5.1.11. Delinquent Return Investigations

(1) These procedures are based on and consistent with the Taxpayer Bill of Rights, The Privacy Act of 1974, the Fair Tax Collection Processes Act, the Freedom of Information Act, and IRS Policy Statement P-1-1, Mission of the Service, located in IRM 1.2.1.2.1.

(1) The following authorities provide the basis for these guidelines:

• Policy Statement P-1-1

• Privacy Act of 1974

• Freedom of Information Act

• Taxpayer Bill of Rights

• Fair Tax Collection Processes Act

(1) Director, Collection Policy is responsible for the policies and procedures in this IRM.

(2) Director, Field Collection, has executive oversight for all Field Collection programs.

(3) Field Collection Area Directors, territory managers and group managers are responsible for ensuring compliance by field personnel with these procedures.

(4) Revenue officers are responsible for reading and implementing the procedures listed in this IRM.

(1) Program Reviews: Program reviews completed by Collection Policy to verify compliance with the IRM requirements and address any TIGTA/GAO findings. Case reviews are conducted by Group Managers to ensure compliance with this IRM.

(2) Program Reports: Collection managers utilize reports generated from the Integrated Collection System (ICS) and the ENTITY Case Management System to monitor and track inventory assignments and timely and appropriately take case actions. Reports and queries from ICS and Entity of cases which include open Delinquent Return (Del Ret) Investigations/ Taxpayer Delinquency Investigations (TDI) can be reviewed to assist managers in determining if employees are timely addressing TDIs. Reports from the Embedded Quality Review system provide review information for managerial use in guiding revenue officers to promote timeliness, effectiveness, and accuracy of case actions.

(3) Program Effectiveness: Operational reviews are conducted by the Collection Area Directors and Territory Managers annually to evaluate program delivery and conformance to administrative and program National Quality Reviews and consistency reviews are routinely conducted to measure program consistency, effectiveness in case actions, and compliance with policy and procedures. Trends reported in these reviews are used to promote and improve program effectiveness. Trends, recommendations and corrective actions issued during the course of program and operational reviews are used to identify opportunities for improvement and achieve program goals.

(1) Collection managers verify program and procedural compliance by conducting case consultations, case reviews, performance reviews, and security reviews. Prescribed internal controls are detailed in IRM 1.4.50, Collection Group Manager, Territory Manager and Area Director Operational Aid, which communicates responsibility to Collection managers for promoting quality case work and required internal controls. The ICS, ENTITY Case Management, Embedded Quality Review, and National Quality Review Systems provide the case access, data, and reports used by managers to monitor internal controls.

(2) There are several procedural and systemic controls for Delinquent Return Closures. Certain methods of TDI closures require managerial approval. Specific transaction codes identify taxpayers under Criminal Investigation. There are a number of controls surrounding IRS employee return delinquencies as well as the referral to CI process.

(1) The following table provides a list of acronyms used throughout this IRM.

(1) IRC 6020(b), Returns executed by Secretary

(2) IRC 6702, Fraudulent acknowledgements with respect to donations of motor vehicles, boats, and planes.

(3) Policy Statement 5-133, Delinquent returns - enforcement of filing requirements, located in IRM 1.2.1.6.18

(4) Notice 2010-33, Frivolous Positions.

(5) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. For additional information about the TBOR, see Taxpayer Bill of Rights.

(1) There are two types of delinquency checks for individuals. Case creation uses information obtained from both delinquency checks in the Case Creation Nonfiler Identification Program (CCNIP).

(2) The CCNIP identifies individual taxpayers from:

• Those who filed an individual income tax return the previous year, but failed to file a current return.

• Taxpayers for whom IRS received third party Information Returns Program (IRP) documents such as Form W-2 and Form 1099. The IMF delinquency checks using IRP are generally run 10 months after the due date of the return.

(3) The BMF case creation program identifies business taxpayers who have an open filing requirement for a return that is not filed. BMF delinquency checks are made 16 weeks after the due date of each return and tax period.

(4) The BMF delinquency check assimilates third party information (CAWR data, 1099 IRP, and Payer Master File Processing) in the case creation program to identify productive BMF nonfiler cases. This process is known as the Business Masterfile Case Creation Nonfiler Identification Process (BMF CCNIP).

(1) Nonfilers generally receive one or two notices about their delinquent return. When the taxpayer fails to resolve the delinquency during the notice process, a delinquent return (Del Ret) module is generated and assigned an Inventory Delivery System (IDS) case prioritization code that determines where it will be assigned.

(2) You must investigate all unresolved previous (the past 6) and subsequent tax periods when a Del Ret module is issued on a taxpayer for a specific tax period. The goal of your investigation is to bring the taxpayer into full filing and paying compliance.

(3) Del Ret cases are worked as a standalone investigation or in combination with a balance due (Bal Due) account or other investigation (OI). The latter is referred to as a "combo case."

(1) Review the complete case history when a Del Ret case is first assigned to you. In addition to the case history, several research tools are available on IDRS and CFOL to help in the initial analysis of your case. The Initial Analysis Tool (IAT) is also a useful tool for verifying compliance. Document the following during your initial analysis:

• All filing requirements

• All filing and payment compliance issues

• A plan of action to resolve the case

(1) Observe taxpayer rights when conducting delinquency investigations.

(2) Verify at first contact that the taxpayer has received Pub 1, Your Rights as a Taxpayer. If first contact is by telephone and the taxpayer has not received a copy of the publication, the interview may continue; however, Pub 1 should be sent to the taxpayer.

(3) Document the case history that the taxpayer has been provided Pub 1 and any questions the taxpayer had were answered.

(1) Give taxpayers who reach an impasse during an interview an opportunity to meet with the supervisory official. Advise taxpayers of their appeal rights even if they do not request a higher level of review.

(2) The taxpayer may be represented during a taxpayer interview by any of the following who is not disbarred or suspended from practice before the IRS, and has a properly executed Form 2848, Power of Attorney and Declaration of Representative, from the taxpayer:

• Attorney

• Certified public accountant

• Enrolled agent

• Full-time employee of the taxpayer

• Immediate family member

• Or other person permitted to represent a taxpayer before the IRS.

(3) Suspend an interview if the taxpayer clearly indicates that they wish to consult with a representative.

(4) Serve a collection summons if you believe the taxpayer abuses this process through repeated delays or suspensions of interviews. Document the reasons for non-issuance in such circumstances.

(5) Notify the taxpayer if you believe the representative is responsible for unreasonable delay or hindrance. Request that the taxpayer appear for an interview and inform the taxpayer that a collection summons requiring the taxpayer’s appearance at an interview may be issued. Refer to IRM 5.1.23.6, By-passing a Taxpayer's Representative, for more information and by-pass procedures.

(6) When appropriate, continue with IRC 6020(b) procedures or referrals to Examination or Criminal Investigation while addressing delays by the taxpayer’s representative.

(1) Determine and document whether all returns are filed and paid during initial contact. A full compliance check will include, as appropriate, reference to the following:

1. All required IMF and BMF returns including information returns

2. Timely payment of estimated taxes and federal tax deposits

3. Timely submission of Form 1099, Form W-2 and Form W-3 .

4. Employer's retention and submission of Form W-4

(2) Determine and document the root cause for the tax delinquency and instruct the taxpayer to take the necessary corrective steps.

(1) Avoid field contact, if possible, when working cases on potentially dangerous taxpayers and taxpayers who use frivolous legal arguments to delay collection. Use field contact only after office methods, such as correspondence, telephone contact, and office appointments, have proven unsuccessful. See IRM 5.1.3.5, Armed Escort to Contact a Taxpayer, for armed escort procedures.

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(1) Frivolous nonfilers are taxpayers who refuse to file or who file non-processable returns based on arguments not supported by tax law. Review Policy Statement 5–133, Delinquent Returns -enforcement of filing requirements, found in IRM 1.2.1.6.18 and follow the appropriate actions specified in IRM 5.1.11.7, Delinquent Return Investigation Closures, to secure a delinquent return when working frivolous nonfiler cases.

(2) If you determine that a taxpayer has submitted a tax return (original or amended) taking a frivolous position, stamp the return with the date received. Do not send the return to Submission Processing. Instead, send the complete original or amended return with all attachments, including the envelope, to the Frivolous Return Program (FRP) unit address below. Maintain a copy of the return in the case file.

Internal Revenue Service

Frivolous Return Program

1973 N. Rulon White Blvd.

M/S 4450

Ogden, UT 84404

(3) IRC 6702(a) provides that a person who files a purported tax return (original or amended) based on one or more positions the IRS has identified as frivolous under IRC 6702(c) will be subject to a penalty of $5,000, if the return,

1. Does not contain information on which the substantial correctness of the return can be judged, or

2. Contains information that on its face indicates that the self-assessment is substantially incorrect

(4) A person will also be subject to a penalty if the purported return is not based on a position listed in Notice 2010-33, but it meets either a) or b) immediately above and reflects a desire to delay or impede tax administration.

(5) The IRC 6702(a) penalty is assessed by the FRP unit at the Ogden Compliance Services Campus.

(6) The FRP unit mails a Letter 3176, Response to Frivolous Documents/Returns Received from Taxpayers, along with Pub 2105, Why do I have to Pay Taxes?, to the taxpayer informing them of the frivolous argument and requesting they rescind their position and submit any non-filed returns. The FRP unit will monitor for a response from the taxpayer.

(7) Monitor IDRS for assessment of the IRC 6702(a) penalty (TC 240, PRN 666). If there is no assessment after ten weeks, contact the Ogden Compliance Service Center FRP Coordinator to determine the status.

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(1) Refer a case to Examination on Form 5666, TE/GE Referral Information Report, if the following occurs:

1. The organization claims to be a church, religious order, or affiliate of a church and no ruling or determination letter is available. Secure a written statement from a responsible officer that the organization is exempt from filing information returns under IRC 6033(a).

2. The organization has a ruling or determination letter that it is a Private Foundation, but fails to file Form 990–PF or it claims not to be a private foundation.

3. The organization claims it is only subject to file Form 990-N or otherwise not required to file Form 990.

4. The organization claims it is no longer in existence, and there is no articles of dissolution or resolution of dissolution, no final return, or no record of final disposition of assets.

5. If a person or entity claims the Del Ret organization has merged with another organization, then note the name and EIN of the surviving organization as well as the merger details. There should be Articles of Merger or a similar document.

6. The organization claims to be an instrumentality or governmental unit, its status is questionable, and there is no ruling or determination letter about its governmental status or the exclusion of income under IRC 115.

7. The organization claims to be a subordinate in a group exemption ruling (e.g., local post or chapter) and fails to file returns.

8. A tax-exempt charitable organization described under IRC 501(c)(3) is supporting or opposing candidates for public office.

(2) Contact TE/GE Customer Account Services at 877–829–5500 in Cincinnati and notify them of any changes that would affect their Exempt Organization Master File.

(1) Field Collection is responsible for securing delinquent wagering, occupational, and/or excise tax returns, except when:

1. Evidence of criminal activity or fraud is discovered.

2. Notification is received advising that the taxpayer is the subject of a criminal investigation.

3. Extensive scrutiny of records requires Examination involvement.

4. The taxpayer is a tribal entity or tribal casino. Review IRM 4.86.1, Indian Tribal Governments (ITG) Procedures, Indian Tribal Administration and Policy, for additional information.

(1) Stop all balance due enforcement actions upon learning that the taxpayer has filed a petition under any chapter in bankruptcy.

1. Secure and process all delinquent returns in accordance with IRM 5.1.11.6.

2. Determine the petition date and docket number.

3. Do not demand payment for pre-bankruptcy periods.

(2) See IRM 5.9.3.9, Revenue Officers and Insolvency, for additional information and necessary actions.

(1) IRS employee Del Rets are identified by specific Selection Codes. Refer to Document 6209, Section 11.7, for the Selection Code assignment by Delinquent Tax Year and Business Operating Division (BOD).

(2) Area offices will designate an experienced revenue officer and back-up to work IRS employee cases.

(3) IRS employee cases bypass ACS and are systemically assigned to the Area ICS/Entity Quality Analyst (IQA) via the Integrated Collection System (ICS).

1. The IQA is responsible for receipt, control, and assignment of these cases.

2. The IQA will notify the Area Director (AD) or a designated member of the AD's staff by secure email of all IRS employee cases within their area.

3. These cases are identified by Taxpayer Identification Number, name, and address as shown on the latest tax return.

4. The AD will ultimately be responsible for identifying any conflict of interest in assignment of IRS employee cases.

(4) Potential violations under RRA '98 Section 1203 (b)(8), "willful failure to file a federal tax return," or (b)(9), "willful understatement of federal tax liability" are generally identified through the Employee Tax Compliance (ETC) program. Do not refer these cases to TIGTA.

(5) IRS employee cases are worked like any other taxpayer delinquent return investigation.

(6) Follow the procedures in IRM 5.1.11.6 when a delinquent return is secured. Record the following information in the ICS history:

1. Date the return was secured

2. Amount of tax, penalty, and interest due identified by "T P I DUE"

3. Amount of refund due identified as "REFUND"

4. Amount due "AMT. DUE"

5. Date paid "DATE PD"

6. "EMPLOYEE DECEASED" when applicable

(7) Always protect against inappropriate disclosures due to the sensitive nature of IRS employee cases.

(8) If the taxpayer is no longer an employee of the IRS or the secondary coded case is on an ex-spouse and there are no outstanding joint liabilities with the IRS employee, request input of TC 972, AC 191 on Form 4844 to turn off the IRS Employee Indicator. Note in the Remarks section of the form "Reversing IRS employee Indicator." Allow two cycles for removal of the indicator.

(9) Remove the FED Indicator by requesting TC 972, AC 51 only if the taxpayer is not a federal employee or retiree.

(1) Intra-Area Del Ret transfers are input using ICS and require managerial approval.

(2) Initiate a Courtesy Investigation (see also IRM 5.1.8.2, Originating Office Procedures, to propose a transfer if:

1. The taxpayer fails to acknowledge receipt of Letter 729, Requesting Delinquent Return, sent to the new address, or

2. You are unable to confirm a change of address.

(3) Indicate the potential taxpayer address in the "Action Information" portion, and specify the action required in the "Action Requested" portion of the request for a Courtesy Investigation.

(1) Refer to Delinquent Return Refund Hold procedures found in IRM 25.12.1, Processing Refund Hold Program Inventory. This IRM subsection contains the criteria for holding a taxpayer's refund while investigating the delinquent return(s) and the functional procedures for screening, working, and monitoring cases.

(2) The IRS holds individual income tax refunds, debtor Master File offsets, and credit elects when a current or prior year return is filed with a refund ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ that is not barred by statute and the taxpayer has a return delinquency in the five years prior to the current filing year. Refund hold modules can be identified by the following:

1. Freeze code "-R" on the IDRS module for the year of the refund being held

2. TC 570 with 999 in the Julian date of the document locator number

(3) The Delinquent Return Refund Hold program delays issuing an income tax refund up to six months while the IRS investigates a return delinquency. The refund is released to the taxpayer after it is used to offset any balance due on the delinquent return(s).

(4) If you are unsuccessful in securing the return(s), refer any select code standalone Del Ret module with a Refund Hold indicator to the Automated Substitute for Return (ASFR) or the appropriate Examination process using the applicable ICS closure. See IRM 5.1.11.7.3.

(1) See IRM 5.7.9.2.1, Identifying Federal Contractor (FEDCON), for information on the Masterfile that identifies the taxpayer as a federal contractor.

(2) Per IRM 5.7.9.4, ENTITY-Query for Federal Contractor TDIs in the Queue promptly assess unpaid delinquent returns secured from a federal contractor or vendor. See IRM 5.1.4.5, Prompt Assessments.

(1) The Taxpayer Protection Program (TPP) is responsible for identifying potential identity theft cases that are scored by a set of identity theft models in the Dependent Database (DDb); selected through filters in the Return Review Program (RRP) system; or manually selected by Return Integrity Verification Operation (RIVO). See IRM 25.25.6.1.7 for an overview of the TPP.

(2) The premise of the Taxpayer Protection Program is to screen returns for identity theft indicators early in the IRS’s return submissions process and engage with taxpayers then, instead of processing suspicious returns and relegating victimized taxpayers to the more burdensome ID Theft Affidavit process. The Taxpayer Protection Program generally involves four functional steps.

• Identifying, removing and holding suspicious returns from the normal processing flow,

• Notifying the affected taxpayers by mail that they must take further action to authenticate themselves and clear their return,

• Providing multiple mechanisms (digital, telephonic or in-person) for legitimate taxpayers to authenticate themselves and their returns, and

• Completing the processing and refund issuance for taxpayers who have successfully authenticated their returns

(3) For returns identified with potential identity theft indications, the processing of the return is stopped and the tax return information is posted to MFT 32.

(4) Employees should be aware of the TPP when working Del Ret cases, and research MFT 32 before proceeding with 6020(b) or referral activity.

(1) Revenue officers may encounter situations in which the taxpayer states they have filed a return. However, a return has not posted to MFT 30 under their TIN and there are Taxpayer Protection Program (TPP) indicators on the account. The following are indications of TPP involvement:

• TC 971 AC 121 or TC 971 AC 124 is present and a return (TC 150) is unpostable (UP) 126 reason code (RC) 0 on CC TXMODA

• TC 971 AC 111 is present on MFT 30 and TC 976 is present on MFT 32 – CC TRDBV CODES screen shows Unpostable code 126 reason code 0

• TC 971 AC 129 is present on MFT 30 and the refund is held with a -R freeze

• The return moved to MFT 32 or the return was archived/deleted in the TPP process on CC TRDBV or the return is not posted on MFT 30 or MFT 32.

  Note: The return may or may not be the taxpayer identification number (TIN) owner’s valid return.

(2) If the account contains unresolved TPP indicators or the presence of an MFT 32, these markers should alert the revenue officer to perform high-risk authentication. Refer to IRM 25.25.6.4(8), Taxpayer Protection Program (TPP) High-Risk Authentication (HRA) Procedures, for manual TPP - high-risk authentication. Additionally, refer to IRM 25.25.6.5.1, Authentication Passed and the Taxpayer Filed the Return in Question, to verify the validity of the taxpayer and the return in question.

(3) After completing the high-risk authentication process and considering the taxpayer authenticated, the revenue officer must follow the procedures outlined in the “If/Then” table under paragraph (2) in IRM 25.25.6.2.3, Exam/Collection/Compliance Office Employees - Procedures for Cases with Taxpayer Protection (TPP) involvement, to resolve the unpostable condition.

(4) Revenue officers who are meeting/calling the taxpayer to determine if that return was filed by them, could start by asking the taxpayer if they received any of the TPP letters which include the following: Letter 4883-C, Letter 5071-C, Letter 5447-C, or Letter 5747-C

(5) If face-to-face contact is made with the taxpayer (or over the phone for International) and authentication is completed, the revenue officers should take the following actions to refer the questionable period to return integrity verification operations (RIVO) using the procedures outlined in the “If/Then” table under paragraph (2) in IRM 25.25.6.2.3, Exam/Collection/Compliance Office Employees - Procedures for Cases with Taxpayer Protection Program (TPP) Involvement.

(6) If the taxpayer indicates that they have previously authenticated their information through phone, correspondence, or fax, it is important to gather more details. Begin by asking the taxpayer for the specific date on which they authenticated their information. This will help determine whether the authentication falls within the processing time frame of 9 weeks (or 16 weeks if the submission was made via fax or mail). Refer to the table below:

(1) Compute and include all penalties and interest in the full amount due.

(2) Apply partial payments secured on multiple returns first to the oldest return in order of tax, penalty, and interest, unless the taxpayer specifically designates otherwise.

(3) See IRM 5.1.11.8.1 for ICS module closure instructions.

(1) Contact the taxpayer and demand full payment (see IRM 5.1.10, Taxpayer Contacts) when a return is received without full payment of tax, penalty, and interest. If full payment is not secured, make all reasonable efforts to collect full payment. If the taxpayer is unable to pay the liability in full, resolve the liability in one of the following ways:

1. Grant an installment agreement (see IRM 5.14, Installment Agreements)

2. Report the account currently not collectible (see IRM 5.16, Currently Not Collectible )

3. Continue the investigation

(2) Write "TC 599 cc 069" on the upper left margin of the secured return and close the ICS Del Ret module per IRM 5.1.11.8.1.

(3) If a Collection Information Statement (CIS) is secured, verify the information contained on the CIS without delaying the processing of the return.

(4) Open an "ICS Only Pre-Assessed" module to complete the investigation if the liability is not resolved by full payment.

(5) If the subsequent investigation reveals assets that can be used to collect the liability, then monitor the assessment of the secured delinquent return and request assignment of the Bal Due through your group manager via CC STAUP and ASSIGN I/B.

(6) If enforced collection action will be taken, then request a prompt assessment per IRM 5.1.4, Jeopardy, Termination, Quick and Prompt Assessments.

(7) If the taxpayer is in bankruptcy, then write TC 599 and the appropriate taxable or nontaxable cc on the return. Assessments can be made on returns where the bankruptcy was filed on or after October 22, 1994. See IRM 5.9.4.3.1(2), BAPCA and BRA94's Effect on Assessments.

(8) See IRM 5.1.11.7.7 and IRM 5.1.11.8.1 for the appropriate case and ICS closing actions for returns prepared and filed under IRC 6020(b).

1. Write TC 599 cc 063 on the upper left margin of the return if unagreed or no response.

2. Write TC 599 cc 064 on the upper left margin of the return if agreed or signed by the taxpayer.

(9) BMF or IMF Del Rets closed with closing codes 063 or 064 with TC 599 receive a first notice from the Master File with Pub 1 and are then accelerated to Bal Due status 26 the following week.

(10) Initiate a Trust Fund Recovery Penalty investigation on any secured trust fund returns, if required.

(1) You may periodically encounter tax returns with potential underreported tax. This may happen when you are:

• Working an assigned Del Ret and the taxpayer files an original return

• Working an SFR Bal Due and the taxpayer files an original return for reconsideration of the SFR assessment

• Comparing financial documents with a previously filed return

(2) If this occurs, do not attempt to audit, examine, or verify the correctness of the return secured. If omitted taxable income appears to be at least ≡ ≡ ≡ ≡ ≡ ≡ or overstatement of credits exceeds ≡ ≡ ≡ ≡ ≡, consider a referral to Examination. Do ensure the secured return is valid (signed and complete) and attempt to resolve with the taxpayer any discrepancies or omissions.

(3) Upon receipt of an original return filed for reconsideration of an SFR assessment do the following:

1. Compare the income reported on the return with the information on IRPTR and attempt to resolve obvious omissions and discrepancies

2. Ensure that the proper schedules are filed according to the types of income shown on IRPTR

3. Determine if any income that has not been subject to withholding or reported on Form 1099 or other such IRP documents has been reported on the return

4. Compare withholding reported to the IRS to that stated on the return

(4) In all investigations, be alert to discrepancies that may indicate underreporting on a tax return.

(1) The determination to pursue or not pursue a return will depend upon the facts of each case. Review IRM 1.2.1.6.18, Policy Statement 5-133, Delinquent returns—enforcement of filing requirements, for general guidelines and factors to consider when determining whether to pursue enforcement of filing requirements and secure a return.

(2) The specific factors that must be considered when making an enforcement determination are as follows:

1. Degree of flagrancy

2. History of noncompliance

3. Impact on future voluntary compliance

4. Whether the delinquency involves trust fund monies collected

5. Special circumstances peculiar to a specific taxpayer, class, industry or type of tax

6. Existence of income from illegal sources

7. Minimal or no Tax due

8. Cost to the IRS to secure a return with respect to anticipated tax revenue

9. Bankruptcy (contact Insolvency)

(3) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(4) Enforcement of filing requirements will normally be pursued for a six year period. Always request all (non-fraudulent) unfiled returns. The taxpayer may file for all open periods regardless of the age of the delinquency.

(5) Document the case history with the facts and reasons supporting your decision. If after consideration of the factors above, a determination is made that more or less than six years of filing requirements will be enforced, then managerial approval is required.

(6) Calculate the six year period for enforcement by starting with the tax year that is currently due and go back six years.

(7) P-5-133 allows an investigating employee to close a Del Ret without enforcement because the non-filing is not willful, and:

1. There would be no tax due on the delinquent return; or

2. There would be minimal net tax due on the return (see IRM 5.1.11.7.1(3) above); or

3. The cost to the IRS to secure a return would exceed anticipated revenue.

   Note: Examine and calculate anticipated revenue on a case-by-case basis over the length of the Collection Statute for both the potential Bal Due and all other Bal Dues already on the entity.

   Note: Consider the impact of not filing a Notice of Federal Tax Lien for assessments not pursued based on a P-5-133 determination.

(8) Generally, when closing a Del Ret under (7) c. above, the nonfiler's current ability to pay will not be the primary factor in determining whether or not to secure less than six years of returns. On a case-by-case basis, apply prudence when it is clear from information available that the nonfiler does not have or will not have the ability to pay some if not all of the potential tax liability over the 10 year statutory collection period (CSED).

(9) The following are examples of situations where we would not pursue returns because the cost to secure the return would exceed anticipated revenue:

1. A defunct corporation where no assets exist to satisfy any part of a tax liability and there is no possibility of a transferee or trust fund recovery penalty assessment.

2. A deceased taxpayer where no estate exists to satisfy any part of a tax liability and there is no possibility of a transferee assessment.

3. A foreign national taxpayer who has departed the United States with no expectation of return and no identifiable assets exist in the United States to satisfy any part of the tax liability, or collection cannot be pursued abroad through terms of a tax treaty or lack of a tax treaty.

4. A taxpayer whose minimum incarceration is a period equal to or exceeding the normal collection period and no identifiable assets exist to satisfy any part of the tax liability.

5. A taxpayer who has minimal assets and earning potential due to advanced age, illness, or debilitating condition which will permanently diminish income producing potential.

6. A taxpayer with minimal assets and earning potential who has substantial assessments with established CSEDs that will not allow for collection of any more than minimal amounts of the potential balance due arising from a new assessment.

(10) The following returns must be secured and should not be closed under the provisions of P-5-133:

1. Nontaxable returns such as those in Form 990 series

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

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

4. IRS employee returns

(11) "Net tax due" on employment tax returns is determined before the application of credits. See IRM 5.1.11.7.1(3), above for P-5-133 thresholds.

(12) Inform taxpayers personally contacted on a potential refund return that a refund will only be issued if a return is filed within three years of the due date of the return. See IRM 25.6.1.5, Statute of Limitation Issues.

(1) The Fraud Handbook, found in IRM 25.1 is the comprehensive guide for compliance functions. It covers the development of potential fraud issues, referrals for criminal fraud, and the duties and responsibilities for joint investigations. Use this guide as a reference for identifying and developing criminal investigation referrals.

(2) Fraud may exist where a taxpayer willfully attempts to illegally underreport taxes, not pay taxes, or both. Willfulness means the individual acted deliberately with the specific intent of violating the law.

(3) Refer and discuss issues of potential fraud with the Fraud Enforcementl Advisor.

(4) You are responsible for identifying potential fraud and referring that taxpayer to Criminal Investigation. The majority of criminal fraud cases will be established based on a taxpayer's:

1. Willful failure to file a return (IRC 7203)

2. Willful failure to pay taxes owed (IRC 7203)

3. Willful submission of a false return, statement,or other document which contains or is verified by a written declaration that is made under penalties of perjury (IRC 7206(1))

4. Failure to collect and deposit in a special trust fund account (IRC 7512 and IRC 7215)

5. Evasion of payment (IRC 7201)

6. Willful failure to collect or pay over tax (IRC 7202)

7. Submission of fraudulent returns, statements, or other documents (IRC 7207), See Exhibit 25.1.1-1, Criminal Violations

(5) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(6) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(7) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) If a determination has been made that a return is required (see IRM 5.1.11.7.1), fraud is not involved (see IRM 5.1.11.7.2), and other collection enforcement activities are not appropriate (see IRM 5.1.11.7), then a nonfiler may be referred for enforced collection of a delinquent return.

(2) Research MFT 32 prior to completing the referral, as the taxpayer may have been selected for inclusion in the Taxpayer Protection Program (TPP). See IRM 25.25.6.1.7 for an overview of the TPP. For returns identified with potential identity theft indications, the processing of the return is stopped and the tax return information is posted to MFT 32.

(3) For Individual (MFT 30) nonfiler (Form 1040) referrals, evaluate factors such as type and source of income, amount of income, and the complexity of the case to make the appropriate and most efficient enforcement referral. Each referral process has limitations and specific requirements; however, always refer to the most efficient process when fraud is not involved.

(4) Refer an Individual Master File (IMF) non-filed return (Form 1040) for enforcement to one of the following processes for preparation of a Substitute for Return (SFR). This table lists the IMF SFR processes in order of most efficient to least efficient and briefly describes limitations and restrictions of each process. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) Form 720, Quarterly Federal Excise Tax Return, and Form 2290, Heavy Highway Vehicle Use Tax Return, may be prepared under the authority of IRC 6020(b) if a taxpayer fails or refuses to file. See IRM 5.1.11.7.7.

(2) Do not prepare the returns under IRC 6020(b) if preparation will involve reviewing taxpayer records or will pose complex legal questions. Refer the taxpayer to Excise Operations Support (EOS) on Form 3449 and provide all facts relative to the preparation of the return.

(3) SendForm 3449 via secure email to the EOS Outlook mailbox *SBSE Excise EOS.

(1) If you encounter a responsible officer of an exempt organization who refuses to file a required exempt organization return, a referral should be sent using Form 5666, TE/GE Referral Information Report, to:

Internal Revenue Service

EO Examinations Classification Unit

MC 4910 DAL

1100 Commercial Street

Dallas, TX 75242

(2) A summons does not have to be served prior to referring a case to TE/GE.

(3) Attach an explanatory cover memo and include all information on the referral to assist TE/GE in preparation of the return.

(4) Employee Plans, Form 5500 series (MFT 74) are no longer worked in Field Collection. If a Del Ret includes a Form 5500 delinquency and the plan number is 001–500, proceed as follows:

1. Prepare Form 5666

2. Attach a copy of the Del Ret and case history

3. Close the ICS Del Ret selecting "Exam Referral, " and

4. Send the referral to:

Internal Revenue Service

TE/GE Second Floor

Employee Plans Classification

9350 Flair Drive

El Monte, CA 91731

(5) If a Del Ret is for any other Form 5500 series or where the plan number is 501 or higher, close the ICS Del Ret by selecting "No Return Secured" and submenu action "Not Liable for return (BMF-NMF)" which will post a TC 590 cc 050 to the module.

(1) Employment Tax Program examiners determine when income of independent contractors or officers of corporations should be reported as wages subject to income tax and/or FICA. These examiners also determine the employer liability for employment taxes in a third-party payer arrangement (e.g., professional employer organization). The program involves the following taxes:

1. Withholding of income tax on wages of employees reported on Form 941, Form 943,Form 944, and Form 1042

2. Employer tax and employee tax (Social Security and Medicare) under the Federal Insurance Contribution Act (FICA) on Form 941, Form 943, and Form 944

3. Employer tax and employee tax for retirement purposes imposed on employers of individuals performing railroad services and the railroad employee representative's tax under the Railroad Retirement Tax Act reported on Form CT–1 and Form CT-2

4. Withholding on certain gambling winnings reported on Form 945 and on Form 1042 by the payor of winnings

5. All non-payroll items reported on Form 945

6. Tax for unemployment insurance under the Federal Unemployment Act reported on Form 940

7. Withholding of tax on nonresident aliens and foreign corporations under IRC 1441 and IRC 1442 reported on Form 941 and Form 1042

(2) Refer a case to Specialty Tax, Employment Tax when it is determined during an investigation that a taxpayer may be treating employees as independent contractors or officers may be taking draws, loans, dividends, professional or administrative fees, etc., to avoid reporting taxable wages. Do not ask to see taxpayer records if there is a question about how a taxpayer is treating individuals performing services. Review and/or use of certain documents secured from the taxpayer in an employment tax delinquent return investigation may constitute an examination and require additional processing not used in Collection. Refer potential Employer/Employee relationship determinations on Form 3449 relating all the facts of the case and close the ICS Del Ret by selecting "Exam Referral."

(3) Refer a case to the Indian Tribal Government (ITG) group when it is determined during an investigation that an ITG entity may be treating employees as independent contractors to avoid reporting taxable wages. See IRM 5.1.12.24.2, Indian Tribal Government Procedures to coordinate with an Indian Tribal Government (ITG) Specialist.

(4) IRM 4.23, Employment Tax, contains additional information for all functions pertaining to the administration of Employer/Employee classification issues.

(1) The following returns may be prepared, signed and executed by revenue officers under the authority of IRC 6020(b):

1. Form 940, Employer’s Annual Federal Unemployment Tax Return

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

3. Form 943, Employer’s Annual Tax Return for Agricultural Employees

4. Form 944, Employer's Annual Federal Tax Return

5. Form 720, Quarterly Federal Excise Tax Return

6. Form 2290, Heavy Highway Vehicle Use Tax Return

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

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

(2) Per Delegation Order 5–2 (Rev 2), effective October 21, 2013, GS-09 Revenue Officers, GS-09 Bankruptcy Specialists, and GS-11 Bankruptcy Advisors have the authority to prepare, sign and execute returns under IRC 6020(b).

(1) Select "Return Secured" from the "Close Del Ret" menu to close the Del Ret module(s) on ICS when a return is secured.

1. Select the appropriate closing action from the submenu for the type return you secured.

2. ICS generates a TC 599 with a cc to IDRS (the closing code depends on what closing action you selected) .

3. Record a payment secured with a return via a submenu within closing actions Taxable, Bankruptcy, or 6020(b) Agreed. This generates a TC 610 workstation transaction and updates the ICS module balance to reflect the payment.

   Caution: If the taxpayer is in bankruptcy, do not accept a payment for a pre-petition tax year.

(2) See IRM 5.1.11.6 for specific details on types of returns secured.

(1) Select "Unable to Locate" from the "Close Del Ret" menu to close the Del Ret when you are unable to locate a taxpayer.

(2) Close the earliest Del Ret period for each MFT.

(3) Group Manager approval is required.

(4) ICS generates a TC 593 cc 057 to IDRS when approved.

(1) Select "No Return Secured" from the "Close Del Ret" menu when a taxpayer is not required to file for a period.

(2) ICS generates a TC 590 and closing code (cc) to satisfy a particular period; however, the requirement to file for subsequent periods remains open.

(3) Select one of the following closing actions from the ICS submenu to generate the appropriate closing code:

1. Not liable for return (BMF - NMF) (cc 050) is used when the taxpayer is not liable for this period but does plan to be liable for future returns and any business activity indicated by the Selection Code, IRPTR, or SRFMI data has been addressed.

2. Income below filing requirement (IMF) (cc 051) is used after verifying and calculating that the taxpayer's total income is below the amount required to file for that year. Use CC IRPTRJ to help you verify income. Be sure to include the spouse's income when calculating married filing joint status.

3. Little or no tax due (Policy Statement 5-133) (cc 052) is used to close a case based on the Policy Statement 5-133. See IRM 5.1.11.7.1.

   Note: It is also used to close a Del Ret module for a Form 1065, U.S. Return of Partnership Income, or a Limited Liability Company (LLC) classified as a domestic partnership, based on Revenue Procedure 84–35. See IRM 5.1.11.7.7.2.

   Note: This closing action requires managerial approval before the closure is completed.

4. T/P due refund (cc 053) is used after verifying the taxpayer's income and calculating that the tax due on the return, if it were filed, would result in a refund.

5. T/P due refund 6020(b) (cc 063) is used when a 6020(b) return is prepared and there is more credit than tax resulting in a refund due the taxpayer. See IRM 5.1.11.7.7 for 6020(b) procedures.

(4) For problems concerning multiple entities, see IRM 5.1.11.8.13 for additional guidance.

(1) Select "No Return Secured/Final" from the "Close Del Ret" menu when the taxpayer is no longer required to file a return. The filing requirement for the MFT should be closed on the Master File, and any business activity indicated by the Selection Code, IRPTR, or SRFMI data addressed.

(2) ICS generates a TC 591 to satisfy that period as well as closing the filing requirements on all subsequent periods for that MFT so be sure to select "No Return Secured/Final" on the earliest period on each MFT.

1. ICS generates a TC 591 cc 066 on all subsequent open Del Rets for that MFT.

2. Close any other ICS modules for other MFTs related to the entity.

3. Prepare paper documents, (Form 2363 or Form 4844) to close filing requirements on non- ICS MFTs. Be sure to include the effective date of the actions.

4. Create an ICS history item to document the actions taken on paper.

(3) A TC 591 will stop future delinquency checks for that MFT.

(4) Select a closing action from the ICS submenu to generate the appropriate closing code:

1. Business discontinued (cc 050) is used when an entity has discontinued and returns are no longer required. Close out all filing requirements on all MFTs after the closing date.

2. Business transferred (cc 050) is used when a business has stopped operating under this entity and has established another entity to take its place. Close out all filing requirements on all MFTs after the transfer date.

3. Change in Organization (cc 050) is used when an organizational change has taken place for the entity and a new entity has been established. In addition to any Del Rets close out all filing requirements on all MFTs after the change date.

4. Discharged all employees (cc 050) is used when the business has discharged all of its employees yet the business has not closed. Close the Form 940, 941, 943, 944, and 945 filing requirements after the discharge date.

5. IRC 6020(b) Program (cc 063) is used when a 6020(b) return is being prepared and it will be the final return for the business. See IRM 5.1.11.7.7 for 6020(b) procedures.

6. Other (cc 050) is used for any situations that do not fall into the above categories.

   Example: An IMF Del Ret where the taxpayer is deceased; in this situation prepare Form 2363 , Master File Entity Change to request the input of a TC 540, "Deceased Taxpayer," and create an ICS history item.

(5) To prevent future delinquencies on those periods or MFTs not appearing on ICS at the time of closing the Del Ret do the following:

1. Prepare Form 2363 or Form 4844 as appropriate

2. Request that a TC 591 with appropriate closing code be input

3. Include the effective date or the out of business date

(1) Select "Exam Referral" from the "Close Del Ret" menu when you refer a case to Examination, ETE, TE/GE, or the Memphis Campus.

(2) Close the earliest Del Ret period for each MFT referred.

(3) ICS generates a TC 595 cc 057 once the closure is verified.

(1) Select "CI Referral (IMF Only)" from the "Close Del Ret" menu when a case is referred to Criminal Investigation.

(2) ICS will generate a TC 596 cc 057 once the closure is verified.

(3) Close the earliest Del Ret period for each MFT referred.

(4) See IRM 5.1.11.7.2 for specific details on CI referrals.

(1) If the return has been previously filed (allow 10 weeks from the date the return was filed for it to post), secure a signed copy of the return with proof of payment, if appropriate. A careful analysis of the facts should be made to determine for which entity the previously filed return was intended. Verify fact of filing using CFOL command codes as shown in IRM 5.1.11.2.3.1.

1. If the signed copy is for the Del Ret entity, forward the return for processing.

2. Write on the top of the return "Possible Duplicate Return" and close the Del Ret module on ICS by selecting "Return Previously Filed." When the submenu is displayed select closing action "Return previously filed." This will generate a TC 594 cc 058.

3. If the signed copy is the spousal entity and the return is posted to spouse's SSN, close the Del Ret module on ICS, using "Close Del Ret" menu select "Return Previously Filed." When the submenu appears select closing action "Spouse on joint return." This will systemically generate a TC 594 cc 059.

4. If the secondary SSN is incorrect on the jointly filed return, use Form 2363, Master File Entity Change, to correct the secondary SSN of the entity.

5. If fact of filing cannot be verified on the spouse's SSN, secure an original tax return and forward for processing using procedures in IRM 5.1.11.6. Close the Del Ret with closing action "Spouse on joint return."

6. Where there has been an entity change and the return was not intended for the Del Ret entity a closing action of "Return Previously Filed" is not appropriate in this situation.

7. When taxpayer is not liable for this module only, close on ICS by selecting "No Return Secured." When the submenu appears select "Not Liable for Return (BMF-NMF)" or "Income below filing requirement (IMF)." This will generate a TC 590 cc 050 or 051 as appropriate.

8. When a taxpayer is no longer liable to file under this entity, close on ICS by selecting "No Return Secured/Final." When the submenu appears select closing action that best describes why the entity is no longer liable to file return. This will generate a TC 591 cc 050.

(1) Select "Shelved" from the "Close Del Ret" menu only when prescribed in IRM instructions or by direction from Headquarters.

(2) ICS generates a TC 598 cc 057 to IDRS once the closure is verified.

(1) Select "Surveyed" from the "Close Del Ret" menu to generate a TC 597 on IDRS.

(2) The appropriate closing actions for a TC 597 are as follows:

1. Routine — cc 057 is used only when prescribed in IRM instructions or by direction from Headquarters.

2. 6020(b) Unagreed Appeal — cc 063 is used to close the Del Ret module(s) when the taxpayer exercises appeal rights in unagreed IRC 6020(b) cases. See IRM 5.1.11.8.3.

(1) Select "Unable to Contact" from the "Close Del Ret" menu to close an IMF module when efforts to contact the taxpayer are unsuccessful and the determination is made not to pursue enforcement.

(2) ICS will generate a TC 593 with cc 056 to IDRS.

(3) Close the earliest Del Ret period for each MFT.

(1) Select "Erroneously Created Mod" from the "Close Del Ret" menu when an ICS only Del Ret was opened and is no longer needed.

(2) ICS will not generate a transaction code to IDRS.

(1) Some Del Ret modules have credit balances after the module is closed. Handle the credit balance separately from the Del Ret closure based on whether you secure a return or not.

(1) Carefully analyze all facts when working a Del Ret module when you find there has been a change in the entity to ensure that the case is closed properly and that all returns have been filed under the appropriate TIN(s).

(2) Make changes to the taxpayer's address, location or ZIP code on ICS using the "Case Summary" screen and selecting the "Entity Detail Menu."

1. Select the "Name/Address menu" from the "Entity Detail Menu."

2. The information will load to IDRS and then return and update the entity on ICS.

(3) All other changes require Form 2363, Master File Entity Change, to make changes to the taxpayer’s entity. Some of these changes could include:

1. TIN change – only if entity is not changed

2. Name change – only one entity is involved

3. Filing Requirements – either changing or establishing

4. Taxpayer Deceased – request input of TC 540 for IMF deceased taxpayer(s)

(4) The following table will help you solve most types of entity problems:

(1) Stamp both copies of Form 2290 Schedule 1 with the area office "received" stamp. Attach one copy of Schedule 1 to the original return. Return the other copy of Schedule 1 to the taxpayer if:

1. The return is filed timely, and

2. The liability is paid in full.

Note: Section 867 (b) of P.L. 108-357, American Jobs Creation Act of 2004, repealed IRC 6156, which gave the taxpayer the option to pay the tax on a timely filed return in four equal installments.

(2) Field Collection employees will also stamp Schedule 1 of Form 2290 in the following situations:

1. The taxpayer provides (i) a copy of the Form 2290 (with the Schedule 1 attached) that it filed and (ii) documentary proof that the tax was paid (even though the taxpayer did not receive a receipted Schedule 1 of Form 2290).

2. The Field Collection employee determines that an installment agreement (Form 433-D) is the appropriate method of resolving the unpaid liability. After an agreement is secured and submitted for processing, the receipted Schedule 1 of Form 2290 will be returned together with Part 2 of Form 433-D to the taxpayer.

   Caution: Exercise care when considering an installment agreement for a taxpayer identified as a repeater.

3. Under no circumstances will Schedule 1 of Form 2290 be receipted without full payment or resolution of the unpaid liability reached using Form 433-D Schedule 1 will not be stamped "received" if the amount is or has been determined to be currently not collectible.