General Examination Information
Identification and Control Number
The similarity of taxpayers' names and the
voluminous flows of documents require the use of permanent
identifying numbers coupled with taxpayers' names. These
numbers are necessary for ADP purposes to ensure positive
control of each tax account and all related transactions.
Standard titles and abbreviations used are as follows:
Security Number (SSN)—means the number
which is assigned to an individual for social security
purposes, tax account purposes, or both.
Identification Number (EIN)—means the
number which is assigned for any tax purpose to a person
other than an individual. It also means the
identification number which is assigned to an individual
who is required to file a return with respect to his/her
liability for any tax other than income, estate, or gift
Locator Number (DLN)—means the number
assigned to each return or other document introduced
into processing, for control and file reference
Number—means the number assigned for
processing purposes when the identifying number has not
been shown by the taxpayer.
The spacing of the digits in identifying
numbers is an integral part of the number. The proper spacing
must be observed in all instances. The spaces may be indicated
by using hyphens, blank spaces, etc. For example, EIN as
00-0000000; and, SSN as 000-00-0000.
In ADP operations:
Identifying numbers (EIN, SSN) are the
link to a taxpayer's record in the master file; no entry
or reference to the master file can be made without this
The Document Locator Number provides a
permanent link with each return, document, etc., of the
taxpayer. See Document 6209, ADP and IDRS Information
for DLN composition.
In non-ADP operations:
The titles "Employer
Identification Number" and "Social Security
Number" will be used as necessary in accordance
with applicable provisions of the regulations and the
Internal Revenue Manual.
The title "Document Locator
Number" is the reference to the number assigned to
returns or related documents.
The foregoing identification and control
numbers do not preclude the use of reference or control
numbers such as Tax Court docket numbers, Criminal
Investigation Division case numbers, reference numbers used in
connection with the collection of delinquent accounts, or
other numbers or codes used for control or reference purposes
within an organizational unit, such as a division, area, etc.
Request for Armed Escort
The Criminal Investigation function is
authorized to provide armed escorts for Service personnel who
in the course of their official duties have been threatened
with bodily harm indicating the need for such protection. (See
When an examiner needs an armed escort,
he/she will immediately report the facts to his/her group
If the group manager determines that an
armed escort is necessary, he/she will request such protection
from the Criminal Investigation function. The request must be
in writing at least three business days prior to the date the
armed escort is needed. This is to ensure that special agents
have time to prepare a plan of action to ensure the safety of
all individuals involved. The request should contain the
Taxpayer's social security number.
Taxpayer's date of birth.
Taxpayer's home address and business
Type of tax and years under
Balance due accounts and collection
activity, if any.
Reason for armed escort.
Name of revenue agent and phone
Name of supervisor and phone number.
When an actual threat or assault has been
made, Treasury Inspector General for Tax Administration
(TIGTA) has primary jurisdiction and must be contacted.
Litigation Affecting the Service
The legal work of the Internal Revenue
Service is performed by the Office of Chief Counsel. Referrals
to the Associate Area Counsel Office should be considered in
unrelated tax issue matters.
Notification to Area Counsel in State Court Suits
The Service ordinarily will not intervene
in litigation in State courts between private litigants even
though the purpose of the parties is to obtain a decree or
judgment affecting Federal tax liability of one or the other
of the parties to the litigation. In those cases arising in
State courts between private litigants, to which officials
of the Service have not been made a party but which may have
a direct bearing on the Government's title or right to
possession to property which has been seized, the Service
may intervene or take other appropriate steps in connection
with the proceeding. (See Policy Statement P–4–10 and
When pending proceedings come to the
attention of Exam personnel, a memorandum report of the
proceeding should be made to the Associate Area Counsel
Office. Area Counsel will determine whether the Service
should intervene or take any other steps in connection with
Suits for Recovery of Erroneous Refunds
Exam personnel may determine a taxpayer
erroneously recovered a payment of money in the form of a
tax refund. IRC § 7405 provides that any portion of tax
which has been erroneously refunded may be recovered by
civil action. IRC § 6532(b) provides that suit under IRC §
7405 may be brought within two years after the refund check
was delivered, or if it appears that any part of the refund
was induced by fraud or misrepresentation of a material
fact, suit may be brought at any time within five years from
the date the refund check was delivered. (See IRM 21.4.5.)
Assessable erroneous refunds may also be
recovered by administrative action within the applicable
period of limitation upon assessment and collection. The
type of tax involved is determinative of the type of
administrative action available. Ordinarily, recovery by
suit is utilized because administrative recovery is barred
by the statute of limitations on assessment. Any
contemplated collection activity based on administrative
recovery should be coordinated with Counsel.
The erroneous refund suit is limited to
erroneously refunded amounts that exceed the litigating
threshold established by the Department of Justice.
A recommendation to the Associate Area
Counsel should be accompanied by the administrative file, a
copy of any request made to the taxpayer for voluntary
payment, a copy of the taxpayer's refusal to make voluntary
payment, transcript of account, and a narrative report
containing the following information:
The type of tax involved and the
amount of money expected to be recovered.
The date the period of limitations
on collection will expire.
A brief statement that
administrative remedies are impractical or have been
exhausted, including the reasons that administrative
actions have not been effective.
Facts, evidence, and other matters
necessary for development of the case.
Brief personal history of the
taxpayer or other facts which might have a bearing on
If a corporation, location of the
principal executive office, date of incorporation,
state of incorporation, and the name and address of
the statutory agent for service.
A statement of the exact legal
premise for recovery of the erroneous refund.
After the narrative report and other
related documents are prepared, the examiner will submit the
entire case file to his/her group manager for initial
review. If the manager agrees, the case will be referred to
Area Counsel by using locally established procedures. For
example, he/she may request the Area Technical Services
(Exam) to conduct a further technical review and to prepare
the advisory request or an Area may have an agreement with
Area Counsel and TS to send requests for technical
assistance directly to Area Counsel (TS should receive a
copy of the request if bypassed).
Chief Counsel or U.S. Attorney Requests for Civil Suit Data
In suits initiated by or against the
Service, the Disclosure Office or Technical Services
(Collection) receives and processes requests from U.S.
Attorneys or Chief Counsel for data or documents. (Basic
data in refund suits, other than suits involving 100-percent
penalty assessments, is requested directly from the campus.)
If a request from Counsel requires an
additional examination by a revenue agent, the Compliance
Technical Services Group Manager will have a copy of the
request handcarried (or overnight mailed) to the Compliance
Territory Manager and request that the examination be given
preferential treatment. The information should be furnished
as soon as possible.
Reports on Cases Involving Expiration of the Statutory Period
Form 3999 will be prepared for each taxpayer
(except those shown in (2) below) involved in returns assigned
for examination and/or controlled on AIMS when the statutory
period expires prior to the appropriate assessment or
The Form 3999 is not required, although the
statute expired for the following:
No-change and survey returns where
such action was taken before the statute expiration and
it is properly documented in the case file with
supervisory or Technical Services approval noted on the
Returns used solely for references or
information purposes in determining the liability of
taxpayer or related taxpayers.
Returns loaned to another agency that
have not been assigned for examination or that are held
Return Preparer Penalty cases for
penalties assessed under IRC section 6694 and IRC
On returns involving an overassessment
if a claim can be filed or a credit or refund allowed
after timely waiver and within six months after the
extended assessment period. See IRC section 6511(c)(2).
Any return received in Examination
after the normal three-year statutory period expired
either because of a joint fraud investigation or because
of the six-year statute when the investigation did not
support either of such findings.
If the three-year statute expires and
the examination continues under the six-year or fraud
statute; however, if these statutes are not sustained, a
report is required.
Any investor return where a Form
3999-T was written for the key case return. A copy of
the Form 3999-T should be attached to the investor
Form 3999-T will be prepared for each
partnership or S corporation (hereafter, key case) return
(except those shown in (4) below) assigned for examination
and/or controlled on AIMS when the IRC section 6229(a)
statutory period expires at the key case level prior to the
appropriate assessment or overassessment for the returns of
the investors in the key case.
The Form 3999-T is not required, although
the statute expired, for the following:
Key case returns used solely for
reference or information purposes in determining the
liability of an investor.
Key case returns loaned to another
agency that have not been assigned for examination or
that are held in suspense.
Any key case return received in
Examination after the IRC section 6229(a) statutory
period expired either because of a joint fraud
investigation or because of the six-year statute when
the investigation did not support either finding.
Any key case where the normal IRC
section 6229(a) three-year statutory period expires, but
the examination continues under the six-year or fraud
statutes (IRC section 6229(c)(2) and IRC section
6229(c)(1)(B), respectively); however, if these statutes
are not sustained, a report is required.
The preliminary report is to be prepared and
submitted to the next level manager within 3 business days of
the date of discovery of a potentially expired statute. This 3
day timeline includes the time required to secure Area Counsel
or Technical Services' advice, if necessary, as to whether or
not the statute has, in fact, expired. The final report is to
be prepared and submitted to the next-level manager no later
than 10 business days from discovery of the expired assessment
statute. The final report is prepared by the immediate manager
of the party responsible for the statute expiration and
forwarded through channels to the Director, Compliance.
Taxpayer Notification of Statute Expiration and Acceptance of
Voluntary Payments on Barred Statutes.
Policy Statement P-4-65 provides that the
Service shall not make any effort, real or implied, to solicit
voluntary payments of a deficiency or taxpayer delinquent
account barred by statute. However, payments made by the
taxpayer completely of his/her free will shall be accepted.
(See IRM 126.96.36.199.18)
Guidelines for Deficiency Cases
If the examination of the return has
progressed to the point where the deficiency can be
determined, an explanation to the taxpayer may be necessary.
A verbal explanation to the taxpayer is not necessary in
each case. In situations where an explanation to the
taxpayer is necessary, the taxpayer should be advised that
the processing of any deficiency resulting from the
examination of his/he return has been discontinued because
the statutory period that the Service can legally assess and
enforce collection of any amount due, has expired.
Written notification of the taxpayer will
be a personal letter similar to Pattern Letter P-427
(Exhibit 4.2.1-1) and an examination report.
The report is a copy of a report
previously furnished to the taxpayer, a revision of
that report or an initial report prepared after
The report should reflect a
deficiency resulting from issues that have been
developed to a point where the Service's position is
reasonably sound. The taxpayer does not need to agree
to the adjustments because in Pattern Letter P-427 the
taxpayer is advised that "the report reflects our
determination" . Adjustments that give the
taxpayer a beneficial "double deduction" are
prohibited as discussed in Treas. Reg. 1.161, e. g.,
capitalizing an item previously expensed and allowing
a depreciation deduction in subsequent years. IRC §
6401(a) provides that the term "overpayment"
includes: Any payment of any Internal Revenue tax
which is assessed or collected after the expiration of
the period of limitation applicable. It will generally
be possible for the taxpayer to file a timely claim
within two years and have any payment refunded. This
permits a double deduction if any report includes any
issues that involve subsequent returns.
The purpose of the report is the
help the taxpayer in filing subsequent returns and to
furnish the amount of the deficiency if the taxpayer
elects to make voluntary payment.
The report will clearly show that
the statute has expired and the taxpayer is under no
legal obligation to pay the deficiency shown.
If the taxpayer inquires about making
voluntary payments, he/she should be informed that the
payment will be accepted and can be mailed to the office
contacted. The subject of voluntary payments should not be
discussed unless the taxpayer inquires about voluntary
If payment is received, prepare Form
3244-A, Payment Posting Voucher, treating the payment
as an advance payment. Notate on Form 3198, Special
Handling Notice, that payment from the taxpayer was
voluntarily received after statute expiration. Submit
the case for normal processing.
If the taxpayer does make payment, a
personal letter similar to Pattern Letter P-429
(Exhibit 4.2.1-3) should be written acknowledging
receipt of the payment and expressing appreciation.
Since the taxpayer will not receive any bill
identifying the payment, this letter should contain
enough detail to identify the payment and the return
involved in the barred deficiency.
If the examination has not reached the
point where the deficiency can be determined, a letter
similar to Pattern Letter P-428 (Exhibit 4.2.1-2) should be
given to the taxpayer. Pattern Letter P-428 explains that
the examination has been discontinued because the statutory
period the Service can legally issue a refund or assess and
enforce collection of amounts due has expired.
In multi-year and related examinations, it
is not necessary to separately process the year in which the
statute expired. The return can follow the case file through
the normal examination process. However, a copy of the final
approved Form 3999 report is required to be placed in the
The responsibility to prepare the
notification letter, mailing of it and routing are outlined
The undated notification letter is
prepared and signed by the immediate manager of the
party responsible for the statute expiration.
The Area Director (or comparable
level of management) signs the final Form 3999 and the
letter is date-stamped and mailed by his/her
secretary/staff assistant. The date of taxpayer
notification is entered in Box 7 of Form 3999.
A copy of the notification letter
and copy of Form 3999 are forwarded back to the
manager via second-level management.
The Area Director (or comparable
level of management) retains a copy for the "Read
File" and forwards through channels to the
New Issues Raised by Appeals
A new issue is one which was not in contest
when the case was received by Appeals in a nondocketed status;
and is put into contest by either the Government or the
taxpayer while the case is under Appeals jurisdiction. An
issue previously included as an adjustment in a 30-day letter
or in the taxpayer's protest is not considered to be a new
issue. However, an issue previously discussed or otherwise
identified but not made the subject of an adjustment in the
Revenue Agent's Report (RAR), is construed to be a new issue
provided it is put into contest.
An affirmative issue is one raised in a
docketed case by either Appeals, Area Counsel or the taxpayer,
but is not included in the statutory notice.
An alternative position constitutes a new or
affirmative issue, even though it is not reflected in the
determination made, if it otherwise qualifies under the
definitions in (1) or (2) above.
An automatic adjustment that is required to
be made because it flows from some other change, is not a new
or affirmative issue. Typical of adjustments in this area are
changes in deductions for contributions or medical expenses
because of the effect of some other adjustment or certain
provisions of law.
Reporting of any new or affirmative issues
raised by Appeals will be included in Appeals determinations
and feedbacks. Also, in special circumstances, when a new or
affirmative issue is raised in a LMSB case, for example,
Appeals may communicate such circumstance in a memorandum to
the Director of Field Operations.
Awards of Attorney's Fees in Tax Cases
IRC § 7430 provides for the award of costs,
attorney's fees and other expenses to "prevailing
parties" in any civil tax action in the U.S. Tax Court,
U. S. district courts or the Court of Federal Claims where the
taxpayer has met the requirements of IRC § 7430(b) and the
Internal Revenue Service is unable to prove that its position
was "substantially justified." The position of the
Service will be "substantially justified" if it had
a reasonable basis both in law and in fact. This is not
applicable to litigation in State courts.
The law also applies to taxpayer suits for
refunds as well as a wide variety of litigation such as suits
to reduce a tax claim to judgment, to enforce a levy, to
foreclose a tax lien, recover an erroneous refund, establish
transferee liability and to summons enforcements.
The law provides that an award may be made
only if the taxpayer has exhausted all available
administrative remedies within the Service, establishes in the
civil proceeding that the position of the United States was
unreasonable, and has substantially prevailed with respect to
the amount in controversy or has substantially prevailed with
respect to the most significant issue or set of issues
All employees need to keep in mind several
important aspects of RRA '98. The provisions include:
Section 1105 (conducting and
terminating tax audits),
Section 1203 (mandatory termination of
employment for certain acts or omissions),
Section 3421 (expansion of procedures
of liens, levies, and seizures),
Section 3466 (communications with
Section 3706 (pseudonyms).
The Act did not change the Service's long-standing commitment
to the fair and equitable treatment of all taxpayers set forth
in Rev. Proc. 64-22, 1964-1 C.B. 689. The pertinent part of
Rev. Proc. 64-22 states the law will be administered in a
reasonable, practical manner. Issues should be raised by
examiners when they have merit and never arbitrarily or for
Processing Returns and Accounts of the President and Vice
All tax returns of the President and Vice
President will receive normal campus processing. However, in
the case of individual income tax returns of the President and
Vice President, the location of the returns will be monitored
at all times during processing. After processing, the income
tax returns will be forwarded (in double sealed envelopes) to
the Deputy Commissioner Operations OP. (See IRM 188.8.131.52.1)
Account Data will be carried on the
appropriate master file and the accounts will not be subjected
to restricted access procedures.
Individual income tax returns for the
President and Vice President will be subject to mandatory
examinations. The Area responsible for the examination will be
determined by the Director, Compliance after consultation with
the Director, Accounts Management. After a determination is
made as to the Area having jurisdiction, copies of returns
will be transmitted for the necessary examinations. The
transmittal memorandum will point out that:
regardless of Discriminant Function
(DIF) score, the return will be examined.
personnel, including specialists,
should be assigned to the examination as necessary.
the Area Director, or his/her designee
should arrange for contact with the authorized
representative of the President and/or Vice President at
the beginning of the examination.
all current prescribed Internal
Revenue Manual procedures i.e., requesting technical
assistance, information from other agencies, etc., will
apply in these as in all other cases.
the return copies and any related
returns examined concurrently, as well as the relevant
workpapers and examination reports, will be subject to
regular filing and retention procedures.
Estate and Gift tax returns will be
handled in accordance with procedures relating to all
Income Tax Bonds under IRC § 332(b) and IRC §905(c)
The Commissioner may require the filing of a
surety bond on Form 1117, Income Tax Surety Bond, or the
signing of a waiver on Form 952, Consent to Fix Period of
Limitation on Assessment of Income Taxes.
Under a three year corporate
liquidation plan, the recipient corporation files a
waiver of the statute of limitations on assessment for
each year that falls wholly or partly in the liquidation
period using Form 952. The recipient corporation may
also be required to file a bond in case nonrecognition
treatment is later lost. (See Treas. Reg. 1.322-4)
In the case of a credit sought for a
foreign tax accrued but not paid, the Area Director or
Director of Field Operations, as a condition precedent
to the allowance of a credit, may require a bond from
the taxpayer. Form 1117 shall be used by an individual
or by a corporation if such bond is required. The
Service may prescribe a payment of tax due for a
potential deficiency should the credit be disallowed.
The form will be executed by the taxpayer or his
representative and approved on behalf of the
No period of limitations is
established under either IRC § 905(c) or IRC § 6501(a)
for the furnishing of a bond requested pursuant to IRC§
905(c) for a foreign tax credit based on an accrual of a
foreign tax. Such bond may be required from a taxpayer
at any time and the foreign tax credit may be disallowed
without regard to any period of limitations if a
taxpayer refuses to furnish the bond. (See Rev. Rul.
A return assigned for examination may
have an income tax bond and/or waiver attached. If a
return is acceptable except for the bond requirements,
the revenue agent will only determine whether the bond
is in order or required.
Any required bond should be secured
before the case is closed.
Examination of Blind Trust Income Tax Returns Filed by
Taxpayers, who are presidential appointees,
are permitted to file their individual income tax returns
through a trustee of a blind trust.
Extreme caution should be exercised not to
violate a " blind trust" . All correspondence,
inquiries, etc. should be directed to the authorized trustee
unless the power of attorney indicates otherwise. No
information regarding the source or nature of a blind trust
can be disclosed. (See IRM 184.108.40.206)
Discounting of Income Tax Refunds
Examiners should be alert to the practice of
discounting income tax refund checks. Unscrupulous return
preparers have the refund checks mailed to their office, exact
an exorbitant fee, forge the endorsement, and negotiate the
check without the client's knowledge. See IRM 220.127.116.11.2. When
evidence of such practices are discovered, an explanatory
memorandum will be prepared for the signature of the Territory
Manager to the Special Agent in Charge (SAC).
Cases Involving Property Blocked by Foreign Funds Control or
Vested by Office of Foreign Assets Control
The Office of Foreign Assets Control (OFAC)
of the Department of Treasury administers and enforces
economic and trade sanctions against targeted foreign
countries, terrorism sponsoring organizations and
international narcotics traffickers based on U.S. foreign
policy and national security goals. OFAC acts under
Presidential wartime and national emergency powers, as well as
authority granted by specific legislation, to impose controls
on transactions and freeze foreign assets under U.S.
On September 24, 2001, President George W.
Bush issued an executive order that immediately froze U.S.
financial assets of and prohibited U.S. transactions with 27
different entities. They include terrorist organizations,
individual terrorist leaders, a corporation that serves as a
front for terrorism, and several nonprofit organizations.
Information regarding blocked property of
aliens and foreign corporations may be obtained from records
located in OFAC. When such information is requested by Area
Offices, a request detailing the desired information will be
forwarded to the SB/SE Compliance Area Director. Requests
should contain clear instructions on what is requested and
Examiner's Source of Information
Information obtained from the records of
OFAC in respect to blocked accounts will be considered to be
of a confidential nature and the source thereof will not be
disclosed to taxpayers or their representatives, nor will
such information be used in any legal proceeding without
written authorization from Headquarters.
OFAC will pay all taxes legally assessed
against a former owner whose property has been vested by
that office if the tax is attributable to taxable income
accruing prior to the date of vesting. This is conditional
upon a proper determination of the taxes, where there is no
nonvested property from which the taxes may be realized, and
there are vested funds available for payment of the taxes.
Investigation and Disposition
Investigation of returns will be made
under the general procedure prescribed for investigation of
income tax returns. If the owner has property vested by
OFAC, any deficiency in tax liability arising from income
realized prior to vesting or from income earned on nonvested
property, will be asserted under the general prescribed
procedures. Preliminary or statutory notices of deficiency
in cases where communication cannot be had with the owner,
or his/her representative, should be addressed in care of
the party or agency having custody of the property. Under
war conditions, such address may be treated as the
taxpayer's last known address.
If all the property of the owner has been
vested, the preliminary as well as the statutory notice of
deficiency should be addressed to the owner, in care of
Justice Dept., Civil Division, Office of Foreign Assets
Control. Check OFAC website at
If the owner of the property or the party
having custody of the property (in situations in which the
property has not been vested by OFAC) does not agree to any
proposed deficiencies, the parties will have the right to a
protest. Any reasonable request for an extension to the 30
day letter should be given favorable consideration, provided
the interests of the Government are adequately protected.
If Appeals consideration is not requested,
the case file will be forwarded to the Area 15 PSP Chief.
The file will include the audit report and a statement of
reasons why an agreement was not reached. In cases where
agreements were concluded in vested cases, the file will be
noted to assess in the name of the Office of Foreign Assets
Control, for the former owner. Likewise, agreed assessments
in nonvested cases will be made in the name of the owner in
care of the person, party, or agency having custody of the
Cases in Which Payor Has Failed to Withhold Tax at Source
In cases of blocked or vested property,
where it is determined the payor failed to withhold tax at
the source on income, the amount required by statute to be
withheld will be asserted against the payor agent. In cases
where it is determined that income arising, but not paid,
prior to blocking or vesting was turned over to OFAC without
withholding, the liability of the payor agent for
withholding will be promptly reported to the Area 15 PSP
Chief for adjustment.
Witness Security Program
Federal agencies have always recognized a
duty to protect informants and witnesses from threats or
possible danger resulting from their assistance to the
government by furnishing information or by testifying on
behalf of the government in the prosecution of individuals.
(See IRM 18.104.22.168)
The IRS has the authority to temporarily
protect an informant/witness until a determination by the
Department of Justice (DOJ) that the person qualifies for
protection under its Witness Security Program.
The IRS has the authority to approve all
confidential expenditures for other protective arrangements
undertaken by the Service for an informant/witness who does
not qualify for or is refused protection under DOJ's Witness
Security Program, in an investigation which is not under
jurisdiction of the U.S. Attorney's Office.
Examination personnel who become aware of or
have indications that the taxpayer assigned may be a person in
the Program will immediately suspend the examination. No
subsequent attempts by Examination employees will be made to
contact a protected witness ofthe U.S. Marshal Service. Any
necessary contact will be coordinated through the Special
Agent in Charge (SAC) to the Deputy Chief, CI, Attn: Witness
Security Coordinator (WSC). A memorandum will be prepared for
signature of the Area Director containing the following:
Any Examination action taken to date,
Facts indicating that the taxpayer is
enrolled in the Witness Security Program,
Relevant facts involved in the tax
matter, i.e., year under examination, information
Upon receipt by a Service employee of
information alleging a threat or possible danger to a past or
present government informant or witness or his or her
families, as a result of his/her furnishing information or
otherwise cooperating with the government, the employee will
forward the information immediately to the SAC.
Taxpayer Advocate Program
Taxpayer Advocate case criteria is described
in IRM 13. The program is designed to alleviate taxpayer
hardships that arise from systemic problems or the application
of the Internal Revenue Code.
All inquiries meeting Taxpayer Advocate
Service (TAS) criteria should be documented on Form 911,
Application for Taxpayer Assistance Order (ATAO), and
forwarded to the Advocate's office by the most expeditious
method available. Note: If the taxpayer specifically requests
TAS assistance, the case should be automatically referred to
the Local Taxpayer Advocate (LTA).
Problems that meet TAS criteria do not
necessarily need to be sent to the Taxpayer Advocate if they
can be immediately resolved by the function. All IRS employees
should handle potential TAS cases with the taxpayer's best
interest in mind.
If TAS accepts an ATAO, it will be forwarded
to Compliance (Exam) for review by the responsible group. The
group Manager will refer to the Service Level Agreement
between the National Taxpayer Advocate and the Commissioner of
his/her respective division for procedural guidance.
Examiners will charge time expended on
TAS activities to transaction code 671 per IRM 4.9,
Examination Technical Time Reporting. Time charged to
this code should only include actual time spent on TAS
activities. Examination time should be charged to the
case in the usual manner if the return is presently
The statute of limitations on
assessment may be extended by IRC § 7811(d) and should
be confirmed in writing with TAS.
Cases Suspended Pending Court Decision
Form 1254 suspense holds cases in Technical
Services (Exam) pending a court decision or Headquarters
action. See IRM 22.214.171.124, Suspense Cases. Cases may be held in
suspense under the following circumstances:
The only issue in dispute is the same
or similar to an issue pending in a federal court.
The issue is similar to one under
consideration in District Court in another jurisdiction,
but only if a Form 906 has been secured, usually by
Headquarters or Chief Counsel has
identified the issue as a suspense issue.
The facts in the case to be suspended must
be so similar to those in the pending case that a decision in
one will ultimately decide the other. Information on most
pending cases is available from the abstracts in the Chief
Counsel's report. The following is required before the case is
forwarded to Technical Services (Exam) for suspense:
The key case is identified.
The case is fully developed.
The statute is properly protected (24
months for Form 1254 cases).
A partial agreement, if applicable,
has been assessed. All other issues must be resolved.
An RAR is in the case file.
Procedures for Reporting Allegations of Tax Violations on the
Part of Senior Treasury Officials
Allegations of income tax evasion or
allegations concerning the willful failure to file any tax
return by a senior official where prosecution is recommended,
or where the 75 percent fraud penalty is asserted when
prosecution is not recommended, will be reported to the
Commissioner. The Commissioner will immediately report the
allegations to the Deputy Secretary of Treasury or to the
Secretary of Treasury. (See IRM 6.751.1.11)
The following individuals are included
within the definition of "senior Treasury
official" for purposes of these procedures:
All individuals within the Treasury
Department serving in Executive Levels I through V;
All individuals within the Treasury
Department serving in the Senior Executive Service or
grades GS-16 and above;
All individuals within the IRS in
grade GS-15 serving in positions centralized in the
IRS Executive Resources Board; and
All individuals within the Treasury
Department (other than IRS) in grade GS-15 which the
Deputy Secretary may designate.
The term "Treasury Department"
means the Office of the Secretary and all agencies, bureaus,
and other organizational elements within the Department of
All information received concerning
misconduct of IRS employees or officials will be reported to
TIGTA via the local TIGTA office or the TIGTA hotline at
1-800-366-4484 or e-mail through the website –
Compliance Examination Procedures
Upon recommending the assertion of the 75
percent Civil Fraud Penalty (for a "Senior Treasury
Official" ) where prosecution has not been recommended
by the Criminal Investigation function, the Territory
Manager will provide the Area Director with a memorandum,
for forwarding through channels, to the Commissioner. The
memorandum will contain the following information:
Taxpayer's name, residence address,
and Social Security number;
Taxpayer's position now held which
qualifies him/her as a " Senior Treasury
Brief summary of the findings and
the tax years involved; and
Additional civil taxes and
Pattern Letter P-427
of the Treasury
any reply to:
Dear [insert taxpayer's name]
We have discontinued action concerning the
deficiency disclosed by our examination of your [state year]
Federal income tax return because the statutory period in which
we could legally have assessed any deficiency has expired.
The enclosed examination report for that year
shows the tax we believe would have been due had the statute not
expired. You have no legal obligation to pay the deficiency
Pattern Letter P-428
of the Treasury
any reply to:
Dear [insert taxpayer's name]
We have discontinued our examination of your
[state year] Federal income tax return, because the statutory
period in which we could have scheduled any refund or assessed
any deficiency has expired.
Pattern Letter P-429
of the Treasury
any reply to:
Dear [insert taxpayer's name]
We have received your check dated [insert
date], for $[amount], which will be applied as payment against
the deficiency disclosed by our examination of your [state year]
Federal income tax return.
Thank you for your cooperation.