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Part 5. Collecting Process

Chapter 1. General Collecting Procedures

Section 15. Abatements, Reconsiderations and Adjustments

5.1.15  Abatements, Reconsiderations and Adjustments

5.1.15.1  (09-03-2008)
Tax Abatements - Law and Regulations

  1. According to the law and regulations, the Service has the authority to abate tax.

  2. Law - Internal Revenue Code (IRC) 6404(a) provides (in part):

    1. The Secretary is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, which--is excessive in amount, or is assessed after the expiration of the period of limitation properly applicable thereto, or is erroneously or illegally assessed.

  3. Regulations - Treasury Regulation 301.6404–1 provides (in part):

    1. The district [area] director or the director of the regional service center [servicing campus] may abate any assessment, or unpaid portion thereof, if the assessment is in excess of the correct tax liability, if the assessment is made subsequent to the expiration of the period of limitations applicable thereto, or if the assessment has been erroneously or illegally made.

    2. No claim for abatement may be filed with respect to income, estate, or gift tax.

    3. Except in case of income, estate, or gift tax, if more than the correct amount of tax, interest, additional amount, addition to the tax, or assessable penalty is assessed but not paid to the district [area] director, the person against whom the assessment is made may file a claim for abatement of such overassessment. Each claim for abatement under this section shall be made on Form 843.

    4. The Commissioner may issue uniform instructions to district [area] directors authorizing them, to the extent permitted in such instructions, to abate amounts the collection of which is not warranted because of the administration and collection costs.

5.1.15.2  (08-17-2006)
Tax Abatements and Requests for Reconsideration

  1. The IRS creates assessments:

    1. based on the original return filed by the taxpayer by conducting an audit, i.e., an examination of the taxpayer's books and records pertinent to the return, in a field or campus location,

    2. based on the original return filed by the taxpayer by document matching to resolve discrepancies, i.e., matching Information Return Program (IRP) documents to the income/deductions reported by the taxpayer on the return, in the campus Automated Underreporter (AUR) Units, or

    3. pursuant to the Individual Master File (IMF) Substitute for Return (SFR) or Business Master File (BMF) assessment procedures under IRC 6020(b) when a taxpayer fails to make any return required by any Internal Revenue law or regulation.

5.1.15.3  (09-01-2007)
Criteria for Reconsideration Processing

  1. Taxpayers can request reconsideration to supply correct information to dispute assessments if they:

    1. did not receive any notification of the assessment/adjustment prior to Collection contact,

    2. moved since filing the return in question and did not receive any correspondence from IRS such as the notice of the examination results,

    3. did not appear for the audit,

    4. never had the opportunity to submit required substantiation and now have the necessary documentation,

    5. disagree with an audit determination due to additional information not available at the time of the audit,

    6. disagree with a Notice of Deficiency assessment created by either Automated Substitute for Return (ASFR) or SFR processing under the authority of IRC 6020(b)and want to submit an original return to correct the assessment, and/or

    7. want to claim tax credits, e.g. Earned Income Tax Credit (EITC), which were denied during a prior audit.

5.1.15.4  (09-01-2007)
Exclusions from Reconsideration Processing

  1. Reconsideration procedures do not apply in the following situations:

    1. The taxpayer paid the liability in full and submitted a claim for refund. Claims are submitted by the taxpayer on Form 843, Claim For Refund and Request for Abatement, and are worked by the appropriate campus.

    2. Requests for abatement of interest for ministerial or managerial delay under IRC section 6404(e)(1) are processed according to procedures found in IRM 20.2.7, Abatement and Suspension of Interest: IRC 6404 and 7508.

5.1.15.5  (08-18-2006)
Exercising Your Discretionary Authority to Reject a Request for Reconsideration

  1. Revenue Officers have discretionary authority to reject a taxpayer's request for reconsideration.

  2. There are three basic reasons you can reject the taxpayer's requests for reconsideration. Rejection is appropriate when the request includes returns that are:

    1. unsigned,

    2. frivolous, or

    3. filed after the statute expiration date.

      Note:

      See IRM 25.6.5 Assessments and IRC 6501 for Assessment Statute Expiration Date (ASED). See IRM 25.6.6 Claims, Abatements, and Refunds and IRC 6511 for Refund Statute Expiration Date (RSED).

      Note:

      For taxpayers residing overseas, see IRC 6503(c). This may be applicable regarding the extension of the collection statute.

  3. The taxpayers' request for reconsideration can also be rejected if they do not provide any new, pertinent information.

    1. This reason does not apply to an original return filed to correct an SFR or BMF IRC 6020(b) assessment.

      Note:

      The Service will accept a signed Form 1040X to amend the Form 1040 filed by the Service during SFR processing as the taxpayer's original return if it is complete, with all required schedules attached.

    2. The taxpayer must refute the rationale for a tax assessment based on an audit assessment or AUR adjustment by providing new information for the examiner to consider. The amended return (or other written statement requesting reconsideration) must address the audit determination or the income/deduction issue(s) that generated the AUR adjustment. If new information is not provided, you can reject the reconsideration request and proceed with collection action.

    3. If it is unclear whether the return or other written statement provides new information for the examiner to consider, then annotate that fact on Form 3870, Request for Adjustment, and forward for processing.

  4. Forward frivolous returns to the Frivolous Return Program (FRP). Frivolous filers are taxpayers that file non-processable returns based on arguments not supported by tax law. See IRM 5.1.11.4.3, Frivolous Non-filers.

  5. Check applicable statutes before accepting signed, non-frivolous returns. See IRM 25.6, Statute of Limitations, andIRC 6503(c),

    1. There is no statute on an unagreed "SFR" return filed by the service. When a taxpayer files an original return to replace an "SFR" assessment, the three year statute (IRC 6013(b)(2)) for converting a married filing separate (MFS) return to a married filing joint (MFJ) return would apply in the situation of a couple where one of the spouses previously filed a MFS return.

    2. Accept amended return (or other written statement requesting reconsideration) for Audit or AUR reconsideration processing only if it provides new, pertinent information for the examiner to consider. Generally, to claim a refund, the Form 1040X must be received within three years after the date the taxpayer filed the original return or within two years after the date the taxpayer paid the tax, whichever is later.

  6. Notify the taxpayer of your decision to reject the request. If the taxpayer requested reconsideration orally, you can reply orally but should follow-up with a written communication. If the request was in writing, reply in writing. In either case document the history.

  7. Document case history and proceed with normal collection actions to resolve any remaining balance.

5.1.15.6  (08-18-2006)
Types of Reconsiderations - Audit, AUR, SFR

  1. For reconsideration purposes, there are four distinct types of reconsiderations based on the type of assessment:

    1. Audit Reconsiderationif the assessment is the result of an audit assessment of a previously filed return,

    2. AUR Reconsiderationif the assessment is the result of an AUR adjustment of a previously filed return,

    3. SFR Reconsideration if the assessment is the result of an Individual Master File (IMF) SFR assessment (under IRC 6020(b)) and

    4. BMF IRC 6020(b) Reconsiderationif the assessment is the result of a BMF IRC 6020(b) assessment.

5.1.15.6.1  (09-03-2008)
General Reconsideration Procedures

  1. For Audit, AUR, SFR, and BMF IRC 6020(b) reconsiderations, always:

    1. Consider cross-compliance and, if necessary, attempt to bring any noncompliant taxpayer into compliance.

    2. Secure levy sources for future collection.

    3. Indicate if a Notice of Federal Tax Lien has been filed on the Form 3870 in block 11 "Reason for Adjustment" .

    4. Suspend collection only on the amount being considered for an adjustment.

    5. Attempt to resolve any obvious errors or discrepancies with the taxpayer and annotate your efforts in block 11 of Form 3870

    6. Advise the taxpayer that failure to respond or cooperate with the examiner will result in the case being returned to Collection to resume collection action. No further consideration will then be given to the reconsideration request until the tax is paid in full.

    7. Complete a separate Form 3870 for each year for which the taxpayer is requesting an adjustment. Include your name, E-mail address, Post of Duty (POD), and group manager's E-mail address, to facilitate contact by campus employees. Include the taxpayer’s full address and daytime phone number to facilitate taxpayer contact by the examiner. Sign in block 13 "Signature of Preparer" .

      Note:

      Taxpayers need to sign the Form 3870 only when they have not already provided a signed written request for reconsideration. An original tax return or an amended tax return will satisfy this requirement.

    8. Insert your group manager's E-mail address in block 14 "Approving Official Signature and Title" . Manager's approval signature is not required.

    9. Include a copy of Form 2848 , Power of Attorney, or Form 8821 , Tax Information Authorization, if applicable. If Form 2848 or Form 8821 is not available, attach CC CFINK print.

    10. If the adjustment will fully pay the module, close the Bal Due using Option B - Abatement. to suspend further collection notices. This will upload "TC 470 CC 90" .

      Caution:

      Select the proper collection suspension code when processing a taxpayer claim to adjust taxes and/or locate payments on a balance due account. Do not use TC 470 cc 90 if the account will not update to Collection Status 12. See Document 6209, IRS Processing codes and Information, Section 11 (Collection) for further information on TC 470 and other Closing Codes Chart.

    11. Document case history and proceed with appropriate collection actions to resolve the remaining balance if the adjustment will not fully pay the tax.

5.1.15.6.2  (10-03-2006)
Audit Reconsiderations

  1. Audit reconsiderations refer to requests to reevaluate the results of an audit assessment when a taxpayer disagrees with the original audit determination.

  2. An audit reconsideration is identified on a TXMOD by TC 420, indicating an audit assessment, followed by a TC 300 amount.

  3. In addition to the general procedures above, if the assessment is the result of an audit of a previously filed return:

    1. Inform the taxpayer that he or she musteither submit a written request for reconsideration and/or file a signed amended return which identifies the specific prior examination issues and the reason for the change, i.e., what new information is now available that was absent in the original audit.

    2. Provide the taxpayer with Publication 3598, What You Should Know About the Audit Reconsideration Process.

    3. Advise the taxpayer that the reconsideration will be worked by the area which previously performed the audit.

    4. Try to secure a copy of the examination report, Form 4549, Income Tax Examination Changes, or ASFR report, Form 1902-B, Report of Individual Tax Examination Changes, from the taxpayer. If you secure a copy of the report, attach it to the Form 3870. ESTAB for the original return and audit papers is not required. Instead, annotate your efforts to secure the report from the taxpayer on Form 3870 block 11 "Reason for Adjustment" , and send the reconsideration package without it.

    5. Stamp a copy of the written request for reconsideration on the front and signature pages of the amended return with the "COPY" stamp or write "COPY" on it for retention in the collection case file along with your copy of the Form 3870.

    6. Include a TXMOD print for each period.

    7. Provide the reason and justification for the request on Form 3870 block 11 "Reason for Adjustment" . If the adjustment creates a credit balance, indicate where it is to be applied or refunded.

    8. Attach the pertinent supporting documentation to the Form 3870 and forward to the campus that assessed the TC 420. See IRM 4.13.7(3) and IRM 4.13.7(4) for processing

    9. Expedite processing of Form 3870 only for an imminent statute.

  4. Document case history with actions taken and proceed with normal collection actions to resolve any remaining balance.

5.1.15.6.3  (10-10-2006)
AUR Reconsiderations

  1. AUR reconsiderations refer to requests to reevaluate the results of a prior AUR adjustment when a taxpayer disagrees with the original AUR determination.

  2. An AUR reconsideration is identified on a TXMOD by a TC 922, indicating an AUR adjustment, followed by a TC 29X amount.

    Note:

    Although the vast majority of AUR assessments are TC 29Xs, AUR also processes tax decrease issues. It is possible that a taxpayer would want a reconsideration of a refund case that AUR processed.

  3. In addition to the general procedures above, if the assessment is the result of an AUR adjustment of a previously filed return:

    1. Inform the taxpayer that he or shemusteither submit a written request for reconsideration and/or file an amended return which identifies the specific income/deduction issues that resulted in the AUR adjustment and the reason for the change, i.e., what new information is available that was absent during the AUR adjustment.

    2. Advise the taxpayer that the reconsideration will be worked by the area which previously performed the AUR adjustment.

    3. Secure a copy of the AUR report (CP 2000 Notice) from the taxpayer, if available, and attach to the Form 3870. ESTAB for the original return and adjustment papers is not required. Annotate your efforts to secure the report from the taxpayer in block 11 of Form 3870"Reason for Adjustment" , and send the reconsideration package without it.

      Note:

      If copy of CP 2000 is not available, you may contact an AUR Coordinator to provide a copy. AUR Coordinators should be able to obtain an electronic version of the CP 2000 Notice through Desktop Integration (DI). A listing of AUR Coordinators is provided on Servicewide Electronic Research Program (SERP).

    4. Stamp a copy of the written request for reconsideration on the front and signature pages of the amended return with the "COPY" stamp or write "COPY" on it for retention in the collection case file along with your copy of the Form 3870 .

    5. Include a TXMOD print for each period.

    6. Provide the reason and justification for the request on Form 3870 block 11 "Reason for Adjustment" . If the adjustment creates a credit balance, indicate where it is to be applied or refunded.

    7. Attach the pertinent supporting documentation to Form 3870 and refer to IRM 4.13.7(3) and IRM 4.13.7(4) for processing.

    8. Expedite processing of Form 3870 only for an imminent statute.

  4. Document case history with actions taken and proceed with normal collection actions to resolve any remaining balance.

5.1.15.6.4  (09-01-2007)
Audit and AUR Reconsideration Supporting Documentation

  1. Attach supporting documents relating to:

    1. specific issue(s) identified in an audit that caused the tax increase, or

    2. reported income/deduction that caused the AUR adjustment.

    Example:

    If the original audit adjusted a specific Schedule A deduction, and the taxpayer disputes the tax increase, then the only documentation that needs to be attached is the documentation relevant to that Schedule A deduction.

    Example:

    If the AUR adjustment was for additional wages, and the taxpayer disputes the amount of additional wages shown on the CP 2000 Notice, then the only documentation that needs to be attached is the documentation relevant to the taxpayer's wages, such as pay-stubs or other documentation to support his/her claim.

  2. Do not include all the supporting documentation provided by the taxpayer if it isvoluminous.

    Note:

    To help control postage costs for these purposes, the documentation will be considered voluminous if it will not fit into a 9-inch by 12-inch flat envelope. See IRM 1.17.4.5, Envelope Program.

  3. Follow the appropriate procedures displayed in the table below when the pertinent documentation is:

    Not Voluminous Voluminous

    • Review the documentation.

    • Determine which documentation is pertinent.

    • Copy the pertinent documentation.

    • Return the supporting documentation to the taxpayer for safekeeping.

    • Use an appropriately-sized envelope imprinted with the Service return address in the upper left-hand corner to mail the request for reconsideration (including the supporting documentation).

      Note:

      Use a general purpose letter-size envelope (4 1/8-inch by 9 1/2-inch) for mailing one to fifteen folded single sheets of letter-size paper (8 1/2-inch by 11-inch).

      Note:

      Use a flat envelope, 6 1/8-inch by 11 1/2-inch or larger, for mailing anything that cannot be folded and mailed in a letter-size envelope, i.e. more than one to fifteen folded single sheets of letter-size paper.

    • Review the documentation.

    • Determine which documentation is pertinent.

    • Copy as much of the pertinent documentation as will fit into the appropriate 9-inch by 12-inch flat envelope.

    • Return the supporting documentation to the taxpayer for safekeeping.

    • Advise the taxpayer they must maintain the supporting documentation and present all of the supporting documentation at the time of the Audit reconsideration examination.

    • Type on the Form 3870 "RO reviewed the supporting documents. Taxpayer is holding supporting documents for review by the examiner."

    • Use a 9-inch by 12-inch flat envelope imprinted with the Service return address in the upper left-hand corner to mail the request for reconsideration (including the copies of the supporting documentation).

5.1.15.6.5  (10-03-2006)
SFR Reconsiderations

  1. SFR Reconsiderations refer to reconsiderations of SFR assessments created by either ASFR or Exam processing which includes but is not limited to High Income Non-Filer (HINF) processing.

  2. A taxpayer must request reconsideration of an SFR assessment by filing anoriginal return.

    Note:

    The Service will accept a signed Form 1040X filed by the taxpayer as the taxpayer's original return if it appears to be complete, with all required schedules attached.

  3. An SFR assessment is identified on a TXMOD by a TC 150 followed by "0.00" and the letters "SFR" at the end of the line. The tax amount assessed will appear as a TC 290 or TC 300.

    Caution:

    If the TXMOD shows that an assessment was originally created by SFR processing, ensure that no subsequent TC 599 with an audit assessment or AUR adjustment appears on the module. If it does, you will need to secure an amended return or other written request for reconsideration and process as a Audit or AUR reconsideration instead of an SFR reconsideration.

  4. In addition to the general procedures above, if the assessment is the result of an Individual Master File (IMF) SFR assessment under IRC 6020(b) and the taxpayer disagrees with the assessment or states the assessment is incorrect:

    1. Secure a signed original tax return. The taxpayer must file a signed original return to request reconsideration of an SFR assessment.

    2. Check the return to ensure there are no obvious problems.

      Note:

      There is no statute on an unagreed SFR return filed by the Service. When a taxpayer files an original return to replace an SFR assessment, the three-year statute for converting a Married Filing Separate (MFS) return to a Married Filing Joint (MFJ) return would apply in the situation of a couple where one of the spouses previously filed a Married Filing Separate (MFS) return. See IRM 25.6, Statute of Limitations.

    3. Attempt to resolve errors or discrepancies between income reported on the return and IRPTR and/or SUPOL information. (You may request aMFTRAW for years prior to 1999, however,MFTRAW would only provide wage information.)

    4. If you document the errors on Form 3870 and annotate your efforts to have them corrected, then the request should not be rejected.

    5. If unable to resolve the discrepancy and the amount in question exceeds the amount shown in LEM 5.2.1, send the return forward for SFR reconsideration processing, and consider making a referral to Criminal Investigation (CI).

    6. It is not required to ESTAB for the SFR assessment file or attach TXMODs.

    7. Indicate "SFR RECONSIDERATION REQUEST—TAXPAYER RETURN ATTACHED" on Form 3870 block 11 "Reason for Adjustment" .

    8. If the adjustment results in a credit balance, indicate where it is to be applied or refunded on Form 3870 block 11.

      Caution:

      If no TC 290 or TC 300 has posted on the module, annotate "Pending SFR Assessment" on Form 3870 block 11.

    9. Send the tax return by E-mail, fax or mail to the Brookhaven campus for processing according to the procedures in the table below. Requests should be sent by E-mail unless it is not practical (e.g., the attachment is too large or a scanner is not available).

      Scan and E-mail Fax or Mail

      • Scan the return and save it as a PDF file.

      • Stamp the actual return with the "DUPLICATE" stamp or write "DUPLICATE" on the return.

      • Attach the PDF file to an E-mail message along with the completed Form 3870 macro.

      • Send the message and attachments via secure E-mail to the address shown in the table below.

      • Indicate "SFR Recon" in the subject line of your E-mail message.

      • Copy the first two pages of the return (the front page and the signature page).

      • Stamp the copy of the return with the "COPY" stamp or write "COPY" on the return for retention in the collection case file.

      • Attach the actual return and all supporting documentation to the Form 3870.

      • Fax or mail the complete Form 3870 package to the Brookhaven campus at either the fax number or the mailing address shown below.

    10. Use the information displayed in the following table to send onlyIMF returns to Brookhaven.

      E-Mail Address Fax Number Mailing Address
      *SBSE ASFR-RECONS (631) 447-4017 IRS - Centralized ASFR Recons
      1040 Waverly Avenue
      PO Box 9013 Stop 654
      Holtsville, NY 11742-9013

    11. Retain a copy of Form 3870 and the return, i.e. either the actual return marked "DUPLICATE" or the photocopy of two pages of the actual return marked "COPY" , in the collection case file. Document case history with actions taken and proceed with normal collection actions to resolve any remaining balance.

5.1.15.6.6  (09-03-2008)
BMF IRC 6020(b) Reconsiderations

  1. BMF 6020(b) reconsiderations refer to reconsideration of a return prepared and assessed under IRC 6020(b). The Service has the authority to prepare returns for any person who fails to submit a return required by Internal Revenue law or regulation at the time prescribed, or makes (willfully or otherwise), a false or fraudulent return. The following returns may be prepared, signed and executed by revenue officers under the authority of IRC 6020(b):

    1. Form 940, Employer's Annual Federal Unemployment Tax Return;

    2. Form 941, Employer's Quarterly Federal Tax Return;

    3. Form 943, Employer's Annual Tax Return for Agricultural Employees;

    4. Form 944, Employer's Annual Federal Tax Return;

    5. Form 720, Quarterly Federal Excise Tax Return;

    6. Form 2290, Heavy Vehicle Use Tax Return;

    7. Form CT-1, Employer's Annual Railroad Retirement Tax Return;

    8. Form 1065, U. S. Return of Partnership Income.

  2. A taxpayer must request reconsideration of a BMF 6020(b) assessment by filing a signed original return.

  3. A BMF 6020(b) assessment is identified on TXMOD by a TC 150 followed by "0.00" and the literal "6020(b)" at the end of the line. The tax amount assessed will appear as a TC 290. See Document 6209 IRS Processing Codes and Information for TDI closing codes.

  4. If the adjustment results in full abatement input TC 470 cc90. Any manually assessed Penalty and Interest, lien fees, and all Failure to Deposit (FTD) penalties (manually and computer generated) must be adjusted or abated.

    Caution:

    Do not use TC 470 cc 90 if the account will not update to Collection Status 12.

    Note:

    See Document 6209, IRS Processing Codes and Information, Section 11 (Collection) for further information on TC 470 and other Closing Codes Chart.

    1. Indicate BMF IRC 6020(b) Reconsideration Request--Taxpayer Return Attached on Form 3870 block 11 "Reason for Adjustment."

    2. If the adjustment results in a credit balance, indicate where it is to be applied or refunded on Form 3870 block 11.

    3. If the taxpayer was out of business provide the date the business closed.

  5. If the adjustment is a partial abatement add the statement: "Input TC 560 to establish ASED as of the date return was received in the field" in block 11 of Form 3870.

  6. Scan the original return signed by the taxpayer. Forward electronically to CCP in Philadelphia.

    Note:

    If the return is a Form 940 adjustment also scan a copy of the state certification if the adjustment is not a full abatement.

    Caution:

    The FTP penalty will need to be addressed on partial adjustments. FTP penalty on 6020(b) assessments comes under the authority of IRC 6651(a)(3). Therefore, FTP begins to accrue 10 days after the assessment and not from the due date of the return. When an original return is filed, the FTP penalty then comes under IRC 6651(a)(2) and the service is entitled to FTP back to the due date of the return. FTF penalty will usually have been assessed at the full 25% rate and will systemically be adjusted by the concurrent FTP penalty to 22.5%. When full payment is secured, you must manually assess the remaining FTP (TC 270) . The accrued FTP may be assessed as a debit entry on Form 3244 Payment Posting Voucher.

    Note:

    Maximum FTP penalty is 25%. Maximum FTF penalty is 22.5% when FTP is also assessed.

  7. Retain a copy of Form 3870 and the return, i.e. either the actual return marked "DUPLICATE" or the photocopy of two pages of the actual return marked "COPY" , in the collection case file. Document the case history and proceed with normal collection action to resolve any remaining balance.

5.1.15.7  (10-06-2006)
Return Processing Guidelines for Audit, AUR and SFR Reconsiderations

  1. This sub-section provides guidelines for handling returns secured in conjunction with a request for reconsideration.

5.1.15.7.1  (09-22-2006)
Accepting a Return for Reconsideration Processing

  1. For secured returns:

    If Then
    The return is received by mail...

    1. Date-stamp the return with the received date.

      Note:

      Always date-stamp a return received by mail.

    2. Review the return.

    3. Attempt to secure the taxpayer's signature if missing.
    The return is received in person from the taxpayer...

    1. Review the return.

    2. Request that the taxpayer sign the return if unsigned.

    3. Date-stamp a signed return with the received date.

      Note:

      Only date-stamp a return received in person from the taxpayer if the return is signed.

  2. Do notaccept a return filed by the taxpayer unless it is signed. Once a signed return is secured and date-stamped, it should be forwarded for processing as soon as possible. The statute begins to run on the date the return is stamped.

    Note:

    The fact that a return has been date-stamped does not mean it must be accepted for reconsideration processing.

    Unsigned Returns Signed Returns

    • Attempt to secure the taxpayer's signature(s).

    • Do not send an unsigned return to the campus for processing.

    • Send an unsigned return back to the taxpayer. See IRM 5.1.15.7.2, Rejecting a Secured Return.

    • Continue with appropriate collection action.

    • Attempt to have the taxpayer perfect the return, i.e. supply the missing SSN, schedule(s), etc.

    • Annotate Form 3870 regarding the obvious errors and your attempt(s) to contact the taxpayer for missing information.

    • Forward the return to the campus for processing.

      Note:

      The campus will adjust the taxpayer's account.

5.1.15.7.2  (09-01-2007)
Rejecting a Secured Return

  1. Send a rejected return back to the taxpayer even if it has been signed by the taxpayer and date-stamped by the IRS instead of forwarding it for audit or AUR processing if it doesn't include new information.

    Caution:

    Do not reject a signed return filed by the taxpayer to replace an SFR return filed by the Service.

  2. Include an explanatory note along with the rejected return. It should include the following:

    • Taxpayer identifying information,

    • Your contact information, and

    • The statement "I have attempted to contact you about correcting this return but have not received a reply. I am returning your tax return and cannot continue processing the adjustment to your tax account for this tax period until you provide the information needed."

  3. Proceed with appropriate collection actions to resolve the module balance after rejection of a return.

5.1.15.7.3  (09-01-2007)
Comparison of Reported Income on Secured Return

  1. Check the income displayed on IDRS/CFOL and compare it to the income reported on the taxpayer's return. Verify that all income is included or accounted for on the return.

    1. Example: Comparison of reported income to the income on the taxpayer's return:

      IDRS / CFOL Return
      Income Source Amount Amount Difference
      Div & Int $37 $37 0
      Non EE Comp $145,233 $118,227 $27,006
      Other $1,418 $1,418 0
      There is a significant income discrepancy ($27,006) on this return which you need to resolve with the taxpayer prior to forwarding the request for reconsideration.

  2. Request CC IRPTR ,SUPOL, or other IDRS or CFOL command code to obtain documents such as Form W-2, Form 1099, Form 5498, if necessary.

    Note:

    SUPOL is the basis for the ASFR 30/90-day letters and is available for longer periods than IRPTR. For years older than 1999, request MFTRAW which will only provide wage information.

  3. Proceed with processing the request for reconsideration if there are no significant income discrepancies.

5.1.15.7.3.1  (09-01-2007)
Resolving Income Discrepancies on Audit and SFR Reconsiderations

  1. When discrepancies are identified, inform the taxpayer that he or she needs to include the additional income shown on IRS records, i.e. IDRS/CFOL, to correct their return. If the taxpayer agrees, secure the corrected return.

  2. Follow the steps below if the taxpayer disagrees with the income displayed on IDRS or CFOL :

    1. Request IRPTRN to receive the individual Form(s) W-2 and /or 1099,

    2. Provide the Form W-2/1099 information to the taxpayer for review, and

    3. Secure a corrected return if the taxpayer agrees with the IDRS/CFOL income.

  3. Follow the steps below if the taxpayer still disagrees with the income displayed on IDRS or CFOL:

    1. Secure a written explanation from the taxpayer regarding the information that is incorrect. Attach the statement and any supporting documentation to the reconsideration request.

    2. Forward request for processing.

  4. If the taxpayer refuses to correct the return, send the request forward for reconsideration processing and consider making a referral to Service Center Examination if the amount in question exceeds the amount shown in LEM 5.2.1

5.1.15.7.3.2  (09-01-2007)
Resolving Income Discrepancies on AUR Reconsiderations

  1. Compare the issues raised in the taxpayer’s request for reconsideration against the AUR Report (CP 2000 Notice) or against IRPTR and/or SUPOL information. You may also request a MFTRAW for years prior to 1999; however, it would only provide wage information.

    Note:

    AUR Coordinators should be able to obtain an electronic version of the CP 2000 Notice through DI if the taxpayer does not provide it. A listing of AUR Coordinators is provided on SERP.

  2. Ensure that the taxpayer provides an explanation and any applicable documentation to support his/her claim for income/deduction issues raised on the CP 2000 Notice.

  3. If the taxpayer includes additional deductions not addressed on the CP 2000 Notice, e.g. additional IRA deduction or Early Withdrawal Penalty, review IRPTR to determine if there is payer information to support the additional deductions.

  4. Request that the taxpayer provide documentation to support any issue not claimed on the original return, e. g. additional exemptions, corrected Schedule A, or credits. If there is any issue for which the taxpayer has no supporting documentation, a written explanation will be attached.

  5. Forward the request for processing.

5.1.15.7.4  (09-01-2007)
Appropriate Forms and Schedules

  1. Check to ensure all appropriate forms and schedules are included with the return and appear to be complete.

  2. Note line items that require an attachment, e.g. Form W-2, Schedule D, Form 2441, and verify that they are attached.

  3. Proceed with processing the request if there are no obvious missing or incomplete forms or schedules.

5.1.15.7.4.1  (09-01-2007)
Resolving Issues Regarding Appropriate Forms and Schedules

  1. Inform the taxpayer that he or she needs to submit any missing or incomplete forms or schedules.

  2. Secure a corrected return if the taxpayer agrees to include the information.