8.7.17. Appeals Remittance Procedures

(1) Purpose: This IRM section provides information on processing remittances received by Appeals. Specifically, IRM 8.7.17:

1. Describes the Appeals Technical Employee’s (ATE) responsibilities upon receipt of a remittance

2. Provides the time frames for processing remittances

3. Describes the steps to identify the type of remittance, prepare processing forms, and ship payments to Submission Processing Centers

4. Explains how remittances are applied in certain situations

5. Identifies circumstances that require different procedures and includes links to IRM subsections containing those procedures

6. Recommends resources, including websites, Internal Revenue Code (IRC) Section references, a Revenue Procedure, and other IRM sections

(2) Audience: Appeals employees that handle remittances, including ATEs and Appeals employees that assist the ATE in preparing remittances for processing and shipment, such as Case Processors

(3) Policy Owner: Director, Case and Operations Support

(4) Program Owner: Director, Policy, Planning, Quality, and Analysis

(5) Contact Information: Appeals employees should follow established procedures on How to Contact an Analyst. Other employees should contact the Product Content Owner shown on the Product Catalog Information page for this IRM Section.

(1) The Appeals Technical Employee (ATE) will encourage the taxpayer to pay the total tax, penalty and interest due on agreed deficiency cases. This will reduce the taxpayer's overall cost. Because Appeals does not have a teller function, cash payments cannot be accepted. Taxpayers who want to pay in cash need to convert the cash into a postal money order, bank cashier’s check, money order or some other negotiable instrument. If the taxpayer is unable to pay the deficiency in full, discuss alternatives such as installment agreements or offers-in-compromise.

(2) Except on criminal investigation or prosecution cases described in paragraph (3) below, do not hold remittances longer than the first workday following receipt. Prepare Form 3244-A, Payment Posting Voucher - Examination, or Form 3244, Payment Posting Voucher. Depending upon local procedures, forward payment and payment posting voucher to the person responsible for submitting payment to Submission Processing. See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244. Advise the taxpayer of the action taken.

(3) A successful criminal investigation or prosecution may be imperiled by the receipt and disposition of advance payments on a case with criminal fraud implications. Prior to processing the payment, consult with Counsel on an expedited basis. Appeals will not notify the taxpayer of the receipt or disposition of the remittances. When processing, note "Fraud Case" in the "Remarks" section of Form 3244-A or Form 3244.

(4) When an advance payment is received after agreement is tentatively reached, but before review and approval of the determination, a new agreement form reflecting receipt of the payment is not necessary.

(5) Use Form 5402, Appeals Transmittal and Case Memorandum, to identify information pertaining to remittances on cases in Appeals. See IRM 8.6.2.3.3, Using Form 5402 as an Alert. If Form 5402 is prepared before receipt of the payment, revise it to reflect the receipt and process the remittance. The following are situations that should be annotated on Form 5402:

1. Remittances received while the case is in Appeals

2. Information pertaining to remittances identified by the taxpayer but not found on the transcript of account

3. Whether it is a "designated or undesignated" remittance, whether it is treated as a "payment or IRC 6603 deposit", amount of remittance, and tax and period to which the remittance applies.

4. For IRC 6603 deposits, identify the disputable tax, date of the statement explaining the disputable tax or the presence of a copy of the 30-day letter received by the Service with the designation (date stamped)

   Note: Without this information, APS cannot identify the deposits that qualify for overpayment interest at the short-term federal rates under IRC 6603. See IRM 8.7.17.7 (4), Interest.

(6) For nondocketed cases, do not assess the liability for "advance payments" made after the issuance of the notice of deficiency unless specifically requested. See IRM 8.7.17.5, Advance Payments and IRC 6603 Deposits. An assessment will not deprive the taxpayer who files a petition of Tax Court jurisdiction. However, the assessment is usually not made until the case is closed, unless there is a large deficiency.

(7) The procedure in docketed cases generally is the same as in nondocketed cases. In a docketed case, assessment may not be made until the Tax Court decision becomes final. See IRC 6213(a) , Time for Filing Petition and Restriction on Assessment. Assessment may be made at any time upon a specific request from Counsel or from the taxpayer after a docketed case is closed.

(8) If it is determined that a remittance was made to a Compliance office or Campus on an Appeals case, whether before or during Appeals consideration, and no evidence of the remittance is contained in the file, contact the office who received the remittance to determine its disposition.

(1) When Appeals receives a remittance, an ATE will prepare Form 3244-A, Payment Posting Voucher-Examination, or Form 3244, Payment Posting Voucher. The ATE can use either form. However, Form 3244-A must be used if the ATE has determined the remittance is a deposit. Complete a separate Form 3244-A or Form 3244 for each tax period and/or type of tax. Generate two copies of each payment posting voucher. See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, for instructions on preparing the payment posting voucher.

(2) The ATE must determine whether the remittance is a "payment" or "deposit". See IRM 8.7.17.5.1, Determining Whether Remittance is a Payment or IRC 6603 Deposit.

(1) Appeals employees will send all remittances via overnight service to Kansas City Submission Processing Center. However, an Appeals office located in the same building as a Submission Processing Center can continue to hand carry remittances for processing to the Field Office Payment Processing Unit to save overnight mailing costs.

(2) When mailing remittances to the Kansas City Submission Processing Center, address remittance packages as follows:

(3) For the most current information and/or Submission Processing contact persons, visit the following web pages:

1. Wage & Investment > CAS > Submission Processing > Standard Procedures & Aids > Field Office Payment Processing > Appeals for Field Office Payment Processing - Appeals, or

2. Servicewide Electronic Research Program (SERP) - See Who/Where tab for Appeals Field Office Remittance Processing Address.

(4) Include a completed Form 3244, Payment Posting Voucher, or Form 3244-A, Payment Posting Voucher - Examination, to ensure proper crediting of taxpayer accounts.

(5) Send remittances and payment posting vouchers by an overnight traceable method with an approved carrier. Regular mail or other delivery methods that do not provide "overnight and tracking" service are not acceptable.

(6) Attach a completed Form 3210, Document Transmittal, that includes the following:

1. Detailed list of items sent, including the dollar amount of each check

2. "APPEALS MAIL REMITTANCE(S) RECEIVED mm/dd/yyyy" entered in the remarks section

3. Sender’s name

4. Sender’s return address

5. Sender’s telephone number

6. Sender’s EEFax or fax number

(7) Attach copy of payment posting voucher to the tax return or substitute document and retain it in the administrative file. Appeals will retain a signed copy of Form 3210 on all payments sent to the remittance processing function.

(8) Sending offices must establish a control to ensure delivery of tax receipts during transit, and follow-up timely. The control must include amounts of taxpayer receipts, listed separately, and taxpayer identification numbers that are correlated to the package tracer information.

(1) The Appeals Technical Employee (ATE) must determine whether a remittance is a deposit or a payment of tax. Both types of remittances will be posted to a taxpayer’s account as of the date of receipt, and both will stop the running of interest on a deficiency from the date the remittance is received. See IRM 8.7.17.5.1, Determining Whether Remittance is a Payment or IRC 6603 Deposit.

(2) Per IRC 6603, a taxpayer may make a cash deposit with IRS which can be used to pay any income, estate, gift, or excise tax (under Chapter 41, 42, 43, or 44) that has not been assessed at the time of the deposit. Deposits are potential payments towards potential underpayments. To the extent that the deposit is used by IRS to pay tax, for purposes of IRC 6601 (relating to interest on underpayments), the tax should be treated as paid when the deposit is made.

(3) Rev. Proc. 2005-18 refers to remittances designated as deposits as "designated remittances" and remittances that are not designated as deposits as "undesignated remittances".

(4) After determining the remittance is a payment of tax (not a deposit), the ATE must then determine if the payment is an advance payment on a deficiency (i.e. before the tax assessment) or subsequent payment (i.e. after the tax assessment). Advance payments are defined as payments, not IRC 6603 deposits, that are intended for application to anticipated, pending, or proposed deficiencies or additional assessments.

(5) Prepare Form 3244-A, Payment Posting Voucher - Examination, for processing "advance payments" and "IRC 6603 deposits". See IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244.

(1) If the taxpayer has not signed an agreement form but has submitted a remittance without specifically addressing how to apply the remittance, the ATE must still process the payment within 24 hours. If necessary, the Designated Payment Code (DPC) can be changed at a later date by completing and forwarding Form 2424, Account Adjustment Voucher, to the address previously used for the remittance and payment posting voucher.

(2) Undesignated (those not designated as a deposit) voluntary payments are treated as payments and are applied by the Service against any outstanding liabilities, unless one of the exceptions described in sections 4.04(1) and 4.05(3) of Rev. Proc. 2005-18 applies. Per Rev. Proc. 2002-26, the Service will apply undesignated payments to periods in the order of priority that the Service determines will serve its best interest. If a payment is not specifically designated, allocate the payment to the earliest unpaid and collectible liability owed and due as of the payment availability date, i.e. oldest open Collection Statute Expiration Date (CSED) in the order - tax, penalty and interest. Also, see IRM 20.2.5.2.1, Application of Payments.

(3) The undesignated remittance treated as a payment is considered when determining the existence of a deficiency and whether a notice of deficiency is required to be issued. See section 4.03 of Rev. Proc. 2005-18. An "undesignated remittance" made after the mailing of a notice of deficiency will be considered a payment of tax, will be posted to the taxpayer’s account as soon as possible, and will not deprive the Tax Court of jurisdiction over the deficiency

(1) Special rules apply for interest on cash bonds and IRC 6603 deposits. Per IRC 6603(a), a taxpayer may make a cash deposit with IRS which may be used to pay an income, estate, gift, or excise tax (under Chapter 41, 42, 43, or 44) which has not been assessed at the time of the deposit. For cash bonds, see IRM 20.2.4.8.1, Cash Bonds.

(2) Except in a case where IRS determines that collection of tax is in jeopardy, IRS can return to the taxpayer any amount of the deposit (to the extent not used for payment of tax) which the taxpayer requests in writing. See IRC 6603(c), Return of Deposit. Deposits will be treated as used for the payment of the tax in the order deposited [i.e. last-in, first-out (LIFO) basis], except as otherwise provided by the taxpayer. See IRC 6603(e), Use of Deposits.

(3) Underpayment Interest (IRC 6601)

IRC 6603 deposits will be posted to a taxpayer’s account as of the date of receipt and will stop the running of interest on a deficiency from the date the remittance is received. Deposits are potential payments towards potential underpayments. The tax will be treated as paid on the date of deposit to the extent the deposit is used by IRS to pay the tax. See IRC 6603(b), No Interest Imposed.

(4) Overpayment Interest (IRC 6611)

A deposit which is returned to a taxpayer will be treated as a payment of tax for any period to the extent (and only to the extent) attributable to the disputable tax for such period. The overpayment interest will be the Federal short-term rate determined under IRC 6621(b), compounded daily. See IRC 6603(d), Payment of Interest. Rules similar to the rules of IRC 6611(b)(2) will apply. For additional information, see the following in IRM 20.2.4, Overpayment Interest

(5) For additional information, see IRC 6603, Deposits Made to Suspend Running of Interest on Potential Underpayments, Etc..

(1) When a remittance is received after the case is closed, send it to Submission Processing in accordance with instructions in IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, and IRM 8.7.17.4, Preparing Remittance Packages for Mailing. Forward any IRS notices or other information furnished by the taxpayer with the payment to ensure credit to the proper account, and acknowledge receipt. If the remittance represents a partial payment, inform the taxpayer where to make future payments. The transmittal letter to the taxpayer must include their name, type of tax and tax period.

(1) A Lockbox is a non-IRS facility. Generally, it is a commercial bank that accepts and processes payments only from taxpayers or tax professionals for specific form types. This method of processing payments serves to accelerate the handling and deposit of funds received and forwarded to Treasury.

(2) A Lockbox does not acknowledge Form 3210 or process Form 3244 or Form 3244-A. Payments sent directly to a Lockbox by an IRS office are generally forwarded to a Submission Processing center for processing, delaying the posting of the payment to the taxpayer's account. As a result, the taxpayer may incur penalty and interest that will later need to be corrected.

(3) Payments intended for Lockboxes that are received by Appeals should be processed as indicated in IRM 8.7.17.3.1, Preparing Forms 3244-A and 3244, and IRM 8.7.17.4, Preparing Remittances Packages for Mailing.

(1) Rev. Proc. 2002-18, Section 6.02(4), authorizes Appeals or Counsel to resolve a "change in accounting method issue" by agreeing that the taxpayer will pay the government a "specified amount" that approximates the time-value-of-money (TVM) benefit the taxpayer has derived from using its method of accounting for the taxable years before Appeals or a federal court (instead of the method of accounting determined by Appeals or Counsel to be the proper method of accounting), reduced by an appropriate factor to reflect the hazards of litigation. If Appeals resolves this issue as a TVM resolution, the TVM resolution amount (i.e. the "specified amount") is not assessed. The Service will process receipt of the taxpayer’s TVM remittance as a "miscellaneous payment", as described in the Internal Revenue Manual.

(2) The Service uses "General Ledger Account 6400 Miscellaneous Revenue Collections" to record miscellaneous collections that are not assessable on the taxpayer’s account. This general ledger account records monies/revenue collected for nine individual accounts within account 6400, one of which is "account 2320 - Miscellaneous receipts not attributable to fees or assessed tax, penalty and interest (20-3220)." See IRM 3.17.15.7.26, Account 6400 Miscellaneous Revenue Collections, and IRM 3.17.64.10.1.4, Account 6400 Miscellaneous Revenue Collections.

(3) Upon Appeals’ receipt of a TVM remittance, the ATE will follow the general guidance in IRM 8.7.17.3.1, Preparing Forms 3422-A and 3244, except for the following:

1. Do not enter a dollar amount next to a transaction code.

2. Enter "6400" next to the "Other credit", and enter the remittance amount.

3. In the remarks section, enter the following special instructions:
   - TVM Specified Amount payment per Rev. Proc. 2002-18, Sec. 6.02(4)(b)(ii)(D)
   - Apply to account 6400
   - Specify Taxpayer Type - see IRM 8.7.17.10 (4) for details.

(4) Specify Taxpayer Type - Section 6.02(4)(b)(ii)(D) of Rev. Proc. 2002-18, Processing of Specified amount, states that the transmittal memorandum should specify the type of taxpayer (LMSB, SBSE, W&I) to which the payment pertains. For the "taxpayer type", see the "BOD-CD" (Business Operational Division Code) on an ENMOD for the relevant tax period. See IRM 2.3.15, Command Code ENMOD, for additional information.