Purpose. This IRM provides specific procedural guidance for revenue officers (ROs) when requesting adjustments on accounts involving international taxpayers (TPs).

Audience. Field Collection employees, including revenue officers and revenue officer group managers, are the primary users of this IRM.

Policy Owner. Director, Collection Policy, SB/SE.

Program Owner. SB/SE, Collection Policy, Global Strategic Compliance (GSC).

Primary Stakeholders. SB/SE Field Collection (FC).

Ensuring compliance with U.S. tax law in international cases can be extremely complex. As an international revenue officer (RO), you must consider a taxpayer's tax status, sources of foreign income, and applicable treaties when determining the taxpayer’s filing requirements.

For Automated Substitute for Return or Substitute for Return (ASFR/SFR) reconsiderations on U.S. citizens and resident aliens living abroad, an original Form 1040, U.S. Individual Income Tax Return, must be submitted with appropriate forms and schedules (i.e. Form 2555, Foreign Earned Income, Form 1116, Foreign Tax Credit). Any Form 3870, Request for Adjustment, for a U.S. citizen, resident alien, or green card holder must have an original return submitted. The return must bear an official IRS date stamp and an original signature. If a joint return, both parties must sign the tax return

An international revenue officer must generally secure an original Form 1040NR, U.S. Non-resident Alien Income Tax Return, with all supporting schedules to submit for an adjustment on ASFR/SFR cases for non-resident aliens.

All IMF international tax returns are processed at Brookhaven campus, even those with only wages. Send IMF international returns to the Brookhaven campus at the address shown below.

For non-resident aliens (NRAs) with an ASFR/SFR adjustment, when no return is secured further investigation is required to determine the taxability of the income. In addition to analyzing sources of income and provisions of applicable treaties, you will have to verify a taxpayer’s personal documentation or research internal and external locator sources when appropriate. Do not request adjustment without actually communicating with the taxpayer and obtaining any needed information or applicable return.

The key to recommending an adjustment on an NRA assessment is that you are not just taking the taxpayer’s word for not being liable to file. It may not always be possible to determine or verify the taxpayer’s status when considering an international adjustment. It will be necessary to rely on a preponderance of evidence that reasonably seems to confirm what the taxpayer indicates to you by both the taxpayer's proof and/or the use of locator sources.

The following are guidelines that must be considered in adjusting ASFR/SFR assessments regarding NRAs.

Determine taxpayer’s citizenship:

Determine if there is effectively connected income:

Determine if taxpayer meets the substantial presence test:

Determine if the taxpayer paid the taxes to a foreign government. The taxpayer may indicate that they paid taxes to the foreign government and do not owe the U.S. taxes. The taxpayer must provide evidence of payment in the form of a cancelled check, documentation of a wire transfer, a copy of the relevant return filed in the foreign country, or other indication of taxes withheld by a foreign government, pursuant to a treaty.

Determine if there is an applicable treaty.

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by IRS. The ITIN is only available to individuals who:

Generally a U.S. Federal income tax return must accompany the ITIN application.

Procedures for requesting an ITIN for cases in which ASFR/SFR reconsideration is needed have often caused delays and confusion in processing Form 3870. Both the ITIN Operation and the ASFR/SFR unit need the original return to process the corresponding requests. The ITIN unit at the Austin campus requires the original tax return and supporting documentation be attached to Form W-7 when submitted for processing. However, the original tax return must also be attached to Form 3870 in order to process the reconsideration request. Form 3870 for the reconsideration request is sent to the Brookhaven ASFR/SFR unit.

The following procedures should be used in all cases where a taxpayer is requesting an ASFR/SFR reconsideration and is submitting Form W-7 for an ITIN:

Sometimes when filing Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, a qualified intermediary (QI) mistakenly does not claim credit on line 66 of the form for the withholding that was done, either by himself or someone else. QIs can claim the withholding credits, based on the Forms 1042-S issued to them, even though they are not the actual withholding agent.

In such cases, it will be necessary for the revenue officer to obtain copies of the Forms 1042-S, Foreign Person's U.S. Source Income Subject to Withholding, issued to the QI that reflect the withholding. See IRM 5.21.7.3.1, Procedures for Working Qualified Intermediary Cases.

The following substantiation must accompany Form 3870 when an adjustment is requested for Form 1042 line 66 after the due date of the return:

Before submitting an adjustment, review the forms for common errors, such as entering the credit on the wrong line.

Forward Form 3870 with substantiation attached to Centralized Case Processing (CCP) for processing using your area mailbox. Any forms sent directly to Accounts Management (AM), without being routed through CCP, will be rejected.

The Entellitrak (E-TRAK) system can be used to secure information about the Forms 1042-S. When ROs request the E-TRAK information, they must put something in the Integrated Collection System (ICS) history indicating that they sent the request to the group's E-TRAK resource person, and include that person's name. No GM approval is required and there is no need for the E-TRAK resource person to access the case to verify completion of the request.

For purposes of adjustment requests, at the time of this revision Accounts Management (AM) will not accept E-TRAK prints in lieu of copies of Forms 1042-S. However, AM has agreed to accept the information from IDRS command code IRPTRL in lieu of copies of Forms 1042-S. Revenue officers can use the summary page on IRPTRL as verification for Form 1042 line 66 credit. The RO does not have to print all the Form 1042 credits on IRPTR. The RO must use document code 02 when obtaining IRPTRL prints. This will specifically show the Form 1042 credits.

The credits reflected on IRPTRL must match the credits claimed on the Form 1042.