4.5.3. TE/GE AIMS Special Processing Procedures

(1) TE/GE’s authority to resolve issues is derived from its authority to make determinations of access to software applications such as AIMS, IDRS and RCCMS as qualified under Document 6209.

(1) The goal of TE/GE is to provide procedures for the accurate reporting of AIMS processes, reports and maintaining secure inventory control of examinations.

(1) This manual uses the following acronyms

(1) Employee Benefit Plans must file one or more of the following returns, unless excused by statute:

1. Form 5500, Annual Return/Report of Employee Benefit Plan

2. Form 5500SF, Short Form Annual Return/Report of Small Employee Benefit Plan

3. Form 5500EZ, Annual Return of One-Participant (Owners/Partners and Their Spouses) Retirement Plan or A Foreign Plan

4. Form 5330, Return of Excise Taxes Related to Employee Benefit Plans

5. Form 990-T, Exempt Organization Business Income Tax Return

6. Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits

(2) In addition to the above returns, EP may also examine the following returns as Discrepancy Adjustments:

1. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

2. Form 941, Employer's Quarterly Federal Tax Return

3. Form 945, Annual Return of Withheld Federal Income Tax

4. Form 1040, U.S. Individual Income Tax Return

5. Form 1041, U.S. Income Tax Return for Estates and Trusts

6. Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

7. Form 1065, U.S. Return of Partnership Income

8. Form 1120, U.S. Corporation Income Tax Return

(1) Each Exempt Organization must file one or more of the following returns, unless excused by statute:

1. Form 990, Return of Organization Exempt from Income Tax

2. Form 990-BL, Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons

3. Form 990-EZ, Short Form Return of Organization Exempt From Income Tax

4. Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as Private Foundation

5. Form 990-T, Exempt Organization Business Income Tax Return

6. Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code

7. Form 5227, Split-Interest Trust Information Return

8. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

9. Form 941 , Employer's Quarterly Federal Tax Return

10. Form 943, Employer's Annual Tax Return for Agricultural Employees

11. Form 945 , Annual Return of Withheld Federal Income Tax

12. Form CT-1, Employer's Annual Railroad Retirement Tax Return

13. Form CT-2, Employee Representatives Quarterly Railroad Tax Return

14. Form 1040 (PR), Self-Employment Tax Return-Puerto Rico

15. Form 1041 , U.S. Income Tax Return for Estates and Trusts

16. Form 1041-A, U.S. Information Return Trust Accumulation of Charitable Amounts

17. Form 1042 , Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

18. Form 1065, U.S. Return of Partnership Income

19. Form 1120 , U.S. Corporation Income Tax Return

20. Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations

21. Form 8871, Political Organization Notice of Section 527 Status

22. Form 8872, Political Organization Report of Contributions and Expenditures

23. Form 8038-B, Information Return of Build America Bonds and Recovery Zone Economic Development Bonds

24. Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds

25. Form 8038-TC, Information Return for Tax Credit Bonds and Specified Tax Credits Bonds

(2) In addition to the above returns, EO may also examine the following returns as Discrepancy Adjustments:

1. Form 11-C, Occupational Tax and Registration Return for Wagering

2. Form 730, Monthly Tax Return for Wagers

3. Form 1040 , U.S. Individual Income Tax Return

4. Form 1042 , Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

5. Form 1065 , U.S. Return of Partnership Income

6. Form 5330 , Return of Excise Taxes Related to Employee Benefit Plans

7. Form 1120 , U.S. Corporation Income Tax Return

8. Form 1120-F, U.S. Income Tax Return of a Foreign Corporation

9. Form 1120-L, U.S. Life Insurance Company Income Tax Return

10. Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return

11. Form 1120-S, U.S. Income Tax Return for an S Corporation

(1) Government Entities must file one or more of the following returns, unless excused by statute:

1. Form CT-1 , Employer's Annual Railroad Retirement Tax Return

2. Form CT-2 , Employee Representatives Quarterly Railroad Tax Return

3. Form 11-C , Occupational Tax and Registration Return for Wagering

4. Form 720, Quarterly Federal Excise Tax Return

5. Form 730 , Monthly Tax Return for Wages

6. Form 940 , Employer's Annual Federal Unemployment (FUTA) Tax Return

7. Form 941 , Employer's Quarterly Federal Tax Return

8. Form 943 , Employer's Annual Tax Return for Agriculture Employees

9. Form 945 , Annual Return of Withheld Federal Income Tax

10. Form 1042 , Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

11. Form 2290, Heavy Highway Vehicle Use Tax Return

12. Form 1040 , U.S. Individual Income Tax Return

13. Form 1040-A, U.S. Individual Income Tax Return

14. Form 1040 with Form 2555, Foreign Earned Income

15. Form 1040-NR, U.S. Non-resident Alien Income Tax Return

16. Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico)

17. Form 1120 , U.S. Corporation Income Tax Return

18. Form 1120-S , U.S. Income Tax Return for an S Corporation

19. Form 990-T , Exempt Organization Business Income Tax Return

20. Form 1065 , U.S. Return of Partnership Income

21. Form 8038, Information Return For Tax-Exempt Private Activity Bond Issues

22. Form 8038-G, Information Return for Tax-Exempt Governmental Obligations

23. Form 8038-GC, Information Return for Tax-Exempt Government Bond Issues, Leases, and Installment Sales

24. Form 8038-T, Arbitrage Rebate, Yield Reduction, and Penalty in Lieu of Arbitrage Rebate

25. Form 8328, Carryforward Election of Unused Private Activity Bond Volume Cap

26. Form 8329, Lender's Information Return for Mortgage Credit Certificates (MCCs)

27. Form 8330, Issuer's Quarterly Information Return for Mortgage Credit Certificates (MCCs)

28. Form 8703, Annual Certification by a Residential Rental Project

(1) The TEGE AIMS Coordinators are responsible for coordinating AIMS quality control procedures for all functions of TEGE.

(1) TE/GE Compliance Planning & Classification (CP&C) Managers are responsible for the accuracy, completeness, and timely forwarding of AIMS documents for terminal input. Their responsibilities include coordination, as necessary, to ensure accurate and timely terminal input.

(2) In addition, TE/GE CP&C Managers are responsible for:

1. Ensuring that AIMS manuals are available to all personnel

2. Ensuring that both technical and clerical personnel receive appropriate training in AIMS procedures

3. Ensuring that AIMS procedures are followed

4. Initiating appropriate corrective action on inventory validations and all data errors identified by the AIMS system

5. Initiating appropriate action whenever AIMS problems are encountered

(1) All problem reports and improvement requests must have the approval of the TE/GE Manager or their designee.

(1) To report all AIMS problems of a non-urgent nature or to request improvements to the system an e-mail is required to be sent to the AIMS Coordinator.

(1) The originating office will receive a response to each change request via email from the HQ Analyst regarding submission.

(2) Forward an information copy of each response from a function other than TE/GE to the TE/GE Director, Business Systems Planning, SE:T:BSP:B.

(1) The statute of limitation date for Form 5500 Series Returns is based on the plan year ending date. The statute date is computed by adding 3 years to the due date or date filed, whichever is later. Since the statute date for the annual return and a Form 1120 or Form 1040 will be different, it will be necessary to coordinate with SB/SE, W&I or LB&I when a statute problem exists. The due date of the Form 5330 return varies depending on the type of excise tax.

(2) The statute of limitation date for the Form 990 Series Returns, Form 4720 and Form 5227 returns is 3 years from the due date of the return or 3 years from the date the return was actually filed, whichever is later. Returns due dates are as follows

1. The due date for Form 990-PF, Form 990-EZ, Form 990-BL, Form 990 and Form 990-T (501(c)) returns is 5¹⁄₂ months after the end of the taxable year.

2. The Form 990-T Trust (IRC 401 and IRC 408) return is due 4 1/2 months after the end of the taxable year.

3. The Form 4720 must be filed by the due date, not including extensions, for filing the organization’s Forms 990-PF, Form 990, Form 990-EZ, or Form 5227.

(3) The Form 8038 series of returns do not have a Statute of Limitation Date. The returns are due by the 15th day of the 2nd calendar month after the close of the calendar quarter in which the bond was issued.

(1) When a return is needed for reference or information purposes and an ERTVU/BRTVU/RTVUE/TRDBV print is not sufficient, it must be requisitioned using Source Code 45. The Examiner must enter a brief reason for the request on Form 5597, TE/GE IMF/BMF/EPMF Request or Form 5588, TE/GE NMF Request.

(2) Generally, a case should not remain in Source Code 45 for more than thirty days.

(1) NMF involves a collection of revenue accounting and manually prepared and maintained account transactions for returns and account adjustments not reflected on the EPMF/BMF/IMF. NMF accounts are maintained on the Automated Non-Master File System (ANMF) at the Enterprise Computing Center (ECC) in Memphis Tennessee. Prior to NMF automation, Unit Ledger Cards (ULC) were prepared only for returns which indicated a balance due. (ULCs are still maintained for old accounts, since not all of the data contained on the unit ledger cards was transferred to the ANMF system.) Full paid or non-taxable returns did not have a ULC prepared. Instead, a Form TY-32, Index Card is prepared.

(2) Index Cards contain the taxpayers name, TIN, MFT, tax period, plan number (if applicable), type of tax and DLN of the assessment or adjustment document.

(3) Index Cards are not prepared for subsequent transactions. These actions are posted on the ULC.

1. The ULC’s are filed by DLN by the Accounting Branch in the Campus Center.

2. To request a ULC, prepare Form 4338, Information or Certified Transcript Request and forward to the Campus Center.

(4) NMF automation provides the Campus Centers and the Area Offices the capability for nationwide on-line transcript research of NMF accounts. Index Cards are prepared for "Information Only" returns, Audit "no change" and NMF "No-Remit Extensions of Time to File". These types of "returns" are not input to the automated ANMF system.

(1) When returns are transferred from one location to another, special care must be taken to ensure that the data base is transferred with the return. If an account is transferred from one Primary Business Code (PBC) to another, as soon as the first PBC takes transfer action on its data base the account is charged to the second.

(2) The address at the EPMF/BMF/IMF should be updated at the same time the data base is being transferred. Project codes remain on the data base when a case is transferred. Ensure that local definition project codes are updated when the case is received.

(1) Every church examination begins with a tax inquiry. To establish a tax inquiry account on AIMS, prepare a dummy Form 990, Return of Organization Exempt from Income Tax, using the current month and year to establish a tax period. Annotate, in red, at the top margin of Form 990, the phrase "DUMMY RETURN-OF A CHURCH."

(2) Prepare Form 13133, Expedite Processing Cycle, as follows:

1. Check the last box on the form

2. Line out the description to the right of the last box, replacing it with the phrase, "DUMMY RETURN-OF A CHURCH."

(3) Forward the dummy Form 990, along with the corresponding Form 13133, to the Campus Center for processing. Request research information to determine if the account is present on the BMF. If present, determine if the EO submodule is also present.

1. If the research indicates that the account is present on the BMF and contains an EO submodule, prepare Form 5597, TE/GE IMF/BMF/EPMF Request, to establish the account on AIMS. Enter Push Code 041, Current Year Pick-Up, in Item 11. Use the tax period established for the dummy Form 990. Refer to IRM 4.5.1.6.8.1 and IRM 4.5.1.6.8.2 and IRM Exhibit 4.5.1-8 for instructions on preparing Form 5597.

2. If the research indicates that the account is not present on BMF or that it is present, the EO submodule is not, hold Form 5597 until further research indicates that both the account and the EO submodule have been posted, and then forward it for terminal input.

(4) Each church tax inquiry account will be established on AIMS with an Activity Code of 345, Church Tax Inquiries.

(5) To close a church tax inquiry account off of AIMS, follow the procedures outlined in IRM 4.75, Exempt Organizations Examination Procedures. When preparing Form 5599, enter the applicable principal issue code for Approved Church Examination in Item 701. Refer to IRM 4.5.2.3 for instructions on preparing Form 5599.

(6) If, at the conclusion of a church tax inquiry, it is determined that a complete examination must be conducted, the church tax inquiry account must be updated. Using Form 5598, TE/GE Correction Request, update the Activity Code to 349, Approved Church Examination. The account need not be closed until the examination is completed. At the end of the examination, follow the procedures outlined in IRM 4.75, Exempt Organizations Examination Procedures, for closing a church examination. Refer to IRM 4.5.1, IRM Exhibit 4.5.1-14 and IRM Exhibit 4.5.1-15 for instructions on preparing Form 5598.

(1) When it is determined that a future examination should be made on an organization currently under examination, establish the future year account on AIMS using Form 5597, TE/GE IMF/BMF/EPMF Request, with the appropriate Push Code. For a listing of valid Push Codes for your functions, refer to:

• Document 6476, Information Systems Codes FY 2022 Quick Reference for EP Agents/Specialist

• Document 6379, Information Systems Codes FY 2022 Quick Reference for EO Employees

• Document 11308, Information Systems Codes FY 2022

(2) For instructions on preparing Form 5597, refer to IRM 4.5.1 Exhibit 4.5.1-8.

(3) In addition to establishing the account on AIMS, prepare a Form 5666, TE/GE Referral Information Report, for the administrative file. Refer to IRM 4.5.1 and IRM Exhibit 4.5.1-12 for instructions on preparing Form 5666.

(1) When conducting a private school examination, record the appropriate project code on AIMS. The project code may be input at the time the account is being requested or after the account has been fully established on one of the following forms:

1. Form 5597, TE/GE IMF/BMF/EPMF Request

2. Form 5588 , TE/GE NMF Request

3. Form 5595 , TE/GE Update

4. Form 5598 , TE/GE Correction Request

(2) If, during the course of a private school examination, it is necessary to refer certain returns not under EO jurisdiction to SB/SE, W&I or LB&I, update the project code to reflect the referral rather than the private school. This must be done at closing on Form 5599, TE/GE Examined Closing Record, and will result in the private school code being replaced by the referral code for information regarding referrals to SB/SE, W&I or LB&I.

(3) If a private school examination is considered part of a Special Emphasis Program (SEP), the project code must identify that program. A SEP code always takes precedence over private school and referral codes. It must be recorded on AIMS at the time the account is established, using the appropriate form. If the appropriate project code has not been input on AIMS before closing, it must be included on the closing document, Form 5599.

(1) A transfer of an IRC 4947 Trust by W&I, SB/SE or LB&I will be indicated on Form 3198-A which will be attached to the case file.

(2) The case file will be transferred via Form 5351, Examination Non-examined Closings, to the Area Office/Primary Business Code and will have a notation that the case is an IRC 4947 Trust. The case file should also contain a blank Form 5351 for use by TE/GE.

(3) When the case file is received in the TE/GE Area office, AIMS documents must be prepared either to close the case or to change the activity and employee group codes on AIMS. This is necessary to remove the account and employee group code from W&I, SB/SE, or LB&I’s inventory.

(1) When it is necessary to refer returns not under TE/GE jurisdiction to W&I, SB/SE, LB&I the Examiner must prepare Form 5666, TE/GE Referral Information Report. Refer to IRM 4.5.1.6.9.2 and IRM Exhibit 4.5.1-12 for instructions on completing this form. Use Form 5599, TE/GE Examined Closing Record to update the project code during the closing action.

(2) If the account under examination is considered part of a Special Emphasis Program, the project code must identify that program. A SEP code always takes precedence over a referral code and must be recorded on AIMS at the time the account is established using the appropriate form. Form 5666 must still be prepared.

(1) On examination cases, in which the original return is missing, every attempt must be made to locate the return. If the return was never received, a follow-up request to the Campus Center should be performed if the examination cannot be conducted using an ERTVU/BRTVU/RTVUE/TRDBV print. If the return was received and subsequently lost, special searches must be performed.

(2) If it is determined that the return is not required and an examination is not to take place, the account can be approved for closing by the Director, EP, EO or GE (TEB, FSL or ITG) Examinations or their designee. DC 33, Error Accounts With No Returns, should be used and all supporting documentation must be forwarded to the Closing Function for closure. See IRM 4.5.1 and IRM 4.75.16.3.1 for additional information for DC 33 Form 10904 for EO.

(3) If it is determined that an examination is warranted or was already in progress, and if all attempts to locate the return are unsuccessful, and an ERTVU/BRTVU/RTVUE print is not sufficient, contact with the employer or organization should be made to secure the necessary information in order to complete the examination. This could be a copy of the return, claim, RAR, etc.

(4) If the original return was received and subsequently lost, the following procedures apply:

1. The Examiner must prepare a "DUMMY RETURN" and annotate at the top of the return "ORIGINAL DESTROYED (MISSING/LOST)."

2. The file must include documentation to support the preparation of the "DUMMY RETURN", specifically information on the efforts made to locate the missing/lost return.

3. The file must also contain a transcript of the account, the report showing the tax increase/decrease and a current AIMS print.

(5) If the examination is conducted using an ERTVU/BRTVU/RTVUE print, follow the original return procedures.

(1) Examinations may be closed based on the employer’s/organization’s retained copy of a return or an ERTVU/BRTVU/RTVUE print.

(2) To avoid unnecessary delay in closing a case, prepare requisitions and forward for terminal input as soon as time is charged to that return or it is known that an examination will be made, whichever is earlier.

(3) A copy of a return cannot be surveyed, therefore, the case should not be established unless the return will be examined. If a copy is established on AIMS in error, use DC 33, Error Accounts With no Return, to remove the record from AIMS.

(1) For 30 day letters, if the taxpayer submits a written protest and/or requests Appeals consideration, the case file and written protest will be transferred to the Appeals Office serving the district office. If only one protest is received, the entire case file, including the duplicate original preliminary notice for which no response was received, will be transmitted to Appeals. All electronic cases will be closed to Appeals using PBC 621, SBC 00000, and EGC 021 in RCCMS

(2) Mandatory Review no longer reviews cases with valid protest to Appeals Division. The field group should submit Appeals cases to the Closing Unit who will forward the case directly to Appeals in RCCMS.

(1) Form 5596 , TE/GE Non-Examined Closings, Examination Return, can be used for closing all non-examined returns except Surveyed Claims (DC 34).

(2) Surveyed claims are closed on Form 5599, TE/GE Examined Closing Record.

(3) If Form 5546 is used:

1. Enter the two-digit disposal code in the space on the second line of the form that follows the words "Non Examined Disposal Code."

2. When the DC is 30, Transfer Out of Area, enter a dash and the two-digit code of the Primary Business Code to which the case is being transferred.

3. Attach the prepared Form 5546 to the return, if a return is available.

(4) If Form 5596 is used:

1. Only one type of tax (MFT) can be used on Form 5596. Each form can be used to transmit up to 20 labels when the MFT is the same. Additional pages can be attached so that up to 100 labels of the same MFT can be transmitted at the same time.

2. More than one disposal code may be used on a Form 5596.

   Exception: DC 30 may not be used with any other disposal code.

3. If more than one page is used, indicate the page number and total number of pages (maximum of five) in the upper right corner of the form.

4. Enter the requestor’s initials, employee group code routing symbols, and date.

5. Attach the Audit label(s) of the case(s) being closed.

6. Enter the two-digit disposal code in the lower left of the label below "STATUS." Select the correct non-examined disposal code. Refer to the following for a list of the non-examined disposal codes.

• Document 6476 , Information Systems Codes FY 2022 Quick Reference for EP Agents/Specialists

• Document. 6379 , Information Systems Codes FY 2022 Quick Reference for EO Employees

• Document 11308 , Information Systems Codes FY 2022

(5) Use of DC 29 is invalid if the current AIMS status code is above 06. If there is an amount claimed on the data base, only DCs 33 or 99 are valid.

(6) For EO/GE Cases - Records cannot be surveyed if an advanced payment, TC 640, is on the module. The TC 640 must be resolved before a record can be surveyed.

1. Research IDRS and AMDIS to determine if posting errors, cycling problems, or examination errors, caused the advanced payment to post to an incorrect tax module.

2. If necessary, secure the payment document to screen for use of the wrong EIN, tax period, or other data that caused the TC 640 to post incorrectly to the BMF.

3. Contact with the organization may be necessary to determine why the payment was made.

(7) Management approval is needed to use a non-examined disposal code. The Manager’s signature and date is entered on Form 5596 or Form 5546.

1. Closings in the Classification Area require the approval of the Manager of Classification or their designee. Closings in the closing functions require approval by the Manager of that Function or their designee.

2. Approval is required by the Business Unit, or their designee, to close an account using DC 33, Error Accounts With No Returns. Review by the AIMS Coordinator prior to submission for approval is required, to ensure all documentation is attached and correct procedures are followed.

(8) Special rules apply for DC 29 and 33.

1. Sufficient documentation must be attached to the closing document to permit the approving official to evaluate the closing request when applying the procedures given for, Missing Returns.

2. When DC 29 or 33 is used, the closing document is kept in searchable order for one year following terminal input. Unless area instructions provide otherwise, these forms are retained in the closing function. Arrangements may be made to have the forms numbered and closed to the Ogden Campus Center for retention.

   Note: DC 33 requires that the filed return has not been secured.

(9) Claims that are surveyed require the use of Form 5650 or Form 5599. Returns that are incorrectly assigned Source Code 30, Claim for Refund, may be surveyed without scheduling an overassessment by using CC AMAXUO or CC AMAXUP to correct the source code and to remove the amount claimed from the data base.

(10) Transfers Out of Area, DC 30.

1. All transfers use CC AMSOCP/AMSOC.

   Reminder: Do not use CC TSCLS when an investor is being transferred.

2. Enter the four-digit Employee Group Code of the Area in which the case is being transferred under the legend "EGC."

(11) Accounts closed with a non-examined disposal code remain on AIMS only until the end of the month that they are closed at the terminal. To allow time for reversal of the examination indicator on EPMF/BMF/IMF, a non-examined EPMF/BMF/IMF account cannot be re-established for one month following closing at the terminal.

(12) Disposition of Form 5596 - Unless local instructions provide otherwise, Form 5596 is retained by the closing function for thirty days after terminal input and then disposed of according to the Records Control Schedule 203.

(1) Non-examined closings containing partnership linkages will be closed only by contacting a TEFRA Coordinator when a PCS Freeze is found.

(1) If an original return is received with a duplicate or amended return which has no tax or refund due, and the case is to be surveyed, the TC 976/977 freeze code must be released on the AIMS section of the TIF. The reject message will consist of a TC 976/977 in the module.

(2) In order to release the freeze, a statement must be noted in the file by the Examiner that the amended/duplicate return was considered.

1. The Closing Unit will prepare Form 8485, Assessment Adjustment Case Record (refer to IRM 4.4, Audit Information Management System (AIMS) – Validity and Consistency, to input a TC 290 with a -0- if the amended/duplicate return has been considered.

2. If the amended/duplicate return has not been considered, return the case file to the originator for consideration.

(1) Tax Examiners must process prior year returns as follows:

1. Secure a MF transcript of the account to avoid duplicate assessments. After terminal research, if the tax period is currently under examination, coordinate with the function who has control of the return before making the quick assessment.

2. Prepare Form 2859, Request for Quick or Prompt Assessment and attach it to the tax return and Form 3244, Payment Posting Voucher. Assess according to guidelines outlined in IRM 4.4.17, AIMS Procedures and Processing Instructions, Jeopardy Assessments/Termination Assessments/Transferor-Transferee Assessments, & IRM 4.4.25, AIMS Procedures and Processing Instructions, Quick Assessments.

3. If the taxpayer made a full payment with the return, (i.e., tax, delinquency penalty, and interest), notate in the "Remarks" section, "Withhold Collection/Do Not Bill Taxpayer."

4. If the payment does not cover the full deficiency, do not notate to withhold collection.

5. Compute interest using normal interest computation procedures. If restrictions appear on the MF transcript, use applicable restricted interest procedures.

6. Tax Examiners should compute delinquency penalty TC 16X, unless prepayment credits exceed tax per return and a refund will be due to the taxpayer after assessment. In these cases, a delinquency penalty is not required.

(1) During an examination, a husband and wife who originally filed their returns on a separate basis, find that it would be to their advantage to use Joint Tax Computations. To have this advantage of filing a joint return the taxpayers are not required to actually file a joint return. Instead, execution of a joint agreement will be sufficient to make this election. To make this election the tax must be paid in full.

(2) The following documents and returns should be present when both husband and wife filed a return.

1. Form 3198-A , indicating "Separate Return Converted to Joint" and when applicable, credits for estimated tax payments are transferred to the joint account.

2. The husband’s and wife’s separate returns. The Tax Examiner must prepare a Form 2363, to add the wife’s name to the account and to correct the filing status from "3" (married filing separately) to "2" (married filing joint return). The wife’s original separate return should be refiled under the refile DLN assigned to Form 5599 for that return.

3. Form 5599 , with the wife’s SSN, Item 12 reflecting the reduction of tax, penalties, and interest previously posted to her account to zero. Prepare Form 2424, to transfer cash credits to the joint account. Form 5599, Item 15, should reflect amount necessary to reduce the unrefunded prepayment credit. Also, in Item 15 (decrease line), enter Reference Number 999 with a blank amount. This will indicate an adjustment to the primary account and "turn off" the multiple filer indicator. If the wife’s account shows zero tax and entire prepayment credit refunded, close the case as a "No Change" (DC 02). A closing letter is not prepared in this situation for the wife.

(3) Special entries on Form 5599 for the husband’s account are:

1. The wife’s name entered in Item C.

2. Tax and penalties for the joint account entered in Item 12.

3. The wife’s unrefunded prepayments entered as an increase in Item 15.

(4) Special entries required on the wife’s account Form 5599 are:

1. The appropriate TC’s and amounts in Item 12 to reduce all tax and penalties to zero.

2. Reference Number 999, with a zero amount in Item 15.

3. Necessary entries to reduce unrefunded prepayment credit by the same amount allowed as a credit on the joint return.

(5) The following documents should be present when only one spouse filed a return:

1. Form 3198-A , indicating separate returns converted to joint return.

2. Only one taxpayer’s return.

(6) The Closing Function Tax Examiners need to prepare a Form 2363 to change the filing status from "3" (married filing separate returns and the spouse is not required to file a return, spouse exemption is claimed) to "2" (married filing joint return) and add the name of the spouse who has not filed.

(7) When a delinquency penalty must be applied against a non-filing spouse, the penalty must be computed manually. Any delinquency penalty imposed on the spouse, who has previously filed, should not be duplicated in the computation. Form 3198-A should show the amount of the penalty. The manually computed delinquency penalty should be entered in Item 12, using TC 160 on Form 5599.

(8) When cash payments such as estimated payments, remittances with return, etc., are shown on the account that is being reduced to zero:

1. Enter Hold Code 2 in Item 7 of Form 5599.

2. Prepare Form 2424, to transfer the cash credits to the joint account, using TC 570 to prevent a refund of any credits that post before Form 5599 is processed.

3. Input Form 2424 in the same cycle as the wife’s Form 5599 is input.

4. Then input the joint Form 5599.

(1) When it is determined during an examination that the taxpayers are not entitled to file a joint return, the case must be flagged with Form 3198-A noted "Joint to Separate." Prepare Form 2363 to remove one taxpayer’s name from the account (it should be lined through on Form 5599). Usually, the account will be under the husband’s SSN and the wife’s name will be removed. If the spouse, whose name is removed from the account, is required to file a return, it must be included in the case file. If the return is in the case file, just forward the return for original processing

(1) If one spouse files a petition with the United States Tax Court or otherwise avails himself/herself of appeal rights on a proposed joint return deficiency, and the other spouse agrees to a deficiency or does not take appeal action, the agent must submit a request on Form 3198-A for a NMF assessment (do not input through terminal) for the non-petitioning spouse. The NMF account will be maintained in the name of the non-petitioning spouse concurrently with the account on the MF. Do not move the NMF account to the MF.

(2) For those cases suspended in the 90 day files, where the statute will expire within 120 days, and it appears that only one spouse has petitioned the Tax Court, the Review Staff must contact Appeals and ask them to review the petition since it appears from the docket list that only one taxpayer has petitioned.

(3) Review Staff must prepare Form 3210, Document Transmittal, to transmit the petitioned case and include the following information on a Routing Slip attached to the case file:

1. "Non-Petitioning Spouse Case"

2. Petitioning Spouse’s Name

3. Non-Petitioning Spouse’s Name

4. Statute Date

5. Indicate whether an assessment has been made against the non-petitioning spouse

6. Indicate who was contacted in Appeals for petition information and the date.

(4) Prepare Form 3210, to transmit the "dummy" case file after the non-petitioning spouse case has been assessed and include the following information on a Routing Slip attached to the file:

1. "Non-Petitioning Spouse Case"

2. Non-Petitioning Spouse’s Name

3. Indicate that the assessment has been made against the Non-Petitioning Spouse.

(5) For those cases, suspended in the 90 day suspense files, where more than 120 days remain on the statute and it appears that one spouse has not petitioned, transmit the case to Appeals using Form 3210, noted "Possible Non-Petitioning Spouse Case."

(1) Both spouses file a joint return and one spouse files a separate return for the same year.

1. If TE/GE determines the joint return is valid and both taxpayers elect to file jointly, zero out the separate return. Reduce the tax and penalties on the separate return in Item 12, Form 5599, (TC 301 $); reduce the unrefunded prepayment credit in Item 15, Form 5599 (TC 807 $). Enter Reference Number 999 in Item 15, Form 5599 for the blank amount.

2. If there is no tax liability on the separate return and the prepayment credit has been refunded, the case can be closed No Change (DC 02). A closing letter is not required.

(2) In the above situation, a Form 2363 is not required, since the MF shows joint names and joint filing status already.

(1) Zero out the incorrect joint account by preparing Form 5599 with the appropriate Transaction Codes(TC) and amount in Item 12 to reduce to zero all tax and penalties assessed.

1. Make whatever entries are necessary in Item 15 to reduce the unrefunded prepayment credit by the amount allowed as a credit on the wife’s separate account.

2. Process Form 5599 with the original joint return.

3. Transfer cash payments with Form 2424 to the wife’s separate account.

(2) Prepare and process a substitute return (TC 150 -0-) to set up the wife’s separate account. The received date for the substitute return should be the same as that of the joint return.

1. When the TC 150 posts to the MF, establish the account on AIMS.

2. Prepare and process Form 5599 for the wife’s return entering in Item 12 the total tax including any adjustment by TE/GE.

3. Enter in Item 15, the withholding credit equal to that which was decreased on the joint account.

4. Process Form 5599 with a copy of the substitute return numbered in the 90X blocking series.

(1) Public Law 91-679 provides that in certain cases a spouse will be relieved of liability arising from a joint income tax return. The three types of situations that can occur:

1. An assessment against the culpable spouse only

2. Two assessments-one against the culpable spouse, and one against the joint account

3. An assessment against the culpable spouse and an overassessment to the innocent spouse

(2) An appropriate notation on Form 3198-A should identify Innocent Spouse cases received from the field.

(1) To quickly release 6405(a) refunds to the taxpayers, the expedite refund request procedures were instituted. Under the expedite refund request procedures, the Service may issue the refund if the Committee does not express an objection within 30 days from the time the report is submitted to them. However, the expedited refund procedures should not be applied in cases where the expiration of the statute of limitations is imminent, or where the Service may have difficulty in recouping the refund.

(2) IRC 6405(b) provides a similar rule for Joint Committee review of a refund or credit made under IRC 6411, which relates to carry back adjustments. In such a case, if the net tentative refund or credit is more than $2,000,000 it will not be reported to the Joint Committee before making the refund or credit, but will be reported when the correct amount of tax is determined. If such determination results in a deficiency, but with a net refund or credit previously allowed under IRC 6411 (i.e., partial recoupment of the tentative allowance), the procedure as to Joint Committee review will be the same as with a refund or credit more than $2,000,000 not involving IRC 6411.

(3) If more than one taxable year is involved, only the overpayment, for each taxable year is considered. Any taxable year, for which there is no net overpayment, is not considered.

(1) After the case clears the Joint Committee on Taxation, the following documents should be in the case file:

1. Completed Form 4081, Transmittal Memorandum Joint Committee Case.

2. Completed Form 5466-B, Multiple Record of Disclosure, (Privacy Act of 1974). (For individual taxpayers only).

3. Yellow copy of the report to the Joint Committee signed on behalf of the Commissioner.

4. Copy of the letter of notification from the Joint Committee to the Commissioner that no exception has been taken (the Joint Committee letter should sometimes contain a list of unrelated taxpayers).

5. The case files, if previously forwarded to the Joint Committee.

(2) Upon receiving the above documents, the Tax Examiner must compare the taxpayer’s name on the yellow copy of the report to the Joint Committee with that listed on the letter from the Joint Committee. The name on the Joint Committee letter should be compared exactly with that on the yellow copy. In the case of a variance in the names, return the cases to the Technical Staff for further guidance.

(3) All Joint Committee cases require that a manual refund be issued if the monies have not already been refunded.

(4) Upon receiving acknowledgment of receipt by the Joint Committee of an "Expedite Refund Request" report, the examining area office QMS should promptly forward a "dummy" work file to the closing function to start refund processing. The work file must be transmitted with Form 3198-A, specifying the scheduled date for the refund. The scheduled refund date should be 31 days from the day the Committee received the "Expedite Refund Request" report. The closing function must coordinate with the Campus Center to schedule the refund to go out on the specified date. If the area office QMS is notified that the Joint Committee objects to the release of the refund, QMS must immediately contact the closing function to stop the processing of the refund.

Internal Revenue Service
Office of Compliance Specialization
901 D St. SW, Room 108
Washington, D.C. 20024

(1) Campus Center personnel must scrutinize all requests for refunds (Form 843, Form 1045, and Form 1139). Campus Center personnel are responsible for processing tentative refunds and forwarding all other TE/GE types of claims to the Area Office. All Form 1040-Xand Form 1120-X, indicating the original return is under TE/GE jurisdiction, must be forwarded to the Directors of the Business Units (i.e., EP, EO, FSL, ITG or TEB).

(2) In TE/GE, claims are generally filed for:

1. Form 11-C , Occupational Tax and Registration Return for Wagering

2. Form 730 , Monthly Tax Return for Wagers

3. Form 940 , Employer's Annual Federal Unemployment (FUTA) Tax Return

4. Form 941 , Employer’s Quarterly Federal Tax Return

5. Form 945 , Annual Return of Withheld Federal Income Tax

6. Form 990-PF , Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation

7. Form 990-T , Exempt Organization Business Income Tax Return

8. Form 1042 , Annual Withholding Tax Return for U.S. Source Income of Foreign Persons

9. Form 4720 , Return of Certain Excise Taxes on Charities and Other Persons Under Chapter 41 and 42 of the Internal Revenue Code

10. Form 5330 , Return of Excise Taxes Related to Employee Benefit Plans

11. Form 8038-T , Arbitrage Rebate, Yield Reduction, and Penalty in Lieu of Arbitrage Rebate

12. Form 3753 , Manual Refund Posting Voucher

(3) Taxable Increase Adjustment - An amended individual or corporation return which shows an increase (additional) tax over that reported on the original return.

(4) Superseding Return - Any return filed prior to the due date changing the data reported on the original return.

(5) When a Campus Center Adjustment Branch receives a timely filed TE/GE claim, they must secure the original return (Index Card and the ANMF transcript for NMF returns) and determine whether the organization or plan is under examination. If it is under examination (TC 420 in the module), they must forward the entire case to the Director of the Business Unit (EP, EO, FSL or ITG). Forward TEB claims to the Compliance and Program Manager.

(6) If the organization/plan is NOT under examination, the entire case must be forwarded to the Campus Center Examination Branch for AIMS opening input. Campus Center personnel should not generate overassessment transactions on TE/GE returns, unless directed or requested by local TE/GE offices except for math or Campus Center errors.

(7) Upon receipt, Campus Center Examination Branch must prepare and input the following Forms:

1. Form 5597 , TE/GE IMF/BMF/EPMF Request, to open IMF, BMF or EPMF accounts on AIMS.

2. Form 5588 , TE/GE NMF Request, to open a NMF account on AIMS for a claim filed on Form 4720-Aor Form 5330 (pre-2001).

(8) Claims should have a Source Code of 30 on Form 5546, Examination Return Charge-Out. After the account is established on AIMS and the charge-out is received, the entire case file must be forwarded to the specific Primary Business Code.

(1) An amended return is a second return filed, after the due date, which changes information submitted on the original return. The taxpayer will send their amended return to the Campus Center where the original return was filed. The amended return should then be posted to the taxpayers account on MF with a TC 976/977. If TC 420 is present, then a TC 470 will post to MF.

(2) In some instances, amended returns may require consideration by TE/GE to change tax liability on the IMF or BMF.

1. For amended returns referred to TE/GE, all assessment/overassessment documents are included in the administrative file. However, check the file to determine if a change in tax liability has been made as evidenced by a CP-36 or CP-193 notice with a TC 290 or 291 or computer notices indicating an adjustment has been made.

2. If the form is not included and doubt exists, secure a transcript of account to make this determination. Any necessary adjustments to refundable credits on individual or corporate returns, except estimated tax payments or credits, should be reflected in the workpapers.

(3) If an amended return is filed with the Examiner and an examination is not warranted, process the amended return directly to the Campus Center for input to the BMF/IMF/EPMF following the applicable delinquent return procedures in Section 4.75.22 for EO Deliquent, Amended and Substitute for Return Procedures. Do not establish on AIMS.

(1) Claims for refund, including amended returns and informal claims, other than TEB claims, may be surveyed after assignment if it is determined that the claim issue is clearly allowable in full and the return does not warrant examination.

(2) The Examiner must complete Form 1900, Income Tax Survey , for cases involving carry backs, if the information upon which the survey is based is not disclosed on the returns affected. The Examiner must also explain the reason for survey on Form 1900. The Group Manager must sign these forms.

(3) If the correct claim amount is not shown on Form 5546 or AMDISA, Examiners must prepare a Form 5598, TE/GE Correction Request to update AIMS with the correct amount.

(4) Form 1139, Corporation Application for Tentative Refund, is not treated as a claim when the amount requested has been refunded, although a claim form with the same issue and tax period was filed at the same time.

(5) Surveyed claims require a DC of 34 in Item 13 of Form 5599. Other required entries on Form 5599 include P7-18, P21-22, P24-29, P31-34, C, P36, P38-40, P52-54 and Items 12 and 36. Additional optional entries include Items 02, 6a, 6b, 6c, 07, 09-11, 15, 39, 40, 43 and 50-53.

(1) In cases involving the disallowance of a claim for refund, whole or in part, a notification letter must be issued to the taxpayer. The area office issues certified notices of disallowance. The Examiner prepares the following forms to inform the taxpayer of a full or partial disallowance of their claim.

1. Form 2297, Waiver of Statutory Notification of Claim Disallowance.

2. Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit.

3. Letter 569, Full/Partial Preliminary Claim Disallowance(accompanies the forms listed above). The Examiner must also prepare a report, unless they disallow a claim in full, and there are no other adjustments.

(2) If a certified notice of claim disallowance is issued, Form 3198-A, should notify the closing function or designee, with the appropriate blocks checked. The following letters are forwarded to the taxpayer by the closing function or designee to inform the taxpayer of the full or partial disallowance of their claim:

1. Letter 905(DO) - Final Partial Claim Disallowance

2. Letter 906(DO) - Final Full Claim Disallowance

(3) The reason for the disallowance must be at the bottom of the letter.

(1) Specific provisions extending the time for filing claims are listed in the following cases:

1. Overpayment resulting from bad debts and worthless security losses, or their effect on carryovers and carry backs.

2. Overpayment resulting from Net Operating Loss (NOL) or capital loss carry backs or certain credit carry backs.

3. Overpayment resulting from foreign tax credit.

4. Certain overpayment of self-employment tax.

5. Overpayment attributable to reduction of life insurance companies of policyholders, surplus accounts.

6. Overpayment relating to employee plan distributions included in income and later recaptured in connection with plan termination.

(2) Special rules are also provided for certain manufacturing sugar payments, for overpayments attributable to items of Federally registered partnerships for windfall profit tax, and trade rubber.

(3) Windfall Profit Tax (WPT) - The statute is based on when the WPT was paid rather than the personal income tax payment date. Amounts of WPT withheld are treated as having been paid by the producer on the due date or extended due date of the income tax return. (The credit for overpayment of WPT has been repealed effective for tax periods beginning after August 1988.) All claims or requests for adjustments to WPT are forwarded to the Austin Campus Center (AUSC).

(4) Self-Employment Tax - If an agreement by a state or subdivision, under Section 218 of the Social Security Act, covering its employees, results in a retroactive reduction of their self-employment taxes, an otherwise barred claim for refund will be timely if made by the last day of the second year after the calendar year of the agreement [IRC 6511(d)(5) ].

(1) If it is found that a corporation does not qualify as a small business and the business is terminated, Form 1120-S Return must be converted to a regular Form 1120. The Examiner must identify the case by attaching a Form 3198-A to the file and should prepare Form 5598, to change the Form 1120-S Activity Code to the appropriate code for Form 1120, as indicated on Form 3198-A.

(2) Form 5599 for the Form 1120-S Return should also be used for Form 1120. Tax Examiners must complete coding and editing in the normal manner.

(3) For unagreed cases closed to the Appeals Office, the appropriate DC (07 or 11) must be entered on Form 5599.

(4) For agreed cases, two additional steps are required:

1. Prepare Form 2363, to input TC 091, changing the filing requirements to those of a corporation. Process Form 2363 two cycles ahead of Form 5599.

2. Prepare a routing slip addressed to the Campus Center Entity Control. The routing slip must include the statement, "Form 1120-S converted to Form 1120 by TE/GE Division; update Form 2553." (Form 2553, Election by Small Business Corporation.)

3. Furnish to Entity Control the following information: The taxpayer’s name, address, and EIN; the effective date of termination; the reason for the ter- mination; the district office code; and, a statement that Form 2363 has been input.

(1) This kind of case must be identified with Form 3198-A. The case file may include the original or a copy of Form 1120.

1. In agreed cases the file should contain a Form 1120 or a photocopy of Form 1120 marked "Form 1041 Converted to Form 1120 by TE/GE Division."

2. In unagreed cases, the file must include a Form 1120 marked "Substitute for Return Prepared by TE/GE Division."

(2) The procedures for conversion are as follows:

(1) Examiners must identify conversion cases on Form 3198-A attached to the file.

1. Agreed cases should be processed in the same manner as conversion of Form 1041 to Form 1120, except that the return forms involved will be Form 1065, Form 1120 or Form 1041, as appropriate.

2. Unagreed cases should be processed in the same manner (except the return forms involved) as conversion of Form 1041 to Form 1120.

(1) Agreed case files should contain a Form 1120 or a photocopy marked "Form 990 converted to Form 1120". This kind of case must be identified with a Form 3198-A attached to the case file.

(2) In order for the Form 1120 to post to MF, the MF should reflect compatible filing requirements and status.

1. Once the Form 1120 has been secured, change the filing requirement and status in order for the Form 1120 to post.

2. After Form 1120 has posted, change the filing requirement and status back to the original filing requirement and status in order to close out the Form 990 as a revocation.

(3) Submit Form 5599 with Form 990 to close off the AIMS data base as a revocation, using DC 09.

(4) For unagreed cases, place the converted Form 1120 substitute for return in the case folder.

1. Process Form 5599, for Form 990, in the normal manner by closing the case to Appeals. Do not change the filing requirement.

2. If necessary, Appeals must take action to process Form 1120 to MF, open the case on AIMS, and request a change to the filing requirements.

(1) In the event that an examination results in the revocation of the exempt status of the trust, follow the procedures below in disposing of Form 1041, U.S. Income Tax Return for Estates and Trusts. Form 5500 Series Returns will be closed upon final disposition of the examination.

(2) When converting a Form 1041, the Campus Center will follow these procedures:

(3) At the time of closing, the Examiner will print in the top margin of Form 1120 and on Form 3198-A, Special Handling Notice, "Form 1041 Converted to Form 1120 by TE/GE". The Examiner will also add the activity code of the new Form 1120 to the Form 3198-A.

(4) The "received date" on the new return is the date of the timely filed return, if the return being converted is timely filed. Otherwise, it is the date that the return being converted was filed. The amount of tax resulting directly from the conversion is shown in the tax computation of Form 1120 or Form 1041.

(1) Form 1331 and Form 1331-B Notice of Adjustment, is used to process NMF overassessments resulting in abatement, credit and or refunds.

(2) The heading information should be completed as follows for Forms 1331 and Form 1331-B:

1. Enter the taxpayer’s EIN/SSN

2. Enter the taxpayer’s Form/MFT/Tax Period in YYYYMM format/Abstract Number

3. Enter the taxpayer’s name and address

4. Amount of check, if the check is enclosed

Form 1331

(3) Section I - Computation of Decrease in Liability. Complete only the applicable fields.

1. Item 1: Tax withheld - enter the amount of tax plus any penalty or interest withheld

2. Item 2: Paid on estimated tax - amount of estimated tax paid should be entered

3. Item 3: Tax due per return - enter the amount of tax due per return plus any penalties or interest

4. . Item 4: Additional tax charged - Account Number - enter additional tax charged plus any penalties or interest

5. Item 5: Total tax previously charged - enter the total amount of tax previously charged plus any penalties or interest

6. Item 6: Less: Correct tax - enter the amount of corrected tax plus any penalties or interest

7. Item 7: Decrease liability - enter the amount of decrease in liability plus any penalties or interest

8. Item 8: Less: Amounts previouslyrefunded or credited to other accounts - enter amounts previously refunded or credited to other accounts plus any penalties or interest

9. Item 9: Net decrease in liability - enter the net decrease in liability plus any penalties or interest

10. Item 10: Reason for adjustment - check the appropriate box; if "Other" box is checked; enter the specific reason for adjustment; enter the DLN; if manual refund is to be issued make a notation: Please process full abatement, Form 3753 attached to process manual refund with interest; fax to appropriate Campus

11. Date - enter present date

12. Prepared by - enter originator’s name

Form 1331-B

(4) Section I - Computation of Decrease in Liability

1. enter DLN from transcript

2. enter the specific reason for adjustment

3. notate if letter or notice is going to taxpayer - Yes or No

4. if manual refund is to be issued make a notation: Please process full abatement, Form 3753 attached to process manual refund with interest; fax to appropriate Campus

5. enter transactions code and amounts that reflect the decrease in tax, penalties, and interest

6. Date - enter present date

7. Prepared by - enter originators name

Form 1331 & Form 1331-B

(5) Section II - Disposition of Decrease in Liability and Interest allowed on Overpayment - Complete as follows for Form 1331 and Form 1331-B:

1. Refund - enter the interest computation date in the Allowable Interest Computed To column; all other fields leave blank

2. Allowable interest Paid - leave all fields blank

3. Elimination - Liability not paid or owed - enter tax period in the Tax Period Account column; enter the total amount of the refund in the Amount column; all other fields leave blank

4. Credit (amount overpaid) applied as credit to tax (T), penalty (P) and interest (I) due onoutstanding accounts - enter the amount of tax, penalty and interest in the Amount column; all other fields leave blank

5. Total decrease in liability eliminated and credited - enter the total amount being decreased in the Total Paid column

6. Allowable interest credited - leave all fields blank

7. Total amount eliminated and credited - enter the total amount being eliminated in the Total Paid column

8. Field Office or Service Center - enter the appropriate Campus processing Form 1331 or Form 1331-B

9. Signature of Approving Official - secure the proper signature

10. Completed by - person preparing form

11. Date - enter date prepared

(1) When evidence that a required return has not been filed, the Examiner will request a transcript of the account to document what action has been taken. The request can be submitted as follows:

1. Form 5644, TEGE Inquiry Request,

2. Form 6882, IDRS/Master File Information Request, or

3. Perform on-line research

For	Use when performing research
EP	CC EMFOL/INOLES
BMF	CC BMFOL/INOLES
IMF	CC IMFOL
EP, BMF and IMF	CC SUMRY and TXMODA

(2) Based on the above, a transcript of the account must accompany each delinquent or substitute for return. This transcript will be attached to the return when submitted to the Campus. The transcript will be used by the Agent to perform processing verification responsibilities and will be kept in a suspense file.

1. EP - Do not submit a delinquent or substitute return if a TC 150 has posted.

2. EO/GE - Do not submit a delinquent or substitute return if a TC 150 has posted. A TC 150 posting with no tax liability followed by a TC 240 posting for $500, W-4 penalty, indicates that the Campus Center has posted a dummy return. Any adjustments must be made as subsequent adjustments, i.e., TC 300.

(3) If a return has not been filed (TC 150), use Form 4844, Request for Terminal Action, to input the following codes into IDRS to close any Collection controls and halt any notice that may be issued requesting the return.

(4) The current or appropriate year’s tax form should be used. Substitute for returns should contain entity information only. Do not attach additional schedules.

(5) The Examiner will mail all delinquent return packages not under examination and delinquent/substitute return packages with payments to the appropriate Campus Center.

(6) The Examiner will mail delinquent return packages under examination, without payments, to the appropriate campus.

(7) Delinquent/Substitute Returns must be established on AIMS as soon as it is known that an examination will be made or when examination time is first applied. The appropriate Push Code must be used when establishing the case on AIMS in order to hold the TC 424 at the EPMF, BMF or IMF until the TC 150 posts. It is extremely important that the delinquent or substitute be submitted for processing since a CP 87 or CP 187 will be generated after the TC 424 posts, if a TC 150 has not posted. Establishing the returns on the EPMF, BMF or IMF, immediately establishes inventory controls and avoids unnecessary delays in closing.

(1) The Agent must perform a review and perfection of the delinquent return package under examination upon receipt prior to being sent to the Campus Center for processing.

(2) The following steps should be taken:

1. Review the tax return for an official date stamp and notation "Delinquent Return secured by TE/GE."

2. Review the transcript of account using CC BMFOL (BMF), IMFOL (IMF), or EMFOL (EPMF), SUMRY and TXMODA, attached to the return to determine that a TC 150 (posting of the return) is not present or pending.

IF	THEN
A TC 150 is posted on the module	The Examiner must keep the return for his file as the return has already been posted.
Payments are posted on the account that were transferred to the Excess Collections File	Complete Form 8758, Excess Collection File Addition and forward it to the Campus Center Accounting Branch with a transcript of the account showing the payment/credit.

3. Review the transcript to confirm the month in which the fiscal year ends (FYM) and the filing requirements. If the FYM on the return is different from that on the transcript and/or the filing requirements are not present, prepare Form 2363/2363-A to correct the FYM or filing requirement and submit to the appropriate area for processing. For EO returns, also confirm that a submodule is present.

   Exception: A submodule should not be present if the return is a Form 990-T (401(a) Trust) or Form 990-T (408(e)). A Form 990-T (401(a) Trust) is not an Exempt Organization Return (refer to chart below.)

IF the submodule	And IF	THEN
1. Is present and the Status is 41 (No Reply to Solicitation)		Prepare Form 2363-A to TC 022 the account only if the EIN is that of the Trust if it is a Form 990-T.
	the return is other than a Form 990-T and the application data went unpostable,	Prepare a Form 2363 or Form 2363-A to correct the Master File.
	the return is submitted to the Campus Center,	it will not post to the Master File and will create an unpostable condition 329-1 or 329-2.
2. Reflects a Status 40 (Application Pending-Inactive No Exemption)		Determine whether or not the organization is exempt for preparation of Form 2363-A.

Reminder: Refer to Document 6209 IRS Processing Codes & Information, ADP and IDRS Information for Filing Requirements, Status Codes and Unpostable Codes.

4. Special Situations - If a Form 990-T is received with the block checked "Type of Organization" as a Section 401(a) or Section 408(e), review the transcript to ensure the filing requirement is a Form 990-T-2. An Exempt Organization submodule should not be present. A Form 990-T, 401(a) or 408(e), must have an Employer Identification Number for the trust, not that of the plan sponsor. Check CC INOLES with a "P" behind the EIN number to ensure that the EIN on Form 990-T is not the same Identification Number as the plan sponsor.

IF	THEN
1. The EIN is the same,	Research CC NAMEE/NAMEB to secure the correct EIN.
2. A submodule is present as well as a Form 990-T-2 filing requirement,	Contact the Ogden Campus Center to remove any Forms 990-T that should have a trust EIN and re-post to the Trust.
3. A filing requirement is a Form 990-T-1 or not present,	Research must be conducted to ensure that the Form 990-T-1 filing requirement was done in error. If the filing requirement of Form 990-T-1 is incorrect then a TC 022 must be used to remove the submodule. This should only be done if the account is positively identified as that of the Trust. If the T/P is filing Form 990-T-1 type of returns, research must be done to secure the Trust EIN.

5. Ensure that the filing status and exemption blocks are completed for Forms 1040only.

6. Verify the taxpayer’s SSN/EIN and name with the transcript.

IF	THEN
1. The name is incorrect,	If the name on the Master File is incorrect, prepare Form 2363 to correct the name.
2. The TIN is incorrect,	Contact the Ogden Campus Center to have the account resequenced to the appropriate EIN.
3. The return is annotated "taxpayer unwilling to obtain SSN/EIN, temporary SSN/EIN necessary,"	Contact the Campus Center Entity Control Section to obtain a temporary SSN and the assignment of a permanent EIN.

7. Review the package for presence of Form 3198-A, (which must be on each return) annotated to either "Assess Delinquency Penalty" or "Do Not Assess Delinquency Penalty-Reasonable Cause Established."

8. If Form 3198-A is not present, the Examiner must make a determination of whether or not to assess the penalty or waive the penalty.

Note: Form 5734, Non-Master File Assessment Voucher, instead of Form 3198-A, may be present for Form 5500 Series Returns to assess the penalties. Form 5734 should not be used to assess penalties against secured delinquent returns, Form 4720-A, and Form 990-BL.

9. Verify entries on Form 13133, Expedite Processing Cycle, for name, address and phone number of the initiator, and name, TIN, MFT, plan number or report number (if applicable) and tax year of the taxpayer.

10. Ensure that Form 4844, is notated either TC 599-97 for EP Form 5500 Returns and EP Form 5330 Returns or TC 599-096. TC 599-094 for EO/GE Returns.

11. Verify all entries on Form 5597.

12. Attach the transcript research data that verifies that a TC 150 has not posted for each delinquent return.

13. Ensure that Form 3198-A and Form 13133 are attached to the package.

14. After package verification is completed, verify that Form 5597, has Push Code 020 for EP Form 5500 Series Returns and 020 for EP Form 5330 returns, EO or GE Returns, indicating that a delinquent return is being processed to ensure that the TE/GE examination request remains on MF, pending the posting of TC 150.

15. The tax return, with Form 13133, Form 3198-A, (if present) and the transcript research data should be forwarded to the appropriate campus. If a delinquent return requires quick assessment processing, do not sent the package to the campus. Process the return according to procedures contained in IRB 4.4.25.

Note: One instance where a quick assessment is needed, would be for the receipt of Form 4720 when a tax is reported under IRC 4912(b), IRC 4941(a), IRC 4944(a)(2),IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a) in Part II. The statute for Form 4720 is ruled by the filing of Form 990, Form 990-EZ, Form 990-PF or Form 5227, not by Form 4720.

Exception: If one of the above returns was not filed, then the filing of the signed Form 4720 will begin the statute. Otherwise, the delinquent return package must be transmitted on Form 3210.

16. The Agent will maintain the case file comprised of a copy of the entire package submitted to the campus for posting of the TC 150. Monitor the case file until the TC 150 posts to MF.

(1) The Agent must review and perfect the NMF delinquent return package under examination without payment, upon receipt prior to sending the package to the Campus Center for processing.

(2) The following returns are processed in accordance with NMF procedures.

1. Form 990-BL (EO)

2. Form 4720 (EO), IRC 4912(b), IRC 4941(a),IRC 4944(a)(2), IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a), Form 4720-A

3. Form 8038 Series Returns (TEB) - prior to 01/01/2001.

(3) The Agent must take the following steps:

1. Review the tax return for an official date stamp and notation "Delinquent Return Secured by TE/GE Division."

2. Request a NMF transcript to review the transcript to the account to determine if a TC 150, posting of the return is not present. If a TC 150 is posted on the module, do not submit the package to the Campus.

3. Since a Form 4720/4720-A can also be processed as a NMF return when IRC 4912(b), IRC 4941(a),IRC 4944(a)(2), IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a) applies, retrieve a transcript of the MF Form 4720 to ensure that a TC 150 has not posted to the MF in error.

IF	THEN
1. IRC Sections on the delinquent return are IRC 4912(b), IRC 4941(a), IRC 4944(a)(2), IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a),	Process the return using NMF delinquent return processing.
2. The return has posted the MF in error,	Prepare an audit report or Form 3870, Request for Adjustment, to request abatement of taxes, interest, and penalties that are reflected on the MF transcript.
3. Payments were made on the MF account in error,	A Form 3198-A should be attached, notating the transfer of payments to the NMFForm 4720. Form 3198-A should also be notated that the payment was erroneously applied to the MF Form 4720.

4. Research CC INOLES to verify the taxpayers SSN/EIN and name against the delinquent return. If the name or SSN/EIN is incorrect, make the appropriate corrections.

Note: For Form 5330 cases with a minimum funding deficiency, the delinquent return should reflect the employer’s EIN/SSN, and for prohibited transaction cases, reflect the EIN/SSN of the disqualified person.

5. Review the package for presence of Form 3198-A, notated to either "Assess Delinquency Penalty" or "Do Not Assess Delinquency Penalty/Reasonable Cause Established". If Form 3198-A is not present, the Agent must make a determination of whether to assess the penalty.

6. Verify entries on Form 13133, for name, address and phone number of the initiator and name, TIN, MFT, plan number (Form 5330 only) or report number (GE - MFT 46 only) and tax year of taxpayer.

7. Form 4844, with a TC 599-97 for EP Form 5500 Returns and EP Forms 5330 Returns, or TC 599-096, TC 599-094 for EO or GE Returns.

8. Verify entries on Form 5588.

9. Attach the research data to the back of each return.

10. Form 3198-A, and Form 13133, must also be attached to the package.

11. After package verification is completed, submit Form 5588, to the Terminal Operator for input.

Note: Immediately upon terminal input the NMF account will establish a full AIMS account.

(4) The tax return, with Form 13133, Form 3198-A, and research data must be forwarded to the Campus. If the Delinquent Return package requires quick assessment processing, do not send the package to the Campus. Process the return in accordance with procedures contained in IRM 4.4.9. Quick Assessment Procedures would apply in the following situations:

1. Delinquent Form 4720 contains entries under IRC 4912(b), IRC 4941(a),IRC 4944(a)(2), IRC 4945(a)(2), IRC 4955(a)(2) or IRC 4958(a). The statute for Form 4720 is ruled by the filing of Form 990, Form 990-EZ, Form 990-PF or Form 5227, not by Form 4720.

Exception: If the applicable return was not filed, then the filing of the signed Form 4720 will begin the statute. Otherwise, the delinquent return package must be transmitted on Form 3210.

2. Delinquent Form 5330 reflects entries under Form4975. The statute for Form 5330 is ruled by the filing of Form 5500. For prohibited transactions the return must be assessed Non Master File only if the statute is imminent.

Note: For prohibited transactions, the statute of limitations is six years whenever adequate disclosure was not made on Form 5500. If adequate disclosure was made on Form 5500, the statute is three years.

(5) The Agent will maintain the case file comprised of a copy of the entire package submitted to the campus for posting of the TC 150.

(6) The Agent will monitor the case file until the TC 150 posts to NMF.

(1) Examiners are responsible for insuring that any delinquent returns received with remittance are forwarded to the appropriate Campus Center by Certified Mail within one workday of receipt.

(1) EP Form 5650 or TE/GE Form 5599 cannot be processed until TC 150 has posted to the MF and the MF control is fully established on AIMS.

(2) Closing procedures are as follows:

(3) For each type of return included in the case file, enter a "T" on the latest year closing record. Enter a "R" on all of the prior years closing records having the same MFT code as the closing record just marked with a "T".

(1) The Substitute for Return (SFR) is used when the employer or organization, upon receiving the due notice from the Service, refuses to file a required return. In such cases, the return must be prepared containing the following entries:

1. Prepare a "dummy/SFR" and Form 13496, IRC Section 6020(b) Certification for each tax period or plan year ending date by entering in red in bold print across the top margin on the face of the return "SUBSTITUTE FOR RETURN PREPARED BY TE/GE."

2. Enter the current or appropriate year’s tax form, depending on local Campus Center preference. If using the current form, cross out the plan year ending date and write the SFR plan year ending date in red using "YYYYMM" format.

3. Enter the plan name/non-filer’s name from the EPMF or BMF, entering a bracket in front of the last name in red.

4. For EP Form 5500 - Enter the name(s) and the address of the plan sponsor

5. Enter the correct EIN

6. For EP Form 5330 - Enter the plan number

   Note: When updating the statute to Alpha Code "EE" you must also select Aging Reason Code 026 in the "Codes" tab of RCCMS to keep Alpha Code "EE" from falling off AIMS (i.e., the statute will revert back to the original statute date if aging reason code 026 is not input). Make sure the "Update AIMS" box in RCCMS is checked when the update is transmitted.

7. For GE - Enter the report number (MFT 46 only)

8. For EP Form 5500 - Enter the name, address, EIN, and plan number of the plan administrator, if applicable

9. Use the current date as the received date in "MM/DD/YYYY" format.

10. For EO/GE - Code the entity with a "P" code (partial entity) in red above the name area. An address will not be entered on "dummy SFR’s." Form 2363 or Form 2363-A must be used to update addresses to BMF.

11. Write TC 599 CC 096, or CC 094 or CC 97 on bottom margin in red.

Reminder: Using Push Code 036 "Effective January 2006" will cause a TC 150 to post to master file with no return due at the Campus level.

(2) For EP Form 5500 - Establishment requests are submitted to the Classification area using the local EP request documents. If the return is not on AIMS, prepare Form 5597, TE/GE IMF/BMF/EPMF Request. Use a "1" or "3" for return not requested. Enter either Push Code 020 or Push Code 036 for substitute for return. In Item 22, Reason for Request, write "TE/GE-SFR."

(3) For EO/GE and Form 5330 - If the return is not on AIMS, prepare Form 5597, TE/GE IMF/BMF/EPMF Request. Enter a "1" or "3" for return not requested. Enter Push Code 036 for substitute for return. In Item C, Reason for Request, write "TE/GE-SFR."

(4) Include with the return package, a copy of a recent transcript (not more than sixty days old) which was used in the determination of the employer’s or organization’s failure to file.

(5) The Substitute For Return, Form 13496, transcript and Form 13133 is kept by the Agent and disclosed out with the EP, EO, GE administrative file when the examination is completed. The filing of the return will establish filing requirements for the employer/organization.

(6) If the return is examined, establish the return on AIMS using Form 5597. A copy of the original return will be kept by the Examiner and marked in red "COPY OF SUBSTITUTE FOR RETURN PREPARED BY TE/GE DIVISION."

(1) Occasionally it may be necessary to process a case, where an examination has been made, but a return has not been filed or there is no requirement that a return be filed. Process these as described below.

(1) If Collection refers a TDI case to EO or EO is working a case and it is identified as a TDI case, a TC 595 CC 88 must be entered to close the Collection TDI. Collection or EO must input the TC 595 depending upon local agreements.

(2) The posting of a TC 150 for a Delinquent Return/Substitute for Return will not close the TDI. When the examination of any case identified as a TDI case is completed, a TC 599 CC 88 (Unagreed) or CC 89 (Agreed) must be input by EO.

(3) If EO determines that the organization did not have a filing requirement, a TC 590 CC 75 must be entered. If a determination was made that the organization is no longer liable, input a TC 591 CC 75, which will satisfy this module and all subsequent modules for the same MFT.

(1) Cases involving delinquent returns that are closed on a copy can also be referred to Appeals on a copy, unless a delinquency penalty is an issue.

(2) Cases referred to Appeals, where a delinquency penalty is not an issue, should be processed as follows:

1. At least three cycles after the original delinquent return is sent to the Campus Center for processing, establish a new activity on RCCMS and AIMS, using Return Requisition Code 3 (Compliance Activity Screen – Codes TAB) for a TE/GE examination assembly. Refer to instructions in IRM 4.4.5 for processing case files to Appeals. The follow-up action described in this section must be initiated one month after Appeals receives the case.

2. When the TE/GE examination assembly is received, complete the RCCMS closing fields in the closing record.

(3) Cases referred to an Appeals Office, where a delinquency penalty is an issue, must be processed as follows:

1. At least three cycles after the original delinquent return is sent to the Campus Center for processing, establish a new activity on RCCMS and AIMS, using Return Requisition Code 3 (Compliance Activity Screen – Codes TAB) for a TE/GE examination assembly. Suspend the retained copy.

2. When the return and TE/GE examination assembly are received, prepare and submit Form 5599 for processing. Forward the return and case file to Appeals. The retained copy may be destroyed.

(4) Cases involving substitutes for returns referred to Appeals, must be processed according to IRM 4.5.3.16.9 (2) above.

(1) All EO or GE Closing Agreements are approved by the Director of the Business Unit and reviewed by the EO or GE Closing Agreement Coordinator. After the Director or delegate has executed the agreement, the Coordinator will mail the Closing Agreement to the taxpayer. The Examiner will prepare a Closing Agreement package and forward with the case file to the Closing Function. The Closing Agreement package will contain:

1. Original or copy of the return.

2. The Examiners report.

3. Form 5599, TE/GE Examined Closing Record.

(2) The case file will consist of:

1. Original or copy of the return, e.g., Form 990-T, Form 990-PF, Form 941, Form 4720 for IRC 4911(a), IRC 4912(a), IRC 4942(a), IRC 4944(a)(2), IRC 4945(a)(1), orIRC 4955(a)(1) or Form 8038 Series Return.

2. Case Chronology.

3. Form 5772 and workpapers.

4. Part 2, Form 3244-A, Payment Posting Voucher-Examination, stapled securely to the face of the return.

5. Form 3198-A, TEGE Special Handling Notice with special instructions for assessment of tax.

(3) Once the package is received:

1. Compare the Closing Agreement against the Examiner's report for the amount of monies assessed.

2. Research IDRS CC TXMODA and under the tax payment identification number for TC 640, Advance Payment of Determined Deficiency, to verify payment was applied. If CC TXMODA reflects no data, secure a transcript of the taxpayers account using CC BMFOL.

3. Ensure that the Examiner's report amount, assessment amount, and TC 640 amount are the same. If the amount of monies differ on any document, return the package to the EO or GE Closing Agreement Coordinator with an explanation.

4. Carefully review Form 5599 for elements described in paragraph IRM 4.5.3.20.1 (4) below.

(4) When an EO or GE Closing Agreement has been entered into for a taxable return, Form 5599 should contain:

• Hold Code 2 in Item 07

• TC 300 and the amount of monies assessed and agreed to entered on in Item 12

• DC 12, in Item 13

• Item 414 Delinquent Return Amount (only completed when EO or GE delinquent returns are secured to capture tax and penalties).

(1) When an executed EO or GE Closing Agreement involves the assessment of a non-tax amount for a Form 990, Form 990-PF, Form 941 or Form 8038 Series, Form 5599 will be used to assess the liability.

(2) Form 5599 must contain:

1. Hold Code 2 in Item 07.

2. TC 300 with -0- in Item 12.

3. The assessment amount as a TC 240 in Item 15 with Reference Code 689, Closing Agreement.

4. DC 12 in Item 13.

(3) The closing unit will use Form 2859, Request for Prompt or Quick Assessment to make a manual assessment when the statute is imminent or to input Transaction Code (TC) 150 -0- to allow the closing assessment when there are problems with posting a return. If a manual assessment, enter the amount of the Closing Agreement liability in Item 35.

(4) All other entries on Form 5599 must be reviewed for accuracy before submitting the closing package to the Tax Examiner.

(1) Any Closing Agreement entered into for Form 990-BL or Form 4720 under IRC 4912(b), IRC 4941(a), IRC 4944(a)(2), IRC 4945(a)(2),IRC 4955(a)(2) or IRC 4958(a) must be processed by quick assessment procedures outlined in IRM 4.4.25, AIMS Procedures and Processing Instructions.

(2) These returns are considered NMF returns and must be processed manually using Form 2859. An "N" should follow the EIN/SSN on Form 2859 and on Form 5599.

(1) The closing unit will prepare and use Form 8485, Assessment Adjustment Case Record, to assess the Closing Agreement liability for a return not on AIMS.

(2) Form 8485 Preparation Instructions:

(3) The Agent will prepare and use Form 3870, Request for Adjustment to assess the Closing Agreement liability for a return not on AIMS.

(4) Form 3870 preparation instructions:

1. TIN - Taxpayer Identifying Number

2. Name and Address of Taxpayer

3. Originating Office - Leave blank

4. MFT

5. Period Ending - mm/dd/yyyy format

6. Assessment Date - Leave blank

7. Source - Check appropriate box

8. DLN - Leave blank

9. Renumbered DLN - Leave blank

10. Personal contact - Check appropriate box

11. Reason for Adjustment - Give reason for adjustment and include the statement: Closing Agreement Sanction Penalty Assessment

12. Signature of Taxpayer - Leave blank - closing agreement will have taxpayer’s/ representative’s signature

13. Signature of Preparer - Agent’s name, number, and date

14. Approving Official Signature and Title - Manager’s name, title, and date

(1) Form 2859, Request for Quick or Prompt Assessment should be prepared and accompanied by the following documents when applicable:

1. Fax cover sheet

2. Interest computation report

3. Form 8278 - Assessment and Abatement of Miscellaneous Civil Penalties

(2) In addition, Form 2859 must be prepared for situations described below or when the statute expiration date is more than 30 days but also less the 60 days. Situations requiring quick assessment action are as follows:

1. There is an agreed and unpaid deficiency of $50,000 or more in tax.

2. The statute of limitations will expire within 60 days, or it is determined that a partial (AMCLSF); terminal closing (AMCLSO) or adjustment processing (ADJ54) cannot be completed before the 60 day period.

3. Additional and / or delinquent taxes due in certain bankruptcy cases. Quick assessment procedures may apply to bankruptcy petitions filed before October 1, 1979, but generally do not apply to bankruptcy petitions filed after October 1, 1979.

4. An amended return is received and the statute will expire within 120 days.

(3) The tax examiner must always obtain current IDRS data when a quick assessment is warranted. Tax examiners should use this data to ensure the taxpayer’s most current address is used.

(4) Restricted interest must carry a TC 340. A TC 340 is used only when the system cannot compute the correct interest.

(5) Normal interest should carry a TC 190. If TC 190 is used and the taxpayer signed an agreement, the tax examiner must enter the agreement date on Form 2859.

(6) Interest is not computed for civil penalty quick assessments on Form 8278. Interest on these penalties are assessed from the date of notice known as the 23C date.

(1) Tax assessed under the followingIRC’s 4911(a), 4912(a), 4942(a), 4943(a), 4944(a)(1), 4945(a)(1), and penalties on Form 4720, Return of Certain Excise Taxes on Charities and Other Persons Under Chapters 41 and 42 of the Internal Revenue Code, are processed as a MF assessment.

(2) Tax assessed under the following IRC’s 4912(b), 4941(a), 4944(a)(2), 4945(a)(2), 4955(a)(2) and penalties on Form 4720 for foundation managers and disqualified persons must be processed as a NMF assessment.

(1) The Director must approve a jeopardy assessment and the tax examiner must make the assessment within 24 hours. After the Director has signed Form 2644, Recommendation for Jeopardy / Termination Assessment, prepared in triplicate, the tax examiner must compute interest and check the appropriate box on Form 2859. The tax examiner must telephone the information on the form necessary to record the assessment properly to the appropriate campus. The following information must be furnished by telephone:

1. The taxpayer’s name, address, EIN, or SSN

2. Type of tax

3. Taxable period

4. The amount of tax, penalty, and interest to be assessed

5. The amount of payment, if any, and the balance due

6. The 23C date

(2) The campus should telephone the person requesting the jeopardy assessment to acknowledge that they have made the assessment. The campus should mail a confirmation copy of Form 3552, Prompt Assessment Billing, Form TY-26, Statement of Tax Due IRS or Form 17-A, Statement of Tax Due, to the district after processing. The tax examiner must associate the confirmation copy with the control copy.

(3) The tax examiner must transmit the original and one copy of Form 2644 promptly, in a sealed envelope to the campus, to the attention of the person contacted for verification that the correct assessment has been made and for association with assessment document.

(1) The second adjustment document should be processed once the DLN verification is received from the campus.

Exception: When a credit transfer, via Form 2424, Accounting Adjustment Voucher, is being made on the module or TXMOD research indicates that a payment has been processed but has not posted to MF. For credit transfers, the second adjustment document must be input on the terminal. This should allow it to post to the module after the campus has transferred the quick assessment to the MF module. If a payment has not posted to the MF, the second adjustment document must not be input until the payment posts. This action should help in preventing the issuance of an erroneous refund. The second adjustment document should be prepared and processed in the following manner for Form 5599.

(2) Prompt, jeopardy or quick assessments may sometimes involve a deficiency for one tax period and an overassessment for another tax period. These situations will be processed as follows:

1. Manually compute the interest for the years involved and enter it with the applicable TC on the adjustment document. Enter hold code 2 for the overassessment tax period.

2. Prepare Form 2424 to manually transfer the applicable credit (TC 820 debit) from the overassessment year to the deficiency year (TC 700 credit) with a secondary TC 570 blank or zero. If allowable interest is involved use a second Form 2424. Use (TC 850 debit) from the overassessment year to the deficiency year (TC 730 credit).

3. Make a notation on Form 2859 in the remarks section, "Credit of $ (amount) being transferred from (period) to post in cycle (number)."

4. Forward the overassessment for processing.

5. Forward Form 2424 for processing. Form 2424 should be input in the same cycle as Form 5599 or a later cycle. It should never be input in an earlier cycle.

(1) The tax examiner should follow MF quick assessment procedures, unless the following applies:

1. Place an "N" after the EIN or SSN on Form 2859 and Form 5599.

2. Notate the proper MFT for a NMF account.

3. The DLN tax class is always a "6".

(2) When two taxpayers are liable for the "same" tax and both are assessed, (typically a non-petitioning spouse case), the tax examiner must notate the comment "Spousal Assessment" and the cross reference TIN, MFT and tax period on Form 2859. This is necessary because the campus must adjust the accounts each time a payment is received.

(1) Offsetting is a method used to transfer an available credit form one tax period to an outstanding liability in another tax period or to another type of tax. This procedure may be done manually or computer generated.

(2) All liabilities on the overassessment year must be satisfied before any overpayment can be applied to liabilities on other tax periods; therefore, all unpaid penalties and interest must be subtracted from the net overassessment to determine the amount available for offset.

(3) The overpayment is the excess of payment(s) over the tax liability, including penalty and interest, for a specific type of tax.

(4) Examiners should identify an offset case on Form 3198-A and the examination report should reflect an overassessment for one tax period and a deficiency for another tax period.

(5) An examination of a taxpayer can cover several tax periods and have adjustments on one or more periods requiring interest computations. Interest must be computed for each period to determine how much of the overassessment is available to offset between the different tax periods.

(6) When applying overpayments as credits, the tax liability, including penalties, additions to the tax and interest, is considered satisfied out of the earliest payment on the module. The overpayment begins with the first amount paid in excess of the liability. This part of the overpayment is applied to the oldest outstanding liability for the earliest year. This is important in arriving at the correct interest liability.

(1) Examination of related taxpayers by EO sometimes results in adjustments increasing tax for one and decreasing tax for the other. This usually occurs between parent and subsidiary corporations or between trusts and beneficiaries. Often the taxpayer will agree that the refund on a correlative taxpayer should be applied to the additional tax of the primary taxpayer. This agreement is documented as a consent signed by the correlative taxpayer and made part of the case file. It is in the interest of the IRS to honor this offset.

(2) The Examiner must attach Form 3198-A to the correlative case file. The "other" box at the bottom of Form 3198-A must be checked, and they must show the primary taxpayer’s name, EIN or SSN and tax period of any additional tax. The case file of the primary taxpayer, including Form 5599 reporting additional tax, should be associated with the correlative taxpayer’s file.

(3) The tax examiner must secure a transcript of the module to be adjusted for the correlative taxpayer before processing Form 5599.

(4) Process Form 5599. If the offset is to be made as described above, follow these instructions besides routine processing:

1. Correlative taxpayer - use hold code 1 to prevent a refund. Input the document immediately.

2. Input Form 2424 to post four cycles after correlative or overpaid Form 5599.

3. Input Form 5599 to the primary or additional tax module one cycle after Form 2424, to assure that the credit is available.

4. Release the MF Form 5599. Two weeks later, release the NMF Form 5599 for assessment and dispose of Form 2424.

   Note: Posting delay cycles can also be used on Form 5599 instead of holding and monitoring document actions.

(1) A credit should be transferred between accounts, only if there is a statement from the taxpayer requesting such application

Exception: A credit may be transferred from an individual’s IMF account to the same individual’s (or his or her partnership) excise or employment tax account without a statement.

(2) The tax examiner should manually compute and enter any interest allowable with TC 770 on Form 5599. For transfers between IMF and BMF accounts, use Form 2424. If the accounts are for different taxpayers, the tax examiner may enter TC 850 and TC 730 on the same Form 2424 carrying the overpayment.

(1) Prepare Form 1331 or Form 1331-B, entering the overpayment in the credit column and entering the taxpayers EIN or SSN as the account number. Refer to IRM 4.5.3.15.6 for instructions on completing Form 1331 and Form 1331-B.

(2) Prepare Form 2424, to transfer the credit from NMF to MF. Hold the MF Form 5599 for two cycles. Also, you may enter a posting delay cycle in item 43 on Form 5599.

(3) Forward Form 2424 to the NMF unit of the appropriate campus for processing.

(1) Refer to IRM 21.4.5 for instructions to follow.

(1) For all increases or decreases in Federal Unemployment Tax Adjustments (FUTA) tax or wages, unique reference codes must be entered with the tax adjustment. The reference codes reflect which state the tax/wages are being adjusted for. The three-digit reference code for the tax portion of the adjustment is comprised of a "T" followed by the two character state code, e.g., California is CA; New Jersey is NJ. The total of the tax (T) reference code amount must equal the TC 300/301 tax adjustment.

(2) Code Section 3301 requires all employers to pay an excise tax (Federal Unemployment Tax) on wages paid to an employee. Under Code Section 3302, the amount of contributions made to an employer’s state unemployment fund can be used as a credit against the excise tax paid under IRC 3301.

(3) Title XXI of the Social Security Act; allow loans (advances) to states that are in need of funds in order to pay unemployment benefits. If the state does not repay the loan within a specific time, employers (in states who have received loans) will have their credit (allowed per IRC 3302) against the FUTA tax reduced. If the tax adjustment is the result of a change in the total taxable wages, the amount shown on the Form 940 return that was claimed as a credit against the FUTA tax must be adjusted. This adjustment is referred to as "credit reduction."

(4) All states are not subject to credit reduction adjustments. Depending on the tax year and whether loans were outstanding, determines whether a credit reduction adjustment is warranted. The amount collected, because of the reduced credit, is applied against the outstanding balances of the states that have unpaid loans.

(5) In order to accurately process Form 940 cases, the Examiner is responsible for providing the total tax adjustment, wage adjustment (along with the applicable state code), and total corrected Form 940 wages. If the wages adjusted for a credit reduction state, the Examiner must provide the credit reduction amount and credit reduction wages. The credit reduction table will always be referenced to determine whether adjustments are being made to a credit reduction state (based on state codes provided by the examining officer).

(6) If the case is being processed as a quick assessment, the campus must always be provided with the amount of the total corrected Form 940 wages. If a credit reduction state is involved, the campus must also be provided the credit reduction wages, the state the credit reduction wages applies to and the total credit reduction amount. This information will be entered in items 22-24b of Form 2859. When completing Form 2859, enter in item 23, the total credit reduction amount. In item 24a, enter the two digit state code and the amount of the credit reduction wages for each state. The total of the credit reduction wages entered in 24a must also be provided to the campus.

(1) If, during the course of an examination, it is determined that an employer / employee relationship exists, IRS is authorized to assess tax, penalty, and interest against the employer for the amount of income taxes that should have been withheld from employees. However, Sections 3402(d) and 3406 of the IRC relieves the employer of their taxes, if the employee has filed income tax returns and paid the tax due. Employers are required to use Form 4670, Request for Relief from Payment of Income Tax Withholding and Backup Withholding (BUWH), along with one or more Form 4669, Statement of Payments Received to obtain this relief. If the employer has paid the tax assessed, Form 843, Claim for Refund and Request for Abatement is required.

(2) Tax assessed under IRC 3509 is not subject to abatement. IRC 3509 provides the authority for determining an employer’s liability for employee FICA tax and income tax withholding, generally for any employee who is not treated as an employee by the employer. IRC 3509 assessments are recognized on IDRS by item reference number 079 and a reference amount of zero.

(3) The employer must secure signed Forms 4669 from the employees covered by the examination. The employer then prepares and signs Form 4670 indicating the tax year and the number of statements, Form 4669 secured. These signed forms are considered "prima facie" evidence of filing and further research is unnecessary.

(4) Form 4668, Employment Tax Examination Changes Report, is the basic report form used for all Forms 941, 942, 943 and 945 examinations. It is used to show the additional tax, overassessment or delinquent tax proposed by the Examiner and should be attached to the last quarter return examined as part of the Revenue Agents Report (RAR).

(5) Process Forms 4670, 4669 and 4668 as follows:

1. In an initiative to reduce unnecessary taxpayer contact and processing time of claims filed under IRC section 3402(d) and 3406, the Examiner will provide the taxpayer with an extra copy of the Form 4668 along with Forms 4669/4670. The taxpayer will be instructed to file the copy of the Form 4668 along with the Forms 4669/4670 to the appropriate campus. If the Forms 4669/4670 are received without Form 4668; return the package to the Examiner.

2. If the claim can be processed, adjust the module for the proper amount using TC 30X and item reference 111 (Total Income Tax Withheld) or 008 (Backup Withholding) as appropriate.

   Note: The employer is liable for all penalties assessed as a result of the examination and they should not be decreased when tax is adjusted. Restrict any penalty assessment on the module if the tax decrease would cause the penalties to be recomputed.

(1) If less than the correct amount of tax imposed by sections 3101, 3111, 3201, 3221 or 3402 is paid with respect to any payment of wages or compensation, proper adjustments with respect to both the tax and the amount to be deducted shall be made without interest.

(2) IRC 6205 provides an employer who makes or has made an under collection or under payment of employee’s taxes (FICA/RRTA) or income tax withholding, may make interest free payments of the tax due when certain conditions are met.

(3) The signing of Form 2504, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, at the close of an examination or the Appeals conference fulfills the return requirements for the interest free adjustment provisions. In addition, full payment of the tax must be paid at the time of signing Form 2504 to be an interest free adjustment. Unagreed cases with no payments are not subject to an interest free adjustment. Unagreed cases with full payment are subject to interest free adjustments. IRC 4.23.8.3.1 (3) states that if the taxpayer elects to pay the full adjustment amount (tax and penalty) at any time prior to the closing of the examination but does not agree and does not sign Form 2504, the case will be processed as an unagreed case without an interest free adjustment. If, after the case is closed unagreed, the taxpayer signs Form 2504 or files Form 941-X prior to the due date of the return for the period in which the payment was made, the taxpayer will be entitled to an interest-free adjustment. If one of the exceptions listed in IRM 4.23.8.3(9) is not applicable, the signing of one of the Forms 2504 at the close of an examination or Appeals conference (and prior to the issuance of a notice and demand for payment) fulfills the requirements for correcting a return for purposes of the interest-free adjustment provisions of IRC 6205 and the regulations.

(4) All employment tax cases which involve a restriction on the payment of interest, Form 3198-A, TE/GE Special Handling Notice must be attached to the outside of the case file. The section of the Code or Regulations which authorizes the restriction of interest must be notated.

(5) IRC 6205 does not apply to FUTA taxes Form 940 or penalties associated with the underpayment.

(6) If a taxpayer qualifies for an interest free adjustment - item 11 interest computation date on Form 5599 must be completed and the transaction code must be a TC 308. Refer to IRM 4.23.8.3.1 (2) for the interest computation date.

(1) This type of agreement is the Classification Settlement Program or "CSP" establishes procedures under an optional classification settlement program that will allow businesses and tax examiners to resolve worker classification cases as early in the administrative process as possible, thereby reducing taxpayer burden.

(2) The procedures will also ensure that the taxpayer relief provisions under Section 530 of the Revenue Act of 1978 are properly applied. Under the CSP, Internal Revenue Service (IRS) examiners will be able to offer businesses under examination a worker classification settlement using a standard closing agreement.

(3) In situations listed under IRM 4.23.6.6 and IRM 4.23.6.7, it is mandatory that the examiner present a CSP offer to a taxpayer. The taxpayer has the option of either accepting or rejecting the offer.

(4) CSP agreements are closing agreements that bind the Service and the taxpayer to prospective tax treatment for future tax periods. Therefore, it is important that CSP agreements be reviewed and approved by employment tax specialists who have the necessary expertise in dealing with worker classification issues.

(1) CSP can be offered at 100 percent or 25 percent of the assessment. It will be identified at the top of the Form 4668 "25 percent CSP Offer Applies — Do Not Process."

(1) A closing agreement applies to employment tax cases only (Form 941 and Form 945). Form 940 may be mentioned in the agreement, if the return is related to Form 941 and/or Form 945. The closing agreement is provided in letter format that details the specific matters regarding worker classification. A closing agreement identifies the following:

1. Entity in question

2. The dispute in question

3. Internal Revenue Procedure

4. The tax period covered

5. Type of tax

6. Amount of tax and penalties to be assessed

7. Whether or not the entity qualifies for an interest free adjustment

8. A signature from the taxpayer

9. A signature from the commissioner of the Internal Revenue Service

(1) Form 2424 , Account Adjustment Voucher, is prepared in two parts (credit and debit) and is used to effect the credit/debit transfer from MF to MF and MF to NMF.

(2) To prepare Form 2424, follow these procedures:

(1) Form 8485 , Assessment Adjustment Case Record for EO, and Form 3177, Notice of Action for Entry on Master File, should be used to bypass the amended return freeze on non-examined closings when the Examiner has taken the amended return into consideration. A TC 290 for 0.00 is used to clear the amended return freeze. Tax examiners should adjust taxes and penalties using this form, if the case is not established on AIMS. Tax examiners must receive the authorization from the Examiner before making the adjustment.

(2) When there are more than eight reference items for item 15 on Form 5599, EO Examined Closing Record, the excess should be processed on Form 8485.

(3) The reference items must be items that do not affect the tax and penalty, which are included in the examination results, (e.g. reference items 878, 879, 886, 887, 888 and 889). Tax examiners must ensure the reference items that do affect the tax and penalties, which are included in the examination results, (e.g. reference items 680, 681, 682, 764, 765, 766, 806 and 807) are processed on Form 5599.

(4) To prepare Form 8485, follow these procedures

(1) The Internal Revenue Code contains various penalty provisions which penalize taxpayer for acts not related to the filing of a tax return, i.e. civil penalties. These types of penalties were enacted by Congress to address the continuing problems of non-compliance with tax laws.

(2) Civil penalties assessed or abated by EO will be assessed / abated on the Master File Civil Penalty Module. Master file tax codes (MFT) are used to record assessments, abatements, and other account actions. In addition to simplifying the assessment/abatement process, these procedures allow for the tracking of assessment data through the use of designated reference numbers.

1. MFT 55 for adjustments against individuals, processed on the Individual Master File (IMF).

2. MFT 13 for adjustments against business entities, processed on the Business Master File (BMF).

(3) These penalties must be adjusted using Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties. The assessment / abatement action should be input to MF through IDRS, using CC ADJ52, TC 290 with a zero amount and the appropriate three digit reference number and amount. Once posted to MF, a positive money amount will generate a TC 240 and a negative amount will generate a TC 241. The reference number will also post to MF and will be shown to the right of the TC 240 or TC 241. The TC 290 is solely a carrier transaction and will not post to MF.

(1) The civil penalty account must not be established or controlled on AIMS but will be controlled on RCCMS. Form 3198-A must be attached to each penalty case file, identifying it as a civil penalty assessment / abatement, notating the applicable code section and any other special handling action.

(2) Penalty case files must contain Form 8278, which must be completed by the Examiner. The file may contain additional paperwork related to the civil penalty assessment.

(3) The tax examiner will prepare a separate file when multiple penalties are assessed for the same tax year. The file will include a copy of the necessary paperwork to comprise a case file.

(4) The civil penalty module is a single entity module; joint assessments cannot be made. Any joint penalty liability, such as a jointly filed frivolous return, must continue to be made NMF utilizing existing instructions. Only the taxpayers name against whom the penalty is asserted should be shown on Form 8278.

(5) MF will not accept a fiscal year tax period for MFT 13 / 55 except for assessments input with reference number 613. Reference number 613, Failure to File Foreign Information Returns, MFT 13, may be input with a fiscal or calendar year tax period. All other penalty assertions must carry a tax period ending in "12" or the transaction will become unpostable at MF.

(6) Incomplete case files and cases with missing entries, manager’s signature, joint names or lack of a statute date on Form 8278 must be returned to the Examiner for correction. The correction can also be made via fax to the Examiner.

(1) Establishment of a civil penalty name line (CVPN) applies only to MFT 55 assessments. Information to otherwise update the entity, such as an address change, must be input prior to establishing the CVPN.

(2) Command code ENMOD or INOLES must be researched for all civil penalty cases to determine if the civil penalty name line needs establishing.

(3) If the MF name line of the taxpayer being assessed the penalty is joint or ever has been, a CVPN must be established using Form 2363, Master File Entity Change, using TC 013, RF 55 (RF 55 informs the data transcriber that only a civil penalty name line is being established or changed). Do not change the name line of the MFT 30 account.

(4) If the name line is single, the special action to establish the CVPN is not warranted. The civil penalty may just be assessed. MF will automatically extract and establish the penalty name line.

(1) To provide easy identification for the person(s) responsible for processing forms they must underline the following entries on Form 8278 in brown pencil:

1. Taxpayers name control

2. MFT code

3. Tax Year

4. Taxpayers Identification Number (TIN)

5. Penalty Reference Number

6. Amount assessed

7. Amount abated - place brackets around amount

8. Penalty Reason Code - if applicable

(2) The civil penalty module will allow posting of only one penalty assessment per taxpayer per cycle. The system will accept input of multiple transactions and cycle each input automatically. Therefore, multiple concurrent transactions for the same taxpayer and tax period that will be asserted on separate Forms 8278 will be processed as follows:

1. The first penalty to be assessed must be input using blocking series 52X

2. The second penalty to be assessed must be input using blocking series 53X

3. Tax examiners must annotate Form 8278 with the correct blocking series opposite each penalty to facilitate terminal input

Note: A posting delay of one cycle can be placed on the second penalty assessment blocking 53X or you can let the system automatically cycle each adjustment.

(1) There are conditions under which an individual may be liable for certain civil penalties which are not assessed through MF. These civil penalties must be assessed NMF on Form 5734, Non-Master File Assessment Voucher. The civil penalty assessment account must not be established or controlled on AIMS but will be controlled on RCCMS and may be received without the related AIMS case file.

(2) Form 3198-A , annotated "Civil Penalty Assessment" in the "Other" section, must be attached to the documents or case file.

(3) Form 5734 , prepared by the Examiner, must be in the case file. A statement for the tax examiner establishing the penalty, with a copy of the front page of the return, may also be included.

(4) Tax examiners must review Form 5734 for completeness and legibility. If any information is missing or incomplete, the file must be returned to the Examiner or the responsible function.

(1) Form 3870 , Request for Adjustment is primarily used to request a tax and or penalty adjustment on a taxpayers account. One Form 3870 is used per tax module that is being adjusted. Some common adjustments include:

1. Penalty abatements

2. Penalty assessments

3. Tax adjustments

4. Transfer of credits

5. Request to move a tax return which has posted to a wrong period or TIN

6. Audit reconsiderations

7. IRC 6020(b) adjustments when a live return is secured

(1) When analyzing Form 3870, read the request carefully, sometimes the request can be conflicting and may require a call to the Examiner for clarification. Tax examiners should print out TXMODA to ensure the adjustment has not already been processed or is pending. Form 8485 may be required if there are accruals on the transcript when freeze codes are present on the module. The turnaround time to work Forms 3870 is usually 2 business days. The document code for this form is 54. This is important when trying to find the appropriate transaction codes in Document 6209, IRS Processing Codes and Information. Now that the Form 3870 and TXMODA has been analyzed, you are ready to code.

(1) There are several types of codes to complete the 3870. It is imperative that tax examiners have the knowledge to properly code this form. The codes utilized by tax examiners are:

1. Transaction codes - TC

2. Reason codes - only if abating a penalty

3. Source code - only for IMF accounts

4. Hold code

5. Priority code

6. Posting delay code

7. Reference number codes

(2) These codes are necessary to affect the exact tax and or penalty adjustment being processed. The proper preparation of this form will ensure the correct input and posting of the adjustment.

(3) Information required from the Examiner:

Note: It is mandatory for Form 3870s to have two signatures, one from the requestor and another from the approving official. If the requestor is a Manager, then the Area Manager would have to be the approving official. These signatures can either be handwritten or electronic.

(4) Information required from Tax Examiner:

(5) The following items are required to be underlined on Form 3870 with a brown pencil or marker:

Reminder: Each entry should be underlined in brown pencil or marker.

(1) When an account moves from one SSN / EIN to another or from one segment of an SSN / EIN (valid or invalid) to the other segment, we call it re-sequencing.

(2) To re-sequence an account, request a CC TXMODA, IMFOL or BMFOL for both SSN’s / EIN’s (valid and invalid). Re-sequencing action moves all tax periods present in the account. Specific tax periods cannot be moved independently. Form 13596 is prepared when re-sequencing is required.

(3) Do not merge account numbers if the following are present:

1. Either account contains a scrambled SSN indicator and Mail Filing Requirement Code (MFR) of 8.

2. Either account contains a criminal investigation transaction.

3. Only one account contains a Potentially Dangerous Taxpayer (PDT) indicator.

4. Both accounts contain a module for the same tax period with an unreversed TC 520 except closing codes 81 or 85 to 88.

5. Both accounts contain a value for a lifetime exclusion indicator.

6. Both accounts contain a module for the same year and the "From" account contains a Central Authorization File (CAF) indicator (TC 960).

7. The name control of the "From" account does not match the name control of the "To" account.

8. The "From" account contains an indicator in the Abusive Tax Shelter (ATS) year.

9. Both accounts contain a module for the same tax year and more than three non-IDRS TC 766, (DOC Code 54, Blocking Series 400 to 499) are posted on the two accounts.

10. The "From" account contains a civil penalty name line that does not match the name control of the "To" account.

11. Both accounts have a TC 060, 930 or 940 present.

12. Both accounts contain a module in Taxpayer Delinquency Investigation (TDI) status 03 or Taxpayer Delinquent Account (TDA) status 22, 24, 26, 60 and the location codes, Accounts Receivable File (ARF) are not in agreement.

13. One or both accounts have a vestigial record for the same year.

14. Both accounts have a TC 150 in the same period.

15. One or both accounts contain an unreversed TC 400, TC 424 or TC 576.

16. Both accounts have a module for the same year that contain either a combination of a TC 150 and multiple TC 610’s, one of which is Remittance Processing System (RPS), or a TC 150 ("S" coded) on one module and the other module contains a TC 610 that does not match the DLN of the TC 150.

(1) Tax Examiners must complete the following blocks or line items on Form 13596, complete all block or line items applicable to the reprocessing or re-sequencing procedure:

(2) Once Form 13596 is completed, make one copy of the return and Form 13596. Forward the original return and Form 13596 to the campus and place the copy of the return and Form 13596 in suspense.

(3) Address for sending original Form 13596:

Internal Revenue Service
1973 Rulon White Blvd.
Mail Stop: 6054
Ogden, UT 84404

(4) Tax Examiners must follow up to ensure that the return has properly been processed and posted.

(1) When the return has been properly reprocessed or re-sequenced Form 5599 will be coded for the incorrect and correct module as follows:

Incorrect Module:

1. Code Form 5599 to abate (zero out) the tax and or penalty and reduce any withholding credits if necessary.

2. Code Form 5599 to abate any adjusted gross income, taxable income (zero out) etc.

3. Prepare Form 2424 if necessary, to transfer any payments on the incorrect module to the correct module.

4. Code RCCMS closing tabs.

5. Submit for terminal closure.

   Note: Any interest on the module will automatically abate.

Correct Module:

1. Code Form 5599 per audit findings on Form 4549Income Tax Examination Changes.

2. Code Form 5599 with a posting delay code if payments are to be transferred.

3. Code RCCMS closing tabs.

4. Submit for terminal closure.