5.1.14. Field Collection Techniques and Other Assignments

(1) This section provides procedural guidance on the methods the United States can use to collect an unpaid liability where an initially liable person, e.g., a taxpayer (the "transferor"), has transferred property to a third party (the "transferee") prior to or after the liability to the United States is incurred.

(2) Whenever action or litigation involving collection matters is pending or the institution of affirmative legal action to effect collection is being considered, revenue officers will mainly be investigators of facts. They will be required to prepare reports concerning any facts ascertained. The reviewers, approvers, and lawyers charged with the responsibility of handling the cases must rely on those facts and reports when making case decisions.

(1) A request, for institution of an administrative or legal proceeding to effect or assist in the collection of a tax, generally originates with an individual revenue officer within a Field Collection Area Director’s organization.

• Specific policies related to collection work start with IRM 1.2.1.6, Policy Statements for the Collecting Process.

• Specific delegations of authority related to collection work are in IRM 1.2.2, Servicewide Delegations of Authority, and throughout IRM 1.2.65.3, SB/SE Functional Delegation Orders – Collection.

(2) The authorities for the legal theories discussed in this IRM are found in the following United States Code and Regulation sections.Table Listing Code and Regulations

(1) Director, Collection Policy is the executive responsible for the policies and procedures employed by Collection personnel.

(2) Director, Field Collection, has executive oversight for all Field Collection programs.

(3) Field Collection Area Directors, Territory Managers and Group Managers are responsible for ensuring compliance by Field personnel with these procedures.

(4) Revenue officers are responsible for reading and implementing the procedures listed in this IRM.

(5) CEASO advisors review and advise revenue officers on work relating to the guidance and procedures described in this IRM. They also ensure compliance with IRM guidance.

(6) IRM 5.17.1, General Information, describes Counsel and revenue officer roles with suits.

(1) Program Effectiveness: Field Collection Group Managers use Document 12359, Embedded Quality Job Aid Field Collection, to complete:

• Annual case reviews IRM 1.4.50.5.2.2, Requirements for Annual Performance Case Reviews,

• Completed case work IRM 1.4.50-2, Criteria for Review of Completed Work, and

• eApproval recommendation reviews.

(2) CEASO Group Managers use Document 12746, Embedded Quality Advisory - Litigation, and Document 12739, Embedded Quality Job Aid Advisory Lien Core, to complete:

• Annual and case reviews IRM 1.4.53.4.7, Reviews, and

• eApproval recommendation reviews for assignment.

(3) National Quality Review System (NQRS) reviewers also review case work for certain attributes.

(1) Management and review when pursuing a third-party liability varies with the type of action:

• Initiating suit to establish a transferee liability requires Group Manager, CEASO, Territory Manager, and Counsel review and approval prior to forwarding the recommendation to the Department of Justice.

  Note: Suits are individual to the case. The Collection employee provides a Narrative Report laying out the basis for the case identifying all pertinent facts. Narrative Reports are discussed in IRM 5.17.12, Investigations and Reports.

• Initiating an Internal Revenue Code (IRC) 6901 assessment requires Group Manager review prior to forwarding the case to Exam Planning and Special Programs (PSP) for assessment.

  Note: IRM 5.1.14.2.1, Report of Investigation of Transferee Liability, describes the preparation and presentation of the report. IRM 4.1.1.6.11.2, Collection Referrals-Form 3031, Report of Investigation of Transferee Liability, discusses the PSP review.

(1) The table below provides terms and definitions applicable to this IRM. Term Table

(2) The table below provides acronyms and definitions as used in this IRM.Acronym Table

(1) Listed below are resources for suits to establish a transferee liability.Resources for Establishing a Transferee Liability

(2) Listed below are resources for assessing a transferee using IRC 6901.Resources for Assessing Under IRC 6901

(3) 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 https://www.irs.gov/taxpayer-bill-of-rights, Taxpayer Bill of Rights (TBOR).

(1) The referral for transferee liability under IRC 6901 is based primarily on the facts developed and reported by the revenue officer. It is essential that the investigation be carefully and thoroughly conducted and the revenue officer’s report be as complete and detailed as possible.

(2) The revenue officer prepares Form 3031, Report of Investigation of Transferee Liability, and completes the following:

1. Attach schedules and explanatory and descriptive statements necessary for a clear and complete presentation of the facts.

2. Attach documentary evidence, beginning with the year of transferor’s liability, of any nature which the revenue officer is able to secure in support of the determination of transferee liability.

3. Forward Form 3031 with attachments to the Group Manager.

(3) The Group Manager examines the report of investigation to ensure that it is complete and that a proper basis exists for assertion of the transferee liability.

(4) Upon agreement with the recommendation, the Group Manager will:

1. Sign and email Form 3031, with attachments, by memorandum to the appropriate Planning and Special Programs (PSP) coordinator contact in the Examination function. The PSP coordinator contact listing by state is located on Knowledge Management https://portal.ds.irsnet.gov/sites/vl051/Lists/PSP%20Territory%20Managers/AllItems.aspx.

2. Retain a copy.

3. Associate a copy with the transferor Bal Due case file.

(1) The revenue officer who initiated the assertion of the transferee assessment, or is assigned multiple transferee assessments initiated by Examination or sustained by Appeals, will act as coordinator of the collection activity.

(2) Multiple transferee assessments initiated by Examination or sustained by Appeals will be identified by the coordinating revenue officer with the notation Transferee assessments exceed transferor liability in the Bal Due case history.

(3) The revenue officer acting as coordinator (transferor revenue officer) will:

1. Effect any required Bal Due account transfer.

2. Work with Counsel on the application of payments between the transferee and transferor.

3. Notify the holders of other related Bal Due accounts of credits to be considered in further collection of the assessed liability upon receipt of the information.

4. Ensure each payment is documented in the Integrated Collection System (ICS) histories to reflect the amount and source of payment, current total of payments received from each transferee, and current total outstanding balance.

5. Suspend collection in the event the total of payments received from all related Bal Due accounts equals the total assessed liability.

6. Work with Counsel to ensure that all Notice of Federal Tax Liens (NFTL) are released appropriately.

(1) The revenue officer receiving a transferee assessment Bal Due account will proceed with all normal collection procedures.

(2) Notify the coordinating (transferor) revenue officer of the following:

1. Receipt of full payment of the assessed liability by memorandum, stating the date paid and the amount paid.

2. Summary of installment payments received, stating the dates and amounts paid.

   Note: A transcript of the account may be sent in lieu of a memorandum. This information will be furnished at 3-month intervals.

3. Copy of Form 53, Report of Currently Not Collectible Taxes, when a module(s) is put into currently not collectible status.

4. Claim for Refund or Refund Litigation.

(1) When the total amount collected exceeds the amount of the transferor’s liability, the excess amount may be refunded provided a claim for refund is filed within the applicable statutory period.

(2) No abatement will be administratively made in those cases which are not involved in court proceedings unless the statutory period in which a refund claim may be brought has expired as to the transferee.

(1) Transferee Bal Due accounts which are not full paid may be abated because of full payment of a related Bal Due account.

(2) The revenue officer will:

1. Prepare Form 3870 to request the abatement.

2. Input a TC 470 CC 90 to close the revenue officer's inventory control.

3. Notate the ICS case history with a description of the Bal Due accounts that have been paid, including date(s) of payment as well as including the expiration date of the statutory period for filing claim for refund by the person who has paid the liability.

4. Transmit the closed physical file with the original approved Form 3870 to the CEASO Group Manager for the location where the controlling case is located.

   Note: The file awaiting abatement is not transmitted with the Form 795 to closed files.

(3) CEASO advisors will:

1. Establish an NFOI on ICS, using time code 175, Transferee Assessment, no later than 7 calendar days of group receipt of the recommendation for abatement, to monitor the account.

   Note: TC 470 CC 90 will reverse systemically after a period of time. The advisor must monitor for this occurrence and take steps to prevent re-issuance of a Bal Due module(s). The systemic reversal time period can be found in Document 6209 with the Section 11 TC 470 chart. IRM 5.1.15 contains additional information on adjustments.

2. Establish a follow-up on the module to review the account for a No Activity indicator until the two-year limitation expires and the accounts are abated or otherwise settled.

(4) Do not file a NFTL when the accounts are awaiting abatement. When accounts are resolved take appropriate action on any existing NFTL.

(1) In certain instances, revenue officers will be notified or otherwise informed that a third party is paying or supplying wages or has paid or supplied wages for an employer. Notification will usually be made by means of Form 4219, Statement of Liability of Lender, Surety, or Other Person for Withholding Taxes. Form 4219 may be received from the taxpayer or the third party. In other cases, Form 4219 will be sent directly to the service center. In such cases, Form 4219 will be received from the service center or from CEASO.

(2) Take the appropriate action below to secure Form 4219 or Form 941.

(3) If the third party is accepting responsibility under IRC 3505(a) or IRC 3505(b), voluntary payments should equal the amount of withheld income tax and FICA required to be paid with Form 941. See IRM 5.1.14.3(3) for the extent of the liability under IRC 3505(b).

(4) When returns are filed without full payment, take the following actions:

1. Consider a jeopardy assessment if it meets the criteria for jeopardy.

2. If not, request a prompt assessment and upon receipt of the assessment notice, demand payment from the employer of record.

(5) When returns are filed without full payment, take the following actions:

(6) Where the facts indicate a third party is liable for all or a portion of the withheld employment taxes, but the third party neglects or refuses to voluntarily pay the amount of the liability under IRC 3505, the revenue officer must develop the facts to support a recommendation for civil suit and forward this recommendation to CEASO.

(7) Facts which may support the liability of a third party under IRC 3505(a) include the following:

1. A written agreement between the employer of record and a third party which states that wages are to be paid directly by the third party.

2. Net wages paid by a third party as evidenced by canceled checks, bank records, or cash disbursements recorded in payroll records of the third party.

3. Payroll records of the employer involved are maintained or controlled by the third party.

4. Forms 941, W-2 and W-3 have been prepared, signed, or filed by the third party.

(8) Facts which support the liability of a third party under IRC 3505(b) include the following:

1. A written agreement between the employer of record and the third party that net wages will be supplied by the third party.

2. Records of the third party showing disbursements by cash or check to the employer of record in amounts approximate to the wages subsequently paid to employees.

3. Statements made by the employer and the third party indicate that the third party was aware of the amount of wages paid each payroll period.

4. Statements indicate that the parties understood that the third party would be supplying funds to the taxpayer to pay wages.

5. Payroll records of the employer involved are maintained or controlled by the third party.

6. Forms 941, W-2 and W-3 have been prepared, signed, or filed by the third party.

(1) CEASO advisors will review and process suits to establish the liability under IRC 3505 of third parties paying or supplying funds for wages.

(2) Periodically CEASO will receive from Compliance Services Collection Operations, Forms 4219, Statement of Liability of Lender, Surety or Other Person for Withholding Taxes, that were mailed directly to the Service Center.

(1) The revenue officer’s responsibility is determining whether there are taxes owed.

(2) The following step table walks through the revenue officer actions when pursuing the surety for unpaid withholding taxes:Revenue Officer Actions with Recommendation to Pursue Notice

(3) The following step table walks through the advisor’s actions:CEASO Advisor Actions

(4) Where the surety does not pay, the following step table walks through revenue officer action for additional enforcement action.Revenue Officer Follow Up Enforcement When the Surety Compliance Period Expires