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IRS Audits

Chapter 5. TE/GE AIMS Manual

Section 2. TE/GE Examined and Non-Examined Closures (Cont. 2)

4.5.2  TE/GE Examined and Non-Examined Closures (Cont. 2)

4.5.2.3 
Processing TE/GE Examined Closing Record, Form 5599

4.5.2.3.1 
Completion, Edit and Review of Form 5599, TE/GE Examined Closing

4.5.2.3.1.55  (06-01-2003)
ARDI Code (Item 42)

  1. The ARDI Code is to be entered by the Examiner.

  2. Enter a one-digit code in this item for an agreed deficiency under the Accounts Receivable Dollar inventory (ARDI) project.

  3. When closing multiple years and an overassessment from one year will be used to offset an assessment from another year, consider the overassessment as payment secured. Full Paid or Partially Paid depends on the amount of the overassessment.

  4. The ARDI Code is valid for all IMF and BMF MFT Codes. Valid DCs are:

    • EP - 03, 06 and 09.

    • EO/GE - 03, 06, 09 and 12.

     

    Reminder:

    DC 05 must contain an ARDI Code if an entry is present in Item 414. If DC 06 is used, $1.00 must be present in Item 35.

     

  5. Valid ARDI Codes are as follows:

    Code: Definition:
    1 Fully Paid
    2 No Payment (i.e., changed cases where a payment was not received; no change cases and cases referred to Appeals)
    3 Partial Payment
    4 Installment Agreement With Payment
    5 Installment Agreement Without Payment
    7 Appeals - Returned
    0, 6, 8 and 9 ARDI Codes reserved for future use

     

4.5.2.3.1.56  (06-01-2003)
Delay Posting Code (Item 43)

  1. The Delay Posting Code is to be entered by ESS.

  2. This item is not applicable for TEB returns.

  3. A one position field with values of 1-6. Values indicate the number of cycles (weeks) delayed between posting transactions.

4.5.2.3.1.57  (06-01-2003)
NOL CF Disallowed (Item 44)

  1. NOL CF Disallowed is to be entered by the Examiner.

  2. Not a valid item for EP BMF Form 5330's or TEB returns.

  3. This item should be completed if all or part of an NOL Carry Forward year return is not picked-up. If Item 44 is entered, item 45 NOL Indicator is required. If Item 44 is input, DC 02 cannot be entered in Item 13 on Form 5599. NOL CF Disallowed is 1-11 characters. May not be negative or zero. This item is to be included in Item 36, Hash Total.

4.5.2.3.1.58  (06-01-2003)
NOL Indicator (Item 45)

  1. NOL Indicator is to be entered by the Examiner.

  2. Not a valid item for EP BMF Form 5330's or TEB returns.

  3. Values are 1, 2, or 3. This item is only used to identify the three types of NOL/Carry Forward Returns.

    1. NOL’s Examined: Enter a "1" in Item 45 for tax periods in which the taxable income line on the Form 1040 or 1120 is less than zero, (i.e., 199712, Form 1120 Line 30).

    2. Carry Back and/or Carry Forward Tax Periods Related to the NOL: Enter a "2" in Item 45 for all carry back and/or carry forward tax periods related to the case in which you entered a "1" in Item 45, even if the NOL was examined and the final result was a no change.

    3. Non-NOL Years Offset by Carry Over: Enter a " 3" in Item 45 for tax periods in which adjustments on the return were offset either in part or full by a carry over if the carry forward year return is not picked-up.

     

  4. NOL/Related Return Examples:

    1. You made no adjustment to the 199812 NOL, therefore you did not pick up the related years.

      199812 Form 5599, Item 44 = leave blank
      199812 Form 5599, Item 45 = "1" (NOL year)

    2. You made a $10,000 adjustment to the 199912 NOL that was carried back to 199712.

      199912 Form 5599, Item 44 = leave blank (there was no carry over)
      199912 Form 5599, Item 45 = "1" (NOL year)
      199712 Form 5599, Item 44 = leave blank
      199712 Form 5599, Item 45 = " 2" (Related year)
      199712 Form 5599, Item 12 = amount of tax assessed on the $10,000 adjustment

    3. You made a $140,000 adjustment to the 199712 NOL. You picked-up the carry back years and applied $20,000 to 199412, $30,000 to 199512, $40,000 to 199612 but the $50,000 for the carry over year could not be applied since the 199812 return was not yet filed.

      199712 Form 5599, Item 44 = $50,000 (captures the carry forward amount disallowed)
      199712 Form 5599, Item 45 = "1" (NOL year)
      199412 Form 5599, Item 44 = leave blank
      199412,199512,199612 Form 5599, ltem 45 = "2" (Related years)
      199412, 199512,199612 Form 5599, Item 12 = amount of tax assessed on the $20,000, $30,000 and $40,000 adjustments

    4. You made a $140,000 adjustment to the 199612 NOL. You picked-up the carry back years and carry forward years and applied $20,000 to 199312, $30,000 to 199412, $40,000 to 199512 and $50,000 to 199712.

      199612 Form 5599, Item 44 = leave blank
      199612 Form 5599, Item 45 = "1" (NOL year)
      199312, 199412, 199512,199712 Form 5599, Item 44 = leave blank
      199312,199412,199512, 199712 Form 5599, Item 45 = "2"
      (Related years)
      199312,199412, 199512, 199712 Form 5599, Item 12 = amount of tax