part4-79

4.8.5 
Post Examination Case Processing Requirements

4.8.5.1 
(10-01-2003)
Overview

  1. This section outlines procedures for the review of cases that have special
    features requiring post examination processing procedures. The following types
    of cases are included:

    1. Innocent spouse,

    2. Bankruptcy cases,

    3. TEFRA cases,

    4. Fraud cases (civil and criminal),

    5. Grand jury cases, and

    6. Cases returned from Appeals.

4.8.5.2 
(10-01-2003)
Innocent Spouse Cases

  1. IRM 25.15, Relief from Joint and Several Liability, contains detailed
    guidance for examining, processing, and reviewing innocent spouse cases.

4.8.5.2.1 
(10-01-2003)
Case Subject to Review

  1. All IRC § 6013(e) and IRC § 6015 innocent spouse cases are
    subject to streamlined innocent spouse procedures outlined in IRM 25.15.10.1.
    Cases worked by Revenue Agents and Tax Compliance Officers should be forwarded
    to TS before any determination letters/notices are issued or assessments/abatements
    are made with respect to the innocent spouse issue, regardless of how the
    issue arose or the determination of the issue.

  2. IRM 25.15.10 details the innocent spouse cases subject to area TS review
    and/or centralized review. Centralized review procedures are outlined in IRM
    25.15.10.8 through 25.15.10.13.

4.8.5.2.2 
(10-01-2003)
Return of a Case to the Group

  1. Reviewers may return an innocent spouse case to the group manager for
    reconsideration of technical provisions or for additional factual development.
    The case may also be returned if account problems have not been resolved.
    If a case is returned to the group, the examiner is required to respond within
    30 days of receipt.

4.8.5.2.3 
(10-01-2003)
Collection Referral Cases

  1. Collection referral cases are reviewed using the same guidelines and
    standards specified for the area TS and centralized review. The Territory
    Manager may delegate TS review responsibility to a revenue agent at a local
    post of duty to expedite treatment of Collection referral cases.

4.8.5.3 
(10-01-2003)
Bankruptcy Cases — General

  1. A bankruptcy petition filed by a business, joint entity, or individual
    generally operates as an automatic stay on any act to assess, collect, or
    recover tax due from the taxpayer. TS works very closely with Area Counsel
    and Insolvency.

4.8.5.3.1 
(10-01-2003)
Case Reviews

  1. TS reviews bankruptcy cases using the quality standards outlined in
    IRM Exhibit 4.8.3–1.

  2. When the case is received in TS, the reviewer verifies the bankruptcy
    petition filing date and that the taxpayer is still in bankruptcy.

4.8.5.3.2 
(10-01-2003)
Pre-October 22, 1994 Bankruptcy Filing

  1. Generally, the Bankruptcy Code prohibits assessments on cases in which
    the petition was filed prior to October 22, 1994 (if the automatic stay is
    still in place).

4.8.5.3.2.1 
(10-01-2003)
Agreed Cases

  1. After review, the case is placed in Bankruptcy Suspense. A statutory
    notice of deficiency is not issued on agreed cases.

4.8.5.3.2.2 
(10-01-2003)
Unagreed Cases

  1. After review, the reviewer prepares a statutory notice of deficiency
    using Letter 1384.

  2. The statutory notice is issued prior to the expiration of the normal
    statute of limitations.

  3. Written instructions to the 90-Day Unit include:

    1. The taxpayer is in bankruptcy, and

    2. The case file is to be returned to TS after the default of the 90-day
      period.

4.8.5.3.3 
(10-01-2003)
Post-October 21, 1994 Bankruptcy Filing

  1. The Bankruptcy Reform Act of 1994 allows the assessment for any agreed
    tax and the issuance of notice and demand for such tax.

4.8.5.3.3.1 
(10-01-2003)
Agreed Cases

  1. All agreed cases can be processed and the tax assessed even though the
    taxpayer is in bankruptcy.

  2. Upon receipt of the case, TS will verify the report agrees with the
    proof of claim in Insolvency.

  3. After review, the case file is forwarded for processing and assessment.

4.8.5.3.3.2 
(10-01-2003)
Unagreed Cases

  1. Follow the same procedures as outlined in IRM 4.8.5.2.2 above.

4.8.5.3.4 
(10-01-2003)
90-Day Default Cases

  1. Unless the taxpayer receives special permission from the Bankruptcy
    Court to petition the statutory notice of deficiency, the case defaults from
    the 90-Day Unit and is returned to TS.

4.8.5.3.5 
(10-01-2003)
Bankruptcy Suspense Procedures

  1. Technical Services (TS) monitors and controls cases placed in Bankruptcy
    Suspense. See procedures outlined in IRM 4.8.2.10.8

  2. Monthly, a listing of cases in bankruptcy suspense is sent to Insolvency
    or the reviewer with access to the Automated Insolvency System (AIS) can verify
    cases are still in bankruptcy. Reviewers may also have access to PACER and
    RACER databases within their respective bankruptcy court districts. Do not
    rely on the absence of a TC 521 to determine if a case is still in bankruptcy.

  3. Cases in which the taxpayers are no longer in bankruptcy are removed
    from suspense and closed.

4.8.5.3.6 
(10-01-2003)
Assessment Statutes

  1. In statutory notice cases, IRC § 6213 and IRC § 6503 prohibit
    the assessment of tax until the expiration of the period allowing the taxpayer
    to file a petition with the tax court. Bankruptcy law generally prohibits
    a taxpayer from petitioning the Tax Court while in bankruptcy status. Therefore,
    once released from bankruptcy, the taxpayer is allowed to file a petition
    with the tax court during the portion of the 90-day statutory period that
    was denied during the bankruptcy, plus an additional 60 days.

4.8.5.3.7 
(10-01-2003)
Closing Cases from Bankruptcy Suspense

  1. The statute of limitations must be recalculated taking into consideration
    IRC § 6213 and IRC § 6503, as noted above. The new statute date
    is noted on Form 895, Notice of Statute Expiration, prior to closing the case.

  2. If the period in which the taxpayer is permitted to file a petition
    with the Tax Court has not expired, the case is forwarded to the 90-Day Unit
    for further suspense. Otherwise, the case is forwarded for assessment.

4.8.5.3.8 
(10-01-2003)
Joint Returns

  1. When a bankruptcy involves a joint tax return, TS determines whether
    one or both spouses filed bankruptcy.

  2. If only one spouse filed bankruptcy:

    1. the statute on the non-bankrupt spouse continues to toll,

    2. the case file is forwarded for non-master file assessment against the
      non-bankrupt spouse, and

    3. the case is returned to TS after assessment for processing the bankrupt
      spouse to bankruptcy suspense.

4.8.5.3.9 
(10-01-2003)
References

  1. Refer to IRM 4.27, Bankruptcy.

    Note:

    This IRM is to be renumbered as
    IRM 25.17.20 through .24.

4.8.5.4 
(10-01-2003)
TEFRA Case Reviews

  1. After completion of the case by the examiner, the TEFRA key case is
    closed to TS.

  2. Reviewers performing reviews of TEFRA cases should be familiar with
    TEFRA proceedings. Complete instructions for TEFRA procedures are contained
    in IRM 4.31, Flow Through Entity Multifunctional Handbook.

4.8.5.4.1 
(10-01-2003)
Completion of TEFRA Procedures by Examiners

  1. Reviewers ensure that the examiner performed specific TEFRA procedures
    and documented the case file appropriately. Reviews of TEFRA cases include,
    but are not limited to, the following items:

    1. Ensure the key TEFRA return is an entity subject to the TEFRA proceeding,

    2. Ensure examiners issued the proper letters for the TEFRA entity, (i.e.,
      Notice of Beginning of Administrative Proceedings (NBAP), Summary Report,
      Consent Transmittal Letter, etc.),

    3. Ensure at least 120 days pass between the issuance of the NBAP to the
      last identified notice investor and the issuance of the Final Partnership
      (S-Corporation) Administrative Adjustment (FPAA or FSAA, as appropriate) to
      the Tax Matters Person (TMP),

    4. Ensure the TMP is properly designated in accordance with Treas. Reg. 301.6231(a)(7)–1,
      26 CFR 301.6231(a)(7)-1 and Treas. Reg. 301.6231(a)(7)-2, 26 CFR 301.6231(a)(7)-2
      and that there is sufficient documentation in the key TEFRA case file verifying
      the validity of the designation,

    5. Ensure the Forms 886-Z(c) are dated and certified by the Campus TEFRA
      Function (CTF) employee. The distributive share schedule must reflect all
      of the investors’ names and TINs. Verify that individual percentage
      interests total 100 percent. Obtain a TSUMYP as a check with the Forms 886-Z(c)
      or if Forms 886-Z(c) have not been generated by the CTF, and

    6. Determine if the Form 2848 is properly executed if case if unagreed. If
      not, solicit a new Form 2848 from the representative and explain that he/she
      will not be able to represent the taxpayer in Appeals or receive notices if
      not properly executed.

4.8.5.4.2 
(10-01-2003)
No-Change TEFRA Cases

  1. Procedures for closing no-change TEFRA cases are outlined in IRM 4.31.1,
    Flow-Through Entity Multifunctional Handbook.

4.8.5.4.3 
(10-01-2003)
Agreed TEFRA Cases

  1. Procedures for closing agreed TEFRA cases are outlined in IRM 4.31.1,
    Flow-Through Entity Multifunctional Handbook.

4.8.5.4.4 
(10-01-2003)
Unagreed TEFRA Cases: 60-Day Letters

  1. 60-Day letters provide the TMP with a copy of the examination results
    for distribution to the investors, invite a protest, explain the taxpayer’s
    appeal rights, and offer the investors another opportunity to agree to the
    TEFRA issues.

  2. 60-Day letters will be issued to the TMP and all notice partners or
    shareholders that did not agree to the examination issues at the closing conference.

  3. A 60-Day letter package will be prepared and submitted to the campus
    or compliance center for issuance, following the guidelines outline in IRM
    4.31.1, Flow Through Entity Multifunctional Handbook.

  4. Response to the 60-Day letter:

    1. ACCEPTANCE OF SETTLEMENT AGREEMENT — Procedures
      outlined in IRM 4.31.1 are to be followed.

    2. PROTESTED — If a protest is filed, a review
      will be conducted as outlined in IRM 4.31.1, and if valid, the case will be
      forwarded to Appeals.

    3. DEFAULT — A 150-Day letter (FPAA/FSAA)
      will be prepared if a valid protest is not received or not all of the partners/shareholders
      have agreed to the partnership or S-corporation issues.

4.8.5.4.5 
(10-01-2003)
FPAA/FSAA: 150-Day Letters

  1. If a TEFRA entity proceeding is not resolved at the examination level,
    a Notice of Final Partnership Administrative Adjustments (FPAA) or Notice
    of Final S Corporation Administrative Adjustment (FSAA) will be issued. FPAA/FSAAs
    are equivalent to statutory notices of deficiency and should be prepared in
    a similar format.

  2. 150-Day letters are issued to the TMP and all notice investors that
    did not agree to the examination issues at the closing conference or when
    the 60-Day letter was issued.

  3. A 150-Day letter package will be prepared and processed as outlined
    in IRM 4.31.1, Flow Through Entity Multifunctional Handbook. If there are
    fewer than 45 days remaining on the statute, then the TMP and investor letters
    should be mailed by the local office, using certified mail.

  4. Response to 150-Day letter:

    1. ACCEPTANCE OF SETTLEMENT AGREEMENT — Procedures
      are outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

    2. PETITIONED TAX COURT CASES — Procedures
      are Outlined in IRM 4.31.1, Flow Through Entity Multifunctional Handbook.

    3. DEFAULT — Procedures are outlined in IRM
      4.31.1, Flow Through Entity Multifunctional Handbook.

4.8.5.5 
(10-01-2003)
Fraud Cases

  1. Procedures for special handling of civil fraud cases are outlined in
    IRM 25.1, Fraud Handbook.

4.8.5.5.1 
(10-01-2003)
Scope of Review

  1. All aspects of fraud, including the recognition of fraud indicators,
    factual development, case file documentation, and proper completion of procedures
    should be considered when reviewing cases.

4.8.5.5.2 
(10-01-2003)
Case Return Criteria

  1. Cases may be returned to the examiner for further development or correction
    if there is evidence of fraud, malfeasance, collusion, concealment, or misrepresentation
    by the taxpayer or representative that has not been adequately addressed in
    the file.

4.8.5.5.3 
(10-01-2003)
Cases Subject to Joint Investigation

  1. A case that has been the subject of a joint investigation and for which
    prosecution has been recommended is reviewed using the quality standards outlined
    in IRM Exhibit 4.8.3–1.

  2. After review of the case, the file is prepared for suspense pending
    resolution of the criminal prosecution action.

  3. Copies of the examiner’s report are forwarded to Criminal Investigation
    by the Fraud Referral Specialist (FRS).

  4. The administrative file should be assembled and, upon request of the
    Special Agent in Charge (SAC), forwarded to Area Counsel (copies of returns
    only).

  5. At a minimum, the suspensed file should include the following:

    1. Documentation that criminal action is pending,

    2. Copy of the examiners report,

    3. Tax returns involved in the case,

    4. Form 2797, Fraud Referral, and

    5. Workpapers of sufficient depth to support the proposed civil adjustments.

  6. TS has responsibility for maintaining fraud suspense files, including:

    1. Inventory controls,

    2. AIMS updates for status codes, project and source codes, and statute dates,

    3. Protection of statutes of limitation and statute controls,

    4. Protection of confidential material in securely locked cabinets during
      the suspense period.

  7. TS has responsibility for making periodic evaluations of the case to
    determine if circumstances have changed and verify that the Government’s
    interests are adequately protected. See IRM 4.8.2.10.6.

  8. Upon receipt of a Criminal Investigation (CI) memorandum advising TS
    of the resolution of the criminal prosecution, the case file will be released
    from suspense and returned to the examiner for civil settlement. Notice of
    cases referred to the Department of Justice (DOJ) prior to July 2000 will
    be by Area Counsel memorandum.

4.8.5.6 
(10-01-2003)
Grand Jury Cases

  1. Criminal Investigation (CI ) has complete jurisdiction over Grand Jury
    cases. Once a request has been approved, the CI Director of Field Operations
    will notify TS through the Fraud Referral Specialist (FSR) that a taxpayer
    is under grand jury investigation.

  2. The TS reviewer determines whether the taxpayer is under examination.
    If an examination is in process, the reviewer submits a written request to
    the group for the case to be submitted for suspense.

4.8.5.6.1 
(10-01-2003)
Examiner Responsibilities

  1. Upon notification of the grand jury investigation, the examination of
    the taxpayer for all periods involving the same type of tax must be suspended.
    Before proceeding with an examination involving a different type of tax, as
    a related entity, contact CI for their recommendation.

  2. The examiner must ensure that all workpapers and documentation contained
    in the file are appropriately dated, initialed and indexed. This eliminates
    any doubt as to the origin of the information available for civil use.

  3. The examiner prepares a report using available information at that time.
    The examiner then forwards the report, along with the original returns and
    administrative file to TS.

4.8.5.6.2 
(10-01-2003)
TS Responsibilities

  1. TS verifies the statute of limitations for all returns contained in
    the file.

  2. The reviewer also reviews the file and prepares a cover sheet submitting
    the case for grand jury suspense.

  3. The reviewer coordinates with CI on all imminent statutes. This coordination
    continues throughout the period the case is in suspense.

4.8.5.6.3 
(10-01-2003)
Grand Jury Suspense

  1. The case status code is updated to status 36.

4.8.5.6.4 
(10-01-2003)
Closing Cases from Grand Jury Suspense

  1. Upon completion of the grand jury proceedings, CI issues a memorandum
    to the area releasing the case for civil disposition.

  2. The case is returned to the group to resume the civil examination.

4.8.5.6.5 
(10-01-2003)
References

  1. Refer to IRM 25.1, Fraud, for a complete discussion of Grand Jury procedures.

4.8.5.7 
(10-01-2003)
Cases Returned from Appeals

  1. Areas have the authority to establish local procedures to control cases
    returned from Appeals. In the absence of local procedures, the following procedures
    in (2) below are suggested.

  2. Appeals may return cases to the areas for further development. Cases
    returned to Compliance are routed to TS and assigned to a reviewer for consideration.
    As Appeals does not use ERCS, the case may be updated on AIMS to status 20.

    Note:

    Appeals may update AIMS to status 23 for cases returned to the Campus TEFRA/non-TEFRA
    functions. The CTFs will update the cases to status 34 upon receipt of the
    database.

4.8.5.7.1 
(10-01-2003)
Disagree with Appeals Request

  1. If the reviewer does not agree with the Appeals recommendation and the
    Technical Services Group Manager concurs, a responding or clarifying memorandum
    is prepared and returned to Appeals with the case file.

4.8.5.7.2 
(10-01-2003)
Agree with Appeals Request

  1. If the reviewer agrees with the Appeals recommendations and the Technical
    Services Group Manager concurs, the case is returned to the examiner for completion
    of the required actions.

4.8.5.7.3 
(10-01-2003)
Criteria for Returning Cases

  1. Cases should be returned to the group if the matter is factual, requires
    further development or verification of new information, and it is more efficient
    and/or expedient for the examiner to complete the work.

  2. Cases should not be returned to the group if the matter is one of legal
    interpretation and is not a matter of factual development.

4.8.5.7.4 
(10-01-2003)
Case Return and Closing Procedures

  1. If Appeals released jurisdiction of the case, AIMS is updated and the
    case is returned to the field. Upon completion of the additional field work,
    the case closes either by using normal procedures without additional action
    by TS or by returning to TS for processing, depending upon the particular
    case.

  2. If Appeals did not release jurisdiction, the case is returned to the
    field. Upon completion of the required field work, the case closes to TS for
    transmittal to Appeals.

  3. TS monitors and follows-up on outstanding cases returned to the field.

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