4.19.25. Information Return Penalty (IRP) Procedures

(1) Information return penalties are important tools for the IRS to encourage voluntary compliance by taxpayers. See IRM 20.1.7, Information Return Penalties.

(2) The IRP program utilizes Notice 972-CG, Proposed Civil Penalty, to inform filers of failures to comply with information reporting requirements. The notice provides filers an opportunity to establish reasonable cause for a waiver of penalties prior to assessment. The penalty is assessed when reasonable cause is not established or when a filer does not respond to the notice.

(1) The provisions for penalty application for the information return penalties covered in this IRM are found in IRC 6721.

(2) IRC 6724(a) provides that the IRC 6721 penalties shall not be imposed if the failure is due to reasonable cause and not due to willful neglect. Treas. Reg. 301.6724-1 defines reasonable cause. Reasonable cause criteria must be applied in all instances of penalty relief consideration.

(1) The director, SB/SE, Examination Field & Campus Policy is the executive responsible for the IRP program.

(2) Management officials are responsible for managing and leading activities per the procedures in this IRM to ensure program objectives and taxpayer expectations are met. This includes providing internal controls relating to each program, process, or activity and ensuring instructions are communicated to and carried out by the appropriate employees.

(3) All IRP employees must keep the following objectives in mind when handling each penalty case:

1. Treat similar cases and similarly situated taxpayers alike.

2. Give each taxpayer the opportunity to have their interests heard and considered.

3. Try to make the right decision the first time. A wrong decision, even though eventually corrected, has a negative impact on voluntary compliance.

4. Provide adequate opportunity for incorrect decisions to be corrected.

5. Treat each case in an impartial and honest way (i.e., approach the job, not from the government’s or the taxpayer’s perspective, but in the interest of fair and impartial enforcement of the tax laws).

6. Use each penalty case as an opportunity to educate the taxpayer, help the taxpayer understand their legal obligations and rights, assist the taxpayer in understanding their appeal rights, and in all cases, observe the taxpayer’s procedural rights.

7. Endeavor to promptly process and resolve each taxpayer’s case.

8. Resolve each penalty case in a manner which promotes voluntary compliance.

(1) Program Reports: Once proposed penalty notices are issued, inventory is monitored through the use of the Control-D reporting system. The following reports are generated to assist with evaluating the performance of the IRP program:

• Embedded Quality Review System (EQRS) Reports

• National Quality Review System (NQRS) Reports

• Integrated Data Retrieval System (IDRS) Inventory Reports

• Overage Report Compiler and Sorter (ORCAS) Manager Reports

(2) Program Effectiveness: Headquarters plans to conduct program reviews for each Campus on a as needed basis. The reviews will target recommendations made during prior visits, adherence to the IRM and Policy directives, movement of inventory, manager and employee reviews and feedback, and any areas of concern.

(1) Management uses the following program controls to oversee the program:

• EQRS Reports

• NQRS Reports

• IDRS Inventory Reports

• ORCAS Manager Reports

(1) See Exhibit 4.19.25-6, Acronyms, for a detailed list of acronyms and definitions used in this IRM and for IRP processing.

(1) The following additional IRMs and publications/documents are listed when the IRP function determines in-depth research is required to resolve unusual technical issues not covered in this IRM. When reference to one of the related IRMs is required for IRP function processing, the complete IRM reference will be stated in this IRM.

(2) The Taxpayer Bill of Rights (TBOR) lists rights that already existed in the tax code, putting them in simple language and grouping them into 10 fundamental rights. Employees are responsible for being familiar with and acting in accord with taxpayer rights. See IRC 7803(a)(3), Execution of Duties in Accord with Taxpayer Rights. You can find additional information about the TBOR at https://www.irs.gov/taxpayer-bill-of-rights.

(1) Even though the IRS strives to improve its systems and provide better service, some taxpayers still have difficulty in getting solutions to their problems or appropriate responses to their inquiries. The purpose of the Taxpayer Advocate Service (TAS) is to give taxpayers someone to speak for them within the IRS - an Advocate. TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels or who believe an IRS system or procedure is not working as it should.

(2) TAS and SB/SE have a service level agreement (SLA) between them outlining the procedures and responsibilities for the processing of TAS cases whenever the statutory or delegated authority to complete case transactions rests outside of TAS. The SB/SE SLA covers the IRP program. An addendum to the SLA lists contacts from various operations in the Philadelphia Service Center. You can view the SLA at https://irsgov.sharepoint.com/sites/TAS/SitePages/SLA.aspx.

(3) Refer taxpayers to TAS, when the contact meets TAS criteria (see IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria), and you cannot resolve the taxpayer's issue the same day. The definition of "same day" is within 24 hours. Same day cases include cases you can completely resolve within 24 hours, as well as cases in which you have taken steps within 24 hours to begin resolving the taxpayer's issues. Do not refer these cases to TAS unless they meet TAS criteria and the taxpayer asks to be transferred to TAS. Refer to IRM 13.1.7.6, Same Day Resolution by Operations.

(4) All potential TAS referrals must be approved by the IRP TAS liaison.

(5) The IRP TAS liaison will complete Sections I, II and III of Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), and forward to TAS. The taxpayer's problem and the taxpayer's relief sought must be clear and specific in items 12a and 12b of section I. The liaison is also required to document the reason why the relief action was not taken.

(1) Although not included on the Notice 972-CG, the IRP program also addresses the following civil penalties:

1. Late filing of prior year information returns referred by the SP sites. See IRM 4.19.25.20, Excessively Late Filed Information Returns, for more information.

2. Excessively late electronically-filed information returns from the Information Returns Branch are received on a password protected Excel spreadsheet via secure email (also PRN 500). See IRM 4.19.25.20, Excessively Late Filed Information Returns, for more information.

3. Failure to file in the proper format (PRN 503). See IRM 4.19.25.18, No Replies to Letter 1865-C Assessments, for more information.

(1) Notice 972-CG is generated from the PMF. The National Print Site (NPS) is responsible for mailing all notices except those requiring special handling.

(1) Taxpayers may contact either the campus or TSO to request recreates (copies) of Notice 972-CG and/or TIN listings. These requests may be received at any time after the initial mailing of the notices.

(2) If a request for a recreated Notice 972-CG is received at the campus:

(3) TSO can provide Notice 972-CG recreates for 10 years of inventory. When a new 972-CG download is added, the oldest year will be removed from the database.

(1) Policy Statement P-21-3 (formerly P-6-12) Guidelines (Action 61) are the result of a task force initiated to provide timely, quality responses to taxpayer correspondence. The general guidelines are:

• A quality response is an accurate and professional communication which, based on information provided, resolves the taxpayer issues and uses language the taxpayer can understand.

• Requests additional information from the taxpayer, or

• Notifies the taxpayer we have requested information from outside the IRS.

(2) A quality response is timely when initiated within 30 calendar days of the IRS received date.

(3) When a quality response cannot be issued timely, an interim response must be initiated by the 30th calendar day from the IRS received date.

1. An interim letter (Letter 5825-C) is generated when the clerical function controls an incoming reply and the IRS received date is older than 23 days.

   Note: Use the Case Control Activity (CCA) 42-43 Report to identify cases that require interim letters.

2. Subsequent interim letters (Letter 5825-C) must be issued when a final resolution cannot be provided as indicated in the previous interim letter.

(4) All interim letters should inform the taxpayer when a final response can be expected and provide a contact name and number for additional inquiries.

(1) The digitalization of IRP correspondence has been implemented to eliminate paper processing, streamline case processing, and improve the taxpayer experience. A document repository was created to store IRP correspondence.

(2) Beginning with TY 2022, all IRP replies and reconsiderations must be digitized.

(3) All guidance provided in IRM 4.19.25, Information Return Penalty (IRP) Procedures, must continue to be followed. Any deviation/change to these procedures will be provided by SB/SE Exam Policy.

(4) Existing inventory management tools such as IDRS Inventory Reports and/or the ORCAS reports should continue to be used to identify workload priorities as established in IRM 4.19.25.21.1.2, IDRS Inventory Report, and IRM 4.19.25.23.6.2, IDRS Overage Report.

(1) When a TIN is assigned to a batch, but the corresponding case is missing, it is considered a "lost" case.

(2) When a lost case is identified, provide the information to the lead tax examiner who will attempt to locate the case.

(3) If a case is NOT on the batch TIN listing, research IDRS and determine the proper location of the case.

(1) The Philadelphia campus receives responses requiring additional action before the case can be closed. Additional action may include (this list is not all inclusive):

• Correspondence with the taxpayer

• Research

• Routing of information

• Address updates

• Telephone contact

(1) If an information return is potentially subject to more than one penalty, consider reasonable cause to determine which penalty (or penalties) can be waived/abated. Then apply the penalty using the following criteria:

1. If it is determined the late-filing penalty should be waived, then the next penalty to be considered is the failure to include correct TINs penalty.

2. If it is determined the failure to include correct TINs penalty should be waived, then the next penalty to be considered is the electronic media penalty.

(2) This amount will be the largest penalty amount applicable to that return.

1. The largest penalty amount is determined by identifying the infraction with the highest value.

2. Evaluate infractions in highest value order and assess the highest value that is not waived.

3. Only one penalty per information return filed incorrectly can be assessed. Do not assess multiple penalties on the same information return. The appropriate penalty is the first valid penalty in the highest order applicable.

Example

If a small business electronically filed 500 Forms 1099-DIV on April 25th and 50 of those late returns had missing or incorrect payee TINs, the proposed penalty on the Notice 972-CG would be calculated as follows: 50 x $290 (missing/incorrect TINs) or $14,500, plus 450 x $50 (late, tier 1) or $22,500 Total proposed penalty: $37,000 If the taxpayer submits a satisfactory explanation for the 50 incorrect TINs, but not for the late filing, the penalty must be recalculated as follows: 500 x $50 (late, tier 1) or $25,000

(1) Third party agent (TPA) is a general term used to describe independent agencies that perform employment related services.

(2) Since Notice 972-CG are issued to individual taxpayers, a TPA may submit a response on behalf of all of their clients that received a Notice 972-CG, rather than having all impacted taxpayers submit individual responses. Therefore it is important to recognize and take appropriate action when this type of response is received, to ensure all impacted taxpayers are addressed and treated in a consistent manner.

(3) When a response indicates more than one taxpayer is impacted (or received a Notice 972-CG) refer the response to the lead tax examiner for further research and action. The lead tax examiner will update the case control to themselves.

(4) If the response indicates multiple impacted taxpayers and does not include the names/ TINs of the other impacted taxpayers, the lead tax examiner will contact (via telephone contact if possible) the TPA and request they provide the names/ TINs of the other impacted taxpayers. Otherwise:

1. For a response case, send Letter 1948-C and request the TPA submit a listing of all impacted taxpayers. Suspend the case. See IRM 4.19.25.13, Suspense Procedures, for more information.

2. For a reconsideration case, send Letter 6304-C and request the TPA submit a listing of all impacted taxpayers. Close the case.

(5) Once the name/TIN information for the other impacted taxpayers is obtained, determine the number of impacted taxpayers:

(6) While working a case containing other issues in addition to those raised by the TPA, the tax examiner will:

1. Issue Letter 1948-C to inform the taxpayer how the issue(s) raised by the TPA was resolved (waived, disallowed or need additional information) and that we need additional information to address the other issues on the Notice 972-CG. Specify the additional issues we need the taxpayer to address.

2. Suspend the case. See IRM 4.19.25.13, Suspense Procedures, for more information.

3. If the taxpayer does not respond by the end of the suspense period, assess the portion of the Notice 972-CG penalty for the other issues. See IRM 4.19.25.16, IDRS Adjustments, for more information.

(1) When a taxpayer contact includes clear and concise notification of an address change, including foreign address change, input the appropriate new address on IDRS CC: ENREQ.

(2) Changes to the taxpayer name line due to a spelling error should also be made. However, do not change the name control. On BMF accounts, the name control is the first four characters of the business name. On IMF accounts, the name control is the first four characters of the taxpayer’s last name.

1. The authority for making changes to the name control is delegated to the IMF/BMF Entity function.

2. Any correspondence received after an SSN/EIN has been assigned, requesting a change to the primary name line that affects the name control, must be routed to the appropriate IMF/BMF Entity function.

(3) Contacts that are considered clear and concise notification of an address change include the following:

1. The taxpayer returns an IRS initiated correspondence that solicits or requires a response to IRS with corrections marked on their address information. The taxpayer's signature on the correspondence (for this purpose) is not required.

2. A return (including an amended return) filed by a taxpayer with new address information. Update Master File for address changes on any amended returns, that bypass normal pipeline processing and are processed as a response.

3. Form 8822-B, Change of Address or Responsible Party - Business, when received in conjunction with an IRP case.

4. Notification of an address change made by the U.S. Postal Service (USPS).

   Caution: Always verify the name on the USPS notification with the name on the notice before updating the address.

   Note: A new address indicated as a return address on the envelope or in the letterhead of the taxpayer's correspondence is not by itself, clear and concise notification and is not sufficient to change an address of record.

(4) Treas. Reg. 301.6212-2(b)(2) and Revenue Procedure 2010-16 govern the update of taxpayer’s address in IRS records. Under specific circumstances, clear and concise notification does include information from the USPS. IRS employees may change an address using information received from the USPS. An address obtained from the USPS becomes the taxpayer’s last known address unless the taxpayer provides clear and concise notification of a change of address. Upon receipt of an undeliverable Notice 972-CG with an affixed USPS yellow label, research and update the address as follows:

(5) Clear and concise notification from the taxpayer, whether written or oral, must contain the following:

1. The entity's full name.

2. The signature of the taxpayer or an authorized representative.

   Note: A faxed signature is acceptable.

3. The taxpayer's new address.

4. The taxpayer's old address, unless it can be determined from the posted data. Do not request the old address from the taxpayer.

5. The TIN.

(6) If any of the information from (3) or (4) above is missing from the taxpayer's request,

1. Do not update Master File.

2. Send the appropriate letter to the taxpayer, at the new address, using a special paragraph to advise them of the information needed.

3. Enclose Form 8822-B, Change of Address or Responsible Party - Business.

(7) If the taxpayer provides a temporary address, a beginning and ending date of when the taxpayer will be using that address should be given. Do not update Master File.

(8) Any time doubt exists as to whether an address should be changed, discuss it with the manager who will either provide an answer or refer the question to the Disclosure Office.

(9) If a document is received containing a name or address change which does not meet the specific requirements for updating Master File, the information should be noted and maintained in the IRP case file. If a notice is returned, the IRS is required to use due diligence in locating the taxpayer, which includes a search of existing records to locate any updated information supplied by the taxpayer.

(1) No tax information can be sent to or discussed with an unauthorized third party. All correspondence should be sent directly to the taxpayer. Include a paragraph to notify the taxpayer we have no record that the third party is authorized to act for them, and we have replied directly to the taxpayer.

(2) Accountants, attorneys, enrolled agents or other representatives from whom a taxpayer has requested assistance on tax issues submit inquiries to the IRS. The third party representative expects a reply to the inquiry so the issue can be explained to the taxpayer.

(3) To authorize the third party reply, the representative may submit a:

• Form 2848, Power of Attorney and Declaration of Representative, or

• Form 8821, Tax Information Authorization.

(4) POA documentation may be received with a response to a civil penalty notice. The POAs or TIAs cannot be entered on the Centralized Authorization File (CAF) because civil penalties are asserted against non-return information documents. To ensure valid POAs/ TIAs are recognized, the POA/TIA should be merged with the digital IRP case file on the document repository.

(5) Each Form 2848 or Form 8821 must be validated before being accepted. The Form 2848 or Form 8821 must be signed by the taxpayer. Immediately reject any unsigned Form 2848 or Form 8821 and return to the taxpayer.

(6) In addition to the required signature, a valid Form 2848 (or Form 8821) contains the following information:

1. Taxpayer’s name, address and TIN.

2. Representative’s (or appointee’s) name, address, CAF number and other contact information.

   Note: In order for the representative/appointee to receive copies of IRS notices, the appropriate box on Form 2848 (or Form 8821) must be checked indicating they can be sent copies of notices and communications.

3. A description of the matter the representative is allowed to act on (or the appointee is allowed to inspect and/or receive) including the tax form type (for example: 1099) and TY(s) involved. For Notice 972-CG related issues, the description of the matter is generally listed as: Civil Penalty, Notice 972-CG, etc. along with the information return type (or series) and the TY(s) involved.

4. For Form 2848 only: The representative’s signature(s) in the declaration section along with their designation code(s).

(7) If a Form 2848 (or Form 8821) is determined to be invalid, return it to the taxpayer with an explanation.

(8) When issuing correspondence to a taxpayer with a valid POA/TIA (that is authorized to receive correspondence), generate a copy of the correspondence to the POA/TIA.

(9) If the taxpayer submits a complete Form 2848, or a Form 8821, that lists tax matters other than civil penalty issues, check to see if the authorization is on file. If not, fax the form for processing based on the state mapping table in IRM 21.3.7-1, State Mapping, Where To File, and keep the original with your case file.

(1) The Notice 972-CG informs the taxpayer they have 45 days (60 days for overseas) from the notice date to provide a response.

(2) When the taxpayer requests additional time or an extension to respond to the notice:

1. Send Letter 1948-C. Inform the taxpayer they have an additional 30 days to respond to the notice and if a response is not provided by the extended due date, the IRS will continue processing the case.

Exception: If the taxpayer requests a specific number of days (or a specific future date), grant the extension for the days requested up to 90 days from the date of the notice.

Note: If the requested date has passed, grant an additional 30 days.

2. Update the IDRS control base with activity code "EXTENDMMDD" where "MMDD" represents the last day of the extension suspense period.

3. Update the IDRS control base status code to "S".

4. Suspend the case for the number of days granted to the taxpayer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

5. Monitor the case until the taxpayer responds or the extension suspense period ends. See IRM 4.19.25.13, Suspense Procedures, for more information.

   Note: Do not grant multiple extensions unless there are extenuating circumstances.

(1) There are four methods for filing a request for an extension of time to file information returns:

1. Fill-in Form 8809, Application for Extension of Time to File Information Returns: Completed online on the FIRE System and receive an instant acknowledgement on screen if forms are completed properly and timely (30-day automatic extension).

2. Electronic File Transmission Submitted on the FIRE System: Transmitters requesting an extension of time via an electronic file will receive the file status results online (30-day automatic extension).

3. Paper Form 8809: Mailed to the Ogden Service Center as directed on the form instructions (30-day automatic, additional 30-day and non-automatic extension).

4. Information Returns Intake System (IRIS): Taxpayers can complete an extension request for Form 1099 series (excluding Form 1099-NEC) and receive an instant acknowledgement on screen if forms are completed properly and timely (30-day automatic extension).

   Note: The IRIS system will eventually replace the FIRE system mentioned in paragraph (1)a and b above.

(2) All current year late-filing penalty cases are compared to the extensions of time to file posted to the PMF prior to the generation of penalty notices.

(3) If the taxpayer’s response indicates they are not subject to the late filing penalty because they were granted an extension to file their information return documents, verify the TIN against the listing of approved extensions provided by TSO. Take the following actions:

1. If the TIN is verified, waive/abate the late filing penalty and send Letter 6304-C.

2. If the TIN cannot be verified, assess the late filing penalty and send Letter 854-C.

(1) Taxpayers residing in a zip code located in a designated Federal Emergency Management Agency (FEMA) Declared Disaster area will have a disaster related freeze code posted to their account. There are two types of disaster freeze codes, the "–O" freeze and the "–S" freeze.

1. The –O freeze code is used for significant major disasters (examples include Hurricane Katrina in 2005 and Hurricane Sandy in 2012). As a general rule, no compliance action is taken until after the relief time frame has expired.

2. The –S freeze code is used for other federally declared disaster areas. Impacted taxpayers are granted additional time to perform time sensitive actions. Unless an act is specifically listed in Rev. Proc. 2018-58, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098, or 1099 series; to Forms 1042-S, 3921, 3922, 8025, or 8027; or to employment and excise tax deposits.

   Note: IDRS CC: TXMODA displays a disaster related freeze code (-S or -O) on impacted accounts for the duration of the disaster relief time frame.

(2) The IRP Technical Coordinator will monitor zip codes for specific declared disaster area situations as necessary based on IRS Disaster Relief Memos.

(3) The IRP Technical Coordinator will provide the tax examiners instruction for the states with declared disasters.

(4) You can find additional information (including special case handling requirements) at www.tris.irs.gov/fema/.

(5) The taxpayer responds to the Notice 972-CG before the disaster start date and a freeze code "-O" is present on the account:

(6) The taxpayer responds to the Notice 972-CG during the disaster time frame (freeze code "-S" or "-O"), follow normal procedures.

(7) If the case is identified as entitled to disaster relief (based on FEMA ZIP codes or through taxpayer self-identification) and a response indicates the taxpayer's place of business or records was lost, destroyed or not accessible due to the disaster:

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(1) If the taxpayer states a payment was submitted, but there is no indication on IDRS the payment was received and at least three weeks have passed since the IRS receive date, research the payment on IDRS:

(1) Discovered remittance is a response and/or correspondence with an original form of payment attached such as a personal check, money order or cashier’s check. Also, a loose check(s) discovered in an envelope or attached to a blank piece of paper.

(2) If any of the items listed in (1) are discovered, both Form 3244, Payment Posting Voucher, and Form 4287, Courier Log for Discovered Remittances, must be completed.

(3) Two copies of Form 3244 must be completed for each discovered remittance and contain entries in the following fields:

• TIN

• Form number/MFT

• Tax period

• Transaction/received date (IRS received date)

• Taxpayer name, address, and ZIP code

• Transaction data, enter remittance amount next to code 640 (Advance Payment of Deficiency)

• Remarks (the team manager’s phone number and mail stop)

• Prepared by

(4) Form 4287, Courier Log for Discovered Remittances, must be completed to log all discovered remittances. The following fields must have entries:

• Stop number

• Unit

• Telephone number

• Today’s date - in MM/DD/YYYY format

• Type of doc - (Example, Form 1099-MISC, Form W-2)

• Tax period - (Example: 202012)

• Type of remit – (Example: check or money order)

• Amount of remittance – (total money amount including comma and decimal point)

• Received date – in MM/DD/YYYY format

• Name (entire name)

• TIN

• Discoverer – (name of person who discovered the remittance and their supervisor’s name)

(5) Remittance may be discovered either while working in the office or while teleworking:

(6) IRS CHECKS - Returned IRS refund checks are handled differently than regular discovered remittance. If an IRS refund check is found, take it to the team manager/lead tax examiner to be routed to the Refund Inquiry Unit.

(7) Voided or Blank Checks: If the response has a "VOIDED" or blank personal check attached, remove the check from the response and attach it to the installment agreement (IA) request. For voided checks, route the "VOIDED" check with the IA to Collections.

(1) Taxpayers are required to file most information returns by:

• February 28 of the processing year if filing via paper

• March 31 of the processing year if filing electronically

  Exception: Form W-2 and Form 1099 reporting non-employee compensation (Form 1099-MISC for TY 2019 and prior, Form 1099-NEC for TY 2020 and later) must be filed by January 31 (paper or electronically filed) of the processing year.

  Exception: Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding must be filed by March 15th (paper or electronically filed) of the processing year.

(2) If the filing date falls on a Saturday, Sunday or legal holiday, then the filing date becomes the next business day. A business day is any day that is not a Saturday, Sunday or legal holiday. The following is a breakdown of required filing dates for the three current IRP processing years:

1. IRs other than Form 1042-S, Form W-2 or Form 1099-MISC (reporting non-employee compensation):

Note: Beginning in TY 2020, non-employee compensation is reported on Form 1099-NEC. See IRM 4.19.25.8.1(2)b below.

Tax Year	Paper	Electronically
2020	March 1, 2021	March 31, 2021
2021	February 28, 2022	March 31, 2022
2022	February 28, 2023	March 31, 2023

2. Form 1099-NEC beginning in TY 2020:

Tax Year	Paper and Electronically
2020	February 1, 2021
2021	January 31, 2022
2022	January 31, 2023

3. Form W-2 or Form 1099-MISC (reporting non-employee compensation):

Tax Year	Paper and Electronically
2020	February 1, 2021
2021	January 31, 2022
2022	January 31, 2023

4. Form 1042-S:

Tax Year	Paper and Electronically
2020	March 15, 2021
2021	March 15, 2022
2022	March 15, 2023

Note: Taxpayers meet the requirement to timely file if the form is properly addressed and mailed on or before the due date (IRC 7502).

(3) Any penalty for failing to file information returns timely ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(4) The Late Filing Penalty is tiered based on when the information returns were filed.

• Tier 1: Not more than 30 days late

• Tier 2: 31 days late through August 1

• Tier 3: After August 1

(5) The maximum penalty rates break down as follows:

• TY 2010 through 2014: $100 per information return

• TY 2015 through 2017: $260 per information return

• TY 2018 through 2019: $270 per information return

• TY 2020 through 2021: $280 per information return

• TY 2022: $290 per information return

• TY 2023: $310 per information return

• TY 2024: $330 per information return

(6) The penalty is reduced based on when the information returns were filed as per the tier rate in (4) above. The following is a breakdown of applicable penalty amounts ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ for the three current IRP processing years:

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≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡

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

≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ Exception: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

4. ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡

≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(7) Research IDRS CC: PMFOLS and CC: PMFOLD to confirm IRS received dates for IRs other than Forms W-2.

(8) Duplicate Filing: If IDRS research indicates a duplicate filing, take the following action:

(9) If the taxpayer states they mailed paper IRs (other than Forms W-2) timely:

(10) If the taxpayer provides a copy of a postage receipt for proof of timely filing:

(11) If the taxpayer acknowledges the IRs (other than Form W-2) were mailed late, but disagree with the penalty rate because they were mailed before the Tier level cutoff date:

1. Refer the response to the lead tax examiner or locally designated SME.

2. The lead/SME will request the Information Return transcript following the instructions in (9) above.

   Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

   
   ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

≡ ≡ ≡	≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡"≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(12) If the taxpayer states they electronically filed the IRs (other than Form W-2) timely or they acknowledge the IRs were filed late but disagree with the penalty rate because they were filed before the Tier level cutoff date, AND:

(13) Forms W-2 are filed with the Social Security Administration (SSA).

1. Research ERQY (Employer Report Query) when the Forms W-2 are electronically filed to validate receipt dates.

2. Research ORS (On-Line Retrieval System) when the Forms W-2 are paper filed to validate receipt dates.

(14) If the taxpayer states they electronically filed their Form W-2 package timely or they acknowledge the Forms W-2 were filed late, but disagree with the penalty rate because they were filed before the tier level cutoff date, use ERQY to determine the received date of the Forms W-2. The ERQY date is posted ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(15) If the taxpayer states they mailed their paper Form W-2 package timely, use ORS to determine the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is generally stamped in the "For Official Use Only" box in the lower right-hand portion of the Form W-3.

(16) If the taxpayer acknowledges they mailed their paper Form W-2 package late, but disagrees with the penalty rate because they were mailed before the tier level cutoff date, use ORS to determine the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ is generally stamped in the "For Official Use Only" box in the lower right-hand portion of the Form W-3.

(17) Waive (or abate previously posted) late filing penalty when the explanation for submitting the IRs late meets reasonable cause. See IRM 4.19.25.8, Request for Reasonable Cause, for more information.

(1) Taxpayers who submit 250 or more information returns for a specific information return type are required to file them electronically per IRC 6011(e) and Treas. Reg. 301.6011-2.

(2) The failure to file electronically penalty applies to the number of IRs over 250 forms.

(3) Generally, taxpayers must establish reasonable cause for this penalty to be abated. See IRM 4.19.25.8, Request for Reasonable Cause, for more information. The electronic media filing requirement does not apply if the taxpayer applies for and receives a hardship waiver. The taxpayer must file Form 8508 , Application for a Waiver From Electronic Filing of Information Returns. The waivers are evaluated on a case-by-case basis and are approved or denied based on Treas. Reg. 301.6011-2(c)(6).

(4) If the taxpayer claims they would suffer undue economic hardship to electronically file then do the following:

1. Determine if the taxpayer received a reasonable cause waiver in any prior year for undue economic hardship. If yes, deny the request for waiver/abatement and issue Letter 854-C explaining the taxpayer did not act in a responsible manner per Treas. Reg. 301.6724-1c(3)(iv). If no, proceed to step 2.

2. Issue Letter 1948-C and request the taxpayer provide copies of the two cost estimates that were secured at least 45 days before the due date of the information returns (without extensions).

3. Suspend the case. See IRM 4.19.25.13, Suspense Procedures, for more information.

(5) Beginning with TY 2023, an exemption is allowed for filers for whom using the technology required to file electronically conflicts with their religious beliefs. Although filers are not required to file a waiver or take any action to claim religious exemption, filers may notify the IRS by filing Form 8508, Application for a Waiver From Electronic Filing of Information Returns. The exemption will be permanently recorded in the Payer Master File and the filer will not need to file a waiver in subsequent years.

(6) All potential failure to file electronically penalty cases are compared to the waivers of the electronic media filing requirement posted to the PMF prior to the generation of Notice 972-CG. IDRS CC: PMFOLS contains a field "W" that indicates if the taxpayer submitted a waiver to file IRs other than on electronic media. The "W" field appears to the right of the "WITHHELD" field. Directly below the "W", either a "Y" (for Yes) or "N" (for No) will display for each of the information return types.

(7) If the taxpayer’s response indicates they are not subject to penalty because they were granted a waiver from filing on electronic media, check to see if the taxpayer’s TIN appears on the waiver listing provided by TSO.

(8) If a taxpayer responds with an approval letter from TSO granting a waiver of the electronic filing requirement, waive the penalty.

(9) If the taxpayer’s response indicates they experienced an unexpected increase in business activity during the year (for example: The taxpayer had an unexpected increase in hiring), research IDRS CC: PMFOL (or ORS/ERQY for Forms W-2) in the prior year.

(10) Duplicate Submissions: If the taxpayer's response indicates duplicate data was provided on paper and on electronic media:

1. Research IDRS CC: PMFOL and any supporting documentation sent by the taxpayer. If the duplicate filing is verified, waive/abate the penalty. See chart below.

2. If IDRS CC: PMFOL research is not successful, refer the case for further research with the TSO liaison. Provide the TSO liaison with: the taxpayer’s name, TIN, Transmitter Control Code (TCC) if available, TY, type of return, and number of returns filed.

IF	THEN
TSO verifies the duplicate filing	Waive/abate the penalty as appropriate. See IRM 4.19.25.16, IDRS Adjustments, for more information. Issue Letter 6304-C. Advise the taxpayer to take steps to ensure they don’t file paper IRs if they are an electronic filer.
TSO cannot verify the duplicate filing	Assess the penalty. See IRM 4.19.25.16, IDRS Adjustments, for more information. Issue Letter 854-C and advise the taxpayer the duplicate filing could not be verified.

(11) If the taxpayer requests a copy of the Form 1096 submission, sanitize the page(s) of the IDRS CC: PMFOL transcript containing the record(s) relevant to the penalty and send the taxpayer a copy with an explanation.

(12) If the taxpayer requests a copy of the Form W-3 submission, print the Form W-3 information from ORS and send it to the taxpayer.

(13) If the taxpayer states the failure to file on electronic media penalty was unavoidable because the previous year’s notification (Notice 972-CG) was not received until after the current year IRs had already been filed, research IDRS CC: PMFOL prior year history for the same issue.

(1) A missing or incorrect TIN generally occurs when:

1. The payee fails to provide a TIN to the payer,

2. The payee provides an incorrect name/TIN to the payer, or

3. The taxpayer makes an error when inputting the name/TIN when creating the information return data to send to the IRS.

(2) A CP 2100 or CP 2100A is issued prior to the generation of a Notice 972-CG, to alert the taxpayer they may be responsible for backup withholding when a missing or incorrect TIN is identified for certain information returns. The following IRs may be subject to backup withholding (BWH):

• Form 1099-B, Proceeds From Broker and Barter Exchange Transactions

• Form 1099-DIV, Dividends and Distributions

• Form 1099-INT, Interest Income

• Form 1099-K, Payment Card and Third Party Network Transactions

• Form 1099-MISC, Miscellaneous Information

• Form 1099-OID, Original Issue Discount and

• Form 1099-PATR, Taxable Distributions Received from Cooperatives

• Form 1099-NEC, Non employee Compensation

(3) When a penalty is imposed for failure to include correct TINs, a taxpayer must comply with special rules for acting in a responsible manner. In general, if the taxpayer failed to include a TIN or if the taxpayer was notified of an incorrect TIN (for example: receipt of CP 2100 or CP 2100A), they will have acted in a responsible manner by making solicitations to obtain the correct TIN information as outlined under Treas. Reg. 301.6724-1(e) and Treas. Reg. 301.6724-1(f).

1. A solicitation is a request by a payer for a payee to furnish a correct TIN.

2. An initial solicitation must be made by a payer for a correct TIN when a transaction with an information reporting requirement is made unless the payer has the payee’s TIN and uses that TIN for all transactions with the payee.

3. When a payee’s TIN is missing or incorrect, the payer generally will need to conduct annual solicitations for a correct TIN. However, annual solicitations are not required if the taxpayer is sending B notices in response to CP 2100 notices for the same TY or received in the same calendar year, for the same incorrect payee TIN.

(4) Initial solicitations can be made in one of the following ways:

1. By mail.

2. By telephone.

3. By electronic means.

(5) Per Treas. Reg. 301.6724-1(e)(2), annual solicitations must be made by mail or telephone.

(6) When the taxpayer requests a waiver/abatement of the penalty for failure to include correct TINs:

1. Evaluate the response to determine if the taxpayer acted in a responsible manner AND

2. Research IDRS to determine Notice 972-CG history and related actions taken on the account.

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

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

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Note: ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Note: ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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

(8) If the taxpayer’s explanation lacks sufficient detail to determine if they acted in a responsible manner:

(9) ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡≡ ≡≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

(1) When acknowledging the taxpayer's response input the correspondence date using the following priority:

1. The date the taxpayer entered on their most recent correspondence.

2. Envelope postmark date.

3. Three days prior to the IRS received date.

4. Current date.

(2) When a letter is sent to a taxpayer, it must explain the process or actions being taken. A letter requesting information should have the following paragraphs, as applicable, in addition to other paragraphs sent for a specific condition:

1. A paragraph that informs the taxpayer when a response is required.

2. A paragraph requesting the taxpayer's telephone number and the most convenient time to call.

3. A paragraph acknowledging the payment, if submitted.

4. A paragraph stating a return envelope is enclosed when a response from the taxpayer is required.

(3) Always print a copy of the CRX letter issued to the taxpayer and keep it with the case file. A copy of the IDRS CC: LPAGE screen indicating "REQUEST COMPLETED" is acceptable. The CRX letter case documentation must be merged with the digital case file on the document repository.

(1) IRP reconsiderations are subject to Policy Statement P-21-3 (formerly P-6-12) guidelines. See IRM 4.19.25.2.4, Policy Statement P-21-3 (Formerly P-6-12) Guidelines (Action 61), for more information.

(2) Use the procedures/guidelines in IRM 4.19.25.7, 972CG Reply Procedures, (including the subsections) and IRM 4.19.25.8, Request for Reasonable Cause, (including the subsections) to evaluate requests for reconsideration.

(3) Reconsideration responses result in one of the following:

1. Fully abating the previously assessed penalty. See IRM 4.19.25.17.1.2, Full Abatement Determinations, for more information.

2. Fully disallowing the claim for reconsideration. See IRM 4.19.25.17.1.3, Full Disallowance Determinations, for more information.

3. Partially abating the previously assessed penalty or partially disallowing the claim for reconsideration. See IRM 4.19.25.17.1.4, Partial Abatement/Disallowance Determinations, for more information.

4. No consideration. See IRM 4.19.25.17.1.5, No Adjustment Determinations, for more information.

(4) Determine if the account is in a balance due status:

(5) If there will still be a balance due on the account when closing a case, reduce IDRS CC: STAUP to three cycles or input a TC 472 to reverse a previously posted TC 470, if applicable.

(1) While most requests for reconsideration can be worked from the information provided and IDRS research, there are times when it may be necessary to order the original IRP assessment if the case file was not stored on the document repository prior to digitalization.

1. Order the IRP adjustment document.

2. Update IDRS control base activity. See Exhibit 4.19.25-3, Activity Codes for IRP Processing, for more information.

3. Monitor for 30 days. If the document is not received, submit a second request.

   Note: If the document is not received after the second request, confer with the lead tax examiner or the manager to determine next steps.

4. Check the STAUP and extend, if needed.

(2) If an original IRP assessment is needed to properly evaluate a request for reconsideration and the original case file was worked digitally, refer the TIN to the lead tax examiner who will have the case file pulled from the document repository retention file.

(1) Requests for relief from civil penalty assessments received after the initial request for relief has been denied through the issuance of Letter 854-C are generally considered an appeal of the previous penalty relief denial.

(2) The appeals coordinator acts as the liaison between the Operation and Appeals.

(3) All cases requesting penalty relief through the IRS Office of Appeals must be processed within 30 calendar days from the IRS Receive Date.

(1) IRP penalties must be assessed within three years after the due date of the return or the date filed, whichever is later.

(2) A claim for credit or refund must be filed within three years from the time the return was filed or two years from the time the penalty was paid, whichever is later.

(1) Generally, taxpayers must establish reasonable cause for the penalty to be abated. Use the procedures/guidelines in IRM 4.19.25.7, 972-CG Reply Procedures, (including the subsections) and IRM 4.19.25.8, Request for Reasonable Cause, (including the subsections) to evaluate the response. If the penalty can be fully abated, see IRM 4.19.25.17.1.2, Full Abatement Determinations, for more information.

(2) If the taxpayer submits corrected returns in response to the penalty adjustment notice (CP 15/ CP 215). Receipt and Control will notate on the CP 15/ CP 215 notice, "Processable returns submitted", and also notate the received date and the number of returns submitted.

(3) Review the taxpayer's response to determine if the explanation establishes reasonable cause. If the taxpayer's explanation does not establish reasonable cause and the received date indicates the penalty should be reduced, do the following:

1. Recalculate the penalty using the information in Exhibit 4.19.25-1, Penalty Rates for Large Businesses, and Exhibit 4.19.25-2, Penalty Rates for Small Businesses, as appropriate. The penalty should only be adjusted for the number of processable returns received as noted on the CP 15/ CP 215 notice. See IRM 4.19.25.17.1.4, Partial Abatement/Disallowance Determinations, for more information.

2. Include the following open paragraph in Letter 6304-C: "We received your corrected information returns on MMDDYYYY. The penalty you were previously assessed for filing unprocessable Forms XXXX has been reduced to $XX.XX per return. You will receive an adjusted balance due notice". See IRM 4.19.25.12.1, Creating Correspondex Letters, for more information.

   Reminder: Do not use the paragraph above verbatim. "MMDDYYYY" represents the IRS received date of the information returns filed. "XXXX" represents the applicable form number filed. "$XX.XX" represents the corrected penalty amount (including zero). Use the correct entries in the open paragraph as required by each case.

(4) If the taxpayer’s explanation does NOT meet reasonable cause regardless of whether they include processable returns, disallow the claim. See IRM 4.19.25.17.1.3, Full Disallowance Determinations, for more information.

(1) If the cooperative indicates they have an approved exemption, and a copy is included, waive or abate the penalty.

(2) If the cooperative indicates they have an approved exemption, and a copy is not included, treat correspondence as an insufficient reply.

(1) Upon receipt of an unprocessed Form 3491, evaluate the form for completeness and validity.

(2) The Form 3491 is considered complete when the taxpayer fills out section 1a, Name of Organization, through section 6, Gross Receipts, and must include the signature of the officer under the penalties of perjury jurat statement.

(3) The Form 3491 is considered valid when the percentage shown on line 6a, column 4, is 85 percent or more. Verify this percentage by:

1. Dividing the amount on line 6a, column 1, by the entry in line 6a, column 3.

2. If the entries on line 6a (first preceding year) do not result in 85 percent or more, then divide the entry on line 6d, column 1 by the entry on line 6d, column 3.

3. If the entries on line 6d (total) do not result in 85 percent more, then the Form 3491 is invalid and the taxpayer is not entitled to the exemption.

(4) If the Form 3491 is incomplete and/or invalid, return it to the taxpayer with Letter 131-C, Information Insufficient or Incomplete for Processing Inquiry. Do NOT make any annotations on the Form 3491.

1. On Letter 131-C, include a detailed explanation explaining why the form is being returned (for example: The form is missing the signature of the officer, the percentage of gross receipts from retail sales is less than 85 percent total receipts, etc.)

2. Input the following two-line IDRS History Item to the MFT 13 for the tax period of the requested exemption: "FORM3491" and "NOTAPPROVD".

(5) If the Form 3491 is complete and the 85 percent rule is met, the request will be approved.

1. Check the "We have approved your application" box on both copies.

2. Stamp the Director’s signature on both copies.

3. Enter the current date on the Director’s signature line of both copies.

4. Return the original Form 3491 to the taxpayer with Letter 6304-C explaining the Form 3491 was approved and to be retained for their records.

5. Input the following adjustment on MFT 13 for the tax period of the approved exemption. Include the following information:

Item	Content
BLK>	"15" for BMF account
ACTIVITY>	"PATREXEMPT"
TC>	290 .00
CD (PRN)>	600
REMARKS>	"Exemption from filing Form 1099-PATR"

(1) Aged criteria - Notice 972-CG replies and requests for reconsideration will be considered aged at 45 days from the IRS received date.

(2) Tax examiners track the time spent performing IRP-related activities based on the applicable Organization Function Program (OFP) code. See IRM 4.19.25.21.1.1, Organization Function Program Codes, for more information.

(3) Tax examiners record the volume of cases worked on a daily basis using an inventory tracker (for example: Feeder Sheet).

(4) Tax examiners use the CCA reports to monitor and manage their individual inventories.

(1) Program Completion Date (PCD): Each year, all of the case types listed below must be resolved by midnight, March 31st following the initial Notice 972-CG notice date:

• All replies to Notice 972-CG.

  Note: For purposes of meeting PCD, a resolved reply must result in either a full waiver, partial waiver/assessment or full denial of reasonable cause (penalty assessment).

• All cases where a reply was not received to Notice 972-CG (penalty assessments).

• All undeliverable Notices 972-CG (penalty assessments).

(2) IRM guidance must be followed and cannot be modified locally to accelerate case processing in order to meet PCD. Any deviation must be formally approved by Exam Policy.

(3) Age Criteria: IRP replies and reconsideration replies will be considered aged at 45 days from the IRS received date.

(4) Prior to the first 972-CG mail-out date, MITS provides the campus with a database file containing the TINs of all the taxpayers that will be sent a notice, broken out by notice date. This information will be used to open a control base for each case with:

1. Activity Code: "972CG_SENT"

2. Status Code: "M"

3. IRS Received Date: the notice date

4. Category Code: "IRP-"

5. Assigned Employee Number: "0583700000"

(5) Default assessment time frames: Cases where the taxpayer has not responded to the Notice 972-CG will be purged (for example: assessed) for the proposed penalty ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

1. Local Management will input the penalty assessments for impacted cases.

   Note: These are cases in status code "M" with Activity Code "972CG_SENT".

2. Cases remaining in each designated mail-out date will be assessed until all mail-out dates have been addressed.

3. The TY 2021 Notice 972-CG No reply purge dates are:

Notice 972-CG Notice Date	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
07/22/2024	≡ ≡ ≡ ≡ ≡ ≡
07/29/2024	≡ ≡ ≡ ≡ ≡ ≡
08/05/2024	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
10/07/2024	≡ ≡ ≡ ≡ ≡ ≡
10/14/2024	≡ ≡ ≡ ≡ ≡ ≡ ≡
10/21/2024	≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

Reminder: Due to undeliverable Notices 972-CG being reissued with notice dates other than those shown above, care must be taken to identify those cases ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and assess the penalty.

(1) The digitalization of all IRP correspondence has been implemented to eliminate paper processing, streamline case processing, and improve the taxpayer experience. A document repository was created for IRP correspondence.

(2) Beginning with TY 2022, all IRP replies and reconsiderations must be digitized.

(3) All guidance provided in IRM 4.19.25, Information Return Penalty (IRP) Procedures, must continue to be followed. Any deviation/change to these procedures will be provided by Exam Policy.

(4) Existing inventory management tools such as IDRS Inventory Reports and/or the ORCAS reports should continue to be used to identify workload priorities as established in IRM 4.19.25.21.1.2, IDRS Inventory Report, and IRM 4.19.25.23.6.2, IDRS Overage Report.

(5) All clerical processing of current year IRP replies and reconsiderations must be completed as required in IRM 4.19.25.22.3, Controlling Incoming Mail.

(6) All IRP replies and reconsiderations must be batched and controlled on IDRS prior to any scanning. Each batch must be controlled to the appropriate inventory wall as required by IRM 4.19.25.22.3.1, Batching and Controlling Replies, and IRM 4.19.25.22.3.2, Batching and Controlling Reconsiderations.

(7) Once controlled to the appropriate inventory wall, each batch must be perfected prior to scanning, and reviewed after scanning, to ensure all scanned information is usable, stored, and can be retrieved.

(8) In the document repository, each piece of correspondence will be given a standard name using the following naming convention: "TINTAXYEAR".

(9) When a batch has been scanned, the paper batch will be placed in the designated document retention area. The batches should be filed in a manner so documents can be easily retrieved. The paper will be retained for at least one year. A purge date will be determined in the future.

(1) The IRS received date for a mailed response is determined by following the priority criteria listed below:

1. Oldest IRS received date stamped on correspondence.

2. Envelope postmark date.

3. Signature date.

4. Current date.

(2) The IRS received date for a faxed response is determined by the following priority criteria listed below:

1. Fax date (printed on fax).

   Caution: The fax date is sometimes incorrect, use caution when determining whether to use this date.

2. The PSC Operation received date stamped on correspondence.

3. Signature date.

4. Current date.

(1) All clerical processing of Notices 972-CG replies and reconsiderations must be completed within 14 business days of IRS receipt or three business days from receipt into the operation, whichever is later.

(2) Use the SB/SE Document Matching Batcher to:

1. Build a 972-CG Reply batch.

2. Build a 972-CG Reconsideration batch.

   Note: Form 4442 can be built into a reconsideration batch.

3. Build a 972-CG Undeliverable batch.

4. Build a 3870 batch.

5. Build a Letter 854-C Replies batch.

6. Generate an interim Letter 5825-C if the IRS received date is older than 23 days.

   Note: Interim letters must be initiated by the 30th calendar day from the IRS received date.

   Exception: Do not issue interim letters on any 3870 cases.

7. Generate IDRS CC: STAUP.

8. Identify mail already in process or under an active control (for example: associations or suspense cases).

(3) When the SB/SE Document Matching Batcher identifies mail as an Association, do the following within five business days of identifying the Association:

1. Scan the Association.

2. Merge the Association with the case file on the document repository.

3. Input an IDRS history item of "ASSOCAVAIL" at the time the Association is identified.

4. Email the tax examiner and lead tax examiner notifying them of the Association.

(4) Route incoming Forms 3491, Consumer Cooperative Exemption Application, to the designated Specialist in the Technical Function.

(5) Additional research may be required to ensure the mail belongs to the IRP program. Route all other mail, as appropriate.

(1) All clerical processing of undeliverable Notices 972-CG must be completed within 14 business days of IRS receipt or three business days from receipt into the operation, whichever is later.

(2) IDRS CCs INOLE, ENMOD or IRPTR should be used to perform research for a new address.

1. CC "INOLE" will provide the most current posted entity information on the National Account Profile (NAP).

2. CC "ENMOD" may reflect a recently input address change not posted to IDRS CC: INOLE.

3. CC "IRPTR" will provide a current address for the taxpayer from an information return filed for the most recent processing year.

(3) The clerical function will treat any undeliverable CP 15 or CP 215 adjustment notices received as classified waste. Dispose of them in the designated "classified waste" container.

(1) The following OFP codes should be used with the 790 (tax account support activity - clerical) function code:

(2) Completed work must be staged within three business days of being controlled/updated.

(3) Associations must be completed within five business days of being identified as an association.

(1) A statute (or period) of limitation is a time period established by law to review, analyze and resolve taxpayer and/or IRS related issues. The IRC requires the IRS assess, refund, credit, and collect taxes within specific time limits. These limits are known as the statutes of limitations. When they expire, the IRS can no longer assess additional tax (including penalties and interest), allow a claim for refund or credit, or take collection action. The determination of statute expiration differs for assessment, refund or credit, and collection.

• Assessment statute expiration date (ASED)

• Refund statute expiration date (RSED)

• Collection statute expiration date (CSED)

(2) Failure to protect an assessment statute can result in disciplinary action against the responsible employee. The responsible area/employee is identified as the area/employee that had the case, when the case was within 90 days of the ASED and either took no action to protect the statute or allowed the statute to expire (barred statute).

(3) For IRP clerical, a statute imminent case is identified when the ASED is within 90 days of expiring. The ASED expires three years from the due date of the information return or three years from the date the information return was filed, whichever is later. The ASED can be found on IDRS CC: TXMOD or CC: BMFOLT.

(4) The SB/SE Document Matching Batcher will assist you in identifying a potential statute case. The tool will not batch the case and it will print the TIN on the error listing with "ASED" in the remarks section. These cases will be manually batched and controlled on IDRS to a designated management official who will be responsible for ensuring the case is reviewed and/or worked immediately to protect the statute.

(5) To manually batch these cases use the following procedures:

1. Access IDRS CC: TXMOD.

2. Access IDRS CC: ACTON.

3. Enter the appropriate Activity Code, use "A" status, input the assigned employee number, and enter the applicable IRS received date.

Example: ACTON
"C#,16IRP0001L,A,IRP-"
"0583712345,09292023"

Note: Cases controlled as potential statutes must be controlled to a designated management official.

(6) Cases identified as potential statute cases must be personally delivered to the management official. Do not leave any potential statute cases on an empty desk or otherwise unattended.

(1) The IRP clerical function is responsible for all outgoing mail. This mail may consist of internal mail, misrouted mail, or external mail.

(2) Internal mail is routed to other areas using Form 3210, Document Transmittal. The receiving area will acknowledge receipt by sending a signed copy of the Form 3210 back to the originating area. These forms must be maintained in a log in the IRP Clerical Function.

(3) When misrouted mail is identified, it must be routed back to the mail room for proper routing if the mail room was the originating office.

(4) If the mail was addressed to IRP, but did not fit IRP criteria, route the correspondence to the proper area and issue Letter 86-C to the taxpayer. For additional information on issuing Letter 86-C, see IRM 21.3.3.4.2.1, Use of 86-C Letter - Referring Taxpayer Inquiry/Forms to Another Office, for more information. Also see http://serp.enterprise.irs.gov/databases/who-where.dr/form-4442-erroneous-referral-coordinators.html for instructions in routing misrouted Forms 4442, Inquiry Referral.

(5) When tax examiners complete their adjustments, they are placed in brown gusset folders. Follow local procedures for routing these folders to the files function each day.

(6) Taxpayers may request assistance from TAS. TAS is an independent organization within the IRS created by Congress to help taxpayers resolve issues with the IRS. Form 12412, Operations Assistance Requests (OARs), are received from TAS in the IRP clerical function both by mail and fax. The IRP clerical function must take the following actions for all OARs received:

1. Date stamp each Form 12412 with the date it was received.

2. Hand carry the Forms 12412 to the TAS Liaison within 24 hours of receipt.

(1) Cash or non-cash remittances found outside of the Receipt and Control secured/restricted area are discovered remittances.

(2) When "discovered remittance" is identified:

1. Notify your manager/lead immediately.

2. Access IDRS CC: INOLES to verify the taxpayer’s name.

3. At the bottom of the IDRS CC: INOLES screen, type the MFT, TY, 670/570, the received date, and the money amount.

4. Print three copies of the IDRS CC: INOLES screen. One copy is attached to the case and the two other copies are attached to the discovered remittance.

5. Complete a Form 4287, Courier Log for Discovered Remittances.

6. Hand carry the Form 4287, the remittance, and IDRS CC: INOLES prints to your manager/lead.

(1) The digitalization of all IRP correspondence has been implemented to eliminate paper processing, streamline case processing, and improve the taxpayer experience. A document repository was created for IRP correspondence.

(2) Beginning with TY 2022, all IRP replies and reconsiderations must be digitized.

(3) All guidance provided in IRM 4.19.25, Information Return Penalty (IRP) Procedures, must continue to be followed. Any deviation/change to these procedures will be provided by Exam Policy.

(4) Existing inventory management tools such as IDRS Inventory Reports and/or the ORCAS reports should continue to be used to identify workload priorities as established in IRM 4.19.25.21.1.2, IDRS Inventory Report, and IRM 4.19.25.23.6.2, IDRS Overage Report.

(5) When a batch has been scanned, the paper batch will be placed in the designated document retention area. The batches should be filed in a manner so documents can be easily retrieved. The paper will be retained for at least one year. A purge date will be determined in the future.

(1) Managers perform the following types of reviews:

• Workload reviews

• Evaluative case reviews

• Non-evaluative case reviews

(2) Managers are required to perform a minimum of two workload reviews per quarter for each employee. These workload reviews consist of:

• Bin reviews

• Day after/time utilization reviews

(3) Managers are required to perform evaluative case reviews. See IRM 4.19.25.23.2.2, Mandatory Evaluative Reviews, for more information.

(4) The primary purpose of a non-evaluative review is to help the employee develop and enhance their job skills. See IRM 4.19.25.23.2.3, Non-Evaluative or Coaching Reviews, for more information.

(5) The number of reviews should be increased when warranted.

(6) These reviews, as in all case reviews, should be documented in a Performance Review Worksheet.