Use Form 8758, Excess Collection File Addition, to transfer payments and credits to the XSF.

Attach current IDRS print (TXMOD/IMFOL/BMFOL) that shows the amount of credit on the account as well as the research performed prior to transferring to XSF. If any other IDRS command codes are researched, list the command codes used and state the analysis of your finding for each code. If no additional research is required, you must state on the Form 8758, Excess Collections File Addition, that no additional research was required on the barred credit and enter "Statute Team" in box 16 of the form. If a payment is not received with the late filed amended tax return no letter is sent to the taxpayer. If the taxpayer files a timely amended tax return with payment and the IRS employee fails to assess the tax prior to the ASED passing, no letter is sent to the taxpayer. Failure to provide proper audit trail of the barred assessment document on the Form 8758, Excess Collections File Addition, will be rejected by XSF employee back to the originator.

See IRM 3.17.220.2.2.1, Preparation of Form 8758, for instructions in the preparation of Form 8758, Excess Collections File Addition. See IRM 3.17.220.1.8, Trace ID Number for Tracking Credits, when completing box 21 of Form 8758, Excess Collections File Addition.

Use a separate Form 8758, Excess Collections File Addition, for each credit which is to be applied to the XSF. You must input TC 570 on all Forms 8758 (Box 8 to prevent credits from releasing for refund or offset when credits are transferred to XSF) when multiple credits are being applied.

Statute employees must check box 16 of Form 8758, Excess Collections File Addition, with the appropriate statement below when adding credits to XSF:

Use the Return Due Date (RDD) for TC 806 when transferring credits to XSF. Use the actual date(s) of payments reflected on the tax module and the DLNs of the payments when transferring estimated tax payments, subsequent payments, federal tax deposits, or credit elect. Credits and payments often applied to XSF are:

Exercise caution when resolving statute cases. Multiple tax modules may be involved in multi-function action and tax assessments may/may not have been made. Examples of "refund/credit statute" cases requiring further research and possible action are:

See IRM 3.17.220, Excess Collections File, for additional instructions for preparing Form 8758, Excess Collections File Addition.

As soon as a record is added to the XSF, it is available for research at any IDRS terminal. Any function that establishes control bases on its cases and adds a credit to the XSF, may consult CC XSINQ to determine appropriate closure of its control base.

Use CC XSINQ to research XSF by amount of credit, name control or by DLN. You must input at least one of these elements. The search is narrowed by using as many of these pieces of information as possible. See IRM 3.17.220-8, CC XSINQ, for further information.

Use Form 8765, IDRS Control File Credit Application, to transfer credits from the XSF. The credits that were previously sent to XSF need to be returned to the taxpayer's account before the processing of a return is completed, in order to prevent any balance due notices from being sent in error.

On claims for credit or refund after the RSED has expired, you must only bring back from XSF allowable credits or payments which will satisfy the balance due amount. Determine if an amount can be refunded or credited to another tax module after the RSED has expired. See IRM 25.6.1.10.3.3, Claims for Credit or Refund - General Time Period for Submitting a Claim. On balance due only accounts (no refund is involved), you must only bring back the credits or payments which will satisfy the account module balance.

The Statute Function will send Form 8765, IDRS Control File Credit Application, to Accounting, if it determines a credit/payment must be transferred from the XSF. You must provide documentation to identify the credit and indicate its proper application. See IRM 3.17.220.2.12, Applying Amounts From XSF-General, for further instructions.

Other functional areas must route Form 8765, IDRS Control File Credit Application, and completed case files (includes research, returns, etc.) through the Statute function for their review to ensure the credit is not barred for refund or transfer.

If the credit/payment was sent to Excess Collection File by another Campus, the area requesting the credit/payment to be posted back to the account must prepare Form 8765, IDRS Control File Credit Application, and route to Statute function to clear the Form 8765, IDRS Control File Credit Application, as required in the instructions for (3) above. The Statute function will route the cleared Form 8765, IDRS Control File Credit Application, to the other Campus Accounting, without routing it to the other Campus Statute function for clearing.

Research or realization that an error was made when adding a record to the XSF may require changing or debiting the record or voiding it completely from the XSF.

You may use a buck slip to make changes with supporting documentation to the Excess Collection function for action. See IRM 3.17.220, Excess Collections File, for further information.

You must use Form 2424, Account Adjustment Voucher, to transfer credits to and from the URF.

Attach documentation providing the existence of the credit to be transferred, as well as, indicating the research performed prior to the transfer request.

Use TC 670/672 when applying subsequent payments to the URF on accounts reinstated from the Retention Register. (Do not use TC 820/700).

For additional information, see IRM 3.17.220, Excess Collections File.

The Non-resident/Non-filer original return is an international return project for Large Business and International (LB&I) work group. The non-resident/non-filer taxpayer is required to file a tax return for the last three years starting September 2012. These original international tax returns are processed by Austin Submission Processing. LB&I has requested that we are to keep all three tax returns together as filed by the taxpayer. If one or more of these original returns need to be cleared by the Statute team, all three tax returns will be sent to the Statute team for clearance. The Statute team employee will clear the return(s) as needed and forward all three returns to SP together for processing.

If one or more of the returns is an amended tax return and the amended tax return requires an immediate tax assessment, the statute employee will forward the entire tax returns package to the Correspondence Imaging Inventory (CII) with a cover sheet instructing them to scan only the amended tax return needing an assessment. The amended tax return(s) will be scanned into CII and forwarded to Philadelphia Statute team via CII as stated in IRM 25.6.1.6.6, Transmitting/Transshipping Cases To Another Campus. The statute employee will not need to make a copy of the amended return(s) prior to sending to CII.

A taxpayer is not considered to have filed a tax return (which begins the period of limitations on assessment) until the taxpayer files a valid tax return. See IRM 25.6.1.6.14, Criteria for Establishing a Statute of Limitation Period, for valid return criteria. In general, a tax return is considered sufficient for establishing a statute of limitations period if it meets the following criteria:

A return filed on the wrong form may be a valid return for the purpose of starting the period of limitations if it provides sufficient data to calculate a tax liability.

See IRM 25.6.1.9.9.3, Correct Records on Expired Statute Periods, for information on how to correct timely original returns that were processed under an incorrect tax period/account.

In general, the filing of an amended return by a taxpayer does not extend the statute of limitations on assessment. It is the timely received date of the amended return, not the postmark date, that determines if the additional tax on an amended return can be assessed per the account’s posted Assessment Statute Expiration Date (ASED). If an amended income tax return is received 60 days before the Assessment Statute Expiration Date would otherwise expire, a period of 60 days from the received date is allowed for the assessment of the additional amount of tax on that return, imposed by IRC 6501, Subtitle A (income tax). Per IRC 6501(c)(7), amended income tax returns are from Form 1040, U.S. Individual Tax Return, Form 1041, U.S. Income Tax Return for Estates and Trusts, Form 1120, U.S. Corporation Income Tax Return, and Form 990-T, Exempt Organization Business Income Tax Return. The 60-day period does not apply to employment taxes, excise taxes, gift or estate taxes. For example, if an amended income tax return for the 2018 tax year was received on April 9, 2022, you would have 60 days from that date to assess the additional amount of tax on that income tax return.

IRS Notice 2020-23, Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, did not change the ASED, including the 201612 ASED period of April 15, 2020. However, pursuant to the Secretary’s authority under IRC 7508A, it does provide for an additional 30 days to be added to the normal 60-day assessment period for timely filed amended income tax returns received on or after April 6, 2020, and before July 15, 2020, with an ASED before July 15, 2020. This does not apply to any amended income tax received after the ASED posted on the taxpayer’s account..

For Civil Service Retirement System and Federal Employee’s Retirement System (CSRS & FERS), if an employer amends an original Form 941, Employer’s Quarterly Federal Tax Return, because of a change in the CSRS, the normal three-year period of limitations remains in effect.

Form 2290, Heavy Highway Vehicle Use Tax Return, covers a beginning tax period on the month the vehicle is first used to June 30 of the following year. Thereafter, July 1 through June 30 is the period covered. The due date to file is the last day of the next month following the month (1) that the vehicle is first used in a given tax period, (2) that the vehicle's mileage use limit is exceeded, (3) that an increase in the vehicle's taxable gross weight results in an additional tax liability, or (4) that a person acquires a vehicle for which the tax has been suspended. Generally, the period of limitation is 3 years after the due date of the return, or 3 years after the return was actually filed, whichever is later. See IRM 4.24.22.4.2.1, Form 2290, Taxable Period and Due Date.

In general, some tax forms show more than one tax amount (i.e., a multipurpose form). Questions may arise as to whether a return for a tax has been filed where there are no entries for that particular tax on the multipurpose form and a required schedule for that tax has not been attached to the return.

The Self Employment Contribution Act (SECA) is calculated on Schedule SE, Self-Employment Tax, (an attachment to Form 1040, U.S. Individual Income Tax Return,) and the tax is entered on Form 1040, U.S. Individual Income Tax Return. A taxpayer has filed a return for purposes of SECA even though the Form 1040, U.S. Individual Income Tax Return, contains no entry with respect to the SECA tax. See Rev. Rul. 82-185 (the rationale is that the SECA tax imposed by chapter 2 of the Code and the individual income tax imposed by chapter 1 are so closely related that they are not separate and distinct taxes for reporting purposes).

FICA tax on tips and income tax on Form 1040, U.S. Individual Income Tax Return: The social security tax imposed on tips by IRC 3101 is calculated on Form 4137, Social Security and Medicare Tax on Unreported Tip Income, (an attachment to Form 1040, U.S. Individual Income Tax Return) and the tax is entered on Form 1040, U.S. Individual Income Tax Return. An employee has not made a valid return for purposes of the social security tax imposed on tips by IRC 3101 if they make no entry for the tips on Form 1040, U.S. Individual Income Tax Return, because they are separate and distinct taxes. See Rev. Rul. 79-39, 1979-1 C.B. 435.

Household Employment Tax and Form 1040, U.S. Individual Income Tax Return/Form 1041, U.S. Income Tax Return for Estates and Trusts: The household employment taxes (the Social Security and Medicare taxes imposed under the Federal Insurance Contributions ACT (FICA), the tax imposed under the Federal Unemployment Tax Act (FUTA) and withheld income tax) are calculated on Schedule H, Household Employment Tax, (an attachment to Form 1040, U.S. Individual Income Tax Return/Form 1041, U.S. Income Tax Return for Estates and Trusts), and the tax is entered on Form 1040, U.S. Individual Income Tax Return/Form 1041, U.S. Income Tax Return for Estates and Trusts. An employer has not made a valid return for purposes of the household employment taxes if they make no entry for the taxes on Form 1040, U.S. Individual Income Tax Return/Form 1041, U.S. Income Tax Return for Estates and Trusts. If the Schedule H is filed without the Form 1040, U.S. Individual Income Tax Return/Form 1041, U.S. Income Tax Return for Estates and Trusts, the statute of limitation for assessment begins with the filing of the Schedule H document. The statute employee should prepare Form 2859, Request for Quick or Prompt Assessment, to manually assess the tax found on the loose Schedule H. The ASED of the Schedule H is based on the received date of the valid filed document with or without Form 1040, U.S. Individual Income Tax Return. The Form 2859, Request for Quick or Prompt Assessment, should contain MFT 30 for the Form 1040, U.S. Individual Income Tax Return.

Various excise taxes on Form 720, Quarterly Federal Excise Tax Return: Form 720, Quarterly Federal Excise Tax Return, reports many miscellaneous excise taxes imposed by subtitle D (IRC 4001-5000C).

Excise tax paid with Form 1040, U.S. Individual Income Tax Return: Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, (an attachment to Form 1040, U.S. Individual Income Tax Return), is used for additional taxes on individual retirement arrangements, other qualified retirement plans, modified endowment contracts, Coverdell education saving accounts, qualified tuition programs, and Archer medical saving accounts. The amount of any tax is entered on Form 1040, U.S. Individual Income Tax Return, for the Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, as follows:

IRC 6013(b) allows a spouse to file joint returns after one, or both spouse(s) file(s) a married filing separate return. Under IRC 6013(b)(2)(A)-(D), the election may not be made:

For tax years beginning on or before 07/30/1996, the election may not be made unless the amount shown as tax on the joint return is paid in full.

For ASED purposes, the filing date of the joint return depends on what returns were filed before the election (IRC 6013(b)(3)(A)(i)-(iii)).

A Transaction Code (TC) 560 extends the ASED. The function responsible for resolving the case will input the TC 560.

If the deadline for filing a separate to joint return has expired (see paragraph (1) above) and the non-filing spouse has not filed a separate return, the IRS is not authorized to process a return based on the joint return information. A disallowance letter must be sent to the taxpayer who previously filed. A separate letter (916C or 112C) must be sent to the non-filing spouse requesting an original return.

If the election for filing a joint return is made later than the dates provided in paragraph (1) above, and both taxpayers have previously filed a return, you must send a separate disallowance letter (105C) to both taxpayers.

Under IRC 6020(b), the IRS has the authority to prepare and process a tax return when a person fails to file a required return or files a false or fraudulent return. If the IRS processes a tax return prepared under the authority of IRC 6020(b), assessing the tax accordingly, the assessment date will start the period for the statute of limitations for collection per IRC 6502(a)(1), but does not start the period of limitations for assessment per IRC 6501(b)(3).

If the taxpayer signs a SFR return prepared from income information received from the taxpayer, it becomes the taxpayer’s return per IRC 6020(a) and starts the assessment period of limitations. If the taxpayer signs a waiver of restriction on assessment (Form 870, Waiver of Restrictions on Assessment & Collection of Deficiency in Tax & Acceptance of Overassessment, Form 4549, Report of Income Tax Examination Changes, etc.), it does not constitute a return under IRC 6020(a), in accordance with Rev. Rul. 2005-–59. If the IRS has processed an unsigned Substitute for Return (SFR), the taxpayer may still file a signed tax return for the same tax year as the SFR return. The assessment statute period for that tax year will begin with the received date of the taxpayer’s signed return. See IRC 6501(a) and (b)(3).

Form 942, Employer's Quarterly Tax Return for Household Employees, is obsolete for tax years beginning in 1995, but it may still be referred to the Statute team for clearance. Because Form 942, Employer's Quarterly Tax Return for Household Employees, and Form 941, Employer's Quarterly Federal Tax Return, report the same taxes, but for different employees, the period of limitations for assessment for a period starts for the taxes that should have been shown on a Form 942, Employer's Quarterly Tax Return for Household Employees, if a Form 941, Employer's Quarterly Federal Tax Return, is filed for that same period.

The role of the Statute function in processing these employment tax forms will be: Upon receipt of a Form 942, Employer's Quarterly Tax Return for Household Employees, for a period, check whether Form 941, Employer's Quarterly Federal Tax Return, was filed for the same period.

If the ASED is imminent, any assessment must be made on the Form 941, Employer's Quarterly Federal Tax Return, account. You must monitor for the posting of the TC 150 since this will establish filing requirements for Form 941, Employer's Quarterly Federal Tax Return, and/or Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return. Delete any Form 941, Employer's Quarterly Federal Tax Return, and Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, filing requirements, which may have been created by processing Form 941, Employer's Quarterly Federal Tax Return, after posting of the TC 150.

If Form SS-16, Certificate of Election of Coverage Under the Federal Insurance Contribution Act (FICA) of Election, is received with or for Form 941, Employer's Quarterly Federal Tax Return, see IRM 21.7.2.5.6, Form SS-16, Certificate of Election of Coverage Under the Federal Insurance Contribution Act (FICA), for more information on how this form affects the ASED.

If a Form 941, Employer's Quarterly Federal Tax Return, has not been filed, clear the Form 942, Employer's Quarterly Tax Return for Household Employees, and route to Code & Edit where it will be converted to Form 941, Employer's Quarterly Federal Tax Return.

A return reporting for a period that is less than the tax period (whether it is a full or short tax year), does not start the period of limitations, Gensinger v. Commissioner, 18 T.C. 122 (1952), aff’d, 208 F.2d 576 (9th Cir. 1953); see also Pittsburgh Realty Investment Trust v. Commissioner, 67 T.C. 260 (1976) (liquidation of corporation). Where the taxpayer incorrectly reports on a fiscal year, the limitations period for a calendar year covered by two such returns begins with the filing of the second return. Atlas Oil & Refining Corp. v. Commissioner, 22 T.C. 552 (1954). The rationale is that the improperly filed returns will, if pieced together, provide the Commissioner with sufficient information to determine the tax liability for the period for which the return should have been filed. Paso Robles Mercantile Co. v. Commissioner, 12 B.T.A. 750, 753 (1928), aff’d, 33 F.2d 653, 654 (9th Cir. 1929).

See IRM 25.6.1.9.9.1, Procedures for Expeditious Assessments, for procedures on how to make assessments when the ASED is about to expire. See IRM 25.6.1.9.9.2, After Hours and Imminent Assessments, for additional information on making after hours imminent assessments.

A Form 872, Consent to Extend the Time to Assess Tax, signed by the taxpayer and an IRS representative prior to the expiration of the normal ASED, extends the ASED to the date agreed to by both parties. See IRM 25.6.22, Extension of Assessment Statute of Limitations by Consent.

There is no period of limitations on assessment for a false or fraudulent return with intent to evade tax.

An amended non-fraudulent return submitted after a fraudulent return does not begin the period of limitations. See Badaracco v. Commissioner, 464 U.S. 386 (1984).

In processing the amended return, you must coordinate fraud/potential fraud cases with Examination. See IRM 25.6.1.9.9.1, Procedures for Expeditious Assessments, if examination does not select the case.

Fraud is not defined in the Code or regulations, but several indicators of fraud are provided in IRM 25.1.2.3, Indicators of Fraud. There are two terms used in the fraud development process: Indicators of Fraud and Affirmative Acts (Firm Indications) of Fraud.

Generally, the taxpayer whose return is at issue will be the one who committed the fraud. In the case of a joint return, the fraud of one spouse will keep the assessment period open with respect to both spouses.

For purposes of IRC 6501(c)(1), fraud is not limited to the fraud of the taxpayer. The fraudulent return exception may apply if someone affiliated with the taxpayer’s return (such as a tax return preparer) committed the fraud that caused the taxes on the return to be understated, even if the taxpayer did not commit fraud and did not know of the other person’s fraudulent intent at the time the return was filed. See Allen v. Comm’r,128 T.C.37, 42 (2007).

Consult with local counsel if you have questions on whether the assessment statute is open because the fraudulent return exception applies.

A taxpayer’s statute of limitations for assessments (ASED) extends to six years after the original return was filed (IRC 6501(e)), if the taxpayer omits:

The 25% omission rule, per IRC 6501(e), which extends the original ASED by 3 years for a total of 6 years from the date that the original return is deemed to have been filed per the IRC, should be considered for amended Economic Impact Payment (EIP) returns where the taxpayer used the Non-Filer tool or reported $1 AGI.

You must input a TC 560 to update the ASED whenever a qualifying omission has been identified as described in (1) above. Do not forward to Statute unless it is within 90 days from the ASED of the six-year statute period.

The 60 days rule on an amended income tax return assessment (found in IRC 6501(c)(7)) and the Saturday, Sunday and Legal Holiday rule (found in IRC 7503) each applies to extend the six-year assessment period.

An item other than an overstatement of basis is not considered omitted from gross income, the gross estate, total gifts, or excise tax reported on Form 720, Quarterly Federal Excise Tax Return, if the taxpayer adequately disclosed the item on the return or on an attached statement. The disclosure must adequately apprise the IRS of the nature and approximate amount of the item; the actual dollar amount of the omission need not be disclosed.

For purposes of determining gross income, IRC 61 reflects the general principle that gross income takes into account the gross income derived from business, 26 CFR 1.61-3(a) provides that in a manufacturing, merchandising, or mining business, "gross income" means the total sales, less the cost of goods sold. Under IRC 6501(e)(1), however, in the case of a trade or business, gross income means receipts from sales of goods or services before reduction by cost of sales or services.

An understatement of gross income caused by an overstatement of basis is an omission from gross income for the tax period for which the assessment statute was open on July 31, 2015, and for returns filed after July 31, 2015.

The period of time for assessment, if extended due to an omission of more than 25% of gross income or more than $5,000 in income attributable to foreign financial assets, applies to all items affecting the amount of income taxes owed, not just the omitted items.

Other returns showing income are as follows:

A decrease in tax, created by the carryback of a net operating loss or a capital loss can be reassessed at any time within the ASED of the year in which the NOL or capital loss occurred. See IRC 6501(h). Also, the amount of a carryback to a year may be adjusted even if the loss year is closed.

Generally, the IRS may only make an assessment under IRC 6501(h) of an amount that is attributable to the carryback; however, if a taxpayer receives a refund for a tentative carryback adjustment under IRC 6411 (on Form 1139, Corporation Application for Tentative Refund, or Form 1045, Application for Tentative Refund), the taxpayer has opened the door so that the assessment period is open for items unrelated to the carryback under IRC 6501(k). The amount, however, that IRS can assess is limited to the amount erroneously refunded, reduced by amounts assessed under IRC 6501(h).

A decrease in tax, as a result of IC carried back from a later year, can be reassessed at any time within the ASED of the year from which the carryback originated. However, if the IC was made available (for carryback to a prior year tax) because of the application of an NOL or capital loss carryback from a later year, the decrease can be reassessed at any time within the ASED of the year in which the NOL or capital loss occurred. See IRC 6501(j).

Generally, the IRS may only make an assessment under IRC 6501(j) of an amount that is attributable to the carryback; however, if a taxpayer receives a refund for a tentative carryback adjustment under IRC 6411 (on Form 1139, Corporation Application for Tentative Refund, or Form 1045, Application for Tentative Refund), the taxpayer has opened the door so that the assessment period is open for items unrelated to the carryback under IRC 6501(k). The amount, however, that the IRS can assess is limited to the amount erroneously refunded, reduced by amounts assessed under IRC 6501(j).

If a taxpayer fails to file information described in IRC 543(a) and IRC 544 with the return, then Personal Holding company tax can be assessed at any time within 6 years after the corporation return was filed. See IRC 6501(f).

In cases where property is involuntarily converted into cash and the taxpayer timely purchases qualifying replacement property, the taxpayer may elect to defer gain (if any) on the conversion to the extent the amount realized from the conversion exceeds the cost of the replacement property. There are two special limitation periods for assessment related to involuntary conversions for which the taxpayer has made the election.

If the taxpayer elects to defer gain attributable to an involuntary conversion, the period of limitations for assessment does not expire before three years from the date that the taxpayer notifies the IRS in accordance with applicable regulations of the taxpayer's (a) replacement of the converted property, (b) intention not to replace, or (c) failure to replace within the replacement period. See IRC 1033(a)(2)(C); 26 CFR 1.1033(a)-2(c)(5).

If the taxpayer purchases replacement property before the beginning of the last taxable year during which any part of the gain is realized (i.e., an anticipatory replacement) a deficiency arising from an election to defer for any taxable year ending before such last taxable year may be assessed within the period of limitations for that last taxable year. See IRC 1033(a)(2)(D); 26 CFR 1.1033(a)-2(c)(6).

IRC 6501(c)(10) provides for an extended period of limitations to assess any tax with respect to a listed transaction for which a taxpayer failed to disclose any information as required under IRC 6011 and the regulations thereunder. If IRC 6501(c)(10) applies, then the period of limitations on assessment will not expire before the date that is one year after the earlier of either (a) the date the taxpayer discloses the transaction in accordance with prescribed procedures (see 26 CFR 301.6501(c)-1(g) and Rev. Proc. 2005-26 or subsequent published guidance) or (b) the date a material advisor meets the requirements of IRC 6112 with respect to a request by the Secretary under IRC 6112(b) relating to the transaction.

IRC 6501(c)(10) applies to taxable years with respect to which the period for assessing a deficiency did not expire before October 22, 2004.

The term "listed transaction" is defined in IRC 6707A(c)(2) as a reportable transaction that is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of 6011. IRC 6707A (c)(2) is effective for returns and statements the due date for which is after October 22, 2004, and which were not filed before such date. Listed transaction also is defined in 26 CFR 1.6011-4(b)(2).

26 CFR 301.6501(c)-1(g) sets forth procedures that taxpayers and material advisors may follow to disclose previously undisclosed listed transactions for purposes of 6501(c)(10) and guidance on the date on which the period of limitations will expire if these procedures are followed. 26 CFR 301.6501(c)-1(g) applies to taxable years with respect which the ASED had not expired before March 31, 2015. Rev. Proc. 2005-26, 2005-17, IRB 965 (Apr. 25, 2005) provides guidance for earlier years

If neither the taxpayer nor the material advisor discloses the required information regarding the undisclosed listed transaction, the period of time for assessment of any tax with respect to the listed transaction is unlimited. In order to determine if the one-year period that will end the period of limitations on assessment under IRC 6501(c)(10) has started to run, the examiner should consult 26 CFR 301.6501(c)-1(g) and Rev. Proc. 2005-26, to determine if the taxpayer or material advisor has complied with the requirements contained in the applicable published guidance. Once the required information is provided, an actual date for the ASED can be determined and entered.

Other exceptions to the normal statutory period for assessment of tax may also apply. Also, IRC 6501(c)(10) does not shorten any other applicable period for assessment, such as the general three-year period or the fraud exception.

IRC 965 pertains to the treatment of deferred foreign income upon transition to a participation exemption system of taxation. Specifically, IRC 965(k), provides that the statute of limitations for assessment with respect to an IRC 965 net tax liability will not expire before six years after the date the original return for the inclusion year is filed.

IRC 965 can be identified by the following Transaction Codes (TC) which are used for IRC 965 pipeline processing, and post processing adjustments:

For more information, see IRM 21.5.13, IRC 965 Transition Tax Procedures - Accounts Management. For additional tax module indicators see IRM 3.14.2.6.5, IRC 965 Transition Tax Overview.

Amended returns with tax increases and credit decreases where the ASED will expire within 90 days will be sent to the Statute function. Statute will coordinate with the IRC 965 AM Site Specialized Team to identify any non-IRC 965 tax to be assessed before the original 3-year ASED expires.

Amended returns, with tax increases and credit decreases on accounts where the original 3-year ASED has expired and the amendment or tax module contains IRC 965 indicators, will be routed to the applicable IRC 965 AM Site Specialized Team. The specialized team will take the following actions:

Any barred case info will be routed to the Statute function.

When a written request for a prompt assessment is received, the tax must be assessed within 18 months after receipt of the request or 3 years after the original return was received, whichever is earlier (IRC 6501(d)). The request is generally made on Form 4810, Request for Prompt Assessment Under Internal Revenue Code 6501(d). The request must be:

A statutory notice of deficiency may be issued by Examination, Collection, Appeals, Deferred Adverse Tax Consequence (DATC/ASTA) and the Document Matching functions. Except for certain limited exceptions, a statutory notice of deficiency must be issued to assess and collect an income tax, estate tax, gift tax, and certain excise and employment tax deficiencies.

The period of limitations on assessment is suspended during the 90 days (150 days if the notice of deficiency is addressed to a person outside the U.S.) which the taxpayer is given to petition the Tax Court from the deficiency notice and the time during which the IRS is prohibited from making the assessment plus 60 days thereafter. The suspension period begins on the day after the mailing of the notice (and not on the day the taxpayer receives the notice).

If the taxpayer petitions the Tax Court, then the IRS is prohibited from making the assessment until the Tax Court's decision becomes final. If an Entered Tax Court Decision includes the IRC 6213 waiver paragraph, then the tax, penalty, and interest determined by the Tax Court are immediately assessable and the Decision Entered Date is the Waiver Date. If the Entered Decision, or an Entered Order for Dismissal, does not also include a waiver paragraph, then the case must be suspended by Counsel for 90 + 10 days awaiting the filing of an appeal to the Court of Appeals by either the taxpayer, or the IRS. On the 101st day, the decision can be processed because the period for filing of an appeal to the Court of Appeals has expired. Whenever a tax and/or penalty is assessed on an entered decision without a waiver paragraph, then no agreement date is associated with the assessment.

The IRS or the taxpayer may appeal the Tax Court decision within 90 days. If no appeal notice is filed, the decision becomes final. If an appeal is filed, the date the Tax Court decision becomes final depends on the subsequent appeal proceedings. (The filing of an appeal notice by the taxpayer will not stay assessment unless the taxpayer files an adequate bond.)

If the taxpayer does not petition the Tax Court, and does not agree to the deficiency, then the case is closed as unagreed and the deficiency can be assessed since the taxpayer defaulted. The IRS has 60 days to process the assessment from the default date, plus the amount of time left on the period of assessment when the notice of deficiency was issued.

If the taxpayer simply informs the IRS that the taxpayer will agree to the asserted deficiency during the 90-day period, the suspension period continues; however, when a Form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, is filed during the 90-day period, the 60-day period begins because the IRS is no longer prohibited from making an assessment, per Rev. Rul. 66-17, 1966-1 C.B. 272.

Request technical assistance from the Examination Operation as to whether an assessment is valid if the case contains a deficiency notice.

Third-Party Summonses in general (see IRC 7609(a)). If a taxpayer or their agent, nominee or person acting under their control, files suit to overturn a third-party summons to which the notice procedures of IRC 7609(a) apply, or if the taxpayer (his agent, nominee etc.) intervenes in a summons enforcement suit, then the statutes of limitation under both IRC 6501 and IRC 6531 will be suspended while the proceeding and any appeals are pending. See IRC 7609(e)(1). If the recipient of a summons subject to IRC 7609(a) or a John Doe summons has not fully complied with the summons within six months after the date of service and there is not a pending proceeding to overturn or to intervene brought by the taxpayer, then the statute of limitation will be suspended beginning on the date which is six months after the service of the summons and ending on the date of the final resolution of summoned person's response. The typical scenario is where a summoned third party who is not the taxpayer (or taxpayer's agent) ignores the summons or notice or files a suit to quash. See IRC 7609(e)(2).

A designated summons in a Coordinated Industry Case (CIC) examination served on a corporation (but not other types of taxpayers), or any other person to whom the corporation has transferred records, extends the assessment period of limitations during the "judicial enforcement period" as defined by IRC 6503(j)(3) (i.e., the period that begins on the day a court proceeding regarding the summons is brought and ends on the day there is a final resolution as to the summoned person’s response to the summons). See IRC 6503(j)(3). The period is also suspended during the "judicial enforcement period" of a related summons as defined by IRC 6503(j)(1)(A)(ii) (i.e., one issued within 30 days of the issuance of the designated summons and relating to the same return as such designated summons). If the court requires any compliance with a designated or related summons by ordering that any record, document, paper, object, or items be produced, or the testimony of any person be given, the period of suspension consists of the judicial enforcement period plus 120 days. If the court does not require any compliance with a designated or related summons, the period of limitations on assessment provided in IRC 6501 shall not expire before the 60th day after the close of the judicial enforcement period.

Generally, the automatic stay, as defined in IRM 5.9.3.5(1), Automatic Stay, is in effect from the date the bankruptcy petition was filed until the earliest of the date the case is closed, the case is dismissed, or the debtor is granted or denied a discharge.

The automatic stay does not prevent the IRS from issuing a statutory notice of deficiency, but the taxpayer may be prohibited from filing a petition with the Tax Court (unless the stay is lifted by the bankruptcy court).

If a statutory notice has been issued, the period for petitioning the Tax Court has not yet expired before the taxpayer files for bankruptcy, and the automatic stay applies to prohibit the taxpayer from filing a Tax Court petition, the period for assessing the deficiency is suspended during the time the IRS is prohibited from making the assessment plus 60 days thereafter. See IRM 25.6.1.9.6.2, Statutory Notice of Deficiency (90-Day Letter) and IRM 5.9.4.3.1, BAPCPA and BRA94’s Effect on Assessments.

The petition date is input as the transaction date of the TC 520 and the discharge or dismissal date is input as the transaction date of the TC 521. In some instances, the court may close a case without issuing either a discharge or dismissal. A TC 521 is input for these cases, also. See IRM 5.9.5.6, Bankruptcy Freeze Code (TC 520).

If you are in doubt that an assessment can be made, contact the Centralized Insolvency Operation (CIO) at SBSE Field Insolvency.

The deadline for assessment may be postponed for a period of up to one year for taxpayers (individuals and businesses) who the IRS determines are affected by a federally declared disaster or significant fire. See IRC 7508A.

See IRM 25.6.1.10.3.5.2, Federally Declared Disaster Area or Significant Fire, for details on what constitutes a taxpayer affected by a Presidentially declared disaster area.

The deadline for assessment may be postponed for a period of up to one year for an individual who the IRS determines is affected by a terroristic or military action. See IRC 7508A.

See IRM 25.6.1.10.3.5.4, Terroristic or Military Action, for details on what constitutes such actions.

See IRM 25.6.1.10.3.5.6, Combat Zone, for Combat Zones procedures.

Tax on flow-through amounts to partners generally is controlled by the assessment statute on the partner’s return, i.e., the tax must be assessed within three years from the date the partner filed their return.

Some partnerships, however, may be subject to the TEFRA partnership procedures, which provides a special extension of the period of limitations for assessment of partnership and affected items. A partnership subject to these procedures is still a flow-through entity for income tax reporting purposes and income tax must be assessed against the partners. If a partnership is subject to TEFRA provisions, see IRM 21.6.6.2.23, Tax Equity and Fiscal Responsibility Act (TEFRA) Partnerships Related Claims, for more information. TEFRA was repealed in 2015 and replaced with the Bipartisan Budget Act of 2015 (BBA), which generally applies to partnerships with a tax year beginning on or after 01/01/2018, unless a partnership elects to be subject to the BBA rules otherwise. See IRM 4.31.9, Centralized Partnership Audit Regime (BBA) Field Examination Procedures, for additional information on BBA partnership audit procedures.

Transferees and transferred assets: The period of limitations for assessment of an initial transferee is one additional year beyond that for the taxpayer. For a transferee of a transferee, the period is extended one year after the period for the prior transferee, but not more than three years after the period as to the taxpayer. See IRC 6901(c)(2). These periods may be extended by agreement and, moreover, an extension by the taxpayer affects the transferee's own period. The periods may also be suspended during certain court proceedings (see IRC 6901(c), (d) and (f)). Generally, a time limitation imposed by state law on fraudulent transfers has no bearing on the assessment period federal law controls. See United States v. Summerlin, 310 U.S. 414 (1940); Bresson v. Commissioner, 111 T.C. 172 (1998).

Fiduciaries and transferred assets: The period of limitations for assessment against a fiduciary end at the later of one year after the liability arises or the expiration of the period for collection of the tax. See IRC 6901(c)(3). This period may be extended by agreement. See IRC 6901(d).

Contact Examination Classification for clarification of the ASED on these types of cases.

Use IDRS or manual assessment procedures to make additional tax assessments.

When an original tax return cannot be located in time to compute an assessment, manually assess the tax shown on the amended return using Protective Manual Assessment (PMA) procedures.

The category code SRET will be used by Statute for paper XRET cases that are statute imminent and being worked by Statute. The category code will be used to manage statute imminent cases within Statute. When a Statute employee selects a statute imminent case, the original XRET base will be closed by the control base owner as MISC. The Statute function will obtain the paper case and establish a new control using the category code of SRET.

Resolve imperfections on amended returns in favor of the government when the time remaining in the limitation period for assessment does not permit correspondence with the taxpayer.

Use Form 2859, Request for Quick or Prompt Assessment, when the ASED is less than 60 days. Route to the Accounting function using Form 3210, Document Transmittal, and input a history item on IDRS (Form 2859, Request for Quick or Prompt Assessment, and tax amount) so that subsequent tax examiners will not prepare another assessment for the same amount causing a duplicate assessment document in Accounting. If your manual assessment is being prepared due to the 60-day rule for income tax returns, you will need to input 60-day rule - amended return in the remarks area. In AMS, input a history item for the amount of tax assessed, penalty and interest when assessed on the Form 2859, Request for Quick or Prompt Assessment, and close your control base on IDRS. In addition, you must open a new IDRS control base with the date the Form 2859, Request for Quick or Prompt Assessment, was prepared to monitor the manual assessment being input. The monitoring of the manual assessment action will help to ensure the assessment post timely. It will enable you to know if the assessment unpost and you are able to correct any unpostable condition before the ASED passes. If the Prompt Assessment (not the quick assessment) needs to be removed, see Form 1331-B, Notice of Adjustment, preparation procedures found in the Accounting IRM 3.17.244.5.4, Statute of Limitations Expiration Cases (Protective Manual Assessments (PMAs)).

Assess the following types of assessments in an expeditious manner.

Use IDRS to make assessments when there are more than 60 days before the ASED if you are a Statute employee. You must monitor IDRS to ensure the adjustment posts.

If the ASED has expired and the amended return is received showing a tax increase or credit decrease:

If the ASED has expired and the amended return showing a tax increase or credit decrease was received with remittance before the ASED expired, report as a barred assessment. Input a TC 290 for zero amount using blocking series 300–309. Any credit will not be offset to other debt conditions and no refunds will be made. In this situation, the taxpayer will not be advised that the assessment cannot be made or that a claim should be filed for refund because the taxpayer legally owed the tax. Do not send Letter 2765C to the taxpayer. See IRM 25.6.1.10.3.1.6.1, Claim for an Amount Paid Before the ASED, for more information.

There are different procedures for processing statute imminent cases/returns, depending on the number of days remaining before the statute expires. If the ASED is within the last 5 calendar days for assessment, the functional manager will ensure Form 2859, Request for Quick or Prompt Assessment, is prepared. Attach the return (if available) with clear identification of tax, penalty, and interest to be assessed, and have the case hand carried to the RACS in the Accounting Function for manual assessment. Refer to IRM 3.17.243, Miscellaneous Accounting, for procedures. Refer to IRM 3.17.63, Redesign Revenue Accounting Control System, for additional After Hours Assessment procedures.

If the ASED is within 6 to 14 calendar days, the manager must hand carry or send through CII potential statute cases to the Statute function. No cases should be sent using eFax. The Statute function will:

If the ASED is within 15 to 90 calendar days, functional managers must:

Use the following procedures to correct timely returns that were processed under an incorrect tax period/account, where the period is barred for assessment and tax has not been abated:

Accounting must re-establish the accounts on Master File (TC 402) when all actions are completed.

Accounting must forward a copy of the 12810 and transmittal to the Statute function annotating "Request Completed" when all actions in (1) and (2) above are completed and accounts are re-established on Master File.

If an amended return is referred to the Statute function for review, and research shows there is an unreversed TC 420 or 424 and the ASED is imminent, you must assess the tax increase before you route the amended return to Examination. This will eliminate the possibility of any barred assessment before the amended return is received in Examination. Research the AIMS file with CC AMDISA for the current status, location and organization codes for the area you will need to route the amended return to.

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Taxes are identified on Form 720, Quarterly Federal Excise Tax Return, by "IRS No." (abstract numbers). Only one Form 720, Quarterly Federal Excise Tax Return, should be filed for each quarter. When a Form 720, Quarterly Federal Excise Tax Return, reports two or more taxes on different dates (for example, because an amended return is filed), use the later filing date rather than the original filing date.

Each abstract number is a separate return for penalty purposes. A return is considered filed for a particular abstract number only if an entry is made on that abstract number’s line. If no entry was made for a particular abstract number when an entry should have been made, the statute with respect to that abstract number remains open for assessment.

The Statute function will request the assistance of the Excise Tax Program on complex issues unique to excise taxes.

If a taxable amended corporate tax return or Form 1120-X, Amended U.S. Corporation Income Tax Returns, is referred to the Statute function for review, and research shows an unreversed TC 420 or 424, you must:

The Railroad Retirement Tax Act (RRTA) is codified at Chapter 22 of the IRC (3201-3233). Retirement taxes are imposed in two tiers: Tier I is the RRTA equivalent of FICA; it is computed on the same percentage rate and annual maximum tax base as FICA. Tier II is comparable to a private pension paid by both the employer and employee to provide an annuity. The employer must collect tax from each employee. An employer who does not collect employee tax is liable for that tax. See IRM 21.7.2.6.2, Imposition of Tax (Forms CT–1) (1-1-2005). An employer deposits the taxes following the regulations under IRC 6302. These taxes are reported on the Form CT-1. The IRS makes available information to the RRB for the administration of the RRTA.

The Railroad Retirement Board (RRB) conducts investigations and determines if additional tax is due on the employer's CT-1 tax return. The RRB sends correspondence to the service center to assess any additional tax. These assessments must be made manually due to the imminent statute expiration date. The RRB has established a ≡ ≡ ≡ tolerance. If any requests are received for assessments of less than that amount, take no action and return the request to the originating office.

Consents to extend the period of limitation on assessment. The RRB’s Chief Financial Officer, in writing, addressed to the IRS Ground Transportation Technical Advisor, will request that the IRS take appropriate steps to protect against the running of the RRTA statute of limitations in cases that have been fully developed by the RRB auditors and where there is potential significant financial impact to the RRB’s trust funds. The IRS will act at its own discretion with respect to the request and will advise the RRB’s CFO in writing as to the decision. See IRM 4.23.2.3.3, Railroad Retirement Board (RRB) Coordination Agreement.

The Statute of Limitations on Assessment of an underpayment relating to a reduction in foreign tax credit (FTC) (generally reported on Form 1116, Foreign Tax Credit, or Form 1118, Foreign Tax Credit - Corporations) may be extended beyond the 3-year assessment period as provided in IRC 905(c). IRC 905(c) requires taxpayers to report certain foreign tax adjustments. When a taxpayer must report an adjustment, IRC 905(c) effectively suspends the assessment period indefinitely, but only to the extent of the deficiency resulting from the tax adjustment required under IRC 905(c). Statute employees will need to review the return, including the Form 1116, Foreign Tax Credit, or Form 1118, Foreign Tax Credit - Corporations, in order to determine whether the reduction in FTC is attributable to a refund of foreign taxes that were claimed as a credit; a failure to pay any accrued foreign taxes claimed as a credit within 24 months of the close of the taxable year to which the taxes relate; an over accrual of foreign taxes claimed as a credit in an earlier year, a change in foreign tax liability that affects the amount of distributions or inclusions under IRC 951, IRC 951A, or IRC 1293, or affects the application of the high-tax exception described in IRC 954(b)(4); or a change to claim a foreign tax credit for foreign income taxes that were previously deducted or a change to claim a deduction for foreign income taxes that were previously credited. If one of these three scenarios applies, IRC 905(c) allows Statute to input the U.S. tax increase.

IRC 905 (c) does not extend the 3-year assessment period to permit assessments that are based on the discovery of errors on the original return that were not timely identified by the taxpayer. For example, the taxpayer amends the original return by reclassifying income originally reported as foreign source income as U.S. source income, thereby reducing the foreign tax credit limitation. Therefore, if you receive an assessment document for Form 1116, Foreign Tax Credit, or Form 1118, Foreign Tax Credit - Corporations, in which the taxpayer states an error occurred on the original return filing and it is after the 3-year assessment period, no additional assessment is allowed under this exception (other exceptions may still apply).

If the erroneous application of a foreign tax carryback results in a deficiency in a carryback year, IRC 6501(i) allows the deficiency to be assessed in the carryback year within one year after the expiration of the period within which a deficiency may be assessed for the year of the excess foreign taxes.

To handle SECA cases, you may need to refer to the following Internal Revenue Manuals (IRMs) and Internal Revenue Code (IRC):

When adjusting the Primary Self Employment Income (PSEI) or the Secondary Self Employment Income (SSEI), Item Reference Numbers (IRN) 878 and 879 must correspond with the information previously provided. Do not adjust the PSEI or SSEI below zero. If Self Employment Income (SEI) is reduced to less than $400 for either taxpayer, you must reduce PSEI and/or SSEI to zero and assess no tax. Notify the taxpayer of any changes.

If you receive a SECA Tax case and the assessment statute expiration date (ASED) has expired:

If a return reporting SECA tax is filed on or before the ASED, but the IRS fails to make assessment before the ASED passes, do not assess any amount. Instead, input TC 290 for zero amount, use Blocking Series 18 and adjust PSEI and/or SSEI using IRNs 878 and/or 879 as appropriate, based on the return. This will ensure the Social Security Administration (SSA) receives notification of the timely filed self-employment income. Transfer any remittance received to XSF or URF, as stated above in 2(b). Report the amount of the unassessed tax as a barred assessment.

Do not assess Form SSA 7000 information without a statutory notice of deficiency being sent prior to the statute date. Do not assess the tax if Examination did not issue a Statutory Notice of Deficiency and stamped the Form SSA 7000 "Survey" or "Accepted As Filed." Instead, use TC 290 for zero amount and blocking series 18 to associate the case with the original return.

Do not make adjustments reported on Form SSA-7000 after the ASED unless accompanied by a taxpayer's claim that was filed before the ASED.

If the taxpayer files an amended return after the ASED expires to increase SECA Tax, do not assess the tax as stated above. In addition, do not increase the Self-employment income reported on the amended tax return. The Social Security Administration will not use this information when computing the taxpayer's Social Security payment amount unless the ASED is still open for the assessment of social security tax on the increase in self-employment income.

Section 218 of the Social Security Act provides that the Social Security Administration and a State may enter into agreements to provide coverage for state and local employees. IRC 6511(d)(5) provides a special period of limitations for claims for refund or credit of overpaid self-employment tax attributable to such agreements.

Claims are timely filed if they are filed on, or before, the last day of the second year after the calendar year in which the agreement was made.

To handle statute unpostable and reject records, you may need to reference other Internal Revenue Manuals (IRMs) such as:

Generally, unapplied Master File credits (i.e., credit amounts that can no longer be refunded to the taxpayer) are transferred to the Excess Collection File (XSF). Occasionally, between the time the credit condition is identified and the debit transaction code (TC) 820 addresses the module, the credit is reduced or eliminated entirely by other transfer actions. Under these conditions, the debit transactions will not post to MF and will be recorded as Unpostable Code (UPC) 175 Individual Master File (IMF) and 325 Business Master File (BMF).

The Unpostable function will not nullify these unpostable records, but must reassign them to the statute examiner who initiated the credit transfer.

Statute employees must request a transcript of the entire account and the documents which caused/absorbed the credit balance, in whole or in part.

Statute unpostable cases are unique in that the record often must be deleted from processing. When the record is deleted, statute tax examiners will:

The Unpostable function will route to Statute function unpostable cases with a UPC 197 and Reason Code 0, per IRM 3.12.179.96.1.3, Resolution Procedure UPC 197 Reason Code 0 for TC 150. The reason for this unpostable is due to a second return attempting to post on a tax module that already has a TC 150, and the return was on the retention register. The Assessment Statute Expiration Date (ASED) has already passed on the account. Statute tax examiner will do the following to resolve this unpostable:

If unpostable code 350 is received in statute and it involves an Estate and Gift Tax or Excise Tax return issue, you should route case to the area based on tax document involved in the unpostable.

When working a Form 1040A, U.S. Individual Income Tax Return, unpostable (Doc code 207-210 only) that needs to be reprocessed, and you would normally close as URC 8, you will now close URC 1. Refer to IRM 3.12.179.4.7, Form 1040-A and Form 1040-EZ DOC code 207-210, for additional procedures.

To handle Civil Penalty tax modules, you may need to refer to other Internal Revenue Manuals (IRMs) and Internal Revenue Code (IRC) such as:

The Omnibus Budget Reconciliation Act (OBRA) of 1989 consolidated and renumbered several IRC provisions containing penalties relating to information shown on or omitted from the return. The proscribed conduct is now addressed in IRC 6662 under the Accuracy-Related Penalty. See IRM 20.1.5.2, Return-Related Penalties, for a list of the penalties. The accuracy-related penalties are assessed with PRNs 680, 681, 683, and 786-792. See IRM 20.1.5.4.2, Penalty Assessments and Abatements, IRM 20.1.1-5, Penalty Reference Numbers (600 Series), and IRM 20.1.1-6, Penalty Reference Numbers (700 Series). The Accuracy Related Penalty is assessed on the Masterfile Tax Period (MFT) for the tax period, instead of the civil penalty module.

The examining officer in the area office will determine the SCD for civil penalty assessments under the following codes:

For a valid Penalty Reference number (PRN) for any of the penalties listed above, please refer to the current revision of Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

A taxpayer may voluntarily pay the penalty imposed by IRC 6723 for failure to provide a Taxpayer Identification Number (TIN). If a case is referred to the Statute function with an imminent statute, you must do the following:

In general, the delinquency penalties, the accuracy-related penalty and information reporting penalties are assessed, collected, and paid in the same manner as taxes pursuant to IRC 6665(a) and IRC 6671(a). The general rules for determining the period for assessment are provided at IRM 25.6.1.9, Assessments, and the guidance for when a return is filed can be found at IRM 25.6.1.6.15, When a Document is Treated as Filed Under the IRC.

The Preparer Penalties under IRC 6694(a) or IRC 6695 may be assessed within three years after the filing of the return or claim for refund with respect to which the penalty is assessed. There is no period of limitations regarding a willful attempt to understate tax or a reckless or intentional disregard of the rules or regulations under IRC 6694(b). See IRC 6696(d).

Promoter Penalties are penalties for promoting abusive tax shelters under IRC 6700 or abetting an understatement of tax liability under IRC 6701 may be assessed at any time because they do not relate to a return. See IRC 6703(b).

Civil Penalty STAT transcripts are extracted using the minimum amount of time until the ASED. The "dummy" ASED date established for civil penalty accounts is 2 years and 6 months from the date of the control DLN in the module.

You will request a hard copy MFTRA transcript for all civil penalty cases (complete entity and all active modules). You must establish a civil penalty name line by using Form 2363, Master File Entity Change, and TC 013, if the Master File name line of the taxpayer being assessed is joint. DO NOT change the name line of the MFT 30 account.

A Master File (MF) entity must be established using Form 2363, Master File Entity Change, for MFT 13 or 55, if MFTRA shows no record.

The Trust Fund Recovery Penalty Cases under IRC 6672 (the 100% penalty) are processed in the Compliance Service Collection Operation (CSCO). The Statute function will route any Trust Fund Recovery Penalty cases received to CSCO.

If there is a TC 240 in the account and research does not result in resolution, contact the area responsible for assessing the penalty for assistance in resolving the condition. If unable to determine the area responsible for assessing the penalty, and all other efforts have been exhausted to determine where the credit belongs, transfer the credit(s) to XSF as indicated in this IRM and IRM 3.17.220, Excess Collections File.

If there are multiple penalties in the account, contact the area responsible for the last assessed penalty. (A TC 240 in a 59 blocking series indicates a systemically (computer) generated IRP civil penalty).

If there is credit and no TC 240 on the account module, see the procedures in IRM 21.2.4.3.3.2, Civil Penalty Module Processing for resolution.

If the Civil Penalty transcript is a STAT-01 caused by an unreversed TC 360, the procedures to resolve this type of transcript is found in IRM 21.2.4.3.32, Debit Balance, No Return (BMF - 01).

The other functional areas preparing the manual assessment must decide if the assessment is "Agreed" or "Unagreed" according to IRS's financial definition. These PMAs are usually IRS initiated assessments. Input one of the following in the remarks section of Form 2859, Request for Quick or Prompt Assessment:

AGREED Assessments are as follows:

UNAGREED Assessments are as follows:

See IRM 3.17.46, Automated Non-Master File Accounting, for further information.

An abatement is the reduction or elimination of an assessment. There are several circumstances when a taxpayer may request an abatement. The authority for the IRS to make abatements comes from IRC 6404.

IRC 6404 provides the general abatement authority for the IRS.

The decision to abate or not abate should include a finding that the explanation or documentation to support the request for abatement is sufficient or insufficient. If Examination criteria applies and the request for abatement contains an explanation or documentation supporting the adjustment, forward the request to CAT-A Exam for classification (see Exhibit 21.5.3-1, Claim Processing with Examination Involvement).

If you are unable to verify documentation to abate the balance due amount, you can send the taxpayer a Letter 916C (no consideration letter) requesting full payment of the amount owed and instruct the taxpayer to file a claim for refund with all supporting documents. Do not send a disallowance letter on these types of cases. Do not deny a request for abatement solely because the tax has not been paid.

If a case has been referred to the Department of Justice, a litigation freeze code, "TC 520," is placed on the taxpayer’s account to prevent the IRS from taking any unauthorized action on the account. When a freeze code is in place on the account, IRS personnel are instructed to take no action on the account without first contacting the “litigation contact” and getting appropriate authorization. See IRM 25.6.1.10.2.1.1.2, Unauthorized Abatements Made After Referral to the Department of Justice.

An abatement should not be made of any paid portion of an assessment for which a refund cannot be made. IRC 6511 (a) provides that a claim for credit or refund must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. IRC 6511(b) limits the amount of the credit or refund to the amount paid within the 2- or 3-year period before the date of a claim. See IRM 25.6.1.10.3.3, Claims for Credit or Refund – General Time Period for Submitting a Claim, for information to identify the 3-year period for refund for tax year 2019 and 2020 per Notice 2023-21.

Penalties and interest should not be abated on a full paid account if the overpayment created is barred from refunding because the RSED has passed, and no condition exists that will extend the refund period. Input a TC 29X for zero with Blocking Series 98/99 and send the taxpayer a disallowance letter as stated in paragraph (6) above. This is true whether the taxpayer’s claim for penalty abatement is based on reasonable cause or First Time Abate (FTA) administrative relief. See IRM 20.1.1.3, Criteria for Relief From Penalties, for more details on penalty abatement.

Employees must not release credit balances for refund or offset where a Substitute For Return (SFR) assessment is on an account. SFR adjustments are input with a Hold Code 4. The hold code freezes the credit from refunding or offsetting and will cause an AM05, ST08 or AM-X05 Transcript to generate for review.

Although an abatement (tax, penalty, or interest) may be made before or after the ASED, the tax cannot be reassessed if it is determined that the tax decrease was erroneous after the ASED has expired. See IRM 25.6.1.10.2, Erroneous Abatement, for more information. Therefore, it may be necessary to consider the ASED in determining whether it is appropriate to exercise the IRS’ abatement authority, or to require the taxpayer to pay the assessed tax in full and file a claim for refund or petition the Tax Court with respect to a final notice of determination.

The context of the erroneous abatement will dictate the corrective action required. The general rule is that when an assessment is abated and the IRS later decides that its decision to abate was incorrect, the IRS must make a new assessment. There are, however, three exceptions to this general rule where an erroneous abatement can be reversed and a new assessment is not required. Reversal of an erroneous abatement is accomplished by the responsible Statute and Originating Functions. See IRM 25.6.1.10.2.2, Controlling Erroneous Abatement Cases, for all cases involving erroneous abatements where reversal is not authorized because the information provided by the taxpayer did not justify the tax abatement. The account correction is handled by Exam, if the ASED has not expired.

The first step is to determine whether the erroneous abatement can be reversed. Reversal is only appropriate in three circumstances, where the erroneous abatement was based on a clerical error, was an unauthorized post-referral abatement, or was due to a collectability determination made following a bankruptcy discharge. For more information on reversal of erroneous abatements, see IRM 25.6.1.10.2.1.1, Reversal of Erroneous Abatements.

If the erroneous abatement cannot be reversed, the next step is to determine whether it can be reassessed. In order to be reassessed, the amount abated must be greater than the tolerance level and the new assessment must occur before the ASED expires. For specific instructions, see IRM 25.6.1.10.2.2.1, Correction of Erroneous Abatements by Exam Function.

If the erroneous abatement cannot be reversed or reassessed certain administrative steps must be followed, including the preparation of a Barred Assessment Report on Form 9355, Barred Statute Report. For specific instructions, see IRM 25.6.1.10.2.2.1, Correction of Erroneous Abatements by Exam Function.

For all cases involving erroneous abatements where reversal is not authorized, correction is handled by Exam. In general, with an erroneous abatement, the amount abated must be reassessed using the Examination deficiency procedures (route case to the Examination Operation) before the ASED passes. If Examination cannot reassess the erroneous abatement because the ASED has passed, you must prepare Form 9355, Barred Statute Report. See IRM 25.6.1.13.2.4, Identifying Barred Statute Cases, for more information on barred cases. The overpayment created by the tax decrease must be moved to XSF. Statute function employees must never reassess the tax on this type of case.

For all cases requiring reversal of erroneous abatements, the Statute function is the "Centralized Control Point" between the function that made the erroneous abatement ("Originating Function" ) and Accounting. See IRM 25.6.1.10.2.2.2, Correction of Erroneous Abatement Cases by Statute, for controlling such cases in Statute, and IRM 25.6.1.10.2.3, Remedies for Recovering an Erroneous Refund, for an overview of the legal remedies for such cases. As the “Central Control Point” Statute will ensure corrective actions are taken on the case.

For cases involving erroneous abatements requiring reversal after the ASED has passed, the Originating Function must initiate corrective action. See IRM 25.6.1.10.2.2.3, Correction of Erroneous Abatement Cases by the Originating Function, concerning the preparation of Form 3465, Adjustment Request, and Form 12810, Account Transfer Request Checklist.

You may need to reference the following:

In processing the recovery of refund, you must route all IMF Rebate Refund Cases to the Examination function for assessment before the ASED expires. For Non-Rebate Refund Cases, you should follow the procedures in IRM 21.4.5.4, Recovering Erroneous Refunds, depending on the type of clerical error in your case.

You may need to reference IRM 21.4.5, Erroneous Refunds, (see Category "B" Erroneous Refunds).

Taxpayer's account overstates the amount of Estimated Tax Credits (ES) or Withholding (WH) Credits, and the overstated amount was allowed against the tax reported on the return, then the overstated amount of ES or WH Credits will be assessed as an amount due on the taxpayer's account, just like an assessment made for a math error. You must input a TC 29X for the ES or WH overstated amount and use reason code for ES or WH on your adjustment without reference number. Unlike the math error, the taxpayer may not request an abatement of the assessment and any balance due may be assessed per IRC 6201(a)(3). With respect to overstated ES or WH credits, you are allowed to reverse these credits after the ASED expires. However, you must not reverse other prepaid credits (i.e., EIC, Additional Child Tax Credit (ACTC) after the ASED expires). You must not make an adjustment to reduce the amount of EIC or Additional Child Tax Credits after the ASED expires because it will create a negative tax amount per IRC 6211(b)(4)(B). If you allow any of the other prepaid credits after the ASED, the credit must be applied to the Excess Collection File, and a 105C, Claim Disallowance letter must be sent to the taxpayer with appeal rights.

A refund based on overstated credits may be recovered by a civil suit. See IRM 25.6.1.10.2.3.1, Recovery of Assessable Erroneous Refunds, for more information on this type of refund recovery.

If the overstated ES or WH credits are discovered before a refund is issued, the overstated credits should be assessed rather than "reversed" on the taxpayer’s account on Master File, unless a notice regarding the disallowance of the claim for refund based on the overstated credits is sent by certified or registered mail. See IRC 6532(a)(1).

This section provides procedures for processing claims for credit or refund.

This section provides details on the form and content for claims for credit or refund.

The period for filing a claim for credit or refund has two prongs:

The following chart will help you in determining general claim rules governing a refund claim:

Per Notice 2023-21, more taxpayers are eligible for credit or refund if they file an amended income tax return for 2019 and 2020. Due to the postponed due dates of July 15, 2020, for 2019 income tax returns and May 17, 2021, for 2020 income tax returns, taxpayers have three years from the date they filed their original return to claim a credit or refund if their original return was filed by the postponed due dates.

This section describes the procedures regarding a claim for credit or refund - special item of income, deduction, loss or credit.

This section describes the procedures regarding claims for credit or refund from taxpayers that meets the special situations described in IRC 6511(h).