For Audit, AUR, and SFR/ASFR reconsiderations always :

Taxpayers may request reconsideration to supply correct information to dispute assessments if they:

Reconsideration procedures do not apply in the following situations:

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

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

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

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 or click on this link for the FRP web page http://sbse.web.irs.gov/cs/Programs/FRP/FRP.htm .

Check applicable assessment and refund statutes of limitations before accepting signed, non-frivolous returns. See IRM 25.6.1, Statute of Limitations - Processes and Procedures, andIRC 6503(c),Suspension of running of period of limitation.

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.

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

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

An audit assessment is identified on IDRS command code (cc) TXMOD by Transaction Code (TC) 420, indicating an audit assignment, followed by a TC 300 amount.

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

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

Automated Underreporter (AUR) is an automated analysis and processing of potential underreported (UR) and/or over-reported (O/R) discrepancies identified through information return (IR) matching. AUR matches information returns against individual income tax returns to verify that income is reported and deductions are taken correctly. The two primary sources of AUR cases are Individual Master file (IMF) which contains the information reported to IRS by taxpayers and Information Returns Master File (IRMF) which is information that is matched with the IMF information to verify all income is reported. AUR reconsiderations refer to requests to reevaluate the results of a prior AUR assessment when a taxpayer disagrees with the original AUR determination.

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

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

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

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

A taxpayer must request reconsideration of an SFR/ASFR assessment by filing an original return.

An SFR/ASFR assessment is identified on IDRS cc TXMOD by the following:

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:

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

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.

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

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

There are two types of Form 1040X Amended U.S. Individual Tax Return processes.

Each of these is processed using different methods. Scan and attach Form 1040X that is amending an item on the original Form 1040 to Form 3870 before forwarding for processing, in all cases where the account to be adjusted is assigned to a Revenue Officer.

Check the validity of the amended return and determine whether or not the claimed adjustment will fully satisfy the tax. If it will, request input of TC 470 cc 90 to remove your account from collection status if applicable.

If Form 1040X pertains to a carry-back, interest would be computed to the credit availability date which is the due date of the loss year tax return without extensions or the received date of the loss year return whichever is later. Carryback claims require expedite handling due to the 45-day interest free period.

Computer generated penalties will be automatically recomputed based on the adjustment of tax. Generally, there is no need to include them on Form 3870. The exception to this is TC 176, Failure to Make Estimated Tax Payment Penalty.

Estimated tax penalty is computed on the original tax and is not increased or decreased with subsequent changes (after the due date including extensions) to the tax. The exceptions to this rule are:

An estimated tax penalty cannot be adjusted because of the change in tax unless the amended return was filed before the due date of the original return or the original return was a result of a Substitute for Return assessment.

Identify potential statute cases. Use prompt assessment procedures when within 4 months of the ASED. See IRM 25.6.1.9.9.1 Procedures for Expeditious Assessments for procedures.

When Accounts Management (AM) Campus Operations receives a Form 1040X on a status 26 account that is assigned to a Revenue Officer, IRM 21.3.3.4.10.2.1, Amended Returns/Claims - Compliance Criteria requires them to send the return to the Revenue Officer. Do not return these to the AM campus operation as misdirected mail. The return must be attached to a Form 3870 and state in Item 11 of Form 3870 "Please process" then forward to CCP using ICS procedures.

If you sent Form 1040X to the campus for processing, and the campus rejects the adjustment for any reason, that information will be posted to cc TXMOD on that module, and the return sent back to the Revenue Officer. If the adjustment has not been processed within a reasonable amount of time (3 cycles) check cc TXMOD to see if it has been rejected and contact CCP.

Carryback claims require expedite handling due to the 45-day interest free period. Carryback claims can be IMF or BMF. Claims for carryback adjustments may be filed on Form 1045, Application for Tentative Refund and Form 1139 , Corporation Application for Tentative Refund. Claims may also be filed on Form 1040X , Amended U.S. Individual Income Tax Return , Form 1120X, Amended U.S. Corporation Income Tax Return, an amended Form 1041, U.S. Income Tax Return for Estates and Trusts, Form 1120–C , U.S. Income Tax Return for Cooperative Associations, and Form 990–T, Exempt Organization Business Income Tax Return.

Scan and attach to Form 3870 the carryback claim and supporting documentation with date stamped and signed amended return. Write in remarks area on Form 3870 NOL Carryback and route to CCP for processing to Accounts Management (AM).

Do not contact campus personnel on Net Operating Loss (NOL) issues.

This section only applies to situations where the taxpayer had originally filed a valid employment tax return but while working with the Revenue Officer it is determined the return was inaccurate and a corrected return is necessary. This section does not apply to situations where the taxpayer has been audited or the RO created the assessment under IRC 6020(b). See IRM 21.7.2.5, Adjusted Employer's Federal Tax Returns or Claim for Refund for additional information.

Scan and attach the appropriate "X" form (e.g. Form 941-X Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund) that corresponds to the return you are correcting, to Form 3870 before electronically transmitting to CCP in all cases where the account to be adjusted is assigned to a Revenue Officer. RO's should review IDRS to compare with the original filed return.

If you send an "X" form to the campus for processing, and the campus rejects the adjustment for any reason, that information will be posted to IDRS cc TXMOD on that module, and you will be notified by E-mail of the rejection. If tax returns with original signatures were sent to CCP they will be returned to the originator. If the adjustment has not been processed within a reasonable amount of time (3 cycles) check cc TXMOD to see if it has been rejected and contact CCP if necessary. Rejected adjustments received electronically by CCP will be destroyed and will need to be resubmitted with the complete information.

There is no "X" form for Form 940, Employer's Annual Federal Unemployment tax return. Use Form 940 and check the box "Amended" to correct a previously filed Form 940.

If the change involves a decrease in Federal Insurance Contributions Act (FICA) tax, a certification is required on the "X" form. The taxpayer must complete the certification area in Part 2 of the " X" form. Part 5 of the "X" form must be signed by the taxpayer or an authorized representative. Taxpayers are required to certify on the "X" form that they have filed or will file Form W-2 or Form W-2c, as required. If the taxpayer is unable to contact employees, or if the employees will not comply, the taxpayer can still receive a refund or credit of the employer share only, by certifying that an attempt was made to locate the employees but was unsuccessful or that the employees will not comply.

Decrease to withheld income tax may only be allowed if the error is identified during the calendar year in which the error occurred. Decreases identified after the end of the year may only be allowed to correct an administrative error or if section 3509 rates apply. The adjustment is made to each affected period.

Indicate on the Form 3870 the amount of Federal Tax Deposit (FTD) penalty, if any, to be adjusted.

If the taxpayer reports that the correction is due to a reporting or typographical error, we accept the taxpayer’s figures without the certification.

If tax was understated on the original return, the taxpayer can file an "X" form to correct. For errors on Form 941, the increase in tax will be assessed on the latest quarter of the year involved in the case of a FICA error or the last quarter of the year in the case of a withholding error. If the taxpayer files the "X" form by the due date of the return for the period in which the error was discovered and pays the tax increase in full with the"X" form, IDRS will create an interest free period from the due date of the period which reflected the error until the due date of the period in which the error was ascertained, reported, and paid. An interest computation date will be reflected on cc TXMOD or cc BMFOLT immediately following a TC 298. In this instance the taxpayer will not receive an FTD penalty increase.

If the taxpayer does not pay and/or does not file the" X" form by the due date of the return for the period in which the error was ascertained, the tax will be increased on the applicable period(s) and interest will be charged from the due dates of that period(s). The FTD penalty will need to be increased or charged on each period as applicable.

When a disregarded entity Limited Liability Company (LLC) fails to file employment tax returns for tax periods ended before January 1, 2009, prepare a 6020(b) return. Although the single member owner (SMO) may file employment tax returns for these tax periods in the name and EIN of the SMO or the name and EIN of the LLC, the 6020(b) return must be prepared in the name and EIN of the liable party, the SMO. If the SMO has previously filed an employment tax return for another business under the SMO EIN for the same tax period, then the return prepared under IRC 6020(b) should not be submitted to submission processing as a secured return. The return prepared under IRC 6020(b) will be processed on Form 3870 as a supplemental tax assessment. Ensure that an additional assessment is not prohibited by an ASED. Consult with Area Counsel, if necessary.

Social Security Administration-CAWR (SSA-CAWR) is a document matching process initiated by SSA to ensure that all employers are correctly reporting wages paid on W-2s they provide to their employees and that employees receive proper credit to SSA for their earnings. They match all the Form W-2s received in a calendar year against information provided by the IRS on wages reported on Form 941, Schedule H (attached to a Form 1040) 943, 944, and 945 returns. If the total of the W-2s is less than the return amount, SSA sends the taxpayer up to two notices.

SSA refers the case to the IRS, which can propose and assess either a Failure to File (FTF) penalty (549 reference number) or a Late Filing Penalty (550 reference number).

The employer will be assessed a FTF penalty (the greater of $100 per missing return or 10% of the total wages that were required to be reported). See IRC 6721(e). This will appear as a MFT 13, Reference Number 549, and a CP 215 is sent to the employer.

The employer will be assessed the late filing penalty ($50 per form) applicable under IRC 6721(a). It will appear as a MFT 13, with Reference number 550, and a CP 215 is sent to the employer. Late Filing Penalty will be assessed for Forms W-2 secured by CAWR in response to the initial CAWR correspondence. This assessment is a penalty.

The RO should attempt to secure the missing W-2s and abate the FTF penalty (549 Penalty). The taxpayer would still be liable for the Late Filing penalty (550 penalty). The RO must address whether there was reasonable cause for the delay in proper filing of the W-2s. Taxpayer must request relief of the Late Filing penalty and provide documentation regarding reasonable cause.

Prepare Form 3870 and state in Item 11 of Form 3870 the type of penalty involved (549 FTF or 550 late filing) and whether the adjustment is based on missing or amended Forms W-2 or missing or amended payroll tax forms. If reasonable cause is established attach the taxpayer's documents and forward to the group manager for approval. Scan and attach all necessary documents to Form 3870 and forward to the appropriate campus for processing. See example below of what to write in Item 11 Reason for Adjustment.

IRS-CAWR compares Forms W-2, W-3, W-3c, W-2c, 1099-R and W-2G withholding amounts to the amounts reported on the Forms 94X (Forms 941, 943, 945), and Schedule H (Forms 1040, 1041) employment tax returns.

If the wages on the returns for a given year total less than the sum of the W-2 wages for that year and the taxpayer does not respond to notices, an increase in tax is made on the last available quarter of the year for that return. A TC 290 is assessed increasing the amount of tax due.

If W-2s were not filed, secure them. If W-2s were filed with incorrect amounts, then secure corrected W-2s. If the employment tax returns were prepared incorrectly or not filed, then secure the corrected or original returns.

Prepare Form 3870 and state what kind of assessment (IRS-CAWR assessment) and what is attached (Amended W-2c, W-3c,or 94X-X attached) on the form. Scan and attach the secured documents and forward to the appropriate campus for processing using the table in 5.1.15.7(7). See example below of what to write in Item 11 Reason for Adjustment.

IRS receives various Information Return Reporting (IRP) documents each year that are either incorrect (wrong TIN or name, not on magnetic medium, etc.) or late. These errors result in various penalty assessments.

Use IDRS cc PMFOL to determine which of the various penalties were asserted on this type of case. See IRM Exhibit 20.1.1-5Penalty Reference Numbers (500 series) and IRM Exhibit 20.1.1–6 Penalty Reference Numbers (600 Series) for a listing of the penalties by reference code number.

Penalties may be imposed when information returns are filed:

The penalty for information returns is $50 per return with a maximum of $250,000 per calendar year. This amount is subject to reductions and limitations. These penalties can be either MFT 13 (BMF) or MFT 55 (IMF) with a DLN blocking (digits 9,10,11) of 500-514.

Prepare Form 3870 and state on the form the specific penalty in question (code 500-514) and whether the taxpayer has been advised of the proper submission in the future. Explain whether reasonable cause exists (if so, provide the appropriate RC codes). If reasonable cause exists explain the reason and whether or not corrected documents were secured. See example below of what to write in Item 11 Reason for Adjustment.

Scan and attach the secured documents and forward to the appropriate campus for processing. Secure managerial approval if penalty is abated for reasonable cause.

Use Form 4159 to request the campus to trace payments.

When preparing a payment tracer, include the following information, as applicable:

If possible, attach a clear photocopy of both sides of the canceled check or money order used to make the payment that needs to be traced.

If the payment was made by cashier’s check or money order, and a copy of the canceled document is not readily available, get the serial number of the payment, the date it was bought, and the name and address of the business that issued it to the taxpayer.

When preparing a request for a payment tracer, be sure the complete 14 digit DLN on the back of the check or money order is included rather than other numbers that are stamped on the payment.

If the missing payment was made by FTD, the taxpayer may have a stub from the FTD form which identifies where the payment was applied. However, recent FTD forms do not include this stub. If this type of form was used, ask for a copy of the canceled check that the taxpayer used to make the FTD. Do not ask the taxpayer to get a copy of the banks FTD transmittal sheet. The FTD unit at the campus will ask the bank for this, if the missing payment cannot be found using only the canceled check. Forward to CCP for processing.

If the payment tracer case involves numerous other actions, e.g. claims, amended returns, offsets of overpayments, returns filed later, etc., no initial research is needed. Instead, prepare Form 4159 with TC 470 cc 90 rather than 93, and close the Bal Due module on ICS after securing managerial approval.

Attach supporting documents to the request for payment tracer. Requests should be sent by E-mail to CCP unless it is not practical (e.g. the attachment is too large or a scanner is not available). Attach Form 3210 if sent by mail.

See IRM 5.4.10.3, Payment Tracers for additional information regarding payment tracers.

Internet research should be used in an attempt to locate a phone number or address for taxpayers with large dollar modules of $100,000.00 or more, if one cannot be obtained through IDRS or Directory Assistance. All research actions must be documented on Form 8758, Excess Collections File Additions.

Funds are only to be moved to Excess Collection (XSF) after completing all research to establish that the funds could not be applied to a specific account or could not be refunded to the taxpayer. Prepare Form 8758 and transmit to CCP. For guidance in preparation of Form 8758 refer to IRM 3.17.220.2.1.1.(1), Preparation of Form 8758 . Form 8758 can be transmitted electronically to the Area CCP mailbox. CCP will route Form 8758 to the appropriate accounting function for processing.

Credits previously sent to XSF need to be returned to the taxpayer's account before the processing of a return is completed. This will prevent any balance due notices from being sent in error. Use Form 8765, IDRS Control File Credit Application , to transfer credits from XSF. Consult IRM 3.17.220.2.11 , Applying Amounts From the XSF - General for instructions on preparation of the form. Further guidance on completing Form 8765 is contained in IRM 21.5.7.4.4.2, Form 8765, IDRS Control File Credit Application.

CCP will forward Form 8765 to the statute unit for clearance, if necessary. If the request is not approved by the statute function, Form 8765 will be rejected back to the originator (RO). If the Statute Unit clears the request, CCP will forward Form 8765 to the appropriate accounting function for processing.

ROs are required to use RCA when the taxpayer requests relief of penalties due to reasonable cause. RCA is to be used for the following penalties:

Refer to IRM 20.1.1 , Penalty Handbook for additional information.

If the taxpayer has not previously been required to file a return or if no prior penalties (except the Estimated Tax Penalty, TC 17X) have been assessed on the same MFT in the prior 3 years RCA provides an option for First Time Abate (FTA). See IRM 20.1.1.3.6.1, First Time Abate (FTA) for additional information.

The reasonable cause explanation provided by the taxpayer will be considered after RCA performs the First-time Abate/Clean Compliance History analysis. If FTA criteria does not apply then the taxpayer's explanation will be used to determine if reasonable cause penalty relief criteria is met. The taxpayer is required to provide documentation to support their claim before a penalty relief determination can be reached.

Reasonable cause penalty abatements must be approved by the group manager. RCA outcomes can only be overridden by the group manager. The group manager will provide a written reason for the abatement.

Forward the approved penalty abatement to CCP by E-mail and retain the taxpayer's letter and any other supporting documentation with the case file.

Prior to processing a request for penalty relief on RCA, the RO must check IDRS and verify that the action was not previously taken on the module. Otherwise, an unpostable action will occur.

Use Form 3870 - Penalty Adjustments (Form 3870 E) ICS template for processing penalty abatements only. Multiple tax periods, for penalty abatement only, can be included on a single Form 3870 (E) ICS template.

Submit the Form 3870 - Penalty Adjustments (Form 3870 E), including a complete explanation to justify the reason for the abatement, to your group manager for approval. Group managers will review TP letter with supporting documentation, and IDRS print verifying the amount of the proposed abatement when approving penalty abatements.

If you are abating Failure to Pay (FTP) penalty now accrued and wish to have the penalty continue to be waived in the future, request input of TC 270 in the amount of .00. This will remove and stop the accruals.

Adjust any manual assessment for Failure to File (FTF) penalty (TC 160) as it will not automatically recompute.

Computer generated penalties will automatically recompute. The exception to this is TC 186, FTD penalty. Request adjustment of the FTD penalty as it will not automatically recompute regardless of whether it is a manual assessment or a computer generated assessment.

When a manual computation is used for FTD computation, if there is a penalty code 11 on IDRS located below the Failure to Deposit (TC 186) amount, the penalty was imposed because the original return contained an inaccurate (or missing) FTD breakdown. Attach a Failure to Deposit Penalty Computation, or an accurate Form 941 with a completed liability section to support your adjustment.

Revenue Procedure 84-35 may allow some partnership entities reasonable cause abatements if the individual partners have reported their shares of the partnership income on their timely filed income tax returns. See IRM 20.1.2.9.3, Penalty Relief.

Penalties asserted by Examination may not be abated by Collection but require a request for Audit consideration.

Penalties or interest sustained by Appeals may only be abated by Appeals. Contact Appeals for the appropriate signature on Form 3870.

See Exhibit 5.1.15-2, Identifying Reasonable Cause Categories.

Forward the approved Form 3870 - Penalty Adjustments (Form 3870 E) to CCP by E-mail and retain the taxpayer's letter and any other supporting documentation with the case file.

Generally, the Service does not abate interest for reasonable cause, however, IRC 6404(e)(1), Abatement of interest attributable to unreasonable errors and delays by Internal Revenue Service provides that the Commissioner may in his/her discretion abate interest on certain tax deficiencies, i.e. income, estate, gift, certain excise taxes (employment taxes are specifically excluded) assessed as a result of unreasonable errors or delays in the performance of a ministerial or managerial act by the Service. These requests must be routed to the Interest Abatement Coordinator in the Area where the alleged error or delay occurred. See SERP IRM tab then select Penalty and Interest for the Interest Abatement Coordinator in your Area or click on this link http://sbse.web.irs.gov/opi/IAC_Coordinators.htm.

An extension of time to file does not extend the time to pay. Therefore, interest is due from the due date of the return without regard to any extension of time to file. However, the Commissioner in his/her discretion may abate the interest on any payment of tax to the extent that an officer’s or an employee’s erroneous or dilatory actions in performing a ministerial or managerial act in his/her official capacity caused an unreasonable error or delay in the payment of the tax. See IRC 6404(e)(1)(B).

Restricted Interest refers to any interest that is computed from other than the normal interest start and stop dates. Transaction Codes 340 and 341 will indicate restricted interest was computed on a tax module. Restricted interest requires manual computation of the adjustment to compute the correct amount of interest. Secure original source documents on computing more difficult cases.

If you cannot obtain the TC 340 source document, or still cannot compute the interest once you have reviewed this document, contact your Interest Abatement Coordinator.

The RO will inform the taxpayer of the determination to not abate a penalty for reasonable cause. The RO must provide written notification to the taxpayer of the denial and of the taxpayer’s appeal rights, regardless of whether the request was received in person, over the phone, or in writing.

If the taxpayer disagrees with the determination and maintains that the penalty should be abated, provide written notification to the taxpayer using Pattern Letter 2413(P), available as an ICS template.

If the taxpayer submits a written appeal, the revenue officer that rejected the abatement request will review the appeal for additional information which may change the original determination to sustain the penalty.

Encourage the taxpayer to full pay the liability prior to submitting an appeal to avoid further interest and penalties on the tax amount and interest on the penalty amount. If the taxpayer has submitted an appeal, continue collection activity on the unpaid tax and interest.

Suspend collection activity only on the unpaid penalty portion of the assessment during the 15-day period granted to the taxpayer to file an appeal. Continue to suspend collection activity on the unpaid penalty portion during the period the penalty abatement is under consideration by Appeals unless collection of the tax liability is in jeopardy or the taxpayer is attempting to delay collection.

A jeopardy situation may be characterized by the taxpayer's appearance of placing assets beyond the reach of the Service by concealment or transferring assets to other individuals or entities. See IRM 5.11.3 , Jeopardy Levy without a Jeopardy Assessment.

If it is determined that collection of the tax liability is in jeopardy or that the taxpayer has submitted an appeal solely to delay collection, secure group manager approval to pursue collection of the penalty while the penalty abatement is under consideration by Appeals. See IRM 5.1.9.4, Collection Appeals Program. Also see IRC 6330(f), Jeopardy and State refund collection.

Document the ICS case history with the factors used to conclude that the abatement appeal was submitted primarily to delay collection.

If the remaining balance on the account is the penalty portion of the assessment, close the Bal Due module on ICS selecting Abatement. This will upload TC 470 cc 90.