The EITC is a refundable credit administered by the IRS and designed to assist working taxpayers in lower income brackets.

EITC cases can present unique challenges due to the complexity of the IRC provisions and the varying circumstances of qualifying taxpayers. EITC taxpayers must frequently overcome numerous obstacles to obtain the credit, including limited education, communication and language barriers, difficulty documenting non-traditional family relationships or housing arrangements, and understanding the complexity of the EITC tax law.

Low-income taxpayers may not have bank accounts and conduct financial transactions using cash, limiting their ability to document expenditures. For this reason, low-income, self-employed taxpayers may have difficulty substantiating both income and support. Receiving IRS correspondence listing “acceptable” forms of traditional documentation can be daunting to taxpayers who know they cannot obtain the kinds of documents appearing on the IRS list. However, these taxpayers can use alternative documentation to prove both the Relationship Test and the Residency Test. See Exhibit 13.1.24-1, List of Traditional and Alternative Documents for Qualifying Child (also see IRM 4.19.14.6.5, EITC-Personal Exemptions and Dependents, listing the traditional documentation to substantiate a qualifying child, this list is not all-inclusive).

The IRS implemented interactive calculators and online self-help resources to assist taxpayers in determining eligibility for EITC. Self-help resources include:

Research the taxpayer’s account using IDRS command codes (cc) (i.e., RTVUE, INOLE, and DDBKD) to identify certain information about the qualifying child (e.g., name, date of birth, citizenship code, birth parent’s name, custodial data, etc.). See IRM 4.19.13.4, Researching Cases, for a list of other IDRS command codes and research tools.

Research the taxpayer’s account using IDRS cc TXMOD and request the following to obtain the examination history and explanation for denying the EITC:

Review the available documentation to identify what the taxpayer previously submitted.

Determine if the IRS properly considered the taxpayer’s documents.

If warranted, determine the type of additional documents (traditional vs. alternative) required to establish EITC eligibility.

Taxpayers generally need to only disclose personal information to the extent that it is relevant and necessary to taxpayer’s case. If the taxpayer is concerned that the documents that prove EITC eligibility may indicate the taxpayer is in violation of a state or local law or other rules, explain that the circumstances under which information can be shared with other agencies is significantly limited by IRC 6103.

Sharing or providing traditional documentation may be challenging for certain segments of the taxpayer public when they have been or are victims of domestic violence, abuse, poverty, and other situations that hinder their ability to provide specific information. Many such taxpayers have had to flee their homes without any records and seek housing in temporary shelter. It may be virtually impossible for them to prove EITC eligibility requirements through traditional documentation, and we must work with the taxpayers creatively to construct the best case possible.

Since Exam generally does not accept oral testimony from the taxpayer to prove that the child meets Relationship or Residency Tests, TAS employees must assist taxpayers in securing records not previously submitted to support EITC eligibility. Obtaining vital records, such as birth certificates to satisfy the Relationship Test, may be difficult for taxpayers in non-traditional relationships. However, these taxpayers can use alternative documentation to prove both the Relationship Test and the Residency Test. See Exhibit 13.1.24-1, Alternative Documents for Qualifying Child (also see IRM 4.19.14.6.5, EITC-Personal Exemptions and Dependents, listing the traditional documentation to substantiate a qualifying child, this list is not all-inclusive).

Help the taxpayer identify acceptable documentation and:

A certain document alone may not support relationship, residency, or support, but in combination with other records may assist in advocating for the taxpayer. See Exhibit 13.1.24-1 for examples of various types of documentation and Exhibit 13.1.24-2, Case Scenarios Identifying Alternative Documentation.

In any case, listen to the taxpayer and attempt to identify any challenges the taxpayer may encounter with obtaining documentation. Explain in plain language what specific eligibility requirement is at issue and suggest some ways the taxpayer can support their position. Listen for hesitation and try to determine if the hesitation is because the taxpayer doesn’t understand the requirement, is concerned about the difficulty of getting a particular document, or because they may not be eligible for the credit. To ensure that the taxpayer understands the requirements, ask the taxpayer to repeat back to you what they have agreed to provide.

Self-employed low-income taxpayers may not have bank accounts and may not use computer software programs or prepare invoices or contracts for services performed. However, these earnings are still taxable and count towards earned income which should be included for the taxpayer to prove eligibility for the EITC.

If the taxpayer is self-employed and proof of earnings is an issue, ask relevant questions about how the taxpayer receives payment for work performed and how the taxpayer keeps track of those payments.

If the taxpayer has not been keeping receipts of expenditures, they may be able to obtain printouts of purchases from a particular supplier to substantiate business expenses. If the taxpayer is unable to obtain printouts of purchases, ask the taxpayer if they are able to secure third party affidavits from regular customers to help establish an income pattern.

When necessary, consult a RATA to assist with identifying acceptable alternative documents.

Once you receive all the taxpayer’s information, prepare an OAR to support TAS’s position to allow the EITC. Make your request specific and direct, include the supporting documentation as an attachment, and explain the purpose of any alternative documents.

Advocating for the taxpayer includes presenting the taxpayer’s position, supported by facts and the law, to the Operating Division (OD)/Function so they can arrive at the correct determination. Presenting nothing more than a request for the OD/Function to make a determination does not advocate for the taxpayer’s position or communicate the facts of the case. Refer to IRM 13.1.19, Advocating With Operations Assistance Requests (OARs), for more information on creating well-developed OARs.

Document the OAR using the following points:

If the OD/Function denies the EITC for lack of adequate documentation substantiating a qualifying child, and you believe the documentation established the taxpayer’s eligibility, elevate the case to your manager or the LTA for consideration of a TAO, see IRM 13.1.20, TAS Taxpayer Assistance Order (TAO) Process

Taxpayers may be eligible for EITC within the provisions of IRC 32, even if they don’t have a qualifying child. If the taxpayer is not eligible to claim EITC with a qualifying child, determine if the taxpayer qualifies for EITC as an individual without a qualifying child, and request the OD/Function adjust the account and allow the EITC amount for an individual without a qualifying child.

Normally, the IRS conducts EITC audits by correspondence. TAS should help taxpayers seek other alternatives if the regular correspondence exam process for EITC audits present challenges that cannot be overcome through correspondence exam. Other options include helping the taxpayer get a face-to-face examination or if there is a dispute after the examination, educating the taxpayer on their appeal rights.

IRS will consider a written request for Examination Area Office interview. IRM 4.13.3.5.1(2), Transfers to an Area Office, provides guidance when taxpayers request a face-to-face interview. After you discuss with the taxpayer the type of alternative documents that will prove EITC eligibility, consider whether it might be helpful if the taxpayer could meet face-to-face with the IRS instead of having the audit conducted through correspondence. Advocating to get the taxpayer a face-to-face interview is an alternative to the correspondence examination process and may help the taxpayer overcome the challenges in proving EITC eligibility.

Encourage the taxpayer to cooperate fully during the examination process. If an agreement cannot be reached, educate the taxpayer on their appeal rights and, as appropriate, assist the taxpayer to assure the case is forwarded to Appeals. Appeals uses various conference methods to resolve tax disputes; most conferences are held by telephone or correspondence. The Appeals technical employee has discretion on the conference method in accordance with guidance found in IRM 8.6.1, Conference and Settlement Practices, Conference and Issue Resolution. Appeals can consider hazards of litigation, including the credibility of the taxpayer as a witness if the case were to go to court. For more information on assisting taxpayers in getting their EITC case to Appeals, see IRM 13.1.24.7, Introduction to Appeals Issues.

IRS employees make NFTL filing determination decisions in accordance with IRM instructions, including cases where installment agreements may be appropriate. IRM 5.19.1.6.4, Installment Agreement (IAs), (starting in paragraph (8)), and IRM 5.19.4.5.1, Notice of Federal Tax Lien Filing Determinations, describes the situations when the IRS makes an NFTL determination when it grants installment agreements.

For field collection installment agreements, see IRM 5.14.1.4.3, Notice of Federal Tax Lien and Installment Agreements.

In situations where the taxpayer’s individual facts and circumstances meet the criteria in IRM 5.12.2.4, Determination Criteria for Do-Not-File or Deferring the NFTL Filing, or one of the IRC 6323(j)(1) criteria for a NFTL withdrawal, TAS employees should advocate against the filing or a deferral of filing of a NFTL.

When making the decision to request that the Operating Division not file or defer filing a NFTL, you must carefully evaluate all of the facts and circumstances including the following:

The following situations are examples where TAS employees should advocate to defer filing the NFTL:

In analyzing your case, consider all the factors and determine whether the IRS NFTL filing is appropriate. Remember that this is not a complete list of factors, and that you should consider other relevant factors depending on the facts of your case.

If at any time you need assistance in determining whether it is appropriate to request that IRS defer or not file the NFTL or whether the taxpayer owns assets, contact a ROTA to discuss the individual facts and circumstances of your case. ROTAs have access to the asset locator services on Accurint.

If after considering all facts and circumstances of your case, you have determined that TAS needs to advocate for the non-filing or defer filing of a NFTL, forward the OAR to the Operating Division (OD) requesting acceptance of the Installment Agreement (IA), OIC, or Currently Not Collectible (CNC) and to defer filing a NFTL. In all cases, the OAR should request an OD manager’s review of any determination denying TAS’s recommendation to defer filing the NFTL.

Include language in the OAR to support your recommendation, clarify the issue, and explain how the non-filing or deferral protects the taxpayer’s right to privacy and confidentiality. Example: Due to the above taxpayer's financial situation, it is TAS’s position that [insert - the account be placed into CNC status / the OIC be accepted / the IA be accepted]. Due to the amount of the liability, a NFTL determination is required. TAS recommends deferring the filing of the NFTL in support of the taxpayer’s right to privacy based upon the following factors [explain how the taxpayer meets the criteria for deferred filing of the NFTL].

If the OD does not agree to defer filing the NFTL, evaluate the reasons given in support of filing the NFTL. If you still disagree, elevate the case to the LTA to consider issuing a TAO. If the LTA decides to issue a TAO, follow the procedures in IRM 13.1.20, TAS Taxpayer Assistance Order (TAO) Process. The TAO should order the IRS to defer filing the NFTL and must explain why, based on the law and the facts of the case, the filing is not appropriate. When preparing the TAO, consider language in the following example.

TAS should help taxpayers seek other alternatives if the regular process for resolving NFTL issues does not meet the taxpayer’s needs.

The first step in a CAP appeal is for the taxpayer to contact the collection employee’s manager. This conference should take place within 2 business days. A verbal warning of a lien or levy action can trigger the right to a CAP appeal.

If the taxpayer is not able to resolve the matter after discussing it with the manager, the taxpayer completes Form 9423, Collection Appeal Request. To avoid resumption of collection activity, IRS must receive the completed Form 9423 (or Form 9423 must be postmarked) within three business days of the conference with the manager. This deadline relates to resumption of collection activity, not a deadline for the right to a CAP appeal. Advocate for the IRS to honor “late” CAP requests.

Collection will forward the appeal to the appropriate Appeals office. Refer to IRM 5.19.8.4.16.4, How Does the Taxpayer Appeal an IRS Action.

The Appeals decision is binding on both the taxpayer and the IRS. However, in TAS cases that are in Appeals jurisdiction, Appeals has agreed to provide TAS the proposed determination in advance, and give TAS five workdays to elevate any concerns. See the Service Level Agreement (SLA) between Appeals and TAS. Collection must comply with Appeals’ decision. If the taxpayer defaults with any agreement made by Appeals, Collection is no longer bound by the terms of the agreement.

The taxpayer may not appeal the same issue in which a CAP appeal request has already been submitted and a determination has been made by Appeals. Form 9423 instructions also inform the taxpayer that providing false information, failing to provide all pertinent information, or an indication of fraud will void Appeals’ decision. See IRM 5.1.9.4.4, CAP Process, for additional information.

For every PDC inquiry, verify the collection contact received by the taxpayer is not a scam. Research IDRS to determine (based on the presence of a TC 971 AC 054) whether the IRS assigned any taxpayer modules to a PCA. The associated PDC ID number found on ENMOD or IMFOLE identifies the PCA (see IRM 5.19.1.5.21.2.1, Private Debt Collection Account Identification). If the IRS assigns the taxpayer’s module to a PCA and the taxpayer wants to work with the PCA (i.e., does not want TAS to open a case):

Create a TAS case for every inquiry received by TAS employees from taxpayers (or their representatives) assigned to a PCA.

Similar to suspending collection as an initial case action, removing taxpayer modules from PCA inventory prevents further taxpayer contact by the PCA and averts conflicting actions on the account.

Within 2-4 weeks of creating the TAS case, a batch process will recall the taxpayer’s modules from the PCA.

Because the PCA may continue to call the taxpayer during this 2-4 week period, encourage the taxpayer to mail by certified mail a written request to their assigned PCA stating that the taxpayer does not want to work with the PCA. Refer the taxpayer to the “Do Not Contact” sample letter located on the Private Debt Collection Program – What You Need to Know webpage at https://www.taxpayeradvocate.irs.gov/news/taxtips-private-debt-collection-program-what-you-need-to-know/. If the taxpayer does not have access to the internet, offer to mail the taxpayer two copies of the letter (one to keep for their records).

If the taxpayer does not want to mail the letter, or wants contact from the PCA to stop immediately, suggest the taxpayer call the PCA and tell the PCA they are working with TAS. The PCA will cease contact for 60 days, allowing time for the IRS to recall the module.

Inform the taxpayer they do not need to make payments requested by the PCA unless they want to; TAS will work with the taxpayer to determine their reasonable collection potential during the course of the case.

If the IRS assigned a taxpayer module to a PCA that meets a statutory exclusion per IRM 5.19.1.5.21.3.1, Legislative Exclusions to Private Debt Collection Criteria, or the module was designated CNC hardship before assignment, report the example on SAMS with the TAS case number.

TAS will take additional steps to expedite relief for taxpayers receiving Social Security benefits and whose income is at or below 250 percent of the federal poverty guidelines. Refer to the LITC page on irs.gov for 250 percent federal poverty guideline thresholds.

Analyze the case and discuss options with the taxpayer. Once the taxpayer decides on the appropriate resolution option and TAS has gathered the necessary documentation to advocate for relief, TAS will issue an expedited OAR for the IRS to take the action necessary to provide relief. If the IRS fails to act appropriately on the OAR, TAS will immediately issue a TAO ordering the IRS to take the action.

While working through the steps discussed above, issue TAOs as needed to advocate for the taxpayer. TAS will issue TAOs to the IRS as necessary to advocate to reduce the taxpayer’s balance due or for collection alternatives. This is especially true when the IRS fails to act on an expedited OAR and the taxpayer’s financial circumstances indicate they are unable to meet basic living expenses.

TAS Also Has Authority to Issue a TAO Directly to a PCA.IRC 7811(g) provides that TAOs apply to PCAs. Issue a TAO to the PCA if the:

TAS will follow the normal IRM 13.1.20, TAS Taxpayer Assistance Order (TAO) Process procedures to determine where to issue a TAO to the IRS. Any TAO to a PCA will be secure emailed to the IRS Technical Analyst assigned to that PCA. This will allow expedited secure communication with the PCA, especially if confidential documents need to be exchanged to resolve the TAO. TAS will also mail the TAO directly to the PCA. Use the PCA TAO Addendum to identify the correct IRS Technical Analyst, their IRS email address, and the PCA mailing address.

If the taxpayer wishes to file a complaint or report PCA employee misconduct, page 3 of Pub 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency, explains how taxpayers file those complaints with TIGTA. If the taxpayer insists on filing the complaint with TAS, forward the details (taxpayer name, TIN, TAS case number, PCA, PCA employee name if known, and details of the complaint) via secure email to the PDC Rapid Response Team at *TAS PDC Questions. Document in TAMIS the details of the taxpayer’s complaint, and the actions TAS took to forward the complaint.

If the taxpayer appears to meet income eligibility, educate the taxpayer about LITCs. LITC representation may be particularly helpful with ASFR/SFR reconsideration, audit reconsideration, or OIC applications. Refer the taxpayer to the Low Income Taxpayer Clinic Finder and Pub 4134, Low Income Taxpayer Clinic List.

If you issue an OAR requesting an installment agreement, do so only after the IRS recalls the case from the PCA (posted TC 972 AC 054). This prevents the possibility of the PCA simultaneously setting up an payment arrangement and ensures the PCA will not receive a commission based on work performed by TAS.

If you can advocate for other case actions via the OAR process, such as penalty abatement or CNC status, it does not matter whether the IRS has recalled the modules from the PCA. PCAs cannot perform these actions, and these actions will not trigger commissions to the PCA.

If you are unable to advocate for a resolution to the balance due, explain in your closing contact that the IRS may reassign the balance due accounts to a different PCA once TAS closes its case. If this happens and the taxpayer does not want PCA contact, remind the taxpayer that they can write a Do Not Contact letter to the PCA.

Focus initial TAS case building on determining the extent of the problem and stopping similar problems from occurring in additional tax periods.

Determine the tax periods affected and which tax forms, tax deposits, and tax payments were late, insufficient, or missing. Use IDRS research to verify IRS records match the employer’s records in adjacent tax periods, and the employer address of record is accurate. Research Form W-2, Wage and Tax Statement, and W-3, Transmittal of Wage and Tax Statements, filings to determine if the third party payer misconduct extended to those returns.

Identify proposed or assessed penalties and IRS enforcement actions taken using IDRS, ICS, AMS, and ALS.

Secure supporting documentation from the employer about the third party payer arrangement.

Initial TAS advocacy will stabilize the situation to give the employer and TAS time to propose a collection alternative to resolve the problem. These initial actions may include requesting suspension of collection action (see IRM 13.1.10.11, Suspending Collection Action) and recommending withdrawal of a Notice of Federal Tax Lien (see IRM 5.12.9, Withdrawal of Notice of Federal Tax Lien).

When the facts show third party payer bad acts caused failure to timely file or pay employment taxes, and the employer acted in a responsible and prudent manner, TAS will advocate for relief. The nature of TAS advocacy will vary for each tax period depending on certain facts.

If you identify a third party payer misconduct case where the actions of the third party payer affected multiple clients, notify your manager and add a submission to the Systemic Advocacy Management System (SAMS). The SAMS submission should include:

Reporting third party payer misconduct via SAMS is important so the IRS (especially Field Collection) learns of all potential victims of third party payer misconduct, and can coordinate fair and equitable treatment of the third party payer clients (especially those not in TAS). See IRM 5.1.24.5.1, Assignment of Third-Party Payer Client Cases. If third party payer misconduct victims are localized to a particular location, Systemic Advocacy may contact the local LTA to coordinate help for non-TAS taxpayers.

If the employer receives a CP 148A or CP 148B notice of an unauthorized address change, advise the employer to contact the IRS immediately. The IRS sends a notice to both the old and new address to protect taxpayers from unauthorized address changes made by third parties. An incorrect address means the employer will not receive future notices about balances due, penalty assessments, or unfiled returns.

Recommend the employer monitor third party payer withdrawals from their bank accounts and use their Electronic Federal Tax Payment System (EFTPS) Inquiry PIN to verify payments made by a third party on the employer’s behalf.

A summary of the steps the employer can take to protect themselves appears in the TAS Small Business website at Third Party Arrangements for Employment Taxes.

Further information can be found by searching for “outsourcing payroll duties” on www.irs.gov.

Use the National Office Use (N.O. Use) code “PSP” to identify cases involving taxpayers affected by third party payer misconduct.

IRC 6331 authorizes the IRS to collect tax by levy upon all property and rights to property, except property that is exempt under IRC 6334. IRC 6334 contains a list of property exempt from levy. A participant’s interest in a retirement plan is not exempt from levy under this section. Title 5 USC 8437(e)(3) provides that monies due or payable from the Thrift Savings Fund to a federal employee or member (or former employee or member) are subject to IRS levy for payment of delinquent taxes.

IRM 5.11.6.3(15) limits the amount of a retirement asset levy to exclude the amount subject to 20 percent federal income tax withholding per IRC 3504(c).

IRM 5.11.6.3, Funds in Pension or Retirement Plans, instructs IRS employees to conduct a three-step analysis in determining whether to levy assets in retirement plan accounts.

IRM 5.11.6.3 directs employees to use the standards in IRM 5.15, Financial Analysis, to establish necessary living expenses and further to use the life expectancy tables in Pub 590-B, Distribution from Individual Retirement Arrangements (IRAs), to estimate how much can be withdrawn annually to deplete the retirement account over the taxpayer’s life expectancy. Pub 590-B allows for the calculation of the taxpayer’s life expectancy, but it does not instruct the employee on how to estimate the annual withdrawals needed for the taxpayer to deplete the account. IRM 5, Collecting Process, contains no direction for the prediction of future growth, if any, of the retirement account and necessary living expenses. Use the steps described in the IRM 13.1.24.5.5 Supplement and Example to address this issue.

In cases involving a retirement asset levy, determine whether the IRS accurately applied the three-step analysis required in IRM 5.11.6.3, Funds in Pension or Retirement Plans. For step three, review the calculation used to determine the taxpayer’s need for retirement account assets.

Use the process outlined in IRM 13.1.24.5.5 Supplement and Example to evaluate the IRS determination. The process uses today’s dollars in both the retirement asset and necessary living expense categories. Attempting to estimate the future growth of either of these contains too many variables to ensure a consistent application for all taxpayers.

If the taxpayer did not request the levy on retirement assets (or ICS indicates the taxpayer requested the retirement asset levy, but the taxpayer informs TAS the IRS compelled the request by warning of future enforcement actions), and the taxpayer wants the levy released or levy proceeds returned:

If the taxpayer is considering requesting a retirement asset levy, educate the taxpayer about:

TAS employees can share the IRM 13.1.24.5.5 Supplement and Example with taxpayers and tax professionals to direct them to public calculators and provide them with a methodology to challenge IRS calculations.

On Taxpayer Screen 5 of the Taxpayer Advocate Management Information System (TAMIS), use Systemic Advocacy Use code “LVRET” to identify cases involving a levy release or return of levied property related to retirement plan assets. Do not add “LVRET” if the levy is on periodic payments from a retirement plan.

The Reasonable Cause Assistant is a decision-support software program designed to help IRS employees determine penalty relief for Individual Master File (IMF) Failure to File (FTF), IMF Failure to Pay (FTP), and Business Master File (BMF) Failure to Deposit (FTD) penalties through the Accounts Management Services (AMS) desktop application. See IRM 20.1.1.3.6, Reasonable Cause Assistant (RCA) for the RCA categories available for penalty abatement. The IRS requires its employees (including Revenue Officers but excluding Appeals employees) to use the program where available for penalty abatement requests. RCA programming applies reasonable cause standards against the reasonable cause categories chosen by the user and the answers selected and dates entered in response to the questions posed by the RCA. To reach the correct determination, users must choose the applicable categories and answers based on the information provided by the taxpayer.

TAS maintains access to the RCA for its employees, but it is not a substitute for analysis of the taxpayer’s facts, supporting documentation, and the law. Instead, TAS employees use the RCA to help determine how the IRS will evaluate the request for penalty abatement, which can assist TAS employees making OAR recommendations. See IRM 13.1.24.6.1.1.1.

In some cases, RCA will require documentation to support the taxpayer’s request before reaching a conclusion. The RCA will reach one of five possible conclusions for the MFT and the tax period reviewed (listed in order of priority):

The user can abort an incorrect conclusion. See IRM 20.1.1.3.6.10.1, Overriding (Aborting) RCA’s Conclusions. The abort conclusion requires an explanation, which the Office of Servicewide Penalties reviews. If the case includes unique individual facts and circumstances that the RCA cannot consider, those elements must be carefully analyzed and must show, in accordance with the reasonable cause guidelines, that despite the exercise of ordinary business care and prudence, the taxpayer was unable to comply within the prescribed time. A determination to abort/override the RCA’s conclusion cannot conflict with law or IRS policy.

TAS employees will generally follow these steps to advocate in penalty relief cases.

TAS employees will analyze the taxpayer’s information to determine how best to advocate for penalty relief based on their knowledge of the reasonable cause abatement provisions and the facts of the case prior to using the RCA. If the penalty is an IMF Failure to File, IMF Failure to Pay, or BMF Failure to Deposit penalty, TAS employees will use the RCA to analyze whether penalty relief may be appropriate due to reasonable cause, statutory exception, or administrative waiver. However, TAS employees should not base their determination to advocate for penalty relief based only upon the results of the RCA analysis. Rather the TAS employee should decide whether to advocate for relief based on the penalty relief standards as applied to the taxpayer’s individual facts and circumstances.

TAS employees have access to the RCA because use of the RCA helps build our case, even when TAS disagrees with the answer provided by the RCA. TAS employees using the RCA will determine what category or categories (if any) will result in abatement. If the RCA decides to sustain the penalty, TAS employees should review the facts and circumstances to determine if an RCA override is appropriate, and should consult ITAP if they need help making this determination.

TAS employees may encounter “in between” cases where it may be difficult to determine the proper OAR recommendation as described in IRM 13.1.24.6.1 (5) and IRM 13.1.19.5, Operations Assistance Request (OAR) - Preparation.

In these situations, TAS employees must use their good judgment and discretion to determine if a follow-up request to the taxpayer for more information would be beneficial. The follow-up contact could point out the weaknesses in the information received and suggest additional information that would strengthen the case. TAS employees should ask themselves the following questions when deciding whether to make a follow-up contact for additional information.

After careful consideration of these questions, TAS employees will again use their good judgment and discretion to determine whether to:

When the IRS disagrees with an OAR relief recommendation and sustains the penalty, TAS employees should review the reasons given to determine if and how TAS should dispute the determination. If TAS employees agree with the IRS’s explanation, then TAS employees will close their OARs without further action (or if the IRS suspended the request pending TAS review, TAS employees should advise the employee assigned the OAR to proceed with sustaining the penalty). The taxpayer can still exercise appeal rights per the denial letter. TAS employees will advise the taxpayer of their appeal rights provided in the denial letter during the closing contact per IRM 13.1.21.2.1(2), Closing Actions.

At any level of OAR disagreement, if the TAS employee believes that the IRS BOD/Function was incorrect in its rejection of an OAR, they should elevate the case for TAO consideration. Discuss appeal rights and options with the taxpayer or their representative if OAR elevation efforts are not successful at the BOD/Function level. Appeals can consider hazards of litigation. Discuss this with the taxpayer or their representative, and if the taxpayer decides to go to Appeals, the taxpayer must file an appeal to the denial of penalty relief. Once the taxpayer’s penalty appeal package is in Appeals, TAS employees can use the OAR process to advocate for penalty relief to Appeals. There are no administrative appeal rights on the IRS's denial of a request for a reduction of an IRC 6702 penalty. See Rev. Proc. 2012-43 to provide taxpayers with information on eligibility and the procedures for filing a request for a reduction of a IRC 6702 penalty. TAS employees will keep the TAS case open until Appeals makes its penalty relief decision. See IRM 13.1.21.2.2.2(1)(b), Appeals for more information.

See IRM 13.1.24.5.4 for advocacy information for employers affected by third party payer misconduct, including penalty relief and relief through offers in compromise.

A taxpayer may request penalty relief if a notice in standard print format was received requiring a taxpayer action, but the taxpayer did not timely respond because the notice was inaccessible. If the taxpayer informs the TAS employee that they are subject to penalties due to a delay in responding to a notice, consider whether a reasonable cause exception might apply in the taxpayer’s situation. See IRM 20.1.1.3.2.2.8, Inaccessible Notices, and IRM 13.1.6.9, Assisting Taxpayers Who Need Documents in an Alternative Media Format, for more information.

Under certain limited circumstances where hardship exists, the IRS may issue a manual refund without first satisfying outstanding federal tax liabilities. These refunds are known as OBRs. Generally, TAS has the delegated authority to issue OBRs if the account does not have an open control for the tax year of the overpayment. However, TAS is subject to the same rules followed by other IRS employees with similar authority. Similarly, TAS can only reverse an offset when there is legal authority to do so – and the legal authority that TAS must follow is the same legal authority applicable to the IRS. As with any other case, TAS must perform an analysis of the facts and applicable legal authorities when deciding whether to issue an OBR or reverse an offset that has already occurred.

OBRs are extremely time-sensitive, particularly with the improvements in return processing made possible by CADE 2. As a result, it is imperative that TAS employees be mindful of deadlines for requesting an OBR. If an employee will be on leave, is called out of the office unexpectedly, or has a large volume of work, it is the employee’s responsibility to bring any case involving an OBR to the attention of their manager immediately for reassignment. (See IRM 13.1.16.8.1, Immediate Elevation of Emergency Cases, and the example in IRM 13.1.18.4(1), Time Frames for Taking Case Actions.)

The following sections summarize OBR law and authorities.

IRM 21.4.6.5.11.1, Offset Bypass Refund (OBR), provides that a request for an OBR must be worked immediately upon receipt. An OBR must be issued before the overpayment has been offset. If the offset has already occurred, IRS employees are instructed to tell the taxpayer that the overpayment has been applied to the balance due account and the IRS cannot reverse the offset. Refer to IRM 21.4.6.5.11.1(6), Offset Bypass Refund (OBR), and IRM 3.17.79.3.16(5), Offset Bypass Refunds.

As described above, if a taxpayer has an IRS debt and a nontax debt for which offset is authorized under IRC 6402 (e.g., child support, student loan, unemployment compensation, state income tax debts, etc.) IRM 3.17.79.3.16(2)(Note) prohibits the IRS from bypassing either debt. The IRS debt must be paid.

Once the offset takes place, the IRS will not reverse the offset unless a clerical error occurred that prevented processing of the request. See IRM 21.4.6.5.11.1(11), IRM 3.17.79.3.16(5), and IRM 3.17.79.3.2(18), Processing Manual Refunds.

Per IRM 3.17.79.3.3(3), Issuing Hardship Refunds, a TRDBV print can be used when issuing a direct deposit hardship manual refund into a RAC/RAL account of an original electronic filed return.

When TAS receives a case involving a refund request, TAS must determine whether an OBR is permissible. TAS must research the status of the current year return (if already submitted for processing), and the taxpayer’s previous attempts to communicate the necessity for an OBR prior to receipt of the case in TAS (generally accomplished through review of the Accounts Management System (AMS)).

If the offset is imminent when TAS receives the request for relief (it generally is), TAS must recognize the short window for providing relief and act quickly. TAS must take into account whether there is an outstanding federal tax debt (in which case an OBR is permissible), and whether there is an outstanding child support debt, Federal agency nontax debt, state income tax obligation, or unemployment compensation debt (in which case an OBR is not permissible).

Currently, CADE2 processing generally results in the tax assessment (TC 150 or 23C date) reflecting the same date as the posting of the offset (TC 826), but the cycle dates of those transactions may appear on IDRS prior to the actual assessment and offset. Legally, an overpayment does not exist until the tax is assessed and the taxpayer’s payments or credits exceed the amount of the assessment. Therefore, until the return processing is complete including assessment of the tax (identified by the TC 150 or 23C date, not the cycle date), there is no overpayment available for offset. Legally, the offset cannot occur prior to the assessment. An OBR can be initiated prior to assessment but no later than the date of offset as reflected by the transaction codes (TC 150 for assessment of tax, and TC 826 for offset of the resulting credit.)

Once the tax is assessed (the 23C date), the overpayment is created and offset occurs, there is no longer any overpayment to refund and the OBR cannot be initiated. However, if a freeze code or other condition exists on the account, preventing the overpayment from offsetting to the outstanding liability, an OBR can be initiated because the overpayment is still available on the module (see IRM 21.4.6.5.11.1(6), Offset Bypass Refund (OBR).)

Figure 13.1.24-1

Screen Shot of an IDRS print displaying relevant information in 6 columns: 1st column lists the transaction code, 2nd column displays the posting date of the transaction, 3rd column displays the amount, 4th column shows the cycle date the transaction is visible on IDRS, 5th column displays the Document Locator Number, and the 6th column contains notes about the transaction (return received date, reference number, tax period the credit is offset to.

Please click here for the text description of the image.

If a clerical error occurred in the processing of the OBR, it may be possible to reverse the offset based on the clerical error doctrine and then issue the OBR.

In the legal context, a clerical error is an error resulting from a minor mistake or inadvertence, in writing or copying something on the record, and not from judicial reasoning or determination. For example, a clerical error includes:

TAS should advocate for an OBR where the following occurs before the offset:

If an IRS or TAS employee makes a clerical, inadvertent or ministerial error (as opposed to a substantive error in judgment) that prevented the processing of the OBR request prior to the date of offset, resulting in harm to the taxpayer, TAS should advocate by requesting the IRS to reverse the offset and providing TAS with written authorization to issue a manual refund. If the Operating Division (OD)/Function disagrees with TAS’s recommended actions, then the TAS employee should elevate the issue to the LTA for possible issuance of a Taxpayer Assistance Order (TAO).

It is important to recognize that refund offsets may be the only avenue for the IRS to collect from some taxpayers. Without the application of refund offsets, those outstanding liabilities continue to accrue more interest and penalties, so the taxpayer’s indebtedness to the government grows, potentially subjecting the taxpayer to enforcement actions like the filing of a Notice of Federal Tax Lien (NFTL) or a levy. TAS should educate taxpayers seeking OBRs about alternatives to resolving their outstanding liabilities, such as installment agreements or offers in compromise.

Alternatively, it is also important to recognize that many taxpayers facing refund offsets may not have sufficient resources to meet necessary living expenses and make payments towards their liabilities. It is not unusual for such taxpayers to experience economic hardship year after year, which may lead them to seek TAS assistance more than once. In these situations, TAS can advocate by exploring, with the taxpayer, the feasibility of adjusting withholding exemptions to reduce tax withholdings, resulting in increased take-home pay, improving the taxpayer’s financial situation. Just because a taxpayer has requested an OBR in one or more prior years is not, in and of itself, a reason to deny an OBR request in a current year.

TAS employees must always approach each case involving an OBR request with an advocacy perspective, reviewing the individual facts and circumstances to determine the best approach for providing relief or alternatives.

TAS employees do not have authority to solicit unprocessed original or amended tax returns. A TAS office is not considered a “designated filing location” for tax returns and TAS employees have not been delegated the responsibility to accept hand-carried returns. In general, the only exception for acceptance of returns by TAS employees is when the return is time-sensitive and the failure of TAS to accept the return would be detrimental to the taxpayer. The return is not received or filed, however, until the return is transmitted by TAS to the proper IRS filing location or hand-carried to an IRS employee who has the delegated authority to accept hand-carried returns.

In rare circumstances the taxpayer may send the unprocessed original return to TAS when requesting an expedite refund. Examples of these rare circumstances are:

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, changed the CTC beginning in tax year 2018. The changes included requiring a social security number and increasing the credit amount to $2,000 per qualifying child. It also created a new credit called the Credit for Other Dependents (ODC) which provides a non-refundable credit of $500 for certain other dependents.

As discussed in the National Taxpayer Advocate 2020 Objectives Report, TAS Will Urge the IRS to Reconsider Its Position on the Application of the Religious Freedom Restoration Act to the Social Security Requirement Under IRC § 24(h)(7), Which Has the Effect of Denying Child Tax Credit Benefits to the Amish and Certain Other Religious Groups and in a NTA blog post, The IRS’s Position on the Application of the Religious Freedom Restoration Act to the Social Security Requirement Under Internal Revenue Code § 24(h)(7) Has the Effect of Denying Child Tax Credit Benefits to the Amish and Certain Other Religious Groups, (subsequently amended and edited during the current NTA’s tenure), some taxpayers with deeply held religious beliefs, most notably the Amish, do not obtain SSNs due to these beliefs. The IRS subsequently revised IRM 3.12.3.26.17.6(2)(a), TIN Requirements (EC 287), indicating it will not allow the CTC on returns where the dependent does not have an SSN due to the taxpayer’s religious beliefs. Most typically, these would include returns filed by Amish and Mennonite taxpayers. The NTA does not agree with the IRS’s position. The NTA and TAS will continue to assert, pursuant to Sherbert v. Verner, 374 U.S. 398 (1963), that the IRS’s position abridges the free exercise of religion and may be in violation of the Religious Freedom Restoration Act.

Since the IRS is disallowing the CTC where a qualifying child does not have an SSN, these taxpayers may pursue one of two options:

To advocate effectively for the position the taxpayer chooses, you will need to discuss both options with the taxpayer after you complete your initial research. Ensure the taxpayer understands that if they so choose you will advocate for the CTC despite the IRS’s position. Our advocacy will be based on the NTA’s disagreement with the IRS’s position which is outlined in the articles noted above. Be aware that the Amish and Mennonites are averse to litigation. See CABIC 325, Invalid Dependent SSN/Name, for more information.

Advocate for a resolution that will remove the taxpayer from the criteria for the Passport Certification Program. For example:

Analyze the situation and discuss the options with the taxpayer. Once you have decided on an option, gather the necessary documentation to advocate for the selected relief. If the case is complex and may take time to fully resolve and the taxpayer has a need for a passport, discuss with the taxpayer the possibility of entering into an Installment Agreement or Partial Pay Installment Agreement while working on a longer-term resolution, to have the taxpayer decertified. Ensure your TAMIS histories show the reason the advocacy option was selected and your efforts to secure the necessary documentation.

If the taxpayer has planned foreign travel within 45 days, lives abroad, or has another compelling reason for the passport, use expedited OARs with short requested completion dates to resolve the debt. If agreement is not reached on your OAR, immediately elevate the situation to your LTA for issuance of a TAO.

If the taxpayer’s need for foreign travel is related to an emergency or humanitarian situation, IRM 13.1.24.8.6 explains the discretion the Department of State can exercise while the taxpayer remains certified.

Once the taxpayer meets a criterion for decertification under IRM 5.19.25.10, Reversal of Certification, review IRM 13.1.24.8.8 to determine if the account will require manual decertification. If so, send an OAR to the SB/SE Passport Office seeking manual decertification.

If the taxpayer has an imminent need for a passport as defined in IRM 5.19.25.10.1, Expedited Decertification, gather the supporting documentation described. If the IRS function that resolved the debt did not complete and sign page one of Form 14794, Expedited Passport Decertification, prepare the form for LTA signature on page one.

Send an expedited OAR to *SBSE Passport Group mailbox, requesting that the taxpayer be decertified within one business day. Include the signed Form 14794 and the required documentation. If the OAR is not complied with timely, or if you disagree with the response, immediately elevate the case to your LTA for issuance of a TAO.