Part 4
Examining Process
Chapter 4
AIMS/Processing Handbook
Section 9
Delinquent and Substitute for Return Processing
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Contents
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- This section contains procedures for processing and closing delinquent
returns and substitute for returns (SFR).
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- Before securing a delinquent return or preparing an SFR, the examiner must
request research. Use Form 6882 or perform on-line research using Command
Code IMFOL/BMFOL/INOLE.
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- Form IMF accounts, both the primary and secondary SSNs are to be researched
for prior filing and for pending assessment activity.
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- A transcript of the account must be attached to each delinquent or SFR
when submitted to Case Processing Support. The transcript will be used
by Case Processing Support to perform their verification responsibilities
and will be forwarded to the service center with the return. Also attach
a copy of the transcript to the copy of the return retained for examination.
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- If a CI freeze ("-Z"
) is present on the account, coordinate with CI to determine if Examination
can work the case.
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- Do not submit as SFR if a TC 150 has posted. See Text 4.4.9.11 for instructions
for processing a delinquent return after the posting of as SFR.
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- A TC 150 posting with no tax liability followed by a TC 240 posting for
$500 (W-4 penalty) indicates that the service center has posted
a dummy return. Any adjustments must be made as subsequent adjustments
(i.e. TC 300).
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- If research shows that the taxpayer is in TDI statuts (Master File status
02) input a TC 595 with Closing Code 57 to close the Collection control.
Extreme care should be taken when using this transaction code since it
will prevent the issuance of TDI notices to the taxpayer.
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- For all tax years in TDI status 03, inputting a TC 424 with a push code
of 020, 021 or 037 will automatically generate a TC 595.
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- The TC 595 must be reversed by Examination if a determination is made to
not pursue the examination. The posting of a TC 150 (not an SFR) also satisfies
the TC 595 and a reversal is not necessary.
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- Establish the nonfiler account on AIMS as soon as it is known that an examination
will take place or when examination time is first applied.
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- When completing Form 5345 to establish a nonfiler, the following items
must be entered:
- Item 5, Return Requested, enter a "1"
or a "3"
. Do not leave blank, since the return is not to be requested.
- Item 9, Push Code, enter 020, 021, or 037. A push code must be used when
establishing the case on AIMS in order to hold the TC 424 at Master File
until the TC 150 posts.
- Item 17, Reason for Request, write "DELINQUENT RETURN SECURED BY EXAMINATION"
, "EXAM/SFR"
or "NONFILER"
, as appropriate.
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- Form 5354 can also be used to provide Non Master File (NMF) AIMS inventory
(IVL) and statute (Table 4.0/4.1) controls since the Master File establishment
will remain a skeletal record until a TC 150 posts.
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- If the taxapyer does not have a TIN, request a dummy TIN (via Command Code
AMTIN7). Establlish NMF AIMS
control using Form 5354. See IRM 4.4.9-12 when TP has no TIN.
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- Upon receipt of a delinquent return, ensure that the following items are
completed:
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- The taxpayer's name must be typed or printed legibly, with no
strikeovers. When possible, it must duplicate the name used on a previously
filed return with the same taxpayer identification number (TIN). The name
used with a recently acquired EIN should duplicate the taxpayer's
Form SS-4.
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- If the name is not correct, prepare or secure a corrected return and solicit
the taxpayer's signature on the corrected delinquent return.
Mark an "X"
across the face of the incorrect return. Write the word "Invalidated"
, sign and date below the notations.
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- Verify with the taxpayer that the address shown on the return is the taxpayer's
current address.
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- Verify the TIN shown on the return is correct by researching Master File.
If the taxpayer does not have a TIN, see IRM 4.4.9.12.
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- Verify that all W-2's, required forms and schedules
are present and the computations are correct. Examination is responsible
for the accuracy of the return and no further verification is performed.
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- Verify the presence of the taxpayer's original signature and
the date the return was signed.
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- Verify the current or appropriate year's tax form (depending
on local service center preference) was used.
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- Date stamp the delinquent return when it is received. If a date stamp is
not available, annotate on the return in the upper left side margin, "Received"
, the date received, and the examiner's name and title.
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- Make a copy of the delinquent return. On the copy, write in red on the
top margin EXAM HAS ORIGINAL DELINQUENT RETURN--PROCESS THIS COPY AS AN ORIGINAL
. Leave room in upper right corner for DLN to be entered by service center.
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- Write in red on top margin of the original return, "DELINQUENT RETURN SECURED BY EXAMINATION--COPY PROCESSED AS ORIGINAL."
Retain the original delinquent return and close it out with the Examination
administrative file when the examination is completed. See IRM 4.4.9.8,
Group Closing Actions.
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- Attach Form 3198 to EACH RETURN
(copy) being submitted.
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- Annotate the Form 3198 if any penalties should or should not be assessed. Note:
If you do not want penalties assessed on the return that you are sending
to the center for processing, enter the applicable codes next to the filing
status box.
J--Do not assess Failure to Deposit Penalty (Forms 720, 940, 941,
943, 945, 1042)
M--Do not assess Failure to Pay Penalty
P--Do not assess Estimated Tax Payment Penalty
R--Do not assess Delinquency Penalty
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- If a dummy TC 150 has posted annotate the Form 3198 to request a TC 971,
Action Code 13 be input. See IRM 104.3.9.11.
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- Attach Document 6469 to the front of EACH BMF return being submitted. Check
box for "DELINQUENT RETURN"
. It is essential that a separate Document 6469 be prepared for each tax
period. If there are multiple tax periods for the same taxpayer indicate
on the first Document 6469, "BLOCK TOGETHER
--Related tax periods/do not separate"
. See IRM 4.4.14.2.
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- Document 6469 is only needed for IMF returns if the return is being processed
as a partial assessment pending a further examination and credits/payments
on the module are to be frozen. See Text 4.4.14.2 for more information.
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- If payment is secured, prepare Form 3244-A following normal procedures.
Indicate payment as advanced payment of deficiency, TC 640. Attach a copy
of the 3244-A to the delinquent return. See IRM 4.4.9.14 for
more information.
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- Attach to the delinquent return copy, a recent (not more than 60 days old)
transcript which reflects the taxpayer's failure to file. (Attaching
a current transcript is mandatory.) Attach a copy of the same transcript
to the original return.
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- Forward the return package (the copy of the return, Form 3198, copy of
3244-A, and Document 6469, if applicable) to Case Processing
Support no later than the day after the return is received.
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- When preparing SFRs, the procedures listed below must be followed:
- Prepare a "dummy/SFR"
for each tax period.
- Use the current or appropriate year's tax form depending on local
service center preference. If using current form, cross out the tax period
and write the SFR tax period in red using "YYYYMM"
format.
- Using the nonfiler's name from Master File, enter a bracket in
front of the last name in red.
- Use the nonfiler's correct SSN/EIN If the nonfiler does not have
a SSN/EIN, see Text 4.4.9.12, No TIN.
- For IMF returns, use either "single"
or "married filing separate"
filing status for each "Dummy/SFR"
. For "married filing separate"
, show the spouse's name and SSN (if available) . DO NOT use
joint filing status.
- Use the current date as the received date in "MMDDYYYY"
format.
- Code the entity with a "P"
code (partial entity) in red above the first name area.
- Do not enter an address on "dummy SFR"
. Use Form 2363 to update an address to Master File.
- Allow exemptions for 65 or over, if applicable.
- Enter Return Processing Codes "L"
(dummy return) and "K"
(delinquent return statute cleared) to the right of Line 23 on Form 1040
in red.
- Write "EXAM/SFR"
across the top margin of the return in red.
- Make a copy of the SFR. Retain the copy and close it with the Examination
administrative file when the examination is completed.
- Attach Form 3198 to each return being submitted.
- Attach Document 6469 to the front of EACH BMF
return being submitted. Check box for "Substitute for Return"
. If you have multiple tax periods for the same taxpayer you may indicate
on the first Form 6949, "BLOCK TOGETHER
--Related tax periods/do not separate"
and forward as a package. Document 6469 is not required for IMF SFRs.
- Attach to the original SFR a recent (not more than 60 days old) transcript
which was used in the determination of the taxpayer's failure
to file. (Attaching current transcript is mandatory.) Also attach a copy
of the transcript to the copy of the SFR.
- Forward the return package (original SFR, Form 3198, transcript and Document
6469, if applicable) to Case Processing Support.
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- Upon receipt Case Processing Support will review and perfect delinquent
and SFR packages. Verify that procedures in IRM 4.4.9.5, for delinquent
returns and IRM 4.4.9.6 for SFRs were followed. Return to originator if
packages are not prepared correctly.
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- Review the transcript attached to the delinquent/SFR. Verify the transcript
matches the return. If the name and SSN on the delinquent/SFR does not
match the transcript then reject the package back to the initiator. If
the return is annotated "Taxpayer unwilling to obtain SSN/EIN"
, see IRM 4.4.9.6, No TIN.
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- Verify that there is no previous TC 150 posting on the transcript. If there
is a TC 150 on the module, send the package back to the initiator explaining
that a return has already posted for the taxpayer.
- EXCEPTION:
- If the TC 150 is for a dummy/SFR and the package contains a delinquent
return see IRM 4.4.9.11.10, Processing of a Delinquent Return if a SFR
Has Posted.
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- If there is no account present on Master File prepare Form 2363 (TC 000)
to add the account to Master File.
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- If the delinquent/SFR period is PRIOR TO
the first time Master File reflects a name line (return filing) for the
taxpayer prepare Form 2363 (TC 013) to replace or establish name line for
tax year indicated by new name line.
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- If payments/credits were transferred from the taxpayer's account
to the Excess Collections File and the Refund Statute Expiration Date has
not expired, complete Form 8765 and forward it to Service Center Accounting
to have the credits transferred back. Attach a transcript of the account
showing the payment/credit.
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- Forward the return package to your service centers Receipt and Control
Branch on Form 3210.
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- Send all excise tax return packages to the Cincinnati Service Center for
processing.
- Send 20-day Ultimate Vendor Claims to:
Internal Revenue Service
PO Box 312
Covington, KY 41012-0313- Send all other original returns, amended returns and claims to:
Internal Revenue Service
Cincinnati, OH 4999-0002- Payments and returns of Forms 2290 must be sent daily by overnight express
to Cincinnati Service Center.
- If a delinquent return requires quick assessment processing, DO NOT
send the package to the service center.
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- When the examination is completed and the delinquent return/SFR administrative
file is closed from the group, the following items must be present:
- The original delinquent return or copy of the SFR.
- Form 5344 with special attention to the completion of Items 37 and 414
for secured delinquent returns sent to the service center to be processed.
The statute of limitations begins with the received date of a secured delinquent
return. Enter the correct statute date in Item 14 of Form 5344.
- NOTE:
- Write in the top margin of the Form 5344, Original Return--SFR
(on SFR cases) or Copy Processed as Original (on secured delinquent returns.)
- An Examination Report, Form 4549, Form 1902B, or Form 4666. (A report is
not required if a delinquent return is accepted as filed.) See e below.
- NOTE:
- The delinquency penalty, if assessed on the original return, must be adjusted
and included in the examination report. If the estimated tax penalty is
applicable, it is also asserted by the examiner on the examination report.
- Form 895, if required. (Make note of TC 150 date per transcript, on all
SFR.)
- Form 3198 instructions. If a delinquent return is secured after the SFR
(dummy 150) has posted, notate on Form 3198 that the return is incorporated
into the examination report.
- A current transcript (not more than 60 days old) is mandatory.
- An AMDISA print must be attached to Form 5344 if a Form 5546 and labels
are not available.
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- If the examination is completed but AIMS still shows a skeletal record,
suspense the case (awaiting the posting of the TC 150) in the group, Case
Processing Support, or other specified location depending on local option.
See IRM 4.4.9.13, Monitoring the Delinquent/SFR Suspense File.
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- For cases with no data on AIMS, return the case to the group for preparation
or re-input of Form 5345.
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- If the data base is a full record, close as in IRM 4.4.9.10 below.
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- Following are the processing instructions for processing delinquent/SFR
cases.
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- If a secured delinquent return is being closed accepted as filed, use DC
01. Complete Item 37 and 414 on all secured delinquent returns regardless
of disposal code.
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- Use an original return blocking series. An original return blocking series
is used to prevent generating a CP notice telling the Files area to pull
the original return and associate it with the copy. Since the original
return is only a dummy return (for SFR cases) or a copy of a secured delinquent
return, it is not necessary for Files to pull the "original."
Write in the top margin of the Form 5344, Original Return--SFR
(for SFR cases) or Copy Processed as Original (for secured delinquent return
cases) to alert the Files area that there will be an SFR copy or an original
return without a DLN in the case file.
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- If an SFR posted, the Refund Statute Expiration Date has expired, the TC
30X will result in a refund, and the credit is going to be move to the
Excess Collection File, then take the following steps:
- Enter Hold Code 4.
- Input an IDRS history item showing excess credits are being moved.
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- If the date the TC 30X posts to Master File, is greater than 3 years from
the SFR TC 150 date, the refund will be automatically frozen and a D Freeze
generated. To release the refund, enter a TC 290 for $0.00 with a Priority
Code of 4. Cycle the TC 290 so it posts after the TC 30X.
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4.4.9.11 (02-08-1999)
Processing of a Delinquent Return if a SFR Has Posted
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- When Case Processing Support receives a request to either process the return
as a partial assessment or as a final closure, Case Processing Support
must process the delinquent return and penalties using current assessment
procedures and the following guidelines.
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- Use Form 3177 to request the input with CC REQ
77 of a TC 971 Action Code 13. Inputting the TC 971 does the following:
- It shows on Master File that the return has been secured and is in Examination.
- It causes Master File to use the IRS received date to compute the ASED.
- It sets the duplicate return freeze at Master File if it is NOT input the
same cycle as the final closing. Therefore, if the TC 971 is not input
the same cycle as the final closing, be sure to input the appropriate priority
code (1 or 3) in order to bypass this duplicate return freeze.
- It produces an AIMS weekly update if not input the same cycle as the final
closing.
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- In addition to the procedures in Text 4.4.9.5, code the return with Computer
Condition Code (CCC) 4. CCC 4 will allow both the return information to
be sent to the Return Transaction File and a TC 976 to Master File (-A
freeze & CP36 will not be generated).
- NOTE:
- Do not do both of the procedures.
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- Complete Form 5344 in the normal manner with special attention given to
the following items:
- Do not make an entry in Item 06, "Interest to Date"
or "Item 08, Agreement Date"
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- Enter Disposal Code 08 in Item 13.
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- The following line items must be taken from the return and entered on the
Form 5344 using the appropriate reference/transaction codes.
- Adjusted Gross Income
- Taxable Income
- Self Employment Income (including TIP Income, Medicare, etc.).
- Withholding Credit (estimated tax payments must not be included since payments
are already posted to Master File.)
- Excess FICA
- Tax Liability
- Self Employment Tax
- Earned Income Credit
- Exemptions
- All other applicable items
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- Case Processing Support must enter the appropriate penalty amount based
on information provided by the examiner on Form 3198.
- The Estimated Tax Penalty (TC 170) will be computed by the RA/TA.
- The Failure to File Penalty (TC 160) will be computed by the RA/TA.
- The Failure to Pay Penalty (TC 270) must be recomputed by ESP using CC COMPAF
on IDRS. The " from date"
will be provided by the RA/TA which will be the due date of the return.
The "to date"
will be the earlier of the 23C date of the assessment or the full payment
date. The computation of failure to pay penalty must also consider payments
made to the account after the due date. Use these dates when inputting
COMPAF. See IRM 20.1.2, Failure to Pay Penalties.
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- Group -- For returns where the taxpayer does not have a TIN, request
that the taxpayer submit Form SS-4 for EIN to the Internal Revenue
Service, or Form SS-5 for SSN to the Social Security Administration.
Also request the taxpayer to furnish the IRS with the SSN assigned by SSA
as soon as possible. Do not delay the processing of the delinquent/SFR
package.
- Prepare the package in the normal manner.
- Annotate Form 3198 Taxpayer Does Not Have a TIN.
- Submit return package and Form 5345 to Case Processing Support.
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- Case Processing Support -- Fax the following information to the
service center Entity Control section to obtain an IRS identification number
(IRSN):
- Taxpayer's current name as well as any previous name(s) used
by taxpayer
- Taxpayer's current address
- Filing status
- Form number; i.e., 1040, etc.
- Tax period
- Area office and phone number
- Reason for the request (Requesting IRSN for the purpose of a temporary
SSN.)
- Entity Control will provide the temporary SSN within 2 workdays of the
receipt of the fax and is responsible for adding the account to Master
File. The temporary SSN always begins with a" 9"
and ends with an asterisk.
- Case Processing Support--enter the temporary SSN on the return
and forward it the service center for processing. Enter the temporary SSN
on the Form 5345, input it on AIMS, and forward it to the group.
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- If the taxpayer will not request their own EIN, then Case Processing Support
will contact the service center Entity Control section to obtain the assignment
of a permanent EIN.
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4.4.9.13 (02-08-1999)
Monitoring the Delinquent/SFR Suspense File
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- Secure a transcript to verify the status of TC 150.
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THEN |
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take the necessary action AIMS to establish on AIMS (may by "hanging"
424). Once established
Once established, close the case in the normal manner. |
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attach a history sheet to the front of the case file to record each follow-up
action. |
If 12 cycles or more have elapsed since the input of TC 424, contact Service
Center Examination Branch processing function for the status.
- At a minimum, pull each case in the Suspense File once a month for follow-up
action.
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4.4.9.14 (02-08-1999)
Delinquent/Substitute Returns With Payments
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- In most circumstances, the examining officer will process any payments
received with the delinquent return. When processing the delinquent or
SFR return, credits on the module should be handled as follows:
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- Attach Document 6469 to the return stating "Freeze Prepayment Credits -- Use Computer Condition Code "X""
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- If the return is a secured delinquent return and a TC 424 is posted at
Master File, a TC 570 will not freeze the prepayment credits pending the
outcome of an examination. If multiple returns were secured, process the
balance due years first and cycle in the refund years to ensure the refunds
are applied to the balance due years.
- If the return is a SFR-Dummy TC 150, the blocking series will automatically
generate a TC 570 which will hold the credits on the module. No special
handling is required.
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- If the taxpayer does not have a valid SSN/EIN, Case Processing Support
will obtain a temporary SSN or a valid EIN in accordance with procedures
outlined in IRM 4.4.9.12. Case Processing Support will process the payment
to Collection with the temporary SSN or valid EIN as follows:
- Prepare Form 3244-A, Payment Posting Voucher, and forward the
original and the payment to Collection for processing.
- Attach a copy of Form 3244-A to the original delinquent return.
- Forward a copy of Form 3244-A to the examining officer for association
with the return being maintained for the examination.
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4.4.9.15 (02-08-1999)
Delinquent Returns with Expired Refund Statute Expiration Dates
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- This procedure relates to the processing of a delinquent return that is
NOT an original delinquent that is being sent to the service center for
posting of TC 150.
- When processing any delinquent return where the examining officer has determined
that a refund is due the taxpayer, ensure that the Refund Statute Expiration
Date (RSED) has not expired. When the RSED has expired, the refund cannot
be issued to the taxpayer. Process the Form 5344 using a Hold Code 4 to
freeze the expired refund. Determine whether the taxpayer owes a balance
due on the tax period being processed. The refund may be used to pay off
any balance due on the module being processed, but it CANNOT be used to
offset any outstanding balance due on any other tax periods. The refund
is to be sent to the Excess Collections File via Form 8758, Excess Collections
File Addition.
- Per Form 3198, issue the appropriate claims disallowance letter to the
taxpayer
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Internal Revenue Manual
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Part 4 Examining Process Chap. 4 AIMS/Processing Handbook Sec. 9 Delinquent and Substitute for Return Processing |
(02-08-1999) |
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