25.15.7. Innocent Spouse Shared Processing Responsibilities

(1) Requests for relief from joint and several liabilities are mainly processed at the Cincinnati IRS Campus known as the Cincinnati Innocent Spouse Operation (CISO). Requests can be received in other operations.

(2) This IRM contains general information related to shared responsibilities with:

• Accounts Management (AM).

• Campus Correspondence Examination Operation/Automated Underreporter Operations (CCEO/AUR).

• Collection (which is further broken down into): Bankruptcy, Collection Due Process (CDP), Offer In Compromise (OIC).

• Small Business/Self Employed (SB/SE) Field Examination.

• Taxpayer Advocate Service (TAS).

• Tax Court/Appeals.

(1) IRC 66, Treatment of Community Income.

(2) 26 CFR 1.66, code of Federal Regulations guidance on requests for relief from federal income tax liability resulting from the operation of community property law.

(3) IRC 6015, Relief from joint and several liability on joint return.

(4) 26 CFR 1.6015-1 through -9, which provide guidance on requests for relief from joint and several liability and related proposed regulations, including 78 F.R. 49242 (issued on August 13, 2013) and 80 F.R. 72649-01 (issued November 20, 2015).

(5) Rev. Proc. 2003-19, administrative appeal rights for the non-requesting spouse.

(6) Rev. Proc. 2013-34, guidelines for taxpayers seeking equitable relief from income tax liability under section 66(c) or section 6015(f).

(7) IRC 6663(c), special rule for joint returns regarding imposition of fraud penalty.

(8) 26 CFR 301.7122-1, Compromises.

(9) IRC 6224(c) regarding settlement agreements related to TEFRA partnership proceedings.

(10) 26 CFR 601.508 regarding disputes between recognized representatives of a taxpayer.

(11) IRC 6103(e) regarding disclosure of joint return to either spouse or authorized representative.

(12) IRC 6213(a) regarding the right to raise innocent spouse relief in a petition for redetermination of a deficiency.

(13) IRC 6320 and IRC 6330 regarding rights to raise innocent spouse relief in a collection due process proceeding.

(1) 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 and campus examination process. See IRM 1.1.16.5.5.1, Examination Field and Campus Policy, for additional information.

(2) Campus Exam and Field Support, which is under the Director, Examination - Field and Campus Policy, is the group responsible for providing Servicewide policy guidance on compliance processes that relate to campus examination operations and support Field Exam and Specialty Programs in SB/SE and Large Business & International (LB&I). See IRM 1.1.16.5.5.1.5, Campus Exam and Field Support, for additional information.

(3) CISO falls under the responsibility of the Director, Examination - Campus, with the Director, Examination - Field and Campus Policy, providing oversight to the innocent spouse processing IRMs.

(4) The Internal Revenue Code (IRC) provides taxpayers specific rights. The Taxpayer Bill of Rights groups these rights into ten fundamental rights. See IRC Section 7803(a)(3). IRS employees are responsible for being familiar with and following these rights. For additional information about your taxpayer rights, please see Publication 1, Your Rights as a Taxpayer or visit Taxpayer Bill of Rights | Internal Revenue Service (irs.gov)

(1) Program Reports - The program reports provided in this IRM are for identification purposes for the Field and Campus managers and Tax Examiners. For reports concerning quality, inventory, and aged listings, refer to IRM 1.4.29, SB/SE Campus Exam/AUR, and Taxpayer Services Exam Operations. The overage report can be viewed by accessing Control Data Analysis, Project PCD, and are on the Control-D/Web Access server, which has a login program control.

• National Quality Review System (NQRS)

• Innocent Spouse Tracking System (ISTS) provides information regarding the current status of the case.

(2) Operational Reviews are performed by:

• Department Managers review Frontline Teams,

• Operation Managers review Department Managers,

• Directors/Planning & Analysis Staff review Operations.

(3) Program Effectiveness - Program effectiveness is determined by Field and Campus employees successfully using IRM guidance to perform necessary account action and duties. The following are used to ensure program effectiveness.

• Case reviews are conducted by Managers and recorded into the Embedded Quality Review System (EQRS) to ensure compliance with the IRM.

• Program reviews are conducted by headquarters analysts to evaluate program delivery and conformance to administrative and compliance requirements.

(1) The Cincinnati Innocent Spouse Operation (CISO) provides support to examiners and managers.

(1) The following is a list of common terms used in this IRM section:

(2) The following table lists commonly used acronyms in this IRM:

(1) The following references are useful when using this IRM section:

(1) If there is a –A Freeze on the account, it needs to be resolved prior to determination. Amended returns may result in:

1. A lower liability,

2. An increase in liability,

3. A change in the account to full paid, or

4. A change to the filing status.

(2) Retrieve a copy of the amended return through Correspondence Imaging Inventory (CII), if available. If there is a control on the account, contact the assigned employee to have the freeze resolved per paragraph (3) below.

(3) If a copy of the amended return cannot be retrieved through CII, request a copy of the amended return from the employee who is assigned the case.

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(4) The request may be received in Full Scope with an –A freeze that posted after the Innocent Spouse request was received. The Full Scope Technician will research and contact the area responsible for resolving the freeze before working the request.

(5) Suspend the case until the -A freeze is resolved. See IRM 21.5.6.4.2, -A Freeze, for additional information.

(1) If the RS calls or corresponds regarding a levy, or there is an indication of a levy (TC 670 with Designated Payment Code (DPC) 04, 05, 16, 18, 19, 20, 21, 22, or 23 ), ask the RS for the following information:

1. Levy source’s name.

2. Contact person.

3. Telephone number.

4. Fax number, if known.

   Note: Continuous or recurring levies may be suspended while an innocent spouse request is pending (for example, a wage levy). Bank account, state income tax, Alaska Permanent Fund Dividend and electronic funds transfer (EFT) levies are typically a one-time levy action. Typically by the time a taxpayer is aware of a one-time levy, the action cannot be stopped. Any levy payment applied to an account after the received date of the request for innocent spouse relief, may be returned to the RS after a determination is made.

   Note: If the RS indicates that the levy created an economic hardship, refer the case to TAS to make a hardship determination.

(2) Send a secure email including the taxpayer information for the release of levy request to the Lead.

(3) The Lead will forward the levy release request to the ACS contact.

(1) Coordination with Bankruptcy is required when either spouse is in bankruptcy.

(2) If a determination is made to grant full or partial relief, call (855) 740-9781 (Internal number for IRS employees only) or email the bankruptcy specialist assigned to the case. See SERP - Field Insolvency Liaisons - Who/Where (irs.gov).

(3) Contact the bankruptcy specialist and advise which taxpayer filed the innocent spouse request and the proposed determination.

(4) Confer with the bankruptcy specialist to determine if CISO can mirror the account and adjust it.

(5) Notate the Activity Record with all information obtained during contact with the bankruptcy specialist, including their name and phone number.

(6) Continue to complete the case process per normal procedures.

(1) Cases with CDP indicators do not automatically go to Stage 12. When preliminary determinations are purged, Generalized IDRS Interface (GII) recognizes coded CDP cases and a listing is generated.  The cases are given to a Lead to research the Appeals Centralized Database System (ACDS).

(2) Complete the following steps and transfer the case using the following procedures to the Appeals Office on open CDP cases where relief is allowed in full or in part:

1. Do Not issue the final determination letter.

2. Recharge documents to the Cincinnati Campus Appeals Office, using ESTAB to recharge the documents.

3. Complete Form 3210, Document Transmittal. Keep two copies with the case and retain one copy for the team. Always use the primary TIN on Form 3210.

4. Update ISTS and ISTSR Input Record accordingly.

5. Close IDRS control base.

6. Send the case to Appeals (Stop 460T) with a Form 1725, Routing Slip.

(1) If an OIC was previously filed, look at the indicator on TXMOD to determine who filed the OIC: P - Primary taxpayer, S - Secondary taxpayer or B - Both taxpayers.

(2) Listed below are OIC transaction codes and their explanation.

(3) If the RS’s offer was rejected, denied, or withdrawn, continue normal procedures.

(4) If there is a pending OIC (TC 480), contact the RS and advise them of the consequences if the OIC is accepted (i.e., the acceptance of an OIC precludes the taxpayer from subsequently being considered for relief from joint and several liability for the same tax period). If the RS wants to proceed with the OIC, contact the OIC area and request that they expedite the OIC. Research SERP under the "Who/Where" tab to determine OIC contact. Suspend the case in Stage 06 until a determination is made on the OIC.

1. Do not consider the innocent spouse request if the OIC is going to be accepted. The taxpayer can't be considered for relief from joint and several liability for the same tax period. Issue Letter 3657-C, No Consideration Innocent Spouse. Update ISTS and ISTSR Input Record to Stage 29 with the activity description "UNPR "and history comment "OPEN OIC."

2. If the OIC is going to be denied, document the case Activity Record and continue with the case, as per normal procedures.

   Note: The taxpayer may submit another OIC if relief is not granted through the innocent spouse provisions.

(1) CISO receives Operations Assistance Requests (OAR) from TAS, either by mail, eFax, or secure email. Upon receipt of an OAR, hand deliver it to the CISO Taxpayer Advocate Liaison.

(2) The CISO TAS liaison will be responsible for:

1. Accepting the OAR from TAS.

2. Acknowledging receipt of the OAR within 3 workdays (within 1 workday for expedited OARs).

3. Reviewing the case for appropriate assignment.

4. Inputting the OAR information on the TAS database.

5. Placing the innocent spouse/TAS cases in appropriate folder (which will remain around the case until it is closed to Appeals, Files or another area).

6. Assigning the case to the appropriate employee within the function using a Form 3210, Document Transmittal, if needed.

(3) All cases will be worked based on the facts and circumstances of the case and in concurrence with the TAS employee per the Service Level Agreement with TAS. The Service Level Agreement can be found at Taxpayer Advocate Service Level Agreements (SLAs) or Service Level Agreement Between The National Taxpayer Advocate and the Commissioner, SB/SE Division (sharepoint.com)...

(4) See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, for additional information on criteria.

(1) OARs will be assigned to all functions of CISO depending upon the recommended actions requested by TAS.

(1) Once a determination has been made or the requested actions have been taken on Full Scope innocent spouse/TAS cases, the technician will:

1. Complete Section V of Form 12412, Operations Assistance Request (OAR), with the employee’s name, phone number, etc.

2. Notate Section VI with actions taken, initial and date.

3. Fax Form 12412 and a fax cover sheet to TAS Originating Office as indicated on the Form 12412.

4. Notate the activity sheet that Form 12412 was faxed to TAS.

5. File case as appropriate.

(2) Once an action has been taken on innocent spouse/TAS cases assigned to First Read and the Processing Team, the technician will:

1. Notate Section VI of the Form 12412 with the action taken, initials, and date.

2. Fax the TAS cover-sheet and completed Form 12412 to TAS.

3. Notate activity sheet (when applicable) that Form 12412 was faxed to TAS. If activity record is not available, notate the Form 12412.

4. Keep original Form 12412, TAS/OAR Disposition Sheet and the ISTSR Input Record with the case going to other areas or Files.

5. Ensure the TAS folder includes a copy of the Form 12412, a print of ISTS showing Stage 30, if closing the case, and a copy of the TAS OAR Disposition Sheet. If there is not an Innocent Spouse issue because it has previously been closed, the originals will stay in the appropriate folder.

6. Return to CISO TAS Liaison.

(1) When closing or transferring a TAS case, update the case on ISTS and notate the ISTSR Input Record to Stage 30 or 07:

1. Complete all required closing processes.

2. Notate Section VI of Form 12412, Operations Assistance Request (OAR), of the actions taken to close the OAR such as closing to Appeals, Files, CDP, etc. Initial and date the Form 12412.

3. Fax Form 12412 with a TAS cover sheet to TAS.

4. Notate the activity sheet that the Form 12412 was faxed to TAS.

5. Make a copy of Pages 1 and 2 of the Form 12412.

6. Remove the innocent spouse case that is closing to Files or forwarding to another area from the TAS folder.

7. Place copies of the Form 12412 and ISTS print in the TAS folder and return to the CISO TAS Liaison.

8. Keep original Form 12412 and ISTS print with the case going to another area or Files. Place originals inside case file so they are on top.

(1) Open Campus Compliance Examination Operation (CCEO) and Area Office Examination cases are identified by an AIMS status of 82 and open AUR cases by having a Processing Code (PC) of 80. Innocent Spouse requests related to Tax Court cases in CCEO, Area Office Exam or AUR require special handling and most often are requests for relief from proposed tax assessments.

1. If the case is in CCEO or Area Office Exam as indicated by AIMS, refer the request to the appropriate Appeals Office to be associated with the case file. See IRM 25.15.18.5.1.5, Audit Information Management System (AIMS), for more information.

   Note: Appeals refers the request to the Area Office Examiner or CISO for the innocent spouse determination, per IRM 8.7.12, Technical and Procedural Guidelines - Appeals Innocent Spouse Case Procedures. If CISO receives the request for consideration, it will be worked at Appeals/Counsel’s direction with regard to taxpayer contact. See IRM 25.15.7.6.2, Litigation Referral Cases, for more information.

(2) For cases open in CCEO/AUR; research to determine if the RS is a party to the Tax Court case. Obtain case information from the Tax Court website at http://www.ustaxcourt.gov/, United States Tax Court.

(3) If the RS is a Non-Petitioning Spouse (NPS):

1. Work the case as normal.

2. Remove the colored folder.

3. Update ISTS and the ISTSR Input Record with "RS Non-Petitioning Spouse".

4. If the RS has not had their account assessed yet, contact AUR to determine the date that the RS will be assessed per IRM 4.8.9.27.8, Non-Petitioning Spouse.

5. On partial relief and disallowed cases, send a copy of the work papers and the allocation worksheets to the appeals office at the time of determination. This will assist the attorney if any subsequent adjustments need to be made to the account as a result of the Tax Court case.

   Note: Attach a Form 1725, Routing Slip, notating "FYI - Please associate RS/NPS INNSP work papers and allocation with NRS/PS Docket No. NNNNN-NNX."

(4) If the RS is a Petitioning Spouse (PS):

1. Notify Counsel and forward request for association with petitioned case. Request direction from Counsel on how to proceed with taxpayer contact. See IRM 25.15.7.6.2, Litigation Referral Cases, for more information.

2. Forward case to Appeals by using a Form 1725, Routing Slip, notate "pre-assessment" and that the case is docketed on the top in red.

   Note: If the TC 922 has a PC of 80 or Status 82 for AIMS, there is no need to notify CCEO/AUR. The case is already in Appeals.

(1) Counsel attorneys, Appeals officers, Department of Justice (DOJ) attorneys, and settlement officers may refer innocent spouse requests received in docketed Tax Court or open litigation cases to CISO to make an innocent spouse relief determination. Obtain case information from Innocent Spouse Handbook - Innocent Spouse Handbook - Admin Use Only - All Documents (sharepoint.com).

1. A copy of the petition or request should be included with the referral.

2. The open litigation may be the result of a petition filed in response to a Statutory Notice of Deficiency, an open bankruptcy case, and other cases that are under a court’s jurisdiction.

3. In general, a request for relief received during Collection Due Process hearings is referred to CISO for determination. See IRM 25.15.7.3.3, for more information.

(2) The case will typically include a memorandum addressed to CISO as follows:

IRS – CISO

Attn: Department One Manager

7940 Kentucky Drive, Stop: 840A

Florence, KY 41042

(3) Upon receipt of a referral to make a determination, call or email the Counsel attorney or officer making the referral, and ask how they want CISO to process the referral, if it is not apparent from the referral itself.

(4) If a request is filed during open litigation, work the request with Counsel’s direction. For example:

1. The Counsel attorney may want CISO to solicit a Form 8857, Request for Innocent Spouse Relief.

2. The Counsel attorney may request that CISO not make contact with the taxpayer and/or any third party witnesses. In these cases, the Counsel attorney will be responsible for corresponding with the taxpayer and/or any third party witnesses and for providing any missing information/documentation to the CISO employee.

3. The Counsel attorney may request that CISO work the request using normal procedures for taxpayer notifications and requests for information.

(5) If copies of the petition and related documents, such as the Statutory Notice of Deficiency are not in the case file, ask Counsel or the settlement officer to provide copies.

(6) Build the case on ISTS through Stage 06 and open TXMOD control with activity "LITIGATION", then:

1. Send Letter 3284-C, Non-Requesting Spouse Initial Contact, to NRS with a Form 12508, Questionnaire For Non-Requesting Spouse, if appropriate.

2. Send Letter 3659-C, Requesting Spouse Initial Contact, to RS to request any additional information needed, including Form 8857, if appropriate

   Note: Once a taxpayer files a petition in Tax Court or any court with jurisdiction, and alleges they are entitled to innocent spouse relief under IRC 6015, a "request" has been made. If a Form 8857 is not included with the referral, solicit one, if Counsel concurs with such a request. If the RS does not respond to requests for Form 8857 or other information necessary to make a determination, advise the Counsel attorney and request further instruction.

(7) Work litigation cases in an expedited manner. Make determinations within 60 days of receipt, or by the date specified by Counsel.

(8) Do not issue determination letters since the taxpayer is already in litigation, and counsel/appeals retains jurisdiction. Provide the determination (allowed, partially allowed, or not allowed) to the Counsel attorney or officer making the referral.

1. Document the case file with the determination. Do not send any letters, unless directed to do so by Counsel.

2. Update ISTS and the ISTSR Input Record with Stage 11, then Stage 19. Activity description "TAXCOURT" will automatically generate when Stage 19 is input.

3. Close TXMOD control.