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Part 8. Appeals

Chapter 20. Appeals Case Processing Manual

Section 7. General Closing Procedures

8.20.7  General Closing Procedures

8.20.7.1  (11-02-2007)
Introduction to Section on Closing Procedures

  1. This section includes information for preparing Form 5403, Appeals Closing Record. See Exhibit 8.20.7-1for line by line instructions. It also covers special actions required in cases.

  2. Many closing procedures are the same no matter what type of tax is involved. General procedures are covered in IRM 8.2.1, Pre-90-Day and 90-Day Cases, Agreed Pre-90-Day Income Tax Cases.

  3. Based on the restructuring of Part 8, different workstreams and/or special types of tax are categorized into separate subsections. Special closing procedures for these cases are found as follows:

    • Appeals Employment Tax Cases - IRM 4.23.16;

    • Appeals Docketed Cases - IRM 8.4.1;

    • Appeals Estate and Gift Cases - IRM 8.7.4;

    • Transferee/Transferor Cases - IRM 8.7.5;

    • Bankruptcy Cases - IRM 8.7.6;

    • Claims and Overassessment Cases - IRM 8.7.7;

    • Tax Exempt and Governmental Entities (TE/GE) - IRM 8.7.8;

    • Joint Committee Case Procedures - IRM 8.7.9;

    • Appeals Team Cases - IRM 8.7.11;

    • TEFRA Cases - IRM 8.19.6.7;

    • Innocent Spouse Cases - IRM 25.15.12.

  4. References to Appeals Officers used throughout this subsection also include the Appeals Team Case Leader positions.

8.20.7.2  (11-02-2007)
Form 5403 When There Are Two Agreements

  1. When closing a case with that has two agreements - one received but not assessed by Examination before the case came to Appeals and another received by Appeals - complete Item 08 of Form 5403 with the most recent agreement date. In Item A, Special Handling Instructions, clearly show both agreement dates and both amounts.

  2. When closing a case where Appeals secured and assessed a partial agreement, enter the following on Form 5403:

    1. Item 12 = Final settlement amount to be assessed;

    2. Item 800 = Final settlement amount to be assessed PLUS the partial agreement amount previously assessed by Appeals;

    3. Item A - Special Handling Instructions = Enter partial agreement date and amount. If more than one partial agreement, list separately.

  3. Example: On 1/13/2001, a delinquent return for $2,300 was received on an SFR case. The assessment was made on 2/15/2001. A decision was entered for an additional deficiency of $500. Take the following steps:

    1. Item 12 = $500

    2. Item 800 = $2,800

    3. Item A - Special Handling Instructions = Partial agreement received 1/13/2001 for $2,300

8.20.7.3  (11-02-2007)
Deficiencies from Adjustments to Carrybacks

  1. When deficiencies result solely from adjustments to carrybacks, it is important to follow these instructions when completing Item A of Form 5403, Appeals Closing Record:

    1. Check block for "Restricted Interest" and enter appropriate IRC Code section.

    2. Check block for "Other" and include a statement similar to the following: "Carryback from 199912, statute for assessment controlled by 199912."

8.20.7.4  (11-02-2007)
Conversions on Cases in Appeals

  1. This subsection provides guidance for the various types of conversions that may occur in cases considered by Appeals. It covers converting one type tax return to another; converting separate returns to joint returns; and converting joint to separate returns.

8.20.7.4.1  (11-02-2007)
Form 1041 to Form 1120

  1. When Appeals sustains conversion of Form 1041 to Form 1120, the case requires the following special processing:

    1. There should be Form 1120 prepared by Examination in the file and marked "1041 converted to 1120 by Examination." Forward the form to the Campus for processing to master file. Retain a copy for closing.

    2. Prepare Form 2363, Master File Entity Change, and input TC 016 (CC ENREQ/BNCHG) to eliminate Form 1041 filing requirements.

    3. After the return posts to master file, input TC 424A to establish the Form 1120 account on AIMS.

    4. After the AIMS account is fully established, prepare Form 5403 following normal procedures. Annotate Item A "Form 2363 to eliminate Form 1041 FR prepared/input by Appeals."

8.20.7.4.2  (11-02-2007)
Form 1120S to Form 1120

  1. When Appeals sustains the conversion from Form 1120S to Form 1120, the case requires the following two steps:

    1. Prepare Form 2363 and input TC 091 to change the filing requirements to corporation. Process Form 2363 and Form 5403 in the same cycle.

    2. Send the following notification to Entity Control Section at the Campus: "Form 1120S converted to Form 1120 by Appeals. Please update Form 2553, Election by Small Business Corporation."

    3. Furnish the following information:

  2. Furnish the following information:

    1. TP name, address, and TIN

    2. Effective date of termination

    3. Reason for termination

    4. Appeals Office

    5. Statement indicating that Form 2363 has been input

  3. Prepare Form 5403 in the usual manner. Annotate the following in Item A: "Form 2363 to change FR (filing requirement) from Form 1120S to Form 1120 prepared/input and Entity Control notified by Appeals."

8.20.7.4.3  (11-02-2007)
Joint to Separate Returns

  1. Taxpayers who originally file a joint return, may NOT change the filing status to separate once the time for filing the return of either spouse expires.

    1. For example: Mr. and Mrs. J. filed their 1999 joint return on 02/15/2000. Mr. and Mrs. J's 1999 return may not be converted to separate after 04/15/2000.

    The following instructions apply when it is deemed appropriate to convert the filing status from joint to separate.

  2. Process Form 5403 for the spouse’s account being adjusted. Remove the other spouse’s name from the name line in Item 4. Annotate "Joint to Separate" in Item A.

  3. If there is an unfiled separate return for the other spouse, send it to the appropriate Campus. Received date is the same date as the joint return.

  4. Prepare Form 2363 and input name change and filing status change via IDRS.

  5. Update ACDS to close.

    1. DO NOT change name line. Leave the joint names and primary SSN because ACDS must reflect the filed return under consideration in Appeals.

    2. RevsdTax - the combined liability amount.

    3. NOTES - Enter a brief description to explain the disposition, i.e., "Conversion to separate filing status." Separate revised deficiency amounts may also be entered i.e., "TPH – $1200, TPW - $1000."

8.20.7.4.4  (11-02-2007)
Rules for Converting Separate to Joint Return

  1. Taxpayers may elect to go from separate filing status to joint filing status if the following apply in that taxable year:

    1. Joint return is filed within three (3) years of the due date of the return.

    2. Neither spouse files a petition in Tax Court after a notice of deficiency is issued (this applies where returns are filed – see note below).

    3. Neither spouse has a suit in any Court for a claim (recovery of tax).

    4. Neither spouse has entered into a closing agreement.

    5. For returns beginning before July 30, 1996, the tax shown on the joint return is paid in full.

      Note:

      A substitute for return (SFR) prepared by the IRS does not constitute a taxpayer filing a return. Therefore, where no return was filed previously, taxpayers may elect to file joint returns even if the case is in Tax Court.

8.20.7.4.4.1  (11-02-2007)
Separate to Joint Return When Both Husband and Wife Filed

  1. If both husband and wife filed separate returns and there are two AIMS accounts, prepare a Form 5403 for each spouse’s return.

  2. Prepare a Form 5403 for the husband’s account as follows:

    1. Item 4 - Add wife’s name to name line.

    2. Item 12 - Enter the adjustment amount to equal the correct tax and penalty minus that assessed on the husband’s return.

    3. Item 15 - Enter the amount of the wife’s unrefundable withholding credits. Circle the plus (+) sign.

    4. Items 800 through 811 - Enter statistical data.

    5. Prepare Form 2363 and input name change and filing status change using IDRS.

  3. Prepare a Form 5403 for the wife’s account. This form becomes a tax adjustment document.

    1. Item 12 - Enter the amount necessary to reduce all assessed tax and penalties to zero.

    2. Item 15 - Enter the amount necessary to reduce the unrefunded prepayment credit by the amount allowed as a credit on the joint return (wife’s credits). Circle the minus (–) sign. Also enter reference number 999 (with blank amount in (–) field). This entry prevents the case from subsequently appearing in the Campus Multiple-Filer Program.

    3. Items 800 through 811 - Enter statistical data.

    4. Item A - Check "Other" block and enter "Change from separate to joint return. See Form 5403 for (Husband’s Name)—(SSN)." If the wife made cash payments of estimated tax or if there are cash payments on the return, request that Form 2424, Account Adjustment Voucher, be prepared to transfer these cash credits.

  4. Update ACDS using general closing instructions. In addition:

    1. NOTES - Add a brief statement to each spouse’s case to explain the disposition, i.e., "Converted to joint filing status under SSN (enter SSN)." Also indicate the amount of the total joint liability, i.e., "Joint liability assessed is $1,000."

    2. RevsdTax - 1/2 the joint liability for each spouse’s case.

8.20.7.4.4.2  (11-02-2007)
Separate to Joint Return When Only One Spouse Filed

  1. If only one spouse filed a return (either the husband or the wife), process one Form 5403.

    1. Prepare Form 2363 to change the filing status to joint, and add the spouse's name and SSN to the joint account.

    2. Item 4, Form 5403 - Include both spouse's names.

    3. Item 12, Form 5403 - Enter the adjustment amount to equal the correct tax and penalty minus the amounts assessed on the filed return.

    4. Item 15, Form 5403 - Enter the change to adjusted gross income (AGI) and taxable income (TI) and circle the plus (+) sign. APS is responsible for transferring credits to the joint account.

  2. Follow general closing instructions to close ACDS. In addition:

    1. DO NOT change name line. Leave only the name of the husband because ACDS must reflect the filed return under consideration by Appeals.

    2. NOTES - Add a brief statement to explain the disposition, i.e., "Converted to joint filing status (both taxpayer's names)."

    3. RevsdTax - Enter the total joint liability amount.

8.20.7.5  (11-02-2007)
Department of Justice Cases

  1. Appeals is notified when the case jurisdiction changes to Department of Justice (DOJ), exclusively.

  2. After the Appeals Officer prepares the case for release to DOJ, close the case on both AIMS and ACDS. Once this is complete and administrative file recharged, send the case to Counsel.

  3. Prepare Form 5403 to close the AIMS file. Use "copy" procedures:

    1. Item 12 - Enter TC 300 for $0.

    2. Items 800 through 810 - Enter appropriate statistical information.

    3. Item 811 - Enter closing code 18 or 19, as appropriate.

    4. Attach a copy of the face of the return and Form 2275, Records Request, Charge and Recharge, to the Form 5403. Forward Form 2275 to the Campus to "recharge" the administrative file and original return to Department of Justice.

  4. Update ACDS following general closing instructions:

    1. CLOSINGCD - 18 or 19, as appropriate.

    2. ACTION - ACKCLS.

    3. TODATE - Date administrative file is delivered to Counsel.

    4. FROMDATE - Date acknowledgment received from Counsel.

  5. The above instructions apply only to cases in Appeals jurisdiction. If a taxpayer petitions the District Court or Claims Court while in Examination jurisdiction, the DOJ transfer is coordinated between Examination and Counsel without involvement by Appeals. The case WILL NOT be controlled on ACDS.

8.20.7.6  (11-02-2007)
Handling Earned Income Credit in Closings

  1. Earned income credit is an adjustment included in the deficiency amount. However, the assessment is separate from the tax assessment.

  2. For example, if the settlement is:

    Increase (decrease) to EIC (750)
    Tax (deficiency) 1,000

    Separate EIC from the tax so Form 5403 looks like this:

    Item 12 (tax) - TC 300 250.00+
    Item 15 (EIC recapture) - REF 765 750.00–
    Item 800 - Appeals Results 1,000.00

8.20.7.6.1  (11-02-2007)
EIC Recertification Program

  1. When the EIC is denied, an Earned Income Tax Credit Recertification Indicator is automatically placed on the National Account Profile (NAP) - part of Master File. The Recertification indicators, found on ENMOD and IMFOLE, are as follows:

    1. 0 (or blank) - Recertification not required

    2. 1 - EIC denied for 1 year after the disallowed year.

    3. 2 - EIC denied for 2 years after the disallowed year.

    4. 4 - EIC denied for 10 years after the disallowed year.

    5. 8 - Reserved

  2. Once the EIC is denied for the following year (or years), taxpayers complete Form 8862, Information to Claim Earned Income Credit After Disallowance, to recertify they are eligible to receive EIC.

  3. To close a case with EIC recertification, follow general closing instructions. In addition, do the following:

    1. Verify Recertification Indicator 1, 2 or 4 appears on IMFOLE or ENMOD (if not there, recertification is not an issue)

    2. Retain a copy of Letter 3094 in the administrative file and the closed office file.

    3. Retain a copy of Form 8862 in the administrative file and the closed office file.

  4. Annotate one of the following on Form 5402:

    • "Reverse Recertification Indicator, Input TC 971, AC 56"

    • "Do Not Reverse Recertification Indicator"

    • "Recertification Ban Was Not Imposed"

  5. Input TC 971, AC 56, if indicated, using REQ77/FRM77.

8.20.7.7  (11-02-2007)
Non-Filer Returns Closed by Appeals

  1. IMPORTANT: Anytime the final settlement computation reflects an overassessment, check the Refund Statute Expiration Date (RSED) to ensure it has not expired. It is also important to remember the distinction between docketed/non-docketed non-filer returns:

    1. A docketed case for tax year ending before August 5, 1997 has an RSED of 2 years prior to the notice of deficiency.

    2. A docketed case for tax year ending after August 5, 1997 has an RSED of 3 years prior to the notice of deficiency.

    3. A non-docketed case has an RSED of 3 years prior to the notice of deficiency.

    Example 1 : Joe didn't file his 1995 return (due 04/15/1996) . The Campus issued a notice of deficiency on 05/15/1998 for $3,000 tax. Joe petitioned Tax Court and it was determined that there was actually an overpayment of $500. The overpayment was due to withholding credits, which are considered paid on 04/15/1996. Joe will NOT receive the $500 refund because the withholding credit was paid more than 2 years prior to 05/15/98 (Joe could only get a refund of money paid back to 05/15/1996).
    Example 2 : Steve didn't file his 1997 return (due 04/15/1998). The Campus issued a notice of deficiency on 05/15/2000 for $800 tax. Steve petitioned Tax Court and it was determined that there was an overpayment of $200. The overpayment was due to withholding credits, which are considered paid on 04/15/1998. Steve WILL receive the $200 refund because the withholding credit was paid within the 3 years prior to 05/15/2000.
    Example 3 : Jane didn't file her 1998 return (due 04/15/1999). The Campus issued a notice of deficiency on 06/20/2002 for $1,200 tax. The only payments on the account are withholding credits, which are considered paid 04/15/1999. It is subsequently determined that Jane actually overpaid her taxes for $600. Jane can only get a refund for money paid 3 years prior to the notice of deficiency, which would be 06/20/1999. The withholding credits were paid before that date. Therefore, she will NOTreceive the refund (whether she petitions Tax Court or defaults and later files a delinquent return).

  2. If the RSED has expired, no refund can be issued to the taxpayer. On Form 5403:

    1. Item 07 Hold Code = 4

    2. Note in Item A – "Expired RSED"

    The refund may be used to pay off a balance due on the module being processed but it CANNOT be used to offset outstanding balances due on any other tax period. APS must send the excess funds to Excess Collections via Form 8758. See IRM 3.17.21 and IRM 3.17.220 for further information on Form 8758.

  3. Specific processing instructions for tax examiners in APS, i.e., application of penalties, prepayment credits, refunds, etc., are found in IRM 4.4.9.

8.20.7.7.1  (11-02-2007)
Delinquent Returns Processed by Appeals

  1. If a delinquent return is received by Appeals after a substitute for return was previously processed, a partial assessment should have been made (See IRM 8.20.6.5).

  2. If no prior return was processed (there is no TC 150 in the account):

    1. Attach the delinquent return to Document 6469 and send it to the receipt and control unit at the Campus via Form 3210. The Appeals Officer should verify the name, TIN, address, and tax on the return.

    2. Request that the Campus "establish master file and post TC 150." Retain a copy of the return for the administrative file.

    3. When the TC 150 posts, establish AIMS using AM424A.

  3. Once master file and AIMs accounts are properly established and/or updated, general closing instructions apply to the return. Prepare Form 5403 using Exhibit 8.20.7-1.

  4. If the case is being closed non-docketed, Form 5403 will have:

    1. Item 08 – leave blank if delinquent return is accepted as filed and assessed. Enter agreement date if an additional deficiency is to be assessed in Item 12.

    2. Item 12 – enter tax and penalty that has not been assessed yet.

    3. Item 14 = delinquent return received date + 3 years.

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15.

  5. If the case is being closed docketed, prepare the Form 5403 as usual. In addition:

    1. Item 08 – leave blank if delinquent return is accepted as filed and assessed. Enter decision entered date if an additional deficiency is to be assessed in Item 12.

    2. Item 12 – enter amount of tax and penalty that has not been assessed yet.

    3. Item 14 – compute using tack–on time (normal statute field is delinquent return received date + 3 years).

    4. Item 800/801 – Include the amount of tax on the return sent to the Campus as well as any additional adjustments reflected in Item 12 and Item 15.

    5. Item A—Enter "Original delinquent return processed and assessed ___(Date)."

  6. If entity changes are necessary, prepare Form 2363 and input the changes (name, TIN, address, filing status, etc.) to correct Master File.

  7. Close ACDS following general closing instructions.

  8. If conversion of filing status from separate to joint is required on Master File, follow instructions outlined in IRM 8.20.7.10.

  9. If, after Appeals consideration, it was determined that no return was due, mark any copy of return in the file "VOID" and securely fasten it in the administrative file. The master file account must also be updated by posting TC 59X with the appropriate closing code. Prepare Form 5403 as usual except:

    1. Item 800/801—Enter zero.

    2. Item A—Enter "Return Not Due."

8.20.7.7.2  (11-02-2007)
Substitute for Return Cases

  1. Substitute for Return case procedures are used when no return was filed by the taxpayer. If a return was filed, delinquent return procedures should be used. (See above).

  2. Generally, the SFR returns are posted to master file (TC 150 for $0) and established on AIMS before the administrative file is received in Appeals.

  3. If the account was not established on master file (no TC 150) and/or no AIMS was established, take the following steps:

    1. Attach the SFR return to Document 6469 and send it to the receipt and control unit at the Campus using Form 3210.

    2. Request that the Campus "establish master file and post TC 150." Retain a copy of the return for the administrative file.

  4. Once the TC 150 has posted to master file, establish AIMS using command code AM424A.

  5. If entity changes are necessary, prepare Form 2363 and input the changes (name, TIN, address, filing status, etc.) to correct Master File as directed in IRM 8.20.6.13.

  6. If both AIMS and MF are established, prepare Form 5403 (use blocking series for original return).

  7. In a non-docketed SFR case, the Appeals Officer may get a signed agreement instead of having the taxpayer file a delinquent return. In these cases, the signed agreement constitutes the delinquent return. Prepare Form 5403 as usual. In addition:

    1. Item 08 – leave blank

    2. Item 14 – 3 years from the date the agreement was received

    3. Item 811 – 04 (will also be CLOSINGCD on ACDS)

    Close an SFR defaulted notice of deficiency the same as any other default. See IRM 8.2.2.15.

  8. On docketed SFR cases, the taxpayer(s) may elect "joint" status; however, since a notice of deficiency was issued, the election must be made on a return. A Form 870 waiver or a stipulated decision document would not constitute a return for this purpose. The file should contain a PROCESSED (delinquent) return (See IRM 8.20.6.5 for processing delinquent returns).

  9. Prepare Form 5403 for a docketed SFR case following Exhibit 8.20.7-1. In addition:

    1. Item 08 – enter date decision was entered.

    2. Item 14 = decision date + 3 years + 150 days.

  10. Close ACDS following general closing instructions.

  11. If, after Appeals consideration, it is determined that no return was due, mark any copy of return in the file "VOID" and securely fasten it in the administrative file. The Master File account must also be updated by posting TC 59X with the appropriate closing code. Prepare Form 5403 with:

    1. Item 800/801—Enter zero.

    2. Item A—Enter "Return Not Due."

8.20.7.8  (11-02-2007)
Non-Master File (NMF) Processing

  1. Additional forms are required for processing the NMF returns and documents below.

      Form NMFT Code
    • All pre-ADP from Document 6209  
    • Form 1042 - US Annual Return of Income Tax to be Paid at Source (1984 and prior only). 12
    • Form 2438 -Regulated Investment Company Undistributed Capital Gains Tax Return 38
    • Form 3780 (Obsolete) - Interest Equalization Quarterly Tax Return 49
    • Form 3845 (Obsolete) - Interest Equalization Tax Brokers’ Quarterly Information Return 85
    • Form 1296 - Assessment Against Transferee or Fiduciary *
    • Form CT-2 - Employee Representative’s Quarterly Railroad Retirement Tax Return 72
    *MFT of transferor

  2. Other tax adjustments that are processed as NMF assessments are set out in IRM 8.20.6.

  3. If a NMF assessment is to be made, prepare Form 2467, Assessment Label (Red), and attach it to the return or assessment form (Form 1296, or Form 5403), if assessment is to be made against a person who did not file the return).

  4. On appropriate transmittal document, enter "prepare F3177 to input TC 130 to the cross-reference master file account" or, as a local option, input TC 130 to the cross-reference master file account via CC REQ77.

  5. If a NMF overassessment is to be allowed, prepare Form 2468, Overassessment Label (Green), and attach it to the return or other document as in (3) above. In addition, attach to the document a Notice of Adjustment ( Form 1331, Form 1331B, or Form 1331C).

  6. On cases involving NMF assessments where collection action is to be withheld, coordinate with the Collection Division through appropriate memorandum.

8.20.7.9  (11-02-2007)
Direct Assessment of Excise Tax

  1. Assess excise tax imposed by IRC 4251 directly against the user of communications facilities and services if the tax is not paid to the collecting agency. Although liable for the tax, the user is not required to file a return.

  2. Do not use a Form 720, Quarterly Federal Excise Tax Return, as a basis for these direct assessments of excise tax.

  3. Process a NMF Form 5403 in the name of the person against whom the direct assessment is being made.

  4. If there is an overassessment of a NMF direct assessment, show the overassessment on Form 5403 and attach a Form 1331, Notice of Adjustment.

  5. Apply these procedures to other direct assessments

8.20.7.10  (11-02-2007)
Premature Referrals or Improper Referrals

  1. When it is determined that a case was improperly or prematurely sent to Appeals, the case should be returned to the originating office (Examination, Collection, EP, EO, etc) for further consideration.

8.20.7.10.1  (11-02-2007)
Jurisdiction Released on Premature or Improper Referrals

  1. If Appeals is not going to maintain control of the case, the jurisdiction is released back to the originating office. The case is closed off ACDS and AIMS (if case is on AIMS).

  2. Close ACDS following general closing procedures. In addition:

    1. CLOSINGCD = 20 (premature referral)

    2. ACTION = ACKCLS

    3. No entries are required on the return level – keep zeroes for the revised tax/penalty

  3. Prepare the appropriate transmittal form to return the case to the originating office

    1. Examination cases – update AIMS to status 20 using AMSTUB. These cases are usually returned to quality measurement staff.

    2. EP/EO cases – if on AIMS, update to status 20. These cases are usually returned to the originating office.

    3. Campus examination cases – follow local procedures. Generally, cases are not returned to the Campus for further development. They may instead be forwarded to the local Examination office for Examination cases.

    4. Collection cases are not on AIMS and are generally returned to the originating office. On CDP cases, if the TC 520 cc 76/77 is input include a note on the transmittal that
      "The CSED reflected in the TC 520 cc 76/77 may have been prematurely suspended and requires reversal and further review by Collection" .

  4. On cases where Appeals releases jurisdiction, Appeals is responsible for the statute of limitations ONLY until a copy of the transmittal is acknowledged. The transmittal must indicate the earliest statute expiration.

8.20.7.10.2  (11-02-2007)
Jurisdiction Not Released on Premature or Improper Referrals

  1. If Appeals is going to keep control of the case but send the file back to the originating office for further development, jurisdiction is not released. ACDS is kept open and AIMS is usually not changed (if case is on AIMS).

  2. Generally, when cases are controlled on AIMS, the data base will remain in current Appeals status while the originating office considers the Appeals request. Local procedure dictates here.

  3. Appeals is responsible for the statute of limitations on cases where Appeals retains jurisdiction.

  4. Update ACDS:

    1. ACTION = DDJRET

    2. TODATE = date case sent to originating office

8.20.7.11  (11-02-2007)
Transfer of Work Units Between Areas in Appeals

  1. See IRM 8.20.6, Appeals Case Processing Procedures, Interim Actions - Remittances, Partials, Transfer and Returns.

Exhibit 8.20.7-1  (11-02-2007)
Form 5403, Appeals Closing Record (Instructions)

(1) General Instructions
  (a) Complete the original and submit with the administrative file to APS for final closing of any case controlled on AIMS.
(2) Specific Instructions
  (a) CC TSCLS Box—Check if PICF code 6 or 8 (NON-TEFRA ONLY).
  (b) CC AMCLSA BOX—Check with all final closures.
  (c) CC AMCLSF Box—Check if interim assessment is being made. Used when an assessment/abatement is being made but AIMS remain open because Appeals has not closed case. See text 8.20.6.2 for interim assessment processing.
  (d) CC AMCLSI Box—Check if Form 5403 is being used to process IRA adjustments. (See text 8.20.7.19)
  (e) Source Document Only Box—Check when Form 5403 will not be used for terminal input.
  (f) CC AMCLSU Box—Check if Form 5403 is being used to reinput unpostable.
  (g) Items 1, 2, 3, and 4—Attach a status label if available. If the name has been changed, line through the label name and enter the correct name above the lined through name. If a status label is not available, complete Items 1, 2, 3, and 4 as shown below:
ITEM 1—Taxpayer’s Identification Number
(a) Enter the applicable TIN. EIN format is EI–NNNNNNN. SSN format is SSN–NN–NNNN.
(b) If the return is non-master file, enter "N" immediately after the TIN.
(c) If the TIN is known to be invalid, enter an asterisk (*) immediately after the last digit of the TIN.
(d) For Form 706, U.S. Estate Tax Return, use the SSN of the decedent and for Form 709, U.S. Gift Tax Return, use the SSN of the donor.
A "V" should be entered immediately after the TIN.
A "W" should be entered immediately after the TIN if the TIN is invalid.
ITEM 2 – MFT OR PLAN NUMBER – Enter:
a) the two-digit master file tax account code (MFT) (30, 02, 01, 10, 06, etc), or
b) the non-master file tax account code (NMFT) (20, 32, 17, 80, etc)
applicable to the tax return in the case file. See Section 2, Document 6209, ADP and IDRS Information, for NMFT and MFT codes.
c) For Employee Plan cases enter the 3 digit plan number.
ITEM 3—TAX PERIOD
(a) Identify tax years by a six-digit group, the first four identifying the year and the last two identifying the month. Thus, calendar year 1999 is 199912; March 31, 1999 fiscal year is 199903; October 31, 2001, fiscal year is 200110.
(b) If the adjustment is going to change tax period from period used on return, check "Other" block in Item A and request Form 2363, Master File Entity Change.
(c) In estate tax cases, enter 000000 (cases are controlled on ACDS by date of death).
(d) In employment and excise tax cases, Form 720, 940, 941, 942, CT–1, and 943, set forth period covered, e.g., quarter ended March 31, 1999, should be shown as 199903.
(e) For Form 2290, show the beginning of the taxable period rather than the ending of period, e.g., period beginning April 1, 1999, should be shown as 199904.
(f) In gift tax cases, show period covered, e.g., calendar year 1999 should be shown as 199912.
(g) For 52–53 week fiscal years use the numeric designation of the month, the last day of which is closest to the actual ending date of the fiscal year, e.g., if ending date is October 3, 1999, use 199909; if October 16, 1999, use 199910.
ITEM 4—NAME CONTROL
(a) Enter Check Digit in positions 3 and 4.
(b) If Check Digit is not available enter Name Control.
(c) Enter taxpayer’s full name in space identified by Name. For example,
"Doe, John P. and Jane L" . Name changes will be indicated in Item A, Form 5403 and on Form 3198.
BLOCK NUMBER—This entry is determined by APS and will be one of the following:
  Non-TEFRA TEFRA
Original Return 700–749 750–759
(Includes electronically filed returns if accompanied by Form 8453.)
Copy of Return 790–799 760–769
(Includes cases where RTVUE/BRTVU or MACs print were used in lieu of return.)
No Return 780–789  
(Partial assessment)    
ITEM 01—IRA ACCOUNT—If IRA account is to be adjusted, enter secondary spouse’s SSN in NNNNNNNNN format. Otherwise, leave this item blank.
ITEM 02—PENALTY REASON CODE—Entry must be made on every case with penalties. Appeals should only use RC 40–42 when another reason code is not applicable.
RC 21—Penalty abated due to LEM tolerance.
RC 22—Taxpayer exercised ordinary business care and prudence/first time filer non-compliance.
RC 23—Relied on practitioners erroneous tax advise OR relied on third-party who failed to meet the requirement to file/pay/deposit.
RC 24—Death or illness in immediate family or party responsible for filing/paying/depositing.
RC 25—Records inaccessible, damaged, destroyed, or lost.
RC 26—Unavoidable absence of party responsible for filing return.
RC 27—Post Office did not deliver timely or mailed to other taxing agency with extenuating circumstances/relied on erroneous date for other federal/state agency (SSA W–2’s).
RC 28—Disaster area.
RC 29—Undue economic hardship/inability to pay.
RC 30—Other reasonable cause.
RC 31—Erroneous oral advice from the Service.
RC 40—Appeals abatement or waiver of proposed penalty.
RC 41—Appeals sustained penalty.
RC 42—Appeals partially sustained penalty.
RC 43—Administrative Waiver.
RC 44—Legislative Waiver.
RC 45—Service Error.
ITEM 03 – LETTER DATE – Applicable for corporation returns only. Entry by APS. This field = the date of the 30–day or 90–day letter, whichever is earlier. Appeals will only enter this date on cases received from Examination prior to July 1, 1991 OR not previously closed to Appeals thru AIMS by Examination, i.e., cases established by Appeals or on which Appeals issues the first notice. This date will update the 2% interest date on the transcript. However, once a date is input, it can not be changed.
ITEM 04 – LETTER AMOUNT – Entry by APS – This field = the amount (to include penalties) of the 30–day or 90–day letter. Appeals will only enter this amount on cases received from Examination prior to July 1, 1991 OR not previously closed to Appeals thru AIMS by Examination, i.e., cases established by Appeals or on which Appeals issues the first notice. (Corporation returns only.)
ITEM 05 – 2% INTEREST DATE – Entry by APS. This field = the 2% interest date, which is the trigger date plus 30 days. Only entered when TC 340 is used. (Corporation returns only.)
ITEM 06a – DEBIT INTEREST TO DATE – Entry by APS. Enter the "TO" date used to manually compute debit interest. This entry is required whenever TC 34X is entered. If the TC 34X amount is zero, enter current date. The date will be passed to master file and reflected on transcripts of accounts. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340.)
ITEM 06b – CREDIT INTEREST TO DATE – Entry by APS – Valid for IMF and BMF input. . Enter the "TO" date used to manually compute credit interest. This entry is required when TC 770 is input for an amount other than zero. This entry is NOT REQUIRED for TC 770 with a zero amount. (Items 6a and 6b may both be entered when processing TC 770 AND TC 340.)
ITEM 06c—COMPUTE INTEREST AMOUNT – Entry by APS – Valid for IMF and BMF input. . Enter the amount which will include the manually computed interest (TC 340 amount and any TC 772 netted interest amount), module balance, accrued and assessed interest, and assessed FTP. If the taxpayer does not pay the bill within 21 days from the 23C date, this entry allows the computer to systemically update the interest.