An account problem may be identified by either First Read or Full Scope while researching the taxpayers' account. Account problems can include math errors from the original return processing, duplicate assessments, missing/incorrectly applied payments, incorrect/incomplete tax assessments made by the Examination or AUR Departments or Form 1040-X, Amended U.S. Individual Income Tax Return, adjustments.

The examiner will prepare Form 3465, Adjustment Request, when an account problem is identified. Form 3465 must clearly explain what the problem is and what action the processor must take.

The examiner must send back-up documentation to justify the actions requested, e.g. copy of the tax return, substantiation for math error, proof of payment. The examiner may or may not send the entire case file. Place account problems in "Yellow" folders and send to the Processing team.

If the entire case file is sent, document the history sheet if the case must be returned to the examiner, or if it can be closed in the Processing team. Update the Innocent Spouse Tracking System (ISTS) to Stage 27 if entire case file is sent to the Processing team. If the case file is not sent, do not update ISTS.

The processor will review Form 3465 for completeness and take the necessary actions to resolve the account problems.

The following are reminders when making a tax adjustment. See IRM 21.5, Account Resolution, for additional adjustment instructions.

Requests for relief which cannot be considered must be identified and closed during the first read process.

When the request for relief has been determined to be unprocessable or not meeting the basic requirements, send Letter 3658 or Letter 3657 to the RS and current POA(s) if applicable. See IRM 25.15.7.8, Non-qualified and Disallowed, for additional information on nonqualifying cases.

Input TC 290 .00, BS 00 (with original return) or 05 (without original return) or 99 (if tax period is more than 10 years earlier and the original return has been destroyed), RC 097, SC 2, HC 3, and SD Y. If relief is nonqualifying for multiple years, input one TC 290 on the latest nonqualifying year. See IRM 21.5.2, Adjustment Guidelines, for additional instructions on posting the TC 290. See IRM 25.15.9.1.25, Case File Assembly, for case assembly instructions.

If TC 971 AC 065 is on the account, reverse it by inputting TC 972 AC 065. See IRM 25.15.2.4.2, Indicator Transaction Code (TC) 971/972, and See IRM 25.15.9.1.23, Final Purge/Transfer Complete, for additional information.

Reverse TC 130, if appropriate. See IRM 25.15.9.1.5.1(7)(c), Denied under IRC § 6015(b), (c), or (f)

Update ISTS to Stage 29 including the appropriate activity code and Stage 30, Activity NOACCTP. See IRM 25.15.14 for information on the ISTS.

Send the case to Files.

When it has been determined the secondary taxpayer is not liable because of an invalid joint election, the Technical examiner will:

When it has been determined the primary taxpayer is not liable because of an invalid joint election, the Processing team will:

Refunds due a taxpayer for payments made with respect to a tax liability stemming from invalid joint elections are available if the claim was received within 3 years of the date the return was filed, or 2 years from the payment date, whichever is later, and a married filing separate (MFS) return has been filed, or the taxpayer would not have been required to file a return.

During an Examination or AUR review of a joint return, one taxpayer may sign agreeing to a tax assessment while the other taxpayer does not respond. The taxpayers will be referred to hereafter as agreed and unagreed. In this case, the agreed taxpayer must have been assessed on NMF 20 or MFT 31. The unagreed taxpayer must have been issued a Statutory Notice of Deficiency. If there was no response to the Statutory Notice of Deficiency, a separate assessment must have been made on NMF 20 or MFT 31.

Under the IRS's prior procedures, deficiency assessments sometimes were made to joint accounts based on one signature on a waiver of assessment form if certain criteria were met. The Service has now changed its policy and will no longer make assessments against the non-signing spouse. Some of these erroneous assessments cannot be corrected as assessment is now barred by the statute of limitations. These are referred to as "Barred Statute One Signature (BSOS)" cases. These barred statutes are attributable to a policy decision and not to any employee action or lack of action. In lieu of completing Form 3999, Statute Expiration Report, a copy of the BSOS memorandum found at http://win.web.irs.gov/innocent_spouse.htm must be completed, approved by the manager, and placed in the administrative file. These cases do not meet Innocent Spouse criteria, but the RS is nevertheless relieved of the liability because the assessment period has expired. The barred assessment is moved to MFT 31 for the spouse whose signature is on the report.

The Full Scope examiner will complete Form 3465, Adjustment Request, the BSOS memorandum and update ISTS to Stage 29 with Activity BSOS and then to Stage 27.

The processing examiner will follow the instructions on Form 3465. Use the following information to determine which taxpayer to establish a MFT 31 or NMF 20 account to transfer the barred assessment to:

If abatement of NMF 20 is required, obtain a current NMF transcript from the campus maintaining the NMF 20 account. If mirrored assessment, obtain transcripts for both taxpayers.

When the transcript is received showing the abatement, close the case using the following steps:

If the unagreed spouse was assessed on MFT 31, abate the tax using CC REQ 77 per Form 3465 instructions. Close the case in the same manner as above.

These procedures are for the Full Scope and First Read examiners.

A claim is considered to be a partial if the RS is granted relief so that he or she does not have a balance due, but RS is not entitled to a refund of any overpayment that results from relief being granted. A refund may be barred by IRC § 6511, IRC § 6015(c), or Rev. Proc. 2003–61, 2003–2 C.B. 296, Section 4.01(4). Any remaining liability will be transferred to the NRS and the MFT 30 will be in zero balance after transfer. There is another type of partial described in the next paragraph.

A claim is considered to be a true partial if the RS is still liable for any part of a tax assessment (including EITC reversal, withholding credit, accuracy-related penalty, etc.).

When the request has been partially allowed on a current return under IRC § 6015(b), IRC § 6015(c), or IRC § 6015(f) the Full Scope examiner will:

If the RS petitions the Tax Court from a partially allowed claim, follow the full denial procedures. See IRM 25.15.9.1.5.1.(7) & (8).

Claims are considered fully allowed when the RS is granted full relief of the entire balance due and/or is entitled to receive refunds requested.

Check CFINK for a current POA(s) for the RS and NRS.

Issue the preliminary determination Ietter to the RS, NRS and POA(s) if current. Place a dated copy of the letter in the case file. Update ISTS to Stage 11 and 13.

Suspend the case for 45 days. If the RS/NRS responds with Form 12509, Statement of Disagreement , see IRM 25.15.7.11.11 for instructions.

After the 45 day suspension period, purge the case and update ISTS to Stage 12. Issue the final determination letter to the RS, NRS, and current POA(s) if applicable. Associate a dated copy of the final determination letter with the case file.

Add together the time on case entries on the history sheet and document total time on case on the ISTSR Input Record near the Stage 13 amounts.

Input TC 971 AC 102 to establish MFT 31 for the NRS. (If a TC 971 AC 104 has been input and an account has been established on MFT 31 in error , input a TC 972 AC 104 on both MFT 30 and MFT 31 accounts to reverse the TC 971 AC 104.)

Update ISTS to Stage 27. Update IDRS control to 0297500000.

Route case and completed Form 3465, Adjustment Request, to the Processing team. Place in the Processing team's designated area marked Incoming Accepted. If a refund is being requested, place the Form 3465 in a lilac folder and place the whole case in the basket marked Incoming Accepted - Lilac Folders.

Prior to completing Form 12810, Account Transfer Request Checklist, the processor will review the case and account information to make sure the TC 971 AC 065, TC 971 AC 102, and TC 130 are posted correctly whether the case is partially allowed or fully allowed. If not, make the appropriate changes.

Review the Form 3465, Adjustment Request, for closing instructions as follows:

Verify the following freeze codes were addressed by the examiner: -L- (AIMS), -Z, and Z- (all are Criminal Investigation (CI) freezes). The examiner must have contacted CI and documented the conversation or reject the case to the examiner. See IRM 25.15.9.1.26, Rejecting Cases.

Check the balance due of MFT 30 to determine if the account is in Master File Status 12 (full paid). Determine whose payment(s) paid the account off:

Check CC IMFOLT for the last CSED. CC IMFOLT will show the next, last and first CSED to expire. CC TXMOD only shows the current CSED.

If an account has a -V and/or -W freeze, check for an open bankruptcy indicator (TC 520 with closing codes 60-67, 81, 83 or 85-89). The TC 520 will also contain a CSED-EXT-IND. Valid entries are P for primary, S for secondary or B for both. Determine if the RS or NRS filed the bankruptcy.

If the account has an open -Y freeze, check for a TC 480 or TC 780. Look at the indicator to determine which taxpayer filed the OIC; P is for primary; S is for secondary; B is for both. If the NRS filed the OIC and the TC 780 posted to the account before the date of determination, then the Full Scope examiner must document the history sheet stating they contacted the OIC office. If not, reject back to the examiner. See IRM 25.15.9.1.26, Rejecting Cases. If the TC 780 posted to the account after the date of determination, then the processing examiner will coordinate with the OIC office. The following is a list of all transactions related to OIC:

If TC 48X or 78X transactions are present for the NRS, transfer the module to MFT 31. If the TC 48X or 78X transactions belong to the NRS, take a print of the MFT 30 TXMOD to the designated processing examiner to have the TC 48X(s) and TC 78X(s) input to MFT 31. Notate on current TXMOD print and activity sheet the request was made to have the TC 480 etc. input on MFT 31. This is necessary so the computer can figure the correct CSED for the NRS. If there is a TC 480 or 780 posted in error, those do not need to be transferred to MFT 31. The CSED would not be extended in this case.

When an accepted OIC is fully paid, including payment of deferred installment payments and completion of the terms of any collateral agreements, the tax liabilities are adjusted to zero. The OIC file is placed into a monitoring status. For more information, see IRM 5.19.7.3.23, Closing an OIC. One of the terms of the offer agreement requires the taxpayer to timely file returns and timely pay taxes for five years after the acceptance of the OIC or until the offered amount is paid in full, whichever is longer. Breach of this future tax compliance provision permits the Service to reinstate the original tax liability. See IRM 5.19.7.3.20.4, Failure to Adhere to Compliance Terms. The future compliance period (five years after acceptance of the OIC or until the OIC is paid in full) starts from the TC 780 date.

Due to the possible reinstatement of the original tax liability because of noncompliance, the initial adjustment bringing the balance in the account to $0 is not considered an abatement of the tax assessment. Given these facts, process all cases involving an accepted OIC (TC 780) as follows:

If the account has been transferred to the RS on NMF 20 because the NRS's liability was compromised through an OIC, follow campus directions for zeroing out the NMF 20 account.

If the account has been transferred to the RS on MFT 31 and the RS has been granted full relief, input a TC 971 AC 131 to establish a false credit to clear a debt. Verify the TC 971 AC 065 is on the MFT 31 account. The following values have been modified to allow input of the TC 971 AC 131 in the XREF-MFT section of the REQ77/FRM77:

Abatement is not permitted when the NRS is deceased and has no estate. However, the NRS's account will be placed in "currently not collectible status (CNC)" according to the following:

If transferring a true partially allowed account to MFT 31, accruals of failure to pay (FTP) penalty and interest may need to be posted to the MFT 30 account. Input a TC 290 .00, BS 05, SC 02, HC 3, Priority Code 5, No Source Doc (NSD). In remarks enter Post accruals - IS claim.

When transferring accounts to NMF 20, post the accruals of FTP penalty and interest to MFT 30 as restricted transactions. Input TC 340 and TC 270 for the amounts shown on CC INTST, BS 05, SC 02, HC 3, DB-INT-TO (INTST Date).

There are three rates of FTP penalty that can be charged:

In all cases, the maximum FTP penalty charged is an aggregate total of 25% of the underpaid tax.

If a FTP penalty is being charged concurrent with the failure to file (FTF) penalty, the FTF penalty rate is reduced by the amount of the FTP penalty. The rate does not change see IRC § 6651(c)(1). If a FTP penalty is not being charged concurrently (as in a TC 300 examination assessment), the FTF penalty rate is 5% per month on the unpaid tax as of the normal return due date, for a maximum of 5 months, or 25%.

When transferring accounts to MFT 31, notice status 21, 56, and 58 cannot be transferred. The original 1% start date which triggers a 1% FTP penalty will be lost. Indicators the FTP penalty must be computed at 1% are:

Using CC REQ 77, input TC 971 AC 035 on MFT 31 to maintain the original 1% start date. Required fields are:

The taxpayer may receive the 1/4% rate for the IA if the original return was filed timely (including extensions). An indication the taxpayer was allowed the 1/4% rate is the TC 971 AC 063 on the MFT 30 account. The Full Scope examiner will note on the history sheet whether the IA was entered into by the RS or NRS. If the IA was entered into by the NRS then input TC 971 AC 063 on the MFT 31 account. Using CC REQ77, input TC 971 AC 063 on MFT 31 account. If there is a TC 971 AC 163 on the MFT 30 account, input this on the MFT 31 account as well.

The following are some situations you may encounter affecting the calculation of the FTP penalty. These are not all-inclusive. See IRM 20.1.2, Failure to File/Failure to Pay Penalties, for additional information.

Interest is charged on underpaid tax from the last date prescribed for payment, without regard to extensions (generally the normal return due date). Underpaid tax is the total tax minus timely credits (TC 806, TC 764, TC 660 and any other payments received on or before the due date). Interest is charged on the FTF and TC 240 penalties (PRN 680, 681, & 682) from the normal due date, extended due date, or 07/18/1984 (whichever is later). Interest on FTP penalties is not charged until the penalties are assessed (23C date).

An original tax return (TC 150) resulting in a refund issued after the normal return due date affects the deficiency interest on a subsequent assessment. Interest is not charged on a subsequent assessment (up to the amount of the refund) for the periods of time the Service had use of the taxpayer's money without the Service paying interest. However, if the taxpayer received interest on the refund, interest on subsequent assessment should be charged for the period for which the Service paid interest on the refund (up to the amount of the refund). Input a separate TC 772 for each netted interest amount for each overpayment that was netted or recaptured. See IRM 20.2.14.4.3, Manually Computing Within Module Interest Netting.

IRC § 6404(g), suspends interest and certain penalties for tax years ending after July 22, 1998 in cases where the Service fails to provide a notice of liability to the taxpayer within 36 months, (18 months prior to November 26,2007), beginning on the later of:

Programming was created to allow the computer to perform this suspension. A TC 971 AC 064 is input on the account with the transaction date of the date the notice is issued. The transaction was only to be used when the 18 or 36 month period has not been met; however, the transaction was input on all AUR/Examination cases. There are three scenarios Innocent Spouse Processing personnel must watch regarding IRC § 6404(g).

If an account contains the following conditions, it can be worked by a processing examiner.

If the account contains a TC 340 with a money amount, or a TC 340 .00 but does not meet any of the conditions listed above, See IRM 25.15.9.1.14, Interest Considerations, the interest will need to be computed by a Senior Tax Examining Technician. The Senior Tax Examining Technician will complete Form 12810, Account Transfer Request Checklist. Prepare Form 1725, Routing Slip, notating there is an -I freeze on the account and an interest computation is required. Reassign case to 0297500000 and place in the Processing team's designated area. Clerical staff will reassign these cases on a weekly basis to the Senior Technicians. A Senior Tax Examining Technician will compute the interest and return the case to the processing examiner. These cases include tax motivated transaction (TMT) interest transactions requiring a restricting TC 340.

Once a notice and demand is issued, the taxpayer has a limited amount of time to pay the amount shown before additional interest is charged. Notice status codes are 19, 20, 21, 54, 56 and 58. See IRM 20.2.5.4, Notice and Demand and Debit Interest, for additional information.

Whenever a situation exists preventing interest from computing accurately, a non-restricting (NR) TC 340 is required. The one time input of the unrestricted TC 340 will require manual computation of interest up to the date in the INT-TO-DATE field and the module balance entered in the COMP-INT-AMT field which will enable Master File to systemically compute interest from that date forward. See IRM 20.2.8, Restricted Interest. Master file can then correctly compute interest from that date forward. The following situations require a NR TC 340 to be input to MFT 31:

Interest not computed at the normal rate (Tax Motivated Interest at 120% of the normal rate) is a restricted transaction. A NR 340 is not appropriate in these cases. A TC 34X can identify these accounts on CC TXMODA for a money amount posted with Item References 221 TX-MOTVTD-TRANS and 222 TX-MOTVTD-INT. These cases require a Senior Tax Examining Technician to compute the interest and request a restricting TC 340 be posted to MFT 31. A Tax Examining Technician can work the case to the point of requesting the interest computation. The Senior Tax Examining Technician will complete Form 12810, Account Transfer Request Checklist, with the interest transactions and item reference codes and amounts required.

Take the following action if a non-restricting TC 340 is required and you are moving the entire account to MFT 31 including the interest (TCs 190, 196, 197, 336, 337):

Take the following action if a non-restricting TC 340 is required, but you are not moving the posted interest transactions from MFT 30 to MFT 31:

Conduct the following research in order to determine the disposition of the payments.

Keep in mind refunds are not authorized under IRC § 6015(c) and that refunds involving deficiencies are limited under IRC § 6015(f).

If the refund statute expiration date (RSED) has expired for an offset or payment made by the RS, it will be used as a payment on the assessment. Do not transfer the payment/credit to excess collection. This would result in the same amount being collected twice.

If any freeze conditions exist that make a refund inappropriate or prevent a refund from being issued by master file, either resolve the freeze or issue a manual refund. See Document 6209, IRS Processing Codes and Information, Chapter 8.

Always use the best method of refunding available credits. Whenever possible, transfer credits back to the year producing the offset and allow the computer to refund the overpayment or transfer to another year. This will ensure the allowable interest on the refund is correctly computed.

Apply any credits to any existing separate or joint liabilities for which the RS was not granted relief or was only granted partial relief. Satisfy the liabilities on the earliest CSED.

IA user fees ($105.00, $52.00, and $45.00 fees for setting up an IA) will not be refunded except for IRS error, (i.e. fee taken twice).

Before refunding TC 670 payments, verify they are not levy payments. The Full Scope examiner must forward a Form 3465, Adjustment Request, to the Processing team requesting the payment(s) be refunded. The Full Scope examiner must monitor the case until the refund is completed before sending the case to the Processing team. If these procedures are not followed, reject the case back to the Full Scope examiner for them to hold/monitor until the refund is completed. See IRM 25.15.9.1.26, Rejecting Cases.

If the account requires a credit transfer/refund for both levy payments and non-levy payments, complete separate Forms 3465. The levy payment refund request will be submitted to the Manager in First Read for Collection contact. A copy of the Form 3465 must be marked "copy" and included in the case file. This will ensure the Processing examiner is aware the levy payments were addressed. Processing will take action on the Form 3465 requesting transfer/refund of non-levy payments.

Credit transfers are requested on Form 3465, Adjustment Request. The credit transfer request will be in addition to the account transfer information shown on the form. Information must be documented in the case file by the examiner if the claim was allowed under IRC § 6015(b), IRC § 6015(c), or IRC § 6015(f) and if refund/offset of credits is appropriate.

Forms 3465 requesting a credit transfer are also received without the case file when a refund has offset from the RS’s individual tax return to the joint account after Form 8857, Request for Innocent Spouse Relief, was filed.

For purposes of determining the date of payment when there is a TC 706 (offset of refund from RS’s account), use the cycle the offset posted. Monday’s date is considered the first day of the cycle and the date the offset occurred, i.e., if the transaction date of the TC 971 AC 065 (received date of Form 8857) is after the Monday's date of the TC 706 cycle, the payment is not available for refund.

Please refer to IRM 21.5.8, Credit Transfer, for detailed instructions on credit transfers.

If TC 971 AC 065 has not posted to the account (has an incomplete DLN, in process of going though all validity checks (AP) or has a complete DLN and has passed all validity checks (PN)), use a posting delay code of one cycle on both sides of the credit transfer.

If a TC 131 is required (posted to incorrect account or not timely released) along with the credit transfer, use a posting delay code of one cycle on both sides of the credit transfer.

Issue credit transfer letters, as appropriate.

It may be necessary to issue a manual refund to the RS if master file is unable to refund the credit. See IRM 21.4.4, Manual Refund, for detailed instructions on manual refunds. Some of the reasons a manual refund would be necessary are:

Do NOT issue a manual refund from a tax module where no TC 150 has posted. This will create an –X freeze and you will be unable to post a TC 290 .00 to release it. If payments must be refunded on an expedite basis and conditions on the module prevent the issuance of the refund from the module, transfer the payments to a module where a TC 150 has posted and the module is in zero balance.

Compute allowable interest, if appropriate, using either CC COMPA or the Automated Computational Tool (ACT) by Decision Modeling Inc. (DMI).

Use Form 5792, Request for IDRS Generated Refund, to request the refund. See IRM 21.4.4.4.1, Preparation of Form 5792, IDRS Generated Refund for instructions.

Attach the following to Form 5792 before faxing:

Input TC 971 AC 037 using CC REQ77 if the refund is being issued from a joint year. This will show the TIN of the recipient of the manual refund on the joint account. Use the CC RFUNDR input date as the Transaction Date. Enter the TIN of the person receiving the refund.

If leaving an account in debit balance, TC 840 will set an -X freeze. To release the -X freeze, input TC 290 .00, BS 05, RC 099, SC 2, HC 3, PC 8, PDC 1, NSD Remarks: "To release -X freeze" .

Update IDRS activity to "WTTC840" .

After completing Form 5792, the Manager will review and initial it and then have the approving official sign and date it.

Manual refund requests will be input by Accounting in the Andover Campus. Per a local agreement, fax Form 5792 to Andover Accounting at fax number (978) 474–5234 no later than 11:00 a.m. They will input CC RFUNDR and CC REFAP on the same day. Verify there is a PN TC 840 at SC 08 the next business day and then give the original Form 5792 and the information listed below to the clerical staff for mailing to:
Internal Revenue Service
310 Lowell St. Stop 321
Andover, MA 01812

Monitor case until TC 840 posts.

Continue to work case after TC 840 posts, or, if the only action requested was the manual refund, close the IDRS base. Attach Form 1725, Routing Slip, to a copy of Form 5792 and send them to the team where case is being worked to be associated with the case.

For credit transfer(s) and/or manual refund(s) on NMF 20, obtain a NMF transcript from the campus maintaining the NMF 20 account.

The Full Scope examiner must address reversed Earned Income Tax Credit (EITC) on Form 3465, Adjustment Request, since an EITC reversal may be treated as a joint liability unless there is clear evidence only one spouse received the benefit of the credit.

An offset to the tax or non-tax debt of one spouse will be considered a benefit to that spouse.

The Processing examiners will compute penalties (TC 16X , 27X, 17X) based on the net tax liability of each spouse. Net tax liability is the total tax for each spouse, less the prepaid credits allocated to each spouse.

Income related penalties (TC 24X, 32X) must be addressed by the Full Scope examiner.

Each taxpayer is responsible for any bad check penalties incurred separately.

IA user fees will not be refunded or reapplied to the tax liability unless they were the result of IRS error.

Withholding credits (TC 806) will be moved according to the instructions on Form 3465.

Likewise, withholding credits (TC 806) will not be left on MFT 30 if an overpayment will result. The entire account will be transferred to MFT 31 in this case.

The Processing examiners will verify Form 3465, Adjustment Request, contains sufficient information to process the account.

If Form 3465 states any portion of the tax, or income related penalties is to be left on the joint account, this is a true partial and must be placed in the Processing team's designated area for a review of the case. Prepare and sign Form 1725, Routing Slip, stating the case appears to be a true partial, and re--control IDRS to 0297500000. If the Processing examiner can work the case, it will be returned with specific processing information documented and initialed on Form 3465.

If Form 3465 states the tax must be transferred and the reversed EITC left on MFT 30, this is a true partial and the same procedures in paragraph (2) above must be followed.

Prepare Form 12810, Account Transfer Request Checklist. For detailed instructions See IRM 25.15.9.1.22, Form 12810 — Special Considerations and IRM 21.5.2.4.23.9, Moving Assessments.

Total the debit and credit transactions to be transferred to the MFT 31 account. Subtract this amount from the MFT 30 module balance. If the resulting answer is less than or equal to the MFT 30 module balance, transferring the interest is not required. If the result is more than the MFT 30 module balance, transfer all interest transactions as well as tax, penalty and credit transactions. Failure to do so will result in the Form 12810 being rejected to you.

Update IDRS control with current date to 0297511399 or 0297511105, Activity WTG402.

Update ISTS to Stage 28 and note the ISTSR Input Record.

Document the history sheet with actions taken.

Place the original Form 12810 and highlighted TXMOD in the Processing team's designated area. Place a copy of Form 12810 and highlighted TXMOD in the case file.

Senior Tax Examining Technicians will verify whether Form 3465, Adjustment Request, contains sufficient information to process the account.

Determine the amount of tax to be transferred to MFT 31 and the amount to leave on MFT 30, if any.

If payments have been made on the account by the RS, a manual computation of the account will be necessary to determine:

Form 12810, Account Transfer Request Checklist, is used to request transfer of part or all of a tax assessment to MFT 31 or NMF 20.

The Credit and Account Transfer Unit cannot transfer a TC 896 through 899 (offset to nontax debt). This is usually associated with the original settlement (TC 150 transactions). Do not transfer the TC 150 and related transactions. A non-restricting (NR) 340 may be required if the purpose of the entire account being transferred was because of a refund/offset after the due date. If it is necessary to transfer the TC 150, see your Manager.

If transferring a TC 280 (bad check penalty) from the MFT 30 account, the related TC 670/671 causing the penalty must also be transferred.

The Credit and Account Transfer Unit cannot transfer a TC 766 with an OTN-CD number (offset trace number) instead of a reference number. If it is necessary to transfer the TC 766 with an OTN-CD number, see the Manager.

Transfer any TC 960/961/962 (CAF indicator) ONLY if they pertain to the NRS. Always verify on CFINK who the valid CAF indicator belongs to. These transactions along with the TC 460 will be listed on the "TO SIDE" only. DO NOT request input of TC 520/521 and closing codes (Bankruptcy transactions) pertaining to the RS. See IRM 25.15.9.1.10, Bankruptcy -V/-W Freeze, and follow the procedures referenced.

If transferring a TC 740 credit (undeliverable refund) posted after a TC 300 or TC 290, transfer the entire account. You cannot transfer a one-sided TC 740. The TC 740 is a credit transaction following a TC 840/846 debit transaction. The only one-sided transactions you can transfer are TC 807 and TC 765. If there is a reason why you must not transfer the entire account, see your Manager.

If transferring an account with a TC 777 (reversal of allowable interest paid) posted with the TC 300 or TC 290, transfer the entire account. The TC 777 and TC 776 cannot be netted against each other. The TC 777 is a debit transaction now part of the balance due. Accounting cannot transfer just the TC 777 since it is a two-sided transaction (TC 776/777). If there is a reason why you must not transfer the entire account, see your Manager.

If a TC 840 has posted to the account as the result of a refund of various payments to the RS, be alert to the fact the computer will always presume the last payments posted before the TC 840 are the payments refunded. CC INTSTD will reflect this. The computer has no way of knowing the payments refunded may not be the last payments made. Therefore, if a NR 340 is required, and the payments refunded do not agree with CC INTSTD, a Senior Tax Examining Technician will need to manually compute the interest.

If the NRS requested an IA (TC 971 AC 043) or has an IA (TC971 AC 063), it is necessary to manually input these transactions to MFT 31 account using CC REQ 77. These protect the taxpayer from levy action. The taxpayer can also receive the benefit of a 1/4% rate on the FTP penalty. The original return must be filed timely (including extensions). If the taxpayer meets both of these requirements, he/she will receive the benefit of the 1/4% rate on the FTP penalty. If the NRS was taken out of the IA status, the account will reflect a TC 971 AC 163 on the MFT 30 account. Input this on the MFT 31 account.

Invalid secondary TINs must be corrected before trying to post to MFT 31.

If the taxpayer used an incorrect TIN (transposed numbers or typographical error) and through research the correct TIN is found, use CC ENMOD/ENREQ to correct the secondary TIN. After posting, the TIN will be validated and the account can be transferred to MFT 31.

The TC 971 AC 065 will also need to be corrected. When the TIN is validated, input TC 972 AC 065 with the invalid XREF TIN. Also input the correct TC 971 AC 065 with the valid XREF TIN.

Typographical errors in the name control and/or use of a hyphenated last name can also be corrected using CC ENMOD/ENREQ to validate the secondary TIN as long as the CC INOLEX Social Security Administration (SSA) and Individual Master File (IMF) name controls match.

Invalid secondary TINs due to Name Control mismatches can be validated using CC IRCHG. To use IRCHG:

The only cases which must be transferred to NMF 20 are those where the secondary claimant is actually using a TIN belonging to another taxpayer. Do not validate the TIN in this situation.

Prior to transferring an account to NMF 20:

If an account must be transferred to NMF 20, and it is necessary to transfer two or more tax assessments from the same module (TC 150, 290, 300 and their related transactions), prepare a separate Form 12810 for each tax assessment. NMF 20 accounts are set up to reflect only one collection statute per module. Be certain to indicate the correct CSED for each tax assessment..

Invalid primary TINs will post to MFT 31.

The following transactions will affect the processing of a claim. These indicate the NRS and/or RS have been relieved of all or part of the debt by Bankruptcy or OIC. The amount may subsequently be transferred to either taxpayer or the entire balance may be removed with a TC 604 (assessed debit cleared). You must ensure the actions taken by Compliance are in agreement with the Innocent Spouse determination. You may be required to post a TC 604 to the RS if the account has been transferred to MFT 31 for the RS or you may be able to close your case if the joint debt was written off. If you are uncertain of the correct action to take, see your Manager.

The Credit and Account Transfer Unit cannot transfer a TC 767 without the corresponding TC 766. If there is a reason why you cannot transfer both transactions, see your Manager.

The Credit and Account Transfer Unit can only transfer 50 transactions on Form 3413, Transcription List (Account Transfer In). If there are more than 50 transactions to be transferred, transfer enough payments to the MFT 31 so the number of transactions is less than 50. Use ADD/ADC 34 with a "1" in the Credit Freeze Code field on the credit side of the transfer to keep the payments from refunding off the MFT 31. Print an entire CC INTSTD before you transfer the payments and keep in case file in case a NR 340 is required.

A transfer of the entire account may be required if there is a reversal of penalties with the TC 290/300 and the reversal amount differs from the amount originally assessed with the TC 150 transaction (ex: a TC 276 for $105.00 and a TC 277 for $55.00)

When the TC 400 and TC 402 have posted on the account, the case is ready for final purge. Cases are identified as ready to purge by either a review of the team inventory reports or receipt of the completed Form 12810, Account Transfer Request Checklist, from the Credit and Account Transfer Unit.

Closing Tax Examiners will do the following:

Post the TC 290 (additional assessment) on the account where the joint assessment exists. This will be the primary TIN shown on the ISTSR Input Record. Multiple years may be contained in the case file.

Input TC 290 .00, BS 00 (with original return), 05 (without original return), or 99 (if tax period is more than 10 years and the original return has been destroyed) SC 2, RC 097 and/or 098, HC 3, SD, Remarks: "To file case" . If the case file contains an Electronic Filing System (ELF) return, research CC TXMODA to determine if a previous adjustment was made to the account with a re-file blocking series. See Document 6209 for "Adjustment Blocking Series" . This can be verified by the controlling DLN on the second line of CC TXMODA. If the ELF return was renumbered with the controlling DLN, use blocking series 00. If not, use blocking series 05. Do not include Form 8453, U.S. Individual Income Tax Declaration for Electronic Filing. Send this document back to Files.

Input TC 972 AC 065 to reverse the L- freeze. When reversing TC 971 AC 065 use the same transaction date and X-REF TIN as the TC 971 AC 065 for all allowed and disallowed cases under IRC § 66(c) cases. For partials and disallowed cases under IRC § 6015(f), IRC § 6015(b), and IRC § 6015(c), the date must be 90 days from the mailing date of the Final Determination Letter plus 60 days if no Tax Court petition was filed, 60 days from the officially signed Form 870–IS, Waiver of Collection Restrictions in Innocent Spouse Cases, or the date the Tax Court decision becomes final plus 60 days if a petition was filed. If there are multiple TC 971 AC 065 transactions, each will need to be reversed separately using a post delay code. Do not reverse a TC 971 AC 065 pertaining to a claim filed by the NRS. Both spouses may have filed claims for the same tax period. For additional information on TC 971 AC 065 see IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972.

Research to determine if the TC 130 is still needed on the account. See IRM 25.15.9.1.5.1(7)(c), Denied under IRC § 6015(b), (c), or (f) for additional information. Do not remove if there are other innocent spouse years still open. Check ISTS to ensure all innocent spouse years are in Stage 30. Do not remove TC 130 if input by another campus unless the DLN of the TC 971 AC 065 and the TC 130 are for the same center and posting cycle of the TC 130 is one cycle later than the posting cycle of the 971 AC 065. If appropriate, input TC 131 using CC REQ 77. Note: If the RS is the primary taxpayer, the TC 130 will be posted to the secondary taxpayer’s Entity module.

Update CC ISTS to Stage 13 or 13 and 14 if not already present. Update CC ISTS to Stage 30, Activity "NOACCTP" , including time on case. Document the history sheet with actions taken.

Close IDRS control base.

Assemble the case and send to Files. See IRM 25.15.9.1.25, Case File Assembly.

A TC 290 will not post in the following instances:

If the conditions above exist, close CC ISTS in the appropriate manner and include a history "NO POST FILE"

Send the case file to the appropriate Innocent Spouse team. This team maintains a database for these cases. The cases are retained for 2 years and a yearly purge occurs each October 1st.

If a taxpayer files a claim where no joint return exists (other than IRC § 66 cases covered in IRM 25.15.5, Relief from Community Property Laws/Community Property States), post the TC 290 to the year listed on the claim.

If the original return and the processing tax year is more than 10 years earlier, use blocking series 99 when inputting TC 290 .00.

When forwarding the case to Files assemble it in the following manner:

Complete Reject Sheet with date, Full Scope examiner's name, team number and reason for rejection.

Document the history sheet.

Re-control IDRS to the examiner's team number and update activity to RJT2U10X, keeping the original received date.

Change Stage 27 on ISTS to appropriate Team number in the Unit field and enter "Back to XXX" in comment field.

Attach reject sheet to a burgundy folder with the case and place in the Processing team's designated area for rejects

If Innocent Spouse relief is granted on an open audit case, tax examiners must use normal procedures for making an assessment to MFT 31. Pay particular attention to the other information section of the Form 4549, Revenue Agent Report, and Form 3198, Special Handling Notice for Examination Case Processing, for instructions on how the tax is to be assessed to the taxpayers. There are three types of situations which can occur:

Use the following disposal codes on Form 5344, Closing Record, when closing cases

Small Business/Self-Employed (SB/SE) Division must send all non-protested allowed and partially allowed cases to CCISO for transferring liabilities to MFT 31. Complete all items below or the case will be rejected to the originator.

For a non-protested allowed or partially allowed case closed in the Area office prior to July 2002, close the AIMS Controls with the input of TC 300 .00. The TC 290 .00 must also be input using adjustment reason code 098. Prepare Form 12810, Account Transfer Request Checklist, and send to Credit and Account Transfer. See IRM 25.15.9.1.22, Form 12810 - Special Considerations, and IRM 21.5.2.4.23.9, Moving Assessments, for instructions on how to prepare the Form 12810.

Check ENMOD to see if TC 130 is posted for the RS. If yes and it must be reversed, ( See IRM 25.15.9.1.5.1.(7)c, Denied under IRC § 6015(b), (c), or (f), for information to determine if it must be reversed), fax Form 3177, Notice of Action for Entry on Master File, to reverse TC 130 to the appropriate team in CCISO.

The Area Offices will close all denial and withdrawals of Innocent Spouse claims.

Close the AIMS Controls with input of TC 300 .00 and TC 290 .00 with adjustment reason code 097.

Use Form 3177, Notice of Action for Entry on Master File, to input TC 972 AC 065 to reverse TC 971 AC 065. To determine the date for TC 972, see IRM 25.15.2.4.2, Innocent Spouse Indicator Transaction Code (TC) 971/972.

Check ENMOD to see if TC 130 is posted for the RS . If yes and it must be reversed ( See IRM 25.15.9.1.5.1.(7)c,Denied under IRC § 6015(b), (c), or (f), for information to determine if it must be reversed), fax Form 3177 to reverse TC 130 to the appropriate team in CCISO.

Update the ISTS to stage 27 and then to stage 30 NOACCTP.

The case file can then be returned to Files.

Secure a NMF transcript

If an account balance is being reduced, prepare a Form 1331, Notice of Adjustment, to reduce tax, penalty and interest to the correct amount and send it to the NMF team. Attach copies of Form 8857, Request for Innocent Spouse Relief, and the final determination letter. Coordinate any refunds from NMF with the NMF team personnel.

If a balance remains on the account, prepare Form 3177, Notice of Action for Entry on Master File, to reverse the TC 971 AC 065 on module and send it to the NMF team.

Complete Form 10904, Request for Record Deletion from AIMS, and attach copies of the Form 8857, Request for Innocent Spouse Relief, the final determination letter, Form 1331, and the NMF transcript. This file will be sent to the Compliance Campus AIMS Coordinator to close the AIMS NMF controls.

It may be necessary (or preferable) to issue a manual refund to the RS if master file is unable to refund the credit. Some of these circumstances may include:

Input IDRS history item "F5792 to SCXX. Refund to TPW(H)" .

Use Form 5792, Request for IDRS Generated Refund, to issue the manual refund. Compute the credit interest to three working days after the date you are forwarding the claim to accounting (or use procedures dictated by your compliance campus).

Input TC 971 AC 037 if the refund is being issued on the claim year. This indicates the refund was issued to a TIN or address other than the address posted on ENMOD. Enter the RFUNDR date on the manual refund as the transaction date.

Enter Bypass Indicator Codes in the remarks field of all manual refunds. See IRM 21.4.4, Manual Refunds, for the list and explanations.