5.19.11. Withholding Compliance Program

(1) This IRM 5.19.11, Liability Collection, Withholding Compliance Program, provides guidelines for working the Withholding Compliance Program.

(2) The IRS Mission statement includes "enforcing the tax law with integrity and fairness to all". A "fair and just tax system" is a cornerstone in the Taxpayer Bill of Rights (TBOR). As IRS employees, we are expected to carry out our duties with integrity and fairness . Fairness and integrity therefore apply to how IRS administers tax laws to all taxpayers, as well as how IRS employees interact with each taxpayer and with tax professionals. Employees must exercise their professional judgement, not personal opinions, in conducting their enforcement responsibilities. There are three parts to enforcing the law with integrity and fairness:

• Ensure fairness to the taxpaying public

• Ensure an equitable process for all taxpayers

• Ensure fairness to each taxpayer

Note: For additional information, refer to Policy 1-236.

(1) Internal Revenue Code (IRC) Section 3402 and IRC Section 3403 provide the legal authority for the withholding of federal income tax from wages and other forms of income. IRC Section 3402 specifies the general form and content of withholding certificates and outlines the basis for claiming reductions or exemption from withholding.

(2) Regulations in 26 CFR Part 31, Employment Taxes and Collection of Income Tax at Source, provide guidance for implementation of IRC Section 3402.

(3) Section 31.3402(f)(2)–1(a) requires each employee to furnish his or her employer with a signed withholding certificate on or before starting employment. The maximum withholding rate to which an employee is entitled depends upon the following:

• Filing status

• Number of dependents

• Reduction to withholding claimed by a spouse (if any) on a Form W-4

• Estimated itemized deductions, tax credits, and other deductions from income

(4) The requirement for employers to routinely submit copies of questionable Form W-4, Employee's Withholding Certificate to the IRS has been eliminated. Regulations, as set forth in Section 31.3402(f)(2)–1(g), require employers to submit copies of any currently effective withholding certificates only if directed to do so in a written notice to the employer or if directed to do so under any published guidance.

(5) An employer must honor a valid withholding certificate furnished by an employee until the IRS provides the employer with written notice to disregard it (a lock-in letter). The IRS may issue such a notice after it determines that an employee's withholding claim is unjustified based on IRS records without first obtaining a copy of the Form W-4 from the employer.

1. The employer is required to withhold at the status and rate specified in our notice. However, if the status and rate claimed on the employee's current Form W-4 or a new Form W-4 will result in MORE income tax withholding than at the status and rate specified in our notice, the employer must honor the Form W-4.

2. If an employee disagrees with our determination, he or she must contact the Withholding Compliance Unit and provide information supporting a change to the status and rate specified in our notice.

(6) Section 31.3402(m)–1 of the Employment Tax Regulations specifies items used to compute withholding . Estimated amounts of deductions, losses, and credits used to compute withholding reductions may not be more than:

1. The amount claimed on the prior year tax return (or, if not yet filed, the tax return for the preceding taxable year) which the employee reasonably expects to show on the current year tax return, plus

2. Additional amounts that are demonstrably attributable to identifiable events.

(7) An employee may claim exempt from withholding by furnishing the employer with a valid exempt Form W-4 certifying that they:

1. Had no tax liability for the preceding taxable year, and

2. Expects no tax liability for the current taxable year.

(8) Exempt W-4 forms , generally expire on February 15th of the year after they were furnished by the employee. If an employee fails to furnish a new W–4, the employer is required to withhold as if no valid W-4 was in effect, withholding as if employee had checked the box for "Single" or "Married filing separately" in Step 1 (c) and made no entries in Step 2, Step 3, or Step 4 of the Form W-4. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4. Refer to Pub 15, (Circular E), Employer's Tax Guide, and Pub 15-T, Federal Income Tax Withholding Methods additional guidance.

(9) IRC Section 6682 and the related tax regulations allow the assessment of a $500 civil penalty on an individual for furnishing a false W–4 if:

1. The statement made on the Form W-4 results in less income tax withheld than would have been withheld if the Form W-4 had been correctly completed, and

2. There was no reasonable basis for such a statement at the time that the statement was made.

(10) IRC Section 3403 makes an employer liable for tax imposed under IRC Section 3402 and the related tax regulations:

1. The employer is liable for the appropriate amount of withholding whether or not it is actually deducted from the employee’s pay. This liability includes tax computed according to the withholding instructions we give the employer in a lock-in letter.

2. Assessments under IRC Section 3403 are made by Employment tax examiners in the Technical Services in the Examination function.

(1) The Director, Collection Inventory Delivery & Selection, is responsible for overseeing program coordination for automated Nonfiler system and Campus procedures related to Compliance Nonfiler programs.

(2) The Operations manager is responsible for managing remote Collection activities including telephone and correspondence transactions. Oversees department, team and employee responses to Balance Due accounts and Withholding Compliance Program.

(3) The Department manager is responsible for overseeing team and employee responses to taxpayer inquiries with regard to the Withholding Compliance Program inquiries.

(4) The Team manager is responsible for overseeing telephone scheduling and employee responses to Balance Due accounts and Withholding Compliance Program inquiries.

(1) Program Reports: Work Planning & Control (WP&C) reports are used to monitor rates, receipts and closures to determine if cases are being received and subsequently closed. WP&C reports are located on the Business Objects platform. Account Management Services (AMS) reports also provide information on inventory and inventory age. Case Control Activity System (CCA) reports detail the cases assigned to an operation, department, team or employee; they are located on Control D.

(2) Program Effectiveness: the program goals and results are housed on the Collection Program and Campus Reports SharePoint site in the Monthly Monitoring Report (MMR). The MMR captures NQRS results to show monthly and cumulative stats. Case reviews are performed by front line mangers, operational reviews performed by senior managers, and program reviews conducted by the program office to ensure procedures are being followed and are effective.

(1) Taxpayer responses and other inventory are loaded to AMS and then distributed to tax examiners. AMS tracks employee actions and is monitored by Operation, Department, and Front-Line managers along with Collection HQ employees.

(1) Below is a list of abbreviations commonly used throughout the IRM.

(1) Withholding Compliance E-Guide (irs.gov).

(2) Pub 505, Tax Withholding and Estimated Tax, Page 3.

(1) Employers are required to give Form W-2, Wage and Tax Statement, to their employees by January 31st of the year following the year in which the wages were paid. A copy of Form W-2 must also be filed with the Social Security Administration (SSA) by January 31st of the following year. W-2 records filed with the SSA are subsequently transmitted to the IRS and loaded into the Information Returns Master File (IRMF).

(2) Application of the WHC business rules results in three potential outcomes:

• Outcome 1: No tax compliance problem is indicated. A WHC case is not created.

• Outcome 2: Withholding compliance problem was identified; lock-in letter systemically issued. Taxpayer has 60 days to respond to the letter before the case proceeds to the next step.

• Outcome 3: Withholding compliance problem was identified; manual review required prior to the lock-in letter issuance. Withholding Compliance (WHC) will no longer generate Outcome 3 cases after June 2016.

(3) WHC cases are created in June. Each calendar year, the Enterprise Computing Center (ECC) will update all tax year dates to correspond to the current calendar year.

(4) W-2 forms received from SSA after the initial case creation are considered "Additional Forms W-2" (AW2) and are processed by WHC at the end of each calendar year following the year in which the wages were paid.

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(6) The Form W-2 records are then sorted by Social Security Number (SSN) and Name Control.

(7) Additional business rules are applied to filter records to:

1. Determine whether the SSN is valid or invalid.

2. Match SSN's against Master File (MF). If a record is found in the valid or invalid segments of MF, proceed with the compliance check. If there is no record on MF, select regardless of compliance check.

3. Current year return was filed and not full paid.

4. Current year return was not filed. Prior year return was not filed or was filed with a balance due.

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(9) Taxpayers in the following statuses are excluded:

• Combat Zone

• Killed in Terrorist Action (KITA)

• Offer in Compromise (OIC)

• Bankruptcy (BNK)

• Criminal Investigation Case (CID)

• Disaster Relief Case (DIS)

• Date of Death (DOD) is less than 24 months

(1) WHC cases will be worked by the Withholding Compliance Unit at the Andover & Austin Compliance Campuses.

(2) Organization Function Program (OFP) codes have been established for WHC.

(3) The following 97X transaction codes (TC) have been designated to identify actions on WHC cases:

(4) Taxpayers with unreversed TC 971 AC 146 transactions are identified by the following IMF entity indicator codes:

• CC ENMOD screen: WHCCI>1

• CC IMFOLE screen: WHC

(5) TC 971 AC 147 will be used to generate listings of Outcome 3 cases to the site to be worked. The miscellaneous field shows the reason code for Outcome 3 selection.

(6) TC 971 AC 146 will post to Master File to identify Outcome 2 cases where a lock-in letter has been systemically issued. The transaction will appear on the year in which the taxpayer was locked in and will provide the following information:

• TC 971 transaction date

• Employer Identification Number (EIN) of taxpayer's employer(s)

• Lock-in status and the number of allowances (prior to May 2020)

• Lock-in status (filing status) and withholding rate (May 2020 forward)

(7) Subsequent transactions will be posted to the year in which the taxpayer was locked in.

(8) WHC case inventory will come from two sources:

• Telephone calls and

• Taxpayer correspondence

(9) Cases will be batched through Account Management Services (AMS) and assigned to a tax examiner. AMS will open an IDRS control base using the year in which the lock-in letter was issued.

(10) Tax examiners will,

• Reconsider previous lock-in determinations based on information supplied by the taxpayer

• Make spousal lock-in determinations and issue lock-in letters

• Assess and abate Form W-4 civil penalties

• Address the entire taxpayer account including all balance due and/or unfiled return issues

• Update IDRS, Withholding Compliance System (WHCS) and AMS as applicable

(1) WHC outgoing correspondence consists of the Correspondex generated letters shown below. Current versions of the letters are available on Servicewide Electronic Research Project (SERP) using the Forms/Letters/Pubs tab.

(2) The following forms and publications are also used:

(1) In order to deliver quality customer service, take all appropriate actions to correct withholding, address any balance due account(s) and/or solicit unfiled returns while the taxpayer is on the telephone. For additional information, see IRM 5.19.1.4.4.2 Balance Due Taxpayer Education (Cause and Cure).

(2) Use the Electronic Withholding Compliance Guide (e-Guide)to assist you in addressing withholding compliance issues.

(3) If you determine that the taxpayer has obtained the WHC unit toll-free number erroneously and does not have a withholding issue, determine the taxpayer's specific issue and transfer the call following the table in paragraph 13 below.

(4) When you identify the topic of the call:

1. Advise the caller that you are transferring their call to the area that handles the question (identify the specific area).

2. Transfer to a specific line by clicking the transfer button

3. Then, enter the appropriate four-digit extension, in the Direct Dial field, or highlight the desired transfer applicable name,

4. Then, click the transfer button

(5) If translation is needed for non-English speaking taxpayers, offer the taxpayer Over-the-Phone Interpreter Service (OPI).

(6) The IRS/OPI contract allows the disclosure of tax information to the OPI interpreter. The assistor should limit disclosure to only that information necessary to resolve the issue. The interpreters are not employees of IRS so communicate to them exactly as you would advise the taxpayer. To use OPI services, complete the following:

1. With the TP already on the line, click the Consult/Conference button.

2. Call the toll-free phone number: 888-563-1155.

(7) Enter your PIN number (xxxx-xxxxx) - this is a unique personal PIN number for each employee. PINS have been distributed to the site management. If an employee doesn't have a PIN, management or local SA will contact coordinator to have one assigned, usually within 1 business day. Select language below:

• Press 1 for Spanish

• Press 2 for Creole

• Press 3 for Mandarin

• Press 4 for Korean

• Press 5 for Vietnamese

• Press 6 for Somali

• Press 7 for Russian

• Press 8 for French

• Press 9 for Arabic

• Press 0 for operator assistance to address any other language needs or concerns

(8) An interpreter will be added to the call, summarize what you wish to accomplish. Add the Non-English speaking taxpayer to the line by clicking the Consult/Conference button again.

(9) The following steps should be taken on all calls:

• Greet the taxpayer - Be sure to provide your name and identification number at the beginning of the call. For additional information, see IRM 21.1.1.4, Communication Skills.

• When you receive a call from a taxpayer regarding their tax account information, you are under no obligation to determine if the taxpayer is using an unsecured platform such as a cell phone. However, if you become aware that the taxpayer is using a cell phone (e.g., the taxpayer states they are calling from a cell phone, etc.), you may advise the taxpayer of the disclosure risk of using the cell phone to discuss their account information.

• To contact IRS, hearing impaired callers may choose to use the Federal Relay Service (FRS), a state relay service or any other relay service, or any third party assistant (friend or family). For further instructions concerning Hearing Impaired Calls refer to IRM 21.2.1.56,Deaf/Hard of Hearing (DHOH) Callers and TTY/TDD Equipment and IRM 21.3.8.5.1.2, Hearing Impaired Customers and TDD Equipment

• When contacted by an employer, do not authenticate taxpayer information. Ask the caller for the name and Social Security Number (SSN) of the taxpayer to which the call relates, then document the taxpayer case as appropriate. If the employer calls for verification of a modification, provide the employer with the modified withholding status/rate and the amount of any annual reductions to withholding or additional amount to withhold per pay period, only. Do NOT discuss Form W-4 calculations or case selection criteria. See IRM 5.19.11.7.4, Employer Responses, for additional information.

• If an employer calls with a "general" question regarding WHC or the lock-in letter, document AMS under the EIN. See IRM 5.19.11.7.4, Employer Responses, for additional information.

• Disclosure verification must occur before assisting taxpayer on account related calls. Follow procedures in IRM 21.1.3.2.3, Required Taxpayer Authentication. If talking to the taxpayer's representative follow procedures in IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication then see IRM 5.19.11.3.4, CAF/POA Requirements .

• Verification of the taxpayer’s phone number on ENMOD is required on all account related calls in which disclosure verification has occurred. When necessary, update this information.

  Reminder: If ENMOD or IDRS is currently unavailable, follow-up action will be performed when systems become available.

• Check Case Status - Check SUMRY and/or CC IMFOLI for any filing and/or payment delinquencies. See IRM 5.19.11.7, Responses and Redeterminations, for delinquent return procedures. See IRM 5.19.11.3.7, Installment Agreement (IA) Taxpayers, for installment agreement procedures. See IRM 5.19.11.3.8, Cases Assigned to Field Collection function, for accounts with at least one balance module in status 26.

(10) Key points for every call:

• Maintain a professional and courteous tone.

• Control the direction of the call, keep focused on resolution of taxpayer’s issues.

• Give accurate and complete assistance.

• Place the taxpayer on hold when needed to perform research or complete case actions. Use the hold feature, not the mute feature.

  Note: Advise the taxpayer of the reason for the delay (e.g., additional research needed, etc.), ask for permission to place the taxpayer on hold and wait for a response. Thank him or her for holding.

• Take all appropriate steps to address any delinquencies while the taxpayer is on the telephone.

• Confirm to the taxpayer all the actions taken before closing the call.

(11) When working balance due accounts, follow procedures in IRM 5.19.11.3.7, Installment Agreements (IA) or Balance Due Taxpayers. When working return delinquency accounts, follow procedures in IRM 5.19.11.7, Responses and Redeterminations. Document AMS with actions taken.

(12) If all case actions cannot be completed (i.e. breaks, lunch, tour of duty), insert case on AMS as WHC correspondence (WHCC) and complete actions as soon as possible after your scheduled phone time.

(13) If a call is inadvertently disconnected, employees have the discretion to immediately call the taxpayer back, if appropriate, to complete the resolution.

1. A callback would be appropriate when speaking with the taxpayer and the call is at the end stages of case resolution when the call inadvertently disconnects.

2. A callback would not be appropriate when the call is in the beginning stages. This may include disclosure verification, accessing IAT tools or initial analysis of the case.

3. Your discretion should be used to make a callback after speaking with a taxpayer for a while but have not come to the full case resolution. In complex case situations, it may be beneficial to make the callback to finalize the case.

4. If you determined a callback is appropriate, insert case on AMS as WHC correspondence and make the callback as soon as possible.

(14) If the Taxpayer has a tax law question, verify the type of tax law before transferring the call . Taxpayer Services will continue to answer tax law inquiries on a limited number of topics. These topics include:

• Tax Exempt Government Entities (TEGE)

• Special Services: Military or Civilian Combat; Federally Declared Disaster

• Affordable Care Act (ACA)

• International Tax Law (overseas calls only)

(15) For all other tax law questions state: I’m sorry, but we do not provide live assistance on this topic. For assistance, you can go to:

• https://irs.gov - Select the Help & Resources’ tab on the irs.gov home page. Options are listed on the left side of the page

• Interactive Tax Assistant- Enter "ITA" into the Search feature

• IRS Tax Map - Enter "IRS Tax Map" into the Search feature for more detailed information

(16) All WHC issues should be addressed before transferring. The assistor should inform the taxpayer they are being transferred and advise caller of what topic to request after the transfer. The assistor should document AMS history with the reason for the transfer.

(1) In order to make proper case decisions, research and utilize these systems.

(1) Complete and accurate case documentation promotes quality and consistency in working WHC cases.

(2) Document each taxpayer contact and/or action taken on the case in AMS history.

(3) AMS history should contain enough information so that any person subsequently reading the history can easily determine what decisions were made, why those decisions were made, what actions were taken, and what further actions are required to resolve the case.

(4) Complete documentation includes, but is not limited to the following:

(5) Add or update case information to WHCS as appropriate. See the WHCS User Guide for instructions. Update IDRS and AMS as appropriate.

(1) Accountants, attorneys, enrolled agents, or other persons acting as representatives through whom a taxpayer requests assistance from the IRS, must have a valid Power of Attorney (POA). For Centralized Authorization File (CAF) purposes, representative must submit a Form 2848, Power of Attorney and Declaration of Representative. Taxpayers may also authorize the release of their tax information to representatives and others through the use of a Form 8821, Tax Information Authorization. We refer to powers of attorney as "POAs" and tax information authorizations as "TIAs".

(2) Any form used in lieu of these two forms should contain the following information:

1. Name, and mailing address of the taxpayer,

2. Identification number of the taxpayer ( e.g., Social Security Number, Individual Taxpayer Identification Number (ITIN), Employer Identification Number),

3. Name and mailing address of the representative(s)/appointee(s),

4. The type of tax involved, the federal tax form number, the specific year(s)/period(s) involved (in estate matters the decedent's date of death), and specific tax matter or actions to be performed,

5. The taxpayer's signature(s),

6. In the case of a Form 2848, Power of Attorney and Declaration of Representative a completed Declaration of Representative (Part 2).

(3) The tax year listed on the POA or TIA must match the year in which you are working the withholding issue.

(4) If the POA or TIA form only includes the current year, you cannot discuss any other years. Ask the taxpayer's representative to submit a new form to cover the years to be discussed. Use general information to explain the Withholding Compliance program.

(5) If you are speaking to the taxpayer's representative by telephone, follow procedures in IRM 21.1.3.3, Third Party (POA/TIA/F706) Authentication, then research IDRS using CC CFINK to determine if the POA or TIA is already on file. If the POA or TIA is on file, verify that it includes the correct tax period. If it does not include the correct tax period, or there is no record on CC CFINK, advise the taxpayer's representative to submit a new or updated signed form.

(6) If correspondence is received from a third party and there is no record on CC CFINK, or no Form 2848 or Form 8821 attached, use Letter 0135C to advise the third party that we do not have a POA form on file. Use paragraphs E or F, and H, as part of your response.

(7) If the Form 2848 is attached to the taxpayer's correspondence, compare the information on the form with the information found on CFINK to verify it is for the same tax period. If there’s no information present on CFINK and the form is acceptable, photocopy the form, attach the copy to the correspondence, and then fax the original to the POA functional processing area as specified on Form 2848, instructions for processing.

(8) If authorization as in (2) above is not attached, before replying to a person other than the taxpayer who states they have a POA or TIA for the taxpayer, research the CAF using CC CFINK. Ensure that we have their POA or TIA on file before sending any information. If there is no POA or TIA, send the information directly to the taxpayer. Notify the taxpayer using Letter 4243-C that a third party inquiry was received from (name), we have no record of a POA or TIA, and without a POA or TIA we are not permitted to furnish information to a third party.

(1) DO NOT initiate a lock-in letter, reconsider or modify any previously issued lock-in letter, or process any referral based on an invalid Form W-4.

(2) Any alteration of, or unauthorized addition to a Form W-4 makes it invalid.

(3) Invalid W-4 forms can be recognized by

• Deletion of the language of the jurat. For example: crossed out penalty of perjury statement above the signature

• Defacement of the certificate

• Any writing on the Form W-4 other than the entries requested

(4) An employer who receives an invalid Form W-4 from an employee must take the following actions:

1. Inform the employee that the Form W-4 is invalid

2. Request another Form W-4 from that employee

3. Until the employee furnishes a new Form W-4, withhold tax from the employee's wages at withholding (filing) status single, and standard withholding rate with no reductions

4. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4

(5) If an invalid Form W-4 is submitted with a referral for assessment of civil penalty, reject the referral. Notify the originator to advise the employer to follow the procedures outlined in (4) above.

(6) If the taxpayer submits an invalid Form W-4 in response to a lock-in letter, or with a request for reconsideration of a previously issued lock-in letter, issue Letter 4243C to advise the taxpayer that the Form W-4 is invalid and ask for a new one. DO NOT process any request for reconsideration based on an invalid Form W-4.

(1) Refer taxpayers to the Taxpayer Advocate Service (TAS) when the contact meets TAS criteria (see IRM 13.1.7.2, Introduction to TAS Case Criteria) and you can’t resolve the taxpayer’s issue the same day. Refer to IRM 13.1.7.5, Same-Day Resolution by Operations.

(1) Check case status on SUMRY. If status is 60, the taxpayer has an approved installment agreement. Work according to general processing procedures unless the taxpayer raises a concern about their ability to meet established IA payments. If status is 26, see IRM 5.19.11.3.8 , Cases Assigned to Collection Field function.

(2) If the status 60 taxpayer raises this concern and meets streamlined agreement criteria, use the WHC Withholding Estimator Per Pay Period calculator to determine the taxpayer's new estimated withholding take-home pay amount. Subtract the estimated withholding amount from the taxpayers gross pay and advise the taxpayer of the new estimated take home pay. See the Per Pay Period Information tab on the WHC Withholding Estimator. Reinstate or modify the streamlined installment agreement as appropriate.

(3) If after handling any WHC issues, the taxpayer has balance due modules that meet streamlined Installment Agreement criteria as defined in IRM 5.19.1.6.4, Installment Agreement (IA) the Tax Examiner (TE) should request full payment (including full payment up to 180 days per IRM 5.19.1.6.3 , Short Term Payment Plan Within 180 Days, of the outstanding balance due. If the taxpayer is unable to full pay (up to 180 days) the TE should review IRM 5.19.1-12 , OPA Referral Criteria, or use IAT Compliance Suite Full Process to determine if they qualify to use Online Payment Agreement (OPA). If the taxpayer appears to qualify for OPA , they should be encouraged to use it to establish their payment arrangement, if possible. If taxpayer qualifies, the TE should advise the taxpayer to visit Payments | Internal Revenue Service (irs.gov) to complete an Online Payment Agreement Application. If they do not qualify, the TE should offer to establish, reinstate or modify the streamlined Installment Agreement.

(4) If after handling any WHC issues, the taxpayer has balance due modules that do not meet streamlined criteria and the taxpayer does not have an IA, the Tax Examiner (TE) should request full payment (including full payment up to 180 days per IRM 5.19.1.6.3, Short Term Payment Plan Within 180 Days, of the outstanding balance due. If the taxpayer is unable to full pay (up to 180 days), the TE should offer to transfer according to IRM 5.19.11.3.1(14) , Telephone Contact Procedures.

(5) If after handling any WHC issues, the taxpayer needs to adjust their non-streamlined IA orif any of the modules are in ST 22 (Automated Collection System, ACS) or ST 26 (Field), the TE should offer to transfer according to IRM 5.19.11.3.1(14) , Telephone Contact Procedures.

(1) When working a WHC case with at least one balance due module in status 26 and/or a Taxpayer Delinquency Investigation (TDI) assigned to Collection Field function (CFf) you must contact the Revenue Officer (RO) assigned the case.

1. Research RO Lookup (irs.gov) on SERP to identify the assigned RO.

   Exception: There are 2 exceptions where a Status 26 is not assigned to an RO or group. MMIA with an assignment code of “35XX6XXX or ASFR where the last 4 digits of the assignment code is "8000". Do not refer these cases to an RO.

2. Before taking any further action on the case, advise the field employee of WHC case actions taken to date. Coordinate any additional WHC case actions with the employee.

(2) If the RO directs you to release the lock-in(s) take the following actions:

1. Document the employee's name, employee number, and telephone number in the AMS history along with the actions requested and taken.

2. Update WHCS.

3. Resolve the case as directed.

(3) If the RO agrees that the lock-in(s) should remain in place and the RO can provide additional information to assist in the resolution of the WHC case, document AMS history with the employee's name and employee number and any additional information provided. Proceed to resolve the WHC case.

(4) If the RO does not respond to your initial contact attempt within one week, make a second call or send email. Each attempted contact must be documented on AMS. AMS will update the status code on IDRS. Use CC ACTON to update the IDRS Control Base and History Information with the appropriate activity.

• If you are still unable to reach the RO, leave a message or email requesting a return call within two days.

• Advise them that you will proceed with general WHC case processing if they do not respond.

• Document these actions in AMS.

(5) When working a WHC telephone call where the taxpayer account meets the conditions in (1) above, take the following actions:

1. While the taxpayer is on the telephone, secure and document in AMS all necessary information to resolve the WHC case.

2. Advise the taxpayer that you will coordinate with the assigned RO to resolve their case and they will be notified by mail of withholding case resolution.

3. Follow procedures in (1) through (4) above.

(1) Letter 2800C and Letter 2801C, mailed to the employer and the taxpayer, respectively, are commonly known as the "lock-in letters". Letter 2800C instructs the employer to disregard Form W-4 submitted by the taxpayer and withhold at the filing status and withholding rate determined by the IRS. Letter 2801-C advises the taxpayer that the employer has been instructed to disregard Form W-4 submitted by the taxpayer and withhold at the withholding status (filing status) and rate specified in Letter 2800C, unless the Form W-4 results in more tax withheld than the lock-in letter.

(2) Letter 2801C is mailed to the taxpayer's last known address as defined by Treas. Reg. Sec. 301.6212-2. As a general rule, the last known address is the address that appears on the taxpayer's most recently filed tax return or as updated by the National Change of Address (NCOA) database. For further guidance regarding the definition of the last known address see Rev. Proc. 2010-16, 2010-19 IRB.

1. If the taxpayer's name and social security number (SSN) do not match, always use the Master File address (including reverse validity) belonging to the case SSN.

2. If the last known address cannot be determined (there is no entity on Master File), the IRS may use the address on the most current Form W-2 for mailing the lock-in letter to the taxpayer. If each Form W-2 shows a different address, use the address on the one showing the most wages. DO NOT update the taxpayer's address of record on Master File, but add the address information to the AMS history and to WHCS.

(3) Letter 2800C and Letter 2801C are mailed at the same time.

• Letter 2801C instructs the taxpayer to respond to us within 30 days if the taxpayer wishes to request a modification.

• Letter 2800C instructs the employer to lock-in the employee starting with the first pay period ending on or after 60 days from the date of the letter. This ensures that the taxpayer has ample time to respond to the proposed lock-in.

(1) Taxpayers may call in or send the IRS additional information and request that we reconsider our proposed or previous lock-in determination.

(2) Look for special situations. Research IDRS for freeze codes associated with Criminal Investigation or Disaster Relief cases. See IRM 5.19.11.10, Special Situations and follow instructions contained therein.

(3) In many instances the taxpayer's correspondence will contain a new Form W-4 and completed worksheet.

1. Review the Form W-4 and worksheet for accuracy. DO NOT take any action based on an invalid Form W-4. See IRM 5.19.11.3.5, Invalid Form W-4 for more information.

2. If the taxpayer did not submit a Form W-4 worksheet, prepare one based on current taxpayer information confirmed by taxpayer communication and/or your research. Use judgement in determining credibility and the need for verification. Follow guidelines in See IRM 5.19.11.7.1.2., Calculating Withholding Rate, for calculating withholding.

(4) If the taxpayer calls, complete the WHC Withholding Estimator while the taxpayer is on the telephone. Try to resolve the entire case by phone. Oral testimony is acceptable. Use judgement in determining credibility and the need for verification.

(5) If the taxpayer response states that they furnished a new Form W-4 to their employer, work the response as a modification.

(6) When verification is required for dependent information, attempt to validate the information from internal sources before contacting the taxpayer.

(7) When verification is required on the Deductions tab of the WHC Withholding Estimator, allow only those amounts that can verified on the most recent return due, including RTVUE/TRDBV for returns in processing; or the immediate prior year return when the most recent return due is not available.

(8) When working correspondence, check the most recent IRPTR and WHCS to identify all current employers. When talking to the taxpayer on the telephone ask them for the names and addresses of all current employers.

1. If not already listed, add these employers to WHCS and document the AMS history.

2. If the taxpayer indicate they no longer work for an employer listed on the most current IRPTR, document AMS history.

(9) See IRM 5.19.11.7, Responses and Redeterminations, for procedures regarding modifying the lock-in if the taxpayer is married and wants to change the withholding rate.

(1) If you determine that the taxpayer's information does not support a change to the withholding status (filing status) and/or withholding rate:

1. Mail Letter 2810C to the taxpayer.

2. Input TC 971 AC 148 to IDRS with the unchanged lock-in rate.

3. Document the AMS history with the reasons the request for change was denied and update WHCS.

(2) All jobs must be modified from Step 2 checkbox withholding (higher withholding) to the standard withholding rate UNLESS the taxpayer is presenting a frivolous argument, see IRM 5.19.11.10.5, Frivolous Communications.

(1) Release the lock-in in the following situations:

(1) When contact is made by an employer on the telephone, do not authenticate taxpayer information. Ask the caller for the name and Social Security Number (SSN) of the taxpayer to which the call relates, then document the taxpayer case as appropriate.

(2) If the employer calls for verification of a modification, provide the employer with the modified withholding status/rate and the amount of any annual reductions to withholding (Step 3, Form W-4) or additional amount to withhold per pay period (Step 4(c), Form W-4), only. Do NOT discuss Form W-4 calculations or case selection criteria.

(3) If the employer calls with a "general" question regarding WHC or the lock-in letter, document AMS under the EIN.

(4) If the employer is calling for a copy of the Letter 2800C, Lock-in Letter, determine if the lock-in has occurred and/or if they just lost the original and need a copy for their records. If they have not received the original and they are inquiring because the employee notified them, send a new lock-in letter and ensure appropriate timeframes are followed.

(5) If an employer responds that a taxpayer no longer works there and the case was batched as correspondence, take no action and destroy unsolicited correspondence. Per IRM 1.4.20.16.4, Security management has responsibility for proper records management.

(6) If the employer responds stating they have no record of the taxpayer ever working there,

• Call the employer to verify to whom the Form W-2 was issued

• Make one attempt to call the employer

• If unable to contact the employer, close the case

• If you determine that the taxpayer is still employed advise the employer to honor the lock-in letter

• Document AMS

(1) If the taxpayer claims that the wage and/or withholding amounts on the Form W-2 are incorrect, check the employer information against the Payer Agent List (PAL).

(2) If the information on the PAL confirms the taxpayer's claim, then redetermine the lock-in decision by calculating the correct withholding arrangement to which the taxpayer is entitled, based on the correct Form W-2 wage amount(s).

(3) If the calculation reveals that the taxpayer's current withholding rate is correct, take the following actions to release the lock-in:

1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer.

2. Input TC 972 AC 146 to IDRS with Disposition Code "ERR", cross-referencing the employer's EIN.

3. Update WHCS (Letters and Transactions section of the Employer Detail screen) with TC 972 AC 146, disposition code "ERR".

4. Notate AMS history with actions taken.

(4) If the taxpayer's current withholding rate is incorrect, take the following actions to modify the lock-in:

1. Issue Letter 2808C to the employer and Letter 2812C to the taxpayer.

2. Input TC 971 AC 148 to IDRS, cross-referencing the employer's EIN and entering the modified lock-in rate.

3. Update WHCS (Letters and Transactions section of the Employer Detail screen) with TC 971 AC 148 and the modified lock-in rate.

4. Notate AMS history with actions taken.

(5) If the information is not on the PAL then

1. Request taxpayer fax, send by Document Upload Tool (DUT), or mail written verification from the employer as to the correct wages and withholding, including a copy of the corrected Form W-2c , Corrected Wage and Tax Statement.

2. If a Form W -2c is received, follow the instructions above to release or modify the lock-in based on the new amounts.

3. Refer the Form W -2c information to the WHC PAL coordinator for inclusion in the PAL.

4. If the requested documentation is not received, follow normal case processing procedures to modify the taxpayer based on the Form W-2 reported on CC IRPTR.

(1) IRS holds that withholding is not part of the bankruptcy estate. Issuance of the lock-in letter is not considered a violation of the automatic stay.

(2) If you are contacted by Insolvency, follow their instructions.

(3) If you are directed to release or modify the lock-in, follow general case processing procedures. Document the AMS history with the name and contact information of the employee providing the direction.

(4) When working the Outcome 3 case listing, DO NOT issue a lock-in letter for a taxpayer in bankruptcy unless you have been previously directed to do so by a field bankruptcy specialist. Check IMFOLI for an open bankruptcy, identified by a literal "-V". If present, document AMS and close the case.

(5) When working correspondence or incoming calls on Outcome 2 cases, if the taxpayer says that he or she is in bankruptcy and the bankruptcy was filed between the date that the Outcome 2 case was selected for the program and the date that the lock-in letter was issued, ask the taxpayer the chapter number of the bankruptcy proceeding and follow the instructions below:

1. Chapter 7: Follow general case processing to determine whether lock-in should be modified or released.

2. All other Chapters, or taxpayer doesn't know: Release lock-in. See IRM 5.19.11.7., Responses and Redeterminations for release procedures.

(1) Combat Zone cases are identified by a "-C" freeze code on IMFOLI. See IRM 5.19.10.6.3, Combat Zone Freeze Code for additional information. If you see this freeze code, check the Combat Zone indicator field on IMFOLE to determine if the freeze code is still active: 1 = active and 2 = not active.

1. If the indicator = 1, do not lock in. Take the following actions.

2. Issue Letter 2809C to the employer(s) and Letter 2813C to the taxpayer, to release the lock-in.

3. Input TC 972 AC 146 with disposition code "COM"

4. Document the history and close the case.

5. If the indicator = 2, then the taxpayer is no longer in Combat Zone status. Document the history and continue to work the case.

(1) This section contains guidance and procedures for working foreign income issues.

(1) If the taxpayer's response contains frivolous arguments work the case according to general procedures. DO NOT modify or release the lock-in.

(2) Frivolous arguments may include:

• Language objecting to Form W-4 requirements

• Comments on the unconstitutionality of the tax law

• Quotes or references to the IRC which indicate that the taxpayer is free of any obligation to pay income tax liabilities

• Statements that the taxpayer is a citizen of an independent entity within the U.S. and not liable for Federal taxes

• Statements, often in pseudo-legalistic language, that the taxpayer is not subject to appropriate legal action for the accuracy of their responses

(3) See IRM 21.5.3.4.16.7, Identifying Frivolous Returns/Correspondence and Responding to Frivolous Arguments for additional information on identifying frivolous arguments.

(4) If the taxpayer is questioning the IRS authority to issue a lock-in letter, send Letter 3042C to the taxpayer. Update AMS and WHCS.

(5) If the taxpayer requests a release or modification without any valid substantiation, send Letter 2810C. Update IDRS with TC 971 AC 148 (unchanged rate), AMS and WHCS.

(6) If both (4) and (5) above apply, send both letters. Update IDRS, AMS and WHCS.

(7) Upon completion of case processing, forward a copy of the correspondence to the Ogden Frivolous Filer Unit.

• Prepare Form 3210 and

Use address: Ogden Compliance Campus
1973 N Rulon White Blvd
M/S 4450, Attention: Frivolous Return Program
Ogden, UT 84404

• Note in the remarks section of Form 3210 that the attached is being sent for information purposes.

• Forward the original with a fraud indicator check sheet to the Collection Function Fraud Coordinator (CFFC) for review.

(8) If you continue to receive frivolous correspondence from the taxpayer after the case is closed, send it on Form 3210 to the Ogden Frivolous Filer Unit at the address shown in (7) above. Ogden will document receipt of the correspondence and send Letter 3175-C, if appropriate.

(1) Employers are NOT required to withhold federal income tax on wages paid to household employees.

(2) Household employees include, but are not limited to, housekeepers, maids, nannies, baby-sitters, private nurses, gardeners and any similar domestic worker. The work is performed in and around the employer's private home.

(3) If the taxpayer says they are a household employee and this is the taxpayer's only source of wages, suggest that the taxpayer talk to their employer about voluntary withholding, or offer to send the taxpayer Form 1040-ES Estimated Tax for Individuals.

(4) If lock-in letters have already been issued and you determine that the taxpayer is a household employee

1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

2. Input TC 972 AC 146 with Disposition Code "NSW".

3. Document the history and close the case.

(5) If the household employment is not the only source of wages, subtract the household wages from the total wages and take the following actions:

1. Compute the withholding rate based on the lesser amount of wages

2. Issue either a 2800C and 2801C , or 2808C and 2812C , as appropriate

3. Input the appropriate TC 97X AC 14X

4. Document the history and close the case

(6) If lock-in letters have not been issued, document the history and close the case.

(7) Follow general lock-in procedures if you determine that the taxpayer is not a household employee.

(1) WHC cases may be created if wages are reported for the taxpayer's SSN more than 24 months after the date of death. For Outcome 2 and Outcome 3 cases, the date of death is displayed on the WHCS Taxpayer Summary screen. It can also be found using IDRS Command Code INOLES.

(2) Decedents' wages are generally reported on Form 1041, U.S. Income Tax Return for Estates and Trusts.

• If you are contacted by a third party representing the decedent, determine whether the wages reported belong to the decedent.

• If the wages belong to the decedent, input TC 972 with disposition code "ERR" to IDRS and WHCS.

(3) Wages reported more than 24 months after the taxpayer's date of death may be an indication of identity theft.

• If you are contacted by the taxpayer and you determine that they are not the true owner of the SSN,

• follow general procedures for working responses and redeterminations.

(1) These taxpayers are generally NOT subject to federal income tax withholding if both the following conditions apply:

• The taxpayer is a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner, and

• The taxpayer's pay is for qualified services.

(2) Qualified services are defined as services performed by the taxpayer in exercise of their ministry or in carrying out their duties as required by the religious organization.

(3) Work performed for a nonreligious organization is considered to be qualified services if the services are assigned or designated by the taxpayer's religious organization.

(4) See Pub 517, Social Security and Other Information for Members of the Clergy and Religious Workers, for more information.

(5) If the taxpayer meets the above criteria;

1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

2. Input TC 972 AC 146 with Disposition Code "NSW".

3. Document the history and close the case.

(1) Do not lock in a taxpayer who has submitted an OIC for consideration or has had an OIC accepted as identified by either an unreversed TC 480 or TC 780 on IDRS.

(2) Check IMFOLI for the OIC indicator: "-Y." If present, take the following actions:

1. Issue Letter 2809C to the employer(s) and Letter 2813C to the taxpayer, to release the lock-in.

2. Advise the taxpayer to adjust their withholding.

3. Input TC 972 AC 146 with disposition code "OIC".

4. Document the history and close the case.

(3) If taxpayer responds that an OIC has been submitted and the OIC indicator is present on IMFOLI, take the actions in (2) above.

(4) If the taxpayer tells you that an OIC has been submitted and there is no evidence of it on IDRS, contact the Compliance Services Offer in Compromise Unit at the campuses. (See SERP - OIC Compliance Campus Locations for the Monitoring of Accepted Offers - Who/Where (irs.gov)) and follow their instructions.

(5) If you are instructed to release the lock-in, follow instructions in (2) above; document the history with the name of the employee providing the direction.

(1) The following criteria have been established for determining CAU status:

1. Threat of physical harm that is less severe or immediate than necessary to satisfy PDT criteria;

2. Suicide threat by the taxpayer; or

3. Filing or threatening to file a frivolous lien or a frivolous criminal or civil legal action against an IRS employee or contractor or an IRS employee's or contractor's immediate family member.

(2) A taxpayer who meets any of the above criteria should be approached with caution. See IRM 25.4.2, "Cautious Upon Contact" Taxpayer, for additional information.

(1) Check IMFOLI for the PDT indicator: the literal "PDT." If present,

• Print the IMFOLI screen,

• Highlight the indicator and

• Route to the lead

(2) The lead will contact the Treasury Inspector General for Tax Administration (TIGTA) for information concerning the PDT prior to making any personal contact.

(3) After making contact, document the history and route to the Tax Examiner (TE) for appropriate action.

(1) Wages received as a statutory employee, under IRC Section 3121(d)(3) are exempt from income tax withholding.

(2) Statutory employees include: agent-drivers or commission drivers, full-time life insurance salespersons, home workers, and traveling or city salespersons. For details on statutory employees, see Pub 15-A, Employer's Supplemental Tax Guide (Supplement to Publication 15 (Circular E), Employer's Tax Guide).

(3) If the taxpayer says they are a statutory employee and there are multiple employers, verify which employer(s) is the statutory employer(s). Check IRPTR for the statutory employee indicator(s) for the tax year in question.

(4) If the indicator is present take the following actions:

1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer to release the lock-in.

2. Input TC 972 AC 146 to IDRS with Disposition Code "NSW".

3. Document AMS with the employer name and EIN where the taxpayer is not subject to withholding, that appropriate letters were sent, and TC 972 AC 146 (NSW) was input.

4. Update WHCS.

(5) If the indicator is not present, tell the taxpayer that we need written verification from that employer (on employer letterhead) confirming the taxpayer's status as a statutory employee. Provide the taxpayer with the appropriate fax number, mailing address and DUT options to send the documentation.

(6) If there are additional non-statutory employee Form W-2, Wage and Tax Statement, subtract the statutory employee Form W-2 wage amount from the total Form W-2 wage amount and follow general procedures for the remaining employer(s).

(1) Third party sick pay payments are generally shown on IRPTR by the literal "3RD PARTY SICK PAY IND: YES". Check IRPTR for the indicator. If present, take the actions shown below.

1. If lock-in Letter 2800C and Letter 2801C have not been issued, document the history and close the case.

2. If lock-in letters have already been issued then Issue Letter 2809C to payer and Letter 2813C to the taxpayer to release the lock-in, input TC 972 AC 146 with Disposition Code NSW, document the history and close the case.

(2) If there is no 3RD PARTY SICK PAY IND on IRPTR , follow general case processing procedures.

(3) If there are other wages, subtract the 3rd Party Sick Pay amount from the total Form W-2 wages and take the following actions:

1. Follow procedures in (1) above to release lock-in on the 3rd Party Sick Pay Form W-2

2. Compute the withholding rate based on the lesser amount of wages

3. Issue either Letter 2800C and Letter 2801C, or Letter 2808C and Letter 2812C, as appropriate

4. Input the appropriate TC 97X AC 14X

5. Document the history and close the case

(1) Beginning January 1, 2012, TC 971 AC 522 will include processes to flag accounts at different stages of processing from initial identity theft allegation to closure. Use the following directions when processing Identity theft issues:

(2) Non-Owner of the SSN communicates with the IRS and claims the Lock-In letter is incorrect.

1. If the individual calling is "inappropriately" using another taxpayer's social security number for purposes of employment and a Lock-In letter was issued on the "borrowed" social security number, do not disclose any of the SSN owner information.

2. The lock-in letter on the non-owner of the SSN will not be release or modified.

3. Refer them to the SSA for help in getting an SSN. Any employee who is legally eligible to work in the US and does not have a SSN can get one by completing Form SS-5, Application for a Social Security Card, and submit the necessary documentation. The taxpayer can get this form at SSA office, from the SSA website at www.socialsecurity.gov, or by calling 800-772-1213.

(1) Wages paid by international organizations are not subject to federal withholding requirements.

(2) The term "international organization" means a public international organization, designated by Executive Order as being entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f). See Exhibit 5.19.11-1, International Organizations Exempt from Federal Withholding Requirements for a list of international organizations.

(3) If the taxpayer or employer responds that the taxpayer works for an international organization and you have confirmed that the organization is listed in Exhibit 5.19.11-1 take the following actions:

1. Issue Letter 2809C to the employer and Letter 2813C to the taxpayer.

2. Input TC 972 AC 146 to IDRS with Disposition Code "NSW".

3. Document in the AMS history that the taxpayer is employed by an international organization (specifying name and EIN) and is not subject to withholding on those wages. Close the case.

4. Update WHCS with letters sent and transaction codes input.

5. If the taxpayer has other wages which are subject to withholding, follow general case processing procedures.

(4) If the organization is not listed in Exhibit 5.19.11-1 verify the employer's status as an international organization. Generally, this will be the number of the Executive Order covering the international organization. Route the case to the lead who will forward this information to Headquarters for a final determination.

(5) If the taxpayer or employer does not furnish the above verification, follow general case processing procedures.

(1) Taxpayers in litigation status are identified by a literal "-W" freeze.

(2) These taxpayers may be locked in if they meet lock-in criteria.

(3) Each "-W" freeze redetermination case will need to be considered on its own merits.

(4) The litigation TC 520 closing codes are 75-81 and 84.

(1) IRM 21.3.8.16.6, Publications for Indian Tribal Governments will provide the necessary information and guidance needed for verification or Exempt status or non Exempt status. They will explain what documentation is needed for proof of exemption from federal tax.

(2) If the information received is enough to release TP issue Letter 2809C to the company and Letter 2813C to the taxpayer.

(3) Update WHCS and IDRS with TC 972 AC 146 and document AMS.

(1) An "IRS" literal can appear on Outcome 2, Outcome 3 (Prior to June 2016) and phone calls.

(2) If you do not know the IRS employee, work the cases using general procedures. Complete Form 11377, Taxpayer Data Access, and give to your manager.

(3) If you know the IRS employee, transfer the case to your lead for someone else to work and complete 11377.

(1) Verify on IMFOLI and/or ENMOD that the open CI indicators "-Z" or "Z-" are present. If one is present:

• Print the IMFOLI or ENMOD screen

• Highlight the applicable indicator

• Route to the lead

(2) The lead will follow local guidelines for contacting the appropriate CI function.

• If CI fails to respond to lead, close case as TC 972/146, ERR

• If the indicator is not present, follow general processing procedures

(1) Check IMFOLI for the "-O" freeze code. If one is present, take the following actions:

1. Check IMFOLI for the most recent TC 971 AC 086 and 087

2. Look for the disaster ending date, identified by the literal "DIS-END-DT": mmddyyyy

3. If the current date is beyond the disaster ending date, then the disaster relief period has ended. Follow general case processing procedures

4. If the disaster relief period has not ended, do not issue lock-in letters. Update WHCS with TC 972 AC 146 and disposition code “ERR”. Document AMS. Do not update IDRS.

(2) If the taxpayer self-identifies and qualifies for an "-O" freeze but no "-O" freeze is present, verify that the taxpayer’s zip code is among those of the affected areas during the disaster period, see IRM 25.16.1.7.2, -O Freeze, for additional instructions.

(3) The "-S" freeze is a disaster indicator for taxpayers in minor disaster area. This freeze does not stop WHC processing.

(1) This section covers procedures for assessing civil penalties when there is no entity on IMF Master File.

(1) Assess the IRC Section 6682 civil penalty using Master File Transaction (MFT) 55 for the calendar year for which the false Form W-4, Employee’s Withholding Certificate was signed. Multiple penalties may be assessed on a given module, one for each false Form W-4.

1. Use TC 290 with Reference Code 616 to assess the $500 civil penalty. IDRS generates a TC 240, Reference Code 616. The reference number uniquely identifies the penalty being assessed and serves as an indicator for generating the first notice to the taxpayer.

2. Use IDRS CC ADJ54 to input W–4 civil penalty assessments. Use TC 290 with a zero amount to open the MFT 55 module. Enter the three-digit reference number, 616 for W–4, along with a positive money amount to generate a TC 240, Miscellaneous Penalty Assessment. Enter in the remarks area SD (source document) and the appropriate remarks, e.g., assess the W-4 civil penalty. This informs the Returns Files function that a document will be received for association with the adjustment Document Locator Number (DLN).

3. The three-digit Reference Number 616 posts to the IMF and appears to the right of the TC 240. The TC 290 is a carrier record only and does not post. Place penalty assessments for each module in the 52X Blocking Series for the first assessment on a module, and in the 53X Blocking Series for subsequent assessments. Source code "0" and Reason Code "00" generate automatically.

(2) When assessing IRC Section 6682 civil penalty, input levy source information (the employer’s name, address, and EIN). Remember to update levy source information when a taxpayer informs you of a new or different employer than the one on the W–4.

(1) The IRC Section 6682 penalty may be abated if the taxpayer demonstrates having a reasonable basis for making the false statement(s) on Form W-4 when it was submitted to the employer. Requests for abatements will be received directly from the taxpayer or may be forwarded from other campuses via Form 3210, Document Transmittal.

(2) If a request for abatement is received, check IDRS for the TSIGN to see if it is assigned to a technical Services in the Examination function, as well as, verifying the penalty was not already abated.

(3) You may find that there was sufficient withholding and credits at the time the W–4, was furnished to cover the liability for the tax year when the form was in effect.

(4) Penalties may be abated if there is a reasonable basis, which exists if:

1. The withholding rate is computed in accordance with the form instructions. See Treas. Reg. 31.6682-1(a).

2. The taxpayer justifies the withholding rate claimed on the W–4.

3. The taxpayer demonstrates that withholding computed at the adjusted or modified withholding status (filing status) and withholding rate is the same as or less than the withholding on the original W–4.

   Example: A taxpayer furnished an exempt W–4 and is penalized. In a subsequent modification and abatement request, the taxpayer shows they are entitled to Single, standard rate and no adjustments. At the taxpayer’s income, no tax would be withheld if withholding were figured at Single, standard rate and no adjustments. Adjust withholding to Single, standard rate and no adjustments, and abate the penalty.

4. The taxpayer establishes that the W–4 was completed taking into account incorrect information received from a Service employee. See Declaration of Taxpayer Rights at VIII in Pub 1. The assertion that Service error is involved should be verifiable and credible under the circumstances. Misunderstanding publications or the law is not a reasonable basis for furnishing a false W–4.

(5) The reasonable cause standard, which is applicable to abate some penalties (for example, penalties for late filing or late payment) does not apply to the penalty for furnishing an incorrect Form W-4.

(6) The taxpayer's reasonable basis for furnishing an incorrect Form W-4 must be related to expected tax liability. The following lists provides examples of reasons taxpayers may offer for furnishing a false Form W-4 that do NOT meet the reasonable basis standard:

1. Illness,

2. Loss of records,

3. Overpayment of a tax liability.

(7) Do not abate or waive the W–4 civil penalty on moral, religious, political, or constitutional arguments.

(8) Do not abate penalties for reasons relating to personal finances of the taxpayer, either at the time the false W–4 was furnished or in connection with the taxpayer’s ability to pay the penalty.

(9) Penalty abatements must be approved by the manager.

(10) If you decide to abate or waive the penalty, send Letter 2811C to the taxpayer. A notice of adjustment is also automatically generated to notify the taxpayer. If the request is denied, use Letter 2804C and document the case history.

(1) The taxpayer has the right to appeal denied requests for abatement of the civil penalty. Follow the procedures below for preparing and transmitting a case to Appeals for review.