25.15.8. Revenue Officer Procedures for Working Innocent Spouse Relief Cases

(1) A taxpayer must exercise his/her right to appeal within a certain time period. The time period is either 30 days or 90 days for administrative or judicial appeal:

1. 30-day period for Administrative AppealUpon the issuance of a preliminary determination letter, the Cincinnati Centralized Innocent Spouse Operation (CCISO) will suspend processing pending an appeal within the 30-day period after the preliminary determination letter.

2. 90-day period for Judicial AppealUpon the issuance of a final determination letter, CCISO will suspend processing pending an appeal (filing a petition with the United States Tax Court) within the 90-day period after issuance of the final determination letter.

(1) Retain the original, date-stamped Form 8857 (or equivalent request for relief) in the case file if the taxpayer's account/module is assigned to you.

(2) Do not make any determination on the merits of the claim, including the issue of whether the claim was timely.

(3) Continue processing the claim for relief. See IRM 25.15.8.5.

(1) Send the original, date-stamped Form 8857 (or equivalent request for relief) by mail immediately (i.e., within three business days of receipt) to the Cincinnati Centralized Innocent Spouse Operation (CCISO) if the taxpayer's account/module is not assigned to you.

(2) Mail the request to:

IRS - Cincinnati Centralized Innocent Spouse Operation (CCISO)
201 W. Rivercenter Blvd., Stop 840F
Covington, KY 41011

(1) Do not continue to process a request for relief if you determine it is premature.

(2) Reject a premature request for relief by following these steps:

1. Retain a photocopy of the original, date-stamped premature request for relief in the case file.

2. Return the original request to the taxpayer in the following manner:

1. Circle the received date in ink, and

2. Use Letter 3657, Non-qualifying Innocent Spouse Claim Letter, to explain that you are returning the Form 8857 because it is premature.

   Note: Select the paragraph on Letter 3657 that notifies the requesting spouse he/she does not meet basic eligibility requirements because the claim is premature (currently there is no balance due and the IRS has not made or proposed any additional assessments for the tax year for which he/she is requesting for relief) and his/her claim will be closed as specified in the letter.

3. Complete the appropriate section on Letter 3657 to advise the taxpayer that the request was premature.

4. Mail Letter 3657 to the RS.

(1) If the submitted innocent spouse relief request is not premature, follow the steps below to determine if the request is processable.

(1) Take the following action within ten business days of receipt if you determine the Form 8857 (or equivalent request for relief) is unprocessable.

(2) Attempt to perfect Form 8857 (or equivalent request for relief) to make it processable.

1. Contact the taxpayer and request he/she correct Form 8857 or equivalent request for relief to make it processable.

2. Retain a photocopy of the original, date-stamped request for relief in the case file.

3. Return the unprocessable claim to the taxpayer.

Note: Do not return the claim to the taxpayer if you and the taxpayer agree to meet to resolve the issues.

(3) Allow a reasonable amount of time for the taxpayer to perfect the claim for relief to make it processable.

(4) Do not allow more than 15 calendar days for the taxpayer to perfect the claim for relief to make it processable.

(5) Return the original request to the taxpayer in the following manner if the attempt at perfection is unsuccessful:

1. Circle the received date in ink, and

2. Prepare Letter 3658, Unprocessable Innocent Spouse Claim Letter to explain why you are returning Form 8857.

   Note: Letter 3658 notifies the requesting spouse (RS) his/her claim cannot be processed as submitted, points out the problem(s), and explains the action required for the claim to proceed.

3. Mail Letter 3658 and Form 8857 to the taxpayer.

(6) Continue appropriate collection action unless you receive a perfected Form 8857 from the RS.

(1) Take the following action within ten business days of receipt if you determine the Form 8857 (or equivalent request for relief) is processable.

(2) Make a referral to the Cincinnati Centralized Innocent Spouse Operation (CCISO). See IRM 25.15.8.5.3.

(3) For tax periods in field exam refer requests to the Area Innocent Spouse Coordinator (ISC)

(4) Use this link to determine the Area ISC: http://mysbse.web.irs.gov/examination/examorg/hq/ecs/fieldexamretsel/31466.aspx . See IRM 25.15.8.5.3.3.

(5) Prepare Form 4844, Request for Terminal Action, to ensure the timely input of request on the Integrated Data Retrieval System (IDRS) of Transaction Code (TC) 971 with Action Code (AC) 065 (i.e., TC 971 AC 065) to the joint account to identify the account as an innocent spouse case.

(6) Take the following action if the case / module is on ICS:

1. Select "Innocent Spouse" from the Module Detail Menu to upload the TC 971 AC 065 to IDRS on the appropriate SSN and generate Form 4844.

2. Forward the completed Form 4844 to update the IDRS Innocent Spouse Tracking System. See IRM 25.15.8.5.2.2.1.

(7) TC 971 AC 065 accomplishes the following:

1. identifies the spouse filing the request for relief

2. tracks the possible suspension of the CSED

3. triggers the generation of Freeze Code "L-" which prevents credit offsets into the module.

   Note: Generation of Freeze Code "L-" could allow "erroneous refunds" to the non-requesting spouse (NRS).

4. automatically generates TC 130 on the NRS to prevent an "erroneous refund".

   Note: TC 130 identifies the TIN of the NRS and identifies the tax year to which any overpayment should be applied. Since TC 130 is systemically posted when the TC 971 AC 065 posts, it should not be necessary to request TC 130 on the non-requesting spouse (RS).

5. causes systemic reversal of TC 971 AC 060

   Note: AC 060 is generated to denote FMS Continuous Levy Program (Federal Payment Levy Program (FPLP)).
   AC 061 is used to inactivate a module previously sent to FMS – also for TC 972 (reversal).
   AC 062 is generated by FPLP.

(8) Check the account to ensure the TC 130 posts on the account of the non-requesting spouse once the TC 971 AC 065 posts to the system, refer to the following IRMs for additional guidance, IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972, IRM 25.15.2.4.3, TC 130 Entire Account Frozen from Refunding, IRM 25.15.8.8 and IRM 25.15.8.8.1.

(1) This section provides step-by step instructions for completing Form 3449.

(2) Prepare Form 3449, Referral Report.

(3) Mark Form 3449 in red ink in the top margin: "Expedite — Innocent Spouse Case."

(4) Annotate clearly on Form 3449 whether the two-year statute for filing the claim has or has not expired.

(5) Mark Form 3449 in red ink in the top margin, as applicable:

1. "Two-Year Statute not Expired — Statute Date = __________."

2. "Two-Year Statute Expired — Date of Expiration = __________."

(6) Annotate clearly on Form 3449 whether the Collection Statute Expiration Date (CSED) of the non-requesting spouse (NRS) is within 12 months or more.

(7) Mark Form 3449 in red ink in the top margin, as applicable:

1. "CSED of NRS > 12 months. CSED = __________"

2. "CSED of NRS < 12 months. CSED = __________"

(8) Retain the original documents.

(9) Include copies of the following documents in the fax referral to CCISO:

• Form 3449, Referral Report

• Form 8857

• Original return, if available

(10) Include other pertinent information in the fax referral to CCISO at (855)233-8558 Attn: Innocent Spouse Coordinator :

• collection history items (including copies of electronic files or paper documents)

• other information relevant to the relief determination process

(11) Other information could include information such as the following:

• telephone number and address of the NRS

• evidence that the joint filing status is erroneous

• whether the RS has any balance due for tax years after the years involved in the claim

• details of any prior communications with the RS

• information regarding the finances of the RS

• any indications of the existence of disqualified assets

(1) As noted above, the Service has centralized "innocent spouse" case processing at the Cincinnati Centralized Innocent Spouse Operation (CCISO). CCISO will:

1. make most determinations of whether to grant relief upon receipt of a referral from Collection.

2. generally make the determinations on Collection cases, but sometimes unusual situations will call for the case to be worked in Field Examination.

3. only send a case to Examination if there is already an open case in the field, or a unique situation exists. See IRM 25.15.8.5.3.3, Field Examination Processing.

(2) CCISO will notify the non-requesting spouse (NRS) regarding:

• a claim has been filed by the RS,

• the preliminary determination,

• the right to appeal, and

• the final determination of the case.

  Note: The NRS has to be notified of the final determination in all circumstances. Refer to Treasury Regulation 1.6015-6(a)(2) and/or Page 2 of the instructions for Form 8857 for more information.

Exception: The NRS is not notified when the claim is nonqualifying.

(3) CCISO will notify the assigned RO if requested via secure e-mail regarding:

• the initial status of the case,

• the updated status of the case via monthly updates every 30 days, and

• the final determination of the case.

(1) If Field Examination has an open exam and is considering the request for relief, Field Examination may request Collection assistance to secure the necessary documents, address account problems, and prepare the case for a prompt resolution of the claim for relief. The examiner can:

1. provide periodic updates about the status of the case, and

2. advise when the case is forwarded to Technical Services.

(2) Coordinate with Field Examination when you:

1. receive a request for assistance from the assigned examiner.

2. require guidance gathering the necessary information.

(1) Any claim for relief filed on or after December 20, 2006, regardless of the revision date of Form 8857 used by the RS, will:

1. be treated as a claim for relief under all subsections of IRC 6015

2. prohibit collection action and suspend the CSED from the date the claim was received

(1) Depending on the type of relief claimed, claims filed before December 20, 2006, will prohibit collection action and suspend the CSED in either of the following ways:

1. beginning on December 20, 2006, not on the date the claim for relief was received, if the RS only requested relief under IRC 6015 (f).

2. beginning on the date the claim for relief was received if the RS requested relief under IRC 6015 (f)and also requested relief under IRC 6015 (b) or IRC 6015 (c).

(1) The CSED may be an issue when a module is not mirrored.

(2) The systemic recordation of the statute on IDRS on a joint module (MFT 30) is extended during the request for relief consideration period or after the consideration period if the request is denied. However, you will need to determine the correct CSED for both spouses separately before taking any enforcerment action since the CSED should not be extended for the non-requesting spouse.

(3) Once the relief determination has been processed:

• When full relief is granted an MFT 31 for the NRS is present and the MFT 30 account is closed.

• If partial relief is granted the separate liability of the NRS is shown as an MFT 31. The remaining liability is retained on the joint MFT 30 liability and treated as a joint liability

• If relief is denied in full, the joint liability stays on the MFT 30 account and the NRS CSED appears to share the same CSED as the RS on the joint (MFT 30) module. You will need to determine the correct CSED for both spouses separately before taking any enforcement action since the CSED should not be extended for the non-requesting spouse. IRM 5.1.19.3.6 Relief From Joint And Several Liability On Joint Returns/Innocent Spouse for additional guidance.

(1) Apply any involuntary payments and/or undesignated voluntary payments received from the NRS and/or from his/her assets in the order below:

1. individual liability

2. joint liability

(1) The Service has made a policy decision not to offset the RS's refund while an innocent spouse request is pending. See IRM 25.15.3.5.1, Collection Activity. If you secure a return from the RS for which a refund is due or obtain information indicating a refund is due the RS, the refund will not offset to any balance due module for which the claim was filed (because of the TC 971 AC 065 input and the resulting TC 130 refund freeze).

(2) See IRM 5.1.12.9, Innocent Spouse, and IRM 5.1.12.21, Refund Offset, for guidance on refunds.

(3) Take the appropriate action to issue a refund to the RS to the extent that an overpayment exceeds any balance due on tax modules not under consideration for IRC 6015 relief.

(1) When the requesting spouse (RS) has an existing installment agreement (IA), he/she will need to decide whether to maintain, renegotiate, or default the IA.

(2) Discuss the IA with the RS. Do not unilaterally default an existing IA with the RS because of the request for relief.

(3) Try to ensure the RS understands that the decision to maintain, renegotiate, or default the IA will have significant consequences.

1. Refer to IRM 25.15.2.2.1, Installment Agreements in Effect, for an explanation of these consequences.

2. Refer to IRM 5.14.4.5, Joint and Several Liability Relief Under IRC Section 6015 and Installment Agreement Requests, for additional guidance in innocent spouse cases.

(4) Do not route a request for an IA to CCISO if the RS requests an IA after submission of Form 8857.

(5) Follow the procedures in IRM 5.19.1.6.3, Full Pay Within 60 or 120 Day Agreement, and IRM 5.14.4.5, Joint and Several Liability Relief Under IRC Section 6015 and Installment Agreement Requests, to process an installment agreement for the RS after submission of Form 8857 or if the NRS requests an installment agreement.

(1) Continue collection action:

1. on the NRS for all applicable periods

2. on the RS for tax years not included in the claim for relief

(2) Follow the applicable procedures if the TM disapproves the continuance of collection action against the RS. See IRM 25.15.8.7.2.2.1, Suit to Reduce Tax Claim to Judgment, IRM 25.15.8.9, Collection Action — While an Appeal is Pending and IRM 25.15.8.5.3, Collection Action — After the Final Determination.

(1) Follow these procedures after the TM has documented approval in the ICS case history.

(2) Continue collection action against the RS on:

1. tax years included in the claim for relief, and

2. tax years not included in the claim for relief.

(3) Consider instituting and carrying out a lawsuit to protect the government's interests. See IRM 5.17.4, Suits by the United States.

(1) In addition to any other necessary action when you close a case, a case closing letter needs to be issued to the taxpayer(s) (and any authorized representative(s), as applicable), when you have concluded the collection investigation on the taxpayer entity.

(2) See IRM 5.1.1.5, Case Closing Letters.

(1) Resume appropriate collection against the RS on all outstanding module(s) upon notification of the determination of no relief after any of the four following events:

1. 90 days have elapsed from issuance of the final determination letter on the claim and no notice is received that the taxpayer filed a Tax Court petition.

2. The Tax Court decision becomes final.

3. The taxpayer has waived the collection restrictions. See IRM 25.15.3.11, Waivers and IRM 25.15.6, Field Examination Procedures.

4. FC determines that the collection of the tax is in jeopardy and has secured proper approval from the TM. See IRM 25.15.8.7.2.

(1) Resume collection against the RS on any other outstanding module(s) when notified of the full relief determination in favor of the RS:

1. Take no collection action against the RS on any applicable period(s) (i.e., period(s) with full relief granted).

2. Request any necessary adjustments to the account. See IRM 25.15.8.10.2.

3. Request partial or full lien releases, when necessary. See IRM 25.15.8.4.3.1.

4. Continue appropriate collection activity against the RS on any applicable period(s) (i.e., period(s) with no relief granted).

(2) Do not take any collection action against the RS on any module(s) when full relief was granted in favor of the RS on those module(s).

(1) Resume collection against the RS on any applicable outstanding module(s) when notified of the partial relief determination in favor of the RS:

1. Take appropriate collection action against the RS on any applicable period(s) (i.e., period(s) with Partial Relief granted).

2. Request any necessary adjustments to the account. See IRM 25.15.8.10.2.

3. Request partial lien releases, when necessary. See IRM 25.15.8.4.3.1.

4. Continue appropriate collection activity against the RS on any applicable period(s) (i.e., period(s) with no relief granted).

(1) Refer to IRM 25.15.9, Account Processing of Requests for Relief from Joint and Several Liability , for information.

(1) Refer to IRM 25.15.15, Mirror Modules for Requests for Relief from Joint and Several Liability for information.

(1) Notify the Centralized Lien Operation (CLO) that the balance due module(s) is(are) now satisfied for the requesting spouse (RS) only.

(2) CLO will not release the original NFTL.

(3) Monitor the case to ensure that the partial release comes through.

Note: There may be a circumstance where you need to request an immediate partial release. In that case, you will need to work directly with CLO.

1. Contact CLO for an immediate partial release, when applicable.

Note: There may be an occasional circumstance where it will assist the RS to have a certificate of nonattachment. This is a manual process and should be carefully considered because it duplicates the partial NFTL release.

2. Request a partial release of the lien through ALS with regard to the requesting spouse (RS) only, so that the non-requesting spouse (NRS) remains liable.

   Note: An NFTL is originally filed bearing both names. Later, when the RS gets innocent spouse relief, the NFTL is partially relieved as to that spouse.

3. Request a certificate of nonattachment for the RS via manual processing, when applicable.

   Note: A partial Lien release is generally more appropriate than the filing of a certificate of non-attachment.

4. See IRM 5.12.10.13, Certificate of Nonattachment for guidance.

5. Contact CLO for assistance if you need help.

(4) Do not take any collection action on the module(s) for which relief is granted.

(1) Take the following action upon notification that partial relief is granted:

1. Treat the reissued joint assessment as if there had been a partial abatement of the original balance due module.

2. Do not take action on the original NFTL until the reissued joint liability is fully paid.

3. Release the lien(s) when the module(s) is(are) fully satisfied.