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Part 3. Submission Processing

Chapter 14. Notice Review

Section 1. IMF Notice Review (Cont. 4)

3.14.1  IMF Notice Review (Cont. 4)

3.14.1.6 
Primary Notice Review Procedures

3.14.1.6.20 
Types of Penalties and Interest

3.14.1.6.20.4  (01-01-2009)
Estimated Tax Penalty

  1. Taxpayers must make quarterly estimated tax payments if a sufficient amount of income tax will not be collected through withholding.

  2. IRC Section 6654 provides for a penalty when individuals underpay or pay late any installments of estimated tax liabilities reported on Form 1040.

  3. An ES penalty will not be charged if any of the following conditions exist:

    • The current year tax liability minus withholding and refundable tax credits is less than $1,000 ($500 for 1997 and prior).

    • The taxpayer was a U.S. citizen or resident for the preceding 12-month tax year and had no tax liability for that tax year.

    • The taxpayer made timely estimated tax installments for a sufficient amount.

  4. The following is a list of ES Penalty Transaction Codes:

    • TC170— A Doc Code of 17, 18, 24, 47, 51, 52, or 54 indicates a manual assessment. Otherwise, it indicates a systemic assessment of the ES Penalty amount shown by the taxpayer on the original return

    • TC171— Manual abatement

    • TC176— Systemic assessment

    • TC177— Systemic abatement

  5. Master File will change a posted ES Penalty under certain conditions:

    If... And... Then...
    The recomputed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡   Master File will abate the entire penalty with a TC177.
    The recomputed ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Differs from a posted TC176 by ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ , or a posted TC170 (Doc Code other than 17, 18, 24, 47, 51, 52, or 54) by≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ Master File will post a TC176 or 177 for the difference and issue a CP 21 or CP 22.

    Note:

    Input a TC290 for .00 with a Hold Code "2" , "3" , or "4" to suppress the recomputation notice, if necessary.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ However, when the adjustment action posts, the entire amount will be abated.

  6. Notice Review must address the ES Penalty if any of the following cIRC Sectionumstances are present:

    • The current year Filing Status is different than the prior year Filing Status.

    • A prior year return has not posted.

    • The tax was decreased during pipeline processing, but is being increased back to the taxpayer’s figures.

    • The original TC150 amount equals the tax per the taxpayer, but is now being decreased.

    Note:

    The computer can recalculate the ES penalty for timely credits but cannot recompute ES penalty for an adjustment.

  7. If the taxpayer entered an ES Penalty ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on the return:

    1. Refer to the Adjustment Notices section for assessing the ES penalty per the taxpayer. See IRM 3.14.1.6.18.

    2. If the assessment conditions are met, input a TC171 for the difference between the posted TC176 and the taxpayer’s figures. Use a posting delay code if the penalty needs to post in the same cycle as a credit transfer.

      Note:

      If an adjustment to withholding is also necessary, combine it with the penalty adjustment. Do not input two separate adjustments. See IRM 3.14.1.6.20.4.9.

  8. See IRM 20.1, Penalty Handbook, Form 2210 and instructions, and Publication 505 for additional information, exhibits, charts, and examples relating to the ES Penalty.

3.14.1.6.20.4.1  (01-01-2009)
Estimated Tax Base Computation

  1. Determine the ES Tax Base by subtracting all of the following taxes and credits from the TC150 amount or from the total tax shown on the return, whichever is less:

    • FICA or RRTA tax on tip income not reported to an employer.

    • Earned Income Tax Credit (EIC – TC768).

    • Refundable credits (TC766), not including withholding (TC806).

      Note:

      Beginning in 1998, the ES Tax Base includes the household employment tax reported on Schedule H.

      Caution:

      For tax periods 199212 through 199311, Reduce the ES tax base by $146 for Filing Status (FS) 1 or by $292 for FS 2, 3, 5, or 6 when computing the ES Tax Base.

  2. Master File sets the ES tax base when the TC150 posts. It is not affected by subsequent tax assessments or abatements.

  3. To avoid the ES penalty, taxpayers must make quarterly installments totaling 90% of the current year ES Tax Base or 100% of the prior year ES Tax Base, whichever is less, with the following exceptions:

    • High Income Computation for Tax Years 199212 through 199411.

    • High Income Computation for Tax Years 199412 and Later.

    • Special Computation for Farmers and Fishermen.

3.14.1.6.20.4.2  (01-01-2009)
High Income Computation for Tax Years 199212 through 199411

  1. Under this rule, the taxpayer may base the first installment on 100% of the prior year’s tax. However, to avoid a penalty, the taxpayer must add the difference between the first payment and the required amount (based on 90% of the current year’s tax) to the second installment payment.

  2. Taxpayers meeting all of the following conditions cannot use 100% of the prior year tax as the basis for the current year installments:

    • The current year Adjusted Gross Income (AGI) exceeds $75,000 (or $37,500 if Married Filing Separate).

    • The current year modified AGI exceeds the prior year AGI by more than $40,000 (or $20,000 if Married Filing Separate).

    • The taxpayer made estimated tax payments or was charged an ES penalty during any of the preceding three years.

    • The prior year tax is less than or equal to 90% of the current year tax.

3.14.1.6.20.4.3  (01-01-2009)
High Income Computation for Tax Years 199412 and Later

  1. Taxpayers may use the prior year tax base with possible variations in the percentage set forth in the table in IRC Section 6654(d)(l)(C)(i).

    If the prior year AGI was... Then the taxpayer...
    Greater than $150,000 (or $75,000 if Married Filing Separate) Must use the lesser of 90% of the current year ES Tax Base, or the applicable percentage of the prior year (PY) ES Tax Base as follows.

    • 1994-1997– 110% of PY tax

    • 1998– 100% of PY tax

    • 1999– 105% of PY tax

    • 2000– 108.6% of PY tax

    • 2001– 110% of PY tax

    • 2002– 112% of PY tax

    • 2003 and later– 110% of PY tax
    $150,000 or less ($75,000 if Married Filing Separate) May use the lesser of 90% of the current year ES Tax Base or 100% of the prior year ES Tax Base.
    For additional information, refer to IRM 20.1.3.2, Assertion Criteria.

3.14.1.6.20.4.4  (01-01-2009)
Special Computation for Farmers and Fishermen

  1. Taxpayers deriving at least 2/3 of their gross income from farming or fishing in the current or prior tax year must do one of the following:

    • Make a lump sum estimated tax payment by the 15th of the month following the end of the tax year (January 15, for calendar year returns).

    • File their return and pay the total tax in full by the first day of the third month following the end of the tax year (March 1, for calendar year returns).

  2. The required annual payment is 662/3% of the current year ES Tax Base or 100% of the prior year ES Tax Base, whichever is less.

  3. Taxpayer filing a joint return must include the spouse’s income when determining the2/3 gross income requirement.

  4. When the taxpayer qualifies as a farmer or fisherman, an indicator is placed on the CC PIEST, CC IMFOL, and CC RTVUE response screens.

3.14.1.6.20.4.5  (01-01-2009)
Quarterly Estimated Tax Payments

  1. Taxpayers must make sufficient timely estimated tax payments to prevent the ES penalty from being assessed on a tax module. See the following table for payment due date information:

    Installment Due Date (in tax year) Calendar Year Due Date
    1st 15th day of the 4th month April 15th
    2nd 15th day of the 6th month June 15th
    3rd 15th day of the 9th month September 15th
    4th 15th day of the 1st month after the end of the tax year. January 15th

    Note:

    Consider an ES payment timely if received within ≡ ≡ ≡ ≡ ≡ ≡ after the installment due date.

    Note:

    For fiscal year filer due dates, see Notice Review Job Aids.

  2. An ES penalty is not charged for an unpaid fourth quarter installment if the tax return is filed and the tax is paid in full on or before January 31, for calendar year returns.

  3. Calculate the ES penalty on the amount underpaid on the due date of each installment.

    Exception:

    Deceased taxpayers are liable for estimated tax payments due prior to the date of death. Calculate the ES penalty from the due date of the payment to the date of the payment or the date of death, whichever is earlier.

3.14.1.6.20.4.6  (01-01-2009)
Applying Estimated Tax Payments

  1. Apply installment payments to the earliest underpaid quarter within a tax period regardless of the actual payment received date.

  2. After satisfying the first installment, apply any excess to the next installment, and so forth, applying all payments or satisfying all liabilities within the tax period, whichever comes first.

  3. Apply prior year Credit Elect (TC716 or 710) to the earliest underpaid quarter.

  4. Apply withholding (TC806) equally to each of the four installments unless the taxpayer requests that the withholding be applied to the installment period(s) in which it was withheld.

3.14.1.6.20.4.7  (01-01-2009)
Calculating Installments Amounts

  1. Unless the taxpayer elects to use the Annualized Income Method, the quarterly installment amount due is 221/2% of the current year ES tax base or 25% (271/2% for years prior to 1998 if the prior year AGI is greater than $150,000) of the prior year ES tax base, whichever is less.

    Exception:

    Taxpayers meeting the income levels described in IRM 3.14.1.6.20.4.3, High Income Computation for Tax Years 199412 and Later, may use 25% of the prior year ES tax base as the amount due for the first installment only. The amount due for the remaining installments is 221/2% of the current year ES tax base.

    Exception:

    See the special rule for farmers and fishermen. See IRM 3.14.1.6.20.4.4.

  2. A taxpayer whose income varied throughout the tax year may elect to vary the amount of each installment, instead of making four equal payments. This is known as the Annualized Income Method.

    1. The total of the payments must be the same as in (1) above, i.e., if one or more payments are reduced or eliminated, the taxpayer must increase at least one of the remaining payments to make up the difference.

    2. The taxpayer must check Box C in Part II and complete Schedule AI of Form 2210 to use this method.

    3. If the taxpayer checked the box, a Code & Edit tax examiner should have assigned CCC P to the tax return. See the CP 30 instructions. See IRM 3.14.1.6.18.2.

3.14.1.6.20.4.8  (01-01-2009)
ES Penalty Computation

  1. The ES Penalty rate is the same as the debit interest rate in effect during the penalty time period.

    Note:

    Do not compound the ES penalty.

  2. Base the ES Penalty computation on the amount of tax reported on the original return.

    Exception:

    If there is a math error on the return, calculate the penalty on the amount of tax as corrected if it is less than the tax reported on the return.

  3. Multiply the penalty rate for the underpayment period by the amount of the underpayment to compute the penalty.

  4. The ES penalty will systemically recompute when either of the following occurs:

    • Timely credits are transferred into or out of the module.

    • Withholding is adjusted and the penalty is not restricted by a TC170 or CCC "P" on the module.

      Note:

      See LEM 20.1.3 for additional information.

3.14.1.6.20.4.9  (01-01-2009)
ES Penalty Command Codes

  1. CC PIEST—This Command Code displays the computer computation of a systemically assessed (TC176) ES Penalty. It shows the amount of the ES tax base used for the computation and the amount of penalty assessed for each quarterly installment due date. It will display a recomputed penalty amount after a credit transfer or withholding adjustment.

    Caution:

    Use CC PIEST only if a TC176 (or a TC170 with the same DLN as the TC150) has posted on the module.

  2. CC COMPA—Use this Command Code with Definers "E" and "S" to manually compute an ES penalty. CC COMPA S is the response screen resulting from the input of CC COMPAE. It lists the installment due dates in the left column and the RDD beside each date.

    Note:

    CC COMPAS may be manually input, but all dates and amounts must also be manually entered before transmitting the command.

    1. Overlay these dates with the appropriate from and to dates, if necessary, and enter the underpayment amounts.

      Note:

      Base all dates and amounts on the posted and pending ES payments and the installment amounts due.

    2. Enter more lines if the payments were not received on the installment due date.

    3. Each installment increases the liability and each payment decreases the liability.

  3. Recomputation of ES Penalty:

    1. The computer automatically recomputes ES penalty when an adjustment to TC806 or 807 is made, or if a TC43X, 61X, 66X, 67X, 700, 702, 71X, 760, 762, or 97X is present or transferred in, with a transaction date prior to the return due date.

    2. The computer will not automatically recompute ES penalty when there is a CCC "P" or Exception 5 applies, or if there is a TC170 with one of the following document codes present on the module: 17, 18, 24, 47, 51, 52, or 54.

3.14.1.6.20.5  (01-01-2009)
Computing Normal and Restricted Interest—General Rules and Information

  1. The purpose of recomputing interest is to ensure that all outstanding balances, late posting credits, subsequent assessments, etc., are considered in determining the amount of interest due on a tax module up to the current 23C Date, and to make adjustments, if necessary.

    Note:

    The purpose is not to verify a previous manual computation. Do not recompute the interest on the entire account unless there appears to be an obvious error on a previous manual interest computation.

  2. If the due date for filing a return or making a payment is on a weekend or legal holiday, taxpayers may file or pay on the following workday without penalties or interest.

    Note:

    If the taxpayer pays after the following workday, penalties and interest will accrue from the due date, even though the due date was a weekend or legal holiday.

    Exception:

    Compute interest on Examination cases with a waiver date to the 30th day after the waiver is filed, even if that date falls on a weekend or legal holiday. See IRM 3.14.1.6.20.6.

  3. Effective January 1, 1983, interest is compounded daily on interest. Use December 31, 1982, as the compounded interest start date.

  4. Apply payments in the following order:

    1. Tax

    2. Penalties

    3. Interest

  5. Recompute the module when manually computing interest. Add additional tax assessments to the original tax to arrive at the total corrected balance of tax due on the RDD. Because of the order in which payments are applied, a payment which previously paid penalty and/or interest on an earlier assessment may now pay an additional tax assessment. Any remaining credit will apply to the penalty and interest. This actually reduces the amount of interest assessed on additional tax assessments, and may also reduce or completely eliminate the FTP penalty.

  6. Compute interest on tax at normal interest rates unless the tax assessment is based on a Tax Motivated Transaction (TMT). See IRM 20.2.13.

    Note:

    Always compute interest on penalties at normal interest rates.

    • TMT tax assessments on returns due before January 1, 1990, are subject to an interest rate of 120% of the normal rate.

    • TMT tax assessments (identified by Reference Number 221) must be over $1,000. They are usually made by Examination or Criminal Investigation Function.

    • Compute 120% interest (identified by Reference Number 222) on the Reference Number 221 amount from the later of the return due date or December 31, 1984, to the date of payment.

  7. Interest computations on an account where a refund was previously allowed depend on the amount of interest, if any, allowed on the refund:

    If... Then compute interest on...
    The refund did not include interest The portion of the assessment up to the amount of the refund from the refund date.
    Any portion of the assessment greater than the amount of the refund from the due date of the return.
    The refund did include interest Any additional assessment from the due date of the return until the tax is paid.

3.14.1.6.20.6  (01-01-2009)
Interest and Examination Issues

  1. Compute interest on an Exam deficiency to 30 days after the 870 waiver date. If an assessment is not made within 30 days after the waiver is signed, interest will not accrue from the 30th day until the assessment date of the additional tax. Interest will resume accruing from the date of assessment to the payment date.

    Note:

    The term "deficiency" includes certain penalties related to the Examination assessment. Beginning January 1991, interest on these penalties will also be automatically suspended during the interest free period. See IRM 20.2.8.

    Caution:

    TMT situations:

    • The waiver period applies to interest on penalties if an agreement is secured for penalties.

  2. When computing restricted interest on an Examination assessment case, it may be necessary to request the documents to verify the interest computation. If the case is still open on the Audit Information Management System (AIMS), contact the appropriate area and request that they send a copy of the interest computation.

  3. TC300 for zero with a TC340 for a non-zero amount usually involves a Form 2285 figured by the Examination Function. If so, request the document to verify the interest computation and update the accruals.

  4. When a payment is made before the additional tax assessment, apply the payment to the deficiency on its received date. Continue to compute interest on the balance due remaining after the payment is applied.

  5. When an Examination assessment is made on an account, apply payments as the taxpayer designates, to an extent:

    If the Examination is... Then the taxpayer can...
    AGREED Pre-pay interest without paying tax and penalty first.
    NOT AGREED Only pay a percentage of the interest due as compared to the tax.

    Example:

    If the taxpayer wants to make a payment that will pay 50 percent of the additional tax.

  6. Apply partial non-designated payments on Examination TMT cases in the following order:

    1. Any tax that is normal tax (not motivated).

    2. Any tax that is tax motivated.

    3. All penalties.

    4. Any normal interest (including interest on penalties).

    5. Any interest that is tax motivated.

      Note:

      For payment purposes, tax motivated interest is all of the interest on the TMT tax, including the normal interest computed prior to December 31, 1984.

  7. When a payment is made on an Examination deficiency before the interest free period begins (the waiver date plus 30 days), apply the payment on its received date.

    Note:

    A payment or credit received during the interest free period will not affect the interest computation. The balance due on the 23C Date is reduced by the payment or credit. Additional interest on the remaining balance due will begin to accrue on the 23C Date.

3.14.1.6.21  (01-01-2009)
Reprocessing Returns

  1. A reprocessable return is a return that posted to an incorrect tax period or SSN/ITIN and needs to be corrected and re-entered through the processing system.

  2. Definitions:

    • Receiving module—The module to which the return belongs and to which it will be reprocessed.

    • Losing module—The module from which the return will be moved.

    • Zeroing-out the module—Adjusting the TC150, withholding, EIC, TC766, Reference Numbers, and certain penalties to zero.

  3. If the return is an Electronically Filed (ELF) return, follow ELF reprocessing procedures. See IRM 3.14.1.6.21.1.

  4. Certain cIRC Sectionumstances prevent a return from being reprocessed:

    If... Then...
    A TC150 has posted to the receiving module

    1. Request both returns.

    2. Do not zero-out the posted tax and reference amounts. Adjust them on both modules to agree with the information from the proper return.

    3. Transfer the TC610 payments if necessary.

    4. Pull all current cycle notices for both modules.

    5. Follow normal notice disposition procedures. See IRM 3.14.1.7.7.

    Either module has:

    1. A pending or posted Doc Code 47, 51, or 54 transaction

    2. A posted TC976 or TC977

    3. An erroneous refund

    1. Void the notice.

    2. Route the case to the Adjustments Function.

  5. If the Assessment Statute Expiration Date (ASED) is within six months of expiring, do not use Form 3893 to reprocess the return. The Statute Function must clear and stamp the case to avoid barred assessments. Do not abate tax on the incorrect module before referring the case to the Statute Unit.

    Caution:

    Hand-carry returns with an ASED that has expired, or will expire within 120 days to the Statute Function immediately.

  6. If the return is reprocessable, make the necessary corrections using local editing procedures and stop any erroneous refund.

    Caution:

    Document Perfection has the final responsibility for editing reprocessed returns. Do not change green or red pencil edit marks entered by previous tax examiners.

    1. Determine whether the return is timely filed for the tax period to which it is being processed:

      If the return And Then
      Is timely filed based on the due date of the correct tax period Is being processed with a Julian Date of 155 (June 3) or later Enter the return due date as the received date in center of the return.
      There is no date stamp on the return Do not edit the received date.
      Was received after the due date of the correct tax period The received date is stamped or edited on the return Do not edit the received date.
      There is no date stamp on the return Determine the received date to be entered in the center of page one of the return. See IRM 3.14.1.6.1.1.7.

      Note:

      All prior year returns must have a received date stamped or edited on the return.

    2. If the DLN is not valid for the type of document or is out-of-area, line through (one single line) the DLN. Use a routing slip to send the return to Receipt and Control Function for complete processing and a new DLN. Do not attach Form 3893.

    3. If a remittance amount (TC610) is present, cIRC Sectionle out the money amount.

      Reminder:

      Use IDRS to transfer the TC610 to the receiving module.

    4. Correct any other necessary information:

      Caution:

      Never erase, line through, or in any way obscure taxpayer entries. Any editing on the return should always be done in red ink only.

      Editing a Tax Return To Be Reprocessed
      Tax Period CIRC Sectionle the incorrect tax period. Enter the correct year in YYYYMM format.

      Note:

      Edit the period on prior year returns even if the return clearly shows the period to which the document will be reprocessed.
      Name, Address, TIN Change the name and/or address if applicable. CIRC Sectionle-out an incorrect TIN and enter the correct TIN directly above it.
      Income, Tax, and Credits Enter any changes to the tax information and credits by placing an "X" to the left of the incorrect amounts. Enter the correct amounts to the left of the "X" .
      Preparer Information CIRC Sectionle out this information to prevent duplication.

  7. Prepare Form 3893. See Figure 3.14.1-9a.

    Figure 3.14.1-9a
    Item Item Description Required Entry
    1 Master File Type Check the "IMF" box
    2 Document Locator Number Enter the first 11 digits of the DLN
    3 Document Count Always enter a "1"
    4 Reinput Source Code Check the "R" box
    5 DLN Year Digit Enter the 14th (last) digit of the DLN
    6 Remarks Enter a description of the required action

    Example:

    "Reprocess to 200612"

    7 Process As Check the "Non-Remittance" box.

    Note:

    Use IDRS to transfer any TC610 payment to the appropriate module. If the payment is attached to the return, take the case to your work or Team Leader.

    8 Serial Number Enter the 12th and 13th Digits of the DLN
    9 Prepared By enter the name and 10-digit employee IDRS number
    10 Telephone Extension Enter a 4 or 5 digit telephone extension
    11 Date Enter the current date
    12 Reprocessable Document Check the box showing the reason the return is being reprocessed.
    13 Area Prepared By Always check the "Other" box. Write in "Notice Review"
    • Staple the completed Form 3893 to the front of the return just below the entity section.
    • Staple a completed routing slip ( Form 3210 or equivalent) to the Form 3893 and return.
    • Use local procedures to route the case for reprocessing.

    Figure 3.14.1-9b
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Form 3893 Re-Entry Document Control

  8. Use the CC REQ54 checklist to ensure the input of all necessary adjustments to zero out the incorrect module. See Figure 3.14.1-10.

    Figure 3.14.1-10
    CC REQ54 / ADJ54 Check List for IMF Return Reprocessing
    ▸ To zero-out an account, the dollars and cents amounts input on CC REQ54/ADJ54 must have a trailing minus (−) sign. Do not reduce any other reference item below $.00.

    Caution:

    A difference of even one cent can cause the adjustment to go unpostable. Listed below are input items that may be necessary, to accurately complete a CC REQ54/ADJ54 reprocessing adjustment.

    ▸ Input TC291 for the amount of the TC150 to zero-out the tax.

    Note:

    If any secondary tax adjustments have already posted prior to the input of CC REQ54 make sure the TC291 zeroes-out the total tax amount.

    ▸ Input TC171 to zero-out any manually assessed TC170 or TC176 ES Penalty (the computer will not reverse the TC 176 when the tax is zeroed-out).

    Note:

    On the CC ADJ54 screen, input Reason Code 065 in the second position and 002 the fourth position .

    ▸ If there is not a TC176 on the module, and credits (including payments, withholding and other refundable tax credits) are transferred out or reversed, input TC170 for zero (.00) to prevent the computer from assessing TC176.
    ▸ Input TC161, TC271, and/or TC341 to zero-out any manually assessed TC160, TC270, and TC340, respectively.

    Note:

    On the CC ADJ54 screen, input Reason Code 065 in the second position and 002 the fourth position .

    ▸ Input Blocking Series "05" , Source Code "2" or "4" , Reason Code "099" , and Hold Code "4" (or Hold Code "1" where appropriate).
    ▸ Input TC888 and TC886 to zero-out AGI and TXI, respectively.

    Caution:

    If the taxpayer filed the return with a negative AGI, increase the TC888 to zero it out.
    ▸ Input TC887 to zero-out the exemptions, using a trailing minus (−) sign. In the ADJ54 screen, Exemptions are expressed as cents (e.g. One exemption = .01, two exemptions = .02, etc.) Use the number of exemptions on TXMOD as a guide for the TC 887 entry.
    ▸ Input TC807 to zero-out any posted TC806 withholding credit.

    • Note:

      For returns processed prior to cycle 200704, the TC807 should include any Excess FICA. For returns processed after 200704, any Excess FICA must be reversed using Credit Reference Number 252 with a minus (-) sign, which will generate TC767.

    ▸ Input a single TC765 to zero-out the total of all EIC TC768 & TC764 transactions.
    ▸ Input TC767 to zero-out any TC766 refundable credits that post without a Credit Reference Number (CRN).
    ▸ Input Credit Reference Numbers with a trailing minus (–) sign to reverse TC766 credits that post with CRN(s). Master File will generate the appropriate TC767:

    • CRN 336 with a trailing minus (–) sign reverses Additional Child Tax Credit.

    • CRN 252 with a trailing minus (–) sign reverses Excess FICA for returns processed after cycle 200704.

    • CRN 253 with a trailing minus (–) sign reverses Telephone Excise Tax Refund (TETR).

    • CRN 254 with a trailing minus (–) sign reverses credit interest issued with the Telephone Excise Tax Refund (TETR). This credit interest is identified by a TC776 with a Julian date of 997.

    ▸ Input TC885 to zero-out any Advanced Earned Income Credit.
    ▸ Input TC889 to zero-out the Self–Employment (SE) Tax.
    ▸ Input TC878 and TC879 to zero-out the Primary and Secondary Self Employment Incomes, respectively.
    ▸ Input TC895 and TC896 to zero-out the Primary and Secondary Medicare Incomes, respectively (tax year 1991 and subsequent). See the Note below.
    ▸ Input TC891 and TC892 to zero-out the Primary and Secondary Unreported Tip Incomes, respectively.
    ▸ Input TC898 and TC899 to zero-out the Primary and Secondary Medicare Tip Incomes, respectively (tax year 1991 and subsequent). See the Note below.
    ▸ Input Remarks (e.g. "Reprocess from 200712 to 200812" ).
    ▸

    Note:

    When Medicare SE or Medicare Tip Income field on TXMOD displays all 9's, the amount is too large for the TXMOD field. Use CC IMFOLR or RTVUE to verify the actual amount.

    CC REQ54 / ADJ54 Check List for IMF Return Reprocessing

  9. Transfer the credits claimed on the return to the correct SSN or Tax Period.

    Note:

    If the module being zeroed out has other credits that are correctly posted and should not be refunded, input a TC570 on the debit side of the credit transfer. Use only one TC570 when transferring multiple credits.

  10. Use CC REQ77 to input a TC971 on the losing module to identify a cross-reference TIN or tax period when an original, amended, or duplicate return posted to an incorrect TIN or tax period and is being reprocessed. See Figure 3.14.1-11a.

    1. TC971 requires an Action Code. Always use Action Code 001 to indicate that the TC150 posted to the wrong TIN or tax period.

    2. The transaction date of the TC150 being reprocessed is the return received date from the "RET-RECD-DT" field shown on CC TXMOD screen.

    Figure 3.14.1-11a
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    CC REQ77 / FRM77 Format

    Figure 3.14.1-11b
    CC REQ77 Item Input Instructions for Reprocessing Returns
    Item 1, Field "TC>" Input "971" .
    Item 2, Field "TRANS–DT>" Input date from the "RET–RECD–DT" field of TXMOD
    Item 3, Field "TC971–CD>" Enter Action Code "001" for original return reprocessing
    Item 4, Field "XREF–TIN>" Enter the SSN to which the return is being reprocessed.
    Item 5, Field "XREF-TX-PRD>" Enter the tax period to which the return is being reprocessed.
    Item 6, Remarks Area Include pertinent remarks.

    CC REQ77 / FRM77 Item Input Instruction

  11. When reprocessing a return to a prior year module that has a TC14X, use CC FRM49 to input a TC599 with Closing Code 18. This will prevent any further Tax Delinquent Investigation (TDI) action.

    Note:

    Input format .

    • Overlay TXMOD with FRM49, then clear the rest of the line and input

    • On the second line the SSN, space, Name control, space, MFT, space, tax period ,space and 59918 as shown below.

    • XXX-XX-XXXX NNNN 30 YYYYMM 59918

    • Then XMIT

  12. After completing all of the above:

    1. Void the notice.

    2. Input history item, e.g. CP (insert applicable CP#) VOIDED.

    3. Attach Form 3893 to the front of the tax return and release with the NRPS package. See Figure 3.14.1-10.

    4. Route Form 3893 with attachment(s) to the Receipt and Control Function via the Clerical Support Staff.

3.14.1.6.21.1  (01-01-2009)
Reprocessing e-filed Returns

  1. Request and associate both the charge-out return from the Electronic Filing office and the Form 8453 or Form 8453–OL from Files, if applicable. If the taxpayer(s) used a Self-Select PIN for an e-filed return, a Form 8453 or Form 8453–OL should not be received in the Submission Processing Campus.

  2. Line through the DLN.

  3. Make necessary corrections using local editing procedures.

  4. Route the case to the Processing Function and request a new DLN.

  5. Zero out the module.

3.14.1.6.22  (01-01-2009)
Individual Retirement Account (IRAF) Notices

  1. Various types of IRA accounts exist, each with distinct features and benefits.

  2. Regular IRA—The taxpayer may contribute up to 100% of the compensation or $5,000 ($6,000 if age 50 or older), whichever is less. Contributions may be deductible.

  3. Spousal IRA—A spousal IRA is a separate IRA established for a spouse, who may or may not receive compensation. The following requirements must be met to contribute to a spousal IRA.

    1. The taxpayers must file a joint return for the year the contributions are made.

    2. The spouse must not reach the age of 701/2 by the end of the tax year.

    3. The taxpayer must have compensation for the tax year, and the spouse must have compensation less than the taxpayer.

    4. The taxpayers may not establish a joint IRA, i.e., a separate IRA must be established for the taxpayer and the spouse.

    5. The taxpayers may not contribute or deduct more than $5,000 ($6,000 if age 50 or older) for either IRA.

    6. For limits on deductions for spousal IRAs, see Publication 590.

  4. SIMPLE IRA—This plan is a simplified retirement plan for small businesses. Generally, employers must have 100 or fewer employees to maintain a SIMPLE IRA Plan. Under this plan, an eligible employee may elect to have his or her employer make salary reduction contributions of up to $11,000 in 2008 ($10,500 in 2007, or $10,000 in 2006) to his or her SIMPLE IRA. The employer must also make matching contributions or non-elective contributions to the employee’s SIMPLE IRA. Taxpayers may not make regular IRA contributions to SIMPLE IRAs.

  5. Roth IRA—Beginning in 1998, a Roth IRA may be established by an individual. Contributions to a Roth IRA are not deductible and qualified distributions are excluded from gross income. A taxpayer may contribute to a Roth IRA if he or she has compensation and his or her modified AGI is less than a certain amount. The maximum amount a taxpayer may contribute to a Roth IRA is $5,000 ($6,000 if age 50 or older). As with regular IRA’s, certain married individuals can treat their spouse’s compensation as their own. If a taxpayer contributes to both a Roth IRA and a regular IRA, the Roth contribution limit must be reduced. A taxpayer may contribute a maximum of $5,000 ($6,000 if age 50 or older) to a combination of Roth IRA’s and regular IRAs

    Note:

    A regular IRA may be converted to a Roth IRA if the taxpayer’s modified AGI does not exceed $100,000. In a conversion, the regular IRA is either distributed and rolled over within 60 days to a Roth IRA or transferred directly to a Roth IRA. As a result of the conversion, the taxpayer must include the distribution from the regular IRA in gross income (amounts converted in 1998 are included in income over four years).

  6. Coverdell Education Savings Account—Certain taxpayers may make non-deductible contributions of up to $2000 to a Coverdell Education Savings Account on behalf of a designated beneficiary (a child under the age of 18) for the purpose of paying the designated beneficiary’s qualified higher education expenses. Earnings are not taxed until distributed. However, if distributions for the year do not exceed the qualified education expenses of the designated beneficiary for the year, they are excluded from gross income. Refer to Publication 970, Tax Benefits for Education.

  7. Simplified Employee Pension (SEP)—Under this plan, the employer (or the self-employed taxpayer) contributes to an employee's IRA rather than to an approved pension plan. An employer may contribute the lesser of $46,000 or 25% of the compensation. An employee for whom an employer contributes may be allowed to deduct contributions to that SEP or another IRA up to the lesser of $5,000 ($6,000 if age 50 or older) or 100% of compensation. See Publication 560, Retirement Plans for Small Business.

    Note:

    Compensation includes wages, salaries, tips, professional fees, bonuses, commissions and other amounts received for providing personal services. It also includes taxable alimony and separate maintenance payments. Compensation does not include earnings from interest, dividends, rental income, pensions or annuities, foreign income, or any other amounts excluded from income, such as certain amounts earned by U.S. citizens abroad.

  8. Form 5329 assesses additional taxes against IRAs:

    • Early Distributions Tax—This 10% tax is assessed on an IMF account when a taxpayer withdraws money before age 591/2.

    • Excess Contributions Tax—This 6% tax is assessed on the IRAF. Taxpayers may not deduct an amount on Form 1040 for an excess contribution to an IRA.

      Exception:

      See Publication 590.

    • Excess Accumulation Tax—This 50% excise tax (also known as an insufficient distribution tax) is assessed on the IRAF for taxpayers who do not receive minimum distributions after age 701/2.

3.14.1.6.22.1  (01-01-2009)
Reviewing IRAF Notices

  1. IRAF accounts (MFT 29), effective January 2005, will be on the IMF Master File.

  2. IRA accounts are on MFT 29. The IMF Notice List includes IRAF series notices, CP 14I, CP 21I, and CP 22I.

  3. Use all available command codes to review IRA notices on the IMF side, to locate any available credits to transfer:

    1. Check for credits on the IMF side under both the primary and secondary taxpayers’ SSNs

    2. Search the Unidentified Remittance File with CC URINQ.

  4. An IMF account may contain any of the following IRA indicators:

    IRA Indicator Description
    0 No IRA.
    1 Primary Taxpayer has an IRA.
    2 Secondary Taxpayer has an IRA.
    3 Both Taxpayers (FS 2 only) have IRAs.
    4 IRA Notice issued.
    5 IRA Notice issued to the primary taxpayer.
    6 IRA Notice issued to the secondary taxpayer.
    7 IRA Notice issued to both taxpayers (FS 2 only).

  5. If credit is available on the IMF side for transfer to the IRAF account:

    1. Delete any current cycle refunds, if necessary.

    2. Use CC ADD24 with TC820/700 to transfer only those credits that are claimed on IRAF.

    3. To ensure the correct notice disposition, contact the tax examiner with an open control base prior to adjusting the module.

  6. Use proper procedures to search for credits attempting to post to the IRAF side.

    Note:

    IRAF tax modules can only be established with a TC001, 150, or 99X. Any transaction attempting to post before these will unpost with an Unpostable Code 151.

  7. If a payment or credit is an Unpostable 151:

    1. Input CC UPTIN.

    2. Use CC UPCASZ to input a history, requesting that the Unpostables Function post the credit.

    3. Retype the notice with the new balance.

  8. Follow the procedures in the sections listed below to review IRAF Notices ( CP 14I, CP 21I, and CP 22I):

    • Data Elements-IMF and IRAF Notice Lists: See IRM 3.14.1.2.3.

    • Clerical Support Procedures: See IRM 3.14.1.5.

    • Clerical Priorities: See IRM 3.14.1.5.1.

    • Manual Intervention List: See IRM 3.14.1.5.2.

    • Notice Disposition: See IRM 3.14.1.7.7.

3.14.1.6.22.2  (01-01-2009)
Adjusting IRAF Accounts

  1. If a credit is being applied or will be applied to the account, use CC INTST or CC COMPA/F to determine if the penalties and interest will recompute.

    Note:

    Failure to File (FTF) penalty may need to be manually recomputed.

    If And the notice is a Then
    Penalties and interest will fully abate and the module balance will be zero or a balance due of less than $5.00 CP 14I Void the notice.
    CP 21I or CP 22I Label or retype the notice.
    The module will have a balance due of $5.00 or more CP 14I, CP 21I, or CP 22I Label the notice with Label 3. See IRM 3.14.1.7.7.5.

    Caution:

    Never void a CP 21I or CP 22I, since these Adjustment Notices generate from a CC REQ54 / ADJ54 adjustment. Label or retype the notice as necessary.

  2. If an adjustment is pending on the account:

    If Then
    Hold Code "3" or "4" was used Retype or Void the notice to reflect the adjustment.
    Hold Code "0" was used Label the notice with Label 1. See IRM 3.14.1.7.7.5.

  3. Input CC STAUP for 8 cycles when needed to delay the issuance of IDRS Collection Notices (500 series).

    Note:

    This is unnecessary if the notice is labeled or voided in cycle.

3.14.1.6.23  (01-01-2009)
Automated Levy Program (ALP) Notices- Not Mailed Timely

  1. The IMF Automated Levy Program notices are as follows:

    • Alaska Permanent Fund Dividend Levy Program (AKPFD) - CP 77 and CP 78

    • Federal Payment Levy Program (FPLP) - CP 90 and CP 91

    • State Income Tax Levy Program (SITLP) - CP 92

  2. The ALP notices are Master File (MF) notices. FPLP and SITLP notices print every cycle. AKPFD notices print once a year in mid-July. The notices generate with a Monday date two weeks in advance.

  3. All ALP notices are mailed from the CPS sites(s). CP 77 and CP 90 are mailed certified, return receipt. CP 92 is mailed certified, but no return receipt. CP 78 and CP 91 are sent via regular (first class) mail.

  4. All ALP notices, with the exception of CP 92, are systemically selected through automated NRPS processing. Selection lists do not generate at the CPS site(s). No NRPS processing (systemic or manual) is performed for CP 92. These instructions, therefore, are only for use in the event of an unforeseen problem with the automation, which might result in the need for manual review.

  5. When a CP 77, CP 90, and CP 92 is created, a TC971 AC069, (which carries the notice date) is posted to the MF for each tax module included on the notice

  6. When a CP 91 is created, a TC971 AC169 is posted to the MF for each tax module on the notice. When a CP 78 is created a TC971 AC269 is posted to the MF for each tax module on the notice.

  7. Take the following action if CP 90 is not mailed by the notice date.

    • Input a TC972 AC069 to reverse the original TC971 AC069. The TC972 AC069 should carry the same transaction date (notice date). This is accomplished by using the notice date as the transaction date on CC REQ77.

    • Input a TC972 AC069 with XREF of secondary SSN for each module on the spousal copy of the CP 90. When a spousal copy is issued, a TC971 AC069 posts under the primary SSN, but it carries an XREF to the secondary SSN. For any spousal copies of CP 90 that are destroyed, you will have to input the reversal TC972 AC069 on under the primary SSN with the XREF secondary SSN. This is accomplished by using the notice date as the transaction date on CC REQ77.

    • Input a TC971 AC061. Use the current date as the transaction date in CC REQ77.

    • Input a TC972 AC061 with a two cycle posting delay code. Use the current date as the transaction date in CC REQ77.

    • Destroy the original notices since unable to mail by the notice date.

  8. Take the following action if CP 77 or CP 92 is not mailed by the notice date.

    • Input a TC972 AC069 to reverse the original TC971 AC069. The TC972 AC069 should carry the same transaction date (notice date). This is accomplished by using the notice date as the transaction date on CC REQ77.

    • Input a TC972 AC069 with XREF of secondary SSN for each module on the spousal copy of the CP 77 or CP 92. When a spousal copy is issued, a TC971 AC069 posts under the primary SSN, but it carries an XREF to the secondary SSN. For any spousal copies of CP 77 or CP 92 that are destroyed, you will have to input the reversal TC972 AC 069 on under the primary SSN with the XREF secondary SSN. This is accomplished by using the notice date as the transaction date on CC REQ77.

    • Destroy the original notices since unable to mail by the notice date.

  9. Take the following action if CP 91 is not mailed by the notice date.

    • Input a TC972 AC 169 to reverse the original TC971 AC169. The TC972 AC169 should carry the same transaction date (notice date). This is accomplished by using the notice date as the transaction date on CC REQ77.

    • Input a TC972 AC169 with XREF of secondary SSN for each module on the spousal copy of the CP 91. When a spousal copy is issued, a TC971 AC169 posts under the primary SSN, but it carries an XREF to the secondary SSN. For any spousal copies of CP 91 that are destroyed, you will have to input the reversal TC972 AC169 on under the primary SSN with the XREF secondary SSN. This is accomplished by using the notice date as the transaction date on CC REQ77 / FRM77.

    • Input a TC971 AC061. Use the current date as the transaction date in CC REQ77 / FRM77.

    • Input a TC972 AC061 with a two cycle posting delay code. Use the current date as the transaction date in CC REQ77 / FRM77.

    • Destroy the original notice since unable to mail by the notice date.

  10. Take the following action if CP 78 is not mailed by the notice date.

    • Input a TC972 AC269 to reverse the original TC971 AC269. The TC972 AC269 should carry the same transaction date (notice date). This is accomplished by using the notice date as the transaction date on CC REQ77 / FRM77.

    • Input a TC972 AC269 with XREF of secondary SSN for each module on the spousal copy of the CP 78. When a spousal copy is issued, a TC971 AC269 posts under the primary SSN, but it carries an XREF to the secondary SSN. For any spousal copies of CP 78 that are destroyed, you will have to input the reversal TC972 AC269 on under the primary SSN with the XREF secondary SSN. This is accomplished by using the notice date as the transaction date on CC REQ77 / FRM77.

    • Destroy the original notice since unable to mail by the notice date.

3.14.1.6.23.1  (01-01-2009)
Alaska Permanent Fund Dividend Levy Program (AKPFD)

  1. The AKPFD notices ( CP 77 and CP 78) are reviewed systemically through automated NRPS processing. In the event that NRPS processing is temporarily unavailable, review the notice manually before mailing.

  2. Review each CP 77 and CP 78 that generates and all balance due tax modules (not just those appearing on the notice) using IDRS and Master File for one of the following:

    • -C freeze or unreversed TC500

    • -Z freeze or unreversed TC914

    • Unreversed TC480 or 780

    • Unreversed TC530 (CC 08)

    • Unreversed TC540 (IMF only)

    • Unreversed TC971 (AC043)

    • Unreversed TC971 (AC063)

    • Unreversed TC524 (TIF only)

    • Unreversed TC971 (AC086 or 087)

    • Unreversed TC520

    • Unreversed TC976 or 977

    • Unreversed TC470 (CC 90, 92, 93, 94, 95, 97, or 98)

    • Notice amount less than LEM 5.19.9 criteria

    • Killed in Terrorist Action (KITA)

    • Unreversed TC971 (AC630)

      Note:

      Review account for both pending and posted transactions.

  3. If any of the criteria shown immediately above is met, do the following:

    1. Destroy the notice.

    2. Input a TC972 AC069 for each tax module for CP 77only. Input a TC972 AC269 for each tax module for CP 78. The TC972 date must have the same date as the TC971 that is being reversed.

  4. Review only the notice tax modules on IDRS and Master File for each CP 77 or CP 78 that generates for one of the following:

    • Unreversed TC530 (CC 04, 05, 07 or 24-32)

    • CSED expires before October 1st of the current year.

    • Unreversed TC971 (AC061) with DLN positions 6-13 not equal to all "9s" or unreversed TC971 (AC275).

    • Unreversed TC971 (AC065 or 071)

    • Unreversed TC971 (AC018)

    • Unreversed TC971 (AC077) if previous Unreversed TC971 AC069 posted before the TC971 AC069 generated for this CP 77. For CP 78 if there is no Unreversed TC971 AC069 then proceed with instructions.

    • Unreversed TC470 without a closing code (CC)

      Note:

      Review account for both pending and posted transactions.

  5. If any of the criteria shown immediately above is met, remove the affected tax module(s) from the notice. Retype the notice unless all tax modules on the notice are impacted. If all tax modules are impacted, destroy the notice for the affected tax module(s).

  6. For each impacted tax module on the CP 77only, input a TC972 AC069. The TC972 date must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

  7. For each impacted tax module on the CP 78only, input a TC972 AC269. The TC972 date must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

3.14.1.6.23.2  (01-01-2009)
Federal Payment Levy Program (FPLP)

  1. The FPLP notices ( CP 90 and CP 91) are reviewed systemically through automated NRPS processing. In the event that NRPS is temporarily unavailable, review the notices manually before mailing.

  2. Review each CP 90 and CP 91 that generates and all balance due tax modules (not just those on the notice) on IDRS and MF for the one of the following:

    • -C freeze or unreversed TC500

    • -Z freeze or unreversed TC914

    • Unreversed TC480 or TC780

    • Unreversed TC530 (CC 24-32)

    • Unreversed TC530 (CC 08)

    • Unreversed TC540

    • Unreversed TC971 (AC043)

    • Unreversed TC971 (AC063)

    • Unreversed TC524 (TIF only)

    • Unreversed TC971 (AC086 or 087)

    • Unreversed TC520

    • Unreversed TC976 or 977

    • Unreversed TC470 (CC 90, 92, 93, 94, 95, 97, or 98)

    • Killed in Terrorist Action

      Note:

      Review the account for both pending and posted transactions.

    • Unreversed TC971 (AC630)

  3. If any of the criteria shown immediately above is met:

    1. Destroy the notice.

    2. Input a TC972 AC069 for each tax module on CP 90. The TC972 must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

    3. Input TC972 AC169 for each tax module on CP 91. The TC972 date must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

  4. Review only the notice tax modules on IDRS and Master File for each CP 90 and CP 91 for one of the following:

    • Module not in status 22, 23, 24, 26, or 53 (with CC 03, 06, 09, 10, 12, 13, or 39)

    • CSED within 3 months

    • Unreversed TC971 (AC061)

    • Unreversed TC971 (AC071)

    • Unreversed TC971 (AC065)

    • Unreversed TC470 without a closing code (CC)

      Note:

      Review the account for both pending and posted transactions.

  5. If any of the criteria shown immediately above is met, remove the affected tax module(s) from the notice. Retype the notice unless all tax modules are impacted. If all tax modules are impacted, destroy the notice. Do the following for each tax module to be removed from the notice:

    1. Input a TC972 AC069 for each tax module on CP 90. The TC972 date must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

    2. Input a TC972 AC169 for each tax module on the CP 91. The TC972 date must have the same date as the TC971 that is being reversed. Be sure to input the appropriate reversal for any spousal copies. See IRM 3.14.1.6.23.

3.14.1.6.24  (01-01-2009)
Command Code STAUP

  1. Use CC STAUP to interrupt the normal IDRS balance-due notice routine (CP 500 series) and delay, accelerate, or skip notices. This will generate a history item on the module and change the Submission Processing Campus Status to 48.

    Note:

    CC STAUP is unnecessary if a notice is retyped, labeled, voided, or printed in the cycle and a balance due remains.

  2. When adjusting a balance due account and the account will remain in balance due status:

    1. Retype the original notice.

    2. Use Hold Code "3" on the adjustment to suppress the adjustment notice. Hold Code 3 will not accelerate IDRS balance due notices.

    3. Use CC STAUP to input the cycle delay if necessary.

  3. When a module contains one or more pending payments (AP, PN, UP, CU, or TEP) that will cause FTF or ES penalty to recompute, enter CC STAUP for 8 cycles to allow the taxpayer adequate time to respond to the subsequent notice.

  4. CC STAUP will automatically release after nine (9) cycles if there has never been an open control on the module.

    1. If a control is opened on the module after CC STAUP is input, it will release nine cycles after the control base is closed.

    2. CC STAUP will never remain for more cycles than the number originally input.

  5. Use CC STAUP when a balance due account requires corrective action that cannot be accomplished within the notice cycle.

    1. Delay CP 50X notices by inputting CC STAUP for 8 cycles.

    2. After working the case, input CC STAUP for the following number of cycles:

      If the original notice was... Then input CC STAUP for...
      Labeled 6 cycles
      Retyped 6 cycles

    3. Do not accelerate notices by skipping statuses using CC STAUP.

      Note:

      See STAUP Status Chart in Job Aid, 2534-002.

    4. Input the next status and the number of cycles that IDRS would normally delay the next notice.

      Caution:

      Use the current status (other than 19 or 21) if the IDRS notice is voided or mailed erroneously.

    5. Check the History Section of the module.

    6. Check for any Pending transactions or any current Status 48.

      Caution:

      Never use CC STAUP to update the Status to 22 for zero cycles. This causes the account to immediately become TDA.

  6. Input CC STAUP for 8 cycles when routing a balance due case and/or any related correspondence to another area.

  7. Never input CC STAUP for fewer cycles than the normal interval to the next notice. Be aware of the posting cycles of each notice, especially if using the same status.

  8. CC STAUP cannot be input when:

    1. The Collection Statute Expiration Date (CSED) is within 6 months of expiring.

    2. An Account is in Status 22, 24, 26, 64, 60, 71, or 72.

  9. CC STAUP will only prevent an erroneous IDRS notice if it is input by the Friday before the erroneous notice is scheduled to generate (10 days prior to the 23C Date).

    1. If the Submission Processing Campus status has updated, it is too late to use CC STAUP.

      Note:

      If CC STAUP is input prior to the 23C Date, the notice will be selected for review on the IDRS Notice Review Register under the category 48 Status Update, and will be voided. If the same notice needs to be regenerated, input CC STAUP in the same Submission Processing Status.

    2. If an erroneous notice has been mailed, send an apology letter notifying the taxpayer to disregard the notice and that either the case has been resolved or that a correct notice will be sent.

  10. If a CP 50X is issued and the current cycle Status is 58, follow instructions to use CC STAUP with definer R or D. Refer to the CP 504 Disposition section. See IRM 3.14.1.8.1.1.

3.14.1.6.25  (01-01-2009)
Extensions

  1. Check for a mis-posted extension of time to file (TC460) that belongs on another account.

    1. Use CC REQ77 to input a TC462 to remove the extension from the incorrect account.

    2. Use CC REQ77 to input a TC460 to post the extension on the correct account. Input the Extension Date (use the latest extension date), the Transaction Date (use the received date of the extension), and the DLN-CD (enter 10).

      Note:

      If penalties will recompute, input a TC 290 for .00 with a Hold Code 3 to suppress the recomputation notice.

    3. Input only one TC460.

    4. Retype, label, or void the notice according to the effect that the posted TC460 will have on the module. The TC460 will cause a recomputation of the FTF penalty (TC166 if posted) if the return is filed before five months after the extended due date.

3.14.1.7  (01-01-2009)
Case Resolution

  1. The term case resolution refers to actions that are taken, or need to be taken, in order to bring the case to a close. There are several different elements that comprise case resolution:

    • Controlling Cases

    • Documenting Adjustment Cases

    • Taxpayer Correspondence/Reply Procedures

    • Entity Adjustments

    • Tax Adjustments

    • Credit Transfers

    • Notice Disposition

    Note:

    Not all of these items will be required on every case.

  2. This section breaks down each of the aforementioned items in greater detail

3.14.1.7.1  (01-01-2009)
Controlling Cases

  1. Pending transactions may require some cases to be monitored prior to an adjustment.

  2. Establish a control on all cases held in suspense past the notice cycle. This will cause the case to appear on the weekly Adjustment Overage Report.

  3. Monitor the overage listing so the case can be worked and closed within one week of the TC841 posting, except cases awaiting correspondence. After one week, the case will count as an aged case. See IRM 3.30.123, Processing Timeliness: Cycles, Criteria, and Critical Dates.

  4. To control a Turnaround (other than refund deletion) case:

    1. Work these cases in the notice cycle. Input all adjustments, retype, label or print notices in the notice cycle to ensure that every taxpayer receives the full benefit of the interest free period.

    2. For cases not worked in cycle, use CC ACTON to control the case under Category Code "OURV" . Input CC STAUPS for 8 cycles on balance due cases not worked in cycle to prevent Collection (500 series) notices. Reduce the STAUP after resolving the case, depending on the notice disposition.

    3. Turnaround cases are considered aged after one week.

  5. If the case is controlled by another tax examiner:

    1. Contact the tax examiner with the other control to determine who will resolve the case.

    2. If the other tax examiner agrees to accept the case, transfer the case and close your control base. Use CC ESTABDT to recharge the return. Route the return and all pertinent documents to the controlling examiner.

      Note:

      Include documentation of your discussion as part of the case.

3.14.1.7.2  (01-01-2009)
Documenting Adjustment Cases

  1. Attach documentation of all telephone contacts to the return.

    If... Then...
    The return or other documents, such as a taxpayer letter, is available as a source document (SD) Attach an explanation, which might include calculations, adding machine tapes, etc., to the document to leave a paper trail for other tax examiners to follow. Enter the explanation in the remarks section of the CC REQ54 or credit transfer screen.
    A document is not available as a source document (NSD) Enter a complete explanation of the adjustment in the remarks section of the CC REQ54 or credit transfer screen on IDRS.

3.14.1.7.3  (01-01-2009)
Taxpayer Correspondence/Reply Procedures

  1. Contact the taxpayer via telephone if additional information is needed to resolve the case. When contacting a taxpayer by telephone, you must use the authentication disclosure procedures found in IRM 21.1.3.2.3, Required Taxpayer Authentication, to ensure it is the taxpayer or his/her authorized representative prior to disclosing any tax information.

    Caution:

    Never leave any taxpayer information on the taxpayers' answering machines or voice mail, per IRM 11.3.2.6.1, Leaving information on Answering Machines/Voice mail.



    If unable to reach the taxpayer by telephone, send the request in writing. If the requested information is not received in cycle:

    1. Cases must be controlled and held in a suspense file while awaiting the taxpayer’s reply.

    2. Send the letter (after unsuccessful attempts by telephone) in the notice cycle to allow adequate time for the taxpayer to respond. If the requested information is not received before the close of the cycle, the notice can be held.

    3. Continue processing the case when the reply is received. Upon receipt of reply, ensure that action is taken immediately to close the case.

      Note:

      Do not correspond again if the IRS already corresponded. Treat as a no reply.

    Requests for Missing Information or Verification of Payments

    If the taxpayer... Then...
    Replies within 45 days and the refund is frozen which now needs to be released Input a TC290 for .00, Hold Code "3" , and Blocking Series "05" to release the refund. If the reply was received after the normal or extended Return Due Date, overlay the "RET-PROC-DT>" field with the IRS received date stamped on the reply to set a new 45-day interest-free period.
    Replies within 45 days to a payment verification letter and states that the payment is for a forthcoming amended return Input a TC290 for .00 with a Hold Code "4" to set a –K freeze. Close the control base as "TP1040X" Mail the notice.
    Does not reply within 45 days to a request for missing information and the account requires no adjustment If a Then
    P– Freeze is holding an overpayment Input a TC290 for .00 with a Hold Code "4" to set a –K freeze.
    –K or –R Freeze is holding an overpayment Close the control base. Do not release the freeze.

    Note:

    Both the –K and the –R freeze will generate a transcript to the Accounting Function.
    Does not reply within 45 days, but the account requires an adjustment, and a P– or –R freeze is holding an overpayment Input CC REQ54 adjustment with Hold Code 4 to set a –K freeze to hold any credit balance. Retype Notice.
    Does not reply within 45 days to a payment verification letter, or denies having made the payment Determine which of these files the payment should be moved to, if it cannot be determined to whom the payment belongs. See IRM 3.14.1.6.8.
    Replies after 45 days and the control base is already closed Complete Form 3465, requesting that the return processable date be updated. Route the case to the Adjustments Function.

    Requests for Court Documents or Form 1310

    If the taxpayer Then
    Replies within 45 days and NRPS shows a second name line with a CCC L or W, but no CCC 9

    1. A manual refund is not necessary.

    2. Use the Form 1310 or court appointment documentation to verify the second name line and address. Update the entity portion of the notice records. See IRM 3.14.1.6.1.1.6, Name and Address. Retype if other changes to the notice are necessary.

    3. Input a TC290 for .00, Hold Code "3" , Blocking Series "05" , to release the freeze. If the reply was received after the normal or extended Return Due Date, overlay the RET-PROC-DT field on the CC REQ54 screen with the IRS received date stamped on the reply.

    Replies within 45 days and NRPS shows a CCC 9, but not a CCC L or W

    1. A manual refund is necessary.

    2. Use the Form 1310 or court appointment documentation to verify the second name line and address. Update the entity portion of the notice records. See IRM 3.14.1.6.1.1.6, Name and Address. Retype the notice if other changes are necessary to the notice.

    3. If the reply was received after the normal or extended due date, input a TC290 for .00, Hold Code "4" , Blocking Series "05" . Overlay the RET-PROC-DT field on the CC REQ54 screen with the IRS received date stamped on the reply.

    4. Complete this action before entering CC RFUNDR to avoid Unpostable 155.

    5. Use TC770 for .00 to restrict the credit interest on Form 5792 and CC RFUNDR. See IRM 3.14.1.6.6, Manual Refunds, for additional information.

    Does not reply within 45 days

    1. Follow the no reply procedures for signature letters that apply to the freeze code on the module and whether or not an adjustment is needed on the case. See IRM 3.14.1.7.3.

    2. Close the control base "NR1310" .

    Replies after 45 days and the control base is closed Complete Form 3465. Indicate the Return Processable Date and whether a manual refund is necessary. Route the reply and the case to the Adjustments Function.

3.14.1.7.4  (01-01-2009)
Entity Adjustments

  1. Tax Examiners should determine if the Entity Adjustment is critical or non-critical and if the refund should be stopped and reissued.

  2. A non-critical entity adjustment is when the taxpayer will receive or be able to cash the refund as addressed. Always correct the entity information on the notice. NRPS will update IDRS with the changes. Be mindful of exceptions. See IRM 3.14.1.6.1.1.4. If the entity requires perfection, correct the ZIP code, if necessary.

  3. A critical entity adjustment is when the taxpayer will not receive or be able to cash the refund unless the name or address is corrected:

    1. Correct the entity information on the notice and mail in the current cycle.

    2. Delete any current cycle refund. After the TC841 posts, release the P– Freeze with a TC290 for .00.

    3. These cases can be worked in the current cycle by using a posting delay code.

    4. Monitor the account and maintain the "M" or "B" status until the TC841 posts.

  4. Review the tax return and the entire module to determine the most current taxpayer information:

    1. If an Invalid SSN Condition exists because of an incorrectly transcribed name control or SSN, correct the entity. See IRM 3.14.1.6.1.1.1.

    2. Use OLNR "E" disposition to correct the name lines, address, and filing status on these accounts. Update the address, if necessary. Correct any misspelled or transposed name line information.

      Caution:

      Never update a prior year name line with current processing year information.

3.14.1.7.4.1  (01-01-2009)
Filing Status Changes

  1. If the only change to the entity is a change in Filing Status, the change must be made in both the OLNR Entity Screen and on CC ENREQ in IDRS.

3.14.1.7.5  (01-01-2009)
Tax Adjustments

  1. Input CC REQ54 on IDRS to generate CC ADJ54, which is used to input corrections to tax, penalty, interest, refundable credits, exemptions, SE tax, primary and secondary SE income, and other information. See Figure 3.14.1-12.

    Figure 3.14.1-12

    This image is too large to be displayed in the current screen. Please click the link to view the image.

    CC REQ54 / ADJ54 Format

3.14.1.7.5.1  (01-01-2009)
Blocking Series

  1. The Blocking Series determines whether a DLN will be a refile or a non-refile DLN. When an incorrect Blocking Series is used on an adjustment, the Files Function will return the source document and adjustment printout ( Form 5147) for correction.

  2. Use Blocking Series "00" when entering an adjustment that uses the original return as the source document.

    1. The original paper return will be renumbered using the adjustment DLN.

    2. Line through the original DLN on the return unless local procedures dictate otherwise.

  3. Use Blocking Series "05" when making an adjustment that does not use the original paper return as the source document.

    1. The original return will not be renumbered.

    2. This Blocking Series must be used when making adjustments to electronically filed (e-file) returns. See the note after (5)(d) below for exception.

  4. Use Blocking Series "18" when making an adjustment that does not use the original return as the source document.

    1. Use this Blocking Series only if the adjustment should be associated with the original return .

    2. A CP 55 will generate to the Files Function requesting that the original return be pulled and associated with the adjustment.

      Note:

      Do not use this Blocking Series for Penalty or Interest adjustments without the original return. These adjustments do not need to be associated with the return.

  5. Use Blocking Series "77" whenever the taxpayer’s original, amended, superseding, or supplemental return is corrected (regardless of whether the correction is an increase or a decrease), if the resulting final tax amount is greater than that shown by the taxpayer, and/or if the resulting EIC (if changed) is less than that shown by the taxpayer.

    Note:

    Use Blocking Series "78" instead of "77" if making the adjustment without the original return.

    1. This will set a "–G" Freeze or extend an existing one, allow the taxpayer 60 days from the 23C Date to appeal the assessment, and suspend Collection activity for 12 cycles.

    2. The original paper return will be renumbered using the adjustment DLN.

    3. Line through the original DLN on the return unless local procedures dictate otherwise.

    4. Retype or label the notice as appropriate.

    Note:

    Use Blocking Series "77" on the e-filed returns meeting the above criteria. Attach print of CC TRPRT or CC IMFOLR to the adjustment form.

3.14.1.7.5.2  (01-01-2009)
Source Codes

  1. Source Codes appear on Adjustment notices to explain whether the taxpayer or the IRS made the error.

    • Use Source Code "2" when the adjustment results from a taxpayer error or when neither Source Code "4" nor "7" apply.

    • Use Source Code "4" when the adjustment results from an IRS error.

    • Use Source Code "6" when the adjustment has a Blocking series of "77" or "78" .

    • Use Source Code "7" when the adjustment is for a TOP offset.

3.14.1.7.5.3  (01-01-2009)
Reason Codes

  1. Reason Codes appear on Adjustment notices to describe the adjustment or other changes made to the taxpayer’s account.

    1. Choose the Reason Code(s) that best describes the error or the area of the return affected by the adjustment.

    2. Use at least one, but no more than three reason codes with a CC REQ54 adjustment.

    3. Input Reason Code(s) using three digits.

      Note:

      The fourth position is only used for in-house data on penalties and will not print on the notice.

      Caution:

      Do not enter Source Codes, Reason Codes, or Item Reference Numbers on a TC290 for .00 input when releasing a P– Freeze.

    4. See Document 6209, IRS Processing Codes and Information, Section 8, for a complete list of IMF Adjustment Reason Codes.

3.14.1.7.5.4  (01-01-2009)
Priority Codes

  1. Priority Codes bypass certain unpostable checks.

  2. Use Priority Code "1" when entering a CC REQ54 adjustment on an account with a –L freeze (open TC420 or 424).

    Note:

    Use Priority Code "1" if both "1" and "8" are required to adjust an account.

  3. Use Priority Code "8" when entering:

    • A TC29X adjustment within $10.00 of a previous adjustment to bypass UPC 158–1.

    • An EIC adjustment (TC764) and there is a previous TC29X adjustment to bypass UPC 180–2.

      Exception:

      Priority Code 8 is unnecessary if the previous TC29X is a TC29X for .00 with Priority Code "6" .

    • A withholding adjustment (TC806 or 807) and there is a previous TC170 or 171 with a Doc Code of 17, 18, 24, 47, 51, or 54.

      Note:

      This action will not force the computer to recompute the ES penalty. Compute the penalty manually, if needed.

  4. Use Priority Code "3" when inputting an adjustment which is IRS initiated for the 45 day interest-free period.

3.14.1.7.5.5  (01-01-2009)
Hold Codes

  1. Use a Hold Code for one or both of the following reasons:

    • To suppress a CP 21 or CP 22 Adjustment Notice.

    • To prevent a refund by freezing an overpayment.

  2. Use a Hold Code "0" on a CC REQ54 adjustment when the taxpayer needs to receive an adjustment notice.

    1. If an adjustment will create a second refund, then the taxpayer needs an Adjustment notice to explain the adjustment and the second refund.

    2. If an original notice was mailed in error, the taxpayer needs an Adjustment notice to explain the nature of the change.

  3. Notice Review may only use the following Hold Codes:

    Hold Code Prevents Description
    Notice Refund  
    0 No No Use when no other hold code is needed.
    1 No Yes Sets a –K Freeze to hold the overpayment until one of the following occurs:

    • A Doc Code 24 or 34 credit transfer posts.

    • A TC830 or TC820 posts.

    • A Doc Code 51 TC300 posts.

    • The module balance becomes zero or a debit.

    • A TC29X or TC30X posts.

    Caution:

    The –K freeze will not be set if any of these conditions post in the same cycle as the adjustment with the Hold Code.

    Example:

    A Doc Code 24 transfer posting in the same cycle as a CC REQ54 adjustment needs a TC570 to hold the credit.
    3 Yes No Use when retyping the original notice to reflect an adjustment.

    Note:

    Hold Code 3 will not accelerate IDRS balance due Collection (500 series) notices.
    4 Yes Yes Sets a –K freeze. See Hold Code 1, above.

3.14.1.7.5.6  (01-01-2009)
Posting Delay Codes

  1. Use of proper posting delay codes is necessary when performing multiple IDRS transactions, and the order in which they post is key to preventing unpostables.

  2. Be aware of the timing of IDRS transactions so that they post either in the same cycle or in consecutive cycles, as needed, and utilize the posting delay code to stagger the posting of those transactions accordingly.

3.14.1.7.5.7  (01-01-2009)
Debit Interest To Date (DB-INT-TO-DT)

  1. Input the Debit Interest To Date when entering a TC34X on a CC REQ54 adjustment.

  2. Overlay the "DB-INT-TO-DT" field with the Interest To date.

    Note:

    The computer will not accept a TC34X adjustment unless the "DB-INT-TO-DT" field is overlaid.

  3. If no interest is assessed, but a TC340 for .00 is needed to address an –I freeze:

    1. Input a TC340 for .00.

    2. Overlay the "DB-INT-TO-DT" field with the Interest To date.

  4. The Interest To date is usually the 23C Date of the adjustment.

3.14.1.7.5.8  (01-01-2009)
Return Processable Date (RPDT)

  1. A return is not considered complete and processable until the required information is received from a taxpayer on a permitted form, schedule, or attachment to allow for mathematical verification of tax liability shown on the return.

  2. A return is not considered complete and processable until all missing information (such as taxpayer's name(s), address, identification number(s), required signatures, Form 1310 / court appointment documentation, or other forms or schedules) are received.

  3. When the taxpayer sends the necessary correspondence, enter the correspondence received date in the "RET-PROC-DT" field on IDRS to update the Return-Processable-Date field on CC TXMOD.

  4. This will also restrict credit interest for 45 days. Future computations of credit interest will be figured from this date.

3.14.1.7.5.9  (12-06-2005)
Credit / Item Reference Numbers

  1. A Credit/Item Reference Number is a three-digit code input in the lower portion of the CC REQ54 screen that refers to specific areas of each type of return. The areas include:

    • Adjusted Gross Income (AGI)

    • Taxable Income (TXI)

    • Medicare Income

    • Self Employment Income and Tax

    • Withholding

    • Exemption

      Note:

      See Document 6209, IRS Processing Codes and Information for a complete list.

  2. Keep the following information in mind when using Credit/Item Reference Numbers:

    1. Use a trailing minus (–) to decrease a credit amount.

      Example:

      Use TC807 for 200.00– to decrease withholding by $200.

      Caution:

      Reducing any credit (other than AGI) to an amount less than zero will generate an Unpostable.

    2. Include all relevant item and credit codes in the adjustment.

      Example:

      A change to the AGI usually changes the TXI. A change to Schedule C generally changes the SE tax, SE income, and Medicare Income.

    3. Use Item Reference Number 888 when changing the AGI. Master File will automatically change the TXI for the same amount.

    Note:

    The computer will not reduce the TXI below zero.

3.14.1.7.5.10  (01-01-2009)
Source Document (SD/NSD) Field

  1. Enter "Y" if attaching a Source Document to the adjustment form.

  2. Enter "N" if not attaching a document.

  3. The Blocking Series used in a CC REQ54 adjustment works in conjunction with whether a Source Document field entry is an "N" or a "Y" .

3.14.1.7.5.11  (01-01-2009)
Remarks Field

  1. Enter a descriptive statement identifying the reason for the adjustment.

  2. The "Remarks" field of the CC REQ54 screen becomes a permanent part of the document, because the data entered appears on the Form 5147 cover sheet associated with the adjustment by Files.

  3. Detailed information is essential to a complete audit trail, and the remarks allow anyone referring to the document at a later date to fully understand the nature of the adjustment.

3.14.1.7.6  (01-01-2009)
Credit Transfers

  1. Use a credit transfer to move credits from one tax module to another. Refer to the following when transferring a credit:

    • Verify that the transfer has not been input by another tax examiner.

    • Do not transfer a pending credit until it posts.

    • Dates and money amounts must be exact. Any discrepancy will create an unpostable.

    • When transferring two or more credits with the same date, transfer the credits in order from the largest to the smallest.

    • Use current NRPS or CC IMFOL information.

  2. There are three Credit Transfer Doc Codes. Use them in conjunction with the credit transfer Command Code format ADDnn/ADCnn, where nn is the Document Code. Each Document Code identifies the different types of credits to be moved:

    1. Use Doc Code 24 to transfer a single payment, a lump sum, an overpayment, or to reverse an offset. Both the debit and credit sides of the transfer post in two or three cycles (depending on the day of input), unless a posting delay cycle is used.

      Note:

      Doc Code 24 can move the same payments as the Doc Code 34.

    2. Use Doc Code 34 to transfer up to four payments at once. The debit side of the transfer posts in two or three cycles (depending on the day of input). The credit side posts one cycle later.

      Caution:

      When using Doc Code 34 in conjunction with other Doc Codes (24, 48, or 54), make sure that the multiple transactions will all post in the same cycle. Use a Posting Delay Code "1" on the credit side of both the 24 and 48 transactions and on CC ADJ54 to prevent erroneous notices, offsets, and refunds.

    3. Use Doc Code 48 to transfer or reverse Credit Elect. Both the debit and credit sides of the transfer post in the same cycle, unless a Posting Delay Code is used. Both sides normally post in two or three cycles, depending on the day of input.

  3. Consider the timing issues unique to Doc Code 34 transfers. The credit side of a Doc Code 34 transfer posts one cycle after:

    • A CC REQ54 adjustment.

    • Both sides of Doc Code 24 and 48 transfers.

    • The debit side of a Doc Code 34 transfer.

    • A CC REQ77 transaction.

    Note:

    If the credit side of a Doc Code 34 transfer needs to post in the same cycle as any of the above transactions, use a Posting Delay Code "1" immediately after "POSTNG-DLAY-CD>__" to avoid erroneous notices, offsets, and refunds.

  4. A credit transfer affects two different tax modules unless the only purpose of the transfer is to change the payment date.

    1. The debit side, which always appears on the upper part of the screen, reflects the module the credit will be transferred from (ADD).

    2. The credit side, which always appears on the bottom part of the screen, reflects the module the credit will be transferred to (ADC).

  5. The last module requested with CC TXMOD (the primary module) determines which command code to use to move the credit. To reduce the chance for errors, use the notice module as the primary module. Determine if the module shown on the IDRS screen is to be debited or credited:

    If the module is to be Then use
    Credited CC ADCnn (nn=Doc Code 24, 34, or 48).
    Debited CC ADDnn (nn=Doc Code 24, 34, or 48).

  6. When reversing an offset, the debit and credit sides may have different dates. Input an Override Code "2" when using different dates. Use the TC826 date for the TC821 and the TC706 date for the TC701.

  7. Reverse multiple offsets separately. Do not combine them.

  8. Use a posting delay code to delay the posting of a transaction by up to six cycles.

  9. When transferring a credit into a zero balance (full-paid) module, or a balance due module that will create an overpayment, use a Bypass Indicator "1" on the credit side of the transfer to prevent an Unpostable Condition 198.

  10. To hold a credit (prevent a refund or offset), use a Credit Freeze Code "1" on Doc Code 34 or a TC570 on Doc Code 24 or 48 as the secondary transaction code on the credit side of the transfer to set an –R Freeze on the module.

    Caution:

    Use this only when the credit module must be frozen.

    1. TC570 may only be used as a secondary transaction on a Doc Code 24 transfer. Enter it on the IDRS screen immediately after the second "TC>___."

    2. Never leave an unnecessary –R Freeze on a module. Use CC REQ77 to input a TC 571 with the appropriate posting delay code to release any remaining TC570, allowing any available credit to refund after the transfer posts.

      If the transfer is Doc Code Then use a Posting Delay Code
      24 or 48 1
      34 2

  11. Use the correct reversal transaction codes when transferring payments. Use:

    • TC662 to reverse TC660 or 430.

    • TC672 to reverse TC670.

    • TC821/701 to reverse TC826/706.

      Note:

      See Document 6209, IRS Processing Codes and Information for a complete list of IDRS Transaction Codes.

  12. TCs 640, 670, and 700 must have a Designated Payment Code (DPC), used only for terminal input.

    1. When transferring these payments, input "00" on the credit side of the Doc Code 24 or 34 screen immediately after "DESG-PYMT-CD>__" unless the payment has another code (01–14 or 99).

    2. See Document 6209, IRS Processing Codes and Information for a complete listing of DPCs.

  13. A TC820 or 830 on a Doc Code 24 or 48 transfer will release –K and P– freezes. Verify that the transfer does not inadvertently release a freeze and cause an erroneous refund. When using CC REQ54 to adjust the tax and transferring a credit into the module, use either a Hold Code "4" or a Posting Delay Code "1" to prevent an erroneous refund or notice or both.

  14. If a misapplied credit posted to a settled module (containing a TC150), input a TC570 on the debit side of the transfer to suppress the CP 60 if transferring the credit will leave a debit balance of $5 or more.

  15. If transferring a credit into the notice module will resolve the credit discrepancy with no other misapplied credit, do not input a TC570 on the credit transfer. Use CC REQ54/ADJ54 to input a TC290 for .00 with Hold Code 3 to prevent an adjustment notice.

  16. If transferring a TC660, or TC670 into a module will create an overpaid condition, be sure to use Bypass Indicators and Designated Payment Codes as appropriate, to avoid creating an unpostable condition.

    1. Use a Bypass Indicator "1" on the Doc Code 24 or 34 IDRS screen, if necessary.

    2. If the credit should be held and not refunded, input a TC570 as a secondary transaction on the credit side of a Doc Code 24 transfer or a Credit Freeze on the credit side of a Doc Code 34 transfer.

3.14.1.7.6.1  (01-01-2009)
Penalty Recomputations Caused by Credit Transfers

  1. Transferring timely credits into a module containing a TC166 (FTF penalty) or TC176 (ES penalty) will cause these penalties to recompute and generate an adjustment notice CP 21 or CP 22. Other penalties may also recompute but will not generate an adjustment notice.

  2. Review CC PIEST or INTST to determine whether the penalties will recompute. The Estimated Tax Penalty may have to be addressed manually. See IRM 3.14.1.6.20.4.

  3. When transferring timely payments into the module to resolve an ES discrepancy condition causes the TC166 or TC176 to recompute, input a TC290 for .00 in Blocking Series 05. Use Hold Code "3" to prevent the subsequent CP 21 or CP 22.

    1. If the credit transfer is under Doc Code 34, use a Posting Delay Code "1" on the TC290 so both adjustments will post in the same cycle.

    2. If the credit transfer is under Doc Code 24 or 48, a posting delay code is unnecessary. Both sides of the credit transfer will post in the same cycle as the CC REQ54 transaction.

3.14.1.7.7  (01-01-2009)
Notice Disposition

  1. All tax examiners are responsible for understanding the tax module conditions that generate a notice, the notice elements, and what effect any change to the module will have on a notice.

  2. All math error returns must receive the appropriate math error notice even if the refund or balance due is what the taxpayer expects, unless returning to ALL of the taxpayer’s original figures.

  3. If an incorrect notice was mailed, a corrected notice along with the apology label or the apology letter ( Letter 0544C) must be sent to the taxpayer or handled according to local procedures.

  4. When making any adjustment or credit transfer to an account, tax examiners are responsible for determining:

    • The disposition of all affected associated notices in addition to the selected notice

    • Whether to generate or suppress the subsequent notice.

    • If FTF, FTP or ES penalties will recompute

    • The proper use of LCF to prevent subsequent notices

    • Proper use of hold codes or transaction codes to allow or prevent future notices

    .

  5. Every tax examiner who inputs:

    • A Doc Code 54 adjustment must determine (prior to the adjustment) whether to generate or suppress the subsequent notice.

    • An adjustment or credit transfer that will cause the FTF, or the ES penalties to recompute must determine if a subsequent notice will generate

    Note:

    Proper use of hold codes is important during the adjustment process. See IRM 3.14.1.7.5.5. Proper use of the LCF is important when a hold code or a TC570 cannot be used to prevent a subsequent notice.

  6. Consider the notice elements that will exist after a Doc Code 54 adjustment or a credit transfer, to correctly determine whether to void, retype, label, or print and mail based on these elements.

  7. An adjustment notice ( CP 21 or CP 22) will generate when:

    • A Doc Code 54 or 47 adjustment posts with Hold Code "0" or with a Hold Code "1" .

    • A payment is transferred into or out of a module and FTF, or ES penalties will assess or recompute.

    • A payment is transferred out of a settled (Full Paid) credit balance module and creates a balance due. This will generate a CP 60.

  8. If an account action will generate a subsequent notice, print the original notice. If the original notice must be voided or retyped, prevent the subsequent notice:

    1. Use Hold Code "3" with a CC REQ54 adjustment to prevent a subsequent notice. Use Hold Code "4" to prevent a notice and to prevent an overpayment from refunding.

    2. Use a TC570 on the debit side of a credit transfer to prevent a CP 60 from generating on a settled module.

    3. Use CC REQ54 to input a TC290 for .00, Blocking Series "05," Hold Code "3," to prevent an adjustment notice from generating on a penalty recomputation caused by a credit transfer. Time the adjustment to post in the same cycle as the credit transfer.

      Note:

      Use a Posting Delay Code "1" on the REQ54 if the credit transfer was a Doc Code 34.

      Exception:

      An adjustment with a Hold Code 3 will suppress a CP 21 or CP 22 but will not suppress a CP 60. A TC570 on the debit side of a credit transfer will suppress a CP 60 but will not suppress a CP 21 or CP 22 generating as the result of a penalty recomputation.

  9. Follow procedures for inputting multiple corrective actions such as a tax adjustment and a credit transfer, or an "in and out" credit transfer. See IRM 3.14.1.7.6.

  10. Any tax examiner reviewing a pending transaction on the notice module must be able to answer the following questions:

    • Which penalties, if any, will recompute?

    • Which subsequent notices, if any, will (or should) generate?

    • Should any subsequent notices be mailed?

    • Will the notice module be overpaid, refunding, underpaid, or even-balance?

    • If the module balance becomes overpaid, should the refund be mailed or intercepted?

    • What is the proper disposition of the original notice?

    Note:

    Use CC IMFOL to view the posting of some transactions one cycle before they appear on CC TXMOD.

    • Review the CC IMFOL notice module for the posting of pending credit or debit transactions.

    • If a transaction posts on CC IMFOL, any recomputation of penalties and interest will also show on that module. However, any balance showing on CC IMFOL is computed to the date indicated on that module and should not be used on a retyped or labeled notice. Use CC INTST or CC COMPA/COMPAF.

    • If a transaction is posted on CC IMFOL, any refund or offset occurring as a result will also show.

      Note:

      Use CC IMFOL to verify the result of a pending transaction whenever possible.

  11. The NRPS content sheet will indicate if an Examination (Unallowable Codes) CP 12E or CP 24E was issued. Notify the Examination Function in cycle of any change to the account that will affect the notice.

3.14.1.7.7.1  (01-01-2009)
Notice Disposition Categories

  1. There are five Notice Disposition categories:

    • PRINT

    • VOID

    • RETYPE

    • LABEL

    • ENTITY

    Note:

    See IRM 3.14.1.4.2.2.

  2. Input a history item (using CC ACTON) whenever voiding a notice, but do not create a dummy module solely to input a history item. Refer to the Notice Disposition/CP Conversion Chart. See Figure 3.14.1-13.

    Figure 3.14.1-13
    This image is too large to be displayed in the current screen. Please click the link to view the image.

    Notice Disposition/CP Conversion Chart

3.14.1.7.7.2  (01-01-2009)
Printing Notices

  1. Print the notice when:

    1. All the notice elements are correct, no adjustment is pending, and no correction will be made to the account.

    2. There is a requirement to print and mail the notice.

      Note:

      Do not input a history item on IDRS for printing a notice.

3.14.1.7.7.3  (01-01-2009)
Voiding Notices

  1. Void the notice when:

    1. The taxpayer does not need to receive the notice information.

      Example:

      Returning to the taxpayer’s original tax figures and the resulting refund is what the taxpayer expected or there is no balance due.

    2. After the adjustment action, the account will have no math error or ES discrepancy, will be overpaid, even balance, or have a balance due of less than $5, match the taxpayer’s figures, AND any incorrect refund was deleted or the module will be overpaid with a resulting refund or credit elect as the taxpayer expected.

    3. It would cause a misunderstanding by the taxpayer.

      Example:

      Due to a previous notice being sent to the taxpayer in error.

    4. Reprocessing a return. See IRM 3.14.1.6.21.

  2. If voiding the original notice, prevent the subsequent notice or use the LCF to intercept and void the subsequent notice.

  3. Do not void an Adjustment Notice unless one of the following is true:

    • The original notice was voided, and the conditions for printing notices are met. See IRM 3.14.1.7.7.2.

    • The original notice is retyped to include the corrected information.

  4. If the original Balance Due Notice was voided in error and the CP 21 or CP 22 generates, retype it to the original notice to show the taxpayer the beginning balance.

3.14.1.7.7.4  (01-01-2009)
Retyping Notices

  1. Retype a notice when the notice elements are no longer correct due to changes in the tax module information. The retyped notice must be complete and accurate. Some conditions which require a retype of the original notice:

    • The tax is increased or the credits are decreased to other than the taxpayer’s figures.

    • The balance due increases.

    • The module balance changes from a balance due to an overpayment because of a CC REQ54 adjustment.

    • The TPNC needs to be corrected.

    Reminder:

    Do not retype to an overpaid notice that matches the taxpayer’s figures.

    Note:

    The TC846 refund amount should match the notice. If the overpaid amount will increase causing a second refund, the notice should be labeled.

  2. Retype a notice to a CP 30 when the computer assessed an ES penalty and there is no ES discrepancy or math error on an overpaid module.

  3. Use a hold code when retyping the original notice to prevent the subsequent notice or use the LCF to intercept the subsequent notice.

  4. If a Balance Due Notice is held past the notice cycle, retype the notice with the correct Pay By Date. Input a history item and CC STAUP for 6 cycles.

    1. Change the balance due amount only if there is a $5 or greater increase over the original balance due. Use CC INTST to obtain an updated balance when no restrictive conditions exist on IDRS.

    2. Use CC ACTON to enter a history item on the notice module, using "UPDATECP__"

  5. The date printed on the notice is the 23C Date (current cycle assessment date). This date is rarely changed. For those notices held past the notice cycle, the notice mail date will update prior to printing.

    Exception:

    If you delete a refund to increase tax input disposition code, "H" , to hold the notice. Use the posting cycle calendar in Document 6209, IRS Processing Codes and Information to determine the 23C Date for the posting of the adjustment and retype and release the notice in the posting cycle. The 23C Date determines the assessments of penalty and interest, collection notices, and TDA issuances. The computer will not recognize a notice date change. The computer does recognize a subsequent tax assessment, which starts a new assessment time period.

  6. The following keys will usually result in a retyped notice:

    • Key 100—(TPNC 100) See IRM 3.14.1.6.17.12.

    • Key 061—(Five or more TPNCs needed on the notice.) See IRM 3.14.1.6.17.8.

    • Key 004—(ES payments on notice print incorrectly.) See IRM 3.14.1.6.17.3.

3.14.1.7.7.5  (01-01-2009)
Labeling Notices

  1. Under certain conditions, a label may be inserted to update information on the notice or to notify the taxpayer to expect additional account actions. Label insertion must only be done when necessary and used only for the specific situations listed in this section. As Labels are selected on-line, they are inserted directly into and printed as part of the notice.

  2. Do not label a notice when the tax or the balance due is being increased. Always retype the notice.

  3. If a name and/or address change is required, in addition to a label select "R" to update the entity. The updated entity will be printed on the notice and NRPS will pass the update to Master File to correct the TP account. See IRM 3.14.1.6.1.1.4.

  4. The labels shown in this text have been approved for the situations listed. Do not insert a label for any other situation. Submission Processing Campus management has the option of requiring a notice to be retyped instead of labeled. Any additional labels must be approved by national office prior to use. The following labels are approved. Refer to the appropriate figures for each Label.

  5. Label 98 is a free-form label that allows any message to be created, similar to that of the TPNC 100. Care should be used when using this label, to ensure accurate punctuation and correct grammar.

    Reminder:

    When using Free Form Label 98, text must be entered in upper case and lower case.

3.14.1.7.7.5.1  (01-01-2009)
Label 1

  1. Use Label 1 when the notice module has a pending AP, PN, CU, UP, or RS Doc Code 54/47 adjustment, with either Hold Code "0" or with Hold Code "1" that was input by another area. If the adjustment was input by a different Notice Review tax examiner, refer the notice to that tax examiner for proper notice disposition. See Figure 3.14.1-14.

    Note:

    Do not apply this label for a posted or pending TC976 or TC977. Adjustments/Correspondence will initiate all required correspondence.

    Exception:

    A TC290 for .00 without a Credit Transaction code will not generate an adjustment notice.

    Caution:

    Refundable credit transactions (TC806/807, TC764/765, and TC766/767) will generate an adjustment notice.

    Figure 3.14.1-14

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.2  (01-01-2009)
Label 2

  1. Use Label 2 when:

    1. A credit transaction is pending (AP, PN, UP, CU, RS, or on the TEP file) and not shown on the notice.

    2. The resulting balance on the notice will be a reduced balance due.

    3. Failure to File (TC166) or Estimated Tax (TC176) penalties will recompute and will generate a subsequent adjustment notice CP 21.

  2. Instead of labeling the original notice, void it and prevent the subsequent notice, if all of the following conditions will be present on the notice module:

    • No math error or ES discrepancy.

    • Module balance becomes overpaid, even, or balance due of less than $5.

    • Returning to the taxpayer’s figures.

    See Figure 3.14.1-15.

    Figure 3.14.1-15
    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.3  (01-01-2009)
Label 3

  1. Use Label 3 when:

    1. The notice cannot otherwise be easily retyped in OLNR.

      Note:

      Since this label was introduced prior to the advent of OLNR Retypes, it has now become nearly obsolete. In rare situations when a retype on OLNR is not possible or practical, the use of this label is permitted.

      Example:

      When the OLNR system produces excessive response time on retype screens, or when the volumes are very high for certain Selection Keys that meet the criteria below.

    2. The notice module is in balance due status.

    3. Payments or credits are pending but are not showing on the notice. The payments or credits may be AP, PN, UP, CU, or RS transactions.

    4. Failure to File (FTF, TC166) or Estimated Tax (ES, TC176) penalties will NOT recompute. A subsequent notice will NOT generate.

    5. The resulting balance on the notice module will be a reduced balance due.

      Reminder:

      Use CC INTST or CC COMPA/COMPAF to compute the new balance.

      Caution:

      If the resulting balance due will be less than $5.00 with no math error or credit discrepancy, VOID the notice.

    See Figure 3.14.1-16.

    Figure 3.14.1-16

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.4  (01-01-2009)
Label 4

  1. Use Label 4 when:

    • Payments or credits are pending, but are not showing on the notice. They may be shown as pending AP, PN, UP, CU, or RS transactions.

    • The resulting balance on the notice module will be an overpayment.

    • Failure to File (FTF, TC166) or Estimated Tax (ES, TC176) penalties will NOT recompute.

    • NO subsequent notice will generate. See Figure 3.14.1-17.

      Note:

      Use CC INTST or COMPA/COMPAF to compute a new balance.

      Caution:

      If the notice is a CP 14, and the resulting balance is the taxpayer’s original refunding amount, VOID the notice.

    Figure 3.14.1-17

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.5  (01-01-2009)
Label 5

  1. Use Label 5 when inputting a CC REQ54 adjustment that will result in an additional refund on a notice module with a posted TC846. See Figure 3.14.1-18.

    • Insert the label into only an overpayment notice in the notice cycle.

    • Make the adjustment in the notice cycle. Do not use a hold code. Allow the subsequent notice ( CP 21B) to generate.

    • Do not delete the current cycle refund.

    Figure 3.14.1-18

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.6  (01-01-2009)
Label 6

  1. Use Label 6 when:

    • A credit transaction is pending (AP, PN, UP, CU, RS, or on the TEP file).

    • There will be no subsequent notice, Doc Code 54 adjustment, or recomputation of the Failure to File (FTF, TC166), or Estimated Tax (ES, TC176) penalties.

    • There will be an additional refund from the notice module.

    See Figure 3.14.1-19.

  2. Insert the label into an overpayment notice and print it in the notice cycle. Do not delete the current cycle refund.

    Figure 3.14.1-19

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.7  (01-01-2009)
Label 7

  1. Use Label 7 when:

    • A credit elect (TC830) or lump-sum offset (TC820) is shown as a pending (AP, PN, CU, UP, or RS) transaction on an overpaid notice module.

    • The notice is a CP 21 adjustment notice.

    See Figure 3.14.1-20.

    Note:

    If the notice module is refunding in the current cycle, delete the refund.

    Caution:

    Determine if the transaction is correct before using this label. The module must have available credit for the offset to post.

    Figure 3.14.1-20

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.8  (01-01-2009)
Label 8

  1. Label 8 will automatically be inserted by the computer when the taxpayer is claiming a credit or payment(s) that refunded in the prior year. Print the notice. See Figure 3.14.1-21.

    Figure 3.14.1-21

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.9  (01-01-2009)
Label 9

  1. Use Label 9 when a Balance Due Notice is returned undeliverable, and the date of the notice is more than seven (7) days prior to the current date. See Figure 3.14.1-22.

    Note:

    Use CC INTST or COMPA/COMPAF to recompute penalties and interest. The "Interest To" and "Payment Due" dates are both the current 23C Date plus 10 days.

    Figure 3.14.1-22

    This image is too large to be displayed in the current screen. Please click the link to view the image.

3.14.1.7.7.5.10  (01-01-2009)
Label 10

  1. UseLabel 10 when all of the following conditions exist:

    1. A balance due notice is returned undeliverable,

    2. The recomputed balance due changes by less than $5.00, and

    3. The taxpayer needs to receive a new pay-by date.

    See Figure 3.14.1-23.

  2. Use this label in conjunction with Label #11.

    Figure 3.14.1-23

    This image is too large to be displayed in the current screen. Please click the link to view the image.


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