4.70.17. Claims and Abatements

(1) This IRM provides an overview of the responsibilities that examiners should understand and apply in the performance of their duties in conducting examinations of claims, abatements, and examination reconsiderations.

(2) Examination of exempt organizations will be conducted to determine whether such entities meet continued qualification of exempt status, compliance, and the causes of noncompliance with the tax laws and applicable resolutions.

(3) Examination of employee benefit plans is regulatory, with emphasis on continued qualification of employee benefit plans. The IRS selects and examines returns to:

1. Promote the highest degree of voluntary compliance with the tax laws governing plan qualification.

2. Determine the extent of compliance and the causes of noncompliance with the tax laws and applicable resolutions.

3. Determine whether such plans meet the applicable qualification requirements in operation.

(4) Examination of governmental entities will be conducted to determine whether such entities are in compliance with their employment tax filing, reporting, and payment requirements.

(5) The Tax-Exempt Bond Examination Program is to identify and correct noncompliance in tax-advantaged bonds.

(6) TE/GE Examiners should refer to IRM 4.23.3, Exam Program and Procedures, when examining employment tax cases in addition to this IRM section.

(7) The procedures contained in this IRM are not intended to be all inclusive. Examiners must use their professional judgment in completing their exam cases and other compliance activities.

(1) Examinations are conducted according to Policy Statement 1-236 (IRM 1.2.1.2.36), Fairness and Integrity in Enforcement Selection, and the Taxpayer Bill of Rights per IRC 7803(a)(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. For additional information about the TBOR, see Taxpayer Bill of Rights.

(2) Policy Statement 4-4 (IRM 1.2.1.5.2) provides package audit requirements, that:

1. Income tax examinations will include consideration of employment tax liability.

2. If warranted, employment tax returns will be examined concurrently with the income tax examination.

3. The examination of any return will include a check for filing other federal tax or information returns required to be filed.

(3) Under Policy Statement 4-117 (IRM 1.2.1.5.34), examiners and managers:

1. Have broad authority to consider and weigh conflicting information, data, and opinions.

2. Use professional judgement when applying examination standards for findings of fact and application of tax law to determine the correct tax liability.

3. Exercise authority to get the greatest number of agreements to tax determinations without sacrificing the quality or integrity of those determinations.

4. Resolve tax differences at the lowest level.

(4) Policy Statement 4-119 (IRM 1.2.1.5.36) provides that the primary objective of the TE/GE program is regulatory, with emphasis on the continued qualification of exempt organizations and employee benefit plans, and continued compliance of governmental entities (federal, state, and local governmental entities, Indian tribal governments and tribal entities, and entities or organizations that issue tax advantaged bonds). The IRS selects and examines returns to:

1. Promote the highest degree of voluntary compliance with the statutes governing qualification of plans and exemption of certain types of organizations from tax.

2. Determine the extent of compliance and the causes of noncompliance with the tax laws by plans, organizations, and governmental entities.

(5) IRC 7602 gives examiners the authority to:

1. Examine any books, papers, records or other data necessary to complete an examination (includes electronic media).

2. Issue a summons for information necessary to complete an examination.

3. Take testimony under oath to secure additional information needed.

4. Ask about any offense connected to administering or enforcing the Internal Revenue laws.

(6) IRC 6201 - Assessment Authority, which falls under Chapter 63 - Assessment.

(7) Additional authorities for the procedures outlined in this IRM are:

1. California Thoroughbred Breeders Association v. Commissioner, 47 TC 355 (1966).

2. IRM 1.2.2.8.11 - Delegation Order 7-11 Abatement of Qualified First Tier Chapter 42 Taxes.

3. IRM 1.2.1.2.36 - Policy Statement 1-236 Fairness and Integrity in Enforcement Selection.

4. IRM 1.2.1.5.27 - Policy Statement 4-88 -Jeopardy assessments to be used sparingly and assessment to be reasonable in amount.

5. IRM 1.2.1.5.31 - Policy Statement 4-103 Abatement claims considered only in exceptional circumstances.

6. IRM 1.2.1.5.34 - Policy Statement 4-117 Examination authority to resolve issues.

7. IRC 148 - Arbitrage.

8. IRC 4962 - Abatement of First Tier Taxes in Certain Cases.

9. IRC 6201 - Assessment Authority.

10. IRC 6404 - Abatements.

11. IRC 6502 - Collections after assessment.

12. IRC 6511 - Limitations on Credit or Refund.

13. IRC 6513 - Time Return Deemed Filed And Tax Considered Paid.

14. IRC 6532 - Periods of Limitation On Suits.

15. IRC 7121 - Closing Agreements.

16. IRC 7122 - Compromises.

17. IRC 7429(a)(2) - Administrative Review.

18. IRC 7459 - Reports and Decisions.

19. IRC 7602 - Examination of Books and Witnesses.

20. Tax Increase Prevention and Reconciliation Act of 2005.

21. 26 CFR 1.148-5(c)(2)(i) permits the recovery of overpayment of yield reduction payments.

22. Rev. Proc. 2008-37 provides additional guidance to issuers of tax-exempt bonds regarding procedures for filing a refund claim.

23. Rev. Proc. 2017-50 modifies Rev. Proc. 2008-37 to extend the deadline for filing claims.

24. The Form 8038-R, Request for Recovery of Overpayment Under Arbitrage Rebate Provisions, instructions provide guidance to issuers for filing a refund claim.

(1) Directors, EO/GE and EP, are the executives 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 1.1.23, Tax Exempt and Government Entities Division, for additional information.

(2) The Directors, EO Examinations, GE, and EP Examinations reports to the Directors, EO/GE and EP respectively, and are responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.23, Tax Exempt and Government Entities Division, for additional information.

(3) All examiners must perform their professional responsibilities in a way that supports the IRS Mission. This requires examiners to provide top quality service and to apply the law with integrity and fairness to all.

(4) Examiners and their managers should thoroughly acquaint themselves with the examination procedures and information contained in this IRM, as well as other resources.

(5) The examiner must determine what type of request the taxpayer has made to properly examine, close and process the case. The following are the types of requests:

• Claims for refund

• Claims for abatement

• Adjusted returns

• Audit reconsideration requests

(6) For a claim, examiners are responsible for:

1. Working claims as high priority cases. Taxpayers may sue for a refund if we don’t take action within six months of a claim filing.

2. Opening claims within 30 days of receipt (put in status 12).

3. Limiting the scope of the examination to the claim issue.

   Exception: If you find indications of non-compliance, discuss expanding the scope of the examination with your group manager.

4. Considering both the Assessment Statute Expiration Date (ASED) and Refund Statute Expiration Date (RSED).

5. Closing the claim:
   • Survey, after assignment (accepting claim as filed)
   • Allowed in full
   • Disallowed in full or part or
   • Assess additional tax

6. In addition to this IRM, see IRM 4.23.13, Employment Tax, Adjusted Returns, Abatements and Claims, when working claims that involve any employment tax.

7. In addition to this IRM, see IRM 4.24.8, Excise Tax, Examination Guidance for Excise Claims for Refund or Abatement, for excise tax claims.

(7) For an abatement request, examiners are responsible for:

• Reviewing the examination file.

• Contacting the taxpayer and obtaining any necessary additional information.

• Evaluating the information and fully documenting your work.

• Making a final determination.

(8) For an OIC-DATL case, examiners are responsible for:

1. Working the file as a high priority case.

2. Contacting taxpayer and obtain additional information, if necessary.

3. Adhering to time frames.

4. Fully documenting your work.

5. Completing OIC-DATL checksheet, when required.

6. Making final determination.

(1) CP&C administers examination inventory control.

(2) The FAC coordinates the assignment of examination inventory.

(3) Two review groups make sure examiners conduct examinations per technical, procedural and administrative requirements:

1. Mandatory Review / Technical.

2. Special Review, see IRM 4.70.7, Special Review (SR) and Tax Exempt Quality Measurement System (TEQMS) Procedures

(4) In order to ensure a consistent level of managerial engagement in the process of making key strategic decisions during an exam, the examiner submits requests for approval by their manager through RCCMS.

(5) The manager approves or rejects any request through RCCMS.

(6) The IRS is fully committed to protecting the privacy rights of taxpayers and employees. Privacy laws are included in the IRC, the Privacy Act of 1974, the Freedom of Information Act, and IRS policies and practices. For more information about these laws, visit the IRS Electronic Freedom of Information Act Reading Room.

1. For questions about privacy, email *Privacy.

2. For question about disclosure, email *Disclosure.

(1) This IRM uses the following acronyms:

(1) General terms and definitions:

(2) Claims don’t include:

• Requests for adjustments that increase the balance on an account, such as tax increases or credit decreases.

• Requests to correct math errors. See IRM 21.5.4, General Math Error Procedures.

• Requests for abatement.

• Amended returns increasing tax.

  Note: A review of the transcript of account should disclose how the submission should be treated. Timely refund or credit of an overpayment may be made in the absence of a claim for refund.

(1) The following are related sources that provide guidance on the procedures outlined in this IRM section:

• IRM 1.2.1, Servicewide Policies and Authorities, Servicewide Policy Statements.

• IRM 1.2.2, Servicewide Delegations of Authority.

• IRM 4.5.2, TE/GE Examined and Non-Examined Closures.

• IRM 4.10.8, Examination of Returns, Report Writing.

• IRM 4.23.13, Employment Tax, Adjusted Returns, Abatements and Claims.

• IRM 4.24.10, Excise Tax, Appeals Referral Procedures.

• IRM 4.36.3, Joint Committee Procedures, Examination Team Responsibilities.

• IRM 4.70.14, Resolving the Examination.

• IRM 5.8.8, Offer in Compromise, Acceptance Processing.

• IRM 5.19.7, Monitoring Offer in Compromise.

• IRM 8.7.7, Technical and Procedural Guidelines, Claim and Overassessment Cases.

• IRM 20.1.1, Penalty Handbook, Introduction and Penalty Relief.

• IRM 20.1.5, Penalty Handbook, Return Related Penalties.

• IRM 20.2.7, Abatement and Suspension of Debit Interest.

• IRM 21.5.4, General Math Error Procedures.

• IRM 21.5.9, Account Resolution, Carrybacks.

• IRM 21.6.6, Individual Tax Returns, Specific Claims and Other Issues.

• IRM 25.5.9, Summons Handbook, Fees and Costs for Summoned Witnesses.

• IRM 25.6.1, Statute of Limitations Processes and Procedures.

• IRM 25.6.23, Statute of Limitations, Examination Process-Assessment Statute of Limitations Controls.

(1) Refund claim rejections are described in Rev. Proc. 2008-37 section 3.03(2)(b) and 26 CFR 1.148-3(i)(3). Generally, an issuer’s failure to follow proper procedures for filing a refund claim or to provide sufficient information to enable TEB to determine that an overpayment occurred can result in a refund claim rejection.

(2) When you receive a refund claim not meeting the initial processing requirements in IRM 21.7.7.7.4.7.1, Business Tax Returns and Non-Master File Accounts, Exempt Organizations and Tax Exempt Bonds, TEB Claim Procedures, prepare a refund claim rejection.

(3) Also prepare a refund claim rejection when:

1. The refund claim relates to issues that were the subject of a final closing agreement under IRC 7121.

2. The refund claim relates solely to issues considered in the issuer’s previously examined returns and the issuer requests, in writing, the immediate issuance of Letter 5677, TEB Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance).

3. The issuer failed to provide sufficient information for the examiner to determine that an overpayment occurred with respect to the refund claim.

(4) A refund claim rejected based on a procedural deficiency or incomplete information is generally not a refund claim denial under Rev. Proc. 2008-37 section 3.03(2)(c). Notify the issuer of any deficiency or incomplete information and provide the issuer at least 21 days to supply additional information to support the claim. A refund claim rejection pursuant to a deficiency or incomplete information permits the issuer to resubmit the refund claim, together with the missing information, in compliance with the initial processing requirements, if they resubmit by the filing deadline under 26 CFR 1.148-3(i)(3)(i), as modified by Rev. Proc. 2017-50.

(5) If the refund claim rejection occurs after the two-year deadline in 26 CFR 1.148-3(i)(3)(i), as modified by Rev. Proc. 2017-50, then the refund claim rejection is functionally a refund claim denial, and the issuer is entitled to appeal rights under 26 CFR 1.148-3(i)(3)(iii). In this case, you must process the refund claim as a fully denied claim under  IRM 4.70.17.6.5, Claim Disallowed in Full without Additional Tax Due or Arbitrage Payment Due, allowing the IRS Independent Office of Appeals (Appeals) to review whether the issuer met the deadline requirements in the request for more information.

(6) The examiner discusses the refund claim rejection with the issuer and any authorized representative and secure e-mails to the TEB Exam group manager:

• Letter 105-T, Arbitrage Claim Incomplete for Processing – No Consideration

• Form 886-A, Explanation of Items

• Any required Letter 937, Transmittal for Power of Attorney

(7) TEB Exam group manager: when you receive the case:

(8) Examiner: when you receive the signed documents from the TEB Exam group manager:

1. Organize the refund claim case file in RCCMS by following the TE/GE RCCMS Naming Convention.

2. If there is a paper case file, prepare Form 3210, Document Transmittal, and send the refund claim paper case file to the CP&C Planning & Monitoring Closing Group at the following address for closing:
   Internal Revenue Service
   TEGE Closing Unit MS 7700
   1973 N. Rulon White Boulevard
   Ogden, Utah 84201-1001

3. Enter disposal code 01 in RCCMS, requests closure of the RCCMS file.

(1) The filing of an original tax return reflecting an overpayment constitutes a claim for credit or refund. Accordingly, a tax return and claim for refund can be filed simultaneously through one document. The taxpayer who files an original tax return reflecting an overpayment is considered to have filed a claim within three years of filing a return, and a refund would be allowed if payment was made within three years of the date the original return/claim for refund is considered filed, as long as no petition is filed with the Tax Court.

(2) Any tax withheld for a wage earner is deemed paid on the fifteenth day of the fourth month following the close of the wage earner’s taxable year (individual returns only) (IRC 6511 and IRC 6513(b)(1)).

(3) Any estimated tax payments made during any calendar year are deemed paid on the last day prescribed for filing the return for that year without considering any extensions (IRC 6513(b)(2)).

(4) If a taxpayer files a tax return more than three years after the due date for the return (including valid extensions), any overpayment amount would be limited to the amount paid in the three years before the return was filed or paid within 2 years of the filing of a claim for refund. See Rev. Rul. 76-511.

(5) Taxpayers can’t carry forward or back barred refund amounts to offset delinquent accounts or future tax liabilities. The overpayments post to an excess collections account using Form 8758, Excess Collection File Addition.

(6) If a taxpayer files a claim for refund after the RSED to perfect a claim filed before the RSED, the claim should be considered. A general claim may be amended after the RSED has expired, provided that the original claim has not been formally disallowed by the IRS at the time the amendment is filed, and the amendment merely makes clear the specific matters the Service has already considered by investigating the original defective claim. The supplemental claim will not generally be considered an amendment if the Service took final action on the original claim by rejecting the original claim or allowing it in whole or in part. A final action disallowing a claim does not occur until the notice of claim disallowance is sent. If no formal disallowance was made, there is no specific time period within which the supplemental claim must be filed.

(7) To close a claim case with a barred refund:

1. For EO, issue Letter 3602, Claim Disallowance.

2. For EP, issue Letter 3602-A, 30-Day Letter - EP Claim Denied. See Employee Plans Examination Exhibits for an example of Letter 3602-A.

3. For Employment Taxes, issue Letter 5376, Full or Partial Claim Disallowance - Employment Tax, when disallowing employment tax claims in full or in part. This includes when a delinquent return seeks a claim for refund for withheld / estimated taxes, earned income credits, or payments that are barred by the period of limitations under IRC 6511.

4. For TEB, issue Letter 5684, Arbitrage Claim Notification of Proposed Claim Disallowance, with Form 886-A, Explanation of Reason(s) for Disallowance, Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit, Form 2297, Waiver of Statutory Notification of Claim Disallowance, Pub 5, Your Appeal Rights and How to Prepare a Protest If You Disagree and Letter 937, Transmittal for Power of Attorney, (if applicable).

5. If the taxpayer doesn’t sign Form 2297, Waiver of Statutory Notification of Claim Disallowance, a certified notice of claim disallowance must be issued. Prepare Letter 906, Final Full Claim Disallowance, (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer) to notify the taxpayer of the full or partial disallowance of their claim. Include the reason for the disallowance in the letter. Annotate 3198-A, "Issue Letter 906, Certified Notice of Claim Disallowance - Transfer barred refund to an excess collections account ", (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer).

6. Mandatory Review issues Letter 906 Final Full Claim Disallowance on unprotested cases (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer). Check box next to Prepare/Issue Letter on 3198-A Checksheet in RCCMS, and type in "906 – Final Full Claim Disallowance" (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer).

(1) Follow the procedures in this section when the taxpayer/representative send you additional information for a claim, and it proves that the claim should be allowed in full.

(2) Refer to the Joint Committee when the refund of tax, penalties and interest exceeds $2,000,000 ($5,000,000 for C corporations). See IRM 4.70.17.7.7 for Joint Committee procedures.

(3) For EO and EP, prepare and mail Letter 570-A, Claim Allowed in Full, to inform the taxpayer of the allowance of the claim.

1. The group will mail the closing letter after the group manager approves the case for closing and saves the letter in the Office Documents folder within the RCCMS activity.

2. Document the case chronology that the closing letter was mailed.

3. Forms 2297 and 3363 aren’t required.

4. Form 4549, Report of Income Tax Examination Changes, is required for income tax claims, Form 4621, Report of Examination - Exempt Organization, and Form 4883, Exempt Organizations Excise Tax Audit Changes, are required for Chapter 41 and 42 excise tax claims, and Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, is required for Miscellaneous excise taxes (e.g., Form 11-C, Occupational Tax and Registration Return for Wagering, Form 730, Monthly Tax Return for Wagers, Form 8849, Claim for Refund of Excise Taxes). However, taxpayer signature is not necessary.

   Exception: Joint Committee cases require a signature.

(4) For TEB, prepare Letter 5761, TEB Arbitrage Claim Allowed in Full, notifying the issuer that the claim for refund has been allowed in full, and any required Letter 937, Transmittal for Power of Attorney.

1. Prepare Form 3753, Manual Refund Posting Voucher.

2. If the allowed claim is for more than $2 million, the claim is subject to mandatory review by a TLS from TEB Technical (not Joint Committee).

3. If the group manager doesn’t agree with the examiner’s recommendation, discuss any issues with them that they must develop and return the RCCMS case file for further development. You may request technical assistance. If disagreement remains, elevate the issue(s) to the Program Manager for resolution.

4. If the group manager agrees with the examiner’s recommendation or are otherwise instructed to proceed with processing the claim, the group manager will:

1. Review the Form 3753, Manual Refund Posting Voucher.

2. Sign Letter 5761, TEB Arbitrage Claim Allowed in Full, for the PM and mail it to the issuer, and to any authorized representative using Letter 937, Transmittal for Power of Attorney.

3. Upload a copy of the signed Letter 5761, TEB Arbitrage Claim Allowed in Full, any Letter 937, Transmittal for Power of Attorney, and the reviewed Form 3753, Manual Refund Posting Voucher, into the RCCMS case file.

4. Notify the examiner of final approval to close.

5. When the TEB examiner receives the final approval to close from the TEB Exam group manager:

Return any hardcopy documents not necessary to support the examination conclusion to the issuer or the issuer’s representative.

For any documents too large for scanning but necessary to support the conclusion in a case file, prepare Form 3210 retaining a copy in the Form 3210 logbook for one year, as required in Document 12990, IRS Records Control Schedule (RCS) 23, Item 36 and send the paper case file to the CP&C Planning & Monitoring Closing Unit at the following address for closing: Internal Revenue Service TEGE Closing Unit MS 7700 1973 N. Rulon White Boulevard Ogden, Utah 87201-1001

Upon receipt of a paper case file, the Manager, CP&C, Planning & Monitoring Closing Unit, or other designee, signs the Form 3753 when they receive the paper case file.

(5) Upload all workpapers, forms and letters you prepared in the RCCMS Office Documents folder using the RCCMS Naming Convention.

(6) Close claims allowed in full electronically (100% paperless). Complete the RCCMS closing record by inputting the following on each tab:

1. The fields and entries of the RCCMS closing record are similar to the Form 5599 other than the disposal code. The RCCMS disposal code for an agreed tax change is 03 (103).

2. Ensure that the record is validated for closure and that all the fields highlighted in red are completed.

   Note: All the required fields may not be enabled or highlighted when "validating for closure".

3. Complete the following fields of the "General Tab" of the closing record:

RCCMS Field	Data Entry
ARDI Code	Select applicable code.
Priority Code	Leave blank if the file contains an original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "1" if the file contains an original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X. Enter "2" if the file contains a copy of the original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "3" if the file contains a copy of the original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X.
Disposal Code	RCCMS 03 (102) (AIMS 03), Agreed Tax Change or Penalty Change.
Closing With	Select option 4 – Paperless Examined.

4. Complete the following fields of the "Detail Tab" of the closing record:

Claim hours

Technique code

Examiner’s name

Examiner’s grade

5. Complete the following fields of the "Individual/Bus.Tab"(1 of 3) in the closing record:

Interest computation date: Entry is required for carry backs. Use the received date of the return with the loss.

Transaction code and amount. Note: This field represents item 12 of the Form 5599. See the instructions for the Form 5599,  TE/GE Examined Closing Record, for guidance of appropriate transaction codes.

Reference number and amount. Note: This field represents item 15 of the Form 5599. See the instructions for the Form 5599,  TE/GE Examined Closing Record, for guidance of appropriate reference numbers.

(7) The group manager will close the case to the TE/GE Closing Group, using status code 51.

(1) When allowing a claim in full, if proposing offsetting adjustments which reduce the amount refundable, treat the claim as a partially or fully disallowed claim. Follow the procedures for claims disallowed in full or in part as applicable.

(2) See IRM 25.6.1.10.2.5.6.1, Claim for an Amount Paid Before the ASED, for the offset of a refund with a time-barred upward adjustment from the same time period.

(1) Issue the report and the following letter proposing partial disallowance of the claim.

1. Select language for partial disallowance.

2. Insert the applicable form number in the letter.

3. For initial reports, give the taxpayer up to 15 days to respond.

4. Attach Pub 1, and Pub 594, when applicable.

5. Include a copy of the claim for refund.

6. Attach all relevant forms as specified in paragraphs (2) through (5) below.

7. Get your manager’s approval before you sign and mail the letter.

(2) Prepare Form 886-A, Explanation of Items, if the case is unagreed. Include the issue, a description of the facts surrounding the issue, an explanation of the law for the issue, an explanation of the government’s position, including calculations clearly showing how you determined the partial disallowance, the taxpayer’s position and a conclusion.

(3) Prepare Form 2297, Waiver of Statutory Notification of Claim Disallowance. See IRM 4.70.17.6.8 for instructions on completing Form 2297.

(4) Prepare Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit. See IRM 4.70.17.6.9 for instructions on completing Form 3363.

(5) Prepare the applicable report of examination changes and waiver form based on the type of tax. See IRM 4.70.14, Resolving the Examination.

(6) Update the RCCMS case status to 13 (30-Day Letter) and hold the case file for up to 45 days pending the taxpayer’s response or until a signed Form 2297 and Form 3363 are received, if earlier.

(7) In the table below, substitute Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, Form 870-E, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessment, Form 870-EP, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, Form 2504-E, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, or other waiver form for Form 4549, Report of Income Tax Examination Changes, as appropriate.

(8) If the taxpayer agrees, issue Letter 2841-A, Agreed Claim Disallowance Closing Letter, and attach a copy of the examination report with a copy of the signed Form 2297, Waiver of Statutory Notification of Claim Disallowance, and Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit.

1. For TEB, Include the completed Form 3753, Manual Refund Posting Voucher, in the case for the allowable portion of the refund claim. Manager, CP&C Planning & Monitoring Closing Unit, or other designee will sign the Form 3753.

Note: For TEB, allowed refund arbitrage claims over $2 million are subject to mandatory review.

(9) If the taxpayer files a protest to Appeals, issue a rebuttal to the protest, and close the case as unagreed - protest to Appeals. Follow the closing procedures in IRM 4.70.14, Resolving the Examination.

1. TEB Examiner: notify the TEB Exam group manager that the issuer has appealed the proposed partial denial and, unless technical review is not required, request transfer of the RCCMS case file to the TLS assigned to conduct the review. If technical review is not required, inform the TEB Exam group manager that the refund claim is ready for transfer to Appeals and e-mail Letter 5918, Protest Received Rebuttal / Transfer to Appeals, issuer’s protest, rebuttal to the protest and any required Letter 937, Transmittal for Power of Attorney.

2. TEB Group Manager: Follow the procedures in IRM 4.70.14, Resolving the Examination, for unagreed issues. If you agree with the prepared rebuttal or are otherwise instructed to proceed.
   i. Sign Letter 5918, Protest Received Rebuttal/Transfer to Appeals for the PM and mail it with the rebuttal to the issuer, and any authorized representative using Letter 937 informing the issuer that you’ve forwarded the refund claim to Appeals.
   ii. Secure e-mail a copy of the signed Letter 5918, the rebuttal, and any Letter 937 to the examiner.

(10) If no response is received after 30 days, close the case as unagreed without protest. All unagreed claim disallowances (full or partial) without protest to Appeals are closed to Mandatory Review for issuance of the final claim disallowance letter. On the RCCMS 3198-A Checksheet:

1. Check the "Mandatory Review, Unagreed Case, and Proposed Adverse boxes".

2. Check the "Claim Case" box under "Expedited Processing".

3. Check the box "Prepare/Issue Letter" and write in the blank to the right "905 – Final Partial Claim Disallowance", or "Letter 5677, TEB Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance)".

   Note: Mandatory Review will prepare and issue the Letter 905, Final Partial Claim Disallowance, or Letter 5677, TEB Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance).

(11) Close claims allowed in full electronically (100% paperless). Complete the RCCMS closing record by inputting the following on each tab:

1. The fields and entries of the RCCMS closing record are similar to the Form 5599 other than the disposal code.

2. Ensure that the record is validated for closure and that all the fields highlighted in red are completed.

   Note: All the required fields may not be enabled or highlighted when "validating for closure".

3. Complete the following fields of the "General Tab" of the closing record:

RCCMS Field	Data Entry
ARDI Code	Select applicable code.
Priority Code	Leave blank if the file contains an original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "1" if the file contains an original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X. Enter "2" if the file contains a copy of the original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "3" if the file contains a copy of the original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X.
Disposal Code	Use disposal code 03 (102) if partially disallowed – agreed, disposal code 07 (601) if unagreed with protest to Appeals, or 10 (604) for partially disallowed – unagreed without protest.
Closing With	Select option 4 – Paperless Examined.

4. Complete the following fields of the "Detail Tab" of the closing record:

Claim hours Claim amount disallowed Technique code Examiner’s name Examiner’s grade Note: Do not input time in the "examiner’s time" box.

5. Complete the following fields of the "Individual/Bus.Tab" (1 of 3) in the closing record:

Interest computation date: Entry is required for carry backs. Use the received date of the return with the loss. Transaction code and amount. Note: This field represents item 12 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate transaction codes. Reference number and amount Note: This field represents item 15 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate reference numbers.

(1) Process partially disallowed claims with additional amounts due the same way as partially disallowed claims without additional amounts as described in IRM 4.70.17.6.3, Claim Partially Disallowed without Additional Tax or Arbitrage Payment Due, with the following exceptions for EO:

1. Issue Letter 3602-B, Claim Disallowance with Additional Tax Due.

2. Prepare Form 4621, Report of Examination or Form 4883, Exempt Organizations Excise Tax Audit Changes, as appropriate.

(2) In the table below substitute Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, Form 870-E, Waiver of Restriction on Assessments and Collection of Deficiency and Acceptance of Overassessment, Form 870-EP, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, Form 2504-E, Agreement to Assessment and Collection of Additional Tax and Acceptance of Overassessment, Form 5384, Excise Tax Examination Changes and Consent to Assessment & Collection, or other waiver form for  Form 4549, Report of Income Tax Examination Changes, as appropriate.

1. If the taxpayer files a protest, close the case as unagreed - protest to Appeals. On the RCCMS 3198-A Checksheet, check "Forward to Appeals".

2. If the claim disallowance is unagreed, Mandatory Review issues a statutory notice of claim disallowance. On the RCCMS 3198-A Checksheet, check "Prepare/Issue Letter". To the right, write "905 - Final Partial Claim Disallowance".

3. If the additional tax is unagreed, Mandatory Review issues a statutory notice of deficiency. On the RCCMS 3198-A Checksheet, check "Prepare/Issue Letter". To the right, write "Statutory Notice of Deficiency".

(3) Complete the following fields of the "Individual/Bus.Tab"(1 of 3) in the closing record:

• Interest computation date: Entry is required for carry backs. Use the received date of the return with the loss.

• Transaction code and amount.

  Note: This field represents item 12 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate transaction codes.

• Reference number and amount.

  Note: This field represents item 15 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate reference numbers.

(1) Issue the report and the following letter proposing claim disallowed in full.

1. Select language for full disallowance.

2. Insert the applicable form number in the letter.

3. For initial reports, give the taxpayer up to 15 days to respond.

4. Attach Pub 1, and Pub 594, when applicable.

5. Include a copy of the claim for refund.

6. Attach all relevant forms as specified in paragraphs (2) through (5) below.

7. Get your manager’s approval before you sign and mail the letter.

(2) Prepare Form 886-A Explanation of Items, if the case is unagreed. Include the issue, a description of the facts surrounding the issue, an explanation of the law for the issue, an explanation of the government’s position, including calculations clearly showing how you determined the partial disallowance, the taxpayer’s position, and a conclusion.

(3) Prepare Form 2297, Waiver of Statutory Notification of Claim Disallowance. See IRM 4.70.17.6.8 for instructions on completing Form 2297.

(4) Prepare Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit. See IRM 4.70.17.6.9 for instructions on completing Form 3363.

(5) Prepare the applicable report of examination changes and waiver form based on the type of tax, see IRM 4.70.14, Resolving the Examination. The taxpayer doesn't need to sign an agreement/waiver form (Forms 870, 870-E, 870-EP, 2504-E, 4549, 4549-E, or 5384) for an agreed closure. However, the Closing Unit needs the form for input onto IDRS.

(6) Update the RCCMS case status to 13 (30-Day Letter) and hold the case file for up to 45 days pending the taxpayer’s response or until a signed Form 2297 and Form 3363 are received, if earlier.

(7) If the taxpayer agrees:

1. For EO and EP, issue Letter 2841-A, Agreed Claim Disallowance Closing Letter, and attach a copy of the examination report with a copy of the signed Form 2297 and Form 3363.

   Note: For EP, see Employee Plans Examination Exhibits for an example of Letter 2841-A.

2. For TEB, prepare Letter 5677, Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance) and any Letter 937. The Group manager will sign and mail Letter 5677, to the issuer and upload a copy of the signed letter into the RCCMS case file.

   Note: For TEB, allowed refund arbitrage claims over $2 million are subject to mandatory review.

(8) If the taxpayer files a protest to Appeals, issue a rebuttal to the protest, and close the case as unagreed - protest to Appeals. Follow the closing procedures in IRM 4.70.14, Resolving the Examination.

1. For TEB, if technical review is required, request a transfer of the RCCMS case to the TLS assigned to conduct the review.

(9) If no response is received after 30 days, close the case as unagreed without protest. All unagreed claim disallowances (full or partial) without protest to Appeals are closed to Mandatory Review for issuance of the final claim disallowance letter. On the RCCMS 3198-A Checksheet:

1. Check the "Mandatory Review, Unagreed Case, and Proposed Adverse" boxes.

2. Check the "Claim Case" box under "Expedited Processing".

3. Check the box "Prepare/Issue Letter" and write in the blank to the right "906 – Final Full Claim Disallowance," or "Letter 5677, TEB Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance)".

   Note: Mandatory Review will prepare and issue Letter 906, Final Full Claim Disallowance (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer), or Letter 5677, TEB Arbitrage Claim Notification of Final Adverse Determination (Full Disallowance).

(10) Close claims allowed in full electronically (100% paperless). Complete the RCCMS closing record by inputting the following on each tab:

1. The fields and entries of the RCCMS closing record are similar to the Form 5599 other than the disposal code.

2. Ensure that the record is validated for closure and that all the fields highlighted in red are completed.

3. Complete the following fields of the "General Tab" of the closing record:

RCCMS Field	Data Entry
ARDI Code	Select applicable code.
Priority Code	Leave blank if the file contains an original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "1" if the file contains an original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X. Enter "2" if the file contains a copy of the original return and BMFOLT doesn’t contain an "A" Freeze or AMDIS does not show a 97X. Enter "3" if the file contains a copy of the original return and BMFOLT contains an "A" Freeze or AMDIS shows a 97X.
Disposal Code	Regulatory/Revenue Protection if disallowed in full – agreed, 07 if unagreed with protest to Appeals, or 10 for partially disallowed – unagreed without protest.
Closing With	Select option 4 – Paperless Examined.

4. Complete the following fields of the "Detail Tab" of the closing record:

Claim hours

Claim amount disallowed

Technique code

Examiner’s name

Examiner’s grade

Note: Do not input time in the "examiner’s time" box.

(1) Process claims disallowed in full with additional amounts due the same way as claims disallowed in full without additional amounts as described in IRM 4.70.17.6.5, Claim Disallowed in Full without Additional Tax Due or Arbitrage Payment Due, with the following exceptions:

1. For EO, Issue Letter 3602-B, Claim Disallowance with Additional Tax Due. Check the box for full disallowance with additional tax due. Prepare Form 4621, Report of Examination or Form 4883, Exempt Organizations Excise Tax Audit Changes, as appropriate.

2. For EO & EP, If the taxpayer has a balance due, and the taxpayer has signed and returned Form 2297 and Form 3363, prepare and mail Letter 2511, TE/GE Agreed Examination Changes, and attach a copy of the examination report with a copy of the signed Form 2297 and Form 3363.

   Note: For EP, see Employee Plans Examination Exhibits for an example of Letter 2511.

3. For TEB, if during the course of a refund claim examination, you determine that a delinquent or amended Form 8038-T, Arbitrage Rebate and Penalty in Lieu of Arbitrage Rebate, with an additional payment is required, expand the scope to include securing the delinquent or amended Form 8038-T and additional payment. Consult the TEB Exam group manager for their agreement.

(2) In the table below substitute Form 870, Form 870-E, Form 2504-E, Form 5384, or other waiver form for Form 4549 as appropriate.

(3) Complete the following fields of the "Individual/Bus.Tab" (1 of 3) in the closing record:

• Interest computation date: Entry is required for carry backs. Use the received date of the return with the loss.

• Transaction code and amount.

  Note: This field represents item 12 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate transaction codes.

• Reference number and amount.

  Note: This field represents item 15 of the Form 5599. See the instructions for the Form 5599, TE/GE Examined Closing Record, for guidance of appropriate reference numbers.

(1) See IRM 4.23.13.7, Adjusted Returns, for when there is an adjustment to an amended employment tax return (Forms 94x-X) which results in a credit balance.

(2) If the “Claim box” is checked (Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, Part 1, box 2), or if the examination results will not create a credit balance (refund), the case will be processed using normal procedures.

(3) The procedures in IRM 4.23.13.7, Adjusted Returns, will only apply when:

1. Line 1 - Adjusted Employment Tax Return box is checked. See explanation in Part 3 Line 21 - first bullet (941-X 1-2011 revision).

   Note: Line number is different for each Form 94x-X series and revision date) AND

2. Examination results will create a credit balance (amount to be refunded) on the module.

(4) You will inform the taxpayer that the credit request will NOT be applied to the quarter for the tax period in which they filed the Form 94x-X until the examination is completed, and NOT to rely on the credit as a payment toward any taxes due.

(5) If an amended return is received on which Line 1, Adjusted Employment Tax Return, is checked and is related to a quarter of an on-going exam, the examiner should explain to the taxpayer that this may affect the credit requesting to be applied to the quarter the Form 94x-X was received.

(6) Upon completion of the examination:

1. Prepare case for final closure from the group.

2. Prepare a Form 3870,  Request for Adjustment, for each separate quarter of the Form 94x-X (i.e., 03, 06, 09, and 12). See IRM 4.23.13-2, Instructions for Completion of Form 3870 by the Examiner.
   • If multiple Form 94x-X for the same quarter (e.g., 201709) are filed in the same “tax period” (e.g., filed January 1, 2018 and February 2, 2018) in which the form is filed/received, then one Form 3870, Request for Adjustment, is prepared to transfer the funds to the same tax period (201803).
   • If multiple Form 94x-X for the same quarter (e.g., 201709) are filed in different tax periods (January 1, 2018 and November 30, 2018) in which the form is filed/received, one Form 3870 can be prepared to transfer the funds to the different tax periods (201803 and 201812).

3. The “tax period” in which the form is filed is determined by the received date stamp on the front of the Form 94x-X.

4. You and your manager must digitally sign the Form 3870.

5. Place the Form 3870 at the front of the case file and upload into RCCMS Office Documents. The naming convention for the Form 3870 should start with “2” for RCCMS purposes.

6. Enter Hold Code 2 in the Closing Records General tab on RCCMS. This will keep the credit balance from being refunded to the taxpayer.

7. Enter “Adjusted Return involving a Credit Balance” in the comment section on the RCCMS 3198-A Checksheet and on the Comments tab on the RCCMS Closing Record.

8. Closing Unit will monitor the accounts to verify the necessary postings were made and review the Form 3870 for accuracy.

(7) If you determine that the credit is no longer needed to pay an employment tax liability in the quarter to which the money was moved, then an additional Form 3870, Request for Adjustment, will be needed to release the credit. TC 290 for $0 will be used.

(1) Complete Form 2297, Waiver of Statutory Notification of Claim Disallowance, for cases that have a full or partial claim disallowance.

(2) Attach Form 2297 to the applicable claim or amended return.

(3) When completing Form 2297:

1. Enter the name, EIN or SSN, and address of taxpayer where indicated.

2. Taxable Period Ended: List each year for which a claim has been filed and disallowed in part or in full on separate lines as follows: For a short period, show the beginning and ending date (for example, 01/01/2017– 09/30/2017). For all other cases, list the period ending date (for example, 12/31/2017).

3. Kind of tax: Enter the type of tax covered by the return under examination, such as income or excise. You don’t have to show the return under examination, form number, or the type of income.

   Note: For TEB, this field is commonly left blank because Arbitrage Payments are not a tax.

4. Enter the claim amount and the amount of the claim disallowed where indicated.

5. See instructions for taxpayer’s signature at the bottom of the form.

   Note: For EP, see Employee Plans Examination Exhibits for an example of a completed Form 2297.

(1) Complete Form 3363, Acceptance of Proposed Disallowance of Claim for Refund or Credit, for cases in which you disallowed a claim in full or in part and don’t have other adjustments to the tax liability.

(2) When completing Form 3363:

1. Enter the name, EIN or SSN, and address of taxpayer where indicated.

2. Year or period: List each year for which a claim has been filed on separate lines as follows: For a short period, reflect the beginning and ending date (e.g., 01/01/2017– 09/30/2017). For all other cases, list the period ending date (for example, 12/31/2017).

3. Date claim filed: Enter the date Form 843, Claim For Refund and Request for Abatement, or amended return was filed.

4. Kind of tax: Enter the type of tax covered by the return under examination, such as income or excise. You don’t have to show the form number of the return under examination or identify the type of income.

   Note: For TEB, this field is commonly left blank because Arbitrage Payments are not a tax.

5. Amount of claim: Enter the amount of refund requested in the claim filed by the taxpayer. Determine the amounts to enter as claims under the following circumstances:

If...	Then...
A claim states a definite amount as being claimed	Enter this amount in the "amount of claim" space.
An amended return shows the computation of the corrected amount as computed by the taxpayer	Enter the tax as shown on the original return in the "amount of claim" space.
A claim is filed for "$1 or more" and no details are shown as to the amount of reduction in income	Enter $1 as "amount of claim".
A claim is filed for "$1 or more" and details are provided as to the amount of reduction in income but computation of amount of tax refund is not shown on the claim	Compute the amount of the claim based upon reduction of income shown by the taxpayer and enter this figure as "amount of claim".
A claim is filed for "entire amount of tax paid"	Enter the entire amount of tax shown on the return.
A claim is filed for "such amount as may be due" and details are shown as to the reduction in income and computation of the tax refund can be made	Enter the computed figure in "amount of claim space".

6. Amount of claim disallowed: Enter the amount of claim disallowed per the RAR.

7. Amount of claim allowed: Enter the amount of claim allowed per RAR.

8. Signature: See the Form 3363 instructions.

   Note: For EP, see Employee Plans Examination Exhibits for an example of a completed Form 3363.

(1) If a claim is received on a case that was previously closed by Appeals, the examiners will need to determine whether the claim issue is related to the issues considered by Appeals.

(2) If Appeals has not previously considered a matter raised in the claim, process the refund claim according to the procedures in this IRM.

(3) If the refund claim relates to a matter that Appeals fully or partially sustained, but the matter was not resolved under a closing agreement, treat the refund claim as a reconsideration of a disallowed claim.

(4) For employment tax claims, see IRM 4.23.13.5, Claims Received or Cases Previously Considered by Appeals.

(1) Don’t treat requests for reconsideration as original claims.

1. The issuance of the final notice of claim disallowance starts the two year period of limitations in IRC 6532(a) for a taxpayer to file suit.

2. There’s no provision in the law or regulations authorizing or requiring the issuance of a certified notice of the denial or disallowance of a customer's request for reconsideration of a claim for refund previously disallowed by certified notice.

3. Under no circumstances should the examiner issue another final adverse determination letter or any letter containing language that might lead the taxpayer to believe that a certified notice of disallowance will be issued. Any reports issued must not state or imply that the IRS will issue a certified notice of disallowance.

(2) A request to reconsider a disallowed refund claim generally results in one of the following actions:

1. The request is rejected with no appeal rights, if the request presents no new information and/or new additional facts, or if the taxpayer files the request after the statutory period for instituting a suit under IRC 6532 has expired.

   Note: The taxpayer's two-year period for bringing suit may be extended by agreement in writing between the taxpayer and the Service under IRC 6532(a)(2). See IRM 8.7.7.3.3, Form 907, Agreement to Extend the Time to Bring Suit. Form 907, Agreement to Extend the Time to Bring Suit, may be executed when either of the following is true: the IRS has under consideration a change in position requiring the suspension of action in all similar cases, or the conclusion on the merits of the request is contingent on the findings of one or more pending court cases.

2. For TEB, the request is denied because the issuer filed it after the filing deadline in 26 CFR 1.148-3(i)(3)(i), as modified by Rev. Proc. 2017-50, has expired. In this case the issuer is permitted the right of appeal provided in 26 CFR 1.148-3(i)(3)(iii).

3. The request is accepted and the claim is approved in whole or in part, requiring the issuance of a letter facilitating the allowance.

4. The request is accepted (based on new information) but the claim is disallowed (denied) in whole or in part. The taxpayer is permitted the right of appeal within the IRS for this denial. However, if the period of limitation for instituting suit on the disallowed refund claim will expire in less than six months, the refund claim case is not referred to Appeals unless that office agrees to accept jurisdiction.

(3) For employment tax claims, see IRM 4.23.13.6, Request for Reconsideration of Disallowed Employment Tax Claims.

(4) For TEB, generally, under Rev. Proc. 2008-37, Section 3.03(2)(c), an issuer may not refile a refund claim after a refund claim denial becomes final. However, a refund claim that has been disallowed (denied) in whole or in part may be reconsidered if the issuer submits additional facts, if those facts are received before the filing deadline under 26 CFR 1.148-3(i)(3)(i), as modified by Rev. Proc. 2017-50, and (if the time for filing a claim has not run) the time to institute a suit under IRC 6532.

(5) If the request for reconsideration concerns a refund claim that Appeals previously considered and disallowed in whole or in part, the request and the refund claim case file are forwarded Appeals.

(1) If a taxpayer files a request for withdrawal of a claim, the only action required is issuance of a certified notice of claim disallowance, Letter 906, Final Full Claim Disallowance, which starts the two-year statute (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer).

(2) If the taxpayer advises that they filed the claim for the sole purpose of instituting suit and that they don't wish to exercise appellate rights, state this in the "Other Information" section of the examination report.

(3) Close the case to Mandatory Review to issue Letter 906, Final Full Claim Disallowance (For EP, use Letter 906-A, Unagreed Claim: 30 Day Letter Issued and No Response from Taxpayer). In the letter, Mandatory Review lists as the reason for disallowance "the taxpayer withdrew the claim request".

(4) Use DC 01 (210). The following RCCMS fields, in addition to normal examination fields, need to be completed:

1. On the Compliance Activities Record: Claim Type and Claim Amount.

2. On the Closing Record: Claim Rejection Date, Claim Hrs., Claim Amount Disallowed, Examiner’s Time (leave blank), Assessment Information on RCCMS (TC 300 and $0). There are no Adjustments (Reference Numbers) required.

(5) For EO, if this is a church tax inquiry, create a memo to the file to explain the circumstances of the closing. Approval from TEGEDC, area manager, Mandatory Review manager, and the group manager is required on the memo. Also, when the TE/GE Closing Unit receives the file, the manager of the TE/GE Closing Unit initials the use of DC 01 (210).

(1) There are instances where claims will not be considered. Requests for Reconsideration of Disallowed Claims, and Requests for Withdrawal of a Claim, are the two that will most likely be encountered by examiners. For other instances, refer to IRM 4.23.13.6, Request for Reconsideration of Disallowed Employment Tax Claims.

(1) The IRS is prohibited from any levy or court proceeding for the collection of the 100% tax under IRC 4971 or IRC 4975 pending the final resolution of court proceedings on the first-tier tax under those Code sections if the taxpayer timely pays the first-tier tax and files a claim for refund (IRC 4961).

(2) IRC 6512(a) provides that where a taxpayer has filed a timely Tax Court petition, the IRS can’t make a refund or allow a credit for the tax that was ever an issue in the Tax Court petition unless there were a mathematical error reference IRC 6513.

(3) If you determine that the first tier tax under IRC 4971 or IRC 4975 should be imposed, solicit a delinquent Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, and request payment of the tax.

(4) If the IRC 4971 or IRC 4975 issue hasn’t been corrected, advise the taxpayer that even if they don’t timely correct, the IRS can’t levy or have a court proceeding to collect the 100% tax when there is a pending court proceeding to resolve the first-tier tax if the taxpayer both.

1. Pays the first-tier tax.

2. Files a claim for refund of the first-tier tax within 90 days after the date the 100% tax is assessed.

(5) IRC 4971(b) tax may be waived in certain situations.

(1) If a claim under examination is placed in suspense pending adjudication of an issue upon which the claim was based, and Counsel or a Campus processes the claim outside of the examination process as ordered by the federal courts, there is no further examining of the claim issue. Assuming there are no other issues, close the examination as follows:

1. If allowing the claim in full or in part, verify payment of the claim using IDRS command code BMFOLT.

2. Notify any project or program analysts or team leaders of the IRS posting of the court order or settlement in IDRS.

3. Indicate a zero claim amount by processing Form 5598, TE/GE Correction Request, CC AMAXUO.

4. If in Status 12, close the claim as a no-change, DC 02 (107).

5. If in Status 10, delete the claim account using Form 10904, Request for Record Deletion from AIMS/ERCS, with DC 33 (901).

   Example: An example of a claim issue previously placed in suspense pending judicial decision was the medical resident FICA claims issue. See IRM 21.6.6.4.42, Federal Insurance Compensation Act (FICA) Claims from Medical Residents.

(1) You are responsible for determining whether a claim case falls under Joint Committee (JC) jurisdiction. A case with a refund or credit in excess of $2 million ($5 million for C corporations) is a JC case. Refer to IRM 4.36.2, Identification of Joint Committee Cases.

(2) See IRM 4.36.1.1.1, Joint Committee Process Overview and following subsections for background information on the Joint Committee Review (JCR) program.

(3) The JCR Knowledge Base Homepage can be accessed at Joint Committee Cases. Tools are available on the JCR Knowledge Base Homepage to help the examiner determine if the case meets JC criteria. These tools should be used before making referrals.

(4) You are responsible for the SOL. If a case has a short statute, the JC Specialist won't be able to update the case to their status code. Consequently, the case stays in AIMS status 12 while the JC Specialist works the case.

(5) Refer to IRM 4.36.1, Joint Committee Process Overview, which describes the entire process.

(6) Additional sources for information on Joint Committee procedures include the following:

• Examiner’s responsibilities are provided in IRM 4.36.3, Joint Committee Procedures, Examination Team Responsibilities.

• Refer to KM - Geographic, Special Case Types.

• E-mail your inquiry to the mailbox at *LB&I Joint Committee Assistance.

(7) Close all JC cases to Mandatory Review. Mandatory Review doesn't review these cases unless you indicate on the RCCMS 3198-A Checksheet that the case is subject to review for one of the other reasons.

• Note on the RCCMS 3198-A Checksheet, the case is a Joint Committee case.

• Check the restricted interest box on the RCCMS 3198-A Checksheet if applicable.

(8) Claims for refund of arbitrage rebate, yield reduction or penalty in lieu of rebate are not subject to Joint Committee review, however, claims in excess of $2,000,000 are subject to mandatory review by TEB Technical. See IRM 4.70.14.2.4.5.4, TEB – Cases Subject to Mandatory Review.

(1) To meet examination reconsideration criteria, the IRS must have assessed currently unpaid amounts, or the IRS reversed tax credits the taxpayer is disputing, and the taxpayer must:

1. Have filed a return.

2. State they did not receive the initial appointment letter, 30-Day Letter with the report, statutory notice of deficiency, or Letter 3523, Notice of Employment Tax Determination Under IRC 7436.

3. Provide additional information not previously considered during the original examination, or identify the disputed adjustments, which if considered, would change the original assessment.

4. Show the assessment was made as a jeopardy assessment. (See IRM 1.2.1.5.27, Policy Statement 4-88, Jeopardy assessments to be used sparingly and assessment to be reasonable in amount).

   Reminder: Additional information on Examination Reconsiderations can be found in IRM 4.13.4, Audit Reconsideration - Area Office Examination.

   Note: If the taxpayer is filing the request under IRC 4962, see IRM 4.70.17.8.4, Requests for Abatement under IRC 4962.

(2) Consider a request for reconsideration if any of the following apply:

1. The taxpayer submits information not previously considered.

2. The taxpayer files an original delinquent return as a result of a Substitute for Return assessment.

3. There was a computational or processing error by the IRS.

(3) Don't consider a request for reconsideration if:

1. We've already granted the taxpayer an examination reconsideration, and the taxpayer didn't provide any additional information with their current request that would change the results.

2. We made the assessment, and pursuant to the compromise, the IRS agrees not to collect the full tax liability per IRC 7122. These agreements use Form 906, Closing Agreements on Final Determination Covering Specific Matters, or Form 866, Agreement as to Final Determination of Tax Liability, or some combination of the two forms.

3. We made the assessment as a result of a compromise under IRC 7122. These agreements are final and conclusive. You can identify a final compromise determination on IDRS by the posting of a TC 788.

4. We made the assessment and pursuant to the compromise, the IRS agrees not to collect the full tax liability as the result of final TEFRA administrative proceedings. This applies to joint ventures and partnerships that the EO may be part of.

5. We made the assessment as a result of the taxpayer entering into an agreement on Form 870-AD, Offer of Waiver of Restrictions on Assessment and Collection of Deficiency in Tax. (Appeals and LB&I use this form).

6. The United States Tax Court entered a decision that becomes final, or a District Court or the United States Court of Federal Claims rendered a judgment on the merits that becomes final.

   Note: Forward to the TEGEDC any request for reconsideration on cases settled by Tax Court, District Court, or Court of Federal Claims. When the Tax Court dismisses a case for lack of jurisdiction, it doesn't enter a decision and doesn't dismiss the case on the merits. See IRC 7459(d). Likewise, when a District Court or the United States Court of Federal Claims dismisses a case for lack of jurisdiction, the court doesn't dismiss the case on the merits.

(4) Per Policy Statement 4-103, (IRM 1.2.1.5.31, Policy Statement 4-103 - Abatement claims considered only in exceptional circumstances) where we made an assessment of excise or employment tax as a result of an examination action, the taxpayer generally must pay the assessment and file a claim for refund prior to any further consideration of his/her case. Consider abatement requests only if:

1. A jeopardy assessment is involved. See IRM 1.2.1.5.27, Policy Statement 4-88, Jeopardy assessments to be used sparingly and assessment to be reasonable in amount. For certain excise taxes subject to the deficiency procedures, see IRC 7429(a)(2).

2. The taxpayer establishes a meritorious reason for considering the request, such as failure to receive a proposed tax change (30-day letter).

   Note: For employment tax cases, refer to IRM 4.23.13, Employment Tax Refund or Abatement Claims, for additional information.

(1) A claim for abatement of an employment tax examination assessment (Examination Reconsideration) will be considered on its merits after employment taxes have been assessed and the circumstances in IRM 4.23.13.4, Audit Reconsideration And Requests for Abatement, have been met. When it is determined that an examination reconsideration request should be considered on its merits, the taxpayer will be afforded consideration by Appeals. Refer to IRM 4.23.13.4, Audit Reconsideration And Requests for Abatement.

(2) When it is determined that an abatement (or Examination Reconsideration) request should not be considered on its merits, or there has been no previous examination action, the taxpayer will be issued a no-consideration letter and will not be afforded consideration by Appeals. Use Letter 924, No Consideration Letter on Abatement Claim, for all claims for abatement of employment taxes that are not considered. Never use Letter 5376, Form 3363 and Form 2297, or any other letter that explains appeal rights. The customer has no appeal rights beyond the group level without paying the tax and filing a formal claim. This should be explained to the customer with the following paragraph: "If you do not agree with our determination, you may, after paying the additional tax due, file an amended return or claim for refund. If you file a claim or amended return, you should do so within three years from the date your return was filed or, if later, two years from the time the tax was paid,"

(1) If a taxpayer files a request for withdrawal of an abatement request:

1. The taxpayer must provide a signed statement of withdrawal.

2. Upon receipt, prepare and issue Letter 693, Reply to Request for Abatement of Assessment. Check the box, "You didn’t provide the information we requested, therefore, we can take no further action on your request."

3. Prepare Form 886-A, Explanation of Items.
   1. Provide the date of the withdrawal.
   2. State that the taxpayer is withdrawing their abatement request.
   3. List the effected returns and year of the returns.

4. Complete Form 5598, TE/GE Correction Request.

5. Complete Form 10904, Request for Record Deletion from AIMS/ERCS.

(1) The IRS has discretionary authority under IRC 4962(a) to not assess, or to abate or refund, any "qualified first-tier tax" (including interest) as long as the taxable event was:

• Due to reasonable cause.

• Not due to willful neglect.

• Corrected within the appropriate correction period.

(2) Qualified First-tier Chapter 42 Excise Taxes described under IRC 4962(b) include the sections listed below:

• IRC 4942(a)

• IRC 4932(a)

• IRC 4944(a)

• IRC 4945(a)

• IRC 4955(a)

• IRC 4958(a)

• IRC 4966(a)

• IRC 4967(a)

  Note: These requests don’t apply to taxes assessed under IRC 4941(a). If a taxpayer or their POA makes a request for abatement for IRC 4941(a) taxes, deny the request. Also, for other Chapter 42 taxes, if neither the taxpayer nor the POA submitted the request, deny it. Prepare and issue Letter 6264, Improper Request Under IRC 4962. Close the case with DC 01 (210). These cases are not subject to mandatory review.

  Note: Form 5774-A, IRC 4962 Abatements, Private Foundation - IRC 4962 Abatements don’t include IRC sections 4966 and 4967 taxes. Write-in or enter these taxes anywhere in the Applicable Internal Revenue Code Sections portion of the form.

(3) A taxpayer’s requests under IRC 4962 must be worked as an abatement, whether the tax has or hasn’t been paid.

(4) Taxpayers file these requests for abatement by filing a Form 843, Claim for Refund and Request for Abatement, or an amended return. The taxpayer may also make an informal request as long as we have all the necessary information including the tax year, issue, and amount.

(1) A taxpayer can't file a claim for abatement of income tax under IRC 6404(b). However, because the IRS has the authority to abate the unpaid portion of tax under IRC 6404(a), the IRS may still consider an informal request filed by a taxpayer, for abatement of income taxes. See IRM 25.6.1.10.1, Requests for Abatement. This informal request should include the tax period involved, issue, and request to abate the tax.

(2) When assigned, the case has a SC of 30, Claims for Refund.

(3) Verify on IDRS any payments the taxpayer made. If the taxpayer paid all of the prior assessments, follow the regular claim procedures.

(4) The project code is 8089 Claims (EO), 6070 Claims (EP), 4300 FSL Claims (FSL/ET), 4164 ITG-Claims (ITG), and 4111 Claims for refund of Arbitrage (TEB). For EO, use project definer code 8499 for Request for Abatement.

(5) Contact the taxpayer and obtain any necessary additional information.

(6) Evaluate the information and make a determination. Document your work in your workpapers.

(7) Prepare Form 4549, Income Tax Examination Changes, to reflect any adjustments to be made. If you determine there was an overassessment, your report should reflect a reduction in the unpaid tax. Clearly explain to the taxpayer that the overassessment won't be refunded and that it will only reduce or eliminate the existing balance due.

(8) If there is a reduction in any penalties, the "Other Information" section of the report should clearly explain the reduction:

(9) The taxpayer receives no judicial rights because IRC 6404(b) indicates the taxpayer can't file a claim for abatement of income taxes. The taxpayer's recourse if the tax isn't abated is to pay the tax, and then file a claim for refund, or file an amended return.

(10) Prepare and issue Letter 693, Reply to Request for Reconsideration of Assessment. Select the appropriate box. No signature is required on the Form 4549, Income Tax Examination Changes, because any adjustments are in the taxpayer's favor.

(11) If making an adjustment:

1. Notate on RCCMS 3198-A Checksheet, Supplemental Report - Reduction of Previously Assessed Tax.

2. Use DC 03 (102), Agreed Tax or Penalty Change.

(12) If disallowing the request for abatement, use DC 01 (210), No Change with Adjustments.

(1) Interest on deficiencies or payments may be abated when the IRS makes an error or delays performing a ministerial or managerial act (IRC 6404(e)(1)).

(2) A "ministerial act" is a procedural act or mechanical act that doesn’t involve the exercise of judgment or discretion and occurs when the IRS processes a taxpayer’s case after we’ve completed all prerequisites to the act, such as conferences and reviews by supervisors.

(3) A "managerial act" is an administrative act that occurs during the IRS’s processing of a taxpayer’s case. It involves the temporary or permanent loss of records or the exercise of judgment or discretion of the IRS management.

(4) The IRS has the authority to abate the amount of interest that accrued during the period in which the unreasonable error or delay in performing a ministerial or managerial act occurred (IRC 6404(e)(1)).

1. It applies only when an unreasonable error or delay occurred after the date the IRS contacts the taxpayer in writing for an audit deficiency or payment.

2. Interest which already accrued from the return due date to when the IRS first contacts the taxpayer isn’t abated under this provision because the taxpayer is aware of the tax liability reported on the filed return as well as the consequences (which are penalties and interest) if they don’t pay the liability by the return due date.

(5) The IRS has discretionary authority to allow claims for abatement of interest when all of the following conditions are met:

1. The statutory period of limitations under IRC 6511 on filing a claim has not expired.

2. The claim relates to interest on IRC 6212(a) taxes, such as income, estate, gift and excise taxes under Chapters 41, 42, 43, and 44.

   Note: IRC 6404(e)(1) does not allow abatement of interest on employment tax deficiencies or payments.

3. An unreasonable error or delay occurred in relation to the performance of a ministerial or managerial act.

4. Error or delay occurred after the taxpayer was contacted in writing with respect to the examination, deficiency, or payment.

5. No significant aspect of the error or delay can be attributed to the taxpayer/representative.

   Note: An interest abatement claim under IRC 6404(e)(1)not meeting all of the above criteria is automatically disallowed by law.

(1) IRC 6651(a)(1)and IRC 6651(a)(2) penalties may be abated for reasonable cause. See IRM 20.1.1, Introduction and Penalty Relief.

(2) All penalty abatement or waiver requests must be in writing and, if not part of the return, must be signed by the taxpayer. See IRM 20.1.3.3.2.1, Evaluating Claims for Abatement or Waiver of Estimated Tax.

(3) The taxpayer may request the refund or abatement of penalty assessments in a written letter and/or on Form 843, Claim For Refund and Request for Abatement. Find Form 843 instructions at the Find a product (irs.gov).

(4) If the taxpayer provides evidence that the penalty was computed incorrectly, verify the penalty computed by the taxpayer and adjust as necessary.

(5) To prepare the case for penalty abatement:

1. Enter TC 161 for IRC 6651(a)(1) penalties, and TC 271 for IRC 6651(a)(2) penalties, with the corresponding amount of penalties that are being abated for each penalty in the RCCMS closing record (or on Form 5599, Item 12 - Penalties (-)), and

2. Enter TC 300 and $0 in the RCCMS closing record (or on Form 5599, Item 12 - Tax Liability Adjustment (+)).

(6) For EP, see the Penalty Relief - Reasonable Cause Lead Sheet to help you determine whether penalties should be waived or abated. See Employee Plans Examination Exhibits for an example of the Penalty Relief - Reasonable Cause Lead Sheet, which you may also incorporate into the examination workpapers.

(1) General OIC-DATL terms and definitions:

(1) Exam Group Manager:

1. Assign the case to an examiner of appropriate grade level, within 15 days of receipt of an Offer case file from Classification.

2. Don’t return cases to the CP&C Classification Group 3.

3. If unable to handle the case in your group, coordinate with your Area Manager to transfer the Offer to another group in the same area.

4. For FSL/ET, notify the FSL/ET Staff Assistant of the case assignment, any reassignment and updates of case status, every 60 days.

(2) Examiner:

1. Process the Offer case file as a high priority case. Delay all other actions on other cases. Postpone and reschedule any upcoming examination appointments for at least a month. Document all actions on the case chronology (i.e., Form 5464, Case Chronology Record, Form 9984, Examining Officer’s Activity Record, or equivalent).

2. Review the prior examination file and the proposed offer. Evaluate supporting documents. Determine whether the taxpayer needs to provide additional documentation.

3. Contact taxpayer within 30 days of receipt of the Offer case file. Notify them that you’re reviewing the Offer.

4. Request additional documentation, as needed.

5. If you don’t need additional documents, you have 30 days from the date of contact to render your decision as to whether to adjust the tax.

   Note: This includes any calculations needed to arrive at the new debt amount.

6. If needed, prepare Form 4564, Information Document Request (IDR), and send to the taxpayer.

7. Give taxpayer up to 30 days to provide additional documents.

8. If the taxpayer doesn’t provide the requested documents within 30 days, you may provide an extension of another 15 days, with your manager’s approval.

9. Schedule an appointment to meet with the taxpayer if preferable to receiving the documents by mail. Schedule appointments within 60 days from current date.

10. Within 30 days from the date of receipt of the additional documents, decide either by mail or in person and complete any calculations.

11. If the taxpayer fails to provide the requested documents by the end of the second time frame, determine whether the taxpayer’s argument and documentation merits an adjustment to the tax liability within 30 days from the second deadline. If the lack of documentation prevents an adjustment, return the Offer as incomplete.

    Note: All deadlines are in calendar days.

(1) The IRS is required under IRC 7122(e) to provide an independent administrative review of all proposed rejections of an offer in compromise before communicating the rejection to the taxpayer. Mandatory Review serves in this role.

(2) The Mandatory Review Manager will assign the case to a reviewer within 15 days of receipt of the offer case file.

(3) For FSL/ET, notify the FSL/ET Staff Assistant of the case assignment.

(1) Track case time as follows:

• WebETS: Charge technical time using normal procedures.

• SETR: Charge time to this project according to separate instructions from the TE/GE Director of Finance as it is part of the ACA implementation.

(1) The Patient Protection and Affordable Care Act (ACA), P.L. 111-148, Section 1421 added IRC 45R.

(2) The Treasury Department and IRS issued the following guidance on IRC 45R:

(1) Requests for the 45R credit are similar to claims. Therefore, in addition to the information below, consider claim and abatement procedures when working these cases.

(2) Refer to IRM 4.70.17.4, Statute of Limitations for Claims, for, and IRM 4.70.17.4.2, Refunds Barred by Statute of Limitations, for barred statute requirements.

(3) Use the following documents when reviewing Forms 8941 and 990-T for the Small Employer Health Care Tax Credit. This package allows you to do a pre-exam review and prepare the examination report, workpapers, letters, IDRs and forms you need to close the case. The package contains:

1. RCCMS 3198-A Checksheet

2. Letter 6031, Initial Exam Appointment

3. Form 4564, Information document request (IDR)

4. Letter 937-A, Transmittal of Information to Power of Attorney

5. Form 4700, Examination Workbook

6. Workpaper B-1, to research IDRS to verify organizational status and other information

7. Form 5773, EO Workpaper Summary

8. Form 5464, Case Chronology Record

9. Supplemental worksheets to calculate allowed credit amount

10. Form 4549, Income Tax Examination Changes

11. Form 4549-A, Income Tax Examination Changes (Unagreed and Excepted Agreed)

12. Form 2297, Waiver of Statutory Notification of Claim Disallowance

13. Form 3363, Acceptance of Proposed Disallowance of Claim of Refund or Credit

14. Form 886-A, Explanation of Items

15. Form 13683, Statement of Disputed Issues

16. Examination Letters

17. Sequestration Notice

18. Form 3870, for Sequestration

19. Form 5666, TE/GE Referral Information Report

20. Pub 1, Your Rights as a Taxpayer

21. Pub 3498-A, The Examination Process (Audits by Mail)

22. Pub 5, Your Appeal Rights and How to Prepare a Protest If You Disagree

23. Pub 556, Examination of Returns, Appeal Rights, and Claims for Refund