25.24.5. Return Preparer Misconduct Field Examination

(1) This IRM provides procedures and guidance examiners should understand and apply in the performance of their duties.

(1) The IRS has established a Policy Statement (P 25-2) that covers victims of return preparer misconduct. See IRM 1.2.1.16, Servicewide Policies and Authorities, Policy Statements for Special Topics.

(1) The Director, Headquarters Examination, is the executive responsible for providing policy and guidance for field employees and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.3.5, Headquarters Examination, for additional information.

(2) The Director, Examination - Field and Campus Policy, reports to the Director, Headquarters Examination, and is responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.16.3.5.1, Field and Campus Policy, for additional information.

(3) FESP, which is under the Director, Examination - Field and Campus Policy, is the group responsible for providing oversight and policy and procedural guidance on specialized examination processes to SB/SE field examiners and managers. See IRM 1.1.16.3.5.1.2, Field Exam Special Processes.

(1) Periodic program reviews are conducted to:

• Assess the effectiveness of specific programs within Examination or across the organization,

• Determine if procedures are being followed,

• Validate policies and procedures and

• Identify and share best/proven practices.

(1) The following table lists commonly used terms, acronyms and their definitions:

(2) The following table provides definitions of return preparer roles:

(1) The following table contains related IRM sections referenced in this IRM:

(1) Perform complete Integrated Data Retrieval System (IDRS) research to confirm a tax return was filed or the taxpayer does not have a filing requirement. Research should include, but is not limited to, the use of CC TXMOD or CC IMFOLT to review posted information; CC RTVUE, CC TRDBV and/or access of Employee User Portal (EUP) to review MeF original tax return information; CC IRPTR to review income information and so on.

(2) An initial review of the taxpayer’s complaint and account information (IDRS, Account Management Services (AMS), Correspondence Imaging System (CIS)) needs to be performed to determine if the complaint meets Compliance RPM criteria or if the case should be routed to an another area. See IRM 25.24.5.4, Return Preparer Misconduct Criteria Not Met, for further guidance.

(3) If the complaint is mis-routed, route to the correct area.

(4) If there are multiple controls, coordinate with the other area to negotiate ownership.

(1) If the taxpayer alleges a preparer altered tax data on a return or misdirected all or a portion of a refund, the taxpayer must submit sufficient documentation to support the allegation.

(2) Documentation for complaint consideration includes the following:

1. Form 14157, Return Preparer Complaint, completed by the taxpayer.

2. Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, completed and signed by the taxpayer (at least one taxpayer if married filing joint).

3. Signed, valid tax return as intended to be filed unless the taxpayer does not have a filing requirement.

4. Signature of the preparer on the return filed by the preparer or preparer information on an electronic return.

   Note: If there is no signing preparer, see paragraph (3) below.

5. Name and address of the preparer on the Form 14157 or Form 14157-A or within taxpayer’s written correspondence.

6. Report from a law enforcement agency (only for Categories 3 and 4): This could include a report made to the police department, State Attorney General (AG), CI and/or Treasury Inspector General for Tax Administration (TIGTA). The law enforcement agency report must be signed by a police officer or equivalent, depending on the report received (or otherwise demonstrably shown it was accepted by the law enforcement agency). It must contain the following:

• Tax year(s) involved,

• Preparer’s first and last name and address and

• Statement describing the preparer misconduct and theft of the refund.

  Note: See IRM 25.24.5.6, Evaluating Return Preparer Misconduct Complaints, for an exception when a law enforcement agency report is not required.

(3) In a case involving a "ghost" or non-signing preparer, in addition to the documentation in (2) above, at least one additional piece of corroborating evidence that the preparer was in the business or held themselves out as being in the business of preparing tax returns is required. Examples of evidence the preparer held themselves out as being in the business of preparing tax returns includes, but is not limited to, the following:

• Copy of past year tax return(s) provided by the preparer if signed by the preparer as the paid preparer (for purposes of establishing the preparer held themselves out as a preparer)

• Preparer’s Preparer Tax Identification Number (PTIN) or Employer Identification Number (EIN)

• Preparer’s business card

• Flyer or advertisement with the name of the return preparation service or the preparer

• Professional or business letterhead bearing the name of the preparer

• Business name on check from preparer

• A letter addressed to the taxpayer from TIGTA, civil preparer investigation IRC 6700, Promoting Abusive Tax Shelters, or IRC 6701, Penalties for Aiding and Abetting Understatement of Tax Liability, or IRS CI regarding an ongoing investigation of the preparer (for purposes of establishing the preparer held themselves out as a preparer)

• Affidavit of the person who hosted or sponsored the preparer or lease agreement (for example, storefront location that is no longer open)

  Example: If the preparer's services were provided at a church hall, then the minister could provide an affidavit with details about when the tax return preparation services were offered.

• Documentation of state or local law enforcement investigation of the preparer

(4) In addition, one piece of corroborating evidence that the person named on the Form 14157 interacted with the taxpayer and submitted the return filed, is required. The corroborating evidence includes:

• Preparer first and last name,

• Tax year(s) in question and

• Applicable corresponding dates indicating an exchange between the taxpayer and the preparer about the filing of a tax return.

• Cover letter, including the tax return, received from the preparer when the return was prepared.

• Copy of Form 8879, IRS e-file Signature Authorization, with signature or evidence it was received from the preparer.

• Copy of negotiated check the taxpayer gave to the preparer for payment of services.

• Credit card statement with the charge in the preparer’s name (or the preparer’s business name) for payment of services.

• Copy of "refund" check the taxpayer received from the preparer.

• Receipt from the preparer reflecting a fee for the preparation of a tax return for the tax year in question.

• E-mail, text messages or other written communication between the taxpayer and preparer about tax return preparation.

(5) Additional documentation relevant to establishing RPM may include the following:

• Copy of bank statement with the refund amount received by direct deposit, if applicable.

• Copy of taxpayer’s bank statement showing the refund was not deposited in the taxpayer’s account.

• Copies of any other documentation to support the complaint.

(1) Verification of the preparer is required on all complaints alleging RPM. Research the account to determine whether the original return was signed by a preparer or there was a "ghost" preparer.

1. If the return was filed electronically, research CC TRDBV and/or access EUP to review MeF original tax return information.

2. If a paper return was filed, the original return may need to be requested from Files to determine if there is a signing or "ghost" preparer scenario.

3. If there is preparer information per CC TRDBV and the name of the preparer matches the name of the preparer on the complaint, there is no need to request the document from Files. If the name does not match or there is no preparer information, request the document from Files. Suspend the case per normal procedures while waiting for the document.

(2) The two levels of verification required are as follows:

1. Documentation and/or IDRS research must show the preparer named on Form 14157, Return Preparer Complaint, is in the business of preparing tax returns or held themselves out as being in the business of preparing tax returns AND

2. Evidence must show the person named on the Form 14157 interacted with the taxpayer and submitted the return filed with the IRS.

(3) Verify the identity of the preparer from the following IRS records:

• CC INOLE to verify the TIN or EIN provided

• CC RPVUE to verify PTIN

• CC NAMEI or CC NAMEB to locate TIN or EIN

(4) Use the following If/Then table to verify the preparer.

(1) In addition to the required documentation to support the RPM complaint, a refund trace may be required on ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡cases. The purpose of the refund trace is to validate the taxpayer’s statement regarding whether a refund was issued or deposited into an account in the taxpayer’s name.

(2) A refund trace is required as outlined below:

(3) Research refund information via CC IMFOLI, TXMOD, TRDBV, and MeF Return Request Display (RRD) through EUP.

1. Indicator DD: 0 (paper check)

2. Indicator DD: 9 (direct deposit)

3. Refund Anticipation Loan (RAL) indicator of "1"

4. Refund Anticipation Check (RAC) indicator of "2"

(4) Complete Form 4844, Request for Terminal Action, and forward to the Designated Identity Theft Adjustment (DITA) team to request a refund trace. Upon completion of the refund trace, DITA will forward the results directly back to the requestor. See IRM 25.24.4-1, Form 4844 Example for Refund Trace Request.

(5) Depending upon the RPM category, this information will be used in conjunction with other required information to determine the correct account adjustment. Review available refund trace information for all cases, if applicable, regardless of category for information on the amount of the refund, if any received by the taxpayer.

(6) Refund trace information will reflect a negotiated check or completed Financial Management Service Form 150.1 or Form 150.2, which provide information as to the individual’s name and where the refund was deposited.

(7) On incomplete Category 3 and 4 complaints, initiate the refund trace while continuing to correspond with the taxpayer for additional information.

(1) An official report from a law enforcement agency (such as police department, State AG, CI or TIGTA) is required in RPM Category 3 and 4 cases for the taxpayer to be eligible for an additional refund.

(2) If the taxpayer is unable to obtain an official report from a law enforcement agency the taxpayer will be directed to their local CI office or TIGTA office. Examiners will follow-up with taxpayers if a report has not been received within a reasonable period.

(3) The official law enforcement agency report must be signed by a law enforcement agency officer or equivalent, depending on the report received (or otherwise demonstrably accepted by the law enforcement agency) and contain the following:

1. Tax year(s) involved

2. Return preparer’s first and last name and address and

3. A statement describing the preparer misconduct and theft of refund.

(4) If signing preparer information is present, the individual named on the law enforcement agency report must match the name of the preparer named in the complaint and on the original return. If signing preparer information is not present, the preparer name on the law enforcement agency report must match the preparer named in the complaint.

(5) If the preparer name does not match, the taxpayer is not entitled to an additional refund. The taxpayer may still be eligible for an account adjustment and removal of the preparer portion of the refund depending on the refund verification results.

(1) Category 1 is defined as a taxpayer who was in contact with a preparer and ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ did not sign or authorize the filing of a return, but a return was filed with their name and TIN.

(2) Potential relief/resolution: The IRS will resolve these cases using RPM procedures and may result in the taxpayer receiving a refund.

(3) Some information that can assist with the determination may include:

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

• ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(4) Complaints that are determined to be Category 1, if allowed, will result in treating the original return filed as a nullity. The complaint will be treated with procedures similar to identity theft procedures. However, identity theft indicators will not be applied for the first year RPM is verified. Any subsequent years in which the preparer files without the taxpayer’s knowledge and consent will be considered identity theft. The account will be adjusted to match the taxpayer’s return and a subsequent refund may be issued barring any other issues.

(5) Category 1 requires specific documentation to qualify for relief. The required documentation is outlined in the chart below:

(6) Consider the documentation complete if the ≡ ≡ ≡ ≡ ≡ ≡ ≡ required documents above are included. In some circumstances all the required documentation is not required as outlined below:

• Tax return is not included because taxpayer states they are not required to file and research (CC IRPTR) supports that statement.

• Form 14157-A is not included; however, other documentation included contains the required information and the taxpayer provides a statement/explanation signed under penalties of perjury.

(7) Also consider the documentation complete if the preparer’s ≡ ≡ ≡ ≡ ≡ ≡ ≡ or first and last name and business address are included on other documentation. Form 14157 is not required.

(8) Consider the documentation incomplete if the ≡ ≡ ≡ ≡ required documents above are not included, or are included, but the information provided within the documentation is incomplete.

(9) If complaint is considered incomplete refer to IRM 25.24.5.9, Incomplete or Missing Documentation, for additional information. Suspend case following normal procedures. If reply received or suspense period ends refer to IRM 25.24.5.9.1, Evaluating Taxpayer Response to Missing Documentation Request.

(10) Verify the preparer information. Refer to IRM 25.24.5.6.3, Verification of the Preparer, for additional information.

(11) For Category 1 ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ cases, a refund trace will only be required to be initiated when the claim is disallowed. This is necessary to determine the appropriate handling of the actual return provided with the claim. However, if a refund trace was previously performed and the trace information is currently available on a ≡ ≡ ≡ ≡ ≡ ≡ ≡ refund, the information will be utilized to verify the receipt or non-receipt of a refund and to determine the amount, if any, of an additional refund that may be issued.

(12) Verify whether a refund was issued or deposited into an account in the taxpayer’s name.

1. If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

2. If ≡ ≡ ≡ ≡ ≡ ≡ ≡, determine if refund trace was previously performed. Refer to IRM 25.24.5.6.4, Refund Trace, for additional information.

   Example: Taxpayer states no refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   Example: Taxpayer states that no refund or portion of refund was received; however, available refund trace shows that a portion of the refund was deposited into an account in the taxpayer’s name. The refund amount from the refund trace information would be utilized to determine the additional refund amount (if any) due to the taxpayer. (Taxpayer states they received $500 and trace shows taxpayer received $1,000. When computing the applicable refund amount allowable, use $1,000.)

3. If trace information is not available or available trace information cannot verify the receipt or non-receipt of the refund, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   Example: Taxpayer states portion of refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. We cannot verify the portion that the taxpayer received.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(13) If complaint is considered complete, all required documentation, including 3rd party documentation (if applicable), is present and the preparer information is considered verified, the complaint is accepted.

(14) The IRS will determine the type of relief to which the taxpayer is entitled. The actual return presented by the taxpayer (unaltered by the preparer) in an allowed claim is considered the taxpayer’s return of record. The IRS will consider the original return a nullity.

(15) For Category 1 cases, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ information regarding fees paid to the preparer that were deducted from the original refund, this amount would be considered part of the preparer portion of the refund. If the taxpayer did not authorize the filing of the tax return, the taxpayer would not be held responsible.

(16) Category 1: Treatment Stream for Accepted Complaints:

(1) Category 2 is defined as a taxpayer who was in contact with a preparer and authorized a return filing, but states tax data (exemptions, income, expenses, deductions, credits) on their return was altered before the return was filed or the return otherwise includes items which they did not authorize.

(2) Potential relief/resolution: The IRS will administratively adjust the taxpayer’s account to reflect the correct information and remove the portion of the refund attributable to preparer misconduct. If refund trace shows taxpayer received more than entitled, taxpayer may be liable for the erroneous refund amount. See IRM 25.24.5.8, Erroneous Refund Procedures.

(3) Complaints that are determined to be Category 2, if allowed, will result in treating the original return filed as a nullity.

(4) Category 2 requires specific documentation to qualify for relief. The required documentation is outlined in the chart below:

(5) Consider the documentation complete if the ≡ ≡ ≡ ≡ ≡ ≡ required documents above are included. In some circumstances all the required documentation is not required as outlined below:

• Tax return is not included because taxpayer states they are not required to file and research (CC IRPTR) supports assertion.

• Form 14157-A is not included; however, other documentation contains the required information and the taxpayer provides a statement/explanation signed under penalties of perjury.

(6) Form 14157 is not required if the preparer’s first and last name and business address is included on other documentation.

(7) Consider the documentation incomplete if the ≡ ≡ ≡ ≡ required documents above are not included, or are included but the information provided within the documentation is incomplete.

(8) If complaint is considered incomplete refer to IRM 25.24.5.9, Incomplete or Missing Documentation, for additional information. Suspend case following normal procedures. If reply received or suspense period ends refer to IRM 25.24.5.9.1, Evaluating Taxpayer Response to Missing Documentation Request.

(9) Verify the preparer information. Refer to IRM 25.24.5.6.3, Verification of the Preparer, for additional information.

(10) For Category 2 ≡ ≡ ≡ ≡ ≡ ≡ ≡ cases, a refund trace will only be required to be initiated when the claim is incomplete or disallowed. This is necessary to determine the appropriate handling of the actual return provided with the complaint. However, if a refund trace was previously performed and the trace information is currently available on a ≡ ≡ ≡ ≡ ≡ ≡ ≡ refund, the information will be utilized to verify the receipt or non-receipt of a refund and to determine the amount, if any, of an erroneous refund received by the taxpayer.

(11) Verify whether a refund was issued or deposited into an account in the taxpayer’s name.

1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, determine if refund trace was previously performed. Refer to IRM 25.24.5.6.4, Refund Trace, for additional information.

   Example: Taxpayer states they received the correct or expected refund amount; however, available refund trace differs showing a larger refund was deposited into an account in the taxpayer’s name. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Use the refund trace information to determine the amount of the erroneous refund that was made.

3. If trace information is not available or available trace information cannot verify the receipt or non-receipt of the refund, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   Example: Taxpayer states portion of refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. We cannot verify the portion that the taxpayer received. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(12) If complaint is considered complete, all required documentation, including 3rd party documentation (if applicable), is present and the preparer information is considered verified, the complaint is accepted.

(13) The IRS will determine the type of relief to which the taxpayer is entitled. The actual return presented by the taxpayer (unaltered by the preparer) in an allowed RPM complaint is considered the taxpayer’s return of record. The IRS will consider the original return a nullity.

(14) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ information regarding fees paid to the preparer that were deducted from the original refund, it must be taken into account when determining preparer portion of refund and any additional refund amounts. The fee amount would not be considered a part of the preparer portion of the refund. However, when the fee is paid by other methods of payment (cash, personal check, unknown), do not take it into account.

(15) Category 2: Treatment Stream for Accepted Complaints

(1) Category 3 is defined as a taxpayer who was in contact with a preparer and authorized a return filing, but alleges tax data (exemptions, income, expenses, deductions, credits) on their return was altered after they signed it or the return otherwise includes items they did not authorize, and taxpayer states either they received no refund or only a portion of the refund they expected.

(2) Potential relief/resolution: The IRS will administratively adjust the taxpayer’s account to reflect the correct information and remove the portion of the refund attributable to preparer misconduct. The taxpayer may receive a refund plus interest, as provided by law, for the amount not received.

(3) Complaints that are determined to be Category 3, if allowed, result in treating the original return filed as a nullity.

(4) Category 3 requires specific documentation to qualify for relief. The required documentation is outlined in the chart below:

(5) Consider the documentation complete if the ≡ ≡ ≡ ≡ ≡ ≡ required documents above are included. In some circumstances, all the required documentation is not required as outlined below:

• Form 14157-A is not included; however, other documentation included contains the required information and the taxpayer provides a statement/explanation signed under penalties of perjury.

• If the preparer’s name (first and last) and business address are included on other documentation, then Form 14157 is not required.

(6) Consider the documentation incomplete if the ≡ ≡ ≡ ≡ ≡ ≡ ≡ required documents above are not included or are included but the information provided within the documentation is incomplete.

(7) If complaint is considered incomplete refer to IRM 25.24.5.9, Incomplete or Missing Documentation, for additional information. Suspend case following normal procedures. If reply is received or suspense period ends refer to IRM 25.24.5.9.1, Evaluating Taxpayer Response to Missing Documentation Request.

(8) Verify the preparer information. Refer to IRM 25.24.5.6.3, Verification of the Preparer, for additional information.

(9) For Category 3, ≡ ≡ ≡ ≡ ≡ ≡ cases, a refund trace is required and used to verify whether a refund was issued in the taxpayer’s name. The trace information will be utilized to verify the receipt or non-receipt of a refund and to determine the amount, if any, of an additional refund that may be issued.

1. If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

2. If ≡ ≡ ≡ ≡ ≡, determine if refund trace was previously performed. If no trace information is available, initiate a refund trace. Refer to IRM 25.24.5.6.4, Refund Trace, for additional information.

3. Verify the taxpayer’s statement regarding whether a refund was issued or deposited into an account in the taxpayer’s name using refund trace information.

Example: Taxpayer states no refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Example: Taxpayer states that no refund or portion of refund received; however, available refund trace shows that the entire refund was deposited into account in the taxpayer’s name. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Use the refund trace information to determine the refund amount, if applicable.

4. If trace information is not available or available trace information cannot verify the receipt or non-receipt of the refund, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   Example: Taxpayer states portion of refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. We cannot verify the portion that the taxpayer received. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(10) If complaint is considered complete and all required documentation, including 3rd party documentation, if applicable, is present and the preparer information is considered verified, the complaint is accepted.

(11) The IRS will determine the type of relief to which the taxpayer is entitled. The actual return presented by the taxpayer (unaltered by the preparer) in an allowed claim is considered the taxpayer’s return of record. The IRS will consider the original return a nullity.

(12) Category 3 involves both a RPM complaint and a claim for refund. If complaint is disallowed, the claim for refund must be disallowed using claim disallowance procedures.

(13) Category 3: Treatment Stream For Accepted Complaints

(1) Category 4 is defined as a taxpayer who was in contact with a preparer and authorized a return filing, but states only the direct deposit information or address was altered, diverting the refund to the preparer and no refund or only a portion of the refund was received.

(2) Potential relief/resolution: The IRS will administratively remove the portion of the refund attributable to preparer misconduct and the taxpayer may receive a refund.

(3) Complaints determined to be Category 4 will not result in treating the original return filed as a nullity.

(4) Category 4 requires specific documentation to qualify for relief. The required documentation is outlined in the chart below:

(5) If the ≡ ≡ ≡ ≡ ≡ ≡ required documents above are included, consider the documentation requirement complete. In some circumstances all the required documentation is not required as outlined below:

• Form 14157-A is not included; however, other documentation included contains the required information and the taxpayer provides a statement/explanation signed under penalties of perjury.

• If the preparer’s first and last name, and business address are included on other documentation, then Form 14157 is not required.

(6) Consider the documentation incomplete if the ≡ ≡ ≡ ≡ ≡ ≡ required documents above are not included or are included but the information provided within the documentation is incomplete.

(7) If complaint is considered incomplete refer to IRM 25.24.5.9, Incomplete or Missing Documentation, for additional information. Suspend case following normal procedures. If reply received or suspense period ends refer to IRM 25.24.5.9.1, Evaluating Taxpayer Response to Missing Documentation Request, for additional information.

(8) Verify the preparer information. Refer to IRM 25.24.5.6.3, Verification of the Preparer, for additional information.

(9) For Category 4, ≡ ≡ ≡ ≡ ≡ cases, a refund trace is required and used to verify whether a refund was issued in the taxpayer’s name. The trace information will be utilized to verify the receipt or non-receipt of a refund and to determine the amount, if any, of an additional refund that may be issued.

1. If ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

2. If ≡ ≡ ≡ ≡ ≡, determine if refund trace was previously performed. If no trace information is available, initiate a refund trace. Refer to IRM 25.24.5.6.4, Refund Trace, for additional information.

3. The trace information will be utilized to verify the receipt or non-receipt of a refund and to determine the amount, if any, of an additional refund that may be issued.

Example: Taxpayer states no refund received and refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Example: Taxpayer states that no refund or portion of refund received; however, refund trace shows that the entire refund was deposited into account in the taxpayer’s name. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Use the refund trace information. Disallow claim.

4. If trace information cannot verify the receipt or non-receipt of the refund, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   Example: Taxpayer states portion of refund received and available refund trace information shows that the refund was NOT deposited into an account in the taxpayer’s name. We cannot verify the portion that the taxpayer received. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(10) If complaint is considered complete and all required documentation, including 3rd party documentation (if applicable) is present and the preparer information is considered verified, the complaint is accepted.

(11) The IRS will determine the type of relief the taxpayer is entitled to. For Category 4 cases the original return is considered valid and not considered a nullity.

(12) Category 4: Treatment Stream For Complaints:

(1) When the taxpayer responds to a request for missing information, re-evaluate the complaint and determine if the additional information is sufficient to provide relief.

(2) Although not all inclusive, follow the If/Then Chart below upon receipt of the taxpayer’s response to the missing information request.

(1) For specific categories, depending upon the facts and circumstances, an otherwise complete claim may not be allowed.

(2) Disallow complaints in full in any category if:

1. The taxpayer does not adequately respond to the request for specific additional information.

   Exception: Category 2 is not a claim for refund. See IRM 25.24.5.14.1, Form 4442 - Designated Identity Theft Adjustments (DITA) Team Referral Package Content, Assembly and Submission.

   Exception: If the only missing element of a Category 3 complaint is a law enforcement agency (such as police department, AG, CI or TIGTA) report, see IRM 25.24.5.10.2, Partial Disallowance.

2. The preparer and/or the documentation cannot be verified.

(3) If the taxpayer’s actual return is included in the documentation and the complaint is disallowed, a refund trace is required to determine the treatment of the taxpayer’s actual return.

(4) Disallowing Complaint of Return Preparer Misconduct & Taxpayer’s Actual Return is Present:

(5) Suggested language for the Complaint Disallowance letter is outlined below. Include the reason(s) for the complaint disallowance.

1. We are disallowing your Return Preparer Misconduct complaint because we received no response to our request for missing information.

2. We are disallowing your Return Preparer Misconduct complaint because you did not provide sufficient information in your response to our request for missing information.

3. We are disallowing your Return Preparer Misconduct complaint because we cannot verify the information you provided regarding your return preparer.

(6) When guidance states to treat taxpayer’s return as an amended return, suggested verbiage: Refund trace information shows that the entire original refund was deposited into an account in your name and/or it has been determined that you received the benefit of the entire original refund. We have adjusted your account to reflect the tax return you provided with your complaint as an amended return. A notice of adjustment will be issued.

(7) For Category 4 disallowances include:

1. We are disallowing your Return Preparer Misconduct complaint because the refund trace information shows that the entire original refund was deposited into an account in your name.

2. We are disallowing your complaint for Return Preparer Misconduct because the preparer information on the law enforcement agency report provided does not match the preparer information you provided on the complaint filed.

(8) When guidance states "Do not process actual return." Suggested verbiage: No adjustments are being made to your account at this time. If you need to make any changes to your original return, please file a Form 1040X, Amended U.S. Individual Income Tax Return.

(9) Provide Pub 4134, Low Income Taxpayer Clinic (LITC) List. This publication provides information on LITCs.

(1) Partial disallowance procedures can occur in RPM Categories 1,3, 4 and may apply if there are RSED implications.

(2) Depending upon the facts and circumstances, including the refund trace results, the taxpayer may have received more than they stated in the RPM complaint which would impact the amount of the refund issued and partial disallowance procedures would apply.

(3) If the law enforcement agency report contains inconsistent information but the complaint was otherwise complete, the taxpayer is not eligible for a refund but is eligible for an account adjustment.

(4) Issue Letter 569, Full/Partial Preliminary Claim Disallowance, when partially disallowing a claim.

(5) Provide IRS Pub 4134, Low Income Taxpayer Clinic (LITC) List. This publication will provide information on LITCs.

(1) This applies to Categories 1-3: For the purposes of applying the RPM procedures, the filing of an altered return by a preparer may not meet the definition of a valid return. When a claim is allowed, the posted return is considered a nullity and the statute of limitations does not start until a signed return is received from the taxpayer regardless of whether the taxpayer authorized the filing of the initial return.

(2) Returns filed in Category 4 cases are not considered nullities and the ASED will begin to run based on the filing of those returns.

(3) If complaints are received after the ASED, the complaint must be evaluated to determine whether the posted return is a valid return.

(4) When returns are received with a taxpayer’s allegation of preparer misconduct and the claim is allowed, with the exception of Category 4, Misdirected Refund, the ASED must be updated based upon the received date of the signed return (return as intended to be filed). The ASED must be updated prior to routing to DITA, if applicable.

(5) Use the received date of the taxpayer’s signed return as intended to be filed to reflect the date of the return of record for allowed complaints.

(6) If a return is submitted but unsigned, correspond for signature. If not received, disallow the complaint. Do not change the ASED on disallowed complaints.

(1) Although a return submitted with an accepted RPM complaint for Categories 1, 2, or 3 is timely filed for purposes of the RSED, the taxpayer may not be entitled to a refund. See IRC 6511(b).Returns submitted as part of an accepted RPM complaint for Categories 1, 2, and 3 will be considered original returns, unless otherwise noted.

(2) Generally, prepaid credits must be claimed within three years of the due date of the return with regard for extensions. Therefore, if a return is received more than three years from the due date with regard to extensions, a refund of prepaid credits should not be made.

(3) If the RSED has expired, send a claim disallowance letter for the RSED issue only on an otherwise allowed claim.

(4) Category 4 cases involve a claim for refund only. Normal RSED procedures will apply.

(1) The ERSED is two years from the date of the erroneous refund or direct deposit. However, a five-year statute will apply if the IRS can show the erroneous refund was induced by fraud or misrepresentation of material facts by the taxpayer. Generally, for purposes of RPM, the two-year statute will apply to the taxpayer.

(1) Accuracy-related penalties must be considered when reviewing RPM complaints.

(2) If audit issues remain on the return after a RPM complaint has been accepted, accuracy-related penalties may be assessed.

(3) If accuracy-related penalties were assessed based upon items inflated by a preparer, the associated penalties should be removed/abated if the items are removed from the account.

(1) Once the examiner determines the taxpayer is a victim of RPM, the examiner completes Form 4442, Inquiry Referral, as follows:

• The phrase "SB/SE Field Exam" in Part I, Box 4 - Location.

• Complete Part I & II in full.

• The preparer’s name and business address. (Part III, Section B).

• Whether the taxpayer received the full refund, partial refund amount, no refund, or an amount greater than expected. (Part III, Section B).

• Category number that fits the individual taxpayer scenario, Category 1, 2, 3 or 4.(Part III, Section B).

• Amount of refund that the taxpayer is entitled, if applicable. (Part III, Section B).

• Penalties and Interest to be assessed/abated, as applicable. (Part III, Section B).

• If erroneous refund Category D is applicable, the amount of the erroneous refund. (Part III, Section B).

• If No Consideration letter Letter 916-C, Claim Incomplete for Processing; No Consideration, is required, DITA will issue for Field Exam. On referral, include whether the complaint is denied in part or full and the appropriate paragraphs. Include your contact information for inclusion on Letter 916-C. (Part III, Section B).

(2) Request DITA to – "Inform the examiner by secure e-mail at [insert your full e-mail address, for example, Mary.Doe@irs.gov] when the account corrections are complete."

(3) The Form 4442 package sent to DITA should contain:

1. Completed Form 4442.

2. Copy of the taxpayer’s posted (RPM) return, TRDBV or MeF print.

3. Copy of the signed return intended to be filed; Annotate the copy of the return intended to be filed as the "Taxpayer Intended Return." The DITA team will use the RPM return and "Taxpayer Intended Return" to make the account adjustments.

   Exception: Annotate on Form 4442 if taxpayer does not have a filing requirement.

4. Copies of Form 14157, Return Preparer Complaint, and Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit, and supporting documentation.

(4) Mail, fax, or e-mail the Form 4442 package, along with Form 3210, Document Transmittal, to the DITA team.

(5) Incomplete referrals will be rejected back to the originating group.