4.10.11. Claims for Refund and Requests for Abatement

(1) A taxpayer may amend a return if they believe mistakes were made or additional information becomes available after the original return was filed. (An original non-frivolous tax return is treated as a claim for refund if the refund is held (i.e., the refund was not paid and not applied to a balance due). See IRM 4.10.11.6.1.) Amendments to a return are typically made on one of the following forms, as applicable:

• Form 1040X, Amended U.S. Individual Income Tax Return

• Form 1120X, Amended U.S. Corporation Income Tax Return

• Form 1065X, Amended Return or Administrative Adjustment Request (AAR)

• Form 1120S, U.S. Income Tax Return for an S Corporation, checking box H(4) "Amended return" on page 1

• Form 1041, U.S. Income Tax Return for Estates and Trusts, checking box F "Amended return" on page 1

• Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund

• Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund

• Form 944-X, Adjusted Employer’s ANNUAL Federal Tax Return or Claim for Refund

• Form 945-X, Adjusted ANNUAL Return of Withheld Federal Income Tax or Claim for Refund

• Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, checking the box for "Amended" on page 1

• Form 843, Claim for Refund and Request for Abatement

(2) An amended return is one of the following (see "Terms" in IRM 4.10.11.1.5 for definitions):

1. Claim for refund;

2. Request for abatement (including audit reconsideration);

3. Amended return; no tax effect; or

4. Taxable amended return

(3) An examiner must properly identify the nature of a taxpayer’s amended return (or other written request) to determine the applicable examination procedures. This IRM provides guidance for determining if an amended return (or other written request) fits the criteria of a claim for refund, request for abatement, or audit reconsideration, and provides examination and report writing guidance for each.

(4) Amended returns with no tax effect (that do not request the refund of any amount) and taxable amended returns (that do not request the refund of any amount) are NOT claims for refund or requests for abatement, but are briefly discussed in the exhibits. See Exhibit 4.10.11-2 and Exhibit 4.10.11-3.

(1) The guidance in this IRM is based on the following authorities:

(2) The following Policy Statements and Delegation Orders are associated with claims for refund and requests for abatement:

• IRM 1.2.1.4.15, Policy Statement 3-15 (Formerly P-2-89), Reconsideration of an Unpaid Assessment.

• IRM 1.2.1.5.21, Policy Statement 4-75; Usual principles applicable in the examination of claims on their merits.

• IRM 1.2.1.5.22, Policy Statement 4-76; Disallowed claims may be reconsidered on the merits.

• IRM 1.2.1.5.23, Policy Statement 4-77; Claims may be allowed without examination.

• IRM 1.2.1.5.31, Policy Statement 4-103; Abatement claims considered only in exceptional circumstances.

• IRM 1.2.65.4.4, SBSE 1-23-13, Authority to Sign Claim Disallowance Notices.

• IRM 1.2.65.3.9, SBSE 1-23-24, Authority to Sign Agreements to Extend the Running of the Period of Time to Bring Suit.

(1) The Director, Examination Headquarters, is the executive responsible for providing policy and guidance for SB/SE Examination employees and ensuring consistent application of policy, procedures and tax law to effect tax administration while protecting taxpayers’ rights. See IRM 1.1.16.5.5, Examination Headquarters, for additional information.

(2) The Director, Examination Field and Campus Policy, reports to the Director, Examination Headquarters, and is responsible for the delivery of policy and guidance that impacts the field examination process. See IRM 1.1.16.5.5.1, Examination Field and Campus Policy, for additional information.

(3) Field Examination General Processes (FEGP), which is under the Director, Examination Field and Campus Policy, is the group responsible for providing policy and procedural guidance on standard examination processes to field employees. See IRM 1.1.16.5.5.1.1, Field Examination General Processes, for additional information.

(4) 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 consistently apply the law with integrity and fairness to all.

(5) Examiners and their managers should thoroughly acquaint themselves with the examination procedures and information contained in this IRM, as well as other resources such as those listed in IRM 4.10.11.1.7 below.

(1) The data for management information reports and tables is derived from the AIMS, A-CIS, and ERCS databases. Additional information can be found in IRM 4.4.27, Reports, and IRM 1.4.40.5, Monitoring Reports Overview.

(2) Periodic program reviews are conducted to:

• Assess the effectiveness of specific programs within Examination or across the organization,

• Determine if procedures are being followed,

• Validate policies and procedures, and

• Identify and share best/proven practices.

(1) The following table contains a list of terms used throughout this IRM. For other commonly used terms related to the examination process, see IRM 4.10.1.1.5, Terms.

(1) The following table lists acronyms used throughout this IRM and their definitions:

(1) IRM 4.10.1, Examination of Returns, Overview of Examiner Responsibilities, provides responsibilities related to taxpayer rights; employee contact information; oral and written communication; and additional examiner responsibilities.

(2) The following IRMs provide additional information regarding claims for refund, requests for abatement, and audit reconsiderations.

(3) Links to helpful information include the following:

• For information and resources relating to processing, working and closing claims, abatements and audit reconsiderations see the Claim, Abatement and Audit Reconsideration Knowledge Base.

• For report writing and closing letters see the Letter Chart job aid.

• For RGS Special Procedures, including saving folders on Audit Reconsideration Cases see the Audit Reconsideration Cases and RGS page.

• For a list of local Technical Services claims coordinators with responsibility for issuing statutory notices of claim disallowance and serving as a resource for field groups, see the Claims Coordinators in Exam Technical Services contacts page.

• For a list of PSP claims coordinators with responsibility for building case files, assigning claims to field groups, and serving as a resource for field groups see Claims Coordinator (PSP) - Area contacts page.

• For information on Protection of the Revenue Base see the P of RB Charges in ERCS for Examiners page in the Claim, Abatement and Audit Reconsideration Knowledge Base.

• For Joint Committee questions research the Joint Committee Cases page.

• For information on IRC 6676 including job aids, FAQs, and examples see the Erroneous Claims knowledge base.

• For LB&I procedures for preparer penalty cases, see the LB&I Penalties Preparer Program on the Penalties Practice Network page.

• For information, guidance, and routing procedures for interest abatement claims see Interest Abatement knowledge base.

(1) Claims for refund must involve overpayments. A claim for refund may relate to any item of income, loss, exclusion, deduction, or credit involving a specific amount of tax and/or penalties. To request a refund or credit of an overpayment, a taxpayer must file a valid claim for refund prior to the expiration of the applicable statutory period of limitation known as the Refund Statute Expiration Date (RSED).

(2) To be a formal claim, a claim for refund must:

1. Be submitted in the required format (form and content) (see IRM 4.10.11.2.1.1),

2. Request a refund of an overpayment (see IRM 4.10.11.2.1.2),

3. Be timely filed (see IRM 4.10.11.2.1.3), and

4. Meet all applicable filing requirements (e.g., signed under penalties of perjury, sent to the correct office as instructed, etc.).

(3) The standards for a valid claim for refund found in the IRC, Treasury Regulations, and court cases are briefly summarized in the following subsections.

(1) The following subsections describe the forms, letters, and IRC 6676 penalty specific to the examination of claims for refund.

(1) An examiner may be assigned a claim for refund case or may receive a claim for refund for a tax period already under examination. Because claims for refund have certain requirements, limitations, and court rights, it is important examiners follow the procedures in this section to properly process claim cases and advise taxpayers of their rights. Examiners must be familiar with the particular aspects of claims for refund found in IRM 4.10.11.2.2.

(2) Examiners should start the pre-contact analysis on claim for refund cases within 30 days of receipt. If the IRS does not act on a claim for refund within six months from the filing date of the claim, the taxpayer is permitted to file a refund suit. Therefore, claims are considered priority work.

(3) For all claims, whether assigned or received during an audit, see IRM 4.10.11.2.4 for guidance in determining the validity and nature of the claim. Examiners assigned a claim for refund case must also follow the initial contact procedures in IRM 4.10.11.2.6.

(4) Once a determination is made regarding the claim for refund, examiners follow the procedures found in this section and Exhibit 4.10.11-1.

(5) In all cases where a claim for refund is disallowed (in full or part), IRC 6402(l) requires an explanation of the reason for the refund disallowance. Examiners must provide this explanation in the preliminary claim disallowance letter (e.g., Letter 569) by including in the "Reason for Disallowance" section either the explanation of why the claim amount was not allowed, or a reference to an attachment containing the explanation (e.g., "See enclosed report.").

(6) In addition to the mandatory administrative lead sheets, an issue lead sheet is required for all examined issues, including claim issues. See IRM 4.10.9.6.2, Issue Lead Sheets.

(7) In general, the taxpayer will be offered an opportunity to participate in Fast Track Settlement or request a conference with Appeals when a claim for refund is disallowed (in full or part). SB/SE examiners see IRM 4.10.7.5.5, SB/SE Fast Track Settlement, and LB&I examiners see IRM 4.51.4, LB&I/Appeals Fast Track Settlement (FTS) Program, for additional information.

(8) When closing a claim for refund case, examiners must follow the procedures found in IRM 4.10.11.2.15 in addition to normal case closing procedures.

(1) Examiners are responsible for determining if an amended return or written request meets the criteria for a claim for refund as described in IRM 4.10.11.2.1. Examiners may contact their local Technical Services Claims Coordinator by State for assistance, if needed.

(2) When copies of amended returns or correspondence relating to campus adjustments are not in the file or not provided by the taxpayer, additional information may be available on the Correspondence Imaging System (CIS). CIS is used to manage scanned images of amended IMF returns, documents, and electronic case files. The CIS View Image function on AMS allows users to view and print images of correspondence and returns. Examiners who do not have access to AMS may request CIS images through the local AIMS/ERCS Analyst.

(3) In addition to reviewing the amended return or written request, the examiner must secure and review a current transcript to identify all actions taken by the IRS, and determine the nature of the request by answering the following questions:

1. Is the taxpayer requesting a refund?

2. Are the criteria met for form and content as stated in the Treasury Regulations and summarized in IRM 4.10.11.2.1? See IRM 21.5.3.4.4, Signature Requirements for Claims, for criteria relating to signatures.

   Note: See IRM 4.10.1.3.7, Policy for Use of Fax in Taxpayer Submission, for information on accepting original and amended tax returns by fax.

3. Was the claim for refund timely filed? For example, is the filing date (indicated by the TC 977 date, post mark, or date stamp) prior to the RSED? See IRM 4.10.11.2.1 and IRM 4.10.11.5.2 for a discussion of the RSED and timely filing requirements, as well as IRM 25.6.1.6.15, When a Document Is Treated As Filed Under the IRC. If a claim for refund is otherwise valid, but was filed after the RSED (i.e., all or part of the refund is barred by the RSED), follow procedures in IRM 4.10.11.2 and IRM 4.10.11.5.2.4 to disallow the claim, and provide the taxpayer an opportunity to appeal.

   Caution: The claim date shown on AIMS represents the date the claim amount was entered on AIMS, not the filing date of the claim. See IRM Exhibit 4.4.1-1, Reference Guide.

4. Has the campus already allowed or disallowed the claim? Are there indications on the transcript the claim has been acted on? For IMF cases, TC 290 (Additional Tax Assessment) or TC 291 (Abatement Prior Tax Assessment) with reason codes (RC) 80-82 indicate the claim was acted on. RC 80 represents "Claim Disallowed In Full;" RC 81 represents "Claim Disallowed In Part;" and RC 82 represents "Claim Allowed In Full." For example, a TC 291 with a dollar amount matching the refund and a RC 82 indicates the claim was allowed in full. A TC 290 with $0 and a RC 80 indicates the claim was disallowed. Review TXMODA and ENMOD for references to "105C" or "106C" with dates corresponding to the claim. Letter 105C and Letter 106C are Correspondex letters sent by the campus for disallowed claims for refund.

   Note: If the adjustments to tax or credits shown on a claim for refund have been posted to Master File (whether the taxpayer received the refund or it was applied to another balance), the procedures in this IRM do not apply as it is no longer a claim for refund. If an examination is warranted, follow normal examination procedures. The statute of limitations for assessment must be protected and the use of "AA" as discussed in IRM 4.10.11.5.1 is not appropriate.

5. Has the liability for the tax period in question been closed with finality (e.g., a closing agreement or an Offer in Compromise)? If so, a claim for refund is not permitted.

(4) The procedures in IRM 4.10.11.2 apply to valid claims for refund. If the amended return or written request does not meet the criteria for a claim for refund, refer to the following table for guidance.

(5) Before determining whether to survey or examine an assigned claim for refund, examiners are responsible for evaluating the audit potential of the entire return. Examiners must follow the procedures outlined in IRM 4.10.2.3, In-Depth Pre-Contact Analysis, which include a thorough review of the return and case file to identify large, unusual, or questionable items (LUQs). The examination need not be limited to the issues raised in the claim for refund if there are other issues that warrant examination or further consideration.

(6) Before limiting the scope of an audit, the probes in IRM 4.10.2.3.2, Pre-Contact Minimum Income Probes, must be completed; for an individual business return, this includes preparing a preliminary financial status analysis (T-Account) based on the amended tax return and available data. If the pre-contact minimum income probes indicate a likelihood of underreported income, then further development is required and the remaining minimum income probes must be completed. If there are no other issues meriting further consideration, the examination can be limited to the claim for refund issue(s).

(7) The analysis and pickup of prior, subsequent, and related returns, when warranted, is a primary responsibility of examiners in every audit, including claims for refund. See IRM 4.10.5, Required Filing Checks, for more information.

(8) Examiners must determine if the assigned claim for refund constitutes a request for a retroactive change in accounting method as outlined in IRM 4.11.6.7.5, IRC 446(e) - Taxpayer Files Amended Return or Claim (Formal or Informal) to Make Retroactive Change in Accounting Method, and if so, whether the claim should be allowed.

(9) Claims for refund that are excluded from paperless electronic closure are placed in blue file folders in accordance with IRM 4.10.8.15.3, Case Folder Color.

(10) To ensure the accuracy of the AIMS database, examiners must verify the source code and claim amount are properly reflected on claim for refund cases. For information on the source code, see Exhibit 4.10.11-5. For information on the claim amount, see Exhibit 4.10.11-6.

(1) After evaluating the audit potential as instructed in IRM 4.10.11.2.4 (5), a claim for refund of income, estate, or gift taxes may be surveyed after assignment if it is determined the claim issue is clearly allowable and the return does not otherwise warrant examination. Follow the procedures in IRM 4.10.2.5.3, Surveying Claims.

(2) A surveyed claim is considered an "examined closure" for AIMS purposes and requires a Form 5344, Examination Closing Record, with a Disposal Code 34. A Survey Reason Code is not required.

(3) Examiners must complete a Form 1900 to explain why the claim is being surveyed.

(4) SB/SE income tax examiners should use RGS for generating a tax computation and Form 5344, in accordance with IRM 4.10.15.10.1, Examined Closures (Form 1040, Form 1120, Form 1120S, Form 1065, and Form 1040NR).

(5) Examiners must ensure the IRS’ calculation of the overassessment agrees with the amount shown on the claim for refund. If the IRS’ calculation is less than the amount shown on the claim, survey procedures are generally not applicable. If the computation of the overassessment is not shown on the claim, the examiner will include a tax computation schedule with Form 1900, Income Tax Survey After Assignment.

(6) If the taxpayer was informed by the campus that their claim for refund was transferred to an area office for review (e.g., the campus issued Letter 86C or Letter 96C), the taxpayer should receive a response from the area. Therefore, if the claim for refund is allowed in full without examination (i.e., surveyed), examiners must prepare Letter 570 undated and have it signed by the group manager on behalf of the appropriate Director based on their Operating Division. For cases excluded from paperless electronic closure, the closing letter is left undated in the case file (with a copy for the file) and it’s mailed by CCP. Closing letters for paperless electronic closure cases are mailed by the group instead of CCP.

(7) If a delinquency penalty was asserted on the original return, the Delinquent Return Indicator is set on AIMS (page 1, line 16 of the AMDISA) and examiners must consider how the allowance of the claim affects the delinquency penalty. If needed, examiners adjust the delinquency penalty in Item 12 on Form 5344. Enter a TC 160 for zero if the delinquency penalty should not be adjusted when allowing the claim.

(8) See the closing procedures in IRM 4.10.11.2.15 for preparation of Form 5344 and Form 3198, Special Handling Notice for Examination Case Processing, then close the case to CCP.

(1) Once the decision has been made to examine the claim for refund, SB/SE Field examiners must follow the initial contact procedures in IRM 4.10.2.8, Initial Contact: Overview, and related sections. LB&I examiners, see IRM 4.46.3.2.7, Contacting the Taxpayer, for guidance.

(2) An examination may have been initiated for reasons other than the claim for refund. However, if a claim for refund is filed for a year open for examination and that request has not been previously acted on, examiners must generally expand the scope to consider the claim for refund issues. An amended return received from a taxpayer under examination must remain with the case file.

(1) If a taxpayer asks to withdraw their claim for refund, the examiner must document the request in the activity record.

(2) Claims that are withdrawn are still considered filed; the taxpayer is withdrawing their argument or position stated in the claim (i.e., the claim issues).

(3) The examination can be discontinued unless the ASED is open and other issues with audit potential were identified during the required pre-contact analysis (see IRM 4.10.11.2.4(5)), or the examination.

(4) If the examination is discontinued (or continued but no additional tax is proposed), examiners follow the procedures for Claims for Refund - Disallowed in Full - No Additional Tax Liability in IRM 4.10.11.2.13. Letter 569 must include the following language as the reason for the disallowance: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). On (date) you requested the IRS no longer consider your claim, therefore we are disallowing your claim in full."

(5) If the examination is continued and other issues result in an additional tax liability, follow the procedures for Claims for Refund - Disallowed in Full - Additional Tax Liability in IRM 4.10.11.2.14.

(6) Examiners must consider the applicability of IRC 6676, Penalty for Erroneous Claim for Refund or Credit. See IRM 4.10.11.2.2.3 for additional information.

(1) A claim is considered allowed in full when the overassessment shown on the examiner’s report equals the claim amount. If the claim issues are allowed in full, but the overassessment does not equal the claim amount, follow the applicable procedures below (partially allowed, allowed in full plus additional refund, etc.).

(2) When a claim for refund is allowed in full, examiners must prepare and issue:

1. Form 4549-A, Report of Income Tax Examination Changes, reflecting the reduction of tax and/or penalties. (RGS users may need to run the tax computation as "unagreed" to get this report option).

   Note: Include the following statement in the Form 4549-A "Other Information" section: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). As a result of our examination, your claim was allowed in full, as shown in this report."

2. Letter 5810, to notify the taxpayer of the findings and transmit the report.

(3) Examiners must also prepare closing Letter 570, undated and have it signed by the group manager on behalf of the appropriate Director based on their Operating Division. For cases excluded from paperless electronic closure, the closing letter is left undated in the case file (with a copy for the file) and it’s mailed by CCP. Closing letters for paperless electronic closure cases are mailed by the group instead of CCP.

(4) Close the case to CCP; it is not necessary to secure a signature on the examination report.

(5) See IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures.

(1) When additional information is provided that substantiates an increase in the refund amount in excess of the original claim for refund, examiners must determine if the information supplements the original claim or raises new facts or legal positions. New claim issues must be requested timely according to the RSED requirements described in IRM 4.10.11.5.2. For a discussion on the difference between supplementing a pending claim versus submitting a new claim, see IRM 25.6.1.10.2.6.4, Supplemental Claims.

(2) When the claim issues are allowed in full, and the examination results in an allowable additional refund, examiners must follow the procedures in IRM 4.10.11.2.8 with the exception of the wording in the "Other Information" section of Form 4549-A, which must be similar to the following: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). As a result of our examination, your claim was allowed in full. However, the total amount of the refund has been increased as the result of other adjustments shown in this report."

(3) When the claim issues are allowed in full, and the examination results in an additional refund that is barred, examiners must follow the procedures in IRM 4.10.11.5.2.4.

(1) When the claim issues are allowed in full, but other adjustments are proposed that reduce the amount of the refund (or the calculated overassessment is less than the claim amount), the claim is treated as a partially or fully disallowed claim.

(2) Examiners must prepare and issue Form 4549 showing the adjustments to the tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $ (amount) for (year). As a result of our examination, your claim was allowed in full. However, the total amount of the refund was decreased by other adjustments shown in this report."

(1) When a claim for refund is partially disallowed, examiners must prepare and issue:

1. Form 4549 reflecting the adjustments to the tax and/or penalties.

   Note: Include the following statement in the "Other Information" section: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). As a result of our examination, we partially allowed your claim, as shown in this report."

   Reminder: Examiners must consider the applicability of IRC 6676, Penalty for Erroneous Claim for Refund or Credit, when a claim for refund is disallowed in full or part.

2. Form 2297 - to solicit a waiver of the right to receive a statutory notice of claim disallowance that must otherwise be issued by Technical Services.

3. Letter 569 - to notify the taxpayer of the findings and offer the opportunity to appeal.

(2) If the taxpayer agrees with the partial claim disallowance and signs Form 2297 and Form 4549, see IRM 4.10.8.4.5, Closing Letters for Agreed Cases, for instructions on preparing Letter 987. See IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures and close the case to CCP.

(3) If an agreement is not secured, follow the procedures below based on the response to Letter 569:

1. If the taxpayer provides additional information after Letter 569 has been issued, the examiner must evaluate the information, then follow the procedures in IRM 4.10.8.12.9.1, Additional Information Received, and issue Letter 692-A, Request for Consideration of Additional Findings (claim).

   Exception: If the additional information raises new issues that result in a deficiency, see IRM 4.10.11.2.14.

2. If the taxpayer requests Appeals’ consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures, then close the case to Technical Services.

3. If no reply is received from the taxpayer within 30 days, and they indicated their intent to reply, see IRM 4.10.8.12.10, No Response to 30-Day Letter, for guidance on extending the time to file a protest and undeliverable letters, if applicable. Otherwise, if a signed Form 2297 is not secured, close the case to Technical Services for preparation and issuance of Letter 905. (LB&I will prepare Letter 905, undated, and secure the appropriate signatures prior to sending to Technical Services.) See IRM 4.10.11.2.15 for guidance on preparing Form 5344 and Form 3198 for closing the case.

(1) When the claim issues are partially disallowed, but other adjustments are proposed that further reduce the amount of the refund, the claim is treated as a partially or fully disallowed claim. For example, if no refund is allowed, the claim is fully disallowed, even if the claim issues are partially allowed.

(2) Examiners must prepare and issue Form 4549 showing the adjustments to the tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you filed a claim using Form (843, 1040X, 1120X), for refund of $(amount) for (year). As a result of our examination, your claim was allowed in part. However, the total amount of the refund was decreased by other adjustments shown in this report."

(1) When a claim for refund is disallowed in full and no additional tax liability is proposed, examiners must prepare and issue:

1. Form 3363 - to secure an agreement to the claim disallowance. Form 3363 presents the amount of the claim disallowance in a more straightforward manner than Form 4549, which would reflect a no-change in this scenario. Therefore, Form 3363 is used instead of Form 4549 when there are no adjustments.

   Exception: If the claim is disallowed in full because other adjustments offset the claim, or a balance due prevents a refund of a partially allowed request, a Form 4549 is used to secure an agreement to the claim disallowance instead of Form 3363. See IRM 4.10.11.2.10 or IRM 4.10.11.2.12 for the applicable wording for the "Other Information" section of Form 4549.

2. Form 2297 - to solicit a waiver of the requirement to receive a statutory notice of claim disallowance that must otherwise be issued by Technical Services.

3. Letter 569 - to notify the taxpayer of the findings and offer the opportunity to appeal. Include the following explanation for the disallowance of the claim on the last page: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). As a result of our examination, we disallowed your claim (follow with a detail explanation for the disallowance)." The explanation and reason for disallowance must include enough information to enable the taxpayer to challenge the determination.

   Reminder: Examiners must consider the applicability of IRC 6676, Penalty for Erroneous Claim for Refund or Credit, when a claim for refund is disallowed in full or part.

(2) If the taxpayer agrees with the full claim disallowance and signs Form 2297 and Form 3363 (or Form 4549), see IRM 4.10.8.4.5, Closing Letters for Agreed Cases, for instructions on preparing Letter 987. See IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(3) If an agreement is not secured, follow the procedures below based on the response to Letter 569:

1. If the taxpayer provides additional information after Letter 569 has been issued, the examiner must evaluate the information, then follow the procedures in IRM 4.10.8.12.9.1, Additional Information Received, and issue Letter 692-A.

   Exception: If the additional information raises new issues that result in a deficiency, see IRM 4.10.11.2.14.

2. If the taxpayer requests Appeals’ consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures, then close the case to Technical Services.

3. If no reply is received from the taxpayer within 30 days, but they had indicated their intent to reply, see IRM 4.10.8.12.10, No Response to 30-Day Letter, for guidance on extending the time to file a protest and undeliverable letters, if applicable. Otherwise, if a signed Form 2297 is not secured, close the case to Technical Services for preparation and issuance of Letter 906. (LB&I will prepare Letter 906, undated, and secure the appropriate signatures prior to sending to Technical Services.) See IRM 4.10.11.2.15 for guidance on preparing Form 5344 and Form 3198 for closing the case.

(1) The ASED must be considered and protected if other issues are present which could result in a deficiency. For example, if adjustments increasing tax (or reducing credits) more than offset the allowable amount (if any) of the claim for refund, a deficiency exists. The ASED must be open to make an assessment of a deficiency (e.g., tax increase or credit reversal). If the ASED is not open, an additional assessment cannot be proposed; follow the procedures in IRM 4.10.11.2.13 for claims disallowed in full. Include a narrative in the workpapers explaining any offsetting adjustments the examiner noted but could not be proposed because the ASED was barred.

(2) When the ASED is open for a claim for refund and the examination results in a proposed deficiency, examiners must prepare and issue:

1. Form 4549 to reflect the adjustments to the tax and/or penalties.

   Note: Include the following statement in the Form 4549 "Other Information" section: "On (date) you filed a claim using Form (843, 1040X, 1120X) for a refund of $(amount) for (year). As a result of our examination, we disallowed your claim and made other adjustments, as shown in this report."

   Reminder: Examiners must consider the applicability of IRC 6676, Penalty for Erroneous Claim for Refund or Credit, when a claim for refund is disallowed in full or part. For the additional deficiency, examiners must consider the applicability of delinquency and return-related penalties.

2. Form 2297 - to solicit a waiver of the right to receive a statutory notice of claim disallowance that must otherwise be issued by Technical Services.

3. Letter 569 or Letter 5153-A - to notify the taxpayer of the findings and offer the opportunity to appeal. The letter used to transmit the findings will depend on the time remaining on the ASED, as explained in the next paragraph.

(3) If fewer than 240 days remain on the ASED, examiners must issue Letter 5153-A, Examination Report Transmittal - Statute < 240 Days (Claim), and follow the procedures in IRM 4.10.8.12.1, 30-Day Letters. If 240 or more days remain on the ASED, examiners must issue Letter 569, and follow the procedures in IRM 4.10.8.12.9, Response to 30-Day Letter.

(4) If the taxpayer agrees with the adjustments and signs Form 2297 and Form 4549, see IRM 4.10.8.4.5, Closing Letters for Agreed Cases, for instructions on preparing Letter 987. See IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(5) If the taxpayer requests Appeals’ consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.2.15 for Form 5344 and Form 3198 closing procedures, then close the case to Technical Services.

(6) In certain circumstances, a partial agreement might be appropriate. For example, the taxpayer wishes to protest the disallowance of the claim issue(s), but there are other adjustments which result in a deficiency to which the taxpayer agrees. In this scenario, examiners:

1. Secure agreement on Form 4549 and assess the agreed deficiency to limit the number of issues for Appeals’ consideration. See the instructions in IRM 4.10.8.6, Partially Agreed Cases, for preparing reports and making assessments on partially agreed cases.

2. See (5) above for procedures if the taxpayer requests Appeals’ consideration for the claim issues. If the assessment statute no longer needs protection because the additional deficiency has been assessed, the statute may be updated to "AA", as explained in IRM 4.10.11.5.1.

(7) If a signed Form 4549 is not secured, or no reply is received from the taxpayer within the time allowed and they had indicated their intent to reply, see IRM 4.10.8.12.10, No Response to 30-Day Letter, for guidance on extending the time to file a protest and undeliverable letters, if applicable. Otherwise, close the case to Technical Services for preparation and issuance of a statutory notice of deficiency and claim disallowance. (LB&I will prepare Letter 906, undated, and secure appropriate signatures prior to sending to Technical Services.) See IRM 4.10.11.2.15 for guidance on preparing Form 5344 and Form 3198 for closing the case to Technical Services.

(1) Form 3198 and a Form 5344 (for each tax period) must be included in the case file. This section provides reminders and references regarding the features of Form 3198 and Form 5344 that examiners must consider when preparing these forms on claim for refund cases.

(2) See IRM 4.10.8.7, Splitting Multi-Year Examination Cases, when closing a multi-year case when at least one of the tax years requires different processing. Do not split a multi-year case when issues raised in an unagreed year(s) are related to or dependent on issues raised in agreed or no-change year(s).

(3) For all cases with an amended return or –A freeze on IDRS, examiners must check the "Amended Return or AAR in the File and Considered" box in the Special Features section of Form 3198. See IRM 21.5.6.4.2, –A Freeze, for additional information.

(4) For cases with overassessments of $100,000 or more, examiners must flag Form 3198 in the Expedite Processing section by checking the "Over $100,000 Agreed and Unpaid" box. See IRM 4.10.8.2.4.3, Large Dollar Cases, for additional information.

(5) For barred refunds, see IRM 4.10.11.5.2.4 for additional instructions for completing Form 3198 and Form 5344.

(6) Exhibit 4.10.11-7 contains a table with disposal codes for claims for refund, requests for abatement, and audit reconsiderations to assist the examiner in completing Item 13 of Form 5344 when a deficiency is not proposed.

(7) IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments, contains procedures for completing Form 5344. Closing instructions and IRM references specific to claims for refund are shown in the table below.

(8) See Protection of Revenue Base for additional instructions on capturing time.

(1) When the examiner’s preliminary findings result in a disallowance of a claim for refund (in full or part), the taxpayer is generally afforded an opportunity to request a conference with Appeals. A statutory notice of claim disallowance, explaining the taxpayer’s right to file a refund suit, is issued when an agreement is not reached during the examination or the Appeals process (if protested).

(2) IRC 6532 imposes a general two-year time limit on the taxpayer to file a refund suit from the date of mailing of the statutory notice of claim disallowance (or the receipt of a signed Form 2297). See IRM Exhibit 8.7.7-1, IRS Claim Disallowance Letters that Begin the 2-Year Period for Filing a Refund Suit, for some of the letters IRS issues to meet this statutory requirement, and IRM 4.10.11.2.2.1 for a discussion of Form 2297 and the two-year time limit.

(3) After the IRS has issued a statutory notice of claim disallowance, the taxpayer may file a refund suit in court or request a reconsideration, as long as the claim was not previously closed with finality (e.g., a closing agreement under IRC 7121, Form 870-AD, or a court order).

(4) The IRC 6532 two-year period in which a taxpayer may file a refund suit is not suspended during any period in which the IRS considers or reconsiders the claim or when the taxpayer requests or receives a conference with Appeals.

(1) Requests for abatement are considered as a courtesy rather than as a right afforded by law. As such, they do not have the same requirements as claims for refund with regard to form, content, and timeliness discussed in IRM 4.10.11.2.1.

(2) Abatements can be requested at any time. If, however, the abatement results in part abatement/part refund, then examiners must consider the provisions of IRC 6511 as they pertain to the refund portion. See IRM 4.10.11.5.2 for additional discussion regarding the RSED and an example of how it applies to the refund portion.

(3) A request for abatement (which does not also include a request for a refund) does not constitute a claim for refund within the meaning of IRC 6511. Taxpayers have no court rights for disallowed requests for abatement (except for judicial review of interest abatement requests as described in IRC 6404(h)).

(4) The determination of whether an amended return or written request that decreases tax and/or penalty (or increases a credit) is a claim for refund or a request for abatement, is based on whether the amended return or written request asked for a refund at the time it was filed. If the taxpayer requests any amount of overpayment, then it is a claim for refund. Otherwise, a request for a reduction to the liability (not resulting in a credit or refund of any amount) is a request for abatement. Examples are given in IRM 4.10.11.2.1.2(5), and will assist examiners in determining if a written request is a claim for refund or request for abatement.

(1) An examiner may be assigned a request for abatement case or may receive a request for abatement for a tax period already under examination. Because requests for abatement and claims for refund differ regarding requirements, limitations, and appeal rights, it is important examiners make the proper determination of the nature of the request to properly process the case and advise taxpayers of their rights.

(2) For all requests for abatement, whether assigned or received during an audit, see IRM 4.10.11.3.3 for guidance in determining the nature of the request. Examiners assigned a request for abatement case must also follow the initial contact procedures in IRM 4.10.11.3.5.

(3) Since a request for abatement is not a claim for refund, claim forms and letters (e.g., Form 3363, Form 2297 and Letter 569) are not used because the appeal and court rights referenced in those forms and letters are not applicable to requests for abatement. Advise taxpayers that disallowed requests for abatement have no appeal rights beyond the group level without paying the tax and/or disputed penalties, and filing a claim for refund.

(4) Examiners sign and issue Letter 693, Reply to Request for Reconsideration of Assessment, to transmit the report as explained below. Allow the taxpayer 15 calendar days to request a group manager conference before closing the case.

(5) Because reports for requests for abatement reduce tax and/or penalties which have been assessed but not paid, examiners must explain to the taxpayer the overassessment shown on the examination report will not necessarily be refunded; instead the existing balance due will be reduced or eliminated.

(6) In all cases where a request for abatement is disallowed (in full or part), examiners must provide a detailed explanation to the taxpayer of why the abatement was not allowed. Examiners must note the explanation in the "Other Information" section of Form 4549-A, or included in a lead sheet, workpaper, or Form 886-A.

(7) In addition to the mandatory administrative lead sheets, an issue lead sheet is required for all examined issues, including abatement issues. See IRM 4.10.9.6.2, Issue Lead Sheets.

(8) When closing a request for abatement case, examiners must follow the procedures found in IRM 4.10.11.3.14 in addition to normal case closing procedures.

(1) Examiners are responsible for determining if an amended return or written request is a request for abatement rather than a claim for refund. Examiners may contact their local Technical Services Claims Coordinator for assistance, if needed.

(2) When copies of amended returns or correspondence relating to campus adjustments are not in the file or provided by the taxpayer, additional information may be available on the Correspondence Imaging System (CIS). CIS is used to manage scanned images of amended IMF returns, documents, and electronic case files. The CIS View Image function on AMS allows users to view and print images of correspondence and returns. Examiners who do not have access to AMS may request CIS images through the local AIMS/ERCS Analyst.

(3) In addition to reviewing the amended return or written request, examiners must secure and review a current transcript to identify all actions taken by the IRS and determine the nature of the request by answering the following questions:

1. Is the taxpayer requesting an abatement of an existing liability? For example, previous assessments of tax and/or disputed penalties were not paid and the module had a balance due at the time the written request was filed and no refund was requested; therefore the request is for an abatement rather than a refund.

   Note: Claim for refund procedures must be followed if a written request asks for some amount of money to be refunded, whether or not it also involves an abatement.

2. Has the campus already allowed the request for abatement? For example, a TC 291 with a dollar amount matching the requested abatement indicates the request was allowed.

   Note: If the adjustments to tax or credits shown on a request for abatement have been allowed and posted to Master File, the procedures in this IRM do not apply. If an examination is warranted, follow normal examination procedures. The statute of limitations for assessment must be protected and the use of "AA" as discussed in IRM 4.10.11.5.1 is not appropriate.

3. Is the request for abatement related to a prior audit? For example, a TC 300 examination assessment posted on the module for the tax period is indicative of a prior audit. If the request for abatement includes new information that was not previously considered, the examiner must follow the audit reconsideration procedures in IRM 4.10.11.4, Audit Reconsiderations.

   Reminder: A TC 290 is not a prior audit assessment.

4. Has the liability for the tax period in question been closed with finality (e.g., a closing agreement or an Offer in Compromise)? If so, a request for abatement is not permitted.

(4) The procedures in IRM 4.10.11.3 apply to requests for abatement that are not audit reconsiderations. If the amended return or written request does not meet the criteria for a request for abatement, refer to the following table for guidance.

(5) Before determining whether to survey or examine an assigned request for abatement, examiners are responsible for evaluating the audit potential of the entire return. Examiners must follow the procedures outlined in IRM 4.10.2.3, In-Depth Pre-Contact Analysis, which include a thorough review of the case file to identify large, unusual, or questionable items (LUQs). The examination need not be limited to the issues raised in the request for abatement if there are other issues that warrant examination or further consideration.

(6) Before limiting the scope of an audit, the probes in IRM 4.10.2.3.2, Pre-Contact Minimum Income Probes, must be completed; for an individual business return, this includes a preliminary financial status analysis (T-Account) based on the amended tax return and available data. If the pre-contact minimum income probes indicate a likelihood of underreported income, then further development is required and the remaining minimum income probes must be completed. If there are no other issues meriting further consideration, the examination can be limited to the abatement issue(s).

(7) The analysis and pickup of prior, subsequent, and related returns, when warranted, is a primary responsibility of examiners in every audit, including requests for abatement. See IRM 4.10.5, Required Filing Checks, for more information.

(8) Requests for abatement that are excluded from paperless electronic closure are placed in light blue file folders in accordance with IRM 4.10.8.15.3, Case Folder Color.

(9) To ensure the accuracy of the AIMS database, examiners must verify the source code and claim amount are properly reflected on request for abatement cases. For information on the source code, see Exhibit 4.10.11-5. Even though a request for abatement is not a claim for refund, a "claim amount" is required on AIMS. For information on the claim amount, see Exhibit 4.10.11-6.

(1) After evaluating the audit potential as instructed in IRM 4.10.11.3.3(5), a request for abatement may be surveyed after assignment if it is determined the abatement issue is clearly allowable in full and the return does not otherwise warrant examination. Follow the procedures in IRM 4.10.2.5.3, Surveying Claims.

(2) A surveyed request for abatement is considered an "examined closure" for AIMS purposes and requires a Form 5344, with a Disposal Code 34. The net of tax and penalties in Item 12 and/or 15 must be negative (or a positive credit amount). A Survey Reason Code is not required.

(3) Examiners must complete a Form 1900 to explain why the request for abatement is being surveyed.

(4) SB/SE income tax examiners should use RGS for generating a tax computation and Form 5344, in accordance with IRM 4.10.15.10.1, Examined Closures (Form 1040, Form 1120, Form 1120S, Form 1065, and Form 1040NR).

(5) Examiners must ensure the IRS’ calculation of the overassessment agrees with the amount shown on the request for abatement. If the IRS’ calculation is less than the amount shown on the amended return or written request, survey procedures are not applicable. If the computation of the overassessment is not shown on the amended return or written request, the examiner must include a tax computation schedule with Form 1900, Income Tax Survey After Assignment.

(6) If a delinquency penalty was asserted on the original return, the Delinquent Return Indicator is set on AIMS (page 1, line 16 of the AMDISA) and examiners must address the delinquency penalty in Item 12 on Form 5344. Enter a TC 160 for zero if the delinquency penalty should not be adjusted when allowing the request for abatement.

(7) See IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(1) Once the decision has been made to examine the request for abatement, SB/SE Field examiners must follow the initial contact procedures in IRM 4.10.2.8, Initial Contact: Overview, and related sections. LB&I examiners, see IRM 4.46.3.2.7, Contacting the Taxpayer, for guidance.

(2) An examination may have been initiated for reasons other than the request for abatement. However, if a request for abatement is made for a year open for examination and that request has not been acted on, examiners must generally expand the scope to consider the abatement issues along with the other issues identified in the examination. An amended return received from a taxpayer under examination must remain with the case file.

(1) If a taxpayer asks to withdraw their request for abatement (i.e., withdraw the argument or position stated in the request), document the request for withdrawal in the activity record.

(2) The examination can be discontinued unless the ASED is open and other issues with audit potential were identified during the required pre-contact analysis (see IRM 4.10.11.3.3(5)), or the examination.

(3) If the examination is discontinued (or continued but no additional tax liability is proposed), examiners follow the procedures for Requests for Abatement - Disallowed in Full - No Additional Tax Liability in IRM 4.10.11.3.12. The following statement must be included in the "Other Information" section of the Form 4549 as the reason for the disallowance: "On (date) you filed a Form (843, 1040X, 1120X) requesting an abatement of $(amount) for (year). On (date) you stated you did not want the IRS to give your request further consideration, therefore we are fully disallowing your abatement request."

(4) If the examination is continued and other issues result in an additional tax liability, follow the procedures for Requests for Abatement - Disallowed in Full - Additional Tax Liability in IRM 4.10.11.3.13.

(1) A request for abatement is considered allowed in full when the overassessment shown on the examiner’s report equals the requested abatement amount. If the abatement issues are allowed in full, but the overassessment does not equal the requested abatement amount, follow the applicable procedures below (partially allowed, allowed in full plus additional refund, etc.).

(2) When a request for abatement is allowed in full, examiners must prepare and issue:

1. Form 4549-A, reflecting the reduction of tax and/or penalties. (RGS users may need to run the tax computation as "unagreed" to get this report option).

   Note: Include the following statement in the Form 4549-A "Other Information" section: "On (date) you filed (a Form 843, 1040X, 1120X) requesting an abatement of $(amount) for (year). As a result of our examination, your request was allowed in full, as shown in this report."

2. Letter 693, with the applicable box checked, to notify the taxpayer of the findings and transmit the report.

(3) It is not necessary to secure a signature on the examination report; therefore, close the case to CCP.

(4) See IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures.

(1) When additional information is provided that substantiates not only the abatement of tax and/or penalties, but a potential refund to the taxpayer, examiners must consider the RSED as discussed in IRM 4.10.11.5.2 to determine if the refund is allowable or barred.

(2) When the examination results in the allowance of abatement issues, plus a refund, examiners must follow the procedures in IRM 4.10.11.3.7 with the exception of the wording in the "Other Information" section of Form 4549-A; instead use wording similar to the following: "On (date) you filed a (Form 843, 1040X, 1120X) requesting an abatement of $(amount) for (year). Your request was allowed. In addition to the abatement, a refund has been allowed as the result of the adjustments shown in this report."

(3) When the examination results in the allowance of abatement issues, plus a refund that is barred, examiners must follow the procedures for Requests for Abatement - Allowed in Full in IRM 4.10.11.3.7 with the exception of the wording in the "Other Information" section of Form 4549-A; instead use wording similar to the following: "On (date) you filed a (Form 843, 1040X, 1120X) requesting an abatement of $(amount) for (year). Your request was allowed. In addition to the abatement, a refund has been computed as the result of the adjustments shown in this report. However, this amount is barred from refunding by IRC 6511, Limitations on Credit or Refund".

(1) When the abatement issues are allowed in full, but other adjustments are proposed that reduce the amount of the abatement (or the calculated overassessment is less than the requested amount), the request is treated as partially or fully disallowed.

(2) Examiners must prepare and issue Form 4549-A showing the adjustments to tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you filed a Form (843, 1040X, 1120X) requesting an abatement of $ (amount) for (year). As a result of our examination, your request was allowed in full. However, the total amount of the abatement was decreased by other adjustments shown in this report."

(1) If the examination of the request for abatement results in a partial disallowance of the amount requested, examiners must prepare and issue:

1. Form 4549-A. (RGS users may need to run the tax computation as "unagreed" to get this report option). The report will reflect an overassessment due to the abatement of tax and/or penalties.

   Note: The following statement must be included in the "Other Information" section of the report: "On (date) you filed a Form (843, 1040X, 1120X) requesting an abatement of $(amount) for (year). As a result of our examination, your request was allowed in part, as shown in this report."

2. Letter 693, with the applicable box checked, to notify the taxpayer of the examination findings. Allow the taxpayer 15 calendar days to request a group manager conference before closing the case.

(2) See IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(1) When the abatement issues are partially allowed, but other adjustments are proposed that reduce the amount of the abatement, the request is treated as partially or fully disallowed.

(2) Examiners must prepare and issue Form 4549-A showing the adjustments to tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you filed a Form (843, 1040X, 1120X) requesting an abatement of $ (amount) for (year). As a result of our examination, your request was allowed in part. However, the total amount of the abatement was decreased by other adjustments shown in this report."

(1) If the examination of the request for abatement results in no decrease in the previously assessed tax and/or penalties, and no additional liability is proposed, examiners must prepare and issue:

1. Form 4549-A. (RGS users may need to run the tax computation as "unagreed" to get this report option). Although no adjustments are made, the following statement must be included in the "Other Information" section of the report: "On (date) you filed a Form (843, 1040X, 1120X) requesting an abatement of $(amount) for (year). As a result of our examination, your request was disallowed in full, as shown in this report."

2. Letter 693, with the applicable box checked, to notify the taxpayer of the examination findings. Allow the taxpayer 15 calendar days to request a group manager conference before closing the case.

(2) See IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(1) The ASED must be considered and protected if other issues are present which could result in a deficiency. For example, if adjustments increasing tax more than offset the allowable amount (if any) of the abatement, a deficiency exists. The ASED must be open to make an assessment of a deficiency (e.g., tax increase or credit reversal). If the ASED is not open, an additional assessment cannot be proposed; follow the procedures in IRM 4.10.11.3.12 for requests for abatement disallowed in full. Include a narrative in the workpapers explaining any offsetting adjustments the examiner noted but could not be proposed because the ASED was barred.

(2) When the ASED is open for a request for abatement and the examination results in a proposed deficiency, examiners must prepare Form 4549 to reflect the adjustments to the tax and/or penalties.

(3) The examiner must prepare and issue the applicable transmittal letter to notify the taxpayer of the findings and explain their appeal rights. While requests for abatement generally have no appeal rights beyond the group level, the taxpayer will be offered the opportunity to appeal a proposed deficiency. The letter used to transmit the findings will depend on the time remaining on the ASED, as explained below:

• If fewer than 240 days remain on the ASED, examiners must issue Letter 5153, Examination Report Transmittal - Statute <240 Days (Straight Deficiency), and follow the procedures in IRM 4.10.8.12.1, 30-Day Letters.

• If 240 or more days remain on the ASED, examiners will issue the applicable 30-day letter (e.g., Letter 915 or Letter 950) and follow the procedures in IRM 4.10.8.12.9, Response to 30-Day Letter.

(4) If the taxpayer agrees with the adjustments and signs Form 4549, see IRM 4.10.8.4.5, Closing Letters for Agreed Cases, for instructions on preparing Letter 987. See IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures, then close the case to CCP.

(5) If the taxpayer requests Appeals consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.3.14 for Form 5344 and Form 3198 closing procedures, then close the case to Technical Services.

(6) If a signed Form 4549 is not secured, or no reply is received from the taxpayer within the time allowed, and they indicated their intent to reply, see IRM 4.10.8.12.10, No Response to 30-Day Letter, for guidance on extending the time to file a protest and undeliverable letters, if applicable. Otherwise, close the case to Technical Services for preparation and issuance of a statutory notice of deficiency. See IRM 4.10.11.3.14 for guidance on preparing Form 5344 and Form 3198 for closing the case to Technical Services.

(1) Form 3198 and a Form 5344 (for each tax period) must be included in the case file. This section provides reminders and references regarding the features of Form 3198 and Form 5344 that examiners must consider when preparing these forms on request for abatement cases.

(2) See IRM 4.10.8.7, Splitting Multi-Year Examination Cases, when closing a multi-year case when at least one of the tax years requires different processing. Do not split a multi-year case when issues raised in an unagreed year(s) are related to or dependent on issues raised in agreed or no-change year(s).

(3) For all cases with an amended return or –A freeze on IDRS, examiners must check the "Amended Return or AAR in the File and Considered" box in the Special Features section of Form 3198. See IRM 21.5.6.4.2, –A Freeze, for additional information.

(4) For cases with overassessments of $100,000 or more, examiners must flag Form 3198 in the Expedite Processing section by checking the Over $100,000 Agreed and Unpaid box. See IRM 4.10.8.2.4.3, Large Dollar Cases, for additional information.

(5) For barred refunds, see IRM 4.10.11.5.2.4 for additional instructions for completing Form 3198.

(6) Exhibit 4.10.11-7 contains a table with disposal codes for claims for refund, abatements and audit reconsiderations to assist the examiner in completing Item 13 of Form 5344 when a deficiency is not proposed.

(7) IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments, contains procedures for completing Form 5344. Closing instructions and IRM references specific to requests for abatement are shown in the table below.

(8) See Protection of Revenue Base for additional instructions on capturing time for cases involving a potential refund.

(1) After the IRS has disallowed a request for abatement (that is not an audit reconsideration), the taxpayer’s only recourse is to pay part or all of the tax and/or penalties and timely file a new amended return or written request that is a claim for refund.

(2) Disallowed requests for abatement are not subject to reconsideration, nor do they have court rights (other than interest abatement requests, for which IRC 6404(h) provides for Tax Court review).

(1) A taxpayer can request an audit reconsideration by submitting an amended return, a delinquent return, or a written request asking for a reconsideration of an examination assessment.

(2) Audit reconsideration procedures apply when the taxpayer disagrees with a prior audit that resulted in a deficiency. The procedures in this subsection generally do not apply to a reconsideration of a prior examination of a claim for refund or request for abatement. Instead, see IRM 4.10.11.2.16.1, Reconsideration of Previously Disallowed Claims for Refund, or IRM 4.10.11.3.15, Requests for Abatement - Post Examination Reconsideration.

(3) Generally, a taxpayer’s written request for audit reconsideration will be considered if the taxpayer provides new information, which would result in a change to the assessment. See IRM 4.13.1.3, Reasons for a Request; IRM 4.13.1.4, Criteria for Reconsideration; and IRM 4.13.1.7, Acceptance of Request, for additional information.

(4) A request for audit reconsideration of an unpaid assessment will not be accepted if the taxpayer has already been afforded an audit reconsideration and did not provide any new information with the current request that would change the audit results. See IRM 4.13.1.8, Non-Acceptance of Request, for additional reasons a request will not be considered.

(5) Generally, audit reconsiderations are requests for abatement. When an audit reconsideration also includes a request for refund, the examiner must determine if the request is a timely, valid claim for refund. See IRM 4.10.11.2.1, for claim for refund requirements (e.g., refund requested, timeliness, and required form and content).

(6) The determination of whether an amended return or written request for reconsideration is a claim for refund or a request for abatement, is based on whether the amended return or written request asked for a refund at the time it was filed. If the taxpayer requests any amount of overpayment, then it is a claim for refund. Otherwise, a request for a reduction to the liability (not resulting in a credit or refund of any amount) is a request for abatement. Examples are given in IRM 4.10.11.2.1.2(5), and will assist examiners in determining if a written request is a claim for refund or request for abatement.

(7) When an audit reconsideration requesting a reduction in the assessed liability also includes a request for refund, examiners generally follow the audit reconsideration procedures in the following subsections (e.g., RGS / CEAS procedures, scope of examination, initial contact letter issued, etc.); however, examiners must also consider additional factors and/or exceptions as noted in the following subsections and summarized in the table below.

(1) Because audit reconsiderations have unique aspects, it is important examiners follow the procedures in this section to ensure the correct amount of tax, penalty, and interest is assessed; taxpayers are advised of the findings of the reconsideration and their appeal rights; and the current and prior workpapers are properly maintained.

(2) The purpose of the audit reconsideration process is to examine information that was not previously considered.

• If the taxpayer presents new information not previously considered, evaluate that information and determine if a change to the assessment is warranted.

• If the taxpayer cannot or does not present new information in support of their position, do not abate any tax.

(3) An audit reconsideration should be worked expeditiously. The examiner should survey the audit reconsideration (allow in full) or make initial contact within 15 days of receipt.

(4) Audit reconsiderations are opened at the taxpayer’s request, therefore are not subject to "reopening" procedures found in IRM 4.2.1.6, Reopening of Closed Cases, even if the reconsideration results in an additional deficiency.

(5) After receipt and evaluation of the taxpayer’s information, examiners follow the procedures in this subsection depending on the results of the reconsideration:

• Allowed in full.

• Disallowed in part (including allowed with offsetting adjustments).

• Disallowed in full (with or without additional tax liability).

(6) In all cases where an audit reconsideration is disallowed (in full or part), examiners must provide a detailed explanation to the taxpayer of why the request was not allowed. Examiners must note the explanation in the "Other Information" section of Form 4549, or included in a lead sheet, workpaper, or Form 886-A.

(7) When the examiner’s preliminary findings result in a full or partial disallowance of an audit reconsideration request, the taxpayer is generally given a 30-day letter offering the opportunity to request a meeting with the group manager and/or a conference with Appeals.

(8) Examiners must consider both the statute of limitations for assessment (ASED) and refund (RSED) as explained in IRM 4.10.11.5.

(1) The examiner must review the taxpayer’s request to confirm it meets audit reconsideration criteria found in IRM 4.10.11.4.1. If the examiner determines it does not meet the criteria:

• The examiner must consult with their group manager for concurrence that the request does not meet audit reconsideration criteria.

• The group manager will contact the local PSP audit reconsideration coordinator to discuss the determination.

• If PSP agrees the request does not meet audit reconsideration criteria, the case should be updated to status 41 and returned to PSP for disposition.

(2) The examiner must document their review of the audit reconsideration request and the pre-contact analysis performed. As part of the review and analysis, the examiner must:

• Review IDRS to ensure the requested abatement has not already been made by the campus.

  Reminder: For joint returns, the tax liability may have been moved to separate MFT 31 accounts. See IRM 4.10.11.6.3.3 for additional information.

• Review the prior audit lead sheets and workpapers to determine the scope of the original examination and issues adjusted.

• Determine if the taxpayer provided new information with the request (or indicated additional information is available).

• Determine if the request should be allowed in full prior to taxpayer contact or examined.

• Determine the ASED and RSED.

  Reminder: The ASED must be considered and protected if issues are present which could result in a deficiency. An audit reconsideration requesting an abatement can be filed at any time and the RSED is generally not an issue. If, however, the allowable abatement results in a refund, examiners must consider the provisions of IRC 6511 as they pertain to the refund portion. See IRM 4.10.11.5.2 for additional discussion regarding the RSED. If the refund is barred, follow the procedures in IRM 4.10.11.5.2.4 for completing Form 4549, Form 5344, and Form 3198.

(3) If it is determined the request should be examined, the examiner must plan the scope of the audit reconsideration. Generally, the scope is limited to the disputed issues unless circumstances warrant expanding the scope (e.g., new information becomes available, or required audit steps (e.g., required filing checks, minimum income probes, etc.) were not fully completed during the prior audit because the taxpayer failed to respond or show for the audit).

(4) If there is an indication of a change of address, see IRM 4.10.2.11, Taxpayer Change of Address or Name, for procedures on updating the Master File when "clear and concise notification" is provided.

(5) To ensure the accuracy of the AIMS database, examiners must verify the source code and aging reason code are properly reflected on audit reconsideration cases. For information on the source code, see Exhibit 4.10.11-5.

(1) After completion of the pre-contact analysis and prior to initial contact with the taxpayer, the examiner may determine the disputed issue(s) are clearly allowable and the requested abatement is warranted.

(2) Because audit reconsiderations do not have claim features on AIMS, the procedures to "survey" a claim for refund or request for abatement do not apply. Instead, if it is determined the reconsideration request is fully allowable (prior to contacting the taxpayer), the procedures in IRM 4.10.11.4.7 are followed to allow the reconsideration in full. Initial contact procedures in IRM 4.10.11.4.5 are not required.

(1) When a decision is made to examine the audit reconsideration request, the examiner must mail an initial contact letter to inform the taxpayer their case was received in Examination, and request additional information when necessary.

(2) Examiners should use regular initial contact letters (see IRM 4.10.2.8, Initial Contact: Overview), if an appointment with the taxpayer is needed. Otherwise, send Letter 3399(DO) , Audit Reconsideration - Request for Further Documentation, to make contact and request additional information.

(3) Prior to issuing the initial contact letter, examiners must check IMFOLT/BMFOLT or TXMODA to determine if a valid power of attorney is on file for the year(s) under examination. If a TC 960 is posted, the examiner must research CC CFINK and retain a copy of the CFINK display in the file. If CC CFINK indicates a valid power of attorney is on file for the years under examination, the examiner must make initial contact with the taxpayer and representative. See IRM 4.10.2.8.1(3), Making Initial Contact, and IRM 4.11.55, Power of Attorney Rights and Responsibilities, for additional information.

(4) For audit reconsiderations involving a joint tax return, initial contact letters are sent separately to both parties at the appropriate address. See IRM 4.10.1.2.2.1, Separate Notice Requirements, for additional information.

(5) If the initial contact letter is returned as undeliverable, attempt to locate a more current address:

• Check IDRS or other internal data (e.g., INOLES, IMFOLE, ENMOD, FINDS, TRDBV, IRPTRO, Accurint, etc.) for the last known address using both the primary and secondary SSNs.

• Perform an internet search using the taxpayer’s name, business name, or phone number.

• If there is a POA on file for the tax year(s) being reconsidered, contact the representative for an updated address.

• Attempt to contact the taxpayer by telephone if the taxpayer provided a number in their reconsideration request.

(6) When the initial contact letter is returned undeliverable, and a more current address is not identified:

• If there is a POA on file, conduct the reconsideration with the POA; see (7) below if the POA does not respond.

• If there is not a POA on file, the examiner must make a determination of the correct tax liability based on the information provided in the reconsideration request. Prepare a report and follow the applicable instructions in this section for requests allowed in full, disallowed in part, or disallowed in full. Examiners are not required to issue an audit reconsideration report and transmittal letter to the undeliverable address; close the case to CCP.

(7) No Response: If the taxpayer has a deliverable address and fails to respond to the initial contact letter within 30 calendar days (or if the taxpayer has a POA on file, and neither the taxpayer or POA respond to the initial contact letter within 30 calendar days), the examiner must make a determination of the correct tax liability based on the information provided in the reconsideration request. Prepare and issue a report and follow the applicable instructions in this section for requests: allowed in full, disallowed in part, or disallowed in full.

(1) If a taxpayer asks to withdraw their request for audit reconsideration, document the request for withdrawal in the activity record.

(2) The examination can be discontinued unless the ASED is open and other issues with audit potential were identified during the required pre-contact analysis.

(3) If the examination is discontinued (or continued but no additional tax is proposed), examiners follow the procedures for Audit Reconsiderations - Disallowed in Full - No Additional Tax Liability in IRM 4.10.11.4.11. Letter 693 will include the following language as the reason for the disallowance: "On (date) you requested an audit reconsideration for (tax year). On (date) you stated you did not want the IRS to give your request further consideration, therefore we are disallowing your request in full." See the closing procedures in IRM 4.10.11.4.13 for preparation of Form 5344 and Form 3198, then close the case to CCP.

(4) If the examination is continued and other issues result in an additional tax liability, follow the procedures for Audit Reconsiderations - Disallowed in Full - Additional Tax Liability in IRM 4.10.11.4.12.

(1) The following procedures apply when all of the disputed issues are allowed as requested by the taxpayer, and the examination results in an abatement of tax and/or penalties, that may or may not result in a refund.

(2) When abating tax from a prior audit assessment, examiners must also consider abating related penalties. Most penalties assessed by Examination are not automatically adjusted when the tax abatement / credit allowance is posted. See IRM 4.10.11.6.6.2 for additional information on penalty abatements. SB/SE examiners should also refer to the Penalty Abatement Job Aid for important information regarding RGS procedures and the completion of Form 5344.

(3) When an audit reconsideration is allowed in full resulting in an abatement and/or an allowable refund, examiners must prepare and issue:

1. Form 4549-A, reflecting the reduction of tax and/or penalties. (RGS users may need to run the tax computation as "unagreed" to get this report option). Include the following statement in the Form 4549-A "Other Information" section: "On (date) you requested an audit reconsideration of disputed issues for (tax year). As a result of our review of the information provided, the issues were allowed in full as shown in this report."

2. Letter 2738, Audit Reconsideration-Allowed in Full, and a report to notify the taxpayer of the findings and transmit the report.

Note: A final closing letter is not necessary. There is no requirement to secure a signature on the examination report; close the case to CCP.

(4) When the audit reconsideration issues are allowed in full, but all or part of a refund is barred, follow the procedures in IRM 4.10.11.5.2.4 for barred refunds, and the procedures below for audit reconsiderations partially or fully disallowed (as applicable).

(5) See IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198.

(1) The following procedures apply when all of the disputed issues are allowed as requested by the taxpayer, but other adjustments are proposed that reduce the amount of the requested abatement of tax and/or penalties.

(2) When the audit reconsideration issues are allowed in full, but other adjustments offset the allowable amount of the requested abatement, the audit reconsideration is treated as partially or fully disallowed.

(3) Examiners must prepare and issue Form 4549 showing the adjustments to the tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you requested an audit reconsideration of disputed issues for (tax year). As a result of our review of the information provided, the issues were allowed in full. However, the total amount of the abatement was decreased by other adjustments shown in this report."

(1) The following procedures apply when the disputed issues and request for abatement of tax and/or penalties are partially disallowed.

(2) When abating tax from a prior audit assessment, examiners must also consider abating related penalties. Most penalties assessed by Examination are not automatically adjusted when the tax abatement / credit allowance is posted. See IRM 4.10.11.6.6.2 for additional information on penalty abatements. SB/SE examiners should also refer to the Penalty Abatement Job Aid for important information regarding RGS procedures and the completion of Form 5344.

(3) If the allowable abatement results in a refund, the examiner must determine if the refund is allowable within the RSED. See IRM 4.10.11.5.2 for information regarding the RSED. If the refund is barred, follow the procedures in IRM 4.10.11.5.2.4 for completing Form 4549, Form 5344, and Form 3198.

(4) When an audit reconsideration is partially disallowed, examiners must prepare and issue Form 4549, reflecting the adjustments to the tax and/or penalties. Include the following statement in the Form 4549 "Other Information" section: "On (date) you requested an audit reconsideration of disputed issues for (tax year). As a result of our review of the information provided, the issues were allowed in part as shown in this report."

(5) The taxpayer may request a conference with the examiner’s manager if there is a disagreement with the examiner’s findings. Additionally, the taxpayer is generally given a 30-day letter offering the opportunity to request a conference with Appeals. However, an opportunity for an Appeals conference will not be offered if an audit reconsideration of an unpaid assessment (abatement request) is disallowed because the taxpayer does not provide new information, does not respond to the appointment letter, or does not keep a scheduled appointment. If the taxpayer missed the appointment due to unavoidable circumstances such as severe weather conditions, or a medical emergency, the appointment should be rescheduled. Based on the appeal rights available, examiners prepare and issue one of the following letters to notify the taxpayer of the partial abatement:

• Letter 2737, Audit Reconsideration - Partial Abatement. Allow the taxpayer 30 days to request an appeals conference.

• Letter 693, Reply to Request for Abatement of Assessment. Allow the taxpayer 15 days to request a group manager conference; no appeal rights.

(6) If the taxpayer agrees with the partial disallowance and signs Form 4549, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to CCP.

(7) If appeal rights were offered and the taxpayer requests Appeals consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to Technical Services.

(8) If no response is received by the response date, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to CCP.

(1) The following procedures apply when the disputed issues and request for abatement of tax and/or penalties are partially disallowed, but other adjustments are proposed that further reduce the amount of the requested abatement of tax and/or penalties.

(2) When the audit reconsideration issues are allowed in part, but other adjustments offset the allowable amount of the requested abatement, the audit reconsideration is treated as partially or fully disallowed.

(3) Examiners must prepare and issue Form 4549 showing the adjustments to the tax and/or penalties, and complete the "Other Information" section as follows: "On (date) you requested an audit reconsideration of disputed issues for (tax year). As a result of our review of the information provided, the issues were allowed in part. However, the total amount of the abatement was decreased by other adjustments shown in this report."

(1) The following procedures apply when the disputed issues and request for abatement of tax and/or penalties are fully disallowed, and no additional tax liability is proposed.

(2) When an audit reconsideration is disallowed in full, examiners must prepare and issue Form 4549, and include the following statement in the Form 4549 "Other Information" section: "On (date) you requested an audit reconsideration of disputed issues for (tax year). As a result of our review of the information provided, we did not allow the disputed issues and did not change the previous examination assessment."

(3) The taxpayer may request a conference with the examiner’s manager if there is a disagreement with the examiner’s findings. Additionally, the taxpayer is generally given a 30-day letter offering the opportunity to request a conference with Appeals. However, an opportunity for an Appeals conference will not be offered if an audit reconsideration of an unpaid assessment (abatement request) is disallowed because the taxpayer does not provide new information, does not respond to the appointment letter, or does not keep a scheduled appointment. If the taxpayer missed the appointment due to unavoidable circumstances such as severe weather conditions, or a medical emergency, the appointment should be rescheduled. Based on the appeal rights available, examiners prepare and issue one of the following letters to notify the taxpayer of the disallowance:

• Letter 2726, Audit Reconsideration - No Change to the Assessment. Allow the taxpayer 30 days to request an appeals conference.

• Letter 693, Reply to Request for Abatement of Assessment. Allow the taxpayer 15 days to request a group manager conference; no appeal rights.

(4) If the taxpayer agrees with the disallowance and signs Form 4549, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to CCP.

(5) If appeal rights were offered and the taxpayer requests an appeals conference, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to Technical Services.

(6) If no response is received by the response date, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to CCP.

(1) The following procedures apply when the disputed issues and request for abatement of tax and/or penalties are fully disallowed, and an additional tax liability is proposed.

(2) The ASED must be considered and protected if other issues are present which could result in a deficiency. For example, if adjustments increasing tax more than offset the allowable amount (if any) of the abatement, a deficiency exists. The ASED must be open to make an assessment of a deficiency (e.g., tax increase or credit reversal). If the ASED is not open, an additional assessment cannot be proposed; follow the procedures in IRM 4.10.11.4.11. In addition, include a narrative in the workpapers explaining the full amount of the barred adjustments.

(3) When the ASED is open for an audit reconsideration and the examination results in a proposed deficiency, examiners must prepare Form 4549 to reflect the adjustments to the tax and/or penalties.

(4) The examiner must prepare and issue the applicable transmittal letter to notify the taxpayer of the findings and explain their appeal rights. The letter used to transmit the findings will depend on the time remaining on the ASED, as explained below:

• If fewer than 240 days remain on the ASED, examiners must issue Letter 5153, Examination Report Transmittal - Statute <240 Days (Straight Deficiency), and follow the procedures in IRM 4.10.8.12.1, 30-Day Letters.

• If 240 or more days remain on the ASED, examiners will issue the applicable 30-day letter (e.g., Letter 915 or Letter 950) and follow the procedures in IRM 4.10.8.12.9, Response to 30-Day Letter.

(5) If the taxpayer agrees with the adjustments and signs Form 4549, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, and close the case to CCP.

(6) If the taxpayer requests Appeals consideration, follow the procedures in IRM 4.10.8.12.9.3, Request for Appeals Conference. For cases transferred to Appeals, see IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, then close the case to Technical Services.

(7) If a signed Form 4549 is not secured, or no reply is received from the taxpayer within the time allowed, and they indicated their intent to reply, see IRM 4.10.8.12.10, No Response to 30-Day Letter, for guidance on extending the time to file a protest and undeliverable letters, if applicable. Otherwise, close the case to Technical Services for preparation and issuance of a statutory notice of deficiency. See IRM 4.10.11.4.13 for closing procedures, including completion of Form 5344 and Form 3198, then close the case to Technical Services.

(1) Form 3198 and a Form 5344 (for each tax period) must be included in the case file. This section provides reminders and references regarding the features of Form 3198 and Form 5344 examiners must consider when preparing these forms on audit reconsideration cases.

(2) See IRM 4.10.8.7, Splitting Multi-Year Examination Cases, when closing a multi-year case when at least one of the tax years requires different processing. Do not split a multi-year case when the issues raised in the unagreed year(s) are related to or dependent on the issues raised in the agreed or no-change year(s).

(3) Generally, there are no closing letters issued on audit reconsideration cases when the case is closed; on page two of Form 3198 check the box "No letter required to be sent by CCP."

(4) For appealed cases, check the "Unagreed to Appeals" box on Form 3198 in the "Forward to Technical Services" section.

(5) For all cases with an amended return or –A freeze on IDRS, examiners must check the "Amended Return or AAR in the File and Considered" box in the "Special Features" section of Form 3198. See IRM 21.5.6.4.2, –A Freeze, for additional information.

(6) For cases with overassessments of $100,000 or more, examiners must flag Form 3198 in the Expedite Processing section by checking the Over $100,000 Agreed and Unpaid box. See IRM 4.10.8.2.4.3, Large Dollar Cases, for additional information.

(7) For barred refunds, see IRM 4.10.11.5.2.4 for additional instructions for completing Form 3198.

(8) Exhibit 4.10.11-7 contains a table with disposal codes for claims for refund, abatements and audit reconsiderations to assist the examiner in completing Item 13 of Form 5344 when a deficiency is not proposed.

(9) In a penalty only case, the examiner enters an amount of $1 on Form 5344, Item 35, with a Disposal Code of 12 in Item 13.

(10) When abating a penalty, the examiner must enter a two-digit penalty reason code on Form 5344, Item 02. For a list of penalty reason codes, see IRM Exhibit 20.1.1-2, Penalty Reason Code Chart.

(11) For additional information on penalty abatements, including RGS procedures and preparation of Form 5344, SB/SE examiners should refer to the Penalty Abatement Job Aid.

(12) IRM 4.4.12, Examined Closings, Surveyed Claims, and Partial Assessments, contains additional procedures for completing Form 5344.

(13) See Protection of Revenue Base for instructions on capturing time for cases involving a potential refund.

(1) The filing of a claim for refund, request for abatement, or audit reconsideration does not extend the period of time for assessing an additional deficiency.

(2) Examiners must verify the tax period’s ASED upon receipt of a claim for refund, request for abatement, or audit reconsideration case.

(3) If the ASED is open when a claim for refund, request for abatement, or audit reconsideration case is received, the examiner must enter or update the ASED to reflect the live statute expiration date on the statute control records (AIMS/ERCS), unless an "alpha code" is applicable. Generally, alpha coding the ASED should only be considered after attempting to extend the assessment statute or where there is not sufficient time to attempt to protect the assessment statute when the return is received in the examining group (generally, less than 30 calendar days prior to the return’s ASED). See IRM 25.6.23, Examination Process - Assessment Statute of Limitations Controls, for guidance on monitoring statutes and the use of alpha codes.

(4) If the ASED is imminent, IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS, allows the assessment statute to be updated to alpha code "AA" only if:

1. The examiner is certain there is no likelihood of a tax and/or penalty assessment, and

2. The examiner ascertains the refund or abatement has not already been made.

(5) If the ASED is not open when a claim for refund, request for abatement, or audit reconsideration case is received, the statute may be updated to alpha code "AA" if the requirements of IRM Exhibit 25.6.23-3, Instructions for Updating the Statute on AIMS, are met.

(6) Updating the statute to "AA" on AIMS indicates the ASED is expired or will be allowed to expire; it does not hold the assessment statute open. If the ASED was previously updated with an alpha code by another function, the group remains responsible for reviewing the determination upon receipt of the case and updating to a live ASED if necessary.

(7) An assessment cannot be made unless the ASED is open. If a deficiency is determined and the ASED was open when the claim for refund, request for abatement, or audit reconsideration was established on AIMS, but allowed to expire, barred statute procedures in IRM 25.6.1.13, Barred Assessments/Barred Statute Cases, must be considered.

(8) If the claim for refund, request for abatement, or audit reconsideration case does not involve a proposed deficiency for the tax period, Appeals does not require 365 days remaining on the ASED and will accept a case with alpha code "AA" in the statute. See IRM 8.7.7.2, Receipt of Newly Assigned Case.

(1) Examiners are responsible for determining if a claim for refund was timely filed within the RSED requirements of IRC 6511.

(2) The period for filing a claim for refund has two prongs:

• IRC 6511(a) specifies the date by which a claim for refund must be filed with the IRS. In general, a claim for refund must be filed three years from the time the original return was filed (i.e., three-year rule) or two years from the time the tax was paid (the payment could be for tax, penalty, or interest) (i.e., two-year rule), and

• IRC 6511(b) imposes a limitation on the amount that may be refunded or credited which is determined by "looking back" from the filing date of the claim to an earlier payment date.

(3) See IRM 25.6.1.10.2.7, Claims for Credit or Refund – General Time Period for Submitting a Claim, for details and examples of the three-year and two-year rules, and IRM 25.6.1.7.2, Time When Payments and Credits Are Considered to be Made, to determine if an amount is included in the look-back period. See IRM 4.10.11.5.2.1 and subsequent sections for some of the exceptions to the general RSED rules.

(4) While the taxpayer is required to file a claim for refund prior to the RSED, a timely claim may be acted on (allowed/disallowed) by the IRS after the expiration of the RSED.

(5) A request for abatement can be filed at any time and therefore the RSED is generally not an issue. If, however, the abatement results in part abatement/part refund (because the module balance was partially or fully paid at a later date), then examiners must consider the provisions of IRC 6511 as they pertain to the refund portion.

(6) If an unagreed case results in a proposed refund where a claim has not been filed, examiners should refer to IRM 4.10.8.10.1, Inviting Claims in Overassessment Cases, for more information.

(7) Barred refunds cannot be applied to other tax periods. If an examination results in an overassessment that is barred, the barred refund amount is transferred to Excess Collection by CCP. See IRM 4.10.11.5.2.4 for examples and additional barred refund procedures.

(1) An original, non-frivolous return can be a claim for refund. If a refund shown on a processed return is held or frozen (i.e., the refund was not paid and not applied to a balance due) and the module reflects a credit balance, the examiner must follow the procedures below, depending on whether the refund is allowed as a result of the examination:

1. If no changes are made which reduce the amount of the refund requested, include the following statement in the "Other Information" section of Form 4549: "A portion or all of the refund shown on your original return was withheld pending the outcome of this examination. It will be applied to the corrected tax deficiency and any remaining overpayment will be refunded if no other taxes are owed." Follow normal no-change/agreed procedures.

Exception: If the refund hold was on a delinquent return secured by the examiner and no changes are made, send Letter 2778, Non-filer No change letter--Penalty waived, and follow the procedures in IRM 4.4.9.7.5.1, No Additional Adjustments Required/Prepare RAR and Form 5344, Examination Closing Record, (if a SFR TC150 has posted) or IRM 4.4.9.5.14.1, No Change to Original Return, (if no SFR TC150 has posted).

2. If changes are made which reduce the amount of the refund requested, the audit report will reflect the additional tax assessment, changes to credits, and / or applicable penalties, and examiners follow the procedures in IRM 4.10.11.2.14. For the applicability of IRC 6676 to frozen refunds, see IRM 20.1.5.18.4, Case Procedures WITH Deficiency Procedures.

(1) Examiners must be aware that refunds meeting Joint Committee criteria require special processing. Generally, IRC 6405 requires the submission of reports by the IRS to the Joint Committee on Taxation, in cases involving refunds in excess of the jurisdictional amount of $2 million ($5 million for C corporations). All refunds from source years open with respect to the statute of limitations need to be considered in determining the jurisdictional amount. For example, if tentative refunds added together exceed $2 million ($5 million for C Corporations), both the source years and tentative refund years will be reported. This is true if none, one or all of the separate tentative refunds exceed $2 million ($5 million for C Corporations).

(2) LB&I provides support to SB/SE, TEGE and LB&I for the Joint Committee Review (JCR) program and oversees the preparation of the report sent to the Joint Committee for all agreed, partially agreed, no-changed, and surveyed cases meeting Joint Committee criteria. See IRM 4.36, Joint Committee Procedures, including:

• IRM 4.36.1, Joint Committee Process Overview

• IRM 4.36.2, Identification of Joint Committee Cases

• IRM 4.36.3, Examination Team Responsibilities

• IRM 4.36.4, Joint Committee Review Team Procedures

• IRM 4.36.5, Reports

(3) Examiners should also refer to Joint Committee Cases on the virtual library for information on identifying and working a Joint Committee case, FAQs, helpful tools, making a referral for a tax computation specialist (TCS) and submitting a referral to JCR.

(4) Cases meeting Joint Committee criteria must contain Project Code 0077. If not already on AIMS, examiners must prepare Form 5348 to request the project code be input for the Joint Committee tax period(s).

(1) Examiners may encounter situations when a claim for refund, request for abatement, or audit reconsideration is subsequently filed for a Married Filing Joint (MFJ) return, or the filing status is changed. This section covers some of those situations.

(1) IRM 25.16.1, Disaster Assistance and Emergency Relief, Program Guidelines, provides Servicewide guidance when the IRS responds to tax-related issues due to federally declared disasters. Examiners should also refer to IRM 4.2.2, Disaster Assistance Relief, for guidance when working with taxpayers who may be affected by a federally declared disaster.

(2) When a federal disaster is declared, the IRS has authority to postpone certain tax related deadlines and provide relief from compliance activity. "Affected taxpayers" are generally eligible for temporary relief from compliance activities, unless they choose to opt out of the postponement period.

(3) If an examiner is assigned a claim for refund, request for abatement, or audit reconsideration for a taxpayer who is eligible for disaster relief, applicable disaster guidance must be followed. For example, an SB/SE examiner working a claim for refund of an affected taxpayer would not issue a Letter 569, Full/Partial Preliminary Claim Disallowance, during the postponement period unless the taxpayer had "opted out" of the postponement period.

(4) Taxpayers may file claims for refund or requests for abatement as a result of a disaster, (e.g., claiming a casualty loss), either during or after the postponement period. Once the postponement period has expired (or the taxpayer has opted out), claims for refund and requests for abatement related to a disaster follow the procedures in this IRM.

(1) If a surviving spouse files a joint claim for refund, a refund may be made to the surviving spouse after researching INOLE to confirm the deceased spouse’s date of death.

(2) Decedent overpayment returns or claims for refund filed by anyone other than the surviving spouse must be filed with Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, or a certificate showing court appointment. See IRM 21.6.6.2.20.2, Processing Decedent Account Refunds, for evidence required.

(1) Taxpayers may use Form 843 to file a claim for refund or request for abatement of interest, penalties or additions to tax, caused by certain IRS errors or delay, or certain erroneous written advice from the IRS.

(2) After an examination, taxpayers may request the abatement of the assessed tax, penalties, and/or interest.

• If a request includes an abatement of tax and/or penalty, follow the audit reconsideration procedures in IRM 4.10.11.4.

• If a request is for penalty abatement only, see IRM 4.10.11.6.6.2 below.

• If a tax and/or penalty abatement request also includes a request to abate interest, the tax and penalty portion must be addressed first (as noted above). Interest abatement claims are worked in Technical Services as explained in IRM 4.10.11.6.6.1 below.