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IRS Audits

Chapter 4. AIMS Processing

Section 22. Non-Master File (NMF) Processing

4.4.22  Non-Master File (NMF) Processing

4.4.22.1  (02-08-1999)
Introduction

  1. This chapter contains procedures on Non-Master File processing.

  2. Some returns have not yet been programmed to the Master File (MF) . Also, certain Examination deficiencies cannot be processed to the MF. Adjustments to these returns and returns for pre-ADP periods require forms and procedures different from those used in adjusting MF returns. Some additional code and edit procedures are necessary and blocking and numbering requirements are different.

4.4.22.1.1  (02-08-1999)
1999 Changes

  1. Document 6209 is being revised to include a NMF section.

  2. CC RMREQ can be used to determine which centers have NMF accounts open on a specific taxpayer.

4.4.22.2  (02-08-1999)
NMF Research and Transcripts

  1. Researching NMF accounts is also different. There is a system consisting of Index Cards and Unit Ledger Cards (ULC) and an automated system, Manual Accounting Replacement System (MARS).

4.4.22.2.1  (02-08-1999)
MARS

  1. Because MARS provides the service centers and offices the capability for nationwide on-line research and on-line transcript requests of NMF accounts, it is no longer necessary to submit requests to the Accounting Branch for most transcripts or copies of NMF accounts.

    1. All NMF accounts open in your service center or have been closed since the implementation of MARS in your service center are available for immediate research or transcript requests on a MARS terminal.

    2. Accounts closed prior to MARS and all NMF accounts in service centers that have not implemented MARS are still requested using Form 4338.

     

  2. To use the MARS system, obtain a unique login from the Automated Systems Branch. You will assign your own password which must be entered with the login each time you access MARS.

    1. The MARS system allows you to read any entity or transaction on the file by following the instructions displayed with the "Research NMF" option.

    2. With the "Query" command, you can search for a desired entity by entering the DLN or TIN, MFT, and tax period of the desired record. If you have only partial information, enter the data for any field(s) shown on the screen, then page for the record you need.

    3. Use the "NMF Transcript" option to request a printed transcript (not a certified transcript) that will be delivered from the NMF unit on the next day. The MARS system does not provide the "print screen" capability that would allow you to copy what you see on the research screen.

     

  3. NMF transcripts are not screen prints. The transcripts are produced from the data base as part of the nightly batch processing and will be available the next day. Accounting will distribute the transcripts, sorted within TIN within the employee’s number. The employee number is an input field for transcript requests and will be the same as the current IDRS number. There is no unique employee number for MARS. Out of service center transcripts will be mailed on a daily basis to the appropriate service center.

  4. For complete instructions for researching NMF accounts on MARS, refer to IRM 3.17.46, Automated Non-Master Accounting, or contact the NMF unit in the Accounting Branch in the Service Center.

4.4.22.3  (02-08-1999)
NMF Assessments and Overassessments

  1. Perform all processing, code and edit functions for all years in file requiring NMF assessment or overassessment for one or more years. Years or periods in the case file not requiring NMF assessment or overassessment should be processed for numbering and blocking in the regular series.

  2. Closely examine the name and address line of all documents. In estate tax cases, the name and address must be that of the estate and executor rather than that of the decedent. The taxpayer’s address must accompany the adjustment document forwarded to the service center. This may require entering the address on the label attached to the adjustment document.

4.4.22.3.1  (02-08-1999)
Assessments

  1. Determine the appropriate dates and compute the interest on a deficiency requiring NMF assessment.

  2. Interest amounts of less than $1.00 will not be shown on Forms 5344, 5403 unless the amount has been paid.

  3. Form 2467 (see Exhibit 4.4.22–1) is to be affixed to the return and initialed. Show increases in tax, penalty and interest, add them, and show the total. If the IRC Section authorizing the assessment is known, insert it. The date of assessment is the 23C date. The new DLN is the account number.

4.4.22.3.1.1  (02-08-1999)
Spousal Assessments

  1. See the Innocent Spouse Chapter and the 90-Day Chapter for special processing instructions.

4.4.22.3.1.2  (02-08-1999)
NMF Assessment Verification

  1. Case Processing Support will establish an Assessment Verification (AV) file for all NMF assessments processed via Form 5734. The Service Center Accounting function will send part 4 of Form 6335 and, if appropriate, related documents to Case Procesing Support to verify that the assessment has been made. If verification is not received follow up action will be initiated no later than 15 workdays from the date of the initial submission of Form 5734.

4.4.22.3.2  (02-08-1999)
Overassessments

  1. A transcript of account (photocopy of unit ledger card) is required in the following instances.

    1. If the return was not full-paid or overpaid.

    2. If there is a record of an additional assessment having been made without a record of payment.

    3.  

      Exception:

      No transcript is needed if there is a verified advance payment which completely paid the additional assessment.

       

     

  2. A check for outstanding accounts, both MF and NMF, is required if the overpayment would result in a refund of $1,000 or more, including allowable interest.

  3. Form 1331 or 1331–B must be prepared with entries in Section 1 of the form in agreement with the amounts on the overassessment label. See Exhibits 4.4.22–2 and 4.4.22–3.

    1. Refund-only Forms 1331, and strictly credit and abatement Forms 1331 should be blocked separately. If there is a combination refund, credit and/or abatement on the Form 1331, this is blocked separately from either of the above. Forms 1331 should be completely filled out, with the exception of the schedule number and date certified, down to and including the "Total abated and credited" line. The name and address and refund amount should be typed in and all other information should be either typed or written with a pen. They should be neatly prepared without corrections or deletions. The first name line on estate tax cases must show the name of the person to receive the check. A transcript of the account may be used for the record of assessment.

    2. Compute the interest allowable on refunds, using the applicable space on the back of Form 1331. Enter in the "date" column the date to which interest is computed on the overpayment. Allowable interest is computed from the paid date or the due date, whichever is later, to the schedule date if a refund is involved, or the due date of the other account if a credit is involved.

    3. If the account is not paid, the overpayment is entered as an abatement on the Form 1331. A copy of the ULC or a certified transcript of account is to be stapled to the reverse side of Form 1331 for the account to be abated and to the posting copy. If the account is in "Notice" status, the list week is to be shown.

    4. If the account is paid but there are other outstanding accounts for the same taxpayer, the overpayment is entered as a credit on Form 1331. This will normally result in an accrual of interest or an abatement of interest on the account receiving the credit. If the account receiving the credit is another NMF account and there is enough credit to apply to accrued interest, the interest can be accrued on Form 1331 by entering it in the credit column, circling the amount in red on the posting copy, and entering code "Al" adjacent to the interest figures. When overpayments are credited to written off accounts, use code "TA" adjacent to the figure in the credit column and circle in red the amount on the posting copy of Form 1331. For credits applied to outstanding liabilities, enter on separate lines in the "Amount Credited" column that part of the unpaid liability, tax, penalty, and interest which are to be satisfied from the current overpayment. The status of the NMF account must be entered on the posting copy of Form 1331. If an abatement of interest is involved, it is necessary to prepare a Form 1331–B to decrease the interest on the other account.

    5. If the overassessment is on an account that is paid in full, and there are no other outstanding accounts for the taxpayer, the overpayment is scheduled for refund.

    6. If interest was assessed on the account that has an overpayment, interest should be decreased proportionately unless a restricted condition prohibits it. An exception is encountered when an estate tax (Form 706) assessment is paid by treasury bonds. In these situations send a copy of page 1, Form 706 to the service center Accounting Branch with a memorandum giving all pertinent information. Interest will not be computed on these cases.

     

  4. Affix Form 2468 to the return and initial the label. See Exhibit 4.4.22–4. Show the decrease in tax and/or penalty. After computing interest on the correct tax liability, compare it with the interest previously assessed and enter the overassessment of assessed interest, if any. Do NOT enter interest allowable on any overpayment. Make no entry for the schedule number.

4.4.22.3.3  (02-08-1999)
Combination Cases— Assessments and Overassessments

  1. When both assessments and overassessments are involved in the same case, the earliest overpayments are applied to the earliest assessments on the Form 1331 by completing the credit portion on the bottom and entering the DLN or account number of the assessment that is being credited. The record of assessments and payments is to be completed (back of file copy of Form 1331) showing the account being credited and the status of the account. If it is an account being assessed at this time, the new DLN and 23C date of the account will be entered by the Accounting Branch. If a transcript of an old account was requested and it does not show the status, request Examination at the service center to identify the unit to be contacted to obtain the current status.

    1. Assessment: Interest is computed on the assessment from the due date of the deficiency to the date the overpayment was available. Any amount not covered by credit will have interest computed in the normal manner. If the available date of the overpayment is before the due date of the assessment, no interest is due on the assessment.

    2. Overpayment: Allowable interest is computed on the overpayment from the paid date or the due date of the return, whichever is later, to the due date of the deficiency. If the deficiency is due before the available date of the overpayment, no interest is allowed on the overpayment unless the overpayment is greater than the assessment(s). Then, interest is allowed on the balance in the normal manner. Interest is allowed on the overpayment applied to interest assessed on a deficiency for another period to the date the interest is assessed, except no interest can be allowed past the schedule date.

    3.  

      Exception:

      These instructions are not applicable where one taxpayer agrees to the application of credit to a deficiency for another taxpayer. In this case, interest is computed on the deficiency without regard to the overpayment and interest is allowed on the overpayment to the schedule date. The tax and allowable interest are then credited to the deficiency through entries in the credit column on the Form 1331.

       

     

  2. When an overpayment is to be applied to an assessment