25.17.14.7.1 (09-01-2004)
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If
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Then
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the TFRP was assessed after the corporations bankruptcy
petition date, and the interest was paid
through the bankruptcy plan |
full adjustment of the TFRP is required |
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the TFRP was assessed prior to the corporate bankruptcy petition
date |
interest may be due on the TFRP Form 3870 should be prepared
to make this adjustment according to local
procedures/requirements |
1.
Closing Code Reversal Determination. Before
input of a TC 521, reversing the bankruptcy freeze
code (TC 520), a determination should be made if a
TC 520 with a particular closing code is to be
reversed or if all of the TC 520 closing codes will
be reversed.
A.
Reversing a Single TC 520. A TC 521 with the same
closing code as the TC 520 to be reversed (for
example, TC 520 CC 85 and TC 521 CC 85) must be used
to prevent an unpostable transaction. This will
reverse both the bankruptcy freeze and the
statistical indicator for the specific closing code.
B.
Reversing Multiple TC 520s. A TC 521 with 999 statistical indicator
reverses all open TC 520s in a module.
When reversing a TC 520 with a closing
code of 84, the TC 521 does not require a closing
code or date.
2.
Table Information on TC 521 Input
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If
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Then
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the discharge or dismissal has been received |
the date the discharge or the dismissal was recorded is used for
the TC 521 transaction date. |
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there is no discharge or dismissal information to enter |
the date of the court closure is used. |
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there is no court closure date to enter (may be delayed or
deferred due to distribution pending), and
the |
the AIS closure date is used. |
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the transaction date of the TC 521 is input with a date earlier
than the date of the TC 520 transaction date |
the TC 521 will unpost. The TC 521 transaction date must be later
than the date of the TC 520. Caution:
All prior TC 520s must be addressed or the case will not close
properly. Note:
The
Nullified Distribution list, containing weekly
unpostable transactions, is sent to Insolvency
for resolution. Insolvency must resolve the
unpostable condition relating to the TC 521,
correct the unpostable condition, and re-input
the TC 521. |
1.
Pre-Adjustment/Lien Release Determinations. Prior
to requesting adjustment of a dischargeable tax and
release of a NFTL, a determination must be made
that:
·
no exempt
or abandoned assets exist, or they are not worth
pursuing
·
collection
from assets is concluded
·
future
collection potential does not warrant keeping the
account in the Service's inventory
·
no
litigation is pending
·
further
monitoring is not required (except for appropriate
closing actions)
·
no other
case actions are pending
2.
Lien Releases. When processing a release of a NFTL,
Insolvency should adhere to the following
guidelines:
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If the |
Then
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NFTL includes a tax period that is not
discharged |
the lien is not released. |
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liability is joint and only one spouse is discharged (the other
spouse is a non-petitioning spouse) |
NFTL release is handled through the Automated Lien System ( |
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adjustment processing may cause a delay in the release of the
lien, and the lien needs immediate release |
local procedures for manual release of the lien must be followed. |
3.
1.
MF Computes ASED/CSED. The Master File automatically computes
extensions of the Assessment Statute Expiration Date
(ASED) when applicable (see below) and automatically
computes the Collection Statute Expiration Date (CSED)
when the TC 521 is input.
2.
Exceptions.
Exceptions to the above are listed in Table below.
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If
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Then
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the TC 520 posted before cycle 8620 |
a manual recomputation via input of TC 560 or TC 550 is required
to extend the ASED/CSED. |
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the TC 520 transaction date is after 10/22/94 |
in general, the restriction to assess was removed by the passage
of BRA 94; a systemic computation of the ASED
no longer applies see |
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the TC 520 has posted to a NMF account |
a manual computation (TC 550) is required to extend the CSED. |
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the TC 520 module has an expired CSED or the CSED is within six
months of expiring |
a manual computation of the
CSED (TC 550) is required. The action date
entered must be after the TC 520 and before
the existing CSED. Also, if the existing CSED
has expired, the TC 550 must be input one
cycle before
the input of TC 521. Insolvency
employees must advise management accordingly.
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3.
Management/Counsel. Should ASED and/or CSED concerns arise at any
time during the pendency of a bankruptcy case while
it is assigned to Insolvency, management must be
made aware and kept informed of the issues,
including imminent or missed ASEDs/CSEDs. Insolvency
should consult with Counsel on statute issues as
needed.
1.
After Discharge Determination. Terminal
actions to close the bankruptcy can be taken only after
a discharge determination has been made, and the
account meets adjustment criteria.
2.
Disposition of Cases . When no further case action is necessary,
accounts not paid at the close of the bankruptcy
should be adjusted or released to collection. Also,
as appropriate, some accounts may be reported as
"Currently Not
Collectible" (
3.
Closing Cases Through AIS. Closure of a case and conversion from one
chapter to another, or a change from a no asset case
to an asset case, are counted as a case disposition
for inventory control purposes. A case closing
checklist is available through AIS for:
·
reversal of
TC 136
·
notification
to other impacted functions such as, Compliance
examination function and Counsel (should outstanding
legal issues remain)
·
resolution
of any unpostables
·
closure of
AIS payment monitoring screen
·
closure of
AIS referral screen, if applicable
·
Other Investigations,
receipt and closure
·
preparation
of adjustment documents per local guidelines (e.g.,
Form 3870, Form 53, TC 971, etc.); updating of CSED,
if necessary; assessment of accrued interest and
penalty for MFT 31 or NMF transfers; preparation of
requests for lien releases; input of TC 521s; and
other closing actions, as appropriate
·
updates of
AIS closure Information
1.
AIS/Paperless Systems. AIS is an electronic information and storage
system. Due to the volume of cases in bankruptcy,
and since AIS was introduced in Insolvency, some
Insolvency offices have tried to institute a "paperless"
system.
2.
Required Retention Periods. All files, including AIS and
paper case files, must be maintained in conformance
with the required documentation retention period.
3.
Litigation Cases. Files to be retained until the end of
the required retention period include
all cases where litigation has occurred during the
pendency of the bankruptcy.
With increasing numbers of
serial/multiple filings and resultant litigation,
prior bankruptcy case files, if retained and
available, may provide beneficial information to
Insolvency employees as they work their
currently-assigned bankruptcy inventories.
1.
Adjusting a Discharged Account. At
the close of a bankruptcy, when Insolvency takes
actions to adjust discharged tax accounts, various
transaction codes and forms must be used for the
required adjustments.
2.
Forms and Actions. Listed below is a recap of the forms to use
and the actions required to make the proper and
necessary (partial or full) adjustment actions.
·
to request
a TC 971 input, Form 3177, Form 4844, or an AIS or
locally-devised form is used
·
TC 971 AC
31 is input to adjust the discharged taxes
systemically on MF to zero (a
full adjustment)
·
TC 971 AC
33 is input to identify a
partial adjustment and is not a systemic
adjustment but requires preparation of Form 3870, Request
for Adjustment
·
TC 971 AC
100 identifies a bankruptcy
split of a joint MFT 30 module to MFT 31
and is input with a cross-reference
This
action systemically creates MFT 31 for the
non-discharged spouse on Master File and is used in
conjunction with Form 12810, Transfer Request
Checklist, the form used to prepare the transaction
codes for transfer to MFT 31.
3.
Full Adjustment Adjusting a Discharged Liability to Zero.
A.
TC 971 AC 31 is input to indicate
a full adjustment.
B.
TC 521 may be input with a two-week posting
delay to allow time for the TC 971 to post first; or
after waiting until TC 971 AC 31 has posted, a TC
521 may be input.
If TC 971 fails to post, and a module
balance remains with an open TC 520, Form 3870 is
used to zero out the discharged tax before input of
TC 521.
4.
Partial Adjustment Adjusting Only a Partial Amount of a Tax Liability. Partial
adjustment requests are used only
when:
.
a portion
of the tax is discharged (for example, the non-trust
fund portion of the liability);
A.
TC 971 unposts, as noted above;
B.
a penalty meets criteria for a discharge, but
the tax and applicable interest remain (see
C.
an account is established on NMF.
5.
Form 3870.
Form 3870, Request for Adjustment, is
prepared for the discharged amounts, including a
statement of the reason for the adjustment. The form
is processed per local procedures.
Non-Master File transfers require Form
12810, which is available on line.
6.
Input Requests. Locally acceptable IDRS terminal input forms
(Form 3177 or 4844) or AIS or a locally-devised form
can be used to request input of:
·
TC 971
Action Code 33 indicating a Partial
Adjustment
·
TC 470 with
closing code 93 with a 2week posting delay
·
TC 521
through AIS when the TC 470 posts, or,
alternatively, with a 2week posting delay
7.
Split of a Joint MFT 30 Module to MFT 31. A
split of a joint MFT 30 module is processed using
MFT 31 procedures. Split
accounts are not sent to NMF unless the
non-petitioning spouse has an invalid
8.
MFT 31 Tolerance Criteria. In all bankruptcy chapters where one spouse is
discharged of a prepetiton joint tax liability with
a non-petitioning spouse, abatements may be
completed - splitting of the accounts to MFT 31 or
NMF is not necessary - if one of the following
conditions (A through E) is met:
.
Condition A: The aggregate amount of the liability owing is
below the IMF criteria in LEM 5.3.2, Routine
A.
Condition B: 1) The aggregate amount owing is below the
requirements for filing a proof of claim under the
specific Chapters in LEM 5.5.3 Bankruptcy; and
2) the non-petitioning spouse has less than one year
left on the CSED; and
3) the account was previously determined currently
non-collectible (unreversed TC 530) prior to
bankruptcy; or a determination is made the account
is presently uncollectible based on the facts of the
case.
All three of the above criteria in
Condition B must be met.
B.
Condition C: The penalty to be abated is a non-pecuniary
loss penalty (such as failure to file or failure to
pay) and falls below the IMF criteria in LEM 5.3.2
Routine
C.
Condition D: Any prepetition amount where a spouse died
prior to the bankruptcy filing and the estate has no
assets.
D.
Condition E: For any prepetition amount in community
property states, as if both
spouses filed the bankruptcy.
9.
Exceptions to MFT 31 Tolerance Abatements. Abatement
of cases below the MFT 31 tolerance level does not
apply in the following situations:
·
the
non-petitioning spouse has an installment agreement
to pay the prepetition tax liability
·
the
non-petitioning spouse has a pending or accepted
offer-in-compromise on the prepetition tax liability
·
the
non-petitioning spouse has an accepted collateral
agreement on the prepetition tax liability
(notification by RO)
·
Criminal
Investigation has a pending or active investigation
on either the petitioning spouse or the
non-petitioning spouse regardless of whether such
investigation relates to a tax liability otherwise
eligible for abatement
·
the Service
is a party to any pending litigation with the
non-petitioning spouse regarding the liability to be
abated
10.
MFT 31 Checklist Form. Form 12810, Account
Transfer Request Checklist, is standard
for transfers, including NMF transfers. Transactions
identified for transfer are listed on this form or
highlighted on a current TXMOD with the reversal
transaction codes listed next to the transactions
being moved.
11.
MFT 31 Established for Non-Debtor. To
establish an MFT 31 account for the non-debtor (the
non-discharged) spouse after a joint balance due
return was assessed by the Service, TC 971 AC 100
with the XREF
TC 971 AC 100 should not be input when
effecting a Non-Master File transfer.
12.
Required Inputs to MFT 30. Transaction codes required to be input to the
MFT 30 module include:
.
TC 470 cc
90 (with a 2week posting delay) to prevent
notices and offsets into the account; and
a.
TC 521 to
reverse the bankruptcy freeze.
13.
Invalid Social Security Numbers. The
.
Invalid Primary
9XX numbers
Master File will allow the MFT 31 to be
created, because it is identified by the system as a
valid
A.
Name Control Mismatch. If the
In
2000 Mary Smith filed a return under her maiden
name, Mary Smith. In 2001 she married John Jones,
and they filed a joint return for 2001 as John and
Mary (Smith) Jones. Her
B.
Invalid Secondary
C.
Correcting an
The entity change should post to the
Master File in approximately three weeks.
D.
Invalids to NMF. Insolvency must transfer an invalid
14.
Additional Instructions.
.
if the
address of the MFT 31 account is different than MFT
30, Master File will search for a current address on
the MFT 31 taxpayer;
a.
the MFT 31
account (TC 971 AC 100) must be allowed time to
post;
b.
if the
address of the MFT 31 on ENMOD is incorrect, an
address change must be input through IDRS CC ENREQ;
c.
the address
change must be done within 4 weeks of the MFT 31
posting so the 4th notice, issued 5 weeks later,
will be mailed to the correct address.
15.
Reviewing the TXMOD. The MFT 30 module must be reviewed to
determine if at least one year remains on the CSED
before requesting the split of a joint account. If
more than one year remains on the CSED, review the
MFT 30 TXMOD to ensure Z is the only freeze code
to be resolved before the transfer and the module
freeze codes L, L, and/or Y have been
successfully coordinated with the responsible
function(s).
16.
TABLE Appropriate Actions to Take on Certain Transaction Codes:
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Transaction Code
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Action
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470
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An unreversed TC 470 cannot be transferred, because it will
freeze the module. |
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150 (return posted) and 290/300 (additional
assessments) |
MFT 31 can handle multiple assessments on one tax module. If the
TC 150 and/or TC 290 or TC 300 remain
collectible on the liable spouse, then it is
not necessary to do separate assessments (as
for NMF). The Return Received Date must be
used in the block on Form 12810 the
processable date should not be entered. Note:
For
a Substitute for Return (SFR), the TC 290
assessment date acts as the Return
Received Date. |
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TC 806 |
On the MFT 30 side of the transfer from, TC 170 is listed for
0 . Note:
If
this is not done, Master File erroneously
assesses a TC 176 estimated tax penalty on MFT
30.____________ |
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460 Extension of time to file
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The transfer must show the same extension date as the MFT 30 so
the penalty calculations will be computed
correctly. If the return is filed late, the Return
Received Date is placed in the
Remarks area of Form 12810 so the delinquency
penalty will be generated for the MFT 31. The Return
Received Date, not the processable
date, must always be entered in the block on
Form 12810. |
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530 Account in |
If the account was in status 53, Currently
Not Collectible ( |
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582 Notice of Federal Tax Lien on file
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The TC 582 must be transferred to MFT 31. When
a TC 971 AC 100 posts to MFT 30, a record is
passed to the Automated Lien System( |
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Affecting CSED computation on the MFT 31
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CSED indicators P
(primary taxpayer), S
(secondary taxpayer), or B
( both taxpayers), if present on
previous TC520/521s, will determine if the
transaction code should be transferred to
extend the CSED on the MFT 31. |
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48X/78X or TC 550
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If applicable to extend the CSED due to a prior offer in
compromise (TC 48X/78X), the Insolvency
employee must list or highlight those
transaction codes, using the original
transaction date(s) on Form 12810. Note:
The
CSED indicator on the Form 12810 need not be
included since it is meaningless for this
process. |
17.
Penalty and Interest. The TXMOD is reviewed to identify restricted
and unrestricted penalty and interest to determine
how they must be listed for the transfer. See
Table below:
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If the MFT 30 Module
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Then
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has only assessments for unrestricted penalty and interest, the
Insolvency employee must check MFT 30 for
status 22/58 and input TC 971 AC 35 with the
date of the 4th notice (status 58) to the MFT
31 module in order to maintain the 1% start
date. Note:
The
TC 276 and TC 196 are not listed for transfer.
Therefore, when adding up the MFT 31 column,
because of the transferring of the TC 670
payments, a net credit may result. In this
situation, the payment(s) that caused the net
credit balance must be identified. Credit
transfers of those payments must be requested
to MFT 31 when created. Those
payments cannot be listed on a Form 12810. |
Insolvency must not list for transfer as it will restrict the MFT
31 module unnecessarily. Master File will
computer generate up to the date on MFT 31. Note:
TC
170/176 and 160/166 must be listed for
transfer, because they will not systemically
generate. |
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has only restricted penalty and interest |
they are listed for transfer. MFT 31 module will remain
restricted, and notice review will update the
accruals. |
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has a mix of unrestricted and restricted penalty and interest |
the unrestricted and restricted transaction codes are listed for
transfer. The MFT 31 module will become
restricted, and Notice Review will update the
accruals. |
18.
Monitoring and Preparation of Form 12810. Insolvency
must monitor to ensure the transaction codes have
posted to the MFT 30 module. Then the transfer form
can be prepared and forwarded to the appropriate
Campus. Form 12810 is
completed as follows:
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Top portion of the Form
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Note:
The
person responsible for preparation of the form
will enter the specific information and check
the items required for the transfer request. |
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"TO" Account Column
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The name and |
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"FROM" Account Column (MFT 30)
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The name of the primary spouse, the primary |
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"Remarks" Section
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Applies only when the MFT 30 was not moved
completely to MFT 31: Note:
Information
for the discharged spouse must include: name, |
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Signature
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Managerial approval is required. |
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Attachments
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Supporting Documentation.
Attachments
must include a current TXMOD print of MFT 30
and MFT 31 and a current print of ENMOD/INOLE
for the MFT 30 to verify valid Note:
The
original return is not required. |
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