassessment must use the deficiency procedures). See IRC 6213(b)(2).

• There is a request for abatement based upon a zero net interest rate on overlapping tax underpayments and overpayments. See Rev. Proc. 2000–26 and IRC 6621(d).

• There is a request for removal of penalties under the Post-Assessment Penalty Appeal process. See IRM 8.11.4, Appeals, Penalty Appeals (PENAP).

(4) If an amended return is received either before or after the Assessment Statute Expiration Date (ASED) requesting an abatement of tax and there are conditions which meet examination selection criteria, the case will be sent to exam before making the abatement.

(5) When preparing a Report of Examination Changes (Report), the "Per Return or As Previously Adjusted" column should reflect amounts for either gift tax or estate tax that are the amounts as reflected on a current transcript of the account. It is not necessary to repeat adjustment(s) previously made. The examiner may disallow, partially allow, or fully allow the request for abatement, and should follow standard report writing and case closure procedures where the statute of limitations to assess tax has not expired. See IRM 4.25.6.6, Report Writing Guide for Estate and Gift Tax Examinations, Estate and Gift Tax Claim Cases, and IRM 4.25.10, Case Closing Procedures.

(6) An examiner may be assigned a request for abatement case or may receive a request for abatement for a tax period already under examination. Because requests for abatement and claims for refund differ regarding requirements, limitations, and appeal rights, it is important that examiners make the proper determination of the nature of the request in order to properly process the case and advise taxpayers of their rights. Since a request for abatement is not a claim for refund, claim forms and letters (e.g., Form 3363, Form 2297 and Letter 569) are not used because the appeal and court rights referenced in those forms and letters are not applicable to requests for abatement. Advise taxpayers that disallowed requests for abatement have no appeal rights beyond the group level without paying the tax and/or disputed penalties, and filing a claim for refund.

(7) In all cases where a request for abatement is disallowed (in full or part), examiners must provide a detailed explanation to the taxpayer of why the abatement was not allowed. Examiners must note the explanation on the Form 886-A .

(8) A taxpayer may label a filing as a request for abatement, but the filing may also include a request for the return of a paid assessment (i.e., a claim for credit or refund). The claim for credit or refund of an overpayment is subject to the requirements of IRC 6511. The period of limitations for filing a claim must be open and the amount of the credit or refund is limited by the two or three year rule look-back limitations.

(9) Examiners may not make determinations on interest abatement requests. All IRC 6404 interest abatement claims are worked by Interest Abatement Coordinators.

(1) A protective claim may be filed at any time before the expiration of the period of limitation (See section 6511(a)) for the filing of a claim for refund to preserve the estate's right to claim a refund by reason of claims or expenses that are not paid or do not otherwise meet the requirements of deductibility. Although the protective claim need not state a particular dollar amount or demand an immediate refund, a protective claim must identify each outstanding claim or expense that would have been deductible under section 2053(a) or (b) if such item already had been paid and must describe the reasons and contingencies delaying the actual payment of the claim or expense. Action on protective claims will proceed after the executor notifies the IRS that the deductible amount has been established.

(2) A protective claim is generally filed by an estate’s fiduciary (Trustee/Executor) or other person authorized to act on behalf of the estate. A written statement affirming the fact that the filer has continuing authority to act in a fiduciary capacity for the estate should be included with any protective claim filing(s).

(3) If a claim is submitted directly to a field examiner, the determination as to whether the claim received is a protective claim will be made by the examiner. If a determination is made that the claim received is a valid protective claim, it will be forwarded to the Estate and Gift Operations at the Campus (Campus) for processing. The Campus will accept the determination made by the field examiner and process the protective claim accordingly.

(4) When a protective claim is received by the Campus, they will determine whether it meets the threshold requirements for a protective claim. The Campus will acknowledge receipt by responding to the taxpayer with a stamped copy of the claim and a letter that provides instructions and contact information for the claim’s perfection. An Action Code 700 for Transaction Code 971 should be placed on the account. The protective claim should then be sent to the Files Unit to be associated with the original filing.

(5) A claim submitted directly to the Campus, must be reviewed to determine if it is a protective claim. IRM 4.25.2.5.9, Campus Estate and Gift, Schedule PC, provides Campus’ protective claim processing. IRM 21.5.3.4.7.3, Customer Account Services, Account Resolution, General Claims, Protective Claims specifically provides that any claim identifying a pending court case or decision should be treated as a protective claim. However, protective claims are not limited to claims identifying a pending court case or decision. Therefore, the Campus will also look at other factors in determining whether a claim is a protective claim, including, but not limited to, claims based on expected changes in the current IRC or regulations. Prior to denial of a claim, a determination needs to be made that it is not a protective claim. Since there are many issues that would permit allowance of a protective claim, and it may not be clear from the claim itself, the Campus will consult the Estate and Gift Tax Workload Selection and Delivery (WSD) National Gatekeeper prior to disallowing a claim to ensure that it is not a protective claim. If it is clear that the claim filed is not a protective claim and was not intended by the taxpayer to be a protective claim then consultation is not required. See IRM 4.25.2.3.3.4, Campus Estate and Gift, Miscellaneous Forms and Schedules, Schedule PC for Campus procedures relating to the processing of protective claims.

(1) Taxpayers must submit claims for refund of estate tax in writing. An oral request either by telephone or interview is not considered a claim, formal or otherwise. The claim for refund may be made by filing:

1. A Form 843, Claim For Refund and Request For Abatement

2. An original or subsequent Form 706 which reports less tax liability than shown on the original return.

3. Any other form of writing (an informal claim). An informal claim must have a written component with the issues of the refund clearly identified, and it should adequately apprise the Service that a refund is sought for certain years. See IRM 25.6.1.10.2.6, Claims for Credit or Refund - Form and Content and IRM 4.10.11.2.1.1, Claims for Refund - Required Form and Content, for the requirements of a valid claim.

(2) The procedure for handling formal and informal claims is the same.

(3) If a claim is submitted directly to a field examiner, the determination as to whether the claim received is a protective claim will be made by the examiner. If a determination is made that the claim received is a valid protective claim, it will be forwarded to the Campus for processing. The Campus will accept the determination made by the field examiner and process the protective claim accordingly.

(4) Determine whether the taxpayer’s claim is complete. All of the following requirements must be met before a claim or amended return is considered complete:

1. It is filed on a permitted form or in an informal written inquiry and includes everything necessary to input a correct adjustment.

2. The claim contains sufficient required information to permit the mathematical verification of the amount shown on the claim.

3. The claim contains the name, address, and Taxpayer Identification Number (TIN) of the taxpayer and is signed by the taxpayer (if a joint return, both taxpayers) or authorized representative under penalties of perjury (also known as the jurat).

4. The taxpayer must sign the claim or amended return requesting an adjustment; or include a valid Power of Attorney (POA) pursuant to Treas. Reg. 1.6012-1(a)(5). For Forms 709 where spouses elected to gift split, both spouses must submit separate signed claims and Powers of Attorney. IRM 21.5.3.4.4.1, Special Handling of Signature Requests, for exceptions. Refer to the table in IRM 21.5.3.4.2, Tax Decrease or Credit Increase Processing, for acceptance of faxed signatures. Signature requirements for penalty abatements are referenced in IRM 20.1, Penalty Handbook.

(5) The claim is determined to be complete and should be initially reviewed for the following:

1. The examiner should verify that the claim was timely filed. Taxpayers may still be entitled to a refund on some claims for abatement/refund filed after the normal Refund Statute Expiration Date (RSED). See IRM 25.6.1.10.2.5.7, Offsetting the Amount of a Refund With a Time-barred Adjustment, for additional information. The examiner and group manager should verify the statute date, and notate any special considerations regarding whether the examiner should apply an "AA" statute date to the ERCS/AIMS module.

2. Whether there are any freezes on the tax account. See IRM 21.5.6.4.51 and IRM 21.5.6.4.52 .

3. Whether the taxpayer requests full or partial disallowance.

4. Whether or not a tax treaty is involved.

(1) Offers in compromise-doubt as to liability (DATL) is an offer made by the taxpayer where there is a genuine dispute as to the existence or amount of the correct tax debt under the law. IRM 4.18.1, Exam Offer-In-Compromise, Offers in Compromise Received in Exam, provides guidance and procedures for working offer in compromise cases. .

(2) In addition to the ASED statute, OIC-DATL cases have a Tax Increase Prevention and Reconciliation Act (TIPRA) statute. IRC 7122(f) , Deemed Acceptance of Offer Not Rejected Within Certain Period, provides, "Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer". A deemed acceptance could mean a significant loss to the government in the form of abated assessments. The Estate and Gift Workload Selection and Delivery (WSD) DATL Coordinator establishes and monitors the TIPRA statute in IDRS and AOIC. Examiners must not change the statute of limitations for assigned DATL cases. Refer questions relating to the established TIPRA statute to the Estate and Gift WSD DATL Coordinator. OIC-DATL cases forwarded to Exam should carry the TIPRA statute date, that is two years from the IRS received date of the Form 656-L. The statute will also carry an "R" as part of the statute date, for example 04-04-2018R, to assist in identifying the TIPRA statute. The TIPRA statute is carried on AIMS/ERCS and the master file ASED will be blank while the offer is in process. See IRM 25.6.23.5.7.2.1, Offer in Compromise - Doubt as to Liability (OIC-DATL) Exam Statute Controls, for additional information about protecting the statute of limitation while working an offer in compromise case.

(3) The WSD DATL Coordinator classifies, routes and monitors DATL cases for Estate and Gift field examination. See IRM 4.25.3.9.2.6, Estate and Gift Tax, Planning, Classification, and Selection, Doubt as to Liability for guidance regarding the ongoing communication required for examiners and the WSD DATL Coordinator.

(1) The determination of whether an amended return or written request that decreases tax and/or penalty (or increases a credit) is a claim for refund or a request for abatement, is based on whether the amended return or written request asked for a refund at the time it was filed. If the taxpayer requests any amount of overpayment, then it is a claim for refund. Otherwise, a request for a reduction to the liability (not resulting in a credit or refund of any amount) is a request for abatement.

(2) Examples distinguishing claims for refund versus requests for abatement are shown below (assume all requirements for form and timeliness are met):