25.3.8. TC 520 - W Freeze Servicewide Guide

(1) This section provides general background for transaction code (TC) 520 - W freeze input, monitoring, and closure. These processes are important in that they help the Service to effectively monitor the status of litigation, which has impacts on the related tax accounts. Previously there has not been a single comprehensive source with guidance on the various parts of the process and how the process can differ with different types of litigation.

(1) The -W litigation freeze codes are used for litigation by or against the United States. The authorities listed below include but are not limited to circumstances where a -W litigation freeze may be appropriate.

(2) The legal authorities for civil actions by the United States include:

(3) The legal authorities related to Tax Court or District Court litigation include:

(4) The legal authority for Bankruptcy and Bankruptcy Litigation:

1. Title 11 (11 USC), Bankruptcy.

(1) Responsibilities: The executives responsible for ensuring appropriate information exists to properly control litigation accounts include:

• Director, SBSE, Collection Policy.

• Director, Independent Office of Appeals, Case & Operations Support.

• Director, W&I, Submission Processing.

• Chief Counsel, Operations.

(2) Roles: This IRM, in its subsections, identifies and defines the roles of the parties active in legal and judicial actions both by and against the United States.

(1) This section discusses systems allowing research beneficial for monitoring TC 520s requires controlled access.

(1) Access to systems used for the input, monitoring, and resolution of litigation freeze codes are controlled following standard access guidelines through the Business Entitlement Access Request System (BEARS) (formerly the Online 5081 (OL5081) system). The primary systems accessed include, but are not limited to:

(2) Document 12990 covers the records retention schedules for tax administration.

(1) Exhibit 25.3.8-4, Acronyms with their Definitions, contains the list of acronyms.

(1) Procedural guidelines for the maintenance of litigation cases include, but are not limited to, the references in the list below.Resource List

(2) Other Related Resources:

1. Knowledge Management Suit Forms page under Other Related Resources click either option located there to open the page Suits - Resources/Examples. On that page is a webinar walking through the suit forms. There are also User Guide tutorials for the different form revisions and examples of the most common suit types,

2. eApproval Information Center.

3. Additionally, examples of Collection Campus IRM resources include:

   Example:
   IRM 5.4.10, General Case Processing
   IRM 5.4.11, CCP Installment Agreements
   IRM 5.4.12, Field Office Resource Team

(3) 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.

(1) This IRM in its entirety is designed to provide background, direction, and assistance in understanding the importance and impact of a -W litigation freeze and where to find answers or contacts on the steps needed to ensure that litigation freezes are closed timely.

(2) Search the IRM by closing code or type of litigation. Also, review -W freezes in IRM 21.5.6.4.46, - W Freeze.

(1) When finding an incorrect Closing Code correct it by inputting or requesting input of a TC 522 to remove the TC 520. Some TC 522s require the matching Closing Code and others do not. See table in IRM 25.3.8.2, Closing Code Resulting Actions.

(1) Use of a TC 520 -W litigation freeze and closing code for purposes not outlined in this IRM, is inappropriate because there are no controls in place to monitor and resolve the freeze.

(2) For a business unit seeking a non-designated use of a litigation freeze:

(1) It is the taxpayer who initiates a suit for recovery of taxes (refund litigation). This is forwarded to the appropriate Submission Processing Center (SPC) by a United States Attorney in district court cases, or by the Tax Division of the Department of Justice in Court of Claims cases.

(2) The Counsel office that made the referral to DOJ is the liaison between DOJ (i.e., U.S. Attorney or Department of Justice attorney) and the SPC. Counsel sends a request to the SPC, in memo format. SPC then creates a physical case file.

(3) Each tax period involved in a Refund Litigation case is identified by input of a TC 520 with cc 73. See also IRM 25.3.8.3(2), Responsible Party Inputs TC 520 and IRM 25.3.8.3(4), Literal List for Control Base/TXMOD History.

(4) References:

• IRM 25.3.8.2(4)b, What the Litigation Closing Codes Indicate.

• IRM 3.17.243.8 et seq., Refund Litigation Cases.

• IRM 3.17.243.8.3, Processing Requests.

(1) Taxpayers who file a petition with the United States Tax Court as a result of receiving a statutory Notice of Deficiency, are controlled on IDRS with a TC 520 cc 72.

(2) The purpose for cc 74 is a Counsel controlled Tax Court case. Counsel may request a TC 520 cc74 be input on modules where they specifically want to restrict notices being issued to a taxpayer.

(3) Appeals and Counsel have jurisdiction over Tax Court cases from receipt through termination of the Tax Court petition.

(4) Appeals is responsible to ensure appropriate TC 520 transaction codes are properly posted to IDRS on Tax Court cases.

(5) References:

• IRM 25.3.8.2, Types of Litigation Closing Codes Indicate.

• IRM 8.20.5, Carding New Receipts.

• IRM 8.20.6, Interim Actions.

(1) Collection Due Process hearings for Notice of Federal Tax Lien (NFTL) filing cases are designated on IDRS by using closing code 76. Closing code 76 suspends the Collection Statute Expiration Date (CSED) on timely hearing requests through the Appeals process and Tax Court proceeding, if filed.

(2) Collection Due Process levy hearing cases are designated on IDRS by using closing code 77. Closing code 77 suspends the Collection Statute Expiration Date (CSED) on timely hearing requests through the Appeals process and Tax Court proceeding, if filed.

(3) Hearing requests filed for both levy and NFTL filing uses closing code 76.

(4) To request a CDP Hearing, taxpayers submit a Form 12153, Request for a Collection Due Process or Equivalent Hearing, or an equivalent of Form 12153.

(5) Input of the TC 520 cc 76/77 is either by

• Automated Collection System (ACS) support caseworkers for cases under their control, or by

• Appeals for all other cases.

(6) References:

• IRM 25.3.8.2, What the Litigation Closing Codes Indicate.

• IRM 5.19.8.4.2, Collection Due Process (CDP) Hearing Requests

• IRM 8.20.5, Carding New Receipts.

• IRM 8.20.7, Closing Procedures.

(1) Advisory inputs the TC 520(s) or sends an input request for input to Collection’s Centralized Case Processing (CCP) Field Office Resource Team (FORT) on a Form 4844. Advisory uses LAMS to reconcile their open TC 520(s). Generally, Advisory utilizes the cc 70, 75, and 80. Sometimes cc 71 and 82 are used for TFRP litigation.

(2) The SBSE CCP FORT role is inputting TCs 520, 521, and 522, which initiate, correct, or resolve litigation freezes, at the request of their client SBSE Field Collection.

(3) Directions for completing Form 4844 are in IRM 25.3.8.3, Instructions for Completing Form 4844, and Exhibit 25.3.8-3, Form 4844 Example.

(4) References:

• IRM 25.3.8.2, Types of Litigation Closing Codes Indicate.

• IRM 25.3.6.3.2, Transaction Code (TC) 520

(1) Sometimes Insolvency uses the -W litigation freezes of cc 81 and cc 84 to designate certain types of cases including: pre-petition, Chapter 7 cases needing TFRP investigations, single member owner of an LLC identifications, serial filers, Identity Theft (IDT), case conversions, or receivership cases

(2) The Insolvency organization uses LAMS reports to monitor their open -W litigation freezes.

(3) References - using Internal Revenue Manual (IRM) Online, use either cc 81 or cc 84 in the search box to locate instructions related to these - W litigation freeze closing codes in the following:

• IRM 25.3.8.2, Types of Litigation Closing Codes Indicate.

• IRM 5.9.5.6.1, Closing Codes.

• IRM 5.9.6-6, Input Guide for Trustee Turnover Requests.

• IRM 5.9.17.17, Reversal of Freeze Codes (TC 521).

• IRM 5.9.20, Non-Bankruptcy Insolvencies.

• IRM 5.9.20.2.1, SIPA Cases.

• IRM 5.9.20.3.1(6), Federal Deposit Insurance Corporation (FDIC) Receivership Proceedings of Insolvent Financial Institutions, Manual Processing.

• IRM 5.9.20.5.1, Corporate Dissolutions - Judicial.

(1) LAMS is a report application. It utilizes the unique closing codes (cc) for both -V (insolvency only) and -W (litigation) freezes. A LAMS report contains a listing of taxpayer accounts with open (unreversed) transaction codes (TC) 520s, along with other criteria such as module balance and cycle the TC 520 posted to IDRS. The portion of the report application of benefit with - W (litigation) freezes is accessible through the Non-Insolvency listing.

(2) LAMS may be of benefit to control TC 520s in combination with systems used by a particular business unit narrowing results to locate unresolved TC 520s needing resolution.

(3) LAMS reports are accessed from the Business Objects Environment (BOE). To utilize LAMS report monitoring TC 520s follow the step list below for access to the BOE.Steps to Gain Access Business Objects for LAMS Reports

(4) When you open LAMS in the BOE, the report titled, LAMS Non-Insolvency Case Listing – ULC & cc Prompts report, will ask for a ULC (Universal Locator Code). The ULC is a geographical code that may be useful in building a report. To find an appropriate ULC, use SERP Universal Locator Code listing. It contains a listing of the codes by Business Operating Division (BOD). See IRM 2.3.78.1(1), IDRS Terminal Responses - Command Code LOCAT, for a description of how the ULC is designed.

(1) The main responsibility for monitoring refund litigation falls on the refund litigation coordinators (RLC). They monitor active cases and follow up with Counsel. Since IDRS control bases are also opened, the team manger can pull Control-D report for open employee control bases.

(2) Open refund litigation are reviewed as necessary, but no less than annually, until litigation is concluded.

(3) Annual monitoring includes:

• Review of cases for Form 3011-A, for closure and reversal of TC520 CC73.

• Follow up with Counsel liaison via e-mail for status update if no Form 3011-A is located

(4) References:

• IRM 3.17.243.8.4, Controlling Cases.

• IRM 3.17.243.11, Monitoring Refund Litigation Cases.

(1) Appeals has the responsibility for monitoring cases under Appeals and/or Counsel jurisdiction. They use several types of systems to accomplish the task including:

• Appeals Centralized Database System (ACDS).

• Automated Information Management System (AIMS).

• Docketed Information Management System (DIMS).

• Innocent Spouse Tracking System (ISTS).

• Integrated Database Retrieval System (IDRS).

• Processing Employee Automated System (PEAS).

• Tax Court Calendar (TAXCAL).

(2) Reference:

• IRM 8.20.6, Interim Actions.

(1) Appeals has the responsibility for monitoring cases under Appeals and/or Counsel jurisdiction. They use several types of systems to accomplish the task including:

• Appeals Centralized Database System (ACDS).

• Docketed Information Management System (DIMS).

• Integrated Database Retrieval System (IDRS).

• Processing Employee Automated System (PEAS).

• Tax Court Calendar (TAXCAL)

(2) Reference:

• IRM 8.20.6 Interim Actions.

• IRM 8.20.7, Closing Procedures.

(1) Advisory’s responsibilities related to monitoring the TC 520s they control include but is not limited to:

1. Monitor as necessary, but no less than annually, until the litigation is concluded (i.e., LAMS reconciliation IRM 25.3.6.4.1, Periodic Open Case Reviews).

2. Coordinate with IRS personnel, Counsel, and DOJ as needed to keep all apprised of significant developments,

3. Monitor the CSED, and

4. Monitor Notice of Federal Tax Lien (NFTL) refining dates ensuring the underlying statutory federal tax lien remains protected.

(2) References:

• IRM 25.3.8.4.1, Steps to Gain Access Business Objects for LAMS Reports.

• IRM 25.3.8.4.1, Creating a LAMS Report.

• Exhibit 25.3.8-1, REPORT: LAMS Non-Insolvency Case Listing – ULC & cc Prompts.

• Exhibit 25.3.8-2, Export LAMS Report to Excel.

• IRM 25.3.6.4, Open Case Monitoring and Actions, et seq.

(1) Insolvency has the responsibility to monitoring debtor tax compliance, including trust fund taxes and the pyramiding of business taxes. The IRMs listed below address reports caseworkers utilize to review and monitor insolvency case inventories. These sections also include the frequency and purpose of each report.

• IRM 5.9.12, Insolvency Automated Processes.

• IRM 5.9.16, Insolvency Case Monitoring.

(1) Form 3011-A, Transmittal Memorandum, is presently being used by appropriate Chief Counsel office, Field Counsel, or National Office to close refund cases. Its use is to notify the Service Center of the outcome of these types of collection litigation refund cases. Modifications should be made to the form where appropriate. An original and two copies of Form 3011-A should be transmitted. See Chief Counsel CCDM 34.10.1.2.1. Form 3011-B, Transmittal Memorandum (100% Penalty Cases), is used in TFRP refund cases.

(2) Only the Refund Litigation Coordinator for the campus, which initially opened the case, may enter TC 521. A TC 521 must be input for each module that contains a TC 520 with cc 73. All open control bases must be closed.

(3) References:

• IRM 3.17.243.8.5, Releasing Cases.

• IRM 3.17.243.8.6, Closing Returned Cases.

(1) Appeals will take actions to reverse all TC 520 postings for cases with Appeals involvement.

(2) For -W freezes, the action taken by Appeals to close the freeze could be either posting:

• TC 522 to correct an erroneous input or a case withdrawn or meeting Appeals criteria for a disregarded or non-processable case, or

• TC 521 to close the litigation freeze.

(3) Reference:

• IRM 8.20.7, Closing Procedures.

(1) A closing action is required to process the applicable resolution for the Appeals’ or the United States Tax Court (USTC) final determination for the respective taxpayer’s case. Appeals uses the appropriate closing form(s) and documents provided by the technical employee, to prepare the adjustment document(s) for all database and systems applicable to the taxpayer’s account(s) concluded under Appeals’ or the United States Tax Court (USTC) jurisdiction. Field Counsel informs the IRS of the disposition of the CDP litigation.

(2) For -W litigation freezes the action taken by Appeals to close the freeze could be either posting:

• TC 522 to correct an erroneous input or a case withdrawn or meeting Appeals criteria for a disregarded or non-processable case, or

• TC 521 to close the litigation freeze.

(3) Reference:

• IRM 8.20.7, Closing Procedures.

(1) Advisory is responsible for the proper closing actions for Advisory controlled litigation. Correct closing actions avoid questions and issues arising later when information regarding the outcome of the litigation may not be readily available.

(2) They input the TC 521/TC 522 or request input of it from CCP FORT on Form 4844.

(3) Reference:

• IRM 25.3.6.5, Closing Actions, et seq.

(1) Insolvency works with - V bankruptcy freezes; however, there are circumstances where there is a need for the - W litigation freezes cc 81 and 84. The following paragraph contains references for closing the - W litigation freezes.

(2) References - using Internal Revenue Manual (IRM) Online, use either cc 81 or cc 84 in the search box to locate instructions related to these - W litigation freeze closing codes:

• IRM 5.9.17.17, Reversal of Freeze Codes (TC 521).

• IRM 5.9.5.6.1, Closing Codes.

• IRM 5.9.20, Non-Bankruptcy Insolvencies.

• IRM 5.9.20.3.1(15), Federal Deposit Insurance Corporation (FDIC) Receivership Proceedings of Insolvent Financial Institutions, Case Closure.