Currently, the Audit Information Management System (AIMS) website and the IRM indicate certain fields on Form 5344 are not required to be completed by examiners. However, these directions are intended for income tax examiners. Report Generation Software (RGS) is a program used for income tax that will populate certain fields on closing documents, making the completion of certain fields on the Form 5344 unnecessary for income tax examiners. Due to the difference in report writing availability, there are different expectations for employment tax examiners.

The following fields on Form 5344 will be completed by the employment tax examiner when closing a case:

Rev. Proc. 2010–16, IRB 2010-1 CT 664 defines "last known address" as the address on the most recently filed and properly processed tax return unless the taxpayer has clearly and concisely notified the Service of a change of address. The Service may also update the taxpayer's address of record with a new address obtained from the United States Postal Service's (USPS) National Change of Address database (NCOA database) in accordance with Treas. Reg. 301.6212-2. The NCOA database is sent to the IRS on a weekly basis at which time master file is updated with any changes.

If there is any doubt as to what the last known address is, additional duplicate original Letters 3523 must be sent by certified or registered mail to each known address.

A statement signed by the taxpayer informing the Service to change the address of record is considered clear and concise notification. The statement must also contain the taxpayer's full name, signature, old address, and social security number and/or employer identification number.

Form 8822, Change of Address, may be used to make the change.

Correspondence sent by the Service that solicits or requires a response from the taxpayer that is returned to the Service by the taxpayer with corrected taxpayer address information constitutes clear and concise notification of a change of address (even if the taxpayer's signature is not on the correspondence).

Standing alone, a new address reflected on any of the following will not constitute clear and concise notification of a new address and, therefore, should not be used to change an address of record:

The following are elements of a new, complete address:

There must be no abbreviations in the taxpayer's address, except for the two-letter state code. However, if the last known address reflected on the last filed and properly processed tax return contains abbreviations, then that address (with abbreviations) may be used. If notices are sent to foreign countries, the name of the country must not be abbreviated.

Address changes to perfect an error in the existing address may only be made based on the taxpayer's oral statement (e.g., telephone or walk-in contact). These changes must be provided to the Service employee who initiated the contact after receipt of an account or adjustment request from the taxpayer.

Authentication of the caller's identity using the criteria in IRM 21.1.3.2.3, Required Taxpayer Authentication, and IRM 21.1.3.2.4, Additional Taxpayer Authentication, is required before making changes to the taxpayer's address of record.

Any request solely for an address change, other than for perfection or in connection with an open account or adjustment request, must be in writing.

The following steps must be taken to determine the taxpayer's "last known address:"

If a power of attorney address is the taxpayer's last known address, the Letter 3523 must be addressed as follows:
Doe's Construction
In care of Power of Attorney's Name
Power of Attorney Address

Reclassified workers must be named, if known, in Table 1 of Letter 3523, with the appropriate periods identified. The workers must be readily identified on a listing completed by the examiner. If there is confusion among similarly named individuals, examiners must provide the job description of the workers and make sure they explain what steps were taken to obtain the names and, if they are unavailable, the reason they are unavailable. Examples of identifying information include the shift worked, the specific job performed, etc. The use of social security numbers for identification of workers is not allowed on the Letter 3523.

Examiners will indicate with a mark (e.g., a check mark or an "X" ) the quarters each worker is being reclassified. Dollar amounts are not to be listed in Table 1.

If the names of the specific workers are not known, the workers must be named by job category or job description in Table 1 of Letter 3523.

Table 1 of Letter 3523 must be as specific as the case facts allow.

Do not use job categories such as "workers paid in cash" or "workers pursuant to information maintained by the taxpayer" for numerous reasons, including application of rates under IRC 3509, application of section 530 of the Revenue Act of 1978 (section 530), and establishing basic case development before the court.

If there are more workers than can fit in Table 1, an attachment may be used to reproduce Table 1. The attachment must be clearly identified at the top as "Table 1 Attachment to the Letter." Table 1 of Letter 3523 must reference the attachment by inserting "See Table 1 Attachment to the Letter."

Workers who were treated as employees by the taxpayer and received additional compensation determined to be a IRC 7436 wage issue are listed in Table 2 of Letter 3523. If known, the names of each worker are listed along with identifying information (such as job description, the shift worked, or the specific job performed) if there could be confusion among similarly named individuals. If individual names are not known, examiners must document in the case file the steps taken to obtain the names and the reason why the names were not available. The use of social security numbers for identification of workers is not allowed on the Letter 3523.

Examiners will indicate with a mark (e.g., a check mark or an "X" ) the quarters each worker is being reclassified. Dollar amounts are not to be listed in Table 2.

Generally, the names of the workers listed in Table 2 must be known since these workers were treated as employees by the taxpayer and were issued Forms W-2. However, if the names of the specific workers are not known, the workers must be named by job category in Table 2 of Letter 3523.

Table 2 of Letter 3523 must be as specific as the case facts allow.

Do not use job categories such as "workers paid in cash" or "workers pursuant to information maintained by the taxpayer" must not be used with reasons including application of rates under IRC 3509, application of Section 530 of the Revenue Act of 1978 (Section 530), and establishing basic case development before the court.

If there are more workers than can fit in Table 2, an attachment may be used to reproduce Table 2. The attachment must be clearly identified at the top as "Table 2 Attachment to the Letter." Table 2 of Letter 3523 must reference the attachment by inserting "See Table 2 Attachment to the Letter" .

Tables 3 and 4 of Letter 3523, must include the Service's calculation of the proper amount of employment tax, additions to tax, and/or penalties that arise from the adjustments related to the workers listed in Tables 1 and 2. Examiners will include a "working copy" draft of Tables 3 and 4 of Letter 3523.

The information about the proposed employment tax assessment must be moved from the reports (Form 4667 and/or Form 4668) to Tables 3 and 4 of Letter 3523.

The amounts must be organized by type of employment tax rather than by type of return and listed separately for each quarter:

The total FUTA tax will be reported in the December 31 tax period.

For substitute for return cases, the failure to file penalty (FTF) under IRC 6651(a)(1) and the failure to pay penalty (FTP) under IRC 6651(a)(2) are applicable. If the FTP has not reached the maximum (i.e., less than 50 months), an attachment to the letter must be completed with an explanation that the penalty will continue to accrue until paid. This statement should be similar to that included with regular statutory notices of deficiency. See IRM 4.8.9.16.2.5, Substitute for Return IRC Section 6651(g), for penalty explanations used with notices of deficiency.

A copy of Form 4666, Form 4667, and Form 4668 must be attached to Letter 3523 to explain which rates were used in calculating the employment taxes.

Date of Report - enter the date the report is completed.

Type of Report - check the applicable box.

Unagreed or Agreed - check the applicable box.

Non-IRC 7436 adjustments, IRC 7436 adjustments (worker classification issues), IRC 7436 adjustments (wage issues) - check the applicable box. Since Letter 3523 only includes IRC 7436 adjustments, the non-IRC 7436 adjustments box must never be checked. If Letter 3523 includes both worker classification and IRC 7436 wage issues, both the IRC 7436 adjustments (worker classification issues) and IRC 7436 adjustments (wage issues) boxes must be checked.

Calendar Year (Column a) - for annual returns, list calendar years examined. For quarterly returns, list only the year if all its quarters result in a change. When a combination of change and no-change occurs in one year's examination, show the year followed by the quarters, grouping the changes on one line and the no-changes on another line.

Return Form Number (Column b) - self-explanatory

Delinquent Tax, Increase(Decrease) in Tax (Column c) - enter the total amounts on line 5 of Forms 4668 and/or on line 8 of Form 4667.

Penalty (Column d) - enter the applicable code sections and the total amount of penalties from line 11 of Forms 4668 and/or line 9 of Forms 4667.

Total (Column d) - enter the sum of Columns c and d for each line.

Other Information - enter: "This does not constitute an income tax examination." Also, enter such items as statements regarding revised or corrected reports, delinquency, information regarding penalties, explanation of adjustments, etc.

Date of Report - enter the date the report is completed.

Type of Report - check the applicable box.

Agreed or Unagreed - check the applicable box.

Non-IRC 7436 adjustments, IRC 7436 adjustments (worker classification issues), IRC 7436 adjustments (wage issues) - check the applicable box. Since Letter 3523 only includes IRC 7436 adjustments, the non-IRC 7436 adjustments box must never be checked. If Letter 3523 includes both worker classification and IRC 7436 wage issues, separate Forms 4667 must be prepared for each type of adjustment.

Line 4 - enter applicable rate from Form 940.

Line 9 - enter IRC section number if other than IRC 6651 or IRC 6656.

Line 10 - use a separate column for each state and experience rate period.

Line 11 - use a separate column for each state and experience rate period and enter calendar year if the taxpayer does not have an experience rate or where the experience rate is constant throughout the year.

Line 12 - enter the experience rate as determined by the state. If the experience rate exceeds 5.4%, enter 5.4%.

Line 13 - enter taxable FUTA wages as corrected in the examination. This must be the same as line 3.

Line 14 - enter the amount of wages subject to state tax that has been reported to the state. This will include the amount reported on the original return to the state plus any additional wages subsequently reported for which the taxpayer has received a statement from the state acknowledging the additional wages reported. The taxpayer must be given 30 days to obtain such statement from the state. If the taxpayer's experience rate is 0%, enter the wages that would have been subject to state unemployment tax if the 0% rate had not been granted.

Line 15 - enter 5.4%. Line 24 will be the same percentage.

Line 19 - Use the Worksheet for Credit Computation found in the instructions to the Form 940 to correctly compute the allowable credits if some of the taxable FUTA wages were excluded from state unemployment tax OR if any state unemployment tax was paid late.

Line 18 - enter contributions timely paid.

Line 21 - for any state to which the credit reduction is applicable, enter the rate from Form 940 for the year under examination.

Other Information - include such items as statements regarding revised or corrected reports, delinquency, explanation of adjustments, information regarding penalties, etc.

Return form number - enter 941, 943, 944, or Schedule H.

Name and address of employer - self explanatory.

Employer identification number - self explanatory.

Calendar year - self explanatory.

Total tax plus penalty or (decrease) in tax - enter the total amount of lines 13 through 16.

Last quarter of this examination - enter the last quarter of the latest calendar year being examined.

Examination discussed with - self explanatory.

Agreed or unagreed - check the applicable box.

Non-IRC 7436 adjustments, IRC 7436 adjustments (worker classification issues) IRC 7436 adjustments (wage issues) - check the applicable box. Since Letter 3523 only includes IRC 7436 adjustments, the non-IRC 7436 adjustments box must never be checked. If Letter 3523 includes both worker classification and IRC 7436 wage issues, separate Forms 4668 must be prepared for each type of adjustment.

Line 1 - Enter the combined employer/employee social security and medicare rates (IRC 3101 and IRC 3111) in Column a and the amount of the wages adjustment in Columns b through e.

Line 2 - Enter the applicable social security and medicare rates under IRC 3509(a) in Column a and the amount of wage adjustment in Columns b through e.

Line 3 - Enter the applicable social security and medicare rates under IRC 3509(b) in Column a and the amount of wage adjustment in Columns b through e.

Line 4 - Enter the applicable social security and medicare rates (IRC 3101 and IRC 3111, if applicable) in Column a and the amount of the adjustment in Columns b through e.

Line 5 - Enter the applicable income tax withholding rate in Column a and the amount of the wage adjustment in Columns b through e.

Line 6 - Enter the applicable income tax withholding rate(s) under IRC 3509 in Column a and the amount of the wage adjustment in Columns b through e.

Line 7 - Enter the applicable rate in Column a and the amount of the payments subject to backup withholding in Columns b through e.

Line 8 - Use for any adjustment that does not affect an employee's social security or medicare wages.

Line 9 - Use for any adjustment that does not affect an employee's income tax withholding wages.

Line 10 - Compute the social security and medicare taxes for lines 1, 2, 3, or 4 and adjustment for any amounts on line 8.

Line 11 - Compute the income tax withholding for lines 5 or 6, and adjust for any amounts on line 9.

Line 13 - Enter the total of lines 10, 11 and 12.

Line 14 - Enter the amount of penalty under IRC 6651.

Line 15 - Enter the amount of penalty under IRC 6656.

Line 16 - Enter IRC section number in space provided for any other penalty and the amount of the penalty in Columns b through e.

Line 17 - Enter the maximum amount of tax subject to the provisions of IRC 3402(d). If not applicable enter "None" . The tax from line 6 (IRC 3509) and any portion of line 9 that is not subject to IRC 3402(d) cannot be abated.

Enter the calendar year and the number of employees in the spaces provided in the statement regarding filing Form W-2c. Complete the mailing address.

If Area Counsel suggests changes to the proposed Letter 3523, the following actions will be taken:

All written communications to/from Area Counsel must be kept in the case file.

Letter 3523 subject to mandatory review must be submitted to Area Counsel with at least 60 days remaining on the ASED. If less than 60 days remain, the Technical Services group manager will call the appropriate Area Counsel to advise him/her of the imminent statute case and to coordinate the case review. The case must be hand delivered, if possible. If hand delivery is not possible, the case will be sent via express mail.

Area Counsel will return the case to the Technical Services reviewer within 45 days of receipt. The reviewer will follow-up on any case that has been pending in Area Counsel for more than 45 days and document the results on the reviewer's activity record.

Prepare Form 3210, Document Transmittal, and a cover memo to transmit a case to Area Counsel for review of the Letter 3523. The memo will include the following:

The reviewer must clearly mark the case "priority handling" for any imminent statute.

The reviewer must ensure the case is updated to Review Type 42 and Suspense Code 542 on ERCS to indicate the case is with Area Counsel for review.

Under Circular 230, Regulations Governing Practice before the Internal Revenue Service, and Treas. Reg. 601.502(b)(5)(iii), an unenrolled return preparer may only represent a taxpayer in the examination process for the tax year or period covered by returns the unenrolled return preparer prepared. An unenrolled return preparer may not represent a taxpayer beyond the examination process.

A copy of Letter 3523 cannot be sent to an unenrolled return preparer, even if authorized to receive such notice, since they cannot represent the taxpayer beyond the examination process.

Letter 4369 - A, Letter 3523 Not Sent to Representative - Limitations to Practice Before the IRS, will be sent to the taxpayer with the Letter 3523 to notify him/her that a copy of Letter 3523 was not sent to the unenrolled return preparer.

AIMS 4.0 Table is generated monthly and provides:

Each Technical Services group, including Letter 3523 suspense unit, is expected to reconcile the 4.0 Table with the ERCS Statute Pending Report on a monthly basis. The group should:

Instructions for working the 4.0 Table are contained in IRM 4.4.27.5.1.1, Procedures for Working Statute Control Report. At a minimum, the following should be completed:

When telephone contact is made, the designated contact person will:

Inform the taxpayer that Letter 3523 gives them three options:

If the taxpayer does not agree, but does want to stop the continuation of interest, he/she may make a deposit under IRC 6603. Revenue Procedure 2005-18, IRB 2005-13, provides that the payment must be accompanied by a written statement designating the remittance as a deposit (known as a "IRC section 6603 Deposit" ).

It is imperative that all telephone contacts are documented in the case history, and a copy of any written documentation received is placed in the case file.

When correspondence is received, the designated contact person will:

Letter 556-A, Acknowledgement of Protests, Correspondence and Requests for Interviews - Employment Tax, is to be used to acknowledge receipt of the correspondence if the taxpayer is not contacted by telephone.

The taxpayer must be clearly informed that reconsideration of the case will not suspend or extend the period for filing a petition with the U.S. Tax Court.

The reviewer may determine that the case must be sent back to the originating examination group for consideration of additional information.

If the case is returned to the group, follow the procedures outlined in IRM 4.8.10.9.3.4 below.

All contacts and actions taken on the case after Letter 3523 is issued must be recorded in the case file.

When the taxpayer submits additional information or requests an appointment, the designated contact person will:

All 90 day cases must be returned to the 90 day suspense area for final disposition.

If the designated Letter 3523 reviewer determines that a case must be returned to the group for consideration of the correspondence and/or information received, the reviewer will prepare a Form 3990, Reviewer's Report, to transmit the case to the group. The Form 3990 must instruct the group to return the case to Technical Services as soon as their reconsideration is complete or prior to the default date. The Form 3990 must also instruct the group that the taxpayer must be informed during each contact (both verbal and written) that reconsideration does not suspend or extend the time to file a petition with the United States Tax Court.

Because the ASED has already been updated to reflect the maximum assessment date (based on a default), the group must be cautioned about the ASED, particularly for those cases for which Letter 3523 was issued with little time remaining on the normal ASED.

The Form 3990 must include a detailed explanation of the ASED shown on the AIMS/ERCS system. The following sample paragraphs may be used for this purpose:

After the Form 3990 is prepared, the case file and Reviewer's Report should be given to the Group Manager for signature.

Once the manager approves the Reviewer's Report, the case should be given to the notice suspense unit for preparation of a "dummy file" . This file is used as a back-up in the event it becomes necessary to make an immediate assessment and is filed in the suspense files. The file should include:

Once the group has completed work on the case, it should be returned directly to the reviewer. The Letter 3523 reviewer is responsible for notifying the taxpayer of the final outcome of the reconsideration via Letter 555-A, Reconsideration After Statutory Notice - Employment Tax, or Letter 645-A, No Change - After Letter 3523 Issued.

The reviewer will then return the case to the notice suspense unit to either close the case if agreed or no-changed, or to continue suspending the case if the 90 day (150 day) suspense period has not expired. The notice suspense unit will destroy the dummy file when the original case file has been returned, ensuring that Letter 3523 still remains with the case file.

If the taxpayer requests transfer of a Letter 3523 to another area, the area that issued Letter 3523 may transfer the case.

Associate the correspondence with the case file and forward the file to designated Letter 3523 reviewer to approve and provide instructions.

Technical Services staff will update ERCS for the transfer per the reviewer's instructions and mail the case via Form 3210, Document Transmittal.

After the Tax Court serves the taxpayer's petition(s) to the Commissioner, the docket list is established by the Docket and Records Branch, Legal Processing Division, in the Office of the Associate Chief Counsel (Procedures and Administration) directly on the Tax Litigation Counsel Automated Tracking System (TLCATS). Once entered on TLCATS, the petitions and files are mailed to the assigned Appeals offices. Additionally, a hard copy of the list is e-mailed as an attachment to employees in the various operating divisions/functions who are members of an e-mail distribution list maintained by Counsel.

The hardcopy docket list shows:

In addition to creating and distributing the hardcopy docket list by e-mail, Counsel also posts the docket list as a file to a server.

The hardcopy docket list is one method of identifying taxpayers who have filed petitions to the U.S. Tax Court.

One advantage of the hardcopy docket list is the speed of delivery. The docket list is usually generated within one or two business days of when the petitions are received. Since the list is then disseminated via e-mail to the users on the distribution list, it is received no more than three (3) business days from the petition's receipt.

One disadvantage of the hardcopy docket list is that the list includes the petitions for all Areas and are in docket number order only. Therefore, all users get the same listing and must go through each page to locate the petitions for the cases they control or need to locate.

For more detailed information concerning TLCATS, refer to IRM 30.7.1, Management Systems; Information Systems.

The Docketed Information Management System (DIMS) is an automated Appeals program similar to the docket list.

Appeals downloads the docket list file from the server and posts it on its automated system, DIMS, a sub-system of the Appeals Centralized Database System (ACDS).

The DIMS system is available to both Appeals and non-Appeals employees responsible for issuing and monitoring notices or letters containing Tax Court rights. Access to DIMS is obtained through the Online 5081 process.

The DIMS system listing is another method of identifying taxpayers who have filed petitions to the U.S. Tax Court.

One advantage of the DIMS system over the hardcopy docket list is that users are able to print either the entire list or sort the list so that it contains only the cases they control or need to locate.

One disadvantage of the DIMS system is that it is produced after the hardcopy docket list.

For more detailed information concerning DIMS, refer to IRM 8.4.1, Appeals Docketed Cases, Procedures for Processing and Settling Docketed Cases.

The last method of identifying docketed cases is through the U.S. Tax Court website (http://www.ustaxcourt.gov). This method is used for 90 day (150 day) cases that are not otherwise identified as petitioned on the hardcopy docket list or the DIMS list. These cases would be defaulted and processed for assessment. Before the cases are closed to Centralized Case Processing, each defaulted taxpayer is checked against the taxpayer database on the Tax Court website.

On the website's home page, select the tab titled "Docket Inquiry."

The Docket Inquiry screen allows the user to search by docket number, individual party name, or corporate name keyword. Since this method is used primarily as a safe guard for defaulted cases, the docket number is usually not known.

The Docket Inquiry page also has a Docket Inquiry Help link that will provide information on how to use the search functions. The help resource does not provide a topical search database. It merely provides general information on how to use each of the three search functions.

The Individual Party Name search page asks for the taxpayer's last name, first name, middle initial, and state code.

The Corporate Name Keyword asks for at least one keyword. The page also includes a link to a list of excluded keywords that cannot be used in the keyword search.

Docket records are available on the website for cases filed on or after May 1, 1986. The docket entries are updated Monday through Friday at approximately 6:00 p.m.

The advantage to this method is that it ensures the most diligent search possible and helps to prevent a situation in which Technical Services must re-establish a closed case because a petitioned taxpayer is untimely identified.

The disadvantage to this method is that it requires a direct search by taxpayer name, and each individual taxpayer must be searched separately.